judgement:
Appeals Nos.
300 302 of 1964.
Appeals from the judgment and order dated March 16, 1962, of the Punjab High Court in Civil Writ Nos. 1194 to 1198 of 1961.
WITH Writ Petition No. 126 of 1964.
Under article 32 of the Constitution of India for enforcement of the fundamental rights.
N.C. Chatterjee, V. section Sawhney, section section Khanduja, section K. Manchanda, B. R. Kohli and Ganpat Rai, for the appellants (in the appeals) the petitioner (in the Writ Petition).
J. N. Kaushal, Advocate General for the State of Punjab, B. K. Khanna and R. N. Sachthey, for the respondent (in all the appeals and the writ petition).
The Judgment of WANCHOO, HIDAYATULLAH, SHAH and SIKRI JJ.
was delivered by WANCHOO, J. MUDHOLKAR J. gave an inde pendent judgment.
Wanchoo, J. These three appeals are against the judgment of the Punjab High Court on certificates granted by that Court.
The writ petition has been filed by Uma Shankar appellant in this Court and raises the same question as in the appeals, namely, whether section 14(e) of the Punjab Municipalities Act, No. III of 1911 (hereinafter referred to as the Act) is unconstitutional inasmuch as it violates article 14 of the Constitution.
The appeals and the writ petition will therefore be dealt with together.
We may add that we are not concerned in these appeals with section 14 (a) and (b) and that part of section 14 (e) which provides for recall at the request of the majority of the electors, and express no opinion in that behalf.
The question arises in this way.
The appellants were elected to the Municipal Committee, Batala in elections held on January 22, 1961.
The result of the elections was notified in the Punjab Government Gazette on February 27, 1961.
The new members took oath on March 16, 1961 and began functioning from that date.
On August 4, 1961, notifications dated July 26, 1961 860 were issued in which it was stated that the Governor of Punjab for reasons of public interest was pleased to direct that the seats of the three appellants shall be vacated from the date of the publication of the notifications in the State Gazette and to direct further that under sub section
(3) of section 16 of the Act, the three appellants shall be disqualified for election for a period of one year from the date specified.
No notice was issued to the appellants to show cause why their seats be not vacated and no hearing was given to them before the action in question was taken by the Governor of Punjab.
The appellants ' case was that after the notifications vacating their seats and disqualifying them had been issued, they came to know that these notifications had been issued on the basis of a resolution passed by the out going municipal committee on March 13, 1961 to the effect that the appellants had taken part in a demonstration on March 10, 1961 and had broken some glass panes of the municipal building.
The appellants ' further case was that the outgoing municipal committee had been dominated by members belonging to the Congress Party; but these members had mostly been defeated in the fresh elections held on January 22, 1961 and it was in consequence that the resolution was passed mala fide by these persons in order to harm the appellants.
A number of grounds were taken in the petitions filed before the High Court challenging the order of the Governor of Punjab.
Now however we are only concerned with one ground, namely, that the provision contained in section 14(e) was discriminatory and hit by article 14 of the Constitution.
It appears however that this ground was not urged before the High Court and that is why the writ petition has been filed in this Court specifically raising this point again, and thus in the present appeals and the writ petition we are only concerned with the question whether section 14 (e) of the Act is bad as it violates article 14 of the Constitution.
We are of opinion that the appeals must succeed on this point.
it is necessary in this connection to refer to section 14(e), section 16 and section 24(3) of the Act.
The relevant part of section 14(e) with which we are concerned provides that notwithstanding anything in the foregoing sections of Chapter III, which deals with constitution of committees, appointment and election of members, term of office of members of municipal committees, the State Government may, at any time, for any reason which it may deem to affect the public interest, by notification, direct that the seat, of any specified member, whether elected or appointed, shall be vacated on a given date, and in such case, such seat shall be 861 vacated accordingly, notwithstanding anything in the Act or in the rules made thereunder.
Further sub section
(3) of section 16 provides that "a person whose seat has been vacated under the provisions of section 14 (e) may be disqualified for election for a period not exceeding five years.
" There is no provision for giving notice to a member against whom action is taken under section 14(e) and he is not 'entitled to any hearing before action is taken against him.
Further action can be taken against a member for any reason which the State Government may deem to affect the public interest.
Section 16 is another provision which gives power to the State Government to remove any member of a municipal com mittee.
This power is exercised for reasons given in cl.
(a) to cl.
(g) of section 16 (1).
The proviso to section 16 (1) lays down that "before the State Government notifies the removal of a member under this section, the reasons for his proposed removal shall be communicated to the member concerned, and he shall be given an opportunity of tendering an explanation in writing.
" The proviso therefore requires a hearing before the State Government takes action under section 16 (1).
Sub section (2) of section 16 provides for disqualification and says inter alia that any person removed under section 16 (1) shall be disqualified for election for a period not exceeding five years.
There is a slight difference here inasmuch as under this provision there must be disqualification for some period not exceeding five years, though if a members seat is vacated under section 14 (e) the disqualification is entirely in the discretion of the State Government and is not imperative.
That however has no effect on the question whether the relevant part of section 14 (e) is unconstitutional as it is hit by article 14.
Reference may now be made to section 24 on which reliance has been placed on behalf of the State.
Section 24 (1) inter alia prescribes the oath before a member can begin to function.
Section 24(2) lays down inter alia that if a person omits or refuses to take the oath as provided in sub section (1) within three months of the date of the notification of his election or within such further period as the State Government may consider reasonable, his election becomes invalid.
Sub section (3) of s.24 provides inter alia that where the election becomes invalid under sub section
(2), a fresh election shall be held.
The Proviso to sub section
(3) on which stress has been laid on behalf of the State lays down inter alia that the State Government may refuse to notify the election as member of any person who could be 862 removed from office by the State Government under any of the provisions of section 16 or of any person whom the State Government for any reason which it may deem to affect the public interests may consider to be unfitted to be a member of the committee, and upon such refusal the election of such person shall be void.
The argument on behalf of the appellants is that section 16 which gives power to the State Government to remove a member pro vides that before that power can be exercised, reasons for the removal have to be communicated to the member concerned and he is to be given an opportunity of tendering his explanation in writing.
So it is urged that before action can be taken to remove a member under section 16, the proviso thereof requires that the member concerned is to be given a hearing as provided therein.
The argument proceeds that the relevant part of section 14(e) also provides in effect for the removal of a member though it actually says that the seat shall be vacated and that this removal has to be for any reason which in the opinion of the State Government affects the public interest.
It is urged that when section 16 (1) provides for removal for reasons given in cls.
(a) to (g), that removal also is in the public interest.
Therefore there are two provisions in the Act for removal of a member in the public interest, one contained in section 14(e) and the other in section 16.
Where the State Government takes action under section 16(1), it has to give a hearing in terms of the proviso thereof to the member concerned, but if for exactly the same reason the State Government chooses to take action under section 14(e) it need not give any opportunity to the member to show cause why he should not be removed.
Further it is submitted that though section 14 (e) may be said to be wider inasmuch as cls.
(a) to (g) may in a conceivable case not completely cover all that may be included in the term "public interests", the removal for reasons given in cls.
(a) to (g) in section 16(1) is inpublic interest and therefore what is contained in section 16(1) is certainly all covered by section 14(e).
In consequence there are two provisions in the Act for removing a member, one contained in section 16 where the State Government cannot remove the member without giving him a hearing in the manner provided in the proviso, and the other in section 14(e) where no hearing is to be given and the member is not even called upon to show cause.
Finally it is urged that it depends entirely on the State Government to use its powers either under section 14(e) or under section 16(1), where the two overlap and therefore there is clear discrimination, as the provision in section 14(e) is more drastic and does not even provide for hearing the member concerned.
863 We are of opinion that these contentions on behalf of the appellants are correct.
There is no doubt that the removal contemplated in section 16(1) for reasons in cls.
(a) to (g) thereof, as their content shows, is in the public interest and the proviso to section 16(1) provides for a hearing in the manner indicated therein.
