Input:
Civil Appeal No. 1 1 37 of 1981 .
From the Award dated 22nd December, 1978 of the 9th Industrial Tribunal, West Bengal in Industrial Case No. X 7/74 (G.O. No. 8231 IR IR IOL 3 (K)/73.
R.K. Garg, P.K. Chakravarti and A K. Ganguli for the Appellants.
G.B. Pai, section Chatterjee, Altaf Ahmed and A K Panda for the Respondents.
The Judgment of the Court was delivered by DESAI, J.
In exercise of the power conferred by Sec. 10 of the , the Government of the State of West Bengal as an appropriate Government referred the following dispute to the Ninth Industrial Tribunal, West Bengal for adjudication.
The reference reads as under: "Whether the termination of services of Shri Manas Kumar Mukherjee is justified ? To what relief, if any is he entitled ?" Hindustan Steel Ltd. ( 'Employer ' for short) dismissed Manas Kumar Mukherjee( 'Workman ' for short) without holding any inquiry 431 and without giving any opportunity to the workman to question or A correct the allegation of misconduct levelled against him and in violation of principles of natural justice.
The employer tried to sustain its action by invoking its powers under Standing Order 32 of the certified Standing Orders of the Hindustan Steel Ltd. S.O. 32 reads as under: B "32.
Special Procedure in certain cases.
Where a workman has been convicted for a criminal offence in a Court of Law or where to General Manager is satisfied, for reasons to be recorded in writing, that it is inexpedient or against the interests of security to continue to employ the workman, the workman may be removed or dismissed from service without following the procedure laid down in Standing Order 31.
" S.O. 31 prescribed detailed procedure for dealing with cases of misconduct.
Briefly stated, the procedure prescribed in S.O. 31 for imposing major penalty is that the employer has to draw up a charge sheet and give an opportunity to the delinquent workman to make his representation within seven days.
If the allegations are controverted, an enquiry has to be held by an officer to be nominated by the management and in such an enquiry reasonable opportunity of explaining and defending the alleged misconduct must be given to the workman.
The delinquent workman may also be given the assistance of a fellow employee.
The procedure also permits suspension of the delinquent workman pending enquiry.
At the end of the enquiry.
if the charges are held proved, and it is provisionally decided to impose major penalty, the delinquent workman has to be afforded a further resalable opportunity to represent why the penalty should not be imposed on him.
According to the employer it can dispense with such an enquiry in exercise of the power conferred by S.O. 32.
The scope and ambit of S.O. 32, will be presently examined.
The Tribunal held that as the employer dispensed with the disciplinary enquiry in exercise of the power conferred by S.O. 32, it cannot be said that dismissal from service was not justified.
The Tribunal observed that even if there were allegations of misconduct, the employer was quite competent to pass an order of removal from service without holding any enquiry in view of the provision con 432 tained in S.O. 32 The Tribunal concluded that the employer accused the workman of committing misconduct and proceeded to pass the order of removal from service without holding any enquiry into the allegations of misconduct, it cannot be said to be a colorable exercise of power and the workman would not be entitled to any relief.
The Tribunal accordingly rejected the reference.
Hence this appeal by special leave.
The only question that must engage our attention is what is the scope and ambit of S.O 32.
It has already been extracted.
Upon its true construction the standing Order does not provide that for reasons to be recorded in writing, an enquiry into misconduct can be dispensed with.
S.O. 32 clearly confers power upon the General Manager that on his being satisfied that it is inexpedient or against the interest of security to continue to employ the workman, then for reasons to be recorded in writing the workman may be removed or dismissed from service without following the procedure laid down in Standing Order 31.
This archaic standing order reminiscent of the days of hire and fire is relied upon by a public sector undertaking to sustain an utterly unsustainable order and to justify an action taken in violation of the principles of natural justice, an action which has the effect of denying livelihood and casting a stigma.
One can appreciate that in a given situation, and enquiry into misconduct may be counter productive.
Constitution itself contemplates such a situation when it enumerates siltations in which a punishment of dismissal, removal or reduction in rank can be imposed without holding a disciplinary enquiry.
Let it be extracted: "311.
Dismissal, removal or reduction in rank of persons employed in civil capacities under the Union or a State ( 1) . . . . . . (2) No such person as aforesaid/shall be dismissed or removed or reduced in rank except after an inquiry in which he has been informed of the charges against him and given a reasonable opportunity of being heard in respect of those charges: . . . . . . . . . 433 Provided further that this clause shall not apply A (a) where a person is dismissed or removed or reduced in rank on the ground ' of conduct which has led to his conviction on a criminal charge: or (b) where the authority empowered to dismiss or remove a person or to reduce him in rank is satisfied that for some reason, to be recorded by that authority in writing, it is not reasonably practicable to hold such inquiry; or (c) where the President or the Governor as the case may be, is satisfied that in the interest of the security of the State it is not expedient to hold such inquiry.
" A bare perusal of the situations and contingencies in which a disciplinary enquiry affording a reasonable opportunity of being heard before imposing the enumerated penalty can be dispensed with will clearly show that the power is not given to dismiss remove or reduce in rank the delinquent worker but the power conferred by the afore mentioned provision is to dispense with an enquiry before imposing major penalty.
Sub art (3) of Art 311 provides that 'if, in respect of any such person as aforesaid, a question arises whether it is reasonably practicable to hold such inquiry as is referred to in clause (2).
the decision thereon of the authority empowered to dismiss or remove such person or to reduce him in rank shall be final. ' Now the three situations contemplated by the provision arc such that holding of an enquiry would be counter productive.
Where the penalty of dismissal, removal or reduction in rank is to be imposed on the ground of a conduct which has led to his conviction on a criminal charge, obviously, the enquiry will be superfluous or a repeat performance because a judicial tribunal has held the charges proved.
But where the authority empowered to impose the penalty is satisfied for reasons to be recorded by it in writing to dispense with an enquiry, the reasons so recorded must ex facie show that it was not reasonably practicable to hold a disciplinary enquiry.
Similarly, where in the interest of the security of the State, the President or the Governor, as the case may be, is satisfied that it is not expedient to hold such enquiry, the same can be dispensed with.
In the last mentioned situation, the highest executive of the country, the President and the highest executive of State the Governor alone is entitled to dispense with the inquiry, if it is satisfied that in the interest of the security of the State, it is not 434 expedient to hold such enquiry Dispensing with the enquiry in the first and third situation does not present a difficulty because in the first situation there is a conviction by a criminal court and in the third situation, the highest executive in the Centre and the State is empowered to dispense with the enquiry.
It is in the second fact situation that one must evaluate the width of discretionary power to dispense with enquiry.
The appointing authority is invested with power to dispense with enquiry.
And in case of persons belonging to Class IV services, the appointing authority may be some one in the lower administrative hierarchy and such an officer is invested with such draconian powers.
Where such a power is conferred, on an authority entitled to impose penalty of dismissal or removal or reduction in rank, before it can dispense with the inquiry, it must be satisfied for reasons to be recorded in writing that it is not reasonably practicable to hold such an enquiry.
