judgement:
Petition Nos.
1483, 1494 and 1544 of 1986 etc.
Under Article 32 of the Constitution of India.
Dr: Y.S. Chitale, Satish Chandra, P.K. Banerjee, S.N. Kacker, K.C. Agarawal, S.S. Rathore, L.K. Garg, M.K.D. Namboodiary, P.M. Amin, Ashok Grover, Bulchandani, M.N. Shroff, P.H. Parekh and Sohail Dutt for the Petitioners.
K. Parasaran, Attorney Genera1, G. Ramaswamy Additional Solicitor General, G. Subramaniam, A.S. Rao, Ms. Relan and P.P. Parmeshwaran for the Respondents.
R.S. Nariman, (Indo Afghan Chamber of Commerce).
Kapil Sibal, (M/s Raj Prakash Chemicals) and Rajiv Dutta for the Interveners.
The Judgment of the Court Was delivered by SABYASACHI MUKHARJI, J.
Writ Petition No. 1483 Of 1986 is directed.
against 'the Show Cause Notices dated 21st August, 1986, 11th September, 1986 and 26th September, 1986 issued to the petitioners Messrs.D. Navinchandra & Company, a partnership firm and Dilip Kumar Dalpatlal Mehta, a part ner 'of the said firm.
In order to 'appreCiate this chal lenge;, it is necessary to refer to certain facts.
This petition raises the question of the rights of the petition ers and 993 other diamond exporters who were entitled to export house certificates and additional licences under import policy of 1978 79 and who were granted the same pursuant to the judg ment and 'order of this Court dated 18th April,1985.
As we shall explain later, there is no conflict With this decision of a Bench which consisted of a bench of three judges and the subsequent decisions of this Court which We.
Shall presently refer.
It is necessary also that in order to make out.
a case, the petitioners have sought to emphasise on the point that the decision dated 18th April, 1985 was a deci sion of three learned Judges, in Order to spin out a case of some sort of conflict with this decision and certain subse quent decisions of this Court consisting of benches of two ' learned judges.
It appears that the import policy issued by the Government of India for the year 1978 79 by paragraph 176 provided for, additional licences.
On 29th April, 1979, the first petitioner, a diamond exporters, was refused Export House Certificate.
The said.
petitioner filed a writ petition before the High Court of Bombay.
being Misc.
peti tion No. 1293/1979.
By his order and judgment, Pendse , J. made the rule absolute holding that canalised items were not banned items, and there was no reason why the first peti tioner should not be compel " led to approach the canalising agency for import of the same.
On 7th April, 1983, the Delhi High Court delivered a judgment in Civil writ Petition No. 1501 of 1981 (which for the sake of convenience, the party has chosen to describe as Rajnikant Bros. & Ors.
case allow ing the diamond exporters the same and holding that merely Canalising an item could not be regarded as import of that item being absolutely banned.
Against` these judgments special leave petitions were filed in this Court, Appeal was also filed on 27th March.
1984 by the Import Control Authorities and Union of India against the judgment dated 11th November, 1983 mentioned hereinbefore passed by Pendse, J. and the said appeal as dismissed on that date.
Against the ' same, the, Export Control authorities and Union of India filed special leave petition No. 7190 Of 1984 in this Court.
Similar special leave petitions were filed in this Court against similar judgments of the Bombay High Court.
On 18th April, 1985, by a common judgment, the special leave.
petitions were disposed of.
As much has been made out 'of this judgment and order, it is necessary to refer to the same.
The matter was disposed of by the order in Civil Appeal No, 1423 of 1984 ' by a bench consisting Fazal Ali, J., Varadarajan, J. and one of us (Sabyasachi Mukharji, J.).
It was held by the said order that there was no requirement of diversification of exports as a condition for the grant of Export 994 House Certificate in the Import Policy for 1978 79.
There fore, while confirming the High Court 's judgment, quashing the order impugned in the writ petitions in the High Court, this Court directed the appellants namely Union of India and Import Control authorities to issue necessary Export House Certificates for the year 1978 79.
It was further directed that Export House Certificates should be granted within three months from that date.
The order stated that 'save and except items which are specifically banned under the preva lent import policy at the time of import, the respondents shall be entitled to import all other items whether cana lised or otherwise in accordance with the relevant rules '.
The appeals were disposed of accordingly with no order as to costs.
Pursuant to the aforesaid order, on 29th July, 1985, import licence was issued, it is claimed, to the first petitioner.
of the c.i.f. value of Rs.71,15,900.
Pursuant to the said import licence, the first petitioner imported several consignments of items failing either under Appendix 3 (List of Limited Permissible Items), Appendix 2B (List of Restricted Items) or Appendix 5 (Canalised Items).
According to the petitioner, in the matter of clearance of such con signments different standards were applied by the Custom authorities.
On 18th October, 1985, in special leave petition No. 11843 of 1985 In the case of Raj Prakash Chemicals Ltd. vs Union of India this Court directed that Acrylic Ester Mono mors would not be permitted to be cleared until further orders unless they had already been cleared.
Similarly, on 31st January, 1986, interim order was passed in the case of M/s Indo Afghan Chambers of Commerce vs Union of India (Writ Petition No. 199 of 1986) directing that Dry Fruits in respect of which Custom clearance had been obtained till 30th January, 1986 would be allowed to be cleared and no clearance of Dry fruits from 31st January, 1986 onwards would be made by the Custom authorities until further or ders.
On 5th March, 1986, judgment was delivered in the case of Raj Prakash Chemicals Ltd. and Another vs Union of India and Others, by a bench consisting of three learned Judges Tulzapurkar, J. and two of us (R.S. Pathak, J. as the Chief Justice then was, and Sabyasachi Mukharji, J.).
This Court held that additional licence holders were entitled to import items permissible to Export Houses under Import Policy 1978 79 excluding those items which fell in Appendix 3 (List of Banned Items) of the Import Policy 1985 88.
This Court observed that diamond exporters who were granted Addi 995 tional Licences had formed a bona fide belief that they could import all the items accessible to them under Open General Licence under the Import Policy of 1978 79 except those placed in Appendix 2 Part A of the Banned List under the Import Policy 1985 88.
This belief was formed on the basis of consistent orders of the High Courts and consistent manner in which Import Control authorities construed those orders.
In view of such a belief, it was further held by this Court, in the interest of broad principles of justice, equity and fair play and to avoid undeserved hardship, without going to the legal technicalities that those diamond exporters who were granted Additional Licences under the Import Policy 1978 79 and had opened and established irrevo cable letters of credit before 18th October, 1985 i.e. the date on which the interim order was passed by this Court in Raj Prakash 's case as mentioned hereinbefore, should be permitted, notwithstanding the construction placed by this Court on the order dated 18th April, 1985 of this Court, to clear the goods imported, or to be imported by them pursuant to such irrevocable letters of credit.
In other words, all imports effected pursuant to such letters of credit should be deemed to have been legally and properly made, and should entail no adverse consequences whatsoever.
This Court fur ther reiterated that the Court must be presumed to have given effect to law That presumption can be rebutted only upon evidence showing a clear intention to the contrary, either expressly or by necessary implication.
This Court noted that the order dated 18th April, 1985 which we have set out hereinbefore used the expression "specifically banned" and the controversy before this Court in Raj Pra kash 's case was on the meaning of the expression 'specifi cally banned ' and the controversy between the parties cen tered round the meaning of the words 'specifically banned '.
It was mentioned that Appendix 3 is the list of items which could not be imported by an Export House on additional licence, it was a ban with reference to the category of importers.
Appendix 4 is the list of items which could not be imported by anyone whosoever.
This Court, therefore, was of the view that when regard is had to the Import Policy 1984 85, reference must necessarily be made to the corre sponding Appendix 3, formerly described as the List of Banned Items and now described as the List of Limited Per missible Items, and Appendix 2 Part A which is now the list of Banned Items replacing Appendix 4 (List of Absolutely Banned Items).
In other words, said the Court, the Addition al Licences to be issued to diamond exporters entitled them to import items permissible to Export Houses under such licence under the Import Policy 1978 79 excluding those items which fell within Appendices 3 and 4 of the Import Policy 1978 79 and also excluding items which fell in Appen dix 3 and Appendix 2 Part A of the Import This Court was of the view that this is the meaning which must be given to the terms of the order dated 18th April, 1985.
This Court noted that when this Court made the previous order on 18th April, 1985 when the Import Policy of 1985 88 was in force.
there were only two items which were absolutely banned.
and these were animal tallow and animal cannot.
That was also Substantially the position under the Import Policy 1984 85.
This Court was of the view that in the Import Policies of 1984 85 and 1985 88 the items open to import under Open General Licence were then set forth, when Raj Prakash 's judgment was delivered i.e. in Appendix 6.