On the other hand section 14(e) which also provides for removal in the public interest makes no provision for hearing the member to be removed.
Even if section 14 (e) is wider than section 16(1), there is no doubt that all the reasons given in cls.
(a) to (g) are in the public interest and therefore even if the State Government intends to remove a person for any reasons given in cls.
(a) to (g) it can take action under section 14(e) and thus circumvent 'the provisions contained in the proviso to section 16(1) for hearing.
Thus there is no doubt that section 14(e) which entirely covers section 16(1) is more drastic than section 16(1) and unlike section 16(1) makes no provision for even calling upon the member concerned to explain.
In this view of the matter it is clear that for the same reasons the State Government may take action under section 16(1) in which case it will have to give notice to the member concerned and take his explanation as provided in the proviso to section 16(1); on the other hand it may choose to take action under section 14(e) in which case it need not give any notice to the member and ask for an explanation from him.
This is obviously discriminatory and therefore this part of section 14(e) must be struck down as it is hit by article 14 of the Constitution.
Reliance in this connection is placed on behalf of the State on the proviso to section 24(3).
Section 24(1) to (3) inter alia provides for what happens where a member omits or refuses to take oath as provided therein.
Then comes the proviso to section 24 (3), which gives power to the State Government to refuse to notify the election of a person elected on any of the grounds mentioned in section 16(1).
It is not necessary for us to decide whether the State Government can take action under this proviso read with section 16(1) without giving notice as provided in the proviso to section 16(1).
That question may have to be decided in a case where the State Government takes action under this part of the proviso to section 24(3) without giving notice to the person concerned under the proviso to section 16(1) and without giving him any opportunity of hearing as provided therein.
The proviso to section 24(3) further provides that the State Government may refuse to notify the name of any person elected if in its opinion he is unfit to be a member of a municipal committee on ground of public interest.
It is urged that there is no provision in this con 864 nection for notice and.
hearing of the person elected.
That seems to be so, but again the question may arise in a proper case whether this provision would be constitutional.
We see no connection between the proviso to section 24 (3) and the provision contained in section 14(e).
The proviso to section 24(3) is complete in itself and deals with a situation where the State Government refuses to notify the election of a person who has been elected.
Section 14(e) on the other hand provides for vacation of the seat of a member after he has taken the oath of office.
Therefore the constitutionality or otherwise of section 14(e) will depend upon its contrast with section 16 (1) which also provides for removal of a member.
As we have already indicated on comparing the two provisions both of which provide for removal of a member in public interest we find that the provision contained in section 14(e) as compared to the provision in section 16(1) is more drastic and arbitrary and denies the member concerned an opportunity being heard as provided in section 16(1) by the proviso thereof.
Consequently we are of opinion that this part of section 14(e) is discriminatory and must be struck down as unconstitutional under article 14 of the Constitution.
In this connection our attention is drawn to Shri Radeshyam Khare vs The State of Madhya Pradesh(1) on which reliance is placed on behalf of the State.
In that case this Court was concerned with sections 53A and 57 of the C.P. and Berar Municipalities Act which to a certain extent were held to overlap.
The argument under article 14 did not really arise in that case because the two provisions dealt with two different situations.
Under section 57 the State Government had the power to dissolve a committee after giving it a reasonable opportunity to furnish its explanation.
Under section 53A the committee was not dissolved, but the State Government had the power to appoint an executive officer and confer upon him such powers of the committee, its president, vice president or secretary as it thought fit, though the reason for taking action under section 53A (1) apparently overlapped the reasons for dissolving a committee under section 57(1).
Because of this difference in the scope of the two provisions contained in sections 53A and 57, there could be no question of application of article 14 to that case.
In the present case, however, section 16(1) which deals with removal of a member for reasons given in cls.
(a) to (g) is completely covered by section 14(e) which deals with vacation of a seat (1) 865 in the public interest, and it is open to the State Government either to proceed under one provision or the other for exactly the same reasons.
One of the provisions provides for notice and hearing while the other does not and is therefore more drastic and arbitrary.
In these circumstances there is in our opinion a clear discrimination in view of article 14 and the State Government cannot take advantage of the decision in Shri Radeshyam Khare 's case(1).
We therefore allow the appeals as well as the writ petition and declaring section 14(e) insofar as it gives power to the State Government to vacate a seat on the ground of public interest to be unconstitutional, set aside the notifications vacating the seats of the appellants.
The direction as to disqualification therefore also fails.
The appellants will get their costs from the State throughout.
One set of hearing fee.
No costs in the writ petition.
Mudholkar, J. I have read the judgment prepared by my brother Wanchoo and while I agree with him that the appeals must be allowed I would prefer to give my own reasons for that conclusion.
The appellants in these three appeals were elected to the Municipal Committee, Batala in the elections held on January 22, 1961.
On August 4, 1961, that is, after these persons started functioning as members of the Municipal Committee the Government of Punjab issued a notification under section 14, cl.
(e) of the Punjab Municipalities Act, 1911 in which it was stated that the Governor of Punjab for reasons of public interest was pleased to direct that the seats of these appellants shall be vacated from the date of publication of the notification and further stated that they would be disqualified for election for a period of one year from the date specified.
This notification is challenged by the appellants on the ground that the provisions contained in section 14(e) of the Act under which it was issued being discriminatory were rendered void by article 14 of the Constitution.
Section 14 of the Act as it now stands runs thus "Notwithstanding anything in the foregoing sections of this chapter, the State Government may at any time for any reason which it may deem to affect the public interests, or at the request of a majority of the electors, by notification, direct (1) 866 (a) that the number of seats on any committee shall be increased or reduced; (b) that any places on a committee which are required to be filled by election shall be filled by appointment, if a sufficient number of members has not been elected; (e) that the seat, of any specified member, whether elected or appointed, shall be vacated on a given date, and in such case, such seat shall be vacated accordingly, notwithstanding anything in this Act or in the rules made thereunder.
" It would be clear from a perusal of the above provision that powers conferred by section 14 can be exercised by the State Government (i) for any reason which it may deem fit to affect the public interest or (ii) at the request of the majority of the electors.
We are not concerned in this case with the second circumstance and, therefore, it is unnecessary to consider whether that part of section 14 which enables the State Government to take action at the request of a majority of electors is valid or not.
Similarly we are not concerned in these appeals with the powers exercisable by the State Government under cls.
(a) and (b).
AR that arises for consideration before us is whether the conferral of power upon the State Government to require that the seat of any specified member of the Committee shall be vacated "for any reason which it may deem to affect the public interest" is valid.
The expression "public interest" is of wide import and what would be a matter which is in the public interest would necessarily depend upon the time and place and circumstances with reference to which the consideration of the question arises.
But it is not a vague or indefinite ground, though the Act does not define what matters would be regarded as being in the public interest.
It would seem that all grounds set out in section 16, which confers upon the State Government the power to remove any member of a Committee and sets out a number of grounds upon which this could be done, would be in the public interest.
Section 14, however, apart from the fact that the power it confers upon the State Government is not limited to matters set, out under section 16, confers upon the Government the power to determine not merely what is in the public interest but also what "for any reason which it may deem to affect the public interest.
" This would suggest that the power so 867 conferred would extend to matters which may not be in the public interest.
For, that would be the effect of introducing the fiction created by the words "for any reason which it may deem".
There is no guidance in the Act for determining what matters, though not in public interest, may yet be capable of being deemed to be in the public interest by the State Government.
In the circumstances it must be held that the power which conferred upon the State Government being unguided is unconstitutional.
For this reason I hold that section 14 in so far as it confers power on the State Government to require a seat of a member of a committee to be vacated for any reason which it may deem to affect public interest as violative of article 14 of the Constitution and, therefore, unconstitutional.
In the result each of the appeals is allowed with costs and I accordingly do so.
Appeals allowed.

summary/full:
The appellants, who had been elected members of the Municipal Committee, Batala, challenged the Notification issued under section 14(e) of the Punjab Municipalities Act (III of 1911) directing their removal and disqualifying them from election for a period of one year.
