judgement:
Appeal No. 35 of 1959.
Appeal from the judgment and decree dated October 29, 1956, of the Allahabad High Court in Writ Petition No. 327 of 1956.
H. N. Sanyal, Additional Solicitor General of India, J. B. Dadachanji, section N. Andley, Rameshwar Nath and P. L. Vohra, for the appellants.
G. C. Mathur and C. P. Lal, for the respondents.
1960, December 13.
The Judgment of Imam, Kapur, Das Gupta and Dayal, JJ. was delivered by Das Gupta, J. Ayyangar, J. delivered a separate judgment.
DAS GUPTA, J.
This appeal is against an order of the High Court of Judicature at Allahabad rejecting the appellants ' application under article 226 of the Constitution.
The first appellant is the Diamond Sugar Mills Ltd., a public limited company owning and operating a sugar factory at Pipraich in the District Gorakhpur, for the manufacture of sugar from 244 sugarcane.
The second appellant is the Director of the company.
By this application the appellants challenged the imposition of cess on the entry of sugarcane into their factory.
On February 24, 1956, when the application was made the U. P. Sugarcane (Regulation of Supply and Purchase) Act, 1953 (U. P. XXIV of 1953), was in force.
Section 20 of this Act gave to the Governor of U. P. the power to impose by notification "a cess not exceeding 4 annas per maund on the entry of sugarcane into an area specified in such notification for consumption, use or sale therein".
This Act it may be mentioned had taken the place of an earlier Act, the U. P. Sugar Factories Control Act, 1938, section 29 of which authorised the Governor of U. P. to impose by a notification after consultation with the Sugar Control Board under the Act "a cess not exceeding 10 per cent of the minimum price, if any, fixed under section 21 or 4 annas per maund whichever was higher on the entry of sugarcane into a local area specified in such notification for consumption, use or sale therein".
Notifications were issued under this provision for different crushing seasons starting from 1938 39, the last notification issued thereunder being for the crushing season of 1952 53.
These notifications set out a number of factories in a schedule and provided that during 1952 53 crushing season cess at a rate of three annas per maund shall be levied on the entry of all sugarcane into the local areas comprised in factories mentioned in the schedule for consumption, use or sale therein.
Act No. XXIV of 1953 repealed the 1938 Act.
The first notification under the provisions of section 20 of the 1953 Act was in these terms: "In exercise of the powers conferred by sub section (1) of section 20 of Uttar Pradesh Sugarcane (Regulation of Supply and Purchase) Act, 1953; (U. P. Act No. XXIV of 1953) the Governor is pleased to declare that during the 1954 55 crushing season, a cess at a rate of three annas per maund shall be levied on the entry of all sugar cane into the local areas comprised in the factories mentioned in the Schedule, for the consumption, use or sale therein".
245 Similar notifications were also issued on October 23, 1954, for the crushing season 1954 55 and on November 9, 1955, for the crushing season 1955 56.
The appellants ' factory was one of the factories mentioned in the schedule of all these notifications.
On the date of the application, i.e., February 24, 1956, a sum.
of Rs. 2,59,644 9 0 was due from the first appellant and a further sum of Rs. 2,41,416 3 0 as liability on account of cess up to the end of January, 1956, also remained unpaid.
The appellant contended on various grounds that section 20 of Act XXIV of 1953 was unconstitutional and invalid and prayed for the issue of appropriate writs directing the respondents the State of U. P. and the Collector of Gorakhpur not to levy and collect cess on account of the arrears of cess for the crushing season 1954 55 and in respect of the crushing season 1955 56 and successive crushing seasons and to withdraw the notifications dated October 23, 1954, and November 9, 1955 , which have been mentioned above.
During the pendency of this application under article 226 before the Allahabad High Court the U. P. Legislature enacted the U. P. Sugarcane Cess Act, 1956 (U. P. XXII of 1956), repealing the 1953 Act.
Section 3 of this Act as originally enacted was in these words: "The State Government may by notification in the official gazette impose a cess not exceeding four annas per maund on the entry of the cane into the premises of a factory for use, consumption or sale therein: Provided that the State Government may like.
wise remit in whole or in part such cess in respect of cane used or to be used in factory for any limited purpose specified in the notification.
Explanation: If the State Government, in the case of any factory situate outside Uttar Pradesh, so declare, any place in Uttar Pradesh set apart for the purchase 'of cane intended or required for use.
consumption or sale in such factory shall be deemed to be the premises of the factory.
(2) The cess imposed under sub section (1) shall 246 be payable by the owner of the factory and shall be paid on such date and at such place as may be prescribed.
(3) Any arrear of cess not paid on the date prescribed under sub section (2) shall carry interest at 6 per cent.
per annum from such date to date of payment.
" There is a later amendment by which the words "four annas" have been altered to "twenty five naye paise" and the words "Gur, Rab or Khandsari Sugar Manufacturing Unit" have been added after the words "factory" in sub section (1).
These amendments are however not relevant for the purpose of this appeal.
Section 9 of this Act repealed section 20 of the Sugar Cane (Regulation of Supply and Purchase) Act, 1953.
Sub sections 2 and 3 of section 9 are important.
They are in these words: "2.
Without prejudice to the general application of section 24 of the U.P. General Clauses Act, 1904, every notification imposing cess issued and every assessment made (including the amount of cess collected) under or in pursuance of any such notification, shall be deemed a notification issued, assess ment made and cess collected under this Act as if sections 2, 3 and 5 to 8 had been in force at all material dates.
Subject as provided in clause (1) of Article 20 of the Constitution every notification issued cess imposed and act or thing done or omitted between the 26th January, 1950, and the Appointed date in exercise or the purported exercise of a power under section 29 of the U. P. Sugar Factories Control Act, 1938, or of section 20 of the U. P. Sugarcane (Regulation of Supply and Purchase) Act, 1953, which would have been validly and properly issued, imposed, done or omitted if the said sections had been as section 3 of this Act, shall in law be deemed to be and to have been validly and properly imposed and done, any judgment, decree or order, of any court notwithstanding.
" The position after the enactment of the U. P. 247 Sugarcane Cess Act, 1956, was that the imposition and assessment of cess that had already been made under the 1953 Act would operate as if made under the 1956 Act.
In view of this the first appellant, the Diamond Sugar Mills Ltd., prayed to the High Court for permission to raise the question of constitutionality and validity of the 1956 Act.
It also prayed for the issue of a writ in the nature of mandamus directing the respondents not to levy cess upon the petitioners appellants under this new Act, the U. P. Sugarcane Cess Act, 1956.
This application was allowed and the High Court considered the question whether section 3 of the U. P. Sugarcane Cess Act, 1956, 'empowering the State Government to impose a cess not exceeding four annas per maund on the entry of the cane into the premises of a factory for the consumption, use or sale therein was a valid law.
The principal ground urged in support of the appellants ' case was that the law as enacted in section 3 was invalid and that it was beyond the legislative competence of the State Legislature.
Several other grounds including one that the provisions of the section went beyond the permissible limits of delegated legislation were also raised.
All the grounds were negatived by the High Court which accordingly rejected the appellants ' petition.
The High Court however gave a certificate under Article 132(1) and also under article 133(1)(c) of the Constitution and on the basis of that certificate the present appeal has been filed.
Of the several grounds urged before the High Court only two are urged before us in appeal.
One is that the law was invalid, being beyond the legislative competence of the State legislature; the other is that in any case the provision giving the Governor power to levy any cess not exceeding 4 annas without providing for any guidance as to the fixation of the particular rate, amounted to excessive delegation, and was accordingly invalid.
The answer to the question whether the impugned law was within or beyond the legislative competence of the State legislature depends on whether the law falls under Entry 52 of the State List 248 List II of the Seventh Schedule to the Constitution.
It is quite clear that there is no other entry in either the State List or the Concurrent List under which the legislation could have been made.
Entry 52 is in these words: "Tax on the entry of goods into a local area for consumption, use or sale therein".
Section 3 of the impugned Act which has already been set out provides for imposition of a cess on the entry of sugarcane into the premises of a factory for use, consumption or sale therein.
Is the "premises of a factory" a local area within the meaning of the words used in Entry 52? If it is the legislation was clearly within the competence of the State legislature; if it is not, the law was beyond the State legislature 's competence and must be struck down as invalid.
In considering the meaning of the words "local area" in entry 52 we have, on the one hand to bear in mind the salutary rule that words conferring the right of legislation should be interpreted liberally and the powers conferred should be given the widest amplitude; on the other hand we have to guard ourselves against extending the meaning of the words beyond their reasonable connotation, in.
an anxiety to preserve the power of the legislature.
In Re the Central Provinces & Berar Act No. XI V of 1938 (1) Sir Maurice Gwyer, C. J., observed: "I conceive that a broad and liberal spirit should inspire those whose duty it is to interpret it; but I do not imply by this that they are free to stretch or pervert the language of the enactment in the interests of any legal or constitutional theory, or even for the purpose of correcting any supposed errors".
Again, in Navinchandra Mafatlal vs The Commissioner of Income Tax, Bombay City (2) Das, J. (as he then was) delivering the judgment of this Court observed: ". . .
The cardinal rule of interpretation however, is that words should be read in their ordinary, natural and grammatical meaning subject to this rider that in construing words in a constitutional enactment conferring legislative power the most (1) , 37.
(2) [1955] 1 S.C.R. 829.
