judgement:
Appeal No. 166 of 1951.
Appeal from the Judgment and Decree dated September 15, 1948, of the High Court of Judicature for the State of Punjab at Simla (Mahajan and Teja Singh JJ.) in Regular Second Appeal No. 1844 of 1945 from the Judgment and Decree dated June 5, 1945, of the Court of the District Judge, Gurgaon, in Civil Appeal No. 171 of 1943, arising out of the Judgment and Decree dated August 27, 1943, of the Court of the Subordinate Judge, Gurgaon, in Civil Suit No. 11 of 1943.
Tarachand Brijmohanlal for the appellant.
Gurubachan Singh (Radha Krishan Aggarwal, with him) for the respondent.
1952, November 7.
The Judgment of the Court was delivered by CHANDRASEKHARA AIYAR J.
The plaintiffs, Joti Prasad and Sat Narain, sued for partition and possession of their two fifths share in the suit properties alleging that the first defendant wag alone in possesSion of the same, having redeemed a mortgage executed by the joint family of which the plaintiffs and defendants were members, in favour of one Raghumal in the year 1896 on paying Rs. 5,800.
Defendants 2 to 5 were impleaded as co sharers.
Out of them, defendants 2 and 3 admitted the claims of the plaintiffs.
Defendant 4 died pending suit, and her name was struck off.
Defendant 5 supported the first defendant.
On the date of the trial court 's decree, the two plaintiffs were held entitled to one sixth share each.
The first defendant resisted the plaintiffs ' claim.
He contended that the redemption by him in 1920 was not on behalf of the joint family as alleged by the plaintiffs but on his own account as there had been a disruption of the joint family status much earlier, and that before the plaintiffs could get arty relief, they were bound to pay him not merely a proportionate share in the sum of Rs. 5,800 which he paid to the mortgagee for redemption but their share in the original mortgage debt of Rs. 11,200.
He also denied that the original mortgage was executed on behalf of the joint family.
The Subordinate Judge, and on appeal, the High Court found that the original mortgage was a mortgage transaction of the joint family, and that the first defendant, Ganeshi Lal, redeemed the mortgage on his own account and for his own benefit at a time when there was no longer any joint family in existence.
It was further held by the trial court that the plaintiffs and other co sharers were bound to pay their proportionate share of the amount paid by the first defendant to redeem the mortgage, namely, Rs. 5,800.
But from this a sum of Rs. 1,200 which he had already received by way of redemption of certain mortgage rights had to be deducted.
The District Judge enhanced this sum of RS.
4,600 to 245 Rs. 5,000, as the first defendant had paid taxes due on the property up to 1940, but he confirmed the main findings of the Subordinate Judge.
A second appeal preferred by the first defendant was dismissed by the High Court at Simla (Mehr Chand Mahajan and Teja Singh JJ.).
They repelled the contention of the first defendant that a suit for partition and possession was not maintainable without bringing a suit for redemption.
They also negatived his right to get a proportionate share in the amount of Rs. 11,200 due on the mortgage.
Two other learned Judges gave leave to appeal under section 109 (c) of the Civil Procedure Code, as a substantial question of law was involved.
Three points were argued before us by learned counsel for the appellant; firstly, there was an assignment of the mortgage in favour of the appellant with the result that the entire rights of the mortgagee vested in him; secondly, even viewing the question as one of legal subrogation, he was entitled, under the principles of justice, equity and good conscience which governed the State of Punjab, as the has not been applied to the State, to recover from the co mortgagors not merely their shares in the sum of Rs. 5,800 which he had paid for redemption but their shares in the full amount of Rs. 11,200 due under the mortgage; and thirdly, that the suit for partition without asking for redemption was not maintainable.
Points Nos. 1 and.
3 have no force whatever.
The registered deed of redemption does not contain any words of assignment.
To say that Ganeshi Lal shall be the owner of the entire amount due from the mortgaged property is something different from stating that the security has been assigned in his favour.
On the other hand, the endorsement of receipt of payment on the back of the mortgage deed itself and the statement of the mortgagee that he has released the mortgaged property from his mortgage go to show that there was no assignment.
246 The non maintainability of the suit does not seem to have been in issue either before the trial court or before the District Judge, and it appears to have been raised for the first time before the High Court.
It was pointed out by the learned Judges, and quite rightly, that so long as no question of limitation was involved, there was no objection to a claim for redemption and one for possession and partition being joined together in the same suit.
Only the second point remains for consideration, and this raises an interesting question of law.
It is not denied that Ganeshi Lal who redeemed the prior mortgage is subrogated to the mortgagee 's rights, but the controversy is about the extent of his rights as subrogee.
By virtue of the redemption, does he get all the rights of the mortgagee and hold the mortgage as a shield against the co mortgagors for the full amount due on the mortgage on the date of redemption whatever he may have himself paid to get it discharged, or does he stand in the mortgagee 's shoes only to the extent of getting reimbursed from the comortgagors for their shares in the amount actually paid by him? The lower courts have held that the latter is the correct position in law, but the appellant has challenged it as unsound.
The first two clauses of the present section 92 of the run in these terms: " Any of the persons referred to in section 91 (other than the, mortgagor) and any co mortgagor shall, on redeeming property subject to the mortgage, have, so far as regards redemption, foreclosure or sale of such property, the same rights as the mortgagee whose mortgage he redeems may have against the mortgagor or any other mortgagee.
The right conferred by this section is called the right of subrogation, and a person acquiring the same is said to be subrogated to the rights of the mortgagee whose mortgage he redeems.
" It is a new section and was inserted by the amending Act XX of 1929.
The original sections 74 and 247 75 conferred the right to redeem in express terms only on second or other subsequent mortgagees, though the co mortgagor 's right to subrogation on redemption was recognised even before the Act.
As the has not been extended to the State of East Punjab, it is unnecessary to decide whether section 92 is retrospective in its operation, on which point there has been a conflict of opinion between the several High Courts.
Section 95 of the Act which removed the confusion caused by the old section which, conferring on the co mortgagor what was called a charge, and thus seeming to negative the application of the doctrine of subrogation, is also inapplicable to the present case.
We therefore steer clear of sections 74 and 75 of the old Act and sections 92 and 95 of the present Act, and we are free to decide the question on principles of justice, equity and good conscience.
If we remember that the doctrine of subrogation which means substitution of one person in place of another and giving him the rights of the latter is essentially an equitable doctrine in its origin and application, and if we examine the reason behind it, the answer to the question which we have to decide in this appeal is not difficult.
Equity insists on the ultimate payment of a debt by one who in justice and good conscience is bound to pay it, and it is well recognised that where there are several joint debtors, the person making the payment is a principal debtor as regards the part of the liability he is to discharge and a surety in respect of the shares of the rest of the debtors.
Such being the legal position as among the co mortgagors, if one of them redeems a mortgage over the property which belongs jointly to himself and the rest, equity confers on him a right to reimburse himself for the amount spent in excess by him in the matter of redemption; he can call upon the co mortgagors to contribute towards the excess which he has paid over his own share.
This proposition is postulated in several authorities.
In the early case of Hodgson vs Shaw (1) Lord Brougham said: (1) ; ; 248 "The rule is undoubted, and it is one founded on the plainest principles of natural reason and justice, that the surety paying off a debt shall stand in the place of the creditor, and have all the rights which he has, for the purpose of obtaining his reimbursement.
" I have italicised the word " reimbursement Sheldon in his well known treatise on Subrogation has got the following passage in section 13 of the Second Edition: " There is another class of cases in which he who has paid money due upon a mortgage of land to which he had some title which might be affected or defeated by the mortgage, and who was thus entitled to redeem, has the right to consider the mortgage as subsisting in himself, and to hold the land as if it subsisted, until others interested in the redemption, or who held also the right to redeem, have paid a contribution.
" Be it noted that what is spoken of here is a contribution.
Dealing with the subject of subrogation of a, surety by payment of a promissory note and citing the observations of the Alabama Court, Harris says in his work on Subrogation (1889 Edition) at page 125: " The rule is, that a surety paying a debt, shall stand in the place of the creditor; and is entitled to the benefit of all the securities which the creditor had for the payment of the debt, from the principal debtors; in a word, he is subrogated to all the rights of the creditor; the surety, however, cannot avail himself of the instrument on which he is surety, by its payment.
By payment it is discharged and ceases to exist, and the payment will not, even in equity, be considered an assignment; the surety merely becomes the creditor of the principal to the amount paid for him.
" To compel the co debtors or co mortgagors to pay more than their share of what was paid to the creditor or mortgagee would be to perpetrate an inequity or 249 injustice, as it would mean that the debtor who is in a position to pay and pays up can obtain an advantage for himself over the other joint debtors.
Such a result will not be countenanced by equity; the favouritism shown by law to a surety, high as it is, does not extend so far.
The surety can ask to be indemnified for his loss: he can invoke the doctrine of subrogation as an aid to his right of contribution.
Sheldon says in section 105 of his book : " The subrogation of a surety will not be carried further than is necessary for his indemnity; if he buys up the security at a discount, or makes his payment in a depreciated currency, he can enforce it only for what it cost him.
