judgement:
Civil Appeal Nos. 761 & 762. of 1971.
(Appeals by Special Leave from the Judgment and order dated the 14 3 1969 of the Patna High Court in M.J.C. Nos.
182 and 183 of 1962).
B. Sen, T. A. Ramachandran and section P. Nayar, for the appellant.
Hardayal Hardy, and Bishamber Lal, for respondent.
The Judgment of the Court was delivered by GOSWAMI, J.
These two appeals by special leave are directed against the common judgment of March 14, 1969, of the Patna High Court in the matter of two references under section 66(1) of the Indian Income tax Act, 1922, relating to assessment years 1953 54 and 1954 55 of the respondent (hereinafter to be referred to as the company) .
The case has a rather chequered history as will appear from the facts narrated below: The company at the material time was a private limited company and at the end of the relevant previous years, namely, August 31, 1952 and August 31, 1953, the shareholding was as follows: Number of shares on: 31 8 1952 31 8 1953.
Sri Ashok Kumar Jain, 10,000 10,000 Managing Director.
Sri R. Sharma Director 10 10 3.
Sri N. C. Jain Director 10 10 4.
Sri section P. Jain 10,000 10,000 5.
RamaJain 10,000 10,000 6.
Sri Alok Prakash Jain 10,000 10,000 7.
Sri Rishabh Investment Ltd 5,000 5,000 8.
Dalmia Jain Co. Ltd. 2,000 2,000 9.
Universal Bank of India Ltd 980 980 10.Ashoka Agencies Ltd.
2,000 2,000 50,000 50,000 401 Of these shareholders Rama Jain is the wife of section P. Jain and Alok Prakash Jain and Ashok Kumar Jain are the sons of section P. Jain and Rama Jain.
Ashok Kumar Jain (briefly A. K. Jain), the Managing Director, attained majority on March 5, 1952, while Alok Prakash Jain was a minor during both the accounting years.
The three companies, namely, Rishabh Investment Ltd., Dalmia Jain Co. Ltd. and Universal Bank of India Ltd., are companies to which the provisions of action 23A of the Income tax Act, 1922 (briefly the Act) prior to its amendment by the Finance Act 1955, applied.
section P. Jain was the principal shareholder of the Universal Bank of India Ltd. holding 980 shares.
Ashoka Agencies Ltd. with 2000 shares was a company to which admittedly section 23A did not apply.
R. Sharma and N. C. Jain holding 10 shares each were employees, N. C. Jain being the Secretary of section P. Jain.
The Income tax officer by his orders of September 25, 1957 and October 30, 1957, held that section 23A was attracted in the case of the company for both the years.
On appeal, the Appellate Assistant Commissioner remanded the matter back to the Income tax officer for a finding on certain additional facts.
The Income tax officer in his remand report submitted certain additional facts to the Appellate Assistant Commissioner who in due course affirmed the orders of the Income tax officer.
The company appealed to the Income tax Appellate Tribunal, Bihar, at Patna.
The Tribunal allowed the appeal by its order of January 26, 1961 (7) and held that section 23A was not applicable to the company in respect of both the assessment years.
At the instance of the Commissioner Income tax, Bihar, the following question was referred by the Tribunal to the High Court: "Whether on the facts and circumstances of the case the Tribunal was justified in holding that the provisions of section 23A of the Income tax Act were not applicable to the assessee company for the assessment years 1953 54 and 1954 55" ? The High Court by its order of December 9, 1965, in view of two decisions of this Court, namely, Raghuvanshi Mills Ltd. vs Commissioner of Income tax, Bombay,(l) decided on December 7, 1960 and Commissioner of Income tax Bombay vs Jubilee Mills Ltd.(2) Bombay, decided on September 1, 1962, directed the Tribunal to submit a supplementary statement of case to it: "Whether bearing in mind the principles laid down by the Supreme Court in Raghuvanshi Mills Ltd. vs Commissioner of Income tax (41 Income Tax Reports 613) and Commissioner of Income tax, Bombay City vs Jubilee Mills Ltd. (48 Income Tax Reports 9) Shrimati Rama Jain and Sri Ashok Kumar Jain, or either of them could be safely taken to have acted in concert with Sri section P. Jain during the years in question, in respect of the affairs of the assessee company" ? (1) ; (2) [1963] Supp. 1 S.C.R. 83. 402 The High Court also directed that "the Tribunal may take additional evidence, if it considers it necessary to enable it to state the supplementary case as directed above".
The Tribunal thereafter, after hearing the parties, submitted a supplementary statement of case to the High Court on September 30, 1966.
A controversy arose before the Tribunal with regard to entertainment of additional evidence which the Revenue wanted to adduce before it, particularly in view of the direction of the High Court, but the Tribunal did not accede to the request and additional evidence was not received.
The matter then came up before the High Court resulting in the impugned order against the Revenue.
Hence these two appeals by special leave.
The Revenue reiterated its grievance before the High Court about the Tribunal 's refusal to entertain additional evidence without success and the matter is no longer in controversy in view of a decision of seven Judges of this Court in The Keshav Mills Co. Ltd. vs Commissioner of Income tax, Bombay North,(1) affirming the earlier decisions of this Court in the case of the New Jehangir Vakil Mills Ltd. vs The Commissioner of Income tax, Bombay North( ') and The Petlad Turkey Red Dye Works Co. Ltd. Petlad vs The Commissioner of Income tax, Bombay, Ahmedabad(3).
It is now well settled that when the Tribunal has disposed of the matter and is preparing a statement of the case either under Section 66(1) or under section 66(2), there is no scope for any further or additional evidence and the power of the High Court under section 66(c) can be exercised only in respect of material and evidence which has already been brought on the record.
It was contended on behalf of the Revenue before the High Court that the finding of the Tribunal was perverse.
Mr. Sen appearing on behalf of the Revenue before us has fairly and, in our opinion, rightly not pressed this submission before us.
Similarly on behalf of the company also it was contended before the High Court that there was no principle of law involved in drawing any inference in the cases answer to the plea of the Revenue that the finding whether section 23A was not attracted was a mixed question of law and fact.
It is not possible to hold that the question referred to the High Court is not a question of law as undoubtedly on the statement of case an important question of law does arise and the composite reference was competent.
The question that arises for consideration is whether on the facts and circumstances that are established before the Tribunal the company in the two assessment years can escape the reach of section 23A of the Act.
(1) ; (2) ; (3) [19631 Supp.
1 S.C.R. 871.
403 Section 23A prior to its amendment in 1956 and so far as it is material read as follows: "23A (1) .
Power to assess individual members of certain companies.
Where the Income tax officer is satisfied that in respect of any previous year the profits and gains distributed as dividends by any company up to the end of the sixth month after its accounts for that previous year are laid before the company in general meeting are less than sixty per cent, of the assessable income of the company of that previous year, as reduced by the amount of income tax and super tax payable by the company in respect thereof he shall, unless he is satisfied that having regard to losses incurred by the company in earlier years or to the smallness of the profit made, the payment of a dividend or a larger dividend than that declared would be unreasonable, make with the previous approval of the Inspecting Assistant Commissioner an order in writing that the undistributed portion of the assessable income of the company of that previous year as computed for income tax purposes and reduced by the amount of income tax and super tax payable by the company in respect thereof shall be deemed to have been distributed as dividends amongst the share holders as at the date of the general meeting aforesaid, and thereupon the proportionate share thereof of each shareholder shall be included in the total income of such shareholder for the purpose of assessing his total income: * * * * Provided further that this sub section shall not apply to any company in which the public are substantially interested Explanation.
For the purpose of this sub section, a company shall be deemed to be a company in which the public are substantially interested if shares of the company . carrying not less than twenty five per cent of the voting power have been allotted unconditionally to, or acquired unconditionally by, and are at the end of the previous year beneficially held by the public . and if any such shares have in the course of such previous year been the subject of dealings in any stock exchange or are in fact freely transferable by the holders to other members of the public '`.
In this case the company did not declare any dividend for the assessment year 1953 54.
In the next assessment year 1954 55, only a sum of Rs. 50,000/ was distributed as dividend.
It is not in dispute that the company had sufficient requisite assessable income out of which sufficient or larger dividend could have been paid.
There is no dispute that the payment of an adequate dividend for the first year and larger dividend for the next year would have been 404 at all unreasonable in respect of these two assessment years.
The only controversy between the parties is with regard to the exclusion of the company from the application of section 33A in view of the third proviso read with the Explanation.
In other words, is the company one in which the public are substantially interested ? It could be so in terms of the Explanation if 25 per cent shares of the company or more had been allotted unconditionally to, or acquired unconditionally by, and are at the end of the previous year beneficially held by the public and if any such shares in the course of such previous year were in fact freely transferable by the holders to other members of the public.
It was not in dispute that the shares of the company were in fact freely transferable by the holders to other members of the public.
The controversy, therefore, is within a very narrow compass, namely, whether, as stated earlier, the company is one in which the public has 25 per cent or more shares allotted unconditionally to, or acquired unconditionally by it and are at the end of the previous year beneficially held by it.
It may be mentioned that section 23A(l), as it stood before the amendment by the Finance Act 1956, did not authorise amalgamation of the shares held by "relatives" as if they represented a single shareholder.
It will, therefore, be a question of fact and a matter of inference in each case whether any "relatives" forming themselves into a company acted as a group or block in concert in controlling the affairs of the company.
Relationship would not, per se, lead to such a conclusion.
The Tribunal in its order observed: "Sri A. K. Jain became major on 5 3 1952.
Therefore, as at the end of the two previous years, his holding of 10,000 shares cannot ipso facto be amalgamated with the shareholding of Sri section P. Jain as if he was the nominee of his father The shareholding of 10,000 shares by Mrs. Rama Jain has also to be left out of account since, as already observed, there is no finding that Sri section P. Jain provided the consideration for the acquisition of 10,000 shares held by her.
Assuming, therefore, that Sri section P. Jain was controlling shareholder, the shares held by the members of the 'public ' which would include Sri A. K. Jain and Mrs. Rama Jain would be at least 22,000 shares".
