judgement:
Civil Appeal No. 1445 of 1979.
Appeal by Special Leave from the Judgment and order dated 17th October, 1978 of the Delhi High Court in Revision Petition No. 689 of 1978.
327 Mrs. Shyamala Pappu, P. H. Parekh, Rain Karanjawala and Miss Vineeta Caprihan for the Appellant.
B.D. Sharma, for the Respondents.
The following Judgment of the Court was delivered by KRISHNA IYER, J. A short but interesting point affecting the validity and propriety of an order under section 15(7) of the Delhi Rent Control Act, 1958 (for short, the Act), has been raised by counsel for the appellant.
The decision of this question is of importance and we regard it as necessary to clarify the position so that the error committed by the trial judge may not be repeated.
Rent Control laws are basically designed to protect tenants because scarcity of accommodation is a nightmare for those who own none and if evicted, will be helpless.
Even so, the legislature has provided some grounds for eviction, and the Delhi law contains an extreme provision for striking out altogether the defence of the tenant which means that even if he has excellent pleas to negative the landlord 's claim the court will not hear him.
Obviously, this is a harsh extreme and having regard to the benign scheme of the legislation this drastic power is meant for use in grossly recalcitrant situations where a tenant is guilty of disregard in paying rent.
That is why a discretion is vested, not a mandate imposed.
Section 15(7) reads thus: "If a tenant fails to make payment or deposit as required by this section, the Controller may order the defence against eviction to be struck out and proceed with the hearing of the application.
" We must adopt a socially informed perspective while construing the provisions and then it will be plain that the Controller is armed with a facultative power.
He may, or not strike out the tenant 's defence.
A judicial discretion has built in self restraint, has the scheme of the statute in mind, cannot ignore the conspectus of circumstances which are present in the case and has the brooding thought playing on the power that, in a court, striking out a party 's defence is an exceptional step, not a routine visitation of a punitive esteem following upon a mere failure to pay rent.
First of all, there must be a failure to pay rent which, in the context, indicates willful failure, deliberate default or volitional non performance.
Secondly, the Section provides no automatic weapon but prescribes a wise discretion, inscribes no mechanical consequence but invests a power to overcome intransigence.
Thus, if a tenant fails or refuses to pay or deposit rent and the court discerns a mood of defiance or gross neglect, the tenant may forfeit his right to be heard in defence.
The last resort 328 cannot be converted into the first resort; a punitive direction of court cannot be used as a booby trap to get the tenant out.
Once this teleological interpretation dawns, the mist of misconception about matter of course invocation of the power to strike out will vanish.
Farewell to the realities of a given case is playing truant with the duty under.
J lying the power.
There is no indication whatsoever in the Act to show that the exercise of the power of striking out of the defence under section 15(7) was imperative whenever the tenant failed to deposit or pay any amount as required by section 15.
The provisions contained in section 15(7) of the Act are directory and not mandatory.
It cannot be disputed that section 15(7) is a penal provision and gives to the Controller discretionary power in the matter of striking out of the defence, and that in appropriate cases, the Controller may refuse to visit upon the tenant the penalty of non payment or non deposit.
The effect of striking out of the defence under section 15(7) is that the tenant is deprived of the protection given by section 14 and, therefore, the powers under section 15(7) of the Act must be exercised with due circumspection.
It will be noted that section 15(7) of tho Act is not couched in mandatory language.
It uses the word 'may '.
The difference in the language of section 15(7) with that of section 13(5) of the repealed Act is significant and indicates that in the present Act there is a deliberate modification of law in favour of the tenant.
In this connection, it would be pertinent to refer to the observations of the Court in V. K Verma vs Radhey Shyam.(1) In that case, the Court compared section 13(5) of the Delhi Rent Control Act, 1952 which laid down that on the failure of a tenant to deposit the arrears of rent within the prescribed time, "the ' court shall order the defence against ejectment to be struck out." with section 15(7) of the Delhi Rent Control Act, 1958 which substitutes 'may ' and observed: "The change of the words from "The Court shall order the defence against ejectment to be struck out" to the words "the Controller may order the defence against eviction to be struck out" is clearly deliberate modification in law in favour of the tenant.
Under the old Act the Court had no option but to strike out the defence if the failure to pay or deposit the rent is proved; under the new Act the Controller who takes the place of the Court has a discretion in the matter, so that that in proper cases he may refuse to strike out the defence.
" 329 These observations leave no doubt that under section 15(7) of the Act, it is in the liberal discretion of the Rent Controller whether or not to strike out the defence.
We stress the need for the Court to be aware of the milieu before exercise of this extreme power because the present case is illustrative of its erroneous use.
The facts in this case cry for intervention, if one may say so.
The appellant is a working woman who has to get to office and be there between 9.00 a.m. to 5.00 p.m.
Naturally, she has a difficulty in appearing in court for every hearing and so she prudently engaged an advocate to appear on her behalf and take proper steps to protect her interests.
It is common ground that all the arrears of rent had been paid by her by cheque or in cash to her advocate.
It also transpires that the amounts received by cheque or in cash by the advocate were not deposited in court or paid to the landlord.
It is further seen that when the tenant found that the amounts were not paid to the landlord by her advocate, she made a complaint to the Bar Council of Delhi and the matter is pending inquiry.
From these circumstances, we are inclined to conclude indeed, that is the only reasonable conclusion in the circumstances that the tenant has not failed to pay and, in any case, the exercise of judicial discretion must persuade the court not to strike out the defence of the tenant but give her fresh opportunity to make deposit of the entire arrears due.
In the present case the deposit has eventually been made in this Court when it directed such deposit to be made.
The tenant did all she could by paying to the advocate the sums regularly but the latter betrayed her and perhaps helped himself.
To trust one 's advocate is not to sin deliberately.
She was innocent but her advocate was innocent.
No party can be punished because her advocate behaved unprofessionally.
The Rent Controller should have controlled himself by a plain look at the eloquent facts and not let down the helpless woman who in good faith believed in the basic ethic of a noble profession.
She did not fail to pay or deposit and, in any view, no case for punitive exercise of discretion has been made out.
The conclusion necessarily follows that the striking out of the defence was not legal and the appellant should have been given an opportunity to contest the claim of the landlord for her eviction.
A sensitized judicial appreciation was missing and, unfortunately, the High Court did not closely look at this facet of the issue.
On the other hand, the appeal was dismissed as not maintainable in view of section 25B. 330 An order striking out the defence is appealable under section 38.
So this order is appealable.
The reliance on section 25B(8) to negative an appeal is inept because this is not an order under that special section but one under section 15.
Moreover, section 25B(10)preserves the procedure except to the extent contra indicated in section 25B. Negation of the right of appeal follows from section 25B(8) only if the order for recovery is made 'in accordance with the procedure specified in this section ' (i.e. 25B).
Here the dispossession was not ordered under the special provision in section 25B but under section 15.
Nor can the theory of merger salvage ' the order because the legality of the eviction order depends on the legality of the order under section 15(7).
Once that order is found illegal what follows upon that cannot be sustained.
In the view we take of the effect of section 15(7) we allow the appeal in exercise of our jurisdiction under Article 136 and direct the case to go back to the Rent Controller.
Having regard to the fact that the landlord has not been able to make out his case of bona fide requirement for long because of the pendency of these proceedings, we direct the Rent Controller to dispose of the petition for eviction expeditiously and, as far, as possible, within four months from today.
Any further arrears, if accrued, will be paid under the directions of the Rent Controller on or before a date fixed by him.
The order for eviction passed in this case after striking out the defence must fail 13: in view of our holding that the order striking out the defence itself is , illegal.
Necessarily, the orders of the Rent Controller and of their High Court must be and are hereby set aside.
The parties will appear before the Rent Controller on 16th April, 1980.
There will be no order as to costs.
S.R. Appeal allowed.

summary/full:
The appellant tenant, a working woman engaged an advocate to appear on her behalf and take proper steps to protect her interests, as she had a difficulty in appearing in Court for every hearing.
She paid all the arrears of rent by cheque or in cash to her advocate who failed either to deposit the Court or to pay to the landlord.
The Rent Controller refused to look into this and struck off her defence under section 15(7) of the Delhi Rent Control Act, 1958.
The appeal was dismissed as not maintainable in view of section 25B of tho Act.
Hence the appeal by special leave.
Allowing the appeal, the Court.
^ HELD :1.
Rent Control laws are basically designed to protect tenants because scarcity of accommodation is a nightmare for those who own none and, if evicted, will be helpless.
Even so, the legislature has provided some grounds for eviction, and the Delhi law contains an extreme provision for striking out together the defence of the tenant which means that even if he has excellent pleas to negative the landlord 's claim the Court will not hear him.
Obviously, this is a harsh extreme and having regard to the benign scheme of the legislation this drastic power is meant for use in grossly recalcitrant situations where a tenant is guilty of disregard in paying rent.
That is why a discretion vested, not a mandate imposed in Section 15(7) of the Delhi Rent Control Act.
[327 C D] 2.
If a socially informed perspective is adopted while construing the provision of Section 15(7), then it will be plain that the Controller is armed with facultative power.
He may, or may not strike out the tenant 's defence.
