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• 1989 (12) TMI 365
  
  ISSUES PRESENTED and CONSIDERED

  The primary issue considered in this judgment was whether the Rotary Disc Screen equipment used in the Khetri Copper Project qualifies as "mining machinery" under item 72(18) of the Indian Customs Tariff (ICT), which would affect the applicable customs duty rate. The secondary issue was whether the denial of a refund for the excess customs duty paid was justified based on the classification of the equipment.

  ISSUE-WISE DETAILED ANALYSIS

  Relevant Legal Framework and Precedents

  The legal framework involved the interpretation of item 72(18) ICT, which pertains to customs duty on mining machinery. The court also referenced the Mines Act 1952 and the Metaliferous Mines Regulations 1961 to understand what constitutes a mining operation. A previous decision by the same court regarding similar equipment (drifter drills and kopek winder) was also relevant.

  Court's Interpretation and Reasoning

  The court examined the definition of mining operations and the role of the Rotary Disc Screen within this context. The revisional authority's interpretation was that mining operations are limited to breaking minerals from their solid position and transporting them to the surface. In contrast, the court accepted the broader definition provided by an expert, which included all activities facilitating the extraction of minerals.

  Key Evidence and Findings

  The court considered a certificate from the Mining Advisor in the Department of Mines, which described the Rotary Disc Screen as mining machinery specifically designed for the Khetri Copper Project. The court also noted the lack of a counter-affidavit from the respondents contesting the petitioners' assertions.

  Application of Law to Facts

  The court applied the broader interpretation of mining operations to conclude that the Rotary Disc Screen was integral to the mining process, as it facilitated the economic lifting of ore by separating smaller boulders from larger ones. The court emphasized that the equipment's role in optimizing the mining process made it part of the mining machinery.

  Treatment of Competing Arguments

  The revisional authority argued that the Rotary Disc Screen was not directly involved in breaking minerals or transporting them to the surface and, therefore, did not qualify as mining machinery. The court rejected this narrow interpretation, emphasizing that the equipment's role in the overall mining process was critical and that economic and efficient utilization of machinery was a significant consideration.

  Conclusions

  The court concluded that the Rotary Disc Screen should be classified as mining machinery under item 72(18) ICT, entitling the petitioners to a refund of the excess customs duty paid. The court found the revisional authority's reasoning flawed and set aside its order.

  SIGNIFICANT HOLDINGS

  The court held that "every activity which enables or facilitates the mining of minerals from prospecting to bringing them to the surface are all mining operations." It determined that the Rotary Disc Screen was an inseparable part of the mining machinery due to its role in the economic and efficient lifting of ore.

  The court also established the principle that in the absence of a specific definition in the tariff, it is appropriate to refer to other enactments and regulations to determine what constitutes mining machinery. The court emphasized the importance of considering the economic use and efficient utilization of machinery, particularly in the public sector.

  Finally, the court directed that the petitioners be refunded the excess customs duty paid, with 12% simple interest, underscoring the need for timely and fair resolution of such disputes.

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• 1989 (12) TMI 364
  
  Issues Involved:
  1. Alleged contravention of section 8(1) of the Foreign Exchange Regulation Act, 1973.
  2. Alleged contravention of sections 9(1)(b) and 9(1)(d) of the Foreign Exchange Regulation Act, 1973.
  
  Issue-wise Detailed Analysis:
  
  1. Alleged contravention of section 8(1) of the Foreign Exchange Regulation Act, 1973:
  
  The appellant was charged under section 8(1) of the Foreign Exchange Regulation Act, 1973, for allegedly acquiring foreign exchange (US $1368) from an unauthorized dealer without the permission of RBI. The charge was based on the Panchnama dated 5-9-1984 and statements from various individuals, including the appellant and Shri Prakash Gandhi.
  
  The appellant contended that the foreign exchange was kept in trust by Shri Prakash Gandhi and not acquired by him. The appellant argued that possession for safekeeping does not constitute acquisition under section 8(1). The Tribunal agreed, stating that "the phrase otherwise acquiring used in section 8(1) does not contemplate mere possession or custody of the foreign exchange." It emphasized that acquisition implies some proprietary interest, which was absent in this case. The Tribunal concluded that the appellant did not contravene section 8(1) as he merely kept the foreign exchange for safekeeping without any proprietary interest.
  
  2. Alleged contravention of sections 9(1)(b) and 9(1)(d) of the Foreign Exchange Regulation Act, 1973:
  
  The appellant was also charged under sections 9(1)(b) and 9(1)(d) for receiving payments of Rs. 87,000 and Rs. 2 lakhs from individuals in India on behalf of a person residing in Pakistan, and for making payments to Shri Khalid and Shri K.P. Yousuf on instructions from a non-resident person without RBI's permission.
  
  The appellant initially admitted to these transactions in his statements dated 5-9-1984 and 6-9-1984 but later retracted these admissions. The Tribunal noted that the appellant's retraction was made at a late stage and lacked credibility. The statements of Shri Khalid and Shri Yousuf, despite their absence for cross-examination, were considered reliable. The Tribunal upheld the charge, stating that "there is ample evidence to show that the appellant had received payment of Rs. 87,000 in July 1984 and another Rs. 2 lakhs in September 1984 on instructions and on behalf of a non-resident person."
  
  Conclusion:
  
  The Tribunal partially allowed the appeal. It set aside the finding of the Adjudicating Officer regarding the first charge under section 8(1) and the corresponding penalty of Rs. 5,000. However, it upheld the second charge under sections 9(1)(b) and 9(1)(d) and maintained the penalty of Rs. 20,000. The appeal was thus decided with the appellant required to pay a total penalty of Rs. 20,000.

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• 1989 (12) TMI 363
  
  Issues Involved:
  1. Quashing of the criminal proceeding initiated based on the complaint.
  2. Validity of the documents alleged to be forged.
  3. Sufficiency of the complaint to constitute an offence under Sections 465/34 and 471/120B of the Indian Penal Code.
  
  Detailed Analysis:
  
  1. Quashing of the Criminal Proceeding:
  The petitioners sought quashing of the criminal proceeding initiated by the complainant, alleging that the complaint did not disclose any offence under Sections 465/34 and 471/120B of the Indian Penal Code. The court examined whether the allegations in the complaint constituted a prima facie case warranting the continuation of the proceedings.
  
