judgement:
Appeal No. LXVI of 1949.
Appeal from the High Court of judicature, Bombay, in a reference under section 66 of the Indian Income tax Act, 1022.
K.M. Munshi (N. P. Nathvani, with him), for the appel lant. ' M.C. Setalvad, Attorney General for India (H. J. Umrigar, with him), for the respondent. 1950.
May 26.
The judgment of the Court was delivered by MEHR CHAND MAHAJAN J.
This is an appeal against a judgment of the High Court of Judicature at Bombay in an income tax matter and it raises the question whether munici pal property tax and urban immoveable property tax payable under the relevant Bombay Acts are allowable deductions under section 9 (1) (iv) of the Indian Income tax Act.
The assessee company is an investment company deriving its income from properties in the city of Bombay.
For the assessment year 1940 41 the net income of the assessee under the head "property" was computed by the Income tax Officer in the sum of Rs. 6,21,764 after deducting from gross rents certain payments.
The company had paid during the relevant year Rs. 1,22,675 as municipal property tax and Rs. 32,760 as urban property tax.
Deduction of these two sums was claimed under the provisions of section 9 the Act.
Out of the first item a deduction in the sum of Rs. 48,572 was allowed on the ground that this item represented tenants ' burdens paid by the assessee, otherwise the claim was disal lowed.
The, appeals of the assessee to the Appellate As sistant Commissioner and to the Income tax Appellate Tribu nal were unsuccessful.
The Tribunal, however, agreed to refer two questions of law to the High Court of Judicature at Bombay, namely, (1) Whether the municipal taxes paid by the applicant company are an allowable deduction under 555 the provisions of section 9 (1) (iv) of the Indian Income tax Act; (2) Whether the urban immoveable property taxes paid by the applicant company are an allowable deduction under section 9 (1) (iv) or under section 9 (1) (v) of the Indian Income tax Act.
A supplementary reference was made covering a third question which was not raised before us and it is not there fore necessary to refer to it.
The High Court answered all the three questions in the negative and hence this appeal.
The question for our determination is whether the munic ipal property tax and urban immoveable property tax can be deducted as an allowance under clause (iv) of sub section (1) of section 9 of the Act.
The decision of the point depends firstly on the construction of the language employed in sub clause (iv) of sub section (1) of section 9 of the Act, and secondly, on a finding as to the true nature and character of the liability of the owner under the relevant Bombay Acts for the payment of these taxes.
Section 9 along with the relevant clause runs thus: (1) The tax shall be payable by an assessee under the head ' income from property ' in respect of the bona fide annual value of property consisting of any buildings or lands appurtenant thereto of Which he is the owner, . . subject to the following allowances, namely : (iv) where the property is subject to a mortgage or other capital charge, the amount of any interest on such mortgage or charge; where the property is subject to an annual charge not being a capital charge, the. amount of such charge; where the property is subject to a ground rent, the amount of such ground rent; and, where the property has been acquired, constructed, repaired, renewed or recon structed with borrowed capital, the amount of any interest payable on such capital; . . . " It will be seen that clause (iv) consists of four sub clauses corresponding to the four deductions allowed 556 under the clause.
Before the amending Act of 1939, clause (iv) contained only the first, third and fourth sub clauses.
Under the first sub clause interest is deductible whether the amount borrowed on the security of the property was spent on the property or not.
There is no question of any capital or other expenditure on the property.
The expression "capital charge" in the sub clause cannot connote a charge on the capital, that is, the property assessed.
That would be a redundancy as the opening words themselves clearly indicate that the charge is on the property.
We are therefore of opinion that capital charge here could only mean a charge created for a capital sum, i.e., a charge to secure the discharge of a liability of a capital nature.
In 1933 the Privy Council decided the case of Bijoy Singh.
Dudhuria vs Commissioner of Income tax, Calcutta (1 ).
It was not an assessment under section 9 but an assess ment on the general income of an assessee who was liable to pay maintenance for his step mother which had been charged on all his assets by a decree of Court.
It was not a li ability voluntarily incurred by him but one cast on him by law.
The Privy Council held that the amount paid by him in discharge of that liability formed no part of his real income and so should not be included in his assessment.
Though the decision proceeded on the principle that the outgoings were not part of the assessee 's income at all, the framers of the amending Act of 1939 wanted, apparently, to extend the principle, so far as the assessment of property was concerned, even to cases where obligatory payments had to be made out of the assessee 's income from the property charged with such payments, and the second sub clause, namely, "where the property is subject to an annual charge not being a capital charge, the amount of such charge" was added.
It is this sub clause which the appellant invokes in support of its claim to deduction of the municipal and urban, property taxes in the present case.
In view of the opening words of the newly added sub clause, the expression "capital charge" also used therein cannot have reference to a charge on the property, and we think it must (1) I.L.R. 60 cal.
557 be understood in the same sense as in sub clause (1); that is to say, the first sub clause having provided for deduc tion of interest where a capital sum is charged on the property, this sub clause provides for a deduction of annual sums so charged, such sums not being capital sums, the limiting words being intended to exclude cases where capital raised on the security of the property is made repayable in instalments.
In Commissioner of Income tax, Bombay vs Mahomedbhoy Rowji (1), a Bench of the Bombay High Court considered the meaning of these words.
As regards "annual charge," Beau mont C.J. observed as follows : "The words, I think, would cover a charge to secure an annual liability." Kania J., as he then was, said as follows : "I do not see how a charge can be annual unless it means a charge in respect of a payment to be made annually." This construction of the words has been followed in the judgment under appeal.
In Gappumal Kanhaiya Lal vs Commissioner of Income tax (2) (the connected appeal before us), the Bench of the Allahabad High Court agreed with the construction placed on these words in the Bombay case, i.e., the words "annual charge" mean a charge to secure an annual liability.
It is therefore clear that there is no conflict of judicial deci sions as to the meaning of the phrase "annual charge" occur ring in section 3 (1) (iv) and the meaning given is the natural meaning of these words.
As to the phrase "capital charge", Beaumont C.J. in the case above referred to took the view that the words mean a charge on capital.
Kania J., however, took a different view and observed that he was not prepared to accept the sugges tion that a document which provides for a certain payment to be made monthly or annually and charged on immoveable property or the estate of an individual becomes a capital charge.
In the Allahabad judgment under appeal these (1) I.L.R. (2) I.L.R. 1944 All.
558 words were considered as not meaning a charge on capital.
It was said that if an annual charge means a charge to secure the discharge of an annual liability, then, capital charge means a charge to secure the discharge of a liability of a capital nature.
We think this construction is a natu ral construction of the section and is right.
The determination of the point whether the taxes in dispute fall within the ambit of the phrase "annual charge not being a capital charge" depends on the provisions of the statutes under which they are levied.
Section 143 of the City of Bombay Municipal Act, 1888, authorises the levy of a general tax on all buildings and lands in the city.
The primary responsibility to pay this property tax is on the lessor (vide section 146 of the Act).
In order to assess the tax provision has been made for the determination of the annual rateable value of the building in section 154.
Section 156 provides for the maintenance of an assessment book in which entries have to be made every official year of all buildings in the city, their rateable value, the names of persons primarily liable for payment of the property tax on such buildings and of the amount for which each building has been assessed.
Section 167 lays down that the assess ment book need not be prepared every official year but public notices shall be given in accordance with sections 160 to 162 every year and the provisions o+ the said sec tions and of sections 163 and 167 shall be applicable each year.
These sections lay down a procedure for hearing objections and complaints against entries in the assessment book.
From these provisions it is clear ' that the liabil ity for the tax is determined at the beginning of each official year and the tax is an annual one.
It recurs from year to year.
Sections 143to 168 concern themselves with the imposition, liability and assessment of the tax for the year.
The amount of the tax for the year and the liability for its payment having been determined, the Act then pre scribes for its collection in the chapter "The collection of taxes.
" Section 197 provides that each of the property taxes shall be payable in 559 advance in half yearly instalments on each first day of April and each first day of October.
The provision as to half yearly instalment necessarily connotes an annual li ability.
In other words, it means that the annual liability can be discharged by half yearly payments.
Procedure has also been prescribed for recovery of the instalments by presentment of a bill, a notice of demand and then distress, and sale.
Finally section 212 provides as follows : "Property taxes due under this Act in respect of any building or land shall, subject to the prior payment of the land revenue, if any, due to the provincial ,Government thereupon, be a first charge . . upon the said build ing or land . " It creates a statutory charge on the building.
Urban immove able property tax is leviable under section 22 of Part VI of the Bombay Finance Act, 1932,on the annual letting value of the property.
The duty to collect the tax is laid on the municipality and it does so in the same manner as in the case of the municipal property tax.
Section 24 (2) (b) is in terms similar to section 212 of the Bombay Municipal Act.
It makes the land or the building security for the payment of this tax also.
For the purposes of section 9 of the Indian Income tax Act both these taxes, namely, the munici pal property tax as well as the urban immoveable property tax are of the same character and stand on the same foot ing.
