judgement:
il Appeal No. 1102 of 1966.
Appeal from the judgment and order dated December 27, 1965 of the Jammu and Kashmir High Court in W. P. No. 67 of 1965.
C.K. Daphtary, Attorney General, section V. Gupte, Solicitor General, Jaswant Singh, Advocate General for the State of J. & K. H. R. Khanna; section Javali, Ravinder Narain, for the appellants.
B. Sen, I. N. Shroff, M. K. Banerjee, B. N. Kirpal, R. K. Kaul, R. N. Kaul, P. L. Handu, Lalit Bhasin and T. R. Bhasin, for respondent No. 1.
The Judgment of the Court was delivered by Sarkar C.J.
This is an appeal by the State of Jammu and Kashmir, G. M. Sadiq, Chief Minister of that State and D. P.Dhar its Home Minister.
The appeal is contested by respondent 403 No. 1, Bakshi Ghulam Mohammad.
The other respondent, N., Rajagopala Ayyangar, a retired Judge of this Court, has not appeared in this Court or in the court below.
These are the parties to the proceedings before us.
After the accession of the State of Jammu and Kashmir to India in 1947, a responsible Government was set up there under the Prime Ministership of Shiekh Mohammad Abdulla.
Bakshi Ghulam Muhammad was the Deputy Prime Minister in that Government and G. M. Sadiq was also in the Cabinet.
In 1953 Sheikh Mohammad Abdulla was dismissed from office and a new Government was formed with Bakshi Ghulam Mohammad as the Prime Minister and G. M. Sadiq and D. P. Dhar were included in the Cabinet.
On January 26, 1957, a new Constitution was framed for Jammu & Kashmir.
In the first elections held under the Constitution, a party called the National Conference got the majority of votes.
Bakshi Ghulam Mohammad and Sadiq were members of this party.
A Ministry was then formed with Bakshi Ghulam Mohammad as the Prime Minister.
It appears that G. M. Sadiq left the party sometime after 1957 and rejoined it along with D. P. Dhar in December 1960 and they were taken into the Cabinet.
The next General Elections were held in 1962.
Again, the National Conference Party came into power.
In the Government that was formed, Bakshi Ghulam Mohammad became the Prime Minister and G. M. Sadiq and D. P. Dhar were taken in the Ministry.
In September 1963, Bakshi Ghulam Mohammad resigned from the Ministry under what is called the Kamraj Plan and Shamsudd in became the Prime Minister in his place.
It will be noticed that Bakshi Ghulam Mohammad was the Deputy Prime Minister of the State from 1947 to 1953 and its Prime Minister from 1953 to 1963.
So he held these offices, one after the other, for a total period of about sixteen years.
In February 1964, Shamsuddin left office and a new Govern ment was formed with G. M. Sadiq as the Prime Minister.
It is said that shortly thereafter, political rivalry between him and Bakshi Ghulam Mohammad started.
In August 1964, a notice was issued fixing a session of the Legislature of the State in the following September.
According to Bakshi Ghulam Mohammad, thereafter, some of the legislators wanted to bring in vote of no confidence against G. M.Sadiqs Ministry and by September 21, 1964 the no confidence motion had obtained the support of the majority of.
members of the Assembly.
On September 22, 1964, at 5 o 'clock in the morning, Bakshi Ghulam Mohammad and some of his supporters were arrested under the Defence of India Rules.
At 8.30 a.m. on the same day the notice of the motion of no confi dence with the signatures of some members was handed over to the Secretary of the Legislative Assembly.
G. M. Sadiq challenges the genuineness of the, signatures on the notice of the motion and also denies that it had the support of, a majority: of the Assembly , At 9 a.m. the Legislative Assembly which was to meet on that day,.
404 was prorogued by the Speaker under the directions of the Sadar i Riyasat, the constitutional head of the State.
Sometime in November 1964, a petition for a writ of habeas corpus for the release of Bakshi Ghulam Mohammad was presented to the High Court of Jammu and Kashmir.
On December 15, 1964, before the petition could be heard and decided, Bakshi Ghulam Mohammad was released from arrest by the State Government.
On January 30, 1965, a Notification was issued by the State Government appointing a Commission of Inquiry constituted by N. Rajagopala Ayyangar to enquire into (1) the nature and extent of the assets and pecuniary resources of Bakshi Ghulam Mohammad and the members of his family and other relatives mentioned in the first Schedule to the Order, in October 1947 and in October 1963; and (ii) whether during this period, Bakshi Ghulam Mohammad and the others mentioned in the Schedule had obtained any assets and pecuniary resources or advantages by Bakshi Ghulam Mohammad abusing the official positions held by him or by the aforesaid people set out in the first Schedule by exploiting that position with his knowledge, consent and connivance.
The Notification provided that in making the inquiry under head (ii) the Commission would examine only the allegations set out in the second Schedule to it.
It is this Noti fication that has given rise to the present proceedings.
The Commission held certain sittings between February 1965 and August 1965 in which Bakshi Ghulam Mohammad took part.
On September 1, 1965, Bakshi Ghulam Mohammad moved the High Court of Jammu and Kashmir under sections 103 and 104 of the Constitution of Jammu and Kashmir, which correspond to articles 226 and 227 of the Indian Constitution, for a writ striking down the Notification and quashing the proceedings of the Commission taken till then and for certain other reliefs to which it is not necessary to refer.
The petition was heard by a Bench of three learned Judges of the High Court.
The High Court allowed the petition, set aside the Notification and quashed the proceedings of the Commission.
This appeal is against the judgment of the High Court.
In the High Court, eight grounds had been advanced in support of the petition, three of which were rejected but the rest were accepted, some unanimously and some by the majority of the learned Judges.
They have however not all been pressed in this Court.
The Notification had been issued under the Jammu & Kashmir Commission of Inquiry Act, 1962.
The first point taken was that the Notification was not justified by the Act because under the Jammu & Kashmir Constitution, a Minister was responsible for his acts only to the Legislature and no action could be taken against him except for criminal and tortuous acts in the ordinary courts of law, unless the Legislature by a resolution demanded it.
The substance of this contention is that an inquiry cannot be directed under the Act into the actions of a Minister except at the instance of the Legislature, it cannot be directed by an order of the Government.
This contention is based on section 37 of the Jammu 405 & Kashmir Constitution.
That section states that the Council of Ministers shall be collectively responsible to the Legislative Assembly.
It is contended that this implies that in no other way is a Minister responsible for anything that he does when in office.
It is also said that is the convention in Britain and it has been adopted in the State of Jammu & Kashmir.
We confess to a certain amount of difficulty in appreciating this argument.
The point about the British convention need not detain us.
It has not been shown that any such convention, even if it exists in England, as to which we say nothing, has been adopted in the State of Jammu & Kashmir.
The Jammu & Kashmir Constitution is a written document and we can only be guided by its provisions.
It is said that section 37 indicates that the British convention was adopted by the State of Jammu & Kashmir.
We are unable to agree with this view.
Section 37 talks of collective responsibility of Ministers to the Legislative Assembly.
That only means that the Council of Ministers will have to stand or fall to other, every member being responsible for the action of any Other.
The emphasis is on collective responsibility as distinguished from individual responsibility.
The only way that a legislature can effectively enforce this responsibility of the Council of Ministers to it is by voting it out of office.
Furthermore, this responsibility is of the Council of Ministers.
Bakshi Ghulam Mohammad did not, at the date of the Notification, belong to that Council.
He did not on that date owe any responsibility to the Legislature under section 37.
That section has no application to this case Again section 3 of the Inquiry Act states, "The Government may and shall if a resolution in this behalf is passed by the Jammu & Kashmir State Legislative Assembly or the Jammu & Kashmir Legislative Council by notification appoint a Commission of Inquiry".
It ,would, therefore, appear that the Act gave power to the Government to set up a Commission and also to both the Houses of the Legislature to require a Commission to be set up.
It is important to note that even the Legislative Council has a right to get a Com mission appointed though section 37 of the Constitution does not say anything about the responsibility of the Ministers to that Council.
The Act was passed by the State Legislature consisting of both the Houses.
It would show that the Legislature did not consider that there was any convention or anything in section 37 which prevented a Commission of Inquiry being set up under the Act at the instance of the Government or the Legislative Council.
The High Court had rejected this contention and we think that it did so rightly.
The next point urged in support of the petition was that the Act permitted a Commission to be set up for making an inquiry into a definite matter of public importance and the matters which the Commission had been set tip to inquire into were not such.
This contention found favour with all the learned Judges of the High Court.
We are, however, unable to accept it.
It is true that 406 a Commission can be set up only to inquire into a definite matter of public importance.
But we think that the matters into which the Commission was asked to inquire were such matters.
The first inquiry was as to the assets possessed by Bakshi Ghulam Mohammad and the other persons mentioned in the Notification, in October 1947 and in October 1963 and the second was whether during this period being the sixteen years when he held office as Prime Minister and Deputy Prime Minister, he and the other persons named had obtained any assets or pecuniary advantage by abuse of his official position or by that position being exploited by the others with his consent, knowledge or connivance, this inquiry being confined only to the instances set out in the second Schedule to the Notification.
That Schedule contains 38 instances, the first of which, in substance, repeats the second head of inquiry earlier mentioned.