A Judicial discretion has built in self restraint, has the scheme of the statute in mind, cannot ignore the conspectus of circumstances which are present in the case and has the brooding thought playing on the power, that, in a court, striking out a 6 party 's defence is an exceptional step, not a routine visitation of a punitive extreme following upon a mere failure to pay rent.
First of all, there must be failure to pay rent which, in the content, indicates willful failure, deliberate default or volitional non performance.
Secondly, the Section provides no automatic weapon but prescribes a wise discretion, inscribes no mechanical conse quence but invests a power to overcome intransigence.
Thus, if a tenant fails or refuses to pay or deposit rent and the court discerns a mood of defiance or gross neglect, the tenant may forfeit his right to be heard in defence.
A last resort cannot be converted into tho first resort a punitive direction of court 326 cannot be used as a booby trap to get the tenant out.
Once this teleological interpretation dawns, the mist of misconception about matter of course invocation of the power to strike out will vanish.
Farewell to the realities of a given case is playing truant with the duty underlying the power.
[327 F H, 328 A B] 3.
The exercise of the power of striking out of the defence under section 15(7) is not imperative whenever the tenant fails to deposit or pay any amount as required by section 15.
The provisions contained in section 15(7) of the Act are directory and not mandatory.
It cannot be disputed that s.15(7) is a penal provision and given to the Controller discretionary power in the matter of striking out of the defence, and that in appropriate cases, the Controller may refuse to visit upon the tenant the penalty of non payment or non deposit.
The effect of striking out of the defence under s.15(7) is that the tenant is deprived of the protection given by s.14 and, therefore, the powers under s.15(7) of the Act must be exercised with due circumspection.
Section 15(7) of the Act is not couched in mandatory language.
It uses the word "may".
The difference in the language of Section 15(7) with that of Section 13(5) of the repealed Act is significant and indicates that in the present Act there is a deliberate modification of law in favour of the tenant.
Under Section 15(7) of the Act, it is in the liberal discretion of the Rent Controller, whether or not to strike out the defence.
The Court should be aware of the milieu before exercise of this extreme power.
[328 B D, 329 A B] In the instant case, the tenant did all she could by paying to the advocate the sums regularly but the latter betrayed her and perhaps helped himself.
To trust one 's advocate is not to sin deliberately.
She was innocent but her advocate was innocent.
No party can be punished because her advocate behaved unprofessionally.
The Rent Controller should have controlled himself by a plain look at the eloquent facts and not let down the helpless woman who in good faith believed in the basic ethic of a noble profession.
She did not fail to pay or deposit and, in any view, no case for punitive exercise of discretion has been made out.
The conclusion necessarily follows that the striking out of the defence was not legal and the appellant should have been given an opportunity to contest the claim of the landlord for her eviction.
A sensitized judicial appreciation was missing and unfortunately, the High Court did not closely look at this facet of the issue.
[329E H] V. K. Varma vs Radhey Shyam, A.I.R. 1964 S.C. 1370, referred to.
An order striking out the defence is appealable under s.38.
So this order is appealable.
The reliance on section 25B(8) to negative an appeal is inept because this is not an order under that special section but one under section 15.
Moreover, s.25B(10) preserves the procedure except to the extent contra indicated in s.25B. Negation of a right of appeal follows from s.25B(8) only if the order for recovery is made 'in accordance with the procedure specified in this Section ' (i.e. 25B).
Here the dispossession was not ordered under the special provision in s.25B but under s.15.
Nor can the theory of merger salvage the order because the legality of the eviction order depends on the legality of the order under s.15(7).
Once that order is found illegal what follows upon that cannot be sustained.
[330 A C]


judgement:
Civil Appeals Nos.
848 850 of 1977.
From the Judgment and Order dated 16 7 1976 of the Kerala High Court in W.A. Nos. 910, 194 and 253/75.
AND CIVIL APPEAL Nos.
666 669 of 1978.
From the Judgment and decree dated 8 6 1977 of the Kerala High Court in W.A. Nos.
364 365, 472 and 473 of 1975.
P. Govindan Nair and K. R. Nambiar for the Appellants in CAs.
848/77 and 666 667/78 and for Respondents 2 to 4 in CA 849/77 and 2 3 in CA 850/77.
M. M. Abdul Khader and N. Sudhakaran for the Appellant in CAs.
849 850/77 and Respondent 2 in CA 848/77 and RR1 in CA 666/78, 667/78 and RR 2 in CA 668 669/78.
T. section Krishnamoorthy Iyer, T.P. Sundara Rajan and P. K. Pillai for Respondent No. 1 in 848/77.
T. L. Vishwanath Iyer, and section Balakrishnan for the Respondent No. 1 in CAs.
668 669/78 and RR 2 in CAs.
666 667/78.
The Judgment of the Court was delivered by 292 KRISHNA IYER, J.
Law and development, as yet a Cinderella of our corpus juris, is a burgeoning branch of creative jurisprudence which needs to be nourished with judicious care, by courts in developing countries.
The Town Planning Act, a developmental legislation amended and updated by the Kerala Legislature, was designed to draw up plans and to execute projects for the improvement of the towns and cities of that over crowded State with its populous multitudes uncontrollably spiralling, defying social hygiene and economic engineering.
Although the Act is of 1932 and originally confined to the Travancore portion of the Kerala State, it has received amendatory attention and now applies to the whole of Kerala with beneficial impact upon explosive cities like Cochin.
This legislation, naturally, has made some deviation from the Kerala Land Acquisition Act, 1961, but having received insufficient attention from the draftsman on constitutional provisions, has landed the Act in litigation through a challenge in the High Court where it met with its judicial Waterloo when a Division Bench invalidated Section 31(1) and 34(2A) which were the strategic provisions whose exit from the statute would virtually scotch the whole measure.
The State of Kerala has come up in appeal, although the immediate victim is the Cochin Town Planning Trust.
The schematic projection of the Town Planning Act (the Act, for short) may be a good starting point for the discussion of the sub missions made at the Bar.
The Act, with a prophetic touch, envisions explosive urban developments leading to terrific stresses and strains, human, industrial and societal.
Land is at the base of all development, and demand for the limited space available in the cities may so defile and distort planned progress as to give future shock unless scientific social engineering takes hold of the situation.
The State of its specialized agencies must take preemptive action and regulate the process of growth.
The Act fills this need and contemplates the creation of a Town Planning Trust, preparation of town planning schemes, acquisition of lands in this behalf, compensation for betterment by citizens and other miscellaneous provisions, apart from creation of development authorities.
While this is the sweep of the statute, our concern is limited to schemes sanctioned by Section 12, acquisition of lands for such schemes under Section 32, compensation for such compulsory taking under Section 34 and the modifications in the manner of acquisition and the mode of compensation wrought into the Land Acquisition Act by the above provisions of the Town Planning Act.
It is indisputable that the compensation payable and certain other matters connected therewith, differ as between the provisions in this Act and the Land Acquisition Act.
The latter is more beneficial 293 to the owner and the challenge, naturally, has stemmed from this allegedly invidious discrimination.
In two separate cases, two judges upheld the challenge and, on appeal, the High Court affirmed the holdings that the provisions of Sub section 34(1) and 34(2A) were unconstitutional, being violative of Article 14.
Hence these appeals.
We will now proceed to scan the substance of the submissions and the reasoning in the High Court 's judgment.
Counsel for the State, Shri P. Govindan Nair, supported by counsel for the Trust, Shri Abdul Khader, have canvassed the correctness of the reasons which have appealed to the High Court, and some decisions of this Court have been brought to our notice in this connection.
The owners of the lands acquired have been represented before us by Sri T. C. Raghavan who has, in his short submission, supported the judgment under appeal.
One of the appeals has become infructious, because the State, after the High Court invalidated Section 34 of the Act, proceeded under the Land Acquisition Act, acquired the land, paid compensation and took possession thereof, thus completely satisfying the land owner.
Shri T. section Krishnamurthi Iyer, appearing for the owner, pointed out this circumstance and so we dismissed that appeal but mention it here because Shri T. C. Raghavan has relied on this fact in support of one of his arguments, as we will presently disclose.
Before entering into the merits, we may recall the submissions of Shri T. L. Viswanathan, a young lawyer from Kerala, who made us feel that orality, marked by pointed brevity and suasive precision, is more telling than advocacy with counter productive prolixity.
Although the responsible scrutiny that a bench decision of the High Court deserves has been bestowed, we are unable to support the judgment under appeal or the arguments of counsel in support.
The controversy regarding the vires of Sec.
34 revolved round a few points.
Before us, article 14 has loomed large and a submission has been made that by use of the provisions for making schemes under Sec. 8 or Sec.
10 the authority may indefinitely immobilize the owner 's ability to deal with his land since Sec.
15 clamps restrictions, and this is unreasonable.
We agree that it is a hardship for the owner of the land if his ability to deal with his property is either restricted or prevented by a notification, and nothing happens, thereafter, leaving him guessing as to what the State may eventually do.
Indeed, if such a state of suspense continues for unlimited periods, it may be unreasonable restriction on the right to property, although currently the right to pro 294 perty itself has been taken away from Part III.
