judgement:
Appeal No. 957 of 1964.
Appeal from the judgment and order dated January 12, 1963 of the Judicial Commissioner 's Court.
Himachal Pradesh in Civil Misc.
2nd Appeal No. 15 of 1961.
R. Ganapathy Iyer, R. N. Sachthey and section P. Nayar, for the appellant.
D. R. Prem and R. Thiagarajan, for the respondent.
448 The Judgment of the Court was delivered by Shelat, J.
The Himachal Pradesh State legislature passed the Himachal Pradesh Abolition of Big Landed Estates and Land Reforms Act 1953 (hereinafter referred to as the Act) on June 17, 1953 and the Act was brought into force with effect from January 26, 1955.
The validity of the Act was thereafter successfully impugned (cf.
Shri Vinod Kumar vs State of Himachal Pradesh)(1).
The Parliament then passed the Validating Act, 56 of 1958.
That Act was itself then challenged in Jadab Singh vs Himachal Pradesh Administration (2 ) but the challenge was rejected and the Act since then remains on the statute book as a valid piece of legislation.
On June 4, 1959 the respondent made an application under section II of the Act for acquiring proprietary rights in the lands set out therein claiming to be the cultivating tenant of those lands and produced a copy of Jamabandhi in support of his claim.
He stated that he was the tenant of the Union of India in respect of the said lands.
that he was cultivating the said lands, that he was paying Rs. 35/5/ annually as rent and Rs. 23/8/ as annual land revenue and other rates and cesses assessed on the said lands and that he was willing to pay compensation as provided by the Act.
On November 26, 1959 the Forest Department on behalf of the Union filed objections alleging that the application was incompetent, that the said lands formed part of the protected forest.
that the relationship between the respondent and the Union was not that of landlord and tenant, that the Union being the paramount owner could not be characterised as landlord qua the respondent.
that a number of trees stood on the said lands, that the respondent was merely a lessee of the said lands which were a forest area, that the entries in the revenue record in respect of the said lands were incorrect and could not be relied on in an application under section 11 and consequently the Compensation Officer.
Mahasu, had no jurisdiction to grant it.
The Compensation Officer held, that the said area was not a forest area, that there were no trees on the said lands as alleged and that since the respondent was mentioned as an occupancy tenant in the Jamabandhi he was entitled to proprietary rights in the said lands on his paying compensation which he fixed at Rs. 76.40 np.
The Forest Department there upon filed an appeal before the District Judge, Mahasu.
principally on the ground that the Compensation Officer had not followed the procedure laid down in the Act and had not given to the Forest Department reasonable opportunity to put forward its case.
The Forest Department did not dispute in the said appeal that the appellant held the said lands as a tenant of the Government.
On July 26, 1960 the District Judge allowed the appeal and remanded the case to the Compensation Officer directing him to raise proper issues and decide the matter in accordance with law.
Accordingly.
the Compensation Officer raised (1) [1959] Supp. 1 S.C.R. 160.
(2) 449 four issues, viz., Whether there were trees on the said lands, whetherthe lands formed part of the forest whether the respondent was a tenant in respect of the said lands and whether there was any impediment in the way of granting proprietary rights to him .
The Compensation Officer held that the respondent was a tenant, there was no impediment in granting proprietary Tights to (him and allowed once again the respondents ' application.
The appeal by the Union against the said order before the District Judge failed.
The District Judge held that the respondent was ,the tenant of the Union ' and that the Act applied to the said lands as also to the Union.
The Union filed a Second Appeal before the Judicial Commissioner challenging the correctness of the District Judge 's said order.
Both the Compensation Officer and the District Judge having held on the strength of the Jamabandhi that the respondent was the occupancy tenant in respect of the said lands, the only questions raised in the Second Appeal were (1) that the Act did not bind the Union or the State Government and (2) that the respondent 's application under section 11 could not lie against the Union in respect of lands owned by it.
The Judicial Commissioner followed the ratio laid, down in Director of Rationing vs Corporation of Calcutta(1) which was the law then prevailing and in view of that decision posed the question whether the Act applied to and was binding on the Union.
He held that though the Act did not contain any express provision to that effect, an examination of sections 11, 15, 27 and 54 showed that the Act applied to Government land and was by necessary implication binding on the Union.
He observed that the object of the Act and the acquisition of right.
title and interest of the landowner in the land of any tenancy held under him by a tenant was that such interest should ultimately be transferred to the tenant.
He held that on a consideration of the relevant provisions of the Act "the conclusion to which I have been driven is that by necessary implication the Act binds the Government and an application under section I I of the Act by a tenant is competent in respect of land held by him under the Government." In that view he dismissed the Union 's appeal.
The Union of India filed this appeal after obtaining certificate under article 133(1)(c) of the Constitu tion.
After this appeal had gone on for some time we felt that as it involved a question of some public importance it was desirable that we should have the assistance of some senior counsel.
We accordingly directed the Registrar to appoint a Senior Counsel amicus curiae.
Accordingly, Mr. D. R. Prem appeared before us.
We gratefully acknowledge the assistance rendered by him.
Mr. Ganapathy Iyer for the Union of India took us through the different provisions of the Act and submitted that considering the scheme and the object of the Act the conclusion was inescapable that the legislature while enacting the Act did not intend that (1) ; 6SCI 3 450 it should to the Government or to lands owned by the Government.
To appreciate the contention ;it is necessary to examine some of the provisions of the Act.
But before we do that it,would be expedient to clear the ground regarding the question theapplicability of statutes on the State and its immunity,if any, 'from such statutes.
In Director of Rationing vs The Corporation of Calcutta(1) the majority judgment held that the law applicable to India ':before the Constitution was as authoritatively laid down in the Province of Bombay vs Municipal Corp. of Bombay(2 ) that the Constitution has not made any change in the legal position and that on the other hand it has clearly indicated that the laws in force before January 26, 1950, shall continue to have validity even in the new set up except in so far as they were in conflict with the express provisions of the Constitution.
The majority also held that the rule of interpretation of statutes that the State was not bound by a statute unless it so provided in express terms or by necessary implication was still good law.
Wanchoo J. (as he then was) in his dissenting opinion, however, held that the rule of construction which was based on the royal prerogative as known to the common law of England could not be applied to India now that there was no crown in India and when the common law ,of England was not applicable and that therefore the State was bound by a statute unless it was exempted expressly or by necessary implication.
The rule in that decision is no longer good law.
In Supdt.
& Legal Remembrancer, West Bengal vs Stale of West Bengal(1) this Court considered the correctness of that decision and disagreeing with the majority view accepted as correct the minority opinion.
The Court held that the common law rule of construction that the crown was not, unless expressly named or clearly intended, bound by a statute was not accepted as a rule of construction throughout India and even in the Presidency towns it was not regarded as an inflexible rule of construction.
It was not statutorily recognised either by incorporating in indifferent Acts or in any General Clauses Act; at the most it was relied upon as a rule of general guidance in some parts of the country.
The legislative practice established that the various legislatures of the country provided specifically exemptions in favour of the crown whenever they intended to do so indicating thereby that they did not rely upon any presumption but only or ,express exemptions.
The Court also observed that the Privy ,Council in Province of Bombay vs Corp. of Bombay ( 2) gave it approval to the rule mainly on concession made by Counsel.
The Court then held that the archaic rule based on the prerogative an( perfection of the crown could have no relevance to a democrat, republic; that such a rule was inconsistent with the rule of law (1) ; (2) 73 I.A. 271.
(3) ; 451 based on the doctrine of equality and introduced conflicts and anomalies.
Therefore, the normal construction, that an enactment applies to citizen as well as to the state unless it expressly or by necessery impliciter excepted the State from its operation, steered clear of all anomalies and consistent with the philosophy of equality enshrined in the Constitution.
The position now therefore is that a statue applies to State as much it does to a citizen unless it expressly or by necessary implication exempts the State from its operation.
It is conceded that neither section II nor any other provision in the Act contains any express exemption.
Broadly stated, if the legislature intended to exclude the applicability of the Act to the State it could have easily stated in section 11 itself or by a separate provision that the Act is not to be applied to the Union or to lands held by it.
In the absence of such a provision, in a constitutional set up as the one we have in this country and of which the over,riding basis is the broad concept of equality, free from any arbitrary discrimination, the presumption would be that a law of which the avowed object is to free the tenant of landlordism and to ensure to him security of tenure would bind all landlords irrespective of whether such a landlord is an ordinary individual or the Union.
The question then is whether in the absence of any express exemption the statute exempts the State by necessary implication? The preamble of the Act declares that its object is not only to abolish big landed estates but also to reform the law relating to tenancies.
Section 2(3) provides that the expression "estate", "land owner" and "holding" Will have the meanings respectively assigned to them in the Punjab Land Revenue Act, 1887.
Turning, therefore to the Punjab Land Revenue Act, 1887 we find that section 3(1) of the Act defines "estate" as meaning any area for which a separate record of rights has been made or which has been separately assessed to land revenue or which the State Government may by general rule or special order declare to be an estate.
