Input:
Appeal No. 51 of 1972.
(From the judgment and order dated the 16th Oct., 1970 of the.
Gujarat High Court in I.T. Ref.
No. 4 of 1967) 221 V.S. Desai, J. Ramamurthi and Girish Chandra, for the appel lant.
B. Sen, Mrs. ,4.
K. Verma, K.J. John and Shri Narain for the respondents.
Judgment of the Court was delivered by KHANNA, J.
This appeal on certificate is against the judgment of Gujarat High Court whereby the High Court an swered the following question referred to it under section 256(1) of the Income tax Act, 1961 (hereinafter referred to as the Act of 1961) in favour of the assessee respondent and against the revenue: "Whether on the facts and in the circumstances of the case, there was a transfer of a capital asset within the meaning of section 45 read with section 2(47) of the Income tax Act, 1961 ?" The matter relates to the assessment year 1962 63, for which the accounting previous year was calendar year 1961.
The assessee who is an individual held 192 shares of Kawelengoji Ginneries Ltd., Kampala, a private limited company incorporated in Uganda (hereinafter referred to as the Uganda company).
Those shares were acquired by the assessee sometimes before January 1, 1954 and he paid Sh.
1000 for each share.
The amount thus paid by the assessee for the 192 shares was Sh.
1,92,000, equivalent to Rs.28,000.
The said company went into voluntary liquidation as per special resolution dated July 10, 1961.
The liquida tors sold the assets of the company in due course and the liquidators account was finally drawn up on July 31, 1961.
As per this account, the assessee became entitled to receive Sh.
4,68,489 at the rate of Sh.
2440.0493 per share as return of capital.
The above amount was equivalent to Rs.3,12,326.
There was thus an excess of Rs.1,84,326.
This amount was received by the assessee during the accounting year.
The Income tax Officer treated the amount of Rs.1,84,326 as capital gains liable to tax within the meaning of section 45 of the Act of 1961.
It was pointed out by him that the Uganda company was not a company within the meaning of section 2(17) of the Act of 1961 and the shareholders thereof could not be said to be entitled to the benefit provided under section 46(2) of the Act of 1961.
Accord ingly, the entire amount was liable to be taxed as above.
On appeal before the Appellate Assistant Commissioner refer ence was made on behalf of the assessee to the definition of the word "transfer" in section 2(47) of the Act of 1961.
according to which transfer in relation to a capital asset includes the sale, exchange or relinquishment of the asset or the extinguishment of any rights therein or the compulsory acquisition thereof under any law.
There was no dispute that the present was not a case of sale, exchange or compulsory acquisition of capital asset within the meaning of section 2(47) of the Act of 1961.
The only question was whether there was "relinquishment of the asset or the extinguishment of any rights therein".
The Appellate Assistant Commissioner held that for the relinquishment of an asset, the asset must 222 continue to be in existence.
Applying that criterion, the Appellate Assistant Commissioner held that there was no relinquishment of the asset.
There was, however, in the opinion of the Appellate Assistant Commissioner, extinguish ment of the rights in the capital assets as represented by the shares and therefore the amount was liable to be taxed to capital gains tax.
The appeal of the assessee was ac cordingly dismissed.
On second appeal the assessee, apart from contesting the taxability of the amount of Rs.1,84,326 as capital gains, raised two other contentions.
One of those contentions was that in any event the capital gains should have been computed by deducting the fair market value of the asset as on January 1, 1954 from the amount received by the assessee.
The other contention was that having regard to the provisions of section 114 of the Act of 1961 the levy of capital gains tax should have been much less than the amount actually calculated by the Income tax Officer.
We are in the present case not concerned with the second con tention.
The first of these two contentions was, however, accepted and it was held that taking into account the value of the shares as on January 1, 1954 the capital gain, if chargeable, would work out to be Rs.1,23,590.
The Tribunal then went into the question as to whether there was transfer of capital assets and came to the conclusion that there was no such transfer within the meaning of section 2(47) of the Act of 1961.
The contention of the revenue that there had been extinguishment of the rights of the assessee was re pelled.
In the result the appeal of the assessee was ac cepted.
On the application made by the appellant, the question reproduced above was then referred to the High Court.
The High Court in answering the question referred to it in the negative, held that the transfer contemplated by section 45 should be one as a result of which consideration is received by the assessee or accrues to him.
When a shareholder receives moneys representing his share on dis tribution of the net assets of the company in liquidation, he, in the opinion of the High Court, receives such moneys in satisfaction of the right which belongs to him by virtue of his holding the share and not by way of consideration for the extinguishment of his right in the share.
The High Court accordingly concluded that when a shareholder receives his share on final distribution of the assets of the company in liquidation, there is no transfer of capital assets by him which would attract the charge of capital gains tax.
The judgment of the High Court is reported in Before proceeding further, we may mention that tax on capital gains was charged for the first time by the Income tax and Excess Profits Tax (Amendment)Act, 1947 (Act 22 of 1947) which inserted section 12 B in the Indian Income tax Act, 1922.
It taxed capital gains arising after March 31, 1946.
The tax on capital gains was virtually abolished by the Indian Finance Act, 1949 which confined the operation of section 12 B to capital gains arising before April 1, 1948.
Capital gains tax was.
however.
revived with effect from April 1. 1957 by the Finance (No. which insert ed new section 12 B instead of the old section 12 B in the Act of 1922.
223 In the present appeal we are, however, concerned with the Act of 1961.
It may be appropriate at this stage to refer to the relevant provisions of that Act at the material time.
Section 2(14) of the Act defined capital assets to mean property of any kind held by an assessee, whether or not connected with his business or profession, but does not include certain categories of property which need not be mentioned as we are not concerned with them.
It is the common case of the parties that the shares held by the assessee in the Uganda company constituted capital asset.
"Company" has been defined in Section 2(17) of the Act to mean (i) any Indian company, or (ii) any association, whether incorporated or not and whether Indian or non Indian, which is or was assesable or was assessed under the Indian Income tax Act, 1922 (XI of 1922), as a company for the assessment year commencing_from the 1st day of April, 1947, o.r which is declared by general of special order of the Board to be a company for the purposes of the Act.
The learned counsel for the parties are agreed that the Uganda company was not a company within the meaning of the word "company" as given in the above provision.
Transfer in relation to a capital asset has been defined in clause (47) of section 2 of the Act, and the definition reads as under: "(47) 'transfer ' in relation to a capi tal asset, includes the sale, exchange or relinquishment of the asset or the extin guishment of any rights therein or the compulsory acquisition thereof under any law;" Section 45 deals with the levy of tax on capital gains, and reads as under: "45 Capital gains.
Any profits o.r gains 'arising from the transfer of a capital asset effected in the previous year shall, save as otherwise provided in section 53 and 54, be chargeable to income tax under the head 'Capital gains ' and shall be deemed to be the income of the previous year in which the transfer took place.
" Section 45 deals with the levy of tax on capital gains, and reads as by companies in liquidation reads as under: "46.
Capital gains on distribution of assets by companies in liquidation. (1) Notwithstanding anything contained in section 45, where the assets of a company are dis tributed to its shareholders on its liquida tion, such distribution shall not be regarded as a transfer by the company for the purposes of section 45.
(2) Where a shareholder on the liquidi sation of a company receives any money or other assets from the company, he shall be chargeable to income tax under the head 'Capital gains ', in respect of the money so received or the market 224 value of the other assets on the date of distribution, as reduced by the amount assessed as dividend within the meaning of sub clause (c) of clause (22) of section 2 and the sum so arrived at shall be deemed to be the full value of tire consideration for the purposes of section 48.
" Section 47 specifies some of the transactions which shall not be regarded as transfers.
Section 48 prescribes the mode of computation and deductions in the matter of tax on capital gains.
