judgement:
Appeal Nos.
1022 24 & 423 of 1982.
100 From the Judgment and Order dated 14.3.78 & 2.7.79 of the Madras High Court in Tax Case Nos.
228/74 & 215 of 1975.
Uttam Reddy, Atul Sharma, A.V. Palli and Ms. Reena Agarwal for E.C. Agrawala for the Appellant.
G. Vishwanatha, P. Parmeshwaran and Ms. A. Subhashini (NP) for the Respondent.
The Judgment of the Court was delivered by B.P. JEEVAN REDDY, J.
These appeals are preferred by the assesagainst the judgment of the Madras High Court answering the Income Tax reference made at the instance of the Revenue, against the assessee.
The assessment years concerned are 1967 68, 1968 69, 1969 70 and 1.970 71.
The question of law which was referred for the opinion of the High Court under Section 256(2) of the Income Tax Act is: "Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the royalty amounts should be assessed on cash basis for 1967 68. 1968 69 and 1969 70 assessment if the books and balance sheet of such receipts were found to be maintained on cash basis and directing fresh assessment on such basis?" In the paper book supplied by the assessee appellant the Statement of the Case is not available nor are the orders of any of the authorities supplied.
We are, therefore, obliged to draw the facts from the judgment of the High Court which we presume are drawn from the Statement of the Case.
As a matter of fact, the facts require to be appreciated clearly for a proper decision of the question arising herein.
The assessee, Standard Triumph Motor Co. Ltd. is a non resident company, having its place of business at Coventry in the United Kingdom.
It entered into a collaboration agreement with the Standard Motor Products of India Ltd. (Indian Company) in November, 1939 whereunder the assessee was entitled to royalty of five per cent on all sales effected by the Indian Company.
This amount of five per cent less the Indian tax had to be remitted to the assessee in the Sterling currency.
The assessee 's accounting year was the year ending 30th of September.
With respect to 101 its Indian income, it was filing its returns through the Indian Company.
The collaboration agreement between the assessee and the Indian Company expired in the year 1965.
It was renewed.
The renewed agreement too expired in November, 1970.
For the assessment years 1967 68 (year ending 30.9.1966) and 196869 (year ending 30.9.1967) the assessee filed returns in which it stated that it was maintaining its accounts on mercantile basis.
It did not dispute its liability to assessment.
In these returns, it disclosed a royalty income of Rs. 1,600 and Rs. 4,57,311 respectively.
When it came to filing of the return for the assessment year 1969 70 (year ending 30.9.1968), the assessee admitted a royalty of Rs. 9,25,257 but filed a nil return saving that it was maintaining its accounts on cash basis and not on mercantile basis, that no part of the royalty amount has been received by it and, therefore, nothing is taxable.
For the next assessment year 1970 71 (year ending 30.9.1.969) as well, it took the same stand.
The I.T.O. completed the assessment for the first two assessment years on the basis of the returns.
For the assessment years 1969 70 and 1970 71, however, he refused to accept the assessee 's plea that it was maintaining its accounts on cash basis.
He held that it was maintaining its accounts on mercantile basis alone and accordingly brought to tax the royalty amount disclosed.
The assessee filed appeals against the assessments relating to all the four years.
In these appeals, it took the stand that even with respect to the accounting years relevant to the assessment years 1967 68 and 1968 69, it has been maintaining accounts on cash basis and since it did rot actually receive any income in all these four years, no tax is payable by it.
Its case was that there was 'no actual payment ' of the royalty by the Indian Company.
It stated that though the Indian Company had credited to the assessee in its account books for the relevant years (accounting year for the Indian Company is stated to be the calendar year), the assessee did not actually receive the amount nor did it take credit for the said amounts in its Books at Coventry.
The Appellate Assistant Commissioner dismissed the appeals holding that the assessment orders for the past years relating to the assessee reveal that the method of accounting was mercantile, that for the A.Y. 1967 68, the assessee did never contest its liability to be taxed on the amounts disclosed and further that it was not open to it to change the method of accounting to suit its convenience, without the approval of 102 the Income Tax Officer.
The assessee carried the matter in further appeals to the Tribunal.
It was contended by the assessee before the Tribunal that it was not following any particular method of accounting regularly in the past years, that it was the Indian Company which was finally filing the returns of income on behalf of the assessee by incorporating the figures as per its profit and loss account, that the Indian Company was not aware of the assessee 's system of accounting in regard to royalty and that, therefore, it had committed a mistake in filing the returns for the assessment years 1967 68 and 1968 69.
The assessee submitted that as soon as it noticed that said mistake it corrected the same and filed the return for the assessment year 1969 70 on correct basis, showing that the method of accounting was cash receipt basis.
The appeals were allowed by the Tribunal.
The Tribunal held that the assessee had not been following any particular method of accounting regularly over the past years.
For example, it said, for the assessment year 1963 64 it did not say anything regarding the method of accounting.
For the assessment year 1.964 65, it said it was on cash basis.
For the assessment years 1967 68 and 1968 69 it stated it was maintaining accounts on mercantile basis and again for the two subsequent years it stated as cash basis.
The Tribunal was, therefore, of the opinion that the question of method of accounting adopted by the assessee must be examined afresh and for that purpose allowed the appeals and remanded the matters to the Income Tax Officer.
The Tribunal gave liberty to the parties to adduce additional evidence in that behalf.
It directed further that if it is found that the assessee was maintaining its accounts and balance sheets on cash basis in respect of the royalty it should be assessed on cash basis.
On a Reference made at the instance of Revenue, the High Court answered the question in the negative, i.e., in favour of the revenue and against the assessee.
It would be appropriate at this stage to notice the contentions urged by the assessee and how they were met by the High Court.
Though the High Court has not set out the arguments of the assessee as such, the arguments advanced can easily be gleaned from the judgment.
The assessee reiterated his contention that though the Indian Company made a credit entry in the account of the assessee in its Books, it did not actually receive the amount.
The argument appears to be that the assessee can be said to have received the royalty amount only when it receives the same in U.K. in the shape of pounds and makes an entry to that effect in its own Books at Coventry.
Since it is maintaining its accounts, with respect to the said royalty on cash basis, it argued, receipt means receipt in U.K. Section 145 was relied upon by the 103 assessee to say that the method of accounting regularly adopted by an assessee is binding upon the department; on that basis it was argued that if the assessee is proved to have maintained its accounts with respect to royalty amount on cash basis, then there is no receipt until it is received by it in U.K.
It is this argument which led the High Court to say that acceptance of the said argument would mean escapement of income from taxation in India altogether.
This is what the High Court said : "If the contention of the assessee that the royalty should be assessed to income tax only on its actual receipt under Section 5(2)(a) of the Act on the ground that it maintains its accounts on cash basis is accepted, the income could not be taxed at all as it would be received in England and not in India.
The assessee company, a non resident, receiving its income outside India could be assessed to tax only under Section 5(2) (b) of the Act on accrual basis.
Section 5(2) (a) cannot be made applicable to such an assessee.
In the case of a non resident, to whom income accrues in India, Section 5(2)(a) will have no application.
unless the non resident receives income in India.
On the facts of this case it is clear that eventuality will never arise in regard to the income with which were are concerned, because that income will have to be remitted to the nonresident by obtaining an irre vocable letter of credit and will thus be received only outside India.
" Pursuing the said reasoning the High Court held further: "So it is clear that there can be cases of non residents to whom section 5(2)(a) will never apply in regard to a particular income.
The question then is, whether in such circumstances the assessee concerned (non resident to whom income had accrued in India) can insist it, since )has kept his accounts in regard to that income on the cash basis, he is not liable to be taxed on the accrual basis.
In other words, the question is Sec 145(1) can be applied in such circumstances.
The effect of applying the section would be to take the income outside the purview of taxation though the charge to tax on that income had taken effect on the accrual basis.
Further, no occasion for imposing tax on receipt outside India would arise in the case of a non resident, because Section 5(2)(a) will apply only to receipt in India.
In such circumstances, to apply Section 145(1) would be to defeat the charge under Section 4 and to obliterate the provisions of section 5(2)(h) and let the income which is taxable escape Such a 104 result is not certainly intended by the statute.
Section 145(1) is only an enabling provision to effectuate the charge.
The section cannot be used for destroying the charge to tax and the provisions of Sec.
5(2)(b), though by merely looking at the wording of Section 145(1) it may appear that in all cases the method of accounting must be followed, unless in any case where the accounts are correct, but the method is such that, in the opinion of the Income Tax Officer, the income cannot properly be deduced therefrom.
But it must be remembered that Sec.
145 is only a machinery provision and cannot qualify the charging section so as to make the latter otioss.
