judgement:
326 of 1953.
Original Petition under article 32 of the Constitution of India.
S.C. Isaacs (section K. Kapur, with him) for the petitioners.
H. J. Umrigar for the respondents.
January 11.
The Judgment of the Court was delivered by MUKHERJEA J.
This is an application presented by the petitioners under article 32 of the Constitution, complaining of infraction of their fundamental rights guaranteed under article 14 and clauses (f) and (g) of article 19 (1) of the Constitution and praying for enforcement of the same by issue of writs in the nature of mandamus.
To appreciate the contentions that have been raised on behalf of the petitioners, it would be necessary to give a short narrative of the material facts.
The petitioners are a firm of traders who had, prior to the cancellation of their licenee, been carrying on the business of retail sellers of coal at a coal depot held by them in the town of Kanpur.
It is said that the District Magistrate of Kanpur as well as the District Supply Officer, who figure respectively as respondents Nos. 2 and 3 in the petition, had been for a considerable time past issuing directives from time to time upon the petitioners as well as other coal depot holders of the town, imposing restrictions of various kinds upon the sale of coal, soft coke, etc.
It is stated that prior to the 14th of February, 1953, the prices that were fixed by the District Officers left the coal dealers a margin of 20 per cent profit upon the sale of soft coke and 15 per cent profit on the sales of hard coke and steam coal, such profits being allowed on the landed costs of the goods up to the depot.
The landed costs 805 comprised several items and besides ex colliery price, the middleman 's commission and the railway freight, there were incidental expenses of various kinds including labour duty, loading and unloading charges, cartage and stacking expenses.
After making a total of these cost elements, an allowance was given for shortage of weight at the rate of 5 rods and odd seers per ton in the case of soft coke and 3 rods and odd seers in the case of hard coke and steam coal, and it was on the basis of the net weight thus arrived at that the price was calculated.
On the 14th of February, 1953, the District Supply Officer issued a directive reducing the selling prices of coke, coal, etc., much below the existing rates.
This reduction was effected in a three fold manner.
In the first place, the allowance for shortage of weight was made much less than before; secondly a sum of Rs. 4 12 0 only was allowed for all the incidental expenses, and thirdly, the margin of profit was cut down to 10 per cent.
On the 22nd of May, 1953, a representative petition was filed by seven colliery depot holders of Kanpur including the present petitioners challenging the validity of the executive order, dated the 14th of February, 1953, mentioned above inter alia on the ground that it infringed the fundamental rights of the petitioners under articles 14 and 19 of the Constitution.
There was an application for ad interim stay in connection with this petition which came up for hearing before the learned Vacation Judge of this court on the Ist of July, 1953.
On that day an undertaking was given by the State of Uttar Pradesh to the effect that they would withdraw the order of the 14th February, 1953, and apparently the consideration that weighed with the State in giving this undertaking was that it was a purely executive order without any legislative sanction behind it.
The order of the 14th February was in fact withdrawn, but on the 10th of July, 1953, the State of Uttar Pradesh promulgated by a notification an order intituled "The Uttar Pradesh Coal Control Order, 1953" purporting to act in exercise of the powers conferred upon it by_section 3(2) of the Essential Supplies Act, 1946, read with the notified order of the Government of India issued under 806 section 4 of the Act.
As the constitutionality of this Coal Control Order is the main object of attack by the petitioners in the present proceeding, it would be convenient to set out the material provisions of the order in respect of which the controversy between the parties primarily centers: "THE UTTAR PRADESH COAL CONTROL ORDER, 1953.
In this Order unless there is anything repugnant in the subject or context .
(a) "Coal" includes coke but does not include cinder and ashes.
(c) "The Licensing Licensing Authority" means the District Magistrate of the District or any other officer authorised by him to perform his functions under this Order and includes the District Supply Officer of the district.
(d) "Licensee" means a person holding a licence under the provisions of this Order in Form 'A ' or in Form 'B '.
(1) No person shall stock, sell, store for sale or utilise coal for burning bricks or shall otherwise dispose of coal in this State except under a licence in Form 'A ' or 'B ' granted under this Order or in accordance with the provisions of this Order.
(2) Nothing contained in sub clause (1) (a) Shall in so far as it relates to taking out a licence for stocking or storing coal for their own consumption, apply to the stocks held by persons or undertakings obtaining coal on permits of the District Magistrate or the State Coal Controller for their own consumption.
(b) Shall apply to any person or class of persons ' exempted from any provision of the above sub clause by the State Coal Controller, to the extent of their exemption.
(1) Every application for licence under this Order shall be made in the form given in Schedule I appended to this Order.
807 (2) A licence granted under this Order shall be in Form 'A ' or Form 'B ' appended to this Order and the holder of a licence granted under this Order shall comply with any directions that may be issued to him by the Licensing Authority in regard to the purchase, sale, storage or distribution of coal.
(3) The Licensing Authority may grant, refuse to grant, renew or refuse to renew a licence and may suspend, cancel, revoke or modify any licence or any terms thereof granted by him under the Order for reasons to be recorded.
Provided that every power which is under this Order exercisable by the Licensing Authority shall also be exercisable by the State Coal Controller or any person authorised by him in this behalf.
The State Coal Controller may by written order likewise require any person holding stock of coal to sell the whole or any part of the stock to such person or class of persons and on such terms and prices as may be determined in accordance with the provisions of clause (8). 8.
(1) No licensee in Form 'B ' and no person acting on his behalf shall sell, agree to sell or offer for sale, coal at a price exceeding the price to be declared by the Licensing Authority in accordance with the formula given in Schedule III.
(2) A licensee in Form 'A ' or any other person holding stock of coal or any other person acting for or on behalf of such licensees or person transferring or disposing of such stocks to any person in accordance with clause 6 or clause 7 shall not charge for the coal a price exceeding the landed cost, plus incidental and handling charges, plus an amount not exceeding 10 per cent of the landed cost as may be determined by the Licensing Authority or the State Coal Controller.
Explanations: (1) Landed cost means the excolliery price of the coal plus the L.D.C.C. and Bihar.
Sales tax plus middleman 's commission actually paid and railway freight.
808 (2) Incidental and handling charges mean the cost of unloading from wagons, transporting to stacking site, unloading at the stacking site, plus godown rent, plus choukidari charges, if any, not exceeding Rs. 8 8 0 per ton as may be determined by the Licensing Authority or the State Coal Controller according to local conditions.
The District Magistrate shall within a week of the commencement of this Order prepare and publish in a local paper a list of persons carrying on the business of sale of coal in his district and upon the publication of the list, the persons included therein will be deemed for purposes of this Order to be licensee until three months next following the publication of the list in Form A or B as may be specified.
If any person contravenes any of the provisions of this Order, or the conditions of licenee granted thereunder, he shall be punishable under section 7 of the Essential Supplies (Temporary Powers) Act, 1946, with imprisonment for a term which may extend to three 'years or with fine or with both and without prejudice to any other punishment to which he may be liable . . " ' Schedule III referred to in the Order is as follows: SCHEDULE III.
(Formula for declaration of prices of soft coke/hard coke/steam coal).
Ex colliery Price Actuals.
L.D.C.C. and Bihar Sales tax Actuals.
Middleman 's commission Actually Raid subject to the maximum laid down under clause 6 of the Government of India Colliery Order 1945 4.
Railway freight Actuals.
Incidental and handling chargers including Maximum of Rs. 8 8 0 per per ton as may be determ ined by the licensing (i) Unloading from wagons.
Licensing Authority according to local condition (ii) Transport upto premises provided that at places 0of stacking which are extra oridenarily (iii) Unloading and stacking distant form the railway at the premises or depot.
way head a higher rate may be allowed by the Licensing Authority.
809 (iv) Godown rent and chaukidari charges, if any (v) Weighing charges, if any. 6.
Local taxes Octroi, etc.
Actuals.
Shortage Not exceeding 31/2 maunds per ton in the case of soft coke and 2 1/2 maunds in the case of hard coke and steam coal as may be determined by the Licensing Authority.
Profit At 10 per cent on total items 1 to 6 above except item No.5 It is said that on the 16th of July, 1953, the respondent No. 2 issued a declaration whereby he fixed the retail rates for the sale of soft coke, coal, etc.
at precisely the same figures as they stood in the directive issued on the 14th of February, 1953.
