judgement:
Appeal No. 1104 of 1970.
Appeal by special leave from the judgment and order dated April 9, 1970, of the Rajasthan High Court in D. B. Civil Special Appeal No. 126 of 1970.
M. C. Chagla, F. section Nariman, P. N. Tiwari and O. C. Malther, for the appellant.
M. C. Setalvad and B. P. Maheshwari, for the respondent.
The Judgment of the Court was delivered by Grover, J.
This is an appeal from a judgment of the Rajasthan High Court holding that the appellant was not entitled to file an appeal against the order of the Company Judge directing sale of lease hold rights of the Golcha Properties (P) Ltd. (in liquidation) in the land belonging to the appellant.
The facts briefly are that on November 5, 1960 an agreement was entered into between the appellant and the respondent company allowing Golcha Properties (P) Ltd. to construct a cinema threatre within three years from the issue of the 'No Objection Certificate ' on land measuring 42,900 sq.
feet at Bhagwandas Road, Jaipur belonging to the appellant.
The Company deposited a sum of Rs. 5 lakhs by way of security.
In October 1963 No Objection Certificate is stated to have been issued for construction of a cinema theatre.
In 1966 a petition for winding up of the company was filed in the Rajasthan High Court.
On May 10, 1968 an order for winding up of the company was made and a liquidator was appointed ' On July 11, 1969 the Official Liquidator made a report to the Company Judge for sale of the lease hold rights of the company in the land belonging to the appellant and the structures standing on it.
It appears that the Official, Liquidator made a report under section 457 of the Indian to obtain the necessary orders for sale.
On July 21, 1969 the Company Judge without hearing any one or issuing notice to the appellant ordered that the lease hold rights and the structures be auctioned as proposed by the Official Liquidator On October 3,1969 the appellant 's attorney sent a letter to the Official Liquidator stating that the licence granted to the company under, an.
agreement dated November 5, 1960 stood revoked and called upon him to deliver possession of the land and also pay compensation amounting to Rs. 10, lakhs.
On February 9, 1970 the Official Liquidator sent a reply claiming that the company was entitled to a lease for 20 years under the agreement.
On March 14, 1970 a notice was issued in a newspaper (Times of India) in respect of the proposed auction sale ,of lease hold rights which was to take place on April 14, 1970.
249 According to the appellant she enquired from the Official Liquidator under whose authority the, property was being sold to which no reply was sent by the Official Liquidator.
On April 3, 1970 the appellant applied for a certified copy of the order dated July 21,1969 after taking inspection of the record in the High Court.
The certified copy was sent on April 24, 1970.
On the same date the appellant filed an appeal before the High Court.
The High Court rejected that application summarily but recorded short order.
In the order of the High Court reference has been made to Rule 139 of the Companies (Court) Rules 1959 and it has been pointed out that since the appellant had not appeared before the Company Judge she was not entitled to maintain the appeal.
It was conceded that no notice had ever been sent to her either by the Official Liquidator or the Company Judge before the order appealed against relating to appellant 's property was made.
The High Court was of the view that the only remedy of the appellant was by way of a suit after obtaining leave of the Company Judge under section 446 of the Act.
Now an appeal lies under section 483 of the Act from any order made or decision given in the matter of finding up of a company by the court and it lies to the same court to which, in the same manner in which, and subject to the same conditions under which, appeals lie from any order or deci sion of the Court in cases within its ordinary jurisdiction.
There can be no manner of doubt that an appeal was competent against the order made by the Company Judge on July 21, 1969 in view of the terms of section 483.
The only question is whether because the Official Liquidator failed to discharge his duties properly by having a notice issued to the appellant, whose rights were directly affected by the order proposed to be made, the appellant was debarred from filing the appeal.
In our opinion apart from Rule 139 to which reference has been made by the High Court the Official Liquidator as well as the learned Company Judge were bound by the rules of natural justice to issue a notice to the appellant and hear her before making the order appealed against.
If there was default on their part in not following the correct procedure it is wholly incomprehensible how the appellant could be deprived of her right to get her grievance redressed by filing an appeal against the order which had been made in her absence and without her knowledge.
It would be a travesty of justice if a party is driven to file a suit which would involve long and cumbersome procedure when an order has been made directly affecting that party and redress can be had by filing an appeal which is permitted by law.
It is well settled that a person who is not a party to the suit may prefer an appeal with the leave of the appellate court and such leave should be granted if he would be prejudicially affected by the judgment.
250 Rule 103 of the Companies (Court) Rules provide for taking out summons for directions not only with reference to the settlement of the list of contributories and the list of creditors but also the axercise by the Official Liquidator of all or any of the powers under section 457(1) and any other matter requiting directions of the court.
The exercise of the power under section 457 (1) (c) of the Act to sell the immovable and movable property of the Company by public auction or private contract would certainly fall Within the ambit of the Rule.
That Rule expressly provides for issuing of a notice of the summons to the petitioner on whose petition the order for winding up was made.
It is implicit that if the directions which have to be given by the court would affect any person prejudicially he: must be served with a notice of the summons under the general rule of natural justice and that no order should be made affecting the rights of a party without affording a proper opportunity to it to represent its case.
The High Court was thus clearly in error in not entertaining and deciding the appeal preferred by the appellant who was the owner of the land in which lease hold rights said to have been created by her in favour of the Company in liquidation were sought to be sold.
The appeal is allowed and the order of the High Court is set aside.
The case is remanded to the High Court for disposing of the appeal in accordance with law.
Costs shall abide the event.
Y.P. Appeal allowed.

summary:
The respondent company holding leasehold rights in the appellant land went into liquidation.
Accepting the.
official liquidator 's report the company Judge (Rajasthan High Court) without hearing anyone or issuing notice to the appellant ordered auction of the lease hold right of the respondent company.
The appellant sent a letter to the Official Liquidator revoking the licence granted to the company and calling upon him to, deliver possession of the land.
The Official Liquidator claimed that the company was entitled to a further period of lease under the agreement.
Notice was issued in respect of the proposed auction sale.
The appellant filed an appeal before the High Court.
The High Court held that since the appellant had not appeared before the company Judge, she was not entitled to maintain the appeal, and further that the only remedy of the appellant was by way of a suit after obtaining leave of the Company Judge under section 446 of the Indian Companies Act.
In appeal to this Court, HELD : The High Court was in error in not entertaining and deciding the appeal preferred by the appellant who was the owner of the land in which lease hold rights said to have been created by her in favour of the company in liquidation were sought to be sold.
An appeal lies under section 483 of the Act from any order made or decision given in the matter of winding up of a company by the Court and it lies to the same, court to which, in the same manner in which, and subject to the same conditions under which appeals lie from any order or decision of the Court in cases within its ordinary jurisdiction.
Therefore an appeal was corn tent against the order of the company Judge.
[249 D] It is implicit in Rule 103 of the Company Court Rules that if the directions which have to be given by the Court would affect any person prejudicially he must be served with a notice of the summons under the general rule of natural justice and that no order should be made affecting the rights of a party without affording a proper opportunity to it to represent its case.
A] Further, the Official Liquidator as well as the, learned company Judge were bound by the rules of natural justice to issue a notice to the appellant and hear her before making the order appealed against.
If there was default on their part in not following the correct procedure the appellant could not be deprived of her right to get her grievance redressed by filing an appeal.
[250 C] 248


judgement:
149 and 167 of 1950.
758 Application under article 32 of the Constitution for a writ in the nature of habeas corpus I Bawa Shiv Charan Singh for the petitioner in petition No. 149.
Bindra for the petitioner in Petition No. 167.
B.K. Khanna, Advocate General of the Punjab, for the respondent in both the petitions.
M.C. Setalvad, Attorney General for India, for the Union of India (Intervener in Petition No. 149).
February 23.
The Judgment of the Court was delivered by CHANDRASEKHARA AIYAR J.
The earlier of the two petitions has been filed by one Ujagar Singh, under article 32 of the Constitution of India, for a writ of habeas corpus and for an order of release from detention.
The latter petition is a similar one by one Jagiit Singh.
In both the petitions, the respondent is the State of Punjab.
The orders of deten tion were made under the preventive Detention Act IV of 1950.
The petitions are not connected with each other, except that they raise the same grounds.
In petition No. 149 of 1950, Ujagar Singh was originally arrested and detained under the East punjab Public Safety Act on 29th September, 1948.He was released on 28th March, 1949, but on the same date, there was an internment order against him.
On 29th September, 1949, he was rearrested.
On 2nd March, 1950, an order of detention under the , was served on him, and on 3rd April, 1950, he was served with the grounds of detention dated 11th March, 1950.
Both in September, 1949, and in March, 1950, the ground alleged was ' 'You tried to create public disor der amongst tenants in Una Tehsil by circulating and dis tributing objectionable literature issued by underground communists.
" Additional grounds were furnished in July 1950.
In petition No. 167 of 1950, Jagjit Singh was arrested on 24th July, 1948.
under the provisions of the 759 Punjab Safety Act, 1947.
After the East Punjab Public Safety Act, 1949, came into force, a fresh detention order dated 14th May, 1949, was served on him and he continued to be kept in jail.