It was contended on their behalf that there were two provisions in the Act, i.e. section 14(e) and section 16(1) clauses (a) to (g) under which a member could be removed in the public interest; and whereas action could only be taken under section 16(1) after notice and an opportunity for a hearing to the member concerned there was no such requirement in the case of section 14(e).
This sec tion was therefore hit by Article 14 and consequently the Notifications were invalid.
HELD : (per Wanchoo, Hidayatullah, Shah and Sikri, JJ.) If the State Government intended to remove a person for any of the reasons given under section 16(1) cases (a) to (g) it could take action under section 14(e) and thus circumvent the provision in section 16(1) for a hearing.
The relevant part of section 14(e) entirely covered section 16(1) but was more drastic.
It was therefore obviously discriminatory and violative of article 14 of the Constitution.
[863 C E] Shri Radeshayam Khare vs The State of Madhya Pradesh , distinguished.
No assistance could be derived by the respondent State from the fact that under the proviso to section 24(3), the State Government had power to refuse to notify the election of a person elected on any of the grounds mentioned in section 16(1) and there was no provision in this connection for notice and hearing of the person elected.
Apart from the question of the constitutionality of this provision, there was no connection between the proviso to section 24(3) and the provision contained in section 14(e).
The proviso to section 24(3) was complete in itself and dealt with a situation where the State Government refused to notify the election of a person who had been elected.
Section 14(e) on the other hand provided for the vacation of the seat of a member after he had taken the oath of office.
Therefore the constitutionality or otherwise of section 14(e) would depend upon its contrast with section 16(1) which also provided for the removal of a member.
[864 A C Per Mudholkar, J. The power conferred by section 14 upon the State Government to require that the seat of any member shall be vacated "for any reason which it may deem to affect the public interest" is unconstitutional.
The expression 'public interest ' is of wide import and what would 859 be a matter which is in the public interest would necessarily depend upon the time and place and circumstances with reference to which the consideration of the question arises.
But it is not a vague or indefinite ground.
There is no guidance in the Act for determining what matters.
though not in public interest may yet be capable of being deemed to affect the public interest.
[866 E G; 867 A C]


judgement:
Appeal No. 503 of 1963.
Appeal from the judgment and order dated January 31, 1962, of the Punjab High Court in I.T.R. No. 28 of 1960.
B. N. Kripal and A. N. Kripal, for the appellant.
Gopal Singh and R. N. Sachthey, for the respondent.
April 9, 1964.
The judgment of the Court was delivered by SUBBA RAO, J.
This appeal by certificate granted by the High Court of Punjab raises the question whether interest paid under section 34 of the Land Acquisition Act, 1894, herein after called the Act, is of the nature 'of a capital receipt or of a revenue receipt.
The relevant facts are not in dispute and they may be briefly stated.
The appellant, Dr. Shamlal Narula, is the Manager of a Hindu undivided family, which owned, inter alia, 40 bighas and 11 biswas of land in the town of Patiala.
The Patiala State Government initiated land acquisition proceedings for acquiring the said land under Regulation then prevailing in the Patiala State.
It is common case that the State Regulations are in pari materia with the provisions of the Act.
The State of Patiala first merged into the Union of Pepsu and later the Union of Pepsu merged into the State of Punjab.
It is also common case that there was a Land Acquisition Act in the Union of Pepsu containing provisions similar to those obtaining in the Act.
On October 6, 1953, the Act was extended to the Union of Pepsu.
On September 30, 1955, the Collector of Patiala made an award under the Act ,as a result of which the appellant received on December 1, 1955, a sum of Rs. 2,81,822/ , which included a sum of 48,660/ as interest up to the date of the award.
For the year 1956 57, the Income tax Officer included the said interest in the income of the Hindu undivided family of which the appellant is the manager, and assessed the same to income tax, after overruling the appellant 's contention that the said interest was a capital receipt and, therefore, not liable to tax.
On June 14, 1957, the Appellate Assistant Commissioner confirmed the order of the Income tax Officer.
The Appellant preferred an appeal to the Income tax Appellate Tribunal.
The said Tribunal by its order dated July 9, 1957, held that 670 the said amount representing the interest was a capital re ceipt and on that finding the said amount was excluded from the total income of the assessee.
At the instance of the Commissioner of Income tax the said Tribunal referred the following question to the High Court of Punjab under section 66 (1) of the Income tax Act, 1922: "Whether on a true interpretation of section 34 of the Land Acquisition Act and the Award given by the Collector 'of Pepsu on the 30th September, 1955, the sum of Rs. 48,660/ , was captital receipt not liable to tax under the Indian Income tax Act?" The said reference was heard by a Division Bench of the High Court and it held that the said amount was not a capital but a revenue receipt and as such liable to tax under the Indian Income tax Act.
Hence the present appeal.
Learned counsel for the appellant raised before us two contentions, namely, (i) the sum of Rs. 4.8,660/ received by the appellant under the award was compensation for deprivinl,7 him of his right to possession of his property and was therefore, a capital receipt not liable to tax; and (ii) whatever may be the character of the amount awarded under section 34 of the Act by way of interest in a case where possession of the land has been taken by the State after the award, in a case where possession of the land acquired has been taken before the award, it would be a capital receipt, for it is said that in the latter the interest necessarily takes the character of compensation for depriving the owner of the land his, right to possession.
On behalf of the Revenue the order of the High Court is sought to be sustained for the reasons stated therein.
The question raised turns upon the true meaning of the provisions of section 34 of the Act.
It reads: "When the amount of such compensation is not paid or deposited on or before taking possession of the land, the Collector shall pay the amount awarded with interest thereon at the rate 'of six per ~centum per ~annum from the time of so ~takin possession until it should have been so paid or deposited".
The section itself makes a distinction between the amount awarded as compensation and the interest payable on the, amount so awarded.
The interest shall be paid on the amount awarded from the time the Collector takes possession until the amount is paid or deposited.
To appreciate the scope of the section it is necessary to notice briefly the scope of an award and the manner in which possession is taken under the Act.
After the statutory notifications are issued and the 671 requisite notice is given to the persons interested in the land so acquired, the Collector, after holding the necessary enquiry, makes an award, inter alia, determining the amount of compensation payable for the land so acquired.
Section 15 in of the Act says that in determining the amount of compensation the Collector shall be guided by the provisions contained in sections 23 and 24.
Section 23 provides for the matters to be considered in determining compensation; section 24 describes the matters to be neglected in determining the compensation.
A perusal of the provisions of section 23 shows that interest is not an item included in the compensation for any of the matters mentioned therein; nor is it mentioned as a consideration for the acquisition of the land.
Under cl.
(2) of section 23, the Legislature in express terms states that in addition to the market value of the land the court shall in every case award a sum of 15 per cent.
of such market value in consideration of the compulsory nature of the acquisition.
If interest on the amount of compensation determined under section 23 is considered to be a part of the compensation or given consideration of the compulsory nature of the acquisition, the Legislature would have provided for it in section 23 itself.
But instead, payment of interest is provided for separately under section 24 in Part V of the Act under the heading "Payment".
It is so ,done, because interest pertains to the domain of payment after the compensation has been ascertained.
It is a consideration paid either for the use of the money or forbearance from demanding it after it has fallen due.
Therefore, the Act itself makes a clear distinction between the compensation payable for the land acquired and the interest payable on the compensation awarded.
Another approach to the problem leads to the same result.
Under section 16 of the Act when the Collector has made an award under section 11 he may take possession of the land which shall thereupon vest absolutely in the Government free from all encumbrances.
Under section 17 thereof: "In cases of urgency, whenever the appropriate Government so directs, the Collector, though no such award has been made, may, on the expiration of fifteen days from the publication of the notice mentioned in section 9, sub section (1), take possession of any waste land or arable land needed for public purposes or for a Company.
Such land shall thereupon vest absolutely in the Government, free from all encumbrances".