The result, according to the petitioners, was that the selling prices were reduced so much that it was not possible for the coal traders to carry on their business at all.
In accordance with the provision of clause 11 of the Control Order set out above, the petitioners ' name appeared in the list of B licence holders and they did apply for a licence in the proper form as required by clause (4).
The licence, it is said, was prepared, though not actually delivered over to the petitioners.
By a letter dated the 3rd of October, 1953, the Area Rationing Officer, Kanpur, accused the petitioners of committing a number of irregularities in connection with the carrying on of the coal depot.
The charges mainly were that there were two other depots held and financed by the petitioners themselves in the names of different persons and that the petitioners had entered into agreements for sale of coal at more than the fixed rates.
The petitioners submitted an explanation which was not considered to be satisfactory and by an order dated the 13th of October, 1953, the District Supply Officer, Kanpur, cancelled the petitioners 'licence.
In the present petition the petitioners have challenged the validity of the Coal Control Order of the 10th of July, 1953, the declaration of prices made on the 16th of July following and also the order cancelling the petitioners ' licence on the 13th of October, 1953.
15 95 section C. I./59 The constitutional validity of the Uttar Pradesh Coal Control Order has been assailed before us substantially on the ground that its provisions vest an unfettered and unguided discretion in the licensing authority or the State Coal Controller in the matter of granting or revoking licenses, in fixing prices of coal and imposing conditions upon the traders; and these arbitrary powers cannot only be exercised by the officers themselves but may be delegated at their option to any person they like.
It is argued that these provisions imposing as they do unreasonable restrictions upon the right of the petitioners to carry on their ' trade and business conflict with their fundamental rights under article 19 (1)(g) of the Constitution and are hence void.
With regard to the order dated the 16th of July, 1953, by which the prices of coke, coal, etc. were fixed, it is pointed out that it was not only made in exercise of the arbitrary power Conferred upon the licensing authority by the Coal Control Order, but the prices, as fixed, are palpably discriminatory as would appear from comparing them with the prices fixed under the very same Control Order in other places within the State of Uttar Pradesh like Allahabad, Lucknow and Aligarh.
The order of the 13th OCtober, 1953, cancelling the petitioners ' licenee is challenged on the ground that the charges made against the ,petitioners were vague and indefinite and that the order was made with the ulterior object of driving the petitioners out of the coal business altogether.
It is said further that as a result of the cancellation order, the petitioners have been made incapable of disposing of the stocks already in their possession, though at the same time the holding of such,stock after the cancellation of their licence has become an offence under the Coal Control Order.
It is not disputed before us that coal is an essential commodity under the Essential Supplies (Temporary ,Powers) Act of 1946, and by virtue of the delegation powers by the Central Government to the Provincial Government under section 4 of the Act, the Uttar Pradesh Government was competent to make provisions, by notified order, for regulating the supply and 811 distribution of coal in such a way as they considered proper with a view to secure the objects as specified in section 3 of the Act.
All that is necessary is that these provisions should not infringe the fundamental rights of the citizens guaranteed under Part III of the Constitution and if they impose restrictions upon the carrying on of trade or business, they must be reasonable restrictions imposed in the interests of the general public as laid down in article 19 (6)of the Constitution.
Nobody can dispute that for ensuring equitable distribution of commodities considered essential to the community and their availability at fair prices, it is quite a reasonable thing to regulate sale of these commodities through licensed vendors to whom quotas are allotted in specified quantities and who are not permitted to sell them beyond the prices that are fixed by the controlling authorities.
The power of granting or withholding licences or of fixing the prices of the goods would necessarily have to be vested in certain public officers or bodies and they would certainly have to be left with some amount of discretion in these matters.
So far no exception can be taken; but the mischief arises when the power conferred on such officers is an arbitrary power unregulated by any rule or principle and it is left entirely to the discretion of particular persons to do anything they like without any check or control by any higher authority.
A law or order, which confers arbitrary and uncontrolled power upon the executive in the matter of regulating trade or business in normally available commodities cannot but be held to be unreasonable.
As has been held, by this court in Chintamon vs The State of Madhya Pradesh(1), the phrase "reasonable restriction, ' connotes that the limitation imposed upon a person in enjoyment of a right should not be arbitrary or of an excessive nature beyond what is required in the interest of the public.
Legislation, which arbitrarily or excessively invades the right, cannot be said to contain the quality of reasonableness, and unless it strikes a proper balance between the freedom guaranteed under (1) ; article 19 (1) (g) and the social control permitted by clause (6) of article 19, it must be held to be wanting in reasonableness.
It is in the light of these principles that we would proceed to examine the provisions of this control Order, the validity of Which has been impugned before us on behalf of the petitioners.
The provision contained in clause 3(1) of the Order that "no person shall stock, sell, store for sale or otherwise utilise or dispose of coal except under a licence granted under this Order" is quite unexceptional as a general provision; in fact, that is the primary object which the control Order is intended to serve.
There are two exceptions engrafted upon this general rule: the first is laid down in sub clause (2) (a) and to that no objection has been or can be taken.
The Second exception, which is embodied in subclause (2)(b)has been objected to by the learned counsel ' appearing for the petitioners.
This exception provides that nothing in clause 3 (1) shall apply to any person or class of persons exempted from any provision of the above sub clause by the State Coal Controller, to the extent of such exemption.
It will be seen that the Control Order nowhere indicates what the grounds for exemption are, nor have any rules been framed on this point.
An unrestricted power has been given to the State Controller to make exemptions, and even if he acts arbitrarily or from improper motives, there is no check over it and no way of obtaining redress.
Clause 3 (2) (b) of the Cntrol Order seems to us, therefore, prima facie to be unreasonable.
We agree, however, with Mr. Umrigar that this portion of the Control Order, even though bad, is severable from the rest and we are not really concerned with the validity or otherwise of this provision in the present case as no action taken under it is the subject matter of any complaint before us.
The more formidable objection has been taken on behalf of the petitioners against clause 4 (3) of the Control Order which relates to the granting and refusing of licences.
The licensing authority has been given absolute power to grant or refuse to grant, renew or refuse to renew, suspend, revoke, cancel or 813 modify any licenee under this Order and the only thing he has to do is to record reasons for the action he takes.
Not only so, the power could be exercised by any person to whom the State Coal Controller may choose to delegate the same, and the choice can be made in favour of any and every person.
It seems to us that such provision cannot be held to be reasonable.
No rules have been framed and no directions given on these matters to regulate or guide the discretion of the licensing officer.
Practically the Order commits to the unrestrained will of a single 'individual the power to grant, withhold or cancel licences in any way he chooses and there is nothing in the Order which could ensure a proper execution of the power or operate as a check upon injustice that might result from improper execution of the same.
Mr. Umrigar contends that a sufficient safeguard has been provided against any abuse of power by reason of the fact that the licensing authority has got to record reasons for what he does.
This safeguard, in our opinion, is hardly effective; for there is no higher authority prescribed in the Order who could examine the propriety of these reasons and revise or review the decision of the subordinate officer.
The reasons, therefore, which are required to be recorded are only for the personal or subjective satisfaction of the licensing authority and not for furnishing any remedy to the aggrieved person.
It was pointed out and with perfect propriety by Mr. Justice Matthews in the well known American case of Yick Wo vs Hopkins(1), that the action or non action of officers placed in such position may proceed from emmity or prejudice, from . partisan zeal or animosity, from favouritism and Other improper influences and motives which are easy of concealment and difficult to be detected and exposed and consequently 'the injustice capable of being wrought under 'cover of such unrestricted power becomes apparent to every man, without the necessity of detailed investigation.
In our opinion, the provision of clause 4(3) of the Uttar Pradesh Coal control Order must be must be held to void as imposing an unreasonable restriction upon the freedom (1) at 373.
814 of trade and business_guaranteed under article 19(1) (g)of the Constitution and not coming within the protection afforded by clause (6) of the article.
As this provision forms an integral part of the entire structure of the Uttar Pradesh Coal Control Order, the order cannot operate properly unless the provision of clause 4 (3) is brought in conformity with the constitutional requirements indicated above.
The licenee of the petitioners having been cancelled in pursuance with the above clause of the Control Order, the cancellation itself should be held to be ineffective and is not necessary for us to enquire further whether or not the grounds upon which the licensing authority purported to act were vague or idefinite or could constitute proper grounds for cancellation.