There can be no dispute that the amount received by the assessee in respect of the 192 shares of the Uganda company held by him in excess of the cost of acquisition of those shares constituted profits or gains.
The question with which we are concerned is whether those profits or gains arose from a transfer of the capital assets.
The argument of Mr. Desai, learned counsel for the appellant, is that when the assessee received the sum of Sh.
4,68,489 in lieu of the 192 shares held by him in the Uganda company, he received that amount as a result of transfer.
The word "transfer" in relation to a capital asset.
according to the learned counsel, includes extinguishment of any rights therein.
The words "extinguishment of any rights therein", it is submitted, would cover the case of the assessee when he received the amount mentioned above on account of the shares held by him in the Uganda company.
The above conten tion has been controverted by Mr. Sen who was urged that there was no transfer contemplated by law as to attract the levy of tax on capital gains.
After giving the matter our earnest consideration, we are of the opinion that the con tention of Mr. Sen is well founded.
The question as to whether the distribution of assets of a company has gone into voluntary liquidation to its share holder would amount to sale, exchange, relinquishment or transfer within the meaning of section 12 B of the Act of 1922 as amended in 1956 was considered by this Court in the case of Commissioner of Income tax, Madras vs Madurai Mills Co. Ltd.(1) While answering that question in the negative, this Court held that the act of the liquidators in distrib uting the assets of the company which had gone into volun tary liquidation did not result in the creation of new rights.
It merely entailed recognition of the legal rights which were in existence prior to the distribution.
This Court further observed "When a shareholder receives money representing his share on distribution of the net assets of the company in liquidation.
he receives that money in satisfaction of the right which belonged to him by virtue of his holding the shares and not by operation of any transaction which amounts to sale, exchange, relinquishment or transfer.
" The above observations, though made in the context of sec tion 12 B of the Act of 1922 which related to capital gains in respect of profits or gains arising from sale, exchange.
relinquishment or transfer of capital assets, in our opin ion, would also cover the case of extinguishment of any rights in capital assets.
(1) 225 The matter can also be looked at from another angle.
In the case of Indian companies and the other companies falling within the definition of company, as given in section 2(17) of the Act of 1961, the legislature, has made.
express provision in sub section (2) of section 46 of the Act that where a shareholder on the liquidation of a company receives any money or other assets from the company, he shall be chargeable.
to income tax under the head "Capital gains" in respect of the money so received or the market value of the other assets on the date of distribution as reduced by certain amounts which need not be specified.
But for this provision, it would not have been possible, in our opinion, to charge tax under the head "Capital gains" on the money or other assets of a company received by its shareholder on its liquidation.
The provisions of sub section (2) of section 46, as already mentioned, apply only to the distribution of assets by such companies in liquidation as are covered by the definition of the word "company" in section 2(17) of the Act.
The legislature having made no similar provision in respect of companies other than those which fall within the definition contained in section 2(17), we find it difficult to sustain the levy of tax on capital gains when such other companies distribute assets on liquidation to share holders.
We are not impressed by the argument of Mr. Desai that section 46(2) does not create liability of a share holder to pay tax on capital gains which liability, according to the learned counsel, arises because of section 45, but was enacted with a view to prescribe the mode of calculating capital gains in the event of distribution of the assets of a company in liquidation to its share holders.
The afore said section, in our view, was enacted.
both with a view to make shareholders liable for payment of tax on capital gains as well as to prescribe the mode of calculating the capital gains to the shareholders on the distribution assets by a company in liquidation.
But for that sub section, as already mentioned, it would have been difficult to.
levy tax on capital gains to the shareholders on distribution of assets by a company in liquidation.
Mr. Desai took us through the legislative history of the provisions relating to the levy of tax on capital gains.
A similar attempt was made by the learned counsel for the revenue in the case.
of Madurai Mills (supra) and this Court observed that consideration stemming from legislative histo ry cannot be allowed to override the plain words of a stat ute.
As a result of the above, we dismiss the appeal with costs.
P.H.P. Appeal dismissed.

Output:
The respondent assessee acquired before 1 1 1954 certain shares in a private limited company incorporated in Uganda for Sh.
192002 Rs.1,28,000/ .
The said company went into voluntary liquidation in the year 1961.
The liquidators, sold the assets of the company and the assessee received an amount equivalent to Rs.3,12,326/ .
The Income Tax Officer treated the difference between the amount received on liqui dation and the amount paid by the assessee for the acquisi tion of shares as capital gains liable to tax within section 45 of the Income Tax Act, 1961.
The Income Tax Officer held that since the Uganda company was not a company within the meaning of section 2(17) of the Act, the assessee was not enti tled to the benefit of section 46(2) and, therefore, the entire amount was liable to.
be taxed.
On an.
appeal, the AAC held that the transaction amounted to a transfer within the meaning of section 2(47) because there was extinguishment of the rights in the capital assets as represented by the shares.
The Tribunal held that it was not transfer within the mean ing of section 2(47).
The High Court decided the reference in favour of the assessee on the ground that when a shareholder received monies representing his share on distribution of the net assets of the company in liquidation, he receives such monies in satisfaction of the right which belongs to him by virtue of his holding the share and not by way of consideration for the extinguishment of his right in the share.
Dismissing the appeal by certificate, HELD: (1) The Uganda company is not a company within the meaning of section 2(17).
There was no transfer as contemplated by the Act to attract the.
levy of capital gain tax.
This Court in the case of Madurai Mills has already held that the act of liquidation in distributing the assets of the company which.
had gone into voluntary liquidation did not result in the creation of new rights.
It merely entailed recognition of the legal rights which were in existence prior to the distribution.
[223 C, 224 E F] Commissioner of Income tax, Madras vs Madurai Mills Co. Ltd., , followed.
(2) The legislature made express provisions in section 46(2) for levying capital gains tax in respect of distribution of assets of a company.
But for the said provision distribution of assets on the liquidation of a company would not attract the capital gains tax under section 45.
Since the Uganda company is not a company within the meaning of the Act the provi sions of section 46(2) do not apply to it.
The said distribu tion, therefore, does not attract capital gains tax.
Section 46(2) creates the liabality of a shareholder to pay the tax on capital gains and also prescribes the mode of calculat ing the capital gains.
[225 A F]


Input:
ivil Appeal No. 1731 of 1986.
From the Judgment and Order dated 26.4.
1985 of the Madhya Pradesh High Court in Misc.
Petition No. 1729 of 1984.
Avadh Behari and S.K. Gambhir for the Appellant.
330 Rameshwar Nath, V.S. Dabir, Rajinder Narain for the Respondents.
The Judgment of the Court was delivered by KULDIP SINGH, J.
S.P. Dubey, employed with the Madhya Pradesh State Road Transport Corporation, was retired from service on his attaining the age of 58 years.
He claims that the age of superannuation was 60 years and as such his retirement at 58 was illegal.
We may state the necessary facts.
Dubey joined service as a junior clerk with the Central Provinces Transport Service Limited (hereinafter called the company) in the year 1947.
The Board of Directors of the company by a resolution dated July 30, 1954 fixed the age of superannuation of all its employees except the drivers as 60 years.
The company was purchased and taken Over by the State of Madhya Pradesh by a notification dated August 31, 1955.
The relevant part of the said notification is as under: "The undertaking will as from the 31st August, 1955 be entitled 'The Central Provinces Transport Services (under Government Ownership)".
So far as the public is concerned there will be no change or interruption in the course of business and the continuity of operation will not be dis turbed and the existing staff will not be adversely affected with regard to terms and conditions of their services.