Grounds of detention were given to him on 7th September, 1949.
A fresh order of detention under the Pre ventive Detention Act (IV of 1950) dated 2nd March, 1950, was served on 7th March, 1950.
Grounds of detention dated 11th March, 1950, were served on him on 3rd April, 1950.
Both in September 1949 and April 1950, the same ground was given, i.e., "In pursuance of the policy of the Communist Party, you were engaged in preparing the masses for violent revolutionary campaign and attended secret party meetings to give effect to this programme.
" Additional or supplementary grounds were served on 5th August, 1950.
Several contentions were advanced on behalf of the petitioners challenging the legality of their detention and urging that as the detention was unlawful and the petition ers ' fundamental right of personal liberty had been in fringed, they should be set at liberty.
The points taken on their behalf can be briefly summarised as follows_ As the ground of detention now mentioned was the same as the ground specified in 1948 or 1949, i.e., months earlier under the Provincial Acts, the order of detention was made mechanical ly and was really mala fide in the sense that there is nothing to show that were was any fresh satisfaction on the part of the detaining authority that detention was necessary in the interests of public order.
Secondly, the grounds were not given "as soon as may be", which is required under section 7 of the Act; and as an unusually long period of time elapsed between the order of detention and the giving of the grounds, the detention must be held to be unlawful after the lapse of a reasonable time.
Thirdly, the grounds given originally were so vague that they could not be said to be grounds at all such as would enable the detenu to make any representation against the order.
Fourthly, supplemen tary grounds could not be furnished and should not be taken into account in considering whether the 760 original order was lawful, or whether the detention became unlawful after a particular period of time.
Two other points of a subsidiary nature were also raised, namely that the order was bad as the period of detention was not specified therein as appears to be required by section 12 and that the grounds given did not purport to state that the authority making the order was the Governor of the State.
There is no substance in the last two points.
Section 12 of the Act does not require that the period of detention should be specified in the order itself where the detention is with a view to preventing any person from acting in any manner prejudicial to the maintenance of public order.
The section itself provides that he can be detained without obtaining the opinion of an Advisory Board for a period longer than three months but not exceeding one year from the date of detention.
Normally, the detention period shall not exceed three months, unless an Advisory Board reports before the expiration of the said period that there is in its opinion sufficient cause for such detention.
See arti cle 22, clause (4), sub clause (a) of the Constitution.
Under sub clause (7) (a) of the same article, Parliament may by law prescrib, the circumstances under which, and the class or classes of cases in which, a person may be detained for a period longer than three months under any law provid ing for preventive detention without obtaining the opinion of an Advisory Board in accordance with the provisions of sub clause (a) of clause (4).
" Therefore, detention for more than three months can be justified either on the ground of an opinion of the Advisory Board sanctioning or warrant ing longer detention or on the ground that the detention is to secure the due maintenance of public order, in which case it cannot exceed one year in any event, as stated.
in sec tion 12 of the .
It is thus clear that the period is not to exceed three months generally, but may go up to one year in certain special cases.
In view of these provisions, the non specification of any definite period 761 in the detention order is not a material omission rendering the order itself invalid.
Under section 3 of the , the authority to make the order is the State Government.
Sec tion 166 (1) of the Constitution provides that all executive action of the Government of a State, shall be expressed to be taken in the name of the Governor.
The orders of deten tion expressly state that the Governor of Punjab was satis fied of their necessity and that they were made by his order.
The orders are signed no doubt by the Home Secre tary, but this is no defect.
The communication of the grounds need not be made directly by the authority making the order.
Section 7 does not require this.
The communica tion may be through recognized channels prescribed by the administrative rules of business.
Let us now turn our attention to the main contentions.
There is nothing strange or surprising in the fact that the same grounds have been repeated after the lapse of several months in both the cases, when it is remembered that the petitioners were under detention and in jail during the whole of the intervening period.
No fresh activities could be attributed to them.
There could only be a repetition of the original ground or grounds, whether good or bad.
It does not follow from this that the satisfaction of the detaining authority was purely mechanical and that the mind did not go with the pen.
The past conduct or antecedent history of a person can be taken into account when making a detention order, and, as a matter of fact, it is largely from prior events showing the tendencies or inclinations of the man that an inference could be drawn whether he is likely even in the future to act in a manner prejudicial to the maintenance of public order.
If the authority satisfied himself that the original ground was still available and that there was need for detention on its basis, no mala fides can be attributed to the authority from this fact alone.
The Act does not fix the time within which the grounds should be furnished to the person detained.
762 It merely states that the communication must be "as soon as may be".
This means reasonable despatch and what is reasona ble must depend on the facts of each case.
No arbitrary time limit can be set down.
The delays in the communication of the grounds in the two petitions have been adequately explained by the Home Secretary who says in this affidavits that grounds had to be supplied to nearly 250 detenus and that the printing of the necessary forms occupied some time.
According to him, he made an order even on 11 3 1950 for the supply of the grounds.
The extreme vagueness of the grounds is alone left as the chief line of attack.
As stated already, the original ground communicated in Petition No. 149 of 1950 is "to create public disorder amongst tenants in the Tehsil by circulating and distributing objectionable literature issued by underground communists.
" In the other petition, the ground is "In pursuance of the policy of the Communist Party you were engaged in preparing the masses for violent revolu tionary campaign and attended secret party meetings to give effect to this programme.
" We shall leave aside for the moment the supplementary grounds furnished later.
There can be little doubt that in both the cases the grounds furnished in the first instance were highly vague.
If we had only Iswar Das 's case to go by, Petition No. 30 of 1950, such vagueness by itself would constitute a justifica tion for release of the petitioners.
Since the date of that decision, however.
this Court had to consider the question at great length in two cases from Bombay and Calcutta re spectively Cases Nos. 22 and 24 of 1950 where the subject of the meaning and scope of section 7 of the and article 22, sub clauses (5) and (6)of the Constitution of India.
came up for elaborate consideration.
The said cases were decided on 25th January, 1951, and we are now governed by the principles laid down in these judg ments.
It was held by a majority of the Judges in Case No. 22 of 1950 (1) State of Bombay vs Atmaram Sridhar Vaidya [1951] S.C.R. 167.
763 (a) that mere vagueness of grounds standing by itself and without leading to an inference of mala fides or lack of good faith is not a justiciable issue in a court of law for the necessity of making ' the order, inasmuch as the ground or grounds on which the order of detention was made is a matter for the subjective satisfaction of the Government or of the detaining authority; (b) that there is nothing in the Act to prevent particulars of the grounds being furnished to the detenu within a reasonable time, so that he may have the earliest opportunity of making a representation against the detention order what is reasonable time being dependent on the facts of each case; (c) that failure to furnish grounds with the speedy addition of such particulars as would enable the detenu to make a representation at the earliest opportunity against the detention order can be considered by a court of law as an.
invasion of a fundamen tal right or safeguard guaranteed by the Constitution, viz., being given the earliest opportunity to make a representa tion;and (d) that no new grounds could be supplied to strengthen or fortify the original order of detention.
We are not concerned so much with the earlier history of the detenus as with what happened to them under the Preven tive Detention Act, 1950.
OverloOking the fact that the ground mentioned In March 1950 was the same as that given in September 1949, and condoning the vagueness in the original ground furnished in both the cases to support the making Of the order, it is impossible to justify the delay of nearly four months in furnishing what have been called additional or supplementary grounds, Let us take up Petition No. 149 first.
In the grounds furnished in July 1950, there are several which do not apparently relate to the original ground.
"You were respon sible for hartal by labourers working on Bhalera Dam in October 1947". "You instigated labourers working in Nangal in 1948 to go on strike to secure the acceptance of their demands" "After release you absconded yourself from your village and 99 764 remained untraced for a considerable period" . "When you were re arrested on 29 9 1949, lot of objectionable communist literature was recovered from your personal search" are instances of new grounds, and they have to be eliminated therefore from consideration.
In Jagjit Singh 's petition No. 167 of 1950, the supplemental grounds, which are as many as ten in number, are dated 31 7 1950, but they were served on him on 5 8 1950, that is two days after he had prepared his petition to this court under article 32 of the Constitution.
The grounds may be taken as particulars of the general allegation made against him on 3 4 1950 when the original grounds of detention were served.
But the time factor to enable him to make a representation at the earliest opportunity was not borne in mind or adhered to.
In the affidavit of Shri Vishan Bhagwan, Home Secretary to the Punjab Government, dated 6th September, 1950, no explanation has been offered for this abnormal delay in the specification of the particulars.
This delay is very unfor tunate indeed.
But for its occurrence the petitioner would not have been able to urge that one of the valuable rights guaranteed to him by the Constitution has been violated.
It is not alleged b.y the Home Secretary that the detenu was furnished with these particulars when he was arrested and detained under the Provincial Act and that consequently it was considered unnecessary to give him the same particu lars once over.
On the other hand, the detenu 's complaint has throughout been that he was given no particulars at all till the 5th August, 1950.
As the petitioners were given only vague grounds which were not particularised or made specific so as to afford them the earliest opportunity of making representations against their detention orders, and their having been inex cusable delay in acquainting them with particulars of what was alleged.
the petitioners have to be released, the rules being made absolute.