249 liberal construction should be put upon the words so that the same may have effect in their widest amplitude.
" Our task being to ascertain the limits of the powers granted by the Constitution, we cannot extend these limits by way of interpretation.
But if there is any difficulty in ascertaining the limits, the difficulty must be resolved so far as possible in favour of the legislative body.
The presumption in favour of constitutionality which was stressed by the learned counsel for the respondents does not take us beyond this.
On behalf of the appellants it has been urged that the word "local area" in its ordinary grammatical meaning is never used in respect of a single house or a single factory or a single plot of land.
It is urged that in ordinary use the words "local area" always mean an area covering a specified region of the country as distinguished from the general area.
While it may not be possible to say that the words "local area" have acquired a definite and precise meaning and the phrase may have different connotations in different contexts, it seems correct to say that it is seldom, if ever, used to denote a single house or a single factory.
The phrase appears in several statutes, some passed by the Central Legislature and some by the Provincial or State Legislatures; but in many of these the words have been defined.
These definitions being for the peculiar purpose of the particular statute cannot be applied to the interpretation of the words "local area" as used in the Constitution.
Nor can we derive any assistance from the judicial interpretation of the words "local area" as used in the Code of Criminal Procedure or other Acts like Bengal Tenancy Act as these interpretations were made with reference to the scope of the legislation in which the phrase occurs.
Researches into dictionaries and law lexicons are also of 'no avail as none of these give the meaning of the phrase "local area".
What they say as regards the meaning of the word "local" offers no guidance except that it is clear that the word "local" has different meanings in different contexts.
32 250 The etymological meaning of the word "local" is "relating to" or "pertaining to" a place.
It may be first observed that whether or not the whole of the State can be a "local area", for the purpose of Entry 52, it is clear that to be a "local area" for this purpose must be an area within the State.
On behalf of the respondents it is argued that "local area" in Entry 52 should therefore be taken to mean "any part of the State in any place therein".
So, the argument runs, a single factory being a part of the State in a place in the State is a "local area".
In other words, "local area" mean "any specified area inside the State".
The obvious fallacy of this argument is that it draws no distinction between the word "area" standing by itself and the phrase "local area".
If the Entry had been " entry of goods into any area of the State. . . some area would be specified for the purpose of the law levying the cess on entry.
If the Constitutions were empowering the State Legislatures to levy a cess on entry of goods into any specified area inside the state the proper words to use would have been "entry of goods into any area. . . " it would be meaningless and indeed incorrect to use the words they did use "entry of goods into a local area".
The use of the words "local area" instead of the word "area" cannot but be due to the intention of the Constitution makers to make sure that the power to make laws relating to levy on entry of goods would not extend to cases of entry of goods into any and every part of the state from outside that part but only to entry from outside into such portions of the state as satisfied the description of "local area".
Something definite was sought to be expressed by the use of the word "local" before the word "area": The question is: what exactly was sought to be expressed? In finding an answer to the question it is legitimate to turn to the previous history of constitutional legislation in the country on this subject of giving power to legislature to levy tax on the entry of goods.
In the State of Madras vs Gannon Dunkerley & Co., Ltd.(1) (1) ; 251 this Court referred with approval to the statement of law in Halsbury 's Laws of England, Vol.
II, para.
157, p. 93, that the existing state of English law in 1867 is relevant for consideration in determining the meaning of the terms used in the British North America Act in conferring power and the extent of that power.
This has necessarily to be so as in the words of Mr. Justice Brewer in South Carolina vs United States (1) "to determine the extent of the grants of power, we must, therefore place ourselves in the position of the men who framed and adopted the Constitution, and inquire what they must have understood to be the meaning and scope of those grants.
" Turning now to the previous legislative history we find that in the Government of India Act, 1935, Entry 49 of the Legislative List (List II of the 7th Schedule) was in the same words as Entry 52 of the Constitution except that instead of the words "taxes" as in Entry 52 of List II of the Constitution, Entry 49 List II of the Government of India Act, used the word "cess".
In Government of India Act, 1915, the powers of the provincial legislatures were defined in section 80A. 'Under clause (a) of the third sub section of this section the local legislature of any province has with the previous sanction of the Governor General power to make or take into consideration any law imposing or authorising the imposition of any new tax unless the tax was a tax scheduled as exempted from this provision by rules made under the Act.
The third of the Rules that were made in this matter under Notification No. 311/8 dated December 18, 1920, provided that the legislative council of a province may without the previous sanction of the Governor General make and take into consideration any law imposing or authorising a local authority to impose for the purpose of such local authority any tax included in Schedule II of the Rules.
Schedule II contained 11 items of which items 7 and 8 were in these words: 7.
An octroi 8.
A terminal tax on goods imported into a local (1) ; 252 area in which an octroi was levied on or before 6th July, 1917.
Item 8 was slightly modified in the year 1924 by another notification as a result of which it stood thus: 8.
A terminal tax on goods imported into or exported from a local area save where such tax is first imposed in a local area in which an octroi was levied on or before July 6, 1917.
Octroi is an old and well known term describing a tax on the entry of goods into a town or a city or a similar area for consumption, sale or use therein.
According to the Encyclopedia Britannica octroi is an indirect or consumption tax levied by a local political unit, normally the commune or municipal authority, on certain categories of goods on their entry into its area.
The Encyclopedia Britannica describes the octroi tax system in France (abolished in 1949) and states that commodities were prescribed by law and were divided into six classes and for all the separate commodities within these six groups maximum rates of tariff were promulgated by presidential decree, specific rates being fixed for the three separate sorts of octroi area, established on the basis of population, namely, communes having (1) less than 10,000 inhabitants, (2) from 10,000 to 50,000 and (3) more than 50,000.
While we are not concerned here with other features of the octroi tax system, it is important to note that the tax was with regard to the entry of goods into the areas of the communes which were local political units.
According to the Shorter Oxford English Dictionary "commune" in France is a small territorial division governed by a maire and municipal council and is used to denote any similar division elsewhere.
The characteristic feature of an octroi tax then was that it was on the entry of goods into an area administered by a local body.
Bearing in mind this characteristic of octroi duty we find on an examination of items 7 and 8 of the Schedule Rules mentioned above that under the Government of India Act, 1919, the local legislature of a Province could without the previous sanction of the Governor General impose a 253 tax octroi for entry of goods into an area administered by a local body, that is, a local government authority and the area in respect of which such tax could be imposed was mentioned in item 8 as local area.
It is in the background of this history that we have to examine the use of the word "local area" in item 49 of List II of the Government of India Act, 1935.
Here the word "octroi" has given place to the longer phrase "cesses on the entry of goods into a local area for consumption, use or sale therein.
" It was with the knowledge of the previous history of the legislation that the Constitution makers set about their task in preparing the lists in the seventh schedule.
There can bring title doubt therefore that in using the words "tax on the entry of goods into a local area for consumption, use or sale therein", they wanted to express by the words "local area" primarily area in respect of which an octroi was leviable under item 7 of the schedule tax rules, 1920 that is, the area administered by a local authority such as a municipality, a district Board, a local Board or a Union Board, a Panchayat or some body constituted under the law for the governance of the local affairs of any part of the State.
Whether the entire area of the State, as an area administered by the State Government, was also intended to be included in the phrase "local area", we need not consider in the present case.
The only other part of the Constitution where the word "local area" appears is in article 277.
That Article is in these words: "Any taxes, duties, cesses or fees which, immediately before the commencement of this Constitution, were being lawfully levied by the Government of any State or by any municipality or other local authority or body for the purposes of the State, municipality, district, or other local area may, notwithstanding that these taxes, duties, cesses or fees are mentioned in the Union List, continue to be levied and to be applied to the same purposes until provision to the contrary is made by Parliament by law.
" 254 There can be little doubt that "local area" in this Article has been used to indicate an area in respect of which there is an authority administering it.
While the scope of Article 277 is different from the scope of entry 52 so that no direct assistance can be obtained in the interpretation of the words "local area" in entry 52 from this meaning of the words in article 277 it is satisfactory to find that the meaning of "local area" in entry 52 which appears reasonable on a consideration of the legislative history of the matter is also appropriate to this phrase in its only other use in the Constitution.
Reliance was sought to be placed by the respondents on a decision of the Allahabad High Court in Emperor vs Munnalal (1) where the word "local area" as used in section 29 of the U. P. Sugar Factories Control Act, 1938, fell to be considered.
That section, as we have already mentioned, authorised the Governor of U. P. to impose by a notification, after consulting the Sugar Control Board under the Act, a cess on the entry of sugarcane into a local area specified in such notification for consumption, use or sale therein.
The notifications which were issued under this provision set out a number of factories for the levy of a cess at the rate of three annas per maund on entry of all sugarcane into the local area comprised in the factories mentioned in the schedule for consumption, use or sale therein.
Section 29 was clearly within the words of entry 49 of List 11.
The question that arose before the Court was whether the specification of certain factories as local areas was valid law.
The learned Judge appears to have proceeded on the basis that the Governor had notified the area comprised in 74 factories as one "local area" and held that once this was 'done the entire area covered by all these factories should be considered as one statutory local area.
It appears to us that the learned Judge was not right in thinking that the area comprised in 74 factories was notified as one local area.
What appears to have been done was that the area of each factory was being notified as a local area for the purpose of the Act.