Under both the sections the land acquired vests absolutely in the Government after the Collector has taken possession in one case after the making of the award and in the other, even 672 before the making of the award.
In either case, some time may lapse between the taking of possession of the acquired land by the Collector and the payment or deposit of the com pensation to the person interested in the land acquired.
As the land acquired vests absolutely in the Government only after the Collector has taken possession of it, no interest therein will be outstanding in the claimant after the taking of such possession: he is divested of his title to the land and his right to possession thereof, and both of them vest thereafter in the Government.
Thereafter he will be entitled only to be paid compensation that has been or will be awarded to him.
He will be entitled to compensation, though the ascertainment thereof may be postponed, from the date his title to the land and the right to possession thereof have been divested and vested in the Government.
It is as it were that from that date the Government withheld the compensation amount which the claimant would be entitled to under the provisions of the Act.
Therefore, a statutory liability has been imposed upon the Collector to pay interest on the amount awarded from the time of the taking possession until the amount is paid or deposited.
This amount is not, therefore, compensation for the land acquired or for deprivin the claimant of his right to possession, but is that paid to the claimant for the use of his money by the State.
In this view there cannot be any difference in the legal position between a case where possession has been taken before and that where possession has been taken after the award, for in either case the title vests in the Government only after possession has been taken.
The Legislature expressly used the word "interest" with its well konwn connotation under section 34 of the Act.
It is, therefore, reasonable to give that expression the natural meaning it bears.
There is an illuminating exposition of the expression "interest" by the House of Lords in Westminster Batik, Ltd. vs Riches(1).
The question there was whettier where in an action for recovery of any debt or damages the court exercises its discretionary power under a statute and orders that there shall be included in the sum for which the judgment is given interest on the debt or damages, the sum of interest so included is taxable under the Income tax Acts.
If the said amount was "interest of money" within Schedule D and the General Rule 21 of the All Schedules Rules of the Income Tax Act, 1918, income tax was payable thereon.
that context it was contended that money awarded as damages for the detention of money was not interest and bad not the quality of interest.
Lord Wright observed: "The general idea is that he is entitled to compensation for the deprivation.
From that point of view (1) , 189.
673 it would seem immaterial whether the money was due to him under a contract express or implied, or a statute, or whether the money was due for any other reason in law.
In either case the money was due to him and was not paid or, in other words, was withheld from him by the debtor after the time when payment should have been made, in breach of his legal rights, and interest was a compensation, whether the compensation was liquidated under an agreement or statute, as for instance under section 57 of the Bills of Exchange Act, 1882, or was unliquidated and claimable under the Act as in the present case.
The essential quality of the claim for compensation is the same, and the compensation is properly des cribed as interest".
This passage indicates that interest, whether it is statutory or contractual, represents the profit the creditor might have made if he had the use of the money or the loss he suffered, because he had not that use.
It is something in addition to the capital amount, though it arises 'out of it.
Under section 34 of the Act when the Legislature designedly used the word "interest" in contradistinction to the amount awarded, we do not see any reason why the expression should not be given the natural meaning it bears.
The scheme of the Act and the express provisions there,of establish that the statutory interest payable under section 34 is not compensation paid to the owner for depriving him of his right to possession of the land acquired, but that given to him for the deprivation of the use of the money representing the compensation for the land acquired.
We shall now proceed to consider the case law cited at the Bar.
Where a Tribunal directed the Improvement Trust, under the provisions of section 28 of the Land Acquisition Act, to pay interest to the assessee from the date of taking possession ,of the property to the date of payment, a Division Bench of the Allahabad High Court held, in Behari Lal Bhargava vs Commissioner of Income tax, C. P. and U. P. (1), that the interest so awarded was in the nature of compensation for the loss of the assessee 's right to retain possession of the property acquired and, therefore, was no income liable to tax.
The reason for the said conclusion is stated thus: "It is not the "fruit of a tree" to borrow the simile used in Shaw Wallace 's case (2) but was compensation or damages for loss of the right to re (1) , 24.
(2) A.I.R. 1932 P.C. 138.
LP(D)lSC 22 .
674 tain possession; and it seems to us that Section 28 was designed as a convenient method of measuring such damages in terms of interest".
As we have pointed out earlier, as soon as the Collector has taken possession of the land either before or after the award the title absolutely vests in the Government and thereafter owner of the land so acquired ceases to have any title or right of possession to the land acquired.
Under the award he gets compensation for both the rights.
Therefore, the interest awarded under section 28 of the Act, just like under section 34 thereof, cannot be a compensation or damages for the loss of the right to retain possession but only compensation payable by the State for keeping back the amount payable to the owner.
Adverting to the said decision a Division Bench of the Madras High Court in Commissioner of Income tax, Madras vs CT.
N. Narayanan Chettiar(1) observed: ". . . with great respect we find ourselves unable to follow the reasoning.
Certainly we are not prepared to accept the judgment as a guide to the decision in the present case".
So was the interest granted to an assesse under section 18A of the Income tax Act on the advance payment of tax by him under the provision of that section held to be income taxable in his hand: see Commissioner of Income tax, Bihar and Orissa vs Maharajadhiraj Sir Kameshwar Singh(2).
There when the decision of the Allahabad High Court in Behari Lal Bhargava 's case(3) was relied upon, the learned Judges,.
refusing to follow it, observed thus: "It is not a matter of discussion for the Central Government but the duty to pay interest is imposed by statute.
Apart from this I think (with great respect) that the Allahabad decision is of doubtful authority.
The decision is not consistent with the principle laid down in Schulze vs Bensted(1) and Commissioners of Inland Revenue vs Barnato(5).
The Madras High Court expressly declined to follow the Allahabad case in Commissioner of Income tax vs Narayanan Chettiar(1).
" The Kerala High Court in P. V. Kurien vs Commissioner of Income tax, Kerala(6) held that interest paid on the enhanc ed amount of compensation directed to be paid by an appellate (1) , 477.
(2) , 225.
(3) (4) (5) (6) 675 court in an appeal against an award of compensation for compulsory acquisition of land under the Land Acquisition Act represented capital and was not income liable to be taxed under the Indian Income tax Act.
It was argued there, sum estimated in terms of interest.
In coming to the conclusion which they did, the learned Judges relied upon the decision of the Judicial Committee in Inglewood Pulp and Paper Co., Ltd. vs New Burnswick Electric Power Commission(1) and that of the Madras High Court in Revenue Divisional Officer, Trichinopoly vs Venkatarama Ayyar(2).
In the former, the Judicial Committee directed the purchaser who had taken delivery and possession of the property he had purchased before the sale to pay interest to the vendor on the purchase money from the date he had taken possession on the ground that "the right to receive interest takes the place of the right to retain possession and is within the rule"; and in the latter, though it arose under the Land Acquisition Act, possession was taken by the Government under circumstances falling outside the scope of sections 16 and 17 of the said Act.
In both the cases the title did not pass to the vendee in one case and to the State in the other when possession was taken by them and, therefore, it may be said that the owner was given interest in place of his right to retain possession of the property.
But in a case where title passes to the State, the statutory interest provided thereafter can only be regarded either as representing the profit which owner 'of the land might have made if he had the use of the money or the loss he suffered because he had not that use.
In no sense of the term can it be described as damages or compensation for the owner 's right to retain possession, for he has no right to retain possession after possession was taken under section 16 or section 17 of the Act.
We, therefore, hold that the statutory interest paid under section 34 of the Act is interest paid for the delayed payment of the compensation amount and, therefore, is a revenue receipt liable to tax under the Income tax Act.
The order of the High Court is, therefore, correct.
In the result, the appeal fails and is dismissed with costs.
Appeal dismissed.
(1) (2) L/ P(D) ISCI 22(a) .

dataset_name: IN-Abs

summary/full:
The State acquired the land of the appellant.
