judgement:
Appeal No. 172 of 1952.
Appeal by special leave from the Judgment and Decree dated January 25, 1952, of the High Court of Judicature at Bombay (Chagla C.J.) in Revision Application No. 1119 of 1951 from the Judgment and Decree dated August 10, 1951, of the Court of Small Causes at Bombay in Appeal No. 355 of 1950, arising out of Judgment and Decree dated 227 December 18, 1950, of the Court of Small Causes in Suit No. 1055/7943 of 1948.
B. H. Lulla for the appellants.
C. H. Daphtary (Solicitor General for India) (B.B. Adhyarujina, with him) for the respondents Nos. 1, 2 and 3. 1952.
December 10.
The Judgment of the Court was delivered by DAS J.
This is an appeal by special leave from the judgment and order of the High Court of Judicature at Bombay passed on January 25, 1952, in Civil Revision, Application No. 1119 of 1951.
It arises out of a suit filed in the Bombay Small Causes Court under section 28 of the Bombay Rents, ' Hotel and Lodging House Rates Control Act, 1947, for ejectment from and compensation at the rate of Rs. 370 per month from November 1, 1947, for the use and occupation of the second floor flat of Sunama House situate in Cumballa Hill, Bombay.
The plaintiffs are the trustees of the will of Framroze D. B. Taraporewala deceased and as such the owners of the Sunama House.
The defendants are two in number, namely, the first defendant Mrs. Dinbai K. Lala to whom the said flat was let out by the plaintiffs on or about September 1, 1942, at Rs. 370 per mouth and the second defendant a limited company to whom the first defendant had sublet the said flat as from November 16, 1947, at the same rent.
The defendants contested the suit on a variety of grounds, but the trial Court by its judgment dated October 18, 1950, rejected all the pleas and passed a decree directing both the defendants to vacate the flat by March 31, 1951, and awarding, only as against the first defendant, Rs. 3,317 10 8 for compensation from November 1, 1947, till July 31, 1948, and thereafter at Rs. 370 per month from August 4, 1948, till delivery of possession besides the costs of the suit.
The defendants preferred an appeal under section 29 of that Apt.
Besides the various pleas put forward 228 before the trial Court, the defendants, before the Appellate Bench, put forward an additional plea, watch was not pleaded in their written statements, namely, that the Small Causes Court had no jurisdiction to entertain the suit in so far as it concerned the second defendant.
The Appellate Bench of the Small Causes Court dismissed the appeal with costs.
The second defendant thereafter moved the High Court in revision under section 115 of the Code of Civil Procedure which was also dismissed with costs.
The second defendant has now come up in appeal before us after having obtained special leave of this Court.
The only contention urged before us is that the Small Causes Court had no jurisdiction to entertain this suit.
The relevant portions of section 28 of the Act are as follows: "Notwithstanding anything contained in any law and notwithstanding that, by Reason of the amount of the claim or for any other reason, the suit or proceeding would not, but for this provision, be with in its jurisdiction, (a) in Greater Bombay, the Court of Small Causes, Bombay, (aa). . . . . . (b). . . . . . . shall have jurisdiction to entertain and try any suit or proceeding between a landlord and a tenant relating to the recovery of rent or possession of any premises to which any of the provisions of this Part apply, and to decide any application made under this Act and to deal with ' any claim or question arising out of this Act or any of its provisions ; and no other Court shall have jurisdiction to entertain any such suit, proceeding or application or to deal with such claim or question.
" It was not disputed that the provisions of Part II of the Act apply to the premises.
The contention of the appellant is that the suit as against it was not a suit between a landlord and a tenant and that, in so 229 far as it claimed compensation for use and occupation, it was not a suit for recovery of rent and, therefore, section 28 had no application, and the Court of Small Causes had no jurisdiction to entertain this suit.
In view of this plea it is necessary to refer to the plaint in this suit.
After setting forth their title as owners of the Sunama Houses trustees under the will of Framroze D. B. Taraporewala the plaintiffs plead that the second floor flat was let out to first defendant on or about September 1, 1942, at Rs. 370 per month on terms and conditions printed on the back Of the rent bill form which were shown to and accepted by the first defendant.
In paragraph 5 of the plaint is set out one of those terms, namely, that the tenant shall not assign, sublet or re let the premises without the previous written consent of the landlords.
In paragraph 7 reference is made to the notice given by the plaintiffs to the first defendant on October 17, 1946, to vacate the flat at the end of November, 1946, on the ground that the same was required reasonably and bonafide for the use of two of the beneficiaries under the will.
Then, after referring to an unsuccessful attempt on the part of the plaintiffs to obtain a certificate under section 9 of the Act ' the plaintiffs refer to a letter dated November 16, 1947, written by the first defendant to the plaintiff8 intimating that she had from that day sublet the flat to the second defendant.
It is stated in para,graphs 12 and 13 of the plaint that on December 19, 1947, the second defendant sent a cheque for Rs. 370 for rent , for the month of November, 1947, but the plaintiffs declined to accept the same or to recognise the second defendant as a lawful occupant as subtenant or otherwise.
It is also alleged that on January 23, 1948, the plaintiffs gave a notice to both ,the Codefendants to vacate the premises at the end of February 29, 1948.
In paragraphs 14 and 15 the plaintiffs formulate the grounds for ejectment, ,namely, (1) that the alleged subletting by the first ,defendant to the second defendant was wrongful, illegal and in breach of the terms of the tenancy and 30 230 (2)that the plaintiffs required the premises reasonably and bona fide for the use and occupation of two of the beneficiaries.
The plaintiffs prayed that both the defendants be ordered to vacate the premises and that both of them be ordered to pay to the plaintiffs compensation for the use and occupation of the premises at Rs. 370 per mouth from November 1, 1947, till delivery of vacant possession.
The appellant points out that on the face of the plaint the plaintiffs declined to recognise it as a lawful occupant as subtenant or otherwise and treated it as a mere trespasser having no lawful claim to the demised flat and, therefore, the suit, in so far as it was one between the plaintiffs and the appellant (the second defendant), cannot be said to be a suit between a landlord and a tenant and that the suit in so far as it claimed compensation from him cannot be said to be a suit for recovery of rent.
The last part of the contention need not detain us long, for the suit was undoubtedly one for possession of the flat and the claim for compensation was only incidental and ancillary to to the claim for possession.
Jurisdiction to entertain a suit for possession will empower the Court not only to pass a decree for possession but also to give directions for payment of mesne profits until delivery of possession.
Such direction for payment of mesne profits is usually an integral part of the decree for possession.
The only question for consideration, therefore, is whether the suit was one between a landlord and a tenant.
The respondents (the plaintiffs) do not contend that the appellant (the second defendant) is a 'tenant" as defined in section 5 (11) of the Act.
The appellant, on the other hand, does not and, indeed, cannot ;deny that, as between the plaintiffs and the first defendant, the suit is one between a landlord and a tenant and as such the Small Causes Court is, under section 28 of the Act, the only Court competent to entertain the suit.
Section 28 confers jurisdiction on the Court of Small Causes not only to entertain and try any suit or proceeding between a landlord and a 231 tenant relating to the recovery of rent or possession of the premises but also "to deal with any claim or question arising out of this Act or any of its provisions.
There is no reason to hold that ' "any claim or question" must necessarily be one between the landlord and the tenant.
In any case, once there is a suit between a landlord and a tenant relating to the recovery of rent or possession of the premises the Small Causes Court acquires the jurisdiction not only to entertain that suit but also "to deal with any claim or question arising out of the Act or any of its pro visions" which may properly be raised in such a suit.
The plaintiffs in this suit claimed that the purported subletting by the first defendant to the second defendant was unlawful both because it was a breach of the terms of the tenancy and also because as the statutory tenant after the determination of the contractual tenancy the first defendant was not entitled to create a sub tenancy and they questioned the validity of the second defendant 's claim to any protection under the Act.
The claim or question as to the respective rights of the plaintiffs and the second defendant thus raised in the plaint certaintly arises out of the Act and the language of section 28 appears to be wide enough to cover the same.
Apart from that section, under the ordinary law a decree for possession passed against a tenant in a suit for ejectment is binding on a person claiming title under or through that tenant and is executable against such person whether or not he was or was not a party to the suit.
The non joinder of such a person does not render the decree any the less binding on him.
It is in this sense, therefore, that he is not a necessary party to an ejectment suit against the tenant.
It is, however, recognised that such a person is, nevertheless, a proper party to the suit in order that the question whether the lease has been properly determined and the landlord plaintiff is entitled to recover possession of the premises may be decided in his presence so that he may have the opportunity to see that there is no collusion between the landlord 232 and the tenant under or through whom he claims and to seek protection under the Act, if he is entitled to ' any.
Such a person may be joined as a party to the suit from the beginning of the suit or at any later stage of the suit if the Court thinks fit to do so.
