Input:
Appeals Nos.
2200, 2200A and 2200B of 1968.
Appeals from the judgment and order dated November 30, 1967 of, the Allahabad High Court in Income tax Reference No. 366 of 1963.
M. C. Chagla and P. N. Tiwari, for the appellant (in all the appeals).
B. Sen, G. L. Sharnia and R. N. Sachthey, for the respondent (in all the appeals).
239 The, judgment of the Court was delivered by Hegde J.
In these appeals by certificate the question that falls for decision is whether oil the facts and in the circumstances of the case registration under section 26(A) of the Indian Income Tax Act, 1922 (to be hereinafter referred to as the act) was rightly refused to the appellant firm on the ground that the partnership in question violated the provisions of section 4 of the Indian Companies Act, 1913.
The authorities under the Act as well as the High Court of Allahabad have answered that question in the affirmative.
The assessee challenges that conclusion.
The above appeals relate to different assessment years of the same assessee, the relevant assessment years being 1952 53, 1953 54 and 1954 55.
In all these years the Income Tax Officer had refused to register the appellant firm under section 26A.
All the partnership deeds are, we are told, similar in terms.
We have before us the deed executed on July 7, 1950.
It shows that the firm consists of 18 partners.
Ex facie that deed does not show that any of the partners had joined the deed as representatives of their Hindu Undivided Families.
From the tenor of the document, they appear to be partners in their own right.
The Income Tax Officer, the Appellate Assistant Commissioner and the Tribunal have come to the conclusion that some of them had joined the partnership as Kartas of their respective Hindu Undivided Families.
All the authorities under the Act as well as the High Court have opined that the partnership in question is not lawful in view of section 4(3) of the Indian Companies Act, 1913.
The material portion of that provision reads (4).
(1). (2) No company, association or partnership consisting of more than twenty persons shall be formed for the purpose of carrying on any other business that has for its object the acquisition of gain by the company, association or partnership or by the individual members thereof, unless it is registered as a company under this Act, or is formed in pursuance of an Act of Parliament of the United Kingdom or some other Indian law or Royal Charter or Letters Patent.
(3) This section shall not apply to a joint family carrying on joint family trade or business and where two or more such joint families form a partnership, in computing the number of persons for the purpose of this section, minor members of such families shall be excluded.
240 (4) Every member of a company, association or partnership carrying on business in contravention of this section shall be personally liable for all liabilities incurred in such business.
(5). . . .
The Income Tax Officer, the Appellate Assistant Commissioner as well as the Tribunal were of the opinion that some partners of the assessee firm having entered into the partnership as representatives of their respective Hindu Undivided Families, the adult members of those families should be taken into consideration for determining whether or not the total number of partners exceeded twenty.
On that basis they have arrived at the conclusion that the firm has more than twenty partners and the same having not been registered as a company under the Companies Act, nor having formed 'in pursuance of an Act of Parliament of the United Kingdom or some other Indian law or Royal Charter or Letters Patent, it must be held to be an unlawful partnership.
When the question formulated earlier was referred to the High Court under section 66(1) of the Act, it was heard by Jagdish Sahai and Beg, JJ.
Jagdish Sahai J. was of the opinion that the partnership in question was not lawful.
Beg J. differed from him and answered the question in favour of the assessee.
In view of this difference of opinion, the matter was referred to Takru J.
He agreed with Jagdish Sahai J. By a majority the question referred to the High Court was answered in favour of the revenue.
Hence these appeals.
Mr. Chagla appearing on behalf of the assessee urged that no Hindu joint family as such can Join a partnership and it is now well settled that when a karta of Hindu Undivided Family joins a firm as a partner even if he contributes his share from out of the family funds, the other members of his family do not ipso facto 'become partners of that firm.
So far as the partnership is concerned, he is the only partner though he may be accountable to the members of his family as regards the profits earned.
According to the learned counsel, for the purpose of working out the rights and liabilities of the partners inter se one cannot go behind the partnership deed.
Proceeding further he urged that in considering whether a partnership should be registered under section 26A or not, the Income tax Officer has merely to see, whether the requirements of section 26A of the Act and the relevant rules are complied with or not.
He is not entitled to investigate into the question as to who are beneficially interested in the partnership.
According to him if the requirements of section 26A and the relevant rules are complied with, the Income tax Officer is bound to register the partnership.
The counsel urged that the second limb of section 4(3) of the Indian Companies Act, 1913, proceeds on the erroneous impression that 241 a joint Hindu family can enter into a partnership, which in law it cannot as it has no legal personality.
Mr. B. Sen, learned counsel for the department did not contest the position that when a karta or a member of a Hindu Joint family joins a partnership the other members of his family do not become partners ipso facto.
But according to him it is open to the department to go behind the partnership deed and find out whether the individual who has joined as a partner has joined in his own right or as a representative of any other body.
His contention was that in view of section 4(3) of the Indian Companies Act, 1913, once the Income tax Officer comes to the conclusion that one of the partners of a firm is a representative of a joint family, he must deem that the adult members of that family are also partners of that firm and on that 'basis find out whether the total number of partners exceed twenty.
If they exceed twenty he cannot register the partnership, as such a partnership contravenes section 4 (2) of the Indian Companies Act, 1913, Section 2 (6B) of the Act provides that the expression 'firm ', partner ' and 'partnership ' in the Act have the same meaning respectively as in the .
Section 4 of the Partnership Act, 1932 prescribes "Partnership" is the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all.
Persons who have entered into partnership with one another are called individually 'partners" and collectively "a firm" and the name under which their business is carried on is called the 'firm name '.
In view of the aforementioned provision only "persons" can join as partners.
Section 2(42) of the General Clauses Act says a "Person" shall include any company or association or body of individuals whether incorporation or not.
But this definition applies when there is nothing repugnant in the subject or context.
After examining the provisions of the Partnership Act, the Privy Council in SenaJi Kapurchand vs Pannaji Devichand(1) and this Court in Dulichand Laxminarayana vs Commissioner of Income Tax, Nagpur(2) , have held that an association of persons is not a person within the meaning of that expression in the Partnership Act, It is true that section 2(9) of the Act says that unless the context otherwise requires "person" includes Hindu Undivided Family, This definition cannot be imported into the Partnership Act, the provisions of which alone are relevant for finding as to who could join as partners.
It is only partnership constituted according to (1) A.I.R. 1930 P.C. 300.
(2) 242 the provisions of the Partnership Act that can be considered as partnerships under the Act.
The definition of 'person ' in the Act is intended for the purpose of levying income tax and for other cognate matters.
On the basis of certain observations of the Judicial Committee in Lala Lachman Das vs Commissioner of Income Tax(1), it Was contended on behalf of the department that a joint Hindu family can enter into a partnership.
Those observations have to be read in the context in which they were made.
The department in that case had requested the tribunal to refer the question "can there 'be a partnership within the meaning of section 2 sub section
6(B) of the Indian Income tax Act, 1922 between a Hindu Undivided Family as such on the one part and one of its undivided members in his indi vidual capacity on the other part.
" But that question was ultimately not referred as being unnecessary on the facts of the case.
But the following observations of the Judicial Committee in its judgment are relevant : "It is unnecessary to consider in this case the question relating to the validity of a partnership between a Hindu Undivided family as such of the one part and one of its undivided members in his individual capacity of the other.
With reference to the latter kind of partnership there seems to be some authority favouring the view that such a partnership cannot exist under the rules.
of Hindu law but their Lordships do not propose to deal with that question in this case.
" In that case the partnership was between the karta of a joint Hindu family and an undivided member of that family.
Hence the observations in the judgment that the Hindu Undivided family was a partner has really reference to the karta who was a partner as representing the family.
In Commissioner of Income tax,, West Bengal vs Kalu Babu Lal Chand(2), this Court observed that it is now well settled that Hindu Undivided Family cannot as such enter into a contract of partnership with another person or persons.
,Several other decisions have taken the same view.
No decision taking a contrary view was ' brought to our notice.
The concept of a Hindu Undivided Family joining a partnership presents considerable difficulty.
A Hindu Undivided Family is a fleeting body.
Its composition changes by births, deaths, marriages and divorces.
Such a partnership is likely to have a precarious existence.
The assumption in section 4(3) of the Companies ' Act, 1913 that a Hindu Joint family can be a partner in a partnership appears to be based on an erroneous view of the law.
(1) 74.
I.A. 277.
(2) 243 The next question is whether when a deed of partnership does not on the face of it show that any Hindu Undivided Family has joined the partnership, is it open to the Income tax Officer to behind the deed and find out for the purpose of registration under section 26A whether the ostensible partner is the representative of someone else.
The Judicial Committee in P. K. P. section Pichappa Chettiar and Ors.
vs Chokalingam Pillai and Ors.
(1) ruled that where a managing member of a joint family enters into a partnership with a stranger, the other members of the family do not ipso facto become partners in the business so as to clothe them with all the rights and obligations of a partner as defined by Contract Act.