He cannot speculate at the expense of his principal ; his only right is to be repaid.
" In section 178, Harris is still stronger. " Since subrogation is founded on principles of equity, the surety who would avail himself of the doctrine and invoke equity must do equity ; and while ' he is entitled to a reimbursement in all that he pays out properly for his principal, debt, interest and cost, he is not entitled, in any way to recover more than he has paid.
For instance, if he pays the debt of his principal, in depreciated currency, the rule would seem to be that he could demand from the principal only the value of that currency at the time he made the payment.
Nor would he upon principles of equity be permitted to purchase the debt at a discount and then be subrogated to collect the whole face value of the debt, and especially if he held securities, or if the creditor held securities which would fall into his hands, out of which to pay the debt; because the securities are trust funds for the purpose, and set aside for the payment of that debt and an assignee of trustee cannot speculate in the purchase of claims against the fund in his hands.
It would not be equality; it would not be equity.
" While it can be readily conceded that the joint debtor who pays up and discharges the mortgage 250 stands in the shoes of the mortgagee, and secures to himself the benefit of the security by such payment, the extent to which he can enforce his right as against the other joint debtors is a different matter altogether.
In his monumental work on Equity Jurisprudence, Pomeroy points out that he will be subrogated to the rights of the mortgagee only to the extent necessary for his own equitable protection.
(See page 632 of Volume IV of the Fifth Edition by Symons).
Clearer still is the passage found at page 640 of the same book: " The mortgagor himself who has conveyed the premises to a grantee in such manner that the latter has assumed payment of the mortgage debt becomes an equitable assignee on payment, and is subrogated to the mortgagee, so far as is necessary to enforce his equity of reimbursement or exoneration from such grantee.
" It is as regards the excess of the payment over his own share that the right can be said to exist.
Pomeroy says this at pages 660 and 661: "In general, whenever redemption by one of the above mentioned persons operates as an equitable assignment of the mortgage to himself, he can keep the lien of it alive as security against others who are also interested in the premises, and who are bound to contribute their proportionate shares of the sum advanced by him, or are bound, it may be, to wholly exonerate him from and reimburse him for the entire payment. .
The doctrine of contribution among all those who are interested in having the mortgage redeemed, in order to refund the redemptor the excess of his payment over and above his own proportionate share, and the doctrine of equitable assignment in order to secure such contribution, are the efficient means by which equity completely and most beautifully works out perfect justice and equality of burden, under these circumstances. . . . " Whatever the difference might be between the English law and the Indian law as regards the right 251 to enforce decrees and securities for the due payment of a debt in the case of a surety who discharges a simple money debt and a surety who pays up a mortgage, it is still noteworthy that Section V of the Mercantile Law Amendment Act of 1856 (England) provided for indemnification by the principal debtor( for the advances made and loss sustained by the surety.
There is a distinction in this respect between a third party who claims subrogation and a co mortgagor who claims the right, and this is brought out by Sir Rashbehary Ghose in his Law of Mortgage in India, Volume I, 5th Edition.
He says at page 354, pointing out that co mortgagors stand in a fiduciary relation : " I should add that an assignee of a mortgage is entitled, as a rule, to recover whatever may be due on the security.
But if he stands in a fiduciary relation, he can only claim the price which he has actually paid together with incidental expenses.
" The right of the co mortgagor who redeems the mortgage is spoken of as the right of reimbursement at page 372 in the following passage : "Strictly speaking, therefore, when one of several mortgagors redeems a mortgage, he is entitled to be treated as an assignee of the security which be may enforce in the usual way for the purpose of re imbursing himself.
" The redeeming co mortgagor being only a surety for the other co mortgagors, his right is, strictly speaking, a right of reimbursement or contribution, and in law, when we have regard to the principles of equity and justice, there should be no difference( between a case where he discharges an unsecured debt and a case where he discharges a secured debt.
It is unnecessary for us to decide in this appeal whether section 92 of the was intended to strike a departure from this position when it states that the co mortgagor shall have the same 252 rights as the mortgagee whose mortgage he redeems, and whether it was intended to abrogate the rule of equity as between co debtors, and provide for the enforcement of the liability on the basis of the amount due under the mortgage ; and this is because, as has been already stated, we are governed not by the statute but by general principles of equity and justice.
If it is equitable that the redeeming co mortgagor should be substituted in the mortgagee 's place, it is equally equitable that the other co mortgagors should not be called upon to pay more than he paid in discharge of the encumbrance.
In this connection, reference may be made with advantage to the decision of Sir Asutosh Mookerjoe and Teunon JJ.
in DigambarDas vs Harendra Narayan Panday (1) where the question arose as regards the the rate of interest and the period for which the redeeming co mortgagor would be entitled.
There is an elaborate examination of the nature of the right of subrogation obtained by one of several joint comortgagors who redeems the mortgaged property, and in the course of the discussion the following observations occur: " In so far as the amount of money which he is entitled to recover from his co mortgagors is concerned, he can claim contribution only with reference to the amount actually and properly paid to effect redemption to which sum he can add his legitimate expenses . .
The substitution, therefore, of the new creditor in place of the original one, does not place the former precisely in the position of the latter for all purposes. .
If therefore one of several mortgagors satisfies the entire mortgage debt, though upon redemption he is subrogated to the right and remedies of the creditor, the principle has to be so administered as to attain the ends of substantial justice regardless of form ; in other words, the fictitious cession in favour of the person who effects the redemption, operates only to the extent to which it is necessary to apply it for his indemnity and protection." (1) 258 There is a definite expression of opinion by the Madras High Court on the point in the decision reported in Suryanarayana vs Sriramulu(1).
In that case, a purchaser of a half share of the equity of redemption claimed to recover half of the amount of the mortgage on the security of the other share in the hands of the defendant, and it was held that as his purchase of the decree on the mortgage was prior to his purchase of the equity of redemption, he was entitled to the full amount claimed by him.
The learned Judges distinguish the case from one where one of two mortgagors discharges an encumbrance binding on both, and say that in such a case the mortgagor doing so could not recover from his comortgagors more than a proportionate share of the amount actually paid by him.
After this rather lengthy discussion of the subject, we consider it unnecessary to notice and comment on the several decisions cited for the appellant.
It may be said generally that they only lay down that in cases where the , as it stood originally or as amended in 1929, is not applicable, we are governed by the principles of equity, justice and good conscience, and that sections 92 and 95 embody such principles.
None of the cases deals with the extent or degree of subrogation, and there is nothing in them which runs counter to the view that the doctrine must be applied along with other rules of equity, so that the person who discharges the mortgage is amply protected, and at the same time there is no injustice done to the other joint debtors.
He who seeks equity must do equity, and we shall be violating this rule if we give effect to the appellant 's contention.
The High Court, in our opinion, reached the correct conclusion.
The parties are not agreed on the shares to which the plaintiffs are entitled, and this is because after the date of the final decree some of the branches have become extinct by the deaths of their representatives.
Whether under customary law in the Punjab, uncles (1) 254 exclude nephews or they take jointly, and whether succession is per stirpes or per capita, was the subject of disagreement at the Bar before us.
This question must therefore be left over for determination by the trial court, and the case will have to go back to that court for effecting partition and delivery of possession according to the shares to which the plaintiffs may be found entitled.
Subject to what is contained in the foregoing paragraph, the appeal will stand dismissed with costs.
Appeal dismissed.

summary/full:
On principles of equity, justice and good conscience, which apply to the Punjab (where the , is not in force) if one of several joint mortgagors redeems the entire Mortgage by paying a s less than the full amount due under the mortgage, he is entitled to receive from his co mortgagors, only their proportionate shares on the amount actually paid by him.
He is not entitled to claim their proportionate shares on the amount which was due to the mortgagee under the terms of the mortgage on the date of redemption.
Hodgson vs Shaw ; , Digambar Das vs Harendra Narayan Panday [(1910) and Suryanarayana vs Sriramulu [(1913) referred to.
Judgment of the High Court of Punjab at Simla affirmed.


judgement:
Appeal No.449 of 1958.
Appeal by special leave from the judgment and decree dated August 7, 1956, of the Patna High Court in Misc.
Judicial Case No. 604 of 1953.
406 D. P. Singh, for the appellant.
section P. Varma, for the respondent.
January 11.
The Judgment of the Court was delivered by SHAH, J.
The High Court of Judicature at Patna answered in the affirmative the following question which was submitted by the Board of Agricultural Income tax, Bihar, under section 28(3) of the Bihar Agricultural Income tax Act, XXXII of 1948 hereinafter referred to as the Act: " Whether, in the facts and circumstances of the case, the petitioner could be legally assessed for the income of the Estate in 1355 Fasli when the Estate was in the hand of the Receiver ? " With special leave under article 136 of the Constitution, this appeal is preferred against the order of the High Court.
The appellant is the Mahant of the Asthal Estate, Salauna, in the District of Bhagalpur in Bihar.
In a suit concerning that estate, a Court Receiver was appointed by the First Class Subordinate Judge, Monghyr, to manage the estate.
The Receiver functioned till sometime in December, 1949, and under the order of the Subordinate Judge he handed over charge of the estate to the appellant on January 8, 1950.