The joinder of such a proper party cannot alter the character of the suit and does not make the suit any the less a suit between the landlord and the tenant or take it out of section 28 of the Act.
To hold otherwise will be to encourage multiplicity of suits which will result in no end of inconvenience and confusion.
In our view the decision and the reasoning of Chagla C.J. are substantially correct and this appeal must fail.
We, therefore, dismiss the appeal with costs.
Appeal dismissed.
Agent for respondents Nos. 1, 2 & 3: B. A. Gagrat.

summary: Where a lease of a flat situated within the City of Bombay contained a term that the tenant shall not assign, sub let or re let the premises, without the previous consent of the landlord and the tenant, in contravention of this term sub let the flat, and the landlord instituted a suit against him and the sub tenant in the Court of Small Causes Bombay, for possession and compensation for use and occupation of the premises, and the sub lessee contended that the Court of Small Causes had no jurisdiction so far as he was concerned inasmuch as the suit was not one between a landlord and a tenant nor, one for rent within section 28 of the Bombay Rents, Hotel and Lodging Rates Control Act, 1947: Hold, (i) that the suit was clearly one for possession and the claim for compensation wag merely an incidental claim; (ii) section 28 of the Act conferred jurisdiction on the Court of Small Causes not only to entertain and try any suit or proceeding between a landlord and tenant for recovery of rent or possession, but also "to deal with any claim or question arising out of this Act or 'any of its provisions" ' and section 28 was thus wide enough to cover the question raised as between the plaintiff and the sub lessee ; (iii) in any event, though the sub lessee was not a necessary party to the suit he was a proper party, and the joinder of such a party cannot alter the nature of the suit and make it any the less a suit between a landlord and tenant or take it out of section 28.


judgement:
Appeals Nos. 237 and 238 of 1960.
Appeals by special leave from the judgment and order dated July 8, 1958, of the Patna High Court, in Misc.
Cases Nos. 713 and 819 of 1958.
A. V. Viswanatha Sastri, section R. Banerjee and section C. Mazumdar, for the appellants.
section P. Varma, for the respondents.
April 19.
The judgment of section K. Das, J. L. Kapur, M. Hidayatullah and T. L. Venkatarama AIyar, JJ., was delivered by Venkatarama Aiyar, J. J. C. Shah, J., delivered a separate judgment.
VENKATARAMA AIYAR, J.
Both these appeals arise out of the same facts and involve the determination of the same question, and this judgment will govern both of them.
The appellant in Civil Appeal No. 237 of 1960 is a company registered at Recklinghausen near Dusseldorf in West Germany, and carries on business in the manufacture and erection of plants and machinery.
On December 19, 1953, it entered into a contract with a company called Sinclair Fertilisers and Chemicals (Private) Ltd., hereinafter referred to as the Owner, for assembling and, installing machinery, plants and 84 accessories for a coke oven battery and by products plant at Sindri in the State of Bihar for an all inclusive price of Rs. 2,31,50,000.
The agreement provides that the appellants were to supply all the materials and labour required for the execution of the works, and that the performance was to be split up into two categories, the German section and the Indian section, that the German section was to consist of deliveries of materials from Germany Free on Board 'European ports, cost of technical drawings and services of German specialists, and that the Indian section was to consist of supply of Indian materials and charges for Indian labour and services to be performed in India.
The German section was to be paid out of the lump sum stated above a sum of Rs. 1,31,50,000 in pounds sterling in London on account of the appellant, and the Indian section was to be paid the balance of Rs. 1,00,00,000 in Indian currency in this country, and payments were to be made in instalments related to the progress of the contract.
Subsequent to the agreement, the appellant entrusted the work of the Indian section to an Indian company called the Coke Oven Construction Company (Private) Ltd., and the Owner having accepted this arrangement the said company has become the assignee of the contract in so far as it relates to the execution of the Indian section thereof.
It is this company that is the appellant in Civil Appeal No. 238 of 1960.
The execution of the works was completed in 1955 as provided in the agreement, and the amounts due thereunder were also paid to the two appellants.
The present dispute between the parties is as to whether the appellants in the two appeals are liable to pay sales tax on the value of the materials used by them in the execution of the works under the contract.
It will be convenient now to refer to the relevant provisions of the Bihar Sales Tax Act (Bihar Act No. XXX of 1947), hereinafter referred to as the Act.
Section2(g)of the Act defines 'sale ' as including a transfer of property in goods involved in the execution.
of contract.
'Contract ' is defined in section 2(b) as meaning any agreement for carrying out for cash or 85 valuable consideration, the construction, fitting out, improvement or repair of any building, road, bridge or other immovable property; and 'goods ' are defined in section 2(d) as including "all materials, articles and commodities, whether or not to be used in the construction, fitting out, improvement or repair of immovable property." 'Sale price ' is defined in section 2(h)(ii) as meaning the amount payable to a dealer as valuable consideration for the carrying out of any contract, less such portion as may be prescribed, of such amount representing the usual proportion of the cost of labour to the cost of materials used in carrying out such contract. 'Dealer ' is defined in section 2(c) as meaning any person who sells or supplies any goods including goods sold or supplied in the execution of a contract.
Section 2(1) defines 'turnover ' as meaning the aggregate of the amounts of sale prices received and receivable by a dealer in respect of sale or supply of goods or carrying out of any contract, effected or made during a given period.
Section 4 is the charging section, and it provides that every dealer whose gross turnover during the accounting period exceeded Rs. 10,000 shall be liable to pay tax on sales which take place in Bihar, and section 5 provides that the "tax payable by a dealer under this Act shall be levied on his taxable turnover at such rate or rates and subject, to such restrictions and conditions as may be laid down from year to year by an annual Bihar Finance, Act.
" The Bihar Finance Act defines 'taxable turnover ' as meaning that part of the dealer 's gross turnover on sales which have taken place in Bihar during any period subject to certain deductions.
Section 9(1) of the Act provides that "No dealer shall, while being liable under section 4 to pay tax under this Act, carry on business as a dealer unless he has been registered under this Act and possesses a registration certificate".
Section 13(5) of the Act under which the present proceedings have been initiated is as follows: " If upon information which has come into his possession, the Commissioner is satisfied that any dealer has been liable to pay tax under this Act in respect of any period and has nevertheless wilfully 86 failed to apply for registration, the Commissioner shall, after giving the dealer a reasonable opportunity of being heard, assess, to the best of his judgment, the amount of tax, if any due, from the dealer in respect of such period and subsequent periods and the Commissioner may direct that the dealer shall pay, by way of penalty, in addition to the amount so assessed, a sum not exceeding one and half times that amount.
" The gist of the above provisions is that in a contract for execution of works, the materials used therein are treated as sold by the contractor and their value is taken as the sale price liable to be taxed, and there are provisions for determining that value.
Acting on these provisions, the Superintendent of Sales Tax, Dhanbad, the third respondent herein, issued on March 20, 1956, a notice to the appellant in Civil Appeal No. 237 of 1960, under section 13 of the Act, stating that on information which had come to his possession he was satisfied that the appellant was liable to pay tax for the periods 1952 53, 1953 54 and 1954 55, that it had wilfully failed to register itself under section 9 of the Act, and it was directed to show cause why penalty should not be imposed.
In response to this notice, the appellant appeared before the third res pondent and represented that it had only supplied materials in execution of works contract, that there was no sale of any goods or materials by it, and that the proceedings for taxing this supply of materials as if they had been sold were illegal.
Disagreeing with this contention, the third respondent directed the appellant to produce all its books, accounts and documents for purposes of assessment, and this is quite understandable, as it was his duty to levy tax in accordance with the provisions of the Act.
Thereupon, the appellant filed petitions before the High Court of Patna under articles 226 and 227 of the Constitution for the issue of appropriate writs for quashing the proceedings before the third respondent and for prohibiting further proceedings under the Act as being wholly incompetent.
, The grounds put forward in support of the petition were firstly that the State 87 legislature having authority to enact a law imposing a tax on the sale of goods was not competent to tax what under the law was not a sale, and that as the supply of materials in the course of the execution of works, was not in law a sale of those goods, a tax on such supply was unauthorized; and secondly that, even if there was a sale of materials, that was in the course of import from Germany, and a tax thereon was repugnant to article 286(1)(b) of the Constitution.
After taking over the Indian section of the contract, the appellant in Civil Appeal No. 238 of 1960 had registered itself on May 11, 1953, as a dealer under section 9 of the Act and was submitting periodical returns as required by the certificate and the Act.
But its contention at all times has been that it is not liable to pay sales tax on the transactions in question, as there were only supplies of materials in execution of works contract and that they did not amount to sale of goods.
This contention was overruled by the Superintendent of Sales Tax, Dhanbad, the third respondent herein, and the appellant was assessed to sales tax successively for the years 1952 53 and 195354.