The other items refer to individual instances of people being made to part with property under pressure brought upon them by abuse of official position and of public money being misappropriated.
At the end of this Schedule, there is a note ' stating that the gravamen of the charge was that Bakshi Ghulam Mohammad abused his official position and the other persons named, exploited that position with his consent, knowledge or connivance in committing the acts whereby they acquired vast wealth.
The inquiry was, therefore, into the assets possessed by Bakshi Ghulam Mohammad and the persons named, respectively in October 1947 and in October 1963 and to find out whether they had during this period acquired wealth by the several acts mentioned in the second Schedule by abuse or exploitation of Bakshi Ghulam Mohammad 's official position.
The first question is, whether these are matters of public importance.
Two of the learned Judges held that they were not and the third took the contrary view.
This was put on two grounds.
First, it was said that these matters were not of public importance because they had to be so at the date of the Notification and they, were not so on that date as Bakshi Ghulam Mohammad did not then hold any office in the Government.
It was next said that there was no evidence of public agitation in respect of the conduct complained of and this showed that they were not matters of public importance.
We do not think that either of these grounds leads to the view that the matters were not of public importance.
As regards the first, it is difficult to imagine how a Commission can be set up by a Council of Ministers to inquire into the acts of its head, the Prime Minister, while he is in office.
It certainly would be a most unusual thing to happen.
If the rest of the Council of Ministers resolves to have any inquiry, the Prime Minister can be expected to ask for their resignation.
In any case, he would himself go out.
If he takes the first course, then no Commission would be set up for the Ministers wanting the inquiry Would have gone.
If he went out himself, then the Commission would be set up to inquire into the acts of a person who was no longer in office and 407 for that reason, if the learned Judges of the High Court were right, into matters which were not of public importance.
The result would be that the acts of a Prime Minister could never be inquired into under the Act.
We find it extremely difficult to accept that view.
These learned Judges of the High Court expressed the view that the acts of Bakshi Ghulam Mohammad would have been acts of public importance if he was in office but they ceased to be so as he was out of office when the Notification was issued.
In taking this view, they appear to have based themselves on the observation made by this Court in Ram Krishan Dalmia vs Shri Justice section R. Tendolkar(1) that "the conduct of an individual may assume such a dangerous proportion and may so prejudicially affect or threaten to affect the public well being as to make such conduct a definite matter of public importance, urgently calling for a full inquiry".
The learned Judges felt that since Bakshi Ghulam Mohammad was out of office, he had become innocuous; apparently, it was felt that he could no longer threaten the public wellbeing by his acts and so was outside the observation in Dalmia 's case.
We are clear in our mind that this is a misreading of this Court 's observation.
This Court, as the learned Judges themselves noticed, was not laying down an exhaustive definition of matters of public importance.
What is to be inquired into in any case are necessarily past acts and it is because they have already affected the public well being or their effect might do so, that they became matters of public importance.
It is irrelevant whether the person who committed those acts is still in power to be able to repeat them.
The inquiry need not necessarily be into his capacity to do again what he has already done and it may well be into what he has done.
The fact that Bakshi Ghulam Mohammad is no longer in office does not affect he question whether his acts already done constitute matters of public importance.
If once it is admitted, as it was done before us, that if he had been in office his acts would have been matters of public importance, that would be acknowledging that his acts were of this character.
His resignation from office cannot change that character.
A Minister, of course, holds a public office.
His acts are necessarily public acts if they arise out of his office.
If they are grave enough, they would be matters of public importance.
When it is alleged that a Minister has acquired vast wealth for himself, his relations and friends, as is done here, by abuse of his official position, there can be no question that the matter is of public importance.
It was said that the object of inquiry was to collect material for the prosecution of Bakshi Ghulam Mohammad and, therefore, the matters to be required into were not of public importance.
This contention is, in our view, fallacious.
It is of public importance that public men failing in their duty should be called upon (1) ; 5SCI 28 408 to face the consequences.
It is certainly a matter of importance to the public that lapses on the part of the Ministers should be exposed.
The cleanliness of public life in which the public should be vitally interested, must be a matter of public importance.
The people are entitled to know whether they have entrusted their affairs to an unworthy man.
It is said that the Notification did not mention anything about the steps to be taken to prevent recurrence of the lapses in future.
But that it could not do.
Before the facts were found steps could not be thought of, for the steps had to suit the facts.
The inquiry proposed in this case will, in the course of finding out the lapses alleged, find out the process as to how they occurred and it is only after the process is known that steps can be devised to meet them.
It was also contended that the inquiry was into allegations of misconduct against Bakshi Ghulam Mohammad and an inquiry into allegations was not contemplated by the Inquiry Act.
We are wholly unable to agree.
An inquiry usually is into a question.
That question may arise on allegations made.
Dabnia 's case(1) dealt with an inquiry ordered at least in part into allegations made against people in charge of a big mercantile enterprise.
Allegations may very well raise questions of great public importance.
Suppose it is alleged that people in a city are suffering from ill health and that is due to the contaminated water supplied by the city admi nistration.
It cannot be said that these allegations about the existence of poor health and its causes are not matters of grave public importance.
They would be so even if it was found that the people 's health was not poor and the water was not contaminated.
It cannot also be said that allegations can never be definite.
They can be as definite as any existing concrete matter.
It must depend on what the allegation is.
Then as to the question whether the allegations against Bakshi Ghulam Mohammad were not matters of public importance because there was no public agitation over them.
The Notification itself and the affidavits filed in this case on behalf of the appellants in fact state that there had been allegations made by the public against Bakshi Ghulam Mohammad that he had amassed a large fortune by the misuse of his office.
But it was said that there was no proof that the allegations had actually been made.
Whether there was proof would depend on whether the statements in the Notification and the affidavits were accepted or not.
We are, however, unable to agree that a matter cannot be of public importance unless there was public agitation over it.
Public may not be aware of the gravity of the situation.
They may not know the facts.
Some members of the public may be aware of individual cases but the entire public may not know all of them.
There may have been influences working to prevent public agitation.
Again, whe (1)[1959] S.C.R. 279. 409 ther a matter is of public importance or not has to be decided essentially from its intrinsic nature.
If a matter is intrinsically of public importance, it does not cease to be so because the public did not agitate over it.
Take this case.
Suppose the Government sets up a Commission to inquire into the mineral wealth in our country.
The public are not likely to agitate over this matter for they would not know about the mineral wealth at all.
Can it be said that the inquiry does not relate to a matter of public importance because they did not agitate over it? The answer must plainly be in the negative.
This would be so whether there were in fact minerals or not.
Considering the allegations contained in the Notification by themselves, we think for the reasons earlier mentioned, that they constitute matters of public importance even if there was no public agitation over them.
It was said that G. M. Sadiq, D. P. Dhar and various other people had praised the administration of Bakshi Ghulam Mohammad.
That they no doubt did.
But these were speeches made in support of party politics.
They might again have been made without knowledge of full facts.
They cannot, in any event, turn a matter of public importance into one not of that character.
It was then pointed out that the Notification only mentioned that the matters were of public importance but did not say that they were definite matters of public importance.
The Act, as we have earlier pointed out, requires that the matters to be inquired into shall be definite matters of public importance.
But this omission of the word "definite" in the Notification does not, in our opinion, make any difference.
A Court can decide whether the matters to be inquired into are definite matters of public importance. 'Definite ' in this connection means something which is not vague.
One of the learned Judges of the High Court held that the matters set out in the second Schedule were vague as some of the instances did not give any date or year.
He also said that the note at the end of the second Schedule., to which we have earlier referred, added to the vagueness.
We are unable to accede to this view.
What the learned Judge had in mind was apparently the particulars of the acts.
In most cases, the acts are identifiable from the particulars given in the second Schedule in respect of them.
Further, it is obvious that they had to be identified at the hearing and could not be proved nor any notice taken of them unless that was done.
It does not appear to have been contended before the Commission that there was any matter not so identifiable.
Neither do we think that the note drawing attention to the gravamen of the charges at the end of the second schedule indicates any indefiniteness.
In most of the allegations it had been expressly stated that the act was done by the misuse of Bakshi Ghulam Mohammad 's official position and by his permitting others to exploit that it is this which made the matters, matters of public importance and it was for greater safety that the note was appended so that no 5SCI 28(a) 410 doubt was left as to the gravamen of the charge in each of the allegations made.
The next point against the validity of the Notification was based on section IO of the Act which is in these terms: "10.
(1) If at any stage of the inquiry the Commission considers it necessary to inquire into the conduct of any person or is of opinion that the reputation of any person is likely to be prejudicially effected by the inquiry, the Commission shall give to that person a, reasonable opportunity of being heard in the inquiry and producing evidence in his defence; Provided that nothing in this sub section shall apply when the credit of a witness is being impeached.
(2)The Government, every person referred to in sub section (1) and with the permission of the Commission, any other person whose evidence is recorded by the Commission: (a) may cross examine any person appearing before the Commission other than a person produced by it or him as a witness, (b) may address the Commission.
(3) It was contended that it showed that an inquiry may be made under the Act into the conduct of a person only incidentally, that is to say, it can be made only when that becomes necessary in connection with an inquiry into something else.
It was, therefore, contended that the present inquiry which was directly into the conduct of Bakshi Ghulam Mohammad was outside the scope of the Act.