On January 15, 1950, the appellant submitted a return of income of the estate to the Agricultural Income tax Officer, Monghyr, for the Fasli year 1355 corresponding to September 16, 1948, to September 15, 1949.
The Agricultural Income tax Officer assessed on August 7, 1950, the agricultural income of the estate at Rs. 90,507 2 6 and ordered the appellant to pay Rs. 20,290 13 0 as agricultural income tax.
Appeals against the order of assessment preferred to the Commissioner of Agricultural Income tax and the Board of Agricultural Income tax, Bihar, were unsuccessful.
The Board however referred the question set out hereinbefore to the High Court under section 28(3) of the Act as arising out of its order.
The only question which falls to be determined in this appeal is whether the appellant was liable to be assessed to pay agricultural income tax for the year 407 in which the estate was in the management of the Court Receiver.
Section 3 of the Act which is the charging section provides: " Agricultural income tax shall be charged for each financial year in accordance with and subject to the provisions of this Act on the total agricultural income of the previous year of every person.
" By section 4,it is provided: Save as hereinafter provided, this Act shall apply to all agricultural income derived from land situated in the State of Bihar.
" The income of the estate of the appellant was not exempt from payment of tax and by virtue of section 3, agricultural income tax was charged upon the income for the assessment year in question, and the appellant was prima facie liable as owner of the estate to pay tax on that income.
The appellant however relied upon section 13 of the Act which provides: " Where any person holds land, from which agricultural income is derived, as a common manager appointed under any law for the time being in force, or under any agreement or as receiver, administrator or the like on behalf of persons jointly interested in such land or in the agricultural income derived therefrom, the aggregate of the sums payable as agricultural income tax by each person on the agricultural income derived from such land and received by him shall be assessed on such common manager, receiver, administrator or the like, and he shall be deemed to be the assessee in respect of the agricultural income tax so payable by each such person and shall be liable to pay the same.
" The appellant urged that if the land from which agricultural income is derived is held by a Receiver and the income is received by the Receiver, the Receiver alone can, by virtue of section 13, be deemed to be the assessee and the Receiver alone is liable to pay the tax in respect of that income.
In support of his contention, the appellant relies upon the definition of the word.
, " person " in s, 2, cl.
(m) which estates; 408 Person ' mean,% any individual or association of individuals, owning or holding property for himself or for any other, or partly for his own benefit and partly for another, either as owner, trustee, receiver, common manager, administrator or executor or in any capacity recognised by law, and includes an undivided Hindu family, firm or company.
" In our view, there is no substance in the contention raised by the appellant.
The liability to pay tax is charged on the agricultural income of every person.
The income though collected by the Receiver was the income of the appellant.
By section 13, in addition to the owner, the Receiver is to be deemed to be an assessee.
But the fact that the Receiver may, because he held the property from which income was derived in the year of account, be deemed to be an assessee and liable to pay tax, does not absolve the appellant on whose behalf the income was received from the obligation to pay agricultural income tax.
Section 13 merely provides a machinery for recovery of tax, and is not a charging section.
When property is in the possession of the Receiver, common manager or administrator, the taxing authorities may, but are not bound to, treat such persons as assessees and recover tax.
The taxing authorities may always proceed against the owner of the income and assess the tax against him.
The definition in the connotation of" person " undoubtedly included a receiver, trustee, common manager, administrator or executor, and by such inclusion, it is open to the taxing authorities to assess tax against any such persons; but on that account, the income in the hand of the owner is not exempt from liability to assessment of tax.
Counsel for the appellant urged that the income received by the appellant from the Receiver did not retain its character of agricultural income and therefore also the appellant was not liable to pay agricultural income tax.
But this contention was never raised before the taxing authorities and no such question has been referred to this court.
The character of the income was accepted to be agricultural 409 income in the hands of the appellant and the only question which was sought to be referred and raised before the Board of Agricultural Income tax was one as to the liability of the appellant to be assessed to agricultural income tax for the year in question.
In that view of the case, the appeal fails and is dismissed with costs.
Appeal dismissed.

dataset_name: IN-Abs

summary/full:
The appellant was the Mahant of the Asthal Estate in Bihar which was in the management of a Receiver appointed by the Civil Court in a suit relating to the estate.
On appeal the question that arose for decision in this Court was whether the appellant Mahant was liable to be assessed under the Bihar Agricultural Income tax Act, 1948, to pay agricultural income tax for the year in which the estate was in the management of the Court Receiver.
Held, that the income though collected by the Receiver was the income of the appellant.
By virtue of the provisions of sections 2, cl.
(m) and 13 of the Bihar Agricultural Income tax Act it was open to the taxing authorities to treat the Receiver as the assessee because he held the property from which income was derived, but on that account the income in the hand of the owner was not exempt from liability to assessment of tax.
Section 3 of the Act provides for charging agricultural income of every person " as defined in section 2, cl.
(m) which includes a receiver and section E3 merely provides a machinery for recovery of tax from "Persons" including receivers and is not by itself a charging section.


judgement:
Appeals Nos. 158 to 164 of 1960.
Appeals from the judgment and order dated October 8, 1958, of the Bombay High Court in I.T.A. Nos.
7505, 7506, 5046 to 5048, 5149 and 5150 of 1956 57.
A. V. Viswanatha Sastri, section N. Andley, J. B. Dadachanji, Rameshwar Nath and P. L. Vohra, for the. appellants.
R. Ganapathy Iyer and D. Gupta, for the respondent.
January 12.
The Judgment of the Court was delivered by HIDAYATULLAH, J.
These seven appeals have been filed on a certificate granted by the High Court of Bombay against the judgment and order of the High Court dated October 8, 1958, in a case referred by the Income tax Appellate Tribunal, Bombay.
The first appellant is the Bhor Industries, Ltd., a Company incorporated in 1944 in the former Bhor State with its registered office also situated in the town of Bhor.
It did the business of dyeing, printing and bleaching cloth, cloth proofing, etc., in Bhor State.
The remaining five appellants are the shareholders of this Company, which, admittedly, was a private Company limited by shares, at all material times.
We are concerned in these appeals with the account years of the Company, 1946 and 1947.
During these years, the income of the Company was as follows: Assessment Total Income accruing Total World year Income or arising in the Income (Sum Indian State of of 2 & 3) Bhor.
1 2 3 4 1947 48 Rs. 4,32,542 Rs. 2,24,542 Rs. 6,57,084 1948 49 Rs. 4,32$709 Rs. 3,47,416 Rs. 7,80,125 412 The Company held its general meetings to declare dividends at Bhor on August 17,1947, and August 19, 1948, respectively.
For the account years 1946 and 1947 respectively it declared a dividend of Rs. 2,580/and Rs. 1,140/ .
Bhor State merged with the Province of Bombay by virtue of the States Merger (Governors ' Provinces) Order, 1949, which came into force on August 1, 1949.
By the Taxation Laws (Extension to Merged States and Amendment) Act, 1949, which received the assent of the Governor General on December 31, 1949, the Indian Income tax Act was extended to the merged States with effect from April 1, 1949.
That Act also introduced section 60A in the Income tax Act, by which power was given to the Central Government, if it considered necessary or expedient so to do, to avoid any hardship or anomaly or to remove any difficulty in the application of the Income tax Act to merged States, to make a general or special order granting exemption, reduction in rate or other modification.
Under the power thus conferred, the Central Government notified the Merged States (Taxation Concessions) Order, 1949.
For the assessment years 1947 48 and 1948 49 corresponding to the account years of the Company, 1946 and 1947, the Income tax Officers assessed the Company as non resident, and held that the Company was not a public Company within the meaning of section 23A of the Indian Income tax Act.
The Income tax Officer who passed the order for the assessment year 1947 48 under section 23A, held that the assessable income in British India of the Company in 1946 minus the taxes, must be deemed to be distributed among the shareholders in the proportion of their shareholdings.
The Incometax Officer calculated the amount deemed to be distributed as follows: 413 1946 (assessment year 1947 48).
Total Income .
Rs. 4,32,542 Taxes .
Rs. 1,89,237 Amount available for distribution .
Rs. 2,43,305 as dividend Dividend declared .
Rs. 2,580 Balance of the amount available and deemed to be distributed .
Rs. 2,40,725 For the account year 1947, the Income tax Officer took the total world income less the taxes as the amount available for distribution as dividend.
According to him, that amount was as follows: 1947 (assessment year 1948 49).
Total income .
Rs. 4,32,709 Income in Bhor State .
Rs. 3,47,416 Total world income .
Rs. 7,80,125 Taxes .
Rs. 2,43,399 Amount available for distribution as dividend .
Rs. 5,36,726 Dividend declared .
Rs.1,140 Balance of the amount available for distribution .
Rs.5,35,586 The Income tax Officer then apportioned it among the shareholders as on August 19, 1948.
This worked out at Rs. 539.9 per share.
The Income tax Officer then divided this amount of Rs. 539.9 in the proportion the total income bore to the income in Bhor State and taxed the former in the hands of the shareholders, but the balance was included and considered for purposes of rate only.