Ordered accordingly.
765 PATANJALI SASTRI J.
I concur in the order proposed by my learned brother Chandrasekhara Aiyar J. DAS J.
In view of the majority decision in Case No. 22 of 1950 (The State of Bombay vs Atma Ram Sridhar Acharya), I concur in the order proposed by my learned brother.
Order accordingly.
Petition No. 194 of 1950 Agent for the petitioner: R.R. Biswas.
Agent for the intervener: P.A. Mehta.
Petition No. 167 of 1950 Agent for the petition: R.S. Narula.

dataset_name: IN-Abs

summary:
Non specification of any definite period in a detention order made under section 3 of the Preventive Detention Act, IV of 1950, is not a material omission rendering the order invalid in view of the provisions contained in clauses (4) (a) and (7) (a) of article 22 the Constitution and section 12 of the Act.
An order of detention which expressly states that the Government of the State concerned was satisfied of the necessity of 757 making such an order and that it was made by the order of the Governor is not defective merely because it is signed by Home Secretary.
Communication of the grounds of the order need not be made directly by the authority making the order but may be made through recognized channels prescribed by the adminis trative rules of business.
The past conduct or antecedent history of a person can be taken into account in making a detention order, and as a matter of fact, it is largely from prior events showing tendencies or inclinations of a man that an inference could be drawn whether he is likely even in the future to act in a manner prejudicial to the maintenance of public order.
If the authority making an order is satisfied that the ground on which the detenue was detained on a former occasion is still available and that there was need for detention on its basis no mala fides can be attributed to the authority from the fact that the ground alleged for the second detention is the same as that of the first detention.
Whether grounds have been communicated "as soon as may be" must depend on the facts of each case.
No arbitrary time limit can be laid down.
The recent rulings of the Supreme Court establish (a) that mere vagueness of grounds standing by itself and with out leading to an inference of mala fides or lack of good faith is not a justiciable issue in a court of law for the necessity of making the order, inasmuch as the ground or grounds on which the order of detention was made is a matter for the subjective satisfaction of the Government or of the detaining authority; (b) that there is nothing in the Act to prevent particulars of the grounds being furnished to the detenu within a reasonable time so that he may have the earliest opportunity of making a representation against the detention order what is reasonable time being dependent on the facts of each case; (c) that failure to furnish grounds with the speedy addition of such particulars as would enable the detenu to make a representation at the earliest opportu nity against the detention order can be considered by a court of law as an invasion of a fundamental right or safe guard guaranteed by the Constitution, viz. being given the earliest opportunity to make a representation; and (d) that no new grounds could be supplied to strengthen or fortify the original order of detention.
Where the petitioners against whom detention orders were made were given only vague grounds and there was inex cusable delay of nearly 4 months in acquainting them of the particulars, held that their detention was illegal and they should be released.


judgement:
Appeal No. 135 of 1951.
Appeal by Special Leave granted by the Supreme Court of India by its Order dated the 21st of May, 1951, from the Judgment and Order dated the 19th February, 1951, of the Labour Appellate Tribunal of India, Allahabad in Appeal No. 136 of 1950.
C.K. Daphtary, Solicitor General of India (J. B. Dadachanji, Rajinder Narain and Devinder Swarup, with him) for the appellant.
S.C. Isaacs (0. P. Lal, with him) for the res.
pondent.
M.C. Setalvad, Attorney General for India, (Rajin der Narain and Devinder Swarup, with him) for the Intervener (All India Organisation of Industrial Employers).
S.C. Isaacs (Mohan Lal Saxena and C. P. Lal, with him) for the Intervener (State of U.P.).
November 19.
The Judgment of the Court as delivered by BHAGWATI J.
This appeal with special leave is directed against the judgment and order of the Labour Appellate Tribunal of India in a dispute regarding the workers ' claim for bonus.
During the year 1948 the appellant made a profit of Rs. 11,97,648 11 9.
It paid 24 3 per cent.
dividend on ordinary shares, being the maximum that could be paid under the Public Companies (Limitation of Dividend) Ordinance of 1948 and also paid to the workers their full share of bonus at annas 4 in a rupee of their basic earnings.
During the year 1949 the selling rates for cloth and yarn were controlled by the Government and were approximately 4 per cent.
below those obtained in 1948.
The basic wages were increased from the 1st December, 1948, by order of the Government of Uttar Pradesh and the total wages paid were therefore higher than those in the previous year.
There 994 was moreover indiscipline amongst the workers and production suffered.
There was a strike in the month of October and the mills were closed for nearly a month.
Further the management were unable to secure cotton which resulted in the curtailment of the working hours.
As a result of all these circumstances the appellant suffered a trading loss of Rs. 5,02,563 1 10.
A sum of Rs. 2,50,000 being the excess reserve for taxation was written back and a sum of Rs. 10,01,871 13 5 being the amount of reserve transferred from the investment account was also brought in.
An aggregate sum of Rs. 12,51,871 13 5 was thus brought into the balance sheet by these two transfers.
The trading loss was deducted from this amount leaving a credit balance of Rs. 7,49,308 11 7 and that amount was shown as the profit for the year 1949 in the balance sheet for that year.
The balance which had been brought forward from the previous year was added thereto and a dividend of 243/4 per cent.
was paid to the ordinary shareholders.
The appellant also paid ex gratia to the workmen bonus at the rate of annas 2 per rupee of their basic earnings making it clear by their notification dated the 7th April, 1950, that the directors had sanctioned the payment at that rate in spite of the appellant having suffered a trading loss for the year, that it was being paid entirely at the discretion of the appellant and was not related to or connected with any contract of employment of any worker.
On the 4th May, 1950, the Secretary of the respondent Union petitioned to the Provincial Conciliation Officer (Textile) that there was more production in 1949 than in 1948, that there was no reason to hold that the profit in 1949 was less than in the previous year and that the rate of bonus was wrongly reduced and asked that bonus for 1949 should also be paid at the rate of annas 4 per rupee.
The industrial dispute which thus arose was referred for enquiry and recording of an award to the Regional Conciliation Board (Textile), Kanpur.
The Conciliation Board by a majority decision repelled the contention of the appellant and awarded the payment of bonus at annas 4 per rupee.
On an appeal taken by the appellant to the 995 Industrial Court (Textiles and Hosiery), Kanpur, the Industrial Court accepted the contention of the appellant, allowed the appeal and set aside the award.
The respondent thereupon appealed to the Labour Appellate Tribunal which substantially agreed with the Industrial Court on questions of fact as well as the general position in law but imported considerations of social justice and treating this as a special case " where social justice would demand that labour should have bonus for the year where for that very year capital had not only a reasonable return but much in excess of that ", allowed the appeal and directed the appellant to pay to the workmen bonus at the rate of annas 4 per rupee within six weeks of their decision.
The appellant filed this appeal against that decision after obtaining special leave from this Court.
Both the Industrial Court as well as the Labour Appellate Tribunal found as a fact that there was a trading loss of Rs. 5,02,563 1 10 during the year 1949 and also that the dividend of 243/4 per cent.
to the ordinary shareholders was distributed after transferring the aggregate sum of Rs. 12,51,871 13 5 from the reserves.
The question which therefore arises for our consideration is mainly whether the workers are entitled to the payment of a bonus in spite of the employer having worked at a loss during the year and incidentally whether the workers have any right, title or interest in the reserves and the undistributed profits of the previous years.
The primary meaning of the word " bonus " according to the definition given in the New English Dictionary is: " A boon or gift over and above what is nominally due as remuneration to the receiver and which is therefore something wholly to the good ".
This definition was adopted by Stirling J. in In re Eddystone Marine Insurance Co. (1).
Webster 's International Dictionary defines bonus as "something given in addition to what is ordinarily received by or strictly due to the recipient ".
The Oxford Concise Dictionary defines it as " something to the good, into the bargain (and as an example) gratuity to workmen beyond their wages".
(1) L. R. (I894) W. N. 30.
996 Corpus Juris Secundum, Volume XI, at page 515 ascribes the following meanings to the word bonus: " An allowance in addition to what is usual current or stipulated ; a sum given or paid beyond what is legally required to be paid to the recipient; something given in addition to what is ordinarily received by or strictly due to the recipient" and adds: It has been said to carry the idea of something uncertain and indefinite, something which may or may not be paid depending on varying circumstances and under particular conditions has been said to imply a benefit accruing to him who offers it and an inducement to the offeree.
" This imports the conception of a boon, a gift or a gratuity otherwise described as an ex gratia payment.
The word 'bonus ' has however acquired a secondary meaning in the sphere of industrial relations.
It is classified amongst the methods of wage payment.
It has been used especially in the United States of America to designate an award in addition to the contractual wage.
It is usually intended as a stimulus to extra effort but sometimes represents the desire of the employer to share with his workers the fruits of their common enterprise.
(Vide Encyclopaedia Britannica, Volume III, page 856).
The Pocket Part of the Corpus Juris Secundum, Volume XI, under the heading "As Compensation for Services" quotes the following passage from Attorney General vs City of Woburn(1) : "The word 'bonus ' is commonly used to denote an increase in salary or wages in contracts of employment.