That apart, we must see whether there is any justifiable classification between common cases of compulsory acquisition under the Land Acquisition Act and the special class of acquisitions covered by the Town Planning Act which may furnish a differentia sufficient to repel the attack of Article 14.
Section 15 of the Act forbids dealings by the owner in many ways, once the publication of a notification is made.
The grievance particularised by Shri Raghavan is that after a draft scheme has been prepared by the municipal council and published, it becomes operational only on the sanction by Government but there is no time limit fixed in Sec.
12 within which Government shall sanction.
Supposing it takes several years for Government to express its approval or disapproval, the owner may suffer.
We regard this grievance as mythical, not real, for more than one reason.
The scheme is for improvement of a town and, therefore, has a sense of urgency implicit in it.
Government is aware of this import and it is fanciful apprehension to imagine that lazy insouciance will make Government slumber over the draft scheme for long years.
Expeditious despatch is writ large on the process and that is an in built guideline in the statute.
At the same time, taking a pragmatic view, no precise time scale can be fixed in the Act because of the myriad factors which are to be considered by Government before granting sanction to a scheme in its original form or after modification.
Section 12 and the other provisions give us some idea of the difficulty of a rigid time frame being written into the statute especially when schemes may be small or big, simple or complex, demanding enquiries or provoking discontent.
The many exercises, the differences of scale, the diverse consequences, the overall implications of developmental schemes and projects and the plurality of considerations, expert techniques and frequent consultations, hearings and other factors, precedent to according sanction are such that the many sided dimension of the sanctioning process makes fixation of rigid time limits by the statute an impractical prescription.
As pointed out earlier, city improvement schemes have facets which mark them out from other land acquisition proposals.
To miss the massive import and specialised nature of improvement schemes is to expose one 's innocence of the dynamics of urban development.
Shri Raghavan fairly pointed out that, in other stages, the Act provides for limitation in time (for example, sec. 33 which fixes a period of three years between the date of notification and the actual acquisition).
Only in one minimal area where time limit may not be workable, it has not been specified.
The statute has left it to Government to deal expeditiously with the scheme and we see sufficient guideline in the Act not to make the gap between the 295 draft scheme and governmental sanction too procrastinatory to be arbitrary.
We need hardly say, that the court is not powerless to quash and grant relief where, arbitrary protraction or mala fide inaction of authorities injures an owner.
An aside: We are surprised at the obsolescent and obscurantist vocabulary surviving in the Town Planning Act because there are many B feudal and incongruous expressions such as 'our Governments and references to a Land Acquisition Act which has already been repealed by the Kerala Land Acquisition Act, 1961.
Modernisation is a process necessary even for the statute book and yet it has not been done, despite opportunity for the legislature, while amending later, to carry out such simple, verbal and yet necessary changes.
Be it remembered that the Town Planning Act did undergo an extensive amendment as late as 1976 when, surely, some of the verbal replacements could easily have been made.
Medievalism lingering in legislations is hardly a tribute to the awareness of our legislators.
Section 12 of the Act provides for publishing the draft schemes so that objections or suggestions may be put forward by affected persons.
The scheme is then passed by the Municipal Council, of course, after considering objections and suggestions.
Thereupon, it is submitted to the Government for sanction and the fact of such submission is also published so that the public may still raise objections or make suggestions to Govt.
which will consider them, make further inquiries, if necessary, and ultimately sanction the scheme with or without modifications or may even refuse sanction or return the scheme to the Council for fresh consideration.
Once the scheme is sanctioned by the Government, it is again published.
Section 12(6) imparts finality to the scheme and this virtually corresponds to the declaration under sec.
6 of the Land Acquisition Act.
Chapter III of the Act is comprehensive and complex because the subject of scheme making demands expert attention and affects community interest.
A Director of Town Planning is appointed who shall be consulted by Municipal Councils in matters of town planning.
Developmental schemes are not sudden creations.
On the other hand, the Municipal Council first decides to prepare a scheme, adopts a draft scheme, if any, made by the owners of the lands, prepares the necessary plan of the lands which is proposed to be included in the scheme and notify its resolution for public information.
A copy of the plan is kept for the inspection of the public.
Since all improvement schemes are matters of public concern, on the passing of a resolution and its notification under sec. 8, a time bound obligation is cast on the Municipal Council by section 9, which reads thus : 296 "section 9: Publication of draft scheme: (1) If the resolution is to make a scheme, municipal council shall, within twelve months from the date of the notification under s.8 or within such further period not exceeding twelve months, as our Government may allow, and after consulting, in the prescribed manner, the owners of lands and buildings in the area affected, prepare and publish a draft scheme.
" It is apparent that improvement schemes cannot hang on indefinitely and an outside limit of 2 years is given for the preparation and publication of draft schemes from the initial resolution to make or adopt the scheme is passed by the Municipal Council.
Government itself may step in and direct the Municipal Council to prepare schemes and sec.
10 empowers it in this behalf.
11 contains detailed provisions regarding the material to be included in the draft scheme.
These are preparatory exercises, and then comes the sanction of the scheme by the Government under Sec. 12.
We indicate the elaborate character of the strategy, stages, contents and character of schemes for improvement and the opportunities for objections and suggestions to the public and the consultation with technical experts and Government, time and again, only to emphasise the complex nature of modern urban development schemes which makes it a different category altogether from the common run of 'public purposes ' for which compulsory acquisition is undertaken by the State.
Conceptwise and strategywise, development schemes stand on a separate footing and classification of town planning schemes differently from the routine projects demanding compulsory acquisition may certainly be justified as based on a rational differentia which has a reasonable relation to the end in view viz., improvement of towns and disciplining their development.
Once this basic factor is recognised, the raison detre of a separate legislation for and separate treatment of town planning as a special subject becomes clear.
It was pointed out that under the Kerala Land Acquisition Act, there is a time limit of 2 years written into Section 6 by engrafting a proviso thereto through an amendment of 1968 Act (Act 29 of 1968).
Section 6 deals with a declaration that land is required for a public purpose and the relevant proviso thereto reads: "S.6(i) Proviso : Provided that no declaration in respect of any particular land covered by a notification under sub section (1) of shall be made after the expiry of two years from the date of publication of such notification." An argument was put forward that under the Land Acquisition Act there is thus a protection against unlimited uncertainty for the owners once lands are frozen in the matter of dealing with them by an initial notification.
This protection against protraction and inaction on the part of the State and immobilisation of ownership is absent in the Town Planning Act.
According to Mr. T. C. Raghavan, appearing for some respondents, this makes for arbitrariness and discrimination invalidatory of the relevant provisions of the Town Planning Act.
In our view there is no substance in this submission, having regard to the specialised nature of improvement schemes and the democratic a participation in the process required in such cases.
We repel the submission.
Much argument was addressed on the 'either or ' arbitrariness implicit in section 33 of the Act.
The precise contention is that it is open to the Trust to acquire either under the Kerala Land Acquisition Act or under Chapter VII of the Town Planning Act.
In the latter event, no solatium is payable while under the former statute it is a statutory obligation of the acquiring Govt.
Thus, if an Authority has an option to proceed under one statute or the other and the consequences upon the owner are more onerous or less, such a facultative provision bears the lethal vice of arbitrariness in its bosom and is violative of article 14 and is therefore, void.
Section 32 of the Act is the foundation for this argument and reads thus: 32.
Modification of Land Acquisition Act: Immovable property required for the purpose of town planning scheme shall be deemed to be land needed for a purpose within the meaning of the Land Acquisition Act, XI of 1089, and may be acquired under the said (Act) modified in the manner provided in this chapter.
What is spun out of the words used is that for the purposes of town planning schemes an immovable property "may be acquired under the said Act (The Land Acquisition Act) modified in the manner provided in this Chapter".
Of course, Chapter VII, particularly sub sec.
(1) of section 34 thereof, relates to compensation and does not provide for payment of solatium.
Moreover, it is mentioned that the provisions of sections 14, 22 and 23 (both sides agree, this should be read as Sec. 25) of the Land Acquisition Act shall have no application in the acquisition of property for the purpose of the Town Planning Act.
298 We do not accept the argument that there is a legal option for the authority to acquire either under the Land Acquisition Act or under the Town Planning Act when land is needed for a scheme.
Theoretically, yes, but practically, No. Which sensible statutory functionary, responsible to the Treasury and to the community, will resort to the more expensive process under the Land Acquisition Act as against the specially designed and less costly provision under section 34? Fanciful possibilities, freak exercise and speculative aberrations are not realistic enough for constitutional invalidation on the score of actual alter.
natives or alive options, one more onerous than the other.
In Magan lal 's case, the Court pointed out : "The statute itself is the two classes of cases before us clearly lays down the purpose behind them, that is premises belonging to the Corporation and the Government should be subject to speedy procedure in the matter of evicting unauthorised persons occupying them.
This is a sufficient guidance for the authorities on whom the power has been conferred.
With such an indication clearly given in the statutes one expects the officers concerned to abail themselves of the procedures prescribed by the Acts and not resort to the dilatory procedure of the ordinary Civil Court.