The Collector made an award under the Land Acquisition Act as a result of which the appellant received Rs. 2,81,822/ , which included a sum of Rs. 48,660/ as interest upto the date of the award. 'The Income tax Officer included Rs. 48,660/ (the said interest) in the total income of the appellant on the ground that the said amount was not a capital receipt.
The matter went upto the Income tax Appellate Tribunal.
The Tribunal excluded the said interest from the total income of the assessee (appellant) on the ground that it was a capital receipt.
On a reference the High Court held that the said interest was not a capital but a revenue receipt and as such liable to tax under the Indian Income tax Act.
The High Court granted a certificate to the appellant to file an appeal to the Supreme Court.
Hence the appeal.
Held: (i) The scheme of the Land Acquisition Act and the express provisions thereof establish that the statutory in terest payable under section 34 is not compensation paid to the owner for depriving him of his right to possession of the land acquired, but that given to him for the deprivation of the use of the money representing the compensation for the land acquired.
In other words the statutory interest paid under section 34 of the Act is interest paid for the delayed payment of the compensation amount and, therefore, is a revenue receipt liable to tax under the Income tax Act.
Behari Lal Bhargava vs Commissioner of Income tax, C.P. and U.P., (1941), 9 I.T.R. and P. V. Kurien, vs Cmmissioner of Income tax, Kerala, , overruled.
Westminister Bank Ltd. vs Riches, , Com missioner of Income tax, Madras vs CT.
N. Narayanan Chettiar, and Commissioner of Income tax Bihar and Orissa vs Maharajadhiraj Sir Kameshwar Singh, , approved.
Inglewood Pulp and Paper Co. Ltd. vs New Brunswaick Electric Power Commission, and Revenue Divisional Officer, Trichinopoly vs Venkatarama Ayyar, , distinguished.
Shaw Wallace 's case, A.I.R. 1932 P.C. 138, Schulze vs Bensted, , and Commissioner of Inland Revenue vs Barnato, , referred to.
(ii) The interest under section 34 of the Land Acquisition Act shall be paid on the amount awarded from the time the Collector take possession until the amount is paid or deposited.
It 669 makes no difference in the legal position between a case where possession has been taken before and that where possession 'has been taken after the award, for in either case the title vests" in the Government only after possession has been taken.
In no sense of the term can it (interest) be described as damages or compensation for the owner 's right to, retain Possession, for as he has no right to retain possession after possession was taken under section 16 or section 17 of the Act.


judgement:
No. 61 of 1950.
Appeal from an order of the High Court of Patna dated 9th September, 1948, (Agarwala C.J. and Meredith J.) in M.J.C. No. 5 of 1948.
The appeal was originally filed as Federal Court Appeal No. 71 of 1948 on a certificate granted by the Patna High Court under cl. 31 of the Letters Patent of that High Court that the case was a fit one for appeal to the Federal Court.
H.P. Sinha (S.C. Sinha, with him) for the appellant.
S.K. Mitra (section L. Chibber, with him) for the respondent.
November 30.
The judgment of the Court was deliv ered by FAzL ALl J.
800 FAZL ALI J.
This is an appeal from an order of the High Court of Judicature at Patna dated the 9th September, 1948, declining to call upon the board of Revenue to state a case under section 21 (3) of the Bihar Sales Tax Act, 1944 (Act VI of 1944), with reference to an assessment made under that Act.
The Bihar Sales Tax Act was passed in 1944, and section 4 of the Act provides that "every dealer whose gross turn over during the year immediately preceding the commencement of the Act exceeded Rs. 5,000 shall be liable to pay tax under the Act on sales effected after the date so notified.
" It is not disputed that, having regard to the definitions of dealer, goods and sale under the Act, the appellant, who has been doing contract work on a fairly extensive scale for the Central Public Works Department and the East Indian Railway, comes within the category of a dealer mentioned in section 4.
Section 7 of the Act provides that "no dealer shall, while being liable under section 4 to pay tax under the Act, carry on business as a dealer unless he has been registered under the Act and possesses a registration certificate".
In pursuance of this provision, the appellant filed an applica tion for registration on the 19th December, 1944, and a certificate of registration was issued to him on the 21st December, 1944.
On the 8th October, 1945, the Sales Tax Officer issued a notice to the appellant asking him to produce his accounts on 10th November, 1945, and to show cause why in addition to the tax to be finally assessed on him a penalty not exceeding one and a half times the amount should not be imposed on him under section 10 (5) of the Act.
Section 10 (5), under which the notice purported to have been issued, runs thus: "If upon information which has come into his posses sion, the Commissioner is satisfied that any dealer has been liable to pay tax under this Act in respect of any period and has nevertheless wilfully failed to apply for registra tion, the Commissioner shall, alter giving the dealer a reasonable opportunity of being heard, assess, to the best of his judgment, the amount of tax, if any, due from the dealer in respect of such 801 period and all subsequent periods and the Commissioner may direct that the dealer shall pay, 'by way of, penalty, in addition to the amount so assessed, a sum not exceeding one and a half times that amount.
" The appellant appeared before the Sales Tax Officer in response to this notice, but obtained several adjournments till 16th March, 1046, and ultimately failed to appear.
Thereupon, he was assessed by the Sales Tax Officer, accord ing to the best of his judgment, and was ordered to pay Rs. 4,526 13 0 as tax and a penalty amounting to one and a half times the amount assessed, under section 10 (5) of the Act.
The appellant appealed to the Commissioner against the assessment and the penalty levied upon him, but his appeal was dismissed on the 6th June, 1946.
He then filed a peti tion for revision to the Board of Revenue, against the order of the Commissioner, but it was dismissed on the 28th May, 1947.
He thereupon moved the Board of Revenue to refer to the High Court certain questions of law arising out of is order of the 28th May, but Mr. N. Baksi, a Member of the Board, by his order of the 4th December, 1947, rejected the petition with the following observations : "No case for review of my predecessor 's order made out.
No reference necessary.
" Section 21 of the Act provides that if the Board of Revenue refuses to make a reference to the High Court, the applicant may apply to the High Court against such refusal, and the High Court, if it is not satisfied that such refusal was justified, may require the Board of Revenue to state a case and refer it to the High Court.
The section also provides that "the High Court upon the hearing of any such case shall decide the question of law raised thereby, and shall deliver its judgment thereon containing the grounds on which such decision is founded, and shall send to the Board of Revenue a copy of such judg ment under the seal of the Court . . and the Board shall dispose of the case accordingly.
" In accordance with this section, the appellant made an application to the High Court praying that the Board of Revenue may be called upon to state a case and refer 802 it to the High Court.
Dealing with this application, the High Court pointed out that the Member of the Board had not been asked to review his predecessor 's order but only to state a case, and gave the following directions : "The ease must, therefore, go back to the Board of Revenue for a case to be stated or for a proper ,order rejecting the application to be passed." The Board then reheard the matter and rejected the application of the appellant and refused to state a case and refer it to the High Court.
The appellant thereafter made an application to the High Court for requiring the Board of Revenue to state a case, but this application was summarily rejected.
He then applied to the High Court for leave to appeal to the Federal Court, which the High Court granted, following the decision of a Full Bench of the Lahore High Court in Feroze Shah Kaka Khd vs Income tax Commissioner, punjab and N.W.F.P., Lahore The High Court pointed out in the order granting leave that in the appeal that was taken to the Privy Council in the Lahore case, an objection had been raised as to the competency of the appeal, but the Privy Council, while dismissing the appeal on the merits, had made the following observation: " The objection is a serious one.
Admittedly such an appeal as the present is not authorized by the Income tax Act itself.
If open at all, it must be justified under clause "9, Letters Patent of the Lahore High Court, as being an appeal from a final judgment, decree or order made in the exercise of original jurisdiction by a Division Bench of the High Court.
And this present appeal was held by the Full Court to be so justified.
Before the Board the question was not fully argued, and their Lordships accordingly refrain from expressing any opinion whatever upon it" (2).
The High Court in granting leave to the appellant seems to have been influenced mainly by the fact that the view of the Lahore High Court had not been held by the Privy Council to be wrong.