The offer of a bonus is the means frequently adopted to secure continuous service from an employee to enhance his efficiency and to augment his loyalty to his employer and the employee 's acceptance of the offer by performing the things called for by the offer binds employer to pay the bonus so called.
" It also gives another meaning of the word bonus ', viz., "increased compensation for services already (1) 997 rendered gratuitously or for a prescribed compensation where there is neither express or implied understanding that additional compensation may be granted.
" This imports the conception that even though the payment be not strictly due to the recipient nor legally enforceable by him, a claim to the same may be laid by the employee under certain conditions and if such claim is entertained either by an agreement with the employer or by adjudication before a properly constituted Tribunal as on an industrial dispute arising, the same would ripen into a legally enforceable claim.
This position was recognised in Sutton vs Attorney General (1), where the Earl of Birkenhead observed "The term 'bonus ' may of course be properly used to describe payments made of grace and not as of right.
But it nevertheless may also include, as here, payments made because legally due but which the parties contemplate will not continue indefinitely", and in National Association of Local Government Officers vs Bolton Corporation(2) "This payment, if made, cannot properly in my opinion be regarded as a mere gratuity.
Though there is an element of bounty in it the bounty, if granted, is given for good reasons of national policy. .
I do not see why this does not fall within the definition of trade dispute just as much as a dispute as to the rate of wages or salary.
" To a similar effect are the observations in Kenicott vs Supervisors of Wayne County (1): "But second, the meaning of the word 'bonus ' is not given to it by the objection.
It is thus defined by Webster. 'A premium given for a loan or a charter or other privilege granted to a company; as, the bank paid a bonus for its charter; a sum paid in addition to a stated compensation '.
It is not a gift or gratuity, but a sum paid for services, or upon a consideration in addition to or in excess of that which would ordinarily be given", (1) , 297, (3) ; (2) , I87.
127 998 and also in Great Western Garment Co. Ltd. vs Minister of National Revenue (1): "A bonus may be a mere gift or gratuity as a gesture of goodwill and not enforceable, or it may be something which an employee is entitled to on the happening of a condition precedent and is enforceable when the condition is fulfilled.
But in both cases it is something in addition to or in excess of that which is ordinarily received.
" The Textile Labour Inquiry Committee defined 'bonus ' as follows : "The term bonus is applied to a cash payment made in addition to wages.
It generally represents the cash incentive given conditionally on certain standards of attendance and efficiency being attained.
" There are however two conditions which have to be satisfied before a demand for bonus can be justified and they are, (1) when wages fall short of the living standard and (2) the industry makes huge profits part of which are due to the contribution which the workmen make in increasing production.
The demand for bonus becomes an industrial claim when either or both these conditions are satisfied.
The principles for the grant of bonus were discussed and a formula was evolved by the Full Bench of the Labour Appellate Tribunal in Millowners ' Association, Bombay vs Rashtreeya Mill Mazdoor Sangh, Bombay (2) "As both labour and capital contribute to the earnings of the industrial concern, it is fair that labour should derive some benefit, if there is a surplus after meeting prior or necessary charges" and the following were prescribed as the first charges on gross profits, viz., (1) Provision for depreciation, (2) Reserves for rehabilitation, (3) A return at 6 per cent.
on the paid up capital.
(4) A return on the working capital at a lesser rate than the return on paid up capital.
The surplus that remained after meeting the aforesaid deductions would be available for distribution as bonus.
(1) , 233.
(2) 999 It is therefore clear that the claim for bonus can be made by the employees only if as a result of the joint contribution of capital and labour the industrial concern has earned profits.
If in any particular year the working of the industrial concern has resulted in loss there is no basis nor justification for a demand for bonus.
Bonus is not a deferred wage.
Because if it were so it would necessarily rank for precedence before dividends ' The dividends can only be paid out of profits and unless and until profits are made no occasion or question can also arise for distribution of any sum as bonus amongst the employees.
If the industrial concern has resulted in a trading loss, there would be no profits of the particular year available for distribution of dividends, much less could the employees claim the distribution of bonus during that year.
This has been clearly recognised even in the various decisions of the Labour Appellate Tribunal, e.g., Nizam Sugar Factory Ltd., Hyderabad vs Their Workmen(1), Textile Mills, Madhya Pradesh vs Their Workmen (2) and Famous Cine Laboratory vs Their Workmen (3).
This was also the basis of the demand of the respondent in the case before us, its case being that the appellant had reaped substantial profits during the year 1949.
This case was negatived by the Industrial Court as well as the Labour Appellate Tribunal, both of whom held that the working of the appellant during the year 1949 had resulted in a loss.
Whereas the Industrial Court declined to grant the respondent any relief because the working of the appellant during the year had resulted in a loss, the Labour Appellate Tribunal made a special case for the respondent in spite of its concurrence with that finding of the Industrial Court.
It is significant to observe that this principle was accepted by the Labour Appellate Tribunal itself.
"As at present advised a claim for bonus which had been rested on profits earned should ordinarily be determined on the basis of the profits earned in the year under claim and that the scale of bonus should be determined on the quantum of profits earned in the (1) (1952) I L.L.J. 386.
(2) (3) (1953) I L.L.J. 466.
1000 year.
So, it would follow that if there is trading loss in the year under claim, bonus should not ordinarily be awarded.
It however observed: " But, in our opinion, that should not be the universal rule.
Considerations of social justice cannot be disregarded altogether, in relations between capital and labour.
There may be special cases, and we consider the case before us to be one, where social justice would demand that labour should have bonus for the year where for that very year capital had not only a. reasonable return but much in excess of that.
" The Labour Appellate Tribunal did not accept the contention of the respondent that bonus should be linked to dividends nor did it rest its decision on the respondent having a right, title and interest in the reserves and the undistributed profits of the appellant.
Linking of bonus to dividend would obviously create difficulties.
Because if that theory was accepted a company would not declare any dividends but accumulate the profits, build up reserves and distribute those profits in the shape of bonus shares or reduce the capital in which event the workers would not be entitled to claim anything as and by way of bonus.
The workers not being members of the company would also not have any right, title and interest in the reserves or the undistributed profits which would form part of the assets of the company.
Even on a winding up of a company the property of the company would be applied in satisfaction of its liabilities pari passu and, unless the articles of association of the company otherwise provided, in distribution amongst the members according to their rights and interest in the company.
The employees would in no event be entitled to any share or interest in the assets and the capital of the company.
A transfer of moneys from these reserves or the undistributed profits would therefore not enure for the benefit of the workers.
The shareholders only would be entitled to such benefit and the mere fact that dividends were declared and paid to the shareholders out of such reserves and undistributed profits would 1001 not entitle the workers to demand bonus when in fact the working of the industrial concern during the particular year had showed a loss.
It has also got to be remembered that the labour force employed in an industrial concern is a fluctuating body and it cannot be predicated of the labour force in a particular year that it represents the past and the present workers, so that it can claim to demand bonus out of the reserves or undistributed profits of the Previous years.
On the accounts of each year being made up and the profits of the industrial concern being ascertained the workers during the particular year have their demand for bonus fully satisfied out of the surplus profits and the balance of profits is allocated and carried over in the accounts.
No further claimed payment of bonus out of those reserves or undistributed profits can therefore survive.
To admit the claim for bonus out of the reserves transferred to the profit and loss account would tantamount to allowing a second bonus on the same profits in respect of which the workers had already received their full bonus in the previous year.
The labour force which earns the profits of a particular year by collaborating with the employers is distinct from the one which contributed to the profits of the previous years and there is no continuity between the labour forces which are employed in the industrial concern during the several years.
The ratio which applies in the case of the shareholders who acquire the right, title and interest of their predecessorsin interest does not apply to the labour force and the fact that the shareholders get a dividend by transfer of funds from the reserves and undistributed profits of the previous years would not entitle the workers to demand bonus out of those funds if the working of the industrial concern during the particular year has resulted in a trading loss.
The considerations of social justice imported by the Labour Appellate Tribunal in arriving at the decision in favour of the respondent were not only irrelevant but untenable.
Social justice is a very vague and indeterminate expression and no clear cut definition can be laid down which will cover all the situations.
1002 Mr. Isaacs, the learned counsel for the respondent,.
attempted to give a definition in the following terms : "social justice connotes the balance of adjustments of the various interests concerned in the social and economic structure of the State, in order to promote harmony upon an ethical and economic basis" and he stated that there were three parties concerned here, viz., the employers, the labour and the State itself, and the conception of social justice had to be worked out in this context.
Without embarking upon a discussion as to the exact connotation of the expression "social justice" we may only observe that the concept of social justice does not emanate from the fanciful notions of any particular adjudicator but must be founded on a more solid foundation.
Indeed the Full Bench of the Labour Appellate Tribunal evolved the abovequoted formula with a view to dispensing social justice between the various parties concerned.
It adopted the following method of approach at page 1258 of that judgment : " Our approach to this problem is motivated by the requirement that we should ensure and achieve industrial peace which is essential for the development and expansion of industry.
