judgement:
ivil Appeal No. 2678 of 1985.
From the Judgment and order dated 30.4.1985 of the Delhi High Court in F.A.O. No. 270 of 1982.
M.C. Bhandare, Sandeep Narain and Shri Narain for the Appellants.
Dr. Shankar Ghosh and N.R. Choudhary for the Respondent.
The Judgment of the Court was delivered by KANIA,J.
The hearing before us now relates to certain objections filed to the Award made by Shri A.C. Gupta a former Judge of this Court who was appointed the sole arbitrator to adjudicate upon the dispute between the parties pursuant to the Order of this Court dated 18th November, 1987 in the circumstances as set out hereinafter.
In order to appreciate the objections, it is necessary to refer to certain facts.
The Settlement Commissioner, Government of India allotted Plot No. 631 at Chitranjan Park, New Delhi measuring 160 sq.
yds to the Respondent under the Settlement Scheme for the refugees from Pakistan for a total price of Rs.4,800.
This allotment was made by the Settlement Commissioner on behalf of the Rehabilitation Department of the Government of India.
The Respondent applied for a loan from the Ministry of Defence for construction of the house on the said plot and a loan of Rs.15,000 was sanctioned in his favour.
Under the House Construction Rules of the Government, the plans and estimates had to be submitted along with the application and a sanctioned amount was paid in four instalments at different stages of construction.
The Respondent started the construction of a building on the said land.
By the end of 1973, the Respondent had constructed a house on the said plot upto the roof level.
By that time he had obtained and used up a sum of Rs.12,000 out of the loan sanctioned to him and only a balance of Rs.3,000 PG NO 517 remained to be paid to him under the said loan.
According to the Respondent, this amount was not sufficient for the final completion of the house and he, therefore, sought the help of Appellant No. I who advanced a sum of Rs.5,000 to him.
In September, 1973 the Respondent entered into an agreement dated September 6, 1973 to sell the house and the said plot to the Appellant No. 1.
The aforesaid amount of Rs.5,000 given by way of loan was shown in that agreement as an advance paid towards the sale price.
The Respondent also executed a General Power of Attorney in favour of Appellant No. 1 inter alia enabling him to carry on construction work on the said land on behalf of the Respondent.
According to the Respondent, the house was not complete but the Appellants who are husband and wife were occupying the same.
Under circumstances, we need not discuss here, on January 29, 1974 another agreement was entered into between Appellant No. 1 and the Respondent which has been described as an agreement for construction.
Under that agreement, Rs.80,000 was to be paid by the Respondent as the price of the construction to be put up by Appellant No. I on the said plot and he was to charge Rs.20,000 as the profits and labour charges.
He was to deposit Rs.15,000 with the Respondent, this transaction was sham and bogus.
Disputes arose Respondent was to return the amount of Rs.1,15,000 within three years in a lump sum and on such payment, Appellant No. I was to hand over the possession of the building and the plot to the Respondent.
Till that amount was paid, Appellant No. 1 was entitled to possess and occupy and enjoy the same and to receive rents thereof.
According to the Respondent, this transaction was sham and bogus.
Disputes arose between the parties and the Respondent filed a suit in August 1977 claiming for the return of the possession of the said plot and the house.
A notice of motion under section 34 of the for stay taken out by the Appellants was dismissed.
An appeal was preferred against the said decision.
In the appeal, which came up for hearing before the Additional District Judge, Delhi.
with the consent of the parties, Shri Bakshi Man Singh was appointed as the sole arbitrator to adjudicate upon the disputes in the suit.
The said Shri Bakshi Man Singh died in July 1979 without making any award.
On an application by the Respondent, the learned Additional District Judge filled up the vacancy by appointing Shri Hari Shanker, Advocate, as the sole rbitrator.
Shri Hari Shanker made and published his award which went against the Appellants.
According to the Appellants, the said award was made ex parte.
The appellants challenged the award by filing objections under sections 30 and 33 of the before the learned Additional District Judge and applied for setting aside the said award.
This application was dismissed by the learned Additional District Judge.
The Appellants PG NO 518 filed an appeal against this decision on October 14,1982 before the Delhi High Court but the said appeal was dismissed by the learned Single Judge of that High Court on April 30, 1985.
This decision of the learned Single Judge was challenged before this Court by way of Special Leave Petition under Article 136 of the Constitution.
Leave was granted and the present Appeal came to be numbered as aforesaid.
This Appeal came up for hearing before a Division Bench of this Court on November 18,1987.
After hearing Counsel for the parties.
in order to ensure fairplay in the action, this Court set aside the award of the Arbitrator and also the judgment of the Delhi High Court and appointed Shri A.C. Gupta, a former Judge of this Court, as the sole arbitrator to adjudicate upon the disputes between the parties.
The arbitrator was directed to make his award with short reasons within four months from the receipt of the the order.
Certain other conditions like payment of compensation and additional expense were imposed on the Appellants.
Pursuant to the said order of this Court, the said Shri A.C. Gupta entered upon the reference and made and made and published his award on March 18,1988.
Under the said award, it was held that the Respondent was entitled to a sum of Rs.58,498.60p and interest on this amount at the rate of 18 per annum from the date of the reference to the date of the award which worked out to a sum of Rs.3,510.
Taking into account the amount paid by the Respondent initially towards the arbitrator 's remuneration and others costs and after setting off the dues of Appellants against the Respondent, it was held that the Respondent claimant was entitled to recover possession of the disputed building from the Appellants and that a sum of Rs.57,753 was payable by the Appellants to the Respondent.
It is this award which is challenged before us now.
The sole submission made by Mr. Bhandare, learned Counsel for the Appellants is that the award is bad in law and liable to be set aside as there is an error of law disclosed on the face of the award.
In this connection, Mr. Bhandare drew our attention to clause 2(b) of the agreement to sell dated September 6, 1973 referred to earlier.
Ten earlier part of the agreement set out that the purchaser (Appellant No. 1) had paid to the seller (Respondent) a sum of Rs.5,000, the receipt of which was acknowledged by the Respondent and the balance amount payable was to be paid in the manner set out in the said clause 2(b) which runs as follows: "The purchaser shall pay to the seller Rs.105 each month against the .sanctioned loan of Rs.15,000 by the fifth day of every English Calendar month till such time the full PG NO 519 amount of loan is recovered from the seller by the Government of lndia.
The first instalment shall commence with effect from 5th October, 1973 The purchaser, if he desires, can also deposit the actual remaining amount towards this loan at any time in lump sum to the Government of India on behalf of the seller.
" It is a common ground that the sum of Rs. 105 per month referred to clause 2(b) of the said agreement was paid by the Respondent only upto January 1976 and that this payment covered upto 23 instalments more than 100 instalments were remaining unpaid.
Mr. Bhandare pointed out that it was contended by the Appellants before the arbitrator that, although the agreement for sale between the parties was not registered and might not convey and interest to Appellant No. 1 in the property, the Appellants had been put in possession of the said land and construction pursuant to the said agreement since September 1973, as appears from the agreement of sale.
and, in view of this, Appellants were entitled to retain possession under the protection afforded by Section 53A of the Transfer of Act.
He drew our attention to the following statements contained in the award of the learned Arbitrator: "The Respondent who has been in possession of the property since September 1973 as would appear from the agreement for sale, claimed that his possession was protected Under Section 53A of the .
Section 53A affords protection to a transferee on certain condition, One of which is that `the transferee has performed or is willing to perform his part of contract '.
Under the agreement for sale, the respondent was required to pay the claimant a monthly sum of Rs. 105 to enable the latter to pay the instalments in discharge of the house building loan.
From the receipts filed it appears that the respondent paid only upto January 1976 which covered 23 instalments only and more than 100 instalments remained to be paid.
There is no valid reason why he should have failed t to carry out his obligation under the contract.
Thus it cannot be said that the respondent had performed or was willing to perform his part of the contract.
Therefore, the respondent was not entitled to retain possession of the disputed property beyond January 1976.
" PG NO 520 It was submitted by Mr. Bhandare that these statements clearly disclose close an error apparent on the face of the award.
It is pointed out by him that, prior to February 1976, the Respondent by his Advocate 's notice dated 16.1.1976 had repudiated the said agreement for sale by contending in his notice that it had been procured by fraud, undue influence and coercion practised by Appellant No. I and it was submitted that the said repudiation was wrongful and in view thereof Appellant No. 1 was absolved from his obligation to make any further payment of Rs.105 per month or to continue to be ready and willing to perform the agreement.
