Interpretation Of Statutes - Cases Texts And Materials.pdf

INTERPRETATION OF STATUTES CASES, TEXTS AND MATERIALS

Khagesh Gautam

© Khagesh Gautam, 2015

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Table of Contents UNIT 1 – WHY ‘INTERPRET’? – A THEORETICAL INTRODUCTION ................................................. 5 Kent Greenwalt, General Theories of Interpretation ......................................................................................... 5 Frederick Schauer, A Critical Guide to Vehicles in the Park ............................................................................... 7

UNIT 2 – GENERAL PRINCIPLES OF INTERPRETATION ................................................................ 19 Literal Rule .................................................................................................................................................... 19 Case Study 1 – Forest Range Officer v. P. Mohammed .................................................................................... 19 Case Study 2 – A. K. Chauhan v. V. K. Mishra ................................................................................................... 23 Mischief Rule ................................................................................................................................................. 28 Case Study 1 – Smith v. Hughes ....................................................................................................................... 29 Case Study 2 – Cabell v. Markham ................................................................................................................... 30

UNIT 3 – EXTERNAL AIDS TO INTERPRETATION ......................................................................... 33 Doctrine of Contemporaneous Exposition ..................................................................................................... 33 Case Study 1 – Desh Bandhu Gupta v. Delhi Stock Exchange........................................................................... 34 Case Study 2 – Raymond Synthetics v. Union of India ..................................................................................... 39 Use of Statement of Object and Reasons ....................................................................................................... 48 Case Study 1 – Santa Singh v. State of Punjab ................................................................................................. 49 Case Study 2 – Bhaiji v. Sub-divisional Officer, Thandala ................................................................................. 56 Use of Parliamentary History & Pre-Legislative Reports ................................................................................ 61 Case Study 1 – Kartar Singh v. State of Punjab ................................................................................................ 62 Case Study 2 – Commissioner of Income Tax v. Sodra Devi ............................................................................. 64 Case – Pepper v. Hart ....................................................................................................................................... 77 Referene to Pari Materia Statutes ................................................................................................................. 78 Case Study 1 – State of Madras v. V. Iyer ......................................................................................................... 79 Reference to Dictionaries .............................................................................................................................. 83 Case Study 1 – N. Lakshmamma v. M. Subbaiah .............................................................................................. 83 Reference to Foreign Precedents ................................................................................................................... 87 Case Study 1 – McDowell & Co. v. Commercial Tax Officer ............................................................................. 88 Case Study 2 – State of Punjab v. Sodhi Sukhdev Singh ................................................................................... 92

UNIT 4 – INTERNAL AIDS TO INTERPRETATION ....................................................................... 102 Title of a Statute .......................................................................................................................................... 102 Case Study 1 – R v. Bates & Russel ................................................................................................................. 102 Case Study 2 – Ashwini Kumar Ghose v. Arabinda Bose ................................................................................ 106 Preamble of a Statute .................................................................................................................................. 112 Case – Union of India v. Elphinstone Spinning and Weaving Co. ................................................................... 112 Case Study – Gullipilli Sowria Raj v Bandaru Pavani ....................................................................................... 115

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Headings and Marginal Notes ...................................................................................................................... 118 Case Study 1 – Director of Public Prosecutions v. Schildkamp....................................................................... 118 Case Study 2 – R. Prabhakar v. R. Dugar ........................................................................................................ 126 Case Study 3 – R v. Montila ............................................................................................................................ 129 Provisos & Explanations............................................................................................................................... 132 Case – Sundaram Pillai v. Pattabiraman ......................................................................................................... 132 Definition Clause ......................................................................................................................................... 142 Case Study 1 – Shree Gollaleshwar Dev v. Gangawwa Kom Shantayya Math ............................................... 143

UNIT 5 – SUBSIDIARY RULES OF INTERPRETATION .................................................................. 149 Mandatory and Directory Provisions ........................................................................................................... 149 Case Study 1 – Ammal Chandra Dutt v. Second Additional District Judge ..................................................... 149 General Laws versus Special Laws ................................................................................................................ 153 Case Study 1 – Commissioner of Customs & Central Excise v. Hongo India Pvt. Ltd. .................................... 153 Non Obstante Clause ................................................................................................................................... 157 Case Study 1 – Dominion of India v. Shirinbai A. Irani ................................................................................... 158 Case Study 2 – A. G. Varadarajulu v. State of Tamil Nadu.............................................................................. 162 Noscitur a Sociis ........................................................................................................................................... 165 Case Study 1 – Commissioners of Customs and Excise v. Savoy Hotel .......................................................... 165 Ejusdem Generis .......................................................................................................................................... 168 Case Study 1 – Rajasthan State Electricity Board v. Mohan Lal ..................................................................... 169

UNIT 6 – THE GENERAL CLAUSES ACT ..................................................................................... 174 Constitution and the General Clauses Act .................................................................................................... 174 Case – Keshavan Madhava Menon V. State of Bombay ................................................................................. 174 Repeal And Savings Clause........................................................................................................................... 181 Case Study 1 – State of Orissa v. Tulloch & Co. .............................................................................................. 181 Case Study 2 – Jayantilal Amrathlal V. Union of India .................................................................................... 187

UNIT 7 – TAXATION STATUTES ................................................................................................ 190 Rule of Strict Interpretation ......................................................................................................................... 190 Case Study 1 – A. V. Fernandez v. State of Kerala .......................................................................................... 190 Case Study – Murarilal v. Vad ......................................................................................................................... 198 Form over Substance ................................................................................................................................... 205 Case – Comm’rs of Inland Revenue v. Duke of Westminster ......................................................................... 206 Case – Gregory v. Helvering ........................................................................................................................... 211

UNIT 8 – PENAL AND REMEDIAL STATUTES............................................................................. 213 Remedial Statutes........................................................................................................................................ 213

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Case Study 1 – London & North Eastern Railway Co. v. Berriman ................................................................. 213 Case Study 2 – Rita Devi v. New India Assurance Co. ..................................................................................... 220 Case Study 3 – Union of India v. P. V. Kumar ................................................................................................. 223 Penal Statutes.............................................................................................................................................. 226 Case Study 1 – State of Maharashtra v. Tapas D. Neogy................................................................................ 227 Case Study 2 – State of U.P. v. R. S. Vaidya .................................................................................................... 232

UNIT 9 – CONSTITUTIONAL INTERPRETATION ......................................................................... 236 An Economic Interpretation of the Constitution .......................................................................................... 236 Richard Posner, The Constitution as an Economic Document ....................................................................... 236 Cast Study 1 – Lockner v. New York ............................................................................................................... 255 Cast Study 2 – Chintaman Rao v. State of Madhya Pradesh .......................................................................... 266 Structure and History as methods of Constitutional Interpretation ............................................................. 268 Case Study – Kesavananda Bharti v. State of Kerala ...................................................................................... 268

UNIT 10 – OTHER DISCIPLINES AND LEGAL INTERPRETATION ................................................. 286 Post-Modernism and Legal Interpretation ................................................................................................... 286 Stephen M. Feldman, Playing with the Pieces: Postmodernism in the Lawyer’s Toolbox ............................. 286 Economics and Law ...................................................................................................................................... 296 Jonathan Klick & Francesco Parisi, Wealth, Utility and the Human Dimension ............................................. 296

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UNIT 1 – WHY ‘INTERPRET’? – A THEORETICAL INTRODUCTION KENT GREENWALT, GENERAL THEORIES OF INTERPRETATION Chapter 5, Legal Interpretation, Perspectives from other Disciplines and Private Texts [The book-chapter has been edited and only selected excepts have been retained, all footnotes and endnotes have been removed]

Theories about How to Interpret Contrasted with Theories about the Nature of Interpretation Modern theories about interpretation reach well beyond texts to understanding a wide variety of events and social practices. Whatever the object of interpretation, theories may focus on actual and desirable methods, or on the basic quality or nature of interpretation. One kind of theory need not displace the other, and whether it is explicitly recognized, each kind of theory will have implications for the other kind. Most obviously, someone building a general theory must pay attention to what people actually do when they engage in interpretation in various domains. And it is hard to develop a general theory that has no implications for desirable methods. If the theory indicates that all understanding of texts and practices is of a particular kind, then a purported method within a discipline that differs radically from that must either misdescribe what actually occurs, be seriously misguided in what it attempts, or stand in need of some complex explanation why those in the discipline are justified in attempting what they are. These are crucial enquiries about Gadamer’s theory, among others, as it may relate to law. What Texts, Communications, and Practices are Subjects of Interpretation? Within this broad study of legal interpretation, I have adopted an inclusive notion of interpretation, one that embraces all attempts to determine the meaning of what has been written or said. We have seen that, both in respect to literary theory and religious interpretation, a distinction is often drawn between ordinary uses of language and literature, or Scripture. Those who offer general theoretical approaches to interpretation to interpretation often distinguish between what is clear and straightforward, on the one hand and what demands thought on the other. Charles Taylor treats interpretation as making clear; its “object must, therefore, be a text or a text-analogue, which in some way is confused, incomplete, cloudy, cloudy, seemingly contradictory---in one way or another unclear.” As Gadamer puts it, “We speak of interpretation when the meaning of text is not understood at first sight; then an interpretation is necessary. In other words an explicit reflection is required on the conditions that enable the text to have one or another meaning.” Everyone agrees that people interpret both oral and written communications, but scholar disagree about how different those exercises are. The relation of Text to Interpreter A range of crucial connected issues fall within this topic. Is the text (or text-analogue) an external object to be examined by the subject who interprets, or is there a kind of interaction or dialogue between the interpreter and the text? (Needless to say, the idea of dialogue is simplest when communication is oral and two actually speak to each other.) Is the interpreter searching for something about the author (her meaning, or some deeper truth about her), about the text, about how the text bears on his life or on some more general concern, or some combination of these? Is the important fruit of interpretation something one can state in propositions, or does it involve experience of a certain kind (as Luther and Bultmann believed about the interpretation of the scripture), or does it produce an opening up to new dimensions

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of life? One frequent claim is that the interpreter is involved in a hermeneutical circle with the text, and we need to do our best to understand that conception. The Interpreter’s Viewpoint and Historicism A central aspect of modern theories is that interpreters do not come at a text as a blanket slate. They begin with viewpoint or pre-understanding. Interpretation takes place in a historical and social context. We cannot expect those who interpret a text today to have the same perception of it that someone would have had one hundred years ago. If we are influenced by our position in history, it is also evident that we are influenced by our position within the society at the present time. If I am incapable of replicating the original understanding of a text written by a trained lawyer of 1908, I am incapable of replicating the original understanding of a text written by a Japanese artist or a female African-American factory worker of 2010. Just what influences bear most heavily on us as we try to interpret is a crucial, debated question. Gadamer emphasizes the inevitability of tradition, and we need to be very careful about what that entails for him – d whether it is, as critics have argued, an essentially conservative stance. Objectivity, Relativism, or Something in Between? A central issue, for law as for other disciplines, is whether interpretations may be right or wrong, objectively correct or incorrect. If all of us begin with pre-understandings and these vary from age to age, how could interpretations of one age be correct or better than those of another age? One might believe in some sort of historical progression, so that interpretations from one era to the next, or that at least at some pinnacle of history true understanding will be achieved. Or one might think history is a setting for progressive degradation, with interpretations worsening as time goes by. A third possibility is that some interpretations may be objectively misguided by and mistaken, although among a range of other interpretations one could not be said to be more correct than another. It is also possible that for a given time and place (and perhaps perspective delimited in other ways) an interpretation could be the best possible, although not necessarily better than a different interpretation at a different time and place. Finally, it is crucial to distinguish whether an approach is objectively better than another from whether we are in a position to perceive that. The precise significance of this distinction is closely related to what an interpreter should be looking for take away from her efforts. If the aim is to understand as well as possible what the author subjectively meant by a text, we might agree with Hirsch that one’s conclusion can only be based on probabilities. One’s interpretation can be more or less accurate, even if one cannot know for certain whether “one has got it right,” and if one lacks compelling arguments why one’s estimates of the probabilities are better than those of someone in a preceding or succeeding generation, or of a colleague in one’s own department who disagrees right now. On the other hand, if a good interpretation is what “speaks to one’s condition”, it is hard to see how a present interpretation that speaks to my condition can be better or worse than different interpretations that spoke or will speak much better to the conditions of others in ages past or future. These troubling questions about objectivity and possible correctness can occupy us in this chapter and in our intensive engagement with approaches to legal interpretation throughout this study. A Sketch of The History Of General Theories On Interpretation Before Gadamer In this section, I offer an extremely brief sketch of general interpretive theories before Gadamer. The modest ambition is to provide a sense of where the Gadamer and other modern theorists stand and of the kinds of questions that were important for Gadamer and remain so. As we have seen, the early history of interpretive theories involved analysis of how particular kinds of texts, in particular canonical religious texts, should be understood. The first theorist to propose a

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universal hermeneutics, reaching across disciplines, was Johan Conard Dannhauer who in 1629 created the neologism hermeneutica. That word points back to the Greek God Hermes, who brought messages from the gods to human beings. For Dannhauer, the task of hermeneutics was to determine the intended meaning of a text, to clarify what the author were attempting to say, whether or not that was true. In the eighteenth century, Johann Martin Chladenius wrote that the task of hermeneutics was not to assure textually correct passages (e.g., correcting mistranslations of ancient texts), or to deal with insufficient insight into a text’s language, or with passages that are ambiguous in themselves, but rather to counter insufficient background knowledge of facts that are needed to render an author’s meaning comprehensible. In order to attain a “complete understanding of a passage”, the interpreter must grasp the viewpoint of the author. Georg Friedrich Meier subsequently proposed a universalist hermeneutics embracing not only communication in language but all “signs”, both nonlinguistic signs of human beings and natural signs. One commentator has called Meir’s “the last instance of a rationalist hermeneutics.” Perhaps the two most of influential theorists of interpretation during the nineteenth century were Friedrich Schleiermacher and Wilhelm Dilthey. With Schleiermacher, regarded as the “father of a modern hermeneutics as a general study”, we move from the Enlightenment to Romantic Thought. For him, hermeneutics was “related to the concrete, existing, acting human being in the process of understanding dialogue.” The aim of the interpreter was to re-experience the author’s mental process, not his emotional feelings or his motives, but his actual thoughts. This can only be achieved by a hermeneutical circle. Just as the parts of a text can only be understood by the meaning of the parts, an interpreter can discern the meaning of a text only by means of what she already knows and by the ways in which her grasp of the text affects what she knows. In both these aspects, one can think of circles of understanding, and should recognize, as did Schleiermacher, that a degree of intuition is unavoidable. The interpreter enters into a dialogical relation with the text, a kind conversation. As Schleiermacher’s thought developed, he shifted from a hermeneutics centered on language to one oriented toward psychology. Dilthey emphasized the autonomy of the human sciences, and saw hermeneutics as the foundation for all the humanities and social sciences. The understanding necessary for interpretation differed, he claimed, from the kind of explanation appropriate in natural sciences. It was based on lived experience, and was not purely cognitive. Our experience is not isolated and individual; Dilthey agreed with Hegel that life is a historical reality, that we understand ourselves through history. The interpreter orients herself to the inner conversation that a text bears within it. Despite his emphasis on the historical situatedness of the shelf, Dilthey defended “the certainty of understanding against historical skepticism and subjective arbitrariness”. Martin Heidegger, writing in the first part of the twentieth century, had a decisive influence on both Rudolf Bultman and on Gadamer. He stressed the historicity of human beings, and the temporal, intentional, and historical nature of understanding. All understanding has a forestructure, and understanding itself is less a matter of knowledge than of knowing one’s way around, of grasping possibilities for one’s being in the world. This emphasis differs sharply from that of both Schleiermacher and Dilthey. In his later writings, Heidegger emphasized the linguisticality of being; words and language are not merely reflections of an external reality, things come into being in words and language.

FREDERICK SCHAUER, A CRITICAL GUIDE TO VEHICLES IN THE PARK 83 New York University Law Review 1109 (2008) [The text of the article has been edited, all footnotes have been removed]

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The 1958 debate between Lon Fuller and H.L.A. Hart in the pages of the Harvard Law Review is one of the landmarks of modern jurisprudence. Much of the debate was about the relative merits of Hart’s version of legal positivism and Fuller’s brand of natural law theory, but the debate also contained the memorable controversy over the fictional rule prohibiting vehicles from the park. Hart used the example to maintain that rules have a core of clear applications surrounded by a penumbra of uncertainty, but Fuller offered a counterexample to insist that the language of a rule, by itself, could never determine any legal outcome. At one level, therefore, the debate was about the relative importance of language and purpose in applying a general rule to a particular issue. At a deeper level, however, the debate was about the formality of law and about the possibility of varying commitments to formality in different legal systems. By examining this debate, and by largely removing it from the surrounding controversy over positivism and natural law, we can gain valuable insights about legal rules, legal interpretation, and the nature of legal language. Introduction It is the most famous hypothetical in the common law world. And it is part of one of the more memorable debates in the history of jurisprudence. Stunning in its simplicity, H.L.A. Hart’s example of a rule prohibiting vehicles from a public park was intended primarily as a response to the claims of the legal realists about the indeterminacy of legal rules. Hart believed that many of the realists were obsessed with difficult appellate cases at the fragile edges of the law and, as a result, overestimated law’s epiphenomenal indeterminacy and vastly underestimated its everyday determinacy. Through the example of the rule excluding vehicles from the park, Hart hoped to differentiate the straightforward applications of a rule at what Hart called the rule’s “core” from the hard cases at a rule’s edge, the area that he labeled the “penumbra.” For Hart, the fundamental flaw of the realist perspective was in taking the often-litigated problems of the penumbra as representative of the operation of law itself. And insofar as judicial decisions in the penumbra necessarily involve determinations of what the law ought to be, it was important for Hart the positivist to stress that the interconnection between what the law is and what the law ought to be in the penumbra was not an accurate characterization of how law operated at the core, where the separation between the “is” and the “ought,” between law and morality, could still obtain. Although Hart’s target was legal realism, the response came from a different direction. Lon Fuller was no legal realist himself, but Hart’s almost offhand observations about the clear cases at the rule’s core – ordinary automobiles, for example – spurred Fuller to respond. Believing Hart to be claiming that the core of a rule’s application was determined by the ordinary meaning of individual words in a rule’s formulation – if something like an automobile was straightforwardly a vehicle in ordinary language, then an automobile would plainly fall within the scope of the rule – Fuller offered a gripping counterexample. What if a group of patriots, Fuller asked, sought to “mount on a pedestal” in the park, as a war memorial, a military truck “in perfect working order”? Although the truck would plainly count as a vehicle in ordinary talk, it was hardly plain to Fuller that the truck ought to be excluded. Indeed, for Fuller it was not even clear whether the truck qualified as a vehicle at all in the particular context of this rule. We could not know whether the truck was within the scope of the rule, Fuller argued, without consulting the rule’s deeper purpose. His challenge was thus not to Hart’s conception of the penumbra, with which Fuller presumably would have had little quarrel. Rather, the hypothetical truck/memorial was a challenge to the idea of a language-determined core. In offering this example, Fuller meant to insist that it was never possible to determine whether a rule applied without understanding the purpose that the rule was supposed to serve. The debate over this simple example has spawned numerous interpretations, applications, variations, and not a few misunderstandings. The fiftieth anniversary of the debate, therefore, seems the appropriate

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occasion on which to offer a guide to understanding a seemingly simple example that has mushroomed into something far larger. The hypothetical rule prohibiting vehicles in the park, and Fuller’s response to what Hart likely initially believed to be its least controversial dimension, has become a lens through which many commentators have viewed more recent debates, including those about statutory interpretation, law’s determinacy, the role of rules in law, and the nature of legal language, among others. If we can get clear about the issues involved in Hart and Fuller’s disagreement over this one example, and if we can understand the strongest arguments on either side (only some of which were actually offered by either Fuller or Hart), we will have learned something important about numerous questions of legal theory and legal practice, questions that transcend what initially may appear to be a rather limited debate. I A Debate Within a Debate The Hart-Fuller debate was focused principally neither on Hart’s example nor on Fuller’s counterexample. Nor was this larger debate significantly one about legal rules, or about rules in general, or even about the interpretation of rules. Rather, the bulk of the debate consisted of a comprehensive and eventually defining controversy about legal positivism and its opponents, with Hart championing the former against Fuller’s procedural variation on traditional natural law theory. Conducted when Nazi atrocities committed in the name of the law were a recent memory, the debate over the question whether a broadly positivist or instead a broadly natural law vision of law would be more conducive to morally right action figured prominently in the articles of both men, as did an even deeper disagreement about the fundamental nature of law itself. In discussing legal interpretation, and in using the rule prohibiting vehicles from the park to further that discussion, Hart does not appear to have taken very seriously the connection between the issue of interpretation and these larger moral and conceptual themes. Hart had something he wanted to say to the legal realists, and, like the chapter of The Concept of Law that the discussion of the no-vehicles-inthe-park example spawned, the debate about interpretation, with the example as its focal point, seems oddly removed from much of the surrounding debate about legal positivism and natural law. This is not to say there was no connection at all. The question of how to understand and interpret a rule such as one prohibiting vehicles from the park does link to Hart’s larger jurisprudential position, and he strains – albeit with less than complete success – to demonstrate this. If law is to be understood as not necessarily incorporating moral criteria for legal validity, then there must exist some possible rules in some possible legal systems that can be identified as legal without resort to moral criteria. And what better example could there be than a rule whose principal operative terms appear morally neutral, and whose application, at least at the core, would seem to avoid any recourse to morality? If the clear applications of the no-vehicles-in-the-park rule were plainly law, Hart appears to be arguing, then the inevitable use of morality (or justice, equity, policy, efficiency, or something else he would have considered non-legal) in the interpretation of unclear rules (or largely clear rules in the region of their murkiness) would not undercut the basic positivist claim. No sensible positivist, even in Hart's time (or in Austin's for that matter, as Hart himself makes clear), would claim that morality is never relevant or necessary for legal interpretation. But in order to support his case that morality is not always or necessarily relevant, Hart needs an example in which recourse to morality is unnecessary (or impermissible) to the performance of an act that is plainly--at least to Hart--deserving of the name “law.” The rule excluding vehicles from the park was just that example, and the application of that rule to clear cases in the core was for Hart just that morality-free legal act. Making the link between the no-vehicles-in-the-park example and Hart’s side of the debate about legal positivism is something of a reach, not least because of Hart’s dual agenda of challenging the realists

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and challenging Blackstone. Much the same can be said about Fuller’s side of the debate. Fuller’s lifelong focus on the purpose of a law and the purpose of law provides an obvious connection between the interpretive debate and the debate about the nature of law, especially from Fuller’s more or less natural law perspective. If law itself is by (Fuller’s) definition just, then the demands of law would require that it understand particular legal acts in just or sensible or otherwise morally desirable ways. A legal outcome excluding the truck/memorial from the park would thus for Fuller not only be a silly one, but also one inconsistent with the deeper nature of law itself. This aspect of the connection between the interpretive debate and the debate about the nature of law is closer for Fuller than its counterpart is for Hart. Still, the connection is neither obvious nor necessary, and it seems fair to conclude that the novehicles-in-the-park example and its surrounding debate were largely, even if not completely, detached on both sides from many of the loftier moral and conceptual issues that were an important part of the larger debate. The lack of a close connection between the interpretive debate and the conceptual one, however, is better seen as a strength than as a weakness. The value of Hart's example transcends his own use of it, and so too for Fuller’s counterexample. For not only would one be hard-pressed to find a question about legal reasoning that is unconnected with one or the other position in the interpretive debate, but the questions of interpretation over which Hart and Fuller tussled are also serious and enduring ones, even when the issue of the nature of the concept of law is far in the distance. II An Unfortunate Example Fuller was of course compelled to take Hart’s example as Hart presented it. But in terms of how we can best understand Fuller’s larger point, an example using the word “vehicle” may have presented an unfortunate distraction. In order to see why this is so, we must take the debate to a higher level of generality. That is, we have to understand that the question was not only the familiar one about the potential conflict between the text of a rule and its purpose – between the letter of the law and its spirit – but about legal formality in all of its (defensible) guises. The question that the debate about vehicles in the park raises is the question of the ever-present potential for conflict between the letter of the law (about which much more will be said in the following Part) and what would otherwise be the best (fairest, wisest, most just, most optimal, etc.) resolution of a legal question. If the straightforward reading of the law produces a ridiculous or even merely suboptimal outcome, are legal actors required or even permitted to reach the right outcome instead of the outcome seemingly mandated by the plain meaning of the words on the page? In order to frame this recurring conflict in the crispest possible way, it is important that following the letter of the law really does produce a poor outcome. And for this purpose the word “vehicle” might not do the trick. It is a colorable understanding of the word “vehicle” that something is not a vehicle unless, at the time we are applying the label, the thing we are describing has the capacity for self-propulsion, or at least for movement. If it cannot move, it might be said, it is not a vehicle. It might be a former vehicle, or a quasi-vehicle, or even a vehicle-in-progress, but to be a real vehicle it must be able to move. If this understanding of at least one meaning of the word “vehicle” is plausible, then it is no longer clear that the truck which has been “mount[ed] on a pedestal” as a military memorial is even a vehicle at all. We have all seen bronzed cannons, immobilized tanks, and flightless airplanes used as war memorials, and a tank – or a truck, for that matter – with all of its moving parts removed or welded fixed might not strike everyone as being a vehicle at all. That conclusion might not be much different if the truck used as a war memorial consisted of an otherwise fully functioning vehicle – Fuller did use the description “in perfect working order” – that was placed in a locked enclosure, or bolted to a base, or even simply

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had its battery or keys removed. At some point on a continuum these former vehicles move from nonvehicles (the bronzed and welded tank) to vehicles (the fully operational truck with the keys removed), but the point is that the issue might be seen as debatable. Some degree of functionality may, and only may, be one of the necessary conditions for something being a vehicle at all and, insofar as this is so, then the example becomes a bit murky on the conflict between what the rule clearly requires and what the best result would be. If the truck/memorial is possibly not a vehicle at all, then the conflict dissolves, and the point of the example is lost. Not so, however, with various other examples. Indeed, Fuller himself, perhaps recognizing the potential complications of the word “vehicle,” provides a different example. A page after talking about trucks being used as war memorials, he asks us to imagine a tired passenger who nods off in the station late at night while waiting for a delayed train. In doing so, the passenger runs afoul of a “no sleeping in the station” rule, a rule plainly designed, says Fuller, as a restriction on the homeless (this being 1958, Fuller calls them “tramps”), who might seek to use the station as their residence. This turns out to be a better example. Sleep is a physiological state, and as a matter of physiology Fuller’s businessman was sleeping. Period. It is true that there are uses of the word “sleep” that do not require physiological sleep, as when sleep is a euphemism for “have sex” or when it is used to describe a computer that has gone into low-power mode, but there are few instances of the reverse. If you are physiologically sleeping you are almost always sleeping in ordinary language, even if sometimes when you are sleeping in ordinary language you are not always physiologically sleeping. The no-sleeping-inthe-station example thus turns out to be a better one than the prohibition on vehicles in the park, because now the conflict between what the rule on its face requires and what a good outcome would be becomes much crisper and substantially less open to challenge on definitional grounds. The same crispness of conflict is equally apparent in the now-prominent example of Riggs v. Palmer, 22 N.E. 188 (N.Y. 1889). The force of using Riggs as an example of one dilemma of legal reasoning is that the case also presents a well-defined opposition between what a rule says and what the morally right or sensibly right or all-things-considered right answer should be. Insofar as New York’s Statute of Wills, as it existed in 1889, said plainly that anyone named in a will would inherit except in cases of fraud, duress, or incapacity at the time the will was made, Elmer Palmer should clearly inherit according to the language of the statute, even though his killing of the testator, his grandfather, makes this a morally abhorrent result. We now associate the case with Ronald Dworkin, and with the Hart and Sacks materials on the Legal Process, but both Riggs and the sleeping businessman would have been clearer examples for Fuller than one using the word “vehicle,” a word that is linguistically problematic for Fuller in just the wrong way. So although some might therefore quibble over whether the military truck ceased being a vehicle at the moment it was mounted on a pedestal to become a war memorial, this is a peculiarity only of the example. The literature on statutory interpretation is replete with instances in which the conflict between the plain meaning of the most immediately applicable legal item and simple good sense is far less escapable … Consequently, we should not get hung up on the word “vehicle,” for the point of Fuller’s counterexample of the vehicle that has become a war memorial is a point that far transcends the peculiarities of the particular word. The example of the no-vehicles-in-the-park rule turns out to be doubly unfortunate because it also allows Fuller mistakenly to suppose that Hart’s argument turns on the meaning of individual words taken in isolation. Fuller stresses that Hart’s mistake is in thinking that a single word by itself can tell us what a rule means, but Hart makes no such claim. Indeed, had Hart anticipated that Fuller would challenge him on this point, he might have used a better example, such as the language in Riggs … So while Hart used an example that turned out to be susceptible to Fuller’s misaimed charge, nothing in

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Hart’s larger point is inconsistent with the (correct) view that it is sentences, not individual words, that are the principal carriers of meaning. Hart’s claim, at least in 1958, was that the statutory language, as language, would generate some number of clear or core applications, and this is a claim that does not at all depend on whether it is this or that particular word in a rule or statute that is expected to carry most of the load. III The Meaning of Meaning Fuller’s challenge to Hart’s theory of meaning is broader than just the question whether it is the word or the sentence that is the principal transmitter of meaning. For Fuller, Hart’s mistake in believing that words can have meanings in isolation is the mistake of ignoring the importance of context, of ignoring the maxim that meaning is use, and, in essence, of not having read his Wittgenstein. Once we recognize that meaning is use, Fuller appears to argue, we cannot avoid the fact that it is the use in the particular context that is the appropriate unit of understanding. If we appreciate this understanding of contextual definition, he seems to be saying, then we must realize that, in the particular context of applying a rule prohibiting vehicles from the park to a particular military truck used as a war memorial, the alleged vehicle may simply not be a vehicle at all. But even if Fuller were right (which he was not) about Hart being committed to a so-called pointer theory of meaning and about Hart believing that the chief unit of meaning was the word, it does not follow that meaning resides solely or even principally in the full immediate context in which words and sentences are used. This is a common view, but its ubiquity, like the ubiquity of belief in the explanatory validity of astrology, is no indicator of its soundness. For if meaning only existed in the particular context in which words and sentences are used, it is hard to see how we could talk to each other. It is true that the compositional nature of language – the ability to understand sentences we have never heard before – is one of the hardest and most complex of questions concerning the nature of language. But anything even residing in the neighborhood of the “meaning is use on a particular occasion” view of language fails even to address the compositional problem: Without knowing something about words and sentences and grammar and syntax as general or acontextual rules (or, even better, conventions), we could never hope to understand each other. The full particular context may indeed add something or even a great deal to our understanding, but we will understand virtually nothing at all about “the cat is on the mat” unless we understand that this sentence carries meaning by drawing on shared acontextual understandings of the facts that the word “cat” refers to cats, that the word “mat” refers to mats, and that the words “is on” refer to a certain kind of relationship that differs from the relationship described by phrases such as “is under,” “is near,” or “is a.” When Wittgenstein, J.L. Austin, and all of their fellow travelers in Cambridge and Oxford, respectively, talked about meaning being use, they were talking not about particulars but about rules or conventions. And they were talking about the rules or conventions that constitute any language. The way the word “cat” is used in a particular linguistic community is what determines the meaning of the word “cat,” but it is the community that is the key. That linguistic community could decide (in a nonconscious sense of that word) over time that the word “cat” would refer instead to dogs or sheep or sealing wax, and in just that sense the meaning of a word or, better, a sentence is a function of how that sentence is now used by the relevant linguistic community. Still, nothing in the view that linguistic communities determine meaning by how they in fact use language entails the view that meaning is entirely or even largely a function of how particular individuals use language on particular occasions. In baseball there used to be, prior to the modern era of interleague play, a difference between a strike in the American League and a strike in the National League, even though the umpires in the respective leagues both purported to be interpreting the same

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words in the same written book of rules. Yet no one suggested that an American League umpire was free to call balls and strikes according to National League criteria. If he did, he would have been criticized or sanctioned for violating a rule that reflected a continuously changing practice, but which possessed sufficient short-term fixity in the face of longer-term flexibility that we could usually understand at any point of time who was following the rules and who was breaking them. The fact that the Constitution adopted in 1787 referred to a “Republican Form of Government” does not mean that we cannot now distinguish the party affiliation of Barack Obama from that of John McCain. And it is hardly nonsense to speak of standing still while on a moving train. Although the conventions of language change over time or in different contexts, they still have the capacity to carry meaning at any given time, and this conclusion applies no less to the language of the law than it does to language in general. In misunderstanding the lessons of “use” and “context” that dominated the philosophy of language of his times, Fuller failed to understand the basic problem of language – our ability to understand sentences we have never heard, people we have never met, and propositions we have never previously encountered. And thus Fuller failed to understand why as an American English-speaking lawyer I can understand far more on a first reading of a New Zealand statute about corporate insolvency, a topic about which I am completely ignorant, than I can on a first reading of a French code provision about freedom of expression, a subject about which I have considerably more knowledge. Fuller’s misguided foray into the philosophy of language is ironic, because it damaged his own case. Insofar as he wished to employ the military truck/war memorial example to demonstrate how legal language may not always produce the correct all-things-considered result or to show that language may not always accurately reflect a rule’s purpose, Fuller needed to rely on the fact that legal language transmitted meaning apart from its particular application. The vividness of Fuller’s counterexample stems precisely from the fact that the truck is a vehicle. If Fuller had instead offered the counterexample of a veterans group that wished to plant a bed of poppies as a war memorial, we would have thought him daft, because it is implausible that a bed of poppies would be prohibited by a “no vehicles in the park” rule. Only because a truck is a vehicle in the way that a bed of poppies is not does the example have its sting. Like pitchers trying to explain the physics of the curveball or artists venturing into philosophical aesthetics, Fuller’s examples demonstrated an intuitive and correct understanding of the problem which his explanations served only to undercut. A related problem arises with respect to the distinction between plain and ordinary meaning. Putting aside any question about words as opposed to sentences, Hart's point was basically one about plain meaning, although he did not explicitly take up the question of the linguistic community or subcommunity within which the meaning would be plain. An automobile is plainly a vehicle, Hart argues, but the fact that what counts as a vehicle in ordinary language is (usually) the same as what counts as a vehicle in legal language does not mean that law is committed to the ordinary meaning of ordinary terms. There are times when law uses language of its own making, often in Latin – replevin, assumpsit, quantum meruit, habeas corpus, res judicata – and sometimes even in English – bailment, demurrer, due process, joinder, interpleader, easement. Such terms have little if any meaning for the layperson, but they can still have plain meanings in law and for lawyers and judges. So as long as one believes in anything close to plain or literal meaning at all, such terms, when used inside the legal world, do not present special problems. Like the words of ordinary language, the meaning here is determined by the rules of use of the relevant linguistic community, but here that community is the community of legal actors rather than the men on the Clapham omnibus.

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Things become somewhat more problematic, however, when terms have both ordinary and technical legal meanings. We know that “due process” in the Fifth and Fourteenth Amendments has a legal/constitutional meaning with no ordinary counterpart. The women on the D train are no more likely ever to use the term than are the men on the Clapham omnibus. But the same does not hold true for “speech” and “religion” in the First Amendment or “arms” in the Second or “searches” in the Fourth. Here there are both ordinary and legal meanings, and the question is about the relation between them. So too outside of constitutional law, where words such as “trespass,” “complaint,” and even “contract” have legal meanings that diverge from their nonlegal ones. This is not the place to engage in an in-depth analysis of the relationship between ordinary language and legal language. My point here is only that there is nothing about the existence of law itself as a relevant linguistic community that entails that every person is his or her own linguistic community. Just as there can be plain (legal) meanings of terms like replevin and bailment, so too can there be plain (legal) meanings of terms like speech and contract. That Hart and Fuller were debating, in part, about the extent to which plain meaning is dispositive in the interpretation or application of a formulated rule says nothing about whether that meaning need be ordinary or technical--whether the terms be everyday ones or terms of art. And although Fuller does not exactly say this, one senses in his challenge a flavor of the belief that if law can be a relevant linguistic community and a relevant linguistic context, then there is no limit to the smallness of the context that should concern us. This is a mistake about the relationships between language and community and between language and rules, but it is not a mistake that detracts from the basic problem: Sometimes language will simply give the wrong answer, and the problem for law is the problem of what, if anything, to do about it. IV Cores, Penumbras, and Open Texture Hart employs the “no vehicles in the park” rule as a way of explaining the problem of the penumbra, but it is important to distinguish two very different types of penumbral problems, problems signaled in Hart's 1958 contribution but not developed fully until The Concept of Law three years later. One type of penumbral problem, if we can even call it that, is the problem of pervasive vagueness. Although Hart focused on statutes with a clear core and a vague penumbra, some legal rules resemble penumbra all the way through. It is true that there exist intentionalist theories of interpretation that would find in the drafters’ mental states a clear set of intended applications even when the language of a legal text is unclear, and in that way “cure” the vagueness of a vague text. But if we put aside such an approach and focus just on the language, we find that on occasion legal language is so vague by itself that there is nothing clear at all. Without recourse to the original intentions of the drafters (or possibly, as Justice Scalia would have it, to potentially narrower contemporaneous meanings), there may be no clear instances of which searches and seizures are “unreasonable” under the Fourth Amendment; which forms of inequality are the focus of the Fourteenth Amendment's prohibition on the denial of the “equal protection of the laws”; when a “contract, combination, . . . or conspiracy” is “in restraint of trade or commerce” for purposes of the Sherman Antitrust Act; which custody decisions are in the “best interests” of the child; and just how fast one may drive when the only relevant rule says simply that one's driving must be “reasonable” and “prudent.” With respect to examples like these, there is no reason to believe that Hart would not have taken the position that all applications (questions of precedent and stare decisis aside) of such rules require an exercise of judicial discretion, and that judicial discretion necessarily requires recourse to extralegal factors. And there is no reason to believe that Fuller would have disagreed, except of course with the designation of such factors as “extralegal.” So although this kind of pervasive vagueness is widespread, and although it requires the type of judicial behavior that Hart saw in the penumbras around clearer cores, this is not an issue about which Hart and Fuller, except perhaps for terminology, would have had much disagreement.

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So what, then, is a penumbra, whether in the context of language generally or of legal language specifically? In explaining the idea of penumbral language, Hart borrows in part from Bertrand Russell, who in his enduring article on “vagueness” drew a distinction between the core and the fringe. He borrows even more, however, from Friedrich Waismann, whose elaboration of Wittgensteinian themes brought us the idea of “open texture.” Russell was concerned principally with line-drawing and boundaries, and he relied on the example of baldness as a way of showing that the inability to draw a sharp demarcation between two words or concepts does not mean that there was no distinction to be had. So in this companion to the classic paradox of sorites, Russell asked us to recognize that although there might be some cases in which we would be unsure about whether a man was bald or not, this does not mean that there are not men who are clearly bald and men who are clearly not. And so too with vehicles: The line between a vehicle and a nonvehicle is fuzzy – and this is presumably what Hart had in mind in offering bicycles, roller skates, and toy automobiles as examples – but this does not mean, Hart argued, that standard ordinary automobiles are not clearly vehicles, nor, he might have said, that lovers quietly strolling hand-in-hand in the park are not nonvehicles. In this respect, the penumbra consists of those anticipated applications of a term that we know now will present uncertainties or indeterminacies, just as we know now that a rule requiring drivers to have their lights on after dark will be vague with respect to dusk and that the mostly clear distinction between frogs and tadpoles will become vague at some point on a tadpole’s journey towards becoming a frog. In offering the example of the no-vehicles-in-the-park rule, and in speaking of the core and the penumbra, Hart was presumably asking us to see that for many or even most rules we can, even at the time of drafting, imagine that there will be hard cases as well as easy ones, but that the existence of the hard ones – the indeterminacy claims of the legal realists notwithstanding – does not mean that there are not easy ones as well, just as there are clear examples of frogs, tadpoles, night, day, and, of course, vehicles. Waismann’s valuable addition to what was in his time well known about vagueness was the conclusion that it is impossible to eliminate the potential for vagueness in even nonvague terms, and this is the phenomenon he called “open texture.” Even the most precise term has the potential for becoming vague upon confronting the unexpected, Waismann argued, and so no amount of precision can wall off every possibility of future but now unforeseen and even unforeseeable vagueness. When Hart’s friend and Waismann’s contemporary J.L. Austin talked of the exploding goldfinch, he vividly captured the same idea, for his point was that even if we could now describe with total precision the necessary and sufficient conditions for “goldfinchness,” “we [would not] know what to say” – “words [would] literally fail us” – when confronting a creature that was a goldfinch according to all of the existing criteria, but which proceeded to explode before our eyes. In other words, the unexpectedly exploding goldfinch would render vague what we had previously thought clear, just as the unexpectedly vehicle-like war memorial would render vague what might have been thought to be the clear part of the no-vehicles-inthe-park rule. Fuller’s example of the truck/memorial thus presents an interesting question with respect to the idea of open texture. Fuller presented the example as a case involving legal uncertainty arising from linguistic certainty – or at least should have – and it raises an important question with respect to the relationship between linguistic open texture and what we might think of as legal open texture. It is certainly possible to imagine legal uncertainty arising out of unexpected linguistic uncertainty: If we had a statute that protected goldfinches as, say, endangered species or national symbols, a sudden awareness of the existence of an exploding goldfinch would have made the law uncertain – it would have produced an indeterminate application – just because that event would have made the language in which the law was written uncertain as well. More commonly, however, and this is the point of Fuller’s example, as well as Pufendorf’s, as well as of real cases like Riggs, … our language does not fail *1128 us but our law does. The language is clear,

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and the application is linguistically clear, but following the clear language will lead to what appears to be a wrong or unjust or unwise or inequitable or silly result. In such cases we do not have linguistic open texture, but we might have legal open texture, and it is in such cases that legal decision-makers must decide what to do. For Fuller, the law should always in such cases seek to come up with the reasonable result, and from this premise Fuller derives the conclusion that there are no purposeindependent, clear, easy, or core cases. Interestingly, Hart may not have completely disagreed with Fuller about the proper outcome of the truck/memorial case, although he might have disagreed with the route that Fuller took to get there. When Hart says in The Concept of Law that legal rules are necessarily always subject to exceptions, and that the grounds for creating such exceptions cannot be specified in advance, we see in Hart the through-and-through mentality of the common law lawyer. Common law rules are always subject to modification at the moment of application, and it is characteristic of the common law that it treats a ridiculous or even somewhat suboptimal outcome generated by an existing common law rule as the occasion for changing the rule. If “no vehicles in the park” were a common law rule, there is little doubt that Hart would have expected the common law judge to change the rule into “no vehicles in the park except for war memorials,” or something of that sort. Indeed, Hart verges on suggesting in his discussion of the always open “unless” clause that this is not only a characteristic of the common law, but a necessary feature of law and a necessary feature of rules. In this Hart was mistaken. As most civil lawyers would understand, and as Jeremy Bentham would have applauded, sometimes the language of a rule generates a bad result, and sometimes we have to live with that bad result as the price to be paid for refusing to empower judges or bureaucrats or police officers with the authority to modify the language of a rule in the service of what they think, perhaps mistakenly, is the best outcome. This is the argument for a plausible formalism, and in this respect Hart’s commitment to the continuous flexibility of the common law may have made him no more of a formalist than Fuller. V The Nature of the Debate So what, precisely, were Hart and Fuller fighting about? What really were their differences regarding the no-vehicles-in-the-park rule? These questions are even more relevant in light of what might appear to some to be Hart’s “concession” in the Preface to Essays in Jurisprudence and Philosophy. Here, Hart acknowledged that the distinction between the core and the penumbra was not necessarily, at least in law, located in the language in which a rule is written. The law could, Hart concedes, distinguish the core from the penumbra on the basis of purpose or of intent, and were the law to do so, it might very well exclude the truck/vehicle from the reach of the rule, thus allowing it to be erected in the park. At this point, it appears that the debate has become, in part, an empirical one. Fuller can be best understood as claiming that the reasonable and purpose-based interpretation of the no-vehicles-in-thepark rule is a necessary feature of law properly so called. And, if we forgive Hart for what he said about “unless” in The Concept of Law, Hart might now be understood, postconcession, as saying that the recourse to purpose or common sense is a possible and even arguably desirable feature of a legal system, but that it is not a necessary component of the concept of law. This is a real disagreement about the concept of law, but there is also an empirical disagreement between Hart and Fuller. Fuller is arguing not only that his purpose-focused approach is a necessary feature of law properly so called, but also that it is an accurate description of what most judges and other legal actors would actually do in most common law jurisdictions. On this point Hart might well be read as being agnostic, but there is still a tone in Hart of believing that Fuller not only overestimates the role of

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purpose in understanding the concept of law, but may well also be overestimating the role of purpose and underestimating the role of plain language in explaining the behavior of lawyers and judges. And if this is not what Hart would have said, and it may not have been, then it may well be what he should have said. Thus, although much of the debate appears to be a nonempirical one, it also has an empirical side, a side in which Fuller and Hart hint at opposing descriptions of the role of language-determined cores in producing actual legal outcomes in actual legal systems. Moreover, even as Hart conceded that the core of a rule might be determined by something other than the plain meaning of the rule’s language, he did not go so far as conceding that anything other than first-level purpose – the purpose of a particular rule – might take the place of language in distinguishing the core from the penumbra. In this respect, Hart would almost certainly have bridled at the prospect of a judge setting aside both the purpose and the language of a rule when the two together produced a poor outcome from the perspective of broader conceptions of justice, fairness, efficiency, or wise policy. And here we suspect that Fuller may well have been more sympathetic to such an outcome because of his commitment to purpose, not only to the particular purpose behind particular rules, but also to the idea that law as a whole had a purpose – the reasonable regulation and organization of human conduct--the frustration of which was always to be avoided. Seen in this way, the example of the no-vehicles-in-the-park rule also suggests a real debate about the role of the judge. One way of understanding Fuller, and possibly theorists such as Ronald Dworkin and Michael Moore as well, is as believing that the good judge is one who sets aside the plain language of the most directly applicable legal rule in the service of purpose, or of reasonableness, or of making law the best it can be, or of integrity, or simply of doing the right thing. Dworkin’s sympathy with the outcome in Riggs makes this clear for him, and Fuller’s only slightly less overt sympathy for his mythical Justice Foster in The Case of the Speluncean Explorers is in the same vein. So then the question is a slightly different one. If the plain meaning of a rule, or of “the law” positivistically understood, generates a wrong, silly, absurd, unjust, inequitable, unwise, or suboptimal outcome (and these are not all the same thing), then is it the job of the judge to do something about it? This is a question of role morality, and just as some would argue that justice is best done if lawyers fight for their clients and not justice, that truth may emerge from the clash of often false ideas, and that economic progress for all comes from the invisible hand of the market while individual economic actors pursue only their own well-being, it might be the case that the best legal system is one in which individual judges do not seek – or at least do not always seek – to obtain the all-things-considered best outcome. Neither Hart nor Fuller addresses this issue directly, but one cannot help believing that on this question it is Fuller who far more likely prefers the justice-seeking judge and Hart who might understand that in law, seeking justice is not always or necessarily part of the job description of either the lawyer or the judge. VI Who Won? There are, to be sure, people who cannot see a debate without insisting that we pick a winner and a loser. Many of those same people cannot see a list or collection of two or more items without ranking the items on the list. But we are not choosing between Hart and Fuller for a single position on a law faculty. They are, after all, both dead, and that appears to make them unlikely candidates for faculty appointments. Thus, it may not really matter whether anyone won or lost the debate. Much more important is what the debate as a whole illuminated and what the particular example of the no-vehiclesin-the-park rule revealed about one of the central dilemmas of law. Most of what we have learned comes not from Hart’s original example itself, nor solely from Fuller’s counterexample, but from the

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conjunction of the two. Looking at the conjunction, we might say that Hart’s basic point about the core and the penumbra was properly influential, and demonstrated not only his firsthand knowledge of how law worked, but also the sophistication, for the times, of his philosophical knowledge. Although Fuller’s philosophical forays were far clumsier, it may be important to remember that Fuller offered a highly resonant picture of modern common law legal systems, especially (though not exclusively) in the United States. In an environment in which law professors who urge judges to rewrite statutes to make them less obsolete can go on to become judges themselves; in which the instrumentalist, anti-literal, and anti-formal approach exemplified by cases like Riggs … is a major component of the legal and judicial arsenal; and in which judges may without fear of impeachment set aside the plain language of even the Constitution in the service of something larger or deeper, Fuller may have correctly captured something important about the legal system he knew best. Even with respect to Great Britain, a legal environment more formal than that of the United States but in which judges still sometimes use broad conceptions of equity to defeat an otherwise unfortunate application of a legal rule, Fuller’s description may capture an element of actual adjudication and legal practice that Hart had neglected or slighted. … Moreover, the United States is also a legal environment in which the formal constitutional separation of powers as specified in the document often is outcome-determinative, in which a court can believe that a statute that produces an obsolete and morally problematic result can nevertheless be changed only by the legislature, and in which prominent political figures who might otherwise have had presidential aspirations never consider the possibility solely because they would run afoul of the Constitution’s “natural born” requirement to be President. So although the example of the truck/memorial that falls within the literal language of a statute tells us something important about modern common law legal systems, so too does the automobile that is plainly a vehicle. Indeed, if we seek to understand law and not just judging – and that was what Hart wanted us to understand by using the example in the first place – it is important that we not forget about the driver of a pickup truck, with family and picnic preparations in tow, who sees the “No Vehicles in the Park” sign at the entrance to the park and simply turns around. Once we see how often law is formal, and once we see how often (especially in the United States) it is not, we can appreciate that the best understanding of rule interpretation in particular, and an important part of law in general, may come neither exclusively from Hart’s example of the automobile, nor from Fuller’s counterexample of the military truck. Rather, we learn a great deal from the conjunction of both examples and both sides, and from an appreciation that each of the two examples captures an important feature of the legal systems we know best. To the extent that this is so, the real winner of the debate is not Hart, nor is it Fuller, for both neglected something important. Instead, insofar as the two perspectives complemented each other and remedied the too-narrow descriptive account of the other, the real winner turns out to be all of us.

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UNIT 2 – GENERAL PRINCIPLES OF INTERPRETATION LITERAL RULE Maxwell on Interpretation of Statutes is a book that is commonly referred to and cited by the Supreme Court of India when dealing with questions of statutory interpretation. In this book the ‘Literal Rule’ is set out in the following words (internal citations omitted) – The first and most elementary rule of construction is that it is to be assumed that the words and phrases of technical legislation are used in their technical meaning if they have acquired one, and otherwise in their ordinary meaning, and the second is that phrases and sentences are to be construed according to the rules of grammar. … The safer and more correct course of dealing with a question of construction is to take the words themselves and arrive if possible at their meaning without, in the first instance, reference to cases. … The rule of construction is “to intend the Legislature to have meant what they have actually expressed.” The object of all interpretation is to discover the intention of Parliament, “but the intention of Parliament must be deduced from the language used,” for “it is well accepted that the beliefs and assumptions of those who frame Acts of Parliament cannot make the law.” … The desirability or the undesirability of one conclusion as compared with another cannot furnish a guide in reaching a decision.” … One consequence of the rule of literal construction is that wide language should be given a wide construction, however restricted the scope of previous legislation dealing with the same matter may have been.