The Tribunal in the statement of the case illustrated this by citing the case of one of the shareholders (Pushpakumar M. D. Thackersey) as follows: 414 "The portion of Rs. 5,35,586 apportionable to his 90 shares at the rate of Rs. 539.9 per share worked out at Rs. 50,211/ .
This amount of Rs. 50,21/was divided into two smaller amounts in the ratio already mentioned and the amount of Rs. 27,851/was actually brought to tax whereas the amount of Rs. 22,360/ attributable to Bhor State income of Rs. 3,47,416/ was merely included in the total income for rate purposes." In computing these " deemed dividends ", the two Income tax Officers did not deduct the interest charged to the Company under section 18A(8), from the assessable income along with income tax and super tax under section 23A(1).
The Company as well as the shareholders appealed to the Appellate Assistant Commissioner, but their appeals were unsuccessful.
Their further appeals to the Tribunal were also dismissed.
They raised the contentions that section 23A was not applicable to the Company, that the deemed income arising from a fictional distribution of the dividends could not be taxed in the hands of the shareholders because section 23A did not apply to them, and that they were protected by the Concessions Order in the same way in which the Company was.
They also raised the contention that in.
determining the balance of the amount available for distribution, interest charged under section 18A(8) ought to have been deducted.
All these contentions were not accepted by the Department and the Tribunal.
At the instance of the Company and the shareholders, the Tribunal drew up a statement of the case, and referred three questions to the High Court for its decision.
These questions were as follows: " 1.
Whether paragraph 12 of the Merged States (Taxation Concessions) Order, 1949, precluded the Income tax Officer from making an order under Section 23A in the case of the assessee company in respect of its profits and gains of the previous year ended 31st December, 1946 ?/ 31st December, 1947 ? 415 2.
Whether in making an order under Section 23A in respect of the profits and gains of the year 1946/1947 the assessable income of that previous year is to be reduced not only by the amount of incometax and super tax payable by the company in respect thereof but also by the amount of interest charged to it in accordance with the provisions of Section 18A ? 3.
Having regard to the order passed by the Income tax Officer under Section 23A in respect of the Company 's profits of the year 1947 and having apportioned the sum of Rs. 17,641/ to the shareholder, Pushpakumar, as his proportionate share in the distribution made by the Income tax Officer under Section 23A and having regard to the provisions of Section 14(2) (c), whether the said sum of Rs. 17,641/has been properly included in his total income for the purpose of charging it to tax ? " The third question was a typical question, as similar questions also arose in the case of other shareholders with variation in the amount.
The amount of Rs. 17,641/ , the Tribunal stated, replaced Rs. 50,211/in view of certain directions given by the Tribunal.
The High Court framed one more question as the second part of question No. 1 in disposing of the reference, which read as follows.
: " Whether paragraph 12 of the Merged States (Taxation Concessions) Order, 1949, precluded the Income tax Officer from making any order under Section 23A so as to affect the assessee shareholders in respect of their profits and gains for the assessment year 1949 50 ? The High Court answered the first and second questions and the question framed by it in the negative, and the third question, in the affirmative.
The High Court, however, granted a certificate under section 66A of the Income tax Act, and the present appeals have been filed.
The contentions raised before the High Court have been raised before us.
The Company questions the application of section 23A to the two assessment years, 1947 48 and 1948 49, while the shareholders 416 question the application of section 23A to the Company and also to them in the assessment year, 1949 50.
Both the Company and the shareholders contend that interest under section 18A(8) ought to have been deducted along with the income tax to find out the available surplus.
The shareholders claim the benefit of section 14(2) (c) in respect of the entire amount of the balance deemed to be distributed.
To begin with, one must remember that the Indian Income tax Act was applied to Bhor State from April 1, 1949, and that there was no income tax law in force in Bhor State prior to its merger.
This position also obtained in many other Indian States, which merged with the Provinces in British India.
The fact that income tax is charged in an assessment year on the income, profits or gains of the previous year would have made persons resident in merged States to pay tax on income which, but for the extension of the Indian Income tax Act, was either not liable to income tax at all or was liable at a lesser rate.
In view of the apprehended difficulties and anomalies, the Extension Act itself gave power to remove such anomalies and hardships.
Section 60A was added to the Income tax Act, and it read as follows: " If the Central Government considers it necessary or expedient so to do for avoiding any hardship or anomaly, or removing any difficulty, that may arise as a result of the extension of this Act to the merged States, the Central Government may, by general or special order, make an exemption, reduction in rate or other modification in respect of income tax in favour of any class of income, or in regard to the whole or any part of the income of any person or class o f persons. . " The Concessions Order, 1949, was passed in furtherance of this power.
We are concerned only with paragraph 12 of the Concessions Order, 1949, which has been relied upon by the Company and the share.
holders, who are appellants before US.
It is not necessary to refer to paragraphs 4, 5 and 6 to which passing reference Was made in the arguments, because 417 they deal with income in an Indian State, which has not been taxed in these cases at all.
Paragraph 12 provided for the application of section 23A to a previous year ending on or after August 1, 1949, but not to a previous year ending before August 1, 1949.
It may be quoted here: "The provisions of section 23A of the Indian Income tax Act shall not be applied in respect of the profits and gains of any previous year ending before 1st day of August, 1949, unless the State law contains a provision corresponding thereto." Reading the Extension Act, section 60A and the Concessions Order, 1949, together, the following position emerges.
The Indian Income tax Act applied to and from the assessment year 1949 50 (April 1, 1949 to March 31, 1950) in the merged States.
Corresponding previous years were comprehended.
The difficulty which was likely to be felt was with respect to the fact that the merger with the Province of Bombay operated from August 1, 1949, and not from April 1, 1949.
In respect of the exemption under section 14 (2) (c), the position was preserved by applying paragraphs 5 and 6 to the exempted income.
These two paragraphs made the State rate applicable to that exempted income.
Similarly, previous years ending after March 31, 1948, were to be assessed to Indian income tax, but the excess of the tax computed at Indian rates over the tax computed at State rates was to be given away as rebate, and profits and gains of companies of any previous year ending before August 1, 1948, earned in an Indian State were saved from section 23A, unless there was, in the State, a provision corresponding to section 23A.
It must be remembered that the Income tax Officer in the present case did not seek by his order under section 23A to distribute the Bhor State income of the shareholders of the Company as dividend; he restricted his order to the British Indian income.
There was, in fact, in the State of Bhor no law of Income tax, and no order taxing income which arose in Bhor could be passed by the Income tax Officer.
418 By the definition in section 2(5A) of the Indian Incometax Act.
a company formed in pursuance of an Act of an Indian State was a company for the purposes of the Act, and it was open to the Income tax Officer exercising powers under section 23A to declare the income of such a company accruing or arising within the taxable territory as distributed among the shareholders.
The right of the Department to pass an order under section 23A(1) of the Indian Income tax Act was not chal lenged before the Tribunal, and it was not the subject of a decision in the High Court.
The argument still has been, on behalf of the Company as well as the shareholders, that paragraph 12 of the Concessions Order saved the profits and gains, whether made in Bhor State or in British India, from the application of section 23A, and that indirectly the shareholders were entitled to the same benefit.
Paragraph 12 of the Concessions Order depends on whether a company was being assessed under the Indian Income tax Act in respect of its profits and gains in an Indian State for any previous year ending before the first day of August, 1949.
By the application of the Indian Act to an Indian State, the income of a company in an Indian State was likely to be taxed to Indian income tax from the assessment year, 1949 50.
For the earlier assessment years a company 's income in the Indian State was exempt without the assistance of the Concessions Order.
The exemption granted by the Concessions Order was to operate in respect of those profits and gains which, but for the exemption, would have been included in the assessment year, 1949 50 and subsequent years.
In so far as paragraph 12 of the Concessions Order was concerned, it gave exemption in respect of action under section 23A to income of " any previous year " ending before the first day of August, 1949.
The date, August 1, 1949, was chosen because the merger with the Provinces took place on that date.
The word " any " does not refer to all the previous years prior to and ending before August 1, 1949, but to a previous year in relation to the assessment year, 1949 50 and ending before the first day of August, 1949.
The words 419 any previous year mean, therefore, only one previous year, which would be a previous year for the purposes of the assessment year, 1949 50 but which, to get the exemption, must end before the first day of August, 1949.
The exemption, therefore, did not apply to previous years other than the one described, and in respect of the earlier previous years, paragraph 12 of the Concessions Order was hardly needed.
Otherwise, there would be no need to mention in the paragraph the date on which the previous year must end.
It is thus quite clear that paragraph 12 provided for income, profits and gains of those previous years which were specially mentioned and in respect of which anomalies were likely to arise by reason of the fact that the merger took place on August 1, 1949, while the Income tax Act was applied from April 1, 1949.
In view of the fact that specific terminii of previous years are expressly mentioned in the Concessions Order, it is not possible to accept the argument on behalf of the appellants that " all " previous years before the date mentioned were comprehended in paragraph 12.
The application of that paragraph must be limited to one previous year only which ended prior to August 1, 1949.
The previous years, with which we are concerned, ended on December 31, 1946, and December 31, 1947, respectively.
In the case of this Company, the previous year which would answer the description in paragraph 12 would be the previous year ending December 31, 1947.