It was submitted by him that the aforestated statements contained in the award ran counter to the settled position in law and disclosed a clear error of law on the face of the award.
He drew our attention to the decision of this Court in International Contractors Ltd. vs Prasanta Kumar Sur, In that case the appellant had purchased the property in dispute from the respondent but soon thereafter there was an agreement for reconveyance of the property to the respondent within a period of two years for almost the same value for which it was sold.
Before the expiry of the stipulated period, the respondent entered into correspondence with the appellant, asking for the completion of the agreed reconveyance and intimating that the purchase money was ready to be paid, but after some further correspondence, the appellant 's solicitors, on his behalf, repudiated the agreement for reconveyance.
The respondent then did not tender the price agreed to be paid and filed a suit for specific performance.
The suit was dismissed by the trial court on the ground that the respondent had not paid the money.
The High Court reversed the decision and decreed the suit.
On an appeal to this Court, it was held that as the appellant had totally repudiated the contract for reconveyance and had tailed lo perform his part of the contract, it was open to the respondent to sue for its enforcement and the High Court was right in holding that respondent was entitled to a decree for specific performance.
In our view, Mr. Bhandare may be right in contending that this decision does show that it has been held by this Court that in certain circumstances once a party to a contract has repudiated a contract, it is not necessary for the other party to tender the amount payable under the contract in the manner provided in the contract in order to successfully claim the specific performance of the contract.
The decision, however, nowhere lays down that where one party to a contract repudiates the contract, the other party to the contract who claims specific performance of the contract is absolved from his obligation to show that he was ready and willing to perform the contract.
Mr. Bhandare 's argument really is to the effect that the Respondent wrongly repudiated the contract by his said letter dated 16th January, 1976, before all the mutual PG NO 521 obligations under the contract had been carried out, that is to say, he committed an anticipatory breach of the contract and in view of this, Appellant No. 1 was absolved from carrying out his remaining obligations under the contract and could claim specific performance of the same even though he failed to carry out his remaining obligations under the contract and might have failed to show his readiness and willingness to perform the contract.
In our view, this argument cannot be accepted.
It is settled in law that where a party to a contract commits an anticipatory breach of the contract, the other party to the contract may treat the breach as putting an end to the contract and sue for damages, but in that event he cannot ask for specific performance.
The other option open to the other party, namely, the aggrieved party, is that he may choose to keep the contract alive till the time for performance and claim specific performance but, in that event.
he cannot claim specific performance of the contract unless he shows his readiness and willingness to perform the contract.
The decision of this Court in International Contractors Limited vs Prasanta Kumar Sur, (supra), properly analysed, only lays down that in certain circumstances it is not necessary for the party complaining of an anticipatory breach of contract by the other party to offer to perform his remaining obligations under the contract in order to show his readiness and willingness to perform the contract and claim specific performance of the said contract.
Mr. Bhandare also referred to the decision of the Andhra Pradesh High Court in Makineni Nagayya and Others v Makineni Bapamma., AIR (45) We do not consider it necessary to refer this decision as it does not carry the case of the Appellants any further.
The ratio of the said decision in no way runs counter to the said position in law set out above.
In the case before us, what the arbitrator has done is to set out in his award the relevant portion of Section 53A of the in terms of the said section.
There can be no dispute that these provisions have been correctly set out.
There is thus no error in the proposition of law set out by the learned Arbitrator in the award.
It may be that there is an error, although that is by no means certain.
in the application of these principles in coming to the conclusion that, notwithstanding the repudiation of the said contract by the respondent, Appellant No. I was not absolved from his obligation to pay the remaining instalments of Rs.105 per month as provided under the contract.
In Coimbatore District Podu Thozillar Samgam vs Balasubramania Foundary and others; , it has been held by this Court that it is an error of law and PG NO 522 not a mistake of fact committed by the Arbitrator which is justiciable in the application before the Court.
If there is no legal proposition either in the award or in any document annexed to the award which is erroneous and constitutes the basis of the award and the alleged mistakes or alleged errors, are only mistakes of fact the award is not amenable to corrections by the Court.
In its judgment, the Court referred to the decision of this Court in Union of India vs A. L. Rallia Ram; , ; and, after referring to certain factors pertaining to awards in arbitration proceedings and the machinery devised by the , pointed out that the award was the decision of a domestic tribunal chosen by the parties and the civil courts which were entrusted with the power to facilitate arbitration and to effectuate the awards, could not exercise appellate powers over the decisions.
This Court reiterated that it was now firmly established that an award was bad on the ground of error of law on the face of it only when in the award itself or in a document actually incorporated in it, there was found some legal proposition which was the basis of the award and which was erroneous.
This view was enunciated by the Judicial Committee in Champsey Bhara and Co. vs Jivraj Balloo Spinning and Weaving Co. Ltd., [1922 23] LR 5O IA 324; This view was again reiterated and emphasised by this Court in Kanpur Nagar Mahapalika v M/s Narain Das Haribansh, 11970] 2 S.C.R. 28; where Ray, J., as the learned Chief Justice then was, observed at page 30 of the Report relying on Champsey Bhara case: "An error of law on the face of the award meant that one could find in the award, or in a document actually incorporated thereto, as, for instance.
a note appended by the arbitrator stating the reasons for his judgment, some legal proposition which was the basis of the award and which one can say is erroneous.
" In State of Orissa & Ors v M/s Lall Brothers, [1988] Judgment Today S.C. 552 it was held by a Bench of this Court that it is not open to the Court to speculate, where no reasons are given by the arbitrator, as to what impelled him to arrive at his conclusions.
Reference was made in this connection (see paragraph 8) to the observations of the Judicial Committee in Champsey Bhara & Co. vs Jivraj Balloo Spinning & Weaving Co. ltd. and of this Court in Jivarajbhai Ujamshi Sheth & Ors.
vs Chintamanrao Balaji and Ors, ; PG NO 523 It was next contended by Mr. Bhandare that the award disclosed an error in law as certain important documents relied on by the Appellants were not referred to or discussed in the award at all.
In support of this contention Mr. Bhandare referred to the decision in K.P. Poulose vs State of Kerala and Another, ; In that case the arbitrator failed to take into account material documents, which were necessary to arrive at for a just and fair decision to resolve the controversy between the parties and it was held that this amounted to legal misconduct on the part of the arbitrator and his award liable to be set aside.
This decision is not of much assistance in the case before us as it is not the contention of Mr. Bhandare that the award is bad on the ground of any misconduct of the arbitrator but on the ground that it discloses an error of law on the face of the record.
Moreover, our attention has not been drawn to any particular document which was essential to resolve the controversy between the parties nor has it been demonstrated that any such document was not taken into account by the arbitrator.
In view of this, there is no basis to support the contention of Mr. Bhandare which must be rejected.
It cannot be even said in this case that the arbitrator was guilty of any legal misconduct or otherwise .
The objections to the Award of Shri A.C. Gupta, therefore, fail and are dismissed.
There will be a judgment in terms of the Award.
Let the decree be drawn up accordingly.
In the facts and circumstances of the case, there will be no order as to costs to the hearing before us.

summary/full:
The respondent had taken a loan of Rs.15,000 from the Ministry of Defence for construction of a house on a plot allotted to him.
As the amount of loan was insufficient to complete the construction, he took a loan of Rs.5,000 from Appellant No. 1 and on 6th September, 1973 he entered into an agreement to sell the house and the plot to Appellant No. 1.
The aforesaid amount of Rs.5,000 was shown as advance of sale price.
Clause 2(b) of the Agreement provided that the appellant purchaser shall pay to the seller!respondent a sum of Rs.105 every month against the sanctioned loan of Rs. 15,000 till the full amount is recovered from the respondent.
I he payment of Rs. 105 per month was made by the appellant only up to .January 1976 and this payment covered upto 23 instalments, and more than l00 instalments remained unpaid.
On January 29, 1974 another agreement, for construction. was entered into between Appellant No. 1 and the respondent.
Under this agreement, Appellant No. 1 was to complete construction of the house and alter the completion of the house the respondent was to return the cost of construction amounting to Ks.1,15,000 including appellant 's profit of Rs.20,000 and security amount of Rs. 15,000 deposited by the Appellant No. 1 with the respondent, within three years in a lump sum and on payment the Appellant No.