While proceedings by way of appeal or revision by the appellant against these orders of assessment were pending, the third respondent issued further notices for assessment of tax for the years 1954 55 and 1955 56, and directed the appellant to produce all its books and accounts for the above period.
Thereupon the appellant filed in the High Court of Patna, petitions under articles 226 and 227 of the Constitution, similar to those filed by the appellant in Civil Appeal No. 237 of 1960, for issue of appropriate writs to quash the orders of the Sales Tax authorities on the ground that the provisions of the Act, in so far as they sought to tax supply of materials in works contracts, were ultra vires.
By the time the above petitions came up for hearing, the decision of this Court in The State of Madras vs Gannon Dunkerley & Co. (Madras) Ltd. (1), had been reported, wherein it was held that the expression "sale of goods" in Entry 48 in List II of Sch.
VII to (1) ; 88 the Government of India Act, 1935, corresponding to Entry 54 in List 11 of Sch.
VII to the Constitution of India had the same meaning that it has in the , that where there is a building contract, under which specified work is to be executed for a lump sum, there is no contract of sale, as such, of materials used in the works, and that accordingly, a tax on the supply of those materials treating it as a sale was ultra vires the powers of the State Legislature under Entry 48 in List 11 of Sch.
VII to the Government of India Act, 1935.
The learned Judges were of opinion that this decision was distinguishable because there was a term in the agreement before them that the property in the materials was to pass to the owner as soon as they were brought on the site.
Dealing next with the contention of the present appellants that, as there was no agreement for the payment of price for the materials, as such, they could not be held to have been sold, the learned Judges noticed without comment the contention of the Government Pleader for the respondents, based on section 9 of the , that even though no price had been fixed for the materials, that could be determined from the account books and invoices and the course of dealings between the parties.
The learned Judges then proceeded to observe: "I wish, however, to state that I do not express any concluded opinion on the question whether there is sale of materials liable to be taxed in the present case.
The facts have not been fully investigated by the sales tax authorities and the petitioners have not furnished all the account books and documents and other relevant information for the purpose of deciding this question.
It would be open to the sales tax authorities to investigate the facts and Upon proper construction of the contract come to.
the finding whether and if so to what extent, the petitioners are liable to pay sales tax.
I have no doubt that in deciding this question the sales tax authorities will keep in view the principles laid down by the Supreme Court in State of Madras versus Gannon Dunkerley and Company (Madras) Limited (9 Sales Tax Cases 353)".
89 With these observations the learned Judges dismissed the petitions.
It is against this judgment that the present appeals by special leave are directed.
The first question that arises for our decision is ,whether on the construction of the agreement dated December 19,1953, it could be held that there was a sale by the appellants of the materials used in the construction works, apart from the execution of those works.
In The State of Madras vs Gannon Dunkerley & Co. (Madras) Ltd. (1), after stating that building contracts could assume several forms, this Court observed as follows: "It is possible that the parties might enter into distinct and separate contracts, one for the transfer of materials for money consideration and other for the payment of remuneration for services and for work done.
In such a case there are really two agreements, though there is a single instrument embodying them and the power of the State to separate the agreement of sale from the agreement to do work and render service and to impose a tax thereon, cannot be questioned and will stand untouched by the present judgment.
" The point for determination, therefore, is whether on its true construction, the contract in question is a Combination of two distinct agreements, one to sell materials and the other to supply labour and services, or whether it, is only one agreement entire and indivisible for execution of the works.
We will now refer to the relevant portion of the agreement dated December 19, 1953.
The preamble to the agreement states that the Owner had agreed with the contractor that the latter was to set up a complete coke oven battery ready for production as well as by products plants according to specifications given therein, that the installation was to be made at a site selected by the Owner and that the contractor was to "erect and construct buildings, plants and machineries and deliver and supply accessories and articles from Germany and also locally from India and render services fully (1) ; 12 90 described in the First Schedule. . for an all inclu sive price of Rs. 2,31,50,000." Then cl.
I provides that the contractor shall execute and complete the works mentioned in the Schedule, and el. 2 that the Owner shall pay to the contractor for executing the contract the sum of Rs. 2,31,50,000.
Clause 4 requires the contractor to "provide all labour, materials, machinery, plant, tools, tackles and other implements for performing the works in a workman like manner.
" Under cl. 11, the contractor guarantees "to accomplish full production within 22 months from the 15th September, 1952" and further undertakes to fulfill the guarantees prescribed in Schedule II to the agreement "to the satisfaction of the Owner within a period of three months from the date of accomplishment of full production.
" Clause 28 provides that in case the contractor fails or is unable to complete the works within the period, the Owner might take possession of the works and of the materials, "which will become the property of the owner," and complete the works and deduct from the agreed price the expenses incurred in such completion.
It is clear from the above clauses that the subject matter of the agreement was the installation of the coke oven battery and it accessories, that the sum of Rs. 2,31,50,000 was the price agreed to be paid for the execution of those works, and that there was no agreement for the sale of materials, as such, by the appellants to the Owner.
In other words, the agreement in question is a contract entire and indivisible for the construction of specified works for a lump sum and not a contract of sale of materials as such.
Now the contention that found favour with the learned Judges in the High Court was that there was in the contract a clause that the property in the, materials was to pass to the owner when they are brought on the site, and that, in effect, amounted to a sale of those materials by the appellant to the Owner.
The clause in question is as follows: "15 (ii).
All materials and plant brought by the Contractor upon the site under the German and Indian Sections in connection with the construction 91 of the Coke Oven and by products Plant shall immediately they are brought upon the site become the Owner 's property and the same shall not on any account whatsoever be removed or taken away by the Contractor or by any other person without the Owner 's prior authority in writing.
Such of them as during the progress of the works will be rejected by the Owner in accordance with the terms agreed upon between the Contractor and the Owner in this respect shall on such rejection, cease to be the Owner 's property. .
The Owner shall not be liable for any loss or damage which may happen to or in respect of such materials and plant by the same being lost, stolen or injured or destroyed by fire, tempest or otherwise for which the contractor will be liable. .
The Owner agrees that after the Coke Oven and by products Plants have been constructed according to the agreed terms, the Contractor will be entitled to remove from the site their tools, tackles, machines, packing materials, protection roof and other materials as are surplus to the requirements of the normal operation of the Coke Oven and by products Plant provided that no claim for increased cost is made in respect of anything so removed.
" In Peare Lal Hagri Singh vs The State of Punjab (1), a building contract contained the following clause: "All stores and materials brought to the Site shall become and remain the, property of Government and shall not be removed off the Site without the prior written approval of the G. E.
But whenever the works are finally completed, the contractor shall at his own expense forthwith remove from the Site all surplus stores and materials originally sup plied by him and upon such removal, the same shall revest in and become the property of the Contractor." Discussing the question whether by reason of this clause there was a Contract of sale of the materials by the Contractor, distinct from the works contract, this Court held that its object was only to ensure that (1) ; 92 materials of the right sort were used in the construction and not to constitute a contract of purchase of the materials separatism.
In the present case, el. 15 is even clearer that no sale of materials, as such, was intended, because it expressly provides that if they were destroyed by fire, tempest or otherwise, the loss would fall not on the owner, which must be the result if the property is taken to have been absolutely transferred to it, but on the contractor.
The argument based on section 9 of the is, in our opinion, equally unsound.
What that section enacts is that where there is a contract of sale of movable but the price is not mentioned, it has to be fixed either in the manner provided in the agreement or by having regard to the course of dealings between the parties, and where that is not possible, the buyer has to pay the seller a reasonable price.
But the section presupposes that there is a Contract of sale of goods, and, as held in The State of Madras V. Gannon Dunkerley & Co. (Madras) Ltd. (1), such a contract requires that there must have been an agreement between the parties for the sale of the very goods in which eventually property passes.
If, as held by us, cl. 15 does not embody an agreement for the sale of materials as such, there is no contract of sale with respect to them and section 9 of the can have no application.
The contention, therefore, that el.
15 of the agreement could be read as amounting to a contract of sale of materials, and that the price therefor could be fixed as provided in section 9 of the by recourse to the account books of the appellants or the invoices or the course of dealings between them and the owner, must be rejected as untenable.
It follows that the agreement dated December 19, 1953, being a contract for the construction of works, one and indivisible, the respondents have no right to impose a tax on the mate rials supplied in execution of that contract on the footing that such supply is a sale.
It is next contended for the respondents that, whatever the merits of the contentions based on the construction of the contract, the proper forum to agitate (1) ; 93 them would be the authorities constituted under the Act to hear and decide disputes relating to assessment of tax, that it was open to the appellants to satisfy those authorities that there have been no sales such as are liable to be taxed, that indeed they were bound to pursue the remedies under the Act before they could invoke the jurisdiction of the court under article 226 and that the learned Judges of the High Court were, therefore, right in declining to entertain the present petitions.
