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1. DHIYAN SINGH AND ANR V. JUGAL KISHORE AND ANR [1950] INSC 1; AIR 1952 SC 145; 1952 SCR 478 (22 February 1950)

22/02/1950 BOSE, VIVIAN BOSE, VIVIAN FAZAL ALI, SAIYID

CITATION: 1952 AIR 145 1952 SCR 478

CITATOR INFO :

F 1953 SC 98 (22) F 1955 SC 481 (58, 62) RF 1961 SC 797 (11) R 1971 SC1041 (4,5, 6) F 1976 SC 794 (16) F 1976 SC 807 (39,41)

ACT:

Arbitration–Award–“Malik Mustaqil “, meaning of–Whether conveys absolute estate–Award acted upon–Estoppel against contesting its validity.

HEADNOTE:

S and B were sons of two brothers respectively. S died in 1884 leaving a daughter M, surviving him. On the death of S dispute arose between B and M. B claimed the entire estate by survivorship, alleging that S died in a state of jointness with him and that all the properties were joint family properties and M was entitled only to maintenance.

The dispute was referred to arbitration and an award was delivered. Under it the suit properties were given to M and the rest of the estate then in dispute was given to B. The operative part of the award stated inter alia that B, first party, and M, the second party, were held entitled to speci- fied shares in the properties in dispute and each had become permanent owner (Malik Mustaqil) of his or her share.

A division was effected and ever since the date of the award in 1884 each branch continued in possession of the proper- ties allotted to it and each had been dealing with them as absolute owner. The defendants claimed that the plaintiffs were bound by the award and were in any event estopped from challenging it.

In 1941 B’s grandsons instituted a suit claiming the properties allotted to M claiming that on the death of S his daughter M succeeded to a limited estate and reversion opened out on her death in 1929 and the plain tiffs were entitled as next reversioners, as M’s son had predeceased her. The defendants (Ms grandsons) alleged that the property possessed by M consisted partly of property which belonged to her and partly of property which belonged exclusively to her father to which she succeeded as daughter.

Held, that the award gave an absolute estate to M as the words “Malik Mustaqil” were strong. clear and unambiguous and were not qualified by. other words and circumstances appearing in the same document in the present case.

Held further. that even if the award be assumed to be invalid the plaintiffs’ claim was barred by the plea of estoppel. There was estoppel against B because by his conduct he induced M to believe that the decision of the arbitrator was fair and reasonable and both the parties would be bound by it and he induced her to act greatly to her detriment and to alter her position by accepting the award and never attempting to go behind it as long 479 as he lived; there was estoppel against B’s sons because it descended to them as they stepped into his shoes, and fur- ther there was independent estoppel against B’s son K by his acts and conduct as evidenced in this case.. There was estoppel against plaintiffs who claimed through their father K.

CIVIL APPELLATE JURISDICTION:Civil Appeal No. 8 of 1951.

Appeal from the judgment and decree dated 12th October, 1944, of the High Court of Judicature atAllahabad(Allsop and Malik JJ.)in First Appeal No. 374 of 1941 arising out of a Decree dated 31st July, 1941, of the Court of the Civil Judge,Moradabad, in Original Suit No. 9 of 1941.

Bakshi Tek Chand (S. K. Kapoor, with him) for the appel- lant.

Achhru Ram (Jwala Prasad, with him) for the respondent.

1952. February 22. The judgment of the Court was deliv- ered by BoSE J.–This is a litigation between two branches of a family whose common ancestor was one Megh Raj Singh The family tree is as follows:

Megh Raj Singh Jawahar Singh Madan Singh Shankar Lal(d- 1884) Brijlal (d. 1889 or (1890) Daughter: Met. Mohan Dei (d. Oct 1929) Kishan Lal Mahabir Prasad Husband: Narain Das (d. 21-5-1940) (d. 1921) Shri Kishan Das Mst. Deoki Jugal Kishore Amar Nath (d.march 1929) (d. 1894) Plff. 1 Plff.2.

Dhiyan Singh Jai Bhagwan Singh Deft. 1 Deft. 2 Ghas Ram Onkar Prasad The dispute is about property which, according to the plaintiffs, formed part of Shanker Lal’s estate. The plain- tiffs state that the two branches of the family were sepa- rate at all material times; that on 480 Shanker Lal’s death in 1884 his daughter Mst. Mohan Dei (the defendants’ grandmother) succeeded to a limited estate.

The reversion opened out on her death in October 1929 and the plaintiffs are entitled as the next reversioners, for Mst. Mohan Dei’s son Shri Kishan Das predeceased her.

The defendants admit that Shanker Lal was separate from the other branch of the family. They divide the property which their grandmother Mst. Mohan Dei possessed into two categories. First, there was property which they say be- longed to her. These are properties which, according to them, she purchased or obtained under mortgages in her own right. Next, there were properties which belonged exclu- sively to her father and to which she succeeded as daughter.

On Shanker Lal’s death disputes arose between Shanker Lal’s father’s brother’s son Brijlal (the plaintiffs’ grandfa- ther) and the defendants’ grandmother Mst. Mohan Dei.

Brijlal claimed the entire estate by survivorship, his allegation being that Shanker Lal died in a state of joint- ness with him and that all the properties were joint family properties. This dispute was referred to arbitration and an award was delivered. Under it Mst. Mohan Dei was given the suit properties as absolute owner and the rest of the estate then in dispute was given to Brijlal, A division was ef- fected accordingly and ever since, that is to say, from 21- 12-1884, the date of the award, down to 26-3-1941, the date of the suit, each branch has been in separate and uninter- rupted possession of the properties respectively allotted to it and each has been dealing with them as absolute owner.

The defendants claim that the plaintiffs are bound by this award and are in any event estopped.

The plaintiffs lost in thefirst Courtbut won in the High Court. The defendants appeal.

The first question is about the nature of the award.

The defendants say that it gave Mst. Mohan Dei an absolute estate.. The plaintiffs deny this and say she obtained only a limited estate. In our opinion, the defendants are right.

481 The question at issue is a simple one of construction. The award is Ex. A-1. The operative portion runs thus:

“Having regard to the specifications give above, Brij Lal, first party, and Musammat Mohan Devi, the deceased’s female issue, second party, have been held entitled to shares, worth Rs. 28,500 and Rs. 42,482-10-0 respective- ly in the said properties; and accordingly…two lots have been made and the first lot is allotted to the first party and the second lot to the second party; and henceforth the parties shall have no claim or liability against each other;

and each party has become permanent owner (malikmustaqil) of his or her share; and each party should enter in proprietary possession and occupation of his or her respective share…… ” The underlining is ours.

We do not think the words admit of any doubt, particu- larly as the words “malik mustaqil” have been used: see Ram Gopal v. Nand Lal and Others (1) and Bishunath Prasad Singh v. Chandika Prasad Kumari (2). But it was argued that the award must be viewed as a whole and that certain earlier passages show that this could not have been the intention. ]he passages relied on are these. First, the finding that the properties claimed by Mst. Mohan Dei as her own really belonged to Shanker Lal. He had purchased some and acquired others through mortgages in her name but she was only a benamidar and had no title to them. Second, that some of the properties in dispute were ancestral and the rest sell acquired, though whether with the help of ances- tral funds or not the arbitrator was unable to determine.

Third, the arbitrator’s view of the Hindu law, namely that- “the brother should be the owner of the joint ancestral property and the daughter who has a male issue should be owner of the self-acquired property.” And lastly, this passage– (1) [1950] INSC 31[1950] S.C.R. 766 at 773.(2)(1933) 60 I.A. 56 at 61 & 62.

482 “Furthermore, when the 2nd party (Mohan Dei) has inher- ited no property from her husband, she, in case of getting this share, will certainly settle down in Amroha and will make her father’s haveli as her abode and thus the haveli shall remain a bad as heretofore, and in this way the de- ceased’s name will be perpetuated; and it is positive that, after the Musammat, this property shall devolve on her son, who will be the malik (owner) thereof, and later the de- scendant of this son will become the owner thereof.” We do not think these passages qualify the operative portion of the award and are unable to agree with the learned Judges of the High Court who hold they do. In our opinion, the arbitrator was confused in his mind both as regards the facts as well as regards the law. His view of the law may have been wrong but the words used are, in our opinion, clear and, in the absence of anything which would unambiguously qualify them, we must interpret them in their usual sense.

Some cases were cited in which the word “malik”, and in one case the words “malik mustaqil” were held to import a limited estate because of qualifying circumstances. We think it would be pointless to examine them because we are concerned here with the document before us and even if it be conceded that words which would ordinarily mean one thing can be qualified by other words and circumstances appearing in the same document, we are of opinion that the passages and circumstances relied on in this case do not qualify the strong, clear and unambiguous words used in this document.

The learned counsel for the plaintiffs-respondents had to search diligently for the meaning for which he contended in other passages and had to make several assumptions which do not appear on the face of the award as to what the arbitra- tor must have thought and must have intended. We are not prepared to qualify clear and unambiguous language by phrases of dubious import which can be made to coincide with either view by calling in aid assumptions of fact about whose existence we can only guess 483 The award was attacked on other grounds also. It was urged, among other things, that the arbitrator had travelled beyond the terms of his reference in awarding Mst. Mohan Dei an absolute interest. It was also urged that even if Brij- lal was bound his son Kishan Lal, who did not claim through him but who had an independent title as reversioner to Shanker Lal, would not be bound, and it was contended that if Kishan Lal was not bound the plaintiffs would not be either. But we need not examine these points because we do not need to proceed on the binding nature of the award.

Even if the award be invalid we are of opinion that the plaintiffs’ claim is completely answered by the plea of estoppel.

Now it can be conceded that before an estoppel can arise, there must be, first, a representation of an existing fact as distinct from a mere promise de futuro made by one party to the other; second, that the other party, believing it, must have been induced to act on the faith of it; and third, that he must have so acted to his detriment.

It will be necessary to deal with this in stages and first we will consider whether there was any estoppel against Brijlal. It is beyond dispute that he laid serious claim to the property in 1884. He claimed that he was joint with Shanker Lal and so, on Shanker Lal’s death he became entitled to the whole of the estate and that Mst. Mohan Dei had only a right of maintenance. Whether he would have had difficulty in establishing such a claim, or indeed whether it would have been impossible for him to do so, is wholly immaterial. The fact remains that he pressed his claim and was serious about it, so much so that he was able to per- suade the arbitrator that he had an immediate right to part of the estate. Mst. Mohan Dei, on the other hand, resisted this claim and contended that she was entitled to separate and exclusive possession, and in any event, that she was entitled in absolute right to a part of the property. On the facts which now emerge it is evident that Brijlal had no right and that his hopes of one day succeeding as 484 reversioner were remote. Mst. Mohan Dei had a son Shri Kishan Das who was the next presumptive reversioner and as the boy was a good deal younger than Brijlal, Brijlal’s chances were slim. Actually, the boy survived Brijlal by nearly forty years. Brijlal died in 1889or 1890 and the boy did not die till March 1929. Had he lived another eight or nine months he would have succeeded and the plaintiffs would have been nowhere. Now this dispute, seriously pressed by both sides, was referred to arbitration. It is neither here nor there whether the award was valid, whether the decision fell within the scope of the reference or whether it had any binding character in itself. Even if it was wholly invalid, it was still open to the parties to say: Never mind whether the arbitrator was right or wrong, his decision is fair and sensible, so instead of wasting further time and money in useless litigation, we will accept it and divide the estate in accordance with his findings. That would have been a perfectly right and proper settlement of the dispute, and whether it bound third parties or not it would certainly bind the immediate parties; and that in effect is what they did. By his conduct Brijlal induced Mst. Mohan Dei to be- lieve that this would be the case and on the faith of that representation, namely the acceptance of the award, he induced Mst. Mohan Dei to act greatly to her detriment and to alter her position by accepting the award and parting with an appreciable portion of the estate, and he himself obtained a substantial advantage to which he would not otherwise have been entitled and enjoyed the benefit of it for the rest of his life; and to his credit be it said, he never attempted to go behind his decision. In any event, we are clear that that created an estoppel as against Brijlal.

In our opinion, the present case is very similar to the one which their Lordships of the Privy Council decided in Kanhai Lal v. Brij Lal (1). There also there was a dispute between a limited owner and a person who, but for an un- proved claim (adoption) which he (1) (1919) 45 I.A. 118.

485 put forward, had no right to the estate. The dispute was taken to the courts but was compromised and according to the agreement the property was divided between the two rival claimants and the agreement was given effect to and acted on for a period of twenty years. Later, the succession opened out and the other party to the compromise, who by then had stepped into the reversion, claimed the rest of the estate, which had been assigned to the limited owner, against her personal heirs. The Judicial Committee rejected the claim on the ground of estoppel and held that even though the plaintiff claimed in a different character in the suit, namely as reversioner, he having been a party to the compro- mise and having acted on it and induced the other side to alter her position to her detriment, was estopped. We do not think the fact that there was a voluntary compromise whereas here there was the imposed decision of an arbitra- tor. makes any difference because we are not proceeding on the footing of the award but on the actings of the parties in accepting it when they need not have done so if the present contentions are correct.

It is true that in one sense a question of title is one of law and it is equally true that there can be no estoppel on a question of law. But every question of law must be grounded on facts and when Brijlal’s conduct is analysed it will be found to entail an assertion by him that he admitted and recognised facts which would in law give Mst. Mohan Dei an absolute interest in the lands awarded to her. It was because of that assertion of fact, namely his recognition and admission of the existence of facts which would give Mst. Mohan Dei an absolute interest, that she was induced to part with about one-third of the property to which Brijlal, on a true estimate of the facts as now known, had no right.

There can be no doubt that she acted to her detriment and there can, we think, be equally no doubt that she was in- duced to do so on the faith of Brijlal’s statements and conduct which induced her to believe that he accepted all the implications of the 63 486 award. But in any event, we are clear that Brijlal would have been estopped. The nature of the dispute and the de- scription of it given in the award show that there was considerable doubt, and certainly much dispute, about the true state of affairs. Even if the arbitrator was wholly wrong and even if he had no power to decide as he did, it was open to both sides to accept the decision and by their acceptance recognise the existence of facts which would in law give the other an absolute estate in the properties they agreed to divide among themselves and did divide. That, in our opinion is a representation of an existing fact or set of facts. Each would consequently be estopped as against the other and Brijlal in particular would have been estopped from denying the existence of facts which would give Mst.

Mohan Dei an absolute interest in the suit property.

We turn next to his son Kishan Lal. Brijlal died in 1889 or 1890. At that date Mst. Mohan Dei’s son Shri Kishan Das was alive and was the next presumptive reversioner.

Brijlal’s sons therefore had no more right to that portion of his estate which was assigned to Brijlal than Brijlal himself. But they took possession and claimed through their father. ]hey did not claim an independent title in them- selves, and, as we know, they had no other title at that date. They were therefore in no better position than Brij- lal and as Brijlal would have been estopped, the estoppel descended to them also because they stepped into his shoes.

This would be so even if Brijlal had claimed the property independently for himself, which he did not; but much more so as he claimed in joint family rights and evidently acted as karta or manager on behalf of his family.

But apart from this, there was also an independent estoppel in Kishan Lal. We have said, he had no right to this part of the estate when his father died apart from the award. But nevertheless he took possession along with his brother and the two of them treated the property as their own and derived benefit 487 from it. They partitioned the estate between themselves and sold away parts of it to third parties. Kishan Lal knew of the award. He knew that mutation had been effected in accordance with it and possession taken by Brijlal under it and that the rest had been retained by Mst. Mohan Dei. His retention of the property therefore and his continuing to deal with it on the basis of the award indicated his own acceptance of the award and, therefore, by his acts and conduct, he represented that he also, like his father, admitted the existence of facts which would in law give Mst.

Mohan Dei an absolute estate; and further, he allowed Mst.

Mohan Dei to deal with the estate as her own, for she, on her part. also acted on the award and claimed absolute rights in the property assigned to her. She dealt with it on that footing and gifted it in that right to her grand- sons, the contesting defendants, on 4th April, 1929. Muta- tion was effected and Kishan Lal raised no objection. We see then that Brijlal retained possession of property to which he was not entitled for a period of five or six years from 1884 to 1889 or 1890 and induced Mst. Mohan Dei to part with it by representing that he accepted the award and her abso- lute title to the rest, and after him Kishan Lal and his brother between them enjoyed the benefit of it from 1889 or 1890 down to October 1929 when Mst. Mohan Dei died, that is, for a further forty years, and led Mst. Mohan Dei to believe that they also acknowledged her title to an absolute estate.

We have no doubt that down to that time Kishan Lal was also estopped for the reasons given above. Had he questioned the award and reopened the dispute Mst. Mohan Dei would at once have sued and would then for forty years have obtained the benefit of property from which she was excluded because of her acceptance of the award on the faith of Brijlal’s asser- tion that he too accepted it. Kishan Lal’s inaction over these years with full knowledge of the facts, as is evident from the deposition of D.W. 2, Dhiyan Singh, whose testimony is uncontradicted, and his acceptance of the estate with all its consequential benefits, unquestionably creates an estoppel in him. This witness tells us that– 488 “Kishanlal always accepted this award and acted upon it.” He qualifies this in cross-examination by saying that Kishan Lal had also objected to it but the witness did not know whether that was before or after Mst. Mohan Dei’s death. The documents filed show it was after, so there is no reason why the main portion of his statement which is uncontradicted, and which could have been contradicted, should not be accepted.

In March, 1929, Mst. Mohan Dei’s son Shri Kishan Das died and Kishan Lal thereupon became the next presumptive reversioner, and in October, 1929, when the reversion opened out the estate vested in him, or rather would have vested in him but for the estoppel. The question therefore is, did he continue to be bound by the estoppel when he assumed a new character on the opening out of the reversion ? We have no doubt he did. The decision of the Judicial Committee which we have just cited, Kanhai Lal v. Brijlal(1), is, we think, clear on that point. Although other reversioners who do not claim through the one who has consented are not bound. the consenting reversioner is estopped. This is beyond dispute when there is an alienation by a limited owner without legal necessity. See Ramgouda Annagouda v. Bhausaheb (2) where the ground of decision was “…….but Annagouda himself being a party to and benefiting by the transaction evidenced thereby was preclud- ed from questioning any part of it.” In our opinion, the same principles apply to a case of the present kind.

It was contended, however, on the strength of Rangasami Gounden v. Nachiappa Gounden(3) and Mr. Binda Kuer v.

Lalitha Prasad(4), that even if Kishan Lal did take posses- sion in 1889or 1890 on the strength of a title derived from his father, that would not have precluded him from asserting his own rights in a different character when the succession opened (1)(1918) 45 I.A 118. (2) (1927) 54 I.A. 396 at 403.

(3) (1919) 46 I.A. 72. (4) (1936) A.I.R. 1936 P.C. 304 at 308.

489 out. Reliance in particular was placed upon page 808 of the latter ruling. In our opinion, that decision is to be distinguished.

In that case the reversion did not fall in till 1916.

Long before that, namely in 1868, the next presumptive reversioners entered into a compromise whereby the grandfa- ther of one Jairam who figured in that case obtained a good deal more than he Would have been entitled to in the ordi- nary way. But for the compromise this grandfather would have got only one anna 12 gundas share, whereas due to the compromise he got as much as 2 annas 4 gundas, The actual taking of possession was however deferred under the compro- mise till the death of one Anandi Kuer. She died in 1885 and on that date Jairam was entitled to his grandfather’s share as both his father and grandfather were dead. Jairam accordingly reaped the benefit of the transaction. But it is to be observed that the extra benefit which he derived was only as to a 12 gundas share because he had an absolute and indefeasible right to 1 anna 12 gundas in any event in his own right under a title which did not spring from the com- promise.

Jairam lost 1 anna 4 gundas to a creditor Munniram and out of the one anna which he had left from the 2 annas 4 gundas he sold 13 gundas to the plaintiffs for a sum of Rs.

500. Now it is evident that on those facts it is impossible to predicate that the 13 gundas which the plaintiffs pur- chased came out of the extra 12 gundas which Jairam obtained because of the compromise rather than out of the 1 anna 12 gundas to which he had a good and independent title anyway;

and of course unless the plaintiffs’ 13 gundas could be assigned with certainty to the 12 gundas it would be impos- sible to say that they had obtained any benefit from the compromise. The Judicial Committee also added that even if it was possible to assign this 13 gundas with certainty to the 12 gundas it by no means followed that the plaintiffs admitted that fact nor would that necessarily have given them a benefit under the compromise. They had the right to contest ‘the 490 position and gamble on the possibility of being able to prove the contrary. Their Lordships added- ” Unless the plaintiffs’ individual conduct makes it unjust that they should have a place among Bajrangi Lal’s reversioners their legal rights should have effect.” In the other case, Rangasami Gounden v. Nachiappa Goun- den(1), their Lordships’ decision about this matter turned on the same sort of point: see page 87.

The present case is very different. When Kishan Lal took possession of his father’s property he held by virtue of the award and under no other title, and for forty years he continued to derive benefit from it. Accordingly, he would have been estopped even if he had claimed in a differ- ent character as reversioner after the succession opened out.

It was conceded that if the estoppel against Kishan Lal enured after October 1929, then the plaintiffs, who claim through Kishan Lal, would also be estopped.

The appeal succeeds. The decree of the High Court is set aside and that of thefirst Courtdismissing the plaintiffs’ claim is restored. Costs here and in the High Court will be borne by the plaintiffs-respondents.

Appeal allowed.

Agent for the appellants: Ganpat Rai.

Agent for the respondents: Sardar Bahadur Saharya.

(1) (1919) 46 I.A. 72.

 

 

 

 

2. MESSRS. KHIMJI POONJA AND COMPANY V. SHRI BALDEV DAS C. PARIKH [1950] INSC 2; AIR 1950 SC 7; 1950 SCR 64 (14 March 1950)

14/03/1950 DAS, SUDHI RANJAN DAS, SUDHI RANJAN KANIA, HIRALAL J. (CJ) FAZAL ALI, SAIYID SASTRI, M. PATANJALI MAHAJAN, MEHR CHAND MUKHERJEA, B.K.

CITATION: 1950 AIR 7 [1950] INSC 21950 SCR 64

ACT:

Bombay Cotton Contracts Act (IV of 1932), s. 8 (1)–East India Cotton Association Bye-laws, Nos. 51-A, 65-A, 80, 82–Cotton Contract–Contract note stating minimum amount Of deposit as Rs. 25 and not in prescribed form–Validity–Arbitration and award under arbitration clause, whither void.

HEADNOTE:

Section 8 of the Bombay Cotton Contractors Act, 1939,, provided that contracts entered into after the date the commencement of the Act which are not in accordance with the bye-laws of any recognised cotton association shall be void.

Bye-law 80 of the East India Cotton Association, Ltd., which was a recognised cotton association within the meaning of the Act provided that contracts between members acting as commission agents on the one hand and their constituents on the other shall be subject to the bye-laws and that a con- tract note in the form given in the Appendix to the bye-laws shall be rendered in respect of every contract. Bye-law 51-A originally required a deposit at a rate not less than Rs. 9,5 per bale and the contract note accordingly contained a clause to that effect. During the war this bye-law was amended by reducing the minimum amount of depos- it to Rs. 12-8 per bale and introducing a new bye-law (bye- law 65-A) which, inter alia, gave certain options to the last buyer, and by a Notification of the Government the form of the contract note Was also amended by altering the mini- mum deposit to Rs. 12,-8 and adding two new clauses to comply with the bye-law 65-A. A contract note rendered after these amendments to the byelaws and the form of contract note, contained a rubber stamp impression in which the minimum amount of deposit was stated as Rs. 9.5, and did not contain the two new clauses that were introduced by the Government Notification:

Held, that the contract note rendered was not in accordance with the bye-laws and in the prescribed form as the clause relating to the minimum amount of deposit was inconsistent with the provisions of bye-law 51-A as amended, and the two new clauses had been omitted, even though. the contract note recited that it was made in accordance with the byelaws, and it was accordingly void and a valid award could not be made under the arbitration clause contained in the note.

[PATANJALI SASTRI .J preferred to rest his decision solely on the ground of the omission to include in the contract in question the two clauses newly added in the prescribed form in order to give effect to bye-law 65-A.] Judgment of the Bombay High Court affirmed, 65

APPEAL from the High Court of Judicature atBombay.

Civil Appeal No. XXVI of 1949.

This was an appeal from a judgment and decree of the Bombay High Court (Stone C.J. and Coyajee J.) dated 20th March, 1947, in Appeal No. 42 of 1946, reversing a judgment of Chagla J. dismissing an application. made by the respond- ent under the Indian Arbitration Act, 1940, praying inter alia that the arbitration agreement contained in certain contract notes sent by the appellants to the respondent be declared invalid and void and for setting aside an award made by arbitrators appointed under the said contract note.

M.C. Setalvad, (Rameshwar Nath with him), for the appel- lants.

C.K. Daphtary, (B. Sen and K.T. Desai with him), for the respondent.

1950. March 14. The judgment of the Court was delivered by DAS J.–This appeal arises out of an application made by the Respondent under the Indian Arbitration Act, 1940, praying inter alia that the arbitration agreement contained in certain contract notes including contract note No. 17996 sent by the Appellants to the Respondent be declared to be invalid, void and unenforceable and be set aside and that a purported award made by the arbitrators appointed in terms of the said contract notes be set aside. That application came to be made in the following circumstances:

The Appellants were and are members of the East India Cotton Association Ltd. The Respondent, however, was not and is not a member of that Association. In April, 1945, the Respondent employed the Appellants as his agents to effect forward contracts for the sale and/or purchase of cotton according to the rules, regulations and bye-laws of that Association. Between the 9th April, 1945, and the 10th August, 1945, the ‘Appellants as such agents put through various contracts for sale and/or purchase of cotton for July, 1945, and September, 1945, deliveries and sent to the Respondent 66 contract notes in respect of each of such contracts. All the said contract notes were in printed forms, a specimen copy whereof is set out at pages 12 to 15 of the Paper Book. On the 10th August, 1945, the purchase of 900 bales of cotton at Rs. 432 per candy for September 1945 delivery remained outstanding. According to the Respondent, on the 11th August, 1945, the Respondent instructed the Appellants to close the said outstanding purchase by selling 900 bales for September 1945 delivery at a rate not less than Rs. 426 per candy, which is said to be the prevailing market rate on that date. As the Respondent did not receive any contract note from the Appellants in respect of the closing transac- tion of 900 bales, the Respondent on the 18th August, 1945, put on record his aforesaid instructions and asked the Appellants to send the contract note. The Appellants, however, deny that any instruction was given by the Respond- ent on the 11th August, 1945, for closing the outstanding contract. They deny the receipt of the Respondent’s letter of that date. According to the Appellants the 21st August, 1945, was a clearing date and on that clearing a sum of Rs.

18,900 became due and payable by the Respondent to the Appellants and that instead of paying up his dues the Re- spondent concocted the false story of having given instruc- tions to the Appellants to close the outstanding purchase.

The Appellants by their letter of the 22nd August, 1945, repudiated the allegations in the Respondent’s last men- tioned letter and called upon the Respondent to pay up Rs.

18,900 and gave notice to him that if he failed to pay up the amount by noon of the 23rd August, 1945, the Appellants would be compelled to square up the outstanding contract at their discretion on account and at the risk of the Respond- ent. The Respondent on the 24th August, 1945, denied having fabricated any false story and repudiated liability for Rs.

18,900 and returned the Appellants’ bill. On the 27th August, 1945, the Appellants closed the outstanding contract for purchase of 900 bales by selling the same at Rs. 356 per candy for September 1945 delivery and along with their letter dated the 27th August, 1945, sent contract ‘note No.

17996. The 67 Respondent by his letter dated the 28th August, 1945, reit- erated the story of previous instruction for closing the contract, denied having given any instruction to the Appel- lants to close the contract on the 27th August, 1945, and returned the contract note No. 17996. On the 28th August, 1945, the Appellants wrote to the Respondent claiming Rs.

34,313 and expressing the desire to refer the disputes to arbitration in terms of the arbitration agreement contained in the contract notes. Both parties appointed their respec- tive arbitrators. The arbitrators entered upon the refer- ence and eventually fixed the 24th October, 1945, for a meeting of the arbitrators. The Respondent alleges that he received the notice of meeting only on 22nd October, 1945, and could not attend the meeting on the 24th October, 1945, as he had to appear before the Income Tax Officer on the same day. Accordingly, the Respondent sent his agent to attend the arbitration meeting and to obtain an adjournment.

The arbitrators, however, rejected the application for adjournment and made an ex parte award on the same day for Rs. 34,313 and interest and costs. Being aggrieved by the award the Respondent on the 10th November, 1945, filed an appeal to the Board of the Association. The Respondent’s allegation is that pending the said appeal he discovered that the contract notes rendered by the Appellants from time to time including the contract note No. 17996 were not in accordance with the prescribed official form of contract notes of the Association and he was advised that in the premises the contracts were void under the provisions of the Bombay Cotton Contracts Act (IV of 1932) and that, that being so, there was no arbitration agreement between the parties under which there could be any reference to arbitra- tion on which any award could be made. The Respondent thereupon amended his memorandum of appeal to the Board pointing out the invalidity of the contracts and at the same time made a substantive application to the High Court under the Indian Arbitration Act for the reliefs already summa- rised above.

In order to appreciate the rival contentions of the parties it is necessary to refer to the relevant 68 provisions of the Bombay Cotton Contracts Act, 1932, and the bye-laws of the said Association.

Section (8) (i) of the Bombay Cotton Contracts Act, 1932, runs as follows :- “Save as hereinafter provided in this Act any contract (whether either party thereto is a member of a recognised cotton association or not) which is entered into after the date on which this Act comes into operation and which is not in accordance with the byelaws of any recognised cotton association shall be void.” There is no dispute that the East India Cotton Associa- tion is one of the recognised cotton associations for the purposes of the said Act. Bye-laws 80 and 82 of Chat Asso- ciation are in the terms following :– “80. Delivery Contracts between members shall be made on the Official form given in the Appendix. Hedge Contracts between members may be verbal or in writing and when in writing shall be in one or other of the forms given in the Appendix. Whether verbal or written all contracts shall be subject to the bye-laws, provided that in the case of Deliv- ery Contracts Byelaws 149 to 163 inclusive shall not apply.

82. Contracts between members acting as commission agents’ on the one hand and their constituents on the other shall, be made subject to the bye-laws and a contract note in the form given in the Appendix (pages 92, 93, 94 and 95) shall be rendered in respect of every such contract. Bye- laws 130 to 166 (inclusive) shall’ not apply to these Con- tracts.” Bye-law 51-A originally required a deposit at a rate not less than Rs. 25 per bale and accordingly the contract note submitted by. the agent to the constituent used to contain the following clause at the end of the clause relating to payment of margin :- “In addition to the above, the deposit (not carrying interest) payable under bye-law 51-A;namely, at a rate not less than Rs. 25 per bale shall, when demanded, be made by you to me/us in Bombay.” During the war bye-law 51-A was amended by reducing the minimum amount of deposit from Rs. 25 per 69 bale to Rs. 12-8-0 per bale and accordingly the Government of Bombay by a Notification made on the 19th September, 1945, in exercise of the powers conferred by the Bombay Options in Cotton Prohibition Act, 1939 (Act XXV of 1939) provided that the contract note should also be amended so that the clause last quoted above should read as follows :– “In addition to the above, the deposit (not carrying interest) payable under bye-law 51-A, namely, at a rate not less than Rs. 12-1/2 per bale shall, when demanded, be made by you to me/us in.Bombay.” In order to enforce war-time controls another amendment of the bye-laws was made whereby a new bye-law was added as bye-law 65-A. In view of this last mentioned amendment and in order to bring the contract note between the agent and the constituent into line with this new bye-law the Government of Bombay by the same Notification dated the 19th September 1944 directed the inclusion of the two following clauses in the contract note, namely:

“If this contract is a contract for sale, then if be- tween us and other members of the East India Cotton Associa- tion we become, under the bye-laws, the first seller of the cotton so sold and if the last buyer exercises the right given by bye-law 65-A, you will then be bound by the provi- sions of that bye-law as between you and us.

If this contract is a contract of purchase, and if between us and other members of the East India Cotton Asso- ciation Ltd., we become the last buyers unless we shall have received express instructions from you in writing to. the contrary, before the commencement of the delivery period if the contract is entered into before the commencement of the delivery period, or with the order if the contract is en- tered into during the permitted days of trading in the delivery period, we shall be at liberty at our option and without any further reference to you to exercise the right given to the last buyer under bye law 65-A, and if we so exercise the right you will be bound by the provisions of that bye-law as between you and us.” 70 After all these amendments the contract note to be rendered by an agent to the constituent had to be in the form, a specimen copy whereof is set out at pages 17 and 18 of the Paper Book. The contracts between the Appellants and the Respondent were made after the aforesaid contract note form came into vogue. The official Contract Note form to be used after the aforesaid amendments opens with the following clause :– “I/we have this day sold/bought for you in Bombay sub- ject to the following conditions and to the Bye-laws of the East India Cotton Association Ltd., in force from time to time and subject also to my/our usual charges and terms of business as Commission Agents.” Then are inserted particulars of the description, quantity, price etc., of the cotton which is the subjectmat- ter of the contract. Then follows the clause for payment of margin, the last sentence of which provides for payment of deposit payable under bye law 51-A as amended, namely, at a rate not less than Rs. 121/2 per bale. At the end of the form are to be found the two new clauses required to be incorporated in every Contract Note by the Government Noti- fication already referred to.

The Contract Notes actually rendered by the Appellants to the Respondent, however,. were in forms, a specimen copy whereof is set out at pages 12–15 of the Paper Book. A comparison of the two forms of the contract notes will reveal the following differences :- (1) In the contract note rendered by the Appellants to the Respondent the last sentence providing for deposit at the end of the margin clause is missing. There is, however, a rubber stamp impression on the top of the back of the contract to the following effect :– “In addition to the above, the deposit (not carrying interest) payable under bye-law 51-A, namely, at a rate not less than Rs. 25 per bale shall, when demanded, be made by you to me/us in Bombay.” Evidently, this rubber stamp provision is a reproduction of the sentence that used to be found at the end of the margin clause before bye-law 51-A was amended and the clause itself was amended by the Government Notification of 1944.

71 (2) The two new clauses required to be inserted in the con- tract referred to above have also been omitted.

The contention of the respondent was that the contract notes actually issued were not in accordance with the bye- laws of the Association and were accordingly void under Section 8 of the Bombay Cotton Contracts Act, 1932, and that, that being so, the arbitration agreement incorporated in the contract note was also void and there could be no reference to arbitration and there could be no award as purported to have been made by the arbitrators on a refer- ence under the void contracts.

The matter was dealt with by Mr. Justice Chagla who overruled the contentions of the Respondent and dismissed the application on 2nd July 1946. The learned Judge point- ed out that whereas bye-law 80 required that delivery con- tracts must be made on the official form and that the hedge contracts, when made in writing, must be made in the form given in the Appendix, clause 82 did not require that the contracts between members acting as commission agents on the one hand and their constituents on the other must be in writing or in particular form. According to the learned Judge bye-law 82 required two things, namely :- (i) that the contracts referred to therein should be made subject to the bye-laws, and (ii) that a contract note in the prescribed form should be rendered in respect of every such contract.

The learned Judge was of the opinion that section 8 of the Bombay Cotton Contracts Act, 1932, only avoided the contracts i.n case of contravention of the first require- ment, namely, if the contracts were not made subject to the bye-laws, but had no concern with the contravention of the second requirement, namely, if the contract notes were not in the prescribed form. The learned Judge appears to have made a distinction between a contract and a contract note which was a mere evidence of the contract. According to him, even if the contract note was not in the prescribed form, that fact did not affect the pre-existing contract which had only to be made subject to the bye-laws but need not have 10 72 been made in writing at all. Accordingly, the learned Judge dismissed the application.

Being aggrieved by that decision, the Respondent went up on appeal which was heard by Stone C.J. and Coyajee J. who accepted the appeal, set aside the dismissal of the Respond- ent’s petition and gave the declaration prayed for and set aside the award. The Appellants have now come up on appeal before us after having obtained the necessary certificate from the Bombay High Court.

We find ourselves in agreement with the decision of the appellate Court. Ordinarily, when a contract between the parties is reduced to writing, the writing becomes the repository of the contract and that writing only can be looked at to ascertain what the contract between the parties is, and if that writing is not in accordance with the bye- laws, the contract itself must be void. We do not, however, feel pressed to emphasize this aspect of the matter, for, assuming that there was a pre-existing oral contract between the parties dehors the written contract note, as held by Chagla J. we have yet to see whether the so-called pre- existing oral contract was in accordance with the bye-laws, for if it were not, then it would be hit by section 8 of the Bombay Cotton Contracts Act, 1932. There is no suggestion that ‘the terms of the so called pre-existing oral contract were in any way different from the terms subsequently re- corded in the contract notes actually issued.

In the first place we find that the last sentence in the margin clause, in order to be in accordance with the bye- laws, should have been as follows :- “In addition to the above, the deposit (not carrying interest) payable under bye-law 51-A, namely, at a rate not less than Rs. 121/2 per bale shall, when demanded, be made by you to me/us in Bombay.” Instead of that sentence, we have the rubber stamp impression reading as follows :- “In addition to the above, the deposit (not carrying interest) payable under bye-law 51-A, namely, at a 73 rate not less than Rs. 25 per bale shall, when demanded, be made by you to us in Bombay.” The respondent contends that this term is not in accord- ance with the bye-laws of the Association. The Appellants on the other hand contend that there is no discrepancy, because a provision for a rate not less than Rs. 25 per bale does not contravene or is not inconsistent with the provi- sion for a rate not less than Rs. 121/2 per bale. In other words, any rate above the rate of Rs. 121/2 may be stipulat- ed in accordance with the terms of business to which the contract was subject, for it did not contravene the require- ment that the rate should not be less than Rs. 121/2. It is true that the opening clause of the contract note makes the contract subject to the Appellants’ usual charges and terms of business, but the contract is at the same time subject to the bye-laws of the Association. In order to reconcile the two, such terms of business as are not inconsistent with the bye-laws can only be permitted to prevail. The rubber stamp provision clearly imposes on the respondent as the constitu- ent the liability to deposit a higher amount as the minimum amount to be deposited and is to that extent not in accord- ance with bye-law 51-A. Apart from this consideration there is another serious objection to the rubber stamp provision.

The language of that rubber stamp provision clearly indi- cates that it purports to summarise and set out what is payable under bye-law 51-A. In fact, as already stated,above, bye-law 51-A had been amended and what is payable under the amended’ bye-law is not at a rate not less than Rs. 25 but at a rate not less than Rs. 121/2. There- fore, the rubber stamp provision wrongly summarises and sets out the provisions of bye-law 51-A and consequently is not in accordance with that bye-law.

The contention of the Respondent has been and is that by reason of the omission of the two clauses at the end of the contract note actually issued by the Appellants it was not in accordance with the bye-laws. The learned Attorney-Gener- al appearing for the Appellants contends that the contract was expressly made subject 74 to the bye-laws and, therefore, the provisions of the new bye-law 65-A were by reference incorporated in the contract.

This contention, we are satisfied, is unsound. Bye-law 65-A in terms regulates the relationship between members and incorporation thereof in a contract between a member agent and an outsider constituent will make no sense and on a plain reading will be meaningless. Further, under bye-law 65-A the last buyer has certain options. The outstanding contract being one for purchase of 900 bales, the Appel- lants, if they became the last buyers, could, under that bye-law, exercise any of those options at their own dis- cretion. In the second of the two clauses which have been omitted from the contract note this option has been made subject to express instructions of the constituent to the contrary, for it provides that the Appellants as agents would be free to exercise their option– “unless I/We shall have received express instructions from you in writing to the contrary, before the commence- ment of the delivery period if the contract is entered into before the commencement of the delivery period or with the order if the contract is entered into during the permitted days of trading in the delivery period.” By reason of the omission of the two clauses, this right of the Respondent as constituent is not made a term of the contract between the parties. It follows, therefore, that the so-called pre-existing oral contract is not in accord- ance with the bye-laws on this ground also.

For reasons stated above, this appeal fails and must be dismissed with costs.

PATANJALI SASTRIJ.—I agree that this appeal should be dismissed with costs, but I would prefer to rest my deci- sion solely on the ground of the omission to include in the contract in question the two clauses newly added in the prescribed form in order to give effect to bye-law 65-A. Appeal dismissed.

Agent for the appellants, Rajinder Narain.

Agent for the respondent: M.S.K. Sastri.

 

 

 

 

 

 

 

 

3. ABDULLA AHMED V. ANIMENDRA KISSEN MITTER [1950] INSC 3; AIR 1950 SC 15; 1950 SCR 30 (14 March 1950)

14/03/1950 SASTRI, M. PATANJALI SASTRI, M. PATANJALI DAS, SUDHI RANJAN KANIA, HIRALAL J. (CJ) FAZAL ALI, SAIYID MAHAJAN, MEHR CHAND

CITATION: 1950 AIR 15 [1950] INSC 31950 SCR 30

CITATOR INFO :

F 1975 SC 32 (19) E 1980 SC 17 (36) E 1990 SC1833 (17)

ACT:

Contract Agency Estate broker–Authority to negotiate a sale’ and’secure purchaser ‘–Whether empowers broker to conclude contract–Construction of contract–Broker finding ready and willing to buy for price fixed by principal con- cluding contract with same purchase for lower price -Bro- ker’s right to commission -power of agents.

principal–Principal

HEADNOTE:

The appellant, an estate broker, was employed by the respondent by a letter dated 5th May, 1943, to negotiate a sale of certain property on the ,,terms mentioned in a commission note which ran as follows: I …..do hereby authorise you to negotiate the sale of my property 27,Amratolla Street, free from all encumbrances at a price not less than Rs. 1,00,000. I shall make out a good title to the property. If you succeed in securing a buyer for Rs.

1,00,000, I shall pay you Rs. 1,000 as your remuneration.

If the price exceeds Rs. 1,05,000 and does not exceed Rs.

1,10,000, I shall pay you the whole of the excess over Rs.1,05,000 in addition to your remuneration of Rs. 1,000 as stated above. In case you can secure a buyer at a price exceeding Rs. 1,10,000, I shall pay you twenty-five percent.

of the excess amount over Rs. 1,10,000 in addition to Its.

6,000 as stated above. This authority will remain in force for one month from date.” In pursuance of this contract the appellant found two persons ready and willing to pur- chase the property for Rs. 1,10,000 on the 2nd June and by letters exchanged with them he purported to conclude the contract for the sale of the propertY, and on the 3rd June communicated the same to the respondent. The respondent, however, cancelled the authority of the appellant on the 9th June and on the same date entered into an agreement with a nominee of the said persons for a sale of the property Rs.

1,05,000 and eventually executed a conveyance in their favour for Rs. 1,05,000. The appellant instituted a suit against the respondent for Rs. 6,000.

Held, per KANIA C.J., FAZL ALl, PATANJALI SASTRI and DAS JJ.–(i) that a house or estate agent is in a different position from a broker at the Stock Exchange owing to the peculiarities of the property with which he has to deal, and an owner employing an estate agent should not, in the ab- sence of clear words to that effect, be taken to have autho- rised him to conclude a contract of sale; but the lack of such authority is not inconsistent with an understanding that the agent is not to be entitled to his commission unless the owner and the purchaser introduced by the agent 31 carried the transaction to completion; (ii) that even if the commission note in the present case were to be construed as making payment of commission conditional on the completion of the transaction, the appellant having “negotiated the sale “and “secured buyers” who made a firm offer to buy for Rs. 1,10,000, acquired the right to the payment of commis- sion on the basis of that price subject only to the condi- tion that the buyers should complete the transaction of purchase and sale; and as this condition was fulfilled when the buyers eventually purchased the property in question, the appellant’s right to commission on that basis became absolute, and could not be affected by the circumstance that the respondent for some reason of his own sold the property at a lower price.

MAHAJAN J.–Under the terms of the commission note in the present case the appellant had authority to enter into a binding contract on behalf of the defendant, and, as he had entered into such a contract he was entitled to the commis- sion of Rs. 6,000 according to the terms of the commission note. Even conceding that he had no such authority, under the terms of the commission note the agent was entitled to his remuneration as soon as he introduced a buyer ready and willing to purchase for the price fixed by the owner, wheth- er the owner completed the transaction or not.

Luxor(Eastbourne) Ltd. v. Cooper ( [1941] A.C. 108) distinguished.

Chadburn v. Moore (67 L.T. 257), Rosenbaum v. Belson ( [1900] 2 Ch. 267), Durga Charan Mitra v. Rajendra Nararain Sinha (36 C.L.J. 467), Wragg v. Lovett ([1948] 2. All E.R.

969) referred to.

APPEAL from the High Court of Judicature atCalcutta:

Civil Appeal No. XLIV of 1949.

This was an appeal by special leave from a judgment and decree of the High Court of Judicature atCalcutta(Hatties C.J. and Mukherjea J.) dated 5th January 1948 which varied a judgment passed by a single Judge sitting on the Original Side of the same High Court (Gentle J.) dated 11th June, 1945. The facts of the case and the arguments of the Counsel appear fully in the judgment.

M.C. Setalvad (A. K. Sen with him), for the appellant.

B. Sen, for the respondent.

1950. March 14. The judgment of Kania C. J, and Fazl Ali, Patanjali Sastri and Das JJ., was delivered by Patan- jali Sastri J.: Mahajan J. delivered a separate judgment.

32 PATANJALI SASTRI J.–This is an appeal by special leave from a judgment and decree of the High Court of Judicature at Fort William in West Bengal dated 5th January, 1948, which varied a judgment and decree passed by a single Judge on 11th June, 1945, on the Original Side of the same Court.

The appellant who is carrying on business as an estate broker in Calcutta was employed by the respondent on the terms mentioned in a commission letter dated the 5th May, 1943, to “negotiate the sale” of premises No. 27, Amratolla Street, Calcutta, belonging to him. In pursuance of this contract the appellant found two persons who were ready and willing to purchase the property for Rs. 1,10,000, and by letters exchanged with them on 2nd June, 1943, he purported to conclude a contract for the sale of the property and communicated the same to the respondent by a letter of even date. The respondent, however, entered into an agreement on 9th June, 1943, with a nominee of the said persons for the sale of the property for Rs. 1,05,000 and eventually execut- ed a conveyance in their favour on 8th December, 1943.

Thereupon the appellant brought the suit alleging that the contract concluded by him with the purchasers for Rs.

1,10,000 on the 2nd June, 1943, was binding on the respond- ent and claimed that he was entitled to the payment of Rs.

6,000 as remuneration in accordance with the terms of his employment as he had done all that he was required to do on behalf of the respondent. In the alternative he claimed the same sum as damages for breach of contract. In defence to the suit the respondent pleaded, inter alia, that the appel- lant had no authority to conclude a binding contract for sale with any one, that the purchasers refused to complete the transaction alleging that they had been induced by the fraudulent misrepresentation of the appellant to agree to a price of Rs. 1,10,000, that the subsequent sale was effected independently of the appellant, and that the appellant was not therefore entitled to any remuneration or damages, 33 Gentle J. who tried the suit found that the terms of the appellant’s employment did not authorise him to conclude a contract of sale and that the letters of 2nd June, 1943, did not effect a contract of sale binding on the respondent.

The learned Judge, however, rejected the respondent’s case that the purchasers refused to purchase on the ground of any fraudulent misrepresentation by the appellant and that the negotiations were later resumed afresh directly between the respondent and the purchasers, and came to the conclusion that the agreement to sell of the 9th June, 1943, and the subsequent conveyance of 8th December, 1943, were due solely to the efforts of the appellant in bringing the parties together as potential buyers and seller. The learned Judge refused to accept the suggestion that the sale was in fact effected for Rs. 1,10,000 as not being supported by any evidence but found that the reduction of the price by Rs.

5,000 from Rs. 1,10,000 for which the purchasers were ready and willing to buy the property, was made only for the purpose of depriving the appellant of his legitimate remu- neration of Rs. 6,000. He accordingly held that the appel- lant, who had performed his part of the contract by finding two persons who were ready, able and willing to buy at Rs.

1,10,000 was entitled to the commission claimed.

The Division Bench (Harries C.J. and Mukherjea J.) which heard the appeal of the respondent, agreed with the trial Judge that the appellant’s authority did not extend to the concluding of a binding contract for sale of the property, but differed from his view that all that the appellant was required to do was to introduce a purchaser who was ready and willing to buy for Rs. 1,10,000 and that he was entitled to his commission whether or not the property was sold at that price or at all. They held, following certain observa- tions of Lord Russell of Killowen and Lord Romer in the case next mentioned, that the appellant, having undertaken to “negotiate the sale” and to “secure a buyer”, could not be said to have either secured a buyer or negotiated the sale “unless the sale actually took place or at least a contract had been entered into “. As, 34 however, a sale did take place between the persons in pro- duced by the plaintiff and the defendant, and as that sale, in the view also of the learned Judges, was the “direct result of the plaintiff’s negotiations”, they held that the appellant was entitled to commission but only on the price mentioned in the sale deed, namely,Rs. 1,05,000 which, they found was the price actually received by the respondent. As to why the respondent accepted a reduced price, Harries C.J., who delivered the judgment of the Court, observed:

“All that is known is that persons who undoubtedly made a firm offer of Rs. 1,10,000 for this property eventually bought it for Rs. 5,000 less. I strongly suspect that the price was reduced at the defendant’s instance but I cannot find it as a fact “. In support of their view that the appellant was not entitled to any commision above that payable on a purchase price of Rs. 1,05,000 the learned Judges relied on the decision of the House of Lords in Luxor (Eastbourne) Ltd. v.Cooper (1), where it was held that, in a contract to pay commission upon the completion of the trans- action which the agent was asked to bring about, there was no room for implying a term that the principal shall not without just cause prevent the agent from earning his com- mission, and that it was open to the principal to break off negotiations and refuse to sell even after the agent had produced a customer who was ready and willing to purchase on the principal’s terms. Applying what they conceived to be the principle of that decision, the Appellate Bench varied the decree of the trial Judge by reducing the amount payable to the appellant to a sum of Rs. 1,000.

The commission letter runs as follows:

“I, Animendra Kissen Mitter of No. 20-B, Nilmoni Mitter Street, Calcutta, do hereby authorise you to negotiate the sale of my property, 27, Amratolla Street, free from all encumbrances at a price not less than Rs. 1,00,000. I shall make out a good title’ to the property. If you succeed in securing a buyer for Rs. 1,00,000 I shall pay you Rs. 1,000 as your remuneration. If the price exceeds Rs. 1,05,000 and does not (1) [1941] A.C. 108.

35 exceed Rs. 1,10,000 I shall pay you the whole of the excess over Rs. 1,05,000 in addition to your remuneration of Rs.

1,000 as stated above. In case you can secure a buyer at a price exceeding Rs. 1,10,000 I shall pay you twenty-five per cent. of the excess amount over Rs. 1,10,000 in addition to Rs. 6,000 as stated above. This authority will remain in force for one month from date”.

In the absence of clear words expressing the intention of the parties it is possible to construe these terms in three different ways corresponding to the three patterns into which commission contracts with real estate brokers may broadly be said to fall. In the first place, the letter may be read as authorising the appellant not only to find a purchaser ready and willing to purchase the property at the price required but also to conclude a binding contract with him for the purchase and sale of the property on behalf of the respondent. Secondly, the contract may be construed as promising to reward the appellant for merely introducing a potential buyer who is ready, able and willing to buy at or above the price named, whether or not the deal goes through.

And lastly, the commission note may be understood as requir- ing the appellant to find such a purchaser without authoris- ing him to conclude a binding contract of sale but making commission contingent upon the consummation of the transac- tion. As stated already, the first of these interpretations was rejected by the learned trial Judge as well as by the Appellate Bench, but it was pressed upon us by Mr. Setalvad on behalf of the appellant. We are unable to accept that view. The contract specifies only the price required by the respondent but does not furnish the broker with other terms such as those relating to the payment of the price, the investigation and approval of title, the execution of the conveyance, the parties who are to join in such conveyance, the costs incidental thereto and so on. In fact, the- agree- ment of sale dated the 9th June 1943 entered into by the respondent with the purchasers contains detailed stipula- tions on all these and other matters. Mr. Setalvad laid stress on the statement in the commission note that the sale was to 36 be free from encumbrances and that a “good title” would be made out, but this is no more than a general indication of the nature of the bargain proposed and is perfectly consist- ent with an understanding that further details will be subject to negotiation between the respondent and the pur- chaser when found.

As pointed out by Kekewich J. in Chadburn v. Moore(1) a house or estate agent is in a different position from a broker at the stock exchange owing to the peculiarities of the property with which he is to deal which does not pass by a short instrument as stocks and shares do but has to be transferred after investigation of title as to which various special stipulations, which might be of particular concern to the owner, may have to be inserted in a concluded con- tract relating to such property. The parties therefore do not ordinarily contemplate that the agent should have the authority to complete the transaction in such cases. That is why it has been held, both in England and here, that author- ity given to a broker to negotiate a sale and find a pur- chaser, without furnishing him with all the terms, means “to find a man willing to become a purchaser and not to find him and make him a purchaser”: see Rosenbaum v. Belson(2) and Durga Charan Mitra v. Rajendra Narayan Sinha(3).

Mr. Setalvad next suggested, in the alternative, that the second interpretation referred to above, which was favoured by the trial Judge, should be adopted, and that, inasmuchs, in that view also, the appellant had done all that he was required to do when he introduced to the re- spondent two prospective buyers who were ready and willing to buy the premises for Rs. 1,10,000, he was entitled to commission on that basis. Learned counsel criticised the view of the Appellate Bench, who adopted the third construc- tion, as illogical and inconsistent, and argued that, if authority to secure a buyer were to be taken to mean author- ity to find one who is not only ready and willing to buy but also becomes eventually a buyer in order to entitle the agent to his commission, then such authority must of neces- sity (1) 67 L.T. 257. (2) [1900] 2 Oh. 267. (8) 86 C.L.J.

467.

37 extend to the concluding of a contract of sale, as otherwise the agent could not possibly accomplish the task assigned to him. We do not see much force in this criticism. As already indicated there are cogent reasons why an owner employing an estate agent to secure a purchaser should not, in the ab- sence of clear words to that effect, be taken to have autho- rised him to conclude a contract of sale, and we cannot see how the lack of such authority is inconsistent with an understanding that the agent is not to be entitled to his commission unless the owner and the purchaser introduced by the agent carried the transaction to completion.

In the present case, however, it is not necessary to decide whether or not the commission note imports such an understanding, for a sale was in fact concluded with the purchasers introduced by the appellant who has thus, in any view, earned his commission, both the trial Judge and the Appellate Bench having found that the appellant’s efforts were the effective cause of that sale. The only question is whether the commission is payable on the basis of Rs.

1,10,000 for which the appellant brought a firm offer from the purchasers, or on the basis of Rs. 1,05,000 which is the price mentioned in the conveyance.

As already stated, the Appellate Bench based their decision on the ruling in theLuxorcase. The learned Judges reasoned thus: “In that case the principal had re- fused to sell in circumstances which afforded no reasonable excuse. Nevertheless, the House of Lords, reversing the Court of Appeal, held that no commission was payable. It appears to me that the principle is applicable to this case.

Though the agent introduced a purchaser ready and willing to buy for Rs. 1,10,000 the sale for some reason took place at a lower figure. Even if the defendant unreasonably or without just cause refused to conclude the sale at the higher figure, nevertheless the plaintiff has no right to commission based on that higher figure “. We are unable to agree with this reasoning and conclusion. The ground of decision in theLuxorcase was that, where commission was made payable on the completion of the transaction, the agent’s right to commission was “a purely 38 contingent right” and arose only when the purchase materia- lised. As Lord Simon put it “The agent is promised a reward in return for an event and the event has not happened “.

But the position is different where the principal, availing himself of the efforts of the agent, concludes the sale with the purchaser introduced by him, as the respondent did in the present case. As observed by Lord Russell of Killowen in the same case, “where a contract is concluded with the purchaser, the event has happened upon the occurrence of which a right to the promised commission has become vested in the agent. From that moment no act or omission by the principal can deprive the agent of his vested right”. Apply- ing that principle, (even if the commission note in the present case were to be construed as making payment of commission conditional on the completion of the transaction, as it was in the English case) the appellant, having “nego- tiated the sale” and, secured buyers” who made a firm offer to buy for Rs. 1,10,000 had done everything he was required by the respondent to do and acquired a right to the payment of commission on the basis of that price which he had suc- cessfully negotiated, subject only to the condition that the buyers should complete the transaction of purchase and sale.

The condition was fulfilled when those buyers eventually purchased the property in question, and the appellant’s right to commission on that basis became absolute and could not be affected by the circumstance that the respondent “for some reason” of his own sold the property at a lower price.’ We accordingly hold that the appellant is entitled to the full commission of Rs. 6,000.

The appeal is allowed, the decree passed on appeal in the Court below is set aside and that of the trial Judge restored. The appellant will have the costs of this appeal including the costs incurred in the lower court as well as his costs of the appeal in that court.

MAHAJAN J.–This is an appeal by special leave from a judgment and decree of the High Court atCalcutta, dated 5th January 1948. By that judgment the High 39 Court varied the judgment and decree of Gentle J. dated 11th June 1945 made in exercise of his original jurisdiction, decreeing the plaintiff’s suit for recovery of a sum of Rs.

6,000.

The appellant is a broker by profession residing at No.

81/1 Phear Lane,Calcutta, and carries on the business of a house agent. The respondent, Animendra Kissen Mitter, re- sides in No. 20B,Nilmony Mitter Street,Calcutta.

The appellant was employed by the respondent to negoti- ate the sale of the respondent’s premises, No. 27, Amratolla Street, Calcutta, on certain terms and conditions on commis- sion and the question raised by this appeal is whether the appellant is entitled to his commission under the circum- stances hereinafter mentioned.

The facts are substantially admitted. By a letter dated 5th May, 1943, the appellant was employed by the respondent for arranging a sale of the premises above mentioned. This letter is in the following terms :– “I, Animendra Kissen Mitter of No. 20B, Nilmoni Mitter Street, Calcutta, do hereby authorize you to negotiate the sale of my above property free from all encumbrances at a price not less than Rs. 1,00,000. I shall make out a good title to the property. If you succeed in securing a buyer for Rs. 1,00,000 I shall pay you Rs. 1,000 as your remuner- ation. If the price exceeds Rs. 1,05,000 and does not exceed Rs. 1,10,000 I shall pay you the whole of the excess over Rs. 1,05,000 in addition to your remuneration of Rs.

1,000 as stated above. In case you can secure a buyer at a price exceeding Rs. 1,10,000. I shall pay you twenty-five per cent. of the excess amount over Rs. 1,10,000 in addition to Rs. 6,000 as stated above. This authority will remain in force for one month from date.” As recited in the letter, the authority given to the appellant was to remain in force for one month from 5th May 1943. Three days before the termination of the appellant’s authority, on 2nd June 1943 the plaintiff appellant obtained an offer from two persons namely, 40 Kishorilal Mahawar and Ramkumar Mahor, for the purchase of the premises regarding which the plaintiff had been author- ized to arrange a sale. This letter is in these terms :- “We are willing to purchase the above house, land and premises at and for the price of Rs. 1,10,000 only free from all encumbrances.

We hereby authorize you to accept the offer for sale of the above premises from Mr. A.K. Mitter for Rs. 1,10,000 on our behalf and send the confirmation to the vendor Mr. A.K.

Mitter on our behalf.” On the same date the plaintiff gave a reply which runs thus :– “I am in receipt of your letter of date and under au- thority from the owner Mr. A.K. Mitter, I hereby confirm your offer for the purchase of the above premises at and for the price of Rs. 1,10,000 free from all encumbrances.” Simultaneously with the issue of this letter he gave intimation of this contract to the respondent in the follow- ing terms :– “Under the authority given to me by you I made an offer for the sale of the above premises to Messrs. Kishorilal Mahawar and Ram Kumar Mahor of No. 27, Amratolla Street, Calcutta, for rupees one lakh and ten thousand only and they have accepted the offer and they have authorized me to send a confirmation to you of the said offer. I accordingly confirm the offer made by you for the sale of the above premises for rupees one lakh and ten thousand only. The draft agreement for sale will be sent to you in the usual course.

A copy of the letter of Messrs. Kishori Lal Mahawar and Ram Kumar Mahor accepting your offer is enclosed herewith.” The letter was received by Mitter on 3rd June 1943, two days before the termination of the plaintiff’s authority.

The respondent made no reply and kept silent. He did not question the agent’s authority in effecting a binding con- tract of sale with the purchasers. He did not repudiate the transaction nor did he 41 expressly ratify it. It was the plaintiff’s case that he had accepted the purchasers’ offer after getting express instructions from the respondent. That case, however, was not accepted in the two courts below.

On 3rd June, 1943, the solicitor for the purchasers wrote to the solicitor for the agent that as the offer of his client for the purchase of 27,Amratolla Streethad already been accepted and acceptance communicated to him, the title deeds should be sent so that a conveyance may be prepared. At his request inspection of the letter of au- thority was offered by the plaintiff and a copy of the letter was sent to him by post. On receipt of this copy the purchasers’ solicitor assumed a curious attitude. He said that the copy of the letter sent contained different terms as to commission than those contained in ‘the letter of authority originally shown to his client. The plaintiff was charged with making a secret illegal gain. In spite of these allegations it was asserted that the contract was a concluded one and that being so, the plaintiff was bound to refund to the purchasers whatever moneys he would receive from the vendor. It appears that the purchasers’ attorney did not like the idea of the plaintiff pocketing a sum of Rs. 6,000 out of the purchase price, and this dislike on the part of the purchasers for the broker’s commission has led to further complications resulting in this litigation.

On 9th June, 1943, the purchasers’ solicitor wrote to the plaintiff’s solicitor that his client had cancelled the agreement of purchase. Immediately on receipt of this communication the plaintiff’s solicitor replied expressing surprise at this attitude and accused the other party of a change of front with an ulterior motive. It was said that further instructions would be given after getting instruc- tions from Mitter to whom these letters were forwarded. It seems that the plaintiff was in the dark while writing the letter of 9th June, 1943, of the negotiations that were going on behind the scene directly between the purchasers and the vendor who had kept absolutely silent all this time.

On 9th June the date of the alleged 42 cancellation of the bargain already made, an agreement was executed between Animendra Kissen Mitter, the vendor, and Makkanlal, a benamidar of Kishorilal Mahawar and Ramkumar Mahor (the purchasers) for sale of the premises for a sum of Rs. 1,05,000. The sale deed in pursuance of this agreement was actually executed on 8th December, 1943, in favour of the original purchasers and not in favour of the benamidar.

As pointed out by the learned Chief Justice who delivered the judgment of the appellate Bench, possibly some arrange- ment was made whereby both the defendant and the purchasers benefited by the insertion of a lower price in. the contract of sale and the transfer deed. It seems obvious enough that the defendant having received a firm offer of Rs. 1,10,000 for this property could not have parted with it for Rs. 5000 less except on the basis of some arrangement between himself and the purchasers under which both of them shared the commission instead of paying it to the broker. It was to the advantage of both of them.

On 14th August, 1943, the appellant filed the suit out of which this appeal arises for recovery of Rs. 6,000, brokerage payable under the commission note. He also claimed relief by way of damages in the alternative. The defendant resisted the suit and denied the appellant’s claim. Gentle J. who heard the suit, gave judgment for the plaintiff and passed a decree for a sum of Rs. 6,000, with interest and costs in his favour. He held that on a true construction of the commission note the appellant’s authority was to find a purchaser, namely, a man ready, able and willing to buy at a price acceptable to the respondent and that the appellant had accomplished this when he introduced to the respondent the purchasers and that he had done all that was required of him. It was held that the appellant had no authority to conclude a contract of sale and no binding contract of sale was made on 2nd and 3rd June, 1943, that the transaction effected nominally in the name of Makkanlal and completed on 8th December, 1943, in favour of Kishorilal Mahawar and Ramkumar Mahor, was effected solely through the intervention of the appellant who brought 43 the parties together in the capacity at least of a potential buyer and seller, that the reduction of the price by Rs.

5000 from Rs. 1,10,000 was more than peculiar and that this reduction was made for one purpose and that was to deprive the plaintiff of his remuneration.

The respondent preferred an appeal against this decree.

This was partially allowed by the learned Chief Justice and Mukherjea J. on the following findings:that the appellant procured two persons, viz. Kishorilal Mahawar and Ram kumar Mahor, on 2nd June, 1943, who were willing to buy the property for Rs. 1,10,000, that on.a true construction of the contract of agency no commission was payable until at least a binding contract had been entered into between the appellant and the respondent, that the agent could only be said to have negotiated the sale if he introduced a person willing to buy who eventually bought, that the sale took place between the persons introduced by the appellant and the respondent and it was the direct result of the appel- lant’s agency, that the commission note gave no authority to the appellant to conclude a contract of sale, that Makkanlal with whom the sale agreement dated 9th June was entered into was a benamidar of Kishorilal Mahawar and Ramkumar Mahor, that the appellant had no right to commission on a higher price than for which the sale was actually made and as the sale was actually made for Rs. 1,05,000, his remuneration could not exceed a sum larger than Rs. 1,000. On the basis of these findings the appeal was allowed and the decree granted by Gentle J. was modified and the plaintiff’s suit was decreed in the sum of Rs. 1000. order for costs was made in the appeal.

In this appeal Mr. Setalvad for the plaintiff raised three contentions: (1) That the finding of the court below that on a true construction of the commission note the plaintiff had no authority to make a binding contract re- garding the sale of this property with the purchasers was erroneous; (2) That even if that finding was correct, the plaintiff was entitled to a decree 44 for the sum of Rs. 6,000, because he had done all that he had promised to do for the respondent, viz., he had secured a purchaser for Rs. 1,10,000, who was ready, able and will- ing to buy the property and that if by reason of his own caprice or in collusion with the purchasers, the respondent did not sell the property for Rs. 1,10,000 but chose to receive instead Rs. 1,05,0O0, the plaintiff could not be made to suffer. (3) That on the evidence it should have been held that the sale was made for a price of Rs. 1,10,000 and that the amount entered in the sale deed was fictitious.

The first thing to see is what the parties have ex- pressed in the commission note and what is the true effect of the language employed in it, read in the light of the material facts. As pointed out by Viscount Simon, Lord Chancellor, inLuxor(Eastbourne), Ltd. v. Cooper (1), contracts with commission agents do not follow a single pattern and the primary necessity in each instance is to ascertain with precision -what are the express terms of the particular contract under discussion. I have very carefully considered the terms of this contract in the light of the material circumstances and with great respect to the Judges who decided this case in the High Court, I am of the opinion that the authority given by the principal to the agent authorized him to enter into a binding contract to sale on his behalf. It was not a mere authority authorizing him to find a purchaser willing, able and ready to buy the premises for a price mentioned in the document. The note, to begin with, confers authority on the plaintiff to negotiate a sale free from all encumbrances at a price not less than Rs.

1,00,000. Then it proceeds to say that the principal under- takes to make out a good title to the property. It further provides that if the agent succeeds in securing a buyer for Rs. 1,00,000, he will be paid a sum of Rs. 1,000 as remuner- ation. In the concluding part of the note a scale of com- mission proportionate to the price has been promised in case a price higher than Rs. 1,00,000 was secured. In express words it is said that if the price exceeds Rs. 1,05,000 and does not exceed Rs. 1,10,000, (1) [1941] A .C . 108.

45 “I shall pay you the whole of the excess over Rs. 1,05,000 in addition to your remuneration of Rs. 1,000”, that if a buyer is secured at a price exceeding Rs. 1,10,000, he will be paid 25 per cent of the excess amount over Rs. 1,10,000 in addition to Rs. 6,000. The authority of the agent was to remain in force for one month. In my opinion, the terms of the note as regards the property being free from encum- brances and in respect of the guarantee about title indicate that the agent was given authority to make a binding con- tract. In a bare authority conferring power on a broker for introducing a customer, these stipulations would ordinarily find no place. The words “to negotiate a sale” standing by themselves may not authorize an agent to make a contract of sale. But here they do not stand by themselves. They are followed by two important conditions adverted to above. The agreement further lays down that if the broker succeeds in securing a buyer, he will get a certain remuneration.

Gentle J. observed that the word “securing” here had the meaning of “obtaining a buyer”. I have consulted the same dictionary as the learned Judge did and I find that the true meaning of the expression “securing a buyer” is “to obtain a buyer firmly “. It is not possible in business sense to secure a buyer firmly unless he is bound by an offer and an acceptance. Otherwise, he is entitled to withdraw the offer at any time before acceptance and it cannot in this situa- tion be said that a buyer has been secured firmly. The word” secure” has not the same meaning as the word “find” or “procure”. It gives an idea of safety and certainty. If a buyer is ensured, he is said to be secured and no buyer can be said to be ensured till he is bound by his offer and that cannot happen unless it stands accepted. The agent could only secure a buyer in the strict sense of the term if he had authority to enter into a binding contract. The word “buyer” when used in a strict sense also means “a person who has actually made the purchase” The authority given to an agent to secure a buyer therefore gives him authority to enter into a binding contract of sale with him. Without such an authority it 46 was not possible to secure a buyer. I am further supported in this view by the language employed in the document in respect of the payment of the commission. When the price secured was Rs. 1,10,000, the broker was entitled to 25 per cent. of the excess. It is difficult to think of an excess in relation to price in a stipulation for commission unless the agent has been given an authority to make a contract of sale. If the scope of the authority is only to introduce a customer ready, able and willing to buy the property with an option to the principal to accept or to refuse the offer, then it would have been drawn up in a different language.

The subsequent conduct of both the parties to the .

agreement very strongly supports this view. The evidence of such conduct is relevant in this case because, as pointed out by Viscount Simon, L.C., in the case already referred to, the phrase “finding a purchaser” is itself not without ambiguity. Here the phrase is “securing a purchaser “.

This phrase similarly is not without ambiguity. The evi- dence of conduct of the parties in this situation as to how they understood the words to mean can be considered in determining the true effect of the contract made between the parties. Extrinsic evidence to determine the effect of an instrument is permissible where there remains a doubt as to its true meaning. Evidence of the acts done under it is a guide to the intention of the parties in such a case and particularly when acts are done shortly after the date of the instrument. (Vide para. 343 of Hailsham Edn. of Hals- bury, Vol. 10, p. 274).

So far as the conduct of the agent is concerned, he accepted the offer and under his own signature sent the letter of acceptance to the purchasers. In the letter writ- ten by him to his principal he specifically refers to his authority. The correspondence above mentioned clearly shows that both the purchasers and the agent thought that a concluded contract had been made. Information of this was given to the vendor and though he did not speak, his silence in the circumstances of the case seems as eloquent as speech would have 47 been. He never repudiated the contract made by the agent but behind his back entered into a fresh contract with the same persons who had been secured by the agent in a surrep- titious manner. In the witness box he assumed a dishonest and untruthful attitude. The learned trial Judge pronounced him a liar and rightly too. He asserted complete ignorance about the subsequent contract of sale and fixed all blame on to his son When asked about the sale price on the contract of 9th June, 1943, his answer was that he knew nothing about this and said that because his son asked him to sign the deed he did sign it and that was all that he knew. When faced with the sale deed, he said that he did not know what his son had told him as to what was written in the deed. He added that he did not know what consideration was paid to him for the sale. He further professed not to know whether the sale price went into his banking account or was even entered in the account books. After a great deal of prevari- cation he was made to accept the document of 5th May, 1948, and its terms. He admitted that on 3rd June he had a conver- sation with the purchasers and was informed by them that they had entered into a bargain with the broker and that the broker had deceived them about the commission and therefore they would not buy the house. He admitted that he got the letter sent by the plaintiff, but gave no explanation as to why he sent no reply to that letter. With great difficulty he was made to accept his signature on the postal acknowl- edgment about the receipt of the letter sent by the broker to him informing him of the concluded bargain made with the purchasers, and he had to admit that he got that letter from the broker. He also admitted that he took no objection to the letter written by the broker before Kishoribabu had told him the story about the commission of two per cent. In further cross-examination he admitted that what was stated by the broker in the letter of the 2nd June was correct.

The whole evidence given by the defendant consists of eva- sive statements and his ultimate resort was in lapses of memory. It is quite clear from his deposition that the respondent accepted the contract made by the agent and was clearly under the 48 belief that the agent had not exceeded his authority in entering into a binding contract with the purchasers. I am therefore of the opinion that the authority given to the agent in this case was an authority to enter into a binding contract of sale and this he did and he was therefore enti- tled to his commission of Rs. 6,000.

The learned single Judge and the learned Judges of the Court of Appeal found otherwise on this part of the case in view of certain decisions of English Courts and a decision of a Division Bench of the Calcutta High Court. In my opinion, none of those cases touch the present case. Unless the language of two documents is identical, an interpreta- tion placed on one document is no authority for the proposi- tion that a document differently drafted, though using partially similar language, should be similarly interpreted.

In Hamer v. Sharp(1) Sir Charles Hall, V.C., considered the case of an authority of an agent for sale appointed by the owner of an estate. The document in that case was in these terms :– “I request you to procure a purchaser for the following freehold property, and to insert particulars of the same in your Monthly Estate Circular till further notice, viz., my beer house and shop No. 4 and No. 6 Manchester Road, Tenant No. 4, William Galloway, gilder, and No. 6, Albert Vaults, Henry Holmes, beer retailer, and work rooms above. Present net rent, pound 150, price pound 2800, when I will pay you a commission and expenses of fifty pounds. About six years’ lease unexpired.” The Vice-Chancellor observed as follows :– “The question is whether, when an owner of an estate puts it into the hands of an estate agent for sale, stating a price for and giving particulars of the property to enable him to inform intending purchasers, but giving no instruc- tions as to the absolute disposal, and none as to the title of the property, and mentioning none of those special stipu- lations which it might be proper to insert in conditions in reference to the title, (1) L.R. 19 Eq. 108, 49 that is sufficient authority to the agent to sign a contract for the sale of the property for the price stated in the instructions, without making any provision whatsoever as to title. In considering whether the instructions of October, 1872, were a sufficient authority to the agent for that purpose, I cannot help expressing an opinion that such an authority to an agent on the part of a vendor would be highly imprudent, as the purchaser would then be entitled to require, on completion, attested copies of all documents of title, and the expense of them would swallow up, to a great extent, the purchase money. This estate agent must have known that if this property had been offered for sale by public auction there would have been conditions to guard the vendor against being subject to certain expenses, and to prevent the contract becoming abortive by reason of a pur- chaser requiring a strictly marketable title. Could he suppose that he was invested with authority to sign a con- tract without considering what it should contain as regards title ? As an intelligent and well informed person, he could not suppose that he was properly discharging his duty to his principal when he signed the contract which he signed; such a contract was not one within the scope of his authority to sign.” The case therefore stood decided on the construction of the document. It was remarked that in those circumstances it was not necessary to decide what words would confer such an authority. Having said so, the learned Vice-Chancellor proceeded to observe as follows :– “but I nevertheless state my opinion to be, that when instructions are given to an agent to find a purchaser of landed property, he, not being instructed as to the condi- tions to be inserted in the contract as to title, is not authorized to sign a contract on the part of the vendor.

This case can hardly be said to be an authority for the construction of the agreement that we are called upon to construe in the present case. Considerable emphasis was laid in that case on the point that no instructions had been given as to the conditions that had to be 50 inserted in the agreement as to title. In the present case the agent was told that the principal guaranteed marketable title. He was further told that the sale should be free of encumbrances. All the material conditions of sale were thus contained in the present agreement.

The next case on which considerable reliance was placed in the courts below is the case of Chadburn v.Moore(1).

In this case an advertisement appeared in the Daily Tele- graph in these words :– “Forced sale by order of the mortgagees–thirty four well built houses, situated at Grays, close to the station on theLondon, Tilbury, and Southend Railway, within easy reach of the docks, all let to respectable tenants at rents amounting to pound 620 per annum. Held for about ninety-five years at ground rents amounting to pound 146; price pound 3500, of which pound 3000 can remain on mortgage. For further particulars apply to Messrs. Pinder, Simpson and Newman, 33 and 34, Savilerow,London, W.” In response to this advertisement the plaintiff in that case, James Chadburn, called on Messrs. Pinder, Simpson and Newman, a firm of surveyors and estate agents, for further information. He then went to see the houses and came back and made an offer to purchase them, which was reduced to writing. It appeared from the evidence that the offer was to be submitted by Mr. Newman to his client the defendant, and the plaintiff was to return the next day for an answer.

Newman saw the defendant, who gave him instructions to withdraw five of the houses, and fixed the price, but did not, according to the evidence given in court, give instruc- tions to Newman to enter into a binding contract. Later on the plaintiff called on Messrs. Pinder, Simpson and Newman and two letters were exchanged between them, which were letters of offer and acceptance for the twenty-nine houses at Grays. The offer and acceptance were forwarded by the defendant to the estate agents. The defendant on receiving this offer wrote a letter saying inter alia:- (1) 67 L.T. 257 51 “I think you were, as you usually are, a little prema- ture in actually entering into what might be a binding contract. It is always best to have an offer and acceptance subject to a formal contract being entered into… ” To this Newman replied:- “The offer for the above was accepted under your definite instructions and is a very good get out for you.” Kekewich J., who decided this case, gave the following judgment :– “Having heard Mr. Newman, who was called without the plaintiff knowing what he was going to say, and having read the correspondence, I have little doubt that I have the real transaction–which is a mere transaction between prin- cipal and agent–before me. It might be’ that a different colour would be put upon the matter by the cross-examination of Mr. Moore, but this was not done, and he is entitled to have judgment upon the point of law.Moore undoubtedly authorized Newman to find a purchaser for the houses. It is true the expression does not come out on the correspondence.

On the second occasion Newman appears to have been instruct- ed to negotiate a sale. Whatever else he did do, Mooredid not in express. terms authorize Newman to enter into a contract.Newman was to find a purchaser, and to negotiate a sale. Is that sufficient ? No evidence was given as to custom; no evidence was brought to show that the position of a house or estate agent resembles that of a broker on the Stock Exchange or any other exchange. A house or estate agent is in a different position, owing to the peculiarity of the property with which he has to deal, which does not pass by a short instrument as stocks and shares do, but has to be transferred after investigation of title and in ac- cordance with strict laws. An agent fox sale of real estate must be more formally constituted than a seller of stocks and securities of a similar nature. There is no definite authority; in Hamer v. Sharp (1), Hall, V.C., does not (1) 19 Eq. 108.

52 go so far as to say an estate agent cannot enter into any contract, and does not decide the question of authority, but only states his opinion. I must perforce refer to Prior v.

Moore(1), where I indicated my own opinion distinctly, that instruction to a house agent to procure a purchaser and to negotiate a sale does not amount to authority to the agent to bind his principal by contract. Here the circumstance must not be forgotten thatMooreon the second occasion told Newman what he was prepared to take for the twenty-nine houses. Newman then jumped at the conclusion that he had power at that price to enter into a contract. That is in my opinion not sufficient, and unless express authority is given to the agent to sell, and for that purpose to enter into a binding contract, the principal reserves his final right to accept or refuse. ” In this case there was no written document between the principal and the agent. From the correspondence it was inferred that the principal had asked the agent to find a purchaser or to negotiate a sale and it was held that within these words an authority to sell could not be spelt out.

Not only is the language of the document with which we are concerned different, but the evidence in the case particu- larly about the conduct of the parties is materially differ- ent. The observations made by the learned Judge must be taken to be limited to the facts found by him. The expres- sions “find a purchaser” “procure a purchaser” “negotiate a sale” standing by themselves may not ‘be sufficient to confer authority on the agent to enter into a binding con- tract on behalf of the principal; but as I have indicated above, the words in the present case are such as by neces- sary implication conferred authority on the agent for making a binding contract.

The next case is Durga Charan Mitra v. Rajendra Narain Sinha (2), a Bench decision of the Calcutta High Court. The document considered in that case bears considerable resem- blance with the document in the present case.

(1) 3 T.L.R.624. (2) 36 C.L.J.467.

53 It was in these terms :– “I hereby authorize you to negotiate the sale of the lands at Tolligunge I have recently purchased from Messrs Martin and Co. If you can secure a purchaser to purchase the same at the gross value of Rs. 16,000, I shall pay you Rs. 200 as your remuneration. If you be able to raise the price to any amount above Rs. 16,000, you will be entitled to the excess amount fully and I shall be bound to mention the whole amount in the conveyance.

Please note that this letter of authority will remain in force for a fortnight only to complete the transaction;

after that this letter will stand cancelled.” The agent acting on this authority sold the property. On receipt of this letter the vendor informed the agent that he would not sell the land. On the acceptance of the agent a suit was brought for specific performance. Sir Asutosh Mookerjee who delivered the judgment of the Bench referred to the cases of Hamer v. Sharp (1), Prior v. Moore (2), Chadburn v. Moore (3), and also Rosenbaum v. Belson (4), and observed that it was well settled that an estate or house- agent, authorized to procure a purchaser, has no implied authority to enter into an open contract of sale, because the transaction mentioned is as specified in the letter, viz., to negotiate a sale after securing a purchaser. There is similarity in the language employed in the letter dealt with in this case and the letter of authority with which we are concerned; but read as a whole, the two documents are drafted with ‘different intents and the true effect of both is not the same. There was no mention of the title being guaranteed by the vendor or of the sale being made free of encumbrances in that case. There was no evidence of sur- rounding circumstances or of the conduct of the parties. On the other hand, the plaintiff who was himself a solicitor realized the difficulties of the situation and endeavoured to alter the foundation of his claim. He conceded that as a broker he had no authority to sell the property and that he (1) 19 Eq. 108. (8) 67 L.T. 257, (2) 3 T.L.R. 624 (4) (1900) 2 Ch. 267.

54 could not have taken a conveyance of sale of the plot. In the present case the attitude adopted by the parties, as already pointed out, was entirely different. Sir Asutosh Mookerjee also cited the case of Rosenbaum v. Belson (1).

In this case the learned Judge made the following observa- tions:- ” To my mind there is a substantial difference between those expressions. Authorizing a man to sell means an authority to conclude a sale; authorizing him to find a purchaser means less than that–it means to find a man willing to become a purchaser, not to find him and also make him a purchaser.” In Saunders v. Dence (2), Field J. distinguished Hamer v. Sharp(s), saying that ‘all that Hall, V.C.,in that case decided, as I understand it, was that if you go to an estate agent, and tell him you have a property to sell, and that you want a purchaser, and you tell him what you have made up your mind shall be the price, and to a certain extent what shall be the conditions, and you instruct him to try and find a purchaser, that is not sufficient, under those cir- cumstances, to authorize the agent to make a contract with- out any conditions whatever with regard to the title’.

I have been unable to find any case in which it has been held that instructions given by A.B. to sell for him his house, and an agreement to pay so much on the purchase price accepted, are not an authority. to make a binding contract, including an authority to sign an agreement.

In my opinion, on the terms of the instrument in this case and in view of the relevant evidence the correct con- clusion to draw is that the agent had authority to enter into a binding contract with the purchaser and that he did and is therefore entitled to succeed in the case. Reference in this connection may be made to Wragg v. Lovett (4), where Lord Greene, M.R., put the proposition in these words :– “Whether or not the agents were authorized (or, what in law is the same thing, reasonably understood (1) (1900) 2 Ch. 267. (3) 19 Eq. 108.

(2) 52 L.T. 644. (4) [1948] 2 A.E.R. 969.

55 themselves to be authorized) to make this particular con- tract”, and it was held that the proper inference from all the facts of the case was that the defendant was satisfied to allow his agents to make whatever contract they thought best and relied on them to protect his interests provided, and provided only, that they obtained the desired statement from the plaintiff as to his intention to remain in the house. The answer to the question depends on the facts of each individual case and though authority to make a binding contract has not to be lightly inferred from vague or ambig- uous language but from substantial grounds, that however does not mean that in express words it should be stated that the agent is authorized to sell the property.

The learned Chief Justice in the judgment under appeal observed that “the agent had undertaken to negotiate a sale and secure a buyer. He could not be said to have either secured a buyer or negotiated a sale unless a sale actually took place or at least a contract of sale had been entered into”. If that is the correct construction of the note, then in my judgment, the true implication of the note is that the agent was authorized to enter into a binding con- tract, because otherwise he could not have secured a buyer.

Later on, the learned Chief Justice while referring to the case of Rosenbaum v. Belson(1), took the view that authoriz- ing a man to sell meant an authority to conclude a sale and authorizing a man to find a purchaser meant less than that. It meant finding a man willing to become a purchaser, not to find him and also make him a purchaser. If that was the duty entrusted to the agent, then he had clearly per- formed his duty and was entitled to his commission.

For the reasons given above I am of the opinion that the plaintiff had authority to enter into a binding contract on behalf of the defendant and he entered into such a contract and thereby earned the commission which he has claimed in the suit and he is entitled to a (1) [1900] 2 Ch. 267.

8 56 decree in the sum of Rs. 6,000 which the trial Judge had given to him, with all costs throughout.

Conceding for the sake of argument that the construction that I have placed on the agreement entered into between the principal and the agent is not the correct one, the question arises .whether in that event the decision under appeal can be maintained. I am inclined to the opinion that even on the construction placed by the trial Judge on the commission note the view taken by him was the correct one and the court of appeal arrived at a wrong conclusion by giving too much importance to certain obiter observations of Lord Russell of Killowen and Lord Romer in Luxor (Eastbourne) Ltd. v. Coop- er(1). In this very case it was pointed out by Viscount Simon L.C. that there were at least three different classes of cases in which the question of a right to commission could arise. He states the first of them in these terms :– “There is the class in which the agent is promised a commission by his principal if he succeeds in introducing to his principal a person who makes an adequate offer, usually an offer of not less than the stipulated amount. If that is all that is needed in order to earn his reward, it is obvi- ous that he is entitled to be paid when this has been done, whether this principal accepts the offer and carries through the bargain or not. No implied term is needed to secure this result.” In my opinion, the present case falls within this class of case and commission became payable on the introduction of a willing buyer by the agent to the principal.

In Burcheil v. Cowrie & Blockhouse Collieries Ltd.(2) it was observed by their Lordships of the Privy Council that if an agent brings a person into relation with his principal as an intending purchaser, the agent has done the most effec- tive, and, possibly, the most laborious and expensive, part of his work, and that if the principal takes advantage of that work, and, behind the back of the agent and unknown to him, sells to the purchaser thus brought into touch with him on terms (1) [1941] A.C. 108. (2) [1910] A.C. 614.

57 which the agent theretofore advised the principal not to accept, the agent’s act may still well be the effective cause of the sale and that there can be no real difference between such a case and those cases where the principal sells to the purchaser introduced by the agent at a price below the limit given to the agent.

In Inchbald v. Western Neilgherry Coffee etc. Co. (1) Willes J. thus lays down the rule of law applicable to such cases :– “I apprehend that wherever money is to be paid by one man to another upon a given event, the party upon whom is cast the obligation to pay, is liable to the party who is to receive the money if he does any act which prevents or makes it less probable that he should receive it.” The rule has been stated by Story on Agency at page 404 in the following terms :– “The general rule of law, as to commissions, undoubtedly is, that the whole service or duty must be performed, before the right to any commissions attaches, either ordinary or extraordinary; for an agent must complete the thing required of him, before he is entitled to charge for it. In the case of brokers employed to sell real estate, it is well settled that they are entitled to their commission when they have found a purchaser, even though the negotiations are conduct- ed and concluded by the principal himself; and also where there is a failure to complete the sale in consequence of a defect in title and no fault on the part of the brokers.” In my judgment therefore, Gentle J. was right when he held on the interpretation placed by him on the document that the plaintiff had earned his commission in full inas- much as he had secured a buyer who was ready, able and willing to buy the property for Rs. 1,10,000.

As I have indicated above, if the word “buyer” is to be construed in a strict sense, then it must be held that the broker had authority to secure a buyer of that type and he could only do so by making a binding (1) [1864] EngR 72617 C.B. (N.S.) 733.

58 contract with him. On the other hand, if the word is taken to mean a potential buyer, such a buyer having been secured, the agent was entitled to the commission that had been promised to him.

It is now convenient to consider the case of Luxor (Eastbourne) Ltd. v. Cooper(1) in some detail because cer- tain observations made by Lord Russell of Killowen and Lord Romer are the basis of the decision of the learned Chief Justice. In this case no commission note was addressed to the broker and the contract was not contained in any docu- ment. Evidence in support of the commission agreement was oral and its terms had to be deduced from that evidence.

Viscount Simon L.C., out of the materials from which express contract had to be pieced together, reached the result that the bargain was this:

“If a party introduced by the respondent should buy the cinemas for at least pound 1,85,000, each of the two appel- lants would pay to the respondent pound 5,000 on the comple- tion of the sale.” No such sale took place, and in those circumstances it was held that there could be nothing due to the respondent on the terms of the express bargain. It was then argued that since the proposed purchasers introduced by the re- spondent were and remained willing and able to buy the properties for the minimum price, while the appellants did not close with the offer, the appellants were liable in.

damages to the respondent for breach of an implied term of the commission contract. In the statement of claim the implied term was said to be that the appellants would” do nothing to prevent the satisfactory completion of the trans- action so as to deprive the respondent of the agreed commis- sion.” The breach pleaded was the failure to complete the contract of sale with the respondent’s client and the dis- posal of the subject-matter in another quarter. The Lord Chancellor was of the opinion that the suggested implied term was not necessary in this contract and it was observed that in contracts made with commission agents there was no justification for introducing an implied term unless it was necessary to (1) [1941] A.C. 108.

59 do so for the purpose of giving to the contract the business effect which both parties to it intended it should have.

Lord Russell of Killowen in his opinion said that the only right of the plaintiff was to receive his commission out of the purchase moneys if and when received. His right was a purely contingent right. He stood .to earn a very large sum at comparatively small pains, taking the risk of either side withdrawing from the negotiations before any binding contract of sale and purchase was concluded, or of the contract for any reason not being carried to completion.

In this view of the case the action was bound to fail and no occasion arose for pronouncing on the correctness or other- wise of the view expressed by the Court of Appeal in Trol- lope & Sons v. Martyn Brothers (1). Then it was said that as the question of these commission contracts was discussed at great length, that furnished an excuse for stating brief- ly conclusions which his Lordship’s mind, free as it was from the fetter of previous decisions, reached. In dealing with the subject the following observations were made :– “I can find no safe ground on which to base the intro- duction of any such implied term. Implied terms, as we all know, can only be justified under the compulsion of some necessity. No such compulsion or necessity exists in the case under consideration. The agent is promised a commission if he introduces a purchaser at a specified or minimum price. The owner is desirous of selling. The chances are largely in favour of the deal going through, if a purchaser is introduced. The agent takes the risk in the hope of a substantial remuneration for comparatively small exertion.

In the case of the plaintiff his contract was made on Sep- tember 23, 1935; his client’s offer was made on October 2, 1935. A sum of I0,000 (the equivalent of the remuneration of a year’s work by a Lord Chancellor) for work done within a period of eight or nine days is no mean reward, and is one well worth a risk. There is no lack of business efficacy..in sUCh a contract, I even (1) [1934] 2 K.B. 436.

60 though the principal is free to refuse to sell to the agent’s client.

