judgement:
Appeal No. 582 of 1969.
Appeal from the Judgment and Decree dated the 19th March, 1968 of the Bombay High Court at Nagpur in First Appeal No. 72 of 1959.
M. N. Phadke, R. A. Gupta and K. B. Rohatgi for the Appellant.
B. N. Lokur, Arun Kumar Sanghi and A. G. Ratnaparkhi for the The Judgment of the Court was delivered by CHANDRACHUD, J.
This is a plaintiff 's appeal on a certificate granted by the High Court of Bombay, Nagpur Bench, under Article 133(1)(a) of the Constitution On March 24, 1953 defendant 1 executed on behalf of himself and 'his minor son defendant 2, a deed of mortgage in favour of the plaintiff.
Defendant 3 is also a son of defendant 1 but he was born, after the mortgage deed, on September 30, 1955.
On January 11, 1956 a registered deed of partition was executed amongst the defendants under which the mortgaged property was allotted to the share of defendants 2 and 3. 884 On September 1, 1956 the mortgagee filed Civil Suit No. 3A of 1956 to enforce the mortgage.
On September 20, 1958 the trial court passed a preliminary decree for sale of defendant 1 's interest in the mortgaged property.
It held that part of the consideration for the mortgage was not supported by legal necessity and the, balance of the debt incurred on the mortgage was tainted with immorality.
Though, therefore, defendant 1 had executed the mortgage as a manager of the joint Hindu family consisting of himself and defendant 2, the debt was held not binding on the one half share of defendant 2 in the mortgaged property.
On the issue relating to the genuineness of the partition effected by defendant 1 between himself and his suits, the trial court recorded a finding that it wag a sham and colourable transaction and its object was to delay or 1 defeat the creditors.
Being aggrieved by.
the decree directing the sale of half the mortgaged property only, the plaintiff filed First Appeal No. 40 of 1959 in the High Court of Bombay.
Though the suit was dismissed as against defendants 2 and 3, they also filed an appeal in the High Court to challenge the finding of the trial court that the deed of partition was a sham and colourable transaction.
That was First Appeal No. 72 of 1959.
During the pendency of these two appeals, the preliminary decree was made final by the trial court on October 23, 1958.
On March 2, 1960 the plaintiff purchased, with the permission of tile court, a joint half share in the mortgaged property in full satisfaction of his decree.
On September 21, 1960 the auction sale was confirmed and on November 25, 1960 the plaintiff was put in joint possession of the property.
On March 15, 1966 the appeals filed by the plaintiff and by defendants 2 and 3 came up for hearing before a.
Division Bench consisting of Abhyankar and Deshmukh JJ.
The hearing of the appeals was adjourned from time to time and while the appeals were part heard, defendants 2 and 3 applied on August 2, 1966 for amendment of their Memorandum of Appeal in First Appeal No, 72 of 1959.
By the proposed amendment they sought leave of the High Court to challenge the preliminary decree passed by the trial court.
The plaintiff opposed that amendment and applied that she did not desire to prosecute First Appeal No. 40 of 1959 filed by her.
The High Court did not pass any orders either on the application for amendment made by defendants 2 and 3 or on the application of the plaintiff asking that her appeal be dismissed for non prosecution.
On August 24, 1966 the High Court adjourned the hearing of the appeals for three months to enable defendants to pay the amount due under the preliminary decree.
On November 24, 1966 defendants 2 and 3 deposited Rs. 12,500 and applied for an extension of two months for paying the balance.
The extension was granted by the High Court and on fabruary 25, 1967 defendants 2 and 3 deposited a further sum of Rs. 25,000 towards the satisfaction of the preliminary decree.
On February 14, 1968 another Division Bench of the High Court (Tambe and Badkas, JJ.) allowed the application of defendants 2 and 3 for amendment of their Memorandum of Appeal in First 885 Appeal No. 72 of 1959.
On an application made by their counsel, the High Court granted to those defendants time till February 23, 1968 to pay the deficit court fees, which they did.
The High Court then took up the two First Appeals.
for hearing in March, 1968.
As the plaintiff had applied that she did not desire to proceed with First Appeal No. 40 of 1959 filed by her, the High Court dismissed that appeal for non prosecution.
As a consequence of this order the High Court observed that the findings recorded by the trial court in favour of the defendants and adverse to the plaintiff would stand confirmed.
In First Appeal No. 72 of 1959 filed by defendants 2 and 3 it was urged by the plaintiff that as the appeal was originally filed to challenge the finding of the trial court on the question of genuineness of the partition.
defendants 2 and 3 were not entitled to include now grounds in the Memorandum of Appeal and that the Memorandum should not have been permitted to be amended.
The High Court hold that in view of the Provisions of Order 41, Rule 2, Civil Procedure Code.
it was oven to defendants 2 and 3.
with leave of the court, to urge additional grounds in their appeal without amending the Memo randum of appeal and therefore the objection raised by the plaintiff as against the amendment was futile.
The High Court further held that the appeal filed by defendants 2 and 3 was competent even though the suit, was wholly dismissed as against them.
According to the High Court, defendants 2 and 3 were aggrieved by the adverse finding on the question of partition and further they were denied under the preliminary decree the right to pay the decretal amount and to redeem the mortgage.
It was there fore open to them to file an appeal against that decree.
On the merits of the appeal the High Court set aside the finding of the trial court and held that the partition was "real and genuine" and that it was not effected in order to defeat :lie creditors.
Defendants 2 and 3 bad therefore become owners of the, equity of redemption and they could not be deprived of the right to redeem the mortgage.
In the result, the High Court set aside the preliminary decree as also the final decree and with it the auction sale in favour of the plaintiff.
The High Court passed a fresh preliminary decree under Order 34, Rule 4, Civil Procedure Code declaring that the plaintiff was entitled to recover Rs. 34, 386 and odd and directing the defendants to pay the entire decretal amount within six months of the date of decree.
The plaintiff questions the correctness of that decree in this appeal.
It is necessary first to understand the nature of the appeal filed by ,defendants 2 and 3 in the High Court and the relief they sought therein.
That appeal was in terms filed only against the finding recorded by the trial court that the partition between defendant 1 and his sons was a sham and colourable transaction intended to defeat or delay the creditors.
The Memorandum of Appeal as filed originally contained 886 seven grounds, each of which was directed against the finding given by the trial court on the question of partition.
The Memorandum contained a note that as the subject matter in dispute was not capable of being estimated in terms of a money value, a fixed court fee of Rs. 20 was paid thereon.
Only one prayer was originally made in the Memorandum of Appeal that the partition deed be declared as genuine.
Counsel for defendants 2 and 3, furnished to the registry of the High Court a written explanation as required by Rule 171 of the High Court Rules that as defendants 2 and 3 were only challenging the finding recorded by the trial court on the question of partition and as they were merely seeking a declaration that the partition was genuine, the fixed court fee of Rs. 20 was properly paid.
It is thus clear that the appeal filed by defendants 2 and 3 in the High Court was directed originally not against any part of the preliminary decree but against mere finding recorded by the trial court that the partition was not genuine.
The main controversy before us centers round the question whether that appeal was maintainable on this question the position seems to us well established.
There is a basic distinction between the right of suit and the right of appeal.
There is an inherent right in every person to bring suit of a civil nature and unless the suit is barred by statute one may, at one 's peril,_bring a suit of one 's choice.
It is no answer to a suit howsoever frivolous the claim, that the law confers no such right to sue.
A suit for its maintainability requires no authority of law and it is enough that no statute bars the suit.
But the position in regard to appeals is quite the opposite.
The right of appeal inheres in no one and therefore an appeal for its maintainability must have the clear authority of law.
That explains why the right of appeal is described as a creature of statute.
Under section 96(1) of the Code of Civil Procedure, save where otherwise expressly provided by the Code or by any other law for the time being in force, an appeal lies from every decree passed by any court exercising original jurisdiction, to the court authorised to hear appeals from the decisions of such court.
Section 100 provides for a second appeal to the High Court from an appellate decree passed by a court subordinate to the High Court.
Section 104(1) provides for appeals against orders of the kind therein mentioned and ordains that save as otherwise expressly provided by the Code or by any law for the time being in force an appeal shall lie "from no other orders".
Clause (i) of this section provides for an appeal against "any orders made under Rules from which an appeal is expressly allowed by rules". 'Order 43, Rule 1 of the Code, which by reason of clause (i) of section 104(1) forms a part of that section, provides for appeals against orders passed under various rules referred to in clauses (a) to (w) thereof, Finally, section 105(1) of the Code lays down that save as otherwise expressly provided, no appeal shall lie from any order made by a court in exercise of its original or appellate jurisdiction.
These provisions show that under the Code of Civil Procedure, an appeal lies only as against a decree or as against an order passed under, rules from which an appeal is expressly allowed by Order 43, Rule 1. 887 No appeal can lie against a mere finding for the simple reason that the Code does not provide for any such appeal.
It must follow that First Appeal No. 72 of 1959 filed by defendants 2 and 3 was not maintainable as it was directed against a mere finding recorded by the trial court.
The High Court mixed up two distinct issues : one, whether it was competent to defendants 2 and 3, if they were aggrieved by the preliminary decree of file an appeal against that decree; and two, whether the appeal such as was filed by them was maintainable.
If it be correct that defendants 2 and 3 could be said to have been aggrieved by the preliminary decree, it was certainly competent for them to challenge that decree in appeal.
But they did not file an appeal against the preliminary decree and therefore the question whether they were aggrieved by that decree and could file an appeal therefrom was irrelevant.
