judgement:
N: Criminal Appeal No. 284 of 1974.
From the judgment and order dated the 12th April, 1973 of the Madhya Pradesh High Court in Criminal Appeal No. 43 of 1971.
F. section Nariman, Addl.
Solicitor General of India, P. P. Rao and R. N. Sachthey, for the appellant.
The respondent appeared in person.
The Judgment of the Court was delivered by FAZAL ALI, J.
This is an appeal by State of M.P. by certificate granted by the High Court of Madhya Pradesh under article 134(1)(c) of the Constitution against its judgment and order dated April 12, 1973 by which the respondent who was convicted by the Special Judge, Indore, under section 220 I.P.C. and s.5(2) read with section 5(1)(d) of the Prevention of Corruption Act, 1947 and sentenced to one year rigorous imprisonment on each count, was acquitted by the High Court.
Briefly put, the prosecution case against the respondent was that he was an employee in the Heavy Electricals (India) Ltd, Bhopal which is a Government company and was working at the relevant time as Personal Assistant to Shri C. Rae, Manager, Purchasing & Main Stores of the Company.
Mr. Rae was allotted a new Fiat Car at Bombay on priority basis and the respondent and Mr. Rae had arrived at Bombay to take delivery of the car on March 14, 1965 and they stayed there till March 13.
Mr. Rae, however, left on the morning of March 13, 1965 directing the respondent to obtain delivery of the Fiat Car on March 14, 1965 and then proceed to Indore.
Ultimately the car was brought to Bhopal on March 16, 1965 at about 2 30 P.M.
On March 23, 1965 the respondent submitted his T.A. bill Ext.
P 21 showing his departure from Bombay on March 16, 1965 by car at 2 00 P.M. 8 and arrival at Bhopal on March 17, 1965 at 6 30 P.M. and claimed daily allowance at the rate of Rs. 12/ per day for halt at Bombay.
The respondent accordingly received the full amount of the T.A. Bill on April 3, 1965.
The allegation against the respondent was that he had prepared a false T.A. Bill and had cheated the Government Company and was guilty of serious criminal misconduct as envisaged by the Prevention of Corruption Act.
The learned Special Judge, Indore, accepted the prosecution case and convicted the respondent as indicated above.
The respondent then filed an appeal before the High Court of Madhya Pradesh which allowed appeal, mainly on the ground that as the respondent was not a public servant as contemplated by the provisions of the Prevention of Corruption Act, his trial under the said Act was without jurisdiction.
The High Court, however, left it open to the Government to prosecute the respondent under the relevant law, if necessary.
It is against this order of the High Court that the State of M.P. has filed this appeal before us after obtaining certificate of fitness from the High Court.
The short point taken by the respondent before the High Court was that as the word "public servant" has not been expressive defined in the Prevention of Corruption Act, 1947, it has borrowed the definition from section 21 of the Indian Penal Code, such a definition amounts to legislation by incorporation, and therefore any subsequent amendment, addition or alteration in the Indian Penal Code would not at all affect the incorporated provision in the Prevention of Corruption Act.
The High Court seems to have readily accepted this contention and has accordingly held that as the various amendments to section 21 of the Indian Penal Code cannot apply to the provisions of the Prevention of Corruption Act, and therefore the respondent being only an employee of the Government Company does not fall within the ambit of public servant as defined in section 21 of the Indian Penal Code prior to the amendment.
In order of appreciate this point, it may be necessary to set out the scheme of the Prevention of Corruption Act hereinafter referred to as 'the Act ' with particular reference to section 21 of the Indian Penal Code hereinafter referred to as 'the Penal Code ' which has been incorporated in the Act.
To begin with, the preamble to the Act clearly shows that the Act has been passed for more effective prevention of bribery and corruption, bribery being a form of corruption.
Section 2 of the Act runs thus: "For the purpose of this Act, "Public servant" means a public servant as defined in section 21 of the Indian Penal Code.
" It would be seen that section 2 of the Act completely incorporates the provision of section 21 of the Penal Code in order to define a "public servant".
The Legislature in its wisdom did not think it necessary to give a separate definition of "public servant" in the Act, but in order to achieve brevity in legislation incorporated the provision of section 21 of the Penal Code into it.
before the Criminal Law (Amendment) Act, 1958 (Act No. 11 of 1958) was passed section 21 of the Penal Code consisted only of eleven clauses and an employee under the 9 Corporation or a Government Company did not fall within the purview of any of the clauses of section 21 of the Penal Code.
Thus when the Legislature incorporated the provisions of section 21 of the Penal Code in the Act in the year 1947, cl. 12 was not there at all on the statute book of the Penal Code.
The High Court took the view that as the Act had incorporated the definition of the Penal Code prior to its amendment, therefore, it became an integral and independent part of the Act and would remain unaffected by any repeal or change in the previous Act, namely the Penal Code.
It appears, however, that by virtue of the Criminal Law (Amendment) Act, 1958, twelfth clause was inserted in section 21 of the Penal Code, which runs as follows: "Twelfth.
Every officer in the service or pay of a local authority or of a corporation engaged in any trade or industry which is established by a Central, Provincial or State Act or of a Government company as define in section 617 of the ." This Act also amended certain provisions of the Prevention of Corruption Act, 1947 in enlarging the concept of criminal misconduct but it did not at all amend any portion of section 2 of the Act, perhaps the reason being that in view of the enlargement of the definition of "public servant" in section 21 of the Penal Code express amendment of section 2 of the Act was not necessary.
By virtue of the Anti Corruption Laws (Amendment) Act, 1964 (Act No. XL of 1964), clause 12 of s 21 of the Penal Code was substituted as follows: "Twelfth.
Every person (a) in the service or pay of the Government or remunerated by fees or commission for the performance of any public duty by the Government; (b) in the service or pay of a local authority, a corporation established by or under a Central, Provincial or State Act or a Government company as defined in section 617 of the ," It would thus appear that by virtue of these two amendments the Parliament sought to enlarge the definition of "public servant" so as to include even an employee of a Government company or a corporation with the avowed object of stamping out corruption at various levels prevailing in the country.
The question that arises for consideration is whether the sub sequent amendments to section 21 of the Penal Code after its incorporation in the Act would have to be read into the Act or not.
It is true that if the doctrine of legislation by incorporation is strictly applied in this 10 case, then the definition of section 21 of the Penal Code prior to its amendment by Act 11 of 1958 and Act XL of 1964 would alone stand and, if this is so, the respondent would not be a public servant within the meaning of section 21 of the Penal Code.
It is well settled that where the subsequent Act incorporates a provision of the previous Act, the position is that the borrowed provision is bodily lifted from the previous Act and placed in the subsequent Act and becomes an integral and independent part of it so as to remain unaffected by any repeal, change or amendment in the previous Act.
In Clarke vs Bradlaugh,(1) Brett, L.J., observed as follows: ". . but there is a rule of construction that, where a statute is incorporated by reference into a second statute the repeal of the first statute by a third does not affect the second." These observations were noticed and approved by this Court in Ram Sarup vs Munshi and others(1), where this Court made the following observations: "Where the provision of an Act are incorporated by reference in a later Act the repeal of the earlier Act has, in general, no effect upon the construction or effect of the Act in which its provisions have been incorporated.
The effect of incorporation is stated by Brett, L.J., in Clarke vs Bradiaugh: "Where a statute is incorporated, by reference into a Second statute the repeal of the first statute by a third does not affect the second.
" In the circumstances, therefore, the repeal of the Punjab Alienation of Land Act of 1900 has no effect on the continued operation of the Pre emption Act and the expression 'agricultural land ' in the later Act has to be read as if the definition in the Alienation of Land Act had been bodily transposed into it." F The doctrine of incorporation by reference to earlier legislation has been very aptly described by Lord Esher, M. R., in In re Wood 's Estate, Ex parte Her Majesty 's Commissioners of Works and Building(3) where he observed as follows: "If a subsequent Act brings into itself by reference some of the clauses of a former Act, the legal effect of that, as has often been held, is to write those sections into the new Act just as if they had been actually written in it with the pen, or printed in it, and, the moment you have those clauses in the later Act, you have no occasion to refer to the former Act at all For all practical purposes, therefore, those sections of the Act of 1840 are to be dealt with as if they were actually in the Act of 1855.
" 11 Craies on Statute Law, (7th Edition), while referring to the observations of Brett, L.J., observed at p. 361 as follows "There is a rule of construction that where a statute is incorporated by reference into a second statute, the repeal of the first statute by a third does not affect the second, as the incorporated provisions have become part of the second statute." The Privy Council in Secretary of State for India in Council vs Hindustan Co operative Insurance Society Ltd. (1), while amplifying this doctrine, observed as follows: "Their Lordship regard the local Act as doing nothing more than incorporating certain provisions from an existing Act, and for convenience of drafting doing so by reference to that Act, instead of setting out for itself at length the provisions which it was desired to adopt.
The independent existence of the two Acts is therefore recognized; despite the death of the parent Act, its offspring survives in the incorporating Act.
Though no such saving clause appears in the General Clauses Act, their Lordships think that the principle involved is as applicable in India as it is in this country.
" Thus, the position is that after the provision of the previous Act is incorporated in the subsequent Act, the off spring, namely the incorporated provisions, survives even if the previous Act is repealed, amended, declared a nullity or erased from the statute book.