Mr. Munshi, the learned counsel for the appellant con tended that both the taxes are assessed on the annual value of the land or the building and are annual taxes, although it may be that they are collected at intervals of six months for the sake of convenience, that the income tax itself is assessed on an annual basis, that in allowing deductions all payments made or all liabilities incurred during the previ ous year of assessment should be allowed and that the taxes in question fell clearly within the language of section 9 (1) (iv).
The learned Attorney General, on the other hand, argued that although the taxes are assessed for the year the liability to pay them arises at the beginning 560 of each half year and unless a notice of demand is issued and a bill presented there is no liability to pay them and that till then no charge under section 212 of the Act could possibly arise and that the liability to pay being half yearly in advance, the charge is not an annual charge.
It was also suggested that the taxes were a capital charge in the sense of the property being security for the payment.
We are satisfied that the contentions raised by the learned Attorney General are not sound.
It is apparent from the whole tenor of the two Bombay Acts that the taxes are in the nature of an annual levy on the property ' and are assessed on the annual value of the property each year.
The annual liability can be discharged by half yearly instalments.
The liability being an annual one and the property having been subjected to it, the provisions of clause (iv) of sub sec tion (1) of section 9 are immediately attracted.
Great emphasis was laid on the word"due" used in section 212 of the Municipal Act and it was said that as the taxes do not become due under the Act unless the time for the payment arrives, no charge comes into existence till then and that the charge is not an annual charge.
We do not think that this is a correct construction of section 212.
The words "property taxes due under this Act" mean property taxes for which a person is liable under the Act.
Taxes payable during the year have been made a charge on the property.
The liability and the charge both co exist and are co exten sive.
The provisions of the Act affording facilities for the discharge of the liability do not in any way affect their true nature and character.
If the annual liability is not discharged in the manner laid down by section 197, can it be said that the property cannot be sold for recovery of the whole amount due for the year ? The answer to this query can only be in the affirmative, i.e., that the proper ty is liable to sale.
In Commissioner of Income tax, Bombay vs Mahomedbhoy Rowji(1) Beaumont C.J., while rejecting the claim for the deduction of the taxes, placed reliance on (1) I.L.R. 561 section 9 (1) (v) which allows a deduction in respect of any sums paid on account of land revenue.
It was observed that land revenue stands on the same footing as municipal taxes and that as the legislature made a special provision for deduction of sums payable in regard to land revenue but not in respect of sums paid on account of municipal taxes that circumstance indicated that the deduction was not allowable.
For the same purpose reference was also made to the provi sions of section 10 which deal with business allowances and wherein deduction of any sum paid on account of land reve nue, local rates or municipal taxes has been allowed.
In the concluding part of his judgment the learned Chief Jus tice said that it was not necessary for him to consider what the exact meaning of the words was and that it was suffi cient for him to say that it did not cover municipal taxes which are made a charge on the property under section 212 of the Bombay Municipal Act.
Without determining the exact meaning of the words used by the statute it seems to us it was not possible to arrive at the conclusion that the taxes were not within the ambit of the clause.
It is elementary that the primary duty of a Court is to give effect to the intention of the legislature as expressed in the words used by it and no outside consideration can be called in aid tO find that intention.
Again reference to clause (v) of the section is not very helpful because land revenue is a charge of a paramount nature on all buildings and lands and that being so, a deduction in respect of the amount was mentioned in express terms.
Municipal taxes, on the other hand, do not stand on the same footing as land revenue.
The law as to them varies from province to province and they may not be necessarily a charge on property in all cases.
The legis lature seems to have thought that so far as municipal taxes on property are concerned, if they fall within the ambit of clause (iv), deduction will be claimable in respect of them but not otherwise.
The deductions allowed in section 10 under the head "Income from business" proceed on a different footing and a construction of section 9 with the aid of section 10 is apt to mislead.
562 Kania J. in the above case in arriving at his conclusion was influenced by the consideration that these taxes were of a variable character, i.e., liable to be increased or re duced under the various provisions of the Municipal Act and that the charge was in the nature of a contingent charge.
With great respect, it may be pointed out that all charges in a way may be or are of a variable and contingent na ture.
If no default is made, no charge is ever enforceable and whenever there is a charge, it can be increased or reduced during the year either by payment or by additional borrowing.
In Moss Empires Ltd. vs Inland Revenue Commissioners (1) it was held by the House of Lords that the fact that certain payments were contingent and variable in amount did not affect their character of being annual payments and that the word, "annual" must be taken to have the quality of being recurrent or being capable of recurrence.
In Cunard 's Trustees vs Inland Revenue Commissioners (2) it was held that the payments were capable of being recur rent and were therefore annual payments within the meaning of schedule D, case III, rule 1 (1), even though they were not necessarily recurrent year by year and the fact that they varied in amount was immaterial.
The learned Attorney General in view of these decisions did not support the view expressed by Kania J. Reliance was placed on a decision of the High Court of Madras in Mamad Keyi vs Commissioner of Income tax, Madras(3), in which moneys paid as urban immoveable property tax under the Bombay Finance Act were disallowed as inadmis sible under section 9 (1) (iv) or 9 (1) (v) of the Indian Income tax Act. 'This decision merely followed the view expressed in Commissioner of income tax, Bombay vs Mahomedb hoy Rowji (4)and was not arrived at on any independent or fresh reasoning and is not of much assistance in the deci sion of the case.
The Allahabad High Court (1) (2) [1948] 1 A.E.R. 150. (3) I.L.R. (4) I.L.R. 563 in Gappumal Kanhaiya Lal vs Commissioner of Incometax (1) (the connected appeal) took a correct view of this matter and the reasoning given therein has our approval.
The result is that this appeal is allowed and the two questions which were referred to the High Court by the Income tax Tribunal and cited above are answered in the affirmative.
The appellants will have their costs in the appeal.
Appeal allowed.

dataset_name: IN-Abs

summary:
The charge created in respect of municipal property tax by section 212 of the City of Bombay Municipal Act, 1888, is an "annual charge not being a capital charge" within the mean ing of section 9 (1) (iv) of the Indian Income tax Act, 199.2, and the amount of such charge should therefore be deducted in computing the income from such property for the purposes of section 9 of the Indian Income tax Act.
The charge in respect of urban immoveable property tax created by the Bombay Finance Act, 1939 is similar in character and the amount of such charge should also be deducted.
The expression "capital charge" in s.9(1) (iv) means a charge created for a capital sum,that is to say, a charge created to. ' secure the discharge of a liability of a capi tal nature; and an "annual charge" means a charge to secure an annual liabili ty. 554


judgement:
Civil Appeal No.94 of 1949.
107 834 Appeal from a judgment and decree of the High Court of Judi cature at Patna in Appeal from Appellate Decree No. 97 of 1946 (Mannohar Lall and Mukherji JJ.) dated 23rd Decem ber, 1947, confirming the judgment of the District Judge of Purulia in Appeal No. 159 of 1944.
S.P. Sinha (P. K. Bose, with him) for the appel lant.
N.C. Chatterjee and Panchanan Ghosh (Chandra Narayan Naik, with them) for the respondent. 1950.
December 1.
The Judgment of the Court was deliv ered by PATANJALI SASTRI J.
This appeal arises out of a suit brought by the respondent in the court of the Subordinate Judge, Dhanbad, for recovery of arrears of royalty and cess from the appellant and another alleged to be due under a compromise decree passed on the 6th March, 1923, in a previ ous suit between the predecessors in interest of the par ties.
The only plea which is material for the purpose of this appeal is that the compromise decree not having been registered was inadmissible in evidence.
The courts below held that the document did not require registration and gave effect to its terms in decreeing the suit.
The second defendant has preferred this appeal.
The facts are not now in dispute and may be briefly stated.
On 11th March, 1921, one Kumar Krishna Prasad Singh (hereinafter referred to as Kumar) granted a perma nent lease of the right to the underground coal in 5,800 bighas of land belonging to him to Shibsaran Singh and Sitaram Singh (hereinafter referred to as the Singhs) by a registered patta stipulating for a salami of Rs. 8,000 and royalty at the rate of 2a.
per ton of coal raised subject to a minimum of Rs. 8,000 and for certain other cesses and interest.
On 7th June, 1921, Kumar executed another perma nent patta leasing the right to the coal in 500 bighas out of the 5,800 bighas referred to above to one Prayngji Bal lavji Deoshi and his son Harakchand Deoshi (hereinafter referred to as the Deoshis).
By this document.
835 the Deoshis agreed inter alia to pay royalty at the rate of 2a. per ton on all classes of coal raised subject to a minimum of Rs. 750 a year.
The Singhs feeling themselves aggrieved by the latter transaction brought a title suit (No. 1291 of 1921) in the Court of the Subordinate Judge of Dhanbad for a declaration of their title and for possession of the 500 bighas leased to the Deoshis under the aforesaid patta of 7th June, 1921.
To that suit Kumar was made a party as defendant No. 3, the Deoshis being defendants 1 and 2.
The suit was however cornpromised on 6th March, 1923, by all the parties and a decree based on the compromise was also passed on the same day.