The position will no doubt be different if the matter has proceeded to the stage of a binding contract having been made between the principal and the agent’s client. In that case it can be said with truth that a ‘purchaser’ has been introduced by the agent; in other words, the event has happened upon the occurrence of which a right to the prom- ised commission has become vested in the agent. From that moment no act or omission by the principal can deprive the agent of that vested right.” It is the observations last quoted which are the basis of the decision of the learned Chief Justice in the present case. It seems to me that these observations had reference to cases visualized by Lord Russell of Killowen in the earlier part of this quotation with specific reference to the facts found in that case and cannot apply to all cases where the word ‘ purchaser ‘ or ‘buyer’ has been loosely used in a different context.

Lord Romer in his opinion made the following observa- tions :- “But supposing that a contract by one person to pay another a sum of money in the event of the latter performing an unsolicited service to the former is as much subject to an implied condition as if the latter had been employed to perform the service, the condition is in general one that merely imposes on the former a negative and not a positive obligation. If I employ a man for reward to build a house on my land I subject myself to an implied condition that I will do nothing to prevent him carrying out the work. But I am under no implied obligation to help him earn the reward whether by the supply of building materials or otherwise.

But there are exceptional cases where in a contract of employment the employer is under a positive obligation. If, for instance, I employ an artist to paint my portrait I subject myself to the positive obligation of giving him the requisite sittings. The question, then, to be determined upon the hypothesis that I mentioned just now is this: Where an owner of 61 property employs an agent to find a purchaser, which must mean at least a person who enters into a binding contract to purchase, is it an implied term of the contract of agency that, after the agent has introduced a person who is ready, willing and able to purchase at a price assented to by the principal, the principal shall enter into a contract with that person to sell at the agreed price subject only to the qualification that he may refuse to do so if he has just cause or reasonable excuse for his refusal ? This qualifica- tion must plainly be added, for the respondent does not contend, and no one could successfully contend, that the obligation of the principal to enter into a contract is an unconditional one.” The learned Chief Justice relying on the last part of the above quotation reached the conclusion that in the present case as the duty of the agent was to secure a pur- chaser, it could not be held that the purchaser had been secured till the contract of sale was concluded by the vendor with him and that the actual sale having been con- cluded for a sum of Rs. 1,05,000, the plaintiff could only get his remuneration on the basis of the price for which the sale was made and not on the basis of the offer the plain- tiff had secured. It seems to me that when Lord Romer was laying down that a purchaser in such contracts means at least a person who enters into a binding contract to pur- chase, he had in mind the contract with which he was dealing in that case. I am free to think that Lord Romer had not in mind commission notes wherein the word “buyer” or “purchas- er” had been employed in a loose sense.

In Jones v. Lowe(1), wherein the instrument was in these terms– “In the event of my introducing a purchaser, I shall look to you for the payment of the usual commission in accordance with the scale fixed by the Auctioneers and Estate Agents Institute “, Hilbery J. said that had he been free of authority, he should have thought that there were strong grounds for saying that what every owner of a house who desired to (1) [1945] 1 K.B. 73.

62 sell it expected a house agent to do, was to bring the property fairly to the notice of persons who resorted to him for houses and endeavour to persuade one of them to buy it.

The learned Judge further observed as follows :– “If the agent introduces someone who is perfectly will- ing to go through with the purchase at a price which will satisfy the vendor, it would seem that the agent has done everything that the parties contemplate that he should do, for they do not contemplate that the agent should have anything to do with the actual completion of the transac- tion. He is to find a person who will pay the price which is asked for the property, and the contract is entered into on the basis that the person so found will be the person to whom the owner of the property will sell.

It seems to me hard, if an agent has done to the full extent what the parties contemplated that he should do, that he should not be entitled to say ‘ I have done what I con- tracted to do because I have introduced someone willing to purchase although he never in fact became the. actual pur- chaser’. I do not feel, however, that it is open to me to put that construction on the words of the contract in the present case because I think that the observations made in the House of Lords, and particularly those of Lord Russell of Killowen and Lord Romer in Luxor (Eastbourne) Ltd. v.

Cooper (1), show that they were clearly of opinion that if an agent is employed to introduce a purchaser for a house and before the purchaser has entered into a binding and legal contract, the house is withdrawn from the market, the agent cannot say that he has earned his commission.” In a later case, E.H. Bennett v. Millet (2), the same learned Judge had to deal with a case where the contract was in these terms :– “We confirm that in the event of our introducing a purchaser who is able and willing to complete the transac- tion, our commission will be in accordance with the recog- nized scale…”.

The plaintiffs introduced a prospective purchaser, Whom the court found to have been at all times able (1) [1941] A.C. 108. (2) (1948) 2 All. E.R. 929.

63 and willing to purchase, but the defendant refused to com- plete. It was argued by the defendant that the qualifica- tion of the word “purchaser” in the plaintiffs’ letter was otiose and therefore should be struck out and the plaintiffs had not performed the contract until they had introduced a person who actually. completed the purchase. It was held that the expression “a purchaser who is able and willing to complete the transaction” meant not a person who did, in fact, ultimately purchase the property, but one who was prepared to purchase it at the seller’s price, and, as the estate agents had found such a person, they were entitled to their commission. The learned Judge further stated that in ordinary parlance we do not use the word “purchaser” as necessarily restricted to a person who actually completes a transaction of purchase and sale. In my judgment, there- fore, on the alternative interpretation which has been placed by the two courts below on the commission note the word “purchaser” cannot be read in the strict sense in which it was read in Luxor’s case (1), but should be read in the sense in which it is loosely used in common parlance, and that being so, the decision under appeal cannot be sus- tained.

Mr. Setalvad cited a number of Indian authorities where the words “buyer” and “purchaser” had not been given the strict meaning that had been given inLuxor’s case (1).

Similarly, the words “lender” and “borrower” had been given the meaning of “potential lender” and “potential borrower”.

It is, however, unnecessary to enter into a discussion of all those cases as it does not in any way advance the matter beyond what I have already said. It is unnecessary to go into the third contention of Mr. Setalvad in view of the above decision.

For the reasons given above I agree with the conclusion reached by my brother, Patanjali Sastri, in the judgment just delivered by him, that the appeal be allowed with costs throughout.

Appeal allowed.

Agent for the appellant: S.P. Varma.

Agent for the respondent: Sukumar Ghose.

(1) [1941] A.C. 108.

 

 

 

 

 

 

 

 

 

 

 

4. BHAWANIPORE BANKING CORPORA-TION, LTD. V. GOURI SHANKAR SHARMA [1950] INSC 4; AIR 1950 SC 6; 1950 SCR 25 (14 March 1950)

14/03/1950 FAZAL ALI, SAIYID FAZAL ALI, SAIYID KANIA, HIRALAL J. (CJ) SASTRI, M. PATANJALI MAHAJAN, MEHR CHAND DAS, SUDHI RANJAN

CITATION: 1950 AIR 6 1950 SCR 25

CITATOR INFO :

R 1974 SC 968 (9,44,49)

ACT:

Limitation Act (IX of .1908), .Art. 182, cls. 2 and 3’Execution of decree–Limitation–Starting point–‘ Where there has been a review “, meaning of–Application for re- opening decree under s. 86, Bengal Money-lenders Act dis- missed for default and appeal from order of dismissal– Whether give fresh starting for limitation for execution of decree–Interpretation of Art. 189, cls. 2 and 3.

HEADNOTE:

A preliminary decree on a mortgage was passed ex parte on the 21st August, 1940. The judgments debtor made an applica- tion under s. 36 of theBengalMoney-lenders Act for re- opening the 26 decree and the application wins dismissed for default of appearance on the 20th December, 1941, and an application under O. IX, r. 9 C.P.C. for restoration of this application was also dismissed on the 1st June, 1942. In the meanwhile on the 22nd December, 1941, a final decree was passed. The judgment-debtor preferred an appeal from the order dismiss- ing his application under O. IX, r. 9, C.P.C., and this appeal was dismissed for non-prosecution on the 3rd July, 1944. On the 9th April, 1945, the decree holder applied for execution of the decree:

Held that, even assuming that the word “review” has been Used in Art. 182 of the Indian Limitation Act, 1908, in a wide sense and that the application under s. 36 of the Bengal Money lenders Act was an application for review, cl.

3 of Art. 182 was not applicable to the case inasmuch as the application under. s. 36 having been dismissed for default the court had no occasion to apply its mind to the question whether the decree could or should be re-opened and it could not. therefore be said that “there has been a review” of the decree within the meaning of the said clause.Held also, that the words “where there has been an appeal ” in cl.2 of Art 182 must be read with the words “for the execution of a decree or order” in the 1st column of the Article and the fact that there was an appeal from the order dismissing the application under O. IX, r. 9, made in connection with the proceeding under s. 36 of Money-lenders Act, could not therefore give fresh starting point for limitation under Art. 182, cl. 2,.

Appeal from the High Court of Judicature at Calcut- ta: Civil Appeal No. LI of 1949.

Manohar Lal, (H.K. Mitter with him), for the appellant.

B.C. Mitter, for the respondent.

1950. March 14. The judgment of the Court was deliv- ered by FAZL ALI J.—The only question to be decided in this appeal, which arises out of an execution proceeding, is whether the decree under execution is barred by limitation.

The first court held that the decree was not barred, but the High Court has come to the opposite conclusion, and the decree-holder has, after obtaining a certificate under Section 110 of the Civil Procedure Code, appealed to this Court.

The facts may be briefly stated as follows. On the 21st August, 1940, a preliminary mortgage decree was 27 passed ex parte in a suit instituted by the appellant to enforce a mortgage. On the 19th September, 1940, the judg- ment-debtor made an application under Order IX, rule 13, of the Civil Procedure Code for setting aside the ex parte decree, but this application was rejected on the 7th June, 1941. On the 11th July, 1941, the judgment-debtor filed an application under Section a6 of the Bengal Money lenders Act, for reopening the preliminary decree, but this applica- tion was dismissed for default of appearance on the 20th December, 1941. Thereafter, a final mortgage decree was passed in favour of the appellant, on the 22nd December.

The judgment-debtor then made an application under Order IX, rule 9, of the Civil Procedure Code for the restoration of the proceedings under Section 36 of the Money lenders Act.

The application. was however dismissed on the 1 st June, 1942, both on the ground that no sufficient cause for the nonappearance of the applicant and his failure to take steps in the proceedings was shown and on the ground that no purpose would be served by reopening the preliminary decree after the final decree had been passed. The judgment-debtor thereafter preferred an appeal to the High Court atCalcuttafrom the decision dismissing his application under Order IX, rule 9, but the appeal was dismissed for non-prosecution, on the 3rd July, 1944. On the 9th April, 1945, the appellant filed an application for executing the decree against the original judgment-debtor, though he had died previously, and this application was dismissed for default on the 11th May, 1945. On the 2nd June, 1945, the present application for execution was filed, and the question which we have to decide is whether this application is in time.

It is quite clear that the application for execution having been made more than three years after the date of the final decree, it must be held to be timebarred, unless, as has been contended before us, the case falls under either clause 2 or clause 3 of article 182 of the Indian Limitation Act. ‘Under these clauses, time to make the application begins to run from– 28 “2. (Where there has been an appeal) the date of the final decree or order of the appellate Court, or the with- drawal of the appeal, or

3. (Where there has been a review of judgment)the date of the decision passed on the review…” It is contended that the case is covered by clause 3,and the ground urged in support of this contention is that the application made by the judgment-debtor for reopening the preliminary mortgage decree under Section 36 of the Money- lenders Act must be regarded as an application for review and time should be held to run from the date of the final order passed in the proceedings connected with that applica- tion. In our opinion, there is no substance in this conten- tion. The important words in clause 3 of article 182 are:(1) “where there has been a review” and (2) “the decision passed on the review “. These words show that before a case can be brought under article 182,clause 8, it must be shown firstly that the court had undertaken to review the relevant decree or order and sec- ondly, that there has been a decision.on.the review.In the present case, even if it be assumed that the word “review’ has been used in article 182 in a large sense and that the application for reopening the decree under Section 36 of the Bengal Money lenders Act was an application for review, the appellant cannot succeed, because the court never undertook or purported to review the decree in question. What actual- ly happened was that the application under Section a6 for reopening the preliminary decree (not the final decree which is the decree sought to be executed) was dismissed for default and the application under Order IX, rule 9, of.the Civil Procedure Code for the restoration of the proceedings under Section 86 of the Money lenders Act was also dis- missed. Even if the fact that the judgment-debtor’s appli- cation under Section 36 was directed against the preliminary mortgage decree is overlooked, that application having been dismissed for default, the court never had occasion to apply its mind to the question as to whether the decree could or should be reopened, and hence it cannot be said that ‘ ‘there ha8 been a review” of the 29 decree. The proceedings under Order II, rule 9, of the Code of Civil Procedure are not material to the present discus- sion, because they did not involve a review of the decree under execution but a review, if it is at all possible to call it a review, (which, in our opinion, it is not), of the order dismissing the judgment debtor’s application under Section 36 for default.

It was also suggested by the learned counsel for the appellant that the case might be held to be covered by clause 2 of article 182 on the ground that, even though no appeal was preferred from the final mortgage decree, the words “where there has been an appeal” are comprehensive enough to include in this case the appeal from the order dismissing the application under Order IX, rule 9, of the Civil Procedure Code, made in connection with the proceed- ings under Section 36 of the Moneylenders Act. This argu- ment also is a highly far-fetched one, because the expres- sion “where there has been an appeal” must be read with the words in column 1 of article 182, viz., “for the execution of a decree or order of any civil Court …… “, and, however broadly we may construe it, it cannot be held to cover an appeal from an order which is passed in a collater- al proceeding or which has no direct or immediate connec- tion with the decree under execution.

In our view, this appeal has no substance, and we ac- cordingly dismiss it with costs.

Appeal dismissed.

Agent for the appellant: P.K. Chatterji.

Agent for the respondent: R.R. Biswas.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5. RAM KRISHNA RAMNATH AGARWALOF KAMPTEE V. SECRETARY, MUNICIPAL COMMITTEE, KAMPTEE & ORS [1950] INSC 5; AIR 1950 SC 11; 1950 SCR 15 (14 March 1950)

14/03/1950 KANIA, HIRALAL J. (CJ) KANIA, HIRALAL J. (CJ) FAZAL ALI, SAIYID SASTRI, M. PATANJALI MAHAJAN, MEHR CHAND DAS, SUDHI RANJAN MUKHERJEA, B.K.

CITATION: 1950 AIR 11 [1950] INSC 51950 SCR 15

CITATOR INFO :

RF 1966 SC1089 (55)

ACT:

Government ofIndiaAct, 1935, es. 100, 143, 292; Sch.

VII, List 1, Entry 45; List 11, Entry 49–Central Excises and Salt Act (1 of 1944, es. 2, 3–Central Provinces Munici- palities Act (11 of 1922), s. 66 (1) (e)–Import of tobacco within municipality .for manufacturing bidis–Tobacco liable to Central excise duty–Levy of octroi duty by munic- ipality–Legality.

HEADNOTE:

Section 66 (1) (e) of the Central Provinces Municipali- ties Act, 1922, empowered municipalities within the Province to levy an octroi duty on goods brought within their limits for sale, consumption or use within those limits. Section 3 of the Central Excises and Salt Act, 1944, an Act of the Central Legislature, provided that there shall be levied and collected duties of excise on all excisable goods other than salt which were produced or manufactured inBritish India, and included tobacco in the list of excisable goods. The question being whether a municipality situated in the Cen- tral Provinces could levy octroi duty on tobacco brought within its limits for the purpose of manufacturing bidis, in view of the exclusive power of the Central Government to levy excise duty under Entry 45 of List I of the Seventh Schedule to the Government of india Act, 1935, and the provisions the Central Excises and SaIt Act:

Held, that excise duty and octroi were taxes essentially different in their nature and the power of the Province to levy octroi was not inconsistent with the power of the Centre to levy excise duty on the some goods, and a munici- pality could therefore validly levy an octroi duty on such tobacco under s. 66 (1)(e) of the Central Provinces Munici- palities Act of 1922.

Held further, that there was nothing in the Central Excises and Salt Act or its provisions contrary to the provisions of s. 66 (1) (e) of the Central Provinces Munici- palities Act or to the levy of octroi duty under the same and s. 143 of the Government of India Act, therefore, pre- served the right of the municipality to levy octroi duty under the Act of 1922.

Provinceof Madrasv. Boddu Paidanna and Sons [1942] F.C.R.. 90, Governor-General in Council v. Province of Madras [1942] F.C.R. 129, In re the Central Provinces and Berar Act No, XIV of 1938, 16 [1939] F.C.R. 80, Miss Kishori Sherry v. The King [1949] F.C.R. 650 referred to.

Administrator, LahoreMunicipalityv. Daulat Ram [1942] F.C.R. 31 distinguished.

Judgment of the High Court of Nagpur affirmed.

APPEAL from the High Court of Judicature atNagpur: Case No. III of 1948.

This was an appeal from a judgment and order of the High Court of Nagpur (Mis. Civil No. 158 of 1946) dated 9th April, 1948, made on a reference under s. 83 (2)of the Central Provinces Municipalities Act (11 of. 1922) by the Extra Assistant Commissioner,Nagpur. The facts of the case and the arguments of counsel appear in the judgment.

T.J. Kedar and B.B. Tawakley (Sir Narain Andley with them) for the appellant.

Lobo, for the respondent.

M. C. Setalvad, Attorney-General ofIndia, (S.M.

Sikri with him), for the Union of India.

1950 March, 14. The Judgment of the Court was delivered by KANIA C.J.–This is an appeal from the judgment and order of the High Court atNagpur, made on a reference under Section 83 (2) of the Central Provinces Municipalities Act 11 of 1922, by the EXtra Assistant Commissioner, Nagput.

The appellant is a trader in Kamptee who manufactures bidis.

On the 30th of November, 1945, he brought to Kamptee from outside tobacco to make bidis. A declaration form signed on his behalf stated that the 254 bags of tobacco liable to octroi duty, which had that day arrived at octroi post No.

3, had been brought for use and consumption within the limits of the Municipality. He however put on record his protest against the recovery of the duty which was fixed at Rs. 1,128-2-0. Against the order claiming the amount, the appellant filed an appeal to the Extra Assistant Commission- er with revenue appellate powers, Nagput. He contended that the municipality claimed to levy the duty under Section 66 (1) (e) of the Municipal Act, but they had 17 no right to do so as under Section 3 of the Central Excises and Salt Act, 1944, that excise duty was levied on tobacco by the Central Government and the levy of the octroi duty on the tobacco in question was covered by the excise duty and therefore not permissible. The Appellate Assistant Commis- sioner in making the reference to the Nagpur High Court expressed his opinion that the appellant’s contention that as the bidis were not sold within the municipal limits, duty was not leviable, was unsound. He however thought that because under Section a of the Excise Act, excise duty was levied by the Central Government the levy of the octroi duty was ‘not in consonance with Section 100 of the Government of India Act, 1935, and was ultra vires the Provincial Govern- ment. The High Court rejected the appellant’s contention and disagreed with the view of the Appellate Commissioner. The High Court however granted a certificate under Section 205 (1) of the Constitution Act and the appellant has come in appeal to this Court.

The Central Provinces Municipalities Act was passed in 1922 and the relevant notifications fixing the rates of octroi duty were issued in 1928. No question about the validity of the Act when passed, or of the notifications issued in pursuance thereof has been raised before us. The argument on behalf of the appellant is that as under the Central Excises and Salt Act, I of 1944, tobacco became excisable goods under Item 9 in Schedule I to that Act and continued to be so till it got converted into bidis, the Central Government alone was entitled to levy excise duty on it till then. According to the definition of ‘manufacture’ in the Excise Act that duty could be levied at any stage in the manufacture of bidis and therefore any tax imposed, while tobacco was being converted into bidis, was excise duty. Legislation in connection with excise duty is within the exclusive province of the Central Legislature as shown by Entry 45 of List I in Schedule VII of the Constitution Act. The impost of octroi duty in pursuance of the Municipal Act, before tobacco was made into bidis, is it was argued in conflict with the legislative powers of the Centre. In this 18 connection our attention was drawn toAdministratorLahoreMunicipality v. Daulat Ram Kapur(1), in which it was held that the levy of octroi duty on salt was not within the powers of the Provincial legislature. It was argued there- fore that under Section 100 of the Government of India Act, octroi duty levied on tobacco under the legislative powers of the Provincial Government was invalid. The only way to reconcile the two Entries, namely, Entry 45 in List I and Entry 49 in List II of the Seventh Schedule, was to read the words “for consumption or use” in Entry 49 as meaning for consumption or use except for manufacture of excisable articles”. So read, the levy of octroi duty on the facts of this case was invalid. In reply to the argument that Sec- tion 292 of the Government of India Act kept alive the old Provincial legislation, namely, the Central Provinces Munic- ipalities Act, and the right to levy octroi duty was saved under Section 143 of the Constitution Act, it was urged on behalf of the appellant that the. provisions of the Excise Act were contrary to the right to levy octroi duty and as that Act was passed in 1944 the right to levy octroi duty saved by Section 148 of the Constitution Act had lapsed. It was argued that although there was no express provision in the Excise Act to that effect, the definition of “excisable goods” and “manufacture” read with Entry 9 in Schedule I and the charging Section 3 in the Act led to that conclusion.

It is clear that both parts of this argument are thus based on the plea that the impost of any duty at any stage before bidis are manufactured is excise duty and therefore the levy of octroi duty is illegal.

Section 66 (1) (e) of the Central Provinces Municipali- ties Act, 1922, runs as follows :– “an octroi on animals, or goods brought within the limits of the municipality for sale, consumption or use within those limits;” The words “excisable goods” and. ” manufacture ” are defined in Section 2 of theCentral Excises and Salt Act,, 1944,. as follows .–.’ (1) [1942] F.C.R. 91 .

19

2. (d) “excisable goods” means goods specified in the First Schedule as being subject to a duty of excise and includes salt;”

2. (f) “manufacture” includes any process incidental or ancillary to the completion of a manufactured product; and (i) in relation to tobacco includes the preparation of cigarettes, cigars, cherots, bidis, cigarette or pipe or hokkah tobacco, chewingtobacco or snuff; and (ii) ……

Section 3 of the Excise Act runs as follows :– “There shall be levied and collected in such manner as may be prescribed duties of excise on all excisable goods other than salt which are produced or manufactured in Brit- ish India, and a duty on salt manufactured in, or imported by land into any part of British India as, and at the rates, set forth in the First Schedule …… ” Entry 9 to the First Schedule of the Excise Act is in these terms :– “9. TOBACCO, CURED- ” Tobacco’ means any form of tobacco, whether cured or uncured, and whether manufactured or not,and includes the leaf, stalks and stem of the tobacco plant but does not include any part of a tobacco plant while still attached to the earth;” (Then follows a list of various articles into which tobacco can be converted, like bidis, cigarettes, snuff,etc. with different rates of duty mentioned against each article.) Sections 143 and 292 of the Government of India Act, 1935, run as follows :– “143. (1) Nothing in the foregoing provisions. of this Chapter affects any duties or taxes levied in anyFederatedStateotherwise than by virtue of an Act of the Federal Legislature applying in the State.

(2) Any taxes, duties, cesses or fees which, immedi- ately before the commencement of Part III,of this Act 20 were being lawfully levied by any Provincial Government, municipality or other local authority or body for the pur- poses of the Province, municipality, district or other local area under a law in force on the first day of January, nineteen hundred and thirty-five, may, notwithstanding that those taxes, duties, cesses or lees are mentioned in the Federal Legislative List, continue to be levied and to be applied to the same purposes until provision to the contrary is made by the Federal Legislature”.

“292. Notwithstanding the repeal by this Act of the Government of India Act, but subject to the other provisions of this Act, all the law in force in British India immedi- ately before the commencement of Part III of this Act shall continue in force in British India until altered or repealed or amended by a competent legislature or other competent authority.” Section 143 can be considered in two ways. If the Government of India Act did not bring the particular impost of tax by the Provincial Government within the legislative powers of the Centre, by reason of the inclusion of such tax in List I of the Seventh Schedule, the pre-existing right of the Provincial Government to levy such tax remained unaf- fected. If so, Section 143 of the Government of India Act did not affect such legislation and the same continued to be valid and operative under Section 202 of the Constitution Act. If however the levy of .such tax by the Provincial Government was a subject which was within the exclusive legislative power of the Centre by reason of such tax being included in List I of the Seventh Schedule, the levy of such tax under the Provincial legislation continued to be valid until the Central Legislature passed an Act the provisions whereof were contrary to the provisions of the Provincial legislature or to the levy of a tax under the Provincial Act. Examining next the contentions of the appellant it seems clear that octroi duty as levied by the respondent comes within the exact wording of Entry 49 of List 11 of the Seventh. Schedule to the Constitution Act. Prima facie, therefore, there is no reason, to 21 consider the levy of the octroi duty under the Provincial legislation invalid. Such levy remained unaffected by reason of Section 292 of the Constitution Act. The argument of the appellant is that the levy of the octroi duty being at a stage after the excisable article, viz., tobacco, came into existence and became liable to excise duty under the Excise Act, the levy of octroi duty before bidis were made from tobacco, is invalid. In support of this argument the definition of ‘excisable goods’, ‘manufacture’ and the Entry 9 in the Schedule to that Act were relied upon. The error underlying the argument of the appellant is the assumption that any impost of tax from the time tobacco came into existence till the same was converted into bidis is neces- sarily excise duty.

The Federal Court had to consider the distinction be- tween the duty of excise and a tax on sale in The Province of Madras v. Boddu Paidanna and Sons(1). It is there ob- served as follows:–“Plainly, a tax levied on the first sale must, in the nature of things, be a tax on the sale by the manufacturer or producer; but it is levied upon him qua seller and not qua manufacturer or producer. It may well be that ‘a manufacturer or producer is sometimes doubly hit …… If the tax-payer who pays a sales tax is also a manufacturer or producer of commodities subject to a central duty of excise, there may no doubt be overlapping in one sense, but there is no overlapping in law. The two taxes which he is called on to pay are economically two separate and distinct imposts. There is, in theory, nothing to prevent the Central Legislature from imposing a duty of excise on a commodity as soon as it comes into existence, no matter what happens to it afterwards, whether it be sold, consumed, destroyed, or given away …… It is the fact of manufacture which attracts the duty even though ‘it may be collected later. In the case of a sales tax, the liabil- ity to tax arises on the occasion of a sale and a sale has no necessary connection with manufacture or production.” The Court further observed that in the Constitution Act the whole (1) [1942] F.C.R. 90.

22 of the taxing power in this particular sphere (power to impose duties of excise) is expressly apportioned between the Centre and the Provinces, to the one being assigned the power to impose duties of excise, to the other taxes on the sale of goods. It is natural enough, when considering the ambit of an express power in relation to an unspecified residuary power, to give a broad interpretation to the former at the expense of the latter. The case however is different where as in the Constitution Act there are two complementary powers,each expressed in precise and definite terms. There can be no reason in such a case for giving a broader interpretation to one power rather than to the other; and there is certainly no reason for extending the meaning of the expression “duties of excise” at the expense of the Provincial power to levy taxes on the sale of goods.

In The Governor-General in Council v. The Provinceof Madras(1), the Judicial Committee approved of the distinc- tion drawn in this case between the excise duty and a tax on sale. There the question arose in respect of tax on the sale of excisable goods. Their Lordships observed as fol- lows :–” An exhaustive discussion of this subject (namely, the meaning of the term duty of excise )from which their Lordships have obtained valuable assistance is to be found in the judgment of the Federal Court in Re The Central Provinces and Berar Act No. XIV of 1938(2). Consistently with this decision their Lordships are of opinion that a duty of excise is primarily a duty levied on a manufacturer or producer in respect of the commodity manufactured or produced. It is a tax on goods not on sales or the proceeds of sale of goods. Here, again,their Lordships find them- selves in complete accord with the reasoning and conclusions of the Federal Court in Boddu Paidann case (3). The two taxes, the one levied on a manufacturer in respect of his goods, the other on a vendor in respect of his sales, may,as is there pointed out, in one sense overlap. But in law there is no overlapping. The taxes are separate and (1) [1942] F.C.R. 129. (3) [1942] F.C.R. 90 (2) [1939] F.C.R. 80.

23 distinct imposts. If in fact they overlap, that may be because the taxing authority, imposing a duty of excise, finds it convenient to impose that duty at the moment when the excisable article leaves the factory or workshop for the first time on the occasion of its sale. But that method of collecting the tax is an accident of administration; it is not of the essence of the duty of excise, which is attracted by the manufacture itself. That this is so is clearly exemplified in those excepted cases in which the Provincial, not the Federal, legislature has power to impose a duty of excise. In such cases there appears to be no reason why the Provincial legislature should not impose a duty of excise in respect of the commodity manufactured and then a tax on first or other sales of the same commodity. Whether or not such a course is followed appears to be merely a matter of administrative convenience. So, by parity of reasoning, may the Federal Legislature impose a duty of excise on the manufacture of excisable goods and the Provin- cial legislature impose a tax on the sale of the same goods when manufactured.” This discussion clearly shows that the relevant question is what is the nature of the tax. Excise duty is a tax on manufactured goods. Octroi duty is a tax levied on the entry of goods within a particular area. Under the Excise Act, tobacco becomes excisable goods within the meaning of Item 9 in the Schedule. The subsequent use of such manufac- tured. goods in making different articles only affects the rate of tax. Therefore, tobacco becomes subject to excise duty when it reaches the stage of manufacture mentioned in Item 9 of the Schedule to the Excise Act. Even before it is converted into bidis or any other article mentioned in the entry it has become excisable goods and liable to pay excise duty. The levy of such duty is therefore not in conflict with the levy of an impost on the entry of the goods within a certain area.

It was argued that under the rules framed by the Govern- ment under the Central Excises and Salt Act, 1944, Govern- ment retained control over the movement of the 24 goods from the beginning till the end. This argument is not of assistance in determining the nature of the octroi tax.

As Government has to collect excise duty and the rate of duty varies in respect of different shapes in which the excisable goods are ultimately converteD, there is nothing unnatural in the Government keeping a control and note of the articles till the manufactured article becomes a commod- ity, and is mixed up with the commodities used by the people at large. The argument that Entry 49 in List 11 being in conflict with Entry 45 in List I of Schedule Seven to the Constitution Act, Entry 49 should be read as “for consump- tion or use, except for manufacture of goods”, in our opin- ion, is unsound. In the first place, the approach to the question itself is wrong. When a particular legislation falls within the exact words of an Entry in the Provincial List, under section 100 it is valid and no question of reconciliation arises. A similar argument advanced in regard to a supposed conflict between Entry 19 of List I and Entry 31 of List II was rejected by us in Case No. 27 of 1949: Miss Kishori Shetty v. The King (1). In the present case if the question of the validity of the Provincial legislation arises, on the interpretation of Entry 49 in List II, it appears that the answer must be in favour of the validity of the legislation. The decision in Administrator,LahoreMunicipalityv. Daulat Ram Kapur(2) does not help the appellant because in that case Entry 47 in List I is only “salt”. A comparison with Entry 45 in List I shows dis- tinctly that Entry 45 is limited to excise duty and is not wide enough to cover tobacco or other goods generally for all purposes of legislation. The observations in that case therefore are not helpful to the appellant.

On the second part of the contention the appellant can succeed only if he establishes that the provisions of the Excise Act are contrary to the levy and recovery of duty under the Provincial Act of 1922. There is no express provi- sion in the Excise Act contrary to the provisions of the Municipal Act. Unless, therefore, it is necessarily implied under the Excise Act, the levy of (1) [1949] F.C.R. 650 (1) [1942] F.C.R. 31 25 the octroi duty under the Municipal Act continues to be valid. On this point again the appellant’s argument is that the levy of a duty at any stage of the manufacture of bidis out 01 tobacco would be the levy of the excise duty and therefore those provisions were contrary to the provisions permitting the levy of the octroi duty. We have already discussed and rejected in the first part of the judgment this contention. It is wrong to think that two independent imposts arising from two different sets of circumstances were not permitted in law. In our opinion, therefore, there is nothing in the Excise Act to make its provisions contrary to the provisions of Section 66 (1) (e) of the Central Provinces Municipalities Act or to the levy of octroi duty under the same. The appeal therefore fails and is dismissed with costs.

Appeal dismissed.

Agent for the appellants: Rajinder Narain.

Agent for the respondent: S.P. Varma.

Agent for the Union ofIndia: P.A. Mehta.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6. SHETH MANEKLAL MANSUKHBHAI V. MESSRS. HORMUSJI JAMSHEDJI GINWALLAAND SONS [1950] INSC 6; AIR 1950 SC 1; 1950 SCR 75 (21 March 1950)

21/03/1950 MAHAJAN, MEHR CHAND MAHAJAN, MEHR CHAND FAZAL ALI, SAIYID MUKHERJEA, B.K.

CITATION: 1950 AIR 1 [1950] INSC 61950 SCR 75

CITATOR INFO :

RF 1977 SC2425 (5)

ACT:

Transfer of Property Act (IV of 1882), 8. 53-A–Agree- ment to lease evidenced by correspondence–Lessee put in possession–Acceptance of rent for several years–No regis- tered lease deed–Suit for ejectment of lessee as trespass- er–Maintainability–Doctrine of partperformance.

HEADNOTE:

The predecessor in interest of the defendant, being desir- ous of putting up a factory in certain plots of land situat- ed within a Taluqdari estate which was under the manage- ment of the Government under the Gujarat Taluqdars Act, 1888, applied in writing to the Taluqdari Settlement Officer for a permanent lease of the plots. The Taluqdari Officer agreed to grant a lease on certain terms subject to the sanction of the Government and forwarded a letter to the Government stating the offer to take the plots on lease, his provisional acceptance of the same subject to the sanction of the Government and the terms of the lease and by a Resolution dated 5th September, 1917, the Government granted the sanction. The defendant’s predecessor was put in pos- session and though a formal lease deed was not executed and registered, the Taluqdari Officer and after the release of the estate by the Government, the agent of the taluqdar, and the plaintiffs who came in as ijaradars continued to receive the agreed rent up to 1939.. In 1933 the plaintiffs insti- tuted a suit to eject the defendant alleging that he was a.

mere trespasser as there was no registered lease deed:

Held, that the correspondence which passed between the defendant’s predecessor-in-title and the Taluqdari Officer, the letter sent by the latter to the Government, and the Resolution of the Government dated 5th September, 1917, proved that there was a contract in writing to grant a lease on the terms.stated in the Taluqdari Officer’s letter, and as the defendant’s predecessor was put in possession in furtherance of this contract and the rents agreed upon were accepted for several years, s. 53-A of the Transfer of Property Act was applicable to the case and the plaintiffs were not entitled to eject the defendant.

Judgment of the Bombay High Court reversed.

76

APPEAL from the High Court of Judicature atBombay: Appeal No. XXXVII of 1949.

This was an appeal from a judgment and decree of the Bombay High Court dated 9th March, 1943, in Second Appeal No. 717 of 1940, varying the decree of the Assistant Judge, Ahmeda- bad, in Appeal No. 173 of 1936 reversing the decree of the joint Sub-Judge, Ahmedabad, in Suit No. 830 of 1933.

R.J. Thakur, for the appellant.

Nanak Chand Pandit, (Diwan Charanjit Lal, with him), for the respondents.

1950. March 21. The judgment of the Court was deliv- ered by MAHAJAN J .–This is an appeal from the judgment and decree of the High Court of Bombay dated 9th March 1943 and made in Second Appeal No. 717 of 1940 varying the decree of the Assistant Judge, Ahmedabad, in Appeal No. 173 of 1936 reversing the decree of the Joint Sub-Judge, Ahmedabad, in Suit No. 830 of 1933.

The suit out of which this appeal arises was filed by the respondent firm in ejectment to recover possession of survey Nos. 222, 223, 225 and 226 situate in Rampura in Ahmedabad district and for mesne profits, as early as July, 1933, and during its 17 years’ span of life it had a some- what chequered career. Those responsible for drawing up the pleadings did not take pains to comprehend correctly as to what they were about and the whole litigation was conducted in a slovenly and slipshod manner. Evidence which should have been produced at the beginning was allowed to be produced at a much later stage after the case went back on remand and the suit was determined by the Assistant Judge on fresh issues and fresh materials. It was in this confused state of the record that it was eventually decided by the High Court and its judgment is by no means satisfactory, The long time taken in deciding the suit which involved determination of a few simple issues is such as is calculat- ed to bring into ridicule the administration of justice.

77 There is a talukdari estate called the Bhankoda estate in Viramgam taluka in Ahmedabad district. It is jointly owned by several talukdars in different shares and comprises twelve villages one of which is Rampura in which the suit lands are situate. By Government Resolution No. 8170, dated 30th August 1912, the estate was taken under Government management under section 28 of the Gujarat Talukdars Act (Bombay Act VI of 1888). The firm of Shah Manilal Maganlal and Bros. (predecessors in interest of the appellant) de- sired to erect a ginning factory on survey Nos. 228, 225, and 226 and with that object approached the Talukdari Set- tlement Officer for a permanent lease of these survey num- bers. The said officer agreed to grant a lease subject to sanction of Government. By Resolution No. 10795 of 1917 dated 5th September 1917 the Government of Bombay granted the requisite sanction. Exhibit 181 is a certified copy of the letter from the Chief Secretary to Government to the Commissioner and to the Talukdari Settlement Officer and in detail it mentions the various steps taken to effect the transaction.

On 9th December 1916 an application was made by Shah Manilal Maganlal in writing signed by him to the Talukdari Settlement Officer offering to take a permanent lease of the above mentioned survey numbers on an annual rental of Rs.

290 for the purpose of erecting a ginning factory. On 12th July 1917 the said officer accepted provisionally this offer after taking into consideration the objections raised by some of the talukdars in respect of the grant of a lease.

He submitted the papers to government with the following recommendations :– “As the petitioner was in urgent need to start opera- tions during the current ginning season I have in anticipa- tion of Government sanction permitted him to enter upon the land and have the honour to approach you for sanction under section 27 (A) of the Court of Wards Act, the provisions of which have been made applicable to Talukdari Estates by section 29 (G) of the Gujarat Talukdars Act,” 78 The conditions of the lease agreed upon by the parties were annexed with this letter and a copy of the offer was also sent to Government. Ex. 181 recites the contents of the offer and states the undertaking given by the lessee. There is intrinsic evidence within its contents to show that these writings were signed by the proposer. The Talukdari Settle- ment Officer in a signed writing accepted the offer and sent it for Government sanction. It further appears that he communicated his acceptance to the lessee and agreed to give a lease if Government gave sanction. The survey numbers in question were in possession of tenants and it was agreed that the lessee would take possession after making private settlements with them. It was also agreed that if no such private arrangement could be made, then the settlement officer would take steps to issue ejectment notice against the tenants. On 20th July, 1917, the Commissioner forwarded the papers to Government with his recommendations and the Government on 5th September, 1917, sanctioned the arrange- ment agreed to by the Talukdari Settlement Officer with Shah Manilal Maganlal. The sanction order is signed by the Chief Secretary to the Government and it contains an endorsement of its having been sent to the officers concerned. It is thus clear that a binding agreement to lease the survey numbers in question was effected between the Talukdari Settlement Officer and Shah Manilal Maganlal with the sanc- tion of the Government. Though a draft of a formal deed of lease was prepared, no such document was formally executed or registered for reasons which it is not necessary to state herein.

Soon after the agreement the lessee took possession of the survey numbers in suit and put up thereupon a ginning and a pressing factory, a bungalow, engine rooms and other structures. He tendered the agreed rent to the Talukdari Settlement Officer who received it from him. He continued receiving it for about two years when the estate was re- leased from the management of the Government and came under the management of the talukdars. The manager appointed by the talukdars continued to receive rent from the lessee as had been settled by the Talukdari Settlement Officer.

79 On 4th May, 1924, a possessory mortgage of the ginning factory along with all its buildings was effected by Shah Manilal Maganlal in the sum of Rs. 1,40,000 in favour of the defendant. The mortgage included in the schedule of the mortgaged property some other property as ‘well. The two contestants in the suit, the defendant and the plaintiffs, acquired their rights in this property during the years 1924-25. The defend ant came in as a mortgagee as above stated, while the plaintiffs came in as ijaradar and assign- ee of certain mortgage rights. The plaintiffs since then have been receiving the rent according to the grant made by the Talukdari Officer. In the year 1933 the appellant purchased the equity of redemption of the suit property at a court auction and became vested with all the rights of Mani- lal Maganlal in this property, the value of which has now been estimated in the neighbourhood of Rs. 38,000.

In the year 1933 the plaintiffs discovered that the defendant had no registered lease in his favour and therefore in law he was not entitled to the rights of a permanent tenant in respect of the survey numbers in dispute. They therefore instituted the present suit for ejectment of the defendant. In the 2nd and 3rd paragraphs of the plaint it was admitted that in .the course of the correspondence with the Government of Bombay a lease was negotiated between the firm of Shah Manilal Maganlal and the Talukari Settlement Officer in respect of the survey numbers in dispute for a period of fifty years at an annual rental of Rs. 290, but it was stated that because Manilal Maganlal did not execute a formal registered lease they were in possession as trespassers. In the 4th paragraph the authority of the Talukdari Settlement Officer to grant the lease was also challenged. In the 8th paragraph it was said that the plaintiffs received the amount of the lease up to 31st July 1932 and that no notice was necessary to be given, the position of the defendant being that of a trespasser. It was however alleged that a notice was given on 25th December 1930, 11 80 The suit was defended on a number of grounds,inter alia, it was pleaded that the plaintiffs had no right to sue in ejectment, not being the landlord inasmuch as they had not obtained any right in the land itself and had not acquired complete title by an assignment of the whole of the interest of the talukdars in the survey numbers in dispute. It was pleaded that the defendant was a permanent tenant of the survey numbers and that the plaintiffs’ own conduct debarred them from claiming ejectment.

The trial Judge decreed the suit on the finding that as no written lease was forthcoming it should be deemed to be non-existent. It was said that no efforts had been made to show that the Settlement Officer had sanctioned with the approval of the Government a permanent lease in respect of survey Nos. 223 and 225 to Shah Manilal Maganlal. In the concluding part of the judgment it was remarked that the doctrine of equitable part performance could not apply to the present case. Though no specific issue was raised on this point, the matter seems to have been argued at some stage before the trial Judge on facts found or admitted.

There was an unsuccessful effort to obtain a review of this decision on the ground of discovery of fresh materi- als. Thereafter the matter was taken to the court of appeal and it was alleged in ground No. 3 that the Subordinate Judge had erred in not considering the position created in the case by the equitable rule of law embodied in section 53-A of the Transfer of Property Act. On 30th July, 1938, the appellate court made an order of remand under Order XLI, Rule 25, and called for a report on the following two issues:- (1) Whether the plaintiff was a mortgagee in occupa- tion of S. Nos. 222, 223, 225 and 226 ? (2) Whether the suit was bad for non-joinder of parties ? The trial Judge reported on the remand issues against the plaintiffs. He also admitted in evidence a number of documents produced after remand and one of these is Ex. 181.

A point was raised that documents produced after remand Were not relevant to the issues remanded 81 and should not be admitted. This contention was overruled.

The Assistant Judge allowed the appeal on 27th April, 1940.

He held that the plaintiffs had failed to establish their right to maintain the suit either as ijaradars or as assign- ees of mortgage rights. In para. 21 of his judgment he observed as follows :– “Ex. 181 shows that the terms of the lease have been reduced to writing though no regular lease appears to have been executed. On the question whether the lease is binding on the plaintiff, I think section 53-A of the Transfer of the Property Act is a complete answer. Ex. 181 shows that the Talukdari Settlement Officer, with the sanction of the Government, contracted to lease out these lands. The writ- ing is signed by the Government. The terms of the lease can be ascertained clearly from Ex. 181. It is not denied that the defendant’s predecessor-in-title was put in possession of this property in performance of that contract. Also the acceptance by the Talukdari Settlement Officer as well as by the plaintiff of the rent of the property as fixed by that contract shows that. the possession of the defendant and his predecessor-in-title was in part performance of the contract of lease. Admittedly, there is no registered lease. The conditions of section 53-A of the Transfer of Property Act are fully satisfied and the plaintiff cannot, therefore, eject the defendant on the ground that there is no registered lease.” Further on the learned Judge said that section 53-A of the ‘Transfer of Property Act embodied the doctrine of estoppel and a plea to that effect had been taken inasmuch as the defendant had pleaded that the plaintiffs were estopped by their conduct from asking for possession and that therefore no separate issue was raised on this point.

The unsuccessful plaintiffs went up in second appeal against this decision to the High. Court of Bombay. The High Court allowed the appeal and modified the decree of the Assistant Judge. It decreed the plaintiffs’ suit in respect of survey Nos. 223 and 225 and dismissed the suit in respect of survey Nos. 222 and 226, 82 On the question of the plaintiffs’ title to maintain the suit the High Court reached the following decision:- “If it were necessary we would hold that the plaintiff has sufficiently proved that it is entitled to maintain this suit in its capacity as ijaradar as well as assignee from the mortgagees. But we think even apart from that, plaintiff is entitled to bring this suit because on the defendant’s own admission he has paid rent to the plaintiff for three of the suit fields, viz., survey Nos. 223, 225, and 226, and that too not the interest of 84 Dakdas in them but for all the 100 Dakdas. In fact, ever since the plaintiff came on the scene the defendant has treated the plaintiff as the landlord as regards these three survey numbers, and in the present suit, therefore, the defendant cannot dispute the plaintiff’s right to sue.” In a later part of the judgment it was observed that in any case Ginwalla as the manager of the plaintiff firm would be entitled to continue the present suit as receiver. On the second question the learned judges of the High Court observed as follows :- “We do not think it necessary to decide whether if there had been a signed contract by the transferor in the present case, it would have fallen under section 53-A,because, in our opinion, the correspondence Which is summarized in the Government Resolution cannot be regarded as evidence of the contract, and secondly, the terms of the contract also cannot be deduced from the correspondence with any reasona- ble certainty. We, therefore, hold that the Government Resolution on which the defendant relies is no evidence of the writing of a contract referred to in section 53-A of the Transfer of Property Act, and apart from that the defendant has no legal basis on which he can claim to hold the land either as a permanent lessee or for a particular period.” The principal questions canvassed in this appeal are, whether the plaintiff firm has proved its title to maintain the present suit in ejectment against the defendant,’ and whether the defendant is entitled to the benefit of the provisions of sec. 53-A of the Transfer of Property Act. The question as to the maintainability of the suit’ 83 against the defendant without a proper notice was raised before the High Court but permission to argue it was refused because the matter had not been raised in either of the lower Courts.

The appeal was elaborately argued before us by the learned counsel for the parties, but in our view, it is ‘ not necessary to consider and decide all the points urged because we consider that the Assistant Judge was right in entertaining and giving effect to the plea under sec. 53-A of the Transfer of Property Act and we are satisfied that no substantial grounds existed for reversing- that deci- sion in second appeal. This section introduced in the Transfer of Property Act in 1929 is in these terms :– “Where any person contracts to transfer for considera- tion any immovable property by writing signed by him or on his behalf from which the terms necessary to constitute the transfer can be ascertained with reasonable certainty, and the transferee has, in part-performance of the contract, taken possession of the property or any part thereof …… and has done some act in furtherance of the contract, and the transferee has performed or is willing to perform his part of the contract, then, notwithstanding that the contract, though required to be registered, has not been registered …… the trans- feror or any person claiming under him shall be debarred from enforcing against the transferee and persons claiming under him any right in respect of the property of which the transferee has taken or continued in possession, other than a right expressly provided by the terms of the contract …… “.

The section is a partial importation in the stat- ute law ofIndiaof the English doctrine of part-perform- ance. It furnishes a statutory defence to a person who has no. registered title deed in his favour to maintain his- possession if he can prove a written and signed contract in his favour and some action on his part in part-performance of that contract. In ‘order to find whether the defendant in the present case has satisfied the conditions of the 84 section, it has to be held proved that the Talukdari Settle- ment Officer contracted to give a lease of the survey num- bers in suit to Manilal Maganlal by a writing signed by him and that from this writing the terms of the tenancy can be ascertained with reasonable certainty. It has further to be held established that .the transferee took possession of the property or did any acts in furtherance of the contract. It may be mentioned that in cases of lease the legislature has recognized that the equity of part performance is an active equity as in English law and is sufficient to support an independent action by the plaintiff. (Vide S. 27-A of the Specific Relief Act). This section however applies to con- tracts executed after 1st April, 1930, and has no applica- tion in the present case; but there can be no mariner of doubt that the defence under Section 53-A is available to a person who has an agreement of lease in his favour though no lease has been executed and registered. We are satisfied that the defendant has fulfilled both the condi- tions necessary to attract the application of the section in the present case. The High Court was in error when it held that the correspondence summarised in Ex. 181 could not be treated as evidence of the contract and that its terms could not be reasonably deduced from this document. It is no doubt true that Ex. 181 is merely secondary evidence of the agreement of lease but it is equally true that it is a very reliable piece of secondary evidence coming as it does from government records. It furnishes proof of the fact that there was an acceptance in writing under which the contract to transfer the survey numbers in suit by way of lease was effected by the Talukdari Settlement Officer in favour of Manilal Maganlal. The offer was also in writing signed by the offeror. The Government Resolution which made the agree- ment binding was also in writing and was signed by competent authority. No objection as to admission of secondary evi- dence could be taken in this case as the primary evidence was in the possession either of the plaintiff or of the talukdars, the predecessors in interest and in spite of notice it was not produced. Reference in this connection may be made to the statement of the 85 plaintiff in the witness box which is to the following effect :– “I must have read the correspondence with T.S.O. since it is so recited in the para. 2 of the plaint. I cannot say whether that correspondence is in my office or with the talukdars. I cannot say without that correspondence as to whether T.S.O. has called survey No. 226 as Lalliti and hence the talukdars are not entitled to any income for it. I also cannot say without that correspond- ence that the rents of survey Nos. 225 and 223 were fixed at Rs. 135 and Rs. 115 respectively and that Rs. 45 were to be taken by way of sugar…” In another part of the same statement he said that the talukdars had got the records of the time preceding his management. It appears that the original documents were returned to the talukdars after the discharge of the Taluk- dari Settlement Officer and were in the possession and power of the plaintiff or his predecessors in interest and they were not produced by him in spite of notice.Para. 2 of the plaint clearly recites that there was correspondence between the Talukdari Settlement Officer and the defendant’S prede- cessor in interest under which a lease was negotiated. The plaintiff’s knowledge of this correspondence and its con- tents is thus prima facie established and leads to the conclusion that it was in his possession or power and he has intentionally withheld it. Without a perusal of this corre- spondence the facts recited in para. 2 of the plaint could not have been mentioned in the plaint. Once it is held that Ex. 181 is good secondary evidence of the agreement of lease, there can then be no hesitation in holding that by an offer and an acceptance made in writing and signed by the respective parties an agreement was com- pleted between the Talukdari Settlement Officer and the predecessor in interest of the defendant and that necessary sanction of the’ Government was also in writing signed by the officer concerned. It has further to be held that the terms of the contract can be fairly deduced from the recit- als of this document. The only important clause with which we are concerned in the present case is as to the nature of the tenancy. It is clearly recited therein 86 that the lease was to be of a permanent character and the terms as regards rental could be revised after a period of fifty years. The rent payable is recited in unambiguous terms in the document as Rs. 290 per annum.

It was not denied that the lessee took possession after this agreement was arrived at. It was argued that posses- sion was taken before sanction of the Government was ob- tained in September, 1917. There is however no proof of this except a bare recital in the Talukdari Settlement Officer’s letter to Government that he had permitted the defendant to enter on the land in anticipation of Govern- ment’s sanction. As already pointed out, the possession was with the tenants and had to be taken after entering into an arrangement with them or by issuing notice to them. It is not possible to think that this could have happened in such a short space of time as elapsed between the middle of July and the beginning of September. In any case the factory could not have been built before the sanction of the Govern- ment was received. Not only did the lessee take possession in part-performance of the agreement but he offered the rent agreed upon and paid it not only to the Talukdari Settlement Officer but to all those who subsequently managed the inter- est of the talukdars in the survey numbers in dispute. The original lessee after having entered into possession of the property effected a mortgage of it in favour of the defend- ant. The defendant advanced a substantial sum on security of the property to the lessee. The equity of redemption was sold at an auction sale. The defendant and his predecessor in interest were willing to perform their part of the con- tract. As a matter of fact, they have performed the whole of it. All that remains to be done is the execution of a lease deed by the lessor in favour of the lessee and of getting it registered. The plaintiff in para. 6 of the plaint in unambiguous terms admitted that he received the amount of the lease up to 31st July, 1932, in respect of the survey numbers in dispute. It is difficult to imagine what.

lease he was referring to in the absence of a registered deed of lease. It Could only mean the agreement of lease given in writing 87 and signed by the Talukdari Settlement Officer. It is in pursuance of this agreement of lease that all the subsequent acts above mentioned were done. It-may also be observed that an agreement of lease creating a present demise but not registered is admissible under S. 49 of the Indian Registra- tion Act as evidence of part performance and Ex. 181 is secondary evidence of that agreement. A formal lease is not necessary to attract the application of S. 53-A of the Transfer of Property Act. All that is required is that an agreement in writing signed by the transferor can begath-ered from the evidence. The correspondence mentioned in Ex.

181 fully establishes that fact.

We are therefore of the opinion that the learned Assist- ant Judge rightly dismissed the plaintiff’s suit and the High Court was in error in interfering with that decision in second appeal. The result therefore is that the appeal is allowed, the decision of the Assistant Judge restored and that of the High Court reversed.The circumstances of the case are such that we would make no order as to costs. The defendant was at fault in not producing all the documentary evidence at the proper stage of the case and he has been enabled to avail himself of the defence furnished to him under S. 53-A by reason of the admission in evidence after remand of Ex. 181, which though not properly admitted at that stage was not rejected by the High Court and could not be rejected at the stage when we dealt with the case. The parties are therefore left to bear their own costs through- out.

Appeal allowed.

Agent for the appellant: S.P. Varma.

Agent for the respondent: Ganpat Rao

 

 

 

 

 

 

 

 

 

 

 

 

7. NANALAL ZAVER & ANR V. BOMBAY LIFE ASSURANCE CO. LTD. & ORS [1950] INSC 7; AIR 1950 SC 172; 1950 SCR 391 (4 May 1950)

04/05/1950 KANIA, HIRALAL J. (CJ) KANIA, HIRALAL J. (CJ) FAZAL ALI, SAIYID SASTRI, M. PATANJALI MAHAJAN, MEHR CHAND DAS, SUDHI RANJAN MUKHERJEA, B.K.

CITATION: 1950 AIR 172 [1950] INSC 71950 SCR 391

CITATOR INFO :

R 1964 SC 136 (11) E&R 1981 SC1298 (64,109,110,111)

ACT:

MUKHERJEA and DAs, JJ.] $ Indian Companies Act (VII of 1913), s.

105-C–Company–Outsider trying to get control of management by purchasing shares –Issue of further shares–Offer of new shares to existing share holders–Validity of resolution and offer–Company in need of funds–Additional motive to prevent outsider getting control–Bona fides of resolution–Scope of 8. 105-C.

HEADNOTE:

A company was incorporated with a capital divided into 10,000 shares. After 5,404 shares had been subscribed, the directors of the company, finding that a businessman who had several other businesses and who was likely to use the funds of this company for his own businesses, was trying to get control of this company by purchasing its shares, resolved to issue the remaining 4,596 shares and offered these shares to the existing shareholders in the proportion of four new shares for every five shares held by them. Two of the share- holders of the company instituted a suit against the company and the directors for the following reliefs: (i) a declara- tion that the resolution of the directors and the offer of shares contravened the provisions of section 105-C of the Indian Companies Act, 1913, and was therefore ultra vires and illegal; (ii) a declaration that the offer of shares was not made bona fide or in the interests of the company and was therefore illegal; and (iii) to restrain the defend- ants from allotting any shares in pursuance of their offer:

Held per KANIA CI.J., MAHAJAN, MUKHERJEA and DAS JJ.- that inasmuch as the shares resolved to be issued were offered to the existing shareholders only, and not to any outsider and these shares were also offered to the existing shareholders in proportion to the shares held by each member without making any discrimination between them the two requirements of section 105-C were complied with and the resolution and offer did not contravene that section even though 272 shares remained undistributed as a result of the offer of four new shares for every five shares.

49-A 392 Held also per KANIA C.,J. MAHAJAN, MUKHERJEA and DAS JJ.–that the fact that one of the motives of the direc- tors in issuing further shares was to prevent an outsider who had not yet become a shareholder, from getting control of the company did not render the resolution or the offer illegal inasmuch such a motive could not in itself be said to be not in the interests of the company and even assuming that such a motive was bad this additional motive could not render the resolution and offer illegal as the company was in fact in need of further funds and it was necessary in the interests of the company to issue further shares.

Judgment of the Bombay High Court affirmed.

APPEAL from the High Court of Judicature atBombay:

(Civil Appeal No. LXIX of 1949).

This was an appeal from the judgment and decree of the High Court of Bombay dated 11th March, 1949, (Chagla C.J.

and Tendolkar J.) in Appeal No. 85 of 1947, confirming a decree of the said High Court in its Original Jurisdiction dated 10th November, 1947. The facts of the case and argu- ments of the counsel arc set out in the judgment.

N.P. Engineer (M.M. Desai and H.J. Umrigar with him) for the appellants.

M.C. Setalvad (G. N. Joshi with him) for respondents Nos. 1 to 6 and 8 and 9.

1950. May 4. The Court delivered the following Judg- ments:

KANIA C.J.–This is an appeal from the decision of the High Court of Judicature atBombay. The respondent company was incorporated in 1908 with an authorised capital of Rs.

10 lakhs divided into 10,000 shares of Rs. 100 each. By 1945, 5,404 shares were subscribed and Rs. 25 per share were called on each of them. Four thousand five hundred and ninetysix shares out of the authorised capital thus remained unissued. From about July, 1944, Mr. Padampat Singhania, a businessman interested in many companies, began to purchase shares of the company from the holders thereof on a large scale. This naturally 393 put up the price of the shares considerably. On the 18th September, 1944, at a board meeting of the directors the chairman drew attention of his co-directors to the attempt thus made by an outsider to corner the shares of the compa- ny. In pursuance of a resolution passed at the meeting, the chairman issued a circular to the existing shareholders acquainting them of the true position and suggesting that if they wanted to part with the shares they might get in touch with the chairman. A circular was accordingly issued with the result that two rival groups were thus offering to buy shares from those who were desirous of selling them. The shares on which about Rs. 12 or 14 were paid per annum as dividend began to be quoted in the market at about Rs. 2,000 per share in March, 1945. Mr. Singhania had not submitted to the company for registration of the transfers to his name the shares purchased by him. In the meantime on the 8th January, 1945, an application was submitted by the company to the Examiner of Capital Issues for sanction of a fresh issue of capital. Several reasons were mentioned in that application to show why the company required additional capital. Such application had become necessary owing to war regulations. The Government granted the sanction on the 16th February, 1945, and the communication was received by the company on the 20th of February. On the next day a board meeting was held at which the directors decided to issue the remaining 4,596 shares at a premium of Rs. 75 per share and to call Rs. 25 per share on them. Pursuant to this resolution a circular was issued to the shareholders on the same day with copies of the form of application and renunci- ation referred to in the resolution and in the circular.

The shares were offered to the shareholders shown on the register of members in the ‘proportion of four further shares for every five shares held by them. The last date for submission of the application and payment was 10th March, 1945. The directors and their friends in the next few days applied and were allotted 1,648 shares. By the 6th, of March, 1945, 2,204 shares were allotted to shareholders who had applied for the same.

394 The appellants are two shareholders of the company.

They filed the suit, out of which this present appeal has arisen, “for themselves and all other aggrieved sharehold- ers of the company.” The defendants are the company and eight directors. It is contended in the plaint that the whole issue of these further shares and the idea of increas- ing the capital of the company was mala fide and with the object of retaining the control and management of the compa- ny in the hands of defendants 2 to 9. It is further con- tended that the resolution of the directors and the offer of shares contained in the circuluar letter were in contraven- tion of section 105-C of the Indian Companies Act. There were further prayers restraining the company and directors from proceeding with the allotment of shares. It was con- tended that the company was not in need of capital and the issue of further shares was not made bona fide for the benefit or in the interest of the company but had been made “merely with the object of retaining or securing the second defendant and his friends the control of the first defendant company.” Considerable evidence was led in the trial Court on the question of bona fides. The trial Court held that the issue of new shares was bona fide and the appellate Court has also come to the conclusion that the object of the directors in issuing the new shares was not merely with the object of retaining or securing to the second defendant and his friends the control of the first defendant company. They held that the company was in need of capital. The suit was consequently dismissed and that decision was affirmed by the High Court on appeal.

The decision of the appellate Court has been challenged before us on both grounds. The learned counsel appearing for the appellants did not contest the concurrent finding of fact of both the lower Courts to the effect that the company was in need of capital. It was however urged on their behalf that as the issue of these shares, although not admitted in the written 395 statement but admitted in the course of evidence, was for the purpose of preventing the control of the company going in the hands of Mr. Singhania, the directors had not acted bonn’ fide and solely in the interest of the company. I have read the judgment prepared by Das J. and I agree with his conclusion and line of reasoning on this part of the case. In my opinion, the contention of the appellants on this point was rightly rejected by both the lower Courts and that contention must fail.

That leaves the question whether the issue of these shares was in contravention of section 105-C of the Indian Companies Act. That section runs as follows:- ” Where the directors decide to increase the capital of the company by the issue of further shares such shares shall be offered to the members in proportion to the exist- ing shares held by each member (irrespective of class) and such offer shall be made by notice specifying the number of shares to which the member is entitled and limiting a time within which the offer if not accepted, will be deemed to be declined; and after the expiration of such time, or on receipt of an intimation from the member to whom, such notice is given that he declines to accept the shares of- fered, the directors may dispose of the same in such manner as they think most beneficial to the company.” On behalf of the respondents three answers were submit- ted. The first was that the section deals with the case of increase of capital by the directors beyond the authorised limit and as in the present case the new shares were issued within the authorized limit of capital, the section has no application. The second was that the terms of the section should be construed in a practical way and there was no difference between Regulation 42 in Table A of the Companies Act and section 105-C in respect of the scheme to offer the proportion of shares to the existing shareholders. It was argued that so long as they were offered “as nearly as circumstances admit” the directors had complied with the requirements of the section and therefore their action was not illegal. The third answer was that in fact the direc- tors had not committed any 50 396 breach of the terms of section 105-C up to now and therefore their action cannot be held to be illegal. In view of my conclusion on the third point it is not necessary to ex- press any opinion on the first two answers submitted on behalf of the respondents. It seems to me that section 105-C, interpreted strictly as contended by the appellants, casts on the directors two obligations. They have to offer the shares issued to the shareholders on the register of the company and not to anyone else, and secondly, the offer must be in the same proportion to all the shareholders and there should be no discrimination amongst them. It is not con- tended that by the offer made by the directors to the share- holders there has been any discrimination amongst the share- holders on the register of the company. It was contended on behalf of the appellant that the directors had failed to offer all the shares resolved to be issued by them to the existing shareholders and therefore the requirements of the section had not been complied with. It was argued that the directors having resolved to issue 4,596 shares, they had to offer that whole lot at once to the shareholders on the register and the result of the offer made by them was to retain in their hands 272-4/5 shares. In my opinion, this contention is unsound. By their resolution of the 21st February, 1945, the directors resolved to issue 4,596 shares out of the authorized capital of the company. They have offered shares to the existing shareholders in the propor- tion of four new shares to five shares held by them. Inas- much as the offer does not absorb the whole lot of 4,596 shares I am unable to construe the offer as an offer of the whole lot at once to the existing shareholders. Unless the whole lot of shares in pursuance of the. offer could be accepted and taken up I am unable to consider the offer contained in the circular as an offer of the 4,596 shares.

That however does not establish the contention of the appel- lants. I find nothing in the section to justify the conclu- sion that the directors must offer all the shares resolved to be issued in one lot to the shareholders. I can Conceive of. numerous cases where a limited company with a growing business does not 397 require its capital to be called up at once. For instance, soon after a company is formed it may issue shares of, say a lakh of rupees required for the construction of the build- ings, and after a year when it requires further capital for payment of machinery etc. it can issue further shares. I do not think the section as worded prevents the directors from issuing shares to existing shareholders from time to time in that way. As noticed before, the object of the section is to prevent discrimination amongst shareholders and prevent the directors from offering shares to outsiders before -they are offered to the shareholders. So long as these two requirements are complied with, the action of the directors in selecting the time when they will issue the shares as also the proportion in which they should be issued is a matter left to their discretion and it is not the province.of the Court to interfere with the exercise of that discretion. This is of course subject to the general excep- tion that the directors are not to act against the interest of the company or mala fide. No such question arises in this case and therefore it is unnecessary to discuss that aspect of the situation. In my opinion therefore on this third ground this contention of the appellants should be rejected.

The appeal therefore fails and is dismissed with costs.

MAHAJAN J.–This is an appeal by special leave from the judgment and decree of the High Court of Judicature at Bombay (Chagla C.J. and Tendolkar J.) dated 11th March, 1948, confirming the judgment of the said High Court in its Original Jurisdiction (Bhagwati J.) dated 10th November, 1947.

The two questions canvassed in this appeal are: (1) whether the issue of further shares by the directors was in contravention of the provisions of section 105-C of the Indian Companies Act, and (2) whether this issue was not made bona fide. Both these questions were answered in favour of the respondents by the High Court.

The Bombay Life Assurance Co. Ltd., the first defendant in the case, was incorporated in the year 398 1908 as a limited company with an authorized capital of ten lakhs. Five thousand four hundred and four shares had been issued till the year 1945 and they were paid up to Rs. 25 each. The second defendant is the chairman of the board of directors which is comprised of defendants 2 to 9. The company has a life fund of Rs. 230 lakhs.

In the year 1944 Sir Padampat Singhania, an industrial- ist ofKanpur, attracted by the soundness of this concern, began purchasing the shares of the company with a view to acquiring a controlling interest in its management. Soon after competition started for the purchase of the shares of the company between the Singhania group and the Maneklal Premchand group who were in management of this company. The result of this competition was that shares which were ordi- narily quoted at 250 went up as much as to 2,000 in March, 1945. A circular was issued by the directors to the share- holders apprising them of the activities of the Singhania party and suggesting that those who wanted to sell their shares should sell them in the first instance to the chair- man. This circular does not seem to have had much effect as the shareholders wanted to reap the maximum benefit which would come to them as a result of this competition between two rich parties. By the end of December, 1944, the Singha- nia group had purchased 2,517 shares as against 2,397 held by Maneklal Premchand’s party. The Singhania group had thus acquired a majority of the shares in the company though these had not yet been transferred in their name. On 8th January, 1945, the chairman at his own instance and after consulting some of the directors made an application to the Examiner of Capital Issues for permission for a fresh issue of capital. This was allowed on 20th February, 1945. As soon as sanction of the Examiner of Capital Issues was obtained for increasing the capital of the company, a meet- ing of the directors was held on 21st February, 1945, and it adopted the following resolution :–

1. That the capital of the company be increased from Rs. 5,40,400 to Rs. 10,00,000 by the issue of the 399 remaining 4,596 ordinary shares of Rs. lOO each at a premium of Rs. 75 per share.

2. That as on the existing shares of Rs. 100 each Rs.

25 is paid up, to call Rs. 22 per, share on these new shares also.

3. That these new.shares shall rank pari passu in all respects with the existing shares of the company, but they shall be entitled to rank for dividend as from 1st April, 1945.

4. That these new shares shall be offered in the first instance by a circular to the shareholders of the company as shown on the register of members on 20th February, 1945, in the proportion of four new shares to every five shares held by them in the capital of the company on that date.

5. That in the case of any shareholder holding less than five shares or whose holding of shares shall not be complete multiples of five shares, then fractional certifi- cates shall be issued to such shareholders in respect of their rights for fraction of a share, each fractional cer- tificate representing one-fifth of a share.

6. That a sum of Rs. 100 per share (Rs. 25 towards capital and Rs. 75 for premium) shall be payable along with application for these new shares.

7. That all applications for shares in accordance with this offer (including applications for shares made in re- spect of and accompanied by fractional certificates and applications for shares accompanied by a renunciation) must be presented to and payment made at the registered office of the company inBombayon or before the 10th March, 1945.

Any shareholder or person in whose favour a renunciation has been signed not applying on or before the 10th March,, 1945, in terms of the offer shall be deemed to have declined to participate in this new issue and all fractional certifi- cates not presented as required on or before 10th March, 1945, will cease to have any validity and will not entitle the holder to any rights.

8. That any balance of the shares remaining out of this issue not applied for by the: 10th March, 1945, shall be disposed of by the directors as they may consider best in the interests of the company.

400 That the draft circular to the shareholders with the enclosures (form A being the form of application, form B form of renunciation and form. of fractional certificates with application form) placed on the table by the manager and actuary be approved and initialled by the chairman.

10. That the manager and actuary be and is hereby directed to issue forthwith the necessary circulars to the shareholders.

11. That a committee consisting of the chairman and any one of the directors or the chairman and any two of the directors be and are hereby appointed to scrutinise the application for the new shares which may be received and to make allotment of these new shares………………” It is the validity of this resolution ‘that is the sub- ject matter of the present dispute. The plaintiffs, who are two shareholders of the company owing allegiance to the Singhania group, filed the suit out of which this appeal arises challenging this issue of further shares, principally on two grounds, viz. (1) that the new issue contravenes the provisions of section 105-C of the Indian Companies Act, and (2) that the issue of shareswas not bona fide made in the interests or for the benefit of the first defendant company, but was resolved upon merely with the object of retaining or securing to the second defendant and his friends control of the first defendant company. As already stated, both these contentions were negatived by the trial Judge and the suit was dismissed and this decision was affirmed on appeal.

The answer to the first question depends on the meaning to be given to the words used in section 105-C of the Indian Companies Act as to its scope. The section was introduced in the Indian Companies Act in the year 1936. Antecedent to this period the question of issue of new shares by the directors was dealt with by article 42 of the Articles of Association given in the schedule to the Indian Companies Act, 1913. The article was in these terms :– “Subject to any directions to the contrary that. may be given by the resolution sanctioning the 401 increase of share capital, all new shares shall, before issue, be offered to such persons as at the date of the offer are entitled to receive notice from the company of general meetings in proportion, as nearly as the circum- stances admit, to the amount of the existing shares to which they are entitled.” As its language indicates, the article only applied to cases where the capital of the company was increased by a resolution of the company. It had no application to cases where the directors issued further shares within the autho- rised limits. The new section introduced in 1936 is in these terms :– “Where the directors decide to increase the capital of the company by the issue of further shares such shares shall be offered to the members in proportion to the existing shares held by each member (irrespective of class) and such offer shall be made by notice specifying the number ‘of shares to which the member is entitled, and limiting a time within which the offer, if not accepted will be deemed to be declined, and after the expiration of such time or on re- ceipt of an intimation from the member to whom such notice is given that ‘he declines to accept the shares offered, the directors may dispose of the :same in such manner as they think most beneficial to the company.” It qualifies the discretion of the directors in the matter of issue of capital by enjoining on them that if they decide to issue further shares, the existing shareholders should be given the first option to buy’ them. The language employed in the section admits of three possible interpreta- tions: (1) that its scope is limited to cases where there is an increase in the capital of the company according to the provisions of section 50; (2) that the section covers within its ambit all issue of further capital whether made by increasing the nominal capital or by issuing further shares within the authorised capital; (3) that the section has application only to cases where the directors issue further shares within the authorized limit.

The learned counsel for the respondents contended that the Who1e intent an d purpose of ‘the section was to limit the discretion of directors in regard to the issue 402 of further shares in those cases alone where there was an increase in the nominal capital of the company by recourse to the provisions of section 50 of the Indian Companies Act.

It was argued that the phrase “increase of capital” has been employed by the legislature in section 50 and some other sections preceding section 105-C with reference only to the nominal capital of a company and that this expression had not been used with reference to the subscribed capital anywhere in the Act and therefore the scope of section 105-C should be limited to cases where the increase in the capital is. brought about under section 50 of the Act and new shares are created and issued by the directors. In Sircar and Sen’s Indian Companies Act, 1937 Edn. at page 309 the learned authors observe as follows :– “The words ‘further shares’ must be read in conjunction with the words ‘decide to increase the capital of the compa- ny.’ They must mean shares which are issued for the purpose of Increasing the capital beyond the authorized capital.” Mr. Ghosh on Indian Company Law, 8th Edn. at page 263 has stated as follows :– “The object of this new section appears to be to make the salient provisions of Regulation 42 in Table A. , com- pulsory. The section as drafted is liable to the construc- tion that whenever the directors decide to increase the capital of the company by the issue of further shares, even if it be a part of the authorized capital, the new shares must be first offered to theexisting shareholders. But this section should be read in conjunction with clause (a) of section 50 under subsection (2) of which the directors have no power to increase the share capital of the company.

Therefore it seems that the words ‘further shares’ mean shares. beyond the authorized capital of the company.” Whatever might be the opinion expressed by these commen- tators, the matter has to be decided on the language of the Act itself. As already pointed out,. the learned counsel for the respondents contended that the above was the correct view as to the scope of the. section. The learned counsel for the appellants however- urged that on a proper inter- pretation of the.

403 section its scope could not be limited only to cases of issue of further shares by creation of new shares by in- creasing the nominal capital of the company, but that the language employed in the section also included within its ambit cases where there was a further issue of shares by the directors, within the authorized capital. The learned counsel laid considerable emphasis on the expression “fur- ther shares” used in the section and suggested that these words have been used advisedly instead of the expression “new shares” in order to bring within the scope of the section increases in the capital of a company whether within the authorised limit or outside it.

The third interpretation of the section finds support from the language employed by the legislature in the opening part of the section, wherein it is said: “Where the direc- tors decide to increase the capital of the company by the issue of further shares……. “The directors can only decide to increase the capital at their own initiative when they issue further shares out of the authorised capital. In no other case can the directors themselves decide as to the increase in the capital of a company. Under section 50 the capital can only be increased by a resolution of the compa- ny. Once the company has increased the nominal capital, then the directors can issue shares within the new limit.

Therefore the authority of the directors, strictly speaking, in respect to the increase of capital is limited to an increase within the authorised limit. They cannot by their own decision increase the nominal capital of the company.

In view of this language the third interpretation of the section seems more plausible.

The expression “capital of a company” is an ambiguous phrase and may mean either issued capital or authorized capital according to the context. It has been used in different senses in various parts of the Act. In what sense it has been used in this section is by no means an easy matter to decide, particularly in view Of the fact that in spite of the introduction of this section in the Indian Companies Act in the year 1936, article42 still remains as one of the articles to be adopted by companies if they do not choose otherwise 404 and this refers to cases of increase in the nominal capital of a company. In my opinion, for the purpose of deciding the present case it is not necessary to pronounce on the question as to the precise scope of the section because I consider that on any interpretation of it the appellants’ contention has to be negatived. If the interpretation sug- gested by the learned counsel for the respondents is accept- ed, then the plaintiffs’ contention on the first question fails, because here there has been no increase in the capi- tal of the company under section 50. Conceding however for the sake of argument (but not deciding) that the scope of the section is as it has been contended for by Sir Noshir- wan, the question still remains “To what extent has there been a contravention of its provisions by the directors in the present case.” So far as I have been able to see, the resolution passed by the directors is in accordance with the provisions of the section and does not injuriously affect the shareholders or the company, and they cannot be said to have any cause of grievance against it. In other words, in my opinion, the resolution substantially complies with the provisions of section 105-C of the Indian Companies Act.

The directors offered all the new shares to the shareholders in the ratio of 4 to 5, as the shares of the company were held in multiples of five to a larger extent than in any other multiple. The result of fixing this ratio is that 272 shares remain outside the offer. In whatever other propor- tion the shares were offered, still a few shares were bound to remain unoffered. If a liberal interpretation is placed on the section, then it has to be held that the directors’ resolution substantially complies with its provisions. On the other hand, if a technical and literal interpretation is placed on the section, then the directors were bound to offer the shares in the ratio of 4596/5404 in spite of the practical difficulties that might result in the actual working out of such a proportion, and irrespective also of whatever absurdities or anomalies might thus result. I am of the opinion that the section has to be given a workable construction and a construction that is businesslike in preference to a literal construction which might lead to a deadlock. In each 405 case it should be seen whether the directors have substan- tially complied with the provisions of the section or not.

The basic idea underlying the section is that whatever is given, is given to all the existing shareholders and is distributed equally and equitably between them. It cannot be denied that all the shareholders were offered the further shares and that they were offered equally and equitably.

Whatever is the balance remains with the company with the result that the capital remains unincreased to this extent.

In such a situation it is difficult to hold that the reso- lution passed by the directors has contravened the provi- sions of section 105-C and has caused any detriment or injury either to the company or to the shareholders. Even if the resolution passed by the directors is held to be in technical breach of the section, as it has caused no injury to anybody, the resolution cannot be held to be void. Under the law as it existed prior to 1936, if a company incorpo- rated in its Articles of Association article 42 mentioned in the schedule to the Indian Companies Act, then in the case of issue of new shares the directors’ discretion was cur- tailed inasmuch as they were bound to offer these shares in the first instance in proportion as nearly as the circum- stances admitted to the amount of the existing shares to the existing shareholders but in all other cases their discre- tion remained unfettered. It was open to a company not to adopt article 42 and thus fetter the discretion of the directors even in the case of the issue of new capital.

After 1936 it has been made obligatory on the directors to give the first option to buy further shares to the existing shareholders and without any favour to anyone. That being the intent and purpose of the section, it has been fully carried out by the directors in the present instance and has been carried out in a businesslike way because the ratio in which they offered the shares is the ratio which works to the convenience of the largest number of shareholders as the shares of the company are held mostly in multiples of five.

If the shares were issued in any other ratio, that would have created some difficulty in the way of shareholders who held shares in multiples of five and who owned 2,110 406 shares. They would have been obliged to collect fractions before they could claim a whole share and thus make an application within the time allowed to exercise the option.

Where the language of a statute in its Ordinary meaning and grammatical construction leads manifest contradiction of the apparent purpose of the enactment, or to some inconven- ience or absurdity, hardship or injustice, presumably not intended, a construction may be put upon it which modifies the meaning of the words, and even the structure of the sencence. In my opinion, the section when it says “such shares shall be offered to the members” should be construed liberally and not literally, as such an interpretation would make the section workable and would not in any way affect its intent and purpose, the phrase “such shares” meaning those shares which admit of being so offered in a business- like way.

It was argued that a liberal interpretation of the section would result in the directors allotting the balance of shares remaining out of the further shares unoffered to their own friends and relations and it would operate to the detriment of the other shareholders. In this connection reference was made to para 8 of the resolution above men- tioned. In my opinion this paragraph does not bear out the contention of the appellants because it has reference only to shares not applied for, obviously shares not offered and which could not be taken up by the shareholders cannot fall under that description. That paragraph applies only to cases where the shares could be applied for and then no applica- tion was made in respect of them. It was not disputed that the directors in the present case had not sold these shares to any one and that these have remained unissued. It was urged strongly by the learned counsel for the appellants that the section being imperative and its language being unambiguous, the Court was bound to place a literal inter- pretation on it and the argument of hardship or inconven- ience should not weigh with it. It was further suggested that the directors could always give effect to the provi- sions of the section by increasing the capital in a manner and to the extent that the further shares 407 could be offered to the shareholders in such a proportion that all the shares offered could be taken up them. In other words, it was contended that the section not only fetters the powers of the directors in the matter of sale of shares but it also restricts their discretion in the matter of increase of capital and as to the number of further shares.

This contention, if accepted, would mean that the legisla- ture by enacting section 105-C indirectly enjoined on the directors that whenever they decide to increase capital by issue of further shares they should make the increase only to such an extent and in a manner as to enable the existing shareholders to take the whole of it. If that was the intention of the section, there was nothing easier for the legislature to say so. The section, on the other hand, recognizes that the directors have a discretion in the matter of the increase of capital when it says, “when the directors decide to increase the capital of a company.” It means that it is within their absolute discretion to take the decision whether to increase the capital or not. It is also within their discretion to say to what limit and to what extent they will increase the capital. It is also for them to decide how many shares and of what value they will issue. Once they have taken their decision, it is then and then only that section 105-C comes into operation. At that stage they have to offer the new shares to the shareholders and at that stage they can offer them in a businesslike manner to all of them equitably and equally and if out of the shares offered some cannot be taken up by the sharehold- ers as they do not fit in the ratio in which the offer has been made, the only result is that those shares remain unoffered and thus unissued. I am therefore of the opinion that the learned Judges of the Court of appeal were right when they held that under section 105-C the shares have to be offered to the existing shareholders as nearly as the circumstances would admit and that the section has to be given a businesslike construction and should be construed liberally and that the charge of contravention of section 105-C cannot be levelled against the directors so long as they have not disposed of the unoffered balance contrary to 408 the provisions of the section. The result is that the first contention of the learned counsel stands negatived.

The next question whether the action of the directors in passing the resolution was not bona fide seems to be con- cluded by concurrent findings of fact of the Courts below to the effect that the resolution was passed because the compa- ny needed additional funds at the moment when the new issue was decided upon and that the issue of shares was not due solely to the desire on the part of the directors to keep themselves in the saddle.

It is not the practice of this Court ordinarily to interfere with concurrent conclusions on questions of fact reached in the Courts below unless those conclusions have been reached on extraneous considerations or by violating rules of procedure or by committing any breach of some provision of law: vide Srimati Bibhabati Devi v. Kumar Ramendra Narayan Roy (1) The learned counsel for the appel- lants while conceding. that it was not open to him to chal- lenge concurrent findings of fact of the Courts below, urged that the whole case has been looked at by them from an erroneous angle. It was contended that the Courts below had misdirected themselves in their approach to the decision of the issue of bona fides. In this connection emphasis was laid on the following observations in the judgment of the learned Chief Justice and on similar observations occurring elsewhere :– “In this particular case it is urged and urged with considerable force that the reason which actuated the’ directors on the 21st February, 1945, in resolving to issue new shares was the fear that the Singhsnia group, would capture the company and oust the present directors from their vantage point and take control of the company itself.

It may be that one of the factors that weighed with the directors was that consideration. It may even be that it weighed with them a great deal. It may also be that the directors selected this particular time viz. the 21st Febru- ary, 1945, for the issue of’ these shares because of the impending danger of the–‘ 73 I.A-. 246.

409 majority of shares going into the hands of the Singhania group with the necessary consequences. If, with all that, it is established before the Court that in fact on the 21st February, 1945, the company was in need of funds, that the funds were required for the working of the company, then the Court will not interfere with the discretion exercised by the directors, because the principle is obvious that if the new shares have been issued because the company needs funds, then it cannot be said that the discretion vested in the directors has been exercised not in the interests of the company or for the purpose of the company. It is only when that discretion is exercised solely for the personal ends of directors, for their personal aggrandisement, for keeping themselves in power, then undoubtedly that discretion cannot be said to have been exercised for the purpose of or in the interests of the company.” Reference was also made to the concluding part of the same judgment which runs thus :– “Undoubtedly this is a case of high finance and we have been given a glimpse of what high finance can be and there is great justification in what Mr. Amin has said as to the manner in which some of the things were done with regard to the affairs of this company. But ultimately we must come down to the one short and simple question, was the company in need of funds at the time when the directors decided upon the issue of new shares, and in my opinion there can be no doubt on the evidence led this case that the answer to that question must be in the affirmative. If that be the posi- tion all other considerations can be of no avail or of very little avail as against this central fact in this case and as I am satisfied as to the central fact, I would agree with the learned Judge who took the same view and came to the conclusion that the plaintiffs have failed to discharge the burden which lay upon them of establishing that the issue of new shares was not bona fide and not in the interests of and for the benefit of the company.” It was argued that the learned Judges were not right in thinking that all other considerations were of 410 no avail and should be practically kept out of consideration once it was established that the company needed funds. It was said that it having been found that at the time of the aforesaid resolution the directors were considerably influ- enced by the consideration of keeping out the Singhania group from capturing the company, and by the consideration of keeping themselves in the saddle, it should have been held that they were acting with an ulterior motive, and that their decision as to the need of the company for further funds was vitiated by reason of the ulterior motive.

It is convenient here to state what the true approach should be to a question of this nature when it arises in a case. It is well settled that in exercising their powers whether general or special, the directors, must always bear in mind that they hold a fiduciary position and must exer- cise their powers for the benefit of the company and for that alone and that the Court can intervene to prevent the abuse of a power whenever such abuse is held proved, but it is equally settled that where directors have a discretion and are bona fide acting in the exercise of it, it is not the habit of the Court to interfere with them. When the company is in no need of further capital, directors are not entitled to use their power of issuing shares merely for the purpose of maintaining themselves and their friends in management over the affairs of the company, or merely for the purpose of defeating the wishes of the existing majority of shareholders.

It appears to me that the learned Judges in the Court below approached the decision of this question in the light of the principles stated above and the contention of the learned counsel therefore does not seem right. Where the directors are not chargeablefor breach of trust so far as the company is concerned and where their action is for the benefit of the company, then merely because in promoting the interests of the company they also promote their own inter- ests. it cannot be held that they have not acted bona )fide.

As it has been said in Hirsche v. Sims (1), if the true effect of the whole evidence is that the defendants truly’ (1) (1894) A.C. 654.

411 and reasonably believed at the time that what they did was for the interest of the company, they are not chargeable with dolus malus or breach of trust merely because in pro- moting the interest of the company they were also promoting their own, or because they afterwards sold shares at prices which gave them large profits.

Both the Courts below have as fact that to a certain extent in resolving to issue new shares the directors were actuated by a fear that the Singhania group would capture the company and oust the present directors from their vantage point and take control of the company itself. It was argued that this motive was an ulterior motive and the exercise of power by the directors to achieve this objec- tive by the issue of further shares was an exercise of power for the purpose for which it was not conferred. This argument would have had force if this was the main purpose of the directors in issuing the further shares, but this is not the case here. As found by the High Court, the central fact working in the mind of the directors was the necessity of further funds for the company at the moment they passed the resolution. That being so, it seems to me that the existence of the other motive does not make the action of the directors in respect of the issue of further shares mala fide.

Moreover, in the present case it seems to me that the directors were on the defensive. They felt that the attempt of the Singhanias to capture the controlling inter- est in the company by paying high prices for its shares must have been with a purpose, i.e., to make use of the funds of the company in their own concerns. Some evidence of this exists on the record. They thought that it was their duty as directors to protect the company from such an attack and they felt that it was beneficial to the company to protect it from such an attack. They did not keep the matter in secret but informed all the sharehold- ers about it. They first attempted to enter into the field of competition with the Singhanias but it seems that they were not wholly successful in their objective. They then decided to issue further capital by taking into consideration the 53 412 interest and the needs of the company and ifs requirements in respect of capital at the moment. They also thought that by this action they would also be able to keep out the Singhanias from capturing the company. They were under no obligation to Singhanias who had not yet even been en- tered as shareholders on the register of shareholders. There was no dolus malus in their mind as directors of the compa- ny, as affecting the company or its shareholders. On the other hand, they honestly considered it to be in the best interests of the company to meet such an attack. The re- sult- therefore is that it cannot be held that this is one of those unusual cases where this Court should not give weight to the concurrent findings of fact by the Courts below, or that it is a case where it can be held that the High Court in arriving at its findings has committed a breach of any rule of procedure or law and that there is no evidence to support the findings that have been arrived at.

The result therefore is that this appeal fails and is dismissed with costs.

DAS J.–I agree that this appeal must be dismissed. As, however, my decision rests on slightly different reasons, I desire to state them in my judgment.

For the purpose of appreciating the questions involved in this appeal which has been brought by the plaintiffs it will suffice to set out the following facts.

The Bombay Life Assurance Company, Ltd. (hereinafter referred to as “the company”)was incorporated in 1908 with an authorised capital of Rs. 10,00,000 divided into 10,000 shares of Rs. 100 each. By 1945, 5,404 shares in all were subscribed, and Rs. 25 per share had been paid on them.

This left 4,596 shares out of the total authorised capital yet to be issued. The plaintiffs are two of the shareholders of the company. Respondents 2 to 9 are the directors of the company of whom respondent 2 is the chairman of the board of directors. It appears that 413 from July, 1944, shares in the company began to be purchased from the holders thereof by or in the interest of Sri Padampat Singhania. This attempt to buy up the shares on a large scale naturally resulted in a sudden rise in the price of the shares. This abnormal rise in the price could not but attract the attention of the board of directors. On September 18, 1944, a board meeting was held at which the chairman drew the attention of his co-directors to the serious implications of the attempt of an outsider group to corner the shares of the company. It was decided at that meeting that a circular should be issued to the Shareholders acquainting them of the true position and the chairman was authorised to sign the circular. Accordingly, on September 19, 1944, a circular was issued to the shareholders drawing their attention to what was happening and exhorting.them, in case they -wanted to dispose of their holdings, to offer them to the chairman. The result of the chairman and other directors entering the arena was a race for purchase of shares of the company which inevitably led to a phenomenal rise in the price of the shares. The shares which in 1944 were quoted at Rs. 250 per share went up to Rs. 2,000 per share in March, 1945. It may be noted here that the shares purchased by the Singhania group were not submitted for registration of the transfers with the result that their names have not yet been entered on the register of members.

In the meantime, on January 8, 19,15, an application was submitted by the company to the Examiner of Capital Issues for sanction for a fresh issue of capital, setting forth several reasons for which such capital was required by the company. The required sanction dated February 16, 1945, was received by the company on February 20, 1945, and on the next day (,February 21, 1945) a board meeting was held at which the directors decided to issue the remaining 4,596 shares at a premium of Rs. 75 per share and to call up Rs.

25 per share on them. The minutes of the board meeting (Ex.

O) are printed at pages 301-2 of the Paper Book. Pursuant to this resolution of the board a circular (Ex. q) was issued to the shareholders on the same day with copies 414 of the form of application and form of renunciation referred to in the resolution and in the circular. These further shares were offered to the shareholders shown on the regis- ter of members in the proportion of four further shares to every five shares then held by them. The last date for submission of the applications and necessary payments for the shares so offered was fixed for March 10, 1945. It is said that on the very next day after the board meeting 1,648 shares were allotted and that between February 22, and March 6, 1945, 2,204 shares were allotted to the shareholders who had applied for the same. The suit out of which the present appeal has arisen was filed on March 5, 1945.

The plaintiffs are two of the members of the company suing” for themselves and all other aggrieved shareholders” of the company. The defendants are the company and the eight directors. The reliefs prayed for are as follows, inter alia:

(a) That it may be declared that the resolution of the directors and the offer referred to in para 6 hereof contra- venes the provisions of section 105-C of Indian Companies Act and was and is ultra vires, and illegal;

(b) That it may be declared that the said offer of shares referred to in para 6 hereof is not bona fide or in the interest of the defendant company and is ultra vires and illegal;

(c) That the defendants 2 to 9 may be restrained by an injunction from allotting any shares or doing any further act in pursuance of the said offer.” It will be noticed that none of the shareholders other than the directors to whom further shares had been allotted before the filing of the suit has been made a party to the suit. Further, even as against the defendants 2 to 9 the consequential relief by way, of cancellation of the allot- ments of further shares to them and the rectification of the register in respect thereof has not been prayed for by the plaintiffs.

