judgement:
Appeals Nos. 384 and 385 of 1957.
Appeal by special leave from the Order dated November 28, 1952, of the Income tax Appellate 303 Tribunal (Calcutta Bench) in I.T.A. No. 4067 and E.P.T. Appeal No. 391 of 1951 52.
N. C. Chatterjee, B. Sen Gupta and B. P. Maheshwari, for the appellant.
K. N. Rajagopala Sastri, R. H. Dhebar and D. Gupta, for the respondents.
March 2.
The Judgment of the Court was delivered by KAPUR, J.
These two appeals pursuant to special leave are brought against two orders of the Incometax Appellate Tribunal (Calcutta Bench) dated November 28, 1952, passed in appeal No. 1.
T. A. 4067 of 1951 52 in respect of income tax assessment for the assessment year ending 31st March, 1944, and in appeal No. E. P. T. A. 391 of 1951 52 in respect of Excess Profits tax assessment of the appellant for the chargeable accounting period ending March 31, 1943.
The original assessee was R. B. Seth Teomal who was the manager of a Hindu undivided family.
On Seth Teomal 's death on May 30, 1944, Seth Ottanmal became the manager.
He is now the appellant representing the Hindu undivided family.
He will be termed as the appellant in these appeals.
Seth Teomal was carrying on the businesss of a railway contractor at Lalmonirhat in the district of Rangpur which is now in Pakistan.
In April 1943 a notice was served on him under section 22(2) of the Income tax Act (hereinafter called the Act).
He filed the return on February 28, 1944.
The Income tax Officer,Rangpur, served notices on him under sections 22(4) and 23(2) for production of books, etc.
It appears that assessment proceedings continued before the Income tax Officer Rangpur, but no final assessment was made.
According to an affidavit which has now been filed in this Court the Central Board of Revenue by an order passed under sub section
(2) of section 5 of the Act assigned the appellant 's case along with some other assessment cases to the Commissioner of Income tax (Central), Calcutta.
The order contains the following endorsements which give an indication of the reason for the case being assigned to the Commissioner of Income.
tax (Central): 304 " Copy forwarded to (1). . . . . . . . . . (2) Commissioner of Income tax (Central), Calcutta.
These cases are reported to have E. P. T. liabilities ".
Thus the appellant 's case which was before an incometax Officer within the area in charge of the Commissioner of Income tax, Bengal (Mofissil) was withdrawn from him and was assigned to the Commissioner of Income tax (Central), Calcutta.
On February 11, 1948, the Income tax Officer District N C (I. T. cum E.P.T.) to whom it appears the appellant 's assessment case was assigned issued notice again under sections 22(4) and 23(2) of the Act.
That officer after making the usual enquiries made the assessment order on March 15, 1948.
The order for Excess Profits Tax assessment was made on March 30,1948.
Against these orders two appeals were taken to the Appellate Assistant Commissioner on April 30, 1948.
In the appeal against income tax assessment the appellant inter alia raised the following two grounds in regard to the jurisdiction of the Income tax Officer, Calcutta: " 5.
For that the petitioner is not aware of any order passed for the transfer of the case from Rangpur to Calcutta and it is submitted that without such an order and communication of such order the assessment is challengeable for want of jurisdiction ".
For that the appellants challenge the jurisdiction as there was no proper order of transfer and the business was carried on outside Calcutta and assessments had never before been made in Calcutta".
But no such ground was taken in the appeal against Excess Profits Tax assessment.
The Appellate Assistant Commissioner dismissed both these appeals.
In regard to jurisdiction he held: " It however appears from records on band that the principal place of business of the concern was at Rangpur and as the income attracted E. P. T. liability the case was transferred to Calcutta under Orders of C. B. R.
Hence there is no substance in the contention of the learned Advocate which fails 305 The appellant then took two appeals to the Incometax Appellate Tribunal.
In the appeal against incometax assessment he took two objections in regard to jurisdiction : " For that the objection taken before the learned A. A. C. on jurisdiction should not have been summarily disposed of by passing reference to an order of transfer of the case from Rangpur to Calcutta without at the same time discussing when the question of jurisdiction was seriously raised and how and under what circumstances and to, whom was the case transferred and for what purpose " 2.
For that the appellant begs leave to repeat that transfer was not legal or proper and was not made by any proper authority to legalise such transfer ".
In the Excess Profits Tax appeal also this time an objection was taken as to jurisdiction : " For that the assessment is bad in law having been made without jurisdiction ".
The Appellate Tribunal held against the appellant in a short paragraph: " So far as the first objection is concerned, in our opinion, it is not within our jurisdiction to go into this matter.
The objection relates to the place of assessment.
As held in Brothers, & Co. Ltd vs Commissioner of Income tax, Bombay, Sind and Baluchistan, Federal Court) the question as to the proper place of assessment is not one for adjudication by a Court or by any Appellate Authority.
Consequently we overrule the first contention of the Assessee.
" The Tribunal thus held that as the objection related to the place of assessment the Tribunal was not competent to go into that question.
Upon this the appellant applied for a reference to be made under section 66(1) of the Act and prayed for five questions to be referred.
The two questions relating to jurisdiction were: (1)" Had the Income tax Officer (Non Companies Income tax cum Excess Profits Tax ' District, Calcutta, jurisdiction to make the assessment ? 39 306 (2)Was the Income tax Appellate Tribunal correct in the circumstances in holding that it has no jurisdiction to determine the competence of the Income tax Officer in making the assessment ?" In the " facts of the case " attached to the grounds of Appeal it was stated that the accounts were produced before the Income tax Officer, Calcutta, under protest because the jurisdiction of that officer was being challenged.
In reply to this the Commissioner after referring to Wallace Brothers ' case (1) stated that it did not appear from the assessment record that the assessee ever raised any objection to the jurisdiction of the Income tax Officer and if it had been taken the matter would have been referred by the Income tax Officer to the Commissioner as required by law.
This application under section 66(1) was dismissed on the ground that the question of jurisdiction could not arise out of the order of Tribunal and reliance was placed on Wallace Brothers ' case (1) and Seth Kanhaiyalal vs Commissioner of Income tax (2 ).
The appellant applied to the High Court under section 66 (2) of the Act and prayed for the following two questions and some others to be referred : (i)" Had the Income tax Officer (N. C. 1.
T. Cum E. P. T. District Calcutta) jurisdiction to make the assessment ? (ii)Was the Income tax Appellate Tribunal correct in the circumstances in holding that it had no jurisdiction to determine the competence of the Income tax Officer in making the assessment?" The High Court dismissed this application on July 23, 1954.
No appeal has been filed in this Court against the order of the High Court but an appeal has been filed against the order passed by the Income tax Appellate Tribunal.
On behalf of the Revenue a preliminary objection was taken that as no appeal had been filed against the order of the High Court that order had become final and this Court, therefore, should not entertain the appeal against the order of the Tribunal and reliance was placed on the observations of Venkatarama (1) ; (2) 307 Aiyar, J., in Govinda Rajulu Mudaliar vs Commissioner of Income tax (1).
At p. 810 it was observed: " The present appeal is against the decision of the Tribunal itself It is no doubt true that this Court has decided in Dhakeswari Cotton Mills Ltd. vs Commissioner of Income tax, West Bengal (2) that an appeal lies under article 136 of the Constitution of India to this court against a decision of the Appellate Tribunal under the Indian Income tax Act.
But seeing that in this case the appellant had moved the High Court and a decision has been pronounced adverse to him and this has become final, obviously it would not be open to him to question the correctness of the decision of the Tribunal on grounds which might have been taken in an appeal against the judgment of the High Court.
All the points urged before us were taken in the reference under section 66 (2) of the Indian Income tax Act.
It would therefore follow that these grounds are not open to the appellant".
But counsel for the appellant relied on Dhakeswari Cotton Mills Ltd. vs Commissioner of Income tax (2) where the scope of appeals under article 136 were set out by the learned Chief Justice.
In this case however it is not necessary to go into this question because in our opinion there is little substance in the appeal itself.
Counsel for the appellant has urged two grounds in support of his appeal: (1) that his place of business was Lalmonirhat and under section 64 (1) and (2) of the Act he was entitled to be assessed by the Income tax Officer of that area and (2) that assessment by the Income tax Officer of Calcutta was an illegal assumption of jurisdiction and therefore he was entitled to have the order of assessment quashed.
In order to decide these questions reference has to be made to the scheme.
of the Act.
