judgement:
minal Appeals Nos.
34 to 36 of 1956.
Appeal by special leave from the judgment and order dated July 1, 1955, of the Bombay High Court in Criminal Revision Applications Nos.
351 to 353 of 1955 arising out of the judgment and order dated November 5, 1954, of the Court of the Presidency Magistrate 14th Court at Girgaum, Bombay in Cases Nos.
328 to 330/P of 1954.
H. J. Umrigar and A. G. Ratnaparkhi, for the appellant.
M. section K. Sastri and R. H. Dhebar, for the respondent.
March 24.
The following Judgment of the Court was delivered by SUBBA RAO J.
These appeals by special leave are directed against the judgment of the High Court of 252 Judicature at Bombay made in three connected Criminal Revision applications and raise the question of the maintainability of prosecution of a person for an offence committed under section 24(1)(b) of the Bombay Sales Tax Act, 1946 (Bom.
V of 1946) (hereinafter referred to as the repealed Act).
The facts that give rise to the appeals may be briefly stated: The appellant, Sri Kapur Chand Pokhraj, was the proprietor of Messrs. N. Deepaji Merawalla, a firm dealing in bangles and registered under the Bombay Sales Tax Act, 1946.
He did not disclose the correct turnover of his sales to the Sales Tax Department in the three quarterly returns furnished by him to the said Department on September 30, 1950, December 31, 1950, and March 31, 1951, respectively.
He maintained double sets of books of accounts and knowingly furnished false returns for the said three quarters to the Sales Tax Officer and thereby committed an offence under section 24(1)(b) of the repealed Act.
Under that Act, sanction of the Collector was a condition precedent for launching of prosecution in respect of an offence committed under section 24(1) of the said Act.
The said Act was repealed by the Bombay Sales Tax Act, 1952 (Bom.
XXIV of 1952), which was published on October 9, 1952.
On December 11, 1952, the Bombay High Court declared the Act of 1952 ultra vires and the State .of
Bombay preferred an appeal against the judgment of the Bombay High Court to the Supreme Court.
On December 22, 1952, the State Government, in order to get over the dislocation caused by the Bombay judgment, issued the Bombay Sales Tax Ordinance II of 1952, where under it was provided that the 1946 Act was to be deemed to have been in existence up to November 1, 1952.
On December 24, 1952, another Ordinance, Ordinance III of 1952, was promulgated extending the life of the Act of 1946.
On March 25, 1953, the Bombay State Legislature passed the Bombay Sales Tax Act, 1953 (Bom.
III of 1953), (hereinafter referred to as the repealing Act), repealing the Act of 1946 and the Ordinance III of 1952.
The material fact to be noticed is that the Act III of 1953, though it repealed the earlier Act and the Ordinance extending 253 the life of that Act, made provision for an offence similar to that covered by section 24(1) of the repealed Act, prescribed a similar procedure for prosecuting persons committing the said offence and saved the liabilities incurred under the repealed Act.
During the period when the Ordinance III of 1952 was in force, the State Government issued a notification under section 3 of that Ordinance appointing the Additional Collector of Bombay to be a Collector under the said Ordinance.
On July 4, 1953, i.e., after Act III of 1953 came into force, Mr. Joshi, the Additional Collector of Bombay, granted sanction for the prosecution of the appellant in respect of the offence committed by him under section 24(1)(b) of the repealed Act.
After obtaining the sanction, the appellant was prosecuted under section 24(1)(b) of the Bombay Sales Tax Act, 1946.
Before the Presidency Magistrate the appellant pleaded guilty to the charge.
The learned Magistrate accepted his plea and convicted him for the offence for which he was charged and sentenced him to pay a fine of Rs. 200, in default to suffer one month 's rigorous imprisonment.
The State of Bombay preferred a Revision against the said Order to the High Court of judicature at Bombay praying that the sentence imposed on the appellant be enhanced on the ground that as the appellant kept double sets of accounts and intentionally furnished false information, the interest of justice required that substantive and heavy sentence should be imposed on him.
Before the High Court, the appellant pleaded that by the repeal of the Sales Tax Act, 1946, the offence, if any, committed by him was effaced and that in any view the prosecution was defective inasmuch as sanction had been given by the Additional Collector and not by the Collector of Sales Tax.
The contentions did not find favour with the learned Judge of the High Court.
In rejecting them, the learned Judge enhanced the sentence passed upon the appellant to rigorous imprisonment for a period of one month in each of the three cases in addition to the fine already imposed by the Magistrate.
He directed the substantive sentence of imprisonment in all the three cases to be concurrent.
The appellant obtained special leave 254 from this Court to prefer the above appeals against the judgment of the High Court.
The learned Counsel for the appellant raised before us the same contentions which his client unsuccessfully raised before the High Court.
We shall now proceed to deal with them seriatim.
The main argument of the learned Counsel was that the Bombay Sales Tax Act, 1953 (Bom.
III of 1953) in repealing the Act of 1946 did not save penalties in respect of offences committed under that Act and therefore no prosecution was maintainable in respect of an offence committed under the Act of 1946.
A clearer conception of the argument can be had by looking at the relevant saving provisions enacted in Act III of 1953 and also the relevant sections of the Bombay General Clauses Act.
Section 48(2) of the Bombay Sales Tax Act, 1953 reads: " Notwithstanding the repeal of the said Act and the said entries, the said repeal shall not affect or be deemed to affect (i) any right, title, obligation or liability already acquired, accrued or incurred; (ii) any legal proceeding pending on the 1st day of November, 1952 in respect of any right, title, obligation or liability or anything done or suffered before the Raid date; and any such proceeding shall be continued and disposed of, as if this Act had not been passed; (iii)the recovery of any tax or penalty which may have become payable under the said Act and the said entries before the said date; and all such taxes or penalties or arrears thereof shall be assessed, imposed and recovered, so far as may be, in accordance with the provisions of this Act; ".
Section 7 of the Bombay General Clauses Act says: " Where this Act, or any Bombay Act made after the commencement of this Act, repeals any enactment hitherto made or thereafter to be made, then, unless a different intention appears, the repeal shall not (a) revive anything not in force or existing at the time at which the repeal takes effect; or (b) affect the previous operation of any enactment 255 so repealed or anything duly done or suffered thereunder; or (c) affect any right, privilege, obligation or liability acquired, accrued or incurred under any enactment so repealed; or (d) affect any penalty, forfeiture or punishment incurred in respect of any offence committed against any enactment so repealed; or (e) affect any investigation, legal proceeding or remedy in respect of any such right, privilege, obligation, liability, penalty, forfeiture or punishment as aforesaid, and any such investigation,, legal proceeding or remedy may be instituted, continued or enforced, and any such penalty, forfeiture or punishment may be imposed, as if the repealing Act had not been passed." A comparative study of the aforesaid provisions indicates that while under section 7 of the Bombay General Clauses Act, there is a specific saving of any penalty, forfeiture or punishment incurred in respect of any offence committed under the enactment repealed, as distinct from civil rights and liabilities, under section 48 of Act III of 1953, there is no separate treatment of Civil and Criminal matters; while under the former provisions legal proceedings are saved, under the latter provisions legal proceedings pending on November 1, 1952, in respect of rights acquired or liabilities incurred under the repealed Act are saved.
By such a study of the two provisions, the argument proceeds, it is clear that the enactment of a specific saving clause in the repealing Act indicates a " different intention " excluding the operation of section 7 of the General Clauses Act and the omission under section 48 of the repealing Act of a clause similar to el.
(d) of section 7 of the General Clauses Act, demonstrates that the liability saved excludes criminal liability.
In our view the consideration of the provisions of section 7 of the General Clauses Act need not detain us, for section 48(2)(i) of the repealing Act affords a complete answer to the question raised.
Under that clause, the repeal did not affect any right, title or obligation or liability already acquired, accrued or I incurred, The words liability 256 incurred " are very general and comprehensive and ordinarily take in both civil and criminal liability.
In Criminal Law the term " liability covers every form of punishment to which a man subjects himself by violating the law of the land.
There is no reason why the all comprehensive word should not carry its full import but be restricted to civil liability alone ? The context does not compel any such limitation.
Indeed, there is no conceivable ground to impute to the Legislature the intention to wipe out the offences committed under the repealed Act, when it expressly retained the same offences under the repealing Act.
If there was any justification for preserving Civil liabilities incurred under the repealed Act, there was an equal justification to save criminal liabilities incurred under that repealed Act.
The fact that section 7 of the Bombay General Clauses Act provided separately in different clauses for Criminal and Civil liabilities, while section 48(2) of the repealing Act clubbed them together in one clause is not decisive of the question raised, as, for ought we know, section 48 might be an attempt by the Legislature at precise drafting by omitting unnecessary words and clauses.
Nor the circumstance that a special provision is made under section 48(2) of the repealing Act for pending proceedings is indicative of any conscious departure by the Legislature from the established practice embodied in section 7 of the General Clauses Act indicating an intention to save only offences under the repealed Act in respect of which legal proceedings were pending on a specified date.
It is more likely, as the learned Judge of the Bombay High Court pointed out, that el. 2 was enacted to obviate the argument that once a case is sent up the liability merges in the proceedings launched and has to be saved specially.