This can be achieved by having a contented labour force on the one hand, and on the other hand an investing public who would be attracted to the industry by a steady and progressive return on capital which the, industry may be able to offer.
" This formula was reiterated in Textile Mills, M. P. Their Workmen(1), and Famous Cine Laboratory vs ,Their Workmen( 2 ), and in the latter case it deprecated the idea of adjudicators importing considerations of social justice which were not comprised in that formula : " And what is social justice ? Social 'justice is not the fancy of any individual adjudicator; if it were so then ideas of social justice might vary from adjudicator to adjudicator over all parts of India.
In our Full Bench decision (See 1950,2 L.L.J., p. 1247), we care.
fully considered the question of social justice in relation (1) (2) 1003 to bonus, and there we equated the rights and liabilities of employers and workmen with a view to achieving a just formula for the computation of bonus.
That Full Bench decision stands, and this tribunal and all other tribunals are bound by it.
" Without committing ourselves to the acceptance of the above formula in its entirety we may point out that the Labour Appellate Tribunal did not apply its own formula to the facts of the present case.
It is also significant to note that even while importing considerations of social justice the Labour Appellate Tribunal was oblivious of the fact that it was by their own acts of indiscipline and strike that the workers of the appellant company themselves contributed, to the trading losses incurred by the appellant and it hardly lay in their mouth then to contend that they were none the less entitled to a payment of bonus commensurate with the dividend paid to the shareholders out of the undistributed profits of the previous years.
The Labour Appellate Tribunal also overlooked the fact that but for the Public Companies (Limitation of Dividend) Ordinance of 1948 the whole of the profits of 1948 could have been distributed after paying the workers bonus in that year of four annas in the rupee.
We may before concluding refer to an argument which was addressed to us by Mr. Isaacs, the learned counsel for the respondent, that this Court under article 136 should not interfere with the decisions of the tribunals set up by the .
This contention can be shortly answered by referring to our decision in Bharat Bank Ltd., Delhi vs Employees of the Bharat Bank Ltd., Delhi(1), where we held that the Industrial Tribunals were tribunals within the meaning of article 136 and further that article 136 has vested in this, Court exceptional and overriding power to interfere where it reaches the conclusion that a person has been dealt with arbitrarily or that a Court or tribunal within the territory of India has not given a fair deal to a litigant.
(Vide (1) (1950] S.C.R. 459.
1004 Dhakeswari Cotton Mills Ltd. vs Commissioner of Income tax, West Bengal(1).
The result therefore is that the decision of the Labour Appellate Tribunal appealed against must be reversed and that of the Industrial Court (Textiles and Hosiery), Kanpur, restored.
The appeal will accordingly be allowed with costs.
Appeal allowed.

summary:
The term bonus is applied to a cash payment made in addition to wages.
it generally represents the cash incentive given conditionally on certain standards of attendance and efficiency being attained.
992 There are two conditions, which have to be satisfied before a demand for bonus can be justified and they are, (1) when wages fall short of the living standard and (2) the industry makes huge profits part of which are due to the contribution which the workmen make in increasing production.
The demand for bonus becomes an industrial claim when either or both these conditions are satisfied.
The formula for the grant of bonus is as follows: As both labour and capital contribute to the earnings of the industrial concern, it is fair that labour should derive some benefit, if there is a surplus after meeting prior or necessary charges, The first charges on gross profits are (1) provision for depreciation.
(2) reserves for rehabilitation, (3) a return at 6 per cent.
on the paid up capital and (4) a return on the working capital at a lesser rate than the return on paid up capital.
The surplus that remained after meeting the aforesaid deductions would be available for distribution as bonus.
The claim for bonus can be made by the employees only if as a result of the joint contribution of capital and labour the industrial concern has earned profits.
If in any particular year the working of the industrial concern has resulted in loss there is no basis nor justification for a demand for bonus.
Bonus is not a deferred wage.
If it were so, it would necessarily rank for precedence before dividends.
The dividends can only be paid out of profits and unless and until profits are made no occasion or question can arise for distribution of any sum as bonus amongst the employees.
Social justice is a very vague and indeterminate expression and no clear cut definition can be laid down which will cover all the situations.
The concept of social justice does not emanate from the fanciful notions of any particular adjudicator but must be founded on a more solid foundation.
Industrial Tribunals are Tribunals within the meaning of article 136 and article 136 has vested in the Supreme Court exceptional and overriding power to interfere where it reaches the conclusion that a person has been dealt with arbitrarily or that a Court or Tribunal within the territory of India has not given a fair deal to a litigant.
In re Eddystone Marine Insurance Co. , Sutton vs Attorney General ([19231 , National Association of Local Government Officers vs Bolton Corporation , Kenicott vs Supervisor of Wayne County ([1873] ; , Great 'Western Garment Co. Ltd. vs Minister of National Revenue ([1948] 1 D.L.R. 225), Millowners ' Association, Bombay vs Bashtreya Mills Mazdoor Sangh, Bombay '[1950] 2 L.L.J. 1247), Nizam Sugar Factory Ltd., Hyderabad vs Their Workmen ([1952], , Textile Mills, Madhya Pradesh vs Their Workmen ([1952] , Famous Cine Laboratory vs Their Workmen ([1953] and Bharat Bank Ltd., Delhi 993 vs Employees of the Bharat Bank Ltd., Delhi, ([1960] S.C.R. 469), referred to.


judgement:
Criminal Appeal No. 135 of 1968.
Appeal by special leave from the judgment and order dated May 1, 1968 of the Madhya Praesh High Court, Gwalior Bench .in
Criminal Appeal No. 143 of 1966.
R. L. Kohli and J. C. Talwar, for the appellant.
I. N. Shroff, for the respondent.
The Judgment of the Court was delivered by Sikri, J.
This appeal by special leave is directed a aginst the judgment of the High Court of Madhya Pradesh, Gwalior Bench, allowing the appeal of the State and convicting the appellant for having committed an offence punishable under section 435, Indian Penal Code, and sentencing him to undergo imprisonment for one year.
The only point involved in the present appeal is whether the appellant was a person of unsound mind within section 84 of the Indian Penal Code at the time of the incident.
The Magistrate held that he was not liable to punishment as he was insane at that time and did not know that he was doing anything wrong or anything contrary to law.
The High Court, on the other hand, came to the conclusion that the case of the appellant did not 'fall within the exception created by section 84, I.P.C.
It is now well settled that the crucial point of time at which unsoundness of mind should be established is the time when the .crime is actually committed and the burden of proving this lies of on the accused.
(See State of Madhya Pradesh vs Ahmadullah) (1).
In D. C. Thakker vs State of Gujarat(2) it was laid down that "there is a rebuttable presu mption that the accused was not insane, when he committed the crime, in the sense laid down by section 84 of the Indian Penal Code : the accused may rebut it by, placing before the court all the relevant evidence al, documentary or circumstantial, but the burden of proof upon him is no higher than that which rests upon a party to civil pro cedings.
" It was further observed : "The crucial point of time for ascertaining the state of mind of the accused is the time when the offence was circumstances which preceded, attended and followed the mind as to be entitled to the benefit of section 84 of the Indian Penal Code can only be established from the circumstances which preceded, attended and followed the crime.
The learned counsel contends that if regard is had to the circumstances which preceded, attended and followed the crime it would be clear that the accused is entitled to the benefit of section 84 of the Indian Penal Code.
(1) [1961] 3S.C.R.583.
(2) [1964] 7S.C.R.361.
253 The prosecution case is that on January 22, 1965, the appel lant set fire to the grass lying in the khalyan of Nemichand at the time of the setting of the sun.
He was caught at the spot while setting fire.
On being asked why he did it the accused said; "I burnt it and do whatever you want." The accused was arrested on January 23, 1965, and he remained in police, custody till February 2, 1965, when it was found that the accused needed medical examination, and accordingly the District Magistrate ordered that he be medically examined.
No explanation has been given why he was kept in police custody all that time.
There is no evidence either to indicate as to his condition from the time of his arrest to the time when his case was referred for medical examination.
These facts were within the knowledge of the police and we should have expected that the prosecution would lead evidence regarding his condition during this time.
Further, the police made it impossible for the appellant to prove his mental condition at the time of the incident by keeping him in their custody from January 23 to February 2, 1965, not having him examined and not sending him to judicial custody earlier where he would have been examined by the jail doctor.
On February 20, 1965, V. section Vaidya, Assistant Surgeon,.
Civil Hospital, Vidisha, reported to the Jailor, Sub Jail, Vidisha, as follows : "Subject, In Ref.
to your letter No. 295 dated 8 2 1965.
Sir, Ratanlal Prisoner was kept under observation as indoor patient during this time.
He was keeping silent, he never used to reply any question so in my opinion he should be refd.
to some specialist for further investigation and needful.
" On February 22, 1965, Y. D. Kamran, Civil Surgeon, Vidisha,.
reported as follows: "Shri Ratanlal, undertrial, was examined by me.
He does not appear to be deaf or dumb, but is mentally retarded.
He should be referred to Stiperintendent, Mental Hospital, Gwalior, for expert opinion." On March 29, 1965, Dr. B. Shah.