The High Court appears to have relied on all these decisions in order to come to its conclusion that as the Act has incorporated the provisions of section 21 of the Penal Code in section 2 thereof, any amendment in the previous Act, namely the Penal Code, will not affect the subsequent Act, namely the Prevention of Corruption Act.
It was argued before the High Court as also before us that the Act and the Penal Code are statutes in pari materia and form part of one system and they should, therefore, be interpreted as enforcing each other.
Thus any change in the definition of section 21 of the Penal Code would have to be implicitly read into s.2 of the Act.
The Additional Solicitor General Mr. Nariman appearing for the State, however, conceded later on, and in our opinion rightly.
that it may not be possible to hold that the Act and the Penal Code were statutes in pari materia.
It would appear that the Act is a completely self contained statute with its own provisions and has created a specific offence of criminal misconduct which is quite different from the offence of bribery as defined in the Penal Code.
Both these statutes have different objects and create offences with separate ingredients.
No authority has been cited before us in support of the proposition that the Act, namely, the Prevention of Corruption Act, and the Penal Code are statutes in pari materia so as to form one system.
12 In the State of Madras vs Vaidyanath Aiyar, (1) this Court while construing the meaning of the phrase 'it shall be presumed ' appearing in section 4 of the Act utilised the construction placed on the phrase shall presume ' in the Evidence Act by holding that the Evidence Act was a statute in pari materia with the Prevention of Corruption Act.
There can be no doubt that the Evidence Act and the Prevention of Corruption Act form part of one system, because the rules of the Evidence Act, with minor exceptions, apply to trials of offences created under the Act.
This principle, however, cannot apply to the present case, where, as we have already stated the areas of the two statutes, namely the Act and the Penal Code are entirely different.
Secondly, while the Indian Penal Code is essentially a penal statute of a much wider scope than the Act, the Act no doubt contains a penal flavour but it is in effect a piece of social legislation directed towards eradication of the evil of corruption amongst the services alone In other words, public servants alone fall within the mischief of the Act i.e. the Prevention of Corruption Act, and no one else.
Mr. Nariman then argued that having regard to the preamble and the object of the Act and the Penal Code there can be no doubt that the Act was undoubtedly a statute supplemental to the Penal Code and that being the position any amendment in the definition of section 21 of the Penal Code would have to be read into section 2 of the Act, because once the definition of s.21 of the Penal Code was incorporated in the Act it had to be imported into the other Act and considered pari passu the Penal Code.
In our opinion, this argument is well founded and must prevail.
We have already indicated that the object of the Act was to eradicate corruption from various levels either in Government services or in services under the Corporations or Government companies.
The Penal Code no doubt creates offences like those mentioned in sections 161 and 165 of the Code but they were not found sufficient to cope with the present situation and the expanding needs of the nation.
In these circumstances, it was considered necessary to evolve a quick, expeditious and effective machinery to destroy the evil of corruption existing in any from.
If, therefore, the Penal Code with the same object enlarged the definition of s.21 by adding the twelfth clause by virtue of the Criminal Law (Amendment) Act, 1958 and the Anti corruption Laws (Amendment) Act, 1964, there is no reason why the extended meaning to the provision of s.2 of the Act as borrowed from section 21 of the Penal Code be not given to that section.
This Court in section Gangoli vs The State of Uttar Pradesh(2) while interpreting section 2 of the Prevention of Corruption Act, that the accused were public servants within the meaning of the Act, being employees of the East Indian Railway, which was managed and owned by the Government of India, observed as follows: "The East Indian Railway which has employed the appellants was at the material time owned by the Government of India and managed and run by it, and so if the status of the appellants had to be judged at the material date solely 13 by reference to s.21 of the Code there would be no difficulty in holding that they are public servants as defined by the said section.
" Even while discussing the exact ambit and scope of the Prevention of Corruption Act, this Court observed in M. Narayanan Nambiar vs Slate of Kerala(1) as follows: "The preamble indicates that the Act was passed as it was expedient to make more effective provision for the prevention of bribery and corruption.
The long title as well as the preamble indicate that the Act was passed to put down the said social evil i.e. bribery and corruption by public servant. .
It also aims to protect honest public servants from harassment by prescribing that the investigation against them could be made only by police officials of particular status and by making the sanction of the Government or other appropriate officer a pre condition for their prosecution.
As it is a socially useful measure conceived in public interest, it should be liberally construed so as to bring about the desired object, i.e. to prevent corruption among public servants and to prevent harassment of the honest among them.
" These observations regarding the object of the Act obviously were based on the footing that the Act must be read as supplemental to the Penal Code, and therefore the definition borrowed from the Penal Code must be read into section 2 of the Act not only at the time when it was borrowed but even at the material date when the offence is committed.
This being the position it is manifest that by virtue of the amendments referred to above in the Penal Code which inserted twelfth clause to s.21 of the Penal Code the respondent clearly comes within the meaning of "public servant" and the High Court was in error in taking a view to the contrary.
Further the Prevention of Corruption Act being a social legislation its provisions must be liberally construed so as to advance the object of the Act.
This can only be done if we give extended meaning to the term "public servant" as referred to in section 2 of the Act by applying the enlarged definition contained in clause 12 inserted in the Penal Code by the two amendments referred to above.
There is yet another aspect of the matter which is spelt out from the decision of the Privy Council in the Hindustan Co operative Insurance Society 's case (supra) which has been relied upon by the High Court itself.
While reiterating the principle that after certain provisions from an existing Act have been incorporated into a subsequent Act, no addition to the former Act can be made, their Lordships of the Privy Council made it clear that this principle would not apply where the subsequent Act is rendered unworkable or is not able to function effectually.
In this connection their Lordships observed.
as follows: 14 "It seems to be no less logical to hold that where certain provisions from an existing Act have been incorporated into a subsequent Act, no addition to the former Act, which is not expressly made applicable to the subsequent Act, can be deemed to be incorporated in it, at all events if it is possible for the subsequent Act to function effectually without the addition " On a consideration of these authorities, therefore, it seems that the following proposition emerges: Where a subsequent Act incorporates provisions of a previous Act then the borrowed provisions become an integral and independent part of the subsequent Act and are to tally unaffected by any repeal or amendment in the previous Act.
This principle, however, will not apply in the following cases: (a) where the subsequent Act and the previous Act are supplemental to each other; (b) where the two Acts are in pari materia; (c) where the amendment in the previous Act, if not imported into the subsequent Act also, would render the subsequent Act wholly unworkable and ineffectual; and (d) where the amendment of the previous Act, either expressly or by necessary intendment, applies the said provisions to the subsequent Act.
The Additional Solicitor General vehemently contended that if the enlarged definition by the insertion of clause 12 in section 21 of the Penal Code is not imported into section 21 of the Act, then the Act would become wholly unworkable.
For instance, if two persons are serving under a Government company and have committed an offence of accepting illegal gratification, and if one is prosecuted under section 161 of the Penal Code and the other under the Act, it is obvious that the prosecution against the employee under the Penal Code would succeed on proof of facts, whereas the employee of the same company who is prosecuted under the Act will fail because such an employee will not be a public servant, according to the extended meaning given by the amendments to section 21 of the Penal Code.
This will, therefore, defeat and frustrate not only the object of the Act but will render it absolutely unworkable.
In view of these circumstances, therefore, we are inclined to hold that in the facts and circumstances of the present case and having regard to the nature and scope or the Prevention of Corruption Act, the extended definition of s.21 of the Penal Code would have to be imported into section 2 of the Act.
That being the position there can be no doubt that the respondent was a public servant within the meaning of section 2 of the Act and his conviction by the learned Special Judge, Indore, did not suffer from any legal infirmity.
There is yet another aspect of the matter.
lt seems to us that even if section 2 of the Act had not applied the provisions of the Penal Code and had not defined public servant, then the provisions of the 15 Penal Code would have come into operation by implied reference because the.
Act was a supplemental Act to the Penal Code.
It was only by way of abundant caution that section 2 of the Act incorporated the definition of public servant" as mentioned in section 21 of the Penal Code and in that sense alone the Act can be treated as being pari materia with the Penal Code.
For these reasons therefore for are clearly of the opinion that the judgment of the High Court holding that the respondent was not a public servant is legally erroneous and cannot be allowed to stand.
The other point is regarding the question of sentence.
The High Court has itself pointed out that the respondent had been forced under duress exercised by his superior officer in drawing the inflated travelling allowance.
The High Court has also expressed the view that having regard to the fact that as the accused had to face a trial for a numher of years, the Government will consider the desirability of not prosecuting him again.
In view of these circumstances, therefore, we feel the respondent has committed only a technical offence and a token sentence is called for We, therefore, allow the appeal, set aside the judgment of the High Court dated April 12, 1973, acquitting the respondent.
We convict the respondent under section 420 I.P.C. and section 5(2) read with section 5(1)(d) of the Prevention of Corruption Act but reduce his sentence to the imprisonment already served.
V.M.K. Appeal allowed.

summary:
Section 2 of the Prevention of Corruption Act, 1947, provides that, for the purposes of this Act, "Public servant" means a public servant as defined in section 21 of the Indian Penal Code.
Before the Criminal Law (Amendment) Act, 1958 (Act No. 11 of 1958) was passed adding clause 12 to this section, section 21 of the Penal Code consisted only of eleven clauses and an employee under the Corporation or a Government Company did No. fall within the purview of any of the clauses of section 21 of the Penal Code.