The provisions relevant to the issue of jurisdiction are sections 5 and 64.
The former is headed " Income tax authorities " and the latter " Place of assessment ".
Assessment is made by the Income tax Officer under section 23 (3).
Against an order of assessment or the liability to be assessed an appeal (1) , 810.
(2) ; , 949.
308 lies under section 30 to the Appellate Assistant Commissioner and a further appeal to Income tax Appellate Tribunal under section 33 of the Act.
And then a reference can be made by the Tribunal to the High Court under section 66 (1) of the Act and if the Tribunal does not make such reference the High Court can under section 66 (2) be moved and it can then direct that such reference be made.
The heading of section 64 is " Place of assessment ".
Sub section (1) of section 64 provides that the assessee shall be assessed by the Income tax Officer of the area in which he carries on his business.
Sub section (2) lays down that in all other cases an assessee shall be assessed by the Income tax Officer of the area in which he resides.
Under these two sub sections therefore the appellant, because he was carrying on business at Lalmonirhat, had to be assessed by the Income tax Officer of that area, i.e., by the Income tax Officer of Rangpur.
Sub section (3) of that section provides that if a question as to the place of assessment arises, it is to be determined by the Commissioner of Income tax or by Central Board of Revenue according as the case may be.
Under the first proviso to this sub section before the question as to the place of assessment is determined the assessee has to have an opportunity of representing his views and under the second proviso the place of assessment cannot be called into question by the assessee if he has made a return in response to the notice under sub section
(1) of section 22 and has stated therein the principal place where he carries on his business or if he has not made such a return, the time specified in the notice has expired.
The third proviso to this subsection is: " Provided further that if the place of assessment is called in question by an assessee the Income Tax Officer shall, if Dot satisfied with the correctness of the claim, refer the matter for determination under this sub section before assessment is made ".
Thus under section 64(3) the question of determination as to the place of assessment only arises if an objection is taken by the assessee and the Income Tax Officer has any doubts as to the matter.
But the determination 309 is to be by the Commissioner of Income Tax or the Central Board of Revenue.
The Act does not 'contemplate any other authority.
It was contended on behalf of the assessee that he produced his accounts before the Income Tax Officer at Calcutta under protest.
There is no mention of this protest in the assessment file and that is what was stated by the Commissioner of Income Tax in his reply which he gave on March 3, 1953, before the Income tax Appellate Tribunal and which has been set out above.
If such an objection had been raised the question would have been referred by the Income tax Officer to the Commissioner as required under section 64(3).
That stage never arose because the objection does not seem to have been taken at the stage when it should have been taken, i.e., before the Income tax Officer, Calcutta.
But it is contended by counsel for the appellant that in the present case there is an illegal assumption of jurisdiction as the officer who made the assessment had no jurisdiction at all to make the assessment.
It was also contended that if the Central Board of Revenue wanted to transfer the assessment proceedings from the Income tax Officer, Rangpur, to the Income tax Officer at Calcutta, it could only exercise that jurisdiction by making an order under section 5(7A) and not under section 5(2) of the Act.
He relied on Taylor vs Taylor (1) where it was held that if a mode of exercise of power is laid down in the statute it has to be exercised in that way and no other.
He also relied on Nazir Ahmad vs The King Emperor (2).
He further contended that this was not a case which fell under section 5(2) of the Act.
Section 5(7A) gives to the Central Board of Revenue the power to transfer any case from one Income tax Officer to another which can be mad6 at any stage of the proceedings and does not necessitate the reissuing of a notice under section 22(2) if it had already been issued by the Income tax Officer from whom the case is transferred and in the explanation the word ' case ' in relation to any person whose name is specified in the order of transfer means (1) , 431 (2) (1936) L.R. 63 I.A. 372.
310 all proceedings under the Act which may be pending on the date of the transfer and includes all proceedings which may be commenced after the date of the transfer.
Section 5 although headed I Income tax authorities ' also gives to the Central Board of Revenue and the Commissioners of Income tax certain powers in regard to withdrawing of cases from one area into other and from one Income tax Officer to another.
Sub section (2) of this section gives power to the Central Government to appoint as many Commis sioner 's of Income tax as it thinks fit and they have to perform their functions in respect of different areas, persons and bases or classes thereof.
The relevant portion of the sub section is as follows: S.5(2) " The Central Government may appoint as many Commissioners of Income tax as it thinks fit and they shall perform their functions in respect of such areas or of such persons or classes of persons or of such incomes or classes of incomes or of such cases or classes of cases as the Central Board of Revenue may direct. . . ." In the present case there are more than one Commissioner of Income tax in Bengal and the Central Board of Revenue assigned certain cases including the case of the appellant to the Commissioner of Income tax (Central) at Calcutta for the exercise of his functions as Commissioner.
Now this is a power which the Central Board of Revenue did possess under sub section
(2) of section 5.
As to which Income tax Officer was to deal with that case was for the Commissioner of Incometax to designate.
Sub section 7A of section 5 confers on the Central Board of Revenue the power to transfer any case from one Income tax Officer to the other which can be done at any state of the proceedings.
This sub section is not a provision which in any way modifies or cuts down the power given to the Central Board of Revenue under section 5(2).
The two sub sections are complementary and operate in two separate spheres.
Sub section (2) is for the purpose of specifying as to which of the Commissioners would perform functions in respect of 311 different areas, persons, incomes or cases or classes thereof.
It was argued that section 7A is a special provision and it necessarily excludes the operation of sub section
(2) but as we have said above the two sections are not mutually exclusive.
They operate in two different spheres, their areas of operation are different and therefore the power which the Central Board of Revenue exercised in the present case cannot be said to be illegal .
It was not transferring the appellant 's case from the Income tax Officer, Rangpur, to the Income tax Officer, Calcutta.
It directed the Commissioner of Incometax (Central), Calcutta, to exercise his functions in respect of certain cases including the case of the appellant and that falls under section 5(2) and not under section 5(7A).
Reference was made to Pannalal Binjraj vs Union of India (1).
But that was a case in which the question raised was of constitutional validity of sub section
7A of section 5 and it was held that it was a measure of administrative convenience and was valid and neither infringed the fundamental rights under article 14 nor under article 19(1)(g).
There are no observations in that case which militate against the view that sub sections (2) & (7A) operate in different areas nor did that question arise in that case.
The contention there raised was that sub section
7A conferred arbitrary and uncontrolled powers of transfer and was discriminatory and violative of the provisions of article 14 and imposed an unreasonable restriction on the right to carry on trade or business in contravention of article 19 (1)(g).
Counsel referred to Bidi Supply Co. vs Union of India (2) But that case also does not deal, with the matter now before us.
The simple question to be decided is whether the Income tax Officer, Calcutta, could make the assessment in the appellant 's case.
The submission that there was illegal assumption of jurisdiction by the Income tax Officer of Calcutta is not well founded.
If the Central Board of Revenue had the power to direct the Commissioner of Incometax (Central), Calcutta, to exercise his functions in (1) ; , 266.
(2) ; 312 respect of several cases including the appellant 's mentioned in the order dated November 29, 1946, as indeed it had under section 5(2), then neither that order could be challenged nor the power of the Income tax Officer, Calcutta, to make the assessment.
After an order by the Central Board of Revenue under section 5(2) of the Act the provisions of sub sections
(1) and (2) of section 64 have no application because of sub section
(5a) of section 64 which is as follows : Sub section
5 " The provisions of sub section (1) and subsection (2) shall not apply and shall be deemed never at any time to have applied to any assessee (a)on whom an assessment or reassessment for the purposes of this Act has been, is being or is to be made in the course of any case in respect of which a Commissioner of Income tax appointed without reference to area under sub section (2) of section 5 is exercising the functions of a Commissioner of Income tax".
In view of this provision no objection can be taken on the ground of sub sections (1) and (2) of section 64.
Counsel for the appellant relied on a judgment of the Bombay High Court in Dayaldas Kushiram vs Commissioner of Income tax (Central) (1), where it was held that section 64 was intended to ensure that as far as practicable the assessee should be assessed locally, i. e., by the Income tax Officer of the area in which the assessee carries on business and there must, so far as the exigencies of the case allow, be some reasonable relation to the place where the assessee carries on business or resides.
In that case the assessee was carrying on business in C Ward and the proper officer under section 64 to assess him was the Income tax Officer of that Ward.