The statutory instrument to be made in due course will provide, among other things that all the rights and liabilities of the Central Provinces Transport Services Ltd. will become the rights and liabilities of the Central Provinces Trans port Services (Under Government ownership) and from a legal point of view the staff, customers and contractors can look to the Central Provinces Transport Services (Under Govern ment ownership) to discharge all the obligations and exer cise all the rights that at present rest with the Central Provinces Transport Service Ltd., Rules for the conduct of business of the above constituted Board of Management are being published separately.
" It is thus obvious that the Government continued to maintain the Central Provinces Transport Services as a separate entity.
The conditions of service, of the staff of the taken over company, were specifically protected.
331 The State of Madhya Pradesh was recoganised under the .
The Central Government, by a notification dated February 28, 1961, extended the provi sions of Road Transport Corporation Act, 1958 (hereinafter called 'the Act ') to the State of Madhya Pradesh with effect from April 1, 1961.
Thereafter the Madhya Pradesh Government acting under Section 3 of the Act established the Madhya Pradesh State Road Transport Corporation (hereinafter called Corporation) with effect from May 21, 1962.
The Madhya Pradesh Government issued two memorandums on May 4, 1962.
By one memorandum the services of the concerned employees including Dubey were transferred to the Corporation and by the second it was clarified that the said transfer was subject to the conditions that their service would be treat ed as uninterrupted and their pay scales and conditions of service would not be affected.
On the same day and Board of Directors of the Corporation passed a resolution to the following effect: "Resolved that the services of the employees employed under M.B.R. and C.P.T.S. on 31.5.1962 are transferred to the Corporation temporarily until further orders from 1.6.1962 on the following conditions: 1.
The pay scale and conditions of service are not affected by the transfer.
The transfer will not be considered as interruption of services.
In case of employees coming under the category of workman as defined under the , the Corporation in the event of retrenchment will pay compensation on the basis that the services had been contin ued and had not affected by transfer.
" The State Government issued directions dated October 29, 1963 to the Corporation under Section 34 of the Act.
Rele vant part of the directions is as under: "The members of the staff of the Madhya Bharat Roadways and Central Provinces Transport Services, who have opted to serve under the Corporation in pursuance of the notices issued to them by the Commerce and Industry Department or any authority of the Madhya Bharat Road 332 ways and Central Provinces Transport Service shall be em ployed by the Corporation subject to such regulations as may be made by it under Section 45(2)(c) of the 'Road Transport Corporation Act, 1950 '(Central Act LXIV of 1950), and subject to 'such assurance as may have been given to them by the State Government.
" The Corporation framed regulations called The Madhya Pradesh State Road Transport Corporation Employees Service Regulations, 1964.
" Regulation 59 which provided the age of superannuation was as under: "Employees of/he State Transport are liable to compulsory retirement on the date of their completion of fifty eight years of age unless specifically permitted by the Corpora tion to continue in service for a specified period thereaf ter, but he must not be retained after the age of 60 years, without the sanction of State Government.
" The corporation issued a notice dated May 25, 1983 to Dubey informing him that he was due to retire from service on June 30, 1984 on attaining the age of 58 years.
He chal lenged the said notice by way of a writ petition under Article 226/227 of the Constitution of India before the Madhya Pradesh High Court at Jabalpur, The High Court by its judgment dated April 26, 1985 dismissed the writ petition.
The present appeal by way of special leave petition is against the judgment of the High Court.
The High Court, following its earlier Division Bench judgment, came to the conclusion that on August 31, 1955 when the appellant became State Government employee his age of superannuation came to be governed by the statutory rules under Article 309 of the Constitution of India operating in respect of the Government employees of the State of Madhya Pradesh and the age of retirement of the State servants under the said rules being 58 years the appellant was right ly retired.
The appellant was in service of the company from 1947 to August 30, 1955.
Admittedly, the age of superannuation of the company employees was 60 years.
The Government of Madhya Pradesh took over the company with effect from August 31, 1955 by a notification of the same date.
The notification specifically stated that the existing staff of the company would not be adversely affected with regard to 333 their conditions of service.
It is no doubt correct that on August 31, 1955 rules were operating in respect of the State Government employees according to which the age of superan nuation was 58 years but the persons who were service with the company were taken into Government serving with a spe cific assurance that their conditions of service were. not to be adversely affected.
When the.
State Government takes over a private company and gives an assurance of the types it is but fair that the State Government should honour the same.
Thus, the State Service rules which fixed the age of superannuation at 58 years could not be made applicable to the appellant and other employees of the taken over company.
We, therefore, do not agree with the reasoning of the High Court.
It was then urged that on the transfer of appellant 's service to the Corporation he was governed by the Regula tions framed by the Corporation under the Act and Regulation 59 provided 58 years as the age of superannuation.
We do not agree with the contention.
The State Government issued directions under Section 34 of the Act which we have repro duced above.
The said directions are binding on the corpora tion.
This Court in The General Manager, Mysore State Road Transport Corporation vs Devraj ors and another, interpreting Section 34 of the Act held as under: "Directions given by the State Government are binding on the corporation and it cannot depart from any general instruc tions issued under sub section (1) of Section 34 except with the previous permission of the State Government.
Such in structions have the force of law .
Therefore breach of the directions given by State Government in the matter of disciplinary action against the respondents was a breach of the statutory duty and made the action of the corporation amenable to the jurisdiction of the High Court under Article 226 of the Constitution".
The State Government and also the Corporation had given assurance to the appellant and other employees who were transferred to the Corporation that their conditions of service would not be adversely affected.
The said assurance was incorporated in the directions issued under the Act.
The Corporation cannot frame regulations contrary to the direc tions issued by the State Government under Section 34 of the Act.
The age of superannution which the appellant was enjoy ing under the State Government could not be altered to his disadvantage by the 334 Corporation.
We are, therefore, of the view that Regulation 59 flamed by the Corporation was not applicable to the appellant.
He was entitled to continue in service upto the age of 60 years.
We, therefore, allow the appeal with costs and set aside the judgment of the High Court.
The appellant has already attained the age of 60 years.
He is only entitled to two years emoluments.
The respondents are directed to pay the same to the appellant within three months from today.
We quantify the costs as Rs.5,000.
P.S.S. Appeal allowed.

Output:
The age of superannuation for the employees of the private transport company in which the appellant was ini tially employed was 60 years.
When the said company was taken over by the State on August 31, 1955, the notification specifically provided that the existing staff would not be adversely affected with regard to terms and conditions of service.
Again, when the services 01 the staff of the taken over company were transferred to the respondent Corpo ration established under section 3 of the Road Transport Corpora tion Act, 1950, the memorandum dated May 4, 1962 recited the same assurance.
A resolution passed by the Board of Direc tors of the Corporation on the same day also reiterated the said assurance.
Subsequently, when the State Government issued directions on October 29, 1963 to the Corporation under section 34 of the Act the said assurance was embodied therein too.
However, Regulation 59 of the M.P. State Road Transport Corporation Employees Service Regulations, 1964 framed by the Corporation under section 45(2)(c) of the Act provided that the employees of the Corporation were liable to compulsory retirement on the date of their completion of 58 years of age unless specifically permitted to continue.
When the appellant was sought to be retired from service in terms of Regulation 59 of the said Regulations on attain ing the age of 58 years with effect from June 30, 1984 by a notice dated May 25, 1983, he challenged it by a petition under Article 226/227 of the Constitution.
It was dismissed by the High Court on the view that on August 31, 1955 when the appellant became State Government employee his age of superannuation came to be governed by the statutory rules under Article 309 of the Constitution and the age of retire ment of the State servants under the said rules being 58 years the appellant was rightly retired.
329 Allowing the appeal, the Court, HELD: 1.
The appellant was entitled to continue in service upto the age of 60 years.
2.1 When the State Government takes over a private company and gives an assurance that conditions of service of the existing staff would not he adversely affected, it is but fair that the State Government should honour the same.