It was also said that section 10 gives a statutory form to the rules of natural justice and provides for the application of such rules only in the case when a person 's conduct comes up for inquiry by the Commission incidentally.
It was then said that the Act could not have contemplated an inquiry directly into the conduct of an individual since it did not provide specifically that he should have the right to be heard, the right to cross examine and the right to lead evidence which were given by section 10 to the person whose conduct came to be inquired into incidentally.
We are unable to accept this view of section 10.
Section 3 which permits a Commission of Inquiry to be appointed is wide enough to cover an inquiry into the conduct of any individual.
It could not be a natu ral reading of the Act to cut down the scope of section 3 by an implication drawn from section 10.
We also think that this argument is illfounded for we are unable to agree that section 10 does not apply to a person whose conduct comes up directly for inquiry before a Commission set up under section 3.
We find nothing in the words of section 10 to justify that view.
If a Commission is set up to inquire directly into the conduct of a person, the Commission must find 411 it necessary to inquire into that conduct and such a person would therefore, be one covered by section 10.
It would be strange indeed if the Act provided for rights of a person whose conduct incidentally came to be enquired into but did not do so in the case of persons whose conduct has directly to be inquired into under the order setting up the Commission.
It would be equally strange if the Act contemplated the conduct of a person being inquired into incidentally and not directly.
What can be done indirectly should obviously have been considered capable of being done directly.
We find no justification for accepting the reading of the Act which learned counsel for Bakshi Ghulam Mohammad suggests.
The next attack on the Notification was that it had been issued mala fide.
One of the learned Judges of the High Court expressly rejected this contention and the others also seem to have been of the same view for they did not accept it.
We find no reason to accept it either.
In that view of the matter, we consider it unnecessary to discuss this aspect of the case in great detail.
We have set out the broad events of the case and it is on them that the case of mala fide is based.
It is not in dispute that for some time past there was political rivalry between Bakshi Ghulam Mohammad and G. M. Sadiq.
It was also said that there was personal animosity because G. M. Sadiq wanted to advance the interest of his relatives and followers by ousting persons belonging to Bakshi Ghulam Mohammad 's group in various fields.
This allegation of personal animosity cannot be said to have been established.
It is really on the political rivalry and the events happening since September 21, 1964 that the allegation of male fide is founded.
It was said that the steps taken since the arrest of Bakshi Ghulam Mohammad down to the setting up of the Commission of Inquiry were all taken with the intention of driving him out of the political life so that G. M. Sadiq would have no rival as a political leader.
First, as to the arrest.
The case of Bakshi Ghulam Mohammad was that the arrest was mala fide.
On the other side, it was said that since about July 1964 various allegations of abuse of power by Bakshi Ghulam Mohammad some of which formed the subject matter of inquiry, had come to the notice of the Government and thereupon investigations were started by the Criminal Investigation Department at the instance of the Government.
In order to stop the investigation Bakshi Ghulam Mohammad and his followers started dowdyism and other form of breaches of law and order endangering public safety and maintenance of public order.
It was pointed out that the situation in Kashmir had not been easy for some time past due to the hostile intentions of Pakistan and China and breach of law and order added to the seriousness of the position.
It was said that for these reasons Bakshi Ghulam Mohammad had to be arrested and detained under the Defence of India Rules.
it was said on behalf of Bakshi Ghulam Mohammad that prior to the arrest, a no confidence motion had been sponsored and had actually gathered in volume and the arrest was made to stultify 412 it.
What support the no confidence motion had we do not know.
It would appear however that the Criminal Investigation Department had been making inquiries against Bakshi Ghulam Mohammad 's acts for some time past and the situation in Kashmir was inflammable.
In those circumstances, it cannot be said that Bakshi Ghulam Mohammad 's arrest was mala fide.
He was no doubt released from arrest after a petition had been moved for his release and before the petition was heard.
It was said that he was released because the Government found that the petition was bound to succeed.
We have no material before us on which we can say that the petition was bound to succeed.
On behalf of G. M. Sadiq and D. P. Dhar it was said that he was released because of ill health.
This does not appear to have been denied.
It was also said on behalf of G. M. Sadiq that the investigation having been completed there was no cause for Bakshi Ghulam Mohammad to instigate breaches of law and order and therefore it was not necessary to keep him in detention any longer.
On the evidence before us, we are unable to say that the case made by G. M. Sadiq cannot be accepted.
As to the prorogation of the Assembly, it is said by the appellants that it was necessary because it was apprehended that if the Assembly met, there might have been trouble inside the House created by Bakshi Ghufam Mohammad 's followers who resented the arrest.
On the materials before us, we are unable to say that this apprehension was pretended.
It was also said by the appellants that the prorogation had been decided upon before the arrest of Bakshi Ghulam Mohammad but the order could not be passed because the Sadar i Riyasat was out of Srinagar from before September 15, 1964 when both the arrest and prorogation had been decided upon and did not return there till some time on September 21, 1964.
The fact that the Sadar i Riyasat returned on that date is not denied.
As we have said, the arrest and the prorogation took place on the next day, that is, September 22, 1964.
Bakshi Ghulam Mohammad was released on December 15, 1964 and the Notification challenged was issued on January 30, 1965.
On these facts, we are unable to hold that Bakshi Ghulam Mohammad has been able to establish that the inquiry had been set up mala fide owing to political rivalry.
It has been said on behalf of the appellants that there could be no political rivalry because, as appears from Bakshi Ghulam Mohammad 's own affidavit, he had declared his intention to retire from politics.
On behalf of Bakshi Ghulam Mohammad it was stated that G. M. Sadiq had made a statement that he would be released after a Commission of Inquiry was set up and this would show that the detention was mala fide and that would indicate that the Notification had also been issued mala fide.
That statement is not before us.
On behalf of G. M. Sadiq it was said that such a statement had not been made and what had been said was that he would be released after the completion of investigation by the Criminal Investigation Department as thereafter, there 413 will be no occasion for Bakshi Ghulam Mohammad to disturb the public peace and safety.
It was also said that it had been mentioned that after the completion of the investigation, the Commission of Inquiry would be set up.
This is not denied.
It however does not make the arrest mala fide.
It was further said by Bakshi Ghulam Mohammad that the statement showed that the Commission was set up to prevent him from disturbing public safety and law and order and that, therefore, it was outside the scope of the Inquiry Act.
This was denied on behalf of G. M. Sadiq.
In the absence of the statement, it is impossible for us to say which is the correct version.
Another point taken was that the affidavits filed on behalf of the appellants showed that the Government were satisfied about the correctness of the allegations into which the inquiry was directed.
It was contended that since the inquiry is for finding facts, if the Government were already satisfied about them, there was no need for further inquiry.
This contention has no force at all.
What the affidavit really said was that the Government were prima facie satisfied.
They had to be so before they could honestly set up the Commission to make the inquiry.
It was said on behalf of G. M. Sadiq that before setting up the Commission the Government had investigated into the facts through the Criminal Investigation Department and if the Government 's intention was mala fide, they could have started criminal proceedings and ruined the political life of Bakshi Ghulam Mohammad just as well thereby and kept him busy and out of politics for a long time.
It was pointed out that this might have resulted in serious consequences for Bakshi Ghulam Mohammad which the Commission of Inquiry would not.
It was also pointed out that the Commissioner appointed was a retired Judge of the Supreme Court of India.
All this, it was said, would indicate that the action had not been prompted by malice.
We cannot say that these contentions of the appellants have no force.
The next ground of attack on the Notification was based on article 14.
It was said that most of the matters into which the Commission had been directed to inquire formed the subject matters of Cabinet decisions.
It was pointed out that since such matters are confidential and no one is allowed to divulge in what way the members of the Cabinet voted on them, it must be held that they were all equally responsible for the acts sanctioned.
That being so, it was contended that by picking Bakshi Ghulam Mohammad out of the entire Cabinet for the purpose of the Inquiry the Government had discriminated against him in a hostile way.
It was contended that the Notification must be set aside on that ground.
We find this contention untenable.
The inquiry is in respect of wealth acquired by Bakshi Ghulam Mohammad and his friends and relatives by misuse of his official position.
It would be strange if all the members of the Cabinet voluntarily abused their office for putting money into the pockets of Bakshi Ghulam Mohammad and his friends.
Let us, however, assume that all the 414 members of the Cabinet assisted Bakshi Ghulam Mohammad in doing this.
It is however not said that other members had acquired wealth by these acts.
He was, therefore, in a class by himself.
This classification has further a rational connection with the setting up of the Commission, for the object is to find out whether the wealth had been acquired by Bakshi Ghulam Mohammad by the abuse of official position.
It remains now to deal with the last point.
This was directed against the proceedings of the Commission.
It was said that the proceedings had been conducted in a manner contrary to the rules of natural justice and to statutory provisions.
Two specific complaints were made.
The first was that the Commission had not allowed Bakshi Ghulam Mohammad to inspect all the documents before he was called upon to answer the allegations made against him.
The second was that the Commission had refused him permission to cross examine persons who had filed affidavits supporting the allegations made against him.
We have now to set out the procedure followed by the Commission.
It first called upon the Government to file affidavits in support of the allegations in the second schedule to the Notification and to produce the documents which supported them.
It then asked Bakshi Ghulam Mohammad to file his affidavit in answer.