While deciding whether the appeal filed by defendants 2 and 3 was maintainable ' , the High Court digressed into the question of the competence of defendants 2 and 3 to file an appeal against the preliminary decree and taking the view that it was open to them to challenge that decree even though the suit was wholly dismissed against them, the High Court held that the appeal, which in fact Was directed against a find ing given by the trial court, was maintainable.
It the High Court had appreciated that the two questions were distinct and separate, it would not have fallen into the error of deciding the latter question by considering the former.
Adverting to the question which the High Court did consider, namely, whether defendants 2 and 3 could be said to be aggrieved by the preliminary decree, there is nothing in the terms of that decree which precluded those defendants from depositing the decretal amount to be able to redeem the mortgage.
The trial court had passed the usual preliminary decree for sale in Form No. 5A, under Order 34, Rule 4, Civil Procedure Code.
If the amount found due to the appellant under the decree was paid into the court within the stipulated or extended period, the appellant would have been obliged to deliver to the mortgagors all the documents in her possession or power relating to the mortgaged property and to deliver up to the defendants quiet and peaceable possession of the property free from the mortgage.
The amount declared to be due to the appellant by the preliminary decree was not paid by the defendants, from which it would appear that they were not interested in paying the amount.
It is significant that defendants 2 and 3 were served with the notice of final decree proceedings and they appeared therein.
The Code is merciful to mortgagors and perhaps 'rightly, because the mortgagee ought to have no grievance if the loan advanced by him is repaid with permissible interest, costs and expenses.
Under Order 21, Rule 89, it was open to defendants 2 and 3 as late as after the appellant purchased the property in the auction sale, to pay the amount due to her.
These defendants had interest in the mortgaged property by virtue of a title acquired before the sale, that is, under the registered partition dated January 11, 1956.
Under Order 21, Rule 89, where immovable property is sold in execution of a decree, any person owing the property or holding an interest there 888 in by virtue of a title acquired before the sale, can apply to have the sale set aside on his depositing in Court, for payment to the purchaser a sum equal to five per cent of the purchase money and for payment to the decree holder, the amount specified in the proclamation of sale as that for the recovery of which the sale was ordered.
Nothing of the kind was done and even the last significant opportunity was not availed of by the defendants.
Counsel for the appellant seems right that the defendants were content that only half the mortgaged property was directed to be sold and that it was only because of the later appreciation in prices of real property that defendants 2 and 3 awoke to the exigency of challenging the preliminary decree.
That was much too late.
So late indeed, that not having any plausible reason to assign for the inordinate delay caused in applying for an amendment of the appeal, they preferred not to file an application for condonation of delay at all.
The appeal was filed on January 4, 1959 while, the application for amendment was made on August 2, 1966.
Event though no explanation was offered for the long delay of over 7 1/2 years, the High Court allowed the amendment with a laconic order "Application for amendment allowed".
Thus, the appeal filed by defendants 2 and 3 being directed against a mere finding given by the trial court was not maintainable; defendants 2 and 3 were not denied by the preliminary decree the right to pay the decretal amount; and the two defendants could even have applied under Order 21, Rule 89, for setting aside the sale in favour of the appellant but they failed to do so as, presumably, they were not interested in paying the amount.
The High Court was therefore wholly in error in allowing the amendment of the Memorandum of Appeal, particularly when defendants 2 and 3 had neither explained the long delay nor sought its condonation.
The preliminary decree had remained unchallenged since Sep tember 1958 and by lapse of time a valuable right had accrued in favour of the decree holder.
The power to allow an amendment is undoubtedly wide and may at any stage be appropriately exercised in the interest of justice, the law of limitation notwithstanding.
But the exercise of such far reaching discretionary powers is governed by judicial considerations and wider the discretion, greater ought to be the care and circumspection on the part of the court.
The appeal in terms was originally directed against the finding given by the trial court that the partition was sham and colourable. "Being aggrieved by the finding given in the Judgment and the Decree. . . it is humbly prayed that findings given by the learned Judge in Para 34 of his Judgment may kindly be set aside, and instead the partition deed dated 11 1 56 may kindly be declared as genuine" So ran the Memorandum of Appeal.
Defendants 2 and 3 reiterated through their counsel by Ming a note to explain the payment of fixed court fees of Rs. 20 that they were "seeking the relief of declaration only" and therefore the court fee paid was proper and sufficient.
Long years thereafter, the High Court allowed the Memorandum to be amended not a reason was cited to, explain the delay and not a reason was given to condone it.
And it was not appreciated that in granting time to defendants 2 and 3 to 889 make up the deficit of the court fees 71 years after the appeal was filed, an amendment was being allowed which had its impact not only on the preliminary decree but on the final decree which was passed in the meanwhile, the auction sale which was held in pursuance of the final decree and the sale certificate which was granted to _the appellant who, with the leave of the court and in full satisfaction of her decree, had purchased a joint 1/3 share in the mortgaged property.
With the striking down of the preliminary decree, these proceedings had to fall but the error really lay in allowing the amendment so as to permit, without good cause shown, a belated challenge to the preliminary decree.
One other aspect of the question relating to the maintainability of the appeal yet remains to be examined.
Counsel for the respondents.
argues that the finding of the trial court on the issue of partition would have operated as res judicata against them and they were therefore entitled to appeal therefrom.
In Harchandra Das vs Bholanath Day on which the learned counsel for the respondents relies in support of this submission, a suit for preemption was dismissed by the trial court on the ground of limitation.
In an appeal filed by the plaintiff, the District Court reversed that finding but confirmed the decree dismissing the suit on the ground that the sale effected by defendants 4 and 5 in favour of defendants 1, 2 and 3 was not validly registered and there being no "sale", there can be no right of preemption.
Defendants 1 to 3 preferred an appeal to the High Court against the finding recorded by the District Court that the sale effected in their favour by defendants 4 and 5 was not valid as it was not lawfully registered.
On a preliminary objection raised by the plaintiffs to the maintainability of the appeal, the High Court of Calcutta, held that though under the Code of Civil Procedure there can be no appeal as against a mere finding, "it may be taken to be the view of courts in India generally, that a party to the suit adver sely affected by a finding contained in a judgment, on which a decree, is based, may appeal; and the test applied in some of the, cases for the purpose of determining whether a party has been aggrieved or not was whether the finding would be res judicata in other proceedings".
The High Court, however, upheld the preliminary objection on the ground that the issue regarding validity of the sale which was decided against defendants 1 to 3 would not operate as res judicata in any subsequent proceeding and therefore the appeal which was solely directed against the finding on that issue was not maintainable.
The position here is similar to that in the Calcutta case.
The trial court decreed the mortgagee"s suit only as against defendant 1, the father, and directed the sale of his one half interest in the mortgaged property on the ground that part of the consideration for the mortgage was not supported by legal necessity, the remaining part of the consideration was tainted with immorality and therefore the mortgage was not binding on the interest of the sons, defendants 2 and 3.
Whether the partition between the father and sons was sham or real had no (1) I.L.R. 890 impact on the judgment of the trial court and made no material difference to the decree passed by it.
The finding recorded by the trial court that the partition was a colourable transaction was unnecessary for the decision of the suit because even if the court were to find that the partition was genuine, the mortgage would only have bound the interest, of the father as the debt was not of a character which, under the .Hindu law, would bind the interest of the sons.
There is no substance .in the submission made on behalf of the sons that if the partition was held to be genuine, the property would have been wholly freed from .the mortgage encumbrance.
The validity or the binding nature of an .alienation cannot depend on a partition effected after the alienation; or else, a sale or a mortgage effected by the Karta of a joint Hindu family ,can easily be avoided by effecting a partition amongst the members of .the joint family.
As the matter relating to the partition was not directly and substantially in issue 'in the suit, the finding that the partition was sham cannot operate as res judicata.
Therefore, the appeal filed by defendants 2 and 3 against that finding was not maintainable, even on ,,the assumption that the High Court of Calcutta is right in its vie", that though under the Code there could be no appeal against a finding, ,yet "On grounds of justice" an appeal may lie against a finding provided that it would operate as res judicata so as to preclude a party aggrieved by the finding from agitating the question covered by the .finding in any other proceeding.
It is not necessary here to determine ,whether the view of the Calcutta High Court is correct.
For these reasons we allow the appeal with costs, set aside the judgment of the High Court and restore that of the trial court.
section C. Appeal allowed.

summary:
In 1953, defendant 1 executed on behalf of himself and his minor son, defendant 2, a deed of mortgage in favour of the plaintiff.
Deft. 3 is also a son of deft.
I who was born after the mortgage deed.
In 1956, a regd.
deed of partition was executed amongst the defendants under which the mortgaged property was allotted to the share of defts 2 & 3.
Thereafter, the mortgagee filed a civil.
suit to enforce the mortgage and the trial court passed a preliminary decree for sale of deft.
1 's interest in the mortgaged property.
It held that part of the consideration for the mortgage was not supported by legal necessity and the balance of the debt incurred was tainted with immorality.
Therefore, the debt was held not binding on the one half share of deft.
2 in the mortgaged property.
As regards the partition, the trial court held that it was a colourable transaction effected to delay or defeat the creditors.
Being aggrieved, pltf.
filed an appeal (40/59) in the High Court.
Deft. 1 & 2 against whom the suit was dismissed, also filed an appeal (72/59) against the finding of the trial court that the partition was a colourable transaction.
