Sai Anupama Agencies Pvt. Ltd. vs K.S.R. Mohan Rao And Anr. on 11 March, 2008

Andhra High Court
Sai Anupama Agencies Pvt. Ltd. vs K.S.R. Mohan Rao And Anr. on 11 March, 2008
Equivalent citations: 2008 (3) ALT 326
Author: D Varma
Bench: D Varma, G Rohini


JUDGMENT

D.S.R. Varma, J.

1. Since all the abovementioned appeals do arise out of the common order, dated 14-08-2007, in Application Nos. 145 of 2007 and 1071 of 2006 in C.S. No. 14 of 1958, passed by a learned Single Judge of this Court, and the question involved is closely inter-twined, they are heard together with the consent of both the parties and being disposed of by this common judgment, at the stage of admission.

2. Heard Sri Vedula Venkataramana, the learned Counsel appearing for the appellants in O.S.A. Nos. 58 and 59 of 2007 as well as Sri Kasa Jaganmohan Reddy, the learned Counsel appearing for the respondents in O.S.A. Nos. 58 and 59 of 2007 and the learned Counsel appearing for the appellant in O.S.A. (SR). No. 7401 of 2007.

3. Aggrieved by the common order, dated 14-08-2007, in Application Nos. 145 of 2007 and 1071 of 2006 in C.S. No. 14 of 1958, passed by the learned Single Judge of this Court, O.S.A. Nos. 58 and 59 of 2007 are filed by the second respondent in Application Nos. 145 of 2007 and 1071 of 2006 in C.S. No. 14 of 1958 while O.S.A. (SR). No. 7401 of 2007 is filed by the applicant in Application No. 145 of 2007.

4. For the sake of convenience, in this common judgment, the parties will be referred to as per their array in Application No. 145 of 2007.

5. So far as O.S.A. Nos. 58 and 59 of 2007 are concerned, the claim of the applicants in Application No. 145 of 2007, as could be seen from the order, dated 14-08-2007, passed by the learned Single Judge of this Court, in nutshell, is, firstly, Hafeezpet is an Inam land and consequently the heirs of Khurshid Jah Paigah or the second respondent (along with other respondents) claiming through them had no right, title or interest in the land in Hafeezpet village and secondly, the applicants being the tenants are lawfully entitled to the property and consequently they have a right to have their names mutated and also for the relief of perpetual injunction in respect of the disputed lands in Survey No. 78 of Hafeezpet village.

6. Yet another Application No. 1071 of 2006 is filed seeking the leave of this Court to implead the applicants therein as respondents in C.S. No. 14 of 1958 so as to enable them to raise objections in the final decree proceedings and to direct the respondents therein to remove the fencing laid in Survey No. 78 of Hafeezpet village by virtue of the orders of this Court in Application No. 521 of 2006.

7. The learned Single Judge of this Court, after an elaborate discussion on the subject and considering all the aspects, by a common order, dated 14-08-2007, had recorded a finding that it was not in dispute that the suit C.S. No. 14 of 1958 had been adjudicated effectively by determining the rights of the parties to the suit and accordingly no fresh direction was required, and what was left for “determination in the suit is not the rights and liabilities of the parties, but pursuant to the preliminary decree the division of the properties by means of metes and bounds so as to passing of a final decree.

The learned Single Judge further observed that no adjudicatory process was left undecided once a preliminary decree had been passed.

8. Therefore, the learned Single Judge had positively arrived at a conclusion that a party cannot seek to come on record after adjudication by passing a preliminary decree in a suit for partition claiming right over the properties except invoking the remedies of amendment of the judgment and decree, appeal and review. The learned Single Judge specifically rejected the contention of the applicants that the lands in dispute along with the other lands, which were the subject matter of partition in the suit C.S. No. 14 of 1958, were not partitionable and eventually held that the subject lands are partitionable. While observing so, as a matter of eventuality, the learned Single Judge had dismissed the said applications.

9. In fact, the reasoning accorded by the learned Single Judge, while touching upon various aspects of law and fact, is more than sufficient to arrive at the said conclusion and there cannot be any controversy with regard to the reasoning assigned by the learned Single Judge on various aspects and also the eventual finding recorded, as above.

10. The only objection for second respondent is, as regards the further observations made by the learned Single Judge

11. For the sake of convenience, the relevant portion of the said observations is extracted hereunder:

…It is an altogether different aspect, as discussed hereinabove, if they are allowed to come in record on the final decree petition to be filed by any of the’ parties to the preliminary decree questioning their right for partition but the specific relief sought for in the instant application by the applicants is to bring them on record at this stage in the suit C.S. No. 14 of 1958, in my considered view, such application is mis-conceived and cannot be allowed.

12. At a glance, the above observations do not actually meant for enabling the applicants to raise the objections at the stage of final decree proceedings. We are conscious that no further observations are necessary, but, still, we may have to add that the aggrieved parties can, as well, avail their remedy elsewhere as permitted under law.

13. But, as could be seen from the elaborate reasoning assigned in the impugned common order, the learned Single Judge was of the absolute opinion that the applications filed by the applicants cannot be sustained.

14. Nevertheless, we are of the view that the further observations of the learned Single Judge, as extracted above, are not warranted, inasmuch as, those observations may create a feeling among the applicants that they can raise their objections even at the stage of final decree proceedings, as a matter of right. In other words, there is a scope, though bleak, for the applicants or for that matter even to the Court below, to understand that the applicants were permitted to raise objections at the stage of passing of final decree proceedings.

15. As already noticed, the above observations of the learned Single Judge, of course, which do not have any positive effect by way of creating a right to the applicants to raise objections at the stage of final decree proceedings, are not warranted.

16. The learned Counsel appearing for the applicants contended that subsequently the final decree proceedings have been initiated, wherein the objections taken by the applicants were not considered by the Court below, therefore, the present appeals have become in fructuous.

17. In this context, we are clear in our mind that the subsequent events, as regards the initiation of final decree proceedings and the other proceedings, initiated by the applicants, are not relevant for the purpose of disposal of the present appeals, for the simple reason that we are confined only to the issue raised for consideration before this Court in these appeals. The subsequent events, may it be in favour or against either of the contesting parties, do not have any bearing on the disposal of these appeals, in view of the fact that the scope and the question raised before this Court, in these appeals, is very limited.

18. Accordingly, the observations of the learned Single Judge, as extracted above, are liable to be set aside.

19. So far as the appeal O.S.A. (SR). No. 7401 of 2007 is concerned, the main grievance of the applicants in this appeal is that the learned Single Judge did not properly construe the objections as regards the deletion of Item No. 37 of Schedule-4 of the suit properties meant for partition. In other words, it is the contention of the applicants that though Item No. 37 of Schedule-4 properties was not available for partition, the learned Single Judge had passed the impugned common order.

20. We have carefully gone through the reasoning accorded by the learned Single Judge on this aspect. Prima facie, we do not find any illegality or irrationality or impropriety in recording a finding to the extent prayed for by the applicants.

21. As already noticed above, while dealing with the other two appeals, the learned Counsel appearing for the applicants pointed out that subsequent to the passing of the impugned common order, by the learned Single Judge, final decree proceedings have been initiated and in those proceedings the very objection as regards the non-availability of the land covered by Item No. 37 of Schedule-4 properties was not accepted to by the Court below and eventually a final decree had been passed on 24-12-2007.

22. As regards the grievance of the applicants that the learned Single Judge did not consider their objections regarding the non-availability of Item No. 37 of Schedule-4 properties, it is to be noticed that the same had already been considered and rejected by the Court below in the final decree proceedings. Therefore, it is the final decree proceedings, by which the present contention had been rejected, that ought to have been challenged.

23. In this context, the learned Counsel appearing for the applicants submits that steps are being taken to file an appeal against the said rejection orders in the final decree proceedings.

24. In view of the fact that no appeal is preferred against the orders passed in the final decree proceedings, as regards the property covered by Item No. 37 of Schedule-4, we see no reason to express any view in this appeal.

Therefore, the appeal O.S.A. (SR). No. 7401 of 2007 is liable to be dismissed as redundant.

25. In the result, the appeals O.S.A. Nos. 58 and 59 of 2007 filed by the second respondent are allowed, setting aside the observations of the learned Single Judge, in the impugned common order, as prayed for, and the appeal O.S.A. (SR). No. 7401 of 2007, filed by the applicants, is dismissed as redundant, at the stage of admission. However, there shall be no order as to costs.

The Continental Construction … vs The Board Of Trustees, … on 20 February, 2008

Andhra High Court
The Continental Construction … vs The Board Of Trustees, … on 20 February, 2008
Author: B S Reddy
Bench: G Mohammed, B S Reddy


JUDGMENT

B. Seshasayana Reddy, J.

1. This Civil Miscellaneous Appeal is filed under Section 39 of the Indian Arbitration Act, 1940 questioning the order dated 5.1.20.00 passed in O.P.No.14 of 1990 on the file of 1st Additional Senior Civil Judge, Visakhapatnam, whereby and where under the learned Additional Senior Civil Judge allowed the application filed under Section 30 of the Indian Arbitration Act, 1940 and set aside the award dated 25.9.1989 and directed the appellant herein to pay seigniorages fee and cess amounting to Rs. 27,84,617.10 together with interest @ 12 percent from 23.6.1988.

2. Back ground facts of the case, in brief, are:

Visakhapatnam Port Trust (hereinafter referred to as Claimant) invited tenders for execution of C2 and C3 contract works. They are land based works at Lova Gardens, and Marine Works and break water construction. Continental Construction Company (hereinafter referred to as the Contractor) submitted tender and the same came to be accepted after due negotiations. The letter of intent for both C2 and C3 contracts were issued on 7.5.1971 and agreements were entered into between the parties. The contractor was permitted to use the quarries of the claimant and the claimant agreed to pay value of sized rocks. The contractor agreed to pay royalty to the claimant @ Rs. 2.50/- per 100 eft. However, royalty was to be paid only on quantity of rock actually used on works. While quarrying operations were in progress, demand notices came to be issued by District Revenue Officer under A.P. Minor, Mineral Concessions Rules demanding seigniorage fee. District Collector, Visakhapatnam attached the dumpers of the contractor. Thereupon, the contractor filed W.P.No.3386 of 1974, The said writ petition came to be allowed on 9.12.1974 directing the District Collector to issue appropriate notice to the claimant and the contractor. Accordingly, notices came to be issued to the contractor and the claimant. Ultimately, liability to pay seigniorage fee came to be fastened on the claimant by the Department of Mines and Geology vide proceedings No. 2195/Sl/75 dated 14.9.1978 of the Director of Mines and Geology, Hyderabad.

3. The claimant filed W.P.No.4940 of 1978 assailing the order of the Director of Mines and Geology as confirmed by Government of A.P. The said writ petition came to be allowed in part setting aside the penalty and giving liberty to the claimant to recover seigniorage fee if it is permissible according to law. For better appreciation, we may refer the relevant portion of the order and it is thus:

It is well settled that levy of penalty is not automatic nor is the levy at ten times obligatory. It depends upon the facts of a given case. The Collector himself had informed the petitioner on an earlier occasion that no such permission is required. The petitioner bona fide believed in the said representation, and did not think it necessary to apply for permission for the said quarrying. There was also some ambiguity about the language of the proviso to Rule 5(1). In all the circumstances, the levy of penalty, in our opinion, is totally unwarranted and uncalled for. After all, the petitioner is a public sector concern, and it cannot be believed that it carried on quarrying operations inspite of knowing that it is illegal. Not that we are saying that such knowledge is necessary. What is important is the letter of the Collector dated 28.2.1970, which clearly told the petitioner that such permission is not necessary. In these circumstances, the levy of penalty must be held to be bad.

The writ petition is, accordingly, allowed in part, and the levy of penalty in a sum of Rs. 2,03,25,672.90 ps., is quashed. The rest of the demand shall, however, stand undisturbed. There shall be no order as to costs.

So far as the question as to who is liable to pay the said fee is concerned, it is a matter between the petitioner and the contractor. The contractor is not represented before us. Without hearing him it is not possible for us to express any opinion on the said question. We, therefore, decline to express any opinion on this question. If, however, the petitioner thinks that it is entitled to recover the said amount of fee or cess from the contractor, it is open to it to adopt such remedies as are open to it according to law.

4. The claimant invoked clause 67 of the contract and requested the ‘engineer’ to enter into arbitration and adjudicate upon the dispute. The ‘engineer’ failed to give his decision within the time provided in the contract. Therefore, the dispute was referred to two arbitrators; one appointed by the claimant and the other appointed by the contractor, as provided in clause 67 of the agreement. The arbitrators did not make agreed award and therefore the dispute came to be referred to an Umpire.

5. Before the learned Umpire, the claimant submitted its claim along with the supporting documents. The contractor filed counter disputing the claim of the claimant. The claimant also filed rejoinder. The learned Umpire, on considering the material brought on record and on hearing learned Counsel for the parties, came to the conclusion that it is the claimant who has to pay seigniorage fee, being the owner of the quarries. For better appreciation, we may refer the relevant portion of the award passed by the learned Umpire and it is thus:

In view of the above conclusion reached by me it may not be necessary to seriously consider some other contentions advanced by the respondent. It has been argued that the claimant is not entitled to retain the royalty paid to him by the respondent and that it is to be paid to the Government in lieu of seigniorage fee. It is, further argued that the word royalty is synonymous with seigniorage and the respondent having paid the royalty to the claimant he must be deemed to have paid the seigniorage. I cannot accept these contentions. The respondent having undertaken to pay royalty to the claimant under the terms of the agreement, cannot now escape from this liability or challenge the right of the claimant to receive the royalty. Though, the two words royalty and seigniorage may be synonymous yet under the terms of the agreement the royalty is payable to the claimant as the owner of the quarries while seigniorage is payable only to the Government for unauthorized quarrying of stones from the mines.

But as in my view the respondent is not the owner of the mine within the meaning of the Section 2(1)(L) of the Mines Act, it cannot be made liable to pay the seigniorge either under law or under the terms of the contract. The claim of the claimant to recover the seigniorge from the respondent is therefore, rejected.

6. The claimant filed O.P. under Section 30 of the Indian Arbitration Act, 1940 before the 1st Additional Senior Civil Judge, Viakhapatnam to set aide the award dated 25.8.1989 and direct the contractor to pay seigniorge fee and cess. The claimant contended before the court below that the contractor utilized the quarry for extracting rock and since the contractor received the value of rock, it is the contractor who is liable to pay seigniorge. It was also contended before the court below that under the terms of the contract, it was the contractor who has to pay all the fees payable to the Government. Whereas the contractor contended before the court below that it was the claimant who is the owner of the quarries and therefore the claimant is liable to pay seigniorge fee. The court below, on considering the rival contentions of the parties, came to the conclusion that the Umpire has not considered the settled legal position and also the documents placed on record and thereby misconducted himself in disallowing the claim of the claimant and accordingly set aside the award and directed the contractor to pay Rs. 27,84,617.10 with interest @ 12 percent, by judgment dated 5.1.2000. For better appreciation, we may refer paragraphs 14 to 17 of the order of the court below and they read as under:

14. In the present case also it is evident that there is an error committed by the learned Umpire in not considering the legal position and there is a mistake with regard to the legal position on the face of the record.

15. Apart from these as rightly contended by the learned Counsel for the petitioner as seen from the entire award the learned umpire has not considered the two documents (Annexure-A of the claim statement) are not at all discussed and considered by the learned arbitrator. The learned Counsel for the petitioner has submitted since the learned Umpire has not considered the above said two documents, it amounts to legal misconduct on the part of the Arbitrator and the award is liable to be set aside. In support of his contention he placed reliance on the decision in Dandasi Sahu v. State of Orissa wherein it has been held as under:

Arbitration Act, 1940 – Section 30 and 16 – legal mis-conduct – Non-application of mind – Award amount disproportionately excessive – Held vitiated by non-application of mind.

Though the Arbitrator is not bound to disclose as to what interpretation has made and what inference he has derived from the documentary evidence, he is bound to refer in the award, that he had considered all the documents placed before him no matter whether he relies on them or discards them from consideration. The arbitrator in his award in this case ex-facie did not mention that he had referred to consider the documents placed before him in respect of the original claim.

16. As it is evident from the award passed by the learned Umpire that there is an error of Law on the face of the record in connection with the determination or the point that he is the owner (as per the Mines Act) I hold that the award passed by the learned Umpire is liable to be set aside.

17. In the result, the petition is allowed with costs. The award passed the learned Umpire dated 25.8.1989 is set aside holding that the respondent should pay the seigniorge charges, cess and mining of Rs. 27,84,617.10 together with costs and interest at 12 % per annum from the date of judgment of the Hon’ble High Court of A.P.

The order passed by the court below is under challenge in this Civil Miscellaneous Appeal.

7. Heard learned Counsel appearing for the appellant/ contractor and learned Counsel appearing for the respondent/claimant?

8. Learned Counsel appearing for the contractor submits that the court below went beyond its jurisdiction in upsetting the finding recorded by the Umpire. He would further submit that the contractor does not come within the meaning of ‘owner’ of the quarry as defined under the provisions of Mines Act, 1952 and in which case he is under no obligation to pay seigniorge fee. A further contention has been advanced by him that the terms of the contract did not provide payment of seigniorge fee by the contractor and that the Umpire considered the terms of the contract in right perspective and came to the conclusion that the contractor had no independent right in quarries and was acting only as an agent of the claimant. To buttress his submissions, reliance has been placed on the decisions of Supreme Court in Union of India v. Kalinga Construction Co. , Hindustan Tea Co. v. K. Sashikant and Co. , Puri Construction Private Limited v. Union of India , BOC India Ltd. v. Bhagwati Oxygen Ltd. (2007) 9 SCC 503 and the decision of Delhi High Court in A.I.I. of Medical Sciences v. American refgn. Co. Ltd. .

9. In the first cited decision, the Supreme Court held that in a proceeding to set aside award, the court cannot sit in appeal over the conclusion of the arbitrator by re-examining and reappraising the evidence considered by the arbitrator. In the second cited decision, the Supreme Court held that where the award which was a reasoned one, it could not be set aside on the ground that the arbitrator acted contrary to the provisions of Section 70 of the Contract Act. In the third cited decision, the Supreme Court held that when a Court is called upon to decide the objections raised by the party against an arbitration award, the jurisdiction of the Court is limited, as expressly indicated in the Arbitration Act, and it has no jurisdiction to sit in an appeal and examine the correctness of the award on merits with reference to the materials produced before the arbitrator. The Court cannot sit in an appeal over the views of the arbitrator by re-examining and re-assessing the materials. In the fourth cited decision, the Supreme Court held that the arbitral award could not at all be interfered with as it was neither based upon an unsound legal proposition nor had an erroneous legal proposition being established.

10. It is further held that when arbitrator had taken a plausible view of the interpretation of the contract, court cannot set aside the award on the ground of mis-conduct of arbitral proceedings. In the fifth cited decision, the Delhi High Court held that an award cannot be impeached on the ground of an error on the face unless some legal proposition is stated which is the basis of the award and which can be said to be erroneous.

11. Learned Counsel appearing for the claimant submits that the terms of the contract are clear and there is no scope for any ambiguity that it is the contractor to pay all the necessary taxes or fees payable to either State or Central Government or Corporation. He would further submit that “Instructions to Tenderers’ forms part of the contract and a reading of the ‘Instructions to tenderers’ gives a clear indication that a bill of quantities shall be inclusive of sales tax, royalty, octroi, custom and import duties or any other State Union or Corporation tax or duty or levy or any other imposition of like nature. The terms of the contract and tender conditions have been referred to by the learned Counsel during the course of arguments. In a way the contention of the learned Counsel is that the court below assigned valid, cogent and convincing reasons for setting aside the award of the Umpire and therefore the order of the court below does not warrant interference.

12. While interpreting Section 30 of the Arbitration Act, 1940 the Courts have laid stress on limitation of exercise of jurisdiction for setting aside or interfering with an award in umpteen number of cases. Some of the well recognized grounds on which interference is permissible are:

i) Violation of principles of natural justice;

ii) An error apparent on the face of the record;

iii) The arbitrator has ignored or deliberately violated a clause in the agreement prohibiting the dispute of the nature entertained;

iv) The award on the face of it based on a proposition of law, which is erroneous.

If the arbitrator has mis-conducted himself of the proceedings, then the impugned award is certainly liable to be set aside. If the award is contrary to the substantive propositions of law or the. provisions of the Act or against the terms of the contract, it would be patently illegal which could be interfered under Section 30 of the Arbitration Act, 1940. The arbitrator cannot act arbitrarily, irrationally, capriciously or independently of the contract. His sole function is to arbitrate in terms of the contract. His authority is derived from the contract and is governed by the Arbitration Act.

13. Indisputably, the claimant is the owner of the quarries from where material (rock) has been extracted. The contractor paid royalty to the claimant @ 2.50 for 100 eft. The amount paid by the contractor to the claimant towards royalty is Rs. 20,62,708.05. The dispute is with regard to the payment of seigniorge fee and cess. Initially proceedings were initiated against the contractor and the claimant for recovery of seigniorge fee and penalty, Both of them submitted statements before the authorities disowning their liability. Indeed it is the contractor who initially approached the High Court by filing W.P.No.3386 of 1974 questioning the notice issued by the authorities wherein a demand for payment of seigniorge fee and penalty has been made. The writ petition came to be allowed directing the authorities to issue appropriate notice to both parties (claimant and contractor). Thereupon, the authorities fastened the liability of payment of seigniorage fee and cess on the claimant on the ground that the claimant is the owner of the quarries. The claimant filed writ petition being W.P.No.4940 of 1978 questioning the proceedings of the Director of Mines and Geology, Hyderabad. The writ petition came to be allowed in part setting aside the penalty and giving liberty to the claimant to recover the amount paid towards seigniorge fee and cess in accordance with law.

14. It is the contention of the claimant that the ‘Instructions to Tenderers’ and the agreement entered into in respect of C2 and C3 contracts are very clear with regard to the liability of the contractor to pay all taxes and fees. Per contra, it is contended by the contractor that ‘Instructions to Tenderers’ does not form part of the contract and therefore they cannot be looked into. This contention can be repelled by referring to the definition of the contract in the general conditions where under the contract is defined as follows:

‘Contract’ means the General Conditions, Special Conditions, Technical Specifications, Drawings and priced Bill of Quantities, Schedule of Rates and prices (if any) tender and contract agreement.

The definition of contract in the general conditions indicates that ‘Instructions to Tenderers’ forms part and parcel of it. Clause 9 of ‘Instructions to Tenderers’ reads as under:

9. The rates to be filled in the Bill of Quantities attached herewith shall be inclusive of sales tax, royalty, octroi custom and import duties or any other State, Union or Corporation tax or duty or levy or any other imposition of like nature.

Any corrections to rates shall be supported by the tenderer’s signature thereagainst.

Corrections to quoted rates shall not be allowed after opening of the tender.

Clause 13 of ‘Instructions to Tenderers’ reads as under:

It must be clearly understood that the rates quoted in the Bill of Quantities are to include for everything required to be done by the instructions to the tenderers, conditions of contract, specifications and drawings, and also for all such work as is necessary for the proper completion of the contract although specific mention thereof may not have been made in the specification or drawings. The rates are for works in site and should be inclusive of incidentals necessary for carrying out the works.

15. A plain reading of the above two clauses indicates that the contractor has to keep in mind all the taxes and fee required to be paid while quoting the rate in the bill of quantities. It is an undisputed fact that the claimant paid the value of the rock extracted from the quarries. Indeed it is the contractor who utilized the material from the quarry for converting rocks of required sizes as provided in the contract.

16. It is the obligation of the contractor to take necessary precautions while extracting rock from the quarries. The contractor has also given liberty to secure rock from other than the quarries owned by the claimant subject to the approval of the quantity. For better appreciation, we may refer clause 2(6) of the General Conditions of the Contract vide page 98 of the material papers Vol.2 and it is thus:

2.6 Lova Garden, Dasarimetta Quarry & other quarries:

Lova Garden is located on the south bank of the inner entrance channel, the limits of Lova Garden are shown on drawings No. I-108/G-007/R-1 while P.T. Quarry at Dasarimetta is located near the Visakhapatnam Airport at a distance of about 19 kms from Lova Garden by road. The drawing I-108/G-006 shows the location of the Garden as well as all external quarries, few bore holes were taken in Lova Garden area, the locations and details of these boreholes are given in drawing I-108/G-007/R-1. This drawing also give results of the trial blasting -carried out at quarry T-4 in Lova Garden. Test results to be used for shown/guidance only, on concrete aggregate are under Clause 1, 2 of Special Application. This information is given in good faith and the tenderers shall examine the quarry sites and estimate the quality of the rock and the yield themselves and the claim will be/ no entertained due to any error in the information supplied above. The contractor is at liberty to open quarries in these areas for the purpose of quarrying stones for breakwater construction, however the exact location of quarry shall be selected by the contractor and approved by the engineer.

Royalty will be charged for material excavated or quarried at Lova Garden and Dasarimetta at the rate of Rs. 2.50 per 100 eft. Lova garden and dasarimetta quarries are reserved for containing the stone for contract C2 only.

Other quarry sites suggested for contractor’s consideration are Aganampudi and Patikonda. However, the contractor is free to obtain aggregates from other sources if approved by the engineer and if the aggregates satisfy the necessary tests. The location of the quarries at Aganampudi and Patikonda are also shown on drawing I-108/G-006 and they are at a distance of about 24 and 44 K.M. respectively from Lova Garden by road.

As per the above referred clause, the contractor is free to obtain aggregates from other sources. The contractor is at liberty to utilize the quarries owned by the claimant subject to payment of royalty. Section 2(1)(L) of Mines Act, 1952 defines owner, which reads as under:

2(1)(L) “owner”, when used in relation to a mine, means any person who is the immediate proprietor or lessee or occupier of the mine or of any part thereof and in the case of a mine the business whereof is being carried on by a liquidator or receiver such liquidator or receiver a[x x x x x]; but does not include a person who merely receives a royalty, rent or fine from the mine, or is merely the proprietor of the mine, subject o any lease, grant or licence for the working there of, or is merely the owner of the soil and not interested in the minerals of the mine; but b[any contractor or sub-lessee] for the working of a mine or any part thereof shall be subject to this Act in like manner as if he were an owner, but not so as to exempt the owner from any liability;

A close reading of the above-referred definition indicates that various persons have been classified as owners of a mine. Proprietor, lessee and occupier come within the meaning of owner. The ‘owner’ as defined under Section 2(1)(L) is considered, both the contractor and the claimant come within the ambit of it.

