judgement:
ecial Leave Petition (Civil) No. 7506 of 1988.
From the Judgment and Order dated 22.10.1987 of the Kerala High Court in S.A. Nos.
527 of 1981 and 535 of 1981.
M.K. Ramamurthy, Mrs. C. Ramamurthy and M.A. Krishnamurthy for the Petitioner.
The Order of the Court was delivered by VENKATARAMIAH, J.
The question involved in this petition is whether a member of a trade union is entitled to ask for an account and to claim refund of the sums received by the trade union from the management for and on his behalf on his ceasing to be a member of the said trade union.
Respondents 1 and 2, E.K. Thomas and K.K. Surendran respectively, were employees of a certain management which was the member of the Cochin Railway Forwarding Agents Association whose President is impleaded as Respondent No. 4 in this petition.
The management concerned was doing the business of a clearing agent in the Cochin Harbour Terminus Railways Goods Shed.
The respondents 1 and 2 were working as head load workers.
Some of the employees working under the management concerned were members of a trade union called Cochin Port Thozhilali Union (hereafter referred to as `the trade union ') whose General Secretary is impleaded as Respondent No. 3 in this petition.
The petitioner, G.S. Dhara Singh was the President of the trade union.
The terms and conditions of service including the rates of wages and other allied matters relating to the head load workers were decided and settled through mutual 'negotiations between the trade union and Respondent No. 4.
Under an agreement entered into in October, l973 an amount equivalent to 10 paise out of every rupee earned by the workers was deducted by the management towards the gratuity fund and transferred to the trade union for and on behalf of the workers.
Under another agreement a sum equivalent to 10 paise per rupee in the wages of the workers was paid by the management to the trade union towards accident benefit fund of which the workers were the beneficiaries.
The amounts so collected were entrusted to the petitioner, who was also the treasurer and custodian of the funds of the trade union.
It is alleged that the Petitioner deposited the amounts so received by him in his personal name in his bank account.
No account of the amounts so received by him was rendered and the members of PG NO 262 the trade union found that it was not possible to keep control over the funds so received by the petitioner.
The petitioner who was the President of the trade union did not call any general body meeting and thus the members of the trade union could not ventilate their grievance regarding the mismanagement of the funds received by the petitioner by democratic means.
In view of the above difficulty faced by them 85 workers including Respondents 1 & 2 and three others, namely, K.T. Raghavan, A.N. Joseph and K.J. Anthappan, resigned from the trade union on 13.1.1976 and formed a separate union of their own, which was registered under the .
Thereafter Respondent Nos. 1 & 2, K.T. Raghavan, 'A.N. Joseph and K.J. Anthappan instituted five suits being Original Suits Nos. 49 to 52 and 54 of 1977 on the file of the Munsiff, Cochin against the petitioner and Respondent No. 3 praying for a decree directing the petitioner and Respondent No. 3 to render an account of the amounts collected on their behalf from December, 1969 towards the accident benefit fund and from October, 1973 towards the gratuity at the rate of 10 paise per rupee under each head and to pay the amounts due to them.
Each of the plaintiffs in the said suits estimated the amount payable to him at Rs. 3000.
They also claimed future interest at 6 per cent per annum on the amounts found to be due to them till the date of payment.
The petitioner, who was the President and Treasurer of the trade union took up various pleas denying his liability to render account and to refund the amount.
One of the pleas raised by the petitioner was that since the plaintiffs had resigned and ceased to be the members of the trade union they had no right to claim the refund of the sums due to them from out of the funds of the trade union and that if they rejoined the trade union they would be entitled for payment of gratuity and accident benefit when occasion arose for payment of the same.
He also pleaded that the suits were not maintainable in civil courts in view of the provisions of the and the .
On the basis of the pleas raised by the parties, the Trial Court framed two issues, in each of the suits namely, (i) whether the plaintiff could ask the petitioner and Respondent No. 3 to render an account of the amounts received by them and (ii) whether he was entitled to claim the refund of any amount.
All the five suits were tried together and they were disposed of by a common Judgment dated 31.5.
1979 by the learned Munsiff.
By his judgment the Munsiff passed a preliminary decree against the petitioner and Respondent No. 3 directing them to render an account of the amounts received by them towards the accident benefit fund from PG NO 263 December l969 to 16.11.1975 and towards gratuity from October, 1973 to 16.11.1975.
The learned Munsiff further directed that each of the plaintiffs was entitled to get proportionate share of the amount due to him from out of the total amount received by the petitioner and Respondent No. 3.
He further directed the plaintiffs to apply for a final decree for ascertaining the actual amount due to them in accordance with the preliminary decree passed by him along with future interest at 6 per cent per annum from the date of suit till date of realization.
Aggrieved by the judgment and decree passed by the learned Munsiff the petitioner filed two appeals in A.S. 122 of 1979 and A.S. 124 of 1979 on the file of the Additional Sub Judge, Cochin against the decrees passed by the Munsiff in favour of Respondent Nos. 1 and 3 respectively.
After hearing the parties the learned SubJudge found that the petitioner and Respondent No. 3 had received from the management amounts on behalf of the workmen concerned towards gratuity and accident benefit fund but the plaintiffs were not entitled to the decree at the hands of the Civil Court since the suits were not maintainable in view of the provisions of the , 19)7?.
and the which provided for separate remedies.
He accordingly set aside the decrees passed in favour of Respondent Nos. 1 and 2 in the suits filed by them.
Aggrieved by the common Judgment dated 21.8.1980 of the learned Additional Sub Judge Respondent Nos. 1 and 7 filed Second Appeal No. 537 of 1981 F and Second Appeal No. 535 of 1981 G respectively on the file of the High Court of Kerala.
The two second appeals were heard together and the High Court by its common Judgment dated 22.
1987 set aside the judgment and decrees passed by the First Appellate Court and restored the judgment and decrees passed by the Trial Court.
This Special Leave Petition is filed by the petitioner against the said common judgment of the High Court under Article 136 of the Constitution of lndia.
At the hearing of the Special Leave Petition the learned counsel for the petitioner stated and we think rightly that the ground on which the First Appellate Court had set aside the decrees passed by the Trial Court, namely, that the suits were barred under the provisions of the and the was unsustainable.
But he, however, contended that since the amounts had been realised by the petitioner and Respondent No. 3 from the management under settlements which had been entered into through the trade union Respondents 1 and 2 could not claim the amount after resigning from the membership of the trade union as the said amounts formed part of the general fund of the trade union to which a PG NO 264 member who had resigned had no right.
The learned counsel further urged that since the amounts were made available to the trade union by the employer for the benefit of the members of the trade union on the happening of certain contingencies and since the resignation from membership of the trade union was not one such contingency a member of a trade union who had resigned from the membership of the trade union could not claim the amount.
He further urged that only on the dissolution of the trade union its funds could be distributed as per the rules of the trade union and where the rules did not provide for the same then the fund was liable to be distributed as per rule 11(1) of the Central Trade Union Regulations, 1938.
We do not find that the petitioner is right in his contentions.
Admittedly, the amounts were received by the trade union from the employer concerned towards the gratuity and accident benefit to which the workers were entitled.
There was no scheme drawn up by the trade union regarding the payment of the gratuity amount and the accident benefit fund received on behalf of the Workmen to the workmen concerned.
There was no agreement between the trade union and its members that the amount received towards gratuity and accident benefit should form part of funds of the trade union.
Any amount received for and on behalf of the members is liable to he refunded to the workmen concerned.
In the instant case the amount which had been received on behalf of Respondent Nos. 1 and 1 by the petitioner and Respondent No. 3 had, therefore, to be refunded to them on their resignation from the membership of the trade union.
We do not find any tenable defence which the trade union could put forward in the circumstances of the case.
On the question that the workmen concerned were entitled to the amounts received on their behalf there is a concurrent finding of all the three courts in favour of the plaintiffs.
The decision in Balmer Lawrie Workers ' Union, Bombay and Anr.
vs Balmer Lawrie and Co. Ltd. and Ors., [ l985 ] 2 S.C.R. 492 is of no assistance to the petitioner.
In that case this Court was concerned with the validity of clause 17 of the Settlement, referred to therein, which read as follows: "Arrears will be paid within two months from the date of signing of the settlement.
Further, the Company shall collect from each workman an amount equivalent to 15% of the gross arrears payable to each employee under this settlement as contribution to the Union Fund and this Amount shall be paid to the Union within 3 days of the payment of arrears by Payee 's A/c Cheque." (emphasis added) PG NO 265 The appellant in the above case which was a non recognised union had challenged the validity of clause 17, referred to above, on the ground that it permitted a compulsory exaction not permitted by the Payment of Wages Act from the arrears payable to the workmen.
This Court rejected the said contention since under clause 17 the amount of 15% of the gross arrears received by the Union was to be treated as contribution to the Union Fund and that the said clause was a valid one.
In the case before us the petitioner and Respondent No. 3 have not shown that there was any such settlement between the management and the trade union or a scheme prepared by the trade union which was binding on the workmen under which the amounts received towards the gratuity and the accident benefit fund on behalf of the workmen would become a part of the Union fund.