  2. Validity of the Documents Alleged to be Forged:
  The complainant alleged that the petitioners conspired to create forged documents dated 03.02.1989 and 30.03.1989 to support a false charge against her, leading to her wrongful termination. The court analyzed whether these documents could be considered "false documents" under Section 464 of the Indian Penal Code. It was noted that merely incorporating false statements in a document does not make it a false document unless it tells a lie about itself. Since the documents were admittedly written and signed by Sri S. N. Banerjee, they could not be considered false even if the content was untrue.
  
  3. Sufficiency of the Complaint to Constitute an Offence:
  The court scrutinized the complaint to determine if it contained sufficient facts to constitute the alleged offences. It was emphasized that a complaint must contain the primary facts on which the allegations are based, not just a mere assertion of offences. The court found that the complaint lacked detailed facts and materials to substantiate the allegation that the documents were not created on the dates mentioned. Consequently, the Magistrate's cognizance of the complaint was deemed unjustified as it was based on an inference without supporting facts.
  
  Conclusion:
  The court concluded that the learned Magistrate was not justified in taking cognizance of the complaint as it did not contain the necessary facts to constitute the alleged offences. The proceeding was quashed, and the benefit of this order extended to the other accused. The court emphasized the importance of detailing the basic facts in a complaint to enable a Magistrate to take cognizance legally.
  
  Separate Judgment:
  S.P. Rajkhowa, J. concurred with the judgment delivered.

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• 1989 (12) TMI 362
  
  Issues:
  1. Whether the loss arising from the nationalization of the coal industry is an admissible deduction as a business loss or a capital loss.
  2. Whether the assessee can claim depreciation on the loss incurred due to compensation received being less than the depreciated value of assets taken over by the Government.
  
  Analysis:
  1. The Tribunal initially held that the loss of Rs. 4,57,844 incurred by the assessee on the nationalization of the coal industry was a capital loss and not an admissible deduction as a business loss. The Commissioner (Appeals) disagreed, citing section 28(ii)(d) of the Income-tax Act, which deems compensation for the resting of management in the Government as business profits. The Commissioner reasoned that since the coal mines were taken over and nationalized, the loss should be treated as a business loss. However, the Tribunal reversed this decision, stating that section 28(ii)(d) did not apply as all assets were taken over, not just management, leading to the loss being classified as a capital loss.
  
  2. The assessee contended that under section 32(1)(iii) of the Act, they should be allowed to claim depreciation on the loss incurred due to receiving compensation less than the depreciated value of assets taken over. The assessee requested a remand to the Tribunal to consider this aspect, which was not raised during the initial proceedings. The Court rejected this request, noting that the point was abandoned by the assessee after being decided against them by the ITO. The Court emphasized that the Tribunal's order only addressed the department's appeal, and the assessee failed to file a cross-objection or a separate appeal to raise the issue. As a result, the Court found no error in the Tribunal's decision and declined to remand the case for further consideration.
  
  In conclusion, the Court upheld the Tribunal's decision that the loss of Rs. 4,57,844 was a capital loss and not a business loss. Additionally, the Court rejected the assessee's request for a remand to consider claiming depreciation on the loss, as the issue was not raised during the initial proceedings and the assessee failed to file a cross-objection before the Tribunal.

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• 1989 (12) TMI 361
  
  Issues:
  Validity of resolution levying octroi under Section 98 of the City of Bangalore Corporation Act, 1949.
  
  Analysis:
  The judgment involved connected appeals challenging the High Court of Karnataka's decision regarding the resolution passed by the Corporation of the City of Bangalore levying octroi on certain additional items under Section 98 of the Act. The High Court declared the resolution invalid due to non-compliance with the mandatory provision of Section 98(1), which required consideration of objections before passing the resolution. The appellant argued that objections were duly considered, and the resolution was passed unanimously after distributing notes analyzing objections. The Court emphasized that taxation must be in strict conformity with the authorizing statute and that conditions precedent must be fulfilled before delegated power is exercised.
  
  The Court discussed the importance of fulfilling conditions precedent for exercising statutory power and presumed regularity in the authority's actions. It highlighted that the legislative body must ascertain local opinion before imposing taxes, assuming that objections were considered before reaching a decision. The Court referenced a previous decision to support the principle that the Court should not examine the manner in which legislative will is indicated once it is clear that objections were considered. The judgment emphasized that the Court's role is to ensure compliance with statutory provisions, not to question the decision-making process.
  
  Furthermore, the Court addressed the presumption of regularity in statutory authority's actions, emphasizing that the burden lies on challengers to show non-compliance with conditions precedent. The judgment cited previous cases to support the principle that taxes must be imposed in accordance with the law to avoid infringing fundamental rights. The Court criticized the High Court for assuming non-compliance based solely on time constraints and emphasized that the term "consideration" in the statute encompasses taking note of objections. Ultimately, the Court held that the High Court erred in assuming non-compliance due to time constraints alone and set aside the High Court's judgment, allowing the appeals without costs.

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• 1989 (12) TMI 360
  
  Issues:
  1. Assessment of sum as business income of the assessee
  2. Classification of sum as dividend income under Section 2(22)(d) of the Income-tax Act, 1961
  3. Entitlement of relief under Section 80M of the Income-tax Act, 1961
  
  Analysis:
  
  Assessment of sum as business income:
  The case involved the purchase of shares by the assessee from a nationalized bank, which later offered an option to sell shares back at a higher price. The Income-tax Officer contended that the assessee attempted to gain double benefits by claiming a loss in share dealing account and profit as dividend income. The High Court held that expenditure for share acquisition cannot be considered for earning dividend income. The shares were treated as stock-in-trade, and the purchase price was deemed business expenditure, not deductible from dividend income.
  
  Classification of sum as dividend income:
  The Tribunal concluded that deemed dividends under Section 2(22)(d) qualified for relief under Section 80M. The High Court disagreed with the Tribunal's decision, emphasizing that the entire amount received by the assessee from the company should be treated as dividend income without deducting the face value or purchase price of the shares. It clarified that the purchase price of shares should be considered business expenditure and allowed as a deduction under the business head.
  