17. Indeed the court below has considered the decision of Supreme Court in Industrial Supplies Pvt. Ltd. v. Union of India to arrive at a conclusion that the contractor also would come within the meaning of owner as defined under Section 2(1)(L). As seen from the award, the learned Umpire at one stage recorded a finding that the contractor and the claimant are equally liable to pay the seigniorge fee and it cannot be said that the contractor alone is liable to pay seigniorge fee. For better appreciation, we may refer the relevant portion of the award and it is thus:

Sri. B.V. Sobha Rao, learned Counsel for the claimant seeks to rely upon the above observations of the Supreme Court in support of the contention that the respondent comes within the definition of ‘owner’ under Section 2(1)(L) of the Mines Act. Firstly, under the above rule laid down by the Supreme Court even if the contractor is construed as the owner, the contractor does not become the sole owner to the exclusion of the real owner. Both are made equally liable for the due observance of the Act. In other words both the claimant and the respondent are equally liable to pay the seigniorge and it cannot be said that the respondent alone is liable to pay the seigniorge fee and the claimant is totally absolved from such a liability. Secondly, the character of the respondent in respect of the working of the quarries owned by the claimant is not similar to that of the contractor in the case before the Supreme Court.

18. Under the Mines Act, both owner and the occupier are liable to pay seigniorgen fee. Let us now look to the terms of the agreement between the parties to decide as to which of the parties undertook to pay the necessary fees including seigniorge fee etc.

19. Clause 26(1) of the General Conditions of the Contract reads as under:

26 (1) The contractor shall give all notices and pay all fees required to be given or paid by any National or State Statute Ordinance or other Law or any Regulation or Bye Law of any local or other duly constituted authority in relation to the execution of the works or of any temporary works and by the rules and regulations of all public bodies and companies whose property or rights are affected or may be affected in any way by the works or any temporary works.

(2) The Contractor shall conform in all respects with the provisions of any such Statute Ordinance or Law as aforesaid and the Regulations or Bye-Laws of any local or other duly constituted authority which may be applicable to the works or to any temporary works and with such rules and regulations of public bodies and companies as aforesaid and shall keep the Board indemnified against all penalties and liability of every kind for breach of any such Statute Ordinance or Law Regulations or Bye Law.

Provided always that the Board will repay or allow to the Contractor all such sums as the Engineer shall certify to have been properly payable and paid by the Contractor in respect of such fees, other than fees which the Contract requires the Contractor to pay, which fees shall be included in the rates and prices entered in the priced Bill of Quantities.

20. Both the counsel referred the above clause copiously in support of their respective contentions. Therefore, we have given close reading of the above-referred clause. Under the proviso to the above-referred clause, the Board i.e. claimant undertook to reimburse all such sums as the engineers would certify to have properly payable and paid by the contractor in respect of such fee other than fee which the contract requires the contractor to pay.

21. It indicates that in case the terms of the contract do not require the contractor to pay such fees, the claimant undertook to reimburse. This clause is to be read along with clauses 9 and 13 of the Instructions to Tenderers. Under clauses 9 and 13 of Instructions to Tenderers, the rates mentioned in the bill of quantities by the contractor are inclusive of all taxes, duty, etc. The seigniorge fee comes within the meaning of any other imposition of like nature. Admittedly, the claimant paid the value of the rock extracted from the quarries. The contractor having received the value of the rock in accordance with the terms of the agreement cannot be permitted to contend that he is not liable to pay the seigniorge fee. If the contention of the contractor is accepted, the claimant has to pay more than what he received as royalty. The royalty received is approximately Rs. 20,62,708.05 and whereas the seigniorge fee is Rs. 27,84,617.10. Such a construction of the terms of the contract tends to absurdity. The learned arbitrator has totally misread the terms of the contract and fastened the liability of payment of seigniorge fee on the claimant. The court below considered the terms of the contract in right perspective and recorded a finding that it is the contractor who is liable to pay seigniorge fee. Therefore, the court below is justified in setting aside the findings of the learned Umpire with regard to payment of seigniorge fee and cess.

22. The next question is with regard to rate of interest. Both the parties contended before the authorities under the Mines Act, 1952 that the material extracted from the quarries had been used for personal use and therefore they were not liable to pay seigniorge fee and cess. Ultimately, the authorities imposed the liability on the claimant. The dispute with regard to seigniorge fee has been dragged for a considerable period.

23. Having regard to the facts and circumstances of the case, we deem it appropriate to modify the rate of interest awarded by the court below. There is depletion in the rate of interest of the financial institutions like Banks etc. The Supreme Court has taken note of substantial reduction of interest rate in Krishna Bhagya Jaya Nigam Limited v. G. Harischandra Reddy (2007) 2 SCC 729 and reduced the rate of interest awarded by the arbitrator to 9 (nine) percent per annum. Accordingly, the award amount shall carry interest @ 9 (nine) percent per annum from 23.6.1988 till the date of payment. In the result, this Civil Miscellaneous Appeal is partly allowed to the extent indicated above. No order as to costs.

M.D. Nyamathulla vs A. Chitharanjan Reddy on 15 February, 2008

Andhra High Court
M.D. Nyamathulla vs A. Chitharanjan Reddy on 15 February, 2008
Equivalent citations: AIR 2008 AP 141, 2008 (3) ALD 303, 2008 (3) ALT 153
Author: B S Reddy
Bench: G Mohammed, B S Reddy


JUDGMENT

B. Seshasayana Reddy, J.

1. This matter is listed before us on the order of reference made by learned single Judge as to “Whether an instrument to be a promissory note, requires a recital which conjunctively incorporates a promise to pay not only a certain person, but also to the order of a certain person and to the bearer of the instrument, as well”.

2. Apparently, the learned single Judge referred the matter to the Division Bench doubting the correctness of the decision rendered by another learned single Judge of this Court in Kotla Sudheer Kumar v. Mallavarapu Jojayya @ Jojaiah Chowdary 2002 (2) ALD 715 as to the reading of the proposition of law laid down by the Full Bench in Bolisetti Bhavannarayana @ Venkata Bhavannarayana v. Kommuri Vullakki Cloth Merchant Firm, Tenali and Ors. 1996 (2) ALD 424 (FB).

3. Before answering the reference, we deem it appropriate to refer the facts of the case, in brief, which led to the reference:

A.Chitharanjan Reddy, the respondent herein, filed O.S. No. 9 of 2003 on the file of Senior Civil Judge, Hindupur for recovery of an amount of Rs. 6,90,000/- on an instrument dated 3.2.2002 executed by M.D. Nyamathulla, the petitioner herein. The instrument reads as hereunder:

Today 03.02.2002 I, Md. Nyamatullah s/o M.A. Jabbar Sab, Hasnabad, Hindupur.

I, promise to pay A.Chittaranjan Reddy, s/o A. Kesava Reddy, Hindupur.

To pay Rs. 6,90,000/- (Rupees six lakhs ninety thousands only). This amount will be paid on or before March, 2002

The instrument is signed by the respondent herein and duly witnessed.

4. The plaintiff sought to mark the instrument as Ex.A1. The defendant raised objection to the admission of the instrument on the ground that it does not constitute a promissory note. The Court below overruled the objection and permitted the plaintiff to mark the instrument as Ex.A1. Hence, the defendant filed this revision. The matter came to be listed before the learned single Judge “for admission”. The learned single Judge while admitting the Civil Revision Petition opined that the interpretation of the decision of the Full Bench in Bolisetti Bhavannarayana @ Venkata Bhavannarayana v. Kommuri Vullakki Cloth Merchant Firm, Tenali and Ors.’s case (2nd cited) by Sri S. Ananda Reddy. J., in Kotla Sudheer Kumar v. Mallavarapu Jojayya @ Jojaiah Chowdary (1st cited) requires consideration afresh. The learned single Judge in the reference order is of the opinion that to categorize an instrument as a promissory note all the three essential conditions are not required to be satisfied cumulatively in view of the disjunctive phraseology employed in the statute, on a grammatical construction of the statutory language. For better understanding, we may refer the relevant portion of the reference order and it is thus:

A learned single Judge of this Court in Kotla Sudheer Kumar’s case (2nd supra) interpreted the decision of the Full Bench of this Court in Bolisetti Bhavannarayana’s case (one supra) to mean that all the terms as to payment, recorded in Section 4 of the Negotiable Instruments Act, 1881 should be found in the recitals of an instrument to justify its classification as a promissory note.

It does not prima facie appear that the Full Bench of this Court in Bolisetti Bhavannarayana’s case (one supra) has laid down the principle, that to be a promissory note the instrument in question must contain all the 3 recitals i.e. (1) the promise to pay a certain person (2) or to the order of a certain person, (3) or to the bearer of the instrument. Section 4 of the Act defines a “promissory note” as an instrument in writing, other than a bank note or a currency note, containing an unconditional undertaking singed by the maker, to pay a certain sum of money only to, or to the order of, a certain person, or to the bearer of the instrument.

Having regard to the disjunctive phraseology employed in the statute, on a grammatical construction of the statutory language, it would appear that, other conditions under Section 4 of the Act being satisfied as to the nature of the instrument and the unconditional undertaking signed by the maker, it is not necessary that the promise to pay should be in favour not only of a certain person, but to the order of a certain person and to the bearer of the instrument as well. On a true and fair construction of the decision of the Full Bench no such inference appears suggested.

5. Heard learned Counsel appearing for the petitioner/ defendant. None appears for the respondent/appellant.

6. Learned counsel appearing for the petitioner submits that the Full Bench judgment of this Court is very clear that an instrument to be a promissory note must satisfy all the ingredients enunciated in Section 4 of the N.I. Act r/w Section 2(22) of the Stamp Act. The Full Bench made such an observation having taken note of the definition of a promissory note as defined in Section 4 of the N.I. Act and also Section 2(22) of the Stamp Act. Section 4 of the N.I. Act reads as hereunder:

A ‘promissory note’ is an instrument in writing (not being a bank-note or a currency note) containing an unconditional undertaking, signed by the maker, to pay a certain sum of money only to, or to the order of, a certain person, or to the bearer of the instrument.

Illustrations:

A signs instruments in the following terms:

(a) “I promise to pay B or order Rs. 500/-“.

(b) “I. acknowledge myself to be indebted to B in Rs. 1,000/-, to be paid on demand, for value received”.

(c) “Mr. B, I.O.U. Rs. 1,000/-“.

(d) “I promise to pay B Rs. 500/- and all other sums which shall be due to him”.

(e) “I promise to pay B Rs. 500/-, first deducting there out any money which he may owe me”.

(f) “I promise to pay B Rs. 500/-, seven days after my marriage with C”.

(g) “I promise to pay B Rs. 500/- on D’s death, provided D leaves me enough to pay that sum”.

(h) “I promise to pay B Rs. 500/- and to deliver to him my black horse on 1st January next”.

The instruments respectively marked (a) and (b) are promissory notes. The instruments respectively marked (c), (d), (e), (g) and (h) are not promissory notes.

7. Section 2(22) of the Stamp Act defines ‘promissory note’ as follows:

“Promissory note” means a promissory note as defined by the Negotiable Instruments Act, 1881:

It also includes a note promising the payment of any sum of money out of any particular fund which may or may not be available, or upon any condition or contingency which may or may not be performed or happen.

8. Essential requisite of a negotiable instrument is certainty (1) as to the person to make the payment; (2) as to the person receive it; (3) as to the time and place of payment; (4) as to the condition of liability; and (5) as to the amount be paid.

9. A close reading of the definition of promissory note indicates that it must contain an unconditional undertaking signed by the maker, to pay a certain sum of money only to, or to the order of, a certain person, or to the bearer of the instrument. The question is – if the omission in the instrument the words ‘to the order of’ does stand outside the definition of promissory note?

10. In the reference order, the learned single Judge has expressed a prima facie view that the ingredients are to be read disjunctively and not conjunctively. Full Bench of this Court in Bolisetti Bhavanarayana v. Kommuru Vullakki Cloth Merchant Firm (2 supra) had an occasion to deal with the ingredients of the promissory note. It is profitable to refer the relevant portion of the judgment, which reads hereunder:

This definition of promissory note itself indicates that there may be several types of promissory notes. Out of these various categories of promissory notes, some may be treated as ‘negotiable instrument’ within the meaning of Section 13 of the Negotiable Instruments Act and some others may not be so treated, but by that very fact, the nature of the document will not change, if it is otherwise a promissory note. In other words, if a document is a ‘promissory note’ within the meaning of Section 4 of the Act, it will continue to be ‘promissory note’, whether it comes or does not come within the meaning of the term ‘negotiable instrument’ as defined in Section 13 of the Act. For this reason, we are of the view that Section 13 of the Negotiable Instruments Act, or the definition of the term ‘negotiable instrument’ is wholly irrelevant when it comes to deciding the nature of a particular document as a promissory note, or otherwise. Similarly and for similar reasons, it is wholly irrelevant to refer to the provisions of Section 13 of the Act while deciding the nature of any document as a ‘bond’ or otherwise. Accordingly, thing to the contrary held in any of the authorities referred to in the orders of reference is not a good law.

Learned single Judge of this Court in Kotla Sudheer Kumar v. Mallavarapu Jojayya @ Jojaiah Chowdary (1 supra), after referring the decision of the Full Bench in Bolisetti Bhavanarayana v. Kommuru Vullakki Cloth Merchant Firm (2 supra) came to the conclusion that all the ingredients are to be read conjunctively and not disjunctively. In a way the learned single Judge came to the conclusion that the ingredients are to be satisfied cumulatively. We are more concerned with the words ‘to the order of’. The definition of promissory note and illustrations thereto have been referred in the aforesaid paragraphs of the judgment.

11. The Comma (,) needs the most care in its use, but, in majority of cases, the exercise of a little common sense will determine where it ought and where it ought not to be placed. The chief use of the comma is to divide a sentence into its natural sections i.e., where a portion is added to the main idea. As an example, let us take the sentence. The man entered into the shop. Then, suppose we want to say that he needed some cigarettes, we might piece the fact into the sentence thus: “the man needing some cigarettes, went into the shop”. Commas, it will be seen are required at both ends of the inserted matter. If this extra portion had been placed at the beginning or end of the original passage, only one comma would have been required. Thus, “Needing some cigarettes, the man went into the shop. The man went to the shop, needing some cigarettes.” A comma is required where words are omitted to avoid repetition and, at the same time, to add strength or balance to the passage. When the sense suggests a repetition of the same conjunction several times, the conjunction is replaced by a comma in all instances, but the last.

12. The sentence in the definition of “promissory note” i.e. to pay a certain sum of money only to, or to the order of” is read to be one sub-clause. The clear intention of the legislative is the unconditional undertaking is to pay a certain sum of money only to or to the order of. The sentence cannot be split into two and read that the unconditional undertaking may be either to the person in the name therein or to the order. If the clause is split into two, it produces unintelligible and incongruous result. The comma succeeding and preceding the word ‘to the order of indicates that a certain sum of money must be paid to or to the order of. If that reading is not permissible, there would not have been any difference between a bond and a promissory note.

13. A division bench of this Court in Ramakistiah v. Yellappa referred Section 4 of the Indian Negotiable Instruments Act and observed as hereunder:

Section 4 of the Indian Negotiable Instruments Act defines a promissory note in the following terms:

‘A promissory note’ is an instrument in writing (not being a bank note or a currency note) containing an unconditional undertaking signed by the maker, to pay a certain sum of money only to, or to order of a certain person, or to the bearer of the instrument.

The learned Counsel for the appellant relaying on this definition of a promissory note in Section 4 of the Indian Negotiable Instruments Act contends that the suit sircath falls within this definition. We are not inclined to accept the contention of the learned Counsel for the appellant. The suit sircath is not payable to order to bearer. It is not payable on demand and it has been attested by a witness. The definition of a bond in the Hyderabad Stamp Act clearly shows that a document which is attested by a witness and which is not payable to order or bearer is a bond.

The division Bench has pointed out that a document, which is not payable to bearer or order and which is attested by a witness, clearly falls within the definition of ‘bond’. The learned Judges reached this conclusion after a careful consideration of the material provisions of the Hyderabad Stamp Act and the Hyderabad Negotiable Instruments Act. They have held that Explanation I to Section 13(1) of the Indian Negotiable Instruments Act, cannot be read into the definition of ‘bond’ as contained in Section 2(4)(b) of the Hyderabad Stamp Act, so as to make the instrument which on the face of it is not payable to order by virtue of the said, explanation. In arriving at this conclusion, the learned Judges followed a series of decisions of the High Courts of Calcutta, Madras and Nagpur and the decision rendered by this Court in Sitharama Ratna Ranganayakamma v. Venkata Subba Rao AIR 1957 A.P. 779. A division bench of this Court in State Bank of Hyderabad v. Ranganath has quoted the earlier decision in Sitharama Ratna Ranganayakamma’s case (4 supra) and approved the proposition of law laid down therein. It has been held by the Division Bench of this Court in Ranganath’s case (5 supra) that negotiability is the test of a promissory note. The expression ‘on demand’ in a promissory note has a technical meaning. It means ‘payable immediately or forthwith’. But every document which contains a promise to pay on demand is not necessarily a promissory note. Where notwithstanding the existence of the words “on demand”, the documents did not satisfy the test of negotiability, they were not promissory notes.

14. Bond is defined in Section 2(5) of the Indian Stamp Act, 1899, which reads hereunder:

“Bond” includes-

a) any instrument whereby a person obliges himself to pay money to another, on condition that the obligation shall be void if a specified act is performed, or is not performed, as the case may be;

b) any instrument attested by a witness and not payable to order or bearer, whereby a person obliges himself to pay money to another; and

c) any instrument so attested, whereby a person obliges himself to deliver grain or other agricultural produce to another;

15. The principle ingredient, which makes a difference lot between the bond and the promissory note, is that if the instrument is an unconditional undertaking to pay or to the order of a certain person, it is to be classified as a promissory note. The learned single Judge of this Court in Kotla Sudheer Kumar v. Mallavarapu Jojayya @ Jojaiah Chowdary (1 supra) has dealt the definition of ‘promissory note’ and ‘bond’ very exhaustively and came to the conclusion that all the ingredients stated above are required to be satisfied to classify an instrument as a promissory note. We approve the view taken by the learned single Judge of this Court in Kotla Sudheer Kumar v. Mallavarapu Jojayya @ Jojaiah Chowdary (1 supra).

Accordingly, the reference is answered as follows:

An instrument to be a promissory note, must necessarily contain the words “to the bearer, or to the order”. In a way these two words i.e. “to the bearer, or to the order” are to be read conjunctively and not disjunctively.

16. Registry is directed to post the matter before the appropriate bench after obtaining necessary orders from The Hon’ble Chief Justice.

Chief Rationing Officer And Anr. vs T.V. Rama Sarma on 12 February, 2008

Andhra High Court
Chief Rationing Officer And Anr. vs T.V. Rama Sarma on 12 February, 2008
Equivalent citations: 2008 (3) ALT 612
Author: D Varma
Bench: D Varma, K Bhanu


ORDER

D.S.R. Varma, J.

1. Heard the learned Government Pleader for Services-I, appearing for the petitioners, as well as the learned Counsel appearing for the respondent.

2. This Writ of Certiorari is filed, under Article 226 of the Constitution of India, seeking to quash the order, dated 6-11-2007, passed by the Andhra Pradesh Administrative Tribunal, Hyderabad (for brevity ‘the Tribunal’), allowing O.A. No.4517 of 2007, filed by the respondent herein, seeking to set aside the proceedings Rc. No. A1/2203/2001/Proceedings No. 201/2007, dated 7-7-2007, of the Chief Rationing Officer, Hyderabad, petitioner No. 1 herein. Petitioners are the respondents and the respondent is the applicant, in the O.A., before the Tribunal. For the sake of convenience, in this order, the petitioners and the respondent will be referred to as “the petitioner No. 1 and petitioner No. 2” and “the respondent”, respectively.

3. The facts, in brief, are that the respondent, while working as a Senior Assistant under the respondent No. 1, was implicated in a trap case by the A.C.B., authorities for receiving illegal gratification. Subsequently, he was placed under suspension and thereafter reinstated into service. A case in C.C. No. 3 of 2003 was registered before the Principal Special Judge for S.P.E., and A.C.B., Cases, Hyderabad (for brevity “the trial Court”), in which the respondent was convicted and sentenced to undergo rigorous imprisonment for six months and also to pay a fine of Rs. 1,000/-. Aggrieved by the same, the respondent had preferred an appeal Criminal Appeal No.638 of 2007, along with Crl.A.M.P. No. 899 of 2007, in which this Court, by order, dated 12-6-2007, has suspended the sentence imposed against him. Thereafter, the competent authority i.e., petitioner No. 1, passed order vide proceedings Rc. No. A1/2203/2001, dated 7-7-2007, dismissing the respondent from service, without conducting any enquiry, as postulated under Rule 9(x) read with Rule 25 of the Andhra Pradesh Civil Services (Classification, Control and Appeal) Rules, 1991 (for brevity “the Rules”). Challenging the said order, dated 7-7-2007, the respondent has filed O.A. No. 4517 of 2007 before the Tribunal.

4. The Tribunal, after hearing both sides and considering the entire material, available on record, allowed the O.A., setting aside the dismissal order, dated 7-7-2007. Aggrieved by the same, the petitioners have filed the present writ petition.

5. From a perusal of the impugned order, it appears that the respondent was involved in a criminal case for receiving illegal gratification. After a full-fledged trial, he was convicted and sentenced also. On appeal, this Court, by order, dated 12-6-2007, suspended the sentence only, but not the conviction. As a sequel of the said order of conviction and sentence, by the trial Court, the petitioner No. 1 had passed order of dismissal of the respondent from service, as postulated under the Rules. Aggrieved thereby, the respondent had filed O.A. No. 4517 of 2007 before the Tribunal.

6. Notwithstanding the rule position, contemplated under the Rules, the Tribunal had allowed the O.A., placing reliance on the judgment, dated 7-8-2007, passed by a Division Bench of this Court, in W.P. No. 16102 of 2007, whereunder and whereby, in similar circumstances, the order of dismissal was set aside.

7. The said judgment, dated 7-8-2007, of the Division Bench of this Court, in W.P. No. 16102 of 2007, was placed before us wherein reliance was placed on Rule 25 of the Rules.

8. For the sake of convenience and ready reference, it is apt to extract Rule 25 of the Rules, which reads thus:

Rule 25. Special procedure in certain cases: Notwithstanding anything contained in Rule 20 to Rule 24-

(i) where penalty is imposed on a Government servant on the ground of conduct which has led to his conviction on a criminal charge, or

(ii) where the disciplinary authority is satisfied for reasons to be recorded by it in writing that it is not reasonably practicable to hold an inquiry in the manner provided in these rules, or

(iii) where the Governor is satisfied that in the interest of the security of the State, it is not expedient to hold any inquiry in the manner provided in these Rules,

the disciplinary authority may consider the circumstances of the case and make such orders as it deems fit:

Provided that the Commission shall be consulted, where such consultation is necessary, before any orders are made in any case under this rule.

[Provided further that no such consultation with the Commission is necessary before any orders are made q under Clause (i) of this rule].

9. Sub-rules (ii) and (iii) of Rule 25 of the Rules deal with the circumstances where an enquiry is reasonably found to be impracticable or in the interest of the security of the State, it is not expedient to hold any enquiry. But, as per Sub-rule (i), the disciplinary authority, notwithstanding anything contained in Rules 20 to 24 of the Rules, may consider the over all circumstances of the case and pass appropriate orders as it deems fit.

10. From the above, it is obvious that the disciplinary authority, depending upon the facts and circumstances, mentioned in Sub-rules (i), (ii) and (iii) of Rule 25 of the Rules, can exercise its discretionary jurisdiction to some extent and pass appropriate orders. The expression “appropriate orders” would include imposition of any penalty, as provided under Rule 9, even without conducting any enquiry.

11. Basing on the said rule position, it was further held by the Division Bench of this Court, in W.P. No.16102of 2007, as under:

Thus, the above provisions make it clear that in case of conviction in a criminal proceedings, the disciplinary authority may consider the circumstances of the case and make such orders as it deems fit. But, at this juncture, it is not out of place to mention that on the conviction and sentence imposed against the applicant by the A.C.B., Court, the applicant has preferred an appeal before this Court in Crl.A. 371 of 2007 wherein the sentence imposed by the A.C.B., Court has been suspended and the said appeal is pending adjudication. At this stage, the G.O., in question has been issued y the 1st respondent dismissing the applicant. In this regard, it is needless to observe that in view of the pendency of the criminal appeal as well as the suspension of the sentence imposed by the A.C.B., Court, the judgment passed by the A.C.B., Court has not become final. Therefore, passing of G.O.Ms. No. 91, at this stage, amounts to violation of the special procedure as laid down under Rule 25 of the Rules and thereby, the same is hit by the principle of subjudice.

12. However, the learned Government Pleader for Services I, appearing for the petitioners, has brought to the notice of this Court the judgment, dated 7-9-2006 (sic. 27-9-2006), rendered by another Division Bench of this Court, in W.P. No. 13421 of 2006 and batch (Municipal Corporation of Guntur v. B. Syamala Kumari), in which the entire gamut of the controversy on the present issue, had been taken into consideration, including the effect of suspension of sentence by the appellate Court, and held as under:

…While the damage suffered by the delinquent government servant can be adequately compensated later, when final orders are passed setting aside an illegal order of dismissal, an interim order, pending disposal of the O.A., directing that such a government servant be continued in service would seriously impair the integrity and efficiency of Public Service and demoralize other honest government servants. The incalculable harm which such orders can cause, if eventually the O.A. was to be dismissed, cannot be over-emphasized. The Tribunal must exercise caution while passing interlocutory orders of this nature.

13. In the said judgment, dated 7-9-2006 (sic. 27-9-2006), in W.P. No. 13421 of 2006 and batch, the Division Bench further discussed the aspect of Rule 25(i) of the Rules and as per the observations of the said Division Bench the expression “conduct” has different connotations, depending upon the facts and circumstances of each case.

14. Any conduct can be brought into the fold of Sub-rule (i) of Rule 25 of the Rules, for the purpose of imposing any punishment, without conducting any enquiry. However, the punishment shall commensurate with the gravity of misconduct.

