judgement:
Appeal No. 1626 of 1966.
Appeal from the judgment and decree dated July 7, 8, 1964 of the Calcutta High Court in Appeal from Original Decree No. 143 of 1960.
R. B. Datar, for the appellant.
B. Sen, N. R. Khaitan and B. P. Maheshwari, for respondent.
The Judgment of the Court was delivered by Shah, J.
Naresh Chandra Sanyal was the holder of a fully paid up share of the Calcutta Stock Exchange Association Ltd.hereinafter called the Exchange '.
As a member of the Exchange he was authorised to carry on business as a broker in shares, stocks and securities in the hall of the Exchange.
In December 1941 Sanyal purchased one hundred shares of the Indian Iron & Steel 'Company Ltd. from Johurmull Daga & Company, but did not arrange to take delivery of the shares on the due date.
Johurmull Daga and Company sold the shares pursuant to the authority given to them by the Sub Committee of the Exchange.
The transaction resulted in a loss of Rs. 438/10/ .
The Sub Committee directed Sanyal to pay the amount due by him, but he failed to carry out that direction.
On January 7, 1942 the complaint of Johurmull Daga & Company was referred to the Full Committee of the Exchange.
Sanyal failed to pay the amount directed to be paid by him and he was by resolution dated February 19, 1942 declared a defaulter.
On September 1, 1942, at a meeting at which Sanyal was present, the Full Committee resolved that the share standing in his name be forfeited to the Exchange with effect from September 1, 1942 and that Sanyal be expelled from the membership of the Exchange.
436Sup.
Cl/71 48 6 Sanyal then instituted an action in the High Court of Calcutta on its original side claiming a declaration that the articles of the Exchange providing for "forfeiture of a fully paid up share were ultra vires and illegal" and that "particularly articles 21, 22.
and 24 were invalid"; that the share held by him had not been "properly forfeited" by the Exchange and that forfeiture of the share was "irregular, void and inoperative and was not binding upon him" He also claimed an order that he be restored to the membership of the Exchange and that the share register be rectified accordingly.
In the alternative Sanyal claimed a decree for Rs. 55,0001 being the value of the share, or in any event to the surplus of the sale proceeds after "liquidating the debts due by him to the Exchange.
" The suit was resisted by the Exchange.
The Trial Court dismissed the suit.
In appeal under the Letters Patent the decree was confirmed.
With special leave Sanyal has appealed to this Court in forma pauperis.
The relevant Articles of Association of the Exchange are these article 21 "The Committee shall have power to expel or suspend any member or if being firm any member or authorised assistant of the firm in any of the events following (6) If the member or if being a firm any member or authorised assistant of the firm refuses to abide by the decision of the Committee in any matter which under these articles or under the Bye laws for the time being in force is made the subject of a reference to the Committee.
Provided always that in every case arising under the provisions of sub, section (5), (6), (7) and (8) of this Article no resolution for the expulsion of a member or if being a firm any member or authorised assistant of the firm shall be valid unless passed by a majority consisting of not less than two thirds of the members of the Committee at a meeting specially convened for the purpose and at which meeting not less than two thirds of the members of the committee at a meeting specially convened for the purpose and at which meeting not less than seven members of the Committee shah be present." 4 8 7 article 22 "Any member who has been declared a defaulter by reason of his failure to fulfil any engagement between himself and any other member or members and who fails to fulfil such engagements within six months from the date upon which he has been so declared a defaulter shall at the expiration of such period of six calendar months automatically cease to be a member.
" article 24 "Upon any member ceasing to be a member under the provisions of article 22 hereof and upon any resolution being passed by the Committee expelling any member under the provisions of Article 21 hereof or upon any member being adjudicated insolvent the share held by such member shall ipso facto be forfeited.
" article 27 "Any share so forfeited shall be deemed to be the property of the Association, and the Committee shall sell, re allot, and otherwise dispose of the same in such manner to the best advantage for the satisfaction of all debts which, may then, be due and owing either to the Association or any of its mem bers arising out of transactions or dealings in stocks and shares.
" article 28 "Any member whose share has been so forfeited shall notwithstanding be liable to pay and shall forthwith pay to the Association all moneys owing by the member to the Association at the time of the forfeiture together with interest thereon, from the time of forfeiture until payment at 12 percent per annum and the committee may enforce the pay ment thereof, without any deduction or allowance for the value of the share at the time of forfeiture.
" article 29 "The forfeiture of a share shall involve the extinction of all interest in and also of all claims and demands against the Association in respect of the share, and all other rights incidental to the share.
except only such of those rights as by these Articles expressly saved.
" article 31 "The Association shall have a first and paramount lien upon the share registered in the name of each member and upon the proceeds of sale thereof for his debts, liabilities and engagements.
488 article 32 "For the purpose of enforcing such hen the Association may sell the share subject thereto in such manner as, they think fit.
article 33 "The nett proceeds of any such sale shall be applied in or towards satisfaction of the debts, liabilities, or engagements, residue (if any) paid to such member, his executors, administrators, committee, curator or other representatives.
" The relevant bye laws of the exchange are: "Settlement of Disputes.
All disputes, complaints and claims between by and against members shall, on the application of either party, be decided by the Committee or by a Standing or Special Sub Committee appointed by the Committee for the purpose.
In the event of the matter being decided by the Committee the decision shall be, final and binding upon all members concerned but any member aggrieved with the decision of the Standing or Special Sub Committee may, within seven days of such decision being given, appeal to the Committee whose decision shall be final.
In the event of any member or members refusing, neglecting or failing to observe, carry out or comply with any decision of the Committee, or if no appeal is preferred, with the decision of the Standing or Special Sub Committee, such member or members so in default shall be dealt with by the Committee under the rules, regulations and/or by laws of the Association for the time being in force.
" Bye law 13 "Defaulters.
Any member who shall fail to pay any subscription or other moneys due by him to the Association on due date, or who shall fail to fulfil any engagement between himself and another member or members may be declared a 'defaulter ' by the Committee and on such declaration his name shall be posted as a 'defaulter ' on the notice board of the Association and so long as the name remains so posted he shall not be at liberty to exercise any of the privileges of member ship." Under the scheme of the Articles of Association of the Ex change, the Committee is authorised to expel or suspend a member on the ground, inter alia, that he refuses to abide by the decision of the Committee in any matter which is under the Articles or under the Bye laws referred to the Committee.
A person declared a "defaulter" because he fails to fulfil any engagement between himself and any other member or members within six months from 489 the date on which he has been declared a defaulter, ceases to be a member of the Exchange and his share also stands forfeited.
The share so forfeited is deemed to be the property of the Exchange.
But the Committee must sell, re allot or otherwise dispose of the share for satisfaction of the debts which may then be due and owing by the defaulter to the Exchange or to any of its members arising out of transactions or dealings in stocks and shares.
Forfeiture of a share involves extinction of all interest in and also of all claims and demands against the Exchange in respect of the share and all other rights incidental to the share, but not the liability of the.
erstwhile member to discharge his liabilities to the Exchange.
The Exchange has a first lien upon the share of a member and upon the proceeds of sale thereof for his debts and liabilities, and in enforcement of the lien, the Exchange may sell the share.
The net proceeds of the share subject to the lien it sold will be applied in or towards satisfaction of the debts, liabilities or engagements of the shareholder and the residue, if any, paid to such member, his executors, administrators, committee, curator or other representatives.
In this appeal counsel for Sanyal contended, that under the Indian Companies Act, 1913, a fully paid up share cannot be forfeited for failure to carry out any engagement by the shareholder other than an engagement to pay a call made by the Company to pay unpaid capital; that the procedure followed by the Sub Committee of the Exchange was irregular in that Sanyal had no notice of the meeting of the Committee to declare him a defaulter; that the Committee had no authority under the Articles of Association to direct sale of the share; and that in any event Sanyal was entitled to the balance remaining on hand with the Exchange after satisfying his debts, liabilities and engagements under the Articles of Association.
For failure to abide by the decision of the Committee in respect of his liability to pay the amount of loss due to Johurmull Daga & Company Sanyal was declared a defaulter, and when he continued to remain a defaulter for six months he was by resolution of the Full Committee expelled from the membership of the Exchange.
The Full Committee also resolved to forfeit his share.
The Exchange thereafter disposed of the share for Rs. 55,000/ .
The argument raised by counsel for Sanyal that a member of the Exchange forfeits his share only if a resolution expelling him and 490 a resolution declaring him a defaulter are passed is without substance.
The conductive "and" between the first two clauses of article 24 is used to indicate an Alternative, and does not make the two conditions cumulative.
We agree with the observations of Panckridge, J., in Surajmall Mohta vs Ballabhdas Mohta(1) that article 24 "is carelessly drawn, because, on its literal application, before his share could be forfeited, a member would both have to be expelled by the Committee under article 21 and automatically cease to be a member under article 22 Clearly this cannot be the intention of the article and it is obvious that by a slip, 'and ' has been substituted for "or".
" In any event the Full Committee passed on February 19, 1942 ,a resolution declaring the appellant a defaulter.