The two other clauses of the Control Order to which exception has been taken on behalf of the petitioners are clauses (7) and (8).
Clause (7) empowers the State Coal Controller to direct, by written order, any person holding stock of coal to sell the whole or any part of the stock to such person or class of persons and on such terms and prices as may be determined in accordance with the provision of clause (8).
Clause 8 (1) provides that no licensee in Form 'B ' shall sell or agree to sell coal at a price exceeding the price to be declared by the licensing authority in accordance with the formula given in Schedule III.
With regard to both these clauses, the contention of the petitioners ' counsel, in substance, is that the formula for determining the price, as laid down in Schedule III, is per se unreasonable as it is made dependent on the exercise of an unfettered and uncontrolled discretion by the licensing authority.
An unfair determination of the price by the licensing authority, it is argued, would be totally destructive of the business of the coal traders and the grievance of the petitioners is that that is exactly what has been done by the declaration of prices made on the 16th of July, 1953.
We have examined the formula given in Schedule Iii to the Control Order with some care and on the materials that have been actually placed before us, we are 815 not in a position to say that the formula is unreasonable. 'The prices, as said already, are calculated on the basis of the landed costs of coke and coal up to the depot, 'to which a profit of 10 per cent is added.
The landed costs comprise seven items in all which are enumerated ' in Schedule III.
With regard to items 1, 2, 3, 4 and 6 of the Schedule the actual costs are taken into, account and to that no objection can possibly be taken.
The entire dispute is with regard to incidental charges specified in item 5 and the allowance or shortage which forms item 7.
So far as incidental charges are concerned, the Schedule allows a maximum of Rs. 8 8 0 per ton to be determined by the licensing authority according to local conditions.
The rates undoubtedly vary according to local conditions and some amount of discretion must have to be left in such cases to the local authorities.
The discretion given to the licensing authority in fixing these rates is, however, not an unlimited discretion, but has got to be exercised with reference to the condition prevalent in the locality with which the local officers, must be presumed to be familiar.
The grievance of the petitioners is that in the declaration of 16th of July, 1953, the licensing authority allowed incidental charges only at the rate of Rs. 4 12 0 per ton and that is grossly unfair.
It is pointed out that at Lucknow, Aligarh, Allahabad and other places much higher rates were allowed, 'though the local conditions of these places are almost identical; and there has been consequently a discrimination in this respect which makes the declaration void altogether.
The statements that have been made by the petitioners in this connection are not supported by any affidavit of any person who is familiar with the local conditions in the other places and on the materials that we have got here we are unable to say that the rates fixed by the licensing authority of Kanpur are really discriminatory.
It is certainly not open to us to substitute our own determination in tile matter of fixing the prices for that of the licensing authority and provided we are satisfied that the discretion that has been vested in a public officer is not an uncontrolled discretion and no unfair 816 discrimination has resulted from the exercise of it, we cannot possibly strike down as illegal any order or declaration made by such officer.
The same reasons apply, in our opinion, to the seventh item of Schedule III which relates to allowances for shortage of weight.
Here also the Control Order specifies a maximum and the determination of the allowance in particular cases has been left to the discretion of the licensing authority.
We are not satisfied from the materials placed before us that this provision is unfair or discriminatory.
The formula allows a profit of loper cent upon the cost items with the exception of item No. 5 which relates to incidental charges.
We do not know why this item has been omitted and Mr. Umrigar, appearing for the respondents, could not suggest any possible reason for it.
But even then, the result of this omission would only be to lower the margin of profit a little below 10 per cent and nothing more.
If the other traders in the locality are willing to carry on business in coal with that amount of profit, as is stated on the affidavits of the respondents, such fixation of profit would undoubtedly be in the interests of the public and cannot be held to be unreasonable.
The counsel for the petitioners is not right in his contention that the Control Order has only fixed the maximum profit at 10 per cent and has left it to the discretion of the licensing authority to reduce it in any way he likes.
Schedule III fixes the profit at 10 per cent upon the landed costs with the exception of item No. 5 and as this is not the maximum, it would have to be allowed in all cases and under clause 8 (1), the 'B ' licensees are to sell their stocks of coal according to the prices fixed under Schedule III.
Clause 8 (2) indeed is not very clearly worded, but we think that all that it provides is to impose a disability upon all holders of coal stocks to charge prices exceeding the landed costs and a profit upon the same not above 10 per cent as may be determined by the licensing authority.
The determination spoken of here must be in accordance with what is laid down in Schedule III and that, as has been said above, does specify a fixed rate and not a maximum and does ' not 817 allow the licensing authority to make any reduction he: likes.
On the whole we are of the opinion that clauses (7 is and (8) of the Control Order do not impose unreasonable restrictions upon the freedom of trade enjoyed by the petitioners and consequently the declaration.
of the 16th of July, 1953, cannot I;e held to be invalid.
The result is that, in our opinion, clause 4 (3) of the Control Order as well as the cancellation of the petitioners licence should be held to be invalid and a writ in the nature of mandamus would issue against the respondents opposite parties preventing them from enforcing the cancellation order.
The rest of the prayers of the petitioners are disallowed.
We make no order as to costs.
Petition partly allowed.
Agent for the petitioners: Ganpat Rai.

summary/full:
A law or order which confers arbitrary and uncontrolled power upon the executive in the matter of regulating trade or business in normally available commodities must be held to be unreasonable.
Under cl.
4(3) of the Uttar Pradesh Coal Control Order, 1953, the licensing authority has been given absolute power to grant or refuse to grant, renew or refuse to renew, suspend, revoke, cancel or modify any licence under this Order and the only thing he has to do is to record reasons for the action he takes.
Not only so, the power could be exercised by any person to whom the State Coal Controller may choose to delegate the same, and the choice can be made in favour of any and every person.
Such provisions cannot be held to be reasonable: Held, therefore that the provision of cl.
4(3) of the Uttar Pradesh Coal Control Order, 1953, must be held to be void as 104 804 imposing an unreasonable restriction upon the freedom of trade and business guaranteed under article 19 (1) (g) of the Constitution and not coming within the protection afforded by cl.
(6) of the article.
Yick Wo vs Hopkins at 373) referred to.


judgement:
Appeal No. 474 of 1964.
Appeal by special leave from the judgment and order dated March 14, 1963 of the Andhra Pradesh High Court in C.R.P. No. 1725 of 1959.
210 M. C. Setalvad, and T. V. R. Tatachari for the appellant.
Kirpa Narain and T. Satyanarayana, for respondent Nos. 1 and 9.
The Judgment of the Court was delivered by Hidayatullah J.
On the application of two creditors the appellant Yenumula Mallu Dora has been adjudged insolvent by the Subordinate Judge, Kakinada and a receiving order has been passed against him.
The respondents before us are one of the petitioning creditors and the legal representatives of the other petitioning creditor who died during these proceedings.
The first petitioning creditor held a decree for money which he had obtained in O.S. 67 of 1949.
He also held another money decree in O.S. 473 of 1948.
The second petitioning creditor held a decree which she had obtained in O.S. 17 of 1955.
The application was based upon three acts of insolvency which the appellant was stated to have committed and on the general facts that he was indebted to the tune of Rs. two lakhs, and was unable to pay his debts.
The three acts of insolvency alleged against him were (a) evasion of arrest in execution of the money decree in O.S. 67 of 1949; (b) sale of some of his properties on September 26, 1956 in execution arising from O.S. 73 of 1952; and (c) sale of some of his properties on September 19, 1956 in execution of money decree in O.S. 9 of 1950.
It was also alleged that he was fraudulently transferring properties in the name of his wife and brother in law and had suffered a collusive charge decree for maintenance 'in favour of his wife, to delay and defeat his creditors.
The Subordinate Judge, Kakinada did not accept the first two acts of insolvency.
The evidence regarding evasion of arrest was not found convincing and the second act of insolvency was rejected because the sale of the property was in execution of a mortgage decree.
In respect of the third art of insolvency the Subordinate Judge held that it satisfied section 6(e) of the and an adjudication and a receiving order were justified in the case.
An appeal was taken to the District Court at Rajahmundry (C.A. 41 of 1958) which was dismissed on October 15, 1959.
