Input:
ivil Appeal Nos.
3452 54 and 4030 32 of 1982.
Appeals by Special leave from the Judgment and order dated the 20th November, 1979 of the Punjab and Haryana High Court in L.P.A. Nos.
26,62, 29, 38,39, and 30 of 1978.
R.K. Garg and N.S. Das Bahl for the Appellants in CAs.
Nos 3452 54 of 1982.
M.K. Ramamurthi, and Mrs. Urmila Sirur for the Appellants in CAs.
4031/82 and CAs.
4030 32 of 1982.
P.P. Rao and D.D. Sharma for the Respondents.
The Judgment of the Court was delivered by PATHAK, J.
The appellants, in these appeals by special leave, are aggrieved by the judgment of a Division Bench of the High Court of Punjab and Haryana affirming the dismissal of their writ petitions by a learned Single Judge of that Court.
The appellants are teachers in the service of the State of Punjab.
They claim the grades prescribed in paragraph 2 of the Government Circular letter No. 2036 ED.
1 67/2167 dated July 29, 1967, and in that regard seek the benefit of the Circular letter No. 9/9179 FR (2)/143 dated February 19, 1979 and its clarification by Circular letter No. 8937 5ED.
1179/2659 dated September 20, 1979.
The Circular letter dated July 29, 1967 gave effect to the recommendations of the Kothari Commission with effect from November 1, 1966 in respect of teachers in Government Schools.
Paragraph 2 of the Circular letter provided: "2.
Lectures in Higher Secondary Schools, Punjab Institute of English and Masters/Mistresses with Post 884 graduate qualifications in High/Higher Secondary Schools will be placed in Rs. 300 25 450/25 600 grade provided they have 1st and 2nd Division Master 's Degree.
Those with 3rd Class Master 's Degree will be placed in the grade of Rs. 250 25 400/25 550.
" It was specified that "the number of posts in Lecturer 's grade will be 1517 i.e. 742 posts for the existing school Lecturers and 829 additional posts for other Masters/Mistresses with Post graduate qualifications.
" It was clarified that "the Masters/Mistresses will be eligible to Lecturer 's grade only if they have Post graduate qualifications in the subject of their teaching.
No one will be entitled to those 829 additional posts automatically.
These posts will be allocated to various subjects keeping in view the requirements of the educational institutions and the appointments will be made keeping in view the rules/instructions as amended from time to time.
" Paragraph 3 stated that "all trained graduates and all other Masters with Post graduate qualifications, who are not fitted in the scale of Lecturer, will be in the scale of Rs. 220 8 300 10 400/20 500.
" It is apparent that paragraph 2 of the Circular letter dated July 29, 1967 is concerned essentially with providing for a Lecturer 's Grade: (1) It was intended to have 1571 posts in the Lecturer 's grade, consisting of 742 posts for the existing Lecturers and another 829 posts for Masters or Mistresses.
Masters or Mistresses were eligible for these posts in the Lecturer 's grade only if they possessed Post graduate qualifications in the subject of their teaching.
Those who did not satisfy that criterion were not eligible for those posts.
Moreover, no one was entitled to any of the 829 additional posts automatically.
The additional posts were to be distributed with reference to different subjects, and the distribution would be made having regard to the requirements of the educational institutions and subject to the rules and instructions currently in force.
(2) Existing Lecturers and Masters or Mistresses with Post graduate qualifications, who possessed a Master 's degree in the first or second division, would be entitled to the grade of Rs. 300 25 450/25 600.
Lecturers and 885 Masters or Mistresses with Post graduate qualifications who possessed a Master 's degrees in the third division would be entitled to the grade of Rs. 250 25 400/25 550 .
The appellants say that they are employed as Masters and Mistresses in High and Higher Secondary Schools run by the Punjab Government and possess an M.A. or M.Sc.
or B.T. or B.Ed.
degree and some of them have even acquired an M.Ed.
degree.
They are presently paid according to the pay scale Rs. 220 500.
They claim that they are entitled to either of the higher grades set forth in paragraph 2 of the Circular letter dated July 29, 1967.
From what has gone before it is clear that they can legitimately claim the benefit of those grades only if they are appointed to the posts of Lecturer.
And they do not dispute that they are not incumbents of those posts.
Much reliance has been placed on the decision of this Court in State of Punjab vs Kirpal Singh Bhatia.
In our opinion, that case is of no assistance to the appellants.
That was a case which was primarily concerned with Circular letter No. 5058 FR II 57/5600 dated July 23, 1957.
The Circular letter dated July 29, 1967 operates on a very different plane from the Circular letter dated July 23, 1957.
A brief reference to the historical background of the Circular letter dated July 23, 1957 will suffice.
Concerned at the low salaries granted to certain categories of Government servants, the Punjab Government issued Circular letter No. 5058 FR II/5600 dated July 23, 1957 revising their scales of pay.
Paragraph 3 classified all teachers in the Education Department according to their qualifications in two broad categories, category A being: "B.A./B.Sc./B.Com./B.Sc.
(Agriculture) and B.T./Diploma in Physical Education/Diploma in Senior Basic Training".
and they would now carry the scale of pay: 886 "Rs. 100 8 190 10 250 with a higher start for M.A. or M.Sc.
as at present.
" As is evident, the category was defined by reference to the possession of the specified graduate degree or Diploma.
In the event such a teacher also held a Post graduate degree he was entitled to a higher start in the grade.
The grade, however, remained the same.
It appears that several teacher tiled writ petitions in the High Court claiming revised scales of pay on the ground that they had taken graduate degrees and, therefore, were entitled to the benefit of the grade mentioned against Category in the Circular letter dated July 23, 1957.
In opposition to the writ petitions, the State Government contended that the letter did not contemplate tho grant of the grade to all teachers but only to teachers appointed as Masters.
The High Court held the teachers entitled to the benefit of the revised grade, whether or not they had been appointed as masters, because, in the opinion of the High Court, the qualifying criterion was the possession of a graduate degree.
The judgment of the High Court was affirmed by this Court in Kirpal Singh Bhatia (Suprd).
The State Government found it difficult, having regard to The prevailing burden on its financial resources, to extend the benefit of the Circular letter dated July 23, 1957 to the much wider section of teachers covered in consequence of the Court 's judgement.
Accordingly, the State Government issued Circular letter No. 9/9/79 FR (2)/143 dated February 19, 1979, paragraph 3 of which stated that in order to ensure that "these unintended and large financial implications do not continue arising in future" the whole matter had been reconsidered by the State Government and as a result the government ordered that henceforth the teachers or the Education Department would not automatically be entitled to placement in the higher scales of pay in terms of paragraph 3 of the Circular letter dated July 23, 1957 by the mere circumstance of their improving or acquiring higher qualifications in the course of their service.
The rigour of the restriction was relaxed in some measure.
Paragraph 3 said further: "However, in order to avoid discrimination between teachers who have already been allowed higher scales of pay on account of having improved their qualifications and those who have not yet been allowed this benefit even though they also possess higher qualifications it is decided that all teachers in the Education Department who have 887 improved their qualifications before the issue of this letter may be allowed the benefit of higher scale of on the basis of their qualifications.
" The benefit was not extended to those who were appointed or who had improved their qualifications after the issue of that Circular letter.
The teachers continued to agitate for a more generous dispensation.
The State Government then issued Circular letter.
No. 8937 5ED.1179/2659 dated September 20, 1979.
which declared: "The implementation of the decision contained in Finance Department Circular letter No. 9/9/79 FR (2)/143 dated February 19, 1979 to grant higher pay scales to the teachers on the basis of higher qualifications was kept pending for want of clarification on certain points from the Finance Department which has now become available and is reproduced below: 1.
The higher scale may be allocated from the date of passing the respective higher examination by the concerned teacher where this has already been done.
However, actual payment at enhanced rates should commence from 12 2.79 and the payment of arrears accruing from the date of passing the examination till 13.2.1979 be restricted to the maximum for 38 months.
The ben fit of the higher scale may be allowed from the date a particular teacher is appointed on regular basis or the date of passing the higher examination, which ever is later, but the payment of arrears as a result of grant of such benefit should be restricted to a period of 38 months only, as already mentioned above.
The teachers placed in the higher scale can only be regularly adjusted when corresponding posts in the higher scale become available; in that case such teachers may continue to enjoy the higher scale as a personal measure till they are adjusted against regular posts as and when the same become available.
" It was clarified that the contemplated benefit was confined to 888 the categories of teachers mentioned in the Circular letter No. 5058 FR II 57/5600 dated July 23, 1957.
The appellants claim the benefit of paragraph 2 of the Circular letter dated July 29, 1967, and therefore no reliance can be placed by them on the Circular letters dated February 19, 1979 and September 20, 1979, which relate merely to the scheme embodied in the Circular letter dated July 23, 1957.
The appellants contend that on the principle of "equal pay for equal work", affirmed by this Court in Randhir Singh vs Union of India & Ors.
they are entitled to the grades mentioned in paragraph 2 of the Circular letter dated July 29, 1967.
It is urged that like those Masters or Mistresses who have been given that benefit they have acquired Post graduate qualifications and are doing the same kind of work.
As has been explained earlier, the grades specified in paragraph 2 of the Circular letter dated July 29, 1967 are applicable only to those who specifically hold the posts of Lecturer.
There are a limited number of such posts, and appointment to them is strictly subject to the conditions detailed in paragraph 2 of the Circular letter.