During the pendency of these 2 appeals, the preliminary decree was made final by the trial court and in 1960, the plaintiff purchased with the permission of the court, a joint half share of the mortgaged property in full satisfaction of his decree.
Thereafter, the auction sale was confirmed and the plaintiff was put in joint possession of the property.
Thereafter, the appeals filed by the) plaintiff and defendants 2 and 3 came up for hearing and while the appeals were part hard, defts 2 & 3 applied on August 2, 1966 (nearly 7 1/2 years after filing the appeals), applied for amendment of their Memorandum of appeal in first appeal No. 72/59 and sought permission of the High Court to challenge the preliminary decree passed by the trial Court.
The plaintiff opposed that amendment and applied that she did not desire to prosecute first appeal No. 40/59 filed by her.
The High Court did not pass any orders either on the application for amendment or the plaintiff 's appeal, but adjourned the hearing of the appeals for 3 months to enable defendants to pay the amount due under the preliminary decree.
Accordingly the defendants deposited the money towards the satisfaction of the preliminary decree.
After about 2 years, another division bench of the High Court, allowed the amendments of the defendants Memo of Appeal in Appeal No. 72/59 and allowed time to the defendants to pay the deficit Court fee, which they paid.
The High Court, then took the 2 appeals for hearing and dismissed appeal No. 40/59 for non prosecution and confirmed the findings of the trial court in favour of the defendants.
As regards appeal No. 72/59, the High Court held that in view of Order 41, Rule 2 C.P.C., it was open to the defendants.
with the leave of the court, to urge additional grounds without amending the Memo of Appeal and therefore, the objection raised.
by the plaintiff that amendment should not be allowed, cannot be upheld.
The High Court further held that the defendants ' appeal was competent and they had the right to redeem the mortgage.
On the merits, the High Court held that the partition was real and genuine.
In the result, the High Court set aside the preliminary decree as also the final decree and with it the auction 883 sale in favour of the plaintiff.
The High Court passed a fresh preliminary decree under order 34, Rule 4 C.P.C., directing that that the plaintiff was to recover Rs. 34,386/ and 'odd and directed the defendants to pay the entire decretal amount within 6 months of the date of decree.
The plaintiff questions the correctness of the decree before this Court.
The appeal filed by defendants 2 & 3 Was against the finding recorded by the trial court that the partition between deft. 1 and his sons was a colourable transaction.
Therefore, it was clear that the appeal filed by defts.
2 & 3 was directed originally not against any part of the preliminary decree but against a mere finding recorded by the trial court that the partition was not genuine.
Before this Court, the main question was whether that appeal was maintainable and secondly, whether it was proper for the High Court to allow the amendment of the Memo of appeal after 7 1/2 years without good cause shown and Without any application for condonation of delay.
Allowing the appeal, HELD : (i) There is a basic distinction between the right of suit and the right of appeal.
There is an inherent right in every person to bring a suit of at civil nature, but the right of appeal inheres in no one and therefore an appeal for its maintainability must have the clear authority of law.
The various provisions in the C.P.C. show that under the Code, an appeal lies only as against a decree or as against an order passed under rates from which an appeal is expressly allowed by Order 43, Rule 1.
No appeal can lie against a mere finding for the simple reason that the Codes does not provide for any such appeal.
Therefore, the first appeal filed by.
defendants 2 and 3 in the High Court was not maintainable as it was directed against a mere finding recorded by the trial court.
[886 D H] (ii) The High Court should not have allowed the amendment of the Menlo of Appeal particularly when defendants 2 & 3 had neither explained the long delay nor sought its condonation.
Defendants 2 & 3 were not denied by the preliminary decree the right to pay the decretal amount and the two defendants could even have applied under order 21, Rule 89 for setting aside the sale in favour of the appellant; but they failed to do so.
The preliminary decree had remained unchallenged since September, 1958 and by lapse of time a valuable right had accrued in favour of the decree holder.
Therefore, to allow the amendment after such a long time without a good cause was not a proper exercise of judicial discretion in the circumstances of the case.
[888 D E]


judgement:
Appeal No. 207 of 1954.
Appeal by special leave from the Judgment and Order dated the 31st day of August 1953 of the Labour Appellate Tribunal of India, Lucknow, in Appeal No. III 57 of 1953.
A. section R. Chari (Bawa Shiv Charan ' Singh and M. R. Krishna pillai, with him), for the appellant.
Achhru Ram (Naunit Lal, with him), for the respondent.
March 15.
The Judgment of the Court was delivered by SINHA J.
This is an appeal by special leave against the orders of the Lucknow Bench of the Labour Appellate Tribunal of India (hereinafter to be referred to as "The Appellate Tribunal") dated the 31st August 1953, setting aside the award dated the 13th October 1952 made by the Chairman, Central Government Industrial Tribunal, Calcutta (herein after to be referred to as "The Tribunal") reinstating the appellant as the head cashier with back salary under the Punjab National Bank (hereinafter called "The Bank").
The facts leading up to this appeal may shortly be stated.
The appellant started his service as the head cashier in the Una Branch of the Bank on the 18th June 1949.
The Cash Department of the Bank is in charge of Treasurers.
The relation between the Bank and the Treasurers is evidenced by an agreement dated the 1st May 1944 (exhibit 1) which will be noticed in detail hereinafter.
That was an agreement between the Bank and "Messrs Rai Bahadur Karam Chand Puri & Bros".
That firm was appointed the Treasurers at the head office of the Bank and other places in and outside the Punjab.
On the 28th September 1951 the District Manager of the Northern Circle of the.
Bank wrote a letter (exhibit 4) to the Treasurers informing 1420 them that it had been decided to close the Una office of the Bank with effect from the close of business on the 3rd November 1951.
In pursuance of that letter the Treasurers intimated by a letter dated 2nd October 1951 enclosing a copy of exhibit 4 to the appellant that the Una Branch of the Bank will cease to function from the close of business on the 3rd November 1951 and that his services will not be required after that date.
The Punjab National Bank Em ployees ' Union (Punjab) took up the cause of the appellant as also that of other employees and made representations to the Government of India.
The Government of India by a notification No. SRO 432 dated the 8th March 1952 published in the Gazette of India, Part II Sec. 3, in exercise of its powers under section 10 of the Industrial Disputes Act XIV of 1947 (hereinafter called the Act) referred the industrial dispute between the Bank and its workmen named in schedule 2 (concerning workers dismissed) and schedule 3 (relating to workers transferred) for adjudication to the Industrial Tribunal at Calcutta constituted under section 7 of the Act.
Schedule 1 in so far as it is necessary for purposes of this case contains the following points of dispute between the employer and the workmen: "1.
Wrongful dismissal of the workmen mentioned in schedule II and their reinstatement.
In the event of any order for reinstatement payment of wages and other allowances from the date of dismissal to the date of reinstatement".
The appellant is No. 5 in schedule 2 aforesaid.
The 'Tribunal gave its award on the 13th October 1952 in respect of a number of employees whose cases were actually in controversy before it.
It is only necessary to refer to the award in so far as it concerned the appellant.
After overruling the preliminary objection of the Bank that the Union bad no locus standi to represent the appellant the Tribunal formulated the following point for its decision: "On merits the main point involved is as to whether the services of an employee of the Cash 1430 Department can be terminated on a change made in the services of the Contractor Cashier".
It answered this point in these words: "This point has been agitated in more than one case and I have also held in Reference No. 3 of 1951 as Chairman of Industrial Tribunal (P. N. Bank dispute) relating to 5 cashiers that the employees of the Cash Department are the employees of the Bank and not the nominees of the Contractor Cashiers so far service conditions are concerned, and I think it will serve no useful purpose to discuss all the legal precedents cited, more especially when the point has been set at rest by their Lordships of the Supreme Court in Civil Appeal No. 66 of 1952 in the matter of United Commercial Bank Ltd. vs Secretary, U. P. Bank EmPloyees ' Union and Others.
I am of the opinion that the dismissal of Shri Sharma was wrongful and liable to be set aside.
Now the normal remedy is reinstatement and I have no hesitation in allowing the same.
He will also be paid his back salary an allowance from the date of dismissal to the date of reinstatement".
Whatever may be the merits of the answer given to the question propounded by the Tribunal, there is no doubt that the question posed had been wrongly framed.
The discharge or dismissal of the appellant had nothing to do with the change in the personnel of the Treasurers.
The appellant 's services were dispensed with on the ground that the Una Branch where he was employed as head cashier being an un economic unit had to be closed and that therefore the appellant 's services were no more required.
The res pondent 's case appears to have been that the firm.
known as Messrs R. B. Karam Chand Puri & Bros. have been contractors for the Cash Department of the Bank at the head office and some of the other offices in the Punjab and beyond; that from time to time agreements were executed between the Bank and the aforesaid firm; that the last agreement was executed on the 1st May 1954 (exhibit 1); that the appellant according to the respondent Bank was the nominee of the said firm, and that his services had been dispensed 1431 with by the said firm whose employee he was and not by the Bank which had nothing directly to do with the employment of cashiers and other workers in the Cash Department which was in charge of the Treasurers described as "Contractor Treasurers".
Hence the main question in controversy between the parties was whether the appellant was an employee of the Bank or of the said "Contractor Treasurers", whom we shall call the "Treasurers" for the sake of brevity.
The Tribunal did not address itself to the determination of that question.
This Court also did not discuss and decide the matter in Civil Appeal No. 66 of 1952, but assumed that cashiers of the Bank were its employees.