Section 3(2) provides that "landowner" does not include a tenant or an assignee of land revenue, but includes a person to whom a holding 'has been transferred, or an estate or holding has been let in farm under the Act for the recovery of an arrear of land revenue or of a sum recoverable as such an arrear and every other person not hereinbefore in this clause mentioned who is in possession of an estate or any share or portion thereof.
or in the enjoyment of any part of the profits of an estate.
"Holding" has been defined as meaning a share or portion of an estate held by one land owner or jointly by two or more landowners.
Since the land in question is admittedly assessed to land revenue as is clear from the copy of the Jamabandhi produced by the respondent here can be no question that the land is estate and the Union of India is the landowner thereof.
Reverting now to the Abolition Net, section 2(5) defines "land" as meaning land which is not 452 occupied as a site of any building in a town or village and in occupied or has been let for agriculture purposes or purpose subservient to agriculture,or for pasture.
Section 2(6) defines "land lord" as a person under whom a tenant holds land and to whom the tenant is or but for a contract to the contrary would be liable .to pay rent for that land.
Clause 13 defines "rent" as meaning whatever is payable to a landlord in money, kind or service be a tenant on account of the use or occupation of land held by him Clause 17 defines a "tenant" as meaning a person who holds land under another person, and is or but for a contract to the contrar would be liable to pay rent for that land to that other pet son an clause 19 defines "tenancy" as meaning a parcel of land held by tenant of a landlord.
under one lease or one set of conditions.
I view of these definitions there can be no doubt that the responder was a tenant having a right of occupancy within the meaning of sections 3 And 4 of the Act.
Indeed, all throughout the proceedings the position that he was a tenant and the Union was h landlord and the landowner of the land in question was accept without any dispute.
Section 3 defines a tenant as having a right of occupancy in the land and section 8 provides that a tenant who immediately before the commencement of the Act had a right c occupancy in any land under the Punjab Tenancy Act 1887, a applied to Himachal Pradesh shall on the commencement of the Act be held to have for all purposes a right of occupancy in th land.
Chapter III of the Act deals with acquisition of proprieter rights by tenants.
Sections 9 and 10 provide for the appointment of compensation officers to carry out the purposes of the Act an confer power on the State Government to exercise control an superintendence over such officers, to issue instructions for the guidance of compensation officers and to cancel or revise any the orders, acts and proceedings of such officers other than those in respect of which an appeal lies under this Act.
Section I idea with the right of a tenant to acquire the interests of a landown and provides inter alia that a tenant shall on application made the compensation officer at any time after the commencement this Act be entitled to acquire on payment of compensation.
the right, title and interest of the landowner in the land of the tenant held by him under such landowner.
Sub section 2 contains certain exemptions with which we are not concerned in this appeal.
Sub section 3 enjoins upon the compensation officer on a tenant meaning an application under sub section (1).
to determine the amount of compensation payable to the landowner in respect of the at in accordance with the provisions of sections 12 and 13.
Under sub section 5 the applicant has to deposit the amount of compensation in a Government treasury and thereupon the Compensation Officer has to issue a certificate declaring the tenant to be the landowner in respect of the land specified, in the certificate.
Sub section 6 provides that on and from the date of the grant of the certificate the tenant shall become the owner of the land comprised in the tenancy and the right, title and interest, of the landowner 453 in the said land shall determine.
Sections 12 and 13 deal, as aforesaid, with compensation payable by the tenant.
Section 14 provides that a tenant holding a tenancy exceeding 12 acres of land can surrender 1/4th of such land to the landowner whereupon the tenant would become the owner of the rest of the land of his tenancy.
There is nothing in these sections which would indicate that they or any of them impliedly exempt the State or its lands from their operation.
Sections 11 to 14 thus contain provisions where, under the tenant, as a result of their operation, acquires the right, title and interest in the land held by him as a tenant on his paying compensation to the landowner as fixed by the Compensation Officer.
Under sections 15 to 24, notwithstanding the provisions of sections 11 to 14, the State Government is empowered on a declaration made by it to acquire the right, title and interest of the landowners in the lands of any tenancy held under him by a tenant in respect of such area or at such time as may be specified by it in a notification.
They also provide that upon such declaration the right.
title and interest of such landowner vests in the Government.
Such a landowner is entitled to compensation as provided in section 16 and onwards on his rights vesting in the Government.
In such cases the tenant becomes the tenant of the Government and has to pay rent directly to the Government and the landowner becomes henceforth exempt from payment of land revenue.
Section 27 then provides that notwithstanding anything contained in section 11 and onwards a landowner who holds land,.
the annual land revenue of which exceeds Rs. 125, the right, title and interest 'of such landowner in such land except such land which is under his personal cultivation shall be deemed to have been transferred and vested in the State Government.
Such a landowner also is entitled to compensation determined having regard to sections 17 and 18 in accordance with the provisions of Sch.
Sub section 4 of section 27 provides that the right, title and interest of the landowner conferred on the Government by subsections I and 2 shall be transferred by the State Government on payment of compensation in accordance with Sch. 1 to such tenant who cultivates such land.
Sub sec.
5 provides for rehabilitation grant payable to such small landowners whose right, title and interest have been extinguished and who do not have any other means of livelihood.
A reading of sections 11 to 27 reveals that they lay down three parts of the scheme of abolition of proprietary rights of land,owners; (1) under section II there would be a direct transfer to and vesting of the right, title and interest of the landowner in the occupancy tenant on his paying compensation as assessed by the Compensation Officer; (2) under section 15 in respect of lands situate in an area specified by Government, there would be a transfer and 454 vesting of ownership of such lands in the State Government and the tenants of such land becoming the tenants of the Government and (3) under section 27 where the holding is large enough to have an annual assessment of over Rs. 125, the ownership in such lands would be first transferred and vested in the State Government and thereafter by the State Government in favour of the tenant.
The contention, however, was that these three ways of abo lishing the landowners ' interest and transferring in two out of these three methods of the proprietary rights to the tenants suggest that the Act was not intended to affect the land owned or held by the Union or the State Government.
This contention cannot be accepted, for, there is nothing in these provisions suggestive of their being not applicable to the State or of any distinction between the lands owned and held by citizens and lands owned and held by the State.
There can therefore be no room for any assumption that the legislature had in mind any such discrimination between the State and the citizens.
Mr. Ganapathy Iyer drew Our attention to sections 48 and 54(1)(g) also but we fail to see how they can be relevant for finding out whether the State is by implication exempted from the operation of the Act.
It is clear that the object of the Act was to abolish big landed estates and alleviate the conditions of occupancy tenants by abolishing the proprietary rights of the landowners in them and vesting such rights in the tenants.
That being the paramount object of the legislature it is hardly likely that it would make any discrimination between the State and the citizen in the matter of the application of the Act.
This is especially so because if such a discrimination were to be brought about through a construction suggested by the State it would result in an anomaly in the sense that whereas occupancy tenants of lands owned by citizens would have the benefit of such a beneficent legislation occupancy tenants of lands owned and held by the State would not get such benefit.
An intention to bring about such a discrimination against the latter class of tenants cannot be attributed to the legislature whose avowed object was to do away in the interest of social and economic justice landlordism in the State.
In view of the decision in Supdt.
& Legal Remembrancer vs Corp. of Calcutta(1) the State cannot also claim exemption on the ground only that the Act does not expressly or by necessary implication make it binding on the State.
For the reasons aforesaid, we must hold that the conclusion arrived at by the Judicial Commissioner was correct.
The appeal is dismissed.
No order as to costs.

summary/full:
The Himachal Pradesh Abolition of Big Landed Estates and Land Reforms Act, 1953, lays down a scheme for the abolition of proprietary rights of landowners: (1) under section 11 there would be a direct transfer of the rights of a landowner from the landowner to the occupancy tenant; (2) under section 15, in respect of lands situate in an area specified by Government, there would be a transfer to the State Government, the tenants of such lands becoming the tenants of the Government; and (3) under section 27, in the case of large holdings the ownership would be first transferred to the State Government and thereafter by the State Government in favour of the tenant.
The respondent made an application under section 11 of the Act for acquiring proprietary rights in certain lands as he was the occupancy tenant of those lands, the Union of India being the landowner.
On the question whether the Act was intended to affect land owned orheld by the Union or State Government, HELD:There is nothing in the provisions of the Act suggesting,expresslyor by necessary implication that the Act was not applicable to the State, or any distinction between lands owned and held by citizens and lands owned and held by the State.
[454C] The object of the Act was to abolish big landed estates and alleviate the conditions of occupancy tenants by abolishing the proprietary rights of landowners in them and vesting such rights in the tenants.
If discrimination between the State and the citizen in the matter of the application of the Act is made it would result in the anomaly that whereas occupancy tenants of lands owned by citizens would have the benefit of such a beneficent legislation, occupancy tenants of lands owned and held by the State would not get such benefit.
