judgement:
ivil Appeal Nos.
632 635 of 1980.
Appeals by Special Leave from the Award dated 1 3 1979 of the Central Government Industrial Tribunal cum Labour Court in I.D. No. 77 of 1977 and 67, 68 and 72 of 1977 respectively published in the Gazette of India dated 28 4 1979.
R. K. Garg, N. C. Sikri and A. K. Sikri for the Appellants.
G. B. Pai, O. C. Mathur and K. J. John for the Respondent No. 2.
The Judgment of V. R. Krishna Iyer and O. Chinnappa Reddy.
JJ. was delivered by Chinnappa Reddy, J. R. section Pathak, J. gave a separate opinion.
792 CHINNAPPA REDDY, J.
The facts of the four appeals before us (except the cases of Usha Kumari and Madhu Bala, two out of the seven appellants in Civil Appeal No. 633 of 1980) are almost identical with the facts in Santosh Gupta vs State Bank of Patiala decided by this Court on April 29, 1980.
Not unnaturally the appellants claim that they should be given the same reliefs as were given to the workman in that case, but which have been denied to them by the Labour Court in the instant cases.
The Labour Court found, as a fact, that except in the cases of three workmen, section C. Goyal, Usha Kumari and Madhu Bala, the termination of the services of the remaining appellants workmen was in violation of the provisions of section 25F of the and therefore invalid and inoperative.
But, as the termination of their services was a consequence of their failure to pass the tests prescribed for permanent absorption into the service of the Bank and as it was thought their reinstatement would have the effect of equating them with workmen who had qualified for permanent absorption by passing the test, the Labour Court refused to give the workmen the relief of reinstatement in service with full back wages, but, instead, directed payment of compensation of six months ' salary to each of the workmen, in addition to the retrenchment compensation.
The appellants claim that they should be awarded the relief of reinstatement with full back wages as was done in the case of Santosh Gupta vs State Bank of Patiala (supra) and other earlier cases decided by this Court.
On the other hand the learned counsel for the employer contended that non compliance with the requirements of section 25F of the did not render the termination of the service of a workman ab initio void but only made it invalid and inoperative and that the Court, when setting aside the termination of the services of a workman on the ground of failure to comply with the provisions of section 25F, had full discretion not to direct reinstatement with full back wages, but, instead, to direct the payment of suitable compensation.
The learned counsel invited our attention to cases where such discretion had been exercised and to other cases arising under sections 33 and 33A of the where it was held that discharge of workmen during the pendency of proceedings, without the previous permission in writing of the authority before which the proceeding was pending was not ab initio void and that the Labour Court or the Tribunal was not bound to direct reinstatement merely because it was found that there was a violation of section 33.
793 In Santosh Gupta vs State Bank of Patiala, (supra) the facts of which case were identical with the facts of the cases before us, this Court found "that the discharge of the workman on the ground that she did not pass the test, which would have enabled her to be confirmed, was retrenchment within the meaning of section 2(oo) and, therefore, the requirements of section 25F had to be complied with".
On that finding, the relief which was awarded was: "the order of the Presiding Officer Central Government Industrial Tribunal cum Labour Court, New Delhi, is set aside and the appellant is directed to be reinstated with full back wages".
Earlier, in Hindustan Steel Ltd. vs The Presiding Officer Labour Court, Orissa and Ors., a Division Bench of this Court consisting of Chandrachud, Goswami and Gupta JJ, on a finding that there was a contravention of the provisions of section 25F of the , affirmed the award of the Lower Court directing reinstatement with full back wages.
In another case M/s. Avon Services Production Agencies (P) Ltd. vs Industrial Tribunal, Haryana and Ors., Krishna Iyer and Desai JJ found that there was retrenchment without compliance with the prescribed conditions precedent.
Therefore, they said "the retrenchment was invalid and the relief of reinstatement with full back wages was amply deserved".
In M/s. Swadesamitran Limited, Madras vs Their Workmen dealing with an argument that even if the impugned retrenchment was justified, reinstatement should not have been ordered, Gajendragadkar, Subba Rao and Das Gupta JJ observed: "Once it is found that retrenchment is unjustified and improper it is for the tribunals below to consider to what relief the retrenched workmen are entitled.
Ordinarily, if a workman has been improperly and illegally retrenched he is entitled to claim reinstatement.
The fact that in the meanwhile the employer has engaged other workmen would not necessarily defeat the claim for reinstatement of the retrenched workmen; nor can the fact that protracted litigation in regard to the dispute has inevitably meant delay, defeat such a claim for reinstatement.
This Court has consistently held that in the case of wrongful dismissal, discharge or retrenchment, a claim for reinstatement cannot be defeated merely because time has lapsed or that the employer has engaged fresh hands (Vide :The Punjab National Bank Ltd. vs The All India Punjab National Bank Employees ' 794 Federation ; and National Transport and General Co. Ltd. V. The Workmen (Civil Appeal No. 312 of 1956 decided on January 22, 1957).
" In State Bank of India vs Shri N. Sundara Money, a Division Bench of this Court consisting of Chandrachud, Krishna Iyer and Gupta JJ held that a certain order of retrenchment was in violation of the provisions of section 25F and was, therefore, invalid and inoperative.
After so holding, they proceeded to consider the question of the relief to be awarded.
They observed: "What follows ? Had the State Bank known the law and acted on it, half a month 's pay would have concluded the story.
But that did not happen.
And now, some years have passed and the Bank has to pay, for no service rendered.
Even so, hard cases cannot make bad law.
Reinstatement is the necessary relief that follows.
At what point ? In the particular facts and circumstances of this case, the respondent shall be put back where he left off, but his new salary will be what he would draw were he to be appointed in the same post today de novo.
As for benefits if any, flowing from service he will be ranked below all permanent employees in that cadre and will be deemed to be a temporary hand upto now.
He will not be allowed to claim any advantages in the matter of seniority or other priority inter se among temporary employees on the ground that his retrenchment is being declared invalid by this Court.
Not that we are laying down any general proposition of law, but make this direction in the special circumstances of the case.
As for the respondent 's emoluments, he will have to pursue other remedies, if any".
We do not propose to refer to the cases arising under section 33 and 33A of the or to cases arising out of references under sections 10 and 10A of the .
Nor do we propose to engage ourselves in the unfruitful task of answering the question whether the termination of the services of a workman in violation of the provisions of section 25F is void ab initio or merely invalid and inoperative, even if it is possible to discover some razor 's edge distinction between the Latin 'Void ab initio ' and the Anglo Saxon 'invalid and inoperative '.
Semantic luxuries are misplaced in the interpretation of 'bread and butter ' statutes.
Welfare statutes must, of necessity, receive a broad interpretation.
Where legislation is designed to give relief against certain kinds of 795 mischief, the Court is not to make inroads by making etymological excursions. 'Void ab initio '. 'invalid and inoperative ' or call it what you will, the workmen and the employer are primarily concerned with the consequence of striking down the order of termination of the services of the workmen.
Plain common sense dictates that the removal of an order terminating the services of workmen must ordinarily lead to the reinstatement of the services of the workmen.
It is as if the order has never been and so it must ordinarily lead to back wages too.
But there may be exceptional circumstances which make it impossible or wholly inequitable vis a vis the employer and workmen to direct reinstatement with full back wages.
For instance, the industry might have closed down or might be in severe financial doldrums: the workmen concerned might have secured better or other employment elsewhere and so on.
In such situations, there is a vestige of discretion left in the Court to make appropriate consequential orders.
The Court may deny the relief of reinstatement where reinstatement is impossible because the industry has closed down.
The Court may deny the relief of award of full back wages where that would place an impossible burden on the employer.
In such and other exceptional cases the Court may mould the relief, but, ordinarily the relief to be awarded must be reinstatement with full back wages.
That relief must be awarded where no special impediment in the way of awarding the relief is clearly shown.
True, occasional hardship may be caused to an employer but we must remember that, more often than not.
comparatively far greater hardship is certain to be caused to the workmen if the relief is denied than to the employer if the relief is granted.
In the cases before us we are unable to see any special impediment in the way of awarding the relief.
The Labour Court appears to have thought that the award of the relief of reinstatement with full back wages would put these workmen on a par with who had qualified for permanent absorption by passing the prescribed test and that would create dissatisfaction amongst the latter.
First, they can never be on par since reinstatement would not qualify them for permanent absorption.
They would continue to be temporary, liable to be retrenched.
Second, there is not a shred of evidence to suggest that their reinstatement would be a cause for dissatisfaction to anyone.
There is no hint in the record that any undue burden would be placed on the employer if the same relief is granted as was done in Santosh Gupta vs State Bank of Patiala (supra).
The cases of Usha Kumari and Madhu Bala were treated by the Labour Court as distinct from the cases of all the other appellants 796 on the ground that, though they had worked for more than two hundred and forty days in the preceding twelve months, they had not been in employment for one year.