As a result of the coming into force of section 5(2) the Commissioner of Income tax (Central) was created without reference to the area.
The case of the assessee on whom the notice had been served but had not been assessed in due course assigned to the Commissioner of Income tax (Central) who designated an Income tax Officer for assessment of the assessee.
The assessee thereupon made an application under section 45 of (1)[1939] 313 the Specific Relief Act and prayed for direction to the Commissioner of Income tax (Central) and the Incometax Officer to whom his case had been assigned to forbear from continuing the proceedings on the grounds that the Income tax Officer had no jurisdiction having regard to section 64 of the Act.
It was held that the Income tax Officer was not the Income tax Officer of the area in which the assessee was carrying on business.
It was also held that in spite of the insertion of section 5(2) of the Act such assessment was without jurisdiction because there was no amendment of section 64.
As a result of this judgment Ordinance IX of 1939 was promulgated which subsequently was enacted as subs.
5 of section 64.
After the Ordinance the assessee Dayaldas Kushiram was assessed by the same Officer and after unsuccessful appeals to the Commissioner of Income tax and the Appellate Tribunal he made an application under section 66(1) on three questions: (1) Whether the order passed by the Commissioner of Incometax deciding the place of assessment of the assessee could be the subject matter of appeal to the Incometax Appellate Tribunal; (2) Whether the Tribunal had the power to entertain an appeal on the question as to the place of assessment of an assessee even in the absence of the order of Commissioner of Income tax and (3) whether the question ,as to the place of assessment is a question of law arising out of the order of the Appellate Tribunal.
It was held that the order of the Commissioner was made under section 5(2) and not under section 64(3) and as the Ordinance had retrospective effect these questions did not arise and that the assessment of the assessee was validly made by the Income tax Officer and the Ordinance removed the invalidity of the orders made prior to the passing of the Ordinance so far as they related to the assessee.
Beaumont, C. J., held that the Income tax Act did not determine the place of assessment but the officer who had to assess and that there could be no appeal under the Act against the order of the Commissioner as to the place of assessment, but only against the order of assessment of the Income tax Officer.
40 314 Counsel for the appellant also relied 'on the judgment of the Allahabad High Court in Dina Nath Hem Raj vs Commissioner of Income tax (1).
In that case the assessee was carrying on business at Calcutta and he was sought to be assessed at Kanpur and an objection was taken to the Income tax Officer, Kanpur, making the assessment.
The Income tax Officer did not proceed in accordance with section 64(3) and therefore it was held that assessment made by him was without jurisdiction.
In the present case no question has been raised as to the jurisdiction of the Income tax Officer who made the assessment and apart from that the order was made by the Central Board of Revenue under section 5(2) of the Act and section 64(5) becomes operative and sub sections
(1) and (2) of section 64 are inoperative.
See also Seth Kanhaiyalal vs Commissioner of Incometax (2).
The question then arises whether the objection as to the place of assessment, i. e., by the Income tax Officer of Calcutta could be challenged in appeal to the Appellate Assistant Commissioner and then before the Appellate Tribunal.
In our opinion it could not be.
The scheme of the Act shows that no appeal in regard to the objection to the place of assessment is contemplated under the Act.
Under section 64(3) of the Act a question as to the place of assessment, when it arises, is determined by the Commissioner.
Any such order cannot be made a ground of appeal to the Appellate Assistant Commissioner under section 30 of the Act which provides for appeals against orders of assessment and other orders enumerated in section 30 but no appeals is there provided against orders made under section 64(3).
Similarly appeals to the Appellate Tribunal which lie under section 33 of the Act also do not provide for any appeal on the question of the place of assessment.
In Wallace Brothers ' case (3) at p. 79 Spens, C. J., after referring to section 64(3) and the proviso thereto said: " These provisions clearly indicate that the matter is more one of administrative convenience than of (1) All. 616.
(2) (.3) 315 jurisdiction and in any event it is not one for adjudication by the Court. . .
This confirms us in the view that the scheme of the Act does not contemplate an objection as to the place of assessment being raised on an appeal against the assessment after the assessment has been made.
As we have already pointed out, the objection was not raised in the present case even before the Appellate Income tax Officer but only before the Appellate Tribunal ".
There is nothing in the Bidi Supply case (1) which in any way detracts from the efficacy of the decision of the Federal Court in Wallace Brothers ' case (2).
We have already said that Bidi Supply case (1) deals with the vires of section 5(7A).
In this view of the matter the question as to the place of assessment does not arise out of the order of the Income tax Appellate Tribunal and therefore no question of law could be referred nor could the High Court make such order under section 66(2).
In our opinion, the High Court rightly dismissed the appellant 's application for directing the case to be stated under section 66(2) of the Act.
The appeals therefore fail and are dismissed with costs.
In the circumstances of the case there will be only one set of costs.
Appeals dismissed.

summary/full:
The appellant was carrying on the business of a railway contractor in a place in the district of R.
In April 1943, the Income tax Officer of R which was under the charge of the Commissioner of Income tax, Bengal (Mufassil), served a notice under section 22(2) of the Indian Income tax Act, 1922, on the appellant who in pursuance of the notice filed the return on February 28, 1944.
The Income tax Officer then served notices on him under SS.
22(4) and 23(2) Of the Act for the production of books, etc., but before the final assessment was made, the Central Board of Revenue by an order passed under section 5(2) of the Act, transferred the appellant 's case along with some other assessment cases, to the Commissioner of Income tax (Central), Calcutta.
On February 11, 1948, the Income tax Officer, Calcutta, to whom the appellant 's case was assigned, issued notices again under SS.
22(4) and 23(2) of the Act and after making the usual enquiries made the assessment order on March 15, 1948.
The appellant 's appeals to the Appellate Assistant Commissioner and then to the Appellate Tribunal raising objections to the legality of the transfer of his case to Calcutta and to the jurisdiction of the Income tax Officer, Calcutta, were dismissed.
The Appellate Tribunal held that as the objection related to the place of assessment it was not competent for the Tribunal to go into that question.
The appellant then made an application to the Commissioner of Income tax for reference under section 66(1) of the Act, but this was dismissed on the ground that the assessee never raised any objection before the Income tax Officer to his jurisdiction and that, in any case, the question of jurisdiction could not arise out of the order of the Tribunal.
An application filed by the appellant to the High Court under section 66(2) of the Act was dismissed and though the order of dismissal was not taken up on appeal, the appellant filed an appeal to the Supreme Court against the order of the Appellate Tribunal.
It was contended for the appellant that under section 64(1) and (2) of the Act he was entitled to be assessed by the Income tax Officer of the area within which the place of his business was situate, that the 302 assessment by the Income tax Officer of Calcutta was illegal assumption of jurisdiction and that, in any case, the order of transfer by the Central Board of Revenue under section 5(2) of the Act was not valid because, if it wanted to transfer the assessment proceedings from the file of one Income tax Officer to another it could be done only under section 5(7A) and not under section 5(2).
Held : (1) Sub section (7A) of section 5 which confers on the Central Board of Revenue the power to transfer any case from one Income tax Officer to another is not a provision which in any way modifies or cuts down the power given to the Central Board of Revenue under sub section 2 of section 5 which enables it to specify as to which of the Commissioners would perform functions in respect of different areas, persons, incomes or cases or classes thereof.
The two sub sections are complementary and operate in two separate spheres.
Pannalal Binjraj vs Union of India, ; and Bidi Supply Co. vs Union of India, ; , distinguished.
In the present case, the Central Board of Revenue directed the Commissioner of Income tax (Central), Calcutta, to exercise his functions in respect of certain cases including the case of the appellant and that fell under section 5(2) and not under section 5(7A).
The order of transfer was, therefore, valid.
(2)The jurisdiction of the Income tax Officer, Calcutta, to make the assessment on the appellant cannot be challenged, in view of sub section 5(a) of section 64 of the Act, under which sub sections
(1) and (2) of section 64 have no application to an assessee in respect of whom anorder has been made by the Central Board of Revenue under S.5(2) of the Act.
(3) Objections as to the place of assessment cannot be raised in appeal either before the Appellate Assistant Commissioner or before the Appellate Tribunal.
Wallace Brothers & Co. Ltd. vs Commissioner of Income tax, Bombay, Sind and Baluchistan, and Seth Kanhaiyalal vs Commissioner of Income tax, [1936] 5 I.T.R. 739, relied on.
Dayaldas Kushiram vs Commissioner of Income tax (Central), and Dina Nath Hem Raj vs Commissioner of Income tax, All. 616, distinguished.