I was to hand over the possession of the building and the plot to the respondent.
Till that amount was paid.
Appellant No 1 was entitled to possess and occupy and enjoy the building PG NO 513 PG NO 514 The house was not completed but the appellants who are husband and wife were occupying the same.
According to the respondent this transaction was sham and bogus and he repudiated the same.
Disputes arose between the parties.
The respondent filed a suit claiming for the return of possession of the said plot of land and house.
The application ot ' the appellant under section 34 of the Arbitration Act was dismissed.
In the appeals preferred by the appellant the Additional District Judge, appointed a sole arbitrator with the consent of the parties.
The arbitrator made and published his award which went against the appellants.
The High Court dismissed the appeal filed by the appellants against the order of the District Judge dismissing their application challenging The Award.
This Court.
in appeal, set aside the award of the Arbitrator and also the judgment of the High Court and appointed Shri A.C. Gupta, a former Judge of this Court as the sole arbitrator.
It was contended before the said Arbitrator that the agreement for sale was not registered and might not convey any interest to appellant No. 1 in the property, but the appellants, who had been put in possession of the said land and construction.
were entitled to retain possession under th4 ' protection affOrded by section 53A of the .
The arbitrator made and published his award which went against the appellants.
The arbitrator held from the receipts filed, that the respondent paid only rent up to than 100 instalments remained to be paid, and that there was no valid reason why the respondent should have failed to carry out his obligation under The contract.
The arbitrator further held that the respondent could not, therefore, claim that his possession was protected, under section 53A of the and was, therefore.
not entitled to retain possession of the disputed property beyond January 1976.
In the objection filed by the appellants challenging the award before this Court it was contended that the award is bad in law and liable to be set aside as there is an error of law disclosed on the face of the award as the statements contained in the award ran counter to the settled position in law that wrongful repudiation by the respondent of the contract by his letter dated 16 January, 1976, before mutual obligation under the contract were carried out, amounted to PG NO 515 an anticipatory breach of contract by him and therefore the Appellant No. 1 is absolved from carrying out his remaining obligation under the contract, and could claim specific performance of the same even though he failed to carry out his remaining obligations under the contract.
Dismissing the objections and upholding the award, the Court, HELD: l.
It is settled in law that where a party to a contract commits an anticipatory breach of the contract, the other party to the contract may treat the breach as putting an end to the contract and sue for damages, but in that event he cannot ask for specific performance.
The other option open to the other party, namely, the aggrieved party, is that he may choose to keep the contract alive till the time for performance and claim specific performance but, in that event, he cannot claim specific performance of the contract unless he shows his readiness and willingness to perform the contract.
[521B C] International Contractors Ltd. vs Prasanta Kumar Sur, [1961]3 SCR 579, distinguished.
It is an error of law and not a mistake of fact committed by the Arbitrator which is justiciable in the application before the Court.
[521A] If there is no legal proposition either in the award or in any document annexed to the award which is erroneous and constitutes the basis of the award and the alleged mistakes or alleged errors are only mistakes of fact the award is not amenable to correction by the Court.
[522A B] Coimbatore District Podu Thozillar Sangam vs Balasubramania Faundary and Others, ; ; Champsey Bhara and Co. vs Jivraj Balloo Spinning Weaving Co. Ltd., [1922 23] LR 50 IA 324, ; Kanpur Nagar Mahapalika vs M/s Narain Das Haribansh, , and State of Orissa & Ors.v.
M/s Lall Brothers, [1988] Judgment Today S.C. 552, referred to.
In this case, what the arbitrator has done is to set out in his award the relevant portion of section 53A of the , in terms of the said section.
There can be no dispute that these provisions have been correctly set out.
There is thus no error in the proposition of law set out by the learned Arbitrator in the award.
It may be that there is an error, although that is by no means certain, in PG NO 516 the application of these principles in coming to the conclusion that, notwithstanding the repudiation of the said contract by the respondent, Appellant No. 1 was not absolved in the facts and circumstances of the case from his obligation to pay the remaining instalments of Rs.105 per month as provided under the contract.
[521F G]


judgement:
: Petition for Special Leave to Appeal (Crl) No 1783/1988.
PG NO 622 From the judgment and Order dated 14.4.1988 of the Andhra Pradesh in W.P. No. 4454 of 1988.
G. Ramaswamy, Additional Solicitor General and T.V.S.N. Chari for the Petitioners.
A. Subba Rao for the Respondent.
The Judgment of the Court was delivered by K. JAGANNATHA SHETTY, J.
This appeal by special leave is directed against the judgment dated April 14, 1988 of the High Court of Andhra Pradesh in writ petition No. 4454 of 1988 whereby the order of detention passed against the respondent under the Prevention of Black Marketing and Maintenance of Supplies of Essential Commodities Act, 1980 ("The Act") was quashed.
Briefly stated the facts are these: The respondent was said to have smuggled paddy from Andhra Pradesh to Tamil Nadu.
During the watch kept by the Inspector, Vigilance Cell, Civil Supplies Department, Nellore on the night of November 4, 1987 a lorry bearing No. MDN 8505 carrying 125 bags of paddy was spotted when it was trying to go to Tamil Nadu avoiding check post.
The lorry was chased by the Inspector of Police and his staff.
The driver suddenly stopped the lorry, but the persons in the vehicle took the heals jumping out there from and disappeared in the bushes.
The respondent was identified by the Inspector of Police and his staff in the head lights of the jeep in which they were chasing.
The driver of the vehicle was apprehended after a hot chase, but not the respondent.
From the interrogation of the driver, it was established that on November 4, 1987, the respondent along with two others were in the cabin of the lorry and they were responsible for transporting paddy to Tamil Nadu.
The paddy and the lorry were seized by the Inspector.
A criminal case was registered against the driver under the Essential Commodities Act and the Andhra Pradesh Rice Procurement (Levy) Order, 1984.
When the investigation of that case was proceeding, Additional Superintendent of Police, Nellore sent proposals to the District Magistrate for detaining the respondent under the Act.
The District Magistrate passed an order dated December 24, 1987 directing the detention of the respondent.
On January 4, 1988, the State Government approved the detention.
On January 11, 1988 the State Government acting under sec.
10 of the Act refered the matter to the Advisory Board.
PG NO 623 On January 27, 1988, the detenu submitted a representation through the Superintendent, Central Prison where he was detained to the Chairman of the Advisory Board and to the Chief Secretary, Government of Andhra Pradesh and also to the detaining authority.
The Government forwarded the representation to the Advisory Board.
On January 29, 1988, the Advisory Board met and heard the detenu and the officers on behalf of the Government.
There were high ranking police officials representing the Government.
The Advisory Board after hearing those officers and the detenu made an order: "We have heard the detenu, who has been produced before us and considered his written representation.
We have also heard Sri V. Appa Rao, I.G.P. (Spl), Vigilance, Sri C.R. Naidu, Addl.
S.P. (Vigilance), Hyderabad, Sri N. Chandramouli, D.S.P. (Vigilance), Nellore and Sri Nageswara Rao, Incharge Joint Collector, Nellore District.
We have perused the grounds of detention and other connected papers.
OPINlON We are of the opinion that there is sufficient cause for the detention of Balajangam Subaramaiah Subaramaiah Subbarami Reddy S/O Changaiah.
Chairman Member Member" The Government agreed with the opinion and confirmed the detention for a period of six months.
The detenu challenged the validity of the order of detention before the High Court.
The High Court allowed the writ petition and quashed the order of detention.
The High Court found that there was unequal treatment by the Advisory Board in considering the representation of the detenu.
The Advisory Board having decided to hear the top ranking police officers like the Inspector General of Police, Vigilance, Additional Superintendent of Police, Vigilance, Deputy Superintendent of Police, Vigilance and Joint Collector of Nellore District ought to have given an equal chance of representation to the detenu by permitting him to be represented by a lawyer or at least by an official (friend) of an equal rank.
The High Court tersely observed: PG NO 624 "In such circumstances, the Advisory Board ought to have provided the prisoner an opportunity for representation though not by a lawyer at least by some one equally competent like those who appeared for the State.
The Government cannot deny the fact that the might of the official representation before the Advisory Board out weighed by several times the value of the detenu 's representation .