Even normally one cannot imagine an officer having the choice of two procedures, one which enables him to get possession of the property quickly and the other which would be a prolonged one, to resort to the latter.
Administrative officers, no less than the courts, do not function in a vacuum.
It would be extremely unreal to hold that an administrative officer would in taking proceedings for eviction of unauthorised occupants of Govt.
property or Municipal property resort to the procedure prescribed by the two Acts in one case and to the ordinary Civil Court in the other.
The provisions of these two Acts cannot be struck down on the fanciful theory that power would be exercised in such an unrealistic fashion.
In considering whether the officers would be discriminating between one set of persons and another, one has got to take into account normal human behaviour and not behaviour which is abnormal.
It is not every fancied possibility of discrimination but the real risk of discrimination that we must take into account.
This is not one of those cases where discrimination is writ large on the face of the statute.
Discrimi 299 nation may be possible but is very improbable.
And if there is discrimination in actual practice this Court is not powerless.
Furthermore, the fact that the Legis lature considered that the ordinary procedure is insufficient or ineffective in evicting unauthorized occupants or Govt.
and Corporation property and provided a special speedy procedure therefor is a clear guidance for the authorities charged with the duty of evicting unauthorised occupants.
We therefore, find ourselves unable to agree with the majority in the Northern India Caterers ' case.
" The same reasoning applies to the present situation.
The Town Planning Act is a special statute where lands have to be acquired on a large scale and as early and quickly as possible so that schemes may be implemented with promptitude.
What is more, there is a specific and purposeful provision excluding some sections of the Kerala Land Acquisition Act.
In such circumstances, it is incredible that the authority acting under the Act will sabotage Chapter VII, in particular section 34, by resorting to the Kerala Land Acquisition Act in derogation of the express provision facilitating acquisition of lands on less onerous terms.
He functions under the Town Planning Act, needs Lands for the schemes under that Act, has provisions for acquisition under that Act.
Then would be, by reckless action, travel beyond that Act and with a view to oblige the private owner betray the public interest and resort to the power under the Land Acquisition Act, disregarding the non obstante provision in Sec.
of the Act? Presumption of perversity cannot be the foundation of unconstitutionality.
Moreover, the expression, used in the context of section 32, clearly (does not bear the meaning attributed to it by the counsel for the respondents.
All that it means is that when immovable property is found necessary for the purpose of a 'scheme ' it may be acquired by the compulsory process written into section 32.
It is, as if there were only one option, not two.
If the scheme is to be implemented, the mode of acquisition shall be under section 32 and the manner of such acquisition is the same under the Land Acquisition Act minus sections 14, 22 and 25 thereof.
A slight reflection makes it clear that the mode prescribed is only one, and so the theory of alternatives one of which being mere onerous than the other, and the consequent inference of arbitrariness, cannot arise.
We overrule that argument.
We must notice, before we part with this point, the argument of Sri Raghavan for the respondents that the existence of alternatives is not theoretical nor chimerical but real, and proof of the pudding is in the eating.
He pointed to one of the appeals in this batch where the proceedings under sec.
34 of the Act were given up, the provision 300 of the Land Acquisition Act used, and full compensation and solatium paid to the owner.
This instance gave flesh and blood to the submission about discrimination.
Shri Khader, for the trust countered this argument by stating that because the High Court struck clown the Act and the land was needed.
the only statute then available to the State was the Land Acquisition Act.
So, the authority was reluctantly constrained to notify and acquire under the Land Acquisition Act.
Had Sec.
34 of the Act been available, this step would not have been taken and absent Sec.
34 the argument of alternatives has no basis.
We agree with this reasoning and repel the submission of arbitrary power to pick and choose.
At worst, a swallow does not make a summer but we must warn that prodigal state action to favour some owner when sec.
34 has been resuscitated will be betrayal of public interest and invalidated as mala fide even at the instance of a concerned citizen.
The legislature cannot be stultified by the suspicious improvidence, or worse, of the Executive.
The more serious submission pressed tersely but clearly, backed by a catena of cases, by Shri Viswanathan merits our consideration.
The argument is shortly this.
As between two owners of property.
the presence of public purpose empowers the State to take the lands of either or both.
But the differential nature of the public purpose does not furnish a rational ground to pay more compensation for one owner and less for another and that impertinence vitiates the present measure.
The purpose may be slum clearance, flood control or housing for workers, but how does the diversity of purposes warrant payment of differential scales or quantum of compensation where no constitutional immunity as in article 31A, or applies? Public purpose sanctions compulsory acquisition, not discriminatory compensation, whether you take A 's land for improvement scheme or irrigation scheme, how can you pay more or less, guided by an irrelevance viz. the particular public purpose? The State must act equally when it takes property unless there is an intelligent and intelligible differentia between two categories of owners having a nexus with the object, namely the scale of compensation.
It is intellectual confusion of constitutional principle to regard classification good for one purpose, as obliteration of differences for unrelated aspects.
This logic is neatly applied in a series af cases of this Court.
It is trite that the test to rebuff article 14 turns of the differentia vis a vis the object of the classification.
In Vajarveu Mudaiar 's case, the Court took the view, (on this aspect the decision is not shown to have been overruled) that where there is no rational relation in the 301 matter of quantum of compensation between one public purpose and another you cannot differentiate between owners.
Whether you acquire for a hospital or university, for slum clearance or housing scheme, compensation cannot vary in the rate or scale or otherwise.
"Out of adjacent lands of the same quality and value, one may be acquired for a housing scheme under the Amending Act and the other for a hospital under the Principal Act, out of two adjacent plots belonging to the same individual and of the same quality ' and value, one may be acquired under the Principal and the other under the Amending Act.
From whatever aspect the matter is looked at, the alleged differences have no reasonable relation to the object sought to be achieved.
In Durganath Sharma 's case, a special legislation for acquisition of land for flood control came up for constitutional examination.
We confine ourselves to the differentiation in the rate of compensation based on the accident of the nature of the purpose where the Court struck a similar note.
In the Nagpur Improvement Trust case and in the Om Prakash case, this Court voided the legislation which provided differential compensation based upon the purpose.
In the latter case the Court observed : "There can be no dispute that the Govt. can acquire land for a public purpose including that of the Mahapalika or other local body, either under the unmodified Land Acquisition Act, 1894, or under that Act as modified by the Adhiniyam.
If it chooses the first course, then the land owners concerned will be entitled to better compensation including 15% solatium, the potential value of the land etc.
nor will there be any impediment or hurdle such as that enacted by section 372(a) of the Adhiniyam in the way of such land owners, dissatisfied by the Collector 's award, to approach the Court under section 18 of that Act.
It is not necessary to dilate further on this point at this matter stands concluded by this Court 's decision in Nagpur Improvement Trust 's case by the ratio of which we bound.
It will be sufficient to close the discussion by extracting here what Sikri C.J., speaking for the Court in Nagpur Improvement Trust 's case said: "Can the Legislature say that for a hospital land will be acquired at 50% of the market value, for a school at 60 % of the value and for a Govt.
building at 70 % of the 302 market value? All three objects are public purposes and as far as the owner is concerned it does not matter to him whether it is one public purpose or the other.
article 14 confers an individual right and in order to justify a classification there should be something which justifies a different treatment to this individual right.
It seems to us that ordinarily a classification based on the public purpose is not permissible under article 14 for the purpose of determining compensation.
The position is different when the owner of the land himself is the recipient of benefits from an improvement scheme, and the benefit to him is taken into consideration in fixing compensation.
Can classifications be made on the basis of authority acquiring the land? In other words can different principles of compensation be laid if the land is acquired for or by an Improvement Trust or Municipal Corporation or the Government? It seems to us that the answer is in the negative because as far as the owner is concerned it does not matter to him whether the land is acquired by one authority or the other.
It is equally immaterial whether it is one Acquisition Act or another Acquisition Act under which the land is acquired.
If the existence of two Acts could enable the State to give one owner different treatment from another equally situated the owner who is discriminated against, can claim the protection of Article 14.
" The principle that may be distilled from these rulings and the basics of 'equality ' jurisprudence is that classification is not permissible for compensation purposes so long as the differentia relied on has no rational relation to the object in view viz. reduction in recompense.
Is it rational to pay different scales of compensation, as pointed out by Sikri, C.J. in the Nagpur Improvement Trust case, depending on whether you acquire for housing or hospital, irrigation scheme or town improvement, school building or police station? The amount of compensation payable has no bearing on this distinction, although it is conceivable that classification for purposes of compensation may exist and in such cases the statute may be good.
We are unable to discern any valid discremen in the Town Planning Act vis a vis the Land Acquisition Act warranting a classification in the matter of denial of solatium.
We uphold the Act in other respects but not when it deals invidiously between two owners based on an irrelevant criterion viz. the acquisition being for an improvement scheme.
We are not to be 303 understood to mean that the rate of compensation may not vary or must be uniform in all cases.
We need not investigate this question further as it does not arise here although we are clear in our mind that under given circumstances differentiation even in the scale of compensation may comfortably comport with article 14.
No such circumstances are present here nor pressed.
Indeed, the State, realising the force of this facet of discrimination offered, expilatory fashion, both before the High Court and before us, to pay 15% solatium to obliterate the hostile distinction.