On a fair reading of the terms of the saving clause in section 48(2) of the repealing Act, we cannot give a restricted meaning to the words" liability incurred", especially when the scheme of the Act does not imply that the Legislature had any intention to exclude from the saving clause criminal liability incurred under the repealed Act.
We, therefore, hold that the liability incurred 257 i.e. the offence committed, under the repealed Act, is covered by the saving clause embodied in section 48 of the repealing Act.
In this view it is not necessary to express our view whether, by reason of the saving clause enacted in section 48 of the repealing Act, the Legislature indicated a different intention within the meaning of section 7 of the Bombay General Clauses Act so as to exclude its operation in construing the provisions of the repealing Act.
Even so, the learned Counsel contended that the appellant, who committed the offence under the repealed Act, should be prosecuted only with the previous sanction of the Collector as provided by that Act, but as the sanction in the present case was given by the Additional Collector, the Magistrate had no jurisdiction to take cognizance of the offence.
To appreciate this argument it would be necessary to notice the provisions relating to sanction in the repealing Act and in the Acts and Ordinances that preceded it. " BOMBAY SALES TAX ACT, 1946.
" Section 24 (1)(b): Whoever fails,without sufficient cause, to submit any return as required by, section 10 or know ingly submits a false return,. . . . . . shall, in addition to the recovery of any tax that may be due from him be punishable with simple imprisonment which may extend to six months or with fine not exceeding one thousand rupees or with both; and when the offence is a continuing one, with a daily fine not exceeding fifty rupees during the period of the continuance of the offence." Section 24(2): No Court shall take cognizance of any offence under this Act, or under the rules made thereunder, except with the previous sanction of the Collector and no Court inferior to that of a Magistrate of the Second Class shall try any such offence." " Section 2(a) : " Collector " means the Collector of Sales Tax appointed under sub section (1) of Section 3." " Section 3(1) : For carrying out the purposes of 33 258 this Act, the State Government may appoint any person to be a Collector of Sales Tax and such other persons to assist him as the State Government thinks fit.
" ORDINANCE No. II of 1952: Under this Ordinance, Bombay Act V of 1946 and the entries relating to the said Act in the third schedule to the Bombay Merged States (Laws) Act, 1950 were deemed to have continued to be in force up to and inclusive of November 1, 1952.
ORDINANCE III OF 1952: "Section 36.
Offences and Penalties: whoever (b) fails without sufficient cause, to furnish any return or statement as required by section 13 or 18 or knowingly furnishes a false return or statement,. . . in addition to the recovery of any tax that may be due from him, be punishable with simple imprisonment which may extend to six months or with fine not exceeding two thousand rupees or with both; and when the offence is a continuing one, with a daily fine not exceeding one hundred rupees during the period of the continuance of the offence." " Section 37.
Cognizance of offences.
No Court shall take cognizance of any offence punishable under section 36 or under any rules made under this Ordinance except with the previous sanction of the Collector and no Court inferior to that of a Magistrate of the Second Class shall try any such offence." " Section 2(6): " Collector " means the Collector of Sales Tax appointed under section 3." " Section 3(1): For carrying out the purposes of this Ordinance, the State Government may appoint any person to be a Collector of Sales Tax, and such other persons to assist him as the State Government thinks fit.
" BOMBAY SALES TAX ACT, 1953 (Act III of 1953): " Section 36: Whoever (b) fails without sufficient cause, to furnish any return or statement as required by Section 13 or 18 or 259 knowingly furnishes a false return or statement. . shall, in addition to the recovery of any tax that may be due from him, be punishable with simple imprisonment which may extent to six months or with fine not exceeding two thousand rupees or with both; and when the offence is a continuing one, with a daily fine not exceeding one hundred rupees during the period of the continuance of the offence." "Section 49(2): Any appointment, notification, notice, order, rule, regulation or form made or issued or deemed to have been made or issued under the Ordinance hereby repealed shall continue in force and be deemed to have been made or issued under the provisions of this Act.
in so far as such appointment, notification, notice, order, rule, regulation or form is not inconsistent with the provision of this Act, unless it has been already, or until it is superseded by an appointment, notification, notice, order, rule, regulation or form made or issued under this Act." THE BOMBAY SALES TAX (AMENDMENT) ACT, 1956.
(BOMBAY ACT NO.
XXXIX OF 1956) Section 3.
Amendment to section 3 of Bom.
III of 1953 : In section 3 of the said Act, for sub section (1), the following sub section shall be and shall be deemed ever to have been substituted, namely: (1) for carrying out the purpose of this Act, the State Government may appoint (a) a person to be the Collector of Sales Tax, and (b) one or more persons to be Additional Collectors of Sales Tax, and (c) such other persons to assist the Collector as the State Government thinks fit." NOTIFICATION ISSUED BY THE STATE GOVERNMENT UNDER SECTION (3) OF THE ORDINANCE III OF 1952: "Government of Bombay is pleased to declare the Additional Collector of Sales Tax, Bombay State, Bombay, as " Collector of Sales Tax, Bombay State, Bombay " for purposes of the Bombay Sales 260 Tax (No. 2) Ordinance, 1952 (Bombay Ordinance No. III of 1952).
" It will be seen from the aforesaid provisions that under the Acts as well as under the Ordinances, knowingly furnishing a false return or statement is made an offence punishable with simple imprisonment or fine or with both.
The only difference is that under the Ordinance and the Act of 1953, the maximum amount of fine is increased from Rs. 1,000 to Rs. 2,000.
Under the Ordinance as well as under the Acts, no Court can take cognizance of the said offence except with the previous sanction of the Collector.
The term Collector " is defined in similar terms in the Ordi nance as well as in the Acts, i e., a person appointed as ,"Collector " by the State Government.
The notification issued by the State Government under Ordinance 11I of 1952, appointing the Additional Collector as Collector of Sales Tax must be deemed to have continued to be in force under the Bombay Sales Tax Act, 1953, by reason of section 49 (2) of that Act, as it is common case that no fresh notification was made under that Act repealing that made under that Ordinance.
Shortly stated, the Bombay Act III of 1953, introduced the same offence and provided for the same machinery that its predecessors contained.
On the basis of the aforesaid provisions, the argument of the learned Counsel for the appellant is that as the State Government appointed the Additional Collector as Collector of Sales Tax in exercise of the power conferred on it under the Ordinance III of 1952 and not under the power conferred on it by the repealed Act, the sanction given by the Additional Collector to prosecute the appellant is invalid.
The first answer to this contention is that, as the State Government had the power to appoint any person including ' an Additional Collector as Collector of Sales Tax both under the repealed Act as well as the Ordinance III of 1952, the appointment may reasonably be construed to have been made in exercise of the relevant power in respect of the offence saved under the Ordinance.
The second answer is more fundamental.
There is an essential distinction between an offence and the 261 prosecution for an offence.
The former forms part of the substantive law and the latter of procedural law.
An offence is.
an aggregate of acts or omissions punishable by law while prosecution signified the procedure for obtaining an adjudication of Court in respect of such acts or omissions.
Sanction or prior approval of an authority is made a condition precedent to prosecute in regard to specified offences.
Prosecution without the requisite sanction makes the entire proceeding ab initio void.
It is intended to be a safeguard against frivolous prosecutions and also to give an opportunity to the authority concerned to decide in the circumstances of a particular case whether prosecution is necessary.
Sanction to prosecute for an offence is not, therefore, an ingredient of the offence, but it really pertains to procedure.
In Maxwell 's Interpretation of Statutes, the following passage appears at page 225: " Although to make a law punish that which, at the time when it was done, was not punishable, is contrary to sound principle, a law which merely alters the procedure may, with perfect propriety, be made applicable to past as well as future transactions.
" In the instant case when the repealing Act did not make any change either in the offence or in the procedure prescribed to prosecute for that offence and expressly saved the offence committed under the repealed Act, the intention can be legitimately imputed to the Legislature that the procedure prescribed ' under the new Act should be followed, even in respect of offences committed under the repealed Act.
If so, it follows that, as sanction pertains to the domain of procedure, the sanction given by the Additional Collector appointed by the State as Collector of Sales Tax was valid.
Even so, it was contended that the notification appointing the Additional Collector as Collector of Sales Tax issued under Ordinance No. 11 of 1952 would not enure to the prosecution launched under Act III of 1953.
This argument ignored the express provisions of section 49 (2) of the said Act (already extracted supra), which in clear and express terms laid down 262 that notifications issued or orders made under the repealed Ordinance would be deemed to have been made or issued under the provisions of the Act and would continue to be in force until superseded by appropriate orders or notifications under the new Act.
It was not suggested that any fresh notification revoking that made under the Ordinance was issued under the repealing Act.
If so, it follows that the notification issued under the Ordinance appointing the Additional Collector as Collector of Sales Tax continued to be in force when the said Collector gave sanction to pro secute the appellant.
In this view it is not necessary to consider the scope of the Bombay Sales Tax (Amendment) Act, 1956.
Lastly, a strong plea was made for reducing the sentence of imprisonment given by the High Court to that of fine.
It was said that the Magistrate in exercise of his discretion gave the sentence of fine and the High Court was not justified in enhancing the same to imprisonment without giving any reasons which compelled them to do so.
Reliance was placed in this context on two decisions of this Court Dalip Singh vs State of Punjab (1) and Bed Raj vs The State of Uttar Pradesh (2).