Proceeding on (1) I.L.R. 1942 All. 302. 255 the basis that the area comprised in the 74 factories was notified as one local area the learned Judge addressed himself to the question whether this entire area was a local area within the meaning of the Act.
He appears to have accepted the contention that the word local area was used in the sense of an administrative unit, but, says he, the administration need not be political, it may be industrial and educational or it may take any other form of governmental activity.
"I cannot see," the learned Judge observed, "why it is not open to the provincial government or the provincial legislature to make an industrial survey of the province and to divide up the entire province into industrial areas or factory areas or mill areas or in any other kind of areas, and each one of these areas may be notified and be treated as a local area.
And once such areas come into existence and remain in operation they can be regarded as local areas within the meaning of entry No. 49 of List II in which a cess may be levied".
Even if this view were correct it would be of no assistance to the respondents.
It is no authority for the proposition that the area of one single factory is a local area within the meaning of entry 49.
We think however that the view taken by the learned Judge is not correct.
It is true that when words and phrases previously interpreted by the courts are used by the Legislature in a later enactment replacing the previous statute, there is a presumption that the Legislature intended to convey by their use the same meaning which the courts had already given to them.
This presumption can however only be used as an aid to the interpretation of the later Statute and should not be considered to be conclusive.
As Mr. Justice Frankfurter observed in Federal Commissioner vs Columbia B. System (1) when considering this doctrine, the persuasion that lies behind the doctrine is merely one factor in the total effort to give fair meaning to language.
The presumption will be strong where the words of the previous statute have received a settled meaning by a (1) 311 U.S. 131.
256 series of decisions in the different courts of the country; and particularly strong when such interpretation has been made or affirmed by the highest court in the land.
We think it reasonable to say however that the presumption will naturally be much weaker when the interpretation was given in one solitary case and was not tested in appeal.
After giving careful consideration ' to the view taken by the learned Judge of the Allahabad High Court in Emperor vs Munnalal (supra) about the meaning of the words "local area" and proper weight to the rule of interpretation mentioned above, we are of opinion that the Constitution makers did not use the words "local area" in the meaning which the learned Judge attached to it.
We are of opinion that the proper meaning to be attached to the words "local area" in Entry 52 of the Constitution, (when the area is a part of the State imposing the law) is an area administered by a local body like a municipality, a district board, a local board, a union board, a Panchayat or the like.
The premises of a factory is therefore not a "local area".
It must therefore be held that section 3 of the U. P. Sugarcane Cess Act, 1956, empowering the Governor to impose a cess on the entry of sugarcane into the premises of a factory did not fall within Entry 52 of the State List.
As there is no other Entry in either State List or Concurrent List in which the impugned law could fall there is no escape from the conclusion that this law was beyond the legislative competence of the State Legislature.
The law as enacted in section 3 of the U. P. Sugarcane Cess Act, 1956, must therefore be struck down as invalid.
It may be mentioned that this is not a case where the law is in two parts and one part can be severed from the other and saved as valid while striking down the other portion which is invalid.
Indeed, that was not even suggested by the learned counsel for the respondents.
It is unnecessary for us to consider whether if section 3 had instead of authorising levy of cess for entry of sugarcane into the premises of a factory for use, consumption or sale therein had authorised the imposition of a cess on entry of cane into a local area for 257 consumption, sale or use in a factory that would have been within Entry 52.
It is sufficient to say that we cannot re write the law for the purpose of saving a portion of it.
Nor is it for the Court to offer any suggestion as to how the law should be drafted in order to keep it within the limits of legislative competence.
As the law enacted by the Legislature stands there is no escape from the conclusion that this entire law must be struck down as invalid.
In view of this conclusion on the first ground raised on behalf of the appellant it is unnecessary to consider the other ground raised in the appeal that section 3 has gone beyond the permissible limits of delegated legislation.
As we have held that the impugned legislation was beyond the legislative competence of the State Legislature the appellants are entitled to the relief asked for.
We accordingly allow the appeal, set aside the order passed by the High Court and order the issue of a writ directing that the respondents do forbear from levying and collecting cess from the appellants on account of arrears of cess for the crushing season 1954 55 and in respect of the crushing season 1955 56 and successive crushing seasons under the U. P. Sugarcane Cess Act, 1956.
The appellants will get their costs here and below.
AYYANGAR, J. I have had the privilege of perusing the judgment just now pronounced, but with the utmost respect regret my inability to agree with the order proposed.
The learned Judges of the High Court held that the impugned enactment was within the scope of Entry 52 of the State Legislative List in Schedule 7 to the Constitution, by placing reliance on the following passage in the Judgment of Das, J. in Emperor vs Munna Lal (1) where the learned Judge said: "Indeed I cannot see why it is not open to Provincial Government or Provincial Legislature to make an industrial survey of the Province and to divide up the entire province into industrial areas (1) I.L.R. [1942] All. 302, 328. 33 258 or factory areas or mill areas or in any other kind of areas, and each one of these areas may be notified and be treated as a local area.
And once such areas come into existence and remain in operation they can be regarded as local areas within the meaning of Entry No. 45 of List II in which a cess may be levied.
" In other words, the view which they favoured was to read the expression "local area".
practically to mean any "area" entry into which was by the relevant fiscal statute, made the subject of taxation.
In my opinion that is not a correct interpretation of the entry and agree with my learned brethren that having regard to the historical material, which has been exhaustively set out and discussed in their judgment, the word "local area" can in the entry designate only a predetermined local unit a unit demarcated by statutes pertaining to local self government and placed under the control and administration of a local authority such as a municipality, a cantonment, a district or a local board, an union or a panchayat etc.
and not any region, place or building within the State which might be defined, described or demarcated by the State 's taxing enactment as an area entry into which is made taxable.
But there my agreement stops and we diverge.
In my opinion, this construction of the expression "local area" in entry 52 does not automatically result in the invalidity of the impugned enactment and of the levy under it, but the extent to which, if any the charging section exceeds the power conferred by the entry would depend on matters which have not been the subject of investigation, and it is this point that I shall elaborate in the rest of this judgment.
It is unnecessary for the purposes of this case and possibly even irrelevant, to determine the precise scope, content and incidents of an "octroi" duty except that in the context in which it appeared in the Scheduled Taxes Rules framed tinder the Government of India Act, 1919, the expression signified a tax levied on entry into an area of an unit of local administration.
It is unprofitable to canvass the question 259 whether a local authority empowered at that date to levy an 'octroi ' might or might not lawfully confine the levy to entry for consumption alone, to use alone or for sale alone.
But when that entry was refashioned and enacted as item 49 of the Provincial Legislative List under the Government of India Act, 1935 (in terms practically identical with Entry 52 in the State Legislative List under the Constitution), the matter was no longer left in doubt.
The new item ran: "Cesses on the entry of goods into a local area for consumption, use or sale therein".
In connection with the use of the words "for consumption, use or sale therein" in the item three matters deserve notice: (1) Where the entry into the "local area" was not for one of the purposes set out in it, viz., for consumption, use or sale therein, but the entry was, for instance in the course of transit or for warehousing during transit, the power was not available; in other words, a mere entry could not per se be made a taxable event.
(2) It was sufficient if the entry was for any one of the three purposes; the use of the disjunctive 'or ' making this clear.
(3) The passage of goods from one portion of a local area to another portion in the same local area, would not enable a tax to be levied, but the entry has to be "into the local area", i.e., from outside the local area.
It is the second and the third of the above features that call for a more detailed examination in the context of the points requiring decision in the present case.
With this background I shall analyse the terms of section 3(1) of the Act (United Provinces Act XXII of 1956) to ascertain where precisely the provision departs from the scope or content of entry 52.
I will read that section which runs: "3.
The State Government may by notification in the official gazette impose a cess not exceeding four annas per maund on the entry of the cane into the premises of a factory for use, consumption or sale therein: Provided that the State Government may likewise remit in whole or in part such cess in respect 260 of cane used or to be used in factory for any limited purpose specified in the notification.
Explanation: If the State Government, in the case of any factory situate outside Uttar Pradesh, so declare, any place in Uttar Pradesh set apart for the purchase of cane intended or required for use, consumption or sale in such factory shall be deemed to be the premises of the factory.
" Leaving the Explanation for the present, there are two matters which require advertence: (1) The first was the point emphasised by Mr. Sanyal for the appellant, that entry into the premises of a factory "for the purpose of consumption, use or sale therein" is fastened on as the taxable event treating the factory premises as if that were itself a "local area".
(2) Apart from entry into factory premises for use, consumption or sale therein, entry of the cane into other places within the local area, i.e., into "unit for local administration" is not made the subject of tax levy.
The second of the above matters cannot invalidate the legislation, because a power to tax is merely enabling, and apart from any question of discrimination under article 14 which does not arise for consideration before us the State is not bound to tax every entry of goods into "a local area".
Again, the tax could undoubtedly be confined to entry of goods into a "local area" for consumption or use in particular modes; in other words, there could be no legal objection to the tax levy on the ground that it does not extend to entry of goods into "a local area" for every type of consumption or use.
In my judgment the real vice of the charging section 3(1) lies not in that it Confines the levy to cases where the entry is for purposes of consumption etc.
in a factory but 'in equating the premises of a factory with "a local area" entry of goods into which, occasions the tax.