It appears that Usha Kumari and Madhu Bala were in the employment of the Bank from May 4, 1974 to January 29, 1975 and had worked for 258 and 266 days respectively during that period.
As the period from May 4, 1974 to January 29, 1975 was not one year, it was conceded before the Labour Court that there was no violation of the provisions of section 25F of the .
Before us, the concession was questioned and it was argued that there was non compliance with the requirements of section 25F of the Act.
Since the facts were not disputed, we entertained the argument and heard the counsel on the question.
The concession was apparently based on the decision of this Court in Sur Enamel and Stamping Works (P) Ltd. vs Their Workmen.
That decision was rendered before section 25B, which defines continuous service for the purposes of Chapter VA of the was recast by Act 36 of 1954.
The learned counsel for the employer submitted that the amendment made no substantial difference.
Let us take a look at the statutory provisions.
section 25 F, then and now, provides that no workman employed in any industry who has been in continuous service for not less than one year under an employer shall be retrenched by that employer until certain conditions are fulfilled.
section 25 B 's marginal title is 'Definition of continuous Service '.
To the extent that it is relevant section 25 B(2) as it now reads is as follows: "Where a workman is not in continuous service. . for a period of one year or six months, he shall be deemed to be in continuous service under an employer. . . . (a) for a period of one year, if the workman, during a period of twelve calendar months preceding the date with reference to which calculation is to be made, has actually worked under the employer for not less than. . (i) one hundred and ninety days in the case of a workman employed below ground in a mine; and (ii) two hundred and forty days in any other case; (b). . . Explanation. . .
The provision appears to be plain enough.
Section 25 F requires that a workman should be in continuous service for not less than one year 797 under an employer before that provision applies.
While so, present section 25 B(2) steps in and says that even if a workman has not been in continuous service under an employer for a period of one year, he shall be deemed to have been in such continuous service for a period of one year, if he has actually worked under the employer for 240 days in the preceding period of twelve months.
There is no stipulation that he should have been in employment or service under the employer for a whole period of twelve months.
In fact, the thrust of the provision is that he need not be.
That appears to be the plain meaning without gloss from any source.
Now, section 25 B was not always so worded.
Prior to Act 36 of 1964, it read as follows : "For the purposes of Section 25 F and 25 F, a workman who, during a period of twelve calendar months, has actually worked in an industry for not less than two hundred and forty days shall be deemed to have completed one year 's continuous service in the industry.
Explanation. . . " The difference between old 25 B and present 25 B is patent.
The clause "where a workman is not in continuous service . for a period of one year" with which present section 25 B(2) so significantly begins, was equally significantly absent from old section 25 B.
Of the same degree of significance was the circumstance that prior to Act 36 of 1964 the expression "Continuous Service" was separately defined by section 2(eee) as follows: "(eee) 'continuous service ' means uninterrupted service, and includes service which may be interrupted merely on account of sickness or authorised leave or an accident or a strike which is not illegal, or lock out or a cessation of work which is not due to any fault on the part of the workman;" section 2(eee) was omitted by the same Act 36 of 1964 which recast section 25 B. section 25 B as it read prior to Act 36 of 1964, in the light of the then existing section 2(eee), certainly lent itself to the construction that a workman had to be in the service of the employer for a period of one year and should have worked for not less than 240 days before he could claim to have completed one year 's completed service so as to attract the provisions of section 25 F.
That precisely was what was decided by this Court in Sur Enamel and Stamping Works Ltd. vs Their Workmen (supra).
The Court said: "On the plain terms of the section (section 25 F) only a workman who has been in continuous service for not less than 798 one year under an employer is entitled to its benefit. 'Continuous Service ' is defined in section 2(eee) as meaning uninterrupted service, and includes service which may be interrupted merely on account of sickness or authorised leave or an accident or a strike which is not illegal or a lock out or a cessation of work which is not due to any fault on the part of the workman.
What is meant by "one year of continuous service ' has been defined in section 25B.
Under this section a workman who during a period of twelve calendar months has actually worked in an industry for not less 240 days shall be deemed to have completed service in the industry. . .
The position (therefore) is that during a period of employment for less than 11 calendar months these two persons worked for more than 240 days.
In our opinion that would not satisfy the requirement of section 25B. Before a workman can be considered to have completed one year of continuous service in an industry it must be shown first that he was employed for a period of not less than 12 calendar months and, next that during those 12 calendar months had worked for not less than 240 days.
Where, as in the present case, the workmen have not at all been employed for a period of 12 calendar months it becomes unnecessary to examine whether the actual days of work numbered 240 days or more".
Act 36 of 1964 has drastically changed the position.
section 2(eee) has been repealed and section 25 B(2) now begins with the clause "where a workman is not in continuous service. for a period of one year".
These changes brought about by Act 36 of 1964 appear to be clearly designed to provide that a workman who has actually worked under the employer for not less than 240 days during a period of twelve months shall be deemed to have been in continuous service for a period of one year whether or not he has in fact been in such continuous service for a period of one year.
It is enough that he has worked for 240 days in a period of 12 months; it is not necessary that he should have been in the service of the employer for one whole year.
So we hold that Usha Kumari and Madhu Bala are in the same position as the other appellants.
In the result all the appeals are allowed and the workmen appellants are directed to be reinstated with full back wages.
We, however, super impose the condition that the salary on reinstatement of the workmen will be the salary which they were drawing when they were retrenched (subject of course to any revision of scales that might have been made in the meanwhile) and the period from the date of retrenchment to the date of reinstatement will not be taken 799 into account for the purpose of reckoning seniority of the workmen among temporary employees.
The respondent is free to deal with its employees, who are temporary, according to the law.
There will be no order regarding costs.
PATHAK, J. I entirely agree with may learned brother Chinnappa Reddy in the order proposed by him.
The appeals raise strictly limited questions.
The appeals by Usha Kumari and Madhubala involve the question whether they can be regarded as being in continuous service for a period of one year within the meaning of section 25B(2), and if so, to what relief would they be entitled.
The remaining appeals require the court to examine whether the appellants should have been awarded reinstatement with back wages instead of the curtailed relief granted by the Industrial Tribunal cum Labour Court.
That is the entire scope of these appeals.
No question arises before us whether the termination of the services of the appellants amounts to "retrenchment" within the meaning of section 2(oo) of the Act.
The respondent Bank of India has apparently accepted the finding of the Industrial Tribunal cum Labour Court that the termination amounts to retrenchment.
It has not preferred any appeal.
I mention this only because I should not be taken to have agreed with the interpretation of section 2(oo) rendered in Santosh Gupta vs State Bank of Patiala.
Proceeding on the footing mentioned above, my learned brother Chinnappa Reddy has, I say with respect, rightly concluded that on the facts and circumstances before us the appellants should be reinstated with full back wages subject to the proviso that the salary on reinstatement will be the salary drawn by the respective appellants on the date of their retrenchment, qualified by the impact of any revisional scale meanwhile, and subject to the further proviso that the period intervening between the date of retrenchment and the date of reinstatement will be omitted from account in the determination of the seniority of these appellants among temporary employees.
Ordinarily, a workman who has been retrenched in contravention of the law is entitled to reinstatement with full back wages and that principle yields only where the justice of the case in the light of the particular facts indicates the desirability of a different relief.
It has not been shown to us on behalf of the respondent why the ordinary rule should not be applied.
800 On the other question decided by my learned brother I have no hesitation in agreeing that having regard to the simultaneous amendments introduced in the by Act No. 36 of 1964 the deletion of section 2(eee) and the substitution of the present section 25B for the original section it is no longer necessary for a workman to show that he has been in employment during a preceding period of twelve calendar months in order to qualify within the terms of section 25B.
It is sufficient for the purposes of section 25B(2) (a) (ii) that he has actually worked for not less than 240 days during the preceding period of 12 calendar months.
The law declared by this Court in Sur Enamel and Stamping Works (P) Ltd. vs Their Workmen does not apply to situations governed by the subsequently substituted section 25B of the Act.
With these observations, J concur with the order proposed by my learned brother.
P.B.R. Appeals allowed.

summary/full:
The respondent Bank terminated the services of the appellants on the ground that they could not pass the prescribed tests for their permanent absorption in its service.
On reference the Labour Court held that the Bank 's action in terminating their services (except in the case of two workmen) was in violation of section 25F of the and, therefore, was invalid and inoperative.
The Labour Court, however, refused to order their reinstatement with full back wages on the ground that reinstatement would have the effect of equating them with workmen who had qualified for permanent absorption by passing the test; instead it directed payment of compensation of six months ' salary in addition to retrenchment compensation.
In Santosh Gupta vs State Bank of Patiala it was held by this Court that the discharge of the workman for the reason that she did not pass the test which would have enabled her to be confirmed was retrenchment within the meaning of section 2(oo) and therefore the requirement of section 25F had to be complied with.