We do not, therefore, find any ground to interfere with the judgment of the High Court.
This Special Leave Petition, therefore, fails and it is dismissed.
N.V.K. Petition dismissed.

summary/full:
The terms and conditions of service including the rates of wages and other allied matters were decided and settled through mutual negotiations between the trade union represented by respondent No. 3, its General Secretary and respondent No. 4, President of the Employers Association.
Respondent Nos. 1 and 2 were workers and were members of the trade union.
Under an agreement entered into in October, 1973 an amount equivalent to 10 paise out of every rupee earned by the workers was deducted by the management towards the gratuity fund and transferred to the trade union for and on behalf of the workers.
Under another agreement a sum equivalent to 10 paise per rupee in the wages of the workers was paid by the management to the trade union towards accident benefit fund of which the workers were the beneficiaries.
The amounts so collected were entrusted to the petitioner, who was also the treasurer and custodian of these funds of the trade union.
The petitioner deposited the amounts received by him in his personal name in his bank account, and no account of these amounts was rendered by him to the members of the trade union.
He did not call any general body meeting and the members of the trade union could not ventilate their grievance regarding mismanagement of the funds.
In view of the aforesaid difficulty, 85 workers including Respon PG NO 258 PG NO 259 dent Nos. 1 and 2 and three others resigned from this trade union on January 13, 1976, and formed a separate trade union of their own and A registered the same under the .
Respondent Nos. 1 & 2 and three other persons instituted five suits in the Munsiff Court against the petitioner and respondent No. 3 for a decree directing the petitioner and respondent No. 3 to render an account of the amounts collected on their behalf from December, 1969 towards the accident benefit fund and from October, 1973 'towards the gratuity fund.
The petitioner who was the President and the Treasurer of the trade union resisted the suits and contended that since the plaintiffs had resigned and ceased to be members of the trade union they had no right to claim the refund of the sums due to them from out of the funds of the trade union and that the suits were not maintainable in the Civil Courts in view of the provisions of the and the .
All these suits were tried together and the Munsiff passed a preliminary decree against the petitioner and respondent No. 3 directing them to render an account of the amounts received by them, and further directed that each of the plaintiffs was entitled to get his proportionate share of the amount due to him from out of the total amount received by the petitioner and respondent No. 3.
The petitioner filed an appeal and the Additional Sub Judge found that the petitioner and respondent No. 3 had received from the management amounts on behalf of the workmen, but held that the plaintiffs were not entitled to any decree at the hands of the Civil Court since the suits were not maintainable in view of the provisions of the , l972 and the .
Second Appeals were filed in the High Court by respondent Nos. 1 & 2 and the High Court by a common judgment set aside the judgment and decree passed by the First Appellate Court and restored the judgment and decree passed by the Trial Court.
In the appeal by Special Leave to this Court it was contended that the provisions of the and the have debarred the filing of the suit, that respondent Nos. 1 & 2 could not claim the amount after resigning from the PG NO 260 membership of the trade union as the said amounts formed part of the general fund of the trade union, and that only on the dissolution of the trade union its funds could be distributed as per the rules of the trade union, and where the rules did not provide for the same, then the fund was liable to be distributed as per Rule 11(1) of the Central Trade Union Regulations, l938.
On the question: whether a member of the trade union is entitled to ask for an account and to claim refund of sums received by the trade union from the management for and on his behalf on his ceasing to be a member.
Dismissing the Special Leave Petition, HELD: 1.
The civil suits filed by the workers Respondent Nos. 1 & 2 were not barred under the provisions of the and the .
[264C] 2.
The amounts were received by the trade union from the employer concerned towards the gratuity and accident benefit to which the workers were entitled.
There was no scheme drawn up by the trade union regarding the payment of the gratuity amount and the accident benefit fund received on behalf of the workmen to the workmen concerned.
There was no agreement between the trade union and its members that the amount received towards gratuity and accident benefit should form part of funds of the trade union.
Any amount received for and on behalf of the members is liable to be refunded to the workmen concerned.
[264D] In the instant Case, the amount which had been received on behalf of Respondent Nos. 1 & 2 by the petitioner and Respondent No. 3 had, therefore, to be refunded to them on their resignation from the membership of the trade union.
[264E] 3.
There is no warrant for the view that only on the dissolution of the trade union its funds could be distributed as per the rules of the trade union and that where the rules did not provide for the same, the fund was liable to be distributed as per Rule 11(1) of the Central Trade Union Regulations 1938.
[264B] Balmer Lawrie Workers Union.
Bombay and Anr.
vs Balmer Lawrie and Co. Ltd. and Ors., [l985] 2 S.C.R. 492 distinguished.
PG NO 261


judgement:
ivil Appeal Nos.
2034 2036 of 1974.
From the Judgment and Order dated 1.10.1973 of the Gujarat High Court in Wealth Tax Reference No. 16 of 1971.
Dr. Gauri Shankar, Miss A. Subhashini for the Appellant.
Harish Salve and Mrs. A.K. Verma for the Respondent.
The following Judgments of the Court were delivered: PATHAK, CJ.
These appeals by certificate granted by the Gujarat High Court are directed against the judgment of the High Court disposing of three wealth tax References.
The three trust deeds were executed by Narottam Lalbhai for the benefit of the assessee, his wife and his children and grand children The deed dated March 19.
1955 created a trust known as the Arvind Narottam Trust.
The deed dated April 9, 1955 created a trust called the Arvind Family Trust.
And the deed dated March 18, 1961 created a trust described as the Arvind Kalyan Trust.
All the three trust deeds are couched in identical terms, except in regard to the minimum amounts payable to the beneficiaries out of the income of each year.
There was one further difference in detail.
The first two deeds.
specified a period of 18 years from the date of execution as the period during which the net income could be distributed to the assessee.
his wife and children, while the third specified a period of 30 years.
The minimum annual payments to be made under the three trust deeds to the assessee by way of maintenance were Rs. 250, Rs. 150 and Rs.250 respectively.
Under each of the trust deeds the settlor specified the interest of the beneficiaries in the trusts.
The pertinent terms of one of them, the Arvind Narottam Trust Deed. may be set forth here.
Clauses 7 and 8 of that Trust Deed provide: "7(a) Whatever income by way of interest or otherwise is received each year by the trustees from the trust fund should be first applied in meeting with the expenses of the PG NO 269 management of the trust and the payment of taxes thereof.
For a period of 18 years hereafter, the trustees may pay to Arvind or if Arvind gets married during the period to Arvind, his wife and children or to one or more of these persons, such portion of the net income remaining thereafter as the trustees deem fit.
However, the trustees shall pay to Arvind, or if Arvind gets married during the period to each Arvind and his wife, at least Rs.150 every year.
After such distribution, if there remains any surplus from the income of any year, it shall be added to the corpus of the fund.
if in any year the net income accuring to the fund is less than Rs.300 the whole amount should be paid to Arvind and if Arvind gets married during the period to Arvind and his wife in equal shares.
If Arvind expires during the period of 18 years hereafter or if Arvind gets married during the period and both Arvind and his wife expire, the whole of the net income of the trust fund should be added to the corpus for a period of 18 years hereafter.
(b) Whatever may be the corpus and the accumulated balance remaining undistributed out of the income of each year, shall be paid (as capital) at the end of 18 years hereafter to Arvind, his wife and his children or survivor or such of them in such proportion as the trustees deem fit.
If the trustees are not able to decide Upon the persons to whom or the proportion in which the said corpus and accumulated balance of income is to be distributed or it is not possible legally to give effect to the decision of trustees or it is illegal to do so, then the proportion in which the distribution will be made will be an equal share for each of the persons or survivors comprising of Arvind, his wife and his children.
If none of the said persons are alive at the time of distribution then the distribution will be made to Niranjan.
his wife and children or survivors.
all or such of them and in such proportion as the trustees deem fit.
If none of the said persons are alive at the time of distribution then the corpus and the balance of income will be given over by the trustees on such conditions as they deem fit as donation to the Gujarat University or any other educational institution or an institution giving medical aid or attending to, the health of public in general.
PG NO 270 8.
If the trustees so think fit the trustees are hereby 74 to distribute as capital even before the expiry of 18 years whatever property and income is at the particular time accumulated in the trust fund to Arvind, his wife and his children or survivor or such of them in such proportion as the trustees deem fit.
If the trustees are not able to decide upon the persons to whom or the proportion in which the said corpus and accumulated balance of income is to be distributed or it is not possible legally to give effect to the decision of trustees or it is illegal to do so, then the proportion in which the distribution will be made will be an equal share for each of the persons or survivors comprising of Arvind, his wife and his children.
If none of the said persons are alive, at the time of distribution then the distribution will be made to Niranjan, his wife and his children or survivors, all or such of them and in such proportion as the trustees deem fit.
If none of the said persons are alive at the time of distribution, then the corpus and the balance of income will be given over by the trustees on such conditions as they deem fit as donation to the Gujarat University or any other educational institution or an institution giving medical aid or attending to the health of public in general.
But if Arvind and his wife are the trustees at that time then they have no right to give vote in the above matter.
But if the other trustees unanimously agree to allow them to vote then they can.