Power to dispense with enquiry is conferred for a purpose and to effectuate the purpose power can be exercised.
But power is hedged in with a condition of setting down reasons in writing why power is exercised.
Obviously therefore the reasons which would permit exercise of power must be such as would clearly spell out that the inquiry if held would be counter productive.
The duty to specify by reasons the satisfaction for holding that the inquiry was not reasonably practicable cannot be dispensed with.
The reasons must be germane to the issue and would be subject to a limited judicial review.
Undoubtedly Sub article
(3) of article 311 provides that the decision of the authority in this behalf is final.
This only mean that the Court cannot inquire into adequacy or sufficiency of reasons.
But if the reasons ex facie are not germane to the issue namely of dispensing with enquiry the Court in a petition for a writ of certiorari can always examine reasons ex facie and if they are not germane to the issue record a finding that the pre requisite for exercise of power having not been satisfied, the exercise of power was bad or Without jurisdiction.
If the court is satisfied that the reasons which prompted the concerned authority to record a finding that it was not reasonably practicable to hold the enquiry, obviously the satisfaction would be a veneer to dispense with the inquiry and the court may reject the same.
What is obligatory is to specify the reasons for the satisfaction of the authority that it was not reasonably practicable to hold such an inquiry.
Once the reasons are specified and are certainly subject to limited judicial review as in a writ for certiorari, the court would examine whether the reasons were germane to the issue or was merely a cloak, device or a pretence to dispense with the inquiry 435 and to impose the penalty.
Let it not be forgotten what is laid down A by a catena of decisions that where an order casts a stigma or affects livelihood before making the order, principles of natural justice namely a reasonable opportunity to present one 's case and controvert the adverse evidence must have full play Thus even where the Constitution permits dispensing with the inquiry, a safeguard is introduced that the concerned authority must specify reasons for its decision why it was not reasonably practicable to hold the inquiry.
Turning to S.O 32, it nowhere obligates the General Manager to record reasons for dispensing with the inquiry as prescribed by S.O. 31.
On the contrary, the language of S O. 32 enjoins a duty upon the General Manager to record reasons for his satisfaction why it was inexpedient or against the interest of the security of the State to continue to employ the workman.
Reasons for dispensing with the inquiry and reasons for not continuing to employ the workman stand wholly apart from each other.
A Standing Order which confers such arbitrary, uncanalised and drastic power to dismiss an employee by merely stating that it is inexpedient or against the interest of the security to continue to employ the workman are violative of the basic requirement of natural justice inasmuch as that the General Manager can impose penalty of such a drastic nature as to affect the livelihood and put a stigma on the character of the workman without recording reasons why disciplinary inquiry is dispensed with and what was the misconduct alleged against the employee.
It is time for such a public sector undertaking as Hindustan Steel Ltd to recast S.O. 32 and to bring it in tune with the philosophy of the Constitution failing which it being other authority and therefore a State under article 12 in an appropriate proceeding, the vires of S O. 32 will have to be examined.
It is not necessary to do so in the present case because even on the terms of S.O. 32, the order made by the General Manager is unsustainable.
The view we are taking gets some support from a decision of this Court.
In a slightly different situation, this Court in L. Michael & Anr.
vs M/s Johnston Pumps India Ltd ll) observed that discharge simplicitor on the ground of loss of confidence when questioned before a court of law on the ground that it was a colorable exercise of power or it is a mala fide action, the employer must disclose that he has acted in good faith and for good and objective reasons.
Mere ipse dixit of the employer in such a situation is of no significance.
Where a disciplinary enquiry is dispensed with on the specious plea that it was not reasonable practicable to hold one and a penalty (1) [1975] 3 S.C.R.489.
436 of dismissal or removal from service is imposed, if the same is challenged on the ground that it was a colorable exercise of power or mala fide action, the same situation would emerge and the employer must satisfy the Court the good and objective reasons showing both proof of misconduct and valid and objective reasons for dispensing with the enquiry.
In our opinion, when the decision of the employer to dispense with enquiry is questioned, the employer must be in a position to satisfy the Court that holding, of the enquiry will be either counter productive or may cause such ireparable and irreversible damage which in the facts and circumstances of the case need not be suffered.
This minimum requirement cannot and should not be dispensed with to control wide discretionary power and to guard against the drastic power to inflict such a heavy punishment as denial of livelihood and casting a stigma without giving the slightest opportunity to the employee to controvert the allegation and even without letting him know what is his misconduct.
Turning to the facts of the case, a bare perusal of the impugned order is both instructive and provides ample material for pointing out how the drastic power can be arbitrarily exercised without keeping in view the prerequisite to be satisfied for exercise of the power.
The order reads as under: " HINDUSTAN STEEL LIMITED DURGAPUR STEEL PLANT Ref.
No. Order/PF/MN 1215 24th August, 1970 O R D E R Having considered the matter fully, I am satisfied that it is no longer expedient to employ Shri Manas Mukharjee, Assistant, Order Department, Durgapur Steel Plant any further.
It is therefore ordered that Shri Manas Mukherjee be removed from the service of the Company with effect from 24.
8. 1970.
He is allowed/three months ' salary which he may collect from the cash section of the Finance Department by 26.8.1970.
Sd/ Maj. ,Gon.
Director Ineharge.
437 The expression 'no longer expedient ' as used in the order A clearly spells out the fact that some enquiry was started.
What prompted the General Manager to close the enquiry, one cannot gather from the order But our attention was invited to Ann.
R 2 which according to the respondents specifies the reasons recorded in writing for dispensing with the enquiry.
Briefly, in Ann.
R 2, it is stated that the authority concerned has looked into the secret .
report sent to him by Shri P S Rao Naidu, Planning & Progress Officer, Order Deptt.
and the comments of DGM thereon.
He has also stated that he has looked into the report received from Sr. AO (E) and the copy of the complaint lodged by Smt.
Gita Majumdar, wife of an employee in the plant with the police.
These recitals have been considered sufficient to dispense with tho enquiry.
If Smt.
Gita Majurndat did file a report with the police making accusation against the appellant, she would have to be examined in the criminal case.
She could have been more conveniently called before the enquiry officer, and the secret reports remain secret.
The reason for dispensing with the enquiry do not spell out what was the nature of the misconduct alleged to have been committed by the appellant and what prompted the General Manager to dispense with tho enquiry.
It is difficult to hold that the recitals of the order spell out some objective reasons and the reasons were germane to the question of dispensing with the enquiry Frankly speaking, we are not satisfied in this case that for valid, objective and relevant reasons, the enquiry was dispensed with.
An attempt was made to urge that some annexures to the counter affidavit would show certain complaints received against; the appellant.
We decline to look into them as they were not given to the appellant in the course of enquiry to meet or explain the same.
We consider them irrelevant at this stage, Once we hold that there was DO justification for dispensing with the enquiry, imposition of penalty of dismissal without disciplinary enquiry as contemplated by S O 31 would be illegal and invalid.