" G In the supplementary statement of case filed by the Tribunal enclosing various orders and other documents, it is shown that section P. Jain was Director of the company from August 3, 1950 to September 25, 1950.
He was appointed Managing Director from June 6, 1953, subject to approval of the Government.
A. K. Jain was Director of the company from August 3, 1950 even when he was a minor (his date of birth being March 5, 1934) and was appointed Deputy Managing Director from June 6, 1953, subject to approval of the Government.
R. Sharma was Director from 3 8 1950 to 405 7 9 1956.
He was Secretary of R. K. Dalmia and employee of Sahu Jain Limited.
H. C. Jain was Director from 25 9 1950 to 25 3 1954.
He was Secretary of section P. Jain and employee of Ashoka Agencies Limited.
From the above it appears that the Deputy Managing Director and the two other Directors held amongst themselves 10,000 shares and out of the balance 30,000 shares were held by the relations of the Managing Director, namely, by the father, the mother and the minor brother.
It also appears that section P. Jain along with Ashok Kumar Jain, R. Sharma and N. C. Jain were the promoters and subscribed to the Memorandum of Association at the start of the company in July 1950.
It also appears Ashok Kumar Jain, Director, was getting a remuneration of Rs. 6,000/ per month w.e.f. September 1951 in accordance with the resolution passed in an extra ordinary general meeting of the shareholders on October 1, 1951.
At the meeting of the Board of Directors dated November 29, 1950, Ashok Kumar Jain and R. Sharma, Directors of the company, were authorised to execute managing agency agreements with different companies.
Ashok Kumar Jain was generally presiding over the meetings from November 1950.
The Tribunal further observed in its statement of case that "A perusal of the minutes or the proceedings of the general meetings does not lead to any inference that Sri section P. Jain, Smt.
Rama Jain and Sri A. K. Jain were necessarily acting in concert.
On the other hand, it appears that despite his young age, Sri A. K. Jain seems to have been taking active interest in the management of the affairs of the asses see company and the companies managed by it.
Unless it is to be presumed that because of relationship, Sri section P. Jain, Smt.
Rama Jain and Sri A. K. Jain should be regarded as acting in concert, there is no other material on record on the basis of which such a conclusion could be supported".
The Tribunal also observed: "that in spite of opportunity afforded by the Appellate Assistant Commissioner, the Income tax officer had not brought on record materials to show that the voting rights of Mrs. Rama Jain or Sri A. K. Jain were controlled by Sri section P. G The Tribunal concluded by observing that " The revenue had failed to establish that Sri section P. Jain, his wife and his son Sri A. K. Jain were acting in concert".
Section 23A again came up for consideration before this Court in Commissioner of Income tax, West Bengal vs East Coast Commercial 406 Co. Ltd.(l).
This Court made a reference to the Raghuvanshi Mills ' case (supra) where it was observed: "The word 'public ' is used (in the Explanation) in contradistinction to one or more persons who act in unions and among whom the voting power constitutes a block.
If such a block exists and possesses more than seventy five per cent of the voting power, then the company cannot be said to be one in which the public are substantially interested . the test is first to find out whether there is an individual or . group which controls the voting power as a block.
If there be such a block, the shares held by it cannot be said to be 'unconditionally ' and 'beneficially ' held by members of the public".
This Court further observed: " The Tribunal had to decide in the first instance whether there was a group of persons acting in concert holding a sufficient number of shares which may control the voting as a block.
But the existence of a block is not decisive.
If there be a group of persons holding control over voting, the Company would still be a Company in which the public are substantially interested, if twenty five per cent or more of the voting power has been allotted unconditionally to and beneficially held by the public and the shares were in the previous years subject of dealings in any stock exchange in the taxable territories or were in fact freely transferable by the holders to other members of the public.
The two enquiries are distinct".
This Court further referred to Jubilee Mills ' case (supra) and Raghuvanshi Mills ' case (supra) and observed as follows: "But in Commissioner of Income tax, Bombay City l vs Jubilee Mills Ltd. (supra) this Court held that no direct evidence of overt act or concert between the members of the group having control over voting was necessary to prove that the Company was not one in which the public were substantially interested.
It was observed in Raghuvanshi Mills ' case (supra) that 'in deciding if there is such a controlling interest, there is no formula applicable to all cases.
Relationship and position as director are not by themselves decisive.
If relative act, not freely, but with others, they cannot be said to belong to that body, which is described as 'public ' in the Explanation '.
In Jubilee Mills ' case (supra) this Court elaborated those observations and stated: The test is not whether they have actually acted in concert but whether circumstances are such that human experience tells us that it can safely be taken that they must (1)[1967] I S.C.R. 821.
407 be acting together.
It is not necessary to state the kind of evidence that will prove such concerted actings.
Each case A must necessarily be decided on its own facts".
This Court finally in the above East Coast Commercial Company 's case concluded as follows: "On an analysis of the reasons recorded by the Tribunal and the High Court, it is clear that the Tribunal held that the Kedias did not form a controlling group because there was no evidence that they actually controlled the voting, even though they held more than seventy five per cent of the shares issued by the Company: the High Court observed that the members of the Kedia family held 4,016 shares of the Company and were in a position to control the affairs of the Company, but there was no evidence to show that they did in fact act in concert and controlled the affairs of the Company as a block.
But, as already observed, if the members of the Kedia family formed a block and held more than seventy five per cent of the voting power, it was not necessary to prove that they actually exercised controlling interest.
It is the holding in the aggregate of a majority of the shares issued by a person or persons acting in concert in relation to the affairs of the Company which establishes the existence of a block.
It is sufficient, if having regard to their relation etc., their conduct, and their common interest, that it may be inferred that they must be acting together; evidence of actual concerted acting is normally difficult to obtain, and is not insisted upon".
We may also observe in passing that it does not appear that the East Coast Commercial Company 's case (supra) was referred to during the hearing in, nor was lt noticed by, the High Court.
The Tribunal in the supplementary statement observed as follows: " Unless it is to be presumed that because of relationship, P Sri section P. Jain, Smt.
Rama Jain and Sri A. K. Jain should be regarded as acting in concert, there is no other material on record on the basis of which such a conclusion could be supported".
The High Court also observed to the same effect: " It may be that in view of the relationship of the parties as to a group consisting of the father, two minor sons and their mother, a possible inference was that the relationship was such that they could reasonably be taken to be acting as a group in concert. " but "the assessee could not be placed in the category of such a company accordingly because of close relationship".
Keeping in the forefront the test laid down by this Court in East Coast Commercial Company 's case (supra), Mr. Sen on behalf of the 408 Revenue submitted for our consideration the following facts and circumstances from which, according to counsel, an inference can be reasonably drawn about the controlling power in a block confined to a family group holding more than 75 per cent shares: (1) 80 per cent of the share capital (40,000 out of 50,000) is held by section P. Jain, his wife and two sons, one of whom was a minor throughout the period of the two accounting years and the other son, A. K. Jain, for a portion of the period upto March 1952.
The remaining 20 per cent of the shares was held by the companies which were under the control by section P. Jain and out of which 20 shares were held by two employees under the control of section P. Jain.
(2) A. K. Jain was appointed as Director in the company in August 1950 when he was a minor, aged 16 years, and he became the Managing Director on 1 2 1954 at a salary of Rs. 6,000/ per month.
According to counsel this could not have been possible if he was not the son of the controlling shareholder, section P. Jain.
(3) section P. Jain who was a Director resigned making room for his Private Secretary N. C. Jain for appointment as Director.
(4) During the assessment year 1953 54 the assessee company claimed Rs. 2,02,500/ as loss in a transaction in hessian through Messrs Kabra & Co. in settlement of August 18, 1952, and the same amount was shown as profit in hessian through the same broker by Smt.
Rama Jain wife of section P. Jain in the settlement.
(5) section P. Jain, A.K. Jain, R. Sharma and N. C. Jain were the promoters of the company and were the signatories to the Memorandum of Association.
Mr. Hardy, the learned counsel for the respondent, on the other hand, replied to the submissions as follows: (1) Rama Jain and A. K. Jain are independent assessees.
The minutes of the Board 's meetings clearly show A. K. Jain as a competent Director taking independent decisions.
Mere relationship, therefore, would not lead to the conclusion that these two shareholders acted with section P. Jain in concert.
He, however, admits that section P. Jain may be said to control the voting power of the minor son, Alok Prakash Jain, as his natural guardian.
According to Mr. Hardy if Rama Jain and A. K. Jain are holding 20,000 shares out of 50,000, they cannot be held to be acting in concert with section P. Jain and section 23A will not be attracted.
(2) With regard tn the second submission of Mr. Sen, Mr. Hardy submits that there is sufficient evidence 409 in the record, which is even referred to in the further A statement of the case, that A. K. Jain was an in dependent shareholder and was not under the control of section P. Jain or any other Director or shareholder.
He further submits that there is no evidence whatsoever that the money for purchasing the shares of A. K. Jain or even of Rama Jain was advanced by S P Jain.
(3) With regard to the third submission of Mr. Sen, Mr. Hardy had to admit that N. C. Jain was Director from 1950 to 1954 and section P. Jain was Director from August 3, 1950 to September 25, 1950 and section P. Jain became Managing Director of the company on June 6, 1953, subject to the approval of the Government on a remuneration of Rs. 8,000/ per month and A. K. Jain was appointed as Deputy Managing Director on a remuneration of Rs. 6,000/ per month subject to the approval of the Central Government (vide minutes of Board 's meeting of June 6, 1953).
According to Mr. Hardy, appointment of Directors or even Managing Director is a regular matter of the company and no particular significance should be attached to these appointments.
(4) With regard to the fourth.
submission Mr. Hardy submits that such transactions are common with brokers and even the purchaser is not known in most of the cases.
Hence no undue importance should be attach ed to the hessain transaction so as to influence the conclusion.
It is also pointed out that there was no controversy about the genuineness of the hessian transaction.
We are of the view that the genuineness of the aforesaid transaction is, however, irrelevant for the purpose of considering its effect in acting in concert by the shareholders.
(5) With regard to the fifth submission Mr. Hardy submits that it is true that section P. Jain, A. K. Jain R. Sharma and N. C. Jain were the promoters of The company but admittedly two of them, namely, R. Sharma and N. C. Jain were outsiders.
