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1986 (2) TMI 349
Issues Involved: 1. Whether the High Court or the Sessions Court has the power to grant anticipatory bail under Section 438 of the Cr. P. C., 1973, after a competent criminal court has taken cognizance of the case and issued a warrant for arrest.
Issue-Wise Detailed Analysis:
1. Power to Grant Anticipatory Bail Post Cognizance and Issuance of Warrant
Background and Judicial Opinions: - The question arose from differing views in previous cases. Madhusudan Rao, J., in N. Dasaratha Reddy v. State, held that Section 438 applies only to arrests where the court's process has not been issued. This view was upheld by a Division Bench in Kamalakara Rao v. State of A. P. - In the present case, the Full Bench was asked to reconsider this view after a Division Bench disagreed with the earlier rulings.
Section 438 Cr. P. C. Analysis: - Section 438(1) allows a person who apprehends arrest to apply for anticipatory bail. Sub-section (2) allows the court to impose conditions. Sub-section (3) provides for the procedure if such a person is arrested. - The Law Commission recommended this provision to prevent misuse of arrest powers, especially in politically motivated cases.
Supreme Court Interpretation: - In Gurbaksh Singh v. State of Punjab, the Supreme Court held that the legislature conferred wide discretion on the High Court and the Court of Session to grant anticipatory bail. It emphasized that anticipatory bail is sought when there is mere apprehension of arrest and should be granted with due care and circumspection.
Contrary Views and Full Bench Decision: - Madhusudan Rao, J., and the Division Bench in Kamalakara Rao's case stressed that Section 438(3) restricts the power to grant anticipatory bail after the court's process has been issued. - The Full Bench disagreed, stating that sub-section (3) does not curtail the powers under sub-section (1). It merely provides the procedure for situations where anticipatory bail is granted, and an arrest is made thereafter. - The Full Bench cited decisions from other High Courts, such as the Madhya Pradesh High Court in Ramsewak v. State of Madhya Pradesh and the Punjab and Haryana High Court in Puran Singh v. Ajit Singh, which supported the view that filing a charge-sheet does not end the power to grant anticipatory bail.
Conclusion: - The Full Bench concluded that Section 438(1) Cr. P. C. allows the High Court or the Sessions Court to grant anticipatory bail even after cognizance is taken and a warrant is issued. - The court emphasized that the discretion to grant anticipatory bail should be exercised judiciously, keeping in view the circumstances of each case.
Final Judgment: - The Full Bench overruled the previous decisions in Kamalakara Rao's case and N. Dasaratha Reddy's case, holding that the High Court or the Court of Session retains the power to grant anticipatory bail under Section 438(1) Cr. P. C. even after a warrant is issued post-cognizance. - The specific petition for anticipatory bail in this case was dismissed, with the petitioner advised to surrender to the police and then move for bail.
Summary: The Full Bench of the Andhra Pradesh High Court resolved the issue by affirming that the High Court or the Sessions Court has the power to grant anticipatory bail under Section 438(1) Cr. P. C. even after the criminal court has taken cognizance and issued a warrant for arrest. The previous rulings restricting this power were overruled. The court emphasized that while the power to grant anticipatory bail should be exercised with caution, it does not cease merely because a charge-sheet has been filed and a warrant issued.
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1986 (2) TMI 348
Issues Involved: 1. Arbitrariness of the Impugned Decision 2. Legal Mala Fides 3. Legal Perspective of Joint Venture Liabilities 4. Guidelines and Directions of the World Bank 5. Judicial Review of Administrative Action
Issue-Wise Detailed Analysis:
1. Arbitrariness of the Impugned Decision: The petitioners contended that the decision to refuse their pre-qualification was arbitrary. The authorities allegedly failed to apply the correct criteria, ignored World Bank directions, misunderstood the legal liabilities of joint venture partners, and did not seek further necessary information. The court found that the authorities did not properly consider the joint venture's legal liabilities and misdirected themselves by focusing on the internal division of responsibilities rather than the joint and several liabilities of the co-venturers. The authorities' failure to call for clarifications, despite being required to do so, rendered the decision unreasonable and arbitrary.
2. Legal Mala Fides: The petitioners argued that the decision was vitiated by legal mala fides, as it was based on extraneous grounds not germane to the criteria for pre-qualification. The authorities' reliance on the joint venture agreement's silence about the specific percentage of financial participation was deemed insufficient for treating the application as non-responsive. The court held that the authorities acted unreasonably by not seeking clarifications and by failing to consider the relevant materials furnished by the petitioners, thereby vitiating the decision.
3. Legal Perspective of Joint Venture Liabilities: The court emphasized the legal concept of joint ventures, highlighting that joint ventures are recognized entities with joint and several liabilities for performance of construction contracts. The authorities misdirected themselves by not appreciating this legal perspective and by focusing on the internal division of responsibilities between the joint venture partners. The court reiterated that internal agreements between joint venture members are not effective vis-`a-vis third parties, and all members are jointly and severally liable for the execution of the works.
4. Guidelines and Directions of the World Bank: The World Bank had suggested that joint ventures with capable partners should be pre-qualified if they indicate joint and several responsibility for the execution of the works. The authorities failed to follow this guideline and did not seek further information or clarifications from the petitioners, as suggested by the World Bank. The court found that the authorities' failure to adhere to these guidelines and directions contributed to the unreasonableness and arbitrariness of the decision.
5. Judicial Review of Administrative Action: The court reiterated the principles of judicial review of administrative action, emphasizing that the decision must be reasonable, rational, and made in good faith. The authorities must consider all relevant factors and exclude irrelevant considerations. The court found that the authorities' decision was perverse and influenced by irrelevant considerations, justifying judicial interference. The court concluded that the authorities acted unreasonably by not seeking clarifications and by failing to apply the correct legal criteria.