The High Court also found that the detenu did write to the Government on January 27, 1988 asking for representation by a lawyer and that request ought to have been acceded to by the Advisory Board when the matter came up before it.
The High Court then said: "We are of the opinion that the dormant right of the detenu for equal representation had become active upon the mode of conducting the proceedings by the Advisory Board.
The prisoner in this case could not have envisaged that the High State officials would appear against his case and for the detaining authority.
For these reasons.
we cannot agree with the contention that the prisoner himself was to blame for not asking the Advisory Board for a lawyer 's representation or for equal level of representation before the Advisory Board.
As we are of the opinion that Article 22 (5) requires the Advisory Board to afford the prisoner an equal opportunity for representing his case compared with the quality and quantity of official representation allowed for the detaining authority and as we are also of the opinion that the official representation in this case far outweighed in importance the detenu 's representation we hold that article 22(5) is violated in this case.
These are the findings of the High Court.
The question is whether the view taken by the High Court in the premises is justified.
In view of the fact that top ranking officials representing the Government were personally heard by the Advisory Board whether the detenu was prejudiced? Whether there was any breach of equality in denying him representation by a lawyer or friend? The Act by sec. 10 provides for constitution of an Advisory Board. Sub sec. 2 thereof provides that every such Board shall consist of three persons who are, or have been, or are qualified to be appointed as, Judges of a High Court, and such persons shall be appointed by the appropriate PG NO 625 Government.
Sub sec.
3 provides that the Government shall appoint one of the members of the Advisory Board who is, or has been, a Judge of a High Court to be its Chairman, etc.
Section I0 provides for reference to Advisory Board.
In every case where a detention order has been made under the Act, the Government shall, within three weeks from the date of detention of a person, place before the Advisory Board constituted by it, the grounds on which the order has been made the representation, if any, made by the person affected by the order.
Section 1I provides procedure to be followed by Advisory Board.
It reads: "(1) The Advisory Board shall, after considering the materials placed before it and, after calling for such further information as it may deem necessary from the appropriate Government or from any person called for the purpose through the appropriate Government or from the person concerned, and if, in any particular case, it considers it essential so to do or if the person concerned desires to be heard, after hearing him in person, submit its report to the appropriate Government within seven weeks from the date of detention of the person concerned.
(2) The report of the Advisory Board shall specify in a separate thereof the opinion of the Advisory Board as to whether or not there is sufficient cause for the detention of the person concerned.
(3) When there is a difference of opinion among the members forming the Advisory Board, the opinion of the majority of such members shall be deemed to be the opinion of the Board.
(4) Nothing in this section shall entitle any person against whom a detention order has been made to appear by any legal practitioner in any matter connected with the reference to the Advisory Board, and the proceedings of the Advisory Board, and its report, excepting that part of the report in which the opinion of the Advisory Board is specified, shall be confidential. ' Section 12 provides that where the Advisory Board has reported that there is in its opinion sufficient cause for the detention of a person, the Government may confirm the detention order and continue the detention of the person PG NO 626 concerned for such period as it thinks fit.
But in case where the Advisory Board has reported that there is in its opinion no sufficient cause for the detention of the person concerned, the Government shall revoke the detention order and cause the person to be released forthwith.
The Act thus by sec.
11(4) expressly denies representation through a legal practitioner.
The Board may hear any person if necessary.
If the detenu desires to be heard, the Board may hear him also.
But no person has a right to be represented by a lawyer much less the detenu.
This provision is in conformity with article 22(3)(b) of the Constitution, the scope of which has been explained by a Constitution Bench of this Court.
In A. K. Roy vs Union of India, [ ; , this Court speaking through Chandrachud, CJ., had this to say (at 339): "On a combined reading of clauses (1) and (3)(b) of Article 22, it is clear that the right to consult and to be defended by a legal practitioner of one 's choice, which is conferred by clause (1), is denied by clause 3(b) to a person who is detained under any law providing for preventive detention.
Thus, according to the express intendment of the Constitution itself, no person who is detained under any law, which provides for preventive detention, can claim the right to consult a legal practitioner of his choice or to be defended by him.
In view of this, it seems to us difficult to hold, by the application of abstract, general principle or on a priori considerations that the detenu has the right of being represented by a legal practitioner in the proceedings before the Advisory Board.
Since the Constitution, as originally enacted, itself contemplates that such a right should not be made available to a detenu, it cannot be said less to be satisfied.
It is therefore, necessary that the procedure prescribed by law for the proceedings before the Advisory Boards must be fair, just and reasonable.
" Learned Chief Justice continued: PG NO 627 "But then, the Constitution itself has provided a yardstick for the application of that standard, through the medium of the provisions contained in Article 22(3)(b).
However, much we would have liked to hold otherwise, we experience serious difficulty in taking the view that the procedure of the Advisory Boards in which the detenu is denied the right of legal representation is unfair, unjust and unreasonable.
If Article 22 were silent on the question of the right of legal representation, it would have been possible, indeed right and proper, to hold that the detenu cannot be denied the right of legal representation in the proceedings before the Advisory Boards.
It is unfortunate that courts have been deprived of that choice by the express language of Article 22(3)(b) read with Article 22(1)." And also said: "We must, therefore, hold, regretfully though, that the detenu has no right to appear through a legal practitioner in the proceedings before the Advisory Board.
It is, however, necessary to add an important caveat.
The reason behind the provisions contained in Article 22(4)(b) of the Constitution clearly is that a legal practitioner should not be permitted to appear before the Advisory Board for any party.
The Constitution does not contemplate that the detaining authority or the Government should have the facility of appearing before the Advisory Board with the aid of a legal practitioner but that the said facility should be denied to the detenu.
In any case, that is not what the Constitution says and it would be wholly inappropriate to read any such meaning into the provisions of Article 22.
Permitting the detaining authority or the Government to appear before the Advisory Board with the aid of a legal practitioner or a legal adviser would be a breach of Article 14, if a similar facility is denied to the detenu.
We must, therefore, make it clear that if the detaining authority or the Government takes the aid of a legal practitioner or a legal adviser before the Advisory Board, the detenu must be allowed the facility of appearing before the Board through a legal practitioner.
We are informed that officers of the Government in the concerned departments often appear before the Board and assist it with a view of justifying the detention orders.
If that be so, we must clarify that the PG NO 628 Boards should not permit the authorities to do indirectly what they cannot do directly; and no one should be enabled to take shelter behind the excuse that such officers are not "legal practitioners" or legal advisers.
Regard must be had to the substance and not the form since, especially, in matters like the proceedings of Advisory Boards, whosoever assist or advises on facts or law must be deemed to be in the position of a legal adviser.
We do hope that Advisory Boards will take care to ensure that the provisions of Article 14 are not violated in any manner in the proceedings before them." Learned Chief Justice also examined the right of a detenu to be represented by a friend if not by a lawyer and in that context observed: "Another aspect of this matter which needs to be mentioned is that the embargo on the appearance of legal practitioners should not be extended so as to prevent the detenu from being aided or assisted by a friend who.
in truth and substance, is not a legal practitioner.
Every person whose interests are adversely affected as a result of the proceedings which have a serious import, is entitled to be heard in those proceedings and be assisted by a friend.
A detenu, taken straight from his cell to the Board s room, may lack the ease and composure to present his point of view.
He may be "tongue tied, nervous, confused or wanting in intelligence", and if justice to he done.
he must at least have the help of a friend who can assist him to give coherence to his stray and wandering ideas.
Incarceration makes a man and his thoughts disnevelled.
Just as a person who is dumb is entitled, as he must, to he represented by a person who has speech, even so, a person who finds himself unable to present his own case is entitled to take the aid and advice of a person who is better situated to appreciate the facts of the case and the language of the law.
It may be that denial of legal representation is not denial o1 natural justice per se, and therefore, if a statute excludes that facility expressly, it would not be open to the tribunal to allow it.
Fairness, as said by Lord Denning M.R., in Maynard vs Osmond, [1977] I Q.B. 240, 253 can he obtained without legal representation.
But, it is not fair, and the statute does not exclude that right, that the detenu should not even be allowed to take the aid of a friend.
Whenever demanded, the Advisory Boards must grant that facility.
" PG NO 629 There are two decisions of this Court earlier to A.K. Roy, (supra).