In the result the appeals fail and are dismissed, but in the circumstances of the case there is no order as to costs.
N.V.K. Appeals dismissed.

Output:
The appellants who were employed as Masters and Mistresses in High and Higher Secondary Schools run by the State Government and possessed an M.A. or M.Sc.
or B.T. or B.Ed.
degree contended in their writ petitions that they were paid according to the pay scale of Rs. 220 500 and claimed that they were entitled to either of the higher grades set forth in paragraph 2 of the State Government Circular Letter dated July 29, 1967 viz. Rs. 300 25 450/25 600 for those with 1st and 2nd Division Master 's Degree and Rs. 250 25 450/25 250 for those with 3rd Class Master 's Degree.
The High Court negatived their contentions and dismissed the writ petition, and this was affirmed by the Division Bench in appeal.
Dismissing the Appeal to this Court, ^ HELD: 1.
The grades specified in paragraph 2 of the Circular Letter dated July, 29, 1967 are applicable only to those who specifically hold the posts of lecturer.
There are a limited number of such posts, and appointment to them is strictly subject to the conditions detailed in paragraph 2 of the Circular Letter.
The contention on behalf of the appellants that on the principle of "equal pay for equal work" Randhir Singh vs Union of India and Ors., ; they are entitled to the grades mentioned in para 2 of the Circular Letter dated July 29, 1967 has there fore to be negatived.
[888 D; C] 2.
The appellants claim the benefit of paragraph 2 of the Circular Letter dated July 29, 1967 and therefore no reliance can be placed by them on the Circular Letters dated February, 19, 1979 and September, 20, 1979 which relate merely (o the scheme embodied in the Circular Letter 883 dated July 23, 1957.
The Circular Letter dated July, 29, 1967 operates on a very different plane from the Circular Letter dated July 23, 1957.
[888 B; 885 E] 3.
The decision of this Court in State of Punjab vs Kirpal Singh Bhatia; , is of no assistance to the appellants.
That was a case which was primarily concerned with Circular Letter dated July, 23, [885 D]


Input:
Civil Appeal No. 2307 of 1969 (Appeal by Special leave from the Award dated the 1st April 1969 of the Addl.
Industrial Tribunal, Delhi in I. D. No. 83 of 1968) and Civil Appeals Nos.
1857 1859/70.
(Appeals by Special Leave from the Judgment and order dated the 17th November 1969 of the Addl.
Labour Court, Madras in claim Petition Nos.
627 and 629 of 1968).
M. K. Ramamurthi and Jitendra Sharma and Janardan Sharma, for the appellants in both the appeals.
371 section N. Andley, (Rameshwar Nath and B. R. Mehta in CAs 1857 A 59/70) for respondents in both the appeals.
The Judgment of the Court was delivered by UNTWALIA, J.
As the main question for determination in these appeals by special leave is common, they have been heard together and are being disposed of by this judgment.
Civil Appeal No. 2307 of 1969 The respondent company in this appeal has its Head office at Bombay.
It manufactures tyres at its Bombay factory and sells the tyres and other accessories in the markets throughout the country.
The company has a Distribution office at Nicholson Road, Delhi.
There was a strike in the Bombay factory from 3rd March, 1967 to 16th May, 1967 and again from 4th October, 1967.
As a result of the strike there was a short supply of tyres etc.
to the Distribution office.
In the Delhi office, there were 30 employees at the relevant time.
17 workmen out of 30 were laid off by the management as per their notice dated the 3rd February, 1968, which was to the following effect: "Management is unable to give employment to the following workmen due to much reduced production in the company 's factory resulting from strike in one of the factory departments.
These workmen are, therefore, laid off in accordance with law with effect from 5th February, 1968." The lay off of the 17 workmen whose names were mentioned in the notice was recalled by the management on the 22nd April, 1968.
The workmen were not given their wages or compensation for the period of lay off.
An industrial dispute was raised and referred by the Delhi Administration on the 17th April, 1968 even when the layoff was in operation.
The reference was in the following terms: "Whether the action of the management to 'lay off ' 17 workmen with effect from 5th Feb. 1968 is illegal and/or unjustified, and if so, to what relief are these workmen entitled? The Presiding officer of the Additional Industrial Tribunal, Delhi has held that the workmen are not entitled to any lay off compensation.
Hence this is an appeal by their Union.
We were informed at the Bar that some of the workmen out of the batch of 17 have settled their disputes with the management and their cases were not represented by the Union in this appeal.
Hence this judgment will not affect the compromise or the settlement arrived at between the management and some of the workmen.
The question which for our determination is whether the management had a right to lay off their workmen and whether the workmen are entitled to claim wages or compensation.
372 The simple dictionary meaning according to the Concise oxford Dictionary of the term 'lay off ' is "period during which a workman is temporarily discharged.
" The term 'lay off ' has been well known in the industrial arena.
Disputes were often raised in relation to the 'lay off ' of the workmen in various industries.
Sometime compensation was awarded for the period of lay off but many a time when the lay off was found to be justified workmen were not found entitled to any wages or compensation.
In Gaya Cotton & Jute Mills Ltd. vs Gaya Cotton & Jute Mills Labour Union(l) the standing order of the company provided that the company could under certain circumstances "stop any machine or machines or department or departments, wholly or partially for any period or periods without notice or without compensation in lieu of notice." In such a situation for the closure of the factory for a certain period, no claim for compensation was allowed by the Labour Appellate Tribunal of India.
We are aware of the distinction betwen a lay off and a closure.
But just to point out the history of the law we have referred to this case.
Then came an amendment in the hereinafter referred to as the Act by Act 43 of 1953.
In section 2 clause (kkk) was added to say: "lay off" (with its grammatical variations and cognate expressions) means the failure, refusal or inability of an employer on account of shortage of coal, power or raw materials or the accumulation of stocks or the break down of machinery or for any other reason to give employment to a workman whose name is borne on the muster rolls of his industrial establishment and who has not been retrenched Explanation Every workman whose name is borne on the muster rolls of the industrial establishment and who presents himself for work at the establishment at the time appointed for the purpose during normal working hours on any day and is not given employment by the employer within two hours of his so presenting himself shall be deemed to have been laid off for that day within the meaning of this clause: Provided that if the workman, instead of being given employment at the commencement of any shift for any day is asked to present himself for the purpose during the second half of the shift for the day and is given employment then, he shall be deemed to have been laid off only for one half of that day: Provided further that if he is not given any such employment even after so presenting himself, he shall not be deemed to have been laid off for the second half of the shift for the day and shall be entitled to full basic wages and dearness allowance for that part of the day. '" (1) [1952] II Labour Law Journal, 37.
373 By the same Amending Act, Chapter VA was introduced in the Act to provide for lay off and retrenchment compensation.
Section 25A excluded the Industrial Establishment in which less than 50 workmen on an average per working day had been employed in the preceding calendar month from the application of Sections 25C to 25E. Section 25 C provides for the right of laid off workmen for compensation and broadly speaking compensation allowable is 50% of the total of the basic wages and dearness allowance that would have been payable 13 to the workman had he not been laid off.
It would be noticed that the sections dealing with the matters of lay off in Chapter VA are not applicable to certain types of Industrial Establishments.
The respondent is one such Establishment because it employed only 30 workmen at its Delhi office at the relevant time.
In such a situation the question beset with difficulty of solution is whether the laid off workmen were entitled to any compensation, if so, what '? We shall now read section 25 J.
It says: "(1) The provisions of this Chapter shall have effect not withstanding anything inconsistent therewith contained in any other law including standing orders made under the Industrial Employment (Standing orders) Act, 1946: Provided that where under the provisions of any other Act or Rules, orders or notifications issued thereunder or under any standing orders or under any award, contract of service or otherwise, a workman is entitled to benefits in respect of any matter which are more favourable to him than those to which he would be entitled under this Act, the workman shall continue to be entitled to the more favourable benefits in respect of that matter, notwithstanding that he receives benefits in respect of other matters under this Act.
For the removal of doubts, it is hereby declared that nothing contained in this Chapter shall be deemed to affect the provisions of any other law for the time being in force in any State in so far as that law provides for the settlement of industrial disputes, but the rights and liabilities of employers and workmen in so far as they relate to layoff and retrenchment shall be determined in accordance with the provisions of this Chapter.
" The effect of the provisions aforesaid is that for the period of lay off in an Industrial Establishment to which the said provisions apply, compensation will have to be paid in accordance with section 25C.
But if a workman is entitled to benefits which are more favourable to him than those provided in the Act, he shall continue to be entitled to the more favourable benefits.
The rights and liabilities of employers and workmen in so far as it relate to lay off and retrenchment, except as provided in section 25J, have got to be determined in accordance with the provisions of Chapter VA.
The ticklish question which does not admit of an easy answer is as to the source of the power of management to lay off a workman.
The employer has a right to terminate the services of a workman.
Therefore, his power to retrench presents no difficulty as retrenchment means the termination by the employer of the service of a workman for any reason whatsoever as mentioned in clause (oo) of section 2 of the 374 Act.
But lay off means the failure, refusal or inability of employer on account of contingencies mentioned in clause (kkk) to give employment to a workman whose name is borne on the Muster Rolls of his Industrial Establishment.
It has been called a temporary discharge of the workman or a temporary suspension of his contract of service.
Strictly speaking, it is not so.
It is merely a fact of temporary unemployment of the workman in the work of the Industrial Establishment.