Conclusion: The petition was allowed, and the impugned decision was quashed. The court directed the respondents to treat the joint venture of the petitioners as provisionally pre-qualified to bid for the works, subject to necessary organizational re-arrangements or legal commitments. The rule was made absolute with no order as to costs.
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1986 (2) TMI 347
The Supreme Court of India dismissed the Civil Appeal with no order as to costs. Signed order is placed on the file. (Citation: 1986 (2) TMI 347 - Supreme Court)
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1986 (2) TMI 346
Issues Involved: 1. Disallowance of expenses incurred on guest houses under section 37(4) of the Income-tax Act, 1961. 2. Disallowance under section 40(c)(i) and (ii) of the Income-tax Act. 3. Disallowance of transport and hotel expenses. 4. Extra shift allowance on diesel generator sets.
Issue-Wise Detailed Analysis:
1. Disallowance of Expenses Incurred on Guest Houses under Section 37(4) of the Income-tax Act, 1961:
The primary issue was whether the expenses incurred on transit flats at Bombay and New Delhi could be disallowed under section 37(4) of the Income-tax Act. The assessee maintained three guest houses, two at Delhi and one at Bombay, with the total expenditure for two guest houses amounting to Rs. 1,29,788. The ITO disallowed the claim for deduction, and the Commissioner (Appeals) upheld this disallowance. The Tribunal had previously confirmed the disallowance for earlier years under section 37. The assessee argued that the provisions of section 37(4) were not correctly applied and that the guest houses were used by employees, directors, and auditors for business purposes, not falling within the scope of section 37(4). The Tribunal considered various High Court decisions, including the Madras High Court in CIT v. Aruna Sugars Ltd. and the Punjab and Haryana High Court in Saraswati Industrial Syndicate Ltd. The Tribunal concluded that the residential accommodations maintained by the assessee were not in the nature of guest houses as per section 37(4) and thus allowed the assessee's claim.
2. Disallowance under Section 40(c)(i) and (ii) of the Income-tax Act:
The assessee contested the disallowance of Rs. 85,501 under section 40(c)(i) and (ii) of the Income-tax Act, which the Commissioner (Appeals) did not decide. The Tribunal, referencing previous decisions, upheld the disallowance. Additionally, the assessee objected to the inclusion of municipal tax, telephone expenses, and flat maintenance expenses as perquisites for computing disallowance under section 40(c). The Tribunal upheld the inclusion of municipal tax but excluded telephone and flat maintenance expenses from disallowance, following prior Tribunal orders.
3. Disallowance of Transport and Hotel Expenses:
The assessee and the department both appealed regarding the disallowance of transport and hotel expenses. The ITO disallowed Rs. 23,717, being 10% of the total expenses due to lack of proper details. The Commissioner (Appeals) restricted the disallowance to Rs. 8,000, considering only hotel and taxi expenses. The Tribunal, following its earlier decision for previous years, upheld the ITO's disallowance of Rs. 23,717, rejecting the Commissioner (Appeals)'s restriction.
4. Extra Shift Allowance on Diesel Generator Sets:
The ITO disallowed the extra shift allowance on diesel generator sets, considering them as electrical machinery not eligible for such allowance. The Commissioner (Appeals) allowed the claim, following previous orders. The Tribunal examined the relevant provisions and concluded that diesel generator sets did not fall under the category of electrical machinery as envisaged in the depreciation schedule. Thus, the Tribunal upheld the assessee's entitlement to extra shift allowance on the generating sets.
Conclusion:
Both the assessee's and the department's appeals were partly allowed. The Tribunal provided a detailed analysis of each issue, considering relevant High Court decisions and prior Tribunal orders, ensuring a comprehensive and legally sound judgment.
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1986 (2) TMI 345
Issues Involved:
1. Whether the Headmaster of a school before it is taken over under Section 3(3) of the Act shall be deemed to be a teacher of that school for the purpose of examining his qualification and suitability because there is no specific mention of Headmaster of such school in Section 3(3)? 2. Whether even the Headmaster of the school taken over under Section 3(3) shall automatically become Headmaster of the school after its takeover in view of Section 4(2) without any scrutiny in respect of his qualification and suitability?
Issue-wise Detailed Analysis:
1. Whether the Headmaster of a school before it is taken over under Section 3(3) of the Act shall be deemed to be a teacher of that school for the purpose of examining his qualification and suitability because there is no specific mention of Headmaster of such school in Section 3(3)?
The core issue is whether the term "teachers" in Section 3(3) includes the Headmaster. The court noted that the Headmaster is also a teacher and falls within the broader definition of the term "teacher." The Headmaster is the head of the teaching staff, and thus, he is inherently a teacher. The definitions in Clauses (g), (h), and (i) of Section 2 of the Act support this interpretation. The Act's definition of "teacher" is broad, and the Headmaster, being the head of the teaching staff, is included within this term. The court emphasized that excluding the Headmaster from the scrutiny of qualifications and suitability would be unreasonable. Therefore, the Headmaster is deemed to be a teacher for the purposes of examining his qualification and suitability under Section 3(3).
2. Whether even the Headmaster of the school taken over under Section 3(3) shall automatically become Headmaster of the school after its takeover in view of Section 4(2) without any scrutiny in respect of his qualification and suitability?
The court held that the Headmaster does not automatically become the Headmaster of the school after its takeover. Section 3(3) requires a meticulous examination of the qualifications and suitability of teachers, including the Headmaster, by a committee constituted by the State Government. The process involves a thorough scrutiny of qualifications and suitability before any appointment to Government service. The court rejected the theory of automatic appointment and emphasized that such an interpretation would render the scrutiny process under Section 3(3) meaningless. The Headmaster's appointment to the nationalized school must be based on the committee's recommendation and the State Government's determination. Section 4(2) must be read harmoniously with Section 3(3), and it does not imply an automatic transfer of the Headmaster's service without scrutiny. The court also noted that the designation of employees taken over by the State Government is subject to the State Government's determination.