A better of understanding of how this rule is applied in cases can be obtained by examining the 1993 Division Bench opinion of the Supreme Court that involved the question as to whether sandalwood oil can be called wood oil for the purposes of the Kerala Forest Act, 1961. CASE STUDY 1 – FOREST RANGE OFFICER V. P. MOHAMMED (1993) Supp. (3) SCC 627 Bench – Justices K. Ramaswamy & R. M. Sahai Justice Ramaswamy (for the Court) … Untramelled by questions of fact the learned Senior counsel on both sides neatly presented question of law whether “sandalwood oil” is forest produce within the meaning of S. 2 (f) (1) of the Kerala Forest Act, 1961, for short ‘the Act’. When proceedings were laid u/s. 51 (1) of the Act against the respondents in Special Leave Petition (Crl.) Nos. 27-29 of 1992, they questioned the jurisdiction of the court in C.C. Nos. 145 and 148 of 1988. Eschewing delineation of intermediary proceedings went on from the start of prosecution, the High Court in exercise of its power u/s. 482 of the Code of Criminal Procedure, 1973 for short ‘the Code’ by order dated August 31, 1992, reported in Mohammed Aliv. Forest Range Officer, (1992) 2 KLT 502 1992 quashed the complaint holding that Sandal Wood Oil is not ‘wood oil’ as defined in s.2 (f) (i) of the Act. So it is not a forest produce. Thus these appeals by Special leave. When same question subsequently arose, other learned Single Judge doubting the correctness of aforesaid judgment referred the matter to the division bench which by order dated December 15, 1992, reported in Khushboo Enterprises v. Forest Range officer, (1993) 1 KLT 91 held that Sandalwool Oil is a forest produce within the meaning of S.2 (f) (1) of the Act. Thus the appeal in the other case. The Forest Conservation Act, 1980 aims to prevent depleting forests, conservation thereof and protection of wild life in the country to maintain ecological balance. The State, Acts regulate preservation of forest and forest produce to supplement the Central Act. The Act prescribes procedure for preservation of the forest and regulates possession of the forest produce, failing of trees in the forest area and removal from the forest or reserved forest area by transit permits etc. When Sandalwood Oil either was found in transit or in possession of the manufacturers, it was seized in the respective cases

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and laid the complaints u/s. 5 1 (1) (or contravention thereof. As said earlier the jurisdictional question was raised on the premise that Sandal Wood Oil is not a wood oil as defined u/s. 2(f) (1) of the Act. The question, therefore, emerges whether Sandalwood Oil is a wood oil. S. 2(f) defines forest produce thus: S. 2(f) ‘forest produce’ includes: (i) the following whether found in or brought from, a forest or not, that is to say – timber, charcoal, wood-oil, gum, resin, natural varnish, bark, lac, fibres and roots of sandalwood and rosewood; and (ii) the following when found in or brought from a forest, that is to say – a) trees and leaves, flowers and fruits and all other parts or produce not here-in-before mentioned, of trees. b) plants not being trees including grass, creapers, reeds and moss and all parts or produce of such plants; c) silk cocoons, honey and wax, and d) peat, surface soil, rock and minerals (including limestone, laterite), mineral oils and all products of mines or quarries. (emphasis supplied)

A reading thereof do indicate that the forest produce whether found in or brought from a forest or not is a forest produce which include, that is to say, the enumerated items in Cls. 1 and 11 “wood-oil” is one of the enumerate items as well as roots of sandalwood and rosewood. The contention of Sri G. Ramaswami, the learned Senior counsel for the accused is that technical Dictionaries, Botanical Tax Books and expert opinion would bring out a demonstrable distinction between wood oil and sandalwood oil. The wood oil is a natural produce of the forest directly derived as an exudation from living trees in the forest belonging to the family of the Dipterocarpucoae trees while sandal wood oil is a bye product from sandalwood (Santalum Album) by industrial process. Wood oil is produced by making a hole on the trunk of the living tree commonly known as “oil trees” or “wood oil trees”. This family of trees are variously known in different parts of South India but they relate to Dipterocarpucoae family. Wood oil is gathered by heating the hole in the trunk to induce exudation of the oleic resin from the tree and commercially dealt with as wood oil which is a cheap substance in the commercial world used solely for the purpose of painting planks of wood or wooden vessels floating in the sea. The physio-chemical properties of wood oil are distinct and different from other oil. Sandal wood oil would be produced only at factory level and that too by mechanised process utilising the heart wood and roots of sandal wood trees removed from the forest as a raw material. Sandal wood oil is having very high commercial value and it is mainly used in manufacturing perfumery and cosmetic items of different types and grades. The production of sandal wood oil is being carried out as industry, either by licence by the individuals or the state government as its monopoly like Karnataka State, in a larger scale or as a small scale business. It is further contended that the meaning of the word “wood oil” defined in S. 2 (f) (1) must receive its colour from its context and connotation. When the legislature used the word “that is to say” the wood oil and other natural growth referred to in the definition it would only mean natural bye-product directly drawn from the trees. The Learned Single Judge had rightly construed the meaning of the word “wood-oil” and held that sandal wood-oil being the bye-product derived commercially manufacturing process is not wood oil. The division bench committed manifest error in its construction of the word “wood-oil” to include sandal wood oil. Sri Krishna Murthy Iyer, the learned senior counsel for the respondents on the other hand, refuted the contention arguing that inclusive definition of forest produce must receive extended meaning. It must also be construed in the context in which it is used and the purpose the Act seeks to serve and the family to which sandal wool oil belongs being an essential oil would include wood oil. The expression woodoil being a technical and part of inclusive definition has to be construed in its technical sense and in an exhaustive manner. It cannot be restricted in a narrow circumference as was done by the learned Single Judge so as to defeat the object and purpose of the Act. Extraction of sandal wood oil even by

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mechanised process would nonetheless be a wood oil. He laid emphasis on the word “timber” defined in s. 2(k) which include ‘sandalwood’ being a forest produce the oil extracted therefrom would also be within the meaning of the word “wood-oil”. The restricted meaning canvassed by the counsel would defeat the purpose of the Act and the literal interpretation giving narrow meaning to the word “woodoil” should be excluded. Ex-facie the argument of Sri Ramaswami backed by material, though is alluring, deeper probe denied its acceptance. Undoubtedly, the Karnataka Forest Act, 1963 incorporated in its definition of forest produce Sandalwood oil after the word “wood oil” and the legislature in Andhra Pradesh and Tamil Nadu, like the Act, do not specifically incorporate sandalwood oil in the definition of forest produce. From this could it be concluded, if it be otherwise interpretable, that wood oil would not include Sandalwood oil as well. Undoubtedly Stedman’s Medical Dictionary (23rd Edition) defined at page 1576, wood oil as gurjan balsam and gurjan balsam defined at p. 156 to mean wood oil - oleo-resin from Dipterocarpus alatus (family Dipterocarpuceae), – a tree of India and other regions of Southern Asia. Similar meaning was given in Concise Chemical and Technical Dictionary edited by H. Bennett (Fourth Edition) at page 1217; Scientific Treatises on the subject by Ernest Guenther in volume 6; Edward Balfour in his Cryclopaedia of India and of Eastern and Southern Asia; R.N. Khori in his Materia Medica of India and their Therapeutics and Pharmacographia Indica by Willim Dymock defined wood oil in the same strain. All these technical literatures were concerned in finding out physio-chemical properties contained in wood oil and the source from which they are drawn for use in industrial purposes. The literal interpretation given therein if given acceptance would lead to manifest frustration of the purpose of the Act. In its interpretation we have to keep at the back of our mind the purpose which the Act and the Parent Act (Forest Conservation Act) seek to subserve. J.F. Dastru equally in his Medical Plants of India and Pakistan treads the same path and given construction to wood oil in the context of its exudation obtained from the trunk of the trees belonging to the family of Dipterocarpaceae as an oleoresin or gurjan balsam. There would be no quarrel on that behalf. It must be noted in this context that there are several types of essential oils in India, the important being Sandalwood oil, agar-wood oil, deodar oil and pine oil, apart from oleo-resin and wood oil derived from exudation from living trees in the forest area. These essential oils are obtained from any of forest wood. Sandalwood as observed by the High Court is forest produce. Even its roots thereof are also included as forest produce. They are also timber within the meaning of S. 2(k) of the Act. The purpose of the Act is to conserve forest wealth which is very dear for preservation to maintain ecology. Forest produce defined under section 2(f) is an inclusive definition. It is settled law that the word ‘include’ is generally used as a word of extension. When used in an interpretation clause, it seeks to enlarge the meaning of the words or phrases occurring in the body of the Statute. Craies on Statute Law, Seventh Edition at p. 64 stated the construction to be adopted to the meanings of the words and pharases that The cardinal rule for the construction of Acts of Parliament is that they should be construed according to the intention expressed in the Acts themselves. If the words of the statute are themselves precise and unambiguous, then no more can be necessary than to expound those words in their ordinary and natural sense. The words themselves alone do in such a case best declare the intention of the law giver.

At p. 214 it is stated that an interpretation clause which extends the meaning of a word does not take away its ordinary meaning. An interpretation clause of the inclusive definition is not meant to prevent the word receiving its ordinary, popular and natural sense whenever that word that would be properly applicable, but to enable the word as used in the Act, when there is nothing in the context or the subject matter to the contrary, to be applied to some things to which it would not ordinarily be applicable … An interpretation clause should be used for the purpose of interpreting word which are ambiguous or equivocal, and not so as to disturb the meaning of such as are plain.

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At p. 216 it is stated that another important rule with regard to the effect of an interpretation clause is, that an interpretation clause is not to be taken as substituting one set of words for another, or as strictly defining what the meaning of the term must be under all circumstances, but rather as declaring what may be comprehended within the term where the circumstances require that it should be so construed. This Court in Babu Manmohan Das Shah v. Bishun Das, [1967] 1 SCR 836 adopting the ordinary rule of construction stated that the provisions of a statute must be construed in accordance with the language used therein unless there are compelling reasons such as where the literal construction would reduce the Act to absurdity or prevent manifest legislative purpose from being carried out.

The question therein was the interpretation of the phrase “materially altered the accommodation or is likely substantially to diminish its value” in the construction to a shop. In that context this court laid that cardinal principle of statutory construction referred to hereinbefore would apply. In State of Madhya Pradesh v. M. V. Narasimhan, [1975] 2 SCC 377 the definition of ‘public servant’ in S. 21, I.P.C. was amended and cl. 12 thereof was brought on statute. The Prevention of Corruption Act, 1947 created its own provisions as specific offences of criminal misconduct which is different from the offence of bribery defined in the Indian Penal Code. When similar definition was not given under the P.C. Act, 1947 the contention was raised that the respondent cannot be prosecuted not being a public servant under the P.C. Act. This court while holding that definition of public servant was incorporated in P.C. Act by necessary implication of public servant defined in Cl. 12 of S.21 I.P.C. and held that P.C. Act is supplemental to I.P.C. and that, therefore, both would deal with the same offence. Accordingly, the respondent was held to be public servant coming within the definition of P.C. Act. This court adopted the doctrine of purposive interpretation to prevent corruption, a penal offence. In Municipal Corporation of Greater Bombay v. Indian Oil Corporation, AIR 1991 SC 686 this Court adopted purposive construction in the definition of the word ‘building’ for the purpose of levy of property tax under the Bombay Municipal Corporation Act to include oil storage tanks to be “building” and held that the language of a statutory provision is not static vehicle of ideas and concepts and as ideas and concepts change, as they are bound to do in any country like-ours with the establishment of a democratic structure based on egalitarian values, the meaning and content of the statutory provision undergo a change. The law does not operate in a vacuum. It cannot be interpreted without taking into account the social, economic and political setting in which it is intended to operate. The Judge has to inject flesh and blood in the dry skeleton provided by the legislature and invest it with a meaning which will harmonise the law with the prevailing concepts and values and make it an effective instrument for delivering justice. The word include in the definition u/s. 2(f) would show that it did not intended to exclude what was ordinarily and in common parlance be spoken of wood oil. The expression being technical and being part of an inclusive definition has to be construed in its technical sense but in an exhaustive manner, it cannot be restricted in such a manner so as to defeat the principle object and purpose of the Act. The process by which the oil is extracted is not decisive as oil may be extracted by natural process of exudation or it may be extracted by subjecting to chemical or mechanical process and Sandalwood (Santalum Album) are cut into pieces. Its heart wood and roots of Sandalwood trees removed from the forest are used as a raw material at a factory level that too by mechanised process to extract sandalwood oil. The purpose for which the oil is used is not decisive. Therefore, the word wood oil used in the Act will require purposive interpretation drawing the context in which the words are used and its meaning will have to be discovered having regard to the intention and object which legislature seeks to subserve. The restricted meaning sought to put up by the accused would frustrate the object and the literal interpretation would defeat the meaning. The Legislature does not intend to restrict the word wood oil nor we find any compelling circumstances in the Act to give

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restricted meaning that only oil derived from Dipterocarpus trees to be wood oil as contended for the accused and found acceptance to the learned single Judge. The purposive interpretation would aid conservation of sandal wood, a valuable forest wealth, prevent illicit failing and transportation of them and makes the manufacturers of sandalwood oil accountable to the possession of sandalwood trees or chips or roots etc. Incorporation of sandalwood oil ex abundente cautela in Karnataka Act and absence thereof in sister Acts operating in South India does not detract from giving its due meaning. The expert opinion is only an opinion evidence on either side and does not aid us in interpretation. This court in Aditya Mills v. Union of India, [1988] 4 SCC 315 did not adopt the dictionary meaning as it may be to some extent delusive guide to interpret entries in Central Excise and Salt Act. In Kishan Lal v. State of Rajasthan, AIR 1990 SC 2269 to which one of us, Sahai, J, was member, this court was to consider the word ‘Sugar’ whether under Rajasthan Agricultrual Produce Marketing Act, 1961 an agricultural produce. It was contended that the Khandsari Sugar was not an agricultural produce. Repelling that contention, this Court held that the word agricultural produce include all produce whether agricultural, horticultural, animal husbandry or otherwise as specified in the schedule. The legislative power to add or include and define a word even artificially, apart, the definition which is not exhaustive but inclusive neither exclude any item produced in mills or factories nor it confines its width to produce from soil. If that be the construction then all items of animal husbandry shall stand excluded. It further overlooks the expression “or otherwise as specified in the Schedule”. Accordingly it was held that Khandsari Sugar is an agricultural produce under that Act. In State of Bombay v.Hospital Mazdoor Sabha, [1960] 2 SCR 866 this court adopted purposive approach in interpreting the word ‘industry’ in s. 2(j) of the Industrial Disputes Act, and held that the Legislature in defining the word ‘industry’ in s.2 (j) of the Act deliberately used term of wide import in its first clause and referring to several other industries in the second in an inclusive way obviously denoting extension. The conventional meaning attributed to trade or business was eschewed even in the absence of profit motive. It was held that hospital was an industry. … Accordingly we hold that Sandalwood oil is wood oil within the meaning of s. 2 (f) (i) of the Act. Therefore, it is a forest produce. Necessary conclusion is that the Trial Court has jurisdiction to proceed with the trial. It is for the Trial Court to find whether the offence as imputed to the accused has been made out the trial. We need express no opinion at this stage. The appeals of the State are allowed and the appeal of the accused is dismissed. … CASE STUDY 2 – A. K. CHAUHAN V. V. K. MISHRA (2009) 2 SCC 532 Bench – Justices S. B. Sinha & Cyriac Joseph Justice Sinha (for the Court) … Interpretation of Ss. 33 and 35 of the Indian Stamp Act 1899 (for short “the Act”) calls for our consideration in this appeal which arises out of a judgment and order dated 27 February, 2007 passed by a learned Single Judge of the High Court of Chattisgarh at Bilaspur dismissing a petition filed by the appellant herein u/art. 227 of the Constitution of India against the orders dated 14 November, 2006 and 9 January, 2007 passed in Civil Suit No.1-B/2006 by the Additional District Judge, Gariaband, Raipur. The undisputed fact of the matter is that the respondent herein, who is said to be a member of the Scheduled Tribe intended to transfer a house and land admeasuring 10150 sq. ft. situated at Village Gariyaband, District Raipur. A sum of Rs. 2,70,000/- fixed by way of consideration towards the aforementioned transfer was paid to the respondent by the appellant. Possession of the said property had also been delivered. Indisputably for the purpose of effecting transfer of the said land, permission of the Collector was required to be obtained in terms of S. 165 (6) of the C.G. Land Revenue Code, 1959, which was applied for but rejected. Appellant herein filed a suit for recovery of Rs. 2,70,000/-. In support of his case, the agreement dated 4 August, 2003 which was sought to be registered as a sale-

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deed has been relied upon. The same was directed to be impounded by an order dated 9th January, 2007, stating: Under the S. 35(a) of the Stamp Act there is a provision that for any such instrument or bill of exchange or promissory note, subject to all just exceptions, will be admitted in evidence on payment of the duty with which the same is chargeable or, in the case of an instrument insufficiently stamped, of the amount required to make up such duty, together with a penalty of five rupees, or, when ten times the amount of the proper duty or deficient portion thereof exceeds five rupees, of a sum equal to ten times such duty or portion. In the matter the agreement of sell produced is valued Rs. 2,70,000/- which as per Art. 23 of Indian Stamp Act and as per Schedule 5, on the said amount stamp duty of 5.6% is leviable and the 7.5% of Rs. 2,70,000/- comes to Rs.20,250/-. In the agreement to sell Rs.60/- is mentioned as stamp which means reducing the Rs.20,250 - Rs.60 = Rs.20,190 is less stamp duty paid, 10 times penalty of which will be leviable as per S. 35 of the Stamp Act means Rs. 2,01,900/- stamp duty will be leviable. … The plaintiff has paid Rs. 20,850/- in the C.C.D. so the rest of the amount of Rs. 1,81,050 be deposited within the next date of hearing and the Opposite Party shall also file its counter reply by the next date of hearing.

As noticed hereinbefore the High Court by reason of the impugned judgment refused to interfere with the said order. Mr. A.K. Bajpai, learned counsel appearing on behalf of the appellant would submit that having regard to the fact that the said unregistered deed of sale was sought to be put in evidence not for the purpose of enforcement of the contract but only for the purpose of recovery of the amount of consideration, which indisputably has been paid to the respondent and such a purpose, it was urged, being a collateral one, the provisions of Ss. 33 and 35 of the Act shall not be attracted. Reliance in this behalf has been placed on the proviso appended to S. 49 of the Indian Registration Act as also on the decision of this Court in Bondar Singh v. Nihal Singh, (2003) 4 SCC 161. Mr. Suhail Dutt, learned counsel appearing on behalf of the respondent, on the other hand, would support the impugned judgment. The Act was enacted to consolidate and amend the law relating to Stamps. “Conveyance” has been defined in S. 2(10) to mean: 2. (10) “conveyance” includes a conveyance on sale and every instrument by which property, whether moveable or immoveable, is transferred inter vivos and which is not otherwise specifically provided for by Schedule I;

“Receipt” has been defined in s. 2(23) of the Act to mean: 2. (23) Receipt. ‘Receipt’ includes any note, memorandum or writing – (a) whereby any money, or any bill of exchange, cheque or promissory note is acknowledged to have been received, or (b) whereby any other moveable property is acknowledged to have been received in satisfaction of a debt, or (c) whereby any debt or demand, or any part of a debt or demand, is acknowledged to have been satisfied or discharged, or (d) which signifies or imports any such acknowledgement ; and whether the same is or is not signed with the name of any person.

“Stamp” has been defined in S. 2(26) to mean: 2. (26) ‘Stamp’ means any mark, seal or endorsement by any agency or person duly authorised by the State Government, and includes an adhesive or impressed stamp, for the purposes of duty chargeable under this Act.

Chapter II of the Act provides for stamp-duties. Section 3, which is the charging Section reads as under: 3. Instruments chargeable with duty. – Subject to the provisions of this Act and the exemptions contained in Schedule I, the following instruments shall be chargeable with duty of the amount indicated in that Schedule as the proper duty therefor, respectively, that is to say(a) every instrument mentioned in that Schedule which, not having been previously executed by any person, is executed in India on or after the first day of July, 1899;

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(b) every bill of exchange payable otherwise than on demand or promissory note drawn or made out of India on or after that day and accepted or paid, or resented for acceptance or payment, or endorsed, transferred or otherwise negotiated, in India; and (c) every instrument (other than a bill of exchange or promissory note) mentioned in that Schedule, which, not having been previously executed by any person, is executed out of India on or after that day, relates to any property situate, or to any matter or thing done or to be done, in 8 [India] and is received in India. Provided that no duty shall be chargeable in respect of(1) any instrument executed by, or on behalf of, or in favour of, the Government in cases where, but for this exemption, the Government would be liable to pay the duty chargeable in respect of such instrument; (2) any instrument for the sale, transfer or other disposition, either absolutely or byway of mortgage or otherwise, of any ship or vessel, or any part, interest, share or property of or in any ship or vessel registered under the Merchant Shipping Act 1894, or under Act 19 of 1838, or the Indian Registration of Ships Act, 1841, as amended by subsequent Acts. (3) any instrument executed ,by, or , on behalf of, or, in favour of, the Developer, or Unit or in connection with the carrying out of purposes of the Special Economic Zone. Explanation – For the purposes of this clause, the expressions ‘Developer’, ‘Special Economic Zone’ and ‘Unit’ shall have meanings respectively assigned to them in clause (g), (za) and (zc) of S. 2 of the Special Economic Zones Act, 2005.

… Chapter III of the Act provides for adjudication with regard to proper stamps; whereas Chapter IV deals with instruments not duly stamped. S. 33 casts a duty upon every person who has authority to receive evidence and every person in charge of a public office before whom the instrument is produced, if it appears to him that the same is not duly stamped, to impound the same. Sub-s. (2) of S. 33 of the Act lays down the procedure for undertaking the process of impounding. S. 35 provides that an instrument shall be inadmissible in evidence if the same is not duly stamped in the following terms: 35. Instruments not duly stamped inadmissible in evidence, etc. – No instrument chargeable with duty shall be admitted in evidence for any purpose by any person having by law or consent of parties authority to receive evidence, or shall be acted upon, registered or authenticated by any such person or by any public officer, unless such instrument is duly stamped: Provided that – (a) any such instrument shall be admitted in evidence on payment of the duty with which the same is chargeable, or, in the case of an instrument insufficiently stamped, of the amount required to make up such duty, together with a penalty of five rupees, or, when ten times the amount of the proper duty or deficient portion thereof exceeds five rupees, of a sum equal to ten times such duty or portion; (b) where any person from whom a stamped receipt could have been demanded, has given an unstamped receipt and such receipt, if stamped, would be admissible in evidence against him, then such receipt shall be admitted in evidence against him on payment of a penalty of one rupee by the person tendering it; (c) where a contract or agreement of any kind is effected by correspondence consisting of two or more letters and any one of the letters bears the proper stamp, the contract or agreement shall be deemed to be duly stamped; (d) nothing herein contained shall prevent the admission of any instrument in evidence in any proceeding in a Criminal Court, other than a proceeding under Chapter XII or Chapter XXXVI of the Code of Criminal Procedure 1898; (e) nothing herein contained shall prevent the admission of any instrument in any Court when such instrument has been executed by or on behalf of the Government or where it bears the certificate of the Collector as provided by s. 32 or any other provision of this Act.

S. 36 of the Act provides that: 36. Admission of instrument where not to be questioned. Where an instrument has been admitted in evidence, such admission shall not, except as provided in S. 21 thereof, be called in question at any stage of same suit or proceeding on the ground that the instrument has not been duly stamped.

S. 38 provides for the mode and manner in which the instrument impounded is to be dealt with. The Parliament has, in S. 35 of the Act, advisedly used the words “for any purpose whatsoever”. Thus, the purpose for which a document is sought to be admitted in evidence or the extent thereof would not be a relevant factor for not invoking the aforementioned provisions.

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The land in the instant case is situated in a Scheduled Area. Execution of a deed of conveyance in respect of the land situated in the scheduled area is statutorily barred. All transactions can be affected only upon obtaining the permission of the collector in terms of the provisions of S. 165 (6) of the C.G. Land Revenue Code, 1959. We are, however, not concerned with the said provisions. Indisputably an instrument was executed. By reason of such an instrument not only the entire amount of consideration was paid but possession of the property had also been transferred. Explanation appended to Art. 23 of Schedule IA of the Stamp Act as substituted by M.P. Act No. 19 of 1989 reads as under: Explanation. – For the purpose of this Article, where in the case of agreement to sell immovable property, the possession of any immovable property is transferred to the purchaser before execution after execution of such agreement without executing the conveyance in respect thereof, then such agreement to sell shall be deemed to be a conveyance and stamp duty thereon shall be leviable accordingly: Provided that the provisions of section 47A shall apply mutatis mutandis to such agreement which is deemed to be a conveyance as aforesaid, as they apply to a conveyance under that section: Provided further that where subsequently a conveyance is effected in pursuance of such agreement of sale, the stamp duty, if any, already paid and recovered on the agreement of sale, which is deemed to be a conveyance shall be adjusted towards the total duty leviable on the conveyance subject to a minimum of Rs.10.

The said explanation has been inserted by M.P. Act 19 of 1989 with effect from 15 November, 1989. By reason of the said provision, thus, a legal fiction has been created. Although ordinarily an agreement to sell would not be subject to payment of stamp duty which is payable on a sale deed, but having regard to the purpose and object it seeks to achieve the legislature thought it necessary to levy stamp duty on an instrument whereby possession has been transferred. The validity of the said provision is not in question. It is not in dispute that the possession of the property had been delivered in favour of the appellant. He has, thus, been exercising some right in or over the land in question. We are not concerned with the enforcement of the said agreement. Although the same was not registered, but registration of the document has nothing to do with the validity thereof as provided for under the provisions of the Indian Registration Act, 1908. We have noticed heretobefore that S. 33 of the Act casts a statutory obligation on all the authorities to impound a document. The court being an authority to receive a document in evidence is bound to give effect thereto. The unregistered deed of sale was an instrument which required payment of the stamp duty applicable to a deed of conveyance. Adequate stamp duty admittedly was not paid. The court, therefore, was empowered to pass an order in terms of S. 35 of the Act. The contention of learned counsel for the appellant that the document was admissible for collateral purpose, in our opinion, is not correct. In Bondar Singh this Court was not concerned with the provisions of the Act. Only interpretation of the provisions of the Registration Act, 1908 was in question. It was opined: The main question, as we have already noted, is the question of continuous possession of the plaintiffs over the suit lands. The sale deed dated 9-5-1931 by Fakir Chand, father of the defendants in favour of Tola Singh, the predecessor-in-interest of the plaintiffs, is an admitted document in the sense its execution is not in dispute. The only defence set up against the said document is that it is unstamped and unregistered and therefore it cannot convey title to the land in favour of the plaintiffs. Under the law a sale deed is required to be properly stamped and registered before it can convey title to the vendee. However, legal position is clear law that a document like the sale deed in the present case, even though not admissible in evidence, can be looked into for collateral purposes. In the present case the collateral purpose to be seen is the nature of possession of the plaintiffs over the suit land. The sale deed in question at least shows that initial possession of the plaintiffs over the suit land was not illegal or unauthorized.

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In this case, by reason of the statutory interdict, no transfer at all is permissible. Even transfer of possession is also not permissible. … The Registration Act, 1908 provides for such a contingency in terms of the proviso appended to S. 49 thereof, which reads as under: 49. Effect of non-registration of documents required to be registered. – No document required by s. 17 or by any provision of the Transfer of Property Act, 1882 (4 of 1882), to be registered shall – (a) affect any immovable property comprised therein, or (b) confer any power to adopt, or (c) be received as evidence of any transaction affecting such property or conferring such power, unless it has been registered: Provided that an unregistered document affecting immovable property and required by this Act or the Transfer of Property Act, 1882 (4 of 1882), to be registered may be received as evidence of a contract in a suit for specific performance under Chapter II of the Specific Relief Act, 1877 (3 of 1877) or as evidence of any collateral transaction not required to be effected by registered instrument.

S. 35 of the Act, however, rules out applicability of such provision as it is categorically provided therein that a document of this nature shall not be admitted for any purpose whatsoever. If all purposes for which the document is sought to be brought in evidence are excluded, we fail to see any reason as to how the document would be admissible for collateral purposes. The view we have taken finds support from the decision of the Privy Council in Ram Rattan v. Parmananad, AIR 1946 PC 51 1945 wherein it was held: That the words ‘for any purpose’ in S. 35 of the Stamp Act should be given their natural meaning and effect and would include a collateral purpose and that an unstamped partition deed cannot be used to corroborate the oral evidence for the purpose of determining even the factum of partition as distinct from its terms.

The said decision has been followed in a large number of decisions by the said Court. In Bhaskarabhotla Padmanabhaiah v. B. Lakshminarayana, AIR 1962 A.P. 132, it has been held: In this case, the learned Subordinate Judge has observed that what the plaintiff was trying to prove was not the division in status but to show that the property was divided under the partition deed. In any case, the fact that the document is inadmissible due to want of being stamped is clear. For, in Ram Rattan v. Parmanand, AIR 1946 PC 51, their Lordships of the Privy Council held that the words ‘for any purpose’ in S. 35 of the Stamp Act should be given their natural meaning and effect and would include a collateral purpose and that an unstamped partition deed cannot be used to corroborate the oral evidence for the purpose of determining even the factum of partition as distinct from its terms.

It was furthermore held: In the result, I agree with the learned Munsif-Magistrate that the document is ‘an instrument of partition’ under Sec. 2(15) of the Indian Stamp Act and it is not admissible in evidence because it is not stamped. But, I further hold that if the document becomes duly stamped, then it would be admissible to evidence to prove the division in status but not the terms of the partition.

In Sanjeeva Reddi v. Johanputra Reddi, AIR 1972 A.P. 373 it has been held: While considering the scope of S. 35 of the Indian Stamp Act we cannot bring in the effect of non-registration of a document under S. 49 of the Indian Registration Act. S. 17 of the Indian Registration Act deals with documents, the registration of which is compulsory and S. 49 is concerned only with the effect of such non-registration of the documents which require to be registered by S. 17 or by any provision of the Transfer of Property Act. The effect of non-registration is that such a document shall not affect any immovable property covered by it or confer any power to adopt and it cannot be received as evidence of any transaction affecting such property or conferring such power. But there is no prohibition under S. 49 to receive such a document which requires registration to be used for a collateral purpose i.e. for an entirely different and independent matter. There is a total and absolute bar as to the admission of an unstamped instrument whatever be the nature of the purpose or however foreign or independent the purpose may be for which it is sought to be used, unless there is compliance with the requirements of the provisos to S. 35. In other words if an unstamped instrument is admitted

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for a collateral purposes. It would amount to receiving such a document in evidence for a purpose which S. 35 prohibits. There is nothing in the case of B. Rangaiah v. B. Rangaswamy, (1970) 2 Andh WR 181 which supports the contention of the petitioner. That was a case as pointed out by Kuppuswami, J., where there were two instruments though contained in one document one a settlement in favour of the 4th defendant therein and the other a will. It was therefore held that part of the instrument which constitutes a will did not require any stamp and will be admissible in evidence for proving the bequest contained therein. It was for that reason that the learned Judge said that Sec. 35 of the Stamp Act has no application to a case where one of the separate instruments relating to one such matters would not at all be chargeable under the Act as in the case before him.

In T. Bhaskar Rao v. T. Gabriel, AIR 1981 A.P. 175, it has been held: S. 35 of the Stamp Act mandates that an instrument chargeable with duty should be stamped so as to make it admissible in evidence. Proviso A to S. 35 of the Stamp Act enables a document to be received in evidence on payment of stamp duty and penalty if the document is chargeable, but not stamped or on payment of deficit duty and penalty, if it is insufficiently stamped. The bar against the admissibility of an instrument which is chargeable with stamp duty and is not stamped is of course absolute whatever be the nature of the purpose, be it for main or collateral purpose, unless the requirements of proviso (A) to S. 35 are complied with. It follows that if the requirements of proviso (A) to S. 35 are satisfied, then the document which is chargeable with duty, but not stamped, can be received in evidence.

It was further held: It is now well settled that there is no prohibition under S. 49 of the Registration Act, to receive an unregistered document in evidence for collateral purpose. But the document so tendered should be duly stamped or should comply with the requirements of S. 35 of the Stamp Act, if not stamped, as a document cannot be received in evidence even for collateral purpose unless it is duly stamped or duty and penalty are paid under S. 35 of the Stamp Act.

… For the reasons aforementioned, there is no merit in this appeal which fails and is dismissed. However, in the facts and circumstances of the case, there shall be no order as to costs. …

MISCHIEF RULE Maxwell on the Interpretation of Statutes refers to a very old 1584 British case (Heydon’s Case) as the authority on the subject. There were four principles laid down in Heydon’s Case. These principles have been cited by the Supreme Court of India in several cases, a few of which will be examined as case-studies later. The four rules in Heydon’s Case, considered by Indian and British judges as an authoritative guide to interpreting statutes, as reproduced in Maxwell, are as follows – (1) What was the common law before the making of the Act? (2) What was the mischief and defect for which the common law did not provide? (3) What remedy the Parliament hath resolved and appointed to cure the disease of the commonwealth; and (4) The true reason of the remedy; and then the office of all the Judges is always to make such construction as shall suppress the mischief, and advance the remedy, and to suppress subtle inventions and evasions for continuance of the mischief, and pro privato commando, and to add force and life to the cure and remedy, according to the true intent of the makers of the Act, pro bono publico.” But the Mischief Rule, that finds mention as the second proposition above, was directly invoked by the British Courts in Smith v. Huges, [1960] 1 W.L.R. 83, where on the application of the Literal Rule, it may well fairly be argued, that the conviction of the prostitute could not be sustained. We’ll examine the Mischief Rule as applied in the said case in detail by reading the opinion of Lord Parker. The

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Mischief Rule, as a general rule, results in an examination of several Internal Aids to a Statute in order to understand the object (or the mischief to be remedied) for which the statute was enacted. Later we will examine the Constitution Bench (5 judges) opinion in Ashwini Kumar Ghose v. Arabinda Bose, AIR 1952 SC 369 (under the head ‘Title of a Statute’ in the Unit on ‘Internal Aids’) in order to see how the Mischief Rule is used in practice. To briefly sample the American view on this point we will read the Second Circuit opinion in Cabell v. Markham, 148 F.2d 737 (1945), written and delivered by Judge Learned Hand. But before reading Smith v. Huges, we may note the following passage from Maxwell – If the choice is between two interpretations, the narrower of which would fail to achieve the manifest purpose of the legislation, we should avoid a construction which would reduce the legislation to futility and should rather approach the bolder construction based on the view that Parliament would legislate only for the purpose of bringing about an effective result.

CASE STUDY 1 – SMITH V. HUGHES [1960] 1 W.L.R. 830 Bench (Queen's Bench Division) – Chief Justice Lord Parker, Justices Hilbery & Donovan Chief Justice Lord Parker (for himself) [Justices Hilbery & Donovan concurring, Justice Hilbery wrote a short concurring opinion] These are six appeals by way of case stated by one of the stipendiary magistrates sitting at Bow Street, before whom informations were preferred by police officers against the defendants, in each case that she “being a common prostitute, did solicit in a street for the purpose of prostitution, contrary to section 1 (1) of the Street Offences Act, 1959.” The magistrate in each case found that the defendant was a common prostitute, that she had solicited and that the solicitation was in a street, and in each case fined the defendant. The facts, to all intents and purposes, raise the same point in each case; there are minute differences. The defendants in each case were not themselves physically in the street but were in a house adjoining the street. In one case the defendant was on a balcony and she attracted the attention of men in the street by tapping and calling down to them. In other cases the defendants were in ground-floor windows, either closed or half open, and in another case in a first-floor window. The sole question here is whether in those circumstances each defendant was soliciting in a street or public place. The words of section 1(1) of the Act of 1959 are in this form: “It shall be an offence for a common prostitute to loiter or solicit in a street or public place for the purpose of prostitution.” Observe that it does not say there specifically that the person who is doing the soliciting must be in the street. Equally, it does not say that it is enough if the person who receives the solicitation or to whom it is addressed is in the street. For my part, I approach the matter by considering what is the mischief aimed at by this Act. Everybody knows that this was an Act intended to clean up the streets, to enable people to walk along the streets without being molested or solicited by common prostitutes. Viewed in that way, it can matter little whether the prostitute is soliciting while in the street or is standing in a doorway or on a balcony, or at a window, or whether the window is shut or open or half open; in each case her solicitation is projected to and addressed to somebody walking in the street. For my part, I am content to base my decision on that ground and that ground alone. I think the magistrate came to a correct conclusion in each case, and that these appeals should be dismissed.

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CASE STATED by Mr. Graham Rogers, metropolitan magistrate at Bow Street Police officers preferred two informations against Marie Theresa Smith and four informations against Christine Tolan alleging that on various dates, they, being common prostitutes, did solicit in a street for the purpose of prostitution contrary to section 1 (1) of the Street Offences Act, 1959. The magistrate found the following facts in relation to the first information against Smith. The defendant was a common prostitute who lived at No. 39 Curzon Street, London, W., and used the premises for the purposes of prostitution. On November 4, 1959, between 8.50 p.m. and 9.05 p.m. the defendant solicited men passing in the street, for the purposes of prostitution, from a first-floor balcony of No. 39 Curzon Street (the balcony being some 8–10 feet above street level). The defendant’s method of soliciting the men was (i) to attract their attention to her by tapping on the balcony railing with some metal object and by hissing at them as they passed in the street beneath her and (ii) having so attracted their attention, to talk with them and invite them to come inside the premises with such words as “Would you like to come up here a little while?” at the same time as she indicated the correct door of the premises. It was contended on behalf of the defendant, inter alia, that the balcony was not “in a street” within the meaning of section 1(1) of the Street Offences Act, 1959, and that accordingly no offence had been committed. It was contended on behalf of the prosecutor, inter alia, that the soliciting had taken place “in a street” within the meaning of section 1(1). The magistrate was of opinion that the soliciting had taken place “in a street” within the meaning of section 1(1), and, accordingly, convicted the defendant and fined her £5 and 5 guineas costs. … CASE STUDY 2 – CABELL V. MARKHAM 148 F.2d 737 (1945) (Circuit Court of Appeals, Second Circuit) Bench – Circuit Judges Learned Hand, Augustus N. Hand & Clark Judge Learned Hand (for the Court) This appeal depends upon the meaning of a part of the proviso to § 9(e) of the Trading with the Enemy Act, as amended on March 10, 1928, 50 U.S.C.A. Appendix, § 9(e), which we quote in the margin.† The plaintiff filed a complaint under § 9(a) of that act, alleging that he was a creditor of an Italian insurance company, whose assets in this country the predecessor in office of the defendant, Markham, had seized, as Alien Property Custodian; and that he has presented his claim in due form to the Custodian, who refused to recognize it. The defendants moved to dismiss the complaint because of its insufficiency in law, on the ground that the claim had not been in existence before October 6, 1917, and had not been filed before the date of the enactment of the Settlement of War Claims Act of 1928. The judge held that, since both these facts appeared in the complaint, the proviso of § 9(e) just quoted covered the situation; and for this reason he dismissed the complaint. When the Trading with the Enemy Act was first passed on October 6, 1917, it contained the substance of what is now subdivision (a), but nothing more. It was amended again and again, but subdivision (e) was not added until 1920 (41 St.L. 980), though from the first it provided that no debt should be paid which had not been ‘owing’ before October 6, 1917. The addition that the claim should be presented before March 10, 1928, dates from the amendment of that year (45 St.L. 271). The statute was not re†

‘nor in any event shall a debt be allowed under this section unless it was owing to and owned by the claimant prior to October 6, 1917, and as to claimants other than citizens of the United States unless it arose with reference to the money or other property held by the Alien Property Custodian or Treasurer of the United States hereunder; nor shall a debt be allowed under this section unless notice of the claim has been filed, or application therefor has been made, prior to the date of the enactment of the Settlement of War Claims Act of 1928.’

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enacted when the present war broke out; nor was that necessary, for it automatically went into effect again. This appears, for example, from the definition of the phrase, ‘beginning of the war,’ in § 2, 50 U.S.C.A. Appendix, § 2 (‘the day on which Congress has declared or shall declare war’); from § 302 of Title III of Chapter 593 of Laws of the First Session of the 77th Congress, 55 St.L. p. 839, 50 U.S.C.A. Appendix, § 617, which assumes that it had not been in force before December 8, 1941, and that it went into effect against at once thereafter; and because § 5(b) was amended without mention of any other part. 55 St.L. 839, 840, 50 U.S.C.A. Appendix, § 616. For this reason it seems proper for purposes of interpretation to interpret it as though it had been enacted on December 8, 1941, when the present war was declared. Were that literally the case, we should be faced with a statute, subdivisions (a) and (e) of which flatly contradicted each other. Subdivision (a) provides that any person … to whom any debt may be owing … may file … a notice of his claim … and the President … may order the payment … of the money … held.

If the President does not order payment, the said claimant may institute a suit in equity … to establish the … debt so claimed, and if so established the court shall order the payment … to which the … claimant is entitled.

This language is mingled with that giving a remedy for property mistakenly seized, and it is unnecessary to labor the point that it was intended to put creditors upon an equal footing with owners. Indeed, although we assume it to be true that for constitutional purposes it was not necessary to allow the alien's creditors any recourse to the seized property, since the alien himself remains liable; for practical purposes there is little difference between debts and claims to property. It is at least arguable that the whole of subdivision (a) is limited to seizures made during the first war. It begins with a provision that ‘a citizen or subject of any nation which was associated with the United States in the prosecution of the war’ may recover his property or collect his debt only in case that nation gave reciprocal rights to citizens of the United States. The use of the preterite is significant, particularly when coupled with the word, ‘associate,’ which it will be remembered was chosen during the last war in sedulous avoidance of any implication that we had ‘allies.’ If this be true, it would be indeed unreasonable not to confine the proviso similarly: that is, to read it otherwise than as limited to seizures made during that war. If we do not so read it, the result is really nonsense, for the remedy given in subdivision (a), which is prospective, is completely defeated by subdivision (e). Nobody can seriously believe that a general plan designed to be successively suspended and revived, as peace and war should alternate, was meant to be permanently mutilated by a statute of limitation expressly made applicable to only the first of its phases. The defendants have no answer except to say that we are not free to depart from the literal meaning of the words, however transparent may be the resulting stultification of the scheme or plan as a whole. Courts have not stood helpless in such situations; the decisions are legion in which they have refused to be bound by the letter, when it frustrates the patent purpose of the whole statute. … As Holmes, J., said in a much-quoted passage from Johnson v. United States, 163 F. 30, 32, 18 L.R.A.,N.S. 1194: … it is not an adequate discharge of duty for courts to say: We see what you are driving at, but you have not said it, and therefore we shall go on as before.

Of course it is true that the words used, even in their literal sense, are the primary, and ordinarily the most reliable, source of interpreting the meaning of any writing: be it a statute, a contract, or anything else. But it is one of the surest indexes of a mature and developed jurisprudence not to make a fortress out of the dictionary; but to remember that statutes always have some purpose or object to accomplish,

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whose sympathetic and imaginative discovery is the surest guide to their meaning. Since it is utterly apparent that the words of this proviso were intended to be limited to seizures made during the last war, and could not conceivably have been intended to apply to seizures made when another war revived the Act as a whole from its suspension, it does no undue violence to the language to assume that it was implicitly subject to that condition which alone made the Act as a whole practicable of administration. Judgment reversed.

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UNIT 3 – EXTERNAL AIDS TO INTERPRETATION DOCTRINE OF CONTEMPORANEOUS EXPOSITION The doctrine of contemporaneous exposition, famously referred to in judicial opinions as Contempranea Expositio, is a very important doctrine in interpretation of statutes. The rule may simply be stated, in words of Singh (Principles of Statutory Interpretation (13 ed.)): Usage or practice developed under a statute is indicative of the meaning ascribed to its words by contemporary opinion and in case of an ancient statute is an admissible external aid to its construction.

In Maxwell on the Interpretation of Statutes (12 ed.) the rule is stated thus: It is said that the best exposition of a statute or any other document is that which it has received from contemporary authority. … But further, the meaning publicly given by contemporary or long professional usage is presumed to be the true one, even where the language has etymologically or popularly a different meaning. But contemporanea expositio will not always be decisive of a question of construction. Where the previous decisions are plainly wrong, and especially where the subsequent course of judicial decisions has disclosed weakness in the reasoning on which they were based, and practice injustice in the consequences that must flow from them, the will be overruled.

The importance of Contemporanea Expositio may be understood by examining the observations of Lord in a House of Lords opinion delivered in Machnaghten in Comm’r for Special Purposes of Income Tax v. Pemsel, (1891) A.C. 531 (HL): When you find legislation following a continuous practice repeating the very words on which that practice was founded, it may perhaps fairly be inferred that the Legislature in re-enacting the statute intended those words to be understood in their received meaning. And perhaps it might be argued that the inference grows stronger with each successive re-enactment.

The rule is simple, yet of profound importance. If certain phrases are interpreted and therefore have come to be understood in a certain way, then those phrases should be continued to be understood in they have come to be understood, unless the statute has expressly provided for an alternate meaning of those phrases. This exposition of the rule, however, must be understood with the following caution given by Singh: Even a longstanding practice sanctioned by judicial decisions as also recognized in text books and in legislation may be overruled if there was no legal basis and in legislation may be overruled if there was no legal basis for it and if in the changed circumstances its continuance led to great hardship.

Lastly we notice the observations of a Constitution Bench (5 judges) of the Supreme Court in the famous Lohia Machines v. Union of India, (1985) 2 SCC 197. In this case the question of law before the Court was the interpretation of the phrase ‘capital employed’ under section 80J of the Income Tax Act, 1961. Rule 19A of the Income Tax Rules, 1962 required exclusion of borrowed money (including longterm borrowing) in order to calculate ‘capital employed’. Upholding the validity of Rule 19A, the Supreme Court observed on Contempranea Expositio as follows:

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Although acquiescence even for a long period does not make a void rule valid, but when rules are made by the Government under earlier enactments on the basis of a particular construction of the enabling enactments on the basis of a particular construction of the enabling section which is followed by omission of all concerned to dispute that construction for a long time by challenging the validity of the rules and the enabling section is reenacted without any material change, an inference arises that the construction on which the rules proceeded correctly represents the intention of Parliament and has its approval.

To understand how Contemporanea Expositio is applied in practice, we will examine the following two opinions of the Supreme Court of India. In Desh Bandu Gupta v. Delhi Stock Exchange, (1979) 4 SCC 565, certain documents issued by the Government simultaneously with a notification under section 16(1) of the Securities Contracts (Regulation) Act, 1956 were used to interpret the notification. In Raymond Synthetics v. Union of India, (1992) 2 SCC 255, the contemporaneous construction placed on certain ambiguous provisions of the Companies Act, 1956 by the administrative officers entrusted with enforcement of the statute was examined to interpret those provisions. CASE STUDY 1 – DESH BANDHU GUPTA V. DELHI STOCK EXCHANGE (1979) 4 SCC 565 Bench – Justices R. S. Sarkaria, V. D. Tulzapurkar and A. P. Sen Justice Tulzapurkar (for the Court) … The Delhi Stock Exchange Association Ltd., New Delhi (the Respondent herein) is a company incorporated under the Indian Companies Act, 1913. It has received recognition from the Central Government under s. 4 of the Securities Contracts Regulation Act (XLII) of 1956 for the purpose of the said Act. One Desh Bandhu Gupta (Appellant No. 2) carried on business as a share-broker in the firm name and style of Desh Bandhu Gupta & Co. (Appellant No. 1) and as such was a member of the Respondent. By a notification No. S.O. 2561 dated June 27,1969 issued under s. 16(1) of the Securities Contracts (Regulation) Act, 1956 the Central Government banned with immediate effect all forward trading in shares at all the Stock Exchanges in the country by declaring that: No person, in the territory to which the said Act extends, shall, save with the permission of the Central Government, enter into any contract for the sale or purchase of securities other than such spot delivery contract or contract for cash or hand delivery or special delivery in any securities as is permissible under the said Act and the rules, bye-laws and regulations of recongnised Stock Exchange.

But as regards the forward contracts which remained out standing as on that date it was directed under the proviso that these could be closed or liquidated in the normal manner. On June 28, 1969 at an emergent meeting held at 10.30 a.m. the Board of Directors of the Respondent considered the abnormal situation arising from the ban imposed under the notification and decided to issue notice to all its members directing them to submit their lists of outstanding transactions in all the securities on the cleared list and to deposit along with it interim margins in cash or approved shares calculated on the basis of differences between the rates of the last clearing and certain average specified rates fixed by it. Upon receipt of such notice dated June 28, 1969 from the Respondent the appellant No. 2 addressed a letter of even date to the Board of Directors contending that the demand for interim margins was by way of “carry over” of the forward transactions which in view of the ban contained in the notification was illegal and instead of submitting a list of his outstanding transactions on the basis of the rates which had been fixed by the Respondent he enclosed a statement of his outstanding transactions adjusted at the last official closing rates which were higher than the rates fixed by the Respondent, thus suggesting that he was not liable to pay anything but was entitled to receive some amount at the foot of closing out or liquidating his outstanding transactions.