" The Wealth Tax Officer made assessment orders for the assessment years 1963 63, 1963 64 and 1964 65 under the Wealth Tax Act, the relevant valuation dates being December 31, 1961, December 31, 1962 and December 31, 1963.
He assessed the assessee under sub section
(2) of section 21 of the Wealth Tax Act on the entire value of the assets held by the trusts.
On appeal the Appellate Assistant Commissioner confined the liability of the assessee to wealth tax on the capitalised value of the minimum amounts payable under the trust deeds for his maintenance.
that is to say say Rs.250, Rs.150 and Rs.250 respectively per year.
The Appellate Tribunal, on second appeal, affirmed the view taken by the Appellate Assistant Commissioner.
At the instance of the Revenue.
the three cases were carried in reference to the High Court for its opinion in each case on the following question,n of law: "Whether, on the facts and in the circumstances of the case, the finding that it is only the capitalised value of the interest of the assessee that has to be included in the net wealth of the assessee is in law justified?" PG NO 271 The High Court answered the question in each case in the affirmative, in favour of the assessee and against the Revenue.
And now these appeals.
Admittedly, on all relevant dates of these assessment years, the assessee was a bachelor, and was alone entitled therefor to the benefit of the three trusts.
It is accepted also that the trusts are discretionary trusts.
The controversy between the parties arises on the application of section 21 of the Wealth Tax Act.
Section 21, as it stood at the relevant time provided: "section 21.
Assessment when assets are held by courts of wards, administrators general, etc. (1) In the case of assets chargeable to tax under this Act, which are held by a court of wards or an administrator general or an official trustee or any receiver or manager or any other person, by whatever name called, appointed under any order of a court to manage property on behalf of another, or any trustee appointed under a trust declared by a duly executed instrument in writing, whether testamentary or otherwise (including a trustee under a valid deed of wakf), the wealth tax shall be levied upon and recoverable from the court of wards, administrator genera1, official trustee, receiver, manager or trustee, as the case may be, in the like manner and to the same extent as it would be leviable upon and recoverable from the person on whose behalf (or for whose benefit) the assets are held, and the provisions of this Act shall apply accordingly.
(2) Nothing contained in sub section
(1) shall prevent either the direct assessment of the person on whose behalf (or for whose benefit) the assets above referred to are held.
or the recovery from such person of the tax payable in respect of such assets.
(3) xx xx xx xx (4) Notwithstanding anything contained in (the foregoing provisions of) this section, where the shares of the persons on whose behalf or for whose benefit any such assets are PG NO 272 held are indeterminate or unKnown, the wealthtax shall be levied upon and recovered from the court of wards, administrator genera1, official trustee, receiver, manager, or other person aforesaid, (as the case may be, in the like manner and to the same extent as it would be leviable upon and recoverable from an individual who is a citizen of India and resident in India) for the purpose of this Act.
The contention of Dr. V. Gauri Shankar on behalf of the Revenue is that the settlor had specifically made these three trusts for the benefit of his son, Arvind, the assesee, and has declared unequivocally that the settlement is for the benefit of the assessee, and on the asses see 's marriage, also for the benefit of his wife and children.
It is urged that the High Court has erred in failing to collect the real intention of the settlor from the entire document and has erroneously confined itself to paragraph 7 of the deed.
According to learned counsel, what the High Court should have done was to ascertain the state of affairs existing on the relevant valuation date.
It should not have been influenced by what could possibly happen in the indefinite future on the happening of certain contingencies.
The submission is that on the valuation dates there was only one beneficiary, the assessee, his share was determined and known, and it extended to the entire interest in the trust properties.
It is urged that in the case of a discretionary trust the interest of the beneficiary extends not only to the actual share paid to him but to his right to be considered as a potential recipient of the net income remaining after defraying the managment expenses and paying the taxes.
It extends, he says, to an interest in the Trust accumulation both before or after the expiry of the stipulated period when the Trustees are empowered to distribute the accumulated balance as capital.
Learned counsel urges that the whole deed of settlement in each case should be read and understood comprehensively and only thereupon can a true answer be returned to the question framed in the reference.
Considerable emphasis has been on the submission that the capital value of the contingent intereset in the entire property must be kept in view.
I have no difficulty in accepting the submission of Dr. Gauri Shankar that for a proper understanding of a case before us we must consider the entire deed of settlement.
That, however, does not lead to the conclusion which learned counsel wishes us to accept.
What is the interest of the assessee under the deed of settlement on the relevant valuation date? We are concerned with the capital value of that interest.
It is apparent that the assessee was entitled only to the minimum prescribed in each of the deeds of settlement.
Whether or not be received any further amount PG NO 273 out of the net income of the Trust Fund was left entirely in the discretion of the Trustees.
There was no right in the assessee to any portion of the net income in excess of the minimum guaranteed to him.
It is the minimum alone which he could claim as his property.
So also, on the distribution of the accumulated balance as capital at the end of the stipulated period there was no right in him to receive any part thereof.
It was open to the Trustees to ignore him altogether and they could pay it to such other members of the family as they chose.
In support of the proposition that the expression 'property ' is a term of the widest amplitude and that every possible interest is includible therein we are referred to Ahmed G.H. Ariff 'and Others vs Commissioner of Wealth Tax, Calcutta, I have no doubt that the expression 'property ' must bear a comprehensive import.
The question remains whether what is conveyed under the three deeds of settlement to the assessee is a right to anything more than the prescribed minimum under each deed.
I may reiterate that the interest extends to no more than that minimum.
It is contended on behalf of the Revenue that the fact that a beneficiary may change on the happening of certain contingencies will not make the share of the beneficiary un determined or unknown.
and reliance has been placed on Padmavati Jaykrishna Trust & Another vs Commissioner of Wealth Tax, Gujarat [l966] ; Commissioner of Wealth Tax, Bombay vs Trustees of Mrs. Hansbai Tribhuwandas Trust, [l968] ; Commissioner of Wealth Tax, A. P. vs Trustees of H.E.H. Nizam 's Family (Remainder Wealth) Trust.
and Commissioner of Wealth Tax, A.P. vs Trustees of H.E.H.
The Nizam 's Sahebzadi Anwar Begum Trust, These cases can be of no assistance to us, for, unlike the facts in each of those cases, the instant case is one where beyond the specified minimum the assessee was not entitled to anything more.
There must be a right, present or contingent, before it can be said that an assessee has an interest, and I am supported in this by what was said by the House of Lords in Gartside & Anr.
vs Inland Revenue Commissioners.
LR 1968 Appeal Cases 553 where it was also observed that a mere right to be considered for distribution of the income or of the corpus of the Trust Fund cannot be regarded as an `interest ' since it was not capable of valuation.
Dr. Gauri Shankar relies on Leedale (Inspector of Taxes) vs Lewis., [l982] 3 All E.R. 808.
But the decision in that case turned on the principle language of the English Statute, where an approximation of the value is permitted by the "just and reasonable" clause and by the words "as near as may be" in section 42(2) of the Finance Act.
PG NO 274 It is vehemently urged by Dr. Gauri Shankar that the approach to be adopted in this case is not that which finds favour under the Income tax law, and different considerations prevail under the Wealth Tax Act.
As I am proceeding on the basis of the true construction of the Deeds of Settlement, I fail to see any substance in that contention.
Reliance war also placed by learned counsel for the Revenue on McDowell and Co. Ltd. vs Commercial Tax Officer, That decision cannot advance the case of the Revenue because the language of the deeds of settlement is plain and admits of no ambiguity.
In the result I endorse the view taken by the High Court and dismiss these appeals with costs.
SABYASACHI MUKHARJI, J.
I agree with the judgment of the learned Chief Justice.
There is, however, one aspect of the matter on which some arguments were advanced at the time of hearing of this case, to which I would like to advert.
Dr. V. Gauri Shankar appearing on behalf of the revenue made an appeal before us stating that we should really construe the three Trust Deeds together and see 'the game of the hidden purpose ' behind these Trust Deeds which were, in fact, for the sole and exclusive benefit of the assessee.
He drew our attention to the observations of Justice Chinnappa Reddy, with which other learned Judges of the Full Bench agreed in McDowell & Co. Ltd. vs Commercial Tax Officer, He invited us to hold that having regard to the taxing Statute the tax avoidance device should be exposed.
Justice Chinnappa Reddy has noticed the change in judicial attitude to the tax avoidance devices.
Justice Reddy mentioned that in the country of its birth the principles of Westminister of condoning tax avoidance have been given a decent burial.
In that very country the phrase 'taxavoidance ' is no longer condoned or looked upon with sympathy.
It is true that tax avoidance in an under developed developing economy should not be encouraged on practical as well as ideological grounds.
One would wish, as noted by Reddy, J. that one could get the enthusiasm of Justice Holmes that taxes are the price of civilization and one would like to pay that price to buy civilization.
But the question which many ordinary tax payers very often in a country of shortages with ostentious consumption and PG NO 275 deprivation for the large masses ask, is does he with taxes buy civilization or does he facilitate the wastes and ostentiousness of the few.
Unless wastes and ostentiousness in Government 's spendings are avoided or eschewed, no amount of moral sermons would change people 's attitude to tax avoidance.