The contentions of the plaintiffs as set forth in the plaint on which the above prayers were founded may be summa- rised shortly as follows:

415 (i) the company was not in need of capital, (ii) the issue of further shares was not made bona fide for the benefit or in the interest of the company but had been made “merely with. the object of retaining or securing to the second defendant and his friends the control of the first defendant company,” and (iii) the issue and offer of further shares are illegal and void for contravention of the provisions of section 105-C of the Indian Companies Act. It is necessary to examine each of these contentions and to ascertain their effect.

Re (i): Both the Courts below.have found it as a fact that at the time the directors resolved upon the issue of further shares the company was in need of capital for the purposes mentioned in the company’s application to the Examiner of Capital Issues referred to above. This concur- rent finding of fact has not been contested before us and the next contention of the appellants will have to be exam- ined in that light.

Re (ii): It is not disputed that the company’s need for funds standing by itself will afford a good motive to the directors to issue further shares. The contention, however, is that if that motive was not the sole motive but was mixed up with any other motive, it was an abuse of the powers of the directors to issue further shares. This plea is clearly a departure from the case made in the plaint.

There-the case was that there was no need for funds at all and the sole motive of the directors was merely to retain their own control over the affairs of the company. It will, however, be a hypertechnicality to shut out this plea alto- gether. The plea of mixed motive raises three questions, namely- (a) whether apart from the motive of finding further capital for the company, there was any, and, if so, what other motive, (b) was that other motive vitiated by bad faith, and (c) if it was so vitiated, whether the presence of it nullified the good motive and rendered the issue of further shares illegal and void.

116 The contention of the plaintiffs before Bhagwati J. as before us, was that the company was not in need any further capital in February, 1945, and that the directors of the company decided to issue the further capitalmerely With a view to retain control of the management of the company in their hands. On the evidence before him, Bhagwati J. found that the motive of the directors was rather to keep the Singhania group out of the control of the company than to retain their own control. The race for the purpose of purchasing the shares was not merely for the purpose of increasing their holdings for holdings’ sake but was really with a view to prevent the Singhania group from obtaining a majority of shares which would give them the control of the management of the company and enable them to utilise the life funds of the company for the purposes of the various industrial concerns of the Singhania group. The result of keeping out the Singhania group might well be to strengthen the position of the directors and to keep them in the sad- dle, but the proximate motive was to exclude the Singhanias.

The distinction is real and quite understandable. The appeal Court does not appear to have dissented from this view of the matter and I do not see any reason to take a different view. It follows, therefore, that apart from the motive of raising fresh capital for the purposes and benefit of the company, the directors also had another motive, namely, to prevent the Singhania group, who are strangers to the company, from intruding into its affairs so as to be able to assume a controlling hand in its management for their own purposes rather than for the benefit of the compa- ny. On the evidence on record the existence of this motive side by side with the motive of raising further capital cannot be denied.

The question then arises whether in acting up to it the directors were actuated by bad faith. In coming to a con- clusion on this point it has to be borne in mind that the Singhania group had only purchased some shares from various existing shareholders but did not submit the transfers of registration so as to get their names put upon the register of members. It is clear that until the Singhania group get their names.

417 entered in the register of members, they are not share :- 1950-9501 holders but are complete strangers to the company ,.

It has been held in Percival v. Wright(1) that ordinarily the directors are not trustees for individual share ;- holders. Even if the directors owe some duty to the exist- ing shareholders on the footing of there being some fiduci- ary relationship between them as stated in some cases [see for example In re Gresham Life Assurance Society] (,2), I see no cogent reason for extending this principle and.

imputing any kind of fiduciary relationship between the directors and persons who are complete strangers to the company. In my judgment, therefore, the conduct of the respondents 2 to 9 cannot be judged on the basis of any assumed fiduciary relationship existing between them and the Singhania group. In my opinion, the respondents 2 to 9 owed] no dnty to the Singhania group and, therefore, the motive to exclude them cannot be said to be mala fide per se. In North-West Transportation Company, Ltd. v. Beatty (3) the Judicial Committee observed atp. 601:

“But the constitution of the company enabled the defend- ant J.H. Beatty to acquire this voting power; there was no limit upon the number of shares which a shareholder might hold, and for every share so held he was entitled to vote, the charter itself recognised the defendant as a holder of 200 shares, one-third of the aggregate number; he had a perfect right to acquire further shares, and to exercise his voting power in such a manner as to secure the election of directors whose views upon policy agreed with his own, and to support those views at any shareholders’ meeting.” Beatty referred to in the above passage was a director. It follows therefore, that the fact of the directors entering into a competition with the Singhania group in purchasing the shares of the company was quite legitimate and was not mala fide. It was urged, however, that the issuing of further shares, although the company required further capi- tal, was, in the circumstances, evidence of bad faith.

Bhagwati J. dealt (1) L.R. (1902) 2 Ch. 421. (2) L.R. 8 Oh. App. 446 at 0. 449. (3) L.R. 12 A.C. 589.

418 with the various acts of the directors relied upon by the plaintiffs as indicating bad faith on the part of the direc- tors and on a consideration of all of them was ‘unable to come to the conclusion that the issue of new shares was decided upon by the directors not bona fide in the interests of the company and merely with a view to keep the control of the affairs of the company in their hands.” The learned Judge, therefore, came to the conclusion that the issue of further shares and the offer thereof made on the 21st February, 1945, wasnot ultra vires and illegal.’ Some of these facts on which the charge of mala fide was sought to be founded were urged before the appeal Court by learned counsel ‘or the appellants. The learned Chief Justice discussed the matters and concluded by saying that he agreed with the trial Judge that the plaintiffs had failed to discharge the burden which lay upon them of estab- lishing that the issue of new shares was not bona fide and not in the interests, and for the benefit, of the company.

I do not see any cogent reason for taking a different view on the facts. The position, shortly put, was that the Singhania group, who were outsiders and to whom the direc- tors owed no duty, were out to corner the shares of the company for their own ends. To thwart that object of the Singhania group by making it more and more difficult for them to acquire more shares the directors took advantage of the existing needs of the company for further capital and decided upon to issue further shares. The issue of further shares served two purposes, namely, the purpose of finding the necessary finance, and to exclude the interlopers, both of which purposes, according to the directors, were for the benefit of the company. Rightly or wrongly, the directors felt that it was not in the interests of the company to allow the Singhania group a controlling hand in the manage- ment of the affairs of the company. Their apprehension evidently was that the Singhania group, if and when they became shareholders, would use their voting power in their own interests and to the detrimcnt of the company by utilis- ing the life fund of the company for the purposes of their various other in-dustrial concerns. I find nothing in the evidence on 419 record to doubt the honesty of the directors in holding this view and, that being so, I see nothing improper if the directors in the interests of the company and the existing shareholders tried to prevent what, according to them, would be a catastrophe. Indeed, if the directors honestly held that view—and as already stated I have no reason to think that they did not–they would, in my opinion, have been guilty of dereliction of duty to the company and to the existing shareholders if they did not exert themselves to prevent such evil. In my judgment the motive to prevent the Singhania group, who were outsiders, from acquiring a con- trol over the company cannot, as between the directors and the company and the existing shareholders, be stigmatised as mala fide.

At two places in his judgment the learned Acting Chief Justice expressed the view that if it were established before the Court that the company needed further capital, all other considerations could be of no avail or of very little avail as against that central fact. Tendolkar J. did not consider it necessary to deal with the various acts of the directors relied upon as evidence of their mnala fides, because he was of the view that assuming that the directors did all those acts with the object of keeping the Singhania group out of control of the company, the moment it was established that the company was in need of further capital or legitimate purposes, the fact that the directors utilised such need for the purpose of establishing themselves more firmly in the saddle did not render the issue of further capital either ultra vires or invalid. Learned counsel for the plaintiffs contends that the learned Judges in the Courts below entirely overlooked the point that the presence of such bad motive would nullify the good motive of finding capital necessary for the company and this mixture of mo- tives would render the issue of further shares illegal and void. Tiffs leads me to a consideration of the third sub- head on the assumption that what I have called the addition- al motive was a bad motive.

It is well established that directors of a company are in a fiduciary position vis-a-vis the company and 53 420 must exercise their power for the benefit of the company.

If the power to issue further shares is exercised by the directors not for the benefit of the company but simply and solely for their personal aggrandisement and to the detri- ment of the company, the Court will interere and prevent the directors from doing so. The very basis of the Court’s interference in such a case is the existence of the rela- tionship of a trustee and of cestui que trust as between the directors and the company.

The first case to be referred to is that of Fraser v.

Whalley(1). In that case a new company was incorporated in 1859 by an Act of Parliament. By that Act also certain existing railway companies were authorised “to acquire, take and hold shares in the undertaking of the company, and for such purpose to create new shares in their undertakings.” The existing companies in 1861 passed resolutions authoris- ing their directors to exercise this power. The resolutions were, however, not acted upon and the existing companies did not issue n ;w shares in their undertakings for the purpose of taking up any share in the new company and all the shares of the new company were issued to persons other than the existing companies. In short, the shares which it was con- templated would be taken up by the existing companies were no longer available. Subsequently, in 1862, another Act of Parliament was passed authorising the new company to make a branch line and for that purpose to raise fresh capital by the creation and issue of new shares. But this new Act gave no fresh power to the existing companies to take up any of these new shares to be issued by the new company. One Savin held the majority of shares in the existing companies and there was dispute between him and the directors. The gener- al meeting of the company was shortly going to be held and the directors knew that at the ensuing general meeting their policy would be repudiated by the majority of shareholders and they would be turned out from their office. It was in these circumstances that the directors purporting to act on the resolutions of (1) (1864)2 H. & M. 10.

421 1861, resolved to issue new shares. Suit was filed on behalf of the shareholders to restrain the directors from issuing any new shares. On a motion for injunction Wood V.C. granted an interlocutory injunction. In course of his judgment the learned Judge observed:

“The directors are informed that at the next general meeting they are likely to be removed, and, therefore, on the very verge of a general meeting, they, without giving notice to anyone, with this indecent haste and scramble which is shewn by the times at which the meetings were held, resolve that shares are, on the faith of this obsolete power entrusted to them for a different purpose, to be issued for the very purpose of controlling the ensuing general meeting.

I have no doubt that the Court will interfere to prevent so gross a breach of trust. I say nothing on the question whether the policy advocated by the directors, or that which I am told is to be pursued by Savin, is the more for the interest of the company. That is a matter wholly for the shareholders. I fully concur in the principle laid down in Foss v. Harbortie [1843] EngR 478(2 Hare, 461) as to that, but if the directors can clandestinely and at the last moment use a stale resolution for the express purpose of preventing the free action of the shareholders, this Court will take care that, when the company cannot interfere, the Court will do so.” It will be noticed that this decision proceeds entirely on the grounds that the resolutions of 1861 on which the directors purported to act were obsolete, for they had not so long been acted upon and also because the shares contem- plated by that resolution were not available, and that even if the resolutions were still effective and gave authority to the directors to issue new shares, the directors could only do so for the purpose of acquiring shares in the new company and not for the purpose of controlling the ensuing general meeting and preventing the free action of the share- holders. There was no evidence whatever in that case that the issue of shares was at all for the benefit of the compa- ny. The issue of shares in that case was not for the pur- pose of taking up shares in the new company for which pur- pose alone the power could be exercised, 422 but that it was being exercised, wholly and solely for quite a different purpose, namely, of maintaining themselves in office.

Punt v. Symons & Co. Limited (1) was a motion for an interim injunction to restrain the holding of a meeting of the defendant company for confirming the resolution for issue of shares. On the evidence it was quite clear “that these shares were not issued bona fide for the general advantage of the company, but that they were issued with the immediate object of controlling the holders of the greater number of shares in the company, and of obtaining the neces- sary statutory majority for passing a special resolution while, at the same time, not conferring upon the minority the power to demand a poll.” Byrne J. granted an injunction restraining the defendant from holding the confirmatory meeting and observed:

“1 am quite satisfied that the meaning, object, and intention of the issue of these shares was to enable the shareholders holding the smaller amount of shares to control the holders of a very considerable majority. A power of the kind exercised by the directors in this case, is one which must be exercised for the benefit of the company; primarily it is given them for the purpose of enabling them to raise capital when required for the purposes of the company.

There may be occasions when the directors may fairly and properly issue shares in the case of a company constituted like the present for other reasons. For instance, it would not be at all an unreasonable thing to create a sufficient number of shareholders to enable statutory powers to be exercised, but when I find a limited issue of shares to persons who are obviously meant and intended to secure the necessary statutory majority in a particular interest, I do not think that is a fair and bona fide exercise of the power.” The learned Judge concluded with the following words:

“If I find as I do that shares have been issued under the general and fiduciary power of the directors for the express purpose of acquiring an unfair majority (1) L.R. [1903] 2 Ch. 506.

423 for the purpose of altering the rights of parties under the articles, I think I ought to interfere.” Piercy v. S. Mi1Is & Co. Ltd. (1) was a witness action before Peterson J. It was indeed a gross case. On the evidence Peterson J. found that it was manifest “that the shares were allotted simply and solely for the purpose of retaining control in the hands of the existing directors.” After stating the facts, the learned Judge said:

“The question is whether the directors were justified in acting as they did, or whether their conduct was a breach of the fiduciary powers which they possessed under the arti- cles. What they did in fact was to-override the wishes of the holders of the majority of the shares of the company for the time being by the issue of fresh shares issued solely for that purpose.” Then after referring to Fraser v. Whalley and Punt v.Symons & Co. Ltd. (supra), the learned Judge concluded:

“The basis of both cases is, as I understand, that directors are not entitled to use their powers of issuing shares merely’ for the purpose of maintaining their control or the control of themselves and their friends over the affairs of the company, or merely for the purpose of defeating the wishes of the existing majority of shareholders. That is however, exactly what has happened in the present case. With the merits of the dispute as between the directors and the plaintiff I have no concern whatever.

The plaintiff and his friends held a majority of the shares of the company, and they were entitled, so long as that majority remained, to have their views prevail in accordance with the regulations of the company, and it was not, in my opinion, open to the directors, for the purpose of convert- ing a minority into a majority, and solely for the purpose of defeating the wishes of the existing majority, to issue the shares which are in dispute in the present action.” In the result, the shares allotted to the defendants were declared void.

(1) L.R. [1920] 1 Ch. 77.

424 It will be noticed that in each of the three cases the act of the directors was not only not of advantage to the company but was in essence to its detriment in that it was calculated to reduce the existing majority into minority and to prevent the majority of the existing shareholders from exercising their discretion with respect to what they con- ceived to be in the best interests of the company. Those cases were not cases of mixed motives at all. The only motive operating in those cases in the minds of the direc- tors was detrimental to the interests of existing sharehold- ers and, therefore, to the company itself. Our attention was drawn to Palmer’s Company Law, 18th Edition, p. 183, where it is stated that “in exercising their powers, whether general or special, directors must always bear in mind that they are in a fiduciary position, and must exercise their powers for the benefit of the company, and for that alone.” Relying on the words “and for that alone,” it is urged that the power to issue shares must be exercised wholly and solely for the benefit of the company, that there must not be any other motive whether or not that other motive is injurious to the company and that if that power is exercised for that purpose and also for some other purpose then irre- spective of the nature of that other purpose the directors would be guilty of an abuse of their power. I am not pre- pared to read the passage in the way urged by learned coun- sel for the plaintiffs. None of the cases cited on that point in Palmer’s Company Law was concerned with mixed motives at all. In none of them was there any motive bene- ficial to the company or to the existing shareholders. In my view what that passage means is that the power must be exercised for the benefit of the company and that as between the directors and the company there must be no other motive which may operate to the detriment of the company. If the directors exercise the power for the benefit of the company and at the same time they have a subsidiary motive which in no way affects the company or its interests or the existing shareholders then the very basis of interference of the Court is absent, for, as I have pointed out, the Court of equity only intervenes in order 425 to prevent a breach of trust on the part of the directors and to protect the cestui que trust, namely the company and possibly the existing shareholders. If as between the directors and the company and the existing shareholders there is no breach of trust or bad faith there can be no occasion for the exercise of the equitable jurisdiction of the Court. I find support for my views in the following observations of their Lordships of the Judicial Committee in Hirsche v. Sims(1):

“If the true effect of the whole evidence is, that the defendants truly and reasonably believed at the time that what they did was for the interest of the company, they are not chargeable with dolus malus or breach of trust merely because in promoting the interest of the company they were also promoting their own, or because they afterwards sold shares at prices which gave them large profits.” On the facts of this case the concurrent finding is that the company was in need of funds and, therefore, the issue of further shares was clearly necessary and is referable to such need. The further motive of keeping out the Singhania group, who are not yet shareholders but are strangers, does not prejudicially affect the company or the existing share- holders and the presence of such further motive cannot vitiate the good motive of finding the necessary funds for the company. In my judgment it is impossible to hold that the issue of fresh shares was, in the circumstances, illegal or void.

Re (iii):–Learned counsel for the plaintiffs contends that both the Courts below were in error in holding that there has been no contravention of the provisions of section 105-C of the Indian Companies Act. That section is in the following terms :– “Where the directors decide to increase the capital of the company by the issue of further shares such shares shall be offered to the members in proportion to the existing shares held by each member (irrespective of class) and such offer shall be made by notice specifying the number of shares to which the member is entitled, and limiting a time within which the offer, if (1) [1894] A.C. 654, at pp. 660-661.

426 not accepted, will be deemed to be declined; and after the expiration of such time, or on receipt of an intimation from the member to whom such notice is given that he de- clines to accept the shares offered, the directors may dispose of the same in such manner as they think most bene- ficial to the company.” This section was added to the Indian Companies Act in 1936.

The first question is whether the section contemplates increase of capital above the authorised limit, or only below the authorised limit. Learned Attorney General appear- ing for the company urges that the words further shares” must be read in conjunction with the words “decide to increase the capital of the company” and, so read, must mean shares which are issued for the purpose of increasing the capital beyond the authorised capital.

He contends that section 105-C has no application to this case. Section 50 deals with, among other things, alteration of the conditions of the Memorandum of Association of the company by increasing its share capital by the issue of new shares. The very idea of alteration of the memorandum by the issue of new shares clearly indicates that it contemplates an increase of the share capital above the authorised capi- tal with which the company got itself registered. This increase can only be done by the company in a general meet- ing as provided in sub-section (2) of section 50. This increase above’ the authorised limit cannot possibly be done by the directors on their own responsibility. Section 105-C, however, speaks of increase of capital by the issue of further shares. The words used are capital and not share capital and further shares and not new shares. It speaks of increase by the directors. Therefore, the section only contemplates such increase of capital as is within the competence of the directors to decide upon. It clearly follows from this that the section is intended to cover a case where the directors decide to increase the capital by issuing further shares within the authorised limit, for it is only within that limit that the directors can decide to issue further shares, unless they are precluded from doing even that by the regulations of 427 the company. It is said that section 105-C becomes applica- ble after the company in a general meeting has decided upon altering its memorandum by increasing its share capital by issuing new shares. If the company at a general meeting has decided upon the increase of its share capital by the issue of new shares, then it is wholly inappropriate to talk of the directors deciding to increase capital, because the increase has already been decided upon by the company itself. Further, after the company has at a general meeting decided to increase its share capital by the issue of new shares, the increased capital becomes its authorised capital and then ii the directors under section 105-C decide to increase the capital by the issue of further shares, then this decision is nothing more than a decision to raise capital within the newly authorised limit. Final- ly, if section 105-C were to be held applicable to the case of an increase of capital above the authorised limit then such construction will lead to anomalous results so far as the companies which have adopted Table A, for the section is not consonant with Regulation 42 of Table A which, as will be shown hereafter, applies to increase of capital beyond the authorised limit. If the Legislature intended that section 105-C should apply to all companies in the matter of increase of capital above the authorised limit, then the simplest thing would have been to make Regulation 42 a compulsory regulation, instead of introducing a section which in its terms differs from Regulation 42 and which therefore makes the position of companies which have adopted Table A anomalous. It appears to me, therefore, for reasons stated above, that section 105-C becomes applicable only when the directors decide to increase capital within the authorised limit by the issue of further shares. In this view of the matter that section is clearly applicable to the facts of this case.

The next question is whether the directors have, in the matter of issuing and offering further shares in the present case, been guilty of any contravention of the provisions of this section. Learned counsel for 54 428 the plaintiffs contends that they have, because they have not offered the whole lot of shares to the shareholders in proportion to the existing shares held by them. It is pointed out that although the directors decided to issue 4,596 further shares they have only offered four shares to every five shares held by the shareholders which works out at 4,323 1/5 shares which leaves 272 4/5 shares in the hands of the directors which they have reserved power unto themselves to dispose of in such manner as they think fit.

Learned Attorney-General appearing for the company sub- mits:

That section 105-C should be construed in the light of Regulation 42 in Table A of the Indian Companies Act, 1913;

(b) That in order to prevent absurdity and to give business efficacy to the section, the words “as nearly as circumstances admit” should be read into the section; and (c) That in any event the directors have not contravened the provisions of the section even if the same be literally construed.

Each of these points requires serious consideration.

As to the first point it should be remembered that section 105-C was introduced in the Act only in 1936. There is no counterpart of it in the English Act even now. Prior to 1936 there was no check on the powers of the directors to issue blocks of shares, within the authorised limit, to themselves or to their nominees, unless their powers were circumscribed by the Articles of Association. One of the mischiefs of the managing agency system which prevails in this country was that the managing agents, who usually dominated the board of directors, could, to secure their own position, induce the board to issue blocks of preference shares to the managing agents or their nominees. To check this mischief section 105-C was introduced in the Indian Act in 1936. As regards the increase of capital beyond 429 the authorised limit it could only be done by the company.

The shareholders could, while sanctioning such increase, protect themselves by giving special directions to the directors as to the mode of disposal of the new shares.. In the model Regulations set forth in Table A of the 1882 Act under the heading “Increase of Capital” are grouped three Regulations 26 to 98. Regulation 27 was in the following terms:

“(27) Subject to any directions to the contrary that may be given by the meeting that sanctions the increase of capital, all new shares shall be offered to the members in proprtion to the existing shares held by them, and such offer shall be made by notice specilying the number of shares to which the member is entitled, and limiting a time within which the offer, if not accepted, will be deemed to be declined, and after the expiration of such time, or on the receipt of an intimation from the member to whom such notice is given that he declines to accept the shares of- fered, the directors may dispose of the same in such manner as they think most beneficial to the company.” In Table A of our present Act under the heading “Altera- tion of Capital” are to be found three corresponding Regula- tions 41 to 43. Regulation 42 is as follows:– “(42) Subject to any direction to the contrary that may be given by the resolution sanctioning the increase of share capital, all new shares shall, before issue, be offered to such persons as at the date of the offer are entitled to receive notices from the company of general meetings in proportion, as nearly as the circmustances admit,. to the amount of the existing shares to which they are entitled.

The offer shall be made by notice specifying the number of shares offered, and limiting a time within which the offer, if not accepted, will be deemed to be declined, and after the expiration of that time, or on the receipt of an intima- tion from the person to whom the offer is made that he declines to acccpt the shares offered, the directors may dispose 430 of the same in such manner as they think most beneficial to the company. The directors may likewise so dispose of any new shares which (by reason of the ratio which the new shares bear to shares held by persons entitled to an offer of new shares) cannot, in the opinion of the directors, be conveniently offered under this article.” The words underlined are new and are not to be found in Regulation 27 of Table A of the 1882 Act. The scheme of the 1882 Act, as of our present Act, and the language used in the two regulations quoted above clearly indicate, to my mind, that they deal with that kind of increase of share capital which involves an alteration of the conditions of the memorandum which the company alone can do by issuing new shares. These Regulations do not purport to deal with in- crease of capital which is within the competency of the directors to decide upon. In that kind of increase of capi- tal beyond the authorised limits these regulations give the directors certain latitude, subject, of course, to any directions to the contrary that may be given by the resolu- tion of the shareholders in general meeting sanctioning such increase. The only difference between Regulation 27 of 1882 and Regulation 42 of our present Act is that under the last mentioned Regulation, in the absence of any direction to the contrary, the discretion of the directors has been widened by the introduction of the words underlined above. This company was incorporated in 1908 under the Act of 1882. It did not adopt the Regulations of Table A of the 1882 Act but article 45 of its Articles of Association proceeds more or less on the lines of Regulation 27 of Table A of the 1882 Act. The discretion given to the directors under article 45 is, therefore, obviously narrower than that left to the directors under Regulation 42 of Table A of the present Act.

Then came section 105C in 1936. As already pointed out, that section deals with increase of capital within the authorised limit which the directors can decide upon without reference to the shareholders in a general meeting of the company. The legislature had before it both Regulation 27 of Table 431 A of 1882 and Regulation 42 of Table A of the Act of 1913.

It chose to adopt the language of Regulation 27 in prefer- ence to that of Regulation 42. The absence in section 105-C of the words I have underlined in Regulation 42 cannot but be regarded as deliberate. And I can conceive of very good reasons for this departure. In the case of increase beyond the authorised limit, that can be done only by the company in general meeting and the shareholders can protect them- selves by giving directions to the contrary and, therefore, subject to such directions a wider latitude may safely be given to the directors. But in the case of increase of capital within the authorised limit which the directors may do without reference to the shareholders the legislature did not think it safe to leave an uncontrolled discretion to the directors. The mischief sought to be remedied required this curtailing of the directors’ discretion. In my judgment it is impossible to construe section 105-C in the light of Regulation 42 for several reasons. Regulation 42 and section 105-C do not cover the same field and cannot be said to be in pari materia. The omission of the underlined words was obviously deliberate. The difference in the language of the two provisions in the same statute cannot be overlooked as merely accidental. And lastly the reading of these words of Regulation 42 in section 105-C will frustrate what I con- ceive to be the underlying reason for the introduction of the section. In my judgment the first point urged by the learned Attorney-General which found favour with the Courts below cannot be accepted.

The second point urged by the learned Attorney General is founded on the supposed necessity of introducing the words “as nearly as the circumstances admit” to avoid the absurdity which may flow from a literal construction of section 105-C. It must be remembered that the cardinal rule of interpretation of statutes is to construe its provisions literally and grammatically giving the words their ordinary and natural meaning. It is only when such a construction leads to an obvious absurdity which. the legislature cannot be supposed to have intended that the Court in 432 interpreting the section may introduce words to give effect to what it conceives to be the true intention of the legis- lature. It is not any and every inconvenience that justi- fies adoption of this extreme rule of construction. The section literally construed is quite inteligible and may easily be applied to many cases where the further shares issued bear a uniform and round proportion. Merely because a literal construction of the section leads to inconvenient result in a particular case cannot, in my opinion, justify the application of such a drastic rule of construction as is urged by the Attorney-General. Even in this case there would have been no inconvenience if the directors decided for the issue of 4,053 shares which could have been offered in the proportion of three shares to every four shares held by each shareholder. It is true that ordinarily it is for the directors to judge as to the exact amount of capital needed by the company but in arriving at their decision they cannot overlook the limitations put upon their power by the section with respect to the proportion in which the further shares are to be offered by them to. the shareholders.

Further, the supposed inconvenience can be easily avoided by a reference to the shareholders in a general meeting by asking them to increase the share capital beyond the autho- rised limit to such an amount as would permit proportionate disposal of the further and new shares. In my opinion there is not sufficient force in the contention which should induce the Court to depart from the ordinary and golden rule of interpretation I have mentioned above.

The last point urged by the ]earned Attorney General appears to me to be of substance. On a strictly literal construction of the section the directors must perforce offer all the further shares to the shareholders in propor- tion to their respective holdings. Section 105-C comes into operation after the directors have decided to issue further shares. The section does not in terms provide that such offer must be made all at once or at any particular point of time and I see no reason to import any such requirement in the section.

433 The underlying object of the section is to effect equitable distribution of the further shares. Here the shares have been offered in the proportion of four shares to every five shares. There can be no suggestion of favouritism in this offer. Every shareholder will get his proportion if he so desires. The majority will remain the majority if every one takes up the shares offered to him. It is true that 272-4/5 shares remain in hand. At best although issued they have not been offered to anyone. I dO not agree that under clause 8 of the directors’ resolution the directors can dispose of those 272-4/5 shares in any manner they please before offer- ing them proportionately to the existing shareholders. That clause, on a true construction of the resolution as a whole, covers only those shares which have been actually issued but have not been applied for. In point of fact the directors have not yet allotted any of these 272-4/5 shares. If and when the directors allot these shares otherwise than in due course of law, i.e., with.out offering them to the share- holders, the shareholders will then have cause for complaint and may then come to Court for redress. It is said that 272-4/5 shares cannot in future be offered to so many share- holders in a reasonable proportion. If it cannot be done, these odd shares will remain in hand until the company at a general meeting decides to increase the share capital by issuing new shares and then these odd shares together with new shares will be easily capable of being offered to the shareholders proportionately. These special considerations which arise in the case of this company by reason of its own peculiar circumstances cannot, in my opinion, affect or alter the meaning and effect of the section. From all that I can see, up to the present time, there has been no contra- vention of the provisions of section 105-C. In my view the directors have substantially complied with the requirements of the section and the plaintiffs can have no grievance.

They rushed to Court prematurely.

For the reasons stated above, I am clearly of opinion that the conclusions of the Courts below were 434 right and no ground has been made out for interfering with the same. The result, therefore, is that this appeal is dismissed with costs.

MUKHERJEA J.–I agree that this appeal should be dis- missed and I concur substantially in the reasons which have been given by my learned brother Mr. Justice Das in his judgment.

Appear dismissed.

Agent for the Appellants: S.P. Varma.

Agent for the Respondents: Rajinder Narain.


 

 

8. COMMISSIONER OF INCOME-TAX, BOMBAY V. AHMEDBHAI UMARBHAI & CO.,BOMBAY[1950] INSC 8; AIR 1950 SC 134; 1950 SCR 335 (4 May 1950)

04/05/1950 KANIA, HIRALAL J. (CJ) KANIA, HIRALAL J. (CJ) FAZAL ALI, SAIYID SASTRI, M. PATANJALI MAHAJAN, MEHR CHAND DAS, SUDHI RANJAN MUKHERJEA, B.K.

CITATION: 1950 AIR 134 [1950] INSC 81950 SCR 335

CITATOR INFO :

F 1953 SC 105 (6A) F 1954 SC 155 (13) RF 1954 SC 198 (10) R 1954 SC 470 (33) R 1955 SC 661 (152) E&D 1957 SC 49 (37,38) R 1959 SC 586 (7) R 1960 SC1162 (10) RF 1963 SC 577 (24) OPN 1967 SC1626 (10) RF 1972 SC 151 (4) F 1977 SC 560 (7) R 1979 SC 289 (24) D 1987 SC2140 (18)

ACT:

Excess Profits Tax Act (XV of 1940), s. 5, Third Provi- so-Indian Income-tax Act (XI of 1922), s.42 (3)–Article manufactured outside British India–Sale in British India–Whether whole profits accrue or arise in British India–Liability to excess profits tax-Manufacturing opera- tions, whether “part of business “– Apportionment of prof- its between place of manufacture and place of sate-permissi- bility–Applicability of s. 42 (3).

HEADNOTE:

Section 5 of the Excess Profits Tax Act, 1940, provided that “the Act shall apply to every business of which any part of the profits made during the chargeable accounting period was chargeable to income-tax.” There was also a proviso to the effect that “the Act shall not apply to any business, the whole of the profits of which accrued or arose in an Indian State and that where the profits of a part of a business accrued or arose in an Indian State, such part shall for the purpose of this provision be deemed to be a separate business, the whole of the profits of which accrued or arose in an Indian State, and the other part of the business shall be deemed to be a separate business.” A firm which was resident in British India and carried on the business of manufacturing and selling groundnut oil, owned some oil mills within British India and a mill in Raichur in the Hyderabad State where oil was manufactured.

The oil manufactured in Raichur was sold partly within the State of Hyderabad and partly inBombay:

Held, by the Full Court (KANIA C. J., PATANJALI SASTRI, FAZL ALI, MEHR CHAND MAHAJAN, MUKHERJEA and DAS JJ.)-The expression “part of a business” in the proviso to section 5 does not necessarily mean a separate composite unit of all the constituent activities of the business or a complete cross-section of the entire business operations but is wide enough to mean one or more of the operations of the busi- ness, and that the manufacturing operations which the firm carried on at Raichur were “a part of the business” of the assessees within the meaning of the proviso.to section 5 of the Act.

Held also per KANIA C.J., FAZL ALI, MEHR CHAND MAHAJAN, MUKHERJEA and DAS JJ.–that the profits of that part of the business, namely, the manufacture of oil at the mill in Raichur accrued or arose in Raichur within the meaning of the said proviso, even though the manufactured oil was sold in Bombay and the price was received there, and accordingly, that part of the profits derived from sales in Bombay which was attributable to the manufacture of the oil in Raichur was exempt from excess profits tax under the proviso to section 5 of the Act.

42–A 336 Per PATANJALI SASTRI J.–The first part of sub-section (1) of section 42 of the Income-tax Act was applicable to the assessees, the expressions “business connection in British India” and “asset or source of income in British India” being wide enough to cover their selling organisation at Bombay; and as a result, the profits received in Bombay from the sale of the oil manufactured in Raichur had to be apportioned under sub-section (3) of section 42 between the two operations of manufacture and sale, and only such por- tion of the profits as was attributable to the sale in Bombay should be deemed to have accrued or arisen in British India. It followed as a corollary that the rest of the profits attributable to the manufacture at Raichur must be regarded as accruing or arising in theHyderabadStateand was therefore exempt under the proviso to s. 5 of the Act.

Quaere: Whether it is in consonance with business prin- ciples or practice in the absence of any statutory require- ment to that effect to cut business operations arbitrarily into two or more portions and to apportion as between them the profits resulting from one continuous process ending in a sale and whether Kirk’s case is applicable to assessments under the Indian Acts as laying down any general principle of apportionment.

Per MAHAJAN J.–Though profits may not be realised until manufactured article is sold, profits are not wholly made by the act of sale and do not necessarily accrue at the place of sale and to the extent profits are attributable to the manufacturing operations, profits accrue at the place where the operations are carried on.

Per MUKHERJEA J.–Where raw material is worked up into it new product by process of manufacture, it obviously increases in value and this increase in value represents the income or profit which is the result of the manufacture, and as this profit accrues by reason of the manufacture it cannot but be located at the place where the manufacturing process is gone through. It is immaterial that the manufac- tured goods are sold later on at various places. If the manufacturer is himself the seller, it might be that he receives the entire profits including that of the manufac- ture only at the time of sale; but in an inchoate shape a portion of the profits does accrue at the p]ace of manufac- ture, the exact amount of which is only ascertained after the sale takes place. Fox purposes of computation the two parts of the business may be conceived of as being carried on by two different sets of persons.

APPEAL [Civil Appeal No. LXVIII of 1949] from a Judgment of the High Court of Bombay dated 18th -March ]948 (Chagla C.J.

and Tendolkar J.) in a Reference under the Excess Profits Tax Act, 1940.

M.C. Setalvad, Attorney-General forIndia, (B. Sen with him) for the appellant.

K.M. Munshi (S. K. Aiyar and N. K. Gamadia with him) for the respondents.

1950. May 4. The Court delivered the following Judg- ments :– 337 KANIA C.J.–This is an appeal from a decision of the High Court of Judicature at Bombay upon a reference made by the Income-tax Appellate Tribunal, Bombay, under section 66 (1)of the Indian Income-tax Act. The respondent firm, the assessees, carried on business of manufacturing and dealing in oil during the relevant accounting periods. They are a registered firm under the Income-tax Act and are residents inBombay. They own three mills atBombayand one at Rai- chur for manufacturing oil from groundnuts. The oil produced at Raichur is sold partly at Raichur and partly inBombay.

Their liability to pay income-tax in respect of their whole profits is not disputed under the Income-tax Act. The question is in respect of their liability under the Excess Profits Tax Act for the oil manufactured at Raichur, but sold inBombay.

The assessees contend that in respect of such oil a portion of the profits earned by them is attributable to their business of manufacturing oil at Raichur and that portion of the profits should not be assessed to tax under the Excess Profits Tax Act. The taxing authorities rejected the contention of the assessees. The Income-tax Tribunal agreed with them. On a reference the High Court disagreed with the view of the Tribunal and held that the assessees’ contention was correct. The Commissioner of Income-tax has come in appeal from that decision. In the Excess Profits Tax Act, section 2 (5) defines “business” as follows “‘Business’ includes any trade,’ commerce or manufac- ture or any adventure in the nature of trade, commerce or manufacture ……

Provided further that all businesses to which this Act applies carried on by the same person shall be treated as one business for the purposes of this Act.” Section 5 of the Act runs as follows :– “5. This Act shall apply to every business of which any part of the profits made during the chargeable accounting period is chargeable to income-tax by virtue of the provi- sions of sub-clause (i) or sub-clause (ii) of clause (b) of sub-section (1) of section 4 of the Indian Income-tax Act, 1922, or of clause (c) of that subsection:

Provided that this Act shall not apply to any business the whole of-the profits of which accrue or 338 arise without British India where such business is carried on by or on behalf of a person who is resident but not ordinarily resident in British India unless the business is controlled inIndia:

Provided further that where the profits of a part only of a business carried on by a person who is not resident in British India or not ordinarily so resident accrue or arise in British India or are deemed under the Indian Income-tax Act, 1922, so to accrue or arise, then except where the business being the business of a person who is resident but not ordinarily resident in British India is controlled in India, this Act shall apply only to such part of the busi- ness, and such part shall for all the purposes of this Act be deemed to be a separate business:

Provided further that this Act shall not apply to any business the whole of the profits of which accrue or arise in an Indian State; and where the profits of a part of a business accrue or arise in an Indian State, such part shall, for the purposes of this provision, be deemed to be a separate business the whole of the profits of which accrue or arise in an Indian State, and the other part of the business shall for all the purposes of this Act, be deemed to be a separate business.” Section 21 of the Act, which was not referred to in the course of the arguments before us, runs as follows :– “21. The ‘provisions of sections 4-A, 4-B, 10, 13, 24-B, 29, 36 to 44-C (inclusive), 45 to 48 (inclusive), 49-E, 49- F, 50, 54, 61 to 63 (inclusive), 65 to 67-A (inclusive) of the Indian Income-tax Act, 1929,, shall apply with such modifications, if any, as may be prescribed as if the said provisions were provisions of this Act and referred to excess profits tax instead of to income-tax, and every officer exercising powers under the said provisions in regard to income-tax may exercise the like powers under this Act in regard to excess profits tax in respect of cases assigned to him under sub-section (3)of section 3 as he exercises in relation to income-tax under the said Act:

Provided that references in the said provisions to the assessee shall be construed as references to a person to whose business this Act applies.” 339 The relevant portion of section 42 of the Indian Income-tax Act is in these terms :– “42. (1) All income, profits or gains accruing or aris- ing, whether directly or indirectly, through or from any business connection in British India, or through or from any property in British India, or through or from any asset or source of income in British India, or through or from any money lent at interest and brought into British India in cash or in kind, shall be deemed to be income accruing or arising within British India, and where the person entitled to the income, profits or gains is not resident in British India, shall be chargeable to income-tax either in his name or in the name of his agent ….

(2) Where a person not resident or not ordinarily resi- dent in British India, carries on business with a person resident in British India, and it appears to the Income-tax Officer that owing to the close connection between such persons the course of business is so arranged that the business done by the resident person with the person not resident or not ordinarily resident produces to the resident either no profits or less than the ordinary profits which might be expected to arise in that business, the profits derived therefrom or which may reasonably be deemed to have been derived therefrom, shall be chargeable to income-tax in the name of the resident person who shall be deemed to be, for all the purposes of this Act, the assessee in re- spect of such income-tax.

(3) In the case of a business of which all the opera- tions are not carried out in British India, the profits and gains of the business deemed under this section to accrue or arise inBritish Indiashall be only such profits and gains as are reasonably attributable to that part of the opera- tions. carried out inBritish India.” On behalf of the appellant it was contended that in order to get exemption. from the Excess Profits Tax Act the assessee has to show that his case is covered by sec- tion 5 proviso 3. It was argued on behalf of the appellant that in the 43 340 present case the business of the assessee consisted of manufacturing and selling oil and unless each of those operations took place at Raichur “a part of the business” of the assessee was not at Raichur in the Hyderabad State and therefore he was not entitled to the exemption claimed by him. It waS secondly contended that even assuming that this was not correct the profits of that part of the business, which was carried on at Raichur, did not accrue or arise in’theHyderabadStatebecause the profits arose the sale of the oil inBombayand therefore the assessee’s contention was incorrect. Proviso 3 to section 5 of the Excess Profits Tax Act requiring the assessee to fulfil three conditions to secure the exemption. They are (1) there should be a part of a business; (2) that part in an Indian State; and 3 profits in respect of which exemption is claimed must accure or arise from that that part of the business. The appellant’s contention is that the part of the business must be a complete unit or as described on his behalf a complete cross section of the business. It is argued that inasmuch as the sale of the oil in question took place in Bombay the cross section composed of manufac- ture and sale did not take place at Raichur if the Hyderabad State and therefore the assessee’s contention must fail In my opinion this contention is unsound. The definition of business in the Excess Profits Tax Act clearly envisages manufacture as a business by itself. It is not necessary that a manufacturer must be a trader in the commodity he manufactures. Similarly because he is a manufacturer and a trader it does not follow that the two activities necessari- ly become one indissoluble business of which the profits cannot be separately ascertained. Because a man is a manu- facturer, a trader and even an exporter it is not correct to say that unless all the three activities take place in:an Indian State he is not entitled to the benefit of the provi- so because a part of his business is not in the Indian State. The argument of the appellant is that there should not be only a separate composite unit of the assessee’s business in anIndianStatebut that each operation making up the assessee’s business must take place in anIndianState. I find no 341 justification for putting such construction on proviso 3 to section 5,- No authority is cited to support such interpre- tation of the proviso. It is not contended in the present case that the activities of the assessee as a manufacturer are so spread out as to be incapable of being ascertained as one unit of business in an ‘IndianState.

for instance difficulties may arise if a manufacturer buys groundnuts in one place, has a crushing mill in another place has a refinery in the third place and packing etc. in a fourth place. It is not disputed here that the assesse’s activities as a manufacturer are all in Raichur if so, that set of activi- ties under the defination of ” business” in the Excess Profits Tax Act is a complete unit. I have no doubt that on the facts of the present case the manufacturing operations of the assessee are “a part of his business in andIndianState. Those conditions of the proviso are therefore fulfilled.

On behalf of the the appellant it was pointed out that under section 42″(3) of the Indian Income-tax Act the legis- lature had made a provision for allocation of profits in- spect of different operations of a business, but there was no such corresponding provision in the Excess Profits Tax Act. This contention overlooks section 21 of the Excess Profits Fax ‘Act which expressly makes, amongst others;

section 42 (3) a part of the Excess Profits Tax Act for assessing the profits of an assessee. If, therefore; profits can be allocated to the manufacture of oil in Raichur it seems to me clear that the manufacturing activity will be a part of the assessee’s business in anIndianState.

The next contention of the appellant was that even if a part of the business. was in an Indian State the profits accrued or arose only on the sale of the oil in Bombay and no part of the profits of manufacture therefore arose in an Indian State. In my opinion this argument is also unsound.

On the sale of goods the assessee receives money. While the receipt of the price is thus in Bombayit is an entirely different thing to say that therefore the whole profits of the manufacture and sale arose in Bombay. This argument overlooks the distinction between accruing or arising on the one 342 hand and receipt on the other. Again, the question of profits has to be determined not on receipt of the price of each lot sold by the assessee but the result of all the operations in connection with the manufacture and sale of oil during the accounting year. An individual transaction may result in profit but that will not make the assessee liable if the result of his accounting year’s activities is a loss. It is therefore improper in a case of this kind to consider the sale of oil as the deciding factor either to ascertain profits or to determine the place of the accrual of profits. Several cases were cited at the Bar dealing with a trader’s business where he bought and sold goods. In my opinion those are not relevant to determine the question before us because in the present case the business is of a different nature. In The Commissioner of Taxation v. Kirk (1), Lord Davey distinguished Sulley v. Attorney-General (“‘) and Grainger & Son v. Gough (3) on this ground. The place of sale was not considered the test when the business was of manufacturing and sale. Similarly cases which deal with the liability of the assessee under the Indian Income- tax Act because the profits were received (and not only accrued or arose) in Indiaare also unhelpful. The Judges of the High Court strongly relied on The Commissioner of Taxation v. Kirk (‘) for their conclusion in favour of the assessee. It was a case of mining operations where the mines were in one colony and the sale of the ore in another. Under the Taxing Act in that case, it was observed that it was wholly immaterial whether the person to be taxed resided in the colony or not. Nor was it material whether the income was received in the colony or not, if it was earned outside the colony. The Board attached no importance to:the word “derived” which was treated as synonymous with arising or accruing. The real question was :what income was arising or accruing to the’ assessee from the business operations carried on by’ him in the colony. This was considered a question of fact. Under the New South Wales Act the liabil- ity to tax has to be decided on the existence of the source of the income in the particular colony and [1900] A.C. 588. (2) [1860] EngR 747;[1860] 5 H. & N; 711. (3) I18961 A.C.

325.

343 to that extent the liability to tax is based on a different basis. While accepting this distinction, I am however unable to accept the contention that the source of income can never be the place where the income accrues or arises.

In my opinion there is nothing to prevent income accruing or arising at the place of the source. The question where the income accrued has to be determined on the facts of each case. The income may accrue or arise at the place of the source or may accrue or arise elsewhere, but it does not follow that the income cannot accrue or arise at the place where the source exists. Therefore it is necessary to ascertain whether that part of the business which is capable of being treated as one separate unit in the HyderabadStatehas given rise to the income or profit sought by the asses- see to be exempted from taxation in the present case. On behalf of the respondents our attention was drawn to the International Harvester Company of Canadav. The Provincial Tax Commissioner (1). In that case the question was of the liability to tax of a resident outside the provinceof S, under the Incometax Act of S, in respect of profits arising from the sale in that province of agricultural implements which were manufactured outside the province. Under the relevant Act the tax was leviable on a person residing outside S who was carrying on business in S on the net profit or gain arising from the business of such person in S. The Board held that although the profits were all re- ceived in S, where the goods were sold, the profits liable to taxation were only the net profits arising from the business in S and therefore the manufacturing profits should be excluded from the assessment. They referred to sections 23 and 24 of the Taxing Act, under which a non-resident person was charged to tax on an apportioned part of profit, which although it might be received outside the province of S could fairly be regarded as having been partially earned inside that province. In my opinion that case substantially helps the contention of the respondents and negatives the appellant’s contention. It shows that when the manufactur- ing portion of the activity of the assessee is in (1) [1919] A,C. 36.

344 one province and the sale is in another province, the whole profits are not necessarily considered as arising from the sale or at the place of sale although they may be treated as received on sale of the products. Secondly, it shows that profits could be apportioned between the manufacturing and trading activities, particularly when the assessee carried on the business of a manufacturer and trader together. This decision was sought to be distinguished by the Attorney- General on the ground that sections 23 and 24 of the Taxing Act of that colony made it a completely different scheme of taxation. I do not think that is a good point of distinc- tion, because proviso 2 to section 5 of the Indian Excess Profits Tax Act, read with section 21, prescribes also a scheme in respect of a non-resident although not in the same details or with the same results under the Indian Act. The expression “part of a business” must in my opinion be read with the same meaning and implication in provisos (2) and (3) to section 5 of’ the Excess Profits Tax Act. I am also unable to accept the contention of the Attorney-General that under our Act there is no scheme of apportionment. That overlooks, as pointed out above, the provisions of section 21 of the Act, which incorporates by reference. amongst others section 42 (3) of the Indian Income-tax Act. In my opinion, therefore, proceeding on the footing that there can arise or accrue profits of the manufacturing activity of the assessee, profits have accrued to the assessee of a part of the business in an Indian State and they having accrued out of such business carried on in such State are exempted under the third proviso to section 5 of the Excess Profits Tax Act. For these reasons, in my opinion, the conclusion of the High Court is correct and the appeal is dismissed with costs.

FAZL ALl J.–1 agree fully with the judgment of Mahajan J.

PATANJALI SASTRI J.–This is an appeal from ajudgment of the High Court of.’ Judicature atBombayupon a reference made by the Income-tax Appellate 345 ‘Tribunal,Bombay’, under section 66 (1) of the Indian Income-tax Act, 1922, read with section 21 of the Excess Profits Tax Act, 1940.

The respondent firm (hereinafter referred to as the “assessees “) are carrying on the business of manufacturing and dealing in oil at Raichur in theHyderabadStateand atBombaywhich, during the relevant period, was part of what was then known asBritish India. The assessees are resident in Bombay and are registered for income-tax purposes, under section 26-A of the Income-tax Act, under the name of Ah- medbhai Umarbhai & Co., while their branch at Raichur is run under the name of Ahmed & Sons. They own three mills atBombayand one at Raichur for manufacturing oil from ground- nuts, and they sell the oil partly at Raichur and partly atBombay. For the chargeable accounting period commencing from 31st October, 1940, and ending on 20th October, 1941, the assessees were assessed to excess profits tax in a sum of Rs. 1,61,807 on their business income of Rs. 6,08,761, including a sum of Rs. 2,49,615 which was said to have accrued or arisen from sales in Bombay of oil manufactured at Raichur. Part of such oil was also sold at Raichur, but the profits derived from such sales were not included in the assessment, and no question now arises in regard to such profits. For the succeeding period commencing from 21st October, 1941, and ending on 8th November, 1942, a tax of Rs. 2,55,485-1-0 computed on the same basis, was also imposed on the assessees. The assessees contended that a part of the profits derived from sales in British India of the oil manufactured at Raichur was attributable to the manufacturing operations at Raichur which are an essential part of their business, and that such profits must be ex- cluded from the assessment, under the third proviso to section 5 of the Excess Profits Tax Act, as having accrued or arisen in the Hyderabad State. The contention was re- jected and the whole of the profits arising out of the sales inBritish Indiaof the oil produced in Raichur were includ- ed in the assessments.

After unsuccessful appeals to the Appellate- 346 Assistant Commissioner,Bombay, the assessees carried the matter to the Income-tax Appellate Tribunal,Bombay, but with no better result. The assessees thereupon applied to the Tribunal requiring them to draw up a statement of the case and refer it to the High Court atBombayfor decision of the question of law involved, and the Tribunal according- ly stated the case and referred the following question:

“Whether on the facts stated above income accruing or aris- ing to the assessees on sales made in British India of goods manufactured in Raichur situated outside British India has been rightly held by the Tribunal as income accruing or arising inBritish Indiaand was liable to excess profits tax.” In the letter of reference they indicated their view on the question referred by stating that the manufactured article received or brought into British India did not include any income, profits or gains, and that such profits and gains, having accrued only after the sale had taken place, accrued or arose in British India.

The reference was heard by Chagla C.J. and Tendolkar J.

and they were of opinion that the question as framed by the Tribunal “did not reallybring out the controversy be- tween the parties.” The learned Judges, after stating the facts of the case, framed the question thus: “Whether on the facts stated above the profits of a part of the business of the assessees accrued or arose in anIndianState.” The question as reframed is also open to similar criticism, for, it assumes that the manufacture of oil at Raichur is “a part of the business” of the assessees, where- as the Commissioner of Income-tax has been seriously con- testing that position as the judgment under appeal itself shows.

Excess profits tax is a charge on the profits arising out of a business in excess of its normal or standard prof- its, a business being regarded as the unit of assessment.

“Business” is defined in section 2 (5) of the Excess Profits Tax Act as including, among other things, “manufacture,” and a proviso to the clause says that “all businesses to which this Act applies 347 carried out by the same person shall be treated as one business for the purposes of this Act.” Section 4 provides for the charge of tax in respect of any business to which the Act applies on the amount by which the profits during any chargeable accounting period exceed the standard prof- its. Section 5, on the true interpretation of which the question for determination in this appeal turns, runs thus:

“5. This Act shall apply to every business of which any part of the profits made during the chargeable accounting period is chargeable to income-tax by virtue of the provi- sions of sub-clause (i) or sub-clause (ii) of clause (b) of sub-section (1) of section 4 of the Indian Income-tax Act, 1922, or of clause (c) of that sub-section:

Provided that this Act shall not apply to any business the whole of the profits of which accrue or arise without British India where such business is carried on by or on behalf of a person who is resident but not ordinarily resi- dent in British India unless the business is controlled inBritish India:

Provided further that where the profits of a part only of a business carried on by a person who is not resident in British India or not ordinarily so resident accrue or arise in British India or are deemed under the Indian Income-tax Act, 1922, so to accrue or arise, then, except where the business, being the business of a person who is resident but not ordinarily resident in British India is controlled in India, this Act shall apply only to such part of the busi- ness, and such part shall, for all the purposes of this Act, be deemed to be a separate business:

Provided further that this Act shall not apply to any business the whole of the profits of which accrue or arise in an Indian State, and where the profits of a part of business accrue or arise in an Indian State, such part shall, for, the purposes of this provision, be deemed to be a separate business the whole of the profits of which accrue or arise in an Indian State, and the other part of the business shall, for all the purposes of this Act, be deemed to be a separate business.” 44 348 As the assessees are resident in British India and the profits of their business in the Hyderabad State made during the relevant periods were charged to income-tax under sec- tion 4 (1 ) (b) (ii) of the Incometax Act, that business was brought under charge to excess profits tax by section 5 of the Excess Profits Tax Act, and the duty would be leviable on the profits of the said business unless proviso (3) excluded the application of the Act to that business, in which case the proviso to section 2 (5) which operates to consolidate only those businesses to which the Act applies would also not take effect. It appears to have been conced- ed by the taxing authority that no excess profits tax was leviable on the profits derived from the sales in the Hyd- erabad State as they were profits of a part of the asses- sees’ business accruing or arising in an Indian State and as such were exempted under proviso (3) to section 5, for these profits, as already stated, were not subjected to tax for the two chargeable accounting periods in question. But it was contended on their behalf by the Attorney-General that the proviso had no such operation in respect of the profits made by sales of the oil in British India, and that for two reasons: Firstly, because the manufacturing operations carried on in the Hyderabad State did not constitute a “part” of the assessees business within the meaning of the proviso, and, secondly, because even if such operations could be regarded as a part of the business, the profits derived from the sales of the oil in Bombay could not be said to have accrued or arisen in that State. Both these propositions were held to be untenable by the learned Judges of the High Court and were contested before us by Mr. Munshi on behalf of the assessees.

On the first point, the Attorney-General insisted that a “part” of a business meant a fraction of the aggregate of all the constituent activities of the business or, as it has been put during the argument, a “cross-section” of the entire business operations, and not one or more of such operations, however essential for the production of the resulting profits. It is difficult to see how this construc- tion will assist the 349 taxing authority in the present case, for, as already stat- ed, the assessees were selling at Raichur, part of the oil manufactured there, and there was thus at that place a complete cross-section of their business which consists of manufacturing and selling oil. Apart from this considera- tion, I can find nothing in the context of section 5 to exclude the ordinary meaning of the words “part of a busi- ness” and to compel the somewhat strained and artificial interpretation sought to be put upon them which, it may be observed in passing, seems inconsistent with the view which left untaxed the profits derived from the sales at Raichur.

Furthermore, section 5 is to be read with the provisions of section 42 of the Indian Income-tax Act which has been made applicable, with certain modifications not material here, to excess profits tax by section 21 of the Excess Prof- its Tax Act “as if the said provisions were provisions of this Act and refer to excess profits tax instead of to income-tax.” That section has, in my opinion, an important bearing on the issues involved in this appeal and deserves careful consideration. So far as material here it reads thus:

“42. (1) All income, profits or gains accruing or arising, whether directly or indirectly, through or from any business connection in British India, or through or from any property in British India, or through or from any asset or source of income in British India or through or from any money lent at interest and brought into British India in cash or in kind, shall be deemed to be income accruing or arising within British India, and where the person entitled to the income, profits or gains is not resident in British India, shall be chargeable to income-tax either in his name or in the name of his agent, and in the latter case such agent shall be deemed to be, for all tile purposes of this Act, the assessee in respect of such income-tax.

Provided that where the person entitled to the income, profits or gains is not resident inBritish India, the income-tax so chargeable may be recovered by deduction under any of the provisions of section 18 ……

(3) In the case of a business of which all the opera- tions are not carried out in British India, the 350 profits and gains of the business deemed under this section to accrue or arise in British India shall be only such profits and gains as are reasonably attributable to that part of the operations carried out in British India.” It will be seen that these provisions, read together, ‘lay down a rule of apportionment for ascertaining the profits of a business part only of whose “operations” “are carried out in British India where such part could be re- garded as either “a business connection in British India” or “a source of income inBritish India.” They also provide machinery for facilitating collection of the tax from the resident agent where the person entitled to such income is a non-resident. Now, these provisions are obviously complemen- tary to section 5 proviso (2) of the Excess Profits Tax Act, and unless we read “part of a business” in that proviso as meaning one or more “operations” of the business referred to in sub-section (3) of section 42, the machinery provided in the latter section for collection of the tax leviable on a non-resident person by virtue of proviso (2) will not be applicable, and the scheme of charge and collection in such cases will be rendered incoherent. A harmonious interpreta- tion of the scheme requires that the words “part of a busi- ness” in’ proviso (2) must be taken to signify one or more of the operations of the business, and, if so, the same expression used in proviso (3), with which we are here concerned, must also have the same connotation. It follows that the manufacture of oil in the mill at Raichur is a part of the assessees’ business.

The question next arises whether the profits derived from such manufacture, other than those arising from sales at Raichur which are not now in question, accrued or arose in Raichur, so as to bring the case within proviso (3). It is clear that the oil manufactured at Raichur cannot itself be regarded as income, profits or gains within the meaning of the Indian Income-tax Act or the Excess Profits Tax Act any more than the green coffee in Mathias case(1) which the Privy Council held could not be so regarded.

(1) I.L.R. [1939] Mad. 178.

351 The oil is manufactured for purposes of sale in order that profits may be earned, and such profits are realised only when the commodity is sold and not before. But, as-the test of non-liability under proviso (3) is the accruing or the arising of the profits in an Indian State, the question is whether the profits, when they do arise from the sales at Bombay of the product of the mill at Raichur, arose in whole or in part at Raichur ? As pointed out by the Privy Council in Chunilal Mehta’s case(1), the words “profits accruing or arising in” (a country) require a place to be assigned as that at which the trading operations come, whether gradually or suddenly, into existence, and they involve a notion difficult to apply to particular transactions. The words “ac.. crue or arise,” too, have been variously interpreted, and no conclusive or clear test of when or where income can be said to accrue has been formulated in the decided cases.

The learned Judges in the Court below solved the problem by invoking what they conceived to be the general principle underlying the decision in Kirk’s case (“), namely, the principle of apportioning profits as between the different processes employed in producing those profits and the dif- ferent places where they are employed. The learned Judges disagreed with the view of the Calcutta High Court in Re Mohanpura Tea Co. (3) that the profits accrue or arise only when the goods are sold and at the place where they are sold, and that the decision in Kirk’s case (2) laid down no principle of general application but proceeded on the lan- guage of an Australian statute. The question in Kirk’s case (2) related to the assessment of the profits of a mining company which extracted ore and converted it into a mer- chantable product in one colony and sold it in another.

Under the relevant statute, tax was leviable in respect of income “arising or accruing from any…………………

trade…………………… carried on” in the colony or “derived from lands,” or “arising or accruing from any kind of property………………. or from any other source whatsoever,” in the colony, but no tax was payable in respect of income “earned” outside the I.L.R. [2938] Bom. 752. (2) [1900] A.C.

588. (3) [1937] I.L.R. 2 C,aI, 201.

352 colony. The Board held that the profits, having been pro- duced by the combined operations of extraction, manufacture and sale, were assessable to tax in the colony either as derived from land by reason of the extraction or as “arising “trade,” certainly from or accruirng, ” if not from a the manufacture in the colon and by reason of were therefore “earned” in the colony, though the profits were received outside the colony. While it may well be a “fallacy,” while in applying a taxing statute which directs attention to the situation of the source of income as the test of chargeability, to ignore the initial stages in the production of the income and fasten attention on the last stage when it is realised in money, it may be open to ques- tion whether it is in ‘consonance with business principles or practice, in the absence of any statutory requirement to that effect, to cut business operations arbitrarily into two or more portions and to apportion, as between them, the profits resulting from one continuous process ending in a sale. It appears, however, unnecessary, in the present case, to consider the applicability of the decision in Kirk’s case(1) to assessments arising under the Indian Act which makes the place at which the profits accrue or arise the test of liability or non-liability, as the case may be, as I am of opinion that section 42 of the Income-tax Act which, as already stated, has been incorporated in the Excess Profits Tax Act, is applicable here and sanctions such apportionment.

It is noteworthy that the first part of sub-section (1) of section 42 providing that certain classes of income are to be deemed to accrue or arise in British India is not con- fined in its application to non-residents ,but is in general terms so as to be applicable to both residents and non- residents. Before its amendment in 1939 the sub-section began with the words “in the case of any person residing out of British India” which obviously restricted the application of the provision to non-resident persons, but in its amended form the subsection has been recast into two distinct parts, the first of which is not so restricted, and the second part (1) 1900] A.C. 588.

353 alone, which begins with the words “and where, the person entitled to the income, profits and gains is not resident in British India,” is made applicable to non-resident persons, thereby showing that the former part applies to both resi- dents and non-residents. The opening words of the first proviso also point to the same conclusion, for these words would be surplusage if the sub-section as a whole applied only to non-residents. A contrary view has, no doubt, been expressed by a Division Bench of the Bombay High Court in Commissioner of Income-tax v. Western India Life Insurance Co. Ltd. (i). Though reference was made in that ,case to the alteration in the structure of sub-section (1) its signifi- cance, as it seems to me was not properly appreciated. The facts that the marginal note to the, whole section refers to “non-residents” and that the section itself finds a place in Chapter V headed “Liability in Special Cases” were relied upon as supporting the view that sub-section (1) as a whole applies only to non-residents. As pointed out by the Privy Council in Balraj Kunwar v. Jagatpal Singh(2), marginal notes in an Indian statute, as in an Act ,of Parliament, cannot be referred to for the purpose of construing the statute, and it may be mentioned in this ,connection that the marginal note relied on has since been replaced by the words “Income deemed to accrue or arise within British India,” which makes it clear that the main object of sub- section (1) was to define that expression [see section 12 (a) of Act XXII of 1947]. Nor can the title be a chapter be legitimately used to restrict the plain terms of an enact- ment. I am therefore of opinion that the first part of sub- section (1) is applicable to the assessees, the expressions “business connection in British India” and “asset or source of income in British India” being wide enough to cover their selling organisation at Bombay. The result is that the profits received at Bombay from the sale of the oil manufac- tured at Raichur have to be apportioned under sub-section (3) between the two operations of manufacture and sale, and only such portion of the profits as is reasonably ,at- tributable to the sale should (1) [1945] 13 I.T.R. 405. (2) I.L.R. 26 All. 393 at 40G.

354 be deemed to accrue or arise inBritish India. It must follow, as a corollary, that the rest of the profits, at- tributable to the manufacture at Raichur, must be. regarded as accruing or arising in theHyderabadState. Therefore proviso (3) to section 5 of the Excess. Profits Tax Act becomes applicable to the case and exempts the manufacturing part of the assessees’ business from the operation of the Act.

On behalf of the respondent, Mr. Munshi called attention to certain observations of the Privy Council in Chunilal Mehta’s case(1) as supporting his contention that, although all the operations of a business must be completed before profit is received, the accrual of the profits begins with the first operation and continues cumulatively till the goods are finally sold, and that, therefore, the expression “accruing or arising in” a place must be applied distribu- tively to the different operations and the places where such operations are carried out. The observations relied on are as follows: “But the legislature has chosen a different test and applied it to all kinds of profits accruing or arising inBritish India. It may even have chosen it as fairer because it can be applied distributively to the profits of a single source” (p. 765), and again, “no doubt if it can be held that under the Indian Act profit in the case of a business must be taken so strictly that it is not to be understood distributively at all the profit of the asses- see’s business would become an ultimate and single figure irreducible and referable only to Bombay, but such a high doctrine cannot be read into the Indian statute without violence not only to its language but to its scheme:” (p.

767). These passages may, at first sight, appear to lend some support to Mr. Munshi’s thesis. But on closer examina- tion in their context they do not, in my opinion, warrant any such general theory. Their Lordships were dealing with a case where the assessee, resident in Bombay, derived profits from speculative contracts for purchase and sale of commodities carried out through brokers in various foreign markets such as Liverpool, Londonand New York. The asses- see- (1) I.L.R. [1938] Bom. 752.

355 contended that he was not liable to pay Indian income-tax in respect of such profits, which were not received in British India, on the ground-that they were not profits accruing or arising inBritish India, and their Lordships upheld that contention. It is with reference to such transactions which individually contributed to the surplus arising in the various places abroad, that their Lordships spoke p, of the profits accruing or arising distributively and not in a single place. That-they were not thinking of the profits resulting from a single composite process such as manufac- ture and sale, and their disintegration and apportionment as between the different operations is shown by their further observation that “profits are frequently, if not ordinarily, regarded as arising’ from many transactions each of which has a result not as if the profits need to be disintegrated with difficulty but as if they were an aggregate of the particular results:” (p. 767).

Reference was also made to a recent decision of the same Tribunal in International Harvester Co. of Canada v. The Provincial Tax Commission(1 ). The case arose out of the assessment of the profits of a non-resident to income-tax, under a provincial Income-tax Act in respect of the profits arising from the sale within the province of goods manu- factured outside the province. The tax was leviable, in the case of a non-resident person, on the “net profit or gain arising from the business of such person in” the province. Their Lordships held that, although the profits sought to be assessed were all received in the province where the goods were sold, as the profits brought under charge under the Act was only the net profit arising from the business in the province, the manufacturing profits should be excluded from the assessment. Their Lordships referred to other provisions of the Act which, in the con- verse case, sought to charge a proportionate part of any profit derived from sale outside the province of goods produced in the province as being “earned” within the prov- ince, and inferred from those provisions that the intention of the legislature in the (I) [1949] A.C. 36.

356 charging section was to bring within the ambit of taxation only an apportioned part of the profit. Such a construc- tion, they thought, would ‘ ‘result in a fair and reasonable scheme of taxation in accordance with that comity which naturally prevails between one province and another.” Referring to Kirk’s case(1) their Lordships remarked “that although the sections under consideration in Kirk’s case (1) differed :in their language from the provisions which their Lordships were considering’, the reasoning which appears in the judgment in that case was helpful to the appellants’ contention in the present case.” This was, presumably, because chargeability in both cases depended not on the income accruing or arising in the country, but, on the source of the income being in the country. The decision was based on the language of the statute and the scheme of taxation disclosed thereby, and what I have said about Kirk’s case(1) equally applies to it. The other cases cited by Mr. Munshi do not call for any special notice.

I agree with the conclusion reached by the High Court, though on different grounds, and dismiss the appeal with costs.

MAHAJAN J.–This is an appeal by the Commissioner of Income-tax, Bombay City, from the judgment of the High Court of Judicature at Bombay upon a case stated by the Income-tax Appellate Tribunal under the provisions of section 66 (1) of the Indian Income- tax Act, 1922, and it raises a question as to the liability of the respondent, Messrs. Ahmedbhai Umar bhai & Co., for excess profits tax.

Excess profits tax is levied under section 4 of the Excess Profits Tax Act, XV of 1940, “in respect of any business to which the Act applies on the amount by which the profit during any chargeable accounting period exceeds the standard profits…….. ” The respondent is a regis- tered firm resident in British India and owns three oil mills in Bombay and one oil mill in Raichur in Hyderabad State and the question to be decided in the appeal is wheth- er the profits which were received or realized by the re- spondent on the sale of (1) [1900] A.c. 588.

357 manufactured in Raichur and sold inBritish Indiaare liable to excess profits tax.

By an order dated 27th March, 1944, the Excess Profits Tax Officer, Circle III, Bombay, assessed the respondent to excess profits tax in the sum of Rs. 1,61,807 for the chargeable accounting period commencing from 31st October, 1940 and ending on 20th October, 1941 on the business income of Rs. 6,08,761, which included a sum of Rs. 2,49,615, being profits accruing or arising in British India in respect of the respondent’s branch at Raichur in Hyderabad State and run in the name of Messrs. Ahmed & Sons. By another order dated 28th March, 1944 the same officer assessed the firm to excess profits tax in a sum of Rs. 2,55,485-1-0 for the chargeable accounting period commencing from 21st October, 1941 and ending on 8th November, 1942 On the business income of Rs. 7,46,561, which included a sum of Rs. 2,34,785, being the profits accruing or arising in British India in respect of the Raichur branch. Both the assessment orders were appealed against to the Appellate Assistant Commission- er but without any success. The Incometax Appellate Tribu- nal on appeal drew up a statement of case and referred the following question of law to the High Court :– “Whether on the facts as stated above income accruing or arising to the assessee on sales made in British India of goods manufactured in Raichur situated outside British India has been rightly held by the Tribunal as income accruing and arising in British India and was liable to excess profits tax ?” The High Court re-framed the question as follows :– “Whether on the facts as stated above profits of a part of the business of the assessee accrued or arose in an Indian State” and answered it in the affirmative. It held that the activity which the respondent carried on at Raichur was a part of its business within the meaning of the third proviso to section 5 of the Excess Profits Tax Act and that the profits of a part of the business accrued or arose in an Indian State and that 358 the said profits were not assessable to excess profits tax.

This order of the High Court is being contested in the present appeal and it has been urged that as regards the oil manufactured in Raichur but sold in British India, no prof- its accrued or arose in theIndianState, but the profits accrued or arose inBritish Indiaand are subject to excess profits tax. It was further contended that the construction put by the High Court on the third proviso to section 5 and on the phrase “part of a business” is erroneous and is not justified on the language of the proviso and the context. It was suggested that in order to constitute “a part of the business” within the meaning of that proviso it must be a complete cross-section of the whole business and not merely one or more of the operations of that business.

Section 5 of the Act on the true construction of which depends the decision of the appeal is in these terms :– “This Act shall apply to every business of which any part of the profits made during the chargeable accounting period is chargeable -to income-tax by virtue of the provi- sions of sub-clause (i) or sUb-clause (ii) of clause (b) of sub-section (1) of section 4 of the Indian Income-tax Act, or of clause (c) of that sub-section In other words, the Act brings within its ambit all income in the case of a person resident in British India which accrues or arises or which is deemed to accrue or arise to him in British India during the accounting year, as also all income which accrues or arises to him without British India during such year; and if such person is not resident in British India during that year, then all income which accrues or arises or is deemed to accrue or arise in British India during such year.’ If section 5 of the Act stopped short at that stage, it is undoubted that in the case of the respondent who is a resident in British India all his income, no matter where it arose, within British India or without British India, would be chargeable to excess profits tax just in the same way as it is chargeable to income-tax under the Indian Income-tax Act. The whole of his income arising 359 in Raichur has legitimately been taxed under that Act.

Section 5 however has three provisos which limit its scope and take certain incomes outside its ambit. The first proviso is to the following effect:

“Provided that this Act shall not apply to any business the whole of the profits of which accrue or arise without British India where such business is carried on by or on behalf of a person who is resident but not ordinarily resi- dent in British India unless the business is controlled inBritish India.” This exception has no bearing to the facts of the present case. The second proviso is in these terms :– “Provided further that where the profits of a part only of a business carried on by a person who is not resident in British India or not ordinarily so resident accrue or arise in British India or are deemed under the Indian Income-tax Act, 1922, so to accrue or arise, then, except where the business being the business of a person who is resident but not ordinarily resident in British India is controlled in India, this Act shall apply only to such part of the busi- ness, and such part shall for all the purposes of this Act’ be deemed to be a separate business.” This proviso also concerns a person not resident inBritish Indiaand does not touch the present case. It howev- er furnishes a clue to the meaning of the following proviso inasmuch as it attracts the application of section 42 of the Indian Income-tax Act to the case of a non-resident and contemplates the apportionment of income between part of a business controlled in British India and a part not so controlled. Sub-section (3)of section 42 of the Income-tax Act enacts thus:

“In the case of a business of which all the operations are not carried out in British India, the profits and gains of the business deemed under this section to accrue or arise in British India shall be only such profits and gains as are reasonably attributable to that part of the operations carried out inBritish India.” Under the second proviso by reason of the application of section 42 (3) of the Income-tax Act, if the manufacturing business of the assessee was in British 360 India and all his sales took place in Raichur, then excess profits tax could only be chargeable on such profits as would really be attributable to his manufacturing operations in British India and the manufacturing operations would be treated as part of the business of the assessee under the proviso. It is the third proviso to which the controversy in the case is limited and this proviso is in these terms :– “Provided further that this Act shall not apply to any business the whole of the profits of which accrue or arise in an Indian State, and where the profits of a part of business accrue or arise in an Indian State, such part shall, for the purposes of this provision, be deemed to be a separate business the whole of the profits of which accrue or arise in an Indian State, and the other part of the business shall, for all the purposes of this Act, be deemed to be a separate business.

We have firstly to determine the meaning of the words “part of a business “in this proviso; does it mean, as argued on behalf of the Commissioner, that the business must be a complete cross-section of the whole business and not merely one or more of the operations of that business, or, does it mean, as contended by the learned counsel for the respondent, a continued and severable business activity of which the profits could be apportioned or ascertained sepa- rately. Secondly, we are called upon to determine at what place do the profits accrue or arise in respect of the part of such business. Do they arise at the place where in the case of a manufacturer his goods are sold, or can they be said to accrue or arise at the place of manufacture ? The word “business” has been defined by the Act in section 2 (5) as follows :– “‘Business’ includes any trade, commerce or manufacture or any adventure in the nature of trade, commerce or manu- facture or any profession or vocation…. ” It means any continued activity of a person which yields profits and which is in the nature of trade, commerce or manufacture. It may even be any adventure in the nature of trade, commerce or 361 manufacture. A proviso was added to this definition in the year 1940 in these terms :– “Provided further that all businesses to which this Act applies carried on by the same person shall be treated as one business for the purposes of this Act.” The effect of the proviso is that if a man is carrying on a number of activities, whether of the same or of dif- ferent natures, all these various businesses are treated as one. The same person, if engaged in the manufacture of hardware, oils, textiles, motor tyres, bicycles and owning mills for his diverse activities in different places and also trading in merchandise and doing contract business, is deemed to carry on a single business. All the businesses that he carries on are lumped together and treated as one business for the purpose of levying the tax and calculating the profits. The proviso has made an amalgam of all the businesses of one individual and it is in view of this amalgam that proviso 3 of section 5 has to be considered. It seems to me that what has been amalgamated by the definition has again been made separate by the proviso to section 5. If a number of businesses carried Ion by a person are situate in different places, then the effect of the proviso is to again treat them as separate business under the description of the phrase “part of a business.” In other words, if a man is carrying on manufacture in textiles in Bombay, a shop at Mysore, has a distillery in Allahabad and has an oil mill in Gwalior, then for the purpose of section 5 all these four trades are part of the business within the meaning of provi- so 3 to section 5, one part situate in one place and anoth- er part situate at another place and if any of these parts produce profits at the place of the business, that place being in an Indian State, then proviso (3) would have application. I think that the effect of the language of proviso (2) of section 5 is to give colour to proviso (3) as being complementary to it and providing for converse cases to those arising under this proviso concerning non-resi- dents. Illustratively it may be said that proviso (2) would cover the case if the manufacturing business of the 362 respondent was situate in Bombay and his sales exclusive- ly were made at Raichur provided he was a non-resident. In that event excess profits duty would be chargeable on a part of the profits attributable to the part of the business inBombay, or in other words, to those business operations that were being carried on inBombay. The converse case where the manufacturing operations are being carried on in Raichur by a resident in India and the sales are made exclusively in Bombay is apparently covered by proviso (3) because a part of the business being situate in Raichur profits attributa- ble to that part of the business out of the total sale proceeds could only be said to accrue at the place of manu- facture.

The present assessee has three mills inBritish Indiaand a mill at Raichur. He has also a sales depot atBombay.

In his case but for the proviso to the definition of “busi- ness” it could be said that he was carrying on five busi- nesses, three of manufacture of oil in India and one of manufacture of oil in Hyderabad and a fifth business as trader at Bombay. By reason of the proviso to the defini- tion, all these businesses become a single business. But for the purposes of provisos (2) and (3) of section 5 all these are part of a business and have to be treated as separate businesses. The theory of cross-section of a busi- ness contended by the appellant is not very intelligible.

It was contended that if a man is a manufacturer as well as a seller of goods and also an importer of goods, then in his case the term “part of a business” means the carrying on of all the three activities together and that unless he carries on all the three activities, it cannot constitute “part of business” under the proviso. This contention to my mind is untenable. The only construction which in the context of the Act can be reasonably placed on the proviso to section 5 and on the words “part of a business” is the one suggested above. I am therefore of the opinion that-the learned Chief Justice was right when he held that the activities which the assesseecarried on at Raichur are certainly a part of the business of the assessee. Mr. Justice Tendolkar on this, part of the case observed as follows :– 363 “The normal meaning of the word is a ‘portion ‘ in whatever way carved out and I have no doubt in ray mind that any of the operations that go towards a complete business are a part of that business.

The contention of the Advocate-Genera]. becomes the more untenable when one looks at the second proviso to section 2 (5) of the Excess Profits Tax Now, under this proviso you may have several businesses of a totally different character carried on by the same person and they all together constitute one business for the purposes of the Excess Profits Tax Act, if the contention of the Advocate-General is right, even if one of these differ- ent businesses in the ordinary sense of the term was wholly carried out in a Native State, it would still not be a part of the whole business in the sense of being a cross-section of all the businesses which together constitute one business under the Excess Profits Tax Act. I am, therefore, of Opinion that the manufacture of oil was part of the business of the assessee firm.” I am in complete agreement with the observations cited above.

The next question for consideration is whether that part of the business situate in Hyderabad gives any profits, in other words, whether any profits of the manufacturing busi- ness of the assessee at Hyderabad accrue or arise in that State.

On behalf of the Commissioner it was contended that the place where comminissioner it was arise is not Ordinarily the place where the source that produces the profits is situate and that the High Court had erred in taking the view that in respect of sales of oil in British India produced by the mill at Raichur any profits accrued at the place of manufacture. It was said that profits in such a case only accrue at the place of sale and not at the place of manufac- ture. I am unable to accede to this contention. It is true that no profits are realized until the oil is sold but the act of sale merely fixes the time and place of receipt of profits, profits are not wholly made by the act of sale and do not necessarily accrue at the place of sale.

:364 A.Act of sale is the culminating process in the earning of profits but it goes without saying that the act of sale could not be performed unless the goods were produced at Raichur and it would be wrong from a business point to say that all the profits resulted from that operation. It was the operation of manufacture at Raichur that enabled the assessee to sell oil and some portion of the profits must necessarily be attributable to the manufacturing process.

To the extent that the profits are attributable to the manufacture of oil it is not possible to say that they accrue or arise at any place different from the place where the manufactured article came into existence.

It was not denied that the business of manufacture at Raichur may produce profits or it may even earn profits and it was conceded that it may also be said that profits are derived from that process of manufacture but it was strenu- ously argued that earning of profits is not the same thing as the accrual of profits and no profits could be said to accrue or arise at a place where the profits may well have been earned or produced and that the place of accrual of profits must necessarily be the place where the sale pro- ceeds are received or realized. On behalf of the assessee it was urged that the words “derived,” “earn,” “ac- crue” or “arise” are synonymous and it is immaterial which word is used indicating the result of the activities of various business operations. The totality of profits that accrues to a business or is earned by it may be ascribed to a number of operations; though it is ascertained at the place where the produce is sold, it accrues where it is earned. Whether the words “derive” and “produce” are or are not synonymous with the words “accrue” or “, arise,” it can be said without hesitation that the words “accrue” or” arise” though not defined in the Act are certainly synony- mous and are used in the sense of “bringing in as a natural result.” Strictly speaking, the word “accrue” is not syn- onymous with “arise,” the former connoting idea of growth or accumulation and the latter of the growth or accumulation with a tangible shape so as to be receivable. There is a distinction in the dictionary 365 meaning of these words, but throughout the Act they seem to denote the same idea or ideas very similar and the differ- ence only lies in this that one is more appropriate when applied to a particular case. In the case of a composite business, i.e., in the case of a person who is carrying on a number of businesses, it is always difficult to decide as to the place of the accrual of profits and their apportionment inter se. For instance, where a person carries on manufac- ture, sale, export and import, it is not possible to say that the place where the profits accrue to him is the place of sale. The profits received relate firstly to his busi- ness as a manufacturer, secondly to his trading operations, and thirdly to his business of import and export. Profit or loss has to be apportioned between these businesses in a businesslike manner and according to well-established prin- ciples of accountancy. In such cases it will be doing no violence to the meaning of the words “accrue” or “arise” if the profits attributable to the manufacturing business are said to arise or accrue at the place where the manufacture is being done and the profits which arise by reason of the sale are said to arise at the place where the sales are made and the profits in respect of the import and export business are said to arise at the place where the business is con- ducted. This apportionment of profits between a number of businesses which are carried on by the same person at dif- ferent places determines also the place of the accrual of profits. To hold that though a businessman has invested millions in establishing a business of manufacture, whether in the nature of a textile mill or in the nature of steel works, yet no profits are attributable to this business or can accrue or arise to the business of manufacture because the produce of his mills is sold at a different place and that it is only the act of sale by which profits accrue and they arise only at that place is to confuse the idea of receipt of income and realization of profits with the idea of the accrual of profits. The act of sale is the mode of realizing the profits. If the goods are sold to a third person at the mill premises no one could have said that these profits arose merely by reason of 366 the sale. Profits would only be ascribed to the business of manufacture and would arise at the mill premises. Merely because the mill owner has started another business organi- zation in the nature of a sales depot or a shop, that cannot wholly deprive the business of manufacture of its profits, though there may have to be apportionment in such a case between the business of manufacture and business of shop- keeping. In a number of cases such apportionment is made and is also suggested by the provisions of section 42 of the Indian Income-tax Act, reference to which ,has also been made in proviso (2) of section 5 of the Excess Profits Tax Act.

In Commissioners of Inland Revenue v. Maxse (1), Maxse purchased a monthly magazine for 1,500 and was the sole proprietor, editor and publisher thereof. The earnings were derived from sales of the magazine, from advertisements and from reprints of articles mostly written by him. Before the war Maxse wrote a large part of each number, and, though some of the matter was contributed by others, the sales were largely due to the popularity of his own writings. When war broke out, he increased his personal contributions and did most of the writing. At that time he required practically no capital. Having been assessed to excess profits duty for the year ending May 31, 1915, he appealed to the General Income Tax Commissioners and contended that the profits were earned by reason of his personal qualifications, that the capital expenditure was small in comparison with the person- al qualifications required to earn the profits, and that he was exempt from duty by virtue of para (c) of section 39 of the Finance (No. 2) Act, 1915. The General Commissioners having discharged the assessment, their decision was re- versed by Sankey L who held that Maxse was carrying on a commercial business and not a profession within para (c) and therefore he was liable to duty. The Court of appeal held that Maxse was carrying on the profession of a journalist, author or man of letters, and also the business of publish- ing his own periodical. The publishing (1) [1919] 1 K.B. 647.

367 business should be debited with a fair and reasonable allow- ance in respect of Maxse’s contributions, and a proper sum for his remuneration as editor, and on that footing he would be liable to duty in respect of his business but exempt therefrom in respect of his profession. This is a case of a combination of a profession with a business. Under the law no excess profits duty could be levied on his profes- sional income but his business income was liable to such duty and the duty was so levied by making the apportionment.

The rule laid down in this case, though it has special reference to the scheme of the English statute, can appo- sitely be laid down for the apportionment of profits qua parts of a business of an assessee. A similar view was expressed by a Bench of the Calcutta High Court in Killing Valley Tea Company v. The Secretary of State forIndia(1). There the question arose whether the income from a tea garden where tea was grown and made ready for the market by mechanical process, was assessable. It was held that the income was to be apportioned and so much of it as was ob- tained by the manufacturing process was assessable. The principle of Maxse’s case and of other English cases was applied to the facts of that particular case. In cases where a person is carrying on composite businesses which for purposes of section 5 are regarded as one business and for purposes of the proviso as several parts of a business, it may be said that there are two stages in the production of the net profit, (1) the manufacture of the article, and (2) the sale of the article and that part of the net profit should be attributed to each stage, the part-attributed to the earlier stage being described as a manufacturing profit.

Reference in this connection may be made to the case of International Harvester Co. of Canada Ltd. v. Provincial Tax Commission(2). In that case it was argued that when money was received by the appellant in Saskatchewanas a result of a sale in Saskatchewanthe whole of the net profit on the sale arose from the business of the appellant in Saskatche- wan, and no apportionment was necessary. This contention (1) I.L.R. 48 Cal. 161. (2) A.I.R. 1949 P.O.

72.

368 was described by their Lordships as fallacious and untena- ble. Their Lordships quoted with approval the following observations from the minority judgment of Sir Lyman Duff C.J. The quotation is in these terms :– “Nowhere does the statute authorise the Province Sas- katchewan to tax a manufacturing company, situated as the appellant company is, in respect of the whole of the profits received by the company inSaskatchewan. It is not the profits received inSaskatchewanthat are taxable, it is the profits arising from its business inSaskatchewannot the profits arising from the company’s manufacturing business inOntarioand from the company’s operations inSaskatchewantaken together, but the profits arising from the company’s operations inSaskatchewan.” The question in the present case in whether in respect of the manufacturing business of the assessee in Raichur profits accure or arise and if so, at what place. My answer unhesitatingly is that the manufacturing profits arise at the place of manufacture. They could arise nowhere else.

The sale profits arise at the place of sale and apportion- ment has to be made between the two, though the place of receipts and realization of the profits is the place where the sales. are made. The manufacturing profits could not be said to have. accrued or arisen at that place because there was nothing done from which they could accrue or arise as natural accrual or as an increase. The increase only took place at the place of manufacture and if there was any accrual over the production cost, that accrual was at the place of the production itself.

Mr. Setalvad for the Commissioner placed reliance on a number of cases, inter alia, The Board of Revenue v. The Madras Export Company (1), Jiwan Das v. Income-tax Commis- sioner,Lahore(2), 1n rePort Said Salt Association Limited (s), and Sudalaimani Nadar v. Income-tax Commissioner (4).

All these cases fall in one category. These are cases where raw materials (1) I.L.R. 46 Mad. 360. (2) I.L.R. 10 Lah.

657.

I.L.R. 59 Cal. 1226. (4) A.I.R. 1941Mad. 229.

369 were purchased at one place and sold at another and it was held that in such cases it was the act of sale from which the profits accrued or arose. In most of these cases the goods as purchased were sold without going through any manufacturing process. It was observed that mere act of purchase produces no profit. This proposition has been doubted in a later case. But it is unnecessary to go into this matter. In the case of a trading business, like pur- chase and sale, it may be said that the business of a person is one operation and the nature and character of the busi- ness is such that the profits arise at the place of sale and that in such a case it is not possible to ascribe any profits to the act of purchase and it is still more diffi- cult to apportion them. These cases are no guide for the decision of cases of manufacturing business or business of a like nature. Observations made in these cases must be limited to the facts of each particular case. A number of cases were cited for the proposition that under the Indian Act it is not the place where a person carries on business (as it is under the English law) where necessarily profits can be said to arise, because the Indian Act takes notice only of the place of accrual of profits and not of the place where the business is carried on or where the source which produces profit is situate. The matter was discussed by their Lordships of the Privy Council in Commissioner of Income-tax,Bombayv. Chunilal B. Mehta (x). The assessee in that case was carrying on buying and selling operations in commodities in various foreign markets. No delivery was ever given or taken and the profits of such forward con- tracts were not received in fact in British India, and it was held that the contracts having been neither framed nor carried out in British India, the profits derived from the contracts did not accrue or arise in British India within the meaning of section 4, sub-section (1) of the Indian Income-tax Act, 1922. The contention raised in that case on behalf of the Commissioner was that these profits resulted from the exercise of skill and judgment in Bombay by the assessee and by the giving of directions (1) 65 I. A. 33.

370 fromBombay. This contention was negatived and it was observed that to determine the place at which such a profit arises not by reference to the transactions, or to any feature of the transactions, but by reference to a place in India at which the. instructions therefor were deter- mined on and cabled toNew Yorkis, in ‘their Lordships’ view, to proceed in a manner which cannot be supported if the transactions are to be looked at separately and the profits of each transaction considered by themselves. It was said that there is a distinct paradox in the contention that the profits. resulting from an order placed in New York would have accrued or arisen in the same place (Bombay) had the order been sent to’ Liverpool with a like result, but that had the assessee decided on and directed the same New York transaction when in Hyderabad the same profits would have arisen in a different place (Hyderabad). It may be observed that the business of the forward contracts was not being conducted inBombayat all in this case. The whole argument was based on the ground that the assessee, a big business magnate, was directing and controlling that busi- ness. Such direction and control could hardly be said to be the place of the accrual of profits on the transactions done elsewhere. It was next argued in that case that these foreign transactions were part of the profits of the Bombay business carried on by the assessee and all the profits of the business must be computed as a whole. Their Lordships negatived this contention and observed as follows :– “But the legislature has chosen a different test, and applied it to all kinds of profits–‘ accruing or arising inBritish India.’ It may even have chosen it as fairer be- cause it could be applied distributively to the profits of a single source. However that may be, the profits of each particular business are to be computed wherever and by whomsoever the business is carried on, but only on condition that they are profits ‘accruing or arising or received inBritish India,’ etc. What connection exists, if any, between place of direction and place at which the profits arise is a matter not touched by sections 4, 6 or 10. Not only 371 do they lay no stress upon the place at which the business is carried on, they make no mention of it. In these circum- stances it cannot be held that it is itself the test of chargeability by virtue of a rule, not mentioned either, that profits arise or accrue at the place where the business is carried on.” Later in the same judgment it was observed that there seemed to be no necessity arising out of the general concep- tion of a business as an organization that profits should arise only at one place, that profits are frequently, if not ordinarily, regarded as arising from many transactions, each of which have a result-not as if the profits need to be disintegrated with difficulty, but as if they were an aggre- gate of the particular results. It was said that the as- sessment order had discriminated between the Bombay and the foreign business income and that to discriminate between all kinds of profits according to the place at which they accrue or arise was a plain dictate of the statute, other discrimi- nation was involved in the exemptions, and in such sections as section 42. In the concluding part of the judgment their Lordships said as follows :– “These considerations lead their Lordships to the con- clusion that under the Indian Act a person resident in British India, carrying on business there and controlling transactions abroad In the course of such business, is not by these mere facTs liable to tax on the profits of such transactions. If such profits have not been received in or brought intoBritish India, it becomes, or may become neces- sary to consider on the facts of the case where they accrued or arose. Their Lordships are not laying down any rule of general application to all classes of foreign transactions, or even with respect to the sale of goods. To do so would be nearly impossible, and wholly unwise. They are not saying that the place of formation of the contract prevails against everything else. In some circumstances it may be so, but other matters–acts done under the contract, for example–cannot be ruled out a priori. In the case before the Board the contracts were 372 neither framed nor carried out in British India, the High Court’s conclusion that the profits accrued or arose outsideBritish Indiais well founded.” In my view this decision does not make us any the wiser for the decision of the present case. It is true that the Indian Act does not lay down that profits necessarily arise or accrue at the place where the business is carried on or that they necessarily arise at the place where the source which produces the profit is situate but at the same time the Act does not lay, down that the profits necessarily accrue or arise at the place where only one operation, namely of sale is performed. Place of accrual of profits cannot necessarily be determined on the test of receivabili- ty. In certain cases the place of origin of the profits may be the determining factor while in others the test of receivability may have application. Profits of a trade or business are what is gained by the business. The term implies a comparison between the state of business at two specific dates separated by an interval of an year and the fundamental meaning is the amount of gain made by the busi- ness during the year and can only be ascertained by a com- parison of the assets of the business at the two dates, the increase shown at a later date compared to the earlier date represents the profits of the business. In this concept of the term the place of business or the source from which they originate would in the case of-certain businesses be the place where they can be said to accrue or arise. In this situation the profits realized at sale have to be appor- tioned between the different business operations which have produced them and those apportioned to the part of business of manufacture at Raichur can only be said to arise at the place of manufacture as no other activity has produced those profits. No other place can be suggested where this in- crease can be said to have arisen. In the view that I have taken it is unnecessary to refer to all the cases that were cited at the Bar, for most of these cases concerned the interpretation of the various sections of the Indian Income-tax Act and none of them concerned the interpretation placed on the Act with which we are concerned.