Consequently, as the question as to the place of assessment could not arise out of the order of the Appellate Tribunal no such question of law could be referred to the High Court.


judgement:
Civil Appeal No.655 of 1986.
From the Judgment and Order dated 23.4.1984 of the Delhi High Court in Letters Patent Appeal No.25 of 1984.
M.K.Ramamurthy, Ms section Pappuh, B.P.Singh, Rishi Kesh, Raj Birbal, Sanjeev Sabharwal, B.R.Sabharwal and M.M. Kashyap for the appearing parties.
S.S.Harlakha appeared in person.
S.S.Onkarmal appeared in person for the Intervener.
The Judgment of the Court was Delivered by K. Ramaswamy, J.
In this appeal by special leave, by way of additional grounds with leave, the appellant impugnes Rule 5 of the Orissa Insurance Co operative Society Ltd. Service Rules (for short "the Rules") as unconstitutional and void offending Article 14 of the Constitution of India.
The material facts relevant to the point are that while the appellant was working as Divisional Manager at Delhi, the general insurance business was nationalised and its management was taken over by the Central Government under General Insurance (Emergency Provisions) Ordinance, 1971 replaced by Act 57 of 1972 (for short "the Act") and vested in the custodian of the New India Assurance Co. Ltd., the management of Orissa Insurance Co operative Society Ltd.
By operation of s.7 of the Act, the services of the appellant and others stood transferred and vested with the custodian.
Under the Act, the Board of Directors was empowered to terminate the service of the officer/employee of the insurer.
The appellant was kept under suspension from August 9,1973 pending investigation into the embezzlement, Explanation was called for on October 16, 1973.
in response thereto the appellant submitted his reply on december 7, 1974.
While dropping the 223 proceeding, the appellant was served with termination order dated April 17,1975 issued by the respondent.
The appellant challenged it in a writ petition in Delhi High Court which was dismissed by a learned Single Judge on November 11, 1983 and was confirmed by the Division Bench in Letter Patent Appeal No.351/1984 dated April 23, 1984.
Section 7 of the Act provides that every whole time officer or other employee of an existing insurer employed in connection with his General Insurance business, immediately before the appointed day, shall become an officer/employee of the Indian Insurance Co. in which the undertaking of the insurer to which the service of the officer relates has vested and would hold his office on the same terms and conditions and with the same rights to pension, gratuity and other matters as would have been admissible to him, if there had been no such vesting and shall continue to do so unless and until his appointment is terminated.
Section 16(1) in Chapter V provides that if the Central Govt.
is of the opinion that for the more efficient carrying on of General Insurance business, it is necessary to do so, it may by notification, frame one or more schemes providing for all or any of the following matter; (e) the rationalisation or revision of pay scales and other terms and conditions of service of officers and other employees wherever necessary.
Pursuant thereto, the central Govt.
framed the New India Assurance Co. Ltd Merger Scheme, 1973 with effect from December 31, 1973.
Thereunder by Rule 3, the undertaking was transferred to the respondent; under Rule 5 the existing whole time officer etc.
became the officer of the transferee company (New Indian Assurance Co. Ltd) and could hold his office on the same terms and conditions as would have been admissible to him if there had been no such transfer, as referred to in paragraph 3.
He shall continue to remain an officer unless and until his employment, in the transferee company is terminated or the terms and conditions are duly altered by any other scheme framed under the Act.
By notification dated April 29, 1976 the Central Govt.
also framed the scheme called the General Insurance (Rationalisation of pay scales and other Conditions of Service of Development Step) Scheme, 1976 which came into force on May 1, 1976, the details of which are not material for the reason that service of the appellant was terminated , in terms of the existing rule 5 of the Rules.
Suffice to state that pursuant to the nationalisation under the Act and Scheme, the appellant became the officer of the respondent.
Rule 5 read thus: Termination of Service: 224 "An employee whether permanent or temporary shall not leave or discontinue his service in the Society without first giving 30 days notice in writing of his intention to do so, to the Principal Officer, Failure to do so will entail forfeiture of the pay of the month.
In the event of the Society not having any further need of any employee 's service whether permanent or temporary, which shall be decided by the Board, the Principal Officer shall give 30 days ' notice in writing for termination of his service or in lieu thereof pay such employee a sum equivalent to his one month pay including allowance upto the termination of the period of notice by way of compensation provided that nothing in these rules shall affect the rights of the society to dismiss an employee under Rule 8 for misconduct etc.
without any notice or salary in lieu of notice, in the manner prescribed in these rules.
An employee shall ordinarily retire from the Society 's services on completion of his 55th year unless the Board reserves to continue him in office of such period as may be determined from time to time.
" It is thus manifest that an employee, whether permanent or temporary, has an option to leave or discontinue by giving 30 days ' notice in writing of his intention to do so.
His failure thereof shall entail forfeiture of the pay of the month.
The employee ordinarily would be superannuated on completion of his 55th year unless the Board continues him for an extended period as may be determined from time to time.
Equally in the event of the Society not having any further need of the employee 's service, whether permanent or temporary, which should be decided by the Board, the Principal Officer shall give 30 days ' notice in writing for termination of his service or in lieu thereof, pay one month 's salary including allowances upto the period of termination.
The respondent also has the right to dismiss an employee, under Rule 8, for misconduct in the manner prescribed in the Rules.
Admittedly, though action was initiated against the appellant for the charges of embezzlement etc.
which are misconduct, the charges were dropped.
Taking aid of Rule 5 and without conducting an enquiry or giving an opportunity, the appellant 's service was terminated by tendering one month 's salary in lieu of notice and also a direction to pay all the allowances upto that date including the period of his suspension.
It is not necessary to go into the grounds taken in the High Court assailing the invalidity of the termination order as they are not pressed before us.
Sri Ramamurthy, the learned Senior counsel for the appellant placing reliance on the ratio of the majority view in D.T.C. vs D.T.C Mazdoor Congress & Ors., 225 Judgment today contended that Rule 5 is ultra vires of Article 14 of the Constitution.
Shyamala Pappu, the learned Senior counsel for the respondent contended that unlike Rule 9 in D.T.C 's case Rule 5 provides guidelines.
The Board of Directors have to take a decision, whether the need to continue the employee 's service subsists which would be based on the relevant material.
Thereby, there would be objective consideration before taking a decision, not only regarding the need to continue the post but also the services of the officer or the employee.
Though the rule does not provide for prior notice, post decisional opportunity would be read into the rule.
If so read, the rule is not ultra vires Article 14.
In our view the ratio in D.T.C. 's case has no application.
Rule 9 of the rules of Delhi Transport Corporation Service Regulation gives naked power to terminate the services of a permanent employee by giving one month 's notice or pay in lieu thereof.
It was not the contention therein, that the rule was capable of two constructions.
It is settled law that there is a presumption of constitutionality of the rule.
The court ought not to interpret the statutory provisions, unless compelled by their language, in such a manner as would involve its unconstitutionality, Since the legislature of the rule making authority is presumed to enact a law which does not contravene or violate the constitutional provisions.
Therefore, there is a presumption in favour of constitutionality of a legislation or statutory rule unless ex facie it violates the fundamental rights guaranteed under Part III of the constitution.
If the provisions of law or the rule is construed in such a way as would make it consistent with the constitution and another interpretation would render the provision or the rule unconstitutional, the court would lean in favour of the former construction.
In view of this settled legal position, the question emerges whether the language in Rule 5 would be capable to be construed consistent with the fundamental rights in Part III.
As stated earlier, the phrase "in the event of the Society not having any further need of any employee 's service whether permanent or temporary which shall be decided by the Board" is susceptible of two interpretations.
The one interpretation put up by Sri Ramamurty is that the Board may unilaterally and arbitrarily decide that there is no need for the services of a particular employee, in given facts and circumstances, though the post which the employee is occupying may continue and would be put to an end by giving one month 's notice or pay in lieu thereof.
In that event the rule per se is arbitrary offending Article 14.
The other view capable to be construed from the language employed would be that the Board of Management may form an objective opinion, on the basis of the material, that the post which the officer or the employee is occupying no longer is in need.
Thereby, the post would be abolished.
This would be a policy decision depending on the exigencies.
In consequences the service of the employee also would become 226 redundant or surplus.
In that event his service would no longer be needed.