15. The said Division Bench, while relying on a judgment of the apex Court in Managing Director ECIL, Hyderabad v. B. Karunakar , illustratively pointed out that if somebody is imposed with some penalty for traffic violation, such imposition of penalty, though can be brought into the fold of the expression “conduct”, as referred to under Article 311(2) of the Constitution of India as well as Rule 25(i) of the Rules, a simple punishment can be imposed, basing on the alleged misconduct. In other words, it need not necessarily result in dismissal of service, in all cases, where an employee has been convicted.

16. It was further pointed out by the said Division Bench that Rule 20 (1) of the Rules prohibits imposition of penalties, specified in Clauses (vi) to (x) of Rule 9 of the Rules, except after an enquiry is held in the manner specified under Rules 20 and 21 of the Rules.

17. In this context’, the learned Government Pleader for Services I, appearing for the petitioners, would submit that in view of the proviso to Sub-rule (x) of Rule 9 of the Rules, the incumbent has to be necessarily dismissed from service.

18. But, it is to be remembered that in the light of the observations made by the Division Bench of this Court, in the order, dated 27-9-2006 in W.P. No. 13421 of 2006 and batch, such a conclusion can be arrived at only after the enquiry is conducted by the Department, as contemplated under Rules 20 and 21 of the Rules. Therefore, the above contention of the learned Government Pleader cannot be sustained.

19. In fact, as per Rule 25 of the Rules, the disciplinary authority has got a wider scope and discretionary jurisdiction to impose punishment or not, including the quantum of punishment.

20. This situation has been made clear in the decision of the apex Court, as was observed by the Division Bench of this Court, in the above said batch of writ petitions, in K.C. Sareen v. C.B.I., Chandigarh 2001 AIR SCW 3339.

21. However, a word of caution has been added by the said Division Bench to the effect that the power conferred under Rule 25(i) of the Rules has to be exercised fairly, justly and reasonably, following the observations made by the apex Court in Dy. Director of Collegiate Education (Admn.) v. S. Nagoor Meera . In other words, the disciplinary authority has to necessarily take into account the entire conduct of the delinquent officer and the gravity of the misconduct and also as to whether such misconduct would have any impact on the administration.

22. In this context, we feel it apposite to extract the observations made by the Division Bench of this Court, in W.P. No. 13421 of 2006 and batch, dated 27-9-2006, while dealing with the scope of Rule 25 and 25(i) of the Rules, which is as under:

Under the 1st proviso to Rule 9 of the A.P.C.S. (C.C. & A) Rules, 1991, in every case in which the charge of acceptance from any person of any gratification, other than the legal remuneration, as a motive or reward for providing or forbearing to provide any official acts, is established the penalty of removal or dismissal is required to be imposed. Under Rule 20(1) all major penalties, including the punishment of removal or dismissal under Rule 9, can only be imposed after an enquiry is held. The first proviso to Rule 9 was substituted by G.O.Ms. No. 205, dated 5-6-1998. The very fact that such a proviso was inserted in Rule 9, and not in Rule 25, can only mean that the discretion conferred on the disciplinary authority under Rule 25(i), to consider the facts and circumstances of the case and make such orders thereon as it deems fit, is not circumscribed by the limitation prescribed under the first proviso to Rule 9.

23. Therefore, the law is well settled that mere suspension of sentence shall not necessarily lead to any kind of penalty as enumerated under Clauses (vi) to (x) of Rule 9 of the Rules.

24. Of course, in Service law Jurisprudence, it has been reiterated that the suspension of conviction and sentence together is totally alien to the Service jurisdiction. But, it was made very clear that such jurisdiction of suspending the conviction shall be in rarest or exceptional cases, depending upon the facts and circumstances of each case. But, suspension of sentence, by itself, does not confer any right to interfere with any penalty imposed by the disciplinary authority, exercising its jurisdiction under Rule 25(i) of the Rules.

25. In the present case, it is on record that the respondent was charge-sheeted for receiving illegal gratification and the conviction, imposed by the trial Court, in the criminal case registered against him, is not suspended. So long as the conviction is not suspended, the same shall be deemed to be in operation and the effect of the said conviction does not cease.

26. From the above facts and circumstances, particularly keeping in view the nature of charges levelled against the respondent and the consequential conviction and sentence, recorded by the trial Court, inasmuch as, the sentence only has been suspended by this Court, we are of the view that the order of dismissal of the respondent from service, passed by the disciplinary authority, exercising the jurisdiction under Rule 25(i) of the Rules, does not warrant any interference by this Court.

27. From a perusal of the judgment, dated 7-8-2007, passed by the Division Bench of this Court, in W.P. No. 16102 of 2007, relied on by the Tribunal, it is obvious that none of the judgments of the apex Court as well as this Court in W.P. No. 13421 of 2006 and batch, dated 27-9-2006, were brought to the notice of either the said Division Bench or the Tribunal. We are of the view that had the observations and the decisions of the apex Court, including the decision in Sareen’s case 2001 AIR SCW 3339, been brought to the notice of the said Division Bench of this Court, the judgment rendered by it in W.P. No. 13421 of 2006 and batch, dated 27-9-2006 (sic. W.P. No. 16102 of 2007 dated 7-8-2007), would have been otherwise.

28. From the judgment, dated 7-8-2007, in W.P. No. 16102 of 2007, we could see the observations of the Division Bench, and for the sake of convenience, it is apt to extract the relevant portion of the said observations, which is thus:

…So the respondents have power to keep the public servant out of service after the conviction till the conviction became final to pass appropriate orders in accordance with Rule 25 of the A.P.C.S. (CC & A) Rules viz., after the conviction becomes final, the orders can be passed under Rule 25 of A.P.C.S. (CC & A) Rules. Till then, it is always open for them to exercise powers under Rule 8(2)(b) of the A.P.C.S. (CC & A) Rules, 1991 to keep the convicted Government servant out of service or employment, pending finalisation or confirmation of the conviction by the appellate/revisional courts and passing orders under Rule 25 of A.P.C.S., (CC & A) Rules, 1991.

29. The above observations of the Division Bench appear to be contrary to the settled legal proposition laid down by the apex Court as well as Rule 25 of the Rules.

30. We are of the further view that the observations of the Tribunal are totally in conflict with the clear intent of Rule 25(i) of the Rules and the object thereof. Therefore, we are of the firm view that the Tribunal had totally misread the scope of Rule 25(i) of the Rules, while making the above observations, contrary to the principles laid down by the apex Court in Sareen’s case 2001 AIR SCW 3339.

31. Therefore, following the judgments of the apex Court in Sareen’s case 2001 AIR SCW 3339 and Nagoor Meera’s case AIR 1995 SC 1364, since the same are binding on this Court, the impugned order is liable to be set aside.

32. In the result, the writ petition is allowed, at the stage of admission, setting aside the order, dated 6-11-2007, passed by the Tribunal, in O.A. No. 4517 of 2007. However, there shall be no order as to costs.

B. Jagadeswar vs Government Of A.P. Rep. By Its … on 1 February, 2008

Andhra High Court
B. Jagadeswar vs Government Of A.P. Rep. By Its … on 1 February, 2008
Equivalent citations: 2008 (2) ALD 698, 2008 (2) ALT 515
Author: B P Rao
Bench: B P Rao, L N Reddy

ORDER

B. Prakash Rao, J.

1. This case has come up before us for consideration of an important question concerning the Subordinate Courts and in regard to the procedure to be adopted in a given situation, especially, as to whether the Presiding Officers of the Courts below should file an affidavit duly sworn to by them in support of the applications seeking extension of the period, which has been prescribed for or ordered by this Court, while disposing of the main cases, for disposal.

2. Heard Sri M.V. Durga Prasad, learned Counsel, Sri M.R.K. Chowdary, learned Senior counsel, Sri D.V. Sitharammurthy, learned counsel, the President of the A.P. High Court Advocates’ Association and the learned Advocate General.

3. Shorn of the details, which are not necessary forthe present purpose, the sequel of events giving rise to the situations commence with the ‘For being’ note put up by the Registry.

In an instance, through a letter dated 3-2-2001 in Dis. No. 362, when the Chairman, Land Reforms Appellate Tribunal-cum-IV Additional District Judge, Kakinada, has requested the Registry for extension of time for a period of two months, for disposal of the case in L.R.A. No. 114 of 1992, while extending time for disposal of the appeal by four weeks, by the order dated 23-3-2001, Hon’ble Sri Satyabrata Sinha, the then Hon’ble the Chief Justice, observed thus:

NB:- Office should treat the aforementioned letterdt. 3-2-2001 as a miscellaneous application and number the same.

The Registry is hereby directed to issue a Circular to all the Judicial Officers that they should not henceforth issue letters seeking extension of time on the administrative side.

4. It is a matter of common practice that while disposing of the cases be it on civil side or criminal side or otherwise on original, writ proceedings etc., the directions are given to the Courts below for disposal of those cases in a given period having regard to the urgency and with a view to put an early end to the dispute. However, in situations where such directions could not be complied with and those cases could not possibly be disposed of within that particular period. Prior to the aforesaid observations of the Hon’ble the Chief Justice (as he then was) and at various points of time later, the Presiding Officers of those Courts have been regularly writing letters to the Registry seeking extension of time, so as to comply the directions and dispose of the same within the extended period. Many times they have shown the reasons for such non-disposal within the said time limit. Now, it has been pointed out by the Office of this Court that pursuant to the above directions as mentioned above, the Registry has given effect to the first part alone but did not issue any directions or Circular to the concerned, in the manner which it has to be strictly required to be followed up. Such letters are being treated on the Judicial Side and were directed to be posted under the caption “For Direction” on the first page of the Cause List by treating them as Miscellaneous Petitions. However, the Registry has noted as under:

It is further respectfully submitted that pursuant to the above direction, the Registry has given effect to the first part alone, but inadvertently omitted to give effect to the second part and thereby issued a Circular to various Sections of the Registry, directing all the filing Sections to forward the letters received from the Judicial Officers seeking extension of time to comply with the directions of the Hon’ble Courts to the Scrutiny Officers Section, further directing that the Scrutiny Officers Section shall treat them as Miscellaneous Petitions, process the same and after numbering, send them to the concerned Filing Sections to enable the Filing Sections to post the Miscellaneous Petitions before the Hon’ble Courts under the caption ‘For Direction’ in the first page of the Cause List. It is still further respectfully submitted that the direction given by the then Hon’ble Chief Justice in relation to that letter was to treat it alone as a Miscellaneous Petition and number the same. Whereas the Registry was directed to issue a Circular to all the Judicial Officers that they should not thenceforth issue letters seeking extension of time on administrative side, but somehow the relevant Circular was not issued to implement the said direction.

5. Therefore, in view of the aforesaid reasons as pointed out by the Registry, the matter has ultimately come up before us for consideration as to the propriety or any necessity of a Presiding Officer to file an affidavit in support of such applications, which are being sent for seeking such extension of time. At this juncture, it is relevant to extract the Standing Order 217-26, which reads as follows:

Where particular time is fixed by the High Court for the disposal of any particular matter by the Lower Court, and if letters are received in the Registry from Judicial Officers, seeking extension of time, such letters, along with the concerned bundle, shall be circulated to the Hon’ble Judge, who fixed the time schedule (and if the Hon’ble Judge is not available, to the Hon’ble Judge for whom provision is made for that particular category of Case), by way of an Office Note to be signed by the Deputy Registrar concerned. Other things follow, as per the directions of the Hon’ble Judge.

6. This procedure was being followed all along for last several years unscathed. Accordingly, the Presiding Officers concerned were addressing letters to this Court and the same were being posted before the Court for “Extension of Time”, of course, without giving any separate number to the letter as such either as miscellaneous or otherwise. However, later having regard to the aforesaid observations of the Hon’ble the Chief Justice (as he then was), these letters were being treated on the Judicial Side and are given numbering as Miscellaneous Petitions, and are being posted accordingly. However, it has been pointed out that henceforth, such letters seeking extension of time sh’ould not be on the Administrative Side but only on the Judicial Side and therefore, the Registry has issued a Circular in R.O.C. No.14/R.Judl./ 2006 dated 11-10-2006, which reads as follows:

All the Presiding Officers under the control of the High Court of Andhra Pradesh are aware of the procedure hitherto being following i.e., whenever directions are given by the High Court directing the Courts below to dispose of any Proceedings pending before them within a time schedule, and in case of any difficulty in disposing of the case as per the directions, the concerned Presiding Officers of the Courts below addressing letters on the Administrative side seeking extension of time for disposing of the Proceedings before them.

They are further informed that such letters are being placed before the concerned Hon’ble Judge/Judges, after treating such letters as Miscellaneous Applications on the Judicial side, and orders passed thereon are communicated to the concerned Courts.

They are further informed that inasmuch as the letters sent by them are being treated as Miscellaneous Petitions on the Judicial Side, I am directed to request all the Presiding Officers under the control of the High Court not to address letters on the Administrative side and instead, they are henceforth required to send appropriate application on the Judicial Side for posting them before the concerned Hon’ble Judge/ Judges, for processing them on the Judicial Side.

The above instructions will come into force with immediate effect.

7. From the above, necessarily, the pointer is to the effect that such letters should be sent in the format of an appropriate application on the Judicial Side, which apparently is taken as an application normally filed in the due compliance of the Appellate Rules of Practice and supported by an affidavit. Therefore, in each case, the Presiding Officers are filing the affidavits sworn to by them giving the reasons and the same are taken as applications. Neither in the aforesaid Standing Order nor the Appellate Side Rules, contemplate any such requirement. The Presiding Officers, by filing their own affidavits, are virtually being made to become a party to each such proceeding, wherever such extensions are being sought. This practice of filing of affidavits is also causing flutter amongst the Judicial Officers, apart from the inconveniences, since most of the situations where the cases would not be disposed of within such period, cannot be attributed to them. Ultimately, it is only due to some or other reason; the cases are being adjourned in the exigency at the instance of either of the parties to the proceedings rather than at the sole instance of the Presiding Officers. Therefore, in such situations, filing of any affidavit duly sworn to or giving any reasons in support in such a format virtually would amount to personal entry into the case, which directly concerns to the parties than to the said officers. Even otherwise, it has never been the practice to file any affidavits by the Presiding Officers. In fact Presiding Officers should never create an involving situation.

8. At this juncture, it is relevant to note certain observations made by one of us (Justice L. Narasimha Reddy) in a similar situation while considering similar application seeking for extension in a situation where it has been observed as under:

It is not uncommon that extension of time stipulated by this Court for disposal of the matters by subordinate Courts is sought. Till recently, the concerned Officers used to address letters to the Registry, which, in turn, used to prepare a formal C.M.P. and list the matter before the concerned Court. Filing of affidavits by the concerned Presiding Officers is said to be in compliance with the requirement of a Circular issued by this Court on 11-10-2006. On a perusal of the Circular, it becomes evident that it was issued to give effect to the direction issued on 23-3-2001 by the then Hon’ble the Chief Justice, which reads as under:

The Registry is hereby directed to issue a circular to all the Judicial Officers that they should not henceforth issue letters seeking extension of time on the administrative side.

This Court is of the view that implementation of the direction referred to above need not entail in insisting the Judicial Officers to file their personal affidavits. Whatever be the object, the insistence on the Judicial Officer, who is entrusted with the adjudication of the matter, to swear to an affidavit, get it attested, would certainly tell upon the sacred function. A trivial matter such as seeking extension of time for disposal, which, for the most part of it, is the function of a party, must not entail in a situation, which would expose the Judicial Officer to non-adjudicatory functions, such as swearing it to affidavits and getting them attested by Advocates. Further, any minor or inaccurancy in the facts stated in the affidavit is prone to expose the Officers to unwarranted delicate situations.

The Registrar (Judicial) has placed before this Court the relevant record that led to issuance of the Circular dated 11-10-2006. Even from this, it is not clear that there was any specific direction that required the Judicial Officers to file affidavits, while seeking extension of time.

Having regard to the facts and circumstances of the case, the Registrar (Judicial) is directed to place the matter before the Hon’ble the Chief Justice and seek specific instructions as to whether it is inevitable and mandatory to require the Judicial Officers to file their affidavits while seeking extension of time for disposal and depending on the nature of directions that may be issued by the Hon’ble the Chief Justice, and take necessary consequential steps.

9. We have given once again a due consideration to the aforesaid observations and we reiterate the same once again in these proceedings.

10. There is no serious dispute and it is well established that under Section 148 of the Code of Civil Procedure, 1908, that this Court has ample powers to extend the time even in the said situation. However, having regard to the scuttle distinction between the powers on Judicial and Administrative Sides, which includes many ministerial acts, the latter cannot prevail over the former. In regard to the administration and control, the powers of the High Court are specifically provided for under Articles 227, 229 and 235 of the Constitution of India, which only take any exercise more on Administrative Side rather than making inroads into the Judicial arena. Any such attempt to insist an affidavit or, direct roping in a Presiding Officer of any Court would be an encroachment over the exclusive prerogative and independence of the Judicial wing.

11. As already pointed out that as per the Standing Order, which has been in force in 217-26, it would suffice on the part of the Presiding Officers to address in the same format and in the same procedure, which has been in practice all along and the same have to be posted on the Judicial Side and accordingly, dispose of the same by treating as an application. Therefore, it is not necessary for the Registry to insist upon filing any affidavit by the Presiding Officers. Whenever such requests are sent and acted upon the appropriate application as mentioned to in the aforesaid Circular dated 11-10-2006 need not accompany any affidavit by the Presiding Officers.

12. Subject to the above, the application is accordingly disposed of. The time for disposal is extended by a further period of four (4) weeks. We place on record, the valuable assistance given by Sri M.R.K. Chowdary, learned Senior Counsel, Sri M.V. Durga Prasad, learned Counsel, Sri D.V. Sitharammurthy, learned Counsel and the learned Advocate General.

Harikishore Bhattad And Ors. vs Union Of India (Uoi), Department … on 17 January, 2008

Andhra High Court
Harikishore Bhattad And Ors. vs Union Of India (Uoi), Department … on 17 January, 2008
Equivalent citations: 2008 (2) ALT 225
Author: P Narayana
Bench: P Narayana


ORDER

P.S. Narayana, J.

1. This writ petition is filed for a writ of mandamus questioning/challenging the proceedings in MRD/DSA/101507/2007, dated 16.8.2007 issued by the Securities and Exchange Board of India (SEBI) i.e., the 2nd and 3rd respondents, as arbitrary, illegal and violative of Articles 14, 19(1)(g) and 21 of the Constitution of India, apart from contrary to the provisions of the Securities Contracts (Regulation) Act, 1956 and the Hyderabad Stock Exchange Limited (Corporatisation and Demutualisation) Scheme, 2005 and Securities and Contracts (Regulation) (Manner of increasing and maintaining public share holding in recognized stock exchange).

2. 4th respondent-Hyderabad Stock Exchange Limited was impleaded as per order dated 7.9.2007 made in W.P.M.P. No. 23994 of 2007.

3. Counter-affidavit had been filed by respondents 2 and 3 and reply affidavit also had been filed by the writ petitioners. This Court issued notice before admission on 29.8.2007 and further issued Rule nisi on 11.10.2007.

4.Contentions of Sri P. Kesava Rao:

Sri Kesava Rao, learned Counsel representing the writ petitioners had taken this Court through the affidavit filed in support of the writ petition and the counter-affidavit and also pointed out to the relevant portions of the regulations governing the field and the material papers, which had been placed before this Court. The learned Counsel also had taken this Court through Section 4B of the Securities Contracts (Regulation) Act, 1956 (hereinafter in short referred to as ‘the Act’ for the sake of convenience) and in particular, would point out to Section 4B(8) of the Act. The learned Counsel also pointed out to the relevant dates and would maintain that if Sub-sections (8) and (7) of Section 4(B) of the Act are read carefully along with the regulations governing the fields, without permitting the time specified by the Act, with effect from the date of regulations being notified, any action taken cannot be sustained. The learned Counsel in elaboration had taken this Court through the Security and Contracts (Regulation) (Manner of increasing and maintaining public share holding in recognized stock exchange) Regulations, 2006 in general and Regulation 4 in particular and would maintain that these regulations have statutory force since these regulations were made by virtue of Section 31 of the Act read with Sub-section (8) of Section 4B of the Act referred to supra. The learned Counsel would also explain how serious prejudice would be caused to the writ petitioners and how the writ petitioners are having locus standi to question the same. The learned Counsel also demonstrated how the period of 12 months and subsequent grace period of 12 months to be calculated or to be reckoned with and explained the relevant expressions employed in the Act and also the regulations as well. The learned Counsel also placed reliance on SEBI (Disclosure & Investor Protection) Guidelines, 2000 (hereinafter referred to as guidelines for the purpose of convenience). The learned Counsel also had drawn the attention of this Court to a decision of the Madras High Court dated 25.8.2006 made in Coimbatore Stock Exchange Limited rep., by its Director v. Securities & Exchange Board of India. The learned Counsel also while elaborating several facts had also drawn the attention of this Court to the contents of the reply-affidavit.

5. Contentions of the Learned Advocate General:

On the contrary, the learned Advocate General had explained the facts and circumstances and had drawn the attention of this Court to Section 2(ab) of the Act and further pointed out to Section 4A and 4B of the Act as well. The learned Advocate General had drawn the attention of this Court to Sub-sections (6), (7) of Section 4B and also Sub-section (8) as well. Further, the learned Advocate General would maintain that publication of the regulations may not have any serious consequence for the reason that Section 5(2) of the Act being mandatory, the same to be operative by operation of law and hence, the impugned action cannot be found fault and that Section 5(2) of the Act is having overriding effect and hence, the contention of the writ petitioners that in the light of Section 4B(8) of the Act read with the regulations, the action called in question to be held as invalid, cannot be a sustainable ground and in the light of Section 5(2) of the Act, the stand taken by the writ petitioners that some more time should have been given cannot be an acceptable contention and the regulations at any rate cannot provide for such extension. The learned Advocate General also had pointed out that the learned Counsel for the petitioners had relied upon only 2-2-1 of the guidelines, but 2-2-2 also may have to be looked into since alternatives had been made under the guidelines 2-2-2. The learned Advocate General also pointed out to the counter-affidavit in general and paragraph No. 20 in particular. The learned Advocate General also pointed out to certain portions of the letters and would maintain that a new plea is being taken. Further, submissions at length were made by the learned Advocate General pointing out to the relevant portions of the correspondence, provisions of the Act and also the relevant regulations as filed, apart from the guidelines specified above.

6. The petitioners are the members of the Hyderabad Stock Exchange Limited (hereinafter referred to in short as ‘HSEL’), which was originally incorporated on 18th day of October, 1943 under the Hyderabad Companies Act during the Nizam Government, Hyderabad Deccan. The HSEL was established with the main objective of creating, protecting and developing a healthy capital market in the State of Hyderabad and to effectively serve the interests of general public and the investors under the provisions of the Securities and Contracts (Regulation) Act, 1956.

7. The HSEL was accorded recognition by the Government of India on 29th September, 1958 and granted permanent recognition in the year 1983. The HSEL is also regulated and controlled by the Securities and Exchange Board of India (hereinafter referred to in short as ‘SEBI’), which is a statutory body established under the Securities and Exchange Board of India Act, 1992. Further, to serve investors and develop the capital market, the HSEL established a trading software called Hyderabad Stock Exchange Online Securities Trading System (HOST). The HSEL currently has over 292 broker members, which includes the petitioners herein, about 774 companies including some of the leading corporate of the country are listed on HSEL as on 23.4.2007. At present, the authorized share capital of the exchange is Rs. 1,00,00,000/- equity shares of Rs. 1 each and the issued capital of the exchange is 29,20,000/- consisting of 29,20,000/- equity shares of Rs. 1 each. All the shares are held by the broker members of HSEL.

8. Further, it is stated that all the members including the petitioners herein are doing the business in shares registered under HSEL and many members are also registered as sub-brokers with HSE Securities Ltd., a 100% subsidiary company holding the terminals of National Stock exchange and Bombay stock exchange serving large number of investors. While matter stood thus, in the year 2005, SEBI, as part of its efforts to improve governance in stock exchanges notified a scheme called as the Hyderabad Stock Exchange Limited (Corporatisation and Demutualisation) Scheme, 2005 (herein after referred to in short ‘scheme, 2005’). The said scheme shall have effect on its publication under Sub-section 4 of Section 4B of Securities Contracts (Regulation) Act, 1956 (herein after referred to in short as ‘SCRA’). The HSEL will be Corporatised and Demutualised in accordance with the scheme, 2005 on and from the appointed date as may be notified by the SEBI under Section 4A of SCRA, provided that the activities specified in the respective Clauses of this scheme shall be implemented as per the time schedule specified in those clauses.

9. It is also further stated that SEBI vide notification dated 29.8.2005 has approved and notified the HSEL Scheme of Corporatisation and Demutualisation. Accordingly, the HSEL was got converted itself from a company Limited by guarantee to company Ltd by shares on 23.11.2005 by following the procedure for the registration of the company under the provisions of the Companies Act, 1956 vide registration No. 629 of 2005 (company Ltd., by guarantee vide No. 629 (3/1953). It is pertinent here to mention that the SEBI notified the scheme of Corporatisation and demutualisation of all stock exchanges to improve governance in stock exchanges in the country. The essence of the Corporatisation and Demutualisation was to segregate trading, ownership and management of the exchanges thereby ensuring independence of stock exchanges from potential conflicts of interests between the brokers and investment communities.

10. One of the key measure of the demutualisation exercise is to ensure induction of non-trading share holders to the extent of 51% of aggregate equity capital of the exchange post-demutualisation. In terms of Clause 9(ii) of the scheme, 2005 the company is to ensure that at least 51% of its equity shares are held by public other than share holders having trading rights in the manner and within the period prescribed in Sub-section 8 of Section 4B. The HSEL is required to comply with the condition with respect to shareholding as above in the manner specified in the regulations made by SEBI within a period of 12 months of the date of publication of the order. The initial period of 12 months came to an end on 29.8.2006 since the scheme, 2005 was notified and approved on 29.8.2005 by the SEBI.

11. In those circumstances in exercise of the powers conferred on SEBI, it has extended the period for a further period of 12 months ending with 28.8.2007. Further, it is averred that for implementation of the Scheme, 2005 the SEBI notified the Securities Contracts (Regulation) (manner of increasing and maintaining public share holding in recognized stock exchange) Regulations, 2006 (herein after referred to in short as Regulations 2006) on 13.11.2006 in terms of which the company has been permitted to achieve the stipulated shareholding pattern either (1) by fresh issue of equity shares (on private placements basis or through a prospectus) or (2) through an offer for sale by the existing shareholders or (3) by any combination of the methods.