The core question now arises.
What is the effect even if we read a discriminatory design in Sec.
34? Is plastic surgery permissible or demolition of the section inevitable? Assuming that there is an untenable discrimination in the matter of compensation does the whole of section 34 have to be liquidated or severable portions voided? In our opinion, scuttling the section, the course the High Court has chosen, should be the last step.
The Court uses its writ power with a constructive design, an affirmative slant and a sustaining bent.
Even when by compulsions of inseverability, a destructive stroke becomes necessary the court minimises the injury by an intelligent containment.
Law keeps alive and "operation pull down" is de mode.
Viewed from this perspective, so far as we are able to see, the only discriminatory factor as between section 34 of the Act and section 25 of the Land Acquisition Act vis a vis quantification of compensation is the non payment of solatium in the former case because of the provision in section 34(1) that section 25 of the Land Acquisition Act shall have no application.
Thus, to achieve the virtue of equality and to eliminate the vice of inequality what is needed is the obliteration of section 25 of the Land Acquisition Act from section 34(1) of the Town Planning Act.
The whole of section 34(1) does not have to be struck down.
Once we excise the discriminatory and, therefore, void part in Sec.
34(1) of the Act, equality is restored.
The owner will then be entitled to the same compensation, including solatium, that he may be eligible for under the Land Acquisition Act.
What is rendered void by article 13 is only to the extent of the contravention of article 14.
The lancet of the Court may remove the offending words and restore to constitutional health the rest of the provision.
We hold that the exclusion of Sec.
25 of the Land Acquisition Act from sec.
34 of the Act is unconstitutional but it is severable and we sever it.
The necessary consequence is that section 34(1) will be read omitting the words 'and section 25 ' .
What follows then? Section 32 obligates the state to act under the Land Acquisition Act but we have struck down that part which excludes sec.
25 of the Land Acquisition Act 304 and so, the 'modification ' no longer covers section 25.
It continues to apply to the acquisition of property under the Town Planning Act.
Section 34(2) provides for compensation exactly like section 25(1) of the Land Acquisition Act and, in the light of what we have just decided, section 25(2) will also apply and "in addition to the market value of the land as above provided, the court shall in every case award a sum of fifteen per cen tum on such market value in consideration of the compulsory nature of the acquisition.
" The upshot of this litigation thus is that the appeal must be allowed except to the extent that solatium shall be payable as under the Land Acquisition Act.
Since the State has always been willing to pay that component and has repeated that offer even before us right from the beginning, we direct the parties to bear their respective costs.
P.B.R. Appeal allowed.

dataset_name: IN-Abs

summary/full:
The Cochin Town Planning Act in particular contemplates the creation of a town planning trust, the preparation of town planning schemes (section 12) acquisition of lands in this behalf (section 32) compensation for such compulsory taking (section 34) and modifications in the manner of acquisition and the mode of compensation in the Kerala Land Acquisition Act.
The petitioners ' writ petitions challenging the validity of the Town Planning Act were allowed by the High Court on the ground that the provisions of Section 34(1) and 34(2A) were unconstitutional being violative of article 14 of the Constitution.
In appeal to this Court it was contended that by the use of the provisions for making schemes under section 8 or section 10, the authority may indefinitely immobilize the owner 's ability to deal with his land since section 15 clamps restrictions and this is unreasonable. ^ HELD: 1.
City improvement schemes have facets which mark them out from other land acquisition proposals.
To miss the massive import of the 15 specialised nature of important schemes is to expose one 's innocence of the dynamics of urban development.
The statute has left it to the government to deal expeditiously with the scheme and there are sufficient guidelines in the Act not to make the gap between the draft scheme and governmental sanction too procrastinatory to be arbitrary.
[294 G H] 2.
Section 12(6) imparts finality to The scheme and this corresponds to the declaration under section 6 of the Land Acquisition Act.
A conspectus of the relevant provisions of the Act makes it clear that improvement scheme cannot hang on indefinitely and an outside limit of two years is given for the preparation and publication of draft schemes from the time the initial resolution to make or adopt the scheme is passed by the Municipal Council.
Conceptwise and strategy wise development schemes stand on a separate footing and classification of town planning schemes differently from the routine projects demanding compulsory acquisition may certainly be justified as based on rational differentia which has a reasonable relation to the end in view namely improvement of towns and disciplining their development.
[295 F G] 3.
There is no substance in the argument that if the land is acquired under the Town Planning Act no solatium is payable while if the land is acquired under the Land Acquisition Act it is a statutory obligation of the acquiring government to pay solatium.
The Town Planning Act is a special statute where lands have to be acquired on large scale and as early and as quickly as possible so that schemes may be implemented with promptitude.
There is in addition a specific and purposeful provision excluding some sections of the 291 Kerala Land Acquisition Act.
In such circumstances it is incredible that the authority acting under the Act will sabotage chapter VII, in particular section 34, by resorting to the Kerala Land Acquisition Act in derogation of the express provision facilitating acquisition of lands on less onerous terms.
[299C D] Maganlal vs Municipal Corporation, [1975] 1 S.C.R. p. 23, referred to.
The amount of compensation payable has no bearing on the distinction whether the lands are acquired for housing or hospital, irrigation schemes or town improvement, school building or police station.
5(a) The exclusion of section 25 of the Land Acquisition Act from section 34 of the Act is unconstitutional.
But it is severable.
[302G] (b) The only discriminatory factor as between section 34 of the Act and section 25 of the Land Acquisition Act vis a vis quantification of compensation is the non payment of solatium in the former case because of the provisions of section 34(1) and that section 25 of the Land Acquisition Act shall have no application.
To achieve the virtue of equality and eliminate the vice of inequality what is needed is the obliteration of section 25 of the Land Acquisition Act from section 34(1) of the Town Planning Act.
The whole of section 34(1) does not have to be struck down.
Once the discriminatory and void part in section 34(1) of the Act is excised equality is restored.
The owner will then be entitled to the same compensation including solatium that he may be eligible under the Land Acquisition Act.
[303E F]


judgement:
Appeal No. 46 of 1950.
Appeal by special leave from a judgment of the High Court of Judicature at Bombay dated 23rd March, 1948, (Chagla C.J. and Tendolkar J.) in Income Tax Reference No. 16 of 1947.
M.C. Setalvad, Attorney General for India (Gopal Singh, with him) for the appellant.
N.C. Chatterjee (B. Sen, with him)for the respondent. 1951.
September 18.
The Judgment of the Court was deliv ered by MAHAJAN J.
The sole controversy in this appeal centres round the point as to whether or not excess profits tax is payable on the sum of Rs. 20,005 received by the respondent from Messrs Parakh & Co. by way of rent for the dyeing plant let out to them during the chargeable accounting period.
The respondent (Sri Lakshmi Silk Mills Ltd.) is a manu facturer of silk cloth, and as a part of its business it installed a plant for dyeing silk yarn.
During the charge able accounting period (1st January, 1943, to 31st December, 1943) owing to difficulty in obtaining silk yarn on account of the war it could make no use of this plant and it re mained idle for some time.
On the 20th August, 1943, it was let out to Messrs E. Parakh & Co. on a rent of Rs. 4,001 per month.
The Excess Profits Tax Officer by his assessment order dated 11th June, 1945, included the sum of Rs. 20,005 realized as rent for five months, in the profits of the business of the respondent and held that excess profits tax was payable on this amount.
This order was confirmed on appeal by the Appellate Assistant Commissioner and on fur ther appeal by the Income tax Tribunal.
The Tribunal, however, on being asked referred the following question of law to the High Court for its opinion: "Whether in the circumstances of the case, the asses see 's income of Rs. 20,005 is profits from business 3 within the meaning of section 2 (5) of the Excess Profits Tax Act and therefore or otherwise liable to pay excess profits tax ?" The High Court answered the question in the negative.
This is an appeal by special leave from this decision.
It was contended on behalf of the Commissioner before the High Court that the dyeing plant was a commercial asset of the assessee 's business for the purpose of earning profit and if this commercial asset yielded income to him in any particular manner, it was income from the assessee 's busi ness for the purpose of the Excess Profits Tax Act.
It was said that it was immaterial whether a commercial asset yields income by use of the assessee himself or its being used by someone else.
This contention was disposed of by the learned Chief Justice in these words : "Mr. Joshi seems to be right but with this qualification that the commercial asset must be at the time it was let out in a condition to be used as a commercial asset by the assessee.
If it has ceased to be a commercial asset, if its use as a commercial asset has been discontinued, then if the assessee lets it out, he is not putting to use something which is a commercial asset at the time.
"Now, on the facts found by the Tribunal, it is clear that when the assessee let out this dyeing plant, it had remained idle for some time.
He could not obtain silk yarn on account of the war and therefore it was not possible to make use of it as a commercial asset as far as the assessee himself was concerned and it was only for that reason that he let it out to Messrs E. Parakh & Co. I can understand the principle for which Mr. Joshi is contending that it makes no difference what an assessee does with a commercial asset belonging to him.
He may use it as he likes.
So long as it yields income it is the income of his business.