Another way of expressing this same idea would be to say that whereas under Entry 52 the movement of goods from within the same local.
area in which the factory is situated into the premises of the factory, could not be the subject of tax liability, because there 261 would in such cases be no entry of the goods "into a local area" under section 3(1) of the Act, not merely is the movement of goods into the factory from outside the 'local area ' in which the factory is situate made the subject of tax, but the words used are capable of imposing the tax even in those cases where the entry into the factory is from within the same local area.
What I have in mind may be thus illustrated: If factory A situated in Panchayat area B gets its supply of cane from outside the Panchayat area, the levy of the tax on the entry of the cane into the Panchayat area would clearly be covered by entry 52.
The State is not bound to tax every entry of the cane into the area but might confine the levy to the entry of the cane for the purpose of consumption in a factory.
The tax might be levied and collected at the border of the Panchayat area but there is no legal obligation to do so, and the place at which the entry of the goods is checked and the duty realised is a matter of administrative machinery which does not touch on the validity of the tax imposition.
It would thus not detract from the validity of the tax if by reason of convenience for effecting collection, the tax was levied at the stage of entry into the premises of a factory.
So long, therefore, as the cane which enters a factory for the purpose of consumption therein comes from outside that local unit of administration in which the factory is situated, in my opinion it would be covered by the words of entry 52 and well within the legislative competence of the State Government.
The language of section 3, as it stands appears, however, also to extend to cases where the supply of cane to a factory is from within the same local unit of administration; in other words, where there is no entry of the cane into the local area as explained earlier.
If this were the true position, the enactment cannot be invalidated as a whole.
It would be valid to the extent to which the tax is levied on cane entering a factory for the purpose of consumption etc.
therein from outside the local area, within which the factory premises are situated, and only invalid where it out steps this limitation.
262 The next question is whether this is a case where the valid and invalid portions are so inextricably interwoven as to leave the Court no option but to strike down the entire enactment as invalid as beyond the legislative competence of the State, or whether the charging provision could be so read down as to leave the valid portion to operate.
In my opinion, what is involved in the case before us is not any problem of severance, but only of reading down.
Before taking up this question for discussion two objections to the latter course have to be considered.
The first is that this aspect of the matter was not argued before us by learned Counsel for the State as a ground for sustaining the validity of the legislation.
In my judgment this is not an objection that should stand in the way of the Court giving effect to a view of the law if that should appear to be the correct one.
In making this observation one has necessarily to take into account the fact that legislation in nearly this form, has been in force in the State for over twenty years, and though its vires was once questioned in 1942, that challenge was repelled and the tax levy was held valid and was being collected during all this period.
The sugar cane cess has been a prime source of State Revenue for this length of time and this Court should not pronounce such a legislation invalid unless it could not be sustained on any reasonable ground and to any extent.
The second ground of objection which has appealed to my learned brethren but with which, I regret, I cannot concur is that it would require a rewriting of the Act to sustain it.
Now if the first paragraph of sub section
(1) of section 3 bad read: "The State Government may by notification in the official gazette impose a cess not exceeding four annas per maund on the entry of the cane into the premises of a factory (from outside the local area in which the factory premises were situate) for use, consumption or sale therein:" (The words in brackets added by me) 263 the levy would be entirely within entry 52 even according to my learned brethren.
The question is whether the implication of these words would be a rewriting of the provision or whether it would be merely reading the existing provision so as to confine it to the powers conferred upon the State Legislature by the relevant legislative entry.
In view of the strong opinion entertained by my learned brethren, I have given the matter the utmost consideration, but I feel that the words which I have suggested are a permissible mode of construction of a statute by which wide words of an enactment which would cover an event, contingency or matter within legislative power as well as matters not within it, are read as confined to those which the law making only had authority to enact.
In my judgment the opinion of the Federal Court in In re Hindu Women 's Rights to Property Act, 1937 (1), affords a useful analogy to the present case.
The enactment there impugned provided for the devolution or succession to "property" in general terms which would have included both agricultural as well as nonagricultural property, whereas the Central Legislature which enacted the law had no power to deal with succession to agricultural property.
The contention urged before the Court was that by the use of the expression "property", the legislature had evinced an intention to deal with property of every type and that it would be rewriting the enactment and not carrying out the legislative intent if the reference to "property" in the statute were read as "property other than agricultural property".
Dealing with this contention, Sir Maurice Gwyer, delivering the opinion of the Court said: "No doubt if the Act does affect agricultural land in the Governors 'Provinces, it was beyond the competence of the Legislature to enact it: and whether or not it does so must depend upon the meaning which is to be given to the word "property" in the Act.
If that word necessarily and inevitably comprises all forms of property, including agricultural land, then clearly the Act went beyond the powers (1) 264 of the Legislature; but when a Legislature with limited and restricted powers makes use of a word of such wide and general import, the presumption must surely be that it is using it with reference 'to that kind of property with respect to which it is competent to legislate and to no other.
The question is thus one of construction, and unless the Act is to be regarded as wholly meaningless and ineffec tive, the Court is bound to construe the word "property" as referring only to those forms of property with respect to which the Legislature which enacted the Act was competent to legislate; that is to say, property other than agricultural land. . .
The Court does not seek to divide the Act into two parts, viz., the part which the Legislature was competent, and the part it was incompetent, to enact.
It holds that, on the true construction of the Act and especially of the word "property" as used in it, no part of the Act was beyond the Legislature 's powers.
" The Court accordingly held that the Hindu Women 's Rights to Property Act, 1937, applied to non agricultural property and so was valid.
In this connection it might be interesting to refer to the decision in Blackwood vs Queen (1) which Sir Maurice Gwyer, C.J., referred to with approval.
That case related to the validity of a duty imposed by the Legislature of Victoria (Australia) on the personal estates of deceased person.
The learned Chief Justice observed "The Judicial Committee construed the expression "personal estate" occurring in the statute to refer only to: "such personal estate as the colonial grant of probate conferred jurisdiction on the personal representatives to administer, whatever the domicile of the testator might be, that is to say, personal estate situate within the Colony, in respect of which alone the Supreme Court of Victoria had power to grant probate: Their Lordships thought that "in imposing a duty of this nature the Victorian Legislature also was contemplating the property which was under its own hand, and did not intend to levy a tax in respect of property (1) 265 beyond its jurisdiction".
And they held that "the general expressions which import the contrary ought to receive the qualification for which the appellant contends, and that the statement of personal property to be made by the executor under section 7(2) of the Act should be confined to that property which the probate enables him to administer" (1).
To confine the tax to the limitations subject to which it could, under the Constitution, be levied is, in my opinion, not an improper method of construing the statute.
The manner in which the word "property" was read down by the Federal Court in In re Hindu Women 's Rights to Property Act, 1937 (1) and the word "personal property" construed by the Privy Council in Blackwood vs Queen (2) make in my opinion less change in the text of the impugned provision than the addition of the words I have set out above, which after all are words implicit in the power conferred on the State Legislature.
I would, therefore, hold that the charging section would be invalid and beyond the legislative competence of the State of Uttar Pradesh only in so far as it seeks to levy a tax on cane entering a factory from within the same local area in which the factory is situate and that in all other cases the tax is properly levied; and that the impugned section could and ought to be so read down.
The matter not having been considered from this aspect at earlier stages, we have necessarily no material before us for adjudicating upon whether tax levied or demanded from the appellant is due and if so to what extent.
We have nothing before us to indicate as to how far the cane, the entry of which into the factory of the appellant is the subject of the impugned levy, has moved into the factory from outside the local unit in which the factory is situated or originated from within the same local area.
I consider that without these matters being investigated it would not be possible to adjudicate upon the validity of the tax demanded from the appellants.
There is one matter to which it is necessary to (1) Per Sir Maurice Gwyer, C. J. , 23, (2) 34 266 advert which I have reserved for later consideration, viz., the validity of the Explanation to section 3(1)of the Act.
It would be apparent that the Explanation was necessitated by the terms of sub section
(1) of section 3 which equated "factory premises" with "local areas", or rather rendering factory premises the sole local areas entry into which occasioned the tax.
So far as the purchasing centres which are dealt with in the Explanation are concerned, the cane that moves into them from outside the "local area" where these centres are would clearly be covered by Entry 52, since the purpose of the movement into the centre is on the terms of the provision for effecting a sale therein.
In other words, the same tests which I have discussed earlier in relation to entry into factory premises, would apply mutates mutandis to these purchasing centres and in so far as a tax is levied on the movement of the cane from outside the local area the levy would be legal and in order.
I would read down the Explanation in the same manner, as I have read down the main charging provision so as to confine the levy to entry from outside 'that "local area" local area being understood in the sense already explained.
I would accordingly allow the appeal, and remand it to the High Court for investigating the material facts which I have mentioned earlier with a direction to pass judgment in accordance with the law as above explained.
BY COURT.
In accordance with the opinion of the majority the appeal is allowed, the order passed by the High Court is set aside and a writ be issued directing that the respondents do forbear from levying and collecting cess from the appellants on account of arrears of cess for the crushing season 1954 55 and successive crushing seasons under the Uttar Pradesh Sugarcane Cess Act, 1956.
The appellants will get their costs here and below.
Appeal allowed.

dataset_name: IN-Abs

summary/full:
Entry 52 of List II of the Seventh Schedule to the Consti tution empowered State Legislatures to make a law relating to "taxes on the entry of goods into a local area for consumption, use or sale therein".
The U. P. Legislature passed the U. P. Sugarcane Cess Act, 1956, which authorised the State Government to impose a cess on the entry of cane into the premises of a factory for use, consumption or sale therein.