12. Further, it was stipulated that no person shall directly or indirectly acquire or hold more than 5% in the paid up equity capital of the company. Further, as per Sub-section (8) of Section 4B of the Act, 1956 every recognized stock exchange should implement the scheme with in 12 months from the date of publication of the order/scheme. Further, the SEBI on sufficient cause being shown to it and in the public interest extended the said period by another 12 months.

13. If any stock exchange fails to implement/submit the scheme within the specified time, the recognition granted to such stock exchange under Section 4 of the Act, 1956 shall stand withdrawn and the Central Government shall publish by notification in the official gazette such withdrawal of recognition. As far as the HSEL is concerned, the Scheme, 2005 was notified on 29.8.2005. However, for implementing/submitting the Scheme, 2005 the Regulations 2006 are issued only on 13.11.2006. Hence, within the short time the scheme, 2005 cannot be implemented/submitted by the HSEL since it is facing difficulties such as a court litigation in respect of its property measuring 17052 sq. yards at Somajiguda under the ULC Act, the exploitation of the members by the strategic investors in asking the shares at a very low price and etc., apart from other aspects.

14. It is pertinent here to mention that all the efforts made by the shareholders for complementing the Scheme, 2005 in constituting a demutualisation committee and in spite of 51 meetings held by the Committee, no fruitful results have been achieved. In those circumstances, the HSEL has addressed letters in Ref: HSE: ADM: 07: 147, dated 12.8.2007 and REF: HSE:ADM:07: 161 dated 22.8.2007 to the executive director of the 2nd respondent intimating the status of demutualisation and requesting the 2nd respondent to take appropriate steps as far as the HSEL is concerned. Not only the HSEL, some of the broker members also ventilated their grievance in person before the SEBI.

15. Though the SEBI promised to look into the matter, no action has been taken till date. Further, the HSEL also submitted a letter in REF: HES: ADM:07:149 dated 13.8.2007 to the Hon’ble Finance Minister, Government of India stating the difficulties that are being faced by it and requested to give relaxations and exemptions and by extending the time period upto 31.12.2008 for compliance. While matters stood thus, the 2nd respondent through its Chief General Manager, Market Regulation Department i.e., the 3rd respondent herein issued proceedings in MRD/DSA/101507/2007, dated 16.8.2007 to the Chairman of HSEL that if HSEL is unable to demutualise by the specified date then as per Section 5(2) of SCRA, 1956 the recognition granted under Sub-section 4 shall stand withdrawn.

16. The action of respondents Nos. 2 and 3 in issuing the impugned proceedings dated 16.8.2007 is arbitrary, illegal and contrary to the provisions of SCRA, 1956 since the time stipulated under Sub-section 8 of Section 4B of SCRA, 1956 is not given to the HSEL as the Regulations, 2006 are issued only in the month of November, 2006. Further, if the HSEL is de-recognized or the recognition granted is withdrawn, the post de-recognition procedure is also not contemplated and indicated anywhere. If the recognition of HSEL is withdrawn, all the members of HSEL including petitioners herein will be put to great financial loss and hardship. In a way, all the broker members will be at the crossroads. It is stated that the Central Government i.e., the 1st respondent has not issued any notice to HSEL giving an opportunity of being heard in the matter before the recognition is sought to be withdrawn.

17. Hence, the action of the respondents is arbitrary, illegal and violative of the procedure as contemplated under the SCRA, 1956. In those circumstances, if the recognition of HSEL is withdrawn, it is not in the interest of the trade or in the public interest and also the broker members will be put to great hardship in depriving of their livelihood apart from that, 20,000 CDSL account holders 774 listed companies, sub-brokers of HSE Securities Ltd and their clients, 44 HSEL employees will be put to great financial loss and serious hardship. Hence, the action is violative of Articles 14, 19(1)(g) of the Constitution of India.

18. It may be appropriate to have a glance at the impugned proceedings MRD/DSA/101507/2007, dated 16.8.2007 and the same reads as follows:

Dear Sir,

Sub: Demutualisation of Hyderabad Stock Exchange Limited (HSE)

This has reference to your letter REF:HSE:ADM:07:147, dated August, 12 2007 in the captioned matter.

As you are aware, the request of FISE/stock exchanges for extension of time was taken up with the Government by SEBI. However, the same has not been acceded to. This has already been communicated to you through FISE and also during the meeting with the stock exchanges in the southern region, held on June 20, 2007 at Bangalore.

In response to specific request for extension of time made by HSE vide it’s letter dated 27/06/2007, we had vide our letter dated 04/07/2007, informed that the request for extension of time for completing demutualisation process was not acceded to. You were accordingly advised to strictly adhere to the time line specified in Section 4B of the Securities Contracts Regulation Act (SCRA) 1956 as communicated to you vide our letter dated August 01, 2006.

You may note that if HSE is unable to demutualise by the specified date then as per Section 5(2) of SCRA 1956 the recognition granted under Section 4 of SCRA-1956 to HSE shall stand withdrawn.

19. In the counter-affidavit filed by respondents 2 and 3, a specific stand had been taken that the withdrawal of recognition came into operation w.e.f., 29.8.2007 by operation of law as per Section 5(2) of the Securities Contracts (Regulation) Act, 1956 as the HSE did not complete the said process. Further, a specific stand was taken that only the HSE can be said to be an aggrieved party by the said action of the 2nd respondent and not the petitioners, who only claim to be members of the HSE. Therefore, the petitioners have no locus standi to challenge the withdrawal of recognition of HSE.

20. Further, it is averrea that the HSE is an incorporated company, whose entire share capital is admittedly held only by the broker members of HSE. With a view to prevent undesirable transactions in securities by regulating the business of dealing therein and for providing for other connected matters, the securities Contracts (Regulation) Act, 1956 (SCRA) was enacted by the Parliament. Section 4A of the SCRA provided that all recognized Stock Exchanges shall be Corporatised and Demutualised in accordance with the provisions contained in Section 4B of SCRA by an appointed date.

21. The reason for corporatisation and demutualisation is to segregate trading, ownership and management of the exchanges thereby ensuring independence of stock Exchanges from potential conflict of interest between the brokers and investment communities. This is sought to be achieved by ensuring that 51 % of the equity share holders are held by public other than the broker members. Section 4B(1) of SCRA provides that all recognized Stock Exchanges shall within such time as may be specified by the SEBI (R2) submit a scheme for Corporatisation and Demutualisation for its approval.

22. After receipt of the said scheme, SEBI would approve it with or without modification. Such an approved scheme would bind all persons and authorities including all members, creditors, depositors and employees of the recognized Stock Exchange and on all persons having any contract, right, power, obligation, or liability with, against, over, to or in connection with the recognized Stock Exchange or its members.

23. The order of the SEBI approving the scheme has to be published in the gazette and will come into operation on its publication in the gazette. After the scheme is approved, a recognized Stock exchange can either by fresh issue of equity shares to the public or in any other manner as may be specified by the Regulations made by the SEBI, ensure that at least 51 % of its equity share capital is held by the public other than shareholders having trading rights within 12 months of the publication of the scheme.

24. The HSE also submitted a scheme for corporatisation and demutualisation to SEBI as per Section 4B(1) of SCRA and the said scheme was approved and notified as the Hyderabad Stock Exchange Limited (Corporatisation and Demutualisation) Scheme, 2005 vide Gazette Notification S.0.1206(E) dated 29.8.2005.

Section 4B(8) of the SCRA stipulates as follows:

Every recognized stock exchange, in respect of which the scheme for corporatisation or demutualisation has been approved under Sub-section (2) shall, either by fresh issue of equity shares to the public or in any other manner as may be specified by the regulations made by the Securities and Exchange Board of India, ensure that at least fifty-one-percent of its equity share capital is held, within twelve months from the date of publication of the order under Sub-section (7), by the public other than share holders having trading rights:

Provided that the Securities and Exchange Board of India may, on sufficient cause being shown to it and in the public interest, extend the said period by another twelve months.

25. Section 5(2) of the SCRA states:

Where the recognized stock exchange has not been corporatised or demutualised or it fails to submit the scheme referred to in Sub-section (1) of Section 4B within the specified time, therefore, or the scheme has been rejected by the Securities and Exchange Board of India under Sub-section (5) of Section 4B, the recognition granted to such stock exchange under Section 4, shall, notwithstanding anything to the contrary contained in this Act, stand withdrawn and the central Government shall publish, by notification in the Official Gazette, such withdrawal of recognition.

26. It is further averred that within 12 months from 29.8.2005 (the date of publication of Notification of the above scheme in the official gazette) the HSEL had the option of issuing fresh equity shares to the public and ensuring that at least 51 % of its equity share capital is held by public other than the share holders having trading rights and to complete the demutualisation process as per Section 4B of SCRA. This period has expired on 28.8.2006. Subsequently, by invoking the proviso to Section 4B(8) SEBI extended time to complete the demutualisation process by 12 more months i.e., on or before 28.8.2007, which is the maximum specified under the SCRA. However, HSE could not complete the process of demutualisation before 28.8.2007 and therefore, by operation of law i.e., Section 5(2) of the SCRA its recognition stood automatically withdrawn w.e.f. 29.8.2007. SEBI notified the Securities Contracts (Regulation) (Manner of Increasing and Maintaining Public Shareholding in Recognized Stock Exchange) Regulations, 2006 (MIMPS Regulations). It may be pertinent to mention that before notifying the aforesaid regulation, SEBI constituted a committee to study the future of regional stock exchangespost demutualisation.

27. One of the terms of reference of the Committee was to recommend modalities for increasing the public shareholding in demutualised stock exchanges in accordance with the provisions of SCRA. The report was put up on the SEBI website on May 8, 2006 for public comments. SEBI also studied the international practice followed by other international stock exchanges and also had discussion with Federation of Indian Stock Exchange (FISE)/various regional stock exchanges at various times on the subject. Further, the Government of India decided to have a policy regarding foreign investments in infrastructure companies in the securities market, namely stock exchanges, depositories and clearing corporations. Accordingly, SEBI and RBI simultaneously issued a circular dated 22.12.2006 on the “Foreign Investments in Infrastructure Companies in the Securities Market”.

28. Merely because there was a delay in notifying the MIMPS Regulations, the petitioners cannot contend that more time should be granted by SEBI for completing the demutualisation process. This is because HSE always could have diluted its share capital by issue of fresh equity shares and ensuring that 51% of its equity share capital is held by public other than share holders having trading rights by following procedure prescribed under the Companies Act, 1956. However, HSE failed to do so even though it had initially a period of 12 months from 29.8.2005 till 28.8.2006 and another period of 12 months from 28.8.2006 to 28.8.2007. Moreover, in the period after 13.11.2006 also till 28.8.2007, HSE could not complete the demutualisation process by following the method prescribed under MIMPS Regulations.

29. It is further averred that SEBI had various meetings with the Federation of Indian stock exchanges (FISE) as well as regional stock exchanges wherein they expressed their apprehensions in complying with the demutualisation within the prescribed time limits. Accordingly, FISE/regional stock exchanges had requested SEBI for extension of time for demutualisation of stock exchanges. After due consideration of their request in consultation with the Central Government, SEBI vide letter dated May 10, 2007 informed FISE that the demutualisation process has to be completed within the time frame specified in Section 4B(8) of SCRA and advised FISE to bring the same to the notice of all concerned stock exchanges. The same was also reiterated to all the stock exchanges during the region-wise meeting held with them (including HSE during the meeting with stock exchanges in the southern region held at Bangalore on June, 20, 2007) wherein it was informed that there is no scope for extension of time for completing the demutualisation process.

30. In spite of the same, HSE vide letters dated June 27, 2007, August 12, 2007 and August 13, 2007 requested for extension of time. SEBI vide letters dated July 4, 2007, August 16, 2007, August 24, 2007, advised HSE to strictly adhere to the time-limit specified in Section 4B of the SCRA. Further, HSE was also informed that if it is unable to demutualise by the specified date then as per Section 5(2) of the SCRA the recognition granted under Section 4 of the SCRA to HSE shall stand automatically withdrawn. Chairman of HSE vide letter dated August 12, 2007 stated that the exchanges unable to complete the demutualisation process mainly because the EGM of the company fixed a minimum bid price of Rs. 450/- per share. This price was fixed because HSE owns an immovable property with a plot area of 17,700 sq. yards and built up area of 4 lakh sq. feet. But the title to the property is in dispute, as clearance under the Urban Land Ceiling (ULC) Act has not been granted till now. The ULC dispute is sub-judice. Hence, bidders are not forthcoming at a purchase price exceeding Rs. 450/- per share. The same was also reiterated by the Executive Director of HSE in letter dated August 13, 2007. He informed that the exchange is unable to complete the demutualisation process since the exchange is not getting fair valuation of the assets it held due to the court litigations and litigations under ULC. As such the exchange cannot complete the demutualisation process, as the shareholders are not able to realize the true value of the shares. As HSE had failed to demutualise within the stipulated time i.e., on or before August 28, 2007, its recognition stood automatically withdrawn in terms of Section 5(2) of the SCRA.

31.It may be pertinent to note that the following 10 stock exchanges including smaller stock exchanges were able to complete the demutualisation process within the stipulated time:

i. Bombay Stock Exchange Ltd.,

ii. The Calcutta Stock Exchange Association Ltd.,

iii. The Utter Pradesh Stock Exchange Association Ltd.,

iv. Bangalore Stock Exchange Ltd.,

v. Delhi Stock Exchange Ltd.,

vi. Madras Stock Exchange Ltd.,

vii. Pune Stock Exchange Ltd.,

viii. Cochin Stock Exchange Ltd.,

ix. Gauhati Stock Exchange Ltd.,

x. Madhya Pradesh Stock Exchange Ltd.

32. It is further stated that so far HSE is the only exchange, which has failed to demutualize as per the statutory mandate. It is further averred that the 3rd respondent had also sent a letter reference MRD/DSA/103154/2007, dated 5.9.2007 to the HSE with regard to what is to be done post de-recognition of HSE. In the said letter, it is specifically stated as follows:

1. With regard to the status of the listed companies it is informed that the companies, which are exclusively listed at HSE may consider seeking listing at other stock exchanges or provide for exit option to the shareholders as per SEBI de-listing guidelines/regulations.

2. With regard to the D.P. operations of HSE, it is informed that in the interest of investors/public, the D.P. operations are allowed to continue for a period of three months to give sufficient time to the investors to transfer/shift the B.O. accounts to another D.P. as per their choice.

3. With regard to status of the share holding of HSE in its subsidiary, the exchange is advised to maintain the status quo till further directions from SEBI.

4. With regard to the operations of HSE securities Ltd., it is informed that the sub-brokers of HSE Securities Ltd., are allowed to continue to trade on Bombay Stock Exchange Ltd., (BSE) and National Stock Exchange of India Ltd., (NSE).

5. With regard to appointment of an Administrator to look after the transitional matters from August 29, 2007, it is informed that the present directors on the Governing Board may continue till further directions from SEBI. In addition to the above, the following directions are also issued:

(a) Money available in the Investor Protection Fund (IPF) and Investor Services Fund (ISF) of HSE lying un-utilized shall be transferred to SEBI Investor protection and Education Fund.

(b) The funds available in the Settlement Guarantee Fund (SGF)/Trade Guarantee Fund (TGF) shall not be alienated till further directions.

(c) HSE shall set aside sufficient funds in order to provide for settlement of any claims, pertaining to pending arbitration cases, pending non-implemented arbitration award, if any, liabilities/claims of contingent nature, if any, and unresolved investor complaints/grievances lying with the exchange.

(d) Consequent upon withdrawal of recognition of HSE, the trading members of HSE shall cease to be trading members of HSE and therefore, liable to be de-registered as stock brokers, and hence, their certificate of registration granted by SEBI shall stand automatically cancelled. However, the said brokers/trading members of HSE shall be liable to pay SEBI registration fees, if any, due as per schedule III of the SEBI (Stock Brokers and Sub Brokers) Regulations, 1992.

(e) Pursuant to the withdrawal of recognition of HSE, the exchange is directed to refrain from using the expression ‘stock exchange/exchange’ or any variant in its name or in its subsidiary’s name.

(f) HSE is restrained from transferring or alienating any movable or immovable property of the exchange including Bank Accounts in any manner till further directions by SEBI in this regard. However, HSE is allowed to operate the bank accounts for a limited purpose of day-to-day administration like payment of salary to its staff, telephone, electricity bills, payment of taxes and property maintenance charges subject to the overall control of SEBI and the following conditions till further directions from SEBI.

(i) There should be no withdrawal of fixed deposits,

(ii) No capital expenditure without the approval of SEBI.

(iii) Fortnightly report to be submitted to SEBI indicating the details of money withdrawn from bank accounts and the details of the expenditure incurred thereof.

33. Thus, there is no illegality or arbitrariness or violation of Constitution or of SCRA committed by R2 and R3 in issuing the impugned letter dated 16.8.2007 informing HSE that if it did not demutualize by the specified date, then as per Section 5(2) of the SCRA, the recognition granted under Section 4 of SCRA stands withdrawn. Further a specific stand had been taken that SEBI has no power under SCRA to grant further extension for completion of the corporatisation and demutualisation process by HSE. It can only grant a period of 12 months from the date of publication of the scheme and extend it by one further period of 12 months i.e., only 24 months. In the absence of power conferred under the Statute on SEBI to grant further extension, its action cannot be said to be contrary to law. It is not true to say that post de-recognition procedure was not contemplated and indicated any where by SEBI.

34. As stated above in the letter, dated 5.9.2007 the post de-recognition procedure has been indicated clearly. Further specific stand had been taken that the recognition stands withdrawn by operation of law and in such cases statutory time limit itself is a notice. No prejudice is caused because the members of HSE including the petitioners are also registered as sub-brokers with HSE Securities Limited, the 100% subsidiary company holding the terminals of NSE and BSE serving large number of investors. There is no restriction for these sub-brokers of HSE Securities Limited to continue to trade on BSE and NSE after recognition of HSE is withdrawn, as clarified in the letter dated 5.9.2007. This is the stand taken by respondents 2 and 3 in their counter-affidavit.

35. A reply-affidavit had been filed wherein the locus standi of the writ petitioners had been explained further saying how they are interested in maintaining the present writ petition. It is specifically averred that the five Directors nominated by the 2nd respondent, who are called as public representative directors, submitted their resignations on 28.8.2007 itself to the 2nd respondent. The stand taken in the counter-affidavit relating to the operation of law i.e., Section 5(2) of SCRA had been explained in the context of 4B(8) in elaboration in paragraph No. 5ofthe reply-affidavit. Further, it is stated that the 4th respondent could not complete the demutualisation process as it facing difficulties as stated supra, apart from the title dispute of the property relating to U.L.C. which is subjudice before this Court. It is pertinent hereto mention that in fact, the 4,h respondent company have already paid Rs. 2.36 crores towards regularization fee for the land and building in terms of G.O.Ms. No. 455, dated 29.7.2002 to the Government of A.P. The same is also pending.

36. It is also relevant hereto mention that HSE members have offered more than 71% of the equity shares at Rs. 450 per share. However, as there is a dispute with regard to the property and as the period was also short, the buyers could not come forward and even those, who come forward, asked at very low price, which was not acceptable. A specific stand taken in the affidavit itself would indicate that the members are directly affected parties since there be a lot of financial impact on them. Further, it had been asserted that the 2nd respondent has got power for extension of time if it is satisfied that any recognition stock exchange was prevented by sufficient cause from being corporatised and demutualised on or after the appointed date.

37. The impugned order already had been referred to above.

38. Section 4B of the Act deals with the procedure for corporatisation and demutualisation. Sub-clause (8) of the said provision specifies that,
Every recognized stock exchange, in respect of which the scheme for corporatisation or demutualisation has been approved under Sub-section (2), shall, either by fresh issue of equity shares to the public or in any other manner as may be specified by the regulations made by the Securities and Exchange Board of India, ensure that at least fifty one percent of its equity share capital is held, within twelve months from the date of publication of the order under Sub-section (7), by the public other than shareholders having trading rights.

39. Sub-section (6) reads as hereunder:

The securities and exchange Board of India may, while approving the scheme under Sub-section (2), by an order in writing, restrict-

(a) the voting rights of the shareholders who are also stock brokers of the recognized stock exchange;

(b) the right of shareholders or a stock broker of the recognized stock exchange to appoint the representatives on the governing board of the stock exchange;

(c) the maximum number of representatives of the stock brokers of the recognized stock exchange to be appointed on the governing board of the recognized stock exchange, which shall not exceed one fourth of the total strength of the governing board.

40. At this juncture, it would be relevant to note Sub-section 7 of Section 4B and the said provision reads as hereunder:

The order made under Sub-section (6) shall be published in the Official Gazette and on the publication thereof, the order shall, notwithstanding anything to the contrary contained in the Companies Act, 1956 (1 of 1956), or any other law for the time being in force, have full effect.

41.Emphasis was laid on the words “within 12 months from the date of publication of the order under Sub-section (7) of 4B”.

42. Further emphasis was laid on the relevant portion of the proviso “Provided that the Securities and Exchange Bpard of India may, on sufficient cause being shown to it and in the public interest, extend the said period by another twelve months.”

43. The Gazette of India Extraordinary Part-II, Section 3 Sub-section (ii) Published by Authority Securities & Exchange Board of India, Notification, Mumbai, the 13th November, 2006 had been placed before this Court.

44. As already aforesaid, these regulations were made by virtue of Section 31 read with Sub-section (8) of Section 4B of the Securities Contracts (Regulation) Act, 1956. Chapter II deals with Manner of Increasing Public Shareholding, and relevant Regulation reads as hereunder:

4. Subject to the provisions of Sub-section (8) of Section 4B of the Act and the scheme, the recognized stock exchange shall ensure that at least fifty one percent of its equity share capital is held by the public, either by fresh issue of equity shares to the public through issue of prospectus or in the following manner:

(a) offer for sale, by issue of prospectus, of shares held by shareholders having trading rights therein;

(b) placement of shares held by shareholders having trading rights to such persons or institutions as may be short-listed by the recognized stock exchange with the approval of the Board.

(c) Issue of equity shares on private placement basis by the recognized stock exchange to any person or group of persons not being shareholders having trading rights or their associates subject to the approval of the Board; or

(d) Any combination of the above.

45. Strong reliance was placed on Section 4B(8) of the Act read with Regulation No. 4 referred to supra. The relevant portions of the letters also had been pointed out to substantiate respective stands taken by the parties. The letter of Chief General Manager Market Regulation Department, dated 5.9.2007, Letter of Manager Market Regulation department, dated 24.8.2007, Letter of Chief general manager, Market Regulation Department, dated 16.8.2007, Letter of Executive Director, Hyderabad, Stock Exchange, dated 13.8.2007, Letter of Chairman Hyderabad Stock Exchange, dated 12.8.2007, Letter of Manager Market Regulation Department, dated 4.7.2007, Letter of Executive Director, Hyderabad, Stock Exchange, dated 27.6.2007 and Letter of Chief General Manager, Market Regulation Department, dated 10.5.2007 had been placed before this Court and the contents thereof had been pointed out. Apart from these, letter dated 17.8.2007, press release statement dated 17.11.2006, proceedings dated 29.8.2005, and 13.11.2006 and letters dated 12.8.2007, 13.8.2007 and 22.8.2007 also had been relied upon.

46. Certain submissions were made relating to the requests made for extension of time. Chapter II of the guidelines deals with eligibility norms for companies issuing securities.

2.2 of the guidelines deals with Initial Public Offerings by unlisted companies:

47. The Counsel for the petitioner placed strong reliance on guidelines 2-2-1, which read as hereunder:

An unlisted company may make an initial public offering (IPO) of equity shares or any other security, which may be converted into or exchanged with equity shares at a later date, only if it meets all the following conditions:

(a) the company has net tangible assets of at least Rs. 3 crore in each of the preceding 3 full years (of 12 months each), of which not more than 50% is held in monetary assets. Provided that if more than 50% of the net tangible assets are held in monetary assets, the company has made firm commitments to deploy such excess monetary assets in its business/ project.

(b) The company has a track record of distributable profits in terms of Section 205 of the Companies act, 1956, for at least three (3) out of immediately preceding five (5) years; Provided further that extraordinary items shall not be considered for calculating distributable profits in terms of Section 205 of the Companies Act, 1956.

(c) The company has a net worth of at least Rs. 1 Crore in each of the preceding 3 full years (of 12 months each);

(d) In case the company has changed its name within the last one year, at least 50% of the revenue for the preceding 1 full year is earned by the company from the activity suggested by the new name; and

(e) The aggregate of the proposed issue and all previous issues made in the same financial year in terms of size (i.e., offer through offer document + firm allotment + promoters’ contribution through the offer document), does not exceed five (5) times its pre-issue net worth as per the audited balance sheet of the last financial year.

48. The learned Advocate General placed strong reliance on the guidelines 2.2.2, which read as hereunder:

An unlisted company not complying with any of the conditions specified in Clause 2.2.1 may make an initial public offering (IPO) of equity shares or any other security, which may be converted into or exchanged with equity shares at a later date, only if it meets both the conditions (a) and (b) given below:

(a)(i) The issue is made through the book building process, with at least 50%of (net offer to public) being allotted to the qualified institutional buyers (QIBs), failing which the full subscription monies shall be refunded.

(or)

(a)(ii) The ‘project’ has at least 15% participation by Financial Institutions/ Scheduled Commercial Banks, of which at least 10% comes from the appraiser(s). In addition to this at least 10% of the issue size shall be allotted to QIBs, failing which the full subscription monies shall be refunded.

And

(bi) the minimum post-issue face value capital of the company shall be Rs. 10 crores.

OR

(b)(ii) There shall be a compulsory market making for atleast 2 years from the date of listing of the shares, subject to the following:

(a) Market makers undertake to offer buyandsellquotesfora minimum depth of 300 shares;

(b) Market makers undertake to ensure that the bid ask spread (difference between quotations for sale and purchase) fortheirquotes shall not at any time exceed 10%;

(c) The inventory of the market makers on each of such stock exchanges, as on the date of allotment of securities, shall be at least 5% of the proposed issue of the company).