373 The result therefore is that in my opinion the High Court was right in answering the question in favour of the assessee and no grounds exist for reversing that decision in appeal, which is therefore dismissed with costs.

MUKHERJEA J.–I agree that this appeal should be dis- missed and I would indicate briefly the reasons which have weighed with me in affirming the judgment of the High Court.

The question which was referred by the Incometax Commis- sioner, Bombay, to the High Court under the provision of section 66 (1) of the Indian Incometax Act, 1922 and which the latter refrained for the purpose of bringing out clearly the real controversy between the parties, turns upon the applicability of the third proviso to section 5 of the Excess Profits Tax Act (Act XV of 1940) to the facts of the present case. The facts are not in controversy and may be shortly stated as follows:

The respondents assessees are a firm, resident in Brit- ishIndiaand they are registered for income-tax purposes under section 26A of the income-tax Act, Their business consists in manufacturing and selling groundnut oil and they have three mills inBombayand one at Raichur in the Hydera- bad State where oil is manufactured. During the chargeable accounting period, the oil that was manufactured at Raichur was sold partly in Raichur itself and partly inBombay, and what the Income-tax Officer did was to ascertain the income arising to the assessees out of the Raichur business and apportion the same on the basis of sales made in Raichur andBombayrespectively. The profits arising out of sales made inBombaywere held by the income-tax Officer to be assessable both to income-tax and excess profits tax.

There is no doubt as to the propriety of his decision so far as income-tax is concerned. The only question that is raised relates to the liability of the firm to pay excess profits tax in respect of income arising out of the sales made in Bombay of the oil manufactured at Raichur. The contention put forward 374 by the assessees is that although the oil was sold in Bom- bay, it was manufactured at Raichur and a portion of the profits ultimately made must be allotted to the manufactur- ing process that was carried on at Raichur. -The manufacture of the oil, therefore, must be regarded as a part of the business and as the profits “of this part accrued at Raichur, it has to be treated as a separate business for purposes of excess profits tax under the third proviso to section 5 of the Excess Profits Tax Act. The High Court answered this question in favour of the assessees and the Commissioner of Income-tax,Bombay, has come up on appeal to this Court.

With a view to appreciate the contentions that have been raised by the learned counsel on both sides, it will be convenient, first of all, to advert to the provisions of the Excess Profits Tax Act which have a bearing on the point.

Section 2, sub-section (5), of the Act defines “business” as including any trade, commerce or manufacture or any adven- ture in the nature of trade, commerce or manufacture or any profession or vocation but does not include a profession carried on by an individual or by individuals in partnership if the profits of the profession depend wholly or mainly on his or their personal qualifications……… One of the provisos attached to this definition provides that all businesses to which this Act applies carried on by the same person shall be treated as one business for the purposes of this Act. Section 4 is the charging section and under it any business to which this Act applies is subject to payment of excess profits tax in the manner and to the extent indi- cated in the section. Section 5 lays down to what business- es the Act will apply.

“This Act shall apply” so runs the section, “to every business of which any part of the profits made during the chargeable accounting period is chargeable to income-tax by virtue of the provisions of sub-clause ‘ (i) or sub-clause (ii) of clause (b) of sub-section (1) of section 4 of the Indian Income-tax Act, 1922, or of clause (c) of that sub- section.” There are three provisos attached to this section;

375 we are concerned for our present purposes with the third proviso which is worded as follows:

“Provided further that this Act shall not apply to any business the whole of the profits of which accrue or arise in an Indian State, and where the profits of a part of a business accrue or arise in an Indian State, such part shall, for the purposes of this provision, be deemed to be a separate business the whole of the profits of which accrue or arise in an Indian State, and the other part of the business shall, for all the purposes of this Act, be deemed to be a separate business.” The point for consideration is whether on the facts of this case which have been stated above, this third proviso to section 5 can be invoked by the assessees and it is open to them to claim that the work of manufacture of groundnut oil carried on by them at Raichur should be treated as a separate business within the meaning of this proviso. To succeed in their claim, it is incumbent upon the assessees to show that there was in fact a part of a business in the present case and that profit accrued or arose to this part in anIndianState. If both these elements are found to exist then and then only the part of the business could be treated as a separate business for purposes of the Act.

It is contended by the assessees that though they carry on the business of manufacturing and selling oil, the proc- ess of manufacture apart from the sale is itself a business and can be treated as a separate part of the trade that the assessees are carrying on. As the profits of this part arose or accrued at Raichur, both the conditions of the proviso are fulfilled in the present case. The learned Attorney- General appearing for the Commissioner of Income-tax has, on the other hand, argue. d that the expression “part of a business” occurring m the proviso does not refer to or contemplate one of the many activities or processes that are comprised in a business. It can only mean a cross-section of the entire business, complete in itself and including parts of each of the processes that are comprised in the same. It is next said that even assuming that the manufacturing operation can be treated as a part of the business, the 376 profits of the same could and did accrue only at the place of sale and hence the proviso could not be attracted to the facts of the present case. ‘ As regards the first part of Mr. Setalvad’s contention, I do not think that it can be accepted as sound “Business” is defined in the Act to include any trade, commerce or manufacture. A man may carry on the trade of a seller or purchaser of goods; he may be a manufacturer of goods or an exporter or importer of the same. Each of these would be a business within the meaning of the Act. Suppose, for exam- ple, that he combines all these activities and carries on a business which includes manufacturing, selling. and also exporting and importing of goods. Can it not be said that each one of these activities is a part of the business which he carries on ? I agree with Mr. Munshi that if a particu- lar process or activity of a continuous character can be distinguished from other processes and if a separate profit can be ascertained and allotted in respect to the same, there is no reason why it should not be regarded as a part of the business which yields income or profits.

The question has been raised in several cases in English Courts regarding liability to excess profits duty when a person carries on a trade or business liable to duty in connection with another business which is not so liable. It has been held that if separation is possible in such cases the proper course to follow is to sever the profits of the two businesses and assess accordingly.

In the case of Commissioners of Inland Revenue’ v.

Ransom(1) the respondents carried on the business as manu- facturing chemists and growers of medicinal herbs; they owned a factory where the manufacture and distillation of herbs were carried on and they also occupied a farm on which they grew herbs for treatment in the factory. The respond- ents were assessed to excess profits duty and on appeal against the assessment, the General Commissioners held that although the respondents occupied the farm mainly for the purpose of the factory, which was excluded from excess (1) [1918] 2 K.B. 709.

377 profits duty, as separation was possible, the profits of the farm were excluded and they were only assessed on the profits of the factory. This view of the General Commis- sioners was upheld by Sankey J. on appeal.

The same question arose in Commissioners of land Revenue v. Maxse(1), where the Court of appeal reversed the decision of San key J. In that case the appellant was the sole proprietor, editor and publisher of the “National Review” and was assessed on the profits of the publication. The General Commissioners held that the appellant was exempt from duty as he carried on the profession of a journalist, the profits of which depended mainly upon his personal qualifications within the meaning of the Finance Act. On appeal, Sankey J. reversed the decision of the General Commissioners and held that the assessee was not in the position of an ordinary journalist but derived his profits by the sale of a commodity, thereby carrying on an ordinary commercial business. The Court of appeal upset this deci- sion of Sankey J. and held that the assessee was really carrying on two businesses, one that of a journalist, author and a man of letters and the other that of publishing his periodical. The result was that the profits of the two businesses were directed to be apportioned, though the process was by no means an easy one. The same principle was applied by the Calcutta High Court in a case where the growing of tea as an agricultural produce, which was not liable to income-tax was carried on along with the business of manufacturing tea [vide Killing Valley Tea Co. v. Secre- tary of State (2)] It is true that these are cases where several businesses were amalgamated and carried on together, or more of which were not liable to tax or excess profits duty; but the principle of apportionment upon which these cases were decided ,could, in my opinion, be applied with equal propriety to cases where one part of the business is distinct and separate from the other parts and is capable of earning profits separately.

That profits could and should be allotted to and (1) [1919] 1. K.B. 647. (2) I.L.R. 4,8Cal.

378 apportioned between different parts of a business of a composite character is fully illustrated by the decision of the Privy Council in the Commissioner of Taxation v.

Kirk(1). In that case the assessees were a mining company who had mines in the colony ofNew South Wales. The ore was extracted inNew South Walesand was converted there into merchantable product. The product, however, was sold not inNew South Walesbut inVictoria. Under section 15 of the New South Wales Land and Income Tax Assessment Act, the following incomes ‘were liable to be taxed :– “Sub-section (1). Arising or accruing to any person wheresoever residing from any profession, trade, employment or vocation carried on inNew South Wales, whether the same be carried on by such person or on his behalf wholly or in part by any other person…… (3) Derived from lands of the Crown held under lease or licence issued by or on behalf of the Crown. (4) Arising or accruing to any person whereso- ever residing from any kind of property except from land subject to land tax as hereinafter specifically excepted, or from any other source whatsoever in New South Wales not included in the preceding sub-sections.” It was held by the New South Wales Court that the asses- see was not liable to tax under any of the above provisions.

This decision was reversed by the Judicial Committee.

“It appears to their Lordships,” so runs the judgment of the Judicial Committee, “that there are four processes in the earning or production of this income-(1) the extraction of the ore from the soil; (2) the conversion of the crude ore into a merchantable product, which is a manufacturing process; (3) the sale of the merchantable product; (4) the receipt of the moneys arising from the sale. All these processes are necessary stages wihch terminate in money, and the income is the money resulting less the expenses attend- ant on all the stages…… The fallacy of the judgment of the Supreme Court in this and in Tindal’s case is in leaving out of sight the initial stages, and fastening their atten- tion [1930] A.C. 588.

379 Income. ‘ ‘ Thus according to the Judicial Committee it was a falla- cy to regard the profits as arising solely at the place of sale. It is to be noted that under the provisions of the New South Wales Act referred to above, the liability to tax depended not whether the income arose or accrued in New South Walesbut whether it accrued from a source in New South Wales. This distinction is undoubtedly important and the learned Chief Justice of the Bombay High Court was not, it seems, right in laying no stress upon it and in observing in course of his judgment that income accrues or arises only at the place where its source is situated. This aspect of the case I will discuss later on in connection with the second point that arises for consideration in this case. It is enough to state at the present stage that on the authori- ty of Kirk’s case it would be quite legitimate to hold that a portion of the net profit that the assessees in the present case made out of their total business could and should be allotted to the manufacturing process that was carried on at Raichur. The view is strengthened by two recent pronouncements of the Judicial Committee, the earlier of which reported in International Harvester Company of Canadav. Provincial Tax Commission (1) discusses the point in great details and was followed in its entirety in the later decision in Provincial Treasurer of Manitobav. Wrig- ley Jr. Co. Ltd. (2). In International Harvester Co. of Canada v. Provincial Tax Commission (1), the question for decision turned upon the construction of section 21 (a) of the Income Tax Act, 1932 of Saskatchewan which after amend- ment was in the same terms as section 23 of the later Act of 1936. The section provides that “the income liable to taxation under this Act of every person residing outside of Saskatchewan who is carrying on business in Saskatchewan either directly or through or in the name of any other person shall be the net profit or gain arising from the business of such person in Saskatchewan.” The appellant company had its Head Office in Hamilton, (1) [1949] A.C. 36. (2) (1950) A.I.R. 1950 P.O. 53.

48 380Ontario, and was for income-tax purposes resident outside ofSaskatchewan. Its business was that of manufacturing and selling agricultural implements, the manufacturing opera- tions being carried on entirely outside the province of Saskatchewan and the selling operations partly in that province and partly in other provinces and countries. The selling business in Saskatchewan was carried on at Branch Offices, all moneys received by the appellant in Saskatche- wan being deposited in separate bank accounts and remitted in full to the Head Office which sent to the Saskatchewan branches such moneys as were required for operating and incidental expenses. It was held by the Judicial Committee that any part of the appellant’s net profit which might fairly be attributed to its manufacturing operations outside the,province of Saskatchewan was not profit arising from the business of the appellant in Saskatchewan within the meaning of section 21 (a) of the Income Tax Act, 1932, as amended, and must be excluded in ascertaining the income of the appellant liable to taxation under that section. The Judi- cial Committee in course of its judgment referred to the following passage occurring in the judgment of Duff C.J. in the Supreme Court of Canada.

“The profits of the company are derived from a series of operations, including the purchase of raw materials or partly manufactured articles, completely manufacturing its products and transporting and selling them, and receiving the proceeds of such sales The essence of its profit-making business is a series of operations as a whole. That part of the proceeds of sales in Saskatchewan which is profits is received in Saskatchewan, but it does not follow, of course, that the whole of such profit ‘ arises from’ that part of the company’s business which is carried on there within contemplation of section 21 (a).” Their Lordships agreed with the appellant that a portion of the money received in Saskatchewan which repre- sents net profit should be sub-divided and part of it should be treated as a manufacturing profit’ 381 arising from the manufacturing business of the appellant outside Saskatchewan. There was no insuperable difficul- ty according to their Lordships in making this apportion- ment.

This reasoning applies fully to the facts of the present case, though here again I should point out that the scheme of the Saskatchewan Act was to tax profits arising from a business in a particular place and to that extent the language of the Indian Act is undoubtedly differ- ent. Like the Kirk’s case, it can, however, be taken as an authority for the proposition that in cases like the one we have before us, there could be apportionment of the net profits that accrue to the business of the assessee and one portion of it could be allotted to that part of the business which relates to the manufacture of commodities which are ultimately sold in the market. The later decision of the Judicial Committee referred to above simply follows the International Harvester Company’s case without any further discussion.

Mr. Munshi in course of his arguments has referred to the provisions of section 42 (3) of the Indian Incometax Act and he contends that the language of this sub-section clearly indicates that in the contemplation of the legisla- ture certain operations of a business could be regarded as a part of tim business and the principle of apportionment which this sub-section provides can very properly be made applicable to a case coming under the third proviso to section 5 of the Excess Profits Tax Act. Section 42, sub- section (1), provides inter alia that the whole of the income and profits accruing or arising whether directly or indirectly through business connection in British India would be deemed to be income accruing withinBritish Indiaso as to be liable to tax in this country. The scope this provision is narrowed down by sub-rule (3) which pro- vides that where all the operations of the business are not carried on in British India, the profits and gains of the business deemed to accrue or arise in this country are limited to such profits or gains as can reasonably be at- tributed to the part of the 382 operations carried on in this country. The Raichur factory certainly has business connection in British India for a part of the oil manufactured by it is sold through theBombayestablishment of the assessees. It is clear also that all the operations of the Raichur business are not carried on inBombay. Therefore, the profits that would be deemed under this section to accrue or arise inBombaywill only be the profits which may reasonably be attributed to that part of the operations carried on inBombay, that is to say, to sale of part of its oil inBombay. As section 42 applies to an assessee who is a resident inIndia, there is no reason why this principle of apportionment should not apply to a case falling within the third proviso to section 5 of the Excess Profits Tax Act. Mr. Setalvad points out that sec- tion 42 contemplates income or profits not actually arising or accruing in British India but only deemed to arise or accrue in this country under the circumstances specified in the section, and therefore no such question can arise under proviso (3) to section 5 of the Excess Profits Tax Act. It appears, however, that in enacting proviso (2) to section 5 of the Excess Profits Tax Act which relates to business carried on by a non-resident, the legislature had in mind the provision of section 42 of the Income-tax Act. The expression “part of a business” occurring in proviso (2) to section 5 can, there fore, be taken legitimately to mean such operations of the business to which separate profits are attributable as laid down in sub-section (3) of section

42. Although proviso (3) is applicable to a different set of circumstances, the words “part of a business” as used in that proviso must be taken to have been used in the same sense as in the earlier proviso and to this extent, at any rate, it favours the contention of the respondents that no cross-section of the entire business was meant by that expression.

Again it is quite true that there is no express direc- tion as to apportionment in the third proviso to section 5 of the Excess Profits Tax Act as there is in sub-section (3) of section 42 of the Income-tax Act. However, profits can accrue in respect to a part of a business only when appor- tionment is possible and it is 383 on this assumption that this proviso is based. If no apportionment can be made in respect of the processes or activities of a particular business, they will not be con- sidered to be a part of the business at all and the proviso will not apply. The principle of apportionment, therefore, is implied in the third proviso to section 5 of the Excess Profits Tax Act.

I now come to the other question as to whether the profits of the manufacturing part of the assessees’ business did arise or accrue at Raichur within theHyderabadState.

The point is not altogether free from difficulty and al- though a large number of decided authorities have been placed before us in this connection by the learned counsel on both sides, none of them seems to be directly in point.

The cases cited relate mostly to different provisions of the Income-tax Act which make income taxable if it arises, accrues or is received in British India or is deemed under the provisions of law to arise, accrue or to be received inBritish India. So far as the third proviso to section 5 of the Excess Profits Tax Act is concerned, it is to be noted that it uses the expression “accrue” and” arise” but not ,the word “received” and further there is no provision here under which income could be deemed to arise or accrue at a particular place even if it does not actually do so. Prof- its of a business are undoubtedly not “received” till the commodities are sold and they are ascertained only when the sale takes place, but the question is that if a part of the business which consists of manufacturing goods and is car- ried on prior to the sale, yields profits, do these profits accrue or arise only at the place where the manufactured goods are sold ? We have been referred to a number of decided authorities, where the assessee carried on the business of buying and selling and the goods and raw materi- als were purchased in one place and sold in another and the question arose whether for purposes of taxation portion of the profits could be held to arise at the place of buying also.

The decision of the Madras High Court in Secretary, Board of Revenue,Madrasv. Madras Export 384 Company (1) is one of the leading pronouncements in this line of authorities. The question for decision in. that case was whether the profits of a firm which had its head- quarters in Paris and purchased raw skins through an Agent in Madras which were exported to and sold in Paris were taxable in British India under section 33 (1)of the Income- tax Act of 1918 which corresponded, though not identically, to section 42 of the present Act. The question was answered in the negative. The learned Judges held that section 33 was not a charging but a machinery section and relied on the decision of the English Court in Greenwood v. Smdth and Company (2), which laid down that a trade is exercised in the place where the business transactions are closed; and in the case of a selling business, that place would be where the sales are effected and the profits realised. The pro- priety of the Madras decision was questioned by the Calcutta High Court in Rogers Pyatt Shellac and Company v. Secretary of State for India (8), and it was pointed out that the Judges of the Madras Court wholly overlooked a vital dis- tinction between Indian and English Income Tax Law in so far as the former lays down that certain profits, though not actually arising or accruing in British India, should be deemed to arise or accrue in this country. Under’ the Eng- lish law, the essential thing for purposes. of taxation was that profit should accrue from trade exercised within theUnited Kingdomand there was* no provision there correspond- ing to that contained in section 42 of the Indian Income-tax Act. The decision in the Secretary, Board of Revenue,Madrasv. Madras Export Company (1) was, however, followed, by a Full Bench of the Lahore High Court in Jiwandas v.

Income-tax Commissioner,Lahore(4). In that case, the question arose as to whether a person residing and carrying on business in British India and purchasing goods there which were sold in Kashmir was liable to assessment on the ground that a part of the, profits accrued within British India. The Full Bench gave a negative answer to this ques- tion and the basis.

(1) I.L.R. 46 Mad. 360. (2) [1922] 1 A.C.

417.

(.3) I.L.R. 52 Cal. 1. (4) I.L.R. 10 Lab.

657.

385 of the decision was that mere purchase of goods inBritish Indiahad too remote a connection to justify the conclusion that a part of the profits should be held to have “accrued” in this country. As the business was one of buying and selling, it was held that the profits accrued or arose actually at the place where the goods were sold and not at the place where they were merely purchased for export. It should be noted that this case was decided prior to 1939 and the changes that were introduced into section 42 of the Income-tax Act by the Amending Act of 1939 were not in existence at that time. The assessee was a resident of British India and the only question for decision in that case was whether the profits did actually arise or accrue inBritish India. It was held that they did not. Both these cases were followed with approval by a Madras Special Bench in the subsequent case of S.V.P. Sudalaimani Nadar v. Com- missioner of Income-tax, Madras(1). That was also a case where the-assessee was a resident of British India and having purchased animals inBritish Indiaexported them to foreign countries for sale. It was held that he was not assessable to income-tax, as the profits were not received or brought intoBritish India. All these cases were re- viewed by a Division Bench of the Orissa High Court, consisting of Chief Justice Ray and Narasimham J. in Rahim v. Commissioner of Incometax (“). Here the assessee used to buy hides, horns, etc. in theOrissaStateand sell them in British India and the question was whether any part of the profits accrued or arose within anIndianState. The answer given by the Court was in the negative, though the Chief justice in a separate judgment observed that he was not prepared to lay down as a proposition of law that in all businesses of buying and selling, the entire profits neces- sarily accrue at the place where the sales take place. Each case would depend upon its own circumstances and there may be cases where the place where the commodities are purchased has an importance of its own. On the facts of the case which they were actually deciding it was said that the act of buying (1) A.I.R. [1941] Mad. 229. (2) A.I.R. [19491 Orissa 60.

386 was so negligible a part of the operation of the business.

as not to make any appreciable difference in the apportion- ment of the amount that accrued or arose inBritish India.

It will be seen that none of these decisions are. really of any assistance to the appellant in the present case. All of them proceeded on the footing that no appreciable profit resulted from the operation of buying when the goods were purchased at one place and exported in a raw state to anoth- er place for sale. In the Orissa case referred to above, Narasimham J. expressly observed in course of his judgment that the position might be different if the materials pur- chased underwent any manufacturing process before they were exported. If no profits really resulted from the purchasing part of the business, obviously the question of the place where such profits arise or accrue does not become material at all.

As against these cases, several authorities have been cited to us which have proceeded on the footing that even purchase of raw materials could be an operation in connec- tion with a business and if it was carried on in British India, it might make the profits attributable to such opera- tion taxable under section 42 of the Indian Income-tax Act.

The case of Rogers Pyatt Shellac and Company v. Secretary of State for lndia (1) is one of the leading decisions on this point. In that case, a company incorporated inU.S.A.and having its Head Office inNew Yorkand Branch Offices, Agencies and factories inCalcutta,London, etc. purchased goods inIndiafor sale inAmerica. It had also a factory in the United Provinces where raw produce was bought locally and worked up into a form suitable for exports toAmerica.

It was held that the company was not exempt from assessment to income-tax or super-tax inIndia. This case was decided under section 33 of the Income-tax Act of 1918 and the judgment shows that the principle followed in the case was similar to that which was subsequently embodied n section 42 (3) of the Income-tax Act of 1922. The same line of reason- ing was adopted by theRangoon(1) I.L.R. 52 cal. 1.

387 High Court in Commissioner ofIncome-tax,BurmaMessrs.

Steel Brothers and Company (1). Among recent cases, on this point, which were decided under section 42 of the Income-tax Act of 1922, can be mentioned the case of Motor Union Insur- ance Co. Ltd. v. Commissioner of Income-tax.Bombay(2)and that of Webb Sons and Company v. Commissioner of Income-tax,East Punjab(3). In the last case, the assessee company which was incorporated in theUnited States of America, was carrying on inAmericathe business of manufacturing car- pets. Its only business inIndiawas the purchase of wool as raw material for the carpets. It was held that the purchase was an operation within the meaning of section 42 (3) of the Income-tax Act and profits from such purchases could he deemed to arise inBritish Indiaand was conse- quently assessable under section’ 42 (3) of the Income-tax Act.

These cases, it must be admitted, are not of much as- sistance to the respondents in this case, though they do not help the appellant either. They were decided on the express language of section 42 of the Incometax Act, 1922, as it then stood or the section corresponding to it in the earlier Act. There remains for me to refer to tile other line of authorities upon which the judgment of the High Court seems to be primarily based. [n my opinion, they cannot also be regarded as direct authorities on the point requiring con- sideration in the present case. In Commissioner of Income- Tax v. Kirk (4), the profits derived from extraction ore from the soil and also from the conversion of the crude ore into merchantable product were held to be taxable, as the source of these profits was situated inNew South Walesand that was the basis of taxation under the New South Wales Act. The High Court was not right in holding that as a matter of law, profits must be held to arise at the place where the source of the profit is situated. The Privy Council clearly laid down in the case of the Commissioner of Incometax v. Chunilal(5) that income from business does not (1) I.L.R. 3 Rang. 614. (2) A.I.R.

[1945] Born.

(3) [1950] 18 I.T R. 33. (4) [1900] A.C. 588. (5) 65 I.A.

332.

49 388 necessarily arise or accrue at the place from which direc- tions are given or skill and judgment exercised, although the operations may take place elsewhere; and it is not the scheme of the Income-tax Act that the profits in the case of a business cannot be taken distributably but must be taken as a single indivisible result accruing at one place.

The learned Chief Justice of Bombay in support of his judgment relied strongly upon the decision of the Madras High Court in Commissioner of Income-tax v. Mathias(1). In that case, the assessee, who was a resident of Mangalore in British India, owned coffee plantations inMysore. The harvested crops were brought to Mangalore to be dried and cleansed there in the factory of the selling agents of the assessee and sold there by that company, the sale proceeds being received and retained at Mangalore by the assessee himself. The question was whether the assessee was entitled to claim the benefit of the second proviso to section 4 (2) of the Income-tax Act and if so, to What extent ? It was held by the learned Judges that the assessee was entitled to exemption of the whole profits earned by the sale of the produce at Mangalore, and the ground upon which the decision rested was that the agricultural produce itself could be taken to be income in kind which accrued at Mysore outside British India. On appeal to the Privy Council, this deci- sion was reversed and the Privy Council took the view that as the income was received in British India, the proviso to section 4 (2) had no application (2). The particular point upon which the Madras High Court based its decision was not considered by the Judicial Committee and was left open.

Obviously in the case before us the manufactured oil that was produced at Raichur could not be taken to be income or profits in kind. The manufactured products themselves cannot be regarded as income though the process of manufac- ture yields profits which form a portion of the profits ultimately realised at the time of the sale. The question before (1) I.L.R. [1938] Mad. 25.

Vide Commissioner of Income-tax V. Mathias–66 I.A.

22.

389 us is, where do the profits resulting from the manufacturing process accrue or arise ? It was pointed out by Mukherji J. in Re Rogers Pyatt Shellac and Co. v. Secretary of State for India (1) that etymologically the word “accrues” connotes the idea of a growth, addition or increase by way of accession or advan- tage, while the word “arises” suggests the idea of growth or accumulation with a tangible shape so as to be receivable.

The two expressions denote almost the same idea and the difference only lies in the fact that one is more appropri- ate than the -other when applied to particular cases. It is clear, however, as the learned Judge pointed out that these words have been used in contradistinction to the word “received” and both of them represent a stage anterior to the point of time when the income becomes receivable; they connote a character of income which is more or less incho- ate. As I have stated already, in proviso (3) to section 5 of the Excess Profits Tax Act, the legislature has deliber- ately left out the word “received” and has spoken only of” accruing” or “arising.” This shows that the legislature had in mind cases where profits could accrue to parts of a business before they were actually received. When a raw material is worked up into a new product by process of manufacture, it obviously increases in value; in other words, there is an accretion of profit to it and the in- creased value represents this income or profit which is the result of manufacture. As these profits accrue by reason of manufacture, the accrual, in my opinion, cannot but be located at the place where the manufacturing process is gone through. It is immaterial that the manufactured goods are sold later on at various places. If the manufacturer is himself the seller, it might be that he receives the entire profits including that of the manufacture only at the time of the sale; but in an inchoate shape, a portion of the profits does accrue at the place of manufacture, the exact amount of which is only ascertained after the sale takes place. For purposes of computation, the two parts of the business may be conceived of as being carried on by two I.L.R. 52 Cal. 1. at p. 30.

390 different sets of persons. As soon as the manufacture is complete, that part of the business is finished and the profits that accrue to that part certainly arises at the place where the manufacture is carried on and not where the sale ultimately takes place. As the principle of section 42 of the Income-tax Act applies to this case the profits to be deemed under that section to accrueor arise inBritish Indiawould only be the profits that may reasonably be attributed to one part of the operations,. namely, sales of part of the oil; and the profits accruing or arising out of the other part of the operation, namely, the manufacture of the oil which takes place outsideIndiacould not be deemed to accrue or arise inIndia. Where then these profits would arise or accrue or be deemed to arise or accrue except at the place of manufacture ? My conclusion, therefore, is that the profits of the manufacturing part of the assessees’ business did accrue and arise at Raichur and the judgment of the High Court should be affirmed, though I do not concur in all the reasons given by the learned Judges.

J.–I substantially agree with the reasonings given in the judgment just delivered by my learned brother Mukherjea and concur in dismissing this appeal.

Appeal dismissed.

Agent for the Appellant: P.A. Mehta.

Agent for the Respondents: Ranjit Singh Nath

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

9. DR. BABU RAM SAKSENA V. THE STATE [1950] INSC 9; AIR 1950 SC 155; 1950 SCR 573 (5 May 1950)

05/05/1950 SASTRI, M. PATANJALI SASTRI, M. PATANJALI KANIA, HIRALAL J. (CJ) FAZAL ALI, SAIYID MAHAJAN, MEHR CHAND DAS, SUDHI RANJAN MUKHERJEA, B.K.

CITATION: 1950 AIR 155 [1950] INSC 91950 SCR 573

ACT:

Constitution of India–Merger of States–Effect–Treaty of Extradition between British Gov- ernment and indian State–Whether subsists after merger–Extradition Act, 1903, ss. 7, 18.–Provision in Act for extradition for additional offences–Whether “derogates” from Treaty–Extradition warrant for additional offences–Legality.

HEADNOTE:

In 1869 the British Government and the State of Tonk entered into a treaty which provided for the extradition of offenders in respect of certain offences specified therein called “heinous offences,” which did not include the of- fences of cheating and extortion. In 1903 the Indian Extradition Act was passed which provided for extradition in respect of cheating and extortion also, but s. 18 of the Act provided that nothing contained in the Act “shall derogate from the provisions of any treaty for the extradition of offenders.” Under the Independence of India Act, 1947, the suzerainty of His Majesty over the Indian States lapsed and with it all treaties and agreements in force; but under a “standstill agreement,” between the Indian Dominion and the States (including Tonk) all agreements between His Majesty and the States were continued, including agreements in respect of extradition. Tonk acceded to the Dominion of India in 1947 and became amemberStateof the United State of Rajasthan. The appellant was a member of the Uttar Pradesh Civil Service and his services were lent to the State ofTonkin 1948. After he had reverted to the Uttar Pradesh he was charged with the offences of cheating and extortion alleged to have been committed while he was in Tonk and was arrested under an extradition warrant issued under s. 7 of the Extradition Act, 1903. He applied under es. 4=91 and 561-A of the Code of Criminal Procedure for his release, contending that in view of the provisions of s. 18 of the Extradition Act and the Treaty of Extradition of 1869, his arrest was illegal:

Held per KANIA O. J. and PATANJALI SASTRI J. (FAZL, ALI. J. concurring),–Even assuming that the Extradition Treaty of 1869 subsisted after the merger of the Tonk State, by providing for extradition for additional offences the Extradition Act of 1903 did not derogate from the provisions of the Treaty of 5869 or the rights of Indian citizens thereunder, and the arrest and surrender of the appellant under s. 7 of the Act was not, therefore, rendered unlawful by anything contained in the said Treaty.

574 Per MUKHERJEA J. (FAZL ALI, MAHAJAN and DAS JJ. concur- ring).–The Extradition Treaty of 1869 was not capable of being given effect to in view of the merger of the Tonk State in the United State of Rajasthan, and, as no enforce- able treaty right existed, s. 18 of the Extradition Act of 1903 had no application; and inasmuch as the conditions of s. 7 of the said Act had been complied with, the warrant of arrest issued under s. 7 of the Act was not illegal.

APPELLATE JURISDICTION: Criminal Appeal No. II of 1949.

Appeal by special leave from the judgment of the Allaha- bad High Court (Harish Chandra J.) dated 11th November, 1949, in Criminal Miscellaneous Case No. 960 of 1949. The facts of the case and the arguments of counsel are set out fully in the judgment.

Alladi Krishnaswami Iyer (Alladi Kuppuswami with him) for the appellant.

M.C. Setalvad, Attorney-General forIndia(V. N. Sethi, with him) for the respondent.

1950. May 5. The judgment of Kania C.J. and Patanjali Sastri J. was delivered by PATANJALI SASTRI J.–This is an appeal by special leave from an order of the High Court at Allahabad dismiss- ing an application under sections 491 and 561-A of the Code of Criminal Procedure for release of the appellant who was arrested in pursuance of an extradition warrant issued by the Regional Commissioner of the United State of Rajasthan who is the principal officer representing the Crown in the territory of that State.

The appellant who is a member of the Uttar Pradesh Civil Service was appointed in 1948 to serve what was then known as the Tonk State in various capacities, and during such service he is alleged to have helped the Nawab in obtaining the sanction of the Government of India to the payment of Rs. 14 lakhs to the Nawab out of the State Treasury for the discharge of his debts, and to have induced the Nawab by threats and deception to pay the appellant, in return for such help, sums totalling Rs. 3 lakhs on various dates. On these allegations the appellant is charged with having committed offences under section 383 (Extortion) and 575 section 420 (Cheating) of the Indian Penal Code which are extraditable offences under the Indian Extradition Act, 1903 (hereinafter referred to as “the Act”). The warrant was issued under section 7 of the Act to the District Magis- trate, Nainital, where the appellant was residing after reverting to the service of the Uttar Pradesh Government, to arrest and deliver him up to the District Magistrate of Tonk.

The appellant’s case is that the sum of Rs. 3 lakhs was paid to him by the Nawab to be kept in safe deposit in a bank for the Nawab’s use inDelhi, that no offence was committed and that the amount was returned when demanded by the authorities of theTonkState. The warrant was issued mala fide on account of enmity. Various technical objections were also raised to the validity of the warrant and to the jurisdiction of the Magistrate at Nainital to take cogni- sance of the matter and arrest the appellant. The High Court overruled all the objections and dismissed the application for the release of the appellant.

On behalf of the appellant Mr. Alladi Krishnaswami Aiyar contended that section 7 of the Act under which the warrant purports to have been issued had no application to the case and that the entire proceedings before the Magistrate were illegal and without jurisdiction and should be quashed.

Learned counsel, relying on section 18 of the Act which provides that nothing in Chapter III (which contains section 7) shall “derogate from the provisions of any treaty for the extradition of offenders,” submitted that the treaty entered into between the British Government and the Tonk State on the 28th January, 1869, although declared by section 7 of the Indian Independence Act, 1947, to have lapsed as from the 15th August, 1947, was continued in force by the “Stand- still Agreement” entered into on the 8th August, 1947, that that treaty exclusively governed all matters relating to extradition between the two States, and that, inasmuch as it did not cover the offences now charged against the appel- lant, no extradition of the appellant could be demanded or ordered.

576 The Attorney-General appearing for the Government ad- vanced three lines of argument in answer to that contention.

In the first place, the standstill agreement entered into with the various Indian States were purely temporary ar- rangements designed to maintain the status quo ante in respect of certain administrative matters of common concern pending the accession of those States to the Dominion of India, and they were superseded by the Instruments of Acces- sion executed by the Rulers of those States. Tonk having acceded to the Dominion on the 16th August, 1947, the stand- still agreement relied on by the appellant must be taken to have lapsed as from that date. Secondly, the treaty was no longer subsisting and its execution became impossible, as the Tonk State ceased to exist politically and such sover- eignty as it possessed was extinguished, when it covenanted with certain other States, with the concurrence of the Indian Government “to unite and integrate their territories in one State, with a common executive, legislature and judiciary, by the name of the United State of Rajasthan,” the last of such covenants, which superseded the earlier ones, having been entered into on the 30th March, 1949.

Lastly, even assuming that the treaty was still in operation as a binding executory contract, its provisions were in no way derogated from by the application of section 7 of the Act to the present case, and the extradition warrant issued under that section and the arrest made in pursuance thereof were legal and valid and could not be called in question under section 491 of the Criminal Procedure Code. As we are clearly of opinion that the appellant’s contention must fail on this last ground, we consider it unnecessary to pronounce on the other points raised by the AttorneyGeneral especially as the issues involved are not purely legal but partake also of a political character, and we have not had the views of the Governments concerned on those points.

It was not disputed before us that the present case would fall within section 7 of the Act, all the requirements thereof being satisfied, if only the applicability of 577 the section was not excluded, under section 18, by reason of the Extradition Treaty of 1869, assuming that it still subsists. The question accordingly arises whether extradi- tion under section 7 for an offence which is not extradita- ble under the treaty is, in any sense, a derogation from the provisions of the treaty, which provides for the extradition of offenders for certain specified offences therein called “heinous offences,” committed in the respective territories of the high contracting parties. Under article 1 the Gov- ernment of theTonkStateundertakes to extradite any per- son, whether a British or a foreign subject, who commits a heinous offence in British territory. A reciprocal obliga- tion is cast by article 2 on the British Government to extradite a subject of Tonk committing such an offence within the limits of that State. Article 3 provides, inter alia, that any person other than a Tonk subject committing a heinous offence within the limits of theTonkStateand seeking asylum in British territory shall be apprehended and the case investigated by such Court as the British Govern- ment may direct. Article 4 prescribes the procedure to be adopted and the conditions to be fulfilled before extradi- tion could be had, and article 5 enumerates the offences which are “to be deemed as coming within the category of heinous offences” which, however, do not include the of- fences charged against the appellant.

The argument on behalf of appellant was put thus: The maxim expressio unius est exclusio alterius is applicable, as pointed out by McNair on The Law of Treaties, (1938–pp.

203, 204), to the interpretation of treaties. According to that rule the treaty in question should be read as allowing extradition only for the specified offences and for no others, that is to say, as implying a prohibition of extra- dition by either State for any other offence than those enumerated in article 5. Further, while the treaty entitled each of the high contracting parties to demand extradition on a reciprocal basis, an unilateral undertaking by the Indian Government to grant extradition for an offence for which it could not claim extradition under the treaty 578 violates the principle of reciprocity which is the recog- nised basis of all international compacts for extradition.

Such an arrangement places the State ofTonkin a more advantageous position which was not contemplated by the framers of the treaty. And where, as here, the person whose surrender is demanded is an Indian subject who is not liable to be extradited under the treaty, his surrender under section 7 trenches upon the liberty of the subject. In so far, therefore, as that section authorises extradition of a person, especially when he is an Indian subject, for an offence which is not extraditable under the treaty, it derogates from the provisions of the treaty within the meaning of section 18, and its application to the present case is thereby excluded. The argument proceeds on a miscon- ception and cannot be accepted.

No doubt the enumeration of “heinous offences” in arti- cle 5 of the treaty is exhaustive in the sense that the high contracting parties are not entitled, under the treaty, to claim extradition of criminals in respect of other offences.

But we cannot agree that such of enumeration implies a prohibition against either those parties providing by its own municipal laws for the surrender of criminals for other offences not covered by the treaty. It is difficult to imagine why the contracting States should place such a fetter on their respective legislatures in advance not only in regard to their subjects but also in regard to alien offenders, for, if such prohibition is at all to be implied, it should cover both. As pointed out in Wheaton’s Interna- tional Law, there is no universally recognised practice that there can be no extradition except under a treaty, for some countries grant extradition without a. treaty: (Fourth Edition, sections 116 (a) to (d), pp. 186-189). No doubt the constitutional doctrine in Englandis that the Crown makes treaties with foreign States for extradition of criminals but those treaties can only be carried into effect by Act of Parliament: (Ibid–section 116 (b), p. 187). Accordingly, the extradition Acts are made applicable by an Order in Council in the case of each State which enters into an extradition treaty 579 with the Crown, and they are made applicable only so far as they can be applied consistently with the terms and condi- tions contained in the treaty. Under such a system where the high contracting parties expressly provide that their own subjects shall not be delivered up, as in the case of the treaty between England and Switzerland, the power to arrest and surrender does not exist: Regina v. Wilson(1). This, it was observed by Cockburn C.J. in that case, was a “serious blot” on the British system of extradition, and the Royal Commission on Extradition, of which he was the chairman, recommended in their report that “reciprocity in this matter should no longer be insisted upon whether the criminal be a British subject or not. If he has broken the laws of a foreign country his liability to be tried by them ought not to depend upon his nationality …… The convenience of trying crimes in the country where they were committed is obvious. It is very much easier to transport the criminal to the place of his offence than to carry all the witnesses and proofs to some other country where the trial is to be held:” (Wheaton, section 120 (a), pp. 197, 198). Evidently, similar considerations led to the passing of the Act by the Indian Legislature providing for the surrender of criminals, including Indian subjects, for a wide variety of offences, with power to the Governor-General in Council to add to the list by notification in the Gazette generally for all States or specially for any one or more States. This statutory authority to surrender cannot of course enlarge the obliga- tion of the other party where an extradition treaty has been entered into, and this is made clear by section 18. But it is equally clear that the Act does not derogate from any such treaty when it authorises the Indian Government to grant extradition for some additional offences, thereby enlarging, not curtailing, the power of the other party to claim surrender of criminals. Nor does the Act derogate, in the true sense of the term, from the position of an Indian subject under the treaty of 1869. That treaty created no right in the subjects of either (1) 3 Q.B.D. 42.

580 State any more than in fugitive aliens not to be extradited for other than “heinous offences.” It is noteworthy that even in Wilson’s case, (ubi supra) where there was an excep- tion in the treaty in favour of the subjects of the con- tracting States, the decision was based not on the ground that the treaty by itself conferred any right or privilege on English subjects not to be surrendered but on the ground that the Order in Council applying the Extradition Act, 1870, to Switzerland limited its operation, consistently with the terms of the treaty, to persons other than English subjects. It is, therefore, not correct to say that, by providing for extradition for additional offences, the Act derogates from the rights of Indian citizens under the treaty or from the provisions of the treaty. We are accord- ingly of opinion that the arrest and surrender of the appel- lant under section 7 of the Act is not rendered unlawful by anything contained in the treaty of 1869, assuming that it still subsists.The appeal fails and is dismissed.

FAZL ALI J.–I have had the advantage of reading the judgments prepared by my brothers Sastri and Mukherjea, who have given different reasons for arriving at the same con- clusion. As I am inclined to agree with the line of reason- ing in both the judgments, I concur in the order that this appeal should be dismissed.

MAHAJAN J.–I agree with the judgment going to be deliv- ered by my brother Mukherjea. For the reasons given therein this appeal should be dismissed.

MUKERJEA J.–This appeal, which has come up before us on special leave granted by this Court, is directed against a judgment of Harish Chandra J. of the Allahabad High Court dated 11th of November, 1949, by which the learned Judge dismissed an application of the appellant under sections 491 and 561-A of the Criminal Procedure Code.

The facts which are material for purposes of this appeal are not in controversy and may be shortly stated as follows: The appellant Dr. Ram Babu 581 Saksena, who is a resident of the United Provinces, was a member of the Executive Civil Service in that province, and during his official career, extending over SO years, held various important posts, both in and outside that province.

In January, 1948, he was appointed Administrator of the TonkState, where a dispute was going on at that time regarding succession to the rulership of the State between two rival claimants. On 11th of February, 1948, the dispute was set- tled and Ismail Ali Khan was recognised as the Nawab or the Ruling Prince of the State and appellant was then appointed Dewan and Vice-President of the State Council, of which the Nawab was the President. In April, 1948, the TonkState, together with several other States in Rajputana, integrated and formed together the United State of Rajasthan and the appellant thereupon became the Chief Executive Officer of the Rajasthan Government. Towards the end of July, 1948, he got another special post under the Rajasthan Government, but soon afterwards, he took leave and proceeded to Naini Tal, where he has been residing since then. On 23rd May, 1949, he was arrested at Naini Tal on the strength of a warrant issued under section 7 of the Indian Extradition Act, 1903, by Shri V.K.B. Pillai, Regional Commissioner and Political Agent of the United State of Rajasthan. The warrant, which is dated the 8th of May, 1949, was addressed to the District Magistrate of Naini Tal and directed the arrest of Dr.

Saksena and his removal to Rajasthan, to be delivered to the District Magistrate of Tonk for enquiry into certain of- fences against the laws of that State which he was alleged to have committed. After his arrest, the appellant was released on bail in terms of the warrant itself and was directed to be present before the District Magistrate of Tonk on the 7th of June, 1949. The allegations against the appellant in substance are, that while he was ‘the Dewan of the Tonk State and Vice-President of the State Council, the Nawab, being in urgent need of money to meet his personal demands, requested Dr. Saksena to help him in obtaining for his own use 582 a sum of Rs. 14 lakhs from the State Treasury. Dr. Saksena promised his assistance on condition that the Nawab would give him a sum of Rs. 3 lakhs out of this amount as his share. By dint of his efforts, the appellant succeeded in inducing the State Ministry to pay the full amount of Rs. 14 lakhs to the Nawab in different instalments. The first instalment, amounting to over Rs. 21/2 lakhs was paid on 31st March, 1948, and a further sum of Rs. 5 lakhs was paid on 21st of April following. On that date, it is said, the Nawab paid to Dr. Saksena a sum of Rs. 1,50,000 which was only half of the promised amount. A few days later, Dr.

Saksena pressed for payment of the balance and held out threats to the Nawab that in case the money was not paid, the latter would find himself in serious difficulties as his position as a Ruling Prince of the State was not at all secure and there were grave charges against him. As a result of these threats and misrepresentations, the Nawab was induced to pay to the appellant the balance of Rs.

1,50,000 in two instalments. The matter became known to the Regional Commissioner some time in November 1948 and he called Dr. Saksena for an interview and succeeded in getting back from him the entire sum of Rs. 3 lakhs which the Nawab had paid. On the basis of these facts, Dr. Saksena has been accused of having committed offences under sections 383 and 420 of the Indian Penal Code.

On 3rd June, 1949, Dr. Saksena filed an application in the High Court of Allahabad under sections 491 and 561-A of the Criminal Procedure Code, complaining of illegal and unauthorised detention under the warrant of the Regional Commissioner of Rajputana dated the 8th of May, 1949. The legality of the warrant and of arrest thereunder was at- tacked on a number of grounds. It was contended, first of all, that the applicant was falsely implicated by the Nawab on account of enmity which grew up between them for various reasons and the allegations made were totally false. It was next said that the District Magistrate of Naini Tal could not take cognizance of the matter without the previous 583 sanction of the U.P. Government under section 197 of the Criminal Procedure Code and that the sanction of the Rajpra- mukh of the United State of Rajasthan was also necessary before any proceeding could be initiated. The third and the main contention was that the alleged offences being said to have been committed in the State of Tonk, the case would be governed by the provisions of the Extradition Treaty entered into between the British Government and the Tonk State on 28th of January, 1869, and as neither “extortion” nor “cheating” was mentioned in the list of offences for which extradition was permissible under that Treaty, the warrant of arrest issued under section 7 of the Extradition Act was wholly illegal and unauthorised. It is admitted that these offences are specified in the Schedule to the Indian Extra- dition Act of 1903, but it was said that section 18 of the Extradition Act expressly made the Act inapplicable when its provisions “derogated” from those of a Treaty. Lastly, it was urged that the extradition warrant was a mala fide step taken by the Nawab of Tonk with the help of his friend the Regional Commissioner of Rajasthan for ulterior purposes and that it constituted a fraud upon the Statute and an abuse of the processes of law. The application was heard by Harish Chandra, J. sitting singly, and by a judgment dated 11th of November, 1949, which fully and elaborately dis- cussed the different points raised in the case, the learned Judge rejected the application of the petitioner. No cer- tificate was given by the High Court under section 205 (1) of the Government of India Act, 1935, and the present appeal has been brought to this Court on the strength of special leave granted by it.

Sir Alladi Krishnaswami Aiyar, who appeared in support of the appeal, has very properly not pressed before us all the points that were canvassed on behalf of his client in the Court below. His contention, in substance, is that the rights of extradition in the present case should be regulat- ed exclusively by the provisions of the Extradition Treaty that was entered into between the TonkStateand the British Government 584 on 28th of January,. 1869, and was subsequently modified by a supplementary ,Treaty in the year 1887. This Treaty, it is argued, has not been abrogated or rendered ineffective in any way by reason of the merger of the TonkStatein the United State of Rajasthan, and the decision of the High Court on this point is erroneous. According to the provi- sions of this Treaty, no extradition is permissible in respect to offences of “extortion” and “cheating” with which the appellant is charged and the warrant of arrest issued by the Political Agent is consequently illegal and ultra vires. It is conceded by Sir Alladi that if section 7 of the Indian Extradition Act, 1903, is held to be applica- ble to the facts of the present case, the warrant of arrest issued by the Political Agent of Rajasthan could not be assailed as invalid or inoperative; but his contention is that section 18 of the Extradition Act makes an express reservation in cases where Treaty rights exist and to the extent that the provisions of Chapter III of the Extradition Act derogate from those of any Treaty relating to extradi- tion of offenders, the Treaty is entitled to prevail.

To appreciate the merits of this contention, it may be convenient to refer at this stage to a few sections of the Indian Extradition Act of 1903 as well as to the material provisions of the Extradition Treaty between theTonkState and the British Government which have a bearing upon the present question.

Chapter 111 of the Indian Extradition Act deals with surrender of fugitive criminals in case of States other than foreign States and section 7, with which this chapter opens, provides as follows:

“(1) Where an extradition offence has been committed or is supposed to have been committed by a person, not being a European British subject, in the territories of any State not being a foreign State, and such person escapes into or is in British India, and the Political Agent in or 1or such State issues a warrant, addressed to the District Magis- trate of any district in which such person is believed to be, (or if such person is believed to be in any Presidency town 585 to the Chief Presidency Magistrate of such town), for his arrest and delivery at a place and to a person or authority indicated in the warrant such Magistrate shall act in pursu- ance of such warrant and may give directions accordingly.” * * * * The expression “extradition offence” has been defined in section 2 (b) and means “any such offence as is described in the First Schedule to the Act.” The First Schedule gives a catalogue of offences described with reference to specific sections of the Indian Penal Code and it includes offences punishable under sections 383 and 420 of the Indian Penal Code prima facie, it seems therefore that all the conditions laid down in section 7 of the Extradition Act are fulfilled in the present case. the warrant has been issued by the Political Agent of a State which is not a “foreign State” as defined by the Act and the offences with which the appellant is charged are “extradition offences” as specified in Sched- ule i. Sir Alladi’s contention, as stated above, is that section 7, which is in Chapter III of the Extradition Act, is controlled by section 18 which lays down that “nothing in this chapter shall derogate from the provisions of any treaty for the extradition of offenders, and the procedure provided by any such treaty shall be followed in any case to which it applies, and the provisions of this Act shall be modified accordingly.” Turning now to the Extradition Treaty between theTonkStateand the British Government, it will be seen that the First Article of the Treaty provides for extradition, where a British subject or a foreign subject commits a “heinous” offence in British territory and seeks shelter within the limits of theTonkState. The Second Article deals with an offender who is a subject of the Tonk State and having committed a “heinous” offence within the State seeks asylum in British territory; while the Third Article relates to a person other than a Tonk subject who commits a “heinous” offence within the limits of the Tonk State and seeks asylum in British territory. The conditions 586 under which extradition could be had in all such cases and the procedure to be followed are laid down in article 4.

Article 5 then gives a list of offences which would be deemed as coming within the category of “heinous” offences.

It is not disputed that neither “cheating” nor “extortion” are mentioned in this list. The whole controversy, there- fore, centers round the point as to whether in view of the provisions of the Extradition Treaty mentioned above, extra- dition could legally be made or demanded in respect of offences coming under sections 383 and 420 of the Indian Penal Code which are mentioned in the list of offences specified in Schedule I to the Extradition Act but do not find a place in article 5 of the Treaty. Could it be said that the provisions of the Extradition Act, derogate in this respect from the Treaty between the TonkStateand the British Government and consequently, the terms of the Treaty would override the statute as indicated in section 18 of the Extradition Act ? The learned Attorney-General, who appeared for the Government of India, put forward a two-fold argument in reply to the contention of Sir Alladi. He argued in the first place, that section 18 of the Indian Extradition Act has no application to the present case inasmuch as the Extradition Treaty between theTonkState and the British Government, upon which the appellant relies, does not subsist and cannot be enforced, at the present day. The other contention is that even if the Treaty still subsists, there is nothing in its terms which prohibits extradition for offences other than those described as heinous offences in article 5. It is argued that “to-derogate” means “to detract” or “to take away” and the Schedule to the Extradi- tion Act by mentioning certain offences, which do not occur in the list of “heinous offences” as given in the Treaty, cannot be said to have derogated from the terms of the Treaty. Both these points were fully argued on both sides and it is clear that if on either of these points a decision is reached adverse to the appellant, the appeal is bound to fail.

587 So far as the first point is concerned, Mr. Setalvad has drawn our attention to various political changes that have come over theTonkStatesince the conclusion of the Extra- dition Treaty in 1869. In 1869 Tonk was one of the Native States in India with a “separate” political existence of its own and the Treaty that was entered into in that year was meant to regulate exclusively the rights and obligations in matters of extradition of offenders as between the Tonk State on the one hand and the British Government on the other. In 1887 there was a modification of the Treaty but it is not disputed that the modification made certain alter- ations in the procedure which are not material for our present purpose.

The major political change with regard to all Indian States which vitally affected their existing Treaties with the British Government occurred on the 15th of August, 1947, whenIndiabecame an Independent Dominion. Section 7 of the Indian Independence Act provided inter alia that:

“(1) As from the appointed day– (b) The suzerainty of His Majesty over the Indian States lapses, and with it, all treaties and agreements in force at the date of the passing of this Act between His Majesty and the rulers of Indian States ……….

As a result of this provision, the Extradition Treaty between Tonk and the British Government must be deemed to have lapsed with effect from the 15th of August, 1947. If matters stood there, obviously there would be nothing left upon which section 18 of the Indian Extradition Act could possibly operate. There was, however, a Standstill Agreement entered into by the Indian Dominion with the Indian States, the first article of which runs as follows:

“1. (1) Until new agreements in this behalf are made, all agreements and administrative arrangements as to matters of common concern now existing between the Crown and any Indian State shall, in so far as may be appropriate, contin- ue as between the Dominion of 588 India or, as the case may be, the part thereof, and the State.

(2) In particular, and without derogation from the generality of sub-clause (1) of this clause the matters referred to above shall include the matters specified in the Schedule to this agreement.” The Schedule does mention “extradition” as one of the matters to which the Standstill Agreement is applicable.

This was certainly intended to be a temporary arrangement and Mr. Setalvad argues that as there was no Treaty in the proper sense of the term but only a substitute for it in the shape of a temporary arrangement, section 18 of the Extradition Act which expressly mentions a Treaty cannot be applicable. While conceding that prima facie there is force in the conten- tion,-I think that this would be taking a too narrow view of the matter and I should assume for the purposes of this case that under the Standstill Agreement the provisions of the Treaty of 1869 still continued to regulate matters of extradition of criminals as between the Tonk State on the one hand and the Indian Dominion on the other till any new agreement was arrived at between them.

Though the Standstill Agreement was to take effect after the establishment of the Indian Dominion, the In- strument was actually signed on 8th of August, 1947. On the 16th of August, 1947, Tonk acceded to the Dominion of India and one of the terms in the Instrument of Acces- sion is that the “Ruler accepts the position that with regard to matters specified in the Schedule to the Instrument, the Dominion Legislature would be entitled to make laws for the State.” “Extradition including the surrender of criminals and accused persons to parts of His Majesty’s Dominion outsideIndia” is one of the matters specified in the Schedule. Thus the State gave up and surrendered in favour of the Dominion Legislature its right, to legislate in respect to extradition after the date of accession. Whether the existing Extradition Treaty was ipso facto abrogated by this Instrument of Accession is not so clear. Obviously, the Indian Dominion 589 could pass any legislation it liked regarding matters of extradition between theTonkState, and any other State, either Indian or Foreign. No such law was, however, passed by the Indian Legislature except that very recently under an Adaptation Order the Extradition Act of 1903 has been made applicable to States under Group B in the Indian Constitution in which Rajasthan is included.

It is to be noted that the Extradition Act itself, which is made applicable to the United State of Rajasthan, contains an express provision in section 18 which safeguards exist- ing treaty rights. It is somewhat unusual that an Extradi- tion Treaty would be subsisting even after the State had acceded toIndiabut we have no materials before us upon which we could definitely hold that the Treaty has been expressly superseded or abrogated by the Indian Legislature.

The next important thing is that in April, 1948, there was a Covenant entered into by the Rulers of nine States including Tonk, by which it was agreed by and between the covenanting parties that the territories of these nine States should be integrated into one State by the name of the United State of Rajasthan. This was done with the concurrence of the Dominion of India. Later on, on 12th of May, 1949, Mewar also became a party to this Covenant and the United State of Rajasthan was reconstituted by the integration of the territories of all the ten States. By the Covenant of Merger, the Covenanting States agreed to unite and integrate their territories in one State known as the United State of Rajasthan and to have a common executive, legislature and judiciary. The Rulers of all the States became members of the Council of Rulers and the President was designated as the Raj Pramukh of theUnitedState.

Article VI of the Covenant of Merger runs as follows:

“(1) The Ruler of each Covenanting State shall, as soon as practicable and in any event not later than the first day of May, 1948, make over the administration of his State to the Raj Pramukh; and thereupon — 590 (a) all rights, authority and jurisdiction belonging to the Ruler which appertain or are incidental to the Govern- ment of the Covenanting State shall vest in the United State and shall hereafter be exercisable only as provided by this Covenant or by the Constitution to be framed thereunder;

(b) all duties and obligations of the Ruler pertain- ing or incidental to the Government of theCovenantingStateshall devolve on theUnitedStateand shall be discharged by it; and (c) all the assets and liabilities of theCovenantingStateshall be the assets and liabilities of theUnitedState.” The question now is how far was the Extradition Treaty between theTonkStateand the British Government affected by reason of the merger of the State into the United State of Rajasthan. When a State relinquishes its life as such through incorporation into or absorption by another State either voluntarily or as a result of conquest or annexation, the general opinion of International Jurists is that the treaties of the former are automatically termi- nated. The result is said to be produced by reason of com- plete loss of personality consequent on extinction of State life(1). The cases discussed in this connection are gener- ally cases where independent States have ceased to be such through constrained or voluntary absorption by another with attendant extinction of the former’s treaties with other States. Thus the forceable incorporation ofHanoverinto thePrussianKingdomdestroyed the previous treaties ofHanover. The admission of Texas into the United States of America by joint resolution extinguished the Treaties of the Independent Republic of Texas(2). The position is the same whenKoreamerged intoJapan. According to Oppenheim, whose opinion has been relied upon, by Sir Alladi, no succession of rights and duties ordinarily takes place in such cases, and as political and personal treaties presuppose the exist- ence of a contracting State, (1) Vide Hyde on International Law, Vol. III, p. 1529. (2) Vide Hyde on International Law, Vol. II1, p. 1531, 591 they are altogether extinguished. It is a debatable point whether succession takes place in cases of treaties relating to commerce or extradition but here again the majority of writers are of opinion that they do not survive merger or annexation(1).

The remarks quoted above do not, however, seem quite appropriate to a case of the present description. Here there was no absorption of one State by another which would put an end to the State life of the former and extinguish its personality. What happened here was that several States voluntarily united together and integrated their territories so as to form a larger and composite State of which every one of the covenanting parties was a component part. There was to be one common executive, legislature and judiciary and the Council of Rulers would consist of the Rulers of all the Covenanting States. It may not be said, therefore, that the Covenanting States lost their personality altogether and it is to be noted that for purposes of succession of Ruler- ship and for counting votes on the strength of population and other purposes the Covenant of Merger recognises a quasi-separation between the territories of the different States. But although such separation exists for some pur- poses between one State territory and another, it is clear that the inhabitants of all the different States became, from the date of merger, the subjects of the United State of Rajasthan and they could not be described as subjects of any particular State. There is no such thing as subject of theTonkStateexisting at the present day and the Ruler of Tonk cannot independently and in his own right exercise any form of sovereignty or control over the Tonk territory. The Government, which exercises sovereign powers, is only one, even though the different Rulers may have a voice in it. It seems to us that in those altered circumstances the Extradi- tion Treaty of 1869 has become entirely incapable of execution. It is not possible for the Tonk State, which is one of the contracting parties to act in accordance with the terms of the treaty, for it has no longer any independent (1) Oppenheim on International Law, Vol. I, p. 152, 592 authority or sovereign rights over the Tonk territory and can neither make nor demand extradition. When as a result of amalgamation or merger, a State loses its full and inde- pendent power of action over the subject-matter of a treaty previously concluded, the treaty must necessarily lapse(1). It cannot be said that the sovereignty of theTonkStatein this respect is now vested in the United State of Rajasthan. The authority, so far as extradition was concerned, was already surrendered by theTonkStatein favour of the Dominion Government by the Instrument of Accession. But even assuming that these treaty rights could devolve upon the United State of Rajasthan by reason of article 6 of the Covenant of Merger, the latter, it seems to me, could be totally incapable of giving effect to the terms of the treaty. As has been said already, there could be no such thing as a subject of theTonkStateat the present moment and article 2 of the Treaty which provides for extra- dition of Tonk subjects accused of having committed heinous offences within Tonk territory and seeking asylum elsewhere would be wholly infructuous. The United State of Rajasthan could not possibly demand extradition on the basis of this article, and if reciprocity, which is the essence of an Extradition Agreement, is gone, the Treaty must be deemed to be void and inoperative.

The decision in Terlinden v.Ames(2) which was relied upon by Sir Alladi in course of his arguments, rather forti- fies the view that I have taken. The question there was whether an Extradition Treaty betweenPrussiaand theUnited States of America, which was entered into in 1852, could be given effect to after the incorporation ofPrussiainto the German Empire. The question was answered in the affirmative.

It was pointed out inter alia that the Constitution of the German Empire left sufficient independent power and sover- eignty to the States composing the confederation to enable them to act upon these treaties and it was observed by Chief Justice Fuller, who delivered the opinion of the Court, that where sovereignty in respect (1) Vide Hyde on International Law, Vol. III. p. 1535. (2) [1902] USSC 53184 U. S. 270.

593 to the execution of treaties is not extinguished and the power to execute remains unimpaired, outstanding treaties cannot be regarded as void. This is the real criterion and as obviously the power of the Tonk State to execute the treaty is altogether gone after the Covenant of Merger, the treaty cannot but be regarded as void.

The other case cited by Sir Alladi, viz., that of Lazard Brothers v. Midland Bank Ltd.(1) has absolutely no bearing on this point. It laid down the well accepted proposition of International Law that a change in the form of government of a contracting State does not put an end to its treaties.

The treaty entered into by the Czarist Russia could be given effect to after the Revolution, once the new government was recognised as a person in International Law.

My conclusion, therefore, is that the Extradition Treaty between the TonkStateand the British Government in 1869 is not capable of being given effect to in the present day in view of the merger of the TonkStatein the United State of Rajasthan. As no treaty rights exist, section 18 of the Indian Extradition Act has no application and section 7 of the Act has been complied with, there is no ground upon which we can interfere.

In view of my decision on the first point, the second point does not require determination and I refrain from expressing any opinion upon it.

In the result, the appeal fails and is dismissed.

DAS J I substantially agree with the reasonings given in the judgment just delivered by my learned brother Mukher- jea and concur in dismissing this application.

Appeal dismissed.

Agent for the appellant: Rajinder Narain. Agent for the respondent: P.A. Mehta.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

10.                   RACHPAL MAHRAJ V. BHAGWANDAS DARUKA & ORS [1950] INSC 10; AIR 1950 SC 272; 1950 SCR 548 (5 May 1950)

05/05/1950 SASTRI, M. PATANJALI SASTRI, M. PATANJALI KANIA, HIRALAL J. (CJ) DAS, SUDHI RANJAN

CITATION: 1950 AIR 272 [1950] INSC 101950 SCR 548

CITATOR INFO :

R 1965 SC1591 (7,9) E 1970 SC 659 (8, 23) F 1971 SC 613 (17,18)

ACT:

Indian Registration Act (XVI of 1908), s. 17–Transfer of Property Act (IV of 1882), s. 58 (f)–Memorandum of deposit of title deeds–When compulsorily registrable.

HEADNOTE:

The question whether a memorandum of deposit of title deeds is compulsorily registrable under section 17 of the Indian Registration Act, 1908, as an instrument creating an interest in immoveable property, depends on whether the parties intended to reduce their bargain regarding the deposit to the form of a document . If so the document requires registration. If, on the other hand, its proper construction and the surrounding circumstances lead to the conclusion that the parties did not intend to do so, there being no express bargain, the contract to create the mort- gage arises by implication of the law from the deposit itself with the requisite intention, and the document, being merely evidential does not require registration. The time factor is not decisive.

Where accounts relating to the appellant’s dealings with the respondents were taken on a certain date and the appel- lant gave certain title deeds to the respondents for being held as security for the amounts then found due and which may become due, and on the same day the appellant gave a memorandum to the respondents in the form of a letter ad- dressed to the respondents which stated: “We write to put on record that to secure the repayment of the money already due to you from us on account of the business transactions between yourselves and ourselves and the money that may hereafter become due on account of such transactions we have this day deposited with you the following title deeds relat- ing to our properties at…with intent to create an equita- ble mortgage on the said properties to secure all moneys including interest that may be found due ….” Held that the parties did not intend to create charge by the execution of the document, but merely to record a transaction which had already been concluded and under which rights and liabilities had already been created and the document did not require registration.

549 Obla Sundarachariar v. Narayana Ayyar (53 I. A, 68) and Hari Sankar Paul v. Kedar Nath Saha (66 I.A. 184) referred to.

APPEAL (Civil Appeal No., LXVII of 1949) from a Judgment and Decree of the High Court of Judicature atPatnadated the 11th March, 1947, in F.A. No. 218 of 1944. The material facts appear from the judgment.

Shiva Prasad Sinha (Sri Kishan, with him) for the appel- lant.

B.K. Saran for the 1st respondent. Respondents 2 to 13 did not enter appearance.

1950. May 5. The judgment of the Court was delivered by PATANJALI SASTRI J.–This appeal arises out of a suit brought by the respondents against the appellant and other members of his joint family to enforce a mortgage alleged to have been created by the appellant by deposit of title deeds on the 23rd October, 1936, atCalcutta.

The short point for determination in the appeal is whether the memorandum signed and delivered by the appellant on 23rd October, 1936, and relied upon by the respondents as evidencing the creation of the mortgage was compulsorily registrable under section 17 of the Indian Registration Act, 1908, and, not having been registered, was inadmissible in evidence to prove the mortgage. The Subordinate Judge of Darbhanga who tried the suit, and the High Court atPatna on appeal, held that the document did not require registration and was admissible in evidence, and accordingly decreed the suit.

The question turns on the proper construction of the memorandum and the circumstances under which it was deliv- ered to the respondents. According to the evidence of the respondents’ witnesses which has been accepted by the Courts below, the accounts relating to the appellant’s dealings were examined on the 23rd October, 1936, and a large sum was found due to the respondents who demanded payment. The appellant thereupon brought and gave certain documents, being 550 title deeds relating to immovable properties belonging to his family, for the purpose of being held as security for the amounts then due and to become due on further dealings.

A draft of the memorandum was thereafter prepared which the appellant took with him to be shown to his lawyer and he returned in the afternoon, and signed and delivered it to the respondents. All this took place inCalcutta. The memorandum is in the form of a letter addressed to the respondents’ firm and is in the following terms:

” We write to put on record that to secure the repayment of the money already due to you from us on account of the business transactions between yourselves and ourselves and the money that may hereafter become due on account of such transactions we have this day deposited with you the follow- ing title deeds in Calcutta at your place of business at No.

7 Sambhu Mallick Lane, relating to our properties at Samas- tipur with intent to create an equitable mortgage on the said properties to secure all moneys including interest that may be found due and payable by us to you on account of the said transactions ……. ” A mortgage by deposit of title deeds is a form of mortgage recognised by section 58 (f) of the Transfer of Property Act which provides that it may be effected in certain towns (including Calcutta) by a person “delivering to his creditor or his agent documents of title to immovable property with intent to create a security thereon.” That is to say, when the debtor deposits with the creditor the title deeds of his property with intent to create a security, the law implies a contract between the parties to create a mortgage, and no registered instrument is required under section 59 as in other forms of mortgage. But if the par- ties choose to reduce the contract to writing,the implica- tion is excluded by their express bargain, and the document will be the sole evidence of its terms. In such a case the deposit and the document both form integral parts of the transaction and are essential ingredients in the creation of the mortgage. As the deposit alone is not intended to create the charge and the document, which 551 constitutes the bargain regarding the security, is also necessary and operates to create the charge in conjunction with the deposit, it requires registration under section 17 of the Indian Registration Act, 1908, as a non-testamentary instrument creating an interest in immovable property, where the value of such property is one hundred rupees and up- wards. The time factor is not decisive. The document may be handed over to the creditor along with the title deeds and yet may not be registrable, as in Obla Sundarachariar v.

Narayana Ayyar (1). Or, it may be delivered at a later date and nevertheless be registrable, as in Hari Sankar Paul v.

Kedar Nath Saha (2). The crucial question is: Did the parties intend to reduce their bargain regarding the deposit of the title deeds to the form of a document ? If so, the document requires registration. If, on the other hand, its proper construction and the surrounding circumstances lead to the conclusion that the parties did not intend to do so, then, there being no express bargain, the contract to create the mortgage arises by implication of the law from the deposit itself with the requisite intention, and the docu- ment, being merely evidential does not require registration.

There are numerous decisions, some of them not easy to reconcile, where this question was considered with reference to the document concerned in the particular case. It is unnecessary to review them, as the two latest pronouncements of the Privy Council, to which reference has been made, aptly illustrate cases falling on either side of the line.

In Obla Sundarachariar v. Narayana Ayyar (1) a signed memo- randum was delivered to the mortgagee along with the title deeds of certain properties deposited as security. The memorandum stated’ ‘As agreed upon in person, I have deliv- ered to you the under-mentioned documents as security,” and listed the title deeds deposited. It was held that the memorandum was no more than a mere record of the particulars of the deeds and did not require registration. The crite- rion applied was: “No such memorandum can be within the section (section 17 of the Registration Act) unless on its face it embodies such terms (1) 58 I.A. 68.

(2) 66 I.A.. 184.

S52 and is signed and delivered at such time and place and in such circumstances as to lead legitimately to the conclusion that, so far as the deposit is concerned, it constitutes the agreement between the parties.” In Hari Sankar Paul v.

Kedar Nath Saha (1) the title deeds were deposited accompa- nied by a memorandum when part of the advance arranged for was made. Some days later when the balance was advanced, another memorandum was delivered superseding the earlier one, and this was a formal document stating the essential terms of the transaction “hereby agreed” and referred to the moneys “hereby secured”. It also conferred an express power of sale on the mortgagee. Lord Macmillan, after reviewing the earlier decisions of the Board, held that the document required registration, observing, “where, as here, the parties professing to create a mortgage by a deposit of title deeds contemporaneously enter into a contractual agreement, in writing, which is made an integral part of the transaction, and is itself an operative instrument and not merely evidential, such a document must, under the statute, be registered.” Turning now to the memorandum before us, it is clear, on the face of it, that the parties did not intend thereby to create the charge. The document purports only to record a transaction which had been concluded and under which the rights and liabilities had been orally agreed upon. No doubt it was taken by the respondents to show that the title deeds of the appellant’s properties were deposited with them as security for the moneys advanced by them, and to obviate a possible plea that the deeds were left with them for other purposes, as indeed was contended by the appellant in his written statement, taking advantage of the non-registration of the memorandum in question. But that is far from intend- ing to reduce the bargain to writing and make the document 0the basis of the rights and liabilities of the parties. In agreement with ,the High Court, we are of opinion,. that the memorandum delivered by the appellant along with the title deeds (1) 66 I.A. 184.

553 deposited,with the respondents did not require registration and was properly admitted in evidence to prove the creation of the charge.

The appeal fails and is dismissed with costs.

Appeal dismissed.

Agent for the appellant: Tarachand Brijmohanlal. Agent for respondent No.1: S. P. Varma.


11.                   PRITAM SINGH V. THE STATE [1950] INSC 11; AIR 1950 SC 169; 1950 SCR 453 (5 May 1950)

05/05/1950 FAZAL ALI, SAIYID FAZAL ALI, SAIYID SASTRI, M. PATANJALI MAHAJAN, MEHR CHAND MUKHERJEA, B.K.

DAS, SUDHI RANJAN

CITATION: 1950 AIR 169 [1950] INSC 111950 SCR 453

CITATOR INFO :

D 1953 SC 415 (10) RF 1954 SC 20 (5) F 1954 SC 23 (13) R 1954 SC 271 (11) R 1956 SC 217 (31,35,44) R 1958 SC 61 (8,9) R 1959 SC 633 (5) F 1961 SC 100 (2) RF 1961 SC1708 (9) R 1964 SC1645 (9) R 1970 SC 668 (2) RF 1976 SC 758 (8) F 1977 SC 472 (5) R 1986 SC 702 (12) R 1988 SC1883 (245) D 1992 SC1277 (39,101)

ACT:

Constitution ofIndia, Art. 136 (1)–Special leave to appeal-Granting of leave–Guiding Principles-Final hearing–Nature of.

HEADNOTE:

The Supreme Court will not grant special leave to appeal under Art. 136 (1) of the Constitution unless it is shown that exceptional and special circumstances exist, that substantial and grave injustice has boon done and the case in question presents features of sufficient gravity to warrant a review of the decision appealed against.

The view that once an appeal has been admitted by special leave the entire case is at large and the appellant is free to contest a11 the findings of fact and raise every point which could be raised in the High Court is wrong. Only those points can be urged at the final hearing of the appeal which are fit to be urged at the preliminary stage when leave to appeal is asked for.

Ibrahim v. Rex ([1914] A.C. 615) referred to.

APPEAL from the High Court of Judicature atEast Punjab:

Criminal Appeal No. II of 1950.

This was an appeal by special leave from a judgment and order of the High Court of Judicature for the Province of East Punjab at Simla (Falshaw and Soni JJ.) dated the 23rd November, 1949, in Criminal Appeal No. 367 of 1949 upholding the conviction of the appellant on a charge of murder and confirming a sentence of death passed on him by the Sessions Judge of Ferozepore.

Jai Gopal Sethi (H. J. Umrigar, with him) for the appel- lant.

Basant Kishan Khanna, Advocate-General of East Punjab (S. M. Sikri, with him) for the respondent.

1950. May 5. The judgment of the Court was delivered by FAZL AL/J.–This is an appeal by one Pritam Singh against the decision of the High Court of Punjab at Simla, upholding his conviction on the charge of 454 murder of one Buta Singh and confirming the sentence of death passed on him by the Sessions Judge of Ferozepore.

The prosecution case, which has been found to be substan- tially true by both the trial judge and the High Court may be shortly stated as follows.

On the 28th December, 1948, Pritam Singh had made inde- cent overtures to one Punni, wife of Kakarra Chamar, who had been brought into the village by Buta Singh, the deceased, about 10 or 12 years ago. Buta Singh, on learning of this incident, spoke to Pritam Singh, but finding that his atti- tude was uncompromising, he advised Kakarra to go to the police station to report the matter. On the next day, while Kakarra was going to the police station, Mal Singh, the first prosecution witness in the case, brought him back telling him that Pritam Singh had apologized and the matter should not be pursued. On the 30th December, at about 5 p.m., just when Buta Singh came out of his house, Pritam Singh came up with a double barrelled 12-bore gun and shot him in the abdomen, and Buta Singh died a short time thereafter. Shortly after the occurrence, Punjab Singh and Nal Singh, who had both witnessed the occurrence, went to the police station at Abohar, which is at a distance of 13 miles from the place of occurrence, and lodged the first information report regarding the murder.

In this report, Punjab Singh reported the facts as already stated, but he also added that Pritam Singh was drunk when he fired the gun and his younger brother, Hakim Singh, who was also drunk was standing at a short distance from him and shouting “Kill, don’t care.” None of the other witnesses however supported Punjab Singh as to the part attributed by him to Hakim Singh or as to the drunken condition of the appellant or Hakim Singh, and the police after due investi- gation of the case sent up a charge sheet against the appel- lant only. The appellant was thereafter put on his trial before the Sessions Judge of Ferozepore. The learned Ses- sions Judge, after hearing the prosecution witnesses, of whom five were eye-witnesses, viz., Punjab Singh, his broth- er Mitta Singh, Mal Singh, Nikka Singh (brother of 455 Singh), and Mst. Phoolan, mother of the deceased, came to the conclusion, in agreement with 4 assessors who were present at the trial, that the version given by the prosecu- tion witnesses was substantially true. In support of his conclusion, he referred to the following facts among others :–(1)that the first information report had been lodged at the police station without any delay, (2)that the names of at least 4 of the alleged eye-witnesses were mentioned in the report, and (3) that no sufficient reason had been shown as to why the prosecution witnesses should have conspired to falsely implicate the accused in a murder case, if he had been innocent. The High Court on appeal agreed with the Sessions Judge, and the learned Judge who delivered the judgment of the High Court observed as follows in the con- cluding part of his judgment :–“I have given the case every consideration and I have come to the conclusion that the learned Sessions Judge was right in holding that the case against the appellant had been proved beyond reasonable doubt.” The appellant thereafter obtained special leave to appeal to this Court, and Mr. Sethi, the learned counsel appearing for him, has in support of the appeal, addressed to us very elaborate arguments to show that the conclusion arrived at by the Courts below is not correct. He has argued that the alleged eye-witnesses were intimately con- nected with each other and with the deceased, that they and the accused belonged to two mutually hostile factions, that these witnesses had made discrepant statements as to the respective places from where they claimed to have seen the occurrence, some of them making discrepant statements about their own position before the police officer who drew up the plan of the scene of occurrence and before the trial Court and also making discrepant statements about the position of the other witnesses, and that they should not be held to be truthful witnesses inasmuch as they had denied certain previous statements made by them either before the police or before the Committing Magistrate. Mr. Sethi also put forward the theory, which has been discredited by both the Courts below on grounds which prima facie do not appear to be 456 unreasonable, that the occurrence must have taken place late at night, that there were probably no eye-witnesses to identify the real assailant and that the appellant had been falsely implicated on account of enmity.

The obvious reply to all these arguments advanced by the learned counsel for the appellant, is that this Court is not an ordinary Court of criminal appeal and will not, generally speaking, allow facts to be reopened, especially when two Courts agree in their conclusions in regard to them and when the conclusions of fact which are challenged are dependent on the credibility of witnesses who have been believed by the trial Court which had the advantage of seeing them and hearing their evidence. In the present case. the story for the prosecution, which is neither incredible nor improbable, is supported by no less than 5 witnesses including the mother of the deceased, and their evidence, in spite of its infirmities, has impressed 4 assessors and the two Courts below, who, in appraising its reliability, have given due weight to certain broad features of the case which, accord- ing to them, negative the theory of conspiracy or concoc- tion. In these circumstances, it would be opposed to all principles and precedents if we were to constitute ourselves into a third Court of fact and, after re-weighing the evi- dence, come to a conclusion different from that arrived at by the trial Judge and the High Court.

In arguing the appeal, Mr. Sethi proceeded on the as- sumption that once an appeal had been admitted by special leave, the entire case was at large and the appellant was free to contest all the findings of fact and raise every point which could be raised in the High Court or the trial Court. This assumption is, in our opinion, entirely unwar- ranted. The misconception involved in the argument is not a new one and had to be dispelled by the Privy Council in England in Ibrahim v. Rex (1) in these words:–“……..

the Board has repeatedly treated applications for leave to appeal and the hearing of criminal appeals (i) [1914] A.c. 615.

457 as being upon the same footing: Riel’s Case; Ex-parte Deem- ing. The Board cannot give leave to appeal where the grounds suggested could not sustain the appeal itself; and, conversely, it cannot allow an appeal on grounds that would not have sufficed for the grant of permission to bring it.” The rule laid down by the Privy Council is based on sound principle, and, in our opinion, only those points can be urged at the final hearing of the appeal which are fit to be urged at the preliminary stage when leave to appeal is asked for, and it would be illogical to adopt different standards at two different stages of the same case.

It seems also necessary to make a few general observa- tions relating to the powers of this Court to grant special leave to appeal in criminal cases. The relevant articles of the Constitution dealing with the appellate jurisdiction of the Supreme Court are articles 132 to 136. Article 132 applies both to civil and criminal cases and under it an appeal shall lie to the Supreme Court from any judgment, decree…… or final order of a High Court, whether in a civil, criminal or other proceeding, if the High Court certifies that the case involves a substantial question of law as to the interpretation of the Constitution. Article 133 deals with the appellate jurisdiction of this Court in civil matters only, and it has been drafted on the lines of sections 109 and 110 of the Civil Procedure Code, 1908.

Article 134 constitutes the Supreme Court as a Court of criminal appeal in a limited class of cases only, and clear- ly implies that no appeal lies to it as a matter of course or right except in cases specified therein. Article 135 merely provides that the Supreme Court shall have jurisdic- tion and powers with respect to any matter to which the provisions of article 133 or article 134 do not apply, if jurisdiction and powers in relation to that matter were exercisable by the Federal Court immediately before the commencement of the Constitution under any existing law.

The last article, with which we are concerned is article 136 and it runs thus :– “136. (1) Notwithstanding anything in this Chapter, the Supreme Court may, in its discretion, 458 grant special leave to appeal from any judgment, decree, determination, sentence or order in any cause or matter passed or made by any court or tribunal in the territory of India, (2)………………..

The points to be noted in regard to this article are firstly, that it is very general and is not confined merely to criminal cases, as is evident from the words “appeal from any judgment, decree, sentence or order” which occur therein and which obviously cover a wide range of matters; secondly, that the words used in this article are “in any cause or matter,” while those used in articles 132 to 134 are “civil, criminal or other proceeding,” and thirdly, that while in articles 132 to 134 reference is made to appeals from the High Courts, under this article, an appeal will lie from any court or tribunal in the territory of India.

On a careful examination of article 136 along with the preceding article, it seems clear that the wide discretion- ary power with which this Court is invested under it is to be exercised sparingly and in exceptional cases on13,, and as far as possible a more or less uniform standard should be adopted in granting special leave in the wide range of matters which can come up before it under this article. By virtue of this article, we can grant special leave in civil cases, in criminal cases, in income-tax cases, in cases which come up before different kinds of tribunals and in a variety of other cases. The only uniform standard which in our opinion can be laid down in the circumstances is that Court should grant special leave to appeal only in those cases where special circumstances are shown to exist. The Privy Council have tried to lay down from time to time certain principles for granting special leave in criminal cases, which were reviewed by the Federal Court in Kapildeo v. The King. It is sufficient for our purpose to say that though we are not bound to follow them too rigidly since the reasons, constitutional and administrative, which sometimes weighed with the Privy Council, need not weigh with us, yet some of those principles are useful as furnishing in many cases 459 a sound basis for invoking the discretion of this Court in granting special leave. Generally speaking, this Court will not grant special leave, unless it is shown that exceptional and special circumstances exist, that substantial and grave injustice has been done and that the case in question presents features of sufficient gravity to warrant a review of the decision appealed against. Since the present case does not in our opinion fulfil any of these conditions, we cannot interfere with the decision of the High Court, and the appeal must be dismissed.

Appeal dismissed.

Agent for the appellant: S.P. Varma.

Agent for the respondent: P.A. Mehta.


 

12.                   COMMISSIONER OF AGRICULTURAL INCOME-TAX,BENGALV. SRI KESHAB CHANDRA MANDAL [1950] INSC 12; AIR 1950 SC 265; 1950 SCR 435 (9 May 1950)

09/05/1950 DAS, SUDHI RANJAN DAS, SUDHI RANJAN FAZAL ALI, SAIYID SASTRI, M. PATANJALI MAHAJAN, MEHR CHAND MUKHERJEA, B.K.

CITATION: 1950 AIR 265 [1950] INSC 121950 SCR 435

CITATOR INFO :

D 1955 SC 249 (5) R 1956 SC 604 (4,11,12)

ACT:

Bengal Agricultural Income-tax Act, (IV of 1944). es.

24, 57-Rules under the Act, r. 11, Form No. 5–Return of illiterate assessee –Declaration signed by pen of son of assessee–Validity of return-Signature by Agent–Permissi- bility–“Qui facit per alium facit “applicability of.

HEADNOTE:

The Rules framed under the Bengal Agricultural Income- tax Act, 1944, provided that the declaration in a return of income had to be signed “in the case of an individual, by the individual himself.” A return of an illiterate assessee, Keshab Chandra Mandal, was. signed in the vernacular as follows: “Sri Keshab Chandra Mandal Ba: Sri Jugal Chandra Mandal,” the latter being the son of the assessee. The Appellate Tribunal referred to the High Court the question “whether in the circumstances of the case, the declaration in the form of return signed by the illiterate assessee by the pen of his son should be treated as properly signed and a valid return.” The High Court answered the question in the affirmative. On appeal:

Held, per FAZL ALl, PATANJALI SASTRI, MUKHERJE and DAS JJ. (MAHAJAN J. dissenting)–that the Bengal Agricultural Income-tax Act, 1944, and the Rules framed thereunder con- tained provisions indicating an intention to exclude the common law rule qui tacit per alium tacit per se in the matter of affixing signature to the return of income made by an assessee who was an individual, and, as it was abundantly clear on the records that there was no physical contact between the assessee and the signature appearing on the return, the return was not properly signed and was not a valid return.

MAHAJAN J–As the question referred was whether the return “signed by the illiterate assessee with the pen of his son” was valid, it must be assumed that there was such contact, and as there was nothing whatsoever on the record to establish that the assessee did not touch the pen or the hand of the son when the signature was affixed, the High Court was right in answering the question in the affirma- tive.

Judgment of the Calcutta High Conrt reversed.

55 436

APPEAL from the High Court of Judicature atFortWilliam: (Civil Appeal No. LXXXVIII of 1949.) This was an appeal from the judgment and order of the High Court of Judicature at Calcutta dated 16th September, 1948, (G. N. Das and R.P. Mookerjee JJ.) in a Reference made to the High Court under section 63 (1) of the Bengal Agricul- tural Income-tax Act, 1944, by the Appellate Tribunal of Agricultural Income-tax, West Bengal. The facts are set out in the judgment.

K.P. Khaitan (B. Sen, with him) for the appellant. The respondent was not represented.

1950. May 9. The following judgments were delivered :– DAs J.–There is no serious dispute as to’ the facts leading up to this appeal. They are shortly as follows:

In response to a notice issued under section 24 (2) of the Bengal Agricultural Income-tax Act, 1944, the assessee, who is the respondent before us, submitted a return showing his total agricultural income for the assessment year 1944- 45 to be Rs. 335. This return is dated the 3rd April, 1945, and just below the declaration appears the following writing in vernacular:

“Sri Keshab Chandra Mandal.” On the 18th April, 1945, the Agricultural Incometax Officer noted on the order sheet that the case would be taken up at Bankura Dak Bungalow on 6th May, 1945, and directed the office to inform the party to appear with all settlement records, vouchers etc. On the 6th May, 1945, the assessee filed a petition before the Agricultural Income-tax Officer who had gone to Bankura stating inter alia that he had been advised that the return which he had submitted before under the advice of a Headmaster of a school was not a proper return, that there were many mistakes in the return and many things had been omitted and that, therefore, it was absolutely necessary for him to submit a fresh return and praying for fifteen days’ time for doing so and 437 also for a form of return. This petition was signed in vernacular as follows :– “Sri Keshab Chandra Mandal x Ba: Sri Jugal Chandra Mandal” Below that was the signature of his pleader H. Nandi. With this petition was attached a Vakalatnama signed in vernacular in the manner following:

“Sri Keshab Chandra Mandal x Ba: Sri Jugal Chandra Mandal of Balya.” It will be noticed that in both the signatures, against the name of Sri Keshab Chandra ‘Mandal there was a cross mark. The vakalatnama contained the following entry :– “I hereby appoint on my behalf Srijukta Babu Hangsa Gopal Nandi, Pleader, to do all works in connection with this case and as I do not know to read and write I put in x mark in the presence of the undermentioned persons as a token thereof.” His son Sri Jugal Chandra Mandal attested the I cross mark in the vakalatnama.

On receipt of this petition the Agricultural Incometax Officer allowed time for one day and fixed the case for the 7th May, 1945, at 10 a.m. The assessee was directed to submit a fresh return and to produce account books and other necessary papers. It was also stated in the order sheet that if the assessee failed to comply with the order, as- sessment would be made under section 25 (5) of the Act.

On the 7th May, 1945, the assessee did not appear per- sonally. His son Jugal Chandra Mandal appeared with pleader Babu Hangsa Gopal Nandi. The son, Jugal Chandra Mandal, had not brought any letter of authority from the assessee. A return was submitted which was signed in vernacular as follows :– “Sri Keshab Chandra Mandal Ba: Sri Jugal Chandra Mandal.” It will be noticed that in this last signature there was no cross mark.

438 The Agricultural Income-tax Officer stated in his as- sessment order as follows :– “A fresh return is submitted to-day. A remarkable dif- ference is noticeable between the two returns. First return shows total agricultural income of Rs. 335 whereas the revised or the fresh one shows an income of Rs. 1,077-12-6.

This is really strange. The first one appears to have been signed by the assessee himself but the second one has been signed by Jugal his son for the assessee. Under the circum- stances, I can put no reliance on any of these returns. I do not make any assessment based on these returns.” The Agricultural Income-tax Officer thereafter immedi- ately proceeded with the assessment and assessed Rs. 4,968- 12-1 as the assessable income.

The assessee preferred an appeal from this order to the Assistant Commissioner, Agricultural Incometax,Bengal.