In any event, however, where the true effect on the construction of the Deeds is clear, as in this case, the appeal to discourage tax avoidance is not a relevant consideration.
But since it was made it has to be noted and rejected.
With these observations I agree.
H.L.C. Appeals dismissed.

dataset_name: IN-Abs

summary/full:
The respondent who was entitled to minimum annual payments of specified amounts under the three trust deeds in question was assessed to tax under sub section
(2) of section 21 of the Wealth Tax Act, on the entire value of the assets held by the trusts.
On appeal, the Appellate Assistant Commissioner confined the liability of the assessee to wealth tax on the capitalised value of the minimum amounts payable under the trust deeds, and his decision was affirmed, on second appeal, by the Appellate Tribunal.
At the instance of the Revenue, the opinion of the High Court was sought on the question whether the finding that it was only the capitalised value of the interest of the assessee that had to be included in the net wealth of the assessee was 5justified.
The High Court answered the question in the affirmative, in favour of the assessee and against the Revenue.
Dismissing the appeals, HELD: A mere right to be considered for distribution of the income or of the corpus of the Trust Fund cannot be regarded as an 'interest ' since it is not capable of valuation.
There must be a right, present or contingent, before it can be said that an assessee has an interest.
The instant case is one where beyond the specified minimum the assessee was not entitled to anything more.
[273F GI Gartside & Anr.
vs Inland Revenue Commissioners, LR,[1968] Appeal Cases 553, relied on.
Padmavati Jaykrishna Trust & Another vs Commissioner of Wealth Tax, Gujarat, [1966] 61 I.T. R. 66; Commissioner of Wealth Tax Bombay vs Trustees of Mrs. Hansbai Tribhuwandas Trust, [l968] ; Commissioner of Wealth Tax, A. P. vs Trustees of H. E.H. PG NO 266 PG NO 267 Nizam 's Family (Remainder Wealth) Trust, ; Commissioner of Wealth tax A.P. vs Trustees of H.E.H.
The Nizam 's Sahabzadi Anwar Begum Trust, ; Leedale (Inspector of ' Taxes] vs Lewis, and McDowell and Co. Ltd. vs Commercial Tax Officer, , distinguished.
There is no doubt that the expression 'property ' must bear a comprehensive import.
The question remains whether what is conveyed under the three deeds of settlement to the assessee is a right to anything more than the prescribed minimum under each deed.
It is apparent that the assessee was entitled only to the minimum prescribed in each of the deeds of settlement.
Whether or not he received any further amount out of the net income of the Trust Fund was left entirely in the discretion of the Trustees.
There was no right in the assessee to any portion of the net income in excess of the minimum guaranteed to him.
It is the minimum alone which he could claim as his property.
So also, on the distribution of the accumulated balance as capital at the end of the stipulated period there was no right in him to receive any part thereof.
It was open to the Trustees to ignore him altogether and they could pay it to such other members of the family as they chose.
[272H; 273.A B] Ahmed G.H. Arriff and Others vs Commissioner of Wealth tax Calcutta referred to.
Per Suhyusuchi Mnkhurji.
On behalf of the Revenue an appeal was made before us that we should really construe the three Trust Deeds together and see 'the game of the hidden purpose ' behind these Trust Deeds which were.
in fact.
for the sole and exclusive benefit of the assessee.
It is true that tax avoidance an under developed developing economy should not be encouraged on practical as well as ideological grounds.
One would wish, that one could get the enthusiasm of Justice Holmes that taxes are the price of civilization and one would like to pay that price to buy civillzation.
But the question which many ordinary tax payers very often in a country of shortages with ostentious consumption and deprivation for the large masses ask, is does he with taxes buy civilization or does he facilitate the wastes and ostentiousness of the few.
Unless waste and ostentiousness in Government 's spendings are avoided or eschewed, no amount of moral sermons would change people 's attitude to tax avoidance.
In any event, however, where the true effect on the construction of the Deeds is clear, as in this case, the appeal to discourage tax avoidance is not a relevant consideration.
[274E H; 275A C] PG NO 268 McDowell & Company Limited vs Commercial Tax Office, [l985] referred to.


judgement:
vil Appeal No. 1622 of 1987.
From the Judgment and Order dated 23.6.1986 of the Bombay High Court in W.P. No. 562 of 1986.
S.N. Kacker, Mrs. J. Wad and Mrs. Aruna Mathur for the Appellant.
G. Ramaswamy, Additional Solicitor General, A.S. Bhasme, K.R. Nagaraja and R.S. Hegde for the Respondents.
A. Mariarputham for the Intervener.
The Judgment of the Court was delivered by VENKATARAMIAH, J.
The question involved in this case relates to the right of a person to obtain a special permit under sub section (6) of section 63 of the (hereinafter referred to as `the Act ') to ply a public service vehicle on routes or portions thereof in respect of which a scheme approved under section 68 D of the Act providing for exclusive operation of contract carriages on the said routes by a State transport undertaking to the complete exclusion of all other persons has been brought into force.
By a notification dated 29th November, 1973 published under section 68 D(3) of the Act by the Government of Maharashtra, the Maharashtra State Road Transport Corporation (hereinafter referred to as `the Corporation ') was authorised to operate contract carriage services in the entire area of the State of Maharashtra and on all routes and portions thereof falling within the said area to the complete exclusion of all other persons except those falling under the seven categories of persons mentioned therein, namely, (1) a State Transport Undertaking, as defined under 8section 68 A(b) of the Act; (2) holders of duly countersigned permits on inter State routes save those falling under the second proviso to section 63(1) of the Act, (3) holders of contract carriage permits for operation of motor cars; (4) holders of contract carriage permits granted for operation of air conditioned vehicles only, (5) PG NO 451 holders of contract carriage permits for operation of vehicles owned by them exclusively for transportation of person, employed by them or students or members of their institutions from and to their residences and respective places of work or study and for occasional tours and excursions; (6) holders of contract carriage permits for operation wholly within the municipal limits of Greater Bombay, and cities of Poona, Sholapur and Kolhapur where the municipal authorities are operating road transport service; and (7) holders of contract carriage permits granted to them exclusively for the daily transportation at appointed hours and between specified terminals and pick up points of only the persons employed by or studying in establishments and institutions with which the said permit holders have specified contract for the purpose.
The said scheme came into force on January, 1974.
The appellant, who did not belong to any one of the above seven categories applied to the Regional Transport Authority, Bombay (C) for a special permit under sub section (6) of section 63 of the Act in relation to the motor vehicle bearing No. MRL 8088 for plying it on the route Bombay to Ashtu Vinayak via Panvel, Mahad, Poona, Shirdi etc.
for a period of five days, namely from 18.9.1985 to 22.9.1985 in Form P. Co. Sp.
A in accordance with rule 80 of the Bombay Motor Vehicles Rules, 1959.
The application made by the appellant for the special permit was rejected by the Secretary, Regional Transport Authority on the ground that the appellant had not produced a `No Objection Certificate ' issued by the Corporation for the grant of a special permit by his Order dated 17.9.1985.
It was also stated that the Corporation being the operator having the exclusive privilege in the entire area of Maharashtra State to operate contract carriages under the scheme it was the primary duty of the Corporation to provide transport facilities to the intending passengers and if it failed to do so, the Corporation could issue a `No Objection Certificate ' to enable other intending operators to enter into contract.
Hence it was held that in the absence of the `No Objection Certificate ' issued by the Corporation no special permit could be issued under section 63(6) of the Act.
Aggrieved by the order passed by the Regional Transport Authority, the appellant filed an appeal under section 64 of the Act before the Maharashtra State Transport Appellate Tribunal, Bombay.
The Tribunal allowed the appeal holding that a special permit issued under section 63(6) of the Act was not a contract carriage permit issued under the Act and that the scheme relied upon by the Corporation under which it had exclusive monopoly to operate contract carriages in the State of Maharashtra to the complete exclusion of all persons other than these who were specifically saved from the operation of the scheme did not have the effect of preventing any person from applying for a special permit PG NO 452 under section 63(6) of the Act to operate a public service vehicle on any of the routes in the State of Maharashtra.
The judgment of the Tribunal was delivered on December 19, 1983.
Aggrieved by the judgment of the Tribunal, the corporation filed a writ petition in Writ Petition No. 562 of 1986 on the file of the High Court of Bombay questioning the correctness of the order of the Tribunal.
The said Writ Petition was heard along with another Writ Petition which had been filed by the Corporation against M/s. Auto Hirers, Tardeo, Bombay and others in Writ Petition No. 561 of 1986.
By a common judgment the High Court allowed the Writ Petition and set aside the order of the Tribunal.
This appeal by special leave is filed against the judgment of the High Court.
It is necessary to refer to some of the provisions of the Act at this stage.
A `contract carriage ' is defined in section 2(3) of the Act as a motor vehicle which carries a passenger or passengers for hire or reward under a contract expressed or implied for the use of the vehicle as a whole at or for a fixed or agreed rate or sum (i) on a time basis whether or not with reference to any route or distance, or (ii) from one point to another, and in either case without stopping to pick up or set down along the line of route passengers not included in the contract, and includes a motor cab notwithstanding that the passengers may pay separate fares.