A perusal of Part I1 of List 8 in Appendix 6 indicated that it enumerated in fairly long detail the items allowed to be imported by the Export Houses holding Additional Licences for sale of those items to eligible Actual Users (Industrial) subject to Actual User conditions.
That was the entitlement of the holder of an Additional Licence under paragraph 265(4) of the Import Policy 1985 88.
It is necessary to set out in detail the aforesaid judgment and also to refer to the order of 18th April.
1985 to emphasise that whether non canalised items could be imported directly.
and not through canalised agency, was not in issue in either of these two cases.
nor decided or adju dicated upon.
In the judgment in Raj Prakash 's case (supra), it was held that Additional Licence holders were entitled to import items permissible to Export Houses under the Import Policy 1978 79 excluding those items which fell in Appendix 3 (list of banned items) of the Import Policy 1985 88.
On 17th March, 1986, letter was written by the Joint Chief Controller of Imports to Messrs. B. Vijay Kumar and Co. stating that against Additional Licences issued in terms of this Court 's Order dated 18th April, 1985, import of items permissible against Additional Licences in terms of Policy for 1978 79 would be allowed even if such items were in the list of canalised items in Policy for 1978 79.
On 3rd April, 1986, there was a meeting with Member of C.B.E.C. and Principal Collector where the minutes recorded that items which were under O.G.L. during 1978 79 and subse quently canalised in Policy for 1985 88 would be allowed to be imported.
On 23rd April, 1986, a circular was issued from the Under Secretary to the Government of India to port authorities stating that canalised items 997 were not covered within the purview of this Court 's decision in Raj Prakash 's case and Additional Licence holders would be allowed to import canalised item.
By a letter on 14/15th May, 1986 from Principal Collector to Chairman, Western Region, Federation of Indian Export Organisation, the matter had been clarified and clearance of canalised items against Additional Licences was unconditionally allowed.
This Court again dealt with the question in the case of M/s Indo Afghan Chambers of Commerce and Another etc.
vs Union of India and Other etc., [1986] 3 SCC 352.
In that decision two of us (R.S. Pathak, J. as the learned Chief Justice then was and Sabyasachi Mukharji, J.) were parties.
It was held that under the import policy of 1978 79 dry fruits (exclud ing cashewnuts) could be imported by all persons under the Open General Licence.
There was no need to obtain any Addi tional Licence for importing items in the year 1978 79 and therefore, the wrongful denial of Additional Licences to diamond exporters in the year 1978 79, could not justify any restitution subsequently in regard to the import of dry fruits (other than cashewnuts).
It was further observed that under the Import Policy 1985 88, dry fruits (excluding cashewnuts and dates) were no longer open to import under the Open General Licence.
The sanction for importing them must be found under some other provision of the Import Policy.
The diamond exporters, it was held, ' could not be regarded as dealers engaged in the trade of stocking and selling dry fruits (excluding cashewnuts and dates).
They were, therefore, not entitled to the advantage of paragraph 181 (3) of the Import Policy 1985 88.
Dry fruits, it was further held, must be regarded as consumer goods of agricul tural origin.
The words "agricultural origin" in Item 121 of Appendix 2 Part B are used in the broadest sense.
The words 'consumer goods ' in item 121 referred to dry fruits imported for supply to Actual Users (Industrial).
It was further held that dry fruits do not appear in Appendix 3 Part A and 5 nor can be imported under the Open General Licence under the Import Policy 1985 88, Inasmuch as they fail within Item 121 of Appendix 2 part B they are excluded from the scope of Item 1 of Appendix 6, and cannot be imported as raw materi als and consumables for sale to Actual Users (Industrial).
Appendix 2 Part B (List of Restricted Items) was also suc cessor of Appendix 4 (List of Absolutely Banned Items) under the Import Policy 1978 79.
This Court reiterated, and it was important to emphasise, that On the reasoning which found favour with this Court in Raj Prakash 's case, it must be held that diamond exporters holding Additional Licences were not entitled to import goods enumerated in Appendix 2 Part B of the Import Policy 1985 88.
As held in that case, holders of Additional Licences were 998 entitled to import only those goods which were included in Appendix 6 Part 2 List 8 of the Import Policy 1985 88.
Dry fruits were not included in that list and therefore they could not be imported under Additional Licences.
It is stated that on 20th May, 1986, there was an order of adjudication in respect of one consignment of the first petitioner in this case i.e. Messrs. D. Navinchandra & Co. of items falling in Appendix 2B (List of Restricted Items) ( 10 Bills of Entry) imposing fine aggregating to Rs.45,000.
Then on 21st August, 1986, a show cause notice was issued to the first petitioner in this petition in respect of consign ment falling in Appendix 5 (Canalised Items) of the Policy for 1985 88.
Reply was duly given on 9th September, 1986 and a show cause notice was issued on 11th September, 1986 to the first petitioner in respect of one consignment falling in Appendix 2B (List of Restricted Items) of Policy for 1985 88.
In the meantime, this Court had occasion to examine some passage of this decision.
This question was examined and it is necessary to refer to the said two subsequent decisions of this Court.
The first one is the decision in Union of India vs Godrej Soaps Pvt. Ltd. and Another, ; and the second one is the decision in M/s Star Diamond Co. India vs Union of India and Others, ; It is neces sary first to refer to Godrej Soaps ' case.
It was held that a diamond exporter could import the items he was entitled to import under the Import Policy 1978 79 provided they were importable also under the Import Policy ruling at the time of import.
These are items which are open to import by an Export House holding an Additional Licence for sale to eligible Actual Users (Industrial).
These are items which could be directly imported, for example, the items enumerat ed in Part 2 of List 8 of Appendix VI of the Import Policy 1985 88.
These are items which are not 'canalised '. 'Cana lised ' items are those items which are ordinarily open to import only through a public sector agency.
There is, howev er, nothing to prevent an Import Policy from providing in the future that an Export House holding an Additional Li cence can directly import certain canalised items also.
In that event, an Export House holding an Additional Licence would be entitled to import items "whether canalised or otherwise", meaning thereby items open ordinarily to direct import (non canalised items) as well as items directly importable although on the canalised list.
It is in that sense that the Court had intended to define the entitlement of a diamond exporter by using the words "whether canalised or otherwise" in its order dated 18th April, 1985.
999 In that case this Court found that in respect of Palm Kernel Fatty Acid which was a canalised item listed as Item 9(v) in Appendix V Part B of the Import Policy 1985 88, there is no provision in that policy which permitted the import of such item by an Export House holding an Additional Licence.
Therefore, both on grounds of equity and construc tion the claim of the diamond exporters, or, as in that case, a purchaser from the diamond exporter, was held to be not maintainable.
As importation of canalised items, this Court reiterated, directly by holders of additional licences was banned, it should not be construed to have been permit ted by virtue of the order of this Court and the items sought to be imported do not come within List 8 of Part 2 of Appendix 6 of the Import Policy of 1985 88 against addition al licences.
It was found that the goods were purchased by the respondents in that case after they were aware of the position of law as enunciated in Raj Prakash 's case as well as Indo Afghan Chambers of Commerce 's case.
No question of any restitution of rights, therefore, arose.
Goods in ques tion being specially banned goods, these could not be im ported under Item I of Appendix 6 (Import of items under Open General Licence) of Import Policy, 1985 88, more so the import being not by the Actual User (Industrial) but by somebody else from whom the respondent purchased the goods.
This position was reiterated in the case of M/s Star Diamond Co. India vs Union of India and others (supra).
This Court further reiterated that a decision of this Court is binding on all.
To complete the narration of events, reply was given by the first petitioner to the show cause notice dated 11th September, 1986 on 18th September, 1986.
On 26th September, 1986, another show cause notice was issued to the Petitioner in respect of another consignment falling in Appendix 2B (List of Restricted Items) of Policy for 1985 88.
Personal hearing was given to the first peti tioner thereafter.
The petitioner moved this Court under Article 32 of the Constitution, for quashing the show cause notices dated 21st August, 1986, 11th September, 1986 and 26th September, 1986 and the order of adjudication dated 20th May, 1986 and for consequential relief.
We are, however, unable to find any merit in this appli cation either in law or in equity.
1000 One of the points on which an argument was sought to be built up was that the Bench of two judges of this Court in the subsequent decisions had cut down the effect of the decision of this Court dated 18th April, 1985 in the case of Union of India vs Rajnikant Bros.
It has been stated that in subsequent decisions referred to hereinbefore, this Court had deviated and indeed differed from the view expressed in that case.
It was urged that in Rajnikant Bros. case a bench of three judges categorically stated that the respondents would be entitled "to import all other items whether cana lised or otherwise" except those which were specifically banned under the prevalent import policy at the time of import, with the relevant rules.
In our opinion, the subse quent decisions referred to hereinbefore do not take any different or contrary view.
Indeed it gives effect to the letter and spirit of the said decision.