The Assistant Commissioner by his order dated the 14th August, 1945, dismissed the appeal and confirmed the assess- ment under section 35 (4) (a)(i).

The assessee thereupon preferred a further appeal before the Income-tax Appellate Tribunal. The Income-tax Appellate Tribunal on the 9th December, 1947, accepted the appeal on the ground, amongst others, that the return filed on the 7th May, 1945, was a proper return and should have been treated as such.

The Commissioner of Income-tax thereupon applied under section 63 (1) of the Act for a reference of certain ques- tions of law to the High Court. The Appellate Tribunal by its order dated the 22nd April, 1948, referred the following question of law to the High Court :- “Whether in the circumstances of this case, the decla- ration in the form of return signed by the illiterate asses- see by the pen of his son should be treated as properly signed and a valid return.” The reference came up before a Bench of the Calcutta High Court (G. N. I)as J. and R.P. Mookerjee J.) who, for reasons stated in their judgment 439 dated the 16th September, 1948, answered the question in the affirmative. The Commissioner thereupon applied to the High Court for a certificate under section 64 (2) of the Act which having been granted the appeal has now come up before us for final disposal. In this appeal we are only called upon to judge whether the answer given by the High Court to the question of law formulated by the Appellate Tribunal is well-founded. It is abundantly clear on the records that there was no physical contact between the assessee and the signature appearing on the return as filed on the 7th May, 1945, and the fact is referred to by the words “in the circumstances of this case” at the beginning of the question. Indeed the whole of the proceedings have proceeded on this footing. I desire to make it clear that in this appeal we are not concerned with the propriety of the In- come-tax Officer in proceeding to assessment without giving the assessee a further opportunity to put his mark on the return.

The High Court quoted the following observations of Blackburn J. in The Queen v. The Justices o/Kent (1):

“No doubt at common law, where a person authorises another to sign for him, the signature of the person so signing is the signature of the person authorising it;never- theless, there may be cases in which a statute may require personal signature.” Then, after stating that the Courts ought not to re- strict the common law rule qui facit per alium facit per se, unless the statute makes a personal signature indispens- able, and referring to certain decided cases, enunciated the proposition that when the word “sign” or “signature” is used by itself and unless there be a clear indication requiring the personal signature by the hand of the person concerned, the provision would be satisfied by a person signing by the hand of an agent. Applying this test the High Court came to the conclusion that there was not only not anything in the Act or the rules requiring the personal signature of the individual assessee (1) (1846) L.R. 8 Q.B. 305 at p. 307.

56 440 but that insistence on such a requirement would create an anomaly, in that while an assessee who is an individual will have to sign personally, the persons authorised to sign for the other categories of assessees, namely, a Hindu undivided family, a company, the Ruler of an Indian State, a firm or any other association will not be compellable to sign per- sonally. The High Court took the view that to avoid such a patent anomaly which would inevitably result if the inter- pretation proposed by the department were to be accepted, the Court should follow the common law rule mentioned above.

In the result, the High Court answered the point of law referred to them in the affirmative.

The learned Standing Counsel to the Government of Bengal (Mr. K.P. Khaitan) in the course of a fair and lucid argu- ment contended before us that the Court should give effect to the plain meaning of the words of’ the statute and the rules which have statutory force whatever might be the consequences and that on a plain reading of the Act and the rules there could be no doubt that the legislature intended the return of an individual assessee to be signed by him- self, i.e., personally. Learned counsel referred us to a number of decisions, both Indian and English, where personal signature had been held indispensable.

There is no doubt that the true rule as laid down in judicial decisions and indeed, as recognised by the High Court in the case before us, is that unless a particular statute expressly or by necessary implication or intendment excludes the common law rule, the latter must prevail. It is, therefore, necessary in this case to examine the Act and the rules to ascertain whether there is any indication therein that the intention of the legislature is to exclude the common law rule.

Turning first to the Act, it will be found that by section 2 (14) the word “received” used with reference to the receipt of agricultural income by a person has been defined to include receipt by an agent or servant on behalf of a principal or master respectively. If the legislature intended that a signature by an agent would be permissible it could easily have defined the 441 word “sign” so as to include the signature by an agent.

Section 25 (2) of the Act requires that if the Agricultural Income-tax Officer is not satisfied without requiring the presence of the person who made the return or the production of evidence that a return made under section 24 is correct and complete, he shall serve on such person a notice requir- ing him, on a date to be therein specified, either to attend at the Agricultural Income-tax Officer’s office or to produce or to cause to be there produced any evidence on which such person may rely in support of the return. This section expressly permits production of evidence by an agent. Section 41 gives to the Agricultural Income-tax Officer, the Assistant Commissioner and the Appellate Tribu- nal for the purposes of Chapter V, and to the Commissioner for the purposes of section 37, the same powers as are vested m a Court under the Code of Civil Procedure, 1908, when trying a suit in respect of certain specified matters only namely, enforcing attendance of any person and examin- ing him on oath or affirmation, compelling production of documents and issuing commissions for the examination of witnesses, and the proceedings before those officers are to be deemed to be “judicial proceedings” within the meaning of sections 193 and 228 and for the purposes of section 196 of the Indian Penal Code. Again, section 60 of the Act permits a notice or requisition under the Act to be served as if it were a summons issued by a Court under the Code of Civil Procedure, 1908, and specifies the person on whom such service may be effected. There is nothing in the Act making the provisions of the Code relating to the signing or veri- fication of pleadings applicable to the returns to be filed by any assessee. If the Legislature intended that the return might be signed by the assessee or by his authorised agent there could have been no difficulty in inserting a section in the Act adopting the provisions of the Code relating to. the signing and verification of pleadings as if the return was a pleading in a suit. Sections 35 and 58 expressly permit an assessee to attend before the Assistant Commissioner and the Appellate Tribunal or 442 any Agricultural Income-tax authority in connection with any proceeding under the Act, otherwise than when required under section 41 to attend personally for examination, to attend by a person authorised by him in writing in this behalf, being a relative of, or a person regularly employed by, the assesses, or a lawyer or accountant or agricultural income- tax practitioner. It should be noted that even under this section any and every agent cannot represent the assessee but only certain specified kinds of agents can do so. To summarise, the omiSSiOn Of a definition of the word” sign” as including a signature by an agent, the permission under section 25 for production of evidence by an agent and under sections 35 and 58 for attendance by an agent and the omis- sion of any provision in the Act applying the provisions of the Code of Civil Procedure relating to the signing and verification of pleadings to the signing and verification of the return while expressly adopting the provisions of that Code relating to the attendance and examination of witness- es, production of documents and issuing of commission for examination and for service of notices under sections 41 and 60 respectively, cannot be regarded as wholly without sig- nificance. The matter, however, does not rest there.

Section 24 of the Act requires the Agricultural Income- tax Officer to call for a return in the prescribed form and verified in the prescribed manner. Rule 11 of the Bengal Agricultural Income-tax Rules, 1944, framed under section 57 of the Act prescribes that the return required under section 24 must be in Form 5 and shall be verified in the manner indicated therein. There is a footnote in Form 5 to the following effect:

“The declaration shall be signed(a) in the case of an individual by the individual himself;

(b) in the case of a Hindu undivided family by the Manager or Karta;

(c) in the case of a company or the Ruler of anIndianStateby the principal officer;

(d) in the case of a firm by a partner;

(e) in the case of any other association by a member of the association.

443 There is also a note that the signatory should satisfy himself that the return is correct and complete in every respect before signing the verification, and the alterna- tives which are not required should be scored out. It will be interesting to compare the requirements of rule 11 and Form 5 with those of other rules dealing with appeals and other proceedings. Section 34 allows an appeal from the Agricultural Income-Tax Officer to the Assistant Commission- er. Sub-section (3) of that section requires that the appeal shall be in the prescribed form and shall be verified in the prescribed manner. Likewise section 36 provides for a further appeal to the Appellate Tribunal and sub-section (4) of that section also requires that such an appeal must be in the prescribed form and be verified in the prescribed man- ner. Rule 13 prescribes the forms of appeals under section 34 and rule 14 prescribes the forms of appeals under section of the Act. Rule 15 is as follows :– “The forms of appeal prescribed by rules 13 and 14 and the forms of verification appended thereto shall be signed- (a) in the case of an individual, by the individual himself;

(b) in the case of a Hindu undivided family, by the Manager or Karta thereof;

(c) in the case of a company, by the principal officer of the company;

(d) in the case of a firm, by a partner of the firm ,’ (e) in the case of a Ruler of an Indian State, by the principal officer of the State; and (f) in the case of any other association of individuals, by a member of the association, and such forms of appeal shall be also signed by the authorised representative, if any, of the appellant.” Rule 17 deals with applications for refund of tax. Sub- rule (2) requires every such application to be signed by the claimant and his authorised representative, if any, and allows such application to be presented by the applicant either in person or through 444 such authorised representative. Rule 22 requires that where an application or memorandum of appeal is signed by an authorised representative, the latter must annex to it the writing constituting his authority and his acceptance of it.

Under rule 25 an appeal to the Tribunal has to be presented in person or by an authorised representative and under rule 28 every such appeal has to be preferred in the form of a memorandum signed by the appellant and his authorised repre- sentative, if any, and verified by the appellant. Each of the forms, from Form 7 to Form 20, contains separate spaces for the signatures of the appellant or the applicant or the claimant as the case may be and the authorised representa- tive, if any. Form 23 which is notice of hearing of appeal under section 36 requires the attendance of the appellant or respondent either inperson or by an authorised representa- tive. Rule 47 provides that, subject to certain special provisions, the provisions contained in Part II of the rules relating to the presentation, notices and hearing of an appeal before the Appellate Tribunal shall apply to the presentation, notices and hearing of a section 63 reference application as if it were an appeal. Rule 53 empowers the Tribunal, if it considers it necessary, to hear the appli- cant or his authorised representative. A perusal of the several rules referred to above will show that while rules 15, 17 (2), 28 and the forms thereunder require the appeal or application to be signed by the appellant or applicant or claimant as well as by his authorised representative, if any, rule 11 and Form 5 require only the signature of the assessee in the manner therein prescribed for different categories assessees. Again rules 17 (2), 25 and 47 permit presentation of applications and appeals by the authorised representative of the assessee whereas there is no such’ provision for the presentation by an authorised agent of a return under rule 11 which could easily be inserted in the rules if the Legislature so intended. That wherever the assessee or the appellant or the applicant is required to sign he must sign personally, is also borne out by note (1) at the foot of Form 20 which is for refund of tax under section 48 (2). It runs as follows:

445 “In the case of a person not resident in British India, the above declaration shall be sworn (a) before a Justice of the Peace, a Notary Public, a Commissioner of Oaths, if the applicant resides in any part of His Majesty’s Dominions outside British India, (b) before a Magistrate or other official of the State or a Political Officer, if he resides in a State in India, and (c) before a British Consul, if he resides elsewhere.” This does not mean that only the claimant for refund under section 48 (2) who resides outsideIndiamust sign his application personally and other assessees or appellants or applicants or claimants need not sign their return or appeal or application personally. All that it means is that such a claimant for refund under section 48 (2) must have his signature authenticated by certain public officers by swear- ing the declaration in their presence. This clearly indi- cates that personal signature of the assessee, the appellant or applicant is necessary in all cases wherever his signa- ture is required and authentication of such signature is required only in the case of a claimant for refund of tax under section 48 (2). There are yet other reasons why per- sonal signature of an assessee, appellant, applicant or claimant is necessary. It has been seen that under the Act and/or the rules several acts can be done by or through the authorised representative, namely, production of documents, presentation of appeal or application and attendance in proceedings before the authorities. The expression “autho- rised representative” is defined in rule 2 (a). It will be noticed that in each case the authorised representative has to be duly authorised in writing. Under rule 22 the authorised representative has to file the writing consti- tuting his authority and his acceptance of it. If it were intended that they, signature by an agent on a return or a memorandum of appeal or other application will suffice as the signature of the assessee or the appellant or the appli- cant or the claimant, there would certainly have been some rule for constitution of such agency in writing and for the filing of the writing constituting such agency and the agent’s acceptance of it. If an agent for mere presentation of an appeal is expressly required by the 446 rules to be duly authorised in writing and such writing has to be filed on record I cannot think that the Act or the rules contemplate or permit the employment of an agent to sign an important document, namely a return or an appeal or application without any written authority and that such agent may sign without producing any such written authority.

And yet that would be the result, for there is no provision in that behalf in the Act or in the rules. On a considera- tion of the provisions of the Act and of the rules and the forms and for reasons stated above there appears to be many clear indications of an intention on the part of the Legis- lature to insist on the personal signature of the assessee, appellant or applicant whenever his signature is required by the Act or the rules and the common law rule qui facit per alium facit per se is excluded by necessary implication or intendment of the Act and the rules.

The Appellate Tribunal and the High Court have referred to certain difficulties in arriving at this conclusion which may now be considered. It is pointed out that to insist On the personal signature of an individual assessee will result in the anomaly that persons authorised to sign for the assessees of other categories will be free to get the re- turns signed by their own agents. This argument really begs the question. For reasons stated above none of the persons designated in the footnote to Form 5 are authorised to employ an agent to sign for him and therefore no anomaly ‘can arise. If anything, the use of the word “himself” with reference to an individual makes the position clearer so far as such individual is concerned. There is an argument based on hardship or inconvenience. Hardship or inconvenience cannot alter the meaning of the language employed by the Legislature if such meaning is clear on the face of the statute or the rules. Further, there is no hardship or inconvenience. In the case of an illiterate person, he can put his mark which, by the Bengal General Clauses Act, is included in the definition of “sign.” If claim Form 20 for refund of tax under section 48 (2) can be sent to a claimant abroad for his signature before certain public 447 officer for authentication, there can be no hardship or inconvenience in sending to him abroad the return in Form 5 for his signature without the necessity of any authentica- tion thereof It is said that such a construction will pre- vent a leper who, by reason of the loss of his fingers, cannot even put his mark. Such cases will indeed be rare and in any event it will be for the Legislature to rectify this:defect. Not to insist on personal signature on returns or appeals or applications will let in signature by agent not duly authorised in writing and without production of such writing. In that case the provisions for penalty for filing false returns may quite conceivably be difficult of application. The omission of a definition of the expression “sign” so as to include the signature of an agent, the presence of the provisions permitting only certain specified acts, other than signing, to be done by or through an autho- rised agent are significant and indicate that the intention of the Legislature is not to permit signature by an agent so as to exclude the common law rule referred to above.

Turning now to the judicial decisions cited before us it will be found that Courts have insisted on personal signa- ture even when there were not so many clear indications in the statutes under consideration in those cases as there are in the statute and the rules before us. Thus in Monks v. Jackson( 1 ), which was a case under section 1 (3) of the Municipal Elections Act and 39 Vic., c. 40) which re- quired delivery of the nomination paper” by the candidate himself or his proposer or seconder to the Town Clerk” it was held that this requirement was not satisfied by the delivery it by an agent. In The Queen v. Mansel Jones(2), it was held that a person charged with any corrupt or illegal practice at a municipal election who was enti- tled, under section 38 of the Corrupt and Illegal Practices Prevention Act, 1883, to be “heard by himself” was not entitled to be heard by his counsel or solicitor. In re- Prince Blucher(9), the English Court of Appeal held that a proposal of composition (1) (1876) L.R. 1 C.P.D. 683 (2) L.R. 23 Q.B.D.

29 (3) L.R. (1931) 2 Ch. 70 57 448 signed by the solicitors of a debtor, who was, by reason of his serious illness, unable to sign it, did not comply with the requirements of section 16 (1) of the Bank ruptcy’ Act, 1914, which required “a proposal in writing signed by him.” The Court of Appeal applied the principles of the decision in Hyde v. Johnson(1) and in In re Whitley Partners Ltd.(2).

In Luchman Bukshi Roy v. Runjeet Ram Panday(3), a Full Bench of the Calcutta High Court held that an acknowledgment by a Mooklear was not sufficient for the purposes of section 1 (5) of the Limitation Act (XIV of 1859) which required an acknowledgment signed by the mortgagee. Rankin C.J. held in Japan Cotton Trading Co. Ltd. v. Jajodia Cotton Mills, Ltd.(4) that a demand letter signed by the solicitors of the petitioning creditor was not a notice under section 163 of the Indian Companies Act which as it then stood required a demand “under his hand.” A similar view was taken by the Rangoon High Court in Manjeebhai Khataw & Co. v. Jamal Brothers & Co. Ltd.(5) and M.A. Kureshi v. Argus Footwear, Ltd. (6). See alsoWilsonv. Wallani ( 7 ). In C.T.A.C.T.

Nachiappa Chettyar v. Secretary of State for India(8), it was held that the registration of a firm on an application signed by the agent of the partners was ultra vires inasmuch as the rules framed under section 59 of the Income-tax Act required an application signed by at least one of the part- ners. In Commissioner of Income-tax, Madrasv. Subba Rao (9), it was held that by reason of the word. “personally” occurring in rule 6 of the Income-tax Rules framed under section 59 of the Income-tax Act, 1922, a duly authorised agent of a partner was precluded from signing on behalf of the partner an application under section 26-A of the Act for registration of the firm. In all these cases the common law rule was not applied, evidently because the particular statutes were held to indicate that the intention was to exclude that rule. This intention Was gathered from the use of the (1) [1836] EngR 695(1836) 2 Bing. (N.C) 776 (2) (1886) L.R. 32 Ch. D. 337 (3) (1873) 20 W.R-375 (4) (1926) I.L.R.

54Cal.

(5) I.L.R. 5 Rang. 483 (6) I.L.R. 9 Rang.

323 (7) (1880) L.R. 5 Ex. D. 155 (8) (1933) I.L.R.

11 Rang. 380 (9) I.L.R. (1947) Mad. 167 449 word “himself” or “by him” or “under his hand” or “personal- ly.” It is needless to say that such an intention may also be gathered from the nature of the particular statute or inferred from the different provisions of the statute and the rules framed thereunder. As already stated, there are many indications in the Bengal Agricultural Income-tax Act, 1944, and the rules made thereunder evidencing an intention to exclude the common law rule in the matter of the signa- ture of the assessee, appellant or applicant on the return, appeal or application.

The High Court referred to the case of’ In the matter of Commissioner of Income-tax, C.P. & U.P. ( 1 ) and sought to find support for its views from the Circumstance that the Court in that case rejected the return not on the ground that it was bad because it was signed by an agent but on the ground that the power of attorney did not authorise the agent to sign it. It is quite clear that the Court in that case found it easier to decide the case on the latter ground than to enter upon a discussion of the first ground. It is impossible to read that case as an authority for the propo- sition that the signature of an agent was permissible at all. The Full Bench decision of the Allahabad High Court in Deo Narain Rai v. Kukur Bind(‘2) referred to in the High Court judgment before us does not appear to militate against the views expressed above. On a construction of section 59 of the Transfer of Property Act it was held that there was nothing in the Act to exclude the application of the common law rule. The only provision of that Act on which reliance was -placed in establishing such exclusion was section 123.

Stanley C.J. pointed out that the language of the last mentioned section was elliptical and was not accurate draughtsmanship and, therefore, it could not be relied upon in construing section 59. The judgment of Banerjee J. also makes it clear that he found nothing in the Act to exclude signature by an agent and that the words “on behalf of” in section 123 were surplusage. It is quite true that when signature by an agent is permissible, the writing of the name of (1) A.I.R. (1935) Oudh. 305 (2) (1902) I.L.R. 24 All. 319.

450 the principal by the agent is regarded as the signature of the principal himself. But this result only follows when it is permissible for the agent to sign the name of the princi- pal. If on a construction of a statute Signature by an agent is not found permissible then the writing of the name of the principal by the agent however clearly he may have been authorised by the principal cannot possibly be regarded as the signature of the principal for the purposes of that statute. If a statute requires personat signature of a person, which includes a mark, the signature or the mark must be that the man himself. There must be physical contact between that person and the signature or the mark put on the document.

The result, therefore, is that this appeal must beac- cepted and the question referred to the High Court must be answered in the negative. There will be no order for costs against the assessee and the appellant Commissioner must bear his own costs throughout.

FAZL ALI J.–I agree.

PATANJAL SASTRI J.–I agree.

MUKHERJEA J.–I agree.

MAHAJAN J.–The question of law referred to the High Court and answered by it in the affirmative is in these terms :–“Whether in the circumstances of this case, the declaration in the form of return signed by the illiterate assessee by the pen of his son should be treated as properly signed and a valid return.” The High Court was not called upon to answer the question whether an income-tax return could be validly signed by an agent in the name of the principal; on the other hand, the question as framed assumes that the return was signed by the illiterate assessee but that the pen affixing the signature was that of his son.

The physical act of putting the mark was made by the pen or possibly by the hand of the son who was not the agent ap- pointed by the father and was not otherwise authorised by him to sign for him.

451 No evidence was led and there is nothing whatsoever on the record to establish that this illiterate assessee did not touch the pen or the hand of the son when the signature was affixed on the return. No precise definition of the word “signature” is given in the Indian Income-tax Act or in any other law. In the General Clauses Act there is no exhaustive definition of the word. It merely says what the word “signature” shall include. It includes the affixing of a mark. InIndiait is a well known practice that when the executant of a document is illiterate he simply touches the pen wherewith someone else signs his name for him. Refer- ence in this connection may be made to page 972, para, 1659, of Gour on The Law Transfer. The signature made in these circumstances is personal signature of the executant.

It is his autograph. No question of agency arises in such a situation. This is what seems to have happened here as one can guess from the frame of the question. Be that as it may, without any enquiry into the circumstances in which the pen of the son affixed the signature of the assessee on the return it could not be assumed that the son acted as the agent of the father and signed his name in that capacity.

In my opinion the discussion of the question whether an agent can sign a return for an assessee was outside the scope of the question which the High Court was called upon to answer. The answer given in my view was a correct one.

After considerable thought I am disinclined to reverse the decision of the High Court by placing an interpretation on the question which it does not bear. In an ex-parte hearing we had not the advantage of hearing any arguments in support of the view taken by the High Court as the respond- ent did not appear. It is unnecessary to express any opinion on the question whether an agent can sign for the principal a form of return under the Indian Income-tax Act as that enquiry is outside the scope of the question referred to the High Court as already pointed out.

In the absence of any material to the contrary I am satisfied that the assessee signed the return 58 452 personally. If the Income-tax Officer felt that the asses- see had not touched the pen or the hand of the person who put the signature on the return he should have called upon the assessee to appear before him and ascertain from him the circumstances in which the son’s pen was used for the signa- ture. In the matter of Commissioner of Income-tax, C.P. & U.P.(1), it was observed that it is the duty of the Income- tax Officer before he accepts a return signed by an agent to satisfy himself about the authority of the agent to do so.

In my opinion, it is equally the duty of an Income-tax Officer before he rejects a return of an illiterate assessee or a person such as a leper, to satisfy himself that there was no physical contact of the person with the mark or the signature put on the form. I agree with my brother Das that there should be physical contact between the person and the signature or the mark put on the document, but I am afraid I cannot agree with him that in this case that has not hap- pened. The question to a certain extent assumes the contact of the assessee with the pen of his son when it states that the illiterate assessee’s signature was put with the pen of the son. Be that as it may, that circumstance has not been eliminated in the case and that being so, the question cannot be answered in the manner proposed by my learned brother. I am further of the opinion that the Incometax Officers should not while administering the law create unnecessary problems for the Courts. In the present case if there was any doubt in the mind of the Income-tax Officer, he should have called upon the illiterate assessee to put his mark in his presence on the return and he should not have acted hastily in assessing him under the penal provi- sions of the Act. Ignorant and illiterate people who are not well versed with the law of income-tax should be dealt with more sympathetically than was done here. They should not be penalised in the manner that the present assessee was pena- lised. In the result I would dismiss this appeal. Appeal allowed.

Agent for appellant: P.K. Bose.

(1) A.I.R. 1935Oudh. 305.


 

The word “law” may be used in an abstract or concrete sense. Sometimes it is preceded by an article such as “a” or “the” or by such words as “any,” “all,” etc., and sometimes it is used without any such prefix.

But, generally, the word “law” has a wider meaning when used in the abstract sense without being preceded by an article.

The question to be decided is whether the word “law” means nothing more than statute law.

Now whatever may be the meaning of the expression “due process of law,” the word “law” is common to that expression as well as “procedure established by law” and though we are not bound to adopt the construction put on “law” or “due process of law” in America, yet since a number of eminent American Judges have devoted much thought to the subject, I am not prepared to hold that we can derive no help from their opinions and we should completely ignore them. I will therefore in the first instance set out certain quotations from a few of the .decisions of the American Supreme Court construing the word “law” as used in the expression “due process of law,” in so far as it bears on the question of legal procedure.

(1) “Although the legislature may at its pleasure provide new remedies or change old ones, the power is never- theless subject to the condition that it cannot remove certain ancient land-marks, or take away certain fundamen- tal rights which have been always 162 recognized and observed in judicial procedures:” Bardwell v.

Collins (1).

(2)’ ‘By the law of the land is most clearly intended the general law: a law which hears before it condemns, which proceeds upon inquiry and renders judgments only- after trial. The meaning is that every citizen shall hold his life, liberty and property, and immunities under the protection of the general rules which govern society:” Dartmouth College Case (2).

(3) “Can it be doubted that due process of law signifies a right to be heard in one’s defence ? If the legislative department of the government were to enact a statute confer- ring the right to condemn the citizen without any opportuni- ty whatever of being heard, would it be pretended that such an enactment would not be violative of the Constitution ? If this be true, as it undoubtedly is, how can it be said that the judicial department. the source and fountain of justice itself, has yet the authority to render lawful that which if done under express legislative sanction would be viola of the Constitution ? If such power obtains, then the judicial department of the government sitting to uphold and enforce the Constitution is the only one possessing a power to disregard it. If such authority exists then in conse- quence of their establishment, to compel obedience to law and enforce justice, Courts possess the right to inflict the very wrongs which they were created to prevent:” Hovey v.

Elliott(3).

(4) “It is a rule as old as the law, and never more to be respected than now, that no one shall be personally bound until he has had his say in Court, by which is meant, until he has been duly cited to appear, and has been afforded an opportunity to be heard. Judgment without such citation and opportunity wants all the attributes of a judicial determi- nation; it is judicial usurpation and oppression, and can never be upheld where justice is justly administered:” Gatpin v. Page(4).

Thus, in America, the word “law” does not mean merely State-made law or law enacted by the State and does not exclude certain fundamental principles of (1) 44 Minn. 979 L.R.A. 152. (3) [1897] USSC 151167 U.S. 409 at page 417.

(2) 17 U.S. 4. (4) 85 U.S. 18.

163 justice which inhere in every civilized system of law and which are at the root of it. The result of the numerous decisions inAmericahas been summed up by Professor Willis in his book on “Constitutional Law” at page 662, in the statement that the essentials of due process are: (1) no- tice, (2) opportunity to be heard, (3) an impartial tribu- nal, and (4) orderly course of procedure. It is pointed out by the learned author that these essentials may assume different forms in different circumstances, and so long as they are conceded in principle, the requirement of law will be fulfilled. For example, a person cannot require any particular form or method of hearing, but all that he can require is a reasonable opportunity to be heard. Similarly, an impartial tribunal does not necessarily mean a judicial tribunal in every case. So far as ‘orderly course of proce- dure is concerned, he explains that it does not require a ‘Court to strictly weigh the ,evidence but it does require it to examine the entire record to ascertain the issues, to discover whether there are facts not reported and to see whether or not the law has been correctly applied to facts.

The view expressed by other writers is practically the same as that expressed by Professor Willis, though some of them do not expressly refer to the fourth element, viz., orderly course of procedure. The real point however is that these four elements are really different aspects of the same right, viz., the right to be heard before one is condemned.

So far as this right is concerned, -judicial opinion inEnglandappears to be the same as that inAmerica. In Eng- land, it would shock one to be told that a man can be de- prived of his personal liberty without a fair trial or hearing. Such a case can happen if the Parliament expressly takes away the right in question in an emergency as the British Parliament did during// the last two world wars in a limited number of cases. I will refer here to a few cases which show that the fundamental principle that a person whose right is affected must be heard has been observed not only in cases involving personal liberty but also ‘in proceedings affecting other rights, even though they may have 164 come before administrative or quasi-judicial tribunals.

Cooper v. The Wadsworth Board of Works (1)was a case under an Act which empowered the District Board to alter or demol- ish a house where the builder had neglected to give notice of his intention. seven days before proceeding to lay or dig the foundation. Acting upon this power, the Board directed the demolition of a building without notice to the builder, but this was held to be illegal. Byles 5. in dealing with the matter observed as follows :– “I conceive they acted judicially, because they had to determine the offence, and they had to apportion the punish- ment as well as the remedy. That being so, a long course of decisions, beginning with Dr. Bentley’s case, and ending with some very recent cases, establish that although there are no positive words in a statute requiring that the party-shall be heard, yet the justice of the common law will supply the omission of the legislature. The judgment of Mr.

Justice Fortescue, in Dr. Bentley’s case, is somewhat quaint, but it is very applicable, and has been the law from that time to the present. He says, “The. objection for want of notice can never be got over. The laws of God and man both give the party an opportunity to make his defence, if he has any.” In the same case Erie C.J. observed :– “It has been said that the principle that no man shall be deprived of his property without an opportunity of being heard, is limited to a judicial proceeding…… I do not quite agree with that; ……the law, I think, has been applied to many exercises of power which in common under- standing would not be at all more a judicial proceeding than would be the act of the District Board in ordering a house to be pulled down.” The observations made by Erie C.J. were quoted and applied by Sir Robert Collier in Smith v. The’ Queen (2), and the observations of Lord Campbell inReginav. The Archbishop of Canterbury (3) were to the. same effect.

(1) [1863] EngR 42414 C.B. (N.S.) 180. (2) 3 A.C. 614.

(3) 1E.& E. 559.

165 A similar opinion was expressed by Sir GeorgeJessel in Fisher v. Keane (1), Labouchere v. Earl of Wharncliffe (2), and Russell v. Russell (3). In the last mentioned case, he observed as follows :– “It [Wood v. Woad (4)] contains a very valuable state- ment by the Lord Chief Baron as to his view of the mode of administering justice by persons other than Judges who have judicial functions to perform which I should have been very glad to have had before me on both those club cases that I recently heard, namely, the case of Fisher v. Keane and the case of Labouchere v. Earl of Wharncliffe. The passage I mean is this, referring to a committee: ‘They are bound in the exercise of their functions by the rule expressed in the maxim “audi alteram partem,” that no man should be condemned to consequences without having the opportunity of making his defence. This rule is not confined to the con- duct of strictly legal’ tribunals, but is applicable to every tribunal or body of persons invested with authority to adjudicate upon matters involving civil consequences to individuals ‘.” This opinion was quoted with approval by Lord Macnaghten in Lapointe v. L’Association etc. deMontreal(5). In that case, on an application for pension by the appellant, who had been obliged to resign, the Board of Directors, without any judicial inquiry into the circumstances, resolved to refuse the claim on the ground that he was obliged to tender his resignation. This procedure was condemned by Lord Macnaghten as being “contrary to rules of society and above all contrary to the elementary principles of justice.” These observations of Lord Macnaghten were referred to and relied on in The King v. Tribunal of Appeal under the Hous- ing Act, 1919 (6). In that case, a company proposed to build a picture house and the local authority having prohibited ‘the building, the company appealed under the Housing (1) H. Ch. D. 353. (4) [1874] L.R. 9 Ex.

190.

(2) 13 Oh. D. 346. (5) [1906] A.C. 535.

(3) 14 Ch. D. 471. (6) [1920] I.B. 334.

166 (Additional Powers) Act, 1919, which contained a provision that an appeal could in certain cases be properly determined without a hearing and that the appellate Court could dis- pense with the hearing and determine the appeal summarily.

It was held that the meaning of rule 7 was that the tribunal on appeal might dispense with an oral hearing, not that they might dispense with a hearing of any kind, and that they were bound to give the appellants a hearing in the sense of an opportunity to make out a case. The Earl of Reading in delivering the judgment observed:

“The principle of law applicable to such a case is well stated by Kelly C.B. in Wood v. Woad in a passage which is cited with approval by Lord Macnaghten in Lapointe v. L’ Association etc. de Montreal …… ” In Local Government Board v. Arlidge(1), the Local Government dismissed an appeal by a person against whom a closing order had been made under Housing, Town Planning, &c. Act, without an oral hearing and without being allowed to see the report made by the Board’s Inspector upon ‘public local inquiry. The House of Lords did not interfere with the order on the ground that the appeal had been dealt with by an administrative authority whose duty was to enforce obligations on the individual in the interests of the commu- nity and whose character was that of an organization with executive functions. The principle however was conceded and lucidly set forth that when the duty of deciding an appeal is imposed, those whose duty it is to decide it must act judicially, and they must deal with the question referred to them without bias and must give to each of the parties an opportunity of presenting its case, and that the decision must be come to in the spirit and with the sense of respon- sibility of a tribunal whose duty it is to mete out justice.

Commenting upon this case, which is generally regarded as an extreme case, Mr. Gavin Simonds, who afterwards became a member of the House of Lords observes :– (1) [1915] A.C.120.

167 “I think you would agree that if the subjectmatter of such proceedings as arc here indicated was the liberty of the subject, or indeed his life, you would regard such a judicial procedure as outrageous.” (See C.K. Allen’s “Law and Orders,” page 167).

I have particularly referred to cases which were before administrative tribunals, because I have to deal in this case with preventive detention which is said to be an execu- tive act and because I wish to point out that even before executive authorities and administrative tribunals an order cannot generally be passed affecting one’s rights without giving one such hearing as may be appropriate to the circum- stances of the case. I have only to add that Halsbury after enumerating the most important liberties which are recog- nized in England, such as right of personal freedom, right to freedom of speech, right of public meeting, etc., adds :– “It seems to me that there should be added to this list the following rights which appear to have become well-estab- lished–the right of the subject to have any case affecting him tried in accordance with the principles of natural justice, particularly the principles that a man may not be a judge in his own cause, and that no party ought to be con- demned unheard, or to have a decision given against him unless he has been given a reasonable opportunity of putting forward his case …… “(Halsbury’s Laws of England, 2nd Edition, volume 6, page 392).

The question is whether the principle that no person can be condemned without a hearing by an impartial tribunal which is well-recognized in all modern civilized systems of law and which Halsbury puts on a par with well-recognized fundamental rights cannot be regarded as part of the law of this country. I must confess that I find it difficult to give a negative answer to this question. The principle being part of the British system of law and procedure which we have inherited, has been observed in this country for a very long the and is also deeply rooted in our ancient history, being the basis of the 168 panchayat system from the earliest times. The whole of the Criminal Procedure Code, whether it deals with trial of offences or with preventive or quasiadministrative measures such as are contemplated in sections 107, 108, 109, 110 and 145, is based upon the foundation of this principle, and it is difficult to see that it has not become part of the “law of the land” and does not inhere in our system of law. If that is so, then “procedure established by law” must include this principle, whatever else it may or may not include.

That the word “law” used in article 21 does not mean only State-made law is clear from the fact that though there is no statute laying down the complete procedure to be adopted in contempt of Court cases, when the contempt is not within the view of the Court, yet such procedure as now prevails in these cases is part of our law. The statute-law which regulates the procedure of trials and enquiries in criminal cases does not specifically provide for arguments in certain cases, but it has always been held that no decision should be pronounced without hearing arguments. In a number of cases, it has been held that though there may be no specific provision for notice in the statute, the provision must be read into the law. I am aware that some Judges have ex- pressed a strong dislike for the expression “natural jus- tice” on the ground that it is too vague and elastic, but where there are well-known principles with no vagueness about them, which all systems of law have respected and recognized, they cannot be discarded merely because they are in the ultimate analysis found to be based on natural jus- tice. That the expression “natural justice” is not unknown to our law is apparent from the fact that the Privy Council has in many criminal appeals from this country laid down that it shall exercise its power of interference with the course of criminal justice in this country when there has been a breach of principles of natural justice or departure from the requirements of justice. [See In re Abraham Mallory Dillet (1), Taba Singh v. King Emperor C), George Gfeller v.

The (1) 12 A.C. 459. (2) I.L.R. 48 Born. 515.

169 King(1), and Bugga and others v. Emperor(2). In the present case, there is no vagueness about the right claimed which is the right to have one’s guilt or innocence considered by an impartial body and that right must be read into the words of article 21. Article 21 purports to protect life and person- al liberty, and it would be a precarious protection and a protection not worth having, if the elementary principle of law under discussion which, according to Halsbury is on a par with fundamental rights, is to be ignored and excluded.

In the course of his arguments, the learned counsel for the petitioner repeatedly asked whether the Constitution would permit a law being enacted, abolishing the mode of trial permitted by the existing law and establishing the procedure of trial by battle or trial by ordeal which was in vogue in olden times in England. The question envisages something which is not likely to happen, but it does raise a legal problem which can perhaps be met only in tiffs way that if the expression “procedure established by law” simply means any procedure established or enacted by statute it will be difficult to give a negative answer to the question, but ii the word “law” includes what I have endeavoured to show it does, such an answer may be justified. It seems to me that there is nothing revolutionary in the doctrine that the words “procedure established by law” must include the four principles set out in Professor Willis’ book, which, as I have already stated, are different aspects of the same principle and which have no vagueness or uncertainty about them. These principles, as the learned author points out and as the authorities show, are not absolutely rigid principles but are adaptable to the circumstances of each case within certain limits. I have only to add that it has not been seriously controverted that “law” in this article means valid law and “procedure” means certain definite rules of proceeding and not something which is a mere pretence for procedure.

I will now proceed to examine article 22 of the Consti- tution which specifically deals with the subject (1) A.I.R. 1943P.C. 211. (2) A.I.R. 1919P. C. 108.

170 of preventive detention. The first point to be noted in regard to this article is that it does not exclude the operation of articles 19 and 21, and it must be read subject to those two articles, in the same way as articles 19 and 21 must be read subject to article 22. The correct position is that article 22 must prevail in so far as there are specific provisions therein regarding preventive detention, but, where there are no such provisions in that article, the operation of articles 19 and 21 cannot be excluded. The mere fact that different aspects of the same right have been dealt with in three different articles will not make them mutually exclusive except to the extent I have indicated.

I will now proceed to analyse the article and deal with its main provisions. In my opinion, the main provisions of this article are :–(1) that no person can be detained beyond three months without the report of an advisory board [clause 4 (a) ]; (2) that the Parliament may prescribe the circumstances and the class or classes of cases in which a person may be detained for more than three months without obtaining the opinion of an advisory board [clause 7 (a)];

(3) that when a person is preventively detained, the author- ity making the order of detention shall communicate to such person the grounds on which the order is made and shall afford him the earliest opportunity of making a representa- tion against the order [clause (5) ]; and (4) that the Parliament may prescribe the maximum period for which any person may in any class or classes of cases be detained under any law providing for preventive detention [clause 7 (b) ]. The last point does not require any consideration in this case, but the first three points do require considera- tion.

In connection with the first point, the question arises as to the exact meaning of the words “such detention” occur- ring in the end of clause 4 (a). Two alternative interpre- tations were put forward: (1) “such detention” means preven- tive detention; (2) “such detention” means detention for a period longer than three months. If the first interpreta- tion is correct, then the function of the advisory board would be to go into the merits of the case of each person and simply 171 report whether there was sufficient cause for his detention.

According to the other interpretation, the function of the advisory board will be to report to the government whether there is sufficient cause for the person being detained for more than three months. On the whole, I am inclined to agree with the second interpretation. Prima facie, it is a seri- ous matter to detain a person for a long period (more than three months) without any enquiry or trial. But article 22 (4) (a) provides that such detention may be ordered on the report of the advisory board. Since the report must be directly connected with the object for which it is required, the safeguard provided by the article, viz., calling for a report from the advisory board, loses its value, if the advisory board is not to apply its mind to the vital ques- tion before the government, namely, whether prolonged deten- tion (detention for more than three’ months) is justified or not. Under article 22 (4) (a), the advisory board has to submit its report before the expiry of three months and may therefore do so on the eighty-ninth day. It would be some- what farcical to provide, that after a man has been detained for eighty-nine days, an advisory board is to say whether ‘ his initial detention was justified. On the other hand, the determination of the question whether prolonged detention (detention for more than three months)is justified must necessarily involve the determination of the question wheth- er the detention was justified at all, and such an interpre- tation only can give real meaning and effectiveness to the provision. The provision being in the nature of a protection or safeguard, I must naturally lean towards the interpreta- tion which is favourable to the subject and which is also in accord with the object in view.

The next question which we have to discuss relates to the meaning and scope of article 22 (7)(a) which runs as follows:- “Parliament may by law prescribe— (a) the circumstances under which, and the class or classes of cases in which, a person may be detained for a period longer than three months under any law providing for preven- tive detention without obtaining 172 the opinion of an Advisory Board in accordance with the provisions of sub-clause (a) of clause (4).” The question is what is meant by “circumstances”‘ and “class or classes of cases” used in this provision. This question has arisen because of the way in which these ex- pressions appear to have been interpreted and applied in the Act of Parliament with which we are concerned. As the matter is important and somewhat complicated, I shall try to express my meaning as clearly as possible even at the risk of some repetition, and, in doing so, I must necessarily refer to the impugned Act as well as Lists I and III of the Seventh Schedule of the Constitution, under which Parliament had jurisdiction to enact it. Item 9 of List I–Union List–shows that the Parliament has power to legislate on preventive detention for reasons connected with (1) defence, (2) foreign affairs, and (3) security ofIndia.. Under List III–Concurrent List–the appropriate item is item 3 which shows that law as to preventive detention can be made for reasons connected with (1) the security of the State, (2) the maintenance of public order, and (3) the maintenance of supplies and services essential to the community. The impugned Act refers to all the subjects mentioned in Lists I and III in regard to which law of preventive detention can be made. Section 3 (1)of the Act, the substance of which has already been mentioned, is important, and I shall reproduce it verbatim.

“The Central Government or the State Government may- (a) if satisfied with respect to any person that with a view to preventing him from acting in any manner prejudicial to- (i) the defence of India, the relations of India with foreign powers, or the security of India, or (ii) the security of the State or the maintenance of public order, or (iii) the maintenance of supplies and services essen- tial to the community, or 173 (b) if satisfied with respect to any person who is a foreigner within the meaning of the Foreigners Act, 1946 (XXXI of 1946), that with a view to regulating his continued presence in India or with a view to making arrangements for his expulsion from India, it is necessary so to do, make an order directing that such person be detained.” It will be noticed that all the subjects of legislation concerning preventive detention occurring in item of List I are grouped in sub-clause (1) of clause (a). The subjects in this group are three in number and, for convenience of reference, I shall hereafter refer to them as A, B and C.

In sub-.clause (ii), we find grouped two of the matters referred to in item 3 of List III, these being security of the State and the maintenance of public order. These two subjects, I shall refer to as D and E. In sub-clause (iii), reference has been made to the third matter in item 3 of List III, and I shall refer to this subject as F. With this classification, let us now turn to the Constitution itself.

On reading articles 22 (4) and 22 (7) together, it would be clear that so long as article 22 (4) (a) holds the field and Parliament does not act under clause (7) (a) of article 22, there must be an advisory board in every case, i.e., if the legislation relates to groups A to F, as it does here, there must be an advisory board for all these groups.

Article 22 (7) however practically engrafts an excep- tion. It states in substance that the Parliament may by an Act provide for preventive detention for more than three months without reference to an advisory board, but in such cases it shall be incumbent on the Parliament to prescribe (1) the circumstances and (2) the class or classes of cases in which such course is found to be necessary. If the case contemplated in clause (4)(a)is the rule and that contem- plated ‘in clause (7) (a) is the exception, then the circum- stances and the class or classes of cases must be of a special or extraordinary nature, so as to take the case out of the rule and bring it within the exception. It is always 174 possible to draw the line between the normal or ordinary and the abnormal or extraordinary cases. and this is what, in my opinion, the Parliament was expected to do under clause (7) (a). I do not think that it was ever intended that Parliament could at its will treat the normal as the abnor- mal or ‘the rule as the exception. But this is precisely what has been done in this case- All the items on which preventive legislation is possible excepting one, i.e., A to E, have been put within the exception, and only one, F, which relates to maintenance of supplies and services essen- tial to the community, has been allowed to remain under the rule. In other words, it is provided that there shall be an advisory board only for the last category, F, but no provi- sion having been made for the other categories, A to E, it may be assumed that the advisory board has been dispensed with in those cases. The learned Attorney-General maintained that it would have been open to the Parliament to dispense with the advisory board even for the category F, and if such a course had been adopted it would not have affected the validity of the Act. This is undoubtedly a logical position in the sense that it was necessary for him to go as far as this to justify his stand; but, in my opinion, the course adopted by the Parliament in enacting section 12 of the impugned Act is not what is contemplated under article 22 (7) (a) or is permitted by it. The circumstances to be prescribed must be special and extraordinary circumstances and the class or classes of cases must be of the same na- ture. In my opinion, the Constitution never contemplated that the Parliament should mechanically reproduce all or most of the categories A to F almost verbatim and not apply its mind to decide in what circumstances and in what class or classes of cases the safeguard of an advisory board is to be dispensed with.

I may state here that two views are put forward before us as to how clauses (4) (a) and 7 (a) of article 22 are to be read:–(1) that clause (4) (a) lays down the rule that in all cases where detention for more than three months is ordered, it should be done in consultation with and on the report of the advisory 175 board, and clause (7) (a) lays down an exception to this rule by providing that Parliament may pass an Act permitting detention for more than three months without reference to an advisory board; (2) that clauses (4)(a) and (7) (a) are independent clauses making two separate and alternative provisions regarding detention for more than three months, in one case on the report of an advisory board and in other case without reference to an advisory board. Looking at the substance and not merely at the words, I am inclined to hold that clause (7) (a) practically engrafts an exception on the rule that preventive detention for more than three months can be ordered only on the report of an advisory board, and so far I have proceeded on that footing. But it seems to me that it will make no difference to the ulti- mate conclusion, whichever of the two views we may adopt.

Even on the latter view, it must be recognized that the law which the Constitution enables the Parliament to make under article 22 (7) (a) would be an exceptionally drastic law, and, on the principle that an exceptionally drastic law must be intended for an exceptional situation, every word of what I have said so far must stand. Clause (7) (a) is only an enabling provision, and it takes care to provide that the Parliament cannot go to the extreme limit to which it is permitted to go without prescribing the class or classes cases and the circumstances to which the extreme law would be applicable. It follows that the class or classes of cases and the circumstances must be of a special nature to require such legislation.

It was urged that the word “and” which occurs between “circumstances” and “class or classes of cases” is used in a disjunctive sense and should be read as “or,” and by way of illustration it was mentioned that when it is said that a person may do this and that, it means that he is at liberty to do either this or that. I do not think that this argu- ment is sound. I think that clause (7)(a) can be accurately paraphrased somewhat as follows :–” Parliament may dispense with an advisory board, but in that case it shall prescribe the circumstances and the class or 23 176 classes of cases …….. “If this is the meaning, then ‘ ‘and” must be read as “and” and not as “or”; and “may” must be read as “shall.” Supposing it was said that Parliament may prescribe the time and place for the doing of a thing, then can it be suggested that both time and place should not be prescribed ? It seems obvious to me that the class or classes of cases must have some reference to the persons to be detained or to their activities and movements or to both.

“Circumstances” on the other hand refer to something extra- neous, such as surroundings, background, prevailing condi- tions, etc., which might prove a fertile field for the dangerous activities of dangerous persons. Therefore the provision clearly means that both the circumstances and the class or classes of cases (which are two different expres- sions with different meanings and connotations and cannot be regarded as synonymous) should be prescribed, and prescrip- tion of one without prescribing the other will not be enough. As I have already stated, such law as can be enact- ed under article 22 (7) (a) must involve, by reason of the extreme limit to which it can go, serious consequences to the persons detained. It will mean (1) prolonged detention, i.e., detention for a period longer than three months, and (2) deprivation of the safeguard of an advisory board. Hence article 22 (7) (a) which purports to be a protective provi- sion will cease to serve its object unless it is given a reasonable interpretation. To my mind, what it contemplates is that the law in question must not be too general but its scope should be limited by prescribing both the class or classes of cases and the circumstances.

It was contended that the expression “class or classes of cases” is wide enough to enable the Parliament to treat any of the categories mentioned in Lists I and III, items 9 and 3 respectively, (i.e., any of the categories A to F) as constituting a class. At first sight, it seemed to me to be a plausible argument,, but the more I think about it the more unsound it appears to me. The chief thing to be remem- bered is what I have already emphasized more than once, viz., that a special or extreme type of law must be limited to special classes of cases and circumstances. Under the 177 Constitution, the Parliament has to prescribe “the class or classes,” acting within the limits of the power granted to it under Lists I and III. The class or classes must be its own prescription and must be so conceived as to justify by their contents the removal of an important safeguard provid- ed by the Constitution. Prescribing is more than a mere mechanical process. It involves a mental effort to select and adapt the thing prescribed to the object for which it has to be prescribed. We find here that what is to be prescribed is “class or classes” (and also “circumstances “). We also find that what the law intends to provide is prolonged detention (by which words I shall hereafter mean detention for more than three months) and elimination of the advisory board. The class or classes to be prescribed must therefore have a direct bearing on these matters and must be so selected and stated that any one by looking at them may say :–” That is the reason why the law has prescribed prolonged detention without reference to an advisory board.” In other words, there must be something to make the class or classes prescribed fit in with an extreme type of legisla- tion–some element of exceptional gravity or menace, which cannot be easily and immediately overcome and therefore necessitates prolonged detention; and there must be some- thing to show that reference to an advisory board would be an undesirable and cumbersome process and wholly unsuitable for the exceptional situation to which the law applies.

Perhaps a simple illustration may make the position still clearer. Under the Lists, one of the subjects on which Parliament may make a law of preventive detention is “matter connected with the maintenance of public order.” The Act simply repeats this phraseology and states in sec- tion 3: “with a view to preventing him (the person to be detained) from acting in a manner prejudicial to the main- tenance of public order.” This may be all right for section 3, but section 12 must go further. An act prejudicial to.

the maintenance of public order may be an ordinary act or it may be an act of special gravity. I think that article 22 (7)(a) contemplates that the graver and 178 more heinous types of acts falling within the category of acts prejudicial to the maintenance of public order (or other heads) should be prescribed so as to define and cir- cumscribe the area of an exceptional piece of legislation.

That some kind of sub-classification (if I may be per- mitted to use this word) of the categories A to F was possi- ble can be illustrated by reference to regulation 18-]3 of the British Defence of the Realm Regulations. This regula- tion was made under an Act of 1039 which authorized “the making of regulations for the detention of persons whose detention appears to the Secretary of State to be expedient in the interests of public safety or the defence of the realm.” The two matters “public safety” and “defence of the realm” are analogous to some of the heads stated in Lists I and III. It will be instructive to note that under these two heads, regulation 18-B has set forth several subheads or class or classes of cases in which preventive detention could be ordered. These classes are much more specific than what we find in section a of the impugned Act and therefore there is less chance of misuse by the executive of the power to order preventive detention. The classes set out are these :–(1) If the Secretary of State has reasonable cause to believe any person to be of hostile origin or associa- tions, (2) if the Secretary of State has reasonable cause to believe any person to have been recently concerned in acts prejudicial to the public safety or the defence of the realm or in the preparation or instigation of such acts, (3) if the Secretary of State has reasonable cause to believe any person to have been or to be a member of, or to have been or to be active in the furtherance of the objects of, any such organization as is hereinafter mentioned …… (a) the organization is subject to foreign influence or control, (b) the persons in control of the organization have or have had associations with, persons concerned in the government of, or sympathies with the system of government of, any Power with which His Majesty is at war, and in either case there is danger of the utilization of the organization for pur- poses prejudicial to the public safety, etc., (4) if the Secretary of State has reasonable cause to believe that the recent conduct of any person for the time being in an area or any words recently written or spoken by such a person expressing sympathy with the enemy, indicates or indicate that person is likely to assist the enemy. I have only to point out that the scope within which preventive detention can be legislat- ed upon in this country is much larger than the scope indi- cated in the British Act under which Regulation 18-B was framed, and therefore there is more scope for specification of the circumstances as well as the class or classes of cases under the impugned Act. But all that has been done is that words which occur in the legislative Lists have been taken and transferred into the Act.

What I have stated with regard to class or classes of cases also applies to the circumstances which are also to be prescribed under article 22 (7) (a). These circumstances are intended to supply the background or setting in which the dangerous activities of dangerous persons might prove specially harmful. They must be special circumstances which demand a specially drastic measure and under which reference to an advisory board might defeat the very object of preven- tive action. The evident meaning of article 22 (7) (a) seems to be that the picture will not be complete without mentioning both the classes and the circumstances. There was some discussion at the Bar as to what kind of circumstances might have been specified. It is not for me to answer this question, but I apprehend that an impending rebellion or war, serious disorder in a particular area such as has induced the Punjab Government to declare certain areas as “disturbed areas,” tense communal situation, prevalence of sabotage or widespread political dacoities and a variety of other matters might answer the purpose the Constitution had in view.

I will now try to sum up the result of a somewhat pro- tracted discussion into which I had to enter merely to clarify the meaning of a very important provision of the Constitution which has, in my opinion, been completely misunderstood by the framers of the 180 impugned Act. It appears to me that article 22 deals with three classes of preventive detention :– (1) preventive detention for three months;

(2) preventive detention for more than three months on the report of the advisory board; and (3) preventive detention for more than three months without reference to the advisory board.

If one has to find some kind of a label for these class- es for a clear understanding of the subject, one may label them as “dangerous,” “more dangerous” and “most danger- ous.” Now so far as the first two classes are concerned, there is nothing to be prescribed under the Constitution Apparently, the authors of the Constitution were not much concerned about class No. (1), and they thought that in so far as class No. (2) was concerned the provision that a reference to the advisory board was necessary coupled with the provision that detention was not to exceed the maximum period which may be fixed by the Parliament was enough. But they did take care to make a special provision for class No.

(3), and it is extermly important for the liberty of the subject as well as for the smooth working of the Constitu- tion that this provision should not be lightly treated but should receive a well considered and reasonable construc- tion. It is elementary that the rigour of a law should correspond to or fit the gravity of the evil or danger it aims at combating, and it is also evident that the law which the Parliament has been permitted to enact under article 22 (7) (a) can, so far as rigour is concerned, go to the I farthest limit. It follows that the law must have been intended for exceptionally grave situations and exigencies.

Hence the authors of the Constitution have made it necessary that the Parliament should put certain specifications into the Act which it is empowered to pass under article 22 (7) (a), so that by means of these specifications the necessity for enacting so drastic a law should be apparent on the face of it, and its application should be confined to the classes and circumstances specified. The Act must prescribe (1) “c]ass or classes of cases” which are to have reference to the persons.

181 against whom the law is to operate and their activities and movements and (2) “circumstances” which would bring into prominence the conditions and the backgrounds against which dangerous activities should call for special measures. By means of such two-fold prescription, the sphere for the application of the law will be confined only to a special type of cases–it will be less vague, less open to abuse and enable those who have to administer it to determine objec- tively when a condition has arisen to justify the use of the power vested in them by the law. This, in my opinion, is the true meaning and significance of article 22 (7) (a) and any attempt to whittle it down will lead to deplorable results.

Having stated my views as to the construction of article 22 (7) (a), I propose to consider at once whether section 12 of the impugned Act conforms to the requirements of that provision. In my opinion, it does not, because it fails to prescribe either the circumstances or the class or classes of cases in the manner required by the Constitution. It does not prescribe circumstances at all, and, though it purports to prescribe the class or classes, it does so in a manner showing that the true meaning of the provision from which the Parliament derived its power has not been grasped.

I have sufficiently dwelt on this part of the case and shall not repeat what I have already said. But I must point out that even if it be assumed that the view advanced by the learned Attorney-General is correct and it was within the competence of Parliament to treat any of the categories mentioned in items 9 and 3 of Lists I and III as constitut- ing a class and to include it without any qualification or change, the impugned section cannot be saved on account of a two-fold error :–. (1) the word “and” which links “class or classes” with “circumstances” in article 22 (7) (a) has been wrongly construed to mean “or ;” and (2) the distinction between “circumstances” and “class or classes” has been completely ignored and they are used as interchangeable terms. The first error appears to me to be quite a serious one, because though the Constitution lays down two require- ments and insists 182 on the prescription of circumstances as well as class or classes, it has been assumed in enacting section 12 that prescription of one of them only will be enough. The other error is still more serious and goes to the root of the matter. There can be no doubt that circumstances and class or classes are two different expressions and have different meanings, but the Act proceeds on the assumption that cir- cumstances are identical with class or classes, as will appear from the words “any person detained in any of the following classes of cases or under any of the following circumstances” used in the section. I have already shown how important the specification of circumstances is in legislation of such an extreme and drastic character. There- fore, to confuse “classes” with “circumstances” and to omit to mention “circumstances” at all are in my opinion grave errors. There can, in my opinion, be no escape from the conclusion that section 12 of the Act by which a most impor- tant protection or safeguard conferred on the subject by the Constitution has been taken away, is not a valid provision, since it contravenes the very provision in the Constitution under which the Parliament derived its competence to enact it.

I will now briefly deal with article 22 (5) which makes it incumbent on the authority ordering preventive deten- tion to communicate to the person detained the grounds on which the order has been made and to give him the earliest opportunity of making a representation against the order. It must be remembered that this provision is intended to afford protection to and be a safeguard in favour of a detained person, and it cannot be read as limiting any rights which he has under the law or any other provisions of the Consti- tution. If article 21 guarantees that before a person is deprived of his liberty he must be allowed an opportunity of establishing his innocence before an impartial tribunal, that right still remains. In point of fact, there is no express exclusion of that right in the Constitution and no prohibition against constituting an impartial tribunal. On the other hand, the right to make a representation which has 183 been granted under the Constitution, must carry with it the right to the representation being properly considered by an impartial person or persons. There must therefore be some machinery for properly examining the cases of the detenus and coming to the conclusion that they have not been de- tained without reason. If this right had been expressly taken away by the Constitution, there would have been an end of the matter, but it has not been expressly taken away, and I am not prepared to read any implicit deprivation of such a valuable right. The mere reference to an advisory board in article 22 (4) (a) does not, if my interpretation of the provision is correct, exclude the constitution of a proper machinery for the purpose of examining the cases of detenus on merits. The constitution of an advisory board for the purpose of reporting whether a person should be detained for more than three months or not is a very different thing from constituting a board for the purpose of reporting whether a man should be detained for a single day. In the view I take, all that Parliament could do under clause (7) (a) of article 22 was to dispense with an advisory board for the purpose contemplated in clause (4) (a) of that article and not to dispense with the proper machinery, by whichever name it may be called, for the purpose of examining the merits of the case of a detained person.

It was argued that article 22 is a code by itself and the whole law of preventive detention is to be found within its four corners. I cannot however easily subscribe to this sweeping statement. The article does provide for some mat- ters of procedure, but it does not exhaustively provide for them. It is said that it provides for notice, an opportuni- ty to the detenu to represent his case, an advisory board which may deal with his case, and for the maximum period beyond which a person cannot be detained. These points have undoubtedly been touched, but it cannot be said that they have been exhaustively treated. The right to represent is given, but it is left to the legislature to provide the machinery for dealing with the representation. The advisory board has been mentioned, but 24 184 it is only to safeguard detention for a period longer than three months. There is ample latitude still left to the Parliament, and if the Parliament makes use of that latitude unreasonably, article 19 (5) may enable the Court to see whether it has transgressed the limits of reasonableness.

I will now proceed to deal with the Act in the light of the conclusions I have arrived at. So far as section 3 of the Act is concerned, it was contended that it is most unreasonable, because it throws a citizen at the mercy of certain authorities, who may at their own will order his detention and into whose minds we cannot probe to see wheth- er there is any foundation for the subjective satisfaction upon which their action is to rest. I am however unable to accept this argument. The administrative authorities who have to discharge their responsibilities have to come to quick decisions and must necessarily be left to act on their own judgment. This principle is by no means unreasonable and it underlies all the preventive or quasi administrative measures which are to be found in the Criminal Procedure Code. Under section 107 of that code, it is left to the discretion of the magistrate concerned to determine whether in his opinion there is sufficient ground for proceeding against any person who is likely to occasion a breach of the peace. Under section 145 also, his initial action depends upon his personal satisfaction. Therefore I do not find anything wrong or unconstitutional in section 3 of the Act.

But I must point out that it is a reasonable provision only for the first step, i.e., for arrest and initial detention, and must be followed by some procedure for testing the so- called subjective satisfaction, which can be done only by providing a suitable machinery for examining the grounds on which the order of detention is made and considering the representations of the persons detained in relation to those grounds.

I do not also find anything radically wrong in section 7 of the Act, which makes it incumbent on the authority con- cerned to communicate to a detenu the grounds on which the order has been made and to 185 afford him the earliest opportunity of making a representa- tion against the order. Section 10 which provides that the advisory board shall make its report within ten weeks from the date of the detention order is in conformity with arti- cle 22 (4) (a) of the Constitution, and the only comment which one can make is that Parliament was not obliged to fix such a long period for the submission of a report and could have made it shorter in ordinary cases. The real sections which appear to me to offend the Constitution are sections 12 and 14. I have already dealt with the principal objec- tion to section 12, while discussing the provisions of article 22 (7) (a) and I am of the opinion that section 12 does not conform to the provisions of the Constitution and is therefore ultra vires. I also think that even if it be held that it technically complies with the requirements of article 22 (7) (a), Parliament has acted unreasonably in exercising its discretionary power without applying its mind to essential matters and thus depriving the detenus of the safeguard of an advisory board which the Constitution has provided in normal cases. So far as section 14 is con- cerned, all my colleagues have held it to be ultra vires, and, as I agree with the views expressed by them, I do not wish to encumber my judgment by repeating in my own words what has been said so clearly and so well by them. Section 14 may be severable from the other provi- sions of the Act and it may not be possible to grant any relief to the petitioner on the ground that section 14 is invalid. But I think that section 12 goes to the very root of the legislation inasmuch as it deprives a detenu of an essential safeguard, and in my opinion the petitioner is entitled to a writ of habeas corpus on the ground that an essential provision of the Constitution has not been com- plied with. This writ will of course be without prejudice to any action which the authorities may have taken or may hereafter take against the petitioner under the penal law I have to add this qualification because there were allega- tions of his being involved in some criminal cases but the actual facts were not clearly brought out before us.

186 I have only to add a few concluding remarks to my judg- ment. In studying the provisions of the impugned Act, I could not help instituting a comparison in my own mind between it and similar legislation inEnglandduring the last two world wars. I could not also help noticing that the impugned Act purports to be a peacetime Act, whereas the legislation to which I have referred was enacted during the war. During the first war as well as the second, a number of persons were detained and a number of cases were brought to Court in connection with their detention, but the two lead- ing cases which will be quoted again and again are Rex v.

Halliday (1) and Liversidge v. Sir John Anderson(2). We are aware that in Americacertain standards which do not conform to ordinary and normal law have been applied by the Judges during the period of the war and sometimes they are compen- dionsly referred to as being included in “war power.” The two English cases to which I have referred also illustrate the same principle, as will appear from two short extracts which I wish to reproduce. In Rex v. Halliday (3), Lord Atkinson observed as follows :–” However precious the personal liberty of the subject may be, there is something for which it may well be, to some extent, sacrificed by legal enactment, namely, national success in the’ war, or escape from national plunder or enslavement.” In Liversidge v. Sir John Anderson (4), Lord Macmillan struck the same note in these words :– “The liberty which we so ‘justly extol is itself the gift of the law and as Magna Charta recognizes may by the law be forfeited or abridged. At a time when it is the undoubted law of the land that a citizen may by conscription or requisition be compelled to give up his life and all that he possesses for his country’s cause it may well be no matter for surprise that there should be confided to the Secretary of State a discretionary power of enforcing the relatively mild precaution of detention.” (1) [1917] A.C.260. (3) [1917] UKHL 1[1917] A.C. 260atp. 271.

[1941] UKHL 1[1942] A.C. 206. (4) [1941] UKHL 1[1942] A.C. 206 at p.

257.

187 These passages represent the majority view in the two cases, but the very elaborate judgments of Lord Shaw in Rex v. Halliday and that of Lord Atkin in Liversidge v. Sir John Anderson show that there. was room for difference of opinion as well as for a more dispassionate treatment of the case and the points involved in it. It is difficult to say that there is not a good substratum of sound law in the celebrat- ed dictum of Lord Atkin that even amidst the clash of arms the laws are not silent and that they speak the same lan- guage in war as in peace. However that may be, what I find is that in the regulations made in England during the first war as well as the second war there was an elaborate provi- sion for an advisory board in all cases without any excep- tion, which provided a wartime safeguard for persons de- prived of their liberty. There was also a provision in the Act of 1939 that the Secretary of State should report at least once in every month as to the action taken under the regulation including the number of persons detained under orders made thereunder. I find that these reports were printed and made available to the public. I also find that the Secretary of State stated in the House of Commons on the 28th January, 1943, that the general order would be to allow British subjects detained under the Regulation to have consultations with their legal advisers out of the hearing of an officer. This order applied to consultations with barristers and solicitors but not to cases where solicitors sent to interview a detained person a clerk who was not an officer of the High Court. The impugned Act suffers in com- parison, on account of want of such provisions, though, so far as I can see, no great harm was likely to have been caused by setting up a machinery composed of either adminis- trative or judicial authorities for examining the cases of detained persons so as to satisfy the essentials of fairness and justice. The Act also suffers in comparison with some of the later Provincial Acts in which the safeguard of an advisory board is , expressly provided for. I find that there is a provision in section 12 (2) of the Act for the review of the cases of detenus after six months, but this is quite different 188 from examining the merits of the case. The object of such a review is obviously to find out whether by reason of any change in the circumstances, a review of the original order is required.

I hope that in pointing out the shortcomings of the Act I will not be misunderstood. I am aware that both in Eng- land and inAmericaand also in many other countries, there has been a reorientation of the old notions of individual freedom which is gradually yielding to social control in many matters. I also realize that those who run the State have very onerous responsibilities, and it is not correct to say that emergent conditions have altogether disappeared from this country. Granting then that private rights must often be subordinated to the public good, is it notessen-tial in a free community to strike a just balance in the matter ? That a person should be deprived of his personal liberty without a trial is a serious matter, but the needs of society may demand it and the individual may often have to yield to those needs. Still the balance between the maintenance of individual rights and public good can be struck only if the person who is deprived of his liberty is allowed a fair chance to establish his innocence, and I do not see how the establishment of an appropriate machinery giving him such a chance can be an impediment to good and just government.

PATANJALI SASTRI J.–This is an application under arti- cle 32 of the Constitution of India for releasing the petitioner from detention in jail without trial under directions purporting to be issued by the Government of Madras under the Preventive Detention Act, 1950, and it has the distinction of being the first application invoking the guaranteed protection of this Court as the guardian of Fundamental Rights against alleged infringement of the petitioner’s right to freedom of movement. As the case involved issues of great public importance and breaking of new ground it was argued with thoroughness and ability on both sides, reference being made to more or less analogous provisions of the Constitutions of 189 other countries and in particular the Constitution of the United States of America.

The petitioner had been under detention previously under orders passed by the said Government under the Madras Main- tenance of Public Order Act, 1947, but as the validity of that Act and all other similar local public safety enact- ments had been questioned in some of the High Courts in India after the new Constitution came into force, the Par- liament enacted a comprehensive measure called the Preven- tive Detention Act, 1950, (hereinafter referred to as the impugned Act) extending to the whole of India with a certain exception not material here.

The Act came into force on 25th February 1950, and, on the 27th February, the Government of Madras, in purported exercise of the powers conferred by the impugned Act and in supersession of earlier orders, directed the detention of the petitioner, and the order was served on him on 1st March. The petitioner contends that the impugned Act and in particular sections 3, 7, 10, 11, 19,, 13 and 14 thereof take away or abridge the fundamental right to freedom of movement in contravention of article 13 (2) of the Constitu- tion and is, therefore, void as declared therein.

Article 13 is one of a fasciculus of articles which are comprised in part III of the Indian Constitution headed “Fundamental Rights.” This Part forms a new feature of the Constitution and is the Indian “Bill of Rights.” It is modelled on the first ten Amendments of the American Con- stitution which declare the fundamental rights of the American citizen. Article 12, which is the first article in this Part, defines “the State” as including the Governments and Legislatures of the Union and the States as well as all local and other authorities against which the fundamental rights are enforceable, and article 13 (1) declares that all existing laws inconsistent with the provisions of Part III shall, to the extent of the inconsistency, be void.

Clause (2) of the article, on which the petitioner’s con- tention is primarily founded reads as follows:

190 “The State shall not make any law which takes away or abridges the rights conferred by this Part and any law made in contravention of this clause shall, to the extent of the contravention, be void.” As the constitutional inhibition against deprivation or abridgement relates only to “the rights conferred by this Part,” it is necessary first to ascertain the nature and extent of the right which, according to the petitioner, Part III has conferred on him, and, secondly, to determine wheth- er the right so ascertained has been taken away or abridged by the impugned Act or by any of its provisions. The first question turns on the proper interpretation of the relevant articles of the Constitution, and the second involves the consideration of the provisions of the impugned Act.

Mr. Nambiar appearing for the petitioner advanced three main lines of argument. In the first place, the right to move freely throughout the territory of India referred to in article 19 (1)(d) is of the very essence of personal liber- ty, and inasmuch as the detention authorised by the impugned Act was not a “reasonable restriction” which Parliament could validly impose on such right under clause (5) of the article, the impugned Act is void. Alternatively, the petitioner had a fundamental right under article 21 not to be deprived of his personal liberty except according to procedure established by law, and the impugned Act by autho- rising detention otherwise than in accordance with proper procedure took away that right and was therefore void. And, lastly, the provisions of the impugned Act already re- ferred to were ultra vires and inoperative as Parliament in enacting them has overstepped the ]imitations placed on its legislative power by article 22 clauses (4) to (7).

Accordingly, the first question for consideration is whether article 19 (1) (d) and (5) is applicable to the present case. “Liberty,” says John Stuart Mill, “consists in doing what one desires. But the liberty’ of the individual must be thus far limited–he must not make him- self a nuisance to others.” Man, as a rational being, desires to do many things, but in a civil society his de- sires have to be controlled, regulated 191 and reconciled with the exercise of similar desires. by other individuals.Libertyhas, therefore, to be limited in order to be effectively possessed. Accordingly, article 19, while guaranteeing some of the most valued phases or elements of liberty to every citizen as civil1 rights, pro- vides for their regulation for the common good by the State imposing certain “restrictions” on their exercise.

The power of locomotion is no doubt an essential element of personal liberty which means freedom from bodily restraint, and detention in jail is a drastic invasion of that liberty.

But the question is: Does article 19, in its setting in Part III of the Constitution, deal with the deprivation of per- sonal liberty in the sense of incarceration ? Sub-clause (d) of clause (1) does not refer to freedom of movement simplic- iter but guarantees the right to move freely “throughout theterritoryofIndia.” Sub-clause (e) similarly guaran- tees the right to reside and settle in any part of theterritoryofIndia. And clause (5) authorises the imposi- tion of “reasonable restrictions” on these rights in the interests of the general public or for the protection of the interests of any Scheduled Tribe. Reading these provisions together, it is reasonably clear that they were designed primarily to emphasise the factual unity of the territory of India and to secure the right of a free citizen to move from one place in India to another and to reside and settle in any part of India unhampered by any barriers which nar- row-minded provincialism may seek to interpose. The use of the word “restrictions” in the various sub-clauses seems to imply, in the context, that the rights guaranteed by the article are still capable of being exercised, and to exclude the idea of incarceration though the words “restriction” and “deprivation” are sometimes used as interchangeable terms, as restriction may reach a point where it may well amount to deprivation. Read as a whole and viewed in its setting among the group of provisions (articles 19-22) relating to “Right to -Freedom,” article 19 seems to my mind to pre–suppose that the citizen to whom the possession of these fundamental rights is secured retains the substratum 192 of personal freedom on which alone the enjoyment of these rights necessarily rests. It was said that subclause (f) would militate against this view, as the enjoyment of the right “to acquire, hold and dispose of property” does not depend upon the owner retaining his personal freedom. This assumption is obviously wrong as regards moveable proper- ties, and even as regards immoveables he could not acquire or dispose of them from behind the prison bars; nor could he “hold” them in the sense of exercising rights of possession and control over them which is what the word seems to mean in the context. But where, as a penalty for committing a crime or otherwise, the citizen is lawfully deprived of his freedom, there could no longer be any ques- tion of his exercising or enforcing the rights referred to in clause (1). Deprivation of personal liberty in such a situation is not, in my opinion, within the purview of article 19 at all but is dealt with by the succeeding arti- cles 20 and 21. In other words, article 19 guarantees to the citizens the enjoyment of certain civil liberties while they are free, while articles 20-22 secure to all persons–citizens and non-citizens–certain constitutional guarantees in regard to punishment and prevention of crime.

Different criteria are provided by which to measure legisla- tive judgments in the two fields, and a construction which would bring within article 19 imprisonment in punishment of a crime committed or in prevention of a crime threatened would, as it seems to me, make a reductio ad absurdum of that provision. If imprisonment were to be regarded as a “restriction” of the right mentioned in article 19 (1)(d), it would equally be a restriction on the rights mentioned by the other subclauses of clause (1), with the result that all penal laws providing for imprisonment as a mode of punish- ment would have to run the gauntlet of clauses (2) to (6) before their validity could be accepted. For instance,the law which imprisons for theft would, on that view, fall to be justified under clause (2) as a law sanctioning restric- tion of freedom of speech and expression. Indeed, a Divi- sion Bench of the Allahabad High Court,in a recent unreport- ed decision brought to our notice 193 applied the test of undermining the security of the State or tending to overthrow it in determining the validity or otherwise of the impugned Act. The learned Judges construed article 19 as covering cases of deprivation of personal liberty and held, logically enough, that inasmuch as the impugned Act, by authorising preventive detention, infringed the right to freedom of speech and expression, its validity should be judged by the reservations in clause (2), and, as it failed to stand that test, it was unconstitutional and void.

Mr. Nambiar did not seek to go so far. He drew a dis- tinction between the right conferred by sub-clause (d) and those conferred by the other sub-clauses. He urged, refer- ring to Blackstone’s Commentaries, that personal liberty consisted “in moving one’s person to whatever place one’s inclination might direct,” and that any law which de- prived a person of such power of locomotion was a direct invasion of the right mentioned in sub-clause (d), whereas it inter-fered only indirectly and consequentially with the rights mentioned in the other sub Clauses. There is no substance in the distinction suggested. It would be illogi- cal, in construing article 19, to attribute to one of the sub-clauses a scope and effect totally different from the scope and effect of the others or to draw a distinc-. tion between one right and another in the group. All the rights mentioned in clause (1) are equally essential elements in the liberty of the individual in any civilised and democrat- ic community, and imprison, ment operates as an extinction of all of them alike. It cannot, therefore, be said that deprivation of personal liberty is an infringement of the right conferred by sub-clause (d) alone but not of the others. The learned Judges of the Allahabad High Court realised this and were perfectly logical in holding that the constitutional validity of a law providing for deprivation of personal liberty or imprisonment must be judged by the tests laid down not only in clause (5) of article 19 but also in the other clauses including clause (2), though their major premise that deprivation of personal liberty was a “restriction” within the meaning of article 19 is, in my judgment, erroneous.

194 It was said that preventive detention being a drasic re- striction of the right to move freely was, in its pith and substance,” within article 19 (1) (d) read with clause (5) and not within article 21 which deals with crime and its punishment and prevention. There is no room here, in my opinion, for the application of the rule of “pith and sub- stance.” As pointed out by the Privy Council in Prafulla Kumar Mukherjee v. The Bank of Commerce Ltd.,Khulna(1), approving the observations of the Federal Court in Subrah- manyam Chettiar v. Muttuswamy Goundan (2), the rule was evolved by the Board for determining whether an impugned statute was, in its true character, legislation with respect to matters within the jurisdiction of one legislature or another in a scheme of divided legislative power. No such question arises here. What the Court has to ascertain is the true scope and meaning of article 19 in the context of Part III of the Constitution, in order to decide whether depriva- tion of personal liberty falls within that article, and the pith and substance rule will be more misleading than helpful in the decision of that issue. Article 19, as I have already indicated, guarantees protection for the more important civil liberties of citizens who are in the enjoyment of their freedom, while at the same time laying down the re- strictions which the legislature may properly impose on the exercise of such rights, and it has nothing to do with deprivation of personal liberty or imprisonment which is dealt with by the succeeding three articles.

There is also another consideration which points to the same conclusion. The ]Drafting Committee of the Constituent Assembly, to whose Report reference was freely made by both sides during the argument, recommended “that the word liber- ty should be qualified by the insertion of the word ‘person- al ‘ before it, for otherwise it might be construed very widely so as to include even the freedoms already dealt with in article 13” (now article 19). The acceptance of this suggestion shows that whatever may be the generally accepted (1) 74 I.A. 23. (2) [1940] F.C.E. 188.

195 connotation of the expression “personal liberty,” it was used in article 21 in a sense which excludes the freedoms dealt with in article 19, that is to say, personal liberty in the context of Part III of the Constitution is something distinct from the freedom to move freely throughout the territory of India.

It was further submitted that article 19 declared the substantive rights of personal liberty while article 21 provided the procedural safeguard against their deprivation.

This view of the correlation between the two articles has found favour with some of the Judges in the High Courts which have had occasion to consider the constitutional validity of the impugned Act. It is, however, to be ob- served that article 19 confers the rights therein specified only on the citizens ofIndia, while article 21 extends the protection of life and personal liberty to all persons–citizens and noncitizens alike. Thus, the two articles do not operate in a conterminous field, and this is one reason for rejecting the correlation suggested. Again, if article 21 is to be understood as providing only proce- dural safeguards, where is the substantive right to personal liberty of non-citizens to be found in the Constitution ? Are they denied such right altogether ? If they are to have no right of personal liberty, why is the proce- dural safeguard in article 21 exended to them ? And where is that most fundamental right of all, the right to life, provided for in the Constitution ? The truth is that arti- cle 21, like its American prototype in the Fifth and Four- teenth Amendments of the Constitution of theUnited States, presents an example of the fusion of procedural and substan- tive rights in the same provision. The right to live, though the most fundamental of all, is also one of the most difficult to define and its protection generally takes the form of a declaration that no person shall be deprived of it save by due process of law or by authority of law. “Process” or “procedure” in this context connotes both the act and the manner of proceeding to take away a man’s life or per- sonal liberty. And the first and essential step in a proce- dure established by law for such deprivation must be a law made by a competent legislature 196 Authorising such deprivation. This brings me to the consid- eration of articles 21 and 22 to which was deroted the greater part of the debate at the Bar.

These articles run as follows:

“21. No person shall be deprived of his life or person- al liberty except according to procedure established by law.

22. (1) No person who is arrested shall be detained in custody without being informed, as soon as may be, of the grounds for such arrest, nor shall he be denied the right to consult, and to be defended by, a legal practitioner of his choice.

(2) Every person who is arrested and detained in custody shall be produced before the nearest magistrate within a period of twenty-four hours of such arrest excluding the time necessary for the journey from the place of arrest to the Court of the magistrate and no such person shall be detained in custody beyond the said period without the authority of a magistrate.

(3) Nothing in clauses ‘(1) and (2) shall apply (a) to any person who for the time being is an enemy alien;

or (b) to any person who is arrested or detained under any law providing for preventive detention.

(4) No law providing for preventive detention shall authorise the detention of a person for a longer period than three months unless- (a) an Advisory Board consisting of persons who, are, or have been, or are qualified to be appointed as, Judges of a High Court has reported before the expiration of the said period of three months that there is in its opinion suffi- cient cause for such detention:

Provided that nothing in this sub-clause shall’ autho- rise the detention of any person beyond the maximum period prescribed by any law made by parliament under sub-clause (b) of clause (7); or (b) such person is detained in accordance with the provisions of any law made by Parliament under sub-clauses (a) and (b) of clause (7).

197 (5) When any person is detained in pursuance of an order made under any law providing for preventive detention, the authority making the order shall, as soon as may be, commu- nicate to such person the grounds on which the order has been made and shall afford him the earliest opportunity of making a representation against the order.

(6) Nothing in clause (5) shall require the authority making any such order as is referred to in that clause to disclose facts which such authority considers to be against the public interest to disclose.

(7) Parliament may by law prescribe (a) the circumstances under which, and the class or classes of cases in which, a person may be detained for a period longer than three months under any law providing for preven- tive detention without obtaining the opinion of an Advisory Board in accordance with the provisions of sub-clause (a) of clause (4);

(b) the maximum period for which any person may in any class or classes of cases be detained under any law provid- ing for preventive detention; and (c) the procedure to be followed by an Advisory Board in an inquiry under sub-clause (a) of clause (4).” Mr. Nambiar urged that the word “law” in article 21 should be understood, not in the sense of an enactment but as signifying the immutable and universal principles of natural justice–the jus naturale of the civil law–and that the expression “procedure established by law” meant the same thing as that famous phrase “due process of law” in the American Constitution in its procedural aspect.

Numerous American decisions were cited to show that the phrase implied the basic requirements of (1) an objective and ascertainable standard of conduct to which it is possi- ble to conform, (2) notice to the party of the accusation against him, (3) a reasonable opportunity for him to estab- lish his innocence, and (4) an impartial tribunal capable of giving an unbiased judgment Mr. Nambiar conceded that these requirements might have to be modified or adapted to suit the nature of the particular proceeding and the object it had in 198 view, as for instance, in a case of preventive detention, previous notice, which might result in the person concerned going underground might be dispensed with Learned counsel insisted that these requirements, being the very core of the principles of natural justice which transcended all State- made laws, must be substantially complied with by any law governing the process of deprivation of life or personal liberty, subject, of course, to any express provision in the Constitution sanctioning their relaxation or dispensation in any case or class of cases. He also appealed to the Pream- ble of the Constitution as the guiding star in its interpre- tation to support his thesis that, in view of the democratic Constitution which the people of India have purported to give themselves guaranteeing to the citizens certain funda- mental rights which are justiciabke, the provisions of Part III must be construed as being paramount to the legislative will, as otherwise the socalled fundamental right to life and personal liberty would have no protection against legis- lative action, and article 13 12) would be rendered nugato- ry.

There can be no doubt that the people of India have, in exercise of their sovereign will as expressed in the Pream- ble, adopted the democratic ideal which assures to the citizen the dignity of the individual and other cherished human values as a means to the full evolution and expression of his personality, and in delegating to the legislature, the executive and the judiciary their respective powers in the Constitution, reserved to themselves certain fundamental rights, socalled, I apprehend, because they have been re- tained by the people and made paramount to the delegated powers, as in the American model. Madison (who played a prominent part in framing the First Amendment of the Ameri- can Constitution) pointing out the distinction, due to historical reasons, between the American and the British ways of securing “the great and essential rights of the people,” observed “Here they are secured not by laws para- mount to prerogative but by Constitutions paramount to laws:” Report on the Virginia Resolutions, quoted in Near v. Minnesota (1).

(1) [1931] USSC 154283 U.S. 697.

109 This has been translated into positive law in Part III of the Indian Constitution, and I agree that in construing these provisions the high purpose and spirit of the Preamble as well as the constitutional significance of a Declaration of Fundamental Rights should be borne in mind. This, howev- er, is not to say that the language of the provisions should be stretched to square with this or that constitutional theory in disregard of the cardinal rule of interpretation of any enactment, constitutional or other, that its spirit, no less than its intendment should be collected primarily from the natural meaning of the words used.

Giving full effect to these principles, however, I am unable to agree that the term “law” in article 21 means the immutable and universal principles of natural justice.

“Procedure established by law” must be taken to refer to a procedure which has a statutory origin, for no procedure is known or can be said to have been established by such vague and uncertain concepts as “the immutable and universal principles of natural justice.” In my opinion, “law” in article 21 means “positive or State-made law.” No doubt, the American Judges have adopted the other connotation in their interpretation of the due process clause in the Fifth and Fourteenth Amendments of the Ameri- can Constitution (” Nor shall any person be deprived of life, liberty or property without due process of law “).

But that clause has an evolutionary history behind it. The phrase has been traced back to 28 Edw. III Ch.3, and Coke in his Institutes identified the term with the expression “the law of the land” in the Great Charter of John. Even in England where the legislative omnipotence of Parliament is now firmly established, Coke understood these terms as implying an inherent limitation on all legislation,and ruled in Dr. Bonham’s Case (1) that “the common law will control Acts of Parliament and sometimes adjudge them to be utterly void when they are against common right and reason.” Though this doctrine was later discarded in Englandas being “a warning (1) 8 Rep. 118 (a).

26 200 rather than an authority to be followed” [per Willes J. in Lee v. Dude and Torrington Ry. (1)] it gained ground m America, at first as a weapon in the hands of the Revolu- tionists with which to resist the laws of Parliament, and later as an instrument in the hands of the Judges for estab- lishing the supremacy of the judiciary [see Calder v. Bull (“‘)]. In the latter half of the 19th century, this doc- trine of a transcendental common law or natural justice was absorbed in the connotation of the phrase “due process of law” occurring in the Fifth and Fourteenth Amendments. By laying emphasis on the word” due,” interpreting “law” as the fundamental principles of natural justice and giving the words “liberty” and “property” their widest meaning, the Judges have made the due process clause into a general restriction on all legislative power. And when that power was threatened with prostration by the excesses of due process, the equally vague and expansive doctrine of “police power,” i.e., the power of Government to regulate private rights in public interest, was evolved to counteract such excesses. All this has been criticised as introducing great uncertainty in the state of the law in that country, for no one could be sure how due process of law would affect a particular enactment. A century after the phrase had been the subject of judicial interpretation one learned Judge observed in 1877 that it was incapable of precise definition and that its intent and application could only be ascer- tained by “the gradual process of inclusion and exclusion” [Davidson v. New Orleans (3)]and, as recently as 1948, another Judge referred to the difficulty of “giving defi- niteness to the vague contours of due process” and “of spinning judgment upon State action out of that gossamer concept:” Haley v. State of Ohio (4).

It is not a matter for surprise, therefore, that the Drafting Committee appointed by the Constituent Assembly of India recommended the substitution of the expression “except according to procedure (1) (1871) L.R. 6 C.P. 576, 582. (3) 96U.S.

97.

[1798] USSC 3(1798) 3 Dallas 386. (4) 332U.S.

596.

201 established by law” taken from the Japanese Constitution, 1946, for the words “without due process of law” which occurred in the original draft, “as the former is more specific.” In their Report the Committee added that they have “attempted to make these rights (fundamental rights) and the. limitations to which they must necessarily be subject as definite as possible, since the Courts may have to pronounce upon them” (para. 5). In the face of all these considerations, it is difficult to accept the suggestion that “law” in. article 21 stands for the jus naturale of the civil law, and that the phrase “according to procedure established by law” is equivalent to due process of law in its procedural aspect, for that would have the effect of introducing into our Constitution those “subtle and elusive criteria” implied in that phrase which it was the deliberate purpose of the framers of our Constitution to avoid.

On the other hand, the interpretation suggested by the Attorney-General on behalf of the intervener that the ex- pression means nothing more than procedure prescribed by any law made by a competent legislature is hardly more accept- able. “Established” according to him, means prescribed, and if Parliament or the Legislature of a State enacted a proce- dure, however novel and ineffective for affording the ac- cused person a fair opportunity of defending himself, it would be sufficient for depriving a person of his life or personal liberty. He submitted that the Constituent Assem- bly definitely rejected the doctrine of judicial supremacy When it rejected the phrase “due process of law” and made the legislative will unchallengeable, provided only “some procedure” was laid down. The Indian Constitution having thus preferred the English doctrine of Parliamentary supremacy, the phrase “procedure established by law” must be construed in accordance with the English view of due process of law, that is to say, any procedure which Parliament may choose to prescribe. Learned counsel drew attention to the speeches made by several members of the Assembly on the floor of the House for explaining, as he put it, the “his- torical background.” A speech 202 made in the course of the debate on a bill could at best be indicative of the subjective intent of the speaker, but it could not reflect the inarticulate mental processes lying behind the majority vote which carried the bill. Nor is it reasonable to assume that the minds of all those legislators were in accord. The Court could only search for the objec- tive intent of the legislature primarily in the words used in the enactment, aided by such historical material as reports of statutory committees, preambles etc. I attach no importance, therefore, to the speeches made by some of the members of the Constituent Assembly in the course of the debate on article 15 (now article 21).

The main difficulty I feel in accepting the construction suggested by the Attorney-General is that it completely stultifies article 13 (2) and, indeed, the very conception of a fundamental right. It is of the essence of that con- ception that it is protected by the fundamental law of the Constitution against infringement by ordinary legislation.

It is not correct to say that the Constitution has adopted the doctrine of Parliamentary supremacy. So far, at any rate, as Part III is concerned, the Constitution, as I have already observed, has accepted the American view of funda- mental rights. The provisions of articles 13 and 32 make this reasonably clear. Could it then have been the inten- tion of the framers of the Constitution that the most impor- tant fundamental rights to life and personal liberty should be at the mercy of legislative majorities as, in effect, they would be if “established” were to mean merely “pre- scribed ?” In other words, as an American Judge said in a similar context, does the constitutional prohibition in article 13 (2) amount to no more than “You shall not take away life or personal freedom unless you choose to take it away,” which is mere verbiage. It is no sound answer to say that, if article 21 conferred no right immune from legisla- tive invasion, there would be no question of contravening article 13 (2). The argument seems, to my mind, to beg the question, for it assumes that the article affords no such immunity. It is said that article 21 affords no protection against competent legislative action in 203 the field of substantive criminal law, for there is no provision for judicial review, on the ground of reasonable- ness or otherwise, of such laws, as in the case of the rights enumerated in article 19. Even assuming it to be so the construction of the learned Attorney. General would have the effect of rendering wholly ineffective and illusory even the procedural protection which the article was un- doubtedly designed to afford. It was argued that “law” in article 31 which provides that no person shall be deprived of his property “save by authority of law” must mean enacted law and that if a person’s property could be taken away by legislative action, his right to life and personal liberty need not enjoy any greater immunity. The analogy is mis- leading. Clause (2) of article 31 provides for payment of compensation and that right is justiciable except in the two cases mentioned in clauses (4) and (6) which are of a tran- sitory character. The constitutional safeguard of the right to property in the said article is, therefore, not so illu- sory or ineffective as clause (1) by itself might make it appear, even assuming that” law” there means ordinary legis- lation.

Much reliance was placed on the Irish case The King v.

The Military Governor of Hare Park Camp (1) where the Court held that the term “law” in article 6 of the Irish Constitu- tion of 1922 which provides that “the liberty of the person is inviolable and no person shall be deprived of his liberty except in accordance with law” meant a law enacted by the Parliament, and that therefore the Public Safety Act of 1924 did not contravene the Constitution. The Court followed The King v. Halliday(2) where the House of Lords by a majority held that the Defence of the Realm (Consolidation) Act, 1914, and the Regulations framed thereunder did not infringe upon the Habeas Corpus Acts and the Magna Carta “for the simple reason that the Act and the Orders become part of the law of the land.” But that was because, as Lord Dunedin pointed out “the British Constitution has entrusted to the two Houses of parliament subject to the assent (1) [19241 2 I.R. 104. (2) [1917] A.C.