That they were employees would not affect their character as shareholders of the company or even as Directors.
It is clear that this company was a family concern with only 20 shares out of 50,000 shares allotted to two outsiders who again happened to be paid employees.
The presence of these two outsiders is of the least significance in the matter of management of the affairs of the company.
It is true that most of the meetings of the Board of Directors were presided over by A. K. Jain with either of the two employees or one of them attending the same.
It must, how ever, be noted that A. K. Jain became a Director even when he was a minor aged 16 years.
He would not ordinarily be able to play the role he is supposed to have done in the Board 's meetings unless section P. 410 Jain was confident that the Board was carrying out his mandates with regard to the affairs of the company.
It is also true that A. K. Jain and the other Directors were authorised to sign agreements on behalf of the company, but this is not of great significance since this was in pursuance of a decision of the Board 's meeting which could not have been passed but for the concurrence of section P. Jain.
There is no evidence whatsoever to show that Rama Jain, wife of section P. Jain, was at all independently acting.
When a company is composed mostly of family members owning lion 's share in the entire share capital of the company the onus to keep clear of the reach of section 23A(l) will be on the shareholders by adducing some positive evidence about the absence of control by the controlling shareholders.
So far as Rama Jain is concerned it is not possible to hold that section P. Jain would not be able to control his wife 's voting power along with that of his minor son, Alok Prakash Jain.
It is true that mere relationship or being a Director is not decisive.
As a matter of fact no single factor can be decisive but having regard to the totality of the circumstances revealed in the case and the conduct of the transactions of the company taken with the relationship which, in the circumstances of the case is not a negligible element, we are clearly of the opinion that it is a case in which it cannot be said that the 'public ' is substantially interested in 25 per cent or more shares of the company.
Even if we allow A. K. Jain to be a member of the 'public ', he only holds 10,000 shares and taken with 2,000 shares of Ashoka Agencies Ltd., the total shareholding comes only to 12,000 shares, that is to say, 500 less than the minimum shareholding requisite to earn the benefit of the third proviso to section 23A read with the Explanation.
Further, between August 1], 1951 and May 1, 1952, A. K. Jails and two employee Directors, the latter having a modicum of 10 shares each, apparently took all decisions for the company in the Board 's meetings.
This is not ordinarily possible but for collaboration with the major shareholders.
This is a case where more is meant than meets the eye.
We are unable to hold in this case, in absence of any reliable evidence to the contrary, that the voting power of the three Directors was free and uninhibited and not within the orbit of control of the other major shareholders, section P.` Jain and Rama Jain acting in concert.
It is a clear case of all the shareholders acting in concert and in unions and the two employee Directors were merely dummies.
There is not the slightest inkling of 'public ' being interested, far less substantially interested, in this company.
There was no one who could come within the term 'public ' outside the ring of the shareholders acting in concert for their own ends with a common purpose.
There is no evidence whatsoever in this case that the shareholders did not cohere together in the matter of transaction of the company 's affairs.
When the reality is manifest some reliable evidence within the special knowledge of the assessee must be forthcoming from its side to contradict the obvious in order to be covered by the exception.
This has not happened in this case.
411 Unless the two employees were nominees of the major shareholders it is ordinarily absurd to suppose that they could aspire to be and become Directors of the company.
The Appellate Assistant Commissioner in his order, which is annexed with the statement of the case, mentions that "In fact Shri section P. Jain as a controlling shareholder had brought himself in as a Director of the company right from the inception of the company and was the first Director of the company from 3 8 SO to 25 9 50.
From September 'SO to March '54, however, he temporarily gave up the directorship by putting in an employee as a nominee director, Sri N. C. Jain, for the intervening period so that there may be no hitch in the appellant company being appointed as Managing Agent of certain other companies under his control on which also Sri section P. Jain was a Director, such as the Rohtas Industries Ltd., Bharat Collieries Ltd., section K. G. Sugar Ltd., Dehri Rohtas Light Railway Co. Ltd. and New Central Jute Mills Ltd.
As soon as this objective was achieved, Sri section P. Jain staged a come back as a Director of the appellant company on 25 3 54 when the nominee director Sri N. C. Jain re signed his directorship to make room for his master Sri section p Jain".
The factual position, not the opinion, revealed in the above extract is more than eloquent with regard to the core of the company.
Having regard to the intimate relationship of the shareholders, with not the least evidence of any disconcert amongst them, the ordinary expectation for individual profit in commercial undertakings, natural reluctance to forego the same, the history of the company and its continued smooth working in a manner which is normally inconsistent with anything other than full unison amongst the shareholders in decisions about the conduct of company 's affairs in common inter est of all, this was a company of one paramount mind operating with out the least doubt.
The Board 's meetings are evidence of a well organised, well knit close unity of views in all affairs and which in ordinary course of human conduct would not have been at all possible but for a single or concerted action in the company 's management by a controlling group.
When all the above conditions are present in a company, the onus would be on the assessee to satisfy by some reliable evidence that what appears on the surface is that which is real.
That is not to say that the Revenue has no burden to bring the case within the mischief of section 23A.
Application of law cannot be bereft of commonsense.
The object of section 23A being to prevent avoidance of super tax by the share holders by piling up the profits of the company in its own hands, the facts and circumstances revealed in this case clearly bring the company within the reach of that section.
We are unable to accede to the submission of Mr. Hardy in this case that because A. K. Jain and Rama Jain were independent assessees and A. K. Jain was pre siding in the Board 's meetings and as such was taking independent 412 decisions and was also doing extra work for the company in Calcutta on salary basis, they should be held to be members of the 'public ' who were substantially interested in the company with the requisite shareholding for the purpose of the Explanation read with the third proviso.
The High Court was therefore, not right in answering the question in favour of the assessee and against the Revenue.
We, therefore, answer the original question in the negative and the revised question in the affirmative both in favour of the Revenue.
The appeals are allowed but we leave the parties to pay and bear their respective costs.
P.H.P. Appeals allowed.

summary/full:
Sahu Jain was a private limited company during the assessment years l952 53 and 1953 54.
All the shareholders of the company are the family member J of Mr. section P. Jain except two employees who held 20 out of 50,000 shares and excepting the three Companies which were also sister concerns.
Under section 23A of the Income Tax Act, 1922, prior to its amendment in the year 1955, where the Income Tax officer is satisfied that in respect of any previous year the profits and gains distributed as dividends by any Company are less than 60 per cent of the assessable income of the company as reduced by the Income Tax and Super Tax payable by the company in respect there of, he shall unless he is satisfied that having regard to the loss incurred by the company in earlier years or to the smallness of the profit made, the payment of a dividend or a larger dividend than declared would be unreasonable, make an order in writing that the undistributed portion of the income of the company of that previous year as computed for income tax purposes and reduced by the amount of income tax and supertax payable by the company in respect thereof shall be deemed to have been distributed as dividends amongst the shareholders.
The proviso to the said section provides that the provisions of the section would not apply to any company in which the public are substantially interested if shares of the company carrying not less than 25 per cent of the voting power have been allotted unconditionally to or acquired unconditionally by the public or beneficially held by public.
The Income Tax officer held that the provisions of section 23A were attracted in the case of the company for both the years.
The Appellate Assistant Commissioner confirmed the order of the Income Tax officer.
The Tribunal held that section 23A was not applicable to the company in respect of both the assessment years.
The Tribunal held that unless.
it is presumed that because of relationship Shri section P. Jain, Smt.
Rama Jain and Shri A. K. Jain should be regarded as acting in concert there is no other material on record on the basis of which such a conclusion could be supported.
On a reference made by the Tribunal, The High Court answered the question in favour of the assessee and against the Revenue.
In an appeal by special leave the appellant contended: 1. 80 per cent of the share capital was held by section P. Jain and his wife and two sons.
One of whom was a minor throughout the period and another for a portion of the period and that the remaining shares were held by tho company which were under the control of section P. Jain and that only 20 share out of 50,000 shares were held by two employees under the control of section P Jain.
A. K. Jain was appointed as a Director when he was a minor and he became a Managing Director on a salary of Rs. 6,000/ per month when he was 20 years old.
3. section P. Jain who was a Director resigned making room for his Private Secretary for appointment as Director.
The Company showed a loss of Rs. 2 lacs and odd in a transaction in hessian and the same was shown as profit by Smt.
Rama Jain wife of section P. Jain.
section P. Jain, A. K. Jain.
R. Sharma and N. C. Jain were the promoters of the company ant were signatories to the Memorandum of Association.
399 The respondent contended: 1. Smt.
Rama Jain and A. K. Jain were independent assessees.
A. K. Jain was taking independent decisions as a competent Director.
Mere relationship would not lead to the conclusion that the said two shareholders acted in concert with section P. Jain.
A. K. Jain was an independent shareholder and was not under the control of section P. Jain or any other Director or shareholder.
N. C. Jain was Director from 1950 to 1954 and section P. Jain became Managing Director subject to the approval of the Government.
A. K Jain was appointed as Deputy Managing Director on a remuneration of Rs. 6,000/ per month subject to the approval of the Central Government.
The transactions like one of hessian are common transactions and no undue importance can be attached to it.
Merely because some persons are promoters or employees of a Company that would not affect their character as shareholders of the Company.
Allowing the appeals by special leave, ^ HELD: 1.
The controversy is whether the company is one in which the public has 25 per cent or more shares.
[404C] 2.
This Court held in the case of Commissioner of Income Tax West Bengal vs East Coast Commercial Co. Ltd., that the word 'public ' is used in the explanation to section 23A in contra distinction to one or more persons who act in unison and amongst whom the voting power constitute s a block.
This Court also held that the Tribunal had to decide in the first instance wreathe there was a group of persons acting in concert holding a sufficient number of shares which may control the voting as a block.
But the existence of block is not decisive.
The company would still be a company in which public are substantially interested if 25 per cent or more of the voting power has been allotted unconditionally to and beneficially held by the public.
This Court also held that the relationship and position as Director are not by themselves decisive.
But if the relatives act not freely but with others they cannot be said to belong to the public.