In such a case the family as a unit does not become a partner but daily such of its members as in fact enter into contractual relationship with the stranger.
In Kshetra Mohan Sannyasi Charan Sadhukhan vs Commr. of Excess Profits Tax, West Bengal,(1) this Court laid down that a Hindu Undivided Family is included in the expression "person, as defined in the Indian Income tax Act but it is not a juristic person for all purposes; when two kartas of Hindu Undivided Families.
enter into a partnereship agreement, the partnership though popularly known as one between two Hindu Undivided Families in the eye of the law, it is a partnership between the two kartas and the other members of the families do not ipso facto become partners; there is, however, nothing to prevent the individual members of one Hindu Undivided Family from entering into a partnership with the individual members of another Hindu Undivided Family and in such a case it: is a partnership between the individual members and it is wholly inappropriate to describe such a partnership as one between two Hindu Undivided Families.
In Firm Bhagat Ram Mohan Lal vs Commissioner of Excess Profits Tax, Nagpur and anr.(3), this Court ruled that when the karta of a joint family enters ' into a partnership with the stranger, the members of the family do not ipso facto become partners in that firm.
They have no right to take part in its management or to sue for its dissolution.
The creditors of the firm would no doubt be entitled to proceed against the joint family assets including the shares of the non Partner co parceners for realisation of their debts.
But that is because under the Hindu law, the karta has.
the right when properly carrying on business to pledge the H credit of the joint family to the extent of its assets, and not because the junior members become partners in the business.
The liability (1) A.I.R. 1934, P.C. 192.
(3) (2)(1953) 244 of the latter arises by reason ' of their status as coparceners and not by reason of any contract of partnership by them.
In Commissioner of Income tax, Bombay City vs Nandlal Gandalal(1), this Court again observed that the position in Hindu law with 'regard to a coparcener, even when he is the karta entering into partnership with others in carrying on a business is well settled.
The partnership that is created is a contractual partnership and is governed by the provisions of the .
The partnership is not between the family and the other partners; it is a partnership between the _coparcener individually and his other partners.
The coparcener is undoubtedly accountable to the family for the income received, but the partnership is exclusively one between the contracting members, including the individual coparcener and the strangers.
On the death of the coparcener, the surviving members of the family cannot claim to continue as partners with the others or institute a suit for dissolution of partnership; nor can the stranger partners sue them as partners for the coparcener 's share of the loss.
Therefore, so far as the partnership is concerned, both under partnership law and under Hindu law, the control and management is in the hands of the individual coparcener who is the partner, and not in the family.
In Commissioner of Income tax, Madras vs Bagyalakshmi and Co. Udamalpet(2), this Court observed that contract of partnership has no concern with the obligation of the partners to others in respect of their shares of profit in the partnership.
it only regulates the rights and liabilities of the partners.
A partner may be the karta of a joint Hindu family, he may be a trustee, he may enter into sub partnership with others, he may under an agreement express or implied, be the representative of a group of persons; he may be a benamidar for another.
In all such cases he occupies a dual position qua the partnership, he functions in his personal capacity; qua the third parties in his representative capacity; third parties, whom one of the partner represents, cannot enforce their rights against the other partners nor can the other partners do so against the said third parties.
Their right is only to a share in the profits of their partner representative in accordance with law or in accordance with the terms of the agreement, as the case may be.
The law of partnership and Hindu law function in different fields.
A divided member or some of the divided members of the erstwhile joint family can certainly enter into a partnership, with third parties under some arrangement among the members of the divided family.
Their shares in the partnership depend on the terms of the partnership; the shares of the members of the divided (1) (1960) 40 I.T.R.1.
(2) ; 245 family in the interest of their representative in the partnership depend upon the terms of the partition deed.
From these decisions it follows that for the purpose of finding, out as to who are all partners of.
a firm, one has only to look to the partnership deed and not to go behind it.
Another contention urged by Mr. Chagla was that the scope of the enquiry I under section 26A is a limited one; if the application made for registration complies with the requirements of that section and the rules framed thereunder.
, then it is not open to the income tax Officer to refuse to register the firm.
Section 26A says : (1) Application may be made to the Income7tax officer on behalf of any firm, constituted under an instrument of partnership specifying the individual shares of the partners, for registration for the purposes, of this Act and of any other enactment for the time being in force relating to the Income tax or super tax.
(2) The application shall be made by such person or persons, and at such times and shall contain such particulars and shall be in such form, and be verified in such manner, as may be prescribed and it shall be dealt with by the Income tax Officer in such manner as may be prescribed.
" The conditions of registration prescribed in this section and the relevant rules are : (1) on behalf of the firm, an application ,should be made to the Income tax Officer by such person and at such times and containing such particulars, being in such form and verified in such manner as are prescribed by the rules;, (2) the firm should be constituted under an instrument of partnership; (3) the instrument must specify the individual shares of the part ners and (4) the partnership must be valid and genuine and must actually exist in the terms specified in the instrument.
If all the above conditions are fulfilled, the Income tax Officer is bound to register the firm unless the assessee has contravened section 23(4) of the Act.
In Commissioner of Income Tax, Madras vs Sivakashi Match Exporting Co. (1) this Court held that the combined effect of section 26A and the rules made thereunder was that the Income tax Officer could not reject an application made by a firm if it gave the necessary particulars prescribed by the rules and if there was a firm in existence as shown in the instrument of partnership.
A firm is said to be not in existence if it was a bogus and not a (1) , Sup.
Cl/70 2 246 genuine one or if in law the constitution of the partnership was void.
The jurisdiction if the Income tax Officer was, therefore, confined to ascertaining two facts namely (1) whether the application for registration was in conformity with the rules framed under the Act and (2) whether the firm shown in the document presented for registration was a bogus one or had no legal existence.
Further the discretion conferred on the Income tax Officer under section 26A was a judicial one and he could not refuse to register a firm on mere speculation.
He had to base his conclusion on relevant evidence.
Therein this Court further held that there was no prohibition under the Partnership Act against a partner or partners of other firms combining together to form a separate partnership to carry on a different business.
The fact that such a partner entered into sub partnership with others in respect of his share did not detract from the validity of the partnership; nor was the manner in which he dealt with his share of the profits of any relevance to the question of the validity of the partnership.
In Commissioner of Income Tax Gujarat vs A. Abdul Rahim and Co. (1), this Court ruled that registration of a partnership deed under s.26A of the Act could not 'be refused on the ground that one of the partners was a benamidar for someone else.
Therein this Court observed that it is a settled law that if a partnership is a 'genuine and valid one, the Income tax Officer has no power to reject its registration if the other provisions of s.26A and the rules framed thereunder are complied with.
When a firm makes an application under s.26A for registration, the Income tax Officer can reject the same if he comes to the conclusion that the partnership is not genuine or the instrument of partnership does not specify correctly the individual share of the partners.
But once he comes to the conclusion that the partnership is genuine and a valid one, he cannot refuse registration on the ground that one of the partners is a benamidar of another.
If the partnership is genuine and legal, the share given to the benamidar will be the correct specification of his individual share in the partnership.
The beneficial interest in the income pertaining to the share of the said benamidar may have relevance to the matter of assessment but none in regard to the question of registration.
His beami character does not affect the benaamidar 's capacity as partner or his relationship with the other members of the partnership.
If a partner is only a benamidar for, another, it can only mean that he is accountable to the real owner for the profits earned by him from and out of the partnership.
Therefore a benamidar is a mere trustee of the real owner and he has no beneficial interest in the property or the business of the real owner.
But, in law, just as in the case of a trustee, he can also enter into a partnership with (1) 247 others.
The benamidar of a partner, qua the other partners, has separate And real existence; he is governed by the terms of the partnership deed, his rights and liabilities are governed by the terms of the contract and by the provisions of the partnership Act; his liability to third parties for the acts of the partnership is coequal with that of the other partners; the other partners have no concern with the real owner; they can only look to him for enforcing their rights or discharging their obligations under the partnership deed.
Any internal arrangement between him and ,another is not governed by the terms of the partnership; that arrangement operates only on the profits accruing to the benamidar; it is outside the partnership arrangement.
If a benamidar possesses the legal character to enter into a partnership with another, the fact that he is accountable for his profits to, and has the right to be indemnified for his losses by a third party or even by one of the partners does not discharge him of the said character.
As mentioned earlier, the persons who are shown in the part nership deed with which we are concerned in these appeals as partners, appeared to have joined the same in their individual capacity.
There is nothing in the partnership deed to indicate that they have joined the partnership as kartas of their respective families.
It was not open to the Income tax Officer to go behind the deed and find out, for the purposes of registration under section 26A whether the partners mentioned in the deed have joined the partnership in their own right or as representing others.
Hence the partnership must be held to have been validly formed as law did not at the relevant time prohibit any one, otherwise competent to contract from entering into a contract of partnership even though, the beneficial interest in his share may vest in others.
The application made for registration complies with the requirements of section 26A and the rules framed thereunder.