The appellant did not carry out his engagements for a period of six months there, after.
By resolution dated September 1, 1942 at a meeting of the Full Committee the appellant was expelled from the membership of the Exchange and it was resolved that his share shall stand forfeited.
There is no provision in the Indian Companies Act, 1913, which restricts the exercise of the tight of the Exchange to forfeit :share ,, for non payment of a call only.
The Indian Companies Act, 1913, made no provision relating to forfeiture of shares.
By section 17(2) of the Act, a company could adopt the regulations contained in Table A in the First Schedule but the Company was not bound to do so.
Regulations 24 to 30 of Table A dealt with the power and the procedure relating to forfeiture of shares.
Regulation 24, it is true, provided for exercise of the power to forfeit a share when there was default in paying calls, but no inference follows therefrom that the share of a member could be forfeited only for non payment of a call made in respect of the share which was not fully paid up.
In The Calcutta Stock Exchange Association Ltd. vs section N. Nundy & Co.(2), Harries C.J. after examining the provisions of the Companies Act 1913 reviewed the decisions of the Courts in England and of the High Court of Calcutta and observed that the Indian Companies Act as well as the English Companies Act contemplate, recognize and sanction forfeiture generally and not for non payment of calls only; that a company may by its Articles lawfully provide for grounds of forfeiture other than nonpayment of call, subject to the qualification that the Articles relating to for feiture do not offend against the general law of the land and in particular the Companies Act, and public policy; and that the forfeiture contemplated does not entail or effect a reduction in capital or involve or amount to purchase by the Company of its (1) I. L R. (2) I. L. R. [1950] 1 cal.
491 own shares nor does it amount to trafficking in its own shares.
The Court in that case was concerned to determine the true effect of the Articles of the Exchange which fall to be interpreted in this case.
This Court in Sri Gopal Jalan & Company vs Calcutta Stock Exchange Association Ltd.(1) also considered whether forfeiture of shares resulted in reduction of capital contrary to the provisions of the Companies Act where power of forfeiture was given by the Articles for failure to carry out an undertaking or satisfy an obligation of the member to forfeit the shares.
The Court in that case was interpreting the Articles which fall to be interpreted in this appeal.
The Court held that the Exchange was not liable to file any return of the forfeited shares under section 75(i) of the Indian when the same were re issued.
The Court observed that when a share is forfeited and re issued, there is no allotment, in the sense of appropriation of shares out of the authorised and unappropriated capital, and approved the observations, of Harries, C.J. in section N. Nundy 's case(2) that "on such forfeiture all that happened was that the right of the particular shareholder disappeared but the share considered as a unit of issued capital )continued to exist and was kept in suspense until another shareholder was found for it".
In the view of this Court, the shares so forfeited may not be "allotted ' in the sense in which that word is understood in the .
The Court also pointed out that re issue of forfeited shares is not allotment of the shares but only a sale, for, if it were not so the forfeiture even for non payment of call would be invalid as involving an illegal reduction of capital.
Article 27 of the Exchange it may be recalled is in terms mandatory.
The share forfeited to the Exchange must be re allotted or otherwise disposed of : it cannot be retained by the Exchange.
The share after forfeiture in the hands of the Company is subject to an obligation to dispose it of.
On that account there is no reduction of capital by mere forfeiture.
Mr. Datar appearing for the appellant however contended that in Sri Gopal Jalan & Company 's case(1) the parties argued the case on the footing that Articles of Association of the Exchange were not invalid, whereas in the present case the validity of the Articles is challenged.
But the Court in citing with approval the observations of Harries C.J. in section N. Nundy 's case(2) did in effect pronounce upon the validity of the Articles.
A forfeited share is, therefore, merely a share available to the Company for sale and remains vested in the Company for that purpose only.
By forfeiting a share pursuant to the authority of the (1) ; (2) I. L. R. 492 Articles of Association, no reduction of capital is achieved.
We are unable to agree with counsel for Sanyal that forfeiture of shares is permissible only in cases expressly contemplated by Table A Model Articles i.e. for non payment of calls in respect of a share which is not fully paid up.
Subject to the provisions of the the Company and the members are bound by the provisions contained in the Articles of Association.
The Articles regulate the internal management of the Company and define the powers of its officers.
They also establish a contract between the Company and the members and between the members inter se.
The contract governs the ordinary rights and obligations incidental to membership in the Company.
In the absence of any provisions contained in the Indian which prohibit a Company from forfeiting a share for failure on the part of the member to carry out an undertaking or an engagement the Articles of a Company which provide that in certain events membership rights of the shareholder including his right to the share will be forfeited are binding.
The Articles of Association of the Exchange expressly provide that in the event of the member failing to carry out the engagement and in the conditions specified therein his share shall stand forfeited.
Articles 22, 24, 26, 27 & 29 of the Exchange relating to forfeiture of shares in certain events are therefore valid.
There is in our judgment nothing in the procedure followed by the Sub Committee and the Full Committee which rendered the forfeiture of Sanyal 's share illegal.
It is not in dispute that Sanyal incurred liability in favour of one of the members of the Exchange to pay Rs. 438 10 0 in the transaction relating to the sale of Indian Iron & Steel Company 's shares and he failed to discharge that liability.
He continued to remain in default for six months even after the resolution of the Full Committee, and on that account he ceased to be a member and his share was forfeited.
The High Court has found that the copies of the letters dated 9th, 10th, 16th, 17th and 20th December, 1941, and of 8th January, 11th & 19th February, 1942, were sent to Sanyal and the usual notices relating to the complaints placed before the Sub Committee or the Full Committee were served upon Sanyal, that such notices were posted on the notice board of the Exchange that the appellant had opportunities at all stages of the proceedings to come before the Exchange and refute the charges made against him and that at no stage of the proceeding until September 1, 1942, did Sanyal appear before the Sub Committee or the Full Committee.
The High Court was of the view that the order had not been made against Sanyal contrary to the rules of natural justice.
It is true that Johurmull Daga complained about the default committed by Sanyal on December 9, 1941 and the meeting of the Sub Committee was held 493 on December 10, 1941.
Granting that the letter of the Sub Committee enclosing a copy of the complaint dated December 9, 1941, sent by post to Sanyal may not have reached him because he had left Calcutta, he had still ample notice of the proceeding of the SubCommittee because intimation was given to him by the notice posted on the board of the Exchange.
Sanyal raised no contention at any stage before the Sub Committee or before the Full Committee that he had not received the notices of the meetings dated December 10, 1941, December 17, 1941, January 7, 1942 of the Sub Committee and of the meeting dated February 19, 1942 of the Full Committee.
Regularity of the proceedings of the Com mittees at the various meetings is not challenged before us.
We are unable to agree with the contention raised by counsel for Sanyal that the rules of natural justice were not complied with when the Sub Committee and the Full Committee passed the impugned resolutions against Sanyal.
There is no substance in the plea that the Committee had no jurisdiction to order sale of the share forfeited.
Article 27 declares that the forfeited share is the property of the Exchange and that the Committee of the Exchange shall sell reallot or otherwise dispose of the share, for satisfaction of all debts due by the member to the Association or to its members out of transactions in shares and stocks.
Under its Articles the Exchange has, authority to sell the share and to appropriate the sale proceeds towards satisfaction of the debts, liabilities or engagements" But we are unable to agree with the view taken by the High Court that the balance of the amount remaining due after satisfying the liabilities of Sanyal remained the property of the Exchange and that Sanyal had no right thereto.
Under the stipulations contained in articles 21, 22, 24, the share of the defaulter or expelled member stands forfeited for failure to fulfil his obligation.
The share of ' Sanyal by express resolution was forfeited.
After applying the, amount realised on sale of the share towards satisfaction of the debts, liabilities and engagements of Sanyal to the Exchange and its members, the balance remaining in the hands of the Exchange had to be held for and on be half of the appellant.
That is expressly provided in article 33.
The expression used in article 29 "The forfeiture shall involve the extinction of all interest" is subject to those rights as by the Articles are saved, and article 33 saves to the defaulting shareholder whose share is forfeited the right to the balance remaining with, the Exchange.
Even assuming that Articles 24 & 31 reserve to the Exchange two distinct powers the power to forfeit and the power to exercise a lien, and that article 33 only applies to sale in enforcement of a lien, and not to a sale under article 27, we are of the view that the balance on hand after satisfying the liability of the defaulter must still be returned to the 494 defaulting shareholder.
The power to forfeit does not imply authority to appropriate the balance, remaining in hand after satisfying the liabilities and obligations of the defaulter to the Exchange and its members.
Any such implication would be contrary to the intendment of section 74 of the Contract Act.
The power of the Exchange to forfeit the shares arises out of the Articles and its source is in contract.
Forfeiture of share is in the nature of imposition of a penalty.
Section 74 of the Indian ,Contract Act provides : "When a contract has been broken, if a sum is named in the contract as the amount to be paid in case of such breach, or if the contract contains any other stipulation by way of penalty, the party complaining of the breach is entitled, whether or not actual damage or loss is proved to have been caused thereby, to receive from the party who has broken the contract reasonable compensation not exceeding, the amount so named or, as the case may be, the penalty stipulated for.