It has to be borne in mind, that the basic background under which the Rajni kant 's decision was rendered, the Export Houses had been refused Export House Certificates because it was insisted that they should have diversified their export and that was a condition for the grant or entitlement of an export house certificate.
It was found and it is common ground now that that was wrong.
Therefore, the wrong was undone.
Those who had been denied Export House Certificates on that wrong ground were put back to the position as far as it could be if that wrong had not been done.
To do so, the Custom au thorities and Govt.
authorities were directed to issue necessary Export House certificates for the year 1978 79 though the order was passed in April, 1985.
This was a measure of restitution, but tile Court, while doing so, ensured that nothing illegal was done.
It is a presumption of law that the courts act lawfully and will not ask any authority to do anything which is illegal.
Therefore, the court directed that except those which were specifically banned under the prevalent import policy at the time of import, the respondents shall be entitled to import all other items whether canalised or not canalised in accordance with the relevant rules.
Analysing the said order, it is apparent, (1) that the importation that was permissible was of goods which were not specifically banned, (2) such ban ning must be under the prevalent import policy at the time of import, and (3) whether items which were canalised or un canalised would be imported in accordance _with the relevant rules.
These conditions had to be fulfilled.
The court never did and could not have said that canalised items could be imported in any manner not permitted nor it could have given a go bye to canalisation policy.
It must be emphasised that in the case of Raj Prakash (supra), this position has been explained by saying that only such items could 1001 be imported by diamond exporters under the Additional Li cences granted to them as could have been imported under the Import Policy of 1978 79.
the period during which the dia mond exporters had applied for Export House Certificates and had been wrongly refused and were also importable under the import policy prevailing at the time of import which in the present case would be during the import policy of 1985 88.
These were the items which had not been 'specifically banned ' under the prevalent import policy.
The items had to pass to two tests.
firstly, they should have been importable under the import policy 1978 79 and secondly they should also have been importable under the import policy 1985 88 in terms of the Order dated 18th April.
1985 and if one may add.
in such terms in accordance with the import rules ' whether canalised or not canalised.
It must be emphasised that in this case also.
the CoUrt had no occasion to consid er the significance of the words 'whether canalised or otherwise ' mentioned in the Order dated 18th April.
1985 because that point did not arise in the case before it.
What did the court then intend by these words used by the court? We have seen that diamond exporters could import the items which they were entitled to import under the Import Policy 1978 79 provided they were importable also under the import policy ruling at the time of import.
These are items which were open to import by Export Houses holding Additional Licences for sale to the Actual Users (Industrial).
These are items which were directly imported, for example, items in Part 2 List 8 of Appendix 6 of Import Policy 1985 88.
These are items which are not canalised.
Canalised items are those items which are ordinarily open to import only through a public sector agency.
Although generally these are import able through public sector agencies, it is permissible for any import policy to provide an exception to the rule and to declare that an importer might import a canalised item directly.
It is in that sense and that sense only that the Court could have intended to define the entitlement of diamond exporters.
They would be entitled to import items which were canalised or not if the import policy prevailing at the time of import permitted them to import items falling under such category.
This was also viewed in that light in the case of Indo Afghan Chambers of Commerce (supra).
It must be emphasised that in the Order dated 18th April, 1985, this Court did not do away with canalisation.
That was not the issue before this Court.
The expression 'whether canalised or not canalised ' was to include both.
This Court did not say that canalised items could be import ed directly by the importers ignoring the canalisation process.
We are of the opinion that this Court did not say that canalisation 1002 could be ignored.
That was not the issue.
High public poli cy, it must be emphasised, is involved in the scheme of canalisation.
This purpose of canalisation was examined by this Court in Daruka & Co. vs Union of India & Ors., ; where the Constitution Bench of this Court ob served that the policies of imports or exports were fash ioned not only with reference to internal or international trade, but also on monetary policy, the development of agriculture and industries and even on the political poli cies of the country and rival theories and views may be held on such policies.
If the Government decided an economic policy that import or export should be by a selected channel or through selected agencies the court would proceed on the assumption that the decision was in the interest of the general public unless the contrary was shown.
Therefore it could not be collaterally altered in the manner suggested.
The policy of canalisation which is a matter of policy of the Government was not given a go bye by the observations referred to in the Order of 18th April, 1985.
Indeed it is possible to read the Order in a manner consistent with canalisation scheme in the way we have indicated.
If that is so, then it should be so read.
When this Court observed that the fact whether items were sought to be imported by diamond merchants were canalised, would not be an impediment to the import directly by them, the Court meant to say that this could be imported directly by them through the canalisation organisation.
The need for canalisation stands on public policy and that need cannot be lightly or inferencially given a go bye.
It should not be presumed that collaterally the court had done away with the system of canalisation based, on sound public policy.
We have found nothing in the different authorities on this subject, which militate against the above views.
Therefore, the action taken by the Custom authorities in issuing adjudication notice and pro ceeding in the manner they did, we are of the opinion that they have not acted illegally or without jurisdiction.
This must proceed in accordance with law as laid down by this Court which, in our opinion, is clear enough.
The fact that in subsequent decision, the petitioner is not a party is not relevant.
Generally legal positions laid down by the court would be binding on all concerned even though Some of them have not been made parties nor were served nor any notice of such proceedings given.
As held in Star Diamond 's case (supra), the meaning of the expression "whether canalised or otherwise" used by this Court in Rajnikant Bros ' case as explained in Godrej Soaps Pvt. Ltd. case and reiterated and followed in the present case is applicable to the present petitioner.
1003 We see no substance in the submission made in the peti tion and reiterated before us in this Court for a reconsid eration of this question by a larger Bench.
In the aforesaid view of the matter, we are unable to sustain the grounds urged in support of this petition.
We are, therefore, of the opinion that proceedings must go in accordance with law.
The government 's understanding of the matter at one point of time is irrelevant.
There are several applications for impleadment.
These are allowed, and they are impleaded.
Their statements are taken on record.
Before parting with this case, certain factors must be noted.
The diamond exporters and dry fruit exporters have their full round in this Court.
Speaking entirely for my self, my conscience protests to me that when thousands remediless wrongs await in the queue for this Court 's inter vention and solution for justice, the petitions at the behest of diamond exporters and dry fruit exporters where large sums are involved should be admitted and disposed of by this Court at such a quick speed.
Neither justice nor equity nor good conscience deserves these applications to be filed or entertained.
There is no equity of restitution against the law declared categorically and repeatedly by this Court and no principle of estoppel involved in these applications.
The Writ petition is dismissed and in the facts and circumstances of this case, we direct that the petitioner must pay cost of this application.
It has been prayed that clear cut date must be fixed where contracts had been entered into and in which letters of credit prior to 15th April, 1986 have been entered into, there should be no prosecution.
It has been further prayed that where however contracts have been entered into but no letters of credit have been opened, such parties should not be penalised in the facts and circumstances of the case.
No direction is necessary by this Court on this aspect.
The authorities concerned will decide the same in taking into consideration all the facts and circumstances and taking into consideration the case of the petitioners and the alleged claim of bona fide on their part.
A submission was made on the principle of promissory estoppel and reliance was placed on the several observations of several cases including the case in Union of India and Others etc.
vs Godfrey Philips India Ltd. etc.
; , It is true that the doctrine of 1004 promissory estoppel is applicable against the Government in the exercise of its government, public or executive func tions and the doctrine of executive necessity or freedom of future executive action cannot be invoked to defeat the applicability of the doctrine of promissory estoppel.
But in this case no such case of promissory estoppel has been made out.
The intervention applications filed in this connection are allowed and the submissions contrary to what we had stated hereinbefore are rejected.
As the points involved in Writ Petition No. 1494 of 1986 are same, this is also dismissed with costs.
Interim orders, if any, are vacated forthwith.
The proceedings will proceed as expeditiously as possible in accordance with law.
For the same reasons, Writ Petition No. 1544 of 1986 is also dis missed with costs with the same observations.
H.L.C. Petition dis missed.

summary:
By a common order dated April 18, 1985 in C.A. No. 1423 of 1984, etc., Union of India vs Rajnikant Bros. the Court had directed issue of Export House Certificates and Addi tional Licences to the petitioners and other diamond export ers under the Import Policy 1978 79 stating: "Save and except items which are specifically banned under the preva lent Import Policy at the time of import, the respondents shall be entitled to import all other items whether cana lised or otherwise in accordance with the relevant rules".
The petitioners, who were issued Additional Licences pursu ant to this order, imported several consignments of items falling under Appendices 2B, 3 and 5 of Import Policy, 1985 88, and, while clearing them, the Customs Authorities imposed a fine of Rs.45,000 in respect of certain items failing in Appendix 2B and issued show cause notices in respect of certain other items failing in Appendices 2B and 5.
The petitioners challenge was directed not only against these orders, but extended to certain subsequent decisions of the Court which, according to them, had cut down the effect of the Court 's earlier order dated April 18, 1985 in Union of India vs Rajnikant Bros. Dismissing the petitions, HELD: The decisions rendered subsequent to the decision dated April 18, 1985 in Union of India vs Rajnikant Bros. do not take any different or contrary view.