Therefore the Income tax Officer was bound to register the partnership.
For the reasons mentioned above, we allow these appeals, set aside the order made by the High Court and answer the question referred to the High Court in the negative and in favour of the assessee.
The department shall pay the costs of the assessee in this Court as well as in the High Court.
One hearing fee.
R.K.P.S. Appeals allowed.

Output:
A firm consisted of 18 partners.
The partnership deed did not show that any of the partners joined the deed as representatives of their Hindu Undivided Families.
The firm applied for registration under section 26A of the Income Tax Act, 1922.
The income tax Officer, the Appellate Assistant Commissioner and the Tribunal were of the opinion that some partners of the firm having entered into the partnership as representatives of their respective Hindu undivided families, in view of section 4(3) of the Companies Act, 1913, the adult members of these families should be taken into consideration for determining whether or not the total number of partners exceeded twenty.
On that basis they arrived at the conclusion that the firm had more than 20 partners and the same having not been registered as a company under the Companies Act, the partnership was un lawful.
The High Court answered a reference made to it in favour of the revenue.
In the appeal to this Court it was contended; (i) Section 4(3) of the Companies Act, 1913 proceeded on the erroneous impression that a joint Hindu Family can enter into a partnership which in law it cannot as it has no legal personality; (ii) it was not open to the Income Tax Officer to go behind the deed for the purpose of registration under section 26A and (iii) if the application, for registration complied with the requirements of that section and the rules made thereunder, it was not open to the Income Tax Officer to refuse to register.
Allowing the appeal, HELD : (i) It is only partnership constituted according to the provisions of the partnership Act that can be considered as partnership under the Act.
Under the Partnership Act only "persons" can join as partners.
An association of persons is not a person within the meaning of that expression in the Partnership Act.
The definition of "Person" in the Income Tax Act including within the definition Hindu Undivided Family is intended for levying income tax and other cognate matters and cannot be imported into the Partnership Act, the provisions of which alone are relevant for finding as to who could join as partners.
A Hindu undivided family cannot as such enter into a contact of Partnership with another person or persons.
The concept of a Hindu undivided family joining a partnership presents considerable difficulty.
It is a fleeting body and such a partnership is likely to have a precarious.
existence.
Therefore, the assumption in section 4(3) of the Companies Act, 1913, that a Hindu Joint Family can be a partner in a partnership appear& to be based on an erroneous view of the law.
[241 H 242 G H] 238 Senaji Kapurchand V. Pannaji Devichand, A I.R. 1930 P.C. 300, Dulichand Laxminarayana vs Commissioner of income tax Nagpur, and Commissioner of Income tax West Bengal vs Kalu Babu Lal Chand, , referred to.
Lala Lachman Das vs Commissioner of Income Tax, 74 I.A. 277, distinguished '.
(ii) For the purpose of finding out as to who are all partners of a firm, one has only to look to, the partnership deed and not to go behind it.
It is well settled that when a co parcener, even when he is the Karta, enters into partnership with others the partnership that is created is a contractual partnership; that partnership is not between the family and the other partners, it is a partnership between the coparcener individually and his other partners.
[244 B C] P. K. P. section Pichappa Chettiar vs Chokalingam Pillai.
A.I.R. 1934 P.C. 192, Kshetra Mohan Sannyasi Charan Sadhukhan vs Commr.
of Excess Profits Tax, West Bengal, , Firm Bhagat Ram Mohan Lal vs Commissioner of Excess Profits Tax, Nagpur and And.
and Commissioner of Income tax, Bombay City vs Nandlal Gandalal, , referred to.
(iii) The Income tax Officer has no, power to reject an application for registration under section 26.A if the provisions of the section and the rules framed thereunder are complied with.
The jurisdiction of the Income tax Officer is confined to ascertaining two facts, namely, (1) whether the application for registration is in conformity with the rules framed under the Act and (2) whether the firm shown in the document %,as a bogus one or had no legal existence.
It is not open to the Income tax Officer to go behind the deed and find out for the purpose of registration whether the, partners mentioned in the deed have joined the partnership in their own right or as representing others.
In the present cast the application made for registration complies with the requirements of the section and the rules framed thereunder.
Hence the partnership must be held to have been validly formed as law did not at the relevant time prohibit anyone, otherwise competent to contract from entering into a contract of partnership even though the beneficial interest in his share may vest in others.
[246 A B, 247 E F] Commissioner of Income tax, Madras vs Sivakashi Match Exporting Co. and Commissioner of Income Tax Gujarat vs ,I. Abdul Rahim and Co., , referred to.


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Nos. 661, 1380, 1885 & 1886 of 1967.
209 Appeal from the judgment and order dated February 25, 1965 of the Patna High Court in First Appeals Nos. 437 and 438 of 1959.
section V. Gupte, B. P. Rajgarhia and U. P. Singh, for the appellants in C.A. Nos. 661 and 1380 of 1967) and for respondent No. 1 C.A. Nos.
1885 and 1886 of 1967).
D. Goburdhun, for the respondent (in C.A. Nos. 661 and 1380 if 1967 and for the appellant (in C.A. Nos. 1885 and 1886 of 1967).
The Judgment of the Court was delivered by P. laganmohan Reddy, J.
These appeals are by certificate against the judgment of the Patna High Court in land acquisition appeals.
Two notifications dated 7 7 1954 under section 4 of the.
Land Acquisition Act 1894 (Act 1 of 1894) (hereinafter called 'the Act '), were issued one in respect of a portion of Plot Nos. 178 and 1784 admeasuring 2.65 acres and the other in respect of the whole of the plot No. 1783 admeasuring 2 acres situated in Ward No. 3 of Ranchi Municipality.
Section 6 notification in respect of these lands was published on 7 9 1954 and possession was taken on 23 9 1954 under section 17(1) after making a declaration under section 17(4) that the provisions of section 5A shall not apply.
The Collector awarded compensation of Rs. 1,20,419 6 11 in respect of the first acquisition and Rs. 47,648 13 6 in respect of the second.
Thereafter, at the instance of the claimant, a reference under section 18 of the Act was made to the Judicial Commissioner of Chhota Nagpur, Ranchi who.
while maintaining the market value, of the land, awarded by the Collector, gave further compensation for severance at the rate of 5% and 10% in respect of potential value of the land.
The Judicial Commissioner, however, did not grant the 15% solatium under section 23(2) of the Act.
Being dissatisfied, the claimants preferred appeals to the High Court.
The High Court revised the compensation and awarded Rs. 90,000/ per acre and 15% as solatium on the market value under section 23(2) of the Act but did not grant them the 5% towards severance.
Interest at 6% per annum on the amount of enhanced compensation from 23 9 1954 together with costs was also decreed.
Against the judgment and decree, the claimants have filed Civil Appeals 661 & 1380/67 while the State has filed Civil Appeals 1885 86/67.
The lands in question which have been acquired were earlier leased on 22 9 1944 to the Military authorities on a rent of Rs. 600/ per month for a period of 6 months under a registered deed with option Lo renew for a maximum period of 10 years 2lO which period expired on 21 9 1954.
One of the conditions of the lease was that on the termination of the lease, the lessor would exercise the option given under the lease to purchase all buildings, structures, gardens and any other structures constructed by the lessee during their occupation of the leased property, at 75 per cent of the valuation that would be determined by the Superintending Engineer, Chhota Nagpur Circle, and in case the lessors refused to purchase, the lessee was entitled to dismantle and take away the materials.
Towards the end of the lease period, the Govern ment of Bihar decided to acquire the property for the State Soldiers, Sailors and Airmen 's Board and initiated proceedings as aforesaid.
In these appeals the only question that has to be determined is : What is the market value of the property as on the date of section 4 notification ? In the valuation report given by the Land Acquisition Officer, Ranchi, Ex 1, the principle of capitalisation on the basis of 20 times the annual rental of Rs. 7,200/ at the rate of Rs. 600/ p.m. was adopted as the price of the lands.
In that report it was also pointed out that the sale price of 1.08.5 acres out of the premises of the Ranchi Club as per registered sale deed, exhibit C 1 dated 1 4 1953, was Rs. 41,470/ per acre.
which was not fair.
Apart from these 25 other sale transactions in respect of portions of Plot No. 1789 between 1952 and 1953 were also referred in that report.
Some of these lands were situated opposite to the Ranchi Club and the sale price came to Rs. 1092/ per katha, which is about Rs. 60,000/ per acre.
He was further pointed out that some other lands a little further away from the main road but belonging to the same Plot No. 1789 were sold at the rates between Rs. 250 / / to Rs. 800/ per katha.
This report formed the basis of the award made by the Collector.
The High Court took judicial notice, and in our view rightly so, that after the termination of the Second World War in 1945 there was a rise in land values due to the increased demand of homestead lands for building purposes.
It also considered various sale deeds produced and proved on behalf of the claimants along with the oral evidence to determine the market value of the land.