260.

204 of the King, an absolute power untrammelled by any written instrument obedience to which may be compelled by some judicial body,” whereas the Irish Constitution restricted the legislative powers of the Irish Parliament by a formal declaration of funda mental rights and by providing for a judicial review of legislation in contravention of the Constitution (article 65). This radical distinction was overlooked.

The Attorney-General further submitted that, even on his interpretation, article 21 would be a protection against violation of the rights by the executive and by individuals, an d that would be sufficient justification for the article ranking as a fundamental safeguard. There is no substance in the suggestion. As pointed out in Eshugbayi Eleko v. Gov- ernment of Nigeria(Officer Administering) (1), the execu- tive could only act in pursuance of the powers given by law and no constitutional protection against such action is really needed. Even in monarchical Britainthe struggle between prerogative and law has long since ended in favour of the latter. “In accordance with British jurisprudence” said Lord Atkin in the case cited above, “no member of the executive can interfere with the liberty or property of a British subject except on the condition that he can support the legality of his action before a Court of justice.” As for protection against individuals, it is a misconception to think that constitutional safeguards are directed against individuals. They are as a rule directed against the State and its organs. Protection against violation of the rights by individuals must be sought in the ordinary law. It is therefore difficult to accept the suggestion that article 21 was designed to afford protection only against infringements by the executive or individuals. On the other hand,the insertion of a declaration of Fundamental Rights in the forefront of the Constitution, coupled with an express prohibition against legislative interference with these rights (article 13) and the provision of a constitutional sanction for the enforcement of such prohibition by means of a judicial review (article 32) is, in my (1) [1931] UKPC 37[1931] A.C. 662.

205 opinion, a clear and emphatic indication that these rights are to be paramount to ordinary State-made laws.

After giving the matter my most careful and anxious consideration, I have come to the conclusion that there are only two possible solutions of the problem. In the first place, a satisfactory via media between the two extreme positions contended for on either side may be found by stressing the word “established” which implies some degree of firmness, permanence and general acceptance, while it does not exclude origination by statute. “Procedure estab- lished by law” may well be taken to mean what the Privy Council referred to in King Emperor v. Benoari Lal Sharma (1) as “the ordinary and well-established criminal proce- dure,” that is to say, those settled usages and normal modes of proceeding sanctioned by the Criminal Procedure Code which is the general law of criminal procedure in the coun- try. Their Lordships were referring to the distinction between trial by special Courts provided by an Ordinance of the Governor-General and trial by ordinary Courts under the Criminal Procedure Code. It can be no objection to this view that the Code prescribes no single and uniform proce- dure for all types of cases but provides varying procedures for different classes of cases. Certain basic principles emerge as the constant factors common to all those proce- dures, and they form the core of the procedure established by law. I realise that even on this view, the life and liberty of the individual will not be immune from legisla- tive interference, for a competent legislature may change the procedure so as to whittle down the protection if so minded. But, in the view I have indicated, it must not be a change ad hoc for any special purpose or occasion, but a change in the general law of procedure embodied in the Code.

So long as such a change is not effected, the protection under article 21 would be available. The different measures of constitutional protection which the fundamental right to life and personal liberty will enjoy under article 21 as interpreted in the three ways (1) [1945] F.C.R. 161,175.

206 referred to above will perhaps be best illustrated by a concrete example. Suppose that article 22 (1) was not there and Parliament passed an Act, as a temporary measure, taking away in certain cases the right of an accused person to be defended by a legal practitioner. According to the petition- er’s learned counsel the Act would be void as being contrary to the immutable principles of natural justice embodied in article 21, whereas on the construction contended for by the Attorney-General, the Act would be perfectly valid, while, on the view I have indicated above, the Act would be bad, but if the denial of such right of defence is made a normal feature of the ordinary law of criminal procedure by abro- gating section 340 (1)of the Code, article 21 would be powerless to protect against such legislative action.

But in a free democratic republic such a drastic change in the normal law of procedure, though theoretically possi- ble, would be difficult to bring about, and that practical difficulty will be the measure of the protection afforded by article 21.

It was said that the safeguards provided in clauses (1) and (2) of article 22 are more or less covered by the provisions of the Criminal Procedure’ Code, and this overlapping would have been avoided if article 21 were intended to bear the construction as indicated above. The argument overlooks that, while the provisions of the Code would be liable to alteration by competent legislative action, the safeguards in clauses (1)and (2) of article 22, being constitutional, could not be similarly dealt with: and this sufficiently explains why those safeguards find a place in the Constitution.

The only alternative to the construction I have indi- cated above, if a constitutional transgression is to be avoided, would be to interpret the reference to “law” as implying a constitutional amendment pro tanto, for it is only a law enacted by the procedure provided for such amend- ment (article 368) that could modify or override a fundamen- tal right without contravening article 13 (2).

207 The question next arises as to how far the protection under article 21, such as it has been found to be, is avail- able to persons under preventive detention. The learned Attorney-General contended that article 21 did not apply to preventive detention at all, as article 22 clauses (4) to (7) formed a complete code of constitutional safeguards in respect of preventive detention,and, provided only these provisions are conformed to, the validity of any law relat- ing to preventive detention could not be challenged. I am unable to agree with this view. The language of article 21 is perfectly general and covers deprivation of personal liberty or incarceration, both for punitive and preventive reasons. If it was really the intention of the framers of the Constitution to exclude the application of article 21 to cases of preventive detention, nothing would have been easier than to add a reference to article 21 in clause (3) of article 22 which provides that clauses (1) and (2) of the latter shall not apply to any person who is arrested or detained under any law providing for preventive detention Nor is there anything in the language of clauses (4) to (7) of article 22 leading necessarily to the inference that article 21 is inapplicable to preventive detention. These clauses deal only with certain aspects of preventive deten- tion such as the duration of such detention, the constitu- tion of an advisory board for reviewing the order of deten- tion in certain cases, the communication of the grounds of detention to the person detained and the provision of an opportunity to him of making a representation against the order. It cannot be said that these provisions form an exhaustive code dealing with all matters relating to preven- tive detention and cover the entire area of protection which article 21, interpretedin the sense I have indicated above, would afford to the person detained. I am, therefore, of opinion that article 21 is applicable to preventive deten- tion as well.

I will now proceed to examine whether the impugned Act or any of its provisions under which the petitioner has been ordered to be detained, takes away any of the rights con- ferred by articles 21 and 22 or infringes the protection afforded thereby. The 208 outstanding fact to be borne in mind in this connection is that preventive detention has been given a constitutional status. This sinister-looking feature, so strangely out of place in a democratic constitution which invests personal liberty with the sacrosanctity of a fundamental right and so incompatible with the promises of its preamble is doubtless designed to prevent an abuse of freedom by anti-sOcial and subversive elements which might imperil the national welfare of the infant Republic. It is in this spirit that clauses (3) to (7) of article 22 should, in my opinion, be con- strued and harmonised as far as possible with article 21 so as not to diminish unnecessarily the protection afforded for the legitimate exercise of personal liberty. In the first place, as already stated, clause (3) of article 22 excludes a, person detained under any law providing for preventive detention from the benefit of the safeguards provided in clauses (1) and (2) No doubt clause (5) of the same article makes some amends for the deprivation of these safeguards in that it provides for the communication to the person detained the grounds on which the order has been made and for an opportunity being afforded to him of making a representation against the order, but the important right to consult and to be defended by a legal practitioner of his choice is gone. Similarly, the prohibition against detention in custody beyond a period of 24 hours without the authority of a magistrate has also been taken away m cases of preventive detention. It was not disputed that, to the extent to which the express provisions of clauses (4) to (7) authorised the abrogation or abridgement of the safeguards provided under other articles or substitution of other safeguards in a modified form, those express provisions must rule. Of the four essentials of the due process on which Mr. Nambiar insisted, (which also form part of the ordinary and established procedure under the Criminal Procedure Code, though I cannot agree that they are immutable and beyond legislative change) the requirements of notice and an opportunity to establish his innocence must, as already stated, be taken to have 209 been provided for by clause (5)of article 22. As for an ascertainable standard of conduct to which it is possible to conform, article 22 makes no specific provision in cases of preventive detention, and if such a safeguard can be said to be implicit in the procedure established by law in the sense explained above in preventive detention cases, it could no doubt be invoked. This point will be considered presently in dealing with provisions of the impugned Act.

The only other essential requirement, and the mostessen-tial of all, is an impartial tribunal capable of giving an unbiassed verdict. This, Mr. Nambiar submitted, was left unprovided for by article 22, the advisory board referred to in clause (4) (a) being, according to him, intended to deal solely with the question of duration of the detention, that is to say, whether or not there was sufficient cause for detaining the person concerned for more than three months, and not with judging whether the person detained was innocent. A tribunal which could give an unbiassed judg- ment on that issue was an essential part of the protection afforded by article21 in whichever way it may be interpret- ed, and reference was made in this connection to the preven- tive provisions of the Criminal Procedure Code (Ch. VIII).

The impugned Act, not having provided for such a tribunal contravened article 21 and was therefore void. It will be seen that the whole of this argument is based on the major premise that the advisory board mentioned in clause (4) (a) of article 22 is not a tribunal intended to deal with the issue of justification of detention. Is that view correct? It was argued that the words “sufficient cause for such detention” in sub-clause (a) of clause (4) had reference to the detention beyond three months mentioned in clause (4) and that this view was supported by the language of sub- clause (a) of clause (7) whereby Parliament is authorised to prescribe the circumstances under’which and the class or classes of cases in which a person may be detained for a period longer than three months without the opinion of an advisory board. In other words, learned counsel submitted, 210 the combined effect of clauses (4) and (7) was that no person could be detained for a period over three months without obtaining the opinion of an advisory board that there was sufficient cause for detention for the longer period, except in cases where Parliament passed a law autho- rising detention for such period even without the opinion of an advisory board. Thus, these two clauses were concerned solely with the duration of the preventive detention, and so was the advisory board which those clauses provided for that purpose. I am unable to accept this view. I am inclined to think that the words “such detention” in sub-clause (a) refer back to the preventive detention mentioned in clause (4) and not to detention for a longer period than three months. An advisory board, composed as it has to be of Judges or lawyers, would hardly be in a position to judge how long a person under preventive detention, say, for reasons connected with defence, should be detained. That must be a matter for the executive authorities, the Depart- ment of Defence, to determine, as they alone are responsible for the defence of the country and have the necessary data for taking a decision on the point. All that an advisory board can reasonably be asked to do, as a safeguard against the misuse of the power, is to judge whether the detention is justified and not arbitrary or mala fide. The -fact that the advisory board is required to make its report before the expiry of three months and so could submit it only a day or two earlier cannot legitimately lead to an inference that the board was solely concerned with the issue whether or not the detention should continue beyond that period. Before any such tribunal could send in its report a reasonable time must elapse, as the grounds have to be communicated to the person detained, he has to make his representation to the detaining authority which has got to be placed before the board through the appropriate departmental channel. Each of these steps may, in the course Of official routine, take some time, and ‘three months’ period might well have been thought a reasonable period to allow before the board could be-required to submit its report.

211 Assuming, however, that the words “such detention” had reference to the period of detention, there is no apparent reason for confining the enquiry by the advisory board to the sole issue of duration beyond three months without reference to the question as to whether the detention was justified or not. Indeed, if is difficult to conceive how a tribunal could fairly judge whether a person should be detained for more than three months without at the same time considering whether there was sufficient cause for the detention at all. I am of opinion that the advisory board referred to in clause (4) is the machinery devised by the Constitution for reviewing orders for preventive detention in certain cases on a consideration of the representations made by the persons detained. This is the view on which Parliament has proceeded in enacting the impugned Act as will be seen from sections 9 and 10 thereof, and I think it is the correct view. It follows that the petitioner cannot claim to have his case judged by any other impartial tribu- nal by virtue of article 21 or otherwise.

Mr. Nambiar, however, objected that, on this view, a law could authorise preventive detention for three months with- out providing for review by any tribunal, and for even longer periods if Parliament passed an Act such as is con- templated in sub-clause (a) of clause (7). That may be so, but, however deplorable such a result may be from the point of view of the person detained, there could be no remedy if, on a proper construction of clauses (4) and (7), the Consti- tution is found to afford no higher protection for the personal liberty of the individual.

Turning next to the provisions of the impugned Act, whose constitutional validity was challenged, it will be necessary to consider only those provisions which affect the petitioner before us. In the first place, it was contended that section 3, which empowers the Central Government or the State Government to detain any person if it is “satisfied” that it is necessary to do so with a view to preventing him from acting in any manner prejudicial to (among other 212 things) the security of the State or the maintenance of public order, cannot be said to comply with the procedure established by law, as the section prescribes no objective and ascertainable standard of conduct to which it will be possible to conform, but leaves it to the will and pleasure of the Government concerned to make an order of detention.

TIm argument proceeds on the assumption that the procedure established by law is equivalent to the due process of law.

I have already endeavoured to show that it is not Apart from this, the argument overlooks that for the purposes of preventive detention it would be difficult, if not impossi- ble to lay down objective rules of conduct failure to conform to which should lead to such detention. As tim very term implies, the detention in such cases is effected with a view to prevent the person concerned from acting prejudi- cially to certain objects which the legislation providing for such detention has in view. Nor would it be practicable to indicate or enumerate in advance what acts or classes of acts would be regarded as prejudicial. The responsibility for the security of the State and the maintenance of public order etc. having been laid on the executive Government it must naturally be left to that Government to exercise the power of preventive detention whenever they think the occa- sion demands it.

Section 12 came in for a good deal of criticism. That section, which governs the duration of thepetitioner’s detention reads as follows :– “Duration of detention in certain cases.–Any person detained in any of the following classes of cases or under any of the following circumstances may be detained without obtaining the opinion of an Advisory Board for a period longer than three months, but not exceeding one year from the date of his detention, namely, where such person has been detained with a view to preventing him from acting in any manner prejudicial to:– (a) the defence of India, relations of India with for- eign powers or the security of India; or (b) the security of a State of the maintenance of public order.

213 (2) The case of every person detained under a detention order to which the provisions of sub-section (1) apply shall, within a period of six months from the date of his detention, be reviewed where the order was made by the Central Government or a State Government, by such Govern- ment, and where the order was made by any officer specified in sub-section (2)of section 3, by the State Government to which such officer is subordinate, in consultation with a person who is, or has been, or is qualified to be appointed as a Judge of a High Court nominated in that behalf by the Central Government or the State Government, as the case may be.” It was urged that this did not comply with the require- ments of clause (7) of article 22 as it merely repeated the “matters” or legislative topics mentioned in Entry 9 of List I and Entry 3 of List III of the Seventh Schedule to the Constitution. What Parliament has to do under clause(7) of article 22 is to prescribe “the circumstances under which and the class or classes of cases in which” a person may be detained for a period longer than three months without obtaining the opinion of an advisory board. It was said that clause (4) (a) provided for ordinary cases of preventive detention Where such detention could not continue beyond three months without obtaining the opinion of an advisory board, whereas clause (7) (a) made provision for special cases of detention for more than three months with- out the safeguard of the advisory board’s opinion, for aggravated forms of prejudicial conduct. In other words, clause (4) (a) laid down the rule and clause (7) (a) enacted an exception. It was therefore necessary for Parliarnent to indicate to the detaining authority for its guidance the more aggravated forms of prejudicial activity, and mere mention of the subjects in respect of which Parliament is authorised under the legislative lists to make laws in respect of preventive detention could hardly afford any guidance to such authority and should not be regarded as sufficient compliance with the requirements of clause (7).

There is a two-fold fallacy in 214 this argument. In the first place, the suggested correla- tion between clause (4) (a) and clause (7) (a) as enacting a rule and an exception is, as a matter of construction, without foundation. Reading clauses (4) and (7) together it is reasonably clear that preventive detention could last longer in two cases: (1) where the opinion of an advisory board is obtained, subject however to a prescribed period [sub-clause (a)of clause (4)] and (2) where a person is detained under a law made by Parliament under sub-clauses (a) and (b) of clause (7) [sub-clause (b) of clause (4)].

These are two distinct and independent provisions. It is significant that sub-clause (b) of clause (4) is not worded as a proviso or an exception to sub-clause (a) of the same clause as it would have been if it was intended to operate as such. The attempt to correlate clause (4)(a)and clause (7) (a) as a rule and an exception respectively is opposed both to the language and the structure of those clauses.

‘Secondly, the argument loses sight of the fact that clause (7) deals with preventive detention which is a purely precautionary measure which “must necessarily proceed in all cases, to some extent, on suspicion or anticipation as distinct from proof” [ per Lord Atkinson in Rex v. Halliday (1) ]. The remarks I have’ already made with reference to the absence of any objective rules of conduct in section 3 of the impugned Act apply also to this criticism of section

12. It would be difficult, if not impracticable, to mention the variouscircumstances, or to enumerate the various class- es of cases exhaustively in which a person should be de- tained for more than three months for preventive purposes, except in broad outline. Suppose a person belongs to. an organization pledged to violent and subversive activity as its policy. Beyond his membership of theparty the person might have done nothing until he1 was arrested and detained.

But if released he might indulge in anything from the mild- est form of prejudicial activity, like sticking an objec- tionable handbill on a hoarding, to the most outrageous acts of sabotage.

(1) [1917] UKHL 1L.R. 1917 A.C. 260, 275.

215 How could the insertion in section 12 of a long series of categories of aggravated forms of prejudicial activities, or the enumeration of the various circumstances in which such activities are likely to be indulged in, be of any assist- ance to the detaining authority in determining whether the person concerned should be detained for three months or for a longer period ? All that would be necessary and suffi- cient for him to know for coming to a decision on the point is that the person is a member of such an organisation and will probably engage in subversive activities prejudicial to the security of the State or the maintenance of public order or, in other words, he belongs to class (b) in section 12.

While enumeration and classification in detail would un- doubtedly help in grading punishment for offences committed, they would not be of much use in fixing the duration of preventive detention. Sufficient guidance in such cases could be given by broadly indicating the general nature of the prejudicial activity which a person is likely to indulge in, and that in effect is what Parliament has done in sec- tion 12. Reference was made in this connection to Rule 34 of the Defence of India Rules framed under the Defence of India Act, 1939, where “prejudicial act” is defined by enumeration. But it was also for the purpose of prohibiting such acts [ Rule 38 sub-rule (1) ] and making them offences (sub-rule 5). And even there, the definition had to end in a residuary clause sweeping in acts likely “to prejudice the efficient prosecution of the war, the defence ofBritish Indiaor, the public safety or interest.” In Lists I and III of the Seventh Schedule to the Constitution six topics are mentioned in respect of which Parliament could make laws providing for preventive detention, and section 12 of the impugned Act mentions five of them as being the classes of cases or the circumstances in which longer detention is authorised. I fail to see why this could not be regarded as a broad classification of cases or a broad description of circumstances where Parliament considers longer detention to be justifiable. A class can well be designated with refer- ence to the end which one desires to secure, and the matters referred to as classes (a) 216 and (b) of sub-section (1) of section 12 being clearly the objects which Parliament desired to secure by enacting the section, it seems to me that the classification with refer- ence to such general aims does not contravene article 22 (7).

It was argued that Parliament did not, in enacting section 12, perform its duty of prescribing both the circumstances and the class or classes of cases where detention without obtaining the advisory board’s opinion could be for a period longer than three months. The use of the disjunctive “or” between the word “circumstances” and the words “class or classes of cases” showed, it was said, that Parliament proceeded on the view that it need not prescribe both. This was in contravention of article 22 (7) which used the con- junctive “and” between those words. There is no substance- in this objection. As I read article 22 (7) it means that Parliament may prescribe either the circumstances or the classes of cases or both, and in enacting section 12 Parliament evidently regarded the matters mentioned in clause (a) and (b) of sub-section (1) as sufficiently indic- ative both of the Circumstances under which and the classes in which a person could be detained for the longer period.

To say, for instance, that persons who are likely to act prejudicially to the defence of India may be detained beyond three months is at once to “prescribe a class of persons in which and the circumstances under which” a person may be detained for the longer period. In other words, the classi- fication itself may be such as to amount to a sufficient description of the circumstances for purposes of clause (7).

The circumstances which would justify precautionary deten- tion beyond three months without recourse to an advisory board must be far too numerous for anything approaching an exhaustive enumeration, and it can, in my judgment, be no objection to the validity of section 12 that no circum- stances are mentioned apart from the matters referred to in clauses (a) and (b) of sub-section (1). It would indeed be singular for the Court to strike down a parliamentary enact- ment because in its opinion a 217 certain classification therein made is imperfect or the mention of certain circumstances is unspecific or inade- quate.

Lastly, Mr. Nambiar turned his attack on section 14 which prohibits the disclosure of the grounds of detention communicated to the person detained and of the representa- tion made by him against the order of detention, and debars the Court from allowing such disclosure to be made except for purposes of a prosecution punishable under sub-section (2) which makes it an offence for any person to disclose or publish such grounds or representation without the previous authorisation of the Central Government or the State Government as the case may be. The petitioner com- plains that this provision nullifies in effect the rights conferred upon him under clause (5) of article 22 which entitles him to have the grounds of his detention communi- cated to him and to make a representation against the order.

If the grounds are too vague to enable him to make any such representation, or if they are altogether irrelevant to the object of his detention, or are such as to show that his detention is not bona fide, he has the further right of moving this Court and this remedy is also guaranteed to him under article 32. These rights and remedies, the petitioner submits, cannot be effectively excercised, if he is prevent- ed on pain of prosecution, from disclosing the grounds to the Court. There is great force in this contention. All that the Attorney-General could say in answer was that if the other provisions of the Act were held to be valid, it would not be open to the Court to examine the sufficiency of the grounds on which the executive authority was “satisfied” that detention was necessary, as laid down in Machindar Shivaji Mahar v. The King (1), and so the petitioner could not complain of any infringement of his rights by reason of section 14 which enacted only a rule of evidence. The argument overlooks that it was recognised in the decision referred to above that it would be open to the Court to examine the grounds of detention in order to see whether they were relevant to the object which the legislature had (1) [1949] F.C.R. 827.

218 in view, such as, for instance, the prevention of acts prejudicial to public safety and tranquillity, or were such as to show that the detention was not bona fide. An examina- tion of the grounds for these purposes is made impossible by section 14, and the protection afforded by article 22 (5) and article 32 is thereby rendered nugatory. It follows that section 14 contravenes the provisions of article 22 (5) and article 32 in so far as it prohibits the person detained from disclosing to the Court the grounds of his detention communicated to him by the detaining authority or the repre- sentation made by him against the order of detention, and prevents the Court from examining them for the purposes aforesaid, and to that extent it must be held under article 13 (2) to be void. This however, does not affect the rest of the Act which is severable. As the petitioner did not disclose the grounds of his detention pending our decision on this point he will now be free to seek his remedy, if so advised, on the basis of those grounds.

In the result, the application fails and is dismissed.

MAHAJAN J.–The people ofIndiahaving solemnly resolved to constituteIndiainto a Sovereign Democratic Republic on the 26th day of November 1949 gave to themselves a Constitution which came into force on the 26th January 1950. This is the first case in which this Court has been called upon to determine how far the Constitution has secured personal liberty to the citizens of this country.

A.K. Gopalan, the petitioner, who was already under the custody of the Superintendent, Central Jail, Cuddalore, was served with an order of detention under section 3 (1) of the Preventive Detention Act, 1950 (Act IV of 1950) on the 27th February 1950. It was said in the order that the Governor of Madras was satisfied that it was necessary to make the order with a view to preventing him from acting in any manner prejudicial to the security of the State and the maintenance of public order. On 20th March 1950 a petition was presented to this Court under article 32 219 of the Constitution praying for the issue of a writ of habeas corpus directing the State of Madras to produce him before the Court and to set him at liberty. A writ was accordingly issued. The return to the writ is that the detention is legal under Act IV of 1950, enacted by Parlia- ment. The petitioner contends that the Act abridges and infringes certain provisions of Part III of the Constitution and is thus outside the constitutional limits of the legis- lature and therefore void and unenforceable.

The matter is one of great importance both be-cause the legislative power expressly conferred by the 7th Schedule has been impugned and because the liberty of the citizen is seriously affected. The decision of the question whether Act IV of 1950 takes away or abridges the rights conferred by Part III of the Constitution depends on a consideration of two points:

(1) In what measure has the Constitution secured person- al liberty to a citizen ofIndia, and.

(2) has the impugned legislation in any way taken away or abridged the rights so secured and if so, to what extent ? Act IV of 1950 provides for preventive detention in certain cases and it has been enacted as a temporary meas- ure. It will cease to have effect on 1st April 1951. It empowers the Central Government and the State Governments to make an order directing a person to be detained with a view to preventing him from acting in any manner prejudicial to the defence ofIndia, the relations ofIndiawith foreign powers or the security ofIndia. It also gives power to detain a person who acts in any manner prejudicial to the security of the State or the maintenance of public order or the maintenance of supplies and services essential to the community. It came into force on 26th February 1950 and was enacted by virtue of the powers conferred on Parliament by article 22 clause (7) of Part III of the Constitution read with the entries in the 7th Schedule. There can be no doubt that the legislative will expressed herein 220 would be enforceable unless the legislature has failed to keep within its constitutional limits. It is quite obvious that the Court cannot declare a statute unconstitutional and void simply on the ground of unjust and oppressive provi- sions or because it is supposed to violate natural, social or political rights of citizens unless it it can be shown that such injustice is prohibited or such rights are guaranteed or protected by the Constitution. It may also be observed that an Act cannot be declared void because in the opinion of the Court it is opposed to the spirit supposed to pervade the Constitution but not so expressed in words. It is difficult on any general principles to limit the omnipo- tence of the sovereign legislative power by judicial inter- position except in so far as the express words of a written Constitution give that authority. Article 13 (2) of our Constitution gives such an authority and to the extent stated therein. It says that the State shall not make any law which takes away or abridges the rights conferred by this Part and any law made in contravention of this clause shall to the extent of the contravention be void.

Preventive detention laws are repugnant to democratic constitutions and they cannot be found to exist in any of the democratic countries of the world. It was stated at the Bar that no such law was in force in theUnited States of America. InEnglandfor the first time during the first world war certain regulations framed under the Defence of the Realm Act provided for preventive detention at the satisfaction of the Home Secretary as a war measure and they ceased to have effect at the conclusion of hostilities. The same thing happened during thesecond world war. Similar regulations were introduced during the period of the war inIndiaunder the Defence of India Act. The Government of India Act, 1935, conferred authority on the Central and Provincial Legislatures to enact laws on this subject for the first time and since then laws on this subject have taken firm root here and have become a permanent part of the statute book of this country. Curiously enough, this subject has found place in the Constitution in the.

221 chapter on Fundamental Rights. Entry 9 of the Union List and Entry 3 of the Concurrent List of the 7th Schedule mention the scope of legislative power of Parliament in respect of this topic. The jurisdiction, however, to enact these laws is subject to the provisions of Part III of the Constitu- tion. Article 22 in this Part provides :– “(1 ) No person who is arrested shall be detained in custody without being informed, as soon as may be, of the grounds for such arrest nor shall he be denied the right to consult, and to be defended by, a legal practitioner of his choice.

(2) Every person who is arrested and detained in custody shall be produced before the nearest magistrate within a period of twenty-four hours of such arrest excluding the time necessary for the journey from the place of arrest to the Court of the magistrate and no such person shall be detained in custody beyond the said period without the authority of a magistrate.

(3) Nothing in clauses (1) and (2) shall apply (a) to any person who for the time being is an enemy alien;

or (b) to any person who is arrested or detained under any law providing for preventive detention.

(4) No law providing for preventive detention shall authorise the detention of a person for a longer period than three months unless- (a) an Advisory Board consisting of persons who are, or have been, or are qualified to be appointed as, Judges of a High Court has reported before the expiration of the said period of three months that there is in its opinion suffi- cient cause for such detention:

Provided that nothing in this sub-clause shall authorise the detention of any person beyond the maximum period pre- scribed by any law made by Parliament under sub-clause (b) of clause (7); or (b) such person is detained in accordance with the provisions of any law made by Parliament under sub-clauses (a) and (b) of clause (7).

(5) When any person is detained in pursuance of an order made under any law providing for preventive detention, the authority making the order shall, as soon as may be, commu- nicate to such person the grounds on which the order has been made and shall afford him the earliest opportunity of making a representation against the order.

(6) Nothing in clause (5) shall require the authority making any such order as is referred to in that clause to, disclose facts which such authority considers to be against the public interest to disclose, (7) parliament may by law prescribe (a) the circumstances under which, and the class or classes of cases in which, a person may be detained for a period longer than three months under any law providing for preven- tive detention without obtaining the opinion of an Advisory Board in accordance with the provisions of sub-clause (a) of clause (4);

(b) the maximum period for which any person may in any class or classes of cases be detained under any law provid- ing for preventive detention; and (c) the procedure to be followed by an Advisory Board in an inquiry under sub-clause (a) of clause (4).” The question of the constitutional validity of the impugned statute has to be approached with great caution in view of these provisions of the Constitution and has to be considered with patient attention. The benefit of reasona- ble doubt has to be resolved in favour of legislative ac- tion, though such a presumption is not conclusive- It seems that the subject of preventive detention became the particu- lar concern of the Constitution because of its intimate connection with deprivation of personal liberty to protect which certain provisions were introduced in the Chapter on Fundamental Rights and because of the conditions prevailing in the newly born Republic. Preventive detention means a complete negation of freedom of movement and of personal liberty and is incompatible with both those subjects and yet it is placed in the same compartment with them in Part III of the Constitution.

223 Though the Constitution has recognized the necessity of laws as to preventive detention it has also provided certain safeguards to mitigate their harshness by placing fetters on legislative power conferred on this subject.

These are- (1) That no law can provide for detention for a period of more than three months unless the sufficiency for the cause of the detention is investigated by an advisory board within the said period of three months. This provision limits legislative power in the matter of duration of the period of detention. A law of preventive detention would be void if it permits detention for a longer period than three months without the intervention of an advisory board.

(2) That a State law cannot authorize detention beyond the maximum period prescribed by Parliament under the powers given to it in clause (7). This is a limitation on the legislative power of the State legislature. They cannot make a law authorizing preventive detention for a longer period than that fixed by Parliament.

(3) That Parliament also cannot make a law authorizing detention for a period beyond three months without the intervention of an advisory board unless the law conforms to the conditions laid down in clause (7) of article 22.

Provision also has been made to enable Parliament to make laws for procedure to be followed by advisory boards. This is a safeguard against any arbitrary form of procedure that may otherwise find place in State laws.

Apart from these enabling and disabling provisions certain procedural rights have been expressly safeguarded by clause (5) of article 22. A person detained under a law of preventive detention has a right to obtain information as to the grounds of his detention and has also the right to make a representation protesting against an order of preventive detention. This right has been guaranteed independently of the duration of the period of detention and irrespective of the existence or non-existence of an advisory board. No machinery, however, has been provided or expressly 29 224 mentioned for dealing with this representation. It seems to me that when a constitutional right has been conferred as a necessary consequence, a constitutional remedy for obtaining redress in case of infringement of the right must be pre- sumed to have been contemplated and it could not have been intended that the right was merely illusory and that a representation made may well find place in cold storage.

Consideration of the representation made by virtue of clause (5) by an unbiassed authority is, m my opinion, a necessary consequence of the guaranteed right contained herein. The right has been conferred to enable a detained person to establish his innocence and to secure justice, and no jus- tice can be said to be secured unless the representation is considered by some impartial person. The interpretation that I am inclined to place on clause (5) of article 22 is justi- fied by the solemn words of the declaration contained in the Preamble to the Constitution. It is this declaration that makes our Constitution sublime and it is the guarantees mentioned in the chapter on Fundamental Rights that make it one of the greatest charters of liberty and of which the people, of this country ‘may well be proud. This charter has not been forced out of unwilling hands of a sovereign like the Magna Carta but it has been given to themselves by the people of the country through their Constituent Assem- bly. Any interpretation of the provisions of Part III of the Constitution without reference to this solemn declara- tion is apt to lead one into error. If the right of repre- sentation given to a detained person by clause (5) of arti- cle 22 is a guaranteed right and has been given for the purpose of securing justice, then it follows that no justice can be held secured to him unless an unbiassed person considers the merits of the representation and gives his opinion on the guilt or the innocence of the persons detained. In my view, the right cannot be defeated or made elusive by presuming that the detaining authority itself will consider the representation with an unbiassed mind and will render justice. That would in a way make the prosecu- tor a judge in the case and such a procedure is repugnant.

to all notions 225 of justice. The Constitution has further curtailed the rights given in clause (5) by providing in clause (6) a privilege on the detaining authority of witholding facts which the said authority considers not in public interests to disclose. This privilege has been conferred for the security of the State and possibly for the security of the Constitution itself, but in view of these stringent provi- sions no additional clogs can be put on the proper consider- ation of the representation of the detained person by pre- suming that the detaining authority itself will properly consider the representation. It has also to be remembered in this context that a person-subjected to the law of pre- ventive detention has been deprived of the rights conferred on persons who become subject to the law of punitive deten- tion [vide clauses (1) and (2) of article 22]. He has been denied the right to consult a lawyer or be defended by him and he can be kept in detention without being produced before a magistrate.

Having examined the provisions of article 22, I now proceed to consider the first question that was canvassed before us by the learned Attorney-General, i.e., that arti- cle 22 of the Constitution read with the entries in the 7th Schedule was a complete Code on the subject of preventive detention, and that being so, the other articles of Part III could not be invoked in the consideration of the validity of the impugne’d statute. It was conceded by the learned coun- sel for the petitioner that to the extent that express provisions exist in article 22 on the topic of preventive detention those provisions would prevail and could not be controlled by the other provisions of Part III. It was, however, urged that on matters on which this article had made no special provision on this topic the other provisions of Part III of the Constitution had application, namely, articles 10 and 21 and to that extent laws made on this subject were justiciable. In order to draw the inference that the framers of the Constitution intended the provisions as regards preventive detention in article 22 to be self- contained a clear indication of such an intention has to be gathered. If the provisions embodied in this article have dealt 226 with all the principal questions that are likely to arise in matters of procedure or on questions of the reasonableness of the period of detention, the inference of such an indica- tion would be irresistible. Ordinarily when a subject is expressly dealt with in a constitution in some detail, it has to be assumed that the intention was to exclude the application of the general provisions contained therein elsewhere. Express mention of one thing is an exclusion of the other. Expressio unius est exclusio alterius. I am satisfied on a review of the whole scheme of the Constitu- tion that the intention was to make article 22 self-con- tained in respect of the laws on the subject of preventive detention. It was contended that all the articles in the Constitution should be read in an harmonious manner and one article should not be read as standing by itself and as having no connection with the other articles in the same part. It was said that they were all supplementary to one another. In this connection it was argued that a law made under article 22 would not be valid unless it was in accord with the provisions of article 21 of the Constitution. This article provides that no person shall be deprived of life or liberty’ except according to procedure established by law.

It was contended that in substance the article laid down that no person will be deprived of life or liberty without having been given a fair trial or a fair hearing and that unless a law of preventive detention provided such a hearing that law would be in contravention of this article and thus void. Conceding for the sake of argument (but without expressing any opinion on it ) that this contention of the learned counsel is correct, the question arises whether there is anything in article 22 which negatives the application of article 21 as above construed to a law on preventive detention. In my opinion, sub-clause (5) of article 22 read with clauses (1) and (2) leads to the inference that the contention raised by the learned counsel is unsound. Clause (5), as already stated, provides that notice has to be given to a detenu of the grounds of his detention. It also provides a limited hearing inasmuch as it gives him an opportunity to 227 establish his innocence. As, in my opinion, the considera- tion of a representation made by a detained person by an unbiassed authority is implicit in clause (5) it gives to the detained person all that he is entitled to under the principles of natural justice. The right to consult and to be represented by a counsel of his own choice has been denied in express terms to such a person by the Constitu- tion. He is also denied an opportunity of appearing before a magistrate. When the Constitution has taken away certain rights that ordinarily will be possessed by a detained person and in substitution thereof certain other rights have been conferred on him even in the matter of procedure, the inference is clear that the intention was to deprive such a person of the right of an elaborate procedure usually pro- vided for in judicial proceedings. Clause (6) of article 22 very strongly supports this conclusion. There would have been no point in laying down such detailed rules of proce- dure in respect of a law of preventive detention if the intention was that such a law would be subject to the provi- sions of article 21 of the Constitution. In its ultimate analysis the argument of the learned counsel for the peti- tioner resolves itself to this: that the impugned statute does not provide for an impartial tribunal for a considera- tion of the representation of the detained person and to this extent it contravenes article 21 of the Constitution.

As discussed above, in ray opinion, such a provision is implicit within article 22 itself and that being so, the application of article 21 to a law made under article 22 is excluded.

It was next contended that a law of preventive detention encroaches on the right of freedom of movement within the territory of India guaranteed to a citizen under article 19 (1) (d) and that being so, by reason of the provisions of sub-clause (5) of article 19 it was justiciable on the ground of reasonableness. It is true, as already pointed out, that a law of preventive detention is wholly incompati- ble with the right of freedom of movement of a citizen.

Preventive detention in substance is a negation of the freedom of locomotion guaranteed under article 19 (1) (d) but it cannot be said that it merely restricts it. Be that as it may, the 228 question for consideration is whether it was intended that article 19 would govern a law made under the provisions of article 22. Article 19 (5) is a saving and an enabling provision. It empowers Parliament to make a law imposing reasonable restriction on the right of freedom of movement while article 22 (7) is auother enabling provision empower- ing Parliament to make a law on the subject of preventive detention in certain circumstances. If a law conforms to the conditions laid down in ‘article 22 (7), it would be a good law and it could not have been intended that that law validly made should also conform itself to the provisions of article 19 (5). One enabling provision cannot be considered as a safeguard against another enabling provision. Article 13 (2) has absolutely no application in such a situation.

If the intention of the constitution was that a law made on the subject of preventive detention had to be tested on the touchstone of reasonableness, then it would not have trou- bled itself by expressly making provision in article 22 about the precise scope of the limitation subject to which such a law could be made and by mentioning the procedure that the law dealing with that subject had to provide. Some of the provisions of article 22 would then have been redun- dant, for instance, the provision that no detention can last longer than three months without the necessity of such detention being examined by an advisory board. This provi- sion negatives the idea that the deprivation of liberty for a period of three months without the consultation of the advisory board would be justiciable on the ground of reason- ableness. Again article 22 has provided a safeguard that if an advisory board has to be dispensed with, it can only be so dispensed with under a law made by Parliament and that Parliament also in enacting such a law has to conform to certain conditions. This provision would have’ been unnec- essary in article 22 if a law on this subject was justicia- ble. In sub-clause (b) of clause (7) of article 22 provision has been made enabling Parliament to fix the maximum period for which a person can be detained under a law on the sub- ject of preventive detention. Under 229 this express provision it is open to Parliament to fix any period, say, even a period of five to ten years as the maximum period of detention of a person. Can it be said that in view of this express provision of the Constitution such a law was intended to be justiciable by reason of article 19 (5) ? Duration of detention is the principal matter in preventive detention laws which possibly could be examined on the touchstone of reasonableness under article 19 (5), but this has been expressly excluded by express provisions in article 22. In my judgment, therefore, an examination of the provisions of article 22 clearly suggests that the intention was to make it self-contained as regards the law of preventive detention and that the validity of a law on the subject of preventive detention cannot be exam- ined or controlled either by the provisions of article 21 or by the provisions of article 19 (5) because article 13 (2) has no application to such a situation and article 22 is not subject to the provisions of these two articles. The Consti- tution in article 22 has gone to the extent of even provid- ing that Parliament may by law lay down the procedure to be followed by an advisory board. On all important points that could arise in connection with the subject of preventive detention provision has been made in article 22 and that being so, the only correct approach in examining the validi- ty of a law on the subject of preventive detention is by considering whether the law made satisfied the requirements of article 22 or in any way abridges or contravenes them and if the answer is in the affirmative, then the law will be valid, but if the answer is in the negative, the law would be void.

In expressing the view that article 22 is in a sense self-contained on the law of preventive detention I should not however be understood as laying down that the framers of the article in any way overlooked the safeguards laid down in article 21. Article 21, in my opinion. lays down sub- stantive law as giving protection to life and liberty inas- much as it says that they cannot be deprived except accord- ing to the procedure established by law; in other words, it means that before a person can be deprived of his life or liberty 230 as a condition precedent there should exist some substantive law conferring authority for doing so and the law should further provide for a mode of procedure for such depriva- tion. This article gives complete’ immunity against the exercise of despotic power by the executive. It further gives immunity against invalid laws which contravene the Constitution. It gives also further guarantee that in its true concept there should be some form of proceeding before a person can be condemned either in respect of his life or his liberty. It negatives the idea of fantastic, arbitrary and oppressive forms of proceedings. The principles there- fore underlying article 21 have been kept in view in draft- ing article 22. A law properly made under article 22 and which is valid in all respects under that article and lays down substantive as well as adjective law on this subject would fully satisfy the requirements of article 21, and that being so, there is no conflict between these two articles.

The next question that arises for decision is whether there is anything in Act IV of 1950 which offends against the provisions of article 22 of Part III of the Constitu- tion. The learned counsel for the petitioner contended that section 3 of the Act was bad inasmuch as it made “satisfaction of the Government” as the criterion for de- taining a person. It was said that as section 3 laid down no objective rule of conduct for a person and as people were not told as to what behaviour was expected of them, the result was that it could not be known what acts a person was expected to avoid and what conduct on his part was prejudi- cial to the security of the State or the maintenance of’ public order; in other words, it was argued that section 3 left the determination of the prejudicial act of a person to the arbitrary judgment of the Government and that even the officer who was to administer this law had been furnished no guide and no standard of conduct in arriving at his own satisfaction whether the conduct was prejudicial to the security of the State etc. This criticism of the learned counsel, in my opinion, is not valid, It is no doubt true that a detention order depends on the satisfac- tion of the’ 231 Government but this provision is in accordance with article 22 of the Constitution which to my mind contemplates detention on the satisfaction of the executive authority.

By its very nature the subject is such that it implies detention on the judgment of the authority entrusted with the making of the order. The whole intent and purpose of the law of preventive detention would be defeated if satis- faction of the authority concerned was subject to such an objective standard and was also subject to conditions as to legal proof and procedure. In the 7th Schedule jurisdiction to make the law on this subject has been given for reasons connected with defence etc. and the maintenance of public order. These are subjects which concern the life and the very existence of the State. Every citizen is presumed to know what behaviour is prejudicial to the life of the State or to its existence as an ordered State. Considering that the State is presumed to have a government that conducts itself in a reasonable way and also presuming that its officers usually will be reasonable men, it cannot be said that in making “satisfaction of the government” as the standard for judging prejudicial acts of persons who are subject to the law of preventive detention section 3 in any way contravenes article 22 of the constitution.

Section 7 of the impugned Act gives full effect to the provisions of article 22 sub clause (5) and enacts that representation has to be made to the Central or State Gov- ernment as the case may be. It was impeached on the ground that no machinery has been provided herein to consider and adjudicate on the merits of the representation. To this extent, as already indicated, the law is defective. In the absence of a machinery for the investigation of the conten- tions raised in the representation it may be open to the detenu to move this Court under article 32 for a proper relief. It is, however, unnecessary to express any opin- ion as to the precise remedy open to a detained person in this respect. The absence of a provision of this nature in the statute however would not make the law wholly void.

Section 9 of the Act makes reference 30 232 to the advisory board obligatory in cases falling under sub-clause (iii) of clause (a) or clause (b) of sub-section (1) of section a within six weeks of the order. The proce- dure to be followed by the advisory board is laid down in section 10. Parliament has been authorized to lay down such a procedure to be followed by an advisory board in sub- clause (c) of clause (7). It was contended that the law had not provided a personal hearing to the detenu before an advisory board, nor had it given him a right to lead evi- dence to establish his innocence. In my opinion, this criticism is not sound and does not in any way invalidate the law. The advisory board has been given the power to call for such information as it requires even from the person detained. It has also been empowered to examine the materi- al placed before it in the light of the facts and arguments contained in the representation. The opportunity afforded is not as full as a person gets under normal judicial proce- dure but when the Constitution itself contemplates a special procedure being prescribed for preventive detention cases, then the validity of the law on that subject cannot be impugned on the grounds contended for.

Section 11 of the Act was also impugned on the ground that it offended against the Constitution inasmuch as it provided for preventive detention for an indefinite period.

This section in my opinion has to be read in the background of the provision in sub-clause (3) of section 1 of the Act which says that the Act will cease to have effect on 1st April, 1951. Besides, the words “for such period as it thinks fit” do not in any way offend against the provisions of article 22 wherein Parliament has been given the power to make a law fixing the maximum period for preventive deten- tion. It has to be noted that Parliament has fixed a period of one year as the maximum period for the duration of detention where detention has to be without reference to an advisory board. In my opinion, there is nothing in section 11 which is outside the constitutional limits of the powers of the supreme legislature.

233 It is section 12 of the Act which was assailed by the learned counsel for the petitioner rather vehemently. This section is of a very controversial character. It has been enacted on the authority of clause (7) of article 22 and runs thus :– “(1) Any person detained in any of the following classes of cases or under any of the following circumstances may be detained without obtaining the opinion of an Advisory Board for a period longer than three months, but not exceed- ing one year from the date of his detention, namely, where such person has been detained with a view to preventing him from acting in any manner prejudicial to- (a) the defence of India, relations of India with for- eign powers or the security of India; or (b) the security of a State or the maintenance of public order.

(2) The case of every person detained under a detention order to which the provisions of sub-section (1) apply shall, within a period of six months from the date of his detention, be reviewed where the order was made by the Central Government or a State Government, by such Govern- ment, and where the order was made by any officer specified in sub-section (2) of section a, by the State Government to which such officer is subordinate, in consultation with a person who is, or has been, or is qualified to be appointed as, a Judge of a High Court nominated in that behalf by the Central Government or the State Government, as the case may be.” The section purports to comply with the conditions laid down in clause (7) of article 22. It was, however, argued that in substance and reality it has failed to comply with any of the conditions laid down therein; that it neither mentions the circumstances under which nor the classes of cases in which preventive detention without recourse to the machinery of an advisory board could be permitted. The crucial question for consideration is whether section 12 mentions any circumstances under which or defined the class- es of cases in which authority was conferred by clause (7) 234 to dispense with an advisory board. So far as I have been able to gather from opinions of text-book writers on the subject of classification, the rule seems clear that in making classification of cases there has to be some rela- tionship to the classification to the objects sought to be accomplished. The question for consideration therefore is what object was sought to be accomplished when the Constitu- tion included clause (7) in article 22. It seems clear that the real purpose of clause (7) was to provide for a contin- gency where compulsory requirement of an advisory board may defeat the object of the law of preventive detention. In my opinion, it was incorporated in the Constitution to meet abnormal and exceptional cases, the cases being of a kind where an advisory board could not be taken into confidence.

The authority to make such drastic legislation was entrusted to ‘the supreme legislature but with the further safeguard that it can only enact a law of such a drastic nature provided it prescribed the circumstances under which such power had to be used or in the alternative it prescribed the classes of cases or stated a determinable group of cases in which this could be done. The intention was to lay down some objective standard for the guidance of the detaining authority on the basis of which without consultation of an advisory board detention could be ordered beyond the period of three months. In this connection it has to be remembered that the Constitution must have thought of really some abnormal situation and of some dangerous groups of persons when it found it necessary to dispense with a tribu- nal like an advisory board which functions in camera and which is not bound even to give a personal hearing to the detenu and whose proceedings are privileged. The law on the subject of preventive detention in order to avoid even such an innocuous institution could only be justified on the basis of peculiar circumstances and peculiar situations which had to be objectively laid down and that was what in my opinion was intended by clause (7). If the peculiarity lies in a situation outside ‘the control or view of a de- tained person, then it may be said that the description of such a situation would 235 amount to a prescription of the circumstances justifying the detention for a longer period than three months by a law without the intervention of an advisory board’. If, however, the abnormality relates to the conduct and character of the activities of a certain determinable group of persons, then that would amount to a class of cases which was contemplated to be dealt with under clause (7). In such cases alone arbitrary detention could be held justifiable by law beyond a period of three months.

It was argued by the learned counsel for the petitioner that the phrase “circumstances under which, and the classes of cases in which” used in clause (7) had to be construed in a cumulative sense; on the other hand, the learned Attorney-General contended that the word “and” had been used in this clause in the same sense as “or.” He further argued that even if the word “and” is not given that meaning the true construction of the phrase was that Parliament could prescribe either the circumstances or the classes of cases for making a law on the subject of preventive detention authorizing detention for a longer period than three months without the machinery of an advisory board. In Full Bench Reference No. 1 of 1950, Das Gupta J. of the Calcutta High Court held that the intention of the legislature in enacting the clause was that the law of preventive detention author- izing detention for a longer period than three months with- out the intervention of an advisory board had to fulfil both the requirements laid down in clause (7) and not only one of the requirements in the alternative. The same view has been expressed by my brother Sir Fazl Ali. I share this view with him. I would, however, like to consider this matter from a different aspect on the assumption that the contention raised by the learned Attorney-General is right.

Dealing first with the question whether section 12 mentions any circumstances, so far as I have been able to see, it does not prescribe any circumstances unless it can be said that the prejudicial acts for reasons connected with the security of State, maintenance of public order, etc. are both the circumstances as well as 236 the classes of cases. In my opinion, this line of approach cannot be held to be correct in the construction of clause (7) of article 22. I am inclined to agree with the learned Attorney-General that the phrase “circumstances under which” means some situation extraneous to the detenu’s own acts, in other words, it means some happening in the country with which the detenu is not concerned, such as a situation of tense communal feelings, an apprehended internal rebellion or disorder, the crisis of an impending war or apprehended war, etc. In such a situation the machinery of an advisory board could be dispensed with because it may become cumber- some or it may hamper the exercise of necessary powers. In this view of the matter I have no hesitation in holding that no circumstances have been stated in section 12, though the section ostensibly says so. If it was permissible to con- jecture, it seems that the draftsman of section 12′ repeated the words of clause’ (7) of article 22 without an applica- tion of his mind to the meaning of those words and as the legislation was passed in haste to meet an emergent situa- tion, it suffers from the defects which all hasty legisla- tion suffer from.

I now proceed to consider whether section 12 has classi- fied the cases in which detention for a longer period beyond three months could be suffered by a citizen without the benefit of the machinery of an advisory board. The section has placed five subjects out of the legislative list within its ambit and these are described as the classes of cases.

The question is whether it can be said that a mere selection of all or any of the categories of the subjects for reasons connected with which a law of preventive detention could be’ made under the 7th Schedule amounts to a classification of cases as contemplated in clause (7) of article 22. Entry 9 of the Union List and Entry 3 of the Concurrent List of the 7th Schedule lay down the ambit of legislative power of Parliament on the subject of preventive detention on the following six subjects :– (1) Defence of India, (2) Foreign Affairs, (a) Security of India, (4) Security of the State, (5) Mainten- 237 ance of public order, (6) Maintenance of supplies and serv- ices essential to the community.

Clause (4) of article 22 enjoins in respect of all the six subjects that no law can provide for preventive deten- tion for a longer period than three months without reference to an advisory board. Clause (7) gives permission to make a law for dispensing with an advisory board by a prescription of the circumstances and by a prescription of the classes of cases in which such a dispensation can be made. The legis- lative authority under clauses (4) and (7)in my opinion, extends to all these six subjects. The normal procedure to be followed when detention is intended to be beyond a period of three months in respect of the six subjects is provided in sub-clause (4) The extraordinary and unusual procedure was intended, to be adopted in certain abnormal cases for which provision could be made by a parliamentary statute under clause (7). It seems to me, however, that section- 12 of Act IV of 1950 has reversed this process quite contrary to the intention of the Constitution. By this section Act IV of 1950 has dispensed with the advisory board in five out of the six subjects above mentioned and the compulsory procedure of an advisory board laid down in clause (4) of article 22 has been relegated to one out of these six sub- jects. This has been achieved by giving a construction to the phrase “circumstances under which and the classes of cases in which” so as to make it co-extensive and cotermi- nous with the “subjects of legislation.” In my opinion, this construction of clause (7) is in contravention of the clear provisions of article 22, and makes clause (4) of article -9,2 to all intents and purposes nugatory. Such a construction of the clause would amount to the Constitution saying in one breath that a law of preventive detention cannot provide for detention for a longer period than three months without reference to an advisory board and at the same breath and moment saying that Parliament, if it so chooses, can do so in respect of all or any of the subjects mentioned in the legislative field. If that was so, it would have been wholly unnecessary to provide such a safe- guard in the Constitution on a matter 238 which very seriously affects personal liberty. On the other hand, it would be a reasonable construction of the clause to hold that the Constitution authorized Parliament that in serious classes of cases or in cases of those groups of persons who are incorrigible or whose activities are secret the procedure of an advisory board may well be dispensed with, that being necessary in the interests of the State. On the other construction as adopted by the framers of section 12, the Constitution need not have troubled itself by con- ferring an authority on Parliament for making such a law.

Moreover, if that was the intention, it would have in very clear words indicated this by drafting article 22 clause (4) thus:

“Unless otherwise provided by Parliament no law provid- ing for preventive detention shall authorize detention for a longer period than three months unless an Advisory Board has investigated the sufficiency of the cause of such detention.” The words “Unless otherwise provided for by Parliament” would have been in accord with the construction which the framers of section 12 have placed on article 22 clause (7).

I am further of the opinion that the construction placed by the learned Attorney-General on clause (7) of article 22 and adopted by the framers of Act IV of 1950 creates a very anomalous situation. The matter may be examined from the point of view of the law of preventive detention for reasons connected with supplies and services essential to the life of the community. This subject has been put under section 9 in Act IV of 1950. Suppose a tense situation arises and there is a danger of the railway system being sabotaged and it becomes necessary to pass detention orders against cer- tain persons. According to Act IV of 1950 in such a serious state of affairs the procedure of an advisory board is compulsory, while on the other hand, if there is an appre- hension of disturbance of public order by reason of a wrong decision of an umpire at a cricket match or on account of conduct of persons celebrating the festival of Holi, then detention beyond three 239 months can be ordered without reference to an advisory board. Could such an anomalous result be in the contempla- tion of the framers of the Constitution ? The construction that I am inclined to place on the section is in accord with the scheme of the law of punitive detention. Hurt is an offence under the Indian Penal Code and this is one of the subjects of punitive detention. The cases on the subject have been classified in different groups, namely, simple hurt, grievous hurt, grievous hurt with dangerous weapons, grievous hurt to extort a confession, grievous hurt to restrain a public officer from doing his duty, grievous hurt by a rash act, and grievous hurt on provocation. Even simple hurt has been classified in different categories. The sub- ject of assault has also been similarly dealt with. Sections 352 to 356 deal with cases classified according to the gravity of the offence, i.e., cases of simple assault, assault on a public servant, assault on women, assault in attempt to’commit theft, assault for wrongfully confining a person and assault on grave provocation have been separately grouped. Another illustration is furnished by the Criminal Procedure Code in the preventive sections 107 to 110. These deal with different groups of persons; vagrants are in one class, habitual offenders in another, bad characters in the third and disturbers of peace in the fourth. It seems that it is on lines similar to these that it must have been contemplated by the Constitution that classes of cases would be prescribed by Parliament, but this has not been done.

The Constitution has recognised varying scales of duration of detention with the idea that this will vary with the nature of the apprehended act, detention for a period of three months in ordinary cases, detention for a longer period than three months with the intervention of an adviso- ry board in more serious cases, while detention for a longer period than three months without the intercession of an advisory board for a still more dangerous class and for acts committed in grave situations. It can hardly be said that all cases of preventive detention for reasons connected with the maintenance of public order stand on the same footing in the degree of gravity and deserve the same 240 duration of detention and all cases connected with the maintenance of supplies and services essential to the life of the community stand in the matter of their gravity on such a footing as to require a lenient treatment. It is true that in a sense all persons who act prejudicially to the defence of India may be comprehensively said to form one group and similarly persons who act prejudicially to the maintenance of supplies and services essential to the life of the community may form another class but the question is, whether it was in this comprehensive sense that classifica- tion was intended by the Constitution in clause (7) or was it intended in a narrower and restricted sense ? It has to be remembered that the law under clause (7) was intended to provide detention for a longer period and such a law very seriously abridges personal liberty and in this situation giving a narrower and restricted meaning to this expression will be in accordance with well established canons of con- struction of statutes.

The wide construction of clause (7) of article 22 brings within the ambit of the clause all the subjects in the legislative list and very seriously abridges the personal liberty of a citizen. This could never have been the inten- tion of the framers of the Constitution. The narrow and restricted interpretation is in accord with the scheme of the article and it also operates on the whole field of the legislative list and within that field it operates by demar- cating certain portions out of each subject which requires severe treatment. If I may say so m conclusion, section 12 treats the lamb and the leopard in the same class because they happen to be quadrupeds. Such a classification could not have been in the thoughts of the Constitution-makers when clause (7) was introduced in article 22. For the reasons given above, I am of the opinion that section 12 of Act IV of 1950 does not fulfil the requirements of clause (7) of article 22 of the Constitution and is not a law which falls within the ambit of that clause. That being so, this section of Act IV of 1950 is void and by reason of it the detention of the petitioner cannot be justified. There is no other provision in 241 this law under which he can be detained for any period whatsoever.

It was argued that it was neither practicable nor possi- ble to make a classification on any definite basis in the case of apprehended acts of persons whose activities are of a prejudicial character to the maintenance of public order or to the security of the State or to the defence of India.

This contention to my mind is not sound. Such a classifica- tion was made in the rules under the Defence of India Act by defining “a prejudicial act” in regulation 34. Mere difficulty in precisely ascertaining the groups or in defin- ing objectively the conduct of such groups is no ground for not complying with the clear provisions of the statute or for disobeying it. I see no difficulty whatsoever if a serious effort was made to comply with the provisions of clause (7). I cannot see that the compulsory requirement of an advisory board is likely to lead to such disastrous or calamitous results that in all cases or at least in five out of the six subjects of legislation it becomes necessary to dispense with this requirement. The requirement of an advi- sory board is in accordance with the preamble of the Consti- tution and is the barest minimum that can make a law of preventive detention to some little degree tolerable to a democratic Constitution. Such a law also may have some justification even without the requirement of an advisory board to meet certain defined dangerous situations or to deal with a class of people who are a danger to the State but without such limitation the law would be destructive of all notions of personal liberty. The Constitution must be taken to have furnished an adequate safeguard to its citi- zens when it laid down certain conditions in clause (7) and it could not be considered that it provided no safeguard to them at all and that the words used in clause (7) were merely illusory and had no real meaning.

Section 14 of Act IV of 1950 has been impugned on the ground that it contravenes and abridges the provisions of articles 22 (5) and 32 of the Constitution. This section is in these terms:– 242 “(1) No Court shall except for the purposes of a prose- cution for an offence punishable under subsection (2), allow any statement to be made, or any evidence to be given, before it of the substance of any communication made under section 7 of the grounds on which a detention order has been made against any person or of any representation made by him against such order, and notwithstanding anything con- tained in any other law, no Court shall be entitled to require any public officer to produce before it, or to disclose the substance of, any such communication or repre- sentation made, or the proceedings of an advisory board or that part of the report of an advisory board which is confi- dential.

(2) It shall be an offence punishable with imprisonment for a term which may extend to one year, or with fine, or with both, for any person to disclose or publish without the previous authorisation of the Central Government or the State Government, as the case may be, any contents or matter purporting to be contents of any such communication or representation as is referred to in sub-section (1):

Provided that nothing in this sub-section shall apply to a disclosure made to his legal adviser by a person who is the subject of a detention order.” This section is in the nature of an iron curtain around the acts of the authority making the order of preventive detention. The Constitution has guaranteed to the detained person the right to be told the grounds of detention. He has been given a right to make a representation [vide arti- cle 22 (5)], yet section 14 prohibits the disclosure of the grounds furnished to him or the contents of the representa- tion made by him in a Court of law and makes a breach of this injunction punishable with imprisonment.

Article 32 (1) of the Constitution is in these terms :– “The right to move the Supreme Court by appropriate proceedings for the enforcement of the rights conferred by this Part is guaranteed.” 243 Sub-section (4) says :– “The right guaranteed by this article shall not be suspended except as otherwise provided for by this Constitu- tion.” Now it is quite clear that if an authority passes an order of preventive detention for reasons not connected with any of the six subjects mentioned in the 7th Schedule, this Court can always declare the detention illegal and release the detenu, but it is not possible for this Court to func- tion if there is a prohibition against disclosing the grounds which have been served upon him. It is only by an examination of the grounds that it is possible to say wheth- er the grounds fall within the ambit of the legislative power contained in the Constitution or are outside its scope. Again something may be served on the detenu as being grounds which are not grounds at all. In this contingency it is the right of the detained person under article 32 to move this Court for enforcing the right under article 22 (5) that he be given the real grounds on which the detention order is based. This Court would be disabled from exercis- ing its functions under article 32 and adjudicating on the point that the grounds given satisfy the requirements of the sub-clause if it is not open to it to see the grounds that have been furnished. It is a guaranteed right of the person detained to have the very grounds which are the basis of the order of detention. This Court would be entitled to examine the matter and to see whether the grounds furnished are the grounds on the basis of which he has been detained or they contain some other vague or irrelevant material. The whole purpose of furnishing a detained person with the grounds is to enable him to make a representation refuting these grounds and of proving his innocence. In order that this Court may be able to safeguard this fundamental right and to grant him relief it is absolutely essential that the detenu is not prohibited under penalty of punishment to disclose the grounds to the Court and no injunction by law can be issued to this Court disabling it from having a look at the grounds. Section 14 creates a substantive offence if the grounds are disclosed and it also lays a duty on the Court not 244 to permit the disclosure of such grounds. It virtually amounts to a suspension of a guaranteed right provided by the Constitution inasmuch as it indirectly by a stringent provision makes administration of the law by this Court impossible and at the same time it deprives a detained person from obtaining justice from this Court. In my opin- ion, therefore, this section when it prohibits the disclo- sure of the grounds contravenes or abridges the rights given by Part III to a citizen and is ultra vires the powers of Parliament to that extent.

The result of the above discussion is that, in my opin- ion, sections 12 and 14 of Act IV of 1950 as above indicated are void and the decision of the detenu’s case has to be made by keeping out of sight these two provisions in the Act. If sections 12 and 14 are deleted from the impugned legislation, then the result is that the detention of the petitioner is not legal. The statute has not provided for detention for a period of three months or less in such cases as it could have done under article22 (4) of the Constitu- tion and that being so, the petitioner cannot be justifia- bly detained even for a period of three months. I would accordingly order his release.

In view of the decision above arrived at I do not con- sider it necessary to express any opinion on the other points that were argued at great length before us, namely, (1)what is ‘the scope and true meaning of the expression “procedure established by law” in article 21 of the Consti- tution, and (2) what is the precise scope of articles 19 (1) (d) and 19 (5)of the Constitution.

MUKHERJEA J.–This is an application under article 32 of the Constitution praying for a writ of habeas corpus upon the respondents with a view to release the petitioner who, it is alleged, is being unlawfully detained in the Central Jail, Cuddalore, within the State of Madras.

The petitioner, it is said, was initially arrested in Malabar on 17th of December, 1947, and prosecution was started against him on various charges for having 245 delivered certain violent speeches. While these criminal cases were going on, he was served with an order of deten- tion under the Madras Maintenance of Public Order Act on 22nd April, 1948. This order of detention was held to be illegal by the Madras High Court, but on the same day that the judgment was pronounced, a second order of detention was served upon him. On his moving the High Court again for a writ of habeas corpus in respect to the subsequent order, his application was dismissed on the ground that as he was not granted bail in one of the three criminal cases that were pending against him, the detention could not be said to be unlawful. Liberty, however, was given to him to renew his application if and when his detention under the criminal proceedings ceased. In two out of the three criminal cases the trial before the magistrate ended on February 23, 1949, and the petitioner was sentenced to rigorous imprisonment for 6 months in each of the cases. These sentences, however, were set aside in appeal on 26th September, 1949. As re- gards the third case, he was tried by the Sessions Judge of North Malabar and sentenced to rigorous imprisonment for 5 years but this sentence was reduced to 6 months’ imprison- ment by the Madras High Court on appeal. The petitioner made a fresh application to the High Court praying for a writ of habeas corpus in respect of his detention under the Madras Maintenance of Public Order Act and this application, which was heard after he had served out his sentences of imprisonment referred to above, was dismissed in January, 1950. On 25th February, 1950, the Preventive Detention Act was passed by the Parliament and on the 1st of March follow- ing, the the detention of the applicant under the Madras Maintainance of Public Order Act was cancelled and he was served with a fresh order of detention under section 3 (1) of the Preventive Detention Act, 1950. On behalf of the respondents the detention of the petitioner is sought to be justified on the strength of the Preventive Detention Act of 1950. The position taken up on behalf of the petitioner on the other hand is that the said Act is invalid and ultra vires the conStitution by reason of its being in conflict with certain 246 fundamental rights which are guaranteed by the Constitution.

It is argued, therefore, that the detention of the peti- tioner is invalid and that he should be set at liberty.

The contentions that have been but forward-by Mr. Nambi- ar who appeared in support of the petition, may be classi- fied under four heads. His first contention is that as preventive detention is, in substance, a restriction on the free movements of a person throughout the Indian territory, it comes within the purview of article 19 (1) (d) of Part III of the Constitution which lays down the fundamental rights. Under clause (5) of the article, any restriction imposed upon this right of free movement must be reasonable and should be prescribed in the interests of the general public. The question as to whether it is reasonable or not is a justiciable matter which is to be determined by the Court. This being the legal position, the learned Counsel invites us to hold that the main provisions of the impugned Act, particularly those which are contained in sections 3, 7, 10, 11, 12, 13 and 14 are wholly unreasonable and should be invalidated on that ground.

The second contention advanced by the learned Counsel is that the impugned legislation is in conflict with the provi- sion of article 21 of the Constitution inasmuch as it pro- vides for deprivation of the personal liberty of a man not in accordance with a procedure established by law. It is argued that the word ‘law’ here does not mean or refer to any particular legislative enactment but it means the gener- al law of the land, embodying those principles of natural justice’ with regard to procedure which are regarded as fundamental, in all systems of civilised jurisprudence.

It is conceded by the learned counsel that the proce- dure, if any, with regard to preventive detention as has been prescribed by article 22 of the Constitution which itself finds a place in the chapter on Fundamental Rights must override those general rules of procedure which are contemplated by article 21 but with regard to matters for which no provision is made in article 22, the general provi- sion made in article 21 247 must apply. He has indicated in course of his arguments what the essentials of such procedure are and the other point specifically raised in this connection is that the provision of section 12 of the Preventive Detention Act is in conflict with article 22 (7) of the Constitution.

The last argument in support of this application is that the provisions of sections 3 and 14 of the Preventive Deten- tion Act are invalid as they take away and render completely nugatory the fundamental right to constitutional remedies as is provided for in article 32 of the Constitution.

In discussing these points it should be well to keep in mind the general scheme of the Indian Constitution relating to the protection of the fundamental rights of the citizens and the limitations imposed in this respect upon the legis- lative powers of the Government. The Constitution of India is a written Constitution and though it has adopted many of the principles of the English Parliamentary system, it has not accepted the English doctrine of the absolute supremacy of Parliament in matters of legislation. In this respect it has followed the American Constitution and other systems modelled on it. Notwithstanding the representative charac- ter of their political institutions, the Americans regard the limitations imposed by their Constitution upon the action of the Government, both legislative and executive, as essential to the preservation of public and private rights.

They serve as a check upon what has been described as the despotism of the majority; and as was observed in the case of Hurtado v. The People of California (1) “a government which holds the lives, the liberty and the property of its citizens, subject at all times to the absolute disposition and unlimited control of even the most democratic depository of power, is after all but a despotism.” In India it is the Constitution that is supreme and Parliament as well as the State Legislatures must not only act within the limits of their respective legislative spheres as demarcated in the three (1)[1884] USSC 84110 U.S. 516.

32 248 lists occuring in the Seventh Schedule to the Constitution, but Part III of the Constitution guarantees to the citizens certain fundamental rights which the legislative authority can on no account transgress. A statute law to be valid must, in all cases, be in conformity with the constitutional requirements and it is for the judiciary to decide whether any enactment is unconstitutional or not. Article 13 (2) is imperative on this point and provides expressly that the State shall not make any law which takes away or abridges the right conferred by this Part and any law made in contra- vention of this clause shall, to the extent of the contra- vention, be void. Clause (1) of the article similarly invalidates all existing laws which are inconsistent with the provisions of this Part of the Constitution.

The fundamental rights guaranteed by the Constitution have been classified under seven heads or categories. They are:

(1) Right to equality;

(2) Right to freedom;

(3) Right against exploitation;

(4) Right to freedom of religion;

(5) Cultural and educational rights;

(6) Right to property; and (7) Right to constitutional remedy.

The arrangement differs in many respects from that adopted in the American Constitution and bears a likeness on certain points to similar declarations in the Constitutions of other countries.

Of the different classes of fundamental rights spoken of above, we are concerned here primarily with right to freedom which is dealt with in four articles beginning from article 19 and also with the right to constitutional remedy which is embodied in article 32.

Article 10 enumerates certain forms of liberty or free- dom, the protection of which is guaranteed by the Constitu- tion. In article 20, certain protections are given in cases of persons accused of criminal offences. Article 21 lays down in general terms that no person shall be deprived of his life or personal liberty, except 249 according to procedure established by law. Article 22 pro- vides for certain additional safeguards in respect to arrest and detention and by way of exception to the rules so made, makes certain special provisions for the particular form of detention known as Preventive Detention.

The first contention advanced by Mr. Nambiar involves a consideration of the question as to whether Preventive Detention, which is the subject matter of the impugned legislative enactment, comes within the purview of article 19 (1) (d) of the Constitution, according to which a right to move freely throughout the territory of India is one of the fundamental rights guaranteed to all citizens. If it comes within that sub-clause, it is not disputed that clause (5) of article 19 would be attracted to it and it would be for the courts to decide whether the restrictions imposed upon this right by the Parliament are reasonable restric- tions and are within the permissible limits prescribed by clause (5) of the article.

There is no authoritative definition of the term ‘Pre- ventive Detention’ in Indian law, though as description of a topic of legislation it occurred in the Legislative Lists of the Government of India Act, 1935, and has been used in Item 9 of List I and Item 3 of List III in the Seventh Schedule to the Constitution. The expression has its origin in the language used by Judges or the law Lords in England while explaining the nature of detention under Regulation 14 (B) of the Defence of Realm Consolidation Act, 1914, passed on the outbreak of the First World War; and the same lan- guage was repeated in connection with the emergency regula- tions made during the last World War. The word ‘ preventive ‘ is used in contradistinction to the word ‘ punitive.’ To quote the words of Lord Finlay in Rex v. Halliday(1), “it is not a punitive but a precautionary measure.” The object is not to punish a man for having done something but to intercept him before he does it and to prevent him from doing it. No offence is proved, nor any charge formulated;

and the justification of such detention is suspicion (1) [1917] UKHL 1[1917] A.C. 260 at p. 269.

250 or reasonable probability and not criminal conviction which can only be warranted by legal evidence (1). Detention in such form is unknown inAmerica. It was resorted to inEnglandonly during war time but no country in the world that I am aware of has made this an integral part of their Constitution as has been done inIndia. This is undoubtedly unfortunate, but it is not our business to speculate on questions of policy or to attempt to explore the reasons which led the representatives of our people to make such a drastic provision in the Constitution itself, which cannot but be regarded as a most unwholesome encroachment upon the liberties of the people.

The detention of a man even as a precautionary measure certainly deprives him of his personal liberty, and as article 21 guarantees to every man, be he a citizen or a foreigner, that he shall not be deprived of his life and personal liberty, except in accordance with the procedure established by law, the requirements of article 21 would certainly have to be complied with, to make preventive detention valid in law. What these requirements are I will discuss later on. Article 22 comes immediately after arti- cle 21. It secures to all persons certain fundamental rights in relation to arrest and detention, and as already said, by way of exception to the rights thus declared, makes certain specific provisions relating to preventive deten- tion. The subject of preventive detention is specified in and constitutes Item No. 9 in the Union legislative List and it also forms Item No. 3 in the Concurrent List. Under article 246 of the Constitution, the Parliament and the State Legislatures are empowered to legislate on this sub- ject within the ambit of their respective authorities.

Clause(3) of article 22 expressly enjoins that the protec- tive provisions of clauses (1) and (2) of the article would not be available to persons detained under any law providing for preventive detention. The only fundamental rights which are guaranteed by the Constitution in the matter of preven- tive detention and which to that extent impose restraints upon the exercise of legislative powers in that respect are (1) Vide Lord Macmillan in Liversidge v. Anderson [1941] UKHL 1[1942] A.C. 206 at p. 254.

251 contained in clauses (4) to (7) of article 22. Clause (4) lays down that no law of preventive detention shall autho- rise the detention of a person for a period longer than three months, unless an advisory board constituted in the manner laid down in sub-clause (a) of the clause has report- ed before the expiration of the period that there is suffi- cient cause for such detention. The period of detention cannot, in any event, exceed the maximum which the Parlia- ment is entitled to prescribe under clause (7) (b). The Parliament is also given the authority to prescribe the circumstances and the class of cases under which a person can be detained for a period longer than three months under any law of preventive detention without obtaining the opin- ion of the advisory board. There is one safeguard provided for all cases which is contained in clause (5) and which lays down that the authority making the order of detention shall, as soon as possible communicate to such person the grounds on which the order has been made and shall afford him the earliest opportunity of making a representation against the order. But even here, the authority while giving the grounds of detention need not disclose such facts which it considers against public interest to disclose.

The question that we have to consider is whether a law relating to preventive detention is justiciable in a Court of law on the ground of reasonableness under article 19 (5) of the Constitution inasmuch as it takes away or abridges the right to free movement in the territory of India guaran- teed by clause (1) (d)of the article. It will be seen from what has been said above that article 22 deals specifically with the subject of preventive detention and expressly takes away the fundamental rights relating to arrest and detention enumerated in clauses (1) and (2) of the article from per- sons who are detained under any law which may be passed by the Parliament or State Legislatures acting under article 246 of the Constitution read with the relevant items in the legislative lists. I will leave aside for the moment the question as to how far the court can examine the reasonable- ness or otherwise of the procedure that is prescribed by any law relating 252 to preventive detention, for that would involve a considera- tion of the precise scope and meaning of article. 21; but this much is beyond controversy that so far as substantive law is concerned, article 22 of the Constitution gives a clear authority to the legislature to take away the funda- mental rights relating to arrest and detention, which are secured by the’first two clauses of the article. Any legis- lation on the subject would only have to conform to the requirements of clauses (4) to (7) and provided that is done, there is nothing in the language employed nor in the context in which it appears which affords any ground for suggestion that such law must be reasonable in its character and that it would be reviewable by the Court on that ground.

Both articles 19 and 22 occur in the same Part of the Con- stitution and both of them purport to lay down the fundamen- tal rights which the Constitution guarantees. It is well settled that the Constitution must be interpreted in a broad and liberal manner giving effect to all its parts, and the presumption should be that no conflict or repugnancy was intended by its framers. In interpreting the words of a Constitution, the same principles undoubtedly apply which are applicable in construing a statute, but as was observed by Lord Wright in James v. Commonwealth of Australia ( 1 ), “the ultimate result must be determined upon the actual words used not in vacuo but as occurring in a single complex instrument in which one part may throw light on the other.” “The Constitution,” his Lordship went on saying, “has been described as the federal compact and the construction must hold a balance between all its parts.” It seems to me that there is no conflict or repugnancy between the two provisions of the Constitution and an exami- nation of the scheme and language of the catena of articles which deal with the rights to freedom would be sufficient to show that what clause (1) (d) of article 19 contemplates is not freedom from detention, either punitive or preventive;

it relates to and speaks of a different aspect or phase of civil liberty.

(1) [1936] A.C. 578 at p. 613.

253 Article 19, which is the first of this series of arti- cles, enumerates seven varieties or forms of freedom begin- ning with liberty of speech and expression and ending’ with free right to practise any trade, profession or business.

The rights declared it articles 19 to 22 do not certainly exhaust the whole list of liberties which people possess under law. The object of the framers of the Constitution obviously is to enumerate and guarantee those forms of liberty which come under well-known categories recognised by constitutional writers and are considered to be fundamental and of vital importance to the community.

There cannot be any such thing as absolute or uncon- trolled liberty wholly freed from restraint, for that would lead to anarchy and disorder. The possession and enjoyment of all rights, as was observed by the Supreme Court of America in Jacobson v.Massachusetts(1), are subject to such reasonable conditions as may be deemed by the governing authority of the country essential to the safety, health, peace, general order and morals of the community. The question, therefore arises in each case of adjusting the conflicting interests of the individual and of the society.

In some cases, restrictions have to be placed upon free exercise of individual rights to safeguard the interests of the society; on the other hand, social control which exists for public good has got to be restrained, lest it should be misused to the detriment of individual rights and liberties.

Ordinarily, every man has the liberty to order his life as he pleases, to say what he will, to go where he will, to follow any trade, occupation or calling at his pleasure and to do any other thing which he can lawfully do without let or hindrance by any other person. On the other hand for the very protection of these liberties the society must arm itself with certain powers. No man’s liberty would be worth its name if it can be violated with impunity by any wrong- doer and if his property or possessions could be preyed upon by a thief or a marauder. The society, therefore, has got to exercise certain powers for the protection of these liber- ties and to arrest, search, imprison and (1) [1905] USSC 38197 U.S. 11.

254 punish those who break the law. If these powers are’ prop- erly exercised, they themselves are the safeguards of free- dom, but they can certainly be abused. The police may arrest any man and throw him into prison without assigning any reasons; they may search his belongings on the slightest pretext; he may be subjected to a sham trial and even pun- ished for crimes unknown to law. What the Constitution, therefore, attempts to do in declaring the rights of the people is to strike a balance between individual liberty and social control.

To me it seems that article 19 of the Constitution gives a list of individual liberties and prescribes in the various clauses the restraints that may be placed upon them by law, so that they may not conflict with public welfare or general morality. On the other hand articles 20, 21 and 22 are primarily concerned with penal enactments or other laws under which personal safety or liberty of persons could be taken away in the interests of the society and they set down the limits within which the State control should be exer- cised. Article 19 uses the expression ‘ ‘freedom” and men- tions the several forms and aspects of it which are secured to individuals, together with the limitations that could be placed upon them in the general interests of the society.

Articles 20, 21 and 22 on the other hand do not make use of the expression “freedom” and they lay down the restrictions that are to be placed on State control where an individual is sought to be deprived of his life or personal liberty.

The right to the safety of one’s life and limbs and to enjoyment of personal liberty, in the sense of freedom from physical restraint and coercion of any sort, are the inher- ent birthrights of a man. The essence of these rights consists in restraining others from interfering with them and hence they cannot be described in terms of “freedom” to do particular things. There is also no question of imposing limits on the activities of individuals so far as the exer- cise of these rights is concerned. For these reasons, I think, these rights have not been mentioned in article 19 of the Constitution. An individual can be deprived of his life or personal liberty only by action 255 of the State, either under the provisions of any penal enactment or in the exercise of any other coercive process vested in it under law. What the Constitution does there- fore is to put restrictions upon the powers of the State, for protecting the rights of the individuals. The re- straints on State authority operate as guarantees of indi- vidual freedom and secure to the people the enjoyment of life and personal liberty which are thus declared to be inviolable except in the manner indicated in these articles.

In my opinion, the group of articles 20 to 22 embody the entire protection guaranteed by the Constitution in relation to deprivation of life and personal liberty both with regard to substantive as well as to procedural law. It is not correct to say, as I shah show more fully later on, that article 21 is confined to matters of procedure only. There must be a substantive law, under which the State is empow- ered to deprive a man of his life and personal liberty and such law must be a valid law which the legislature is compe- tent to enact within the limits of the powers assigned to it and which does not transgress any of the fundamental rights that the Constitution lays down. Thus a person cannot be convicted or punished under an ex post facto law, or a law which compels the accused to incriminate himself in a crimi- nal trial or punishes him for the same offence more than once. These are the protections provided for by article 20.

Again a law providing for arrest and detention must conform to the limitations prescribed by clauses (1) and (2) of article 22. These provisions indeed have been withdrawn expressly in case of preventive detention and protections of much more feeble and attenuated character have been substi- tuted in their place;but this is a question of the policy adopted by the Constitution which does not concern us at all. The position, therefore, is that with regard to life and personal liberty, the Constitution guarantees protection to this extent that no man could be deprived of these rights except under a valid law passed by a competent legislature within the limits mentioned above and in accordance with the procedure which such law lays down. Article 19, on the other hand, 256 enunciates certain particular forms of civil liberty quite independently of the rights dealt with under article 21.

Most of them may be connected with or dependent upon person- al liberty but are not identical with it; and the purpose of article 19 is to indicate the limits within which the State could, by legislation, impose restrictions on the exercise of these rights by the individuals. The reasonableness or otherwise of such legislation can indeed be determined by the Court to the extent laid down in the several clauses of article 19, though no such review is permissible with regard to laws relating to deprivation of life and personal liber- ty. This may be due to the fact that life and personal freedom constitute the most vital and essential rights which people enjoy under any State and in such matters the pre- cise and definite expression of the intention of the legislature has been preferred by the Constitution to the variable standards which the judiciary might lay down.

We find the rights relating to personal liberty being de- clared almost in the same terms in the Irish Consti- tution article 40 (1) (4) (1) of which lays down that “no citizen shall be deprived of his personal liberty save in accordance with law.” In the Constitution of the Free City of Danzig, “the liberty of the person has been declared to be inviolable and no limitation or deprivation of personal liberty may be imposed by public authority except by virtue of a law” (vide article 74). Article 31 of the Japanese Constitution is the closest parallel to article 21 of the Indian Constitution and the language is almost identical.

This is the scheme adopted by the Constitution in dealing with the rights to freedom described in the chapter on fundamental rights and in my opinion, therefore, the proper test for determining the validity of an enactment under which a person is sought to be deprived of his life and personal liberty has to be found not in article 19, but in the three following articles of the Constitution. Article 20 of course has no application so far as the law relating to preventive detention is concerned.

Mr. Nambiar’s endeavour throughout has been to 257 establish that article 19 (1) (d) of the Constitution read with article 19 (5) enunciates the fundamental rights of the citizens regarding the substantive law of personal liberty, while article 21 embodies the protection as regards proce- dural law. This, in my opinion, would be looking at these provisions from a wrong angle altogether. Article 19 cannot be said to deal with substantive law merely, nor article 21 with mere matters of procedure. It cannot also be said that the provisions of article 19 (1) (d) read with clause (5) and article 21 are complementary to each other. The con- tents and subject matter of the two provisions are not identical and they proceed on totally different princi- ples. There is no mention of any “right to life” in article 19, although that is the primary and the most important thing for which provision is made in article 21. If the contention of the learned counsel is correct, we would have to hold that no protection is guaranteed by the Constitution as regards right to life so far substantive law is con- cerned. In the second place, even if freedom of movement may be regarded as one of the ingredients of personal liberty, surely there are other elements included in the concept and admittedly no provision for other forms of personal liberty are to be found in article 19 (5) of the Constitution.

Furthermore article 19 is applicable to citizens only, while the rights guaranteed by article 21 are for all per- sons. citizens as well as aliens. The only proper way of avoiding these anomalies is to interpret the two provisions as applying to different subjects and this would be the right conclusion if we have in mind the scheme which under- lies this group of articles.

I will now turn to the language of article 19 (1) (d) and see whether preventive detention really comes within its purview. Article 19 (1) (d) provides that all citizens shall have the right to move freely throughout theterritoryofIndia. The two sub-clauses which come immediately after sub-clause (d) and are intimately connected with it, are in these terms:

“(e) To reside and settle in any part of theterritoryofIndia;

258 (f) to acquire, hold and dispose of property.” Clause (5)relates to all these three sub-clauses and lays down that nothing in them shall affect the operation of any existing law in so far as it imposes, or prevent the State from making any law imposing, reasonable restrictions on the exercise of any of the rights conferred by the said sub- clause either in the interests of the general public or for the protection of the interests of any scheduled tribe.

I agree with the learned Attorney-General that in con- struing article 19 (1) (d) stress is to be laid upon the expression “throughout the territory of India,” and it is a particular and special kind of right, viz., that of free movement throughout the Indian territory, that is the aim and object of the Constitution to secure. In the next sub- clause, right tO reside and settle “in any part of theterritoryofIndia” is given and here again the material thing is not the right of residence or settlement but the right to reside or settle in any part of the Indian territo- ry. For an analogous provision, we may refer to article 301 which says that subject to the other provisions of this Part, commerce and intercourse throughout theterritoryofIndiashall be free. The meaning of sub-clause (d) of arti- cle 19 (1) will be clear if we take it along with sub- clauses (e) and (f), all of which have been lumped together in clause (5) and to all of which the same restrictions including those relating to protecion of the interest of any scheduled tribe have been made applicable. It will be remembered that these rights are available only to citizens.

To an alien or foreigner, no guarantee of such rights has been given. Normally all citizens would have the free right to move from one part of the Indian territory to another.

They can shift their residence from one place to any other place of their choice and settle anywhere they like. The right of free trade, commerce and intercourse throughout theterritoryofIndiais also secured. What the Constitu- tion emphasises upon by guaranteeing these rights is that the whole of Indian Unian in spite of its being divided into a number of States is really one unit as far as the citizens of theUnionare concerned. All the 259 citizens would have the same privileges and the same facilities for moving into any part of the territory and they can reside or carry on business anywhere they like; and no restrictions either inter-State or otherwise would be allowed to set up in these respects between one part ofIndiaand another.

So far as free movement throughout the territory is concerned, the right is subject to the provision of clause (5), under which reasonable limitation may be imposed upon these liberties in the interests of the general public or protection of any scheduled tribe. The interests of the public which necessitates such restrictions may be of var- ious kinds. They may be connected with the avoidance of pestilence or spreading of contagious diseases; certain places ‘again may be kept closed for military purposes and there may be prohibition of entry into areas which are actual or potential war zones or where disturbances of some kind or other prevail. Whatever the reasons might be, it is necessary that these restrictions must be reasonable, that is to say, commensurate with the purpose for which they are laid down. In addition to general interest, the Constitu- tion has specified the protection of the interests of the scheduled tribes as one of the factors which has got to be taken into consideration in the framing of these restric- tions. The scheduled tribes, as is well known, are a back- ward and unsophisticated class of people who are liable to be imposed upon by shrewd and designing persons. Hence there are various provisions disabling them from alienating even their own properties except under special conditions.

In their interest and for their benefit, laws may be made restricting the ordinary right of citizens to go or settle in particular areas or acquire property in them. The refer- ence to the interest of scheduled tribe makes it quite clear-that the free movement spoken of in the clause relates not to general rights of locomotion but to the particular right of shifting or moving from one part of the Indian territory to another, without any sort of discriminatory barriers.

This view will receive further support if we look to some analogous provisions ,in the Constitution of 260 other countries. It will be seen that sub-clauses (d) (e) and (f)of article 19 (1) are embodied in almost identical language in one single article, viz., article 75 of the Constitution of the Free City of Danzig. The article runs as follows:

“All nationals shall enjoy freedom of movement within the free city and shall have the right to stay and to settle at any place they may choose, to acquire real property and to earn their living in any way. This right shall not be curtailed without legal sanctions.” The several rights are thus mentioned together as being included in the same category, while they are differentiated from the “liberty of the person” which is “described to be inviolable except by virtue of a law” in article 74 which appears just previous to this article. An analogous provi- sion in slightly altered language occurs in article 111 of the Constitution of the German Reich which is worded in the following manner:

All Germans enjoy the right of change of domicile within the whole Reich. Every one has the right to stay in any part of the Realm that he chooses, t6 settle there, acquire landed property and pursue any means of livelihood.” Here again the right to personal liberty has been dealt with separately in article 114. A suggestion was made in course of our discussions that the expression “throughout the territory of India” occurring in article 19 (1) (d) might have been used with a view to save Passport Regulations or to emphasise that no rights of free emigration are guaran- teed by the Constitution. The suggestion does not seem to me to be proper. No State can guarantee to its citizens the. free right to do anything outside its own territory.This is true of all the fundamental rights men- tioned in article 19 and not merely of the right of free movement. Further it seems to me that the words “throughout theterritoryofIndia” have nothing to do with rights of emigration. We find that both in the Danzig as well as in the German Constitution, where similar words have been used with regard to the excercise of the right of free movement throughout the.

261 territory, there are specific provisions which guarantee to all nationals the free right of emigration to other coun- tries (vide article 76 of the Danzig Constitution and arti- cle 112 of the Constitution of the German Reich). In my opinion, therefore, preventive detention does not come either within the express language or within the spirit and intendment of clause (1) (d) of article 19 of the Constitu- tion which deals with a totally different aspect or form of civil liberty.

It is true that by reason of preventive detention, a man may be prevented from exercising the right of free movement within the territory of India as contemplated by article 19 (1) (d) of the Constitution, but that is merely incidental to or consequential upon loss of liberty resulting from the order of detention. Not merely the right under clause (1) (d), but many of the other rights which are enumerated under the other-sub-clauses of article 19 (1) may be lost or suspended so long as preventive detention continues. Thus a detenu so long as he is under detention may not be able to practise any profession, or carry on any trade or business which he might like to do; but this would not make the law providing for preventive detention a legislation taking away or abridging the rights under article 19 (1) (g) of the Constitution and it would be absurd to suggest that in such cases the validity of the legislation should be tested in accordance with the requirement of clause (6) of article 19’and that the only restrictions that could be placed upon the person’s free exercise of trade and profession are those specified in that clause. Mr. Nambiar concedes that in such cases we must look to the substance of the particular legis- lation and the mere fact that it incidentally trenches upon some other right to which it does not directly relate is not material. He argues, however, that the essence or substance of a legislation which provides for preventive detention is to take away or curtail the right of free move- ments and in fact, “personal liberty” according to him, connotes nothing else but unrestricted right of locomotion.

The learned counsel refers in this connection to certain passages in Blackstone’s Commentaries on the Laws of Eng- land, where 262 the author discusses what he calls the three absoluterights inherent in every Englishman, namely, rights of personal security, personal liberty and property. “Personal security”, according to Blackstone, consists in a person’s legal and uninterrupted enjoyment of his life, his limb, his body, his health and his reputation; whereas “personal liberty” consists in the power of locomotion, of changing of situation or moving one’s person to whatsoever place one’s own inclination may direct without imprisonment or restraint unless by due course of law (1). It will be seen that Blackstone uses the expression “personal liberty” in a somewhat narrow and restricted sense. A much wider and larger connotation is given to it by later writers on con- stitutional documents, particularly inAmerica. In ordinary language “personal liberty” means liberty relating to or concerning the person or body of the individual; and “per- sonal liberty” in this sense is the antithesis of physical restraint or coercion. According to Dicey, who is an acknowledged authority on the subject “personal liberty” means a personal right not to be subjected to imprisonment, arrest or other physical coercion in any manner that does not admit of legal justification(2). It is, in my opinion, this negative right of not being subjected to any form of physical restraint or coercion that constitutes the essence of personal liberty and not mere freedom to move to any part of theIndian territory.