An intention to bring about such a discrimination cannot be attributed to the legislature whose avowed object was to do away, in the interest of social and economic justice, landlordism in the State.
[454 D G] Superintendent and, Legal Remembrancer V. Corporation of Calcutta, ; , followed.


judgement:
Appeal No. 246 of 1967.
Appeal from the judgment and order dated October 19, 1966 of the Punjab High Court in Civil Writ No. 739 of of 1966.
N. C. Chatterjee, section C. Agarwala, R. K. Garg, K.M.K. Nairand L. M. Singhvi, for the appellant.
Niren De, Additional Solicitor General, Chetan Das Dewan, Deputy Advocate General for the State of Haryana and N. H. Hingorani, for the respondent.
436 The Judgment of the Court was delivered by Shah, J.
The State of Madhya Pradesh held an enquiry against the appellant Dr. ' Bool Chand a member of the Indian Administrative Service on charges of "gross misconduct and indiscipline" in respect of the conduct of the appellant when he was Collector District Rajgarh.
The Enquiry Officer held that in recording certain remarks "regarding association of tile Commissioner of Bhopal with one B.L. Gupta a pleader of Zirapur", the appellant was "actuated by malice" and his conduct "offended against official propriety, decorum and discipline", and that the appellant had without permission removed a safe from the Rajgarh Treasury.
The President of India served notice upon the ap pellant requiring him to show cause against the order of compulsory retirement proposed to be passed in regard to him.
The President also consulted the Union Public Service Commission.
The Union Put", Service Commission was of the view that "in the light of the findings and conclusions stated by them and having regard to all the circumstances relevant to the case.
the penalty of compulsory retirement on proportionate pension should be imposed upon" the appellant.
and they advised the President accordingly.
By order dated February 28, 1963.
the President directed that the, appellant be compulsorily retired from the Indian Administrative Service with immediate effect.
In March 1965 the appellant was appointed Professor and Head of the Department of Political Science in the Punjab Univer sity.
On June 18, 1965, the appellant was appointed Vice Chancellor of the Kurukshetra University by order of Mr. Hafiz Mohd Ibrahim who was the Chancellor of the University.
After Mr.
Hafiz Mohd. Ibrahim vacated the office of Chancellor of the University, Sardar Ujjal Singh, Governor of Punjab.
held the office of Chancellor.
On March 31, 1966, the Chancellor Sardar Ujjal Singh ordered that the appellant be Suspended from the office of Vice Chancellor, and by another order the Chancellor issued a notice requiring the appellant to show Cause why his services as Vice Chancellor of the Kurukshetra University be not terminated.
The appellant submitted his representation, and shortly thereafter filed a petition in the High Court of Punjab for a writ in the nature of mandamus quashing the order and the notice dated March, 31, 1966.
On May. 8, 1966 the Chancellor passed an order in exercise of the power under sub cl.
(vi) of cl. 4 of Sch. 1 to the Kurukshetra University Act, 1956, read with section 14 of the Punjab General Clauses Act, 1898, terminating with immediate effect "the services" of the appellant "from the office of Vice Chancellor of the Kurukshetra University".
The petition was then amended by the appellant.
and a writ of certiorari or appropriate writ calling for the record and quashing the order dated May 8. 1966, terminating the services of the appellant was also claimed.
The High Court rejected the petition filed by the appellant.
Against that 437 order, with certificate granted by the High Court, this appeal has been preferred.
The first argument raised on behalf of the appellant is that the Chancellor had no power to terminate the tenure of office of a Vice Chancellor.
It is necessary, in considering the validity of that argument, to read certain provisions of the Kurukshetra University Act 12 of 1956.
By section 4 the University is invested with the power, inter alia, to do all such things as may be necessary, incidental or conducive to the attainment of all or any of the objects of the University.
By section 7.
amongst others, the Chancellor, the Vice Chancellor and the Registrar are declared to be officers of the University.
By section 8 the powers, duties of officers, terms of office and filling of casual vacancies are to be prescribed by the statutes.
Section 14(1) provides that the statutes in Sch.
I shall be the statutes of the University and that the "Court of the University shall have the power to make new or additional statutes and to amend or repeal the statutes.
By section 21 it is provided that every salaried officer and teacher of the University shall be appointed under a written contract, which shall be lodged with the University.
By cl. 4 of Sch.
I the Vice Chancellor is declared the principal executive and academic officer of the University, and also the ex officio Chairman of the Executive Council, the Academic Council, and the Finance Committee, and is invested with authority to see that the Act.
the Statutes, the Ordinances and the Regulations are faithfully observed, and to take such action as he deems necessary in that behalf.
The Vice Chancellor is also authorised to exercise general control over the affairs of the University and to give effect to the decisions of the authorities of the University.
Sub clauses (vi) & (vii) of cl. 4 provide: "(vi) The 'Upa Kulapati ' (Vice Chancellor) shall be appointed by the 'Kulapati ' (Chancellor) on terms and conditions to be laid by the 'Kulapati ' (Chancellor).
(vii) The 'Upa Kulapati ' (Vice Chancellor) shall hold office ordinarily for a period of three years which term may be renewed. '. '.
From a review of these provisions it is clear that the Vice Chancellor is an officer of the University invested with executive powers set out in the Statutes and his appointment is to be made ordinarily for a period of three years and on terms and conditions laid down by the Chancellor.
There is no express provision in the Kurukshetra University Act or the Statutes thereunder which deals with the termination of the tenure of office of Vice Chancellor.
But on that account we are unable to accept the plea of the appellant that the tenure of office of a Vice Chancellor under the Act cannot be determined before the expiry of the period for which he is appointed.
A power to appoint ordinarily implies a power to determine the 438 employment.
In section R. Tiwari vs District Boarel, Agra,(1) it was observed by this Court at p. 67: "Power to appoint ordinarily carries with it the power to, determine appointment, and a power to terminate may in the absence of restrictions express or implied be exercised, subject to the conditions prescribed in that behalf, by the authority competent to appoint.
" A similar view was also expressed in Lekhraj Sathramdas Lalvani vs N. M. Shah, Deputy Custodian cum Managing Officer, Bombay (2) .
That rule is incorporated in section 14 of the Punjab General Clauses Act I of 1898.
That section provides: "Where, by any Punjab Act, a power to make any appointment is conferred, then, unless a different intention appears, the authority having for the time being power to make the appointment shall 'also have power to suspend or dismiss any person appointed whether by itself or any other authority by it in exercise of that power." Counsel for the appellant urged that since the general rule is given a statutory form, the validity of the exercise of the power to determine the tenure of the office of the appellant must be found in section 14 of the, Punjab General Clauses Act.
Counsel says that section 14 has no application to the interpretation of the Kurukshetra University Act, because cl.
4(vii) of the Statutes which prescribes that the appointment of a Vice Chancellor shall ordinarily be for a period of three years discloses a different intention.
But cl.
4(vii) of the Statutes does not purport to confer upon a person appointed Vice Chancellor an indefeasible right to continue in office for three years: the clause merely places a restriction upon the power of the Chancellor, when fixing the tenure of the office of Vice Chancellor.
Counsel also urged that under section 14 of the Act power to ap point includes power to dismiss, but not to determine employment.
In support of that contention he urged that in relation to the tenure of service of a public servant, the expression "to dismiss" has come to mean to determine employment as a measure of punishment.
But section 14 of the General Clauses Act is a general provision: it does not merely deal with the appointment of public servants.
It deals with all appointments, and there is no reason to hold, having regard to the context in which the expression occurs, that the authority invested with the power of appointment has the power to determine employment as a penalty, but not otherwise.
The expression "dismiss" does not in its etymological sense necessarily involve any such meaning as is urged by counsel (1) ; (2) ; 439 for the appellant.
The implication that dismissal of a servant involves determination of employment as a penalty has been a matter of recent development since the Government of India Act, 1935, was enacted.
By that Act certain restrictions were imposed upon the power of the authorities to dismiss or remove members of the civil services, from employment.
There is no warrant however for assuming that in the General Clauses Act, 1898, the expression "dismiss" which was generally used in connection with the termination of appointments was intended to be used only in the sense of determination of employment as a measure of punishment.
The expression "Punjab Act" is defined in section 2(46) of the Punjab General Clauses Act as meaning an Act made by the Lieutenant Governor of the Punjab in Council under the Indian Councils Acts, 1861 to 1909, or any of those Acts, or the Government of India Act, 1915, or by the Local Legislature or the Governor of the Punjab under the Government of India Act, or by the Provincial Legislature or the Governor of the Punjab, or by the Provincial Legislature or the Governor.
of East Punjab under the Government of India Act, 1935, or by the Legislature of Punjab Linder the Constitution.
By section 14(1) of the Kurukshetra University Act 12 of 1956, it was declared that on the commencement of the Act, the Statutes of the University shall be those as set out in the Schedule 1.
The Statutes incorporated in the First Schedule were made by the Legislature and must for the purpose of section 14 of the Punjab General Clauses Act be regarded as "Punjab Act".