The appellant contended that the premises of a factory was not a 'local area ' within the meaning of Entry 52 and the Act was beyond the competence of the legislature.
243 Held, (per Imam, Kapur, Das Gupta and Raghubar Dayal, jj.) that the impugned Act was beyond the competence of the legislature and was invalid.
The premises of a factory was not a "local area" within the meaning of Entry 52.
The proper meaning to be attached to the words "local area" in Entry 52 was an area administered by a local body like a municipality, a district board, a local board, a union board, a Panchayat or the like.
In re: the Central Provinces & Beray Act No. XIV of 1938, , Navinchandra Mafatlal vs The Commissioner of Income tax, Bombay City, [1955] 1 S.C.R. 829, State of Madras vs Gannon Dunkerley & Co., Ltd., ; and South Carolina vs United States, , referred to.
Emperor vs Munnalal, I.L.R. 1942 All. 302, disapproved.
Per Ayyangar, J.
The Act was invalid only in so far as it sought to levy a tax on cane entering a factory from within the same local area in which the factory was situate and was valid in other cases.
It was permissible to read the Act so as to confine the tax to the limitations subject to which it could be constitutionally levied and to strike down that portion which out stepped the limitations.
In re Hindu Women 's Rights to Property Act, 1937, and Blackwood vs Queen, , applied.


judgement:
Appeal No. 516 of 1959.
Appeal from the judgment and order dated September 3, 1957, of the Bombay High Court in Income tax Reference No. 49 of 1957.
J.M. Thakar, section N. Andley, J. B. Dadachanji, Rameshwar Nath and P. L. Vohra, for the appellants.
A. N. Kripal and D. Gupta, for the respondent.
December 12.
The Judgment of the Court was delivered by HIDAYATULLAH, J.
The three appellants appeal against the judgment and order of the High Court of Bombay answering, in the affirmative, the following question: "Whether the share income of the assessees from the unregistered firm (which is separately taxed), namely, Rs. 26,110 can be set off against their share loss from registered firms, namely, Rs. 13,167?" The facts are as follows: Two of the appellants are 176 brothers, and the third appellant is the widow of a third brother, who died during the pendency of the appeal after certificate had been granted by the High Court.
The three brothers were partners in two registered firms and one other firm, which was unregistered.
The assessment years for the purposes of the appeal are 1948 49 and 1949 50.
For the assessment year 1948 49, the income of the three brothers was the same, and it was as follows: From registered firms .
Rs. 11,902 loss 1,265 loss Total loss Rs. 13,167 Income from the unregistered firm Rs. 26,110 profit Other income Rs. 262 The income of the unregistered firm was taxed on the firm and not in the hands of the partners, as was possible under the provisions of cl.
(b) of sub section
(5) of section 23.
In assessing the amount of Rs. 262, the Income tax Officer first determined the total income of each of the appellants by setting off their share of the profits of the unregistered firm against their share of the loss of the registered firms.
The appellants contended that, inasmuch as tax had already been assessed on the unregistered firm, this could not be done, and that as there was loss in the business of the registered firms, no tax was demandable on Rs. 262.
They also contended that they were entitled to carry forward the, loss amounting to Rs. 12,905 to the succeeding year under section 24(2) of the Income tax Act.
These contentions were not accepted by the Income tax Officer, to whose order it is not necessary to refer in detail.
The assessment for the assessment year 1949 50 was also done on similar lines.
The appeal to the Appellate Assistant Commissioner was unsuccessful, and six appeals were taken to the Tribunal by the three appellants three for each assessment year.
These appeals were disposed of by a common order.
The Tribunal held, relying upon the second proviso to section 24(1), that just as loss in an unregistered firm could not be set off against profits 177 from a registered firm under that proviso, the profits in an unregistered firm could not be set off against the loss from a registered firm.
It relied upon a decision of the Madras High Court in Commissioner of Income tax vs Ratanshi Bhavanji (1), which it purported to follow in preference to a decision of the Punjab High Court in Banka Mal Niranjandas vs Commissioner of Income tax (2).
The same reasoning was applied to the assessment year 1949 50, and in the result, all the six appeals were allowed.
The order of the Tribunal involved, in addition to the point set out above, certain other questions, which were asked by the assessees to be referred to the High Court for decision under section 66(1).
The Commissioner also asked for a reference in respect of the decision, substance whereof has been set out above.
The Tribunal referred two questions at the instance of the assessees and one question, which we have already quoted, at the instance of the Commissioner.
In the High Court, the assessees abandoned the two questions, and the High Court accordingly expressed its opinion in the judgment and order under appeal, on the remaining question.
The High Court differed from the decision of the Tribunal, and held that the profit from the unregistered firm could be set off against the losses from the registered firms to find out the rate applicable to Rs. 262, which was other income of the assessees.
The High Court also held that the assessees could not carry forward the loss of the registered firms to the following year, because such loss must be deemed to have been absorbed in the profits of the unregistered firm.
It, however, certified the case as fit for appeal to this Court, and the present appeal has been filed.
In our opinion, the High Court correctly answered the question referred to it, but was in error in holding that the losses of the registered firms could not be carried forward, because they must be deemed to have been absorbed in the profits of the unregistered firm.
Inasmuch as we substantially agree with the High (1) (2) 23 178 Court on the first part of the case, it is not necessary to examine closely or in detail the reasons on which the decision of the High Court proceeds.
In our opinion, the matter is simple, and can be stated within a narrow compass.
Under section 3 of the Income tax Act, income tax is chargeable for an assessment year at rate or rates prescribed by an annual Act in respect of the total income of the previous year.
Section 14 (2)(a), before its amendment in 1956, provided that the tax shall not be payable by an assessee, if a partner of an unregistered firm in respect of any portion of his share in the profits and gains of the firm, computed in the manner laid down in cl.
(b) of sub section
(1) of section 16 on which the tax had already been paid by the firm.
The section thus gave immunity from tax to the share of the assessee as a partner in an unregistered firm in respect of the share of profits received by him from the unregistered firm and on which the unregistered firm had already been taxed.
Section 16(1)(a), however, provided that in computing the total income of an assessee, any sum exempted under sub section
(2) of section 14 shall be included.
The combined effect of those two sections was stated by the High Court to be, "that although the share of a partner in the profits of an unregistered firm is exempt from tax, it is included in his total income for the purpose of rate only.
" We agree that this is a correct analysis.
The Tribunal relied upon the second proviso to section 24(1), which read as follows: "Provided further that where the assessee is an unregistered firm which has not been assessed under the provisions of clause (b) of sub section (5) of section 23 . any such loss shall be set off only against the income, profits and gains of the firm and not against the income, profits and gains of any of the partners of the said firm; and where the assessee is a registered firm, any loss which cannot be set off against other income, profits and gains of the firm shall be apportioned between the partners of the firm and they alone shall be entitled to have the amount of the loss set off under this section.
" 179 The Tribunal came to the conclusion that, ". just as a partner in an unregistered firm which has suffered loss will not be allowed to set off his share loss in the unregistered firm against his income from any other source, so it stands to reason that his loss from other sources cannot also be set off against his share income from an unregistered firm.
" The decision of the Tribunal was not based upon any specific provision of the Income tax Act but upon a parity of reasoning, by which a specific provision about loss was held to apply the other way round also.
The High Court correctly pointed out that all that section 14, subs.
(2), did was to save the profits of an unregistered firm from liability to tax in the hands of the partners.
It did not affect the computation of the total income to determine the rate applicable under section 3, in the light of section 16(1)(a).
Indeed, section 16(1)(a) clearly provided that any sum exempt under section 14(2) was to be included in computing the total income of an assessee, and in view of this specific provision, the converse of the second proviso to section 24(1) which we have quoted above, hardly applied.
To this extent, the order of the Tribunal was incorrect.
The error was pointed out by the High Court, and the question thus raised was properly decided.
We see no reason to differ from the High Court on this part of the case.
The question, however, arose before the High Court as to whether in view of this decision, the assessees could carry forward loss from the registered firms in the subsequent year or years.
The High Court came to the conclusion that they could not carry forward the loss.
Indeed, the Tribunal had earlier stated that if the profits from the unregistered firm were to be set off against the losses of the registered firms, such losses would not be carried forward to the following year, and that would be contrary to section 24.
The High Court rejected this ground in dealing with the question as to the rate applicable to the other income, and pointed out and in our view, rightly, that under sections 14(2) and 16(1)(a) the profits and losses had to be set off against each other, to find out the total income.
180 The High Court, however, held that once losses were set off against profits, they were to that extent absorbed, and that there was nothing to carry forward.
This conclusion does not follow.
Section 24 provides for a different situation altogether; it provides for the carrying forward of a loss in business to the subsequent year or years till the loss is absorbed in profits, or till it cannot be carried forward any further.
That has little to do with the manner in which the total income of an assessee has to be determined for the purpose of finding out the rate applicable to his income, taxable in the year of assessment.
To read the provisions of sections 14(2) and 16(1)(a) in this extended manner would be to nullify in certain cases section 24 altogether.
Neither is such an intention expressed; nor can it be implied.
In our opinion, though the decision of the High Court on the main issue and on one aspect of the question posed for its opinion was correct, it was in error in deciding that the losses of ,the registered firms could not be carried forward because they had been absorbed by the profits of the unregistered firm.
To this extent, the judgment and order of the High Court will stand modified.