In this connection, it may not be irrelevant to. point out that it was in accordance with the recommendation of the’Drafting Committee that the word “personal” was inserted before “liberty” in article 15 of the Constitution which now stands as article 21. In the report of the Drafting Commit- tee it is stated that the word “liberty” should be quali- fied by the insertion of the word “personal” before it;

otherwise, it might be construed very widely so as to in- clude even the freedoms already dealt with in article 13.

Article. 13, it should be noted, is the present article 19.

If the views of the Drafting Committee were accepted by the (1) Vide Chase’s Blackstone, 4th Edn, pp. 68, 73.

(2) Vide Dicey on Constitutional Law, 9th Edn, pp. 207-208.

263 Constituent Assembly, the intention obviously was to exclude the contents of article 19. from the concept of “personal liberty” as used in article 21. To -what extent the meaning of words used in the Constitution could be discovered from reports of Drafting Committee or debates on the floor of the House is a matter not quite free from doubt and I may have to take up this matter later on when discussing the meaning of the material clause in article 21 of the Constitution.

It is enough to say at this stage that if the report of the Drafting Committee is an appropriate material upon which the interpretation of the words of the Constitution could be based, it certainly goes against the contention of the applicant and it shows that the words used in article 19 (1) (d) of the Constitution do not mean the same thing as the expression “personal liberty” in article 21 does. It is well known that the word “‘liberty” standing by itself has been given a very wide meaning by the Supreme Court of the United States of America. It includes not only personal freedom from physical restraint but the right to the free use of one’s own property and to enter into free contractual relations, In the Indian Constitution, on the other hand, the expression “personal liberty” has been deliberately used to restrict it to freedom from physical restraint of person by incarceration or otherwise. Apart from the report of the Drafting Committee, that is the plain grammatical meaning of the expression as I have already explained.

It may not, I think, be quite accurate to state that the operation of article 19 of the Constitution is limited to free citizens only and that the rights have been described in that article on the presupposition that the citizens are at liberty. The deprivation of personal liberty may entail as a consequence the loss or abridgement of many of the rights described in article 19, but that is because the nature of these rights is such that free exercise of them is not possible in the absence of personal liberty. On the other hand, the right to hold and dispose of property which is in subclause (f) of article 19 (1) and which is not dependent on full possession of personal liberty by the owner may 264 not be affected if the owner is imprisoned or detained.

Anyway, the point is not of much importance for purposes of the present discussion. The result is that, in my opinion, the first contention raised by Mr. Nambiar cannot succeed and it must be held that we are not entitled to examine the reasonableness or otherwise of the Preventive Detention Act and see whether it is within the permissible bounds specified in clause (5) of article 19.

I now come to the second point raised by Mr. Nambiar in support of the application; and upon this point we had arguments of a most elaborate nature addressed to us by the learned counsel on both sides, displaying a considerable amount of learning and research. The point, however, is a short one and turns upon the interpretation to be put upon article 21 of the Constitution, which lays down that “no person shall be deprived of his …….. personal liberty, except according to procedure established by law.” On a plain reading of the article the meaning seems to be that you cannot deprive a man of his personal liberty, unless you follow and act according to the law which provides for deprivation of such liberty. The expression “procedure” means the manner and form of enforcing the law. In my opinion, it cannot be disputed that in order that there may be a legally established procedure, the law which establish- es it must be a valid and lawful law which the legislature is competent to enact in accordance with article 245 of the Constitution and the particular items in the legislative lists which it relates to. It is also not disputed that such law must not offend against the fundamental rights which are declared in Part III of the Constitution. The position taken up by the learned Attorney-General is that as in the present case there is no doubt about the competency of that Parliament to enact the law relating to preventive detention which is fully covered by Item 9 of List I, and Item 3 of List III, and as no question of the law being reasonable or otherwise arises for consideration by reason of the fact that article 19 (1) (d) is not attracted to this case, the law must be held to be a valid piece of legisla- tion and if the procedure 265 laid down by it has been adhered to, the validity of the detention cannot possibly be challenged. His further argu- ment is that article 22 specifically provides for preventive detention and lays down fully what the requirements of a legislation on the subject should be. As the impugned Act conforms to the requirements of article 22, no further ques- tion of its validity under article 21 of the Constitution at all arises. The latter aspect of his arguments, I will deal with later on. So far as the main argument is concerned,the position taken up by Mr. Nambiar is that article 21 refers to ‘procedure only and not to substan- tive law the procedure, however, must be one which is established by law. The expression “law” in this context does not mean or signify, according to the learned counsel, any particular law enacted by the legislature in conformity with the requirements of the Constitu- tion or otherwise possessing a binding authority. It refers to law in the abstract or general sense–in the sense of jus and not lex–and meaning thereby the legal principles or fundamental rules that lie at the root of every system of positive law including our own, and the authority of which is acknowledged in the jurisprudence of all civilised coun- tries. It is argued that if the word “law” is interpret- ed in the sense of any State-made law, article 21 could not rank as a fundamental right imposing a check or limitation on the legislative authority of the Government. It will be always competent to the legislature to pass a law laying down a thoroughly arbitrary and irrational procedure opposed to all elementary principles of justice and fairness and the people would have no protection whatsoever, provided such procedure was scrupulously adhered to. In support of this argument the learned counsel has relied upon a large number of American cases, where the Supreme Court of America ap- plied the doctrine of “due process of law” as it appears in the American Constitution for the purpose of invalidating various legislative enactments which appeared to that Court to be capricious and arbitrary and opposed to the fundamen- tal principles of law.

266 It may be noted here that in the original draft of the Indian Constitution the words used in article 15 (which now stands as article 21) were “in accordance with due process of law.” The Drafting Committee recommended that in place of the “due process” clause, the expression “according to procedure established by law” should be substituted. The present article 21 seems to have been modeled on article 31 of the Japanese Constitution, where the language employed is “no person shall be deprived of’life or liberty, nor shall any other criminal penalty be imposed, except according to procedure established by law.” Mr. Nambiar argues that the expression “procedure established by law” in article 21 of the Constitution bears the same meaning as the “due process” clause does in America, restricted only to this extent, viz., that it is limited to matters of procedure and does not extend to questions of substantive law. To appre- ciate the arguments that have been advanced for and against this view and to fix the precise meaning that is to be given to this clause in article 21, it would be necessary to discuss briefly the conception of the doctrine of “due process of law” as it appears in the American Constitution and the way in which it has been developed and applied by the Supreme Court of America.

In the history of Anglo-American law, the concept of “due process of law” or what is considered to be its equiva- lent “law of the land” traces its lineage far back into the beginning of the 13th century A.D. The famous 39th chapter of the Magna Charta provides that “no free man shall be taken or imprisoned or disseized, or outlawed or exiled or in any way destroyed; nor shall we go upon him nor send upon him but by the lawful judgment of his peers and by the law of the land.” Magna Charta as a charter of English liberty was confirmed by successive English monarchs and it is in one of these confirmations (28 Ed. III, Chap. 3) known as “Statute of Westminster of the liberties ofLondon”, that the expression “due process of law” for the first time appears. Neither of these phrases was explained or defined in any of the 267 -documents, but on the authority of Sir Edward Coke it may be said that both the expressions have the same meaning. In substance, they guaranteed that persons should not be imprisoned without proper indictment and trial by peers, and that property should not be seized except in proceedings conducted in due form in which the owner or the person in possession should have an opportunity to show cause why seizure should not be made (1). These concepts came intoAmericaas part of the rights of Englishmen claimed by the colonists. The expression in one form or other appeared in some of the earlier State Constitutions and the exact phrase “due process of law” came to be a part of the Federal Constitution by the Fifth Amendment which was adopted in 1791 and which provided that “no person shall… be deprived of life, liberty or property without due process of law.” It was imposed upon the State Constitution in almost identical language by the Fourteenth Amendment in the year 1868.

What “due process of law” exactly means is difficult to define even at the present day, The Constitution contains no description of what is “due process of law” nor does it declare the principles by application of which it could be ascertained. In Twining v.New Jersey(2) the Court ob- served:

“Few phrases in the law are so elusive of exact appre- hension as this. This COurt has always declined to give a comprehensive definition of it and has preferred that its full meaning should be gradually ascertained by the process of inclusion and exclusion in the course of the decisions of cases as they arise.” It is clear, however, that the requirement of “due process of law” in the United States Constitution imposes a limitation upon all the powers of Government, legislative as well as executive and judicial. Applied inEnglandonly as protection against executive usurpation and royal tyranny, inAmericait became a bulwark against arbitrary legislation (3).

(1) VideWilloughbyon the Constitution of theUnited States, Vol. III, p. 1087.

(2) 211 U.S. 79.

(3) Vide Hurtando v. People of California, [1884] USSC 84110 U.S. 516 at p. 532.

268 As it is a restraint upon the legislative power and the- object is to protect citizens against arbitrary and capri- cious legislation, it is not within the competence of the Congress to make any process a “due process of law” by its mere will; for that would make the limitation quite nugato- ry. As laid down in the case cited above, “it is not any act legislative in form that is law; law is something more than mere will exerted as an act of power.” It means and signifies the general law of the land, the settled and abid- ing principles which inhere in the Constitution and lie at the root of the entire legal system. To quote the words of Daniel Webster in a famous argument before.the Supreme Court (1):

“By the law of the land is most clearly intended the general law–a law which hears before it condemns, which proceeds upon enquiry and renders judgment only after trial.

The meaning is that every citizen shall hold his life, liberty, property and immunities under the protection of the general rules which govern society.” What these principles of general law are nobody has ever attempted to enumerate. To a large extent they are the principles of English common law and modes of judicial pro- ceedings obtaining in England, the traditions of which came along with the settlers in America. Some Judges seem to have alluded to the principles of natural justice in ex- plaining what is meant by general law or “law of the land,” though the doctrine of a law of nature did not obtain a firm footing at any time. In Wynehamer v. New York(2), Justice Hubbard declared himself opposed to the judiciary attempting to set bounds to the legislative authority or declaring a statute invalid upon any fanciful theory of’higher law or first principles of natural right outside of the Constitu- tion. Coke’s dictum of a supreme fundamental law which obviously referred to principles of English common law cer- tainly did exercise considerable influence upon the minds of the American Judges (3) and there are observations in some cases (1) Darmouth College case, 4 Wheaton p. 518. (2) 13 N.Y. 379.

(3) Willis on Constitutional Law, p. 647.

269 which go to suggest that the principles of natural justice were regarded as identical with those of common law, except where the rules of common law were not considered to be of fundamental character or were not acted upon as being un- suited to the progress of time or conditions of the American Society (1). In the case of Loan Association v.Topeka(2), it was observed that there are limitations upon powers of Government which grow out of the essential nature of free Governments–implied reservations of individual rights without which the social compact could not exist and which are respected by all Governments entitled to the name. What is hinted at, is undoubtedly the old idea of a social com- pact under which political institutions were supposed to come into being; and the suggestion is that when the Ameri- cans formed themselves into a State by surrendering a por- tion of their rights which they possessed at that time and which presumably they inherited from their English ancestors, there were certain rights of a fundamental character still reserved by them which no State could possibly take away.

As has been said already, “due process of law” has never been defined by Judges or Jurists inAmerica. The best description of the expression would be to say that it means in each particular case such an exercise of the powers of Government as the settled maxims of law permit and sanction, and under such safeguards for the protection of individual rights as those maxims prescribe for the class of cases to which the one in question belongs (3).

In the actual application of the clause relating to “due process of law” to particular cases the decisions of the Supreme Court of America present certain peculiar and unusu- al features and there is total lack of uniformity and consistency in them. Ever since the appearance of the clause in the Fifth Amendment and down to the middle of the 19th century, it was interpreted as a restriction on proce- dure, and particularly the judicial procedure, by which the Government (1) Cooley’s Constitutional Limitations, Vol. II, p. 73940.

(2) 20 Wall, p. 655. (3) Cooley’s Constitutional Limita- tions, Vol. II, p. 741.

270 exercises its powers. Principally it related to the proce- dure by which persons were tried for crimes and guaranteed to accused persons the right to have a fair trial in compli- ance with well established criminal proceedings. The same principle applied to the machinery or proceeding by which property rights were adjudicated and by which the powers of eminent domain and taxation were exercised. During this period it was not considered to have any bearing on substan- tial law at all.

Change, however, came in and the period that followed witnessed a growing recognition of the doctrine that sub- stantive rights of life, liberty and property are protected by the requirement of due process of law against any depri- vation attempted at by legislative authority; and the polit- ical and economic conditions of the country accounted to a great extent for this change in judicial outlook. The close of the civil war brought in a new period of industrial development leading to accumulation of large capital in the hands of industrialists and the emergence of a definite labouring class. New and important problems arose which the States attempted to deal with by various laws and regu- lations. Some of them seem to have been ill-advised and arbitrary and there was a clamour amongst businessmen against what they described as legislative encroachments upon their vested private rights. The Supreme Court now began to use the rule of due process of law as a direct restraint upon substantial legislation and any statute or administrative act, which imposed a limitation upon rights of private property or free contractual relations between the employers and employed, was invalidated as not being in accordance with due process of law (1). What constituted a legitimate exercise of the powers of legislation now came to be a judicial question and no statute was valid unless it was. reasonable in the opinion of the Court. The question of reasonableness obviously depends largely upon the. ideas of particular individuals and the Courts or rather the majority of Judges thus marshalled their own (1) Vide Encyclopaedia of the Social Sciences, Vol. V, pp.

265-67.

271 views of social and economic policy in deciding the reasona- bleness or otherwise of the statutes. In the language of a well-known writer, the Courts became a kind of negative third chamber both to the State Legislatures and the Con- gress(1). To what extent the Courts laid stress upon the doctrine of freedom of contract is illustrated in the case of Lochner v.New York(2). In that case the question arose as to the validity of a labour legislation which prohibited the employment of persons in certain fields of activity for more than 60 hours a week. Lochner was indicted for violat- ing this law by employing a man in his Biscuit and Cake Factory who was to work more than 60 hours in a week. The Court by a majority of 5 to 4 held the statute to be invalid on the ground that the “right to purchase or sell labour is part of the liberty protected by the Amendment unless there are circumstances which excluded the right.” That decision has been criticized not merely on the ground that it rested upon an economic theory which to quote the language of Holmes J., who was one of the dissentient Judges “was not entertained by a large part of the country;” but it ignored that such regulation was necessary for protecting the health of the employees, that is to say, it was in substance an exercise of police powers with a view to accomplish some object of public interest(s).

It may be mentioned here that while the due process doctrine was being extended by judicial pronouncements, the doctrine of police power which operates to some extent as a check upon the “due process” clause was simultaneously gaining importance. Roughly speaking, police power may be defined as “a right of a Government to regulate the conduct of its people in the interests of public safety, health, morals and convenience. Under this authority, a Government may make regulations concerning the safety of building, the regulation of traffic, the reporting of incurable diseases, the inspection of markets, the sanitation of factories, the hours of work for women (1) Vide Kelley and Harbinson on the American Constitution, p. 539.

198u.s.45.

VideWilloughbyon the Constitution of theU.S., Vol. III, p. 271.

272 and children, the sale of intoxicants and such other matters ,,(1). Here again, the extent to which the Court can inter- fere with exercise of police powers by the State has not been clearly defined by judicial pronouncements. The doc- trine generally accepted is that although any enactment by legislature under the guise of exercise of police powers would not necessarily be constitutional, yet if the regula- tion has a direct relation to its proposed object which is the accomplishment of some legitimate public purpose, the wisdom or policy of the legislation should not be examined by the Courts. The rule is not without its exceptions but it is not necessary to elaborate them for our present pur- pose(2). The later decisions, though not quite uniform, reveal the growing influence of the police power doctrine.

It may be said that since 1936 there has been a definite swing of the judicial pendulum in the other direction. In the case of West Coast Hotel Company v. Parrish(3) which related to the legality of a Statute for regulating the minimum wages of women, Chief Justice Hughes, who delivered the opinion of the Court, observed as follows:

“In each case the violation alleged by those attack- ing minimum wage regulation for women is deprivation of freedom of contract. What is the freedom? The Constitution does not speak of freedom of contract. It speaks of liberty and prohibits the deprivation of liberty without due process of law. In prohibiting that deprivation the Constitution does not recognise an absolute and uncontrol- lable liberty.Libertyin each of its phases has its histo- ry and connotation. But the liberty safeguarded is liberty in a social organisation which requires the protection of law. against the evils which menace the health, safety, morals and welfare of the people.” In the succeeding years the indications certainly are that the requirement of due process of law as a substantial restriction on Government control is becoming a thing of the past and the rule is being restricted more (1) Vide Munroe–The Government of the U.S., p. 522.

(2) VideWilloughbyon the Constitution of theU.S.Vol.

III, pp. 1709-70.

(3) [1937] USSC 73300 U.S. 379.

273 and more to its original procedural meaning. What will happen in future cannot certainly be predicted at this stage(1).

Thus it will be seen that the “due process” clause in the American Constitution came to be used as a potent in- strument in the hands of the judiciary for exercising con- trol over social legislation. The judicial pronouncements are not guided by any uniform principle, and the economic and social ideas of the Judges, who form the majority in the Supreme Court for the time being, constitute, so to say, the yard-stick for measuring the reasonableness or otherwise of any enactment passed during that period. No writer of American Constitutional Law has been able uptil now to evolve anything like a definite and consistent set of prin- ciples out of the large mass of cases, where the doctrine of “due process of law” has been invoked or applied.

It is against this background that we must consider how the constitution-makers inIndiadealt with and gave final shape to the provisions, on an analogous subject in the Indian Constitution. In the Draft Constitution, article 15 (which now stands as article 21) was apparently framed on the basis of the 5th and 14th Amendments in the American Constitution. The article was worded as follows:

“No person shall be deprived of his life or liberty without due process of law.” The Drafting Committee in their report recommended a change in the language of this article. The first sugges- tion was that the word “personal” shall be inserted before the word “liberty” and the second was that the expression “in accordance with procedure established by law” shall be substituted for “due process of law,” the reason given being that the former expression was more specific.

The learned Attorney-General has placed before us the debates in the Constituent Assembly centering round the adoption of this recommendation of the Drafting Committee and he has referred us to the (1) Swisher–The Growth of Constitutional Power in the United States, pp. 123-25.

274 speeches of several members of the Assembly who played an important part in the shaping of the Constitution.

As an aid to discover the meaning of the words in a Consti- tution, these debates are of doubtful value. ”Resort can be had to them”‘ saysWilloughby, ”with great caution and only when latent ambiguities are to be solved. The proceed- ings may be of some value when they clearly point out the purpose of the provision. But when the question is of ab- stract meaning, it will be difficult to derive from this source much material assistance in interpretation”(1).

The learned Attorney-General concedes that these debates are not admissible to explain the meaning of the words used and he wanted to use them only for the purpose of showing that the Constituent Assembly when they finally adopted the recommendation of the Drafting Committee, were fully aware of the implications of the differences between the old form of expression and the new. In my opinion, in interpreting the Constitution, it will be better if such extrinsic evi- dence is left out of account. In matters like this, differ- ent members act upon different impulses and from different motives and it is quite possible that some members accepted certain words in a particular sense, while others took them in a different light.

The report of the Drafting Committee, however,has been relied upon by both parties and there are decided authori- ties in which a higher value has been attached to such reports than the debates on the floor of the House. In Caminetti v. United States (2), it is said that reports to Congress accompanying the introduction of proposed law may aid the Courts in reaching the true meaning of the legisla- tion in case of doubtful interpretation. The report is extremely short. It simply says that the reason for the suggested change is to make the thing more

13.                   RASHID AHMED V. THE MUNICIPAL BOARD, KAIRANA [1950] INSC 13; AIR 1950 SC 163; 1950 SCR 566 (19 May 1950)

19/05/1950 DAS, SUDHI RANJAN DAS, SUDHI RANJAN KANIA, HIRALAL J. (CJ) FAZAL ALI, SAIYID SASTRI, M. PATANJALI MAHAJAN, MEHR CHAND MUKHERJEA, B.K.

CITATION: 1950 AIR 163 [1950] INSC 131950 SCR 566

CITATOR INFO :

D 1952 SC 115 (4) RF 1954 SC 220 (9) RF 1954 SC 630 (3) R 1957 SC 882 (6) R 1958 SC 956 (26) R 1959 SC 725 (8,11) R 1960 SC 994 (13) RF 1961 SC1506 (9) R 1962 SC1621 (75,108) R 1969 SC 556 (3)

ACT:

Constitution ofIndia, Arts. 19 (1), 19 (6), 32–Funda- mental right to carry on trade–Reasonableness of restric- tions imposed-U.P. Municipalities Act, 1916, s. 241 (2)(a)–Municipal byelaw prohibiting carrying on wholesale trade without permission–Absence of Provision for issuing license to old traders–Provision permitting Grant of monopoly–Legality of byelaw.

HEADNOTE:

Byelaw No.2 of the byelaws of a municipal board, which came into force on the 1st January, 1950, provided that “no person shall establish any new market or place for wholesale transactions without obtaining the previous permission of the board, and no person shall sell or expose for sale any vegetable, fruit, etc. at any place other than that fixed by the board for the purpose “; and bye-law No. 4 permitted the grant of a monopoly to a contractor to deal in wholesale transactions at the place fixed as a market. In anticipation of these byelaws the monopoly right to do wholesale business in vegetable for three years was auctioned by the municipal board and granted to the high- est bidder And A place was also fixed as the market where such business could be carried on. The petitioner who had been carrying on wholesale business in vegetables at a rented shop within the municipality for two years before the byelaws came into force applied for a license to carry on his business at his shop but this was rejected on the ground that there was no provision in the byelaws authorising the grant of any such license, and he was prosecuted for contra- vention of the byelaws. He applied under Art. 32 of the Constitution for the enforcements of his fundamental right as a citizen to carry on his business which was guaranteed by Art. 19 (1) of the Constitution.

Held (i) that the prohibition in byelaw No.2 became absolute in the absence of provision authorising the issue of a license, and, inasmuch as the municipal board had, further, put it out of its power to grant a license to the petitioner by granting a monopoly, the restrictions imposed were not reasonable within 567 the meaning of Art. 19 (6) of the Constitution, and the byelaws were accordingly void and the prosecution of the petitioner illegal, (ii) that the fact that the Constitution came into force only after the byelaws had come into force did not affect the petitioners’s right to carry on his business.

Held also, that an appeal under section 318 of the U. P.

Municipalities Act was not in the circumstances an adequate legal remedy the existence of which would disentitle the petitioner from maintaining this application.

ORIGINAL JURISDICTION`: Petition No. X of 1950.

This was an application under article 32 (1) of the Constitution for the enforcement of the applicant’s funda- mental right to carry on his business which was guaranteed by article 19 (1) of the Constitution. The facts of the case appear in the judgment.

Nur-ud-din, for the petitioner.

Radhelal Agarwala, for the opposite party.

M.C. Setalvad, Attorney-General forIndia, (S. M. Sikri, with him), for the Union of India.

Pearylal Banerji, Advocate-General of U.P. (Shri Ram, with him), for the State ofUttar Pradesh.

1950. May 19. The judgment of the Court was delivered by DAS J.–I am reading the judgment of the Court.

This is an application under article 32 of the Constitu- tion ofIndiamade by Rashid Ahmed for enforcement of his fundamental right to carry on his business which is said to have been completely stopped by the respondent, the Munici- pal Board of Kairana. The facts shortly are as follows:

The petitioner is an Aratia (commission agent) carrying on wholesale business in vegetables and fruits at Kairana in the District of Muzaffarnagar in the 568 State of Uttar Pradesh. He has been carrying on this busi- ness for the last two years at a rented shop in Bazar Jama Masjid in the town ofKairana. Until recently there were no bye-laws of the respondent Board regulating the sale of vegetables and fruit within the limits of the municipality.

In March, 1949. the respondent Board published certain proposed bye, laws made under section 298 of the U.P. Munic- ipalities Act, 1916. These bye-laws were passed by the respondent Board on the 19th April, 1949. After confirma- tion by the Commissioner these bye-laws came into operation on and from 1st January, 1950. In anticipation of these new bye-laws coming into effect the respondent Board on the 21st May, 1949, auctioned” the contract for wholesale of vegeta- bles, presumably meaning thereby the monopoly right to do wholesale business in vegetables. The contract was given to one Habib Ahmad, who was the highest bidder for three years at and for Rs, 72,750 payable in equal quarterly instalments in advance. On the 31st December, 1949, respondent Board notified a place near Police Post Imam as the market for wholesale purchase and sale of vegetables and fruits. The petitioner applied for a license to carry on his wholesale Aratia business at his shop. On or about the 22nd December, 1949, the respondent Board by resolution No. 188 rejected the petitioner’s application. This decision was communicated to the petitioner on the 9th February, 1950. The order of the Chairman of the respondent Board was in these terms:

“According to resolution No. 188 dated 22-12-49 the applica- tion of Mr. Rashid Ahmed is rejected and he be informed accordingly.” No reason was assigned by the respondent Board’s resolution for the rejection of the petitioner’s application. We are now informed by the learned Advocate for the respondent Board that the application was rejected as there. was no bye-law for entertaining such application or granting such license as was prayed for. The fact that the respondent Board had already auctioned the contract to Habib Ahmad might conceivably have had some bearing on this refusal to grant a license. to the petitioner. In the mean- time on the 28th 569 January, 1950, a notice was served on the petitioner in the following terms:

“You are hereby informed that the Municipal Board, Kairana, have given the contract of wholesale purchase and sale of the vegetables, which is in force from the 1st day of January, 1950. It has been repeatedly promulgated, in the city by the beat of drum, through a Khakrob (sweeper) that excepting the contractor of vegetables the Municipal Board, Kairana, nobody shall deal in wholesale purchase and sale of vegetables at a place other than the one approved by the Municipal Board aforesaid (i.e. the place near Police Post Imam). As against this, you in the first place kept selling vegetables by wholesale, at the house near Jama Masjid otherwise known as Qaziwala, despite occasional verbal warnings requiring you to desist therefrom, which were conveyed through an employee of the Board. On your failure to comply, you were warned by a notice in writing, dated the 3rd January, 1950. That notice was duly served on you. But still you paid no heed. Accordingly a complaint was lodged against you, under the bye-laws, quoted above, in the Court of Pargana Officer, Tahsil Kairana. The complaint is still pending. Now you are selling wholesale by auction, vegetable at another place in Jama Masjid Bazar, which is a thoroughfare.

Your above conduct is unlawful and in contravention of the Municipal Board’s Bye-law 2 pertaining to vegetable contract. Moreover, highly prejudicial as it is to the interests of both the contractor and the Board, you are warned that after this notice has been served on you, you should cease to sell any more vegetable in breach of the bye-laws above mentioned. Herein fail not.” This notice is rather disingenuous in that while it sug- gests that everybody can deal in wholesale purchase and sale of vegetables at the place approved by the Board, i.e., at the place near Police Post Imam, the fact, as we are now told by the learned Advocate for the respondent Board, is entirely contrary, for it is 570 only the contractor Habib Ahmad who can carry on wholesale business at that place. The position, therefore, is that the petitioner cannot do any wholesale business either at the appointed market or at his own shop where he had admit- tedly been doing wholesale. business for two years prior to the bye-laws coming into force. In short, the petitioner’s business has been wholly stopped and he is being prosecuted for alleged breach of the bye-laws. The above notice was headed as “Notice under bye-law 2 of the bye-laws pertaining to contract of vegetables.” Bye-law 2 runs thus:

“No person shall establish any new market or place for wholesale transaction without obtaining the previous per- mission of the Board and no person shall sell or expose for sale any vegetable, fruit, etc., at any place other than that fixed by the Board for the purpose.” The second part of this bye-law clearly contem- plates that everybody will be entitled to do business at the place fixed by the respondent Board, but as a result of a monopoly in favour of the contractor Habib Ahmad having been created, nobody else can do business at that place as conceded by the learned Advocate for the respondent Board.

Under the first part of this bye-law no person can establish a new market or place for wholesale transaction without obtaining the permission of the respondent Board. This part of the bye-law clearly contemplates that the Board may permit the establishment of a new market for wholesale dealings in vegetables. The petitioner applied for this permission but it was refused. Bye-law 2 is still in force.

If it requires a license then under section 241 (2)(a) the respondent Board cannot refuse such license except on the ground that the place where the market or shop is estab- lished fails to comply with any condition prescribed by, or under, the Act. It’ is conceded that the rejection of the petitioner’s application was not based on any such ground but that it was because there was no bye-law authorising the issue of any license. The Constitution by article 19 (1) guarantees 571 to the Indian citizen the right to carry on trade or busi- ness subject to such reasonable restrictions as are men- tioned in clause (6) of that article. The position, howev- er, under bye-law 2 is that while it provided that no person shall establish a market for wholesale transactions in vegetables except with the permission of the Board, there is no bye-law authorising the respondent Board to issue the license. The nett result is that the prohibition of this bye-law, in the absence of any provision for issuing li- cense, becomes absolute. Further: bye-law 4 contemplates the grant of a monopoly to a contractor to deal in wholesale transactions at the place fixed as a market. Acting upon that provision, the respondent Board has granted monopoly to Habib Ahmad and has put it out of its power to grant a license to the petitioner to carry on wholesale business in vegetables either at the fixed market place or at any other place within the municipal limits of Kairana. This certainly is much more than reasonable restrictions on the petitioner as are contemplated by clause (6) of article 19. This being the position, the bye-laws would be void under article 13 (1)of the Constitution. On the other hand, if there is no bye-law requiring the petitioner to take out license, then there can be no justification for the respondent Board to stop the petitioner’s business or to prosecute him.

Learned counsel for the respondent Board faintly con- tended that the’ bye-laws having come into force on 1st January, 1950, i.e., before the Constitution came into force, the petitioner no longer had any right to continue the business and, therefore, his case is not governed by article 19 (1) (g). There is no substance in this argument for, if it were sound, article 19 (1) (g) would only protect persons who were carrying on business before the Constitu- tion came into force.

Learned Advocate-General of Uttar Pradesh appearing for the intervener drew our attention to section 318 of the U.P. Municipalties Act, 1916, and submitted that the peti- tioner having adequate remedy by way of appeal, this Court should not grant any writ in the nature of the prerogative writ of mandamus 572 or certiorari. There can be no question that the existence of an adequate legal remedy is a thing to be taken into consideration in the matter of granting , writs, but the powers given to this Court under article 32 are much wider and are not confined to issuing prerogative writs only. The respondent Board having admittedly put it out of its power to grant a license and having regard to the fact that there is no specific bye-law authorising the issue of a license, we do not consider that the appeal under section 318 to the local Government which sanctioned the bye-laws is, in the circumstances of this case, an adequate legal remedy.

We are satisfied that in this case the petitioner’s fundamental rights have been infringed and he is entitled to have his grievance redressed. The proper order in such circumstances would be to direct the respondent Board not to prohibit the petitioner from carrying on the trade of whole- sale dealer and commission agent of vegetables and fruits within the limits of the Municipal Board of Kairana, except in accordance with the bye-laws as and when framed in future according to law and further to direct the respondent Munic- ipal Board to withdraw the pending prosecution of the peti- tioner and we order accordingly. The respondents to pay the costs of the petitioner.

Petition allowed.

Agent for the petitioner: Naunitlal.

Agent for the opposite party : Tarachand Brijmohanlal.

Agent for the Union ofIndia: P.A. Mehta.

Agent for Uttar Pradesh: Tarachand Brijmohanlal.


 

14.                   A.K. GOPALAN V. THE STATE OFMADRAS[1950] INSC 14; AIR 1950 SC 27; 1950 SCR 88 (19 May 1950)

19/05/1950 KANIA, HIRALAL J. (CJ) KANIA, HIRALAL J. (CJ) FAZAL ALI, SAIYID SASTRI, M. PATANJALI MAHAJAN, MEHR CHAND DAS, SUDHI RANJAN MUKHERJEA, B.K.

CITATION: 1950 AIR 27 [1950] INSC 141950 SCR 88

CITATOR INFO :

F 1951 SC 157 (21) F 1951 SC 270 (5, 6) F 1951 SC 301 (10) F 1951 SC 332 (344) E 1952 SC 75 (45) RF 1952 SC 123 (6) F 1952 SC 181 (6,27,29,33) D1952 SC 196 (16) RF 1952 SC 252 (106) R 1952 SC 366 (16) E&F 1952 SC 369 (90, 93) F 1953 SC 451 (7) E&F 1954 SC 92 (5, 39) RF 1954 SC 119 (15) RF 1954 SC 728 (17) R 1955 SC 41 (6) F 1956 SC 108 (6) R 1957 SC 688 (6,8,9) R 1958 SC 163 (7,8,9,25,26,33,36,38,41) APL 1958 SC 578 (154,223) D1958 SC 731 (17) R 1959 SC 149 (27,82) D 1960 SC 430 (10) D 1960 SC1080 (25,27, 28) RF 1961 SC 232 (55) R 1961 SC1629 (5) R 1962 SC1006 (67,72,79) R 1962 SC1371 (32,34,35) R 1962 SC1621 (73,108) R 1963 SC1047 (18) F 1963 SC1295 (15, 31) F 1964 SC 381 (54) R 1965 SC 845(29,30,44,45) E 1966 SC 424 (2, 7) RF 1966 SC1910 (34) R 1967 SC 1 (41,42,75,158) APL 1967 SC1639 (7,10) R 1967 SC1643 (22,95,230,274) R 1967 SC1836 (13,23,53,58) E 1968 SC1138 (14) E 1968 SC1313 (10) RF 1969 SC1100 (7) O 1970 SC 564 (48,53,54,64,149,152,153, 156) RF 1971 SC 481 (46) E 1972 SC 963 (35) R 1972 SC1660 (7, 9) RF 1973 SC 106 (105) O 1973 SC1425 (7,18,25,27,33,37,38, 39) RF 1973 SC1461 (24,30,184,310,503,648,699, 790 RF 1973 SC2555 (5) F 1974 SC 348 (24) R 1974 SC 613 (8,10,31,32,33,34,43,50,51) R 1974 SC2154 (21) RF 1975 SC 550 (12) E 1975 SC 775 (3) RF 1975 SC2213 (7) RF 1975 SC2299 (135,609,610) E 1976 SC1207 (53,55, 57) RF 1976 SC1750 (3) R 1977 SC1027 (23,30,42) R 1978 SC 68 (89) R 1978 SC 215 (67) D 1978 SC 489 (1,9) E&R 1978 SC 597 (5,9,10,11,12,16,40,41,54,55,* RF 1978 SC1675 (55, 227) RF 1979 SC 478 (90, 159) RF 1979 SC 745 (71) RF 1979 SC1925 (16) C 1980 SC 898 (30,41,43,44,47,48,50,51, 54) RF 1982 SC 710 (17,21,71,84,114) MV 1982 SC1325 (16, 80) RF 1983 SC 361 (2,12, 13) F 1985 SC1367 (33) F 1985 SC1416 (103, 104) RF 1986 SC 555 (6) RF 1986 SC1162 (5) R 1990 SC 231 (17) RF 1991 SC 564 (5) R 1992 SC 320 (51) RF 1992 SC1701 (21,26,27)

ACT:

Preventive Detention Act (IV of 1950), ss. 8, 7, 10-I4.–Validity–Constitution ofIndia, 1950, Arts. 13, 19 to 22, 32–Law relating to preventive detention–Whether infringes Fundamental Right as to freedom of movement–Whether subject to judicial review as to reasona- bleness under Art. 19 (5)–Scope of Art. 19–Right of free movement and Right to personal liberty, nature and incidents of–Art. 22, whether complete code as to preventive deten- tion–Scope and applicability of Art.. 21–“Law,” “proce- dure established by law,” meanings of–Whether include rules of natural justice–Construction of Art. 21–American deci- sions on “due process of law,” value of-Omission to provide objective standard for satisfaction of authorities, to provide for oral hearing or leading of evidence, to fix maximum period of detention, and to specify “circumstances” and “classes of cases” where period of detention may be extended over 3 months, prohibiting detenu from disclos- ing grounds of detention–Validity of law–Construction of Constitution –Reference to debates and Report of Draft- ing Committee-Permissibility.

HEADNOTE:

The petitioner who was detained under the Preventive Detention Act (Act IV of 1950) applied under Art. 32 of the Constitution for a writ of habeas corpus and for his release from detention, on the ground that the said Act contravened the provisions of Arts. 13, 19, 21 and 22 of the Constitu- tion and was consequently ultra rites and that his detention was therefore illegal:

Held, per KANIA C.J., PATANJALI SASTRI, MUKHERJEA and DAS JJ. (FAZL ALI and MAHAJAN JJ. dissentinq)–that the preventive Detention Act, 1950, with the exception of Sec.

14 thereof did not contravene any of the Articles of the Constitution and even though Sec. 14 was ultra rites inas- much as it contravened the provisions of Art. 9.9, (5) of the Constitution, as this section was severable from the remaining sections of the Act, the invalidity of Sec. 14 did not affect the validity of the Act as a whole, and the detention of the petitioner was not illegal.

FAZL ALl and MAHAJAN JJ.–Section 12, of the Act was also ultra vires, and since it contravened the very provi- sion in the 89 Constitution under which the Parliament derived its compe- tence to enact the law, the detention was illegal.

Held, by the Full Court(KANIA CJ., FAZL ALI, PATANJALI SASTRI, MAHAJAN, MUKHERJEA and DAS JJ.)–Section 14 of the Preventive Detention Act, 1950, contravenes the provisions of Art. 9.9. (5) of the Constitution in so far as it prohibits a person detained from disclosing to the Court the grounds on which a detention order has been made or the representation made by him against the order of detention, and is to that extent ultra vires and void.

Per KANIA C.J., PATANJALI SASTRI, MAHAJAN, MUKHERJEA and DAS JJ. (FAZL ALI J. dissenting).–Article 19 of the Consti- tution has no application to a law which relates directly to preventive detention even though as a result of an order of detention the rights referred to in sub-cls. (a) to (e) and (g) in general, and sub-cl. (d) in particular, of cl. (1) of Art. 19 may be restricted or abridged; and the constitution- al validity of a law relating to such detention cannot therefore, be judged in the light of the test prescribed in el. (5) of the said Article.

DAS J.–Article 19 (1) postulates a legal capacity to exercise the rights guaranteed by it and if a citizen loses the freedom of his person by reason of lawful detention as a result of a conviction for an offence or otherwise he cannot claim the right s under- sub-cls. (a) to (e) and (g) of Art. 19 (1); likewise if a citizen’s property is compulsorily ac- quired under Art. 31, he cannot claim the right under sub- el. (f) of Art. 19 (1) with respect to that property. In short the rights under sub-cls. (a) to (e) and (g) end where lawful detention begins and therefore the validity of a preventive detention Act cannot be judged by Arc. 19 (5).

MAHAJAN J.—Whatever be the precise scope of Art. 19 (1) (d) and Art.19(5) the provisions of Art. 19(5) do not apply to a law relating to preventive detention, inasmuch as ‘there is a special self-contained provision in Art. 22 regulating it.

FAZL ALI.J.–Preventive detention is a direct infringe- ment of the right guaranteed in Art. 19 (1) (d), even if a narrow construction is placed on the said sub-clause, and a law relating to preventive detention is therefore subject to such limited judicial review as is permitted by Art. 19 (5).

Per KANIA C.J., PATANJALI SASTRI, MUKHERJEA and DAS JJ.

(FAZL ALl J. dissenting).–The concept of the right “to move freely throughout theterritoryofIndia” referred to in Art. 19 (1) (d), of the Constitution is entirely differ- ent from the concept of the right to “personal liberty” referred to in Art. 21, and Art. 19 should not, therefore, be read as controlled by the provisions of Art. 21. The view that Art. 19 guarantees substantive rights and Art. 21 prescribes the procedure is incorrect. DAs J.–Article 19 protects some of the important attributes of personal liber- ty as independent rights and the expression “personal liber- ty” is used in Art. 21 as a compendious term 90 including within Rs meaning all varieties of rights which go to make up the personal liberties of men.

FAZL ALl J.–Even if it be assumed that Art. 19 (1) (d) does not refer to ” personal liberty” and that it bears the restricted meaning attributed to it,that is to say, R signi- fies merely the right to move from one locality to another, preventive detention must be held to affect this limited right of movement directly and substantially. One of the objects of preventive detention is to restrain a person detained from moving from place to place so that he may not spread disaffection or indulge in dangerous activities in the places he visits. The same consideration applies to the cases of persons who are interned or externed. Hence, externment, interment and certain other forms of restriction on movement have always been treated as kindred matters belonging to the same group or family, and the rule which applies to one must necessarily apply to the others.

Per KANIA C. J ,, PATANJALI SASTRI and DAS 35. (MAHAJAN

3. dissenting).–Article 22 does not form a complete code of constitutional safeguards relating to preventive detention.

To the extent that provision is made in Art. 9.9, it cannot be controlled by Art. 9,1; but on points of procedure which expressly or by necessary implication are not dealt with by Art. 22, Art. 9.1 will apply. DAS J.–Art. 21 protects substantive rights by requiring a procedure and Art. 9.9.

lays down the minimum rules of procedure that even the Parliament cannot abrogate or overlook. MAHAJAN J.–Art. 99.

contains a self-contained code of constitutional safeguards relating to preventive detention and cannot be examined or controlled by the provisions of Art. 21. The principles underlying Art. 21 are however kept in view in Art. 22 and there is no conflict between these articles. MUKHERJEA J.

–Even assuming that Art. 22 is not a self-contained code relating to preventive detention and that Art. 21 would apply, it is .not permissible to supplement Art. 22 by the application of rules of natural justice. FAZL ALI J.–Art.

22. does not form an exhaustive code by itself relating to preventive detention. Parliament can make further provi- sions and if it has done so Art. 19 (5) may be applied to see if those provisions have transgressed the bounds of reasonableness.

Per KANIA C.J., MUKHERJEA and DAS JJ. (FAZL ALI J. dis- senting).–In Art. 9.1 the word ‘law” has been used in the sense of State-made law and not as an equivalent of law in the abstract or general sense embodying the principles of natural justice; and “procedure established by law” means procedure established by law made by the State, that is to say, the Union Parliament or the Legislatures of the States.

It is not proper to construe this expression in the light of the meaning given to.the expression “due process of law” in the American Constitution by the Supreme Court of America.

FATANJALI SASTRI cl.– “Law” in Art. 21 does not mean the jus naturale of civil law but means 91 positive or State-made law. “Procedure established by law” does not however mean any procedure which may be prescribed by a competent legislature, but the ordinary well-estab- lished criminal procedure, i.e., those settled. usages and normal modes of procedure sanctioned by the Criminal Proce- dure Code, which is the general law of criminal proce- dure in this country. The only alternative to this con- struction, if a constitutional transgression is to be avoid- ed is to interpret the reference to “law” as implying a constitutional ‘amendment pro tanto, for it is only a law enacted by the procedure provided for such amendment that could modify or override a fundamental right without contra- vening Art. 13 (2).

FAZL, ALI J.–There is nothing revolutionary in the view that “procedure established by law “must include the four principles of elementary justice which inhere in and are at the root of all civilized systems of law, and which have been stated by the American Courts and jurists as consisting in (1) notice, (2) opportunity to be heard, (3) impartial tribunal and (4) orderly course of procedure. These four principles are really different aspects of the same right, namely, the right to be heard before one is condemned. Hence the words “procedure established by law “, whatever its exact meaning be, must necessarily include the principle that no person shall be condemned without hearing by an impartial tribunal.

Per KANIA C.J., FAZL ALI, PATANJALI SASTRI, MAHAJAN and DAS JJ.–Section 3 of the Preventive Detention Act, 1950, does not delegate any legislative power to an executive officer but merely confers on such officer a discretion to enforce the law made by the legislature, and is not there- fore invalid on this ground. The fact that the section does not provide an objective standard for determining whether the requirements of law have been complied with, is not a ground for holding that it is invalid. FAZL ALI J.—Section 3 is however a reasonable provision only for the first step, i.e., for arrest and initial detention and must be followed by some procedure for testing the so-called subjective satisfaction, which can be done only by providing a suitable machinery for examining the grounds on which the order of detention is made and considering the representations of the persons detained in relation to those grounds.

Per KANIA C. J., MAHAJAN and DAS JJ.—Section 7 of the said Act is not invalid merely because it does not provide for an oral hearing or an opportunity to lead evidence but only gives right to make a representation. Right to an oral hearing and right to give evidence are not necessarily implied in the right to make a representation given by Art.

22.

Per KANIA C.J., and MAHAJAN J.–The provision contained in Sec. 11 that a person may be detained for such period as the 12-A 92 State thinks fit does not contravene Art. 22 (7) and it is not therefore invalid.

Per KANIA. C.J., PATANJALI SASTRI, MUKHERJEA and DAS JJ. (FAZL ALI and MAHAJAN JJ. dissenting).–Article 22 (7) means that Parliament may prescribe either the circumstances under which, or the class or classes of cases in which, a person may be detained for a period longer than three months without reference to an advisory board. It is not necessary that the Parliament should prescribe both. The matters referred to in clauses (a) and (b) of sub-see. (1) of Sec.

12 constitute a sufficient description of such circumstances or classes of cases and Section 12 is not therefore open to the objection that it does not comply with Art. 22 (7) DAS J.–Parliament has in act and substance prescribed both in clauses (a) and (b) of sub-sec. (1) of Sec. 12.

FAZL ALI and MAJAN JJ.–Article 22 (7) Means that both the circumstances and the class or classes of cases (which are two different expressions with different meanings and connotations) should be prescribed, and the prescription of one without the other will not be enough. The enumeration of the subjects for reasons connected with which a law of preventive detention could be made contained in els. (a) and (b) of sub-see. (1) of Sec.12 does not amount to prescribing the circumstances under which, or the class or classes of cases in which, a person can be detained for more than three months.

Per KANIA C.J.–While it is not proper to take into consideration the individual opinions of members of Parlia- ment or Convention to construe the meaning of a particular clause, when a question is raised whether a certain phrase or expression was up for consideration at all or not, a reference to the debates may be permitted. PATANJAYLI SASTRI J.–In construing the provisions of an Act, speeches made in the course of the debates on the bill should not be taken into consideration. MUKHERJEA J.–In construing the Constitution it is better to leave out of account the debates in the Constituent Assembly, but a higher value may be placed on the report of the Drafting Committee.

ORIGINAL JURISDICTION: Petition No. XIII of 1950.

Application under Art. 32 (1) of the Constitution of India for a writ of habeas corpus against the detention of the appellant in the Madras jail in pursuance of an order of detention made under the Preventive Detention Act, 1950.

The material facts of the case and arguments of counsel are set out in detail in the judgments. The relevant provisions of the Preventive Detention Act, 1950, are printed below.

93

1. Short title, extent and duration.–This Act may be called the Preventive Detention Act, 1950.

(2) It extends to the whole ofIndia…..

(3) It shall cease to have effect on the 1st day of April, 1951, as respects things done or omitted to be done before that date.

2. Definitions.–In this Act, unless the context other- wise requires,– (a) “State Government” means, in relation to a Part C State, the Chief Commissioner of the State; and (b) “detention order” means an order made under Section 3.

3. Power to make orders detaining certain persons.–(1) The Central Government or the State Government may— (a) if satisfied with respect to any person that with a view to preventing him from acting in any manner prejudicial to– (i) the defence of India, the relations of India foreign power, or the security of India, or (ii) the security of the State or the maintenance of public order, or (iii) the maintenance of supplies and services to the community, or (b) if satisfied with respect to any person who is a foreigner within the meaning of the Foreigners Act, 1946 (XXXI of 1946), that with a view to regulating his continued presence in India or with a view to making arrangements for his expulsion from India it is necessary so to do, make an order directing that such person be detained.

(2) Any District Magistrate or Sub-Divisional Magistrate, or Presidency-town, the Commissioner of Police, may, if satisfied provided in sub-clauses (ii) and (iii) of clause (a) of sub-section (1), exercise the power conferred by the said sub-section.

(3) When any order is made under this section by a Dis- trict Magistrate, Sub-Divisional Magistrate or Commissioner of Police, he shall forthwith report the fact to the State Government to which he is subordinate together with the grounds on which the order has been made and such other particulars as in his opinion have a bearing on the necessi- ty for the order.

7. Grounds of order of detention to be disclosed to persons affected by the order.–(1) When a person is de- tained in pursuance of a detention order, the authority making the order shall, as soon as may be, communicate to him the grounds on which the order his been made, and shall afford him the earliest opportunity of making a representa- tion against the order, in a case where such order has been made by the Central Government, to that Government, and in a case where it has been made by a State Government or an officer subordinate thereto, to the State Government.

94

11. Confirmation of detention order.–In any case where the Advisory Board has reported that* there is in Rs opinion suffcient cause for the detention of the person concerned, the Central Government or the State Government. as the case may be, may confirm the detention order and continue the detention of the person concerned for’ such period as it thinks fit.

12. Duration of detention in certain cases.–(1) Any person detained in any of the following classes of cases or under ‘my of the following circumstances may be detained without obtaining the opinion of an Advisory Board for a period longer than three months, but not exceeding one year from the date of his detention, namely, where such person has been detained wish a view to preventing him from acting in any manner prejudicial to– (a) the defence of India, relations of India with foreign powers or the security- of India; or (b) the security of a State or the maintenance of public order. * * *

14. Disclosure of grounds of detention, etc.–(1) No court shall, except for the purpose of a prosecution for an offence punishable under sub-section (9,), allow any state- ment to be made, or any evidence to be given. before it of the substance of any communication made under section 7 of the grounds on which a detention order has been made against any person or of any representation made by ‘him against such order; and notwithstanding anything contained in any other law, no court shall be entitled to require any public officer to produce before it, or to disclose the substance of, any such communication or representation made, or the proceedings of an Advisory Board or that par of the report of an Advisory Board which is confidential.

(2) It shall be an offence punishable with imprisonment for term which may extend to one year, or with fine, or with both, for any person to disclose or publish without the previous authorisation of the Central Government or the State Government, as the case may be, any contents or matter purporting to be contents of any such communication or representation as is referred to in sub-section (1):

Provided that nothing in this sub-section shall apply to a disclosure made’ to his legal adviser by a person who is the subject of a detention order.

M. K. Nambiar (S. K. Aiyar and V.G. Rao, with him) for the petitioner.

K. Rajah Aiyar, Advocate-General ofMadras(C. R.

Pattabi Raman and R. Ganapathi, with him) lot the State of Madras.

M.C. Setalvad, Attorney-General forIndia(Jindralal, with him) for the Union of India.

95 1950. May 19. The following Judgments were delivered.

KANIA C. J–This is a petition by the applicant under article 32 (1) of the Constitution of India for a writ of habeas corpus against his detention in the Madras Jail. In the petition he has given various dates showing how he has been under detention since December, 1947. Under the ordi- nary Criminal Law he was sentenced to terms of imprisonment but those convictions were set aside. While he was tires under detention under one of the orders of the Madras State Government, on the 1st of March, 1950, he was served with an order made under section 3 (1) of the Preventive Detention Act, IV of 1950. He challenges the legality of the order as it is contended that Act IV of 1950 contravenes the provisions of articles 13, 19 and 21 and the provisions of that Act are not in accordance with article 22 of the Con- stitution. He has also challenged the validity of the order on the ground that it is issued mala fide. The burden of proving that allegation is on the applicant. Because of the penal provisions of section 14 of the impugned Act the applicant has not disclosed the grounds, supplied to him, for his detention and the question of mala fides of the order therefore cannot be gone into under this petition.

The question of the validity of Act IV of 1950 was argued before us at great length. This is the first case in which the different articles of the Constitution of India contained in the Chapter on Fundamental Rights has come for discussion before us. The Court is indebted to the learned counsel for the applicant and the Attorney-General for their assistance in interpreting the true meaning of the relevant clauses of the Constitution.

In order to appreciate the rival contentions it is useful first to bear in mind the general scheme of the Constitution. Under article 53 of the Constitution the executive power of theUnionis vested in the President and is to be exercised by him in accordance with the 96 Constitution either directly or through officers subordinate to him. The legislative powers of theUnionare divided between the Parliament and Legislatures of the States. The ambit and limitations on their respective powers are found in article 246 read with article 245, Schedule VII, Lists 1,2 and 3 of the Constitution. For the Union of India the Supreme Court is established and its powers and jurisdiction are set out in articles 124 to 147. This follows the pat- tern of the Government of India Act, 1935, which was the previous Constitution of the Government of India. Unlike the American Constitution, there is no article vesting the judicial power of the Union of India in the Supreme Court.

The material points substantially altering the edifice are first in the Preamble which declaresindiaa Sovereign Democratic Republic to secure to all its citizens justice, liberty and equality and to promote among them all, frater- nity. Part III of the Constitution is an important innova- tion. It is headed “Fundamental Rights.” In that Part the word “State” includes both the Government of theUnionand the Government of the States. By article 13 it is expressly provided that all laws in force in theterritoryofIndia, immediately before the commencement of the Constitution, in so far as they are inconsistent with the provisions of this Part, to the extent of such inconsistency, are void. There- fore, all laws in operation in India on the day the Consti- tution came into force, unless otherwise saved, to the extent they are inconsistent with this Chapter on Fundamen- tal Rights, become automatically void. Under article 13 (2) provision is made for legislation after the Constitution comes into operation. It is there provided that the State shall not make any law which takes away or abridges the rights conferred by this Part and any law made in contraven- tion of this clause shall to the extent of the contraven- tion, be void. Therefore, as regards future legislation also the Fundamental Rights in Part III have to be respected and, unless otherwise saved by the provisions of the Consti- tution, they will be void to the extent they contravene the provisions of Part III. Under article 245 (1) the legisla- tive powers conferred under 97 article 246 are also made “subject to the provisions of this Constitution,” which of course includes Part III dealing with the Fundamental Rights. The term law in article 13, is expressed to be wide enough to include Acts, Ordinances, Orders, Bye-laws, Rules, Regulations and even custom or usage having, in theterritoryofIndia, the force of law.

The rest of this Part is divided in seven divisions. “Right to Equality” is found in articles 14-18, “Eight to Freedom” in articles 19-22, “Right against Exploitation” in articles 23 and 24, “Right to Freedom of Religion” in articles 25-28, “Cultural and Educational Rights” in articles 29 and 30, “Right to Property” in article 31 and “Right to Constitu- tional Remedies” in articles 32-35. In this case we are directly concerned only with the articles under the caption “Right to Freedom” (19-22) and article 32 which gives a remedy to enforce, the rights conferred by this Part. The rest of the articles may have to be referred to only to assist in the interpretation of the above-mentioned arti- cles.

It is obvious that by the insertion of this Part the powers of the Legislature and the Executive, both of the Union and the States, are further curtailed and the right to enforce the Fundamental Rights found in Part III by a direct application to the Supreme Court is removed from the legislative control. The wording of article 32 shows that the Supreme Court can be moved to grant a suitable relief, mentioned in article 32 (2), only in respect of the Funda- mental Rights mentioned in Part III of the Constitution.

The petitioner is detained under a preventive detention order, made under Act IV of 1950, which has been passed by the Parliament of India. In the Seventh Schedule of the Constitution, List I contains entries specifying items in respect of which the Parliament has exclusive legislative powers. Entry 9 is in these terms: “preventive detention for reasons connected with Defence, Foreign Affairs or the Security of India; persons subjected to such detention.” List III of that Schedule enumerates topics on which both theUnionand the States have concurrent legislative 98 powers. Entry 3 of that List is in these terms: “Preventive detention for reasons connected with the security of a State, the maintenance of public order or the maintenance of supplies and services essential to the community; persons subjected to such detention.” It is not disputed that Act IV of 1950 is covered by these two Entries in List I and List III of the Seventh Schedule. The contention of the peti- tioner is that the impugned legislation abridges or in- fringes the rights given by articles 19-21 and is also not in accordance with the permissive legislation on preventive detention allowed under articles 22 (4) and (7) and in particular is an infringement of the provisions of article 22 (5). It is therefore necessary to consider in detail each of these articles and the arguments advanced in respect thereof.

Article 19 is for the protection of certain rights of freedom to citizens. It runs as follows :– “19. (1)–All citizens shall have the right-(a) to free- dom of speech and expression;

(b) to assemble peaceably and without arms;

(c) to form associations or unions;

(d) to move freely throughout theterritoryofIndia;

(e) to reside and settle in any part of theterritoryofIndia;

(f) to acquire, hold and dispose of property;

and (g) to practise any profession, or to carry on any occupation, trade or business.

“(2) Nothing in sub-clause (a) of clause (1) shall affect the operation of any existing law in so far as it relates to, or prevent the State from making any law relat- ing to, libel, slander, defamation, contempt of court or any matter which offends against decency or morality or which undermines the security of, or tends to overthrow, the State.

(3) Nothing in sub-clause (b) of the said clause shall affect the operation of any existing law in so far as it imposts, or prevent the State from making any law imposing, in the interests of public order 99 reasonable restrictions on the exercise of the right con- ferred by the said sub-clause.

(4) Nothing in sub-clause (c) of the said clause shall affect the operation of any existing law in so far as it imposes, or prevent the State from making any law imposing, in the interests of public order or morality, reasonable restrictions on the exercise of the right conferred by the said sub-clause.

(5) Nothing in sub-clauses (d), (e) and (f) of the said clause shall affect the operation of any existing law in so far as it imposes, or prevent the State from making any law imposing, reasonable restrictions on the exercise of any of the rights conferred by the said sub-clauses either in the interests of the general public or for the protection of the interests of any Scheduled Tribe.

(6) Nothing in sub-clause (g) of the said clause shall affect the operation of any existing law in so far as it imposes, or prevent the State from making any law imposing, in the interests of the general public, reasonable restric- tions on the exercise of the right conferred by the said sub-clause, and, in particular, nothing in the said sub- clause shall affect the operation of any existing law in so far as it prescribes or empowers any authority to prescribe, or prevent the State from making any law prescribing or empowering any authority to prescribe, the professional or technical qualifications necessary for practising any pro- fession or carrying on any occupation, trade or business.” Clause (2) specifies the limits up to which the abridge- ment- of the right contained in 19 (1) (a) may be permitted.

it is an exception. Similarly clause (3) sets out the limit of abridgement of the right in 19 (1) (b) and clause (4) specifies such limits in respect of the right in 19 (1) (c).

Clause (5) is in respect of the rights mentioned in 19 (1) (d), (e) and (f) and clause (6) is in respect of the rights contained in 19 (1) (g). It cannot be disputed that the articles collected under the caption “Right to Freedom” have to be considered together to appreciate the extent of the Fundamental Rights. In the first place it is necessary to notice that 100 there is a distinction between rights given to citizens and persons. This is clear on a perusal of the provisions of article 19 on the one hand and articles 20, 21 and 22 on the other. In order to determine whether a right is abridged or infringed it is first necessary to determine the extent of the right given by the articles and the limitations pre- scribed in the articles themselves permitting its curtail- ment. The inclusion of article 13 (1) and (2) in the Con- stitution appears to be a matter of abundant caution. Even in their absence, if any of the fundamental rights was infiringed by any legislative enactment, the Court has always the power to declare the enactment, to the extent it transgresses the limits, invalid. The existence of article 13 (1) and (2) in the Constitution therefore is not material for the decision of the question what fundamental right is given and to what extent it is permitted to be abridged by the Constitution itself.

As the preventive detention order results in the deten- tion of the applicant in a cell it was contended on his behalf that the rights specified in article 19 (1) (a), (b), (c), (d), (e) and (g) have been infringed. It was argued that because of his detention he cannot have a free right to speech as and where he desired and the same argument was urged in respect of the rest of the rights mentioned in sub-clauses (b), (c), (d), (e) and (g). Although this argu- ment is advanced in a case which deals with preventive detention, if correct, it-should be applicable in the case of punitive detention also to any one sentenced to a term of imprisonment under the relevant section of the Indian Penal Code. So considered, the argument must clearly be rejected.

In spite of the saving clauses (2)to(6) permitting abridge- ment of the rights connected with each of them, punitive detention under several sections of the Penal Code, e.g., for theft, cheating, forgery and even ordinary assault, will be illegal. ‘Unless such conclusion necessarily follows from the article, it is obvious that such construction should be avoided. In my opinion, such result is clearly not the outcome of the Constitution. The article has to be read without any pre-conceived notions. So read, it clearly means 101 that the legislation to be examined must be directly in respect of one of the rights mentioned in the subclauses.

If there is a legislation directly attempting to control a citizen’s freedom of speech or expression, or his right to assemble peaceably and without arms, etc., the question whether that legislation is saved by the relevant saving clause of article 19 will arise. If, however, the legisla- tion is not directly in respect of any of these subjects, but as a result of the operation of other legislation, for instance, for punitive or preventive detention, his right under any of these subclauses is abridged, the question of the application of article 19 does not arise. The true approach is only to consider the directness of the legisla- tion and not what will be the result of the detention other- wise valid, on the mode of the detenue’s life. On that short ground, in my opinion, this argument about the in- fringement of the rights mentioned in article 19 (1) gener- ally must fail. Any other construction put on the article, it seems to me. will be unreasonable.

It was next urged that while this interpretation may meet the contention in respect of rights under article 19 (1) (a), (b), (c), (e) and (g), the right given by article 19 (1) (d) is left untouched. That sub-clause expressly gives the right “to move freely throughout theterritoryofIndia.” It was argued that by the confinement of the peti- tioner under the preventive detention order his right to move freely throughout the territory of India is directly abridged and therefore the State must show that the im- pugned legislation imposes only reasonable restrictions on the exercise of that right in the interests of the general public or for the protection of the interests of any Sched- uled Tribe, under article 19 (5). The Court is thus en- joined to inquire whether the restrictions imposed on the detained person are reasonable in the interests of the general public. Article 14 of the Constitution gives the right to equality in these terms:

“The State shall not deny to any person equality before the law or the equal protection of the laws within theterritoryofIndia.” 102 It was argued that the words “within theterritoryofIndia” are unnecessary in that article because the Parlia- ment is supreme to make laws operative only within theterritoryofIndia. Without those words also the article will bear the same meaning. Similarly, it was urged that the words “territoryofIndia” in article 19 (1) (d) may be treated as superfluous, and preventive detention would thus be an abridgement of the right to move freely. In my opin- ion, this rule of construction itself is faulty. Because certain words may be considered superfluous (assuming them to be. so in article 14 for the present discussion) it is quite improper to assume that they are superfluous wherever found in the rest of the Constitution. On the contrary, in my opinion, reading sub-clause (d) as a whole the words “territoryofIndia” are very important. What is sought to be protected by that sub-clause is the right to freedom of movement, i.e., without restriction, throughout the terri- tory ofIndia. Read with their natural grammatical.. mean- ing the sub-clause only means that if restrictions are sought to be put upon movement of a citizen from State to State or even within a State such restrictions will have to be tested by the permissive limits prescribed in clause (5) of that Article. Sub-clause (d) has nothing to do with detention, preventive or punitive. The Constitution men- tions a right to freedom of movement throughout the territo- ry ofIndia, Every word of that clause must be given its true and legitimate meaning and in the construction of a Statute, particularly a Constitution, it is improper. to omit any word which has a reasonable and proper place in it or to refrain from giving effect to its meaning. This position is made quite clear when clause (5) is read along with this sub-clause. It permits the imposition of reasona- ble. restrictions on the exercise of such right either in the interest of general public or the protection of the interest of any Scheduled Tribe. It is difficult to conceive of a reasonable restriction necessary in the interests of the general public for confining a person in a cell. Such restriction may be appropriate to prevent a person from going from one Province to another or 103 one area to another, having regard to local conditions prevailing in particular areas. The point however is made abundantly clear by the alternative, viz., for the protec- tion of the interests of any Scheduled Tribe. What protec- tion of the interests of a Scheduled Tribe requires the confinement of a man in a cell ? On the other hand, pre- venting the movement of a person from one part of the terri- tory of India to another and the question of reasonable restriction imposed to protect the interests of a Scheduled Tribe is clearly intelligible and often noticed in the course of the administration of the country. Scheduled Tribes have certain rights, privileges and also disabili- ties. They have their own civilization, customs and mode of life and prevention of contact with persons or groups with a particular Scheduled Tribe may be considered undesirable during a certain time or in certain conditions. The legis- lative history ofIndiashows that Scheduled Tribes have been given a separate place on these grounds. Reading article 19 as a whole, therefore, it seems to me that it has no application to a legislation dealing with preventive or punitive detention as its direct object. I may point out that the acceptance of the petitioner’s argument on the interpretation of this clause will result in the Court being called upon to decide upon the reasonableness of several provisions of the Indian Penal Code and several other penal legislations as abridging this right. Even under clause (5), the Court is permitted to apply the test of reasonable- ness of the restrictions or limits not generally, but only to the extent they are either in the interests of the gener- al public, e.g., in case of an epidemic, riot, etc., or for the protection of the interests of any Scheduled Tribe. In my opinion, this is not the intention of the Constitution.

Therefore the contention urged in respect of article 19 fails.

It was argued that article 19 and article 21 should be read together as implementing each other. Article 19 gave substantive rights to citizens while article 21 prescribed that no person can be deprived of his life and personal liberty except by procedure 104 established by law. Even so, on a true construction of article 19, it seems to me that both preventive and punitive detention are outside the scope of article 19.

In order to appreciate the true scope of article 19 it is useful to read it by itself and then to consider how far the other articles in Part HI affect or control its meaning.

It is the first article under the caption “Right to Freedom .” It gives the rights mentioned in 19 (1) (a) to (g) to all citizens ofIndia. These rights read by them- selves and apart from the controls found in clauses (2) to (6) of the same article, specify the different general rights which a free citizen in a democratic country ordi- narily has. Having specified those rights, each of them is considered separately from the point of view of a similar right in the other citizens, and also after taking into consideration the principle that individual liberty must give way, to the extent it is necessary, when the good or safety of the people generally is concerned. Thus the right to freedom of speech and expression is given by 19 (1) (a). But clause (2) provides that such right shall not prevent the operation of a law which relates to libel, slander, defamation, contempt of Court or any matter which offends against decency or morality or which undermines the security of, or tends to overthrow, the State. Clause (2) thus only emphasizes that while the individual citizen has a free right of speech or expression, he cannot be permit- ted to use the same to the detriment of a similar right in another citizen or to the detriment of the State. Thus, all laws of libel, slander, contempt of Court or laws in respect of matters which offend against decency or morality are reaffirmed to be operative in spite of this individual right of the citizen to freedom of speech and expression. Simi- larly; that right is also subject to laws which prevent undermining the security of the State or against activities which tend to overthrow the State. A similar analysis of clauses f3) and (4) shows similar restrictions imposed on similar grounds. In the same way clause (5) also permits reasonable restrictions in the exercise of the right to freedom of movement throughout the territory of India, the right to reside and settle in any part of the 105 territory of India or the right to acquire, hold and dispose of property, being imposed by law provided such reasonable restrictions on the exercise of such right are in the inter- est of the general’ public. The Constitution further pro- vides by the same clause that similar reasonable restric- tions could be put on the exercise of those rights for the protection of the interest of a Scheduled Tribe. This is obviously to prevent an argument being advanced that while such restriction could be put in the interest of general public, the Constitution did not provide for the imposi- tion of such restriction to protect the interests of a smaller group of people only.Readingarticle 19 in that way as a whole the only concept appears to be that the specified rights of a free citizen arc thus controlled by what the framers of the Constitution thought were necessary restric- tions in the interest of the rest of the citizens.

Readingarticle 19 in that way it appears to me that the concept of the right to move freely throughout the territo- ry ofIndiais an entirely different concept from the right to “personal liberty” contemplated by article 21. “Person- al liberty” covers many more rights in one sense and has a restricted meaning in another sense. For instance, while the right to move or reside may be covered by the expression ,’personal liberty” the right to freedom of speech (men- tioned in article 19 (1) (a)) or the right to acquire, hold or dispose of property (mentioned in 19 (1) (f)) cannot be considered a part of the personal liberty of a citizen.

They form part of the liberty of a citizen but the limita- tion imposed by the word “personal”leads me to believe that those rights are not covered by the expression personal liberty. So read there is no conflict between articles 19 and 21. The contents and subject matters of articles 19 and 21 are thus not the same and they proceed to deal with the rights covered by their respective words from totally different angles. As already mentioned in respect of each of the rights specified in sub-clauses of article 19 (1) specific limitations in respect of each is provided, while the expression “personal 106 liberty” in article 21 is generally controlled by the gener- al expression “procedure established by law.” The Constitu- tion, in article 19, and also in other articles in Part III, thus attempts to strike a balance between individ- ual liberty and the general interest of the society. The restraints provided by the Constitution on the legislative powers or the executive authority of the State thus operate as guarantees of life and personal liberty of the individu- als.

Deprivation (total loss) of personal liberty, which inter alia includes the right to eat or sleep when one likes or to work or not to work as and when one pleases and sever- al such rights sought to be protected by the expression “personal liberty” in article 21, is quite different from restriction (which is only a partial control) of the right to move freely (which is relatively a minor right of a citizen) as safeguarded by article 19 (1) (d). Deprivation of personal liberty has not the same meaning as restriction of free movement in theterritoryofIndia. This is made clear when the provisions of the Criminal Procedure Code in Chapter VIII relating to security of peace or maintenance of public order are read. Therefore article 19 (5) cannot apply to a substantive law depriving a citizen of personal liberty. I am unable to accept the contention that the word “deprivation” includes within its scope “restriction” when interpreting article 21. Article 22 envisages the law of preventive detention. So does article 9.46 read with Schedule Seven, List I, Entry 9, and List III, Entry 3.

Therefore, when the subject of preventive detention is specifically dealt with in the Chapter on Fundamental Rights I do not think it is proper to consider a legisla- tion ‘ permitting preventive detention as in conflict with the rights mentioned in article 19 (1). Article 19 (1) does not purport to cover all aspects of liberty or of personal liberty. In that article only certain phases of liberty are dealt with. “Personal liberty” would primarily mean liberty of the physical body. The rights given under article 19 (1) do not directly come under that description.

They are rights which accompany the freedom or liberty of the person. By their very 107 nature they are freedoms of a person assumed to be in full possession of his personal liberty. If article 19 is considered to be the only article safeguarding personal liberty several well-recognised rights, as for instance, the right to eat or drink, the right to work, play, swim and numerous other rights and activities and even the right to life will not be deemed protected under the Constitution. I do not think that is the intention. It seems to me improper to read article 19 as dealing with the same subject as article 21. Article 19 gives the rights specified therein only to the citizens ofIndiawhile arti- cle 21 is applicable to all persons. The word citizen is expressly defined in the Constitution to indicate only a certain section of the inhabitants ofIndia. Moreover, the protection given by article 21 is very general. It is of “law”–whatever that expression is interpreted to mean. The legislative restrictions on the law-making powers of the legislature are not here prescribed in detail as in the case of the rights specified in article 19. In my opinion there- fore article should be read as a separate complete article.

Article 21 which is also in Part III under the caption “Right to Freedom” runs as follows :- “No person shall be deprived of his life or personal liberty except according to procedure established by law.” This article has been strongly relied upon by the peti- tioner in support of his contention that the impugned Act is ultra vires the Parliament as it abridges the right given by this article to every person. It was argued that under the Constitution of theUnited States of Americathe corre- sponding provision is found in the 5th and 14th Amendments where the provision, inter alia, is “that no person shall be deprived of his life or liberty or property except by due process of law.” It was contended for the petitioner that the Indian Constitution gives the same protection to every person in India, except that in the ‘United States “due process of law” has been .construed by its Supreme Court to cover both 108 substantive and procedural law, while in India only the protection of procedural law is guaranteed. It was contend- ed that the omission of the word “due” made no difference to the interpretation of the words in article 21. The word “established”‘ was not equivalent to “prescribed”. It had a wider meaning. The word “law” did not mean enacted law because that will be no ‘legislative protection at all. If so construed, any Act passed by the Parliament or the State Legislature, which was otherwise within its legislative power, can destroy or abridge this right. On the same line of reasoning, it was argued that if that was the inten- tion there was no necessity to put this as a fundamental right in Part III at all. As to the meaning of the word “law” it was argued that it meant principles of natural justice. It meant “jus”, i.e., law in the abstract sense of the principles of natural justice, as mentioned in standard works of Jurisprudence, and not “lex”, i.e., enact- ed law. Against the contention that such construction will leave the meaning vague, it was argued that four principles of natural justice recognised in all civilized countries were covered, in any event, by the word “law”. They are:

(1) An objective test, i.e., a certain, definite and ascer- tainable rule of human conduct for the violation of which one can be detained; (2) Notice of the grounds of such detention; (3) An impartial tribunal, administrative, judi- cial or advisory, to decide whether the detention is justi- fied; and (4) Orderly course of procedure, including an opportunity to be heard orally (not merely by making a written representation) with a right to lead evidence and call witnesses.

In my opinion, this line of approach is not proper and indeed is misleading. As regards the American Constitution its general structure is noticed in these words in “The Government of the United States” by Munro (5th Edition) at page 53: “The architects of 1787 built only the basement.

Their descendants have kept adding walls and windows, wings and gables, pillars and porches to make a rambling structure which is not yet finished. Or, to change the metaphor, it has a fabric which, to use the words of 109 James Russell Lowell, is still being ‘woven on the roaring loom of time’. That is what the framers of the original Constitution intended it to be. Never was it in their mind to work out a final scheme for the government of the country and stereotype it for all time. They sought merely to pro- vide a starting point.” The same aspect is emphasized in Professor Willis’s book on Constitutional Law and Cooley’s Constitutional Limitations. In contrast to the American Constitution, the Indian Constitution is a very detailed one. The Constitution itself provides in minute details the legislative powers of the Parliament and the State Legisla- tures. The same feature is noticeable in the case of the judiciary, finance, trade, commerce and services. It is thus quite detailed and the whole of it has to be read with the same sanctity, without giving undue weight to Part III or article 246, except to the extent one is legitimately and clearly limited by the other.

Four marked points of distinction between the clause in the American Constitution and article 21 of the Constitution of India may be noticed at this stage. The first is that in U.S A. Constitution the word “liberty” is used simpliciter while inIndiait is restricted to personal liberty. (2) In U.S.A. Constitution the same protection is given to proper- ty, while inIndiathe fundamental right in respect of property is contained in article 31. (3) The word “due” is omitted altogether and the expression “due process of law” is not used deliberately. (4) The word “established” is used and is limited to “Procedure” in Our article 21.

The whole argument of the petitioner is rounded on the meaning of the word “law” given to it by the Supreme Court of America. It seems unnecessary to embark on a discussion of the powers and jurisdiction of the Supreme Court of the ‘U.S.A.and how they came to enlarge or abridge the meaning of law in the expression “due process of law”. Without going into details, I think there is no justification to adopt the meaning of the word “law” as interpreted by the Supreme Court of U.S.A. in the expression “due 110 process of law” merely because the word “law” is used in article 21. The discussion of the meaning of “due process of law” found in Willis on Constitutional Law and in Coo- ley’s Constitutional Limitations shows the diverse meanings given to that expression at different times and under dif- ferent circumstances by the Supreme Court of U.S.A., so much so that the conclusion reached by these authors is that the expression. means reasonable law according to the view of the majority of the judges of the Supreme Court at a particular time holding office. It also shows how the meaning of the expression was widened or abridged in certain decades. Moreover, to control the meaning so given to that expression from time to time the doctrine of police powers was brought into play. That doctrine, shortly put, is that legislation meant for the good of the people generally, and in which the individual has to surrender his freedom to a certain extent because it is for the benefit of the people at large, has not to be tested by the touchstone of the “due process of law” formula.

Our attention was drawn to the debates and report of the drafting committee of the Constituent Assembly in respect of the wording of this clause. The report may be read not to control the meaning of the article, but may be seen in case of ambiguity. In The Municipal Council of Sydneyv. The Commonwealth(1), it was thought that individu- al opinion of members of the Convention expressed in the debate cannot be referred to for the purpose of construing the Constitution. The same opinion was expressed in United Statesv. Wong Kim Ark(2). The result appears to be that while it is not proper to take into consideration the indi- vidual opinions of Members of Parliament or Convention to construe the meaning of the particular clause, when a ques- tion is raised whether a certain phrase or expression was up for consideration at all or not, a reference to the debates may be’ permitted. In the present case the debates were referred to to show that the expression “due process of law” was known to exist in the American Constitution (1) (1904) 1 Com. L.R. 208. (2) (169) U.S 649 at 699.

111 and after a discussion was not adopted by the Constituent Assembly in our Constitution. In Administrator General of Bengal v. Premlal Mullick(1), a reference to the proceedings of the Legislature which resulted in the passing of the Act was not considered legitimate aid in the construction of a particular section. The same reasons were held as cogent for excluding a reference to such debates in construing an Indian Statute. Resort may be had to these sources with- great caution and only when latent ambiguities are to be resolved. See Craies’ Statute Law (4th Edition) page 122, Maxwell on Interpretation of Statutes (9th Edition)pp. 28- 29 and Crawford on Statutory Construction (1940 Edition) p.

379, article 214. A perusal of the report of the drafting committee to which our attention was drawn shows clearly that the Constituent Assembly had before it the American article and the expression “due process of law” but they deliberately dropped the use of that expression from our Constitution.

No extrinsic aid is needed to interpret the words of article 21, which in my opinion, are not ambiguous.Normally read, and without thinking of other Constitutions, the expression “procedure established by law” must mean procedure prescribed by the law of the State. If the Indian Constitution wanted to preserve to every person the protection given by the due process clause of the Ameri- can Constitution there was nothing to prevent the Assembly from adopting the phrase, or if they wanted to limit the same to procedure only, to adopt that expression with only the word “procedural” prefixed to “law.” However, the correct question is what is the right given by article 21 ? The only right is that no person shall be deprived of his life or liberty except according to procedure established by law. One may like that right to cover a larger area, but to give such a right is not the function of the Court; it is the function of the Constitution. To read the word “law” as meaning rules of natural justice will land one in (1) (1895)L.R. 221. A. 107. 15 15 112 difficulties because the rules of natural justice, as re- gards procedure, are nowhere defined and in my opinion the Constitution cannot be read as laying down a vague standard.

This is particularly so when in omitting to adopt “due process of law” it was considered that the expression “procedure established by law” made the standard specific.

It can not be specific except by reading the expression as meaning procedure prescribed by the legislature. The word “law” as used in this Part has different shades of meaning but in no other article it appears to bear the indefinite meaning of natural justice. If so, there appears no reason why in this article it should receive this peculiar meaning.

Article 31 which is also in Part III and relates to the fundamental rights in respect of property runs as follows :- “No person shall be deprived of his property save by authority of law.” It is obvious that in that clause “law” must mean enact- ed law. The object of dealing with property under a differ- ent article appears more to provide the exceptions found in article 31 (2) to (6), rather than to give the word “law” a different meaning than the one given in article 21. The world “established” according to the Oxford Dictionary means “to fix, settle, institute or ordain by enactment or agree- ment.” The word “established” itself suggests an agency which fixes the limits. According to the dictionary this agency can be either the legislature or an agreement between the parties. There is therefore no justification to give the meaning of “jus” to “law” in article 21.

The phrase “procedure established by law” seems to be borrowed from article 31 of the Japanese Constitution. But other articles of that Constitution which expressly pre- serve other personal liberties in different clauses have to be read together to determine the meaning of “law” in the expression “procedure established by law.” These articles of the Japanese Constitution have not been incorporated in the Constitution of India in the same language. It is not shown that the word “law” means “jus” in the Japanese Constitution. In the Japanese Constitution these 113 rights claimed under the rules of natural justice are not given by the interpretation of the words “procedure established by law” in their article 31. The word “due” in the expression “due process of law” in the American Consti- tution is interpreted to mean “just,” according to the opinion of the Supreme Court of U.S.A. That word imparts jurisdiction to the Courts to pronounce what is “due” from otherwise, according to law. The deliberate omission of the word “due” from article 21 lends strength to the conten- tion that the justiciable aspect of “law”, i.e., to consider whether it is reasonable or not by the Court, does not form part of the Indian Constitution. The omission of the word “due”, the limitation imposed by the word “procedure” and the insertion of the word “established” thus brings out more clearly the idea of legislative prescription in the expres- sion used in article 21. By adopting the phrase “procedure established by law” the Constitution gave the legislature the final word to determine the law.

Our attention was drawn to The King v. The Military Governor of the Hair Park Camp (‘), where articles 6 and 70 of the Irish Constitution are discussed. Under article 6 it is provided that the liberty of the person is inviolable and no person shall be deprived of such except “in accord- ance with law” ……In article 70 it is provided that no one shall be tried “save in due course of law” and extraor- dinary Courts were not permitted to be established except the Military Courts to try military offences. The expres- sion “in accordance with law” was interpreted to mean not rules of natural justice but as the law in force at the time. TheIrish Courtgave the expression “due course of law” the meaning given to it according to the English law and not the American law. It was observed by Lord Atkin in Eshugbayi Eleko v. Officer Administering the Government of Nigeria C), that in accordance with British Jurispru- dence no member of the executive can interfere with the liberty or property of a British subject except when he can support the legality of his act before a Court of justice.

(1) [1924] 2 Irish Reports K.B. 104. (2) [1931] A.C.

(62 at 670.

114 In The King v. The Secretary of State for Home Affairs(1), Scrutton LJ. observed: “A man undoubtedly guilty of murder must yet be released if due forms of law have not been followed in his conviction.” It seems very arguable that in the whole set-up of Part III of our Constitution these principles only remain guaranteed by article 21.

A detailed discussion of the true limits of article 21 will not be necessary if article 22 is considered a code to the extent there are provisions therein for preventive detention. In this. connection it may be noticed that the articles in Part III deal with different and separate rights. Under the caption “Right to Freedom” articles 19–22 are grouped but each with a separate marginal note.

It is obvious that article 22 (1) and (2) prescribe limita- tions on the right given by article 21. If the procedure mentioned in those articles is followed the arrest and detention contemplated by article 22 (1) and (2), although they infringe the personal liberty of the individual, will be legal, because that becomes the established legal proce- dure in respect of arrest and detention. Article 22 is for protection against arrest and detention in certain cases, and runs as follows :– “22. (1) No person who is arrested shall be detained in custody without being informed, as soon as may be, of the grounds for such arrest nor shall he be denied the right to consult, and to be defended by, a legal practitioner of his choice.

(2.) Every person who is arrested and detained in custo- dy shall be produced before the nearest magistrate within a period of twenty-four hours of such arrest excluding the time necessary for the journey from the place of arrest to the Court of the magistrate and no such person shall be detained in custody beyond the said period without the authority of a magistrate.

(3) Nothing in clauses (1) and (2) shall apply(a) to any person who for the time being is an enemy alien; or (1) (1923) 2 K.B. 361 at 382.

115 (b) to any person who is arrested or detained under any law providing for preventive detention.

(4) No law providing for preventive detention shall authorize the detention of a person for a longer period than three months unless- (a) an Advisory Board consisting of persons who are, or have been, or are qualified to be appointed as, Judges of a High Court, has reported before the expiration of the said period of three months that there is in its opinion suffi- cient cause for such detention:

Provided that nothing in this sub-clause shall authorise the detention of any person beyond the maximum period prescribed by any law made by Parliament under sub-clause (b) of clause 17); or (b) such person is detained in accordance with the provisions of any law made by Parliament under subclauses (a) and (b) of clause (7).

(5) When any person is detained in pursuance .of an order made under any law providing for preventive detention, the authority making the order shall, as soon as may be, communicate to such person the grounds on which the order has been made and shall afford him the earliest opportunity of making a representation against the order.

Nothing in clause (5) shall require the authority making any such order as is referred to in that clause to disclose facts which such authority considers to be against the public interest to disclose.

(7) Parliament may by law prescribe- (a) the circumstances under which, and the class or classes of cases in which, a person may be detained for a period longer than three months under any law providing for preventive detention without obtaining the opinion of an Advisory Board in accordance with the provisions of sub- clause (a) of clause (4);

(b) the maximum period for which any person may ,in any class or classes of cases be detained under any law provid- ing for preventive detention; and (c) the procedure to be followed by an Advisory Board in an inquiry under sub-clause (a) of clause (4).” The learned Attorney-General contended that the subject of preventive detention does not fall under 116 article 21 at all and is covered wholly by article 22.

According to him, article 22 is a complete code. I am unable to accept that contention. It is obvious that in respect of arrest and detention article 22 (1) and (2) provide safeguards. These safeguards are excluded in the case of preventive detention by article 22 (3), but safe- guards in connection with such detention are provided by clauses (4) to (7) of the same article. It is therefore clear that article 21 has to be read as supplemented by article 22.Readingin that way the proper mode of construc- tion will be that to the extent the procedure is prescribed by article 22 the same is to be observed; otherwise article 21 will apply. But if certain procedural safeguards are expressly stated as not required, or specific rules on certain points of procedure are prescribed, it seems im- proper to interpret these points as not covered by article 22 and left open for consideration under article 21. To the extent the points are dealt with, and included or excluded,, article 22 is a complete code. On the points of procedure which expressly or by necessary implication are not dealt with by article 22, the operation of article 21 will remain unaffected. It is thus necessary first to look at article 22 (4) to (7) and next at the provisions 0 the impugned Act to determine if the Act or any of its provi- sions are ultra vires. It may be noticed that neither the American nor the Japanese Constitution contain provisions permitting preventive detention,. much less laying down limitations on such right of detention, in normal timeS, i.e., without a declaration of emergency. Preventive deten- tion in normal times,. i.e., without the existence of an emergency like war,. is recognised as a normal topic of legislation in List I. Entry 9, and List III, Entry 3, of the Seventh Schedule. Even in the Chapter on Fundamental Rights article 22 envisages legislation in respect of pre- ventive detention in normal times. The provisions of article 22 (4) to (7) by their very wording leave unaffected the large powers of legislation on this point and emphasize particularly by article 22 (7) the power of the Parliament to deprive a person of a right to have his case considered by an advisory board. Part III and.

117 article 22 in particular are the only restrictions on that power and but for those provisions the power to legislate on this subject would have been quite unrestricted. Parliament could have made a law without any safeguard or any procedure for preventive detention. Such an autocratic supremacy of the legislature is certainly cut down by article 21. There- fore, if the legislature prescribes a procedure by a validly enacted law and such procedure in the case of preventive detention does not come in conflict with the express provi- sions of Part III or article 22 (4) to (7), the Preventive Detention Act must be held valid notwithstanding that the Court may not fully approve of the procedure prescribed under such Act.

Article 22 (4) opens with a double negative. Put in a positive form it will mean that a law which provides for preventive detention for a period longer than three months shall contain .a provision establishing an advisory board, (consisting of persons with the qualifications mentioned in sub-clause (a)), and which has to report before the expira- tion of three months if in its opinion there was sufficient cause for such detention. This clause, if it stood by itself and without the remaining provisions of article 22, will apply both to the Parliament and the State Legislatures.

The proviso to this clause further enjoins that even though the advisory board may be of the opinion that there was sufficient cause for such detention, i.e., detention beyond the period of three months, still the detention is not to be permitted beyond the maximum period, if any, prescribed by Parliament under article 22 (7) (b). Again the whole of this sub-clause is made inoperative by article 22 (4) (b) in respect of an Act of preventive detention passed by Parlia- ment under clauses (7) (a) .and (b). Inasmuch as the im- pugned Act is an Act of the Parliament purported to be so made, clause 22 (4) has no operation and may for the present discussion be kept aside. Article 22 prescribes that when any person under a preventive detention law is detained, the authority making the order shall, as soon as may be, commu- nicate to such person the grounds on which . the order has been made and shall afford him the 118 earliest opportunity of making a representation against the order. This clause is of general operation in respect of every detention order made under any law permitting deten- tion. Article 22 (6) permits the authority making the order to withhold disclosure of facts which such authority consid- ers against the public interest to disclose. It may be noticed that this clause only permits the non-disclosure of facts, and reading clauses (5) and (6) together a distinc- tion is drawn between facts and grounds of detention.

Article 22 (4) and (7) deal not with the period of detention only but with other requirements in the case of preventive detention also. They provide for the establishment of an advisory board, and the necessity of furnishing grounds to the detenue and also to give him a right to make a represen- tation. Reading article 22 clauses (4) and (7) together it appears to be implied that preventive detention for less than three months, without an advisory board, is permitted under the Chapter on Fundamental Rights, provided such legislation is within the legislative competence of the Parliament or the State Legislature, as the case may be.

Article 22 (5) permits the detained person to make a representation. The Constitution is silent as to the person to whom it has to be made, or how it has to be dealt with.

But that is the procedure laid down by the Constitution. It does not therefore mean that if a law made by the Parliament in respect of preventive detention does not make provision on those two points it is invalid. Silence on these points does not make the impugned Act in contravention of the Constitution because the first question is what are the rights given by the Constitution in the case of preventive detention. The contention that the representation should be to an outside body has no support in law. Even in the Liversidge case the representation had to be made to the Secretary of State and not to another body. After such representation was made, another advisory board had to consider it, but it was not necessary to make the represen- tation itself to a third party. Article 22 (4) and (7) permit the non-establishment of an advisory board expressly in a parliamentary legislation- 119 providing for preventive detention beyond three months.

If so, how can it be urged that the nonestablishment of an advisory. board is a fundamental right violated by the procedure prescribed in the Act passed by the Parliament? The important clause to be considered is article 22 (7).

Sub-clause (a) is important-for this case. In the case of an Act of preventive detention passed by the Parliament this clause contained in the Chapter on Fundamental Rights, thus permits detention beyond a period of three months and ex- cludes the necessity of consulting an advisory board, if the opening words of the sub-clause are complied with. Sub- clause (b) is permissive. It is not obligatory on the Parliament to prescribe any maximum period. It was argued that this gives the Parliament a right to allow a person to be detained indefinitely. If that construction is correct, it springs out of the words of sub-clause (7) itself and the Court cannot help in the matter. Subclause (c) permits the Parliament to lay down the procedure to be followed by the advisory board in an inquiry under sub-clause (a) of clause (4). I am unable to accept the contention that article 22 (4) (a) is the rule and article 22 (7) the exception. I read them as two alternatives provided by the Constitution for making laws on preventive detention.

Bearing in mind the provisions of article 22 read with article 246 and Schedule VII, List I, Entry 9, and List III, Entry 3, it is thus clear that the Parliament is empowered to enact a law of preventive detention (a) for reasons connected with defence, (b) for reasons connected with foreign affairs, (c) for reasons connected with the security of India; and (under List III), (d) for reasons connected with the security of a State, (e) for reasons connected with the maintenance of public order, or (f) for reasons connect- ed with the maintenance of supplies and services essential to the community. Counsel for the petitioner has challenged the validity of several provisions of the Act. In respect of the construction of a Constitution Lord Wright in James v. The Commonwealth ofAustralia(1), (1) (1936) A. 0. 578 at 614.