  Entitlement of relief under Section 80M:
  The High Court ruled that the assessee was entitled to relief under Section 80M for the dividend received from the company on the reduction of capital. The relief was to be calculated on the net amount of dividend included in the gross total income. The Court directed the Tribunal to dispose of the case in line with the provided answers, ensuring the assessee's entitlement to Section 80M relief.
  
  In conclusion, the High Court clarified the treatment of dividend income, purchase price of shares, and eligibility for relief under Section 80M, emphasizing the distinction between business expenditure and dividend income. The judgment provided a comprehensive analysis of the issues raised by the Revenue, ensuring proper application of tax laws in the case.

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• 1989 (12) TMI 359
  
  Issues Involved:
  1. Validity of the Arbitration Award without registration under Section 17(1)(b) of the Registration Act, 1908.
  2. Arbitrators' authority to direct payment by installments.
  
  Detailed Analysis:
  
  1. Validity of the Arbitration Award without registration under Section 17(1)(b) of the Registration Act, 1908:
  
  The petitioner challenged the arbitration award on the grounds that it was not registered under Section 17(1)(b) of the Registration Act, 1908, which mandates compulsory registration for non-testamentary instruments creating, declaring, assigning, limiting, or extinguishing any right, title, or interest in immovable property valued at one hundred rupees and upwards. The petitioner argued that the award declared an interest in Flat No. G-3, Dadar Co-operative Housing Society, thereby necessitating registration.
  
  The court examined the nature of the right in the flat, noting that the land and building belong to the Dadar Co-operative Housing Society Ltd., a tenant co-partnership housing society under the Maharashtra Co-operative Societies Act, 1960. The deceased member's right was to occupy the flat by virtue of membership and holding shares in the society, not ownership of the property itself. The award dealt with transferring these shares, not declaring or creating rights in immovable property.
  
  Section 41 of the Maharashtra Co-operative Societies Act, 1960 exempts instruments relating to shares in a society from compulsory registration under Section 17(1)(b) of the Registration Act. The court referenced Ramesh Himmatlal Shah v. Harsukh Jadhavji Joshi, where the Supreme Court held that attachment and sale of a flat in a tenant co-partnership housing society only involve the right to occupy the flat and obtain a transfer of shares, not an interest in immovable property requiring registration.
  
  The court emphasized that Section 17 of the Registration Act should be strictly construed and that Section 41 of the Maharashtra Co-operative Societies Act clearly intended to exclude transfer of shares in a co-operative society from its ambit. The Gujarat High Court's Full Bench decision in Mulshankar Kunverji Cor and ors. v. Juvansinhji Shivubha Jadeja supported this view, holding that transfer of shares in a tenant co-partnership society does not require registration under Section 17(1)(b).
  
  The court distinguished the present case from Lachhmandas v. Ram Lal and anr., and Capt. (now Major) Ashok Kashyap v. Mrs. Sudha Vasisht and anr., noting that these cases did not involve rights to reside in flats belonging to co-operative housing societies. The court concluded that the award, dealing with transfer of shares in a tenant co-partnership society, did not require registration under Section 17(1)(b) of the Registration Act.
  
  2. Arbitrators' authority to direct payment by installments:
  
  The petitioner contended that the arbitrators acted beyond their jurisdiction by directing payments in installments, arguing that the terms of reference did not empower them to award payments in this manner. The court dismissed this objection, stating that arbitrators have an implied power to prescribe the manner of payment when determining the rights and amounts payable by parties.
  
  Referencing Russel on Arbitration and the case of J. Kaikabad v. F. Khambatta and another, the court affirmed that arbitrators may direct payment by installments and that such directions are within their discretion and form essential parts of an award. The court emphasized that it is not within its purview to decide on the reasonableness of the award or the installment terms.
  
  Conclusion:
  
  The court dismissed the petition, holding that the arbitration award did not require registration under Section 17(1)(b) of the Registration Act and that the arbitrators were within their rights to direct payment by installments. No order as to costs was made in the circumstances of the case.

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• 1989 (12) TMI 358
  
  Issues Involved:
  1. Whether the Bank should be restrained from releasing the amount of the Bank guarantee to the Corporation during the pendency of the suit.
  2. The nature and enforceability of the Bank guarantee.
  
  Summary:
  
  Issue 1: Restraint on Bank Guarantee Release

  This petition challenges the appellate Judge's order affirming the trial Judge's decision to restrain respondent No. 3 from releasing the Bank guarantee amount to the petitioner during the suit's pendency. The National Hydro Electric Power Corporation Limited (N.H.P.C.) had invited tenders for the Chamera Project, which was allotted to National Project Construction Corporation Limited (the Corporation). The Contractor's tender was accepted, and a Bank guarantee of Rs. 5 lacs was furnished by Punjab and Sind Bank. The Corporation invoked the Bank guarantee, leading to the Contractor filing a suit for a permanent injunction to restrain the Corporation from enforcing the Bank guarantee. The trial Judge granted the injunction, which was affirmed on appeal. The Corporation then filed a revision petition.

  Issue 2: Nature and Enforceability of the Bank Guarantee

  The Courts below misunderstood the controversy and erroneously invoked the agreement provisions between the Corporation and the Contractor. The Bank guarantee constitutes an independent contract between the Bank and the Corporation, with an absolute obligation on the Bank to pay the amount on demand. The Bank is prohibited from raising any objections, and the demand made on the Bank is conclusive regarding the amount due. The Bank guarantee is an "autonomous" contract imposing an "absolute obligation" on the Bank, irrespective of disputes between the Contractor and the Corporation. The law is well settled that banks must honor such guarantees according to their terms, except in clear cases of fraud.

  The Court cited precedents, including B.L.R. Mohan v. P.S. Co-op. S. & M. Federation Ltd., where it was held that performance guarantees are independent contracts, and banks must honor them irrespective of the underlying contract disputes. The Court also referred to the Supreme Court's ruling in United Commercial Bank v. Bank of India, emphasizing that banks' obligations under letters of credit or guarantees are independent of the underlying contracts.

  The Court concluded that the Contractor cannot restrain the Bank from releasing the guaranteed amount to the Corporation. The orders of the Courts below were set aside, allowing the Corporation to enforce the Bank guarantee.