Thereafter the Commission decided whether any prima facie case had been made for Bakshi Ghulam Mohammad to meet and in that process rejected some of the allegations.
Bakshi Ghulam Mohammad was told that there was no case, which be had to meet in respect of them.
Out of the remaining allegations, a group was selected for final consideration and it was decided that the rest would be taken up gradually thereafter.
In connection with that group of cases, counsel for Bakshi Ghulam Mohammad wanted to cross examine all the persons who had filed affidavits supporting the Government 's allegations in the cases included in that group.
The Commissioner ordered that he would not give permission to cross examine all the deponents of affidavits but would decide each case separately.
It was after this that the petition for the writ was presented.
The question of inspection is no longer a live question.
It is true that when Bakshi Ghulam Mohammad was directed to file his affidavits he had not been given inspection of ' all the documents and files which the Government proposed to use to support their case.
On behalf of Bakshi Ghulam Mohammad it was said that this was a denial of the rules of natural justice.
It is not necessary to consider this question because it is admitted that since then inspection of the entire lot of files and documents has been given.
At the final hearing of the allegations, therefore, Bakshi Ghulam Mohammad would no longer be at any disadvantage.
The next point is as to the right of cross examination.
This claim was first based on the rules of natural justice.
It was said 415 that these rules require that Bakshi Ghulam Mohammad should have been given a right to cross examine all those persons who had sworn affidavits supporting the allegations against him.
We are not aware of any such rule of natural justice.
No authority has been cited in support of it.
Our attention was drawn to Meenglas Tea Estates vs Their Workmen(1), but there all that was said was that when evidence is given viva voce against a person be must have the opportunity to hear it and to put the witnesses questions in cross examination.
That is not our case.
Furthermore, in Meenglas Tea Estate case(1) the Court was not dealing With a fact finding body as we are.
Rules of natural justice require that a party against whom an allegation is being inquired into should be given a hearing.
Bakshi Ghulam Mohammad was certainly given that It was said that the right to the hearing included a right to cross examine.
We are unable to agree that is so.
The right must depend upon the circumstances of each case and must also depend on the statute under which the allegations are being inquired into.
This Court has held in Nagendra Nath Bora vs Commissioner of Hills Division and Appeals, Assam(1) that "the rules of natural justice vary with the varying constitution of statutory bodies and the rules prescribed by the Act under which they function; and the question whether or not any rules of natural justice had been contravened, should be decided not under any preconceived notions, but in the light of the statutory rules and provisions.
" We have to remember that we are dealing with a statute which permits a Commission of Inquiry to be set up for fact finding purposes.
The report of the Commission has no force proportion vigorous.
This aspect of the matter is important in deciding the rules of natural justice reasonably applicable in the proceedings of the Commission of Inquiry under the Act. 'Then we find that section 10 to which we have earlier referred, gives a right to be heard but only a restricted right of cross exaniination.
The latter right is confined only to the witnesses called to depose against the person demanding the right.
So the Act did not contemplate a right of hearing to include a right to crossexamine.
It will be natural to think that the statute did not intend that in other cases a party appearing before the Commission should have any further right of cross examination.
We, therefore.
think that no case has been made out by Bakshi Ghulam Mohammad that the rules of natural justice require that lie should have a right to cross examine all the persons who had sworn affidavits supporting the allegations made against him.
We will now deal with the claim to the right to cross examine based on statutory provision.
That claim is based on section 4(c) of the Act.
The relevant part of the section is as follows: "The Commission shall have the power of a Civil Court.
while trying a suit under the Code of Civil Proce (1) ; (2) ; 416 dure Svt.
1977, in respect of the following matters, namely: (a) summoning and ao enforce the attendance yof an person and examining him on oath; (b) (c) receiving evidence on affidavits" ' It is not in dispute that the Code of Civil Procedure of Jammu and Kashmir State referred to in this section is in the same terms as the Indian Code of Civil Procedure.
Order 19 r. I. of the Indian Code reads as follows: "Any Court may at any time for sufficient reason order that any particular fact or facts may be proved by affidavit, or that the affidavit of any witness may be read at the hearing, on such conditions as the Court thinks reasonable: Provided that where it appears to the Court that either party bona fide desires the production of a witness for cross examination, and that such witness can be produced, an order shall not be made authorising the evi dence of such witness to be given by affidavit.
" The contention is that the powers of the Commission therefore to order a fact to be proved by affidavit are subject to the proviso that power cannot be exercised when a party desires the production of the persons swearing the affidavits for cross examining them.
The contention was accepted by the High Court.
We take a different view of the matter.
We first observe that the inquiry before the Commission is a fact finding inquiry.
Then we note that section 10 which, in our opinion, applies to a person whose conduct comes up for inquiry by the Commission directly, has a right to cross examine only those persons who give viva voce evidence before the Commission against him.
If section 4(c) conferred a right to cross examine every one who swore an affidavit as to the facts involved in the inquiry, then section 10(2) would become superfluous.
An interpretation producing such a result cannot be right.
It also seems to us that O. 19 r.
I has to be read with O. 18 r. 4 which states that the evidence of the witnesses in attendance shall be taken orally in open court.
It would appear, therefore, that O. 19 r. I. is intended as a sort of exception to the provisions contained in O. 18 r. 4.
The Act contains no provision similar to O. 18 r. 4.
Therefore, when section 4(c) of the Act gave the Commission the power of receiving evidence on affidavits, it gave that as an independent power and not by way of an exception to the general rule of taking evidence viva voce in open court.
It would be natural in such circumstances to think that what the Act gave was only the power 417 to take evidence by affidavit and did not intend it to be subject to the proviso contained in O. 19 r. I.
If it were not so, then the result really would be to require all evidence before the Commission to be given orally in open court.
If that was intended, it would have been expressly provided for in the Act.
We should here refer to Khandesh Spinning etc.
Co. Ltd. vs Rashtriya Girni Kamgar Sangh(1) where this Court dealing with a somewhat similar section like section 4(c) observed that facts might be proved by an affidavit subject to O. 19 r. (1).
The observations appear to have been obiter dicta.
In any case that case was dealing with a statute different from the one before us.
The observation there made cannot be of much assistance in interpreting the Jammu and Kashmir Inquiry Act.
The number of witnesses swearing affidavits on the side of the Government may often be very large.
In fact, in this case the number of witnesses swearing affidavits on the side of the Government is, it appears, in the region of four hundred.
The statute could not have intended that all of them had to be examined in open court and subjected to cross examination, for then, the proceedings of the Commission would be interminable.
We feel no doubt that the Act contemplated a quick disposal of the business before the Commission, for, otherwise.
the object behind it might have been defeated.
While on this topic, we would impress upon the Commission the desirability of speedy disposal of the inquiry.
For these reasons, in our view, section 4(c) of the Act does not confer a right on a party appearing before the Commission to require a witness giving evidence by an affidavit to be produced for his cross examination.
The Commission would, of course, permit cross examination in a case where it thinks that necessary.
The view that we take should not put any party in any difficulty.
He can always file affidavits of his own denying the allegations made in affidavits filed on behalf of the other party.
If the evidence on both sides is tendered by affidavits, no one should be at any special disadvantage.
We have also to remember that section 9 of the Act gives the Commission power to regulate its own procedure subject to any rules made under the Act.
We find that the rules provide that evidence may be given by affidavits and the Commission may after reading it, if it finds it necessary to do so, record the evidence of the deponents of the affidavits and also of others; see ff.
6, 7 and 8.
Rule 10 reproduces the restricted right of cross examination given by section 10.
Rule 11 says that in all matters not provided by the rules, the Commission may decide its own procedure.
One of the matters covered by the rules is cross examination of witnesses.
So the rules contemplate cross examination as a matter of procedure and the Commission is free to decide what cross examination it will allow provided that in doing so it cannot go behind the rules relating to cross examination.
Section 9 of the Act has to be read in the light of these rules.
All this.
we think, supports (1)[1060] 2 S.C.R. 841.
418 the interpretation we have put on section 4(c).
We also feel that the procedure before a body like the Commission has necessarily to be flexible.
We, therefore, reject the last contention.
In our view, for these reasons, the judgment of the High Court cannot be supported.
We accordingly set it aside.
The appeal is allowed.
Appeal allowed.

summary:
The first respondent became a member of the Council of Ministers of the State of Jammu and Kashmir in 1947 and was the Prime Minister of the State from 1953 'to January 1963, when he resigned.
Thereafter a Notification was issued by the State Government under section 3 of the Jammu and Kashmir Commission of Inquiry Act 1962 setting up a Commission to inquire into the wealth, acquired by the first respondent and certain specified members of his family during his period of office; the Commission was also to inquire whether in acquiring this wealth there was any abuse of his official position by the first respondent or the said relatives.
The Commissioner so appointed held certain sittings between February 1965 and August 1965 in which the first respondent took part.
In September 1965 he filed a writ petition before the High Court of Jammu and Kashmir and the High Court, allowing the said petition, set aside the Notification instituting the inquiry and quashed the proceedings of the Commission.
The State appealed to the Court.
HELD: (i) Section 37 of the Constitution of Jammu and Kashmir talks of the collective responsibility of Ministers to the Legislative Assembly.
That, only means that the Council of Ministers will have to stand or.
fall together, every member being responsible for the action of any other.