Two options are thereupon open to us.
One would be to permit the General Manager, if he is so minded to hold the disciplinary enquiry and come to his own decision and the second would be to remit the matter to the Labour Court to permit the respondent employer if it is entitled in law to substantiate the charges of misconduct before the Tribunal.
The order removing the appellant from service was passed way back on August 24, 1970.
More than 14 years have rolled by.
H 438 In such a situation, to start the whole thing de nevo would neither be of any help to the appellant nor would be conducive to the maintenance of discipline in the plant.
Undoubtedly, once a workman is removed from service a stigma attaches to him, and if the order is held to be not in consonance with the provisions of the relevant standing orders at any rate, the stigma has to be removed Having given the matter our anxious consideration, we dispose of the appeal as under The respondent shall recall and cancel the order dated August 24, 1970 removing the appellant from service and reinstate him and on the same day the appellant shall tender resignation of his post which shall be accepted by the respondent.
The respondent shall pay as and by way of back wages and future wages, a sum of Rs. 1,50,000 to the appellant within 2 months from today to be spread over from year to year commencing from the date of removal from service.
We give one more opportunity to the respondent to recast its Standing Order 32 within a period of two weeks to be brought at best in conformity with the second proviso to sub article
(2) of article 311 failing which its validity will be re examined by this Court.
The amount of Rs. 1, 50,000 directed to be paid to the appellant by the respondent comprises backwages, and all other allowances admissible to him from year to year from 1970 upto the end of 1984.
The amount shall be spread over from year to year.
If because of the lump sum payment as directed herein the respondent is required to deduct Income tax as enjoined by Sec. 192 of the y Income tax Act, 1961, the appellant shall be entitled to relief under Sec.
89 of the Income Tax Act, 1961.
For this purpose, the appellant shall make an application as required by Sec. 89 read with Rule 21A to the appropriate authority, who would consider granting of relief to the appellant under Sec.
89 of the Income tax Act.
The proceeding in this behalf shall be disposed of within a period of six months.
The appeal is disposed of in these terms with no order as to cost.
N.V.K. Appeal allowed.

Output:
Standing Order 31 of the 1st Respondent/Public Sector Undertaking prescribed a detailed procedure for dealing with cases of misconduct; and for imposing major penalty, the employer had to draw up a chargesheet and give an opportunity to the delinquent workman to make his representation within 7 days.
If the allegations were controverted, an enquiry had to be held by an officer to be nominated by the management and in such an enquiry reasonable opportunity of explaining and defending the alleged misconduct had to be given to the workman.
Suspension of the delinquent workman pending enquiry was also permitted.
At the end of the enquiry, if the charges were held proved, and it was provisionally decided to impose a major penalty, tho delinquent workman bad to be afforded a further reasonable opportunity to represent why the penalty should not be imposed on him.
Standing Order 32 provided for a special procedure in case of a workman was convicted for a criminal offence in a court of law or where the General Manager was satisfied for reasons to be recorded in writing that it was inexpedient or against the interests of security to continue to employ the workmen ', viz., the workman could be removed or dismissed from service without following the procedure laid down in Standing Order No. 31.
429 The appellant an Assistant in the 1st Respondent undertaking was A removed from service on the ground that it was no longer expedient to employ him.
The management dispensed with the departmental enquiry, after looking into the secret report of one of their officers that the appellant had misbehaved with the wife of an employee and that a complaint in respect thereof had been lodged with the police.
In the reference to the Industrial Tribunal, the Tribunal held that as the employer dispensed with the disciplinary enquiry in exercise of the power conferred by Standing Order 32, it could not be said that the dismissal from service was not justified, and that if there were allegations of misconduct, the employer was quite competent to pass an order of removal from service without holding any enquiry any in view of the provisions contained in Standing Order 32, and rejected the reference.
Allowing the appeal, by the employee to this Court, ^ HELD: 1.
The reasons for dispensing with the enquiry do not spell out what was the nature of the misconduct alleged to have been committed by the appellant and what prompted the General Manager to dispense with the enquiry.
[437D] 2.
As there was no justification for dispensing with the enquiry, imposition of penaly of dismissal without the disciplinary enquiry as contemplated by Standing Order 31 is illegal and invalid.
[437F] 3 The respondent shall recall and cancel the order dated August 24, 1970 removing the appellant from service and reinstate him and on the same day the appellant shall tender resignation of his post which shall be accepted by the respondent.
The respondent shall pay as and by way of back wages and future wages, a sum of Rs. l.5 lakhs to the appellant within 2 months which shall be spread over from year to year commencing from the date of removal from service.
The appellant shall be entitled to relief under Section 89 of the Income tax Act, 1961 for which he shall make the necessary application to the appropriate authority.
who would consider granting of relief.
[438C D;F] F 4.
Where an order casts a stigma or affects livelihood, before making the order, principles of natural justice in a reasonable opportunity to present one s case and controvert the adverse evidence must have full play.
Even he Constitution which permits dispensing with the inquiry under Article 311 (2) a safeguard is introduced that the concerned authority must specify reasons for its decision why it was not reasonably practicable to hold the inquiry.
[435 A B] 5.
(i) Standing Order 32, nowhere obligates the General Manager to record reasons for dispensing with the inquiry as prescribed by Standing Order 31.
On the contrary, the language of Standing Order 32 enjoins a duty upon the General Manager to record reasons for his satisfaction why it was inexpedient ar against the interest of the security of the State to continue to employ the workman.
Ressons for dispensing with the enquiry an reasons for not continuing to employ the workman stand, wholly apart from each other.
[435C D] 430 (ii) A Standing Order which confers such arbitrary.
uncanalised and drastic power to dismiss an employee by merely stating that it is inexpedient or against the interest of security to continue to employ the workman is violative of the basis c requirement of natural justice, as tho General Manger can impose penalty of such a drastic nature as to affect the livelihood and put a stigma on the character of the workman without recording reasons why disciplinary enquiry is dispensed with and, what was the misconduct 13 alleged against the employee.
[435D E] 6 When the decision of the employer to dispense with the enquiry is questioned, the employer must be in a position to satisfy the Court that holding of the enquiry will be either counter productive or may cause such irreparable and irreversible damage which in the facts and circumstances of the case need not be suffered This minimum requirement cannot and should not be dispensed with.
[436B C] L. Michael and Anr.
vs M/s. Johnston Pumps India Ltd ; , referred to.
It is time for the 1st respondent public sector undertaking to recast Standing Order 32, and to bring it in tune with the philosophy of the Constitution failing which the vires of the said standing Order would have to be examined in an appropriate proceeding.
[438D]


Input:
Civil Appeal No. 5653 1983.
From the Judgment and Order dated 31.8.1979 of the Allahabad High Court in Misc.
Writ Petition No. 4994 of 1975 E.C. Agarwal for the Appellant.
Manoj Swarup and Ashok K. Srivastava for the Respondent.
The Judgment of the Court was delivered by S.C. AGRAWAL, J.