In the former case, the Sessions Judge convicted each of the 7 accused under section 302, Indian Penal Code read with section 149, Indian Penal Code.
As the fatal injuries could not be attributed to any one of the accused, he refrained from passing a sentence of death, but instead he convicted them to imprisonment for life.
The High Court, without giving any reasons, changed their sentences from transportation to death.
Bose J. who delivered.
the judgment of the Court, in holding that the High Court should not have interfered with the discretion exercised by the Sessions Judge, made the following observation at page 156: " But the discretion is his and if he gives reasons on which a judicial mind could properly found, and appellate Court should not interfere.
The power to enhance a sentence from transportation to death should very rarely be exercised and only for the strongest (1) ; (2) ; 263 possible reasons.
It is not enough for an appellate Court to say, or think, that if left to itself it would have awarded the greater penalty because the discretion does not belong to the appellate Court but to the trial Judge and the only ground on which an appellate Court can interfere is that the discretion has been improperly exercised, as for example, where no reasons are given and none can be inferred from the circumstances of the case, or where the facts are so gross that no normal Judicial mind would have awarded the lesser penalty.
" In the latter case, the appellant along with another was convicted by the Sessions Judge under section 304 Indian Penal Code and sentenced to three years ' rigorous imprisonment.
On appeal the High Court enhanced the sentence to ten years.
In enhancing the sentence, the learned Judges gave the reason that the deceased was unarmed and the attack was made with a knife and it could not be said that the appellant did not act in a cruel or unusual manner.
This Court, in allowing the appeal on the question of sentence, made the following observation at page 588: " A question of a sentence is a matter of discretion and it is well settled that when discretion has been properly exercised along accepted judicial lines, an appellate Court should not interfere to the detriment of an accused person except for very strong reasons which must be disclosed on the face of the judgment. . .
In a matter of enhancement there should not be interference when the sentence passed imposes substantial punishment.
Interference is only called for when it is manifestly inadequate.
" These observations are entitled to great weight.
But it is impossible to lay down a hard and fast rule, for each case must depend upon its own facts.
Whether in a given case there was proper exercise of judicial discretion by the trial Judge depends upon the circumstances of that case.
In the present case, the appellant kept double sets of account books and submitted false returns for successive quarters, omitting from the turn over shown by him in the returns substantial amounts.
Under section 24(1) of the Act, infringement of 264 the provisions of the Act is made punishable.
The offences under that section are of different degrees of moral turpitude.
They range from a mere infringement of a rule to conscious and deliberate making of false returns.
For all the offences, the section fixes the maximum punishment of simple imprisonment which may extend to six months.
The magistrate, who tries the offenders under that section, is given a wide discretion to could the punishment in such a way as to make it commensurate with the nature of the offence committed.
Though the appellant adopted a syste matic scheme to defraud the State by keeping double sets of account books and therefore deserved deterrent punishment, the learned Magistrate, presumably because the appellant pleaded guilty, without giving any reasons, gave him the lenient punishment of fine of Rs. 200.
It is obvious that the sentence should depend upon the gravity of the offence committed and not upon the fact that the accused pleaded guilty or made an attempt to defend the case.
In the circumstances the High Court was certainly justified in enhancing the sentence from fine to imprisonment and fine and it had given good reasons for doing so.
The High Court thought and, in our view, rightly that as the appellant had kept double sets of account books, it was eminently a case in which a substantive sentence ought to have been imposed.
The Magistrate has improperly exercised his discretion within the meaning of the aforesaid observations of this Court and therefore, the High Court was certainly within its right to enhance the sentence.
But the High Court committed a mistake in awarding a sentence of rigorous imprisonment for a period of one month, which it is not entitled to do under the provisions of section 24(1) of the Act.
Under that section the Court had jurisdiction only to give a maximum sentence of simple imprisonment extending to 6 months but had no power to impose a sentence of rigorous imprisonment.
This mistake, if any, should go to the benefit of the appellant, for the High Court might have imposed a sentence of longer period of simple imprisonment if it had realised that it had, no power to sentence 265 the appellant to rigorous imprisonment.
Be it as it may, as the High Court had no power to impose a sentence of rigorous imprisonment we change the sentence from rigorous imprisonment to simple imprisonment for a period of one month in each case.
With this modification the appeals are dismissed.
Appeals dismissed.

summary/full:
The appellant was registered under the Bombay Sales Tax Act, 1946.
He maintained double sets of account books and knowingly furnished, for the period September 30, 1950 to March 31, 1951, false returns to the Sales Tax Officer and thereby committed an offence under section 24(1)(b) of the Act.
Under the Act sanction of the Collector was necessary before cognizance of the offence could be taken by a Court.
The I946 Act was repealed by the Bombay Sales Tax Act, 1952, but the 1952 Act was declared ultra vires by the Bombay High Court.
Thereupon the Bombay Sales Tax Ordinance 11 Of 1952 was promulgated which provided that the 1946 Act was to be deemed to have been in existence up to November 1, 1952.
This was followed by Ordinance 111 of 1952 which further extended the life of the 1946 Act.
Thereafter, the Bombay Sales Tax Act, 1953 was passed which repealed both the 1946 Act and Ordinance III of 1952.
The 1953 Act made provision for an offence similar to that covered by section 24(1)(b) of the Act, prescribed a similar procedure for prosecuting persons committing the said offence and saved liabilities incurred under the 1946 Act.
During the period when Ordinance III of 1952 was in force the State Government issued a notification appointing the Additional Collector to be a Collector under the Ordinance, and the Additional Collector granted sanction for the prosecution of the appellant.
The appellant was tried by the Presidency Magistrate before whom he pleaded guilty.
The Magistrate accepted the plea, convicted him under section 24(1)(b) of the 1946 Act and sentenced him to a fine of Rs. 200, in default to suffer one month 's rigorous imprisonment.
The State preferred a revision to the High Court for enhancement of the sentence.
The appellant contended that by the repeal of the 1946 Act the offence was effaced and that the prosecution was defective inasmuch as sanction was given by the Additional Collector and not by the Collector as required by the 1946 Act.
The High Court repelled both these contentions and enhanced the sentence to rigorous imprisonment for one month in addition to the fine already imposed 251 Held, that the offence under section 24(1)(b) of the 1946 Act was covered by the saving clause in section 48 of 953 Act and the appellant could be convicted of that offence.
The saving by section 48 of the 1953 Act of " any liability incurred " under the 1946 Act saved both civil and criminal liability.
Held, that the sanction given by the Additional Collector was a valid sanction for the prosecution of the appellant.
The notification issued under Ordinance III of 1952 appointing the Additional Collector as Collector must be deemed to have been made in exercise of the relevant power in respect of the offence saved by the Ordinance.
Further, the notification must be deemed to have continued in force under the 1953 Act by reason of section 49(2) of that Act.
Sanction pertains to the domain of procedure and the procedure prescribed under the new 1953 Act must be followed even in respect of offences committed under the repealed 1946 Act.
Held further, that in the circumstances of the case the High Court was justified in enhancing the sentence.
The sentence should depend upon the gravity of the offence and not upon the fact that the accused pleaded guilty or attempted to defend the case.
As the appellant had kept double sets of account books, it was eminently a case in which a substantive sentence ought to have been imposed, and the Magistrate improperly exercised his discretion in awarding a sentence of fine only.
But the High Court was wrong in awarding rigorous imprisonment as section 24(1)(b) provided only for simple imprisonment.


judgement:
DICTION: Civil Appeal Nos.
3797 3798 of 84 and 3926 of 1986.
From the Judgment and Order dated 2.12.1983 of the Allahabad High Court in Writ Petition Nos. 2451 and 2155 of 1983.
Anil Dev Singh, G.L.Sanghi, M.K. Ramamurthi, Mrs. S.Dikshit, S.K. Mehta, M.K. Dua, Aman Vachhar and S.C. Birla for the Appellants/Petitioners.
S.N. Kacker and R. B. Mehrotra for the Respondents.
The Judgment of the Court was delivered by RAY, J.
We allowed the Civil Appeal No. 3926 of 1986 and dismissed Civil Appeal No. 3797 of 1984 and writ petition No.3796 of 1986 filed by Dr. M.C. Bindal and Civil Appeal No. 3798 of 1984 filed by the State of Uttar Pradesh by our order dated December 19, 1986 and we indicated therein that the reasons for the above order would be given later on.
Accordingly, we are giving the reasoned judgment hereinbelow.
The U.P. Public Service Commission made an advertisement in various newspapers on September 13, 1981 inviting applications for the post of Food & Drug Controller, U.P. The qualifications for this post stated in the said advertisement are set out hereunder: "Necessary qualifications: (1) A degree from any recognised University in Medicine Science/Pharmaceutical Chemistry.
PG NO 39 (2) Experience of 5 years in Drug Standardization and problems relating to controlling of Drug standards or drug manufacturing or drug testing in a renowned institution.
Pursuant to the said advertisement Dr. M.C. Bindal, I)r.
S.K. Majumdar, Shri Ram Chander Singh and others filed applications.
The appellant Dr. Bindal stated in his application that he has seven years ' experience as per the advertisement.