They do not cease to be "Punjab Act" merely because they are liable to be altered by the University Court in exercise of the power conferred by section 14(2) of the University Act.
It was also urged that whereas provision was made by cl. 6 of the Annexure to Ordinance XI that the services of the tea hers may be summarily determined on the ground of misconduct, .here was no such provision for determination of the employment of the Vice Chancellor and that also indicated an intention to the contrary within the meaning of section 14 of the Punjab General Clauses Act.
We are unable to agree with that contention.
It is true,.
the office of the Vice Chancellor of a University is one of great Responsibility and carries with it considerable prestige and authority.
But we are unable to hold that a person appointed a Vice Chancellor is entitled to continue in office for the full period of ' his appointment even if it turns out that he is physically decrepit, mentally infirm, or grossly immoral.
Absence of a provision setting up procedure for determining the employment of the Vice Chancellor in the Act or the Statutes or Ordinances does not, in our judgment, lead to the inference that the tenure of office of Vice Chancellor is not liable to be determined.
The first contention raised by counsel for the appellant must therefore fail.
It was then urged by counsel for the appellant that the Chancellor was bound to hold an enquiry against the appellant before 440 determining his tenure, and the enquiry must be held in consonance with the rules of natural justice.
The Additional Solicitor General submitted that since the claim for relief by the appellant was founded on an alleged breach of contract, the remedy of the appellant, if any, lay in an action for damages, and not in a petition for a high prerogative writ.
The Additional Solicitor General invited our attention to the averments made in the petition filed by the appellant that the Chancellor "was bound by the letter of appointment which created a tenure of office for three years" and which the Chancellor could not unilaterally determine in the purported exercise of an assumed power, and that in any event no such circumstances had been disclosed which would entitle the Chancellor to avoid the contract of service which was binding on the University, and submitted that since it was the appellant 's case that his appointment as Vice Chancellor was purely contractual, and the Chancellor had no power unilaterally to determine the contract, no relief of declaration about the invalidity of the order of the Chancellor may be granted in exercise of the jurisdiction of the High Court to issue high prerogative writs, and the only remedy which the appellant is entitled to claim is compensation for breach of contract, in action in a Civil Court.
It is true, as pointed out by the Judicial Committee of the Privy Council in A. Francis vs Municipal Councillors of Kuala Lumpur(1), that when there has been purported termination of a contract of service, a declaration that the contract of service still subsisted would rarely be made and would not be made in the absence of special circumstances, because of the principle that the Courts do not grant specific performance of contracts of service.
The same view was expressed in Barber vs Manchester Regional Hospital Board and Anr(2) and in Vidyodaya University of Ceylon and Ors.
vs Silva(3).
In these cases the authority appointing a servant was acting in exercise of statutory authority but the relation between the person appointed and the employer was contractual, and it was held that the relation between the employer and the person appointed being that of master and servant, termination of relationship will not entitle the servant to a declaration that his employment bad not been validly determined.
If the appointment of the Vice Chancellor gave rise to the relation of master and servant governed by the terms of appointment, in the absence of special circumstances, the High Court would relegate a party complaining of wrongful termination Of the contract to a suit for compensation, and would not exercise its jurisdiction to issue a high prerogative writ compelling the University to retain the services of the Vice Chancellor whom the University does not wish to retain in service.
But the office of a (1) (2) (3) 441 Vice Chancellor is created by the University Act: and by his appointment the Vice Chancellor is invested with statutory powers and authority under the Act.
The petition filed by he appellant in the High Court is a confused document.
Thereby the appellant did plead that the relation between him and the University was contractual, but that was not the whole pleading.
The appellant also pleaded, with some circumlocution that since he was appointed to the office, of Vice Chancellor which is created by the Statute, the tenure of his appointment could not be determined without giving him an opportunity to explain why his appointment should not be terminated.
The University Act, the Statutes and the Ordinances do not lay down the conditions in which the appointment of the Vice Chancellor may be determined, nor does the Act prescribe any limitations upon the exercise of the power of the Chancellor to determine the employment.
But once the appointment is made in pursuance of a Statute, though the appointing authority is not precluded from determining the employment, the decision of the appointing authority to terminate the appointment may be based only upon the result of an enquiry held in a manner consistent with the basic concept of justice and fairplay.
This Court observed in State of Orissa vs Dr. (Miss) Binapani(1) it p. 1271: "It is one of the fundamental rules of our constitutional set up that every citizen is protected against exercise of arbitrary authority by the State or its officers.
Duty to act judicially would, therefore, arise from the every nature of the function intended to be performed, it need not be shown to be super added.
If there is power to decide and determine to the prejudice of a person, duty to act judicially is implicit in the exercise of such power.
If the essentials of justice be ignored and an order to the prejudice of a person is made, the order is a nullity.
That is a basic concept of the rule of law and importance thereof transcends the significance of a decision in any particular case.
" The power to appoint a Vice Chancellor has its source in the University Act: investment of that power carries with it the power to determine the employment; but the power is coupled with duty.
The power may not be exercised arbitrarily, it can be only exercised, for good cause, i.e. in the interests of the University and only when it is found after due enquiry held in manner consistent with the rules of natural justice, that the bolder of the office is unfit to continue as Vice Chancellor.
In Ridge vs Baldwin and Others(1) a chief constable who was subject to the Police Acts and Regulations was, during the pendency of certain criminal proceedings in which he was arrested (1) ; (2) [1964] A.C. 41.
442 and charged together with other persons, with conspiracy to obstruct the course of justice, was suspended from duty by the borough watch committee.
The chief constable was acquitted by the jury on the criminal charges against him and he applied to be reinstated.
The watch committee at a meeting decided that the chief constable had been negligent in the discharge of his duties and in purported exercise of the powers conferred on them by section 191(4) of the Act of 1882 dismissed him from office.
No specific charge was formulated against him, but the watch committee in arriving at their decision, considered his own statements in evidence and the observations made by the Judge who acquitted him.
in support of the order of dismissal.
The chief constable appealed to the Home Secretary who held that there was sufficient material on which the watch committee could properly exercise their power of dismissal under section 191(4).
The decision of the Home Secretary was made final and binding on the parties by section 2(3) of the, Police Appeals Act, 1927.
The chief constable then commenced ' an action for a declaration that the purported termination of his appointment as chief constable was illegal, ultra vires and void,, and for payment of salary.
The action was taken in appeal to the House of Lords.
The House of Lords (Lord Evershed dissenting) held that the decision of the watch committee to dismiss the chief constable was null and void, and that accordingly notwithstanding that the decision of the Home Secretary was made final and binding on the parties, that decision could not give validity to the decision of the watch committee.
Lord Reid observed at p. 65: "So I shall deal first with cases of dismissal.
These appear to fall into three classes: dismissal of a servant by his master, dismissal from office held during pleasure, and dismissal from an office where there must be something against a man to warrant his dismissal.
The law regarding master and servant is not in doubt.
There cannot be specific performance of contract of service, and the master can terminate the contract with his servant at any time and for any reason or for none.
But if he does so in a manner not warranted by the contract he must pay damages for breach of contract.
So the question in a pure case of master and servant does not at all depend on whether the master has beard the servant in his own defence: it depends on whether the facts emerging at the trial prove breach of contract.
Then there are many cases where a man holds an office at pleasure.
Apart from judges and others whose tenure of office is governed by statute, all servants and officers of the Crown hold office at pleasure, and this has been held even to apply to a colonial judge (Terrell vs Secretary of State for the Colonies It has always been held, I think rightly, and the reason is clear.
As the person having the power of dismissal need 443 .lm15 not have anything against the officer, he need not give any reasons.
So I come to the third class, which includes the present case.
There I find an unbroken line of authority to the effect that an officer cannot lawfully be dismissed without first telling him what is alleged against him and hearing his defence or explanation.
" The case of the appellant falls within the third class mentioned by Lord Reid, and the tenure of his office could not be interrupted without first informing him of what was alleged against him and without giving him an opportunity to make his defence or explanation.
The Chancellor Sardar Ujjal Singh did issue a notice upon the appellant requiring him to show cause why the tenure of his service should not be terminated.
The appellant made a representation which was considered, and his tenure was determined because in the view of the Chancellor it was not in the public interest to retain the appellant as Vice Chancellor.
The appellant was informed of the grounds of the proposed termination of the tenure of his office and an order giving detailed reasons was passed by the Chancellor.
But the appellant contended that in arriving at his decision.
the Chancellor misread the order of the President and took into consideration evidence which was not disclosed to the appellant, and failed to consider evidence in his favour which was on the, record.
It is true that the order of the President only recites that the appellant was compulsorily retired as an officer of the Madhya Pradesh Cadre of the Indian Administrative Service: it does not expressly state that the order of compulsory retirement was imposed as a penalty.
But a review of the disciplinary proceedings against the appellant which culminated in the order of the President leaves no room for doubt.
The order of compulsory retirement was passed against the appellant as a penal order.