  Conclusion:

  The revision petition is allowed, and the Corporation is entitled to enforce the Bank guarantee.

  Petition allowed.

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• 1989 (12) TMI 357
  
  Issues Involved:
  1. Jurisdiction of Civil Court under Section 331 of the U.P. Zamindari Abolition and Land Reforms Act.
  2. Interpretation of appellant's pleadings and the nature of relief sought.
  3. Legal principles regarding the cancellation of sale deeds and possession.
  4. Application of the doctrine of non est factum.
  5. Precedents on Civil Court jurisdiction over void or voidable transactions.
  
  Issue-wise Detailed Analysis:
  
  1. Jurisdiction of Civil Court under Section 331 of the U.P. Zamindari Abolition and Land Reforms Act:
  The primary issue was whether the Civil Court had jurisdiction to entertain the appellant's suit for cancellation of sale deeds and possession of agricultural lands, or if such jurisdiction was barred by Section 331 of the U.P. Zamindari Abolition and Land Reforms Act. The High Court had directed the return of the plaint for presentation to the proper Court, concluding that the relief sought was within the exclusive domain of the Revenue Court. The Supreme Court noted that the exclusion of Civil Court jurisdiction must be explicitly expressed or clearly implied and should be strictly construed.
  
  2. Interpretation of Appellant's Pleadings and the Nature of Relief Sought:
  The appellant claimed that the sales were fraudulent and collusive, executed without her knowledge and consent, and sought cancellation of the sale deeds, delivery of possession, and rendition of accounts. The High Court construed the pleadings as a plea of nullity, holding that the relief for cancellation was "illusory" and the main relief was possession, which fell under the Revenue Court's jurisdiction. The Supreme Court, however, emphasized that the jurisdiction depends on the allegations in the plaint and not on the merits or result of the suit. The pleadings should be taken as a whole to determine the nature of the action.
  
  3. Legal Principles Regarding the Cancellation of Sale Deeds and Possession:
  The Court referred to previous judgments distinguishing between cases where the binding effect of a deed needed to be adjudicated and cases where a transaction was void in law. It was held that if the legal effect of a document could only be taken away by setting it aside or its cancellation, the Civil Court would have jurisdiction. The appellant's suit was seen as falling within this category, where the sales needed to be set aside before possession could be granted.
  
  4. Application of the Doctrine of Non Est Factum:
  The doctrine of non est factum was discussed, which allows a person to claim that a document they signed is not binding if they were mistaken about its nature or contents due to fraud or misrepresentation. The Supreme Court cited cases like Foster v. Mackinnon and Ningawwa v. Byrappa, highlighting that a transaction induced by fraud is voidable, but if the misrepresentation relates to the character of the document, it is void. The appellant's case was seen as one where the sales could not be ignored and needed to be set aside due to fraudulent misrepresentation.
  
  5. Precedents on Civil Court Jurisdiction Over Void or Voidable Transactions:
  The Court reviewed precedents, including the Allahabad High Court's decisions in India Dev v. Ram Pyari and Ram Padarath v. Second Addl. Dist. Judge, Sultanpur. These cases held that the Civil Court's jurisdiction is not barred when seeking cancellation of sale deeds, even if the transaction is void. The Supreme Court concluded that the appellant's case was covered by these precedents, and the Civil Court had jurisdiction to entertain the suit.
  
  Conclusion:
  The Supreme Court allowed the appeal, set aside the High Court's order, and restored the trial Court's order on the preliminary issue, remitting the suit back to the trial Court for disposal in accordance with law on the merits.

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• 1989 (12) TMI 356
  
  Issues Involved:
  1. Constitutional validity of Section 29(1) of the State Financial Corporations Act, 1951.
  2. Alleged unreasonableness and arbitrariness of Section 29(1).
  3. Comparison between Section 29 and Section 31 of the Act.
  4. Alleged discriminatory and arbitrary power of the Corporation under Section 29(1).
  5. Principles of natural justice and fair play in the application of Section 29(1).
  6. Remedies available to aggrieved parties.
  7. Specific individual grievances of petitioners.
  
  Detailed Analysis:
  
  1. Constitutional Validity of Section 29(1) of the Act:
  The petitioners challenged the constitutional validity of Section 29(1) of the State Financial Corporations Act, 1951, arguing that it is "unreasonable, drastic, arbitrary, violative of the principles of natural justice and fair play." They contended that the provision allows the Corporation to act as a judge in its own cause without any hearing, reasoned order, or procedural safeguards, making it violative of Articles 14, 19, 21, and 300A of the Constitution.
  
  2. Alleged Unreasonableness and Arbitrariness of Section 29(1):
  The petitioners argued that Section 29(1) is unreasonable and arbitrary because it provides the Corporation with absolute discretion to take possession and transfer the industrial concern without following any procedure. They claimed that this violates the principles of natural justice and fair play.
  
  3. Comparison Between Section 29 and Section 31 of the Act:
  The petitioners pointed out that Section 31 of the Act provides a judicial remedy by allowing the Corporation to approach the District Judge for an order of sale or transfer of management. They argued that the existence of these two remedies gives arbitrary power to the Corporation, enabling it to "pick and choose" which industrial concern to proceed against under Section 29(1) and which to proceed against under Section 31(1). This, they claimed, violates Article 14 of the Constitution.
  
  4. Alleged Discriminatory and Arbitrary Power of the Corporation:
  The petitioners contended that the discretion given to the Corporation to choose between proceeding under Section 29 or Section 31 is discriminatory and arbitrary. They argued that this violates the guarantee of equality under Article 14 of the Constitution.
  
  5. Principles of Natural Justice and Fair Play:
  The court held that even though the decision of the Corporation under Section 29 is not a quasi-judicial decision but an administrative function, a reasonable reading of Section 29 does not exclude the principle of fair play and some element of natural justice. The court stated that the Corporation must give notice to the party about the default and the consequences, allowing the party reasonable time to explain, reply, or comply. If the Corporation acts fairly and reasonably, it would not be acting arbitrarily.
  