2.2 In the instant case, the appellant was in service of the company from 1947 to August 30, 1955 in which the age of superannuation of the employees was 60 years.
The company was taken over by the State Government with effect from August 31, 1955 by a notification of the same date which specifically stated that the existing staff of the company would not he adversely affected with regard to their condi tions of service.
The State Service Rules which fixed the age of superannuation at 58 years could not thus he made applicable to the appellant and other employees of the taken over company.
Furthermore, the said assurance was also incorporated in the directions issued by the State Government to the Corporation under section 34 of the Act.
The Corporation could not frame regulations contrary to the said directions and the age of superannuation which the appellant was enjoying under the State Government could not he altered to his disadvantage by the Corporation.
Regulation 59 framed by the Corporation was, therefore, not applicable to the appellant.
The General Manager, Mysore State Road Transport Corpo ration vs Devraj Ors and Anr., , referred to.
Since the appellant had already attained the age of 60 years, he was only entitled to two years emoluments.
The respondents are directed to pay the same to him within three months.
[334B]


Input:
Appeal No. 1968 of 1972.
Appeal by Special Leave from the Judgment and Order dated the 4th August 1971 of the Madhya Pradesh High Court in Misc.
Petition No. 41 of 1970 O. P. Malhotra, O. C. Mathur, and R. N. Mishra, for the Appellant.
M. K. Ramamurthi and J. Ramamurthi for Respondents Nos 14.
25. 31.
46. 47, 59, 61, 68, 70, 72, 76, 79, 80, 83, 84.
95, 96, 102, 126 and 129.
The Judgment of the Court was delivered by SARKARIA, J.
This appeal by special leave is directed against the judgment, dated August 4, 1971, of the Madhya Pradesh High Court 875 whereby the apPellant 's Writ Petition under Articles 226 and 227 of the Constitution was dismissed.
The appellant is the Jhagrakhan Collieries (P) Ltd., a Company incorporated under the Indian Companies Act.
The Company owns three collieries in Jhagrakhan in Surguja District of Madhya Pradesh.
These collieries employ over 4,200 workmen.
At the relevant time there were three Trade Unions functioning at the collieries, namely, (1) Madhya Pradesh Koyla Mazdoor Panchayat (for short, the 'Panchayat ' ); (2) Azad Koyla Shramik Sabha (for short, the 'Sabha '), (3) Madhya Pradesh Colliery Workers ' Federation (for short.
the Federation) At the material time, the Panchayat, according to the allegations of the Company, had about 75 per cent of the workers on its rolls.
This Union conducted a complete strike for 57 days in the months of March and April 1968 at the collieries.
The Central Wage Board for Coal Mining Industry by its award recommended payment of Variable Dearness Allowance (for short, V.D.A.), correlated to the cost of living index prevailing from time to time.
The Company accepted these recommendations.
The workers represented by *,he various Unions, on the basis of the Wage Board 's award demanded V.D.A. at the rate of Rs. 1.47 per day with effect from April 1, 1968 while the Company was paying it at the rate of Rs. 1. 11 per day.
The Company refused to pay more than Rs. 1.11 per day.
Thereupon, in December 1968.
the Federation, which had a membership of 169 workers (Respondents 4 to 173 herein) made an application before the Central Labour Court cum Industrial Tribunal Jabalpur (for short, the Labour Court) under Section 33 C(2) of the Industrial Dispute ,; Act (for short the 'Act ') for determination of the amount of V.D.A. due to the workers The Company submitted its written statement on May 13.
1969, challenging the jurisdiction of the court and raised other legal objections.
On October 4, 1969, the Panchayat served a notice of strike under Section 22(1) of the Act on the Company together with a charter of 29 demands and threatened to strike on or after November 7, 1969 if their demands were not conceded.
Thereupon.
the counciliation Proceedings purporting to be under section 22 read with section 12(1) of the Act were held by Mr. B. D. Sharma, Assistant Labour Commissioner (C) Shahdol on the 21st and 22nd October.
In the course of these conciliation proceedings on October 22, 1969, besides other matters.
the dispute relating to V.D.A. was settled.
On October 22, 1969, the Assistant Labour Commissioner (Mr. Sharma) sent a report together with a copy of the settlement to the Government, as required by Section 12(3) of the Act.
Subsequent to the signing of this conciliation agreement, dated October 22, 1969.
the Company filed a supplementary statement on November 5, 1969, submitting that in view of the said settlement, the application under section 33C(2) of the Act filed by the Federation, had become infructuous.
The Labour 876 Court by its order, dated December 20, 1969 framed this additional issue : "Whether the claim stands settled by 'reason of settlement dated 22 10 1969, if any".
On behalf of the workers several objections were raised to the enforceability of.
this settlement, Their ultimate stand was that the settlement was not in accordance with the provisions of the Act, inasmuch as it had not been brought about in proceedings before a duly appointed Conciliation Officer.
The Labour Court tried this issue as a preliminary issue.
It held that Shri Sharma was not a duly appointed Conciliation Officer on the date on which the settlement was arrived at, and consequently, it did not put an end to the dispute pending before the Labour Court.
To impugn this order of the Labour Court, the Company through its agent and Mining Engineer filed a Writ Petition under Article 226 and 227 of the Constitution, which as stated before, was dismissed by the High Court.
Hence this appeal.
Mr. Malhotra, learned Counsel for the appellant raised three points in the course of his arguments before us : (1) In holding that the settlement, dated October 22, 1969 was not a settlement in the course of conciliation proceedings, the courts below have misconstrued Section 4 of the Act , inasmuch as, they have relied only upon sub section (1) and have not taken into account its sub section (2) and the relevant notification thereunder.
(2) (a) Assuming that the settlement in question was not a settlement in the course of conciliation proceedings and binding under section 18(3) on the Act, it was still a settlement binding on the workman, including respondents 4 to 173 herein, when 99 per cent of the total workmen had accepted the terms of the settlement, including V.D.A. (b) The Labour Court 's order refusing permission to the appellant Company to lead evidence to prove the implementation and acceptance of the, aforesaid settlement by 99 per cent of the workers, was.
violative of the principles of natural justice.
(3) There is nothing in the Act which prohibits the employee and the workmen from entering into a settlement during the pendency of proceedings under section 33 C(2) of the Act.
On the other band, settlements inter se between the parties have always been preferred by this Court to the adjudicatory process.
Subsequently, however, Mr. Malhotra withdrew his contention with regard to point No. (1) and requested the Court not to give any finding thereon.
We, therefore, refrain from going into the same.
877 For points (2) and (3), Mr. Malhotra placed reliance on two decisions of this Court, namely : Amalgamated Coffee Estates Ltd. and ors.
vs Their workmen and others(1) and The Sirsilk Ltd. and ors.
vs Government of Andhra Pradesh and anr.(2) Before dealing with the points canvassed, it will be appropriate to examine the relevant provisions of the Act.
Section 2(p) of the Act defines settlement to mean " a settlement arrived at in the course of conciliation proceedings and includes a written agreement between the employer and workmen arrived at otherwise than in the course of conciliation proceeding 'where such agreement has been signed by the parties thereto in such manner as may be prescribed and a copy thereof has been sent to (an officer authorised in this behalf by) the appropriate Government and the conciliation officer." As analysis of.
the above definition would show that it contemplates only two kinds of settlement (i) A settlement arrived at in the course of conciliation,proceedings under the Act and (ii) a written agreement between the employer and the workmen arrived at otherwise than in the course of conciliation proceedings.
But a written agreement of the latter kind in order to fall within the definition must satisfy two more conditions, namely : (a) it must have been signed by the parties thereto in the prescribed manner, and (b) a copy thereof must have been sent to the authorities indicated in section 2(p).
The effect of a settlement of the first kind is indicated in subsection (3) and that of the second in sub section
(1) of section 18 of the Act.