Psychiatrist and Superintendent,Mental Hospital, Gwalior, reported as follows: "This is to certify that Shri Ratanlal s/o Kishanlal who has been kept under observation in this hospital from 18 3 1965 to 29 3 1965 is a person of unsound mind, in terms of Indian Lunancy Act; 1912.
He is not dangerous, 254 and/or violents by reason of Lunancy and thus unfit to be at large.
The report is based on the following facts observed here : (1) Remains depressed.
(2) Does not talk.
(3) He is a case of Maniac depressive.
(4) Psychosis and needs treatment.
" On April 28, 1965, another report was given that he was still a person of unsound mind in terms of Indian Lunancy Act, 1912, but was better though still confused, and further that treatment was being continued and it may take 4 to 6 weeks more for recovery.
The defence also led evidence as to his condition before the incident in question.
Shyamlal, D. W. 1, son in law of the appellant stated that "the accused was not feeling well for 2 3 years.
He was in such a condition that if he is sitting will remain sitting.
If he is to go then he will go and if he wishes to fall in the river then he will fall.
Such was the conditions of his mind that he used to set fire in his own clothes and house.
" He further stated that on the day of the incident the appellant did not allow anybody ,to enter his house and had put a lock on the house and his children took their food outside, and the accused did not talk to anybody.
He further stated that "prior to this incident the accused was being taken to Bhopal after tying him for the treatment of mind.
He was also taken to Bhavera but the accused did not improve.
" In ,cross examination it was brought out that "prior to the setting of fire the accused was neither got admitted in the government hospital nor any, report was lodged in the police station." No cross examination was directed to ascertain the nature of his illness or to bring out that he was otherwise sane.
Another witness, Than Singh, D.W. 2, (the appellant is his maternal uncle) stated that the appellant "used to do whatever he thought.
He used to run away wherever he liked.
He used to jump in the river also.
He used to enter the house of anybody.
He used to lock his house.
His ' children used to lie hungry outside.
He used to set fire in his clothes also.
On the day of occurrence the condition of the accused was worst.
He did not speak to anybody on that day.
" The witness, however, admitted that the accused had not been taken to Government hospital.
The Trial Court also mentioned that Moolchand, P.W. 3, Madora, P.W. 4, and Dhanna, P.W. 6. admitted that the appellant remained in the khalyan throughout the period that the grass was burning till the chowkidar took him to thana and did not utter a word and did not try to run away.
255 The Trial Court, relying on the evidence of Shyamlal, D.W. 1, Than Singh, D.W. 2, and the behaviour of the accused on that day came to the conclusion that the accused was insane.
He also relied on the certificates issued by the doctors, mentioned above .He further found support in the, absence of motive for the crime.
He also relied on the fact that the appellant 's khalayan adjoined the khalayan which was set on fire by him and if the appellant had been sane he would not have taken the risk of having his own khalayan burnt, which was most likely.
The High Court, with respect, erred in differing from the Trial Court.
The High Court observed that the appellant had not examined in defence any expert in mental diseases to substantiate his plea of legal insanity.
It is expecting rather a great deal from a poor villager that he should produce experts in mental diseases, specially in view of the certificates issued by the Medical authorities after he was arrested.
The High Court further erred in holding that the medical reports were of no evidential value.
it is true that the reports speak of the mental state of the accused at the time when the reports were issued but the High Court failed to note that the appellant was in police custody from January 23, 1965, and the police could have produced evidence to show that he was absolutely sane till the day when they sent him for medical examination.
, The High Court thought that the evidence of the two defence witnesses only suggested an irrational behaviour on the part of the accused.
The High Court failed to note that, according to D.W. 2, the appellant used to set fire to his own clothes and house, and this could hardly be called irrational it is more like verging on insanity.
The High Court also felt it rather unsafe to rely on the testimony of the two defence witnesses because such evidence could always be procured.
It was also impressed by the fact that there was no independent witness forthcoming nor was there any evidence showing that the accused was taken to Bhopal or Gwalior for treatment.
The High Court observed: "Apart from this, these witnesses merely suggest that there was irrational behaviour on the part of the accused.
But it has not been proved that he entertained any homicidal tendencies.
The evidence adduced is merely of conduct not confirming to the accepted pattern of human behaviour.
Such evidence is inadequate to establish that there was such an impairment of cognitive faculties of the accused as to render him legally insane.
" 256 With respect, it is not necessary that every insane person should have homicidal tendencies.
In this case he is not charged for an offence involving homicide but arson.
Although the High Court discarded the medical evidence, it took account of its own observations, when it stated "We had an opportunity to observe the accused, who was produced before us by the learned counsel, and he appeared to be a man of normal understanding.
We also find that in answering questions which were put to him by the court under section 342, Cr. P.C., the accused showed intelligence and care." With great respect, these are irrelevant considerations.
The appeal was heard on April 25, 1968, and the incident occurred on January 22, 1965.
A person can surely improve within three years.
We are inclined to agree with the conclusion arrived at by the learned Magistrate.
We hold that the appellant has dis charged the burden.
There is no reason why the evidence of Shyam Lal, D.W. 1, and Than Singh, D.W. 2, should not be believed.
It is true that they are relations of the appellant, but it is the relations who are likely to remain in intimate contact.
The behaviour of the appellant on the day of occurrence, failure of the police to lead evidence as to his condition when the appellant was in custody, and the medical evidence indicate that the appellant was insane within the meaning ' of section 84, I.P.C. We accordingly allow the appeal and acquit the appellant of the offence under section 435, I.P.C., because at the time of the incident he was a person of unsound mind within the meaning of section 84 of the Indian Penal Code.
His bail bond shall stand cancelled.
G.C. Appeal allowed.

summary:
The appellant set fire to grass lying near a khalyan.
He was arrested next day From February 23, 1965 when he was arrested to February 2, 1965, he was in police custody and thereafter sent to jail.
The Assistant Surgeon, the Civil Surgeon, and the Psychiatrist of the mental hospital to which he was referred reported that he was depressed and silent.
According to the Psychiatrist he was a lunatic in terms of the Indian Lunacy Act, 1912.
At is trial under section 435 of the Indian Penal Code two of his relatives appeared as defence witnesses and testified that he was mentally unsound.
The trial Magistrate acquitted the accused on the finding that the appellant fell within the general exception in section 84 of the Indian Penal Code.
The High Court, in appeal filed by the State, reversed the judgment.
In appeal by special leave, HELD : It is now well settled that the crucial point of time at which unsoundness of mind should be established is the time when the crime was committed.
The burden of proving this lies on the accused though the burden is no higher than that which rests upon a party to civil preceedings.
[252 E] State of Madya Pradesh vs Ahmadulla, ; and D. C. Thakker vs State of Gujarat, ; , referred to.
In the present case the appellant had discharged the burden.
There was no reason why the defence witnesses should not be believed.
They were no doubt relations of the appellant but it is the relations who are likely to remain in intimate contact.
The behaviour of the appellant on the day of occurrence, failure of the police to lead evidence as to his condition when the appellant was in custody, and the medical evidence indicated that the appellant was insane within the meaning of section 84 I.P.C.[256 D] The High Court was wrong in drawing an adverse inference against the accused on the ground that he had not produced any expert medical evidence in defence.
This could not be expected from a poor villager specially in view of the certificates issued by the medical authorities after he was arrested.
[2 55 C] The High Court 's observation that the appellant appeared to be of normal understanding and the fact that he had given intelligent answers.
to questions under section 342 Cr.
P.C., were irrelevant considerations in view of the time that had elapsed since the alleged commission of the offence.
[256 B C] 252


judgement:
minal Appeal No. 834 of 1965.
Appeal by special leave from the judgment and order dated October 19, 24, 1964 of the Bombay High Court in Criminal Appeal No. 1330 of 1964.
A. section R. Chari, R. Nagaratnam, Vineet Kumar and Shyamala Pappu, for the appellant.
Debabrata Mukherjee, H. R. Khanna and section P. Nayar, for the respondent.
The Judgment of the Court was delivered by Sikri, J.
This is an appeal by special leave against the judgment and order of the High Court of Judicature at Bombay dismissing the appeal of the appellant against the conviction recorded by the Special Judge for Greater Bombay.
The appellant was convicted by the Special Judge under section 5(2), read with section 5 1 (1 ) (a) X (d) and section 5 (3 ), of the Prevention of Corruption Act, 1947 (11 of 1947) hereinafter referred to as the Act and sentenced to suffer rigorous imprisonment for three years and to pay a fine of Rs. 1,25,000/ , in default of payment of fine to suffer further rigorous imprisonment for one year.
The Special Judge further directed that the amount of fine be recovered from the properties seized.
The following charge was framed against the appellant: " That you, while functioning as (a) Income tax Officer, from about 1st April 1947 to November 1954 at Jalgaon Dhulia, Godhra and Mahansa (b) as Inspector of Income tax from November 1954 to January 1958 at Surat and Broach, (c) as Incometax Officer from January 1958 to the end of November 1961 at Bhavnagar, Dhulia, Amraoti and Ratnagiri, habitually accepted or obtained and habitually agreed to accept or attempted to obtain gratification other than legal remuneration and obtained for yourself pecuniary advantage by corrupt and illegal means or by otherwise abusing your position as a public servant, with the result that, during the said period you came in possession of assets of the value of about Rs. 2,01,080/ which were disproportionate to your known sources of income for which you could not satisfactorily account and you thereby committed the offence of criminal misconduct punishable under subs.