The objections from both the appellant and the respondent were taken into account in respect of each of these and most of them were considered as not furnishing a proper or adequate valuation either having regard to the distance of the lands which were the subject matter of the sale or the inadequacy of the information pertaining thereto.
The High Court, however, adopted the price in the sale deed Ex C 1 executed on 6 5 1953 by the Ranchi Club Ltd., in favour of the President of India in respect of 1.085 acres 3 bighas 5 kathas 10 chhataks in Plot No. 1221 for Rs. 45,000/:as the basis for arriving at the market value of the acquired land.
211 Though the land in question was situated on the main Ranchi Chaibasa Road, a strong objection was taken against adopting the price as a basis because it was not only 1/2 mile away from the land under acquisition but what was sold was only the leasehold right in the land.
These objections were rejected on the ground that for all,practical purposes the interest that was held or sold by the Ranchi Club under Ex.
C 1 was not inferior to an absolute title.
The area of the land, the subject matter of the sale, was considered to be fairly large being more than 1 acre and the situation was also the same as the land under acquisition except that it was farther away from it.
In these circumstances, the High Court thought, after a proper allowance is made for the difference in distance, the transaction yields a more acceptable guide for determining the market value of the land under acquisition and accordingly, it adopted twice the price.
as charged for the land in Ext.
C 1 as indicating a fair market value of the land in question.
The High Court further added Rs. 7060/ per acre as the difference between tenure rights and lease hold rights that were held by the President of India and awarded Rs. 90,00O./ per acre.
it did notwithstanding the fact that it was conscious that there was no definite data for the two additions that have been made, because in its view, in cases of this nature a certain amount of estimate has to be made which may even be arbitrary.
Accordingly, it awarded compensation for the 4.65 acres of land which was acquired by the Government at Rs. 90,000/ per acre together with 15% solatium Payable under clause (2) of section 23 of the Act.
5% compensation for severance of land from the claimants ' other portion of the land that remained with them after acquisition, which was awarded by the Judicial Commissioner, Chhota Nagpur, was disallowed on the ground that there was an entrance to the back portion of the land which was left with the #owners and also because there was no evidence to show that in fact there had been any depreciation in he value of the remaining area and if so, to what extent.
On the other hand, it main tained the 10% on the market value of the land awarded by the Land Acquisition Court on account of the increase in the potentialities of the land.
The basis adopted by the High Court is challenged on the ground that they are contrary to the well established principles applicable for determining the value of lands acquired under the Act.
The general principles for determining compensation have, been set out in sections 23 & 24 of the Act.
The compensation payable to the owner of the land is the market value which is determined by reference to the price which a seller might reasonably expect to obtain from a willing purchaser, bat as this may not be possible to ascertain with any amount of precision, the authority charged with the duty to award compensation is bound to 212 make an estimate judged by an objective standard.
The land acqui red has, therefore, to be valued not only with reference to its condition at the time of the declaration under section 4 of the Act but its potential value also must be taken into account.
The sale deeds of the lands situated in the vicinity and the comparable benefits and advantages which they have, furnish a rough and ready method of computing the market value.
This, however, is not the only method.
The rent which an owner was actually receiving at the relevant point of time or the rent which the neighbouring lands of similar nature are fetching can be taken into account by capitalising the rent which according to the present prevailing rate of interest is 20 times the annual rent.
But this also is not a conclusive method.
This Court had in Special Land Acquisition Officer, Bangalore vs T. Adinarayan Setty(1), indicated at page 412 the methods of valuation to be adopted in ascertaining the market value of the land on the date of the notificatioa under section 4(1) which are : (i) opinion of experts, (ii) the price paid within a reasonable time in bona fide transactions of purchase ,of the lands acquired or the lands adjacent to the lands acquired and possessing similar advantages; and (iii) a number of years ' purchase of the actual or immediately prospective profits of the lands acquired.
These methods, however, do not preclude the Court from taking any other special circumstances into consideration, the requirement being always to arrive as near as possible an estimate of the market value.
In arriving to a reasonably correct market value, it may be necessary to take even two or all of those methods into account inasmuch as the exact valuation is not always possible as no two lands may be the same either in respect of the situation or the extent or the potentially nor is it possible in all cases to have reliable material from which that valuation can be accurately determined.
Bearing these principles in mind, we do not think that the High Court was justified in adopting the registered sale deed, Ex.
C 1 executed by the Ranchi Club, in favour of the President of India, because that land is farther away not only from the, land acquired but from the town though it is on the main RanchiChaibasa Road.
Even the High Court recognised that there was no definite data for the two additions that have been made and in our view it would not be a proper method of ascertaining the value of the land 'acquired.
The only two documents that may be considered are Ex.10 and Ex 11 which are in respect of the lands situated in the vicinity and on either side of the land ac quired.
The other sale deeds are of smaller areas and do not furnish a proper basis for ascertaining the market value and have been quite properly not relied upon by the learned Advocate for (1) (1959) (Supp1. 1) S.CR.
213 the claimants ' The annual rental value of the land acquired, namely, Rs. 7 200/ will also not furnish a proper method of computation because that was a rent fixed in 1944 when that land was not of such great value as it had acquired at the time when sec.
4 notification was issued.
A perusal of the correspondence between the owners of the land and the Deputy Commissioner of Ranchi would show that the land owners had given it at consessional rate to ' the Military authorities having regard to the purpose for which it was being put to use.
On behalf of the claimants great reliance is placed on Ex.11 which is a sale deed executed on 16 12 1946 by the claimants the Ranchi Automobiles of an area of 1 bigha 17 kathas equal to .617 acres for Rs. 1,45,000/. After deducting Rs. 15,403/ the price of the structures according ;to the Engineer 's report in 1959 (Ex 25), the net value of the land is Rs. 1,29,697/ .
This value would work out to Rs. 2,08,135.70 per acre.
The High Court rejected this computation on the ground that though the land was contiguous to the land under acquisition, neither the value of the pump and the other structures belonging to Burmah Shell nor the value of the structures that might have been on the land on the date of the sale which were built by the vendees as lessees could be ascertained either from the sale deed or the evidence.
Ex.10 is a lease in respect of 1/3 acre granted by the owners to Thakur Chandra Bali Shah and others executed on 20 2 1950 on a monthly rent of Rs. 157/ .
The High Court calculated the monthly rental of the land under acquisition at that rate to be not less than Rs. 2,000/ per month or Rs. 24,000/ per year.
On the basis of 20 times the annual rent if computed Rs. 4,80,000/as the market value which works out at Rs. 1,03,226/per acre.
It is, however, pointed out on behalf of the claimants that the High Court made a mistake in thinking that the rent for the land leased under Ex.10 was Rs. 157/ p.m. and on that basis it calculated the annual rental value of 4.65 acres of the ' acquired land.
We have checked the figures from the original lease and find that in fact the rent is Rs. 175/ and not Rs. 157/ .
On this basis the rate per acre of 20 times annual rental value would come to Rs. 1,26,000/ .
Even if exhibit 11 is to be taken as, the basis and ,the value of the structures as given by the Engineer in Ex.25 is to be accepted that cannot furnish a proper basis because the land in question is a small area of .617 acres or just over 1 an acre.
A smaller area such as this on a main road Would certainly fetch a higher price compared to a larger un developed area even though it may have a frontage on the main road.
In order to develop that area atleast the value of 1/3 of the land will have to be deducted for roads, drainage and other amenities.
On this basis, the value of the land at Rs. 2,08,135.70 per acre would, after deduction of 1/3 come to Rs. 1,38,757/per acre.
On the basis of the rental of Rs. 175/ p.m. in Ex.10, 214 the value at 20 times the rental will work out as already seen at Rs. 1,26,000/ .
Allowing for an increase in rents from 1950 to 1954, the date of section 4 notification, say at 5% the value per acre may be Rs. 1,33,000/ or thereabout.
If we take the average of Ex.10 and Ex.11 as computed by us the value per acre would come to about Rs. 1,35,878/ .
In our view, Rs. 1,35,000/ per acre would be a reasonable rate at which compensation could be awarded to the claimants.
The High Court was not justified in giving 10% towards potential value because that element is inherent in the fixation of the market value of the land and could not be assessed separately.
The High Court was also not justified in disallowing 5% awarded by the Judicial Commissioner, Chhotanagpur as compensation for severance merely because there was an entrance to the land.
When a portion left out there would be a diminution in the value of ;the land that is left out for which some compensation has to be allowed.
The 5% allowed by the Judicial Commissioner, Chhotanagpur is reasonable.
In this view, the claimants would be entitled to a decree as follows in respect of the lands acquired : (1) At the rate of Rs. 1,35,000 per acre for 4.65 acres; (2) 5% severence and 15% solatium on the market value computed as in (1); (3) Interest at 6% from the date of taking possession.
The appeals of the claimants are allowed to the extent of the variation and those by the Government are dismissed with costs.
The claimants will be entitled to proportionate costs on the difference between the amounts decreed and those that are now awarded in each of the two appeals filed by them.