Mr. section N. Andley submitted with reference to the explanation and the provisions appended to clause (kkk) that the power to lay off a workman is inherent in the definition.
We do not find any words in the definition clause to indicate the conferment of any power on the employer to lay off a workman.
His failure or inability to give employment by itself militates against the theory of conferment of power.
The power to lay off for the failure or inability to give employment has to be searched somewhere else.
No section in the Act confers this power.
There are two small matters which present some difficulty in the solution of the problem.
In explanation (1) appended to sub section ( 2) of section 25B the words used are: "he has been laid off under an agreement or as permitted by standing order made under the Industrial Employment (Standing orders) Act, 1946, or under this Act or under any other law applicable to the industrial establishment.
" indicating that a workman can be laid off under the also.
But it is strange to find that no section in Chapter VA in express language or by necessary implication confers any power, even on the management of the Industrial Establishment to which the relevant provisions are applicable, to lay off a workman.
Clause (ii) of section 25E says: "No compensation shall be paid to a workman who has been laid off If he does not present himself for work at the establishment at the appointed time during normal working hours at least once a day." This indicates that there is neither a temporary discharge of the work man nor a temporary suspension of his contract of service.
Under the general law of Master and Servants an employer may discharge an employee either temporarily or permanently but that cannot be without adequate notice.
Mere refusal or inability to give employment to the workman when he reports for duty on one or more grounds mentioned in clause (kkk) of section 2 is not a temporary discharge of the work man.
Such a power, therefore, must be found out from the terms of contract of service or the Standing orders governing the establishment.
In the instant case the number of workmen being only 30, there were no Standing orders certified under the Industrial employment (Standing orders) Act, 1946.
Nor was there any term of contract of service conferring any such right of lay off.
In such a situation the conclusion seems to be inescapable that the workmen were laid off without any authority of law or the power in the management under the contract of service.
In Industrial Establishments where there is a power in the management to lay off a workman and to which the 375 provisions of Chapter VA apply, the question of payment of compensation will be governed and determined by the said provisions.
Otherwise Chapter VA is not a complete Code as was argued on behalf of the respondent company in the matter of payment of lay off compensation.
This case, therefore, goes out of Chapter VA.
Ordinarily and generally the workmen would be entitled to their full wages but in a reference made under section 10(l) of the Act, it is open to the Tribunal or the Court to award a lesser sum finding the justifiability of the lay off.
` In The Management of Hotel Imperial, New Delhi & others vs Hotel Workers ' Union(l) in a case of suspension of a workman it was said by Wanchoo, J. as he then was, delivering the judgment on behalf of the Court at page 482: "Ordinarily, therefore, the absence of such power either as an express term in the contract or in the rules framed under some statute would mean that the master would have no power to suspend a workman and even if he does so in the sense that he forbids the employee to work.
he will have to pay wages during the so called period of suspension.
Where, however.
there is power to suspend either in the contract of employment or in the statute or the rules framed thereunder, the suspension has the effect of temporarily suspending the relation of master and servant with the consequence that ` the servant is not bound to render service and the master is not bound to pay.
" The same principle was reiterated in V. P. Gindroniya vs State of Madhya Pradesh & Ors.(2) We have referred to the suspension cases because in our opinion the principles governing the case of lay off are very akin to those applicable to a suspension case.
In Veiyra (M. A.) vs Fernandez (C. P.) and another(3) a Bench of the Bombay High Court opined that under the general law the employer was free to dispense with the services of a workman but under the he was under an obligation to lay him off; that being so, the action of lay off by the employer could not .
be questioned as being ultra vires.
We do not think that the view expressed by the Bomby High Court is correct.
There is an important decision of this Court in Workmen of Dewan Tea Estate and ors.
vs The Management(4) on which reliance was placed heavily by Mr. M. K. Ramamurti appearing for the appellant and also by Mr. Andley for the respondent.
One of the question for consideration was whether section 25C of the Act recognises the common law right of the management to declare a lay off for reasons other than those specified in the relevant clause of the Standing order.
While considering this question, Gajendragadkar, J. as he then was.
said at page 554: "The question which we are concerned with at this stage is whether it can be said that s.25C recognises a common law (1) ; (2) [1970] 3 S.C.R. 448.
(3) [1956] I Labour Law Journal, 547.
(4) []964] S S.C.R. 548.
376 right of the industrial employer to lay off his workmen.
This question must, in our opinion, be answered in the negative.
When the laying off of the workmen is referred to in section 25C, it is the laying off as defined by section 2 (kkk) and so, workmen who can claim the benefit of section 25C must be workmen who are laid off and laid off for reasons contemplated by section 2 (kkk); that is all that section 25C means.
Then follows a sentence which was pressed into service by the respondent.
It says: "If any case is not covered by the Standing orders, it will necessarily be governed by the provisions of the Act, and layoff would be permissible only where one or the other of the factors mentioned by section 2 (kkk) is present, and for such lay off compensation would be awarded under section 25C." In our opinion, in the context, the sentence aforesaid means that if the power of lay off is there in the Standing orders but the grounds of lay off are not covered by them, rather, are governed by the provisions of the Act, then lay off would be permissible only on one or the other of the factors mentioned in clause (kkk).
Subsequent discussions at pages 558 and 559 lend ample support to the appellant 's argument that there is no provision in the Act specifically providing that an employer would be entitled to lay off his workmen for the reasons prescribed by section 2 (kkk).
Mr. Andley placed strong reliance upon the decision of this Court in Sanjhi Jeevraj Ghewar Chand & Ors.
vs Secretary, Madras Chillies, Grains Kirana Merchants Workers ' Union & Anr.(l) The statute under consideration in this case was the and it was held that the Act was intended to be a comprehensive and exhaustive law dealing with the entire subject of bonus of the persons to whom it should apply.
The Bonus Act was not to apply to certain Establishments.
Argument before the Court was that bonus was payable de hors the Act in such establishment also.
This argument was repe11ed and in that connection it was observed at page 381: "It will be noticed that though the confers substantive rights on workmen with regard to lay off, retrenchment compensation, etc., it does not create or confer any such statutory right as to payment to bonus.
Bonus was so far the creature of industrial adjudication and was made payable by the employers under the machinery provided under that Act and other corresponding Acts enacted for ,.
investigation and settlement of disputes raised thereunder.
There was, therefore, no question of Parliament having to delete or modify item S in the Third Schedule to or any such provision in any corresponding Act or its having to exclude any right to bonus thereunder by any categorical exclusion in the present case." And finally it was held at page 385: "Considering the history of the legislation, the background and the circumstances in which the Act was enacted, the (1) [1969] I S.C.C. 366.
377 object of the Act and its scheme, it is not possible to accept A the construction suggested on behalf of the respondents that the Act is not an exhaustive Act dealing comprehensively with the subject matter of bonus in all its aspects or that Parliament still left it open to those to whom the Act does not apply by reason of its provisions either as to exclusion or exemption to raise a dispute with regard to bonus through Industrial adjudication under the or other corresponding law.
" In a case of compensation for lay off the position is quite distinct and different.
If the term of contract of service or the statutory terms engrafted in the Standing orders do not give the power of lay off to the employer, the employer will be bound to pay compensation for the period of lay off which ordinarily and generally would be equal to the full wages of the concerned workmen.
If, however, the terms of r employment confer a right of lay off on the management, then, in the case of an industrial establishment which is governed by Chapter VA, compensation will be payable in accordance with the provisions contained therein.
But compensation or no compensation will be payable in the case of an industrial establishment to which the provisions of Chapter VA do not apply, and it will be so as per the terms of the employment.
In Kanhaiya Lal Gupta vs Ajeet Kumar Dey and others(l) a learned single Judge of the Allahabad High Court seem to have rightly held that in the absence of any term in the contract of service or in the statute or in the statutory rules or standing orders an employer has no right to lay off a workman without paying him wages.
A learned single Judge of the Punjab and Haryana High Court took an identical view in the case of Steel and General Mills Co. Ltd. vs Additional District Judge, Rohtak and others.
(2) The majority view of the Bombay High Court in K. T. Rolling Mills Private Ltd. and another vs M. R. Meher and other(8) that it is not open to the Industrial Tribunal under the Act to award lay off compensation to workmen employed in an 'Industrial Establishment ' to which section 25 C does not apply, is not correct.
The source of the power of the employer to lay off workmen does not seem to have been canvassed or discussed by the Bombay High Court in the said judgment.
In the case of the Delhi office of the respondent the Tribunal has held that the lay off was justified.
It was open to the Tribunal to award a lesser amount of compensation than the full wages.
Instead of sending back the case to the Tribunal, we direct that 75% the basic wages and dearness allowance would be paid to the workmen concerned for the period of lay off.
As we have said above this will not cover the case of those workmen who have settled or compromised their disputes with the management.
Civil Appeals 1857 1859 (NL) of 1970 In these appeals the facts are identical to those in the other appeal.
There were only 33 employees in the Madras office of the respondent company.
Certain workmen were laid off for identical reasons from the (1) [1967] II Labour Law Journal, 761.
(2) [1972] 1 Labour Law Journal, 284.
(3) A.I.R. 1963 Bombay, 146.
378 5th February, 1968.
The lay off was lifted on the 29th April, 1968.
The concerned workmen filed petitions under section 33C (2) of the Act for computation of their wages for the period of lay off.
Holding that the lay off was justified and valid the Presiding officer of the Additional Labour Court, Madras has dismissed their applications for salary and allowances for the period of lay off.