Conclusion:
The court concluded that the Headmaster of an unrecognized secondary school before its takeover is deemed to be a teacher for the purposes of examining his qualification and suitability under Section 3(3) of the Act. Furthermore, the Headmaster does not automatically become the Headmaster of the school after its takeover under Section 4(2) without scrutiny of his qualification and suitability. The appointment must be based on a recommendation by the constituted committee and the State Government's determination. The court dismissed the writ petitions, emphasizing that the policy of appointing Headmasters through the School Service Board is in accordance with justice and the mandate of Article 16.
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1986 (2) TMI 344
Issues Involved: 1. Competence of the Sub-Registrar to impound the sale-certificate. 2. Jurisdiction of the Sub-Divisional Officer (SDO) to order the recovery of stamp duty. 3. Applicability of Section 147 of the M.P. Land Revenue Code regarding stamp duty exemption. 4. Applicability of Section 29(f) of the Stamp Act to the sale-certificate. 5. Jurisdiction of the Sub-Registrar after filing the sale-certificate in Book No. 1. 6. Authority of the Collector to impound the instrument and demand stamp duty.
Issue-wise Detailed Analysis:
1. Competence of the Sub-Registrar to Impound the Sale-Certificate: The petitioner argued that the Sub-Registrar, Jaora, was not competent to impound the sale-certificate and send it to the Sub-Divisional Officer for recovery of stamp duty. The court noted that the Sub-Registrar had entered the sale-certificate in Book No. 1 by mistake without verifying the payment of stamp duty. The Sub-Registrar later realized the mistake and informed the SDO about the recovery of the stamp duty. The court concluded that the Sub-Registrar's action was a bona fide mistake and did not invalidate the process.
2. Jurisdiction of the Sub-Divisional Officer to Order Recovery of Stamp Duty: The petitioner contended that the SDO's order dated 14-4-78 (Annexure-C) was without jurisdiction as the reference by the Sub-Registrar was illegal. The court held that the SDO acted within his jurisdiction to demand the stamp duty from the petitioner. The court emphasized that the petitioner had initially taken shelter behind a promise allegedly made by the Sales-tax Officer regarding the non-payment of stamp duty, which was not a valid defense.
3. Applicability of Section 147 of the M.P. Land Revenue Code Regarding Stamp Duty Exemption: The petitioner argued that the sale-certificate issued under Section 147 of the M.P. Land Revenue Code was exempt from stamp duty. The court clarified that Section 147 merely prescribes a procedure for the recovery of government dues and does not exempt the sale-certificate from stamp duty. The payment of stamp duty is governed by the Stamp Act, and there was no scope for interference on this count.
4. Applicability of Section 29(f) of the Stamp Act to the Sale-Certificate: The petitioner contended that Section 29(f) of the Stamp Act, which specifies that the purchaser bears the expenses of the proper stamp, was not applicable. The court disagreed, stating that Section 29(f) clearly indicates that the purchaser of the property to which the sale-certificate relates must bear the stamp duty expenses. The court also noted the absence of any repugnancy between Section 29(f) of the Stamp Act and Section 147 of the M.P. Land Revenue Code.
5. Jurisdiction of the Sub-Registrar After Filing the Sale-Certificate in Book No. 1: The petitioner argued that once the Sub-Registrar entered the sale-certificate in Book No. 1, he became functus officio and had no jurisdiction to refer the matter to the Collector. The court noted that the Sub-Registrar's entry was a bona fide mistake, and the petitioner could not claim relief based on this mistake. The court emphasized that the mistake did not exempt the petitioner from paying the stamp duty.
6. Authority of the Collector to Impound the Instrument and Demand Stamp Duty: The petitioner argued that the Collector could not impound the instrument or demand stamp duty without impounding the sale-certificate. The court held that the Collector acted within his authority to demand the stamp duty. The court referenced Section 3 of the Stamp Act, which makes the certificate of sale chargeable to stamp duty, and concluded that the petitioner was liable to pay the stamp duty.
Conclusion: The court dismissed the petition, upholding the orders passed by the SDO (Annexure-C) and the Revenue Board (Annexure-D). The court affirmed that the petitioner was liable to pay the stamp duty on the sale-certificate and that the actions of the Sub-Registrar and the SDO were within their respective jurisdictions. The petitioner's reliance on the Sub-Registrar's mistake was not a valid ground for relief under Article 226 of the Constitution. The court also dismissed the petitioner's argument regarding the applicability of Section 147 of the M.P. Land Revenue Code and Section 29(f) of the Stamp Act. The petition was dismissed with costs, and the counsel's fee was set at Rs. 250.
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1986 (2) TMI 343
Issues: 1. Legality and propriety of an ad-interim order dated December 11, 1985 passed by a Division Bench of the Calcutta High Court. 2. Observations made by the learned Judges prejudging the issues involved in the prosecution launched against the respondents. 3. Granting of the impugned order directing release of seized goods without affording an opportunity to the State Government. 4. Prejudging the whole issue before the learned Single Judge and foreclosing the trial of the respondents. 5. Disapproval of the practice prevailing in the High Court of granting ad-interim orders with far-reaching consequences.
Analysis: The Supreme Court judgment addressed the legality and propriety of an ad-interim order passed by the Calcutta High Court. The issue revolved around the release of seized tin plates worth nearly about &8377; 60 lakhs. The Division Bench directed the release of the goods without proper consideration of the State Government's arguments. The learned Judges' observations prejudged the prosecution launched against the respondents, creating concerns about the fairness of the trial process. The Supreme Court criticized the High Court's approach, emphasizing the need for circumspection in granting such ad-interim orders.
The Supreme Court highlighted the seriousness of the charges against the respondents and the importance of due process in handling cases involving alleged offences under various legal provisions. The judgment underscored the need for a fair trial and the avoidance of prejudgment before the appropriate judicial authority. The Court expressed disappointment in the High Court's decision to release the seized goods without adequate security or consideration of the State Government's position, emphasizing the importance of upholding the rule of law and ensuring a just legal process.