The test is not whether they have actually acted in concert but whether the circumstances are such that human experience tells us that it can safely be taken that they must be acting together.
[406A, C D, H, 407A] 3.
It is clear that this company was a family concern with only 20 shares out of 50,000 shares allotted to the two outsiders who again happened to be paid employees.
The presence of these two outsiders is of the least significance in the matter of management of the affairs of the company.
A. K. Jain became a Director even when he was a. minor.
He would not ordinarily be able to play the role he is supposed to have done in the Board meetings unless section P. Jain was confident that the Board was carrying out its mandates with regard to the affairs of the Company.
The fact that A. K. Jain and others were authorised to sign agreements on behalf of the Company is not of great significance.
There is no evidence whatsoever to show that Rama Jain wife of section P. Jain was at all independently acting.
[409G, H, 410] 4.
When a company is composed mostly of family member owning lion 's share in the entire share capital of the company the onus to keep clear of the reach of section 23A will be on the shareholders by adducing some positive evidence about the absence of control by the controlling shareholders.
[410 B] 5.
No single factor can be decisive but having regard to the totality of the circumstances revealed in the case and the conduct of the transactions of the company taken with the relationship which in the circumstances of this case is not a negligible element this Court is dearly of the opinion that it is a case in which it cannot be said that the public is substantially interested in 25 per cent or more shares of the company.
[410D E] 6.
Even if A. K. Jain is said to be a member of the public, his shares together with the shares of Ashoka Agencies Limited is 500 less than the r minimum shareholding requisite to earn the benefit of the third proviso to section 23A read with the explanation.
[410 E] 400 7.
Between August 11, 1951 and May 1, 1952, A. K. Jain and 2 employee Directors apparently took all decisions for the company in the Board 's meetings.
This is not ordinarily possible but for collaboration with the major shareholders.
This is a case where more is meant than meets the eye.
[410E F] 8.
It is A clear case of all the shareholders acting in concert and in unison and the two employee Directors were merely dummies.
There is not the slightest inkling of the public being interested far less substantially interested in this company.
[410G] 9.
The intimate relationship of the shareholders, with not the least evidence of disconcert amongst them, the ordinary expectation for individual profit in commercial undertaking, the history of the company and its continued smooth working is inconsistent with anything but full unison amongst the shareholders.
The Board 's meetings are evidence of well organised, well knit, close unity of vie vs in all affairs which in ordinary course of human conduct would not have been at all possible but for a single or concerted action in the company management by a controlling group.
[410D F]


judgement:
: Criminal Appeal No 188 of 1971.
Appeal by special leave from the judgment and order dated the 29 9 1970 of the Gujarat High Court in Criminal Appeal No. 410 304 D. Mookherjee, section K. Dholakia and M. N. Shroff, for the appellant.
K. J. Shethna and Vimal Dave and Miss Kailash Mehta, for the respondent.
The Judgment of the Court was delivered by GOSWAMl, J.
The accused Haidarali Kalubhai was convicted by the Sessions Judge, Mehsana, under section 304 Part II, Indian Penal Code, and was sentenced to rigorous imprisonment for seven years for causing death of Mahomadali Kasamali.
He was also convicted under sections 326 and 323 I.P.C. and sentenced to rigorous imprisonment for two years and to three months respectively in connection with injuries to two other persons.
On appeal to the High Court conviction was altered to one under section 304 A.I.P.C.
Only and the accused was sentenced to rigorous imprisonment for eighteen months and to a fine of Rs. 500/ , in default rigorous imprisonment for six months.
Briefly the facts are as Follows: It was usual for the deceased Mahomadali Kasamali, who was the sarpanch of village Nandasan, to spend some hours of the night from 8.00 P.M. to 11.P.M. near the Hotel Shanker Vijay which is situated by the side of the highway from Mehsana to Ahmedabad.
There is a big open space in front of the hotel towards the north and a kutcha road branches off from the highway towards Dangarwa.
This kutcha road is almost in the centre of the open space in front of the hotel measuring about 80 feet.
It is said that the portion immediately in front of the hotel is about two feet higher in elevation from the kutcha road.
On August 23, 1969, the accused came in a tractor and stopped the same on the highway.
He saw truck No. G.T.F. 904 which Was parked opposite to the aforesaid hotel of Vasudev (P.W. 7).
The owner of the truck had gone to the village leaving his conductor Usman Imamali (P.W. 11) in the truck.
It is said that the accused used to drive this truck earlier with permission of the truck owner.
This time he used the key of his tractor to start the truck and he drove the same by the open field in front of the hotel.
He drove the truck with the head lights on in full speed straight on the steel cot on which The deceased was resting with the result that the truck dashed against the cot and the deceased was thrown away to a distance of about ten feet from the cot.
Head Constable Revajit (PW 3) was sitting on the same cot with the deceased and he was also thrown away.
There was another wooden cot nearby where Constable Dalpat Singh (PW 4) and Vavdinmiya (PW 5) were sitting.
The Head Constable with the other Constable came to meet the Sarpanch in connection with the investigation of a certain case.
Since there was enmity between the accused and the deceased on account of Panchayat elections the prosecution case is that the accused willfully and deliberately drove the vehicle towards the cot with the intention of causing death to the A deceased Sarpanch.
The accused was originally charged under section 302 IPC and under section 326 and 323 IPC with the result mentioned above.
Hence this appeal by the State by special leave against the judgment of the High Court.
The question that arises for consideration is whether the facts that `are established against the accused fulfil the ingredients of section 304 305 Part II as submitted by Mr. Debabrata Mukherjee on behalf of the State.
According to the learned counsel this is a clear case under section 304 Part II and conviction under section 304A is unsustainable.
Section 304A carves out a specific offence where death is caused by doing a rash or negligent act and that act does not amount to culpable homicide under section 299 IPC or murder under section 300 IPC.
If a person willfully drives a motor vehicle into the midst of a crowd and thereby causes death to some person, it will not be a case of mere rash and negligent driving and the act will amount to culpable homicide.
Each case will, therefore, depend upon the particular facts established against the accused.
The prosecution in this case wanted to establish a motive for committing the offence against the Sarpanch.
It was sought to be established that there was enmity between the Sarpanch and the accused ` and his relations on account of Panchayat elections.
Some evidence was led in order to prove that the accused and his relations were gunning against the Sarpanch for some time after the latter 's election as Sarpanch.
Even an anonymous letter was received by the Sarpanch threatening his life which was handed over to the police by the Sarpanch.
Both the Sessions Judge as well as the High Court did not accept the evidence appertaining to motive.
Mr. Mukherjee, therefore, rightly and very fairly did not address us with regard to that part of the case.
Even so, the learned counsel submits that the act per se and the manner in which the vehicle was driven clearly brought the case under section 304 Part II IPC.
The following facts are established.
The accused drove the truck at great speed with lights on.
He had the conductor with him in the truck.
Some time before driving the truck the accused had seen the Constables talking with the Sarpanch at the spot in question.
There is no evidence that the accused had a licence to drive the truck.
It, however appears from it.
70, which is a complaint in criminal case No. 160 of 1969 dated January 17, 1969 that the accused "had no licence. while driving his truck No. GTF 704.
" While the two Constables jumped from the cot and escaped the deceased could not do so in spite of being alerted by the Head Constable as he was in a Lying posture on the cot.
It appears from the map of the scene Ext.
9 that the truck while being driven by the field was trying to turn towards the kutcha road at a point near the cot shown in the map.
This would go to show that the accused was unable to control the vehicle in high speed while taking a turn to get into the kutcha road from the open field and in this process hit the cot throwing the deceased out of the cot by the impact resulting in injuries which ultimately led to his death.
Even the Constables, who jumped from the cot, received injuries.
There was no direct impact of the persons with the vehicle in speed.
The accused in his statement under section 342, Criminal Procedure Code, stated as follows: "I took the truck in reverse first and as there were other trucks lying round about, I took out my truck from the available way.
306 The accilator (sic) stuck down and hence the truck went in full speed and did not remain in control.
One truck was coming from opposite side with full light.
While driving with (sic) this way, I heard some noise, and the conductor Usman told me that the truck had struck with something then I heard some shouts and realised that some persons were injured but I did not stop the truck through fear of assault . truck through fear of assault . .
I presented myself at the Police Station".
Now this version is supported by Usman (PW 11) who, however, has been declared hostile by the prosecution.
He was cross examined by the prosecution in order to show that he made a wrong statement in the examination in chief when he stated that the accused drove the truck with the key of the truck whereas he had stated before the police that the accused came on his tractor and started the truck with his key.
He was also cross examined about a truck coming from the opposite side with full light that he had not stated to the police to that effect.
We do not think that the omission to mention before the police about another truck coming from the opposite direction can be a contradiction within the meaning of section 162, Criminal Procedure Code.
We also do not give much importance as to whether the accused drove the truck with his key or with the key of the tractor.
That has not much relevance in view of the fact that the accused admitted to have driven the truck.
Besides, it is admitted by the prosecution witnesses (PWs ' 2 and 6) that the conductor (PW 11 ) was in the truck when the accused drove the same.
PW11 is, therefore, a natural witness and we do not find any reason to disbelieve him when he stated that a truck was coming from the opposite direction with full lights on.
Besides, the owner of the truck having not found the truck in the place where he had parked had already telephoned to the Police Station about someone taking away the truck.
PW11, who is an employee of the truck owner, was, therefore, not even obliged to speak in favour of the accused.
The facts disclosed in the prosecution evidence, therefore, do not make out a case of any wilful or deliberate act on the part of the accused in order to cause the death of the Sarpanch by driving the truck in the way he did.
Besides, the presence of the Head Constable and another Constable with the deceased whom the accused had himself seen prior to his driving the truck would run counter to a theory of wilful and deliberate act on the part of the accused to cause the death not only of the Sarpanch but necessarily also of the Constables.
Section 304A by its own definition totally excludes the ingredients of section 299 or section 300 IPC.
Doing an act with the intent to kill a person or knowledge that doing of an act was likely to cause a person 's death are ingredients of the offence of culpable homicide.
When intent or knowledge as described above is the direct motivating force of the act complained of, section 304 A has to make room for the graver 307 and more serious charge of culpable homicide.