Subject to that modification, the appeal will be dismissed.
In the circumstances of the case, there will be no order as to costs.
Appeal dismissed with modification.

summary/full:
The appellants were partners of two registered firms and another firm which was unregistered.
Their profit and loss for the assessment year 1948 49 were as follows: From registered firms Rs. 11,902 loss, 1,265 loss, total loss Rs. 13,167.
Income from the unregistered firm Rs. 26,110 profit, other income Rs. 262.
The income of the unregistered firm was taxed on the firm.
In assessing the amount of Rs. 262 the Income tax Officer first determined the total income of each of the appellants by setting off their share of the profits of the unregistered firm against their share of the loss of the registered firm.
The appeal to the Appellate Assistant Commissioner being unsuccessful appeals 175 were taken to the Tribunal which relying on the decisions in Commissioner of Income tax vs Ratanshi Bhavanji, [1952]22 I.T.R. 82, held that just as loss in an unregistered firm could not be set off against profits from a registered firm, the profits in an unregistered firm could not be set off against the loss from a registered firm.
On a reference being made to it the High Court differed from the decision of the Tribunal, and held that the profit from the unregistered firm could be set off against the loss from the registered firms to find out the rate applicable to Rs. 262 which was other income of the assessees.
The High Court further held that the assessees could not carry forward the loss of the registered firms to the following year, because such loss must be deemed to have been absorbed in the profits of the unregistered firm.
On appeal with a certificate of the High Court, Held, that the view of the High Court that under sections 14(2) and 16(1)(a) the profit and loss had to be set off against each other to find out the total income, and that although the share of a partner in the profits of an unregistered firm is exempt from tax, it is included in his total income for the purpose of rate only, was correct but the High Court erred in holding that the losses suffered by the registered firms could not be carried forward because they had been absorbed by the profits of the unregistered firm.


judgement:
Appeals Nos. 32 and 33 of 1960.
Appeals by special leave from the Award dated February 24, 1959, of the Industrial Tribunal, Bihar, Patna, in Reference nos.
10 of 1959 and 1 of 1955.
M. C. Setalvad, Attorney General for India, Nooni Coomar Chakravarti and B. P. Maheshwari, for the appellant.
B. C. Ghose and P. K. Chatterjee, for the respondents.
December 15.
The Judgment of the Court was delivered by WANCHOO, J.
These are two connected appeals by special leave in an industrial matter and relate to the dismissal of sixty workmen of the appellant company.
The dispute was referred by two references; 310 one relates to 31 workmen and the other to 29 workmen.
They have been disposed of by a common award, though, as the references were two, there are two appeals before us.
The brief facts necessary for present purposes are these: On November 10, 1953, a general meeting was held by the workmen of the appellant and a no confidence motion was passed against the executives of the workmen 's union and Shri Shahabuddin Bari was elected as the new president of the union.
On February 6, 1954, the newly elected president served a strike notice on the management.
On February 18, 1954, a settlement was arrived at between the management and Shri Fateh Narain Singh, the general secretary of the old executive committees.
On February 23, 1954, the strike was launched in accordance with the notice served by Shri Bari and the strike continued for about a month.
The strike was called off on March 19 and 20, 1954.
The case of the appellant was that the strike which began on February 23,1954, was an illegal strike as it took place during the currency of a settlement arrived at in the course of conciliation proceedings with the assistance of the Labour Commissioner who acted as conciliation officer.
Conse quently, the appellant took steps to serve charge sheets on the workmen, who had joined the illegal strike, on March 4, 1954.
This was followed by the dismissal of these sixty workmen after a managerial inquiry.
It is said that thereafter there were conciliation proceedings which failed and consequently the two references were made.
The main findings of the tribunal are that the settlement of February 18, 1954, was a bona fide settlement arrived at during the course of conciliation proceedings and was therefore binding on the workmen; and consequently the strike which began on February 23, 1954, was in breach of the terms of the settlement and was therefore illegal.
The tribunal further held that the strike was staged in hot haste and no reasonable opportunity was given to the management to reply to the demands made before launching the strike.
It also held that the trouble arose because of the election of 311 Shri Bari and the new office bearers.
This matter was referred to the Registrar of Trade Unions and he held that the meeting at which Shri Bari and the new office bearers were elected was irregular and in consequence the old office bearers of the union continued to remain validly elected executives of the union.
This decision was given on February 22, 1954, and the strike was launched on February 23 immediately thereafter.
The tribunal was not sure whether this decision had been communicated to Shri Bari before the strike was launched; but in any case it was of the opinion that there was no reason to stage the strike in such hot haste after the settlement of February 18, 1954.
Having thus held that the strike was illegal and there was no reason why it should have been launched in such hot haste, the tribunal went on to consider the case of these sixty workmen who were dismissed.
It held that no charge of violence was brought home to these workmen and even the charge sheets which were originally issued to the workmen did not contain any charge of violence.
The tribunal then divided the sixty workmen into three batches of 47, 11 and 2.
In the case of 47 workmen, it held that they must be assumed to have been served with charge sheets as they refused to accept them and that proper inquiry was held into the charges, though in their absence.
In the case of 11 workmen, it was of opinion that charge sheets had not been served on them and therefore any inquiry held in their absence was of no avail.
In the case of two workmen, it held that no attempt was made to serve any charge sheet on them.
Further, it set aside the order of dismissal with respect to 13 of the workmen on the ground that they were either not served with any charge sheet or no charge sheet was issued to them; as for the remaining 47, though it found that charge sheets had been issued to them and they had refused to accept them and proper inquiry had been held in their case, it set aside the order of dismissal on the ground that they had not been shown to have taken part in violence and there were extenuating circumstances in their case inasmuch as they were misled to join the strike in order to oust the old office 312 bearers of the union so that others might be elected in their place.
It further pointed out that though a much larger number of workmen had taken part in the illegal strike and the union took up their case, only these sixty were eventually dismissed while the rest were reinstated.
It was of the view that there was no reason for the appellant to make any distinction between these workmen and the others who were reinstated.
It therefore ordered reinstatement of these 47 workmen also.
Finally, it held that the workmen were sufficiently penalised, they being out of employment from March 1954 to February 1959 when it made the award and that there was no reason in the circumstances to maintain their dismissal.
It awarded 50% of the back basic wages to the two workmen in whose case charge sheets were not even issued and 25 per cent of the back basic wages to the 11 workmen who were not served with charge sheets; no back wages were allowed to the forty seven workmen who had refused to accept the charge sheets sent to them.
Three points have been raised on behalf of the appellant before us; namely, (i) as a settlement had been arrived at during the course of conciliation proceedings on September 2, 1954, which specifically dealt with the case of these sixty workmen, the references were incompetent; (ii) the references were incompetent because what was referred was not an industrial dispute but a dispute between the employer and its individual workman; and (iii) the tribunal 's order of reinstatement was in any case unjustified.
It appears that after the dismissal of a large number of workmen consequent on the illegal strike that took place on February 23, 1954, there were conciliation proceedings before the Labour Commissioner, Bihar, with respect to these dismissals and other matters.
These conciliation proceedings appear to have begun some time before May 1, 1954, for we find that on that day the Labour Commissioner wrote to the appellant that its objection that conciliation proceedings were illegal and without jurisdiction was baseless.
It seems 313 that efforts at conciliation continued right up to the end of August 1954, for we find another letter of August 31, 1954, from the Labour Commissioner to the appellant saying that he had heard that mutual negotiations were going on between the appellant and its workmen for the settlement of their dispute and September 2 had been fixed for that purpose.
The Labour Commissioner therefore gave notice to the appellant that he would hold conciliation proceedings on September 3 at 3 p.m. in his office in case the disputes were not mutually settled before that date.
It seems that an agreement was arrived at between the appellant and the union on September 2.
In this agreement it was Doted that 76 dismissed workmen had already been employed; it was further provided that 110 workmen would also be employed in the same manner as the seventy six.
Further 31 dismissed workmen were to remain dismissed and would not be considered for further employment or for any other benefit.
30 other dismissed workmen would for the time being remain dismissed and it would be decided later on between the union and the appellant whether their dismissal should be confirmed like those of 31 mentioned above or whether they should be given the option to wait for employment as and when vacancies arose or should be treated as retired on the date of dismissal in order to enable them to receive the benefits of gratuity and refund of provident fund.
It may be added that the present references are with respect to sixty workmen out of these sixty one.
It seems that the Labour Commissioner was apprised of this settlement.
Consequently he wrote on September 3, 1954, to the appellant that the conciliation proceedings proposed to be held on that date were cancelled.
The Labour Commissioner further pointed out that the union was opposing reinstatement of certain workmen; he therefore proposed to hold further conciliation proceedings in the case of such workmen on September 6, 1954, at 3 p.m. before making his final recommendations to government in this matter.
The appellant protested to the Labour Commissioner 40 314 against the holding of any further conciliation proceedings after the agreement of September 2 and apparently did not attend the meeting fixed for September 6.
Nothing further therefore seems to have taken place in the conciliation proceedings.
Presumably the Labour Commissioner must have reported thereafter to the government under section 12(4) of the , No. XIV of 1947 (hereinafter called the Act).
Then followed the two references by the government; the first on October 8, 1954, relating to 31 workmen and the other on January 15, 1955, relating to 29 workmen.
On these facts the contention on behalf of the appellant is that the references were incompetent because of the agreement made on September 2, 1954.