Indeed, they give effect to the letter and spirit of that decision.
The basic background in which the decision in Union of India vs Rajni kant Bros. was rendered was that Export Houses had been refused Export House Certificates on the ground that they had not diversified their exports.
It was found that was wrong.
The wrong was undone by directing issue of Export House Certificates for 990 the year 1978 79 though the order was passed in April, 1985.
That was a measure of restitution, but the Court, while doing so, ensured that nothing illegal was done.
It is a presumption of law that the courts act lawfully and will not ask any authority to do anything which is illegal.
It was directed that except those items which were specifically banned under the prevalent import policy at the time of import, the respondents therein were entitled to import all other items whether canalised or not canalised in accordance with the relevant rules.
Analysing the said order, it is apparent: (1) that the importation that was permissible was of goods which were not specifically banned, (2) that such banning must be under the prevalent import policy at the time of import.
and (3) whether items which were canalised or uncanalised would be imported in accordance with the relevant rules.
These conditions had to be fulfilled.
The court never did and could not have said that canalised items could be imported in any manner not permitted nor it could have given a go bye to the canalisation policy.
[1000C H] (ii).
In Raj Prakash Chemicals vs Union of India,, it was explained that only such items could be imported by diamond exporters under the Additional Licences granted to them as could have been imported under the Import Policy 1978 79 and were also importable under the Import Policy prevailing at the time of import.
These were the items which had not been 'specifically banned ' under the prevalent Import Policy.
The items had to pass through two tests, firstly, they should have been importable under the Import Policy 1978 79 and, secondly, they should also have been importable under the Import Policy, 1985 88 in terms of the Order dated 18th April, 1985 and if one may add, in such terms 'in accordance with the import rules ' whether cana lised or not canalised.
The Court had no occasion to consid er in that case the significance of the words 'whether canalised or otherwise ' mentioned in the Order dated 18th April, 1985 in Union of India vs Rajnikant Bros., because that point did not arise there.
[1000H; 1001A D] (iii) What did the court then intend by the words 'whet her canalised or otherwise ' used in the order dated 18th April, 1985 in Union of India vs Rajnikant Bros? The diamond exporters could import the items which they were entitled to import under the Import Policy 1978 79 provided they were importable also under the Import Policy ruling at the time of import.
These are items which were open to import by Export Houses holding Additional Licences for Sale to the Actual Users (Industrial).
These are items which were di rectly imported, for example, items in Part II List 8 of Appendix 6 of Import Policy 1985 88.
These are items which are not canalised.
Canalised items are those 991 items which are ordinarily open to import only through a public sector agency.
Although generally these are import able through public sector agencies, it is permissible for any Import Policy to provide an exception to the rule and to declare that an importer might import a canalised item directly.
It is in that sense and that sense only that the Court could have intended to define the entitlement of diamond exporters.
They would be entitled to import items which were canalised or not if the Import Policy prevailing at the time of import permitted them to import items failing under such category.
[1001D G] (iv) In the Order dated 18th April, 1985 in Union of India vs Rajnikant Bros., this Court did not do away with canalisation.
That was not the issue before this Court.
This expression 'whether canalised or not canalised ' was to include both.
This Court did not say that canalised items could be imported directly by the importers ignoring the canalisation process.
High public policy, it must be empha sised, is involved in the scheme of canalisation.
This purpose of canalisation was examined by.this Court in Daruka of this Court observed that the policies of imports or exports were fashioned not only with reference to internal or international trade, but also on monetary policy, the development of agriculture and industries and even on the political policies of the country and rival theories and views may be held on such policies.
If the Government decid ed an economic policy that import or export should be by a selected channel or through selected agencies, the court would proceed on the assumption that the decision was in the interest of the general public unless the contrary was shown.
Therefore, it could not be collaterally altered in the manner suggested.
The policy of canalisation which is a matter of policy of the Government was not given a go bye by the observations referred to in the Order of 18th April, 1985.
Indeed, it is possible to read the Order in a manner consistent with canalisation scheme in the way we have indicated.
If that is so, then it should be so read.
When this Court observed that the fact whether items were sought to be imported by diamond merchants were canalised, would not be an impediment to the import directly by them, the Court meant to say that this could be imported directly by them through the canalisation organisation.
The need for canalisation stands on public policy and that need cannot be lightly or inferentially given a go bye.
It should not be presumed that collaterally the court had done away with the system of canalisation based on sound public policy.
We have found nothing in the different authorities on this subject, which militate against the above views.
Therefore, the action taken by the Customs Authorities in issuing adjudica tion notice and proceeding in 992 the manner they did we are of the opinion that they have not acted illegally or without jurisdiction.
This must proceed in accordance with law as laid down by this Court which, in.
our opinion is clear enough.
The fact that in subsequent decision, the petitioner is not a party is not relevant.
Generally legal positions laid down by the court would be binding on all concerned even though some of them have not been made parties nor were served nor any notice of such proceedings given.
[1001H; 1002A G] Union of India vs Rajnikant Bros., C.A. No. 1423 of 1984 decided on April 18, 1985; Raj Prakash Chemicals Ltd. & Anr.
vs Union of India & Ors.
, ; M/s. Indo Afghan Chambers of Commerce &Anr., etc.
vs Union of India & Ors., etc., [1986] 3 S.C.C. 352; Union of India vs Godrej Soaps Pvt. Ltd. &Anr., ; ; and M/s. Star Diamond Co. India vs Union of India & Ors., [1986] 4 S.C.C. 246, discussed, explained and reiterated.
Daruka & Co. vs Union of India & Ors., ; , referred to.


judgement:
vil Appeal No. 4395 of 1986.
From the Judgment and Order dated 10.8.1984 of the Punjab and Haryana High Court in L.P.A. No. 748 of 1983.
F.S. Nariman, S.S. Shroff and Mrs. P.S. Shroff for the Appellant.
Respondent in person.
R.K. Garg, and A. Saran for the Intervener.
The Judgment of the Court was delivered by DUTT, J.
This appeal by special leave has been preferred by the State of Haryana against the judgment of the Division Bench of the High Court of Punjab & Haryana whereby the Division Bench has set aside the judgment of a learned Single Judge of the High Court dismissing the writ petition of the respondent Shri P.C. Wadhwa, a member of the Indian Police Service.
who was the Inspector General of Police, Haryana, from June 30, 1979 to July 25, 1980.
It appears that certain adverse remarks were made by the Home Secretary to the Govern ment of Haryana against Shri Wadhwa, the Inspector General of Police for the said period.
The adverse remarks were duly accepted by the competent authority under the All India Services (Confidential Rolls) Rules, 1970, hereinafter referred to as 'the Rules '.
After such acceptance, the adverse remarks were communicated to Shri Wadhwa by the Home Secre tary by his letter dated May 4, 1982, about two years three months after the close of the relevant period of March 31, 1980.
The re spondent did not make any representation against the adverse remarks to the reviewing authority under the Rules.
Instead, he chose to file a writ petition before the Punjab & Haryana High Court challenging the authority of the Home Secretary to write a confidential report assessing the performances, character, conduct and qualities of the respondent as the Inspector General of Police and prayed for the quashing of such report or adverse remarks.
1034 A learned Single Judge of the High Court took the view that as the Home Secretary was specifically empowered by the State Government as the reporting authority under Rule 2(e) of the Rules, he had the authority to write the report or to make adverse remarks against the performances of the Inspector General of Police, Haryana.
In that view of the matter, the learned Single Judge dismissed the writ petition.
Being aggrieved by the judgment of the learned Single Judge, the respondent filed an appeal against the same to the Division Bench of the High Court and, as stated al ready, the Division Bench set aside the judg ment of the learned Single Judge and allowed the writ petition holding inter alia, that the Home Secretary had no authority to submit any report against the performance of the respond ent for the aforesaid period during which he was the Inspector General of Police, Haryana.
Hence this appeal by special leave by the State of Haryana.
The only point that is involved in this appeal is whether the State Government was justified in specifically empowering the Home Secretary as the reporting authority for the purpose of writing a confidential report in respect of the Inspector General of Police.
Section 3 of the empowers the Central Government to make rules for the regulation of recruitment, and the conditions of services of persons appointed to an All India Service.
By virtue of section 3, the Central Government framed the Rules.
Under Rule 1(3), the Rules shall apply to the writ ing and the maintenance of the confidential reports on the members of the Service.
Clauses (e), (f) and (a) of Rule 2 of the Rules are as follows: "2.