This appeal by special leave is direct ed against the judgment of the High Court of Judicature at Allahabad dated August 31, 1979 in Civil Misc.
Writ Petition No. 4994 of 1975 filed by the appellant.
The said writ petition related to proceedings for determination of surplus land under the U.P. Imposition of Ceiling on Land Holdings Act.
1960 (hereinafter referred to as 'the Act ').
The Act has been enacted by the U.P. State legislature to provide for the imposition of ceiling on land holdings in Uttar pradesh and certain other matters connected therewith.
In Section 4 of the Act provision is made for calculation of ceiling area.
Section 5 provides for imposition of ceiling on existing holdings.
Sections 6 to 8 provide for exemption of certain lands from the imposition of ceiling.
Section 9 provides for issue of a general notice by the Prescribed Authority calling upon every tenure holder holding land in excess of the ceiling area to submit to him a statement in respect of all his holdings.
Section 10 days down that in every case where a tenure holder fails to submit a statement or submits an incorrect statement the Prescribed Authority shall.
after making such enquiry as he may consider neces sary cause to be prepared a statement indicating the plot or plots proposed to be declared as surplus land and thereupon cause to be served on every such tenure holder a notice together with a copy of the statement thus prepared calling upon him to show cause.
within a period specified in the notice.
why the statement be not taken as correct.
Section 11 provides for determination of surplus land by the Pre scribed Authority in cases where no objection is filed within the period specified in the notice.
issued under Section 10.
Section 12 provides for determination of surplus land by the Prescribed Authority in cases where an objection has been filed.
Section 13 makes provision for appeal against the order passed by the Prescribed Authority under Section 11 or Section 12. 121 In 1972 it was decided to lower the ceiling limit and to make further provisions with regard to transfers in antici pation of the imposition of ceiling.
The U.P. State legisla ture enacted the U.P. Imposition of Ceiling on Land Holdings (Amendment) Act, 1972.
U.P. Act 18 of 1973 (hereinafter referred to as 'the 1973 Act ') which came into force on June 8, 1973.
By the 1973 Act Sections 3 to 8 were substituted and other amendments were made in the Act.
Certain further amendments were made in the Act by the U.P. Act 2 of 1975.
Among the amendments introduced by the Amendment Act of 1975 was insertion of Explanation I and Explanation II after sub section (1) of Section 5 as substituted by the 1973 Act.
U.P. Act 2 of 1975 was brought into force with effect from June 8, 1973.
A notice under Section 10(2) of the Act was issued to the appellant and he filed objections wherein it was submit ted that Chhiddu Singh.
the father of the appellant, had executed a registered gift deed dated October 13, 1971 in respect of Plot No. 111 measuring 63 Bighas, 12 Biswas and 17 Dhur in favour of his wife, Smt.
Roshan Kumari, Smt.
Premwati, wife of the appellant, and Virendera Bahadur Singh and Tej Vir Singh, sons of the appellant.
It was also stated that Chhiddu Singh died on April 28, 1973.
The submission of the appellant was that the said land which was gifted by his father Chhiddu Singh was not inherited by the appellant and it could not be treated as part of the holding of the appel lant for the purpose of imposition of ceiling.
The Pre scribed Authority overruled the said objection of the appel lant and ignoring the gift made by Chhiddu Singh, included the said land as part of the holding of the appellant and declared the surplus land of the appellant to the extent of 49 Bighas and 17 Biswas.
The appellant filed an appeal which was partly allowed by the First Additional Civil Judge.
Aligarh, by his judgment dated January 31.
1975, whereby the area of surplus land was reduced to 42 Bighas, 13 Biswas and 6 Dhur.
The appellant filed a writ petition in the High Court which was dismissed by the High Court by judgment dated August 31, 1979.
Feeling aggrieved by the said judg ment of the High Court the appellant has filed this appeal after obtaining special leave to appeal.
The expression 'holding ' is defined in clause (9) of Section 3 as under: "(9) 'holding ' means the land or lands held by a person as a bhumidhar, sirdar, asami of Gaon Sabha or an asami mentioned in Section 11 of the Uttar Pradesh Zamindari Abolition and Land Reforms Act, 1950, or as a tenant 122 under the UP.
Tenancy Act, 1939, other than a sub tenant, or as a Government lessee or as a sub lessee of a Government lessee, where the period of sub lease is co extensive with the period of the lease;" The expression 'tenure holder ' is defined in clause (17) of Section 3 as under: "(17) 'tenure holder ' means a person who is the holder of a holding, but does not include (a) a woman whose husband is a tenure holder; (b) a minor child whose father or mother is a tenure holder.
" The relevant provisions of Section 5 are: "5 Imposition of ceiling (1) On and from the commencement of the Uttar Pradesh Imposition of Ceiling of Land Holdings (Amendment) Act, 1972, no tenure holder shall be entitled to hold in the aggregate throughout Uttar Pradesh, any land in excess of the ceiling area applicable to him.
Explanation I In determining the ceiling area applicable to a tenure holder, all land held by him in his own right, whether in his own name, or ostensible in the name of any other person, shall be taken into account.
Explanation II (If on or before January 24, 1971, any land was held by a person who continues to be in its actual cultivatory possession and the name of any other person is entered in the annual register after the said date) either in addition to or to the exclusion of the former and whether on the basis of a deed of transfer or licence or on the basis of a decree, it shall be presumed, unless the contrary is proved to the satisfaction of the prescribed authority, that the first mentioned person continues to held the land and that it is so held by him ostensibly in the name of the second mentioned person.
" "(6) In determining the ceiling area applicable to a tenure 123 holder, any transfer of land made after the twenty fourth day of January, 1971, which but for the transfer would have been declared surplus land under this Act, shall be ignored and not taken into account; Provided that nothing in this sub section shall apply (a) a transfer in favour of any person (including Govern ment) referred to in sub section (2); (b) a transfer proved to the satisfaction of the prescribed authority to be in good faith and for adequate consideration and under an irrevocable instrument not being a benami transaction or for the immediate or deferred benefit of the tenure holder or other members of his family.
Explanation The burden of proving that a case falls within clause (b) of the proviso shall rest with the part.x, ' claiming its benefit.
" Shri Agarwal has urged that the amendments that were introduced in the Act by U.P. Act 18 of 1973 are not retro spective in nature and that the said amendments are opera tive with effect from June 1973, and that surplus land has to be determined with reference to June 8, 1973, the date of coming into force of the 1973 Act.
The submission of Shri Agarwal is that on June 8.
1973 the land covered by Plot No. 111 measuring 63 Bighas, 12 Biswas and 17 Dhur could not be included in the holding of the appellant and the appellant was not the tenure holder in respect of the said land.
Shri Agarwal has contended that in view of the gift deed dated October 13, 1971, executed by Chhiddu Singh, the father of the appellant, the land covered by the gift deed had vested in the donees and the appellant did not inherit the said land on the death of Chhiddu Singh on 28th April, 1973.