He also stated that he had three and a half years ' specific experience i.e. experience in the field of drug testing and four years other experience namely experience in the field of teaching Pharma analysis including testing of transfusion fluids in the hospitals, pharmacy manufacturing units attached to LLRM Medical College, Meerut.
It has also been stated that in the four years of teaching experience in addition to his teaching responsibility he also conducted the laboratories in which drug testing was carried out.
Of the applicants, Dr. S.K. Majumdar was not called for interview.
The U.P. Public Service Commission after holding interview of the candidates recommended the following candidates for appointment to the post of Food & Drug Controller, U.P.: (a) In the main list .
Shri R.C. Singh (b) In the Reserve List .
Dr. M.C. Bindal (Prov.) The Commission also recommended for relaxation of age of Shri R.C. Singh.
The Commission also made it clear that "the word 'Provisional ' denoted that the recommendation was sub ject to the petitioner meeting the necessary qualification experience of 5 years for the appointment to the office of the Drug Controller." On December 5, l982, the State of Uttar Pradesh intimated the Commission that the candidate Shri R.C. Singh did not appear to be suitable in view of the fact that there had been a vigilance enquiry against him.
It was also pointed out in the said letter that the appointment of Shri R.C. Singh as Food & Drug Controller would not be in public interest.
The State further pointed out that Dr. Bindal had the requisite experience of 5 years and he had al60 excellent academic and other qualifications.
In reply to the said letter sent by the Secretary, Medical and Health, U.P. Government.
the U.P. Public Service Commission by its letter dated February 23, 1983 intimated to the State of U.P. that the right to appoint or not to PG NO 40 appoint a candidate vested with the State of U.P. and it was for the State Government to take a decision accordingly.
On eceipt on this letter the State Government appointed Dr. M.C. Bindal as Food & Drug Controller, U.P. by its letter dated April 6. 1983.
Thereafter two writ petitions were filed in the High Court at Allahabad, Lucknow Bench; one by Shri R.C. Singh and another by Dr. S.K. Majumdar challenging the appointment of Dr. M.C. Bindal on the ground that he had not the requisite experience as required for the said post of Food & Drug Controller, U.P.
These writ petitions are writ petition No. 2451 of 1983 and writ petition No. 2155 of 1983.These were heard together and were allowed in part by a common judgment on December 22, 1983.
The relevant portions of the findings are set out herein: "To sum up: ( I) The order appointing Dr. Bindal to the post finally was premature (2) Before final decisions taken in the matter, the State Government has to take a decision on: (a) whether to allow or reject Shri R.C. Singh s representation against the censure entry based on vigilance report and then to consider the question of his suitability for appointment.
(b) Whether to relax the age limit for Shri R.C. Singh (c) If Shri R.C. Singh was not to be considered suitable, then to consider in consultation with the Public Service Commission the question whether Dr. Bindal fulfilled the requisite qualification relating to practical experience in accordance with law (d) If Dr. Bindal is found not to fulfil the qualification, then to consider whether the qualification relating to practical experience has to be modified or not (e) As Dr. Bindal is not perse unsuitable or disqualified for the post, he will continue to hold the post provisionally till a decision is taken as above.
The final decision should however be taken at an early date, say within a period of three months from today.
Accordingly, the petitioners succeed in part.
The matter will have to be considered afresh by the State Government in some respects as set out above in consultation with the Commission.
Dr. Bindal 's appointment cannot, however, be held to be illegal because it is not in violation of any statutory provision.
Indeed, ii an I.A.S. Officer could hold the post for such a long time, Dr. Bindal being certainly better qualified can also hold the post.
PG NO 41 However, his appointment shall be treated as only provisional and will be subject to the final decision of the State Government as indicated herein above.
The writ petitions are, accordingly, allowed in part to the extent indicated above.
No order is made as to costs.
" Aggrieved by the said judgment Dr. Bindal who was one of the respondents in the said writ petitions filed a special leave petition being SLP (C) No. 10330 of 1984 which was numbered as Civil Appeal NO.
3797 of 1984 after the grant of special leave.
The State of Uttar Pradesh also filed SLP (C) NO.9084/84 and this was numbered subsequently as Civil Appeal NO.3798 of 1984 after grant of special leave.
The U.P. Public Service Commission however, in the meantime on March 15, 1984 directed one of its officers i.e. Deputy Secretary to verify whether Dr. Bindal fulfilled the qualifications relating to practical experience in drugs standardization or drug manufacturing or drug testing in a renowned institution.
The Deputy Secretary after enquiry sent a report to the U.P. Public Service Commission stating that the total period of experience of Dr. Bindal on the date of submission of his application was only 3 years 4 months and 9 days whereas the essential qualification required was experience should be for 5 years from any repute concern.
The U.P. Public Service Commission took a decision on April 17, 1984 to the effect "that the Commission withdraws and cancels the provisional recommendation and the candidature because Shri Bindal does not possess the requisite qualifications" and the same was sent to the Government on April 23, 1984.
Dr. Bindal moved a writ petition being writ petition No. 756 of 1986 against this impugned order made by the Public Service Commission withdrawing the candidature of Dr. Bindal and cancelling its recommendation of the petitioner for the post of Food and Drug Controller, U .
It is necessary to mention in this connection that on September 21, 1984 this Court while granting special leave made an order of stay of operation of the High Court judgment pending hearing of the appeal.
But subsequently on March 18, 1986 after hearing the learned counsels the interim order of stay was recalled in consideration of the fact that U.P. Public Service Commission had already cancelled the candidature of the appellant and withdrawn the recommendation made in his favour for the reason inter alia that he lacked in five years experience in Drug testing.
This Court also directed the State Government to appoint a member or one Indian Administrative Service to function as the Food & Drug Controller, U.P. PG NO 42 It has been urged on behalf of the appellant, Dr. Bindal that the order of the Public Service Commission in cancelling the candidature of the appellant and withdrawing the recommendation made in his favour is wholly illegal and bad in as much as the Government has considered the certificates produced by the appellant and found that the appellant had the requisite experience of five years in Drug testing and as such he was appointed by the Government as Food and Drug Controller, U.P.
The U.P. Public Service Commission was wrong and patently in error in withdrawing the candidature of the appellant and in cancelling its recommendation without properly considering the opinion of the Government to the effect that the appellant had the requisite experience of five years in drug testing.
It has been further contended in this connection that the Provision of Article 320 of the Constitution of India providing for consultation with the Union Public Service Commission or providing for consultation with the State Public Service Commission is not mandatory and as such the recommendation of the Commission was not binding on the State Government.
It has been submitted that the recommendation of the Commission is in the nature of advisory function and it is for the State to take the ultimate decision.
Some decisions of this Court have been cited at the bar on this score.
In the instant case, the advertisement for the post was made at the instance of the U.P. Public Service Commission and the requisite qualification for the post had been specified in the advertisement.
It is therefore, essential that a candidate in order to be considered for appointment for the said post must have to comply with the requisite qualification namely the educational qualification as well as the experience in drug testing etc.
for a period of five years.
If any of these essential qualifications is lacking then the candidate cannot claim to be appointed in the said post.
Undoubtedly, it is the Public Service Commission who has to receive the applications of the candidates and has to scrutinise them and then to decide which of the applicants have got the requisite qualifications and so be called for interview.
It is the duty of the Commission with the help of experts in the particular subject to hold interview and to find out and select the candidates having the requisite qualifications and experience fit to be recommended to the Government for appointment to the said post of Food & Drug Controller.
Therefore, under Article 320(3)(a) and (b), it is the duty of Public Service Commission to consider and to get itself satisfied as to which of the candidates has fulfilled the requisite qualifications specified in the advertisement.
The Commission in this particular case has duly got verified the certificate of the Dr. Bindal in regard to his experience of five years in drug testing by a Deputy Secretary of the Commission and after considering his PG NO 43 report as well as the certificates came to the conclusion that the appellant though fulfilled educational qualifications, lacked in the requisite experience of five years in drug testing.
The Commission, therefore, revised its earlier decision and withdrew the candidature of the appellant and also cancelled its recommendation earlier given in favour of the appellant.
This decision of the Public Service Commission, in our considered opinion cannot be faulted.
It is the constitutional requirement envisaged in Article 320 that the Commission will have to perform the duty of recommending the candidate fulfilling all the requisite qualifications for the post to the Government for being considered for appointment to the post concerned.
It is, of course, a well settled legal position that the duty to consult the Commission in the matter of appointment to civil posts by the Government is not mandatory but directory and as such the absence of consultation with the State Public Service Commission does not render any appointment made by the Government in Civil posts invalid or illegal.
It cannot also be contended that since the duty to consult the Public Service Commission in the matter of making appointments to Civil Services of the State is directory and not mandatory, the appointment of Dr. Bindal as Food & Drug Controller, U.P. by the Government of Uttar Pradesh cannot be questioned or interfered in by the Court in as much as the candidature of the appellant, Dr. Bindal for the post in question has already been withdrawn by the Public Service Commission and as such the question of validity or invalidity of the appointment of the appellant.
Dr. Bindal to the said post is no longer open to be considered by the Court.
In such circumstances the only course open for the Government is to re advertise the post.
If such advertisement is made the appellant.
Dr. Bindal will be free to apply for the same.