Does this happen in A this case ? The tangential track of the speeding truck coming in contact with the corner of the steel cot throwing it over the wooden cot and thereby throwing the deceased out of it resulting in fatal injuries would not reveal the accused intention or any deliberate act with the requisite knowledge for an offence of culpable homicide.
The facts and circumstances disclosed in this case fit in more reasonably with the theory of loss of control by the accused of the vehicle in high speed trying to take a turn for the kutcha road.
There is, therefore, no error committed by the High Court in holding that the falls under section 304A IPC and not under 304 Part II IPC.
The appeal is accordingly dismissed.
C S.R. Appeal dismissed.

dataset_name: IN-Abs

summary/full:
On August 23, 1969, the respondent accused came in a tractor and stopped it on the highway.
Seeing the parked truck GTF 904 which he used to drive previously, the accused used the key of his tractor to start the same and drove it with the head lights on in full speed.
The conductor of the truck owner was also in the tractor at that time.
The tractor while being driven by the field and while he was trying to turn towards the kutcha road hit against the cot in which the village Sarpanch who was resting on it and taking with three policemen.
The policemen jumped from the cot and sustained injuries, while the Sarpanch who was thrown away by the impact of the tractor to a distance of about ten feet from the cot, had grievous injuries to which he succumbed later.
Since there was enmity between the deceased and the accused over the Panchayat elections, the prosecution put up a case of deliberate and willful driving of the vehicle towards the cot with the intention of causing death of the deceased Sarpanch.
The Sessions Judge convicted the accused (i) under section 304 Part IT, I.P.C. for causing the death of the Sarpanch and (ii) under section 326 and 323, I.P.C. for causing injuries to the two other persons and sentenced him for rigorous imprisonment for seven years and two years respectively for the said offences.
On appeal to the High Court the conviction was altered to one under section 304A only and the respondent was sentenced to rigorous imprisonment for 18 months and to a fine of Rs. 500/ .
Dismissing the State 's appeal by special leave, the Court, ^ HELD .
(1) Section 304A carves out a specific offence where death is caused by doing a rash or negligent act and that act does not amount to culpable homicide under section 299, I.P.C. or murder under section 300 I.P.C. Each case will depend on the particular facts established against the accused.
[305A B] (2) Section 304A, by its own definition totally excludes the ingredients of section 299 or section 300, I.P.C. Doing an act with the intent to kill a person or knowledge that doing of an act is likely to cause a person 's death are ingredients of the offence of culpable homicide.
When intent or knowledge is the direct motivating force of the act complained of, section 304A has to make room for the graver and more serious charge of culpable homicide.
[306 GH, 307A] (3) In the instant case, the tangential track of the speeding truck coming in contact with the corner of the steel cot throwing it over the wooden cot and thereby throwing tho deceased out of it resulting in fatal injuries, would not reveal the accused 's intention or any deliberate act with the requisite knowledge for an offence of culpable homicide.
The facts and circumstances disclosed in this case fit in more reasonably with the theory of loss of control by the accused of the vehicle in high speed trying to take a turn for the kutcha road.
The case falls under section 304A, I.P.C. and not under 3. 304 Part 11, I.P.C. [307 A C]


judgement:
ivil Appeals No. 2390 2391 of 1972.
(From the Judgment and order dated 27 3 1972 of the High Court of Andhra Pradesh in Writ Petition Nos.
3976 3977 of 1971.) Civil Appeal No. 604 of 1975 (From the Judgment and order dated 28 3 1973 of the Andhra Pradesh High Court in Writ Petition No. 685/72).
389 Civil Appeals Nos. 2423 2437 (From the Judgment and order dated 27 3 1972 of the Andhra Pradesh High Court in Writ Petitions Nos.
3974, 3975, 3978, 4015, 4016, 4017, 4018, 4019, 4020, 4021, 4247, 4246, 4248, 4249 and 5779/71).
Civil Appeal Nos. 2584 2586 of 1972 (From the Judgment and order dated 28 3 1972 of the Andhra Pradesh High Court in Writ Petition No. 606 and 620, 622/72).
Civil Appeals Nos.
281 286of 1973 (From the Judgment and order dated 28 3 1972 of the Andhra Pradesh High Court in Writ Petitions Nos.
4642, 4643, 4644, 4701, 4702 and 5776 of 1971) Civil Appeals No. 539 540 of 1973 (From the Judgment and order dated 27.3.1972 of the High Court of Andhra Pradesh in Writ Petition NOS.
5170, 5173/71).
Civil Appeals No. 2019 2034 of 1973.
(From the Judgment and order dated 28.3.1972 of the Andhra Pradesh High Court in Writ Petitions Nos.
4512, 4588, 4589, 4590, 4591, 4679, 4683, 4684, 4690, 4943, 4953, 4983, 5115, 5117 and 5118 of 1971) Civil Appeal No. 653 662/74 (From the Judgment and order dated 28.3.1972 of the High Court of Andhra Pradesh in Writ Petitions NOS.
603, 607, 609, 621, 627, 629, 738, 739, 744 and 746/72).
Civil Appeals NOS.
637, 1837 1842 of 1973.
(From the Judgment and order dated 27.3.1972 of the Andhra Pradesh High Court in Writ Petitions NOS.
343/72 and 5669/71, 254, 256, 260, 334, 562/72).
A. K. Sen, for the appellants in CAs 2390 2391 & 2423 2437/72.
P. A. Chowdhary, for the appellants in Cas 2019 2034/73.
N. Bhaskar Rao, for the appellants in CAs 2390 2391, 2423 2437/72.
B. Kanta Rao, for all the appellants.
A. K. Sen with section Markandeya and N. Madhusudan Raj, for the appellants in CAs 604/75, 2584 2586/72 and 653 662/74.
H A. K. Sen with N. Madhusudan Raj and G. N. Rao, for the appellants in CAs 281 286/73.
390 P. Ram Reddy with P. P. Rao, for the respondents in CAs 2390 2391 & 2423 2437/72, 281 282, 539, 540, 2019 2034/73; rr. 2 4 in CA No. 664/75, 653 662/74 and 2584 2586/72; rr. 1 3 in CA 1042/73 and for rr.
in CA 636/73.
1837 1841/73.
P. P. Rao for Respondent No. 1 in CA 604/75.
section P. Nayar and Girish Chandra for respondent No. 1 in CAs 653 662/74 & rr.
in CAS 2584 2586/72.
The Judgment of the Court was delivered by RAY, C.J.
These appeals are by certificate from the common judgment dated 27 March, 1972 of the Andhra Pradesh High Court dismissing the writ petitions of the appellants.
The appellants filed the writ petitions for an appropriate writ or order directing the respondent State of Andhra Pradesh to refund the sums of money collected from the appellants as administrative surcharges.
The appellants are dealers in foodgrains and held licences issued in accordance with the provisions of relevant statutes and control orders.
Under the provisions of the various Control orders have been issued for maintaining or increasing supplies of any essential commodity or for securing their equitable ` distribution and availability at fair prices.
The Control orders contemplate regulation or prohibition or production, supply and distribution of essential commodities and trade and commerce therein.
The State Government exercising powers delegated to it by the Central Government in accordance with the provisions of the issued several measures to achieve the objectives of the Control orders.
The Government of Andhra Pradesh introduced a scheme known as "Incentive Export Scheme".
Under that Scheme all millers who delivered 50 per cent of their purchases to the Food Corporation of India towards mill levy would be eligible for export under the Scheme.
Incentive export permits were to be granted in the ratio of 2: 3.
The ratio meant that if a miller delivered two additional wagons to the Food Corporation of India he would be entitled to export three wagons on private trade account.
The last date for delivering rice to the Food Corporation of India was fixed as 20 May, 1971.
The last date for issue of permits was fixed as 31 May, 1971.
Permits were of four types.
The A type of permits was for export from one block to another within the State.
Under these permits administrative charge were Rs. 2.50 per quintal.
The type of permits was for export from the State of Andhra Pradesh to other States in the South.
The administrative charges under the type permits were RS.
10/ per quintal.
The type permits was for export to any State outside Andhra Pradesh.
The administrative charges for type permits were RS.
8/ per quintal.
The fourth 391 type of permits was for export of broken rice under the A type or the A type permits and the surcharges were Re. 1.00 per quintal.
By an order dated 24 July, 1967 under section S of the , l955 the Central Government directed that the powers conferred on it by section 3 (1) of the Essential Commodities ` I Act, 1955 to make orders to provide for matters specified in clauses (a), (b), (c), (d), (e), (f), (h), (i) and (j) of sub section (2) thereof shall, in relation to foodstufls be exercisable also by a State Government subject to the conditions (1) that such power shall be exercised by a State government subject to such directions, if any, as may be issued by the Central Government in this behalf, and (2) . that before making any order relating to any matter specified in clauses (a) and (c) or in regard to regulation of transport of any foodstuffs under clause (d) of section 3 (2) of the , the State Government shall also obtain prior concurrence of the Central Government.
By an order dated 30 September, 1967 in exercise of powers conferred by section S of the the Central .
Government made an amendment to the order dated 24 July, 1967.
The amendment was to the effect that before making an order relating to any matter specified in clauses (a), (c) and (f) or in regard to t distribution or disposal of foodstuffs to places outside the State or in regard to regulation of transport of any foodstuff under clause (d) the State Government shall obtain the prior concurrence of the Central Government.
The State of Andhra Pradesh by an order dated 22 July, 1968 pursuant to the representation of the millers for export of rice outside the block but within the State passed orders that permits for export of rice would be issued subject to the fulfilment of their commitments and that administrative charging of Rs. 2.50 per quintal of rice would be collected from the millers before the issue of permits.
Under the Southern States (Regulation of Export of Rice) (Order, 1964, Andhra Pradesh Rice and Paddy (Restriction on Movement) order 1965 and the Andhra Pradesh Rice Procurement (Levy and Restriction on Sale order, 1967 every dealer or miller was required to supply a minimum quantity of rice to the State Government or its nominees and the balance, that is to say levy free rice, could be sold in the open market or exported to the places outside the block or State under permit issued by the State Government.