The workman in that case was directed to be reinstated with full back wages.
The workmen claimed that their case being identical with this case, they should be reinstated with full back wages.
The Bank on the other hand contended that non compliance with the requirements of section 25F did not render the termination of their service void ab initio but made it invalid and inoperative and that the Court had full discretion to direct payment of suitable compensation instead of ordering reinstatement with full back wages.
In respect of two of the seven appellants, however, it was conceded before the Labour Court that these two employees worked in the Bank for a few days more than 240 days during the preceding 12 months and since they had 790 not been in the Bank 's employment for one year, there was no violation of section 25F.
But this concession was questioned before this Court in appeal and it was contended that there was non compliance with the requirements of section 25F.
Allowing the appeals, ^ HELD: [per Krishna Iyer and Chinnappa Reddy, JJ.
Pathak, J. concurring] The five retrenched workmen should be reinstated with full back wages.
When an order terminating the services of a workman is struck down it is as if that order had never been passed and it must ordinarily lead to reinstatement of the workman with full backwages.
In cases where it is impossible or wholly inequitable vis a vis the employer and the worker to direct reinstatement with full back wages, as for instance, where the industry has closed down or where the industry is in severe financial straits, for to order reinstatement in such a case would place an impossible burden on the employer or where the workman had secured better or an alternative employment elsewhere and so on, there is a vestige of discretion left in the court to make appropriate orders.
Occasional hardship may be caused to the employer; but more often than not, far greater hardship is certain to be caused to the workman if the relief is denied than to the employer if the relief is granted.
[795B E] In the instant case there is no special impediment in the way of awarding the relief of reinstatement with back wages.
The apprehension of the Labour Court that reinstatement with full back wages would put these workmen on a par with those who were qualified for permanent absorption by passing the prescribed test and that would create dissatisfaction amongst the latter is unfounded because firstly these workmen can never be on par with the others since reinstatement would not qualify them for permanent absorption but they would continue to be temporary liable to be retrenched.
Secondly there is nothing to show that their reinstatement would cause dissatisfaction to anyone nor even that it would place an undue burden on the employer.
[795F G] Santosh Gupta vs State Bank of Patiala (1980) Vol.
II LLJ 72, applied, Hindustan Steel Ltd. vs The Presiding Officer, Labour Court, Orissa & Ors.
; , M/s. Avon Services Production Agencies (P) Ltd. vs Industrial Tribunal, Haryana and Ors. ; , M/s. Swadesamitran Limited, Madras vs Their Workmen ; 156 and State Bank of India vs Shri N. Sundara Money ; @ 166 referred to.
To attempt to discern a distinction between "void ab initio" and "invalid and inoperative", even if it be possible to discover some razor 's edge distinction would be an unfruitful task because semantic luxuries are misplaced in the interpretation of 'bread and butter ' statutes.
Where legislation is designed to give relief against certain kinds of mischief, the Court is not to make inroads by making etymological excursions.
Whatever expression is used the workman and the employer primarily are concerned with the consequence of striking down the order of termination of the services of the workman.
[794H] The two other appellants were in much the same position as the five others.
The concession made before the Labour Court was apparently based on the decision of this Court in Sur Enamel & Stamping Works (P) Ltd. vs Their 791 Workmen ; which was a case before section 25B was recast by Act 36 of 1964.
The amendment Act 36 of 1964 has brought about a change in the law by repealing section 2(eee) (defining continuous service) and adding section 25B(2) which now begins with "where a workman is not in continuous service. . for a period of one year".
These changes are designed to provide that a workman who had actually worked under the employer for not less than 240 days during a period of 12 months shall be deemed to have been in continuous service for a period of one year whether or not he has in fact been in such continuous service for a period of one year.
It is enough that he has worked for 240 days in a period of 12 months.
[798F G] Pathak, J. concurring: The limited question for examination is whether the appellants should have been awarded reinstatement with back wages instead of the curtailed relief granted by the Labour Court.
The respondent bank having accepted that the termination of the services of the workmen amounted to retrenchment within the meaning of section 2(oo) it is not necessary to invoke the rule laid down by this Court in Santosh Gupta vs State Bank of Patiala for the interpretation of section 2(oo).
[799G E] Ordinarily a workman who has been retrenched in contravention of the law is entitled to reinstatement with full back wages and that principle yields only where the justice of the case in the light of the particular facts indicates the desirability of a different relief.
It has not been shown in this case why the ordinary rule should not be applied.
[799 G H] Having regard to the simultaneous amendments introduced in the by Act 36 of 1964 it is no longer necessary for a workman to show that he has been in employment during a preceding period of twelve calendar months in order to qualify within the terms of section 25B.
It is sufficient for the purpose of section 25B(2)(a)(ii) that he has actually worked for not less than 240 days during the preceding period of 12 calendar months.
[800A C] Sur Enamel and Stamping Works (P) Ltd. vs Their Workmen ; , 622 3, held inapplicable.


judgement:
Civil Appeal No. 1145 of 1970.
From the Judgment and Order dated 8 4 1969 of the Allahabad High Court in First Appeal No. 45/55.
Mrs. Rani Chhabra for the Appellant.
B. N. Dikshit, O. P. Rana and Mrs. Shobha Dikshit for the Respondent.
The Judgment of the Court was delivered by FAZAL ALI, J.
This appeal by certificate is directed against a judgment dated January 6, 1969 of the Allahabad High Court and arises in the following circumstances.
The land in dispute originally belonged to Smt.
Jawahar Devi who had inherited the same from her father Shankar Das who died sometime in or before the year 1905.
Jawahar Devi had a daughter Putli Bibi who had three sons, namely, Basantlal, Shankarlal and Girdharilal.
Jawahar Devi died in the year 1934.
On the 25th February 1905, Jawahar Devi let out the land to the late Lala Lachman Das for the construction of a mill which was known as 'Narain Das Lachman Das Oil Mill '.
The lease was to continue for 50 years and contained a clause for renewal.
In the year 1936 37, the lessee Lachman Das transferred his rights in the 817 lease to Northern India Oil Industries Limited (hereinafter referred to as the 'Company ').
Thereafter, the three sons of Putli Bibi sent a notice on the 15th of December 1937 to M/s. Narain Dass Lachman Dass claiming damages.
At that stage Girdharilal sold his rights in the land to his brother Basant Lal.
In the year 1938, a suit was filed by Basantlal and Shankarlal against M/s. Narain Dass Lachman Dass as well as the Company.
This suit was, however, compromised on the 2nd of June 1941 and on the same date a fresh lease was executed by the two plaintiffs therein in favour of the company.
The terms of the lease were incorporated in the compromise (Exhibit 31) but both the lease and the compromise were contained in unregistered documents.
Disputes again arose between the parties and led to the institution of a suit by the company against Basantlal and Shankarlal for specific performance of the compromise above mentioned (Exhibit 31).
This suit also ended on the 26th of May 1943 in a compromise according to which a fresh lease embodying the terms of the lease dated the 2nd June 1941 was to be executed by Basantlal and Shankarlal in favour of the Company and at its cost within a week provided the company complied with the covenants contained in that lease to the satisfaction of Rai Bahadur Lala Ram Narain, Treasurer, Imperial Bank of India, Kanpur.
Despite the second compromise disputes again cropped up between the parties and ultimately Basantlal and Shankarlal, who are the appellants before us, sent to the company a notice dated 26th of February 1944 (Exhibit 36 A) terminating the lease dated the 2nd June 1941 on the ground of breach by the company of covenants 2, 4 and 5 contained therein.
Time was allowed to the company till the 30th June 1944 for the removal of machinery, stores, buildings and other constructions.
The Company, however, secured an order from a civil court forbidding the appellants from ejecting it.
On the 7th June 1946, the Company applied to the State Government for compulsory acquisition of the land.
Its request was accepted and the land covered by the lease was acquired by the Government for the purpose of the company.
In proceedings before the Collector the appellants claimed compensation not only for the land but also for the buildings and other structures standing thereon.
Compensation for the land was awarded to them but the rest of their claim was turned down.
The matter was re agitated before the District Judge to whom it was referred and then in appeal before the High Court.
The District Judge and the High Court raised the quantum of compensation for the land but rejected the claim of the appellants for compensation in respect of buildings and structures.
818 In the appeal before us no dispute subsists about the compensation for the land and the controversy is limited to the compensation for the buildings, etc., which were constructed on the premises by the lessee and to which the appellants claim title on the ground that the company did not remove the same despite a period of more than 4 months granted to it for the purpose in the notice dated the 26th of February 1944 and that the title thereto had consequently vested in the appellants with effect from 1st July 1944.
Before proceeding further we may recapitulate the manner in which the present dispute was dealt with by the two Courts below.