A Revision Application filed under section 75 of the was dismissed by the High Court of Andhra Pradesh on March 14, 1963.
The appellant, however, obtained special leave of this Court and has filed the present appeal against the order of the High Court.
The contention of the appellant was, and still is, that the third act of insolvency was not established as he had deposited, within 211 one month of the sale, the entire decretal amount together with poundage and commission and the sale was set aside on his petition under Or.
21 r. 89 of the Code of Civil Procedure.
He contended, therefore, that as none of the acts of insolvency remained, the petition ought to have been dismissed as incompetent or he was.
entitled to have the petition dismissed in any event, under section 25 of the which allows a creditor 's petition to be dismissed on sufficient cause.
He submitted that as the sale was set aside before the order of adjudication was made the preexisted sufficient cause for the dismissal of the creditors ' petition.
The Subordinate Judge relying upon Venkatakrishnayya vs Malakondayya(1) and on decisions of the Lahore and the Calcutta High Courts rejected the submission and made the order against the appellant.
The District Judge, Rajahmundry agreed with the, conclusion of the Subordinate Judge and the High Court rejected ' the petition for revision.
In this appeal the same points are urged ' again for our acceptance.
In our judgment the view of the law taken in this case by the Subordinate Judge and approved by the, District Court is right and does not warrant any interference.
The object of the law of insolvency is to seize the property of ' an insolvent before he can squander it and to distribute it amongst his creditors.
It is, however, not every debtor, who has borrowed ' beyond his assets or even one whose property is attached in execution of his debts, who can be subjected to such control.
The jurisdiction of the court commences when certain acts take place which are known as acts of insolvency and which give a right to, his creditors to apply to the Court for his adjudication as an insolvent.
The lays down in section 6 what acts.
are to be regarded as acts of insolvency.
It is a long list.
Some are voluntary acts of the insolvent and some others, are involuntary.
The involuntary acts are of a kind by which a creditor is able to, compel a debtor to disclose his insolvent condition even if the insolvent is careful enough not to commit a voluntary act of insolvency.
One such act is that the insolvent has been imprisoned in execution of a decree of any court for payment of money, and another is that any of his property has been sold in execution of a decree of any court for payment of money.
In this case the property of the appellant was sold on September 19, 1956 in execution of a money decree against him and therefore there is no question that he was guilty of an act of insolvency described in section 6(e); of the .
(1) A.I.R, 1942 Mad, 306, 212 Under section 7, a creditor is entitled to present a petition in the Insolvency Court against a debtor if he has committed an act of insolvency provided [as laid down in section 9(i) (c)] the petition is made within three months of the act of insolvency on which the petition is grounded.
In this case both these conditions are fulfilled.
There is thus no doubt that the petitioning creditors ' application under section 7 complied with section 6 (e) and section 9 ( 1 ) (c) of the .
The petitioning creditors alleged that the appellant was indebted to the extent of Rs. two lakhs and this was not denied by the appellant.
In the trial of one of the execution petitions filed against him by a decree holder the appellant admitted that he had "no means to pay the decree debt" because "all his properties" were "under attachment and were being brought to sale".
He also stated that he was not "in a position to discharge the debts".
It is, therefore, clear that the appellant who was in more than embarrassed pecuniary circumstances was unable to pay his debts.
It was also clear from the evidence, which the District Court and the Subordinate Judge have concurrently accepted, that he had made some transfers to screen his properties from his creditors and had suffered a decree for maintenance in a suit by his wife.
In view of these facts, which the appellant cannot now deny, he is driven to support his case by argument on law.
The argument, as we have seen, is two fold.
We, are not inclined to accept either leg of the argument.
An act of insolvency once, committed cannot be explained or purged by subsequent events.
The insolvent cannot claim to wipe it off by paying some of his creditors.
This is because the same act of insolvency is available to all his creditors.
By satisfying one of the creditors the act of insolvency is not erased unless all creditors are satisfied because till all creditors are paid the debtor must prove his ability to meet his liabilities.
In this case the petitioning creditors had their own decrees.
It was in the decree of another creditor that the payment was made but only after the act of insolvency was committed.
Besides the petitioning creditors there were several other creditors to whom the appellant owed large sum of money and his total debts aggregated to Rs. two lakhs.
It is plain that any of the remaining creditors, including the petitioning creditors, could rely upon the act of insolvency even though one or more creditors might have been paid in full.
The act of insolvency which the appellant had committed thus remained and was not purged by payment of decretal amount after the sale in execution of the money decree.
21 3 The next question is whether the Subordinate Judge should have exercised his discretion under section 25, to dismiss the petition of the creditors treating the deposit of the money as sufficient cause.
Section 25 of the is, in wide terms but it is impossible to give effect to those wide terms so as to confer a jurisdiction to ignore an act of insolvency at least in cases where the debtor continues to be heavily indebted and there is no proof that he is able to pay As debts.
The section reads as follows "25.
Dismissal of petition.
(1) In the case of a petition presented by a creditor, where the Court is not satisfied with the proof of his right to present the petition or of the service on the debtor of notice of the order admitting the petition, or of the alleged act of insolvency, or is satisfied by the debtor that he is able to pay his debts, or that for any other sufficient cause no order ought to be made, the Court shall dismiss the petition, (2). . . . . . " The section expressly mentions three circumstances in which the petition made by a creditor must be dismissed, namely, (i) the absence of the right of the creditor to make the application (ii) failure to serve the debtor with the notice of the admission of the petition; and (iii) the ability of the debtor to pay his debts.
In addition, the Court has been given a discretion to dismiss the petition if it is satisfied that there is other sufficient cause for not making the order against the debtor.
The last clause of the section need not necessarily be read ejusdm generis with the previous ones but even so there can be no sufficient cause if, after an act of insolvency is established, the debtor is unable to pay his debts.
The discretion to dismiss the petition can only be exercised under very different circumstances.
What those cases would be, it is neither easy nor necessary to specify, but examples of sufficient cause are to be found when the petition is malicious and has been made for some collateral or inequitable purpose such as putting pressure upon the debtor or for extorting money from him, or where the petitioning creditor having refused tender of money, fraudulently and maliciously files the application.
An order is sometimes not made when by the receiving order the only asset of the debtor would be destroyed such as a life interest which would cease on his bankruptcy.
Cases have also occurred 214 where a receiving order was not made because there were no assets and it would have been a waste of time and money to make a receiving order against the debtor.
These examples merely illustrate the grounds on which orders are generally made in the exercise of the discretion conferred by the last clause of section 25.
This case is clearly one which cannot be treated under that clause.
There are huge debts and no means to pay even though there are properties which, if realised, may satisfy at least in part the creditors of the appellant.
The appellant was clearly guilty of an act of insolvency and an act of insolvency cannot be purged by anything he may have done subsequently.
There is no proof of malicious or inequitable dealing on the part of the petitioning creditors.
They have proved the necessary facts and have established both the act of insolvency and the inability of the appellant to pay his debts.
The appellant has not been able to prove that he is able to pay.
In fact, he has admitted that he is unable to pay his debts.
The High Courts have taken a similar and uniform view of such cases.
These rulings are quite numerous but the following may be seen: Pratapmall Rameshwar vs Chunnilal Jahuri,(1) Lal Chand Chaughuri vs Bogha Ram and others(2) and Venkatakrishnayya vs Malakondayya(3).
We do not consider it necessary to examine the facts in those cases because they apply correctly the principles, which we have set out above to the facts in the cases then present.
It is, therefore, quite clear that the adjudication of the appellant and the receiving order against him were properly made.
In the result the appeal fails and is dismissed.
There will be no order as to costs.
Appeal dismissed.
(1) A.I.R. (1933) Cal.
(2) A.I.R. (1938) Lah.
819, (3) A.I.R.(1942) Mad.

dataset_name: IN-Abs

summary/full:
On the application of two creditors (respondents in this appeal) the appellant was adjudged a bankrupt by the Subordinate Judge, Kakinada, and a receiving order was passed against him.
This adjudication was based on the one act of insolvency out of three alleged in the application which was accepted by the sub judge, i.e., the sale of some of his properties in execution of a money decree.
Appeals against the order to the District Judge, and later to the High Court, were dismissed.