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By a rejoinder of the same date the Board of Directors of the Respondent reiterated that its action in fixing the interim clearing rates in the concerned securities and demanding interim margins was in order and that the adjustment of outstanding business claimed by appellant No. 2 was utterly wrong and as such appellant No. 2 was called upon to comply with its notice by submitting an amended list in accordance with the directions together with the differences, if any, immediately. By a telegram dated June 30, 1969, which was confirmed by a letter of even date the appellant No. 2 was again called upon to submit his list along with the amount of differences, if any, by July 1, 1969 failing which he was informed that necessary action would be taken against him. As the appellant No. 2 stuck to his stand, the Respondent by its letter dated July 1, 1969 once again stressed that the action of the Board in calling for the list and margin money was in order and in accordance with the rules, byelaws, regulations, practices usages and previous resolutions of the Board and gave further opportunity to him to comply with the directions by July 2, 1969 upto 11.00 a.m. failing which further action was threatened. At the meeting of the Board of Directors of the Respondent held on July 2, 1969 at 4.00 P.M. the Board noticed that all members, except appellant No. 2, had complied with its directions and on a consideration of the entire matter came to the conclusion that appellant No. 2 was intentionally evading to comply with its direction and to pay the required amount of margins and, therefore, resolved that appellant No. 2 trading in the name and style of Desh Bandhu Gupta & Co. be declared a defaulter for such failure and a notice in that behalf be pasted on the Notice Board and appellant No. 2 was informed about it by a telegram and a letter. The resolution passed on July 2, 1969 declaring appellant No. 2 as a defaulter exposed him under the bye-laws to a rigorous inquiry by the Respondent into his financial condition and entailed other disabilities including termination of his membership of the Respondent under Bye-law 308 read with Art. 43(iv) of the Articles of Association. Appellant No. 2 thereupon filed a writ petition (Civil Writ No. 520 of 1969) in Delhi High Court challenging the directions of the Respondent demanding payment of interim margins as also its resolution declaring him to be a defaulter. It appears that after the filing of the petition the Board of Directors of the Respondent at its meeting held on July 3, 1969 passed another resolution calling upon the appellant No. 2 u/art. 29 of the Articles of Association to deposit additional security of Rs. 20,000/failing which further action was threatened. The writ petition was amended and a prayer seeking to quash the second resolution was added. The main contention of the appellant No. 2 was that all his transactions which remained outstanding as on June 27, 1969 were forward contracts pertaining to cleared securities and as such were affected by the Notification which banned all forward contracts, that these had to be adjusted at the last official closing rates, that the action of the Respondent in calling upon him to deposit interim margins calculated on the basis of certain average specified rates fixed by it was not warranted by the proviso therein but in fact amounted to carry over of those transactions which had been prohibited and, therefore, illegal and that both the resolutions, one dated July 2, 1969 whereby he was declared to be a defaulter and the other dated July 3, 1969 whereby he was called upon to deposit Rs. 20,000/- as additional security were contrary to law and unjust and, therefore, the said action as well as the resolutions were liable to be quashed. The appellant No. 2 further contended that by passing the two resolutions, particularly the first one dated July 2, 1969 in contravention or breach of statutory Bye-laws and Regulations his fundamental right to carry on business u/art. 19(1)(f) of the Constitution had been infringed and, therefore, issuance of appropriate writ quashing the directions issued on June 28, 1969 and the two resolutions dated July 2 and 3, 1969 was sought. By its reply filed on July 15, 1969 the Respondent raised a preliminary objection to the maintainability of the petition. It was contended that the relationship between appellant No. 2 and the Respondent was contractual resulting from the Memorandum & Articles of Association and the Rules, Bye-laws and Regulations made under the powers given by the Articles of Association, and since the grievance made in the writ petition related to contractual rights and obligations between the parties and no question of enforcement of any statutory right or obligation arose the remedy under writ jurisdiction was not available. On merits it was contended that the construction sought to be placed by the appellants on the

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proviso contained in the Central Government Notification, which dealt with closing out or liquid dating the transactions outstanding as on June 27, 1969 was not correct, that under the said proviso such transactions were permitted to be closed or liquidated in accordance with the rules, bye-laws and regulations of the Respondent and, therefore, the directions issued by its Board of Directors on June 28, 1969 to all its members including appellant No. 2 to submit their lists of outstanding transactions and to pay interim margins on the basis of the average specified rates fixed by it were proper and lawful and both the resolutions were legal and justified. The respondent, therefore, prayed for dismissal of the writ petition. … In the view which we are taking on the merits of the case after giving our anxious consideration to the rival submissions thereon, we feel that it would be unnecessary to go into and decide the preliminary objection raised by the respondent to the maintainability of the writ petition. We, therefore, propose to dispose of the appeal on merits. On merits the question that arises for our determination is what on proper construction is the scope and ambit of the proviso contained in the notification? Whether, after the imposition of the ban on all forward trading in shares with effect from the close of June 27, 1969, the outstanding contracts that had remained to be performed as on that date were permitted to be closed or liquidated under the proviso in accordance with the rules, bye-laws and regulations of the Respondent or not ? On the one hand counsel for the appellants contended that by reason of the ban imposed on all forward trading in shares with effect from the close of June 27, 1969 the action of the respondent in making the demand for interim margins calculated on the basis of the difference between the rates of the last clearing and certain average rates fixed by it in respect of their forward outstanding transactions, which amounted to “carry over” of those transactions, was illegal; in other words the proviso did not permit the closing out or liquidation of the existing outstanding transactions by way of “carry over”. On the other hand, counsel for the respondent contended that notwithstanding the ban imposed, which prohibited all future forward trading in shares, the existing forward transactions that remained outstanding on that date were permitted to be closed or liquidated in the normal manner under its rules, bye-laws and regulations and, therefore, the directions issued by the respondent on June 28, 1969 were in accordance with the notification. It was pointed out that at the close of June 27, 1969, the appellant No. 2 had certain outstanding contracts in Cleared Securities for the then current clearing of July 8, 1969 which had to be completed and performed for the said clearing in the manner laid down in Regulation 8 and Bye-law 52(e) which meant that he could either make cross contracts to close his outstanding purchases or sales for that clearing or to make carry over contracts so as to close the contracts of the current clearing and to make contracts for the ensuing clearing and such contracts could be made upto the last business day prescribed for that clearing by the Respondent; and so much was permitted by the proviso contained in the notification. Moreover, in view of the crisis created by the Notification the Board of Directors of the Respondent issued the directions on June 28, 1969 having regard to Bye-law 73, which were in order and the further action taken by the respondent against the appellant No. 2 consequent upon his failure to comply with the directions was proper and justified under Bye-law 308 read with Art. 43(iv) of the Articles of Association of the respondent. Since the question depends upon proper construction of the notification dated June 27, 1969, it will be desirable to set out the said notification in extenso which ran thus: New Delhi, June 27, 1969. NOTIFICATION S.O. 2561. In exercise of the powers conferred by subs. (1) of s. 16 of the Securities Contracts (Regulation) Act 1956 (42 of 1956) the Central Government, being of opinion that it is necessary to prevent undesirable speculation in securities in the whole of India, hereby declares that no person, in the territory to which the said Act extends, shall, save with the permission of the Central Government, enter into any contract for the sale or purchase of

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securities other than such spot delivery contract or contracts for cash or hand delivery or special delivery in any securities as is permissible under the said Act, and the rules, bye-laws and regulations of a recognised stock exchange: Provided that a contract other than a spot delivery contract or contracts for cash or hand delivery or special delivery in any securities on the Cleared Securities List of a recognised stock exchange may be entered into between its members or through or with any such member for the purpose of closing out or liquidating all existing contracts entered into upto the date of this notification and remaining to be performed after the said date, but such contracts shall be subject to the rules, bye-laws and regulations of the recognised stock exchange that come into force when further new dealings are prohibited in any securities on the Cleared Securities List and subject also to such terms and conditions, if any, as the Central Government may from time to time impose.

Counsel for the appellants did not dispute that the proviso in the aforesaid notification dealt with the topic of closing out or liquidating all existing forward contracts entered into up to the date of the notification and which remained to be performed or outstanding as on that date but contended that it did not permit the closing or liquidating all such outstanding transactions in the normal manner under the rules, bye-law or regulations of the respondent, but such outstanding transactions were declared to be subject to the rules, bye-laws and regulations of the recognised Stock Exchange that come into force when further new dealings are prohibited in any securities on the Cleared Securities List and subject also to such terms and conditions, if any as the Central Government may from time to time impose.

In other words, according to counsel, the words “but such contracts” occurring in the last part of the notification referred to the outstanding contracts that remained to be performed at the close of June 27, 1969 and it is this last portion of the notification which indicated the manner in which such outstanding transactions were required to be closed or liquidated. The Respondent’s counsel disputed this and urged that the last portion had nothing to do with such outstanding transactions, the closing or liquidating of which was fully dealt with by the proviso. It cannot be disputed that the drafting of the notification in question has been far from happy but even so on a fair reading of the notification it is difficult to accept the construction sought to be placed thereon by counsel for the appellants. In our view, the notification was in three parts. By the first part the Central Government put a ban on all forward trading in shares through the Stock Exchanges in the country by declaring that: No person … shall, save with the permission of the Central Government, enter into any contract for the sale or purchase of securities other than such spot delivery contract or contract for cash or hand delivery or special delivery in any securities as is permissible under the said Act, and the rules, bye-laws and regulations of a recognised stock exchange.

The second part consisted of the proviso and it dealt fully with how all existing contracts remaining outstanding as on the date of the notification should be closed or liquidated, and the direction contained therein in that behalf was to the effect that: A contract other than a spot delivery contract or contract for cash or hand delivery or special delivery (meaning thereby a forward contract) may be entered into between its members or through or with any such member for the purpose of closing out or liquidating all existing contracts remaining to be performed after that date.

In other words, for the purpose of closing or liquidating existing outstanding transactions a forward contract (which would include a carryover) was permitted to be entered into. Then follows the third or the last part of the notification which commences with the words “but such contracts shall be subject to

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…”. The expression “such contracts” occurring in this last part of the notification meant those as were referred to in the first part of the notification the making of which was banned after June 27, 1969 and the last portion provided that such forward contracts that had been banned “shall be subject to the rules, bye-laws or regulations of the recognised Stock Exchange that come into force (i.e. become applicable) when further new dealings are prohibited and subject also to such terms and conditions as the Central Government may from time to time impose.” In our view the expression “such contracts” occurring in the last part of the notification were not referable to the existing outstanding contracts nor to ‘a contract’ that could be entered into for closing or liquidating the existing outstanding contracts. In other words, the third part of the notification on which reliance has been placed by the counsel for the appellants, in our view, has nothing to do with the existing outstanding contracts, the closing or liquidating of which was independently provided for by the proviso. It will thus appear clear that on a proper construction of the notification in question the proviso clearly permitted the closing or liquidating of the existing outstanding transactions in the normal manner by entering into a forward contract (which would include a “carry over”) in accordance with the rules, bye-laws and regulations of the Respondent. There was no warrant for the stand taken by the appellant No. 2 that all outstanding transactions had to be or could be adjusted on the basis of “previous official closing”. On the construction of the proviso counsel for the Respondent rightly invited our attention to two documents on record which had come into existence almost simultaneously with the issuance of the notification explaining the manner in which outstanding transactions were intended to be closed or liquidated. In a Press Statement or Press Note issued by the Finance Ministry immediately upon the issuance of the notification it was stated thus: The existing contracts entered into upto the date of the notification and remaining to be performed are, however, permitted by the same notification to be liquidated in accordance with the rules, bye-laws and regulations of the Stock Exchange concerned.

Further it appears that in response to a query made by the President of the respondent, Shri Maitra, Joint Director (S.E.) Ministry of Finance, Department of Economic Affairs, addressed a communication dated June 28, 1969 to the President in which he stated thus: As stated in the notification itself, all outstanding contracts which were not liquidated till the date of notification, will have to be liquidated in accordance with the relevant rules, bye-laws and regulations of your exchange in that regard. No fresh forward transactions in any cleared security, however, is permissible. A statement of outstanding position in each of the cleared securities on your Exchange, as on the date of the notification may please be forwarded to us as early as possible and thereafter at each settlement so as to enable Government to know the reduction in the outstanding business effected from time to time. As will be seen, no specific period has been mentioned in the notification for liquidation of the out standings. It is, however, hoped that you will issue suitable instruction to your members to ensure that the out standings are cleared in a smooth and orderly manner within a reasonable period. (Emphasis supplied)

It may be stated that in one of his earlier communications appellant No. 2 himself had requested the respondent to seek clarification from the Government on the points raised by him in regard to the outstanding transactions. The letter dated June 28, 1969 addressed by the Joint Director to the President of the Respondent clearly brings out two aspects: first, that as per the notification itself all outstanding contracts were permitted to be liquidated in accordance with the relevant rules, bye-laws and regulations of the respondent and secondly, no specific period was mentioned in the notification for liquidation of

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the outstanding business but the members operating on a recognised Stock Exchange were expected to clear the out standings in a smooth and orderly manner within a reasonable period and, in fact, the Government desired the respondent to forward to it a statement at each settlement indicating the reduction in outstanding business effected from time to time. The exposition in these two documents, therefore, conforms to our interpretation of the proviso. It may be stated that it was not disputed before us that these two documents which came into existence almost simultaneously with the issuance of the notification could be looked at for finding out the true intention of the Government in issuing the notification in question, particularly in regard to the manner in which outstanding transactions were to be closed or liquidated. The principle of contemporanea expositio (interpreting a statute or any other document by reference to the exposition it has received from contemporary authority) can be invoked though the same will not always be decisive of the question of construction. (Maxwell 12th Edn. p. 268). In Crawford on Statutory Construction (1940 Edn.) in para 219 (at pp. 393395) it has been stated that administrative construction (i.e. contemporaneous construction placed by administrative or executive officers charged with executing a statute) generally should be clearly wrong before it is overturned; such a construction, commonly referred to as practical construction, although not controlling, is nevertheless entitled to considerable weight; it is highly persuasive. In Baleshwar Bagarti v. Bhagirathi Dass, ILR 35 Cal. 701 1913 the principle, which was reiterated in Mathura Mohan Saha v. Ram Kumar Saha, ILR 43 Cal. 790, has been stated by Mukerjee J. thus: It is a well-settled principle of construction that courts in construing a statute will give much weight to the interpretation put upon it, at the time of its enactment and since, by those whose duty it has been to construe, execute and apply it. I do not suggest for a moment that such interpretation has by any means a controlling effect upon the Courts; such interpretation may, if occasion arises, have to be disregarded for cogent and persuasive reasons, and in a clear case of error, a Court would without hesitation refuse to follow such construction.

Of course, even without the aid of these two documents which contain a contemporaneous exposition of the Government's intention, we have come to the conclusion that on a plain construction of the Notification the proviso permitted the closing out or liquidation of all outstanding transactions by entering into a forward contract in accordance with the rules, bye-laws and regulations of the respondent. Having regard to the above construction which appears to us to be the true and proper construction of the notification in question it will be clear that the directions issued by the respondent to all its members including appellant No. 2 on June 28, 1969 in regard to their outstanding transactions as at the close of June 27, 1969 were proper and legal and the appellants' stand was clearly erroneous. It cannot be disputed that ample opportunity was given to appellant No. 2 to comply with the directions but the appellant persisted in his erroneous contention, and failed to comply with those directions with the result that the respondent had no alternative but to declare him a defaulter. In our view, the directions dated June 28, 1969 as well as the two resolutions passed by the respondent on July 2 and July 3, 1969 were proper and justified and the appellants' case on merits was rightly rejected by the High Court. This conclusion of ours, as stated at the commencement of the judgment, renders unnecessary the determination of the preliminary objection. In the result the appeal fails and is dismissed with costs. …

CASE STUDY 2 – RAYMOND SYNTHETICS V. UNION OF INDIA (1992) 2 SCC 255 Bench – Justices Dr. T. K. Thommen and S. Mohan Justice Thommen (for the Court) [Justice Mohan concurring]

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The question which arises in this appeal from the judgment of the Bombay High Court in writ petition No. 2038 of 1991 is, when does a company become liable to pay interest u/s. 73 (2A) of the Companies Act, 1956 (the “Act”). The answer to it depends on the answer to the more fundamental and far more difficult question, i.e. when does a company become liable to repay the money received from applicants for shares or debentures in excess of the aggregate of the application money relating to the allotted shares or debentures. If such excess application money is not repaid within eight days from the days on which the company and every director ‘who is an officer in default’ is liable to pay interest at the specified rates. The period of eight days has to be reckoned in accordance with s. 74. But it is not clear when exactly does the liability to repay the excess money arise. Does it arise on the date of the allotment, as found by the High Court, or on the expiry of 10 weeks from the date of closing of the subscription lists, referred to in sub-section (1A) of section 73, or, as contended by the company, on the expiry of the period mentioned in the prospectus? Whichever is the correct date, interest becomes payable by the company and its directors ‘in default’, if the excess money is not repaid within the period of grace of eight days from the date on which the company becomes liable to pay it. When does that liability arise is the crucial question. We shall presently examine the relevant provisions of the section, but before we do so, it may be of interest to refer briefly to the circumstances in which the alleged liability of the appellant company has arisen. The appellant is a company registered under the provisions of the Companies Act, 1956. The company obtained the consent of the Government of India vide its Order dated May 31, 1990 to issue 7,20,00,000 equity shares of Rs. 10 each at par and 33, 90,000 fourteen per cent secured redeemable non-convertible debentures of Rs. 100 each at par. This Order was, made by the Government in exercise of its power under the Capital Issues (Control) Act, 1947. One of the conditions attached to the order reads: The company shall scrupulously adhere to the time limit of 10 weeks from the date of closure of the subscription list for allotment of all securities and despatch of allotment letters/certificates and refund orders.

A prospectus was issued by the company on 12 July, 1990 for the issue of the aforesaid shares and debentures. The prospectus stated, amongst other things, that the company had sought the permission of the stock exchanges at Indore, Ahmedabad, Bombay, Calcutta and Delhi for dealing in equity shares and debentures in terms of the prospectus; that interest at the rate of 15 % per annum on the excess application money will be paid to the applicants as per the guidelines issued by the Ministry of Finance on July 21, 1983 and September 27, 1985; that the public issue will open on August 20, 1990 and close on August 23, 1990; and that it would not be extended beyond August 31, 1990. When the issue thus opened on August 20, 1990, it received overwhelming response as a result of which it was about 40 times over-subscribed. The company received 26,32,894 applications for equity shares together with an aggregate sum of Rs. 225,25,51,247 in respect of a public issue of Rs. 25 crores. In view of this public response, the share issue was close on 23 August, 1990. On October 15, 1990 the board of directors of the company approved the allotment of shares. Shortly thereafter, it secured the requisite permissions of the stock exchanges at Indore, Ahmedabad, Bombay, Calcutta and Delhi to deal in the shares offered in the prospectus. These permissions were obtained prior to November 1, 1990. The company had to despatch 25,50,604 refund orders of an aggregate value of well over Rs. 200 crores. These orders which were printed in Bombay were meant to be despatched from Delhi. The company despatched 8,55,226 refund orders from the Sarojini Nagar Post Office, New Delhi at the rate of approx. 1,00,000 refund orders per day. On 26 October, 1990 a consignment of 6,69,999 refund orders had been despatched from Bombay to Delhi in a brake van of the Paschim Express. A fire broke out on the way in the brake van as a result of which many refund orders were destroyed. Almost 50 % of the consignment was missing after the accident. In consultation with the Madhya Pradesh Stock Exchange and the Company’s Bank, instructions were issued by the Company to stop payment of all refund orders with a view to avoiding any possible fraud or misuse. As a result of the countermanding of all the multi-colored refund orders and the printing of new refund orders with distinctive colours etc., delay occurred in the despatch of newly printed orders. At the request of the company, the Madhya Pradesh Stock Exchange granted it extension of time till November 30, 1990 for issuing the refund orders. Time for this purpose was

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further extended by that stock exchange till 19 December, 1990. The Bombay Stock Exchange, however, refused to grant extension of time. It further informed the company that it was bound to pay interest by reason of the delay in the despatch of refund orders. The Securities and Exchange Board of India, the second respondent, called upon the company by its letter dated March 13, 1991 to pay interest to the investors at varying rates for the period from 1 November (which is when the period of 10 weeks from the date of the closure of the subscription lists expired) till the date of posting of the refund orders. The refund orders were not despatched until 12 November, 1990. The Government of India and the Securities and Exchange Board of India insisted that the company should pay interest to the investors for the period of the delay in making the refund in accordance with the provisions of s. 73. Apprehending that the Government might direct the stock exchanges to delist the shares of the company by reason of its failure to pay interest, and also initiate actions against it, the company filed a petition in the High Court u/art. 226 of the Constitution, but it was dismissed by the impugned judgment. The Bombay Stock Exchange seems to have understood that the liability of the company arose on the expiry of 10 weeks after the date of closure of the subscription lists. Paragraph 23.2 of its publication of March 1991 quotes the condition mentioned in the Order of the Government of India dated 31.5.1990 (which we have extracted above) to the effect that the liability of the company for despatch for refund orders arose only at the end of 10 weeks from the date of closure of the subscription lists. In the High Court, the Union of India and the Securities and Exchange Board of India appeared to have taken a divergent stand on the question. While the Government of India submitted (as disclosed in its affidavit, and as referred to by the High Court in the impugned judgment) that the liability to pay the excess amounts arose on the expiry of 10 weeks from the date of closure of the subscription lists, the Securities and Exchange Board of India contended that the liability arose on the date of allotment. In the present appeal, however, the Union of India support the stand of the Securities and Exchange Board of India. On the other hand, the company contended that, on the facts of this case, the liability arose only at the end of the period as extended by the Stock Exchange at Indore in terms of the prospects. The High Court held: … In our judgment, there is no difficulty in fixing the date from which the liability of the company to make repayment arises. In a case where the allotment is completed before expiry of the 10 weeks, then from the date of allotment and in case where the allotment is not completed till the expiry of ten weeks from the date of closure of the subscription list, then from the date of expiry of ten weeks …

The reason stated by the High Court for coming to this conclusion is that the company knew that the excess amount was on the date of allotment and there was no reason why the company should delay payment till the end of 10 weeks in case the allotment was made earlier. The High Court says: … In cases where the allotment is completed before expiry of ten weeks, then the Company very well knows the excess amount, which is to be repaid and consequently the liability accrues forthwith to repay the said amount. In case the Company fails to repay the amount within the grace period of eight days, then the Company would be liable to pay interest to the investor inspite of the fact that period of ten weeks from the date of closure of the subscription list is not over …

The High Court thus held that the company was liable to pay interest at the prescribed rates for the period of delay and the liability for the same arose on the expiry of 8 days from the date of allotment of the shares, and not from the date of expiry of 10 weeks, where allotment was made earlier to that date. The High Court did not accept the contention of the company that the time having been extended by the Madhya Pradesh Stock Exchange till 19th December, 1990 in accordance with the relevant provisions of the prospectus, the company had no liability to pay interest. The question for consideration, therefore, is whether the High Court was right in discarding, for computation of interest, the time limit of 10 weeks running from the date of closure of the subscription lists, notwithstanding that the allotment had been made, as in the present case, prior to the date of expiry of 10 weeks.

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Listing means the admission of the securities of a company to trading privileges on a Stock Exchange. The principal objectives of listing are to provide ready marketability and impart liquidity and free negotiability to stocks and shares; ensure proper supervision and control of dealings therein; and protect the interests of shareholders and of the general investing public. (See para 1.1. of the ‘Stock Exchange Listing’, publication of Bombay Stock Exchange of March, 1991). A public limited company has no obligation to have its shares listed on a recognised stock exchange. But if the company intends to offer its shares or debentures to the public for subscription by the issue of a prospectus, it must, before issuing such prospectus, apply to one or more recognised stock exchanges for permission to have the shares or debentures intended to be so offered to the public to be dealt with in each such stock exchange in terms of s. 73. We shall now read the provisions of s. 73 insofar as they are material: Sub-s. (1) of s. 73 read: 73 (1). Allotment of shares and debentures to be dealt in on stock exchanges. – Every company intending to offer shares or debentures to the public for subscription by the issue of a prospectus shall, before such issue, make an application to one or more recognised stock exchanges for permission for the shares or debentures intending to be so offered to be dealt with in the stock exchange or each such stock exchange.

This sub-section was inserted by the Companies (Amendment) Act, 1988 with effect from 15.6.1988. It has application only to a company intending to offer shares or debentures to the public for subscription by the issue of a prospectus. Until this sub-section was inserted, listing of public issues was not compulsory. This original sub-s. (1) was substituted by the Companies (Amendment) Act, 1974 with effect from 1.2.1975, and substituted again and renumbered as the present sub-section (1A) with effect from 15.6.1988 by the Companies (Amendment) Act, 1988. Sub-section (1A) reads: 73(1A). Where a prospectus, whether issued generally or not, states that an application under sub-s. (1) has been made for permission for the shares or debentures offered thereby to be dealt in one or more recognised stock exchanges, such prospectus shall state the name of the stock exchange or, as the case may be, each such stock exchange, and any allotment made on an application in pursuance of such prospectus shall, whenever made, be void if the permission has not been granted by the stock exchange or each such stock exchange, as the case may be, before the expiry of ten weeks from the date of the closing of the subscription lists: Provided that where an appeal against the decision of any recognised stock exchange refusing permission for the shares or debentures to be dealt in on that stock exchange has been preferred under Section 22 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956), such allotment shall not be void until the dismissal of the appeal.

This provision makes it necessary for the company to state in its prospectus the name of each of the recognised stock exchanges whose permission for listing has been sought by the company. Any allotment of shares will become void if permission is not granted by the stock exchange or each such stock exchange, as the case may be, before the expiry of 10 weeks from the date of the closing of the subscription lists. The validity of the allotment is thus made dependent on securing the requisite permission of each stock exchange whose permission has been sought. The liability to repay the application money arises only upon refusal of the stock exchange to grant the permission sought by the company before the expiry of 10 weeks from the date of closing of the subscription lists. This is clear from sub-section (1A) read with sub-s. (5). There is a deemed refusal if permission is not granted by the stock exchange before the expiry of 10 weeks from the date of closing of the subscription lists, and upon the expiry of that date, any allotment of shares made by the company becomes void. However, from the decision of the stock exchange refusing permission, an appeal will lie u/s. 22 of the Securities Contracts (Regulation) Act, 1956. Pending the decision in appeal, the allotment made would not be void, and the decision of the concerned stock exchange is made dependent on the result of the appeal. What is significant is that it is the legislative intent to delay the result postulated under sub-section (IA), i.e., rendering the allotment void, until the said period of 10 weeks has expired or until the dismissal of the appeal. Sub-section (2), as amended in 1988, reads:

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73(2). Where the permission has not been applied under sub-section (1) or, such permission having been applied for, has not been granted as aforesaid, the company shall forthwith repay without interest all moneys received from applicants in pursuance of the prospectus, and, if any such money is not repaid within eight days after the company becomes liable to repay it, the company and every director of the company who is an officer in default shall, on and from the expiry of the eighth day, be jointly and severally liable to repay that money with interest at such rate, not less than four per cent and not more than fifteen per cent, as may be prescribed, having regard to the length of the period of delay in making the repayment of such money.

This sub-section requires the company to repay ‘forthwith’ all money received from applicants in response to the company’s prospectus either where the company has not applied for permission of the recognised stock exchange for listing or where permission has been applied for but not granted. If the company has issued a prospectus without seeking permission for listing, it has clearly acted in violation of the mandatory provisions of the Act, and the company has no right to receive or retain any amount by way of subscription in pursuance of its prospectus. On the other hand, where permission has been sought, but has not been obtained within 10 weeks from the date of closing of the subscription lists, thereby rendering void any allotment made, the company is bound to repay all such money forthwith, but without interest. In the event of such money not being repaid within 8 days after the liability to repay arose, the company and every director of the company who is ‘an officer in default’ are made jointly and severally liable to pay the principal amount as well as interest thereon from the date of expiry of the said 8 days. The interest is payable at the prescribed rates varying from 4% to 15%, dependent on the length of the period of delay in making such repayment. This sub-section thus postulates two circumstances in which interest becomes payable, namely, where the permission has not been applied for before issuing the prospectus and the company had thus acted in violation of the law or where permission, though applied for, has not been granted. In the former case, apart from the other consequences which may flow from the company’s disobedience of the law, the liability to pay interest arises as from the date of receipt of the amounts, for the company ought not to have received any such amount in response to the prospectus issued by the company in disobedience of the requirements of sub-section (I). In the latter case, the liability to pay interest does not arise until the expiry of 8 days after the company became liable to repay the amounts received by reason of its failure to obtain the necessary permission as referred to in sub-section (IA). It may be mentioned in this connection that, prior to the amendment of 1988, sub-s. (2) did not make the company liable to pay interest on the amounts repayable by it in terms thereof, but only the directors were liable for payment of such interest, apart from the principal amounts. The proviso to the subsection as it stood prior to 1988 exempted a director from such liability if the default was not caused by his misconduct or negligence. As a result of substitution of a proviso of the sub-section by the Amendment Act of 1988, the company and every director of the company ‘who is an officer in default’ are made jointly and severally liable for payment of the principal amount as well as interest. 17. We shall now read the crucial provision which is sub-section (2A): S.73 (2A). Where permission has been granted by the recognised stock exchange or stock exchanges for dealing in any shares or debentures in such stock exchange or each such stock exchange and the moneys received from applicants for shares or debentures are in excess of the aggregate of the application moneys relating to the shares or debentures in respect of which allotments have been made, the company shall repay the moneys to the extent of such excess forthwith without interest, and if such money is not repaid within eight days, from the date the company becomes liable to pay it, the company and every director of the company who is an officer in default shall, on and from the expiry of the eighth day, be jointly and severally liable to repay that money with interest at such rate, not less than four per cent and not more than fifteen per cent, as may be prescribed having regard to the length of the period of delay in making the repayment of such money.

Sub-section (2A) was inserted by the Companies (Amendment) Act, 1974 which came into force w.e.f. 1.2.1975. Section 73, as it stood prior to 1975, contained no specific provision compelling the company or its directors to repay the amounts received in excess of the aggregate of the application money relating to the shares or debentures in respect of which allotments have been made. Sub-section (2A) was inserted to cover cases where permission of the stock exchange has been obtained, but the shares

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or debentures have been over-subscribed and the company is consequently in possession of excess amounts. The sub-section, as inserted in 1975, made the company liable to repay the excess amounts forthwith, but did not make the company liable to pay interest on such excess amounts. But a liability was cast on the directors. If the excess amount was not repaid within 8 days from the day the company became liable to repay it, the directors were made jointly and severally liable to repay such amount with interest. The proviso to sub-section (2A), which like the proviso to sub-section (2), as they stood prior to 1988, provided that a director was not liable to repay the money with interest if he proved that the default in payment of the money was not on account of any misconduct or negligence on his part. Owing to the absence of a specific provision imposing liability on the company to pay interest on the over-subscribed amounts, and also owing to the absence of any provision to exempt directors who were not directly in charge of the administration of the company and the need to make listing of public issues compulsory, further amendments to the section became necessary. Accordingly the Amendment Act of 1988 introduced several amendments to section 73, one of them being the substitution of a part of sub-section (2A) making the company and every director of the company who is ‘an officer in default’ jointly and severally liable to repay the excess money with interest. A ‘director of a company who is an officer in default’ appearing in sub-section (2A) must be understood with reference to the definition of ‘an officer who is in default’ contained in s. 2(31) read with s. 5. This definition includes the managing director or the whole time director of a company. So understood, the liability imposed under sub-section (2A) on a director of the company falls only upon a director who is ‘an officer in default’, as defined under s. 2(31) read with s. 5(a) (b), and not upon any other director. The nominees of the Government or financial institutions on the board of directors of the company, but not directly in charge of its administration as full time directors, are exempted from personal liability. The rate of interest payable under sub-section (2A) is, as seen above, not less than 4 per cent and not more than 15 per cent. The sub-section requires the company to repay the oversubscribed amounts. These amounts are paid by persons who have responded to the prospectus which was issued by the company after making an application for permission in accordance with sub-s. (1). But when the subscription lists are closed, the excess money is ascertained with reference to the actual allotments made and so it becomes repayable as the company has no right to retain it. The question is, for the purpose of computing interest, did it become repayable upon the date of allotment, as found by the High Court and as contended by the respondents, or on some other day. The Additional Solicitor General, appearing for the Union of India, Mr. K.S. Cooper, for the Securities & Exchange Board of India, Mr. T.R. Andhyarujina, for the Bombay Stock Exchange and Dr. A.M. Singhvi, for one of the interveners, submit that the liability to repay the excess amount arises on the date of allotment of the shares, for the statute says that the liability arises forthwith and any delay beyond the period of 8 days from the day on which the liability arose attracts interest. The expression ‘forthwith’ has to be understood as an immediate liability ascertainable with reference to the date of allotment, but subject to a period of grace of 8 days. Mr. Anil B. Dewan, appearing for the company, on the other hand, contends that the company is entitled to retain the excess amount for the period mentioned in the prospectus and consequently no liability to pay interest can arise until the expiry of that period. Prospectus is an instrument registered u/s. 60 of the Act and all statements contained in it are matters permitted to be inserted by the statue. The terms of the prospectus are binding not only upon the company but also upon persons who deal with the company in pursuance of the prospectus. One of those terms concerns the repayment of excess money. It reads: … In case an application is rejected in full, the whole of the application money received will be refunded and where an application is rejected in part, the balance, if any, after adjusting money due in the manner provided earlier in this Prospectus on Equity Shares/Debentures allotted will be refunded to the applicants within ten weeks of the date of closing of the Subscription List or in the event of unforeseen circumstances within such further time as may be allowed by the Stock Exchange at Indore.

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(emphasis supplied)

In the present case, counsel points out, time for refund had been extended by the Madhya Pradesh Stock Exchange till 19 December, 1990. Accordingly the liability of the company to repay the excess amount did not arise until then. In the circumstances, interest became payable only after 8 days from the expiry of the period as extended by the Madhya Pradesh Stock Exchange. If Mr. Dewan’s argument were to be accepted, the company would have incurred no liability to pay interest, for time had been extended by the Madhya Pradesh Stock Exchange. But this argument is clearly contrary to the provisions contained in sub-s. (4) of s. 73 of the Act which reads: 73(4). Any condition purporting to require or bind any applicant for shares or debentures to waive compliance with any of the requirements of this section shall be void.

In the teeth of that sub-section, Mr. Dewan’s argument on the point is totally without merit. Even if sub-s. (4) had not been inserted in section 73, Mr. Dewan’s argument in this respect would have been equally unsustainable, for no agreement can defeat or circumvent a mandatory requirement of the statute. This is all the more so in view of s. 9 which specifically provides that the provisions of the Act override the memorandum or articles of association of the company or any agreement executed or resolution passed by it. The statute requires the company to pay interest in terms of sub-section (2A). That provision says that the company should pay excess money forthwith, failing which interest becomes payable at the end of 8 days therefrom. Any inconsistent provision in the prospectus is unenforceable and it can be of no avail to the company. It is true that the expression ‘forthwith’ does not necessarily and always mean instantaneous. The expression has to be understood in the context of the statute. Where, however, the statute prescribes the payment of money and the accrual of interest thereon at certain points of time, the expression ‘forthwith’ must necessarily be understood to be immediate or instantaneous, so as to avoid any ambiguity or uncertainty. The right accrues or liability arises exactly as prescribed by the statute. … The legislature intended the expression 'forthwith' to refer to a particular day on which the liability to repay the principal amount arose, and that is the day from which the period of 8 days has to be computed, and on the expiry of that period, interest begins to accrue. It is further contended on behalf of the company that in any view interest is payable as a penalty and, therefore, a reasonable and rational construction has to be placed upon the statute in regard to the commencement of the liability of the company to repay the excess amount. Relevant circumstances which caused the delay must be taken into account in this regard. There is no substance in this contention. As stated earlier, sub-section (2A) provides for the accrual of interest and the rates thereof. Unlike sub-section (2B) provides for punishment by imposition of fine or imprisonment, sub-section (2A) speaks only of interest which is in contradiction to punishment and is not penal in character. It merely provides a mode of calculation of the amounts payable. Any consideration with reference to a penal provision is of no relevance to the liability of the company or its directors to pay interest in terms of sub-section (2A). Sub-section (2B) on the other hand provides for punishment. It reads: 73(2B). If default is made in complying with the provisions of sub-section (2A), the company and every officer of the company who is in default shall be punishable with fine which may extend to five thousand rupees, and where repayment is not made within six months from the expiry of the eighth day, also with imprisonment for a term which may extend to one year.

This sub-section concerns solely with default of compliance with the requirement of sub-section (2A) namely, repayment of excess money. Failure to repay the excess money as required by sub-section (2A) visits the company and every officer of the company who is in default (as defined u/s. 5) with the stipulated punishment. This is, of course, in addition to the payment of interest prescribed under subsection (2A). Sub-section (5), as it stood prior to 1.2.1975, read:

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73(5). For the purpose of this section permission shall not be deemed to be refused if it is intimated that the application for permission though not at present granted, will be given further consideration.

This sub-section was substituted by the Companies (Amendment) Act, 1974 with effect from 1.2.1975 reading as follows: 73(5). For the purposes of this section, it shall be deemed that permission has not been granted if the application for permission, where made, has not been disposed of within the time specified in sub-s. (1).

Sub-s. (1) referred to in sub-section (5), as substituted on 1.2.1975, is in fact the present sub-section (1A), for, as stated earlier, the original sub-s. (1) was amended and renumbered as sub-section (1A) when the present sub-s. (1) was inserted by the Companies (Amendment) Act, 1988 w.e.f. 15.6.1988. Consequently, the words ‘the time specified in sub-section (1)’ appearing in sub-section (5), as inserted w.e.f. 1.2.1975, denote the period of 10 weeks mentioned in the present sub-section (1A). This means that the permission for listing is deemed not to have been granted, i.e., impliedly refused, if the application for permission filed by the company has not been disposed of before the expiry of 10 weeks from the date of the closing of the subscription lists, as mentioned under sub-section (1A). Sub-section (1A) postulates that any allotment made becomes void at the end of 10 weeks from the date of the closing of the subscription lists if by that time the requisite permission of the stock exchange has not been obtained. But this consequence is postponed till the dismissal of any appeal preferred u/s. 22 of the Securities Contracts (Regulation) Act, 1956 (see the proviso to sub-section (1A) of s. 73 of the Act). Nevertheless, the permission, if not obtained within 10 weeks, is deemed not to have been granted. If the permission for listing sought under sub-section (1) is not granted, the interest payable under subsection (2) is attracted. Sub-s. (2) says that the liability to repay the money received from applicants arises forthwith either where the permission has not been sought or, having been sought, it has not been granted. The fact that an appeal is pending does not postpone the result contemplated in sub-s. (2) in regard to the liability to repay the amounts and the interest accruing thereon if the amounts are not repaid within 8 days after the liability arose. The accrual of interest under sub-s. (2) is not dependent or consequent on the nullity postulated in sub-section (1A). In this connection, reference may be made to sub-s. (3) which reads: 73. (3) All moneys received as aforesaid shall be kept in a separate bank account maintained with a Scheduled bank until the permission has been granted, or where an appeal has been preferred against the refusal to grant such permission, until the disposal of the appeal, and the money standing in such separate account shall, where the permission has not been applied for as aforesaid or has not been granted, be repaid within the time and in the manner specified in sub-section (2), and if default is made in complying with this sub-section, the company, and every officer of the company who is in default, shall be punishable with fine which may extend to five thousand rupees. (emphasis supplied)

This sub-section refers to the obligation of the company to keep all amounts received from the subscribers in a separate bank account maintained with a Scheduled bank. Such money must so remain in the bank until the permission has been granted by the stock exchange or until the disposal of an appeal preferred against refusal to grant permission. Where the permission has not been sought, the company has, as seen above, acted in disobedience of the law, and the amounts received from the investors must be credited to the separate bank account and immediately returned to them together with the interest which accrued for the period. But where permission has been sought, but not granted, the amounts so kept in the bank have to be repaid within the time specified in sub-s. (2). Default of compliance with this requirement will make the company and every officer in default (as defined u/s. 5) liable to be punished with fine. This will, of course, be in addition to the liability for payment of interest in terms of sub-s. (2). The right or obligation of the company to keep the money in the bank is only for the period preceding the decision of the stock exchange on the company's request for permission to list. Once the permission

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is expressly or impliedly refused, the money has to be returned to the applicants, notwithstanding the pendency of the company's appeal. The earlier part of the sub-section about depositing the money in the bank is controlled by the latter provision in the sub-section for returns of the money as required by sub-s. (2). This is particularly so by reason of the penalty specially provided in sub-s. (3) in the event of default of compliance with the requirement of that sub-section. Sub-s. (3) may at the first blush appear to be contradictory, but it is really not so, considering the legislative intent to protect the legitimate claim of the applicants for interest on the money paid by them. The interest provided under sub-s. (2) is payable to the applicants in terms of that sub-section, unless the money is returned to them within the specified time, notwithstanding the pendency of an appeal mentioned in the proviso to sub-section (1A). Sub-s. (3) has to be so understood to be in harmony with the other provisions of s. 73. This is all the more explicit from sub-section (3A). Sub-section (3A) says that the company shall not utilise the amounts held in the separate bank account for any purpose other than what is permitted by sub-section (3A). Sub-section (3A) provides: 73. (3A) Moneys standing to the credit of the separate bank account referred to in sub-s. (3) shall not be utilised for any purpose other than the following purposes, namely:(a) adjustment against allotment of shares, where the shares have been permitted to be dealt in on the stock exchange or each stock exchange specified in the prospectus; or (b) repayment of moneys received from applicants in pursuance of the prospectus, where shares have not been permitted to the dealt in on the stock exchange or each stock exchange specified in the prospectus, as the case may be, or, where the company is for any other reason unable to make the allotment of share.

The money credited to the separate bank account can be utilised for only two purposes: (1) for adjustment against allotment of shares where listing is permitted; or (2) for repayment where listing is not permitted or the company is otherwise unable to allot shares. The company has no right to deal with the money in any other manner or keep it longer than permitted by the section. The money so kept in the separate bank account is held by the company for and on behalf of the subscribers in a fiduciary capacity. Such amount do not form part of the general assets of the company. The relationship between the applicants and the company in respect of the application money so held in accordance with sub-s. (3) is that of ‘bailers and bailee and not of creditors and debtor’. … Interest does not begin to run under sub-s. (2) until 8 days have elapsed from the date of expiry of the period of 10 weeks commencing on the date of closure of the subscription lists. The fact that the legislature has so provided in cases where permission has been refused expressly or by reason of the deeming provision is sufficient indication of the legislative intent to give the company reasonable time to repay the money. Companies generally make allotments as soon as practicable after the necessary application has been made to the recognised stock exchange for permission for listing. Upon the issue of the prospectus after making such application, amounts are received from the public in consideration of which allotments are made in anticipation of the requisite permission. Greater the reputation of the company, larger are the amounts likely to be received. If permission is not granted, the entire amounts received from the public have to be forthwith repaid. On the other hand, if permission is obtained, but the amounts received from the public are in excess of the aggregate of the application money relating to the allotted shares or debentures, such excess amounts are forthwith repayable. Whether or not permission will be obtained cannot be ascertained until the period prescribed for the purpose has expired namely, 10 weeks from the date of closing of the subscription lists. Until the expiry of those 10 weeks, neither the subscribing public nor the company will be in a position to decide whether or not the allotments made are valid. This is a period of uncertainty and it is for that reason that the legislature has, in a case of refusal to grant permission, provided that the liability to repay the application money arises upon the expiry of 10 weeks. The possibility of an appeal being allowed is, as stated above, not a ground to delay repayment. It should make no difference whether it is as a result of the permission having been refused, or

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permission having been granted and excess amounts are received by reason of over-subscription, that repayment of money has to be made by the company. In either event, the liability to repay the amounts arises forthwith on the expiry of 10 weeks from the date of closure of the subscription lists, and the interest will begin to accrue thereon on the expiry of 8 days therefrom. This construction is, in our view, just and reasonable from the point of view of both the investor and the company, and has the advantage of certainty, uniformity and easy application. The condition attached to the Order of the Government of India dated 31 May, 1990, which we have extracted above, indicates that the time limit of 10 weeks from the date of closure of the subscription lists applied to refund orders as well as to allotment of all securities and despatch of allotment letters/certificates. The Government of India thus understood that the liability of the company to repay the amounts in terms of s. 73 arose only at the end of 10 weeks from the date of closure of the subscription lists. This condition presumably applies to repayment under sub-s. (2) as well as under sub-section (2A) of s. 73. This is fully borne out by the averments contained in the affidavit filed in the High Court on behalf of the Union of India as well as by the oral submissions on its behalf before the High Court on the point. Similar appears to be the stand of the Bombay Stock Exchange, as seen from its publication of March 1991. The letter dated March 13, 1991 sent by the Securities and Exchange Board of India, the 2nd respondent, to the appellant company stating that interest was payable from 1st November, 1990, which is the date of expiry of the period of 10 weeks from the date of closure of the subscription lists, roughly indicates how the 2nd respondent construed the provision shortly before the proceedings commenced in the High Court. The section is not free from ambiguities and doubts. Having been amended in several respect, it has not finally emerged with the clarity that admits of easy construction. But the contemporaneous construction placed upon an ambiguous section by the administrators entrusted with the task of executing the statute is extremely significant. This construction is, in our view, perfectly consistent with the language and the object of the statute. It is a practical and reasonable construction, particularly because it affords the company reasonably sufficient time to complete the formalities for despatch of the refund orders. And the investor who has responded to the invitation contained in the prospectus is not unduly kept waiting for the return of the excess amounts due to him. … Neither the date of allotment, as found by the High Court, nor the date specified in the prospectus, as contended by the company, is relevant to the commencement of liability for payment of interest on the excess money. The liability of a company to repay the excess money u/s. 73(2A) of the Act arises on the expiry of 10 weeks from the date of the closing of the subscription lists, and the interest begins to accrue thereon at the end of 8 days therefrom. Accordingly the liability to repay the excess money in the present case arose on 1.11.1990 which was admittedly the date of expiry of 10 weeks from the date of the closing of the subscription lists, and consequently the liability to pay interest at the rate specified in sub-section (2A) arose on the expiry of 8 days from 1.11.1990.

USE OF STATEMENT OF OBJECT AND REASONS In 1952 a Constitution Bench (5 judges) delivered its opinion in Ashwini Kumar Ghose v. Arabinda Bose, AIR 1952 SC 369. The dispute in this case was whether an advocate of the Supreme Court was allowed to practice in the original side of the Calcutta High Court. This case will be examined later as a case study in order to understand the importance of a title of a statute as interpretive tool. But the observations of Chief Justice Sastri on the point of using Statement of Object and Reasons of a statute as an interpretive tool are particularly instructive – … There was much argument before us as to the object which Parliament had in view in passing, the new Act, each side suggesting an object which would support the construction which it sought to place upon s. 2. Each side relied upon the “statement of objects and reasons” annexed to the Bill in support of its own contentions.

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Reference was also made to speeches made the floor of the House by members during the debate the Bill. Our attention was also called to the form of the Bill as originally introduced in the House and its amendment by omitting part (a) of the proviso to cl. (2) thereof. As regards the speeches made by the members of the House in the course of the debate, this Court has recently held that they are not admissible as extrinsic aids to the interpretation of statutory provisions … As regards the propriety of the reference to the statement of objects and reasons, it must be remembered that it seeks only to explain what reasons induced the mover to introduce the Bill in the House and what objects he sought to achieve. But those objects and reasons may or may not correspond to the objective which the majority of members had in view when they passed it into law. The Bill may have undergone radical changes during its passage through the House or Houses, and there is no guarantee that the reasons which led to its introduction and the objects thereby sought to be achieved have remained the same throughout till the Bill emerges from the House as an Act of the Legislature for they do not form part of the Bill and are not voted upon by the members. We, therefore, consider that the statement of objects and reasons appended to the Bill should be, ruled out as an aid to the construction of a statute. … It was urged that acceptance or rejection of amendments to a Bill in the course of Parliamentary proceedings forms part of the pre-enactment history of a statute and as such might throw valuable light the intention of the legislature when the language used in the statute admitted of more than one construction. We are unable to assent to this proposition. The reason why a particular amendment was proposed or accepted or rejected is often a matter of controversy, as it happened to be in this case, and without the speeches bearing upon the motion, it cannot be ascertained with any reasonable degree of certainty. And where the legislature happens to be bicameral, the second Chamber may or may not have known of such reason when it dealt with the measure. We hold accordingly that all the three forms of extrinsic aid- sought to be resorted to by the parties in this case must be excluded from consideration in ascertaining the true object and intention of the Legislature.

This view however is no longer accepted as correct. An examination of the following opinion as a casestudy of the point will demonstrate this point. The first of these two cases, Santa Singh v. State of Punjab, (1976) 4 SCC 190 provides a particularly useful instance of the use of statements and objects as well as that of a report of the Law Commission of India (a point considered in more detail in the next sub-part of this Unit) as interpretive tools. The holdings of Justice Bhagwati and Justice Fazal Ali in Santa Singh can be taken to fairly reflective of the new view on the use of statement of objects and reasons as interpretive tools, a view that clearly rejects the old view as stated in the quote above. CASE STUDY 1 – SANTA SINGH V. STATE OF PUNJAB (1976) 4 SCC 190 Bench – Justices P. N. Bhagwati & S. Murtaza Fazal Ali Justice Bhagwati (for himself) [Justice Fazal Ali, concurring] This appeal, by special leave, raises an interesting question of law relating to the construction of s. 235(2) of the Code of Criminal Procedure, 1973. The appellant was tried before the Sessions Judge, Ludhiana for committing a double murder, one of his mother and the other of her second husband. He was represented by a lawyer during the trial and after the evidence was concluded and the arguments were heard, the learned Sessions Judge adjourned the case to February 13, 1975 for pronouncing the judgment. It appears that on February 13, 1975, the judgment was not ready and hence the case was adjourned to February 20, 1975 and again to February 26, 1975. The roznamcha of the proceedings shows that on February 26, 1975 the appellant was present without his lawyer and the learned Sessions Judge pronounced the judgment convicting the appellant of the offence under s. 302 of the Indian Penal Code and sentenced him to death. It was common ground that after pronouncing the judgment convicting the appellant, the learned Sessions Judge did not give the appellant an opportunity to be heard in regard to the sentence to be

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imposed on him and by one single judgment, convicted the appellant and also sentenced him to death. The appellant preferred an appeal to the High Court and the case was also referred to the High Court for confirmation of the death sentence. The High Court agreed with the view taken by the learned Sessions Judge and confirmed the conviction as also the sentence of death. The appellant thereupon preferred the present appeal with special leave obtained from this Court. The appeal is limited to the question of sentence and the principal argument advanced on behalf of the appellant is that in not giving an opportunity to the appellant to be heard in regard to the sentence to be imposed on him after the judgment was pronounced convicting him, the learned Sessions Judge committed a breach of s. 235 (2) of the Code of Criminal Procedure, 1973 and that vitiated the sentence of death imposed on the appellant. This argument is a substantial one and it rests on the true interpretation of s. 235(2). This is a new provision and it occurs in s. 235 of the Code of Criminal Procedure, 1973 which reads as follows: 235 (1) After hearing arguments and points of law (if any), the Judge shall give a judgment in the case. (2) If the accused is convicted, the Judge shall, unless he proceeds in accordance with the provisions of section 360, hear the accused on the question of sentence, and then pass sentence on him according to law.