In Fateh Chand vs Balkishan Das(1) this Court in dealing with a case in which a claim for damages for breach of contract to sell :a lien of immovable property arose, pronounced that the expression " 'the contract contains any other stipulation by way of penalty" comprehensively applies to every covenant involving a penalty whether it is for payment on breach of contract of money, or delivery of property in future, or for forfeiture of right to money or other property already delivered.
Duty not to enforce the penalty clause but only to award reasonable compensation is statutorily imposed upon courts by section 74 of the Indian Contract Act.
In all cases, therefore, where there is a stipulation in the nature of penalty for forfeiture of an amount deposited pursuant to the terms of a contract which expressly provides for forfeiture the Court has jurisdiction to award such sum only as it considers reasonable, but not exceeding the amount specified in the contract as liable to forfeiture.
The same principles, in our judgment, would apply in the ,case in which there is a stipulation in the contract by way of a penalty, and the damages awarded to the party complaining of the breach will not in any case exceed the loss suffered by the complainant party.
It was observed at p. 526 in Fateh Chand 's case(,) : "The section (section 74) is clearly an attempt to eliminate the somewhat elaborate refinements made under the English common law in distinguishing between stipulations providing for payment of liquidated damages and (1) [1964] IS.
C.R. 515.
495 stipulatings in the nature of penalty.
Under the common law a genuine pre estimate of damages by mutual agreement is regarded as a stipulation naming liquidated damages and binding between the parties : a stipulation in a contract in terrorem is a penalty and the Court refuses to enforce it, awarding to the aggrieved party only reasonable compensation.
The Indian Legislature has sought to cut across the web of rules and presumptions under the English common law, by enacting a uniform principle applicable to all stipulations naming amounts to be paid in case of breach, and stipulations by way of penalty.
" The Court also observed at p. 530 "Section 74 declares the law as to liability upon breach of contract where compensation is by agreement of the parties predetermined, or where there is a stipulation by way of penalty.
But the application of the enactment is not restricted to cases where the aggrieved party claims relief as a plaintiff.
The section does not confer a special benefit upon any party; it merely declares the law that notwithstanding any term in the contract pre determining damages or providing for forfeiture of any property by way of penalty, the Court will award to the party aggrieved only reasonable compensation not exceeding the amount named or penalty stipulated.
" Granting that article 33 deals with those cases in which lien alone is, enforced and not in cases where forfeiture is levied, and the obligation of the defaulting shareholder is determined by article 29, in our judgment, on the principle underlying section 74 of the Contract Act the Exchange had no right to hold out of the sale proceeds of the share any amount in excess of the amount due to it or to its members.
The Exchange may not purchase its own shares.
If it does so, it amounts to reduction of capital.
The legal theory of forfeiture is that a share forfeited is only taken over by the Company with the object of disposing it of to satisfy its claim to enforce which the share was forfeited and all other obligations arising against him out of his membership.
The Company is given this right to recover the loss suffered by it by reason of the breach of contract committed by the shareholder.
If the Company is permitted to retain the balance of the amount after satisfying the debts, liabili ties and engagements of the shareholder, the transaction would not be different from one purchasing the share of the defaulting shareholder for a value equal to the amount of his obligations.
That would be plainly illegal.
We are therefore unable to agree with the 496 High Court that the Exchange was entitled to retain the balance after satisfying the debts, liabilities and engagements of the appellant to the other members or to the Exchange.
The decree passed by the High Court is set aside and the case remanded to the High Court for determining the extent of the liabilities of the appellant to the Exchange not only in respect of the transactions with Johurmull Daga but in respect of all other outstanding liabilities of the appellant to other members of the Exchange and to the Exchange which are enforceable under the Articles.
The appellant is entitled to receive from the Exchange the balance remaining due after deducting the aggregate amount or value of the obligations.
He will be entitled to interest on the balance at the rate of 6% per annum from the date of the institution of the suit.
Parties will bear their own costs throughout.
This appeal was filed in forma pauperis.
The 'appellant will pay the court fee payable on the memorandum of appeal if he had not been permitted to appeal in forma pauperis.
V.P.S. Appeal allowed and case remanded.

summary/full:
Under the scheme of the articles of association of the Calcutta Stock Exchange Association Ltd., the Committee is authorised under article 21 to expel or suspend a member on the ground inter alia that he refused to abide by the decision of Committee in any matter which is under the articles or under the bye laws referred to the Committee.
Under article 22, a member declared a "defaulter" because he fails to fulfil any engagement between himself and any other member within six months from the date on which he has been declared a defaulter ceases to be a member of the Exchange automatically.
Upon his ceasing to be a member and upon a resolution being passed by the Committee expelling a member his share stands forfeited.
The share so forfeited is deemed to be the property of the Exchange.
Such forfeiture involves the extinction of all interest in and also all claims and demands against the Exchange in respect of the share and all other rights incidental to the share, but, not the liability of the erstwhile member to discharge his liabilities to the Exchange.
But the Committee must sell, reallot or otherwise dispose of the share for the satisfaction of the debts, which may then be due and owing by the defaulter to the Exchange or to any of its members arising out of transactions or dealings in stocks and shares.
The net proceeds of the sale shall be applied towards the satisfaction of the debts, liabilities or engagements of the shareholder and the residue, if any, paid to the member or his legal representatives.
The appellant failed to carry out a direction to pay a certain sum arising out of a share transaction and the Committee after notice, declared him a defaulter.
Six months later, after notice to the appellant, the Committee resolved that the share standing in his name shall be forfeited to the Exchange and that the appellant be expelled from the membership of the Exchange.
The Exchange thereafter disposed of the 'share for Rs. 55,000.
The appellant challenged the action taken by the Exchange but the suit was dismissed.
In appeal to this Court, HELD : (1) It is not necessary that a resolution expelling a member and a resolution declaring him a defaulter should both be passed before his share is forfeited by the Exchange.
The word and is used to indicate an alternative and does not make the two conditions cumulative, because, it would lead to the anomalous result that a member would have to be expelled by the Committee under article 21 and would also automatically cease to be a member under article 22.
[490 A C] Surajmall Mohta vs Ballabhdas Mohta, I.L.R , approved.
484 In any event, in the present case, a resolution declaring the appellant a defaulter was passed and six months later the appellant was expelled from the membership of the Exchange and it was resolved that his share shall stand forfeited.
[490 C D] (2)(a) Regulation 24 in Table A in the First Schedule to the Companies Act, 1913, provides for the exercise of the power to forfeit a share when there is default in paying calls, but no inference follows therefrom that the share of a member could be forfeited only for non payment of a call made in respect of a share which was not fully paid up.
Subject to the provisions of the Companies Act a company and its members are bound by the Provisions contained in its articles of association.
The Articles regulate the internal management of the company and define the powers of its officers.
In the absence of any provision contained in the Act which prohibits a company from forfeiting a share for failure on the part of a member to carry out an undertaking or engagement the articles of a company which provide that in certain events membership rights of a shareholder including his right to the share will be forfeited are binding.
There ' is no provision the Indian Companies Act 1913, which restricts the exercise of the right of the Exchange to forfeit shares for non payment of a call only, and the articles of the Exchange expressly provide that in the event of a member failing to carry out the engagement and in ,the conditions specified therein his share shall stand forfeited.
[492 A E] (b) Under article 27, the terms of which are mandatory, the shares forfeited to the Exchange must be re allotted or otherwise disposed of : it cannot be retained by the Exchange.
A forfeited share is merely a shake available to the company for sale and remains vested in it for that pur pose only.
By forfeiting a share pursuant to the authority of the articles of association no reduction of capital is achieved.
[491 F, H; 492 A] Therefore, articles 22, 24, 26, 27 and 29 relating to forfeiture of shares are valid.
[492 D E] Sri Gopal Jalan & Co. vs Calcutta Stock Exchange Association Ltd., ; , followed.
Calcutta Stock Exchange Association Ltd. vs section N. Nundy & Co. I.L.R. , approved.
(3) There is nothing in the procedure followed which rendered the forfeiture of the appellant 's share illegal.
The appellant had ample notice of the proceedings and the orders were not made against him contrary to rules of natural justice.
[493 C] (4)(a) Under its articles the Exchange has authority to sell the share and to appropriate the sale proceeds towards satisfaction of the debts, liabilities or engagements.
But the balance of the amount remaining due after satisfying the liabilities of the appellant did not remain the property of the Exchange.
The appellant was entitled to the amount.
This is expressly provided for in article 33.
The expression used in article 29 'the forfeiture shall involve extinction of all interest ' is subject to the rights as by the articles saved and article 33 saves the defaulting share holder 's right lo the balance remaining with the Exchange.[493 D G] (b) Even assuming that articles 24 and 31 reserve to the Exchange two distinct powers the power to forfeit and the power to exercise a lien, and that article 33 only applies to a sale in enforcement of a lien and not to a sale after forfeiture, the balance on hand after satisfying the liability 485 of the defaulter must still be returned to the defaulter, under section 74 of the Contract Act.