It was argued before the District Judge on behalf of the State that the lease dated the 2nd June 1941 being unregistered it was inadmissible in evidence and that the Company, therefore, was not bound to vacate the premises.
The District Judge overruled the argument (and in our opinion rightly) on the ground that the terms of the lease formed part of the decree based on compromise Exhibit 31, that the compromise related to the property which was the subject matter of the suit and that, therefore, the compromise did not require registration.
The argument was repeated before the High Court and was rejected for the same reason for which it was repelled by the District Judge.
Another point taken before the District Judge was that as the appellants had accepted the rent after having given the notice dated February 26, 1944, their conduct in doing so amounted to waiver of the notice as a result of which the tenancy continued to subsist.
The District Judge accepted this point and non suited the appellants mainly on this ground.
The High Court, however, did not agree with the conclusion of the District Judge and held that, in the first place, there was no evidence to show that the rent was accepted at any time after the notice was given to the company, and, secondly, as the rent was accepted by the appellants under protest, it could not amount to waiver because there was no intention on the part of the lessor to treat the lease as subsisting.
In this connection, the High Court observed as follows: "We have been taken through the deposition of Basant Lal, but we have failed to find anything in that statement which may go to show that rent for the period beginning after the termination of the lease was accepted by him.
All that he said was as follows: "Rent was sent to me and I accepted some rent under protest.
" 819 "From that statement, it cannot be said that the rent so accepted was for the period after termination of the lease.
There is another sentence in the statement of Basant Lal, which reads as follows: " 'I treated the defendant as trespasser from 26th February 1944 and accepted payment for use and occupation of the land. '" "The learned District Judge, therefore, was not right in taking the view that the notice was waived.
" We find ourselves in complete agreement with the view taken by the High Court.
There is no reliable evidence at all to show the exact date when the rent was accepted or, at any rate, the fact that the rent was accepted between the 26th February 1944, when the notice was sent, and the 30th June 1944, when the Company was asked to vacate the premises.
Furthermore, the High Court has pointed out from the evidence of the appellants that the Company was treated as a trespasser ever since 26th February 1944, namely, the date when the notice was given and has held that any rent which the appellants accepted was really not rent but mere compensation for wrongful use and occupation of the land.
In these circumstances, we fully endorse the finding of the High Court that there was no waiver of the notice such as was spelt by the District Judge.
The High Court, however, upheld the order of the District Judge for a different reason which was that there could not be any forfeiture of the tenancy under section 111(g) of the Transfer of Property Act unless a notice was given to the lessee by the lessor expressing his intention to terminate the lease and in addition a notice under s.114 A of that Act also affording an opportunity to the lessee to comply with the terms, the non compliance of which would result in forfeiture.
According to the High Court, as the second condition was not complied with, there was no forfeiture and hence the title to the structures, etc., continued to vest in the lessee and therefore after the Government acquired the land under the Land Acquisition Act, the appellants were not entitled to any compensation for the structures and the materials as claimed by them.
We are, however, unable to agree with the view taken by the High Court for the reasons that we shall give hereafter.
It is no doubt true that section 114 A of the Transfer of Property Act requires two conditions to be fulfilled before a suit for ejectment could lie (1) that a notice should be given to the lessee specifying the particular breach complained of, and (2) that the lessee should be called upon to remedy the breach.
If these conditions are fulfilled, then alone the lessor would be entitled to bring a suit for ejectment 820 of the lessee.
In the instant case, it is no doubt common ground that in the notice dated February 26, 1944 the appellants did not at all mention that the lessee should remedy the breach within a reasonable period to be fixed by the lessor, but that does not advance the case of the lessee because s.114 A merely bars a suit for ejectment of the lessee.
In the instant case, as the land had been acquired for the purpose of the lessee, viz., the Company, the question of filing a suit for ejectment did not arise at all.
In fact, the lessees themselves filed a suit and obtained an injunction restraining the appellants from ejecting them before the land acquisition proceedings were taken in respect of the land in dispute.
Thus, the non compliance of sub section (b) of s.114 A is of no consequence so far as this particular case is concerned.
In the lease dated 2nd June, 1941, clause (6) clearly lays down that within four months after the expiry of the period of the lease the lessee would be entitled to remove the stocks and machinery.
The last part of that clause also empowers the lessor to re enter possession and acquire title to the buildings, etc., that may be constructed by the lessee.
Mr. Dixit, appearing for the State of U.P., relied on s.108(h) of the Transfer of Property Act which runs thus: "108(h).
The lessee may even after the determination of the lease remove, at any time whilst he is in possession of the property leased, but not afterwards, all things which he has attached to the earth, provided he leaves the property in the State in which he received it." He contended that even if the lease was determined, the title to the construction, etc., would vest in the lessor only if the lessee does not remove the materials at any time whilst he is in possession of the property leased.
It was argued that in the instant case, as the leased land was acquired by the Government while the lessee was still in possession and continued to be in possession, by virtue of the land having been acquired, the lessor could not claim any title to the constructions or the materials.
There could be no doubt that this is the real effect of clause (h) of section 108 but section 108 opens with a sort of a non obstante clause which is as follows: "In the absence of a contract or local usage to the contrary, the lessor and the lessee of immovable property, as against one another, respectively, possess the rights and are subject to the liabilities mentioned in the rules next following, or such of them as are applicable to the property leased.
" 821 A construction of this clause clearly reveals that where there is a contract to the contrary the provisions of s.108(h) would not apply.
In the lease dated June 2, 1941, there is not only an express clause under which the lessee was entitled to remove the stocks and materials within four months after the termination of the lease but thereafter there was another stipulation that in case the lessee failed to do so, all the buildings, etc., would become the property of the lessor.
In this connection, the relevant part of the lease may be extracted thus: "6.
That within four months after the expiry of the period of lease, the lessees, their successors or assigns will be entitled to remove their stocks and machinery etc.
pipelines, electric installation, fixtures, fittings, including stocks and materials of their constructions and fittings which stand on the plot of land shown by the letters A F H G in the accompanying map and will, on the expiry at the period of lease have over to the lessors the said plot of land (shown by letters A F H G in the accompanying map) duly levelled but the lessees would not be entitled to remove the boundary walls or any constructions or buildings which at present are created, which may be created during the period of lease on the plot of land shown by letters A B E F in the accompanying map and which is outside the compound of the lessees Oil Mills on the eastern side and on which at present stand twenty three quarters facing Hamirpur Road, as their quarters or any other buildings that may be created in their place or on their site as well as boundary walls would become the property of the lessors on the expiry of the period of lease, without any compensation being paid for the same by the lessors to the lessees." (Emphasis ours) Thus, although the lessee continued to remain in the premises after the expiry of the notice terminating the lease, yet by force of the express recitals in clause(6) extracted above, the buildings, etc., became the property of the lessors.
Unfortunately, this aspect of the matter does not appear to have been considered by the High Court.
In these circumstances, therefore, the conclusion is inescapable that 822 after the Government acquired the property it was bound to pay compensation to the appellants not only for the land but also for the buildings and structures thereon.
As, however, neither of the Courts below have assessed the compensation for the buildings, etc., as they stood in the year 1946 when the land was acquired, the matter will have to be determined by the District Judge afresh in so far as such compensation is concerned.
We would, therefore, allow this appeal with costs, set aside the Judgments of the High Court and the District Judge in so far as no compensation has been awarded in respect of the buildings, structures, etc., and remand the case to the District Judge for determining such compensation according to the rates prevailing in 1946 and also to determine the interest and solatium to be paid on such compensation from 1946 upto the date of payment.
S.R. Appeal allowed.

dataset_name: IN-Abs

summary/full:
The appellants terminated the lease of the suit lands by a notice dated 26th February, 1944 and allowed the lessee company "Narain Das Lachman Das Oil Mill" time till 30th June, 1944 for the removal of machinery, stores, buildings and other constructions in terms of clause (6) of the lease deed dated 2nd June, 1941.
The company not only secured an order from a Civil Court forbidding the appellants from ejecting it, but applied to the State Government for compulsory acquisition of the suit land.
In the land acquisition proceedings, the claim of the appellants "for the machinery, stores, buildings and other constructions made by the lessee" by virtue of automatic vesting in the appellants in terms of clause (6) of the lease deed dated 2nd June, 1941 and also, pursuant to notice of termination, was negatived.
Having failed before the District Court and the High Court to obtain the relief, the appellants obtained special leave of the Supreme Court.
Allowing the appeal, the Court ^ HELD: (1) Although the lessee continued to remain in the premises after the expiry of the notice terminating the lease, yet by force of the express recitals in clause (6) of the lease deed dated 2nd June, 1941, the buildings, etc., became the property of the lessors.
Therefore, after the Government acquired the property it was bound to pay compensation to the appellants not only for the land but also for the buildings and structures thereon.
[821H; 822A] (2) There was no waiver of the notice by the appellants.