  6. Remedies Available to Aggrieved Parties:
  The court noted that if the Corporation's action under Section 29 is in breach of the principles of natural justice, such action could be challenged. However, this would not vitiate the legal provision contained in Section 29. The court also mentioned that the absence of an appeal or corrective machinery does not make the provision bad, as the aggrieved party can challenge the action in writ jurisdiction.
  
  7. Specific Individual Grievances of Petitioners:
  The court addressed specific grievances raised by the petitioners, such as:
  - Non-payment of the full amount of the loan sanctioned.
  - The unit being a sick unit and the Corporation's duty to help in its revival.
  - The Corporation's duty to rehabilitate and not kill industrial units by coercive recovery.
  - Running units should not be forced to close down by enforcing recovery under Section 29.
  
  The court found that these arguments were attempts to avoid paying the amounts due and delaying recovery. The court emphasized that the Corporation is entitled to cancel the remaining outstanding loan after a reasonable time and proceed under Section 29 if the debtor fails to make substantial payments or offer reasonable reschedulement.
  
  Conclusion:
  The court upheld the constitutional validity of Section 29(1) of the State Financial Corporations Act, 1951, stating that it is not arbitrary, irrational, or unreasonable, and is not violative of Articles 14, 19, 21, and 300A of the Constitution. The court emphasized that the Corporation must act fairly and reasonably, giving notice to the debtor and allowing reasonable time for compliance. The court dismissed all the petitions, vacated interim relief, and directed the Corporation to issue fresh advertisements for sale where necessary. The court also provided specific directions for individual cases where possession had been taken or sale had been effected.

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• 1989 (12) TMI 355
  
  Issues Involved:
  1. Applicability of the doctrine of promissory estoppel.
  2. Validity of the State government's order and demand notices.
  3. Whether the respondent acted to its prejudice based on the State's assurance.
  4. Legal implications under the Madhya Pradesh Electricity Duty Act, 1949.
  
  Issue-wise Detailed Analysis:
  
  1. Applicability of the Doctrine of Promissory Estoppel:
  The respondent, Orient Paper Mills Ltd., invoked the doctrine of promissory estoppel to claim an exemption from electricity duty based on an assurance dated 1/08/1961 by the State of Madhya Pradesh. The assurance stated, "Where power has to be generated by industrialists themselves, exemption from electricity duty shall be granted for a period of five years from the date the plant goes into production. The concession shall be applicable only to new generating sets installed during the Third Plan period." The High Court, after considering the voluminous documentary evidence, concluded that the respondent was entitled to invoke the doctrine of promissory estoppel. The Court stated, "To conclude, we are of opinion that the petitioner is entitled to invoke the doctrine of promissory estoppel in order to claim exemption from payment of electricity duty for a period of five years from 16/02/1965 to 15/02/1970 in terms of the assurance of the State government, dated 1/08/1961."
  
  2. Validity of the State Government's Order and Demand Notices:
  The High Court quashed the State government's order dated 15/03/1973, which declined to grant the respondent exemption from payment of electricity duty for the period from 16/02/1965 to 15/02/1970, as well as the demand notices dated 20/03/1973 and 3/04/1973. The Court found that the respondent's case fell squarely within the scope of the assurance given by the State government. The judgment stated, "We can certainly quash the order of the State government, dated 15/03/1973 as also the demand notices, dated 20/03/1973 (petitioners Annx. 48) and dated 3/04/1973 (petitioners Annx. 50) and leave the matter at that."
  
  3. Whether the Respondent Acted to Its Prejudice Based on the State's Assurance:
  The State argued that the respondent had not acted to its prejudice based on the assurance dated 1/08/1961 and had been planning to set up a generating plant independently. However, the High Court rejected this argument, stating, "The petitioners action in making a final decision to set up its own power plant can be directly connected with the State governments assurance dated August I, 1961." The Court found that the respondent's indecision ended and it became decisive on the announcement of the assurance. The Supreme Court upheld this finding, noting that it was a possible view based on the material placed before the High Court.
  
  4. Legal Implications Under the Madhya Pradesh Electricity Duty Act, 1949:
  The appellant contended that the doctrine of promissory estoppel could not compel the State government to issue a notification under S. 3-A (vii) and S. 3-B of the Madhya Pradesh Electricity Duty Act, 1949, exempting the respondent from payment of electricity duty. The High Court addressed this by stating that without commanding the State government to issue such a notification, it granted relief to the respondent. The Court concluded, "No provision of Madhya Pradesh Electricity Duty Act, 1949 or any other law can be said to have been transgressed."
  
  Conclusion:
  The Supreme Court dismissed the appeal, affirming the High Court's judgment that the respondent was entitled to the exemption based on the doctrine of promissory estoppel. The Court found no reason to interfere with the High Court's factual findings and legal conclusions. The appeal was dismissed with no costs.

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• 1989 (12) TMI 354
  
  Issues:
  1. Jurisdiction of the Commissioner to initiate proceedings under section 263 of the Income-tax Act, 1961.
  2. Merger of orders between Inspecting Assistant Commissioner and Commissioner (Appeals) regarding the calculation of disallowable amount under section 44C.
  
  Detailed Analysis:
  1. The High Court was tasked with determining whether the Tribunal was justified in holding that the Commissioner had no jurisdiction to initiate proceedings under section 263 of the Income-tax Act, 1961. The controversy arose from the Commissioner seeking to invoke section 263 in relation to the assessee's claim under section 44C of the Act. The Tribunal, after reviewing the case, found that the Commissioner (Appeals) had considered the applicability of section 44C extensively. The Tribunal observed that the question of applicability of section 44C was in dispute before the Commissioner (Appeals) as the assessee had challenged its applicability. Although the Commissioner (Appeals) upheld the applicability, he did not interfere with the amount disallowable under section 44C. This led to the conclusion that the Commissioner (Appeals) could have considered the correctness of the calculation, indicating a question of merger between the orders.
  
  2. The judgment referred to a previous case, Hindustan Aluminium Corpn. Ltd. v. CIT [1989] 178 ITR 741, where a similar issue was discussed. In that case, it was held that if a particular part of the assessment order was not appealable or was not considered by the appellate authority, there could be a merger of the original order with the appellate order. In the present case, the Tribunal noted that while the applicability of section 44C was in dispute, there was no disagreement on the calculation of the disallowable amount. As a result, the Tribunal found that there had been a merger of the appellate order with the Commissioner (Appeals) order, precluding the Commissioner (Appeals) from invoking section 263. The Tribunal's decision was upheld by the High Court, answering the question of law in the affirmative and in favor of the assessee.
  