It is true that if a statute sets up a Tribunal and confides to it jurisdiction over certain matters and if a proceeding is properly taken before it in respect of such matters, the High Court will not, in the exercise of its extraordinary jurisdiction under article 226, issue a prerogative writ so as to remove the proceedings out of the hands of the Tribunal or interfere with their course before it.
But it is equally well settled that, when proceedings are taken before a Tribunal under a provision of law, which is ultra vires, it is open to a party aggrieved thereby to move the court under article 226 for issuing appropriate writs for quashing them on the ground that they are incompetent, without his being obliged to wait until those proceedings run their full course.
That has been held by this court in The State of Bombay vs The United Motors (India) Ltd. (1), Himmatlal Harilal Mehta vs The State of Madhya Pradesh (2).
and The Bengal Immunity Company Limited vs The State of Bihar (3).
The position that emerges is that, if the proceedings before the Sales Tax Officer are founded on the provisions of the Act, which authorizes the levy of the tax on the supply of materials in construction contracts, then they must in view of the decision in The State of Madras vs Gannon Dunkerly & Co. (Madras) Lid.
(4), be held to be incompetent and quashed.
But if the proceedings relate to any extent to sales otherwise than under the contract, then the enquiry with respect to them must proceed (1) ; , 1077.
(2) ; , 1127.
(3) , 617 619, 764 766.
(4) ; 94 before the authorities under the Act and the application under article 226 must fail.
We must now examine the true scope of the proceedings before the Sales Tax Officer in the light of the above principles.
We start with this that the Act contains provisions imposing a tax on the supply of materials under a construction contract.
The appellants were indisputably engaged in construction works under the agreement dated December 19, 1953, and it is not suggested that they were carrying on any independent business as dealers in the State of Bihar.
Presumably, therefore, when the sales tax authorities took proceedings against them, it was in respect of materials supplied by them under their contract dated December 19, 1953.
When the appellants, in response to the notice issued by the third respondent, contested their liability to be taxed, it was on the ground that the supplies of materials under the contract were not sales.
When the appellants next moved the court tinder article 226 for quashing the proceedings, they urged that the provisions of the Act, in so far as they purported to impose a tax on the materials supplied in the performance of the contract, as if they were sold, were ultra vires.
If the respondents sought to tax the appellants on the footing that sales of materials were effected outside the contract, it was their duty to have put that case forward in answer to the petition.
They did nothing of the kind.
They did not file even a counter statement.
At the time of the argument, when faced with the decision of this Court in the case of The State of Madras vs Gannon Dunkerley & Co. (Madras) Ltd. (1), their entire case was that the agreement between the parties should be construed as involving a sale of materials, and that their value could be ascertained from the invoices, account books and the course of dealings between the parties.
No contention was urged that there were sales of materials which fell outside the agreement between the appellants and the Owner.
The learned Judges of the High Court in dismissing the petitions made it clear that the investigation before the sales (1) ; 95 tax authorities must be as regards their liability to pay sales tax "upon proper construction of the contract.
" In this Court also, the respondents seek in their statement to maintain the liability of the appellants only on the basis of the contract, reliance being placed on cl. 15 already referred to and on section 9 of the .
There is no claim that the appellants are liable on the basis of sales falling outside the agreement.
It was stated before us for the appellants, and not contradicted by the respondents, that the Sindri Fertilisers and Chemicals (Private) Ltd., is a company controlled by the Government.
If that is so, the respondents were at all times in possession of facts which would have shown whether the appellants entered into any transaction decors the agreement, and it is significant that at no stage have they alleged any such facts.
We are satisfied that the proceedings have at all stages gone on the footing that the liability of the appellants arose under the contract and not otherwise.
In that view, we must hold, following the decision in The State of Madras vs Gannon Dunkerley & Co. (Madras) Ltd. (1) that the proceedings taken by the respondents for imposing sales tax on the supplies of materials by the appellants, pursuant to the contract dated December 19, 1953, are illegal and must be quashed.
In the result, the appeals are allowed and appropriate writs as prayed for by the appellants will be issued.
The appellants are entitled to their costs throughout.
SHAH, J.
In my view these appeals must fail.
The appellants claim that they are not liable to be taxed in respect of the transaction dated December 19, 1953, because it is not a sale within the meaning of the Bihar Sales Tax Act, 19 of 1947, but is a contract to assemble and install machinery, plants and accessories of a coke oven battery and other plants which under the principle of the decision of this Court in The State of Madras vs Gannon Dunkerley & Co. (Madras) Ltd. (1) is not subject to sales tax.
The Act defines "sale" as meaning omitting parts not material any transfer of property in goods for (1) ; 96 cash or deferred payment or other valuable consideration, including a transfer of property in goods involved in the execution of contract.
"Contract" is defined as meaning any agreement for carrying out for cash or deferred payment or other valuable consideration, the construction, fitting out, improvement or repair of any building, road, bridge or other immovable property.
The expression "goods" means all kinds of movable property other than actionable claims, stocks, shares or securities and includes all materials, articles and commodities whether or not to be used in the construction, fitting out, improvement or repair of immovable property.
"Sale price" means the amount payable to a dealer as valuable consideration for (1) the sale or supply of any goods, less any sum allowed as cash discount according to ordinary trade practice, but including any sum charged for anything done by the dealer in respect of the goods at the time of, or before, delivery thereof, other than the cost of freight or delivery or the cost of in stallation when such cost is separately charged; or (ii) the carrying out of any contract, less such portions as may be prescribed , of such amount, representing the usual proportion of the cost of labour to the cost of materials used in carrying out such contract.
These definitions in so far as they seek to treat goods supplied or used in the execution of a works or construction contract, as sold and liable to sales tax under the Act, must, on the decision of this Court in Gannon Dunkerley 's case (1) be regarded as beyond the legislative competence of the State Legislature.
In Gannon Dunkerley 's case (1), this Court held that in a building contract, the contractor constructs the building according to the specifications contained in the agreement and in consideration therefor receives payment as provided therein, and in such an agreement, there is neither a contract to sell the materials used in the construction, nor does property pass therein as moveables, and accordingly in a building contract which is one, entire and indivisible, there is no sale of goods and it is not within the competence of the Provincial Legislature under Entry 48 in List 11 in (1) ; 97 Sch.
VII of the Government of India Act, 1935, to impose a tax on the supply of the materials used in such a contract treating it as a sale.
Relying upon the decision of this court in Gannon Dunkerley 's case (1), the appellants contend that the amount received by them under the contract dated December 19, 1953, is not liable to be assessed to sales tax.
But the question whether the contract is a pure works contract or a composite contract has never been investi gated.
Undoubtedly, the formal document evidencing the contract suggests, prima facie, that it is a works contract, but in assessing liability to tax, the taxing authority is not restricted merely to the letter of the document: he has to enquire into the true nature of the transaction on all the relevant materials and to ascertain whether it partakes of the nature of the transaction which the statute renders taxable.
He is, in ascertaining the true nature of the contract, also entitled to consider how the contract"was performed.
The Act entrusts power to ascertain the facts on which the liability to tax depends to the taxing authorities and in that behalf, the Act is exhaustive in scope and content.
The appellants in approaching the High Court by petitions under articles 226 and 227 of the Constitution sought to eliminate the entire procedure and machinery set up by the Act for ascertaining facts on which the liability to tax depends.
I strongly deprecate the practice of the taxpayer being permitted to invoke the jurisdiction of the High Court to issue high prerogative writs on certain assumed facts facts the truth of which has never been subjected to scrutiny in the only manner in which the law provides they should be scrutinised.
The power to assess the facts on which the decision as to the true nature of the taxable transaction depends by the statute lies solely with the taxing authorities: it does not lie with any other body or tri bunal.
Invoking the jurisdiction of the High Court to adjudicate upon the facts, directly or indirectly, on which the liability to tax depends, in my view, (1) ; 13 98 amounts to inviting the High Court to exercise jurisdiction which it does not possess.
This is however not to say that the jurisdiction of the High Court to issue a writ of prohibition restraining the levy of tax under a statute can never be entertained.
If, for instance, the statute is beyond the legislative competence of the legislature or defies a constitutional restriction or infringes a fundamental right or the taxing authority arrogates to himself powers which he does not possess or attempts to levy tax more than once in respect of the same transaction when it is not permitted by the statute, or the taxing authority threatens to recover tax on an interpretation of a statutory provision imposing tax which is on the face of the statute erroneous, jurisdiction to issue writ of prohibition from the High Court may properly be invoked.
But the High Court cannot be asked to ascertain disputed facts bearing upon the taxability of a transaction, because that jurisdiction is vested elsewhere.
The contract in question is principally a works contract.