There is no substance in the plea that the order of the Chancellor was vitiated, since the Chancellor in ascertaining the true.
effect of the order of the President took into consideration a letter from the Secretary (Services), Government of India, Ministry of ' Home Affairs, dated May 6, 1966.
The letter which has been set out in the order of the Chancellor merely catalogues the various, steps taken by the different authorities which considered the case of the appellant before the order of compulsory retirement of the appellant from the Indian Administrative Service was passed by the President.
That letter contains no new material.
The plea that the Chancellor was influenced by evidence which was not disclosed to the appellant is also without substance.
444 It appears that before he passed the order of suspension the Chancellor had received letter from Prof. D.C. Sharma and Dr. A. C. Joshi in answer to enquiries made by him relating to the circumstances in which the appellant was appointed to the post of Professor of Political Science in the University of Punjab, and these letters were not disclosed to the appellant.
Counsel for the appellant says that these letters indicate that the University authorities fully knowing that the appellant was compulsorily retired from the Indian Administrative Service, appointed him as Vice Chan cellor.
But the appellant did not specifically plead or make out the case that the Chancellor Mr. Hafiz Mohd. Ibrahim was made aware of the order of compulsory retirement.
The Chancellor Sardar Ujjal Singh in passing the impugned order considered the grounds set up in the representation and then posed the question whether his predecessor in office, when he made the appointment of the appellant was aware of the fact that the appellant had been compulsorily retired as a measure of punishment from the Indian Administrative Service, and came to the conclusion that there was nothing to show that he Mr.
Hafiz Mohd. Ibrahim was aware of the order of compulsory retirement.
In paragraph .13 of his order, the Chancellor Sardar Ujjal Singh observed: "At the time of his appointment as Vice Chancellor, the fact of his compulsory retirement was not known to the Chief Minister or the then Chancellor.
The alleged knowledge of the fact of compulsory retirement on the part of the Chief Minister, Cabinet or the previous Chancellor is, therefore, without any basis.
" Unless he was moved in that behalf by the appellant it was not the duty of the Chancellor Sardar Ujjal Singh, before he passed the order against the appellant determining the tenure of his appointment, to enquire of Mr. Hafiz Mohd. Ibrahim who passed the order of appointment and of the Chief Minister, Punjab, whether they had come to know of the order of the President.
In the petition filed before the High Court the petitioner merely averred in ground (iv) (d) that "the order of the Chancellor was vitiated, inter alia, because the Chancellor had without any material come to a conclusion that there was no basis to allege knowledge of the fact of compulsory retirement on the part of the Chief Minister or the Cabinet or the previous Chancellor": he did not set up the case that the Chancellor had information about the order of the President.
His principal plea was that he was under no obligation to disclose that he was compulsorily retired from the Indian Administrative Service.
In the affidavit filed by Sardar Ujjal Singh, the assertion made in ground (iv) (d) is denied.
Affidavits of Mr. Hafiz Mohd. Ibrahim and Mr. Ram Kishan.
Chief Minister.
Punjab, were also filed before the High Court.
and it was averred that neither of them knew at the time when the appointment was made that the appellant bad been compulsorily retired by the President from the Indian Administrative Service.
445 Mr. Hafiz Mohd. Ibrahim further averred that "this information did not also come to his notice so long he remained Chancellor of the Kurukshetra University", and that if the fact of compulsory retirement of the appellant as a penalty had been within his know .
ledge, he would not have appointed the appellant as Vice Chancellor.
Even after the affidavits by Mr. Hafiz Mohd. Ibrahim and Mr. Ram Kishan were filed, the appellant by his supplementary affidavit which was filed on July 27, 1966, did not contend that, Mr. Hafiz Mohd. Ibrahim or the Chief Minister had information about the determination of his employment in the Indian Administrative Service.
His plea was that the members of the syndicate.
the members of the senate and the Vice Chancellor of the Punjab University had knowledge about determination of his employment.
when lie was appointed Professor of Political Science; and that plea.
we agree with the High Court, was wholly irrelevant.
It is true that the Chancellor in his order recorded that Mr. Hafiz Mohd. Ibrahim did not know at the time of making the appointment of the appellant to the office of Vice Chancellor that he was compulsorily retired from the Indian Administrative Service.
But no inference arises therefrom that Sardar Ujjal Singh before he passed the orders made any enquiries or had access to evidence which was not disclosed to the appellant.
We are unable to agree with counsel for the appellant that before a conclusion could be recorded, it was the duty of Sardar Ujjal Singh to ascertain from Mr. Hafiz Mohd. Ibrahim and Mr. Ram Kishan whether they were aware before the appellant was appointed Vice Chancellor of the order passed by the President.
The Chancellor, Sardara Ujjal Singh.
was, in Our judgment, under no obligation.
unless moved by the appellant, to hold such enquiry.
It was for the appellant to take up the defence that Mr. Hafiz Mohd. Ibrahim was informed of the order of the President and to take steps to prove that fact.
He did not take up that defence, and he cannot no,, seek to make out the case that the order was vitiated because the Chancellor Sardar Ujjal Singh did not make an enquiry which the Chancellor was never asked to make.
The reference to the letter of Prof. D. C. Sharma in the order of the Chancellor has no bearing either on the true effect of the order of the President or on the question whether the Chancellor was cognizant of the order passed by the President.
The argument that when considering the letter of Prof. D.C. Sharma, the Chancellor should have also considered the letter of Dr. A.C. Joshi requires no serious consideration.
The letters of Prof. D. C. Sharma and Dr. A. C. Joshi are.
in our judgment.
irrelevant in considering whether the Chancellor Mr. Hafiz Mohd. Ibrahim was aware of the order passed by the President.
It is impossible to raise an inference that because the order of the President was gazetted and certain members of the syndicate and senate were aware of tile order of the President, knowledge must also be attributed to the Chancellor.
446 The proceeding resulting in the order passed by the Chancel lor does not suffer from any such infirmity as would justify this Court in holding that the rules of natural justice were not complied with.
It is unnecessary in the circumstances to consider the argument advanced by the Additional Solicitor General that even if Mr. Hafiz Mohd. Ibrahim was aware of the order passed by the President ordering compulsory retirement of the appellant from the Indian Administrative Service, it was still open to his successor Sardar Ujjal Singh to determine the tenure of office of the appellant as Vice Chancellor, if in his view it appeared, having regard to the antecedents of the appellant, that the appellant was unfit to continue as Vice Chancellor.
We agree with the High Court that.
the appellant had the fullest opportunity of making his representation and that the enquiry held by the Chancellor was not vitiated because of violation of the rules of natural justice.
In the very scheme of our educational set up at the Univer sity level, the post of Vice Chancellor is of very great importance, and if the Chancellor was of the view, after making due enquiry, that a person of the antecedents of the appellant was unfit to continue as Vice Chancellor, it would be impossible, unless the plea that the Chancellor acted maliciously or for a collateral purpose is made out, for the High Court to declare that order ineffective.
The plea that the Chancellor acted mala fide was raised, but was not pressed before the High Court.
The appeal therefore fails.
There will be no order as to costs.
R. K. P. section Appeal dismissed.

dataset_name: IN-Abs

summary/full:
The appellant was a member of the Indian Administrative Ser vice in the Madhya Pradesh Cadre and was compulsorily retired from the Service for misconduct by an order of the President in February, 1963.
In June, 1965 he was appointed Vice Chancellor of the Kurukshetra University, by the then Chancellor of the University.
On March 31, 1966 the new Chancellor who Was in office at the time, ordered the suspension of the appellant from the office of Vice Chan cellor and also issued to him a notice to show cause why his services I should not be terminated.
The appellant filed a petition in the High Court seeking a writ in the nature of mandamus to quash the Chancellor 's order of suspension.
In the meantime the Chancellor passed an order on May 8, 1966, in exercise of the power under Clause 4(vi).
of Schedule I to the Kurukshetra University Act, 1956, read with s.14 of the Punjab General Clauses Act, 1898, terminating the services of the appellant with immediate effect.
The appellant then amended his petition and sought a writ of certiorari to quash the order of May 8, 1966.
The High Court rejected the petition.
In appeal to this Court, it was contended on behalf of the appellant, inter alia, (i) that the Chancellor had no power under the Act or the Statutes to terminate the tenure of office of a Vice Chancellor; and (ii) that the Chancellor was bound to hold an enquiry in accordance with the rules of natural justice before determining the appellant 's tenure, but the appellant had not been given a proper opportunity to explain why his services should not be terminated and, furthermore, the Chancellor had taken into consideration evidence which was not disclosed to the appellant.
On the other hand, it was contended for the respondent that since the claim for relief by the respondent was founded on an alleged breach of contract, the remedy of the appellant, if any, lay in an action for damages and not in a petition for a high prerogative writ.
HELD, dismissing the appeal: (i)The absence of a provision setting up the procedure for determining the employment of the Vice Chancellor in the Act or the Statutes or Ordinances does not lead to the inference that the tenure of office of Vice Chancellor is not liable to be determined.