The officer or employee may be permanent or temporary but the absence of the need for the continuance of the post would necessitate to terminate the service of an employee or officer.
It must not be a pretext or a rouse to get rid of the service of an inconvenient officer or of an employee.
If that be so.
it would become colourable exercise of power and would be liable to be quashed as offending Article 14.
Once the Board reaches a decision to abolish the post, in consequence the service of the officer/ employee occupying couched in Rule 5 also is capable of that interpretation.
In that light we are of the opinion that Rule 5 does not become arbitrary.
unreasonable or void offending Article 14.
Accordingly, we hold that the rule is valid.
But from the facts, it is clear that the Board of Management did not abolish the post but put an end to the service of the appellant.
Obviously due to loss of confidence as his honesty and integrity became suspicious and his continuance in service was felt inexpedient and not in the interest of the business of the respondents.
But Rule 8 was available for taking action for misconduct but was not availed.
Therefore, the impugned order terminating the services of the appellant is illegal.
What would be the consequence? Normally the appellant is entitled to reinstatement but in our view the ends of justice would be met by directing the respondent to pay him Rs. 1,00,000 as compensation, instead of reinstatement and further continuance in service.
The compensation awarded would be staggered between the year 1973 till date for the purpose of income tax and given the appropriate relief.
In this view it is not necessary to deal with other contentions or decisions cited across the bar.
Before parting with the case it is necessary to mention that march of service jurisprudence necessitates the respondent to recast the rules in tune with the constitution and the law.
The appeal is allowed but without cost.
The intervention application filed by Sri S.S. Onkarmal Harlalka is dismissed.
S.B. Appeal allowed.

dataset_name: IN-Abs

summary/full:
While the appellant was working as Divisional Manager at Delhi, the general insurance business was nationalised and its management was taken over by the Central Government under General Insurance (Emergency Provisions) Ordinance, 1971 which was replaced by Act 57 of 1972 and vested in the Custodian of the New India Assurance Co. Ltd. the management of Orissa Insurance Co operative Society Ltd. By operation of Section 7 of the Act the services of the appellant and others stood transferred and vested with the custodian.
The appellant was kept under suspension from August 9,1973 pending investigation into charges of embezzlement.
Explanation was called for on October 16,1973 and the appellant submitted his reply on December 7, 1974, While dropping the proceeding, the appellant was served with a termination order dated april 17, 1975 issued by the respondent.
The appellant challenged the aforesaid termination order in a writ petition in Delhi High Court which was dismissed by a Single Judge on November 11,1983 and this judgment was confirmed by the division Bench in a Letter Patent Appeal.
In the appeal to this Court it was contended on behalf of the 221 appellant placing reliance on the majority view in D.T.C vs D.T.C Mazdoor Congress & Ors.
judgment Today 1990(3) SC 725 that Rule 5 of the Orissa Insurance Co operative Ltd. services Rules is ultra vires of Article 14 of the Constitution.
On behalf of the respondent it was contended that unlike Rule 9 involved in D.T.C 's case, Rule 5 in the instant case provided guidelines, and that the Board of Directors had to take a decision, whether the need to continue the employee 's service subsists which would be based on relevant material and thus there would be objective consideration before taking a decision, not only regarding the need to continue the post but also the services of the Officer or the employee, and if so construed the rule is not ultra vires of article 14.
Allowing the appeal, this Court, HELD: Rule 5 of the Orissa Insurance Co operative Society Ltd. is capable of the interpretation that the Board of management may form an objective opinion, on the basis of material, that the post which the officer or the employee is occupying is no longer in need and that the post would be abolished.
This would be a policy decision depending on the exigencies.
Once the Board reaches such a decision to abolish the post, in consequence the service of the officer/employee occupying the post could be terminated.
Viewed in that light the said rule does not become arbitrary, unreasonable or void offending Article 14 and therefore the rule is valid.
[225G 226 B] There is a presumption in favour of constitutionality of a legislation or statutory rule unless ex facie it violates the fundamental rights guaranteed under Part III of the constitution.
If the provisions of a law or the rule is construed in such a way as would make it consistent with the Constitution and another interpretation would render the provision or the rule unconstitutional, the Court would lean in favour of the former construction.
[225 E] It is clear in the instant case, that the Board of Management did not abolish the post but put an end to the service of the appellant, obviously due to loss of confidence as his honesty and integrity became suspicious and his continuance in service was felt inexpedient and not in the interest of the business of the respondents.
But rule 8 was available for taking action for misconduct but was not availed.
Therefore, the order terminating the services of the appellant is illegal.
[226 C] 222 Normally the appellant is entitled to reinstatement but the ends of justice would be met by directing the respondents to pay him Rs. 1,00,000 as compensation, instead of reinstatement and further continuance in service.
The compensation awarded would be staggered between the year 1973 till date for the purpose of income tax and given the appropriate relief.
[226D E] March of service jurisprudence necessitates that the respondent recast Rule 5 in tune with the Constitution and the law.
[226 E]


judgement:
Civil Appeal No. 378 of 1992.
From the Judgment dated 31.7.1991 of the Karnataka High Court in Writ Appeal No. 1224 of 1990.
Santosh N. Hegde and P.Mahale for the Appellants.
A.K. Subbiah, Ranji Thomas, K.V. Mohan, M Veerappa and K.H. Nobin Singh for the Respondents.
290 The Judgment of the Court was delivered by AHMADI, J.
Special leave granted.
This appeal is directed against the judgment of the High Court of Karnataka dated 31 st July, 1991, whereby the Division Bench allowed the Writ Appeal setting aside the decision of the learned Single Judge and held, relying on the judgment in Writ Appeal No. 2564 of 1987 decided on 28th May, 1991, that Section 4 (2) of the Karnataka Zila Parishads, Taluk, Panchayat Samithis, Mandal Panchayats and Nyaya Panchayats Act, 1983 (hereinafter referred to as `the Act ') does not confer any power in the Deputy Commissioner to change the headquarter of any Mandal.
It is this view taken by the Division Bench of the High Court that is put in issue in the present appeal.
For the purpose of disposal of this appeal we may notice a few relevant facts.
The Act came into force w.e.f. 14 'th August, 1984.
Thereafter, on 16th January, 1986 a notification was issued by the Deputy Commissioner in exercise of power conferred by Section 4 (1) of the Act constituting a Mandal, named Mudiyannur Mandal, and located its headquarter at Mudiyannur.
However, the Divisional Commissioner changed the headquarter to Uthanpur while exercising power under Section 4 (3) of the Act.
Thereupon a writ petition was filed on 14th December, 1987, being Writ Petition No. 7685/86, challenging the said decision of the Divisional Commissioner.
That Writ petition was dismissed by the High Court observing: if the Mandal so desires it may pass a resolution to change the headquarter from the existing place to another place whereupon it will be open to the Deputy Commissioner to consider if he would like to exercise power under Section 4 (2) of the Act.
Pursuant thereto a fresh resolution was passed whereupon the Deputy Commissioner issued a notification under Section 4 (2) of the Act for change of headquarter which was published in the Government Gazette of 20th January, 1988.
On the issuance of the said draft notification respondents Nos. 1 to 10 filed a writ petition, being Writ Petition No. 1888/88, challenging the said draft notification.
That writ petition was also dismissed by the High Court.
The Deputy Commissioner after considering the resolution of the Mandal and the objections received in response to the draft notification from respondents Nos 1 to 10 passed an order declaring Mudiyannur as the headquarter of the Mandal.
To give effect to his decision, a notification under Section 4 (2) of the Act was issued on 23rd July, 1988 whereby the headquarter was changed from Uthanpur to Mudiyannur.
Once again the respondent Nos 1 to 10 challenged that notification by a revision application filed under Section 4 (3) 291 of the Act.
The Divisional Commissioner exercising power under the said provision dismissed the revision application whereupon a Writ Petition no 77 of 1989 was taken to the High Court.
A learned Single Judge of the High Court dismissed the writ petition.
An appeal was carried to the Division Bench of the High Court.
the Division Bench allowed the appeal by the impugned judgment dated 31 st July, 1991 following an earlier decision in Writ Appeal No. 2564 of 1987 rendered on 28th May, 1991.
It is the correctness of this decision which we are called upon to examine.
Section 4 (1) as it stood before its amendment on 4th October, 1985 empowered the Deputy Commissioner to declare any area comprising a village or group of village having the required population to be a Mandal for the purposes of the Act.