It was contended on behalf of the appellant that the alleged act of insolvency was not established as he had deposited, within one month of the sale, the entire decretal amount, and the sale was set aside on a petition by him under Order 21, rule 89 of the Code of Civil Procedure; that in any event he was entitled to have the application dismissed under section 25 of the , which allows a creditor 's application to be dismissed on sufficient cause.
HELD: The adjudication of the appellant as an insolvent and the receiving order against him were properly made.
[214 E] An act of insolvency once committed cannot be explained or purged by subsequent events.
The insolvent cannot claim to wipe it off by paying some of his creditors; the same act of insolvency is available to all his creditors and is not erased unless all creditors are satisfied.
The act of insolvency which the appellant had committed had remained and was not purged by payment of the decretal amount after the sale in execution of the money decree; the respondents could therefore rely on it even though one or more creditors might have been paid in full.
1212 F H] (ii) Although section 25 of the is in wide terms, it cannot be given effect to so as to ignore an act of insolvency in cases such as the present one, where the debtor continues to be heavily indebted and there is no proof that he is able to pay his debts.
[213 A B] Venkatakrishnayya vs Malakondayya, A.I.R. 1942 Mad. 306; Pratapmall Rameshwar vs Chunnilal Jahuri, A.I.R. 1933 Cal. 417 and Lal Chand Changhuri vs Bogha Ram & Ors., A.I.R. 1938 Lah. 819, referred to.


judgement:
vil Appeals Nos. 89 93 of 1964.
Appeals by special leave from the judgment and orders dated August 30, 1961 and June 13, 1961 in Special Civil Application Nos. 440, 441,509, 510 and 7 of 1961.
K.S. Chawla and R.S. Sachthey, for the appellant (in C. As.
89/91 of 1964).
79 C.K. Daphtary, Attorney General, K.S. Chawla and R.N. Sachthey, for the appellant (in C.A. NO. 93/64).
N.N. Keshwani, for the respondents in all the appeals.
The Judgment of the Court was delivered by Sikri, J.
These five appeals by special leave raise a common question of interpretation of r. 19 of the Displaced Persons (Compensation & Rehabilitation) Rules, 1955 (hereinafter referred to as the Rules).
It is common ground that nothing turns on any dissimilarity in the facts of each appeal.
It will accordingly suffice if facts in Civil Appeal No. 93 of 1964 are set out.
The respondent, Lachman Hotchand Kriplani, is a displaced person from West Pakistan.
He has three brothers.
They owned 731 acres of agricultural land in District Nawabshah, Taluka Nawab Shah, Sind now in Pakistan.
The respondent submitted a claim under the Displaced Persons (Claims) Act, 1950 (XLIV of 1950) hereinafter referred to as the Claims Act.
The word 'claim ' was defined to mean "assertion of a right to the ownership of, or to any interest in (i) any immovable property in West Pakistan which is situated within an urban area, or (,ii) such class of property in any part of West Pakistan, other than an urban area as may be notified by the Central Government in this behalf in the official gazette".
It is common ground that agricultural land in Sind was so notified.
The respondent 's claim was that he owned 1/4 share of 731 acres and 14 ghuntas standing in the name, of Fatehehand.
The Claim Officer, by order dated October 7, 1952, accepted the claim and assessed his claim as 94 3 standard acres.
On July 2, 1955, the respondent applied for compensation under the (XLIV Of 1954) hereinafter referred to as the Compensation Act.
In the application he stated that he was not a member of a Joint Hindu Family in Pakistan, but his claim was as a co sharer alongwith three others, who had filed separate claims.
The Assistant Settlement Commissioner was, however, not satisfied with this assertion and after holding an enquiry, by order dated March 3, 1960, he held that the four alleged co sharers were members of a Joint Hindu Family, and the whole agricultural land claim was to be treated as joint property.
On August 29, 1960, a statement of account was issued to the respondent.
This statement showed that his claim was assessed as Rs. 10,701/ gross compensation.
This figure was arrived at, as stated in the affidavit of the Assistant Settlement Commissioner, thus: "The claim was assessed for 376 standard acres and 12 units out of which the petitioner had 1/4th share.
The compensation on 376 Standard Acres and 12 Units works out to 108 Standard Acres 0 3/10 Units as per 80 scale indicated in Rule 51.
This converted in terms of money as per Rule 56 comes to Rs. 42,806/ The petitioner 's 1/4th share would be Rs. 10,701/ ".
The respondent then on October 28, 1960, served a notice on the Regional Settlement Commissioner calling upon him to rectify the statement of account, failing which he will be constrained to move the High Court under articles 226 and 227 of the Constitution.
In this notice he claimed that r. 20 applied to his case; in the alternative he asserted that at least r. 19 should be applied to him.
In reply, the Assistant Settlement Commissioner informed him that the calculation had been done correctly.
Thereupon, he filed a petition under articles 226 and 227, in the Bombay High Court.
The High Court allowed the petition and set aside the statement of account furnished to the petitioner on August 29, 1960, and directed that the respondent shall give the benefit of r. 19 and determine the amount of compensation payable to him in accordance with the provisions of rr. 19, 51 and 56 and other rules of the Displaced Persons (Compensation and Rehabilitation) Rules, 1955.
The appellant having obtained special leave, the appeals are now before us.
We may mention at the outset that in the High Court the respondent 's counsel did not challenge the finding of the Assistant Settlement Commissioner that the respondent and his brothers were members of a joint family.
The High Court came to the conclusion that r. 19 applied to agricultural land.
It found nothing in the scheme of the Rules, or in the language of r. 19, to support the claim of the Department that r. 19 applied only to nonagricultural land.
The learned Attorney General, on behalf of the appellant, challenges the conclusion of the High Court.
He has taken us through various sections of the Compensation Act of 1954 and various rules to substantiate his contention.
Let us then look at the Compensation Act and the Rules.
The Compensation Act was enacted to provide for payment of compensation and rehabilitation grant to displaced persons and for matters connected therewith. 'Verified claim" is defined to mean, inter alia, a claim registered under the Displaced Persons (Claims) Act (XLIV of 1950).
It is not disputed that the claim of the respondent verified by order dated October 7, 1952, is a verified claim.
Section 4 provides for an application for the payment of compensation in the prescribed form to be made by a displaced person having a verified claim within a certain period.
Section 5 provides that on receipt of an application under section 4, the Settlement Officer shall determine the amount of public dues, if any, recoverable from the applicant and shall forward the application and the record to the Settlement Commissioner.
It will be noticed that a verified claim registered under the Claim Act, 1950, includes claims to urban as well as certain agricultural land.
Therefore, both sections 4 and 81 5 apply to such agricultural land as has been made the subjectmatter of claim and verification under the Claims Act of 1950.
Section 6 was referred to by the learned Attorney General but we have not been able to appreciate how it advances his case.
Section 6 gives relief to certain banking companies in this way.
If a banking company held a mortgage of an immovable property belonging to a displaced person in west Pakistan, and that mortgage was subsisting at the date when the claim of the banking company was registered under the Claim Act, 1950, and the displaced person is entitled to receive compensation in respect of any such property, the banking company was entitled to various reliefs, the appropriate relief depending on whether the compensation to the displaced person is payable (1) in cash or (2) in the form of transfer of any property, or (3) in any other form.
In this section immovable property would include agricultural land and it cannot be denied that the respondent is entitled to compensation at least in one of the three forms mentioned in sub.
section (2).
Section 7(1).directs the Settlement Commissioner on receipt of the application trader section 5 to ascertain the amount of compensation having due regard to the nature of the verified claim and other circumstances of the case.
Section 7(2) provides for the deduction of certain dues and the Settlement Commissioner then makes an order under section 7(3) ascertaining the net amount of compensation.
Section 8 provides the form and manner of payment of compensation of the net compensation determined under section 7(3) as being payable to a displaced person.
Subject to any rules that may be made, the net compensation is payable in cash, in government bonds, or by sale to the displaced person of any property from the compensation pool and setting off the purchase money against the compensation payable to him, etc.
Section 8(2) enables rules to be made by the Central Government on various matters, inter alia, the scales according to which, the form and the manner in which and the installments by which compensation may be paid to different classes of displaced persons.
Section 40 enables rules to be made to carry out by the purposes of the Compensation Act.
It is not necessary to refer to other sections of the Compensation Act.