Hence these appeals.
In a reference under section 10 (1) of the Act it is open to the Tribunal or the Court to award compensation which may not be equal to the full amount of basic wages and dearness allowance.
But no such power exists in the Labour Court under section 33C (2) of the Act.
only the money due has got to be quantified.
If the lay off could be held to be in accordance with the terms of the contract of service, no compensation at all could be allowed under section 33C (2) of the Act, while, in the reference some compensation could be allowed.
Similarly on the view expressed above that the respondent company had no power to lay off any workmen, there is no escape from the position that the entire sum payable to the laid off workmen except the workmen who have settled or compromised, has got to be computed and quantified under section 33C(2) of the Act for the period of lay off.
For the reasons stated above all the appeals are allowed.
In Civil Appeal No. 2307/1969 in place of the order of the Tribunal, an order is made on the lines indicated above.
And in Civil Appeals 1857 to 1859/1970 the orders of the Labour Court are set aside and the cases of the appellants are remitted back to that Court for computation and quantification of the sums payable to the concerned workmen for the period of lay off.
There will be no order as to costs in any of the appeals.
S.R Appeals allowed: Orders in CA 2307/69 modified : CAs 1857 1859/70 remitted hock to the Tribunal.

Output:
The respondent company manufacturing tyres in Bombay, due to the general strike in its factory between the period 3rd March 1967 and 16th May 1967 and again from 4th October 1967 and due to the consequent short supply of tyres had to lay off 17 out of its 30 workmen in the Delhi distribution office and also some out of its 33 workmen in its Madras distribution office.
The workmen in the Delhi and Madras offices were called back to duty on 22nd April 1968 and 29th April 1968 respectively.
The workmen were not given their wages or compensation for the period of lay off.
An industrial dispute was raised and referred to the tribunal by the Delhi Administration even when the lay off was in operation.
The Presiding officer of the Additional Industrial Tribunal, Delhi held that the workmen were not entitled to any layoff compensation.
The workmen in Madras filed petitions under section 33C(2) of the for computation of their wages for the period of their lay off.
The Presiding officer of the Additional Labour Court, Madras, holding that the lay off was justified, dismissed their applications.
on appeal to this Court by special leave, ^ HELD: (I) The simple dictionary meaning according to the concise oxford Dictionary of the term "lay ofF ' is "period during which a workman is temporarily discharged".
Lay off means the failure, refusal or inability of employer on account of contingencies mentioned in cl.
(kkk) of section 2 of the , to give employment to a workman whose name is borne on the Muster Rolls of his Industrial Establishment.
It has been called a temporary discharge of the workmen or a temporary suspension of his contract of service.
Strictly speaking, it is not so.
It is merely a fact of temporary unemployment of the workman in the work of the lndustrial Establihment.
Mere refusal or inability to give employment to the workman when he reports for duty on one or more grounds mentioned in cl.
(kkk) of section 2 is not a temporary discharge of the workman.
[372A, 374A, B, G] Gaya Cotton & Jute Mills Ltd. vs Gaya Cotton & lute Mills Labour Union [1952] II Labour Law Journal 37, referred to.
(2)(i) That the power to lay off a workman is inherent in the definition in cl.
(kkk) of section 2 is not correct, since no words in the definition clause to indicate the conferment of any power on the employer to lay off a workman can be found.
His failure or inability to give employment, by itself militates against the theory of conferment of power.
No section in Chapter VA in express language or by necessary implication confers any power, even on the management of the Industrial Establishment to which the relevant provisions are applicable, to lay off a workman.
There is no provision in the Act specifically providing that an employer would be entitled to lay off his workmen 370 for the reasons prescribed by section 2 (kkk).
Such a power, therefore, must be found out from the terms of contract of service or the Standing orders governing the Establishment.
[374 B G] (ii) In the instant case, the number of workmen being only 3, there being no Standing orders certified under the Industrial Employment (Standing orders) Act (Act 20 of 1946), 1946, and there being no contract of service conferring any such right of lay off, the inescapable conclusion is that the workmen were laid off without any authority of law or the power in the management under the contract of service.
[374 G H] The Management of Hotel Imperial New Delhi & others vs Hotel Workers Union ; and V. P. Gindroniya vs State of Madhya Pradesh & ors.
[1970] 3 S.C.R. 448, referred to.
Veiyra (MA ) Fernandez (CP.) and another [1956] 1 Labour Law Journal.
547, reversed.
Workmen of Dewan Tea Estate and ors.
vs The Management [19641 S S.C.R. 548, applied.
Sanghi Jeevaraj Ghewar Chand & ors vs Secretary Madras Challies Grains Kirana Merchants Workers Union and Anr. , distinguished.
(3) If the terms of a contract of service or the statutory terms engrafted in the Standing orders do not give the power to lay off to the employer, the employer would be bound to pay compensation for the period of lay off which ordinarily and general would be equal to the full wages of the concerned V workman.
If, however, the terms of employment confer a right of lay off on the management then in the case of an Industrial Establishment which is governed by Chapter VA, compensation will be payable in accordance with the provisions contained therein.
But compensation or no compensation will be payable in the case of an Industrial Establishment to which the provisions of Chapter VA do not apply and it will be so as per the terms of employment.
[377 B D] Kanhaiya Lal Gupta vs Ajeet Kumar Dey and others [1967] II Labour Law Journal.
761 and Steel and General Mills Co. Ltd v Additional District judge Rohtak and others [1972] 1 Labour Law Journal, 2847 approved.
K. T Rolling Mills Private Ltd. and another vs M R Meher and others A.I.R. 1963 Bombay 146.
reversed.
(4) In a reference under section 10(l) of the Act.
it is open to the tribunal or court to award compensation which may not be equal to the full amount of basic wages and dearness allowance.
But no such power exists in the Labour Court under section 33C(2) of the Act.
Only the money due has to be quantified.
If the lay off could be held to be in accordance with the terms of contract of service.
no compensation at all could be allowed under section 33C(2) of the Act, while in the reference some compensation could be allowed.
[378 B Cl [In the instant case as regards the workmen in the Delhi case.
the court held 75% of the basic wages and dearness allowance would be the adequate compensation for the lay off period.]


Input:
Appeal No. 315/1958.
Appeal by special leave from the judgment and order dated February 5, 1957, of the Bombay High Court in I.T.R. No. 34/1956.
372 R. J. Kolah, and I. N. Shorff, for the appellant.
A. N. Kripal and D. Gupta, for the respondent.
January 6.
The Judgment of the court was delivered by KAPUR, J.
This is ail appeal against the judgment and order of the High Court of Judicature at Bombay in Income tax Reference No. 34 of 1956.
The appellant is a non resident Bank incorporated under the National Bank Act of the United States of America with its head office in that country and with branches all over the world including some branches in India.
It was assessed under the Business Profits Tax Act (Act XXI of 1947), hereinafter termed the " Act ", in respect of the chargeable accounting periods: 1 4 1946 to 24 12 1946, 25 12 1946 to 24 12 1947, 25 12 1947 to 23 12 1948, and 24 12 1948 to 31 3 1949 and the sole question for decision in this appeal is the meaning of the word " reserves " in R. 2(1) of Schedule 2 of the Act and how the capital of the appellant during the above mentioned chargeable accounting periods has to be computed for the purpose of allowing the " abatement " under the Act.
The appellant contended that in computing the amount for the purpose of abatement it was entitled to include what is termed in the United States " Undivided Profits ", the contention being that this item falls within the word " reserves" in R. 2(1) of Schedule 11 of the Act which provides: "Where the company is one to which rule 3 of Schedule I applies, its capital shall be the sum of the amounts of its paid up share capital and of its reserves in so far as they have not been allowed in computing the profits of the company for the purpose of the Indian Income tax Act, 1922 (XI of 1922), diminished by the cost to it of its investments or other property the income from which is not includable in the profits, so far as that cost exceeds any debt for money borrowed by it.
" 373 It is not necessary to give the details of all the years; but it will be sufficient as an illustration if we: were to confine ourselves to the " Undivided Profits " in the Balance Sheet as on December 31, 1946, wherein the relevant entries were as follows : Capital . $ 77,500,000 00 Surplus . $ 152,500,000.00 Undivided Profit . $ 29,534,614.21 The Report of the Directors dated January 14, 1947, was as follows: " At the year end, Capital of the Bank remains at $ 77,500,000 surplus has increased to $ 152,500,000 by the transfer of Rs. 10,000,000 from Undivided Profits.
After this transfer, Undivided Profits are $ 29,534,614 an increase of $ 240,376 from a year ago.
The Trust Company has Capital of $ 10,000,000 surplus of s 10,000,000 and Undivided Profits of $ 8,097,020.
The two institutions thus show total capital funds, that is Capital, Surplus and Undivided Profits of $ 287,631,634 or $ 46 39 per share compared with $ 44.60 per share at the end of 1945.
" According to the Balance Sheet of 1948, capital funds since 1939 had increased from $ 169,768 thousands to $ 320,795 thousands in the year 1948 and there had been a progressive increase both in what is called " Surplus " as well as " Undivided Profits ", the former increased from $ 62,500 thousands to $ 182,500 thousands and the latter from $ 19,768 thousands to $ 50,795 thousands.
The question in this case is whether this large sum of money shown as " Undivided Profits " is a part of the Reserves or is equivalent to the unallocated amount carried forward at the end of a year of account in the balance of Profit & Loss Account as we know it.