Furthermore, the Supreme Court referenced previous decisions to emphasize the negative impact of granting ad-interim orders without proper consideration of all relevant factors. The judgment cited instances where such orders had adverse effects on public revenue, administrative processes, and overall public interest. The Court reiterated the importance of balancing various considerations, including the public interest, irreparable harm, and the balance of convenience, when deciding on ad-interim orders.
In conclusion, the Supreme Court allowed the appeal, setting aside the Division Bench's order and restoring the decision of the learned Single Judge. The Court directed the High Court to take immediate steps to recover the seized property from the respondents and imposed costs on the respondents. The judgment served as a reminder of the need for caution and restraint in granting ad-interim orders, emphasizing the broader implications of such decisions on the legal system and public interest.
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1986 (2) TMI 342
Issues: 1. Entitlement to investment allowance and classification as an industrial company. 2. Jurisdiction of the Commissioner of Income Tax (CIT) to revise assessment orders. 3. Merger of assessment order with CIT(A) order for the assessment year 1978-79. 4. Tax effect and prejudicial impact on revenue for the assessment year 1979-80.
Detailed Analysis:
1. The primary issues in this case revolve around the entitlement of the assessee to investment allowance and the classification of the company as an industrial company. The CIT, in exercising powers under section 263 of the Income Tax Act, 1961, directed the withdrawal of investment allowance and application of the tax rate applicable to non-industrial companies. The CIT found the original assessment by the Income Tax Officer (ITO) erroneous and prejudicial to the revenue's interest. The assessee contended that the directions in the original assessment were correct and challenged the CIT's jurisdiction to revise the assessment order on these grounds. The Tribunal analyzed the definition of an industrial company and the interpretation of the term "business of construction" to determine the entitlement to investment allowance. Relying on precedents and decisions, the Tribunal held that the assessee was entitled to the investment allowance, and the CIT's directions to withdraw it were unsustainable.
2. Regarding the classification of the assessee as an industrial company, the Tribunal examined the definition provided in the relevant Finance Act and relevant case law. While the assessee argued against the classification based on its activities, the Tribunal upheld the CIT's decision that the company did not qualify as an industrial company. The Tribunal emphasized adherence to the Bombay High Court's decision on this matter, despite contrary views from other High Courts. Consequently, the Tribunal supported the CIT's decision that the assessee was not eligible for treatment as an industrial company for tax rate purposes.
3. For the assessment year 1979-80, the Tribunal considered the tax effect and the prejudicial impact on revenue due to the withdrawal of investment allowance. Despite finding the ITO's order erroneous, the Tribunal concluded that the net income would remain unaffected even if the investment allowance was withdrawn. As a result, the Tribunal determined that the CIT should not have exercised powers under section 263 for this assessment year due to the absence of a prejudicial impact on revenue.
4. In the case of the assessment year 1978-79, the Tribunal highlighted technical grounds that prevented the CIT from exercising powers under section 263. Specifically, the Tribunal noted that the assessment order had merged with the CIT(A) order before the CIT could exercise revisionary powers. Citing a precedent, the Tribunal concluded that the CIT's exercise of powers under section 263 was not justified for this assessment year.
In conclusion, the Tribunal allowed the appeals for the assessment years 1978-79 and 1979-80, and partly allowed the appeal for the assessment year 1980-81 based on the detailed analysis of the issues surrounding entitlement to investment allowance, classification as an industrial company, jurisdiction of the CIT, tax effect, and merger of assessment orders with CIT(A) decisions.
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1986 (2) TMI 341
Issues Involved: 1. Applicability of Section 370 of the Companies Act, 1956, to deposits made by the company. 2. Distinction between loans and deposits under the Companies Act, 1956. 3. Penal consequences under Section 371 of the Companies Act, 1956, for alleged contravention of Section 370. 4. Interpretation of the terms "loan" and "deposit" in the context of the Companies Act, 1956.
Issue-wise Detailed Analysis:
1. Applicability of Section 370 of the Companies Act, 1956, to deposits made by the company: The primary issue in this case is whether the deposits made by the appellant company with various reputed public limited companies fall within the ambit of "loans" as contemplated under Section 370 of the Companies Act, 1956. The company received a show-cause notice for exceeding the 30% limit prescribed under Section 370(1)(a) without prior approval from the Central Government. The appellant contended that Section 370 does not apply to deposits, as they are not synonymous with loans.
2. Distinction between loans and deposits under the Companies Act, 1956: The judgment elaborates on the difference between loans and deposits. It is highlighted that although both transactions involve a debtor-creditor relationship, they are not identical. The judgment refers to various legal precedents to underscore that loans and deposits have distinct characteristics. For example, the Limitation Act differentiates between "money lent" and "money deposited," and the Companies Act itself has provisions that suggest loans and deposits are not interchangeable. The court cited the case of Ram Ratan Gupta and Suleman Haji Ahmed Umer to emphasize that the terms "loan" and "deposit" are not mutually exclusive but distinct for legal purposes.
3. Penal consequences under Section 371 of the Companies Act, 1956, for alleged contravention of Section 370: Section 371(1) prescribes penalties for contravention of Section 370, including fines and imprisonment. The court noted that if deposits were to be included within the meaning of loans under Section 370, it should have been explicitly stated, especially since non-compliance involves criminal prosecution and penal consequences. The court emphasized that the interpretation of Section 370 should not be broader than what the actual words warrant, particularly in the context of penal provisions.
4. Interpretation of the terms "loan" and "deposit" in the context of the Companies Act, 1956: The court examined the specific language of Section 370 and concluded that the term "loan" does not inherently include deposits. The judgment pointed out that while the balance sheets of the appellant company listed the amounts under "Loans and Advances," they were specifically described as "deposits with joint stock companies." This indicated that the company did not treat these amounts as loans. The court concluded that, in the absence of explicit language in Section 370 to include deposits within the term "loans," the deposits made by the appellant company should not be considered as loans.