So Section 145(1) should not be permitted to be applied in such circumstances as those while arise from the facts of this case.
it is therefore immaterial whether the assessee is keeping his accounts in regard to a particular income regularly on the cash basis.
Even if the assessee is keeping his accounts on the cash basis in regard to his income, the assessee is liable to tax under Sec.
5(2)(b).
To hold otherwise would be to take the income outside the purview of taxation under the Act, though such income had accrued in India to a nonresident and under Sec.
5(2)(b) the charge to tax had taken effect and there is no possibility of Sec.
5(2)(b) ever coming into operation.
We cannot give to Sec.
145(1) such an overriding effect as to defeat the charge and the provisions of Section 5(2)(b).
" In this court, the learned counsel for the assessee contended that so far as the royalty income is concerned, the assessee was maintaining its accounts at Coventry in the United Kingdom on receipt basis.
Its accounting years was the year ending on 30th of September of each year whereas the accounting year of the Indian Company was the calendar year.
Notwithstanding the stipulation in the collaboration agreement for half yearly remittances, the practice was that the Indian Company was determining the amount of royalty at the end of its accounting year.
This amount was credited to the account of the assessee in the account books of the Indian Company, but mere crediting to the account of the assessee in the Books of the Indian Company does not 105 amount to receipt of income by the assessee.
Receipt is only when the amount is remitted to United Kingdom in accordance with the agreement.
Counsel submitted that the assessee was not maintaining any particular method of accounting regularly in respect of the said royalty amount and that the alleged statement in the returns relating to the assessment years 1967 68 and 1968 69 to the effect that it was maintaining its accounts on mercantile basis, was an incorrect statement made by the Indian Company which was not aware of the true state of affairs relating to the assessee 's accounts.
The learned counsel submitted that all that the Tribunal has done is to direct an inquiry to find out the true state of affairs viz., whether the assessee was maintaining its accounts on mercantile basis or on cash receipt basis in so far as the royalty amount is concerned.
He submitted further that since the Appellate Assistant Commissioner exercises all the powers of the assessing authority, it was perfectly open to the assessee to raise the contention relating to the method of accounting even with respect to the assessment years 1967 68 and 1968 69, in the appeals.
When the assessee has not actually received any royalty income from the Indian Company, it is not expected to bring money from the United Kingdom for paying its taxes in India, the learned counsel contended.
The collaboration agreement between the assessee and the Indian Company is as old as 1939.
According to its own case, the assessee has been filing its income tax returns in India through the Indian Company.
It is true that the agreement contemplated royalty amount being remitted in Sterling currency to U.K., but it cannot be said that until it is so remitted to and received in the U.K., the assessee has not received the income.
The practice evidently was that the Indian Company was maintaining an account pertaining to the assessee in its Books.
After it made up its accounts at the end of the calendar year and determined the royalty amount payable to the assessee, the the Indian Company was crediting the said amount to the account of the assessee in its Books.
This was treated as income by the assessee over all these years.
The returns filed by the assessee even with respect to assessment years 1967 68 and 1968 69 were based upon the said premise.
In the said returns, the assessee declared a particular amount of income and offered the same for taxation.
It did not take the stand that the said credit entry in the Books of the Indian Company does not give rise to income in India nor did it ever say that the receipt in U.K. in the shape of Sterling pounds alone constitutes income or for that matter receipt of income.
It may also be noticed that in its returns relating to the assessment years 1967 68 and 1968 69, the assessee stated that it was maintaining its 106 accounts on mercantile basis.
Only in the returns relating to the assessment year 1968 69, did it raise the plea that it was maintaining its books, with respect to the said royalty amount, on cash receipt basis.
(The Tribunal appears to have stated that for the year 1964 65 too, the assessee had stated ,cash basis ' but it is not clear for what purpose the said plea was raised.
One thing is clear: the assessee did not say at any time earlier to A.Y. 1968 69 that receipt of money in U.K. alone is receipt by it).
It also took the rather strange plea that the Indian Company was not aware of the method of accounting adopted by the assessee and, therefore, it made the aforesaid incorrect statement in the returns relating to the years 1966 67 and 1967 68.
This plea, the Appellant Assistant Commissioner refused to countenance.
It is significant to notice that the assessee did not say that the method of accounting adopted by it for all its income was on cash basis.
It confined the said plea to its Indian income alone.
The said plea, it should be noticed, had no significance by itself.
Its significance lies when we examine the said plea in the fight of the further contention of the assessee that it did not actually receive the amount from the Indian Company.
We put a pointed question to the learned counsel for the assessee whether it was the assessee 's case at any stage that the credit entry made in the account books of the Indian Company in favour of the assessee was a bogus or a mere make believe entry.
The counsel replied that it was not its case at any point of time.
His contention was that the mere entry in the account books of the Indian Company does not amount to receipt of income by the assessee.
The assessee had been very careful not to say that the Indian Company did not place the said amount at the disposal of the assessee.
Indeed, he replied to a further question by us that even if the said amount were put by the Indian Company in a Bank to the credit of the assessee, it could not have been said that the assessee has received the amount.
In other words, according to the learned counsel, the said royalty income can be said to have been received by the assessee only when it received the same in U.K.
It is this extreme argument which led the High Court to make the observations quoted hereinbefore.
It would immediately be evident that this was not the basis put forward by the assessee at any point of time till it to the filing of return for the assessment year 1969 70.
We are not suggesting that it is estopped from doing so.
We are only saying that the said plea was not and is not acceptable.
The receipt of the said income in the U.K., in our opinion, is immaterial.
It may happen that a non resident assessee may choose not to repatriate his income/profits to his parent 107 country; he may choose to plough back the said amount in India for such purposes as he may choose.
It cannot be said in such a situation that he has not received the income in India.
In Raghava Reddi vs CL T., Andhra Pradesh, 44 I.T.R. 720 the non resident company instructed the assessee, in view of the difficulties in this country in remitting the monies abroad, to credit the amount due to it on account of commission in the account Books of the assessee awaiting further instructions regarding its remittance.
The assessee was assessed as the statutory agent of the non resident company.
The I.T.O. assessed the amounts credited in the accounts of the assessee as the income of the non resident company.
The contention of the assessee was that mere entry in the Books of the assessee cannot amount to receipt and that the amounts cannot be assessed until they were actually paid over to the non resident company or dealt with according to its directions.
Rejecting the contention, it was held by this court that as soon as the monies were credited to the account of the non resident (Japanese) com pany, it must be held that it "received" the same and are taxable.
Hidayatullah, J. speaking for the Constitution Bench observed: "This leaves over the question which was earnestly argued, namely, whether the amounts in the two account years can be said to be received by the Japanese company in the taxable territories.
The argument is that the money was not actually received, but the assessee firm was a debtor in respect of that amount and unless the entry can be deemed to be a payment or receipt, clause (a) cannot apply.
We need not consider the fiction, for it is not necessary to go to the fiction at all.
The agreement, from which we have quoted the relevant term, provided that the Japanese company desired that the assessee firm should open an account in the name of the Japanese company in their books of account, credit the amounts in that account, and deal with those amounts according to the instructions of the Japanese company.
Till the money was so credited, there might be a relation of debtor and creditor; but after the amounts were credited, the money was held by the assessee firm as a depositee.
The money then belonged to the japanese company and was held for and on behalf of the company and was at its disposal.
The character of the money changed from a debt to a deposit in much the same 108 way as if it was credited in bank to the account of the company.
Thus, the amount must be held, on the terms of the agreement, to have been received by the Japanese company, and this attracts the application of section 4(1)(a).
Indeed, the Japanese company did dispose of a part of amounts by instructing the assessee firm that they be applied in a particular way.
In our opinion, the High Court was right in answering the question against the assessee.
" Applying the above principle, it must be held in this case that the credit entry to the account of the assessee in the Books of the Indian Company does amount to its receipt by assessee and is accordingly taxable and that it is immaterial when did it actually receive it in U.K.
In this view of the matter, it must be held that in the circumstances of the case.
the method of accounting adopted by the assessee for the relevant accounting years is really irrelevant.
As explained hereinbefore, the very concept of "receipt" as espoused by the assessee is untenable and unacceptable.
The order of remand made by the Tribunal was thus unnecessary.
In the circumstances, we do not think it necessary to express any opinion on the question whether there is any conflict or inconsistency between Section 5(2) and Section 145 of the Act nor is it necessary to express ourselves on the view expressed by the High Court that in the case of a non resident assessee like the petitioner clause (a) of sub section (2) of Section 5 has no application whatsoever and that Section 5(2)(b) governs it irrespective of the fact whether it maintains its accounts on cash basis or mercantile basis.