(1) A.I.R. 1981 Lah.
(2) A.I.R. 1933 P. C. 198.
803 At the commencement of the hearing of the appeal in this Court, a preliminary objection was raised by the learned counsel for the respondent that this appeals was not compe tent, and, on hearing both the parties, we are of the opin ion that the objection is wellfounded.
In Sri Mahanth Harihar Gir vs Commissioner of Income tax, Bihar and Orissa (1) it was held by a special Bench of the Patna High Court that no appeal lay to His Majesty in Council under clause 31 of the Letters Patent of the Patna High Court, from an order of the High Court dismissing an application under section 66 (3) of the Income tax Act, (a provision similar to section 21 of the Act before us) to direct the Commissioner of Income tax to state a case.
In that case, the whole law on the subject has been clearly and exhaustively dealt with, and it has been pointed out that the view taken by the Full Bench of the Lahore High Court in the case cited by the appellant was not supported by sever al other High Courts and that the Privy Council also, when the matter came before it, refrained from expressing any opinion as to its correctness.
In our opinion, the view expressed in the Patna case is correct.
Clause 31 of the Letters Patent of the Patna High Court, on the strength of which the appellant resists the prelimi nary objection raised by the respondent, runs thus : "And We do further ordain that any person or persons may appeal to Us, Our heirs and successors, in Our or Their Privy Council, in any matter not being of criminal juris diction, from any final judgment, decree, or order of the said High Court of Judicature at Patna, made on appeal and from any final judgment, decree on order made in the exercise of original jurisdiction by Judges of the said High Court or of any Division Court, from which an appeal does not lie to the said High Court under the provisions contained in the 10th clause of these (1) A.I.R. 1941 Prat.
804 presents: provided, in either case, that the sum or matter at issue is of the amount or value of not less than ten thousand rupees, or that such judgment,decree or order involves, directly or indirectly, some claim, demand or question to or respecting property amounting to or of the value of not less than ten thousand rupees; or from any other final judgment, aecree or order made either on appeal or otherwise as aforesaid, when the said High Court declares that the case is a fit one for appeal to Us . " In order to attract the provisions of this clause, it is necessary to show, firstly, that the order under appeal is a final order; and secondly, that it was passed in the exer cise of the original or appellate jurisdiction of the High Court.
The second requirement clearly follows from the concluding part of the clause.
It seems to us that the order appealed against in this case, cannot be regarded as a final order, because it does not of its own force bind or affect the rights of the parties.
All that the High Court is required to do under section 21 of the Bihar Sales Tax Act is to decide the question of law raised and send a copy of its judgment to the Board of Revenue.
The Board of Revenue then has to dispose of the case in the light of the judgment of the High Court.
It is true that the Board 's order is based on what is stated by the High Court to be the correct legal position, but the fact remains that the order of the High Court standing by itself does not affect the rights of the parties, and the final order in the matter is the order which is passed ultimately by the Board of Revenue.
This question has been fully dealt with in Tata Iron and Steel Company vs Chief Revenue Authority, Bombay(1), where Lord Atkinson pointed out that the order made by the High Court was merely advisory and quoted the following observations of Lord Esher in In re Knight and the Tabernacle Permanent Building Society(2): "In the case of Ex parte County Council of Kent, where a statute provided that a case might be stated (1) at 617. 805 for the decision of the Court it was held that though the language might prima facie import that there has to be the equivalent of a judgment or order, yet when the context was looked at it appeared that the jurisdiction of the Court appealed to was only consultative, and that there was noth ing which amounted to a judgment or order.
" It cannot also be held that the order was passed by the High Court in this case in the exercise of either original or appellate jurisdiction.
It is not contended that the matter arose in the exercise of the appellate jurisdiction of the High Court, because there was no appeal before it.
Nor can the matter, properly speaking, be said to have arisen in the exercise of the original jurisdiction of the High Court, as was held by the Judges of the Lahore High Court in the case to which reference was made, because the proceeding did not commence in the High Court as all origi nal suits and proceedings should commence.
But the High Court acquired jurisdiction to deal with the case by virtue of an express provision of the Bihar Sales Tax Act.
The crux of the matter therefore is that the jurisdiction of the High Court was only consultative and was neither original nor appellate.
In this view, the appeal must be dismissed, though on hearing the parties, it appeared to us that the salestax authorities including the Commissioner and the Board of Revenue were in error in imposing a penalty upon the appel lant under section 10 15) of the Act which had no applica tion to his case, inasmuch as he had been registered as required by section 7 of the Act.
In the circumstances, while dismissing the appeal, we make no order as to costs.
Appeal dismissed.
Agent for the respondent:
K. Chatterjee.

summary/full:
No appeal lay to the Federal Court from an order of the Patna High Court dismissing an application under section 21(3)of the Bihar Sales Tax Act, 1944, to direct the Board of Reve nue, Bihar, to state a case and refer it to the High Court.
Such an order is not a` "final order" within the meaning of cl. 31 of the Letters Patent of the Patna High Court, inas much as an order of the High Court under section '21 (3) is advisory and standing by itself does not bind or affect the rights of the parties though the ultimate order passed by the Board of Revenue may be based on the opinion expressed by the High Court.
Nor is such an order passed by the High Court in the exercise either of its appellate or original jurisdiction within the meaning of the said clause.
Sri Mahant Harihar Gir vs Commissioner of Income tax, Bihar and Orissa (A.I.R. 1941 Pat. 225) and Tata Iron and Steel Company vs Chief Revenue Authority, Bombay (50 I.A. 212 applied.
Feroze Shah Kaka Khel vs Income tax Commissioner, Punjab (A.I.R. 1931 Lab.
138)disapproved.


judgement:
Appeal No. 4 of 1950.
Appeal from the High Court of Judicature of Calcutta (Sir Trevor Harries C.J. and Mukherjea J.) from a judgment and decree dated May 30, 1948, in Appeal No. 21 of 1947 confirming with modifications the decree of a single Judge of the same High Court (Ormond J.) dated January 24, 1947, in suit No. 1031 of 1945.
108 842 N.C.Catterjee (Samarendra Nath Mukherje, with him) for the appellant.
P.L. Banerjee (Upendra Chandra Mullick, with him) for the respondent. 1950.
December 1.
The Judgment of the Court was deliv ered by DAS J.
This is an appeal by the defendant in a suit for specific performance against the judgment and decree of the High Court of Judicature at Fort William in Bengal (Sir Trevor Hatties C.J. and Mukherjea J.) dated May 30, 1948, dismissing his appeal and confirming, with certain modifica tions, the judgment and decree for specific performance passed by Ormond J. on January 24, 1947.
There is no sub stantial dispute as to the facts leading up to tim suit out of which the present appeal has arisen and they may shortly be stated: Maharaja Sris Chandra Nandy of Cossimbazar is the owner of premises No. 374 Upper Chitpur Road in the town of Cal cutta (hereinafter referred to as the "said premises").
By an Indenture of lease made on April 27, 1931, the Maharaja as manager of the Cossimbazar Raj Wards Estate which was then under the management of the Court of Wards demised tim said premises to one Madan Gopal Daga for a term of 51 years commencing from May 1, 1931, at and for the monthly rent of Rs. 1,083 5 3 and upon terms and conditions contained there in.
By sub clause (6) of clause 2 of the said Indenture the lessee covenanted, amongst other things, "not to assign the demised premises or any part thereof without first obtaining the written consent of the lessor, such consent, however, not to be unreasonably withheld in the case of respectable or responsible person . . " There was the usual proviso for re entry for non payment of rent for three months or for breach of any of the lessee 's covenants, without prejudice to the lessor 's right of action for such breach.
On March 25, 1943, Madan Gopal Daga, with the written consent of the lessor, assigned the unexpired resi due of the lease to the defendant who 843 was accepted as the lessee by the lessor.