It has been brought to our notice by a subsequent affidavit sworn by Dr. S.K. Majumdar that the said post with a changed name as Drug Controller was advertised and Dr. Bindal 's name was recommended for the said post by the U.P. Public Service Commission and the deponant was not called for interview.
We do not think it proper to take notice of the subsequent fact and we refrain from expressing any opinion in this respect.
It is open to the parties to take appropriate steps in accordance with law.
For the reasons aforesaid the Civil Appeal No. 3926 of 1986 is allowed and Civil Appeal No. 3797 of 1984.
Writ Petition No. 756 of 1986 filed by Dr. M.C. Bindal and Civil Appeal No. 3798 of 1984 filed by the State of Uttar Pradesh are dismissed with costs.

dataset_name: IN-Abs

summary/full:
The U.P. Public Service Commission made an advertisement in various newspapers inviting applications for the post of Food & Drug Controller, U.P. The requisite qualification for the said post were specified in the advertisement as: (l) a degree from any recognised University in Medicine/Science/Pharmaceutical Chemistry, and (2) experience of five years in Drug Standardization and problems relating to control of Drug standards or Drug manufacture or Drug testing in a renowned institution.
Pursuant to the said advertisement Dr. M.C. Bindal, Dr. S.K. Majumdar, the appellants in the two appeals C.A. No. 379/84 and C.A. No. 3926/84 respectively, and Ram Chander Singh.
the respondent in the first appeal along with others filed applications.
The Commission after holding interview recommended the appointment of (a) in the main list R.C. Singh and (b) in the reserved list Dr.
M.C. Bindal (Provisional) and made it clear that the word `Provisional ' denoted that the recommendation was subject to the candidate meeting the necessary qualification experience of five years.
The State of Uttar Pradesh intimated the Commission that the candidature of R.C. Singh did not appear to be suitable in view of the vigilance enquiry against him, and that Dr. Bindal had the requisite experience of five years.
In its reply the Commission intimated that the right to appoint or not to appoint a candidate vested with the State of U.P. and it was for the State Government to take a decision accordingly.
On receipt of this letter, the State Government appointed Dr. M.C. Bindal as Food & Drug Controller.
Two writ petitions were filed in the High Court, one by PG NO 36 PG NO 37 R.C. Singh and another by S.K. Majumdar challenging the appointment of Dr. M.C. Bindal on the ground that he had not the requisite experience.
The High Court by a common judgment allowed in part the writ petitions, and held that though Dr. Bindal is not per se unsuitable or disqualified for the post, his appointment was to be treated as only provisional and subject to the final decision of the State Government.
Dr. Bindal appealed to this Court.
In the meantime the Service Commission directed one of its officers to verify whether Dr. Bindal fulfilled the qualifications relating to practical experience of 5 years in Drug Standardization or Drug testing in a renowned institution.
The Deputy Secretary after enquiry sent a report that the total period of experience of Dr. Bindal on the date of submission of his application was only 3 years 4 months and 9 days whereas the essential qualification required was experience should be for 5 years.
The Commission thereafter took the decision: 'that the Commission withdraws and cancels the provisional recommendation and the candidature because Dr. Bindal did not possess the requisite qualification 'section In the appeal and the writ petition it was contended on behalf of Dr. Bindal that the Service Commission was wrong and patently in error in withdrawing the candidature of the appellant and in cancelling its recommendation.
Allowing C.A. No. 3926 of l986 filed by Dr. Majumdar, and dismissing C.A. No. 3797 of l984, W.P. No. 756 of 19X6 filed by Dr. Bindal and C.A. No. 3798 of l984 filed by the State of l .P., the Court, HELD: 1.
A candidate in order to be considered for appointment for the post must have to comply with the requisite qualification, namely the educational qualification as well as experience.
If any of these essential qualifications is lacking then the candidate cannot claim to be appointed in the said Post.
[42E] 2.
Under Article 320(3)(a) and (b), it is the duty of the Public Service Commission to consider and to get itself satisfied as to which of the candidates has fulfilled the requisite qualifications specified in the advertisement.
[42G] 3.
The Commission in the instant case has duly got verified the certificates of Dr. Bindal in regard to his experience of five years in drug testing by a Deputy Secretary of the Commission, and after considering his report as well as the certificates came to the conclusion that the appellant though fulfilled educational PG NO 38 qualification, lacked in the requisite experience of five years in drug testing.
The Commission therefore, revised its earlier decision and also cancelled the recommendation earlier given in favour of the appellant.
The decision of the Public Service Commission, cannot be faulted.
[42H; 43A B] 4.
It is the constitutional requirement envisaged in Article 320 that the Commission will have to perform the duty of recommending the candidate fulfilling all the requisite qualifications for the post to the Government for being considered for appointment to the post concerned.
[143B C]


judgement:
Petition No. 22428 Of 1988.
IN SPEClAL LEAVE PETITION (CIVIL) NO. 15228 OF 1983.
From the Judgment and Order dated 17.8.1983 of the Bombay High Court in Arbitration Petn.
No. 6 of 1983.
(FOR DIRECTIONS WlTH CMP Nos.
22429/88 & 3805f87).
And in the matter of the scheme for revival sanctioned by the BIFR by its decision dated 6th September, 1988 in pursuance of the directions of this Court.
R.F. Nariman, D.H. Nanavati, Raian Karanjawala, Mrs. Manik Karanjawala and Hardeep section Anand for the Petitioners.
Dr. Y.S. Chitale, section Ganesh, I.R. Joshi, Arun Sinha, P. Parmeshwaran, A.K. Sinha, Mrs. Vijayalakshmi Menon, B.R. Agarwala, Ms. Sushma Manchanda, Ms. Urmila Kapoor, B.V. Desai, A.K. Verma, D.N. Misra, Shri Narain, Atul Sharma, Vineet Kumar, A.S. Bhasme, P.H. Parekh, M.K. section Menon, K.C. Dua, H.S. Parihar, K.J. John, A.K. Sinha, Girish Chandra, A.K. Sil, G. Joshi, Ms. Nina Gupta, Vineet Kumar, S.K. Dogra, Harish N. Salve, Ms. Nina Kapur and Manoj Swarup, for the Respondents.
N.B. Shetye, Gopal Subramaniam and Mukul Mudgal for the Intervener.
The Order of the Court was delivered by THAKKAR, J. More than a thousand brimming eyes are waiting to, replace the tears of despair by tears of relief.
No less than 600 wronged _ workers of a once prosperous industrial unit ' induced or reduced to sickness ' are on their toes to resort to self help to restore 1.
Kamani Tubes limited (KTL) PG NO 126 the lost source of their butterless bread.
Their pens are quivering to write a new chapter in the sage of workers ' struggle for finding their true 'indentity ' and 'dignity '.
Their dream is coming true with the enlightened and refreshing approach of the Central and State Governments, and the concerned Nationalized Banks, coupled with prompt, efficient and swift decision making on the part of the BIFR3 and the IDBI.
And with the consensus of all the parties (which is the most heartening feature) who have risen above narrow individual interests by not opposing the workers ' scheme in order to promote the larger National interest of reviving the industry, augmenting the National product and providing employment to hundreds of starving workers (three of whom became martyrs to the cause by committing suicide).
Internal discord gave rise to disputes and litigations between different branches of a family headed by a pioneering and successful industrialist in the wake of his demise, which culminated in SLP No. 15228 of 1983 wherein all the concerned members of the family were impleaded.
When the said matter came up before this Court it was .1) impressed upon the parties that the internecine conflict between the warring factions deserved to be speedily resolved, not only in their own interest, and for saving the name and honour of the founder, but also to ensure that neither the industrial units nor the workers employed in the industries which were controlled by one or the other branch of the industrial family, were ruined.
A retired Judge of the Supreme Court ' was accordingly prevailed upon to accept the assignment of resolving the innumerable problems in the larger interest of the warring factions as also in order to protect the interests of the community and the workers in August 1984.
The learned Mediator has invested considerable time, effort and accumen in order to resolve the problems presented in the course of the proceedings and has successfully disentangled the economic mess to a considerable extent.
This is evident from the fact that after the learned Mediator came on the scene Income Tax and Capital Gains Tax dues to the tune of over Rs.48 lakhs and over Rs.35 lakhs respectively have been paid.
Bank of India, Canara Bank and Dena Bank.
Board for Industrial and Financial Reconstruction constituted under the of 1985, (Act).
Industrial Development Bank of India.
Shri Ramjibhai Kamani.
justice A.C. Gupta.
PG NO 127 In the course of the proceedings it came to light that: (1) KTL has stopped production and ceased working in August 1985.
(2) KTL has not resorted to closure of the unit or to retrenchment of the workers in accordance with the relevant provisions of law.
(3) While in the eye of law and in theory the workers continue on the rolls of KTL and in employment of KTL, the workers have not been paid wages for over 8 months since December 1984 till stoppage of work in August 1985 and ever since till now.
The arrears till August 1988 work out in the region of Rs.6 1/2 crores.
(4) The wages due to the workers amounting to approximately Rs.2.5 crores have remained unpaid since December 1984.
(5) Employees ' contribution to Provident Fund actually deducted from the wages of the workers to the tune of approximately 31/2 lakhs had been wrongfully retained by the management and criminal prosecutions are pending in the Criminal Courts.