K.B.N. 864SupCI/72 2500 12 4 73 GIPF.

Output:
According to the general principles set out in sections 23 and 24 of the Land Acquision Act, 1894, for determining compensation, the compensation payable to the owner of the land is the market value which is determined by reference to the price which a seller might reasonable expect to obtain from a willing purchaser; but since it may not be possible to ascertain this with any amount of precision the authority charged with the duty to award compensation is bound to make an estimate judged by an objective standard.
The land acquired, has, therefore, to be valued not only with reference to its condition at the time of the declaration under section 4 of the Act, but its potential value also must be taken into account.
This Court has laid down the methods of valuation to be adopted in ascertaining the market value of the land on the date of the notification under section 4, which are : (i) opinion of experts (ii) the price paid within a reasonable time in bona fide transactions of the purchase of the lands acquired or the lands adjacent to the lands acquired and possessing similar advantages and (iii) a number of years purchase of the actual or immediately prospective profits of the lands acquired.
These methods, however, do not preclude the Court from taking any other special circumstance into consideration, the requirement being always to arrive as near as possible an estimate of the market value.
In arriving at a reasonable correct market value it may be necessary to take even two or all these methods into account in as much as the exact valuation is not always possible as no two lands may be same either in respect of the situation or the extent or the potentiality, nor is it possible in all cases to have reliable material from which that valuation can be accurately determined.
[211 H] Special Land Acquisition Officer Bangalore vs T. Adinarayan Setty, [1959] Supp.
1 S.C.R. 404, referred to.
In the present case, the High Court was not justified in adopting the sale deed in respect of a land which was farther away not only from the land acquired, but from the town.
The annual rental value of the land acquired, based on the rent fixed in 1944 when that land was not of such great value as , it had acquired at the time when section 4 notification was issued, would also not furnish a proper method of computation.
The High Court was not justified in giving 10 per cent towards potential value, be.
cause, that element was inherent in the fixation of market value of the land and could not be assessed separately.
The High Court was also not justified in disallowing 5 per cent awarded by the Judicial Commissioner Is compensation for severance merely because there was an entrance to the land.
When a portion of the land is acquired and a large portion left out there would be diminution.
in the value of land that is left out for which some compensation has to be allowed.
[214 B]


Input:
ivil Appeal No. 173 of 1986.
From the Judgment and Order dated 29.3.
1985 of the Andhra Pradesh Administrative Tribunal, Hyderabad in Repre sentation Petition No. 1589 of 1983.
WITH Writ Petition (Civil) Nos.
11135 37 of 1984.
485 (Under Article 32 of the Constitution of India).
C. Sitharamaiah, G. Prabhakar, D. Prakash Reddy, B. Rajeshwar Rao and Vimal Dave for the Appellants.
Subodh Markandeya, W.A. Nomani, Seshagiri Rao, Mrs. Chitra Markandeya and A. Subba Rao for the Respondents.
The Judgment of the Court was delivered by SHARMA, J.
Civil Appeal No. 173 of 1986: By the judgment under appeal the Andhra Pradesh Adminis trative Tribunal has accepted the claim of seniority pressed by the respondents in their Representation Petition No. 1589 of 1983.
The respondents were working as Lower Division Clerks (LDCs) in the district police offices/units in Andhra Pra desh, when the question of appointing LDCs in the Chief Office arose.
It was decided to give an opportunity to the LDCs working in the district police offices/units on the condition that they would be willing not to rely upon their service rendered in the district police offices/units for the purpose of seniority and that their seniority would be counted with effect from the date they joined the Chief Office.
Accordingly a Memorandum Rc.
No. 1020/S1/68 dated 21.11.
1968 (Annexure 'A ') was issued to the district police offices/units.
The choice was limited to probationers and approved probationers having good service records.
The letter expressly stated that the appointees were to be put at the bottom of the list of probationers or approved proba tioners already working in the Chief Office.
Immediately thereafter the respondents and two other LDCs, who are not parties to the present case, expressed their desire to join the Chief Office on the condition as mentioned in the said memorandum.
They in positive terms declared in Annexure 'C ' series their willingness to forego their seniority.
After examination of their service records, orders were passed and accordingly Memorandum Rc.
No. 1020/S1/68 dated 1.6.
197 (1 Annexure '0 ') was issued to the heads of departments of the concerned district police offices/units.
A pointed reference to the memorandum of 21.11.
1968 was made stating that the clerks in question were to take their seniority from the date of their joining the duty in the Chief Office as already mentioned in their letters.
Accordingly, all the five respondents joined their duty in the Chief Office after submitting, with reference to the memorandum dated 1.6.
1970, separate letters (at pages 40 44 of the 486 paper book) addressed to the Inspector General of Police, stating that: "I submit that I am willing to take the last rank in senior ity in the category of LDCs.
in Chief Office from the date reporting duty in Chief Office.
" Their respective dates of joining the Chief Office are detailed in the Memorandum dated 7.9.1970, Annexure 'H ' (page 47 of the paper book).
They were placed on probation with the condition that if they failed to complete their probation satisfactorily they would be sent back to their original district/unit offices.
The respondents satisfactorily completed their proba tion and were substantively confirmed in the Chief Office and their seniority was counted with effect from the dates they joined the Chief Office.
In 1983 they filed an applica tion before the Andhra Pradesh Administrative Tribunal claiming that they were entitled to count their service rendered in the district police offices/units for the pur pose of their seniority in the Chief Office, which has been allowed by the impugned judgment.
In support of their claim the respondents relied on the Memorandum Rc.
No. 1020/S1/68 dated 18.1.
1969 (Annexure 'B ') issued by the office of the Inspector General of Police to the heads of the district police organisations/units, stating that, "In continuation of the Chief Office memorandum cited, the Commissioner of Police, all Superintendents of Police and Commandants etc., are requested to state whether there are any L.D. Clerks willing to come on transfer to Chief Office, if the condition stipulated in the Memorandum cited regarding taking of last rank is not insisted upon.
The records of the L.D. Clerks recommended should be good.
" It has been argued before the Tribunal as also before us that this letter clearly indicates that adequate number of clerks from the district police offices/units were not available and a decision to forgo the condition in regard to the seniority of the clerks was taken.
It has been contended that in view of this departmental decision the respondents should not be bound down by their statements made in Annex ures 'C ' series and in their letters Annexures 'E ' series.
The Tribunal has accepted their plea.
487 5.
Mr. C. Sitharamaiah, the learned counsel appearing in support of the appeal, has urged that the Memorandum Annex ure 'B ' does not indicate any final decision taken by the Department.
The learned counsel appears to be right.
A perusal of the letter makes it clear that the office of the Inspector General of Police was only making an inquiry in the terms indicated therein.
It is true that presumably.
sufficient number of volunteers from the district police offices/units were not available which promoted the authori ty concerned to issue the letter Annexure 'B ', but it does not go beyond circulating a query.
It cannot be suggested on its basis that there was a reversal of the policy with respect to the counting of the seniority of the incoming LDCs from the district police offices/units.
It has been asserted in the counter affidavit of the State filed before the Tribunal that not a single person was allowed to join the Chief Office on the condition indicated in Annexure 'B ', and it has not been denied on behalf of the respondents either before the Tribunal or before us.
The respondents have not been able to produce a copy of any decision taken on the lines indicated in Annexure 'B ' nor have they been able to cite even a single case of an LDC joining the Chief Office on such a supposed decision.
We have, therefore, no hesitation in holding that the condition mentioned in Annex ure 'B ' is of no avail to the respondents.
The learned counsel for the respondents referred to r. 16 of the A.P. Ministerial Service Rules (hereinafter referred to as the Rules) and urged that when the respond ents were permitted to join the Chief Office, they were allowed to do so by way of a regular transfer from one department to another and this was done for administrative exigencies of the Police Department, within the meaning of the said Rules, and not on their own request.
They are, therefore, entitled to count their earlier service for the purpose of seniority.
It is alleged that the fact that the respondents were paid travelling allowances for joining the Chief Office corroborates their stand.
We have considered the argument addressed on behalf of the respondents along with the relevant documents but do not find any merit in their stand.
It has to be appreciated that the cadre of the Chief Office is altogether different from cadre,of the district police offices/units where the respondents were earlier appointed and they were not liable to be transferred to the Chief Office.
The service conditions at the Chief Office were better, which was presumably the reason for the respondents to give up their claim based upon their past services.
It is true that the differential advantage was not so substantial as to attract every LDC working in the dis trict offices/units, and in that situation the letter Annex ure 'B ' had to be circulated.
However, so far the respond ents and the two others 488 were concerned, they found it in their own interest to forego their claim of seniority on the Oasis of their past services and they did so.
It is significant to note that their letters Annexures 'E ' series were sent to the Inspec tor General of Police many months after the issuance of Annexure 'B ' and they were allowed to join the Chief Office on clear Understanding that they would not be entitled to count their past services.