The power of the Exchange to forfeit the shares arises out of the articles and its source is in contract.
On the principle underlying section 74 of the Contract Act the Exchange had no right to hold, out of the sale proceeds of the share, any amount in excess of the amount due to it or to its members.
[493 H; 494 A B] Fateh Chand vs Balkishan Das, ; , followed.
(c) The legal theory of forfeiture is that a share forfeited is only taken over by the company with the object of disposing of it to satisfy its claims to enforce which the share was forfeited and all other obligations arising against him out of his membership.
If the company is per mitted to retain the balance of the amount after satisfying the debts, liabilities and engagements of the share holder, the transaction would not be different from one purchasing the share of the defaulting shareholder for a value equal to the amount of his obligation and that would be illegal.
[495 E H]


judgement:
minal Appeal No. 178 of 1967.
Appeal by special leave from the judgment and order dated January 5, 1967 of the Madras High Court in Criminal Appeal Nos.
34 to 38 of 1965.
R. N. Sachthey, for the appellant.
H. R. Gokhale, M. K. Ramamurthi, Vineet Kumar and Shyamala Pappu, for respondent No. 1.
A. V. Rangam, for respondent No. 6.
The Judgment of the Court was delivered by Dua, J.
A complaint under section 6 of the Imports and Exports Control Act, 1947 dated 24th February, 1964 was presented by the Chief Controller of Imports and Exports, New Delhi in the court of the Chief Presidency Magistrate, Madras against (1) K. T. Kosalram, Director in charge of Messrs Dina Seithi Ltd., Madras, (2) K. T. Janakiram, Director, Messrs Dina Seithi Ltd., (3) K. Natarajan, Manager, Messrs Mohan Ram Press, Madras, (4) Messrs Dina Seithi Ltd., Madras, (5) Sri T. N. Ramachandran son of section Natesa lyer, Madras and (6) T. Natarajan, Manager, Messrs Dina Seithi Ltd., Madras.
Accord 5 10 ing to the broad allegations in the complaint, on November 28, 1959 accused No. 4 (hereafter called the Company) was registered under the , as a public limited company with the Registrar of Companies, Madras.
Accused nos.
1 and 2 who are brothers were both directors of the Company, accused No. 1 being the Director in charge attending to its day to day management and administration.
He was also authorised to operate its accounts with the banks.
The primary object of the Company was publication of a Tamil daily newspaper "Dina Seithi".
Accused No. 3 was the Manager of Messrs Mohan Ram Press located in the same building in which the Company was located.
Srimati Gomati Devi, wife of accused No. 1 was the sole proprietress of this Press.
She had given power of attorney to her husband for operating the bank account of her Press.
The daily newspaper (Dina Seithi) used to be printed at this press.
Accused No. 5 was a broker engaged in the business of negotiating sale and purchase of printing machinery.
Between 1949 and 1951 he was working as Chief Salesman of Printers ' House, Madras and before that for about two years he had worked as a salesman with Messrs Standard Printing Machinery Company, Madras.
In 1951 he started his independent business as a broker; in addition he also used to work as a correspondent of "Kerala Kaumudi" belonging to the Company.
Accused No. 6 was the Manager of the Company and his wife Smt.
Sarojini was one of its Directors.
On May 5, 1960 accused No. 1 applied on behalf of the Company to the Chief Controller of Imports and Exports, New Delhi, for the grant of an import licence in favour of the Company for importing two secondhand rotary printing presses valued at Rs. 3 lakhs in the category of "Actual Users".
The Chief Controller of Imports & Exports, on the recommendation of the Committee constituted for the purpose, issued in the first instance aft import licence for Rs. 1,50,000 (exhibit P 12).
The number of this licence was A 759626/60/AU/CCI/HO and it was dated September 19, 1960.
Later, on the request of accused No. 2 on behalf of the Company, the value of this licence was raised to Rs. 3 lakhs on the recommendation of the Press Registrar of India.
The licence was returned to the Company on December 16, 1960.
The original period of validity of the licence having expired on June 19, 1961 accused No. 2 requested the Licensing Authority on behalf of the Company to extend the period on the ground that the machinery could not be fixed up by the Company 's Directors.
Under the orders of the Controller in charge of the newsprint sale, the validity of the licence was extended upto March 19, 1962.
Oil July 2, 1961 accused No. 1 sought permission of the Licensing Authority on behalf of the Company to import two secondhand rotary presses instead of one already permitted within the licence value of Rs. 3 lakhs under the import 51 1 licence exhibit P/12 on the ground that one more printing press was required for the proposed office at Madurai (exhibit P/15).
After securing further necessary information about the machinery proposed to be imported the Chief Controller approved the request with the result that the amended licence for two presses was sent to the Company, on August 16, 1961.
On December 19, 1961 the Company as per letter sent by accused No. 1, informed the Chief Controller that one rotary printing press had been imported and the other was expected to arrive by January, 1962.
It was requested that in the import licence the description of the goods be changed from "Rotary Press" to "Rotary Press with Stereo equipment and Turtles".
We find from exhibit P/17 and exhibit P/17(a) that it was represented that the Company was incurring heavy demurrage as the cases were lying on the wharf uncleared for want of the required amendment of the licence.
This was described as a purely technical amendment in the licence.
This request was granted with the approval of the Chief Controller of Imports and Exports.
The amended licence was despatched to, the Company on January 3, 1962.
According to condition (c) reproduced on the reverse of the import licence the licence holder had to utilise the goods imported only for consumption in his own factory and its sale to or use by other parties was specifically prohibited.
The licence holder was further prohibited from pledging the imported goods in whole or in part except with a scheduled bank duly authorised to deal in foreign exchange and that also with prior permission of the Licensing Authority.
One Dr. K. G. Thomas owned "Kerala Dhwani", a daily newspaper of Kottayam having circulation in the State of Kerala.
It has started on August 20, 1959 and C. J. Mani was its general business manager ever since its inception.
On November 10, 1960 Dr. Thomas applied to the Chief Controller of Imports and Exports on behalf of his firm for importing a rotary printing press under a Customs Clearance Permit.
But this was rejected.
On October 25, 1961 he sent another application dated October 3, 1961 on behalf of ,the firm requesting for an import licence for importing a secondhand rotary press for the period October March, 1962.
But this was also rejected.
Still another application dated May 10, 1962 for licence for importing two mono typefacing units was also rejected on April 29, 1963.
C. J. Mani, the General Manager of this concern was also independently trying to secure a rotary printing press through various parties and firms.
Accused No. 5 was known to C. J. Mani and during the former 's visit to Kottayam in the first quarter of 1961 he learnt that Dr. Thomas was desirous of securing a secondhand rotary printing press.
Sometime in April or May, 1961 accused nos.
2 and 5 visited Kottayam and on meeting Dr. Thomas they told him that accused No. 1 was going to have an import licence for two rotary 512 printing presses but he needed only one, with the result that one R. Hoe & Co eight page rotary printing press would be available for sale.
After some correspondence and discussion between accused No. 5 and C. J. Mani and Dr. Thomas and after a personal meeting between Dr. Thomas and accused No. 1 (at the instance of accused No. 5) the terms of sale of rotary press to Dr. Thomas were finally settled on July 17, 1961.
The price was settled at Rs. 2 lakhs ex godown, Madras, The same day Dr. Thomas paid to accused No. 5 Rs. 15,000 by means of a cheque by way of advance money.
Accused No. 5 issued a stamped receipt which was also signed by accused No. 1.
On July 19, 1961 the photo prints of the press offered for sale were forwarded by accused No. 5 to Dr. Thomas.
On the reverse of these prints were the rubber stamp impressions of the Company.
On August 2, 1961 a further sum of Rs. 25,000 was paid by Dr. Thomas for which a receipt was given by accused nos.
1 and 5.
Between September 23, 1961 and March 17, 1962 the balance of Rs. 1,76,700 (total being Rs. 2,16,700) was paid by Dr. Thomas in instalments towards the price of the rotary press and its accessories.
On September 1, 1961 accused No. 1 had 'opened a letter of credit with a nil margin with the Indian Overseas Bank Ltd., Madras on Messrs Universal Printing Equipment Company, ,New York for importing a secondhand rotary press for dollars equivalent to Rs. 1,00, 1 12 against import licence No. A 759626/ 60/AU/CCI/HQ.
On October 28, 1961, the Bank received the relevant import documents and on December 13, 1961 it received from the Company the remittance of the amount in cash towards the letter of credit.
On October 20, 1961 Messrs Binny & Co., Madras, the agents of the ' Shipping Company Messrs Isthmian Lines Inc., U. section A. had requested the Company to remit Rs. 12,712 being the freight payable at Madras towards the con signment of 19 boxes containing secondhand rotary press due to arrive from New York by s.s.
"Steel Vendor" so as to enable them to cable to their principals at New York to issue the bills of leding to the shippers.
A cheque for Rs. 12,712 was accordingly sent by the Company to Messrs Binny & Co., on October 31, 1961.
The necessary cable was then sent to New York.