The question referred did not really arise in the facts and circumstances of the case and need not have been answered.
The Tribunal shall complete the assessments in question in the light of this judgment.
In view of the above, it is unnecessary for us to deal with the decisions cited by the learned counsel for the assessee.
The first decision cited by him is in C.I.T vs Macnzillan & Co., ; regarding the powers of the Appellate Authority.
The second decision is in Keshav Mills Ltd. vs CL T., Bombay The principle of this decision does in no way support the principle contended for by the appellant.
The appeals accordingly fail and are dismissed.
No costs.
N.V.K. Appeals dismissed.

summary:
The assessee appellant in the appeal is a non resident company having its place of business at Coven" in the United Kingdom.
It entered into a collaboration agreement with an Indian company in November, 1939 the assessee being entitled to royalty of 5% on all sales effected by the Indian Company, and this amount less the Indian tax had to be remitted by the assessee in Sterling currency.
The assessee 's accounting year was the year ending 30th September and with respect to its Indian income, it was filing its returns through the Indian Company.
The aforesaid collaboration agreement expired in the year 1965, but it was renewed and the renewed agreement also expired in November, 1970.
For the assessment years 1967 68 and 1968 69 the assessee riled returns in which it stated that it was maintaining its accounts on mercantile basis, and did not dispute its liability to assessment.
In these returns, it disclosed a royalty income of Rs. 7,21,600 and Rs. 4,57,311 respectively.
When it came to the filing of the return for the assessment year 1969 70 the assessee admitted a royalty of Rs. 9,25,357 but filed a nil return saying that it was maintaining its accounts on cash basis and not on mercantile basis, that no part of the royalty amount had been received by it and, therefore, nothing was taxable.
For the next assessment year 1970 71 as well, the same stand was taken by the assessee.
The Income Tax Officer completed the assessment for the first two 97 assessment years on the basis of the returnes, but for the assessment years 1969 70 and 1970 71, he refused to accept the plea of the assessee; and held that the assessee maintaining its accounts on mercantile basis alone and that the royalty amount disclosed be brought to tax.
The assessee filed appeals against the assessments relating to all the four years, taking the stand that even with respect to the accounting year relevant to the assessment years 1967 68 and 1968 69, it had been maintaining accounts on cash basis and since it did not actually receive any income in all these 4 years no tax was payable.
The Appellate Assistant Commissioner dismissed the appeals holding that the assessment orders for the past years reveal that the method of accounting was mercantile, that for the assessment year 1967 68, the assessee never contested its liability to be taxed on the amounts disclosed and further it was not open to the assessee to change the method of accounting to suit its convenience, without the approval of the Income Tax Officer.
The assessee carried the matter In further appeals to the Tribunal and contended that it was not following any particular method of accounting regularly in the past years that it was the Indian Company which was finally filing the returns of income on behalf of the assessee by incorporating the figures as per its profit and loss account, that the Indian Company was not aware of the assessee 's system of accounting in regard to royalty and that, therefore, it had committed a mistake in filing the returns for the assessment years 1967 68 and 1968 69, that as soon as the mistake had been noticed, it was corrected and returns for the assessment year 1969 70 on correct basis showing that the method of account cash receipt basis was filed. 'Me appeals were allowed the Tribunal which held that as the assessee had not been following any particular method of accounting regularly over the past years, the question of the method of accounting adopted by the assessee must be examined afresh and for that purpose remanded the matters to the Income Tax Officer.
On a reference made at the instance.
of the Revenue, the High Court answered the reference in favour of revenue and against assessee.
The High Court held that it was 'immaterial whether the assessee was keeping his accounts in regard to a particular income regularly on the cash basis; that even if the assessee was keeping his accounts on the cash basis in regard to his income the assessee was liable to tax under Section 5 (2) (a); to hold 98 otherwise would be to take the income outside the purview of taxation under the Act, though such income had accrued in India to a non resident, and under Section 5(2)(b) the charge to tax had taken effect; and, therefore, there is no possibility of Section 5(2)(b) ever coming into operation and that Section 145(1) cannot be given such an overriding effect so as to defeat the charge and the provisions of Section 5(2)(b).
The assessee appealed to this Court contending that so far as the royalty income was concerned, the assessee was maintaining its accounts at Coventry in the United Kingdom on receipt basis, that the accounting year was the year ending 30th September of each year, whereas the accounting year for the Indian Company was the Calendar year and that notwithstanding the stipulation in the collaboration agreement for half yearly remittances, the practice was that the Indian Company was determining the amount of royalty at the end of its accounting year and that this amount was credited to the account of the assessee in the account books of the Indian Company and that receipt is only when the amount is remitted to the United Kingdom in accordance with the Company.
Dismissing the appeals, this Court, HELD: The collaboration agreement between the assessee and the Indian Company was as old as 1939.
The assessee had been riling its income tax return in India through the Indian Company.
Though the collaboration agreement contemplated the royalty amount being remitted in Sterling Currency to U.K., it cannot be said that until it was so remitted to and received in the U.K., the assessee had not received the income.
The practice evidently was that the Indian Company was maintaining an account pertaining to the assessee in its Books.
After it made up its accounts at the end of the calender year and determined the royalty amount payable to the assessee, the Indian Company was crediting the said amount to the account of the assessee in its Books, and this was recorded as income by the assessee over all these years.
The returns riled by the assessee even with respect to the assessment years 1967 68 and 1968 69 were based upon this premise.
In the said returns, the assessee declared a particular amount of income and offered the same for taxation.
It did not take the stand that the said credit entry in the Books of the Indian Company did not give rise to income in India nor did it ever say that the receipt in U.K. in the shape of sterling pounds alone constitutes 99 income or for that matter receipt of income.
It can also be noticed that in its returns relating to the assessment years 1967 68 and 1968 69, the assessee stated that it was maintaining its accounts on mercantile basis, and that only in the returns relating to the assessment year 1968 69, did it raise the plea that it was maintaining its books, with respect to the said royalty amount, on cash receipt basis.
[105E H] The receipt of the said income in the U.K., is immaterial.
It may happen that a non resident assessee may choose not to repatriate his income/profits to his parent country; he may choose to plough back the said amount in India for such purposes as he may choose.
It, therefore, cannot be said in such a situation that he has not received the income in India.
[106H] Raghava Red& vs C.I.T, Andhra Pradesh, ; relied on.
[107A] The credit entry to the account of the assessee in the Books of the Indian Company does amount to receipt by assessee and is accordingly taxable.
It is immaterial when it was actually received in U.K. [108C] The method of accounting adopted by the assessee for the relevant accounting years Is really irrelevant.
Thi very concept of 'receipt" as espoused by the assessee is untenable and unacceptable.
The order of remand made by the Tribunal was unnecessary.
It is not necessary to express any opinion either on the question whether there is any conflict or inconsistency between Section 5(2) and Section 145 of the Act or on the view expressed by the High Court that in the case of a non resident assessee like the appellant clause (a) of sub section (2) of Section 5 has no application whatsoever and that Section 5(2)(b) governs it irrespective of the fact whether it maintains its accounts on cash basis or mercantile basis.
The question referred did not really arise in the facts and circumstances of the case and need not have been answered.
The Tribunal shall complete the assessments in question.
[108D F] C.I. T. vs Machillan & Co., ; and Keshav Mills Ltd. vs C.I T., Bombay, , distinguished.
[108G]


judgement:
Appeal No. 830 of 1993.
From the Judgment and Order dated 6.4.87 of the Allahabad High Court in Civil Misc.
W.P. No. 20544 of 1986.
section Markandeya for the Appellant 152 Pankaj Kalra for the Respondents.
The Judgment of the Court was delivered by B.P. JEEVAN REDDY, J.
The appeal is directed against the judgment and order of a Division Bench of the Allahabad High Court allowing Writ Petition 20544 of 1986 with certain directions.
The first respondent Gem Cap (India) Pvt. Ltd. is a private limited company.
Second respondment is its Managing Director.
At the request of the respondents, the appellant, U.P. Financial Corporation, sanctioned a loan of Rs. 29.70 lakhs.
The terms and conditions of loan and the manner of repayment of the loan are contained in the agreement and hypothecation deeds executed in 1981.
Suffice it to note that loan was repayable in certain specified instalments alongwith interest.
A sum of Rs. 26, 29, 578 was released to the respondents.
The first respondent went into production in December 1982.
Within a few months i.e., in March 1983 its operations ceased.
By an order dated February 21, 1984 the first respondent unit was declared a sick unit.
The respondents did not make any repayment as stipulated in the agreement and hypothecation deeds whereupon the Corporation took steps to take over the unit under Section 29 of the for recovering an amount of Rs. 38.57 lakhs due to it by that date vide notice dated July 10, 1984.