Definitions In these rules, unless the context otherwise requires: (e) 'reporting authority ' means the authority who was, during the period for which the confidential report is written, immediate ly superior to the member of the Service and such other authority as may be specifically empowered in this behalf by the Government; (f) 'reviewing authority ' means the authority who was, 1035 during the period for which the confidential report is written, immediately superior to the reporting authority and such other authority as may be specifically empowered in this behalf by the Government; (a) 'accepting authority ' means the authority who was, during the period for which the confidential report is written, immediate ly superior to the reviewing authority and such other authority as may be specifically empowered in this behalf by the Government;" In this connection, it may be pointed out that it is not disputed that the conjunction 'and ' occurring in clauses (e), (f) and (a) should be read as 'or '.
Under clause (e), the 'reporting authority ' may be either immediately superior to the member of the Service or such other authority as may be specifically empowered in this behalf by the Government.
The expression 'immediately superior ' obviously indicates that the reporting authority should be the immediate superi or officer in the same Service to which the member of the Service belongs.
The position is the same as in the cases of 'reviewing authority ' and 'accepting authority '.
So, under the first part of clause (e), the reporting authority of the respondent could be a person who is immediately superior to him in the Police Service.
At this stage, it is necessary to refer to sections 3 and 4 of the .
Sections 3 and 4 are as follows: "Section 3.
The superintendence of the police throughout a general police district shall vest in and shall be exercised by the State Government to which such district is subordi nate; and except as authorized under the provisions of this Act, no person, officer, or Court shall be empowered by the State Govern ment to supersede, or control any police func tionary.".
"Section 4.
The administration of the police throughout a general police district shall be vested in an officer to be styled the Inspec tor General of Police, and in such Deputy Inspectors General and Assistant Inspectors General as to the State Government shall seem fit.
The administration of the Police throughout the local jurisdiction of the Magistrate of the district shall, under the general control and direction of such Magis trate, be vested 1036 in a District Superintendent and such Assist ant District Superintendents as the State Government shall consider necessary," It is clear from sections 3 and 4 that the administra tion of the police throughout a general police district shall be vested in the Inspector General of Police.
The position and status of the Inspector General of Police have been described in Rule 1.2 of the Punjab Police Rules, 1934, Volume I. Rule 1.2 provides as follows: "Rule 1.2.
The responsibility for the command of the police force, its recruitment, disci pline, internal economy and administration throughout the general police district vests in the Inspector General of Police.
He is head of the Police Department, and is responsible for its direction and control and for advising the Provincial Government in all matters connected with It.
In the discharge of his duties as Inspector General arid in the execu tion of order of Government he is bound to act in conformity with the system and regulations regarding the functions, discipline and admin istration of the Force contained, in the (V of 1861) and in these rules.
Orders of the Provincial Government affecting the Police force, in whole or in part, will be issued through him.
Inspector General is assisted in the control and administration of the Police force by such number of Deputy Inspectors General and Assistant Inspectors General as the Pro vincial (Government may from time to time appoint.
" Under Rule 1.2, the Inspector General of Police is the head of the Police Department and is responsible for its direction and control and for advising the Provincial Gov ernment in all matters connected with it.
Thus, the Inspec tor General of Police being the head of the Police Depart ment, there is no immediately superior officer to him in the Police Service.
Consequently, the first part of clause (e) will not have any application to the respondent.
Now the question is whether the State Government can specifically empower any authority to be the reporting authority of the Inspector General of Police under the second part of clause (e).
Apart from any legal provision, it is just and proper that a reporting authority 1037 must be a person to whom the member of the Service is an swerable for his performances.
In other words, the reporting authority should be a person higher in rank than the member of the Service.
Indeed, that is apparent from the first part of clause (e).
It is true that under the second part of clause (e), there is no indication as to the status and position of the authority who may be specifically empowered by the Government as the reporting authority, but from the point of view of propriety and reasonableness and having regard to the intention behind the rule which is manifest, such an authority must be one superior in rank to the member of the Service concerned.
If that be not so, there will be an apparent conflict between the first part and second part of clause (e).
We are, therefore of the view that the State Government can specifically empower only such authority as the reporting authority as is superior in rank to the In spector General of Police.
It is, however, submitted by Mr. Nariman, learned Coun sel appearing on behalf of the State of Haryana, that the Home Secretary is the head of the Police Department under the Business of the Haryana Government (Allocation) Rules, 1974, hereinafter referred to as the Business Rules.
The Business Rules have been framed by the Haryana Government in exercise of the power conferred by clauses (2) and (3) of Article 166 of the Constitution of India.
Rules 1 to 4 of the Business Rules are as follows: "1.
These rules may be called the Busi ness of the Haryana Government (Allocation) Rules, 1974.
The Business of the Government of the State of Haryana shall be transacted in the Departments specified in the Schedule annexed to these rules and shall be classified and distributed among those Departments as laid down therein.
The Governor shall, on the advice of the Chief Minister, allot among the Ministers the business of the Government by assigning one or more Departments to the Charge of a Minister.
Provided that nothing in this rule shall prevent the assigning of one Department to the charge of more than one Minister.
Each Department of the Secretariat shall consist of the 1038 Secretary to the Government, who shall be the official head of that Department, and of such other officers and servants subordinate to him as the State Government may determine: Provided that: (a) more than one Department may be placed in charge of the same Secretary; and (b) the work of a Department may be divided between two or more Secretaries.
" Rule 2 provides inter alia that the Business of the Government of the State of Haryana shall be transacted in the Departments specified in the Schedule.
Under rule 4 each Department of the Secretariat shall consist of the Secretary to the Government, who shall be official head of that De partment.
In the Schedule to the Business Rules, Item No. 17 under the Home Department inter alia relates to "Police, Railway Police and P.A.P." Much reliance has been placed by the learned Counsel for the State of Haryana on Rule 4 read with Item No. 17.
It is submitted by him that the Home Secretary being the head of the Home Department and as the Police Department has been placed under the Home Department, the Home Secretary must necessarily be the head of the Police Department.
We are unable to accept this contention.
The Business Rules have been framed under clauses (2) and (3) of Article 166 of the Constitution for the more conven ient transaction of the business of the Government of Har yana and for the allocation of business among the Ministers.
Under Rule 4, the Secretary of each Department of the Secre tariat is the head of that Department.
Thus, the Secretary of the Home Department is the head of the Home Department being a Department of the Secretariat, but merely because he has to conduct the business, on behalf of the Government, of the Police Department, he does not thereby become the head of the Police Department.
Item No. 37 under the General Administration Department in the Schedule relates to Judges of the High Court and officers of the Superior Judicial Service.
The Chief Secretary of the Government of Haryana is the head of the General Administration Department by virtue of Rule 4 of the Business Rules.
But that does not mean that the Chief Secretary is also the head of the Administration relating to the Judges of the High Court and officers of the Superior Judicial Service.
Similarly, Item No. 21 of the General Administration Department relates to Council of Ministers and its 1039 Committees.
Surely, the Chief Secretary has no authority whatsoever on the Council of Ministers and its Committees.
There is, therefore, no substance in the contention made on behalf of the appellant that as Police, Railway Police and P.A.P. have been placed under the Home Department, the Secretary of the Home Department is the head of the Police Department by virtue of Rule 4 of the Business Rules.
The Rules of Business that have been framed under Article 166 cannot override the provisions of the Act or any statutory rules.
Indeed, the Business Rules also do not attempt to override Rule 1.2 of the Punjab Police Rules, for it cannot.
There is much substance in the contention made by the re spondent appearing in person and Mr. Garg, learned Counsel appearing on behalf of the intervener, the IPS Officers ' Association, that the Business Rules framed under Article 166 cannot be relied upon for the purpose of interpretating the provision of clause (e) of Rule 2 of the Rules.
In view of sections 3 and 4 of the read with Rule 1.2 of the Punjab Police Rules, the Inspector General of Police, Haryana, is the head of the Police Department.
The immediate authority superior to the Inspector General of Police is the Minister in Charge of the Police Department.
The only authority who could be specifically empowered as the reporting authority in regard to the Inspector General of Police under clause (e) of Rule 2 of the ' Rules is the Minister in Charge and the Chief Minister, being superior to the Minister in Charge, may be the reviewing authority under clause (f) of Rule 2.
In acting as the reporting authority the Minister in Charge may be assisted by the Home Secre tary, but the confidential report relating to the perform ance of the Inspector General of Police has to be written by the Minister in Charge.
The Minister in Charge of the Police Department is supposed to be aware of the performance of the Inspector General of Police.
As the Chief Minister is the reviewing authority, he will also act as the accepting authority on the basis of the principle as laid down under Rule 6B of the Rules providing that where the accepting authority writes or reviews the confidential report of any member of the Service, it shall not be further necessary to review or accept any such report.
In other words, the Chief Minister will act both as the reviewing authority and the accepting authority.
In this connection, we may notice the statements made in the writ petition filed by the respondent in the High court of Punjab & Haryana.