Before we deal with the 1955 Rules, it is apparent that sections 4, 5, 6, 7 and 8 do not in any manner distinguish between urban land and agricultural land as long as the agricultural land is the subject matter of a verified claim.
If a person holding a verified claim in respect of agricultural land owes.public dues and "public dues" is defined very widely in section 2(d) to include all kind of loans not only from the Central Government but from a State Government also this has to be deducted under section 7(3).
It is suggested that the expression "net amount of compensation" in section 7(3) means only cash compensation but we are unable to limit the expression thus in view of the scheme of sections 4 to 8. 82 The Central Government in exercise of the power conferred by section 40 of the Compensation Act made the Displaced Persons (Compensation and Rehabilitation) Rules, 1955.
Chapter I contains various definitions; Chapter II deals with procedure for submission of compensation application and determination of public dues.
Rule 3 enables a displaced person having a verified claim to make an application for compensation.
Rule 4 deals with the form of application and Appendix I is the form prescribed, and Appendix II is the questionnaire which has to be answered.
One question is important for our purpose.
Under the heading "11.
Particulars of claims under Displaced Persons Claims Act, 1950" is mentioned: "(a) agricultural land, index no; Village/Tehsil/District; value assessed in standard acres; cosharers in each property with respective shares; if any property is mortgaged state mortgage money and name of the mortgagees".
The rest of the rules, upto r. 9, in this Chapter deal with the scrutiny of the application and the determination of public dues.
It is only necessary to notice r. 6(2) which requires a Settlement Officer to send a duplicate copy of the application to the Office of the Chief Settlement Commissioner for verification of the assessed value of the claim in respect of which the application has been made.
Under r. 10 the Settlement Officer is required to pass an order and send a copy of the order and the original application along with the records of the case to the Regional Settlement Commissioner.
It will be seen that Chapter II does not distinguish between verified claims relating to urban property and rural property.
Then we come to Chapter III which contains r. 11.
Under this rule the settlement Commissioner deals with the duplicate copy sent to him under r. 6(2).
He verities the assessed value of the claim, as stated in the application, with the final order in respect thereof, in the claims record and returns the duplicate copy to the Regional Settlement Commissioner with such remarks as may be relevant for the determination of the amount of compensation.
Chapter IV deals with determination of compensation.
It will be remembered that section 5 of the Compensation Act requires the Settlement Officer to determine the amount of public dues and forward the application and the record of the case to the Settlement Commissioner, and r. 11, which we have just noticed, requires the Settlement Commissioner (Headquarters) to send the duplicate copy to the Regional Settlement Commissioner.
Rule 12 directs the Regional Settlement Commissioner to consolidate all these papers.
Rule 12 obviously applies to application in respect of verified claims to agricultural land.
As we have already said, section 5 and r. 11 applied to such verified claims.
Rule 13 deals with determination of certain dues to banking companies under section 6 and any unsecured debt payable by an applicant in respect of which a communication has been received from any Tribunal under section 52 of the Displaced Persons (Debt Adjustment) Act, 1951 (LXX of 1951).
Rule 14 directs that the public dues and the amounts referred to in Rule 13 83 shall be deducted from the amount of compensation in a certain order of priority.
Rule 15 reads as follows: "Determination of net compensation; After deducting the amount referred to in rule 14, the Regional Settlement Commissioner or an Assistant Settlement Commissioner or a Settlement Officer, or an Assistant Settlement Officer, having jurisdiction and duly authorised by the Regional Settlement Commissioner, shall pass an order determining the net amount of compensation payable to the applicant in respect of his verified claim and shall prepare a summary in the form specified in Appendix VII (Abstract of particulars).
It is significant that Appendix Vii has a column for agricultural land and a column for remarks regarding application of r. 19.
Pausing here, it is difficult to hold that rr. 12, 13 and 14 do not apply to applications for compensation in respect of agricultural lands which are the subject matter of a verified claim.
There fore, we must reject the contention that Chapter IV, in which r. 19 occurs, does not deal with agricultural lands at all.
It may be conceded that r. 16 does not apply to agricultural lands.
The scale compensation in respect of agricultural lands which are the subject matter of a verified claim is expressly dealt with else where.
Rule 51 which provides that the scale of allotment of land as compensation in respect of a verified claim for agricultural land shall be the same as in quasi permanent land allotment scheme in the State of Punjab and Patiala, and the East Punjab States Union, as set out in Appendix XIV.
The explanation further provides that if any public dues are recoverable the allocable area shall be reduced correspondingly.
Rule 49 read with r. 56 enables the compensation due on the verified claim for agricultural land to be converted into cash if a person wishes to have his claim satisfied against property other than agricultural land.
Rule 18 expressly excludes agricultural land from its purview.
What emerges from a consideration of these rules in Chapter IV is that we must consider each rule and see whether it has application to a claim for compensation in respect of agricultural land.
Rule 19 reads thus: "Special Provision for payment of compensation to Joint families Where a claim relates to properties left by the members of an undivided Hindu family in West Pakistan thereinafter referred to as the joint family) compensation shall be computed in the manner hereinafter provided in this rule.
(2) where on the 26th Sept. 1955 (hereinafter referred to as the relevant date) the joint family consisted of: (a) two or three members entitled to claim partition, 84 the compensation payable to such family shall be computed by dividing the verified claim into two equal shares and calculating the compensation separately on each such share, (b) four or more members entitled to claim partition, the compensation payable to such family shall be computed by dividing the verified claim into three equal shares and calculating the compensation separately on each such share.
(3) For the purpose of calculating the number of the member of a joint family under sub rule (2), a person who on the relevant date: (a) was less than 18 years of age, (b) was a lenial descendant in the main line of another living member of joint Hindu family entitled to claim partition shall be excluded: Provided that where a member of a joint family has died during the period commencing on the 14th August 1947 and ending on the relevant date leaving behind on the relevant date all or any of the following heirs namely: (a) a widow or widows, (b) a son or sons (whatever the age of such son or sons) but no lenial ascendant in the main line, then all such heirs shall, notwithstanding anything contained in this rule, be reckoned as one member of the joint Hindu family.
Explanation For the purpose of this rule, the question whether a family is joint or separate shall be determined with reference to the status of the family on the 14th day of August, 1947 and every member of a joint family shall be deemed to be joint notwithstanding the fact that he had separated from the family after the date".
The heading "Special Provision for payment of compensation to joint families" is general.
So is sub rule (1).
The word properties ' is general and would include agricultural land.
That this is the meaning is also borne out if we consider the word "claim".
The word "claim" must have reference to the claim in the application to be made under section 4 read with rr. 3 and 4, and as we have already noticed, the application would include a claim in respect of agricultural land if it is the subject matter of a verified claim.
The learned Attorney General has not been able to point to any principle of construction which would enable us to limit the scope of the general words in r. 19(1).
His main argument that no rule in Chapter IV applies to claims in respect of agricultural land we have already rejected.
85 The learned Attorney General then urges that the scheme of the Rules is to provide in separate chapters for compensation in respect of various classes of properties, and he says that Chapter VIII provides for compensation in respect of verified claim for agricultural land situated in rural area and the rules contained in the chapter are the only rules that govern the grant of compensation.
But none of the rules in this chapter deals with what is t9 happen if the agricultural land was held by a joint family in West Pakistan or if the agricultural land was held by co owners in West Pakistan.
Even if a Joint Hindu Family is treated as a unit for some purposes in some laws, co owners are very rarely treated as a unit and it would require express language to treat co owners as a unit an.d award compensation to them as a unit.
However, r. 20 recognises the general rule and provides that where a claim relates to property left in West Pakistan, which is owned by more than one claimant as co owners, the unit for the assessment of compensation shall be the share of each co owner and the compensation shall be payable in respect of each such share as if a claim in respect thereof has been filed and verified separately.
The learned Attorney General, when asked, said that even r. 20 ' would not apply to a claim in respect of agricultural land, but we are unable to accede to this contention.
It would be the height of ' inequity to hold this.
In other words, rr. 19 and 20 enable the authorities to determine the unit for assessment of compensation.
This subject is not dealt with in Chapter VIII, which deals with how the unit, be it an individual, a member of Joint Hindu Family or a co owner, is to be compensated.
There is nothing in Chapter VIII which modifies or overrides rr. 19 and 20.