This provision is clear and explicit and does not admit of any doubt. It requires that in every trial before a court of sessions, there must first be a decision as to the guilt of the accused. The court must, in the first instance, deliver a judgment convicting or acquitting the accused. If the accused is acquitted, no further question arises. But if he is convicted, then the court has to “hear the accused on the question of sentence, and then pass sentence on him according to law”. When a judgment is rendered convicting the accused, he is, at that stage, to be given an opportunity to be heard in regard to the sentence and it is only after hearing him that the court can proceed to pass the sentence. This new provision in s. 235(2) is in consonance with the modern trends in penology and sentencing procedures. There was no such provision in the old Code. Under the old Code, whatever the accused wished to submit in regard to the sentence had to be stated by him before the arguments concluded and the judgment was delivered. There was no separate stage for being heard in regard to sentence. The accused had to produce material and make his submissions in regard to sentence on the assumption that he was ultimately going to be convicted. This was most unsatisfactory. The legislature, therefore, decided that it is only when the accused is convicted that the question of sentence should come up for consideration and at that stage, an opportunity should be given to the accused to be heard in regard to the sentence. Moreover, it was realised that sentencing is an important stage in the process of administration of criminal justice – as important as the adjudication of guilt – and it should not be consigned to a subsidiary position as if it were a matter of not much consequence. It should be a matter of some anxiety to the court to impose an appropriate punishment on the criminal and sentencing should, therefore, receive serious attention of the court. In most of the countries of the world, the problem of sentencing the criminal offender is receiving increasing attention and that is largely because of the rapidly changing attitude towards crime and criminal. There is in many of the countries, intensive study of the sociology of crime and that has shifted the focus from the crime to the criminal, leading to a widening of the objectives of sentencing and, simultaneously, of the range of sentencing procedures. Today, more than ever before, sentencing is becoming a delicate task, requiring an inter-disciplinary approach and calling for skills and talents vary much different from those ordinarily expected of lawyers. This was pointed out in clear and emphatic words by Mr. Justice Frankfurter:

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I myself think that the bench – we lawyers who become judges – are not very competent, are not qualified by experience, to impose sentences where any discretion is to be exercised. I do not think it is in the domain of the training of lawyers to know what to do with a fellow after you find out he is a thief. I do not think legal training gives you any special competence. I, myself, hope that one of these days, and before long, we will divide the functions of criminal justice. I think the lawyers are people who are competent to ascertain whether or not a crime has been committed. The whole scheme of common law judicial machinery the rule of evidence, the ascertainment of what is relevant and what is irrelevant and what is fair, the whole question of whether you can introduce prior crimes in order to prove intent – I think lawyers are peculiarly fitted for that task. But all the questions that follow upon ascertainment of guilt, I think require very different and much more diversified talents than the lawyers and judges are normally likely to possess.

The reason is that a proper sentence is the amalgam of many factors such as the nature of the offence, the circumstances – extenuating or aggravating – of the offence, the prior criminal record, if any, of the offender, the age of the offender, the record of the offender as to employment, the background of the offender with reference to education, home life, society and social adjustment, the emotional and mental condition of the offender, the prospects for the rehabilitation of the offender, the possibility of return of the offender to a normal life in the community, the possibility of treatment or training of the offender, the possibility that the sentence may serve as a deterrent to crime by the offender or by others and the current community need, if any, for such a deterrent in respect to the particular type of offence. These are factors which have to be taken into account by the court in deciding upon the appropriate sentence, and therefore, the legislature felt that, for this purpose, a separate stage should be provided after conviction when the court can bear the accused in regard to these factors bearing on sentence and then pass proper sentence on the accused. Hence the new provision in s. 235(2). But, on the interpretation of s. 235(2), another question arises and that is, what is the meaning and content of the words “hear the accused”. Does it mean merely that the accused has to be given an opportunity to make his submissions or he can also produce material bearing on sentence which has so far not come before the Court? Can he lead further evidence relating to the question of sentence or is the hearing to be confined only to oral submissions? That depends on the interpretation to be placed on the word “hear”. Now, the word “hear” has no fixed rigid connotation. It can bear either of the two rival meanings depending on the context in which it occurs. It is a well settled rule of interpretation, hallowed by time and sanctified by authority, that the meaning of an ordinary word is to be found not so much in strict etymological propriety of language, nor even in popular use, as in the subject or occasion on which it is used and the object which is intended to be attained. It was Mr. Justice Holmes who pointed out in his inimitable style that a word is not a crystal, transparent and unchanged: it is the skin of a living thought and may vary greatly in colour and content according to the circumstances and the time in which it is used.

Here, in this provision, the word “hear” has been used to give an opportunity to the accused to place before the court various circumstances bearing on the sentence to be passed against him. Modern penology, as pointed out by this Court in Ediga Annamma v. State of Andhra Pradesh, [1974] 3 SCR 329 “regards crime and criminal as equally material when the right sentence has to be picked out”. It turns the focus not only on the crime, but also on the criminal and seeks to personalise the punishment so that the reformist component is as much operative as the deterrent element. It is necessary for this purpose that facts of a social and personal nature, sometimes altogether irrelevant, if not injurious, at the stage of fixing the guilt, may have to be brought to the notice of the court when the actual sentence is determined.

We have set out large number of factors which go into the alchemy which ultimately produces an appropriate sentence and full and adequate material relating to these factors would have to be brought

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before the court in order to enable the court to pass an appropriate sentence. This material may be placed before the court by means of affidavits, but if either party disputes the correctness or veracity of the material sought to be produced by the other, an opportunity would have to be given to the party concerned to lead evidence for the purpose of bringing such material on record. The hearing on the question of sentence, would be rendered devoid of all meaning and content and it would become an idle formality, if it were confined merely to hearing oral submissions without any opportunity being given to the parties and particularly to the accused, to produce material in regard to various factors beating on the question of sentence, and if necessary, to lead evidence for the purpose of placing such material before the court. This was also the opinion expressed by the Law Commission in its Forty Eighth Report where it was stated that the taking of evidence as to the circumstances relevant to sentencing should be encouraged and both the prosecution and the accused should be allowed to cooperate in the process.

The Law Commission strongly recommended that “if a request is made in that behalf by either the prosecution or the accused, an opportunity for leading evidence on the question” of sentence “should be given”. We are, therefore, of the view that the hearing contemplated by s. 235(2) is not confined merely to hearing oral submissions, but it is also intended to give an opportunity to the prosecution and the accused to place before the court facts and material relating to various factors beating on the question of sentence and if they are contested by either side, then to produce evidence for the purpose of establishing the same. Of course, care would have to be taken by the court to see that this hearing on the question of sentence is not abused and turned into an instrument for unduly protracting the proceedings. The claim of due and proper hearing would have to be harmonised with the requirement of expeditious disposal of proceedings. Now there can be no doubt that in the present case the requirement of s. 235(2) was not complied with, inasmuch as no opportunity was given to the appellant, after recording his conviction, to produce material and make submissions in regard to the sentence to be imposed on him. Since the appellant was convicted under s. 302 of the Indian Penal Code, only two options were available to the Sessions Court in the matter of sentencing the appellant either to sentence him to death or to impose on him sentence of imprisonment for life. It the Sessions Court had, instead of sentencing him to death, imposed on him sentence of life imprisonment, the appellant could have made no grievance of the breach of the provision of s. 235(2), because, even after hearing the appellant, the Sessions Court would not have passed a sentence more favourable to the appellant than the sentence of life imprisonment. In such a case, even if any complaint of violation of the requirement of s. 235 (2) were made, it would not have been entertained by the appellate court as it would have been meaningless and futile. But, in the present case, the Sessions Court chose to inflict death sentence on the appellant and the possibility cannot be ruled out that if the accused had been given opportunity to produce material and make submissions on the question of sentence, as contemplated by s. 235(2), he might have been able to persuade the Sessions Court to impose the lesser penalty of life imprisonment. The breach of the mandatory requirement of s. 235(2) cannot, in the circumstances, be ignored as inconsequential and it must be held to vitiate the sentence of death imposed by the Sessions Court. It was, however, contended on behalf of the State that non-compliance with the mandatory requirement of s. 235(2) was a mere irregularity curable under s. 465 of the Code of Criminal Procedure, 1973 as no failure of justice was occasioned by it and the trial could not on that account be held to be bad. The State leaned heavily on the fact that the appellant did not insist on his right to be heard under s. 235(2)

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before the Sessions Court, nor did he make any complaint before the High Court that the Sessions Court had committed a breach of s. 235(2) and this omission on the part of the appellant, contended the State, showed that he had nothing to say in regard to the question of sentence and consequently, no prejudice was suffered by him as a result of non-compliance with s. 235(2). This contention is, in my opinion, without force and must be rejected. It must be remembered that s. 235(2) is a new provision introduced for the first time in the Code of Criminal Procedure, and 1973 and it is quite possible that many lawyers and judges might be unaware of it. Before the Sessions Court, the appellant was not represented by a lawyer at the time when the judgment was pronounced and obviously he could not be aware of this new stage in the trial provided by s. 235(2). Even the Sessions Judge was not aware of it, for it is reasonable to assume that if he had been aware, he would have informed the appellant about his right to be heard in regard to the sentence and given him an opportunity to be heard. It is unfortunate that in our country there is no system of continuing education for judges so that judges can remain fully informed about the latest developments in the law and acquire familiarity with modern methods and techniques of judicial decision-making. The world is changing fast and in our own country, vast social and economic changes are taking place. There is a revolution of rising expectation amongst millions of human beings who have so far been consigned to a life of abject poverty, hunger and destitution. Law has, for the first time, adopted a positive approach and come out openly in the service of the weaker sections of the community. It has ceased to be merely an instrument providing a framework of freedom in which men may work out their destinies. It has acquired a new dimension, a dynamic activism and it is now directed towards achieving socio-economic justice which encompasses not merely a few privileged classes but the large masses of our people who have so far been denied freedom and equality-social as well as economic-and who have nothing to hope for and to live for. Law strives to give them social and economic justice and it has, therefore, necessarily to be weighted in favour of the weak and the exposed. This is the new law which judges are now called upon to administer and it is, therefore, essential that they should receive proper training which would bring about an orientation in their approach and outlook, stimulate sympathies in them for the vulnerable sections of the community and inject a new awareness and sense of public commitment in them. They should also be educated in the new trends in penology and sentencing procedures so that they may learn to use penal law as a tool for reforming and rehabilitating criminals and smoothening out the uneven texture of the social fabric and not as a weapon, fashioned by law, for protecting and perpetuating the hegemony of one class over the other. Be that as it may, it is clear that the learned Sessions Judge was not aware of the provision in s. 235(2) and so also was the lawyer of the appellant in the High Court unaware of it. No inference can, therefore, be drawn from the omission of the appellant to raise this point, that he had nothing to Say in regard to the sentence and that consequently no prejudice was caused to him. So far as s. 465 of the Code of Criminal Procedure, 1973 is concerned, I do not think it can avail the State in the present ease. In the first place, non-compliance with the requirement of s. 235(2) cannot be described as mere irregularity in the course of the trial curable under s. 465. It is much more serious. It amounts to by passing an important stage of the trial and omitting it altogether, so that the trial cannot be aid to be that contemplated in the Code. It is a different kind of trial conducted in a manner different from that prescribed by the Code. This deviation constitutes disobedience to an express provision of the Code as to the mode of trial, and as pointed out by the Judicial Committee of the Privy Council in Subramania Iyer v. King Emperor, (1901) 28 IA 257, such a deviation cannot be regarded as a mere irregularity. It goes to the root of the matters and the resulting illegality is of such a character that it vitiates the sentence. … Secondly, when no opportunity has been given to the appellant to produce material and make submissions in regard to the sentence to be imposed on him, failure of justice must

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be regarded as implicit. S. 465 cannot, in the circumstances, have any application in a case like the present. I accordingly allow the appeal and whilst not interfering with the conviction of the appellant under s. 302 of the Indian Penal Code, set aside the sentence of death and remand the case to the Sessions Court with a direction to pass appropriate sentence after giving an opportunity to the appellant to be heard in regard to the question of sentence in accordance with the provision of s. 235 (2) as interpreted by me. Justice Fazal Ali (for himself, concurring) I entirely agree with the judgment proposed by my learned brother Bhagwati, J., and I am at one with the views expressed by him in his judgment, but I would like to add a few lines of my own to highlight some important aspects of the question involved in this appeal. In this appeal by special leave which is confined only to the question of sentence an interesting question of law arises as to the interpretation of the provisions of s. 235(2) of the Code of Criminal Procedure, 1973 – hereinafter after referred to as “the 1973 Code”. In the light of the arguments advanced before us by the parties the question may be framed thus: Does the non-compliance with the provisions of s. 235(2) of the 1973 Code vitiate the sentence passed by the Court? In order to answer this question it may be necessary to trace the historical background and the social setting under which s. 235(2) was inserted for the first time in the 1973 Code. It would appear that the 1973 Code was based on a good deal of research done by several authorities including the Law Commission which made several recommendations for revolutionary changes in the provisions of the previous Code so as to make the 1973 Code in consonance with the growing needs of the society and in order to solve the social problems of the people. Apart from introducing a number of changes in the procedure, new rights and powers were conferred on the Courts or sometimes even on the accused. For instance, a provision for anticipatory bail was introduced to enable the, accused to be saved from unnecessary harassment. In its Forty-Eighth Report the Law Commission, while recommending the insertion of a provision which would enable the accused to make a representation against the sentence to be imposed after the judgment of conviction had been passed, observed as follows: It is now being increasingly recognised that a rational and consistent sentencing policy requires the removal of several deficiencies in the present system. One such deficiency is the lack of comprehensive information as to characteristics and background of the offender. We are of the view that the taking of evidence as to the circumstances relevant to sentencing should be encouraged, and both the prosecution and the accused should be allowed to co-operate in the process.

In the aims and objects of 1973 Code which have been given clause by clause, a reference to this particular provision has been made thus: If the judgment is one of conviction, the accused will be given an opportunity to make his representation, if any, on the punishment proposed to be awarded and such representation shall be taken into consideration before imposing the sentence. This last provision has been made because it may happen that the accused may have some grounds to urge for giving him consideration in regard to the sentence such as that he is the bread-winner of the family of which the Court may not be made aware during the trial.

Para 6(d) of the statement of objects and reasons of the 1973 Code runs thus: 6. Some of the more important changes intended to provide relief to the poorer sections of the community are:

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(d) the accused will be given an opportunity to make representation against the punishment before it is imposed.

The statement of objects and reasons further indicates that the recommendations of the Law Commission were examined carefully keeping in view, among others, the principle that “an accused person should get a fair trial in accordance with the accepted principles of natural justice”. In these circumstances, therefore, I feel that the provisions of s. 235 (2) are very salutary and contain one of the cardinal features of natural justice, namely, that the accused must be given an opportunity to make a representation against the sentence proposed to be imposed on him. A perusal of [section 235] clearly reveals that the object of the 1973 Code was to split up the sessions trial or the warrant trial, where also a similar provision exists, into two integral parts – (i) the stage which culminates in the passing of the judgment of conviction or acquittal; and (ii) the stage which on conviction results in imposition of sentence on the accused. Both these parts are absolutely fundamental and non-compliance with any of the provisions would undoubtedly vitiate the final order passed by the Court. The two provisions do not amount merely to a ritual formula or an exercise in futility but have a very sound and definite purpose to achieve. S. 235 (2) of the 1973 Code enjoins on the Court that after passing a judgment of conviction the Court should stay its hands and hear the accused on the question of sentence before passing the sentence in accordance with the law. This obviously postulates that the accused must be given an opportunity of making his representation only regarding the question of sentence and for this purpose he may be allowed to place such materials as he may think fit but which may have bearing only on the question of sentence. The statute, in my view, seeks to achieve a socio-economic purpose and is aimed at attaining the ideal principle of proper sentencing in a rational and progressive society. The modern concept of punishment and penology has undergone a vital transformation and the criminal is now not looked upon as a grave menace to the society which should be got rid of but is a diseased person suffering from mental malady or psychological frustration due to subconscious reactions and is, therefore, to be cured and corrected rather than to be killed or destroyed. There may be a number of circumstances of which the Court may not be aware and which may be taken into consideration by the Court while awarding the sentence, particularly a sentence of death, as in the instant case. It will be difficult to lay down any hard and fast rule, but the statement of objects and reasons of the 1973 Code itself gives a clear illustration. It refers to an instance where the accused is the sole breadearner of the family. In such a case if the sentence of death is passed and executed it amounts not only to a physical effacement of the criminal but also a complete socio-economic destruction of the family which he leaves behind. Similarly there may be cases, where, after the offence and during the trial, the accused may have developed some virulent disease or some mental infirmity, which may be an important factor to be taken into consideration while passing the sentence of death. It was for these reasons that s. 235(2) of the 1973 Code was enshrined in the Code for the purpose of making the Court aware of these circumstances so that even if the highest penalty of death is passed on the accused he does not have a grievance that he was not heard on his personal, social and domestic circumstances before the sentence was given. My learned brother has very rightly pointed out that our independence has led to the framing of numerous laws on various social concepts and a proper machinery must be evolved to educate not only the people regarding the laws which have been made for their benefit but also the Courts, most of whom are not aware of some of the recent and the new provisions. It is, therefore, the prime need of the hour to set up Training Institutes to impart the new judicial recruits or even to serving judges with the changing trends of judicial thoughts and the new ideas which the new judicial approach has imbibed over the years as a result of the influence of new circumstances that have come into existence.

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The next question that arises for consideration is whether noncompliance with s. 235(2) is merely an irregularity which can be cured by s. 465 or it is an illegality which vitiates the sentence. Having regard to the object and the setting in which the new provision of s. 235(2) was inserted in the 1973 Code there can be no doubt that it is one of the most fundamental part of the criminal procedure and non-compliance thereof will ex facie vitiate the order. Even if it be regarded as an irregularity the prejudice caused to the accused would be inherent and implicit because of the infraction of the rules of natural justice which have been incorporated in this statutory provision, because the accused has been completely deprived of an opportunity to represent to the Court regarding the proposed sentence and which manifestly results in a serious failure of justice. There is abundant authority for this proposition to which reference has been made by my learned brother. The last point to be considered is the extent and import of the word “hear” used in s. 235(2) of the 1973 Code. Does it indicate, that the accused should enter into a fresh trial by producing oral and documentary evidence on the question of the sentence which naturally will result in further delay of the trial? The Parliament does not appear to have intended that the accused should adopt dilatory tactics under the cover of this new provision but contemplated that a short and simple opportunity has to be given to the accused to place materials if necessary by leading evidence before the Court bearing on the question of sentence and a consequent opportunity to the prosecution to rebut those materials. The Law Commission was fully aware of this anomaly and it accordingly suggested thus: We are aware that a provision for an opportunity to give evidence in this .respect may necessitate an adjournment; and to avoid delay adjournment, for the purpose should, ordinarily be for not more than 14 days. It may be so provided in the relevant clause.

It may not be practicable to keep up to the time-limit suggested by the Law Commission with mathematical accuracy but the Courts must be vigilant to exercise proper control over the proceedings so that the trial is not unavoidably or unnecessarily delayed. I, therefore, agree with the order of my learned Bhagwati, J., that the appeal should be allowed on the question of the sentence and the, matter should be sent back to the Trial Court for giving an opportunity to the accused to make a representation regarding the sentence proposed. …

CASE STUDY 2 – BHAIJI V. SUB-DIVISIONAL OFFICER, THANDALA (2003) 1 SCC 692 Bench – Justices R. C. Lahoti, Brajesh Kumar and Arun Kumar Justice Lahoti (for the Court) The M.P. Land Revenue Code 1959 (Act No. 20 of 1959) was enacted by the Legislative Assembly of Madhya Pradesh to consolidate and amend the law relating to land revenue, the powers of Revenue Officers, rights and liabilities of holders of land from the State Government, agriculture tenures and other matters relating to land and the liabilities incidental thereto in Madhya Pradesh. There were different laws relating to land revenue, land tenure and other matters touching thereto prevalent in the different regions of the State and the Legislature considered it desirable that there should be one uniform law enacted for whole of the State. There are tribal land holders in many a regions of the State of Madhya Pradesh. The Code took care to enact some special provisions taking special care for protecting the interest of such tribals.

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In the year 1980, the State Legislature enacted the Madhya Pradesh Land Revenue Code (Amendment) Act 1980 (Act No. 59 of 1980) whereby certain amendments were incorporated and a few new provisions were inserted into the body of the Code. One such amendment is the insertion of Section 170-B which read as under: 170-B. Reversion of land of member of aboriginal tribe which was transferred by fraud- (1) Every person who on the date of commencement of the Madhya Pradesh Land Revenue Code (Amendment) Act, 1980, (hereinafter referred to as the Amendment Act of 1980) is in possession of agricultural land which belonging to a member of a tribe which has been declared to be an aboriginal tribe under sub-s. (6) of s. 165 between the period commencing on the 2nd October, 1959 and ending on the date of the commencement of Amendment Act of 1980 shall, within one year of such commencement, notify to the Sub-Divisional Officer in such form and in such manner as may be prescribed, all the information as to how he has come in possession of such land: (2) If any person fails to notify the information as required by sub-section (1) within the period specified therein it shall be presumed that such person has been in possession of the agricultural land without any lawful authority and the agricultural land shall, on the expiration of the period aforesaid revert to the person to whom it originally belonged and if that person be dead, to his legal heirs; (3) On receipt of the information under sub-section (1), the Sub-Divisional Officer shall make such enquiry as may be deemed necessary about all such transactions of transfer and if he finds that the member of aboriginal tribe has been defrauded of his legitimate right he shall declare the transaction null and void and pass an order revesting the agricultural land in the transferor and, if he be dead, in his legal heirs.

Subsequently, there have been a few changes incorporated in the next of Section 170-B abovesaid. For example, the period of one year specified in sub-S. (1) of Section 170-B later on came to be enlarged to one and a half years and then to two years as it now stands. Similarly, sub-S. (3) has been recast by virtue of notification No.1-70-VII-N-2-83 dated 5th January 1984 issued under sub-paragraph 1 of paragraph 5 of the Fifth Schedule to the Constitution of India which amendment we are ignoring for the purpose of this judgment as the language of the essential part of the sub-S. (3) remains as before and what has been amended is the consequential direction required to be made where certain building or structure have come up on the land forming subject matter of enquiry under sub-S. (3). However, subSection (2-A) was inserted between sub-Ss. (2) and (3) by Act No. 1 of 1998 passed by the State Legislature which reads as under: 170-B. (2-A) If a Gram Sabha in the Scheduled area referred to in cl. (1) of Art. 244 of the Constitution finds that any person, other than a member of an aboriginal tribe, is in possession of any land of a Bhumiswami belonging to an aboriginal tribe, without any lawful authority, it shall restore the possession of such land to that person to whom it originally belonged and if that person is dead to his legal heirs Provided that if the Gram Sabha fails to restore the possession of such land, it shall refer the matter to the Sub-Divisional Officer, who shall restore the possession of such land within three months from the date of receipt of the reference. (emphasis supplied)

The land forming subject matter of these proceedings was owned by Bhikala and Thanwaria who are members of a tribe which has been declared to be an aboriginal tribe under sub-S. (6) of S. 165 of the Code as contemplated by Section 170-B(1). The appellant too claims to be a similar aboriginal tribal. It appears that the land was sold by the aboriginal tribal bhumiswamis through registered sale deeds and it came to be purchased by the appellant. All these transactions have taken place between 2nd October 1959 and the date of the commencement of the Amendment Act of 1980, meaning thereby, during the period attracting applicability of Section 170-B(1). The appellant did not furnish the information in the form and in the manner prescribed within the period of two years. In the year 1982-83, the SubDivisional Officer, Thandla Petlawad, Distt. Jhabua, within whose jurisdiction the land is situated, initiated proceedings under Section 170-B of the Code by calling upon the appellant to show cause in response to the notice issued by the SDO. Soon on service of the notice the appellant filed a writ petition

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in the High Court of Madhya Pradesh submitting that the appellant and the vendor bhumiswamis, both being aboriginal tribals notified u/s. 165(6) of the Code, the applicability of Section 170-B was not attracted and therefore the notice issued by the SDO was illegal, uncalled for and without any authority in law. The challenge has been rejected by the High Court. The singular contention advanced by Shri S.K. Gambhir, the learned senior counsel for the appellant, is that looking to the scheme of the Code specially Sections 165, 168, 170-A and 170-B thereof, it is clear that what Section 170-B proposes to embrace within its fold are such transactions as are fraudulent and entered into by aboriginal tribals in favour of non-tribals. The Code does not contemplate any enquiry into and consequent annulling of transactions or reverting back of land from the person in possession to the aboriginal tribe bhumiswami where both the parties are aboriginal tribals notified u/s. 165(6) of the Code. Strong reliance was placed on the statement of object and reasons and the language employed by the Legislature in framing sub-Section (2-A) of the Code. The statement of object and reasons appended to the M.P. Land Revenue Code (Amendment) Bill 1980, as published in M.P. Government Gazette dated 26.9.1980, so far as Section 170-B abovesaid is concerned, is as under: Clause 10. – All transfers made by members of aboriginal tribes to non-tribals between 2.10.1959 and the date of commencement of the proposed measure will be subject to review and the burden of providing all the necessary information of such transactions and thereby establishing that such transactions were not made due to use of fraudulent methods will be on the purchaser. Failure to notify the information would meet with a consequence of reverting the land to the original aboriginal (emphasis supplied)

Shri Gambhir submitted that the statement of objects and reasons makes it very clear that the Legislature had intended to enact the provision for enquiry into transfers made by members of aboriginal tribe to non-tribals. The same inference follows from the language employed by the State Legislature in drafting sub-Section (2-A) of the Code. Challenge to vires of Section 170-B abovesaid along with Section 170-A was laid before a Division Bench of the High Court of Madhya Pradesh in Dhirendra Nath Sharma vs. State of Madhya Pradesh, AIR 1986 MP 122. Justice J.S. Verma speaking for the Division Bench, upheld the constitutional validity of Section 170-A and Section 170-B both. The history of legislation resulting in enactment of Section 170-B has been succinctly set out by the Division Bench in its judgment and it is not necessary to restate the same hereat and if needed the reference can be had to the reported decision. Suffice it to observe that the Division Bench, by tracking the legislative history, concluded that the impugned provisions form a part of the principles of distributive justice by avoidance of illegal transactions of transfers of agricultural lands by members of the aboriginal tribes who were unequals and the legislation is also in implementation of the directive principle contained in Art. 46 of the Constitution, which enjoins the State to protect the Scheduled Castes and Scheduled Tribes from all social injustice and from all forms of exploitation. It is true that the Division Bench of the High Court has made a reference to illegal transactions of transfers of agricultural land by members of the aboriginal tribes to non-tribals in these transactions. But that is so because the Division Bench was dealing with the petition filed by a non-tribals and did not have an occasion to examine the transfers as amongst tribals inter se. It is well known that some of the aboriginal tribes are nomadic and some indulge into crimes traditionally and historically. The purpose of settling land with the tribals mostly which is done at very concessional rates and at times even without involving an obligation to pay the land revenue, is so done with a view to see that the aboriginals settle at one place abandoning nomadism and picking up tilling the soil as their vocation by settling at one place and earning livelihood by labour and toil. It is also well

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known that creamy layers have developed and even as amongst socially unprivileged some have acquired affluence. An affluent shrewd tribal may indulge in exploiting his fellow beings. Possibility cannot be ruled out where a non-tribal may manage to have land transferred apparently but not in reality in the name of a tribal and taking advantage of his status, affluence or any other means, conferring him with capacity to exploit, may till the land to his own advantage depriving the aboriginal tribal from the benefits of the land settled by the State with him. All such cases are taken care of by Section 170-B. The purpose of enacting Section 170-B of the Code is very wide. The object sought to be achieved, as its drafting indicates, is to gather and make available all statistics with the State officials so as to find out how much land belonging to aboriginal tribals is in possession of anyone to whom it does not belong as on the cut off date. The information having been collected for the enquiry under sub-S. (3) shall be directed towards finding out the nature of transactions resulting into transfer of land - whether such transaction of transfer has resulted in the aboriginal tribals having been defrauded of his legitimate right in the land? Sub-Sections (1), (2) and (3), as enacted in 1980, have to be read as part of one whole scheme. If the submission of Shri Gambhir is correct then the object of enquiry under sub-S. (3) would have been to find out if such transaction of transfer has resulted in an aboriginal tribal having been defrauded of his legitimate right by person not belonging to aboriginal tribe. But that is not so. Nowhere in the entire scheme of sub-Sections (1), (2) and (3) of Section 170B, as enacted in 1980, there is the least indication of confining the applicability of the provision to such transactions of transfer as were entered into by a member of aboriginal tribe in favour of a member not belonging to aboriginal tribe. No exception has been enacted by the Legislature so as to exclude from the purview of Section 170-B transactions of transfer between two persons both of whom are members of aboriginal tribes. Had it been so, the Legislature would have specifically said so. The language of the Section as drafted in 1980 is clear and unambiguous and does not admit of any doubt so far as this aspect is concerned. Sub-Section (2-A) came to be enacted in 1998. An attempt at placing construction on the language of a statute enacted in the year 1980 and trying to find out its meaning and extent of operation by reference to the words employed in drafting a piece of legislation in the year 1998 may not be countenanced by principles of interpretation. Sub-Section (2-A) contemplates a limited category of cases where (i) any person other than a member of an aboriginal tribe is in possession of any land of a bhumiswami belonging to an aboriginal tribe, and (ii) without any lawful authority. The power is conferred on the Gram Sabha. It contemplates a summary and quick remedy for restoration of possession so as to provide quick relief at the hands of a local body to an aboriginal tribe on the twin conditions being satisfied. The very fact that the language employed by the Legislature in 1998 while drafting sub-Section (2-A) is materially different from the language employed by it in 1980 while drafting sub-Sections (1), (2) and (3) of Section 170-B, is rather suggestive of the fact that the Legislature was conscious of the wide scope of the original provision and therefore kept the scope of sub-Section (2-A) confined to a limited category of transactions as the power was being conferred on Gram Sabha, The essential ingredient vitiating the transaction of transfer under Section 170-B as enacted in 1980 is fraudulent nature of transaction resulting in deprivation of legitimate right of an aboriginal tribal while all that is required to be seen for the purpose of sub-Section (2-A) as inserted in 1998 is transfer by an aboriginal tribal in favour of an non-aboriginal tribal and that transfer being without any lawful authority; without regard to the nature of transactions - whether it is fraudulent or not. Sub-sections (1), (2) and (3) of Section 170-B employ the expressions ‘every person’, ‘any person’ and ‘all such transactions of transfer’ respectively; Sub-section (2-A) speaks of 'any person, other than a member of aboriginal tribe'. That is a material distinction. The Division Bench of Madhya Pradesh High Court in Dhirendra Nath Sharma’s case has held that sub-S. (2) would not result in the person in possession being divested of his land without an enquiry

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under sub-S. (3) though sub-S. (2) by itself does not speak of any enquiry. In spite of failure to furnish information within the period prescribed by sub-Section (1), the consequence which flows is the raising of a presumption, not conclusive but a rebuttable one, which shall be taken into consideration while holding an enquiry under sub-S. (3). This interpretation was placed by the Division Bench in Dhirendra Nath Sharma's case because it was necessary to do so for saving sub-S. (2) from being rendered ultra vires the Constitution. One of the submissions made before the Division Bench was that the person in possession of the land would be deprived of means of livelihood necessary for his existence without any enquiry and that would contravene Art. 21 of the Constitution. It was submitted before the Division Bench by the learned Additional Advocate General appearing for the State that the practice which was being followed by the Sub-Divisional Officers of the State was to hold an enquiry under sub-S. (3) and then pass a final order irrespective of the fact whether the person in possession has notified the information as required by subS. (1) or not. The Division Bench held that the fact that an order contemplated by sub-S. (3) has to be passed even in cases falling within the ambit of sub-S. (2) it is sufficient to indicate that there is no usurpation of judicial function thereby and there is no arbitrariness in the procedure nor is there the vice of absence of enquiry. This was further explained by another Division Bench of Madhya Pradesh High Court in Atmaram Rohulla v. State of M.P., AIR 1995 MP 225. Reference to the Statement of Objects and Reasons is permissible for understanding the background, the antecedent state of affairs, the surrounding circumstances in relation to the statute, and the evil which the statute sought to remedy. The weight of judicial authority leans in favour of the view that Statement of Objects and Reasons cannot be utilized for the purpose of restricting and controlling the plain meaning of the language employed by the Legislature in drafting statute and excluding from its operation such transactions which it plainly covers. The learned senior counsel for the appellant placed strong reliance on Girdhari Lal and Sons vs. Balbir Nath Mathur, (1986) 2 SCC 237 wherein it has been held that the courts can by ascertaining legislative intent place such construction on statute as would advance its purpose and object. Where the words of statute are plain and unambiguous, effect must be given to them. The Legislature may be safely presumed to have intended what the words plainly say. The plain words can be departed from when reading them as they are leads to patent injustice, anomaly or absurdity or invalidation of a law. The Court permitted the Statement of Objects and Reasons Parliamentary Debates, Reports of Committees and Commissions preceding the Legislation and the legislative history being referred to for the purpose of gathering the legislative intent in such cases. The law so stated does not advance the contention of Shri Gambhir. The wide scope of transactions covered by the plain language of Section 170-B as enacted in 1980 cannot be scuttled or narrowed down by reading the Statement of Objects and Reasons. It is true that in Dhirendra Nath’s case the Division Bench makes a casual reference to ‘avoidance of illegal transactions of transfers of agricultural land by members of aboriginal tribes who were unequals with the non-tribes in these transactions’, but that observation about the legislative history of the provision is clearly based on the Statement of Objects and Reasons. The Division Bench was not dealing with the question whether the case of a tribal in possession of agricultural land of another tribal would attract applicability of Section 170-B(1) or not; nor was it dealing specifically with the question whether a transaction of transfer, the transferor wherein is a member of aboriginal tribe though made in favour of a similar member would be covered by sub-s. (3) or not even if the transaction has resulted in a member of a aboriginal tribe being defrauded of his legitimate right. The expression employed by the Division Bench while dealing with legislative history of the enactment cannot be pressed in service for supporting the submission seeking to restrict and narrow down the application of the provision. …

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The petition filed by the writ petitioner before the High Court was entirely misconceived and, in a way, premature. The show cause notice issued by the Sub-Divisional Officer cannot be said to be without jurisdiction. The appellant should have participated in the enquiry after showing cause. Instead he chose to rush post haste to the High Court. The High Court rightly turned down the writ petition. The appeal is held devoid of any merit and is liable to be dismissed. It is dismissed accordingly though without any order as to the costs. …

USE OF PARLIAMENTARY HISTORY & PRE-LEGISLATIVE REPORTS This is also a particularly contested area is the realm of Statutory Interpretation. The use of Parliamentary History (or drafting history) may be divided into two parts for the purpose of our study. First is its use in interpretation of statutes and second is its use in Constitutional Interpretation. The second part will be addressed later. The first may further be divided broadly into three areas – (i) use of the speeches made in the legislature during the bill is being debated; (ii) the several drafts of the bill that may have been considered by the legislature and/or any special committee set up to so consider; and (iii) a pre-legislative report (either by a special committee appointed by the legislature, the government or a special body like the Law Commission of India). The traditional position in this regard, especially in the context of the speeches made while the bill was being debated in the legislature is captured in the following observation made in State of Travancore-Cochin v. Bombay Co., AIR 1952 SC 365: A speech made in the course of the debate on a bill could at best be indicative of the subjective intent of the speaker, but it could not reflect the inarticulate mental process lying behind the majority vote which carried the bill. Nor is it reasonable to assume that the minds of all those legislators were in accord.

This traditional view, say Singh in his authoritative commentary Principles of Statutory Interpretation (13 ed.) was based on the British view. However, the traditional view is no longer good law because there are several reported decisions of the Supreme Court of India as well as of the highest court(s) in England, where these materials have been used as interpretive tools. There are several leading opinions of the Supreme Court where in order to interpret a particular constitutional provision resort has been had to the speeches of the leading members of the Constituent Assembly. Some of those will be examined later. But what of the use of the same materials to interpret a statute? Let us examine the following two case, the first of which is a leading opinion of the Supreme Court in the realm of constitutional law, Kartar Singh v. State of Punjab, (1994) 3 SCC 569 (Constitution Bench, 5 judges). In this the constitutional validity of the dreaded Terrorist and Disruptive Activities (Prevention) Act, 1985 (TADA) along with a few other similar Parliamentary legislations was challenged. Note carefully in this case how the majority opinion refers to the speeches of the M.P.s made during the bill was being debated in order to understand the context of law in order to determine the question of its constitutional validity. The second case, Commissioner of Income Tax v. Sodra Devi, AIR 1957 SC 832 is a three judge bench decision. The question in case was about construction of a provision in the Income Tax Act that was enacted to tackle a particular problem of tax evasion. The Court elaborately referred to the Income Tax Enquiry Report of 1936 that resulted in the enactment of the provision under question. And lastly, since British legal thought on this point is weighs heavily, we will examine briefly the House of Lords opinion Pepper v. Hart, (1993) 1 All.E.R. 42, which has brought about a change in the British legal though with regards to use of these materials as

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interpretive tools. Note that only the relevant observations as to the use of parliamentary debates is being studies, without going into the factual details of the case (this case was an income tax dispute). CASE STUDY 1 – KARTAR SINGH V. STATE OF PUNJAB (1994) 3 SCC 569 Bench - Justice S. Ratnavel Pandian, M. M. Punchhi, K. Ramaswamy, S. C. Agrawal & R. M. Sahai Justice Pandian (for himself, Justices Punchhi & Agrawal concurring, Majority Opinion) [The Terrorist Affected Areas (Special Courts) Act, 1984, Terrorist and Disruptive Activities (Prevention) Act, 1985, Terrorist and Disruptive Activities (Prevention) Act, 1987, Section 9 of the Code of Criminal Procedure (U.P. Amendment) Act, 1976 (by which section 438 of the Code of Criminal Procedure as applicable to Uttar Pradesh was deleted), U.P. Gangsters and Anti-Social Activities (Prevention) Act, 1986, Prevention of Illicit Traffic of Narcotic Drugs and Psychotropic Substances Act, 1988 and some provisions of Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974 (COFEPOSA) were challenged. However, arguments were heard only qua the vires of Terrorist Affected Areas (Special Courts) Act, 1984, Terrorist and Disruptive Activities (Prevention) Act, 1985, Terrorist and Disruptive Activities (Prevention) Act, 1987 and Section 9 of the Code of Criminal Procedure (U.P. Amendment) Act, 1976]

… Before we make an in-depth examination of the challenges canvassed which are manifestly and pristinely legal, with regard to the impugned Acts and some of their provisions with a comprehensive and exclusive survey, it has become inevitable for us to give a brief sketch of the historical background and the circumstances which forced the legislature to enact these laws, as gathered from the parliamentary debates, Statement of Objects and Reasons and prefatory notes of the impugned Acts, etc., etc. From the recent past, in many parts of the world, terrorism and disruption are spearheading for one reason or another and resultantly great leaders have been assassinated by suicide bombers and many dastardly murders have been committed. Deplorably, determined youths lured by hardcore criminals and underground extremists and attracted by the ideology of terrorism are indulging in committing serious crimes against the humanity. In spite of the drastic actions taken and intense vigilance activated, the terrorists and militants do not desist from triggering lawlessness if it suits their purpose. In short, they are waging a domestic war against the sovereignty of their respective nations or against a race or community in order to create an embryonic imbalance and nervous disorder in the society either on being stimulated or instigated by the national, transnational or international hard-core criminals or secessionists etc. Resultantly, the security and integrity of the countries concerned are at peril and the law and order in many countries is disrupted. To say differently, the logic of the cult of the bullet is hovering the globe completely robbing off the reasons and rhymes. Therefore, every country has now felt the need to strengthen vigilance against the spurt in the illegal and criminal activities of the militants and terrorists so that the danger to its sovereignty is averted and the community is protected. Thus, terrorism and disruptive activities are a worldwide phenomenon and India is not an exception. Unfortunately in the recent past this country has fallen in the firm grip of spiraling terrorists’ violence and is caught between the deadly pangs of disruptive activities. As seen from the Objects and Reasons of the Act 31 of 1985, “Terrorists had been indulging in wanton killings, arson, looting of properties and other heinous crimes mostly in Punjab and Chandigarh” and then slowly they expanded their activities to other parts of the country i.e. Delhi, Haryana, U.P. and Rajasthan. At present they have outstretched their activities by spreading their wings far and wide almost bringing the major part of the country under the extreme violence and terrorism by letting loose unprecedented and unprovoked repression and disruption unmindful of the security of the nation, personal liberty and right, inclusive

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of the right to live with human dignity of the innocent citizens of this country and destroying the image of many glitzy cities like Chandigarh, Srinagar, Delhi and Bombay by strangulating the normal life of the citizens. Apart from many skirmishes in various parts of the country, there were countless serious and horrendous events engulfing many cities with blood-bath, firing, looting, mad killing even without sparing women and children and reducing those areas into a graveyard, which brutal atrocities have rocked and shocked the whole nation. Everyday, there are jarring pieces of information through electronic and print media that many innocent, defenseless people particularly poor, politicians, statesmen, government officials, police officials, army personnel inclusive of the jawans belonging to Border Security Force have been mercilessly gunned down. No one can deny these stark facts and naked truth by adopting an ostrich like attitude completely ignoring the impending danger. Whatever may be the reasons, indeed there is none to deny that. The speeches made by the then Home Minister, the then Minister of State for Home Affairs and many Members of Parliament during the debates at the time of the introduction of the Act of 1987 and at the subsequent stage of its extension and modification, would unfold the magnitude and seriousness of the terrorist and disruptive activities and their consequent dangerous impact on the security of the nation. On April 8, 1988, the then Home Minister in his speech before the Lok Sabha stated thus: As I told in the beginning, the forces working to destabilize the country are being encouraged from outside as well as inside of the country… According to the information received, it appears that its master mind is somewhere else and it is also inside.

The then Minister of State for Home Affairs gave an extensive speech with regard to the commission of heinous crimes on a large scale not only threatening the security and territorial integrity of the nation but also extremely affecting the normal life of the people and stressed the importance of the enactment of law providing the special procedure and speedy trial of those offenses. One of the Members of Parliament (Shri Kamal Chaudhary) expressing his view during the discussion on the Bill on the Terrorists and Disruptive Activities (Prevention) Act, 1987 stated: … Punjab is burning. The legend goes that in the rivers of Punjab milk used to flow but they are now drenched with blood. There is hatred all over. What is a democratic solution for Punjab … How many women are beating their breasts every night? We feel the pinch only when our near and dear ones get killed.

Yet another Member of Parliament (Shri Anoopchand Shah) speaking on the Bill presented before the House said: Today terrorism has not remained confined to Punjab only. It has rather spread to every corner of the country. The same terrorism which exists in Punjab is making its presence felt in Delhi and Maharashtra also…

Another Member of Parliament (Shri Jagan Nath Kaushal) taking part in the debate on the Act of 1987 spoke thus: … The Hon. Members know that we are not dealing with normal peaceful times. We are dealing with extraordinary times. Shri Satyendra Narayan Singh has said that not only for Punjab but do something for Bihar also because in the garb of political party etc. greater terrorism is prevailing there also.

We feel that it is not necessary to swell this judgment by reproducing the entire speeches made by the then Home Minister, the Minister of State for Home Affairs and some Members of Parliament on the atrocities committed by terrorists and disruptionists and on the necessity of bringing the Acts (TADA) to effectively prevent the consequent violence. But suffice to give the compelling reasons as shown in the Statements of Objects and Reasons for enacting the Acts of 1985 and Objects and Reasons for

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enacting the Acts of 1985 and 1987 which are to the effect that the terrorists and disruptionists by their expanded activities have created dreadful fear and panic in the minds of the citizens and disrupted communal peace and harmony; that their activities are on an escalation in many parts of the country; that it has been felt that in order to combat and cope with such activities effectively, it had become necessary to take appropriate legal steps effectively and expeditiously so that the alarming increase of these activities which are a matter of serious concern, could be prevented and severely dealt with. … It was only in the above prevailing circumstances, the Legislature has been compelled to bring forth these Acts (TADA) to prevent and deal with the peril of the erupting terrorism and the consequent potential disorder among others disrupting the law and order and to sternly deal with many groups lurking beneath the murky surface, aiding, abetting, nourishing and fomenting terrorism besides giving financial support and supplying sophisticated automatic lethal arms and ammunitions both from inside and outside of India. It may not be out of place to mention that the facts of the cases appealed against and set out in the writ petitions and SLP, if accepted in their entirety, reveal the multiple acts of violence let loose; and the acts of savage revenge perpetrated against individuals, group of persons or any particular community or religious sects show that the violent threat which has manifested itself is not evidently going to vanish with such inexplicable suddenness as would seem to have been visually presumed. In this context, a question may arise as to whether judges can take notice of matters of common knowledge and authenticated report. This question has been examined by a Full Bench of the High Court of Punjab and Haryana in Sukhdev Singh v. Union Territory, Chandigarh, AIR 1987 P&H 5. M.M. Punchhi, J. (as he then was) speaking for the majority observed: I know that in order to sustain the presumption of constitutionality of a legislative measure, the court can take into consideration matters of common knowledge, matters of common report, the history of the times and also assume every state of facts which can be conceived existing at the time of the legislation.

To redress all the multiple dimensions of crimes whether of national or transnational or international committed by individual or group of criminals, is of course a very difficult task because the crimes and criminals do not respect frontiers and the field of operation of the activities of the criminals know no territorial limits. The Parliament, evidently, taking note of the gravity of terrorism committed by terrorists either with an intention to overawe the Government as by law established or to strike terror in the people or any section of the people or to alienate any section of the people or to adversely affect the harmony amongst different sections of the people and the consequent widespread apparent danger to the nation, has felt the need of not only continuing but also further strengthening the provisions of TADA Act (Act 31 of 1985) in order to cope with the menace of terrorism, enacted Act 28 of 1987 bringing drastic changes with regard to the admissibility of confessions made to police officials prescribing special procedures and providing consign punishments etc., leave apart the question with regard to the validity of these provisions to be tested on the touchstone of the Constitution. Keeping in view the above historical background, we shall unbiasedly and without any preconceived notion, examine the various legal problems presented inclusive of the constitutional validity of the three Acts (TADA) in general and of the various provisions in particular of those Acts on the touchstone of the Constitution of India.

CASE STUDY 2 – COMMISSIONER OF INCOME TAX V. SODRA DEVI AIR 1957 SC 832

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Bench – Justices N. H. Bhagwati, S. K. Das and J. L. Kapur Justice Bhagwati (for himself and Justice Kapur) [Justice Das dissenting] … The facts leading up to these appeals may be shortly stated as under. Prior to October 18, 1944, one Rai Bahadur Narsingdas Daga (since deceased), his wife Shrimati Sodradevi (the assessee), and his three major and three minor sons constituted a joint and undivided Hindu family. There was a severance of joint status between the erstwhile members of the said joint family on October 18, 1944, and the joint family properties were accordingly partitioned. On such partition, the business of the Spinning and Weaving Mills and agency shop at Hinganghat fell to the share of the assessee and her three major and three minor sons. A partnership was entered into between the assessee and her three major sons for the purpose of carrying on the business of the Spinning and Weaving Mills and the agency firm at Hinganghat. The three minor sons of the assessee were admitted to the benefits of the partnership. The genuineness of the partnership was not disputed. The only question which arose for the consideration of the Tribunal was whether the income falling to the share of the three minor sons was liable to be included in the total income of the assessee. Oil a construction of s. 16 (3) (a) (ii) of the Act, the Tribunal held that the income falling to the shares of the three minor sons of the assessee was liable to be included in her total income. The assessee thereupon applied to the Tribunal for a reference to the High Court of Judicature at Nagpur of the question of law arising out of its order under s. 66 (1) of the Act and the Tribunal submitted a statement of case referring the following question of law for the determination of the High Court: Whether on a true construction of the provisions of s. 16 (3) (a) (ii) of the Indian Income-Tax Act, 1922, the income of the three minor sons of the assessee is liable to be included in her total income.

The High Court heard the reference and came to the conclusion that it was not the intention of the Legislature to include in the income of the mother, the income of her minor children arising from the benefits of partnership of a firm in which the mother is a partner and accordingly answered the referred question in the negative. The High Court, however, granted the necessary certificate under s. 66A (2) of the Act to the Commissioner of Income-tax, Madhya Pradesh and Bhopal, and hence Civil Appeal No. 322 of 1955 before us. One Ishwardas Sahni who died on November 7, 1946, was a partner in the firm of Messrs. Ishwardas Sahni & Bros. The firm’s accounting year ended on March 31, 1947. The said Ishwardas Sahni left him surviving his widow Damayanti (the assessee) and two minor sons. The assessee became a partner in the said firm which also admitted her two minor sons to the benefits of the partnership. The Income-tax authorities included the minor sons’ shares in the reconstituted firm's profits in computing the income of the assessee on the ground that “individual” in s. 16 (3) (a) (ii) of the Act meant an individual person of either sex. The Income-tax Appellate Tribunal held that the word “individual” must be taken as referring only to a male assessee wherever that occurred in s. 16 (3) and directed the deletion from the assessee’s income of the shares of her minor sons in the profits of the firm. At the instance of the Commissioner of Income-tax, Delhi, the Tribunal referred to the High Court of Punjab at Simla the question of law arising out of its order under s. 66 (1) of the Act together with a statement of case. The referred question was: Whether the word “individual” in S. 16(3) (a) (ii) of the Income Tax Act, 1922, includes also a female and whether the shares of the two minor sons of Shrimati Damayanti Sahni in the profits of the re-constituted firm of Messrs. Ishwardas Sahni and Brothers should be included in the income of Shrimati Damayanti Sahni in assessing her income, profits and gains.

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The High Court heard the reference and … answered the referred question in the affirmative. The assessee obtained the requisite certificate under s. 66A. Of the Act from the High Court and that is how Civil Appeal No. 25 of 1955 is before us. The common question of law which we have to determine in these appeals is whether the word “individual” in s. 16 (3) (a) (ii) of the Act includes also a female and the income of the minor sons derived from a partnership to the benefits of which they have been admitted is liable to be included in the income of the mother who is a member of that partnership. S. 16(3) of the Act provides: In computing the total income of any individual for the purpose of assessment, there shall be included(a) so much of the income of a wife or minor child of such individual as arises directly or indirectly: (i) from the membership of the wife in a firm of which her husband is a partner; (ii) from the admission of the minor to the benefits of the partnership in a firm of which such individual is a partner; (iii) from assets transferred directly or indirectly to the wife by the husband otherwise than for adequate consideration or in connection with an agreement to live apart; or (iv) from assets transferred directly or indirectly to the minor child, not being a married daughter, by such individual otherwise than for adequate consideration; and (b) so much of the income of any person or association of persons as arises from assets transferred otherwise than for adequate consideration to the person or association by such individual for the benefit of his wife or a minor child or both.

S. 3 of the Act may also be referred to in this context and it runs as follows: s. 3. Charge of Income Tax: Where any Central Act enacts that income-tax shall be charged for any year at any rate or rates, tax at that rate or those rates shall be charged for that year in accordance with, and subject to the provisions of this Act in respect of the total income of the previous year- of every individual, Hindu undivided family, company and local authority, and of every firm and other association of persons or the partners of the firm or the members of the association individually.