The preamble states that the appellants had agreed with the Sindri Fertilizers and Chemicals Ltd. to set up a complete coke oven battery ready for production as well as by products plant on the site specified and to construct buildings, plants and machineries and deliver and supply accessories and articles and to render services fully described in the first schedule, subject to the guarantees to be fulfilled on the part of the appellants and terms and conditions mutually agreed and settled and mentioned in the second schedule for an all inclusive price in accordance with the preliminary site plan.
It is manifest from the preamble that there is a contract for the construction of a coke oven battery and by products together with the plant, and also to deliver and supply accessories and articles.
Undoubtedly, the price agreed to be paid is an "inclusive price" in respect of the entire contract, but that does not affect the nature of the contract to deliver and supply accessories and articles.
The appellants have undertaken, subject to the terms and conditions mentioned in the contract, to execute and complete the works mentioned in the first schedule.
99 The contract in so far as it relates to the installation of plant and construction of building was a works contract and notwithstanding the definition of "sale" and "contract" in the Act, was not taxable but the contract contemplates delivery and supply by the appellant of accessories and articles.
Even if this delivery and supply of accessories and articles is incidental to the works contract, it cannot be assumed without investigation that it was not a part of a transaction of sale liable to tax.
The appellants asked the High Court to assume that the contract in question was a pure works contract, but the High Court declined to make that assumption.
Ramaswami, C. J., in dealing with that plea observed: "I wish, however to state that I do not express any concluded opinion on the question whether there is sale of materials liable to be taxed in the present case.
The facts have not been fully investigated by the sales tax authorities and the petitioners have not furnished all the account books and documents and other relevant information for the purpose of deciding this question.
It would be open to the sales tax authorities to investigate the facts and upon proper construction of the contract come to the finding whether and if so to what extent, the petitioners are liable to pay sales tax," In my view, the learned Chief Justice was right in so approaching the question.
The sales tax authorities have made no assessment; they merely issued a notice purporting to do so under section 13(5) of the Act and required the appellants to produce their books of account and records for ascertaining whether the transaction or any part thereof was in the nature of sale of goods.
The sales tax authorities had jurisdiction to do so and by merely looking at the terms of the written contract and without any investigation as to the true nature of the transaction the High Court could not decide whether the contract performed was a pure works or construction contract or was a composite contract.
It was urged that in the petition filed by the appellants before the High Court, an affidavit 100 in rejoinder challenging the correctness of the averment made in the petition that it was a pure works contract was not filed by the taxing authorities and therefore the High Court was bound to decide the dispute on the footing set up by the appellants.
But the taxing authorities could not be expected without investigation to assert a state of facts which was not and could not be within their knowledge, and their statutory authority could not, because of their failure to so assert, be nullified.
As I have already observed, the investigation of facts on the question of the liability to pay tax has to be made by the taxing authorities in whom that jurisdiction is vested.
Before the facts on which the liability to tax depends are ascertained, the High Court could not be asked to assume that the transaction was in the nature of a pure works contract and to decide the question as to the liability of the appellants on that footing.
There is no ground for assuming that the taxing authorities will not give effect to the decision of this court in Gannon Dunkerley 's case (1) after the true nature of the transaction is ascertained.
In my view, the High Court was right in declining to issue the writ prayed for.
By COURT: In accordance with the opinion of the majority, the appeals are allowed and it is directed that appropriate writs as prayed be issued.
The appellants are also entitled to their costs throughout.
Appeals allowed.

dataset_name: IN-Abs

summary:
On December 19, 1953, the appellant, a company registered in West Germany, entered into a contract with a company in India to set up a complete coke oven battery ready for production as well as by products plants at Sindri in the State of Bihar, agreeing to erect and construct buildings, plants and machinery and deliver and supply accessories and articles from Germany and also locally from India, and render services fully described in the First Schedule, for an all inclusive price of Rs. 2,31,50,000.
The contract provided that in case the contractor failed to complete the works within the period specified therein the Indian company might take possession of the works and the materials which would become its property and complete the works and deduct from the agreed price the expenses incurred in such completion.
Under cl.
15(ii) of the contract all materials brought by the contractor upon the site shall immediately become the company 's property, but such of them as during the progress of the works.
were rejected by the company ceased to be Company 's property, and after the coke oven and byproducts plants had been constructed the contractor was entitled to remove the surplus materials.
The clause further provided that the company shall not be liable for any loss if the materials were destroyed by fire or otherwise.
Under the Bihar Sales Tax Act, 1947, in a contract for, execution of works, the materials used 11 82 therein are treated as sold by the contractors and their value is taken as the sale price liable to be taxed.
The execution of the works was completed in 1955 as provided in the agreement and on March 20, 1956, the sales tax authorities issued a notice to the appellant to the effect that it was liable to pay tax for the three years 1952 to 1955, under the provisions of the Act.
The appellant represented that it had only supplied materials in execution of works contract, that there was no sale of any goods or materials by it and that the proceedings for taxing this supply of materials as if they had been sold were illegal.
The sales tax authorities having proceeded to take further steps to levy the tax in spite of its representations, the appellant filed a petition before the High Court of Patna under articles 226 and 227 of the Constitution of India for quashing the proceedings.
The High Court took the view that under cl.
15(ii) of the contract in question the property in the materials was to pass to the Indian company as soon as they were brought on the site, and that, in effect, amounted to a sale of those materials by the appellant to the company.
The Court, however, dismissed the petition on the ground that the facts had not yet been fully investigated and that it would be open to the sales tax authorities to investigate the facts and upon the proper construction of the contract come to the finding whether and if so to what extent, the appellant was liable to pay sales tax.
Held (Shah, J., dissenting): (1) that on its proper construction the agreement dated December 19, 1953, was a contract entire and indivisible for the construction of specified works for a lump sum and not a contract of sale of materials as such and that the sales tax authorities had no right to impose a tax on the materials supplied in execution of that contract on the footing that such supply was a sale.
The State of Madras vs Gannon Dunkerley & Co. (Madras) Ltd., ; and Peare Lal Hari Singh vs The State of Punjab, ; , followed.
(2) that where proceedings are taken before a tribunal under a provision of law, which is ultra vires, it is open to a party aggrieved thereby to move the court under article 226 for issuing appropriate writs for quashing them on the ground that they are incompetent, without his being obliged to wait until those proceedings run their full course.
The State of Bombay vs The United Motors (India) Ltd., ; , Himmatlal Harilal Mehta vs State of Madhya Pradesh, ; and The Bengal Immunity Company Ltd. vs State of Bihar, , relied on.
In the present case, the sales tax authorities sought to maintain the liability of the appellant to pay tax in respect of materials supplied by it only under the contract dated December 19, 953, and on the basis of the legality of the provisions 83 of the Bihar Sales Tax Act, 1947.
Consequently, the proceedings taken by them must be held to be illegal and must be quashed.
Per Shah, J. Under the agreement dated December 19, 1953, there was a contract for the construction of a coke oven battery and by products plant, and also to deliver and supply accessories and articles.
Even if this delivery and supply was incidental to the works contract, it could not be assumed without investigation that it was not a part of a transaction of sale liable to tax.
The investigation of facts on the question of liability to pay tax has to be made by the taxing authorities in whom that jurisdiction is vested.
Before these facts are ascertained, by merely looking at the terms of the written contract and without any investigation as to the true nature of the transaction, the High Court could not decide whether the contract performed was a pure works or construction contract or was a composite contract.
The High Court was, therefore, right in declining to issue the writ prayed for.


judgement:
Appeal No. 340 of 1958.
Appeal by special leave from the Judgment and Order dated July 3, 1953, of the Punjab High Court in Civil Writ Application No. 256 of 1952.
Jwala Parshad Chopra and J. K. Hiranandani, for the appellants.
Nanak Chand, R. H. Dhebar and T. M. Sen, for respondents Nos. 1 to 3. 1961.
April 21.
DAYAL, J.
This appeal, by special leave, is against the order of the Punjab High Court 153 dismissing the petition of the appellants under article 226 of the Constitution praying for quashing the orders of the Custodian General, dated June 17, 1952.
The appellants and respondents Nos. 4 and 5 are, residents of village Baland, Tehsil and District Rohtak, and are members of the body of proprietors of that village.
The village Baland is divided between three estates.
The plot in suit is in the estate known as 'Barsan '.
One Fakira, a mendicant and a non proprietor, had his house on the plot in suit.
In January, 1950, the Custodian of Evacuee Property issued a notice under section 7 of the Administration of Evacuee Property Ordinance No. XXVII of 1949, stating that the appellants were in unauthorised possession of the house of Fakira, a Muslim evacuee, and that the should either vacate the house or show cause to the contrary.
The appellants filed their objections to the notice.
The Deputy Custodian of Evacuee Property, by his order dated September 3, 1950, rejected the objections raised by the appellants and declared the house to be 'evacuee property '.