Clause 12 was further amended by the Anti Corruption Laws (Amendment) Act, 1964 (Act No. XL of 1964) enlarging the definition of "public servant".
The respondent who was an employee in the Heavy Electricals (India) Ltd. Bhopal, which is a Government Company, was convected by the Special Judge Indore, under section 420 I.P.C. and section 5(2) read with section 5(1)(d) of the Act and was sentenced to one year rigorous imprisonment on each count.
The appeal filed by the respondent before the High Court of Madhya Pradesh was allowed mainly on the ground that as the respondent was not a public servant as contemplated by the provisions of the Act, his trial under the Act was without jurisdiction.
The High Court took the view that as the Act had incorporated the definition of the Penal Code prior to its amendment, it became an integral and independent part of the Act and would remain unaffected by any repeal or change in the previous Act, namely, the Penal Code.
This appeal has been preferred on the basis of the certificate granted by the High Court.
Allowing the appeal, ^ HELD: (i) It is well settled that, after the provision of the previous Act is incorporated in the subsequent Act, the off spring, namely, the incorporated provisions, survives even if the previous Act is repealed, amended, declared a nullity or erased from the statute book.
But the Act being a social legislation its provisions must be construed liberally so as to advance the object of the Act.
Though the Act and the Penal Code are not statutes in pari materia there can be no doubt that the evidence Act and the Prevention of Corruption Act form part of one system, because the rules of Evidence Act, with minor exceptions, apply to trials of offences created under the Act.
The Act, no doubt, contains a penal flavour but it is in effect a piece of social legislation directed towards eradication of the evil of corruption amongst the services alone.
In other words, the public servants alone fall within the mischief of the Act and no one else.
[11E; 12A C] Clarke vs Bradlaugh, ,69, Ram Sarup vs Munshi and other ; , 868 869, In re Wood 's Estate, Ex parte Her Majesty 's Commissioners of Works and Buildings, [18861 , 615 616, Secretary of State for India in Council vs Hindustan Co operative Insurance Society Ltd. L.R. 58 I.A. 259.
266 267. referred to.
State of Madras vs Vaidyanath Aiyar, A.I.R. 1958 S.C. 61, relied on.
(ii) The object of the Act is to eradicate corruption from various levels either in Government services or in service under the Corporation or Government Companies.
The Penal Code no doubt creates offences like those mentioned in sections 161 and 165 of the Code but they were not found sufficient to cope with the present situation and the expending needs of the nation.
In these circumstances, 7 it was considered necessary to evolve a quick, expeditious and effective machinery to destroy the evil of corruption existing in any form.
If, therefore, the Penal Code with the same object enlarged the definition of section 21 by adding the twelfth clause by virtue, of the Criminal law (Amendment) Act, 1958 and the Anti corruption Laws (Amendment) Act, 1964, there is no reason why the extended meaning to the provision of section 2 of the Act ns borrowed from section 21 of the Penal Code be not given lo that section.
Otherwise the Act would become wholly unworkable.
[12D F] Secretary of State for India in Council vs Hindustan Co operative Insurance Society Ltd. L.R. 58 I.A. 259, 266 267.
section Gangoli vs The State of Uttar Pradesh, [1960] 1 section C. R. 290 and M. Narayanan Nambiar vs State of Kerala, [1963 Supp. 2 S.C.R. 724.
referred to.
(iii) Even if section 2 of the Act had not applied the provisions of the Penal Code and had not defined public servant, then the provisions of the Penal Code would have come into operation by implied reference because the Act was a supplemental Act to the Penal Code.
It was only by way of abundant caution that section 2 of the Act incorporated the definition of "public servant" as mentioned in section 21 of the Penal Code and in that sense alone the Act can be treated as being pari meteria with the Penal Code.
[15A B]


judgement:
Civil Appeal No. 2166 of 1970.
of 1970 From the Judgment and Order dated the 31st October, 1968 of the Allahabad High Court in W.P. No. 3233 of 1968.
section C. Manchanda and A. G. Ratanaparkhi, for the appellant.
T. A. Ramachandran, for the respondent.
The Judgment of the Court was delivered by KRISHNA IYER, J.
The freak but few facts of this appeal appear to highlight an issue of morality versus legality.
But closer scrutiny whittles down this conflict and induces us to dismiss the appeal, subject to certain observations warranted by the circumstances of the case.
We may proceed straight to a miniaturised statement of the circumstances giving rise to the controversy before us.
The appellant has been the owner of a mango grove of long ago from which he has been deriving income by way of fruits and fallen trees.
Way back in 1939 40 he claimed this income to be agricultural and therefore immune to Central income tax.
His plea was over ruled by the Income tax officer, but adverse orders notwithstanding, the assessee reached the High Court undaunted by the disappointment he met with as he steered through the statutory spiral of authorities.
Unfortunately, on account of the zigzag course of this litigation which had its deck by deck slow motion, more than two decades passed before the High Court could pronounce at long last in favour 5 of the appellant holding that the income in dispute was agricultural t income and therefore could not be taxed.
The State did not carry the case further to this Court and thus the decision of the Allahabad High Court rendered on March 21, 1963 became final.
As a proposition of law, on the facts of the case the ruling was that such income as arose from mango fruits and fallen trees was agricultural income and therefore outside the pale of the 51 Income tax Act (vide s.4(3) of the Income tax Act).
We have no reason to disagree with this view and proceed to dispose of this writ appeal which has come to us by certificate under article 133(1)(a) of the Constitution on the footing that for all the assessment years with which we are concerned as will be explained presently what has been taxed and is in dispute is agricultural income.
Some more facts are necessary to bring out the real grievance of the appellant.
We have already mentioned that although the first assessment related to the year 1939 40, the final pronouncement by the High Court came only in 1963.
During this protracted pendency, years rolled on.
and, at the base, the tax officer was busy ritually repeating annually, by his orders, the tax impost on similar income accruing year after year treating it as non agricultural income.
In deed, the assessee had been assessed to tax for 21 years on this assumption but he filed appeals only for 8 years, and even that only upto the Appellate Assistant Commissioner 's level where he left it off apparently in the hope that if ultimately the High Court upheld his contention for one year, the tax authorities would give effect to that holding for all the years not a fantastic assumption if Government were a virtuous litigant.
At this stage we may state that for the years 1940 41, 1941 42, 1947 48, 1949 50, 1950 51 and 1958 59 to 1961 62 appeals had been preferred most of which were dismissed although in one year or so the appellate authority gave relief accepting the plea of agricultural income.
So far as the Income tax officer was concerned, he uniformly adopted the hostile line of treating the income as non agricultural and, except for the years referred to above, the assessee did not think it necessary was it wise or otherwise the sequel proves to challenge these assessment orders.
But when the High Court held in his favour in 1963 for the assessment year 1939 40, he applied for refund to the Central Board of` Direct Taxes of the tax paid by him for the other years on the glib ground that, limitation apart, the income having been found by the High Court to be agricultural, had to be excluded from the tax.
The Central Board of Revenue, however.
declined to oblige him and when on May 11, 1968 his petition was rejected, the assessee moved the High Court under article 226 seeking many reliefs including a direction to the Central Board to issue 'necessary instructions to the Income tax officer, Faizabad,. for the purpose of passing final assessment orders for the assessment years 1940 41 to 1961 62 and for another writ 'quashing the order of the Central Board of Direct Taxes dated 11th May 1968 wherein the Board declined to interfere in the matter in dispute '.
A Division Bench of that Court dismissed the writ petition on two grounds: (a) that the assessment orders for the relevant years had become final the assessee not having taken advantage of his remedy provided for in the statute; (b) that several years had lapsed between the last impugned order which related to the assessment year 1961 62 and the writ petition which was filed in September 1968.
However, the Court made an observation that if so advised, the petitioner may file appeals under section 30 of the Indian Income tax Act, 1922 and pray for condonation of delay under section 30(2) of the said Act.
Surely discomfited.
52 the assessee has come up to this Court hopefully and urged that the various assessment orders were void, that the State was bound to refund what had been illegally levied, that the Central Board should have exercised its power to give proper directions for refund and that in and case justice should be done to the party who should not be penalised for not having filed appeals and second appeals and references to the High Court year after year a repeat performance which would add to the totality of avoidable litigation since the High Court was seized of the identical point between the same parties.
At the first flush it may seem that the assessee 's agricultural income having been taxed illegally, a refund was obligatory and the fanatical insistence on the legal 'pound of flesh ' based on limitation and finality was not to be expected from a party like the State.
Indeed, one might go to the extent of quoting the cynical words of the ancient legal wit: "Law and equity are two things which God hath joined, but which Man has put asunder".
We have to examine the merits of the case in the light of the facts we have set out above and of the principles settled by this Court in regard to the exercise of the writ jurisdiction of the High Court.
Shri Manchanda, alive to the spinal weakness of his case in law in that his client had, by option for inaction, permitted the impugned order to become final and listless by lapse of limitation period, played upon judicial sensitivity to justice, equity and good conscience.
He argued that regardless of statutory remedies and rules of limitation, the High Court had power under Art 226 to quash orders loudly illegal, deprivatory of property and promoting unjust enrichment by the State.