The same description of the assessee is also to be found in s. 4A, which deals with residence in the taxable territories, s. 48 dealing with refund and s. 58 dealing with the charge of super-tax. The word assessee is wide enough to cover not only an “individual” but also a Hindu undivided family, company and local authority and every firm and other association of persons or the partners of the firm or the members of the association individually. Whereas the word “individual” is narrower in its connotation being one of the units for the purposes of taxation than the word “assessee”, the word “individual” has not been defined in the Act and there is authority for the proposition that the word “individual” does not mean only a human being but is wide enough to include a group of persons forming a unit. It has been held that the word “individual” includes a Corporation created by a statute, e.g., a University or a Bar Council, or the trustees of a baronetcy trust incorporated by a Baronetcy Act. It would also include a minor or a person of unsound mind. If this is the connotation of the word “individual” it follows that when s. 16(3) talks of an “individual” it is only in a restricted sense that the word has been used. The section only talks of “individual” capable of having a wife or minor child or both. It therefore necessarily excludes from its purview a group of persons forming a unit or a corporation created by a statute and is confined only to human beings who in the context would be -comprised within that category. The Revenue urges before us that the word “individual” as used qua human beings is capable of including within its connotation a male as well as a female of the species and having regard to the context in which the word has been used in s. 16(3), it should be construed as meaning a male of the species when used in Juxtaposition with “a wife” and as meaning both a male and a female when used in juxtaposition with “minor child” so that when s. 16(3) talks of such individual" in sub-cls. (ii) and

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(iv) of cl. (a) thereof it refers to both a male and a female of the species so as to include within its compass not only a father of the minor child but also a mother. The assessees, on the other hand, contend that the word “individual” used in s. 16(3) is not used in its generic sense but is used in a restricted and narrower sense as connoting only human being and if it is thus restricted there is ample justification for restricting it still further to the male of the species when regarded in the context of s. 16(3). Sub-cls. (i) to (iv) of cl. (a) are specific cases where the income of a wife or a minor child of such “individual” arising directly or indirectly from the several sources therein indicated is to be included in computing the total income of the “individual” for the purpose of assessment and the word could not have been used in a different sense for the purposes of sub-cls. (i) and (iii) and sub cls. (ii) and (iv) of cl. (a). The word “such individual” as used in sub-cl. (a) can only have been used in one sense and one sense only and if that is the sense in which it could have been used “such individual” should be one who is capable of having a wife or minor child or both and that individual can only be a male of the species and not a female. The question for our determination is a very narrow one and it turns on the construction of s. 16(3) of the Act. The High Court of Madhya Pradesh plunged headlong into a discussion of the reasons which motivated the Legislature into enacting s. 16 (3) by Act IV of 1937, and took into consideration the recommendations made in the Income Tax Enquiry Report, 1936 and also the statement of objects and reasons for the enactment of the same, without considering in the first instance whether there was any ambiguity in the word “individual” as used therein. It is clear that unless there is any such ambiguity it would not be open to the court to depart from the normal rule of construction which is that the intention of the Legislature should be primarily gathered from the words which are used. It is only when the words used are ambiguous that they would stand to be examined and construed in the light of surrounding circumstances and Constitutional principle and practice (Per Lord Ashbourne in Nairn v. University of St. Andrews, (1909) A.C. 147). In the latter event the following observations of Lord Lindley M. R. in Thomson v. Lord Clanmorris (1900) 1 Ch. D. 718, 725) would be apposite: In construing any statutory enactment, regard must be had not only to the words used, but to the history of the Act and the reasons which led to its being passed. You must look at the mischief which had to be cured as well as at the cure provided" (See also the observations of Goddard C. J. in B. v. Paddington and St. Marylebone Rent Tribunal (1949) 65 T.L.R. 200).

The position in law has been thus enunciated in the judgment of Das, Actg. C.J. (as he then was) in the Bengal Immunity Company Limited v. State of Bihar (1955) 2 S.C.R. 603, 632: It is a sound rule of construction of a statute firmly established in England as far back as 1584 when Heydon’s Case (1584) 3 Co. Rep. 7a; 76 E.R. 637) was decided that … for the sure and true interpretation of all statutes in general (be they penal or beneficial, restrictive or enlarging of the common law) four things are to be discerned and considered: 1st. What was the common law before the making of the Act, 2nd. What was the mischief and defect for which the common law did not provide, 3rd. What remedy the Parliament hath resolved and appointed to cure the disease of the Commonwealth, and 4th. The true reason of the remedy; and then the office of all judges is always to make such construction as shall suppress the mischief, and advance the remedy, and to suppress subtle inventions and evasions for continuance of the mischief, and pro privato commodo, and to add force and life to the cure and remedy, according to the true intent of the makers of the Act, pro bono publico.

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In In re Mayfair Property Company (L.R. (1898) 2 Ch. 28, 35) Lindley M. R. in 1898 found the rule “as necessary now as it was when Lord Coke reported Heydon’s case”. In Eastman Photographic Materials Company v. Comptroller General of Patents, Designs and Trade Marks (1898) A.C. 571, 576) Earl of Halsbury re-affirmed the rule as follows: My Lords, it appears to me that to construe the statute now in question, it is not only legitimate but highly convenient to refer both to the former Act and to the ascertained evils to which the former Act had given rise, and to the later Act which provided the remedy. These three things being compared, I cannot doubt the conclusion.

The High Court of Punjab based its conclusion primarily on the use of the word “or” between the word “wife” and the words “minor child” in s. 16(3)(a) of the Act and it was of opinion that these words were used disjunctively and the “individual” referred to in s. 16(3) (a) of the Act may have a wife and minor child or may not have a wife but have a “minor child”. If the individual assessed to income tax is a female that individual will have no wife but she may have a minor child and therefore s. 16 (3) (a) of the Act does not imply that the individual must necessarily be a male. The argument based on the disjunctive user of the word “wife” and the words “minor child” is capable of being summarily disposed of. Even if the words “such individual” in s. 16 (3)(a) of the Act meant only a male of the species the word “wife” and the words “minor child” could only have been used with the word “or” in between. A male of the species may not necessarily have both a wife and a minor child. He may have a wife but no “minor child”. He may have a minor child but may have no wife at the relevant period. If therefore provision had to be made for the inclusion of the income of a wife or minor child or both in the total income of a male of the species the word “or” was absolutely necessary to be interposed between the word “wife” and the words “minor child”. To construe the word “or” as disjunctive between the word “wife” and the words “minor child” does not necessarily lead to the conclusion that the words “such individual” were used for both a male and a female of the species and were necessarily inconsistent with the user of those words for the male of the species if the context otherwise lead to that conclusion. The reasoning adopted by the learned Judges of the High Court of Punjab therefore does not clinch the matter. We have therefore got to examine whether the use of the word “individual” in s. 16(3) (a) of the Act is in any manner ambiguous. The opening words of s. 16(3) talk of “any individual” whose total income has got to be computed for the purpose of assessment and the words “such individual” used in s. 16(3) (a) have reference only to that individual. That individual must be an assessee and it is in the computation of his total income for the purpose of assessment that the income of the persons mentioned in cls. (a) and (b) have got to be included. Sub-cl. (a) refers to two distinct sets of persons bearing a relationship with “such individual”, the assessee. One is a wife and the other is a minor child. The case of the wife is dealt with in sub-cls. (i) and (iii) and the case of a minor child is dealt in sub-cls. (ii) and (iv). Sub-cls. (i) and (iii) use the word “her husband” or “the husband” in place of the words “such individual” with reference to the income derived by the wife in the circumstances therein mentioned, though, it may be observed that the user of the words “such individual’ would not have made the slightest difference to the position. Subcls. (ii) and (iv) which deal with a “minor child’ use the words “such individual” in relation to the minor child whose income under the circumstances therein mentioned has to be included in computing the total income of “such individual” for the purpose of assessment. Whereas the words used in sub-cls. (i) and (iii) are specific and refer only to “her husband” and “the husband” as “such individual”, the words used in sub-cls. (ii) and (iv) leave it indefinite as to which is meant by the words “such individual” whether a male and/or a female of the species. If the words used in all these four sub-clauses were to be harmoniously read and the two cases which are mentioned in sub-cls. (i) and (iii) are not to be read differently from the cases mentioned in sub-cls.

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(ii) and (iv) the only way in which the words “such individual” as used in sub-cls. (ii) and (iv) could be understood would be to read them as confined to a male of the species and not including the female. If these words “such individual” as used in sub cls. (ii) and (iv) are thus read restricted to a male of the species, all these sub-clauses would have reference only to the male of the species irrespective of the fact that the words “her husband” and “the husband” have been used in sub- cls. (i) and (iii) instead of the words “such individual”. If the words “such individual” had been used in sub-cls. (i) and (iii) as they have been used in sub-cls. (ii) and (iv) the position would have been just the same because in that event also we would have had to determine whether there was any justification for reading the words “such individual” used with reference to sub-cls. (i) and (iii) in any different sense from the same words “such individual” as used in sub-cls. (ii) and (iv). The crux of the question, therefore, is whether the words “such individual” used in the opening part of s. 16 (3) (a) are used to mean a male of the species when they are read in juxtaposition with the words “a wife” and are used to mean both a male as well as a female of the species, as the case may be, when used in juxtaposition with the words “minor child”. If that was the intention of the Legislature there was nothing to prevent it from dividing cl. (a) into two sub-clauses whether they were numbered (a) and (ai) or (a) and (b) respectively. The Legislature could as well have enacted the provisions in the manner following: (a): so much of the income of a wife of such individual as arises directly or indirectly; (i)from the membership of the wife in a firm of which her husband (or such individual) is a partner; or (ii) from assets transferred directly or indirectly to the wife by the husband (or such individual) otherwise than for adequate consideration or in connection with an agreement to live apart; (ai) or (b): so much of the income of a minor child of such individual as arises directly or indirectly; (i) from the admission of the minor to the benefits of the partnership in a firm of which such individual is a partner; or (ii) from assets transferred directly or indirectly to the minor child, not being a married daughter, by such individual otherwise than for adequate consideration. If these provisions had been enacted in the manner aforesaid it would have been possible to urge, as has been urged before us by the Revenue, that cl. (a) referred only to a male of the species who only could have a wife and cl. (ai) or (b) referred to a male and/or a female of the species. The Legislature however chose to adopt a peculiar mode of enactment either for the purpose of economy of words or structural beauty and mixed up both these sets of provisions into the enactment of cl. (a) of s. 16(3) of the Act as it stands at present. It rolled in both these sets of cases and used the words “a wife” or “minor child” of “such individual” raising thus the question of construction which has got to be determined by us. “Such individual” as is talked of in s. 16(3) (a) may have a wife, may have a minor child or may have both a wife and a minor child. When “such individual” is thought of in connection with a wife, it can only be a male of the species, but when "such individual" is thought of in connection with a minor child it can be both a male as well as a female of the species, though, of course, when “such individual” is thought of in connection with “both” then again it would have to be a male of the species and certainly not a female. Such an interpretation would lead to the interpretation of the same words “such individual” as meaning two different things in two different contexts. They would mean one thing when used in relation to “a wife” and would mean another thing when used in relation to a “minor child”. They would be capable of being understood in a narrower sense when used in connection with “a wife” and would be capable of being understood in a wider sense when used in connection with a “minor child”. One may as well question the elegance or the propriety of such user of the words “such individual” where the words “as

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the case may be” are necessarily to be imported in order to understand the true import of these words, when again they are used not in different parts of the same section but at one place only. If one turns to s. 16 (3) (b) the words used therein are “transferred … by ‘such individual’ for the benefit of his wife or a minor child or both”. There is the indefinite article “a” used before the words “minor child”. If that indefinite article “a” had not been used, the expression would have run “for the benefit of his wife or minor child or both” thus leaving no doubt at all that in cl. (b) at least the words “such individual” meant only a male of the species. It is urged however that the use of the indefinite article “a” shows that the words “his wife” and “minor child” mid “both” have been used disjunctively and should be read in the same manner as in s. 16(3)(a) of the Act. The words “his wife” would appropriately go with a male of the species but the words “a minor child” would appropriately go with a male as well as a female of the species, though the word “both” could only be appropriate in relation to a male of the species and not a female who can have a minor child but not both a wife and a minor child. The same want of elegance or propriety can be predicated of this expression also and the use of such expressions both in s. 16 (3)(a) and s. 16 (3)(b) raise questions of construction whether what was meant by the Legislature was only a male of the species in both these contexts or a male and/or female of the species, as the case may be, applying one or the other in accordance with the circumstances attendant, upon the computation of the total income of “any individual” for the purpose of assessment. We are of opinion that the very manner in which all the four sub-clauses have been grouped together in s. 16 (3) (a) and the manner in which the expression “for the benefit of his wife, a minor child or both” is used in s. 16 (3) (b) renders the words “any individual” or “such individual” ambiguous. There is no knowing with certainty as to whether the Legislature meant to enact these provisions with reference only to a male of the species using the words “any individual” or “such individual” in the narrower sense of the term indicated above or intended to include within the connotation of the words “any individual” or “such individual” also a female of the species, wherever appropriate which would of course only be possible in the cases contemplated in sub-cls. (ii) and (iv) of s. 16 (3)(a) and in one of the three cases contemplated in s. 16 (3)(b). The Legislature certainly was guilty of using, an ambiguous term in enacting s. 16 (3) of the Act as it did. In order to resolve this ambiguity therefore we must of necessity have resort to the state of the law before the enactment of the provisions; the mischief and defect for which the law did not provide; the remedy which the legislature resolved and appointed to cure the defect and; the true reason of the remedy within the meaning of the authorities referred to above. Before the enactment of s. 16 (3) of the Act by the Indian Income-tax (Amendment) Act, 1937 (IV of 1937), there was no provision at all for the inclusion of the income of a wife or a minor child in the computation of the total income of “any individual” for the purpose of assessment. Whatever may have been the income of a wife from her membership in a firm of which her husband was a partner or from assets transferred directly or indirectly to her by her husband otherwise than for adequate consideration or in connection with an agreement to live apart, her income was not included in the income of her husband in computing the total income of the husband for the purpose of assessment. Similar was the position in the case of income derived by a minor child from the admission of the minor to the benefits of partnership in a firm of which “such individual” was a partner or from assets transferred directly or indirectly to the minor child, not being a married daughter, by "such individual" otherwise than for adequate consideration. The income derived by such minor child could not be added to the income of the father for the purpose of assessment. The income derived by the wife or minor child could only be included in computing his or its total income for the purposes of assessment and neither the husband nor the father could be made liable for income-tax in respect of such income, whatever may be the reason which actuated them in providing such income for the wife or the minor child. The position was pregnant with difficulties for the Revenue.

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There were no doubt genuine cases where a wife or the minor child as the case may be, was provided with such income on bona fide severance of joint status between the erstwhile members of a joint and undivided Hindu family and where after such partition the adult member of the family entered into a bona fide -partnership admitting the minors to the benefits of the partnership. There were, on the other hand, innumerable cases where such severance of joint status was resorted to mainly with a view to evade a higher incidence of income tax. There were also cases where husbands and fathers provided shares for their wives and minor sons and thus evaded payment of income tax in regard to their shares in the profits of such partnerships. This evil was so rampant that the Income Tax Enquiry Report, 1936, recognised the same and made the following recommendations for remedying the situation (vide pp. 19 & 20 of the Report). CHAPTER III – Assessees Section I-Individuals. (a) Wife’s Income. Our attention has been drawn to the extent to which taxation is avoided by nominal partnerships between husband and wife and minor children. In some parts of the country, avoidance of taxation by this means has attained very serious dimensions. The obvious remedy for this state of affairs so far as husband and wife are concerned is the aggregation for assessment of their incomes, but such a course would involve aggregation in a quite different class of cases i.e., where the wife's income arises from sources unconnected with the husband … We recommend, therefore, that the incomes of a wife should be deemed to be, for income tax purposes, the income of her husband, but that where the income of the wife is derived from her personal exertions and is unconnected with any business of her husband, her income from her personal exertions up to a certain limit, say Rs. 500, should not be so included. (b) Income of Minor Children. There is also a growing and serious tendency to avoid taxation by the admission of minor children to the benefits of partnership in the father's business. Moreover, the admission is, as a rule, merely nominal, but being supported by entries in the firm's books, the Income-Tax Officer is rarely in a position to prove that the alleged participation in the benefits of partnership is unreal. We suggest that the income of a minor should be deemed to be the income of the father (i) if it arises from the benefits of partnership in a business in which the father is a partner or (ii) if, being the income of a minor other than a married daughter, it is derived from assets transferred directly or indirectly to the minor by his or her father or mother, (iii) if it is derived from assets apportioned to him in the partition of a Hindu Undivided Family.

It may be noted that the recommendations of the Enquiry Committee even in the cases hereinbefore mentioned went to the length of including the income of the wife or the minor child as the case may be in the income of the husband or the father in the computation of his total income for the purpose of assessment. The mischief which the Enquiry Report sought to remedy by its recommendations was one which was the result of husbands entering into nominal partnerships between themselves and their wives and fathers admitting their minor children to the benefits of such partnerships. The mischief, if any, resulting from the mothers admitting their minor children to the benefits of partnerships in which they were members was farthest from the thoughts of the Enquiry Committee and was nowhere sought to be remedied. Having regard to the circumstances which prevailed at the time when the Enquiry Committee made its report, the only mischief which they sought to remedy by their recommendations was the one resulting from the male assessees indulging in such tactics for the evasion of income tax by creating nominal partnerships between themselves and their wives on the one hand and their minor children on the other.

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These recommendations were duly considered by the Government and as a result thereof Act IV of 1937 was enacted introducing a. 16(3) in the Act. What was intended to be done by the Legislature in enacting this amendment may be gleaned to a certain extent from the statement of objects and reasons appended to the Bill which eventually became the amending Act. Though it is not legitimate to refer to the statement of objects and reasons as an aid to the construction or for ascertaining the meaning of any particular word used in the Act or Statute (See Aswani Kumar Ghose v. Arabinda Bose (1953) S.C.R. 1, nevertheless, this Court in State of West Bengal v. Subodh Gopal Bose (1954) S.C.R. 587, 628 referred to the same “for the limited purpose of ascertaining the conditions prevailing at the time which actuated the sponsor of the Bill to introduce the same and the extent and urgency of evil which he sought to remedy.” The statement of objects and reasons which led to the passing of Act IV of 1937 ran as follows: Reference is made in sections I and 4 of Chapter III of the Income Tax Enquiry Report, 1936, to the practice of avoiding taxation by means of nominal partnerships between husband and wife or parent and minor child or by the nominal transfer of assets to a wife or minor child (or to an “Association” consisting of husband and wife) when there is no substantial separation of the interests of the assessee and the wife or child. These practices are reported to have become very widespread already, with considerable detriment to the revenue, and there is little doubt that if they are not checked there will be progressive deterioration. The proposals in the Report regarding the aggregation of the incomes of husband and wife go beyond the immediate necessities of the case and to that extent their adoption would involve the admission of a new principle which the Government of India do not desire to establish in advance of the general public discussion of the Report which has been arranged; and the present Bill has been so drafted as to deal only with the abuses to which I have referred.

It is clear from the above extracts that the evil which was sought to be remedied was the one resulting from the widespread practice of husbands entering into nominal partnerships with their wives and fathers admitting their minor children to the benefits of the partnerships of which they were members. This evil was sought to be remedied by the enactment of s. 16(3) in the Act. If this background of the enactment of s. 16(3) is borne in mind, there is no room for any doubt that howsoever that mischief was sought to be remedied by the amending Act, the only intention of the Legislature in doing so was to include the income derived by the wife or a minor child, in the computation of the total income of the male assessee, the husband or the father, as the case may be, for the purpose of assessment. If that was the position, howsoever wide the words “any individual” or “such individual” as used in s. 16(3) and s. 16(3)(a) may appear be so as to include within their connotation the male as well as the female of the species taken by the themselves, these words in the context could only have been meant as restricted to the male and not including the female of the species. If these words are used as referring only to the male of the species the whole of the s. 16(3)(a) can be read harmoniously in the manner above comprehending within its scope all the four cases specified in sub-cls. (i) to (iv) thereof and so also s. 16(3)(b). We are, therefore, of opinion that the words “any individual” and “such individual” occurring in s. 16(3) and s. 16(3)(a) of the Act are restricted in their connotation to mean only the male of the species, and do not include the female of the species, even though by a disjunctive reading of the expression “the wife” or “a minor child” of “such individual” in s. 16(3)(a) and the expression “by such individual” for the benefit of his wife or a minor child or both in s. 16(3)(b), it may be possible in the particular instances of the mothers being connected with the minor children in the manner suggested by the Revenue to include the mothers also within the connotation of these words. Such inclusion which involves different interpretations of the words “any individual” or “such individual” in the different contexts could never have been intended by the Legislature and would in any event involve the addition of the words “as the case may be” which addition is not normally permissible in the interpretation of a statute. … It would have been better expressive of the intention of the Legislature, as we have already divined above (viz., to use the words “any individual” and “such individual” in s. 16(3) and 16(3)(a)

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respectively in the restricted meaning of the male of the species), to have used the words “the father” in place of the words “such individual” in sub-cls. (ii) and (iv) of s. 16(3)(a). It is however difficult to fathom the mind of the draftsman when he used one particular expression in preference to the other … The result therefore is that Civil Appeal No. 322 of 1955 will be dismissed with costs, and Civil Appeal No. 25 of 1955 will be allowed with costs, the referred question being answered in the negative.

Justice Das (for himself, dissenting) … We now turn to the critical question before us – is there a further restriction in the sub-section confining the word “individual” to a male individual only? My answer is that there is nothing in the context of s. 16 or of the sub- section which confines the word “individual” to a male individual only. S. 16 deals with the computation of total income and provides what sums are to be included or excluded in determining the total income. The effect of including exempted income in the assessee’s total income is mainly two-fold: first, the tax payable by the assessee is determined with reference to the total income and therefore exempted income which is included in the total income would affect the rate of tax applicable to the chargeable portion of the total income; secondly, in several cases reliefs are given or calculations made with reference to the total income. Sub-s. (3) of s. 16 appears ex facie to be directed towards preventing an individual's attempt to avoid or reduce the incidence of tax by transferring the assets to his wife or a minor child or admitting the wife as a partner or admitting a minor child to the benefits of partnership in a firm in which such individual is a partner. I agree that the sub-section creates, to some extent, an artificial liability to tax by including the income of A in the income of B, and must therefore be strictly construed; that merely means that the words of the subsection must be given their strictly natural meaning, and there should be no attempt at artificial stretching one way or the other. What then is the proper construction of the subsection? It naturally falls into three interconnected parts. The first part controls both cl. (a) and cl. (b), and states that “in computing the total income of any individual for the purpose of assessment, there shall be included so much of the income etc.” as is specified in cls. (a) and (b). The second part is cl. (a) itself which starts with an opening sentence that “so much of the income of a wife or minor child of such individual as arises directly or indirectly” from four specific cases shall be included in the total income of the individual, and then the cases are enumerated in four sub- clauses numbered (i), (ii), (iii) and (iv). Then, comes the third part which deals with cl. (b). I have divided the sub-section into its three natural parts, but I must make it clear that all the three parts must be construed together as they are interconnected and interdependent. In the first part, there is no difficulty whatsoever, in my opinion, in giving the word “individual” its natural meaning, that is, that the word means either a male or a female. The opening sentence of cl. (a) contains the expression “so much of the income of a wife or minor child of such individual”. Does the use of the word “individual” in the opening sentence of cl. (a) give rise to any ambiguity or difficulty? I do not think that it does. It is quite obvious that a female individual cannot have a wife, but she can have a minor child whereas a male individual can have a wife, minor child or both. It has been argued that cl. (a) must be interpreted noscitur a sociis, and as the expression “a wife or minor child” is capable of meaning only when used in connection with a male individual, the whole sub-section must be confined to a male individual. I am unable to accede to this argument. The collocation or association of the words “a wife or minor child” in connection with the words “such individual” in the opening sentence of cl. (a) does not necessarily mean that the individual contemplated

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is a male individual only. I agree that the word “or” in between the words “wife” and “minor child” must be there, even when the individual talked of is a male only; in other words, the use of the disjunctive word "or" does not necessarily clinch the issue. But I do not see any real difficulty in reading the opening sentence of cl. (a) distributively so as to mean a male individual when the wife is being talked of and either a male or a female individual when a minor child is talked of I do not think that such a construction does any violence to the words used; on the contrary, in my opinion, it gives effect to the plain meaning of the word “individual”. Turning now to the sub-clauses numbered (i) to (iv), there can be no doubt from the phraseology used that sub-cls. (i) and (iii) refer only to a male individual, because a female individual cannot have a wife. It is worthy of note, however – and this is very important – that sub-cls. (ii) and (iv) make it equally clear that they are not confined to the male individual only in the manner in which sub-cls. (i) and (iii) are so confined. In sub-cls. (i) and (iii) the word “individual” is not used, and the words used are “her husband” and “the husband”. In sub-cls. (ii) and (iv) the words used are “such individual”. Why did the Legislature make this difference in phraseology? If the intention was to confine the entire sub-section to a male individual only, nothing could have been easier than to qualify the word “individual” by the adjective “male” in the first part of the sub-section which controls both cls. (a) and (b); alternatively, in sub-cls. (ii) and (iv) it would have been easy to use the word “father” instead of “such individual”. It is true that a change of language is some, though possibly slight, indication of a change of intention. I am unable, however, to accept the argument advanced before us that the phraseology employed in sub-cls. (i) and (iii) different as it is from that employed in sub-cls. (ii) and (iv) can be accounted for on the ground of elegance or felicity of expression. It seems to me that if the intention was to confine the word “individual” to a male individual only, elegance and clarity both required that the word “individual” should be qualified by the adjective “male”, and the word “father” should have been used in sub- cls. (ii) and (iv). I am aware that a draftsman often uses different words merely to avoid repetition. I am also aware that it is dangerous to suppose that the Legislature foresees every possible result that may ensue from the “unguarded use of a single word, or that the language used in statutes is so precisely accurate that you can pick out … this and that expression and skillfully, piecing them together, lay a safe foundation for some remote inference” (as per Lord Loreburn, L.C., in Nairn v. University of St. Andrews, [1909] A.C. 147, 161). But what is noteworthy in the present case is that the difference in phraseology between sub-cls. (i) and (iii) on the one side and sub-cls. (ii) and (iv) on the other, is so striking that the conclusion appears to me to be reasonably plain; it is not really a case of the unguarded use of a single word or picking out an expression here or picking out another expression there in order to piece out some remote inference. The striking difference in phraseology hits, as it were, one in the face when one reads the four sub- clauses. It seems to me that the meaning, is very clear. In the opening part of cl. (a), the word “individual” is used to mean a male or a female; two of the subclauses, however, are confined to the male only and therefore the word “husband” is used in juxtaposition to the word “wife”. In the other two sub- clauses, however, the word “individual” is used in order to make it clear that they refer either to a male or to a female individual. I do not see any incongruity or disharmony in the enumeration of the four sub-clauses, nor do I appreciate the argument urged before us that the word “individual”, on the construction adopted by me, has a different meaning in two of the four sub-clauses of cl. (a). The word “individual” has and retains the same meaning, namely a male or a female, all throughout the subsection. All that happens is that in two of the sub-clauses of cl. (a), when the Legislature intends that they should be confined to a male individual only, the word “husband” is used to make the intention clear. On the same reasoning, when the Legislature intends in two other sub-clauses that they should apply to either a male or a female, the word “individual” is used to include either of them. I am unable to accept the contention that such an interpretation offends against the rule of harmonious construction. So far as cl. (b) of the sub-section is concerned, the word “individual” is again used and that again relates to a male or a female.

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The last part of the clause reads “by such individual for the benefit of his wife or a minor child or both.” Here again the sentence has to be read distributively – that is, when the wife is talked of, the individual can only be a male; when a minor child is talked of, the individual can be a male or a female; when both wife and minor child are talked of, the individual can again be a male only. There was some argument before us with regard to the use of the indefinite article “a” before the words “minor child” and it was submitted by the learned Solicitor-General that if the Legislature intended to confine cl. (b) to a male individual only, it could have easily dropped the indefinite article and used the word “his” before the words “minor child”. Personally, I do not attach much significance to the use of the indefinite article “a”. It is to be noted that no such indefinite article is used before the words “minor child” in the opening sentence of cl. (a); but I do not see any compelling reasons why the natural meaning of the word “individual” should not be given to it in cl. (a) and cl. (b) of the sub-section. Such meaning can be easily given to both the clauses if they are read distributively, and such reading does not, in my opinion, do any violence to the language used. On a plain reading of the sub-section, I have come to the conclusion that there really is no ambiguity and the word “individual” has been used in the sub-section in its ordinary accepted connotation, that is, either a male or a female individual; two of the sub-clauses of cl. (a) are no doubt confined to a male individual and that has been made clear by the use of the words “wife” and “husband”, instead of the words “such individual”. Assuming, however, that there is some ambiguity in the sub- section by reason of (1) the use of the phraseology in sub- cls. (i) and (iii) of cl. (a), and (2) of the opening sentence of cl. (a) which controls all the four sub-clauses of that clause, what then is the position ? The four principles laid down in Heydon’s case have been thus summarised: That for the sure and true interpretation of all statutes in general (be they penal or beneficial, restrictive or enlarging of the common law) four things are to be discerned and considered: (1) what was the common law before the passing of the Act; (2) what was the mischief and defect for which the common law did not provide; (3) what remedy the Parliament hath resolved and appointed to cure the disease of the commonwealth; (4) the true reason of the remedy. And then the office all the Judges is always to make such construction as shall suppress the mischief and advance the remedy, and to suppress subtle inventions and evasions for the continuance of the mischief and pro privato commedo, and to add force and life to the cure and remedy according to the true intent of the makers of the Act pro bono publico.

Let me now apply these principles in the construction of sub-s. (3) of S. 16 of the Act. The subjection was introduced in 1937, and before the enactment of the sub-section, there was no provision for the inclusion of the income of a wife or a, minor child in the computation of the total income of an individual. The Income Tax Enquiry Report, 1936, referred to the widespread evil of the evasion of tax by the severance of the joint status amongst members of a joint and undivided Hindu family. The Report said: Our attention has been drawn to the extent to which taxation is avoided by nominal partnerships between husband and wife and minor children. In some parts of the country, avoidance of taxation by this means has attained very serious dimensions. The obvious remedy for this state of affairs so far as husband and wife are concerned is the aggregation for assessment of their incomes, but such a course would involve aggregation in a quite different class of case, i.e., where the wife's income arises from sources quite unconnected with the husband … We recommend, therefore, that the incomes of a wife should be deemed to be, for Income-tax purposes, the income of her husband, but that where the income of the wife is derived from her personal exertions and is unconnected with any business of her husband, her income from her personal exertions up to a certain limit, say Rs. 500, should not be so included …

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(b) Income of minor children. There is also a growing and serious tendency to avoid taxation by the admission of minor children to the benefits of partnership in the father's business. Moreover, the admission is, as a rule, merely nominal, but being supported by entries in the firm's books, the Income-tax Officer is rarely in a position to prove that the alleged participation in the benefits of partnership is unreal. … We suggest that the income of a minor should be deemed to be the income of the father (i) if it arises from the benefits of partnership in a business in which the father is a partner or (ii) if, being the income of a minor other than a married daughter, it is derived from assets transferred directly or indirectly to the minor by his or her father or mother, (iii) if it is derived from assets apportioned to him in the partition of a Hindu Undivided Family.

It is clear, however, that the report is of very little help in the construction of the sub-section, because the Legislature did not accept in full the recommendations made in the Report. Two of the rules in Heydon’s case lay down (1) that we must find what was the mischief or defect for which the earlier law did not provide and (2) what remedy the Parliament has resolved and appointed to cure the mischief or defect. In the case under our consideration, the interpretation which has been put by me on sub-s. (3) of s. 16 does not militate against any of the aforesaid rules of Heydon’s case. The interpretation put by me undoubtedly remedies the mischief or defect for which the earlier law did not provide. The only serious criticism made by learned counsel for the assessees against that interpretation Is that the remedy not merely cures the mischief for which the earlier law did not provide, but it goes a little further and attacks the evil even when the evil is committed by a female individual, though the Income Tax Enquiry Report (except in one part) did not in specific terms refer to such an evil committed by a female individual. I can see nothing in the rules laid down in Heydon’s case which militates against the view taken by me. There is no presumption that, while remedying an evil, the Legislature may not cast its net very wide so as to remedy the evil in all its aspects. Let me again refer to sub-cls. (i) and (ii) of cl. (a) of sub-s. (3) of s. 16 of the Act. Those two sub-clauses are absolute and unqualified in terms and not subject to any exception. If the wife owns and manages a business and she takes her husband into partnership with her in the business, the result of the partnership would be that the wife’s income from the business would be no longer taxable in her hands but would be included in the total income of her husband under the sub-section, even though the husband may be a dormant partner. This clearly shows that the Legislature was not confining itself to the recommendations made in the Income Tax Enquiry Report. What is to be included in the total income of an individual under cl. (a) is the income of a wife or minor child arising directly or indirectly “from the membership of the wife” in the firm or “from the admission of the minor to the benefits of partnership” in the firm of which the individual is a partner. The clause covers the share of the profits of the firm received by the wife in her capacity – as a partner or by the minor child in his or her capacity as one admitted to the benefits of partnership. But the income received from the firm by the wife or the minor child under any other contract with the firm or in any other capacity, does not fall within the clause and is not included in the husband’s or parent’s total income. From what is stated above, it is clear that the Legislature did not confine itself strictly or solely to the recommendations made by the Income Tax Enquiry Committee but provided for all such aspects of the evil or mischief as it thought fit to remedy by the Indian Income-tax (Amendment) Act, 1937 (Act IV of 1937). In these circumstances, I do not think that the recommendations made by the Income-tax Enquiry Committee can be relied upon to restrict the meaning of the word “individual” used in sub-s. (3) of s. 16 of the Act. As to the Statement of Objects and Reasons which led to the passing of Act IV of 1-937 and which has been set out in the judgment of the High Court of Madhya Pradesh, I do not think that the Statement can be referred to as an aid to construction for ascertaining the meaning of the word “individual” used in the sub-section. Even if it is referred to “for the limited purpose of ascertaining the conditions

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prevailing at the time which actuated the sponsor of the Bill to introduce the same and the extent and urgency of the evil which he sought to remedy”, the use of the word “Parent” in the Statement of Objects and Reasons shows that the evil was not confined to the male individual only, and the sponsor of the Bill was aware of it. The Statement reads: “Sec. 16(3) was thus designed to bring within the ambit of taxation incomes of wives and minor children as income of husband or parent, which otherwise would escape the whole burden of taxation.” I emphasise the use of the word “parent” which would show that the evil contemplated was an evil which was not confined to the “father” only but included the mother as well. My conclusion therefore is that there is nothing in the policy of the legislation and the scope and object of the statute which compels one to cut down the natural meaning of the word “individual” used in subs. (3) of s. 16 of the Act so as to confine it to a male individual alone. … … Civil Appeal No. 322 of 1955 should be allowed with costs and Civil Appeal No. 25 of 1955 should be dismissed with costs. By COURT: In accordance with the Judgment of the majority Civil Appeal No. 322 of 1955 is dismissed with costs and Civil Appeal No. 25 of 1955 is allowed with costs, the referred question being answered in the negative. CASE – PEPPER V. HART [1993] 1 All.E.R. 42 (House of Lords) Bench - Lord Mackay of Clashfern, Lord Keith of Kinkel, Lord Bridge of Harwich, Lord Griffiths, Lord Ackner, Lord Oliver of Aylmerton and Lord Browne-Wilkinson, Lord Bridge of Harwich, Lord Emslie, Lord Oliver of Aylmerton Lord Griffiths (for himself) My Lords, I have long thought that the time had come to change the self-imposed judicial rule that forbade any reference to the legislative history of an enactment as an aid to its interpretation. The ever increasing volume of legislation must inevitably result in ambiguities of statutory language which are not perceived at the time the legislation is enacted. The object of the court in interpreting legislation is to give effect so far as the language permits to the intention of the legislature. If the language proves to be ambiguous I can see no sound reason not to consult Hansard∗ to see if there is a clear statement of the meaning that the words were intended to carry. The days have long passed when the courts adopted a strict constructionist view of interpretation which required them to adopt the literal meaning of the language. The courts now adopt a purposive approach which seeks to give effect to the true purpose of legislation and are prepared to look at much extraneous material that bears upon the background against which the legislation was enacted. Why then cut ourselves off from the one source in which may be found an authoritative statement of the intention with which the legislation is placed before Parliament? I have had the advantage of reading the speech of Lord Browne-Wilkinson and save on the construction of the Act, without recourse to Hansard, I agree with all he has to say. In summary, I agree that the courts should have recourse to Hansard in the circumstances and to the extent he proposes. I agree that the use of Hansard as an aid to assist the court to give effect to the true intention of Parliament is not “questioning” within the meaning of article 9 of the Bill of Rights. I agree that the House is not inhibited by any Parliamentary privilege in deciding this appeal. I cannot agree with the view that consulting Hansard will add so greatly to the cost of litigation, that on this ground alone we should refuse to do so. Modern technology greatly facilitates the recall and display of material held centrally. I have to confess that on many occasions I have had recourse to Hansard, of course only to check if my interpretation had conflicted with an express Parliamentary intention, but I ∗

Ed. – A ‘Hansard’ is the official published verbatim report of the proceedings of a parliamentary body

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can say that it does not take long to recall and assemble the relevant passages in which the particular section was dealt with in Parliament, nor does it take long to see if anything relevant was said. Furthermore if the search resolves the ambiguity it will in future save all the expense that would otherwise be incurred in fighting the rival interpretations through the courts. We have heard no suggestion that recourse to Parliamentary history has significantly increased the cost of litigation in Australia or New Zealand and I do not believe that it will do so in this country. As to the question of statutory construction I should myself have construed the section in favour of the taxpayer without recourse to Hansard. The crucial question is the meaning of the words “the cost of a benefit is the amount of any expense incurred in or connection with its provision.” Do these words refer to the actual expense incurred by the school in providing the benefit or do they refer to the hypothetical expense incurred by the school arrived at by the formula of dividing the total cost of running the school by the number of pupils attending it or to put it more shortly do they refer to the additional or the average cost of the provision of the benefit. …

REFERENE TO PARI MATERIA STATUTES Reference to other statutes as an interpretive is a permissible method of interpretation of statutes provided the other statute i.e. the statute that is been referred to is dealing with the same subject matter or forms the part of the same system. Therefore, for example, to interpret a sales tax statute it will be permissible to see how similar terms or phrases have been interpreted in the context of, for example, income tax or service tax statutes, but it will not be permitted to examine the interpretation of a similar term in the context of, for example, a human rights statute. Similarly, if there is a penal provision in a taxation statute (say criminal penalty for tax fraud), it will be permissible to examine the interpretation of a similar term in the context of Indian Penal Code but a reference to terrorism prevention statutes might not be allowed for the context in that case would be totally different. Singh in his authoritative commentary Principles of Statutory Interpretation (13 ed.), referring to an old US case (United Society v. Eagle Bank, (1829) 7 Connecticut 457) quotes the following passage from the said case that goes a long way in explaining the meaning of the phrase pari material: Statutes are in pari material which relate to the same person or thing, or to the same class of persons or things. The word par must not be confounded with the word similis. It is used in opposition to it – intimating not likeness merely but identity. It is a phrase applicable to public statutes or general laws made at different times and in reference to the same subject. (Emphasis Added)

As to why this method of interpretation is a sound method, Singh states as follows: The application of this rule of construction has the merit of avoiding any apparent contradiction between a series of statutes dealing with the same subject; it allows the use of an earlier statute to thrown light on the meaning of a phrase used in a later statute in the same context; it permits the raising of a presumption; in the absence of any context indicating a contrary intention, that the same meaning attaches to the same words in a later statute as in an earlier statute if the words are used in a similar connection in the two statutes; and it enables the use of a later statute as parliamentary exposition of the meaning of ambiguous expressions in an earlier statute. (Emphasis Added)

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In Maxwell on the Interpretation of Statutes (12 ed.) the rule of interpretation qua pari material statutes is stated as follows: If an Act of Parliament uses the same language which was used in a former Act of Parliament referring to the same subject, and passed with the same purpose, and for the same object, the safe and well-known rule of construction is to assume that the legislature when using well-known words upon which there have been wellknown decisions use those words in the sense which the decisions have attached to them.

To better understand how this rule is applied in practice we will examine the following case where to interpret a phrase in the Prevention of Corruption Act, 1947 the Supreme Court relied on the interpretation of the same phrase in the Indian Evidence Act, 1872. In another case, Murarilal v. Vad, (1975) 2 SCC 736, studied later under ‘Taxation Statutes’, another good example of this rule is furnished when Justice Chandrachud (later Chief Justice) refers to the jurisprudence under the Income Tax law in order to determine the question whether a dead person can be assessed under a sales tax statute. CASE STUDY 1 – STATE OF MADRAS V. V. IYER AIR 1958 SC 61 Bench – Justices B. P. Sinha, P. G. Menon & J. L. Kapur Justice Kapur (for the Court) [The trial court found the respondent-accused guilty of the offences under section 161, Indian Penal Code and section 4, Prevention of Corruption Act, 1947. On appeal, the High Court reversed the trial court’s opinion and the State filed a Special Leave Petition before the Supreme Court. The Supreme Court granted the Special Leave and reversed the High Court’s decision and restored the conviction. The accused, V. Aiyer, an Income Tax Officer at Coimbatore was charged with the offence of demanding a bribe of Rs. 1,000/- from the complainant K. S. Narayana Iyer. The complainant had failed to pay advance tax and the accused demanded the said bribe to have his income tax returns accepted without payment of penalty. The police was notified and they laid down a trap to catch the accused red-handed.]

… The Inspector then gave ten one hundred currency notes to the complainant after their numbers were taken down in Ex. P-17. The complainant then went to the office of the accused but no money was accepted on that day because the respondent had received an anonymous letter Ex. P-18 warning, him of the trap which was being laid by the Malayalam people. The respondent naturally got very annoyed with the complainant and sent him away. The same evening the complainant was told that he was required to go to the house of the respondent on the following morning which he did at 8 a. m. The respondent told him that he should take no notice of the anonymous letter which must have been sent by his enemies and asked him to pay some money. The complainant paid a sum of Rs. 200 which on his return he entered in his kacha account book which the High Court has rejected without sufficient reason. On the evening of November 15, the complainant again went to the house of the respondent and the latter told him that he would pass final orders and that money should be paid. The record, P-7 and P-7 (a), shows that an order was dictated on November 13 although there is no proof or even indication that the complainant knew about it. The complainant was given 8 one hundred rupee notes by the Inspector and the complainant paid them to the respondent on the morning of November 17 at the latter’s house. On this occasion the complainant accompanied by his manager P.W. 14 had gone towards the house of the respondent along with the Magistrate and Circle Inspector and Venkates Iyer P.W. 14 in a car which

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was stopped three or four blocks away from the house of the respondent and only the complainant and his manager went into the respondent’s house and paid the money. Two or three minutes later the Inspector P.W. 12 and the Magistrate P.W. 13 and one Sesha Ayyar who had joined the party en-route also came into the house on receiving the signal from the complainant. They disclosed their identity to the respondent and told him that they had information that he had received Rs. 800 from the complainant as illegal gratification and asked him to produce the money which he had received from the complainant. The respondent did not say anything and got up from the chair on which he was sitting and tried to go into the house but was prevented from doing so by the Inspector and he then produced the money from the folds of his dhoti. While the mahazar was being prepared the respondent said that he had received this money as a loan from the complainant who denied this and said it had been paid as a bribe. A telegram was then sent to the Superintendent of Special Police Establishment and under his orders a case was registered and the investigation was then taken up by a Deputy Superintendent of Police who searched the house of the respondent on November 19 but no pronote seems to have been received or taken into possession on that date. A pronote with four anna stamps affixed was later produced in the court by the respondent on July 17, 1952 during the course of his statement under s. 342 Criminal Procedure Code but it was not mentioned to the Magistrate P.W. 13 by the respondent. The charge against the respondent was that he had obtained from the complainant Rs. 800 as gratification other than legal remuneration as a motive for the reward for showing favour to him in the exercise of official functions and had thereby committed an offence punishable under s. 161 of the Indian Penal Code read with s. 4 of the Prevention of Corruption Act (Act II of 47). The explanation of the respondent was that he mentioned to the complainant about his money difficulties when accidentally he met him on the road towards the end of August or beginning of September 1951. The complainant offered to lend him Rs 1,000/-. At that time he was not aware that the complainant had an assessment pending before him. It was the complainant who told him on November 15 when he met him again that the anonymous letter was the “work of his enemies” and promised to advance the loan as previously promised and he also suggested that the respondent should execute a pronote for Rs. 1,000 which would be attested by Venkatesa Ayyar to which he (the respondent) was agreeable. The complainant paid Rs. 800 on the morning of November 17 and promised to pay Rs. 200 in the evening. The respondent had the pronote ready and offered to hand it over in the morning but the complainant said he would take it when “he left the house”. The learned Special Judge accepted the story of the prosecution and after a careful analysis of the evidence found the respondent guilty of the offence charged and sentenced him to six months simple imprisonment. On appeal being taken to the High Court the learned Single Judge reversed the judgment and acquitted the respondent. It will be convenient to give here the main findings of the learned judge in his own words: (i) It is true that at the time when the money was accepted by the accused, the proceedings in relation to assessment of income tax on P.W. 8 were pending before the accused. Naturally, therefore, if in such circumstances, the accused should receive money from an assessee, the suspicion is readily aroused that the money must have been paid only as an illegal gratification. On going through the judgment of the learned trial Judge, I formed the impression that he was totally influenced by such suspicion. (ii) The result is that if the version of P.W. 8 and that of the accused are balanced, the probability seems to tilt the scale in favour of the accused’s version. In any case, the evidence is not enough to show that the explanation offered by the accused cannot reasonably be true, and so, the benefit of doubt must go to him. (iii) But this was not a case of ordinary lendee, but an Income-tax Officer whose favour was needed by the lender.

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(iv) Evidence shows that in November, 1951, the accused was in need of a sum of Rs. 1,000 and, for that purpose, has asked P.W. 8 for a loan. (v) In my view, the evidence does not necessarily make out a case that the accused must have accepted the money only as a bribe. (vi) I do not therefore feel certain that the taking of a loan with an obligation to repay it with interest, would fall within the meaning of the term I gratification.

… This court will not readily interfere with the findings of fact given by the High Court but if the High Court acts perversely or otherwise improperly interference will be called for. The findings of the High Court in the present case are, to say the least, halting, and the approach to the whole question has been such that it falls within what Mr. Justice Mahajan in State of Madhya Pradesh v. Ramakrishna Ganpatrao, A.I.R. 1054 S.C. 20 described as “acting perversely or otherwise improperly”. Although the learned High Court Judge has in the beginning of the judgment mentioned the presumption which arises under s. 4 of the Prevention of Corruption Act (II of 1947), the following passage in the judgment: in any case, the evidence is not enough to show that the explanation offered by the accused cannot reasonably be true, and so, the benefit of doubt must go to him.

is indicative of a disregard of the presumption which the law requires to be raised under s. 4. The relevant words of this section are: Where in any trial of an offence punishable under section 161 … it is proved that an accused … person has accepted … any gratification (other than legal remuneration) … from any person, it shall be presumed unless the contrary is proved that he accepted … that gratification as a motive or reward such as is mentioned in the said section 161 …

Therefore where it is proved that a gratification has been accepted, then the presumption shall at once arise under the section. It introduces an exception to the general rule as to the burden of proof in criminal cases and shifts the onus on to the accused. It may here be mentioned that the legislature has chosen to use the words ‘shall presume’ and not ‘may presume’, the former a presumption of law and latter of fact. Both these phrases have been defined in the Indian Evidence Act, no doubt for the purpose of that Act, but s. 4 of the Prevention of Corruption Act is in pari materia with the Evidence Act because it deals with a branch of law of evidence, e.g., presumptions, and there-fore should have the same meaning. “Shall presume” has been defined in the Evidence Act as follows: Whenever it is directed by this Act that the Court shall presume a fact, it shall regard such fact as proved unless and until it is disproved.

It is a presumption of law and therefore it is obligatory on the court to raise this presumption in every case brought under s. 4 of the Prevention of Corruption Act because unlike the case of presumptions of fact, presumptions of law constitute a branch of jurisprudence. While giving the finding quoted above the learned judge seems to have disregarded the special rule of burden of proof under s. 4 and therefore his approach in this case has been on erroneous lines. The judgment also shows that certain salient pieces of evidence were missed or were not properly appreciated. At the time when the penalty notice was issued under s. 28 of the Income-tax Act the

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respondent was not the Income-tax Officer at Coimbatore but by June 6, he had been posted at Coimbatore and the note on the Penalty File dated June 6, 1951: put up proposal to I.A.C. for levy of standard penalty

was made by him. Although this proposal was made on June 6, 1951, it is not clear as to what final orders were passed in these proceedings and when. At least there is nothing to indicate that any intimation was given to the complainant in regard to this matter. The complainant has stated on oath as P.W. 8: I alone went to the accused on 28th September, 1951. He then told me that the penalty paper was not disposed of and that the accounts for the current year had not also been gone through.

On the day following this the respondent asked the complainant for illegal gratification of Rs. 1,000. Counsel for the respondent contended that there was no occasion for the respondent to say anything about the penalty proceedings because as far as he was concerned the recommendation had already been made by him but the real question is whether the complainant was told as to what had happened or had any knowledge of this. He states that he had none and there is nothing to indicate that he had. The respondent has then stated that the complainant was known to him since 1942 when he, the respondent, was the Head Clerk of the Appellate Assistant Commissioner of Income-tax and that is the reason why towards the end of August or the beginning of September when he casually met the complainant on the road, he told him that he was in financial difficulties and the complainant offered him a loan of Rs. 1,000 to be returned in easy instalments and that he did not know at that time that the complainant was an assessee before him. This statement of the respondent has been accepted by the High Court without considering the following important facts. Notice was issued to the complainant and he filed his return on August 11, 1951. The notice must have been issued to the complainant under a. 22(2) of the Income-tax Act by the respondent himself as he was at that time the Income-tax Officer. So it is difficult to believe his statement about his not knowing that the complainant was an assessee before him and it is improbable that the respondent would mention his financial troubles to a more or less casual acquaintance who has neither been shown to be a banker, nor a money lender nor a wealthy person. The complainant has stated that he visited the respondent on 6th or 7th October, 1951, when he asked him if he had brought the money. The complaint replied that he had no money to spare as he had purchased a house and he also asked him if the respondent had finished the assessment. The latter’s reply was that he would look into the matter and also told him that the complainant might pay half the amount (of the illegal gratification) before the deepavali time. This statement the respondent has denied but the statement of the complainant as to his having no money as he had purchased a house has not been seriously challenged in cross-examination. The complainant had been asked to produce the accounts and be did produce them on September 27. The notes made by the respondent in P-7 and P-7(a) show that the accounts of the complainant were not being accepted in regard to Coimbatore Hotel. The portion of the order was: All the defects that are usual in hotel accounts exist here.

In regard to Bhavanisagar hotel the note stated: Purchases are not fully supported and sales are reckoned from till takings.