The section does not mean that a Minister is responsible for his acts only to the Legislature and no action can be taken against him except for criminal or tortuous acts, in the ordinary course of law, unless the Legislature by a resolution demanded it.
No British convention to this effect, if any, can be said to have been adopted by section 37.
Furthermore, the responsibility to the Legislature is of the Council of Ministers, and not of those who have, like the first respondent ceased to be Ministers.
[405C E].
(ii)Section 3 of the Commission of Inquiry Act expressly gives power to Government as well as to both the Houses of Legislature to initiate action instituting an inquiry.
When enacting it the Legislature obviously did not consider that there was any convention or anything in section 37 which prevented a Commission of Inquiry being set up under the Act at the instance of the Government or the Legislative Council.
[405F G], (iii)The acts of a Minister while in office do not cease to be matters of public importance after he ceases to hold office; their character cannot change.
When it is alleged that a Minister has acquired vast wealth for himself and his friends by abuse of his official ' position, there can be no question that the matter is of public 402 importance.
It does not cease to be of public importance merely because what is proposed is to inquire into allegations and not into the steps to be taken to prevent lapses in the future.
Nor can absence of public agitation show that the facts to be inquired into are not of, public importance.
[407E G; 408 G] Ram Krishan Dalmia vs Shri Justice section R. Tendolkar, ; , referred to.
(iv) It is incorrect to say that) allegations mentioned are not definiteor that an inquiry into them is not contemplated by the Inquiry Act.
[409 E F] (v) It cannot be inferred from the provisions of section 10 of the Act that a Commission of Inquiry can inquire into the conduct of a person only incidentally, when the main inquiry is in respect of something else.
What can be done indirectly should obviously have been considered capabe of being done directly.
[411B] (vi)On the facts of the case the inquiry could not be said to be mala fide.
[412F] (vii)The. doctrine of Cabinet responsibility does not mean that if an inquiry was made against one of the members of the Cabinet that would be discrimination under article 14.
The respondent was in a class, by himself and the classification was justified.
[414A B] (viii)The rule of natural justice only requires that a hearing should be given.
When the Commission refused permission to the first respondent to cross examine all the witnesses who had filed affidavits against him no rule of natural justice was violated.
[415G] Meenglas Tea Estate V. Their Workmen, [1964]2 S.C.R. 165 and Nagendra Nath Bora vs Commissioner of Hills Division & Appeals, ,Assam ; (ix)Section 10 of the Act gives a right to cross examine only these persons who give viva voce evidence before the Commissioner.
[416F] (x)Section 4(c) of the Act does not confer a right on a party appearing before the Commission to require a witness giving evidence by affidavit to be produced for his cross examination.
The Commission would, of course, permit cross examination in a case where it thinks that necessary.
[417E]


judgement:
CIVIL APPEALS Nos. 170 to 176 and 178 to 183 of 1953.
Appeals from the Judgment and Order dated the 22nd August, 1952, of the High Court of Judicature at Madras in Civil Miscellaneous Petitions Nos.
13386, 13388,13390, 7812, 12003, 13188, 13262, 7822, 13123, 13347, 13341, 12997, 12494 of 1950 and Order dated 8th September, 1952, in C.M.P. No. 13936 of 1950.
K. section Krishnaswamy lyengar (K. g.
Champakesa lyengar, with him) for the appellants.
V. K.T. Chari, Advocate General of Madras (R. Ganapathy lyer and V.V. Raghavan, with him) for the respondent (State of Madras) in Civil Appeals Nos. 170 to 176 and 178 to 181.
M. Seshachalapathi for the respondent (State of Andhra) in Civil Appeals Nos. 182 and 183.
February 5.
The Judgment of the Court was delivered by MUKHERJEA J.
I2 95 S.C. I./59 762 MUKHERJEA J.
These consolidated appeals, numbering fourteen in all, are directed against a common judgment of a Division Bench of the Madras High Court dated the 23rd of August, 1952, by which the learned Judges dismissed the petitions of the different appellants made under article 226 of the Constitution.
The appellants are landholders of Madras, holding zamindaries within that State, and in their applications under article 226 of the Constitution they prayed for writs in the nature of mandamus, directing the State of Madras to forbear from notifying and taking over possession of the estates held by them and also to cancel the notifications already issued, in exercise of its powers under the Madras Estates (Abolition and Conversion into Ryotwari) Act, (Act XXVI of 1948).
This Act, the constitutional validity of which has been assailed by the appellants, was passed by the Provincial Legislature of Madras functioning under the Government of India Act, 1935, and it received the assent the Governor General of India on the 2nd of April, 1949.
The avowed object of the Act is to abolish the zamindary system by repealing the Madras Permanent Settlement Regulation of 1802, to acquire the rights landholders in the permanently settled and other ,estates and to introduce the Ryotwari system in all such estates.
After the advent of the Constitution, the Act was reserved for certification of the President and it was certified on the 12th of April, 1950.
In the petitions presented by the appellants, a large number of grounds were put forward by way of attacking the validity of the legislation which was characterised as confiscatory in its character and subversive of the fundamental right of property, which the petitioners had in the zamindaries held by them under the Permanent Settlement Regulation.
Pending the disposal of these petitions, the Constitution (First Amendment) Act of 1951 was passed on 1st of June, 1951, and this amendment introduced two new articles namely, article 31 A and 31 B in the Constitution, apparently with a view to protect the 'various laws enacted for acquisition of estates from being challenged under the relevant articles of Part III of the 763 Constitution.
Article 31 B specifically refers to a number of statutes mentioned in the ninth Schedule to the Constitution and it declares expressly that none of them shall be deemed to be void on the ground that they contravened any of the fundamental rights, notwithstanding the decision of a court or tribunal to the contrary.
It is not disputed that Madras Act XXVI of 1948 is one of the statutes included in this schedule.
It may be remembered that an attempt was made to impeach the validity of the Constitution (First Amendment) Act itself before this court in the case of Shankari Prasad Singh Deo vs Union of India (1).
The attempt failed and after the pronouncement of this court in Shankari Prasad 's case, the grounds upon which the writ petitions of the appellants were sought to be supported became for the most part unavailing.
It appears that at the time of the final hearing of the applications the arguments actually advanced on behalf of the petitioners were aimed not at invalidating the enactment as a whole, but only some of its provisions, firstly on the ground that there was no public purpose behind the acquisition of some of the items of property mentioned therein and secondly, that the provisions for compensation in certain aspects were colourable exercise of legislative powers and constituted a fraud upon the Constitution Act of 1935.
These arguments were sought to be supported entirely on the authority of the majority decision of this court in the case of The State of Bihar vs Maharajadhiraja Sir Kameshwar Singh (2) to the extent that it pronounced two of the provisions of the Bihar Land Reforms Act.
1950 a legislation similar in type to the Madras Act 1948 to be unconstitutional.
These contentions did not find favour with the learned Judges of the High Court who heard the petitions and holding that the principles enunciated by the majority of this court in the Bihar case referred to above were not applicable to the impugned provisions of the Madras Act, they dismissed all the petitions.
Certificates, however, were granted by the High Court to the petitioners (1) ; (2) 764 under article 132(1) of the Constitution and it is on the strength of these certificates that the appeals have ' come before us.
Mr. Ayyangar, appearing in support of these appeals, has taken his stand solely upon the doctrine of ' 'colourable legislation ' as enunciated by the majority of this court in the Bihar case referred to above.
He has very properly not attempted to make any point as to the absence of a public purpose in regard to any of the items of acquisition, since it is clear that according to the majority view of this court, as explained in Narayan Deo vs State of Orissa (1), the existence of a public purpose is not a justiciable issue in case of an enactment which having fulfilled the requirements of clause (4) of article 31 of the Constitution enjoys the protection afforded by it.
The contentions of Mr. Ayyangar, in substance, are that the provisions of 'section 27(i) as well as of section 30 of the impugned Act are colourable legislative provisions which have been enacted in fraud of the Constitution Act of 1935.
It appears that in determining the amount of compensation, that is to be paid under the Act, in respect of an acquired estate, it is necessary, first of all, to ascertain what has been described as the 'basic annual sum ' in regard to that estate.
The ' basic annual sum comprises several items or parts which have been set out in section 27 and the subsequent sections of the Act, and it is upon the amount of the basis annual sum determined in accordance with the provisions of these sections that the total amount of compensation money payable to a proprietor is made to depend.
Mr. Ayyangar contends that section 27(i) of the Act, which lays down that in computing the basic annual sum only one third of the gross annual Ryotwari demand of specified kinds is to be taken into account, is a colourable provision which, ignores altogether the actual income derived from the property and introduces an artificial and an arbitrary standard for determining the income or profits which has absolutely no relation to facts.
Similarly, in computing the net miscellaneous revenue, which is an (x) [1945] S.C.R. A.I.R. x953 8.
G. 375 at P. 380.
765 element in the computation of the basic annual sum, what is to be taken into account under section 30 is not the average of net annual income which the proprietors themselves derived from the sources, mentioned in the Act, when they were in possession of the estates, but which the Government might derive from them in future years after the date of notification. 'Thus if on account of mismanagement or for other reasons the Government does not derive any income from these sources, the proprietor would not have any compensation under this head at all.
It is argued that these are mere devices or contrivances aimed at , confiscation of private property and they neither lay down nor are based upon any principle of compensation.