There is no reliable evidence at all in the instant case to show the exact date when the rent was accepted or, at any rate, the fact that the rent was accepted between the 26th February, 1944, when the notice was sent, and the 30th June, 1944, when the Company was asked to vacate the premises.
Besides there is a finding of fact that the Company was treated as a trespasser ever since 26th February, 1944, namely, the date when the notice was given and that any rent which the appellants accepted was really not rent but mere compensation for wrongful use and occupation of the land.
[819C E] (3) It is no doubt true that section 114A of the Transfer of Property Act requires two conditions to be fulfilled before a suit for ejectment could lie (i) that a notice should be given to the lessee specifying the particular breach complained of, and (ii) that the lessee should be called upon to remedy the 816 breach.
If these conditions are fulfilled, then alone the lessor would be entitled to bring a suit for ejectment of the lessee.
Section 114A merely bars a suit for ejectment of the lessee in the instant case as the land had been acquired for the purpose of the lessee, namely, the Company, the question of filing a suit for ejectment did not arise at all.
In fact, the lessees themselves filed a suit and obtained injunction restraining the appellants from ejecting them before the land acquisition proceedings were taken in respect of the land in dispute.
Thus, the non compliance of sub section
(b) of section 114A is of no consequence so far as this particular case is concerned.
In the lease dated 2nd June, 1941, clause (6) clearly lays down that within four months after the expiry of the period of the lease the lessee would be entitled to remove the stocks and machinery.
The last part of that clause also empowers the lessor to re enter possession and acquire title to the buildings etc., that may be constructed by the lessee.
[819H; 820B D] (4) A construction of clause (h) of section 108 of the Transfer of Property Act clearly reveals that where there is a contract contrary to the provisions of that section would not apply.
In the lease dated June 2, 1941, there is not only an express clause under which the lessee was entitled to remove the stocks and materials within four months after the termination of the lease but thereafter there was another stipulation that in case the lessee failed to do so, all the buildings etc.
would become the property of the lessor.
[821A B]


judgement:
tition Nos. 833 835 of 1979.
(Under article 32 of the Constitution) P. Parmeswara Rao, G. D. Gupta and Ashwani Kumar for the Petitioners.
U. R. Lalit and Miss A. Subshashini for the Respondent.
The Judgment of the Court was delivered by PATHAK, J.
In these three petitions under Article 32 of the Constitution, the petitioners separately pray for a restoration of the quota originally granted to them in their respective licences for the manufacture of fire arms.
Writ Petition No. 833 of 1979 has been filed by Ranjit Singh who alleges that his father Pritam Singh commenced the business of manufacturing guns in 1950 under a licence issued by the Government of Jammu and Kashmir.
The licence permitted him to manufacture 849 30 guns per month.
The guns were manufactured by hand and were not proof tested.
The licence was renewed annually and the quota was maintained throughout.
Later, with the enactment of the , the licence was issued under that statute.
The Government insisted that the guns manufactured by Pritam Singh should undergo proof testing, and for that purpose it became necessary for the manufacturer to purchase and install the necessary machinery and plant.
The machinery was installed shortly after 1960 on a substantial investment of funds raised with great difficulty and, it is said, in the result the factory is now capable of manufacturing 50 guns per month.
Until the year 1963, the licence in favour of Pritam Singh was renewed by the Government of Jammu & Kashmir for the full quota of 30 guns.
But with effect from the year 1964 the Government of India began to issue the licences.
The quota was reduced from 30 guns to 10 guns per month, and it is alleged that this has resulted in considerable hardship in view of the financial liability and the establishment expenses suffered pursuant to the installation of the machinery.
On the death of Pritam Singh in 1969, the business was carried on by the petitioner and his mother, and the licence now stands in their names.
Several representations were made to the authorities for the restoration of the original quota but there was no satisfactory response.
The petitioner claims that his plea for the restoration of his original quota has been supported by the State Government.
The petitioner cites a number of cases where the quota reduced in the case of other manufacturers has been restored and relies on other material to show that the determination of his quota has been arbitrary.
Writ Petition No. 834 of 1979 has been filed by Bachan Singh.
The facts incorporated in the petition run a materially similar course, except that the original quota granted to the petitioner consisted of 50 guns per month and has now been reduced to 5 guns per month.
The petitioner in the third Writ Petition, No. 835 of 1979, is Uttam Singh.
In his case, the original quota of 50 guns a month has been reduced to 15 guns a month.
Here again, the pattern of facts is substantially similar to that traced in the other two writ petitions.
In opposition to the writ petitions, the Union of India which is the sole respondent, relies on an Industrial Policy Resolution of 1956 which envisions an exclusive monopoly in the Central Government in the matter of manufacturing arms and ammunition while permitting existing manufacturers in the private sector to continue to carry on their business on a limited scale.
It is asserted that in fixing a quota the manufacturing capacity of a concern is not a determining factor, 850 and it is denied that the Government has acted arbitrarily.
It is also urged that the petitioners should be denied relief on the ground of laches.
The Union of India rests its case on the Industrial Policy Resolution of 1956.
Under that Resolution, however, it was decided that no objection would be taken to the continuance of the manufacture of arms and ammunition by existing units in the private sector already licensed for such manufacture provided the operation of those units was strictly restricted to the items already manufactured by them and that no expansion of their production or increasing the capacity of the items already produced was undertaken without the prior sanction of the Government of India.
Plainly, what was envisaged was a prohibition against an increase in the quota, not its curtailment.
Purporting to implement the Industrial Policy Resolution, the Government issued instructions that the quota fixed should be such that the market was not flooded with arms and ammunition.
No objection can be raised to that.
It is as it should be, but with that primary consideration defining the outer limits, there are other factors which govern the fixation of the actual quota.
There is the production capacity of the factory, the quality of guns produced and the economic viability of the unit.
The Government is bound to keep these in mind while deciding on the manufacturing quota.
There is need to remember that the manufacture of arms has been the business of some of these units for several years and the Industrial Policy Resolution contains a specific commitment to permit the continuance of those factories.
On the other side, the Government is entitled to take into consideration the requirements of current administrative policy pertinent to the maintenance of law and order and internal security.
Any curtailment of the quota must necessarily proceed on the basis of reason and relevance.
If all relevant factors are not considered, or irrelevant considerations allowed to find place, the decision is vitiated by arbitrary judgment.
On the material placed before us, we are not satisfied that the Government of India has taken into careful consideration the several elements necessary for forming a decision on the quota permissible to each of these petitioners.
We are of opinion that it should do so now.
And, for that purpose, the petitioners should be entitled to place before the Government a fresh and complete statement of their case, with supporting written material, to enable the Government to reach a just decision in each case.
We need not, in the circumstances, consider the other grounds on which the petitioners claim relief.
851 On behalf of the Government it is urged that there is no fundamental right under Article 19(1)(g) of the Constitution to carry on the manufacture of arms.
That contention is disposed of shortly.
The , expressly contemplates the grant of licences for manufacturing arms.
An applicant for a licence is entitled to have it considered in accordance with the terms of the statute and to have for its grant on the basis of the criteria set forth in it.
The other contention on behalf of the Government is that the petitioners are guilty of laches.
We are not impressed by the contention for the reason that the licences are granted for specific periods with a right to apply for renewal on the expiry of each period.
Each renewal constitutes a further grant of rights and it is open to the applicant to show on each occasion that the quota governing the preceding period should now be revised in the light of present circumstances.
Besides, the petitioners have been continuously agitating for the restoration of their quota.
Having regard to the peculiar circumstances of these cases, we are not inclined to deny them relief.
Accordingly, we allow the writ petitions and direct the respondent Union of India to reconsider the manufacturing quota fixed in the case of each petitioner after allowing a reasonable period to the respective petitioners to set forth their case on the merits, with such supporting written material as they may choose to place before it.
N.V.K. Petitions allowed.

summary/full:
In 1950, the State Government issued a manufacturing licence renewable every year to the petitioners for the manufacture by hand of a specified number of guns per month.
The guns were however not proof tested.
After the , came into force, the government insisted that the guns manufactured should undergo proof testing.
Pursuant to that condition in 1960, the petitioners installed machinery and plant, by making substantial investment of funds.
From 1964, the Government of India, reduced the monthly quota of guns.
The petitioners in their writ petitions under Article 32 alleged that this reduction had resulted in considerable hardship to them because of the fixed overhead costs which could not be avoided.
They also alleged that though in the case of a number of other such manufacturers quotas were restored, in their cases, the Government refused to restore the quotas.
The Union of India, however, denied the allegation of arbitrariness, and stated that: (a) what was done was pursuant to the Industrial Policy Resolution of 1956 which envisioned an exclusive monopoly in the Central Government in the matter of manufacturing arms and ammunition and that in fixing the quota the manufacturing capacity of a concern was not a determining factor; (b) there is no fundamental right under Article 19(1)(g) of the Constitution to carry on the manufacture of arms; and (c) there was laches on the part of the petitioners.