(6) The starving workers who have not been paid their wages since December 1984 have been squatting on the factory premises which have been abandoned by the Management.
The workers have remained on the premises in order to keep day and night vigil for all these years since August 1985 in order to protect the plant which had provided them work and enabled them to earn their bread with the sweat of their brow.
(7) Three of the starving workers have committed suicide on account of their inability to survive the burden of misfortune heaped on them.
The plight of the workers notwithstanding, they exhibited exemplary conduct in their part, and the Kamani Employees Union (KEU) extended its hand of cooperation to the Kanani family group as has been noticed by the learned Mediator in his minutes dated July 2, 1986:.
PG NO 128 "The bona fides of the applicant workers would be clear from the fact that in spite of the fact that no wages have been paid to them for the last 14 months, yet, in order to demonstrate their spirit of cooperation, the workers, through their union, had offered in writing to cooperate with the management and accept deferred payment of unpaid wages.
The applicants repeat and reiterate that offer.
The workmen always were, and still are ready and willing to accept the ar}ears of unpaid wages with increase of production and creation of surplus.
I shall be happy if the authorities who have to take a decision in this matter could find their way to accepting the request of the workers who have not received wages for about 16 months now.
As regards the two proposals given by the workers, neither of them was found acceptable by any of the Kamani family groups present; they thought that the proposals were not feasible." A proposal was then mooted to sell 90% of the shares of KTL.
Meanwhile the workers sought leave to frame a scheme of their own for revival the 'sick ' unit.
What exactly transpired 2 1/2 years back has E been recorded in the Mediator 's minutes dated July 2, 1986: "At the end of the discussions it was decided that the different groups of the family or any of them would try to find a buyer willing to buy the 90% shares held by the family in Kamani Tubes Limited as it is at present.
The buyer will have to sit with the workers of the company to come to an agreement with them with regard to the payment of their dues.
If the prospective buyer wishes to inspect the factories, no objection would be raised either by the workers or the present management of the company.
Parties will report to me within six weeks any progress made in this matter.
On behalf of the workers it was submitted that as the search for a buyer was likely to take time, they may be permitted in the meantime to try and frame a scheme of their own for restarting the factories after discussing the matter with the Bank and other authorities.
They are free to do so.
" PG NO 129 And after an exasperating waiting period of nearly one year thereafter the workers instituted CMP No. 3805 of 1987 on July 2, 1987 inter alia seeking the Following prayers: "(a) All appropriate orders and directions for the sale of the shares of KTL to KEU on behalf of and representing the proposed society at such price and on such valuation as this Hon 'ble Court in its absolute discretion deems proper and subject to such terms and conditions as may be stipulated.
(b) appropriate orders and directions to the said Board respondent No. 59 to take expeditious remedial and other measure for the revival of the factories of the K.T. including directions to the said Board to consider the scheme of the applicants for the revival and rehabilitation of K.T in terms of Exhibits 10 and 12 hereto.
(c) all appropriate orders and directions for the implementation and consideration of the scheme for the revival of the factory of K.T. as per exhibit 10 and 12 hereto including directions for management of K.T., amendment of Articles of K.T. and all matters connected therewith with such modifications as may be deemed necessary.
" By an order of this Court.
dated October 13, 1987 in CMP 3805/87, this Court directed the BIFR to file a feasibility report with respect to the scheme presented by the workers for the revival of KTL .
This Court also directed the BIFR to hear the workers as well as the different groups of Kamani family before making its recommendations.
As per this direction the Board held a number of hearings which were attended inter alia, by representatives of KEU .
Financial Institutions, Banks, State Government, Central Government and different groups of the Kamani family, IDBI, an apex institution in the field of term lending and one of the operating agencies of BIFR, was entrusted with the examination of KEU 's scheme particularly with regard to technical health of the plant and time required to run it, various, assumptions made in respect of the parameters of costs/prices, estimates of production pattern vis a vis projection of future demand, correctness of cost of production, working capital requirement projected operating cash surplus etc.
IDBI submitted its report which was discussed in the subsequent hearings and the views of the concerned agencies, such as, Banks, State Government, Central Government.and the commitments regarding reliefs and PG NO 130 concessions that would be available from these agencies, were obtained.
On being so required IDBI subsequently revised its projections and viability estimates.
Based on the above, BIFR prepared its Feasibility Report and submitted it to this Court.
After considering the report of BIFR, and hearing various parties and with the consent of the parties, this Court vide its order dated 20th April, 1988 directed, inter alia, that the matter be placed before BIFR for consideration whether it should proceed to pass an order in terms of the proposed scheme as revised in consultation with IDBI under Section 18(4) of the .
The Board was requested to arrive at a decision after giving notice to all the concerned parties.
The relevant part of the order deserves to be quoted: "In compliance with the Court s order dated 13th October, 1987 the Board for Industrial & Financial Reconstruction New Delhi, established under section 4 of the in consultation with the Industrial Development Bank of India, constituted under section 3 of the as its operating agency within the meaning of section 3(1) of the Act, considered in depth the scheme submitted by the Kamani Employees Union and has evaluated the same by its 'feasibility report dated 12 th January, 1988.
We have heard learned counsel for the parties and they agree to the order we purpose to make.
We direct that the matter shall now be placed before the Board for Industrial & Financial Reconstruction for consideration as to whether it should proceed to pass an order in terms of the proposed scheme as revised in consultation with the Industrial Development Bank of India under section 18(4).
The Board .shall come to a decision after notice lo all the parties and it shall act in conformity with the provisions of the Act.
The Board may, if necessary, frame its own scheme or adopt the proposed scheme framed by the Kamani Employees Union, with such modifications as it deems fit.
The Board shall also be at liberty to consider any alternative scheme at its discretion but the whole exercise shall be completed within eight weeks from today.
If the objections to the Kamani Employees Union s scheme are not sustained the said scheme shall be dealt with according to law. ' ' PG NO 131 Pursuant to the direction of this Court, the Board afforded a hearing to all the concerned parties on 20th May, 1988 and after having ' examined the submissions made but the various groups of Kamani family, Banks, State Government and Central Government, prepared a Draft Scheme for revival of KTL.
The said draft Scheme was circulated to all the parties concerned and short particulars thereof were also published in two news dailies for the information of the shareholders, the creditors and the employees etc.
in general.
The parties were given due notice for making suggestions/raising objections with respect to the Scheme.
On receipt of various suggestions/ objections the Board held its hearing on 28.7.88 for considering the same.
After hearing all the parties, and after having examined all the written/oral submissions made, the Board has financed, and sanctioned the scheme as per its decision dated 6th September, 1988 which has now been placed before this Court for further orders in the light of the submissions of the concerned parties Two questions arise in the context of the Workers ' Scheme which has been sanctioned by the BIFR as per its decision dated September 6, 1988: (1) Whether the Scheme presented by Shri Ashish Puranchand Kamani, applicant in CMP No. 22428 of ]988, at the time of the hearing on 12th September, 1988 (which was not presented before BIFR) deserves to be considered having regard to his claim that his scheme is preferable to the Workers ' Scheme already sanctioned by the BIFR on September 6, 1988: (2) Whether the Workers ' Scheme as sanctioned by BIFR deserves to be stamped with the imprimatur of the Court.
The scheme presented by Shri Ashish Kamani who claims to hold 24% of the shares of KLT, could not be presented before the BIFR.
which was seized with the matter in regard to the framing of a feasible Scheme in pursuance to the directions of this Court, till the BIFR rendered its decision on September 6, 1988.
In the order dated April 20, 1988, this Court had observed that: The Board may, if necessary, frame its own scheme or adopt the revised scheme framed by the Kamani Employees Union, with such modifications as it deems fit.
The board shall also be at liberty to consider any alternative Scheme PG NO 132 at its discretion but the whole exercise shall be completed within eight weeks from today.
" Two points must be underscored.
First, that the Court had merely accorded "liberty" to the Board to consider any alternative scheme.
and secondly that the matter was left to the "discretion" of the Board.
It is therefore clear that no 'right ' was conferred on any party to present a new scheme.
Option was given to the Board to exercise its discretion to consider any alternative Scheme if it was presented within the time frame.
Learned counsel for the applicant Shri Ashish Kamani, could not contend that any 'right ' was conferred on the applicant to present a Scheme.
In fact there was no obligation on the part of the Board to consider the Scheme even if it was presented within the time frame.
As a matter of fact the applicant did not present any scheme before BIFR within the time bracket specified by this Court.
And the Board has, after full and complete deliberation, rendered a well considered decision sanctioning the Scheme of the workers.
On 6th September, 1988, about a week before Shri Ashish Kamani, the applicant, was able to present his Scheme.
It is not necessary to examine the issue as to whether or not there was any justification for not presenting the Scheme before the stipulated deadline.
Even though it is too late to examine the applicant 's scheme it is not considered appropriate to shut out consideration of the scheme only on the ground that it is being presented so late and the workers ' scheme has already been sanctioned much earlier.
In case the applicant is able to persuade the Court that the Scheme presented by him is preferable to the workers ' scheme in the larger interest of all concerned, the decision rendered by the BIFR could possibly be set aside and the Scheme presented by the applicant could possibly be remitted to the BIFR for considering the whole matter afresh.