If that question had been decided by this Court, as the Tribunal erroneously thought this Court had, in Civil Appeal No. 66 of 1952, the controversy would have been at an end.
Therefore when the respondent preferred an appeal to the Appellate Tribunal, the Bank at the forefront of its attack against the award of the Tribunal raised the ground that the Tribunal had not determined the basic question which could have given jurisdiction to the Tribunal to decide the dispute whether the head cashier was an employee of the Bank or was a nominee of the "Treasurer" as contended on behalf of the Bank.
The Bank relied very strongly before the Appellate Tribunal on the memorandum of agreement (exhibit 1) and the correspondence that passed between the Bank and the "Treasurers" on the one hand and the latter and the appellant before us on the other (Exs. 2, 3, 4 and 5).
The Appellate Tribunal rightly remarked that the Tribunal had recorded no finding on that basic question and had assumed that the respondent before it was an employee of the Bank.
The Appellate Tribunal took the view that the agreement (exhibit 1) was decisive of that question.
After referring in great detail to the terms of the agreement the Appellate Tribunal came to the conclusion that the cashier was not an employee of the Bank but of the Treasurers and that therefore the Tribunal had no jurisdiction to give any relief to the complainant before it.
The 183 1432 award by the Tribunal was, in the result, set aside and the Bank 's appeal allowed.
The appellant in this Court through his counsel Shri Chari, argued that the Appellate Tribunal had misinterpreted the provisions of the Industrial Disputes Act in coming to the conclusion that the Tribunal had no jurisdiction to entertain the dispute simply on the ground that one of the parties to the dispute bad successfully denied the relationship of employer and employee; that the Appellate Tribunal misconceived its functions by basing its findings on the interpretation of the written agreement between the Bank and its Treasurers when it should have gone into all the relevant facts to determine the substance of the matter; and finally, that the Appellate Tribunal misdirected itself on the question of the interpretation of the agreement for coming to the conclusion that the appellant was not an employee of the Bank but was a nominee of the "Treasurers".
It was further argued on behalf of the appellant that the Tribunal having based its decision on its previous award dated the 16th September 1952 in Reference No. 3 of 1951 between persons more or less in the same position as the appellant and the respondent Bank, in the background.
of the decision of the previous Tribunals, e.g., the award of the Conciliation Board presided over by Mr. Justice Bind Basni Prasad of the Allahabad High Court, the award by the Tribunal presided over by Mr ' K. C. Sen, and the award of the All India Industrial Tribunal '(Bank Disputes), presided over by Sri section Panchapagesa Sastri and the award dated the 24th March 1951 in Reference No. 20, the award of the Tribunal was really final.
The argument was that the award of the Tribunal was based on considerations of facts and circumstances disclosed in those earlier awards to which the Bank and its cashiers and other employees employed in the Cash Department were parties.
It was thus a final finding of fact which was not open to appeal before the Appellate Tribunal.
It was therefore contended that the Appellate Tribunal bad no jurisdiction to entertain the appeal and to reverse the award of the Tribunal.
1433 On behalf of the respondent Bank it was contended that no specific grounds had been taken either before the Appellate Tribunal or in the memorandum of appeal to this Court that the Appellate Tribunal had no jurisdiction on the ground now taken by the appellant in this Court, nor was that ground taken in the statement of case.
On merits it was contended by the respondent 's counsel that the Tribunal is as much bound by the rules of evidence and procedure as any other Tribunal and as the Tribunal had not addressed itself to the question whether the cashier appellant was an employee of the Bank, the question was open before the Appellate Tribunal which was competent to pronounce on that basic question.
Finally it was argued that on a true construction of the provisions of the agreement (exhibit 1) this Court should accept the finding of the Appellate Tribunal that the appellant was not an employee of the Bank and that on that account the Tribunal had no jurisdiction to grant any relief to the appellant.
On behalf of the respondent the case was practically rested on the construction of the agreement (exhibit 1).
With reference to the terms of the agreement the learned counsel for the respondent argued that the Treasurers were not servants or employees of the Bank but were "independent contractors" and that the appellant and other employees in the Cash Department having been nominees of the "independent contractors" there could not be any relation of employer and employee between the Bank and the appellant.
It is therefore necessary to examine in some detail the terms of the agreement aforesaid.
We set out below, underlining important words, the terms of the agreement in so far as they are relevant for the determination of the true relation between the Bank and the Treasurers.
Though this agreement is dated the 1st May 1944, cl.
(1) provides that it will be deemed to have commenced and come into force from the 15th March 1942, the date of the death of R. B. Karam Chand Puri and will take the place of the previous agreement dated the 26th July 1941, thus maintaining the continuity of the relationship between the 1434 Bank and the Treasurers '.
The agreement provides that the Treasurers shall diligently and faithfully serve the Bank at the Head Office and its various offices mentioned in schedule A attached to and forming part of the agreement and at other offices where they may hereafter be appointed treasurers and shall in all respects diligently and faithfully obey and observe all lawful orders and instructions of the Bank or the person placed by the Bank in authority over them in relation to the due discharge of their duties as Treasurers.
The Treasurers in addition to the duties, liabilities and responsibilities devolving upon them by virtue of the provisions of the agreement shall also be liable to perform such duties and discharge such responsibilities as by custom usually devolve on treasurers in the employ of a bank.
The Treasurers shall be paid for their services a remuneration as mentioned in schedule A aforesaid or such remuneration as the General Board of Directors of the Bank may determine from time to time.
Out of the remuneration paid to them by 'the Bank the Treasurers shall pay salaries to their nominees employed by them for performing the duties of a cashier in the Bank on their behalf or other functionaries of a similar nature.
The salaries of such nominees employed by them will be fixed by the Treasurers themselves but the same will be subject to the approval of the Bank.
The remuneration of the Treasurers will be the net amount which will be left to them after paying salaries to their nominees employed by them for working as cashiers, etc.
The Treasurers themselves will not be entitled to any kind of allowances besides the net remuneration as aforesaid but their nominees or working cashiers will be entitled to allowances which ,the authorities of the Bank may sanction for members of the staff from time to time.
The Treasurers shall employ the number of men at each office as mentioned in schedule A aforesaid.
The Board of Directors shall have the power to increase or decrease the number of their nominees for any particular office and the amount of remuneration fixed for that office.
The Treasurers shall be responsible for the due safety, both within and outside the premises of the Bank at any 1435 office placed under their charge, of all money, specie, ornaments, bullion, cash, etc.
and of other valuable documents received by them for and on behalf of the Bank or from the Bank and shall be answerable to the Bank for all losses occurring either inadvertently or by or through the negligence or misconduct of the Treasurers or any of their nominees.
The Treasurers shall be entitled to resign the services of the Bank by giving three calendar months ' notice to the Bank.
The Bank shall also be entitled to dispense with the Treasurers ' services on giving three months ' notice In case of gross negligence or misconduct or of any fraud, misappropriation or embezzlement by the Treasurers or any of the nominees in the discharge of ,their duties as such Treasurers, no notice shall be necessary and the Bank shall have the right to dispense with their services forthwith.
The Bank shall have the right to take the Treasurers into the service of the Bank after settlement of remuneration with the Treasurers at any other office or offices of the Bank.
The Treasurers and their nominees shall obey all the orders, rules and regulations prescribed by the Bank with regard to the discharge of their duties by the cashiers as well as with regard to the amount of balance they are allowed to keep with them.
It shall be the duty of the cashiers to inform the manager of the Bank as soon as the balance in hand exceeds the prescribed limit and to ask for orders on the point.
The Treasurers shall not engage any person as their assistant or peon about whose character, conduct or reliability the manager of the Board of Directors of the Bank may have any objection.
The Treasurers shall also arrange that no person under employment absents himself from duty without the written permission of the manager for the time being.
If any such employee is absent without leave, or he is turned out on the objection of the Board or the Manager, the Treasurers shall forthwith appoint a substitute in his place.
The Treasurers shall be responsible for the acts and defaults of all their nominees.
The Treasurers and their nominees shall be entitled to traveling allowance according to rates sanctioned by the Board 1436 of Directors of the Bank.
The Treasurers have deposited security of the value of Rs. 15,000/ on which they shall be entitled to receive interest at the rate of 31 per cent.
per annum.
As a further security for the due performance of the terms and conditions of the agreement as a cover for loss that may be caused to the Bank by any act or omission of themselves or any one of their nominees, the Treasurers hypothecated properties as per schedule C attached to and forming part of the agreement.
Schedule A aforesaid contains the names of the offices, the monthly remuneration of the Treasurers in respect of each one of those offices separately, net savings of the Treasurers after paying the salaries of the total number of men including cashiers, etc., as stated against each one of the offices.
Apart from the terms set out above bearing on the relation between the Bank and the Treasurers, some of which apply equally to their nominees, the following terms of the agreement bear directly on the relation between the nominees of the Treasurers, like the appellant, and the Bank.
In this connection the agreement provides that the Board of Directors shall have the power to increase or decrease the number of the Treasurers ' nominees for any particular office and the amount of remuneration fixed for that office.
Such nominees shall be entitled as servants of the Bank to any bonus which may from time to time be declared for the members of the staff.
The bonus of the Treasurers shall be limited to the amount of their own net remuneration and no further.
They shall not be entitled to any bonus to which their cashiers are not eligible under the rules of the Bank.
The nominees of the Treasurers shall be entitled to participate as ordinary members of the staff in the provident fund constituted by the Bank.
Such nominees shall also be entitled to traveling allowance according to rates sanctioned by the Board of Directors of the Bank whenever they are required to go to out stations on bank business.