Laying stress on the definition of expression holding ' contained in clause (9) of Section 3 and the expression 'tenure holder ' contained in clause 117) of Section 3, Shri Agarwal has submitted that on June 8, 1973 the land that was gifted by Chhiddu Singh was not held by the appellant and it was not part of appellant 's holding and the appellant was not the tenure holder in respect of the same.
find no merit in this contention.
The Act postulates that the ceiling area of a tenure holder has to be deter mined in accordance with the provisions contained in Section 5.
Alongwith such determina 124 tion of ceiling area there has to Be determination of the surplus land held in excess of the ceiling area which is to be acquired by the Stale.
For the purpose of determination of the ceiling area provision has been made in sub section (6) of Section 5 that any transfer of land, which but for the transfer would have been declared surplus land under the Act.
if made after January 24, 1971, shall be ignored and not taken into account.
Transfers falling within the ambit of clauses (a) and (b) of the proviso to sub section (6) are.
however, excluded and such transfers even though made after January 24, 1971 have to be taken into account.
The gift made under the gift deed dated October 13, 1971 executed by Chhiddu Singh was a transfer of land.
It was made after January 24, 1971.
It was in respect of land which but for the transfer would have been declared surplus land under the Act.
The said transfer did not fall within the ambit of clauses (a) and (b) of the proviso to sub section (6) of Section 5.
In view of sub section (6) of Section 5 the said gift was, therefore, liable to be ignored for the purpose of determining the ceiling area applicable to the appellant.
Shri Agarwal has urged that sub section (6) of Section 5 cannot be applied to the present case inasmuch as it postu lates a transfer by the tenure holder whose ceiling area is to be determined under the Act and that in the present case the gift was not made by the appellant but by his father and.
therefore.
the said gift cannot be ignored on the basis of the provisions of Sub section (6) of Section 5.
We are unable to agree.
Sub section (6) of Section 5 does not speak of a transfer by the tenure holder.
It speaks of any trans fer of land made after January 24, 1971 which but for the transfer would have been declared surplus land under the Act.
It is not the requirement of sub section (6) of Section 5 that the transfer should be by the tenure holder whose ceiling area is to be determined.
We cannot read this re quirement in it.
While construing sub section (6) of Section 5 it has to be borne in mind that this provision has been made with the object of preventing evasion of the ceiling law by owners of large holdings making transfers in antici pation of the imposition of the lower limit on the ceiling area, Such a provision must be so interpreted as to curb the mischief find advance the remedy.
A construction which will cut down the scope of this provision cannot be adopted.
In our opinion, therefore, sub section (6) of Section 5 is applicable to a transfer made by the predecssor ininterest of the tenure holder whose ceiling area is to be determined in cases where such predecessor died before June 8, 1973 and the tenure holder whose ceiling area is to be determined inherited the lands of 125 such predecessor prior to June 8, 1973.
In the instant case the land which was transferred by Chhiddu Singh under gift deed dated October 13, 1971 was land which but for the said transfer would have been declared surplus under the Act.
Once the gift made by Chhiddu Singh is ignored the land so gifted should be treated to have continued to vest in Chhiddu Singh at the time of his death on April 28, 1973 and on the death of Chhiddu Singh the appellant inherited the same.
The said land has to be treated as part of the holding of the appellant on June 8, 1973 and he was the tenure holder in respect of the same on that date.
The said land was required to be taken into consideration for determining the surplus land held by him.
Shri Agarwal has relied upon the decision of this Court in Arjan Singh and Another vs The State of Punjab and Oth ers; , This case turns on the interpreta tion of the expression 'this Act ' in Section 7 of the Pepsu Tenancy and Agricultural Lands (Amendment and Validation) Act, 1962 whereby Section 32KK was introduced in the Pepsu Tenancy and Agricultural Lands Act, 1955 with effect from October 30, 1956.
By Section 32KK it was provided that land owned by a Hindu undivided family would be deemed to be land of one land owner and partition of land owned by such a family shall be deemed to be a disposition of land for the purposes of Section 32FF and the question was whether a partition effected by a registered partition deed dated September 6, 1956 was covered by the said provision.
It would have been so covered if the expression 'this Act ' was construed to mean the principal Act of 1955.
This Court, however, held that in view of the various provisions con tained in the Amendment Act of 1962 the expression 'this Act ' meant the Amendment Act of 1962 and not the principal Act.
This decision, therefore, turns on the interpretation of the particular provision of the Amendment Act of 1962 and it has no bearing on the present case.
therefore, find no merit in the appeal and it is accordingly dismissed.
No order as to costs.
S.Bali Appeal dismissed.

Output:
The 1960 Act makes provision for imposition of Ceiling on Land holdings and for determination of surplus land.
It was amended by U.P. Act 18 of 1973 to lower the ceiling limit and to make provisions with regard to transfers of land in anticipation of the imposition of ceiling.
This Act came into force on June 8, 1973.
Further amendments were made in the Act by U.P. Act 2 of 1975 inserting Explanation I & Explanation II after sub section (1) of section 5 as substituted by 1973 Act and given effect retrospectively i.e. from June 8, 1973.
A notice under section10(2) of Act was issued to the appellant and he filed objections submitting that Chhiddu Singh, his father, had executed a registered gift deed dated October 13, 1971 in respect of plot No. 111 measuring 63 Bighas, 12 Biswas and 17 Dhur in favour of appellant 's mother.
appellant 's wife and two sons of the appellant.
Chhiddu Singh died on April 28, 1973.
Accordingly the said gifted land was not inherited by the appellant and it could not be treated as part of his holding for the purpose of imposition of ceiling.
The prescribed authority overruled the objections, included the said land as part of the hold ing of the appellant and declared the surplus land of the appellant to the extent of 49 Bighas and 17 Biswas.
The appellant filed an appeal to the First Additional Civil Judge.
It was allowed partly and the surplus land was reduced to 42 Bighas 13 Biswas and 6 Dhur.
The appellant thereafter filed a writ petition in the High Court which was dismissed.
Feeling aggrieved the appellant filed this appeal after obtaining special leave to appeal.
The appellant urged before this Court that amendments introduced by the 1973 Act are not retrospective in nature and are operative only from June 8, 1973, that the surplus land has to be determined as on June 8, 1973, the date of coming into force of 1973 Act, and that the 119 land gifted by the appellant 's father on October 13, 1971 could not be included in the holding of the appellant as he was not the tenure holder of the said land on the death of his father on April 28, 1973.
Dismissing the appeal, the Court, HELD: The 1973 Act postulates that ceiling area of a tenure holder has to be determined in accordance with the provisions contained in sec.
5 of the Act.
While determining the ceiling area, the surplus land held in excess of ceiling area, which is to be acquired by the State, has also to be determined.
[123H; 124A] For determining ceiling area sub section (6) of section 5 provides that any transfer of land, which but for the transfer would have been declared surplus land under the Act if made after January 24, 1971 shall be ignored and not taken into account but transfers falling within the ambit of clauses (a) and (b) of the proviso to sub sec.
(6) are, excluded, and such transfers even though made after January 24, 1971, have to be taken into account.