The Deputy Custodian passed this order after he got an enquiry made through the Revenue Assistant (Rehabilitation).
The appel lants went in appeal to the Additional Custodian, Evacuee Property, who got further enquiry made to ascertain whether Mumtaz, son of Fakira, evacuee, had been in occupation of the house up to the date of the migration of the Muslims as a result of the partition.
This enquiry revealed that Mumtaz had continued to reside in the village Baland and that a son was born to him in July, 1947.
The Additional Custodian therefore agreed with the report and the order of the Deputy Custodian that the property in suit was evacuee property.
The appellants then filed a revision before the Custodian General.
It was dismissed on June 17, 1952.
The Custodian General observed that there was more than sufficient evidence to establish that Mumtaz continued to be in possession of the house in dispute up to July, 1947.
Thereafter, the appellants filed a writ petition in the High Court challenging the legality of the order of the 20 154 Deputy Custodian on the grounds that the Deputy Custodian gave no notice or opportunity to them to meet the case and that the Custodian had no jurisdiction in the matter in view of the provisions of the wajibul arz according to which the house of a non proprietor, on his leaving the village, vested in the proprietory body.
The learned Single Judge who heard the petition held that the provisions of the Administration of the Evacuee Property Act, 1950 (Act XXXI of 1950), had been complied with throughout and referred the question whether the site occupied by a non proprietor vested or not in the Custodian after the occupier had abandoned it, to a larger Bench in view of his opinion that the decision of another Single Judge in Joti Parshad vs Bhawani Lal required re consideration.
The Division Bench then decided this question and held the right of a non proprietor to occupy a village site was a right in property, though it might not be an interest in property and that this right vested in the Custodian if the non proprietor left the country and became an evacuee.
The writ petition was accordingly dismissed and it is against this order that this appeal has been filed.
The sole question for determination in this case is whether Fakira had any such right in the property in suit which could vest in the Custodian on Fakira or his son Mumtaz becoming an evacuee.
The case for the appellants is that Fakira had no such right which could vest in the Custodian both on account of the terms of the wajib ul arz and on account of his being a licensee.
The respondents rely on section 18 of the to rebut this contention.
It is necessary therefore to determine the scope of section IS of the Act.
Section 18, as originally enacted, was substituted by section 8 of Act XI of 1953, which provided that the substituted section shall be deemed always to have been substituted for the original section.
Thus the present section must be deemed to be the section existing from the commencement of this Act.
Sub section (1) of section 18 is: "(1) Where the rights of an evacuee in any land 155 or in any house or other building consist or consisted of occupancy rights, nothing contained in any law for the time being in force or in any instrument having the force of law or in any decree or order of any court, shall extinguish or be deemed to have extinguished any such rights either on the tenant becoming an evacuee within the meaning of this Act or at any time thereafter so as to prevent such rights from vesting in the Custodian under the provision of this Act or to prevent the Custodian from exercising all or any of the powers conferred on him by this Act in respect of any such rights, and, notwithstanding anything containd in any such law, contract, instrument, decree, or order, neither the evacuee nor the Custodian, whether as an occupancy tenant or as a tenant for a certain time, monthly or otherwise, of any land or house or other building shall be liable to be ejected or be deemed to have become so liable on any ground whatsoever for any default of (a) the evacuee committed after he became an evacuee or within a period of one year immediately preceding the date of his becoming an evacuee; or (b) the Custodian." The expression 'occupancy rights ' has not been defined in the Act.
It is these occupancy rights which are not extinguished in spite of the provisions to the contrary in any other law or in any instrument having the force of law or in any decree or order of the Court.
The occasion when they will not be extinguished would be when a tenant becomes an 'evacuee ' within the meaning of the Act, or thereafter.
It follows that sub section
(1) of section 18 provided for the non extinguishment of those occupancy rights which would have been extinguished otherwise on the tenant 's becoming an evacuee and that therefore the person having such rights must be a tenant.
If he is not a tenant, then the occasion contemplated by sub section
(1) of section 18, for the application of its provisions, does not arise.
This is further clear from the latter part of this subsection which provides that notwithstanding anything contained in any law etc.
, neither the evacuee nor the Custodian, whether as an occupancy tenant or as a, 156 tenant for a certain time, shall be liable to be ejected or be deemed to have become so liable on any ground whatsoever for any default.
This latter part also makes it clear that the persons contemplated by the section are the tenants, whether occupancy tenants or tenants for a certain time.
We therefore hold that the provisions of section 18 apply to the occupancy rights of a tenant.
The next question to determine is whether Fakira was a tenant of this house.
It is clear that Fakira who resided in the house in suit, was not a tenant of it.
He occupied the site and probably built the house himself on getting the necessary permission from the proprietors.
With respect to non proprietors, the wajib ul arz of the village states: "No non proprietor can settle in the village or build a house without the consent of the owner of the estate.
Whenever anybody settles, he obtains land or house from the proprietor of the same and he can live there so long as he pleases.
Whenever he abandons the village, if the house belongs to the Shamlat ofit falls into the possession of that proprietorAbout the houses of non proprietors . there isno customary right to sell or mortgage residential houses, remove the material or build burnt brick house without the consent of the proprietor If any person dies heirless his house reverts to the possession of the proprietor of the estate in which it is situate.
" The mendicants are mentioned as one of the types of non proprietors settled in the Shamlat of the estate.
It is clear from these provisions that Fakira, a non proprietor, had no such right in the site as would make him a tenant of it.
He just had a right to occupy it and build a house which was, however, heritable and transferable only with the consent of the proprietor.
It follows, therefore, that the provisions of sub section
(1) of section 18, do not apply to Fakira 's rights in the plot in suit and cannot therefore over ride the provisions of the wajib ul arz according to which his right to 157 reside in the house in suit came to an end when he abandoned the village on his migrating to Pakistan.
Learned counsel for the respondent has further contended that apart from section 18 of the Act, Fakira 's right to residence in the house in suit will vest in the Custodian as his migrating from the village to Pakistan on partition does not amount to abandonment contemplated by the provisions of the wajib ul arz.
It is submitted that the wajib ul arz contemplates voluntary abandonment and not abandonment under force.
We find it difficult to accept this contention.
The abandonment is voluntary, though the volition to abandon arises on account of circumstances over which Fakira bad no control.
He left the village and migrated to Pakistan because he thought that to be the better thing to do.
This point was also not taken before the High Court.
Reliance is placed on the case reported as Associated Hotels of India vs R. N. Kapoor (1) for supporting the contention that Fakira was a lessee of the land in suit and not a licensee.
We do not think this case supports the contention.
The following propositions were laid down in that case for determining whether a document creates a licence or a lease: (1)To ascertain whether a document creates a licence or lease, the substance of the document must be preferred to the form.
(2)The real test is the intention of the parties whether they intended to create a lease or a licence.
(3) If the document creates an interest in the property, it is a lease, but, if it only permits another to make use of the property, of which the legal possession continues with the owner, it is a licence, and (4) If under the document a party gets exclusive possession of the property, prima facie, he is considered to be a tenant, but circumstances may be established which negative that intention to create a lease.
The terms of the wajib ul arz, already mentioned, make it clear that no interest in the site on which Fakira was settled was given to Fakira by the proprietors of the village.
He was just granted a heritable (1) [1060] 1 S.C.R. 368,385, 158 right to occupy it for residence.
The house reverted to the possession of the proprietors if he died heirless.
Learned counsel for the respondent has drawn our attention to the observation in the above case to the effect: "The right of the respondent to transfer his interest under the document, although with the consent of the appellants, is destructive of any theory of licence.
" This observation does not help the respondent 's case because no interest was created in Fakira and therefore no question of his transferring that interest arises.
The wajib ul arz only expresses this much, that there was no customary right to sell or mortgage residential houses, remove the material or build burnt brick houses without the consent of the proprietors.
It does not say that the non proprietor can transfer his residential right to any one with or without the consent of the proprietor.
We therefore do not agree with this contention.
It has also been contended for the respondent that the licensee 's rights which Fakira bad, could vest in the Custodian, as they come within the meaning of the expression 'property '.
Even if they do, those rights get extinguished in view of the provisions of the wajib ul arz and therefore there could be no vesting of those rights in the Custodian if the vesting of those rights is not prevented on account of the applicability of section 18 of the Act.
We have already held that section 18 does not apply as Fakira was not a tenant.
The expression 'evacuee property ' as it stood in the Act till its amendment in 1953, meant any property in which an evacuee had any right or interest, whether personal or as a trustee or as a beneficiary or in any other capacity and included any property etc.
Fakira had no right in any capacity in the property in suit when the came into force in 1950, and therefore the property in suit could not have been 'evacuee property '.