He also urged that the assessment orders were void and the routine challenges through prescribed channels could be bypassed and frontal attack made under article 226 in such extraordinary situations.
Sri Ramachandran, appearing for the Revenue, scouted the supplicant plea for equity as unavailable in a court of law.
He also insisted that the orders of assessment having become conclusive could not be invaded by the back door, that the orders were not nullities but good until set aside through the regular statutory processes and that the alleged jab on the face of justice is imaginary, the party himself having been guilty of gross laches.
We will examine these pleas, not in the general terms set out but within the confines of the particular facts of the present case.
We must pause to state one important aspect of the assessment orders since that oxygenates Sri Manchanda 's submission on equity.
The Income tax officer, aware of the pendency in the High Court of the precise question confronting him about the agricultural character of the income, had in some years (e.g. 1952 53) recited in his order under section 23(3) of the Act, words which kindled hope in the assessee somewhat in the following terms: "Income from Mango gul Mahuwa and Kathal have been excluded from the total income and treated as agricultural 11 income by the learned Appellate Asstt.
Commissioner of In come Tax Banaras in this very case but this very point is 53 already under consideration before the Hon 'ble High Court of Judicature at Allahabad.
However with respects to the learned A.A.C. and pending the decision of the Hon 'ble High Court on this point the sum of Rs. 7,960/ is being added back " But the palliative is absent in the orders relating to many other years and, above all, the orders are all made under section 23(3), which means final assessments neither provisional assessments being under section 23(3) nor conditional assessments, such orders being unknown to the scheme of the Act.
The points in controversy may be briefly formulated: (1) Are the orders of assessment, which have not been assailed, amenable to challenge under article 226 of the Constitution, or is such jurisdiction inhibited because the regular statutory remedies have not been pursued ? (2) Is the appellant guilty of laches to such an extent that the extra ordinary remedy in writ jurisdiction `l) should not be exercised in his favour? (3) Are the orders of assessments nullities since they are taxes levied on agricultural income, and if so, is the appellant entitled to claim a refund ? (4) Is the Central Board of Direct Taxes charged with any statutory duty to grant refunds even in cases where orders of assessment, though illegal, have been allowed to become final by the wilful default of the assessee ? (5) If justice is on the side of the assessee but law against him, can he seek redressal in a Court on that footing ? We may deal with these points more or less as a package submission but not in the order in which they have been itemised.
Counsel has placed considerable stress on the last point which we deal with first.
It is true that two stark facts generate some considerations of conscience in favour of the assessee.
The High Court having declared this kind of income which was taxed by the income tax officer, 'agricultural income ', it is not liable to tax under the Income tax Act (section 4(8)).
In any case, after the Constitution of India came into force, the Union List in the Seventh Schedule expressly excluded agricultural income as forbidden zone for the Centre, so much so it would be an unconstitutional levy if a taxing authority imposed tax on agricultural income purporting to act under the Income tax Act.
It may, therefore, well be argued that all the assessments, notwithstanding that no appeals were filed, were void being beyond the jurisdiction of the officer to tax.
There is a basic difference between the decision in Comm.
of I.T. vs Tribune Trust, 54 Lahore (1) cited by Sri Ramachandran and the present case.
There, one of the exemptions statutorily provided in favour of income derived from property held under trust wholly for religious or charitable purposes, fell for consideration.
The Judicial Committee held that such assessments, regularly made, which failed to give the exemption claimed, were not nullities: "The assessments were duly made, as they were bound to be made, by the Income tax officer in the proper exercise of his duty.
It does not appear to their Lordships that they were a 'nullity ' in any other sense than that if they had been challenged in due time they might have been set aside.
" True, mere exemptions from taxation of income otherwise competently taxable fell wholly within the jurisdiction of the officer for determination.
There is a fundamental difference where the claim is that agricultural income is beyond the legislative competence of Parliament to enact and altogether outside the jurisdiction of the Income tax officer.
It may well be contended that the impost is ultra vires his powers and therefore a nullity.
Merely because an order has been passed by the officer and has not been appealed against, it does not become legal and final if otherwise it is void; for instance, if there is a flagrant violation of natural justice, the order by a Tribunal may be a nullity.
However, we need not explore this penumbral area because we are satisfied, for reasons to be set out below, that the writ petition itself is misconceived and is bad for unexplained delay.
Even so we may state that the levies for the various years would have undoubtedly been set aside and refund ordered if only the assessee had been diligent enough to make annual appeals to higher authorities.
In that sense there is some justice on his side.
What is more, in some of the orders, as earlier indicated, the Income tax officer himself has stated that he is making the assessments finally but he takes note of the pendency of the identical question before the High Court.
He has vaguely quickened wishful thinking in the assessee that in the event of his winning in the High Court he may somehow get a refund.
We have set out what Mr. Manchanda has pressed before us as the 'justice ' of his case.
Assuming for a moment that 'justice ' is on his side, law is against him because the assessment orders are now unassailable except perhaps under article 226 or article 32 with which we will deal separately.
Can a court over ride law to effectuate what it conceives to be justice ? Any legal system, especially one evolving in a developing country, may permit judges to play a creative role and innovate to ensure justice without doing violence to the norms set by legislation.
But to invoke judicial activism to set at nought legislative judgment is subversive of the constitutional harmony and comity of instrumentalities.
So viewed, the appeal of Sri Manchanda, for relief in the name of justice must fail.
If the statute speaks on the subject the judge has to be silent and stop.
In a contest between morality and legality.
the court, in clear cases has no option.
Here, both sides agree that 55 the assessments are final, that limitation has long ago run out, that the Central Board has no judicial power to upset what has been decided by lesser tribunals.
Not being a fringe area for judicial activism to play the submission must suffer rejection.
The surviving issue of some moment is whether the writ jurisdiction is muzzled by statutory finality to orders regardless of their illegality.
We think not.
If the levy is illegal, the constitutional remedy goes into action.
The Privy Council ruling does not contradict this rule of law because for one thing there the case was income taxable but for a statutory exemption; here the income is agricultural and beyond the orbit of the Income tax Act.
For another, the Judicial Committee was not considering the sweep of the constitutional remedy de hors statutory changes but was construing the plea of 'nullity ' with reference to an order Passed, erroneously may be but within jurisdiction and impugned before the statutory tribunals.
Even so, the journey of the appellant is beset with insurmountable hurdles.
article 226 is not a blanket power, regardless of temporal and discretionary restraints.
If a party is inexplicably insouciant and unduly belated due to laches, the court may ordinarily deny redress.
And if the High Court has exercised its discretion to refuse, this Court declines to disturb such exercise unless the ground is too untenable.
To awaken this Court 's special power gross injustice and grievous departure from well established criteria in this jurisdiction, have to be made out.
In the present case, long years have elapsed not only after the impugned orders but even after the High Court held the taxed income agricultural.
The reason for the inaction is stated to be an illusory expectation of suo moto modification of assessment orders on representation by the party.
The High Court has examined and dismissed the plea and consequentially refused relief.
We do not think that in so refusing relief on ground of laches the High Court exercised its discretion arbitrarily or improperly.
And the sorry story must thus close.
When at the end of the legal tether, the appellant made a plaintive plea for considerateness based on good conscience.
No doubt, we feel this is a case where, had the party not been optimistically asleep but had diligently appealed, the tax could not have been recovered by the State.
We equally see some compassionate merit in his complaint that a few of the assessment orders made misleading reference to the pendency of the High Court being seised of the identical legal issue.
But it is no good alibi in expiation of the sin of gross delay in coming to the High Court.
It is doubtful if the Central Board can exercise any judicial power and direct refund.
Nor is there a statutory duty cast on it to consider applications for refund and so a writ of mandamus could not issue from the Court.
Even so, it is always open to the State, where the justice of the case warrants reconsideration of the levy of a tax illegally imposed to view the situation from an equitable standpoint and direct refund wholly or in part.
This perhaps is case where a liberal approach may well be justified.
The Court has, however, jurisdiction only when there is a statutory duty.
There being 56 none, the issuance of a writ hardly arises.
We endorse the observations of the High.
Court that, despite inordinate delay, the appellate authority, if moved under section 30(2), will give due regard to the happenings in between, in exercising its power of condonation of delay in filing appeals.
We also make it clear that no observation made in this judgment with regard to delay on the part of the assessee in moving the High Court under article 226 shall be taken into account to the prejudice of the assessee while considering the condonation of the delay on his part in preferring the appeal/appeals, if any, filed by him to the.
appropriate authority under the Act.
The appeal fails and is dismissed.
The circumstances are such that the parties may appropriately be, directed to bear their respective costs.
We direct accordingly.
P.H.P. Appeal dismissed.

dataset_name: IN-Abs

summary:
The appellant an owner of a mango grove has been deriving income by was of fruits and fallen trees.
In the year 1939 40 he claimed this income to be agricultural income and therefore immune to income tax.
The Assessing Authorities negatived the claim of the appellant.
The High Court in the year 1963 held the income to be agricultural income and therefore exempt from income tax.
The State did not challenge the decision of the High Court.
The appellant did not challenge the orders of the Assessing Authorities for the subsequent years i.e. 1940 to 1962 in the hope that if ultimately the High Court upheld his contention for one year the Tax Authorities would give effect to that holding for all the years.
The appellant thereafter approached the Central Board of Revenue for refund of the tax paid by the appellant in respect of the subsequent years.