Allowing the writ petitions, ^ HELD: (a)(i) Any curtailment of the quota must proceed on the basis of reason and relevance.
The Government is entitled to take into consideration the requirements of current administrative policy pertinent to the maintenance of law and order and internal security.
If all relevant factors are not considered, or irrelevant considerations allowed to find place, the decision is vitiated by arbitrary judgment.
[850F; E] In the instant case the Government of India had not taken into careful consideration the several elements necessary for forming a decision on the 848 quota permissible to each of the petitioners.
That should be done and for that purpose the petitioners would be entitled to place before the Government a fresh and complete statement of their case, with supporting material, to enable the Government to reach a just decision.
[850G H] (ii) The Industrial Policy Resolution envisaged a prohibition against an increase in the quota of guns, not its curtailment.
No objection could be taken to the government 's instructions on the subject.
The other factors governing the fixation of the actual quota are the production capacity of the factory, the quality of the guns produced and the economic viability of the unit.
The Industrial Policy Resolution contains a specific commitment to permit the continuance of the factories which were functioning for several years earlier.
[850C; D E] (b) The , expressly contemplates the grant of licences for manufacturing arms and an applicant for a licence is entitled to have it considered in accordance with the terms of the statute and to press for its grant on the basis of the criteria set forth in it.
[851A B] (c) The licences are granted for specific periods with a right to apply for renewal on the expiry of each period.
Each renewal constitutes a further grant of rights and it is open to the applicant to show on each occasion that the quota governing the preceding period should be revised in the light of present circumstances.
[851C] In the instant case the petitioners had been continuously agitating for the restoration of their quota.
They are, therefore, not guilty of laches and are entitled to relief.
[851D]


judgement:
tition Nos.
711, 138, 1152 & 1546 of 1979.
(Under Article 32 of the Constitution) K. K. Venugopal and A. Subha Rao for the Petitioners in WP Nos. 138, 711 of 79. M. M. Abdul Khader, M. A. Feroze, M.R.K. Pillai and K. R. Rajasekharan Pillai for the Petitioner in WP No. 1152/79.
B. Kanta Rao, P. Ram Reddy and G. Narayana Rao for the Petitioner in WP No. 1546/79.
K. Parasaram, Solicitor Genl and Miss A. Subhashini for the Respondent (Union of India).
P. Ram Reddy and G. N. Rao for the Respondents in WP No. 1546/79.
K. R. Nambiar for Respondent No. 3 in WP No. 1152/79.
P. H. Parekh, C. B. Singh & Rajian Karanjawala for the Intervener in WP No. 711/79.
The Judgment of the Court was delivered by KRISHNA IYER, J.
Section 2(e) of the (Act 43 of 1978) (for short, the Act) defines a 'Prize chit ' inclusively: 2.
In this Act, unless the context otherwise requires, *** *** *** (e) "prize chit" includes any transaction or arrangement by whatever name called under which a person collects whether as a promoter, foreman, agent or in any other capacity, monies in one lump sum or in instalments by way of contributions or subscriptions or by sale of 804 units, certificates or other instruments or in any other manner or as membership fees or admission fees or service charges to or in respect of any savings, mutual benefit, thrift, or any other scheme or arrangement by whatever name called, and utilises the monies so collected or any part thereof or the income accruing from investment or other use of such monies for all or any of the following purposes, namely: (i) giving or awarding periodically or otherwise to a specified number of subscribers as determined by lot, draw or in any other manner, prizes or gifts in cash or in kind whether or not the recipient of the prize or gift is under a liability to make any further payment in respect of such scheme or arrangement; (ii) refunding to the subscribers or such of them as have not won any prize or gift, the whole or part of the subscriptions, contributions or other monies collected, with or without any bonus, premium, interest or other advantage by whatever name called, on the termination of the scheme or arrangement, or on or after the expiry of the period stipulated therein, but does not include a conventional chit; The quintessential aspects of a prize chit are that the organizer collects moneys in lump sum or instalments, pursuant to a scheme or arrangement, and he utilises such moneys as he fancies primarily for his private appetite and for (1) awarding periodically or otherwise to a specified number of subscribers, prizes in cash or kind and (2) refunding to the subscribers the whole or part of the money collected on the termination of the scheme or otherwise.
The apparent tenor may not fully bring out the exploitative import lurking beneath the surface of the words which describe the scheme.
Small sums are collected from vast numbers of persons, ordinarily of slender means, in urban and rural areas.
They are reduced to believe by the blare of glittering publicity and the dangling of astronomical amounts that they stand a chance in practice, negligible of getting a huge fortune by making petty periodical payments.
The indigent agrestics and the proletarian urbanites, pressured by dire poverty and doped by the hazy hope of a lucky draw, subscribe to the scheme although they can ill afford to spare any money.
This is not promotion of thrift or wholesome small savings because the poor who pay, are bound to continue to pay for a whole period of 805 a few years over peril of losing what has been paid and, at the end of it, the fragile prospects of their getting prizes are next to nil and even the hard earned money which they have invested hardly carries any interest.
They are eligible to get back the money they have paid in driblets, virtually without interest, the expression 'bonus ' in section 2(a) being an euphemism for a nominal sum.
What is more, the repayable amount being small and the subscribers being scattered all over the country, they find it difficult even to recover the money by expensive, dilatory litigative process.
Since there are a large number of prize chits all over the country which have almost become a pan Indian epidemic and since the total number of people victimised by these projects are considerable the injury to the community is substantial, so that a welfare state dedicated to the Directive Principles of has to awake and protect the vulnerable sector.
Another weighty factor which has alerted the State into action is that the flood of funds flowing through prize chits benefit the organisers of such schemes who have no social responsibility for national productivity and in their hands is easy money with little developmental benefits or attractive returns for the poor investors.
The noxious net cast by the prize chit promoters was large and the State moved to stop this menace.
Many a little makes a mickle, and those small sums collected from a substantial number of subscribers accumulated into huge resources which otherwise would ordinarily have been available for national development.
The grim picture of the luckless many who were losing their money, appetized by gambling prospects, and the sterilization of people 's resources which were siphoned off by private adventurists through prize chits to the detriment of national development ignited the impugned legislation.
Such is the case of the State as justification for enacting what is contended for as unconstitutional for three reasons which we will presently examine.
The Union of India has furnished socio economic data to help the court appreciate how expert opinion had been collected before launching on the prohibitory legislation.
A study group headed by Dr. J. section Raj made a report to the Central Government wherein pointed reference was made to prize chits and allied schemes.
The report devoted a whole chapter to prize chits, savings schemes, and others of their ilk and exposed the modus operandi of such schemes and their anti social impact upon the community and recommended to the State to intervene and interdict.
806 We may quote briefly to bring home tersely the trauma inflicted by lucky draw schemes on the host of luckless illiterates succumbing (perhaps astrologically) to the prize mania: .
It was observed that several companies conducting prize chits, benefits or savings schemes or lucky draws claimed themselves to be either mutual benefit financial companies (by enrolling subscribers as 'associate ' members under the directions as they stood prior to January 1, 1973) or as chit fund companies and thus contended that the subscriptions collected by them were not 'deposits ' as defined in the directions and hence not subject to any ceiling restrictions. .
Modus Operandi of Prize Chits/Benefit or Savings Schemes or Lucky Draws 6.3.
Companies conducting the above types of Schemes are comparatively of a recent origin and of late, there has been a mushroom growth of such companies which are doing brisk business in several parts of the country, especially in big cities like Ahmedabad, Bangalore, Bombay, Calcutta and Delhi.
They have also established branches in various States.
These companies float schemes for collecting money from the public and the modus operandi of such schemes is generally as described below: The company acts as the foreman or promoter and collects subscriptions in one lump sum or by monthly instalments spread over a specified period from the subscribers to the schemes.
Periodically, the numbers allotted to members holding the tickets or units are put to a draw and the member holding the lucky ticket gets the prize either in cash or in the form of an article of utility, such as a motor car, scooter etc.
Once a person gets the prize, he is very often not required to pay further instalments and his name is deleted from further draws.
The schemes usually provide for the return of subscriptions paid by the members with or without an additional sum by way of bonus or premium at the end of the stipulated period in case they do not get any prize.
The principal items of income of these companies are interest earned on loans given to the subscribers against the security of the subscriptions paid or on an unsecured basis as also loans 807 to other parties, service charges and membership fees collected from the subscribers at the time of admission to the membership of the schemes.
The major heads of expenditure are prizes given in accordance with the rules and regulations of the schemes, advertisements and publicity expenses and remuneration and other perquisites to the directors.
The financial fall outs of these schemes were also examined by the Study Group to demonstrate how the promoter companies were gargantuan and were swallowing up huge surpluses from the public who lost interest on their subscriptions, and, sometimes, even the principal amounts paid : .