Lastly, we do not find any support in the provisions of the wajib ul arz or in any law for the observation in the judgment of the Court below: 159 "Were the evacuee to come back he could demand to take possession of the site, and so it cannot be said that the right has ceased to exist.
The right ceases only if the occupier leaves the village permanently with no intention of returning,.
It was nobody 's case that Fakira and his son had left the village temporarily and were to return.
It was said in paragraph 5 of the written statement of respondents 1 to 3 that Fakira abandoned the house only in 1947 at the time of partition.
The entire case was that Fakira had migrated to Pakistan and had abandoned the village.
We are therefore of opinion that Fakira did not possess any such right in the land in suit which could vest in the Custodian and that therefore the property in suit is not 'evacuee property '.
We therefore allow the appeal with costs throughout and, setting aside the order of the Court below, allow the petition and quash the order of the Custodian General dated June 17, 1952, declaring the property in suit to be evacuee property.
Appeal allowed.

summary:
The wajib ul arz of village Buland, teshil and district Rohtak, provided as follows: "No non proprietor can settle in the village or build a house without the consent of the owner of the estate.
Whenever anybody settles, he obtains land or house from the proprietor of the same and he can live there so long as he pleases.
Whenever he abandons the village, if the house belongs to the Shamlat of it falls into the possession of the proprietor About the houses of non proprietors there is no customary right to sell or mortgage residential houses, remove the material or build burnt brick house without the consent of the proprietor If any person dies heirless his house reverts 152 to the possession, of the proprietor of the estate in which it is situate", and mentioned the mendicants as a type of non proprietors settled in the village.
One F, a Muslim belonging to that class, migrated to Pakistan.
The appellants, who were proprietors, took possession of his dwelling house.
The Custo dian of Evacuee Property claimed it as evacuee property.
The appellants ' objection was finally dismissed by the Custodian General who held that the house was evacuee property and vested in the Custodian.
The High Court dismissed the appellants ' petition under article 226 of the Constitution holding that the right of a non proprietor to occupy a village site was a right in property and vested in the Custodian when the non proprietor became an evacuee.
In this Court, while the appellants relied on the wajib ul arz, on behalf of the respondents reliance was placed on section 18 of the .
Held, that section 18(1) of the Administration of Evacuee Pro perty Act, 1950, contemplated tenants, whether occupancy tenants or tenants for a certain time and applied only to the occupancy rights of a tenant.
Under the wajib ul arz, however, a non proprietor could have no such right in the site occupied by him as would make him a tenant of it.
Section 18(1) of the Act, therefore, had no application and the house in question reverted to the proprietors under the provisions of the wajib ul arz when the non proprietor abandoned the village and migrated to Pakistan.
It could not, therefore, vest in the Custodian.
It was not correct to say that under the wajib ul arz that F 's interest in the house was that of a lessee.
Associated Hotels of India vs R. N. Kapur, [1960] 1 S.C.R. 368, held inapplicable,


judgement:
Appeal No. 454 of 1957.
Appeal from the judgment and order dated December 16, 1954, of the Court of Judicial Commissioner, Ajmer in Civil Appeal No. 134 of 1952.
A. V. Viswanatha Sastri, section N. Andley, Rameshwar Nath and P. L. Vohra, for the appellants.
G. C. Kasliwal, Advocate General, Rajasthan, section K. Kapur and T. M. Sen, for the respondent.
325 1961.
April 24.
The Judgment of the Court was delivered by AYYANGAR, J.
This is an appeal on a certificate granted by the Judicial Commissioner, Ajmer, and is directed against the judgment of that Court dated December 16, 1954 by which the decree in favour of the respondent Union of India was affirmed.
Seth Lal Chand Kothari the original first appellant in the appeal before us (he died pending this appeal and his heirs have been brought on record as his legal representatives appellants 1 to 6) was appointed by the Commissioner Ajmer Merwara as Government Treasurer, Ajmer Merwara, by an order dated February 20, 1940, the treasuries to be under his charge being two that at Ajmer and a subtreasury at Beawar.
Before accepting office he had, under the rules, to deposit Government promissory notes to the extent of Rs. 60,000 and also execute a Security Bond for a like amount with two sureties to cover any loss to the Government in these treasuries.
He accordingly made the deposit, and a security bond was executed by him on February 27, 1940 with Seth Phool Chand who is now the 7th appellant in the appeal and one Seth Kanwarlal Ranka who died even before the suit and was not impleaded in it.
Thereupon Lal Chand Kothari was directed to take charge of the office as Treasurer and he did so on March 6, 1940.
We are not concerned with the treasury at Ajmer, but only with that at Beawar.
Lal Chand, at the time of his taking charge, executed a receipt headed " charge report" and in it is recited that he had taken over from the previous incumbent (VI. L. Patni) the amount of cash which tallied with what had to be in the treasury according to the books.
Nothing happened between 1940 and 1948 and the business at the treasury appeared to be proceeding regularly and according to the rules.
It may be mentioned that there were the usual periodical checks and audits by 42 326 Government officials but no impropriety was discovered during these checks or audits.
On March 31, 1948, the Extra Assistant Commissioner, Ajmer, made a check of the treasury at Beawar.
The treasury staff who ought to have been there were however absent in spite of their having had prior intimation of his arrival and there upon he directed the treasury to be sealed.
There were two cash chests at this sub treasury one secured with a single lock, the key of which was with the staff of the Treasurer and the other with doublelocks, the keys of which were held, one by the emplo yee of the Treasurer and the other by the Government Treasury Officer the Tahsildar.
A verification of the balance in the two chests disclosed that a sum of 7 annas, 9 pies was missing from the single lock chest and Rs. 84,215 from the chest with the double lock.
The Government thereupon took proceedings to realise the missing amount from the security of Rs. 60,000 which had been under deposit.
The Government securities were sold and they realized about rupees 58 thousands and odd leaving a sum of Rs. 25,786 13 9 ,still due.
The Union of India thereupon filed a suitCivil Suit 125 of 1951 before the Sub Judge First Class, Beawar on the security bond dated February 27, 1940 against Lal Chand Kothari and Seth Phool Chand for recovery of this sum.
Several defences were raised by the defendants but they were all rejected by the learned Subordinate Judge who granted the respondents a decree in terms prayed for in the suit.
The defendants filed an appeal to the Judicial Commissioner who dismissed it, but having regard to the fact that some of the defences turned on the interpretation of the security bond dated February 27, 1940, granted a certificate under article 133(1) of the Constitution and that is how the appeal is now before US.
Neither the factum of the loss by embezzlement nor its amount is in question, and the only points raised for consideration are: (1) whether on the terms of the bond the decree in favour of the appellants could be sustained; (2) whether the claim in the suit was not barred by limitation.
The argument on this second 327 point was that if article 83 of the Indian Limitation Act governed the claim it would be barred, and that the provision contained in article 149 prescribing a 60 year period of limitation for suits by the Government was Si, unconstitutional as violative of article 14 of the Consti tution.
It is this last plea that has led to the appeal being heard by this larger Bench.
As regards the first point that the suit claim was not comprehended within the terms of the security bond, learned Counsel made three submissions: (1) In order to render the defendants liable, the loss sustained by the Government must be proved to have occured on or after March 6, 1940 on which date alone Lal Chand Kothari took charge of the treasury.
Though loss to the extent set out in the plaint did occur at the treasury in Beawar, learned Counsel urged, the plain.
tiff respondent had not proved that it occurred after March 6, 1940.
In other words, the argument was that there was no physical checking on March 6, 1940 when he took over and because of this one could not be certain whether it was a loss which had occurred during the period of the previous incumbent in office or could with certainty be attributed to the period subsequent to March 6, 1940.
This argument was rejected by the courts below and, in our opinion, correctly.
In the face of the receipt executed by Lal Chand Kothari it would not be open to him to contend that the recitals in it were not correct, and in any event it would be for him to show that it was incorrect and, of course, there was no possibility of his establishing this.
(2) It was next urged that on the terms of the Bond read in the context of the surrounding circumstances Lal Chand Kothari would be liable only for the deficiency in the chest with the single lock and not for the loss or embezzlement or deficiency in the other chest with the double lock.
The whole basis of this argument was that the security deposit of Rs. 60,000 and the security bond for the like amount executed by the Treasurer was an indication that it was with reference to the amount which was the maximum in the chest under the single lock and from this feature it was 328 urged that it was the intention of the parties that Lal Chand Kothari would not be responsible for any embezzlement, loss or deficiency in the other chest.
This submission is without any foundation, because the liability under the Bond would depend upon its terms and in the face of the language used in the document learned Counsel realised that the submission could not be seriously maintained.
(3) The last submission under this head was that the loss having occurred in the chest with the doublelock, this could not have been without the connivance of Government officials and that therefore the liability of the Treasurer was excluded.
Learned Counsel also drew our attention to the fact that the terms of the bond made Lal Chand liable even for embezzlement by government officers, notwithstanding that he had no control over them.