To that previous year, the provisions of section 23A were not applicable, and the profits and gains made in Bhor State would be protected.
The position which obtained in the assessment year 194748 would thus obtain also in the assessment year 1948 49 in so far as the Company was concerned, and its profits and gains in Bhor State could not be considered for purposes of application of section 23A.
The position was, however, different in regard to the income in British India which formed the total income of the Company in the taxable territory.
It was not contended that the assessable income of the Company in the taxable territories would not attract 420 s.23A, if the distribution of dividends from that income was below the mark set in section 23A. There is thus no difference between the assessment years 194748 and 1948 49, and the method of calculation adopted in the first year is also applicable to the second.
To this extent, the answer to the first question (first part) must be deemed to be modified in respect of the previous year ending December 31, 1947.
It is next contended that interest that was charged to the Company under section 18A(8) ought to have been deducted along with the income tax before the fictional dividends were computed.
Section 18A(8) reads as follows: " Where, on making a regular assessment, the Income tax Officer finds that no payment of tax has been made in accordance with the foregoing provisions of the section, interest calculated in the manner laid down in sub section (6) shall be added to the tax as determined on the basis of regular assessment.
" The words of the sub section are clear to show that interest as interest is added to the tax as determined.
There is nothing to show that it is to be treated as tax, and it thus retains its character of interest but is recoverable along with the tax.
Indeed, section 29 of the Income tax Act makes a distinction between tax, penalty and interest.
Since section 23A speaks of deduction only of income tax and super tax, no deduction could be made in respect of this interest.
Question No. 2 was thus correctly answered by the High Court.
In so far as the shareholders who were all resident in the taxable territories were concerned, paragraph 12 of the Concessions Order did not, in terms, protect them.
Section 23A enjoins that dividends to the extent of 60 per cent.
of the assessable income of the Company after deduction of income tax and super tax must be paid.
When the assessable income of the Company has been determined and after the necessary deductions have been made, if dividends are not distributed in accordance with section 23A, the fiction applies to that portion of the profits and gains which were taxable as assessable income of the Company in the 421 taxable territories and which ought to have been so dis tributed.
Section 23A, as it was before the amendment in 1955, mentioned 60 per cent.
of the assessable income of a company as reduced by the amount of income tax and super tax payable by a company, and provided further that the undistributed portion of the assessable income of a company as computed and reduced shall, subject to certain conditions, be deemed to have been distributed as dividends amongst the shareholders.
We have already shown that the benefit of paragraph 12 is not available in respect of these fictional dividends, in so far as the assessable income of the Company was concerned.
It is, however, contended that these dividends would be deemed to be declared in Bhor State and to have been received there, and that unless another fiction is engrafted upon the fiction created by section 23A, these deemed dividends cannot be taxed in the hands of the shareholders.
No doubt, the section implies a fiction; but if the fiction is given effect to, such income must be deemed to be distributed to the shareholders, and the fiction thus transcends all questions of accrual or receipt in the taxable territories.
What is deemed to be distributed must be deemed to have accrued and also received by the person to whom it is deemed to be distributed [See sections 4(1)(a) and 4(1)(b)(i) and (ii)].
Paragraph 12 of the Concessions Order saved the Company in respect of income in Bhor State for the assessment year 194849 for the corresponding previous year ending before August 1, 1949, but it did not save the operation of a. 23A in respect of the assessable income of the Company in the taxable territories and the distribution of dividends to the shareholders from that income.
In our opinion, the High Court was right in holding that the dividends deemed to have been distributed out of the Assessable income of the Company in the taxable territories were ' rightly assessable in the total income of the shareholders resident in the taxable territories.
No question has been referred on the method of calculation of the dividends deemed to 422 have been distributed, and we need, therefore, express no opinion on that part of the case.
The shareholders (appellants 2 to 6) claim the benefit of a 14(2)(o) of the Act, which provides: " 14(2).
The tax shall not be payable by an assessee (c) in respect of any income, profits or gains accruing or arising to him within an Indian State, unless such income, profits or gains are received or deemed to be received in or are brought into British India in the previous year by or on behalf of the assessee, or are assessable under Section 12 B or Section 42.
" We have already shown that the force of the fiction makes the dividends which ought to have been distributed, to be so distributed.
We have also said that this fiction transcends all questions of accrual and receipt.
The effect of section 23A is to make dividends payable out of the British Indian income to the shareholders.
Paragraph 4 of the Concessions Order and section 14(2)(c) saved for the shareholders the income of the Company outside the taxable territories only, that is to say, the income earned in Bhor State.
They do not affect the operation of section 23A on the assessable income of the Company which, by reason of the application of the Indian Income tax Act even prior to the Extension Act, was assessable under the Indian Income tax Act.
Dividends payable out of that portion of the income will attract section 23A, and section 14(2)(c) does not apply.
Section 14(2)(c) saves only that portion of the income which was not assessable in the taxable territories by reason of its accrual in the State.
The Income tax Officer in assessing the income of the shareholders for the assessment year, 1949 50, ought to have deducted the income which accrued in Bhor State, while applying section 23A to them.
This he, in effect, did, but he adopted a method on which no question has been raised, and the correctness of the method cannot be examined.
The answer to question No. 1 is thus in the negative, with the modification that section 23A applied only to that 423 portion of the income which was earned in British India and not in Bhor State.
The answer to the second question is in the negative.
The answer to the third question is in the affirmative.
The question posed and answered by the High Court hardly arises, in view of the answer to the first questions That question and the answer to it are set aside as being not necessary.
The appeals thus fail except for a slight modification in the answer to the first question, and subject to that modification, are dismissed.
The appellants must bear the costs of these appeals.
There shall be one hearing fee.
Appeals dismissed.

summary/full:
The appellant had been incorporated in 1944 as a private company limited by shares in the former State of Bhor with its registered office in Bhor.
The shareholders of the company were at all material times resident in British India.
By virtue of the States Merger (Governors ' Provinces) Order, 1949, the State was merged with the Province of Bombay with effect from August 1, 1949.
The provisions of the Indian Income tax Act, 1922, were extended to the merged State with effect from April 1, 1949.
Under the power given by section 60A of the Act which enabled the Central Government to remove any difficulty in the application of the Act to merged States by making a general or special order granting exemption or other modification, the Central Government notified the Merged States (Taxation Concessions) Order, 1949.
Paragraph 12 of that Order stated that " the provisions of section 23A of tile Indian Income tax Act shall not be applied in respect of the profits and gains of any previous year ending before 1st day of August, 1949, unless the State law contains a provision corresponding thereto.
" The total world income of the company for 1946 and 1947 was Rs. 6,57,084 and 7,8o, 125 respectively and for those years the company declared dividends of Rs. 2,580 and Rs. 1140.
For the assessment years 1947 48 and 52 410 1948 49, corresponding to the account years 1946 and 1947, the Income tax Officers assessed the company as nonresident ; for the assessment year 1947 48, the Officer held that ' the assessable income of the company in British India for 1946 less the taxes must be deemed to be distributed among the shareholders in the proportion of their shareholdings, under section 23A of the Act, while for the account year 1947, the total world income less the taxes was deemed to be is tributed, the part proportionate to the income in Bhor State being excluded, except for purposes of rate.
In computing the " deemed dividends " the Income tax Officer did not deduct the interest charged to the company under section 18A (8) from the assessable income along with the income tax and super tax under section 23A(1).
The company and the shareholders claimed (1) that para.
12 of the Merged States (Taxation Concessions) Order, 1949, precluded the Income tax Officer from making an order under section 23A of the Act in respect of the profits and gains of the account years ending December 31, 1946, and December 31, 1947, which were previous years ending before August 1, 1949, and (2) that, in any case, interest under section 18A(8) ought to have been deducted along with the income tax before the fictional dividends were computed.
A further contention was raised that since the dividends in question would be deemed to have been declared in Bhor State and received there, unless another fiction was engrafted upon the fiction created in section 23A that the dividends must be deemed to have been received in the taxable territories, they could not be taxed in the hands of the shareholders.
The shareholders also claimed the benefit of s 14(2)(C) in respect of the entire amount of the balance deemed to be distributed.
Held: (1) that the expression "any previous year" in para.
12 of the Merged States (Taxation Concessions) Order, 1949, did not refer to all the previous years prior to and ending before August 1, 1949, but meant only one previous year, which would be a previous year for the purposes of the assessment year 194950, but which, to get the exemption, must end before the first day of August, 1949; (2) that the force of the fiction under section 23A of the Indian Income tax Act, 1922, which makes the dividends which ought to have been distributed to be so distributed, transcends all questions of accrual and receipt, and what is deemed to be distributed must also be deemed to have accrued and received by the person to whom it is deemed to be distributed; (3) that section 14(2)(c) of the Act saves only that portion of the income which is not assessable in the taxable territories by reason of its accrual in the State and does not affect the operation of section 23A on the assessable income of the company which, by reason of the application of the Indian Income tax Act even prior to the extension of the Act to the State after merger, was assessable under the Act 411 (4) that the wording of section 18A(8) of the Act under which interest is recoverable along with the tax, does not show that it is to be treated as tax but retains its character as interest, and since section 23A speaks of deduction only of income tax and supertax, no deduction could be made in respect of the interest under that section.