Then started a series of Writ Petitions by the respondents, all designed to stall the appellant from taking over and/or recovering the amount due to it.
It is not necessary to trace the course of the several writ petitions except the one from which the present appeal arises.
Writ Petition 20544 of 1986 was filed questioning the taking over of the first respondent unit by the appellant Corporation under Section 29 of the Act and for a direction to the appellant to reschedule the repayment of debt in accordance with the earlier orders of the High Court.
The writ petition has been allowed with the following directions : "(1) Having regard to the discussion made above we direct the U.P. Financial Corporation : (1) to consider expeditiously the resolution dated 29.1.1986aimed at the rehabilitation of the industrial concern in question in the light of the feasibility report of the U.P. Industrial Consultants Ltd. the Financial aid 153 forthcoming from the Bank of Baroda and other financial institutions and the reports of the managing director of the corporation dated 18.12.85 and 29.1.1986; (2) to restore back possession of the unit to the petition No. 1 forthwith.
The notice dated 11.6.1986 issued by the Corporation under Section 29 of the State Financial Corporation Act, 1951 shall, however, remain alive it being open to the Corporation to proceed further in pursuance thereof in case the rehabilitation deal is given a fair trial but does not bear fruit.
The petition is allowed accordingly with no order, however, as to costs." With great respect to the Learned Judges who allowed the writ petition we feel constrained to say this : a reading of the judgment shows that they have not kept in mind the well recognised limitations of their jurisdiction under Article 226 of the Constitution.
The judgment reads as If they were setting as an Appellate Authority over the appellate Corporation.
Not a single provision of law is said to have been violated.
The exclusive concern of the court appears to be to revive and resurrect the respondent Company, with the aid of public funds, without giving any thought to the interest of public financial institutions.
The approach is : "the Corporafion is supposed to act in the best interest of the industrial concern with the object primarily to promote and advance the industrial activity without, of course, undue involvement or risk of its financial commitment 'section .
It needs no emphasis to say that the Corporation is conceived '.Regional Development Bank with the principal object to accelerate the industrial growth in the State by providing financial assistance mainly to small and smaller of the medium scale industries.
The approach has to be business like in conformity with the declared policy of the State Govt.
If the unit is potentially viable or such as maY be capable of being rehabilitated, it would deserve being administered proper treatment and not lead to its liquidation.
" Here was a company which drew substantial public funds and became sick within three months of its going into production.
One of the main reasons for its sickness appears to be the inter necine fight between the two groups controlling the Company.
The 154 unit was closed.
It was not paying a single pie in repayment of the loan neither the principal nor the interest.
Already a huge amount was due to the appellant.
There was no prospect of its recovery.
And yet other financial corporations were being asked by the court, four years after its closure, to sink more money into the sick unit.
Though a passing reference is made to the financial risk of appellant.
this concern was not translated into appropriate directions.
The Corporation was not allowed to sell the unit when it wanted to in 1984 85.
Now, it is difficult to sell it, because it has been lying closed for about 8 years and more.
The machinery must have become junk.
While the Company could not be revived, the appellant corporation now stands to lose more than a crore of rupees all public money in this one instance.
To continue the factual narration against the judgment of the Allahabad High Court aforesaid (dated April 6, 1987) the appellant filed this appeal and on May 8, 1987 this Court while issuing notice on the SLP directed stay of operation of the judgment of the High court.
After the respondents filed a counter affidavit this Court made the following order on September 18, 1987 : "Stay made absolute with the direction that there shall be no sale of the industrial unit.
Hearing expedited.
To be heard alongwith Civil Appeal No. 568 of 1987.
" The S.L.P. could not be heard finally though it was posted for hearing on certain dates.
On November 13, 1991, the counsel for the respondents made an offer which is recorded in the order of that date.
It reads "This matter is adjourned for 11.12.91.
Mr. Shanti Bhushan, Sr.
Adv., suggests that in view of the lapse of time of more than 5 years the position has changed and the Corporation should now consider the feasibility of taking over the assets in liquidation of the dues by making an assessment and consider relieving the directors from their personal responsibilities to the corporation and the other creditors.
" The subsequent order dated December 12, 1991, however, shows that the appellant corporation refused to bite the bait.
The amount due to it had risen to over a crore of rupees by now.
Whereupon, this Court passed 155 the following order : "The appellant in consultation with the other creditors is permitted to put up the industrial undertaking of the firstrespondent for sale.
It may do so either by public auction or by inviting tenders or by an combination of both.
It may proceed to do so within a period of two months from today.
While permitting the appellant to take steps for the sale, we make it clear that before accepting the offers, the appellant should obtain prior permission of this Court.
List this matter after 10 weeks, i.e., in the first week of March, 92.
" It is clear as to why the unit could not be sold .
On March 13, 1992, this Court passed the following further order: "We have heard learned counsel on both sides.
Apart from the merits of the issues raised, it appears to us that the present impasse is to nobody 's advantage.
The dispute has to be resolved in some meaningful way.
We accordingly direct the respondent Company and Sri K.P. Chaturvedi, who claims to be in charge of the affairs of the Company, to confirm in writing to the petitioner Cor poration within three weeks from today that they unconditionally agree to settle the claims of the.
Financial Corporation at a figure which would represent the principal amount said to be Rs. 26.30 lacs and interest thereon from the inception at 13.5% per year with half yearly rests calculated upto 25.7.1986.
If such an offer is made, the Financial Corporation will assess the merit and acceptability of that offer and take within six weeks thereafter, an appropriate decision including the manner in which and the period over which the payment should be completed, and if the Financial Corporation agrees to grant time for payment, the rate of interest for the deferred period.
The decision taken by the Corporation will be placed before this Court.
156 If, however, any offer, as indicated above, is not communicated by the company or Sri Chaturvedi within a period of three weeks from today, then the Financial Corporation shall be at liberty to initiate, with notice to the respondents, steps for the sale by public auction of the subjectmatter of the security in its favour and to treat and hold the proceeds of sale as substituted security in the place of the subject matter of the security, subject to the final result of this S.L.P. Call this matter in the 3rd week of May, 1992.
" Pursuant to the said order the second respondent, Managing Director of the first respondent Company merely wrote a letter addressed to the appellant Corporation, to the following effect : "We, herewith, attach a photo copy of the captioned order which is self explicit.
We, however, unconditionally agree to abide with the directions given to us by the Hon 'ble Supreme Court.
Further, as the Corporation is aware that the Unit (Company) as well as The Registered Office of the Company, both are in possession of the Corporation, we shall feel obliged if you kindly communicate your views to us at the below given address.
" It is evident that the letter written by the second respondent is not in terms of the order to this Court dated March 13, 1992.
No figure is mentioned nor is it mentioned as to how and in what manner the said huge debt is sought to be repaid by the respondents.
Evidently, the appellant corporation could not pay any heed to such a letter.
When the matter came before this Court the second respondent appeared in person stating that he has discharged his advocate and that he will argue the matter himself.
The matter again came up before us on 19.2.1993 when we heard the appellant 's counsel and the second respondent in person.
We allowed the appeal stating that the reasons would follow.
There are the reasons for the order.
It is true that the appellant Corporation is an instrumentality of the 157 State created under the State Finance Corporation Act, 1951.
The said Act was made by the Parliament with a view to promote industrialisation of the States by encouraging small and medium industries by giving financial assistance in the shape of loans and advances, repayable within a period not exceeding 20 years from the date of loan.
We agree that the Corporation is not like an ordinary money lender or a Bank which lends money.
It is a lender with a purpose the purpose being promoting the small and medium industries.
At the same time, it is necessary to keep certain basic facts in view.
The relationship between the Corporation and the borrower is that of creditor and debtor.
The corporation is not supposed to give loans once and go out of business.
It has also to recover them so that it can give fresh loans to others.
The Corporation no doubt has to act within the four corners of the Act and in furtherance of the object underlying the Act.
But this factor cannot be carried to the extent of obligating the Corporation to revive and resurrect every sick industry irrespective of the cost involved.
Promoting industrialisation at the cost of public funds does not serve the public interest; it merely amounts to transferring public money to private account.
The fairness required of the Corporation cannot be carried to the extent of disabling it from recovering what is due to it.
While not insisting upon the borrower to honour the commitments undertaken by him, the Corporation alone cannot be shackled hand and foot in the name of fairness.
Fairness is not a one way street, mote particularly it? matters like the present one.
The above narration of facts shows that the respondents have no intention of repaying any part of the debt.
They are merely putting forward one or other ploy to keep the Corporation at bay.
Approaching the Courts through successive writ petitions is but a part of this game.