The material part of section 18 reads "18)1) A settlement arrived at by agreement between the employer and workmen otherwise than in the course of conciliation proceedings shall be binding on the parties to the agreement.
(2) Subject to the provisions of sub section (3), an arbitration award which has become enforceable shall be binding on the parties to the agreement who referred the dispute to arbitration.
" (3) A settlement arrived at in the course of conciliation proceedings under this Act (or an arbitration award in a case where a notification has been issued under ,sub section (3A) of Section (10A) or (an award of a Labour Court, Tribunal or National Tribunal) which has become enforceable shall be binding on (a) all parties to the industrial dispute; (b) all other parties summoned to appear in the proceedings as parties to the dispute, unless the Board, (arbitrator) (Labour Court, Tribunal or National (1) (2) [1964]S.C.R. 448. 878 Tribunal), as the case may be, records the opinion that they were summoned without proper cause; (c) where a party referred to in clause (a) or clause (b) is an employer, his heirs, successors or assigns in respect of the establishment to which the dispute relates; (d) where a party referred to in clause (a) or clause (b) is composed of workmen, all persons who were employed in the establishment or part of the establishment, as the case may be, to which the dispute relates on the date of the dispute and all persons who subsequently become employed in that establishment or part.
" It is clear from a perusal of Section 18, that a settlement arrived at in the course of conciliation proceedings is binding not only on the actual parties to the industrial dispute but also on the heirs, successors or assigns of the employer on the one hand, and all the workmen in the establishment, present or future, on the other.
In extending the operation of such a settlement beyond the parties thereto, sub section (3) of the Section departs from the ordinary law of contract and gives effect to the principle of collective bargaining.
Thus, had Mr. B. D. Sharma been a duly appointed Conciliation Officer, the settlement arrived at in the conciliation proceedings, duly conducted by him under Section 12, would have been binding on the entire body of the workers including Respondents 4 to 173 represented by the Federation.
and others who 'are members of the Sabha.
Since the finding of the High Court to the effect that the settlement between the Panchayat and the management cannot be deemed to be settlement arrived at in the course of conciliation proceedings under the Act, now stands unassailed.
the aforesaid sub section (3) cannot be invoked to make it binding on Respondents 4 to 173.
The question remains : Can it be enforced against these Respondents by virtue of sub section (1) of the Section ? This further narrows down into the issue : Were these respondents parties and signatories to the agreement between the management and the Panchayat ? The answer to this question is undoubtedly in the negative.
Even Mr. Malhotra has conceded that at the time when the settlement was arrived at on October 22, 1969, these respondents and the members of the Sabha. were not Parties to it.
But his argument is that subsequently by drawing V.D.A. in accordance with the settlement, 99% of the workers have accepted the settlement which, in consequence, would be as effective against them as if they were parties to it.
The argument is attractive but does not stand a close examination.
We have already noticed that according to the scheme of section 18, read with section 2(d), an agreement, made otherwise than in the course of conciliation proceedings, to be a settlement within the meaning of 879 the Act must be a written agreement signed in the manner prescribed by the Rules framed under the Act.
As rightly pointed out by Mr. Ramamurthy, learned Counsel for the Respondents an implied agreement by acquiescence, or conduct such as acceptance of a benefit under an agreement in which the worker acquiescing or accepting the benefit was not a party being outside the purview of the Act, is not binding on such a worker either under sub section (1) or under sub section (3) of section 18.
It follows, therefore, that even if 99% of the workers have impliedly accepted the agreement arrived at on October 22, 1969, by drawing V.D.A., under it, it will not whatever its effect under the general law put an end to the dispute before the Labour Court and make it functus officio under the Act.
The refusal of the Labour Court to allow the appellant to lead evidence at this stage, has not caused any prejudice to the appellant.
The issue decided as a preliminary issue involved a question of law which could be decided on the, basis of material on record.
For its it was not necessary to prove that 99% of the workers had accepted the agreement dated October 22, 1969.
Even on an assumption of that fact in favour of the Company, the claim before the Labour Court could not be deemed to have been settled qua respondents 4 to 173.
Furthermore.
the decision of the Labour Court neither debars the appellant from bringing on record evidence relevant to the issues; which still remain to be decided, nor does it rule out the agreement dated October 22, 1969, for all purposes.
Indeed, the Labour Court has in its order, towards the end, expressly said that the settlement, dated October 22,_ 1969, can be binding under section 18 (1) of the Act between the contracting parties.
In view of the above, we would negative contention (2) canvassed by Mr. Malhotra.
This takes us to the third contention.
Assuming that the Act does not inhibit the employers and the workmen from arriving at a settlement during the pendency of proceedings under section 33 C(2) of the Act, such a settlement, not being one arrived at in the course of conciliation proceedings would be enforceable only against the parties thereto.
In the present case, Respondents 4 to 173 and others who were not parties to the settlement dated October 22, 1969, would not be bound by it.
In the case of Amalgamated Coffee Estates Ltd. vs Their workmen (supra) cited by Mr. Malhotra, pending the appeals by the management before this Court, the subject matter of the award were settled between most of the managements and most of their employees represented by 'certain Unions.
An application was made requesting the Court to dispose of the appeals in terms of such settlement.
It was opposed on behalf of some of the employees.
This Court called for a finding from the Industrial Tribunal on this issue 880 "In view of the fact that admittedly a large number of workmen employed by the appellants have accepted payments consistently with the terms of the agreements set up by the employers.
in their present petition, is it shown by the respondents that the said agreement is not valid and binding on them ?" The Tribunal submitted the finding that in every estate payments were made in terms of the settlement and such payments were voluntary and knowingly accepted by the workmen.
It also held that the terms of the settlement were fair.
This Court accepted the finding of the Tribunal holding that "the settlement appears to us also to be a fair one".
It therefore, decided the appeals in terms of the settlement.
It will be seen that the decision in Amalgamated Coffee Estates case (supra) stands on its own facts.
There the appeals arose, out of an award of the Special Industrial Tribunal for plantations in a dispute between 228 coffee, tea and rubber estates in South India and their employees referred to it under section 10(1) whereas the instant appeal arises out of proceedings under section 33 C(2) for the recovery of money on the basis of the Wage Board 's award and the dispute, if any, is about the computation of V.D.A. in implementation of that award.
The scope of section 33 C(2) is not the same as that of section 10(1) of the Act.
In East India Coal Company Ltd. Banares Colliery, Dhanbad vs Raweshwar and Ors.(1) this Court held that although the scope of section 33 C(2) is wider than that of a 33 C(1), cases which would appropriately be adjudicated under section 10(1) are outside the purview of section 33 C(2).
The provisions of section 33 C are, broadly speaking, in the nature of executing provisions.
An appeal being a rehearing of the case, in Amalgamated Coffee Estates ' case, the jurisdiction of the Court to decide the dispute in a just manner was co extensive with that of the Tribunal to which it was referred under section 10(1).
This Court found in agreement with the report of the Tribunal that the settlement arrived at between the most of the Unions representing most of the workers and the manage ments was fair and conducive to industrial peace, and therefore, it was just and appropriate to decide the dispute and dispose of the appeals in terms of the settlement.
In the case before us, the jurisdiction of the Labour Court is not only circumscribed by s 33 C(2) but the matter also is yet at the initial stage.
The controversy between the parties still remains to be determined on merits.
therefore, do not think it necessary to say anything more with regard to contention No. 3 than what we have broadly indicated above.
For the foregoing reasons, the appeal fails and is dismissed with costs.
Appeal Dismissed.
V.M.K. 1.

Output:
The three collieries owned by the appellant company employ over 4,200 workmen.
At the relevant time, there were three Trade Unions functioning at the collieries namely, Madhya Pradesh Koyla Mazdoor Panchayat, Azad Koyla Shramik Sabha and Madhya Pradesh Colliery Workers ' Federation.