On October 1, 1951, the assesse had filed his written statement and also some other documents. Nothing more seems to have been done till November 7, when the relevant part of the note on the file is:

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I have been keeping this in order to compare the results with other nearby hotels.

As to why no enquiries could be made in the whole of this period is not clear from the assessment record and it lends support to the prosecution case that the respondent was making approaches to the complainant to get money from him. The respondent during the pendency of assessment proceedings of the complainant allowed the complainant to visit him at his house and even paid visit to his cafe. Even according to the findings of the High Court the complainant was “needing the favours” of the respondent who on his own showing was himself in dire need of a thousand rupees as he had succeeded in collecting only a thousand rupees by November 2, and needed twice that amount for his son’s premium or security as he chooses to call it. No importance was attached to this aspect of the case by the learned judge of the High Court. In our opinion the learned trial judge correctly appreciated this part of the prosecution case and his judgment is not, as tile High Court has said, coloured by mere suspicion. … In view of the finding that the sum of Rs. 800 was a bribe and not a loan it is not necessary to consider whether in this case the loan would be an illegal gratification within s. 4 of the Prevention of Corruption Act (II of 1947) or not. We would, therefore, allow this appeal, set aside the judgment and order of the High Court of Madras and restore that of the Special Judge of Coimbatore convicting the respondent of the offence he was charged with. The respondent must surrender to his bail bond. …

REFERENCE TO DICTIONARIES Reference to Dictionaries (judicial or otherwise) is generally made when the phrase or term being interpreted is not defined in the statute and no precise meaning could be assigned to this phrase or term otherwise. However, while selecting a meaning (from among the many that may appear in dictionaries) it is necessary to keep in mind the context of the phrase in the statute in which they appear. It is difficult to state precisely what the rule regarding the use of dictionaries is except that dictionaries are allowed to be referred to in order to understand what is or are the several meaning(s) assigned to the word by lexicographers and then to select that meaning that fits best under the circumstances of the case being decided. We should examine some legal opinions where dictionaries have been referred to as interpretive tools. We should particularly examine closely when judges accept them and when not to get a better idea of this rule as it is practiced. In the first case Lakshamma v. Subbaiah, (1998) 5 SCC 285, the Division Bench (2 judges) refused to accept the dictionary meaning of the term ‘sign’ in order to interpret the said phrase in the context of the Succession Act, 1872. The mode of judicial reasoning in this case is particularly instructive. CASE STUDY 1 – N. LAKSHMAMMA V. M. SUBBAIAH (1998) 5 SCC 285 Bench – Justices G. N. Ray & M. Srinivasan Justice Srinivasan (for the Court) The appellant herein is one of the four daughters of Madamanchi Velugondaiah who had no son. He died in 1946 leaving his widow Punnamma and three daughters as his eldest daughter had predeceased him leaving one daughter. Velugondaiah had left several properties some of which were dealt with by Punnamma by execution of settlement deeds. Dispute arose between the parties resulting in three suits

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O.S. Nos. 186/71 and 52.75 on the file of the subordinate Judge, Ongole. The appellant was the first defendant in O.S. 186 and 187/71 and plaintiff in O.S. No. 52/75. The respondent who was the son of the second daughter of Velugondaiah was the second plaintiff in the two suits of 1971 and the only defendant in the suit of 1975. Punnamma who was the first plaintiff in the two suits of 1971 died during the pendency thereof and the respondent was recorded as her legal representative. Though several issues were raised in the suits, we are concerned only with one of them which was the pivotal issue. According to the appellant Velugondaiah executed a will on 2.7.45 bequeathing his properties in a particular manner. The genuineness of the will was challenged by the respondent and Punnamma. The Subordinate Judge held that the will was proved by the appellant to be true and valid. On that footing the suits were disposed of by grant of appropriate reliefs. On appeals, the District Judge, Ongole concurred with the Subordinate Judge and dismissed the same. The matter was taken in second appeals to the High Court of Andhra Pradesh. At this stage, it is better to advert to the following undisputed facts. The will purports to have been attested by five persons. Two of them had signed. The other three had not affixed their thump impressions or made any mark. They have been described as “Nishanis”. It is also written in the will as against their names “LTI mark of …” though there is no thumb impression or mark actually. Out of the two attestors who had signed, one was dead and the other was not examined though admittedly alive. One of the three persons described as “Nishanis”, namely, Kondaiah son of Madhumanchi Narayya was examined as DW 2. Admittedly he had not affixed his thumb impression or made any mark on the will. While the Subordinate Judge and the District Judge treated him as an attesting witness and believing him held the will to be proved, the High Court held that he was not an attester in the eye of law and his evidence could not prove the will. It is also worthwhile extracting the following passage in the judgment of the High Court: It is no doubt true that both the Courts have accepted the evidence of DW 2 who said that he attested the will. Beyond that DW 2 does not say anything. He does not mention the person, who has written his name. He stated in the cross-examination that nobody asked him to put his thumb impression and he was asked by one Karanam Venkatappaiah to touch the pen. He does not even say who wrote his name. Karanam Venkatappaiah is not even the scribe. There is no evidence that his name was written at his instance or under his direction or in his presence. The observation of the Courts below that his name was written by the scribe at his instance is an error apparent on the face of the record …

On the aforesaid reasoning, the High Court held that the will was not proved as required by law and allowed the second appeals, setting aside the judgments and decrees passed by the Courts below. Aggrieved thereby, the appellant has approached this Court. The only contention urged by the appellant’s learned counsel is that DW 2 is an attesting witness in as much as the scribe had on his directions written “LTI of Kondaiah son of Madhumanchi Narayya”. According to her, DW 2 had thereby ‘signed’ in the will as an attestor. She has placed reliance on the definition of the word ‘signed’ in Stroud’s Judicial Dictionary and drawn our attention to the decisions of some High Courts. Thus the question of law which arises for consideration is whether a person who has not himself signed or made any mark on a will can be said to be an attesting witness if another person on his authority or direction signs or makes a mark or writes his name on his behalf. Before examining the relevant provisions of law and the decisions of the High Courts, we would like to place on record that we have perused the deposition of DW 2 and we are entirely in agreement with the observations of the High Court contained in the passage extracted earlier. The High Court has stopped short of giving a factual finding that DW 2 was not present at the time of the execution of the will. Probably the High Court

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hesitated to do so as it was dealing with the matter in its second appellate stage. Hence the High Court was and we are now obliged to consider and decide the question of law. S. 68 of the Indian Evidence Act enjoins the calling of at least one attesting witness for the purpose of proving execution of a will. S. 63 of the Indian Succession Act which prescribes how an unprivileged will is to be executed reads as follows: 63. Execution of unprivileged wills. Every testator, not being a soldier employed in an expedition or engaged in actual warfare, (or an airman so employed or engaged,) or a mariner at sea, shall execute his will according to the following rules: (a) The testator shall sign or shall affix his mark to the will, or it shall be signed by some other person in his presence and by his direction. (b) The signature or mark of the testator, or the signature of the person signing for him, shall be so placed that it shall appear that intended thereby to give effect to the writing as a will. (c) The will shall be attested by two or more witnesses, each of whom has seen the testator sign or affix his mark to the will or has seen some other person sign the will, in the presence and by the direction of the presence and by the direction of the testator, or has received from testator a personal acknowledgment of his signature or mark, or of the signature of such other person; and each of the witnesses shall sign the will in the presence of testator, but it shall not be necessary that more than one witness be present at the same time, and no particular form of attestation shall be necessary.

The Section makes a vital distinction between the testator and the attestors in the matter of signing the will. The testator may sign or affix his mark himself or direct some other person to sign in his presence. The reason for such a provision is quite obvious. Many a time, people who are desirous of making testamentary dispositions may be physically incapacitated from signing their names or affixing their marks on account of illness or other causes. Such persons should not be deprived of an opportunity of making a will. Such persons can instead of signing or affixing their marks themselves can direct some other person to sign in their presence. But in the case of attesters such an enabling provision is absent. The section expressly states that each of the witness shall sign the will in the presence of the testator. The privilege or power of delegation, if we may say so, is not available to the attesting witnesses under the section. When the same section makes a distinction expressly between a testator and an attestor it is not possible to accept the contention that an attestor can also direct some other person to sign or make a mark of his behalf. If a witness to the execution of the will chooses to do so, he is not an attesting witness as there is no attestation by him as contemplated by S. 63(c) of the Indian Succession Act. Consequently, he will not be an attesting witness for the purpose of S. 68 of the Indian Evidence Act. According to learned counsel for appellant the word ‘sign’ occurring in the last part of S. 63(c) would mean “sign his name or affix his mark himself or get it signed by some other person in his presence any by his direction”. In support of this argument, reliance is placed on Stroud’s Judicial Dictionary. At Pages 2431 and 2432 Vol. 5 of Fifth Edn., the word “signed” is defined as follows: Signed; Signature. (1) Speaking generally, a signature is the writing, or otherwise affixing, a person's name, or a mark to represent his name, by himself or by his authority (R.V. Kent Justices, (1873) 8 QB 305) with the intention of authenticating a document as being that of, or as binding on, the person whose name or mark is so written or affixed. In Morton v. Copeland, 16 C.B. 535, Maule J., said, “Signature does not, necessarily, mean writing a person’s Christian and surname, but any mark which identifies it as the act of the party” but the reporter adds in a note, “provided it be proved or admitted to be genuine, and be the accustomed mode of signature of the party”. Without more, “to sign” is not the same as “to subscribe.”

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(2) The minute requisite of a signature will very according to the nature of the documents to which it is affixed, e.g. – (a) Deeds; (b) Wills; (c) Contracts; (d) Bills of exchange and promissory notes; (e) Solicitors’ bills; (f) Electioneering paper; (g) Judge’s orders and legal proceedings; (h) Office copies and ‘in every case where a statute requires a particular document to be signed by a particular person, it must be a pure question on the construction of the statute whether the signature by an agent is sufficient’ (per Bowen L.J., Whitley, Re (1886) 32 Ch. D. 337).

We are unable to accept the argument. When there is an express statutory provision in this regard, the definition contained in the Judicial Dictionary cannot be invoked by the appellant. In some case decided before the advent of the General Clauses Act, 1897 some High Courts took the view that it was necessary for the validity of a will that the actual signature, as distinguished from a mere mark, of at least two attesting witnesses should appear on the face of the will. … The General Clauses Act which came into force in 1898 contained a definition of the word ‘sign’ in S. 3(56) thereof as follows: 3. (56) ‘sign’ with its grammatical variations and cognate expressions, shall, with reference to a person who is unable to write his name, include ‘mark’ with its grammatical variations and cognate expressions;

But even thereafter, in a case which arose under a Transfer of Property Act, a single Judge of the Madras High Court held in Venkataramayya v. Nagamma, AIR 1932 Mad. 272 that a mark by an attesting witness although valid at the date of execution of a deed of gift made in 1912 should be held to be inoperative in view of the law as amended on the point by Act 27 of 1926 which was expressly made retrospective in effect. The learned Judge referred to the definition of the word ‘attested’ in S. 3 of the Transfer of Property Act and held that in as much as the witnesses were required to sign the instrument it was not sufficient if they made their mark or affixed their thumb impression. It has to be pointed out that the definition of the word ‘attested’ contained in S. 3 of the Transfer of Property Act is almost a verbatim reproduction of sub-section (c) of S. 63 of the Indian Succession Act. However the judgment of the learned single Judge referred to above was reversed on appeal by a Division Bench in Nagamma v. Venkataramayya, AIR 1935 Mad. 178. The Bench held that the definition of ‘sign’ in General Clauses Act would apply and therefore the word ‘sign’ in S. 3 of the Transfer of Property Act included also a mark by the attestor. A single Judge of the Calcutta High Court held in Rajani Mandal v. Digindra Mohan Biswas, AIR 1932 Cal. 440 that in Bengal there was a customary practice among illiterate persons to sign documents by touching the pen and authorising another person to sign by writing their name for them in their presence, and therefore an endorsement of payment of interest made by the scribe and also signed by him on behalf of the debtor who was illiterate and made no mark beneath the endorsement, amounted to acknowledgement of payment of interest by the debtor within the meaning of S. 20 of the Limitation Act (1908). It is not necessary in this case to consider the correctness of that judgment. A Full Bench of the Allahabad High Court upheld the validity of ‘attestation’ of a will when it found that the attesting witnesses had affixed their marks. The Full Bench agreed with the view expressed by

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the Division Bench of the Madras High Court in Nagamma v. Venkatramayya, AIR 1935 Mad. 178 referred to earlier. … Though there is no direct decision of this court on the above question, the ruling of the Constitution Bench in CIT v. Keshab Chandra Mandal, AIR 1950 SC 265 will govern the situation. The question before the court was whether the declaration in the form of return submitted under Bengal Agricultural Income-tax Act which was not signed by the assessee himself who was an illiterate but signed by his son should be treated as properly signed and a valid return. The High Court answered the question in the affirmative. That was challenged by the Commissioner of Agricultural Income-tax in this Court. It was found that there was no physical contact between the assessee and the signature appearing on the return. This court answered the question in the negative and reversed the judgment of the High Court by holding that if on a construction of a statute signature by an agent is not found permissible then the writing of the name of the principal by the agent however clearly he may have been authorised by the principal cannot possible be regarded as the signature of the principal for the purposes of that statute. The court rejected an argument of hardship or inconvenience and observed that hardship or inconvenience cannot alter the meaning of the language employed by the legislature when such meaning is clear on the face of the statute or the rules. It is advantageous to quote the following passage which is instructive: It is quite true that when signature by an agent is permissible, the writing of the name of the principal by the agent is regarded as the signature of the principal himself. But this result only follows when it is permissible for the agent to sign the name of the principal. It on a construction of a statute signature by an agent is not found permissible then the writing of the name of the principal by the agent however clearly he may have been authorised by the principal cannot possibly be regarded as the signature of the principal for the purposes of that statute. If a statute requires personal signature of a person, which includes a mark, the signature or the mark must be that of the man himself. There must be physical contact between that person and the signature or the mark put on the document.

With great respect, we adopt the aforesaid reasoning and hold that for the purpose of valid attestation under S. 63 of the Indian Succession Act it is absolutely necessary that the attesting witness should either sign or affix his thumb impression or mark himself as the Section does not permit an attesting witness to delegate that function to another. It follows that in the present case DW 2 is not an attesting witness and in the absence of the evidence of any other attesting witness the decision of the High Court that the will propounded by the appellant has not been proved is unassailable. Hence the appeals fail and are dismissed. …

REFERENCE TO FOREIGN PRECEDENTS The use of foreign precedents to interpret Indian statutes and most importantly the Constitution of India remains one of the most under theorized areas in Indian law. Whereas while interpreting the Fundamental Rights provisions of the Constitution the Supreme Court of India traditionally listens with respect the opinions delivered on similar question by foreign courts, whether or not they would rely on those foreign precedents in anybody’s guess. But when it comes to interpreting Indian statutes embodying common law principles, the Supreme Court is generally more open to examining British precedents on the point and on more than one occasion have been willing to change Indian common law to follow the trend in British judicial thought. Before we examine some cases and case-studies on the point, we may profitably refer to observations made by Singh in his authoritative commentary Principles of Statutory Interpretation (13 ed.) on the

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point. As a general principle, the following two proposition are made. The first is in context of pari material statutes: On a question of construction of Indian Statutes sobered use of foreign decisions of countries following the same system of jurisprudence as ours and rendered on statutes in pari material has been permitted by practice in Indian Courts. (Emphasis Added)

We may note the use of the phrase “by practice” by Singh. The frequent use and citation of foreign precedents in Indian Courts is permitted by practice and not by some principle of common law laid down by the Supreme Court. We may also note the use of the term “sobered”. This shows that the Supreme Court would not accept a foreign precedent easily and would have to be convinced to accept the same. However, what would convince the Court remains till date a subject yet to receive detailed any attention. Furthermore, the examination of the following case-studies would show that the use of the term “sobered” might not be appropriate to describe the judicial decision making in the Supreme Court when it comes to foreign precedents. Nevertheless, the second proposition of law by Singh may be described as “respect with caution” rule which may be stated as follow: … [S]tatutory construction must be home-spun even if hospitable to alien thinking … when guidance is available from binding Indian decisions, reference to foreign decisions may become unnecessary.

As to the use of foreign precedents for interpreting the Constitution, we will return to this complex issue at a later stage. For now, we may examine the following cases as case-studies in the use of foreign decisions in interpreting Indian law (including the common law and statutes). The first case, McDowell & Co. v. Commercial Tax Officer, (1985) 3 SCC 230, deals with the complex question of tax evasion and tax avoidance. There is considerable confusion on the meaning of these two phrases and what is the proper judicial method to decide whether a transaction is tax evasive or tax avoidant. The holdings of Justice Reddy’s opinion (the subject of our examination) have been considerably diluted, by Union of India v. Azadi Bachao Andolan, (2004) 10 SCC 1 (Division Bench, 2 judges) and subsequently by Vodafone International Holdings v. Union of India, (2012) 6 SCC 613 (3 judge bench). Justice Reddy’s opinion is being examined as a case-study but those interested in a deeper examination of the tax avoidance question in India are encouraged to read these two cases. The second case is State of Punjab v. Sodhi Sukhdev Singh, AIR 1961 SC 493, where the Court cited three important British precedents on the doctrine of crown privilege but didn’t completely accept the British position on the point. Sodhi Sukhdev Singh is the authoritative pronouncement on the issue of State privilege in withholding documents from the Court despite those documents being relevant to decide a legal matter before the Courts. But here, like McDowell, the case is being examined as a case-study in the use of foreign precedents to interpret Indian statutes. CASE STUDY 1 – MCDOWELL & CO. V. COMMERCIAL TAX OFFICER (1985) 3 SCC 230 Bench – Chief Justice Y. V. Chandrachud, Justices D. A. Desai, O. Chinnappa Reddy, E. S. Venkataramiah & Ranganah Misra

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Justice Chinnappa Reddy (for himself) [Justice Misra wrote the lead opinion (for the Chief Justice, Justices Desai, Venkataramiah & himself) of the case with which Justice Reddy concurred) While I entirely agree with my brother Rangnath Misra, J. in the judgment proposed to be delivered by him, I wish to add a few paragraphs, particularly to supplement what he has said on the fashionable topic of tax avoidance. My excuse for inflicting this extra opinion is that the ingenious attempts to rationalise and legitimise tax avoidance have always fascinated and amused me and made me wonder how ready the minds are to adapt themselves and discover excuses to dip into the treasury. The shortest definition of tax avoidance that I have come across is “the art of dodging tax without breaking the law.” Much legal sophistry and judicial exposition have gone into the attempt to differentiate the concepts of tax evasion and tax avoidance and to discover the invisible line supposed to exist which distinguishes one from the other. Tax avoidance, it seems, is legal tax evasion is illegal. Though initially the law was, and I suppose the law still is, “there is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied”, during the period between the two world wars, the theory came to be propounded and developed that it was perfectly open for persons to evade (avoid) income tax if they could do so legally. For some time it looked as if tax avoidance was even viewed with affection. Lord Sumner in Inland Revenue Commissioners v. Fishers Executors, [1926] A.C. 395 said: My Lords the highest authorities have always recognised that the subject is entitled so to arrange his affairs as not to attract taxes imposed by the Crown so far as he can do so within the law, and that he may legitimately claim the advantage of any expressed term or of any emotions that he can find in his favour in taxing Acts. In so doing he neither comes under liability nor incurs blame.

Lord Tomlin echoing what Lord Sumner had said observed in Inland Revenue Commissioners v. Duke of West Minister, [1936] A.C. 1 follows type filing the prevalent attitude towards tax avoidance at that time: Every man is entitled if he can to order his affairs so that the tax attaching under the appropriate Acts is less than if otherwise would be. If he succeeds in ordering them so as to secure this result, then, however, unappreciative the Commissioners of Inland Revenue or his fellow tax payers may be of his ingenuity, he cannot be compelled to pay on increased tax.

Then came World War II and in its wake huge profiteering and racketeering, something which persists till today, but on a much larger scale. The attitude of the Courts towards avoidance of tax perceptibly changed and hardened and in Lord Howard De Waldan v. IRC, [1942] 1 K.B. 389 Greene, M.R., dealing with the construction of an anti-avoidance section said: For years a battle of manoeuvre has been waged between the legislature and those who are minded to throw the burden of taxation off their own shoulders on to those of their fellow subjects. In that battle the legislature has been worsted by the skill, determination and resourcefulness of its opponents of whom the present appellant has not been the least successful. It would not shock us in the least to find that the legislature has determined to put on and to the struggle by imposing the severest penalties. It scarcely lies in the mouth of the tax payer who plays with fire to complain of burnt fingers.

Expressing the same sentiment and dissertating on the moral aspects of tax avoidance Lord Simon in Latilla v. IRC, [1943] A.C. 377 said:

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My Lords, of recent years much ingenuity has been expended in certain quarters in attempting to devise methods of disposition of income by which those who were prepared to adopt them might enjoy the benefits of residents in this country while receiving the equivalent of such income without sharing in the appropriate burden of British taxation. Judicial dicta may be cited which point out that, however, elaborate and artificial such methods may be, those who adopt them are ‘entitled’ to do 60. There is, of course, no doubt that they are within their legal rights but that is no reason why their efforts, or those of the professional gentlemen who assist them in the matter, should be regarded as a commendable exercise of ingenuity or as a discharge of the duties of good citizenship. On the contrary, one result of such methods, if they succeed, is of course to increase pro tanto the load of tax on the shoulders of the great body of good citizens who do not desire or do not know how, to adopt these manoeuvres.

In several cases, Griffith v. J. P. Harrizan Ltd., [1963] A.C. 1, Morgan v. IRC, [1963] Ch. 438, Public Trustee v. IRC, [1965] Ch. 286, Lord Denning repeatedly referred to tax avoidance schemes and described them as magic performance by lawyer-turned-magicians. Lord Harman, almost in the same words as Lord Denning described a tax avoidance scheme as one “which smells a little of the lamp” and said “it is a splendid scheme … it is almost too good to be true. In law quite too good to be true. It won't do.” (Campbell v. IRC, [1967] Ch. 651), Stamp J. In Re Western’s Settlements, [1969] 1 Ch. 223 observed – … There must be some limit to the devices which this Court ought to countenance in order to defeat the fiscal intentions of the legislature. In my judgment these proposals overstep that limit … I am not persuaded with this application represents more than a cheap exercise in tax avoidance which r ought not to sanction as distinct from a legitimate avoidance of liability to taxation.

In Greenberg v. IRC, [1971] 3 All E.R. 135, Lord Reid dealing with a scheme for tax avoidance by forward dividend stripping observed: .... We seem to have travelled a long way from the general and salutary rule that the subject is not be taxed except by plain words. But I must recognise that plain words are seldom adequate to anticipate and forestall the multiplicity of ingenious schemes which are constantly being devised to evade taxation. Parliament is very properly determined to prevent this kind of tax evasion and, if the courts find it impossible to give very wide meanings to general phrases, the only alternative may be for Parliament to do as some other countries have done and introduce legislation of a more sweeping character which will put the ordinary well-intentioned person at much greater risk than is created by a wide interpretation of such provisions as those which we are now considering. I am inclined to think that the real explanation of these verbal difficulties may be that, in legislation of such extreme complexity as we have here, it is not humanly possible for a draftsman to preserve that consistency in the use of language which we generally look for. Indeed, l sometimes suspect that our normal meticulous methods of statutory construction tend to lead us astray by concentrating too much 1 on verbal niceties and paying too little attention to the provisions read as a whole.

The march of the law against tax avoidance schemes continued and came a significant departure from the Westminister and the Fisher’s Executor principle. In Ramsay v. IRC,, [1982] A.C. 300, the House of Lords had to consider a scheme of tax avoidance which consisted of a series or a combination of transactions each of which was individually genuine but the result of all of which was an avoidance of tax. Lord Wilberforce, with great force, observed: Given that a document or transaction is genuine, the court cannot go behind it to some supposed underlying substance. This is the well-known principle of IRC v. Duke of Westminister. This is a cardinal principle but it must not be overstated or overextended. While obliging the court to accept documents or transactions, found to be genuine, as such, it does not compel the court to look at a document or a transaction in blinkers, isolated from any context to which it properly belongs. If it can be seen that a document or transaction was intended to have effect as part of a nexus or series of transactions, or as an ingredient of a wider transaction intended as a whole, there is nothing in the doctrine to prevent it being so regarded: to do so is not to prefer form to sub stance, or substance to

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form. It is the task of the court to ascertain the legal nature of any transaction to which it is sought to attach a tax or a tax consequence and if that emerges from a series or combination of transactions, intended to operate as such, it is that series or combination which may be regarded.

… The significance of Ramsay as a turning point in the interpretation of tax laws in England and the departure from the strings of Westminister were explained in IRC v. Burmah Oil Company Ltd., [1982] S.T.C. 30 where Lord Diplock said: It would be disingenuous to suggest, and dangerous on the part of those who advise on elaborate tax- avoidance schemes to assume, that Ramsay case did not mark a significant change in the approach adopted by this House in its judicial role to a pre-ordained series of transactions (whether or not they include the achievement of a legitimate commercial end) into which there are inserted steps that have no commercial purpose apart from the avoidance of a liability to tax which in the absence of those particular steps would have been payable. The difference is in approach. It does not necessitate the overruling of any earlier decisions of this House; hut it does involve recognising that Lord Hamlin's oft-quoted dictum in IRC v. Duke of Westminister, [1936] A.C. 119 ‘Every man is entitled if he can to order his affairs so as that the tax attaching under the appropriate Acts is less then it otherwise would be’, tells us little or nothing as to what methods of ordering one’s affairs will be recognised by the courts as effective to lessen the tax what would attach to them if business transactions were conducted in a straightforward way.

… The winds of change continued to blow and in Furniss v. Dawson, [1984] 1 All E.R. 530 Ramsay was reiterated. Lord Brightman observed: The fact that the court accepted that each step in a transaction was a genuine step producing its intended legal results did not confine the court to considering each step in h. isolation for the purpose of assessing the fiscal results.

He further said: My Lords, in my opinion the rationale of the new approach is this. In a preplanned tax saving scheme, no distinction is to be drawn for fiscal purposes, because none exists in reality, between (i) a series of steps which are followed through by virtue of an arrangement which falls short of a binding contract, and (ii) a like series of steps which and followed through because the participants are contractually bound to take each step seriatim. In a contractual case the fiscal consequences will naturally fall to be assessed in the light of the contractually agreed results.

… Thus the ghost of Westminister (in the words of Lord Roskill) has been exercised in England. Should it be allowed to rear its head in India? I have referred to the English cases at some length, only to show that in the very country of its birth, the principle of Westminister has been given a decent burial and in that very country where the phrase ‘tax avoidance’ originated the judicial attitude towards tax avoidance has changed and the smile, cynical or even affectionate though it might have been at one time, has now frozen into a deep frown. The courts are now concerning themselves not merely with the genuineness of a transaction, but with the intended effect of it for fiscal purposes. No one can now get away with a tax avoidance project with the mere statement that there is nothing illegal about it. … In CIT v. A. Raman, [1968] 1 S.C.R 10 J. C. Shah, J. speaking for himself and Sikri and Ramaswami, JJ repeating almost verbatim the observations in Westminister and Fisher’s Executors observed: Avoidance of tax liability by arranging commercial affairs that charge of tax is distributed is not prohibited. A taxpayer may resort to a device to divert the income before it accrues or arises to him. Effectiveness of the device

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depends not upon considerations of morality, but on the Legislative injunction in taking statutes may not, except on period of penalty, be violated, but it may lawfully be commented.

The same Judge, speaking for himself, Ramaswami and Grover JJ in CIT v. Kharwar (72 ITR 603 1968 Indlaw SC 280) expressly followed Westminister and observed: The taxing authority is entitled and is indeed bound to determine the true legal relation resulting from a transaction. If the parties have chosen to conceal by a device the legal relation, it is open to the taking authorities to unravel the device and to determine the true character of relationship. But the legal effect of a transaction cannot be displaced by probing into the ‘substance of the transaction’.

We think that time has come for us to depart from the Westminister principle as emphatically as the British Courts have done and to dissociate ourselves from the observations of Shah, J. and similar observations made elsewhere. The evil consequences of tax avoidance are manifold. First there is substantial loss of much needed public revenue, particularly in a welfare state like ours. Next there is the serious disturbance caused to the economy of the country by the piling up of mountains of black money, directly causing inflation. Then there is “the large hidden loss” to the community (as pointed out by Master Sheatcraft in 18 Modern Law Review 209) by some of the best brains in the country being involved in the perpetual war waged between the tax-avoider and his expert team of advisers, lawyers and accountants on one side and the tax-gatherer and his perhaps not so skillful, advisers on the other side. Then again there is the ‘sense of injustice and inequality which tax avoidance arouses in the breasts of those who are unwilling or unable to profit by it’. Last but not the least is the ethics (to be precise, the lack of it) of transferring the burden of tax liability to the shoulders of the guideless good citizens from those of the ‘artful dodgers’. It may, indeed, be difficult for lesser mortals to attain the state of mind of Mr. Justice Holmes, who said, “Taxes are what we pay for civilized society. I like to pay taxes. With them I buy civilization.” But, surely, it is high time for the judiciary in India too to part its ways from the principle of Westminister and the alluring logic of tax avoidance. We now live in a welfare state whose financial needs, if backed by the law, have to be respected and met. We must recognise that there is behind taxation laws as much moral sanction as behind any other welfare legislation and it is a pretence to say that avoidance of taxation is not unethical and that It stands on no less moral plane than honest payment of taxation. In our view, the proper way to construe a taking statute, while considering a device to avoid tax, is not to ask whether the provisions should be construed literally, or liberally, nor whether the transaction is not unreal and not prohibited by the statute, but whether the transaction is a device to avoid tax, and whether the transaction is such that the judicial process may accord its approval to it. … It is neither fair nor desirable to expect the legislature to intervene and take care of every device and scheme to avoid taxation. It is upto the Court to take stock to determine the nature of the new and sophisticated legal devices to avoid tax and consider whether the situation created by the devices could be related to the existing legislation with the aid of ‘emerging’ techniques of interpretation as was done in Ramsay, Burma Oil and Dawson, to expose the devices for what they really are and to refuse to give judicial benediction.

CASE STUDY 2 – STATE OF PUNJAB V. SODHI SUKHDEV SINGH AIR 1961 SC 493 Bench – Chief Justice B. P. Sinha, Justices J. L. Kapur, P. B. Gajendragadkar, K. Subba Rao & K. N. Wanchoo Justice Gajendragadkar (for Justices Sinha, Wanchoo & himself, Majority Opinion)

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[The question of law in this case was regarding interpretation of sections 123 and 162 of the Indian Evidence Act, 1872. The respondent was a District & Sessions Judge who was removed from his position by an order passed by the President of India (because President’s Rule was in force in the State of PEPSU that time). Later, when the President’s Rule was lifted, the respondent sent a representation to the Council of Ministers. The Council of Minister arrived at the same conclusion but resolved that the respondent may be re-employed on some suitable post. The respondent then sued for a declaration that his removal was illegal, void and inoperative and recovery of his salary in arrears. Certain government documents were required to be produced before the Trial Court and it was so ordered. The State invoked its privilege under section 123 of the Indian Evidence Act and refused to produce said documents. The Trial Court accepted this claim. The respondent approached the High Court in revision for quashing the Trial Court’s order and ordering the production of said documents. The High Court ordered the production of some of those documents. The State approached the Supreme Court in appeal against the High Court’s order. The question before the Constitution Bench was regarding the true scope and effect of sections 123 and 162 of the Indian Evidence Act. Appearing for the State, Homi Seervai argued that since these provisions were enacted in 1872 and were intended to introduce the English law into India, to correctly interpret these provisions a reference to English law is necessary. Justice Gajendragadkar, speaking for the majority discussed the historical development of English law to determine the scope of the doctrine of Crown Privilege.]

… In order to decide this question three representative English decisions must be considered. In Home v. Lord F. C. Bentinck, (1820) 2 Brod. & B. 130:129 E.R. 907 the Court was dealing with a claim made by H who had sued the president of the enquiry for a libel alleged to be contained in the report made by him. It appears that H was a commissioned officer in the Army and the Commander-in-Chief of the said Army had directed an assemblage of commissioned military officers to hold an enquiry into the conduct of H. According to H the said report contained libellous matter, and so he had sued the president of the enquiry. At the trial H desired that the report submitted by the court of enquiry should be produced and this request was resisted by the defendant on the ground that the document in question was a privileged communication. This plea was upheld. Dallas, C.J., referred to the precedents relevant to the decision of the point, and observed that the basis of the said precedents was that the disclosure would cause danger to the public good. He then considered the nature of the enquiry which had been directed against H, and observed that in the course of the enquiry a number of persons may be called before the court and may give information as witnesses which they would not choose to have disclosed; but, if the minutes of the court of enquiry are to be produced on an action brought by the party, they reveal the name of every witness and the evidence given by each. Not only this but they also reveal what has been said and done by each member of the existing court of enquiry; and, according to the learned judge, the reception of the said minutes would tend directly to disclose that which is not permitted to be disclosed; and so, independently of the character of the court the production of the report was privileged on the broad rule of public policy and convenience that matters like those covered by the report are secret in their nature and involve delicate enquiry and the names of persons who ought to stand protected. The next decision to which our attention has been invited is Smith v. East India Company, (1841) 1 Ph. 50:41 E.R. (Chancery) 550. In that case the dispute with which the Court was concerned had arisen with respect to a commercial transaction in which the East India Company had been engaged with a third party; and privilege was claimed in regard to the correspondence which had been carried on by the defendant with the Board of Control. It was held that the said correspondence was, on the ground of public policy, a privileged communication, and so the Company were not bound to produce or set for the contents of it in answer to a bill of discovery filed against them by the third party in relation to the transaction to which it referred. Lord Lyndhurst upheld the claim of privilege not because the

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correspondence purported to be confidential nor because it was official, but because of the effect of the provisions of section 85 of Act 3 & 4 W. 4 on which the claim of privilege was founded. It was noticed that the Company had been prohibited from carrying on any commercial transactions except for the purpose of winding up their affairs or for the purposes of the Government of India; and it was held that the result of the relevant provisions, and particularly of section 29 was that the Directors of the East India Company were required to make communication of all their acts, transactions and correspondence of every description to the Board of Control. That is why a claim for privilege in respect of the said correspondence was upheld. This decision shows that a claim for privilege could have been made even for correspondence which had reference to a commercial transaction in circumstances similar to those in that case. The last decision on which considerable reliance has been placed by Mr. Seervai is the case of Beatson v. Skene, (1860) 5 H. & N. 838:157 E.R. 1415. It may incidentally be pointed out that Chief Baron Pollock's observations in this judgment are frequently cited in judicial decisions where the question of privilege falls to be considered. In that case the plaintiff had been a general who commanded corps of irregular troops during the war in Crimea. Complaint having been made about the insubordination of troops the corps was placed under the superior command of V. Thereupon the plaintiff resigned his command. V directed S to inspect and report upon the state of the corps, and referred S for information to the defendant who was a Civil Commissioner. The defendant, in a conversation with S, made a defamatory statement respecting the conduct of the plaintiff. The plaintiff brought an action against the defendant for slander. The defence set up against the plaintiff’s claim was that what had passed between the defendant and S was a privileged communication. The jury had found a verdict for the defendant. A new trial was claimed by the plaintiff, inter alia, on the ground that the learned judge had declined to compel the production of certain documents. It appeared that the Secretary for War had been subpoenaed to produce certain letters written by the plaintiff to him and also the minutes of the court of enquiry as to the conduct of S in writing the letter to V. The plea for a new trial was rejected on the ground that the Court was of the opinion that the non-production of the said documents furnished no ground for a new trial. There was a difference of opinion among the members of the Court on the question as to whether Bramwell, J., was justified in upholding the claim of privilege. Pollock, C. B., Bramwell, B., Wilde, B., held that the claim for privilege was properly upheld, whereas Martin, B., took a contrary view. Dealing with the claim made that the production of the documents would be injurious to the public service Pollock, C. B., observed that the general public interest must be considered paramount to the individual interest of a suitor in a Court of Justice, and he posed the question: How is this to be determined? Then Pollock, C. B., proceeded to observe that the question must be determined either by a presiding judge or by the responsible servant of the Crown in whose custody the paper is; and he remarked that the judge would be unable to determine it without ascertaining what the document is and why the publication of it would be injurious to public service – an enquiry which cannot take place in private, and which taking place in public may do all the mischief which it is proposed to guard against. He further held that “the administration of justice is only a part of the general conduct of the affairs of any State or nation, and we think is (with respect to the production or non-production of a State paper in a Court of Justice) subordinate to the general welfare of the community”. Martin, B., however, was of the opinion that whenever the judge is satisfied that the document may be made public without prejudice to the public service the judge ought to compel its production notwithstanding the reluctance of the head of the department to produce it. It would thus be seen that according to the majority view the question as to whether any injury to public interest would be caused by the production of the document could not be determined by the Court, because such an enquiry would tend to defeat the very purpose for which privilege is claimed, whereas, according to the minority view it was for the Court to hold an enquiry and determine whether any injury would follow the production of the document.

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Mr. Seervai contends that these decisions correctly represent the legal position in regard to the Crown privilege in England in the second half of the Nineteenth Century, and, according to him, when the Indian Evidence Act was drafted by Sir James Fitzjames Stephen he intended to make provisions in the Act which would correspond to the said position in the English Law. In other words, the argument is that sections 123 and 162 are intended to lay down that, when a privilege is claimed by the State in the matter of production of State documents, the total question with regard to the said claims falls within the discretion of the head of the department concerned, and he has to decide in his discretion whether the document belongs to the privileged class and whether its production would cause injury to public interest. It is in the light of this background that Mr. Seervai wants us to construe the relevant sections of the Act. In support of this argument Mr. Seervai has also referred us to the draft prepared by Sir James Fitzjames Stephen at the instance of Lord Coleridge for adoption by the English Parliament, and has relied on Art. 112 in the said draft. Art. 112 provides, inter alia, that no one can be compelled to give evidence relating to any affairs of State, or as to official communications between public officers upon public affairs, unless the officer at the head of the department concerned permits him to do so. It also refers to some other matters with which we are not concerned. This part of Art. 112 as framed by Sir James Fitzjames Stephen seems to include the provisions of sections 123 and 124 of the Act. It is significant that there is nothing in this Article which corresponds to section 162 of the Act. Mr. Seervai concedes that the draft prepared by Sir James Fitzjames Stephen was not adopted by Parliament, and even now there is no statutory law of evidence in England; even so, he contends that the intention which Sir James Fitzjames Stephen had in drafting the relevant sections of the Indian Evidence Act must have been similar to his intention in drafting Art. 112, and that is another fact which we may bear in mind in construing the relevant sections of the Act. We ought, however, to add that though Mr. Seervai elaborately argued this part of his case he fairly conceded that recourse to extrinsic aid in interpreting a statutory provision would be justified only within well recognised limits; and that primarily the effect of the statutory provisions must be judged on a fair and reasonable construction of the words used by the statute itself. Let us now turn to section 123. It reads thus: No one shall be permitted to give any evidence derived from unpublished official records relating to any affairs of State, except with the permission of the officer at the head of the department concerned, who shall give or withhold such permission as he thinks fit.

This section refers to evidence derived from unpublished official records which have a relation to any affairs of State, and it provides that such evidence shall not be permitted to be given unless the head of the department concerned gives permission in that behalf. In other words, as a result of this section a document which is material and relevant is allowed to be withheld from the Court, and that undoubtedly constitutes a very serious departure from the ordinary rules of evidence. It is well known that in the administration of justice it is a principle of general application that both parties to the dispute must produce all the relevant and material evidence in their possession or their power which is necessary to prove their respective contentions; that is why the Act has prescribed elaborate rules to determine relevance and has evolved the doctrine of onus of proof. If the onus of proof of any issue is on a party and it fails to produce such evidence, section 114 of the Act justifies the inference that the said evidence if produced would be against the interest of the person who withholds it. As a result of section 123 no such inference can be drawn against the State if its privilege is upheld. That shows the nature and the extent of the departure from the ordinary rule which is authorised by section 123. The principle on which this departure can be and is justified is the principle of the overriding and paramount character of public interest. A valid claim for privilege made under section 123 proceeds on

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the basis of the theory that the production of the document in question would cause injury to public interest, and that, where a conflict arises between public interest and private interest, the latter must yield to the former. No doubt the litigant whose claim may not succeed as a result of the non-production of the relevant and material document may feel aggrieved by the result, and the Court, in reaching the said decision, may feel dissatisfied; but that will not affect the validity of the basic principle that public good and interest must override considerations of private good and private interest. Care has, however, to be taken to see that interests other than that of the public do not masquerade in the garb of public interest and take undue advantage of the provisions of section 123. Subject to this reservation the maxim silus populi est supreme lex which means that regard for public welfare is the highest law is the basis of the provisions contained in section 123. Though section 123 does not expressly refer to injury to public interest that principle is obviously implicit in it and indeed is its sole foundation. Whilst we are discussing the basic principle underlying the provisions of section 123, it may be pertinent to enquire whether fair and fearless administration of justice itself is not a matter of high public importance. Fair administration of justice between a citizen and a citizen or between a citizen and the State is itself a matter of great public importance; much more so would the administration of justice as a whole be a matter of very high public importance; even so, on principle, if there is a real, not imaginary or fictitious, conflict between public interest and the interest of an individual in a pending case, it may reluctantly have to be conceded that the interest of the individual cannot prevail over the public interest. If social security and progress which are necessarily included in the concept of public good are the ideal then injury to the said ideal must on principle be avoided even at the cost of the interest of an individual involved in a particular case. That is why Courts are and ought to be vigilant in dealing with a claim of privilege made under section 123. If under section 123 a dispute arises as to whether the evidence in question is derived from unpublished official records that can be easily resolved; but what presents considerable difficulty is a dispute as to whether the evidence in question relates to any affairs of State. What are the affairs of State under section 123? In the latter half of the Nineteenth Century affairs of State may have had a comparatively narrow content. Having regard to the notion about governmental functions and duties which then obtained, affairs of State would have meant matters of political or administrative character relating, for instance, to national defence, public peace and security and good neighborly relations. Thus, if the contents of the documents were such that their disclosure would affect either the national defence or public security or good neighborly relations they could claim the character of a document relating to affairs of State. There may be another class of documents which could claim the said privilege not by reason of their contents as such but by reason of the fact that, if the said documents were disclosed, they would materially affect the freedom and candour of expression of opinion in the determination and execution of public policies. In this class may legitimately be included notes and minutes made by the respective officers on the relevant files, opinions expressed, or reports made, and gist of official decisions reached in the course of the determination of the said questions of policy. In the efficient administration of public affairs government may reasonably treat such a class of documents as confidential and urge that its disclosure should be prevented on the ground of possible injury to public interest. In other words, if the proper functioning of the public service would be impaired by the disclosure of any document or class of documents such document or such class of documents may also claim the status of documents relating to public affairs. It may be that when the Act was passed the concept of governmental functions and their extent was limited, and so was the concept of the words “affairs of State” correspondingly limited; but, as is often said, words are not static vehicles of ideas or concepts. As the content of the ideas or concepts conveyed by respective words expands, so does the content of the words keep pace with the said expanding content of the ideas or concepts, and that naturally tends to widen the field of public interest which the section wants to protect. The inevitable consequence of the change in the concept of the functions of the State

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is that the State in pursuit of its welfare activities undertakes to an increasing extent activities which were formerly treated as purely commercial, and documents in relation to such commercial activities undertaken by the State in the pursuit of public policies of social welfare are also apt to claim the privilege of documents relating to the affairs of State. It is in respect of such documents that we reach the marginal line in the application of section 123; and it is precisely in determining the claim for privilege for such border-line cases that difficulty arises. It is, however, necessary to remember that where the Legislature has advisedly refrained from defining the expression “affairs of State” it would be inexpedient for judicial decisions to attempt to put the said expression into a strait jacket of a definition judicially evolved. The question as to whether any particular document or a class of documents answers the description must be determined in each case on the relevant facts and circumstances adduced before the Court. “Affairs of State”, according to Mr. Seervai, are synonymous with public business and he contends that section 123 provides for a general prohibition against the production of any document relating to public business unless permission for its production is given by the head of the department concerned. Mr. Seervai has argued that documents in regard to affairs of State constitute a genus under which there are two species of documents, one the disclosure of which will cause no injury to public interest, and the other the disclosure of which may cause injury to public interest. In the light of the consequence which may flow from their disclosure the two species of documents can be described as innocuous and noxious respectively. According to Mr. Seervai the effect of section 123 is that there is a general prohibition against the production of all documents relating to public business subject to the exception that the head of the department can give permission for the production of such documents as are innocuous and not noxious. He contends that it is not possible to imagine that the section contemplates that the head of the department would give permission to produce a noxious document. It is on this interpretation of section 123 that Mr. Seervai seeks to build up similarity between section 123 and the English Law as it was understood in 1872. In other words, according to Mr. Seervai the jurisdiction of the Court in dealing with a claim of privilege under section 123 is very limited and in most of the cases, if not all, the Court would have to accept the claim without effective scrutiny. On the other hand it has been urged by Mr. Sastri that the expression “documents relating to any affairs of State” should receive a narrow construction; and it should be confined only to the class of noxious documents. Even in regard to this class the argument is that the Court should decide the character of the document and should not hesitate to enquire, incidentally if necessary, whether its disclosure would lead to injury to public interest. This contention seeks to make the jurisdiction of the Court wider and the field of discretion entrusted to the department correspondingly narrower. It would thus be seen that on the point in controversy between the parties three views are possible. The first view is that it is the head of the department who decides to which class the document belongs; if he comes to the conclusion that the document is innocuous he will give permission to its production; if however, he comes to the conclusion that the document is noxious he will withhold such permission; in any case the Court does not materially come into the picture. The other view is that it is for the Court to determine the character of the document, and if necessary enquire into the possible consequences of its disclosure; on this view the jurisdiction of the Court is very much wider. A third view which does not accept either of the two extreme positions would be that the Court can determine the character of the document, and if it comes to the conclusion that the document belongs to the noxious class it may leave it to the head of the department to decide whether its production should be permitted or not; for it is not the policy of section 123 that in the case of every noxious document the head of the department must always withhold permission. In deciding the question as to which of these three views correctly represents the true legal position under the Act it would be necessary to examine section 162. Let us therefore, turn to that section.

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Section 162 reads thus: A witness summoned to produce a document shall, if it is in his possession or power, bring it to Court, notwithstanding any objection which there may be to its production or to its admissibility. The validity of any such objection shall be decided on by the Court.