By an agreement said to have been arrived at by correspondence exchanged between the plaintiff and the defendant and their respective solicitors between January 27, 1945, and February 2, 1945, the defendant is alleged to have agreed to assign the said lease to the plaintiff for the unexpired residue of the term with effect from February 1, 1945, at and for the price of Rs. 1,80,000 and upon terms and conditions contained in the correspondence to which reference will be made in greater detail hereafter.
On February 21, 1945, the defendant wrote a letter to the lessor intimating that he had agreed to assign his interest in the lease to the plaintiff and re questing the lessor to give his consent in writing to such assignment.
On March 5, 1945, the lessor replied that the question of his giving consent to the transfer of the lease could not be entertained as he had already determined the lease and that in the circumstances the whole initiative was in the hands of the defendant.
This letter clearly indicated that the lease had been determined for non payment of rents and it obviously implied that it was for the defendant to get the lease revived by paying up the arrears of rent so that the question of giving consent to an assignment of the lease might be considered by the lessor.
On March 8, 1945, the defendant by his solicitors ' letter informed the plain tiff 's solicitors that the defendant had approached the lessor but had failed to secure his consent and that, as no valid transfer could be made without such consent and the agreement for sale was subject to such consent being ob tained, the defendant was reluctantly compelled to cancel the agreement.
The plaintiff by his solicitors ' letter of March 10, 1945, maintained that the agreement was not sub ject to the alleged condition and that the defendant was not entitled to cancel the agreement.
It was pointed out that under the terms of the lease the lessor could not refuse his consent to the transfer of the lease to a respectable or responsible person which the plaintiff undoubtedly was.
It is not necessary to refer to the further correspondence that followed in which each 844 party maintained his own contention.
On March 17, 1945, the lessor filed a suit (being suit No. 425 of 1945) in the High Court against the defendant for the recovery of the demised premises on the ground that the lease had been determined.
It was during the pendency of that suit that on July 4, 1945, the suit for specific performance of the agreement to assign the lease out of which the present appeal has arisen was filed by the plaintiff against the defendant.
On July 13, 1945, the lessor 's suit for ejectment was settled by the defendant consenting to a decree for Rs. 59,213 11 0 for arrears of rent which was paid up.
There is no dispute that the forfeiture of the lease for non payment of rent was waived and the lease was accordingly revived.
Shortly after the settlement of the ejectment suit the defendant on August 6, 1945, applied to the lessor for his consent to the assignment of the lease and on the same day the lessor in reply declined to give his consent without assigning any reason whatever.
The suit for specific per formance came up for disposal before Ormond J. in November 1946 when it was heard in part and was adjourned.
It was eventually further heard in January 1947 and finally dis posed of on January 23, 1947, when Ormond J. passed a decree against the defendant for specific performance of the agree ment.
The decree provided that in the event of the defend ant being unable within a fortnight from the date of the decree to obtain the written consent of the lessor the assignment should be made without such consent.
The defend ant appealed.
After two days ' hearing, "in order to clear up the matter" the appeal Court "gave the plaintiff an opportu nity to examine the Maharaja as a witness in this case so that all relevant facts might be brought out and placed before the Court for the purpose of enabling it to come to a proper decision on this point.
" The appeal was accordingly adjourned and the lessor was examined on commission and his evidence was filed in the proceedings.
After further hear ing the appeal Court dismissed the defendant 's appeal and confirmed the decree for specific performance of the agree ment 845 without the need for obtaining the consent of the lessor prior to the execution of the deed of assignment in favour of the plaintiff.
This decree was subsequently amended by inserting therein a provision enabling the plaintiff to set off from the purchase price the amount of rent payable as and from February 1, 1945, until the date of conveyance less all outgoings and interest on the purchase price at four per cent.
per annum from that date to the date of the convey ance.
The defendant has now come up before us in appeal from this judgment and decree of the appeal Court.
The first point urged by learned counsel appearing in support of this appeal is that, being subject to the consent of the lessor, the agreement was contingent on the defendant obtaining such consent and as the defendant could not secure the lessor 's consent no effective agreement came into being which could be ordered to be specifically performed.
The determination of this question must depend on a correct analysis and ascertainment of the meaning and import of the correspondence by which the agreement is said to have been arrived at.
It was on January 9.7, 1945, that the plaintiff offered to purchase the defendant 's leasehold interest in the said premises upon terms and conditions set forth in the plaintiff 's letter of that date.
Clauses 3 and 4 of those terms were as follows: "(3).
The lease will be transferred in my favour as from the 1st February, 1945, and I shall be entitled to recover rents from the tenants as from that date and shall pay the rent to the superior landlord and municipal taxes from that date.
You shall have to obtain the necessary consent for the transfer of the lease in favour of myself or my nominees from the said Maharaja of Cossimbazar before the execution of the transfer of lease in my favour. ' ' The defendant replied to the plaintiff 's above letter on January 28, 1945.
By this reply the defendant expressed his willingness to transfer the lease to the plaintiff on terms contained therein.
Clauses 3 and 4 of this letter were as follows: 846 "(3) If your final acceptance as stated above is re ceived within 30th January current and if I am able to obtain the consent of Maharaja Cossimbazar for transfer of the leasehold interest wi.
thin the first week of February, 1945, I agree to your para 3.
(4) Your para 4 is agreed to but the name or names of the persons to be mentioned in the sale deed for whom per mission is to be taken from Maharaja Cossimbazar should be clearly stated with their respective addresses.
" It is quite clear that no agreement was concluded by these two letters for the defendant 's letter was not an unconditional acceptance of the plaintiff 's offer but amounted in law to only a counter offer.
By clause 3 the defendant offered to transfer the lease to the plaintiff as from February 1, 1945, so as to entitle the plaintiff to realize the rents from that date and to be liable to pay the rent to the lessor also from that date on two conditions, namely, that the plaintiff 's acceptance was received within January 30, 1945, and the defendant was able to obtain the lessor 's consent within the first week of February, 1945.
This clause did not make the offer itself contingent on the obtaining of the lessor 's consent but made one of the terms of the offer, namely, that the lease would be transferred as from February 1, 1945, conditional on the obtaining of the lessor 's consent within the first week of February, 1945.
Likewise, subject to the name of the assignee being clearly stated the defendant by clause 4 offered to obtain the lessor 's consent to the assignment of the lease.
Clause 4 of the defendant 's letter was not so expressed as to make the defendant 's offer contingent on his obtaining the les sor 's consent.
On the contrary, clause 4 constituted one of the terms of the offer which, on the offer being accepted, would become binding on the defendant as one of the terms of the agreement.
The plaintiff, however, does not appear to have accepted the defendant 's counter offer but on January 29, 1945, through his solicitors made a fresh offer to purchase the defendant 's leasehold interest at Rs. 1,80,000 on the following terms: 847 "(a) That the earnest money will be Rs. 5,000 (Rupees five thousand) instead of Rs. 30,000.
(b) Our client will have the conveyance in his own favour.
The consent of the landlord will be obtained by you before the completion of sale.
(c) That your client will complete the conveyance within a month after the receipt by us of all the original title deeds with you.
(d) That the transfer of the property in favour of our client will take effect on and from the 1st February, 1945, irrespective of the date of the conveyance, he being enti tled to all the rents, issues and profits and being liable for all the liabilities in respect thereof since the said date.
(e) That our client will not be liable to pay your Solici tor 's Bill of cost in respect of the sale.
" Again, it will be noticed that by clause (b) the offer was not made contingent on the obtaining of the lessor 's consent but the plaintiff insisted on the defendant 's obtaining such consent as a substantive term of his offer so that if the offer by being accepted ripened into an agree ment the defendant would be bound to obtain the lessor 's consent as a term of such agreement.
The defendant by his solicitors ' letter dated February 1, 1945, purported to accept the plaintiff 's last offer with a slight reservation, namely , "As regards clause (d) of your said letter, it is dis tinctly understood that the same should be given effect to only in case the conveyance is completed in terms of clause (c) of your said letter.