In Kavita w/o Sunder Shankardas Devidasani etc.
vs State of Maharashtra, 11982] I SCR 138, Chinnappa Reddy, J. speaking for a three Judge Bench, observed (at 147): "Where a detenu makes a request for legal assistance, his request would have to be considered on its own merit in each individual case.
In the present case, the Government merely informed the detenu that he had no statutory right to be represented by a lawyer before the Advisory Board.
Since it was for the Advisory Board and not for the Government to afford legal assistance to the detenu the latter, when he was produced before the Advisory Board, could have; if he was so minded, made a request to the Advisory Board for permission to be represented by a lawyer.
He preferred not to do so.
In the special circumstances of the present case, we are not prepared to hold that the detenu was wrongfully denied the assistance of counsel so as to lead to the conclusion that procedural fairness, a part of the Fundamental Right guaranteed by Article 21 of the Constitution was denied to him .
In that case, this Court found that there was no denial of procedural fairness which is a part of the Fundamental Rights guaranteed under Article 21 of the Constitution.
It was also found that the detenu made no request for representation by a legal practitioner before the Advisory Board.
In Nand Lal vs State of Punjab, ; , A.P. Sen, J. said (at 723): It is the arbitrariness of the procedure adopted by the Advisory Board that vitiates the impugned order of detention.
There is no denying the fact that while the Advisory Board disallowed the detenu 's request for legal assistance, it allowed the detaining authority, to be represented by counsel.
It appears that the Advisory Board blindly applied the provisions of sub s (4) of section 11 of the Act to the case of the detenu failing to appreciate that it could not allow legal assistance to the detaining authority PG NO 630 and deny the same to the detenu.
The Advisory Board is expected to act in a manner which is just and fair to both the parties.
" More recently in Johney D 'Couto vs State of Tamil Nadu, , Ranganath Misra, J. speaking for a Bench of this Court, said (at 112): "The rule in A.K Roy 's case (supra) made it clear that the detenu was entitled to the assistance of a 'friend '.
The word friend ' used there was obviously not intended to carry the meaning of the term in common parlance.
One of the meanings of the word 'friend ', according to the Collins English Dictionary is "an ally in a fight or cause; supporter".
The term 'friend ' used in the judgments of this Court was more in this sense than meaning 'a person known well to another and regarded with liking, affection and loyality?.
A person not being a friend in the normal sense could be picked up for rendering assistance within the frame of the law as settled by this Court.
The Advisory Board has, of course, to be careful in permitting assistance of a friend in order to ensure due observance of the policy of law that a detenu is not entitled to representation through a lawyer.
As has been indicated by this Court, what cannot be permitted directly should not be allowed to be done in an indirect way.
Sundararajan, in this view of the matter.
was perhaps a friend prepared to assist the detenu before the Advisory Board and the refusal of such assistance to the appellant was not justified.
" The history of civilised man is the history of incessant conflict between liberty and authority.
The concentration of power in one hand and liberty in the other cannot go side by side.
Temptation to use the power to curtail or destroy the liberty will be always there.
It is found in the history of every country.
The power to detain a person without trial is a serious inroad into the liberty of individuals.
It is a drastic power capable of being misused or arbitrarily exercised.
The Framers of our Constitution were not unaware of it.
Some of them perhaps were the worst sufferers being the victims in the exercise of that arbitrary power.
They had, therefore, specifically incorporated in the Constitution enough safeguards against the abuse of such power.
The power to legislate in regard to preventive detention is located in Entry 9 of List I as well as in Entry 3 of List III in the VII Schedule of the PG NO 631 Constitution.
The safeguards in regard to preventive detention are incoporated under Article 22 of the Constitution.
Article 22(4) provides: "No law providing for preventive detention shall authorise the detention of a person for a longer period than three months unless (a) an Advisory Board consisting of persons who are, or have been, or are qualified to be appointed as, Judges of a High Court has reported before the expiration of the said period of three months that there is in its opinion sufficient cause for such detention: Provided that nothing in this sub clause shall authorise the detention of any person beyond the maximum period prescribed by any law made by Parliament under sub clause (b) of clause (7): or xxx xxx xxx xx xx xx xx xx xx Article 22(5) provides: "When any person is detained in pursuance of an order made under any law providing for preventive detention, the authority making the order shall, as soon as may be, communicate to such person the grounds on which the order has been made and shall afford him the earliest opportunity of making a representation against the order.
" These are the two important constitutional safeguards.
The Advisory Board is a constitutional imperative.
It has an important function to perform.
It has to form an opinion whether there is sufficient cause for the detention of the person concerned.
There is no particular procedure prescribed for the Advisory Board since there is no lis to be adjudicated.
Section 11 of the Act provides only the broad guidelines for observance.
The Advisory Board however, may adopt any procedure depending upon varying circumstances.
But any procedure that it adapts must satisfy the procedural fairness.
We need not deal with this aspect in detail since the Advisory Board consists of person who are, or have been or are qualified to be appointed as Judges of a High Court.
They are men of wisdom and learning.
Their report as envisaged under sec.
11(2) of the Act should provide specifically in a separate part whereof as to PG NO 632 "whether or not there is sufficient cause for the detention of the person concerned.
" That opinion as to sufficient cause is required to be reached with equal opportunity to the State as well as the person concerned, no matter what the procedure.
It is important for laws and authorities not only to be just but also appear to be just.
Therefore, the action that gives the appearance of unequal treatment or unreasonableness whether or not any substance in it should be avoided by the Advisory Board.
We consider that it must be stated and stated clearly and unequivocally that it is the duty of the Advisory Board to see that the case of detenu is not adversely affected by the procedure it adopts.
It must be ensured that the detenu is not handicapped by the unequal representation or refusal of access to a friend to represent his case.
In the instant case, since the Advisory Board has heard the high ranking officers of the Police Department and others on behalf of the Government and detaining authority, it ought to have permitted the detenu to have the assistance of a friend who could have made an equally effective representation on his behalf.
Since that has been denied to the detenu, the High Court, in our opinion, was justified in quashing the detention order.
It was, however, sought to be made out for the State that the police officers were present before the Board only to produce the record and they did not do anything further.
But the record shows otherwise.
The officers were not there only to produce the records.
They were in fact heard by the Advisory Board obviously on the merits of the matter and that makes all the difference in the instant case.
In the result, we agree with the conclusion of the High Court and dismiss this appeal.
R.S.S. Appeal dismissed.

dataset_name: IN-Abs

summary/full:
An order was passed by the District Magistrate, Nellore, directing the detention of the respondent under the Prevention of Black Marketing and Maintenance of supplies of Essential Commodities Act, 1980.
The State Government approved the detention and referred the matter to the Advisory Board under section 10 of the Act.
The detenus.
representation was also forwarded by the Government to the Advisory Board.
The Advisory Board heard the detenu and the top ranking police officers, who represented the State, and expressed the opinion that there was sufficient cause for the detention of the respondent.
The Government agreed with the opinion and confirmed the respondent 's detention for a period of six months.
The detenu challenged the validity of the order of detention.
The High Court allowed the writ petition.
The High Court found that there was unequal treatment by the Advisory Board in considering the representation of the detenu.
Dismissing the appeal, it was, HELD: (1) The Act by section 11(4) expressly denies representation through a legal practitioner.
The Board may hear any person it necessary.
If the detenu desires to be PG NO 620 PG NO 621 heard, the Board may hear him also.
But no person has a right to be represented by a lawyer, much less the detenu.
This provision is in conformity with article 22(3)(b) of the Constitution.
[626B C] (2) The power to detain a person without trial is a serious In road into the liberty of individuals.
It is a drastic power capable of being misused or arbitrarily exercised.
The framers of our Constitution were not unaware of it.
They had, therefore, specially incorporated in the Constitution enough safeguards against the abuse of such power.
[630G H] (3) The Advisory Board is a constitutional imperative.
It has an important function to perform.
There is no particular procedure prescribed for the Advisory Board since there is no lis to be adjudicated.
Section 11 of the Act provides only the broad guidelines for observance.
The Advisory Board, however, may adopt any procedure depending upon varying circumstances.
But any procedure that it adopts must satisfy the procedural fairness.
[631F G] (4) It is important for laws and authorities not only to be just but also appear to be just.