Of course it would cause great hardship to all concerned more particularly because the Scheme sanctioned by BIFR on 6th September, 1988 comes into force with 'immediate effect '.
It has also to be realised that the matter would be delayed by several months at the cost of the suffering workers.
These are considerations which are more than adequate to discourage and deter the Court from undertaking any such exercise.
All the same we have heard the learned counsel for the applicant in regard to the Scheme presented by him even at this late stage.
As indicated earlier learned counsel for the applicant stated that while the applicant did not oppose the Scheme presented by the workers, the applicant was confident of persuading the Court to hold that the Scheme presented by the applicant was by far in the larger interest of all concerned as compared to the Scheme presented by the workers and sanctioned by the Board.
In PG NO 133 order to effectively deal with this question the cantours of the two Schemes require to be traced: Scheme presented by the Scheme presented by Shri Workers Ashish Kamani 1.
It contemplates starting 1.
It envisages the operations with the existing replacement of the existing machinery after effecting machinery by imported second necessary repairs and hand press and plant reconditioning of the plant equipment, at an estimated to the extent necessary.
It cost of Rs.345 lakhs.
It is is envisaged that the not known how much time will production can be commenced elapse in replacement and within about six months.
when operations can be commenced.
There is not even a vague idea about this factor.
The scheme is fully backed 2.
The Scheme does not show by the same Nationalized that there is even a banks as are secured tentative commitment much creditors of KTL.
These banks less a firm commitment by any have also made firm Banks or financial commitments for further institutions to finance the financial assistance.
project.
Nor is it shown that the applicant himself is investing any sizeable amounts to lauch the project.
The Scheme is altogether silent as to how the resources are to be raised in regard to the modernization programme involving Rs.694 lakhs.
The Central Govt.
and the 3.
Neither the Central State Govt.
have agreed to Govt.
nor the State Govt.
grant tax concessions having has shown its willingness to regard to the fact that it is give any concession to the the first Scheme of its kind applicant.
In fact there for reviving an industrial appears little likelihood of unit framed by the very such concessions having workers rendered jobless on Regard to fact that the account of the sickness.
special factors relating to public interest involved in enabling the workers themselves to revive the sick industrial unit does not exist in the case of the applicant.
PG NO 134 4.
The workers themselves 4.
The workers would not have agreed ( I) to make wage agree to forego any part of sacrifice of 25 % for the their wages or make a wage first year of operations and sacrifice to enable the 15% for the next two years.
applicant to take over the in other words the workers unit.
Nor the workers would have agreed to forego 15% to accept deferment of dues or 25% of the wages which they to rationalization of staff would be otherwise entitled pattern or retrenchment.
to having regard to the fact Learned counsel for KEU has that it is the workers own stated that they are not at Scheme calculated to benefit all prepared to do so.
them atleast in future (2) to deferment of annual increments for two years as also (3) to rationalisation of the staff pattern by persuading the workers to be 3retrenched on payment of compensation in the larger interest of the workers and to restrict the workers to 600 (4) to forego dues subsequent to 31.12.85 (5) to deferment of prestoppage dues till other dues are paid off.
The secured oreditors have 5.
There is no such agreed to convert 50% of commitment on behalf of the dues into interest free loan secured creditors.
Nor is repayable within 10 years and there any liklihood of such a moratorium of one year for concessions for the benefit for 50% of outstandings .
of the applicant .
The Scheme has been found 6.
The fessibility of the to be feasible and viable by applicant 's claim has not experts and by the operating been examined by any agency viz. IDBI, which is competent or authorised fully equipped to form the agency acceptable to the opinion in this behalf.
When the two Schemes are viewed in juxtaposition, there is no manner of doubt that the scheme presented by the applicant appears in a rather poor light.
In fact the said scheme suffers from some fundamental infirmities.
It is not shown that there is any commitment on behalf of any Bank of financial institution to provide the requisite financial PG NO 135 resources to enable the applicant to modernize the plant and to run it.
The applicant 'hopes ' to purchase a second hand plant from some foreign country.
It is not known whether any such second hand plant in working condition with reasonable life expectancy is available.
It is not known what would be the cost thereof.
It is not known whether the Central Govt.
would release foreign exchange in order to enable the applicant to purchase the said plant.
Thus the entire scheme is wrapped in imponderables and there is no concrete basis to entertain a reasonable belief that the 'hope ' entertained by the applicant would materialise at all in the foreseeable future.
It is proposed to finance the cost of the additional plant and machinery to the tune of Rs.694 lakhs out of which it is stated that Rs.520 lakhs will be by way of term loan assistance from banks and financial institutions.
It is conceded that there have been no negotiations with any Bank or financial institution and there has not been even a tentative, not to speak of a firm commitment in this behalf.
With regard to the remaining Rs.174 lakhs it is stated that it will be by way of promoters contribution or through issue of share capital.
whether or not Rs.174 lakhs can be so raised is in the realm of wishful thinking and conjecture.
It merely reflects the hope of the applicant which is not rooted in reality.
It is built on a non existant foundation.
Nor is it shown whether the applicant himself has any sizeable financial resources of his own.
Or whether he is in a position to raise such resources.
The Scheme is a manifestation of the hope and 'desire of the applicant and no more.
There is little doubt about the fact that no useful purpose will be served by granting the request of the applicant in these circumstances.
Even so we would have considered the matter further if the applicant had satisfied this Court about his bona fides and provided an assurance that delay will not be to the detriment or prejudice of the workers or at their cost.
An enquiry was accordingly made from the learned counsel for the applicant whether the applicant was prepared to deposit a sum of Rs. 1 crore representing about 15% of the arrears of wages which have by now become payable to the workers to enable the Court to examine the matter notwithstanding the aforesaid short comings.
The learned counsel for the applicant frankly stated that the applicant was not in a position to deposit such a sum s/p In fact he did not even mention that the applicant was prepared to deposit a lesser sum in order to show his good faith and bona fides and in order to protect the legitimate interests of the workers.
Counsel wanted the Court to consider the Scheme without any such provision being made merely on the assertion that the Scheme presented by the applicant was the only feasible Scheme which appears to be an altogether ill founded assertion for the foregoing reasons.
Under the circumstances we do not have the slightest hesitation in refusing the applicant 's prayer in this behalf.
PG NO 136 In order to deal with the remaining question as regards stamping the Scheme sanctioned by the BIFR on September 6, 1988 with the imprimatur of the Court is concerned, it will be appropriate to take a glance at the provisions of the under which the Board has been constituted, before the exercise is undertaken.
The statement of objects and reasons reveals the purpose underlying the benevolent legislation as also the anxiety of the legislature to provide for preventive, ameliorative and remedial measures essential for reviving sick or potentially sick companies and for ensuring expeditious enforcement of the measures devised by the competent authority under the Act.
The statement of objects and reasons discloses the anxiety of the legislature at the alarming increase in the incidence of sickness of industrial companies and it also reveals that the legislation has been enacted with the end in view to: 1.
afford maximum protection of employment; 2.
optimise the use of funds of the companies etc.
; 3. salvaging the production assets; 4.
realising the amounts due to the Banks etc.; and 5.
to replace the existing time consuming and inadequate machinery by efficient machinery for expeditious determination by a body of experts.
The scheme envisaged by Section 187 of the Act inter alia provides for the reduction of the interest or rights of the shareholders in the sick industrial companies to the extent necessary for the reconstruction, rovival or rehabilitation of the sick company.
There is also a very salutory provision which contemplates transfer of the shares in the sick industrial company at face value or intrinsic value (which may be discounted value or such other value as may be specified) inter alia 7.
Section 18(2)(f): "the reduction of the interest or rights which the shareholders have in the sick Industrial company to such an extent as the Board considers necessary in the interests of the reconstruction, rovival or rehabilitation of the sick industrial company or for the maintenance of the business of the sick industrial company;" PG NO 137 to the employees of the sick industrial companies.
The provision for transferring the shares to the employees which makes manifest the intention of the legislature to encourage the employees to take over the sick units and to clothe the competent authority with power to direct the transfer of the shares to the employees in this behalf.
Thus the authority and competence of the Board to issue a direction for the transfer of the shares to the employees has the full backing of the benevolent legislation ' enacted especially in order to restructure or revive the sick undertakings.
In the course of the discussion in the earlier part of this order we have referred to the abortive efforts made by the learned Mediator and the members of the different family groups of Kamanis for selling 90% of the shares of KTL.
It however appears that no purchaser was coming forth.
The aforesaid exercise however shows the willingness and preparedness of the concerned members of the Kamani group to transfer their shares on their own even without a directive.
Their willingness is however irrelevant since the BIFR is clothed with the authority and competence to reduce the value of the shares from Rs.10 per share to Re.1 per share and direct the transfer of the shares to the employees.
A point was made before the BIFR for the transfer of the shares as regards the order reducing the value of the share and the direction to transfer the shares at the reduced value of Re.1 per share.
BIFR has closely, carefully and dispassionately considered this dimension of the matter and has rightly reached the conclusion that the intrinsic value of the share is zero.
The liabilities far exceed the assets and even by applying the break up or back up method suggested by the members of the Kamani family the value of the shares could be determined only at the intrinsic value of the shares and the Board reached the firm conclusion that each share had zero value.