The Court, if it sees fit, may inspect the document, unless it refers to matters of State, or take other evidence to enable it to determine on its admissibility. The first clause of section 162 requires that a witness summoned to produce a document must bring it to the Court and then raise an objection against either its production or its admissibility. It also authorises the Court, and indeed makes it its obligation, to decide the validity of either or both of the said objections. It is significant that the objections to the production or admissibility of evidence specified in section 162 relate to all claims of privilege provided by the relevant sections of Chapter IX of Part III of the Act. Section 123 is only one of such privileges so that the jurisdiction given to the Court to decide the validity of the objections covers not only the objections raised under section 123 but all other objections as well. Take for instance the privilege claimed under section 124 of the Act which provides that no public officer shall be compelled to disclose communications made to him in official confidence when he considers that the public interest would suffer by the disclosure. It is clear, and indeed it is not disputed, that in dealing with an objection against the production of a document raised under section 124the Court would have first to determine whether the communication in question has been made in official confidence. If the answer to the said question is in the negative then the document has to be produced; if the said answer is in the affirmative then it is for the officer concerned to decide whether the document should be disclosed or not. This illustration brings out the character and the scope of the jurisdiction conferred on the Court dealing with an objection raised under section 162. The second clause of section 162 in terms refers to the objection as to the admissibility of the document. It seems to us that this clause should be construed to refer to the objections both as to the production and the admissibility of documents; otherwise, in the absence of any limitation on its power the Court would be justified in exercising its authority under, and discharging its obligation imposed by, clause 1 of section 162 by inspecting the document while holding an enquiry into the validity of the objection raised against its production under section 123, and that would be inconsistent with the material provision in clause 2 of section 162. That is why we hold that the second clause covers both kinds of objections. In other words, admissibility in the context refers both to production and admissibility. It may be added that “matters of State” referred to in the second clause are identical with “affairs of State” mentioned in section 123. Reading this clause on this assumption what is its effect? It empowers the Court to inspect the document while dealing with the objection; but this power cannot be exercised where the objection relates to a document having reference to matters of State and it is raised under section 123. In such a case the Court is empowered to take other evidence to enable it to determine the validity of the objection. Mr. Seervai contends that the first part of clause 2 which deals with the inspection of the document is confined to the objection relating to the production of the document, and on that basis he contends that since inspection is not permissible in regard to the document falling under section 123 the Court can do nothing else but record its approval to, and uphold the validity of, the objection raised by the head of the department. In regard to the objection as to the admissibility of the said document, however, he concedes that the Court can take other evidence, if necessary, and then determine its validity. According to him, such evidence would be necessary and permissible when the objection to admissibility is based for instance on want of stamp or absence of registration. In our opinion, this construction though ingenious is not supportable on a plain and grammatical construction of the clause read as a whole; it breaks up the clause artificially which is plainly not justified by rules of grammar. We are satisfied that

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the Court can take other evidence in lieu of inspection of the document in dealing with a privilege claimed or an objection raised even under section 123. If the privileged document cannot be inspected the Court may well take other collateral evidence to determine its character or class. In other words, the jurisdiction conferred on the Court to deal with the validity of an objection as to the production of a document conferred by the first clause is not illusory or nominal; it has to be exercised in cases of objections raised under section 123 also by calling for evidence permissible in that behalf. It is perfectly true that in holding an enquiry into the validity of the objection under section 123 the Court cannot permit any evidence about the contents of the document. If the document cannot be inspected its contents cannot indirectly be proved; but that is not to say that other collateral evidence cannot be produced which may assist the Court in determining the validity of the objection. This position would be clear if at this stage we consider the question as to how an objection against the production of document should be raised under section123. It is well settled and not disputed that the privilege should not be claimed under section 123 because it is apprehended that the document if produced would defeat the defence raised by the State. Anxiety to suppress a document may be natural in an individual litigant and so it is checked and kept under control by the provisions of section 114 of the Act. Where, however, section 123 confers wide powers on the head of the department to claim privilege on the ground that the disclosure may cause injury to public interest scrupulous care must be taken to avoid making a claim for such a privilege on the ground that the disclosure of the document may defeat the defence raised by the State. It must be clearly realised that the effect of the document on the ultimate course of litigation or its impact on the head of the department or the Minister in charge of the department, or even the government in power, has no relevance in making a claim of privilege under section 123. The apprehension that the disclosure may adversely affect the head of the department or the department itself or the Minister or even the government, or that it may provoke public criticism or censure in the Legislature has also no relevance in the matter and should not weigh in the mind of the head of the department who makes the claim. The sole and the only test which should determine the decision of the head of the department is injury to public interest and nothing else. Since it is not unlikely that extraneous and collateral purposes may operate in the mind of the person claiming the privilege it is necessary to lay down certain rules in respect of the manner in which the privilege should be claimed. We think that in such cases the privilege should be claimed generally by the Minister in charge who is the political head of the department concerned; if not, the Secretary of the department who is the departmental head should make the claim; and the claim should always be made in the form of an affidavit. When the affidavit is made by the Secretary the Court may, in a proper case, require an affidavit of the Minister himself. The affidavit should show that each document in question has been carefully read and considered, and the person making the affidavit is satisfied that its disclosure would lead to public injury. If there are a series of documents included in a file it should appear from the affidavit that each one of the documents, whose disclosure is objected to, has been duly considered by the authority concerned. The affidavit should also indicate briefly within permissible limits the reason why it is apprehended that their disclosure would lead to injury to public interest. This last requirement would be very important when privilege is claimed in regard to documents which prima facie suggest that they are documents of a commercial character having relation only to commercial activities of the State. If the document clearly falls within the category of privileged documents no serious dispute generally arises; it is only when Courts are dealing with marginal or border-line documents that difficulties are experienced in deciding whether the privilege should be upheld or not, and it is particularly in respect of such documents that it is expedient and desirable that the affidavit should give some indication about the reasons why it is apprehended that public interest may be injured by their disclosure. It is conceded by Mr. Seervai that if the affidavit produced in support of the claim for privilege is founded to be unsatisfactory a further affidavit may be called, and in a proper case the person making the affidavit whether he is a Minister or the Secretary should be summoned to face cross-examination

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on the relevant points. Mr. Seervai, however, contends that the object of such cross-examination must be limited to test the credibility of the witness and nothing more. We do not see why any such a limitation should be imposed on cross-examination in such a case. It would be open to the opponent to put such relevant and permissible questions as he may think of to help the Court in determining whether the document belongs to the privileged class or not. It is true that the scope of the enquiry in such a case is bound to be narrow and restricted; but the existence of the power in the Court to hold such an enquiry will itself act as a salutary check on the capricious exercise of the power conferred under section 123; and as some of the decisions show the existence of this power is not merely a matter of theoretical abstraction. … Thus our conclusion is that reading sections 123 and 162 together the Court cannot hold an enquiry into the possible injury to public interest which may result from the disclosure of the document in question. That is a matter for the authority concerned to decide; but the Court is competent, and indeed is bound, to hold a preliminary enquiry and determine the validity of the objections to its production, and that necessarily involves an enquiry into the question as to whether the evidence relates to an affair of State under section 123 or not. In this enquiry the Court has to determine the character or class of the document. If it comes to the conclusion that the document does not relate to affairs of State then it should reject the claim for privilege and direct its production. If it comes to the conclusion that the document relates to the affairs of State it should leave it to the head of the department to decide whether he should permit its production or not. We are not impressed by Mr. Seervai's argument that the Act could not have intended that the head of the department would permit the production of a document which belongs to the noxious class. In our opinion, it is quite conceivable that even in regard to a document falling within the class of documents relating to affairs of State the head of the department may legitimately take the view that its disclosure would not cause injury to public interest. Take for instance the case of a document which came into existence quiet some time before its production is called for in litigation; it is not unlikely that the head of the department may feel that though the character of the document may theoretically justify his refusing to permit its production, at the time when its production is claimed no public injury is likely to be caused. It is also possible that the head of the department may feel that the injury to public interest which the disclosure of the document may cause is minor or insignificant, indirect or remote; and having regard to the wider extent of the direct injury to the cause of justice which may result from its non-production he may decide to permit its production. In exercising his discretion under section 123 in many cases the head of the department may have to weight the pros and cons of the problem and objectively determine the nature and extent of the injury to public interest as against the injury to the administration of justice. That is why we think it is not unreasonable to hold that section 123 gives discretion to the head of the department to permit the production of a document even though its production may theoretically lead to some kind of injury to public interest. While construing sections 123 and 162, it would be irrelevant to consider why the enquiry as to injury to public interest should not be within the jurisdiction of the Court, for that clearly is a matter of policy on which the Court does not and should not generally express any opinion. In this connection it is necessary to add that the nature and scope of the enquiry which, in our opinion, it is competent to the Court to hold under section 162 would remain substantially the same whether we accept the wider or the narrower interpretation of the expression “affairs of State”. In the former case the Court will decide whether the document falls in the Class of innocuous or noxious documents; if it finds that the document belongs to the innocuous class it will direct its production; if it finds that the document belongs to the noxious class it will leave it to the discretion of the head of the department whether to permit its production or not. Even on the narrow construction of the expression "affairs of State" the Court will determine its character in the first instance, if it holds that it does not fall within the noxious class which alone is included in the relevant expression on this view an order for its production will follow; if the finding is that it belongs to the noxious class the question about its production will be left to the discretion of the head of the department. We have already stated how three

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views are possible on this point. In our opinion, Mr. Seervai’s contention which adopts one extreme position ignores the effect of section 162, whereas the contrary position which is also extreme in character ignores the provisions of section 123. The view which we are disposed to take about the authority and jurisdiction of the Court in such matters is based on a harmonious construction of section 123 and section 162 read together; it recognises the power conferred on the Court by clause (1) of section 162, and also gives due effect to the discretion vested in the head of the department by section 123. It would thus be clear that in view of the provisions of section 162 the position in India in regard to the Court’s power and jurisdiction is different from the position under the English Law as it obtained in England in 1872. It may be true to say that in prohibiting the inspection of documents relating to matters of State the second clause of section 162 is intended to repel the minority view of Baron Martin in the case of Beatson (1860) 5 H. & N. 838 157 E. R. 1415. Nevertheless the effect of the first clause of section 162 clearly brings out the departure made by the Indian Law in one material particular, and that is the authority given to the Court to hold a preliminary enquiry into the character of the document. That is why we think that the arguments so elaborately and ingeniously built up by Mr. Seervai on the basis of the background of the Indian Evidence Act breaks down in the light of the provisions of section 162. We may add that in substance and broadly stated the consensus of judicial opinion in this country is in favour of this conclusion. …

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UNIT 4 – INTERNAL AIDS TO INTERPRETATION TITLE OF A STATUTE The use of a Title of a Statute depends on two things – the length of the title and most importantly whether the Title is considered as a part of the Statue. Singh in his famous commentary Principles of Statutory Interpretation reports at least three cases where the Title of the Statue was used as an interpretive tool. These are Popatlal Shah v. State of Madras, AIR 1953 SC 274 (Madras General Sales Tax Act, 1939), Kedar Nath Bajoria v. State of Bengal, AIR 1953 SC 404 (West Bengal Criminal Law Amendment (Special Courts) Act, 1949) and Ashwini Kumar Ghose v. Arabinda Bose, AIR 1952 SC 369. The principle of interpretation stated by Justice Donovan in R v. Bates, [1952] 2 All.E.R. 842, is helpful to understand this rule and is reproduced here – The principle, as I understand it, is that where something is doubtful or ambiguous the long title may be looked to resolve the doubt or ambiguity, but in the absence of doubt or ambiguity, the passage under construction must be taken to mean what it says, so that if its meaning is clear, that meaning is not to be narrowed or restricted by reference to the long title

A principle similar to this was observed in Manoharlal v. State of Punjab, AIR 1961 SC 418, by Justice Ayyanger in the following words – The long title of the Act – on which learned counsel placed considerable reliance as a guide for the determination of the scope of the Act and the policy underlying the legislation, no doubt, indicates the main purpose of the enactment but cannot, obviously, control the express operative provisions of the Act.

The principle seems to be that in case of genuine doubt as to the object of the statute, the Title of the Statute may be examined in order to determine the same. That a statute must be interpreted in accordance with its object is a general rule we have already examined above (The Mischief Rule). In order to get an idea of the rule as laid down by the British courts we will examine as a case-study the opinion of the Central Criminal Court in R v. Bates and Russel, [1952] 2 All.E.R. 842 and in order to understand how this rule plays out in practice in India we will examine Ashwini Kumar Ghose v. Arabinda Bose as a case study. Three opinions were delivered in Ashwini Kumar, but we will only examine the majority opinion by Chief Justice Sastri. CASE STUDY 1 – R V. BATES & RUSSEL [1952] 2 All.E.R. 842 (Central Criminal Court) Justice Donovan [Harry Noel Bates and Charles Frederick Russell were charged under section 12(1) of the Prevention of Fraud (Investments) Act, 1939. The first charge was fraudulent attempt to induce persons to invest. The attempt was through a letter by which people to enter into agreements to acquire ordinary shares in a company (Specialloid Ltd.) by dishonest concealment of material facts. The second charge was on similar grounds except now on the basis of a forecast that was misleading and deceptive. The third charge was also the same except this time on the basis of making a reckless forecast that was misleading and deceptive. The defendants argued that the word ‘reckless’ in section 12(1) should be construed as involving recklessness amounting to dishonesty. So construed, the count did not disclose an offence known to the law and thus should be quashed.]

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… It is contended that, in view of the Solicitor-General’s avowal that the word “reckless” in that count does not necessarily connote dishonesty, the count alleges an offence unknown to the law and should be quashed. Section 12(1) of the Prevention of Fraud (Investments) Act, 1939 , under which the charge is laid, provides: “Any person who, by any statement, promise or forecast which he knows to be misleading, false or deceptive, or by any dishonest concealment of material facts, or by the reckless making of any statement, promise or forecast which is misleading, false or deceptive, induces or attempts to induce another person [to invest money] … shall be guilty of an offence ….” Counts 1 and 2 of the indictment allege against each of the defendants the dishonest concealment of material facts and the making of a statement which each knew to be misleading, false or deceptive. Count 3 reads thus: “Statement of Offence: Recklessly attempting to induce persons to invest money, contrary to section 12(1) of the Prevention of Fraud (Investments) Act, 1939. Particulars of offence: [Bates and Russell] on a day between April 1, 1945, and November 30, 1945, in the county of London, in a letter headed ‘Joseph Sebag & Co., Statistical Department,’ dated November, 1945, attempted to induce persons to enter into agreements for acquiring ordinary shares in Specialloid, Ltd., by the reckless making of a forecast which was misleading and deceptive, namely, that the directions of Specialloid, Ltd., anticipate that the profits for the year ended March 31, 1946, should not be less than those shown in the auditors’ report for the preceding year, namely, £65,349, before charging income tax.” The Solicitor-General, in opening the case, said that count 3 was an alternative to counts 1 and 2, in the sense that it would be possible to convict under count 3 even if each defendant were acquitted under counts 1 and 2, for counts 1 and 2 obviously involved charges of dishonesty, whereas count 3 did not. A man, it was said, might make a forecast which was false, misleading, and deceptive, through recklessness falling short of dishonesty. In the present case he (the Solicitor-General) would be content, in supporting count 3, to allege such recklessness. Even though it fell short of dishonesty, such a case, he argued, is still caught by the words of section 12(1). That view is challenged on behalf of each defendant, and it is said that, unless the prosecution allege recklessness amounting to dishonesty, count 3 has no legal basis, and since no such allegation is made, that count is bad and ought to go. The issue which this argument raises is purely one of construction of section 12 (1), and, in particular, the construction of the passage “the reckless making of any statement, promise or forecast which is misleading, false or deceptive.” The rival constructions of this passage appear from what I have already said. Counsel for Bates contends that one, at least, of the meanings of the word “reckless” in this context is careless whether the statement be true or false, and he quotes the speeches of Lord Bramwell and Lord Herschell in Derry v. Peek, (1889) 14 App.Cas. 337 to the effect that a man who makes a statement, careless whether it be true or false, and induces another to act on it to the latter’s detriment, would be guilty of fraud so as to make him liable to an action for deceit. Lord Bramwell, in particular, says (at p. 350): … a man who makes a statement without care and regard for its truth or falsity commits a fraud. He is a rogue. For every man who makes a statement says ‘the truth is so and so, and I know it or believe it.

So, it is argued that the word “reckless” in section 12(1) should be construed in the same sense, that is, as meaning, and meaning only, a statement made by a person careless whether the statement be true or false, and, therefore, dishonest. This is purely a question of the construction of section 12 (1), in which the word “reckless” finds its setting. Obviously I am not constrained by what was said in Derry v. Peek to decide that in section 12(1) the word connotes only something dishonest, and it is not suggested that I am. Derry v. Peek was an action for deceit, to succeed in which the plaintiff had to establish fraud, and the House of Lords said, among other things, that a statement made recklessly – that is, without belief in its truth – would be fraud for that purpose. They contrasted such a statement with one made

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recklessly, but with belief in its truth, which could not be fraud. Obviously the word “Reckless” may be used as connoting something entirely free from any moral stigma. It is, however, said that it is not so used in section 12 (1), but is used only in the sense that Lord Bramwell used it in Derry v. Peek, that is, dishonest or fraudulent, and the reasons are these. First, the long title to the Act proclaims as one of its purposes … to make general provision for preventing fraud in connection with dealings in investments. …

Secondly, the cross-heading which immediately precedes section 12 (1) reads thus: General provisions for the prevention of fraud.

Thirdly, the marginal note to the section is: Penalty for fraudulently inducing persons to invest money.”

I agree that the long title is a legitimate aid to the construction of section 12 (1), and I take the same view, in this case, of the cross-heading. When Parliament proclaims what the purpose of an Act is, it would be wrong to leave that out of account when construing the Act – in particular, when construing some doubtful or ambiguous expression. In many cases the long title may supply the key to the meaning. The principle, as I understand it, is that where something is doubtful or ambiguous the long title may be looked to to resolve the doubt or ambiguity, but, in the absence of doubt or ambiguity, the passage under construction must be taken to mean what it says, so that, if its meaning be clear, that meaning is not to be narrowed or restricted by reference to the long title. I take the same view about the crossheading. Instances, indeed, abound where Parliament, proclaiming in an Act that its purpose is to prevent people doing such and such a thing, has caught people who never had any intention of doing it. The patch, in other words, has been larger than the hole. A neat example is section 21 of the Finance Act, 1922, which has been held to apply to persons altogether innocent of the mischief which Parliament said it intended the section to prevent. The section has frequently come under review in the House of Lords without that construction ever being questioned by their Lordships. The marginal note I reject as a guide to construction. As I said during the argument, it is not the subject of debate or amendment in Parliament, and it follows that during the passage of a Bill amendments may be made to a clause which extend its effect beyond the scope of the marginal note, which, nevertheless, remains unamended. The note, therefore, would then become actually misleading if used as a guide to construction. I might point out that in section 12 of the Act of 1939, the marginal note gives no indication that a fraudulent attempt to induce people to invest is an offence. It refers only to the completed act of inducing. The vital question is: Is there such an ambiguity or doubt about section 12(1) in this particular respect that I ought to restrict the meaning of the word “reckless” by reference to the long title and the crossheading? In other words, although “reckless” may mean “careless, but without dishonesty,” am I to say that the word does not bear that meaning here? If one analyses section 12 (1), it is found to deal with three categories of persons who have induced or attempted to induce other persons to invest money. The first is the person who makes a statement which he knows to be misleading, false or deceptive; the second is the person who dishonestly conceals material facts; and the third is the person who recklessly makes a statement, promise, or forecast which is misleading, false, or deceptive. Categories 1 and 2 obviously refer to persons who are dishonest, but, after referring to a person who has knowingly made a false statement or has dishonestly concealed material facts, the legislature, introducing its third category by the disjunctive “or,” changes its language altogether. It does not specify a person who

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knowingly makes a misleading, false, or deceptive statement, promise, or forecast, or dishonestly makes it. It simply specifies a person who recklessly makes these things. It is admitted that, if the arguments to which I have listened are right, the word “reckless” means and means only, something dishonest. If that be so, why did Parliament not use that word as it had done in the line immediately before? Am I to say that the change of words involves no change of meaning? The ordinary meaning of the word “reckless” in the English language is “careless,” “heedless,” “inattentive to duty,” Literally, of course, it means “without reck,” “Reck” is simply an old English word, now, perhaps, obsolete, meaning “heed,” “concern,” or “care,” In accordance with the accepted principles of construction I ought to give that meaning to the word, and, therefore, include that recklessness which is not dishonest, unless it is clear that in section 12(1) it bears a restricted meaning. On what grounds can I say that that is clear? Because, says counsel for Bates, the long title and cross-heading apart, Parliament cannot have intended that recklessness which would not even have supported a civil action for deceit should amount to a criminal offence carrying a maximum penalty of seven years’ imprisonment, and because, says counsel for Russell, Parliament cannot have intended to treat alike dishonest rogues and persons who were honest, but careless. Those are cogent arguments. Against them there is this important consideration. The first two things with which section 12 (1) deals are false statements of fact and dishonest concealment of facts. It is not a difficult matter to decide in any given case whether a false statement of fact is false to the knowledge of him who makes it, nor whether a concealment of facts is dishonest. But then the section goes on to deal, among other things, with forecasts which are misleading, false or deceptive. The case of a forecast seems to me to be a different matter. A man may say: “I expect the profits to go on increasing, or to be not less than last year,” or: “I expect the value of the company's land and property to appreciate considerably.” Those forecasts may turn out to be falsified by the events. How, in the majority of cases, could one prove that they were made dishonestly, even if such were the case? There would, I suppose, be glaring cases where it could be done, but such are the vicissitudes of human affairs, and their reaction on trade and business, that forecasts such as I have instanced might be made quite honestly, although they turned out to be unjustified. Obviously, therefore, it might be very difficult to bring to justice the person who had made such a forecast dishonestly. It would seem to be quite understandable, in those circumstances, if Parliament, intending to do something about misleading, false and deceptive forecasts, took the view that, as a practical matter, it ought to go a step further than in the case of false statements and dishonest concealment of facts, and, besides striking at the dishonest prophet, do something to ensure that even the honest ones should take due care to see that their forecasts were not misleading, false and deceptive, and if, although honest, they were reckless, they should be liable to a penalty. There is nothing in this so repugnant to natural justice that I ought to limit the meaning of which Parliament has used. It has given the courts, after all, ample latitude in the matter of punishment, enabling them to discriminate properly between moral turpitude and mere recklessness. It is not without interest to observe that Lord Herschell in Derry v. Peek foreshadowed that Parliament might one day provide against negligence which was merely a breach of moral duty. Such weight as attaches to that which I have just said is not diminished because this part of section 12(1) deals also with statements and promises. With those considerations in mind and remembering all that has been urged on behalf of the defendants, I am unable to accede to the argument that the word “reckless” in section 12(1) should receive a restricted meaning connoting only such recklessness as is dishonest. In my opinion, it must be left to bear its full meaning, and be construed, therefore, as covering the case where there is a high degree of negligence without dishonesty. … I hold count 3 of the indictment to be good. …

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CASE STUDY 2 – ASHWINI KUMAR GHOSE V. ARABINDA BOSE AIR 1952 SC 369 Bench – Chief Justice M. Patanjali Sastri, Justices B. K. Mukherjea, S. R. Das, Vivian Bose & Ghulam Hasan Chief Justice Sastri (for himself) This is an application under Art. 32 of the Constitution for relief in respect of an alleged infringement of the fundamental right of the petitioners under Art. 19 (1) (g) … The facts leading to this proceeding are not in dispute and may be briefly stated. The first petitioner is an Advocate of this Court and his name is also the roll of Advocates of the High Court of Calcutta. As an Advocate of the latter Court he is entitled, under the relevant rules there in force, both to act and to plead the Appellate Side but not to act or to appear, unless instructed by an Attorney, the Original Side. 18 July, 1951, he filed in the Registry the Original Side a warrant of authority executed in his favour by the second petitioner to defend the latter in a pending suit. The warrant was returned 27 July, 195 1, with the endorsement that it “must be filed by an Attorney of this Court under the High Court Rules and Orders, Original Side, and not by an Advocate”. The return was made by an Assistant in charge of Suit Registry Department, who is called as the first respondent to this petition. The second respondent is the Registrar, Original Side, who is alleged to have refused the same ground to accept a warrant filed earlier in a company matter. It is conceded that the Action of the respondent would be valid apart from the right claimed by the first petitioner as an Advocate of this Court under the Supreme Court Advocates (Practice in High Courts) Act, 1951, (hereinafter referred to as “the new Act”) which provides that such Advocates are “entitled as of right to practice” in any High Court in India. The petitioners, however, claimed that the right to practice thus conferred included also the right to act as well as to appear without the intervention of an Attorney the Original Side, and moved the High Court under Art. 226 for issue of appropriate writs orders or directions to the respondent for enforcement of the right denied to them. A Special Bench consisting of Trevor Harries C.J., Chakravartti and Banerjee, JJ. heard the motion and dismissed it, holding that the first petitioner did not, being enrolled as an Advocate of the Supreme Court, become entitled to act the Original Side of the Court. The second petitioner has since dropped out of these proceedings, and the first petitioner, who appeared in person and argued his case before us, is hereinafter referred to as the petitioner. … A brief historical survey of the functions, rights and duties of legal practitioners in this country may facilitate appreciation of the contentions of the parties. Before the Indian High Courts Act of 1861 (24 and 25 Vic. Ch. 104) was enacted, there were, in the territories subject to the British rule in India, Supreme Courts exercising jurisdiction mainly in the Presidency Towns and Sudder Courts exercising jurisdiction over the mofussil. Though the Supreme Courts were given, by the Charter Acts and the Letters Patent establishing them, power to enroll Advocates who could be authorised by the rules to act as well as to plead in the Supreme Courts, rules were made empowering Advocates only to appear and plead and not to act, while Attorneys were enrolled and authorised to act and not to plead. In the Sudder Courts and the Courts subordinate thereto, pleaders who obtained a certificate from those Courts were allowed both to act and plead. When the Supreme Courts and the Sudder Courts were abolished and their jurisdictions were transferred to High Courts under the statute of 1861, this differentiation in the functions of legal practitioners was continued in the High Courts under the notion, apparently, that the High Court, in the exercise of its Ordinary Original Jurisdiction, was the successor of the Supreme Court, and that, the Appellate Side, it inherited the jurisdiction and powers of the Sudder Courts, with the result that Advocates were allowed only to appear and plead instructed by Attorneys empowered to act the Original Side as in the Supreme Court, while the Appellate Side, they were allowed both to act and plead as in the Sudder Courts. There was also another class of practitioners known as Vakils who were neither allowed to act nor to plead the Original Side, but were allowed both to act and plead the Appellate Side. Within a short time,

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however, the Vakils at Madras were permitted by a rule made by the High Court to appear, plead and act the Original Side as wel1 vide In the Matter of the Petition of the Attorneys (1876-78) I.L.R. 1 Mad. 24 – but the cleavage between the two jurisdictions, Original and Appellate, was maintained in the Calcutta and Bombay High Courts with modifications by means of rules framed by the respective High Courts from time to time. While this was the position in the High Courts in the three Presidency Towns of Calcutta, Bombay and Madras, no distinction was drawn between Advocates and Vakils (except in the matter of authorisation by their clients) as regards their right to appear, plead and act in the other High Courts subsequently established in British India without original jurisdiction. The position in these Courts was correctly stated by a Full Bench of the Allahabad High Court thus: Not only by the Letters Patent but by the Civil Procedure Code, an Advocate may act for his client in this Court in the manner in that statute set forth and do all things that a Pleader, that is, a Vakil, may do, provided always that he be upon the Roll of the Court’s Advocates: Bakhtawar Singh v. Sant Lal, (1887) 9 All. 617, 621.

In this situation, the Legal Practitioners Act, 1879, (Act XVIII of 1879) which consolidated and amended the law relating to Legal Practitioners was passed. By s. 4 it empowered the Advocates and Vakils enrolled in any High Court to “practice” in all subordinate courts and in any other High Court with the “permission” of the latter Court. No Vakil or Pleader, however, was to be entitled to “practice” in a High Court exercising jurisdiction in a Presidency Town. By s. 5 all persons enrolled as Attorneys in any High Court became “entitled to practice” in all courts subordinate to such High Court and in any court in British India other than a High Court established by Royal Charter the roll of which he is not entered. It is worthy of note that the right to practise thus conferred included the right to plead as well as to act in all the courts referred to above. Then came the Indian Bar Councils Act, 1926, which was enacted in response to a demand by the legal profession for unification and autonomy of the Bar, and it achieved a certain measure of both, eliminating the two grades of practitioners, the Vakils and the Pleaders, by merging them in the class of Advocates who, were “entitled as of right to practice” in the High Courts in which they were enrolled and in any other court in British India, subject to certain exceptions. It also provided for Constitution of Bar Councils for the High Courts with power to regulate the admission of Advocates, to prescribe their qualifications and to inquire into any case of misconduct that may be referred to them. But the right to practise and the power to make rules were not to limit or in any way affect the unlimited powers of the High Courts at Calcutta and Bombay to make rules allowing or disallowing Advocates to practise their Original Side: (vide s. 9 (4) and s. 14). While such was the position of Advocates in the courts in what – used to be known as British India, it is not a matter of dispute that Advocates practising in the courts of what were known as Indian States were allowed to appear, plead and act behalf of suitors. It will thus be seen that legal practitioners, by whatever name called, practising in all the High Courts in India, except the Original Side of the Calcutta and Bombay High Courts, and in the innumerable subordinate courts all over India were always entitled to plead as well as to act. In the Original Side of the Calcutta and Bombay High Courts alone, where the cleavage between the Original and Appellate jurisdictions continued to be marked, due, as we have seen, to historical reasons, the functions of pleading and acting, which a legal practitioner normally combines in his own person, were bifurcated and assigned, following “the usage and the peculiar constitution of the English Bar” (per Lord Watson in the case cited below), to Advocates and Attorneys respectively. In this situation, the establishment of the Supreme Court of India, exercising appellate jurisdiction over all the High Courts naturally stimulated the demand for the unification of the Bar in India, and Parliament enacted the new Act as a step towards that end. It is a brief enactment entitled “an Act to authorise Advocates of the Supreme Court to practise as of right in any High Court” and consists of only two sections. Section I describes the short title of the Act and s. 2 enacts (so far as material here): Notwithstanding anything contained in the Indian Bar Councils Act, 1926, or in any other law regulating the conditions subject to which a person not entered in the roll of Advocates of a High Court may, be permitted to

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practise in that High Court every Advocate of the Supreme Court shall be entitled as of right to practise in any High Court whether or not he is an Advocate of that High Court: Provided that nothing in this section shall be deemed to entitle any person, merely by reason of his being an Advocate of the Supreme Court, to practise in any High Court of which he was at any time a judge, if he bad given an undertaking not to practice therein after ceasing to hold office as such judge.

According to the petitioner’s contention, an Advocate of the Supreme Court becomes entitled as of right to appear and plead as well as to act in all the High Courts including the High Court in which he is already enrolled, without any differentiation being made for this purpose between the various jurisdictions exercised by those courts. The word “practise” as applied to an Advocate in India includes both the functions of acting and pleading, and there is nothing in s. 2 to warrant the cutting down of that statutory right to pleading only the Original Side of the Calcutta High Court as the respondents seek to do. the other hand, the respondents contend that the non obstante clause in the first part of the section furnishes the key to the proper interpretation of its scope, and inasmuch as that clause supersedes only those pro-visions of the Bar Councils Act, and of any other law which exclude persons not entered in the roll of Advocates of a High Court from the right to practise in that Court, the enacting clause must be construed as conferring only a right co-extensive with the disability removed by the opening clause; that is to say, the section is designed only to enable Advocates of the Supreme Court who are not enrolled as Advocates of any High Court to practise nevertheless in that High Court. The petitioner, who is already an Advocate of the Calcutta High Court, could derive no additional right from the section in relation to that Court, as he does not fall within the purview of the section. Alternatively, even if the provision is read as conferring Advocates of the Supreme Court the right to practise in relation to all the High Courts in India, including the High Courts in which they are already enrolled, the section does no more than entitle them to practise in conformity with the conditions subject to which advocates are permitted to practise in those Courts, for the word “practice” is a term of indefinite import and, as applied to an Advocate, it may mean pleading or acting or both, according to the conditions under which the profession of an Advocate is exercised in the court concerned. Both branches of this contention have found favour with the learned Judges of the court below. A third view was also suggested in the course of the debate before us. An Advocate of the Supreme Court is entitled under the Rules of that Court only to appear and plead and not to act, while Agents who are enrolled as such are entitled only to act but not to appear and plead. In dealing with the right of Advocates of the Supreme Court to “practice” in the High Courts, Parliament must therefore be taken to have used that word in the sense only of appearing and pleading, the object of s. 2 being only to confer the Supreme Court Advocates the right to appear and plead in all the High Courts and no further or other right. Having given the matter our most careful and anxious consideration, we have come to the conclusion that the petitioner’s contention is correct and must prevail. As we have already seen, there are in this country more than 20 High Courts (including the Judicial Commissioners’ Courts which are treated as High Courts for this purpose), and in all these High Courts excepting the original jurisdiction of the Calcutta and Bombay High Courts and in all the numerous subordinate courts, both civil and criminal, existing all over the country, an Advocate combines in himself both the functions of acting and pleading which constitute the normal activities of all legal practitioners except members of the English Bar whose “usage and peculiar constitution” allow them only to appear and plead and not to act. It would seem that this peculiar British system of division of functions between Barristers and Attorneys is not in vogue even in all the British Dominions and Colonies. … It seems reasonable, therefore, to assume that the practice of law in this country generally involves the exercise of both the functions of acting and pleading, behalf of a litigant party; in other words, the Bar in India, generally speaking, is organised as a single agency. Accordingly, when the Legislature confers upon an Advocate “the right to practice” in a Court, it is legitimate to understand that expression as authorising him to appear and plead as well as to act behalf of suitors in that Court. It is true that the word “practice” used in relation to a given profession means simply the pursuit of that

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profession and involves the exercise of the functions which are ordinarily exercised by the members of the profession. But it seems to be fallacious to relate that expression, as applied to an Advocate, either, the one, hand, to the Court in which the Advocate is enrolled or, the other, to the Court in which he seeks to exercise the statutory right conferred him. It must, in our opinion, be related to the general constitution of the Bar in India as a single agency in dealing with the litigant public, a system which prevails all over this vast country except in two small pockets where a dual agency imported from England was maintained, owing, as we have seen, to historical reasons. We are accordingly unable to accept the suggestion that because the Advocates of the Supreme Court are not, under the Rules of that Court, entitled to act, the word “practice” as used by Parliament in s. 2 must be understood in the restricted sense of appearing and pleading only. Parliament was, of course, aware that the right of the Advocates of the Supreme Court to practise in that Court was confined only to appearing and pleading, but the object of s. 2 was to confer upon a designated body of persons, namely, the Advocates of the Supreme Court, a right to practise in other courts, viz., the various High Courts in India, whether or not they were already enrolled in such courts. This statutory right, which is conferred the Supreme Court Advocates in relation to other courts and which they did not have before) cannot, as a matter of construction, be taken to be, controlled by reference to what they are allowed or not allowed to do in the Supreme Court under the Rules of that Court. Such Rules are liable to be altered at any time in exercise of the rule-making power conferred by art. 145 of the Constitution. The scope and content of the new statutory right conferred in relation to the High Courts could not have been intended to depend the varying scope of the functions which the Supreme Court Advocates are allowed to, exercise in that Court from time to time. Besides, the consequences of such a construction would be somewhat startling. For instance, if an Advocate of the Supreme Court not entered the Roll of the Allahabad High Court desired to practise in the latter Court where there are no Attorneys or Agents, he would find himself in a difficult situation. It was said that a, local Advocate could be engaged to instruct him, acting for the client. Even if it were permissible to substitute a local Advocate for an “Agent” to overcome the disability imposed by Order IV, Rule 11, of the Supreme Court Rules which prohibits an Advocate from appearing “unless he is instructed by an Agent”, it would be tantamount to introducing a new type of dual agency where it does not exist at present, an innovation which, we think, could hardly have been contemplated. Such an interpretation would also render the right conferred by the new Act largely illusory in practice. The construction adopted by the learned Judges of the High Court, which relates the word “practice” in s. 2 to the High Court in which the Supreme Court Advocate seeks to exercise his right, seems to us to be equally open to objections. In their view, that word as applied to the same Advocate should be understood in a wider or narrower sense in relation to different High Courts, and indeed, to different jurisdictions of the same High Court, according to the rules there in force. They say: Since the section applies to a number of different High Courts where different conditions of practice prevail, the word ‘practice’ has no one particular and invariable meaning in the section but its meaning must vary according as the section is applied to one High Court or another. In its application to each High Court it will have the meaning which an Advocatess right to practise bears in that Court at the time under the local rules and regulations. This meaning may be wider in relation to one High Court and narrower in relation to another, and even in relation to the same High Court it may not always remain the same, for a High Court-may enlarge the professional rights of its Advocates and if it does so, Advocates of the Supreme Court will, thereafter, have the enlarged rights in that Court. But at any given point of time the rights of an Advocate of the Supreme Court to practise in any particular High Court in exercise of the power conferred him by s. 2 can at most be co-extensive with but no greater than the right which Advocates of that Court themselves possess at the time.

We are unable to agree with this ambulatory interpretation of s. 2. It may be that the full sense of the word “practice” as including both acting and pleading may be out down by the context in which it is used in a particular statute. But we do not find any such context in the language of the new Act or in its object as we conceive it. The construction which the learned Judges have placed s. 2 was supported

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before us by attributing to the word “practice” the “dictionary meaning”, as it was called, of exercising a profession and postulating the exercise by the Advocate of the Supreme Court of different professions in different High Courts in which he may seek to appear. Thus, he exercises the profession of a Madras Advocate while appearing in Madras; the profession of an. Appellate Side Advocate or of an Original Side Advocate, as the case may be, while appearing those sides of the Calcutta and the Bombay High Courts, and so. The object of this curious differentiation is to read the different conditions under which an Advocate exercises his profession in each of those Courts or jurisdictions into the word “practice” itself as the necessary implication of its dictionary meaning so as to bring in the exclusion of acting the Original Side as part of its connotation. We find it difficult to appreciate this view. The Advocate of the Supreme Court in all the cases referred to above seeks to practise only one profession, namely, the profession of an Advocate. As such he would be bound to observe the rules of practice of each Court, that is, the prescribed procedure for conducting legal proceedings in the Court concerned; but a rule which denies to him the right to exercise an essential part of his function by insisting a dual agency the Original Side is much more than a rule of practice and the power of making such a rule, unless expressly reserved by the new Act, as it was reserved in s. 9 (4) and s. 14(3) of the Bar Councils Act, would be repugnant to the right conferred by s. 2. In this connection, it may be pertinent to point out that the power of the High Courts to make rules of practice regulating the procedure to be followed in the conduct of proceedings before them and the power to frame rules regulating the admission and conduct of legal practitioners were always derived from distinct sources originally under different clauses of the Letters Patent establishing them and later from the Civil Procedure Code and the Bar Councils Act. The learned Judges have also overlooked an important distinction between the position of an Advocate of the Calcutta or the Bombay High Court in relation to his Court and that of an Advocate of the Supreme Court in relation to those Courts. The former is not entitled to practise “as of right” the Original Side of his High Court as his right to practise is made under s. 14(1)(a) expressly subject to s. 9(4) which reserves the power of those Courts to exclude him from such right so far as the Original Side is concerned. In other words, the local Advocate is not entitled “as of right” to practise the Original Side of those two High Courts, whereas it is open to argument and indeed is now argued that the Advocate of the Supreme Court becomes under the new Act entitled to practise “as of right” in all High Courts without any distinction in the matter of the jurisdictions exercised by them, because no, such power is preserved and continued in the new Act. In view of this difference, which is vital to the petitioner’s contention, it is not correct to say that the right conferred the Supreme Court Advocate “can at most be co-extensive with but no greater than the right which Advocates of that Court themselves possess at the time”. Here, indeed, we reach the crux of the whole case. Now, s. 14(1) (a) of the Bar Councils Act enacts 14. (1) An Advocate shall be entitled as of right to practice - (a) subject to the provisions of subs. (4) of section 9, in the High Court of which he is an Advocate,

and S. 9(4) provides:Nothing in this section or in any other, provision of this Act shall be deemed to limit or in any way affect the powers of the High Courts of Judicature at Fort William in Bengal and at Bombay to prescribe the qualifications to be possessed by persons applying to practise in those High Courts respectively in the exercise of their original jurisdiction or the powers of those High Courts to grant or refuse, as they think fit, any such application, or to prescribe the conditions under which such persons shall be entitled to practise or plead.

S. 14(3) reads Nothing in this section shall be deemed to limit or in any way affect the power of the High Court of Judicature at Fort William in Bengal or of the High Court of Judicature at Bombay to make rules determining the persons who shall be entitled respectively to lead and to act in the High Court in the exercise of its original jurisdiction.

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It is to be noted that by virtue of the last two provisions to which the right of local Advocates is made expressly subject, the High Courts of Calcutta and Bombay have the power to “grant or refuse as they think fit” the application of any person applying to practise in the Original Side of those Courts, and the power to make rules laying down who shall plead and who shall act that side. It is in exercise of these powers that the High Courts have framed the rules, to which reference has been made, cutting down the right of the Advocates of those Courts to practise the Original Side to appearing and pleading only and otherwise imposing restrictions that right, such as, that they shall not appear unless instructed by an Attorney. That is to say, the Advocates of those Courts are not entitled to practise as of right the Original Side. As the powers thus reserved are exercisable only in regard to the Original Side, the Advocates of these Courts are under s. 14(1) (a) entitled as of right to practise in the appellate and other jurisdictions exercised by those Courts. Similarly, under s. 2 of the new Act every Advocate of the Supreme Court is entitled as of right to practise in any High Court. But it is significant that no power is reserved, to the Calcutta or the Bombay High Courts to cut down this statutory right and confine it to pleading alone the Original Side. Why were the reservations which the Legislature took care to insert in the Bar Councils Act in conferring a statutory right of practice Advocates of the High Courts omitted in the new Act in conferring a similar right in similar terms the Advocates of the Supreme Court in relation to the High Courts? Why this departure from the pattern of what is, in this respect, a closely analogous piece of legislation? The respondents made two answers to this question neither of which seems to us satisfactory. One was that the word “practice” itself connoted, in relation to the Original Side of the Calcutta and Bombay High Courts, only pleading and not acting, as Advocates of those Courts practising that side had long been only appearing and pleading instructed by Attorneys who acted for the suitors. This argument we have already rejected. But, even so, why insert s. 9(4) in the Bar Councils Act and make the right under s. 14(1)(a) subject to the overriding powers under s. 9(4)? If the argument were valid, such provisions would have been wholly unnecessary, for, even in their absence, the word “practice” would connote only pleading and not acting. This indeed is an additional ground for rejecting that construction. It is legitimate, therefore, to conclude that the Legislature used the word “practice” both in the Bar Councils Act and in the new Act in its full sense of acting and pleading, but while in the case of Advocates of the Calcutta and Bombay High Courts it has expressly preserved and continued the power of those courts to restrict or exclude the right of practice the Original Side, it has reserved no such overriding power under the new Act with the result that any restrictive rule cutting down the statutory right would be repugnant to s. 2 and therefore void and inoperative. A similar view of the effect of s. 14(1) (a) of the Bar Councils Act was expressed by a Full Bench of the Madras High Court in Powers of Advocates, In re (1928) I.L.R. 52 Mad. 92, where it was held that a rule made by that Court excluding the Advocates enrolled there from acting the Insolvency Side became invalid and inoperative after the enactment of that Act, and we entirely agree with that decision. The learned Judges below attempted to distinguish that case, as Mr. Chatterjee for the respondents did before us, by observing that because the Bar Councils Act made no distinction between the different jurisdictions of the Madras High Court and the rules of that Court allowed the Advocates to act and plead the Original as well as the Appellate jurisdiction thereof, the learned Judges construed the word “practice” in s. 14 to mean both acting and pleading. That is not a correct view of the reasoning employed by the Full Bench. The learned Judges failed to see that such reasoning would indeed lead to the opposite conclusion. As a matter of, fact, there was a rule under which the local Advocates were prevented from acting and they had accordingly not acted in the insolvency jurisdiction of that Court, so that if “practice” in s. 14(1)(a) were to be construed in the light of what the Advocates bad been doing in the past under the rules of that Court, the Court would have had to hold that the Advocates acquired no new right by virtue of s. 14(1)(a) But the Full Bench held that they did and the gist of their reasoning was thus put by Kumaraswami Sastri J., who delivered the leading judgment:

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The word ‘practise’ ordinarily means appear, act and plead, unless there is anything in the subject or context to limit its meaning … I am of opinion that where an Act confers rights to a party in general terms and entitles him to perform more than one function, the cutting down of those rights by a rule would make that rule repugnant to the provisions of the Act. … In the result, treating this proceeding as an appeal from the judgment of the High Court, we set aside

the order of that Court and direct the respondents to receive any warrant of authority which the first; petitioner may produce from the legal representative of the second petitioner who is reported to have died in the course of the proceeding. We make no order as to costs.

PREAMBLE OF A STATUTE The use of the Preamble of a Statute as an interpretive tool is on the same lines as that of the Title. The observations of the Supreme Court in the following case may be taken as an authoritative exposition of the law on this point. This case thus is not being studies as a case-study but as an important precedent on the point. Although we may profitably note the following observations made by Singh in his authoritative commentary Principles of Statutory Interpretation (13 ed.) – The preamble of a statute like the long title is a part of the Act and is an admissible aid to construction. Although not an enacting part, the preamble is expected to express the scope, object and purpose of the Act more comprehensively than the long title.

Singh also quotes approvingly from Burakar Coal Co. Ltd. v. Union of India, AIR 1961 SC 954, the following observations of Justice Mudholkar – It is one of the cardinal principles of construction that where the language of an Act is clear, the preamble must be disregarded though, where the object or meaning of an enactment is not clear, the Preamble may be resorted to explain it. Again, where very general language is used in an enactment which, it is clear must be intended to have a limited application, the preamble may be used to indicate to what particular instances, the enactment is intended to apply. We cannot, therefore, start with the preamble for construing the provisions of an Act, though we could be justified in resorting to it, nay, we will be required to do so, if we find that language used by Parliament is ambiguous or is too general though in point of fact Parliament intended that it should have a limited application.

A brief comparison with the principles of interpretation as described with respect to the use of the Title of a Statute as an interpretive tool show that the use of the Preamble is permissible to find out the object for which the statute has been enacted if it is not otherwise clear from the text of the provisions of the statute under consideration. This is a specific instance of the Mischief Rule being applied. We may now examine the following two cases. The first is Union of India v. Elphinstone Spinning and Weaving Co., (2001) 4 SCC 139 – a unanimous Constitution Bench (5 judges) that is being examined as a case having precedental value. The second is Gullipilli Sowrai Raj v. Bandaru Pavani, (2009) 1 SCC 714, a Division Bench (2 judges) decision that is being examined as a case-study to see how this principle is applied in practice. CASE – UNION OF INDIA V. ELPHINSTONE SPINNING AND WEAVING CO. (2001) 4 SCC 139 Bench – Justices G. B. Pattanaik, S. Rajendra Babu, D. P. Mohapatra, D. Raju & Shivraj V. Patil Justice Pattanaik (for the Court)

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[The Union Government enacted the Textile Undertakings (Taking over of Management) Act, 1983 (referred by Justice Pattanaik as “the Act”), which was preceded by an Ordinance by the same title, took over certain industrial undertakings. The undertaken entities challenged this undertaking as violative on the fundamental rights (articles 14 and 19(1)(g) of the Constitution) before the Bombay High Court where they succeeded. The Bombay High Court held that the Union Government had failed to establish any mismanagement on part of the undertaken entities and thus struck down the Act. The Union Government came, in appeal, to the Supreme Court. The Supreme Court reversed the Bombay High Court’s judgment. The following observations and holdings of the Court on the question of use of a Preamble of a Statute as an interpretive tool are generally considered as authoritative.]

… The learned Judges then held that there was no nexus between the main object or purpose of The Act to take over the management of only those Mills whose financial condition before strike was wholly unsatisfactory by reason of mismanagement, and as such, the rights of the Mills under art. 14 of the Constitution has been violated. At the outset it may be stated that the High Court committed serious error in recording a finding that the Preamble and other provisions of The Act go to show that in the context of things the term mismanagement has been used to mean mismanagement having an element of fraud or dishonesty. We have examined the impugned Act carefully and we fail to understand that how the High Court could come to a conclusion that the expression mismanagement has been used to indicate an element of fraud and dishonesty whereas in fact neither the provisions of The Act nor the object or Preamble have indicated any such intention. While examining a particular statute for finding out the legislative intent it is the attitude of judges in arriving at a solution by striking a balance between the letter and spirit of the statute without acknowledging that they have in any way supplement the statute would be the proper criteria. The duty of judges is to expound and not to legislate is a fundamental rule. There is no doubt a marginal area in which the courts mould or creatively interpret legislation and they are thus finishers, refiners and polishers of legislation which comes to them in a state requiring varying degrees of further processing. … But by no stretch of imagination a Judge is entitled to add something more than what is there in the Statute by way of a supposed intention of the legislature. It is, therefore, a cardinal principle of construction of statute that the true or legal meaning of an enactment is derived by considering the meaning of the words used in the enactment in the light of any discernible purpose or object which comprehends the mischief and its remedy to which the enactment is directed. Applying the aforesaid principle we really fail to understand as to how the learned judges of Bombay High Court could come to a conclusion that the mismanagement must necessarily mean an element of fraud or dishonesty. Courts are not entitled to usurp legislative function under the disguise of interpretation and they must avoid the danger of determining the meaning of a provision based on their own preconceived notions of ideological structure or scheme into which the provision to be interpreted is somehow fitted. Caution is all the more necessary in dealing with a legislation enacted to give effect to policies that are subject to bitter public and parliamentary controversy for in controversial matters there is room for differences of opinion as to what is expedient, what is just and what is morally justifiable; it is the Parliaments opinion in these matters that is paramount. … When the question arises as to the meaning of a certain provision in a Statute it is not only legitimate but proper to read that provision in its context. The context means; the statute as a whole, the previous state of law, other statutes in pari materia, the general scope of the statute and the mischief that it was intended to remedy. An Act consists of a long title which precedes the Preamble and the said long title is a part of an Act itself and is admissible as an aid to its construction. It has been held in several cases that a long title along with Preamble or even in its absence is a good guide regarding the object, scope or purpose of The Act whereas the Preamble being only an abbreviation for purposes of reference is not a useful aid to construction. The Preamble of an Act, no doubt can also be read along with other provisions of The Act to find out the meaning of the words in enacting provisions to decide whether they are clear or

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ambiguous but the preamble in itself not being an enacting provision is not of the same weight as an aid to construction of a Section of The Act as are other relevant enacting words to be found elsewhere in The Act. The utility of the Preamble diminishes on a conclusion as to clarity of enacting provisions. It is therefore said that the Preamble is not to influence the meaning otherwise ascribable to the enacting parts unless there is a compelling reason for it. If in an Act the Preamble is general or brief statement of the main purpose, it may well be of little value. Mudholkar, J. had observed in Burakar Coal Co. Ltd. vs. Union of India, AIR 1961 SC 954 1961: It is one of the cardinal principles of construction that where the language of an Act is clear, the Preamble must be disregarded though, where the object meaning of an enactment is not clear the Preamble may be resorted to explain it. Again where very general language is used in an enactment which, it is clear must be intended to have a limited application, the preamble may be used to indicate to what particular instances the enactment is intended to apply. We cannot, therefore, start with the preamble for construing the provisions of an Act, though we could be justified in resorting to it nay we will be required to do so if we find that the language used by Parliament is ambiguous or is too general though in point of fact Parliament intended that it should have a limited application.

In Coal Bearing Areas (Acquisition and Development) Act 1957 the Court was construing a Notification issued under s. 4(1) of the said Act and as in the present case the Preamble of that Act was to the effect: An Act to establish in the economic interest of India greater public control over the coal mining industry and its development by providing for the acquisition by the State of unworked land containing or likely to contain coal deposits or of right in or over such land, for the extinguishment or modification of such rights accruing by virtue of any agreement, lease license or otherwise, and for matters connected therewith.

Repelling an argument advanced on behalf of the Mine owners that The Act intended to apply only to virgin land and not on the land which are being worked or were worked in the past because of the use of the words unworked land in the preamble, this Court held that the language of the enacting provisions was clear and therefore not controlled by the Preamble. (See: Burrakur Coal Co. Vs. Union of India, AIR 1961 SC 954). This being the position, and the Textile Undertakings Taking Over of the Management Act, 1983, being an Act providing for taking over in the public interest of the Management of Textile Undertakings of the Companies specified in the First Schedule pending nationalisation of such undertakings and for matters connected therewith or incidental thereto as is apparent from the long title, use of the expression mismanagement of the affairs in the preamble will not control the purpose of The Act, namely, the public interest and the Parliament having decided to take over the management of the Textile Mills which were in serious financial crisis, in the public interest it was not open for the Court to come to a conclusion by taking recourse to the use of the word mismanagement in the Preamble to hold that the Parliament intended only to take those Mills whose financial condition was deplorable on account of mismanagement and not in case of those mills where the financial condition may be deplorable but not on account of mismanagement. … In our considered opinion the impugned Act read as a whole unequivocally indicates that the Parliament was satisfied that the management of the Textile Undertakings specified in the First Schedule should be taken over pending nationalisation of such undertakings, and therefore, passed the impugned Act in public interest. … So far as the fifth question is concerned, though it is no doubt true that the Court would be justified to some extent in examining the materials for finding out the true legislative intent, engrafted in a Statute, but the same would be done only, when the Statute itself is ambiguous or a particular meaning given to a particular provision of the Statute, it would make the Statute unworkable or the very purpose of enacting the Statute would get frustrated. But by no stretch of imagination, it would be open for a Court to expand even the language used in the Preamble to extract the meaning of the Statute or to find out the latent intention of the legislature in enacting the Statute. As has been stated earlier, in the case in hand, the Taking over of Management Statute of 1983, had been engrafted in the public interest as the legislature found that there is imperative need to take over of the management of the companies

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until the process of nationalisation is finalised. This is apparent from the long title of The Act itself and the Preamble also indicates that to make the mills viable, it would be necessary for the public financial institutions to invest very large sum of money, so that the mills will be rehabilitated and the interest of the workmen, employed therein would be protected. The Preamble further indicates that the process of acquisition would take a longer time and to enable the Central Government to invest large sum of money, it was necessary in the public interest to take over the management of the undertakings. Thus, the taking over of the management of the mills was in the public interest, the said public interest being to rehabilitate the mills by pumping in, huge sums of public money to protect the interest of the workers in the mills. The High Court in the impugned judgment, however gave a restricted meaning to the purpose of The Act by interpreting the expression Mismanagement used in the first preamble to connote fraud and dis-honesty, and in our considered opinion, the High Court was wholly unjustified in going behind the apparent legislative intention as already stated and in coming to a conclusion which cannot be sustained either on the materials on record or applying the rules of interpretation of a Statute. The said conclusion of the High Court as to the spirit behind the Statute, therefore, cannot be sustained.