But if Lal Chand agreed to those terms and this is not disputed, the terms must pre vail.
Apart from the terms of the security bond however, it would be apparent that if the key of one of the locks was with the employee of the Treasurer the defecation could not have occurred without such employee 's connivance or negligence.
If so, the fixing of liability upon the employer could not be characterised even as unreasonable apart from the liability flowing from the terms of the Bond, and such a vicarious liability for the negligence or misconduct of his servants, is not lessened by reason of the assistance or negligence of Government officials.
These exhaust the points urged based on the terms of the Bond.
It remains to deal only with the contention that the claim is barred by Limitation under article 83 of the Limitation Act on the plea that article 149 of the Limitation Act which fixes a period of 60 years for suits by the Government is unconstitutional as violating article 14 of the Constitution.
It is urged that there is no rational basis for treating claims by Government differently from those of private individuals in the matter of the time within which they could be enforced by suit.
Learned Counsel urged that statutes of limitation were statutes of repose and enacted to ensure that stale 329 claims were not agitated, so that after a reasonable length of time people might proceed on the footing that they would not be held liable for possible claims against them.
Basing himself on these principles, the argument of the learned Counsel was that for the purpose of agitating claims no distinction could be drawn between Government and private ' individuals and that on no rational basis could a legislation which permitted a longer period of limitation for claims by the State be sustained.
It is, no doubt, true that Lord Kenyon described statutes of limitation as "Statutes of repose" (vide per Dallas, C. J. in Tolson vs Kaye (1)) and Bramwell, B. as "Statutes of peace" (Hunter vs Oibbons (2)), though sometimes contrary opinions have been expressed.
In re Baker (3), Cotton, L. J. observed that pleas of limitation would never be looked upon with any favour since they are used to defeat debts clearly due.
It is however unnecessary to examine further the theory underlying statutes of limitation.
We shall proceed on the generally accepted basis that they are designed to effectuate a beneficent public purpose, Viz.
to prevent the taking away from one what he has for long been permitted to consider his own and on the faith of which he plans his life,, habits and expenses.
This however does not militate against there being a rational basis for a distinction being drawn between the claims of the State and the claims of the individual in the matter of a provision of a bar of limitation for enforcing them.
In considering this matter two points have to be kept separate: (1) whether a distinction could be drawn or a classification supported between the provision of any variation in the time that should be available for enforcing claims by private individuals and claims by the State, (2) whether, if such a classification were good, the period of 60 years provided by article 149 of the Indian Limitation Act is such a long period of time as to be unreasonable.
We are drawing attention to the distinction between these two points because learned Counsel laid (1) , 223: ; , 126g.
(2) ; , 5.
(3) , 270.
330 much stress on the fact that the period, of limitation fixed by article 149 was 60 years and that this was an unreasonably long period of time.
If learned Counsel is right in his submission that there is no rational basis for placing private individuals and the Government in different classes while framing a legislation providing for limitation for actions he might succeed; but if he is wrong there and the correct view is that there is a rational basis of classification, then the period that should be allowed to the Government to file a suit would be a matter of legislative policy and could not be brought within the scope or purview of a challenge under article 14 or indeed of any other article in the Constitution.
It is sufficient therefore if we confine ourselves to the first point, viz., whether there is a rational basis for treating the Government differently as regards the period within which claims might be put in suit between the Government on the one hand and private individuals on the other.
First and foremost there is this feature that the Limitation Act, though a statute of repose and intended for quieting titles, and in that sense looks at the problem from the point of view of the defendant with a view to provide for him a security against stale claims, addresses itself at the same time also to the position of the plaintiff.
Thus, for instance, where the plaintiff is under a legal disability to institute a suit by reason of his being a minor or being insane or an idiot, it makes provisions for.
the extension of the period taking into account that disability.
Similarly, public interest in a claim being protected is taken into account by section 10 of the Act by providing that there shall be no period of limitation in the case of express trusts.
It is not necessary to go into the details of these provisions but it is sufficient to state that the approach here is from the point of view of protecting the enforceability of claims which, if the ordinary rules applied, would become barred by limitation.
It is in great part on this principle that it is said that subject to statutory provision, while the maxim vigilantibus et non dormientibus jura Subveniunt is a rule for the subject, the maxim nullum tempus occurit regi 331 is in general applicable to the Crown.
The reason assigned was, to quote Coke, that the State ought not to suffer for the negligence of its officers or for their fraudulent collusion with the adverse party.
It is with this background that the question of the special provision contained in article 149 of the Act has to be viewed.
First, we have the fact that in the case of the Government, if a claim becomes barred by limitation, the loss falls on the public, i.e., on the community in general and to the benefit of the private individual who derives advantage by the lapse of time.
This itself would appear to indicate a sufficient ground for differentiating between the claims of an individual and the claims of the community at large.
Next, it may be mentioned that in the case of governmental machinery, it is a known fact that it does not move as quickly as in the case of individuals.
Apart from the delay occurring in the proper officers ascertaining that a cause of action has accrued Government being an impersonal body, before a claim is launched there has to be inter departmental correspondence, consultations, sanctions obtained according to the rules.
These necessarily take time and it is because of these features which are sometimes characterised as red tape that there is delay in the functioning of government offices.
It is precisely for this reason that we have from the earliest Civil Procedure Codes provisions which find place in the Code of 1908, like O.27,rr.5 and 7 reading: "0. 27.
The Court in fixing the day for the Government to answer to the plaint, shall allow a reasonable time for the necessary communication with the Government through the proper channel, and for the issue of instructions to the Government Pleader to appear and answer on behalf of the Government and may extend the time at its discretion. 0. 27.
r. 7(1).
Where the defendant is a public officer and, in receiving the summons, considers it proper to make a reference to the Government before answering the plaint, he may apply to the Court to 332 grant such extension of the time fixed in the summons as may be necessary to enable him to make such reference and to receive orders thereon through the proper channel.
(2) Upon such application the Court.
shall extend the time for so long as appears to it to be necessary.
" These matters apart, the ratio underlying the special provisions for summary recovery of amounts due to Government without resort to suits by a procedure not available for enforcing the dues of private individuals, like the "Revenue Recovery Acts" and "Public Demands Recovery Acts" which, have been on the statute book for over a century is also similar, viz., the interest of the public and of the community in realising what is due to it expeditiously; and the constitutional validity of such provisions have been sustained by this Court.
In Purshottam Govindji Halai vs Desai (1) this Court held that section 13 of the Bombay Land Revenue Act, 1876, by virtue of which a person had been arrested in pursuance of a warrant issued for recovery of a demand certified under section 46(2) of the Indian Income tax Act, did not offend article 14 of the Constitution.
Similarly, in Collector of Malabar vs Ebrahim (2) the arrest of a defaulter in respect of an income tax demand under section 48 of the Madras Revenue Recovery Act was held not to offend article 14 of the Constitution.
Perhaps another decision of this Court of more immediate relevance, in which the point now raised that there is no rational basis for distinguishing between the claims of the Government and the claims of private individuals was considered and negatived, is that in Mannalal vs Collector, Jahalwar (3) in which judgment was delivered on December 7, 1960.
In this last case it was urged before this Court that the summary mode of recovery of amounts due to the Government for which provision was made by the Rajasthan Public Recovery Act there impugned a mode of recovery which was not available to the private citizen contravened the equal protection of (1) ; (2) ; (3) ; 333 the laws guaranteed by article 14 and this contention was repelled.
The argument of learned Counsel for the appellants has therefore to be rejected both on the around of principle as well as on the ratio under lying the decisions of this Court.
The appeal fails and is dismissed with costs.
Appeal dismissed.

summary:
The Government filed a suit on the basis of a security bond executed by a Government Treasurer and certain sureties who joined in the execution of the bond.
The contention in defence, inter alia, was that article 149 Of the Indian Limitation Act prescribing a 60 years period of limitation for suits by the Government was unconstitutional as violative of article 14 Of the Constitution and as such the suit was barred under article 83.
Held, that statutes of limitation are designed for the bene ficent public purpose of preventing the taking away from one what he has been permitted to consider his own for a long time and on the faith of which he plans his future life.
If the suit was by a private individual the suit would have fallen under article 83 and would have been barred by it but different considerations arise in the case of the State and there is a distinction between claims by the Government and those of private individuals.
Article 149 Of the Limitation Act, 1908, which fixes a period of 60 years for suits by the Government has a reasonable basis of classification between the Government and private individuals, and the exact period that should be allowed to the Government to file a suit would be a matter of legislative policy and as such its constitutional validity cannot be questioned under article 14 Of the Constitution.
Purushottam Govindji Halai vs Desai, ; , Collector of Malabar vs Ebrahim, ; and Mannalal vs Collector of Jhalway, ; , applied.