Reliance in this connection is placed on sections 18 and 19 of the Act, as they were at the relevant time.
18 provided that a settlement arrived at in the course of conciliation proceedings would be binding on all parties to the industrial dispute and others indicated therein and section 19 provided that such settlement would come into force on such date as was agreed upon between the parties and if no date was agreed upon then on the date on which the memorandum of the settlement was signed by the parties.
Such settlement would be binding for such period as was agreed upon by the parties and if no such period was agreed upon, for a period of six months and would continue to be binding upon the parties thereafter until the expiry of two months from the date on which a notice in writing to terminate the settlement was given by one of the parties to the other party or parties to the settlement.
The contention on behalf of the appellant is that the agreement of September 2, 1954, arrived at during the course of conciliation proceedings between the appellant and the union was binding on all workmen and therefore it was not open to the government to make these references within six months of it.
The question thus posed raises the question as to what is meant by the words "in the course of conciliation proceedings " appearing in section 18 of the Act.
One thing is clear that these words refer to the duration 315 when the conciliation proceedings are pending and it may be accepted that the conciliation proceedings with respect to these dismissals, which began sometime before May 1, 1954, were certainly pending upto September 6, 1954, and may be a little later, as is clear from the two letters of the Labour Commissioner.
But do these words mean that any agreement arrived at between the parties during this period would be binding under section 18 of the Act ? Or do they mean that a settlement arrived at in the course of conciliation proceedings postulates that that settlement should have been arrived at between the parties with the concurrence of the conciliation officer? As we read this provision we feel that the legislature when it made a settlement reached during the course of conciliation proceedings binding not only on the parties thereto but also on all present and future workmen intended that such settlement was arrived at with the assistance of the conciliation officer and was considered by him to be reasonable and therefore had his concurrence.
12 of the Act prescribes duties of the conciliation officer and provides that the conciliation officer shall for the purpose of bringing about settlement of the dispute without delay investigate the dispute and all matters affecting the merits and the right settlement thereof and may do all such things as he may think fit for the purpose of inducing the parties to come to a fair and amicable settlement of the dispute: (vide section 12(2) ).
Then comes section 12(3), which provides, "If a settlement of the dispute or of any of the matters in dispute is arrived at in the course of the conciliation proceedings the conciliation officer shall send a report thereof to the appropriate Government together with a memorandum of the settlement signed by the parties to the dispute".
Reading these two provisions along with section 18 of the Act, it seems to us clear beyond doubt that a settlement which is made binding under section 18 on the ground that it is arrived at in the course of conciliation proceedings is a settlement arrived at with the assistance and concurrence of the conciliation officer, for it is the duty of the conciliation officer to promote 316 a right settlement and to do everything he can to induce the parties to come to a fair and amicable settlement of the dispute.
It is only such a settlement which is arrived at while conciliation proceedings are pending that can be binding under section 18.
In the present case it is obvious that the Labour Commissioner took no steps to promote the actual agreement which was arrived at between the appellant and the union on September 2.
The letter of August 31 made it clear that the Labour Commissioner would take action under section 12(2) on September 3 if no mutual agreement was arrived at between the appellant and the union.
It seems that a mutual agreement was arrived at between the appellant and the union without the assistance of the Labour Commissioner and it did not receive his concurrence even later; on the contrary evidence shows that the Labour Commissioner did not approve of the settlement which excluded the reinstatement of a large group of workmen and so he did not act under section 12(3).
In the circumstances such a mutual agreement could not be called a settlement arrived at in the course of conciliation proceedings even though it may be accepted that it was arrived at a time when conciliation proceedings were pending.
A settlement which can be said to be arrived at in the course of conciliation proceedings is not only to be arrived at during the time the conciliation proceedings are pending but also to be arrived at with the assistance of the conciliation officer and his concurrence; such a settlement would be reported to the appropriate government under section 12(3).
In the present case the agreement of September 2, 1954 was not arrived at with the assistance and concurrence of the conciliation officer, namely, the Labour Commissioner, which will be clear from his letter of September 3, 1954.
In the circumstances it is not a settlement which is binding under section 18 of the Act and therefore will not bar a reference by the Government with respect to these sixty workmen.
Re (ii).
The next point that is urged is that it is not an industrial dispute but a dispute between the employer 317 and its individual workmen, even though their number may be large and therefore the Government had no jurisdiction to make the references.
We are of opinion that there is no force in this contention.
We have already set out the history of the conciliation proceedings in this case.
It is obvious from the letter of the Labour Commissioner dated September 3, 1954, that he must have made a report to the Government under section 12(4) and it must be on that report that these references must have been made under section 12(5) read with section 10(1).
It is not in dispute that originally the case of dismissal of a much larger number of workmen was under consideration during the conciliation proceedings but on September 2,1954, a mutual agreement was arrived at between the appellant and the union, which in a sense excluded the case of these sixty workmen.
The Labour Commissioner apparently was not prepared to concur with this action of the parties as appears from his letter of September 3 and must therefore have made a report to the Government under section 12(4) which was followed by references under section 10.
In the circumstances we fail to understand how what began as an industrial dispute and was sponsored by the union, related to the dismissal of a much larger number of workmen (including these sixty) and as such became the subject matter of conciliation proceedings under section 12(1) would turn into an individual dispute because a mutual agreement was arrived at between the appellant and the union with which the Labour Commissioner was not in entire agreement and in consequence of which he apparently made a report to the Government under section 12(4) which was followed by the two references under section 10(1).
In these circumstances we are satisfied that the references are not bad on the ground that an individual dispute had been referred to the tribunal for adjudication.
Re (iii) We now come to the merits of the case.
We shall deal with the sixty workmen in three batches in the same manner as the tribunal did.
We shall first take the case of 47 workmen.
In the case of these workmen, the tribunal held that they were guilty of 318 taking part in an illegal strike and that there was no reason for staging such an illegal strike in hot haste.
It also held that they were sent charge sheets which they refused to take.
The Standing Orders provide that a workman who refuses to accept a charge sheet or to submit an explanation on being charged with an offence will be deemed to have admitted the charge against him.
It also provides that a workman who refuses to accept any communication addressed to him by the company will be liable to disciplinary action for insubordination.
The tribunal also held that in the case of these workmen, a proper inquiry was held, though in the circumstances in their absence.
It further held that such misconduct as merited dismissal under the Standing Orders was committed by these 47 workmen.
On these findings we should have thought that the tribunal would not have interfered with the order of dismissal, for the case would be clearly covered by the principles governing the limits of the tribunal 's power of interference with the findings of the managerial inquiry laid down by this Court in Indian Iron and Steel Co. Ltd. and another vs Their Workmen (1).
Learned counsel for the respondent workmen in this connection relies on Indian General Navigation and Railway Co. Ltd. vs Their Workmen (2).
In that case it was laid down that "to determine the question of punishment, a clear distinction has to be made between those workmen who not only joined in such a strike but also took part in obstructing the loyal workmen from carrying on their work, or took part in violent demonstrations, or acted in defiance of law and order, on the one hand and those workmen who were more or less silent participators in such a strike on the other hand.
" These observations have however to be read in the context of that case, which was (i) that it was not shown in that case that an employee merely taking part in an illegal strike was liable to be punished with dismissal under the Standing Orders and (ii) that there was no (1) ; (2) ; 319 proper managerial inquiry.
In these circumstances the quantum of punishment was also within the jurisdiction of the industrial tribunal.
In the present case, however, the finding of the tribunal is that there was misconduct which merited dismissal under the Standing Orders and that the managerial inquiry was proper.
In these circumstances those observations torn from their context cannot be applied to the facts of this case.
The reasoning of the tribunal therefore that as these 47 workmen had not taken part in violence the appellant was not justified in dismissing them cannot be accepted on the facts of this case.
The other reason given by the tribunal for setting aside the dismissal is that the appellant had taken back a large number of other employees who had taken similar part in the illegal strike and had absented themselves and there was no reason to discriminate between those employees and these 47 workmen.
It is clear from the award of the tribunal that no discri mination was made when taking back the workmen on the ground that these workmen supported Shri Bari, for the award shows that a number of other workmen who supported Shri Bari were taken back.
Reliance in this connection is placed on Messrs. Burn and Co. Ltd. vs Their Workmen (1), where, it was observed when dealing with the workmen involved in that case that it could not be said that mere participation in the illegal strike would justify the suspension or dismissal particularly when no clear distinction could be made between those persons and the very large number of workmen who had been taken back into service although they had participated in the strike.
There is no doubt that if an employer makes an unreasonable discrimination in the matter of taking back employees there may in certain circumstances be reason for the industrial tribunal to interfere; but the circumstances of each case have to be examined before the tribunal can interfere with the order of the employer in a properly held managerial inquiry on the ground of discrimination.
In Burn & Co. 's case (1) there was apparently no reason whatsoever for (1) A.I.R. 1959 S.C. 529.
320 making the discrimination.
In the present case, however, the circumstances are different.
It is not the appellant which has made the discrimination; in the present case so far as the appellant is concerned it was prepared to take back even those who supported Shri Bari and did actually take back a large number of such workmen.
The genesis of the trouble in this case was a dispute within the union itself which led to the illegal strike, the history of which we have already given.
The mutual agreement of September 2, 1954, shows that the union which represented the workmen was not agreeable that sixty one workmen should be taken back and these forty seven workmen are out of these sixty one.