Another circumstance.
These Corporation are not sitting on King Solomon 's mines.
They too borrow monies from Government or other 'financial corporation.
They too have to pay interest thereon.
The fairness required of it must be tempered nay, determined, in the light of all these circumstances.
Indeed, in a matter between the Corporation and its debtor, a writ court has no say except in two situation : (1) there is a statutory violation on the part of the Corporation or (21) Where the Corporation acts unfairly i.e., unreasonably.
While the former does not present any difficulty, the latter needs a little reiteration of its precise meaning.
What does acting unfairly or unreasonably mean? Does it mean that the High Court exercising its jurisdiction under Article 226 of the Constitution can sit as an Appellate Authority over the acts and deeds of the corporation and seek 158 to correct them ? Surely, it cannot be.
That is not the function of the High Court under Article 226.
Doctrine of fairness, evolved in administrative law was not supposed to convert the writ courts into appellate authorities over administrative authorities.
The constraints self imposed undoubtedly of writ jurisdiction still remain.
Ignoring them would lead to confusion and uncertainty.
The jurisdiction may become rudderless.
The obligation to act fairly on the part of the administrative authorities was evolved to ensure the Rule of Law and to prevent failure of justice.
This doctrine is complementary to the principles of natural justice which the Quasi Judicial Authorities are bound to observe.
It is true that the distinction between a quasi judicial and the administrative action has become thin, as pointed out by this Court as far back as 1970 in A.K. Kraipak & Ors.
vs Union of India & Ors., AIR 1970 S.C. 150.
Even so the extent of judicial scrutiny/judicial review in the case of administrative action cannot be larger than in the case of quasi judicial action.
If the High Court cannot sit as an appellate authority over the decisions and orders of quasi judicial authorities it follows equally that it cannot do so in the case of administrative authorities.
In the matter of administrative action, it is well known, more than one choice is available to the administrative authorities; they have a certain amount of discretion available to them.
They have "a right to choose between more than one possible course of action upon which there is room for reasonable people to hold differing opinions as to which is to be preferred ' (Lord Diplock in Secretary of State for Education vs Tameside Metropolitan Borough Counsel, ; at 1064).
The Court cannot substitute its judgment for the judgment of administrative authorities in such cases.
Only when the action of the administrative authority is so unfair or unreasonable that no reasonable person would have taken that action, can the Court intervene.
To quote the classic passage from the judgment of Lord Greene MR in Associated Provincial Picture Houses Ltd. vs Wednesbury Corporation, (1948) 1 KB at 229.
"It is true the discretion must be exercised reasonably.
Now what does than mean ? Lawyers familiar with the phraseology commonly used in relation to exercise of statutory discretions often use the word "unreasonable" in a rather comprehensive sense.
It has frequently been used and is frequently used as a general description of the 159 things that must not be done.
For instance, a person entrusted with the discretion must, so to speak, direct himself properly in law.
He must call his own attention to the matters which he is bound to consider.
He must exclude from his consideration matters which are irrelevant to what he has to consider.
If he does not obey those rules, he may truly be said, and often is said, to be acting 'unreasonably '.
Similarly, there may be something so absurd that no sensible person could ever dream that it lay within the powers of the authority. ' While this is not the occasion to examine the content and contours of the doctrine of fairness, it is enough to reiterate for the purpose of this case that the power of the High Court while reviewing the administrative action is not that of an appellate court.
The judgment under appeal precisely does that and for that reason is liable to be and is herewith set aside.
On behalf of the appellant reliance has been placed upon the decision of this court in Mahesh Chandra vs Regional Manager, U.P. Financial Corporation & Ors., (1992) 2 J.T. 326.
We have perused the decision.
That was a case where the debtor was anxious to pay off the debt and had been taking several steps to discharge his obligation.
On the facts of that particular 'case it was found that the corporation was acting reasonably.
In that context certain observations were made.
The decision also deals with the procedure to be adopted by the Corporation while selling the units taken over under Section 29.
That aspect is not relevant in this case.
We are, therefore, of the opinion that the said decision is of no help to the appellant herein.
The appeal is accordingly allowed.
The respondents shall pay the .costs of the appellant assessed at Rs. 10,000 consolidated.
T.N.A. Appeal allowed.

dataset_name: IN-Abs

summary:
The respondent Company obtained loan from the appellant Financial Corporation.
Soon after obtaining the loan it ceased to, operate and was declared a sick unit.
Consequently, it did not make any repayment of loan as stipulated in the agreement and the hypothecation deeds.
Thereafter, the appellant Corporation issued notice under section 29 of the for taking over the respondent 's unit for recovery of the amount due Rs.38.57 lakhs.
Ile respondent Company filed a writ petition in the Allahabad High Court questioning the appellant 's action.
Ile High Court allowed the petition and directed (1) expeditious rehabilitation of the concern and (2) to restore back the 150 possession of the unit to the respondent Company.
Against the judgment of the High Court the Financial Corporation riled an appeal in this Court.
Allowing the appeal and setting aside the order of the High Court, this Court, HELD : 1.
It is true that the appellant Corporation which Is an instrumentality of the State created under the is not like an ordinary money lender or a Bank which lends money.
It is a lender with a purpose the purpose being promoting the small and medium industries.
At the same time, It is necessary to keep certain basic facts In view.
The relationship between the Corporation and the borrower is that of creditor and debtor.
the Corporation is not supposed to give loans once and go out of business.
It has also to recover them so that it can give fresh loans to others.
Corporations too borrow monies from Government or other financial corporations and they too have to pay interest thereon.
No doubt it has to act within the four corners of the Act and in furtherance of the object underlying the Act.
But this factor cannot be carried to the extent of obligating the Corporation to revive and resurrect every sick industry irrespective of the cost involved.
[156H, 157A C,F,] Promoting industrilisation at the cost of public funds does not serve the public interest; it merely amounts to transferring public money to private account.
The fairness required of the Corporation cannot be carried to the extent of disabling it from recovering what Is due to it.
While not insisting upon the borrower to honour the commitments undertaken by him, the Corporation alone cannot be shackled band and foot in the name of fairness.
Fairness is not a one way street more particularly in matters like the present one.
The fairness required of it must be tempered nay, determined in the light of all these circumstances.
In the instant case the respondents have no intention of repaying any part of the debt.
They were merely putting forward one or other ploy to keep the Corporation at bay.
[157D F] Mahesh Chandra vs Regional Manager, U.P. Financial Corporation Ors., (1992) 2 J.T. 326, held Inapplicable.
In a matter between the corporation and Its debtor, a writ court has no say except in two situations : (1) there is a statutory violation on the part of the Corporation or (2) where the Corporation acts unfairly i.e. 151 unreasonably.
The High Court exercising its jurisdiction under Article 226 of the Constitution cannot sit as an Appellate Authority over the acts and deeds of the Corporation and seek to correct them.
Doctrine of fairness.
evolved in administrative law was not supposed to convert the writ courts into appellate authorities over administrative authorities.
The constraints self imposed undoubtedly of writ jurisdiction still remain.
Ignoring them would lead to confusion and uncertainty.
The jurisdiction way become rudderless.
[157G H, 158A] 2.1.
The obligation to act fairly on the part of the administrative authorities was evolved to ensure the Rule of law and to prevent failure of justice.
This doctrine is complementary to the principle of natural justice which the Quasi judicial Authorities are bound to observe.
It is true that the distinction between a quasi judicial and the administrative action has become thin.
But even so the extent of judicial scrutiny/judicial review in the case of administrative action cannot be larger than in the case of quasi judicial action.
If the High Court cannot sit as an appellate authority over the decisions and orders of quasi judicial authorities it follows equally that it cannot do so in the case of administrative authorities.
The Court cannot substitute its judgment for the judgment of administrative authorities in such cases.
Only when the action of the administrative authority is so unfair or unreasonable that no reasonable person would have taken that action, can the Court intervenes.
[158C F] A.K Kraipak & Ors.
vs Union of India & Ors.
, A.I.R. 1970 S.C. 150; Secretary of State for Education vs Talimeside Metropolitan Borough Council, ; and Associated Provincial Picture Houses Ltd., vs Wednesbury Corporation, ; , relied on.
While passing the impugned order the High Court has not kept in mind the well recognised limitations of its jurisdiction under Article 226 of the Constitution.
While reviewing the administrative action it was not justified in acting as an appellate court.
[153D,159C]


judgement:
minal Appeal No. 462 of 1985.
From the Judgment and Order dated 21.12.84 of the Patna High Court in Crl.
A. No. 146 of 1978 (R).
R.C. Kohli Advocate for the Appellant.