Even if the company offers some amount by way of bonus or premium to the subscribers at the time of refund of their subscriptions and allowing for reasonable expenditure on publicity, commission to agents, etc., a sizeable balance will still be left with the company.
This is exclusive of the amounts which the company might be collecting by way of membership fees and service charges from the subscribers and also of the amounts which it might be appropriating in respect of the subscriptions on forfeited tickets on which there will be no future liability for refund to the members at the end of the scheme.
It will thus be obvious from the foregoing that such schemes confer monetary benefit only on a few members and on the promoter companies.
There is reference in the Study Group report to other studies conducted by the Reserve Bank which also demonstrated the many sinister effects upon the community on account of proliferous prize chits benefits schemes.
(a) the companies had advanced sizeable amounts to the directors or their relatives or firms in which they were interested as partners, directors or as commission agents and there were practically no repayments of the loans; (b) the books of account had not been maintained satisfactorily; (c) close relatives of the directors had been employed in the companies as members of the staff or as agents on high salaries; 808 (d) In one case, it was observed that a scheme announced by a company in which collections had been made was withdrawn subsequently without notice to the subscribers and no refunds of the subscriptions already received had been made to the subscribers.
Prize moneys had not been paid to all the subscribers who had won the prizes; and (e) subscriptions were shown to have been refunded in the books of account of a company but doubts have been expressed by the Inspecting Officer about the genuineness of the payments in view of certain attendant circumstances.
There have also been allegations that some companies had resorted to certain malpractices in drawing the names of prize winners.
** ** ** . . in the absence of any authoritative judicial pronouncement on the subject, we are not sure whether the activities of companies conducting price chits, etc., are clearly prohibited by the existing legislations.
It has been reported that resources of prize chits are used for wasteful spending and hoarding commodities and that these schemes "enable certain persons to convert tax evaded income into accounted money.
The persons concerned pay a premium to the promoters in return for the facility.
" It has also been stated that "there are a number of agents who go about contacting persons who are likely to face the problem of saving their income from the tax authorities.
The prize chit pass books issued to them under different names become their passports for travelling from black money territory to the white money area the easiest and surest way of using ill gotten wealth.
Besides, by their misleading names and companies the prize chit companies divert private savings into their personal drains, thus disrupting the national economy.
From the foregoing discussion, it would be obvious that prize chits or benefit schemes benefit primarily the promoters and do not serve any social purpose.
On the contrary, they are prejudicial to the public interest and also adversely affect the efficacy of fiscal and monetary policy.
There has also been a public clamour for banning of such schemes; this stems largely from the malpractices indulged in by the promoters and also the possible exploitation of such schemes by unscrupulous elements to their own advantage.
We 809 are, therefore, of the view that the conduct of prize chits or benefit schemes by whatever name called should be totally banned in the larger interests of the public and that suitable legislative measures should be taken for the purpose if the provisions of the existing enactments are considered inadequate.
Companies conducting prize chits, benefit schemes, etc., may be allowed a period of three years which may be extended by one more year to wind up their business in respect of such schemes and/or switch over to any other type of business permissible under the law.
(emphasis added) The learned Solicitor General drew our attention to cases where the notorious abuses by prize promoters had attracted judicial notice.
In particular, he cited a decision of the Gujarat High Court in Navjivan Trading Financing Pvt.
Ltd. Thakkar, J. while dealing with the social anguish at the exploitative spectacle, said : The facts speak for themselves so eloquently that no further discussion is called for and it is unnecessary to demonstrate any further that the company is in such a precarious condition and the financial condition is so very ugly that there is no possibility whatsoever of the company ever being in a position to pay its debts.
It is not in a position to day and, even in future, it is not likely to be in a position to discharge the debt burden.
In fact, the deficit will go on increasing and for aught we know, more innocent persons would be trapped meanwhile.
The contributors from whom collections are made are persons with extremely limited financial means and are petty subscribers who cannot possibly afford to take recourse to legal proceedings.
It would be cheaper for them to abandon their claims than to make recourse to legal proceedings and incur expenses for court fees and advocates ' fees, apart from the inconvenience involved therein.
With special reference to malpractices of prize chits promoters the learned Judge drove home the point; Where the company is not producing or manufacturing any goods and is not rendering any service useful to the society, where the whole purpose of its existence appears to be to provide the directors with an opportunity to enrich themselves at the cost of petty subscribers who in the hope of getting some prizes or rewards and better returns on their hard earned 810 savings (sometimes they may even resort to borrowing in the hope of getting rich quickly) become contributories to various schemes floated by the company, the matter stands on a different footing.
In a case like the present where the main activity of the company consists in tempting and roping in innocent persons in the scheme by publishing tantalizing advertisements, greater harm would ensue by refusing to pass an order of winding up than by passing an order of winding up.
In fact, to wind up such company would be an act of social service, for, thereby, several innocent persons would be saved from being trapped by a company of this nature.
Alas, as discussed earlier, the time taken in affording reasonable opportunity to the company in obeisance to the principles of natural justice has been utilised by the company to collect lakhs of rupees from the innocent subscribers merely in order to enrich the directors in an unjust fashion.
Under the circumstances, there is no scope for hesitation or reluctance in winding up the company which the court ordinarily feels when dealing with some manufacturing unit.
(emphasis added) There is sufficient justification for undertaking legislation restricting the freedom to fleece through prize chits.
Indeed, Shri Venugopal did not seriously contest this position.
The thrust of his argument was that his client was a well behaved prize chit organizer, above board in all respects, and so, a package of proper safeguards would adequately protect the community and a total ban was recklessly excessive, unintelligently over broad and, therefore, unconstitutional.
Surely, article 19(6) permits reasonable restrictions in the interest of the general public on the exercise of the right conferred by article 19(1)(g).
It is a constitutional truism restrictions, in extreme cases, may be pushed to the point of prohibition if any lesser strategy will not achieve the purpose.
Fundamental rights are fundamental, and so, no ban can be glibly imposed unless effective alternatives are unavailable.
Counsel on both sides cited rulings for the two sides of the proposition but it is an act of supererogation to load judgments with or profusion precedential erudition to make out what is plain, profound.
The twin requirements of article 19(6) are (a) the reasonableness of the restriction upon the fundamental right to trade, and (b) the measure of the reasonableness being the compelling need to promote the interest of the general public.
Public interest, of course, there is.
811 But the controversy rages round the compulsive necessity to extinguish the prize chit enterprises altogether as distinguished from hand cuffing them with severe conditions geared to protection of public interest.
We have already indicated that the Raj Report does recommend a total ban on prize chits.
In matters of economics, sociology and other specialised subjects, courts should not embark upon views of halflit infallibility and reject what economists or social scientists have, after detailed studies, commended as the correct course of action.
True, the final word is with the court in constitutional matters but judges hesitate to 'rush in ' where even specialists 'fear to tread '.
If experts fall out, court, perforce, must guide itself and pronounce upon the matter from the constitutional angle, since the final verdict, where constitutional contraventions are complained of, belongs to the judicial arm.
The alternative proposals to save the public from prize chit rackets attractively presented by Shri Venugopal do not impress us.
In many situations, the poor and unwary have to be saved from the seducing processes resorted by unscrupulous racketeers who glamourize and prey upon the gambling instinct to get rich quick through prizes.
So long as there is the resistless spell of a chance though small, of securing a prize, though on paper, people chase the prospect by subscribing to the speculative scheme only to lose what they had.
Can you save moths from the fire except by putting out the fatal glow ? Once this prize facet of the chit scheme is given up, it becomes substantially a 'conventional chit ' and the ban of the law ceases to operate.
We are unable to persuade ourselves that the State is wrong in its assertion, based upon expert opinions that a complete ban of prize chits is an over kill or excessive blow.
Therefore, we decline to strike down the legislation on the score of article 19(1)(f) and (g) of the Constitution.
We may not be taken to mean that every prize chit promoter is a blood sucker.
Indeed, Shri Venugopal persuasively presented the case of his client to make us feel that responsible business was being done by the petitioner.
May be.
But when a general evil is sought to be suppressed some martyrs may have to suffer for the legislature cannot easily make meticulous exceptions and has to proceed on broad categorisations, not singular individualisations.
We give short shrift to the next contention based upon article 14.
Broadly presented, the argument is that conventional chits and prize chits are substantially similar and, therefore, permission to continue 'conventional chits ' and prohibition of prize chits altogether may be discriminatory.
We do not agree.
Not only do the definitions show the differentiation between the two schemes, but the Raj Report 812 also brings out the fact that 'conventional chits ' and 'prize chits ' are different categories with different financial features and different damaging effects.
We see no force in the plea of violation of article 14.
Equally untenable is the contention that there is a discriminatory exemption from the operation of the prohibition in regard to those categories of prize chits which fall within section 11.