It has been stated in paragraph 14 that reports of the work and conduct of the various Secretaries to the Government are written and recorded by the Minister in Charge of the Departments concerned 1040 and not even by the Chief Secretary so that the Minister in Charge of the Departments concerned are the 'immediate superior ' authorities to the Secretaries concerned within the meaning of Rule 2(e) of the Rules.
Further, it has been stated that before independence the report on the work and conduct of the Inspector General of Police, Punjab, was being recorded by the Minister in Charge of the Department and such a position continued even after the independence till 1974 when the Haryana State Government passed the order dated May 3, 1974 under clause (e) of Rule 2 of the Rules, inter alia, specifically empowering the Home Secretary as the reporting authority for writing out the confidential reports in regard to the Inspector General of Police, Har yana.
The statements made in paragraph 14 have not been denied by the State of Haryana in its counter affidavit filed in the High Court.
The Division Bench of the High Court was, therefore, perfectly justified in quashing the confidential report written by the then Home Secretary on the work and conduct of the respondent Shri Wadhwa.
Before we part with this appeal, we may dispose of another contention of the respondent about the delay in communicating to him the impugned adverse remarks.
Under Rule 5 of the Rules, a confidential report assessing the performances, character, conduct and qualities of every member of the service shall be written for each financial year, or calendar year, as may be specified by the Govern ment, ordinarily within two months of the close of the said year.
Rule 6 provides that the confidential report shall be reviewed by the reviewing authority ordinarily within one month of its being written.
Under Rule 6A, the confidential report, after review, shall be accepted with such modifica tions as may be considered necessary, and countersigned by the accepting authority, ordinarily within one month of its review.
Thus, the whole process from the writing of the confidential report to the acceptance thereof has to be completed ordinarily within a maximum period of four months.
Further, under Rule 7 the adverse remarks, if any, in a confidential report shall be communicated to the officer concerned within three months of the receipt of the confi dential report.
Thus, a total period of seven months has been laid down as the maximum period within which adverse remarks, if any, has to be communicated to the officer concerned.
It has been already noticed that the adverse remarks were sent to the respondent after two years three months, that is, after twenty seven months of the close of the year.
It is submitted by the respondent that in view of the delayed communication.
the adverse remarks lost all importance and should be struk down on that ground.
1041 The whole object of the making and communication of adverse remarks is to give to the officer concerned an opportunity to improve his performance, conduct or charac ter, as the case may.
The adverse remarks should not be understood in terms of punishment, but really it should be taken as an advice to the officer concerned, so that he can act in accordance with the advice and improve his service career.
The whole object of the making of adverse remarks would be lost if they are communicated to the officer con cerned after an inordinate delay.
In the instant case, it was communicated to the respondent after twenty seven months.
It is true that the provisions of Rules 5, 6, 6A and 7 are directory and not mandatory, but that does not mean that the directory provisions need not be complied with even substantially.
Such provisions may not be complied with strictly, and substantial compliance will be sufficient.
But, where compliance after an inordinate delay would be against the spirit and object of the directory provision, such compliance would not be substantial compliance.
In the instant case, while the provisions of Rules 5, 6, 6A and 7 require that everything including the communication of the adverse remarks should be completed within a period of seven months, this period cannot be stretched to twenty seven months, simply because these Rules are directory, without serving any purpose consistent with the spirit and objec tives of these Rules.
We need not, however, dilate upon the question any more and consider whether on the ground of inordinate and unreasonable delay, the adverse remarks against the respondent should be struck down or not, and suffice it to say that we do not approve of the inordinate delay made in communicating the adverse remarks to the respondent.
For the reasons aforesaid, this appeal is dismissed.
There will, however, be no order as to costs.
N.P.V. Appeal dis missed.

dataset_name: IN-Abs

summary:
The respondent, a member of the Indian Police Service was the Inspector General of Police, Haryana from June 30, 1979 to July 25, 1980.
The Home Secretary to the Government of Haryana made certain adverse remarks against the respondent which after acceptance were communicated to the respondent on May 4, 1982, about two years and three months after the close of the relevant period on March 31, 1980.
The respondent filed a writ petition challenging the authority of the Home Secre tary to write a confidential report assessing the per 1031 formance, character, conduct and qualities of the respondent as Inspector General of Police and for the quashing of such report or adverse remarks, which was dismissed by a Single Judge of the High Court.
The respondent filed an appeal and the Division Bench set aside the judgment of the Single Judge and allowed the writ petition holding that the Home Secretary had no authority to submit any report against the performance of the respondent for the aforesaid period during which he was the Inspector General of Police, Haryana.
In the appeal by special leave by the State of Haryana it was submitted that as the Police Department has been placed under the Home Department and the Home Secretary being the head of the Department, the Home Secretary must necessarily be the Head of the Police Department under the Business of the Haryana Government (Allocation) Rules, 1974.
It was also stated that the provisions of Rules 5, 6, 6A and 7 of the All India Services (Confiden tial Rolls) Rules 1970 are directory and not mandatory.
It was urged by the respondent that the Business Rules framed under Article 166 cannot be relied upon for the purpose of interpreting the provisions of clause (e) of Rule 2 of the Rules, and in view of the delay in communica tion, the adverse remarks lost all importance and should be struck down on that ground.
Dismissing the appeal, HELD: 1.
A reporting authority must be a person to whom the member of the Service is answerable for his performances.
Such an authority must be one superior in rank to the member of the Service concerned.
The State Government can specifically empower only such authority as the reporting authority as is superior in rank to the Inspector General of Police.
[1036H; 1037A B] 2.1 The Business Rules have been framed under clauses (2) and (3) of Article 166 of the Constitution for the more convenient transaction of the business of the Government of Haryana and for the allocation of business among the Ministers.
[1038E F] 2.2 Under Rule 4 of the Business Rules, the Secretary of each Department of the Secre tariat is the head of the Department.
Thus, the Secretary of the Home Department is the head of the Home Department being a Department of the Secretariat, but merely because he has to conduct the business.
on behalf of the Government, of the Police 1032 Department, he does not thereby become the Head of the Police Department.
[1038F G] 2.3 The Rules of Business that have been framed under Article 166 cannot override the provisions of the Act, or any statutory rules.
In view of Section 3 and 4 of the read with Rule 1.2 to the Punjab Police Rules, the Inspector General of Police, Haryana is the Head of the Police Department.
The immediate authority superior to Inspector General of Police is the Minister in Charge of the Police Department.
The only authority who could be specifically empowered as the report ing authority in regard to the Inspector General of Police under clause (e) of Rule 2 of the All India Services (Confidential Rolls) Rules is the Minister in Charge and the Chief Minister being superior to the Minister in Charge may be the reviewing authority under clause (f) of Rule 2.
[1039D E] 4.1 Rules 5, 6, 6A and 7 of the All India Services (Confidential Rolls) Rules require that the whole process from the writing of the confidential reports assessing the perform ance, character conduct and qualities of every member of the service, to the communication of the adverse remarks should be completed within a period of seven months.
In the instant case, the adverse remarks were communicated after 27 months.
[1040F G] 4.2 The whole subject of the making and communication of adverse remarks is to give to the officer concerned an opportunity to im prove his performance, conduct or character, as the case may be, and this object would be lost if they are communicated to the officer concerned after an inordinate delay.
Adverse remarks should not be understood in terms of punishment, but really should be taken as an advice to the officer concerned, so that he can act in accordance with the advice and improve his service career.
[1041A B] 4.3 Rules 5, 6, 6A and 7 are directory and not mandatory, but that does not mean that the directory provisions need not be complied with even substantially.
But, where compliance after an inordinate delay would be against the spirit and object of the directory provision, such compliance would not be substantial compliance.
[1041C D] 4.4 While the provisions of Rules 5, 6, 6A and 7 require that everything including the communication of the adverse remarks should be completed within a period of seven months, this period cannot be 1033 stretched to twenty seven months, simply because these rules are directory, without serving any purpose consistent with the spirit and objective of these Rules.
[1041D E]


judgement:
ivil Appeal No. 1187 of 1974.
From the Judgment and Order dated 19.12.1973 of the Calcutta High Court in Appeal No. 131 of 1971.
S.C. Manchanda and Ms. A. Subhashini for the Appellants.
B.P. Maheshwari, S.P. Mittal and R.S. Rana for the Respondent, The Judgment of the Court was delivered by RANGANATH MISRA, J.
This appeal by the Revenue is by certificate and is directed against the judgment of a Divi sion Bench of the Calcutta High Court which upheld the decision of a single judge in a writ petition quashing the notices issued to the petitioner under section 147(a) of the Income Tax Act of 1961 in respect of assessment years 1960 61, 1961 62 and 1962 63.
Respondent was assessed to income tax for the assessment year 1960 61 under section 23(3) of the Act of 1922 on 4.3.1961 and for the following two assessment years under section 143(3) of the Act of 1961 on 10th and 11th June, 1963, respectively.