49. Section 5 of the Act deals with ‘withdrawal of recognition’. Sub-section (2) of Section 5 reads as hereunder:

Where the recognized stock exchange has not been corporatised or demutualised or it fails to submit the scheme referred to in Sub-section (1) of Section 4B within the specified time therefor or the scheme has been rejected by the Securities and exchange Board of India under Sub-section (5) of Section 4B, the recognition granted to such stock exchange under Section 4, shall notwithstanding anything to the contrary contained in this Act, stand withdrawn and the central Government shall publish, by notification in the Official Gazette, such withdrawal of recognition:

Provided that no such withdrawal shall affect the validity of any contract entered into or made before the date of the notification, and the Securities and exchange Board of India may, after consultation with the stock exchange, make such provisions as it deems fit in the order rejecting the scheme published in the Official Gazette under Sub-section (5) of Section 4B.

50. Reliance was placed on the decision of the Madras High Court dated 25.8.2006 in Writ Petition No. 11557 of 2006 in Coimbatore Stock Exchange Limited, represented by its Director Ashok Lunia v. Securities and Exchange Board of India.

Certain portions of the said judgment had been pointed out to show how different stands had been taken by SEBI.

51. The contents of the letter, dated 5.9.2007 may be glanced at for better appreciation:

Dr. N.R. Siva Swamy,

Chairman,

The Hyderabad Stock exchange Limited, 6-3-654, Adjacent to Erramanjil Bus Stop,

Somajiguda,

Hyderabad-500082

Dear Sir,

Sub: Derecognition of the Hyderabad Stock Exchange Limited (HSE) and consequential actions -Regarding.

Please refer to the letter dated August 22, 2007 received by us on August 27, 2007 seeking clarification on the functioning of the Hyderabad Stock Exchange Limited (HSE) and its subsidiary i.e., HSE Securities Ltd., pursuant to de-recognition of HSE in accordance with Section 5(2) of the Securities Contracts (Regulation) Act, 1956.

In this regard, you are advised as under:

(1) With regard to the status of the listed companies it is informed that the companies, which are exclusively listed at HSE may consider seeking listing at other stock exchanges or provide for exit option to the shareholders as per SEBI Delisting Guidelines/Regulations.

(2) With regard to the DP Operations of HSE it is informed that in the interest of investors/public, the DP operations are allowed to continue for a period of three months to give sufficient time to the investors to transfer/shift the B.O. accounts to another DP as per their choice.

(3) With regard to status of the shareholding of HSE in its subsidiary, the exchange is advised to maintain the status quo till further directions from SEBI.

(4) With regard to the operations of HSE Securities Ltd., it is informed that the sub-brokers of HSE securities Ltd., are allowed to continue to trade on Bombay Stock Exchange Ltd., (BSE) and National Stock Exchange of India Ltd., (NSE).

(5) With regard to appointment of an Administrator to look after the transitional matters from August 29, 2007, it is informed that the present directors on the Governing Board may continue till further directions from SEBI.

In addition to the above, the following directions are also issued:

(a) Money available in the Investor Protection Fund (IPF) and Investor services Fund (ISF) of HSE lying un-utilized shall be transferred to SEBI Investor Protection and Education Fund.

(b) The Funds available in the Settlement Guarantee Fund (SGF)/ Trade Guarantee Fund (TGF) shall not be alienated till furtherdirections.

(c) HSE shall set aside sufficient funds in order to provide for settlement of any claims, pertaining to pending arbitration cases, pending non-implemented arbitration award, if any, liabilities/claims of contingent nature, if any, and unresolved investor complaints/grievance lying with the exchange.

(d) Consequent upon withdrawal of recognition of HSE, the trading members of HSE shall cease to be trading members of HSE and therefore, liable to be deregistered as stock brokers, and hence, their certificate of registration granted by SEBI shall stand automatically cancelled. However, the said brokers/trading members of HSE shall be liable to pay SEBI registration fees, if any, due as per Schedule III of the SEBI (Stock Brokers and Sub Brokers) Regulations, 1992.

(e) Pursuant to the withdrawal of recognition of HSE, the exchange is directed to refrain from using the expression ‘stock exchange/exchange’ or any variant in its name or in its subsidiary’s name.

(f) HSE is restrained from transferring or alienating any movable or immovable property of the exchange including Bank Accounts in any manner till further directions by SEBI in this regard. However, HSE is allowed to operate the bank accounts for a limited purpose of day-to-day administration like payment of salary to its staff, telephone, electricity bills, payment of taxes and property maintenance charges subject to the overall control of SEBI and the following conditions till further directions from SEBI.

i. There should be no withdrawal of fixed deposits.

ii. No capital expenditure without the approval of SEBI.

iii. Fortnightly reportto be submitted to SEBI indicating the details of money withdrawn from bank accounts and the details of the expenditure incurred thereof.

52. The principle question which may have to be decided is whether the impugned proceedings be declared as invalid for the reason that though the SEBI is having the power to extend further time as stated by the writ petitioners and whether such power is conferred by the statute on the SEBI and even assuming that such power to be inferred, whether the impugned action is to be interfered with in the light of Section 5(2) of the Act as referred to supra.

53. Certain submissions were made that Section 4B(8) of the Act and regulation No. 4 may harmoniously be read along with Section 5(2) of the Act and hence, in the facts and circumstances stated supra, instead of extending time, though power exists, declining to extend the same and taking impugned action cannot be sustained and on the contrary, the learned Advocate-General had taken a specific stand that Section 5(2) of the Act being imperative or mandatory, automatically by operation of law, the withdrawal or de-recognition would become operative. The alternatives available specified under guidelines 2-2-2 also cannot be lost sight of in this regard.

54. Certain submissions relating to locus standi also had been made by the learned Counsel representing the parties.

On appreciation of overall facts and circumstances, this Court is of the considered opinion that merely because the regulations had been notified at a later date, by that itself, it cannot be said that the operation of Section 5(2) can be controlled or restricted. Section 4B(8) of the Act is an enabling provision and may be in the light of the language of the said provision, an extension may be given. This Court is not inclined to express any further opinion relating to this aspect.

55. With regard to the specific stand taken I by the writ petitioners that since the time to be reckoned with from the date of notifying the regulations, the impugned action cannot be sustained, this Court is unable to accept the same for the reason that Section 5(2) of the Act is not controlled by Section 4B(8) of the Act and Section 5(2) of the Act being mandatory, the same would be operative and hence, in the light of the same, the impugned order in the present writ petition cannot be found fault.

56. It is needless to say that in the result, the writ petition is bound to fail and accordingly, the same shall stand dismissed. No costs.

Ramesh G. Makhija vs A.P. Industrial Infrastructure … on 17 January, 2008

Andhra High Court
Ramesh G. Makhija vs A.P. Industrial Infrastructure … on 17 January, 2008
Equivalent citations: 2008 (2) ALD 721, 2008 (2) ALT 499
Author: P Narayana
Bench: P Narayana


JUDGMENT

P.S. Narayana, J.

1. S.A.M.P. No. 2971/2007 is filed praying for permission of this Court to formulate the substantial questions of law in the present Second Appeal.

2. The appellant filed the present application praying for the formulation of the substantial questions of law arising in the present Second Appeal. In view of the facts and circumstances explained, this Court is inclined to order the said application and accordingly the same is hereby ordered.

3. The following substantial questions of law arise for consideration in this Second Appeal:

(a) Whether Ex.A-5 dated 15-12-1974 constituted a legal offer (proposal) made to the appellant/plaintiff for out-right sale of the suit plot at Rs. 10/- per sq. yard to him and whether an agreement is formed by the compliance of the conditions in such offer (proposal)?

(b) Whether the scheme evolved by the 1st respondent/1st defendant on its formation from 1-1-1974 constitutes an open offer and the appellant/ plaintiff is entitled to the allotment of the suit plot on the out right sale basis by complying with the conditions of such offer?

(c) Whetherthe said scheme disentitles the holder of adjoining industrial unit alone as ineligible for the allotment if he is in arrears of rents, if any, for the adjoining industrial unit?

(d) Whether there is any other legally formed agreement with others in order to impede the allotment to the appellant/plaintiff and if so with whom and with regard to which subject matter?

4. Sri Natraj Sharma, the learned Counsel representing the appellant having pointed out to the su hstantial questions of law formulated had taken through the respective pleadings of the parties, the evidence available on record and made elaborate submissions on the aspect of offer and acceptance and proposal and acceptance. The learned Counsel also had taken this Court through the contents of Ex.A-5 and Ex.A-6 as well and made certain submissions in relation to the named officer Rajaratnam. The 2nd defendant is a person and not a firm. The conditions of acceptance had been complied with. When the offer was not withdrawn, it may have to be taken that the contract is complete. When once the acceptance is received it would amount to completion of the contract. The findings relating to readiness and willingness to pay the balance of consideration also had been argued in elaboration. The defendants had not repudiated the contract at any point of time and it is not known whether any steps had been taken in that direction. The Counsel also pointed out to certain relevant provisions of the Indian Companies Act, 1956 as well in this regard. The sketch had not been produced and it is pertinent to note the said document is in their custody and the non-production thereof should enure to the benefit of the appellant in this regard. The Judgment of the first appellate Court is not of much help inasmuch as all the aspects had not been taken into consideration. No relief had been prayed for as against the 2nd defendant and the 2nd defendant is just a proforma defendant. The Counsel also further explained the findings recorded by the Court of first instance and also the findings recorded by the appellate Court and how this Second Appeal filed is perfectly maintainable in the facts and circumstances of the case. The Counsel also relied upon several decisions to substantiate his submissions.

5. On the contrary, Sri Sreedhar Reddy and Simhardi, representing the respondents had taken this Court through the respective pleadings of the parties and the evidence available on record and would Municipality (sic. maintain) that even if the contents of Ex.A-5 to be taken into consideration, it cannot be said to be a concluded contract. The learned Counsel also explained how the suit was decreed and how two Appeals were preferred and the Appeals were allowed and how only one Second Appeal had been preferred and in the light of the same, the Counsel would maintain that this Second Appeal cannot be maintained since the Decree and Judgment made in the other Appeal had attained finality inasmuch as no Appeal had been preferred as against the said Decree and Judgment. The Counsel also pointed out to the relief of specific performance and also the alternative relief prayed for and the findings recorded in the Common Judgment had been pointed out. The Counsel would lay emphasis on the aspect that when there is no concluded contract, the other aspects need not be adverted to. The Counsel pointed out to the contents of Ex.A-5 and also Ex.A-19 and further relied upon certain decisions in this regard.

6. Heard the Counsel on record and perused the oral and documentary evidence available on record, the findings recorded by the Court of first instance and also the findings recorded by the appellate Court.

7. The appellant herein, Ramesh G. Makhija, is the unsuccessful plaintiff. 1st respondent is the A.P. Industrial Infrastructure Corporation Ltd, Hyderabad. 2nd respondent is shown as M/s. Electrical Accessories represented by Sri Kacham Bhadraiah. 3rd respondent Kacham Laxminarayana s/o. K. Bhadraiah is brought on record by an order made by this Court in C.M.P. No. 550/2007 dated 28-2-2007.

8. For the purpose of convenience, the parties hereinafter would be referred to as shown in the suit O.S. No. 91/80 on the file of I Additional Subordinate Judge, Warangal.

9. The plaintiff filed the suit praying for the relief of specific performance of contract of sale of the suit plot described in the plaint schedule and the plaint plan as against the 1st defendant and in the alternative for declaration that the plaintiff is entitled to allotment of the suit plot of the 1st defendant and also to direct the 1st defendant to execute and register proper conveyance of sale relating to the said plot. It was averred in the plaint as hereunder.

10. The plaintiff is a qualified Mechanical Engineer and a leading entrepreneur having obtained his B.E. (Mechanical) from Gujarat University in 1962 and commenced his industry in 1962 on taking the Unit (F.9., F. 10) in the industrial Estate, Warangal from the then Assistant Estate Engineer of the Industrial Estates, under the Industries Department of the Government of Andhra Pradesh. The plaintiff developed his industry by his own dint of hard work and ability into a multi-industrial unit in the manufacture of (1) splints and veneers for matches and match boxes; (2) plywood chair seats and chair backs, (3) Black boards and flush doors. The plaintiff had not only fabricated and installed some of his own machinery but also fabricated and supplied plywood hot press on order from M/s. Godavari Plywoods Limited which otherwise would have consumed large amount of foreign exchange. The plaintiff was the only person favoured and financed by the Bank under the Technocrat scheme. The plaintiff hails from a family with industrial experience from Larkana of Sind (Pakisthan). His dealings with the Industrial Estate authorities were always fair and straight forward on account of which the 1st defendant conveyed the present unit (F.9, F.10) in the Industrial Estate on outright sale to the plaintiff a the first person in the said Estate. Originally, the Government of Andhra Pradesh established the Industrial Estate in Warangal for the development of small scale industries which was purely under the control and ownership of the Government. The units were allotted to the industrial entrepreneurs on lease and subsequently evolved a scheme to convey the constructed units to the same persons subject to certain conditions. Thereafter the 1st defendant was formed as a Corporation fullyowned by the Government with effect from 1-1-1974 and consequently transferred the entire estate, the assets, rights, obligations and everything to the 1st defendant. However, until a separate officer from the 1st defendant was appointed, the Assistant Director, Industries and Commerce Department, Warangal was incharge of the affairs relating to the Industrial Estate, Warangal. The 1st defendant had not only followed the scheme evolved by the Government for the conveyance of the constructed units, but also evolved a scheme for the conveyance of vacant plots in Estate of the industrialists alone on sale. In accordance with the scheme for the conveyance of the vacant plots, the 1st defendant laid down the following terms and conditions and preference according to which the vacant plots in the Estate can be conveyed without favour or discrimination. The essential terms and conditions and preference are:

(a) that the cost of the land in the plot shall be Rs. 10/- per sq. yard on actual measurement, which the 1st defendant later revised the rate from 1-4-1980 at Rs. 15/- per sq. yard applying the same only to those who enter into the transaction after the said day;

(b) that the vacant plots cannot be sold to any person other than an industrialist or an entrepreneur proposing to start the industry immediately;

(c) that the 1st defendant shall allot and convey the vacant plot firstly to the entrepreneur who is having his units in the Estate adjoining the plot and need the same from expansion and secondly to the entrepreneurs having units in the same Estate and thirdly to outsiders;

(d) that if prospective purchaser is a new entrepreneur he shall on allotment commence the construction within six months and complete within 18 months of allotment the entire construction fully in accordance with the previously approved plans;

(e) formal agreement with the 1st defendant is not a pre-condition for the conclusion of the transaction (contract);

(f) the non-observance of the conditions shall automatically render the transaction cancelled.

It was further pleaded that the plaintiff is having the need of vacant plot adjoining his unit (F.9, F.10) in the Estate right from 1963 and requested the Assistant Estate Engineer as long back as on 24-6-1963 to permit him to use the adjoining vacant plot for the existing industry. The Director of Industries and Commerce Department granted permission and required the plaintiff to pay ground rent and he is accordingly using the plot. It was further pleaded that the plaintiff was in the need of adjoining plot since 1963 when his industry was only in the manufacture of splints and veneers. The industry had been expanding since then and the needs of the plaintiff for the vacant plot is also growing since then. The needs of the plaintiff were well known to the Assistant Estate Engineer when the Estate was under the Government and thereafter to the 1st defendant since the time it constituted. The available vacant plot is described in the suit schedule and the suit plan submitted along with the piaint and therefore the vacant plot which is adjoining the unit petition of in the Industrial Estate, Warangal is termed a plot No. 15 by the 1st defendant and thereafter referred to as the suit plot. During the time when the Industrial Estate of the 1st defendant was under the control of the Assistant Director of Industries and Commerce Department, Warangal, the plaintiff was offered the suit plot for sale in writing at Rs. 10/- per sq. yard by the said Assistant Director through letter dated 15-12-1974 and signed by the Assistant through letter dated 15-12-1974 and signed by the Assistant Director on 18-12-1974. The plaintiff conveyed his acceptance immediately on 23-12-1974. A proforma was enclosed with the letter of offer from the Assistant Director which was designated by him as application and such proforma was also delivered by the plaintiff after filling the same duly. The Assistant Director was incharge during the transitory period and the plaintiff was therefore given the option to pay the entire amount or pay an advance of Rs. 500/- after the management was taken over by the officer employed by the defendant. It was further pleaded that the contract for sale of the suit plot was concluded even though the payments could not be received by the Assistant Director due to administrative inconvenience. Subsequently the plaintiff expressed his intention to pay the entire amount, but the said Assistant Director received a sum of Rs. 500/- alone. The 1st defendant appointed and posted an Industrial Development Officer at the Industrial Estate, Warangal. The plaintiff approached him several times explaining the whole matter and the plaintiff was always assured that he had the first priority for the plot and that he was also offered the said plot in 1974. However, in order to have a record separately with the I.D.O. he asked the plaintiff on 23-5-1975 to give another proforma. He was also asked to deposit Rs. 500/- in cash and give a postal order for Rs. 5/-. Accordingly the plaintiff deposited the cash amount, delivered the postal order and also the proforma duly filled to the I.D.O. along with a covering letter on 26-5-1975. The I.D.O. who is the representative of the 1st defendant found that the plaintiff alone is entitled to obtain the suit plot and accordingly assured the plaintiff. The plaintiff was and had always been ready and willing to perform all his obligations and was always ready and willing to bear all expenses of stamps and registration charges and had been eagerly waiting for the 1st defendant to make proper measurements and in such event the plaintiff was also prepared to help in the measurements and preparations of plans. The 1st defendant had not taken measurements and ascertained the area for calculating the total price. The plaintiff took the measurement of the suit plot according to which he submits the suit plan. The total area came to 1279 sq. yards and accordingly the price of the land is Rs. 12,790/- However, if the 1st defendant disputes the measurements and the actual area of the suit plot, the plaintiff is and had always been ready and willing to pay the price according to the measurements actually taken by the 1st defendant. The plaintiff was always ready and willing to pay the said amount of Rs. 12,790/- or such amount a might be calculated according to the actual measurements taken by the 1st defendant. The attitude of the I.D.O., Warangal became hostilel and accordingly he started to create troubles to the plaintiff. He went to the extent of making out imaginary arrears of rent for the existing units (F.9, F.10) to the tune of Rs. 42,130-12 with a view to deny the plaintiff the opportunity of purchasing the unit (F.9,F.10) and also the suit plot. The arrears if any relating to the Unit is in fact irrelevant for the sale of plot and even so the 1st defendant found that the figures given by the I.D.O. Warangal were not true and conveyed the Unit already to the plaintiff. It was further pleaded that the I.D.O. Warangal played wanton mischief for the reasons best known to him. The I.D.O. Warangal demanded the payment of half the amount of his imaginary arrears of rent relating to the Unit in order to consider the allotment of the suit plot through his letter dated 17-6-1975. The said demand itself is without authority or sanction from the 1st defendant and it is not only illegal but also mischievous. The plaintiff clarified the matter and the 1st defendant had not raised any question with the plaintiff about the concluded nature of the contract of sale. The plaintiff noticed Sri Kancham Bhadraiah meddling with the irrigation channel belonging to the Government. The channel is adjacent to the suit plot and suspecting the bona fides of the defendants, issued a notice personally by registered post on 10-5-1979 to the 1st defendant on its address at the head office Hyderabad and through I.D.O. Warangal. The 1st defendant was clearly intimated about the concluded nature of the contract for sale of the suit plot and also requested to inform whether the 1st defendant offered the same plot for sale to the 2nd defendant or which the 2nd defendant made any offer to purchase the same plot, whether any application was made or amount deposited by the 2nd defendant or whether any undue preference was shown to the 2nd defendant. The plaintiff had also demanded the 1st defendant to measure the plot and intimate the total balance amount payable towards the price of the suit plot. The plaintiff expressed his readiness and willingness to do everything on his part and also required the 1st defendant and execute a proper conveyance to complete its part of the contract. The notice was served both at the address of the 1st defendant and it was found that the plaintiff’s claim cannot be refuted. However, the 1st defendant is unwilling to put his willingness in writing till now. The plaintiff sent reminders on 12-6-1976 and on 19-7-1979 but there was no response in writing. Sri Kancham Bhadraiah appears to have access and influence to gain undue favour even though it is a firm which had no unit in the Industrial Estate, Warangal. Even the type of its proposed undertaking is not the one that can be properly called as an industry at all. In fact it had no place of business of factual existence. The 2nd defendant cannot be called an industrial entrepreneur in its true spirit. The plaintiff was surprised when the 1st defendant allowed Sri Kacham Bhadraiah to meddle with the channel and visit the suit plot with no ostensible purpose. The 1st defendant had not intimated anything about its dealing with the 2nd defendant in spite of notice dated 10-5-1979 and the reminders and hence the plaintiff was constrained to file the suit and seek appropriate reliefs for specific performance.

11. The 1st defendant filed written statement with the following averments:

It was averred that the 1st defendant had not entered into any contract with the plaintiff on any day for the sale of suit plot and as such the question of specific performance of contract as claimed in the suit does not arise. The date, time and place, the parties to the contract, the document or documents constituting the contract, the terms and conditions thereof and the alleged breach of obligation had not been set out any where in the plaint with any degree of clarity which itself shows the speculative character of the suit. It was further averred that the allegations made in para-5 of the plaint are not true. The plaintiff did not and’ does not heed the suit plot (10) expansion of his existing industry. The sheds allotted to him are not fully utilized by him so far. He was never entitled to any allotment, preferential or otherwise of the suit plan. The suit plot had been numbered as plot bearing No. 115. As to para-6 of the plaint, it was averred that there was no offer as such. The plaintiff himself stated that he had not made any payment in respect of the proposed allotment. There was no agreement at all, much less a concluded contract. The plaintiff did not satisfy the requirements entitling him to the allotment. The question of a blanket offer without conditions is inconceivable in view of the policy of allotment detailed in the said para. The plea of concluded contract pleaded is falsified by the plaintiff’s own averments in para-7 of the plaint. As to paras 7 and 8 of the plaint, it was averred that the plaintiff had submitted the prescribed application form with the E.M.O. and application fee for considering his case for allotment on 26-5-1975. The Industrial Development Officer could neither assure him of any allotment nor had he so assured the plaintiff of any allotment of the plot. Further it was averred that it is also not true to say that the I.D.O. found the plaintiff alone to be entitled to the allotment. The I.D.O., Warangal had through his letter No. 12/75 dated 17-6-1975 demanded the plaintiff to pay at least 50% of the arrears due by his existing units F.9 and F.10 as a condition precedent to consider his request for allotment of the adjoining plot for expansion of his industry. The arrears outstanding by June 1975 were Rs. 42,130-12. Measurements of the vacant land does not arise and the plaintiff is not entitled to enter upon and measure the adjacent land without any allotment to him and he cannot be measuring it and make out a case for allotment treating his own measurement as constituting a contract. No such measurements were made by the plaintiff to the knowledge of the 1st defendant. The question of the plaintiff’s readiness and willingness to pay the price of the suit plot does not arise as there was no allotment to him and there was no contract with him by the 1st defendant to convey the plot to him. The measurements said to be made by the plaintiff are not binding on the 1st defendant and are also factually incorrect. As to paras 9 to 12 of the plaint, it was averred that it is ridiculous to plead that the payment of arrears due to the 1st defendant from the plaintiff in respect of his existing sheds is irrelevant for the purpose of allotting additional land to him and that too on preferential basis. There is no point in saying that the attitude of the I.D.O. was hostile to the plaintiff. He was bound to follow the norms laid down by the Corporation as stated earlier in the matter of recommending the allotments. The I.D.O. had in fact forwarded the application of the plaintiff to the Central Office of the Corporation along with the application of the 2nd defendant even though the plaintiff did not make payment of even the 50% of arrears demanded of him as a condition for considering his application. The 2nd defendant duly applied for allotment of plot in question depositing the E.M.O. and application fee on 15-5-1975 proposing to start industry for manufacture of wooden accessories for electrical wiring which was unique in the Individual Estate, Warangal. The Assistant Director of Industries and Commerce, Warangal had recommended the case of the 2nd defendant stating that the scheme was sponsored during the intensive campaign held in May 1975. He pointed out that the plaintiff was a habitual defaulter in respect of payments in respect of his existing units. The Central Office after careful verification of the application of the plaintiff and the 2nd defendant allotted the plot toe the 2nd defendant for starting his proposed venture under the name and style of M/s. Laxmi Electrical Accessories through letter No. DW/ D. 4/14007/75 dated 1-8-1975 of the Deputy Development Officer, A.P.I.I.C. Limited, Hyderabad and it was followed by a contract concluded with the party on 26-8-1975 on which date physical possession of the plot was also delivered to the 2nd defendant. The notice issued by the plaintiff does not constitute cause of action nor does it save limitation. The plaintiff has no cause of action and the suit is hopelessly barred by limitation even otherwise.

12. The 2nd defendant filed separate written statement with the averments as referred to hereunder:-

It was averred that as to the contents of paras 4 to 6 of the plaint, the suit plot was never enjoyed by the plaintiff for any purpose whatsoever. The plaintiff did not even fully utilize the two units allotted to him and hence there is no question of the plaintiff using the suit plot or any other vacant space. To the knowledge of the 2nd defendant the plaintiff never contracted or made any endeavour to purchase the suit plot and the same was never utilized by the plaintiff in any manner whatsoever. On learning that the suit plot is available for allotment to a new entrepreneur, the 2nd defendant applied for the allotment of the same, depositing the required E.M.D. and the application fee proposing to start industry for the manufacture of wooden accessories for electrical wiring. Further, such an industry is unique in whole of Warangal Individual Estate. The application of the 2nd defendant was also recommended by the Assistant Director of Industries and Commerce, Warangal. The said recommendation was accepted by the Central Office and the suit plot was allotted to the 2nd defendant through letter No. D/D.4/140075/ 75 dated 1-8-1975 of the Deputy Development Officer, A.P.I.I.C. Limited, Hyderabad. Through the said letter, the terms and conditions of allotment of the suit plot were proposed and the same were accepted by the 2nd defendant. Thereafter, contract was concluded between the parties and the same written statement reduced into writing on 26-8-1975. The 2nd defendant paid the total sale consideration to the 1st defendant in accordance with the terms and conditions of allotment. On 26-8-1975 the 2nd defendant was placed in actual and physical possession of the suit plot and the 2nd defendant is in actual possession of the same till today as owner and purchaser thereof. It was further averred that the main channel of Bhadri tank used to pass through the suit plot covering the suit plot on its three sides. Due to the said channel, the suit plot became a big water pool and was not in a fit condition to be used for making any construction thereon. Therefore, immediately after taking possession of the suit plot the 2nd defendant approached the P.W.D. authorities with a request to divert the channel to one side of the plot and for the construction of pucca channel to avoid inundation of the suit plot. The P.W.D. authorities stating that there is no allotment of funds for the said purpose permitted the 2nd defendant through letter dated 27-9-1975 to construct such a channel with the funds of the 2nd defendant. Accordingly, the 2nd defendant constructed a pucca 4′ wide channel by constructing two pucca stone walls of 2′ to 2½ width and 8′ height by spending not less than Rs. 20,000/-. After the construction of the said channel, the 2nd defendant got the suit plot filled the leveled by dumping several lorry loads of morum by spending about Rs. 15,000/-. Therefore, the 2nd defendant collected material for the construction of the required sheds at the suit plot. During all this period the plaintiff never objected to the exercise of ownership rights by the 2nd defendant over the suit plot. On account of the recent hike in the prices of vacant plots, the plaintiff became greedy and with a view to knock off the suit plot, he filed the suit. As a matter of fact, there is absolutely no merit in the plaintiff’s suit. The 2nd defendant further averred that he purchased the suit plot bona fide for valuable consideration and he had also spent huge amounts for leveling and for making the suit plot usable. Hence, the rights of the 2nd defendant to the suit plot deserve to be protected. The 2nd defendant did not receive any notice as alleged by the plaintiff. The 2nd is in actual and physical possession of the suit plot as its allottee and hence the plaintiff has no right to question the authority of the 2nd defendant in respect of the enjoyment of the suit plot. The plaintiff has no cause of action of file the suit and hence the same is not maintainable. Even according to the plaint allegations neither the area of the land claimed is definite nor the price payable is ascertained and hence the suit is not tenable on this point also. The suit is hopelessly barred by time and hence the suit is liable to be dismissed in limini.