Therefore, the action that gives the appearance of unequal treatment or unreasonableness whether or not any substance in it should be avoided by the Advisory Board.
It is the duty of the Advisory Board to see that the case of detenu is not adversely affected by the procedure it adopts.
It must be ensured that the detenu is not handicapped by the unequal representation or refusal of access to a friend to represent his case [632B C] (5) In the instant case, since the Advisory Board has heard the high ranking officers of the Police Department and others on behalf of the Government and detaining authority it ought to have permitted the detenu to have the assistance of a friend who could have made an equally effective representation on his behalf.
Since that has been denied to the detenu, the High Court was justified in quashing the detention order.
1632D E] A.K. Roy vs Union of India, ; ; Kavita w/o Sunder Shankardas Devidasani etc.
vs State of Maharashtra; , ; Nand Lal vs State of Punjab, [1982] I SCR 718; Johney DaCouto vs State of Tamil Nadu, , referred to.


judgement:
ivil Appeal No. 340 of 1988.
From the Judgment and Order dated 8.12.1986 in the High Court of Madhya Pradesh in M.P. No. 1670 of 1984.
R.K. Virmani for the Appellant.
T.C. Sharma for the Respondents.
The Judgment of the Court was delivered by SABYASACHI MUKHARJI, J.
This appeal by special leave is from the judgment and order of the Full Bench to the Madhya Pradesh High Court, dated 8th December, 1986.
The Writ Petition in question out of which this Judgment arose, had been referred to the Full Bench by the Division Bench on the question whether the petitioner appellant could be said to have effected entry of the goods in the local area and thereby made it liable for payment of entry tax under Section 3 of the M.P. Sthaniya Kshetra Me Mal Ke Pravesh Par Kar Adhiniyam, 1976 (hereinafter called `the Act ').
I here was conflict between the Division Benches of the Madhya Pradesh High Court and as a result the matter was referred to the Full Bench.
In order to appreciate the controversy and the question, it is necessary to state a few facts.
The appellant company is a building contractor at Rajnandgaon in Madhya Pradesh and is registered as a dealer under the Madhya Pradesh General Sales Tax Act.
The appellant 's tender for construction of foodgrains godown and ancillary buildings at Rajnandgaon was accepted by the Central Public Works Department.
It was an item rate tender.
In the tender so submitted by the appellant the prices of the materials to be used for the construction including cost of iron, steel and cement were included.
The PWD, however, had agreed to supply from its stores the said iron, steel and cement for the construction work and to deduct the prices of materials so supplied and consumed the construction from the final bill of the appellant Clause (10) of the Contract is relevant and was as follows: PG NO 661 "Clause 10.
If the specification or Schedule of terms provides for the use of any special description of materials to be supplied from Engineer in charge 's Stores, or if it is required that the Contractor shall use certain stores to be provided by the Engineer in charge as shown in the Schedule of materials hereto annexed, the contractor shall be bound to procure and shall be supplied such material and stores as are from time to time required to be used by him for the purposes of the contract only, and the value of the full quantity of materials and stores to supply at the rates specified in the said Schedule of materials may be set off or deducted from any sums then due or thereafter to become due to the contractor under the contract or otherwise, or against or from the Security deposit, or the proceeds or sale thereof if the same is held in Government securities, the same or a sufficient portion thereof being in this case sold for the purpose.
All materials so supplied to the contractor shall remain the absolute property of Government and shall not be removed on any account from the site of the work, and shall be at all times open to inspection by the Engineer in charge.
Any such materials remaining unused and in perfectly good condition at the time of the completion or determination of the contract shall be returned to the Engineer in charge at a place directed by him, if by a notice in writing under his hand he shall so require; but the contractor shall not be entitled to return any such materials unless with such consent and shall have no claim for compensation on account of any such materials so supplied to him as aforesaid not being used by him or for any wastage in or damage to any such materials.
Provided that the contractor shall in no case be entitled to any compensation or damage on account of any delay in supply or non supply thereof all or any such materials and stores.
Provided further that the contractor shall be bound to execute the entire work it the materials are supplied by the Government within the scheduled time for completion of the work plus 50 per cent thereof (scheduled time plus 6 months if the time of completion of the work exceeds (12 months) but it a part only of the materials has been supplied within the aforesaid period, then the contractor shall be bound to do so much of the work as may be possible with the materials and stores supplied in the aforesaid period.
For the completion of the rest of the work, the contractor shall be PG NO 662 entitled to such extension of time as may be determined by the Engineer in charge whose decision in this regard shall be final".
As mentioned hereinbefore, under the said clause, all materials supplied to the contractor remained the absolute property of the Government and could not be removed on any account from the site of the work and were at all times open to inspection by the Engineer in charge.
Any such materials remaining unused and in perfectly good condition at the time of completion or determination of the contract were to be returned to the Engineer in charge at a place directed by him by a notice in writing in his hand if he so required but the contractor was not entitled to return any such material unless he was required to do so.
There was no dispute that for the construction the appellant was supplied iron, steel and cement by the PWD and it had purchased other materials from the market.
The prices of iron, steel and cement supplied to the appellant for the work were deducted from its final bill.
On 22nd September, 1982 the appellant was assessed by the respondent for entry tax for the period 7th June.
1979 to 31st March, 1980 to a tax of Rs.11,292 including penalty of Rs. 2,000 and by an order dated 5th October 1982 the appellant was assessed for the period from 1st April, 1980 to 31st March, 1981 for the entry tax of Rs. 23,393 including penalty of Rs. 4,500.
The appellant was a registered dealer under the Madhya Pradesh General Sales Tax Act and had been assessed to purchase tax under Section 7(1) of the Act and was as such liable for payment of entry tax for iron, steel and cement, the entry for the same having been effected at the instance of the appellant because it had ultimately used the material for the construction work.
The appellant filed revisions before the Deputy Commissioner of Sales Tax who affirmed the assessment orders.
The appellant then filed a writ petition challenging the assessment of purchase tax under Section 7(1) of the Madhya Pradesh General Tax Act and assessment of entry tax under Section 3(1) of the Act saying that the entry of the materials so supplied by the PWD was effected by it and not by the appellant and it further contended that as there was no sale of these materials and that as these materials were used for construction of the building, there was no sale as such and so no entry tax could be levied.
It was contended that since the appellant had purchased the iron, steel and cement from the PWD and not from the market as per the PG NO 663 contract the prices of which had been deducted from its final bill, the entry of material could be presumed to have been made at the instance of the appellant who had ultimately used the materials for the construction work, and since these materials were purchased from the unregistered dealer, i.e. the PWD, the appellant was held liable for payment of purchase tax and entry tax.
Section 3 of the Act is the charging section.
Under this, entry tax is levied on the entry in the course of business of a dealer of goods in local area specified in Schedule II for consumption, use and sale therein and on the entry of the goods specified in Schedule III for consumption, use of such goods as raw materials or as packing materials or in the execution of work contracts but not for sale therein.
Iron and steel are in Schedule II and cement is in Schedule III and these are assessable to entry tax at the rate of 1.5 per cent and 1 per cent respectively.
Under Section 6(c) of the Act where a dealer purchases goods specified in Schedule II and Schedule III in a local area from a person or a dealer who is not a registered dealer, it is presumed, unless the contrary is proved by him, that the entry of such goods had been effected by him into such local area before they were purchased by such dealer.
It was, in those circumstances, presumed that the appellant had effected the entry of iron, steel and cement which were supplied by the PWD for the construction of work in the local area for consumption, use and sale therein.
This position was conceded on behalf of the appellant before the Full Bench of the High Court.
The PWD is not a registered dealer, and therefore, Section 6(c) of the Act applied to the appellant.
Under Section 13 of the Act, certain provisions of the M.P. General Sales Tax Act applied mutatis mutandis to a dealer in respect of entry tax payable under the Act.
The question, therefore, was whether there was sale of iron, steel and cement by the PWD while supplying those materials for the construction work undertaken by the appellant.
If supply of these materials is sale within the meaning of Section 2(n) of the M.P. General Sales Tax Act then the appellant would be liable for payment of entry tax as it has been assessed.
The question, therefore, is whether there was sale and whether the property in the goods in question passed to the appellant or continued to remain with the PWD although the PWD had in the final bill debited the prices of the goods so supplied to the appellant under clause (10) of the contract.
The Full Bench found that there was sale and as a result of that the duty was leviable.