judgement:
90 of 1956.
Petition under article 32 of the Constitution of India for enforcement of Fundamental rights.
R. V. section Mani, for the petitioner.
N.S. Bindra, K. L. Hathi and R. H. Dhebar, for the respondents.
January 12.
The Judgment of the Court was delivered by MUDHOLKAR, J.
This is a petition under article 32 of the Constitution for issuing an appropriate writ to the respondents not to enforce the provisions of s.1144 of the Criminal Procedure Code or an appropriate writ forbidding respondent No. 4 from proceeding further with the prosecution of the petitioner for offences under sections 143 and 188 of the Indian Penal Code read with section 1 17 thereof, for quashing the proceedings against the petitioner before respondent No. 4 and for the issue of a writ of habeas corpus to respondents 1 to 3 directing them to produce or to cause to be produced the petitioner to be dealt with according to law and to set him at liberty.
The facts which have led up to the petition are briefly as follows: There are two unions of textile workers in Nagpur, one known as the Rashtriya Mill Majdoor Sangh and the other as Nagpur Mill Majdoor Sangh.
The former is a branch of the Indian National Trade Union Congress.
The Rashtriya Mill Majdoor Sangh entered into an agreement with the management of the Empress Mills regarding the closure of Empress Mill No. 1 for rebuilding it and regarding the employment of workers who were employed therein in a third shift.
This agreement was opposed by the Nagpur Mill Majdoor Sangh.
On January 25, 1956, a group of workers belonging to the Nagpur Mill Majdoor Sangh went in a procession to Gujar 's Wada, Mahal, Nagpur, where the office of the Rashtriya Mill Majdoor Sangh is located.
54 426 It is said that a scuffle took place there between some members of the procession and some workers belonging to Rashtriya Mill Majdoor Sangh.
Thereupon an offence under section 452 read with section 147 of the Indian Penal Code was registered by the police on January 27, 1956.
A large procession consisting of the workers of the Nagpur Mill Majdoor Sangh was taken out.
This procession marched through the city of Nagpur shouting slogans which, according to the District Magistrate, were provocative.
On the same night a meeting was held at the Kasturchand Park in which it was alleged that the workers belonging to the Nagpur Mill Majdoor Sangh were instigated by the speakers who addressed the meeting to offer satyagraha in front of the Empress Mill No. 1 and also to take out a procession to the office of the Rashtriya Mill Majdoor Sangh.
On January 28,1956, the workers belonging to the Nagpur Mill Majdoor Sangh assembled in large numbers in Mahal Chowk and on Mahal road blocking the traffic on the road.
It is said that these persons were squatting on the road and as they refused to budge the District Magistrate passed an order at 4 00 a.m. on January 29, 1956, which came into force immediately and was to remain in force for a period of fifteen days prohibiting, among other things, the assembly of five or more persons in certain areas specified in the order.
The petitioner entertained the view that the order promulgated by the District Magistrate under section 144 of the Code of Criminal Procedure was an encroachment on the fundamental rights of the citizens to freedom of speech and expression and to assemble peaceably and without arms, guaranteed under article 19(1)(a) and (b) of the Constitution and, therefore, he held a public meeting outside the area covered by the aforesaid order.
It is alleged that at that meeting he criticised the District Magistrate and exhorted the workers to contravene his order and take out processions in the area covered by the order.
Thereupon he was arrested by the Nagpur police for having committed the offences already referred to and produced before a magistrate, The magistrate remanded him to 427 jail custody till February 15, 1956.
The petitioner 's application for bail was rejected on the ground that the accusation against him related to a Don bailable offence.
Thereupon the petitioner moved the High Court at Nagpur for his release on bail but his application was rejected on February 22, 1956.
The petitioner then presented a petition before the High Court under section 491 of the Code of Criminal Procedure for a writ of habeas corpus.
That petition was dismissed by the High Court on May 9, 1956.
The petitioner then moved the High Court for granting a certificate under article 132 of the Constitution.
The High Court refused to grant the certificate non the ground that in its opinion the case did not involve any substantial question of law regarding the interpretation of the Constitution and was also not otherwise fit for grant of a certificate.
On April 23, 1956, the petitioner presented the present petition before this Court.
The petitioner also sought an exparte order for the stay of the proceedings before the respondent No. 4 till the decision on the petition to this Court.
This Court admitted the petition but rejected the application for stay.
On May 6, 1956, the petitioner took out a notice of motion for securing stay of the proceedings before respondent No. 4.
On May 28,1956, this Court ordered that the entire prosecution evidence be recorded but the delivery of the judgment be stayed pending the decision of this petition.
After the proceedings were stayed by this Court, the petitioner was released on bail by the trying magistrate.
On behalf of the petitioner Mr. Mani has raised the following contentions: (1) That section 144 of the Code of Criminal Procedure in so far as it relates to placing of restrictions on freedom of speech and freedom of assembly confers very wide powers on the District Magistrate and certain other magistrates and thus places unreasonable restrictions on the rights guaranteed under article 19(1)(a) and (b) of the Constitution.
(2) The District Magistrate constitutes the whole legal machinery and the only check for control on 428 his powers is by way of a petition to him to modify or rescind the order, that thus the District Magistrate becomes " a judge in his own cause" presumably, what learned counsel means is a judge with regard to his own decision and so the remedy afforded by the section is illusory.
Further the remedy by way of a revision application before the High Court against the order of the District Magis trate is also illusory and thus in effect there can be no judicial review of his order in the proper sense of that expression.
(3 Section 144 adopts "likelihood" or "tendency" as tests for judging criminality ; the test of determining the criminality in advance is unreasonable.
(4) Section 144 substitutes suppression of lawful activity or right for the duty of public authorities to maintain order.
(5) Even assuming that section 144 of the Code of Criminal Procedure is not ultra vires the Constitution, the order passed by the District Magistrate in this case places restrictions which go far beyond the scope of clauses (2) and (3) of article 19 and thus that order is unconstitutional.
Learned counsel also challenged the validity of the order on grounds other than constitutional, but we need not consider them here since it will be open to the petitioner to raise them at the trial.
This being a petition under article 32 of the Constitution, the petitioner must restrict himself to those grounds which fall within cl.
(1) thereof.
We think it desirable to reproduce the whole of section 144.
(1)In cases where, in the opinion of a District Magistrate, a Chief Presidency Magistrate, Sub Divisional Magistrate, or of any other Magistrate (not being a Magistrate of the third class) specially empowered by the 'State Government ' or the Chief Presidency Magistrate or the District Magistrate to act under this section there is sufficient ground for proceeding under this section and im mediate prevention or speedy remedy is desirable, such Magistrate may, by a written order stating 429 the material facts of the case and served in manner provided by section 134, direct any person to abstain from a certain act or to take certain order with certain property in his possession or under his management, if such Magistrate considers that such direction is likely to prevent or tends to prevent, obstruction, annoyance or injury, or risk of obstruction, annoyance or injury to any person lawfully employed, or danger to human life, health or safety, or a disturbance of the public tranquility or a riot, or an affray.
(2) An order under this section may, in cases of emergency or in cases where the circumstances do not admit of the serving in due time of a notice upon the person against whom the order is directed, be passed ex parte.
(3) An order under this section may be directed to a particular individual, or to the public generally when frequenting or visiting a particular place.
(4) Any Magistrate may, either on his own motion or on the application of any person aggrieved, rescind or alter any order made under this section by himself or any Magistrate subordinate to him, or by his predecessor in office.
(5) Where such an application is received, the Magistrate shall afford to the applicant an early opportunity of appearing before him either in person or by pleader and showing cause against the order; and if the Magistrate rejects the application wholly or in part, he shall record in writing his reasons for doing.
(6) No order under this section shall remain in force for more than two months from the making thereof; unless, in cases of danger to human life, health or safety, or a likelihood of a riot or an affray, the 'State Government ' by notification in the Official Gazette, otherwise directs.
" Sub section (1) confers powers not on the executive but on certain Magistrates.
This provision has been amended in some States, as for instance, the former Bombay State where power has been conferred on the Commissioner of Police to pass an order thereunder.
But we are not concerned with that matter here 430 because that provision is not contained in the law as applicable to the former State of Madhya Pradesh with which alone we are concerned in the matter before us.
Under sub section (1) the Magistrate himself has to form an opinion that there is sufficient ground for proceeding under this section and immediate prevention or speedy remedy is desirable.
Again the subsection requires the Magistrate to make an order in writing and state therein the material facts by reason of which he is making the order thereunder.
The sub section further enumerates the particular activities with regard to which the Magistrate is entitled to place restraints.
Sub section (2) requires the Magistrate ordinarily to serve a notice on the person against whom the order is directed and empowers him to proceed exparte only where the circumstances do not admit of serving such a notice in due time.
Sub section (3) does not require any comment.
Sub section (4) enables a Magistrate to rescind or alter an order made under this section and thus enables the person affected, if the order is addressed to a specified individual, or any member of the public, if the order is addressed to the public in general, to seek, by making an application, exemption from compliance with the order or to seek a modification of the order and thus gives him an opportunity to satisfy the Magistrate about his grievances.