It was the sum of $ 29,534,614.21 and similar sums for the other chargeable Accounting Periods which are the subject matter of controversy in this appeal.
Both the Income tax Officer and the Appellate Assistant Commissioner excluded these amounts in determining the capital of the Bank under R. 2(1) of Schedule II on the ground that they were not a part of the reserves of the Bank.
374 The appellant took an appeal to the Income tax Appellate Tribunal which was dismissed on the ground that " Undivided Profits " meant nothing more than the " Balance of the profits and loss account" and that no distinction could be drawn merely because in the nomenclature used in the United States, the amount was shown as " Undivided Profits" and not balance of the profit and loss account.
At the instance of the appellant the following question of law was referred to the High Court.
" Whether on the facts and in the circumstances of the case I Undivided Profits ' of $ 29,534,614.21 shown in the condensed statements of conditions as of December 31, 1946, can be treated as reserves and added to the capital, as required by rule 2(1) of Schedule II to the Business Profits Tax Act for the chargeable accounting period 25 12 1946 to 24 12 1947?" In its order the Tribunal said that the Treasury Rules in United States divided capital account into four different heads, Capital, Reserve, Surplus and the Undivided Profits.
The reserves are really reserves for liabilities including the reserves for dividends.
" The general reserves as shown by the balance sheet in India is equivalent to the Surplus.
The undivided profits is equivalent to the balance of profit and loss account.
" In the statement of the Case submitted to the High Court, the Appellate Tribunal stated that the question whether the Undivided Profits meant the same thing as balance of the profit and loss account was a question of fact and it did not matter what name was given to it.
But this was the very question which was referred to the High Court.
The High Court after referring to the Directors ' Report to the shareholders held that the Undivided Profit of $ 29,534,614.21 did not constitute " reserves " because no direction had been given in regard to it, it had never been transferred to any reserve and had never been earmarked for any particular purpose and that the only act of volition on the part of the Directors of the Bank was the transfer of 10 million 375 dollars to the Surplus.
In its judgment the High Court said : "It is true that these large amounts (of Un divided Profits) remain with the Bank, that the Bank uses them, that business is carried on with the help of those funds and that they are as much capital of the Bank as capital in the strict sense of the term. " The High Court however held that they did not satisfy the test laid down by the Supreme Court in Century Spinning & Manufacturing Co. Ltd. vs C.I.T., Bombay (1) as the amount was not transferred to any reserve and there being no act of volition on the part of the Directors this could not be regarded as Reserve.
The correctness of this view is challenged before us.
The Directors ' report dated January 14, 1947, shows that the surplus increased as a result of the allocation made by the Directors, by 10 million Dollars, which was taken from Undivided Profits and the Undivided Profits themselves increased to $29,534,614.21 which was an increase of $240,376 in the year 1946 and therefore the Capital Funds of the company which included Capital, Surplus and Undivided Profits along with similar items from the Trust Company had increased considerably which was reflected in per share increase, i.e., 44.60 per share at the end of 1945 to 46.39 per share at the end of 1946 thus showing that it was the result of an act of the Directors that Surplus was increased and a particular sum was left in the Undivided Profits.
It was contended that no sum could be treated as 'Reserves ' unless the Directors recommended it to be so allocated and it was so adopted by the shareholders.
But this argument ignores the evidence placed by the appellant.
Under the Treasury Rules of the United States of America containing " Instructions for Preparation of Reports of Condition by National Banking Associations ", certain sums had to be specifically allocated under section 5211 of the revised Statute of the United States (Title Items 25 to 28, according to these instructions, deal (1) ; 376 with Capital Account.
Item 26 deals with 'Surplus ' and item 27 with 'Undivided Profits ' and item 28 with ' Reserves ' (and retirement account for preferred stock).
The following Reserves come under item 28: (a).
Reserve for dividends payable in Common stock.
(b) Reserves for other undeclared dividends.
(c) Retirement account for,preferred stock.
(d) Reserves for contingencies, etc.
Item 29 was as follows " Total capital accounts ".
This item is the sum of items 25 to 28, inclusive.
Along with this the appellant has placed a copy of the letter from the Deputy Controller of Currency, Washington, the relevant portion of which is as follows : " In connection with this matter we wish to assure you that your position as stated is in complete accord with that of the Office of the Comptroller of the Currency.
In the United States, the 'Undivided Profits ' as reflected in the accounting of a bank actually represents a part of its capital funds.
All of the other bank supervisory agencies in the United States consider the 'Undivided Profits ' of a bank as a part of its capital funds.
In any calculation for the purpose of determining the adequacy of capital in a: commercial bank in the United States, the supervisory authorities include 'Undivided Profits ' as an integral part of the capital structure as it would not be possible otherwise to make an accurate computation.
When losses occur in banks, it is the usual practice in many banks to charge them against the 'Undivided Profits ' account which by any reasoning would be inappropriate if the account were regarded as ' Undistributed Profits '.
In commercial banks in the United States, it is not customary to maintain any account that could be regarded specifically as 'Undistributed Profits ' in the same.
sense as applied to similar accounts in the other corporations in India.
The term 'Undivided Profits ' simply follows a bank accounting nomenclature used ill the 'United States to 377 designate profits set aside, after provisions for expenses and taxes, dividends and reserves, for continuous future use in the business of the bank ' and it bears a close, if not identical, relationship to the Earned Surplus Account of an industrial corporation.
Balance sheets of three other banks of the United States relied on by the appellant show that Capital Fund comprises three kinds of funds, i.e., Capital, Surplus and Undivided Profits.
The documents placed on the record show that these three different kinds of funds put together make up what is called " Capital Fund '.
The creation and maintenance of the item known as Undivided Profits is a requirement of the Treasury Rules which are made under the Statute and therefore it cannot be said that the amount of Undivided Profits in the Balance Sheet was not allocated as a result of either a resolution of the Directors, accepted by the shareholders or on account of the requirements of the law.
The " Undivided Profits " have to be employed in the manner indicated by the letter of the Deputy Controller of Currency.
They are set up for expenses, taxes, dividends and reserves for continuous use in the business of the Bank and are a part of the capital funds and an integral part of the capital structure and without it, it would not be possible to make an accurate computation.
The reason for the existence of this fund, as shown by that letter is that when there are losses, they can be charged against "Undivid ed Profits " which expression means profits set apart after provision for expenses and taxes etc.
for continuous use in the business of the Bank.
There is a difference between the system of accounting of Banking Companies in India and the United States; the failure to appreciate this difference has led the Appellate Tribunal as well as the High Court to arrive at an erroneous conclusion.
In India at the end of an year of account the unallocated profit or loss is carried forward to the account of the next year and such unallocated amount gets merged in the account of that year, In the system of accounting in the 48 378 U.S. A. each year 's account is self contained and ,nothing is carried forward.
If after allocating the profits to diverse heads mentioned above any balance remains, it is credited to the " Undivided Profits " which become part of the capital fund.
If in any year as a result of the allocation there is a loss the accumulated undivided profits of the previous years are drawn upon and if that fund is exhausted the Banking Company draws upon the surplus.
In its very nature the Undivided Profits are accumulation of amounts of residue on hand at the end of year of successive periods of accounting and these amounts are by the prevailing accounting practice and the Treasury directions regarded as a part of the capital fund of the Banking Company.
The nature of " Undivided Profits" was considered by the Supreme Court of America in Fidelity Title and Trust Co. vs United States (1).
In that case a suit was brought by the Fedelity Co. to recover the tax assessed on its whole capital and undivided profits under section 2 of the Spanish War Revenue Act.
In the Supreme Court it was contended by the company that the terms "Capital", " Surplus " and " Undivided Profits " have a precise and definite meaning in the business of banking and that Undivided Profits are not surplus and cannot therefore be taxed as " Surplus ".
The Government on the other hand contended that the undivided profits were taxable as being a part of Capital or Surplus.
The Court held that " Undivided Profits ".
were taxable as being a part of the Capital employed.
Mr. Justice Brandeis delivering the opinion of the Court said at p. 955: " The Act declares that 'in estimating capital surplus shall be included, ' and that the 'annual tax shall in all cases be computed on the basis of the capital and surplus for the preceding fisical year. . . . . . . " As it is the use or employment of capital in banking, not mere possession thereof by the banker, which determines the amount of tax, the fact that a portion of the capital so used or employed is (1) ; ; 379 designated 'undivided profits ' is of no legal signi ficance." As to what the word " Reserves " as used in the Business Profits Tax Act connotes, was considered by this Court in the Commissioner of Income tax vs Century Spinning & Manufacturing Co. Ltd. (1).
It was held that the true nature and character of a sum disputed as reserve was to be determined with reference to the substance of the matter.
The amount in dispute in that case was the profits after the deduction of depreciation and tax which amount was carried to the Balance Sheet and was later recommended by the Directors to be appropriated mainly to dividends and balance to be carried forward to the next year 's account.
Thus on the crucial date, i.e., April 1, 1946, from which the Chargeable Accounting Period began the sum in dispute had not been declared as reserve; on the other hand the Directors had earmarked it for distribution as dividend and it remained as a mass of undistributed profits available for distribution.
At page 209 Ghulam Hassan J. said: "The reserve may be a general reserve or a specific reserve, but there must be a clear indication to show whether it was a reserve either of the one or the other kind.