From the terms of the agreement aforesaid set out above almost verbatim omitting such clauses and words as are not relevant to this case, it will appear 1437 that the Treasurers are under the employment of the Bank on a monthly basis for an indefinite term, that is to say, until such time as either party to the agreement terminated it in accordance with the terms quoted above.
They are under the complete control and direction of the Bank through its manager or other functionaries.
The Treasurers have to take their orders from day to day as regards the cash balance or other cognate matters relating to the safe custody of cash, valuable documents, etc.
belonging to the Bank or its constituents.
The Treasurers receive in respect of each office under the incharge a certain name sum out of which they have to pay the salary of a stated number of their assistants who may be head cashiers or cashiers or assistant cashiers and other such functionaries.
They are entitled to receive bonus on the net amount secured to them as their remuneration, being the lump sum fixed in respect of each office, minus the salary of the assistants.
It is true that these Treasurers are not and cannot be expected to be personally present to discharge their onerous duties at each one of the large number of offices spread over the Punjab and outside.
Naturally they had to be authorized to engage head cashiers, or assistant cashiers in respect of each of the offices placed in their charge.
They had to guarantee the fidelity of the persons so employed as their assistants.
Those assistants had to be persons in whose reliability, 'honesty and efficiency both the Bank and the Treasurers had confidence.
The Treasurers have the right to nominate those assistants but the Bank had the final words in the choice.
The Bank Manager has complete control over such nominees in the matter of leave of absence, discipline and conduct in the discharge of their duties as assistants managing the cash and other valuables in the custody of the Bank.
From the very nature of things it bad to be a dual control in the sense that the Treasurers had to nominate the assistants who are to discharge those responsible functions in connection with cash and other valuables of the Bank and the Bank could not abdicate its powers of full control over the day to day working of 1438 the Cash Department.
The nominees of the Treasurers are treated on the same footing as the other servants of the Bank in the matter of bonus ' travelling allowance and provident fund, etc.
It is true those nominees are to be paid by the, Treasurers but it is out of the money provided by the Bank.
It is not always easy to determine whether the relation between two parties, in the present case of the Treasurers vis a vis the Bank, is that of servants to a master or of independent contractors who have undertaken to do a particular job for their employer.
The question has generally arisen in connection with the determination of vicarious liability of an employer in respect of acts done by his agent (using a neutral word which includes an independent contractor as also a servant).
The distinction between a servant and an independent contractor has been the subject matter of a large volume of case law from which the text book writers on torts have attempted to lay down some general tests.
For example, in Pollock 's Law of Torts,* the distinction has thus been brought out: "A master is one who not only prescribes to the workman the end of his work, but directs or at any moment may direct the means also, or, as it has been put, 'retains the power of controlling the work ', a servant is a person subject to the command of his master as to the manner in which he shall do his work. .
An independent contractor is one who undertakes to produce a given result but so that in the actual execution of the work he is not under the order or ,control of the person for whom be does it, and may use his own discretion in things not specified before hand. . . . ." Clerk & Lindsell on Torts (11th Edn.) at p. 135 have adopted the description of an independent contractor given by Pollock as quoted above.
In the 11th Edn. of Salmond 's Treatise on the Law of Torts, the same distinction has been clearly indicated in the following passage at p. 98 *Pages 62 & 63 of Pollock on Torts, 15th Edn.
1439 "what then, is the test of this distinction between a servant and an independent contractor? The test is the existence of a right of control over the agent in respect of the manner in which his work is to be done.
A servant is an agent who works under the supervision and direction of his employer; an in dependent contractor is one who is his own master.
A servant is a person engaged to obey his em ployer 's orders from time to time; an independent contractor is a person engaged to do certain work, but to exercise his own discretion as to the mode and time of doing it he is bound by his contract, but not by his employer 's orders".
Those learned authors have discussed in great detail cases illustrative of those distinctions, indicating the circumstances in which the general rule has been applied to individual cases with such modifications as the facts and circumstances of a particular case required.
We are here not concerned with those nice distinctions which have been drawn in connection with the rule of vicarious liability in torts.
We are here concerned only with the question how far the test laid down by the standard authors as quoted above can be applied to determine the present controversy whether the Treasurers of the Bank were its servants as contended on behalf of the appellant or independent contractors as claimed on behalf of the respondent Bank.
The agreement between the parties, as summarised above, is a composite transaction constituting the Treasurers agents of the Bank, the former agreeing to indemnify the latter against any loss occasioned to the Bank due to the lack of fidelity and efficiency of the ministerial staff entrusted with the charge of the Bank 's cash and valuable documents.
The Treasurers have been charged with the duty of nominating their assistants who are to be responsible in their day to day work to the Bank which all the time has full control over them in the matter of their leave of absence, as to how they shall keep the cash and other valuables and as to how they shall be under the general direction of the Bank 's manager or, some 184 1440 other functionary who may be nominated by the Bank to supervise the work of the Cash Department.
The Bank makes itself answerable to the employees thus appointed by the Treasurers with the concurrence of the Bank for their bonus, provident fund and travelling allowance.
For those purposes these assistants are to be on the same footing as the other employees of the Bank.
It was contended on behalf of the respondent Bank that its agreement with the Treasurers shows that the latter bad the fullest responsibility for the appointment and dismissal and payment of salary of the employees in charge of the, Cash Department of the Bank and that therefore the Treasurers could not but be independent contractors.
It has already been noticed that the appointment of such assistants as are entrusted with the work of the Cash Department is not under the absolute power of the Treasurers.
The appointment has to be approved by the Bank and the Treasurers cannot continue to employ those workmen in whose fidelity and efficiency the Bank has no confidence.
Hence both in the matter of appointment and dismissal of the employees the Bank reserves to itself the power to ' give direction to the Treasurers.
Similarly in the matter of the payment of salary the money comes out of the coffers of the Bank, though it may be paid by the hand of the Treasurers.
In this connection it was contended on behalf of the appellant that payment of salary of the employees in the Cash Department is made through the Ban].
,, itself but we have no tangible evidence in this case beyond the bare assertion at the Bar.
But, in our opinion, the situation in respect of the appointment, dismissal and payment of salary of the employees of the Cash Department is analogous to that of the employees of a particular department of Government, in which appointment and dismissal of ministerial staff may rest with an authority so empowered by the head of the department.
Payment of salary may also be made by the appointing authority but the money comes out of the Government treasury.
In those circumstances, can it be rightly asserted that 1441 those employees are not the servants of Government? The analogy may not be perfect, because, in the present case, the appointment and dismissal of the employees of the Cash Department is the joint responsibility of the Bank and its Treasurers.
It has got to be so because the Treasurers are the guarantors of the fidelity and efficiency of the employees and the Bank has to exercise complete control over the day to day discharge of their functions because it is the Bank which is vitally and immediately concerned with the efficient and honest discharge of the duties of the assistants in the Cash Department, the efficient running of which is the most important of a bank 's functions.
It will further be noticed with reference to the terms of the agreement set out above that whereas the Treasurers and their nominees have to take their orders from the Bank Manager or other such functionary, there is no specific provision that those nominees shall discharge their day to day functions under the direct control of the Treasurers or that they will be subject to the immediate control of the Treasurers in the discharge of their daily duties and in the matter of the grant of leave of absence.
There could not be such a provision, as a dual control of that kind in the daily work of the employees would lead to a great deal of confusion and lack of discipline amongst the ministerial staff.
The employees of the Cash Department have of necessity to be under the direct control of the Bank Manager or of some other functionary appointed by the Bank.
It is the Bank which has undertaken the responsibility in the matter of their pay and prospects in the service and naturally therefore, such employees, even as other employees of the Bank, have to take their orders from the Bank.
It must therefore be held that the Treasurers are the servants of the Bank and that their nominees must equally be so.
The Appellate Tribunal held that on a reading as a whole of the clauses of the agreement aforesaid the appellant was an employee of the Treasurers and not of the Bank, It did not address itself pointedly 1442 to the question as to what was the exact relation between the Bank and the Treasurers.
It did not also consider the question as to what would be the position of the employees of the Cash Department vis a Vis the Bank if it were held that the Treasurers Id. themselves were the servants of the Bank and not independent contractors.
Before the Appellate Tribunal both parties appear to have concentrated their attention on the question as to whether the employees of the Cash Department were servants of the Bank or of the Treasurers.
In our opinion, that was not a correct approach to the determination of the controversy between the parties.
If the Treasurers ' relation to the Bank was that of servants to a master, simply because the servants were authorized to appoint and dismiss the ministerial staff of the Cash Department would not make the employees in the Cash Department independent of the Bank.
In that situation the ultimate employer would be the Bank through the agency of the Treasurers.
It was argued on behalf of the respondent that even if it were held that the Treasurers were the servants of the Bank and not independent contractors, the legal position of the employees of the Cash Department vis a vis the Bank would be the same, namely, that they will be in law the servants of the Treasurers.
In our opinion, there is no substance in that contention.
If a master employs a servant and authorizes him to employ a number of persons to do a particular job and to guarantee their fidelity and efficiency for a cash consideration.
, the employees thus appointed by the servant would be equally with the employer, servants of the master.
It is not always correct to say that persons appointed and liable to be dismissed by an independent contractor can in.
no circumstances be the employees of the third party.
This would be clear from the following observations of Lord Esher, M.R., in the case of Donovan vs Laing, Wharton & Down Construction,Syndicate(1): "It is true that the ' defendants selected the man and paid his wages, and these are circumstances which, if nothing else intervened, would be strong to show (1) (1893] at 632, 1443 that he was the servant of the defendants.