An application for a contract carriage permit is required to be made in accordance with section 49 of the Act which provides that an application for a permit to use one of more motor vehicles as a contract carriage or carriages shall contain the following particulars, namely, (a) the type and seating capacity of the vehicle or each of the vehicles, (b) the area for which the permit is required; (c) in the case of a motor vehicle other than a motor cab, the manner in which it is claimed that the public convenience will be served by the vehicle; and (d) any other particulars which may be prescribed.
Section 50 of the Act specifies the procedure to be followed by the Regional Transport Authority in considering the application for contract carriage permit.
It says that a Regional Transport Authority shall in considering an application for a contract carriage permit, have regard to the extent to which additional contract carriages may be necessary or desirable in the public interest; and shall also take into consideration any representations which may then be made or which may previously have been made by persons already holding contract carriage permits in the region or by any local authority or police authority in the region or by any local authority or police authority in the region to the effect that the number of contract carriages for which permits have already been granted is sufficient for or in excess of the needs of the region or any area within the PG NO 453 region.
Section 51 of the Act provides for grant of contract carriage permits.
That section provides that subject to the provisions of section 50, a Regional Transport Authority, may, on an application made to it under section 49, grant a contract carriage permit in accordance with the application or with such modifications as it deems fit or refuse to grant such a permit.
In the event of the Regional Transport Authority deciding to grant a contract carriage permit it can attach to the permit any one or more of the conditions specified in sub section (2) of section 51 of the Act.
Section 58 of the Act deals with the duration of a contract carriage permit.
It provides that a stage carriage permit or a contract carriage permit other than a temporary permit issued under section 62 of the Act shall be effective without renewal for such period, not less than three years and not more than five years, as the Regional Transport Authority may specify in the permit.
Such a permit may be renewed on an application made and disposed of as if it was an application for a permit under sub section (2) of section 58 of the Act.
Section 62 of the Act lays down the provisions for grant of a temporary permit to be effective for a limited period not exceeding four months.
Then follows section 63 of the Act which deals with the validation of permits for use outside the region in which granted.
Sub section (1) of Section 63 provides that except as may be otherwise prescribed, a permit granted by the Regional Transport Authority of any one region shall not be valid in any other region, unless the permit has been counter signed by the Regional Authority of that other region, and a permit granted in any one State shall not be valid in any other State unless counter signed by the State Transport Authority or that other State or by the Regional Transport Authority concerned.
Sub section (6) of section 63 of the Act with which we are concerned in this case reads thus: "(6) Notwithstanding anything contained in sub section (1), but subject to any rules that may be made under this Act, the Regional Transport Authority or any one region may, for the convenience of the public, grant a special permit in relation to a public service vehicle for carrying a passenger or passengers for hire or reward under a contract, express or implied, for the use of the vehicle as a whole without stopping to pick up or set down along the line of route passengers not included in the contract, and in every case where such special permit is granted, the Regional Transport Authority shall assign to the vehicle, for display thereon, a special distinguishing mark in the form and PG NO 454 manner specified by the Central Government and such special permit shall be valid in any other region or State without the countersignature of the Regional Transport Authority of the other region or of the State Transport Authority of the other region or of the State Transport Authority of the other State, as the case may be.
" It is no doubt true that the special permit issued under sub section (6) of section 63 of the Act has same of the features of a contract carriage permit but it is not the same as a contract carriage permit.
The distinguishing features of these two types of permits are these: (1) A permit for which an application is made under section 49 of the Act and which is granted under section 51 of the Act is called a contract carriage permit.
A permit issued under section 63(6) of the Act is called a special permit.
(2) While a contract carriage permit issued by a Regional Transport Authority of any one region is not valid in any other region unless the permit has been countersigned by the Regional Transport Authority of the other region as provided under section 63(1) of the Act a special permit issued by one Regional Transport Authority under section 63(6) of the Act is valid in any other region or State without the countersignature of the Regional Transport Authority of the other region or the other State as the case may be.
(3) While the duration of a contract carriage permit is as prescribed under section 58(1) of the Act, a special permit can be issued only for a specific period which may be for a few days only as in the present case in accordance with the rules prescribed for that purpose.
(4) A contract carriage permit is renewable under section 58(2) of the Act, but there is no corresponding provision providing for renewal of a special permit.
Thus it is seen that a contract carriage permit and a special permit are not one and the same.
A special permit is ordinarily taken to meet a need that exists for a few days like carrying a marriage party or persons going on a pilgrimage etc.
The learned counsel for the Corporation relied upon two decisions of the Andhra Pradesh High Court, i.e., Mohd. Basha and Others vs The Secretary, Regional Transport Authority and Another, and G. Shaikh Shavalli, Uravakonda and Others vs The Secretary, Regional Transport Authority, Anantapur and Another A.I.R. 1982 A.P. 296 in support of his contention that a special permit is not in any way different from a contract carriage permit.
In the first case the question involved was whether it was open to a Regional Transport Authority to insist upon the furnishing of the names of passengers who were included in the contract.
The High Court in that case held that the Regional Transport Authority was entitled to call upon the PG NO 455 applicant for a special permit to furnish the names of the passengers in order to satisfy itself that the application was a genuine application for the purposes mentioned in section 63(6) of the Act and was not intended to be a camouflage for using the vehicle unauthorisedly and in deciding the said case the learned Judge, who decided the case, no doubt referred to the common feature, that existed between a contract carriage permit and a special permit, namely, that the passengers could be carried in them only under a single contract without stopping to pick up or to set down along the line of the route passengers not including in the contract.
In the second case the question was whether it was open to the holder of a special permit issued under section 63(6) of the Act to take his bus empty from his State into another State and to pick up passengers there and transport them to the end of their voyage, set them down at their starting point in the other State and drive the bus back to the home State empty.
The High Court said that the holder of a special permit could not be permitted to do so since such a permit can be issued for carrying passenger or passengers for hire or reward in a contract express or implied for the use of the vehicle as a whole without stopping to pick up along the line of the route passengers not included in the contract.
In these decisions it was enough to deal with one of the common features that existed in a contract carriage permit and in a special permit and the ratio of each of the said decisions depended on that common feature.
There was no necessity to examine all the features of the two kinds of permits referred to above in order to determine whether they were the same for all intents and purposes.
In neither of these two decisions the features that distinguished a contract carriage permit from a special permit have been considered.
There was also no consideration of the question whether on the publication of an approved scheme under section 68 D(3) of the Act excluding the operation of contract carriages by persons other than the State Transport Undertaking concerned special permit under section 63(6) of the Act could or could not be issued.
On the other hand there are two decisions of the Karnataka High Court where a special permit issued under section 63(6) of the Act has been held to be different from a contract carriage permit issued under section 51 of the Act.
In S.R.M.S. Tourist Service Co., Bangalore and Others vs The Secretary, Regional Transport Authority, A.I.R. 1975 Karnataka 166 the State Government had published a scheme under section 68 C of the Act proposing to nationalise contract carriage services.
The question for consideration before the Court was whether after the publication of the said scheme it was open to the Regional Transport Authority PG NO 456 to grant a special permit under section 63(6) of the Act.
K. Jagannatha Shetty, J. (as he then was) taking into consideration the peculiar features of a special permit took the view that it was impossible to reach the conclusion that the Legislature intended to equate a contract carriage permit with a special permit and held that one was totally different from the other.
He accordingly held that the publication of a scheme under section 68 C of the Act proposing to nationalise contract carriage service was not an impediment for the grant of permits under section 63(6) of the Act in respect of the routes covered by the scheme.
In K.N. Sreekantaiah vs Deputy Transport Commissioner, Bangalore & Another, a Division Bench of the Karnataka High Court, has taken the view that a special permit issued under section 63(6) of the Act was different from a contract carriage permit issued under section 51 of Act.
While doing so it approved the decision of Jagannatha Shetty, J referred to above.
We are in agreement with the decisions of the Karnataka High Court.
We hasten to add that the conclusions reached in the two Andhra Pradesh High Court decisions are also correct.
It is open to the Regional Transport Authority if it wishes to do so to insist upon the furnishing of the names of passengers, who are proposed to be carried in a bus under the special permit for which an application is made and also that a holder of a special permit cannot run his bus empty to another State to pick up passengers, who are not covered by the contract, there, to drop them in that State at the end of the journey and to return to his own State where he had obtained the special permit in an empty bus, because these two conclusions are based on the condition to be found in section 63(6) itself which provides that a holder of a special permit cannot pick up or set down on the route passengers nor covered by the contract.
In the present case the High Court of Bombay erred in not taking note of the distinguishing features that existed between a contract carriage permit and a special permit.
it is significant that in the State of Maharashtra the Regional Transport Authorities had not taken the view until the High Court pronounced this judgment that in no event a special permit could be issued to a person other than the Corporation and the seven classes of persons who were excluded from the operation of the scheme.
They were issuing special permits to such persons on the production of a `No Objection Certificate ' issued by the Corporation.