The Central Board rejected the petition in 1968.
The appellant moved the High Court under article 226.
The High Court refused to interfere both on the ground of delay as well as on the ground that the assessment orders for the relevant years had become final, the assessee not having taken advantage of his remedy provided for in the statute.
The High Court.
however, made an observation that if so advised the appellant might file appeals under section 30 of the Income Tax Act, 1922 and pray for condonation of delay under section 30(2) of the said Act.
appeal by Special leave to this Court, it was contended by the appellant.
(1) Since various assessment orders were void the State was bound to refund what had been illegally levied.
(2) The Central Board should have exercised its power to give appropriate directions for refund.
(3) Regardless of statutory remedies and rules of limitation, the High l; Court had power under article 226 to quash the illegal orders and to prevent unjust enrichment by the State.
The respondents contended: (1) The appellant is guilty of laches.
High Court has rightly exercised its discretion.
This Court may not interfere with it (2) The assessment orders have become final (3) The Central Board of Direct Taxes has no statutory duty to grant refund even in cases where orders of assessment, though illegal, have been allowed to become final by.
wilful default of the assessee.
Dismissing the appeal.
^ HELD: (1) The imposition of tax on agricultural income is beyond the legislative competence of Parliament and altogether outside the jurisdiction of the Income Tax officer.
It may well be contended that the impost is ultra vires.
its powers, and therefore, a nullity.
We need not consider this aspect especially since the writ petition itself is bad for unexplained delay.
[54C E] 50 (2) The writ jurisdiction is not measured by statutory finality to orders regardless of their illegality.
If the levy is illegal the constitutional remedy goes into action.
However, article 226 is not blanket power regardless of temporal and discretionary restraint.
of a party is inexplicably and unduly delayed due to laches the court may ordinarily deny redress.
If the High Court has exercised its discretion to refuse the redress, this court declines to disturb such exercise unless the ground is too untellable.
The High Court I in refusing relief on ground of laches did not exercise its discretion arbitrarily or improperly.
[55B. D E] (3) It is doubtful if the Central Board can exercise any judicial power and direct refund.
Even so, it is always open to the state where the justice of the ease warrants reconsideration of the levy of a tax illegally imposed, to view the situation from an equitable standpoint and direct refund wholly or in part.
In this case a liberal approach may well be justified The Appellate Authority if moved under section 30(2) will give due regard to the happenings in between exercising its power of condonation of delay in filing appeals and no observations made in this judgment or in the High Court judgment shall be taken into account to the prejudice of the appellant while considering the condonation of delay by the appropriate authority.
[55G 56C]


judgement:
Civil Appeal No. 1264 of 1969.
Appeal by certificate from the judgment and order dated the 12th Feb., 1968 of the High Court of Assam and Nagaland at Gauhati in First Appeal No. 21 of 1963.
D. Mookherjee and section K. Nandy, for the appellant.
M. H. Chowdhury and section N. Chowdhury, for the respondent The Judgment of the Court was delivered by KRISHNA IYER, J.
The concurrent conclusions of fact reached by both the courts below regarding the quantum of compensation payable to the appellant on the acquisition of his land for a public purpose by the State are assailed by Shri D. Mukherjee before us on the ground that the amount is grossly inadequate.
Having heard him in the light of the High Court 's reasoning, we are persuaded to affirm the finding.
100 bighas of land belonging to the appellant (a Tea Planter) were first requisitioned by Government to settle landless people and the owner 'gladly ' agreed to surrender the area which, on his own showing, was lying unused.
Later, the State proceeded to acquire the land under s.7 (1A) of the Assam Land (Requisition and Acquisition) Act, 1948 (Assam Act XXV of 1948).
The sole dispute turns on whether the lesser scale of compensation proceeded under s.7(1A) or the larger one stipulated under s.7(1) is attracted to the situation.
The simple statutory test that settles the issue is to find out whether the land acquired is Lying fallow or uncultivated.
If it is, a small compensation alone is awardable, as laid down in s.7(1A) of the Act.
On the other 69 hand.
if it is ten garden, the quantum is as under section 23 of the Land Acquisition Act, 1894.
This decisive factor lends itself to easy decision, because a plethora of evidence, to most of which the appellant is a party, proceeds on the basis that the land in question is fallow.
The High Court has collected and considered the prior statements and other materials leading to the reasonable holding that s.7(1A) appropriately applied to this case.
It follows that the appeal has no merit and deserves to be dismissed.
We order both parties to bear their respective costs.
Subject to this direction, the appeal is dismissed.
V. M. K. Appeal dismissed.

summary:
100 bights of land lying unused were requisitioned by Government to settle landless people.
The appellant, a tea planter, willingly surrendered the same.
But, when the State proceeded to acquire the land under section 7(1A) of ' the Assam Land (Requisition and Acquisition) Act, 1948 he disputed the payment of lesser scale of compensation prescribed under section 7(1A) of the Act. 'The Courts below concurrently held against him.
Dismissing the appeal, ^ HELD: The simple statutory test that settles the issue is lo find out whether the land acquired is Lying fallow or uncultivated.
If it is, a small compensation alone is awardable, as laid down in section 7(1A) of the Act.
On the other hand, if it is tea garden, the quantum is as under section 23 of the Land Acquisition Act, 1894.
Plethora of evidence adduced in this case clearly proceeds on the basis that the land in question is fallow.
The High Court has, therefore, rightly held that section 7(1A) appropriately applied to this case.
[68H 69B]


judgement:
Civil Appeal No. 98 of 1975.
From the Judgment and order dated 25 7 1974 of the Madras High Court of Judicature at Madras in Writ Appeal No. 519 of 1968.
K. section Ramamurthi and A. T. M. Sampath, for the appellant.
M. K. Ramamurthi and Vineet Kumar, for respondent No. 1.
The Judgment of the Court was delivered by KRISHNA IYER, J.
A spiral of reversals is the fate of this litigative battle between the appellant and the first respondent over a permit to ply a bus on the route between Madurai and Paramakkudi, Tamil Nadu.
While its admission into this Court was by special leave, the first round of the contest was fought before the RTA (Regional Transport Authority) which, on an evaluation of the relative merits and demerits of the rivals, granted the permit to the present appellant, but this victory was short lived because, at the second stage of the legal bout, the STAT (State Transport Appellate Tribunal) held that the 103 respondent before us had better claims.
The worsted appellant, invoked the writ jurisdiction of the High Court under article 226 and the learned Single Judge, who heard the petition, re judged the relevance and weight of the points, pro and con, and as a result of this adjudicatory exercise of facts, demolished the order of the STAT.
The learned Judge disagreed with the conclusion of the STAT instead of sending the case back for a fresh look at the merits of the matter, set aside the permit granted to the respondent and affirmed the award in favour of the appellant.
Thereupon, the respondent moved a Division Bench of that Court which felt that a full scale re appraisal of the points for and against such claimant was in excess of the jurisdiction of the Single Judge under article 226, although it noticed that certain factors not relevant to the adjudication had been taken into consideration by the STATE.
Consequently, the order of the learned Judge was set aside, the result being that the respondent 's permit was restored. 'the appellant urged that the decision of the Division Bench of the High Court was utterly wrong and somewhat casual, while that of the learned Single Judge was careful, elaborate and correct.
Of course, this view of the matter was hotly controverted by counsel for the 1st respondent but, after having heard both Shri K. section Ramamurthy, for the appellant, and Shri M. K. Ramamurthy.
for the respondent, we are satisfied that the reluctant course of remitting the whole case to the STAT for a de novo disposal is called for as a matter of law and in the interests of justice The boundaries of the High Court 's jurisdiction under article 226 are clearly and strongly built and cannot be breached without risking jurisprudential confusion (Shri Rama Vilas Service (P) Ltd. v, C. Chandrasekharan(1).
The power is supervisory in nature, although the Judges at both the tiers, in the instant case, have unwittingly slipped into the subtle, but fatal, error of exercising a kind of appellate review.
Shri M. K. Ramamurthy, for the respondent, was right in pointing out that the learned Single Judge went into the factum and weight of the claims which could be put in the scales in choosing the better of the two applicants for the permit.
However, the Court rightly pointed out that some relevant factors had been ignored by the STAT (for example.
that the first respondent 's history sheet was not clean) and included in the judicial verdict factors which were extraneous, such as `that the bus of the petitioner did not, in fact, ply from 2 9 65 to 4 12 65, this being attributable to non payment of surcharge rather than operational inefficiency.
A reading of the learned Single Judge 's judgment leaves us in no doubt that he had undertaken an evaluation of the merits on his own.
This, undoubtedly, was beyond the jurisdiction of the High Court.
Nor is it possible to support the direction that if there were errors of law vitiating the STAT 's finding, the case need not to back for fresh consideration but could be finally decided by the High Court itself.
In Writ Appeal, the leaned Chief Justice, speaking for the Division Bench of the High Court, disposed of the case in a short paragraph which hardly did justice to the order appealed against.
May be that 104 order was wrong and unsustainable, but while reversing it valid reasons had to be adduced.
All that we find in the appellate judgment is a partial admission that extraneous considerations were inputs of the order of the STAT and a brief disposal of the whole matter in a single sentence, as it were "Even so, there is nothing in the order of the Tribunal to support it.