It is, therefore, idle to suggest that the respondents can.now turn back and repudiate their commitment expressly made many months after Annexure 'B '.
So far the allegation regarding payment of travelling allowance is concerned, the same has been dealt with in paragraph 6 of the counter affidavit of the appellant filed before the Tribunal in the following terms: "They cannot claim seniority now after a lapse of 13 years on the ground that they were given T.T.A. at the time of their transfer.
No orders were issued from this office to the Subordinate Officer that the petitioners are eligible for T.T.A. and joining time.
In fact the Dy.
Inspr.
of Police, Hyderabad Range in his order No. 534/E/256/70 Hr.
Dt. 5.6.70, addressed to Supdt.
of Police, Medak had specif ically informed that the petitioners No. 1 and 2 are not entitled for any T.T.A. and joining time." [t is urged that inspite of the clarification made by the Deputy Inspector General of Police, as stated above, if some officers permitted the respondents to draw travelling allow ance, this cannot be a ground to hold that it was a case of regular departmental transfer.
The '.
16 cannot, therefore, be held to be applicable in the present case.
Mr. Sitharamaiah urged that having regard to the entire circumstances as spelt out of the different documents on the records of the present case, it should be held that the Memorandum Annexure A ' issued by the Office of the 'Inspector General of Police was a mere invitation to the LDCs in the district police offices/units to apply for appointment in the Chief Office with the condition mentioned therein.
and availing of the opportunity, the respondents accordingly requested by their statements and letters for appointment in the Chief Office.
It is suggested by the learned counsel that if the case be treated to be one of transfer, it has to be held, in the circumstances, to be at the request of the LDCs concerned within the meaning of r. 16 of the Rules.
There considerable substance in the alter native argument of Mr. Sithara 489 maiah also, but, it is not necessary to go into this ques tion deeper as the absorption of the respondents in the Chief Office cannot be treated by way of transfer within the meaning of the Rules.
Besides the above infirmities there are two other important considerations which weigh heavily against the respondents.
The petition before the Tribunal was filed by the respondents after a period of 13 years of their initial appointment in the Chief Office, during which period many orders consistent with the terms of service as indicated in the Memorandum Annexure 'A ' must have been passed in favour of the other incumbents of the service.
The courts and tribunals should be slow in disturbing the settled affairs in a service for such a long period.
Besides, the respond ents, in the application before the Tribunal, did not im plead their colleagues who have been prejudicially affected by the impugned judgment.
It cannot be assumed that the respondents had no knowledge about them.
As was rightly pointed out by Mr. Sitharamaiah, although in paragraph 4(d) of their application before the Tribunal (page 53 of the paper book) the respondents mentioned one Vijaya Chand alleged to be an officiating LDC who was put over them, they did not implead even him.
We are, therefore, of the view that apart from the merits of the case, the petition of the respondents before the Tribunal was fit to be rejected on the ground of the above mentioned last two points.
Finally the learned counsel for the respondents said that in any event they should not be put below those persons who had not successfully completed their probation in the Chief Office on the date the respondents joined there.
We do not find any merit in this submission either.
Accordingly, the judgment under appeal passed by the Andhra Pradesh Administrative Tribunal is set aside and the Representation petition of the respondents is dismissed.
The appeal is allowed, but, in the circumstances, there will be no order as to costs.
Writ Petitions (Civil) Nos.
11135 37 of 1984: 11.
These applications under Article 32 of the Constitu tion have been filed by the three petitioners who were appointed during the years 1965 67 in the Central Office of the Inspector General of Police (now redesignated as Direc tor General and Inspector General of Police), Andhra Pra desh.
Since they had not passed the general examination held for the purpose, a special qualifying examination was held in 1968 to facilitate the petitioners and other similarly situated persons to pass at the test.
The petitioners, however, did not appear at this 490 examination.
Another special qualifying examination was held in 1974 and the petitioners successfully cleared the same.
Thereafter, by an order dated 17.6.
1976 (Annexure 'E '), their services were regularised with effect from 1.8.1972.
Their claim in the present case is for counting their sen iority with effect from their initial dates of appointment in the years 1965 67 12.
It has been contended by the learned counsel for the petitioners that they were not qualified for the 1968 exami nation and at the very first opportunity available to them in 1974, they passed the special qualifying examination and, therefore, they should not be penalised by ignoring their services rendered before 1.8. 1972.
It is significant to note that although the impugned order was passed in 1976, the petitioners did not commence any legal remedy before the year 1984 when they filed the present application directly before this Court after a period of 8 years.
By way of a preliminary objection, Mr. Subbarao, the learned counsel appearing for some of the officers impleaded as respondents in this petition, has drawn our attention to the fact that earlier a writ application, being W.P. No. 106 of 1980, was filed by some of the employees of the central office making similar claim of seniority and the present petitioners specifically stated that their case would be governed by the judgment in the earlier writ petition which was ultimately dismissed by this Court on August 8, 1986 (M. Nirmala and Others vs State of Andhra Pradesh and Others, Mr. Subbarao contends that after the dismissal of the earlier case, the petitioners now cannot be permitted to urge any new ground in support of their claim.
The reply on behalf of the petitioners is that if the earli er writ application had been allowed, they would also be entitled to succeed, but after its dismissal their claim cannot be rejected without examination of the additional questions which did not arise in the earlier case.
On merits the reply on behalf of the Government of Andhra Pradesh is that the respondent officers had joined the office of the Inspector General of Police after qualify ing at the general examination held for the purpose, and since the petitioners did not appear at the examination, they cannot be equated with the respondent officers.
The general examinations for recruitment to the central office were held in 1964, 1965, 1966, 1967 and 1968, but the peti tioners did not choose to avail of the ordinary method for joining the service.
Instead 491 they entered the service by the side door and their depart ment, taking an attitude liberal to them and other similar officers, decided to hold special qualifying examinations.
It is contended that in these circumstances the rule as laid down in Memorandum No. 473/Y1/70 5 dated 24.7.
1970 (Annex ure 'VII ') is clearly applicable, and for the purpose of seniority the petitioners were given the advantage of two years of service rendered by them prior to their successful ly completing the special qualifying examination.
The argu ment is well founded.
The learned counsel also pointed out that the standard of the special qualifying examination was not the same as that of the general examination held for recruitment.
Besides the weakness in the case of the petitioners as mentioned above, the delay of 8 years on their part to initiate legal remedy is fatal and these writ petitions are fit to be rejected on this ground alone.
The writ applica tions are, therefore, dismissed with costs payable to the respondents represented by Mr. Subbarao.
G.N. Appeal allowed and writ petition dismissed.

Output:
The respondents in the Civil Appeal, were working as Lower Division Clerks in the district police offices/units.
Some posts of Lower Division Clerks fell vacant in the Chief Office and it was decided to fill up the same by appointing Lower Division Clerks with good service record from the district police offices.
Accordingly a Memorandum was issued on 21.11.
1968 which expressly stated that the appointees would be put at the bottom of the list of Lower Division Clerks already working in the Chief Office.
The respondents and two others expressed their willingness to join and also to forego their seniority.
Accordingly an order was passed and the respondents joined duty in the Chief Office in 1970 and were placed on probation.
They completed the probation satisfactorily and were confirmed with their seniority counted from the dates they joined Chief Office.
Later, in 1983 they filed a Representation Petition before the State Administrative Tribunal that in view of Memorandum dated 18.1.1969 which stated that the condition regarding taking last rank would not be insisted upon, the respondents were entitled to count their service rendered in the district police offices/units for the purpose of senior ity in the Chief Office.
The Tribunal allowed the petition.
The State has preferred the appeal against the said order.
The petitioners in the Writ Petitions were appointed in the years 1965 to 1967.
Since they did not pass the general examination, a special qualifying examination was held in 1968.
They did not appear at the examination.
Another chance was given in 1974 and the petitioners successfully cleared the same.
By an order dated 17.6.1976, their services were regularised with effect from 1.8.1972.
The petitioners challenged the validity of the order, claiming, that their seniority 483 should be counted from the dates they were appointed.
Allowing the appeal and dismissing the Writ Petitions, HELD: 1.
It has to be appreciated that the cadre of the Chief Office is altogether different from the cadre of the district police offices/ units where the respondents were earlier appointed and they were not liable to be transferred to the Chief Office.
The service conditions at the Chief Office were better, which was presumably the reason for the respondents to give up their claim based upon their past services.
It is true that the differential advantage was not so substantial as to attract every Lower Division Clerk working in the district offices/units, and in that situation the letter dated 21.11.1968 had to be circulated.
However, so far the respondents and the two others were concerned, they found it in their own interest to forego their claim of seniority on the basis of their past services and they did so.
It is significant to note that their letters expressing their willingness to join Chief Office by foregoing their seniority were sent to the Inspector General of Police many months after the issuance of circular dated 18.1.1969 stat ing that the condition of foregoing seniority would not be insisted upon and they were allowed to join the Chief Office on clear understanding that they would not be entitled to count their past services.