13. On the strength of these pleadings, the following Issues were settled before the Court of first instance:

1. Whether there was a concluded contract for the sale of suit plot at Rs. 10/- per square yard in favour of the plaintiff?

2. Whetherthe defendant No. 1 evolved a scheme for conveyance of vacant plots in estate, to the Industrialists alone on sale, and whether the plaintiff is entitled to sale of the suit plot on the terms as pleaded by him in para-4 of the plaint?

3. Whether I.D.O. acted mala fide?

4. Whether the second defendant is entitled to preference in sale of the suit plot and if so whether he has satisfied the conditions and terms of allotment and also scheme for allotment?

5. Whether the 1st defendant accepted the concluded nature of contract with plaintiff and estopped from denying the same?

6. Whether the defendant No. 1 had power to demand payment of 50% of arrears due in respect of F.9 and F.10 units already under the occupation of the plaintiff to enable the D-1 to consider the allotment of adjoining plot for expansion of plaintiff’s industry?

7. Whether the plaintiff is ready and willing to perform his part of the contract?

8. To what relief?

On behalf of the plaintiff, the plaintiff examined himself as P.W.1 and deposed in relation to the averments made in the plaint. Further, Exs. A-1 to A-33 were marked. On behalf of the defendants, D.W. 1 and D.W. 2 were examined and Exs.B-1 to B-28 were marked. Ex.C-1, the report of the Commissioner dated 18-9-1982 also had been marked. The Court of first instance recorded reasons in detail and came to the conclusion that there was proposal and acceptance and the same to be taken as concluded contract and the plaintiff always has been ready and willing to perform his part of the contract and ultimately decreed the suit for specific performance. Aggrieved by the same, M/s. Laxmi Electrical Accessories, represented by Kancham Bhadraiah, preferred A.S. No. 4/89 and the A.P.I.I.C. Limited, Hyderabad represented by its Secretary preferred A.S. No. 10/89 as against the aforesaid Decree and Judgment on the file of II Additional District Judge, Warangal. The appellate Court by a Common Judgment, formulated the following Points for determination at para-8 of the Judgment:

1. Whether there was a concluded contract between the plaintiff and the 1st defendant for purchase and sale of the. suit plot located in the Industrial Estate, Warangal, in otherwords, whether Ex.A-5 tetter sent on behalf of the defendant-Corporation is an offer itself and if accepted in accordance with the terms of it gives rise to a concluded contract for sale and purchase of the suit plot?

2. Whether the scheme evolved by the 1st defendant Corporation in allotment of vacant sites in the Industrial Estate, Warangal and other industrial estates in the Andhra Pradesh State, would give a preferential right to the plaintiff to be allotted with the suit plot against the 2nd defendant?

The appellate Court proceeded to discuss all the Points commencing from paras 9 to 18 and ultimately allowed both the Appeals setting aside the Decree and Judgment made by the I Additional Subordinate Judge, Warangal in O.S. No. 91/80. Aggrieved by the same, the present Second Appeal is preferred as against the Decree and Judgment made in A.S. No. 10/89 on the file of II Additional District Judge, Warangal. Though it is a Common Judgment, it is pertinent to note that as against the other Appeal A.S. No. 4/89 filed by M/s. Laxmi Electrical Accessories, no Second Appeal as such had been preferred. Elaborate submissions were made on this preliminary objection whether the Second Appeal as such can be maintained since when two Appeals had been preferred as against the Decree and Judgment of the Court of first instance and when only one Second Appeal had been preferred as against the Decree and Judgment made in one such Appeals only, in the light of the finality being attained to the Decree drafted in the other Appeal A.S. No. 4/89, this Appeal can be maintained at all. Strong reliance was placed on Narhari v. Shanked wherein two Appeals were preferred against the Decree of the trial Court by two sets of the defendants and the appellate Court allowed both the appeal and dismissed the plaintiffs suit by one judgment and ordered a copy of the judgment to be placed on the file of the other connected appeal and two Decrees were prepared and the plaintiff preferred two appeals and one of the appeals was time barred and on the principle of Section 11 of the Code of Civil Procedure, it was observed:

It was not necessary to file two separate appeals in this case. The question of res judicata arose only when there were two suits. As there was one suit and both the decrees were in the same case and based on the same judgment and the matter decided concerned the entire suit the principle of res judicata did not apply.

14. Reliance also was placed on Pallapothu Narasimha Rao and Anr. v. Kidanbi Radha Krishnamacharyulu wherein it was held that where a person had been added as proforma respondent and no relief had been claimed against him, the dismissal order for non-payment of batta against him would not constitute res judicata.

15. It is no doubt true that when different parties prefer Appeal as against the same Decree and Judgment and when Second Appeals are to be preferred as against such Decrees and Judgments, though all these Appeals arise out of the Common Judgment of the Court of first instance, it would be always desirable to prefer Second Appeals as against the Decrees which would be made in those separate Appeals irrespective of the fact that all these Appeals would arise out of the same Decree and Judgment of the Court of first instance.

16. It is no doubt true that the suit filed by the appellant/plaintiff had been decreed by the Court of first instance and it is also not in controversy that two Appeals had been preferred and a Common Judgment was delivered and it is also not in controversy that separate Decrees had been drafted. It is also true that in the eye of Law, the Decree made in A.S. No. 4/89 had attained finality since no Appeal had been preferred as against the said Decree. But however, certain submissions were made that the 2nd defendant being only a proforma party, even if the suit was not further prosecuted even before the Court of first instance, the same would not seriously alterthe situation. In the light of the fact that this objection is purely a technical objection and a hair-splitting argument, this Court is not inclined to dismiss the Second Appeal on the said ground.

17. The whole issue revolves around Ex.A-5 and the same reads as hereunder:

Government of Andhra Pradesh Department of Industries

From

Sri P.V. Rajarathnam, B.Sc, H.D.C.,

Assistant Director of Indis,

Commerce & Export Promotion,

Warangal.

To

M/s. Mahbubia Industries,

F.9& F.10, Industrial

Estate, Warangal.

No. 5213/1/74, dated 15-12-1974

Sir,

Sub:- Use of space near irrigation channel adjacent to F. 10 unit -Regarding.

Ref:- Your letter dated 30-10-1974.

With reference to the letter cited, I have to inform you that the Industrial Estate is now under the administrative control of A.P. Industrial Infrastructure Corporation, Hyderabad. The Corporation is allotting the plots on outright sale @ Rs. 10/- sq. yard. If you are interested in purchasing the above land, please send your consent along with application (copy of specimen enclosed) accompanying bank draft for Rs. 500/- towards Earnest Money Deposit and a postal order for Rs. 5/-towards application fee.

Yours faithfully,
(Sd/-) Rajarathanm,
Assistant Director

Elaborate submissions were made whether it can be taken as a binding contract or a concluded contract and whether the plaintiff is having a right to enforce such alleged agreement. Incidentally, Section 2(24) and 2(30) dealing with definitions of ‘manager’ and ‘officer’ and Section 46 dealing with Form of contracts under the Indian Companies Act, 1956 also had been referred to.

18. In Har Bhajan Lal v. Har Charan Lal and Anr AIR 1925 Allahabad 539:

A young boy ran away from his father’s home. The father eventually issued a pamphlet, offering a reward in these terms: “Anybody who finds trace of the boy and brings him home, will get Rs. 500.” The plaintiff was at the dharmashala of a railway station, there he saw a body, over-heard part of a conversion, realized that the body was the missing boy and promptly took him to the Railway Police Station where he made a report and sent a telegram to the boy’s father saying that he had found his son.

In the aforesaid circumstances, it was held that the hand-bill was an offer open to the whole world and capable of acceptance by any person who fulfilled the condition and that the plaintiff substantially performed the condition and he was entitled to the amount offered.

19. Strong reliance was placed on a decision of the Apex Court in Kollipara Sriramulu (dead) by his legal representative v. T. Aswatha Narayana (dead) by his legal representative and Ors. wherein it was held at para-3 as hereunder:

We proceed to consider the next question raised in these appeals, namely whether the oral agreement was ineffective because the parties contemplated the execution of a formal document or because the mode of payment of the purchase money written statement not actually agreed upon. It was submitted on behalf of the appellant that there was no contract because the sale was conditional upon a regular agreement being executed and no such agreement was executed. We do not accept this argument as correct. It is well established that a mere reference to a future formal contract will not prevent a b’nding bargain between the parties. The fact that the parties refer to the preparation of an agreement by which the terms agreed upon are to be put in a more formal shape does not prevent the existence of a binding contract. There are, however, cases where the reference to a future contract is made in such terms as to show that the parties did not intend to be bound until a formal contract is signed. The question depends upon the intention of the parties and the special circumstances of each particular case. As observed by the Lord Chancellor (Lord Cranworth) in Ridawav v. Wharton (1857) 6 HLC 238 at p. 263, the fact of a subsequent agreement being prepared may be evidence that the previous negotiation, did not amount to a concluded agreement, but the mere fact that persons wish to have a formal agreement drawn up does not establish the proposition that they cannot be bound by a previous agreement. In Von Hatzfeldt-Wildenburg v. Alexander (1912) 1 Ch. 284 at p.288, it was stated by Parker, J as follows:

It appears to be well settled by the authorities that if the documents or letters relied on as constituting a contract contemplate the execution of a further contract between the parties, it is a question of construction whether the execution of the further contract is a condition or term of the bargain or whether it is a mere expression of the desire of the parties as to the manner in which the transaction already agreed to will in fact go through. In the former case there is no enforceable contract either because the condition is unfulfilled or because the law does not recognize a contract to enter into a contract. In the letter case there is a binding contract and the reference to the more formal document may be ignored. In other words, there may be a case where the signing of a further formal agreement is made a condition or term of the bargain and if the formal agreement is not approved and signed there is no concluded contract.

In Rossiter v. Miller (1878) 3 AC 1124 Lord Cairns said:

If you find out an unqualified acceptance subject to the condition that an agreement is to be prepared and agreed upon between the parties and until that condition is fulfilled no contract is to the raise ten you cannot find a concluded contract.

In Currimbhoy and Co. Ltd. v. Creet the Judicial Committee expressed the view that the principle of the English law which is summarized in the judgment of Parker. J., in (1912) 1 Ch.284 was applicable in India. The question in the present appeals is whether the execution of a formal agreement was intended to be a condition of the bargain dated July 6, 1952 or whether it was a mere expression of the desire of the parties for a formal agreement which can be ignored. The evidence adduced behalf of the respondent No. 1 does not show that the drawing up of a written agreement was a pre-requisite to the coming into effect of the oral agreement. It is therefore not possible to accept the contention of the appellant that the oral agreement was ineffective in law because there is o execution of any formal written document. As regards the other point, it is true that there is no specific agreement with regard to the mode of payment but this does not necessarily make the agreement ineffective. The mere omission to settle the mode of payment does not affect the completeness of the contract because the vital terms of the contract like the price and area of the land and the time for completion of the sale were all fixed. We accordingly hold that Mr. Gokhale is unable to make good his argument on this aspect of the case.

20. Reliance also was placed on Raja of Vizianagaram v. Maharaja of Jeypore wherein it was held that though the actual figure of the rent had not been determined, if there is no uncertainty regarding the way in which it should be fixed throughout the lease there would be a binding lease.

21. There cannot be any doubt or controversy relating to several of the propositions which had been advanced by the parties. The principal question to be decided is whether in the facts and circumstances of the case, the findings recorded by the appellate Court relating to non-enforceability of the alleged contract be confirmed or to be disturbed. In other words, whether Ex.A-5 letter sent on behalf of the 1st defendant-Corporation is offer itself and if accepted in accordance with the terms, whether it would amount to a concluded contract of sale and whether the same can be enforced. Since the result of the matter would revolve around the said question, it is no doubt true that the appellate Court had concentrated on the contents of Ex.A-5 and recorded findings in detail and specifically referred to the wording employed in Ex.A-5 and came to the conclusion that this cannot be treated as a concluded contract and hence the same is unenforceable in a Court of law and on the strength of such document, the relief of specific performance cannot be granted. The contents of Ex.A-5 already had been referred to above and the same need not be repeated. It is no doubt true that Ex.A-1 to Ex.A-4 to some extent would make it clear that the plaintiff was having an intention to annex the vacant site located to the West of his Unit and the averments in the plaint had been deposed by P.W.1 and several documents also had been marked as Ex.A series and the said documents are as hereunder:

Ex.A-1 dt.24-6-1963 – Office copy of the letter addressed to Assistant Estate Engineer for allotment of Plot No. 15.

Ex.A-2/16-9-1963 – Letter from AEE informing P.W.1 for allotment of the place adjacent to the unit of P.W. 1.

Ex.A-3 dt. 15-7-1966 – Office copy of the letter submitting the non-judicial stamp papers for executing agreement for plot, acknowledged by the D-1 on office copy.

Ex.A-4 dt. 15-7-1966 – Office copy of agreement.

Ex.A-5 dt. 15-12-1974 – Officer made by the D-1 Corporation to sell the suit plot on outright sale basis @ Rs. 10/- per sq. yard.

Ex.A-6 dt. 23-12-1974 – Note made by the plaintiff on Ex.A-5 about the submission of E.M.D. amount.

Ex.A-7 dt. 25-5-1975 – Office copy of covering letter of plaint in second application.

Ex.A-8 dt. 26-5-1975 – Office copy of the second application submitted by the plaintiff.

Ex.A-9 dt. 26-5-1975 – Counter foil of the Postal order.

Ex.A-10 dt. 1-7-1966 – Application for hire purchase for units F-9 and F-10

Ex.A-11 dt. 14-12-1967 – Letter issued by D-1 to the plaintiff.

Ex.A-12 Dt. 12-1-1978 – Receipt showing the final payment

Ex.A-13 dt. 12-1-1978 – Plan of the Industrial Estate, Warangal

Ex.A-14 dt. 21 -5-1975 – Letter written by P.V. Rajaratnam to l.D.O.

Ex.A-15 dt. 21 -5-1975 – Letter written by Rajaratnam to l.D.O.

Ex.A-16 dt. 20-6-1975 – Handwritten draft of letter from D-1 to the plaintiff demanding for 50% arrears of the rent before the allotment of the suit plot.

Ex.A-17 dt. 30-6-1975 – Letter addressed to the D-1 Corporation by the I.D.O. Warangal, for the allotment of the suit plot to D-2 in preference to the plaintiff.

Ex.A-18 dt. 26-8-1975 – Plan showing the handover the suit plot to defendant No. 2

Ex.A-19 dt. 10-5-1979 – Office copy of the suit notice

Ex.A-20 dt. 12-5-1979 – Postal acknowledgement

Ex.A-21 dt. 12-5-1979 – Postal acknowledgement

Ex.A-22 dt. 12-6-1979 – Office copy of the reminder issued by P.W. 1

Ex.A-23 dt. 19-7-1979 – Office copy of the second reminder issued by the plaintiff

Ex.A-24 dt. 23-7-1979 – Postal acknowledgement of Ex.A-23

Ex.A-25 dt. 25-7-1979 – Postal acknowledgement of Ex.A-23

Ex.A-26 dt. 29-10-1974 – Receipt for rental arrears signed by Rajaratnam as Officer-in-charge

Ex.A-27 dt. January 1969 – Demand notice issued to the plaintiff demanding rent for January 1969

Ex.A-28 dt. 9-12-1975 – Communication regarding the unit F-9 with the enclosures to the plaintiff.

Ex.A-29 dt. 9-12-1975 – Communication regarding the Unit F-10 with the enclosures to the plaintiff.

Ex.A-30 dt. 23-11-1987 – Notice given by the plaintiff for production of the lease deeds

Ex.A-31 dt. 23-11-1962 – Certified copy of lease deed for F-10 unit

Ex.A-32 dt. 22-6-1976 – Circular issued by D-1 Corporation specifying order of preference in the allotment (marked by consent)

Ex.A-33 dt. – Photograph of the suit property

22. It is also true that the appellant/plaintiff also sent an agreement in terms suggested under Ex.A-2 and as can be seen from the events there was no follow up action in this regard. From the contents of Ex.A-5 it is also true that the appellant/plaintiff made a representation to the 1st defendant-Corporation to include the additional plot. In reply to the said representation, the Assistant Director of Industries sent the letter Ex.A-5 and on the strength of this letter several submissions were made in elaboration and the relevant provisions of the Indian Contract Act also had been strongly relied upon. The question is whether Ex.A-5 is really an offer or just an invitation to offer and the authority or the competence of the concerned officer who addressed the letter also had been made the ground of attack. On a careful reading of the letter Ex.A-5, it would be clear that the officer who had addressed the letter is not the competent authority either to expect or to allot the sites or the units in the industrial estate. Emphasis was laid on the word “consent” used in ExA-5 and the payments made also had been emphasized in elaboration in this regard. Exs.A-7 and A-9 also had been strongly relied upon. The contents of Ex.A-19 had been appreciated by the appellate Court and clear findings had been recorded that the stand taken by the appellant/plaintiff cannot be believed. G.O. Ms. Nos. 415, 417 also had been referred to.

23. No doubt certain submissions were made relating to the non-production of the G.Os. but it is pertinent to note that this is a suit for specific performance and the plaintiff may have to succeed or fail on the strength of his case. If the plaintiff is able to establish that this would amount to concluded contract or an enforceable contract, then, on the strength of it, a suit for specific performance may be maintainable. Even if it is to be taken as a lawfully concluded contract, always necessarily the relief of specific performance need not be granted. The Courts are expected to analyse the facts of a particular given case and are expected to exercise the discretion depending upon the facts and circumstances of a given case.

24. In the present case, the evidence of D.W. 1 and D.W. 2 is available on record. Exs.B-1 to B-28, relied upon by the respondents/defendants are as hereunder;

Ex.B-1 dt. 1-4-1975 onwards – Rental register for the year from 1-4-1975 to 31-3-1978

Ex.B-2 dt. – Entry on page No. 137 in Ex.B-1

Ex.B-3 dt. 13-5-1975 – Application filed by 2nd defendant for allotment of suit plot

Ex.B-4 dt. 1-8-1975 – Office copy of the letter in favour of 2nd defendant in respect of the suit plot

Ex.B-5 dt. 26-8-1975 – Agreement executed between defendants 1 and 2 regarding the suit plot along with the plaint

Ex.B-6 dt. 26-8-1976 – Xerox copy of temporary S.S.I. certificate of 2nd defendant industry, originally issued on 25-5-1975 with endorsement of renewed dated 26-8-1976

Ex.B-7 dt. – Project report (Scheme) of 2nd defendant industry

Ex.B-8 dt. 29-11-1978 – Office copy of the final notice from 1st defendant to 2nd defendant regarding the non-utilisation of the suit plot

Ex.B-9 dt. – Acknowledgement of Ex.B-8 by the 2nd defendant

Ex.B-10 dt. 5-7-1975 – Receipt issued by 1st defendant in token of payment of Rs. 500/- towards E.M.D.

Ex.B-11 dt. 1-8-1975 – Letter of allotment of the suit plot to the 2nd defendant

Ex.B-12 dt. 27-9-1975 – Letter given to D.W. 2 by the P.W.D. Irrigation Department for diverting the channel flowing through the suit plot

Ex.B-13 dt. 30-12-1976 – Letter from I.D.O. (D-1) to the Manager Guilts and Estate, A.P.S.I.D.C. Limited, Hyderabad for allotment of the plot to D.W. 2.

Ex.B-14 dt. 9-6-1976- Letter addressed by the 1st defendant to the Principal, I.T.I. Warangal, for construction of the compound wall

Ex.B-15 dt. 29-7-1976 – Permission issued by the R&B Department to the 2nd defendant for construction of the compound wall

Ex.B-16 dt. 22-3-1983 – Letter from Industrial Development Officer for erection of the Saw Mill by the defendant No. 2 in the suit plot

Ex.B-17 dt. 25-5-1975 -S.S.I. Certificate of the 2nd defendant renewed upto 24-11-1977

Ex.B-18 dt. 7-11-1974 – S.S.I. Certificate of another firm viz., (Kasam Bhadraiah Saw Mill.

Ex.B-19 dt. 24-3-1976 – Letter signed and issued to the plaintiff by Yellaiah Swamy

Ex.B-20 dt. 18-4-1981 – Letter addressed by the I.D.O. Warangal to the Law Officer of the defendant Corporation to supply certain documents.

Ex.B-21 dt. 5-12-1963 – Lease Deed of Unit No. F-9

Ex.B-22 dt. 23-11-1962 – Lease Deed of Unit No. F-10

Ex.B-23 dt. 9-9-1980 – Lette5 of I.D.O. informing about the seven different ledgers from 1963 pertaining to F-9 and F-10 rentals

Ex. B-24 dt. 26-5-1975 – Original letter addressed by the plaintiff to the I.D.O. Warangal

Ex.B-25 dt. 10-3-1977 – Final notice from I.D.O. (D-1) for the D-2 for noncompliance of the terms and conditions.

Ex.B-26 dt. 19-4-1977 – Final notice from I.D.O. (D-1) to the 2nd defendant for non-compliance of the terms and conditions and also the payment

Ex.B-27 dt. 7-10-1987 – Office copy of the letter addressed by the I.D.O. Warangal to the law Officer of the 1st defendant Corporation

Ex.B-28dt. 24-3-1983-Letter from I.D.O. to 2nd defendant about the triangular piece of 280 sq. yards.

25. Ex. C-1 is the report of the Commissioner. Elaborate submissions were made on the aspect that the appellate Court had not taken into consideration all the facts and circumstances and also had not answered almost all the Issues and formulated just cryptic Points and disposed of the matter without considering the whole factual matrix available on record.

26. It is no doubt true that the appellate Court, especially while reversing the Judgment and Decree of the Court of first instance may have to be more careful and cautious in recording findings in detail. This Court had given its anxious consideration to this aspect also and in all thoroughness had gone through the findings recorded by the appellate Court. In the light of the findings recorded by the appellate Court, this Court is thoroughly satisfied that the appellate Court declining the relief of specific performance in the facts and circumstances of the case, cannot be said to be either improper or unjust. Apart from this aspect of the matter, as can be seen from the substantial questions of law which had been framed and argued in elaboration, this Court is well satisfied that these are all factual issues, may be predominantly the interpretation of certain of the terms specified in Ex.A-5, in particular. Except the submissions recorded above, no other contentions had been advanced before, this Court by the Counsel on record.

27. On Careful analysis of all the factsand circumstances, since this Court is thoroughly satisfied with the findings recorded by the appellate Court while disposing of A.S. Nos. 4/ 89 and 10/89 respectively by a Common Judgment allowing the Appeals, absolutely there is no serious legal infirmity or illegality warranting interference by this Court in the present Second Appeal especially in the light of the parameters and the limitations imposed on this Court in respect of reappreciation of evidence under Section 100 of the Code of Civil Procedure. Accordingly, the Second Appeal shall stand dismissed. No order as to costs.

N. Annapurna And Anr. vs District Collector And Ors. on 17 January, 2008

Andhra High Court
N. Annapurna And Anr. vs District Collector And Ors. on 17 January, 2008
Equivalent citations: 2008 (2) ALT 195
Author: V Eswaraiah
Bench: V Eswaraiah


ORDER

V. Eswaraiah, J.

1. Petitioners seek a writ of mandamus to declare the action of the respondents in seeking to dispossess them on 15.1.1998 arid their continued effort to prevent them from continuing to enjoy the buildings and other institutions in Sy. Nos. 1020(3) and 1020(6) of Patnam Village, Thavanampalli Mandal, Chittoor District as illegal and arbitrary and to refrain the respondents from interfering with their rights from running the college and other religious institutions in the buildings constructed by them in the land in question. First petitioner is the Managing Trustee of the second petitioner – Sri Sai Charitable Trust (hereinafter referred to as ‘trust’).

2. Petitioners submit that they are in occupation and enjoyment of the buildings constructed for the use of the trust in Sy. Nos. 1020/3 and 1020/6 admeasuring Ac.2.70 cents and Ac.0.28 cents respectively totalling Ac.2.98 cents situated at Patnam Village, Thavanampalli Mandal, Chittoor District. One Mr. Markandeya Naidu was the absolute owner of an extent of Ac.3.43 cents in Sy. No. 1020/3 of the said village of erstwhile Bangarupalyam Taluk and the said village subsequently became a part of Thavanampalli Mandal. The said Markandeya Naidu gifted the said property to his sister – Bharathi under a registered settlement deed dated 4.3.1976; thereafter she was in possession of the said property until she leased out the said property in favour of the first petitioner vide registered lease deed dated 31.3.1988 for period of 60 years. Thus, it is stated that the first petitioner came into possession of the entire land which originally belonged to Markandeya Naidu, gifted to his sister -Bharathi. It is further submitted that the Markandeya Naidu purchased the said property under a registered sale deed dated 5.11.1973 executed by one Mr. K. Sivam, S/o. Kolla Krishnama Naidu.