The representation of the millers for permission to export rice outside the block or the State was that the denial of permission to export rice would result in deterioration of stocks and consequential loss to both the trade and consuming public.
The appellants applied for and obtained permits by fulfilling two principal conditions.
One was to satisfy the statutory requirements of supply to the Food Corporation of India and the another was payment of administrative surcharges for every quintal of rice.
In the petitions before the High Court the appellant alleged that they paid the surcharge under "trying circumstances", "mistaken belief and impression" that "the respondent has the right to collect the surcharge".
The appellants also alleged that having come to know about 392 the correct legal position in the matter they asked the respondents to refund the administrative surcharges.
The respondents refused to refund any administrative surcharge.
The appellants contended in the petitions that the respondent Government has no right to collect any administrative surcharge, and, therefore the amount should be refunded.
The appellants alleged that they made the payments under mistake of law.
The High Court held that the levy of administrative surcharge is not backed by valid legislative sanction".
The High Court said that the agreements between the State and the appellant millers for export were an executive scheme undertaken by the State but liability to pay tax must be covered by the statute.
The High Court expressed the view that there could be no estoppel when both parties are under a mistake of law.
The High Court however hold that the appellants were not entitled to any relief on three grounds.
First, the administrative surcharges were paid voluntarily by the appellants.
The appellants themselves represented for issue of permits.
The appellants obtained the permits.
They exported rice under the permits.
The High Court, therefore, held that the appellants cannot claim refund of the entire amount without giving due credit for the expenses or charges incurred by the Government for the issue of permits and for the supervision of export, transport and other administrative charges.
The second reason given by the High Court was that the Court would not be justified in exercising discretion in favour of the appellants who voluntarily paid the administrative charges, obtained the permits and derived considerable profits therefrom.
The third reason given by the High Court was that there was undue delay in claiming the refund.
The appellants contended that the three grounds on which the High Court dismissed the writ petitions were unsustainable.
It is said on behalf of one of the appellants (Civil Appeals No. 2584 to 2586 of 1972) that in their application dated 10 February, 1970 for refund of charges paid by them the appellants gave particulars of payments showing the dates of payment, quantity covered by the permit, the amount of charges paid, the number of permit against which payment was made as well as the challenge under which the payment was made Thereafter the appellants called upon the Collector to furnish copies of regulations under which surcharge was collected.
The Collector by letter dated 28 July 1970 informed the appellants that the State Government alone was competent to give the copy of the relevant rule or regulation under which surcharge was collected.
The appellants referred to the letters dated 22 December, 1970 and 2 January, 1971 by which the State Government refused to grant certified copy of the rule or regulation on the ground that it was part of the official correspondence not meant to be supplied to the private party.
In this back ground the appellants contended that since 10 February, 1970 when the appellants demanded refund the appellants from time to time made application for refund and the last reminder was on 30 December, 1971.
Some of the appellants filed their writ petitions in the 393 High Court in the month of September, 1970 and some of them filed A, their writ petitions in the month of January 1972.
It was, therefore, said that The applications for refund were all made within three years from the date of payment and the High Court should not have dismissed the writ petitions on the ground of delay.
The appellants next contended that the pleadings were not vague and the appellants in Civil Appeals No. 2584 to 2586 of 1972 gave B. all details of the payments and, therefore, the High Court should not have dismissed the writ petitions on the ground of vagueness of particulars and pleadings.
It was also said on behalf of the appellants that if the levy as well as collection of administrative surcharges was without authority of law the High Court was in error in refusing any relief to the appellants on the ground that the payments were voluntarily made.
The appellants relied on the decision of this Court in The State of Kerala etc.
vs k .
P. Govindan Tapioca Exporter etc.(l) as an authority for the proposition that the levy of administrative surcharge is illegal.
In the Tapioca case (supra) under the Kerala Tapioca Manufacture and Export (Control) order, 1966 no person could export tapioca except in accordance with permit.
The State Government Levied administrative surcharge under a scheme.
The State contended that the administrative surcharge was in effect and substance a licence fee charged in exercise of the police powers of the State for permitting the appellants by grant of permits to export tapioca.
This Court held that the scheme was not an order under any of the provisions of the and no licence fee or fee for grant of permit was imposed by the Kerala Tapioca Control order.
The E. Kerala Tapioca Control order only provided for levy of administrative surcharge.
The Kerala Tapioca Control order came into existence on 9 June, 1966.
Even before the promulgation of the order administrative surcharge was levied under a scheme formulated by the State Government on 15 April, 1966 published in the Kerala Gazette on 3 May, 1966.
The rate of administrative surcharge levied on tapioca under the scheme dated 15 April, 1966 varied from time to time.
This Court found that the order dated 15 April, 1966 formulating the scheme was not an order under any of the provisions of section 3 of the .
The Scheme did not impose any licence fee.
The scheme merely provided for levying of administrative surcharge.
The orders levying administrative surcharge which followed the Tapioca Control order did not refer to the exercise of any power under the order.
Therefore, this Court held that G. the administrative surcharge in the Tapioca case (supra) was bad and the realisations were without any authority of law.
The appellants contended relying on the decision of this Court in State of Madhya Pradesh vs Bhailal Bhai(2) that the High Court in exercise of powers under Article 226 has power to order refund and repayment of tax illegally collected.
The appellants submitted H: that the State had no power under any statute or any authority to (1) ; (2) ; 394 impose and collect administrative surcharge and, therefore, the payments which were made by the appellants were made under mistake of law and the State was liable to refund them.
The appellants contended that the administrative surcharge was neither in the nature of a fee nor was it a tax and there was no authority of law to support the levy and collection of administrative surcharge.
It was said on behalf of the appellants that neither the Essential commodities Act, 1955 nor the Southern States (Regulation of Export of Rice) order, 1964 nor the Andhra Pradesh Rice and Paddy order, 1965 nor the Andhra Pradesh Rice Procurement (Levy and Restriction on Sale) order, 1967 conferred any power to levy administrative surcharge.
The respondents contended that the permits were granted pursuant to the representation of the appellants that unless they were allowed the movement of rice to places outside their blocks or outside the State they could not sell rice locally because there was no demand.
The respondents further said that for ensuring export of rice the administrative machinery had to be set up.
The permits were grant ed on terms and conditions of payment of surcharge and the appellants voluntarily paid surcharge and received benefits under permits.
The respondents also said that the permits were contractual obligations between the appellants and the respondents.
The High Court in exercise of its discretion refused to grant mandamus on a consideration of facts and circumstances of the case.
The two principal matters which weighed with the High Court are these.
First, the appellants voluntarily paid the amounts and derived full advantage and benefit by utilizing the permits.
Second, there is undue delay in claiming refund.
Where the High Court has in exercise of discretion refused to grant a writ of mandamus, this Court does not ordinarily interfere.
(See Municipal Corporation of Greater Bombay vs Advance Builders (India) Private Limited;(l) D. Cawasji & Co, vs State of Mysore.(2) Refund of illegal taxes stands on a different footing from claiming refund of surcharge paid under terms and conditions of permits.
The only basis of tax is legislative sanction and if the legislative sanction fails, the collection of tax cannot be sustained.
In the present case the claim for refund is to be judged between the rival contentions.
The appellants contend that there is no legislative sanction for collection of administrative surcharge.
The respondents on the other hand support the collection of administrative surcharge first as a condition for permit and second as an item of maintenance charges in the maintenance and supervision of the scheme for export of rice.
The respondents also contend that the appellants have no right to claim refund under section 72 of the Indian Contract Act because the payments were neither under mistake of law nor under coercion.
It is said by the respondents that there is no coercion because the export scheme was voluntary.
Again, it is said that there is no mis take because the payments made were in fact due as part of the export scheme initiated at the instance of the appellants.
The respondents deny the claim of the appellants on the further ground that the (1) ; at p. 420.
(2) [19751 2 S.C.R. Sl I at p. 527 395 appellants having derived the benefit and caused detriment to the A Government are estopped from questioning the validity of the payments voluntarily made.
Another ground on which the respondents challenge the claim of the appellants is that the payments were part of the consideration of the agreement entered into by the appellants with State.
If it be assumed that the agreements are illegal, the respondent contends that the appellant being a party to the same cannot sue for recovery of money paid.
All the matters were covered by the common judgment.
In some cases the claims were beyond three years from the date of the payments.
In some cases they were within a lesser time but the ground of delay on which the High Court exercised discretion is not confined L purely to period of limitation but is bound up with matters relating to conduct of parties in regard to payments pursuant to agreements between the parties.
The remedy under Article 226 is not appropriate in the present cases for these reasons as well.
First, several petitioners have joined.
Each petitioner has individual and independent cause of action.
A suit by such a combination of plaintiffs would be open to misjoinder.
Second, there are triable issues like limitation, estoppel and questions of fact in ascertaining the expenses incurred by the Government for administrative surcharges of the scheme and allocating the expenses with regard to quality as well as quantity of rice covered by the permits.
The appellants contended that in all cases of claim for refund of money, the payments were voluntary and, therefore, the High 3 Court was in error in refusing refund because of the voluntary character of payment.
In cases relating to refund of payments of tax which is illegal the voluntary character of payment is that tax payer has no say but is compelled to pay.
In the present cases the questions are whether it can be said that payments of administrative charges were voluntary in order to reap benefits of export of rice covered by the permits.
The contention of the respondents that the export scheme was framed at the instance of the appellants and that the administrative surcharge is the consideration for preparation, maintenance and supervision of the scheme raises questions which can be solved by a suit.
A mandamus will go where there is a specific legal right.
Mandamus may be refused where there is an alternative remedy which is equally convenient, beneficial and effectual.
If there is no other means of obtaining justice, the writ of mandamus is grant ed to enable justice to be done.
Those are cases where justice can not be done unless a mandamus is to go.
R. V. Bristol and Exeter Railway Co.(l) is an authority for the proposition where the Corporation could be compelled to pay a sum of money pursuant to an agreement which could not be enforced by action because the agreement was not under seal.
This Court in Lekh Raj vs Deputy Custodian(2) and Har Shankar & Ors.
vs Deputy Excise and Taxation Commissioner & ors.(8) held that contractual obligations cannot be enforced through a writ of mandamus.