Notices under section 147(a) read with section 148 of the Act of 1961 were issued to the respondent in respect of these three assessment years whereupon he challenged the validity of those notices by filing an appli cation under Article 226 of the Constitution.
Though the notices did not disclose any material to justify their issue, the Income tax Officer in his return to the rule nisi before the High Court stated: " . .
The assessment for the year 1963 64 of Smt.
Sushila Bala Devi Ladia, wife of the petitioner, was taken up by me.
During the course of the said assessment, she contended having received valuable assets from the petitioner between 11th December, 1955 and 28th October, 1960, without adequate consider ation in money or money 's worth.
It was con tended on her behalf that she received over 1203 tolas of gold in jewellery on or about 11.12./1955 and 1104 Rs.1,00,000 in cash on or about 28.10.1960.
It was further contended on her behalf that the said jewellery was sold between the years 1959 and 1962.
The income from the said assets which should have been included in the return of the petitioner was not so included by him.
The capital gains arising therefrom was also not included or disclosed by the petitioner in his returns.
" On behalf of the assessee reliance was placed on the deci sion of this Court in V.D.M. RM. M. RM.
Muthiah Chettiar vs Commissioner of Income tax, Madras, where with reference to failure of the assessee to include the share income of his wife and minor child in a firm, this Court held: "In considering the first question it is necessary to refer to certain provisions of the Income tax Act, 1922.
By section 3 the total income of the previous year of every individual, Hindu Undivided family, company and local authority, and of every firm and other association of persons or the partners of the firm or the members of the association individually was charged to tax for that year in accordance with, and subject to the provi sions of the Act at any rate or rates pre scribed by the Finance Act.
Total income was defined in section 2(15) as meaning 'total amount of income, profits gains referred to in sub section (1) of section 4 computed in the manner laid down this Act '.
Section 4(1) set out the method of computation of total income; it enacted: '(I) subject to the provisions of this Act, a total income of any previous year of any person includes all income, profits and gains from whatever source derived which: (a) are received or are deemed to be received in the taxable territories in such year by or on behalf of such person, or (b) if such person is resent in the taxable territories during such year (i) accrue or arise or are deemed to accrue or arise to him in the taxable territories during such year, or . . ' 1105 Section 22 by sub section (1) required the income tax officer to give notice by publica tion in the press in the prescribed manner, requiring every person whose total income during the previous year exceed the maximum exempt from tax, to furnish a return in the prescribed form setting forth his total in come.
Sub section (2) authorised the Income tax Officer to serve a notice upon a person whose income in the opinion of the income tax officer exceeded the minimum free from tax.
Section 23 dealt with the assessment.
It conferred power upon the Income tax Officer to assess the total income of the assessee and to determine the sum payable by him on the basis of such return submitted by him.
Rule 19 framed under section 59 of the Income tax Act, 1922 required the assessee to make a return in the form prescribed thereunder, and in Form A applicable to an individual or a Hindu Undi vided family or an association of persons there was no clause which required disclosure of income of any person other than the income of the assessee, which was liable to be in cluded in the total income.
The Act and rules accordingly imposed no obligation upon the assessee to disclose to the Incometax Officer in his return information relating to income of any other person by law taxable in his hands." "But section 16 sub section (3) provided in computing the total income of any individu al for the purpose of assessment there shall be included the classes of income mentioned in clauses (a) and (b).
Sub section 3(a)(ii) insolar as it is material, provided: 'In computing the total income of any individual for the purpose of assessment there shall be included (a) so much of the income of a wife or minor child of such individual as arises directly or indirectly . . (ii) From the admission of minor to the benefits of partnership in a firm of which such individual is a partner. ' The assessee was bound to disclose under section 22(5) the names and addresses of his partners, if any, engaged in business, profes sion or vocation together with the location and styled of the principal place and branches 1106 thereof and the extent of the shares of all such partners in the profits of the business, profession or vocation and branches thereof, but the assessee was not required in making a return to disclose that any income was re ceived by his wife or minor child admitted to the benefits of partnership of a firm of which he was a partner.
" Upon this conclusion this Court therein held: "For failing or omitting to disclose that income proceedings for reassessment cannot, therefore, be commenced under section 34( l)(a)." Relying upon this decision the learned Single Judge quashed the notices.
The Revenue appealed to the Division Bench but failed to obtain any relief in view of the said decision of this Court.
The Division Bench also took note of the decision in the case of Malegaon Electricity Co. (P) Ltd. vs Commissioner or Income tax, Bombay, Therein after referring to Muthiah Chettiar case (supra).
Hedge, J. speaking for the Court, stated: "Hence, by not showing the income of his wife and minor children, the assessee cannot be deemed to have failed to disclose fully and truly all material facts necessary for his assessment within the meaning of section 34(1)(a) of the Act.
" It is appropriate to take note of a later decision of this Court in Commissioner of Income tax, Kerala vs Smt.
P.K. Kochammu Amma, Peroke, That was of a two Judge Bench.
Reliance was sought to be placed on Muthiah Chettiar 's case (supra).
Dealing with the question of impo sition of penalty under section 27 1(l)(c) of the 1961 Act, the Division Bench observed: "It is obvious that on this view the order imposing penalty on the assessee would have to be sustained but there is a decision of this Court in V.D.M. RM, M. RM.
Muthiah Cheuiar vs Commissioner of Income tax, which is binding upon us and where we find that a different view has been taken by a Bench of three Judges of this Court.
It was held in this case that even if there were any printed instructions in the form of the return requiring the assessee to disclose the income received by his wife and 1107 minor child from a firm of which the assessee was a partner.
there was, in the absence in the return of any head under which the income of the wife or minor child could be shown, no obligation on the assessee to disclose this item of income, and the assessee could not be deemed to have failed or omitted to disclose fully and truly all material facts necessary for his assessment within the meaning of 34(l)(a) of the Indian Income Tax Act, 1922.
With the greatest respect to the learned Judges who decided this case.
we do not think, for reasons already discussed, that this decision lays down the correct law on the subject, and had it not been for the fact that since 1st April, 1972, the form of the return prescribed by rule 12 has been amended and since then.
there is a separate column provid ing that 'income arising to spouse/minor child or any other person as referred to in Chapter V of the Act ' should be shown separately under that column and consequently there is no longer any scope for arguing that the assessee is not bound to disclose such income in the return to be furnished by him, we would have referred the present case to a larger Bench.
But we do not propose to do so since the question has now become academic in view of the amendment in the form of the return car ried out with effect from 1st April, 1972.
we would, therefore, follow this decision in Muthian Chettiar 's case which being a decision of three Judges of this Court is binding upon us . . . . . . ." We agree with what has been stated in Kocharammu Amma 's case and for the reasons indicated therein, we do not pro pose to refer this case to a larger bench.
Following the law as laid down in the two cases reported in and we dismiss the appeal.
There would be no order for costs throughout.
A.P.J. Appeal dis missed.

summary:
The respondent was assessed to income tax for assessment year 1960 61 under section 23(3) of the, Income Tax Act, 1922 and for the assessment years 1961 62 and 1962 63 under section 143(3) of the income Tax Act, 1961.
The validity of the notices issued under section 147(a) read with section 148 of the Act of 1961 in respect of these three assessment years was challenged by the respondent under Act 226.
Though the notices did not disclose any material to justify their issue, the Income Tax Officer in his return before the High Court stated that during the course of assessment for the year 1963 64 of the wife of the respondent, she contended having received valu able assets from the respondent between 11th December 1955 and 28th October, 1960 without adequate consideration in money or money 's worth.
The income from the said assets which should have been included in the return of the re spondent was not so included by him and that the capital gains arisen therefrom was also not included or disclosed by the respondent In his returns.
A Learned Single Judge relying upon the decision of the Supreme Court in V.D.M. RM.
M. RM.
Mathiah Chettiar vs Commissioner of Income tax, Madras quashed the notices.
The appeal of the Revenue failed before the Divi sion Bench. ' Dismissing the appeal, HELD: By failure of the assessee to include the share income of his wife and minor child in his return, it cannot be deemed that he has failed to disclose fully and truly all material facts necessary for the assessment within the meaning of section 34(1)(a) of the Indian Income Tax Act.
[1107B] V.D.M. RM.
M. RM.
Muthiah Chettiar vs Commissioner of Income tax, Madras, ; Malegaon Electricity Co. (P) Ltd. vs 1103 Commissioner of Income tax, Bombay, and Commis sioner of Income tax, Kerala vs Smt.
P.K. Kochammu Amma, Peroke, , followed.


judgement:
vil Appeal No. 1747 (N) of 1973.
From the Judgment and Order dated 16.6.1972 of the Calcutta High Court in Appeal No. 54 of 1969.
C.S. Vaidayanathan, Pravir Choudhary, K.V. Mohan, H.K. Dutt and S.R. Bhat for the Appellant.
G.S. Chatterjee for the Respondent.