" While the Division Bench was perhaps justified in.
Observing that while sitting on the writ side, judicial review should have been more restricted that while sitting on the appellate side, its own judgment was vulnerable because of the plain finding that what was not pertinent was taken into consideration by the STAT.
For instance, The learned Chief Justice observed: 'It is no doubt true that the non performance of service after the grant was made, cannot go into the computation and the reference relating to night halt might will have been avoided in its discussion. ' 'The non performance of service ', which is slightly obscure, but we read it in the context as meaning the failure to ply the bus on the route is question subsequent to the grant of the permit.
We express no opinion on the soundness of the observation but it is clear that the Division Bench itself has plainly accepted the position that what was not, according to it, relevant had gone into the reckoning when the STAT awarded the permit to the appellant.
In this view, this judgment cannot also be sustained.
1 The fair course would, therefore, be to set aside the judgment under appeal and send the whole case back to the STAT to hear the case afresh, consider relevant factors bearing upon 'public interest ' as highlighted in s.47 of the Motor Vehicles Act and dispose of the appeal before it in accordance with law, guided by the decisions of this Court and untrammeled by any observations made either by the Single Judge or by the Division Bench.
Currently, the respondent is plying his bus on the route and we direct that the status quo be maintained and he will continue to operate on the route until the appeal is disposed of by the STAT.
Of course, the RTA passed its orders as early as 1966 November and is it thinks that public interest demands the need for an extra bus to ply on the route to cope with the traffic, it will be open to the RTA to grant a permit, pending disposal of the appeal, to the present appellant.
The fluctuating fortunes of the combatants for the permit have been such that it is appropriate to direct both parties to bear their costs throughout.
P.B.R. Case remanded.

summary:
The Regional Transport Authority granted a permit to the appellant but this decision was reversed by the State Transport Appellate Tribunal.
In a petition under article 226 of the Constitution a single Judge of the High Court, on an examination of the merits of the case, reversed the view of the Stale Transport Appellate Tribunal.
On appeal, a Division Bench of the High Court held that a full scale reappraisal of the points was in excess of the jurisdiction of the single Judge under article 226.
the Division Bench restored the order of the State Transport Appellate Tribunal.
On appeal to this Court, remitting the, case to the State Transport Appellate Tribunal, ^ HELD: The boundaries of the High Court 's jurisdiction under article 226 of the Constitution are clearly and strongly built and cannot be breached without risking jurisprudential confusion.
The power of the High Court under article 226 be supervisory in nature.
[103E] Sri Rama Vilas Service (P) Ltd. vs C. Chandrasekharan ; referred to.
The single judge had undertaken an evaluation of the merits on his own which was beyond his jurisdiction.
The Division Bench disposed of the case in a short paragraph which hardly did justice to the order appealed against.
But while reversing the order appealed against valid reasons had to be adduced.
While the Division Bench was justified in observing that, sitting on the writ side, judicial review should have been more restricted than while sitting on the appellate side, its own judgment was vulnerable because of the plain finding that what was not pertinent was taken into consideration by the Appellate Tribunal.
[103G, H; 104A B]


judgement:
Appeal No. 535 of 1974.
Appeal by special leave from the Judgment and order dated the 14th January, 1974 of the Calcutta High Court in Award Case No. 181/1973.
section T. Desai, B. P. Maheshwari, Sharad Manohar and Suresh Sethi, for the appellant.
Somnath Chatterjee, and P. K. Mukherjee, for the respondent.
The Judgment of the Court was delivered by 138 MATHEW, J.
This appeal.
by special leave, is directed against an order of a learned judge of the ' Calcutta High Court allowing an application filed under section 37(4) of the (hereinafter called the Act) for extension of time to refer the matter of arbitration.
The facts are these.
The appellant is a company doing business in general insurance.
The respondent carries on business as a common carrier of goods.
The respondent had taken out three transit policies of insurance renewable every year.
The policy which is relevant for the purpose of the present appeal is freight policy No. CL1/RE P/257 taken by the respondent in January, 1969 from the appellant against risk of loss or damage to any goods or merchandise during transit.
In June 1971, the respondent declared to the appellant that it had received for transit a consignment of 185 packages of general merchandise alleged to be of the total value of Rs. 1,10,000 (approx) for transportation from Calcutta to various places in Assam and Tripura and paid the requisite premium on the value of goods and the goods stood insured under the said policy.
According to the respondent, on the evening of 29 6 71, the consignment of 185 packages was loaded in Truck No. WGH 8261, and the truck left Calcutta on the same day for Gauhati.
It is alleged that the owner of the truck informed the respondent that after the truck reached Barasat on the night of 29th June, 1971, there was a robbery and neither the truck, nor the driver, nor the merchandise could be traced.
On 1 7 1971, the respondent sent letters to the officer incharge of Jarabagan Police Station, the Assistant Commissioner of Police, Intelligence Branch, Lall Bazar Calcutta and the Deputy Commissioner of Police, Intelligence Branch intimating them that the truck which left Calcutta on 29th June 1971 had not reached Beniagram at the scheduled time and that the truck, the driver, the assistant and the merchandise could not be traced.
A copy of the letter sent to the Assistant Commissioner of Police, Lall Bazar, Calcutta was sent to the appellant and it was received by the appellant on 2 7 1971.
On 1 7 1971 and 21 9 1971, the respondent lodged the claim for loss with the appellant on the basis that the loss was covered by the policy.
On 3 7 1971, the appellant sent a letter to their respondent calling upon the respondent to furnish the particulars as regards the name and address of the owner of the vehicle, the name and address of the driver and other particulars.
On 21 9 1971, the respondent informed the appellant by a letter that the information and the records asked for in the letter dated 3 7 1971 were already supplied to Mr. A. L. Chopra, the agent of the appellant on 5 7 1971, when he called upon the respondent for that purpose.
On 10 10 1971, the appellant wrote to the respondent informing that until the report of the investigation by the police was produced by the respondent, it would not be possible for the appellant to proceed further in the matter.
The appellant received a copy of the investigation report by the police at Barasat on 12 5 1972.
The report was to the effect that the alleged episode of robbery was false.
On this basis, the appellant sent to the respondent a letter dated 4 8 1972 stating the contents of the investigation report of the police at Barasat asking for the investigation report of Jarabagan 139 Police Lall Bazar Police .
Thereafter the, appellant intimated the respondent by letter dated 16 2 1973 disclaiming its liability under the freight policy as regards the loss of the consignment of 185 packages.
On receipt of the letter, the respondent wrote to the appellant on 30 3 1973 asking for the grounds on which the appellant disclaimed its liability.
The appellant sent a letter after two months on May 30, 1973, stating that it had nothing to add to what had been stated in its letter dated February 16, 1973.
Thereafter, the respondent took the advice of solicitors and counsel.
On 17 8 1973, the respondent filed the application before the High Court under section 37(4) of the Act for extension of time for referring the dispute to arbitration till a date 15 days after the order of the High Court.
In the application, the respondent stated the reasons for the delay in filing the application in court after receiving the letter dated May 30, 1973.
In answer to the application, the appellant contended that section 37(4) of the Act had no, application, that the court had no jurisdiction to extend the time and that even if the court had jurisdiction, there were no valid grounds for extension.
The application came up for hearing before a learned Judge and lie passed the order extending the time to, refer the dispute to arbitration within a fortnight from 14 1 1974.
The, question that arises for consideration is whether the High Court had power to extend the time and if it had power, whether it exercised its power properly in extending the time for preferring the claim to arbitration.
That will depend upon a correct interpretation of the relevant clauses of the policy and of section 37(4) of the Act.
Clause I of the policy states that notice of any accident, loss or damage affecting the insurance shall be given to the Company at the earliest possible date and not later than 30 days from the date of the accident, loss or damage.
Clause 2 of the policy provides that in the event of any loss or damage covered by the insurance shall produce and give to the Company all evidence as may be reasonably required by the Company.
Clause 9 provides that if the insured shall make any claim knowing the same to be false or fraudulent as regards the amount or otherwise the insurance shall become void and all claims thereunder shall be forfeited.
Clause 11 states that all differences arising out of the contract shall be referred to the decision.
of an arbitrator to be appointed in writing by the parties or if they cannot agree upon a single arbitrator, to the decision of two arbitrators, one to be appointed in writing by each of the parties within one calendar month after having been required in writing so to do by either of the parties.
It further provides that the making of an award by the arbitrator or arbitrators shall be a condition precedent to any right of action against the Company.
Clause 12 which is the material '.
clause for the purpose of this case reads : "If the Company shall disclaim liability to the Insured for any claim hereunder and such claim shall not within three calendar months from the date of such disclaimer have been 140 preferred to Arbitration under the provisions herein contained, then the claim shall for ill p urposes be deemed to have been abandoned and shall not thereafter be recoverable hereunder." Section 37(4) of the Act reads as follows "Whether the terms of an agreement to refer future differences to arbitration provide that any claims to which the agreement applies shall be barred unless notice to appoint an arbitrator is given or an arbitrator is appointed or sonic other step to commence arbitration proceedings is taken within a time fixed by the agreement and a difference arises to which the agreement applies, the Court, if it is of opinion that in the circumstances of the case undue hardships would otherwise be caused, and notwithstanding that the time so fixed has expired, may on such terms, if any, as the justice of the case may require, extend the time for such period as it thinks proper." _ It was not seriously contended that section 37(4) of the Act was not applicable to the agreement embodied in the policy in question and the High Court had no jurisdiction to extend the time.