So, indeed, he was as to a great many things but as to the working of the crane he was no longer their servant, but bound to work under the orders of Jones & Co., and, if they saw the man misconducting himself in working the crane or disobeying their orders, they would have a right to discharge him from that employment".
Those observations have been approved in the latest decision of the House of Lords in the case of Mersey Docks & Harbour Board vs Coggins & Griffith (Liverpool) Ltd.(1).
The House of Lords distinguished that ruling on facts but did not depart from the general rule laid down in the earlier decision that the determinative factor is as to which party had control over the workers as to how they would do their job from day to day.
Lord Macmillan in his speech at p. 14 has observed as follows: "Many reported cases were cited to your Lordships but where,, as all agree, the question in each case turns on its own circumstances, decisions in other cases are rather illustrative than determinative.
So far as attempts have been made to formulate a criterion of general application, it cannot be said that these attempts have been very successful".
It would thus appear that the question as to whose employee a particular person was has to be determined with reference to the facts and circumstances of each individual case.
Lord Porter in the course of his speech in the reported case (supra) at p. 17 has observed as follows: "Many factors have a bearing on the result.
Who is paymaster, who can dismiss, how long the alternative service lasts, what machinery is employed, have all to be kept in mind.
The expressions used in any individual case must always be considered in regard to the subject matter under discussion but amongst the many tests suggested I think that the most satisfactory, by which to ascertain who is the employer at any particular time is to ask who is entitled to tell the employee the way in which he is to do the work upon which he is engaged".
(1) ; , 1444 As indicated above, in the present case the direction and control of the appellant and of the ministerial staff in charge of the Cash Department of the Bank was entirely vested in the Bank through its manager or other superior officer.
We have therefore no hesitation in differing from the conclusion arrived at by the Appellate Tribunal and in holding that the appellant was an employee of the Bank.
That being so, the Tribunal had the jurisdiction to make the directions it did in respect of the appellant.
The respondent did not at any stage of the proceedings challenge the orders of the Tribunal on its merits.
That conclusion being reached, there is no difficulty in upholding the orders of the Tribunal in respect of the appellant.
It is therefore not necessary to pronounce upon the other points raised by the parties.
The appeal is accordingly allowed wit costs throughout.
Appeal allowed.

dataset_name: IN-Abs

summary:
The appellant was appointed head cashier in one of the branches of the respondent Bank by the Treasurers who were in charge of the Cash Department of the Bank by virtue of an agreement between them.
The question arose as to whether the appellant was an employee of the Bank.
(i) that the terms of the agreement clearly showed that the Treasurers were servants of the Bank and not independent contractors; and that (ii)as the direction and control of the appellant and of the ministerial staff in charge of the Cash Department of the Bank was entirely vested in the Bank, the appellant was an employee of the Bank.
If a master employs a servant and authorizes him to employ a number of persons to do a particular job and to guarantee their fidelity and efficiency for a cash consideration, the employees thus appointed by the servant would be, equally with the employer, servants of the master.
The question as to whose employee a particular person is has to be determined with reference to the facts and circumstances of each individual case, and among the many tests by which to ascertain who is the employer, the most satisfactory one is to ask who is entitled to tell the employee the way in which he is to do the work upon which he is engaged.
(1) (1924] I.L.R. (2) Cal.
297, 1428 Donovan vs Laing, Wharton & Down Construction Syndicate ([1893] and Mersey Docks & Harbour Board vs Coggins & Griffith (Liverpool) Ltd. ([1947] A.C.1), referred to.


judgement:
ns Nos.
1524, 1537 1580 of 1973 and 74, 75, 254, 510 512 of 19702 ' 21 of 1971 and 1525 & 1581 1606 of 1973.
Petitions under article 32 of the Constitution of India.
A. K. Sen, Yogeshwar Prasad, section K. Bagga and section Bagga, for the petitioners (in W.Ps.
1524 and 1537 1580/73).
A. K. Sea, (in W.P. No. 74/70), Hardyal Hardy (in W.P. No. 75/70), Yogeshwar Prasad, section K. Bagga and section Bagga, for the petitioners in (W.P. Nos 74, 75, 254 and 510 512/70, 21/71 and 1525, 1581 1606/1973).
L. N. Sinha, Solicitor General and O. P. Rana, for respondents (in W.Ps.
1524, 1537 1580173).
O. P. Rana, for respondents (in W.Ps.
Nos. 74, 254/70, 21171, 1525, 1581 1606/73 and respondents nos.
1 & 3 in W.P. 75 and 510 512/70).
V. M. Tarkunde and E. C. Agarwala, for respondent No. 2 (in W. P. No. 75/70 and applicant/intervener in W.P. No. 75/70.
The Judgment of the Court was delivered by Goswami, J.
By the above writ applications under Article 32 of the Constitution the validity of the Uttar Pradesh Krishi Utpadhan Mandi Adhiniyam, 1964 (U.P. Act No. XXV of 1964 as amended by U.P. Act No. 10 of 1970) (briefly called the Act) and the rules made thereunder are challenged on the ground of violation of Article 14 and Article 19(1)(g) of the, Constitution.
The petitioners in all the above cases are traders or commission agents dealing in agricultural produce.
The following submissions are made on behalf of the petitioners (1) The constitution of the Market Committee under section 13 of the Act is highly prejudicial to their interests and of the traders in general since, it will have a perpetual majority of producers.
(2) To entrustment of licensing to such a Market Committee instead of to any impartial authority is unfair and an un .
reasonable restriction on the right to trade.
(3) The Act in the matter of grant of licences gives no guidance at all and even under rule 70(4) two vague criteria have been laid down in the matter of issue of licences under the Act.
(4) The petitioners are required to provide a storage space to the producers for their agricultural produce going to the market and this obligation is also an unreasonable res triction on the fundamental right of the petitioners.
379 (5) Rule 76 (1) is invalid and ultra vires section 40 of the Act and has also placed unreasonable restrictions on the right to carry on trade or business.
Before we deal with these submissions, we may turn out attention to the Act.
As the preamble shows the Act has to provide for the regulation of sale and purchase of agricultural produce and fox the establishment, superintendence, and control of markets therefore in Uttar Pradesh.
The statement of object and reasons gives a clear picture of the evils sought to be, remedied by this legislation and a portion therefrom may be extracted below : "The present chaotic state of affairs as, obtaining in agricultural produce markets is an acknowledged fact.
There are.
,innumerable charges,, levies.
and exactions which the agricultural producer is required to pay without having any say in the proper utilisation of the amount so paid by him.
In matters of dispute, between the seller and the buyer, the former is generally put at a disadvantage; by being given arbitrary awards.
The producer is also denied a large pa rt of his produce by manipulation and defective use of weights and scales in the market.
The Government of India and the various committees and commissions appointed to study the condition of agricultural markets in the country have also been inviting the attention of the State Government from time to time towards improving the conditions of these markets .
The Planning Commission stressed long ago that legislation in respect of regulation of markets should be, enacted and enforced by 1955 56".
It is also mentioned that legislation in the State was first proposed in 1938 but lapsed.
It also appears that most of the other states have already passed legislation in this respect.
It is, therefore, clear that the principal object of this Act is to come in aid of the producers who are generally ill organised and are by far and large the exploited party in the bargain between unequals.
Section 2 contains the definitions.
By section 2(a) " 'agricultural produce ' means such items of produce of agriculture, horticulture, viticulture, apiculture, sericulture, pisciculture, animal husbandry or forest as are specified in the schedule, and includes admixture of 2 or more of such items, and also includes any such item in processed form, and further includes gur, rab, shakkar, khandsari and jaggery".
By section 2 (f) " 'Committee ' means a Committee constituted under this Act".
By section 2(k) " 'Market Area ' means an area notified as such under section 6 or as modified under section 8".
By section 2(p) " 'producer ' means a person who, whether by himself or through hired labour, produces, rears or catches, any agricultural produce, not being a producer who also works as a trader, broker or Dalal, commission agent or Arhatiya or who is otherwise ordinarily engaged in the business, of storage of agricultural produce".
We are not concerned with the pro viso attached thereto.
By section 2(y) " 'trader ' means a person who in the ordinary course of business is engaged in buying or selling agricultural produce as a principal or as a duly authorised agent of one or more 380 principals and includes a person, engaged in processing of agricultural produce".
After notification by the State Government of its intention to declare a particular area as a Market Area under section 5 and after inviting objections and consideration of the same, the State Government under section 6 declares the whole or any specified portion of the area mentioned in the notification to be the Market Area in respect of such agricultural produce as may be specified.
Similarly under section 7, the Principal Market Yard and Sub Market Yards are declared.
Section 9(2) which is material for our purpose, may be quoted: "No person shall, in a Principal Market Yard or any Sub Market Yard, carry on business or work as a trader, broker, commission agent, warehouse man, weighman, palledar or in such other capacity as may be prescribed in respect of any specified agricultural produce except under and in accordance with the conditions of a licence obtained therefore from the Committee concerned".
The petitioners make a great grievance of this licensing provision by the Market Committee called the Mandi Samiti of the Market Area.
Section 13 provides for constitution of the Market Committee and provides for representation from different sources as detailed in (i) to (xi) thereunder.
The learned counsel draws our attention to clauses, (vii) and (vii a) of section 13(1) whereby ten representatives of the producers are included in the Committee.