The Magistrate has to deal with applications of this kind judicially because he is required by sub section
(5) to state his reasons for rejecting, wholly or in part, the application made to him.
Finally the normal maximum duration of the order is two months from the date of its making.
The restraints imposed by the order are thus intended to be of a temporary nature.
Looking at the section as a whole it would be clear that, broadly speaking, it is intended to be availed of for preventing disorders, obstructions and annoyances and is intended to secure the public weal.
The powers are exercisable by responsible magistrates and these magistrates have to act judicially.
Moreover, the 431 restraints permissible under the provision are of a temporary nature and can only be imposed in an emergency.
Even so, according to the learned counsel these provisions place unreasonable restrictions on certain fundamental rights of citizens.
Firstly, according to learned counsel restrictions on the rights guaranteed by cls.
(2) and (3) of article 19 of the Constitution can be placed in the interest of id public order " and not in the interest of the " general public ", which expression, according to him is wider in its ambit than public order and that since section 144 enables a magistrate to pass an order in the interest of the general public the restrictions it authorises are beyond those permissible under cls.
(2) and (3) of article 19.
It is significant to note that section 144 nowhere uses the expression " general public ".
Some of the objects for securing which an order thereunder can be passed are, " to prevent obstruction, annoyance, injury. . . etc.
No doubt, the prevention of such activities would be in the ,public interest" but it would be no less in the interest of maintenance of " public order.
" Secondly, according to learned counsel, section 144 is an amalgam of a number of things to many of which there is no reference even in el.
(2) of article 19.
In order to enable the State to avail of the provisions of cls.
(2) and (3), he contends, a special law has to be passed and a provision like section 144 can serve no purpose.
This contention has only to be mentioned to be rejected.
Clauses (2) to (6) of article 19 do not require the making of a law solely for the purpose of placing the restrictions mentioned in them.
Thirdly, according to learned counsel sub section
(1) of a. 144 does not require the magistrate to make an enquiry as to the circumstances which necessitate the making of an order thereunder.
It is true that there is no express mention anywhere in section 144 that the order of the magistrate should be preceded by an enquiry.
But we must construe the section as a whole.
The latter part of sub section
(1) of section 144 specifically mentions that the order of the magistrate should sot out the 432 material facts of the case.
It would not be possible for the magistrate to set out the facts unless he makes an enquiry or unless he is satisfied about the facts from personal knowledge or on a report made to him which he prima facie accepts as correct.
Clearly, therefore, the section does not confer an arbitrary power on the magistrate in the matter of making an order.
It is contended that section 144 of the Code of Criminal Procedure confers very wide powers upon certain magistrates and that in exercise of those powers the magistrates can place very severe restrictions upon the rights of citizens to freedom of speech and expression and to assemble peaceably and without arms.
It seems to us, however, that wide though the power appears to be, it can be exercised only in an emergency and for the purpose of preventing obstruction, annoyance or injury to any person lawfully employed, or danger to human life, health or safety, or a disturbance of the public tranquillity or a riot, or " an affray ".
These factors condition the exercise of the power and it would consequently be wrong to regard that power as being unlimited or untrammelled.
Further, it should be borne in mind that no one has a right to cause " obstruction, annoyance or injury etc., " to anyone.
Since the judgment has to be of a magistrate as to whether in the particular circumstances of a case an order, in exercise of these powers, should be made or not, we are entitled to assume that the powers will be exercised legitimately and honestly.
The section cannot be struck down on the ground that the magistrate may possibly abuse his powers.
It is also true that initially it is the magistrate con cerned who has to form an opinion as to the necessity of making an order.
The question ', therefore, is whether the conferral of such a wide power amounts to an infringement of the rights guaranteed under article 19(1)(a) and (b) of the Constitution.
The rights guaranteed by sub cl.
(a) are not absolute rights but are subject to limitations specified in cl.
(2) of article 19 which runs thus: " Nothing in sub clause (a) of clause (1) shall affect the operation of any existing law,, or prevent the 433 State from making any law, in so far as such law imposes reasonable restrictions on the exercise of the right conferred by the said sub clause in the interests of the security of the State, friendly relations with foreign States, public order, decency or morality, or in relation to contempt of court, defamation or incitement to an offence.
" Similarly the rights to which sub cl.
(b) relates are subject to the limitations to be found in cl.
(3) of article 19, which runs thus: " Nothing in sub clause (b) of the said clause shall affect the operation of any existing law in so far as it imposes, or prevent the State from making any law imposing, in the interests of public order, reasonable restrictions on the exercise of the right conferred by the said sub clause.
" The Code of Criminal Procedure was an existing law at the commencement of the Constitution and so, in the context of the grounds on which its validity is challenged before us, what we have to ascertain is whether the conferral thereunder of a power on a magistrate to place restrictions on the rights to which sub section
(a) and (b) of article 19 relate is reasonable.
It must be borne in mind that the provisions of section 144 are attracted only in an emergency.
Thereunder, the initial judge of the emergency is, no doubt, the District Magistrate or the Chief Presidency Magistrate or the sub divisional magistrate or any other magistrate specially empowered by the State Government.
But then, the maintenance of law and order being the duty and function of the executive department of the State it is inevitable that the q question of formation of the opinion as to whether there is an emergency or not must necessarily rest, in the first instance, with those persons through whom the executive exercises its functions and discharges its duties.
It would be impracticable and even impossible to expect the State Government itself to exercise those duties and func tions in each and every case.
The provisions of the section therefore which commit the power in this regard to a magistrate belonging to any of the classes referred to therein cannot be regarded as unreasonable.
We 55 434 may also point out that the satisfaction of the magistrate as to the necessity of promulgating an order under section 144 of the Code of Criminal Procedure is not made entirely subjective by the section.
We may also mention that though in an appropriate case a magistrate is empowered to make an order under this section ex parte the law requires that he should, where possible serve a notice on the person or persons against whom the order is directed before passing that order.
Then sub section
(4) provides that any magistrate may either on his own motion or on the application of any person aggrieved, rescind or alter any order made under this section.
This clearly shows that even where an ex parte order is made the person or persons affected thereby have a right to challenge the order of the magistrate.
Sub section
(5) provides that where such a challenge is made, the magistrate shall give an early opportunity to the person concerned of appearing before him and showing cause against the order.
The decision of the magistrate in such a proceeding would undoubtedly be a judicial one inasmuch as it will have been arrived at after hearing the party affected by the order.
Since the proceeding before the magistrate would be a judicial one, he will have to set aside the order unless he comes to the conclusion that the grounds on which it rests are in law sufficient to warrant it.
Further, since the propriety of the order is open to challenge it cannot be said that by reason of the wide amplitude of the power which section 144 confers on certain magistrates it places unreasonable restrictions on certain fundamental rights.
Learned counsel, however, says that the right conferred on the aggrieved person to challenge the order of the magistrate is illusory as he would be a judge with regard to his own decision.
This argument would equally apply to an application for review made in a civil proceeding and we do not think that it is at all a good one.
Again, though no appeal has been provided in the Code against the Magistrate 's order under section 144, the High Court has power under section 435 read with section 439 of the Code to entertain an application for the revision of such an order, The powers of the High Court in 435 dealing with a revision application are wide enough to enable it to quash an order which cannot be supported by the materials upon which it is supposed to be based.
We may point out that sub section
(1) of section 144 requires a magistrate who makes an order thereunder to state therein the material facts upon which it is based and thus the High Court will have before it relevant material and would be in a position to consider for itself whether that material is adequate or not.
As an instance of a case where the High Court interfered with an order of this kind, we may refer to a decision in P. T. Chandra, Editor, Tribune vs Emperor(1).
There, the learned judges quite correctly pointed out that the propriety of the order as well as its legality can be considered by the High Court in revision, though in examining the propriety of the order the High Court will give due weight to the opinion of the District Magistrate who is the man on the spot and responsible for the maintenance of public peace in the district.
In that case the learned judges set aside an order of the District Magistrate upon the ground that there was no connection between the act prohibited and the danger apprehended to prevent which the order was passed.
We would also like to point out that the penalty for infringing an order under section 144 is that provided in section 188, Indian Penal Code.
When, therefore, a prosecution is launched thereunder, the validity of the order under section 144, Criminal Procedure Code, could be challenged.
We are, therefore, unable to accept Mr. Mani 's contention that the remedy of judicial review is illusory.
The argument that the test of determining criminality in advance is unreasonable, is apparently founded upon the doctrine adumbrated in Scheneck 's case(2) that previous restraints on the exercise of fundamental rights are permissible only if there be a clear and present danger.
It seems to us, however, that the American doctrine cannot be imported under our Constitution because the fundamental rights guaranteed under article 19 (1) of the Constitution are not absolute rights but, as pointed out in State of Madras (1) A.I.R. 1942 Lah. 171.
(2) Scheneck vs U. section, ; 436 vs
V. G. Row (1) are subject to the restrictions placed in the subsequent clauses of article 19.
There is nothing in the American Constitution corresponding to cls.
(2) to (6) of article 19 of our Constitution.