A special permit could not be issued after the publication of the approved scheme even when the Corporation had issued a `No Objection Certificate ' because the scheme did not provide that the clause regarding exclusion of other persons from operating contract carriages would cease to operate if the Corporation PG NO 457 issued a `No Objection Certificate '.
The insistence on he production of a `No Objection Certificate ' by the Corporation by a person applying for a special permit under section 63(6) of the Act was therefore wholly unwarranted.
We are of the view that the provision in the scheme which excludes operation of contract carriage services by persons other than those who are permitted to do so under the Scheme refers to only those persons who wish to operated contract carriage services under permits issued under section 51 of the Act.
The scheme does not in any way prevent the issuing of special permits under section 63(6) of the Act by the Regional Transport Authorities in accordance with law as it does not say that holders of special permits under section 63(6) would also be excluded from running the public service vehicles on the rates in question.
It now becomes obvious that the decision in Adarsh Travels Bus Service and another vs State of Uttar Pradesh & Others, [1985] Supp.
(3) S.C.R. 661 on which the High Court has relied has no application at all to the case on hand.
That decision would have been relevant if a contract carriage permit and a special permit were of the same type.
We, therefore, set aside the judgment of the High Court of Bombay against which this appeal is filed.
Since the period in respect of which the special permit was sought has expired, there is no necessity to issue a writ directing the Regional Transport Authority to consider the application of the appellant for a special permit again.
Hence, we do not issue any such direction.
The true legal position has, however, been set out above.
The appeal is accordingly disposed of.
No costs.
R.S.S. Appeals disposed of.

summary/full:
On November 29, 1973 the Government of Maharashtra Notified a scheme approved under section 68 D of the authorising the Maharashtra State Road Transport Corporation to operate contract carriage services in the entire area of the State of Maharashtra to the complete exclusion of all other persons except those falling under the seven categories mentioned therein.
The appellant who did not belong to any one of the seven categories applied to the Regional Transport Authority for a special permit under section 63(6) of the Act on the route Bombay to Shirdi for five days.
This application was rejected because the appellant had not produced a `No objection Certificate ' from the State Road Transport Corporation.
It was held by the Regional Transport Authority that in the absence of a `No Objection Certificate ' no special permit could be issued under section 63(6) of the Act.
The Maharashtra State Transport Appellate Tribunal allowed the appellant 's appeal holding that a special permit issued under section 63(6) of the Act was not a contract carriage permit issued under the Act and that the scheme did not have the effect of preventing any person from applying for a special permit under section 63(6) to operate a public service vehicle on any of the routes in the State.
The Corporation filed a writ petition in the High Court against the Tribunal 's order.
The High Court allowed the Writ Petition.
Disposing of the appeal and setting aside the judgment of the High Court, it was, HELD: (1) A contract carriage permit and a special permit are not one and the same, though the special permit has some of the features of a contract carriage permit.
[454E Fl (2) A Special permit is ordinarily taken to meet a need PG NO 448 PG NO 449 that exists for a few days like carrying a marriage party or persons going to a pilgrimage, etc.
[454F] (3) The distinguishing features of the two types of permits are: (1) A permit for which an application is made under section 49 of the Act and which is granted under section 51 of the Act is called a contract carriage permit.
A permit issued under section 63(6) of the Act is called a special permit; (2) while a contract carriage permit issued by a Regional Transport Authority of any one region is not valid in any other region unless the permit has been countersigned by the Regional Transport Authority of the other region as provided under section 63(1) of the Act, a special permit issued by one Regional Transport Authority under section 63(6) of the Act is valid in any other region or State without the countersignature of the Regional Transport Authority of the other region or the other State as the case may be; (3) While the duration of a contract carriage permit is as prescribed under section 58(1) of the Act, a Special permit can be issued only for a specific period which may be for a few days only in accordance with the rules prescribed for that purpose; and (4) A contract carriage permit is renewable under section 58(2) of the Act, but there is no corresponding provision providing for renewal of a special permit.
[454B E] (4) The provision in the scheme which excludes operation of contract carriage services by persons other than those who are permitted to do so under the scheme refers to only those persons who wish to operate contract carriage services under permits issued under section 51 of the Act.
The scheme does not in any way prevent the issuing of special permits under section 63(6) of the Act by the Regional Transport Authorities in accordance with law as it does any that holders of special permits under section 63(6) would also be excluded from running the public service vehicles.
[457B C] (5) The scheme does not provide that the clause regarding exclusion of other persons from operating contract carriages would cease to operate if the Corporation issued a `No Objection Certificate '.
The insistence on the production of a `No objection Certificate ' from the Corporation by a person applying for a special permit under section 63(6) of the Act was wholly unwarranted.
[456H; 457A B] Mohd. Basha and others vs The Secretary, Regional Transport Authority and Anr., ; G. Shaikh Shavalli, Uravakonda & Ors.
vs The Secretary, Regional Transport Authority, Anantapur and Anr., A.I.R. ; S.R.M.S. Tourist Service Co. Bangalore & Ors.
PG NO 450 vs The Secretary, Regional Transport Authority, A.I.R. 1975 Karnataka 166; K.N. Sreekantaiah vs Deputy Transport Commissioner, Bangalore & Anr., ; Adarsh Travels Bus Service & Anr.
vs State of Uttar Pradesh & Ors.
, [1985] Supp. 3 S.C.R. 661, referred to.


judgement:
ivil Appeal Nos.
1219 20(NM) of 1987.
From the Judgment and Order dated 17.3.
1987 of the Customs, Excise & Gold (Control) Appellate Tribunal, New Delhi in Appeal No. CD/BOM 398 & 399 of 1984.
M.S. Ganesh for the Appellants.
The Judgment of the Court was delivered by SABYASACHI MUKHARJI, J.
These two appeals are under Section 130E(b) of the (hereinafter called the Act) from the orders passed by the Customs, Excise & Gold (Control) Appellate Tribunal (hereinafter called `the CEGAT).
The questions involved in these two appeals are identical.
The appellants ' claim to be the citizens of India is not disputed.
At the material time in 1983 they were based in Hong Kong and Singapore respectively.
In February, 1993, when the appellants came to India, they were charged with alleged offences under Sections 112 and 114 of the Act and also simultaneously with the alleged offences under the Foreign Exchange Regulation Act, 1973 (hereinafter called `the FERA ').The
Enforcement authorities recorded under Section 40 of the FERA the appellants ' statements at the time of their arrest.
It is alleged that these statements were obtained under duress and by using third degree methods against them, who soon thereafter retracted their statements.
No statements were, however.
recorded by the Customs authorities under the corresponding Section 108 of the Act.
In the FERA proceedings.
the Enforcement Directorate, it is stated, applied that there was no evidence against the appellant Vijay Prakash Mehta and the Directorate had no objection to his discharge.
Accordingly, by an order dated 29.10.1985, of the Additional Chief Metropolitan Magistrate, 8th Court, Esplanade, Bombay, has was discharged and his bailbond was cancelled.
So far as the appellant J.D. Mehta is concerned, he had replied to the show cause notice issued by the Enforcement Directorate and the mater is pending adjudication.
In the meantime the proceedings under Sections 111 to 114 & 118 of the Act resulted in the order dated 19.1.1984 of the Addl.
Collector of Customs (Preventive) Bombay, whereby he imposed a penalty of Rs. 3,00,000 on each of the appellants.
It may be mentioned that each of the appellants was alleged to have PG NO 437 been caught red handed with the foreign exchange to the tune of Rs. 11,90,648.
The appellants had admitted their part in the systematic illegal export of foreign exchange from India during the past several years.
Against the said order dated 19.1.
1984, the appellants preferred their respective appeals to the Appellate Tribunal under Section 129A of the Act.
The Tribunal reduced the amount of penalty to be deposited, in an application made under Section 129E of the Act.
pending hearing of the appeal, to Rs. 1 lakh for each of the appellants.
It is alleged that since neither of the appellants were in any financial position to deposit even Rs. 1 lakh, they sought further reduction.
The Appellate Tribunal, after considering the facts and circumstances of the case and taking: into consideration all the relevant material facts and factors, by its order dated 17th February, 1987, declined to do so and dismissed the appeals for non compliance with the provisions of Section 129E of the Act.
Aggrieved thereby the appellants have appealed to this Court.
Section 129E of the Act provides as follows.
"Where in any appeal under this Chapter, the decision or order appealed against relates to any duty demanded in respect of goods which are not under the control of the customs authorities or any penalty levied under this Act.
the person desirous of appealing against such decision or order shall, pending the appeal, deposit with the proper officer the duty demanded or the penalty levied: Provided that where in any particular case.
the Collector (Appeals) or the Appellate Tribunal is of opinion that the deposit of duty demanded or penalty levied would cause undue hardship to such person, the Collector (Appeals) or, as the case may be, the Appellate Tribunal may dispense with such deposit subject to such conditions as he or it may deem fit to impose so as to safeguard the interests of revenue.
" The aforesaid Section provides a conditional right of appeal in respect of an appeal against the duty demanded or penalty levied.
Although the Section does not expressly provide for rejection of the appeal for non deposit of duty or penalty, yet it makes it obligatory on the appellant to deposit the duty or penalty, pending the appeal, failing which the Appellate Tribunal is fully competent to reject the appeal.