The Judgment of the Court was delivered by KHALID, J.
This is an appeal by special leave filed by the plaintiff bank against the judgment of the Calcutta High Court, arising from suit No. 547 of 1952, filed for recovery of a sum of Rs.17,091 0 1 with interest.
The question in volved in this appeal is a short one, but of general impor tance to banks in the country.
we have made it clear to the appellant bank that we are interested only in laying down the law in this appeal and not in giving a decree to the bank for this small amount, the claim for which originated nearly 35 years ago.
The learned counsel for the appellant bank has agreed to this suggestion.
The defendant in the suit was one Ramesh Chandra Roy Choudhury.
The plaintiff was the United Bank of India Ltd. The defendant had an over draft account with the bank.
He died on the 6th November, 1960.
On the 20th Dec., 1960 the widow of the defendant, 1092 Smt.
Kananbala Devi informed the Deshapriya Park Branch of the bank of the death of the defendant.
The bank had several branches in Calcutta.
One of the branches was the Royal Exchange Branch.
It was this branch that instituted the suit in question.
The applications for impleading the legal representa tives of the defendant and for setting aside abatement were made by a Chambers Summons on the 8th August, 1968 about 8 years after the death of the defendant.
The delay in making these applications was attempted to be explained with the plea that the Royal Exchange Branch of the bank had no knowledge of the death of the defendant till the Deshapriya Park Branch was informed of the death.
The High Court re jected the applications holding that "In our opinion it is no explanation to say that the Royal Exchange Branch of the plaintiff bank which had really instituted the suit could not and/or did not have knowledge of the death of Ramesh Chandra Roy Choudhury.
An intimation of the death of Ramesh Chandra Roy Choudhury to the bank in the Deshapriya Park Branch could not be treated as no intimation to the bank which happens to be the plaintiff in this suit.
In our view no sufficient cause was shown in the petition for setting aside the abatement and the learned Judge was right in dismissing the said application.
The appeal, therefore, fails and is dismissed" Hence this appeal.
The learned counsel for the appellant submits that it would be extremely dangerous for courts to impute knowledge of the death of a customer with all the branches of a bank, solely on the strength of information given to a particular branch of the bank.
It is submitted that in these days when banking business has expanded by leaps and bounds with branches spread over large areas, it would not be possible for a particular branch to know the death of one of its customers if that branch had not been informed of the death.
In the absence of highly technical modern methods or com puterised information to all the branches, of their custom ers and their details, no branch of a bank can be presumed to know whether a particular customer is alive or not unless that hank is given necessary information.
The submission that all branches of a bank should be imputed with constructive knowledge of the death of a cus tomer simply because one of the branches had been informed of it would result in adverse consequences and would defeat actions by banks for recovery of dues 1093 and would work great loss to banks and would harm public interest.
In this case, it is not stated or proved that the Royal Exchange Branch had information earlier about the death of the defendant.
To prove this we have two letters produced by the appellant: (1) dated 3rd June, 1968 and the other dated 17th June, 1968.
The two letters read as fol lows: 10 OLD POST OFFICE ST., CALCUTTA.
M/s. S.N. Sen & Co. Dear Sir, 3rd June, 1968.
United Bank of India Ltd. vs Ramesh Chandra Roy Choudhury.
As I have not yet been able to make contact with my client until now in spite of my at tempts on that behalf, please do not mention the suit tomorrow but mention the suit some time next week.
The suit was part heard about 9 or 10 years before and my client has not seen since then.
I hope you will mention the suit next week on previous notice to me.
Yours faithful ly, sd/ K.P. Mustaphy.
M/s. S.N. Sen & Co. Dear Sir, 17th June 1968.
Suit No. 547 of 1952 United Bank of India Ltd. V. Ramesh Chandra Roy Choudhury Kindly note that when the above suit will be mentioned by you before his Lordship the Hon 'ble Mr. Justice R.M. Dutt, I will submit his Lordship that as the defendant died in 1960, the suit has abated and cannot be pro ceeded with.
Yours faithful ly, Sd/ K.P. Mustaphy.
Both the letters are written by the counsel for the defend ant to 1094 the bank.
It is evident from the first letter that even on 3rd June, 1968, the counsel for the defendant did not know about the death of the defendant.
It was only thereafter that he came to know of the same.
This branch of law appears to be barren of authority.
A question akin to this is reported in 1918, The Times Law Reports, Volume XXXV, page 142.
The brief facts are as follows: The plaintiffs ' claim in the suit was on a cheque for a 100, dated February 5, 1918 drawn by the ,defendant and made payable to the order of a Mrs. N. Try, who endorsed it to the plaintiffs.
The defendant obtained leave to defend.
The bank had branch at Victoria street, Westminster. of which the manager was Mr. Stephen Trott.
Among their customers was Mrs. Try.
The bank had a branch at the Oxford street branch of the Bank and she asked the manager to cash it.
The amount was paid.
The manager had no notice that the cheque had been stopped.
The cheque when presented by the Victoria street Branch to the Oxford street Branch was returned marked "Ordered not to pay".
The cheque was stopped by a letter from the defendant to the Oxford street Branch.
That letter was undated.
It was under these circumstances that the action was brought.
The question was when the drawer of a cheque stops payment by a notice given only to that branch on which it is drawn and the payee afterwards endorses the cheque to anoth er branch of the same bank and the manager of that other branch advances money on the cheque in good faith and with out notice that the cheque had been stopped, whether the bank is entitled to recover against the drawer in an action on the cheque.
Here it was clear that the cheque was stopped on the Oxford street Branch and that there was no notice yet at the Victoria street Branch when the cheque was pre sented.
it was held that the bank was the holder of the cheque and the fact that the branch at Oxford street had notice not to pay the cheque did not affect the bank and, therefore, the bank was entitled to relief.
It was observed that there was a right to a separate notice of dishonour as between the different branches of a bank.
Though this judgment is not .on all fours with our case, we seek some assistance from it for our purpose and that limited purpose is that notice to one branch of a bank is no notice to the other branches.
That being so the fact that the Deshapriya Park Branch had knowledge of 1095 the death, will not be sufficient to impute Royal Exchange Branch with constructive notice and reject the applications to set aside abatement and to condone delay.
Of course, the law under the present Civil Procedure Code obviates this difficulty to some extent under Order 22 Rule 10 A, Under the rule, when a pleader appearing for a party to the suit comes to know of the death of that party, he shall inform the Court about it, whereupon the Court shall give notice of such death of the other party.
However, this provision not being absolutely mandatory and cast a duty only on the pleader, we thought it necessary to answer the question of law involved in this appeal.
For the foregoing reasons we hold that the High Court was in an error in rejecting the application to set aside abatement and to condone delay on the plea that notice to one branch will be notice to other branches.
We set aside the judgment of the High Court and allow this appeal with no order as to costs, As indicated above, the matter will rest here and the bank will not be permitted to proceed against the defendant or his legal representa tives to realize the amount involved in the suit.
The amount will be deemed to have been fully discharged.
We have only decided the question of law for the benefit of the banks and general public.
P.S.S. Appeal allowed.

summary:
The defendant had an overdraft account with a particular branch of the plaintiff bank in the city.
A suit was insti tuted against him by that branch in 1952 for recovery of certain sums with interest.
He died on 6th November 1960.
The widow informed another branch of the bank of the death of her husband on 20th December, 1960.
The applications for impleading the legal representa tives of the defendant and for setting aside abatement were made in 1968, about 8 years after the death of the defend ant.
The delay in making these applications was sought to be explained with the plea that the concerned branch of the bank had no knowledge of the death of the defendant till it was informed by the other branch.
The High Court rejected the applications on the ground that no sufficient cause was shown for setting aside abate ment.
It held that an intimation of the death of the defend ant to the bank in the other branch could not be treated as no intimation to the branch which was the plaintiff in the suit.
Allowing the appeal by special leave, the Court, HELD: The High Court was in error in rejecting the application to set aside abatement and to condone delay.
[1095C] All branches of a bank could not be imputed with con structive knowledge of the death of a customer simply be cause one of the branches had been informed of it, for notice to one branch of a bank is no notice to the other branches.
[1092H; 1094H] 1091 In the instant case, it is not stated or proved that the branch which had filed the suit had information earlier about the death of the defendant.
It is evident from the record that even on 3rd June, 1968 the counsel for the defendant did not know about the death of the defendant.
The fact that a particular branch of the plaintiff bank had knowledge of the death was not sufficient to impute the concerned branch with constructive notice.
[1093A; 1094A, H; 1095A] (1918) The Times Law Reports, Vol.
XXXV, p. 142 referred to.
The provisions of 0. 22, R. 10 A of the Civil Procedure Code requiring a pleader appearing for a party to the suit to inform the court when he comes to know of the death of that party, whereupon the court is enjoined to give notice of such death to the other party, casts a duty only on the pleader and is not absolutely mandatory.
[1095B]