The import documents pertaining to the rotary press were sent by accused No. 1 on behalf of the Company to Messrs Natesa lyer & Co., Clearing Agents, Madras for clearing the goods from the Madras Port by the Indian Overseas Bank Ltd., Pursawalakam, Madras.
This invoice was issued by the Universal Printing Equipment Company, Lindhurst in the name of Messrs Dina Seithi Ltd., indicating shipment of the goods imported contained in the 19 boxes bearing marks "Dina Seithi".
The customs duty and the clearance charges were paid by the Company.
It is unnecessary to state at length further details of the complaint.
Suffice it to 513 started functioning from May 20, 1962.
In March, 1962 the Deputy Superintendent of Police, Madras, visited the premises of this newspaper and found the rotary printing Press tallying with the description given in the invoice issued to the Company by R. Hoe & Co., New York/London.
The number 458 assigned to the press was also found on its major parts.
No rotary press imported by accused No. 1 on behalf of the Company was found at its (the Company 's) premises.
The amount received by cheques and drafts from Dr. Thomas were credited to the account of Messrs Mohan Ram Press of which Smt.
Gomati Devi, wife of accused No. 1, was the sole proprietress.
On these broad avermerits it was prayed in the complaint that accused nos.
1 to 3 and 5 and 6 be proceeded against for offences under section 120 B, I.P.C. read with section 5 of Imports and Exports (Control) Act, 1947 ' Lind also for an offence under section 5 of the said Act.
The Company was alleged to be guilty under section 5 of the said Act read with cl.
(5), sub cl.
(iv) of Imports (Control) Order, 1955.
The Chief Presidency Magistrate who tried the complaint acquitted accused No. 6 holding that he had nothing to do with the impugned transaction but convicted the rest.
The Company was sentenced to fine only and so were accused nos.
2, 3 and 5; three individual accused persons were directed, in case of default to undergo rigorous imprisonment for three months on each count.
Leniency was shown to accused nos.
2, 3 and 5 because they had acted under the directions given by accused No. 1 who was sentenced to rigorous imprisonment for six months under each count and also to pay fine and in default to undergo further rigorous imprisonment for three months.
The convicted accused appealed to the High Court at Madras and the State applied for enhancement of sentences.
The, High Court acquitted all the accused persons with the result that the revision for enhancement necessarily failed.
The High Court having declined certificate of fitness under article 1 3 4 ( 1 ) (c) of the Constitution the Deputy Chief Controller of Imports & Exports secured special leave to appeal under article 136 of the Constitution against the order of acquittal by the High, Court.
In the High Court, though in the memorandum of appeal several grounds were taken, during arguments the appellant 's counsel confined his submission mainly to the point that condition.
(c) of the licence issued to accused No. 4 (exhibit P/ 1 2) related only to raw material or accessories and that as such the sale of printing press which was neither raw material nor accessories, did not contravene that clause.
The factum of sale of the printing press, 514 to Dr. Thomas (P. W. 16) was not disputed.
The High Court accepting this contention held condition (c) in exhibit P/12 to be inapplicable to printing presses and observed that the Licensing Authority had not applied its mind when this condition was inserted in the licence for importing the printing press in question.
On this ground the conviction recorded by the trial court was set aside.
The appellant 's learned counsel in this Court has questioned the correctness of this view and has submitted that it is not sustainable on the statutory provisions and has resulted in grave failure of justice.
Before dealing with this question we may dispose of a pre liminary objection to the competency of this appeal at the instance of the Deputy Chief Controller of Imports and Exports, raised by Shri H. R. Gokhale on behalf of the respondents.
It has been pointed out that the special leave petition in this Court purports to be filed by the Deputy Chief Controller of Imports & Exports and not by the State.
As the State had conducted the prosecution the complainant, it is argued, cannot seek leave nor can he prosecute this appeal.
Leave already granted ex parte is, according, to Shri Gokhale liable to be revoked.
Reliance has been placed on Management of Hindustan Commercial Bank Ltd., Kanpur vs Bhagwandass(1).
There the appellant had secured from this Court ex parte special leave to appeal under article 136 of the Constitution without first moving the High Court for the necessary certificate and this Court, on objection by the respondent, revoked the special leave as being in contravention of O. 13, r. 2 of the Supreme Court Rules.
The respondents ' contention before us is that the Public Prosecutor and not the Deputy Chief Controller of Imports & Exports had applied to the High Court for the necessary certificate and, therefore, the Deputy Chief Controller has no locus standi to apply for special leave.
Having been granted on an incompetent petition the special leave deserves to be revoked, argues Shri Gokhale.
We are unable to uphold this objection.
The complaint was filed in the court of the Chief Presidency Magistrate by the Deputy Chief Controller of Imports and Exports under section 6 of the Imports and Exports (Control Act, 1947.
It is not disputed that this officer was, as stated in para 1 of the complaint, duly authorised to make the complaint within the contemplation of section 6.
In the appeals filed by the accused against their conviction the State was impleaded, as represented by the Deputy Chief Controller of Imports and Exports (complainant), as the respondent.
It is true that in a petition for enhancement of sentence filed in the High Court the Public Prosecutor was shown as the petitioner and similarly the application for leave to appeal from the judgment of the High Court was (1) ; 515 also filed in that Court by the Public Prosecutor.
But that, in our view, does not in any way disentitle the Deputy Chief Controller of Imports and Exports (the original complainant duly authorised by the statute) to apply for special leave to appeal to this Court and to prosecute the appeal.
, Our attention has not been drawn to any provision of law which can be said to deprive the Deputy Chief Controller the lawfully authorised complainant in this case to seek special leave and prosecute this appeal.
In any event article 136 of the Constitution and the Supreme Court Rules are wide enough in their language to empower this Court to grant special leave to the Deputy Chief Controller in cases like the present and deal with the appeal on the merits.
The preliminary objection must accordingly be repelled.
Coming to the merits we may for a while again turn to con dition (c) of the licence which has already been noticed earlier.
It may be recalled that this condition expressly provides that the goods would be utilised only for consumption as raw material or accessories in the licence holder 's factory and no portion thereof would be sold to, or, be permitted to be utilised by, any other party.
The goods imported are also not to be pledged with any financier other than banks authorised to deal in foreign exchange, provided that particulars of the goods so pledged are reported in advance to the licensing authority.
Under section 3 of the Imports and Exports Act , 18 of 1947 the Central Government is empowered to provide by order published in the official Gazette for prohibiting, restricting or otherwise controlling the import, export, carriage or shipment etc., of goods of any specified description and also the bringing into any port or place in India of goods of any specified description intended to be taken out of India without being removed from the ship or conveyance in which they are being carried.
The Central Government by Order dated December 7, 1955 made the Import Control Order under sections 3 and 4A of the said Act.
Clause (3) of this Order provides for restriction on import of certain goods in these words : "Save as otherwise provided in this Order, no person shall import any goods of the description specified in Schedule 1, except under, and in accordance with, a licence or a customs clearance permit granted by the Central Government or by any officer specified in Schedule II.
" Clause 7 of this Order empowers the Licensing Authority suo motu or on application by the licensee to amend the licences granted under this Order in such manner as may be necessary to make them conform to the aforesaid Act or this Order or any other law in force or to rectify any error or omission in the licence : on the licensee 's request, however, the licence may be 5 1 6 amended in any manner consonant with the Import and Export Control Regulations.
Item No. 67(1) in Schedule 1, Part V, which appears to us to be relevant for this case reads : "Printing and Lithographic material, namely, presses, lithographic plates, composing sticks, chases, imposing tables, lithographic stones, stero blocks, wood blocks, half tone blocks, electrotype blocks, process blocks, roller moulds, roller frames and stocks, roller composition, lithographic nap rollers, standing screw and hot presses, perforating machines, gold blocking presses, galley presses, proof presses, arming presses, copper plate printing presses, rolling presses, ruling machines, ruling pen making machines, lead cutters, rule cutters, slug cutters, type casting machines, type setting and casting machines, paper in rolls with side perforations to be used after further perforation for typecasting, rule bending machines, rule mitreing machines, bronzing machines, stereotyping apparatus, paper fold ing machines, paging machines, but excluding ink and paper and sets of mats when imported as advertising material in connection with composed films." This item which contains a very large number of various components of a printing press corresponds to item No. 72(2) of the Indian Tariff Act, 1934 which consolidates the law relating to customs duties.
Item No. 67(2) in Schedule I speaks of component parts as defined in import tariff item No. 72(3), of machinery specified in cl.
(1) excluding those covered by sl.
no 6 8 of this schedule.
Serial No. 68 refers to rubber blankets for printing presses etc.
Item No. 67 (1) would suggest that printing presses are included in the expression "printing and lithographic material.
" Our attention has not been drawn to any other entry either in Schedule I of the Imports Control Order or in the first Schedule of the Indian Tariff Act which would cover the import of printing presses and payment of customs duty on such import.
These two statutes forming parts of the Import Control Scheme may appropriately be considered as throwing some light on each other.
The principal argument advanced on behalf of the respondents is that cl.
(c) of the conditions of the licence does not cover the printing presses in question because the plain language of this clause postulates that goods covered by it should be capable of being utilised for consumption as raw material or accessory in a factory.