It is, therefore, idle to suggest that the respondents can now turn back and repudiate their commitment expressly made many months after the said circu lar.
[297G H; 298A B] 2.
So far the allegation regarding payment of travelling allowance is concerned, if some officers permitted the respondents to draw travelling allowance, this cannot be a ground to hold that it was a case of regular departmental transfer.
Rule 16 of the Andhra Pradesh Ministerial Service Rules cannot, therefore, be held to be applicable in the present case.
[298C E] 3.
The petition before the Tribunal was filed by the respondents after a period of 13 years of their initial appointment in the Chief Office, during which period many orders consistent with the terms of service as indicated in the Memorandum dated 21.11.1968, must have been passed in favour of the other incumbents of the service.
The courts and tribunals should be slow in disturbing the settled affairs in a service for such a long period.
Besides, the respondents, in the application before the Tribunal, did not implead their colleagues who have been prejudicially affect ed by the impugned judgment.
It cannot be assumed that the respondents had no knowledge about them.
Apart from the merits of the case, the petition of the respondents before the Tribunal 484 was fit to be rejected on these grounds.
[298B D] 4.
There is also no merit in the contention that the respondents should not be put below those persons who had not successfully completed their probation in the Chief Office on the date the respondents joined there.
[299E] 5.1 As regards the Writ Petitions, it is significant to note that although the impugned order was passed in 1976, the petitioners did not commence any legal remedy before the year 1984 when they filed the present application directly before this Court after a period of 8 years.
[300C] 5.2 Though a Writ Petition was filed by some of the employees of the Central Office making similar claim of seniority the same was ultimately dismissed by this Court on August 8, 1986.
[300E] M. Nirmala and others vs State of Andhra Pradesh and Others, , referred to.
5.3 The respondent officers had joined the Central Office after qualifying at the general examination held for the purpose, and since the petitioners did not appear at the examination, they cannot be equated with the respondent officers.
The general examinations for recruitment to the Central Office were held in 1964, 1965, 1966, 1967 and 1968, but the petitioners did not choose to avail of the ordinary method for joining the service.
Instead they entered the service by the side door and their department, taking an attitude liberal to them and other similar officers, decided to hold special qualifying examinations.
However, for the purpose of seniority the petitioners were given the advan tage of two years of service rendered by them prior to their successfully completing the special qualifying examination.
Even the standard of the special qualifying examination was not the same as that of the general examination held for recruitment.
[300G H; 301A B]


Input:
Appeals Nos. 1061 and 1627 to 1629 of 1966.
Appeals by special leave from the judgment and order dated March 9, 10, 1965 of the Bombay High Court in Revision Applications Nos.
1428, 1427, 1430 and 1676 of 1961.
M. C. Chagla, J. L. Hathi, K. L. Hathi and K. N. Bhat for the appellants (in all the appeals).
R. P. Bhat, Janendra Lal, R. A. Gagrat and B. R. Agarwala, for the respondent (in all the appeals).
The Judgment of the Court was delivered 'by Shah, J.
Under an indenture dated August 2, 1950, Dossibai respondent in this appeal granted a lease of 555 sq. yards in village Pahadi, Taluka Borivli to Mathura Prasad appellant herein for constructing buildings for residential or,business purposes.
The appellant constructed buildings on the land.
He then submitted an application in the Court of the Civil Judge, Junior Division, Borivli, District Thana, that the standard rent of the land be determined under section 11 of the Bombay Rents, Hotel and Lodging House Rates Control Act, 1947.
The Civil Judge rejected the application holding that the provisions of the Bombay Rents, Hotel and Lodging House Rates Control Act, 1947, did not apply to open land let for constructing buildings for residence, education, business, trade or storage.
This order was confirmed on September 28, 1955, by a single Judge of the Bombay High Court in a group of revision applications : Mrs. Dossibai N. B. Jeejeebhoy vs Hingoo Manohar Missar : Nos. 233 to 242 of 1955.
But in Vinayak Gopal Limaye vs Laxman Kashinath Athavale(1) the High Court of Bombay held that the question whether section 6(1) of the Act applies to any particular lease must be determined on its terms and a building lease in respect of an open plot is not ex (1) I.L.R. 832 cluded from section 6(1) of the Act solely because open land may be used for residence or educational purposes only after a structure is built thereon.
Relying upon this judgment, the appellant filed a fresh petition in the Court of the Small Causes, Bombay, for an order determining the standard rent of the premises.
The application was filed in the Court of Small Causes because the area in which the land was situated had since been included within the limits of the Greater Bombay area.
The Trial Judge rejected the application holding that the question whether to an open piece of land let for the purpose of constructing buildings for residence.
education, business or trade section 6 (1) of the Act applied was res judicata since it had been finally decided by the High Court between the same parties in respect of the same land in the earlier proceeding for fixation of standard rent.
The order was confirmed by a Bench of the Court,of Small Causes and by the High Court of Bombay.
With special leave, the appellant has appealed to this Court.
The view expressed by the High Court of Bombay in Mrs. Dossibai N. B. Jeejeebhoy vs Hingoo Manohar Missar (Civil) Revision Application No. 233 of 1955 (decided on September 28, 1955) was overruled by this Court in Mrs. Dossibai N. B. Jeejeebhoy vs Khemchand Gorumal & Others(1).
In the latter case the Court affirmed the view expressed by the Bombay High Court in Vinayak Gopal Limaye 's case (2).
But all the Courts have held that the earlier decision of the High Court of Bombay between the same parties and relating to the same land is res judicata.
Section II of the Code of Civil Procedure which enacts the general rule of res judicata, insofar as it is relevant, provides : "No Court shall try any suit or issue in which the matter directly and substantially in issue has been directly and substantially in issue in a former suit between the same parties, or between parties under whom they or any of them claim litigating under the same title, in a Court competent to try such subsequent suit or the suit in which such issue has been subsequently raised, and has been heard and finally decided by such Court." The Civil judge, Junior Division, Borivli, was competent to try the application for determination of standard rent, and he held that s 6(1) of the Bombay Rents, Hotel and Lodging House Rates Control Act, 1947, did not apply to open land let for construction of residential and business premises.
The rule of res judicata applies if "the matter directly and substantially in issue" in a suit or proceeding was directly and sub (1) I.L.R. (2) 833 stantially in issue in the previous suit between the same parties and had been heard and finally decided by a competent Court.
The Civil Judge, Junior Division, Borivli, decided the application between the parties to the present proceeding for determination of standard rent in respect of the same piece of land let for construction of buildings for residential or business purposes.
The High Court has held that a decision of a competent Court may operate as res judicata in respect of not only an issue of fact, but mixed issues of law and fact, and even abstract questions of law.
It was also assumed by the High Court that a decision relating to the jurisdiction of the Court to entertain or not to entertain a proceeding is binding and conclusive between these parties in respect of the same question in a later proceeding.
But the doctrine of res judicata belongs to the domain of procedure : it cannot be exalted to the status of a legislative direction between the parties so as to determine the question relating to the interpretation of enactment affecting the jurisdiction of a Court finally between them, even though no question of fact or mixed question of law and fact and relating to the right in dispute between the parties has been determined thereby.
A decision of a competent Court on a matter in issue may be res judicata in another proceeding between the same parties : the "matter in issue" may be an issue of fact, an issue of law, or one of mixed law and fact.
An issue of fact or an issue of mixed law and fact decided by a competent court is finally determined between the parties and cannot be re opened between them in another proceeding.
The previous decision on a matter in issue alone is res judicata : the reasons for the decision are not res judicata.
A matter in issue between the parties is the right claimed by one party and denied by the other, and the claim of right from its very nature depends upon proof of facts and application of the relevant law thereto.
A pure question of law unrelated to facts which give rise to a right, cannot be deemed to be a matter in issue.
When it is said that a previous decision is res judicata, it is meant that the right claimed has been adjudicated upon and cannot again be placed in contest between the same parties.
A previous decision of a competent Court on facts which are the foundation of the right and the relevant law applicable to the determination of the , transaction which is the foundation of the right and the relevant law applicable to the determination of the transactions which is the soured of the right is res judicata.
A previous decision on a matter in issue is a composite decision: the decision of law can not be dissociated from the decision on facts on which the right is founded.
A decision on an issue of law will be as res judicata in a subsequent proceeding between the same parties, if the cause of action of the subsequent Proceeding be the same as in the previous proceeding, but not when the cause of action is different, nor 834 when the law has since the earlier decision been altered by a competent authority, nor when the decision relates to the jurisdiction of the Court to try the earlier proceeding, nor when the earlier decision declares valid a transaction which is prohibited by law.
The authorities on the question whether a decision on a question of, law operates as res judicata disclose widely differing views.
In some cases it was decided that a decision on a question of law can never be res judicata in a subsequent proceeding between the same parties : Parthasardhi Ayyangar vs Chinnakrishna Ayyangar(1); Chamanlal vs Bapubhai (2) ; and Kanta Devi vs Kalawati(3).