The interest of the Singhs was brought to sale in 193S in execution of a decree obtained against them and was purchased by the plaintiff who insti tuted the presnt suit on 3rd October, 1942, claiming the royalty and cesses payable under the compromise decree for the period from Pous 1345 to Asadh 1349 B.S. from defendants 1 and 2 as the representatives of the Deoshis who entered into the compromise of March, 1923.
In order to appreciate the contentions of the parties, it is necessary to set out the relevant terms of the compro mise decree which are as follows : "The plaintiffs (the Singhs) within two months from this date shall pay Rs. 8,000 as salami to defendant No. 3 (Kumar).
Otherwise all the terms of the compromise Will stand cancelled and the plaintiffs shall not be competent to claim any right to or possession over the.land covered by the patta dated 11th March, 1921.
The patta which defend ant No. 3 executed in favour of the plaintiffs in respect of 5,800 bighas of coal land in village Rahraband shall remain in force, and the plaintiffs will get a decree of declara tion of their right and title to the 500 bighas of coal land in dispute but defendants 1 and 2 (the Deoshis) shall hold possession as tenants.
Besides the terms mentioned below, defendants 1 and 2 shall remain bound by all the remaining terms under which they took settlement of the 500 bighas of coal land from defendant No. 3 under 836 patta and Kabuliyat, and both the defendants 1 and 2 shall possess the same under the plaintiffs from generation to generation and all the terms of the said patta and Kabuliyat shall remain effective and in force between them.
Both the defendants 1 and 2 shall remain bound to pay to the plain tiffs commission at the rate of 2a.
per ton on all sorts of coal instead of 2a.
a ton as stated before in the patta of 5,800 bighas of land settled with the plaintiffs.
The plaintiffs shall pay to defendant No. 3 in future the mini mum royalty of Rs. 6,000 instead of Rs. 8,000 as stipulated in the original patta of 11 th March 1921 and commission at the rate of la.
a ton in place of 2a.
a ton as stipulat ed in the patta of March 21 .
Unless the plaintiffs pay to the defendant No. 3 Rs. 8,000 within 2 months from this day they shall not be competent to take out execution of this decree, nor shall they be competent to take posses sion of the land in dispute.
The defendants 1 and 2 within one month from the date of payment of Rs. 8,000 as aforesaid to defendant No. 3 shall execute a new Kabuliyat in favour of the plaintiff in respect of the modified terms stated above, i.e., on the condition to pay commission at the rate of 2a.
per ton.
In the new patta which defendant No. 3 will execute in favour of the plaintiffs he shall embody the condition that the annual minimum royalty will be Rs. 6,000 instead of Rs. 8,000 and commission will be at the rate of la. 9p.
per ton in place of 2a.
per ton as mentioned in the aforesaid patta.
If the defendant No. 3 does not execute the parts on the aforesaid modified terms in favour 'of the plaintiffs within the time aforesaid and both the defendants 1 and 2 also do not execute a kabuliyat on the aforesaid modified terms, then this very rafanama shall be treated as the parts and kabuliyat, and the plaintiffs in accordance with the terms of the rafanama shall pay to defendant No. 3, Rs. 6,000 only as minimum royalty and commission at the rate of la.
per ton with respect to 5,800 bighas and shall continue to realise commission at the rate of 2a. 6p. per ton from defendants 1 and 2 who shall remain bound to pay the same.
" 837 The answer to the question whether this compromise decree requires registration depends on the legal effect of the changes in the status quo ante of the parties brought about by the document.
A careful analysis reveals the following alterations : (1) In the lease to the Singhs, the rate of royalty or commission was reduced from 2a.
per ton of coal raised to la.
per ton and the minimum royalty was reduced from Rs. 8,000 to Rs. 6,000 while the area of coal land in their khas possession was reduced by 500 bighas. (2) In the lease to the Deoshis the rate of royalty or commission was enhanced from 2a.
per ton to 2a.
per ton and tiffs was made payable to the Singhs.
The Singhs and the Deoshis were brought into a new legal relationship, the former accepting the latter as tenants holding the disputed 500 bighas under them in consideration of the latter agreeing to pay the enhanced royalty to the former. (4) The whole arrangement was made conditional on the Singhs paying Rs. 8,000 to Kumar within 2 months from the date of the compromise, it being expressly provided that the Singhs were not to be entitled to execute the decree or to take possession of the disputed area of 503 bighas which evidently had not till then passed into their possession.
Now, sub section (1) of section 17 of the , enumerates five categories of documents of which regis tration is made compulsory which include" (d) leases of immoveable property from year to year, or for any term exceeding one year, or reserving a yearly rent;".
Sub sec tion (2) however provided that "nothing in clauses (b) and (c) of sub section (1)applies to . (vi) any decree or order of court.
" It may be mentioned in passing that this clause was amended with affect from the 1st April, 1930, by the , so as to exclude from the scope of the exception compromise decrees comprising immovable property other than that which is the subject matter of the suit.
But 838 the amendment cannot affect the document here in question which came into existence in 1923.
Before the amendment, the clause was held to cover even compromise decrees comprising immovable property which was not the subject matter of the suit: [Vide Hemanta Kumari Debi vs Midnapur Zamindari Co. ( ')].
That decision applies to the present case and obviates the objection that because the compromise in question covered also the remaining 5,300 bighas which were not the subject matter of the title suit of 1921, it was outside the scope of the exception in sub section (2), clause (vi).
The only question, therefore, is whether the compromise decree is a "lease" [which expression includes "an agreement to lease" by the definition in section 2 (7)] within the meaning of el.
(d) of sub section (1).
It is obvious that if the compromise decree fails within clause (d) of sub section (1) it would not be protected under clause (vi) of sub section (2) which excepts only documents falling under the categories (b) and (c) of sub section (1).
The High Court was of opinion that, on a proper construction of the terms of the compromise, it did not fall under clause (d).
Mano har Lall J., who delivered the leading judgment, observed: "It was a tripartite agreement embodied in the decree of the court and was, therefore, exempt from registration.
It will be oh.served also that so far as the defendants were con cerned, their possession of the 500 bighas was not inter fered with and they still remained in possession as the lessees, but instead of paying the royalty to the plaintiffs it was agreed between all the parties that the defendants would pay the royalty in future to Shibsaran and Sitcram.
If the matter had stood there, the learned Advocate for the appellant could not have seriously contested the position, but he vehemently argued that when the agreement was not to pay the same amount of royalty or commission as previously agreed to but an altered amount of royalty and commission, the document should be held to fall within the mischief of section 17 (1)(d)of the (1) P.C. 839 .
The answer to this contention is, as I have stated just now, to be found in the Full Bench decision of this court :" [see Charu Chandra Mitra 's case ()].
It was there held that a mere alteration of the rent reserved does not make the transaction a new lease so as to bring it within clause (d)of subsection (1).
We are unable to share this view.
It oversimplifies the compromise transaction which, in our opinion, involves much more than a mere alteration of the royalties stipulated for in the previous pattas executed by Kumar.
Nor can we accept the suggestion of Mr. Chatterjee for the respondents theft the compromise operated as an assignment to the Singhs by Kumar of the latter 's reversion under the "lease granted to the Deoshis and all that the latter did was to acknowledge the Singhs as their landlords and attern to them.
On tiffs view it was said that the transaction would not fall under clause (d), although it would fall under clause (b) but then would be saved by the exception in clause (vi) of sub section (2).
The argument, however, overlooks that Kumar had leased the area of 5,800 bighas to the Singhs by his patta dated 11th March, 1921, and the compromise by providing that the Singhs should pay the reduced royalty of 1a.
per ton in respect of the whole area preserved Kumar 's reversion intact.
He could not therefore be deemed to have assigned any part of his inter est in 5,800 bighas as landlord to the Singhs who continue to hold the entire extent as tenants under him.
What the compromise really did was.
as stated already, to bring the Singhs and the Deoshis into a new legal relationship as underlessor and under lessee in respect of 500 bighas which were the subject matter of the title suit; in other words, its legal effect was to create a perpetual underlease be tween the Singhs and the Deoshis which would clearly fall under clause (d) but for the circumstance that it was to take effect only on condition float the Singhs paid Rs. 8,000 to Kumar within 2 months (1) 840 thereafter.
As pointed out by the Judicial Committee in Hemanta Kumar 's case (1) "An agreement for a lease, which a lease is by the statute declared to include, must, in their Lordships ' opinion, be a document which effects an actual demise and operates as a lease .
The phrase which in the context where it occurs and in the statute in which it is found, must in their opinion relate to some document which creates a present and immediate interest in the land.
" The compromise decree expressly provides that unless the sum of Rs. 8,000 was paid within the stipulated time the Singhs were not to execute the decree or to take possession of the disputed property.
Until the payment was made it was impossible to determine whether there would be any under lease or not.
Such a contingent agreement is not within clause (d) and although it is covered by clause (b). is excepted by clause (vi) of sub section ( '2).
We therefore agree with the conclusion of the High Court though on dif ferent grounds and dismiss the appeal with costs.
Appeal dismisseel.

summary:
An agreement for a lease, which a lease is by the Indian declared to include, must be a document which effects an actual demise and operates as a lease.
It must create present and immediate interest in land.