The appellant in this case was therefore placed in the position that it had to choose between the large majority of workmen and sixty one workmen whom the union did not want to be taken back.
It was in these circumstances that the appellant did not take back those sixty one workmen out of whom are these forty seven.
The charge of discrimination therefore cannot be properly laid at the door of the appellant in this case and if there is anybody to blame for it it is the union.
In these circumstances when the managerial inquiry was held to be proper and the misconduct committed is such as to deserve dismissal under the Standing Orders, there was no reason for the tribunal to interfere with the order of dismissal passed by the appellant in the case of these forty seven workmen.
It may be that participation in an illegal strike may not necessarily and in every case be punished with dismissal; but where an inquiry has been properly held and the employer has imposed the punishment of dismissal on the employee who has been guilty of the misconduct of joining the illegal strike, the tribunal should not interfere unless it finds unfair labour practice or victimisation against the employee.
Then we come to the case of two workmen to whom no charge sheets were given at all.
They are Jagdish Lal (respondent 31) and L. Choudhary (respondent 60).
It is not in dispute that no charge sheets were issued to these workmen.
The appellant 321 however contends that under the Standing Orders it was not necessary to issue any charge sheet to them.
The Standing Orders provide that "any workman charged with an offence under these Orders, except in cases of lateness and absenteeism, shall receive a copy of such charge but in all cases will be given an opportunity of offering his explanation before any decision is arrived at.
" It is said that the charge against these two workmen was only for absenting themselves; it was not therefore necessary to frame any charge sheet against them.
This is not quite correct so far as Jagdish La].
in concerned as will appear from the letter of dismissal sent to him; but assuming it to be so, Standing Orders provide that though the charge sheet may not be given no action can be taken against a workman for any misconduct unless he is given an opportunity of offering his explanation before any decision is arrived at.
There is no proof in this case that any opportunity was given to these two workmen of offering their explanation before the decision of dismissal was arrived at in their case.
In these circumstances even though no charge sheet might have been necessary in the case of these two workmen their dismissal was against the provision of the Standing Orders, for no explanation was taken from them before arriving at the decision to dismiss them.
The order of the tribunal with respect to these two workmen must be upheld.
This brings us to the case of eleven workmen who are: Mohd. Mansoor (respondent 6), Ram Kuber Das (respondent 9), Ramasis (respondent 15), Mohd. Zafir (respondent 19), Mohd. Islam (respondent 20), Mohd. Zafir (respondent 22), Rajeshwar Prasad (respondent 26), Chirkut (respondent 27), Lal Das (respondent 43), Inderdip (respondent 47) and Mohd. Nazir (respondent 58).
In their case the tribunal held that though charge sheets were issued to them, they could not be served and the inquiry took place without their knowing anything about the charges or the date of the inquiry.
In those circumstances the tribunal held 41 322 that the inquiry was no inquiry and therefore ordered their reinstatement.
It is contended on behalf of the appellant that the case of these eleven workmen is similar to the case of forty seven who refused to take the charge sheets sent to them by registered post.
In any case it is urged that the charge sheets were notified on the notice board and notices were issued in the newspapers and that should be deemed sufficient service of the charge sheets on them.
In this connection reliance was placed on Mckenzie & Co. Ltd. vs Its Workmen(1).
In that case the Standing Orders provided that notice would be served on a workman by communicating the same orally to the workman concerned and/or by affixing the same on the company 's notice board and the company had acted in conformity with the Standing Orders by affixing the notices on its notice board.
It was found in that case that the company first sent notices by registered post acknowledgement due to the workmen concerned.
When some of the notices came back unserved the company wrote to the secretary of the union asking for the addresses of the workmen but the secretary gave no reply to the letter.
It was then that the company affixed the notices on the notice board both inside and outside the mill gate.
In those circumstances it was held that the company did all that it could under the Standing Orders to serve the workmen and the affixing of the notices on the notice board was sufficient service.
The facts in the present case however are different.
All that the Standing Orders provide is that the workmen charged with an offence shall receive a copy of such charge.
It is also provided that a workman who refuses to accept the charge sheet shall be deemed to have admitted the charge made against him.
There is no provision in the Standing Orders for affixing such charge sheets on the notice board of the company.
The charge sheets in this case were sent to the eleven workmen by registered post and returned unserved, because they were not found in their villages.
On the same day on which the charge sheets were sent by registered post it appears that notices were (1) [1959] SUPPl.
1 S.C.R. 222.
323 issued in certain newspapers to the effect that a group of workmen under a common understanding had engaged in an illegal strike from February 23, 1954, and that all such workmen were liable to strong disciplinary action and that in consequence they had been charged under the Standing Orders and Rules of the company and such charge sheets had been sent to them individually by registered post acknowledgement due and had also been displayed on the notice boards inside and outside the factory gate and they were required to submit the explanations by March 9, 1954.
These notices did not contain the names of the work.
men to whom charge sheets were sent and in whose case charge sheets were displayed on the notice boards.
In the circumstances it can hardly be said that these eleven workmen would have notice that they were among those to whom charge sheets had been sent or about whom charge sheets had been displayed on the notice boards.
The proper course in our view was when the registered notices came back unserved in the case of these eleven workmen to publish notices in their names in some newspaper in the regional language with a wide circulation in Bihar along with the charges framed against them.
It would have been a different matter if the Standing Orders had provided for service of charge sheets through their display on the notice boards of the appellant.
In the absence of such provision, the proper course to take was what we have mentioned above.
If that course had been taken, the appellant would have been justified in saying that it did all that it could to serve the workmen; but as that was not done, we agree with the tribunal that these eleven workmen had no notice of the charges against them and the date by which they had to submit their explanations as well as the date of inquiry.
In these circumstances the order of the tribunal with respect to these eleven workmen must also be upheld.
We therefore allow the appeal so far as the first group of forty seven workmen are concerned and set aside the order of the tribunal reinstating them.
We dismiss the appeals so far as the remaining thirteen 324 are concerned, namely, Jagdish Lal (respondent 31), L. Choudhary (respondent 60), Mohd. Mansoor (respondent 6), Ram Kuber Das (respondent 9), Ramasis (respondent 15), Mohd. Zafir (respondent 19), Mohd. Islam (respondent 20), Mohd. Zafir (respondent 22), Rajeshwar Prasad (respondent 26), Chirkut (respondent 27), Lal Das (respondent 43), Inderdip (respondent 47) and Mohd. Nazir (respondent 58) and confirm the order of the tribunal with respect to them.
In the circumstances the parties will bear their own costs of this Court.
Appeal partly allowed.

summary/full:
During the course of conciliation proceedings in respect of a dispute between the appellant company and its workmen a settlement was arrived at between the parties on February 18, 1954.
Despite the settlement some of the workmen went on strike on February 23, 1954, but eventually it was called off on March 19 and 20, 1954.
On the ground that the strike was illegal because it took place during the currency of a settlement, the appellant took steps to serve charge sheets on the workmen who had joined the strike and, after a managerial inquiry, dismissed sixty of them.
There were conciliation proceedings in respect of the dismissal of the workmen before the Labour Commissioner and an agreement was arrived at between the appellant and the union on September 2, 1954.
The Labour Commissioner was apprised of this settlement, but since it was found that the union was opposing reinstatement of certain workmen, he proposed to hold further conciliation proceedings.
The appellant was against holding further conciliation steps and, therefore, the Labour Commissioner reported the matter to the Government under section 12(4) of the .
A reference was accordingly made and the Tribunal gave the award under which all the dismissed workmen were to be reinstated on the ground that they had not been shown to have taken part in violence and there were extenuating circumstances in their case inasmuch as they were misled to join the strike in order to oust the old office bearers of the union so that others might be elected in their place, and that though a much larger number of workmen had taken part in the illegal strike and the union took up the case, only these sixty were eventually dismissed while the rest were reinstated.
The appellant objected to the award on the grounds (1) that as a settlement had been arrived at during the course of conciliation proceedings on September 2, 1954, which specifically dealt with the case of these sixty workmen, the reference was incompetent in view of section 18 of that Act, (2) the reference was also incompetent because what was referred was riot an industrial dispute but a dispute between the employer and its individual workmen, and (3) the Tribunal 's order of reinstatement was in any case unjustified.
309 Held:. .(1) under sections 12 and 18 of the , a settlement which is binding under section 18 on the ground that it was arrived at in the course of conciliation proceedings is a settlement arrived at with the assistance and concurrence of the conciliation officer, and that a settlement which is not binding under section 18 will not be a bar to a reference by the Government.
In the present case the agreement of September 2, 1954, did not have the approval of the conciliation officer and, consequently, the reference based on 'the report of the conciliation officer under section 12 of the Act was competent.
(2). that the reference was not bad on the ground that an individual dispute had been referred to the Tribunal for adjudication, because the dispute in the present case was originally sponsored by the union and related to the dismissal of a much larger number of workmen.
(3). that where the finding of the Tribunal was that there was misconduct which merited dismissal under the Standing Orders and that the managerial inquiry was proper, the Tribunal was not justified in interfering with the action of the management unless it found unreasonable discrimination in the matter of taking back employees, or unfair labour practice or victimisation against the employees.
Indian Iron and Steel Co. Ltd. and Another vs Their Workmen, ; , followed.
I. G. N. and Railway Co. Ltd. vs Their Workmen, ; , distinguished.