" On February 2, 1945, the plaintiff by his solicitors ' letter of that date unconditionally accepted this reserva tion and so a concluded agreement was arrived at between the parties.
This agreement was not, for its coming into being, contingent or conditional on the obtaining of the lessor 's consent.
The obligation to obtain the lessor 's consent was cast upon the defendant as a term of the agreement.
In our judgment the Court below was right in holding that the agreement 848 itself was not contingent as contended for by the appellant.
The contentions next advanced by learned counsel for the appellant relate to the lessee 's covenant contained in sub clause (6) of clause 2 of the lease to which reference has already been made.
The legal incidents of such a covenant are now well established by judicial decisions referred to in the judgment of the High Court and it is not necessary to refer to them in detail.
Suffice it to say, that the words "such consent, however, not to be unreasonably withheld in the case of respectable or responsible person" contained in the covenant do not amount to a separate or independent covenant by the lessor that he would not refuse consent except upon reasonable grounds in the case of respectable or responsible person, but that those words limit or qualify the lessee 's covenant not to assign the demised premises without the consent in writing of the lessor.
In other words, those words have the effect of relieving the lessee from the burden of this covenant if the lessor withholds his consent unreasonably in case of proposed assignment to a respectable or responsible person.
In this view of the matter, the plaintiff contended that he being a respectable and responsible person the lessor had unreasonably withheld his consent to the proposed assignment to him and had consequently relieved the defendant from the burden of his covenant so that the defendant could legally and validly assign the lease to him without such consent of the lessor.
The first objection taken by the appellant to this contention of the plaintiff is that in his plaint the plain tiff insisted on the defendant obtaining the lessor 's consent and that he should not have been permitted to make this new case at the hearing.
Both the trial Court and the appeal Court held that there was, strictly speaking, no element of surprise, particularly because the plaintiff relied upon facts admitted and proved by the defendant himself and that it was open to him to take this point.
We may also add that this point was in a manner indicated in the plaint 849 itself for in paragraph 11 thereof it was pleaded that the plaintiff was a responsible and respectable person and that if consent to assign in his favour was withdrawn such with drawal would be unreasonable and would not be valid and binding.
In view of such pleading we are unable to say that the point raised by the plaintiff at the trial was an en tirely new point or that the defendant was taken by sur prise.
The next objection of the appellant was that this point should not have been allowed to be raised and no evidence should have been permitted to be adduced on this point in the absence of the lessor as a party to the suit.
We do not think that there is any force in this objection.
The Court had to decide whether it was a case where relief by way of specific performance should be given.
The Court could not force the defendant to apply to the lessor for his consent nor could the Court force the lessor to give his consent and, if the matter only depended on the consent, the Court would not have ordinarily, in those circumstances, directed the agreement for assignment to be specifically enforced.
The Court, therefore, had also to consider, for the purposes of this case, as to whether the circumstances were such as would indicate that the defendant had been relieved of the burden of his covenant by reason of the lessor having unrea sonably withheld his consent.
It is true that a decision on that question in this suit would not be binding on the lessor, but nevertheless the Court had to come to a decision on that question for the purposes of this suit as between the parties thereto in order to award the relief of specific performance to the plaintiff.
The third objection of the appellant is that the appeal Court should not have allowed the plaintiff to adduce fur ther evidence.
It will be recalled that the appeal Court directed the evidence of the Maharaja of Cossimbazar to be taken during the hearing of the appeal.
The judgment of the appeal Court clearly indicates that it was the appeal Court that "required" the evidence "in order to clear up the matter" and 109 850 "for the purpose of enabling it to come to a proper decision on this point ".
The matter, therefore, is fully covered by Order XLI, rule 27 of the Code of Civil Procedure and no objection can be taken to the course adopted by the appeal Court on that ground.
We do not think there is any reason to interfere in the exercise of the Court 's discretion.
The fourth objection is that the High Court was wrong in holding that the term in the agreement that the defendant must obtain the consent of the lessor before executing the assignment to the plaintiff was a term for the benefit of the plaintiff only.
It will be recalled that that was a term which was introduced by the plaintiff in his offer that eventually ripened into an agreement.
The term was not expressed in a manner indicating that it was inserted in the agreement for the protection of the defendant.
In other words, the objection that the consent of the lessor had not been obtained was one which could be availed of by the plaintiff who could rescind the contract and claim damages for the breach thereof.
We cannot see how, in view of the language used in the correspondence, the defendant could plead the absence of the lessor 's consent as relieving him from the obligation of performing his part of the agreement if the plaintiff waived the objection and insisted on his carrying out the agreement.
The absence of consent may amount to a defect in the title of the defendant, but which the plaintiff was willing to accept.
Finally it is said that by directing the specific per formance of the agreement the Court has exposed the defend ant to the risk of an action for damages for breach of covenant.
If the assignment of the lease by the defendant to the plaintiff without the lessor 's consent amounted to a breach of covenant, the lessor could forfeit the lease and sue for possession.
Such a course would affect only the plaintiff but not the defendant, for he had already parted with the lease for valuable consideration.
It is said that the lessor could sue the defendant for damages for breach of that 851 covenant and the Court should not, by decreeing specific performance, have put the defendant in that perilous posi tion, There appear to us to be two answers to this argu ment, namely, (1) that the defendant should have, by proper language, made his obligation to transfer dependent or conditional upon his being able to obtain the lessor 's consent which he did not do and (2) that the plaintiff being a respectable and responsible person of means, the measure of damages could only be a problematic conjecture.
Indeed, it may have been precisely for this very consideration that the defendant had unconditionally agreed to obtain the consent of the lessor and to assign his interest in the lease.
That the plaintiff was a respectable and responsible person cannot, on the evidence before the Court, be denied or disputed and, indeed, learned counsel for the appellant did not so contend.
We find ourselves in agreement with the High Court that in the circumstances and on the evidence on record the lessor had unreasonably withheld his consent so as to enable the defendant to assign the lease without such consent.
In the circumstances, we are satisfied that both the trial Court and the appeal Court exercised their discre tion properly and no ground has been made out for our inter fering with the judgment of the High Court.
The appeal is accordingly dismissed.
The appellant to pay the costs of this appeal.
Appeal dismissed.

summary/full:
The defendant had obtained certain premises on lease under a deed which contained a covenant by the lessee "not to assign the demised premises or any part thereof without first obtaining the written consent of the lessor, such consent, however, not to be unreasonably withheld in the ease of respectable or responsible person ".
After some offers and counter offers the plaintiff finally made an offer to purchase the defendant 's leasehold interest on certain terms one of which was that "the consent of the landlord will be obtained by you before the completion of the sale "; and the offer was unconditionally accepted by the defendant.
The defendant subsequently refused to assign on the ground that the lessor had withheld his consent, and the plaintiff sued for specific performance of the agree ment: Held, (i) that the agreement was not, for its coming into being, conditional or contingent on the obtaining of the lessor 's consent, the obligation to obtain the lessor 's consent being only a term of the agreement which the defend ant had to fulfil; (ii) the words "such consent, however, not to be unreasonably withheld in the case of a respectable or responsible person" in the leasedeed did not amount to a separate or independent covenant by the lessor that he would not refuse consent except on reasonable grounds in the case of a respectable or responsible person, but only limited or qualified the leesee 's covenant not to assign with.
out the lessor 's consent, by relieving him from the burden of the covenant if the lessor withheld his consent unreasonably in the case of proposed assignment to a respectable or respon sible person ; (iii) that, as the plaintiff was admittedly a respectable and responsible person and on the facts of the case the lessor 's refusal to give consent was unreasonable, the defendant could validly assign the lease without such consent; (iv) that the court could come to a decision on this matter even though the lessor was not a party to the suit and the decision might not bind him; (v) that the defendant could not under these circumstances plead the absence of the lessor 's consent as relieving him from the obligation to perform his part of the agreement if the plaintiff insisted on his carrying out the agreement even though the lessor had not given his consent; and the plain tiff was therefore entitled to a decree for specifie per formance of the agreement.