Petitioners further submit that a trust was created on 2.4.1988 and the first petitioner being one of the trustees permitted the trust to takeover the land for achieving the objects of constructing buildings for educational institutions. The entire land i.e. Ac.3.43 cents was part of Sy. No. 1020 and by virtue of sub-division the same was subdivided as Sy. Nos. 1020/3 and 1020/6 with extents Ac.2.70 cents and Ac.0.28 cents respectively. The said Bharathi also executed a Power of Attorney in favour of the first petitioner in 1991. While so, when the District Collector passed resumption orders in Roc. No. B2/10708/97 dated 19.8.1997 directing the Mandal Revenue Officer to takeover the possession of the said land, the first petitioner filed W.P. No. 31673 of 1997 and the same was disposed on 28.11.1997 directing the respondents herein not to evict the first petitioner unless notice under the appropriate enactment is issued and the explanation is called. After explanation is submitted the respondents were directed to pass orders and communicate the same to the petitioners. Till the said exercise is done, it was directed not to dispossess the first petitioner nor demolish the existing structures. They further submit that when the first petitioner was hospitalized in the second week of January 1998 the Joint Director, Agriculture Department, Chittoor – fourth respondent claimed to have taken over the possession of the said property on the instructions of the respondents 1 to 3, which was resisted by the first petitioner.

3. It is the case of the petitioners that pursuant to the orders of this Court in W.P. No. 31673 of 1997 dated 28.11.1997 no notice was issued and without following due process of law, it is not open for the respondents to dispossess them. The petitioners further submit that even if the said lands are assigned lands action has to be initiated under the Andhra Pradesh Assigned Lands (Prohibition of Transfers) Act, 1977 (for short ‘the Act’) and even if the said lands are Government lands unless action is initiated under the Andhra Pradesh Land Encroachment Act, 1905, they cannot be evicted. Petitioners claim absolute right, title and ownership over the said property contending that neither it is an assigned land nor Government land, but it is a ryoti land.

4. It is the case of the official respondents 1 to 3 that the said property of an extent of Ac.2.98 cents i.e. Ac.2.70 cents and Ac.0.28 cents respectively in Sy. Nos. 1020/3 and 1020/6, which was carved out from original Block No. 218 of Patnam Village is a Government land and the said land was assigned in favour of Sri A. Kesavulu Naidu vide DKT No. 82-4-1392 dated 28.5.1983 for the purpose of agriculture. While so, the villagers of Thellagundlapalle H/o. Patnam Village filed a complaint before the Lokayuktha on 27.1.1992 alleging that the said land, which was assigned land, is in illegal possession and enjoyment of the second petitioner -trust. The matter was enquired into by the then MRO and found that the said assigned lands are in possession of the trust. Accordingly, action was initiated under the provisions of the Act and show-cause notices in Roc.A/327/93 dated 30.3.1993 were issued to the assignee as well as the alienee – M.N. Raja Reddy, Managing Trustee of the trust. After following due procedure, the MRO, Thavanampalli cancelled the assignment vide proceedings in Roc.A/327/93 dated 22.4.1993 for violating the condition of grant and the action was duly reported to the Lokayuktha by the Collector in Roc.B2/3363/93 dated 28.4.1993. The said order has become final as neither the assignee nor the purchaser or the second petitioner – trust challenged the said order. The resumption of land was effected by taking over the possession in the presence of M.N. Raja Reddy and the fact of taking over the possession pursuant to the resumption of land together with superstructures thereon was published in the newspaper on 25.8.1997. The said resumed land with superstructures was handed over by the MRO to the fourth respondent vide proceedings of the Collector in Roc.B2/10708/97 dated 25.8.1997, the same was resisted by the petitioners.

5. It is stated that the Managing Trustee – M.N. Raja Reddy set up his wife Smt. M.R. Suseela to file a suit in O.S. No. 175 of 1997 on the file of the Principal Sub-Judge, Chittoor, and the same was ultimately dismissed and he thereafter set up his sister – Annapurna – the first petitioner to file W.P. No. 31673 of 1997, which was disposed at the admission stage with a direction to the respondents not to interfere with the peaceful possession of the petitioners without following due process of law. It is the case of the respondents that the writ petition was disposed at the admission stage on 28.11.1997 and the resumption orders were passed on 24.8.1997 cancelling the DKT Patta dated 22.4.1993 was not at all questioned. The resumed land was handed in favour of the fourth respondent vide proceedings dated 25.8.1997. Thus, it is the case of the respondents that the said land is a Government land and assigned in favour of Kesavulu Naidu in DKT No. 82/4/1392 dated 28.5.1983 and for alienation of the said land in favour of the trust, the said land was resumed.

6. It is stated that Kesavulu Naidu is an Ex-serviceman, who was assigned the land as he was a landless poor, but he alienated the said land in favour of the second petitioner trust and the trustees are 1. M.N. Raja Reddy, 2. N. Annapoorna, 3. M.R. Suseela W/o. M.N. Raja Reddy and 4. P.V. Sai Prasad S/o. Dr. Venkatappa and the trust has constructed buildings for running of the school, college, kalyana mantapam, Shiridi Sai Temple and guest house. As the assigned land was alienated, on a complaint made by the villagers, the resumption proceedings have been initiated and the land was resumed. Thereafter, the said Raja Reddy created fictitious DKT Patta in the name of his wife – Suseela vide DKT No. 354-1402 dated 12.10.1992 and accordingly submitted explanation on 5.4.1993 to the resumption notice dated 30.3.1993 stating that the said land was neither donated nor alienated by Kesavulu Naidu and based on the fictitious assignment, the patta was implemented in the village accounts and on the complaint, the entries made were cancelled. In fact, Raja Reddy applied for alienation of the land to the trust and the same was rejected by the District Collector in his proceedings Roc.B2/10703/ 1997 dated 19.3.1997. In fact, Smt. Suseela W/o. Raja Reddy filed a suit in O.S. No. 175/ 1997, which was rejected ultimately and thereafter the writ petition filed by the first petitioner was disposed of. It is stated that the orders in the writ petition were received on 11.12.1997 i.e., after the resumption orders were passed on 22.4.1993, thereafter allotting the same to the fourth respondent vide order dated 25.8.1997 and the lands were handed over to the fourth respondent on 26.8.1997. As the petitioners trespassed into the said land with the help of the students a complaint was lodged and criminal case was registered. The first petitioner being the Managing Trustee of the trust, proceedings were initiated against the trust represented by the Managing Trustee – M.R. Raja Reddy and the first petitioner being the sister of Raja Reddy, she is not entitled for any relief.

7. The fourth respondent also filed a counter stating that pursuant to the proceedings of the District Collector dated 25.8.1997 the said land including other lands were handed over to them on 26.8.1997 i.e., prior to passing of the interim order by this Court in WPMP No. 1414 of 1998 in WP No. 1262 of 1998 on 21.1.1998, in the presence of M.N. Raja Reddy – Managing Trustee of the trust. Though the possession was handed over to them on 26.8.1997 the Managing Trustees and the students have been interfering with their possession and therefore, the police complaint has been lodged on 2.9.1997 and 8.2.1998 and a case in Cr. No. 101 of 1998 was registered. Additional counter-affidavit and reply have been filed.

8. In the reply affidavit it is stated by the petitioners that the said Kesavulu Naidu, in whose favour the said land is said to have been assigned, is none other than the husband of Smt. Bharathi in whose favour Markandeya Naidu the original owner executed the settlement deed, therefore, the contention of the Government that Kesavulu Naidu was assignee under the Darkhast Patta dated 28.5.1983 is incorrect. Kesavulu Naidu never admitted about the said assignment nor did his wife Bharathi admit the same. Even assuming that Kesavulu Naidu was assigned the said land, there is no condition imposing prohibition not to alienate the said land. It was not an assigned land in favour of the landless poor. If the said land was granted by mistake without knowing that it was owned by the wife of Kesavulu Naidu, such assignment cannot have any effect on the title, possession and right of Smt. Bharathi. Even if the assignment in favour of Kesavulu Naidu is a valid assignment the said land cannot be resumed at this length of time without resorting to filing declaration of title and recovery of possession. It is stated that the said land was leased out by Smt. Bharathi in favour of Annapurna – first petitioner and she being the trustee of the trust permitted the trust to develop the said land, therefore, it is incorrect to state that Kesavulu Naidu alienated the said land in favour of the trust.

9. With regard to the contention that the notice of resuming the said land was Served on the assignee and M.N. Raja Reddy, it is stated that the said notice was not served on the alienee – trust and therefore, service of notice on M.N. Raja Reddy is not a legal requirement. It is stated that the statement made by M.N. Raja Reddy does not have any relevance for consideration or adjudication with regard to the dispute involved in the matter. Therefore, the contention that the petitioners have concealed about the earlier resumption orders under Act 9 of 1977 by the MRO is incorrect and denied. There are no resumption proceedings as alleged in the counter. The so-called fictitious patta in favour of Smt. Suseela W/o. M.N. Raja Reddy is irrelevant as the petitioners are claiming title based on the registered document executed by the original owner. Smt. Suseela never claimed any interest on the ground of assignment; therefore, the said aspects are not relevant. It is stated that the assignment itself in favour of Kesavulu Naidu is illegal and therefore the resumption proceedings initiated against the alleged assignee and Raja Reddy – Managing Trustee of the trust are of no consequence. The filing of the suit by Smt. Suseela for injunction restraining the revenue authorities from interfering with the possession and its dismissal for want of notice under Section 80 of the Code of Civil Procedure is of no consequence. Therefore, the petitioners cannot in any way be precluded from seeking any relief against the illegal action of the respondents. It is stated that the said land is purely patta land and the petitioners are in possession and enjoyment of the said land for over a period of 30 years and acquired title by adverse possession. Thus, it is the contention of the petitioners that the proceedings under the Act are illegal and have no application in respect of the land in question as it is not an assigned land but it is a patta land.

The questions that arise for consideration:

1. Whether the said land is a Government land and assigned in favour of Kesavulu Naidu vide DKT No. 82/ 4/1392 dated 28.5.1983?

2. Whether the said assigned land was resumed by the MRO vide proceedings Roc.A/327/93 dated 22.4.1993?

If these questions are held in favour of the petitioners they are entitled for the relief claimed in this writ petition otherwise all other contentions raised by the petitioners with regard to their possession even after the resumption orders and claim of independent title are of no consequence.

10. It is the case of the petitioners that the said land originally belonged to one K. Sivam, pattedar of the said land, and he sold the land to an extent of Ac.3.43 cents in Sy. No. 1020 vide registered sale deed dated 5.11.1973 in favour of Markandeya Naidu, who gifted the said land in favour of his sister – Bharathi under registered settlement deed dated 4.3.1976 and the said Bharathi leased out the said land in question in favour of the trustees of the trust under registered deed dated 31.8.1983. The trust constructed buildings, religious temples, kalyana mantapam in the said land and educational institutions are being run by the trust. Thus, it is contended that the said land is not an assigned land and the action of the District Collector seeking to disposes them was questioned in W.P. No. 31673 of 1997 and the same was disposed on 28.11.1997 and contrary to the said judgment, the respondents resorted to deliver the possession of the said land in favour of the fourth respondent on 15.1.1998; therefore, the said action has been questioned in the present writ petition.

11. This Court while admitting the writ petition on 21.1.1998 granted interim direction directing the respondents not to interfere with the possession and enjoyment of the buildings and other institutions, run by the second petitioner trust in the land in Sy. Nos. 1020/3 and 1020/6 of Patnam Village, Thavanampalli Mandal, Chittoor District till further orders without recourse to law and without insisting necessary proceedings under the enabling statute as directed by this Court in its final order dated 28.11.1997 in W.P. No. 31673 of 1998. It is stated that the said land is not a Government land and the mistaken assignment in favour of Kesavulu Naidu for agricultural purpose is of no consequence and the proceedings initiated thereon on the complaint and resumption of the said land cancelling the DKT Patta are also of no consequence. The earlier writ petition was disposed of and a review petition has been filed and the same is pending and the petitioners are in continuous possession and enjoyment of the said land as absolute owners and it is not an assigned land.

12. I have heard the arguments of Sri M.R.K. Chowdary learned Counsel appearing for the petitioners and learned Government Pleader for Assignment appearing on behalf of the respondents 1 to 4, elaborately, perused the writ papers and records.

The Service and Resettlement Register of the Village of Patnam, No. 62, Chittoor Taluk, Chittoor District goes to show that Re-Survey No. 218 of old Sy. No. 218-2 is a Government un-assessed poramboke land total extent being Ac.948.62 cents. The total extent of Ac.948.62 cents of Block No. 218 was divided and assigned Sy. No. 1020 and the same was sub-divided into Sy. No. 1020/1 to 10. The extent of Sy. Nos. 1020/3 and 1020/6 is Ac.2.70 cents and Ac.0.28 cents respectively. The entire land in Sy. No. 1020 is a Government land and they are not ryoti lands/settlement lands. The Village Account Book of Patnam Village goes to show that the land of an extent of Ac.2.70 cents in Sy. No. 1020/3 is under the occupation of second petitioner-trust and it is an assigned land vide Darkhast Patta No. 82/4/92 dated 25.5.1983 and so also an extent of Ac.0.28 cents of land in Sy. No. 1020/6 is also Darkhast Patta in which the school management is in occupation of the said land.

13. The District Collector vide his letter Roc.B2/3363/93 dated 16.3.1993 after perusing the report of the Mandal Revenue Officer, requested him to take necessary action for cancellation of the assignment made in favour of Kesavulu Naidu in respect of the said land in question and resume the same to the Government along with structures as per the conditions 1,2, 19 and 20 of D Form patta and send a report. Accordingly the MRO issued a notice in Roc.A.327/93 dated 30.3.1993 stating that the said land in Sy. No. 1020/1 to 6 of various extents are assigned lands in favour of different persons and insofar as the land in Sy. Nos. 1020/3 and 1020/6 i.e. Ac.2.70 cents and Ac.0.28 cents respectively, assigned in favour of Kesavulu Naidu, is in possession of Sri Shiridi Sai Charitable Trust, Chittoor for which Dr. M.N. Raja Reddy is the Managing Trustee. Accordingly, the lands assigned in favour of Kesavulu Naidu, K. Neelakantam and E. Manohar Naidu by the then Tahsildar for agricultural purpose are sought to be resumed for violation of conditions of grant and requested to submit explanation within seven days from the date of receipt of said notice. A copy of which was also marked to Dr. M.N. Raja Reddy.

Dr. M.N. Raja Reddy filed explanation on 5.4.1993 stating that the trust is a non-profit making non-religious registered body formed with the members of the public willing to participate in the development of education in addition to the welfare of the physically handicapped and mentally retarded persons. The trust or the Managing Trustee has not purchased or taken possession of the said land and A. Kesavulu Naidu also joined in the trust, on 27.7.1988 and his membership number being 123 and his wife and his relatives also joined the trust. He had Ac.2.70 cents of land in Sy. No. 1020/3 and Ac.0.28 cents of land in Sy. No. 1020/6 and he raised mango garden and other crops in Sy. No. 1020/3 and constructed school building in Sy. No. 1020/6 with public contribution. He neither donated nor sold the said land and there is no alienation of the said land and the said land is in practical possession of A. Kesavulu Naidu. Similarly, Mr. Neelakantam and other alleged assignees are also members. It is stated Dr. M.N. Raja Reddy purchased the other land from E. Manohar Naidu and the revenue records by mistake shows that it is a DKT land.

Kesavulu Naidu the original assignee also submitted a reply on 3.4.1993 admitting that the said land of an extent Ac.2.70 cents and Ac.0.28 cents in Sy. Nos. 1020/3 and 1020/6 is the assigned land by the then Tahsildar of Bangarupalyam vide Ref. No. 82/4/13/1392 dated 28.3.1983 and from the date of assignment he is in possession of the said assigned land and he has been growing mango and guava trees apart from groundnuts. He joined the trust as a life member vide his Application No. 123 dated 27.7.1988 and the trust is working for public purpose and it has constructed two community halls for Muslims and Hindus. He along with his wife and brother-in-law joined in the trust. The said land is not in possession of Dr. M.N. Raja Reddy and the buildings constructed by them for running school are in the name of the trust in Sy. No. 1020/6 in an extent of Ac.0.28 cents. The said assigned land given to him has not been transferred in favour of any other person and his son is also studying in the said school. The other lands in which the buildings are constructed are not in his possession and he is a part and parcel of the trust.

15. After considering the explanations, the MRO passed resumption orders on 22.4.1993 in Roc.A.327/93 stating that the said lands are assigned in favour of Kesavulu Naidu for agricultural purpose and Kesavulu Naidu being the life member of the trust consented for construction of high school, junior college and other buildings, which are run by the trust. The said land was assigned for agricultural purpose but he has let out the lands in favour of the trust for construction of buildings. The contention of the Kesavulu Naidu in his explanation that the said lands are assigned lands is correct but the contention that he is growing mango, coconut and guava trees in an extent of Ac.2.70 cents in Sy. No. 1020/3, is utterly false as the trust constructed buildings etc. as is evident on the ground. The Managing Trustee of the trust – Dr. M.N. Raja Reddy in his reply stated that the said lands are not sold in favour of the trust and the contention that the said lands are not assigned lands is incorrect, as the assignee himself did not dispute about the assignment of the said lands. As the condition imposed in the DKT Patta has been violated, the assignment of the lands was cancelled for breach of the condition No. 1 of DKT Patta and also for contravention of Sub-section (1) of Section 3 of the Act and accordingly ordered resumption of the lands for assignment of the same to the landless poor persons. Similar reasoned orders were also passed insofar as other assigned lands in favour of E. Manohar Naidu and Neelakantam Naidu by order dated 22.4.1993. After passing resumption orders in respect of the lands in Sy.No. 1020/1 to 6 the MRO, Thavanampalli Mandal reported the same to the District Collector. The said resumption orders have not been questioned either by Dr. MM. Raja Reddy or by the assignee Kesavulu Naidu and thus, the said orders have become final. Thereafter, the Revenue Divisional Officer by his order dated 1.6.1997 in Roc.D/2022/97 placed the Village Administrative Officer under suspension for making false entries under 10(1) account about entering of the name of Dr. MM Raja Reddy in respect of the said lands in Sy.No.214/1 to 3 as well as the land in Sy. No. 1020/3 to 6. The petitioners are not disputing about the existence, validity or correctness of the said cancellation orders of the assignment vide proceedings dated 22.4.1993. But only contend that the said lands are not assigned land, therefore, passing of the said orders are of no consequence to consider the claim of the petitioners. After passing resumption orders the said lands have been taken possession on 24.8.1997 in the presence of panchas wherein it was clearly observed that the property constructed by the trust exists in the said lands.

The statement of Dr. M.N. Raja Reddy was also recorded on 24.8.1997 about the details of the land, superstructures existing on the ground and the said fact of taking over possession was also published in the local edition of the daily newspaper dated 25.8.1997. It was also published by way of torn torn on 24.8.1997 about taking over the possession of the same. Thereafter, the District Collector vide proceedings in Roc.B2/ 10708/97 dated 25.8.1997 passed orders stating that the various extents of lands in Sy. Nos. 1020/1 to 6, in which superstructures are existing, resumed by the Government are directed to be handed over in favour of the fourth respondent. In fact, Kesavulu Naidu filed a suit in O.S. No. 121 of 1993 on the file of the Principal District Munsif, Chittoor for grant of permanent injunction restraining the District Collector, Chittoor and Mandal Revenue Officer, Thavanampalli from interfering with his peaceful possession and enjoyment of the plaint schedule property in the said survey numbers.

16. Though the original assignee Kesavulu Naidu did not dispute about the nature of the land that the said lands are assigned lands, but the petitioners’ dispute that the said lands are not assigned lands. To resolve the controversy the question that is to be considered as to whether the said lands are assigned lands or not. It is to be noticed that A. Kesavulu Naidu filed an application for assignment of the land of Ac.2.70 cents in Sy. No. 1020/3 and Ac.0.28 cents in Sy. No. 1020/6 the total extent of is Ac.2.98 cents. In the said application it is clearly stated that he is an Ex-Serviceman and the said land is a communal poramboke available for assignment. The said application has been enquired into and the Revenue Inspector of the village made a remark that Kesavulu Naidu/applicant is a landless poor, therefore, he may be assigned the land subject to leaving minimum cart track in width 15 links. After conducting enquiry on the application filed by Kesavulu Naidu, D Form Patta in DKT. No. 82/4/1392 dated 28.5.1983 was granted earmarking the location in the map and according to condition No. 1, the assignee shall alone cultivate the said land personally and it can be inherited but not alienated in any manner. The assigned land shall be brought under cultivation within three years. The land was assigned subject to the condition that he shall leave 10 links width for cart tract and 10 links for canal.

17. From a perusal of the records, as reflected above, I am of the opinion that the land in question is not a ryoti land but it is a Government poramboke land assigned in favour of Kesavulu Naidu and other part of the land in the same survey number was also assigned. After issuing notice and after following due process of law under the provisions of the Act the said land in question was resumed to the Government by cancelling the assignment patta in exercise of the powers vested in the competent authority for violation of condition No. 1 of the patta and as well as for violation of Sub-section (1) of Section 3 of the Act, therefore, I am of the opinion that the contention of the petitioners that the said land is not an assigned land in favour of Kesavulu Naidu is not correct and the fact of assignment in favour of Kesavulu Naidu is supported by the records produced before this Court. There is no dispute that the Block 218 of A Register relating to No. 62 of Patnam Village consisting of Ac.948.62 cents and the Survey and Resettlement Register goes to show that the Sy. No. 1020 is part of the said block wherein it is clearly mentioned that it is a poramboke land. As against the said records the petitioners failed to rebut the same and have not filed any document in support of their contention to show that it is a ryoti land but not Government land.

18. The contention that there is no condition in the assignment prohibiting alienation is also not correct, as a matter of fact, though Kesavulu Naidu is an Ex-Serviceman the said land was not assigned under the quota of Ex-Serviceman, but the application and the assignment patta goes to show that the said land has been assigned considering that he is a landless poor but not under quota of Ex-Serviceman. No other proceedings show that the said application has been processed through the concerned department for assignment of the land in favour of Ex-Serviceman. Even assuming that it is a land assigned in favour of Ex-Serviceman, the said land is not alienable within a period of ten years. In the instant case, the nature of the land has been changed and the said land is not assigned for the purpose of using it for non-agricultural purpose. Admittedly, the said land has been used for non-agricultural purpose by the second petitioner trust. Though Kesavulu Naidu is a member of the trust, the fact remains that the trust is found in possession of the land changing its nature by constructing buildings for school, college, kalyana mantapam etc., therefore, it is a clear violation of Sub-section (1) of Section 3 of the Act. As per the aims and objects of the Act the said lands are non-alienable in any manner and there is a permanent prohibition on alienation of the lands assigned in favour of landless poor. Admittedly, in the instant case, the land has been assigned in favour of Kesavulu Naidu considering him as landless poor person, therefore, the provisions of the Act do apply to the facts of the case as the said land was assigned in favour of landless poor. Under Sub-section (1) of Section 3 of the Act the land assigned in favour of the landless poor for the purpose of cultivating are not transferable or alienable. Even if there is any transfer of the said land under any law or deed such deed or document relating to such land shall be deemed that the land has not been transferred and accordingly no right, title in such assignment shall vest in any person acquiring the land by such transfer. Therefore, I am of the opinion that the utilization of the said land for other than agricultural purpose by the trust is in violation of Sub-section (1) of Section 3 of the Act apart from the clear violation of condition No. 1 of DKT Patta.

19. Insofar as the contention of the petitioners that they have acquired title by adverse possession, I am of the opinion that there is no acceptable evidence that they are in continuous possession and enjoyment of the said land for over a period of 30 years. In respect of the assigned lands, the question of acquiring any title does not arise as the Act has been legislated to protect the assigned lands assigned in favour of landless poor as in the case of the legislation enacted under the Andhra Pradesh Land Transfer Regulations, prohibiting transfer of assigned lands permanently. To consider the provisions of the Act whether there is any violation of the Act in the respect of the assigned land and if the land is found in possession of any person other than the original assignee or his legal heirs, it shall be presumed, until contrary is proved, that there is contravention of Sub-section (1) of Section 3 of the Act. Admittedly, the trust is found in possession of the said land, therefore, it shall be presumed that there is violation of Sub-section (1) of Section 3 of the Act as contemplated under Section 4(3) of the Act. The assignment was made only in August 1983 and the resumption was made within 10 years i.e., on 22.4.1993 and the violation of Sub-section (1) of Section 3 of the Act is also well within 10 years i.e., immediately after the assignment. Therefore, it cannot be said there is no violation of the provisions of Sub-section (1) of Section 3 of the Act and condition No. 1 of DKT Patta. I have elaborately dealt with the nature of the assigned lands permanently prohibiting alienation of assigned lands assigned in favour of the landless poor in W.P. No. 2985 of 2003 and batch dated 19.12.2007.

20. In view of the aforesaid facts and circumstances and the records placed before this Court, I have no doubt about the nature of the land that it is a Government land assigned in favour of Kesavulu Naidu, who violated the conditions of assignment under the provisions of the Act, therefore, DKT Patta has been rightly cancelled resuming the land. Even if the petitioners are in possession after resumption orders are being passed, their possession is illegal and unauthorized and they are not entitled for any relief in this writ petition, as the said resumption orders have not been questioned either by the petitioners or by the original assignee or by the erstwhile Managing Trustee of the trust. In view of the aforesaid facts and circumstances of the case, I do not see any merits in the writ petition.

The writ petition is accordingly dismissed. There shall be no order as to costs.

Pasha Educational Training … vs C.C. And C.E., Service Tax Cell on 31 December, 2007

Andhra High Court
Pasha Educational Training … vs C.C. And C.E., Service Tax Cell on 31 December, 2007
Equivalent citations: 2008 10 S T R 434
Author: T M Kumari
Bench: T M Kumari, G Rohini


ORDER

T. Meena Kumari, J.

1. Seeking a writ of mandamus directing the Customs, Central Excise and Service Tax Appellate Tribunal, Bangalore, to dispose of the appeal filed by the petitioner against the order dated 31-8-2007 in Appeal No. 35 of 2007 (H.H) Service Tax by the first respondent expeditiously, the petitioner filed this writ petition.