It is pointed out by the learned Solicitor General and not contradicted by Mr. Sen that ' the Committee under section 13 consists of 23 members out of which ten are from the producers.
Section 16 provides for functions and duties of the Committee and, inter alia, under section 2(i) thereof "a Committee shall ensure fair dealings between the producers and persons engaged in the sale or purchase of specified agricultural produce.
" Under section 17, "A Committee shall, for the purposes of this Act, have the powers to (i) issue or renew licences under this Act on such terms and conditions and subject to such restrictions as may be prescribed, or, after recording reasons therefore, refuse to issue or renew any such licence; (ii) suspend or cancel licences issued or renewed under this Act".
Section 25 provides for appeals against the, orders of the Committee to the Director of Agriculture who is to decide the same in accordance with the rules.
Under section 32, the State Government also has powers of revision and may call for the records of the proceedings of the Committee and pass orders modifying, annulling or reversing the same.
Section 40 enables the State Government to make rules for carrying out the purposes of this Act.
The rules, inter alia, provide for matters relating to the functions, powers and duties of the Committee, licensing fee, or market fee which may be levied and realised by the Committee and their mode of recovery and the terms and conditions for assessment and renewal of licences under this Act [section 40 (2) ].
There is a schedule to the Act 381 which contains the description of the agricultural produce Under eight different heads.
Chapter VIII of the rules deals with transaction of business in Market Yards and the opening rule 70 provides for licensing by the Market Committees.
By sub rule(3) "any person desiring to hold licence under sub rule (1) shall make, in Form No. XI or Form No. XII, as the case may be, a written application for a licence to the Market Committee and shall pay the licence fees prescribed under rule 67".
Rule 70(4) (i) may now be quoted: "On receipt of such application together with the amount of fee prescribed under rule 67, the Market Committee may issue him the licence applied for,, if (a) it is satisfied that the applicant is solvent; (b) it is satisfied that the applicant is a desirable person to whom a licence may be granted; provided that the provisions of sub clause (a) shall not apply to weighmen, measurers, palledars, truck plyers and Thela plyers".
This rule will have to be read with section 17 quoted above.
By rule 73, the order of refusal, cancellation or suspension of a licence by, the Committee shall be communicated to the person concerned in the specified manner indicated therein.
Rule 76(1) which is impugned may be quoted : "Every consignment of specified agricultural produce brought for sale into the Principal Market Yard or any sub Market Yard shall be sold by open auction: Provided that nothing in this sub rule shall apply to a retail sale as may be specified in the bye laws of the Committee".
Some provisions of similar Acts of the States of Madras, Bombay and Gujarat had earlier been the targets of unsuccessful attack in this Court and hence the constitutional challenge in the present applications against the U.P. Act is necessarily on different ground,,.
[See M. C. V ' section Arunchala Nadar etc.
vs The State of Madras & others;(1) Mohammad Hussain Gulam Mohammad and Another vs The State of Bombay and another;(2) and Jan Mohammed Noor Mohammed Begban vs State of Gujarat and Another(3)].
We may now turn to the Submissions.
With regard to the first submission, as earlier noted, the grievance is not factually accurate.
Out of 23 members of.
the Committee only 10 are from the producers.
Therefore, there is no question of a perpetual majority of the producers in the Committee.
Besides under section 13(1)(vii), 8 producers are elected.
It may be even a legitimate expectation of the legislature that there may be reasonable likelihood that Producers of eight categories of agricultural produce mentioned in the schedule, (1) [1959] (Supp) (1) S.C.R. 92.
(2) ; (3) ; 382 may be represented.
Under section 13(1)(vii a), which was introduced by an amendment in 1970, two producers belonging to the scheduled castes are to be nominated by the State Government This provision is made in the interest of the People belonging to the scheduled castes who may not be able to.
get due representation in the elections.
We do not find any unreasonable features in the scheme of representation in the Committee under section 13.
This will be clear even from section 14 whereby the first Committee appoints suit able members "to represent different interests referred to in sub section (1) of section 13".
The first submission of the petitioners is, therefore, of no avail.
We may now take up consideration of the second and the third submissions which may be dealt with together.
It is submitted that the licensing of the traders should not be left in the hands of the Market Committee.
We find it difficult to appreciate how the performance of this duty by the Committee will at all prejudice the traders.
To say the least it is a hypothetical objection in this case, as, we understand, none of the petitioners have been refused a licence.
It is true that usually some governmental authority is charged with the duty of granting of licences under various local Acts.
That, however, does not prove that the duly cannot be properly and impartially exercised by the Committee representing various interests which are vitally interested in the trade of agricultural produce.
Whether in a particular case the action of the Committee is mala fide or otherwise, objectionable, may be a different matter and such a grievance can be properly dealt with.
That would, however, not make, the, provision invalid nor can it be said to place an unreasonable restriction on the right of the petitioners to trade.
It is further submitted that there is no guidance in the Act in the matter of grant of licence and the relevant rule 70(4)(1) prescribes only two vague criteria in the matter.
This submission fails to take note of the fact that the Committee which is entrusted with the duty of granting licences consists of people from different sources vitally interested in the marketing of agricultural produce.
The Committee consists also of representatives from local bodies, cooperative marketing societies Central Warehousing Corporation, State Warehousing Corporation, representatives of traders and commission agents, Government officials of whom one shall be a representative of the Agriculture Department and the other of Food and Supplies Department, and so forth.
It is, therefore, a fairly well represented Committee which is expected to know the object and purpose of the Act of which it is a creature.
One may legitimately expect that the members are well aware of the difficulties of the producers, interests of the traders and the intricacies of the trade.
There is sufficient guidance from the preamble and other provisions of the Act with which the members of the Committee owe their duty to be conversant For example under section 16 the Committee is charged with the duty of enforcing the provisions of the Act, the rules and the bye laws.
It has to exercise its powers and perform its duties and discharge its functions in accordance with the provisions of the Act and the rules.
38 3 Under sub section (2) of section 16, the Committee shall ensure fair dealings between the producers and the traders besides performing other functions.
Form No. XI in which a trader has to submit his application for a licence.
also gives various particulars from which the Committee would be able to consider his claim for a licence.
It will be ' seen that in this form the, applicant has to undertake to abide by the conditions of the licence and the provisions of the Act and the rules.
The condition of the licence which are noted in Form No. XIII would also give an indication of the obligations of the licensee.
All these would be known to the Committee.
At any rate, with the help of the Government officials in the Committee there is no reason to think that the work of the Committee will not function smoothly and that there will be any reason to apprehend that licences would be refused arbitrarily.
Even the scope for such an apprehension is sought to be done away with by providing a provision Provision of appeal against the decision of the Committee and also a further revision to the State Government.
There is a further limitation on the power of the Committee by insisting upon recording of reasons while refusing a licence.
It is, therefore, clear that a speaking order has to be.
passed when refusing a licence and it will have to justify that the licence is refused only on relevant considerations with regard to solvency and fitness in terms of the provisions.
of the Act.
It is submitted that the choice of the two criteria under rule 70(4) (i) is bad and there is no proper guidance in these criteria which are not capable of objective determination.
The two criteria laid down are solvency and desirability.
The applicant has to satisfy the Committee that he is solvent as opposed to insolvent that is bankrupt.
We are informed that the original Hindi version of the rule which is translated into English gives the equivalents as follows : "It is satisfied that the applicant is not a bankrupt (rindiwali) ".
"It is satisfied that the applicant is a proper (upoyukta) person to whom a licence may be granted".
Mr. Sen candidly admits that the criterion on the score of "bankruptcy" is well known and cannot be said to be vague or indefinite.
Hi, however, submits that the second criterion is not at all precise and definite.
Although perhaps a more expressive guidance could have been given, we have already observed that the Act itself provides sufficient guidance to the Committee in the matter of deciding whether a particular applicant is or is not a proper person to hold a licence and we cannot accede to the submission that the two criteria taken with the other guidelines from the provisions of the Act and the rules offer no proper guidance to the Committee in tic matter of grant of licence.
The second and the third submissions of the petitioners are, therefore, devoid of substance.
With regard to the fourth submission, it is sufficient to point out that under section 16(2)(vii) the Committee has to provide, inter 384 alia, accommodation for storage and such other facilities as may be prescribed.
Under rule 52(4) storing of the specified agricultural produce shall be subject to the payment of such storage fee and such other conditions as may be specified in the by laws.
That being the position, this may be even an interim measure pending arrangements by.the Committee, for proper storage.
Even otherwise the storage by the traders in the Market Yards will be always paid for under rule 52(4).
There is, therefore, no substance in the fourth submission of the petitioner.
With regard to the last submission regarding invalidity of rule 76(1), we are not satisfied that the same is ultra vires section 40 of the Act.
Section 40 empowers the State Government to make rules for carrying out the purposes of the Act.
Rule 76(1) is well within the rule making power of the State Government under section 40(2), clause (xxvii).
Section 9(2) restricts the right to carry on trade except under and in accordance with a licence.
Section 17 provides for issuing or renewal of licences subject to the restrictions under the rules.
Section 9(2) and section 17 are not challenged before us.
Rule 76(1) prescribes the mode of sale that is to say by open auction under the rule making power under section 40 read with clause (xxvii).
The rule is not ultra vires section 40 of the Act.
It is said that prohibiting private sales by confining only to sale by open auction puts an unreasonable restriction on the right to trade of the petitioners.
If section 9(2) and section 17 are not challenged as invalid, it is not understood how rule 76(1) which is within the rule making power can be said to be unreasonable.