The fact that it constituted a mass of undistributed profits on the 1st January ' 1946, cannot automatically make it a reserve . . . . .A reserve in the sense in which it is used in rule 2 can only mean profit earned by a company and not distributed as dividend to the shareholders but kept back by the directors for any purpose to which it may be put in future. . . . " Applying this test to the disputed sum, it cannot be said that the amount is not "Reserve" within the meaning of the Rules.
As is shown by the instruction under section 5211 of the Revised Statute of the United States and the letter of the Deputy Controller referred to above, the appellant bank was required to keep a, certain sum of money under the head " Undivided ,Profits " and that is an integral part of the capital (1) ; 380 structure.
Under these circumstances it would be erroneous not to treat the amount of " Undivided Profits " as a part of the capital fund.
In our opinion therefore the amount designated as Undivided Profits " is a part of the reserves and has to be taken into account when computing the capital and reserves within R. 2(1) of Schedule 11 of the Act.
The question which was referred by the Tribunal should have been decided in the affirmative and in favour of the appellant and the amount should have been added to the capital as allowed by R. 2(1) for the Chargeable Accounting Periods.
In the result the appeal is allowed.
The appellant will have its costs in this Court and in the High Court.
Appeal allowed.

Output:
The appellant, a non resident Banker incorporated under the National Bank Act of the United States of America with its Head Office in America, was assessed under Business Profits Tax Act, 147.
Under the Treasury Rules of the United States of America and Instructions for preparation of reports of conditions by the National Banking Association certain sums had to be specifically allocated under section 5211 of the Revised Statute of the United States, and the appellant bank was required to keep a certain sum of money under the head " undivided profits " and that was an integral part of tile capital structure.
The reason for the existence of this fund was that when losses occurred according to the practice they could be charged against " undivided profits ", i.e., profits set apart after provision for expenses and taxes etc.
for continuous use in the business of the Bank.
The appellant contended that in computing the amount for the purpose of " abatement " it was entitled to include the undivided profits " which fell within the word " reserves ".
The question was whether the large sum of money shown as " undivided profits " was a part of the reserves.
Held, that the amount designated as " undivided profits was a part of the reserves and had to be taken into account when computing the capital and reserves within Rule 2(1) of Sch.
II of the Business Profits Tax Act, 1947.


Input:
Appeal No. 92 of 59.
Appeal from the judgment and order dated August 31, 1956, of the Orissa High Court in second appeal No. 1.5.1 of 1951.
A. V. Viswanatha Sastri and T. V. R. Tatachari, for the appellant.
M. section K. Sastri, for respondents.
674 1961.
September 20.
The Judgment of the Court was delivered by GAJENDRAGADKAR, J.
This is an appeal by a certificate granted by the High Court of Orissa and it raises a short question about the scope and effect of the provisions of section 7 (1) of the Orissa Tenants Protection Act, 1948 (Act III of 1948) (hereafter called the Act).
The appellant Magiti Sasamal sued the respondents Pandab Bissoi and others in the Court of the District Munsiff, Berhampur, for a permanent injunction restraining them from entering the suit lands belonging to the appellant.
The appellants case was that the suit lands belonged to him and were in his personal cultivation for many years.
In the year of the suit the appellant had cultivated the said lands as usual, manured and raised paddy crop thereon after spending a large amount in that behalf According to the appellant the respondents had no manner of right or title to the said lands and had never cultivated them.
From the notice given by them to the appellant, however, it appeared that the respondents wanted to enter upon the lands forcibly and to remove the standing crop therefrom.
This they desired to do by setting up a false claim that they were the tenants of the lands and as such were entitled to the protection of the Act.
The appel lant alleged that the respondents were local rowdies and were known for their high handed action in the neighbourhood.
On these allegations the appellant claimed a permanent injunction against the respondents.
The respondents admitted the title of the appellant to the lands in suit but pleaded that they were the tenants in respect of separate portions of the said lands.
Their version was that they had cultivated their holdings and raised the paddy crop thereon in the year in question.
According to them they had been in cultivating possession of their respective holdings as tenants long before September 1, 1947, and so they were entitled to remain in possession as such tenants under the 675 they had filed petitions under the Act before the Sub Collector, Berhampur, claiming appropriate relief against the appellant.
They urged that they were ever ready and willing to pay the Rajabhag as provided by the Act and they contended that the Suit was not maintainable in a civil court.
On these pleadings the learned trial judge framed appropriate issues.
Three issues of law had been framed by him on the pleas raised by the respondents.
These issues were, however, not pressed at the hearing, One of them, namely issue 5, refers to the jurisdiction of the Court to try the suit in view of the provisions of the Act.
Thus, it if; clear that the issue of jurisdiction was not pressed by the respondents at the trial.
On the merits the learned trial judge considered the evidence and held that though the appellant was the owner of the property the respondents had proved that they were the tenants in possession of their respective holdings and that their possession was long before September 1, 1947.
On these findings the learned judge came to the conclusion that the appellant was not entitled to claim an injunction against the respondents and so he dismissed his suit.
The matter was then taken by the appellant before the District Judge, Ganjam, Nayagarh.
The learned District Judge considered the evidence led by the parties and reversed the conclusions of the trial court.
He held that the onus was on the respondents to prove their possession of their respective holdings as tenants on or before the specified date, and according to him they had failed to dis charge that onus.
The question of jurisdiction was not raised before the appellate court by the respondents.
Having held against the respondents on the merits the learned District Judge allowed the appeal, set aside the decree passed by the trial court and directed that an injunction should be issued against the respondents as claimed by the appellant.
676 The respondents then moved the High Court by second appeal ; and the main point which they urged before the High Court was that the learned trial judge had no jurisdiction to entertain the suit having regard to the provisions of section 7 (1) of the Act.
The appellant pointed out to the High Court that this question of jurisdiction bad not been pressed before the trial court and had not been raised before the lower appellate court.
Even so the High Court allowed the point to be raised and decided it in favour of the respondents.
As a result of the finding that the civil court bad no jurisdiction to entertain the suit the second appeal preferred by the respondents has been allowed and the appellant 's suit dismissed with costs throughout.
It is against this decree that the appellant has come to this Court with the certificate granted by the High Court; and the short point which has been raised before us on his behalf by Mr. Viswanatha Sastri is that in holding that the present suit is outside the jurisdiction of the civil court the High Court has misconstrued the scope and effect of the Provisions of section 7(1) of the Act.
The Act received the assent of the Governor General on February 5, 1948 and was published on February 14,194S.
It is a temporary Act and by s.1(4) it has been provided that it shall cease to have effect on April 15, 1949 except is respects things done or omitted to be done before the expiration thereof.
It has been passed in order to provide for temporary protection to certain classes of tenants in the Province of Orissa.
Legislature thought that the said tenants deserved protection and so as a beneficent measure the Act has been passed.
Section 2(c) of the Act defines landlord and section 2(g) defines a tenant.
The main operative provision of the Act is contained in section 3.
This Section provides that not withstanding anything contained in any other law for the time being in force, or any express or implied agreement to the contrary, but subject to the provisions of this Act, 677 a person who, on the first day of September 1947, was cultivating any land as a tenant shall continue to have the right to cultivate such land and it shall not be lawful for the landlord to evict the tenant from the land or interfere in any way with the cultivation of such land by the tenant.
It would thus be seen that the Act purports to provide protection to tenants who were in possession of lands on the appointed day which is September 1, 1947.
The other sub sections of section 3 make material and subsidiary provisions in regard to the said protection.
Section 7(1) reads thus: " 'Any dispute between the tenant and the landlord as regards, (a) tenant 's possession of the land on the 1st day of September, 1947 and his right to the benefits under this Act.
or (b) misuse of the land by the tenant, or (c) failure of the tenant to cultivate the land properly, or (d) failure of the tenant to deliver to the landlord the rent accrued due within two months from the date on which it becomes payable, or (e) the quantity of the produce payable to the landlord as rent, shall be decided by the Collector on the application of either of the parties".
The appellant contends that section 7(1) covers disputes between landlords and tenants which are specified under cls.
(a) to (e) but it does not cover a dispute between the parties as to whether the relationship of landlord and tenant 'exists between them.
It is only where such a relation ship is either admitted or established in a civil court that the specified disputes fall within the exclusive jurisdiction of the Collector on the other hand the respondents ' case is that the dispute as to the status of the tenant is also included under section 7(1).
The High Court has upheld the respondents ' interpretation, and Mr. Viswanatha Sastri contends that this interpretation is based on a misconstruction of the section.
It is true that having regard to the beneficent object which the Legislature had in view in passing the Act its material provisions should be liberally 678 construed.
The Legislature intends that the 'disputes contemplated by the said material provisions should be tried not by ordinary civil courts but by tribunals specially designated by it, and so in dealing with the scope and effect of the jurisdiction of such tribunals the relevant words used in the section should receive not a narrow but a liberal construction.
While bearing this principle in mind we must have regard to another important principle of construction, and that is that if a statute purports to exclude the ordinary jurisdiction of civil courts it must do so either by express terms or by the use of such terms as would necessarily lead to the inference of such exclusion.
As the Privy Council has observed in Secretary of State vs Mask & Co., (1) "it is settled law that the exclusion of the jurisdiction of the civil courts is not to be readily inferred, but that such exclusion must either be explicitly expressed or clearly implied".
There can be no doubt that ordinarily a dispute in regard to the relationship between the parties such as that between a landlord and a tenant would be a dispute of a civil nature and would fall within the competence of the civil court.