2. The petitioner is a charitable educational trust formed with the object of imparting training/coaching in various educational fields and they are not commercial in nature. In furtherance of such object, it established Pasha Institute of Insurance & Management Training, Pasha Institute of Healthcare, Pasha Institute of Media Studies, Pasha Institute of Performing Arts and A.P.M. Kindergarten School. The petitioner is exempted from payment of income tax.

3. While so, the petitioner received a notice dated 23-1-2006 from the Joint Commissioner, Customs and Central Excise, Hyderabad – II requiring the petitioner to register itself with the Service Tax Authorities and to furnish the details of month wise payments received for providing services with effect from 1-7-2003 along with tax returns for the corresponding years, to which the petitioner filed reply dated 11-12-2006 claiming exemption from payment of service tax, under various notifications. Subsequently, on 18-8-2006, a show cause notice was issued by the second respondent, calling upon the petitioner to explain as to why an amount of Rs. 28,02,950/- towards Service Tax and an amount of Rs. 70,070/- towards Education Cess should not be levied for the period from July, 2003 to March, 2006, apart from imposition of penalties and interest. The petitioner filed reply to the said notice on 19-9-2006, but the second respondent, dissatisfied with the submissions made by the petitioner, passed an Order-in-Original No. 6 of 2006 dated 29-12-2006, holding that the services provided by the petitioner are not covered by the Notification No. 10 of 2003 and that the activity of the petitioner falls within the definition of Commercial Training or Coaching and, hence, is liable for payment of tax and demanded an amount of Rs. 38,02,950/- towards Service Tax, Rs. 70,070/- towards Education Cess for the commercial coaching activity for the period from 1-7-2003 to 31-3-2006 with interest on the said amount. A penalty of Rs. 100/- per day until payment of duty, penalty of Rs. 1000/- for contravention of provisions of Finance Act, 1994 and also a penalty of Rs. 38,73,020/- for suppressing the value of tax on services, were levied. Aggrieved by the said order, petitioner herein preferred appeal being Appeal No. 35 of 2007 before the first respondent and the first respondent vide order dated 31-8-2007 dismissed the same. Aggrieved thereby, the petitioner preferred appeal before the Customs, Central Excise and Service Fax Appellate Tribunal, Bangalore. Along with the appeal, the petitioner also filed stay petition and subsequently, it also submitted a letter seeking early disposal of the appeal.

4. Heard the learned Counsel for the petitioner and the learned Asst. Solicitor General of India. The learned Counsel for the petitioner submitted that the fact that the petitioner is a Charitable Trust and is not carrying on the activity on commercial lines, is not appreciated by both the original and appellate authorities in correct perspective and therefore, the finding that the petitioner falls within the ambit of Commercial Coaching and Training under Section 65(27) of the Finance Act, 1994 cannot be sustained.

5. While the learned Asst. Solicitor General of India, vehemently opposed the prayer of the petitioner.

6. Having regard to the facts and circumstances of the case and having heard both the counsel, we feel that the ends of justice would be met, if stay of recovery of the demanded tax is granted subject to the condition of the petitioner depositing half of the demanded amount. Accordingly, there shall be stay of recovery of the demanded amount on the condition of the petitioner depositing half of the demanded amount within a period of eight weeks from today. The Tribunal is directed to dispose of the appeal preferred by the petitioner within a period of six months from the dale of receipt of a copy of this order.

7. With these directions, the writ petition is disposed of. No order as to costs.

Union Of India (Uoi), Rep. By Its … vs Satyanarayana Construction … on 28 December, 2007

Andhra High Court
Union Of India (Uoi), Rep. By Its … vs Satyanarayana Construction … on 28 December, 2007
Equivalent citations: 2008 (2) ALT 1
Author: B S Reddy
Bench: G Mohammed, B S Reddy

ORDER

B. Seshasayana Reddy, J.

1. This civil revision petition is directed against the order dated 22-10-2007 passed in E.P. No. 20 of 2005 on the file of III Additional Chief Judge, City Civil Court, Hyderabad, whereby and whereunder the learned Additional Chief Judge overruled the objections of the judgment-debtors and ordered further step with regard to sale of E.P. schedule property.

2. Background facts in a nutshell leading to filing of this civil revision petition by the judgment-debtors in E.P. No. 20 of 2005 are: This is second journey to the High Court by the judgment-debtors. The respondent/decree-holder entered into an agreement with the Indian Railways for laying Pedddapalli – Karimnagar new railway line. Certain disputes arose in respect of executing the work. Therefore, the decree-holder invoked the arbitration clause and filed A.A. No. 31 of 2001 seeking appointment of arbitrator to adjudicate the disputes. Sri K. Srinivasa Murthy, Advocate, came to be appointed as a sole arbitrator to resolve the disputes. The sole arbitrator passed an award dated 6-2-2004. The decree-holder filed an application before the arbitrator under Section 33 of the Arbitration and Conciliation Act, 1996, (for short, ‘the Act’), seeking certain modifications in the award. A supplementary award dated 3-3-2004 came to be passed by the arbitrator. The decree-holder submitted a representation dated 12-5-2004 to the Chief Administrative Officer (Construction), South Central Railway, Secunderabad, requesting for payment of the award amount. The Deputy Chief Engineer/Con.Plg/SC, South Central Railway, Secunderabad, informed the decree-holder that the sole arbitrator has rendered an award for Rs. 16.00 Lakhs towards cost of rock chiseling and Rs. 2.00 Lakhs towards overhead expenses without there being any proof and the South Central Railway is prepared to pay the amounts awarded by the arbitrator on other items except the amount awarded under the above two items. For better appreciation, we may extract the text of the letter dated 30-6-2004 and it is thus:

The award given by the Sole Arbitrator in the above subjected arbitration case along with supplementary award has been received by this office and is under consideration of the competent authority.

The Sole Arbitrator has rendered an award for Rs. 16 lakhs towards “cost of rock chiseling” vide page 67 of item No. 2 of the original award. There is no claim/dispute between Railways and you on this issue, yet the arbitrator has given award for this claim. It has been requested by you in your application to the Sole Arbitrator (cited under reference 3 above) to omit this item.

Similarly, the Sole Arbitrator has rendered an award of Rs. 2 lakhs towards overhead expenses for item No. 3 of page 67 of original award and page 5 of the supplementary award. The sole arbitrator while giving reasons towards this claim has mentioned that “hence they are discarded as not clinching evidence for proving expenditure on overhead chares claimed by the claimant contractor. In the absence of proof, claimant is not entitled for any sum towards overhead.

Since there is no dispute/claim for rock chiseling from either end and also since there is clear findings of the Arbitrator that in the absence of proof you are not entitled for any sum towards overhead, you are requested to give your unconditional “no claim certificate” foregoing the awards towards the above two items (Rs. 16 lakhs + Rs. 2 lakhs + interest thereupon), so that the balance award can be considered for acceptance by competent authority.

An early reply is requested.

The decree-holder issued unconditional no claim certificate on 12-7-2004. Based on the said unconditional no claim certificate an amount of Rs. 6,69,053.92ps. came to be paid to the decree holder by the South Central Railway. The decree-holder accepted the said amount. Thereafter, the decree-holder filed E.P. No. 20 of 2005 for recovery of Rs. 24,45,615/-. The judgment-debtors filed counter resisting the execution petition. The principal contention of the judgment-debtors is that the decree-holder accepted Rs. 6,69,053.92 ps. towards full and final settlement of the award and therefore, execution petition is liable to be dismissed. They also filed E.A. No. 23 of 2006 to recall the order of attachment of E.P. schedule property. The executing court overruled the objection of the judgment-debtors on the ground that no efforts have been made by the judgment-debtors by way of filing a petition to record the adjustment within 30 days of the payment, by orders datd 13-7-2006/ 30-8-2006. The said orders came to be challenged by the judgment-debtors through C.R.P. Nos. 4596, 4597, 4598 and 4892 of 2006. Those C.R.Ps. came to be allowed remitting the matter back to the executing court for fresh consideration after giving an opportunity to both parties, by common order dated 17-1 -2007. The relevant portion of the common order, dated 17-1-2007 passed in CRP Nos. 4596,4597,4598 and 4892 of 2006 reads as hereunder:

The entire issue revolves around the no claim certificate alleged to have been issued by the Decree holder foregoing the claim under the award and accepting the amount arrived at between the parties. The same has been thrown out on the ground that no efforts have been made by the judgment debtor by way of filing a petition so as to record the same within 30 days.

The main contention of the judgment debtors, is that the provisions of Order 21, Rule 2(2) C.P.C. have not been properly appreciated while rejecting to consider the no claim certificate.

In view of the provisions of Order 21, Rule 2(2) C.P.C. and in the present facts and circumstances of the case on hand, without expressing any opinion on the merits of the case, we feel it a fit a case wherein all the matters be remitted back for fresh disposal in accordance with the provisions.

Accordingly, all the C.R.Ps. are allowed and thereby the order impugned in each C.R.P. is set aside. However, the matters are remitted back to the Court below for fresh consideration after giving an opportunity to both the parties.

However, it is needless to observe that genuineness or otherwise of the no claim certificate, besides being its binding nature on the parties, shall have to be adjudicated, so as to avoid the multiplicity of the proceedings as well as to have an effective adjudication of the issue involved.

On remand, the executing court took up E.A. No. 23 of 2006 and E.P. No. 20 of 2005 together and allowed the parties to adduce further evidence in support of their respective contentions. The judgment-debtors marked six documents on their behalf. On hearing the rival contentions of the parties, the executing court formulated the following points for consideration:

(1) Whether the “no claim” certificate is true and valid?

(2) Whether the amount due under the award is fully satisfied by means of adjustment under the “no claim’ certificate issued by the Decree Holder?

(3) To what relief?

The executing Court, on considering the material brought on record, came to the conclusion that Ex.A-1 No claim certificate dated 12-7-2004 is true and it is acted upon. However, since judgment-debtors failed to get the payment/adjustment certified or recorded under Sub-rule (3) of Rule 2 of Order XXI C.P.C. they cannot be permitted to plead discharge of the decretal debt. With the above observations, the executing court proceeded to order further step for sale of the E.P. schedule property, by order dated 22-10-2007. For better appreciation, we may refer paras 14 and 15 of the order impugned in this revision and they are thus:

14. Thus, the objection raised by the Judgment Debtor basing on the plea of adjustment by virtue of Ex.A-1, dated 12-7-2004 which is not recorded within a period of 30 days by the missionary provided under Order XXI, Rule 2 C.P.C., the plea of adjustment is liable to be rejected even though the adjustment is true. The options open to the Judgment Debtor are otherwise and certainly not in this petition.

15. Therefore, the objections taken by the Judgment Debtor in E.P.20/2005 are overruled and further step in the execution, for sale papers in order to issue sale notice has to be issued. So far as the result in E.A.23/2006 is concerned, no separate order is to be passed in that petition, because the said petition is only to review the orders of this Court dt. 13-7-2006. But in the CRPs the orders dated 13-7-2006 are already set aside by the High Court. Objections overruled. For sale papers call on 7-11-2007.

Hence, this civil revision petition.

3. Heard Sri S.R. Ashok, learned senior Counsel appearing for the petitioners/judgment-debtors and Sri A. Ramalingeswara Rao, learned Counsel appearing for the respondent/decree-holder.

Sri S.R. Ashok, learned senior Counsel appearing for the petitioners/judgment-debtors submits that the executing court thoroughly misread the provisions of Order XXI, Rule 2 C.P.C. and thereby erred in overruling the objections of the petitioners/judgment-debtors. A further contention has been raised that mere intimation of passing of the award to the South Central Railway cannot be construed as ‘received’ by the party, unless a copy of the award is served on a person directly connected with and involved in the proceedings and who is in control of the proceedings before the arbitrator. Learned senior Counsel narrated the sequence of events right from the passing of the award by the sole arbitrator till accepting of the amount of Rs. 6,69,053.92 ps. by the decree-holder on furnishing ‘No claim certificate.’ In support of his submissions, reliance has been placed on the following decisions:

(1) Sultana Begum v. Prem Chand Jain .

(2) Industrial Finance Corporation of India v. Cannanore Spinning & Weaving Mills Ltd. .

(3) Shree Ram Mills Ltd. v. Utility Premises (P) Ltd. 2007 (6) SCJ 171 : (2007) 4 SCC 599.

(4) Union of India v. Tecco Trichy Engineers & Contractors .

(5) I.R. Coelho (dead) by LRs. v. State of Tamil Nadu and Ors. 2007 (2) ALT 1 (SC) : 2007(1) SCJ 694 : 2007 (1) Decisions To-day (SC) 45 (Cons. Bench).

(6) Ramanathan Chettiar v. Venkatachelam AIR 1923 Mad. 619.

(7) Nanhelal and Anr. v. Umrao Singh , and

(8) Obhoy Churu Mookerjee v. Mussannut Pearee Dossir 1874 Vol. XXII of the Weekly Reporter Civil Rulings pages 270 and 271.

4. Learned Counsel appearing for the respondent/decree-holder submits that the respondent/decree-holder received Rs. 6,69,053.92 ps. without prejudice to his rights and therefore, it cannot be construed as the amount towards full satisfaction of the award. He further submitted that any adjustment not certified or recorded in accordance with the provisions of Rule 2 of Order XXI of CPC cannot be looked into by the executing court. He emphasized Order XXI, Rule 2 of CPC and Article 125 of the Limitation Act to convince that the judgment debtor, who does not get the payment made by him outside the court recorded and certified under Sub-rule (2) of Rule 2 of Order XXI of CPC cannot be permitted to plead such payment, after the expiry of period of 30 days prescribed under Article 125 of the Limitation Act. In support of his submissions, reliance has been placed on the decision of our High Court in P. Narsaiah v. P. Rajoo Reddy , wherein it has been held that any payment or adjustment which has not been certified or recorded in accordance with Rule 2 shall not be recognized by any court executing the decree, any such payment or adjustment not certified or recorded is no payment or adjustment in law. It is further held that any such payment or adjustment cannot be recognized by the court executing the decree – unless, of course, the decree-holder himself admits the same. Para 9 of the judgment reads as hereunder:

9. Part -II of the Code of Civil Procedure containing Sections 36 to 74 deals with execution of decrees and orders. Order XXI in the First Schedule to the Code also deals with the same subject. There can be no conceived inconsistency between Sections 36 to 74, and the several Rules contained in Order XXI. Indeed, Order XXI merely elaborates and provides detailed provisions to carry out the intent and purposes of the provisions contained in Sections 36 to 74. The Rules in the First Schedule to the Code, including Order XXI, are referable to Part-X containing Sections 121 to 131. Section 121 says that the Rules in the First Schedule shall have effect as if enacted in the body of the Code until annulled or altered in accordance with the provisions of the said Part. Section 122 empowers the High Courts in the country to make rules regulating their own procedure and the procedure of the Civil Courts subject to their superintendence, and that the Rules so made may annul, alter or add to all or any of the Rules in the First Schedule. Rules 1 and 2 of Order XXI are evidently based on the assumption that a judgment-debtor would not, ordinarily, pay the amount due under the money decree passed against him outside the Court without ensuring proper proof of such payment. Rules 1 and 2, therefore, make detailed provisions providing the manner in which the payment or adjustment outside the Court should be made. They also provide that if any such payment or adjustment is made outside the Court, it should promptly be got recorded and certified by the Court which is competent to execute the decree, either at the instance of the decree-holder or the judgment-debtor. It also declares that a payment or adjustment made outside the Court, which has not been certified or recorded in accordance with Rule 2, shall not be recognized by any Court executing the decree. Rule 2 of Order XXI does not deal with the payment or adjustment of the decree in Court, i.e., in execution proceedings taken by the decree-holder. (The judgment-debtor may well wait for execution proceedings, and go and pay the money – In case it is a money decree – or satisfy the decree in the appropriate manner where it is the decree of any other kind. The payment so made, or the satisfaction provided by him will naturally be recorded by the executing Court. There can be no controversy about his payment/adjustment in such a situation). A judgment-debtor need not wait for the decree-holder to take out execution. As soon as the decree is passed, or at anytime thereafter, the judgment-debtor can himself pay the money due under a decree; but this has to be done in any one of the three modes mentioned in Order XXI, Rule 1(1). Now, the law says further that if money is paid or adjustment of decree of any kind is arrived at outside the Court, it should be promptly got recorded and certified as contemplated by Rule 2. This can be done either by the J.Dr. or by the decree-holder; but in the very nature of things, a judgment-debtor should be more concerned in having such payment or adjustment recorded and certified by the Court. Article 125 of the Limitation Act provides a period of 30 days for applying to the Court for recording an adjustment or satisfaction of the decree, from the date of payment or adjustment. There is no provision for extending the said period. Since by virtue of Sub-rule (3) of Rule 2 of Order XXI “a payment or adjustment, which has not been certified or recorded as aforesaid (in accordance with Rule 2) shall not be recognized by any Court executing the decree”, any payment or adjustment not certified or recorded in accordance with Rule 2 of Order XXI is no payment or adjustment in law. Any such payment or adjustment cannot be recognized by the Court executing the decree – unless, of course, the decree-holder himself admits the same. Therefore, when a decree-holder takes out execution, the judgment-debtor will not be entitled to plead – if by the date of his plea a period of thirty days has expired from the date of payment or adjustment, as the case may be – that he has paid the money due, or has otherwise adjusted the decree, outside the Court. It is, no doubt, that the use of the expression ‘may’ in Sub-rule (2) of Rule 2 has given room for controversy and argument; but, in my opinion, the said expression has to be construed and understood in the light of Sub-rule (3) of Rule 2, and if so read, the expression ‘may’ is liable to be construed and understood as ‘shall’. By placing this construction no inconsistency arises between Order XXI, Rule 2 and Section 47. When Section 47 declares that all questions relating to execution, discharge or satisfaction of a decree shall be enquired into and determined only by the Court executing the decree and not by a separate suit, it does not mean that the provisions in Order XXI, Rule 2 read with Article 125 of the Limitation Act should be ignored. Indeed, one should read them together harmoniously. As stated hereinbefore, the several Rules in Order XXI supplement, illustrate and elaborate the provisions contained in part-II of the Code. The object behind Sub-rule (3) of Rule 2 of Order XXI is to shut out any plea of payment, or adjustment, which is not promptly got recorded and certified under the said Rule. The idea is to preclude any such pleas and leave no room for them.

5. In response, learned senior Counsel submits that had the decree-holder not submitting ‘No claim certificate’ foregoing his claim under two items viz., rock chiseling for Rs. 16.00 Lakhs and overhead expenses for Rs. 2.00 Lakhs, the judgment-debtors ought to have proceeded to file an application under Section 34 of the Act, to challenge the award. The decree-holder having accepted the amount towards full satisfaction of his claim lost remedy to recover any further amount by the principle of estoppel. He would also contended that obligating the judgment-debtors to file application to record adjustment is an impossibility of performance since there being no execution application as on 12-7-2004 i.e., the date on which the decree-holder accepted Rs. 6,69,053.92 ps. towards full satisfaction of the award. The learned senior Counsel took me to Sub-sections (1) and (3) of Section 34 of the Act.

6. At the cost of repetition, we may mention few relevant dates. An award came to be passed on 6-2-2004. The decree-holder filed application before the arbitrator for correction of the award and thereupon the learned Arbitrator passed a supplementary award dated 3-3-2004. The decree-holder submitted a representation dated 12-5-2004 to the Chief Administrative Officer (Constitution), South Central Railway, Secunderabad, with a request to arrange for payment of the amount awarded to him by the arbitrator. The Deputy Chief Engineer/ Con.Plg/SC, South Central Railway, Secunderabad, responded to the representation of the decree-holder and addressed a letter dated 30-6-2004 which has been extracted supra. The decree-holder submitted ‘No claim certificate’ to the Deputy Chief Engineer/Con.Plg/SC, South Central Railway, Secunderabad, foregoing his claim in respect of rock chiseling for Rs. 16.00 Lakhs and overhead expenses for Rs. 2.00 Lakhs. The ‘No claim certificate’ tendered by the decree-holder reads as hereunder:

Further to the letters cited above, I hereby submit my unconditional ‘No claim Certificate’. I am prepared to forego the Award in the 2 Claims viz., Award in Claim towards Rock Chiseling for Rs. 16.00 lakhs (Rupees Sixteen Lakhs Only) and Award in Claim No. 3 towards Overhead Expenses for Rs. 2.00 lakhs (Rupees Two Lakhs Only), Total Rs. 18.00 Lakhs (Rupees Eighteen Lakhs Only). I will not make any further Claims in respect of the above Award in future. Therefore, I request you to accept my unconditional ‘No Claim Certificate’ and arrange the payment of the balance Award Amounts at the earliest.

Indisputably the judgment-debtors paid Rs. 6,69,054/- by way of Pay Order and the decree-holder accepted the same without any murmur.

7. At this juncture, it is trite to note Sub-sections (1) and (3) of Section 34 of the Act and they are reproduced hereunder:

34. Application for setting aside arbitral award: (1) Recourse to a Court against an arbitral award may be made only by an application for setting aside such award in accordance with Sub-section (2) and Sub-section (3).

(2) x x x x

(3) An application for setting aside may not be made after three months have elapsed from the date on which the party making that application had received the arbitral award or, if a request had been made under Section 33, from the date on which that request had been disposed of by the arbitral tribunal:

Provided that if the Court is satisfied that the applicant was prevented by sufficient cause from making the application within the said period of three months it may entertain the application within a further period of thirty days, but not thereafter.

8. Form and contents of arbitral award are provided by Section 31 of the Act. The arbitral award drawn up in the manner prescribed by Section 31 of the Act has to be signed and dated. According to Sub-section (5), “after the arbitral award is made, a signed copy shall be delivered to each party”. The term “party” is defined by Clause (h) of Section 2 of the Act as meaning “a party to an arbitration agreement”. The definition is to be read as given unless the context otherwise requires. Under Sub-section (3) of Section 34 the limitation of 3 months commences from the date on which “the party making that application” had received the arbitral award. What is the meaning to be assigned to the term “party” and “party making the application” for setting aside the award in the context of the State or a department of the Government, moreso a large organization like the Railways came up for consideration in Union of India v. Tecco Trichy Engineers and Contractors , wherein it has been held that the delivery of an arbitral award under Sub-section (5) of Section 31 is not a matter of mere formality. It is a matter of substance. It is only after the stage under Section 31 has passed, then the stage of termination of arbitral proceedings within the meaning of Section 32 of the Act arises. The delivery of arbitral award to the party, to be effective, has to be “received” by the party. This delivery by the arbitral Tribunal and receipt by the party of the award sets in motion several periods of limitation such as an application for correction and interpretation of an award within 30 days under Section 33(1), an application for making an additional award under Sections 33(4) and an application for setting aside an award under Section 34(3) and so on. As this delivery of the copy of award has the effect of conferring certain rights on the party as also bringing to an end of the right to exercise those rights on expiry of the prescribed period of limitation which would be calculated from that date, the delivery of the copy of award by the Tribunal and the receipt thereof by each party constitutes an important stage in the arbitral proceedings. It is further held that in the context of a huge organization like Railways the copy of the award has to be received by the person who has knowledge of the proceedings and who would be the best person to understand and appreciate the arbitral award and also to take a decision in the matter of moving an application under Sub-section (1) or (5) of Section 33 or under Sub-section (1) of Section 34.

9. The decree-holder submitted a representation dated 12-5-2004 to the Chief Administrative Officer (Construction), South Central Railway, Secunderabad, with a prayer to arrange for payment of the amounts awarded by the arbitrator. Indisputably a supplementary award came to be passed on 3-3-2004. The date on which the supplementary award came to be served on the judgment-debtors is not indicated. Even assuming the date of supplementary award as the date of service, the judgment-debtors have time till 3-6-2004 and with a delay condonation petition till 3-7-2004. Even before the expiry of the limitation provided under Section 34(3) of the Act, the decree-holder submitted representation dated 12-5-2004 foregoing certain claims and made the judgment-debtors to pay the amount.

10. The only issue that survives for consideration is whether the decree-holder accepted Rs. 6,69,053.92 ps. towards full satisfaction or part satisfaction. The executing court misdirected itself as if the issue is with regard to recording or certifying of the payment made outside the court. The dispute is not with regard to recording the payments made outside the court. The decree-holder himself admits of receiving Rs. 6,69,053.92 ps. Indeed in Col. No. 4(b) of the execution petition the decree-holder acknowledges the receipt of Rs. 6,69,053.92 ps. When once the part payment is shown by the decree-holder himself, the requirement of certificate as contemplated under Sub-rule (2) of Rule 2, Order XXI CPC pales into insignificance. Therefore, the enquiry is with regard to execution, discharge or satisfaction of the decree as contemplated under Section 47 C.P.C. Section 47 of CPC reads as under:

47. Questions to be determined by the Court executing decree-

(1) All questions arising between the parties to the suit in which the decree was passed, or their representatives, and relating to the execution, discharge or satisfaction of the decree, shall be determined by the court executing the decree and not by a separate suit.

(2) [* * ]

(3) Where a question arises as to whether any person is or is not the representative of a party such question shall for the purposes of this section, be determined by the Court.

Explanation 1. For the purposes of this section, a plaintiff whose suit has been dismissed and a defendant against whom a suit has been dismissed are parties to the suit.

Explanation II.

(a) For the purposes of this section, a purchaser of property at a sale in execution of a decree shall be deemed to be a party to the suit in which the decree is passed; and

(b) all questions relating to the delivery of possession of such property to such purchaser or his representative shall be deemed to be questions relating to the execution, discharge or satisfaction of the decree within the meaning of this section.

Uttar Pradesh. – In Section 47 of the Principal Act, Expl. II as inserted by the U.P. Civil Laws (Reforms and Amendment) Act, 1954 (U.R. Act 24 of 1954) shall be omitted.

The object underlying Section 47 of CPC is to ensure that all questions relating to execution, discharge or satisfaction of the decree should be determined only by the executing court. The object is to avoid multiplicity of proceedings.

11. Ex.A-1 no claim certificate has been extracted supra. Indeed the executing Court on thorough consideration of the material brought on record came to the conclusion that no claim certificate issued by the decree-holder foregoing the amounts under two claims, totalling Rs. 18.00 Lakhs is true and valid. Once that finding goes in favour of the judgment-debtors, the E.P. is liable to be dismissed.

12. Accordingly, this civil revision petition is allowed and the order assailed in the revision overruling the objections of the judgment-debtors is unsustainable and accordingly, the same is set aside. Consequently, E.P. No. 20 of 2005 stands dismissed. No orders as to costs.