Conclusion: The court ruled in favor of the appellants, making the rule absolute in terms of prayer (a) of the petition, thereby quashing the impugned complaint and summons. The court held that the deposits made by the appellant company do not fall within the scope of "loans" under Section 370 of the Companies Act, 1956, and thus, there was no contravention warranting penal consequences under Section 371. The judgment underscores the importance of precise language in legislative provisions, especially when they carry penal implications.
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1986 (2) TMI 340
Issues Involved: 1. Territorial Jurisdiction of the Trial Court 2. Maintainability of the Suit 3. Impact of the Sugar Undertakings (Taking over of Management) Act, 1978 on the Suit
Summary:
1. Territorial Jurisdiction of the Trial Court: The trial court found that it had jurisdiction to try the suit as the properties given as security were situated within its jurisdiction. This finding was not disputed by the parties.
2. Maintainability of the Suit: Respondents Nos. 1 to 5 contended that the suit was not maintainable and should be stayed due to the provisions of the Sugar Undertakings (Taking over of Management) Act, 1978. The trial court, however, found no impediment to proceed with the trial despite the management of the mill being taken over by the Central Government.
3. Impact of the Sugar Undertakings (Taking over of Management) Act, 1978 on the Suit: The High Court of Allahabad held that the trial of the suit for the recovery of Rs. 54,89,822.99 against respondents Nos. 1 to 5 should be stayed by virtue of the Act. The State Bank of India sought clarification from the High Court, which was denied, leading to the present appeals.
The Supreme Court examined section 7 of the Act, which allows the Central Government to suspend the operation of contracts and liabilities through a notification. The relevant notification dated March 21, 1984, explicitly excluded "secured liabilities to banks and financial institutions" from its scope. The Supreme Court noted that the High Court erred in overlooking this exclusion and held that the suit against respondent No.1 and the guarantors (respondents Nos. 2 to 5) was not affected by the notification.
The Supreme Court emphasized that the liability of the guarantors remains unaffected by the notification and that their liability is co-extensive with that of the principal debtor u/s 128 of the Indian Contract Act, 1872. Consequently, the High Court's order to stay the suit was set aside, and the trial court was directed to proceed with the suit.
Conclusion: The appeals were allowed, and the orders passed by the High Court were set aside. The trial court was directed to proceed with the suit, and respondents Nos. 1 to 5 were ordered to pay the costs of the appellant.
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1986 (2) TMI 339
Issues Involved: 1. Judicial power over administrative inaction. 2. Constitutional obligation to provide roads. 3. Separation of powers and judicial review of administrative actions.
Summary:
Issue 1: Judicial Power over Administrative Inaction The Supreme Court reviewed whether the High Court had the authority to issue directives to the State Government regarding the construction of a road, given the provisions of Articles 202 to 207 of the Constitution. The High Court had directed the Superintending Engineer to proceed with the road construction and requested the State Government to consider allocating additional funds. The Supreme Court emphasized that the judiciary should not interfere with the functions of the executive and legislature, and any court direction must align with constitutional provisions. The Court concluded that the High Court's order did not overstep its jurisdiction, as it only suggested the State Government consider additional funding without mandating it.
Issue 2: Constitutional Obligation to Provide Roads The petitioners, poor Harijans from Himachal Pradesh, claimed that the lack of a usable road violated their rights u/s Article 21 and Article 19(1)(d) of the Constitution. The Supreme Court acknowledged that access to roads is essential for life and quality of life, especially in hilly areas, and that the State has a constitutional obligation to provide such infrastructure. The Court noted that the State Government had sanctioned funds for the road construction and that the High Court's directive aimed to expedite the process within the sanctioned limits.
Issue 3: Separation of Powers and Judicial Review of Administrative Actions The Supreme Court reiterated the principle of separation of powers, stating that each government branch must function within its domain. The judiciary can review administrative actions but should do so cautiously and not substitute its priorities for those of the executive. The Court cited previous judgments to support this view and concluded that the High Court's order was within its supervisory role, aiming to energize the executive without overstepping its bounds.
Conclusion: The Supreme Court dismissed the petition for special leave, affirming the High Court's order with clarifications. The Court directed that the matter be placed before the High Court only to inform it of the steps taken, emphasizing that further action should be left to the executive and legislature's discretion. The Court highlighted the importance of judicial restraint and the need for cooperation between the branches of government to address public needs effectively.
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1986 (2) TMI 338
Issues Involved: 1. Constitutional validity of Section 15 of the Punjab Pre-emption Act, 1913. 2. Right of pre-emption based on consanguinity. 3. Classification of kinsfolk entitled to pre-emption. 4. Application of Articles 14, 15, and 19(1)(f) of the Constitution.
Summary:
1. Constitutional Validity of Section 15 of the Punjab Pre-emption Act, 1913: The constitutional validity of Section 15 of the Punjab Pre-emption Act, 1913, as applied in Haryana, was challenged. The Act was repealed in Punjab in 1973 but continued in Haryana. The Supreme Court previously upheld the Act's validity in Ram Sarup v. Munshi (1963) under Article 19(1)(f). The current challenge focuses on Articles 14 and 15.
2. Right of Pre-emption Based on Consanguinity: The right of pre-emption based on consanguinity was described as "feudal," "piratical," and "tribal," and deemed inconsistent with the Constitutional scheme. The Supreme Court noted that since India is now a socialist republic, feudal rights must be abolished. The right to property, no longer a fundamental right post-Forty-Fourth Amendment, must be examined under Articles 14, 15, and 19(1)(d) and (g).