(2) read with section (1) (a), (d) & (3) of section 5 of Act IT of 1947, the Prevention of Corruption Act, 1947, and within the cognizance of this Court.
" 238 The case of the prosecution before the Special Judge was that the appellant was habitually corrupt, and wherever he was posted he used to develop personal contacts with the assessees, whose cases were pending before him and in his talk with them he tried to impress upon them that they were likely to be heavily taxed; he used to create a favourable psychological background and taking advantage of the same tried to screw out money from them; if the assessee did not accept his proposal or proved to be smarter, he used to harass him by various methods.
The prosecution sought to establish the charge against him under section 5(1)(a) of the Act by leading evidence of five instances: (i) He obtained from the witness Gopaldas an amount of Rs. 3,000/ as a loan and subsequently converted it as his personal gratification for finalising income tax cases of his firm.
(ii) He demanded an illegal gratification ( Rs. 10,000/ from the witness Gopaldas to show him were pending before him.
(iii) He attempted to obtain bribe from P.W. 7 Motilal Bansgopal, whose income tax proceedings were pending before him.
(iv) He atempted to obtain bribe from the assessee P.W. 9, Somchand Khimji, whose income tax proceedings were pending before him.
(v) He also made a demand of bribe of Rs. 400/ to Rs. 500/ from P.W. 93 Gulabdas Kisondas Bhatia of Dharanyaon.
Before the Special Judge the prosecution also relied on the presumption arising under section 5(3) of the Act as the accused was found to be in possession of assets worth about Rs. 2,01,080 which were disproportionate to his known sources of income.
The learned Special Judge, in a very detailed and lengthy judgment, held that it was not proved that the appellant had obtained Rs. 3000/ from Gopaldas representing that he wanted the amount as a hand loan for taking delivery of the car.
He further held that it was not proved that the appellant demanded bribe of Rs. 10,000/ from him as a motive for doing him favour in the disposal of his wealth tax cases.
Regarding P.W. 7.
Motilat Bansgopal.
the Special Judge held that the accused had entertained a corrupt motive in asking the assessee P.W. 7to see him at his residence, and this circumstance could be considered against him in considering the charge for the offence of 239 habitually being corrupt.
Regarding Somchand, P.W. 9, the Special Judge held that the appellant had made an implied demand of bribe and had a guilty conscience.
Regarding Gulabdas, he held that the allegation regarding demand of bribe from P.W. 93, Gulabdas, had not been proved.
He summarised.
the findings thus "Thus out of specific instances the prosecution has established only two and it has been proved that the accused had made an implied demand of bribe from P.W. 9, Somchand and he had also asked P.W. 7, Motilal to come to his residence in connection with the delay in filing the return.
The second instance though does not establish any demand of bribe as such, it does prove the proclivity of the mind of the accused and a corrupt tendency and would support the prosecution version." He further held that "the two instances proved will not themselves be sufficient to prove habit of bribe taking and the question is whether considering all the matters before the court it can be held that the accused is guilty of criminal misconduct and if yes, of what category." He further held that the appellant could be convicted on the strength of presumption arising under section 5 (3).
The High Court repelled the contention of the appellant that no presumption arose under section 5 (3) of the Act because no specific instances had been held to be proved and, at any rate, they did not amount to an offence.
The High Court distinguished the cases of R. section Pandit vs State of Bihar,(1) and Surajpal Singh vs The State of Uttar Pradesh(2).
The High Court further observed that the trial Judge had accepted the evidence regarding two instances while it was prepared to accept the instance involving Gopaldas also.
The High Court generally agreed with the finding regarding disproportionate assets and disbelieved the explanation offered by the appellant.
Before we deal with the merits of the case, we shall taker up two preliminary points raised by the learned counsel for the appellant, Mr. Chari.
He urged that as sanction had not been given for prosecuting the appellant the whole trial was bad.
He said that the search of the appellant 's house took place on November 4, 1961, and on June 27, 1962, he was dismissed ' from service by the Commissioner of Income tax.
On July 30, 1962, charge sheet was filed in the court of Special Judge.
On (1) [1963] Suppl.
2 S.C.R. 652.
(2) ; 240 "September 21, 1962, the appellant submitted an appeal to the President of India and the President was pleased to, convert the order of dismissal into one of the removal.
The learned counsel contends that I pending the appeal the appellant should have been deemed to be in service and, therefore deemed to be in service on July 30, 1962.
A similar point was raised before the Special Judge and he repelled the contention in the following terms . "For requiring a sanction to be taken before taking cognizance of an offence against a person, he must be in actual employment of the State.
A mere right of appeal will not invest him with that status.
Moreover, a person may have right of appeal, but he may not exercise the same and may not file the appeal.
It is purely within his discretion and the act of taking cognizance which is the course of law would not be made dependent upon such arbitrary and discretionary alternatives held by a person.
" The Special Judge also referred to rule 23 of the Central Civil Services (Classification, Control and Appeal) Rules, 1957, and the explanation thereto in which it is stated : "In this rule the expression 'member of a Central Civil Service ' includes a person who has ceased to be a member of the service.
" This explanation was also relied on before us.
Regarding the explanation the learned Special Judge came to the conclusion that the explanation was restricted to that particular rule for giving the dismissed servant a right to prefer an appeal.
We agree with the conclusion of the learned Special Judge.
Section 6 of the Act reads as follows : "Previous sanction necessary for prosecution.
(1) No Court shall take cognizance of an offence punishable under section 161 or section 164 or section 165 of the Indian Penal Code (Act 45 of 1860), or under sub section (2) of section 5 this Act, alleged to have been committed by a public servant, except with the previous sanction, (a) in the case of a person who is employed in connection with the affairs of the Union and is not removable from his office save, by or with the sanction of the Central Government, of the Central Government.
241 (b) in the case of a person who is employed in connection with the affairs of a State and is not removable from the office save by or with the sanction of the State Government, of the State Government; (c) in the case of any other person, of the authority competent to remove him from his office.
(2) Where for any reason whatsoever any doubt arises whether the previous sanction as required under sub section (1) should be given by the Central or State Government or any other authority, such sanction shall be given by that Government or authority which would have been competent to remove the public ser vant from his office at the time when the offence was alleged to have been committed.
" It seems to us that the person must be employed in connection with the affairs of the Union in sub cl.
(a) and with the affairs of the State in sub cl.
(b) The case of the appellant would be covered in sub cl.
(a) because he had been employed in connection with the affairs of the Union.
But the sub section contemplates that the person must be employed in connection with the affairs of the Union and not that he was employed with the affairs of the Union.
The policy underlying section 6, and similar sections, is that there should not be unnecessary harassment of public servants.
But if a person ceases to be a public servant the question of harassment does not arise.
The fact that an appeal is pending does not make him A public servant.
The appellant ceased to be a public servant when the order of dismissal was passed.
There is no force in the contention of the learned counsel and the trial cannot be held to be bad for lack of sanction under section 6 of the Act.
The other preliminary point which the learned counsel raised was that the charge was defective.
We have already set out the charge.
It is true that there are no instances given in the charge.
But as the charge is of habitually accepting the.
bribe it is no,, necessary that the various instances should have been mentioned.
It was expressly so held by this Court in Biswabhusan Naik vs The State of Orissa(1).
This Court overruled a similar point in the following words: "But no particulars need be set out in the charge in such a case because the offence under section 5(1) (a) does not consist of individual acts of bribe as in section 161 of the Indian Penal Code but is of a general character.
Individual instances may be useful to prove (1) [1955]1 S.C.R.92.
2 807 Sup CI/71 242 the general averment in particular cases but it is by no means necessary because of the presumption which section 5(3) requires the Court to draw.
" This Court accordingly held in that case that there was no illegality in the charge.
We accordingly hold that the charge in this case was not illegal.
We may now deal with the merits of the case.
This is an appeal by special leave, and as there are concurrent findings of fact we do not ordinarily go into questions of fact.
But we allowed Mr. Chari to take us through the relevant evidence, both oral and documentary, in order to show whether the concurrent findings were vitiated in any respect.
He has not been able to point out any circumstances which may lead us to differ from the concur rent findings.
It is true that as far as the case of Gopaldas is concerned the High Court differed from the Special Judge and held that the allegations were proved.
The learned counsel has taken us in detail through the material relevant to this witness and we are inclined to agree with the conclusion arrived at by the High Court.
But apart from that the concurrent findings regarding P.W. 7, Motilal, and P.W. 9, Somchand, and the presumption arising under section 5(3) are sufficient to sustain the conviction recorded against the appellant.
The learned counsel urged before us that if the prosecution fails to establish any of the offences mentioned in section 5 (1) (a) to 5 (1) (d), the question of assets being found disproportionate to the known sources of the accused becomes irrelevant.
A number of cases were referred to us but we are unable to agree with this proposition because we are bound by the ruling to the ,contrary given by this Court.