Var ious cases have been cited at the Bar and I think that those cases though apparently conflicting are reconcilable if we accept this principle to be the correct principle 4 and apply this ratio as the ratio emerging from these cases and I will state the principle and the ratio again that if an assessee derives income from a commercial asset which is capable at the time of being used as a commercial asset, then it is income from his business, whether he uses that commercial asset himself or lets it out to somebody else to be used.
But if the commercial asset is not capable of being used as such, then its being let out does not result in an income which is the income of the business." Mr. Justice Tendolkar concurred in this view and ob served as follows : "The ratio of all these cases to my mind is that if there is a commercial asset which is capable of being worked by the assessee himself for the purpose of earning profits and the assessee instead of doing so, either voluntarily allows someone else to use it on payment of a certain sum or is compelled by law to allow it to be used in such manner, then what he receives is income from business.
But if the commercial asset has ceased to be a commercial asset in the hands of the assessee and thereafter he gets what he can out of it by letting it out to be used by others, then the rent he receives is not income from any business that he carries on.
" The learned Attorney General pointed out that the nature of a commercial asset is not changed because a par ticular person is unable to use it.
The inability of the assessee to make use of it in certain circumstances does not in any way ' affect the nature of the asset and cause an infirmity in the asset itself.
It was contended that when the dyeing plant became idle for a short time during the chargeable accounting period it did not cease to be a com mercial asset of the respondent for it had no other busi ness; that all the assets of the respondent including the dyeing plant were the assets of the business, that whatever income was derived by the use of these assets including the income that an asset fetched by its being let out was the business income of the assessee, and that there was no warrant 5 in law for the proposition that a commercial asset which yields income must be used as an asset by the respondent himself before its income becomes chargeable to tax.
The learned counsel for the respondent urged that as soon as the assessee found difficulty in obtaining yarn the dyeing plant became redundant for its business and ceased to be an asset of its business and any income derived from the rent by letting out this asset was income received by the assessee from other sources and therefore was not charge able to excess profits tax.
In our opinion, the contention raised by the learned Attorney General is sound.
The High Court was in error in engrafting a proviso on the rule deduced by it from the authorities considered by it, to the effect that a commer cial asset of a business concern which yields income must at the time it was let out be in a condition to be used as a commercial asset by the assessee himself.
We respectfully concur in the opinion of the learned Chief Justice that if the commercial asset is not capable of being used as such, then its being let out to others does not result in an income which is the income of the business, but we cannot accept the view that an asset which was acquired and used for the purpose of the business ceased to be a commercial asset of that business as soon as it was temporarily put out of use or let out to another person for use in his business or trade.
The yield of income by a commercial asset is the profit of the business irrespective of the manner in which.
that asset is exploited by the owner of the business.
He is entitled to exploit it to his best advantage and he may do so either by using it himself personally or by letting it out to somebody else.
Suppose, for instance, in a manufac turing concern the use of its plant and machinery can advan tageously be made owing to paucity of raw materials only for six hours in a working day, and in order to get the best yield out of it, another person who has got the requisite raw materials is allowed to use it as a licensee on payment of certain 6 consideration for three hours; can it be said in such a situation with any justification that ' the amount realized from the licensee is not a part of the business income of the licensor.
In this case the company was incorporated purely as a manufacturing concern with the object of making profit.
It installed plant and machinery for the purpose of its business, and it was open to it if at any time it found that any part of its plant "for the time being" could not be advantageously employed for earning profit by the company itself, to earn profit by leasing it to somebody else.
It is difficult to hold that the income thus earned by the commer cial asset is not income from the business of the company that has been solely incorporated for the purpose of doing business and earning profits.
There is no material whatever for taking the view that the assessee company was incorpo rated with any other object than of carrying on business or trade.
Owning properties and letting them was not a purpose for which it was formed and that being so, the disputed income cannot be said to fall under any section of the Indian Income tax Act other than section 10.
Cases of undertakings of this nature stand on an entirely different footing and are distinguishable from cases of individuals or companies acquiring lands or buildings and making income by letting them on hire.
These latter cases may legitimately fall under the specific provisions of section 9 or section 12, though the High Courts in this country are by no means unanimous on this subject; but for the purpose of this case it is unnecessary to resolve that conflict.
It may be observed that no general principle can be laid down which is applicable to all cases, and each case has to be decided on its own circumstances.
Decisions of the Eng lish courts given under the Finance Acts, the scheme of which is different from the Indian Income tax statutes, are not always very helpful in dealing with matters arising under the Indian law and analogies and inferences drawn from those decisions are at times misleading.
We, however, are in respectful agreement with the observations of Lord 7 President Strathclyde in Sutherland vs The Commissioners of Inland Revenue(1) that if a commercial asset is susceptible of being put to a variety of different uses in which gain might be acquired, whichever of these uses it was put to by the appellant, the profit earned was a user of the asset of the same business.
A mere substituted use of the commercial asset does not change or alter the nature of that asset.
Whatever the commercial asset produces is income of the business of which it is an asset, the process by which the asset makes the income being immaterial.
Mr. Chatterjee for the respondent stressed the point that as the dyeing plant in the present case could not be made use of by the assessee in its manufacturing business owing to the non availability of yarn, it ceased to be a commercial asset of the business of the assessee and became redundant to that business and that being so, any income earned by this asset which had ceased to be a commercial asset was not an income of the business but must be held to have been derived from a source other than business and fell within the ambit of section 12 of the Indian Income tax Act, and on this income excess profits tax was not payable.
He contended that the facts of this case were analogous to the case of Inland Revenue Commissioners vs lies(2) and it should be similarly decided.
In that case the taxpayer carried on the business of sand and gravel merchant on certain land and at the same time he granted licences to three firms to enter his land and win gravel for themselves in return for which he received from them a royalty for each cubic yard of gravel taken away.
It was held that the royalties were not part of the profits of the business because, in granting the licences, the taxpayer was exploit ing his rights of ownership in the land and was not carrying on his business of a sand and gravel merchant.
The income was held taxable as an income from an investment and did not fall under Schedule D which concerns profits earned from a trade.
Mr. Chatterjee also laid emphasis on the observations of Lord (1) (2) [1947] 1 A.E.R. 798.
8 Greene M.R. in Croft vs Sywell Aerodrome Ltd. (1), wherein the learned Master of the Rolls observed as fol lows: "I cannot myself see that a person who leases the land to others, or grants licences to others to come upon it, is doing anything more than exploiting his own rights of property, even if the tenant or licensee is, by the terms of the lease or licence, entitled himself to carry on a trade on the land.
" It was urged that what the assessee was doing in this case was exploiting his rights of property by letting the dyeing plant to other persons precisely in the same manner as the owner of land in the case cited above was exploiting his own rights to property by granting a licence to another to come on his land.
The argument, in our opinion, though attractive, is fallacious.
The analogy between the case of land and of a dyeing plant for the purpose of taxing stat utes is inappropriate.
The distinction becomes apparent from the following passage which occurs in Atkinson J. 's judgment in I les 's case(2) : "Then it was suggested by counsel for the Crown that the case was like the Desoutter case(3), where it was held that, if you make use of a patent in your business and also receive royalties from the use of the patent by others licensed to use it, those royalties cannot be regarded as receipts from an investment.
In other words, the door has to be either open or shut.
A patent is either an investment or it is not.
The suggestion was that freehold land is in the same position, and if you carry on business on part of it, whatever you do with the rest by way of licensing or letting cannot be regarded as producing income from investment.
That, however, is dead in the teeth of the judgment in the Broadway Car Co. case(4).
The same argument was tried there, but Tucker L.J. said he thought the Desoutter case(3) had very little to do with it, as there was a great difference between land (1) (3) (2) (4) 9 and a patent, and he did not think the Desoutter case(1) threw any light on the matter .
A patent is quite different from freehold land." These observations appositely apply to the case of a company incorporated for the purpose of doing business and earning profit by the process of manufacture.
Letting out a part of its machinery in a certain situation in order to make the business advantageous as a whole does not alter the nature of the income.
The case of an owner of land letting out his land and carrying on exploitation of part of that land by selling gravel out of it, as at present advised, in our opinion, would fall under section 9 of the Indian In come tax Act, as income earned, no matter by whatever meth od, from land, and specifically dealt with by that section.
The observations therefore made in I les 's case(2) can have no apposite application to the case of a manufacturing concern letting out a part of its machinery temporarily which it cannot advantageously use itself.
Mr. Chatterjee also laid stress on the decision of the Court of Appeal in Inland Revenue Commissioners vs Broadway Car Co. Ltd.(3).
In this case the company carried on the business of motor car agents and repairers on land held on lease from 1935 to 1956 at an annual rent of pound 750.
By 1940 the company 's business had dwindled under war condi tions to such an extent that no more than one third of the land was required.
In those circumstances the remainder was sublet for fourteen years at an annual rent of pound 1,150.
The general commissioners of income tax decided that the difference of pound 400 between the outgoing of pound 750 for the land retained and the incoming of pound 1,150 for the land disposed of was "income received from an invest ment," and, the business not being one within the special categories mentioned in the Finance Act, 1939, that pound 400 was not taxable.