3. Classification of Kinsfolk Entitled to Pre-emption: The classification of kinsfolk under Section 15 was scrutinized. The Court found the list of persons entitled to pre-emption to be inconsistent and self-contradictory. The exclusion of certain relatives, such as the father, mother, sister, and sister's son, while including others like the father's brother's son, was deemed illogical and unjustifiable. The classification was held to be unreasonable and not in tune with modern constitutional principles.
4. Application of Articles 14, 15, and 19(1)(f) of the Constitution: The Court referenced previous judgments, including Bhau Ram v. B. Baijnath Singh, which invalidated pre-emption based on vicinage under Article 19(1)(f), and Ram Sarup v. Munshi, which upheld pre-emption for co-sharers but questioned its applicability based on consanguinity. The Court concluded that the right of pre-emption based on consanguinity could not be sustained under Articles 14 and 15, as it was inconsistent with the principles of equality and non-discrimination.
Conclusion: The Supreme Court declared clauses 'First,' 'Secondly,' and 'Thirdly' of Section 15(1)(a), (b), and (c), and the whole of Section 15(2) of the Punjab Pre-emption Act, 1913, as ultra vires the Constitution. Pending suits and appeals will be disposed of in accordance with this declaration, while final decrees not appealed will remain binding inter-partes. No order was made regarding costs.
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1986 (2) TMI 337
Issues Involved:
1. Taxability of forfeited earnest money and security deposits. 2. Inclusion of a sum claimed as reimbursement of loss from the government in the income of the assessee.
Issue-wise Detailed Analysis:
1. Taxability of Forfeited Earnest Money and Security Deposits:
The primary issue was whether the sum of Rs. 24,87,847, representing forfeited earnest money and security deposits, should be treated as taxable income of the assessee company. The assessee, a major public sector undertaking, argued that this amount was not liable to be taxed as income, relying on a previous ITAT decision for the assessment year 1972-73, which held that such forfeiture did not constitute income. The Income Tax Officer (ITO), however, treated this sum as income, relying on the Punjab High Court decision in Punjab Steel Scrap Merchant's Association vs. CIT (1961) and the provisions of Section 28(iv) of the Income Tax Act, 1961, which includes the value of any benefit or perquisite arising from business as income.
The Commissioner (A) agreed with the ITO, stating that the forfeiture of earnest money was a benefit arising from business and thus constituted income under Section 28(iv). This view was supported by the Delhi High Court decision in CIT vs. Nar Hari Dalmia (1971), which held that a benefit in cash could be considered income.
However, the assessee argued, citing the Gujarat High Court decision in CIT vs. Alchemic Pvt. Ltd. (1981), that Section 28(iv) applies only to benefits other than cash. The Tribunal agreed with the assessee, stating that the nature of the receipt at the time of its receipt is crucial. The Tribunal's earlier decisions had held that such receipts were capital in nature, as they were deposits to ensure contract execution and not revenue receipts. The Tribunal concluded that Section 28(iv) does not apply to cash receipts, and the forfeited earnest money and security deposits did not constitute income.
2. Inclusion of a Sum Claimed as Reimbursement of Loss from the Government:
The second issue was whether a sum of Rs. 1,59,49,245, claimed as reimbursement of loss from the government, should be included in the income of the assessee. The assessee had imported PVC and sold it at a loss, which the government agreed to subsidize within certain limits. The assessee claimed this amount as income based on the mercantile system of accounting, the minutes of an inter-ministerial meeting, and a letter from the Finance Secretary.
The IAC included this sum as income, but the Commissioner (A) deleted it, stating that there was no unequivocal acceptance by the government to reimburse the claimed amount. The Commissioner (A) held that the correspondence did not create an enforceable right for the assessee to receive the reimbursement, and the mere book entries did not result in income.
The Tribunal agreed with the Commissioner (A), stating that the letters and minutes did not unequivocally promise reimbursement, and the assessee's unilateral claim did not create a right to receive the sum. The Tribunal emphasized that income does not result from mere book entries but must result in law. Therefore, the sum claimed as reimbursement was not includible in the income of the assessee.
Conclusion:
The Tribunal allowed the assessee's appeal regarding the taxability of forfeited earnest money and security deposits, holding that these did not constitute income. The Tribunal dismissed the departmental appeal, upholding the Commissioner (A)'s deletion of the sum claimed as reimbursement of loss from the income of the assessee, as there was no enforceable right to receive the amount from the government.
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1986 (2) TMI 336
Issues: 1. Compensation entitlement of an occupancy tenant. 2. Specific claim requirement for compensation. 3. Revision of claim under Section 9 of the Land Acquisition Act.
Analysis:
Issue 1: Compensation entitlement of an occupancy tenant The State of U.P. appealed against the decision of the Tribunal regarding compensation for land acquisition. The appellant argued that the respondent, an occupancy tenant, was not entitled to compensation as the State owned the property. The Court rejected this contention, citing a previous ruling that occupancy tenants are entitled to compensation against the Zamindar. The Tribunal's decision to award compensation to the respondent was upheld based on this legal precedent.
Issue 2: Specific claim requirement for compensation The appellant contended that the respondent did not make specific claims for various items in her objection under Section 9 of the Act, thus the Tribunal should not have awarded compensation for those items. However, the Court referred to legal provisions stating that a claimant need not specify the amount for each sub-head of compensation, and failure to do so does not bar the Tribunal from awarding compensation. The Tribunal's decision to award compensation for the items was deemed legally sound.
Issue 3: Revision of claim under Section 9 The appellant argued that since the respondent did not revise her claim under Section 9, she should not be awarded compensation for fixtures, trees, and crops. However, the Court found that the respondent had put forward her claim in applications under Section 18 of the Act, and the Tribunal had rightly awarded compensation based on Section 25(3) of the Act. The Court rejected the technical challenge to the judgment, emphasizing that the respondent was justified in pressing her claim.
In conclusion, the Court upheld the Tribunal's decision to award compensation to the respondent, modifying the judgment to increase the solatium and interest rates in line with a subsequent amendment. The appeal was dismissed, and the parties were directed to bear their own costs.