Accordingly, in agreement with the High Court, we hold that r. 19 will apply to the claim of the respondent in respect of agricultural land left by him as a member of the Joint Hindu Family.
In the result, the appeal fails and is dismissed with costs.
As stated in the beginning, it is common ground that if this appeal fails the other appeals must also fail.
They are accordingly dismissed with costs.
There will be one hearing fee in them.
Appeals dismissed.

summary/full:
The respondent who had a "verified claim" applied for compensation under the .
He alleged that he was a co sharer along with his brothers in agricultural property in West Pakistan and claimed his share of the compensation.
The Assistant Settlement Officer held that the alleged co sharers were members of a joint Hindu family and that t.he agricultural property was joint property.
He then calculated the compensation on the joint property as per rr.
51 and 56 of the Displaced Persons (Compensation and Rehabilitation) Rules 1955.
The respondent thereupon filed a petition in the High Court under articles 226 and 227 of the Constitution contending that on the finding that the respondent and his brothers constituted a joint family, the unit for assessment of compensation should first be determined according to r. 19, which makes special provision for payment of compensation to joint families, before compensation was calculated.
The High Court allowed the petition.
In the appeal to this Court it was contended that r. 19 was inapplicable as that rule does not apply to agricultural land.
HELD: The High Court was right in holding that the rule applied to the claim of the respondent in respect of the agricultural land.
Chapter IV of the Rules in which r.19 occurs contains some rules which apply to applications for compensation in respect of agricultural lands also.
Therefore it cannot be said that the Chapter does not deal with agricultural lands at all.
Each rule must be considered to see whether it has application to a claim for compensation in respect of agricultural land.
So considered, there is no principle of construction by which the scope of the general words in r. 19 could be limited, so as not to apply to agricultural land.
Chapter VIII of the Rules provides for compensation in respect of verified claims for agricultural lands in rural areas and only deals with how a unit that has been determined is to be compensated.
There is nothing in that Chapter which modifies or overrides r.19 which enables the authorities to determine the unit for assessment of compensation in the case of joint families.
[83 D E; 85 A F]


judgement:
Appeal No. 152 of 1965.
Appeal from the judgment and order dated November 13, 1964 of the Madhya Pradesh High Court in Misc.
Petition No. 373 of 1964.
M. section Gupta, for the appellant.
222 B. R. L. Iyengar, for the respondents.
The Judgment of the Court was delivered by Ramaswami, J.
On August 7, 1963 the Regional Transport Authority, Bilaspur granted to the Punjab Sikh Regular Motor Service, (hereinafter called the appellant), renewal of a stage carriage permit for an inter regional route Saraipalli to Sarangarh in the State of Madhya Pradesh.
The permit was valid upto August 5, 1963 and by the order of renewal dated August 7, 1963 the permit was renewed for a period of three years.
On September 13, 1963 the appellant applied to the Regional Transport Authority, Raipur for renewal of the grant of countersignature on the renewed permit.
Respondent No. 2 objected to the renewal of the grant of counter signature on the ground that the application of the appellant dated September 13, 1963 was barred by time.
The Regional Transport Authority, Raipur held that the application for renewal of the grant of countersignature was not made within the time prescribed by rule 62 of the Central Provinces and Berar Motor Vehicles Rules but it took the view that the application for renewal had been filed within six weeks of the date of the passing of the order of renewal of the permit by the Regional Transport Authority, Bilaspur and therefore the application for the renewal of the grant of countersignature could not be rejected on the ground that it was time barred.
The Regional Transport Authority, Raipur accordingly granted the renewal of the counter signature on the permit by its order dated February 24, 1964.
Respondent No. 2 thereafter applied to the High Court of Madhya Pradesh under article 226 of the Constitution of India for a writ quashing the order dated February 24, 1964 passed by the Regional Transport Authority, Raipur.
The High Court took the view that an application for renewal of the grant of counter signature must be made within the period prescribed by section 58 (2) of the and the appellant having failed to apply within that period, the application of the appellant for renewal of the counter signature on the permit was barred and the Regional Transport Authority, Raipur had no jurisdiction to countersign the permit renewed by the Regional Transport Authority, Bilaspur.
The High Court accordingly quashed the order dated February 24, 1964 passed by the Regional Transport Authority, Raipur.
This appeal is brought by the appellant with a certificate granted by the High Court tinder article 1 33 (1) (c) of the Constitution.
It is advisable at this stage to refer to the material provisions of the (Act 4 of 1939) which have a bearing 22 3 on the validity of the order of the Regional Transport Authority, Raipur dated February 24, 1964.
Section 45 of the provides that every application for a permit shall be made to the Regional Transport Authority of the region in which it is proposed to use the vehicle or vehicles.
By the proviso to section 45 it is enacted that where it is proposed to use the vehicle or vehicles in two or more regions lying within the same State, the application shall be made to the Regional Transport Authority of the region in which the major portion of the proposed route or area lies.
Section 47 sets out the procedure of the Regional Transport Authority in considering applications for stage carriage permits and prescribes the matters which may be taken into account by that officer ingraining or rejecting the applications for stage carriage permits.
Section 48 provides that subject to the provision of section 47,a Regional Transport Authority may, on an application made to it, grant a stage carriage permit, in accordance with the application or with such modifications as it deems fit, valid for a specified route or routes or a specified area.
Section 57 prescribes the procedure in " applying for and granting permits".
It is provided by sub section
(2) of section 57 that an application for a stage carriage permit or a public carrier 's permit shall be made not less than six weeks before the date on which it is desired that the permit shall take effect, or, if the Regional Transport Authority appoints a date for the receipt of such applications, on such date.
Section 58(1) provides that a stage carriage permit or a contract carriage permit other than a temporary permit shall be effective without renewal for such period not less than three years and more than five years, as the Regional Transport Authority may specify in the permit.
Sub section (2) enacts that a permit may be renewed on an application made and disposed of as if it were an application for a permit, provided that the application for the renewal of a permit shall be made (a) in the case of a stage carriage permit or a public carrier 's permit, not less than sixty days before the date of its expiry, and (b) in any other case, not less than thirty days before the date of, its expiry.
By sub section
(3) the Authority is, notwithstanding anything contained in the first proviso to sub section
(2), authorised to entertain an application for the renewal of a permit after the last date specified in the said proviso, if the application is made not more than fifteen days after the said last date.
Section 63 deals with inter regional and inter state permits.
The material parts of that section are "(1) Except as may be otherwise prescribed, a permit granted by the Regional Transport Authority 224 of any one region, shall not be valid in any other region, unless the permit has been countersigned, by the Regional Transport Authority of that other region, and a permit granted in any one State shall not be valid in any other State unless countersigned by the State Transport Authority of that other State or by the Regional Transport Authority concerned : Provided. . . . . (2) A Regional Transport Authority when countersigning the permit may attach to the permit any condition which it might have imposed if it had granted the permit and may likewise vary any condition attached to the permit by the authority, by which the permit was granted.
(3) The provisions of this Chapter relating to the grant, revocation and suspension of permits shall apply to the grant, revocation and suspension of countersignatures of permits : Provided. . . . .
Section 68(1) confers authority upon the State Government to make rules for the purpose of carying into effect the provisions of Ch.
IV of the Act.
A stage carriage permit granted by a Regional Transport Authority therefore remains effective without renewal for a period of not less than three years and not more than five years as the authority may specify in the permit.
A person desiring to obtain renewal of the permit must, in the case of a stage carriage permit, make an application not less than sixty days before the date of its expiry, and the Authority has to deal with the application for the renewal as if it were an application for a permit.
The procedure for obtaining renewal is assimilated to the procedure prescribed for an application for a first permit, but in order that there is no interruption in the transport service the Legislature has provided that the application for renewal shall be made not less than sixty days before the date of its expiry, it being assumed that the authority would be able, in the interval, to publish the application, and to hear objections to the grant of renewal.
Except as may be otherwise prescribed, an interregional permit by a Regional Transport Authority in any region.
is not valid unless the permit is countersigned by the Regional Transport Authority of that other region.
The provisions of Ch.
IV relating to the grant, revocation and suspension of permits 225 apply to the grant, revocation and suspension of countersignatures of permits.