(1) 1845 (3)(1) 1845(3)Ry.
& Can.
(2) 11966] I S.C.R. 120.
(3) ; 396 The view of this Court in Sales Tax officer, Banaras & ors.
v A Kanhaiya Lal Mukundalal Saraf(1) was that a mandamus could be issued when the assessments were found to be illegal.
In Suganmal vs State of Madhya Pradesh & ors.(2) this Court said that the mandamus for recovery of money could be issued only when the petitioner was entitled to recover that money under some statute.
In Burmah Construction Co. vs State of Orissa(8) this Court said that normally the parties are relegated to a suit to enforce civil liability arising out of a breach of contract or a tort to pay an amount of money.
An order for payment of money may sometimes be made to enforce a statutory obligation.
In the State of Kerala vs Aluminium Industries Ltd.(4) the refund claimed was by reason of the moneys being paid under mistake of law and the collection having been made wrongly.
The petitions solely for the writ of mandamus directing the State to refund the moneys in the present case have been rightly refused by the High Court on the grounds of delay, insufficiency of particulars and pleadings, and voluntary payments.
The additional reasons in our opinion are that various questions of fact arise as to whether there was really mistake or it was a case of voluntary payment pursuant to contractual rights and obligations.
The plea of mistake is a bare averment in the writ petitions.
The payments did not disclose the circumstances under which the alleged mistake occurred and the circumstances in which the legal position became known to the appellants.
The respondents contradicted the plea of mistake.
A triable issue arose as to whether there was a mistake in paying the amounts and when exactly the mistake occurred and under what circumstances.
Section 72 of the Contract Act states that a person to whom money has been paid, or anything delivered, by mistake or under coercion, must repay or return it.
The mistake is material only so far as it leads to the payment being made without consideration.
This Court has said that the true principle is that if one party under a mis take of law pays to another money which is not due by contract or otherwise that is to be repaid.
When there is a clear and unambiguous position of law which entitles a party to the relief claimed by him equitable considerations are not imported.
A contract entered into under a mistake of law of both parties falls under section 21 of the Contract Act and not section 72.
If a mistake of law had led to the formation of a contract, section 21 enacts that the contract is not for that reason voidable.
If money is paid under that contract, it cannot be said that the money was paid under mistake of law; it was paid because it was due under a valid contract and if it had not been paid payment could have been enforced.
(See Shiba Prasad Singh vs Srish Chandra Nandi(5) See also Pollock & Mulla Contract Act 9th Ed.
by J. L. Kapur pp.
519 520).
In the present case, the respondents do not support the demand for administrative charges either as a tax or as a fee but as a term and condition of permit and as a (1) (2) A.I.R. 1965 S.C. 1740.
(3) [1962] Supp. 1 S.C.R. 242.
(4) 16 S.T.C. 689.
(5) 76 I.A. 244.
397 term of agreement between the parties for the maintenance and supervision expenses for the scheme for export permits of rice from one block to another within the State or outside the State.
It may be stated here that in cases where the State collected administrative changes but could not grant permits the State refund t ed moneys to such Person.
It is only where millers have obtained permits and taken advantage thereof that the State contends that there is no mistake and that the payments were made voluntarily with full knowledge of facts.
For these reasons the appeals are dismissed.
If the parties are so advised they may institute suits and all rival contentions would be .
open to both parties.
Parties will pay and bear their own costs.
V.P.S. Appeals dismissed.

summary/full:
The respondent State Government was exercising powers delegated to it by the Central Government under the .
It introduced an 'Incentive Export Scheme ' under which, millers, who delivered 50% of their purchases to the Food Corporation of India towards mill levy, would be eligible for exporting rice either within the State from one block to another or to States outside.
On payment of administrative charges.
On the representation of the millers (appellants) that they could not sell rice locally because there was no demand, and that unless they were allowed to move rice outside the blocks or outside the State there would be deterioration of stocks resulting in loss to both trade and the consuming public, the State passed orders permittion the export of rice subject to the fulfilment of their commitments to the Food Corporation and the payment of administrative charges; and also set up the necessary administrative machinery for ensuring such export.
Permits were accordingly granted on terms and on condition of payment of the surcharge fixed.
and the millers paid the surcharge and received the benefits under the permits.
Thereafter, they claimed refund of the administrative surcharge on the ground that the State had no right to collect it and that they made the payments under mistake of law.
Where the State collected administrative charges but could not grant permits, the State refunded the money, but, where millers obtained permits and had taken advantage thereof, the State contended that there was no mistake on the part of the millers and that the payments were made voluntarily with full knowledge of facts and in discharge of their contractual obligations.
The millers filed writ petitions praying for directions to the State to refund the administrative surcharges collected from them, but the High Court held that they were not entitled to the relief on the grounds of delay, insufficiency of particulars regarding expenses and charges incurred by the Government, and the payments being voluntary.
Dismissing the appeals to this Court, ^ HELD: The petitions were rightly dismissed by the High Court.
Also, since various question of fact are involved as to whether there was really a mistake, or whether it was a case of voluntary payment pursuant to contractual rights and obligations.
the remedy under article 226 is not appropriate in the present cases.
[396C D] (a) A mandamus will go where there is a specific legal right.
If there is no other means of obtaining justice, the writ of mandamus is granted to enable justice to be done.
A writ of mandamus for recovery of money could be issued only when the petitioner was entitled to recover that money under some statute.
An order for payment of money may sometimes be made to enforce a statutory obligation.
A mandamus for refund of tax could be issued when the assessments were held to be illegal; but contractual obligations cannot be enforced through a writ of mandamus.
Normally, the parties are relegated to a suit of enforce civil liability arising out of a breach of contract or a tort, to pay an amount of money.
Mandamus may also be refused where there is an alternative remedy which is equally convenient, beneficial and effectual [395F 396C] 388 R. V. Bristol and Exeter Railway Co. 1845(3) Ry.
& Can.
Cas. 777; Lekh Raj v Deputy Custodian, ; Har Shankar & ors.
vs Deputy Excise and Taxation Commissioner & Ors., ; ; Sales Tax officer Banaras & ors.
vs Kanhaiya Lal Mukundalal Saraf, ; Suganmal vs State of Madhya Pradesh & ors., A.I.R. 1965 S.C. 1740; Burmah Construction Co. vs State of Orissa, [1962] Supp. 1 S.C.R 242 and State of Kerala vs Aluminium Industries Ltd., 16 S.T.C. 689, referred to.
(b) The ground of delay on which the High Court, in the exercise of its discretion, refused to grant a mandamus is not confined purely to the period of limitation.
Though some of the petitions were filed within 3 years from the date of payment, the delay is bound up with matters relating to the conduct of parties in regard to payments pursuant to agreements between the parties.
[395B C] (c) In the present cases, several petitioners have joined in the writ petitions.
Since each has an individual and independent cause of action, such a combination would be open to the objection of misjoinder even in a suit.
[395C D] (d) The issues regarding limitation, estoppel and questions of fact in ascertaining the expenses incurred by the Government for administrative purposes of the scheme and allocating the expenses with regard to the quality as well as quantity of rice covered by the permits, are triable more appropriately in a suit.
[395D] (e) The plea of mistake is a bare averment in the writ petition.
The payments did not disclose the circumstances under which the alleged mistake occurred nor the circumstances in which the legal position became known to the millers.
Whether there was a mistake in paying the amounts and when exactly the mistake occurred, are also issues triable in a suit.
[1396D E] (f) The Government did not support its demand for administrative charges either as a tax or a fee, but as a condition of the permit and as a term of agreement between the parties to meet the maintenance and supervision ex penses for the Scheme of export permits.
Under section 72, Contract Act, 1872 if one party, under a mistake of law, pays to another money which is not due by contract or otherwise, that money has to be repaid.
The mistake is material only so far as it leads to the payment being made without consideration.
But if a mistake of law had led to the formation of a contract.
section 21 of the Contract Act enacts that such a contract is not, for that reason, voidable; and if money is paid under that contract, it cannot be said that the money was paid under mistake of law.
It was paid because it was due under a valid contract, and if it had not been paid, payment could have been enforced.
[396E 397A] The State of Kerala etc.
vs K. P. Govindan Tapioca Exporter etc.
; ; State of Madhya Pradesh vs Bhailal Bhai ; and Shiba Prasad Singh vs Srish Chandra Nandi, 76 I.A. 244, referred to.
(g) Where the High Court has, in the exercise of its discretion refused to grant a writ of madamus, this Court does not ordinarily interfere [394E] Municipal Corporation of Greater Bomboy vs Advance Builders (India) Private Limited.
[1972] I S.C.R. 408 at p. 420 and D. Cawasji d Co. vs State of Mysore [1975] 2 S.C.R. 511 at p. 527, referred to.


judgement:
Civil Appeal No. 1203 of 1968.
From the order dated the 4 4 1967 of the Punjab and Haryana High Court in L.P.A. No. 104 of 1967.
O. P. Sharma, for the appellant.
H. K. Puri and M. C. Dhingra, for the respondent.
The Judgment of the Court was delivered by JASWANT SINGH, J.
This appeal by certificate of fitness granted by the Punjab and Haryana High Court is directed against the judgment dated April 4, 1967 of a Division Bench of that Court passed in Letters Patent Appeal No. 104 of 1967 whereby the judgment and order dated December 19, 1966 of Narula, J. (as he then was) in Civil Writ Petition No 298 of 1966 was affirmed.
361 It appears that the respondent joined the Punjab Education A Department (Class II) Service by direct recruitment as senior lecturer in 1933.
He was promoted to Punjab Education Service (Class l) on October 1, 1949.
He was given the selection grade with effect from February 15, 1956 and in due course rose to the position of Director of Public Instruction cum Secretary to the Government of Punjab, Education Department.
He proceeded on leave preparatory to retirement on March 18, 1958, on attaining the age of super annuation.
In June; 1961, he received a copy of letter No. 5137 ED I 60/9269 dated May 2, 1961 addressed by the Secretary to Government, Punjab, Education Department to the Director of Public Instruction, Punjab, Chandigarh, conveying the sanction of the Governor of Punjab to the grant to him i.e. the respondent of superannuation pension and death cun1 retirement gratuity of Rs. 417.02 np.
per mensem and Rs. 17,030.25 np in lump sum respectively under rules 5.27 and 6.13 of the Punjab Civil Service Rules, Vol.