[439H] A power to appoint ordinarily implies a power to determine employment and this rule is incorporated in s.14 of the Punjab General Clauses Act I of 1898.
[437H 438A] S.R. Tiwari vs District Board, Agra, ; and Lekhraj Sathramdas Lalvani vs N. M. Shah, Deputy Custodian cum Managing Officer, Bombay; , ; referred to.
435 An intention contrary to the rule was not evidenced either by the fact that under Clause 4(vii) of the Statutes the appointment of a Vice Chancellor is for three years or because there was no express provision covering the determination of service of a Vice Chancellor for misconduct as there was in the case of teachers.
Clause 4(vii) of the Statutes does not purport to confer upon a person appointed Vice Chancellor an indefeasible right to continue in office for three years; the clause merely places a restriction upon the power of the Chancellor, when fixing the tenure of the office of Vice Chancellor.
It could not be held that a person appointed a Vice Chancellor is entitled to continue in office for the full period of his appointment even if it turns out that he is physically decrepit, mentally infirm, or grossly immoral.
[438E F; 439G H] S.14 of the General Clauses Act is a general provision: it does not merely deal with the appointment of public servants.
It deals with all appointments, and there is no reason to hold, having regard to the context in which the expression occurs, that the authority invested with the power of appointment has the power to determine employment as a penalty, but not otherwise.
[438G H] (ii)The new Chancellor did issue a notice upon the appellant requiring him to show cause why the tenure of his service should not be terminated and the appellant made a representation which was considered; the appellant was informed of the grounds of the proposed termination of the tenure of his service and an order giving detailed reasons was passed by 'the Chancellor.
The High Court had rightly held on the facts that the appellant had the fullest opportunity of making his representation and that the inquiry held by the Chancellor was not vitiated because of any violations of the rules of natural justice.
[443D; 446C] (iii) The power to appoint a Vice Chancellor has its source in the University Act: investment of that power carries with it the power to determine the employment but that power may not be exercised arbitrarily; it can be only exercised for good cause, i.e. in the interests of the University and only when it is found after due enquiry held in a manner consistent with the rules of natural justice, that the holder of the office is unfit to continue as Vice Chancellor.
[441G] A.Francis vs Municipal Councillors of Kuala Lumpur, ; Barber vs Manchester Regional Hospital Board and Anr., ; Vidyodaya University of Ceylon and Ors.
vs Silva.
; State of Orissa vs Dr. (Miss) Binapani, ; ; Ridge vs Baldwin and Ors.
[1964] A.C. 41; referred to.


judgement:
Appeal No. 15 of 1965.
Appeal from the judgment and decree dated April 15 / 16,1963 of the Bombay High Court in Appeal No. 216of 1961 from Original Decree.
section T Desai, 0.
P. Malhotra and 0.
C. Mathur for the appellant.
section V. Gupte, Solicitor General and Rameshwar Nath, for the respondent.
The Judgment of the Court was delivered by Shelat, J.
This appeal by certificate obtained from the High Court at Bombay involves the question as to the true meaning of section 154 of the Bombay Municipal Corporation Act, III of 1888 and the correct rateable value to be assessed thereunder.
The respondent Club runs two race courses, one in Bombay and the other at Poona.
We are concerned in this appeal with the Bombay race course which is comprised of land and certain structures standing thereon.
The said land is the property of the appellant corporation given on lease to the Club for a period of 30 years commencing from June 1, 1944 at an annual rent of Rs. 3,75,000.
The said structures thereon have been built by and belong to the Club.
The Club has obtained a licence from the Government of Maharashtra, permitting the Club to hold racemeetings at both the Courses and for which it paid a sum of licence fees between the two Courses in the ratio of 2: 1 and thus licence fees between the two Courses in the ratio of 1: 2 and thus the share of the Bombay Course came to Rs. 8,66,666.
The rating year in question is 1954 55.
The assessment was made on the basis of the Club 's accounts for the year 1953 54 that being the year concluded before the assessment.
According to these accounts the gross receipts of the Club came to Rs. 117 lacs and odd and the expenses .
to Rs. 124 lacs and odd; the accounts thus showed a loss of Rs. 7 lacs and odd.
The Deputy Municipal Commissioner who is the assessing authority disallowed expenses totalling Rs. 22 lacs and odd as having been wrongly included in the working expenses add 'determined.
13,22,430 as the gross annual rent and deducting therefrom the 10 percent deduction allowable under section 15.4 of the Act assessed the net rateable value at Rs, 11,90,187.
The respondent Club thereupon filed an appeal before the Small Cause Court, Bombay, under section 217 of the Act.
The Club claimed in all 19 items of expenses which according to it ought to have been allowed.
The Club,, however, conceded that items 1, 2, 4, 5, 15, 16 and 18 were rightly disallowed.
The remaining items were: 3.
Bombay Course upkeep and repairs 6.
Track sand and Murum 7.
Legal charges 528 8.
Licence fee 9.
Totalisator upkeep and repairs 10.
Bombay Course salaries and wages, 11.
Motor lorry expenses 12, Grass and charges for maintenance of horses and bullocks 13.
Insurance and garden,expenses 14.
Spares for tractors and machinery parts 19.
Painting.
Out of these, items 3, 9 and 19 were wholly disallowed by the Deputy Municipal Commissioner while the rest were partially allowed.
As regards Item 19, that is, painting, Counsel for the Club stated before us that he would not press that item.
We are therefore no longer concerned with that item.
The Small Cause Court agreed with the Deputy Municipal Commissioner in totally disallowing expenses under Items 3 and 9.
It allowed however item 7, that is, legal charges which were disallowed by the Deputy Municipal Commissioner.
Regarding Item 6, the view of the Small Cause Court was that only 7/12th and not 50 per cent deducted by the assessing authority ought to have been allowed.
It was also of the view that only 7/12th and not 50 per cent of the expenses under Items 10, 11, 12, 13 and 14 ought to have been allowed by the assessing authority.
As regards the licence fees the Club had, as aforesaid, allotted Rs. 8,66,666 to the Bombay Race Course.
The Small Cause Court confirmed the deduction of 50 per cent only of this amount allowed by the assessing authority.
So far as water tax and wheel tax were concerned the, Small cause Court confirmed the deduction of 3/4th of the these taxes made by the authority The Small Cause Court held that the pro fits basis method employed by the assessing authority was properly employed and further held that the Club had failed to prove that the net rateable value of Rs. 11,90,185 determined by the assessing authority was excessive.
Before the High Court the Club agitated the same objections.
The High Court was of the view that considering the unique nature of the use of the premises by the Club, the proper method for determination of the annual rent was the profits basis method but upheld the Club 's objections as regards the disallowance of the several items of expenditure.
The High Court held that the gross rateable 'value of the :property would after these deductions be Rs. 2,15,750 and after deducting therefrom the statutory deduction of 10 percent.
the net rateable value would come to Rs. 1,94,175 a figure, no doubt, less than the actual annual rent of Rs. 3,75,000 payable by the Club under the said lease.
The appellant corporation challenges the correctness of these deductions allowed by the High Court.
529 Before we proceed to consider the contentions urged before us on behalf of the Corporation, we may first look at some of the provisions of the Act.
Under section 139 the Corporation is required to levy property taxes, tax on vehicles and animals, theatre tax and octroi.
Section 140 provides that property taxes mean water tax, halalkhor tax and general tax of not less than 8 per cent.
and not more than 26 per cent.
of the rateable value of lands and buildings, education cess and betterment charges.
Section 154 is concerned with the valuation of property assessable to property taxes and provides how the rateable value of such property is to be determined.
Sub section (1) runs as follows: "In order to fix the rateable value of any building or land assessable to a property tax, there shall be deducted from the amount of the annual rent for which such land or building might reasonably be expected to let from year to year a sum equal to ten percentum of the said annual rent and the said deduction shall be in lieu of all allowances for repairs or on any other account whatever.
" The section provides only for the determination of the annual rent (not the actual rent paid by the tenant) for which such land or building might reasonably be expected to let from year to year and then to fix the rateable value after deducting therefrom 10 percent.
of such annual rent in lieu of all allowances for repairs or any other account whatever.
The annual rent has to be worked out on the basis of what a hypothetical tenant would be willing to pay 'as rent for the premises to a hypothetical landlord who is prepared to let the premises from year to year as they stand having regard to all the advantages and disadvantages relating lo Such premises, such as, the situation, the nature of the property, the obligations and liabilities attached thereto and other features, if any, which enhance or decrease their value to such a, tenant.
The section simply enjoins upon the Municipal Corporation to determine the annual rent and the rateable value of the property therefrom but does not provide for any particular method of rating out of the several well known methods usually followed in such assessments, such as the comparative method, the contractor 's method, the unit method and profits basis method, that is, profit making capacity or valuation by reference to receipts and expenditure.