On the other hand Aikman, J., in Chandi Prasad vs Maharaja Mahendra Mahendra Singh(1) held that a decision on a question of law is always res judicata.
But as observed by Rankin, C.J., in Tarini Charan Bhattacharjee vs Kedar Nath Haldar(5) : "Questions of law are of all kinds and cannot be dealt with as though they were all the same.
Questions of procedure, questions affecting jurisdiction, questions of limitation, may all be questions of law.
In such questions the rights of parties are not the only matter for consideration.
" We may analyse the illustrative cases retating to questions of law, decisions on which may be deemed res judicata in subsequent proceeding.
In Bindeshwari Charan Singh vs Bageshwari Charan Singh(1) the Judicial Committee held that a decision of a court in a previous suit between the same parties that section 12A of the Chota Nagpur Encumbered Estates Act 6 of 1876 which renders void a transaction to which it applies was inapplicable, was Yes judicata.
In that case the owner of an impartable estate, after his estate was released from management, executed a maintenance grant in favour of his minor son B, but without the sanction of the Commissioner as required by section 12A of the, Act.
B on attaining majority sued his father and brothers for a maintenance grant at the rate of Rs. 4,000 per annum.
The claim was decreed, and the plaintiff was awarded a decree for a grant of Rs. 4,000 inclusive of the previous grant of 1909, and the Court held that the grant of 1909 was valid in law.
The father implemented the decree and made an additional maintenance grant upto the value of the decreed sum.
In an action by the sons of B 's brothers challenging the two grants on the plea that the grants were illegal and not binding upon them, the Judicial Committee held that the plea was barred as res judicata in respect of both the grants in respect of the first because there was an express decision on the validity of the first grant in the earlier suit, and in respect of the second the (1) I.L.R. (3) A.I.R. [1946] Lah. 419.
(5) I.L.R. (2) I L.R, (4) I.L.R. 23 All.
(6) L.R. 63 I.A. 53.
83 5 decision in the first suit was res judicata as to the validity of the second grant which was made in fulfillment of the obligation under the Court 's decision.
The Judicial Committee held that in respect of the first grant, the decision that section 12A did not apply to the grant, was res judicata, and in respect of the second grant the construction between the same parties of section 12A was res judicata.
Validity of the second grant was never adjudicated upon in any previous suit; the second grant was held valid because between the parties it was decided that to the grant of maintenance of an impartible zamindari section 12A of the Chota Nagpur Encumbered Estates Act had no application.
This part of the judgment of the Judicial Committee is open to doubt.
Where the law is altered since the earlier decision, the earlier decision will not operate as res judicata between the same, parties : Tarini Charan Bhattacharjee 's case(1).
It is obvious that the matter in issue in a subsequent proceeding is not the same as in the previous proceeding, because the law interpreted is different.
In a case relating to levy of tax a decision valuing property or determining liability to tax in a different taxable period or event is binding only in that period or event, and is not binding in the subsequent years, and therefore the rule of, res judicata has no application; see Broken Hill Proprietary Company Ltd. vs Municipal Council of Broken Hill(2) A question of jurisdiction of the Court, or of procedure, or a pure question of law unrelated to the right of the parties to a previous suit, is not res judicata in the subsequent suit.
Rankin, observed in Tarini Charan Bhattacharjee 's case(1) : "The object of the doctrine of res judicata is not to fasten upon parties special principles of law as applicable to them inter se, but to ascertain their rights and the facts upon which these rights directly and substantially depend; and to prevent this ascertainment from becoming nugatory by precluding the parties from reopening or recontesting that which has 'been finally decided.
" A question relating to the jurisdiction of a Court cannot be deemed to have been finally determined by an erroneous decision of the Court.
If by an erroneous interpretation of the statute the Court holds that it has no jurisdiction, the question would not, in our judgment, operate as res judicata.
Similarly by an erroneous decision if the Court assumes jurisdiction which it does.
not possess under the statute, the question cannot operate as res judicata bet (1) I.L.R. (2) 83 6 ween the same parties, whether the cause of action in the subsequent litigation is the same or otherwise.
It is true that in determining the application of the rule of res judicata the Court is not concerned with the correctness or otherwise of the earlier judgment.
The matter in issue, if it is one purely of fact, decided in the earlier proceeding by a competent court must in a subsequent litigation between the same parties be regarded as finally decided and cannot be, reopened.
A mixed question of law and fact determined in the earlier proceeding between the same parties may not, for the same reason, be questioned a subsequent proceeding between the same parties.
But, where the decision is on a question law, i.e. the interpretation of a statute, it will be res judicata in a subsequent proceeding between the same parties where the cause of action is the same for the expression "the matter in issue" in section 11 Code of Civil Procedure means the right litigated between the parties, i.e. the facts on which the right is claimed or denied and the law applicable to the determination of that issue.
Where, however, the question is one purely of law and it relates to the jurisdiction of the Court or a decision of the Court sanctioning something which is illegal, by resort to the rule of res judicata a party affected by the decision will not be precluded from challenging the validity of that order under the rule of res judicata,for a rule of procedure cannot supersede the law of the land.
In the present case the decision of the Civil Judge, Junior Division, Borivli, that he had no jurisdiction to entertain the application for determination of standard rent, is, in view of the judgment of this Court, plainly erroneous : see Mrs. Dossibai N. B. Jeejeebhoy vs Khemchand Gorumal & Others(1) If the decision in the previous proceeding be.
regarded as conclusive it will assume the status of a special rule of law applicable to the parties relating to the jurisdiction 'of the Court in derogation of the rule declared by the Legislature.
The appeals are allowed, and the orders passed by the High Court and the Court of Small Causes are set aside and the proceedings are remanded to the Court of First Instance to deal with and dispose them of in accordance with law.
There will be no order as to costs throughout.
Y.P. Appeals allowed.

Output:
The appellant obtained lease of an open land for construction of buildings.
After the constructions, the appellant applied for determination of standard rent under the Bombay Rents, Hotel and Lodging House Rates Control Act, 1947.
The application was rejected holding that the provi sions of the Act did not apply to open land let for construction.
This view was confirmed by the High Court.
Sometime thereafter in another case the High Court held that the question whether the provisions of the Act applied to any particular lease must be determined on its terms and a building lease in respect of an open plot was not excluded from the provisions of the Act solely because open land may be used from residence or educational purposes only after a structure is built thereon.
Relying upon this judgment, the appellant filed a fresh application for determining the standard rent.
The Trial Judge rejected the application holding that question of the applicability of the Act was res judicata since it had been finally decided by the High Court between the same parties in respect of the same land in the earlier proceeding for fixation of standard rent.
The order was confirmed by first appellate court and on further appeal by the High Court.
HELD:The judgment did not operate as res judicata.
A question relating.
to the jurisdiction of a Court cannot be deemed to have been finally determined by an erroneous decision of the Court.
If by an erroneous interpretation of the statute the court holds that it has no jurisdiction, the decision will not, operate as res judicata.
Similarly by an erroneous decision if the Court assumes jurisdiction which it does not possess under the statute, the decision will not operate as res judicata between the same parties, whether the cause of action in the subsequent litigation is the same or otherwise.
in determining the application of the rule of res judicata the court is not concerned with the correctness or otherwise of the earlier judgment.
The matter in issue, if it is one purely of fact, decided in the earlier proceeding by a competent court must in a subsequent litigation between the same parties be regarded as finally decided and cannot be reopened.
A mixed question of law and fact determined in the earlier proceeding between the same parties may not, for the same reason, be questioned in a subsequent proceeding between the same parties where the cause of action is the same, for the expression "the matter in issue" in section 11, Code of Civil Procedure means the right litigated between the parties, i.e., the facts on which the right is claimed or denied and the law applicable to the determination of that issue.
Where, however, the question is one purely of law and it relates to the jurisdiction of the Court or a decision of the Court sanctioning something which is illegal, by resort to the rule of res judicata a party affected by the decision will not be precluded_ from challenging the validity of that order because of the rule of res judicata, for a rule of procedure cannot supersede the law of the land.
83 1 if the decision in the previous proceeding be regarded as conclusive it will assume the status of a special rule of law applicable to the parties relating to the jurisdiction of_the Court, in derogation of the rule declared by the Legislature.
[835G 836 F] Parthasardhi Ayyangar vs Chinnakrishna Ayyangar, I.L.R. , Chamanlal vs Bapubhai, I.L.R. , Kanta Devi vs Kalawati, A.I.R. 1946 Lah.
419,, Tarini Charan Bhattacharjee vs Kedar Nath Haldar, I.L.R. , and Broken Hill Proprietary Company Ltd. vs Municipal Council of Broken Hill, , approved.
Chandi Prasad vs Maharaja Mahendra Mahendra Singh, I.L.R. 23 All.
,5, disapproved.
Bindeshwari Charan Singh vs Bageshwari, Charan Singh, L.R. 63 I.A. 53, doubted.