At the material time, the Panchayat, according to the allegations of the Company, had about 75 per cent of the workers on its rolls.
This Union conducted a complete strike for 57 days in the months of March and April 1968 at the collieries.
The Central Wage Board for Mining Industry by its award recommended payment of Variable Dearness Allowance (V.D.A.), correlated to the cost of living index prevailing from time to time.
The Company accepted those recommendations.
The workers represented by the various Unions, on the basis of the Wage Board 's award, demanded V.D.A. at the rate of Rs. 1.47 per day with effect from April 1, 1968 while the Company was paying it at the rate of Re. 1. 1 1 per day.
The Company refused to pay more than Re. 1. 11 per day.
Thereupon, in December 1968.
the Federation.
which had a membership of 169 workers (Respondents 4 to 173) made an application before the Central Labour Court cum Industrial Tribunal Jabalpur (the Labour Court) under section 33 C(2) of the Industrial Disputes Act for determination of the amount of V.D.A. due to the workers.
The Company submitted its Written Statement on May 13, 1969, challenging the jurisdiction of the court and raised other legal objections.
In consequence of the notice of strike under Sec.
22(1) of the Act by the Panchayat, the conciliation proceedings to be under section 22 read with sec.
12(1) of the Act were held by Mr. B. D. Sharma.
Assistant Labour Commissioner.
In the course of these conciliation proceedings besides other matters, the dispute relating to V.D.A. was settled.
Subsequent to the signing of the conciliation agreement, the company filed a supplementary statement before the Labour Court that, in view of the settlement, the application filed by the Federation had become infructuous.
The stand taken by the workers Was that the settlement was not in accordance.
with the provisions of the Act.
The Labour Court tried this issue as a preliminary issue.
It held that Shri Sharma was not a duly appointed ,conciliation officer on the 'date on which the settlement was arrived at and consequently, it did not put an end to the dispute pending before the Labour Court.
The Writ Petition filed by the Company in the High Court impugning the order of the Labour Court was dismissed.
Hence this appeal by special leave.
It was contended for the appellant (i) Assuming that the settlement in question was not a settlement in the course of conciliation proceedings and binding under section 18(3) of the Act, it was still a settlement binding on the workmen, including respondents 4 to 173 herein, when 99 per cent of the total workmen had accepted the terms of the settlement, including V.D.A; (ii) The Labour Court 's order refusing permission to the appellant Company to lead evidence to prove the implementation and acceptance of the aforesaid settlement by 99 per cent of the workers, was violative of the principles of natural justice, and (iii) There is nothing in the Act which prohibits the employers and the workmen 874 from entering into a settlement during the pendency of proceedings under section 33 C(2) the Act.
On the other hand, settlements inter se between the parties have always been preferred by this Court to the adjudicatory process.
HELD (i) A perusal of sec.
18 of the Act makes it clear that a settlement at rived at in the course of conciliation proceedings is binding not only On the actual parties to the industrial dispute but also on the heirs, successors or assigns ,of the employer on the one hand, and all the workmen in the establishment, present or future.
on the other.
Thus had Mr. B. D. Sharma been a duly appointed Conciliation Officer, the settlement arrived at in the conciliation proceedings, duly conducted by him under sec.
12, would have been binding on the entire body of the workers.
Since the finding of the High Court to the effect, that the settlement between the Panchayat and the management cannot be deemed a, settlement arrived at in the course of conciliation proceedings under the Act, now stands unassailed, sub sec.
(3) of sec.
18 cannot be invoked to make it binding on Respondents 4 to 173 represented by the Federation.
An implied agreement by acquiescence or conduct such as acceptance of a benefit under an agreement to which the worker acquiescing or accepting the benefit was not a party being out side the purview of the Act is not binding on such a worker either under sub sec.
(1) or under sub sec.
(3) of sec.
18 of the Act.
It follows, therefore, that, even if 99% of the workers have impliedly accepted the agreement by drawing V.D.A. under it, it will not whatever its effect under the general law put an end to the dispute before the Labour Court and make it functus officio under the Act, [878C E; 879A B] (ii) The refusal of the Labour Court to allow the appellant to lead evidence at this stage, has not caused any prejudice to the appellant.
The issue decided as a preliminary issue involved a question of law which could be decided on the basis of material on record.
Furthermore, the decision of the Labour Court neither debars the appellant from bringing on record evidence relevant to the issues which still remain to be decided, nor does it rule out the agreement for all purposes.
[879C E] ' (iii) In East India Coal Company Ltd., Benares Colliery, Dhanbad vs Rameshwar and ors.
, this Court held that although the scope of section 33C(2) is wider than that of sec. 33 C(1), cases which would appropriately be adjudicated under sec.
10(1) are outside the purview of sec.
33C(2).
The provisions of section 33 C are broadly speaking in the nature of executing provisions.
The jurisdiction of the Labour Court, in the present case, is not only circumscribed by sec.33 C(2) but the matter also is yet at the initial stage.
The controversy between the parties still remains to be determined on merits.
[880F & G] Amalgamated Coffee Estates Ltd. and Ors.
vs Their workmen and Ors.
discussed and The Sirsilk Ltd. and Ors.
vs Govt.
of Andhra Pradesh and Anr, [1964] S.C.R. 448, referred to.


Input:
: Criminal Appeal No. 99 of 1976.
Appeal by Special Leave from the Judgment and order dated 16 12 75 of the Karnataka High Court in Criminal Petition No. 50 of 1975.
N. B. Datar and R. B. Datar for the Appellant.
M. C. Bhandare, (Mrs.) section Bhandare, M. section Narsimhan Sharma, and A. K. Mathur for Respondents I and 2.
Narayan Nettar for Respondent No. 3.
The Judgment of the Court was delivered by FAZAL ALI, J.
This appeal by special leave is directed against the judgment of the Karnataka High Court by which it set aside the order of the Additional Judicial Magistrate, First Class, Gokak issuing process against respondents 1 & 2 in exercise of his discretion under section 204 of the Code of Criminal Procedure.
The facts of the case lie within a very narrow compass and although the High Court has taken great pains to write a laboured judgment the point involved is short and simple and does not merit a detailed discussion.
The police of Gokak Police Station submitted a charge sheet against Nagappa Giddannavar and seven others under sections 302, 114, 148, 147 and other sections on the allegations that on July 19, 1973 the accused persons had waylaid and murdered one Nagappa son of the appellant in this Court.
The appellant, who had filed the report before the police does not appear to have bean satisfied with the investigation by the police which according to her was tainted and had suppressed some important materials, filed a complaint before the Magistrate at Gokak on October 4, 1973 alleging that respondents 1 & 2 had in fact abetted the offence of murder committed by the other accused but as they were influential 125 persons their names were deliberately left out in the report as also in the dying declaration.
On receiving the complaint on October 4, 1973 the Magistrate decided to hold an inquiry into the complaint himself and in pursuance of his decision he recorded some evidence on October 8, 1973.
Thereafter the case was posted for October 10, 1973 for arguments and further evidence, if any.
On October 10, 1973 the Magistrate observed that six witnesses had been examined and the evidence recorded so far was sufficient for the Court to determine the question as to whether or not process should be issued to respondents 1 & 2.
He then adjourned the case for argument for October 12, 1973.
On that day arguments were heard but before any order could be passed the Magistrate who had recorded the evidence was transferred and therefore the case had to be adjourned.
The new Magistrate took up the matter on November 26, 1973 and after hearing the complainant he adjourned the case to December 3, 1973 and on this day he directed that further inquiry may be made by Superintendent of Police, Belgaum and he accordingly referred the matter for inquiry and report to the Superintendent of Police, Belgaum asking him to submit his report within six weeks.