(See Ryde on Rating 11th ed., 398 and Faraday on Rating, 5th ed.
p. 24) The profits basis method which the assessing authority has adopted in the present case consists in ascertaining the net annual value of the premises which has to be worked out from the profits which are made or which are capable of being made out of the premises.
The gross receipts form the starting point of the calculation and they are those shown in the assessee 's accounts for the account year concluded last before the making of the proposal.
When these have been ascertained, the next step is to deduct therefrom the expenses of earning those receipts, the cost 530 Of repairs, insurance and other expenses necessary to maintain the premises in a state to command the hypothetical rent.
The remaining balance is divisible between the tenant, that is,, the tenant 's share, the landlord, that is, the hypothetical rent or net annual value and rates.
The tenant 's share is often estimated by applying a percentage to the tenant 's capital or it may be directly taken as a proportion of the divisible balance or by applying a percentage to the receipts.
(See Halsbury 's Laws of England, (3rd ed.), Vol. 32, 87 88).
It must be remembered that it is not the profits which are rateable; they serve to indicate the rent at which the premises might reasonably be expected to let, particularly where profit is the motive of the hypothetical tenant in taking the hereditament.
This method at one stage used to be adopted in the case of public utilities only.
But there are a number of decisions which show that at a later stage it began to be employed to other premises also such as foot ball stadia, markets, race courses, etc.
One of the earliest cases where this method was applied to undertakings which are not public utilities is the case of R. vs Verall(1) which was a case of a race course.
In Sanddown Park Case(2) the Court of Appeal held that in cases where actual receipts and expenditure are accepted as relevant factors for the ascertainment of cross value, sums reflecting the tenant 's reasonable profit.
risk and interest on capital should be together treated as a charge on the divisible profits in priority to other deductions.
The profits basis method has also been applied to such premises as grey hound race tracks.
Briefly stated, the profits basis method is no more than a calculation based on the profit earning capacity of the premises and as stated by Lord Birkenhead L.C. in Port of London Authority vs Assessment Committee(3): "By this reckoning the amount of the gross receipts is ascertained, and from such amount are deducted the expenses of earning such receipts, the deductions provided, for by statute, interest on tenant 's capital and the estimated amount of tenant 's profit.
The figure so ascertained would give the rating authority a valuable indication as to the rent which the hypothetical tenant would be likely to give for the right to occupy the hereditament in question and therefore would enable them to form an opinion as to the correct amount of the net annual value for the purpose of rating.
" In the instant case, the profits basis method has been adopted for the last several years and approved by the Small Causes Court in several appeals by the respondent Club.
It appears that at one stage the respondent Club raised an objection regarding its application to the present case.
We need not go into the comparative merits of the different methods or into the question whether (1) (2) (1954) 47 R&T 351 (CA) (quoted in Ryde on Rating.
11th ed.523 (3) at p, 281.
531 it can suitably be applied in the present case or not, as Counsel for the Club stated before us that he was not pressing that objection.
We therefore proceed on the footing that this method was properly adopted by the assessing authority.
But that does not end the controversy, for, even.
though the principles on which the profits basis method is worked out are fairly well understood, there is nevertheless bound to be controversy in regard to actual working expenses shown in the assessee 's accounts.
A question would often arise whether these expenses are the hypothetical landlord 's burden or that of the hypothetical tenant.
If they are of the former class, they cannot obviously be claimed as deductible expenses for the hypothetical tenant would not take them into account while offering the rent at which he would take the premises on lease.
We now proceed to examine the contentions in regard to the items of expenses in controversy in the light of these principles.
The first of these items is Item No. 3 of Rs. 1,07,414 for expenses for upkeep and repairs of the race course.
The contention on behalf of the Municipal Corporation was that the 10 per cent statutory deduction allowed by section 154(1) covers all expenses for repairs and therefor deduction of costs of repairs and upkeep, if allowed, would mean a duplicate deduction.
Even if 10% statutory deduction were considered inadequate looking to the present rate of prices, the legislature has fixed that percentage as a matter of policy and if it is found to be inequitable or otherwise it is for the legislature and not for the Court to alter it.
The question, however, is not the inadequacy of deduction allowed in section 154(1) but as to which are the costs of repairs contemplated by the sub section.
Under section 108(m) of the Transfer of Property Act the lessee is required to use the leased premises as a person of 'ordinary prudence would use them if they were his own and must keep them in as good a condition as he found them and must yield them up in the same condition subject only to fair wear and tear and irresistible force.
There would thus be two implied covenants in a lease: (1) to keep in repair and (2) to restore in repair.
It would therefore be the obligation of the tenant to maintain the premises in good repair and in the same condition at all times during the term of the lease.
lessor bears the burden only in respect of dilapidation to the premises caused by reasonable wear and tear and extraordinary causes such as storm, flood or accidental fire.
It will however be seen that the deed of lease under which the respondent Club took the land on lease expressly excludes the applicability of cl.
(in) of section 108.
That being so the question as to whether it is the lessor or the lessee who would be liable to pay for repairs cannot be resolved by the provisions of section 108(m).
But the expenses in question are not expenses for the upkeep and repairs of either the land or the structures standing on it which have been put up by the Club.
Costs of these repairs may conceivably be the land 532 lord 's burden.
Item 3 represents expenses for the maintenance in good repair of the track which is the source of receipts earned by the Club.
it is manifest that the track together with all its fitments has to be maintained properly if the Club were to earn the receipts and secure the largest possible attendance of persons willing to bet at the races and to attract likewise as many horses and their owners to participate in the race meetings held by the Club.
A well maintained track is obviously one of the principal attractions inducing as large an attendance as possible.
Therefore it would be in the interest of the tenant who takes on lease a race course with profit making motive to maintain the course efficiently and in good order.
Disbursements for the upkeep of the course and all its adjuncts consequently are proper outgoings incurred for earning the receipts.
They are thus not the landlord 's liability and are not part of or included in the statutory deduction of 10 percent.
The statutory deduction in section 154(1) is in lieu of the cost of repairs, insurance, etc.
incurred by the lessor.
There is therefore no question of any duplication if expenses incurred by the Club for the maintenance of the Course were to be allowed as a proper deduction.
The High Court was therefore right in deducting those expenses from the gross receipts.
Next is Item 9 which comprises expenses for the upkeep and repairs of the totalisator set up by the Club.
The totalisator is an apparatus or a mechanical device for registering and showing the total operations and the number of tickets sold to betters on each horse in a race.
Obviously it is maintained to ensure efficient and expeditious working of the races.
It does mechanically the work which if done by human labour would necessitate employment of a large number of persons.
It is almost an indispensable adjunct of a modern race course and is necessary to declare within the short time available to the betters which are the horses on which heavy betting has been done in a particular race and the total amount of betting on each of the competing horses in that race.
The expenses incurred in the upkeep and repair of such an adjunct necessary to an efficient race course must necessarily be regarded as the outgoings of the business.
The Corporation 's contention that it is a, machinery and its value therefore is not to be included in rating under section 154(2) has no merit as it is part of the necessary equipment of a good race course and its upkeep goes to the making of receipts.
The next items in controversy are items 6, 10, 11, 12, 13 and 14, that it cost of sand and moorum, salaries and charges of employees, motor lorry expenses, stores and charges for maintenance of horses and bullocks, manure and garden expenses, spares of tractors and other machinery and lastly the wheel tax and water tax.
The only ground on which the Small Cause Court partially ,allowed these expenses was that since race meetings were held .in
Bombay for 6 months in a year only, these expenses would partly be borne by the Club and partly by the lessor.
The High 533 Court disagreed with this view and rightly allowed the deduction of the entire amount.
In our view, it is not possible to find any Principle on which it would be possible to hold that if the race meetings are held for 6 months only in Bombay the burden of these disbursements would be on the tenant for 6 months and for the remainder on the lessor.
There is nothing in the lease which would show that the lessor had to maintain the track during the time that race meetings were not held in Bombay.
Since it is the Turf Club which ran the race meetings it would be the Club 's obligation and not that of the lessor to look after the track 's upkeep and maintenance and therefore it would be the Club which would bear the costs of its maintenance even during the period when race meetings were not held in Bombay.
The distribution of these expenses between the tenant and the landlord made by the assessing authority and the Small Cause Court cannot therefore be supported on any principle nor can it be sustained on the mere ground that race meetings were held in Bombay only for part of the year.
The measure in arriving at the net rateable value under section 154(1) is what a hypothetical tenant would pay as rent and that would depend upon the amount of profits earned from race meetings held on the race course.
To arrive at the correct amount of such profit all expenses reasonably and properly incurred which go to the making of the receipts have to be deducted from the grossreceipts.
There was no challenge at any stage that these expenses were not properly incurred for the upkeep and maintenance of the race course.
The High Court therefore was right in allowing the deduction of these expenses also.
For the relevant year the Club had allotted Rs, 8,66,666 out of the licence fee of Rs. 13 lacs to the Bombay race course.