The High Court has held, in the present case, that an appli cation for renewal of counter signature has also to be made not less than sixty days before the date of its expiry and if no such application is made, the Regional Transport Authority has no power to countersign the permit, and upon that ground the High Court has quashed the order of the Regional Transport Authority, Raipur dated February 24, 1964 granting countersignature of the permit.
It was argued on behalf of the appellant that the period of limitation prescribed by section 58 of the Motor Vehicle, , Act cannot be applied to an application for countersignature of a renewed permit.
It was submitted that the question of counter signature cannot arise unless and until the permit was first renewed and therefore it was erroneous to say that an application for countersignature should be made even before the permit was renewed and within the time prescribed by section 58.
The contrary view was put forward on behalf of respondent No. 2.
It was contended that in the case of an inter regional route, the countersignature of the Regional Transport Authority concerned was essential for the validity and confirmation of the grant made by the Regional Transport Authority having jurisdiction to grant a permit for the inter regional route.
It was pointed out that under section 63 (3) of the the provisions of Ch.
IV relating to grant, revocation and suspension of permits apply to the grant, revocation and suspension of countersignatures of permits and therefore the provisions of sections 57 and 58 about the making of an application for the grant of a permit, the time within which it must be made and the procedure that must be followed, apply equally in the matter of the grant of countersignatures and that as section 58 laid down that an application for renewal of a permit must be made, in the case of a stage carriage permit, not less than sixty days before the date of its expiry, it necessarily followed that an application for countersignature of the renewed permit for inter regional route had to be made to the Regional Transport Authority concerned within sixty days before the date of the expiry of the permit.
We do not think it is necessary to express any opinion on the contentions advanced by the parties on this aspect of the case, for we are of the view that on a proper construction of the rules made by the State Government in regard to the grant of permits and countersignatures of inter regional permits the Regional Transport Authority, Raipur was not competent to renew 226 the countersignature on the permit for tile interregional route granted by the Regional Transport Authority, Bilaspur in the present case.
Under the the Central Provinces and Berar Motor Vehicles Rules, 1940 were made by the appropriate authority and it is the admitted position that these rules were at the material time in operation in the two regions Bilaspur and Raipur in the State of Madhya Pradesh with which we are concerned.
By r. 61 it is provided : "(a) Application for the renewal of a permit shall be made, in writing to the Regional Transport Authority by which the permit was issued not less than two months, in the case of a stage carriage permit or a public carrier 's permit, and not less than one month in other cases, before the expiry of the permit, and shall be accompanied by Part A of the permit.
The application shall state the period for which the renewal is desired and shall be accompanied by the fee prescribed in rule 55.
(b) The Regional Transport Authority renewing a permit shall call upon the holder to produce part B or Parts A, B thereof, as the case may be, and shall endorse Parts A and B accordingly and shall return them to the holder.
" By r. 62 cl.
(a) it is provided "Subject to the provisions of r. 63, application for the renewal of a countersignature on a permit shall be made to the Regional Transport Authority concerned and within the appropriate periods prescribed by Rule 61 and shall, subject to the provisions of sub rule (b), be accompanied by Part A of the permit.
The application shall set forth the period for which the renewal of the countersignature is required".
By r. 63 cl.
(a) it is provided : "The authority by which a permit is renewed may, unless any authority by which the permit has been countersigned (with effect not terminating before the date of expiry of the permit) has by general or special order otherwise directed, likewise renew any countersignature of the permit (by endorsement of the permit in the manner set forth in the appropriate form) and shall, in such case, intimate the renewal to such authority".
227 Rule 61 substantially incorporates the provisions of sub section
(2) of section 58 of the and the proviso thereto, and makes certain incidental provisions.
Clause (a) of r. 62 provides that the application for renewal of countersignature of a permit shall be made to the Regional Transport Authority concerned and within the appropriate period prescribed by r. 61 but the provisions of r. 62(a) are subject to the provisions of r. 63(a) which confers power upon the Authority which grants renewal of inter regional permit under the first proviso to section 45 to countersign the permit so as to make it valid for the other region covered by the route.
Therefore, even though by section 63 the power to countersign the pen nit is entrusted to the Regional Transport Authority of the region in which the remaining part of the route is situate, the effect of r. 63 is that the power to countersign the permit is vested in the Authority which grants the renewal of the permit.
The Legislature has by providing in the opening part of sub section
(1) of section 63 "except as may be otherwise prescribed" made the provision subject to the rules framed by the State Government under section 68 of the .
The provisions of r. 63, therefore, must supersede the direction contained in section 63(1) of the statute and the Regional Transport Authority, Bilaspur was competent in the present case to grant countersignature of the pen nit even in so far as it related to the Raipur region.
On behalf of the appellant attention was drawn to the expression "may" in r. 63.
But in the context and the language of the rule the word "may" though permissive in form, must be held to be obligatory.
Under r. 63 the power to grant renewal of the countersignature on the permit in the present case is conferred on the Regional Transport Authority, Bilaspur.
The exercise of such power of renewal depends not upon the discretion of the authority but upon the proof of the particular case out of which such power arises.
"Enabling words are construed as compulsory whenever the object of the, power is to effectuate a legal right" (See Julius vs Bishop of Oxford) (1).
If the Regional Transport Authority, Bilaspur had power to renew the countersignature on the permit under r. 63, it must be held that the Regional Transport Authority, Raipur had no such power under r. 62 because the latter rule is expressly made subject to the provisions of rule 63, and the power granted to the Regional Transport Authority under section 62 is taken away by the provisions of r. 63.
It follows, therefore, that the Regional Transport Authority, Raipur was not competent to renew the countersignature on the permit in the present case and the Regional Transport Autho (1) 5 A.C. 214, 244.
228 rity, Bilaspur was alone competent to renew the countersignature of the permit.
We accordingly hold that the order of the Regional Transport Authority, Raipur dated February 24, 1964 granting countersignature of the permit was illegal and ultra vires and was rightly quashed by the High Court by its order dated November 13, 1964.
We, therefore, confirm the order of the High Court, but for different reasons.
We, however, desire to make it clear that our order does not affect the validity of the permit granted to the appellant by the Regional Transport Authority, Bilaspur in so far as it relates to the route within the limits of Bilaspur region.
That is the ratio of the decision of this Court in M/s. Bundelkhand Motor Transport Company, Nowgaon vs Behari Lal Chaurasia and anr.(1) in which it was pointed out that inter regional permit when granted is valid for the region over which the authority granting the permit has jurisdiction even though it is not countersigned by the proper Regional Transport Authority with regard to the portion of the route outside that region.
We accordingly dismiss this appeal.
There will be no order as to costs.
We desire to express our thanks to Mr. Iyengar who acted as amicus curiae in this case.
Appeal dismissed.

summary/full:
The Regional Transport Authority, Bilaspur, granted the appellant renewal of the stage carriage permit for an inter regional route, The appellant, thereafter, applied to the Regional Transport Authority, Raipur, for renewal of the grant of counter signature on the renewed permit, and it was granted.
In an application under article 226 by the 2nd respondent, the High Court quashed the order of the Regional Transport Authority, Raipur, on the ground that the appellant 's application for renewel of the counter signature was barred by time.
In appeal to this Court, HELD : On a proper construction of the Central Provinces and Berar Motor Vehicles Rules made by the State Government in regard to the grant of permits and counter signatures of inter regional permits, the Regional Transport Authority, Raipur, was not competent to renew the counter signature on the permit for the inter regional route granted by the Regional Transport Authority, Bilaspur, and the permit was valid only so far as it related to the route within the limits of Bilaspur region, (225 H] Even though by section 63 of the , the power to counter sign the permit is entrusted to the Regional Transport Authority of the region in which the remaining part of the route is situate, the effect of r. 63 is that the power to counter sign the permit is vested in the Authority which grants the renewal of the permit.
In the context and the language of the rule the word "may" in the rule, though permissive in form, is obligatory.
If the Regional Transport Authority, Bilaspur, had power to renew the counter signature on the permit under the rule,, it must be held that the Regional Transport Authority, Raipur, had no such power under r. 62, because, the latter rule As expressly made subject to the provisions of r. 63, and the power granted to the Regional Transport Authority under r. 62 is taken away by the provisions of r. 63.
[227 C G] M/s. Bundelkhand Motors Transport Company vs Beharilal, ; , referred to.