It runs thus: 11.
Nothing contained in this Act shall apply to any prize chit or money circulation scheme promoted by (a) a State Government or any officer or authority on its behalf; or (b) a company wholly owned by a State Government which does not carry on any business other than the conducting of a prize chit or money circulation scheme whether it is in the nature of a conventional chit or otherwise; or (c) a banking company as defined in clause (c) of section 5 of the Banking Regulation Act, 1949, or a banking institution notified by the Central Government under section 51 of that Act or the State Bank of India constituted under section 3 of the , or a subsidiary bank constituted under section 3 of the , or a corresponding new bank constituted under Section 3 of the , or a Regional Rural Bank established under section 3 of the or a co operative bank as defined in clause (bii) of section 2 of the ; or (d) any charitable or educational institution notified in this behalf by the State Government, in consultation with the Reserve Bank.
A bare reading of that provision makes it clear that the exempted categories do not possess the vices of private prize chits.
For one thing, what are exempted are prize chits and money circulation schemes promoted by or controlled by the State Governments, the Central Government or the State Bank of India or the Reserve Bank.
Even Rural Banks and Co operatives covered by section 11, are subject to public control.
Likewise, charitable and educational institutions are exempted only if they are notified by the State Government in consultation with the Reserve Bank.
There are enough arguments to justify the different classification of these items 813 and their exemption cannot be called in question on the ground of violation of article 14.
Reasonable classification wins absolution from the charge of discrimination if the differentia has a nexus with the statutory object.
The final submission of Shri Venugopal was regarding legislative competency.
He urged that legislation regarding lottery falls within the State List (Entry 34, List II) and Parliament cannot enact such a law under Entry 7 of List III.
Relying upon State of Bombay vs R.M.D. Chamarbugwala counsel contended that the present legislation was aimed at prize chits and intended to ban lotteries.
Such an anti lottery law could not be sustained under Entry 7 of the List III.
We are not persuaded that in pith and substance the present legislation is one against lotteries.
It deals with a special species of contracts with sinister features, although one such feature is the award of prizes to subscribers.
While motives cannot validate or invalidate a legislation the core of the subject matter must govern competency.
So viewed, it is easy to accept the submission of the Union of India that Parliament wanted to restrict and prohibit certain types of contracts because of the noxious element of gambling and lottery implicit therein and apt to entice the credulous and uncautious.
We do not think it necessary to expand on the subject and the incidental impact on lotteries does not affect the vires of the Act.
Judicial validation of a social legislation only keeps the path clear for enforcement.
Spraying legislative socio moral pesticides cannot serve any purpose unless the target area is relentlessly hit.
We hope that this legislation enacted in response to expert recommendation and popular clamour will be implemented by dynamic State action.
We wish to make it clear that the possible hardship that bona fide prize chit promoters may suffer on account of the total prohibition clamped down by this legislation can be relieved against by the Central Government acting under section 12.
The learned Solicitor General assured the court that the Union of India would take ameliorative measure to avoid unjust hardship, especially because it had power to do so under section 12.
Mr. M. M. Abdul Khader appearing in Writ Petition No. 1152 of 1979 argued that in his case ornaments and vessels were given as prizes and if strictly construed, his client 's scheme did not fall within the scope of the Act.
He wanted the court to declare so but we decline to do so, since under article 32 this Court 's function 814 is not to give advisory opinion to petitioners but to pronounce upon transgression of fundamental rights by State action.
While there is no merit in his submission of procedural unreasonableness in the provisions of the Act, it is perfectly open to the writ petitioner to urge his plea that the Act does not apply to his scheme if he were prosecuted.
We leave the matter at that.
Shri Parekh, as intervener, Shri Kanta Rao, appearing in Writ Petition No. 1546/79, Shri Subba Rao pressing Writ Petition No. 138/79 and Shri K.R.R. Pillai in W.P. No. 1152/79 have adopted the leading arguments of Shri Venugopal which we have rejected.
All of them must share the same fate.
State lotteries escalating year after year and enticing proletarian sections of the people across the States are dubious in morality and ruinous in impact.
Moreover, a detailed study may disclose the diminishing returns and increasing establishment expenses, menace to peaceful life and a traffic and dubious consequences.
So much so, a second look at the propriety of these State run schemes and reversion to the old stance of the State setting an anti lottery example, is worthwhile from many angles.
For the reasons given above, we dismiss all the Writ Petitions, leaving the parties to bear their own costs.
N.V.K. Petitions dismissed.

summary/full:
Prize Chits are one type of saving schemes.
In Prize Chits the organiser collects subscription in one lump sum or by monthly instalments spread over a specified period from the subscribers to the schemes.
Periodically, the numbers allotted to the members holding the tickets or units are put to a draw and the member holding the lucky ticket gets the prize either in cash or in the form of an article of utility, such as a motor car, scooter etc.
Once a person gets the prize, he is very often not required to pay further instalments and his name is deleted from further draws.
In case members do not get any prize, the schemes usually provide for the return of subscription paid by the members with or without an additional sum by way of bonus or premium at the end of the stipulated period.
As the flood of funds flowing through these prize chits benefited only the organisers of such schemes, and the total number of people victimised by these projects were considerable and injury to the community substantial, the Central Government set up a Study Group which went into the operation of these schemes.
The Report of the Study Group demonstrated the many sinister effects and also exposed the anti social impact upon the community by the operation of such schemes, and recommended to the State to intervene and interdict.
The Central Government thereupon undertook legislation for curbing the effect of the operation of these schemes by enacting the .
The petitioners in their writ petitions under Article 32 of the Constitution assailed the aforesaid statute: (1) contending that a package of proper safeguards would adequately protect the community, a total ban being recklessly excessive, unintelligently over broad and, therefore, unconstitutional, under Article 19(1)(g), (2) conventional chits and prize chits are substantially similar and, therefore, permission to continue 'conventional chits ' and prohibition of prize chits was discriminatory under Article 14, (3) there is a discriminatory exemp 802 tion from the operation of the prohibition in regard to those categories of prize chits which fall within section 11, and (4) the legislation being aimed at prize chits and intended to ban lotteries, would fall within the State List, Entry 34 List II and Parliament cannot enact such a law under Entry 7 of List III.
Dismissing the writ petitions, ^ HELD: (1) (i) There is a sufficient justification for undertaking legislation restricting the freedom to fleece through prize chits.
[810E].
(ii) The legislation cannot be struck down on the score of article 19(1)(g) of the Constitution.
[811F] (iii) The requirements of article 19(6) are, the reasonableness of the restriction upon the fundamental right to trade, the measure of reasonableness being the compelling need to promote the interest of the general public.
[810H] 2.
Conventional chits and prize chits are different categories with different financial features and different damaging effects.
There is, therefore, no force in the plea of violation of Article 14.
[812A] 3.
A bare reading of section 11 makes it clear that the exempted categories do not possess the vices of private prize chits.
What are exempted are prize chits and money circulation schemes promoted by or controlled by the State Governments, the Central Government, or the State Bank of India or the Reserve Bank.
Even Rural Banks and Cooperatives covered by section 11, are subject to public control.
Charitable and educational institutions are exempted only if they are notified by the State Government in consultation with the Reserve Bank.
There is, therefore, sufficient justification to justify the different classification of these items and their exemption cannot be called in question on the ground of violation of article 14.
[812G H; 813A] 4.
In pith and substance the present legislation is not one against lotteries.
It deals with a special species of contracts with sinister features, although one such feature is the award of prizes to subscribers.
While motives cannot validate or invalidate a legislation the core of the subject matter must govern competency.
[813 C D] 5.
In matters of economics, sociology and other specialised subjects, courts should not embark upon views of half lit infallibility and reject what economists or social scientists have, after detailed studies, commanded as the correct course of action.
The final word is with the Court in constitutional matters but judges hesitate to 'rush in ' where even specialists 'fear to tread '.
If experts fall out, court, perforce, must guide itself and pronounce upon the matter from the constitutional angle, since the final verdict, where constitutional contraventions are complained of, belongs to the judicial arm.
[811B C] 6.
When a general evil is sought to be suppressed some martyrs may have to suffer for the legislature cannot easily make meticulous exceptions and has to proceed on broad categorisations, not singular individualisations.
[811G] 7.
Judicial validation of a social legislation only keeps the path clear for enforcement.
Spraying legislative socio moral pesticides cannot serve any purpose unless the target area is relentlessly hit.
This legislation enacted in 803 response to expert recommendation and popular clamour is to be implemented by dynamic State Action.
[813E F] 8.
The possible hardship that bona fide prize chit promoters may suffer on account of the total prohibition clamped down by this legislation can be relieved against by the Central Government acting under Section 12.
[813F] 9.
Under Article 32 the Court 's function is not to give advisory opinion but to pronounce upon transgression of fundamental rights by State action.
[813H 814A]