Pramod Swarup Advocate for the Respondent.
The Judgment of the Court was delivered by N.P. SINGH, J.
This appeal is on behalf of the sole appellant who has been convicted under section 304 Part 1 of the Indian Penal Code (hereinafter referred to as "the Penal Code") and has been sentenced to undergo rigorous imprisonment for two years by the High Court.
The appellant along with Sitaram Mandal and Tribhanga Mandal 140 were charged for offence under section 307 read with section 34 for attempting to commit the murder of Gopal Chandra Ravidas, They had also been charged under section 379 of the Penal Code for committing the theft of the paddy crops from plot No. 2760 of village Amjhore, P.S. Baliapur, District Dhanbad.
According to the prosecution case, on 26.10.75 at about 12.00 noon the informant Bishnu Ravidas (PW 9) and his brother Gopal Chandra Ravidas having learnt that the accused persons were harvesting their paddy from the plot aforesaid went there.
When they protested as to why their crops were being harvested, accused Sitaram Mandal caught hold of the hands of Gopal Chandra Ravidas and Harendra Nath Mandal, the appellant, assaulted Gopal Chandra Ravidas on his head with the back portion of a Tangi.
At that very time, accused Tribhanga Mandal assaulted informant with a lathi on his right hand.
On a consideration of the evidence on record, the learned Sessions Judge convicted appellant Harendra Nath Mandal and Sitaram Mandal for offence under section 307 read with section 34 of the Penal Code and sentenced the appellant, Harendra Nath Mandal to undergo rigorous imprisonment for seven years and accused Sitaram Mandal to undergo rigorous imprisonment for five years.
Accused Tribhanga Mandal was convicted under section 323 and sentenced to undergo rigorous imprisonment for six months.
All of them were also convicted under section 379 of the Penal Code and sentenced to one year rigorous imprisonment each.
The sentences were directed to run concurrently.
During the pendency of the appeal before the High Court, Sitaram Mandal died and his appeal abated.
The learned Judge, however, set aside the conviction and sentence under section 307 read with section 34 passed against the appellant Harendra Nath Mandal but convicted him under section 304 Part 1 of the Penal Code and sentenced him to two years ' rigorous imprisonment.
The conviction and sentence under section 379 were also set aside.
The conviction and sentence under section 323 of the Penal Code against Tribhanga Mandal were also set aside and he was acquitted of the charges levelled against him.
It was rightly urged on behalf of the appellant that when Gopal Chandra Ravidas to whom this appellant is alleged to have given a blow by the back portion of a Tangi, has survived 141 the injury aforesaid, there was no question of covicting the appellant under section 304 Part 1 of the Penal Code.
Section 304 does not create an offence but provides the punishment for culpable homicide not amounting to murder.
In view of section 299 of the Penal Code, whoever causes death by doing an act with the intention of causing death, or with the intention of causing such bodily injury as is likely to cause death, or with the knowledge that he is likely by such act to cause death, commits the offence of culpable homicide.
In view of section 300 of the Penal Code, except in cases covered by the five exceptions mentioned therein, culpable homicide is murder.
It is well known that if a death is caused and the case is covered by any one of the five exceptions of section 300 then such culpable homicide shall not amount to murder.
Section 304 provides punishment for culpable homicide not amounting to murder and draws a distinction in the penalty to be inflicted in cases covered by one of the five exceptions, where an intention to kill is present and where there is only knowledge that death will be a likely result, but intention to cause death or such bodily injury which is likely to cause death is absent.
To put it otherwise if the act of the accused falls within any of the clauses 1, 2 and 3 of section 300 but is covered by any of the five exceptions it will be punishable under the first part of section 304.
If, however, the act comes under clause 4 of section 300 i.e. the person committing the act knows that it is so imminently dangerous that it must, in all probability cause death but without any intention to cause death and is covered by any of the exceptions, it will be punishable under the second part.
The first part of section 304 applies where there is guilty intention whereas the second part applies where there is guilty knowledge.
But before an accused is held guilty and punished under first part or second part of section 304, a death must have been caused by him under any of the circumstances mentioned in the five exceptions to section 300, which include death caused while deprived of power of self control under grave and sudden provocation, while exercising in good faith the right of private defence of person or property, and in a sudden fight in the heat of passion without premeditation.
So far the present case is concerned, when death itself had not been caused, there was no occasion for convicting the appellant under section 304 of the Penal Code.
Now the next question is as to whether the appellant should be convicted for causing injury on the head of aforesaid Gopal Chandra 142 Ravidas with the back portion of a Tangi.
It was pointed out that the appellant has sustained injuries during the same occurrence including one at the scalp.
The aforesaid injuries on the person of the appellant were examined by the Civil Assistant Surgeon, Sadar Hospital, Dhanbad, who has been examined as a witness at the trial.
The appellant in his examination under section 313 of the Code of Criminal Procedure stated that he had sustained injuries aforesaid while warding off the Bhala blow aimed at his chest by the aforesaid Gopal Chandra Ravidas.
The other accused Sitaram Mandal who died during the pendency of the appeal had also been examined by the jail Doctor in the Dhanbad jail and said Doctor was examined as a witness at the trial, who proved the injuries on the person of accused Sitaram Mandal.
The learned Judge himself on consideration of the materials on recored has come to the following conclusion : "From the aforesaid discussion of the evidence, in the facts and circumstances of the case, it appears that since long before the occurrence both the parties were claiming title and possession over the disputed land and the occurrence took place regarding the harvesting of the paddy crop.
In the same occurrence the informant (PW 9) and his brother Gopal Ravidas sustained injuries and the first and second appellants were also injured.
According to the appellants Gopal Ravidas aimed a 'Bhala ' blow on the chest of the first appellant but he warded it off and sustained injuries at his hand.
The first and the second appellants were also assaulted by lathis.
The injuries were examined and proved by the doctor (DW 8).
Likewise, the injuries of the second appellant were examined by the jaid doctor, (DW 7), who proved the injury report.
May be, that their injuries were not severe but it was a matter of luck that the first appellant could avoid and ward off the 'Bhala ' blow aimed at his chest.
The manner of occurrence as alleged by the appellants in which they sustained injuries has been suppressed and the true version of the occurrence has not been given by the prosecution.
In the circumstances, the right of private defence of person and property cannot be completely ruled out.
" 143 Once the finding aforesaid was recorded that the prosecution has not disclosed the true version of the occurrence and the right of private defence of person and property was available to the appellant then the appellant was entitled to be acquitted.
Accordingly, the appeal is allowed.
The conviction and sentence passed against the appellant are set aside.
N.P.V. Appeal allowed.

summary:
The prosecution alleged that when PW 9 and his brother, having learnt that the appellant and two other persons were harvesting paddy from their plot, went there and protested as to why their crops were being harvested, one person caught hold of the hands of PW 9 's brother, and the appellant, assaulted him on his head with the back portion of a Tangi, and at that very time, another person assaulted PW 9, the informant, with a lathi on his right hand.
The three persons were charged with attempt to commit murder of PW 9 's brother, and also theft of the paddy crops from the plot of PW 9 and his brother.
On consideration of the evidence on record, the Sessions Judge convicted the appellant and another accused for offence under section 307 read with section 34 of the Penal Code.
They were sentenced to undergo seven years ' and five years ' rigorous imprisonment respectively.
The third accused was convicted under section 323 and sentenced to undergo rigorous imprisonment for six months.
All of them were also convicted under section 379 of the Penal Code and sentenced to one year 's rigorous imprisonment each.
138 During the pendency of the appeal before the High Court, preferred by the three accused, one of them died and his appeal abated.
The High Court set aside the conviction and sentence under section 323 of the Penal Code against the other accused and he was acquitted of the charges levelled against him.
The High Court also set aside the conviction and sentence under section 307 read with section 34 passed against the appellant, but convicted him under section 304 Part 1 of the Penal Code and sentenced him to two years ' rigorous imprisonment.
In the appeal before this Court on behalf of the appellant, it was urged that when PW 9 to whom the appellant was alleged to have given a blow by the back portion of a Tangi, survived the injury, there was no question of convicting the appellant under section 304 Part 1 of the Penal Code.
It was also contended that the appellant had sustained injuries during the same occurrence including one at the scalp.
Allowing the appeal, this Court, HELD : 1.1.
Section 304 does not create an offence but provides the punishment for culpable homicide not amounting to murder.
In view of section 300 of the Penal Code, except in cases covered by the five exceptions mentioned therein, culpable homicide is murder.
If a death is caused and the case is covered by any one of the five exceptions of section 300, then such culpable homicide shall not amount to murder.