That sub section did not carry a provision empowering the Deputy Commissioner to specify the headquarter of the Mandal.
By the amendment brought about in that provision by Act 3 of 1986 w.e.f. 4th October, 1985, this power was specifically conferred on the Deputy Commissioner.
The amended Section 4 (1) reads as under : "(1) Subject to the general or special orders of the Government, the Deputy Commissioner, if in his opinion, it is expedient to declare any area comprising a village or group of village having a population of not less than eight thousand and not more than twelve thousand to be a Mandal, may, after previous publication, declare such area as a Mandal for the purposes of this Act and also specify its headquarter.
" On a plain reading of this provision, it becomes obvious that the Deputy Commissioner was empowered not only to declare a village or group of villages as a Mandal but also to specify its headquarter.
We then come to sub section (2) which empowers the Deputy Commissioner, at the request of the Mandal concerned, or otherwise, to increase or decrease the area of any Mandal, by including within or excluding from such Mandal any village or group of villages or alter the name of any Mandal or declare that any area shall cease to be a Mandal after previous publication of the proposal by a notification in the Gazette.
This sub section confers power on the Deputy Commissioner to increase or diminish the area of any Mandal and to alter the name of any such Mandal but it does not in so many words confer power to specify the headquarter of such reconstituted Mandal.
Sub section (3) of section 4 empowers the Commissioner either on an application made within thirty days from the date of the notification by an aggrieved party or in exercise of suo moto power after giving a reasonable opportunity of being heard to the applicant or the Mandals 292 concerned, revise the orders of the Deputy Commissioner passed under sub section (1) or sub section (2), as the case may be, and may also, if he considers necessary, modify it as provided in the third proviso to subsection (1) Every order so passed revising or modifying the order of the Deputy Commissioner shall be published in the Official Gazette.
We are not concerned with the third proviso to sub section 4.
Sub section (1) of Section 4, therefore, empowers the Deputy Commissioner to declare any village or group of villages as a Mandal and to specify its headquarter.
After the constitution of the Mandal and on the headquarter being specified under this sub section, if any change, is to be effected in the area of the Mandal either by increasing or reducing its size, the power has to be exercised under sub section (2) of Section 4 of the Act.
That sub section also empowers the Deputy Commissioner to alter the name of the Mandal.
It was submitted by the counsels for the respondents that while this sub section in terms empowers the Deputy Commissioner to alter the name of the Mandal, it does not empower him to alter the headquarter of the Mandal because the headquarter once specified under sub section (1) of Section 4 must remain unaltered since the Act designedly does not confer any power on any authority whatsoever to change the headquarter once specified under sub section (1) of Section 4.
This submission was countered by the learned counsel for the appellant by inviting our attention to Section 14 of the Karnataka (hereinafter called `the '.
that provision reads as under: "Where by any Mysore or Karnataka Act made after the commencement of this Act, any power is conferred then that power may be exercised from time to time as occasion requires.
" Counsel for the appellant submitted that once the power to specify the headquarter is conferred on the Deputy Commissioner by sub section (1) of Section 4 of the Act it can be exercised from time to time by virtue of the said Section 14 if the occasion so requires.
He, therefore submitted that this Court should construe the scheme of Section 4 of the Act with the aid of Section 14 in such a manner as not to leave a vacuum for the exercise of power if need arises for a change of headquarter.
He submitted that if, the view taken by the High Court is approved, a situation may arise when even after a change takes place in the size of the Mandal area there would be no power vested in any authority whatsoever for changing of specifying the headquarter of the reconstituted Mandal which vacuum may lead to avoidable complications.
He, therefore, submitted that once the legislature has invested the Deputy Commissioner with the power to 293 specify the headquarter under sub section (1) of Section 4, subject to the modification which the Commissioner may choose to make under sub section (3) of Section 4, the power to alter the headquarter of a Mandal from time to time if the occasion so requires must be read into it.
We think there is a considerable force in this submission.
As pointed out earlier, Section 4(1) empowers the Deputy Commissioner to do two things, namely, (i) to declare an area as a Mandal, and (ii) to specify its headquarter.
The word `also ' preceding the words `specify its headquarter ' cannot be understood to convey that the power once exercised would stand exhausted.
Such a construction sought to be placed by counsel for the respondent does not accord with the language of the provision.
It merely conveys that when the Deputy Commissioner constitutes a Mandal for the first time it will be necessary for him to specify its headquarter also.
This power to specify the headquarter conferred on the Deputy Commissioner can be exercised from time to time as occasion requires by virtue of Section 14 of the .
The attention of the High Court was not drawn to the provision in Section 14 when it disposed of the Writ Appeal No. 2564 of 1987 and Writ Petition No 375 of 1989 on 28 th May, 1991.
It is true that the power conferred by sub section (2) of Section 4 can be exercised where there is a change in the area of the Mandal either by addition or reduction in the area.
Under clause (c) of sub section (2) of Section 4 the Deputy Commissioner is also invested with the power to alter the name of any Mandal.
The scheme of subsection (2) would, therefore, show that when there is any increase or decrease in the area of any Mandal, the Deputy Commissioner may, after the previous publication of the proposal by notification, exercise that power and rename the Mandal, if so required.
The absence of the power in sub section (2) of section 4 to specify the headquarter afresh does not necessarily mean that once the initial constitution of the Mandal takes place and the headquarter is specified the power is exhausted, notwithstanding section 14 of the .
If such an interpretation is placed on the scheme of section 4 of the Act neither the Deputy Commissioner nor any other authority will thereafter be able to alter and specify any other place as the Mandal 's headquarter.
Such a view would create a vacuum and even when a genuine need for specifying any other headquarter arises, the authorities will not be able to exercise power for want of a specific provision in the Act and that may lead to avoidable hardship and complications.
It is, therefore, essential that we read the provision of the Act in a manner so as to ensure that such a vacuum does not arise and the power is retained in the concerned authority which can be exercised should a genuine need arise.
In J.R. Raghupathy & Ors.
vs State of A.P. others; , this Court observed that the ultimate decision as 294 to the place or location of Mandal headquarter is left to the Government to decide and conferment of discretion upon the concerned authority in that behalf must necessarily leave the choice to the discretion of the said authority and it would not be proper for the courts to interfere with the discretion so exercised.
This is not to say that the discretion can be exercised in an arbitrary or whimsical manner without proper application of mind or for ulterior or malafide purpose.
If it is shown that the discretion was so exercised it would certainly be open to the Courts to interfere with the discretion but not otherwise.
We are, therefore, of the opinion that if the situation so demands and there is justification for altering the place of headquarter, it would be open to the Deputy Commissioner to exercise power under Section 4(1) of the Act read with section 14 of the to meet the situation.
We, therefore, allow this appeal, set aside the impugned order of the Division Bench of the High court and restore the order of the learned Single Judge directing that the writ petition, which gave rise to the writ appeal, shall stand dismissed.
However, in the facts and circumstances of the case there will be no order as to costs.
V.P.R. Appeal allowed.

summary/full:
On 16.1.1986, the Deputy Commissioner issued a notification constituting a Mandal under section 4 (1) of the Karnataka Zila Parishads, Taluk Panchayat Samithis, Mandal Panchayats and Nyaya Panchayats Act, 1983 and located the headquarter of the Mandal at Mudiyannur.
Later on exercising powers under section 4 (3) of the Act he changed the headquarter to Uthanpur.
On 14.12.1987 a writ petition (W.P.No. 7685/86) was filed challenging the decision of the Deputy Commissioner.
The High Court dismissed the petition holding that on passing a resolution my Mandal to change the headquarter from the existing place to another place, the Deputy Commissioner was to consider if he would like to exercise power under section 4(2) of the Act.
The Mandal passed a fresh resolution and thereupon the Deputy Commissioner issued a notification under section 4 (2) of the Act for change of headquarter and on 20.1.1988 the draft notification was published in the Gazette.
The respondents 1 to 10 filed a writ petition (W.P. No 1888/88) 287 before the High Court challenging the draft notification.
The writ petition was dismissed.
Considering the resolution and the objections to the notification, the Deputy Commissioner issued another notification under section 4 (2) of the Act and the headquarter of the Mandal was changed from Uthanpur to Mudiyannur.
The respondents challenged the notification by filing a revision application under section 4 (3) of the Act which was dismissed by the Divisional Commissioner.
The respondents moved the High Court in W.P. No. 77 of 1989 challenging the order of the Deputy Commissioner.