The question, therefore, is whether there was sale of goods in view of the contract between the parties whereunder the custody and control of the goods remained with the PWD PG NO 664 and goods were only used in the construction under the contract.
This question has been considered by this Court in The Government of Andhra Pradesh vs Guntur Tobaccos Ltd., 16 STC 240.
There, the majority of the judges in a Bench of three learned Judges, viz., Justice Shah and Justice Sikri held that although in the execution of a contract for work some materials were used and property in the goods so used passed to the other person, the contractor undertaking the work would not necessarily be deemed, on that account, to sell the materials.
This Court observed that a contract for work in the execution of which goods were used might take one of the three forms.
It was indicated that the contract might be for the work to be done for remuneration and for supply of materials used in the execution of the works for a price, it might be a contract for work in which the use of the materials was necessary and incidental to the execution of the work or it might be a contract for work and use and supply of materials, though not accessory to the execution of the contract, was voluntary or gratuitous.
In the last class there was no sale because though the property passed, it did not pass for a price.
Whether a contract was of the first or the second class must depend upon the circumstances; if it was of the first class, it was composite contract for work and sale of goods; where it was of the second category, it was a contract for execution of work not involving sale of goods.
The majority of the learned Judges was of the view that in order that there should be a sale of goods which was liable to sales tax as part of a contract for work under a statute enacted by the Provincial or State Legislature, there must be a contract in which there was not merely transfer of title to goods as an incident of the contract, but there must be a contract, express or implied, for sale of the very goods which the parties intended should be sold for a money consideration, i.e., there must have been in the contract for work an independent term for sale of goods by one party to the other for a money consideration.
The question in each case was one about the true agreement between the parties and the terms of the agreement must be deduced from a review of all the attendant circumstances.
But from the mere passing of title to goods either as integral part of or independent of goods, it could not be inferred that the goods were agreed to be sold, and the prices were liable to sales tax.
Whether a contract for service or for execution of work involved a taxable sale of goods must be decided on the facts and circumstances of each case.
The burden in such a case lay upon the taxing authorities to show that there was a taxable sale, and that burden was not discharged by merely showing that property in the goods which belonged to the party performing service or executing the contract stood transferred to the other party.
In that case, the assessee PG NO 665 company was a dealer carrying on the business of redrying in its factory raw tobacco entrusted to it by its customers.
The assessee redried the tobacco, packed it in packing materials purchased from the market and delivered it to the customers.
For redrying each bale of tobacco the assessee had charged the customers a certain sum but there was no separate charge for the value of the packing materials used.
The assessee was assessed to sales tax under the Madras General Sales Tax Act, 1939, on the value of the packing materials on the ground that there was a sale of the packing materials.
The High Court found that the packing of the redried tobacco and its storage for the requisite period was an integral part of the redrying process and held that there was no sale of packing materials.
On appeal in that case, this Court by majority held that the finding recorded by the High Court that it was intended by the parties that the packing material should form an integral part of the process of redrying the without the use of the "packing material" redrying process could not be completed, and that there was no independent contract for sale of "packing material".
It was only as an incident of redrying process and as a part thereof that the assessee had to seal up the package of tobacco, after it had emerged from the reconditioning chamber, with a view to protect it from atmospheric action.
In the absence of any evidence from which contract to sell "packing material" for a price might be inferred, the use of the "packing material" by the assessee must be regarded as all execution of the works contract and the fact that the tobacco delivered by the constituent was taken away with the "packing material" would not justify an inference that there was an intention to sell the "packing material".
Mr. Justice Subba Rao, as the Chief Justice then was, held, however, that all the ingredients of the charging Section read with the definition of "sale" were satisfied.
He observed that unless it could be said that the material used for packing was transformed into some other commodity not covered by the definition of "goods", it could not be held that there was no sale of the material.
The packing material remained distinct from the dried tobacco.
Property in it passed to the customer, who had paid for it.
On the basis of the practice prevailing in the factory of the assessee, contracts for sale arose easily by implication and therefore the Sales Tax Authorities had rightly assessed the turnover in regard to the packing materials.
In Hindustan Steel Ltd. vs The State of Orissa, 25 STC 211, this Court was concerned with Section 9(1) read with Section 25(1)(e) of the Orissa Sales Tax Act, 1947.
Penalty was imposed therein for failure to register as a dealer.
But the liability to pay penalty did not arise merely upon proof PG NO 666 of default in registering as a dealer.
An order imposing penalty for failure to carry out a statutory obligation was the result of a quasi criminal proceeding and penalty would not ordinarily be imposed.
Between 1954 and 1959, the appellant company was erecting factory buildings for its steel plant, residential buildings for its employees and ancillary work such as roads, water supply and drainage.
Some construction work was done departmentally and the rest through contractors.
The company supplied to the contractors for use in construction bricks, coal, cement, steel etc.
for a consideration which in addition to the cost price of the appellant company included some additional amounts which were charged by the appellant.
The question was whether the supply of building materials amounted to "sale" and the appellant company was a dealer for the purpose of sales tax under the Orissa Sales Tax Act, 1947.
It was held that the supply constituted "sale".
It was further held that, however, the company had charged a fixed percentage above its cost price only for storage, insurance and rental or other incidental charges, it could not be said that the company was carrying on business of supplying materials and it would not be a "dealer".
In other words, it is clearly held by this Court in the Hindustan Steel Ltd. case (Supra) that where company supplies to the contractor for use in its construction coal, steel and cement etc.
for a consideration, it amounts to a "sale" and the company becomes a "dealer" for the purpose of sales tax.
The provisions were similar to that of the present Act.
In Brij Bhushan Lal Parduman Kumar etc.
vs Commissioner of Income Tax, Haryana, Himachal Pradesh and New Delhi III, , the question arose in the context of income tax.
The appellant therein, a registered firm, was a Military Engineering Services contractor carrying on the business of executing contracts and works on behalf of the Government.
For the execution of the works undertaken by the appellant, certain materials, such as cement, coal, steel etc. were supplied by the Government at the fixed rates specified in the respective contract.
Such materials, though in the custody of the appellant, remained the property of the Government and any surplus had to be returned to the Government, and the Government was to give credit therefor at fixed rates at which they were supplied by the Government.
After rejecting the book results, the Income Tax Officer sought to estimate the profits of the appellant at a percentage of the net cash payments received by the appellants against the contracts as well as the cost of the materials supplied by the Government.
The Appellate Tribunal, however, held that the cost of the materials supplied by the Government could not be added to the figure of cash payments received by the appellant as no profits could have arisen therefrom.
On a reference, the High Court held that the cost of materials was liable to be included PG NO 667 before applying a flat rate to the appellant 's receipts.
On appeal, this Court reversing the decision of the High Court held that since in substance and in reality the materials supplied by the Government always remained the property of the Government and the appellant merely had custody and fixed or incorporated them into the works, there was not even a theoretical possibility of any element of profit being involved in the turnover represented by the cost of such materials.
Though, ordinarily, when a works contract was put through or completed by a contractor, profit from the contract was determined on the value of the contract as a whole and not by considering the several items that would go to form such value of the contract, where, as in that case, materials were supplied at fixed rates by the Government to the contractor solely for being used, fixed or incorporated in the works on the terms that they would remain the property of the Government and any surplus should be returned to the Government, and the real total value of the entire contract would be the value minus the cost of such materials so supplied.
Since no element of profit was involved in the turnover represented by the cost of the materials supplied by the Government to the appellant, the income or profits derived by the appellant from such contracts had to be determined on the basis of the value of the contracts represented by the cash payments received by the appellant from the Government exclusive of the cost of the materials received for being used, fixed or incorporated in the works.
There the question was whether there was profit taxable to income tax on the sale of the materials.
There was none and it was so held.
This Court again examined the question in the context of a sale of meals and amenities by a hotelier in the case of The State of Himachal Pradesh & Ors.
vs Associated Hotels of India Ltd., 29 STC 474, where this Court reiterated that mere passing of property in an article or commodity during the course of the performance of a transaction did not render it a transaction of sale.
For, even in a contract purely of work or service, it is possible that articles may have to be used by the person executing the work and property in such articles or materials may pass to the other party.
That would not necessarily convert the contract into one of sale of those materials.
In every case, the court has to find out the primary object of the transaction and the intention of the parties while entering into it.