It seems to us that in view of the change of the Magistrate the successor Magistrate was not able to grasp the implications of the proceedings which had been taken by his predecessor who had in fact first decided to hold an inquiry himself and after recording the evidence had decided to pass an order under section 204 of the Code of Criminal Procedure.
Before however he could pass any order he was succeeded by the present Magistrate.
The appellant filed an application in revision to the High Court on December 11, 1973 against the order of the Magistrate dated December 3, 1973 referring the matter to the Superintendent of Police for inquiry and report.
While the application was pending before the High Court, respondents 1 & 2 filed a petition before the High Court praying for an early hearing of the revision and for vacation of the stay order.
Along with this petition the respondents filed a number of documents including the copies of the petitions sent by the appellant to the Chief Minister and the Speaker.
We might indicate here that there was absolutely no occasion for the respondents to have filed the documents before the High Court in a miscellaneous petition nor did they obtain any permission of the Court for filing those documents.
The High Court, after hearing the revision application filed be the appellant, allowed the same mainly on the ground that as the Magistrate had ultimately decided to hold an inquiry into the truth or falsehood of the complaint himself he had no jurisdiction to stop that inquiry and then make a reference to the police afresh.
The High Court accordingly quashed the order of the Magistrate and directed him to decide the case in accordance with the law after recording further evidence, if any.
It appears that the High Court did not give any directions to the Magistrate for considering the documents which had been filed by the respondents before it but by a subsequent order merely forwarded the documents to the Magistrate.
The papers were sent back to the Magistrate on January 7, 1975 and by his order dated January 27, 1975 the Magistrate was informed that the appellant did not want to adduce any further evidence.
The matter was accordingly posted for argument on February 7, 1975 and after hearing the 126 arguments and considering the evidence recorded by the Magistrate he by his order dated February 11, 1975 directed process to be issued against respondents 1 & 2 under section 204(1) (b) of the Code of Criminal Procedure.
Respondents 1 & 2 then preferred a revision against this order to the High Court under section 482 of the Code of Criminal Procedure praying that the order of the Magistrate may be quashed.
This revision was allowed by the High Court by the impugned order against which special leave was granted by this Court at the instance of the appellant.
In support of the appeal Mr. H. B. Datar submitted that the Magistrate had given cogent reasons for holding that there were sufficient grounds for proceeding against respondents 1 & 2 and the High Court was in error in interfering with the order of the Magistrate by examining the merits of the case after taking into consideration the documents filed by the respondents which could not be looked into by the Magistrate as they did not form part of the complaint or the evidence recorded in support thereof.
In our opinion the contention raised by the learned counsel for the appellant is well founded and must prevail.
Mr. M. C. Bhandare sought to repel the argument of the appellant on the ground that the order of the Magistrate was perverse and as the case was full of patent absurdities and was politically motivated the prosecution of respondents 1 & 2 would amount to unnecessary harassment resulting in abuse of the process of the Court.
In the view we take in the instant case it is not necessary for us to enter into the merits of the case at this stage.
It is well settled by a long catena of decisions of this Court that at the stage of issuing process the Magistrate is mainly concerned with the allegations made in the complaint or the evidence led in support of the same and he is only to be prima facie satisfied whether there are sufficient grounds for proceeding against the accused.
It is not the province of the Magistrate to enter into a detailed discussion of the merits or demerits of the case nor can the High Court go into this matter in its revisional jurisdiction which is a very limited one.
In Chandra Deo Singh vs Prokash Chandra Bose(1) this Court had after fully considering the matter observed as follows: "The courts have also pointed out in these cases that what the Magistrate has to see is whether there is evidence in support of the allegations of the complainant and not whether the evidence is sufficient to warrant a conviction.
The learned Judges in some of these cases have been at pains to observe that an enquiry under section 202 is not to be likened to a trial which can only take place after process is issued, and that there can be only one trial.
No doubt, as stated in sub section(1) of section 202 itself, the object of the enquiry is to ascertain the truth or falsehood of the complaint, but the Magistrate making the enquiry has to do this only with reference to the intrinsic quality of the statements made before him at the enquiry which would naturally mean the complaint itself, the statement on oath made by the complainant (1) (1964)1 section C. R. 639, 648 127 and the statements made before him by persons examined at the instance of the complainant.
" Indicating the scope, ambit of section 202 of the Code of Criminal Procedure this Court in Vadilal Panchal vs Dattatrya Dulaji Ghadigaonker and Another(1) observed as follows: "Section 202 says that the Magistrate may, if he thinks lit, for reasons to be recorded in writing, postpone the issue of process for compelling the attendance of the person complained against and direct an inquiry for the purpose of ascertaining the truth or falsehood of the complaint; in other words, the scope of an inquiry under the section is limited to finding out the truth or falsehood of the complaint in order to determine the question of the issue of process.
The inquiry is for the purpose of ascertaining the truth or falsehood of the complaint; that is, for ascertaining whether there is evidence in support of the complaint so as to justify the issue of process and commencement of proceedings against the person concerned.
The section does not say that a regular trial for adjudging the guilt or otherwise of the person complained against should take place at that stage; for the person complained against can` be legally called upon to answer; the accusation made against him only when a process has issued and he is put on trial."
It would thus be clear from the two decisions of this Court that the scope of the inquiry under section 202 of the.
Code of Criminal Procedure is extremely limited limited only to the ascertainment of the truth of falsehood, of the allegations made in the complaint (1) on the materials placed by the complaint before the Court.
(ii) for the limited purpose of finding out whether a prima facie case for issue of process has been made out; and (iii) for deciding the question purely from the point of view of the complainant without at all adverting to any defence that, the accused may have.
In fact it is well settled that in proceedings under section 202 the accused has got absolutely no locus us standi and is not entitled to be heard on the question whether the process should be issued against him or not.
Mr. Bhandare laid great stress on the words "the truth or falsehood of the complaint" and contended that in determining whether the complaint is false the Court can go into the question of the broad probabilities of the case or intrinsic infirmities appearing in the evidence.
It is true that in coming to a decision as to whether a process should be issued the Magistrate can take into consideration inherent improbabilities appearing on the face of the complaint or in the evidence led by the complainant ill support of the allegations but there appears to be a very thin line of demarcation between a probability of conviction of the accused and establishment of a prima facie case against him.
The Magistrate has been given an undoubted discretion in the matter and the discretion has to be judicially exercised by him.
Once the Magistrate has exercise his discretion it is not for (1) , 9. 128 the High Court, or even this Court, to substitute its own discretion for.
that of the Magistrate or to examine the case on merits with view to find out whether or not the allegations in the complaint, if proved, would ultimately end in conviction of the accused.
These considerations, in our opinion, are totally foreign to the scope and ambit of an inquiry under section 202 of the Code of Criminal Procedure which culminates into an order under section 2042 of the Code.
Thus it may be safely held that in the following cases an order of the Magistrate issuing process against the accused can be quashed or set aside: (1) Where the allegations made in the complaint or the statements of the witnesses recorded in support of the same taken at their face value make out absolutely no case against the accused or the complaint does net disclose the essential ingredients of an offence which is alleged against the accused; (2) where the allegations made in the complaint are patently absurd and inherently improbable so that no prudent person can ever reach a conclusion that there is sufficient ground for proceeding against the accused; (3) where the discretion exercised by the Magistrate in issuing process is capricious and arbitrary having been based either on no evidence or on materials which are wholly irrelevant or inadmissible; and .
(4) where the complaint suffers from fundamental legal defects, such as, want of sanction, or absence of a complaint by legally competent authority and the like.
The cases mentioned by us are purely illustrative and provide sufficient guidelines to indicate contingencies where the High Court can quash proceedings.
Applying these principles to the facts of facts present case it seems to US that the present case is not one in which the High Court should have quashed the proceedings.