If the respondents contend that the jurisdiction of the civil court to deal with such a civil dispute has been taken away by section 7 (1) we must enquire whether section 7(1) expressly takes away the said jurisdiction or whether the material words used in the section lead to such an inference or the scheme of the Act inescapably establishes such an inference.
The relevance and materiality of both these principles are not in dispute.
Let us then revert to section 7.
It would be noticed that a. 7(1) has expressly and specifically provided for five categories of disputes which are within the jurisdiction of the Collector and which must therefore be taken to be excluded from the jurisdiction of the civil court.
On a reasonable construction of section 7(1) a dispute specified by section 7(1)(a) would be a dispute between a tenant and a landlord in regard (1) (1940) L. R. 67 1.
A. 222, 236.
679 to the former 's possession of the land on September 1, 1947.
It is clear that the dispute to which section 7(1)(a) refers is a narrow dispute as to the possession of the tenant on a specific date and his consequential right to the benefits of the Act.
The same is the position with regard to the other categories of the dispute specified by section 7(1).
In none of the said categories is a dispute contemplated as to the relationship of the parties itself.
In other words section 7(1) postulates the relationship of tenant and landlord between the parties and proceeds to provide for the exclusive jurisdiction of the Collector to try the five categories of disputes that may arise between the landlord and the tenant.
The disputes which are the subject matter of section 7(1) must be in regard to the five categories.
That is the plain and obvious construction of the words "any dispute as regards".
On this construction it would be unreasonable to hold that a dispute about the status of the tenant also falls within the purview of the said section.
The scheme of section 7(1) is unambiguous and clear.
It refers to the tenant and landlord as such and it contemplates disputes of the specified character arising between them.
Therefore, in our opinion, even on a liberal construction of section 7(1) it would be difficult to uphold the argument that a dispute as regards the existence of the relationship of landlord and tenant falls to be determined by the Collector under section 7(1).
In this connection it would be relevant to take into consideration the provisions of section 7(2).
This clause provides that the Collector may, after making such enquiries as he may deem necessary, order the tenant, by a notice served in the prescribed manner and specifying the grounds on which the order is made, to cease to cultivate the land.
It is significant that the making of the enquiry and its mode are left to the discretion of the Collector.
If a serious dispute as to the existence of the relationship of landlord and tenant between the parties had been covered by section 7(1) it is difficult to imagine that the 680 Legislature would have left the decision of such an important issue to the Collector giving him full freedom to make such enquiries as he may, deem necessary.
As is well known, a dispute as to the existence of the relationship of landlord and tenant raises serious questions of fact for decision, and if such a serious dispute was intended to be tried by the Collector the Legislature would have provided for an appropriate enquiry in that behalf and would have made the provisions of the Code of Civil Procedure applicable to such an enquiry.
Section 7(2) can be easily explained on the basis that the relationship between the parties is outside section 7(1) and so the disputes that are covered by section 7(1) are not of such a nature as would Justify a formal enquiry in that behalf The provisions of sub sections
(3), (6) and (7) also indicate that the relationship between the parties is not, and cannot be, disputed before the Collector.
The parties arrayed before him are landlord and tenant or vice versa, and it is on the basis of such relationship between them that he proceeds to deal with the disputes entrusted to him by section 7(1).
It is true that when the relationship of landlord and tenant is proved or admitted the disputes falling within the five categories enumerated in section 7(1) will have to be tried by the Collector.
Let us take the present case itself to illustrate how section 7(1) will operate.
In the suit filed by the appellant against the respondents the issue about the status of the respondents was framed and so it had to be tried by the civil court.
In such a suit if the civil court holds that the relationship between the landlord and the tenant had not been established it may proceed to deal with the suit on the merits.
If, however, it holds that the said relationship is established then the civil court cannot deal with the dispute between the parties if it falls within any one of the categories specified by section 7(1).
In such a case, having made the finding about the relationship between the parties the civil court will either dismiss the suit on the ground that it can give no relief to 681 the landlord, or may, if it is permissible to do so, return the plaint for presentation to the Collector.
What course should be adopted in such a case it is unnecessary for us to decide in the present appeal.
All that we wish to emphasise is that the initial dispute between the parties about the relationship subsisting between them will still continue to be tried by the civil court and is outside the purview of section 7(1).
In support of the argument that a dispute as to the existence of relationship as landlord and tenant should be taken to be included under section 7(1) reliance is placed on the provisions of section 8(1) of the Act.
Section 8(1) provides that subject to the provisions of section 7 all disputes arising between landlord and tenant shall be cogniscible by the revenue court and shall not be cogniscible by the civil court.
It must be pointed out that we are really not concerned with section 8(1) in the present appeal because even according to the respondents the present dispute between the parties attracted section 7(1.) and should have been tried by the Collector and not by 'the civil court.
However, the question about the construction of section 8(1) has been incidentally raised before us.
In appreciating the scope and effect of section 8(1) it is necessary to bear in mind the provisions of section 13 of the Act.
The said section provides that the Act shall, as far as may be, read and construed.
as forming part of the Madras Estates Land Act, 1908, or as the case may be, of the Orissa tenancy Act, 1913.
Therefore reading the provisions of section 8(1) and section 13 tog other it follows that all that section 8 (1) provides is that except for the disputes covered by section 7 (1) all disputes arising between landlord and tenant shall be cogniscible by the revenue court and to the trial of such disputes by the revenue court the relevant provisions of the Orissa Tenancy Act, 1913 would apply.
It is true that disputes to which section 8(1) applies are entrusted to the exclusive jurisdiction of the revenue courts and are excluded from the jurisdiction of civil courts, but the effect of this 682 the other relevant provisions of the parent Act of which this temporary Act forms a part.
Now, if we turn to some of the relevant provisions of the, parent Act it would be clear that when the revenue courts are given jurisdiction to try the disputes the enquiry held by them purports to be a formal enquiry to which the provisions of the Code of Civil Procedure may apply (Vide: section 192 of the Orissa Tenancy Act, 1913).
Similarly, the provisions of section 204(1) which provides for appeals contemplate appeals to the District Court and the High Court where questions of title are involved.
These provisions illustrate the point that where serious disputes about title are entrusted to special tribunals usually the Legislature contemplates a formal en quiry and makes the provisions of the Code of Civil Procedure applicable to such an enquiry and provides for appropriate appeals.
Now, in regard to the order passed by the Collector under section 7(1) the only provision about appeals is that made by section 11 which provides that an appeal shall lie to the prescribed superior revenue authority whose decision shall be final, and shall not be subject to any further appeal or revision.
Departure made by the Legislature in providing only one appeal and that too in every case to the prescribed superior revenue authority clearly brings out that the disputes which are entrusted to the Collector under section 7(1) axe the simple disputes specified in the five categories and do not include a serious dispute like that of the relation,ship between the parties as landlord and tenant.
, If such a dispute had been intended to be tried by the Collector the Legislature would have provided for a formal enquiry and would have prescribed appropriate appeals on the lines of sections 192 and 204 of the parent Act.
In this connection we may in passing refer to the provisions of section 126 of the parent Act.
This section deals with the jurisdiction of civil courts in matters relating to rent.
Section 126(3) provides for the institution of suits in civil courts on the 683 grounds specified by cls.
(a) to (g).
Clause (c) deals with the ground that the relationship of landlord and tenant does not exist.
This clause shows that if a dispute arose between the parties as to the existence of the relationship of landlord and tenant a suit in a civil court a.% contemplated is prescribed by section 126(3) (c).
That also has some bearing on the construction of section 7(1); and it is for that limited purpose that we have referred to it.
Therefore, we are satisfied that the High Court was in error in holding that under a. 7(1) of the Act it was competent to the Collector to try the issue between the appellant and the respondents whether or not the Respondents were the tenants of the appellant and that the civil court had no jurisdiction to entertain the said dispute.
In the result, the appeal must be allowed, the order passed by the High Court set aside and that of the District Court restored with.
costs throughout.
Appeal allowed.

Output:
The appellant filed in the Civil Court a suit for permanent injunction restraining the respondents from entering the lands in suit on the allegation that the lands belonged to him and were in his cultivatory possession for many years and that the respondents had no right or title to them and had never cultivated them.
The respondents contended that they were tenants of portions of the said lands and were in cultivating possession of the same as tenants.
The question which arose for decision was whether having regard to the provisions of section 7(1) of the Orissa Tenants Protection Act, 1948, the Civil Court had jurisdiction to entertain the suit which involved a dispute as to the relationship of landlord and tenant between the parties.
Held, that even on a liberal construction of section 7(1) of the Act it cannot be held that disputes as regards the existence of the relationship of landlord and tenant fall to be deter mined by the Collector under that section.
Disputes which are entrusted to the Collector under section 7(1) are the simple disputes specified therein in the five categories and do not include a serious dispute as to the relationship between the parties as landlord and tenant.
In the present case the suit was therefore within the jurisdiction of the Civil Court.
Secretary of State vs Mask & Co. (1940) L.R. 67 I.A. 222, referred to.


Input:
vil Appeal No. 211 of 1964.
Appeal from the judgment and order dated February ,22, 1961 of the Bombay High Court in Miscellaneous Application No. 352 of 1959.
Niren De, Additional Solicitor General, R. Ganapathy lyer and R.N. Sachthey, for the appellants.
A.V. Viswanatha Sastri, T.A. Ramachandran, J.B. Dadachanji, O.C. Mathur and Ravinder Narain, for the respondents.