See, in this connection, the observations of this Court in respect of Section 129 prior to substitution PG NO 438 of Chapter XV by the Finance Act, 1980 in Navin Chandra Chhotelal vs Central Board of Excise & Customs & Ors. ; The proviso, however,gives power to the Appellate Authority to dispense with such deposit unconditionally or subject to such conditions in cases of undue hardships.
It is a matter of judicial discretion of the Appellate Authority.
The case of the appellants was that they had not gone out of India and had no assets in India.
Their passports were impounded at the time of arrest.
Their visa had lapsed and could not be renewed.
They had no money, hence, the right of appeal could be illusory unless they are permitted to deposit only Rs.60,000 each which they contend they are able to procure with the assistance of their father.
In the impugned order the Tribunal noted the several abortive and defective attempts made to get extension of time to deposit the security.
Firstly.
the prayer was to accept the deposit of Rs.35,000 and secondly, to accept the deposit of Rs.60,000 in 2 months.
The Tribunal took into account the probability of the prima facie case of the appellants.
The appeals were filed two years ago.
After taking into consideration these factors, the Tribunal rejected the prayer for reduction.
It was contended that this was wrong Shri M. section Ganesh.
learned advocate for the petitioners.
pleaded that in a situation of this type the condition for deposit of penalty was bad as it whittled down the appellants right of appeal.
This, in our opinion is incorrect Shri Ganesh tried to contend that the right of appeal is being whittled down by the procedure followed in this case, He drew our attention to certain observations of this Court in Hoosein Kasam Dada (India) Ltd. V. The State of Madhya Pradesh & Ors., ; There this Court held that when the right to appeal vests, change of law after initiation of proceedings in lower court would not divest the vested rights of the appellant.
The right of appeal is a matter of substantive right and not merely a matter of procedure, and this right becomes vested in a party when the proceedings are first initiated in, and before a decision is given by the inferior court and such a right cannot be taken away except by express enactment or necessary intendment.
The aforesaid observations, in our opinion.
have no application to the instant case.
Here the right that was granted, w as a right held with a condition.
There was o question of change of that right.
In the instant case the only substantive right is the right of appeal as contemplated under Sections 129A and 129E of the Act and that right is a conditional one and the Legislature in its wisdom has imposed that condition.
No question of whittling PG NO 439 down that right by an alteration of procedure arises in this case.
Right to appeal is neither an absolute right nor an ingredient of natural justice the principles of which must be followed in all judicial and quasi judicial adjudications.
The right to appeal is a statutory right and it can be circumscribed by the conditions in the grant.
Counsel referred us to the decision of this Court in Collector of Customs & Excise, Cochin & Ors.
vs A.S. Bava, [l968] 1 SCR 82.
There this Court found that Section 35 of the Central Excises & Salt Act, 1944 (Excises Act) gave a right to appeal.
Under Section 12 of the Act, the Central Government was authorised to apply to appeals under the Excises Act the provisions of the dealing with the procedure relating to appeals.
In exercise of that power the provisions of Section 129 of the Act were made applicable to appeals under the Excises Act.
The Section required an appellant to deposit, pending the appeal, the duty or penalty imposed, and empowered the Appellate Authority, in his discretion, to dispense with such deposit pending the appeal in any particular case.
The respondent therein filed an appeal against the duty imposed on him under the Excises Act and prayed for dispensation of the deposit.
The Collector, who was the appellate authority, rejected the prayer and when no deposit was made within the time fixed, dismissed the appeal.
The respondent filed a petition in the High Court which was allowed, and the Collector was directed to hear the appeal on merits.
This Court held that Section 35 of the Excises Act gave a right of appeal and Section 129 of the Act whittled down that substantive right and, as such, Section 129 could not be regarded as "Procedure relating to appeals" within Section 12 of the Excises Act.
These observations cannot be applied to the facts of this case.
Here we are concerned with the right given under Section 129 A of the Act as controlled by Section 129E of the Act, and that right is with a condition and thus a conditional right.
The petitioner in this case has no absolute right of stay.
He could obtain stay of realisation of tax levied or penalty imposed in an appeal subject to the limitation of Section 129E.
The proviso gives a discretion to the authority to dispense with the obligation to deposit in case of "undue hardships".
That discretion must be exercised on relevant materials, honestly, bona fide and objectively.
Once that position is established it cannot be contended that there was any improper exercise of the jurisdiction by the Appellate Authority.
In this case it is manifest that the order of the Tribunal was passed honestly, PG NO 440 bona fide and having regard to the plea of "undue hardship ' as canvassed by the appellant.
There was no error of jurisdiction or misdirection.
Though in a different context the public policy involved in not granting interim stay has been explained by this Court in Asstt.
Collector of Central Excise West Bengal vs Dunlop India Ltd., It is not the law that adjudication by itself following the rules of natural justice would be violative of any right constitutional or statutory, without any right of appeal, as such.
If the statute gives a right to appeal upon certain conditions, it is upon fulfilment of those conditions that the right becomes vested and exercisable to the appellant.
The proviso to Section l29E of the Act gives a discretion to the Tribunal in cases of undue hardships to condone the obligation to deposit or to reduce.
It is a discretion vested in an obligation to act judicially and properly.
In the facts and circumstances of the case and all the relevant factors, namely, the probability of the prima facie case of the appellants, the conduct of the parties, have been taken into consideration by the Tribunal.
The purpose of the Section is to act in terrorem to make the people comply with the provisions of law.
In that view of the matter, we are unable to accept the submission that there was improper rejection and non consideration of material and relevant facts.
If that is the position then the appeals have no merit and are accordingly rejected.
P.S.S. Appeals dismissed.

summary/full:
Section 129A of the confers right of appeal to the Appellate Tribunal.
Where, however, the order appealed against relates to duty demanded in respect of goods which are not under the control of the customs authorities or any penalty levied under the Act, section 129E requires the aggrieved person to deposit with the proper officer the duty demanded or the penalty levied, pending the appeal.
The proviso thereto, however, empowers the Appellate Authority to dispense with such deposit in case of under hardship.
The appellants, Indian citizens based in Hong Kong and Singapore respectively, were caught red handed, while on a visit to India, with huge amounts of foreign exchange.
They admitted their part in systematic illegal export of foreign exchange from the country over the past several years.
In proceedings under sections 111 to 114 and 118 of the Act the Addl.
Collector of Customs imposed a penalty of Ks.3 lacs on each of them.
They preferred appeals to the Appellate Tribunal under section 129A. In an application made under section 129E the Tribunal reduced the amount of penalty to be deposited to Rs. 1 lac for each of them.
The appellants sought further reduction.
Their case was that they had not gone out of the country and had no assets in India.
Their passports were impounded at the time of arrest.
Their visas had lapsed and could not be renewed.
They had no money and that in a situation of this type the condition for deposit of penalty was bad as it whittled down the appellants ' right of appeal.
The Tribunal after considering the relevant factors declined to reduce the penalty further and dismissed the appeal for non compliance with the provisions of section 129E. Dismissing the appeals under section 130E(b) of the .
HELD: Right to appeal is neither an absolute right nor an ingredient of natural justice the principles of which PG NO 434 PG NO 435 must be followed in all judicial and quasi judicial adjudications.
The right to appeal is a statutory right and it can be circumscribed by the conditions in the grant.
[439A B] 2.
It is not the law that adjudication by itself following the rules of natural justice would be violative of any right, constitutional or statutory, without any right of appeal, as such.
If a statute gives a right to appeal upon certain conditions, it is upon fulfilment of those conditions that the right becomes vested and exercisable to the appellant.
[440C] 3.
The purpose of section 129E of the is to act in terrorem to make the people comply with the provisions of law.
The right of appeal provided therein is a conditional one.
The petitioner could obtain stay of realisation of tax levied or penalty imposed in an appeal subject to the limitations contemplated therein.
Although the section does not expressly provide for rejection of the appeal for non deposit of duty or penalty yet it makes it obligatory on the appellant to deposit the same pending the appeal? failing which the Appellate Tribunal is fully competent to reject the appeal.
The proviso thereto gives a discretion to the authority in cases of undue hardships to condone the obligation to deposit or reduce.
It is a discretion vested in an obligation to act judicially and properly.
[440E, 439F, 437G, 440C] In the instant case, the order of the Tribunal was passed honestly, bona fide and having regafd to the plea of `undue hardship ' as canvassed by the appellants.
All the relevant factors, namely, the probability of the prima facie case of the appellants and the conduct of the parties were taken into consideration.
The Tribunal noted the several abortive and defective attempts made to get extension of time to deposit the security.
Firstly, the prayer was to accept Rs.35,000 and secondly to accept Rs. 60,000 in two months .
It also noted the fact that the appeals were filed two years ago.
It could not therefore, be said that there was any improper exercise of jurisdiction or misdirection by the Appellate Authority.
[439H,440A,D,438C] Navin Chandra Chhotelal vs Central Board of Excise & Customs & Ors.
, ; , referred to.