  3. The judgment concluded by affirming that the Commissioner (Appeals) lacked jurisdiction to revise the order passed under section 263 due to the merger of the appellate order with the original order. The judges concurred on this decision, and no costs were awarded in the case.

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• 1989 (12) TMI 353
  
  Issues:
  - Applicability of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 to a carpet manufacturing establishment.
  
  Detailed Analysis:
  The case revolves around the question of whether a partnership firm engaged in manufacturing and selling carpets in Rajasthan is subject to the provisions of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 (the Act). The firm contested the applicability of the Act on the grounds that the establishment was not manufacturing textiles as per Schedule I of the Act. The Regional Provident Fund Commissioner, after a hearing, determined that the business of manufacturing carpets made the Act applicable to the firm. The Central Government upheld this decision on appeal under section 19A of the Act. Subsequently, the firm filed a petition under Article 226 of the Constitution before the Rajasthan High Court, which was dismissed, leading to an appeal to the Division Bench of the High Court, which also ruled against the firm. The current appeal to the Supreme Court challenges the Division Bench's decision.
  
  The primary argument raised by the appellant before the Supreme Court was that carpets manufactured by them did not fall under the definition of textiles as per Schedule I of the Act, hence the Act was inapplicable to their establishment. The relevant part of Schedule I includes textiles made of various materials, including wool. The Court delved into the process of manufacturing carpets, emphasizing that weaving carpets involves interlacing yarn on a loom, making it a form of textile fabric. The Court clarified that even if there are knots in the yarn during weaving, the final product remains a textile fabric. The Court rejected the argument that the certification of carpets as handicrafts by the Handicrafts Board exempted them from being considered textiles, asserting that the activity of making carpets, despite knotting, amounts to weaving and falls within the definition of textiles under the Act.
  
  The Court referenced the case of Porritts & Spencer (Asia) Ltd. v. State of Haryana, highlighting that the concept of textiles is dynamic and continually expanding with evolving materials and techniques. The Court emphasized that any fabric woven from yarn, regardless of material or size, qualifies as a textile. The Court dismissed the argument that knotting was not explicitly mentioned in the Explanation to Schedule I, asserting that it does not impact the classification of carpets as textiles. Ultimately, the Court affirmed the decisions of the Regional Provident Fund Commissioner, the Government of India, and the High Court, holding that the appellant's establishment fell within the scope of the Act, and the firm was obligated to comply with its provisions. Consequently, the appeal was dismissed by the Supreme Court.

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• 1989 (12) TMI 352
  
  Issues:
  1. Treatment of Dewali Bohni, gifts, and Baksis as entertainment expenditure under section 37(2A) of the Income-tax Act.
  2. Classification of the loss incurred from the sale of shares in 1977 as revenue loss or capital loss.
  
  Analysis:
  
  Issue 1:
  The Tribunal forwarded two questions of law regarding the treatment of Dewali Bohni, gifts, and Baksis as entertainment expenditure under section 37(2A) of the Income-tax Act. The assessee claimed these expenses as sales promotion expenses for the assessment year 1977-78. The Income Tax Officer disallowed the claim of entertainment expenses, but other expenses were allowed. The Commissioner also disallowed the claim of entertainment expenses. The main contention was whether these expenses could be categorized as entertainment expenditure. The Explanation 2 of section 37 clarified that hospitality expenses would be considered entertainment expenditure, but the expenses in question were more in the nature of customary gifts for fostering goodwill and sales promotion, not hospitality. The Tribunal upheld this interpretation, stating that the Dewali gifts did not fall under Explanation 2 of section 37. The High Court agreed with the Tribunal's findings, emphasizing that the expenses were not incurred for hospitality but as customary gifts, thus not constituting entertainment expenditure.
  
  Issue 2:
  The second question revolved around the nature of losses incurred from the sale of shares in 1977. The shares were received in consideration of services rendered under a technical collaboration agreement. The Tribunal held that the shares' value could not be considered a capital receipt as the company suffered a loss and was struck off the register in 1977. Therefore, the loss was treated as a revenue loss, and the addition made by the Income-tax Officer was deleted. The High Court concurred with the Tribunal's decision, emphasizing that the shares were received for services rendered and were not part of the company's capital. The Court highlighted that the Tribunal correctly analyzed the facts and circumstances to determine the nature of the loss, stating that such determinations are primarily questions of fact. Referring to a Supreme Court case, the Court reiterated that the Tribunal's findings were not perverse and were based on relevant material. Consequently, the Court answered both questions in favor of the assessee.
  
  In conclusion, the High Court upheld the Tribunal's decisions regarding the treatment of expenses and the classification of losses, emphasizing the factual analysis and legal principles applied in reaching those conclusions.

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• 1989 (12) TMI 351
  
  Issues Involved:
  1. Validity of the Karnataka Public Service Commission's Notification and select list for Motor Vehicle Inspectors.
  2. Impact of the amendment to the Recruitment Rules on the selection process.
  3. Retrospective vs. prospective application of the amended Recruitment Rules.
  
  Summary:
  
  1. Validity of the Karnataka Public Service Commission's Notification and select list for Motor Vehicle Inspectors:
  The appeal challenges the Karnataka Administrative Tribunal's decision quashing the Karnataka Public Service Commission's Notification dated September 28, 1983, and the select list for Motor Vehicle Inspectors. The Tribunal directed the Commission to invite fresh applications per the amended Rules. The appellants, whose names were included in the select list, filed a writ petition u/s Article 32 of the Constitution for directions to the Karnataka Government to make appointments from the select list.
  
  2. Impact of the amendment to the Recruitment Rules on the selection process:
  The dispute centers on the selection and appointment of Motor Vehicle Inspectors regulated by the Karnataka General Service (Motor Vehicles Branch) (Recruitment) Rules, 1962. Initially, candidates with a Diploma in Mechanical Engineering or Automobile Engineering were eligible. However, the Rules were amended on May 4, 1987, omitting the qualification of Diploma in Mechanical Engineering. The Tribunal held that the selection of candidates with a Diploma in Mechanical Engineering was illegal post-amendment and directed fresh selections per the amended Rules.
  