Where a litigation between two persons A and B who claimed to be tenants under C was settled by a compromise decree the effect of which was to create a perpetual underlease between A and B which was to take effect only on condition that A paid Rs. 8,000 to C within a fixed period: Held, that such a contingent agreement was not "a lease" within el.
(a) of section 17 (t) of the Indian , and even though it was covered by cl.
(b) of the said sec tion it was exempt from registration under el.
(vi) of subs.
(2) of section 17.
Hemanta Kumari Debi vs Midnapur Zamindari Co. (I P.C.) relied on.


judgement:
iminal Appeal No. 40 of 1951, 127 Appeal from the Judgment and Order dated the 1st June, 1951, of the High Court of Judicature in Assam (Thadani C.J. and Ram Labhaya J.,) in Criminal Reference No. I of 1951, arising out of Judgment and Order dated the 15th November, 1950, of the Court of the Additional District Magistrate, Lakhimpur, in Case No. 1126C of 1950.
Jindra Lal for the appellant.
Nuruddin Ahmed for the respondent.
October 23.
The Judgment of the Court was delivered by CHANDRASEKHARA AIYAR J.
Rameshwar Bhartia, the appellant, is a shopkeeper in Assam.
He was prosecuted for storing paddy without a licence in excess of the quantity permitted by the Assam Food Grains Control Order, 1947.
He admitted storage and possession of 550 maunds of paddy, but pleaded that he did not know that any licence was necessary.
The 'Additional District Magistrate recorded a plea of guilty, but imposed him a fine of Rs. 50 only, as he considered his ignorance of the provisions of the Food Grains Control Order to be genuine.
The stock of paddy was left in the possession of the appellant by the Procurement Inspector under a Jimmanama or security bond executed in his favour.
He was subsequently unable to produce it before the court, as the whole of it was taken away by a Congress M.L.A. for affording relief to those who suffered in the earthquake, and so, the appellant was ordered to procure a similar quantity of paddy after taking an appropriate licence, and to make over the same to the procurement department payment of the price.
The District Magistrate, being moved to do so by the procurement department, referred the case to the High Court under section 438, Criminal Procedure Code, for enhancement of the sentence, as in his opinion the sentence was unduly lenient and the Jimmanama, which was admittedly broken, should have been forfeited.
128 The reference was accepted by the High Court, and the sent ence was enhanced to rigorous ' imprisonment for six months and a fine of Rs. 1,000.
As regards the Jimmanama, the case was sent back to the trial court for taking action according to law under section 514, Criminal Procedure Code, for its forfeiture.
The appellant applied to the High.
Court for a certificate under article 134 (1) (c) of the Constitution that the case was a fit one for appeal to this Court.
This application was granted.
Out of the three points urged for the appellant, two were rejected, but the third one was accepted as a good ground, namely, that there was a contravention of the provisions of section 556, Criminal Procedure Code and that consequently the, trial before the Additional District Magistrate was void.
One of the contentions urged before us was that Shri C.K. Bhuyan was not a "Director" at all and therefore there was no valid sanction under section 38 of the Order.
A notifications dated 16th May) 1950, and published in the Assam Gazette of the 24th May, 1950, was produced before us to show that Sri C.K. Bhuyan was an Additional Deputy Commissioner and it was conceded by the appellant 's counsel before the High Court that if he was a Deputy Commissioner, he would be a Director under the Order, as all Deputy Commissioners in Assam were notified as Directors for the purposes of the Order.
Mr. Jindra Lal sought to draw a distinction between a Deputy Commissioner and an Additional Deputy Commissioner in this respect, but there is no warrant for the same,, apart from the circumstance that it is a question of fact which has to be investigated afresh, and which we cannot allow to be raised now for the first time.
The primary question to consider in this appeal is whether there has been any infringement of Section 556, Criminal Procedure Code, and a consequent want of jurisdiction in the court which tried the offence.
The facts relevant to this question lie 129 within a narrow compass.
The Procurement Inspector sent a report , Ist July,1950 about the nature of the offence ; he wrote out a short note the, subject, and requested that the accused might be prosecuted and the Assistant Director of Procurement, Dibru garh, might be authorised to dispose of the paddy immediately to avoid loss due to deterioration, Sri 0.
K. Bhuyan,who was the then District Magistrate Lakhimpur, made the following order: "Prosecution sanctioned under section 7 (1) of ,the Essential Supplies (Temporary Powers) Act, 1946, for violation of sections 3 and 7 of the Assam Food Grains Oontrol Order, 1947.
" The case happened to be tried by the same gentleman in his capacity as Addtional District Magistrate, and the accused was convicted as aforesaid.
The argument for the appellant was that having sanctioned the prosecution, Sri C.K. Bhuyan became "personally interested" in the case within the meaning of section 556, and was therefore incompetent to try the same.
It was contended that the trial was not only irregular but illegal.
There is no question that "personal interest" within the meaning of the section is not limited to private interest, and that it may well include official interest also.
But what is the extent of the interest which will attract the disability is a subject which different views are possible and have been taken.
Section 556 itself indicates the difficulty.
The Explanation to the section runs in these terms: "A Judge or Magistrate shall not be deemed a party, or personally interested, within the , meaning of this section, to or in any case by reason only that be is a Municipal Commissioner or otherwise concerned therein in a public capacity, or by reason only that he has viewed the place in which an offence, is alleged to have been committed, or any other place .in which any other transaction material to the case 'is alleged to have occurred, and made an inquiry III connection with the case.
" 130 This shows that to be connected with a case in a public capacity is not by itself enough to render the person incompetent to try it.
Even if he had made an enquiry in connection with this case, it would not matter.
But look at the illustration: "A, as collector, upon consideration of information furnished to him, directs the prosecution of B for a breach of the excise laws.
A is disqualified from trying this case as a Magistrate.
" It is evident from the words of the illustration that if a prosecution is directed by a person in one capacity, he shall not try the case acting in another capacity as a Magistrate.
The explanation and illustration lend some support to the view that there is a distinction between a passive interest and an active interest, and that it is only in the latter case that the disqualification arises or intervenes.
Under sub section (3) (a) of section 2 of the Assam Food Grains Control Order "Director" means "the Director of Supply, Assam, and includes, for the purpose of any specific. provision of this Order, any other officer duly authorised in that behalf by him or by the Provincial Government by notification in the Official Gazette.
" Section 38 provides: No prosecution in respect of an alleged contravention of any provision of this Order shall be instituted without the sanction of the Director.
" A little confusion is likely to arise from the employment of the word " Director" in the Control Order and the word "directs" in the illustration to section 556 of the Code '.
It has to be borne in mind that a sanction by the Director within the meaning of the Code does not necessarily mean "a direction given by him that the accused should be prosecuted.
" In both cases of sanction and direction, an application of the mind is necessary, but there is this essential difference that in the one case there is a legal impediment to the prosecution if there be no sanction, and in the other case, there is a positive order that 131 the prosecution should be launched.
For a sanction, all that is necessary for one to be satisfied about is the existence of a prima facie case.
In the case of a, direction, a further element that the accused deserves to be prosecuted is involved.
The question whether a Magistrate is personally interested or not has essentially to be decided the facts in each case.
Pecuniary interest, however small, will be a disqualification but as regards other kinds of interest, there is no measure or standard except that it should be a substantial one, giving rise to a real bias, or a reasonable apprehension the part of the accused of such bias.
, The maxim " Nemo debet esse judex in propria sua causa" applies only when the interest attributed is such as to render the case his own cause.
The fulfllment of a technical requirement imposed by a statute may not, in many cases, amount to a mental satisfaction of the truth of the facts placed before the officer.
Whether sanction should be granted or not may conceivably depend upon consideration extraneous to the merits of the case.
But where a prosecution is directed, it means that the authority who gives the direction is satisfied in his own mind that the case must be initiated.
Sanction is in the nature of a permission while a direction is in the nature of a command.
Let us now examine some of the decisions the subject.
For the appellant, strong reliance was placed the judgment of the Privy Council in Gokulchand Dwarkadas vs King(1), and it was argued the basis of some of the observations of the Judicial Committee that a sanction was an important and substantial matter and not a mere formality.
The facts in that case were that while there was a sanction of the Government for a prosecution under the Cotton Cloth and Yarn Control, Order, there was nothing in the sanction itself, or in the shape of extraneous evidence, to show that the sanction was accorded after the relevant facts were placed before the sanctioning authority.
To quote their Lordships ' own words; (1) (1948) 52 C.W.N.325.
132 "There is no evidence to show that the report of the Sub Inspector to the District Superintendent of Police, which was not put in evidence, was forwarded to the District Magistrate, nor is there any evidence is to the contents of the endorsement of the District Magistrate, referred to in the sanction, which endorsement also was not put in evidence.
The prosecution was in a position either to produce or to account for the absence of the 'report made to the District Superintendent of Police and the endorsement of the District Magistrate referred to in the sanction, and to call any necessary oral evidence to supplement the documents and show what were the facts which the sanction was given.