Hoosein Kasam Dada (India) Ltd. vs The State of Madhya Pradesh & Ors., ; and Collector of Customs & Excise, Cochin & Ors.
vs A.S. Bava, , distinguished.
PG NO 436


judgement:
Special Leave Petition [Civil) Nos. 1 l(i50 58 of 1987.
From the Judgment and Order dated 3 1.7.
1987 of the Madras High Court in Appeal against Order Nos. 54 1 to 544 and 558 to 562 of 1981.
A.K. Sen, V. Krishnamurthy and V. Balachandran for the Petitioner.
A. V. Rangam for the Respondents.
The Judgment of the Court was delivered by SABYASACHI MUKHARJI, J.
These are petitions under Article 136 of the Constitution seeking leave to appeal against the judgment and order of the High Court of Madras dated 31st July, 1987.
The petitioner company undertook the work of widening and strengthening pavements in Nation Highway No. 7, Madurai Kanya kumari Road from Reaches 37.6 k.m.
to '1 ', k.m.
on the Madurai Kanyakumari Road and the work was divided into fourteen Reaches and 14 separate agreements were entered into between the petitioner and the Superintending Engineer, National Highways, Tirunelveli.
respondent No. 3 to the present petitions.
There is not much dispute on this point.
At the relevant time, according to, the petitioner, the Superintending Engineer.
National Highways, Salem was one Thiru Mohan.
He entered into reference.
He took up the matter for arbitration and called for statements from the parties.
Statements were filed before him and evidence were also adduced before him.
But before he could complete the adjudication he was transferred and was succeeded by one Thiru J.R. Cornelius, Superintending Engineer.
The contention of the petitioner in this case was that he had no Jurisdiction to, proceed and complete the arbitration.
It appears however, that he entered into the task of adjudication with the knowledge and consent of the petitioner and the petitioner had participated actively in the proceeding before him.
From the notices served by Thiru Mohan previously and subsequently by Thiru Cornelius.
it is apparent that the petitioner had knowledge of the change of the incumbent of the Superintending Engineer who was to arbitrate in the matter.
This is evident from the documents appearing at pages 164 PG NO 465 and 165 of the present paper book and both the parties had notice of the succession in office.
The arbitrator could not complete the award within time and there was need for extension of time.
He wrote a letter to the petitioner on lst May 1977 stating "extension of time was necessary to pass orders on reference and hearing has been concluded".
In reply to that fetter on 11th May, 1977 the petitioner agreed to such extension.
The petitioner was content with that situation and never asked for any further or fresh opportunity either to make any submission or to adduce any evidence.
In that light the arbitrator has made the award.
This was challenged before the learned District Judge by means of a suit under sections 30 and 33 of the that the previous arbitrator Thiru Mohan having entered into reference and Thiru Cornelius had no jurisdiction to conclude.
It was violative of the principles of natural justice, it was submitted.
But as mentioned hereinbefore, the petitioner had knowledge of the change of the incumbent.
He did not protest and the proceedings went on before Thiru Cornelius.
It is apparent from the terms of the agreement between the parties that the Superintending Engineer of the Circle for the time being was the named arbitrator.
The learned District Judge held that Thiru Cornelius was competent to pass the award.
The High Court also upheld that and rejected the challenge to the award on this ground made by the petitioner.
Shri A.K. Sen, learned counsel for the petitioners, urged before us that once an arbitrator had entered into reference, the next incumbent could not conclude the said arbitration proceeding without a fresh agreement.
In the facts of this case, as the petitioner had knowledge of the alleged defect and had acquiesced in the proceedings before the successor, namely, Thiru Cornelius; we are of the c,pinion, that this contention of Shri Sen cannot be entertained.
It was contended that there was violation of the principles of natural justice.
This objection cannot be entertained.
If the parties to the reference either agree beforehand to the method of appointment, or afterwards acquiescence in the appointment made with full knowledge of all the circumstances.
they will be precluded from objection~ to such appointment as invalidating subsequent proceedings.
Attending and taking part in the proceedings with full knowledge of the relevant fact will amount to such acquiescence, explains Russell on Arbitration.
18th Edition at page 105.
This was stated by the Judicial Committee long ago in Chowdhury Murtaza Hossein vs Mussumat Bibi Bechunnissa, 3 I.A. 209.
See also the observations of P.B. Mukherji, J. in the decision of the Calcutta High Court PG NO 466 Calcutta, A.I.R. 1456 Calcutta 470 at 472.
This Court held in N. Challappan vs Secretary, Kerala State Electricity Board and another; , that acquiescence defeated the right of the appellant at a latter stage.
See also the observations of this Court in Prasun Roy vs The Calcutta Metropolitan Development Authority and another; , See Russell on Arbitration, 20th Edition, pages 432 435.
Shri Sen contended that no notice was issued after the appointment of the new arbitrator.
This was factually incorrect, as mentioned before.
Then, it was said that the award was bad as it did not consider all the claims.
This also cannot be entertained.
It must be assumed that the arbitrator had considered all the evidence adduced before him.
There was no disregard of any principle of law.
There was nothing to indicate that the arbitrator had not considered all the evidence.
Unless there was a patent mistake of law and gross misstatement of facts resulting in miscarriage of justice or of equity, the award remains unassailable.
In this case the arbitrator gave no reason for the award.
There is no legal proposition which is the basis of the award, far less any legal proposition which is erroneous.
There is no appeal from the verdict of the arbitrator.
The Court cannot review, in such circumstances, the award and correct any mistake in the adjudication by the arbitrator See Champsey Bhara B Company vs Jivray Ballo Spinning and Weaving Company Ltd., 50 I.A. 324 and the observations of Bachawat, J. in Firm Madanlal Roshanlal Mahajan vs Hukumchand Mills Ltd., Indore, [ l967] 1 section C. R. 105 of this Court.
In the facts and circumstances of the case, in our opinion, this award is not assailable.
The High Court was, therefore, right in upholding the learned District judge 's dismissal of the challenge to the award.
These petitions, therefore, fail and are dismissed accordingly ,without any order as to costs.
N.P.V. Petitions dismissed.

summary/full:
The petitioner Construction firm entered into agreements with respondent No. 3, Superintending Engineer of a Circle for execution of certain civil works.
Respondent No. 1 Superintending Engineer of another Circle entered into a reference for arbitration and parties filed statements and adduced evidence.
Before the adjudication was completed, respondent No. 1 was transferred and his successor in office entered into the task of adjudication with the knowledge, consent and active participation of the petitioner in the proceeding.
Since the arbitrator could not complete the award within time, be sought extension of time by a letter to the petitioner and the petitioner agreed to such extension by a letter.
The petitioner did not ask for any further or fresh opportunity for adducing any evidence.
Thereafter, the arbitrator made his award.
The petitioner challenged the award under sections 30 and 33 of the before the District Judge on the ground that the previous arbitrator having entered into reference, his successor in office had no jurisdiction to conclude it and the award was violative of principles of natural justice.
The District Judge held that the successor in office to the original arbitrator was competent to pass the award.
Upholding this, the High Court rejected the challenge to the award.
Hence the petitioner filed the Special Leave Petition in this Court contending that once an arbitrator had entered into a reference, the next incumbent could not conclude the said arbitration proceedings without a fresh agreement, that there was violation of principles of natural justice and PG NO 462 PG NO 463 that the award was bad.
Dismissing the Special Leave Petition, HELD: 1.
If the parties to the reference either agree before,hand to the method of appointment, or afterwards acquiesce in the appointment made, with full knowledge of all the circumstances, they will be precluded from objecting to such. appointment as invalidating subsequent proceedings.
Attending and taking part in the proceedings with full knowledge of the relevant fact will amount to such acquiescence [465G ] N. Challappan vs Secretary, Kerala State Electricity Board and another; , relied on.
Chowdhury Murtaza Hossein vs Mussumat Bibi Bechunnissa, 3 I.A. 209 and Prasun Roy vs The Calcutta Metropolitan Development Authority and another; , , referred to.
Russell on Arbitration, 18th Edition/20th Edition, pages 105/432 435, referred to.
In the instant case, the petitioner had full knowledge of the change of the incumbent and did not protest and proceedings went on before the new incumbent.
Thus, the petitioner had knowledge of the alleged defect and had acquiesced in the proceedings before the successor.
There was, therefore, no violation of principles of natural justice.
[465C, F] 2.
Unless there was a patent mistake of law and gross misstatement of facts resulting in miscarriage of justice or of equity, the award remains unassailable.
[466C] Champsey Bhara & Company vs Jivraj Ballo Spinning and Weaving Company Ltd., 50 I.A. 324 and Firm Madanlal Roshanlal Mahajan vs Hukumchand Mills Ltd., lndore; , , referred to.
In the instant case, the arbitrator gave no reason for the award.
There is no legal proposition which is the basis of the award, far less any legal proposition which is erroneous.
There is no appeal from the verdict of the arbitrator.
The Court cannot review, in such circumstances,the award and correct any mistake in the adjudication by the arbitrator.
[466D] PG NO 464 3.
In the facts and circumstances of the case, the award is unassailable.
The High Court was right in upholding the District Judge 's dismissal of the challenge to the award.
[466F]