And even so the Board directed that the value of the share be reduced to Re. 1 per share and directed them to transfer the shares at Re. l per share.
Having given our anxious consideration to this factor even on our own, we are fully convinced and fully satisfied that the Board was perfectly right in directing the members of the Kamani family to transfer the shares at the rate of Re. l per share in order to effectuate the Scheme for revival of KTL.
We may also mention that the BIFR was wholly right that the provisions of the Act were immune from challenge by virtue of the declaration contained in Section 2 of the Act attracting the application of article 31C of the Constitution.
Turning to the merits of the Scheme sanctioned by 8.
Section 18(2)(1): "transfer or issue of the shares in the sick industrial company at the face value or at the intrinsic value which may be a discounted value or such other value as may be specified to any industrial company or any person including the executives and employees of the sick industrial company;" PG NO 138 BIFR, it does not suffer from any infirmity.
It has been considered to A be feasible and economically viable by experts.
It envisages the management by a Board of Directors consisting of fully qualified experts and representatives of Banks, Government and of the employees.
The Scheme has the full backing of the nationalized Banks and the encouragement from the Central Government and the State Government which have made commitments for granting tax concessions.
The backing and the concessions are forthcoming essentially because it is a Scheme framed by the employees who themselves are making tremendous wage sacrifice and are trying to stand erect on their feet in order to salvage the ship which has been almost wrecked by others.
It is appropriate to refer to one more important aspect.
The Scheme envisages that the liability of the guarantors under the con tract of guarantee executed in favour of the concerned Banks should remain unaffected by the framing of the Scheme.
BIFR has rightly made a provision in this behalf and sanctioned the Scheme subject to the direction that the sanctioning of the Scheme will not result in the detraction from the obligations incurred by the guarantors towards the Banks.
Since the Scheme is being framed under the statutory authority and directive in order to revive the same in the larger public interest and inasmuch as there is a necessary declaration contained in Section 2 of the Act which attracts the applicability of article 31C of the Constitution, the decision rendered by the BIFR is unassailable and unimpeachable.
Besides, the Scheme has been framed as per the direction and mandate of this Court in exercise of its inherent jurisdiction and its constitutional jurisdiction under article 142 of the Constitution and therefore the framing of the Scheme and the enforcement of the sanctioned Scheme does not detract from or have any impact on the obligation incurred by the guarantors in regard to the debts incurred by KTL in the past.
The concerned Banks were and are bound by the directives and mandates.
Having given our anxious consideration to the decision rendered by BIFR sanctioning the Scheme taking into account all the factors we fully agree with the reasoning and conclusion of BIFR and hereby stamp the Scheme with the imprimatur of this Court.
An apprehension has been expressed that same attempts might be made by those who are not happy with the sanctioning of the Workers ' Scheme to throw a spanner in the wheel and to impede the implementation of the Scheme.
We do not think any such effort would be made having regard to the fact that the Scheme has been devised as per the directions of this Court and that it has now been stamped with the PG NO 139 imprimatur of this Court pursuant to this order.
It is of course true that if the legal forum is utilised with an eye on impeding the implementation of the Scheme, it could throw everything out of gear.
This cannot be countenanced as implementation of the Scheme with expedition is of the essence of the present exercise.
The Act itself has been enacted in order to evolve a speedy and efficient machinery so that a sick industry could be revived with utmost expedition, production could be started, locked up funds could be utilised for furthering socioeconomic development.
And so that the unemployment of starving workers could be ended before they are starved to death and they are provided with employment to enable them to 'live ' with dignity instead of 'existing ' in humiliating conditions.
We, therefore, make it clear that notwithstanding any order that may be secured by any party from any other forum the Scheme shall be implemented in obeisance to the judicial command embodied in this order and that in case there is any problem, it may be brought to this Court for seeking appropriate directions instead of resorting to other forums to impede the implementation of this socially and economically wholesome Scheme.
A note of caution is required to be sounded before we conclude this order.
While the Act enacted in 1985 does envisage the revival of sick units by the workers who had been rendered unemployed, it is (as far as is known) for the first time that the legislative intent reflected in the relevant provisions of the Act to encourage workers ' schemes is being given a concrete shape in this manner.
It is perhaps for the first time that such a Scheme sponsored by the suffering employees themselves has come to be sanctioned.
Under the circumstances a very heavy burden rests on the shoulders of KEU and the concerned employees.
Tens of thousands of similarly situated workers would be watching with anxious eves the outcome of this bold experiment undertaken by the workers of KTL.
On their success or failure will depend the future hope and destiny of tens of thousands of similarly situated workers.
Success of this venture will instil new confidence and enable the workers to try to build their own future with their own hands albeit at Some initial sacrifice.
Failure will be visited with disastrous consequences.
We, therefore, not only hope and trust that KEU and the concerned workers will make themselves fully aware of this crucial factor, but also beseech them to rise to the occasion and individually and collectively do their best to make it a success.
They will have an opportunity to show to the world that the workers in New lndia are capable of managing their own affairs, shaping their own destiny, and building their own future.
They will also have an opportunity to establish that when the workers are inspired by an ideal they can produce optimum quantity PG NO 140 as also the best quality.
Because, they would be working for a great cause, and working for themselves instead of working for others who often deny to them their legitimate dues and even deprive them of such legitimate dues by appropriating to themselves the fruits of the worker 's labour.
Be it also realized that the Trade Union Movement, in the event of the success of this exercise, will be stepping into a new creative phase in the struggle of the working class to assert its identity.
One can almost hear the footsteps of the new era in the corridors of future.
The workers must therefore ensure the roaring success of this Scheme in this noble cause at any cost.
We also hope and trust that the concerned nationalized Banks, IDBI, and the concerned Governments will continue to cooperate with the same enthusiasm and zeal and with the same motivation in order to make the Scheme a success so as to usher in a new era in the industrial history of New India.
On this note of cautious optimism we conclude.

summary/full:
A dispute between different branches of an industrialist family culminated in the instant special leave petition.
This Court, with a view to speedily resolve the dispute between the parties, and keeping in view the interest of the workers employed in the Kamani Tubes Ltd. (KTL).
in August 1984 persuaded a retired Judge of the Supreme Court to mediate between the parties.
In August 1985, (KTL) stopped production.
During the discussions before the Mediator on July 2, 1986 it was decided that the different groups of the family would try to find a willing buyer for 90% shares held by them.
At the same time, the Mediator permitted the workers to frame a scheme on their own for restarting the factories.
In July 1987 the Kamani Employees Union (KEU) instituted a petition seeking Court 's directions for the sale of KTL shares to KEU and for expeditious consideration of the scheme submitted by the workers for the revival of the factories.
In pursuance of the directions of the Court, the scheme was scrutinised by the Board for Industrial and Financial Reconstruction (BIFR) constituted under the .
The Board after consultation with various agencies including the Industrial Development Bank of India, sanctioned the Workers ' Scheme on 6th September 1988, which was placed before the Court for further orders.
At this stage one of the parties (Shri Ashish Kamani) submitted an alternate scheme.
While stamping the Workers ' Scheme with the imprimatur of the Court, it was.
PG NO 123 PG NO 124 HELD: (I) When the two Schemes are viewed in juxtaposition, there is no manner of doubt that the scheme presented by Shri Ashish Kamani appears in a rather poor light.
The entire scheme is wrapped in imponderables and is built on a non existant foundation.
[134G; 135B, 135C] (2) Section 18 of the inter alia provides for the reduction of the interest or rights of the shareholders in the sick industrial company to the extent necessary for the reconstruction, revival or rehabilitation of the sick company and further provides for the transfer of its shares at their face value or intrinsic value to the employees of the sick company.
[136F G] (3) The provision for transferring the shares to the employees makes manifest the intention of the legislature to encourage the employees to take over the sick units and to clothe the competent authority with power to direct the transfer of the shares to the employees in this behalf.
Thus the authority and competence of the BIFR to issue a direction for the transfer of the shares to the employees has the full backing Of the benevolent legislation enacted especially in order to restructure or revive the sick undertakings.
[137A B] (4) The BIFR has rightly reached the conclusion that the intrinsic value of the KTL share is zero and the Board was perfectly right in directing the members of the Kamani family to transfer the shares at the rate of Re. 1 per share in order to effectuate the Scheme for revival of KTL.
[137E G] (5) Since the Scheme is being framed under the statutory authority and directive in order to revive the industry in the larger public interest and inasmuch as there is a necessary declaration contained in Section 2 of the Act which attracts the applicability of article 31C Of the Constitution, the decision rendered by the BIFR is unassailable and unimpeachable.
[138D] (6) The Scheme has been framed as per the direction and mandate of this Court in exercise of its inherent constitutional jurisdiction under article 142 of the Constitution and there ore the framing of the Scheme and the enforcement of the sanctioned scheme does not detract from or have any impact on the obligation incurred by the guarantors in regard to the debts incurred by KTL in past.
The concerned Banks were and are bound by the directives and mandates.
[138E F] PG NO 125 (7) Notwithstanding any order that may be secured by party from any other forum the Scheme shall be implemented in obeisance to the judicial command embodied in this order and that in a there is any problem, it may be brought to this Court for seeking appropriate directions instead of resorting to other forums to impede the implementation of this socially and economically wholesome scheme.
[139C D]