In Biswabhusan Naik vs State of Orissa(1), after referring to section 5(1)(a) and section 5(3), Bose, J., speaking for the Court, observed : "Therefore, all that the prosecution has to do is to show that the accused, or some person on his behalf, is in possession of pecuniary resources or property disproportionate to his known sources of income and for which the accused cannot satisfactorily account.
Once that is established then the Court has to presume, unless the contrary is proved, that the accused is guilty of the new offence created by section 5, namely criminal misconduct in the discharge of his official duty." (1) [19551] 1 S.C.R. 92.
243 Then the Court proceeded to deal with the facts thus "Now the accused was found in possession of Rs. 3,148/ .
He accounted for Rs. 430/ of that sum by showing that it was paid to him at the, time as a trap.
He has been acquitted of that offence, so all he had to account for was the balance Rs. 2,698/ .
This is a large sum for a touring officer to carry with him in cash while on tour.
His explanation was not considered satisfactory and that is a question of fact with which we are not concerned in this Court.
Therefore, all that remains to be seen is whether this was disproportionate to his known sources of income.
" Then the Court referred to the findings regarding his total emoluments drawn and the small piece of land owned by him, and observed "Once the facts set out above were found to exist and the explanation of the accused rejected as unsatisfactory, section 5(3) was at once attracted and the Court was bound to presume (the word used in the section is 'shall ' and not 'may ') that the accused was guilty under section 5(2), especially as this part of the section goes on to say 'and his conviction 'therefor shall not be invalid by reason only that it is based solely on such presumption." These facts alone are enough to sustain the conviction and we need not consider the other matters.
" The conviction, therefore, of Biswabhushan Naik, in that case, solely proceeded on the presumption as in the earlier part of the judgment it was observed that he was separately charged and separately prosecuted under section 161 of the Indian Penal Code for three specific offences of bribe taking but was acquitted on all the counts and his conviction was only under section 5 (2) alone.
Similarly in C.S.D. Swamy vs The State, Swamy 's conviction was sustained only on the presumption.
The appellant, Swamy, in that case was put up on trial on charges under sections 5(1) (a) and 5 (1) (d) of the Act.
Payments of particular sums by way of bribe were not proved against him.
But the High Court, holding that the appellant 's bare statements from the dock un supported by any other acceptable evidence could not satisfactorily account for the large deposits standing to his credit in (1) ; 244 his bank accounts raised the presumption under section 5 (3) of the ,Act and held him guilty of criminal misconduct in the discharge of his official duty under section 5 (1) (d) of the Act.
It was contended before this Court that the charge relating to specific instances of bribery having failed the contrary presumption under section 5(3) of the Act should have been established.
This Court repelled the argument in the following words : "The finding of the High Court and the court below is that the prosecution had failed to adduce sufficient evidence to prove those particular facts and circumstances of criminal misconduct within the meaning of section 5 (1 ) (a) of the Act, but the failure to bring the charge home to the accused under section 5 (1 ) (a) does not necessarily lead to the legal effect contended for.
As soon as the requirements of sub section (3) of section 5 have been fulfilled, the Court will not only be justified in making, but is called upon to make the presumption that the accused person is guilty of criminal misconduct within the meaning of section 5 (1) (d).
If there is evidence forthcoming to satisfy the requirements of the earlier part of sub section
(3) of section 5, conviction for criminal misconduct can be had on the basis of the presumption which is a legal pre sumption to be drawn from the proof of ' facts in the earlier part of the sub section
(3) aforesaid.
That is what has been found by the courts below against the accused person.
Hence, the failure of the charge under cl.
(a) of sub section
(1) of section 5 does not necesarily mean the failure of the charge tinder section 5(1)(d).
" It will be noticed that while Bose, J., in Biswabhushan Naik vs State of Orissa(1), held that once the presumption applies the accused was guilty of the new offence created by section 5, namely.
criminal misconduct in the discharge of his official duties, without specifying any of the sub clauses,Sinha, J,, as he then was.
held that the offence under ' section 5 (1) (d) 'was made out.
It is not necessary to decide in this case which is the correct way of putting the matter because, whichever reasoning is adopted the case of the appellant fails.
The case of Surajpal Singh vs State of Uttar Pradesh(2) does not assist the appellant.
It is true that, as laid down by this Court, section 5(3) does not create a new offence.
But this does not mean that if the prosecution fails to prove the specific (1) ; (2) [1961] 2 S.C.R.971.
245 charges the presumption under section 5(3) cannot be applied.
in Surajpal 's case what, happened was that the only charge against Surajpal was of 'criminal misconduct under section 5(1)(c) of the Act.
But since he was acquitted of the charge it was held that he could not be convicted.
of criminal misconduct referred to in cls.
(a), (b) or (d) of section 5(1) of the Act for which he had not been charged.
R. section Pandit vs State of Bihar(1) also does not assist 'the appellant.
It is true that it was held in that case section 5(3) does not create a separate offence but lays down only a rule of evidence and marks a departure from the well established principle of criminal jurisprudence that onus is always on the prosecution to bring home the guilt to the accused.
But it does not follow from this that if the prosecution has failed to prove specific instances it cannot rely on the presumption.
The learned counsel contended that if this is the law, the prosecution need not allege any specific instance at all and could come to Court only alleging that the accused had assets disproportionate to his known sources of income.
This point does not arise in this case and is not likely to arise again because the Act has since been amended and the act of possessing pecuniary resources or property disproportionate to known sources of income, for which the public servant cannot satisfactorily account, has been made into a separate offence.
Therefore we need not consider this example given by the learned counsel.
Accordingly we hold that the, appellant in this case had pecuniary resources and property disproportionate to his known sources of income, and that both the High Court and the learned Special Judge rightly held that the presumption arose under section 5 (3).
We may mention that the learned counsel tried to show that the assets were not too disproportionate but nothing has been shown which would entitle us to set 'aside the concurrent findings on this aspect of the case.
The learned counsel then said that a fine of Rs. 1,25,000/ has been levied and the appellant has already undergone sen tence of about four months.
He said that the appellant is now on bail and it would be hard on him if we send him back to jail.
He further said that the investigation began somewhere in 1961, the trial began in 1963, and the expenses of the,trail and the printing of the records has cost the appellant a great deal, (1) [1963] Supp. 2 S.C.R. 652. 246 and further that the State has kept Rs. 1,25,000/ out of the seized amount for recovery of the fine.
The learned council for the respondent drew our attention to section 5(2) which provides that any public, servant who commits criminal miscounduct in the discharge of his duty shall be punishable with imprisonment which shall not be less than one year but which may extend to seven Years and shall also be liable to fine, provided that the court may, for any special reasons recorded in writing impose a sentence of imprisonment of less than one year.
It seems to us that in view of the facts mentioned by the learned counsel for the appellant it will meet the ends of justice if the sentence is reduced to one already undergone, maintaining the sentence of fine.
In the result the appeal is allowed to the extent that sentence of three year 's rigorous imprisonment is altered to imprisonment already undergone.
His bail bonds shall stand cancelled.
V.P.S. Sentence modified.

summary:
The appellant, who was an income tax Officer, was, dismissed from service and against the order of dismissal he filed an appeal to the President of India.
Meanwhile, he was charged under the Prevention of Corruption Act, 1947, with the offence of habitually accepting bribes.
Five instances were offered by the prosecution in evidence against him to prove the charge.
The trial court accepted the evidence regarding two instances, and convicted the appellant under section 5(2) read with sections 5(1)(d) and 5(3) of the Act drawing the presumption under section 5.(3) (before its amendment in 1964) against him on the ground that he was in possession of assets disproportionate to his known sources of income.
He was sentenced to rigorous imprisonment for three years and to pay a fine of Rs. 1,25,000/ , to be recovered from the properties siezed from him.
The High Court accepted the evidence regarding one more instance and confirmed the conviction and sentence.
In appeal to this Court, HELD : (1) The trial is not bad for lack of santcion under section 6 of the Act.
The appellant ceased to be a public servant when the order of dismissal was passed.
The fact that an appeal was pending would not make him a public servant.
Sanction is necessary only when the person is employed in connection with the affairs of the Union and not when he was employed.
[241 D F] (2)Since the charge was one of habitually accepting bribes it was not necessary that specific instances of taking bribe should be given in the charge.
[241 G] Biswabhusan Naik vs State of Orissa, ; , followed.
(3) The appellant had property disproportionate to his known sources of income and the presumption under section 5(3) of the Act was rightly drawn against him.
Failure to establish any of the offences in section 5(1) (a) to (d) is irrelevant for sustaining a conviction based on the presumption.
Biswabhusan Naik vs State of Orissa, ; and C. S.D. Swamy vs State, ; , followed.
Surajmal Singh vs State of Uttar Pradesh, [1961] 2 S.C.R. 971 and R. section Pandit vs State of Bihar, [1963] Supp.
2 S.C.R., 652, referred to and explained.
[245 C] (4) In view of the fact that the appellant had undergone the sentence for about four months and a large fine was imposed on him, the ends of justice would be met if the sentence is reduced to one already undergone while maintaining the sentence of fine.
[246 B C] 237