" It is in this connection that their Lordships em phasise that the sanction to prosecute is an important step constituting a condition precedent, and observe: "Looked at as a matter of substance it is plain that the Government cannot adequately discharge the obligation of deciding whether to give or withhold a sanction without a knowledge of the facts of the case.
Nor, in their Lordships ' view, is a sanction given without reference to the facts constituting the offence a compliance with the actual terms of clause 23.
" This, however, is no authority for the position that a sanction stands the same footing as a direction.
It is true that the facts should be known to the sanctioning authority ; but it is not at all necessary that the authority should embark also an investigation of the facts, deep or perfunctory, before according the sanction.
The decision lends no support to the view that wherever there is a sanction, the sanctioning authority is disabled under section 556 of the Code from trying the case initiated as a result of the sanction. the other hand, there is plenty of support for the opposite) view.
In the very early case of The Government of Bengal vs HeeraLall Dass and Others(1), at a time when there (1) (1872) 17 Weekly Reporter, Criminal Rulings, 39. 133 was no such statutory provision as section 556 of the Code but, only the general rule of law that a man could not be judge in a case in which he had an interest, the facts were that a Sub Registrar, who was also an Assistant Magistrate, having come to know in his official capacity as a registering officer that an offence under the Registration Act had been committed, sanctioned a prosecution, and subsequently tried the case himself.
A Full Bench consisting of Sir Richard Couch C. ' J. and five other learned Judges came to the conclusion, after an examination of some of the English cases, that the trial was not vitiated.
The learned Chief Justice said: "In this case, I think, the Sub Registrar has not such an interest in the matter as disqualifies him from trying the case; and I may observe with reference to some of the arguments that have been used as to the Sub Registrar having made up his mind, and that the accused would have no chance of a fair trial, that the sanction of the superior officer, the Registrar, is required before the prosecution can be instituted, and certainly I do not consider that the prosecution will not be instituted unless the Sub Registrar has made up his mind as to the guilt of the party.
It is his duty, when he comes to know that an offence has been committed, to cause a prosecution to be instituted, by which I understand that there is prima facie evidence of an offence having been committed, that there is that which renders it proper that there should be ail enquiry, and the Registrar accordingly gives his sanction to it ; and certainly, I cannot suppose that, because an officer in his position sanctions the institution of a prosecution, his mind is made up as to the guilt of the party and .
that he is not willing to consider the evidence which may be produced before him when he comes to try the case.
In this case, there appears to 'be no such interest as would prevent the case from going" before the Magistrate as the trying authority . 134 In Queen Empress vs Chenchi Reddi(1) it was pointed out that when there was only an authorisation and not a direction, there was no supervening disability ; and the case of Girish Chunder Ghose vs The QueenEmpress(2) was distinguished, the ground that there the Magistrate had taken a very active part in connection with the case as an executive officer.
The Bombay High Court went even a step further in the case reported in Emperor vs Bavji(3), where the Magistrate who tried the case had earlier held a departmental enquiry and forwarded the papers to the Collector with his opinion that there was sufficient evidence to justify a criminal prosecution.
As he did no more than express an opinion that there was evidence, which he, had neither taken nor sifted, which made a criminal prosecution desirable, it was held that the Magistrate was not disqualified from holding the trial, though, no doubt it would have been more expedient had the Collector sent the case for disposal to another of his subordinates.
As stated already, the question whether the bar under section 556 comes into play depends upon the facts and circumstances of each particular case, the dividing line being a thin one somewhat but still sufficiently definite and tangible, namely, the removal of a legal impediment by the grant 'of sanction and the initiation of criminal proceedings as the result of a direction.
In the present case before us, we have nothing more than a sanction, and consequently we are unable to hold that the trial has become vitiated by reason of the provisions of section 556, Criminal Procedure Code.
The other point taken behalf of the appellant is a more substantial one.
The security bond was taken from him not by the court but by the Procurement Inspector.
It is true that it contained the undertaking that, the seized paddy would be produced before the court, but still it was a promise made to the particular official and not to the court.
The High (1) Mad. 238.
(3) (19O3) (2) Cal.
857. 135 Court was in error in thinking that section 514, Criminal Procedure Code, applied.
Action could be taken only when the bond is taken by the court under the provisions of the Code such as section 91 for appearance, the several security sections or those relating to bail.
Clause (1) of section 514 runs: "Whenever it is proved to the satisfaction of the, Court by which a bond under this Code has been taken, or of the Court of a Presidency Magistrate or Magistrate of the first class, or when the bond is for appearance before a Court, to the satisfaction of such Court, that such bond has been forfeited, the Court shall record the grounds of such proof, and may call upon any person bound by such bond to pay the penalty thereof, or to show cause why it should not be paid.
" The language is perfectly clear; the power to forfeit and the imposition of the penalty provided for in the later parts of the section arise only if the preliminary conditions are satisfied.
There was no argument addressed to us that the High Court in suggesting that action should be taken under section 514 for forfeiture of the bond acted in the exercise of its inherent powers under section 561 A.
It did not purport to exercise any such power; and, moreover, there will then arise the question whether when the Code contains an express provision a particular subject, there could be any resort to inherent jurisdiction, under a general provision.
We have got an additional circumstance in the appellant 's favour in this case that the seized paddy was taken away by a member of the Legislative Assembly for giving relief to those affected by the earthquake, and if that is true, as it seems to be from the letter written by the ' M.L.A. to the Additional District Magistrate the 1st November, 1950, it appears to us harsh, if not unjust, to ask him to produce the same paddy or a similar quantity of paddy.
The order of the High Court sending back the case to the 136 Magistrate for taking action according to law under section 514 will, therefore, stand set aside.
We generally do not interfere in the matter of sentence, but in this case we find that the Magistrate has held that the appellant 's plea that he was ignorant of the provisions of the Assam Food Grains Control Order, 1947, was a genuine one.
Having regard to this circumstance and the fact that from a fine of Rs. 50 to 6 months ' rigorous imprisonment and a fine of Rs. 1,000 is a big jump, we think it is appropriate that the sentence of imprisonment imposed by the High Court should be set aside and we order accordingly.
The fine of Rs. 1,000 will stand.
Sentence reduced.

summary:
The question whether a Magistrate is "personally interested" in a ease within the meaning of section 556, Criminal Procedure Code, has essentially to be decided the facts of each case.
Where an officer as a District Magistrate exercising his powers under section 7(1) of the Essential Supplies (Temporary Powers) Act, 1946, sanctioned the prosecution of a person for violation of sections 3 and 7 of the Assam Food Grains Control Order, 1947, and the same officer as Additional District Magistrate tried and convicted the accused, and it was contended that as the officer had given sanction for prosecution he was "personally interested" in the case within the meaning of section 656, Criminal Procedure Code, and the trial and conviction were therefore illegal: Held, that bymerely giving sanction for prosecution he did not become personally interested" in the case and the trial and conviction were not illegal.
In both cases of sanction and direction to prosecute, an application of the mind is necessary, but there is this essential difference that in the one case there is a legal impediment to the prosecution if there is no sanction and in the other case there is a positive order that the prosecution should be launched.
For a sanction, all that is necessary for one to be satisfied about is the existence of a prima facie case.
In the case of a direction, a further element that the accused deserves to be prosecuted is involved.
Whether sanction should be granted or not may conceivably depend considerations extraneous to the merits of the case.
But where a prosecution is directed, it means that the authority who gives the sanction is satisfied in his own mind that the case must be initiated.
Sanction is in the nature of a permission, while direction is in the nature of a command.
Gokulchand Dwarka Das vs The King , Government of Bengal vs Heera Lall Dass and Others (1872) 17 W. R. Cr. 39, Queen Empress vs Chenchi Reddi (1901) I.L.R. , Girish Chunder vs Queen Empress (1893) I.L.R. , and Emperor vs Ravji , referred to.


judgement:
Appeal No. 388 of 1960.
Appeal by special leave from the judgment and order dated February 3, 1959, of the Patna High Court in Election Appeal No. 10 of 1958.
section P. Varma, for the appellant.
L. K. Jha and D. Govardhan, for respondent No. 1.
L. K. Jha and K. K. Sinha, for respondent No. 2. 1960.
November 17.
The Judgment of the Court was delivered by 471 GAJENDRAGADKAR, J.
Is the appellant Ram Padarath Mahto disqualified for membership of the Bihar Legislature under section 7(d) of the Representation of the People Act, 1951 (hereafter called the Act)? That is the short question which arises for our decision in the present appeal by special leave.
The appellant was one of the candidates for the Dalsinghsarai Constituency in the District of Darbhanga in Bihar for the State Legislature.
The said Constituency is a Double Member Constituency; it was required to elect two members, one for the general and the other for the reserved seat for scheduled castes in the Bihar Legislative Assembly.
It appears that the said Constituency called upon voters to elect members on January 19, 1957.
January 29, 1957 was fixed as the last date for the filing of the nomination papers.
The appellant filed his nomination paper on January 28, 1957, and on the next day seven other members filed their nomination papers.
On February 1, 1957, the nomination paper filed by the appellant was rejected by the returning officer on two grounds; he held that the appellant being an Inspector of Co operative Societies was a Government servant at the material time and so was disqualified from standing for election.