It was held that the word "investment" must be construed in the ordinary, popular sense of the word as used by businessmen and not as a (1) [1946] 1 A.E.R.58.
(3) [1946] 2 A.E.R. 609.
(2) 2 10 term of art having a defined or technical meaning and that it was impossible to say that the commissioners had erred in law in coming to the conclusion that the transaction result ed in an investment.
Scott L.J. in delivering his judgment laid emphasis on the point that after the business of the company had dwindled, it partitioned part of the land from the rest and sublet it by installing a heating apparatus for the sub lessee.
It was found that war conditions had reduced the company 's business to very small proportions and they cut their loss by going out of business in respect of the major part of their land and put it out of their power for 14 years to resume business there.
In this situation it was observed that in that case they were dealing with part of the property of the company which had come redundant and was sublet purely to produce income a transaction.
quite apart from the ordinary business activities of the company.
It was pointed out that the question whether a particular source of income was income or not must be decided, as it could be, according to ordinary commonsense principles.
The short question to decide in this case is whether on the facts found, it could be said reasonably that the dyeing plant had become redundant for its business as a silk manu facturing concern, simply by the circumstance that for the time being it could not be used by it personally for the purpose of dyeing silk yarn owing to the non availability of yarn.
It is difficult to conceive that the company would not have immediately started dyeing yarn as soon as it became available.
Instead of dyeing yarn, another person was allowed to dye jute (we are told), the assessee company making income out of its use as a commercial asset.
In this situation it is not possible to hold that the income thus earned was not a part of the income of the business and was not earned for the business by its commercial asset or that this commercial asset had become redundant to the company 's business of manufacture of silk.
The analogy of Broadway Car Co. Ltd. (1) therefore does not hold good for the decision of the present matter, (1) 11 We are therefore of the opinion that it was a part of the normal activities of the assessee 's business to earn money by making use of its machinery by either employing it in its own manufacturing concern or temporarily letting it to others for making profit for that business when for the time being it could not itself run it.
The High Court therefore was in error in holding that the dyeing plant had ceased to be a commercial asset of the assessee and the income earned by it and received from the lessee, Messrs Parakh & Co., was not chargeable to excess profits tax.
The result therefore is that we hold that the answer returned by the High Court to the question referred to it by the Tribu nal was wrong and that the correct answer to the question would be in the affirmative and not in the negative.
The appeal is allowed, but in the circumstances of the case we make no order as to costs.
We have not thought it necessary to refer to all the cases cited at the Bar as none of them really is in point on the short question that we were called upon to decide and analogies drawn from them would not be helpful in arriving at our decision.
Appeal allowed.
Agent for the appellant.
P.A. Mehta.

summary/full:
The respondent, a company formed for the purpose of manufacturing silk cloth, installed a plant for dyeing silk yarn as a part of its Business.
During the chargeable accounting period (last January, 1943, to 31st December, 1943) owing to difficulty in obtaining silk yarn on account of the war, it could make no use of this plant and it re mained idle for some time.
In August, 1943, the plant was let out to another company on a monthly rent.
The question being whether the income received by the respondent company in the year 1948 by way of rent of this plant was income from business and assessable to excess profits tax, the High Court of Bombay held that, as the assessee was not able to use the plant as a commercial asset, it had ceased to be a commercial asset in the assessee 's hands and the rent re ceived was not income from business.
On appeal: Held, that an asset which was acquired and used for the purpose of the business by a company formed for carrying on business and earning profits, does not cease to be a commer cial asset of that business as soon as it is temporarily put out of use or let out to another person for use in his business or trade; the income from the asset would be profit of the business irrespective of the manner in which that asset is exploited by the owner, and the rent in question was therefore income from business and assessable to excess profits tax.
No general principle, however, can be laid down which is applicable to all cases.
Each ease has to be decid ed on its own circumstances.
Sutherland vs Commissioners of Inland Revenue relied on.
Inland Revenue Commissioners vs lies [1947] 1 A.E.R. 798, Croft vs Sywell Aerodrome Co., Ltd. [1942] 1 A.E.R. 110, Inland Revenue Commissioners vs Broadway Car Co., Ltd. [1946] 2A.E.R. 609 distinguished.
Judgment of the Bombay High Court reversed.


judgement:
civil Appeal No. 353 of 1955.
On appeal by special leave from the judgment and order dated the 22nd August 1955 of the Labour Appellate Tribunal of India at Lucknow in Misc.
Case No. 111 C 650 of 1954.
Veda Vyas, (section K. Kapur and N. H. Hingorani, with him) for the appellant.
J. N. Bannerji, (P. C. Agarwalla, with him) for the respondent.
561 1956.
May 8.
The Judgment of the Court was delivered by VENKATARAMA AYYAR J.
The appellant is a company registered under the Indian Companies Act, and owns a factory called Modi Oil Mills in the district of Meerut.
The respondents are workmen employed in the Mills.
The business of the Mills consists in the manufacture of oils and paints.
On 12 7 1954 the management put up the following notice: "Notice is hereby given that due to non availability of groundnut seed and neem seed at the parity with the ruling prices of the groundnut oil and neem oil, the Management is reluctantly compelled to close the Groundnut Crushing Section and Neem Section till the next groundnut season and thus the workers in the attached list are surplus and their services are laid off with effect from 14th July, 1954.
Workers, thus affected, shall be paid compensation according to Industrial Disputes (Amendment) Act, 1953, subject to conditions laid therein.
It is further notified that the time of the attendance as provided in Section 25(D) and (E) shall be 10 a.m. for all the laid off workers".
Pursuant to this notice, 142 workmen mentioned therein, being the respondents in this appeal, were laid off from the 14th July 1954.
On 26 7 1954 the workmen acting through their Union sent a notice to the management demanding full wages for the period of lay off on the ground that it was unjustified and illegal.
The management denied these alle gations, and.
refused the demand.
This being an industrial dispute as defined in section 2(k) of the Industrial Disputes Act XIV of 1947, in the ordinary course, proceedings would have been taken with reference thereto under the provisions of that Act.
But there was at that time another industrial dispute between the parties pending final adjudication.
That dispute had been referred under section 10 of the Industrial Disputes Act for adjudication to the Regional Conciliation Officer, Meerut.
He had pro nounced his award, and against that, both the parties 562 had preferred appeals to the Labour Appellate Tribunal, and they were pending at the date of the, notice.
The Industrial Disputes (Appellate Tribunal) Act XLVIII of 1950, hereinafter referred to as the Act, contains special provisions with reference to certain disputes which might arise between parties, when there is already pending adjudication between them another industrial dispute.
They are sections 22 and 23, which are as follows: "22.
During the period of thirty days allowed for the filing of an appeal under section 10 or during the pendency of any appeal under this Act no employer shall (a)alter, to the prejudice of the workmen concerned in such appeal, the conditions of service applicable to them immediately before the filing of such appeal, or (b)discharge or punish, whether by dismissal or otherwise, any workmen concerned in such appeal, save with the express permission ' in writing of the Appellate Tribunal.
Where an employer contravenes the provisions of section 22 during the pendency of proceedings before the Appellate Tribunal, any employee aggrieved by such contravention, may make a complaint in writing, in the prescribed manner to such Appellate Tribunal and on receipt of such complaint, the Appellate Tribunal shall decide the complaint as if it were an appeal pending before it, in accordance with the provisions of this Act and shall pronounce its decision thereon and the provisions of this Act shall apply accordingly" '.
On 24 8 1954 the respondents filed an application before the Labour Appellate Tribunal under section 23 of the Act.
Therein, they alleged that the lay off was not bona fide, because the ground given therefor, namely, non availability of groundnut and neem seeds at parity with ruling prices was not true; that further in view of the pendency before the Labour Appellate Tribunal of an industrial dispute between the parties, the lay .off was in contravention of section 22(a) of the Act, and they accordingly prayed 563 that they might be awarded by way of compensation full wages for the entire period of the lay off.
The appellant contested the claim.
It contended that the non availability of groundnut and neem seeds as ,mentioned in the notice was true, and that the lay off was bonafide.
It also claimed that section 22(a ) of the Act had no application to the dispute, as the notice distinctly stated that the workmen would be paid compensation as provided in section 25 C of the Industrial Disputes Act as amended by Act XLIII of 1953.
It also contended that under that section compensation was payable only for the first 45 days at the rate mentioned in the body of the section and not for any period subsequent thereto.
The Tribunal held that the lay off was justified.
It further held on a construction of section 25 C that the workmen were entitled to half the basic wages and dearness allowance not merely for the first 45 days but for the entire period, and that as the appellant did "not observe them provisions 'of that section", there was an alteration of the conditions of service within section 22(a) of the Act.
It accordingly awarded compensation for the whole of the period at 50 per cent.
of the basic wages and dearness allowance.
Against this decision, the management has preferred this appeal by special leave.
On behal of the appellant, Sri Veda Vyas contended firstly, that on its finding that the lay off was justified, the only order which the Tribunal could have passed was one of dismissal of the petition filed by the respondents and that the award of compeneation was in consequence, without jurisdiction; and secondly, that on a true construction of section 25 C of the industrial Disputes Act, the workmen were entitled to compensation only for a period of 45 days as provided in proviso (a) to section 25 C.