[124B] In the instant case, the gift was made and executed on October 13, 1971 and it was a transfer of land and as it was made after January 24, 1971 the transfer of land was in respect of land which would have been declared surplus land under the Act.
This transfer did not fall within the ambit of clauses (a) and (b) of the proviso to sub section (6) of section 5.
Thus such gift was liable to be ignored for the purpose of determining the ceiling area applicable to the appellant.
Sub section (6) of section 5 does not speak of a transfer by the tenure holder but it speaks of any transfer of land made after January 24, 1971.
So the contention of the appellant that gift was made by his father and not by him as tenure holder and he did not inherit the same on the death of his father is untenable, since sub section (6) of section 5 is applicable to a transfer even made by the predecessors in interest of the tenure holder whose ceiling area is to be determined and who inherited the land prior to June 8, 1973.
The land which was transferred vide gift deed dated October 13, 1971 was land which but for the said transfer would have been declared surplus land under the Act.
[124C H; 125A] Thus, once the gift is ignored it is to be treated to have continued to vest in the appellant 's father and after his death the appellant inherited the same and as such was part of the holdings of the appellant on June 8, 1973 and has to be taken into consideration for determining the surplus land held by the appellant.
[125B] 120


Input:
Appeals Nos.
1153 to 1160 and 1161 to 1168 of 1968.
Appeals by special leave from the judgment and order, dated November 16, 1967 of the Madhya Pradesh High Court in Misc.
Civil Cases Nos. 96 to 103 of 1967.
I. N. Shroff, for the appellant (in C.As.
Nos. 115 3 to 1160 of 1968) and the respondent (in C.As.
1161 to 1168 of 1968).
S.T. Desai, B.L. Neema and Anjali Varma, for the appellant (in C.As.
1161 to 1168 of 1968): and the respondent C.As.
1153 to 1160 of 1958).
N.D. Karkhanis and 11.
G. Ratnaparkhi, for the intervener (in C. Pa, Nos. 1153 to 1160 of 1968).
The judgment of the Court was delivered by Grover, J.
This judgment will dispose of two 'sets of cross appeals Nos.
1153 1160 & 1161 1168/68 which are from a common judgment of the Madhya Pradesh High Court and have been entertained by special leave.
The relevant assessment years for the purpose of levy of sales tax are from April 1, 1957 to March 31, 1958.
and April 1, 1964 to March 31, 1965.
For the assessment years prior to April 1, 1959 the enactment in force was the C.P. and Berar Sales Tax Act, 1947 (No; XXI of 1947) and for the subsequent two years it is the Madhya Pradesh General Sales Tax Act (Act No. 2 of 1959), which would be applicable.
material facts may be shortly stated, The assessee Madhya Pradesh Electricity Board hereinafter called the "Electricity Board? ' is a body constituted under section 5 of the Electricity Supply Act, 1948.
Under section 944 18 of that Act it was the general duty of the Electricity Board to promote coordinated development of the generation, supply and distribution of electric energy within the State of Madhya Pradesh in the most efficient and economical manner.
In the assessment years in question the Electricity Board sold, supplied and distributed electric energy to various consumers.
It also sold coal ash a waste product and Supplied steam to Nepa Mills of Burhanpur.
It further supplied specification and tender forms on payment to persons desirous of submitting tenders for the works undertaken by the Electricity Board.
It purchased articles like Gitti, Murram, sand etc.
from unregistered dealers.
It is common ground that under the provisions of Act XXI of 1947 and H of 1959 read with the ' Schedule contained therein sale of electricity is exempt from sales tax.
For the purpose of determining the gross turnover, however, the sale of electric energy is to be taken into account.
The Assistant Commissioner of Sales tax assessed the Electricity Board to tax on its turnover of sale of coal ash and specification and tender forms and the supply of steam to Nepa Mills.
The Board was further assessed to purchase tax on Gitti, Murram etc.
purchased from unregistered dealers.
In appeal the Deputy Commissioner, Sales Tax, upheld the assessment orders.
On second appeal the Sales Tax Tribunal which was the Board of Revenue, Madhya Pradesh, held that the Electricity Board was not a "dealer" within the meaning of that term as defined in the two Acts and that the coal ash was not produced for the purpose of sale with the result that sales of coal ash could not be subjected to tax.
As regards the supply of steam to Nepa Mills the tribunal, on examining the terms of the agreement under which the Electricity Board supplied the steam, came to the conclusion that such supply was an isolated transaction and that such activity which had been undertaken on no profit no loss basis could not be assessed to sales tax.
The specification and tender forms were held not to be marketable goods involving any profit element and for that reason could not be taxed.
As regards the purchase tax the tribunal held that as the Electricity Board was not a dealer in respect of the sale and supply of electric energy no purchase tax could be imposed on goods purchased by it and consumed "in furtherance of and in aid of the business activity of generating, supplying and distributing electricity.
" Both the Electricity Board and the Commissioner of Sales Tax.
Madhya Pradesh, filed applications requiring the Tribunal to refer to the High.
Court certain questions of law arising out of its common order.
The tribunal drew up a common statement of case and referred five questions of law.
On the first question the High Court 'held that the Electricity Board could not be held to be "dealer" as defined in section 2(c) of Act XXI of 19.47 or section 2(d) 942 of Act H of 1959 in respect of its activity of generation, distribution, sale and supply of electric energy.
On the second question it was held that as the Electricity Board regularly and continuously produced coal ash as a subsidiary product and sold it regularly it was a "dealer" in regard to the sale of coal ash and the sale, transactions relating to this product were liable to be assessed to sales tax.
The third question was answered in favour of the Electricity Board.
It was found that stem was not being supplied to the Nepa mills with profit motive although it fell within the definition of "goods" given in the two Acts.
As regards the specification and tender forms the High Court was of the view that the Electricity Board was not carrying on any business of selling such forms and therefore no sales tax could be levied in respect of them.
The fifth question was answered by holding that as the Electricity Board was not a "dealer" in respect of sale and supply of electric energy it was not entitled to purchase any taxable goods for consumption or use for producing such energy without paying sales tax to the selling dealer under section 4(6) of Act XXI of 1947 and section 7 of Act II of 1959 and therefore there.
was no liability to pay purchase tax.
Mr. Shroff, who has argued the appeals of the Commissioner of Sales Tax, has not quite properly and rightly pressed the matter relating to imposition of sales tax on supply of specification and tender forms.
Mr. S.T. Desai, who has.
appeared for the Electricity Board, after a certain amount of argument, has submitted that he had nothing much to say on the question relating to coalash except that it should be held to be exempt from payment of sales tax because electric energy is exempt from such tax as stated before.
As regards the fifth question relating to the imposition of purchase tax Mr. Desai has not pressed for any decision being given by us.
Arguments which have been addressed by both sides have therefore centered on question nos.