A complete printing press, it is contended, is neither raw material nor accessories and it cannot be said that by fixing a printing press for running it, the press is utilised for consumption as raw material or accessory.
This argument, though attractive on first impression seems to us on a deeper thought to 517 be unacceptable.
A close scrutiny of the scheme and language of the relevant provisions of the import and export legislation and of the Import Control Policy formulated by the Government leaves no doubt that the argument is unfounded.
Clause (c) reads : " (c) The goods will be utilised only for con sumption as raw materials or accessories in the licence holders ' factory and that no portion thereof will be sold to or be permitted to be utilised by any other party or pledged with any financier other than Banks authorised to deal in foreign exchange provided that particulars of goods so pledged are reported in advance to the licensing authority.
" The respondents have sought assistance for their argument principally from the dictionary meaning of the words "consumption", "raw material" and "utilised" used in this clause.
"Consumption", it is argued, conveys the idea of destruction of the commodity consumed and "raw material" according to this submission, must be "utilised" in this sense.
In our opinion dictionary meanings, however helpful in understanding the general sense of the words cannot control where the scheme of the statute or the instrument considered as a whole clearly conveys a somewhat different shade of meaning.
It is not always a safe way to construe a statute or a contract by dividing it by a process of etymological dissection and after separating words from their context to give each word some particular definition given by lexicographers and then to reconstruct the instrument upon the basis of those definitions.
What particular meaning should be attached to words and phrases in a given instrument is usually to be gathered ?from the context, the nature of the subject matter, the purpose or the intention of the author and the effect of giving to them one or the other permissible meaning on the object to be achieved.
Words are after all used merely as a vehicle to convey the idea of the speaker or the writer and the words have naturally, therefore, to be so construed as to fit in with the idea which emerges on a consideration of the entire context.
Each word is but a symbol which may stand for one or a number of objects.
The context, in which a word con veying different shades of meanings is used, is of importance in determining the precise sense which fits in with the context as intended to be conveyed by the author.
The words used in the licence (exhibit P/12) have accordingly to be construed in the background of the scheme of the Import Control Order, 1955, the entry No. 67 of Schedule I to this Order and the Import Trade Control Policy.
The word "consumption" as used in cl.
(c) in the licence seems to us to convey the idea of using up the goods by L 436 Sup Cl/71 518 fixing them in the factory along with other components.
This is clear from the fact that entry No. 67(1) in Schedule 1 of the Import Control Order does not contain any single item denoting a complete printing press and from the fact that the various ;articles mentioned in this item seem as if to have been intended to constitute "raw material".
This construction fits in with the scheme and policy of the Import Trade Control as we will presently show.
The dictionary meaning of the three words in cl.
(c) on which the respondent relies also seems, in our opinion to harmo nise with this view.
The Government of India (Ministry of Commerce and Industry) has been publishing from time to time Import Trade Control Handbook on rules and procedure providing for the assistance of those interested in imports up to date information as to the manner in which applications for import licences should be made, the appropriate authority to be addressed in each case, the procedure governing the grant of licences for different classes of goods, the validity and use of import licences and other similar matters.
In the Handbook of 1956, which is the relevant Handbook for this case which relates to the licence originally granted in 1960, Schedule I commonly known as the ITC Schedule serves broadly to classify the articles that enter into the import trade.
Part V of the Schedule covers 'industrial requirements and it is in this part that the printing and lithographic material including and Other items are entered at sl.
No. 67(1), already noticed by us.
This Handbook emphasises the importance of correct classification with reference to the serial number and part of the ITC Schedule.
In Appendix III of the Handbook application forms are prescribed.
Form B is the one which was used by the respondents.
This form is meant for the import of goods by actual users not borne on the registers maintained by the Industrial Advisers, Ministry of Commerce and Industry, when licence is sought for import of goods (other than those falling under the capital goods licensing procedure) vide : Government of India, Ministry of Commerce and Industry Order No. 17/55 dated 7th December, 1955.
It is expressly stated in the respondents ' application exhibit P/ 11 (b) 1 that the raw material was required by them for printing newspaper (Dina Seithi, Tamil Daily) : full particulars of the raw materials required to be imported were given as printing machinery and proforma was attached with the application.
ITC number and part was specifically stated to be 67 (1 ) (i), Part V.
It was on the basis of this application that the licence exhibit P/12 was granted subject inter alia to condition (c).
The Government of India, Ministry of Commerce and Industry also publishes from time to time Import Trade Control Policy 519 for the various licensing periods.
in the publication for the licensing period April September, 1960 we find the policy statement, showing the list of items licensable to actual users.
At p. 360 in Appendix IV, Part V, items 67 (1) (i) and 67 (2) occur.
Item 67 (1 ) (i) reads : "Printing machinery (for Newspaper Establishments and quality printers).
" Item 67 (2) reads : "Component parts of printing machinery".
It is obvious that in the respondents ' application serial No. 67(1) (i) refers to this item in the Import Trade Control Policy, AprilSeptember, 1960, the period relevant for this case.
There is no other item in any one of the lists which covers printing presses as a separate item.
This clearly shows that the printing presses are treated by legislative intendment as Printing material or Printing machinery.
Form 'B ' used in the present case indicates that the Press intended to be imported was not considered to fall under the Capital Goods Licensing Procedure.
It seems that it is for all these reasons that in the licence it was provided that these goods would be utilised only for consumption as raw material or accessories in the licence holder 's factory.
The words "utilised", "consumption" and "raw material" have to be fitted into the clearly discernable statutory scheme and this is possible without doing violence to the dictionary meaning of these words.
The appropriate dictionary meaning of words possessing variable shades of meanings has not to be arbitrarily selected and mechanically applied without considering the setting in which they are, used and the purpose sought to be achieved.
There is another very cogent factor in this case, namely, that the respondents, when they sought licence for the import of printing press expressly represented that the imported goods were required to meet the increasing demand of circulation of their newspaper.
This indeed was the sole round for importing the press.
The amended licence was.
also secured by the respondents so as to enable them to import two printing presses on the ground that one press was required for their Madurai office as well.
Licence for both the printing presses was obtained for actual use by them for their newspapers.
Had they not complied with the procedure meant for the import of goods by actual users, they might not have secured the necessary licence.
Having secured a licence expressly for the import of goods for their use they may not be permitted to ignore the condition of actual user on the plea (which by no means seems to be virtuous) that cl.
(c) is inapplicable to actual users.
5 20 The respondents on their own showing clearly knew their dis ability under the conditions imposed by cl.
(c) of the licence.
Knowing full well the condition prohibiting the transfer of the press to other persons the respondents as the correspondence to which our attention has been drawn shows were actually negotiating for the sale of one of the presses during the period when the procedure in regard to its import was being carried out.
On July 2, 1961 amendment of the licence was sought so as to import one more printing press and on July 17, 1961 its resale was actually finalised and a part of the price also received.
These facts do not need any comment on the intention and bona fides of the respondents.
It is unnecessary to go into the evidence on this point because, as already noticed, it is not disputed that one of the printing presses was actually sold to Dr. Thomas prior to its arrival in India.
The amendment of the licence also appears to have been sought with the object of reselling the second press.
The only argument urged namely that condition (c) was inapplicable to the present case having been repelled, the appeal, in our view, must succeed and the order of the High Court reversed.
The validity of condition (c) in the licence has not been questioned and in our opinion rightly in view of the decision of this Court in M/s. Ramchand Jagdish Chand vs Union of India(1).
There is neither any legal nor equitable justification for reselling the printing press.
The suggestion faintly thrown that the Company was the holder of the licence and, therefore, the other respondents (accused persons) should not be held liable is also without merit.
On the facts found and on the authority of State of West Bengal vs Motilal Kanoria (2 ) all the respondents (the individual accused persons along with the Company) are guilty.
The argument that the High Court having acquitted the,res pondents on a view which is a possible view this Court should not convert acquittal into conviction under article 136 of the Constitution has not appealed to us.
The view of the High Court does not seem to be sustainable on the statutory language and on the Import Control Policy of which the respondents were fully aware.
Their own application is proof positive of their awareness of the true position and the breach of the conditions of the licence on their part was deliberate.
Indeed, as observed earlier, the permission for the import of the second press was apparently sought with the object of its resale.
Breach of conditions for import of goods is a serious matter because it prejudicially affects our country 's national economy.
The import licence for the second press having, in our view, been sought on false representation with (1) ; (2) [1966] 3 section C. R. 933.
521 the object and purpose of its resale the breach of the licence was, therefore, fully intended and designed.
The respondents are guilty of malpractices and of abuse of the import licence with the object of making money.
We, however, think that in view of the fact that this litigation has been pending since a long time, it would meet the ends of justice if we impose merely fine and do not sentence anyone to imprisonment.
The final result is that the order of the High Court is set aside and accused nos.
1, 2, 3 and 5 are convicted under section 120 B, I.P.C. and section 5 of the Imports & Exports Act, 1947 read with cl. 5 of the Import Control Order, 1955 and each of the accused nos.