In order that the producers obtain the best price for their commodity, sale by open auction is prescribed under rule 76(1) lo fulfil one of the important purposes of the Act.
Sale by auction is a well known mode of sale by which the producers, for whose interest this Act has been made, can obtain the best price for their commodities.
The definition of sale and purchase to which our attention has been drawn by the petitioners do not run counter to the provisions for auction sale under rule 76.
It cannot by any stretch of imagination be held to be an unreasonable mode in the entire scheme of the Act.
The legislature is intervening to see that the producers get the maximum pecuniary return possible in their transactions and, as a necessary concomitant, eliminated the mode of private sale by individual negotiations resulting in malpractices.
Besides by the proviso to rule 76(1) this restriction is not allowed to operate in the case of retail sales.
There is, therefore, no substance in the submission that rule 76(1) violates the fundamental right of the petitioners under Article 19 (1) (g) of the Constitution.
Mr. Sen particularly drew our attention to two decisions of this Court.
The first is given in Lala Hari Chand Sarda vs Mizo District Council and Anr.
(1) That was a case where the Executive Committee of the Mizo District Council refused to renew the temporary licence issued to the appellant therein who was a non tribal trader under section 3 of the Lushai Hills District (Trading by non Tribals) Regulation, 1953.
This Court by majority struck down section 3 as (1) ; 385 violative of Article 19(1) (g) of the Constitution.
This decision is clearly distinguishable from the present case.
In that case there was no right of appeal to any superior authority against a refusal to grant or renew a ]licence and the non tribal trader had no remedy whatsoever against such an order.
This Court also observed in that case that "a perusal of the Regulation shows that it nowhere provides any principle or standard on which the Executive Committee has to act in granting or refusing to grant the licence" (emphasis added).
The second decision, is in Harakchand Ratanchana Benthia and Ors. etc.
vs Union of India and Ors.(1) This was a case under the Gold (Control) Act and Mr. Sen drew our attention to the expression 'suitability of the applicant" in section 27(6)(e) of the Gold (Control) Act which was held to provide no objective standard or norm and as such was held to be constitutionally invalid.
This Court while dealing with the objection to section 27 of the Gold (Control) Act which relates to licensing of dealers held as follows : "Section 27(6)(a) states that in the matter of issue or renewal of licences the Administrator shall have regard to the number of dealers existing in the region in which the applicant intends to carry on business as a dealer, But the word 'region is nowhere defined in the Act.
Similarly section 27(6)(b) requires the Administrator to have due regard to the anticipated demand, as estimated by him for ornaments in that region, but the expression anticipated demand ' is vague and incapable of objective assessment and is bound to lead to a great deal of uncertainty.
In the same way 'the expression 'Suitability of the applicant in section 27(6 ) (e) and 'public interest" in section 27 (6) (g) do not provide any objective standard or norm.
Further, the requirement in the section imposing the same conditions for the renewal of the licence as for the initial grant is unreasonable, as it renders the entire future of the business of the dealer uncertain and subject to the caprice and arbitrary will of the administrative 'autho rities.
Therefore, clauses (a), (b), (e) and (g) of section 27(6) are constitutionally invalid".
In the instant case we have already examined the two criteria laid down under rule 70(4) (i) and have held that they do not place any unreasonable restriction on the right of the applicants to obtain a licence.
By rule, 70(4)(i)(b) the Committee has to be satisfied that the applicant is a fit and proper person (upoyukta) to whom a licence may be granted.
This is not the same thing as the suitability simpliciter which this Court had to deal with in the Gold (Control) Act case.
The decision is, therefore, clearly distinguishable.
In the result all the applications fail and are dismissed.
The parties will pay and bear their own costs.
V.P.S. Petitions dismissed.
(1) [1970] (1) S.C.R.479.

summary:
The Uttar Pradesh Krishi Utpadhan Mandi Adhiniyam, 1964 as amended by U.P. Acts 25 of 1964 and 10 of 1970.
was enacted to provide for the regulation of the sale and purchase of agricultural produce, to protect the producers from exploitation and for the establishment, superintendence and control of markets in U.P.
Under section 5, the State Government is empowered to declare a particular area as market area and under section 7.
the principal market yard and sub market yards are declared.
Section 7(2) provides that no person shall in a principal market yard or sub market yard carry on business as a trader, broker, commission agent etc., in respect of specified agricultural produce except in accordance with the conditions of a licence obtained from he concerned market committee.
Sec. 13 provides for the constitution of the market committee and for representation on the committee from different sources.
Under section 17.
the committee has power to issue, renew, suspend or cancellicences.
Section 25 provides for appeals against orders of the committeeto the Director of Agriculture and section 32 for revision by the State Government Under section 16(2)(vii), the committee has to provide accommodation for storage.
40 enables the ' State Government to make rules Rule 70(4)(1)provides that the Committee may issue a licence to an applicant if it is satisfied.
(a) that the applicant is solvent and (b) that the applicant is a desirable person.
Rule 76(1) provides that every consignment of specified agricultural produce brought for sale into the principal or sub market yard shall be sold by open auction.
The petitioners who were traders or commission agents, dealing in agricultural produce, challenged the validity of the Act, and the rules made thereunder on the ground of violation of articles 14 and19(1)(g).
They contended that : (1) that constitution of the committee is prejudicial to their interests since.
it will have a perpetual majority of producers, (2) the entrustment of licensing to such a committee is an unreasonable restriction on their right to trade, (3) there is no guidance in the matter of grant of licences, the criteria mentioned in r. 70(4) being vague, (4) the requirement to provide storage space for the producers by the petitioners is an unreasonable restriction, and (5) r. 76(1) is ultra vires section 40 and also places an unreasonable restriction on the petitioners.
Dismissing the petitions, HELD : (1) Under section 13, the Committee is to consist of 23 members and out of, them only 10 are from the producers.
Therefore the submission is factually inaccurate as there is no question of a perpetual majority of producers.
[381G H] (2) There are no unreasonable features in the scheme of representation in the committee.
Under 8. 13, 8 producers are elected who may represent the 8 categories of agricultural produce mentioned in the schedule and two producers are nominated from the schedule castes by the Government, because, they may not get due representation in the election.
The performance of the duty of licensing by such a committee cannot prejudice the petitioners.
In fact, none of the petitioners has been refused a licence.
Though usually some governments] authority is charged with the duty of granting licences under various Acts, that does not prove that the duty cannot be property and impartially exercised by a Committee representing various interests which are 377 vitally interested in the trade.
of agricultural produce.
If in a particular case.
the action of the Committee is mala fide ' or otherwise objectionable such grievance can be properly dealt with.
[381H 382E] (3) It is not correct to say that there is no guidance in the Act in the matter of grant of license and that the two criteria provided by rule 70(4)(1) are vague.
[382E F] (a) The Committee which is entrusted with the duty of granting licences consists of people from different sources vitally interested in the marketing of agricultural produce, as well as Government officials.
It is a well represented Committee which is expected to know the object and purpose of the Act of ' which it is a creature.
There is sufficient guidance from the preamble and other provisions of the Act with which the members of the Committee would be familiar and conversant, for example, section 16 of the Act and the particulars in Forms XI and XIII.
for the application of a licence and Conditions of a licence.
With the help of Government officials in the committee there is no reason to think that the Committee will not function smoothly or to apprehend that licence would be refused arbitrarily.
There is also a limitation on the power of the Committee in that the Act insists that the Committee should record its reasons while refusing a licence.
Further, there is provision of appeal against the decision of the Committee and a further revision to the State Government.
[382F 383D] (b) One of the two criteria mentioned in r. 70(4)(i).
is solvency and the criterion on the score or 'bankruptcy is well known and cannot be said to be vague or indefinite.
As regards the second criterion, namely, that the applicant should be a desirable person the Act itself provides sufficient guidance to the Committee in the matter of deciding whether a particular applicant is or is not a proper person to hold the licence.
[383F H] (4) The requirement to provide a storage space is only an interim measure pending arrangements by the Committee for proper storage as required by section 16.
Under r. 52(4) storing of the specified agricultural produce shall be subject to the payment of such storage fee and other conditions as may be: specified in the bye laws.
Since the storage by the traders in the market yards will always be paid for under the rule there is no substance in the contention that the requirement is unreasonable.
[384A B] (5)(a Rule 76(1) is not ultra vires section 40 Section 9(2) restricts the right to carry on trade except under and in accordance with the licence_ and section 17 provides for issuing or renewal of licences subject to the restrictions under the rules, and these sections are not challenged.
Section 40 empowers the State Government to make rules for carrying out the purposes of the Act, and under section 40(2) (xxvii), r. 76(1) only prescribes open auction as the mode of sale.
[384B D] (b) The rule does not violate the fundamental right of the petitioners under article 19(1)(g).
[384G] The definitions of sale and purchase in the.
Act do not run counter to the provisions relating to auction sale under, the rule and, it Could not be field to be an unreasonable mode considered in the entire scheme of the Act.
in order that the producers may obtain the best price for their commodity, sale by open auction is prescribed under the rule to fulfil one of the important purposes of the Act.
The legislature is intervening to see that the producers get the maximum pecuniary return possible in the transaction and as a necessary concomitant eliminated the made of private sale by individual negotiation resulting in malpractices.
Besides, by the Proviso to the rule the restriction is not allowed to operate in the case of retail sales.
[384D G] Lala Hari Chand Sarda vs Mizo District Council and all) .
and Harakchand Ratanchand Banthia and ors.
vs Union of India and ors.
; , distinguished.