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1986 (2) TMI 335
Issues Involved: 1. Timeliness of the writ petition. 2. Validity of the land acquisition notification. 3. Determination of public purpose under the West Bengal Land Development and Planning Act, 1948. 4. Allegations of mala fide intentions and colorable exercise of power by the authorities.
Issue-Wise Detailed Analysis:
1. Timeliness of the Writ Petition: The learned Single Judge of the Calcutta High Court held that the challenge to the notification was "hopelessly barred by time." The notification under Section 4 was published on March 28, 1957, and the declaration under Section 6 followed on January 4, 1962. The writ petition was filed on March 26, 1964, after a lapse of more than two years and two months. The respondents did not provide any satisfactory explanation for this delay, leading the Single Judge to decide that the discretionary powers under Article 226 should not be exercised in their favor.
2. Validity of the Land Acquisition Notification: The Division Bench of the High Court reversed the Single Judge's decision, both on the question of delay and on the merits. The Division Bench held that the letters discovered during the inspection of records did not even remotely suggest that the purpose of the acquisition was for the "settlement of immigrants" but was for the establishment of a hospital for crippled children by the Society. The Division Bench concluded that the acquisition was made in bad faith to deprive the appellants of compensation as on the date of notification.
3. Determination of Public Purpose under the West Bengal Land Development and Planning Act, 1948: The Supreme Court examined whether the notification and the land acquisition proceedings were bad as found by the Division Bench. Section 2(d) of the Act defines 'public purpose' to include the settlement of immigrants, establishment of towns, model villages, agricultural colonies, creation of better living conditions, and improvement and development of agriculture, forestry, fisheries, and industries. Section 8(1)(b) specifies that the market value for compensation should be based on the date of publication of the notification under Section 4, with certain conditions for land acquired for public purposes specified in Section 2(d)(i).
4. Allegations of Mala Fide Intentions and Colorable Exercise of Power by the Authorities: The Supreme Court rejected the respondents' contention that 'settlement' and 're-settlement' were different, stating that the intent was to provide habitation and other amenities to those displaced from across the border. The Court examined letters indicating that the land was to be handed over to the Society of Experimental Medical Sciences for constructing a hospital for crippled children. The Court held that the proposed hospital was intimately connected with the rehabilitation process, as providing medical facilities is an important facet of rehabilitation. The Court emphasized that providing a hospital for crippled children falls within the concept of 'rehabilitation of displaced persons' and that the notification could not be faulted on the grounds that the purpose disclosed in the letters was different from the public purpose disclosed in the notification.
Conclusion: The Supreme Court allowed the appeal, set aside the Judgment of the Division Bench of the High Court, and restored that of the Single Judge. The Court concluded that the establishment of a hospital for crippled children falls within the idea of settlement and rehabilitation of displaced persons, and the notification could not be faulted on the grounds of mala fide intentions or colorable exercise of power. The appeal was allowed with no order as to costs.
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1986 (2) TMI 334
Whether it was necessary to detain the appellant under the COFEPOSA?
Held that:- No one can dispute the right of the detaining authority to make an order of detention if on a consideration of the relevant material, the detaining authority came to the conclusion that it was necessary to detain the appellant. But the question was whether the detaining authority applied its mind to relevant considerations. If it did not, the appellant would be entitled to be released. The counters to which we have referred seem to us to make it clear that relevant material was not placed before the detaining authority and therefore, there was no occasion for the detaining authority to apply its mind to the relevant material. In the circumstances, the appellant is entitled to be released. The appeal is allowed and the appellant is directed to be set at liberty forthwith.
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1986 (2) TMI 333
Whether after the coming into force of the Part States (Laws) Act 1951, the Travancore Christian Succession Act 1092 continues to govern intestate succession to the property of a member of the Indian Christian Community in the territories originally forming part of the erstwhile state of Travancore or is such intestate succession governed by the Indian Succession Act 1925?
Held that:- On the coming into force of Part-B States (Laws) Act, 1951 the Travancore Cochin Succession Act, 1092 stood repealed and Chapter II of Part V of the Indian Succession Act, 1925 became applicable and intestate succession to the property of members of the Indian Christian community in the territories of the erstwhile State of Travancore was thereafter governed by Chapter II of Part V of the Indian Succession Act, 1925. On this view, it becomes unnecessary to consider whether sections 24, 28 and 29 of the Travancore Christian Succession Act, 1092 are unconstitutional and void. We, therefore, allow the writ petitions and declare that intestate succession to the property of Indian Christians in the territories of the former State of Travancore is governed by the provisions contained in Chapter II of Part V of the Indian Succession Act, 1925. Petitions allowed.
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1986 (2) TMI 332
Issues: Validity of assessment under section 5A of the Kerala General Sales Tax Act, 1963 regarding (1) ivory purchased from the Travancore Devaswom Board, (2) purchase value of packing materials, and (3) purchase value of finished articles locally purchased and exported.
Analysis:
The judgment pertains to revisions against the Sales Tax Appellate Tribunal's order confirming the Appellate Assistant Commissioner's assessment orders for the periods 1972-73 and 1973-74. The issues revolve around the applicability of section 5A of the Act to ivory purchased from the Travancore Devaswom Board, packing materials, and finished articles locally purchased and exported. The Tribunal upheld the assessment that the purchase turnover of these items is subject to tax under section 5A.
The Court examined the purchase turnover of ivory from the Devaswom Board and concluded that it was not exigible to sales tax under section 5 at the point of sale by the Board. However, the purchase turnover would be taxable under section 5A if certain conditions are met. The Court determined that raw ivory used in manufacturing articles for export or local sale is liable to tax under section 5A, except for the quantity sold within the State.