Whatever the merits of these contentions might be, it appears to us that there is an initial and an insuperable difficulty in the way of the learned counsel 's invoking the authority of the majority decision of this court in the case of The State of Bihar vs Maharajadhiraja Sir Kameshwar Singh(1) to the circumstances of 'the present case.
The Bihar Land Reforms Act, 'which was the subject matter of decision in that case, was a legislation which was pending at the time when the Constitution came into force.
It was reserved for consideration of the President and received his assent in due course and consequently under clause (4)of article 31 of the Constitution it was immune from judicial scrutiny on the ground that the compensation provided by it was inadequate or unjust.
With regard 'to two of the provisions of the Act, however, which were embodied in sections 4 (b) and 23(f) of 'the Act, it was held by the majority of this court that they were void as they really did not come within entry 42 of List III of Schedule VII of the Constitution, under which they purported to have been enacted.
Entry 42 of List III speaks of "principles on which compensation for property acquired or requisitioned for the purposes of the Union or of a State or for any other public purpose is to be determined, and the form and the manner in which such compensation is (1) [1952] s.c.
R. 889.
766 to be given.
" It was pointed out that entry 42 was undoubtedly the description of a legislative head and in deciding the competency of a legislation under this entry, the court was not concerned with the justice or propriety of the principles upon which the determination of the compensation was to be made or the form or manner in which it was to be given.
But even then, the legislation must rest upon some principle of giving compensation and not of denying or withholding it, and a legislation could not be supported which was based upon something which was non existent or was unrelated to facts and consequently could not have a conceivable bearing on any principle of compensation.
The initial difficulty in the way of invoking this doctrine in the present case lies in the fact that the legislation, which is impugned here, was passed by the Madras Provincial Legislature functioning under the Government of India Act, 1935, and ' there was no entry in any of the lists attached to the Act of 1935 corresponding to entry 42 in List I1I of the Indian Constitution.
The only entry relevant to.
this point in the Act of 1935 was entry9 of List I1 which spoke merely of 'compulsory acquisition of land '; and it is clear that a duty to pay compensation or of ' laying down any principle regarding it was not inherent in the language of that entry.
The guarantee for payment of compensation, so far as the Constitution Act of 1935 is concerned, was contained in section 299 clause (2) which was worded as follows: "Neither the Federal Legislature nor a Provincial Legislature shall have power to make any law ' authorising the compulsory acquisition for public purposes of any land, or any commercial or industrial ' undertaking . . unless the law provides for the payment of compensation for the property acquired and either fixes the amount of the compensation, or specifies the principles on which, and the manner in which it is to be determined.
" The appellants could have very well relied upon this guarantee if a bar had not been created in their way by the provision of article 31(6) of the Constitution.
That clause of article 31 stands of follows: 767 "Any law of the State enacted not more than eighteen months before the commencement of this Constitution may within three months from such commencement be submitted to the president for his certification; and thereupon, if the President by public notification so certifies, it shall not be called in question in any court on the ground that it contravenes the provisions of clause (2) of this article or has contravened the provisions of sub section (2) of section 299 of the Government of India Act, 1935.
" It is not disputed that the Madras Act XXVI of 1948 does fulfil all the requirements mentioned above.
Consequently, it is not possible for us to allow the appellants to raise the contentions which the learned counsel on their behalf wants to raise.
The result is that the appeals would stand dismissed, but in the circumstances of this case we shall make no order as costs.
Appeals dismissed.

dataset_name: IN-Abs

summary:
The Madras Estates (Abolition and Conversion into Ryotwari) Act, (Act XXVI of 1948) was passed by the Provincial Legislature of Madras functioning under the Government of India Act, 1935 and it received the assent of the Governor*General of India on the 2nd of April, 1949.
After the advent of the Constitution, the Act was reserved for the certification of the President and it was certified on the 12th of April, 1950: Held, that in view of the provisions of article 31(6) of the Constitution the validity of the Act could not be challenged on the ground that it contravened the provisions of section 299(2) of the Government of India Act, 1935.
Shankari Prasad Singh Deo vs Union of India ([1952] S.C.R. 89), The State of Bihar vs Maharajadhiraja Sir Kameshwar Singh ([1952] S.C.R. 889) and Narayan Deo vs The State of Orissa ([1954] S.C.R. 1) referred to.


judgement:
il Appeal Nos.
1108 to 1110 of 1964.
Appeals by special leave from the judgment and order dated August 1, 1962 of the Calcutta High Court in Income tax Reference Nos. 20 and 21 of 1959.
A.K. Sen, section C. Mazumdar and J. Datta Gupta, for the appellants.
R.M. Hazarnavis, R. Ganapathy Iyer and R. N. Sachthey, for the respondent.
The Judgment of the Court was delivered by Sikri, J.
These appeals by special leave are directed against the judgment of the High Court of Calcutta in two cases referred to it by the Income Tax Appellate Tribunal, Calcutta Bench, under section 66(1) of the Indian Income tax Act (XI of 1922) hereinafter called the Act).
One of the references (Income Tax Reference No. 20 of 1959) was made at the instance of M/s Fatehchand Murlidhar, and the other (Income Tax Reference No. 21 of 1959) was made at the instance of Shri Murlidhar Himatsingka.
In the former reference the question referred was "whether on the facts and in the circumstances of the case, the income of Murlidhar Himatsingka for his share in the firm of Messrs. Basantlal Ghanshyamdas for the assessment years 1952 53 and 1953 54 was rightly excluded from the income of the applicant firm".
In the latter reference the question referred was "whether on the facts and circumstances of the case the income of Murlidhar Himatsingha for his share in the firm of Messrs. Basantlal Ghanshyamdas for the assessment year 1955 56 was rightly included in his personal assessment for that year".
The facts and circumstances out of which these references were made are common because the real question raised by these references is whether the income of Murlidhar Himatsingka, from the firm of M/s Basantlal Ghanshyamdas, in which he was a partner, should be included in his personal assessment or in the assessment of the firm of Fatehchand Murlidhar, to which Murlidhar Himatsingka had purported to assign the profits and losses from M/s Basantlal Ghanshyamdas.
It is sufficient to take the facts from the statement of the case in Income Tax Reference No. 21 of 1959, made at the instance of Murlidhar Himatsingka.
Murli dhar Himatsingka was carrying on business in shellac, jute, hessian etc.
under the name and style of "Fatehchand Murlidhar" at 14/ 1, Clive Row and 71, Burtolla Street, Calcutta.
He was also a partner in the registered firm, Messrs Basantlal Ghanshyamdas having /2/8 share.
On December 21, 1949, a deed of partnership was executed by the said Murlidhar Himatsingka and his two sons, Madanlal Himatsingka and Radhaballav Himatsingka and a grandson named Mahabir Prasad Himatsingka.
The deed recited that Murlidhar Himatsingka had become too old and infirm 455 to look after the various businesses and that Madanlal and Radha Ballav were already practically managing the business and that they had signified their intention to become the partners of the said firm "Fatehchand Murlidhar" and had agreed to contribute capital, Rupees ten thousand, Rupees five thousand and Rupees five thousand respectively.
The parties further agreed to become and be partners in the business mentioned in the deed.
Clause 5 of this deed is important for our purpose and reads as follows: "The profits and losses for the share of the said Murlidhar Himatsingka as partner in the said partnership firm of Basantlal Ghanshyamdas shall belong to the present partnership and shall be divided and borne by the parties hereto in accordance with the shares as specified hereafter, but the capital with its assets and liabilities will belong exclusively to Murlidhar Himatsingka the party hereto of the First Part and the Parties hereto of the Second, Third and Fourth parts shall have no lien or claim upon the said share capital or assets of the party hereto of the first part in the business of the said Messrs Basantlal Ghanshyamdas".
Clause 10 provides: "The Profits and losses (if any) of the partnership including the shares of the profits and losses of the said partnership firm of Basantlal Ghanshyamdas aforesaid shall be divided and borne by and between the parties in the following manner: Party hereto of the First Part Six annas (Murlidhar Himatsingka).
Party hereto of the Second Part Four annas (Madanlal Himatsingka).
Party hereto of the Third Part Three annas (Radhaballav Himatsingka).
Party hereto of the Fourth Part Three annas (Mahabirprasad Himatsingka).
Clause 11 provides that "all partnership moneys and securities for money shall as and when received be paid into and deposited to the credit of the partnership account".
In clause 13 it is provided that "the party hereto of the First Part shall have the sole control and direction of the partnership business and his opinion shall prevail if there be any dispute between the parties hereto".
Clause 16 provides that "the net profits of the partnership after payment of all outgoings interest on capital or loans and subject to the creation and maintenance of any reserve or other fund shall belong to the parties and the losses, if any, shall also be borne and paid by the parties in proportion to their shares as stated in Clause 10 hereof".
For the assessment year 1955 56 the Income Tax Officer included the income from the share in the registered firm of 456 Basantlal Ghanshyamdas in the individual assessment of Murlidhar Himatsingka, Murlidhar Himatsingka appealed to the Appellate Assistant Commissioner.
Referring to section 23(5)(a) of the Act.
he held that as Murlidhar Himatsingka was a partner in the registered firm of Basantlal Ghanshyamdas, his share had to be assessed in his hands.