It may, in some cases, be that even while entering into a contract of work or even service, parties might enter into separate agreements, one of work and service and the other of sale and purchase of materials to be used in the course of executing the work or performing the service.
In such cases the transaction would not be one and indivisible, but would form two separate agreements one of work or service and the other of sale.
PG NO. 668 Therefore, from the above decisions it follows that in order to be sale taxable to duty, not only the property in the goods should pass from the contractor to the Government, or the appellant in this case but there should be an independent contract separate and distinct apart from mere passing of the property where a party purchases or procures goods from the Government.
Mere passing of property from the contractor to the Government would not suffice.
There must be sale of good.
The primary object of the bargain judged in its entirely must be viewed.
In the instant case, clause (10) is significant as we have set out hereinbefore.
For the purpose of performance, the contractor was bound to procure materials.
But in order to ensure that quality materials are procured, the PWD undertook to supply such materials and stores as from time to time required by the contractor to be used for the purpose of performing the contract only.
The value of such quantity of materials and stores so supplied was specified at a rate and got set off or deducted from any sum due or to become due thereafter to the contractor.
Mr. Virmani, appearing for the appellant submitted before us that in the instant case, there was no such independent and separate sale.
But we are unable to accept.
Though, in a transaction of this type there is no inherent sale; a sale inheres from the transaction.
Clause (10) read in the proper light indicates that position.
Our attention was drawn to a Bench decision of the Kerala High Court in Construction Company, Changanacherry & Anr.
vs State of Kerala, 36 STC 320, wherein on a consideration of the contract the Court came to the conclusion that the consideration stipulated to be paid to the petitioner in that case was for the work which the petitioner had undertaken to perform and not by way of sale price of the poles to be produced and delivered by the petitioner.
Therefore, it was held that the petitioner was not liable to sales Tax.
Mr. Virmani also drew our attention to a Division Bench decision of the Calcutta High Court in Cementation Patel (Durgapur) vs Commissioner of Commercial Taxes, West Bengal, Calcutta, 47 STC 385.
There, on a consideration of the transaction entered into between the parties the Court came to the conclusion that the property in the materials all along remained with the Government of India and whatever was the nature of the transaction involved between the assessee on the one hand and the other members of the consortium or the sub contractors on the other, the same did not and could not amount to sale as the assessee could not in the facts of that case transfer the PG NO 669 property therein.
In the instant case, by use or consumption of materials in the work of construction, there was passing of the property in the goods to the assessee from the PWD.
By appropriation and by the agreement, there was a sale as envisaged in terms of clause (10) set out hereinbefore.
Therefore, in our opinion, there was a sale which was liable to tax.
The Full Bench was right in its conclusion.
The appeal, therefore, fails and is accordingly dismissed.
There will be no order as to costs.
R.P.D. Appeal dismissed.

summary/full:
Section 3 of M.P. Sthaniya Kshetra Me Mal Ke Prevesh Par Kar Adhiniyam 1976 provides for levy of entry tax on the entry of goods specified in Schedule Il for consumption, use and sale therein, and on entry of goods specified in Schedule III for consumption or in the execution of work contracts but not for sale.
Section 6(c) provides that where a dealer purchases goods specified in Schedule II and Schedule III in a local area from a person or a dealer who is not a registered dealer, it is presumed, unless the contrary is proved by him, that the entry of such goods had been effected by him into such local area before they were purchased by such dealer.
Iron and steel are listed among other goods in Schedule II, and cement in Schedule III.
Section 13 provides that certain provisions of the M.P. General Sales Tax Act apply mutatis mutandis to a dealer in respect of entry tax payable under the Adhiniyam.
The appellant company, a building contractor and registered as a dealer under the Madhya Pradesh General Sales Tax Act, entered into a Works Contract with the P.W.D. for construction of foodgrains godown and ancillary buildings.
It was on item rate basis.
In the tender submitted by the appellant, the prices of the materials to be used for construction including cost of iron, steel and cement were included.
The P.W.D. had agreed to supply from its stores the iron, steel and cement for the construction work and to deduct the prices of materials so supplied and consumed in the said construction work from and out of the final bill of the appellant.
Under clause 10 of the Works Contract, the contractor was `bound to procure ' certain materials of special description, and in order to ensure that quality materials are procured, the PWD undertook to PG NO 657 PG NO 658 supply such materials and stores from time to time as required by the contractor to be used for the purpose of performing the contract.
The value of such quantity of materials and stores so supplied was specified at a rate and got set off or deducted from any sum due or to become due thereafter to the contractor.
It also provided that all materials supplied to the contractor, remained the absolute property of the Government and could not be removed on any account from the site of the work and were at all times open to inspection by the Engineer in charge.
Any such materials remaining unused and in perfectly good condition at the time of completion or determination of the contract were to be returned to the Engineer in charge.
Iron, steel and cement were supplied by the P.W.D., an unregistered dealer, to the appellant for the construction of work.
The Taxing authority assessed the appellant to purchase tax under section 7(1) of the Madhya Pradesh General Sales Tax Act and also held it liable for payment of entry tax for iron, steel and cement, the entry for the same having been effected at the instance of the appellant because it had ultimately used the materials for the construction work.
The aforesaid assessment orders were affirmed by the Deputy Commissioner of Sales Tax by dismissing the revision petitions of the appellant.
The appellant challenged the aforesaid assessment orders in a writ petition before the High Court, on the ground that the entry of materials so supplied by the P.W.D. was effected by it and not by the appellant and that as these materials were used for construction of the building, there was no sale as such and consequently no entry tax could be levied.
On behalf of the Taxing authorities respondent, it was argued that since the appellant and purchased the iron, steel and cement from the PWD and not from the market as per the contract the prices of which had been deducted from its final bill, the entry of material could be presumed to have been made at the instance of the appellant who had ultimately used the materials for the construction work, and since these materials were purchased from the unregistered dealer, i.e., the P.W.D., the appellant was liable for payment of purchase tax and entry tax.
The Full Bench of the High Court, which disposed of the writ petition found that there was `sale ' and that the tax was leviable.
In the appeal by special leave by the assessee to this Court, on the question: whether there was sale and whether the property in the goods had passed to the appellant or continued to remain with the PWD, although the PWD had in the final bill debited the prices of the goods so supplied to the appellant under clause (10) of the contract: PG NO 659 Dismissing the appeal, this Court, HELD: 1.1.
Whether a contract for service or for execution of work involved a taxable sale of goods must be decided on the facts and circumstances of each case.
The burden in such a case lay upon the taxing authorities to show that there was a taxable sale, and that burden was not discharged by merely showing that property in the goods which belonged to the party performing service or executing the contract stood transferred to the other party.
[664G H] 1.2 Even in a contract purely of work or service, it is possible that articles may have to be used by the person executing the work and property in such articles or materials may pass to the other party.
That would not necessarily convert the contract into one of sale of those materials.
In every case, the court has to find out the primary object of the transaction and the intention of the parties while entering into it.
[667F G] 1.3 In order to be 'sale taxable to duty ', not only the property in the goods should pass from the contractor to the Government, or the appellant in the instant case, but there should be an independent contract separate and distinct apart from mere passing of the property where a party purchases or procures goods from the Government.
Mere passing of property from the contractor to the Government would not suffice.
There must be sale of goods.
The primary object of the Bargain judged in its entirety must be viewed.
[668B C] 1.4 In the instant case, by use or consumption of materials in the work of construction, there was passing of the property in the goods to the Assessee from the PWD.
By appropriation and by the agreement, there was a sale as envisaged in terms of clause (l0) of the contract, and consequently such sale was liable to tax.
[669A B] The Government of Andhra Pradesh vs Guntur Tobaccos Ltd., 16 STC 240; Hindustan Steel Ltd. vs The State of Orissa, 25 STC 211, The State of Himachal Pradesh & Ors.
vs Associated Hotels of India Ltd., 29 STC 474, relied on.
Brij Bhushan Lal Parduman Kumar etc.
vs Commissioner of Income Tax, Haryana, Himachal Pradesh and New Delhi III, , referred to.
PG NO 660 Construction Company Changanacherry & Anr.
vs State of Kerala, 36 STC 320,; Cementation Patel (Durgapur) vs Commissioner of Commercial Taxes, West Bengal, Calcutta, 47 STC 385, distinguished.