The Fourteenth Amendment to the U. section Constitution provides, among other things, that " no State shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any State deprive any person of life, liberty, or property, without due process of law; that of the Constitution of the United States.
Then again, the Supreme Court of the United States has held that the privileges and immunities conferred by the Constitution are subject to social control by resort to the doctrine of police power.
It is in the light of this background that the test laid down in Scheneck 's case (2) has to be understood.
The language of section 144 is somewhat different.
The test laid down in the section is not merely " likelihood " or " tendency ".
The section says that the magistrate must be satisfied that immediate prevention of particular acts is necessary to counteract danger to public safety etc.
The power conferred by the section is exercisable not only where present danger exists but is exercisable also when there is an apprehension of danger.
Apart from this it is worthy of note that in Scheneck 's case (2) the Supreme Court was concerned with the right of freedom of speech and it observed: "It well may be that the prohibition of law abridging the freedom of speech is not confined to previous restraints, although to prevent them may have been the main purpose We admit that in many places and in ordinary times the defendants, in saying all that was said in the circular, would have been within their constitutional rights.
But the character of every act depends upon the circumstances in which it is done The most stringent protection of free speech would not protect a man in falsely shouting fire in a theatre, and causing a (1) ; (2) ; 437 panic.
It does not even protect a man from an injunction against uttering words that may have all the effect of force. .
The question in every case is whether the words used are used in such circumstances and are of such a nature as to create a clear and present danger that they will bring about the substantive evils that Congress has a right to prevent.
It is a question of proximity and degree.
" Whatever may be the position in the United States it seems to us clear that anticipatory action of the kind permissible under section 144 is not impermissible under cls.
(2) and (3) of article 19.
Both in el.
(2) (as amended in 1951) and in cl.
(3) power is given to the legislature to make laws placing reasonable restrictions on the exercise of the rights conferred by these clauses in the interest, among other things, of public order.
Public order has to be maintained in advance in order to ensure it and, therefore, it is competent to a legislature to pass a law permitting an appropriate authority to take anticipatory action or place anticipatory restrictions upon particular kinds of acts in an emergency for the purpose of maintaining public order.
We must, therefore, reject the contention.
It is no doubt true that since the duty to maintain law and order is cast upon the Magistrate, he must perform that duty and not shirk it by prohibiting or restricting the normal activities of the citizen.
But it is difficult to say that an anticipatory action taken by such an authority in an emergency where danger to public order is genuinely apprehended is anything other than an action done in the discharge of the duty to maintain order.
In such circumstances that could be the only mode of discharging the duty.
We, therefore, reject the contention that section 144 substitutes suppression of lawful activity or right for the duty of public authorities to maintain order.
Coming to the order itself we must consider certain objections of Mr. Mani which are, in effect, that there are three features in the order which make it unconstitutional.
In the first place, according to him the order is directed against the entire public though the magistrate has stated clearly that it was promulgated 438 because of the serious turn which an industrial dispute had taken.
Mr. Mani contends that it is unreasonable to place restrictions on the movements of the public in general when there is nothing to suggest that members of the public were likely to indulge in activities prejudicial to public order.
It is true that there is no suggestion that the general public was involved in the industrial dispute.
It is also true that by operation of the order the movements of the members of the public would be restricted in particular areas.
But it seems to us that it would be extremely difficult for those who are in charge of law and order to differentiate between members of the public and members of the two textile unions and, therefore, the only practical way in which the particular activities referred to in the order could be restrained or restricted would be by making those restrictions applicable to the public generally.
The right of citizens to take out processions or to hold public meetings flows from the right in article 19(1)(b) to assemble peaceably and without arms and the right to move anywhere in the territory of India.
If, therefore, any members of the public unconnected with the two textile unions wanted to exercise these rights it was open to them to move the District Magistrate and apply for a modification of the order by granting them an exemption from the restrictions placed by the order.
Mr. Mani 's contention, and that is his second ground of attack on the Magistrate 's order, is that the only exception made in the order is with respect to funeral processions and religious processions and, therefore, it would not have been possible to secure the District Magistrate 's permission for going out in procession for some other purpose or for assembling for some other purpose in the area to which the order applied.
So far as the customary religious or funeral processions are concerned, the exemption has been granted in the order itself that if anyone wanted to take out a pro cession for some other purpose which was lawful it was open to them under section 144, sub section
(4), to apply for an alteration of the order and obtain a special exemption.
439 More omission of the District Magistrate to make the exemption clause of the order more comprehensive would not, in our opinion, vitiate the order on the ground that it places unreasonable restrictions on certain fundamental rights of citizens.
The third and last ground on which Mr. Mani challenged the constitutionality of the order was that while the order prohibits the shouting of provocative slogans in public places etc., it does not give any definition of what was meant by the expression "provocative slogans ".
Therefore, according to Mr. Mani, this order is vague and must be deemed to be placing unreasonable restrictions on the rights of free speech of citizens.
It seems to us that the expression " provocative slogans " has necessarily to be understood in the context in which it has been used in the order and, therefore, it cannot be regarded as vague.
We have, therefore, reached the conclusion that the order of the District Magistrate is not unconstitutional either because section 144 is itself violative of fundamental rights recognised in article 19 or on the ground that it is vague and places unreasonable restrictions on those fundamental rights.
We, therefore, dismiss this petition.
Shortly after this petition was made to this Court, the petitioner presented a special leave petition in which he seeks to challenge the judgment of the Nagpur High Court dated April 9, 1956, dismissing his writ petition to that High Court.
The points raised in the Special Leave Petition are similar to those raised in this petition.
Since we are dismissing this petition, there can be no question of granting the special leave to the petitioner to appeal against the judgment of the Nagpur High Court.
Petition dismissed.

summary/full:
The District Magistrate, apprehending a breach of peace as a result of demonstrations and counter demonstrations held by two rival labour unions promulgated an order under section 144 of the Code of Criminal Procedure, which was to remain in force for a period of fifteen days, prohibiting, inter alia, the assembly of five or more persons in certain specified areas.
The petitioner took it as an invasion on the fundamental rights of the citizens under article 19(1)(a) and (b) of the Constitution and held a meeting outside the specified areas and exhorted the workers to take out processions in the notified areas in defiance of the said order.
He was thereupon prosecuted under sections 143 and 188 read with section 117 of the Indian Penal Code.
He moved the High Court under section 491 of the Code of Criminal Procedure, and having failed to get relief there, moved this Court under article 32 of the Constitution challenging the constitutional validity of section 144 of the Code on the ground that it conferred wide and unguided powers on the District Magistrate and thus contravened article 19(i)(a) and (b) of the Constitution.
Held, that the attack on the constitutional validity of section 144 of the Code of Criminal Procedure must fail, 424 Read as a whole, the section clearly showed that it was intended to secure the public weal by preventing disorders, obstructions and annoyances.
The powers conferred by it were exercisable by responsible Magistrates who were to act judicially and the restraints permitted by it were of a temporary nature and could be imposed only in an emergency.
The restrictions which the section authorises are not beyond the limits prescribed by cls.
(2) and (3) of article 19 of the Constitution.
The prevention of such activities as are contemplated by the section is undoubtedly in public interest and therefore no less in the interest of public order.
Clauses (2) to (6) of article 19 of the Constitution do not require a special enactment for the enforcement of the restrictions mentioned in them.
The impugned section must be construed as a whole and although the first part of cl.
(1) does not expressly mention that the order of the Magistrate must be preceded by an enquiry, the second part clearly indicates that the Magistrate has to satisfy himself either by his own enquiry or from a report made to him as to what the facts are.
The section does not, therefore, confer an arbitrary power on the Magistrate in the matter of making the order.
The wide power under the section can be exercised only in an emergency and for the purpose of preventing obstruction, annoyance or injury etc.
as specified therein and those are the factors that must necessarily condition the exercise of the power and, therefore, it was not correct to say that the power is unlimited or untrammelled.
Since the judgment has to be of a Magistrate, it can be assumed that the power will be exercised legitimately and honestly.
The section cannot be struck down simply on the ground that the Magistrate might possibly abuse his power.
Although the section makes the Magistrate the initial Judge of an emergency that cannot make the restrictions placed by it unreasonable.
Since maintenance of law and order rests with the Executive, it is only appropriate that the initial decision must be with the Magistrate.
But such decision is not entirely based on his subjective satisfaction.
Sub sections (2), (4) and (5) clearly indicate that the Magistrate must act judicially.
Moreover, the propriety of his order can be challenged in revision.
It was not, therefore, correct to say that the remedy of a person aggrieved by an order under the section was illusory.
P. T. Chandra, Editor, Tribune vs Emperor, A.I.R. 1942 Lah. 17r, referred to.
The American doctrine that previous restraints on the exer cise of fundamental rights are permissible only if there is a clear and present danger, can have no application in India, since the rights guaranteed by article 19(1) of the Constitution are not absolute but subject to restrictions under cls.
(2) to (6) of that 425 Article.
Anticipatory action permitted by section 144 is not, therefore, hit by cls.
(2) and (3) of article 19.
Scheneck vs U. section ; , considered.
State of Madras vs V. G. Row ; , relied on.