The Judgment of the Court was delivered by Sikri, J.
This appeal is in pursuant to a certificate of fitness granted by the High Court of Maharashtra at Bombay under article 133(1)(c)of the Constitution is directed against the judgment of the said High Court in a petition under article 226 of the Constitution filed by the respondent.
The India Fisheries (P) Ltd. hereinafter called the respondent was a private limited company and was directed to be wound up by an order of the Bombay High Court, dated October 11, 1950, and a Court Liquidator was appointed as the Official Liquidator thereof with all powers under section 179 of the Indian Companies Act.
1913 (VII of 1913) to be exercised by him under section 180 without sanction or intervention of the Court save and except in case of sales of immovable property belonging to the respondent.
For the assessment year 1948 49, the respondent was assessed on December 8. 1950, the tax being assessed at Rs. 8,737/15/ .
On or about March 15.
1951, the Income Tax Officer lodged a claim in respect of this tax with the Official Liquidator.
That claim was adjudged and allowed as an ordinary claim and certified as such on April 2 1952.
in August, 1954, the Official Liquidator declared a dividend of 9 1/2 annas in a rupee and paid to the Income Tax Department a sum of Rs. 5,188/3/ against the claim made by the Income Tax Officer as an ordinary creditor.
Thus a balance of Rs. 3,549/12 still remained payable to the Income Tax Department from the assets of the respondent.
For the year 1955 56, the Department made a demand from the respondent on June 22, 1954, for a sum of Rs. 2,565/6/ as advance tax.
This was paid by the Official Liquidator.
On a 681 regular assessment being made for the said year, only Rs. 1,1 26/12/was assessed as payable by the respondent.
After adjusting this sum against the advance payment of Rs. 2,565/6/ , Rs. 1,460/1/became refundable to the respondent, inclusive of interest.
Instead refunding the said balance to the respondent, the Income Tax Officer set off the said amount against the balance of Rs. 3,549/12/which was still outstanding in respect of the Income tax demand for the year 1948 49.
The respondent filed a revision petition to the Commissioner of Income tax, but the said petition was rejected by the Commissioner on September 21.
holding that the action of the Income Tax Officer was perfectly justified under the provision of section 49E of the Income Tax Act.
On November 25, 1959, the respondent filed a petition under article 226 of the Constitution and prayed for a writ, direction or order for setting aside the orders of the Income Tax Officer and the Income Tax Commissioner.
He further prayed for any further writ, direction or order restraining the Department from setting off the refund against the tax dues and directing them to hand over the balance to the Official Liquidator.
The High Court held that the demand of Rs. 8.737/12/ in respect of the assessment year 1948 49.
being adjudged and certified, came to have all the incidents and character of an unsecured debt payable by the Official Liquidator to the Department.
The High Court observed that "this claim thereafter was governed by the provisions of the Company law and could be paid to the creditor only in accordance with the provisions of the Company law.
No other remedy nor any other method of obtaining satisfaction of this claim was available to the creditor thereafter.
It was no longer the amount of tax remaining payable by a person to whom the refund was due within the meaning of Section 49E of the Income Tax Act.
In our opinion, therefore.
the provision of Section 49E was not available to the Department for setting off the amount of the excess towards the balance of its claim of Rs. 8,737/15/ which the department had proved in the insolvency of the company and was being dealt with in the Insolvency." The High Court accordingly set aside the orders passed by the Department in so far as they set off the amount of the refund towards the tax remaining payable, and directed the Income Tax Officer to deal with and dispose of the claim of the present respondent for the refund and pass appropriate orders in respect of the said amount of refund under the provisions of section 48 of the Income Tax Act.
The learned Additional Solicitor General on behalf of the appellant.
contends that s, 49E gives statutory power to the Income tax Officer.
inter alia, to set off the amount to be refunded or any part of that amount against the tax remaining payable by the person to whom the refund is due, and this statutory power is not subject to any provision of any other law.
He says that the Companies Act 682 does not take away this power.
Section 49E is in the following terms: "Where under any of the provisions of this Act, a refund is found to be due to any person, the Income tax Officer, Appellate Assistant Commissioner or Commissioner, as the case may be, may, in lieu of payment of the refund, set off the amount to be refunded, or any part of that amount against the tax, interest or penalty, if any, remaining payable by the person to whom the refund is due.
" On the face of this provision, there is no doubt that this section is not subject to any other provision of law.
But it will be surprising if this power can be exercised in such a way as to defeat the provisions of the Indian Companies Act.
It is not denied by the learned Additional Solicitor General that the State has no priority in respect of this claim.
The question then arises whether section 49E is subject to the Insolvency Rules contained in the Companies Act.
Section 228 of the Companies Act, 1913, provides: "228.
Debts of all descriptions to be proved.
In every winding up (subject in the case of insolvent companies to the application in accordance with the provisions of this Act of the law of insolvency) all debts payable on a contingency, and all claims against the company, present or future, certain or contingent, shall be admissible to proof against the company, a just estimate being made, so far as possible, of the value of such debts or claims as may be subject to any contingency or for some other reason do not bear a certain value.
" Section 229 provides: "Application of insolvency rules in winding up of insolvent companies.
In the winding up of an insolvent company the same rules shall prevail and be observed with regard to the respective rights of secured and unsecured creditors and to debate provable and to the valuation of annuities and future and contingent liabilities as are in force for the time being under the law of insolvency with respect to the estates of persons adjudged insolvent; and all persons who in any such case, would be entitled to prove for and receive dividends out of the assets of the company may come in under the winding up, and make such claims against the company as they respectively are entitled to by virtue of this section.
" The effect of these statutory provisions is, inter alia, that an unsecured creditor must prove his debts and all unsecured debts 683 are to be paid pari passu.
Therefore, once the claim of the Department has to be proved and is proved in the liquidation proceedings, the Department cannot by exercising the right under section 49E of the Income Tax Act get priority over the other unsecured creditors.
If we were to read section 49E in the way suggested by the learned Additional Solicitor General, it would be defeating the very object underlying sections 228 and 229 of the Companies Act, 1913.
If there is an apparent conflict between two independant provisions of law, the special provision must prevail.
Section 49E is a general provision applicable to all assessees and in all circumstances; sections 228 and 229 deal with the proof of debts and their payment in liquidation.
In our opinion, section 49E can be reconciled with sections 228 and 229 by holding that section 49E applies when insolvency rules do not apply.
Accordingly, agreeing with the High Court, we hold that the Income Tax Officer was in error in applying section 49E and setting off the refund due.
The Commissioner was equally in error in affirming this order.
The learned Additional Solicitor General also urged that the application under article 226 was misconceived because the Income Tax Officer had jurisdiction.
But if we interpret section 49E as we have done, it is a clear case of lack of jurisdiction.
At any rate, there is an error apparent on the face of the orders and the High Court was quite right in exercising its jurisdiction under article 226.
The appeal is accordingly dismissed with costs.
Appeal dismissed.

Output:
The respondent company was directed to be wound up and an official liquidator appointed by an order of the High Court in October, 1950.
In December, 1950, the respondent was assessed to tax amounting to Rs. 3737/ for the year 1948 49.
A claim made for this tax on the official liquidator was adjudged and allowed as an ordinary claim and certified as such in April, 1952.
The Liquidator declared a dividend of 91/2 annas in the Rupee in August, 1954 and paid a sum of Rs. 5188 to the Department, leaving a balance of Rs. 3549.
In June, 1954.
the Department made a demand from the respondent and was paid Rs. 2565 as advance tax for the year 1955 56.
On a regular assessment being made for that year, only Rs. 1126 was assessed as payable, so that a sum of Rs. 1460, inclusive of interest, became refundable to the respondent.
However, the Income Tax Officer, purporting to exercise the power available to him under section 49E of the Income Tax Act, 1922, set off this amount against the balance of Rs. 3549 due for the year 194849.
A revision petition filed by respondent in respect of this set off was rejected by the Commissioner of Income Tax.
Thereafter, a petition under article 226 filed by the respondent to set aside the orders of the Income Tax Officer and the Commissioner was allowed by the High Court, mainly on the ground that the demand for Rs. 8737 in respect of 1948 49, being adjudged and certified came to have all the incidents and character of an unsecured debt payable by the liquidator to the Department; it was therefore governed by the provisions of Company Law and no other remedy or method to obtain satisfaction of the claim was available to the creditor.
In the appeal to this Court it was contended on behalf of the appellant that section 49E gave statutory power to Income tax Officer to set off a refundable amount against any tax remaining payable and that this power was not subject to any provision of any other law.
HELD:The Income Tax Officer was in error in applying section 49E and setting off the refund due to the respondent.
[683C D] The effect of sections 228 and 229 of the Companies Act, 1913, is, inter alia, that an unsecured creditor must prove his debts and all unsecured debts are to be paid part passu.
Once the claim of the Department has to be proved and is proved in liquidation proceedings, it 680 cannot, by exercising the right under section 49E get priority over the other unsecured creditors and thus defeat the very object of sections 228 and 229 of the Companies Act.
Furthermore, if there is an apparent conflict between two independant provisions of law, the special provision must prevail.
Section 49E is a general provision applicable to all assessees in all circumstances; sections 228 and 229 deal with proof of does and their payment in liquidation.
Section 49E can be reconciled with sections 228 and 229 by holding that section 49E applies when insolpency rules do not apply.
[682H 683D]