He also found that the appellant was a member of a joint and undivided Hindu family which carried on the business of Government as stockiest of grain under a contract between the Government of Bihar and a firm of the joint family known as Nebi Mahton Bishundayal Mahto.
Thereafter the election was duly held, and Mr. Mishri Singh and Mr. Baleshwar Ram, respondents 1 and 2 were declared duly elected to the general and reserved seat respectively.
The validity of this election was challenged by the appellant by his Election Petition No. 428 of 1957.
To this petition he impleaded the two candidates declared to have been duly elected and five others who had contested in the election.
Before the Election Tribunal the appellant urged that he was not in the employ of the Government of Bihar at the material time.
He pointed out that he had resigned his job on January 13, 472 1957, and his resignation had been accepted on January 25, 1957, relieving him from his post as from the later date.
He also contended that there was a partition in his family and that he had no share or interest in the contract in question.
Alternatively it was argued that even if the appellant had an interest in the said contract it did not fall within the mischief of section 7(d) of the Act.
These pleas were traversed by respondents 1 and 2 who contested the appellant 's election petition.
The Election Tribunal found that the petitioner was not a Government servant on the day he filed his nomination paper, and so according to it the returning officer was wrong in rejecting his nomination paper on the ground that he was a Government servant at the material time.
The Election Tribunal rejected the appellant 's case that there was a partition in the family, and held that at the relevant time the appellant continued to be a member of the joint Hindu family which had entered into the contract in question with the Government of Bihar.
However, in its opinion, having regard to the nature of the said contract it was not possible to hold that the appellant was disqualified under section 7(d), and so it came to the conclusion that the returning officer was in error in rejecting the appellant 's nomination paper on this ground as well.
In the result the Tribunal allowed the election petition, declared that the nomination paper had been improperly rejected, and that the election of the two contesting respondents was void.
Against this decision the two contesting respondents filed two appeals in the High Court at Patna (Election Appeals Nos. 9 and 10 of 1958).
The High Court has confirmed the finding of the Tribunal that the appellant was not a Government servant at the material time.
It has also agreed with the conclusion of the Tribunal that at the relevant time the appellant was a member of the undivided Hindu family.
On the construction of the contract, however, it differed from the view adopted by the Tribunal, and it has held that as a result of the said contract the appellant was disqualified under section 7(d) of the Act.
This finding 473 inevitably led to the conclusion that the appellant 's nomination paper had been properly rejected.
On that view the High Court did not think it necessary to consider whether the Tribunal was right in declaring void the election of not only respondent 1 but of respondent 2 as well.
It is against this decision of the High Court that the appellant has come to this Court by special leave; and the only question which is raised on his behalf is that the High Court was in error in coming to the conclusion that he was disqualified under section 7(d).
The decision of this question naturally depends primarily on the construction and effect of the contract in question.
Section 7 of the Act provides for disqualification for membership of Parliament or of State Legislatures.
Section 7(d), as it stood at the material time and with which we are concerned in the present appeal provides,, inter alia, that a person shall be disqualified for being chosen as, and for being, a member of the Legislative Assembly of a State, if whether by himself or by any person or body of persons in trust for him or for his benefit or on his account, he has any share or interest in a contract for the supply of goods to, or for the execution of any works or the performance of any services undertaken by, the appropriate Government.
On the concurrent findings recorded by the High Court and the Tribunal it cannot now be disputed that the appellant has interest in the contract in question; so that the first part of section 7(d) is satisfied.
The High Court has found that the contract attracts the last part of section 7(d) inasmuch as according to the High Court the Government of Bihar had undertaken to discharge the service of supplying grain to the residents of Bihar and the firm of the appellant 's family had entered into a contract for the performance of the said services.
The last part of section 7(d) postulates that the appropriate Government has undertaken to perform certain specific services, and it is for the performance of such services that the contract had been entered into by a citi zen.
In other words, if a citizen has entered into a contract with the appropriate Government for the 60 474 performance of the services undertaken by the said Government he attracts the application of section 7(d).
This provision inevitably raises two questions: what are the services undertaken by the appropriate Government? Has the contract been entered into for the performance of the said services? At this stage it is necessary to consider the material terms of the contract.
This contract was made on February 8, 1956, between the Governor of Bihar who is described as the first party and the firm which is described as the second party.
The preamble to the contract shows that the first party had to stock and store foodgrains in Darbhanga District for sale in pursuance of the Grain Supply Scheme of the Government for which a proper custodian and bailee for reward was necessary.
It also recites that the second party had applied to become such custodian and bailee of such stock of foodgrains as the first party shall deliver to the second party in one lump or from time to time on terms and in the manner expressly specified under the contract, or as may be necessarily implied.
Clause 1 of the contract provides that the second party shall, at the direction of the first party, take over foodgrains from the railway wagons or from any place as directed by the first party; thereafter the second party had to cause the grains to be stored in his godown at Dalsinghsarai and had to redeliver the same to the first party after weighing either at the second party 's godown approved by the first party or at any other place as directed by the first party.
The movement of the grain had to be done by the second party himself or by a transport contractor appointed by the first party.
Clause 2 imposed on the second party the liability to maintain a register and keep accounts as prescribed thereunder.
Under cl. 3 the second party undertook to keep such stocks and establishments as may be necessary at his own expense.
Clause 4 imposed upon the second party the obligation to protect the stock of foodgrains or to make good the losses except as thereinafter provided: Clauses 5 to 8 are not material for our purpose.
Clause 9 provides that the second party shall deposit the sum of 475 Rs. 5,000 in a Savings Bank account which has been pledged to the District Magistrate, Darbhanga, and comply with the other conditions specified in the clause.
Clause 10 deals with the remuneration of the second party.
It provides that the first party shall be liable to pay to the second party remuneration for the undertaking in this agreement at the rate of Re. 1 per( cent on the value of the stocks moved or taken over from his custody under the orders or directions of the first party or his agent calculated at the rate fixed by the Government from time to time for wholesale sales of grain.
The clause adds that no remuneration shall be payable to the second party if the first party takes over the whole of the balance stock lying with the second party for reasons of the termination of the agreement.
The rest of the clauses need not be recited.
It would thus be seen that the agreement in terms is one of bailment.
The State Government wanted to entrust the work of stocking and storing foodgrains to a custodian or bailee.
In that behalf the appellant 's firm made an application and ultimately was appointed a bailee.
There is no doubt that by this contract the firm has undertaken to do the work of stocking and storing foodgrains belonging to the State Government; and if it can be reasonably held that the service undertaken by the State Government in the present case was that of stocking the foodgrains the contract in question would obviously attract the provisions of section 7(d).
Mr. Varma, however, contends that the service undertaken by the State Government is the sale of foodgrains under its Grain Supply Scheme; and he argues that unless the contract shows that it was for sale of the said goods it cannot attract the provisions of section 7(d).
Unfortunately the scheme adopted by the State Government for the supply of grain has not been produced before the Election Tribunal, and so the precise nature and extent of the services undertaken by the State Government fall to be determined solely by reference to the contract in question.
It is true that the contract relates to the stocking and storing of foodgrains which the State Government wanted to sell to the residents of Bihar; but can it be said 476 that stocking and storing of foodgrains was such an integral or essential part of the selling of goods that a contract for stocking and storing foodgrains should necessarily be regarded as a contract for their sale? In our opinion, it is difficult to accept the argument that stocking and storing of foodgrains is shown to be such an essential and integral part of the supply scheme adopted by the State Government.
Theoretically speaking stocking and storing foodgrains cannot be said to be essential for the purpose of carrying out the scheme of sale of foodgrains, because it would conceivably be possible for the State Government to adopt a scheme whereby goods may be supplied without the State Government having to store them; and so the work of stocking and storing of foodgrains may in some cases be conceivably incidental to the scheme and not its essential part.
It is significant that sale of goods under the contract was never to take place at the godown of the firm.
It had always to take place at other selling, centers or shops; and thus, between the stocking and storing of goods and their sale there is an element of time lag.
The only obligation that was imposed on the firm by this contract was to be a custodian or bailee of the goods, keep them in good order and deliver them after weighment as directed by the first party.
It cannot be denied that the remuneration for the bailee has been fixed at the rate, of Re. 1 per cent on the value of the stocks moved or taken over from his custody; but that only shows the mode or method adopted by the con tract for determining the remuneration including rent of the godowns; it cannot possibly show the relationship of the contract with the sale of goods even indirectly.
Can it be said that the contract entered into by the State Government for purchasing foodgrains from agriculturists who grow them or for transporting them after purchase to the godowns are contracts for the sale or supply of goods? Purchase of goods and their transport are no doubt preparatory to the carrying out of the scheme of selling them or supplying them, and yet it would be difficult to hold that contracts entered into by the State Government with the agriculturists or the transport agency is a contract for the 477 sale of goods.
We have carefully considered the material terms of this contract, and on the record as it stands we are unable to accept the conclusion of the High Court that a contract of bailment which imposed on the bailee the obligation to stock and store the foodgrains in his godown can be said to be a contract for the purpose of the service of sale of grain which the State Government had undertaken within the meaning of section 7(d).