  3. Retrospective vs. prospective application of the amended Recruitment Rules:
  The Supreme Court held that the amendment to the Recruitment Rules was prospective, not retrospective. The Rules did not contain any provision enforcing the amended Rules retrospectively. The appellants were qualified for selection and appointment under the Rules existing at the time of their application and scrutiny by the Commission. The Court emphasized that statutory rules are prospective unless expressly or by necessary implication made retrospective. The amending Rules of 1987 did not contain any express provision or necessary intendment for retrospective effect. Thus, the appellants' right to selection and appointment could not be defeated by the subsequent amendment of Rules.
  
  Conclusion:
  The Supreme Court allowed the appeal, set aside the Tribunal's order, and directed the State Government to make appointments based on the select list prepared and finalized by the Commission. The writ petition was disposed of accordingly, with no order as to costs.

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• 1989 (12) TMI 350
  
  Issues Involved:
  1. Contempt of Court by Respondents 1 and 2.
  2. Execution of eviction decree against the second respondent.
  3. Relief and punishment for the first respondent.
  
  Summary:
  
  Issue 1: Contempt of Court by Respondents 1 and 2
  The petitioner sought to convict Respondents 1 and 2 for contempt of court by violating the terms of an undertaking in Civil Appeal No. 2628 of 1980. The first respondent, K.M.M. Shetty, had filed an undertaking to vacate the premises by 31.3.1989. However, the second respondent, Raghuram A. Shetty, filed Civil Suit No. 306 of 1989 seeking a declaration that the eviction decree could not be executed against him, and obtained a temporary injunction. The court found the first respondent guilty of contempt for not handing over possession as per the undertaking and misleading the court by stating he was not in possession of the premises.
  
  Issue 2: Execution of eviction decree against the second respondent
  The second respondent claimed to be in possession of the premises under a license from P.A. Dange and later from the tenant, and sought protection under amendments to the Bombay Rents, Hotel and Lodging House Rates Control Act. The court held that the interim injunction granted by the IIIrd Joint Civil Judge, Thane, was not justified. The court directed that the petitioner is entitled to execute the eviction decree against all persons in possession of the property, including the second respondent.
  
  Issue 3: Relief and punishment for the first respondent
  The court found the first respondent guilty of contempt for willful disobedience of the undertaking and sentenced him to pay a fine of Rs. 500 within four weeks, failing which he would face simple imprisonment for one month. The court also directed the first respondent to deliver vacant possession of the premises immediately. The District Magistrate, Thane, was instructed to evict all persons in possession of the property, including the second respondent, with police help if necessary, and give vacant possession to the petitioner. The rule issued against the second respondent was discharged.

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• 1989 (12) TMI 349
  
  Issues Involved:
  1. Constitutional validity of the Bhopal Gas Leak Disaster (Processing of Claims) Act, 1985.
  2. Whether the Act provides a just, fair, and reasonable procedure for the victims.
  3. The role of the Central Government as the exclusive representative of the victims.
  4. The legality and fairness of the settlement reached under the Act.
  5. The necessity of notice to victims before any settlement.
  6. The adequacy of compensation and the inclusion of punitive damages.
  7. The impact of the Act on criminal liability.
  
  Issue-Wise Comprehensive Details:
  
  1. Constitutional Validity of the Act
  The Supreme Court held that the Bhopal Gas Leak Disaster (Processing of Claims) Act, 1985 is constitutionally valid. The Act was enacted to ensure that claims arising from the disaster are dealt with "speedily, effectively, equitably and to the best advantage of the claimants." The Act does not curtail the liability of the Union Carbide Corporation (UCC) or the Union Carbide India Limited (UCIL) and does not address criminal liability.
  
  2. Just, Fair, and Reasonable Procedure
  The Court emphasized that the Act provides a special procedure for a unique class of victims, ensuring their claims are processed effectively. The Act was considered necessary due to the unique nature of the disaster and the victims' inability to pursue claims independently. The Court found that the Act, coupled with the principles of natural justice, provides a fair procedure.
  
  3. Role of the Central Government
  The Act grants the Central Government the exclusive right to represent the victims. This was justified under the doctrine of "parens patriae," where the State acts as a guardian for those unable to protect their own interests. The Central Government's role was to ensure the victims' claims were pursued effectively against the multinational corporation, UCC.
  
  4. Legality and Fairness of the Settlement
  The Court acknowledged the settlement of $470 million reached with UCC. It stated that the settlement was made considering the urgent need for relief and the complexities of prolonged litigation. The Court also noted that the settlement was approved after considering all relevant factors and ensuring it was just, equitable, and reasonable.
  
  5. Notice to Victims Before Settlement
  The Court held that the victims should have been given notice before any settlement to ensure their views were considered. However, it recognized the practical difficulties in providing individual notices and suggested that public notices through mass media could suffice. The lack of pre-decisional notice was deemed a procedural lapse, but the Court did not find it sufficient to invalidate the settlement.
  
  6. Adequacy of Compensation and Punitive Damages
  The Court noted that the settlement amount was based on a reasonable estimate of the damages. It acknowledged the argument for punitive damages but found it an uncertain area of law. The Court emphasized that the settlement aimed to provide immediate relief rather than engage in prolonged litigation over punitive damages.
  
  7. Impact on Criminal Liability
  The Act does not address criminal liability, and the settlement's provision to quash criminal proceedings was outside the scope of the Act. The Court clarified that the Act deals only with civil claims for compensation and not with criminal proceedings.
  
  Conclusion:
  The Supreme Court upheld the constitutional validity of the Bhopal Gas Leak Disaster (Processing of Claims) Act, 1985, while emphasizing the need for a fair procedure, including notice to victims before settlement. The Court recognized the urgency and complexity of the situation, justifying the settlement reached. The Act was found to be a necessary and reasonable measure to ensure effective relief for the victims.