The only contention pressed on behalf of the appellant was that in the circumstances of the case, there would be no undue hardship to the respondent if the time for preferring the claim to arbitration is not extended and, therefore, the High Court went wrong in exercising the discretion by extending the time.
There are no decisions of this Court or of the High Courts concerning the relevant consideration to be taken into account in exercising the jurisdiction for extending time under section 37(4) of the Act.
Section 16(6) of the English Arbitration Act, 1934 which is practically the same as section 27 of the English Arbitration Act of 1950 is in pari materia with section 37(4) of the Act.
Therefore, the interpretation placed by English Courts upon section 16(6).
and section 27 of the respective ,Acts has great persuasive value.
The English courts originally took a very strict and narrow view ,of the words "undue hardship".
In Steamship Co. of 1912 etc.
vs Indlo American Grain Co. etc.(1) Lord Parkar, C.J. said : "It has been said, over and over again by this Court, that there must be very special circumstances for extending the time.
Of course, if a valid claim is barred, there is hardship, but that is not what is provided for by the clause, and before this Court can extend the time they must be satisfied that the hardship amounts in the particular case to undue hardship. . .
In Watney, Comba, Raid & Co. vs E. Al.
Dower & Co. Ltd.(2) Goddard, C.J. said : "I desire to say in the clearest possible terms that the mere fact that the claimant is barred cannot be held to be an 1. 2. , 131.
141 undue hadship, which is what the section requires to be found by the court before it extends the time.
The section does not mean that this Court can take out of the contract the provision which will bar the claim if it is not pursued in time.
They have no power to do that.
The only thing they have power to do is to extend the time if undue hardship is caused.
One, can visualise certain cases of undue hardship.".
In F. E. Hookway & Co. Ltd. vs H. W. H. Hopper & Co.(1) where the buyers made an application for extension of time under section 16(6) of the English Act of 1934, Denning, L.J. observed That the extent of delay in a relevant circumstances to be considered, that if the delay is not on account of the fault of the buyer, it would no doubt, be an undue hardship on him to hold the clause against him but, if the delay is his own fault, the hardship may not be undue as it may be a hardship which it is due and proper that he should bear.
He further said that another relevant circumstance was whether there was evidence of any loss on any sub contracts and claims by sub buyers or any complaints by them and if there was evidence of such loss or claims, then the court would take a lenient view of the delay and bold that, notwithstanding it, there was undue hardship on the buyer.
In Stanhope Steamship Co. Ltd. vs British Phosphate Commissioners(2), Singleton.
J., in delivering the judgment said "What, then, is the meaning of "undue hardship" ? "Undue", it is said by Mr. McCrindle, means something which is not merited by the conduct of the claimant.
That may be right.
If the result of claimant 's being perhaps a day late is so oppressive, so burdensome, as to be altogether out of proportion to the fault, I am inclined to think that one may well say that there is undue hardship.
Both the amount at stake and the reasons for the delay are material considerations " In Librarian Shipping etc.
vs A King & Sons(3), the facts were these.
A vessel was let on a voyage charter party in Centrocon from containing an arbitration clause under which any claim had to be made in writing and the claimant 's arbitrator had to be appointed within three months of final discharge.
A fire occurred on board the vessel during leading.
Both the owners and the charterers had claims against each other.
The time limit was to expire on June 26, 1966.
The parties were negotiating and.
after considerable correspondence.
a meeting between both parties was arranged for June 27, 1966, with a view to settlement.
The meeting did not result in a settlement.
The charterers first realised that time had expired which the owners sought an extension of it by consent, nine days after the expiry.
The charterers had not contributed to the delay on the part of the owners in relation to the arbitration clause.
The charterers did not consent to the time being extended.
The owner , applied under section 27 of the Arbitration Act.
1950 for an extension of time on the ground that "undue hardship" would otherwise be caused to them.
Their claim 1. 2. 3.
142 amounted to about pound 33.000.
The master granted an extension of time, but on appeal the judge refused it.
On further appeal the court by a majority said that if the time were not extended, undue hardship would be caused to the owners since they would be deprived of what might be a valid claim for pound 33,000 by a delay of only a few days due to excusable inadvertence, that the charterers would not in any way be prejudiced by time being extended and so the court would exercise the discretion conferred by section 27 of the Arbitration Act, 1950, and 'Would extend the time.
In the course of his judgment Lord Denning, M. R. observed that in the past the courts had been inclined to emphasize the word "undue" and to say that if a man does not read the contract and is a day or two late, it is a "hardship": but it is not an "undue hardship", because, it is his own fault but that the interpretation was narrow.
He said that these time limit clauses used to operate most unjustly on claimants for, they found their claim barred by some oversight and it was to.
avoid that injustice the legislature intervened so as to enable the courts to extend the time whenever "in ,the circumstances of the case undue hardship would otherwise be caused".
He also said that the word "undue" in the context simply means excessive hardship greater than the circumstances warrant and that even if a claimant has been at fault himself, it is an undue on him if the consequences are put of proportion to his fault.
He further stated that even if a claimant makes a mistake which is excusable, and is in consequence a few days out of time, then if there is no prejudice to the other side, it would be altogether too harsh to deprive him of ,all chance for ever of coming and making his claim and that is all the more so,, if the mistake is contributed or shared by the other side.
He , then observed "It was said that this was a matter for the Judge 's discretion.
True enough.
We have, however, said time and again that we will interfere with a Judge 's discretion if satisfied that the discretion was wrongly exercised.
In any case the judge was, not exercising an unfettered discretion.
He felt himself fettered by the. trend of the authorities to give the words "undue hardship" a narrow meaning.
I think that we should reverse that trend and give the words their ordinary meaning, as Parliament intended.
It would be "undue hardship" on the owners to hold them barred by the clause.
" In the same case, Salmon, L.J. said that the arbitration clause put it out of the power of the court to grant any relief to a claimant who bad allowed a few days to run beyond the period specified in the clause even although the delay could have caused no conceivable harm to the other side.
He said that it would be hard and unjust if a man with a perfectly good claim for thousands of pounds worth of damage for breach of contract inadvertently allowed a day or two to go by was deprived of the right to be compensated for the loss which he bud suffered, even though the other party bad not been in any way affected by the delay and might perhaps have been guilty of a deliberate breach of contract and that it was to remedy this hardship and injustice that the legislature intervened to alter the Law.
He further said 143 "This enactment was a beneficent reform, liberalising the law in an admittedly narrow sector of the commercial field.
I have heard it said that when people have spent their lives in chains and the shackles are eventually struck off, they cannot believe that their claims are no longer there.
They still feel bound by the shackles to which they have so long been accustomed.
To my mind, that factor may explain the court 's approach in some of the cases to the problem with which we are now faced.
He then summed up his conclusion as follows "In considering this question the court must take all the relevant circumstances of the case into account; the degree of blameworthiness of the claimants in failing to appoint an arbitrator within the time; the amoun t at stake, the length of the.
delay; whether the claimants have been misled, whether through some circumstances beyond their control it was impossible for them to appoint an arbitrator in time.
In the last two circumstances Which I have mentioned, which do not arise here, it is obvious that normally the power would be exercised; but those are not the only circumstances and they are not, to my mind, necessary circumstances for the exercise of the power to exte nd time.
I do not intend to catalogue the circumstances to be taken into account, but one very important circumstance is whether there is any possibility of the other side having been prejudiced by the delay.
Of course ' if there is such a possibility, it might be said that it is no undue hardship on the owners to refuse an extension of time because, if the hardship is lifted from their shoulders, some hardship will fall on the shoulders of the charterers, and, after all, the delay is the owners ' fault.
" Therefore, we will have to take a liberal view of the meaning of the words "undue hardship." "Undue" must mean something which is 'not merited by the conduct of the claimant, or is very much disproportionate to it.
Keeping in view these principles, it has to be seen whether in the facts and circumstances of this case, there was reasonable and sufficient ground for not preferring the claim to arbitration within the time specified in clause 12 of the policy and whether there would be "undue hardship" to the respondent if time not extended.
It may be recalled that it was on July 1, 1971 and September 21, 1971 that the respondent lodged its claim with the appellant to recover the loss suffered.
Thereafter, various letters passed between the parties.
Ultimately, on February 16, 1973, the appellant wrote the letter to the respondent stating that the claim papers submitted in connection with the claim had been scrutinized by the appellant but that it was unable to accept liability for the loss.
The respondent then wrote a letter to the appellant on 30 3 1973 complaining about the uncertain language used in the letter dated February 16, 1973 and calling upon the respondent to point out specifically under which clause of exclusion of liability in the policy and the appellant disclaim the liability.
The appellant kept quiet for 2 months and then on May 144 30, 1973, seat a letter stating that it had I nothing further to add to what had been stated in its letter dated February 16, 1973.
The respondent was having dealings with the appellant in the business of insurance from 1958 onwards and in no instance was the claim made by the respondent rejected by the appellant.
The conduct of the respondent in enquiring of the appellant the grounds on which the claim was rejected was quite reasonable.
It was only after the grounds of rejection were known that the respondent could have decided whether to resort to arbitration or not.