The Single Judge of the High Court dismissed the petition, against which an appeal was filed before the Division Bench of the High Court.
The Division Bench allowed the appeal following an earlier decision of the High Court in Writ Application No. 2564 of 1987 dated 28.5.1991.
The correctness of the decision of the Division Bench of the High Court was challenged in this appeal by special leave.
The appellant contended that once the power to specify the headquarter was conferred on the Deputy Commissioner by Section 4 (1) of the Act, it could be exercised from time to time by virtue of section 14 of the Karnataka General Clauses Act,1897; that the scheme of section 4 of the Act should be construed with the aid of section 14 of the General Clauses Act in such a manner as not to leave a vacuum for the exercise of power for a change of headquarter; that if the High Court 's view was approved, there could be no power vested in any authority whatsoever for changing or specifying the headquarter of the reconstituted Mandal which vacuum might lead to avoidable complications; and that once the legislature invested the Deputy Commissioner with the power to specify the headquarter under section 4 (1), subject to the modification by the Commissioner under section 4 (3), the power to alter the headquarter of the Mandal from time to time, if the occasion so required, must be read into it.
288 The respondents submitted that while sub section (2) of Section 4 of the Act in terms empowered the Deputy Commissioner to alter the headquarter of the Mandal because the headquarter once specified under section 4(1) should remain unaltered; that the act designedly did not confer any power on any authority whatsoever to change the headquarter once specified under section 4 (1).
Allowing the appeal, this Court, HELD : 1.01 Section 4 (1) empowers the Deputy Commissioner to do two things, namely (i) to declare an area as a Mandal, and (ii) to specify its headquarter.
[293 B] 1.02 The power conferred by sub section (2) of Section 4 of the Karnataka Zila Parishads, Taluk Panchayat Samithis, Mandal Panchayats and Nyaya Panchayats Act, 1983 can be exercised where there is a change in the areas of the Mandal either by addition or reduction in the area.
Under clause (c) of sub section (2) of Section 4, the Deputy Commissioner is also invested with the power to alter the name of any Mandal.
[293 D E] 1.0 The scheme of sub section (2) of Section 4 would show that when there is any increase or decrease in the area of any Mandal, the Deputy Commissioner may, after the previous publication of the proposal by notification, exercise that power and rename the Mandal, if so required.
[293 E] 1.04 If the situation so demands and there is justification for altering the place of headquarter, it would be open to the Deputy Commissioner to exercise power under section 4 (1) of the Act read with Section 14 of the General Clauses Act to meet the situation.
[294 C] 1.05 The word `also ' preceding the words `specify its headquarter ' cannot be understood to convey that the power once exercised would stand exhausted.
Such a construction sought to be placed by counsel for the respondent does not accord with the language of the provision.
It merely conveys that when the Deputy Commissioner constitutes a Mandal for the first time it will be necessary for him to specify its headquarter also.
[293 B C] 1.06 The power to specify the headquarter conferred on the Deputy Commissioner can be exercised from time to time as occasion 289 requires by virtue of section 14 of the General Clauses Act.
[293 C D] 1.07 The ultimate decision as to the place or location of Mandal headquarter is left to the Government to decide and conferment of discretion upon the concerned authority in that behalf must necessarily leave the choice to the discretion of the authority and it would not be proper for the courts to interfere with the discretion so exercised.
This is not to say that the discretion can be exercised in an arbitrary or whimsical manner without proper application of mind or for ulterior or malafide purpose.
If it is shown that the discretion was so exercised it would certainly be open to the courts to interfere with the discretion but not otherwise.
[293 H; 294 A B] 2.
The absence of the power in sub section (2) of Section 4 to specify the headquarter afresh does not necessarily mean that once the initial constitution of the Mandal takes place and the headquarter is specified, the power is exhausted, notwithstanding section 14 of the General Clauses Act.
If such an interpretation is placed on the scheme of section 4 of the Act neither the Deputy Commissioner nor any other authority will thereafter be able to alter and specify any other place as the Mandal 's headquarter.
Such a view would create a vacuum and even when a genuine need for specifying any other headquarter arises, the authorities will not be able to exercise power for want of a specific provision in the Act and that may lead to avoidable hardship and complications.
It is, therefore, essential that the provision of the Act be read in a manner so as to ensure that such a vacuum does not arise and the power is retained in the concerned authority which can be exercised should a genuine need arise.
[293 F H] J.R. Raghupaty & Ors.
vs State of A.P. & Ors.
, ; , referred to.


judgement:
Civil Appeal No. 4134 of 1991.
From the Judgment and Order dated 30.8.1991 of the Bombay High Court in Writ Petition No 3580 of 1991.
J.P.Pathak and P.H. Parekh for the Appellants.
A.M. Khanwilkar and S.K. Parshankar for the Respondents.
The Judgment of the Court was delivered by 229 KASLIWAL, J.
This appeal by grant of special leave is directed against the judgment of the Bombay High Court dated 30th August, 1991 in a suit for possession under the Bombay Rents, Hotel and Lodging House Rates Control Act, 1947 (hereinafter referred to as the Act).
The suit was dismissed by the 7th Additional Small Causes Judge.
On appeal the learned 10th Additional District Judge, Pune by Judgment dated 25.4.1991 set aside the order of the trial court and decreed the plaintiff 's suit for possession.
The tenants filed the writ petition in the High Court challenging the order of the Additional District Judge, But the same was dismissed and the decree for possession passed by the Additional District Judge was affirmed.
The trial court held that the service of notice dated 7.8.1980 on the defendant tenants was not held proved.
The plaintiffs were unable to prove that the postal acknowledgement Exhibit 51 Contained the signatures of defendant no 2 or 3.
It was held that on the point of service of notice the case of the plaintiff was rather confusing and not clear.
It was held that even assuming that the notice had been served yet the case did not fall under Section 12(3) (a) of the Act.
The trial court also held that the case did not fall under Section 12(3) (b) of the Act as the defendants had paid Rs. 55,800 on 16.1.1984 and thereafter made regular payment of Rs. 600 every month.
According to the learned trial court the issues were framed on 26.8.1985 and before that the defendants had made full payment as demanded in the notice and as such no decree can be passed under Section 12(3)(b) of the Act.
Learned Additional District Judge reversed the above finding of the trial court and held that the evidence of the plaintiff showed that the copy of the notice was sent to all the defendants by registered post.
The postal receipts have been filed as exhibits 52, 53 and 54.
Learned Additional District Judge further held that when the notices are sent by registered post it is presumed to have been served and mere denial by the tenants had no value, unless they proved some extraordinary happenings or events which prevented following of usual course of business.
Learned Additional District Judge further held that the notice was sent on the address given in the plaint and it was admitted by the defendant in his statement that it contained the correct address.
A presumption of service of notice was drawn under Section 27 of the General Clauses Act and Section 114 of the Evidence Act.
Learned additional District Judge though affirmed the finding of the trial court that the case is not covered under section 12(3)(a) of the Act, but the plaintiffs were entitled to a decree under Section 12(3) (B) of the Act.
In this regard learned Additional District Judge recorded the finding that the entire arrears of rent amounted to Rs. 71,088 but the defendant tenant only 230 deposited Rs 66.000 till the first date of hearing and thus remained in arrears of Rs. 5,088.
It was also held that the provisions of 12(3)(b) of the Act are mandatory provisions and those are required to be strictly complied with by the tenants during the pendency of the suit and also appeal when the landlord claims possession of the suit premises on the ground of Section 12(3)(b) of Act.
The defendant tenant did not deposit the entire arrears on the first date of hearing and did not deposit the further rent during the pendency of the appeal.
Thus the defendant persistently committed defaults during the pendency of the suit and also the appeal in paying the rent.
We have heard learned counsel for the parties and have thoroughly gone through the record.
It is important to note that M/s Kulkarni Patterns Pvt. Ltd/. (defendant No.1) Was the tenant, defendant No 2 Shri D G. Kulkarni was the Chairman of the company and defendant No 3 Mrs M.D. Kulkarni was the wife of defendant No 2 and Director of defendant No 1.
The plaintiffs sent a notice dated 7.8.1980 to all the defendants vide postal receipts Exhibit 52,53 and 54.
Exhibit 51 is only one acknowledgement receipt which has been produced on record.
It has been contended on behalf of the appellants that the learned Additional District Judge was wrong in drawing presumption of service of service of notice in the facts of the present case.