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• 1989 (12) TMI 348
  
  Issues Involved:
  
  1. Validity of the sale deed (Ex. 3) and will (Ex. 4).
  2. Whether the previous suit against Bhonrilal was a representative suit on behalf of the Darjee community.
  3. The implications of the previous judgments and decrees on the current suit.
  4. The legitimacy of the plaintiff's claim to the property.
  
  Issue-wise Detailed Analysis:
  
  1. Validity of the Sale Deed (Ex. 3) and Will (Ex. 4):
  
  The High Court rejected both the sale deed (Ex. 3) and the will (Ex. 4), which were the foundation of Ganga Ram's title to the suit property. The sale deed was deemed inadmissible in evidence as it was neither a certified copy nor a copy made from the original by any mechanical process. The will was disregarded due to suspicious circumstances surrounding its execution. The court noted that the will excluded the testator's wife, which was unnatural and ran counter to societal values. Additionally, the will was not produced for many years, even though there were opportunities to do so. This raised doubts about its genuineness. The court emphasized that proving a will requires trustworthy and unimpeachable evidence, which was not provided in this case.
  
  2. Whether the Previous Suit Against Bhonrilal was a Representative Suit on Behalf of the Darjee Community:
  
  The court examined whether the previous suit against Bhonrilal was a representative suit on behalf of the Darjee community. It was argued that the suit was only on behalf of the 'Panchayat Darjian' and not the entire Darjee community. The trial court had not framed any issue on this controversy, and there was no evidence to support the contention that the suit was representative. The court concluded that in the absence of necessary material, determining the nature of the previous suit was unjustified. However, it noted that any member of a community could bring a suit to assert their right in community property without complying with Order 1 Rule 8 of the Code of Civil Procedure.
  
  3. Implications of the Previous Judgments and Decrees on the Current Suit:
  
  The previous judgments and decrees, particularly the suit against Bhonrilal, played a significant role in the current case. The court noted that the suit against Bhonrilal was decreed, and his claim of adverse possession was negatived. The High Court's observation that the present suit was a fruitless exercise was sustained on the ground that the previous decree was still in operation. This meant that the current suit could not succeed as long as the previous decree stood.
  
  4. Legitimacy of the Plaintiff's Claim to the Property:
  
  The plaintiff's claim to the property was based on the sale deed (Ex. 3) and the will (Ex. 4). The court found that the sale deed was not admissible as secondary evidence, and the will was surrounded by suspicious circumstances. The plaintiff failed to provide satisfactory material to remove these suspicions. The court also noted that the plaintiff's testimony and the evidence of witnesses were far from satisfactory. The plaintiff's claim that he was the adopted son of Gaurilal was not supported by any reference in the will or other material. The court concluded that the plaintiff's claim to the property was not legitimate.
  
  Conclusion:
  
  The Supreme Court allowed the appeal, modifying the judgment and decree of the High Court. The judgment and decree of the trial court, as affirmed by the District Court, were set aside, and the plaintiff's suit was dismissed. No order as to costs was made since the original plaintiff had died, leaving behind his widow during the pendency of the appeal before the High Court.

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• 1989 (12) TMI 347
  
  Issues Involved:
  The judgment involves the quashing of two appointments by the High Court based on various grounds, including delay in filling vacancies, alleged mala fides, comparative merits of the candidates, and the composition of the Selection Committee.
  
  Appointment of Chief Extension Education Officer (CA No. 3507/89):
  The High Court set aside the appointment due to alleged delay in filling the vacancy and a perceived deliberate attempt to delay the appointment until 1980. However, the University provided a satisfactory explanation for the delay, and the High Court's reasoning was deemed flawed. The Court also found fault with the High Court's assessment of mala fides, highlighting that the University's actions were not indicative of favoritism towards the appellant.
  
  Appointment of Deputy Director, Central Farm (CA No. 3508/89):
  Similar to the previous case, the High Court quashed this appointment based on reasons common to both cases. The High Court's decision was primarily influenced by the comparative merits of the candidates, as assessed by the Court itself. However, the Court noted that it is not within its jurisdiction to review the Selection Committee's decisions on candidate suitability unless there are specific legal grounds for interference.
  
  General Observations:
  The High Court's reliance on the comparative merits of the candidates was criticized, as the Court's role is not to reevaluate the Selection Committee's decisions. Additionally, the High Court's concerns regarding the appellant's relationship with his former guides during his studies were deemed irrelevant to the selection process. The judgment also highlighted the lack of substantial evidence to support claims of bias in the Selection Committee's composition.
  
  Constitution of Selection Committee:
  An argument regarding the composition of the Selection Committee, specifically the absence of experts from other universities, was raised but not considered as it was not presented before the High Court. The Court emphasized that new arguments cannot be introduced at a later stage without proper opportunity for all parties to address them.
  
  Conclusion:
  In conclusion, the Supreme Court allowed all the appeals and overturned the High Court's decision to quash the appointments. The respondents were ordered to bear the costs of the proceedings.

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• 1989 (12) TMI 346
  
  Issues involved:
  The issues involved in the judgment include seeking relief under Art. 32 of the Constitution for regularizing services, equal wages, unfair labor practices, violation of right to equality of pay under Art. 14, and non-regularization of services.
  
  Judgment Details:
  
  Issue 1: Regularization of Services and Equal Wages
  The petitioners, daily rated workers seeking relief under Art. 32, contended that despite continuous service, the respondent resorted to unfair labor practices by creating artificial breaks in service. The Industrial Tribunal found that petitioners are entitled to equal pay for equal work under Art. 39(d) and Arts. 14 and 16 of the Constitution. It recommended regularizing the petitioners, granting increments, and criticized the dismissal of workers without following the rule of last come first go. The Tribunal also found non-regularization due to uncertain contract validity as a pretense and suggested framing a scheme for regularization.
  
  Issue 2: Confirmation of Employment
  The controversy centered around whether some petitioners had the requisite qualifications for confirmation in their posts. The Court emphasized practical experience gained during work and directed the regularization of senior-most workmen with immediate effect and the remaining petitioners in a phased manner. It mandated equal pay, reinstatement of ousted workers, and consideration for promotions. The respondent was directed to deposit a sum for the Industrial Tribunal's remuneration.
  
  Separate Judgment by Judges:
  No separate judgment was delivered by the judges in this case.

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