Regarding packing materials, the Court differentiated between materials used for local sales, inter-State sales, and export. It held that materials used for export or consignment sales outside the State are subject to tax under section 5A, as they have not been taxed previously. The extent of taxability of packing materials was left for reconsideration by the assessing authority.
The judgment also addressed the purchase turnover of manufactured articles locally bought and exported. It ruled that such articles, purchased from non-dealers and not previously taxed under section 5, are subject to tax under section 5A. The Court cited previous decisions and Supreme Court rulings to support its interpretation of section 5A.
In conclusion, the Court set aside the orders related to the levy of purchase tax on packing materials and remanded the case for reassessment based on the judgment's directions. The Tribunal's decision was confirmed in all other aspects, with no costs awarded.
This detailed analysis highlights the Court's reasoning on the issues of assessment under section 5A concerning ivory, packing materials, and finished articles, providing a comprehensive overview of the judgment's findings and implications for the parties involved.
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1986 (2) TMI 331
Issues Involved: 1. Legislative Competence and Constitutional Validity 2. Excessive Delegation and Retrospective Notifications 3. Supersession of Notifications 4. Omission of Items from the Schedule 5. Article 14 and Uniform Rates of Tax 6. Retrospective Operation of Exemption Notifications 7. Presidential Assent and Article 304(b) 8. Retrospective Imposition of Tax and Article 19(1)(g)
Summary:
Legislative Competence and Constitutional Validity: The petitioners argued that the State Legislature lacked competence to levy entry tax on raw materials and products of industries controlled by the Union. The Court held that the State's taxing power under entry 52, List II, was not overborne by the Union power under entry 52, List I. The Court concluded that there were no irreconcilably overlapping areas between the legislative fields of entry 52, List I, and entry 52, List II.
Excessive Delegation and Retrospective Notifications: The petitioners contended that section 3(1) of the Act, which allowed the State Government to issue notifications retrospectively, constituted excessive delegation. The Court held that the delegation was within permissible limits and that the power to issue notifications retrospectively did not constitute an abdication of essential legislative functions.
Supersession of Notifications: The petitioners argued that the supersession of notifications dated 31st March 1983, and Notifications Nos. I and II dated 13th November 1984, rendered them non-operative. The Court held that the superseded notifications continued to support the tax liability incurred prior to their supersession, applying the principle from the Titaghur Paper Mills case.
Omission of Items from the Schedule: The petitioners contended that the omission of items from the schedule by Act 38 of 1984 and Ordinance 15 of 1984 should be treated as a repeal, making section 6 of the General Clauses Act inapplicable. The Court held that the liability to tax incurred prior to the omission could be enforced even after the date of omission, as the process of "omission" was, in effect, an amendment of the law.
Article 14 and Uniform Rates of Tax: The petitioners argued that the notifications imposing uniform rates of tax across different local areas violated Article 14. The Court held that the legislature has wide latitude in taxation matters and that the petitioners failed to establish how the uniform rates resulted in hostile unequal treatment.
Retrospective Operation of Exemption Notifications: The petitioners contended that the exemption notifications issued under explanation II of item 18 should be retrospective. The Court held that the notifications were not necessary to effectuate the power and that the principle from S.A.L. Narayan Row's case was inapplicable.
Presidential Assent and Article 304(b): The petitioners argued that the amending Act 38 of 1984 was invalid for not being introduced with the prior sanction of the President. The Court held that the subsequent assent of the President cured the initial non-compliance, as per Article 255, and the Act was valid.
Retrospective Imposition of Tax and Article 19(1)(g): The petitioners contended that the retrospective imposition of tax on new items by the amending Act 38 of 1984 violated Article 19(1)(g). The Court held that the legislative process was complete with the Presidential assent and that the period between the passing of the legislation and the assent did not constitute retroactivity that would violate Article 19(1)(g).
Conclusion: The petitions were dismissed, and the Court upheld the validity of the impugned provisions and notifications, except for certain provisions of the amending Act 13 of 1982, which were held unenforceable for want of compliance with Article 304(b).
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1986 (2) TMI 330
Issues Involved: 1. Validity of section 6-C of the Andhra Pradesh General Sales Tax Act, 1957. 2. Inclusion of excise duty on beer in the turnover of the dealer. 3. Revised assessments and show cause notices related to sales tax on packing material prior to the insertion of section 6-C.
Summary of the Judgment:
1. Validity of Section 6-C: The primary issue is whether section 6-C of the Act, which provides for the levy of sales tax on packing materials at the same rate as the goods packed in such materials, is violative of Article 14 of the Constitution of India due to arbitrariness and discrimination. The court held that the nature of the transaction involving the sale of beer or cement packed in materials is a composite and integrated sale of the container and contents. The containers are necessary concomitants and their transfer is incidental and unavoidable. The court concluded that section 6-C merely reflects the existing legal position and does not introduce any new element, thus it is not arbitrary or discriminatory.
2. Inclusion of Excise Duty on Beer: The petitioners argued that excise duty paid on beer should not be included in the sale price and thus should not be exigible to tax. The court referred to the Supreme Court's decision in Hindustan Sugar Mills Ltd. v. State of Rajasthan, which held that excise duty forms a component of the consideration payable by the purchaser and thus is part of the "sale price". The court upheld that excise duty paid on beer is part of the turnover and is exigible to tax.
3. Revised Assessments and Show Cause Notices: The petitioners challenged the revised assessments made u/s 20 of the Act and the show cause notices issued for the period before the insertion of section 6-C. The court noted that the insertion of section 6-C was to clarify and ensure uniformity in the application of tax rates on packing materials. It was observed that the consideration paid by the purchaser includes the price of the containers, and hence, the revised assessments and show cause notices were valid.
Conclusion: The court dismissed all the writ petitions, holding that section 6-C is valid and not violative of Article 14, excise duty on beer forms part of the sale price and is exigible to tax, and the revised assessments and show cause notices are justified. The court granted the assessees time to pay the demanded amounts in installments due to financial constraints.
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