We are of opinion that both these contentions are well founded.
On the first question, the jurisdiction of the Tribunal to grant relief under section 23 of the Act arises only if it is made out that there was contravention of section 22 by the management.
The respondents ,understood this position quite correctly, and with 564 view to bring themselves within section 23, they alleged that the lay off was not bona. ' fide, inasmuch as, in fact, groundnut and neem seeds were available.
This contention rests on the supposition that the conditions under which workmen could be laid off are conditions as to their service, 'and that when the employer lays off workmen without proper grounds therefor, it is a violation of the conditions of service within section 22(a) of the Act.
There was some argument before ' us whether lay off, whether justifiable or otherwise, could be brought within section 22(a) of the 'Act as amounting to breach of the conditions of service.
On the one hand, the argument was that the expression "conditions of service" would include only such conditions as would operate when the workmen were actually in service ,such as the quantum of wages, hours of work, provision for leave and so forth, and that when there was a lay off, these conditions could by their very nature have no application, and that if the lay off 'was unjustified, that would give the workmen a right to take proceedings under the 'provisions of the Industrial Disputes Act, but that they could make no claim under section 23 as for a breach of the provisions of section 22(a).
The contention on the other side, was that the workmen and the management ,should be deemed to have agreed that there would be lay off only for good and proper reasons and under conditions permitted by law, and that if those conditions were not satisfied, the lay off would be an alteration of the conditions of service within section 22(a).
The question is one of some importance, but it is unnecessary to express any opinion on it, as counsel for the appellant conceded after some argu ment that conditions under which the workmen could be laid off would be conditions of service.
On this footing, he contended that as the lay off *as, in fact, justified, there Was no breach of those conditions, and that, in consequence, section 22(a) of the Act had no application.
On behalf of the respondents, it is argued that the lay off must, by its very nature, be temporary and of short duration, and that if it is for 565 a long or indefinite period as in the present case, it could not be said to be a proper lay off such as could be deemed to have been agreed to by the workmen, and that section 22(a) of the Act would, therefore, be applicable.
It is common ground that there are no statutory rules prescribing the conditions under which there could be a lay off.
If there had been, they would operate as conditions of service between the parties, and then the question would simply have been whether there had been a compliance with them.
Under the provisions of the Industrial Employment (Standing Orders) Act XX of 1946, certain Standing Orders had been framed with reference to this matter.
Counsel on both sides state that after the enactment of the Industrial Disputes (Amendment) Act XLIII of 1953, they are no longer in force, and that there are no statutory provisions applicable to the present dispute.
We must, therefore, decide the question on the footing that the only condition which the parties might be taken to have agreed to is that the lay off should be for adequate grounds and for a reasonable period.
On this question, there is a clear finding in favour of the appellant.
The Tribunal has found that groundnut and neem seeds were not available at parity prices, and that for that reason, the work had to be stopped.
It is not likely that businessmen would cut their profits to spite the workmen.
The period of the lay off was expressed to be until the next groundnut season and we have been told that the season for groundnut begins sometime in November December.
In fact, all the respondents have been reemployed in relays from September onwards, and by the first week of December all of them had been absorbed.
On the finding of the Tribunal that the lay off was justified, it follows that the application of the respondents under section 23 of the Act was liable to be dismissed on the ground that there had been no contravention of section 22(a).
But., notwithstanding this finding, the Tribunal went on to hold that the application under section 23 of the Act was maintainable.
To appreciate the 566 reasoning 'behind this decision, it is necessary to refer to section 25 C of the Industrial Disputes Act, which runs as follows: "Right of workmen laid off for compensation: Whenever a workman (other than a badli workman or a casual workman) whose name is borne on the muster rolls of an industrial establishment and who has completed not less than one year of continuous service under an employer is laid off, he shall be paid by the employer for all days during which he is so laid off, except for such weekly holidays as may intervene, compensation which shall be equal to fifty per cent.
of the total of the basic wages and dearness allowance that would have been payable to him bad he not been so laid off: Provided that (a)the compensation payable to a workman during any period of twelve months shall not be for more than forty five days except in the case specified in clause (b); (b)if during any period of twelve months, a workman has been paid compensation for forty five days and during the same period of twelve months he is again laid off for further continuous periods of more than one week at a time, he shall, unless there is any agreement to the contrary between him and the employer, be paid for all the days ' during such subsequent periods of lay off compensation at the rate specified in this section".
The appellant does not dispute the right of the respondents to compensation, and, in fact, they were informed by the very notice dated 12 7 1954 under which they were laid off, that compensation would be paid to them in accordance with section 25 C.
It is as regards the quantum of compensation payable under that section that the parties are disagreed.
It will be remembered that the lay off commenced on 14 7 1954 and was to continue until the next groundnut season, and that the workers were actually absorbed in batches from September, and that by the first week of December, they had all of them been employed.
There was thus one continuous lay off 567 for periods varying from 57 to 121 days.
The contention of the appellant is that, on these facts, the workmen were entitled to compensation only in accordance with proviso (a) to section 25 C, and that they would therefore be entitled to 50 per cent.
of the basic wages and dearness allowance for the first 45 days and for the rest of the period, no compensation was payable.
The respondents agree that proviso (a) to section 25 C applies to the first period of 45 days; but they contend that for the remaining period of the lay off, the governing provision is proviso (b) to sec tion 25 C, and that under that proviso, they would ,be entitled to compensation as provided in the body of the section, i.e. 50 per cent.
of the basic wages and dearness allowance, for the remaining period also.
This contention was accepted by the Tribunal, and holding that the compensation awarded by the appellant was not in accordance with section 25 C, it decided, as already mentioned, that there was an alteration of the conditions of service, and accordingly awarded compensation under section 23 of the Act.
It is contended for the appellant that the construction which the Tribunal has put on section 25 C is erroneous, and that the amount of compensation offered by the appellant was the correct amount payable under that section.
As already stated, there is no dispute that the compensation payable for the first 45 days has to be determined in accordance with proviso (a) to section 25 C.
The dispute is only as to whether for the rest of the period of lay off the workmen are entitled to compensation under proviso (b) to section 25 C. That proviso would apply only if the workmen had been paid compensation for 45 days, and were again laid off for further periods of more than one week at a time.
On the wording of the section, it is clear that the lay off which falls within proviso (b) to section 25 C must be distinct from that for which compensation had been paid in accordance with proviso (a) to section 25 C and subsequent thereto in point of time.
And as, in the present case, there was one continuous lay off for the entire period, proviso (b) could have no application.
568 Counsel for the respondents contends that though there was only one lay off, it should notionally be split up into two, the first period being the 45 days covered by proviso (a) to the section and the rest of the period, by proviso (b) It is arguable that there could be a second and distinct lay off following the first without a break, as for example, when the management first notifies lay off for a period of 45 days and pays compensation therefor, and again issues a fresh notification at the end of the period declaring a further lay off for a period exceeding 7 days in continuation of the notified lay off, and that that would fall within proviso (b).
But, in the present case, there was only one notification.
, and the period specified therein was up to the next season.
By no straining of the language.
of proviso (b) to section 25 C can such a lay off be brought within its purview.
The respondents rely in support of their contention on the decision in Automobile Products of India Ltd. vs Their Workmen(1).
But that decision gives no effect whatever to the words "again laid off", and moreover, if the construction adopted therein is correct, there would be no need for the provisos (a) and (b), as what would be payable under them, according to the respondents, would become payable under the body of the section itself.
If, as observed in the above decision, this conclusion leads to an anomalous position, it is for the legislature, if it thinks fit, to amend the section and not for the Tribunal to construe it otherwise than what it plainly means.
We are accordingly of opinion that the respondents are entitled to compensation only for the 45 days as provided in proviso (a), and that as the appellant had offered to pay the same by its notice dated 12 7 1954, there was no aIteration of the conditions of service within section 22 of the Act, and that, in consequence, the petition of the respondents was liable to be rejected.
We accordingly allow the appeal, set aside the order of the Tribunal, and dismiss the petition of the respondents.
The parties will bear their own costs.
(1) [19551 1 Labour Law Journal 67.

summary/full:
During the pendency of an appeal before the Labour Appellate Tribunal in respect of a prior industrial dispute between the same parties the management laid off certain workmen and offered to pay compensation equal to half the basic wages and dearness allowance for the first 45 days in accordance with the provisions of proviso (a) to section 25 C, Industrial Disputes Act.
The workmen made an application to the Tribunal under section 23 of the Industrial Disputes (Appellate Tribunal) Act, 1950 alleging that there was a breach of section 22(a) of the same Act, and that the lay off was not bona fide and claimed full wages for the entire period of the lay off as compensation.
The Tribunal held that the lay off was justified but that the workmen were entitled to half the basic wages and dearness allowance not merely for the first 45 days but for the entire period under proviso (b) to section 25 C. Held, that on the finding of the Tribunal that the lay off wag justified the application under section 23 was liable to be dismissed.
Proviso (b) to section 25 C, Industrial Disputes Act, is only applicable in case of a second and distinct lay off and does not apply to a period subsequent to the first 45 days of one continuous lay off.