II read with para 9(1) (a) of the New Pension Rules, 1951.
It was stated in the aforesaid letter that personal file of the respondent had been examined with reference to rule 6.4 of the Punjab Civil Service Rules, Vol.
II and Government were satisfied that his service record was not satisfactory and a cut of 10% had accordingly been made in the amount of pension and death cum retirement gratuity admissible to his.
On January, 28, 1962, the respondent submitted representations to the Chief Minister and Governor of Punjab against the aforesaid decision of the Government to apply 10% cut in his pension and death cum retirenment gratuity but the same proved abortive.
After the establishment of the Board set up to examine and remove the grievances in the matters of promotion and fixation of pension etc.
Of the Gazetted officers of the Government, the respondent addressed a representation to the said Board on September 14, 1964, against the.
aforesaid decision of the Government to apply a cut of l0% in his pension and gratuity.
On November l . 1965, the respondent received a copy of letter No. EDI 4(64) 65/22436 dated October 21, 1965, addressed by the Education Commissioner and Secretary to Government, Punjab, Education Department, to the Director of Public Instruction, Punjab, intimating that in supersession of the aforesaid letter dated May 2, 1961 of the Punjab Government, it had been decided to grant to the respondent a superannuation pension and death cum retirement gratuity of Rs. 440.18 np per mensem and Rs. 18,927.50 np in lump sum respectively under rules 5.27 and 6.13 of the Punjab Civil Service Rules, Vol.
II read with para 9(i) (a) of the New Pension Rules, 1951.
In para 3 of the letter, it was reiterated that a cut of 5% had been made in the pension admissible to the respondent as his service record which had been examined with reference to rule 6.4 of the Punjab Civil Service Rules, Vol.
II had not been satisfactory.
Aggrieved by this communication, the respondent filed in the Punjab and Haryana High Court at Chandigarh a petition under Articles 226 and 227 of the Constitution, being Civil Writ Petition No. 298 of 1966, challenging the aforesaid decision of the Punjab Government which was, as already stated, allowed by Narula, J. r(as he then was) by his judgment and order dated December 19, 1966, following the Full Bench Judgment of his Court dated October 362 25,1966,in Civil Writ Petition No. 504 of 1954 entitled Shri K. R. Erry, Retired.
Superintending Engineer, 45, Cecil Hotel, Simla vs
The State of Punjab(l).
Dissatisfied with this judgment and order, the appellants preferred a Letters Patent Appeal, being L. P. A. No. 104 of 1967 which did not meet with success.
Thereupon the appellants applied for a certificate under Article 133 of the Constitution which was granted to them.
This is how the matter is before us.
Although in the grounds of appeal, it has been urged by the appeIlants that the Full Bench decision of the High Court of Punjab and Haryana in K. R. Erry 's(l) case (supra) is not in accordance with law as superannuation pension is a bounty and is given only as an act of grace, that ground is no longer available to the appellants in view of the decision of this Court in Deokinandan Prasad vs The state of Bihar & Ors.
(2) where it was held that pension is not a bounty payable on the sweet will and pleasure of the Government and the right of a Government servant to receive it is property under Article 31(1) of the Constitution and the State cannot withhold the same by a mere executive order.
It was further held in that case that the claim to pension was also property under Article 19(1) (f) of the Constitution and was not saved by clause (S) thereof.
The learned counsel appearing for the appellants has, however, made a feeble attempt to urge that no opportunity to show cause was required to be given to the respondent before passing the order imposing the cut in his superannuation pension and death cum retirement gratuity under clauses (a) and (b) of rule 6.4 of the Punjab Civil Service Rules (Pension Rules), as the order was an administrative order and the case did not fall within the purview of Article 311 (2) of the Constitution.
It has been further contended by learned counsel for the appellants that it was the judgment of this Court in M. Narasimachar vs The State of Mysore(8), and not the judgment in State of Punjab vs The K. R. Erry & Sobhag Rai Mehta(4) which governed the present case.
We regret we are unable to accede to these contentions.
Though the impugned order imposing cut in pension and gratuity is not one of reduction in rank falling within the purview of Article 311 (2) yet there can be no doubt that it adversely affected the respondent and such an order could not have been passed without giving him a reasonable opportunity of making his defence.
Reference r in this connection may be made with advantage to the decision of this Court in K. R. Erry & Sobhag Rai Mehta 's case (supra) where after an exhaustive review of the case law bearing on the point, it was observed at page 413 as follows: "Where a body or authority is judicial or where it has to determine a matter involving rights judicially because of express or implied provision, the principle of natural justice audi alteram partem applies.
See: Province of Bombay, vs Kusaldas section Advani & Ors. ; (725), and Board of High School & Intermediate Education, U.P. (1) I.L.R. (1917) Punjab & Haryana 278.
(2) [1971] Supp.
S.C.R. 634.
(3) [1960] I S.C.R. 981: A.I.R. 1960 S.C. 247.
(4) ; 363 ALLahabad vs Ghanshyam Das Gupta & ors.
(1962) Suppl.
A (3) S.C.R. 36.] With the profiteration of administrative decisions in the welfare state it is now further recognised by Courts both in England and in this country, (especially after the decision of House of Lords in Ridge vs Baldwin ; that where a body or authority is characteristically administrative the principle of natural justice is also liable to be invoked if the decision of that body or authority affects, individual rights or interests, and having regard to the particular situation it would be unfair for the body or authority not to have allowed a reasonable opportunity to be heard.
See: State of orissa vs Dr. (Miss) Binapani Dei & Ors.
[1967) 2 S.C.R. 625 and In re H. K. (An lnfant) In the former case it was observed as follows: C "An order by the State to the prejudice of a person in derogation of his vested rights may be made only in accordance with the basic rules of justice and fairplay.
The deciding authority, it is true, is not in the position of a Judge called upon to decide an action between contesting parties, and strict compliance with the forms of judicial procedure may not be insisted upon.
He is however under a duty to give the person against whom an enquiry is held an opportunity to set up`his version or drefence and an opportunity to correct or to controvert any evidence in the possession of the authority which is sought to be relied upon to his prejudice.
For that purpose the person against whom an enquiry is held must be informed of the case he is called upon to meet and the evidence in support thereof.
The rule that a party to whose prejudice an order is intended to be passed is entitled to a hearing applied alike to judicial tribunals and bodies of persons invested with authority to adjudicate upon matters involving civil consequences.
It is one of the fundamental rules of our constitutional set up that every citizen is protected against exercise of arbitrary authority by the State or its officers.
Duty to act judicially would therefore arise from the very nature of the function intended to be performed.
It need not be shown to be super added.
If there is power to decide and determine to the prejudice of a person, duty to act judicially is implicit in the exercise of such power.
If the essentials of justice be ignored and an order to the prejudice of a person is made, the order is a nullity.
That is a basic concept of the rule of law and importance thereof transcends the significance of a decision in any particular case.
" These observations were made with reference to an authority which could be described as characteristically administrative.
At page 630 it was observed: "It is true that the order is administrative in character, but even an administrative order which involves civil 364 consequences as already stated, must be made consistently with the rules of natural justice after informing the first respondent of the case of the State, the evidenve in support thereof and after giving an opportunity to the first respondent of being heard and meeting or explaining the evidence." "This case and the English case in re H.K. (An Infant) were spcifically referred to with approval in a decision of the constitutional bench of this Court in A. K. Kraipak & Ors. etc.
vs Union of India & Ors.
[1970] l S.C.R. 457".
The decision of this Court in M. Narasimachar 's case (supra) on which strong reliance has been placed on behalf of the appellants is of no assistance to them as the point as to whether an opportunity to show cause was to be afforded to a Government servant before applying a cut in his pension in view of the principle of natural justice embodied in the well known maxim audi alteram partem was never urged or gone into in that case.
Furthemore as pointed out by Palekar, J. while speaking for the Court in K. R. Erry & Sobhag Rai Mehta 's case (supra) the question whether pension is a bounty or property did not arise in the former case.
The present case is, in our , opinion, fully covered by the judgment of this Court in K. R. Erry & Sobha Rai Mehta 's case (supra).
For the foregoing reasons we are of the view that the impugned judgments do not suffer from any illegality and were rightly rendered.
In the result the appeal fails and is hereby dismissed with costs.
P.B.R. Appeal dismissed.

summary/full:
Purporting to act under r. 6.4 of the Punjab Civil Service Rules.
the State imposed a cut of 5 per cent on the pension and death cum retirement gratuity of the respondent.
who was a retired Government servant, on the ground that his service record was not satisfactory.
The High Court allowed the respondent 's writ petition challenging the decision of the Government.
Dismissing the appeal of the State.
^ HELD: The ground that superannuation pension is a bounty and is given as an act of grace is not available to the appellant.
In Deoki Nandan Prasad vs The State of Bihar, [1971] Supp.
S.C.R. 634, it was held by this Court (1) that pension is not a bounty payable on the sweet will and pleasure of the Government and the right of a Government servant to receive it is property under article 31 ( 1 ) of the Constitution.
and so the State cannot withhold the same by a mere executive order: and (2) the claim to pension is property under article 19 (1) (f) of the Constitution and is not saved by cl.
(5) of article 19.
[362C D] (2) Though the impugned order imposing the cut in pension and gratuity is not one of reduction in rank falling within the purview of article 311(2), yet there can be no doubt that it adversely affected the respondent and such an order could not have been passed without giving him a reasonable opportunity of making his defence.
[362G] State of Punjab vs K. R. Erry & Sobhag Rai Mehta [19731 2 S.C.R. 405, applied.
(3) M. Narasimachar vs The State of Mysore [1960] 1 S.C.R. 981, is inapplicable to this case because the point as to whether an opportunity to show cause was to be afforded to a retired Government servant before applying the cut in his pension in view of the principle of natural justice of audi alteram partem was never urged or gone into in that case, nor was the question whether pension was a bounty or property arose in that case.
[364 D E]