He further held that the agreement was merely an arrangement which came into force after the profits were earned and not before they were earned.
He held that this agreement being a subsequent disposition of profits, after they had been earned, had to be disregarded.
Murlidhar Himatsingka appealed to the Income Tax Appellate Tribunal.
The Appellate Tribunal heard this appeal together with the two appeals filed by M/s Fatehchand Murlidhar.
The Appellate Tribunal, agreeing with the views of the Appellate Assistant Commissioner, dismissed the appeal.
The High Court held that it was a case of diversion of in come by Murlidhar Himatsingka after it had accrued to him and it was not a diversion at the source by any overriding interest.
In the result, the High Court answered the questions in the affirmative in both the references.
Murlidhar Himatsingka and M/s Fatehchand Murlidhar having obtained special leave, the appeals are now before us.
The learned counsel for the appellants, Mr. A. K. Sen, con tends that a partner 's share is property capable of being assigned, mortgaged, charged and dealt with as any other property, and where a partner sells his share to a stranger, though that stranger does not become a partner yet the vendor partner holds the property as trustee for the purchaser and consequently the income received by the partner is not his income but the income of the purchaser.
He says that similarly if a partner assigns part of his share the same result follows.
He further contends that in this case, by the agreement dated December 21, 1949, Murlidhar Himatsingka had entered into a sub partnership with his two sons and a grandson in respect of his share in the firm Basantlal Ghanshyamdas, and it is the sub partnership that is entitled to the income from the firm Basantlal Ghanshyamdas and not Murlidhar Himatsingka who must be taken to be acting on behalf of the firm Fatehchand Murlidhar.
Mr. Sen further urges that the Indian Income Tax Act taxes real income and not notional income and the real income in this case belonged not to Murlidhar but to M/s Fatehchand Murlidhar.
Mr. Hazarnavis, on the other hand, contends that this agree ment is a mere device for dividing income which had accrued to Murlidhar Himatsingka among his sons and grandson.
In the alternative he contends that the Indian Income Tax Act does not contemplate the application of section 23(5)(a) twice.
He says that the firm of Basantlal Ghanshyamdas was a registered firm and the 457 Income Tax Officer was bound.
under section 23(5)(a), to assess Murlidhar in respect of the income received from this firm , he could not carry this income to the assessment of another registered firm, namely, Fatehchand Murlidhar, and then apply section 23(5)(a).
The first point that arises is whether the agreement dated December 21, 1949, has succeeded in diverting the income from Murlidhu 's share in M/s Basantlal Ghanshyamdas to M/s Fatehchand Murlidhar before it reached Murlidhar.
What is the effect of the agreement? In our opinion the agreement dated December 21, 1949, constituted a sub partnership in respect of Murlidhar 's share in M/s Basantlal Ghanshyamdas.
The High Court in this connection observed: "At best it could be called a sub partnership entered into by Murlidhar with strangers in respect of his share of the partnership".
In arriving at this conclusion we attach importance to the fact that losses were also to be shared and the right to receive profits and pay losses became an asset of the firm, Fatehchand Murlidhar.
In Commissioner of lncome tax, Bombay vs Sitaldas Tirath.
das,(1) Hidayatullah, J., speaking for the Court, laid down the following test for determining questions like the one posed above.
After reviewing a number of authorities, he observed: "In our opinion, the true test is whether the amount sought to be deducted, in truth, never reached the assessee as his income.
Obligations, no doubt, there are in every case, but it is the nature of the obligation which is the decisive fact.
There is a difference between an amount which a person is obliged to apply out of his income and an amount which by the nature of the obligation cannot be said to be a part of the income of the assessee.
Where by the obligation income is diverted before it reaches the assessee, it is deductible; but where the income is required to be applied to discharge an obligation after such income reaches the assessee, the same consequence, in law, does not follow.
It is the first kind of payment which can truly be excused and not the second.
The second payment is merely an obligation to pay another a portion of one 's own income, which has been received and is since applied.
The first is a case in which the income never reaches the assessee, who even if he were to collect it, does so, not as part of his income but for and on behalf of the person to whom it is payable '.
458 This test clearly shows that it is not every obligation to apply income in a particular way that results in the diversion of income before it reaches the assessee.
In its judgment in the above case (Sitaldas Tirathdas vs Commissioner of Income tax, Bombay(1) the High Court of Bombay had observed: "It is not essential that there should be a charge, it is quite sufficient if there is a legally enforceable claim".
These observations must be treated as unsound.
The test laid down by this Court is quite clear, though like some other tests it is not easy of application in all cases.
The other cases cited before us, namely, K. A. Ramachar vs Commissioner of Income tax, Madras(1) and Provat Kumar Mitter vs Commissioner of Income tax, West Bengal(1) do not assist us in disposing of this case because the facts are not similar.
Only two cases, one of the Bombay High Court and the other of the Calcutta High Court, have close resemblance to the facts of this case and we may now consider them.
In Ratilal B. Daftri vs Commissioner of Income tax, Bombay(1) the assessee who was one of the sixteen partners in a registered partnership had contributed Rs. 25,000/ out of the capital of the partnership, Rs. 3,45,000/ .
In order to contribute this capital of Rs. 25,000/ he had entered into an agreement with four others on the same date on which the registered partnership deed was executed, which provided for contribution of diverse sums by the four others and it was further provided in this agreement that the five parties would share the profits and losses in proportion to their individual contribution.
It was also mentioned that the terms and conditions mentioned in the registered partnership were to be applicable and binding on them.
The Bombay High Court held that the assessee was liable to be assessed only in respect of his share of the profits of the registered partnership.
In coming to this conclusion, the High Court relied on two other decisions of the same Court, namely, Motilal Manekchand vs Commissioner of Income tax(1) and Sitaldas Tirathdas vs Commissioner of Income tax(1) As pointed out by the learned counsel for the respondent, Mr. Hazarnavis, Sitaldas Tirathdas vs Commissioner of Income tax(1) was reversed by this Court in Commissioner of Income tax vs Sitaldas Tirathdas(4) Hidayatullah, J., at p. 374 of his judgment reversing the judgment of the Bombay High Court, had also referred to Motilal Manekchand vs Commissioner of Income tax (5) but did not expressly dissent from this case.
In our opinion the case of Ratilal B. Daftari vs Commis sioner of Income tax, Bombay(1) was rightly decided, although the reasoning given by the learned Judges of the High Court has to some extent not been accepted by Hidayatullah, J., in Commissioner of Income tax vs Sitaldas Tirathdas(3).
We say so far the follow.
(1) ,394.
(2) (3) , (4) 36 I.T.B. Is.
(5) (6) 459 ing reasons.
Lindley on Partnership, 12th Edition, page 99, deals with sub partnerships as follows: "A sub partnership is, as it were, a partnership within a partnership, it presupposes the existence of a partnership to which it is itself subordinate.
An agreement to share profits only constitutes a partnership between the parties to the agreement.
If, therefore, several persons are partners and one of them agrees to share the profits derived by him with a stranger, this agreement does not make the stranger a partner in the original firm.
The result of such an agreement is to constitute what is called a sub partnership, that is to say, it makes the parties to it partners inter se; but it in no way affects the other members of the principal firm".
He further states: "Since the decision of the House of Lords in Cox vs Hickman ; , a sub partner could not before the Partnership Act, 1890, be held liable to the creditors of the principal firm by reason only of his participation in the profits thereof, and there is nothing in that Act to alter the law in this respect".
Sub partnerships have been recognised in India and registration accorded to them under the Indian Income Tax Act.
(See Commissioner of Income tax, Punjab vs Laxmi Trading Company)(1) The question then arises is whether the interest of the sub partnership in the profits received from the main partnernship is of such a nature as diverts the income from the original partner to the sub partnership.
Suppose that A is carrying on a business as a sole proprietor and he takes another person B as a partner.
There is no doubt that the income derived by A after the date of the partnership cannot be treated as his income; it must be treated as the income of the partnership consisting of A and B. What difference does it make in principle where A is not carrying on a business as a sole proprietor but as one of the partners in a firm? There is no doubt that there is this difference that the partners of the sub partnership do not become partners of the original partnership.
This is because the Law of Partnership does not permit a partner, unless there is an agreement to the contrary, to bring strangers into the firm as partners.
But as far as the partner himself is concerned, after the deed of agreement of subpartnership, he cannot treat the income as his own.
Prior to the case of Cox vs Hickman(1), sub partners were even liable to the creditors of the original partnership.
Be that as it may, and whether he is treated as an assignee within, section 29 of the Indian Partnership Act, as some cases do, a sub partner has definite enforceable rights to claim a share in the profits accrued to or received by the partner.
(1)24 I.T.B. 173.
(2) ; 460 The decision of this Court in Charandas Haridas vs Commissioner of Income tax (1) seems to support, at least by inference, this conclusion.
In that case the facts were as follows.
Charandas Haridas was the karta of a Hindu undivided family consisting of his wife, his three minor sons and himself.
He was a partner in six managing agency firms and the share of the managing agency commission received by him as such partner was being assessed as the income of the family.
By a memorandum executed by the co parceners of the family a partial portion of the income from the managing agency was brought about.
The memorandum stated: "We have decided that. . in respect of the commission which accrues from 1st January, 1946 and received after that date each of us becomes absolute owner of his one fifth share and therefore from that date. these commissions cease to be the joint property of our family '.