1 and 3 which are as follows : "(1) On the facts and circumstances of the case whether or not the Madhya Pradesh Electricity Board is a dealer within the meaning of section 2(c) of the C.P. & Berar Sales Tax Act, and section 2(d) of the Madhya Pradesh General Sales Tax Act, 1958, in respect of its activity of generation, distribution, sale and supply of electrical energy ? (2) (3) On the facts and circumstances of the case, whether or not steam is saleable goods and if they are saleable goods is the turnover representing the supply thereof liable to be assessed to sales tax m the hands of the assessee ?" 943 it is somewhat curious that both sides are almost agreed that the decision of the.
High Court on the first question is not correct.
Since enunciation of the true position is involved we proceed to give our opinion in the matter.
The definition of a "dealer" as given in the two Acts substantially is that any person who carries on the business of buying, selling, supplying or distributing the goods as a "dealer" and "goods" are defined by s.2(d) of Act of 1947 as meaning all kinds ' of movable property other than actionable claims . and include all materials articles and commodities whether or not to be used in the construction, fitting out, improvement or repair of immovable property.
The definition contained in section ~2(g) of Act II of 1959 is almost in similar terms except that there are certain additions with which we are not concerned.
Reference may be made, at this stage, to the definition of "movable property" which has not been defined in the two Acts given in section 2(24) of the Madhya Pradesh General Clauses Act.
It has been defined to mean "property of every description, except immovable property".
Section 2(18) of that Act says that "immovable property" includes land,.
benefits to arise out of land and things attached to the earth, or permanently fastened to anything attached to the earth.
" The High Court went into a discussion from the point of view of mechanics relating to transmission of electric energy.
It was of the view that electricity could not be regarded as an article or matter which could be possessed or moved or delivered.
It relied on certain decisions and referred to Entries Nos. 53 and 54 in List II of Seventh Schedule to the Constitution and held that electricity did not fall within the meaning of "goods" in the two Acts and therefore the Electricity Board could not be held to be a "dealer" in respect of its activity of generation, distribution, sale and supply of electric energy.
Mr. I.N. Shroff has relied on certain decisions in which the same point was involved as in the present case.
namely, whether electricity is "goods" for the purpose of imposition of sales tax. ' In Kumbakonam Electric Supply Corporation Ltd. vs Joint Commercial Tax Officer, Esplanade Division, Madras(1), the Madras High Court was called upon to decide whether electricity is "goods" for the purposes of the Madras General Sales Tax Act, 1959 and the .
After referring to the definition of "goods" as given in the , it was observed that under that definition goods must be property and it must be movable.
According to the learned Madras Judge any kind of property which is movable would fall within the definition of "goods" provided it was transmissible or transferable from hand to hand or capable of delivery which need not necessarily be in a tangible or a physical sense.
Reference was also (1) 14 S.T.C. 600.
L6 Sup.
C I.169 9 944 made to the definition given in the General Clauses Act which was quite wide and it was held that if electricity was property and it was movable it would be "goods".
The learned Judge found little difference between electricity and gas or water which would be property and could be subjected to a particular process, bottled up and sold for consumption.
It was observed that electricity was capable of sale as property as it was sold, purchased and consumed everywhere.
A "dealer" was defined by the practically in the same way as in the Madras General Sales Tax Act and it meant a person who carried on business of buying and selling goods.
In the opinion of the learned Judge the concept of dealer, goods and sale comprehended all kinds of movable property.
He further relied on certain decisions which have been cited before and which will be presently noticed.
A similar view was expressed by Tek Chand, J. of the Punjab & Haryana High Court in Malerkotla Power Supply Company vs The Excise & Taxation Officer, Sangrur, & Ors.(1) It was held that electric energy fell within the definition of "goods" in both the Punjab Sales Tax Act, 1948 and the .
According to the learned Judge electric energy has the commonly accepted attributes of movable property.
It can be stored and transmitted.
It is also capable of theft.
It may not be tangible in the sense that it cannot be touched without considerable danger of destruction or injury but it was perceptible both as an illuminant and a fuel and also in other energy giving forms.
Electric energy may not be property in the sense of the term "movable property" as used in the Punjab & Central General Clauses Acts in contra distinction to "immovable property" but it must fall within the ambit of "goods" "even if in a sense it was intangible or invisible".
As pointed out in the Madras case the statement contained in American Jurisprudence(2) recognises that electricity is property capable of sale and it may be the subject of larceny.
In Naini Tal Hotel vs Municipal Board(a) it was held that for the purpose of article 52 of the Indian Limitation Act electricity was property and goods.
In Erie County Natural Gas & Fuel Co. Ltd. vs Carroll(4), a question arose as to the measure of damages for a breach of contract to supply gas.
Lord Atkinson delivering the judgment of the Privy Council applied the same rule which is applicable where the contract is one for sale of goods.
In other words gas Was treated to be "goods".
The High Court, in the present case, appears to have relied on Rash Behari vs Emperor(5) in which approval was accorded to the statement in Pollock & Mulla 's Commentary on Sale Goods Act, 1913 that it was doubtful whether that Act was applicable to such "goods" as gas, water 'and electricity.
The context (1) 22 S.T.C. 325.
(2) 18 American Jurisprudence 407 (section 2 Electy.) (3) A.I.R. (1946) All. 502.
(4) (5) A.I,R. 945 which this matter is discussed in the Calcutta case is altogether different and distinguishable and what was being decided there was the scope and ambit of section 39 of the Electricity Act, 1910, As regards the Entries in List 11 of the Seventh Schedule to the Constitution, the relevant ones may be produced: "53.
Taxes on the consumption or sale of electricity.
Taxes on the sale or purchase of goods other than newspapers, subject to the provisions of entry 92A of List I".
The reasoning which prevailed with the High Court was that a well defined distinction existed between the sale or purchase of "goods" and consumption or sale of electricity; otherwise there was no necessity of having Entry No. 53.
But under Entry 53 taxes can be levied not only on sale of electricity but also on its consumption which could not probably have been done under Entry 54.
It is difficult to derive much assistance from the aforesaid entries.
What has essentially to be seen is whether electric energy is "goods" within the meaning of the relevant provisions of the two Acts.
The definition in terms is very wide according to which "goods" means all kinds of movable property.
Then certain items are specifically excluded or included and electric energy or electricity is.
not one of them.
The term "movable property" when considered with reference to "goods" as defined for the purposes of sales tax cannot be taken in a narrow sense and merely because electric energy is not tangible or cannot be moved or touched like, for instance, a piece.
of wood or a book it cannot cease to be movable property when it has all the attributes of such property.
It is needless to repeat that it is capable of abstraction, consumption and use which, if done dishonestly, would attract punishment under section 39 of the .
It can be transmitted, transferred, delivered, stored, possessed etc.
in the same way as any other movable property.
Even in Banjamin on Sale, 8th Edn., reference has been made at page 171 to County of Durham Electrical, etc., Co. vs Inland Revenue(1) in which electric energy was assumed to be "goods".
If there can be sale and purchase of electric energy like any other movable object we see no difficulty in holding that electric energy was intended to be covered by the definition of "goods" in the two Acts.