It appears that before the High Court it was not disputed by the appellant that the service whose performance had been undertaken by the State Government consisted in the supply of grain to the people of the State of Bihar; and the High Court thought that from this concession it inevitably followed that the firm had a share and was interested in the contract for the performance of the service undertaken by the Government of Bihar.
It seems to us that the concession made by the appellant does not inevitably or necessarily lead to the inference drawn by the High Court.
If the service undertaken by the State Government is one of supplying grain how does it necessarily follow that a contract by which the bailee undertook to store the grain was a contract for the supply of grain? It may sound technical, but in dealing with a statutory provision which imposes a disqualification on a citizen it would be unreasonable to take merely a broad and general view and ignore the essential points of distinction on the ground that they are technical.
The narrow question is: if the State Government undertook the work of supplying the grain, is the contract one for the supply of grain?; in our opinion, the answer to this question must be in the negative; that is why we think the High Court did not correctly appreciate the effect of the contract when it held that the said contract brought the appellant 's case within the mischief of section 7(d).
In coming to its conclusion the High Court thought that its view was supported by a decision of this Court in N. Satyanathan vs K. Subramanyan (1).
In that case the appellant who was a contractor had entered into an agreement with the Central Government (1) ; 478 whereby he had offered to contract with the Governor General for the provision of a motor vehicle service for the transit and conveyance of all postal articles for the period specified in the contract, and the Governor General had accepted the offer.
As a consideration for the same the Government had agreed to pay to the contractor Rs. 200 per month during the subsistence of the agreement "as his remuneration for the service to be rendered by him".
It appears that on this contract two questions were raised before this Court.
First it was urged that it could not be said that the Central Government had undertaken any service within the meaning of section 7(d) of the Act when it made arrangements for the carriage of mailbags and postal articles through the contractor.
This contention was rejected on the ground that though the Government was not bound in the discharge of its duties as a sovereign State to make provision for postal mail service, it had in fact undertaken to do so under the Indian Post Offices Act for the convenience of the public. "It cannot be gainsaid", observed Sinha, J., as he then was, "that the postal department is rendering a very useful service, and that the appellant has by his contract with the Government undertaken to render that kind of service on a specified route"; and he added, "the present case is a straightforward illustration of the kind of contract contemplated under section 7(d) of the Act".
This straightforward illustration, in our opinion, clearly brings out the class and type of contracts which fall within section 7(d) of the Act.
Government must undertake to render a specified service or specified services and the contract must be for the rendering of the said service or services.
That was precisely what the contract in the case of N. Satyanathan (1) purported to do.
It is difficult to see how this case can be said to support the conclusion of the High Court that the contract for stocking and storing of goods is a contract for rendering the service of supplying and selling the same to the residents of the place.
In this connection Mr. Jha, for the respondents, has drawn our attention to a decision of the Madras High (1) ; 479 Court in V. V. Ramaswamy vs Election Tribunal, Tirunelveli (1).
In that case the Court was concerned with four contracts by which the contracting party agreed "to hold the reserve grain stock belonging to the Government of Madras, safely store it, and dispose of it according to the directions of the Government".
In other words, it was a contract not only for the stocking and storing of foodgrains but also of disposing of it, and that naturally meant that the contract was for service which the State Government had undertaken to perform.
This decision cannot assist the respondents in the present appeal.
In the result we hold that the High Court was not justified in reversing the finding of the Tribunal that the contract in question did not attract the provisions of section 7(d) of the Act.
The appeal must, therefore, be allowed and the order passed by the High Court set aside.
We cannot finally dispose of the matter, because one question still remains to be considered, and that is whether the conclusion that the appellant 's nomination paper had been improperly rejected would lead to the decision that the election of not only respondent 1 but also respondent 2 should be declared to be void.
The Election Tribunal has declared the whole election to be void, and in their respective appeals filed before the High Court both the respondents have challenged the correctness of that finding.
The High Court, however, thought that since in its opinion the nomination paper of the appellant had been properly rejected it was unnecessary to deal with the other point.
The point will now have to be considered by the High Court.
We would, therefore, set aside the order passed by the High Court and remand the pro ceedings to it in order that it may deal with the other question and dispose of the appeals expeditiously in accordance with law.
In the circumstances of this case we direct that the parties should bear their own costs in this Court.
Costs in the High Court will be costs in the appeal before it.
Appeal allowed.

summary:
The appellant was a member of a joint Hindu family which carried on the business of Government stockists of grain under a contract with the Government of Bihar.
His nomination for election to the Bihar Legislative Assembly was rejected on the ground that he was disqualified under section 7(d) of the Representation of the People Act, 195T, as he had an interest in a contract for the performance of services undertaken by the Bihar Government.
The appellant contended that the service undertaken by the Government was the sale of foodgrains under the Grain Supply Scheme and the contract was not for the sale of such foodgrains and did not attract the provisions of section 7(d).
Held, that the contract was not one for the performance of any service undertaken by the Government and the appellant was not disqualified under section 7(d).
A contract of bailment which imposed on the bailee the obligation to stock and store the foodgrains in his godowns was not a contract for the purpose of the service of sale of grain which the Government had undertaken.
The Government had undertaken the work of supplying grain but the contract was not one for the supply of grain.
N. Satyanathan vs K. Subramanyam, ; and V. V. Ramaswamy vs Election Tribunal, Tirunelveli, , distinguished.


judgement:
Appeal No. 198 of 1954.
Appeal from the judgment and order dated October 16, 1952, of the former Nagpur High Court in Misc. Petn.; No. 1231 of 1951.
M. section K. Sastri, for the appellant.
H. L. Khaskalam, B. K. B. Naidu and I. N. Shroff, for the respondent.
64 502 1960.
November 18.
The Judgment of the Court was delivered by IMAM, J.
This is an appeal from the judgment of the Nagpur High Court dismissing the appellants petition under articles 226 and 227 of the Constitution of India.
The High Court certified under article 132(1) of the Constitution that the case involved a substantial question of law as to the interpretation of the Constitution.
Hence the present appeal.
The appellant was the Ruler of the State of Baster.
After the passing of the Indian Independence Act, 1947, the appellant executed an Instrument of Accession to the Dominion of India on August 14, 1947.
Thereafter, he entered into an agreement with the Dominion of India popularly known as "The Stand Still Agreement".
On December 15, 1947, he entered into an agreement with the Government of India whereby he ceded the State of Baster to the Government of India to be integrated with the Central Provinces and Berar (now the State of Madhya Pradesh) in such manner as the Government of India thought fit.
Con sequently the Governments in India came to have exclusive and plenary authority, jurisdiction and powers over the Baster State with effect from January 1, 1948.
The Legislature of the State of Madhya Pradesh passed the Madhya Pradesh Abolition of Proprietary Rights (Estates, Mahals, Alienated Lands) Act, 1950 (Madhya Pradesh Act 1 of 1951), hereinafter referred to as the Act, which received the assent of the President of India on January 22, 1951.
The preamble of the Act stated that it was one to provide for the acquisition of the rights of proprietors in estates, mahals, alienated villages and alienated lands in Madhya Pradesh and to make provisions for other matters connected therewith.
Under section 3 of the Act, vesting of proprietary rights in the State Government takes place on certain conditions,, mentioned in that section, being complied with.
The definition of 'proprietor ' is stated in section 2 cl.
(m) and it is "in relation to 503 (i) the Central Provinces, includes an inferior proprietor, a protected thekadar or other thekadar, or protected headman; (ii) the merged territories, means a maufidar including an ex Ruler of an Indian State merged with Madhya Pradesh, a Zamindar, Ilaquedar, Khorposhdar or Jagirdar within the meaning of wajib ul arz, or any sanad, deed or other instrument, and a gaontia or a thekadar of a village in respect of which by or under the provisions contained in the wajib ul arz applicable to such village the maufidar, the gaontia, or the thekadar, as the case may be, has a right to recover rent or revenue from persons holding land in such village;".
The definition of 'mahal ' is stated in section 2(j) and it is "mahal", in relation to merged territories, means any area other than land in possession of a raiyat which has been separately assessed to land revenue, whether such land revenue be payable or has been released, compounded for or redeemed in whole or in part;".
Before the High Court the appellant contended that he was still a Sovereign Ruler and absolute owner of the villages specified in Schedules A and B of his petition under articles 226 and 227 of the Constitution.
He urged that his rights had been recognized and guaranteed under the agreements entered into by him with the Government of India.
The provisions of the Act, therefore, did not apply to him.
It was further contended that the provisions of the Act did not apply to a Ruler or to the private property of a Ruler which was not assessed to land revenue.
He relied on article 6 of the Instrument of Accession and the first paragraph of article 3 of the Merger Agreement.
The High Court held that if the petitioner 's rights under article 6 of the Instrument of Accession and article 3 of the Merger Agreement had been infringed it was clear from the provisions of article 363 of the Constitution that interference by the courts was barred in disputes arising out of these two instruments.
The High Court was also of the opinion that article 362 of the Constitu tion was of no assistance to the appellant.