2, 3 and 5 are sentenced to pay a fine of Rs. 2,000/ under each count.
Accused No. 1 who is the principal culprit and who was sen tenced by the trial court to imprisonment and fine is sentenced to pay a fine of Rs. 5,000/ under each count.
In default of payment of fine the defaulting accused persons will undergo rigorous imprisonment for three months.
The Company is convicted only under section 5 of the Imports & Exports Act read with cl. 5 of the Import Control Order and sentenced to pay a fine of Rs. 2,000/ .
V.P.S. Appeal allowed.

dataset_name: IN-Abs

summary/full:
Under section 3 of the Imports and Exports Act, 1947, the Central Government is empowered to provide by Order published in the Official Gazette for prohibiting, restricting or otherwise controlling the import,, export, carriage or shipment etc., of goods of any specified description.
The Central Government made the Import Control Order, 1955.
Under cl. 3 of this Order the import of any goods of the description specified in Sch.
I of the Order is restricted except under and in accordance with a licence or a customs clearance permit granted by the Central Government.
Item 67(1) in Sch.
I Part V, contains printing and lithographic material, and a large number of various components of a printing press.
In Part V of the Schedule, known as ITC Schedule of the Import Trade Control Handbook, relevant for the year 1960, published by the Government of India (Ministry of Commerce and Industry) printing and lithographic material are entered at serial No. 67(1).
The I.T.C Handbook, which is published to give information of rules and procedure for the assistance of those interested in imports, emphasises the importance of correct classification with reference to the serial number and part, of the ITC Schedule.
The Government of India, Ministry of Commerce and Industry also publishes from time to time its Import Trade Control Policy.
In the publication, relevant for the period April September 1960, the policy statement shows the list of items licensable to actual users, and item 67(1)(i) dealing with printing machinery (for Newspaper Establishments and quality printers), is shown in App.
iv, Part V.
The respondents who were the Director in Charge and other officers of a company publishing a Tamil daily newspaper and others applied in Form B prescribed in Appendix III of the ITC Handbook, for a licence for importing a printing press.
This form is meant for the import of goods by actual users, when the licence is sought for import of goods other than those falling under the capital goods licensing procedure.
The respondents stated that the raw material was required by them for printing their newspaper.
The ITC number and part were specifically stated to be No. 67(1)(i), Part V. An amendment of the licence was sought by the respondents for importing one more printing press, and while the matter was pending with the Government, negotiations were entered into by the respondents with a third party for the sale of one of the printing presses.
One of the presses was ultimately sold and delivered to the third party.
According to condition (c) of the licence issued 508 to the respondents the licence bolder had to utilise the goods imported only for consumption as raw material or accessories in his own factory and their sale to or use by other parties was specifically prohibited.
Alleging that the respondents had violated cl.
(c) of the licence, the appellant, (Deputy Chief Controller of Imports and Exports) who was authorised by Statute to do so, field a complaint against them for offences under section 120B I.P.C., section 5 of the Imports and Exports Control Act and cl.
5(iv) of the Imports Control Order, 1955.
The respondents justified the sale on the contention that cl.
(c) did not cover the printing presses, that this clause postulated that the goods covered by it should be capable of being utilized for consumption as raw material or accessory in a factory, and that a complete printing press is neither raw material nor accessories and that it cannot be said that by fixing a printing press for running it the press is utilised for consumption as raw material or accessory.
The trial court convicted some of the accused.
The High Court acquitted them on appeal, and dismissed the petition for enhancement of sentence filed by the Public Prosecutor.
The Public Prosecutor applied under article 134(1) (c) of the Constitution for leave to appeal to this Court but that application was dismissed by the High Court.
Special leave to appeal under article 136 was applied for by the appellant and was granted.
On the questions: (1) Whether special leave to appeal could be granted to the appellant when he did not move the High Court; and (2) whether the respondents were guilty of the offences charged, HELD : (1) There is no provision of law which disentitles the appellant, who was the original complaint, from applying for special leave in this Court merely because the Public Prosecutor had applied in the High Court for enhanced punishment and for leave to appeal to this Court, under article 134(1) (c).
Article 136 and the Supreme Court Rules are also wide enough to empower this Court to grant special leave to the appellant in cases like the present [515 A C] Management of Hindustan Commercial Bank Ltd. Kanpur vs Bhagwandass; , , referred to.
(2) (a) The words used in the licence have to be construed in the background of the scheme of the Import Control Order, 1955, entry No. 67 of Schedule I to that Order and the Import Trade Control Policy.
What particular meaning should be attached to words and phrases in a given instrument is usually to be gathered from the context.
the nature of the subject matter, the purpose or the intention of the author, and the effect of giving to them one or the other of the permissible meanings, on the object to be achieved.
[515 F H] There is no item in any of the lists referred to in the Import Control Order, 1955, or the relevant ITC Handbook or the relevant publication regarding Import Trade Control Policy which covers printing presses as a separate item.
Printing presses are thus treated by legislative intendment as printing material or printing machinery, and the respondents also proceeded on that footing.
This is shown by their use of Form B, and by the reference in their application to serial No. 67(1)(i).
They also knew the disability imposed on them by cl.
(c) of the conditions in the licence issued to them.
The words 'utilised ', 'consumption ' and 509 raw material ', in the conditions have to be fitted into the clearly discernible statutory scheme and this is, possible without doing violence to the dictionary meaning of the words.
The word "consumption" conveys the idea of using up the goods by fixing them in the factory along with the other components, and the various articles mentioned in Item 67(1) (i) have been intended constitute 'raw material. ' [518 A B; 519 E F] (b) Further, the respondents sought as actual users the original licence and the amended licence on the ground that the imported goods were required to meet the increasing demand of circulation of their newspaper.
Had they not complied with the procedure meant for the import of goods by actual users they might not have secured the licence.
Having secured a licence expressly for the import of goods for their use they cannot be permitted to ignore the condition of actual user on the plea that cl.
(c) of the conditions is inapplicable to them.
[519 F H] Therefore, all the respondents the individual accused and the company were guilty of the offences charged.
[520 F] State of West Bengal vs Motilal Kanoria, [1966] 3 S.C.R. 933, followed.
(3) Breach of conditions for import of goods is a serious matter because it prejudicially affects the country 's national economy.
The view of the High Court is not sustainable on the statutory language and on the Import Control Policy of which the respondents were fully aware, and hence, this Court is justified in converting the acquittal into conviction, under article 136 of the Constitution.
[520 G H]


judgement:
Appeal No. 1908 of 1968.
Appeal from the judgment and decree dated August 9, 1966 of the Patna High Court in Misc.
Judicial Case No. 1665 of 1964.
M. C. Chagla, Kailash Mehta and, A. K. Nag, for the appel lants.
Jagadish Swarup, Solicitor General and R. C. Prasad, for respondents Nos. 1, 3 and 4.
V. A. Seyid Muhammad and section P. Nayar, for respondent No. 2.
The Judgment of the Court was delivered by Hegde, J.
On June 24, 1959, the Deputy Commissioner Santal Parganas caused a notice dated June 20, 1959 published in the Bihar Gazette in accordance with the provisions of Rule 67 of the Mineral Concession Rules, 1949, of the availability for regrant of mining rights in respect of fireclay over the whole of village Palasthali No. 39, situate in Thana Nala, Block Kasta, Sub Division Jamtara in the District of Santal Parganas.
He announced in that notice that the said area will be available for regrant with effect from August 1, 1959 and invited applications for grant of mining lease in respect of that area in accordance with the provisions of Mineral Concession Rules, 1949.
The appellant, a partnership firm applied for that lease on June 24, 1959 itself.
Thereafter other persons including the 5th respondent Nankhu Singh also applied for obtaining the lease in question.
The State Government of Bihar granted the lease to the appellant on March 31, 1962.
In pursuance of that grant a written agreement was entered into between the State Government and the appellant and the same was duly registered.
The State Government rejected the applications of the other applicants.
Even during the pendency of the applications before the State Government, the 5th respondent moved the Central Government under rule 54 of the Mineral Concession Rules, 1960 which had replaced the 1949 Rules.
Therein he prayed that the grant of the lease in favour of the appellant, if it had been made, should be cancelled and that he should be granted the mineral lease in question.
The Central Government served a copy of that petition on the appellant and called for its comments.
At the same time it called for the comments of the State Government as well.
After 5 24 receiving the comments of the State Government, the same were passed on to the appellant as well as to the 5th respondent and their further comments were called for.
After examining the representation made by the parties and the comments offered by the State Government, the Central Government dismissed the petition made by the 5th respondent on September 30, 1964.
The Order of the Central Government reads thus "GOVERNMENT OF INDIA MINISTRY OF STEEL & MINES, (Department of Mines and Metals), No. MV 1(569)/61 New Delhi, the 30th September, 1964 From Shri A. Nabar, Under Secretary to the Government of India.
To Shri Nankhu Singh, P.O. Churulia, Distt.
Burdwan (West Bengal) Subject : Application under rule 54 of the Mineral Concession Rules, 1960 in respect of Mining lease for fire clay over 248 acres in Mouza Palasthali, P.S. Nala, Distt.