It was submitted that the plaintiff initially stated that the acknowledgement receipt Exhibit 51 contained the signatures of defendant NO.3, but subsequently admitted that it contained the signature of defendant No. 2.
It was further argued that defendant No.2.
had appeared in the witness box and clearly denied his signatures on Exhibit 51.
It was thus contended that the presumption of service of notice was rebutted and thereafter the burden lay on the plaintiffs to prove the service of notice by examining the postman or by other evidence and the plaintiffs having failed to do so, the service of notice having not established, the suit was liable to be dismissed.
Reliance in support of the above contention was placed on a decision of this Court to which one of us was a party in Green view Radio Service vs Laxmibai Ramji And Another.
, Reliance was placed on the following observations made in the above case.
"In this connection, we may also point out that the provisions of section 106 of the Transfer of Property Act require that notice to quit has to be sent either by post to the party or be tendered or delivered personally to such party or to one of his family members or servants at his residence or if such tender or delivery is not practicable, affixed to a conspicuous part of the 231 property.
The service is complete when the notice is sent by post.
In the present case, as pointed out earlier, the notice was sent by the plaintiff 's advocate by registered post acknowledgement due.
The acknowledgement signed by the party was received by the advocate of the plaintiff.
Thus in our view the presumption of service of a letter sent by registered post can be rebutted by the addressee by appearing as witness and stating that he never received such letter.
If the acknowledgement due receipt contains the signatures of the addressee himself and the addressee as a witness states that he never received such letter and the acknowledgement due does not bear his signature and such statement of the addressee is believed then it would be a sufficient rebuttal of the presumption drawn against him.
The burden would then shift on the plaintiff who wants to rely on such presumption to satisfy the court by leading oral or documentary evidence to prove the service of such letter on the addressee.
This rebuttal by the defendant of the presumption drawn against him would of course depend on the veracity of his statement.
The court in the facts and circumstances of a case may not consider such denial by the defendant as truthful and in that case such denial alone would not be sufficient.
But if there is nothing to disbelieve the statement of the defendant then it would be sufficient rebuttal of the presumption of service of such letter or notice sent to him by registered post.
" In the present case the plaintiffs had sent a copy of the notice to all the three defendants by registered post.
Three postal receipts Exhibits 52, 53 and 54 have been filed in the present case and Exhibit 51, one acknowledgement receipt.
As regards Exhibit 51, the defendant No.2 has appeared in the witness box and has denied his signatures.
However, it has not been shown that this acknowledgement receipt was related to which of the three notices sent vide postal receipts Exhibits 52,53 and 54.
The plaintiffs have clearly proved that three notices were sent by registered post and which is clearly born out from the three postal receipts.
Admittedly the premises were taken on rent in the name of the defendant No.1 namely Kulkarni Patterns.
Pvt. Ltd. and it is proved that one of the notices by registered post was also sent to the company.
It has been admitted by the defendant No.2 in his statement that the notice was sent on the correct address.
The defendant No.2 in his statement has nowhere stated that no notice has bee received by the company.
The only denial is in respect of the acknowledgment receipt Exhibit 51 and the only inference which could legitimately be drawn is that in respect of one notice, it was not proved as 232 to who acknowledged the receipt of the notice.
We do not approve the following statement of law made by the learned Additional District Judge "that the evidence of the defendant did not show any extraordinary happenings or the events which prevented the following of usual course of business and thus, his mere denial has no value".
However, in the present case three notices were sent by registered post and one of which was sent in the name of the defendant company who was the tenant, a presumption can legitimately be drawn that the notice dated 7.8.1980 had been served on the company.
There is no rebuttal on behalf of the defendant as regards the notice served on the company and in the facts and circumstances of the present case we hold that notice dated 7.8.1980 sent by registered post was served on the defendant company, In Green View Radio Service (supra) it was held that the acknowledgement due receipt contained the signature of the addressee himself and the addressee as a witness stated that he never received such letter and the acknowledgement due did not bear his signature and such statement of the addressee if believed then it would be a sufficient rebuttal of the presumption drawn against him.
The burden will then shift on the plaintiff who wants to rely on such presumption to satisfy the court by leading oral or documentary evidence to prove the service of such letter on the addressee.
Even applying this statement of law in the facts of the present case, the rebuttal, if any, made by defendant No.2 can be related only with regard to Exhibit to Exhibit 51 for one notice but not with regard to all the three notices sent by registered post vide exhibits 52 to 54 Thus, in the facts of the case in hand before us we are fully convinced that the service of notice shall have to be presumed so far as defendant company is concerned and there is no rebuttal to such presumption by the defendant appellants.
The requirement of sending notice under Section 12(2) of the Act is to be done in the manner prescribed under paragraph two of Section 106 of the Transfer of Property Act which reads as under.
"Every notice under this Section must be in writing signed by or on behalf of the person giving it and either be sent by post to the party who is intended to be bound by it or be tendered or delivered personally to such party, or to one of his family or servants, at his residence, or (if such tender or delivery is not practicable ) affixed to a conspicuous part of the property." The reading of the above provision clearly shows that the notice can be sent by post to the party who is intended to be bound by it.
Thus, the notice sent by registered post in the name of the defendant company who 233 is the tenant is fully in accordance with the requirement of section 106 of A the Transfer of Property Act.
So far as the finding recorded by the learned Additional District Judge that the defendants were defaulter in the payment of rent and full amount of rent was not paid or deposited on the first date of hearing and no rent was paid month by month during the pendency of the appeal could not be assailed by the learned counsel for the appellants.
Thus, the learned Additional District Judge as well as High Court was right in passing a decree for possession under section 12(3)(b) of the Act.
As a result of the above discussion and findings recorded by us, we find no force in this appeal and the same is dismissed with costs.
Y.L Appeal dismissed.

summary/full:
The Respondents landlords filed a suit for possession of the suit premises against the appellants on the ground of default in payment of rent, amongst other, The 7th Additional Small Causes Judge, dismissed the suit holding that the service of notice dated 7 8 1980 on the defendants terminating the tenancy was not proved, even though one out of the three acknowledgments due, had been received duly signed.
As regards the question of default in payment of rent, the learned Judge took the view that the case did not fall under Section 12(3)(b) of the Act, as the defendants had paid Rs. 55,800 on 16.1.1984 and thereafter made regular payment of Rs. 600 every month.
On appeal by the respondent landlords, the learned additional District Judge reversed the findings of the trial Court and decreed the suit.
The learned Additional District Judge held that when the notices are sent by registered post, it is presumed to have been served and mere denial by the tenants had no value, unless they proved some extraordinary happenings or events which prevented following of usual course of business.
On the question of default in payment of rent the learned Judge held that as the defendants did not deposit the entire arrears on the first date of hearing and did not deposit the further rent during the pendency of the appeal, they persistently committed defaults during the pendency of the suit and also the appeal.
The appellants thereupon filed a writ petition in the High Court challenging the validity of the aforesaid order of the learned Additional District Judge.
The High Court dismissed the writ petition and affirmed the order passed by the learned Additional District Judge.
Hence this appeal by the appellants, after obtaining special leave.
Dismissing the appeal, this Court, 228 HELD: The notice under Section 106 T.P. Act can be sent by post to the party who is intended to be bound by it.
Thus the notice sent by registered post in the name of the defendant company who is the tenant is fully in accordance with the requirement of section 106 of the Transfer of Property Act.[232H 233A] The plaintiffs had sent a copy of the notice to all the three defendants by registered post.
Three postal receipts Exhs.
52,53 and 54 have been filed in the present case Exh. 51, one acknowledgment receipt.
As regards Exh. 51, the defendants No.2 has appeared in the witness box and has denied his signatures.
However, it has not been shown that this acknowledgment receipt was related to which of the three notices sent vide postal receipts Exhs. 52,53 and 54.
[231E F] The rebuttal, if any, made by defendant No.2 can be related only with regard to Exh.
51 for one notice but not with regard to all the three notices sent by registered post vide Exhs.
52 to 54.[232D] The service of notice shall have to be presumed so far as defendant company is concerned and there is no rebuttal to presumption by the defendant appellants.
[232E] The finding recorded by the learned Additional District Judge that the defendants were defaulter in the payment of rent as full amount of rent was not paid or deposited on the first date of hearing and no rent was paid month by month during the pendency of the appeal could not be assailed.
[233B] Green View Radio Service vs Laxmibai Ramji and Anr., , referred to.