Section 304 provides punishment for culpable homicide not amounting to murder and draws a distinction in the penalty to be inflicted in cases covered by one of the five exceptions where an intention to kill is present and where there is only knowledge that death will be a likely result, but intention to cause death or such bodily injury which is likely to cause death is absent.
The first part of section 304 applies where there is guilty intention whereas the second part applies where there is guilty knowledge.
But before an accused is held guilty and punished under first part or second part of section 304, a death must have been caused by him under any of the circumstances mentioned in the five exceptions to section 300, which include death caused while deprived of power of self control under grave and sudden provocation, while exercising in good faith the right of private defence of person or property, and in a sudden fight in the heat of passion without permeditation.
[141B D,F] 1.2.
In the instant case, when death itself had not been caused, there 139 was no occasion for convicting the appellant under section 304 of the Penal Code.
[141G] 1.3.
The appellant, in his examination under section 313 of the Code of Criminal Procedure, stated that he had sustained injuries during the same occurrence while warding off the Bhala blow aimed at his chest by PW 9.
The aforesaid injuries on the person of the appellant were examined by the Civil Assistant Surgeon, who had been examined as a witness at the trial.
The other accused, who died during the pendency of the appeal had also been examined by the Jail Doctor and the Doctor was examined as a witness at the trial, who proved the injuries on the person of accused.
The Judge himself on consideration of the materials on record has come to the conclusion that the manner of occurrence, as alleged by the appellants in which they sustained injuries, has been suppressed and the true version of the occurrence has not been given by the prosecution and in the circumstances, the right of private defence of person and property cannot be completely ruled out.
[142B CG H] 1.4.
In view of the finding of the High Court that the prosecution had not disclosed the true version of the occurrence, and the right of private defence of person and property was available to the appellant, the appellant was entitled to be acquitted.
[143A]


judgement:
Appeal No. 901 of 1993.
From the Judgment and Order dated 15.11.91 of the Patna High Court in C.W. C. No. 3430 of 1991.
A. Sharan for the Appellant.
G. Ramaswamy and A.V. Rangam for the Respondents.
The Judgment of the Court was delivered by BHARUCHA, J.
Leave to appeal is granted.
The appeal is directed against the judgment and order of the High Court at Patna dismissing the writ petition filed by the appellant.
The appellant was employed by the respondent.
He was chargesheeted for having granted bank loans to a large number of persons without proper documentation and without verifying their creditworthiness and also with having obtained illegal gratification in that connection.
An en quiry was held.
The Enquiry Officer made a report holding the appellant guilty.
Upon the basis of the enquiry report the appellant was dismissed from service.
The appellant filed a writ petition before the High Court at Patna (being Writ Petition No. C.W.J.C. No. 1979 of 1988) impugning the dis 163 missal.
The High Court allowed the writ petition by judgment and order dated 8th July, 1988.
The enquiry, the court concluded, could not be held to be proper and in accordance with law.
Consequently, the order of dismissal was set aside.
The High Court observed : "This does not mean that the petitioner should be got scot free.
He must face enquiry.
Sufficient time has already lapsed.
The enquiry must be concluded as early as pos sible.
The petitioner will appear before the Enquirying Officer (to be nominated in the meantime) at Patna on 2nd August, 1988 and the prosecution will produce the witnesses examined on his behalf for cross examination.
After the cross examination is over the petitioner will also produce the witnesses when he may like to enquire.
This should be done without any adjournment and the proceed ing should be conducted day to day so that it may be concluded as early as possible.
With this observation this writ application is disposed of.
" The same Enquiry Officer then permitted the appellant to cross examine the witnesses produced in support of the charge and to examine his own witnesses.
He made a report dated 27th March, 1989 in which he held nine charges against the appellant to be proved, one to be partly proved and one not proved.
The disciplinary authority, upon consideration of the enquiry report, passed an order dated 23rd October, 1989, dismissing the appellant from service.
The appellant challenged the order of dismissal dated 23rd October, 1989 on the ground that the enquiry upon the basis of which it had been passed had not been conducted as required by the order of the High Court dated 8th July, 1988.
He also challenged it upon the ground that he had not been furnished with a copy of the Enquiry Report.
The High Court rejected the writ petition.
It held that the judgment of this Court in the case of Union of India and others vs Mohd. Ramzan Khan; , , did not cover an order of dismissal that had been passed before the said judgment was delivered.
Insofar as the enquiry report was concerned, the High Court took the view that the Enquiry Officer had allowed the appellant to participate in the proceedings as also to cross examine witnesses and he had considered all relevant aspects on the record.
164 It will be recalled that the High Court by the judgment and order dated 8th July, 1988 had held that the earlier enquiry was not proper and in accordance with law and had quashed the order of dismissal dated 14th February, 1987 based thereon.
It had directed that the appellant should face an enquiry whereat the prosecution would produce the witnesses it had examined on its behalf for cross examination.
by the appellant.
Thereafter, the appellant could produce such witnesses as he desired.
It is the submission of learned counsel on behalf of the appellant that the Enquiry Officer had in the second enquiry report relied upon the findings of the earlier enquiry, since quashed, and that he had not permitted the appellant to examine three necessary witnesses in support of his case.
There had, therefore, been no real enquiry as contemplated by the High Court 's order dated 8th July, 1988 and that, therefore, the dismissal order passed upon the basis of the second enquiry report should be quashed.
Shri G Ramaswamy, learner senior counsel for the respondent, submitted that the Enquiry Officer had conducted the enquiry as directed by the High Court in its order dated 8th July, 1988, from the point of cross examination of the respondent 's witnesses onward.
The enquiry report made by the Enquiry Officer subsequent to the order of the High Court dated 8th July, 1988 is entitled Additional enquiry report in respect of charges laid against Shri Heera Prasad".
It opens with the sentence, "This enquiry, report is further to the enquiry, report already submitted by me in September 1986".
It says that "the enquiry was reopened".
It says, further, ".As the charges have been dealt with one by one in detail in my previous enquiry report I am confining this report only to the cross examination of prosecution witnesses as also examination/cross examination of defence witnesses.
" The report concludes thus : "After going through the proceedings, hearing the depositions made by the defence witnesses, and hearing the answers given by the prosecution witnesses, I find no reason to change may report as no exonerating fact came out during the enquiry instead it becomes a little darker particularly noting the fact that at least three (03) of the witnesses cited by the charged officer himself refused to come for deposing before the enquiry for reasons best known to the charged officer/witnesses.
As the various 165 exhibits etc. were discussed and analysed by me in my previous report, I am not repeating the analysis once again in this report.
" As aforesaid, the Enquiry Officer held nine of the eleven charges to be proved, one to be partly proved and one to be not proved.
(The Emphasis is supplied).
It is patent that the order dated 8th July, 1988 contemplated a fresh enquiry.
At best, the examination in chief of the witnesses of ' the respondent could be said to have been allowed to be incorporated in the second enquiry proceedings.
The order certainly contemplated that the Enquiry Officer would apply his mind afresh to the evidence on record comprising the examination in chief and cross examination of the respondents witnesses and that of the appellant 's witnesses.
It is patent from the "Additional enquiry report" made by the Enquiry Officer that there has been no fresh application of mind.
It was impermissible for the Enquiry Officer, in these circumstances, to have borne his previous Enquiry Report in mind and to have confined the "Additional enquiry report" only to the cross examination of prosecution witnesses and the examination and cross ex amination of defence witnesses "as the charges have been dealt with one by one in detail in my previous enquiry report".
It was also impermissible for him to have stated that "the findings of the previous enquiry report remain as they are".
Having regard to the High Court 's order dated 8th July, 1988, the Enquiry Officer was bound to consider the material or, record afresh and not to take his earlier report into account and to say that he found "no reason to change that report".
We are, in the circumstances, not satisfied that the appellant has had a fair opportunity of presenting his case to an Enquiry Officer unbiased by pre conceptions.
Having regard to all that has transpired.
we think that it is in the fitness of things that the order of dismissal dated 23rd October, 1989 should be quashed and another Enquiry Officer should be appointed by the respondent who should allow the appellant the opportunity of examining as his witnesses the three persons referred to by the earlier Enquiry Officer in the paragraph of the "Additional enquiry report" subtitled "Conclusion".
He should give to the respondent and the appellant the opportunity of a hearing.
He should then apply his mind to the material on record without in any way being influenced by the earlier enquiry reports, and make his own enquiry report accordingly.
In the result, the appeal is allowed.
The judgment and order under appeal are set aside.
The writ petition is allowed to the extent mentioned in the preceding paragraph.
There shall be no order as to costs.
V.P.R. Appeal allowed.

summary:
The respondent bank charge sheeted the appellant employee for granting bank loans to a large number of persons without proper documentation and without verifying their credit worthiness and obtaining illegal gratification in that connection.