Santal, Parganas.
Sir, I am directed to refer to your application dated 17 10 1961 on the above subject and to say that after careful consideration the Central Government hereby reject your revision application as being time barred.
Yours faithfully, Sd./ A. Nabar, Under Secretary to the Government of India.
" Thereafter the Central Government passed a further order on November 5, 1964 and that order reads thus : Registered A/D D. N. ROY V. BIHAR (.Hegde, J.) 5 2 5 "GOVERNMENT OF INDIA MINISTRY OF STEEL AND MINES (Department of Mines and Metals) No. MV 1(569)/61 New Delhi, the 5th November, 1964.
From Shri H. section Sahni, Under Secretary to the Government of India.
TO The Secretary to the Government of Bihar, Department of Mines and Geology, Patna.
Subject : Revision application under rule 54 of the Mineral Concession Rules, 1960 from Shri Nankoo Singh relating to Mining lease for Fire clay over 248 acres in Santal Pargana District.
Sir, In continuation of this Ministry 's letter of even number dated 30 9 1964 on the above subject, I am directed to say that since no entry in the standard register was made as required under former rule 67 of the Mineral Concession Rules, 1949, the area could not have been held to be available and the four applications (referred to in para 2 of the State Government 's letter No. 3181/ M, dated 9 6 1962) would be deemed to be premature and should have been rejected on that ground alone.
Even assuming that the notification was valid, the first two applications were premature under rule 68 and on that ground should have been rejected.
Apart from this the application of M/s. D. N. Roy and section K. Bannerjee was deemed to be rejected on the expiry of 9 months from the date of receipt of application i.e., 24 3 1960.
The party did not come up in revision.
The application, therefore, ceased to exist and the order of the State Government granting the lease to this party on 31 3 1962 was without jurisdiction.
The grant and consequent execution of the Mining lease are therefore, void.
In view of the position explained above the Central Govern ment in exercise of their revisionary power conferred by Rule 55 of Mineral Concession Rules, 1960 and all other powers enabling in this behalf hereby set aside the order of the State Government contained in their letter No. A/MM/4031/62 1789M, dated 5 2 6 31 3 1962 (mentioned in State Government 's letter No. A/MM 4031./62 3181/M, dated 9 6 1962) granting Mining lease to M/s. D. N. Roy and section K. Banerjee and further direct them to through open the area again under Rule 58(1) of Mineral Concession Rule 1960 for regrant.
The notification should clearly indicate the date from which the area could be available for regrant and the date by.
which the petitioners should submit their applications for mineral concession.
M/s. D. N. Roy and section K. Banerjee are being informed.
Yours, faithfully, Sd./ H. section Sahni Under Secretary to the Government of India.
Copy forwarded to M/s. D. N. Roy and section K. Banerjee village and P. O. Churulia, Distt.
Burdwan (West Bengal) with reference to their letter dated 12 6 1963.
Sd./ H. section Sahni Under Secretary to the Government of India.
" Aggrieved by this order the appellant moved the Patna High Court under article 226 of the Constitution to quash the order of the Central Government dated November 5, 1964 (which will hereinafter be referred to as the 'impugned order ').
The High Court dismissed its petition.
As against the order of the High Court the appellant has brought this appeal after obtaining Certificate of fitness from the High Court.
It was urged before the High Court that the Government having passed the final order on September 30, 1964, it had no power to review its own order and make any further order.
Admittedly there is no provision under the or under the Mineral Concession Rules, 1960 empowering the Central Government to review its order.
The High Court did not hold that the Central Government had any power to review its own order either under the Mines and Mineral (Regulation and Development) Act, 1957 or under the Mineral Concession Rules.
It upheld the Central Government 's order on two grounds namely that the order dated September 30, 1964 is not a complete order as it did not dispose of the application made by the 5th respondent completely and secondly the Central Government had suo moto power to review the order of the State Government under section 30 of the .
These conclusions of the High Court were assailed before us.
527 In his application under rule 54 of the Mineral Concession Rules, 1960, the 5th respondent prayed for (i) setting aside the grant made in favour of the appellant and (ii) grant the area in question, on lease to him.
The High Court thought that these are two independent prayers.
In its view the Central Government by its order dated September 30, 1964 had disposed of only the prayer of the 5th respondent to grant the area on lease to him but it had not disposed of his first prayer namely to cancel the grant in favour of the appellant.
In our opinion this is an incorrect approach.
The two reliefs asked for by the 5th respondent were inter connected reliefs.
In the context in which they were made, they cannot be considered as independent prayers.
No grant in his favour could have been made without first setting aside the grant made in favour of the appellant.
Therefore the first relief asked for by the 5th respondent is a necessary condition precedent for a grant in his favour.
Further by its order dated September 30, 1964, the Central Government dismissed the entire application of the 5th respondent on the ground that the same was time barred.
If his application in respect of one part of Ms prayer was time barred, it was equally time barred in respect of the other part.
The impugned order of the Central Government does not show that it was made in the exercise of its suo moto power.
It is purpoted to have been made on the basis of the application made by the 5th respondent under rule 54 of the Mineral Concession Rules, 1960.
In paragraph 3 of that order it says "in view of the position explained above the Central Government in exercise of their revisionary power conferred by Rule 55 of Mineral Concession Rules, 1960 and all other powers enabling in this behalf hereby set aside the order of the State Government contained in their letter No. A/MM/4031/62 1789M, dated March 31, 1962".
It is true that the order in question also refers to "all other powers enabling in this behalf".
But in its return to the writ petition the Central Government did not plead that the impugned order was passed in exercise of its suo moto powers.
We agree that if the exercise of a power can be traced to an existing power even though that power was not purported to have been exercised, under certain circumstances, the exercise of the power can be upheld on the strength of an undisclosed but undoubted power.
But in this case the difficulty is that at no stage the Central Government intimated to the appellant that it was exercising its suo moto power.
At all stages it purported to act under rules 54 and 55 of the Mineral Concession Rules, 1960.
If the Central Government wanted to exercise its suo moto power it should have intimated that fact as well as the grounds on which it proposed to 5 28 exercise that power to the appellant and given him an opportunity 'to show cause against the exercise of suo moto power as well as against the grounds on which it wanted to exercise its power.
Quite clearly the Central Government had not given him that opportunity.
The High Court thought that as the Central Government had not only intimated to the appellant the grounds mentioned in the application made by the 5th respondent but also the comments of the State Government, the appellant had adequate opportunity to put forward his case.
This conclusion in our judgment is untenable.
At no stage, the appellant was informed that the Central Government proposed to exercise its suo moto power and asked him to show cause against the exercise of such a power.
Failure of the Central Government to do so, in our opinion, vitiates the impugned order.
For the reasons mentioned above we allow this appeal as well as the writ petition and set aside the impugned order.
Central 'Government shall pay the costs of the appellant in this Court as well as in the High Court.
Y.P. Appeal and petition allowed.

summary/full:
The respondent State granted a mining lease to the appellant.
The 5th respondent, whose application was rejected moved the Central Government under rule 54 of the, Mineral Concession Rules, 1960, praying (i) for setting aside the grant in favour of the appellant, and (ii) for grant of the area on lease to him.
The Central Government asked for the comments of the appellant and the State Government and after receipt of these comments, they were passed to the parties for further comments.
The Central Government by an order passed on Sept. 30, 1964 rejected the application of 5th respondent as time barred.
Thereafter, the Central Government on Nov. 5, 1964, under the revisionary powers conferred by r, 55, of the Rules and "all the powers enabling in this behalf," set aside the order granting the lease to the appellant, and further directed regrant after issuing fresh notification.
The appellant, moved the High Court under article 226 of the Constitution for quashing the order of November, 1964, The High Court dismissed the petition.
HELD : The appeal as well as the Writ Petition must be allowed and the order of the Central Government Nov. 5, 1964 must be set aside.
The High Court erred in its approach that the two prayers in the application of the 5th respondent were independent, and that the Central Government by its order of Sept. 30, 1964 had disposed of only the prayer of 5th respondent to grant the area on lease to him, but it had not disposed of his other prayer to cancel the grant in favour of the appellant.
The two reliefs asked for by the 5th respondent were inter connected reliefs.
In the context in which they were mad, they could not be considered as independent prayers.
Further by its order dated September 30, 1964, the Central Government dismissed the entire application of the 5th res pondent on the ground that the same was time barred.
If his application in respect of one part of his prayer was time barred, it was equally, time barred in respect of the other part.
[527 B D] The order of Nov. 5, 1964 of the Central Government does not show that it was made in the exercise of its suo motu powers.
It is purported to have been made on the basis of the application made by the 5th respondent.
[527 E] If the Central Government wanted to exercise its suo motu power it should have intimated that fact as well as the grounds on which it proposed to exercise that power to the appellant and given him an opportunity to show cause against the exercise of suo motu power as well as 5 2 3 against the grounds on which it wanted to exercise its power.
The Central Government had not given him that opportunity.
Failure of the Central Government to do so, vitiates the impugned order.
[527 H]