Counsel urged that the Club was entitled to a deduction of Rs. 4,33,333 only as the licence was for a dual purpose, viz., for the premises as a race course and for permission to conduct race meetings on.
the race course.
It was argued that for the first the burden would be on the lessor and for the second on the tenant.
The licence exhibit B shows that it was granted to the Committee of the respondent Club.
The licence is not a joint licence in favour of the Corporation and the Club.
The application for it was made by the Committee on behalf of the Club and not by the Municipal Corporation.
If the licence was for a dual purpose prima facie the landlord would either apply separately or join the Club in the application.
The licence shows that the application was for "horse racing in the race courses leased by them" at Mahalaxmi, Bombay and in the Cantonment at Poona.
The licence is "granted to the licencees. . . to hold horse races on the said race courses.
" Condition I of the licence prescribes that the Club could hold only 36 race meetings in a year out of which not more than 16 should be allotted to the Poona racecourse.
The licence is clearly permission to run race meetings on the two race courses and not an instrument licensing the premises as a race course.
It is manifest that since it is the tenant who would hold the race meetings the fees payable for the licence is his burden 534 and not that of the lessor.
Mr. Desai.
however, contended that the ' scheme of the Bombay Race Courses Licensing Act, III of 1912 is to license the premises and then to licence the person who runs races on such premises.
He relied strongly on the long title of the.
Act which states that it was an Act to provide for the licensing of race courses in the State of Bombay.
Reliance was also placed on, section 3(i) which provides that no horse ' race shall be held on a race course for which there is no licence for horse racing in force.
But the charging section is section 4 under which the owner, the lessee or the occupier of a racecourse can apply for a licence for horse racing on a race course.
The licence for horse racing and the obligation to obtain it and to pay the fee therefor is on the person who conducts the business of running the race course for horseracing.
Such a person can be either the owner, the lessee or the occupier of such a racecourse.
What section 3 does is to prohibit horse racing on a racecourse unless a licence for horse racing has been obtained in accordance with the provisions of the Act.
There is no provision in the Act which Mr. Desai could point out which lays down any licence fee for a race course.
There is therefore nothing in the Act to warrant the construction that the licence obtained under section 4 has a dual purpose as contended.
Therefore there can be no justification for dividing the burden of the licence fees between the tenant and the landlord.
Mr. Desai, however, argued that even so, the respondent Club was not entitled to claim the deduction of the licence fees because it was not the Club but its Committee which applied for and obtained the licence.
The Articles of Association empower the Committee to act in all matters ,on behalf of the Club.
The Committee applied for and obtained the licence on behalf of and as the agent of the Club.
The fees were expended on behalf of the Club and as expenses of its business and it is the Club and not the Committee which is licensed to run horse racing on the race course.
The Club was therefore entitled to treat the licence fees as its own expenses and claim deduction therefor on the footing that the fees were expenses incurred by it to earn the receipts.
As regards the wheel tax and the water tax there is no justification in distributing them on the ground that during the time racemeetings were not held in Bombay it would be the landlord 's obligation to pay those taxes.
In our view there is no basis for disallowing a part of these taxes.
These again were expenses incurred by the Club in the ordinary course of its business and were as necessary .as other expenses in connection with its business.
Counsel for the Corporation lastly urged that if these expenses were allowed to be deducted the net rateable value arrived at would be less than the actual rent of Rs. 3,75,000 payable by the Club to the Corporation and that such a result cannot be contemplated under any method of assessing the rateable value.
It is true that the net rateable value as calculated by the High Court comes to Rs. 1,94,175 but the rateable value need not always be equal 535 to the actual rent.
As aforesaid the measure is what a, hypothetical tenant is expected to pay for a lease from year to Year taking the property as it exists with all its privileges, advantages and burdens.
The leased premises no doubt consist of a large track of land but it must be remembered that under cl.
(i)(f) of the lease the Club is in exclusive possession of only certain portions and the remainder has to be kept open to the public except on race days and when training of horses is held.
A large portion of the land has thus to be kept open for being used as playgrounds for the public.
It is therefore not surprising that the rateable value as determined by the High Court comes to an amount less than the actual rent payable by the Club.
The appeal fails and is dismissed with costs.
R.K.P.S. Appeal dismissed.

summary/full:
The respondent club ran a race course and had built certain structures on land in Bombay which it had leased from the appellant corporation at an annual rent of Rs. 3.75 lakhs.
It had obtained a licence from the State Government to hold race meetings on its course in Bombay as well as on another course owned by it in Poona for which 'it had paid a licence fee of Rs. 13 lakhs for the relevant I year and had apportioned the fee in the ratio of 2: 1 between the Bombay and the Poona courses.
For assessment of the correct rateable value of the property for the rating year 1954 55 the assessing authority made an assessment by the profits basis method on the basis of the Club 's accounts for the year 1953 54 and, in doing so, disallowed certain expenses claimed by the Club in determining the net rateable value at Rs. 11,90,187.
The respondent club thereupon ' filed an appeal before the small Causes Court under section 217 of the Act and although that Court made a few adjustments, it held the Club had failed to prove that the net rateable value determined by the assessing authority was excessive.
The High Court however, in appeal, upheld the Club 's objections as regards the disallowance of several items of expenditure and held that the gross annual value of the property would, after the deductions to be allowed, come to Rs. 2,15,750; and after deducting therefrom the statutory allowance of 10 percent under section 154 on account of allowances for repairs etc.
, the net annual value would come to Rs. 1,94,175.
In the appeal to this Court it was contended on behalf of the appellant, inter alia, (i) that the 10 percent statutory deduction allowed by section 154(1) covers all expenses for repairs and therefore deduction of costs of repairs and upkeep of the course, if allowed, would mean a duplicate deduction; (ii) that the totalisator maintained by the Club being 'machinery, its value was not to be included in rating under s.154(2); (iii) that the Club wag entitled to a deduction of only half of the licence fee apportioned to the Bombay Course because that fee covered dual purpose i.e. for the premises as a race course and for permission to conduct race meetings on the race course; for the first the burden would be on the lessor and for the second on the tenant; that this was borne out by the scheme of the Bombay Race Courses Licencing Act 3 of 1912 which was to licence the premises and then to licence the person who runs races on such premises; and (iv) that if the expenses claimed were allowed to be deducted, the net rateable value arrived at would be less than the actual rent of Rs. 3,75,000 payable by the Club to the Corporation and that such a result cannot be contemplated under any method of assessing the rateable value.
HELP:Dismissing the appeal: (i)The expenses in question were for the maintenance in good repair of the race track which is the source of 526 receipts earned by teh Club.
Disbursements for the upkeep of the course and all its adjuncts consequently are proper out goings incurred for earning the receipts.
They are not the landlord 's obligation and are not part of or included in teh statutory deduction of 10 percent in section 154(1), which is, in lieu of, the cost of repairs, insurance, etc.
incurred by,the lessor.
The High Court was therefore right in deducting such expenses from the gross receipts.
(ii) Similarly the expenses incurred for the upkeep and re pair of the totalisator were incurred on an adjunct neces sary to an efficient race course and must necessarily be regarded as the outgoings of the business.
The contention that as it was machinery its value could not be included in, rating tinder section 154(2) had no merit.
(iii) The High Court had rightly allowed the deduction of the entire amount of expenditure in connection with the cost of sand and morum, salaries and charges of empolyees, motor lorry expenses, stores and charges for maintenance of horses 'and bullocks, manure and garden expenses, spares of tractors and other machinery and the wheel tax and water tax.
The distribution of these expenses between the tenant and the landlord made by the assessing authority and the small Cause Court could not be sustained on the ground that race meetings were held in Bombay only for Part of the year.
There was nothing to show that the lessor had to maintain the track during the time when race meetings were not held in Bombay.
The measure in arriving at the net rateable value under section 154(1) is what a hypothetical tenant would pay as rent and that would depend upon the amount of profits earned from race meetings held on the race course.
To arrive at the correct amount of such profit all expenses reasonably and properly incurred which go to the making of the receipts have to be deducted from the gross receipts.
[533D] (iv) The licence obtained by the Club was clearly permission to run race meetings on the two race courses and not an instrument licensing the premises as a race course.
Since it is the tenant who would hold the race meetings, the fee, payable for the licence is his burden and not that of the lessor.
Furthermore there was no provision in Bombay Act 3 of 1912 to warrant the construction that the licence obtained under section 4 had a dual purpose as contended.
[533H 534D] (v) The rateable value need not always be equal to the actual rent.
The measure is what a hypothetical tenant is expected to pay for a lease from year to year taking the property as it exists with all its advantages and burdens.
In view of the fact that the Club was only in exclusive possession of some portions of the land and the remainder 'had to be kept open to the public except on race days, it was not surprising that the rateable value came to less than the actual rent.
[534H; 535C] R.v.
Verall , Sanddown Park CAse [1954] 47 R. T. 351 (CA).
(quoted in Ryde on Rating, 11th ed.
523); Port of London Authority vs Assessment Committee, at p. 281, referred to.