16 120 observed that “a Constitution must not be construed in any narrow and pedantic sense.” Mr. Justice Higgins in Attorney-General of New South Wales v. Brewery Employees’ Union (1), observed: “Although we are to interpret words of the Constitution on the same principles of interpretation as we apply to any ordinary law, these very principles of interpretation compel us to take into account the nature and scope of the Act that we are interpreting–to remember that it is a Constitution, a mechanism under which laws are to be made and not a mere Act which declares what the law is to be.” In In re The Central Provinces and Berar Act XIV of 1938 (“‘), Sir Maurice Gwyer C.J. after adopting these observations said: “especially is this true of a Federal Constitution with its nice balance of jurisdictions. I conceive that a broad and liberal spirit should inspire those whose duty it is to interpret it; but I do not imply by this that they are free to stretch or pervert the lan- guage of the enactment in the interest of any legal or con- stitutional theory or even for the purpose of supplying omissions or of correcting supposed errors.” There is considerable authority for the statement that the Courts are not at liberty to declare an Act void because in their opinion it is opposed to a spirit supposed to pervade the Constitution but not expressed in words. Where the funda- mental law has not limited, either in terms or by necessary implication, the general powers conferred upon the Legisla- ture we cannot declare a limitation under the notion of hav- ing discovered something in the spirit of the Constitution which is not even mentioned in the instrument. It is diffi- cult upon any general principles to limit the omnipotence of the sovereign legislative power by judicial interposition, except so far as the express words of a written Constitution give that authority. It is also stated, if the words be positive and without ambiguity, there is no authority for a Court to vacate or repeal a Statute on that ground alone.

But it is only in express constitutional provisions limiting legislative power and controlling the temporary will of a majority by a permanent and (1)(1908) 6 Com. L.R. 469 at 611-12. (2) (1939) F.C.R. 18 at 37.

121 paramount law settled by the deliberate wisdom of the nation that one can find a safe and. solid ground for the authority of Courts of justice to declare void ,any legislative enact- ment. Any assumption of authority beyond this would be to place in the hands of the judiciary powers too great and too ‘indefinite either for its own security. or the protection of private rights.

It was first argued that by section 3 the Parliament had delegated its legislative power to the executive officer in detaining a person on his being satisfied of its necessi- ty. It was urged that the satisfaction must be of the legislative body. This contention of delegation of the legislative power in such cases has been considered and rejected in numerous cases by our Federal Court and by the English Courts. It is unnecessary to refer to all those cases. A reading of the various speeches in Liversidge v.

Andersonclearly negatives this contention. Section 3 of the impugned Act is no delegation of legislative power to make laws. It only confers discretion on the officer to enforce the law made by the legislature. Section 3 is also impugned on the ground that it does not provide an objective standard which the Court can utilize for determining whether the requirements of law have been complied with. It is clear that no such objective standard of conduct can be pre- scribed, except as laying down conduct tending to achieve or to avoid a particular object. For preventive detention action must be taken on good suspicion. It is a subjective test based on the cumulative effect of different actions, perhaps spread over a considerable period. As observed by Lord Finlay in The King v. Halliday (2), a Court is the least appropriate tribunal to investigate the question whether circumstances of suspicion exist warranting the restraint on a person. The contention is urged in respect of preventive detention and not punitive detention. Before a person can be held liable for an offence it is obvious that he should be in a position to know what he may do or not do, and an omission to do or not to do will result in the State (1) (1942) A.C. 2C6. (2) [1917] UKHL 1(1917) A.C. 260 at 269.

122 considering him guilty according to the penal enactment.

When it comes however to preventive detention, the very purpose is to prevent the individual not merely from acting in a particular way but, as the sub-heads summarized above show, from achieving a particular object. It will not be humanly possible to tabulate exhaustively all actions which may lead to a particular object. It has therefore been considered that a punitive detention Act which sufficiently prescribes the objects which the legislature considers have not to be worked up to is. a sufficient standard to prevent the legislation being vague. In my opinion, therefore, the argument of the petitioner against section 3 of the impugned Act fails. It was also contended that section 3 prescribes no limit of time for detention and therefore the legislation is ultra vires. The answer is found in article 22 (7) (b).

A perusal of the provisions of the impugned Act moreover shows that in section 12 provision is made for detention for a period longer than three months but not exceeding one year in respect of clauses (a) and (b) of that section. It appears therefore that in respect of the rest of the clauses mentioned in section 3 (1)(a)the detention is not contem- plated to be for a period longer than three months, and in such cases a reference to the advisory board under section 9 is contemplated.

Section 7 of the Act which is next challenged, runs on the same lines as article 22 (5) and. (6) and in my opinion infringes no provision of the Constitution. It was argued that this gave only the right of making a representation without being heard ‘orally or without affording an opportu- nity to lead evidence and therefore was not an orderly course of procedure, as required by the rules of natural justice. The Parliament by the Act has expressly given a right to the person detained under a preventive detention order to receive the grounds for detention and also has given him a right to make a representation. The Act has thus complied with the requirements of article 22 (s). That clause, which prescribes what procedure has to be followed as a matter of fundamental right, is silent about the person detained having a right to be heard 123 orally or by a lawyer. The Constituent Assembly had before them the provisions of clause (1) of the same article. The Assembly having dealt with the requirements of receiving grounds and giving an opportunity to make a representation has deliberately refrained from providing a right to be heard orally. If so, I do not read the clause as guarantee- ing such right under article 22 (5). An “orderly course of procedure” is not limited to procedure which has been sanc- tioned by settled usage. New forms of procedure are as much, held even by the Supreme Court of America, due process of law as old forms, provided they give a person a fair opportunity to present his case. It was contended that the right to make a representation in article 22 (5) must carry with it a right to be heard by an independent tribunal;

otherwise the making of a representation has no substance because it is not an effective remedy. I am unable to read clause (5) of .article 22 as giving a fundamental right to be heard by an independent tribunal. The Constitution deliberately stops at giving the right of representation.

This is natural because under article 22 (7), in terms, the Constitution permits the making of a law by Parliament in which a reference to an advisory board may be omitted. To consider the right to make a representation as necessarily including a right to be heard by an independent judicial, administrative or advisory tribunal will thus be directly in conflict with the express words of article 22 (7).

Even according to the Supreme Court of U.S.A. a right to a judicial trial is not absolute. In theUnited Statesv.

Ju Toy (1), a question arose about the exclusion from entry into the States, of a Chinese who claimed to be a citizen of theUnited States. At page 263 the majority judgment con- tains the following passage :–” If for the purpose of argument, we assume that the Fifth Amendment applies to him, and that to deny entrance to a citizen is to deprive him ,of liberty, we nevertheless are of opinion that with regard to him due process of law does not require judicial trial: That is the result of the cases which we have cited, and the almost necessary result of the (1) (198) U.S. 253 at 263.

124 power of the Congress to pass exclusion laws. That the decision may be entrusted to an executive officer, and that his decision is due process of law, was affirmed and ex- plained in several cases. It is unnecessary to repeat the often-quoted remarks of Mr. Justice Curtis, speaking for the whole Court, in Den Exden Murray v.HobokenLandand Im- provement Company (1), to. show that the requirement of a judicial trial does not prevail in every case.” Again, I am not prepared to accept the’ contention that a right to be heard orally is an essential right of proce- dure even according to the rules of natural justice. The right to make a defence may be admitted, but there is nothing to support the contention that an oral interview is compulsory. In the Local Government Board v. Arlidge (2), the respondent applied to the Board constituted under the Housing Act to state a special case for the opinion of the High Court, contending that the order was invalid because (1) the report of the Inspector had been treated as a confi- dential document and had not been disclosed to the respond- ent, and (2) because the Board had declined to give the respondent an opportunity of being heard orally by the person or persons by whom the appeal was finally decided.

The Board rejected the application. Both the points were urged before the House of Lords on appeal. Viscount Haldane L.C. in his speech rejected the contention about the necessity of an oral hearing by observing “But it does not follow that the procedure of every tribunal must be.the same. In the case of a Court of law tradition in this country has prescribed certain principles to which, in the main, the procedure must conform. But what that procedure is to be in detail must depend on the nature of a tribunal.” In rejecting the contention about the disclosure of the report of the Inspector, the Lord Chancellor stated: “It might or might not have been useful to disclose this report, but I do not think that the Board was bound to do so. any more than it would have been bound to disclose all the minutes made on the papers in the office before (1) 18 HO.W. 272 at 280. (2) (1915) A.C. 120.

125 a decision was come to …… What appears to me to have been the fallacy of the judgment of the majority in the Court of appeal is that it begs the question at the begin- ning by setting up the test of the procedure of a Court of justice instead of the other standard which was laid down for such cases in Board of Education v. Rice (1). I do not think the Board was bound to hear the respondent orally provided it gave him the opportunities he actually had.” In spite of the fact that inEnglandthe Parliament is supreme I am unable to accept the view that the Parliament in making laws, legislates against the well-recognised principles of natural justice accepted as such in all civilized countries.

The same view is accepted in theUnited Statesin Federal Communications Commission v. WJR The Goodwill Station (2).

A right to lead evidence against facts suspected to exist is also not essential in the case of preventive deten- tion. Article 22 (6) permits the non-disclosure of facts.

That is one of the clauses of the Constitution dealing with fundamental rights. If even the non-disclosure of facts is permitted, I fail to see how there can exist a right to contest facts by evidence and the noninclusion of such procedural right could make this Act invalid.

Section 10 (3) was challenged on the ground that it excludes the right to appear in person or by any lawyer before the advisory board and it was argued that this was an infringement of a fundamental right. It must be noticed that article 22 (1) which gives a detained person a right to consult or be defended by his own legal practitioner is specifically excluded by article 22 (3) in the case of legislation dealing with preventive detention. Moreover,.

the Parliament is expressly given power under article 22 (7) (c) to lay down the procedure in an inquiry by an advisory board. This is also a part of article 22 itself. If so, how can the omission to give a right to audience be considered -against the constitutional rights ? It was pointed out that section 10 (3) prevents even the disclosure of a (1) (1911) A.C. 179. (2) [1949] USSC 71337 U.S. 265 at 276.

126 portion of the report and opinion of the advisory board.. It was argued that if so how can the detained person put forth his case before a Court and challenge the conclusions ? This argument was similarly advanced in Local Government Board v. Arlidge (1) and rejected, as mentioned above. In my opinion, the answer is in the provision found in article 22 (7) (c) of the Constitution of India.

It was argued that section 11 of the impugned Act was invalid as it permitted the continuance of the detention for such period as the Central Government or the State Govern- ment thought fit. This may mean an indefinite period. In my opinion this argument has nos substance because the Act has to be read as a whole., The whole life of the Act is for a year and therefore the argument that the detention may be for an indefinite period is unsound. Again, by virtue of article 22 (7)(b), the Parliament is not obliged to fix the maximum term of such detention. It has not so fixed it, except under section 12, and therefore it cannot be stated that section 11 is in contravention of article 22 (7).

Section 12 of the impugned Act is challenged on the ground that it does not conform to the provisions of article 22 (7). It is argued that article 22 (7) permits preventive detention beyond three months, when the Parliament pre- scribes “the circumstances in which, and the class or class- es of cases in which,” a person may be detained. It was argued that both these conditions must be fulfilled. In my opinion, this argument is unsound, because the words used in article 22 (7) themselves are against such interpretation.

The use of the word “which” twice in the first part of the sub-clause, read with the comma put after each, shows that the legislature wanted these to be read as disjunctive and not conjunctive. Such argument might have been possible (though not necessarily accepted) if’ the article in the Constitution was “the circumstances. and the class or class- es of cases in which …… “I have. no doubt that by the clause, as worded, the legislature- (1) (1915) A.C. 120.

127 intended that the power of preventive detention beyond three months may be exercised either if the circumstances in which, or the class or classes of cases in which, a person is suspected or apprehended to be doing the objectionable things mentioned in the section. This contention therefore fails.

It was next contended that by section 12 the Parliament had provided that a person might be detained for a period longer than three months but not exceeding one year from the date of his detention, without obtaining the opinion of an advisory board, with a view to prevent him from acting in any manner prejudicial to (a) the defence of India, rela- tions of India with foreign powers or the security of India;

or (b)the security of a State or the maintenance of public order. It must be noticed that the contingency provided in section 3 (1) (a) (iii), viz., the maintenance of supplies and services essential to the community is omitted in sec- tion 12. Relying on the wording of these two sub-sections in section 12, it was argued that in the impugned Act the wording of Schedule VII List I, Entry 9, and List III, Entry 3, except the last part, are only copied. This did not comply with the requirement to specify either the circum- stances or the class or classes of cases as is necessary to be done under article 22 (7) of the Constitution. Circum- stances ordinarily mean events or situation extraneous to the actions of the individual concerned, while a class of cases mean determinable groups based on the actions of the individuals with a common aim or idea. Determinable may be according to the nature of the object also. It is obvious that the classification can be by grouping the activities of people or by specifying the objectives to be attained or avoided. The argument advanced on behalf of the petitioner on this point does not’ appeal to me because it assumes that the words of Schedule VII List I, Entry 9, and List III, Entry 3 are never capable of being considered as circum- stances or classes of cases. In my opinion, that assumption is not justified, particularly when we have to take into consideration cases of preventive 17 128 detention and not of conviction and punitive detention.

Each of the expressions used in those entries is capable of complying with the requirement of mentioning circumstances or classes of cases. The classification of cases, having regard to an object, may itself amount to a description of the circumstances. It is not disputed that each of the entries in the Legislative Lists in the Seventh Schedule has a specific connotation well understood and ascertainable in law. If so, there appears no reason why the same expression when used in section 12 (1) (a) and (b) of the impugned Act should not be held to have such specific meaning and thus comply with the requirement of prescribing circumstances or classes of cases. This argument therefore must be rejected.

Section 13(2) was attacked on the ground that even if a detention order was revoked, another detention order under section 3 might be made against the same person on the same grounds. This clause appears to be inserted to prevent a man being released if a detention order was held invalid on some technical ground. There is nothing in the Chapter on Fundamental Rights and in article 21 or 22 to prevent the inclusion of such a clause in a parliamentary legislation, permitting preventive detention. Article 20 (2) may be read as a contrast on this point.

Dealing with the four fundamental principles of natural justice in procedure claimed by the petitioner, it is thus clear that in respect of preventive detention no question of an objective standard of human conduct can be laid down. It is conceded that no notice before detention can be claimed by the very nature of such detention. The argument that after detention intimation of the grounds should be given has been recognised in article 22 (5) and incorporated in the impugned Act. As regards an impartial tribunal, article 22 and (7) read together give the Parliament ample discretion. When in specified circumstances and classes of cases the preventive detention exceeds three months, the absence of an advisory board is expressly per- mitted 129 by article 22 (7). Under article 22 (4) it appears implied that a provision for such tribunal is not necessary if the detention is for less than three months. As regards an opportunity to be heard, there is no absolute natural right recognised in respect of oral representation. It has been held to depend on the nature of the tribunal. The right to make a representation is affirmed by the Constitution in article 22 (5) and finds a place in the impugned Act. The right to an orderly course of procedure to the extent it is guaranteed by article 22 (4) read with article 22 (7) (c), and by article 22 (7) (a) and (b), has also been thus provided in the Act. It seems to me therefore that the petitioner’s contentions even on these points fail.

Section 14 was strongly attacked on the ground that it violated all principles of natural justice and even in- fringed the right given by article 22 (5) of the Constitu- tion. It runs as follows:

“14. (1) No Court shall, except for the purposes of a prosecution for an offence punishable under subsection (2), allow any statement to be made, or any evidence to be given, before it of the substance of any communication made under section 7 of the grounds on which a detention order has been made against any person or of any representation made by him against such order; and, notwithstanding anything contained in any other law, no Court shall be entitled to require any public officer to produce before it, or to disclose the substance of, any such communication or representation made, or the proceedings of an Advisory Board or that part of the report of an Advisory Board which is confidential.

(2) It shall be an offence punishable with imprisonment for a term which may extend to one year, or with fine, or with both, for any person to disclose or publish without the previous authorisation of the Central Government or the State Government, as the case may be, any contents or matter purporting to be contents of any such communication or representation as is referred to in sub-section (1):

130 Provided that nothing in this sub-section shall apply to a disclosure made to his legal adviser by a person who is the subject of a detention order.” By that section the Court is prevented (except for the purpose of punishment for such disclosure) from being in- formed, either by a statement or by leading evidence, of the substance of the grounds conveyed to the detained person under section 7 on which the order was made, or of any representation made by him against such order. It also prevents the Court from calling upon any public officer to disclose the substance of those grounds or from the produc- tion of the proceedings or report of the.advisory board which may be declared confidential. It is clear that if this provision is permitted to stand the Court can have no material before it to determine whether the detention is proper or not. I do not mean whether the grounds are suffi- cient or not. It even prevents the Court from ascertaining whether the alleged grounds of detention have anything to do with the circumstances or class or classes of cases men- tioned in section 12 (1) (a) or (b). In Machindar Shivaji Mahar v. The King (1), the Federal Court. held that the Court can examine the grounds given by the Government to see if they are relevant to the object which the legislation has in view. The provisions of article 22 (5) do not exclude that right of the Court. Section 14 of the impugned Act appears to be a drastic provision. which re- quires considerable support to sustain it in a preventive detention Act. The learned Attorney-General urged that the whole object of the section was to prevent ventilation in public of the grounds and the representations, and that it was a rule of evidence only which the Parliament could prescribe. I do not agree. This argument is clearly not sustainable on the words of article 22 clauses (5) and (6).

The Government has the right under article 22 (6)not to disclose facts which it considers undesirable to disclose in the public interest. It does not permit the Government to refrain from disclosing grounds which fall under clause (5).

(1) [1949-50] F.C.R. 827.

131 Therefore, it cannot successfully be contended that the disclosure of grounds may be withheld from the Court in public interest, as a rule of evidence. Moreover, the position is made clear by the words of article 22 (5). It provides that the detaining authority shall communicate to such detained person the grounds on which the order has been made. It is there fore ,essential that the grounds must be connected with the order of preventive detention. If they are not so .connected the requirements of article 22 (5) are not ,complied with and the detention order will be invalid.

Therefore, it is open to a detained person to contend before a Court that the grounds on which the order’ has been made have no connection at all with the order, or have no connec- tion with the circumstances or class or classes of cases under which a preventive detention order could be supported under section 12. To urge this argument the aggrieved party must have a right to intimate to the Court the grounds given for the alleged detention and the representation made by him. For instance, a person is served with a paper on which there are written three stanzas of a poem or three alphabets written in three different ways. For the validity of the detention order it is necessary that the grounds should be those on which the order has been made. If the detained person is not in a position to put before the Court this paper, the Court will be prevented from considering whether the requirements of article 22 (5) are complied with and that is a right which is guaranteed to every person. It seems to me therefore that the provisions .of section 14 abridge the right given under article 22 (5) and are there- fore ultra vires.

It next remains to be considered how far the invalidity of this section affects the rest of the impugned Act. The impugned Act minus this section can remain unaffected. The omission of this section will not change the nature or the structure or the object of the legislation. Therefore the decision that section 14 is ultra vires does not affect the validity of the rest of the Act. In my opinion therefore Act IV of 1950, except .section 14, is not ultra vires. It does not infringe any 132 provisions of Part III of the Constitution and the con- tention of the applicant against the validity of that Act except to the extent of section 14, fails. The petition therefore fails and is dismissed.

FAZL ALI J.–The question to be decided in this case is whether ‘the Preventive Detention Act, 1950 (Act IV of 1950), is wholly or in part invalid and whether the peti- tioner who has been detained under that Act is entitled to a writ in the nature of habeas corpus on the ground that his detention is illegal. The question being a pure question of law can he decided without referring to a long chain of facts which are narrated in the petitioner’s application to this Court and which have a more direct bearing on the alleged mala fides of the authorities who have detained him than on the validity of the Act.

The Act which is impugned was enacted by the Parliament on the 26th February, 1950, and will cease to have effect on the 1st April, 1951, save as respects. things done or omit- ted to be done before that date. The main provisions of the Act are set out in sections 7, 8, 9, 10,11, 12 and 14.

Section a (1) provides that “the Central Government or the State Government may- (a) if satisfied with respect to any person that with a view to preventing him from acting in any manner prejudicial to- (i) the defence of India, the relations of India with foreign powers, or the security of India, or (ii) the security of the State or the maintenance of public order, or (iii) the maintenance of supplies and services essential to the community, or (b) if satisfied with respect to any person who is. a foreigner within the meaning of the Foreigners Act, 1946 (XXXI of 1946), that with a view to regulating his continued presence in India or with a view to making arrangements for his expulsion from India, 133 it is necessary so to do, make an order directing that such person be detained.” Sub-sections (2) and (3) of this section empower a District Magistrate, Sub-Divisional Magistrate or the Com- missioner of Police in a Presidency Town to exercise the power conferred by and make the order contemplated in sub- section (1), but with the qualification that any order made thereunder must be reported forthwith to the Government of the State to which the .officer in question is subordinate with the grounds on which the order has been made and such other particulars as in his opinion have a bearing on the necessity for the order. Section 7 of the Act provides that the authority making an order of detention shall as soon as may be communicate to the person detained the grounds on which the order has been made and shall afford him the earliest opportunity of making a representation against the order, in a case where such ,order has been made by the Central Government, to that Government, and in a case where it has been made by a State Government or an officer subor- dinate thereto, to the State Government. Section 8 provides that the Central Government and each State Government shall, whenever necessary, constitute one or more advisory boards for the purposes of the Act, and state the qualifications of persons of which the board should consist. Section 9 pro- vides that when a detention order has been made with a view to preventing a person from acting in any manner prejudicial to the maintenance of supplies and services essential to the community or if it is made in regard to a person who is a foreigner within the meaning of theForeigners Act with a view to regulating his continued presence in India or making arrangements for his expulsion from India, the grounds on which the order has been made and the representation, if any,. of the person detained shall, within six weeks from the date of detention, be placed ‘before an advisory regard.

It will be noticed that this section does not provide that the cases of persons who are detained under section 3 (1) (a) (i) and (ii) will also be placed before the advisory board. Section 10 lays down the 134 procedure to be followed by. the advisory board and section 11 provides that in any case where the advisory board has reported that there is sufficient cause for the detention of the person concerned, the detention order may be confirmed and the detention of the person concerned may be continued for such period as the Central Government or the State Government, as the case may be, thinks fit. Section 12,.

which is a very important section, as we shall presently see, runs as follows :– “12 (1) Any person detained in any of the following classes of cases or under any of the following circumstances may be detained without obtaining the opinion of an Advisory Board for a period longer than three months, but not exceed- ing one year from the date of his detention, namely, where such person has been detained with a view to preventing him from acting in any manner prejudicial to- (a) the defence of India, relations of India with foreign powers or the security of India; or (b) the security of a State or the maintenance of public order.

(2) The case of every person detained under a detention order to which the provisions of sub-section (1) apply shall, within a period of six months from the date of his detention, be reviewed where the order was made by the Central Government or a State, Government, by such Govern- ment, and where the order was made by any officer specified in sub-section (2) of section 3, by the State Government to which such officer is subordinate, in consultation with a person who is or has been or is qualified to be appointed as Judge of a High Court nominated in that behalf by the Cen- tral Government or the State Government, as the case may be.” Section 14, which is also a material section for the purpose of this case, is to the following effect :– “(1) No Court shall, except for the purposes of’ a prosecution for an offence punishable under subsection (2), allow any statement to be made, or any 135 evidence to be given, before it of the substance of any communication made under section 7 of the grounds on which a detention order has been made against any person or of any representation made by him against such order; and, not- withstanding anything contained in any other law, no Court shall be entitled to require any public officer to produce before it, or to disclose the substance of, any such commu- nication or representation made, or the proceedings of an Advisory Board or that part of the report of an Advisory Board which is confidential.

(2) It shall be an offence punishable with imprisonment for a term which may extend to one year, or with fine, or with both, for any person to disclose or publish without the previous authorisation of the Central Government or the State Government, as the case may be, any contents or matter purporting to be the contents of any such communication or representation as is referred to in sub-section (1):

Provided that nothing in this sub-section shall apply to a disclosure made to his legal adviser by a person who is the subject of a detention order.” The point which has been pressed before us is that the Act is invalid, as it takes away or abridges certain funda- mental rights conferred by Part III of the Constitution of India, and in support of this general proposition, reliance is placed on article 13 (2) which runs as follows :- “The State shall not make any law which takes away or abridges the rights conferred by this Part and any law made in contravention of this clause shall, to the extent of the contravention, be void.” The rights guaranteed under Part III of the Constitution are classified under seven broad heads, as follows :– (1) Right to equality;

(2) Right to freedom;

(3) Right against exploitation;

(4) Right to freedom of religion;

(5) Cultural and educational rights;

(6) Right to property; and (7) Right to constitutional remedies.

136 Most of the articles which are said to have been disre- garded occur under the heading “Right to freedom,” these articles being articles 19 (1) (d), 21 and 22. Another article which is also said to have been violated is article 32, under which the present application for a writ of habeas corpus purports to have been made.

Article 19 (1)is divided into seven sub-clauses and runs as follows:- “All citizens shall have the right- (a) to freedom of speech and expression;

(b) to assemble peaceably and without arms;

(c) to form associations or unions;

(d) to move freely throughout theterritoryofIndia;

(e) to reside and settle in any part of the territory of India; ” (f) to acquire, hold and dispose of property; and (g) to practise any profession, or to carry on any occupation, trade or business.” Clauses (2), (3), (4), (5) and (6) of this article pro- vide that nothing in clause (1) shall affect the operation of any existing law in regard to the rights under that clause, under certain conditions which are mentioned there- in. Clause (5), with which we are directly concerned and which will serve as a specimen to show the nature of these provisions, is to the following effect :– “Nothing in sub-clauses (d), (e) and (f)of the said clause shall affect the operation of any existing law in so far as it imposes, or prevent the State from making any law imposing, reasonable restrictions on the exercise of any of the rights conferred by the said sub-clauses either in the interests of the general public or for the protection ‘of the interests of any Scheduled Tribe.” The contentions advanced on behalf of the petitioner with reference to this article are :–(1) that the Act under which he has been detained deprives him who is a citizen of the Republic of India of the right to move freely throughout the territory of India, which is guaran- teed under article 19 (1) (d), and (2) 137 that under clause (5) of article 19, it is open to this Court to judge whether the restrictions imposed by the Act on the exercise of the right conferred by article 19 (1) (d) are reasonable or otherwise. Before dealing with this argument, it is necessary to understand the meaning of the words used in article 19 (1)(d) and to have a clear compre- hension as to the true nature of the right conferred there- under. The contention put forward on behalf of the peti- tioner is that freedom of movement is the essence of person- al liberty and any restraint on freedom of movement must be held to amount to abridgment or deprivation of personal liberty, as the case may be, according to the nature of the restraint. After very careful consideration, I have come to the conclusion that this contention is well-founded in law.

Blackstone in his “Commentaries on the Laws of England” (4th Edition, volume 1, page 134) states that “personal liberty consists in the power of locomotion, of changing .’situation or moving one’s person to whatsoever place one’s own incli- nation may direct, without imprisonment or restraint unless by due course of law.” The authority of this state- ment has never been questioned, and it has been bodily incorporated by H.J. Stephen in his “Commentaries on the Laws of England” and has been reproduced by Cooley in his well-known treatise on “Constitutional Limitations” (8th Edition, volume 1, page 710), which was extensively quoted by both parties in the course of their arguments. The view that freedom of movement is the essence of personal liberty will also be confirmed by reference to any book on the criminal law ofEnglanddealing with the offence of false imprisonment or any commentary on the Indian Penal Code dealing with the offences of wrongful restraint or confine- ment. Russell in his book on “Crimes and Misdemeanours” (8th Edition, volume 1, page 861), dealing with the offence of false imprisonment states as follows :– “False imprisonment is unlawful and total restraint of the personal liberty of another, whether by constraining him or compelling him to go to a particular place or by confin- ing him in a prison or 138 police station or private place, or by detaining him against his will in a public place ……….. the essential element in the offence is the unlawful detention of the person or the unlawful restraint on his liberty. Such interference with the liberty of another’s movements is unlawful, unless it may be justified …… ” Again, Dr. Gour in dealing with the offence of wrongful restraint in his book on “The Penal Law of British India” (5th Edition, page 1144) observes as follows :– “Following the principle that every man’s person is sacred and that it is free, law visits with its penalties those who abridge his personal liberty, though he may have no design upon his person. But the fact that he controls its movements for ever so short a time is an offence against the King’s peace, for no one has the right to molest another in his free movements.” Dealing with the offence of wrongful confinement, the same learned author observes as follows at page 1148 of his book :– “‘Wrongful confinement’ is a species of ‘ wrongful restraint’ as defined in the last section. In wrongful restraint, there is only a partial suspension of one’s liberty of locomotion, while in wrongful confinement there is a total suspension of liberty ‘beyond certain circum- scribing limits’.” Both these authors speak of restraint on personal liber- ty and interference with the liberty of one’s movements or suspension of liberty or locomotion as interchangeable terms. In Bird v. Jones (1), Coleridge J. said that “it is one part of the definition of freedom to be able to go whithersoever one pleases.” A similar opinion has been expressed by several authors including Sir Alfred Denning in his book entitled “Freedom under the Law.” There can there- fore be no doubt that freedom of movement is in the last analysis the essence of personal liberty, and just as a man’s wealth is generally measured in this country in terms of rupees, annas and pies, one’s personal liberty depends upon the extent of his freedom of movement. But it is contended on behalf of the State that freedom of move- (1) 7 Q.B. 742.

139 ment to which reference has been made in article 19 (1) (d) is not the freedom of movement to which Blackstone and other authors have referred, but is a different species of freedom which is qualified by the words “throughout theterritoryofIndia.” How the use of the expression “throughout theterritoryofIndia” can qualify the meaning of the rest of the words used in the article is a matter beyond my compre- hension. In my opinion, the words “throughout theterritoryofIndia” were used to stretch the ambit of the freedom of movement to the utmost extent to which it could be guaran- teed by our Constitution. The Constitution could not guar- antee freedom of movement outside the territorial limits of India, and so has used those words to show that a citizen was entitled to move from one corner of the country to another freely and without any obstruction. “Throughout” is an amplifying and not a limiting expression, and I am sur- prised to find that the expression “throughout the territory of India,” which was used to give the widest possible scope to the freedom of movement, is sought to be construed as an expression limiting the scope and nature of the freedom. In my opinion, the words “throughout the territory of India,” having regard to the context in which they have been used here, have the same force and meaning as the expression “to whatsoever place one’s own inclination may direct” used by Blackstone, or the expression “freedom to be ,able to go whithersoever one pleases” used by Coleridge J. in Bird v.

Jones (1). I am certain that neither of these authorities contemplated that the freedom of movement which is vouch- safed to a British citizen, is guaranteed beyond the terri- torial limits of British territories.

The question as to whether preventive detention is an encroachment on the right guaranteed by article 19 (1) (d) has been considered by theNagpur,Patnaand Calcutta High Courts. The view which has .been ultimately adopted by these High Courts is that preventive detention is not a violation of the right guaranteed by article 19 (1) (d), but, in the Calcutta (1) 7 Q.B. 742.

140 High Court, where the matter has been elaborately discussed, at least five Judges have held that it does, and in the ultimate analysis the number of Judges. who have held the contrary view appears to be the same. Having regard to the fact that the view expressed by so many learned Judges is opposed to the view I am inclined to take, I consider it necessary to deal briefly with the main objections which have been raised in support of the narrow meaning sought to be attached to the words in article 19 (1)(d). I have already dealt with one of them which is based on the ex- pression “throughout theterritoryofIndia.” A. nd I shall now proceed to deal with the, others seriatim.

I. It will be recalled that clause (5) of article 19, which I have already quoted in full, provides among other things that nothing in clause (1) (d) shall affect the operation of any law, present or future, imposing reasonable restrictions on the exercise of the right of freedom of movement either in the interests of the general public or for the protection of the interests of any Scheduled Tribe.

It has been argued that the use of the words “interests of any Scheduled Tribe” in this clause shows that the right guaranteed by article 19 (1) (d) is a limited right of movement, such as the right to visit different localities and to go from one place to another and is different from the expression “freedom of movement” which has been stated by Blackstone to be another name for personal liberty. It is pointed out that the restrictions in contemplation here are mainly restrictions preventing undesirable outsiders from visiting Scheduled Areas and exploiting Scheduled Tribes, and if the words “freedom of movement” had been used in the larger sense, such a small matter would not have found a place in clause (5) of article 19..

I must frankly confess that I am unable to appreciate this argument and to hold that a mere reference to Scheduled Tribes affects the plain meaning of the words used in clause (1) (d) of article 19. The words used in article 19 (1) (d) are very wide and mean that a person can go at his will in any direction to any locality and to any distance. Re- straint on a freedom.

141 so wide in scope and extent may assume a variety of forms and may include internment or externment of a person, his confinement to a particular locality or within the walls of a prison, his being prevented from visiting or staying in any particular area, etc. The framers of the Constitution wanted to save all restrictive legislation affecting freedom of movement made in the interests of the general public (which expression means the same thing as “public interests”) and I think that the law in regard to preventive detention is fully covered by the expression “restrictions imposed in the public interests.” But they also remembered that there were restrictive laws made in the interests of an important community and that similar laws may have to be made in future and hence they added the words “for the protection of the interests of any Scheduled Tribe.” A reference to the Fifth Schedule of the Constitution and the corresponding provisions of the Government of India Act, 1935, as well as to certain laws made for Chota Nagpur, Santhai Pargangs and .other localities will show that great importance has been attached in this country to. the protec- tion and preservation of the members of the scheduled tribes .and maintenance of order in tribal areas, and this, in my opinion, is sufficient to account for the special mention of the scheduled tribes in clause (5). It may, at first sight, appear to be a relatively small matter, but in their anxiety to cover the whole field of restrictive laws made whether in the public interest or in the interests of a particular community and not to leave the smallest loophole, the framers of the Constitution apparently decided to draft the clause in the present form. As far as I am aware, there are no restrictive laws made in the interests of any commu- nity other than the scheduled tribes, and I think clause (5)is sufficiently comprehensive to include the smallest as well as the most complete restrictions on freedom of move- ment. I am also satisfied that the mere mention of sched- uled tribes in clause (5) cannot change, the plain meaning of the words of the main provision which we find in article 19 (1) (d) and confine it to some kind of peculiar and truncated freedom of 142 movement which is unconnected with personal liberty and which is unknown to any Constitution with which. we are familiar:

It will perhaps be not out of place to refer in this.

connection to Ordinance XIV of 1943, which is one of the ordinances by which the Defence of India Act, 1939, was partly amended. This ordinance provides for– “the apprehension and detention in custody of any person whom the authority empowered by the rules to appre- hend or detain as the case may be suspects, on grounds appearing to such authority-to be reasonable, of being of hostile origin, or of having acted, acting, being about to act, or being likely to act in a manner prejudicial to the public safety or interest, the defence of British India, the maintenance of public order, His Majesty’s relations with foreign powers or Indian States, the maintenance of peaceful conditions in tribal areas or the efficient prosecution of the war, or with respect to whom such authority is satisfied that his apprehension and detention are necessary for the purpose of preventing him from acting in any such prejudi- cial manner, the prohibition of such person from entering or residing or remaining in any area, and the compelling of such person to reside and remain in any area, or to do or abstain from doing anything.” The points to be noted in connection with the ordinance are :– (1) that it is an ordinance specifically providing for apprehension and detention;

(2) that notwithstanding the fact that there is a gener- al reference in it to acts prejudicial to public safety or interests and maintenance of public order there is also a specific reference to maintenance of peaceful conditions in tribal areas;

(3) that tribal areas and scheduled tribes are, kindred subjects as would appear from the Fifth Schedule appended to the Constitution; and (4) that maintenance of peaceful conditions in tribal areas may be as much in the public interest as in the inter- ests of persons living in those areas.

143 This ordinance shows at least this much that sometimes the law of preventive detention can also be made in the interests of scheduled tribes or scheduled areas and conse- quently the mere mention of scheduled tribes in clause (5) does not necessarily exclude laws relating to preventive detention from the scope of article 19 (5) The same remarks apply to the ordinance called “The Restriction and Detention Ordinance, 1944” (Ordinance No. III of 1944) which empow- ered the Central Government or the Provincial Government to detain and make orders restricting the movements of certain persons in the interest of public safety, maintenance of public order as well as maintenance of peaceful conditions in tribal areas, etc.

II. It is also argued that since preventive detention amounts to a total deprivation of freedom of movement, it is not a violation of the right granted under article 19 (1) (d) in regard to which the word “restriction” and not “deprivation” has been used in clause (5). This argument also does not appeal to me. There are really two questions which fall to be decided in this case, viz., (a) Does pre- ventive detention take away the right guaranteed by article 19 (1) (d)?; and (b) if so, what are the consequences, if any ? It seems obvious to me that preventive detention amounts to a complete deprivation of the right guaranteed by article (19) (d). The meaning of the word “restriction” is to be considered with reference to the second question and I think that it will be highly technical to argue that deprivation of a right cannot be said to involve restriction on the exercise of the right. In my opinion, having regard to the context in which the word “restriction” has been used, there is no antithesis between that word and the word “depriva- tion.” As I have already stated, restraint on the right to move can assume a variety of forms and restriction would be the most appropriate expression to be’ used in clause (5) so as to cover all those forms ranging from total to various kinds of partial deprivation freedom of movement. I will however have to advert to this subject later and will try to show that the 19 144 construction I have suggested is supported by good authori- ty.

III. It appears that some of the Judges who had to deal with the question which we have before us were greatly influenced by the argument that if the deprivation of per- sonal liberty amounts to deprivation of the right granted under article 19 (1) (d), any conviction for an offence under the Indian Penal Code involving a sentence of impris- onment will be subject to judicial review on the ground of reasonableness of the provisions of the Code under which the conviction is recorded. Meredith C.J. of the Patna High Court has given expression to his concern for the situation which will thereby arise, in these words :– “It will be seen that the claim made is very sweeping indeed. It would mean that every law under which a person may be imprisoned, including all the provisions of the Penal Code, is open to examination by the Courts on the ground of reasonableness. It makes the Courts supreme arbiters in regard to any such legislation, and they can reject it-or accept it in accordance with their ideas of whether it appeals to their reason. But ideas of reasonableness or otherwise are apt to vary widely. Take for example, laws relating to prohibition or take such a matter as adultery which the Indian law regards as a crime punishable with imprisonment but the English law does not. It is difficult to believe the framers of the Constitution ever intended to place so enormous a power in the hands of the Courts …………….”[Rattan Roy v. The State ofBiharl.

The obvious and strictly legal reply to this argument is that the consideration, which has so greatly weighed with the learned Chief Justice, is not enough to cut down the plain meaning of the general words used in article 19 (5) of the Constitution. As has been pointed out in a number of cases, “in construing enacted words, we are not concerned with the policy involved or with the results injurious or otherwise which may follow by giving effect to the language 145 -used” [King Emperor v. Benoari Lal Sharma and others (1)I Apart from this aspect of the matter, I agree with one of the learned Judges Of the Calcutta High Court in his remark that “no calamitous or untoward result will follow even if the provisions of the Penal Code become justiciable.” I am certain that no Court would interfere with a Code which has been the law of the land for nearly a century and the provisions of which are not in conflict with the basic principles of any system of law. It seems to me that this Court should not be deterred from giving effect to a fundamental right granted under the Constitution, merely because of a vague and unfounded fear that something catas- trophic may happen.

I have so far proceeded on the assumption that the basis of the objection raised by Meredith C.J. is correct in law, but, in my opinion, it is not. Crime has been defined to consist in those acts or omissions involving breach of a duty to which a sanction is attached by law by way of pun- ishment or pecuniary penalty in the public interests. (See Russell’s “Crimes and Misdemeanours “). Section 2 of the Indian Penal Code, 1860, provides that “every person shall be liable to punishment under this Code’ and not otherwise for every act or omission contrary to the provisions there- of, of which he shall be guilty within British India .” The Indian Penal Code does not primarily or necessarily impose restrictions on the freedom of movement, and it is not correct to say that it is a law imposing restrictions on the right to move freely. Its primary object is to punish crime and not to restrict movement. The punishment may consist in imprisonment or a pecuniary penalty. If it consists in a pecuniary, penalty, it obviously involves no restriction on movement; but if it consists in imprisonment, there is a restriction on movement. This restraint is imposed not under a law imposing restrictions on movement but under a law defining crime and making it punishable. The punishment is correlated directly with the violation of some other person’s right and not with the right of (1) [1945] F.C.R. 161 at p. 177.

146 movement possessed by the offender himself. In my opinion, therefore, the Indian Penal Code does not come within the ambit of the words “law imposing restriction on the right to move freely “.

In the course of the arguments, the expression “punitive detention” was frequently used and the tendency was to put it on the same footing as preventive detention for the purpose of certain arguments. Punitive detention is however essentially different from preventive detention. A person is punitively detained only after a trial for committing a crime and after his guilt has been established in a compe- tent Court of justice. A person so convicted can take his case to the State High Court and sometimes bring it to this Court also; and he can in the course of the proceedings connected with his trial take all pleas available to him including the plea of want of jurisdiction of the Court of trial and the invalidity of the law under which he has been prosecuted. The final judgment in the criminal trial will thus constitute a serious obstacle in his way if he chooses to assert even after his conviction that his right under article 19 (1) (d) has been violated. But a person who is preventively detained has not to face such an obstacle whatever other obstacle may be in his way.

IV. It was pointed out that article 19 being confined to citizens, the anomalous situation will follow that in cases of preventive detention, a citizen will be placed in a better position than a non-citizen, because if a citizen is detained his detention will be open to some kind of judicial review under article 19 (5), but if a non-citizen has been detained his case will not be open to such review. In this view, it is said that the whole Act relating to preventive detention, may be declared to be void if it is unreasonable, though it concerns citizens as well as persons other than citizens. I must frankly state that I am not at all per- turbed by this argument. It is a patent fact that the Constitution has confined all the rights mentioned in arti- cle 19 (1) to citizens. It is equally clear that restric- tions on those rights are to a limited extent at least open to judicial review- The very same question which is 147 raised in regard to article 19 (1)(d) will arise with regard to most of the other sub-clauses. A citizen has the right to assemble peaceably and without arms, to form associations or unions and so on. If there is any law imposing unreason- able restrictions on any of these rights, that law will not be good law so far as citizens are concerned, but it may be good law so far as non-citizens are concerned. I do not see why a similar situation arising with regard to the right granted under sub-clause (d) should be stated to be anoma- lous. So far as the right of free movement is concerned, a non-citizen has been granted certain protections in articles 21 and 22. If a ,citizen has been granted certain other additional protections under article 19 (1) (d), there is no anomaly involved in the discrimination. I think that it is conceivable that a certain law may be declared to be void as against a citizen but not against a non-citizen. Such a result however should not affect our mind if it is found to have been clearly within the contemplation of the framers of the Constitution.

V. It was contended that the rights declared by article 19 are the rights of a free citizen and if he has already been deprived of his liberty in the circumstances referred to in articles 20, 21 and 22, then it would be idle to say that he still enjoys the right referred to in article 19.

After giving my fullest consideration to this argument, I have not been able to appreciate how it arises in this case.

There is nothing in article 19 go suggest that it applies only to those cases which do not fall under articles 20, 21 and 22. Confining ourselves to preventive detention, it is enough to point out that a person who is preventively de- tained must have been, before he lost his liberty, a free man. Why can’t he say to those who detained him: “As a citizen I have the right to move freely and you cannot curtail or take away my right beyond the limits imposed by clause (5)of article 19.” This is the only question which arises in the case and it should not be obscured by any abstruse or metaphysical considerations. It is true that if you put a man under detention, he cannot move and therefore he is not in a position to 148 exercise the right guaranteed under article 19 (1) (d). but this is only the physical aspect of the matter and a person who is bed-ridden on account of disease suffers from a similar disability. In law, however,. physical duress does not deprive a person of the right to freedom of movement.

If he has been detained under some provision of law imposing restrictions on the freedom of movement, then the question will arise whether the restrictions are reasonable. If he has been detained under no provision of law or under some law which is invalid, he must be set at liberty.

To my mind, the scheme of the Chapter dealing with the fundamental rights does not contemplate what is attributed to it, namely, that each article is a code by itself and is independent of the others. In my opinion, it cannot be said that articles 19, 20, 21 and 22 do not to some extent over- lap each other. The case of a person who is convicted of an offence will come under articles 20 and 21 and also under article 221 so far as his arrest and detention in custody before trial are concerned. Preventive detention, which is dealt with in article 22, also amounts to deprivation of personal liberty which is referred to in article 21, and is a violation of the right of freedom of movement dealt with in article 19 (1) (d). That there are other instances of overlapping of articles in the Constitution may be illus- trated by reference to article 19 (1) (f) and article 31 both of which deal with the right to property and to some extent overlap each other. It appears that some learned High Court Judges, who had to deal with the very question before us, were greatly impressed by the statement in the report of the Drafting Committee of the Constituent Assembly on article 15 (corresponding to the present article 21), that the word “liberty” should be qualified by the insertion of the word “personal” before it for otherwise it may be construed very widely so as to include the freedoms dealt with in article 13 (corresponding to the present article 19). I am not however prepared to hold that this statement is decisive on the question of the construction of the words used in article 19 (1) (d) which are quite plain and can be construed without any 149 extraneous help. Whether the report of the Drafting Commit- tee and the debates on the floor of the House should be used at all in construing the words of a statute, which are words of ordinary and common use and are not used in any technical or peculiar sense, is a debatable question; and whether they can be used in aid of a construction which is a strain upon the language used in the clause to be interpreted is a still more doubtful matter. But, apart from these legal consider- ations, it is, I think, open to us to analyse the statement and see whether it goes beyond adding a somewhat plausible reason–a superficially plausible reason–for a slight verbal change in article 21. It seems clear that the addi- tion of the word “personal” before “liberty” in article 21 cannot change the meaning of the words used in article 19, nor can it put a matter which is inseparably bound up with personal liberty beyond its place. Personal liberty and personal freedom, in spite of the use of the word “personal ,” are, as we find in several books, sometimes used in a wide sense and embrace freedom of speech, freedom of .asso- ciation, etc. These rights are some of the most valuable phases or elements of liberty and they do not cease to be so by the addition of the word “personal.” A general statement by the Drafting Committee referring to freedom in plural cannot take the place of an authoritative exposition of the meaning of the words used in article 19 (1)(d), which has not been specifically referred to and cannot be such an overriding consideration as to compel us to put a meaning opposed to reason and authority. The words used in article 19 (1) (d) must be construed as they stand, and we have to decide upon the words themselves whether in the .case of preventive detention the right under article 19 (1) (d) is or is not infringed. But, as I shall point out later, however literally we may construe the words used in article 19 (1) (d) and however restricted may be the meaning we may attribute to those words, there can be no escape from the conclusion that preventive detention is a direct infringe- ment of the right guaranteed in article 19 (1) (d).

150 Having dealt with the principal objections, I wish to revert once again to the main topic. The expressions “per- sonal liberty” and” personal freedom” have, as we find in several books, a wider meaning and also a narrower meaning.

In the wider sense, they include not only immunity from arrest and detention but also freedom of speech, freedom of association, etc. In the narrower sense, they mean immunity from arrest and detention. I have shown that the juristic conception of “personal liberty ,” when these words are used in the sense of immunity from arrest, is. that it consists in freedom of movement and locomotion. I have also pointed out that this conception is at the root of the criminal law ofEnglandand of this country, so far as the offences of false imprisonment and wrongful confinement are concerned.

The gravamen of these offences is restraint on freedom of movement. With these facts in view, I have tried to find out whether there is any freedom of movement known inEnglandapart from personal liberty used in the sense of immunity from arrest and detention, but I find no trace of any such freedom. In Halsbury’s Laws of England (2nd Edition, volume 6, page 391), the freedoms mentioned are the right to per- sonal freedom (or immunity from detention or confinement), the right to property, the right to freedom of speech, the right of public meeting, the right of association, etc.

Similar classifications will be found in Dicey’s “Introduc- tion to the Study of the Law of the Constitution” and Keith’s “Constitutional Law” and other books on constitu- tional subjects, but there is no reference anywhere to any freedom or right of movement in the sense in which we are asked to. construe the words used in article 19 (1) (d)..

In the Constitutions of America,Irelandand many other countries where freedom is prized, there is no reference to freedom or right of movement as something distinct from personal liberty used in the sense of immunity from arrest and confinement. The obvious explanation is that in legal conception no freedom or right of movement exists apart from what personal liberty connotes and therefore a separate treatment of this freedom was not necessary. It is only in the Constitution of the Free 151 City of Danzig, which covers an area of 701 square miles, that we find these words in article 75 :– “All nationals shall enjoy freedom of movement within the City.” There is however no authoritative opinion available to support the view that this freedom is anything different from what is otherwise called personal liberty. The problem of construc- tion in regard to this particular right in the Constitution of Danzig is the same as in our Constitution. Such being the general position, I am confirmed in my view that the juristic conception that personal liberty and freedom of movement connote the same thing is the correct and true conception, and the words used in article 10 (1) (d) must be construed according to this universally accepted legal conception.

This conclusion is further supported by reference to the war legislation in Englandand in India, upon which the law of preventive detention, which has been in force in this country since the war, is based. In the first world war, the British Parliament passed the Defence of the Realm Consoli- dation Act, in 1914, and a number of regulations were made under it including regulation 14-B, which permitted the Secretary of State to subject any person “to such obliga- tions and restrictions as hereinafter mentioned in view of his hostile origin or associations.” Lord Atkin in refer- ring to this regulation said in Liversidge v. Sir John Anderson (1), “that the regulation undisputedly gave to a Secretary of State unrestricted power to detain a suspected person.” Apparently, Lord Atkin meant that the restriction referred to in the Act included preventive detention. Under this regulation, one Arthur Zadig was interned, and he applied to the King’s Bench for a writ of habeas corpus which was refused. The matter ultimately came up before the House of Lords in Rex v. Halliday (2), and the noble Lords in dealing with the case proceeded on the assumption that there was no difference between internment and incarceration or imprisonment. Lord Shaw in narrating the facts of the case stated :– (1) [1942] A.C. 238. (2) [1917] UKHL 1[1917] A.C. 260.

20 152 His person was seized, he has been interned ……

The appellant lost his liberty and was interned ……” He then proceeded to state that there was no difference between internment and imprisonment and quoted the following passage from Blackstone :– “The confinement of the person, in any wise, is an imprisonment. So that the keeping a man against his will in a private house, putting him in the stocks, arresting or forcibly detaining him in the street, is an imprisonment.” Proceeding on this footing (which I find to be the common basis in all other speeches delivered in the case, though Lord Shaw had given a dissenting judgment), Lord Finlay while dealing with the provisions of the regulations observed :– “One of the most obvious means of taking precautions against dangers such as are enumerated is to impose some restriction on the freedom of movement of persons whom there may be any reason to suspect of being disposed to help the enemy “(1).

Again, Lord Atkinson while dealing with the merits of the case made the following observations :– “If the legislature chooses to enact that he can be deprived of his liberty and incarcerated or interned for certain things for which he could not have been heretofore incarcerated or interned, that enactment and the orders made under it if intra vires do not infringe upon the Habeas Corpus Acts or take away any right conferred by Magna Charta …… ,, (2).

This passage read with the previous passage quoted by me will show that both internment and incarceration were re- garded as “restrictions on the freedom of movement “and that deprivation of liberty and restriction on freedom of move- ment were used as alternative expressions bearing the same meaning.

The same conclusion is to be drawn by reference to the regulations made in the last world war under the Emergency Powers (Defence)Act, 1939. The regulation which directly dealt-with detention orders was 18-B. This regulation and a number of other regulations have been placed in Part I under the heading” Restrictions (1) [1917] A.C. 269. (2) [1917] A.C. 272.

153 On movements and activities of persons .” The classifica- tion is important, because it meets two principal arguments advanced in this case. It shows firstly that detention is a form of restriction and secondly that it is a restriction on movement. I have noticed that” movement” is used in plural, and the heading also refers to restrictions on activities, but, having regard to the subjects classified under this head, movement undoubtedly refers to physical movement and includes such movements as entering a particu- lar locality, going from one place to another, etc., i.e., the very things to which article 19 (1) (d) is said to have reference. In Liversidge’s case, in construing the provi- sions of the Act of 1939, Viscount Maugham observed as follows :– “The language of the Act of 1939 (above cited) shows beyond doubt that Defence Regulations may be made which must deprive the subject “whose detention appears to the Secre- tary of State to be expedient in the interests of public safety” of all his liberty of movement while the regulations remain in force”(1).

Thus Viscount Maugham also considered detention to be synonymous with deprivation of liberty of movement.

The classification that we find in the Defence of the Realm Regulations was with a little verbal modification adopted in the Defence of India Rules, and we find that here also rule 26, which dealt with preventive detention, has been placed under the heading “Restriction of movements and activities of persons.” A somewhat similar classification has also been adopted in a series of Provincial Acts and Ordinances relating to maintenance of order [see section 2 of the Bihar Maintenance of Public Order. Act, 1949, section 16 of the West Bengal Security Act, 1948, section 4 of the East Punjab Public Safety Act, 1949, section 2 of the Madras Maintenance of Public Order Act, 1947, section 3 of the U.P.

Maintenance of Public Order Temporary Act, 1947, and section 2 of the Bombay Public Security Measures Act, 1947. In these Acts and Ordinances, preventive detention and certain (1) [1942] A.C. 219.

154 other forms of restriction on movement such as internment, externment, etc. have been classed together and dealt with more or less on the same footing, and sometimes they have been dealt with in different clauses of the same section. In one of the Acts, the same advisory board is to deal with the case of a detenue as well as that of an externed person, and there are also similar provisions giving them the right to represent their case to the Government.

I will now assume for the sake of argument that the freedom of movement to which reference is made in article 19 (1) (d) has nothing to do with personal liberty and that the words which occur in the article bear the restricted meaning attributed to them by the learned Attorney-General and some of my colleagues. It seems to me that even on this assump- tion, it is difficult to arrive at any conclusion other than what I have already arrived at. There can be no doubt that preventive detention does take away even this limited free- dom of movement directly and substantially, and, if so, I do not see how it can be argued that the right under article 19 (1) (d) is not infringed if the alternative interpretation is accepted. We have only to ask ourselves: Does a person who is detained retain even a fraction of his freedom of movement in howsoever restricted sense the term may be used and does he not lose his right to move freely from one place to another or visit any locality he likes as a necessary result of his detention ? I think I should refer here once more to the fact that in the Defence of the Realm Regula- tions and Defence of India Rules, preventive detention is classed under the heading “Restriction of movements and activities.” “Movement” is here used in plural and refers to that very type of movement which is said to be protected by article 19 (1) (d), moving from one State or place to another, visiting different localities, etc. One of the objects of ‘preventive detention is to restrain the person detained from moving from place to. place so that he may not spread disaffection or indulge in dangerous activities in the’ places he visits. The same consideration applies to the cases of persons who are interned or externed. Hence, externment, 155 internment and certain other forms of restriction on move- ment have always been treated as kindred matters belonging to the same group or family and the rule which applies to one must necessarily apply to the other. It is difficult to hold that the case of externment can possibly be dealt with on a different footing from the case of preventive deten- tion. I am however interested to find that the Patna and Bombay High Courts have held that a person who is externed can successfully assert that the right granted to him under article 19 (1) (d) has been violated. This view has not been seriously challenged before us, and, if it is correct, I really do not see how it can be held that preventive deten- tion is also not a direct invasion of the right guaranteed in article 19 (1) (d). Perhaps, one may pause here to ask what kind of laws were in contemplation of the framers of the Constitution when they referred to laws imposing re- strictions in the public interest in article 19 (5). I think the war laws and the Provincial Acts and Ordinances to which I have already referred must have been among them, these being laws which expressly purport to impose restrictions on movements. If so, we should not overlook the fact that preventive detention was an inseparable part of these laws and was treated as a form of restriction on movement and classified as such. It seems to me that when the matter is seriously considered, it would be found that the interpreta- tion of the learned Attorney-General attracts the operation of article 13 (2) no less strongly and directly than the interpretation I have suggested, and I prefer the latter only because I consider that it is legally unsound to treat what is inseparably bound up with and is the essential element in the legal concept 1of personal liberty as a wholly separate and unconnected entity. But, as I have already indicated, it will be enough for the purpose of this case if we forget all about personal liberty and remember only that detention is, as is self-evident and as has been pointed out by Viscount Maugham and other eminent judges, another name for depriving a person of all his “liberty of movement.” It was pointed out in the course of the arguments 156 that preventive detention not only takes away the right in article 19 (1) (d) but also takes away all the other rights guaranteed by article 19 (1), except the right to hold, acquire and dispose of property. Where exactly this argu- ment is intended to lead us to, I cannot fully understand, but it seems to me that it involves an obvious fallacy, because it overlooks the difference in the modes in which preventive detention operates on the right referred to in sub-clause (d) and other sub-clauses of article 19 (1). The difference is that while preventive detention operates on freedom of movement directly and inevitably, its operation on the other rights is indirect and consequential and is, often only notional. One who is preventively detained is straightaway deprived of his right of movement as a direct result of his detention, but he loses the other rights only in consequence of his losing freedom of movement. Beside% while freedom of movement is lost by him in all reality and substance, some of the other rights may not be lost until he wishes to exercise them or is interested in exercising them.

A person who is detained may not be interested in freedom of association or may not pursue any profession, occupation, trade or business. In such a case, the rights referred to are lost only in theory and not as a matter of substance. I wish only to add that when I said that I was not able to understand the full force of the argument which I have tried to deal with, what I had, in mind was that if preventive detention sweeps away or affects almost all the rights guaranteed in article. 19 (1), the matter deserves very serious consideration and we cannot lightly lay down that article 13 (2) does not come into operation.

Being fully alive to the fact that it is a serious matter to be asked to declare a law enacted by Parliament to be unconstitutional, I have again and again asked myself the question: What are we to put in the scales against the construction which I am inclined to adopt and in favour of the view that preventive detention does not take away the freedom of movement guaranteed in article 19 (1) (d)? The inevitable answer has always been that while in one of the scales 157 we have plain and unambiguous language, the opinion eminent jurists, judicial dicta of high authority, constitu- tional practice in the sense that no Constitution refers to any freedom of movement apart from personal liberty, and the manner in which preventive detention has been treated in the very laws on which our law on this subject is based, all that we can put in the opposite scale is a vague and ill- rounded apprehension that some fearful object such as the revision of the Penal .Code is looming obscurely in the distant horizon, the peculiar objection that the mere men- tion of the scheduled tribes will alter the meaning of certain plain words, the highly technical and unreal dis- tinction between restriction and deprivation and the assump- tion not warranted by any express provision that a person who is preventively detained cannot claim the right of freedom of movement because he is not a free man and certain other things which, whether taken singly or ,collectively, are too unsubstantial to carry any weight. In these circum- stances, I am strongly of the view that article 19 (1)(d) guarantees the right of freedom of movement in its widest sense, that freedom of movement being the essence of person- al liberty, the right guaranteed under the article is really a right to personal liberty and that preventive detention is a deprivation of that right. I am also of the view that even on the interpretation suggested by the learned Attor- ney-General, preventive detention cannot but be held to be a violation of the right conferred by article 19 ,(1) (d). In either view, therefore, the law of preventive detention is subject to such limited judicial review as is permitted under article 19 (5). The scope of the review is simply to see whether any particular law imposes any unreasonable restrictions. Considering that the restrictions are imposed on a most valuable right, there is nothing revolutionary in ‘the legislature trusting the Supreme Court to examine whether an Act which infringes upon that right is within the limits of reason.

I will now pass on to the consideration of article 21, which runs as follows :- “No person shall be deprived of his life or personal 158 liberty except according to procedure established by law.” Here again, our first step must be to arrive at a clear meaning of the provision. The only words which cause some difficulty in the proper construction of the article are “procedure established by law.” The learned Attorney-General contended before us that the word “law” which is used in article 21 means State-made law or law enacted by the State. On the other hand, the learned counsel for the petitioner strongly contended that the expression “procedure established by law” is used in a much wider sense and approximates in meaning to the expres- sion “due process of law” as interpreted by the Supreme COurt of America in the earliest times and, if that is so, it means exactly what some of the American writers mean to convey by the expression “procedural due process.” In the course of the arguments, the learned Attorney- General referred us to the proceedings in the Constituent Assembly for the purpose of showing that the article as originally drafted contained the words “without due process of law” but these words were subsequently replaced by the words “except according to procedure established by law.” In my opinion, though the proceedings or discussions in the Assembly are not relevant for the purpose of construing the meaning of the expressions used in article 21, especially when they are plain and unambiguous, they are relevant to show that the Assembly intended to avoid the use of the expression “without due process of law.” That expression had its roots in the expression “per legem terrae” (law of the land) used in Magna Charta in 1215. In the reign of Edward III, ‘however, the words “due process of law” were used in a statute guaranteeing that no person will be de- prived of his property or imprisoned or indicted or put to death without being brought in to answer by due process of law (28, Edward III, Ch. III). The expression was after- wards adopted in the American Constitution and also in the Constitutions of some of the constituent States, though some of the States preferred to use the 159 words “in due course of law” or “according to the law of the land.” [See Cooley on “Constitutional Limitations,” 8th Edn. Vol. II, pages 734-51. In the earliest times, the American Supreme Court construed “due process of law” to cover matters of procedure only, but gradually the meaning of the expression was widened so as to cover substantive law also, by laying emphasis on the word “due.” The expression was used in such a wide sense that the judges found it difficult to define it and in one of the cases it was ob- served as follows :– “It would be difficult and perhaps impossible to give to those words a definition, at once accurate, and broad enough to cover every case. This difficulty and perhaps impossi- bility was referred to by Mr. Justice Miller in Davidson v.

New Orleans, where the opinion was expressed that it is wiser to ascertain their intent and application by the ‘gradual process of judicial inclusion and exclusion,’ as the cases presented for decision shall require, with the reasoning on which such decisions may be rounded:” Missouri Pacific Railway Co. v. Humes (1).

It seems plain that the Constituent Assembly did not adopt this expression on account of the very elastic meaning given to it, but preferred to use the words “according to procedure established by law” which occur in the Japanese Constitution framed in 1946.

It will not be out of place to state here in a few words how the Japanese Constitution came into existence. It appears that on the 11th October, 1945. General McArthur directed the Japanese Cabinet to initiate measures for the preparation of the Japanese Constitution, but, as no progress was made, it was. decided in February, 1946, that the problem of constitutional reform should be taken over by the Government Section of the Supreme Commander’s Headquar- ters. Subsequently the Chief of this Section ,and the staff drafted the Constitution with the help of American constitu- tional lawyers who were called to assist the Government Section in the task. This Constitution, as a learned writer has remarked, bore (1) [1885] USSC 224;115 U.S. 512 at page 513.

21 160 on almost every page evidences of its essentially Western origin, and this characteristic was especially evident in the preamble “particularly reminiscent of the American Declaration of Independence, a preamble which, it has been observed, no Japanese could possibly have conceived or written and which few could even understand” [See Ogg and Zink’s “Modern Foreign Governments”]. One of the character- istics of the Constitution which undoubtedly bespeaks of direct American influence is to be found in a lengthy chap- ter, consisting of 31 articles, entitled “Rights and Duties of the People,” which provided for the first time an effec- tive “Bill of Rights” for the Japanese people. The usual safeguards have been provided there against apprehension without a warrant and against arrest or detention without being informed of the charges or without adequate cause (articles 33 and 34).

Now there are two matters which deserve to be noticed :–(1) that the Japanese Constitution was framed wholly under American influence; and (2) that at the time it was framed the trend of judicial opinion in America was in favour of confining the meaning of the expression “due process of law” to what is expressed by certain American writers by the somewhat quaint but useful expression “proce- dural due process.” That there was such a trend would be clear from the following passage which I quote from Carl Brent Swisher’s “The Growth of Constitutional Power in theUnited States” (page 107.):– “The American history of its interpretation falls into three periods. During the first period, covering roughly the first century of government under the Constitution, due process was interpreted principally as a restriction upon procedure–and largely the judicial procedure–by which the government exercised its powers. During the second period, which, again roughly speaking, extended through 1936, due process was expanded to serve as a restriction not merely upon procedure but upon the substance of the activities in which the government might engage. During the third period, extending from 1936 to date, the use of due 161 process as a substantive restriction has been largely sus- pended or abandoned, leaving it principally in its original status as a restriction upon procedure.” In the circumstances mentioned, it seems permissible to surmise that the expression “procedure established by law” as used in the Japanese Constitution represented the current trend of American judicial opinion with regard to “due process of law,” and, if that is so, the expression as used in our Constitution means all that the American writers have read into the words “procedural due process.” But I do not wish to base any conclusions upon mere surmise and will try to examine the whole question on its merits.

The word “law” may be used in an abstract or concrete sense. Sometimes it is preceded by an article such as “a” or “the” or by such words as “any,” “all,” etc., and sometimes it is used without any such prefix.

But, generally, the word “law” has a wider meaning when used in the abstract sense without being preceded by an article.

The question to be decided is whether the word “law” means nothing more than statute law.

Now whatever may be the meaning of the expression “due process of law,” the word “law” is common to that expression as well as “procedure established by law” and though we are not bound to adopt the construction put on “law” or “due process of law” in America, yet since a number of eminent American Judges have devoted much thought to the subject, I am not prepared to hold that we can derive no help from their opinions and we should completely ignore them. I will therefore in the first instance set out certain quotations from a few of the .decisions of the American Supreme Court construing the word “law” as used in the expression “due process of law,” in so far as it bears on the question of legal procedure.

(1) “Although the legislature may at its pleasure provide new remedies or change old ones, the power is never- theless subject to the condition that it cannot remove certain ancient land-marks, or take away certain fundamen- tal rights which have been always 162 recognized and observed in judicial procedures:” Bardwell v.

Collins (1).

(2)’ ‘By the law of the land is most clearly intended the general law: a law which hears before it condemns, which proceeds upon inquiry and renders judgments only- after trial. The meaning is that every citizen shall hold his life, liberty and property, and immunities under the protection of the general rules which govern society:” Dartmouth College Case (2).

(3) “Can it be doubted that due process of law signifies a right to be heard in one’s defence ? If the legislative department of the government were to enact a statute confer- ring the right to condemn the citizen without any opportuni- ty whatever of being heard, would it be pretended that such an enactment would not be violative of the Constitution ? If this be true, as it undoubtedly is, how can it be said that the judicial department. the source and fountain of justice itself, has yet the authority to render lawful that which if done under express legislative sanction would be viola of the Constitution ? If such power obtains, then the judicial department of the government sitting to uphold and enforce the Constitution is the only one possessing a power to disregard it. If such authority exists then in conse- quence of their establishment, to compel obedience to law and enforce justice, Courts possess the right to inflict the very wrongs which they were created to prevent:” Hovey v.

Elliott(3).

(4) “It is a rule as old as the law, and never more to be respected than now, that no one shall be personally bound until he has had his say in Court, by which is meant, until he has been duly cited to appear, and has been afforded an opportunity to be heard. Judgment without such citation and opportunity wants all the attributes of a judicial determi- nation; it is judicial usurpation and oppression, and can never be upheld where justice is justly administered:” Gatpin v. Page(4).

Thus, in America, the word “law” does not mean merely State-made law or law enacted by the State and does not exclude certain fundamental principles of (1) 44 Minn. 979 L.R.A. 152. (3) [1897] USSC 151167 U.S. 409 at page 417.

(2) 17 U.S. 4. (4) 85 U.S. 18.

163 justice which inhere in every civilized system of law and which are at the root of it. The result of the numerous decisions inAmericahas been summed up by Professor Willis in his book on “Constitutional Law” at page 662, in the statement that the essentials of due process are: (1) no- tice, (2) opportunity to be heard, (3) an impartial tribu- nal, and (4) orderly course of procedure. It is pointed out by the learned author that these essentials may assume different forms in different circumstances, and so long as they are conceded in principle, the requirement of law will be fulfilled. For example, a person cannot require any particular form or method of hearing, but all that he can require is a reasonable opportunity to be heard. Similarly, an impartial tribunal does not necessarily mean a judicial tribunal in every case. So far as ‘orderly course of proce- dure is concerned, he explains that it does not require a ‘Court to strictly weigh the ,evidence but it does require it to examine the entire record to ascertain the issues, to discover whether there are facts not reported and to see whether or not the law has been correctly applied to facts.

The view expressed by other writers is practically the same as that expressed by Professor Willis, though some of them do not expressly refer to the fourth element, viz., orderly course of procedure. The real point however is that these four elements are really different aspects of the same right, viz., the right to be heard before one is condemned.

So far as this right is concerned, -judicial opinion inEnglandappears to be the same as that inAmerica. In Eng- land, it would shock one to be told that a man can be de- prived of his personal liberty without a fair trial or hearing. Such a case can happen if the Parliament expressly takes away the right in question in an emergency as the British Parliament did during// the last two world wars in a limited number of cases. I will refer here to a few cases which show that the fundamental principle that a person whose right is affected must be heard has been observed not only in cases involving personal liberty but also ‘in proceedings affecting other rights, even though they may have 164 come before administrative or quasi-judicial tribunals.

Cooper v. The Wadsworth Board of Works (1)was a case under an Act which empowered the District Board to alter or demol- ish a house where the builder had neglected to give notice of his intention. seven days before proceeding to lay or dig the foundation. Acting upon this power, the Board directed the demolition of a building without notice to the builder, but this was held to be illegal. Byles 5. in dealing with the matter observed as follows :– “I conceive they acted judicially, because they had to determine the offence, and they had to apportion the punish- ment as well as the remedy. That being so, a long course of decisions, beginning with Dr. Bentley’s case, and ending with some very recent cases, establish that although there are no positive words in a statute requiring that the party-shall be heard, yet the justice of the common law will supply the omission of the legislature. The judgment of Mr.

Justice Fortescue, in Dr. Bentley’s case, is somewhat quaint, but it is very applicable, and has been the law from that time to the present. He says, “The. objection for want of notice can never be got over. The laws of God and man both give the party an opportunity to make his defence, if he has any.” In the same case Erie C.J. observed :– “It has been said that the principle that no man shall be deprived of his property without an opportunity of being heard, is limited to a judicial proceeding…… I do not quite agree with that; ……the law, I think, has been applied to many exercises of power which in common under- standing would not be at all more a judicial proceeding than would be the act of the District Board in ordering a house to be pulled down.” The observations made by Erie C.J. were quoted and applied by Sir Robert Collier in Smith v. The’ Queen (2), and the observations of Lord Campbell inReginav. The Archbishop of Canterbury (3) were to the. same effect.

(1) [1863] EngR 42414 C.B. (N.S.) 180. (2) 3 A.C. 614.

(3) 1E.& E. 559.

165 A similar opinion was expressed by Sir GeorgeJessel in Fisher v. Keane (1), Labouchere v. Earl of Wharncliffe (2), and Russell v. Russell (3). In the last mentioned case, he observed as follows :– “It [Wood v. Woad (4)] contains a very valuable state- ment by the Lord Chief Baron as to his view of the mode of administering justice by persons other than Judges who have judicial functions to perform which I should have been very glad to have had before me on both those club cases that I recently heard, namely, the case of Fisher v. Keane and the case of Labouchere v. Earl of Wharncliffe. The passage I mean is this, referring to a committee: ‘They are bound in the exercise of their functions by the rule expressed in the maxim “audi alteram partem,” that no man should be condemned to consequences without having the opportunity of making his defence. This rule is not confined to the con- duct of strictly legal’ tribunals, but is applicable to every tribunal or body of persons invested with authority to adjudicate upon matters involving civil consequences to individuals ‘.” This opinion was quoted with approval by Lord Macnaghten in Lapointe v. L’Association etc. deMontreal(5). In that case, on an application for pension by the appellant, who had been obliged to resign, the Board of Directors, without any judicial inquiry into the circumstances, resolved to refuse the claim on the ground that he was obliged to tender his resignation. This procedure was condemned by Lord Macnaghten as being “contrary to rules of society and above all contrary to the elementary principles of justice.” These observations of Lord Macnaghten were referred to and relied on in The King v. Tribunal of Appeal under the Hous- ing Act, 1919 (6). In that case, a company proposed to build a picture house and the local authority having prohibited ‘the building, the company appealed under the Housing (1) H. Ch. D. 353. (4) [1874] L.R. 9 Ex.

190.

(2) 13 Oh. D. 346. (5) [1906] A.C. 535.

(3) 14 Ch. D. 471. (6) [1920] I.B. 334.

166 (Additional Powers) Act, 1919, which contained a provision that an appeal could in certain cases be properly determined without a hearing and that the appellate Court could dis- pense with the hearing and determine the appeal summarily.

It was held that the meaning of rule 7 was that the tribunal on appeal might dispense with an oral hearing, not that they might dispense with a hearing of any kind, and that they were bound to give the appellants a hearing in the sense of an opportunity to make out a case. The Earl of Reading in delivering the judgment observed:

“The principle of law applicable to such a case is well stated by Kelly C.B. in Wood v. Woad in a passage which is cited with approval by Lord Macnaghten in Lapointe v. L’ Association etc. de Montreal …… ” In Local Government Board v. Arlidge(1), the Local Government dismissed an appeal by a person against whom a closing order had been made under Housing, Town Planning, &c. Act, without an oral hearing and without being allowed to see the report made by the Board’s Inspector upon ‘public local inquiry. The House of Lords did not interfere with the order on the ground that the appeal had been dealt with by an administrative authority whose duty was to enforce obligations on the individual in the interests of the commu- nity and whose character was that of an organization with executive functions. The principle however was conceded and lucidly set forth that when the duty of deciding an appeal is imposed, those whose duty it is to decide it must act judicially, and they must deal with the question referred to them without bias and must give to each of the parties an opportunity of presenting its case, and that the decision must be come to in the spirit and with the sense of respon- sibility of a tribunal whose duty it is to mete out justice.

Commenting upon this case, which is generally regarded as an extreme case, Mr. Gavin Simonds, who afterwards became a member of the House of Lords observes :– (1) [1915] A.C.120.

167 “I think you would agree that if the subjectmatter of such proceedings as arc here indicated was the liberty of the subject, or indeed his life, you would regard such a judicial procedure as outrageous.” (See C.K. Allen’s “Law and Orders,” page 167).

I have particularly referred to cases which were before administrative tribunals, because I have to deal in this case with preventive detention which is said to be an execu- tive act and because I wish to point out that even before executive authorities and administrative tribunals an order cannot generally be passed affecting one’s rights without giving one such hearing as may be appropriate to the circum- stances of the case. I have only to add that Halsbury after enumerating the most important liberties which are recog- nized in England, such as right of personal freedom, right to freedom of speech, right of public meeting, etc., adds :– “It seems to me that there should be added to this list the following rights which appear to have become well-estab- lished–the right of the subject to have any case affecting him tried in accordance with the principles of natural justice, particularly the principles that a man may not be a judge in his own cause, and that no party ought to be con- demned unheard, or to have a decision given against him unless he has been given a reasonable opportunity of putting forward his case …… “(Halsbury’s Laws of England, 2nd Edition, volume 6, page 392).

The question is whether the principle that no person can be condemned without a hearing by an impartial tribunal which is well-recognized in all modern civilized systems of law and which Halsbury puts on a par with well-recognized fundamental rights cannot be regarded as part of the law of this country. I must confess that I find it difficult to give a negative answer to this question. The principle being part of the British system of law and procedure which we have inherited, has been observed in this country for a very long the and is also deeply rooted in our ancient history, being the basis of the 168 panchayat system from the earliest times. The whole of the Criminal Procedure Code, whether it deals with trial of offences or with preventive or quasiadministrative measures such as are contemplated in sections 107, 108, 109, 110 and 145, is based upon the foundation of this principle, and it is difficult to see that it has not become part of the “law of the land” and does not inhere in our system of law. If that is so, then “procedure established by law” must include this principle, whatever else it may or may not include.

That the word “law” used in article 21 does not mean only State-made law is clear from the fact that though there is no statute laying down the complete procedure to be adopted in contempt of Court cases, when the contempt is not within the view of the Court, yet such procedure as now prevails in these cases is part of our law. The statute-law which regulates the procedure of trials and enquiries in criminal cases does not specifically provide for arguments in certain cases, but it has always been held that no decision should be pronounced without hearing arguments. In a number of cases, it has been held that though there may be no specific provision for notice in the statute, the provision must be read into the law. I am aware that some Judges have ex- pressed a strong dislike for the expression “natural jus- tice” on the ground that it is too vague and elastic, but where there are well-known principles with no vagueness about them, which all systems of law have respected and recognized, they cannot be discarded merely because they are in the ultimate analysis found to be based on natural jus- tice. That the expression “natural justice” is not unknown to our law is apparent from the fact that the Privy Council has in many criminal appeals from this country laid down that it shall exercise its power of interference with the course of criminal justice in this country when there has been a breach of principles of natural justice or departure from the requirements of justice. [See In re Abraham Mallory Dillet (1), Taba Singh v. King Emperor C), George Gfeller v.

The (1) 12 A.C. 459. (2) I.L.R. 48 Born. 515.

169 King(1), and Bugga and others v. Emperor(2). In the present case, there is no vagueness about the right claimed which is the right to have one’s guilt or innocence considered by an impartial body and that right must be read into the words of article 21. Article 21 purports to protect life and person- al liberty, and it would be a precarious protection and a protection not worth having, if the elementary principle of law under discussion which, according to Halsbury is on a par with fundamental rights, is to be ignored and excluded.

In the course of his arguments, the learned counsel for the petitioner repeatedly asked whether the Constitution would permit a law being enacted, abolishing the mode of trial permitted by the existing law and establishing the procedure of trial by battle or trial by ordeal which was in vogue in olden times in England. The question envisages something which is not likely to happen, but it does raise a legal problem which can perhaps be met only in tiffs way that if the expression “procedure established by law” simply means any procedure established or enacted by statute it will be difficult to give a negative answer to the question, but ii the word “law” includes what I have endeavoured to show it does, such an answer may be justified. It seems to me that there is nothing revolutionary in the doctrine that the words “procedure established by law” must include the four principles set out in Professor Willis’ book, which, as I have already stated, are different aspects of the same principle and which have no vagueness or uncertainty about them. These principles, as the learned author points out and as the authorities show, are not absolutely rigid principles but are adaptable to the circumstances of each case within certain limits. I have only to add that it has not been seriously controverted that “law” in this article means valid law and “procedure” means certain definite rules of proceeding and not something which is a mere pretence for procedure.

I will now proceed to examine article 22 of the Consti- tution which specifically deals with the subject (1) A.I.R. 1943P.C. 211. (2) A.I.R. 1919P. C. 108.

170 of preventive detention. The first point to be noted in regard to this article is that it does not exclude the operation of articles 19 and 21, and it must be read subject to those two articles, in the same way as articles 19 and 21 must be read subject to article 22. The correct position is that article 22 must prevail in so far as there are specific provisions therein regarding preventive detention, but, where there are no such provisions in that article, the operation of articles 19 and 21 cannot be excluded. The mere fact that different aspects of the same right have been dealt with in three different articles will not make them mutually exclusive except to the extent I have indicated.

I will now proceed to analyse the article and deal with its main provisions. In my opinion, the main provisions of this article are :–(1) that no person can be detained beyond three months without the report of an advisory board [clause 4 (a) ]; (2) that the Parliament may prescribe the circumstances and the class or classes of cases in which a person may be detained for more than three months without obtaining the opinion of an advisory board [clause 7 (a)];

(3) that when a person is preventively detained, the author- ity making the order of detention shall communicate to such person the grounds on which the order is made and shall afford him the earliest opportunity of making a representa- tion against the order [clause (5) ]; and (4) that the Parliament may prescribe the maximum period for which any person may in any class or classes of cases be detained under any law providing for preventive detention [clause 7 (b) ]. The last point does not require any consideration in this case, but the first three points do require considera- tion.

In connection with the first point, the question arises as to the exact meaning of the words “such detention” occur- ring in the end of clause 4 (a). Two alternative interpre- tations were put forward: (1) “such detention” means preven- tive detention; (2) “such detention” means detention for a period longer than three months. If the first interpreta- tion is correct, then the function of the advisory board would be to go into the merits of the case of each person and simply 171 report whether there was sufficient cause for his detention.

According to the other interpretation, the function of the advisory board will be to report to the government whether there is sufficient cause for the person being detained for more than three months. On the whole, I am inclined to agree with the second interpretation. Prima facie, it is a seri- ous matter to detain a person for a long period (more than three months) without any enquiry or trial. But article 22 (4) (a) provides that such detention may be ordered on the report of the advisory board. Since the report must be directly connected with the object for which it is required, the safeguard provided by the article, viz., calling for a report from the advisory board, loses its value, if the advisory board is not to apply its mind to the vital ques- tion before the government, namely, whether prolonged deten- tion (detention for more than three’ months) is justified or not. Under article 22 (4) (a), the advisory board has to submit its report before the expiry of three months and may therefore do so on the eighty-ninth day. It would be some- what farcical to provide, that after a man has been detained for eighty-nine days, an advisory board is to say whether ‘ his initial detention was justified. On the other hand, the determination of the question whether prolonged detention (detention for more than three months)is justified must necessarily involve the determination of the question wheth- er the detention was justified at all, and such an interpre- tation only can give real meaning and effectiveness to the provision. The provision being in the nature of a protection or safeguard, I must naturally lean towards the interpreta- tion which is favourable to the subject and which is also in accord with the object in view.

The next question which we have to discuss relates to the meaning and scope of article 22 (7)(a) which runs as follows:- “Parliament may by law prescribe— (a) the circumstances under which, and the class or classes of cases in which, a person may be detained for a period longer than three months under any law providing for preven- tive detention without obtaining 172 the opinion of an Advisory Board in accordance with the provisions of sub-clause (a) of clause (4).” The question is what is meant by “circumstances”‘ and “class or classes of cases” used in this provision. This question has arisen because of the way in which these ex- pressions appear to have been interpreted and applied in the Act of Parliament with which we are concerned. As the matter is important and somewhat complicated, I shall try to express my meaning as clearly as possible even at the risk of some repetition, and, in doing so, I must necessarily refer to the impugned Act as well as Lists I and III of the Seventh Schedule of the Constitution, under which Parliament had jurisdiction to enact it. Item 9 of List I–Union List–shows that the Parliament has power to legislate on preventive detention for reasons connected with (1) defence, (2) foreign affairs, and (3) security ofIndia.. Under List III–Concurrent List–the appropriate item is item 3 which shows that law as to preventive detention can be made for reasons connected with (1) the security of the State, (2) the maintenance of public order, and (3) the maintenance of supplies and services essential to the community. The impugned Act refers to all the subjects mentioned in Lists I and III in regard to which law of preventive detention can be made. Section 3 (1)of the Act, the substance of which has already been mentioned, is important, and I shall reproduce it verbatim.

“The Central Government or the State Government may- (a) if satisfied with respect to any person that with a view to preventing him from acting in any manner prejudicial to- (i) the defence of India, the relations of India with foreign powers, or the security of India, or (ii) the security of the State or the maintenance of public order, or (iii) the maintenance of supplies and services essen- tial to the community, or 173 (b) if satisfied with respect to any person who is a foreigner within the meaning of the Foreigners Act, 1946 (XXXI of 1946), that with a view to regulating his continued presence in India or with a view to making arrangements for his expulsion from India, it is necessary so to do, make an order directing that such person be detained.” It will be noticed that all the subjects of legislation concerning preventive detention occurring in item of List I are grouped in sub-clause (1) of clause (a). The subjects in this group are three in number and, for convenience of reference, I shall hereafter refer to them as A, B and C.

In sub-.clause (ii), we find grouped two of the matters referred to in item 3 of List III, these being security of the State and the maintenance of public order. These two subjects, I shall refer to as D and E. In sub-clause (iii), reference has been made to the third matter in item 3 of List III, and I shall refer to this subject as F. With this classification, let us now turn to the Constitution itself.

On reading articles 22 (4) and 22 (7) together, it would be clear that so long as article 22 (4) (a) holds the field and Parliament does not act under clause (7) (a) of article 22, there must be an advisory board in every case, i.e., if the legislation relates to groups A to F, as it does here, there must be an advisory board for all these groups.

Article 22 (7) however practically engrafts an excep- tion. It states in substance that the Parliament may by an Act provide for preventive detention for more than three months without reference to an advisory board, but in such cases it shall be incumbent on the Parliament to prescribe (1) the circumstances and (2) the class or classes of cases in which such course is found to be necessary. If the case contemplated in clause (4)(a)is the rule and that contem- plated ‘in clause (7) (a) is the exception, then the circum- stances and the class or classes of cases must be of a special or extraordinary nature, so as to take the case out of the rule and bring it within the exception. It is always 174 possible to draw the line between the normal or ordinary and the abnormal or extraordinary cases. and this is what, in my opinion, the Parliament was expected to do under clause (7) (a). I do not think that it was ever intended that Parliament could at its will treat the normal as the abnor- mal or ‘the rule as the exception. But this is precisely what has been done in this case- All the items on which preventive legislation is possible excepting one, i.e., A to E, have been put within the exception, and only one, F, which relates to maintenance of supplies and services essen- tial to the community, has been allowed to remain under the rule. In other words, it is provided that there shall be an advisory board only for the last category, F, but no provi- sion having been made for the other categories, A to E, it may be assumed that the advisory board has been dispensed with in those cases. The learned Attorney-General maintained that it would have been open to the Parliament to dispense with the advisory board even for the category F, and if such a course had been adopted it would not have affected the validity of the Act. This is undoubtedly a logical position in the sense that it was necessary for him to go as far as this to justify his stand; but, in my opinion, the course adopted by the Parliament in enacting section 12 of the impugned Act is not what is contemplated under article 22 (7) (a) or is permitted by it. The circumstances to be prescribed must be special and extraordinary circumstances and the class or classes of cases must be of the same na- ture. In my opinion, the Constitution never contemplated that the Parliament should mechanically reproduce all or most of the categories A to F almost verbatim and not apply its mind to decide in what circumstances and in what class or classes of cases the safeguard of an advisory board is to be dispensed with.

I may state here that two views are put forward before us as to how clauses (4) (a) and 7 (a) of article 22 are to be read:–(1) that clause (4) (a) lays down the rule that in all cases where detention for more than three months is ordered, it should be done in consultation with and on the report of the advisory 175 board, and clause (7) (a) lays down an exception to this rule by providing that Parliament may pass an Act permitting detention for more than three months without reference to an advisory board; (2) that clauses (4)(a) and (7) (a) are independent clauses making two separate and alternative provisions regarding detention for more than three months, in one case on the report of an advisory board and in other case without reference to an advisory board. Looking at the substance and not merely at the words, I am inclined to hold that clause (7) (a) practically engrafts an exception on the rule that preventive detention for more than three months can be ordered only on the report of an advisory board, and so far I have proceeded on that footing. But it seems to me that it will make no difference to the ulti- mate conclusion, whichever of the two views we may adopt.

Even on the latter view, it must be recognized that the law which the Constitution enables the Parliament to make under article 22 (7) (a) would be an exceptionally drastic law, and, on the principle that an exceptionally drastic law must be intended for an exceptional situation, every word of what I have said so far must stand. Clause (7) (a) is only an enabling provision, and it takes care to provide that the Parliament cannot go to the extreme limit to which it is permitted to go without prescribing the class or classes cases and the circumstances to which the extreme law would be applicable. It follows that the class or classes of cases and the circumstances must be of a special nature to require such legislation.

It was urged that the word “and” which occurs between “circumstances” and “class or classes of cases” is used in a disjunctive sense and should be read as “or,” and by way of illustration it was mentioned that when it is said that a person may do this and that, it means that he is at liberty to do either this or that. I do not think that this argu- ment is sound. I think that clause (7)(a) can be accurately paraphrased somewhat as follows :–” Parliament may dispense with an advisory board, but in that case it shall prescribe the circumstances and the class or 23 176 classes of cases …….. “If this is the meaning, then ‘ ‘and” must be read as “and” and not as “or”; and “may” must be read as “shall.” Supposing it was said that Parliament may prescribe the time and place for the doing of a thing, then can it be suggested that both time and place should not be prescribed ? It seems obvious to me that the class or classes of cases must have some reference to the persons to be detained or to their activities and movements or to both.

“Circumstances” on the other hand refer to something extra- neous, such as surroundings, background, prevailing condi- tions, etc., which might prove a fertile field for the dangerous activities of dangerous persons. Therefore the provision clearly means that both the circumstances and the class or classes of cases (which are two different expres- sions with different meanings and connotations and cannot be regarded as synonymous) should be prescribed, and prescrip- tion of one without prescribing the other will not be enough. As I have already stated, such law as can be enact- ed under article 22 (7) (a) must involve, by reason of the extreme limit to which it can go, serious consequences to the persons detained. It will mean (1) prolonged detention, i.e., detention for a period longer than three months, and (2) deprivation of the safeguard of an advisory board. Hence article 22 (7) (a) which purports to be a protective provi- sion will cease to serve its object unless it is given a reasonable interpretation. To my mind, what it contemplates is that the law in question must not be too general but its scope should be limited by prescribing both the class or classes of cases and the circumstances.

It was contended that the expression “class or classes of cases” is wide enough to enable the Parliament to treat any of the categories mentioned in Lists I and III, items 9 and 3 respectively, (i.e., any of the categories A to F) as constituting a class. At first sight, it seemed to me to be a plausible argument,, but the more I think about it the more unsound it appears to me. The chief thing to be remem- bered is what I have already emphasized more than once, viz., that a special or extreme type of law must be limited to special classes of cases and circumstances. Under the 177 Constitution, the Parliament has to prescribe “the class or classes,” acting within the limits of the power granted to it under Lists I and III. The class or classes must be its own prescription and must be so conceived as to justify by their contents the removal of an important safeguard provid- ed by the Constitution. Prescribing is more than a mere mechanical process. It involves a mental effort to select and adapt the thing prescribed to the object for which it has to be prescribed. We find here that what is to be prescribed is “class or classes” (and also “circumstances “). We also find that what the law intends to provide is prolonged detention (by which words I shall hereafter mean detention for more than three months) and elimination of the advisory board. The class or classes to be prescribed must therefore have a direct bearing on these matters and must be so selected and stated that any one by looking at them may say :–” That is the reason why the law has prescribed prolonged detention without reference to an advisory board.” In other words, there must be something to make the class or classes prescribed fit in with an extreme type of legisla- tion–some element of exceptional gravity or menace, which cannot be easily and immediately overcome and therefore necessitates prolonged detention; and there must be some- thing to show that reference to an advisory board would be an undesirable and cumbersome process and wholly unsuitable for the exceptional situation to which the law applies.

Perhaps a simple illustration may make the position still clearer. Under the Lists, one of the subjects on which Parliament may make a law of preventive detention is “matter connected with the maintenance of public order.” The Act simply repeats this phraseology and states in sec- tion 3: “with a view to preventing him (the person to be detained) from acting in a manner prejudicial to the main- tenance of public order.” This may be all right for section 3, but section 12 must go further. An act prejudicial to.

the maintenance of public order may be an ordinary act or it may be an act of special gravity. I think that article 22 (7)(a) contemplates that the graver and 178 more heinous types of acts falling within the category of acts prejudicial to the maintenance of public order (or other heads) should be prescribed so as to define and cir-