504 After referring to the definition of the word 'proprietor ' in the Act, the High Court was of the opinion that the word 'maufidar ' in section 2(m) of the Act had not been used in any narrow or technical sense.
A 'maufidar ' was not only a person to whom a grant of maufi lands had been made but was also one who held land which was exempt from the payment of "rent or tax".
It accordingly rejected the contention on behalf of the appellant that the word 'maufidar ' is necessarily confined to a grantee from the State or Ruler and therefore a Ruler could not conceivably be a maufidar.
The High Court also rejected the contention on behalf of the appellant that as he was a "Ruler" within the meaning of that expression in article 366(22) of the Constitution he did not come within the expression 'ex Ruler ' as contained in the definition of the word 'proprietor ' in the Act.
The expression 'Ruler ' as defined in article 366(22) of the Constitution applied only for interpreting the provisions of the Constitution.
The expression 'ex Ruler ' given in the Act must therefore be given the ordinary dictionary meaning.
According to Shorter Oxford English Dictionary, 'Ruler ' means "one who, or that which, exercises rule, especially of a supreme or sovereign kind.
One who has control, management, or head ship within some limited sphere".
The High Court accordingly took the view that although the appellant did exercise such a rule in the past he ceased to exercise it in his former Domain after the agreements of accession and merger had come into operation.
Accordingly the appellant must be regarded as an ex Ruler and as he was also a maufidar he fell within the definition of the word 'proprietor ' in the Act.
The question whether the villages mentioned in Schedules A and B of the petition under articles 226 and 227 of the Constitution fell in any of the categories, "Estates, Mahals, Alienated lands", was also considered by the High Court.
In its opinion they did not fall within the category of Estates or Alienated lands but they did fall within the category of Mahals.
According to the definition of 'Mahal ' in section 2(j) of the Act the same must be separately assessed to land 505 revenue.
According to the appellant they had not been assessed to land revenue but this was denied on behalf of the State of Madhya Pradesh.
The High Court was of the opinion that in these circumstances it was for the appellant to establish that the villages in question had never been assessed to land revenue but no evidence had been led to this effect.
On the contrary, according to the High Court, it would appear from the documents on the record that the villages known as 'Bhandar villages ' had been assessed to land revenue.
As the rest of the villages in Schedule A and the villages in Schedule B, upto the date of the High Court judgment, had not been recognized as the private property of the appellant by the Government of India as required by the second and third paragraphs of the Merger Agreement, the appellant could not assert his ownership over them.
The High Court, accordingly, dismissed his petition under articles 226 and 227 of the Constitution.
Two questions in the main were urged before us (1) whether the appellant is a proprietor within the meaning of that expression in the Act and (2) whether the villages in question came within the definition of the word 'mahal ' contained in the Act.
On behalf of the appellant it had also been urged that the Act could not defeat the rights of the appellant guaranteed under article 3 of the Merger Agreement.
It seems clear to us, however, that in view of the provisions of article 363(1) of the Constitution any dispute arising out of the Merger Agreement or the Instrument of Accession is beyond the competence of the courts to enquire into.
The High Court rightly decided this point against the appellant.
With reference to the first point we would first consider whether the appellant is an ex Ruler for the purposes of the Act.
That he is so factually cannot be denied, since he ceded his State to the Government of India to be integrated with the Central Provinces and Berar (now the State of Madhya Pradesh) in such manner as the Government of India thought fit.
He further ceded to the Government ' of India full and exclusive authority, jurisdiction and powers in relation 506 to the governance of his State when he agreed that the administration of that State would be transferred to the Government of India as from January 1, 1948.
The question is whether his recognition for the purposes of the Constitution as Ruler by virtue of the provisions of article 366(22) of the Constitution of India continues his status as a Ruler for purposes other than the Constitution.
article 366(22) states: " "Ruler" in relation to an Indian State means the Prince, Chief or other person by whom any such covenant or agreement as is referred to in clause (1) of article 291 was entered into and who for the time being is recognised by the President as the Ruler of the State, and includes any person who for the time being is recognised by the President as the successor of such Ruler".
Article 291 refers to the privy purse payable to Rulers.
It states: "Where under any covenant or agreement entered into by the Ruler of any Indian State before the commencement of this Constitution, the payment of any sums, free of tax, has been guaranteed or assured by the Government of the Dominion of India to any Ruler of such State as privy purse (a) such sums shall be charged on, and paid out of, the Consolidated Fund of India; and (b) the sums so paid to any Ruler shall be exempt from all taxes on income.
" Article 291 refers to any covenant or agreement entered into by the Ruler of any Indian State before the commencement of the Constitution.
The covenant or agreement referred to in this Article certainly includes the Instrument of Accession and the Merger Agreement.
The effect of the Merger Agreement is clearly one by which factually a Ruler of an Indian State ceases to be a Ruler but for the purposes of the Constitution and for the purposes of the privy purse guaranteed, he is a Ruler as defined in article 366(22) of the Constitution.
There is nothing in the provisions of article 366(22) which requires a court to recognise such a person as a Ruler for purposes outside the Constitution.
In our opinion, the High Court rightly held that 507 the appellant was an ex Ruler and that article 366(22) of the Constitution did not make him a Ruler for the purposes of the Act.
As the appellant was an 'ex Ruler ', he was within the class of persons who were by name specifically included in the definition of 'proprietor ' and therefore clearly within the scope of the Act.
That the appellant was not only an ex Ruler but a maufidar appears to us to be clear.
The ordinary dictionary meaning of maufi is "Released, exempted, exempt from the payment of rent or tax, rent free" and maufidar is "A holder of rent free land, a grantee".
It was common ground in the High Court that the villages in question were exempt from the payment of rent or tax.
In our opinion, the High Court rightly took the view that the expression 'maufidar ' was not necessarily confined to a grantee from a State or a Ruler of a State.
A maufidar could be a person who was the holder of land which was exempted from the payment of rent or tax.
In our opinion, the appellant certainly came within the expression 'maufidar ' besides being an ex Ruler ' of an Indian State merged with Madhya Pradesh.
It is, however, contended on behalf of the appellant that the most important part of the definition was the concluding portion where it was stated that in the case of a maufidar he must be a person who by or under the provisions contained in the wajib ul arz applicable to his village, had the right to recover rent or revenue from persons holding land in such village.
It was contended that even if the appellant was a maufidar, there was nothing to show that with reference to any village held by him it was entered in the wajib ul arz, that he had a right to recover rent or revenue from persons holding land in such village.
In the petition under articles 226 and 227 of the Constitution, filed by the appellant in the High Court, it was nowhere asserted that even if he was regarded as a maufidar it was not entered in the wajib ul arz with respect to any of his maufi villages that he had a right to recover rent or revenue from persons holding land in such villages.
From the judgment of the High 508 Court it would appear that no such argument was advanced before it.
In the application for a certificate under article 132(1) of the Constitution we can find no mention of this.
In the statement of the case filed in this Court also there is no mention of this fact.
There is thus no material on the record to establish that the appellant as a maufidar had no right to recover rent or revenue from persons holding land in his villages.
The burden was on the appellant to prove this fact which he never attempted to discharge.
It is impossible therefore to accept this contention on behalf of the appellant raised for the first time before us in the course of the submissions made on behalf of the appellant.
Regarding the second point arising out of the definition of 'Mahal ', the High Court definitely found that the petitioner had given no evidence to establish that the villages in question were not assessed to land revenue.
On the contrary, at least with reference to the Bhandar villages documents on the record showed that these villages had been assessed to land revenue.
Since it was a question of fact whether the villages had been assessed to land revenue, which was denied on behalf of the State of Madhya Pradesh, the High Court rightly held that the contention of the appellant in this respect could not be accepted.
As for the other villages, in Schedules A and B of the petition of the appellant under articles 226 and 227 of the Constitution the High Court, in our opinion, rightly held that the petition was not maintainable as these villages had not yet been recognised by the Government of India as the private property of the appellant.
In our opinion, the appeal accordingly fails and is dismissed with costs.
Appeal dismissed.

summary:
The appellant was the Ruler of the State of Baster which was later integrated with the State of Madhya Pradesh.
He was recognised by the President as a Ruler under article 366(22) of the Constitution.
The respondent resumed certain lands belonging to the appellant under the Madhya Pradesh Abolition of Proprietary Rights (Estates, Mahals, Alienated Lands) Act, 1950.
The appellant contended that he was still a Ruler and not an ex Ruler and as such did not come within the definition of "proprietor" given in the Act.
Held, that the appellant was an ex Ruler for the purposes of the Act and was within the class of persons who were by name included in the definition of 'proprietor ' and was within the scope of the Act.
Factually the appellant was an ex Ruler.
He was a Ruler for the purposes of the privy purse guaranteed to him.
There was nothing in article 366(22) which required a court to treat such a person as a Ruler for purposes outside the Constitution.
Further, the appellant was also a maufidar in respect of the lands acquired which were exempt from the payment of rent or tax.
The expression "maufidar" was not necessarily confined to a grantee from a State or a Ruler of a State; he could be the holder of land which was exempted from payment of rent or tax.