If that had not been the case there was no necessity of specifically exempting sale of electric energy from the payment of sales tax by making a provision for it in the Schedules to the two Acts.
It cannot be denied that the Electricity Board carried on principally the business of selling, supplying or distributing electric energy.
It would therefore clearly fall within the meaning of the expression "dealer ' ' in the two Acts.
(1) 946 As regards steam there has been a good deal of argument on the question whether it is liable to be assessed to sales tax in the hands of the Electricity Board.
According to Mr. Shroff the Electricity Board carried on the business of selling steam to the Nepa Mills and that this has lasted for a number of years.
It has been submitted that simply because the Electricity Board does not have any profit motive in supplying steam it cannot escape.
payment of sales tax because the steam is nevertheless being sold as "goods".
The High Court was of the view that the water which the Nepa Mills supplied free to the Electricity Board became the property of the Board and in return for this free supply the Board agreed to give steam to Nepa Mills at a rate based solely on the coal consumed in producing steam.
The mills had also agreed to reimburse the Electricity Board for the loss sustained on account of the mills not taking the "full demand of steam".
According.
to the High Court there was no contract for the sale of steam as such and it was only for the labour and cost involved in its supply to the mills.
The High Court relied on the findings of the Tribunal on this point and held that the turnover in respect of steam was not taxable.
The tribunal in its order dated June 16, 1966 referred to certain conditions of working arrangement which was reduced to writing but which had not been properly executed as a contract which showed that the mills was supplying water free and the Electricity Board was making a pro rata charge of conversion of water into steam.
It seems to us that the High Court was right in coming to the conclusion, on the finding of the tribunal, that the real arrangement was for supplying steam on actual cost basis and in that sense it was more akin to a labour contract than to sale.
Mr. Shroff has argued that the document which was relied upon by the tribunal could not be looked at as it was neither admissible in evidence nor had it been properly executed as a contract between the Electricity Board and the mills and it happened to be a mere draft of an agreement which was proposed to be entered into.
It is too late for Mr. Shroff to take these objections because these should have been raised before the Tribunal and the High Court.
It is stated in Halsbury 's Laws of England, III Edn.
34, page 6 that "a contract of sale of goods" must be distinguished from a contract for work and labour.
The distinction is often a fine one.
A contract of sale is a contract whose main object is the transfer of the property in, and the delivery of possession of, a chattel as a chattel to the buyer.
Where the main object of work undertaken by the payee.
of the price is not the transfer of a chattel qua chattel, the contract is one for work and labour.
It has been laid down by this Court in The Government of Andhra Pradesh vs Guntur Tobaccos Ltd.(1) that in business transactions (1) 16 S.T.C. 240.
947 the works contracts are frequently not recorded in writing setting out all the covenants and conditions thereof, and the terms and incidents of the contracts have to be gathered from the evidence and attendant circumstances.
The question in each case is one about the true agreement between the parties and the terms of the agreement must be deduced from a review of all the attendant circumstances.
On the findings of the tribunal and the High Court we are of the opinion that the arrangement relating to supply of steam in return for the water supplied by the mills on payment of actual cost was not one of sale but was more in the nature of a works contract.
In the result the answer of the High Court to the first question is discharged and it is held that the Electricity Board is a "dealer" within the meaning of the relevant provisions of the two Acts in respect of its activities of generation, distribution, sale and supply of electric energy.
The answers to the second, third and fourth questions are affirmed.
The answer given by the High Court to the fifth question is discharged.
It is unnecessary to express any opinion on that question because Mr. Desai has not pressed for any decision being given by us and has accepted the liability in respect of the purchase tax as determined by the assessing authorities for the assessment orders in question.
The appeals are allowed to the extent indicated above.
In view of all the circumstances the parties are left to bear their own costs.
Appeals allowed in pan.

Output:
The assessee Electricity Board constituted under the Electricity Supply Act, 1948, supplied and distributed electric energy within the State of Madhya Pradesh.
In the assessment years in question the Electricity Board sold, supplied and distributed electric energy to various consumers, It also supplied steam to Nepa Mills.
The mill was supplying water free and the Electricity Board was making a pro rata charge of conversion of water into steam.
The mill had also agreed to re imburse the Board for the loss sustained on account of the mills not taking the full demand of steam.
In proceedings under the C.P. & Bearar Sales Tax Act, 1947 'and the Madhya Pradesh General Sales Tax Act, 1959 the question for consideration, inter alia, were (i) whether electricity was 'goodS ' within the meaning of the two Acts and whether the Board was a 'dealer ' within the, meaning of section 2(c) of the 1947 Act and section 2(d) of the 1959 Act; and (ii) whether the supply of steam amounted to 'sale ' 'and was therefore taxable.
The High Court, in reference, held that electricity was not 'goods ', that the Board was not a 'dealer"in electricity and that the supply of steam was not taxable as it was not supplied With 'a profit motive.
In appeal by special leave to this Court by the Commissioner of Sales Tax, HELD: (i) The Electricity Board carried on the business of selling, supplying and distributing electricity which fell within the meaning of the expression 'goods ' in the two Acts and was therefore a 'dealer '.
[945 H] The definition of "goods" is very wide and includes all kinds of movable property.
The term 'movable property ' when considered with reference to 'goods ' as defined for the purposes of sales tax cannot be taken in a narrow sense and merely because electric energy is not tangible or cannot be moved or touched, like, for instance, a piece of wood or a book, it cannot cease to be movable property when it has all the attributes of such property.
It is capable of abstraction, consumption and use which, if done dishonestly, would attract punishment Under section 39 of the .
It can be transmitted, transferred, delivered, stored, possessed etc.
in the same way as any other movable property.
If there can be sale and purchase of electric energy like any other movable object, it st be held that electric energy was intended to be covered by the definition of 'goods ' in the two Acts.
If that had not been the case there was no necessity of specifically exempting sale of electric energy from the payment of sales tax by making a provision for it in the Schedule to the two Acts.
[945.E H] 940 Kumbakonam Electric Supply Corporation Ltd. vs Joint Commercial Tax Officer, Esplanade Division, Madras, 14 S.T.C. 600, Malerkotla Power Supply Company vs The Excise & Taxation Officer, Sangrur & Ors.
22 S.T.C. 325, Naini Tal Hotel.
Municipal Board, A.I.R. 1946 All.
502, Erie County Natural Gas & Fuel Co. Ltd. vs Carroll, , County of Durham Electrical etc.
Co. vs Inland Revenue , referred to.
Rash Behari vs Emperor, A.I.R. 1936 Cal.
753 distinguished.
(ii) On the facts of the present case the arrangement relating to supply of steam in return of water supplied by the mills on payment of actual cost was not one of sale but was more in the nature of a workS ,contract Where the main object of work undertaken by the payee of the price is not the transfer of a chattel qua chattel, the contract is one for work and labour.
[946 G H] The Government of Andhra Pradesh vs Guntur Tobaccos Ltd., 16 S.T.C. 240, and HaLsbury 's Laws of England, HI Edn.
34 page 6, referred to.