To begin with, the order of the Magistrate dated February 11, 1975 issuing process against respondents 1 and `2 is a very well reasoned one which takes into consideration the allegations in the complaint as also the evidence adduced in support of it.
The Magistrate clearly applied his mind and has analysed the evidence into three categories (1) those witnesses who have deposed as eye witnesses regarding the actual occurrence and the part attributed to respondents 1 and 2.
The Magistrate then refers to other witnesses who corroborated the evidence of the complainant, and thirdly the Magistrate relied on the evidence of witnesses who were admittedly signatories to the dying declaration and had clearly stated on oath that the names of respondents 1 and 2 were mentioned in their presence by the deceased but were not recorded by the Police Patel in the dying declaration and in spite of the protest by the witnesses they were made to sign the dying declaration as attesting witnesses under threat and duress.
On a consideration of this evidence the Magistrate was satis 129 fied that a prima facie case against respondents 1 and 2 was made out and he accordingly issued process against them.
It was not a case where the Magistrate had passed an order issuing process In a mechanical manner or just by way of routine.
The High Court appears to have gone into the whole history of the case, examined the merits of the evidence, the contradictions and what it called the improbabilities and after a detailed discussion not only of the materials produced before the Magistrate but also of the document which had been filed by the defence and which should not have been looked into at the stage when the matter was pending under section 202, has held that the order of the Magistrate was illegal and was fit to be quashed.
In the first place the High Court ought not to have considered the document filed by respondents 1 and 2 in the previous revision without obtaining the permission of the Court and` particularly when the High Court itself gave no directions whatsoever to the Magistrate to consider those documents.
In fact the Magistrate considering the question as to whether process should be issued against the accused or not cannot be into the materials placed by the accused and therefore the High Court could not have given any such directions while disposing of the previous, revision.
The impugned order of the High Court proceeds on the basis that it was incumbent on the Magistrate to have considered the documents and their effect on the truth or falsehood of the allegations made by the complainant.
This was an entirely wrong approach As we arc clearly of the opinion that the Magistrate was fully justified in completely excluding the documents from consideration, we refrain from making any observation regarding the, effect of those documents.
In fact the documents filed by the respondents were mere copies and they were, therefore, not admissible.
At any rate, at the stage of section 202, or section 204 of the Code of Criminal Procedure as the accused had no locus standi the Magistrate had absolutely no jurisdiction to go into any materials or evidence which may be produced by the accused who could be present only to watch the proceedings and not to participate in them.
Indeed if the documents or the evidence produced by the accused is allowed to be taken by the Magistrate then an inquiry under section 202 would have to be converted into a full dress trial defeating the very object for which this section has been engrafted he High Court in quashing the order of the Magistrate completely failed.
to consider the limited scope of an inquiry under section 202.
Having gone through the order of the Magistrate we do not find any error or law committed by him.
The Magistrate was exercises ' his discretion and has given cogent reasons for his conclusion.
Whether the reasons were, good or bad, sufficient or insufficient, is not a matter which could have been examined by the High Court ill revision.
We are constrained to observe that the High Court went out of its way write a laboured judgment highlighting certain aspect of the case of the accused as appearing from the documents filed 'of them which they were not entitled to file and which were not entitled in law to be considered.
For these reasons, therefore, we arc satisfied that the order of the High Court suffers from a serious legal infirmity and the High Court 11 833 SCI/76 130 has exceeded its jurisdiction in interfering in revision by quashing the order of the Magistrate.
We, therefore, allow the appeal, set aside the order of the High Court dated December 16, 1975 and restore the order of the Magistrate issuing process against respondents 1 and 2.
At the time of granting the special leave, we has directed the Sessions Judge who was trying the original case resulting from the F.I.R. lodged before the police to stay proceedings to the extent that the judgment was not to be pronounced until this appeal was disposed of.
We understand that the Sessions case is now concluded before the learned Sessions Judge and arguments have also been heard.
1 view of the order of the Magistrate issuing process against respondents 1 and 2 which has been confirmed by us, the respondents will have to face a supplementary trial and it is not conducive in the interests of justice to allow the other trial to be stayed any further.
The Sessions Judge is therefore directed to dispose of the Sessions Case and the stay granted by this Court earlier is Vacated.
Appeal allowed.

Output:
The appellant filed a complaint before the Magistrate alleging that the police did not deliberately charge sheet unrespondents 1 and 2 despite the fact that they abetted in the murder of her son because they were influential persons.
After the inquiry the Magistrate issued a process to respondents 1 under 2 under section 204(1)(b) of the Code of Criminal Procedure, 1973.
The revision petition of respondents I and 2 filed under section 482 Cr.
P.C. was allowed by the High Court.
in appeal to this Court it was contended for.
the appellant that the High Court was in error in examining the order of the Magistrate on merits after taking into consideration the documents filed by the respondents, which did not form part of the complaint or evidence recorded in support thereof before the Magistrate.
Allowing the appeal, ^ HELD: The order of the High Court suffers from a serious legal infirmity and the High Court has exceeded its jurisdiction in interfering in revision by question the order of the Magistrate.
[129 H] (1) In the following cases an order or the Magistrate can be quashed or set aside: (a) Where the allegations made in the complaint or the statements of the witnesses recorded in support of the same taken at their face value make out absolutely no case against the accused or the complaint does not disclose the essential ingredients of an offence which is alleged against the accused; (b) Where the allegations made in the complaint are patently absurd and inherently improbable so that no prudent person can ever reach a conclusion that there is sufficient ground for proceeding against the accused.
(c) Where the discretion exercised by the Magistrate in issuing process is capricious and arbitrary having been based either on no evidence or on materials which are wholly irrelevant or inadmissible; and (d) Where the complaint suffers from fundamental legal defects, such as, want of sanction, or absence of a complaint by legally competent authority and the like.
[128 C E] (2) (a) At the stage of issuing the process the Magistrate is mainly concerned with allegations made in the complaint or the evidence led and he is only.
to be prima facie satisfied whether there are sufficient grounds for proceeding against the accused.
It is not the province of the Magistrate to enter into a detailed discussion on the merits or demerits of the case.
The scope of the inquiry under section 202 Cr.
P.C. is extremely limited limited to the ascertainment of the truth or falsehood of the allegations made in the complaint: (1) on the materials placed by the complainant before the court (ii) for the limited purpose of finding out whether a prima facie case for issue of process had been made out and (iii) for deciding the question purely from the point of view of the complainant without at all adverting to any defence that the accused may have.
In proceedings under section 202 the accused has got absolutely no locus standing and is not entitled to be heard on the question whether the process should be issued against him or not.
E F] 124 Chandra Deo Singh vs Prokash Chandra Bose, ; and Vadilal Panchal vs Dattatraya Dulaji Ghadigaonker and Another, followed.
(b) In coming to a decision as to whether a process should be issued the Magistrate can take into consideration inherent improbabilities appearing on the face of the complaint or in evidence led by the complainant in support of the allegations.
Once the Magistrate has exercised judicially the discretion given to him it is not for the High Court or even this Court to substitute its own discretion for that of the Magistrate or to examine the case on merits with a view to find out whether or not the allegations in the complaint, if proved, would ultimately end in conviction of the accused.
These considerations are totally foreign to the scope and ambit of inquiry under 5. 202 of the Code of Criminal Procedure, which culminates in an order under section 204 of the Code.
[127G H; 128A B] (3) In the instant case the High Court should not have quashed the proceedings.
The order of the Magistrate was a reasoned one which took into consideration the allegations in the complaint as also the evidence adduced in support of it.
It was not a case where the Magistrate had passed an order ill a mechanical manner or just by way of routine.
The High Court could not to into this matter in its revisional jurisdiction which is a very limited one.
[ 128 F G]