This Court held that the document effectively divided the income and the income could no longer be treated as that of the Hindu undivided family.
This case shows that although the karta continued to be a partner in the managing agency firm, yet the character in which he received the income vis a vis the Hindu undivided family had changed and the Court gave effect to the change of his position.
Previously he was acting as a karta on behalf of the Hindu undivided family in the managing agency firm , later he became a partner on behalf of the members of the family.
It seems to us that when a sub partnership is entered into the partner changes his character vis a vis the sub partners and the Income Tax authorities, although other partners in the original partner.
ship are not affected by the changes that may have taken place.
In our view the Calcutta High Court decision relied on by the High Court and the learned counsel for the respondent (Mahaliram Santhalia vs Commissioner of Income tax(1) was wrongly decided.
The facts in that case were these.
Mahal ' Santhalia was a partner in the firm M/s Benares Steel Rolling Nills.
He was also a partner in another firm named M/s Radhakissen Santhalia.
By agreement dated April 3, 1944, between the partners of M/s Radhakissen Santhalia, it was provided that the partnership income from M/s Benares Steel Rolling Mills would belong not to Mahaliram Santhalia individually but to the firm of M/s Radhakissen Santhalia.
The High Court of Calcutta held that the agreement amounted only to voluntary disposition by Mahaliram Santhalia of his income and there was no diversion of income to the firm M/s Radhakissen Santhalia before it became (1) ; (2) 33 I.T.& 261.
461 Mahaliram Santhalia 's income.
The High Court observed at p. 272: "If.
as Mr. Mitra conceded, Mahaliram was rightly taken as a partner of the Benares Steel Rolling Mills in personal capacity and if a one fourth share of the income was rightly allocated to him, any agreement bet ween him and his three partners of the firm of Radhakissen Santhalia, under which the income was to be treated as the income of the whole firm, could only be an agreement by which Mahaliram Santhalia was allowing what was really his income to be treated as the income of the firm or, in other words, as agreement by which he was applying or distributing an income which he had already himself earned and received.
Such application ,or distribution would be a voluntary act of Mahaliram Santhalia in respect of a sum which it was conceded, had rightly been included in his own total, income and, therefore was his own income.
If the moment the share of the income from the Benares Steel Rolling Miffs was allocated to Mahaliram Santhalia, it became his income and liable to be included in his own total income for the purpose of his personal assessment, an agreement by him with other persons regarding the rights to that income could only be a voluntary disposition of his income by him.
No question of a diversion by superior tide could possibly arise.
" With respect, we are unable to agree with most of this reasoning.
In our view, in the case of a sub partnership the sub partnership creates a superior title and diverts the income before it becomes the income of the partner.
In other words, the partner in the main firm receives the income not only on his behalf but on behalf of the partners in the sub partnership.
The Calcutta High Court also seems to be, in our opinion, erroneously impressed by the argument that "It is impossible to see how, after a proportionate share of the income had thus been included in the total income of a partner for the purposes of his personal assessment, it could then go anywhere else or could be further divided between such partners and other parties.
" We will deal with this aspect while dealing with the second point raised by the learned counsel for the revenue.
Mr. Hazarnavis, in this connection, drew our attention to the following passage in K. A. Ramachar vs Commissioner of Income tax, Madras(1): "This, in our opinion, is neither in accordance with the law of partnership nor with the facts as we have found on the record.
Under the law of partnership, it is the partner and the partner alone who is entitled to (1)42 I.T.B. 25, 29.
462 the profits.
A stranger, even if he were an assignee, has and can have no direct claim to the profits.
By the deeds in question, the assessee merely allowed a payment to his wife and daughters to constitute a valid discharge in favour of the firm; but what was paid was, in law, a portion of his profits, or, in other words, his income".
This passage was also relied on by the High Court.
In our opinion, these observations have to be read in the context of the facts found in that case.
In that case it was neither urged nor found that a sub partnership came into existence between the assessee who was a partner in a firm and his wife, married daughter and minor daughter.
It was a pure case of assignment of profits (and not losses) by the partner during the period of eight years.
Further the fact that a sub partner can have no direct claim, to the profits vis a vis the other partners of the firm and that it is the partner alone who is entitled to profits vis a vis the other partners does not show that the changed character of the partner should not be taken into consideration for income tax purposes.
This Court held in Commissioner of Income tax, Gujarat vs Abdul Rahim(1) that registration of the firm could not be refused on the ground that a partner was a benamidar and that a benamidar is a mere trustee of the real owner and he has no beneficial interest in the profits of the business of the real owner.
Under the law of partnership it is the benamidar who would be entitled to receive the profits from the other partners but for income tax purposes it does not mean that it is the benamidar who alone can be assessed in respect of the income received by him.
In conclusion we hold that the High Court was in error in holding that there was no question of an overriding ogligation in this case and that the income remained the income of Murlidhar Himatsingka in spite of the sub partnership created by him under the agreement dated December 21, 1949.
The second contention raised by Mr. Hazarnavis was not debated in the High Court, but in our opinion, there is no substance in this contention.
We have already mentioned that a benamidar can be a partner in a firm.
Now if Mr. Hazarnavis 's contention is right, under section 25(5)(a) of the Act it is only he who could be assessed, but there is no warrant for this proposition.
In Commissioner of Income tax, West Bengal vs Kalu Babu Lal Chand(2) this Court mentioned with approval Kaniram Hazarimull vs Commissioner of Income tax(1) where income from a partnership received by a karta was held to be assessable in the hands of Hindu Undivided famlly.
This Court observed at p. 12 as follows: "If for the purpose of contribution of his share of the capital in the firm the karta brought in monies out (1) (2) (3) 463 of the till of the Hindu undivided family, then he must be regarded as having entered into the partnernship for the benefit of the Hindu undivided family and as between him and the other members of his family he would be accountable for all profits received b y him as his share out of the partnership profits and such profits would be assessable as income in the hands of the Hindu undivided family.
Reference may be made to the cases of Kaniram Hazarimull vs Commissioner of Income tax(1) and Dhanwatav vs Commissioner of Income tax(1) in support of this view".
The object of section 23(5)(a) is not to assess the firm itself but to apportion the income among the various partners.
After the income has been apportioned, the Income Tax Officer has to find whether it is the partner who is assessable or whether the income should be taken to be the real income of some other person.
If it is the real income of another firm, it is that firm which is liable to be assessed under section 23(5)(a) of the Act.
This view was taken by the Bombay High Court in Ratilal B., Daftri vs Commissioner of Income tax(1).
The Bombay High Court observed at p. 24 as follows: "The principle asserted in that case is that even in the case of a partner in a registered firm, when the question arises as to his individual assessment, what is to be considered is not the income allocated to his share by employing the machinery of section 23(5)(a), but his real income, and that real income is what remains after deducting the amounts which may be said to have been diverted and never constituted his real income and such amounts will have to be excluded before his real income is reached".
In conclusion we hold that there is nothing in section 23(5)(a) that prevents the income from the firm Basantlal Ghanshyamdas being treated as the income of M/s Fatehchand Murlidhar and section 23(5) (a) being applied again.
In the result we accept the appeals, set aside the judgment of the High Court and answer the questions in the negative.
The appellants will be entitled to costs here and in the High Court.
, One hearing fee.
Appeals allowed.
(1)27 I.T.R. 294.
(2) (3)36 I.T.R. 18.

summary:
The assessee was a partner in a registered firm.
In 1949 he entered into a partnership with persons who were strangers to the registered firm and a deed of partnership was executed between them.
It recited that the profits and losses for the share of the assessee in the registered firm should belong to the new firm and be divided and borne by the partners of the new firm in accordance with the shares specified in the deed.
On the question whether the income of the assessee from the registered firm for the years 1952 53, 1953 54 and 1955 56, should be included in his individual assessment, HELD: The income should be included in the assessment of the new firm and not in the personal assessment of the assessee, (i)The new partnership constituted a sub partnership in respect of the assessee 's share in the registered firm.
(In the case of a subpartnership, it creates a superior title and diverts the income before it becomes the income of the partner, that is, the partner in the main firm receives the income not only on his own behalf but on behalf of the partners in the sub partnership,.
The fact that a sub partner can have no direct claim to the profits vis a vis the other partners of the main firm and that it is the partner alone who is entitled to the profits vis a vis the other partners in the main firm, does not show that the changed character of the partner should not be taken into consideration for income tax purposes.
[461E F; 462C] (ii)The object of section 23(5)(a) is not to assess the firm itself but to apportion the income among the various partners.
After the income has been apportioned, the Income tax Officer has to find whether it is the partner who is assessable or whether the income should be taken to be the real income of some other person.
If it is the real income of another firm, it is that firm which is liable to be assessed under the section.
There is nothing in the section that prevents the income of the assessee from the registered firm being treated as the income of the sub partnership and the section being applied again.
[463C, F] Charandas Haridas vs Commissioner of Income Tax, ; , and Commissioner of Income Tax, Bombay vs Sitaldas Tirathdas , followed.
Commissioner of Income Tax, Punjab vs Laxmi Trading Co. and Ratilal B. Daftari vs Commissioner of Income Tax: , Bombay, , referred to.
Mahaliram Santhalia vs Commissioner of Income Tax 33 I.T.R. 261, overruled.