If the grounds of rejection would come within the clause of exclusion of liability under the policy, it would serve no purpose to incur the expense and hardship involved in resorting to arbitration.
The appellant did not give the reason for disclaiming liability even in its letter dated 30 5 1973.
We do not think that there was any lack of promptness on the part of the respondent in waiting for the reply to its letter dated 30.3.1973.
And, in the first week of June, 1973, the respondent made over the papers to the solicitors viz., M/s. Banerji & Co. for the purpose of taking necessary steps for referring the dispute to arbitration in terms of the arbitration clause in the policy.
On or about June 15, 1973, the respondent received the written opinion from the Solicitors wherein they stated that since the letter of the appellant disclaiming liability was vague and since the appellant gave no reason for rejection of the claim even in their letter dated 30 5 1973, the appellant might rely upon clause 12 of the policy of insurance and contend that the reference to arbitration would be beyond time.
The solicitors, however, advised that in view of the delay on the part of the appellant and its failure to specify any reason for the disclaimer, the respondent might take steps for nominating an arbitrator and proceed with the reference.
When the written opinion was received from the solicitors, the respondent had some doubt, because the solicitors did ',lot give a definite opinion.
So, it instructed the solicitors to take the opinion of counsel.
After preparing the necessary case for the opinion, the solicitors briefed counsel for opinion, on June 28, 1973.
The opinion of counsel was to the effect that the respondent should apply for extension of time under section 37(4) of the Arbitration Act and that was received by the solicitors on 16 7 1973.
The respondent was informed of the opinion of counsel and it received a copy thereof on 18 7 1973.
After gathering the facts from the records mentioned in the opinion of the counsel the respondent instructed the solicitors to take steps for filing a petition for extension of time.
It, however took some time to gather the facts indicated in the opinion of counsel.
On 25 7 1973 the respondent 's solicitors sent the brief to counsel to draft the petition and the petition was received by them on 30 7 1973.
Thereafter it took sometime to prepare a statement from available records.
In the facts and circumstances of this case, we think the High Court exercised its discretion properly in extending the time.
The conduct of the respondent was reasonable.
It took all steps it could when it knew about the alleged robbery inform the police and the appellant The fact that the Barasat police reported that the case was false does not necessarily mean that the respondent tried to prac 145 tise any fraud upon the appellant.
The respondent had filed a suit against the owner of the truck in question in July 1972 for recovery of the amount of loss.
The respondent also paid a suit against the owner of the truck in question in July 1972 for recovery of the amount of loss.
The respondent also paid the claims arising out of the loss of goods which were transported through the track.
All these go to show the bonafides and reasonableness of the conduct of the respondent.
Both the amount at stake and the reasons for delay are material in considering the question of undue hardship.
We do not think that any material prejudice would be, caused to the appellant by extending the time.
There would be undue hardship if time is not extended, as the consequences of non extension would in any event be excessive and out of proportion to the fault of the respondent, if any, in not being prompt.
We do not say that the mere fact that a claim would be barred would be undue hardship.
But considering the amount involved and the reasons for the delay, we think it would be undue hardship to the respondent if time is not extended.
We dismiss the appeal but in the circumstances, it is necessary that further time should be given to the appellant to nominate an arbitrator.
We, therefore, extend the time one month from the date of this judgment to enable the appellant to nominate its arbitrator.
We also think that this is a fit case in which the parties should suffer their own costs of the application in the High Court and of the appeal here.
V.M.K. Appeal dismissed.

summary:
The respondent , a common carrier of goods, had taken out three transit policies of insurance renewable every year from the appellant.
The freight policy taken out in January 1969, was against risk of loss or damage to any goods or merchandise during transit.
In June 1971.
the respondent declared to the appellant that it had received for transit a consignment of 185 packages of general merchandise alleged to be of the total value of Rs. 1,10,000/(approx) for transportation from Calcutta to various places in Assam and Tripura and paid the requisite premium on the value of goods and the goods stood insured under the said policy.
According to the respondent on the evening of 29 6 71, the consignment of 185 packages was loaded in Truck No. WGH 8261, and the truck left Calcutta on the same day for Gauhati.
It is alleged that the owner of the truck reached Barasat on the night of 29th June, 1971, there was a robbery and neither the truck, nor the driver, nor the merchandise could be traced.
On 1 7 1971, the respondent sent letters to the officer incharge of Jorabagan Police Station, the Assistant Commissioner of Police, Intelligence Branch, Lall Bazar.
Calcutta and the Deputy Commissioner of Police Intelligence Branch intimating them that the truck, the driver, the assistant and the merchandise could not be traced.
A copy of the letter sent to the Assistant Commissioner of Police.
Lall Bazar, Calcutta was sent to the appellant and it was received by the appellant on 2 7 1971.
On 1 7 1971 and 21 9 1971, the respondent lodged the claim for loss with the appellant on the basis that the loss was covered by the policy.
On 3 7 1971, the appellant sent a, letter to the respondent calling upon the respondent to furnish the particulars as regards the name and address of the owner of the vehicle, the name and ' address of the driver and other particulars.
On 21 9 1971 the respondent informed the appellant by a letter that the information and the records asked for in the letter dated 3 7 1971 were already supplied to Mr. A. L. Chopra, the agent of the appellant on 5 7 1971 when he called upon the respondent for that, purpose.
On 10 10 1971.
the appellant wrote to the respondent informing that until the report of the investigation by the police was produced by the respondent, it would not be possible for the appellant to proceed further in the matter.
The appellant received a copy of the investigation report by the police at Barasat on 12 5 1972.
The report was to the effect that the alleged episode, of robbery was false.
On this basis, the appellant sent to the respondent a letter dated 4 8 1972 stating the contents of the investigation report of the police at Barasat asking for the investigation report of Jambagan Police Lall Bazar Police.
Thereafter the appellant intimated the respondent by letter dated 16 2 1973 disclaiming its liability under the freight policy as regards the loss of the consignment of 185 packages.
On receipt of the letter, the respondent wrote to the appellant on 30 3 73 asking for the ground on which the appellant disclaimed its liability.
The appellant sent a letter after two months on May 30, 1973, stating that it had nothing to add to what had been stated in its letter dated February 16, 1973.
Thereafter, the respondent took the advice of solicitors and counsel.
On 17 8 1973, the respondent filed the application before the High Court under section 37(4) of the Act for extension of time for referring the dispute to arbitration till a date 15 days after the order of the High Court.
In the application the respondent stated the reasons for the delay in filing the application in court after receiving the letter dated May 30, 1973.
In answer to the application, the appellant contended that section 37(4) of the Act had no application that the Court had no jurisdiction to extend the time and that even if the court had 137 jurisdiction, there were no valid grounds for extension.
The learned Judge of the High Court passed the order extending the time to refer the dispute to arbitration within a fortnight from 14 1 1974.
In this appeal by special leave, it was contended for appellant that there would be no undue hardship to the respondent if the time for preferring the claim to arbitration is not extended and, therefore, the High Court went wrong in exercising its discretion by extending the time.
Rejecting the contention and dismissing the appeal, HELD ; (i) Court has to take a liberal view of the meaning of the words "undue hardship" occurring in section 37(4) of the . 'Undue ' must mean something which is not merited by the conduct of the claimant, or is very much disproportionate to it.
[143E F] Steamship Co. of 1912, etc.
vs Anglo American Grain Co. [1958] 2 Llyod 's Rep. 341; Watney, Comba, Raid & Co. vs E. M. Dower & Co. etc.
, 13 1; F. E. Hookway & Co. Ltd. vs H. W. H. Hopper & Co. ; Stanhope Steamship Co. Ltd. vs British Phosphate Commissioners ; and Librarian Shipping etc.
vs A King & Sorts referred to (ii) The respondent was having dealings with the appellant in the business of insurance from 1958 onwards and in no instance was the claim made by the respondent rejected by the appellant.
The conduct of the respondent in enquiring of the appellant the grounds on which the claim was rejected was quite reasonable.
It was only after the grounds of rejection were known that the respondent could have decided whether to resort to arbitration or not.
If the grounds of rejection would come within the clause of exclusion of liability under the Policy, it would serve no purpose to incur the expense and hardship involved in resorting to arbitration.
The appellant did not give the reason for disclaiming liability even in its letter dated 30 5 1973.
We do not think that there was any lack of promptness on the part of the respondent in waiting for the reply to its letter dated 30 3 1973.
In the facts and circumstances of the case it is clear that the High Court exercised its discretion properly in extending the time.
The conduct of the respondent was reasonable.
It took all steps it could when it knew about the alleged robbery to inform the police and the appellant.
The fact that the Barasat police reported that the case was false does not necessarily mean that the respondent tried to practise any fraud on the appellant.
The respondent had filed a suit against the owner of the truck in question in July 1972 for the recovery of the amount of loss.
It also paid the claims arising out of the loss of goods which were transported through the truck.
All these go to show the bona fides and reasonableness of the conduct of the respondent.
Both the amount at stake and the reasons for delay are material in considering the question of undue hardship.
It cannot be said that any material prejudice would be caused to the appellant by extending the time.
There would be undue hardship if time is not extended, as the consequence of non extension would in any event be excessive and out of proportion to the fault of the respondent, if any, in not being prompt.
It also cannot be, said that the mere fact that a claim would be barred would be undue hardship.
[144B C; 14; 145A B]