An enquiry was held.
The Enquiry Officer found the appellant guilty and on the basis of the enquiry report, he was dismissed from service.
The appellant challenged the order of dismissal in a writ petition before the High Court.
On 8.7.1988 the High Court allowed the petition holding that the enquiry held was not proper and in accordance with law and ordered the appellant to face another enquiry in respect of which it gave certain directions.
The same enquiry Officer then permitted the appellant to cross examine the witnesses of the bank and to examine his own witnesses.
The Enquiry Officer held in his report dated 27.3.1989 that nine charges against the appellant were found to be proved, one not proved and one partly proved.
The disciplinary authority, considering the enquiry report, dismissed the appellant from service on 23.10.1989.
161 The appellant challenged the dismissal order in the High Court contending that the enquiry was not conducted as required by the order of the High Court dated 8.7.1998 and that he was not furnished with a copy of the Enquiry Report.
The High Court dismissed the writ petition, against which the present appeal by special leave was filed.
The appellant contended that the Enquiry Officer in the second enquiry report had relied upon the findings of the earlier enquiry, since quashed, and that he did not permit the appellant to examine three necessary witnesses in support of his case; that there was no real enquiry as contemplated by the High Court 's order dated 8.7.1988; and that, therefore, the dismissal order passed on the basis of the second enquiry report be quashed.
The respondent bank submitted that the Enquiry Officer conducted the enquiry as directed by the High Court in its order dated 8.7.1988.
Allowing the appeal, this Court, HELD : 1.01.
The order dated 8th July, 1988 contemplated a fresh enquiry.
At best, the examination in chief of the witnesses of the respondent could be said to have been allowed to be incorporated in the second enquiry proceedings.
The order certainly contemplated that the Enquiry Officer would apply his mind afresh to the evidence on record, comprising the examination in chief and cross examination of the respondent 's witnesses and that of the appellant 's witnesses.
[165C] 1.02.
It was patent from the "Additional enquiry report" made by the Enquiry.
Officer that there had been no fresh application of mind.
It was impermissible for the Enquiry Officer, in these circumstances, to have borne his previous Enquiry Report in mind and to have confined the "Additional enquiry report" only to the cross examination of prosecution witnesses and the examination and cross examination of defence witnesses .as the charges have been dealt with one by one in detail in my previous enquiry report".
It was also impermissible for him to have stated that "the findings of the previous enquiry report remain as they are".
Having regard to the High Court 's order dated 8th July, 1988, the Enquiry Officer was bound to consider the material on record afresh and not to take his earlier 162 report into account and to say that he found "no reason to change that report '. [165C E] 1.03.
In the fitness of things it was directed that another Enquiry Officer should be appointed by the respondent who should allow the appellant the opportunity of examining as his witnesses the three persons referred to by the earlier Enquiry Officer in the paragraph of the 'Addi tional enquiry report" sub titled 'Conclusion".
He should give to the respondent and the appellant the opportunity of a hearing.
He should then apply his mind to the material on record without in any way being influenced by the earlier enquiry reports, and make his own enquiry report accordingly.
[165G H, '166A] Union of India and Others vs Mohd Ramzan Khan, ; , referred to.


judgement:
ial Leave Petition (c) No.17098 of 1992.
From the Judgment and Order dated 23.10.1992 of the Allahabad High Court in Civil Misc.
Writ Petition No.473 of 1992.
R.B. Misra for the Petitioners.
Ms. Shalmi Soni, Mrs. P.S. Shroff (For M/s S.A. Shroff & Co.) for the Respondents.
The following Order of the Court was delivered: Heard counsel for the petitioners as well as the counsel for the respondents.
We see no reason to entertain this special leave petition.
It is established by the decision of this Court in Synthetics and Chemicals Ltd. and Ors.
vs State of U.P. and Ors.
, ; that so far as the industrial alcohol is concerned, the power of licencing vests in the Union of India alone.
At the same time it is held that the power of the State Government to legislate with respect to potable liquor referable to Entry 6 of List II remains unaffected.
It is also held that the State has the power to make regulations and to take appropriate action to ensure that nonpotable alcohol is not diverted and misused as a substitute for potable alcohol.
Another principle enunciated in the said decision is that the State can, not only charge excise duty on potable alcohol and sales tax on sales of such potable alcohol, but also entitled, in cases it renders any service, 293 as distinct from its claim of grant of privilege, to charge fees based on quid pro quo.
The High Court in this case has merely reiterated the said principles.
It has held "that the Central Government has the exclusive power to grant a licence for the the manufacture of Industrial Alcohol.
It is not necessary for the petitioner to obtain a PD 2 licence from the Excise Commissioner, U.P., Allahabad before starting its distillery for the manufacture of Industrial Alcohol.
The provisions in the U.P. Excise Manual relating to taking of PD 2 licence are not applicable to a case where a person wants to manufacture industrial alcohol.
The other provisions of the Act and Rules of the U.P. Excise Act and Manual are applicable in order to ensure that Industrial alcohol is not converted into potable alcohol.
" The final order of the High Court is to the following effect: "In view of the above, we allow the writ petition and direct the respondents not to interfere with the petitioner 's manufacturing industrial alcohol in the distillery for which licence had been granted.
This is, however, subject to the right of the State Government to ensure that industrial alcohol is not converted into potable alcohol." In our opinion the said observations must be understood as reiterating the principles enunciated by this Court in the decision afore cited.
Mr. Salve, learned counsel for the State of Uttar Pradesh submitted that before manufacturing industrial alcohol, the Respondent company has to manufacture rectified spirit and that rectified spirit can be coverted into potable liquor by merely adding water.
May be so.
The observations made by the High Court and the law laid down by this Court recognise and safeguard the power of the State Government to guard against such abuse.
We affirm it.
Shri Salve questioned the direction given by the High Court to the following effect: "We further direct that the respondents shall allot molasses to the petitioner in accordance with the assurance given to the petitioner vide order of the Government dated 23.3.1989.
" The proceeding dated 23.3.1989 of course pertaints to the year 1989.
But Mr. F.S. Nariman, leanred counsel for the Respondent Company says that the said order has been extended from time to time for the subsequent years as well.
Mr. Salve points out that in the body of the Judgment of the High Court no reasons 294 are given in support of the aforesaid direction.
We are, however, of the opinion that the said direction cannot be construed and shall not be understood, as calling upon or directing the Government to do anything, or to make any supplies, contrary to the Provisions of the Molasses control order or any other law governing the supply of molasses.
The supply of molasses to the Respondent shall be made in accordance with law.
Mr. Salve raised certain other contentions but we did not allow him to do, so in view of the fact that those contentions were not urged before the High Court.
We need express no opinion thereon.
Special Leave Petition is accordingly dismissed subject to the above observations.
V.P.R. Petition dismissed.

summary:
The High Court reiterating the principles enunciation in Synthetics and Chemicals Ltd. and Ors.
vs State of U.P. and Ors.
, ; held that the Central Government had the exclusive power to grant a licence for the manufacture of industrial alcohol and it was not necessary for the Company respondent to obtain a PD 2 licence from the Excise Commissioner before starting its distillery for the manufacture of industrial alcohol.
The High Court directed the State of U.P. and another not to interfere with the respondent Company 's manufacturing Industrial alcohol in the distillery for which licence was granted but subject to the State Government 's right to ensure that industrial alcohol was not converted into potable alcohol.
The State of U.P. filed a special leave petition against the judgment of the High Court, in this Court contending that before manufacturing industrial alcohol, the respondent company was to manufacture into rectified spirit and that rectified spirit Could be converted potable liquor by merely adding water, that the High Court did not give any reason in support of the High Court 's direction.
"We further direct that the respondents shall allot molasses to the, petitioner in accordance with the assurance given to the petitioner vide order of the Government dated 23.3.1989." The respondent Company submitted that the High Court order was extended from time to time for the subsequent years as well.
Dismissing the Special Leave Petition, this Court, HELD: 01.
The law laid down by this court and the observations of 292 the High Court in the impugned judgment recognise and safeguard the right of the State Govt.
to guard against any abuse and to ensure that rectified spirit is not diverted for human consumption.
That power is affirmed.
[293F] 02.
The direction of the High Court cannot be construed and shall not be understood as calling upon or directing the Government to do anything, or to make any supplies, contrary to the provisions of the provisions of the Molasses Contral Order or any other law governing the supplies of molasses.
The supply of molasses to the respondent shall be made in accordance with law.
[294A B] Synthetics and Chemicals Ltd. and Ors.
vs State of U.P. and Ors.
, ; , referred to.
[292F]