CASE STUDY – GULLIPILLI SOWRIA RAJ V BANDARU PAVANI (2009) 1 SCC 714 Bench – Justices Altamas Kabir & Aftab Alam Justice Altamas Kabir (for the Court) The only question which falls for determination in this Civil Appeal by way of Special Leave is whether a marriage entered into by a Hindu with a Christian is valid under the provisions of the Hindu Marriage Act, 1955. The appellant, who is a Roman Catholic Christian allegedly married the respondent, who is a Hindu, on 24.10.1996, in a temple only by exchange of ‘Thali’ and in the absence of any representative from either side. Subsequently, the marriage was registered on 2.11.1996 under s. 8 of the Hindu Marriage Act, 1955, hereinafter referred to as “the 1955 Act”. Soon thereafter, on 13.3.1997, the respondent-wife filed a petition before the Family Court at Vishakapatnam, being O.P. No. 84 of 1997, u/s. 12(1)(c) of 1955 Act, for a decree of nullity of the marriage entered into between the parties on 24.10.1996 on the grounds mentioned in the said petition. The main ground for declaring the marriage to be a nullity was mainly misrepresentation by the appellant regarding his social status and that he was a Hindu by religion, although it transpired after the marriage that the appellant and his family members all professed the Christian faith. The Family Court dismissed the said petition against which an appeal was preferred by the respondent before the High Court, which allowed the appeal by its judgment and order dated 12.9.2002 upon holding that the marriage between a Hindu and a Christian under the 1955 Act is void ab initio and that the marriage was, therefore, a nullity. A few months thereafter on 23.1.2003 the respondent married one Dr. Praveen. Thereafter, on 23.4.2003 the appellant filed a Special Leave Petition out of which the present appeal arises. There is no dispute that at the time of the purported marriage between the appellant and the respondent the appellant was a Christian and continues to be so whereas the respondent was a Hindu and continues to be so. There is also no dispute that the marriage was alleged to have been performed under the Hindu Marriage Act, 1955, and was also registered under s. 8 thereof. As against the above, a novel argument has been advanced on behalf of the appellant, the substance whereof is that the Hindu Marriage Act, 1955 does not preclude a Hindu from marrying a person of some other faith. In order to assist the Court in regard to such a submission, the Court had requested Mr. U.U. Lalit, learned Senior Advocate, to assist the Court in the matter. Mr. Lalit firstly took us through the provisions of S. 5 of the 1955 Act which prescribes the conditions for a Hindu marriage. The opening words of S. 5 are as follows:

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A marriage may be solemnized between any two Hindus, if the following conditions are fulfilled, namely ...

Mr. Lalit submitted that the use of the word ‘may’ in the opening words of S. 5 seems to indicate that the conditions were not mandatory and that as a result, the said conditions would not be binding on the marriage performed between the appellant and the respondent. Mr. Lalit then took us through the provisions of S. 11 of the 1955 Act, which deals with void marriages and indicates as follows: 11. Void marriages: Any marriage solemnized after the commencement of this Act shall be null and void and may, on a petition presented by either party thereto, against the other party be so declared by a decree of nullity if it contravenes any one of the conditions specified in clauses (i), (iv) and (v), S. 5.

Mr. Lalit submitted that none of the conditions, as indicated in Section 11, apply to the facts of this case and as such the marriage between the appellant and the respondent could not be said to be a void marriage. According to Mr. Lalit, at best the marriage could be said to be a voidable marriage and the High Court appears to have proceeded on an erroneous footing that the marriage was ab initio void. Adopting the line of submission advanced by Mr. Lalit, Mr. C. Mukund, learned counsel for the appellant, submitted that the Heading of S. 5 – ‘Conditions for a Hindu marriage’ was a misnomer, having regard to the use of the expression ‘may’ in the opening lines of the Section. Mr. Mukund submitted that the conditions indicated in S. 5 must be held to be optional and that S. 7 of the said Act where also the expression ‘may’ has been used in Sub-s. (1) must be understood to refer to a marriage and not the parties to the marriage. Mr. Mukund submitted that S. 11 of the Hindu Marriage Act, 1955, would, therefore, have an overriding effect over the provisions of S. 5 which, according to him, were optional. Mr. Mukund reiterated that the Hindu Marriage Act, 1955, does not contemplate a valid marriage only between two Hindus, and urged that the High Court had erred in allowing the respondent's application under s. 12(1)(c) of the above Act on such misconception of the provisions thereof. Mr. Y. Rajagopala Rao, learned advocate appearing for the respondent wife, submitted that it will first have to be decided whether the marriage performed between the parties was a valid Hindu marriage or not. According to Mr. Rao, the other questions would arise only thereafter. In this regard, Mr. Rao submitted that the Preamble to the Hindu Marriage Act, 1955, in unambiguous terms makes it clear that the Act was promulgated to amend and codify law relating to marriage amongst Hindus. He urged that the language of the Preamble leaves no room for doubt that the Act and its provisions would apply to Hindus only, as defined in Section 2, Sub-s. (1)(c) whereof specifically excludes a person professing the Christian faith from the its ambit. Mr. Rao urged that each religious community in India had their own form of marriages which excluded members of other religious communities, though the Indian Marriage Act did recognize a marriage between a Christian and non-Christian to be valid, though under the provisions of the Special Marriage Act. Mr. Rao also referred to S. 2 of the above Act which reads as follows: 2. Application of Act – (1) This Act applies, (a) to any person who is a Hindu by religion in any of its forms or developments, including a Virashaiva, a Lingayat or a follower of the Brahmo, Prarthana or Arya Samaj; (b) to any person who is a Buddhist, Jaina or Sikh by religion, and (c) to any other person domiciled in the territories to which this Act extends who is not a Muslim, Christian, Parsi or Jew by religion, unless it is proved that any such person would not have been governed by the Hindu law or by any custom or usage as part of that law in respect of any of the matters dealt with herein if this Act had not been passed. Explanation. – The following persons are Hindus, Buddhists, Jainas or Sikhs by religion, as the case may be,(a) any child, legitimate or illegitimate, both of whose parents are Hindus, Buddhists, Jainas or Sikhs by religion;

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(b) any child, legitimate or illegitimate, one of whose parents is a Hindu, Buddhist Jaina or Sikh by religion and who is brought up as a member of tribe, community, group or family to which such parents belongs or belonged; and (c) any person who is a convert or re-convert to the Hindus, Buddhist, Jaina or Sikh religion. (2) Notwithstanding anything contained in sub-section (1),nothing contained in this Act shall apply to the members of any Scheduled Tribe within the meaning of cl. (25) of Art. 366 of the Constitution unless the Central Government, by notification in the Official Gazette, otherwise directs. (3) The expression “Hindus” in any portion of this Act shall be construed as if it included a person who, though not a Hindu by religion is, nevertheless, a person whom this Act applies by virtue of the provisions contained in this section.

Reference was then made to S. 4 of the Act which, inter alia, provides that save as otherwise expressly provided in the Act any text Rule or interpretation of Hindu Law or any customs or usage as part of that law in force immediately before the commencement of the Act would cease to have effect with respect to any matter for which provision had been made in that Act. Mr. Rao pointed out that the said Section also provided that the Hindu Marriage Act, 1955, would override other laws in force immediately before the commencement of the Hindu Marriage Act, 1955, in so far it was inconsistent with any of the provisions of the 1955 Act. With regard to the provisions of S. 5 of the Hindu Marriage Act, 1955, Mr. Rao submitted that it was clear from the wording thereof that the conditions indicated in the Section were to apply only in respect of a marriage between two Hindus and that a Hindu marriage could be solemnized between two Hindus only when the conditions set out in the provisions contained therein had been fulfilled. According to Mr. Rao, the marriage between the parties would have to be categorised within the scope and ambit of S. 12 relating to voidable marriage since a void marriage under S. 11 of the Act had been defined to mean any marriage solemnized after the commencement of the Act if it contravenes any one of the conditions specified in cls. (i)(iv) and (v) of S. 5. Since the marriage of the parties did not fall within the said categories, the respondent had no option but to make an application under S. 12 (1)(c) that the marriage was a nullity on the ground that the appellant had been beguiled into the marriage by the appellant on fraudulent considerations, one of which was that he was a Hindu at the time of marriage. Mr. Rao submitted that since a valid marriage under the Hindu Marriage Act, 1955, could only be performed between two Hindus the marriage had been rightly declared to be a nullity by the High Court and its decision did not warrant any interference in this appeal. … Although, an attempt has been made to establish that the Hindu Marriage Act, 1955, did not prohibit a valid Hindu marriage of a Hindu and another professing a different faith, we are unable to agree with such submission in view of the definite scheme of the 1955 Act. In order to appreciate the same, we may first refer to the Preamble to the Hindu Marriage Act, 1955, which reads as follows: An Act to amend and codify the law relating to marriage among Hindus

As submitted by Mr. Rao, the Preamble itself indicates that the Act was enacted to codify the law relating to marriage amongst Hindus. S. 2 of the Act which deals with application of the Act, and has been reproduced hereinabove, reinforces the said proposition. S. 5 of the Act thereafter also makes it clear that a marriage may be solemnized between any two Hindus if the conditions contained in the said Section were fulfilled. The usage of the expression ‘may’ in the opening line of the Section, in our view, does not make the provision of S. 5 optional. On the other hand, it in positive terms, indicates that a marriage can be solemnized between two Hindus if the conditions indicated were fulfilled. In other words, in the event the conditions remain unfulfilled, a marriage between two Hindus could not be solemnized. The expression ‘may’ used in the opening words of S. 5 is not directory, as has been sought to be argued, but mandatory and non-fulfilment thereof would not permit a marriage under the Act between two Hindus. S. 7 of the 1955 Act is to be read along with S. 5 in that a Hindu marriage, as understood under Section 5, could be solemnized according to the ceremonies indicated therein.

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In the facts pleaded by the respondent in her application under s. 12(1)(c) of the 1955 Act and the admission of the appellant that he was and still is a Christian belonging to the Roman Catholic denomination, the marriage solemnized in accordance with Hindu customs was a nullity and its registration under s. 8 of the Act could not and/or did not validate the same. In our view, the High Court rightly allowed the appeal preferred by the respondent herein and the judgment and order of the High Court does not warrant any interference. The other question raised regarding the subsequent marriage of the respondent is of little relevance once we have held that the marriage purported to have been performed between the appellant and the respondent on 24.10.1996 was a nullity. Hence, no decision is called for in that regard and we also make no observation in respect thereof. The appeal is accordingly dismissed. …

HEADINGS AND MARGINAL NOTES The basic rule regarding the use of Headings and Marginal Notes as interpretive tools remains the same as it was in the case of the use of Title and Preamble. They may be used as interpretive tools in the event of an ambiguity with the reservation that they cannot be used to cut down clear meaning of the text of the statutory provision. Singh in his authoritative commentary Principles of Statutory Interpretation reports a British case R v. Surrey, [1947] 2 All.E.R. 276. The observations of Chief Justice Lord Goddard may be examined to understand the content of the rule – While, however, the court is entitled to look at the headings in an Act of Parliament to resolve any doubt they may have as to ambiguous words, the law is clear that those headings cannot be used to give a different effect to clear words in the section where there cannot be any doubt as to the ordinary meaning of the words.

We will examine three cases to understand the use of Headings as interpretive tools. For the use of Headings, we would first examine the House of Lord’s opinion in Director of Public Prosecutions v. Schildkamp, [1969] 3 All.E.R. 1640 in order to deduce some propositions of law on the point. And then we will examine Supreme Court’s opinion in R. Prabhakar v. R. Dugar, (2004) 4 SCC 766, which is relatively recent Division Bench (2 judges) opinion as a case study where Justice Lahoti used the Heading of a statutory provision to interpret the same. The observations of the judge in this case may be accepted as reflecting the accurate legal position on the point. For the use of Marginal Notes, we will examine a comparatively recent House of Lords opinion delivered in R v. Montila, [2005] 1 All.E.R. 113. Singh in his authoritative commentary Principles of Statutory Interpretation (13 ed.) notes that the Supreme Court of India has started referring to Marginal Notes as interpretive tools but also notes that the trend in Indian judicial thought tends to follow closely in British judicial thought on the point. And British judicial thought has undergone some change on the point, thus the need to examine what the British courts have held on the point. CASE STUDY 1 – DIRECTOR OF PUBLIC PROSECUTIONS V. SCHILDKAMP [1969] 3 All.E.R. 1640 (House of Lords) Bench – Lord Reid, Lord Hodson, Lord Guest, Viscount Dilhorne & Lord Upjohn Lord Upjohn (for himself) My Lords, this appeal raises a difficult and important point affecting the liberty of the subject upon the true construction of section 332 (3) of the Companies Act, 1948. I must set out subsections (1) and (3) of that section in full:

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(1) If in the course of the winding up of a company it appears that any business of the company has been carried on with intent to defraud creditors of the company or creditors of any other person or for any fraudulent purpose, the court, on the application of the official receiver, or the liquidator or any creditor or contributory of the company, may, if it thinks proper so to do, declare that any persons who were knowingly parties to the carrying on of the business in manner aforesaid shall be personally responsible, without any limitation of liability, for all or any of the debts or other liabilities of the company as the court may direct. On the hearing of an application under this subsection the official receiver or the liquidator, as the case may be, may himself give evidence or call witnesses. ... (3) Where any business of a company is carried on with such intent or for such purpose as is mentioned in subsection (1) of this section, every person who was knowingly a party to the carrying on of the business in manner aforesaid, shall be liable on conviction on indictment to imprisonment for a term not exceeding two years or to a fine not exceeding £500 or to both.

Of course, the fraudulent trading must take place while the company is a going concern and the whole question is whether before any person can be prosecuted for the commission of an offence under subsection (3) the company referred to must subsequently have been put into liquidation, which admittedly is not the case here. The argument of counsel for the appellant was straightforward. Reading subsection (3) he submits truly that its terms are perfectly clear and simple. There is no ambiguity; the subsection clearly applies so as to create an offence on the part of a person knowingly carrying on a business – with intent to defraud creditors of the company or creditors of any other person or for any fraudulent purpose, and the circumstance that the company may subsequently have been wound up is quite irrelevant. The subsection plainly applies as a matter of language to the case where there has been no subsequent winding up. Looking at that subsection alone, I agree. Naturally he relies upon the contrast between subsection (1) where there is a reference to winding up and subsection (3) where there is not; a point to which I shall return later. But, my Lords, this, in my opinion, is the wrong approach to the construction of an Act of Parliament. The task of the court is to ascertain the intention of Parliament; you cannot look at a section, still less a subsection, in isolation, to ascertain that intention; you must look at all the admissible surrounding circumstances before starting to construe the Act. The principle was stated by Lord Simonds in Attorney-General v. Prince Ernest Augustus of Hanover, [1957] A.C. 436, 461: For words, and particularly general words, cannot be read in isolation: their colour and content are derived from their context. So it is that I conceive it to be my right and duty to examine every word of a statute in its context, and I use 'context' in its widest sense, which I have already indicated as including not only other enacting provisions of the same statute, but its preamble, the existing state of the law, other statutes in pari materia, and the mischief which I can, by those and other legitimate means, discern the statute was intended to remedy.

So I look to the Companies Act, 1948, as a whole and the very first thing that I notice from the Long Title is that it is a consolidation Act. Therefore, bearing in mind that a consolidation Act is presumed not to alter the law, it becomes material to trace this subsection to its original source. Section 332 (1) and (3) first appeared as section 75 (1) and (3) of the Companies Act, 1928, an Act which amended and by section 118 (2) was to be read as one with the Companies (Consolidation) Act, 1908. Section 75 (1) and (3) duly reappeared as section 275 (1) and (3) of the Companies Act, 1929, another consolidation Act. Minor and, for present purposes irrelevant, amendments were made to section 275 (1) and (3) by the Companies Act, 1947, and as so amended the section duly reappeared as section 332 (1) and (3) of the 1948 Act. Section 75 (4) of the 1928 Act, to which I must later refer, now appears as section 188 of the 1948 Act, but for all relevant purposes one may say with sufficient accuracy that section 332 (1) and (3) of the 1948 Act exactly reproduce the wording of section 75 (1) and (3) of the 1928 Act, so I need not set out the provisions of that section. … [T]he problem is essentially a question of construction of the 1928 Act and not the 1948 Act, for it was the former that created the new concept of making directors liable for the fraudulent trading of a

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company and the true scope and ambit of that liability, whether civil or criminal, must be determined by considering the terms of that Act and not of the subsequent consolidation Acts. My Lords, the arguments of counsel for the appellant upon section 75(3) are, of course, precisely the same as upon section 332(3) but, for the reasons I have already given, in my opinion, are based upon the wrong approach; one must consider the whole of the 1928 Act before trying to ascertain and determine the true scope of section 75(3) thereof. There are no relevant cross-headings in the 1928 Act but it is nevertheless necessary to consider the general scope and plan of the Act. Sections 1-55, with the possible exception of section 52, are essentially dealing with the incorporation and conduct of the business of the company while it is a going concern, the issue of shares and debentures, conduct of meetings, and so on, but section 56 appears to start a new fasciculus of sections. Section 56 itself defines the courts which have jurisdiction to wind up companies, and thereafter the sections are concerned with amendments to or addition of powers conferred by the 1908 Act in respect of matters in connection with the winding up. In particular, sections 72-77 form a group of punitive sections punishing officers and others for misconduct sometimes before the winding up and sometimes during the winding up, but all these sections are concerned with the situation where a winding up has in fact occurred. As a matter of historical interest it may be noticed that sections 72, 73, 74 were brought in from the Bankruptcy Acts; section 75, as I have said was new. Then section 78 turns back to the conduct of affairs while the company is a going concern; it makes void certain provisions in a company’s articles for indemnifying a director against liability which under the general law he would otherwise incur, and in later sections it makes other provisions regarding loans to and remuneration of directors, disclosure by directors of their interest in contracts, provisions as to undischarged bankrupts acting as directors, and so on. Then follow a number of miscellaneous provisions, but in section 92 it is made unlawful to peddle shares from house to house and that is constituted a criminal offence and in section 93 there are analogous provisions regarding the circulation of prospectus of foreign companies in this country. These two sections are dealing with offences during the time that the company is a going concern and winding up is irrelevant. My Lords, that in outline is the general structure of the 1928 Act. Is there anything in that structure which should throw doubt on the admittedly plain and unambiguous words (taken by themselves) of section 75 (3)? In approaching this problem I have very much in mind the warning given by Lord Simonds in the Hanover case, [1957] A.C. 436 , 463 against creating or imagining an ambiguity in order to bring in the aid of the preamble. Here I warn myself against creating or imagining a difficulty or doubt as to the scope and ambit of apparently plain and unambiguous words by reason of the general structure of the Act, but I hope (again to echo Lord Simonds’ words) I am doing no more than read the whole statute before professing to understand any part of it. But, my Lords, I do have the most genuine doubt upon this matter. In the first place, upon the construction of section 75 itself I feel the gravest doubts as to the true scope and ambit of subsection (3). I see much to be said for the view that subsection (3) is limited to prosecutions after the commencement of a winding up. Subsection (1) which creates a new civil liability for fraudulent trading before winding up is clearly so limited. I find it almost impossible to suppose that if Parliament intended to create a criminal liability while the company was a going concern it would not have imposed a civil liability at the same time. Of course, a fraudulent trader might be made civilly and criminally liable if his fraudulent trading fell within some well-known category, for example, obtaining money or goods by fraud. But this is a very wide and vague new offence. If it was intended that subsection (3) was to be of general application while the company was a going concern, I should expect to find the subsection clearly so expressed. Then in the absence of such express words where you find subsection (3) joined by its opening words to subsection (1) I should be inclined to think that the draftsman had been careless in drafting and was not intending to create a new and quite independent liability. If the appellant's argument to the effect that to limit the effect of subsection (3) to prosecutions after the commencement of the winding up you must virtually rewrite the subsection was correct, I

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should see much force in his argument, for it would be very difficult to rewrite the subsection so that in grammatical terms you confined it to prosecutions after winding up, but I do not think this is necessary for reasons which I will give later. Then I think section 75 (4) is helpful. Its relevant part is in these terms: The court may, in the case of any person in respect of whom a declaration has been made under the foregoing provisions of this section or who has been convicted of an offence under the foregoing provisions of this section, order that that person shall not, without the leave of the court, be a director of or in any way, whether directly or indirectly, be concerned in or take part in the management of a company for such period, not exceeding five years, from the date of the declaration or of the conviction, ...

On a natural construction this seems to point, though it does no more, to the intention of Parliament that the civil liabilities under subsection (1) and the criminal liability under subsection (3) were in pari materia and the disqualification would only arise in respect of an order made after a winding up. But on a wider horizon I cannot think subsection (3) is in its natural place in the fasciculus of sections 56-77 or more narrowly 72-77 if it has the alleged wide effect contended for. I have already sketched the general structure of the Act of 1928 and I cannot believe Parliament would have tucked away this subsection creating this vague but serious offence having such an important effect on the liberty of the subject in this part of the Act dealing with the consequences of winding up; at all events, having real doubt upon the matter, I would give the subject the benefit of the doubt in a criminal matter. Then, my Lords, if Parliament had intended to create a new offence subject to prosecution while the company was a going concern, surely it would have enacted an independent section and placed it in a position contiguous to sections 92 or 93. But I must say a few more words about the argument based on the absence of words of limitation in subsection (3) in contrast to subsection (1) and other sections and to the virtual impossibility of rewriting subsection (3) so as to limit its application to post winding up prosecutions. Closely allied to these arguments was the argument that it would be virtually impossible to frame an indictment in accordance with the Indictment Rules. At first sight these arguments appear formidable. But, in my opinion, no alteration to the phraseology of subsection (3) is required; it stands as it is, plain and unambiguous, but the context in which it is found requires a limitation in its application to cases where the company has subsequently gone into liquidation. On that footing I can see no difficulty in framing an indictment. … My Lords, my opinion upon the whole of the Act of 1928 is that Parliament never intended by enacting section 75(3) to create an offence capable of prosecution before the commencement of the winding up. The consolidation Acts of 1929 and 1948 plainly did not alter the law, so I would dismiss this appeal. … Upon the footing that the Act of 1948 is the only relevant statute your Lordships have heard an interesting argument on its construction and the proper regard that is to be paid to cross-headings and marginal notes when construing an Act of Parliament and I propose to say a few words upon this matter. It must always be remembered that cross-headings, punctuations and marginal notes are not part of the Bill passing through Parliament in this sense that they cannot be debated and amended as the Bill passes its various stages, in marked contrast to the preamble and long title. These cross-headings and marginal notes are put there in the first place by the Parliamentary draftsman but as the Bill proceeds may be altered (probably in consultation with the draftsman) by the officials of Parliament to accord with amendments made to the body of the Bill as it progresses. … My Lords, in this somewhat fluctuating state of the authorities what role do cross-headings play in the construction of the statute? In my opinion, it is wrong to confine their role to the resolution of ambiguities in the body of the statute. When the court construing the statute is reading it through to

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understand it, it must read the cross-headings as well as the body of the statute and that will always be a useful pointer as to the intention of Parliament in enacting the immediately following sections. Whether the cross-heading is no more than a pointer or label or is helpful in assisting to construe, or even in some cases to control, the meaning or ambit of those sections must necessarily depend on the circumstances of each case, and I do not think it is possible to lay down any rules. In this case and treating section 332(3) as containing plain and unambiguous language, as in a sense it does, nevertheless it seems to me quite clear from the three cross-headings I have mentioned that Parliament was considering only the position where there has been a winding up. But I believe that the correct way of regarding this matter is that, granting that the words of subsection (3) taken in isolation are plain and unambiguous, yet read in the contend of the surrounding sections a genuine doubt is at once created in the reader’s mind not as to the meaning of the language employed but as to its scope and ambit; is its application confined to cases where there is a winding up? Reference to the cross-headings resolves that doubt at once. In Chandler v. Director of Public Prosecutions, [1964] A.C. 763, 789, Lord Reid said the marginal or side-note to a statute affords no guidance to the construction of a statute and I believe that to be a sound working general rule. A side-note is a very brief précis of the section and therefore forms a most unsure guide to the construction of the enacting section, but it is as much a part of the Bill as a cross-heading and I can conceive of cases where very rarely it might throw some light on the intentions of Parliament just as a punctuation mark. … The real point is whether before a prosecution can be initiated in respect of a alleged fraudulent trading while the company was a going concern the company must be in liquidation. I would answer that question in the affirmative because subsection (3) is by reason of its context in the statute so limited in its application. For these reasons I would dismiss this appeal. Viscount Dilhorne (for himself) … The Companies Act, 1928, was passed to amend the Companies Acts, 1908 to 1917. Section 75 of this Act contained new provisions with regard to fraudulent trading and section 75(3) is in substantially the same terms as section 332(3) of the Act of 1948. When the Companies Acts were consolidated in 1929 section 75 became section 275 of the Companies Act, 1929. This section was amended by section 101(1) and (2) of the Companies Act, 1947. Instead of subsections (1) and (3) of section 275 applying only to directors of a company, the subsections were extended to apply to any persons, and the maximum punishment for the offence created by subsection (3) was increased. Section 275 as amended by the Act of 1947 was replaced by section 332 of the Act of 1948 when the Companies Acts were again consolidated, but with the omission of what had been subsection (4) of section 275 of the Act of 1929 and section 75 (4) of the Act of 1928. The Act of 1947, by section 33, gave wide powers to restrain fraudulent persons from managing companies and it consequently became unnecessary to retain the subsection when section 33 was replaced by section 188 of the Act of 1948. Bearing in mind that consolidation Acts are presumed not to intend to change the pre-existing law, one has, to answer the question posed by the Court of Appeal, first to consider section 75 of the Act of 1928 and see whether from the terms of that section and having regard to the context of that section the conclusion is to be drawn that the offence created by subsection (3) is only an offence when the company concerned is being or has been wound up. In Attorney-General v. Prince Ernest Augustus of Hanover [1957] A.C. 436 where it was sought to restrict the generality of the words of an enactment by reference to the preamble Viscount Simonds said, at p. 463: On the one hand, the proposition can be accepted that ‘it is a settled rule that the preamble cannot be made use of to control the enactments themselves where they are expressed in clear and unambiguous terms.’ I quote the words

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of Chitty L.J. which were cordially approved by Lord Davey in Powell v. Kempton Park Racecourse Co. Ltd., [1899] A.C. 143, 185. On the other hand, it must often be difficult to say that any terms are clear and unambiguous until they have been studied in their context. That is not to say that the warning is to be disregarded against creating or imagining an ambiguity in order to bring in the aid of the preamble. It means only that the elementary rule must be observed that no one should profess to understand any part of a statute or of any other document before he had read the whole of it. Until he has done so he is not entitled to say that it or any part of it is clear and unambiguous. To say, then, that you may not call in aid the preamble in order to create an ambiguity in effect means very little, and, with great respect to those who have from time to time invoked this rule, I would suggest that it is better stated by saying that the context of the preamble is not to influence the meaning otherwise ascribable to the enacting part unless there is a compelling reason for it.

The actual words of section 75 (3) are clear and unambiguous. The subsection reads as follows: Where any business of a company is carried on with such intent or for such purpose as is mentioned in subsection (1) of this section, every director of the company who was knowingly a party to the carrying on of the business in manner aforesaid, shall be liable on conviction on indictment to imprisonment ...

It was said that this subsection created a very vague and ill-defined offence. Whether it is an offence which can be committed at any time or whether it is only one when the company has been or is being wound up, that comment can still be made. The fact that it can be so described throws, in my opinion, no light on the question whether, in spite of its clear terms, the subsection is to be restricted in its application to cases where the company concerned is being or has been wound up. Section 75 (1) reads as follows: If in the course of a winding up it appears that any business of the company has been carried on with intent to defraud creditors of the company or creditors of any other person or for any fraudulent purpose, the court ... may, if it thinks proper so to do, declare that any of the directors, whether past or present, of the company who were knowingly parties to the carrying on of the business in manner aforesaid shall be personally responsible, without any limitation of liability, for all or any of the debts or other liabilities of the company as the court may direct ...

There are two other subsections of section 75 to which reference must be made. Subsection (4) provides that the court by which a declaration is made under subsection (1) and the court before which a person is convicted of an offence under subsection (3) can order that a person against whom such a declaration has been made or who has been so convicted shall not without the leave of the court be a director of or in any way, directly or indirectly, be concerned in or take part in the management of a company for a period not exceeding five years. While this subsection throws no light on the scope of subsection (3), as it operated both in relation to subsection (1) and subsection (3), it was obviously convenient that it should be preceded by these two subsections and that they should be included in the same section. When section 33 of the Act of 1947 was enacted and replaced by section 188 of the Act of 1948, the retention of this subsection in section 332 became, as I have said, unnecessary. Subsection (4) commences with the words: The provisions of this section shall have effect notwithstanding that the person concerned may be criminally liable in respect of the matters on the ground of which the declaration is to be made.

One can understand why this subsection was included if the section only related to the making of a declaration by a court in the course of a winding up, but it is not easy to see what useful purpose it can serve in relation to subsection (3). Perhaps the explanation may be that this subsection was not in the Bill as originally drafted but was inserted during its passage through Parliament in consequence of the view being held that a declaration alone was not a sufficient deterrent, and that subsection (6) was not altered in consequence of the amendment. However this may be, I can find no indication in section 75 that Parliament only intended subsection (3) to operate when the company concerned was being or had been wound up.

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One has only to glance at the section to see that subsection (1) only enables a declaration to be made when it appears in the course of a winding up that a person has been guilty of the conduct specified in the subsection and that subsection (3) is not subject to any such limitation. I can see no reason to suppose that this difference between the two subsections was not deliberate and intentional. This view is strengthened by the fact that subsection (3) imports part of subsection (1) but does not import the requirement of a winding up. To hold that it was not deliberate and intentional seems to me to involve a finding of incompetence on the part of Parliament and Parliamentary draftsmen of a degree which I would regard as inconceivable. If the mischief aimed at was punishment for fraudulent trading, I can see no reason of public policy which would make it desirable that such conduct should only be punishable in the event of the company being wound up. I fully appreciate that there are other sections both in the Act of 1928 and in the Act of 1948 which make the requirement of a winding up a condition of a prosecution. These sections were obviously derived from the Bankruptcy Act, 1914. Section 75 created an entirely new offence, and I can see no reason why Parliament should, when making such conduct criminal, have thought that it should only be criminal if the company concerned was being wound up. Section 8 of the Interpretation Act, 1889, enacts that: Every section of an Act shall have effect as a substantive enactment without introductory words.

If this section had been a separate Act, the argument that subsection (3) only operated when there was or had been a winding up would not, in my opinion, have been one which would have obtained any support. One is, as Viscount Simonds pointed out in Attorney-General v. Prince Ernest Augustus of Hanover, [1957] A.C. 436, 461, entitled to have regard, and should have regard, to the whole of the Act in which section 75 appears. When one does so, one sees that precedents were not lacking for making conduct an offence only when there had been or was a winding up. Section 72 (now replaced by section 330 of the Act of 1948) created a number of offences and made it clear that they were only offences in relation to a company “which is subsequently ordered to be wound up by the court or subsequently passes a resolution” for voluntary winding up and section 73 (now replaced by section 328 of the Act of 1948) which also defines a number of criminal offences which may be committed in relation to companies, commences with the words: If any person, being a past or present officer of a company which at the time of the commission of the alleged offence is being wound up, whether by the court or voluntarily, or is subsequently ordered to be wound up by the court or passes a resolution ... authorising the company to be wound up voluntarily ...

It would indeed have been easy to provide, if that was Parliament's intention that subsection (3) should only operate in relation to a company which was being or had been wound up. While it is true that sections 72 to 77 of the Act of 1928 all relate to the winding up of a company, it is not, in my opinion, to be inferred from that that a subsection, clear in its terms, of a section included in this group of sections must apply and can only apply where there is a winding up. A section may be amended, a new section or subsection may be inserted during the passage of a Bill through Parliament but the place in an Act where a section is printed is not determined or considered by the members of either House. Consequently, in my opinion, the inclusion of a section in a group of sections affords no reliable guide as to the meaning of the words in a particular subsection. The preamble to a Bill can be amended during the Bill’s passage through Parliament. A preamble to an Act can, therefore, be assumed to have had the approval of Parliament. Nevertheless, “as so often has been said, Parliament may well intend the remedy to extend beyond the immediate mischief: the single fact therefore that the enacting words are more general than the preamble would suggest is not enough”

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( per Viscount Simonds in Attorney-General v. Prince Ernest Augustus of Hanover, at pp. 462-463) to restrict the meaning of the enacting words. If for the purpose, not of determining the meaning to be given to the words used in a section, but for limiting the operation of those words, it is proper to draw any inference from the conjunction of the section with other sections of the Act, any such inference must carry far less weight than an inference from a preamble approved by Parliament. If there had been a preamble to the 1928 Act indicating that section 75 (3) was only to operate when the company concerned was being or had been wound up, then I regard the decision of this House in Attorney-General v. Prince Ernest Augustus of Hanover as an authority for holding that such a preamble would not have restricted the scope of the subsection for “the context of the preamble is not to influence the meaning otherwise ascribable to the enacting part unless there is a compelling reason for it” (per Viscount Simonds in Attorney-General v. Prince Ernest Augustus of Hanover, at p. 463). Equally, if any such inference can be drawn from the arrangements of the sections of an Act – and as I have said, any such inference must carry far less weight than a preamble – such an inference should not influence the meaning of the words in the subsection unless there is a compelling reason for it. And there is, in my opinion, no compelling reason to be found for it in this case. The 1928 Act was not divided into Parts but it had two cross-headings, “Provisions of General Application” and “Provisions relating to Scotland.” In the 1929 consolidation Act section 75 became section 275 and that section was included in Part V of the Act which was entitled “Winding Up.” Sections 271 to 277 appeared under the cross-heading “Offences antecedent to or in course of Winding Up.” Section 332 of the 1948 Act was also in Part V of that Act under the same title and in a group of sections also under the same cross-heading. … I do not consider that it is proper to infer from the title to a Part and from this cross-heading that the scope of the subsection is limited as the respondent contends. In the first place, a consolidation statute is presumed not to intend to change the law. If section 75(3) was not so limited, it is not, in my opinion, to be inferred from the title of the Part of the 1948 Act and from the cross-heading that the words in section 332(3) are to be given a different meaning from that which they bore in section 75(3). Secondly, while I would not suggest that, when one is considering an Act of Parliament, one is not entitled to look at the title given to a Part of the Act and to cross-headings, the weight to be attached to them is, in my opinion, very slight and less than that which should be given to a preamble. In Chandler v. Director of Public Prosecutions, [1964] A.C. 763, 789 Lord Reid said that side-notes to a section cannot be used as an aid to construction. I agree. A marginal or side-note is inserted by the draftsman as an indication, but not as a definition, of the contents of the section. Similarly, in my view, the title given to a Part of an Act and the cross-headings to a modern statute, which are inserted by the draftsman and not subject to amendment by the members of either House, are no more than guides to the contents of the Part or of the sections which follow. They are not meant to control the operation of the enacting words and it would be wrong to permit them to do so. … So in this case reliance was placed on the cross-heading and the nature of adjoining sections to support the view that Parliament had not per incuriam in the process of consolidation altered the law. That, to my mind, is a very different thing from saying that the insertion of a cross-heading and the position in which a section is placed in a consolidating Act changes and limits the meaning of the words contained in the section which is consolidated. … … In my opinion, the answer to the question posed by the Court of Appeal is that no words of limitation are to be imported into section 332(3) of the Companies Act, 1948. My Lords, I would allow the appeal.

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CASE STUDY 2 – R. PRABHAKAR V. R. DUGAR (2004) 4 SCC 766 Bench – Justices R. C. Lahoti & Ashok Bhan Justice Lahoti (for the Court) [This case involved a tenancy dispute between one landlord and two tenants and two separate premises. The landlord wanted the possession of his property on the grounds of bona fide requirements for demolition and erection of a new building on the sites of rented property. Two proceedings were initiated under Section 12(1)(b) of the A.P. Buildings (Lease, Rent and Eviction) Control Act, 1960 (the Act). The landlord was successful in both. The tenants appealed and lost. They were given one month to hand over possession. The landlord gave an undertaking that upon completion of the works on the site the buildings will be offered to the tenants. Upon completion of the work, the landlord sent an offer to the two tenants to occupy the premises. The tenants failed to reply to this offer but later filed two execution petitions seeking enforcement of the undertaking given by the landlord. These execution petitions were dismissed on the ground of being barred by limitation. Tenants filed revision petitions before the High Court and succeeded and the landlord was directed to restore possession to the tenants. Against that order, the landlord filed a Special Leave Petition before the Supreme Court.] … Two questions arise for decision: (1) Whether a new tenancy comes into existence, between the parties, on possession being restored to the tenant over the newly erected building or any part thereof, which would entitle the landlord to settle the rent and other terms of lease afresh? (2) What is the period of limitation for filing an application by the tenant seeking enforcement of the order of the Rent Controller made under Section 12 of the Act? Both the abovesaid issues call for construing the provision enacted in Section 12 of the Act. The Andhra Pradesh Buildings (Lease, Rent and Eviction) Control Act 1960 (Act No. 15 of 1960) was enacted to replace former two State enactments namely the Madras Buildings (Lease and Rent) Control Act, 1949 (Madras Act XXV of 1949) and the Hyderabad Houses (Rent, Eviction and Lease) Control Act, 1954 (Hyderabad Act XX of 1954) which were operating in two areas of the State namely the Andhra area and Telangana areas respectively. It seems that in the predecessor legislation there was no provision similar to the one contained in Section 12 of the Act of 1960. The Statement of Objects and Reasons states inter alia that new Act was introducing some important new provisions and one of them being: to make a provision empowering the Rent Controller to direct the tenant to hand over possession of a building to the landlord to enable him to reconstruct or renovate the old building subject to certain safeguards.

Section 12 of the Act with which we are concerned reads as under: 12. Recovery of possession by landlord for repairs, alterations or additions or for reconstruction. (1) Notwithstanding anything in this Act on an application made by a landlord, the Controller may, if he is satisfied: (a) that the building is reasonable and bona fide required by the landlord for carrying out repairs, alterations or additions which cannot be carried out without the building being vacated; or (b) that the building consists of not more than two floors and is reasonable and bona fide required by the landlord for the immediate purpose of demolishing it and such demolition is to be made for the purpose of erecting a new

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building on the site of the building sought to be demolished, pass an order directing the tenant to deliver possession of the building to the landlord before a specified date. (2) No order for recovery of possession under this Section shall be passed unless the landlord gives an undertaking that the building on completion of the repairs, alterations or additions or the new building on its completion will be offered to the tenant, who delivered possession in pursuance of an order under sub-section (1), for his occupation before the expiry of such period as may be specified by the Controller in this behalf. (3) In case the tenant, to whom the building or the new building, as the case may be, is offered under sub-section (2) by the landlord does not want to occupy it the landlord shall give notice of vacancy in writing to the authorized officer under sub- section (1) of Section 3. (4) Nothing in this Section shall entitle the landlord, who has recovered possession of the building for repairs, alterations or additions or for reconstruction to convert a residential building into a non-residential building or a residential building unless such conversion is permitted by the Controller at the time of passing an order under sub-section (1).

In exercise of the power conferred by Section 30 of the Act, rules have been framed by the Government of Andhra Pradesh, called the Andhra Pradesh Buildings (Lease, Rent and Eviction) Control Rules, 1961. The relevant part of Rule 23, with which we are concerned, is extracted and reproduced hereunder: 23. (1) Every application for the execution of orders passed under this Act shall be in writing signed and verified by the decree-holder and filed before the Controller within six months from the date of the order accompanied by a certified copy of the order concerned together with the necessary process fee: Provided that an application may be admitted after the specified period if the applicant satisfied the Controller that he has sufficient cause for not preferring the application within such period. (2) On receipt of an application for the execution of order as provided by sub-rule (1), the Controller shall ascertain whether all the requirements have been complied, and if they have not been complied, the Controller may reject the application or may allow the defect to be remedied within the time to be fixed by him. … (5) An order of eviction passed under Sections 10, 12, and 13 shall be executed by evicting the persons against whom the order was passed or any other persons bound by the said order and by delivering the vacant possession of the building in regard to which the order was passed either to the person in whose favour the order was passed or to such person as he may appoint to take delivery on his behalf. …

The leases of immovable property and the relationship between landlord and tenant are governed by Chapter V of the Transfer of Property Act, 1882. The rights and liabilities of lessor and lessee are stated in Section 108 of the T.P. Act which apply subject to the contract or local usage to the contrary. Under Clause (b) and (c) thereof, not only the lessor is bound on the lessee's request to put him in possession of the property but there is also an implied covenant for peaceful possession and enjoyment of the leased property by the tenant. So long as the lessee pays the rent reserved by the lease and performs the obligations cast on him by the contract of lease, he is entitled to hold and enjoy the property without interruption by anyone including the lessor. Under Clause (l) the lessee is bound to pay or tender, at the proper time and place, the premium or rent to the lessor. There has developed what is known as the doctrine of suspension of rent based on principles of justice, equity and good conscience. If the lessee is dispossessed by the lessor from the leased property the obligation of the lessee to pay rent to the lessor is suspended. In V. Dhanapal Chettiar Vs. Yesodia Ammal, AIR 1979 S.C. 1745, the Seven-Judge Bench of this Court examined the impact of Rent Control Legislations on the provisions of the Transfer of Property Act in the context of the issue whether for the purpose of seeking an eviction of tenant under the provisions of the rent control law, it was still necessary for the landlord to terminate the tenancy by giving a notice under Section 106 of the T.P. Act. Certain observations made by this Court during the course of its judgment are relevant for our purpose and may be noticed. The State Rent Acts have, to a very large extent, encroached upon the field of freedom of contract. The right of re-entry controlled by Section 111 of the T.P. Act is further restricted

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and fettered by the provisions of the Rent Restriction Act. In spite of the contract of lease having expired or terminated, the tenant lessee continues in possession under the protective wing of the Rent Restriction Act until the lessee loses that protection. The lessee is not bound to vacate nor can the lessor-landlord exercises his right of re-entry unless a ground entitling him to do so within the meaning of the Rent Act has been made out and established in a court of law. The landlord-tenant relationship stands snapped and the tenancy comes to an end only on a decree or order in that regard being passed by a competent court. Thus, the contractual lease may have come to an end and the landlord-tenant relationship may have ceased to exist under the contract or the T.P. Act, yet the same continues to exist for the purpose of Rent Act. With this much prefatory statement we proceed to examine the provisions of the A.P. Act. The Heading given to Section 10 of the Act is ‘Eviction of Tenants’. It confers a protection on the tenant to occupy the tenancy premises by providing that the tenant shall not be evicted whether in execution of a decree or otherwise except in accordance with the provisions of Section 10 or Sections 12 and 13. Sub-section (2) of Section 10 enumerates the grounds on the availability whereof the tenant becomes liable to be evicted. The provision opens by enacting that a landlord who seeks to evict his tenant shall apply to the Controller for a direction in that behalf. If the Controller, after hearing both the parties, is satisfied of the availability of any one or more of the grounds specified in sub-section (2) being made out, the Controller shall make an order directing the tenant to put the landlord in possession of the building. The Headings given to Sections 12 and 13 speak of “recovery of possession by landlord for repairs, alterations or additions or for reconstruction” of buildings. The view is now settled that the Headings or Titles pre-fixed to sections or group of sections can be referred to in construing an Act of the Legislature. But conflicting opinions have been expressed on the question as to what weight should be attached to the Headings or Titles. According to one view, the Headings might be treated as preambles to the provisions following them so as to be regarded as giving the key to opening the mind of the draftsman of the clauses arranged thereunder. According to the other view, resort to Heading can only be taken when the enacting words are ambiguous. They cannot control the meaning of plain words but they may explain ambiguities. (See: Principles of Statutory Interpretation by Justice G.P. Singh, Ninth Edition, 2004, pp. 152,155). In our opinion, it is permissible to assign the Heading or Title of a section a limited role to play in the construction of statutes. They may be taken as very broad and general indicators of the nature of the subject-matter dealt with thereunder. The Heading or Title may also be taken as a condensed name assigned to indicate collectively the characteristics of the subject-matter dealt with by the enactment underneath; though the name would always be brief having its own limitations. In case of conflict between the plain language of the provision and the meaning of the Heading or Title, the Heading or Title would not control the meaning which is clearly and plainly discernible from the language of the provision thereunder. In the present case, Sections 10 and, 12 and 13 are placed in close proximity and yet assigned different titles which is suggestive of the legislative intent that the subject-matter dealt with under the two headings, differently named, is different. A comparative reading of Section 10 with Sections 12 and 13 shows that while sub-section (2) of Section 10 contemplates the tenant being directed to put the landlord in possession of the buildings consequent upon a ground for eviction of tenant having been made out and the landlord having succeeded in making out a case for eviction of his tenant. And so, the delivery of possession by tenant to landlord is in effect eviction of tenant by landlord. The tenancy itself is determined. Under Sections 12 and 13 the Controller orders the tenant to deliver possession of the buildings to the landlord for a specific purpose and according to a calendar of events which binds the landlord and the tenant both. In other words, under Sections 12 and 13 the tenant is not evicted; the tenancy does not come to an end; the lease continues to survive; and yet the tenant ceases to be in actual possession of the building which is placed in possession of the landlord for a specified purpose. Under Clause (a) of sub-section (1) of Section 12 the purpose is “for carrying out repairs, alterations or additions which cannot be carried out without the building being vacated”. Under Clause (b) of subsection (1) the purpose is “the immediate purpose of demolishing it and such demolition is to be made

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for the purpose of erecting a new building on the site of the building sought to be demolished.” The provision seeks to achieve a multi-purpose. The tenant is protected because his tenancy does not come to an end and his right to re-occupy the building repaired, altered, added or erected continues to survive. The landlord is benefited because but for the tenant having been directed to deliver possession to him he could not have carried out such repairs, etc. or rebuilding. The public interest is served as the buildings are kept in good state and habitable and new building activity continues to be carried on. Under Section 12, as we have already stated, the lease does not come to an end, nor the tenancy is terminated, merely on account of possession of the building having been delivered to the landlord; nor does it come to an end nor extinguished because the old building has been demolished and a new building has been erected. The tenant, when he re-enters into possession, does so under the original tenancy which stands statutorily protected under the Act and he has not been evicted nor held liable to be evicted. In spite of the building having been repaired, altered, added to or re-erected, the tenant shall re- enter to occupy the premises on the same terms and conditions on which he was occupying the building on the date on which he delivered possession to the landlord, pursuant to the order of the Controller. The rent for the period between the date of delivery of possession by tenant to landlord and the date of tenant's re-entry shall remain suspended because during that period it was not the tenant but the landlord who was in possession of the building. On the tenant’s re- entry into possession of the building, his obligation to pay the same rent which he was paying on the date of delivery of possession by him to the landlord, shall stand revived. If the law permits a revision of rent or fixation of standard rent afresh, the landlord would be at liberty to invoke that provision and revise the rent consistently with such provisions. But the revision of rent cannot be insisted on by the landlord as a condition precedent to re-entry by the tenant. Therefore, the landlord in the present case was not justified in offering the premises to the tenants for re-entry by qualifying the offer for payment of a higher rate of rent. …

CASE STUDY 3 – R V. MONTILA [2005] 1 All.E.R. 113 (House of Lords) Bench – Lord Bingham of Cornhill, Lord Steyn, Lord Hope of Craighead, Baroness Hale of Richmond, Lord Carswell Judgment of House of Lords [This case was a prosecution for money laundering under section 49(2) of the Drug Trafficking Act 1994 and section 93C(2) of the Criminal Justice Act 1988. The appellants appealed against a lower court’s decision that in such a prosecution it was not necessary for the prosecution (i.e. the Crown) to prove that the property was in fact the proceeds of drug trafficking. In order to determine this question, the House of Lords considered the validity of headings and side-notes included in the legislation. The House decided that the Crown was required by the statute to prove that property was in fact the proceeds of drug trafficking. During this certain observations on the use of marginal notes as interpretive tools were made.]

… This appeal concerns the meaning of words in legislation which was introduced to combat that aspect of criminal conduct which is popularly known as money laundering. In its typical form money laundering occurs when criminals who profit from their criminal enterprises seek to bring their profits within the legitimate financial sector with a view to disguising their true origin. Their aim is to avoid prosecution for the offences that they committed and confiscation of the proceeds of their offences. Various measures have been taken both internationally and in domestic law aimed at detecting and deterring this activity. They include much closer regulation of the financial sector and the introduction of measures requiring known or suspected money laundering to be reported to the authorities. They also include the enactment of a series of offences to bring the activities of third parties within the reach of the criminal law.

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The issue The appellants, who are nine in number, are awaiting trial in the Crown Court at Canterbury. They were arraigned on 18 December 2002 on three indictments. Each of the three indictments has been laid against three of the appellants. Each of them contains counts laid in pairs against those named in the indictment. Each pair comprises one count of converting the proceeds of drug trafficking, contrary to section 49(2)(b) of the Drug Trafficking Act 1994, and one count of converting the proceeds of criminal conduct, contrary to section 93C(2) of the Criminal Justice Act 1988. The particulars of dates, places and sums of money are identical within each pair of counts. It is alleged that between 17 March 2000 and 20 September 2001 in 34 separate transactions the appellants used the services of one or another of two bureaux de change in London to convert a total of over £3m in sterling banknotes into Dutch guilders. A preparatory hearing took place before Judge van der Bijl at Canterbury under section 29 of the Criminal Procedure and Investigations Act 1996. It was held to resolve a point of law which had been raised about the elements within each of the twin offences that the prosecution must prove to establish guilt. The question is whether it is necessary for the Crown to prove that the property being converted was in fact the proceeds, in the case of the 1994 Act, of drug trafficking and, in the case of the 1988 Act, of crime. The argument for the Crown was that, while it had to prove that the defendants knew or had reasonable grounds to suspect that the property being converted was the proceeds of drug trafficking or of criminal conduct, it did not have to prove that the property was in fact those proceeds. On 19 December 2002 Judge van der Bijl held that the clear and unambiguous implication of the words used by the relevant subsections was that the foundation stone of the offences which they created was that the alleged offenders were dealing with the proceeds of drug trafficking or of criminal conduct. So it was for the Crown to prove that the property being converted was in fact the proceeds of that activity. The prosecutor appealed to the Court of Appeal by way of an interlocutory appeal under section 35(1) of the 1996 Act. On 3 November 2003 the Court of Appeal … allowed the appeal by the Crown. It held that it was not necessary, to prove an offence under subsection (2) of either section 49 of the 1994 Act or section 93C of the 1988 Act, that the property was in the case of the former the proceeds of drug trafficking or in the case of the latter the proceeds of crime … The Court of Appeal certified under section 33(2) of the Criminal Appeal Act 1968 that a point of law of general public importance was involved in its decision, namely: In a prosecution under section 93C(2) of the Criminal Justice Act 1988 or under section 49(2) of the Drug Trafficking Act 1994 is it necessary for the Crown to prove that the property was, in the case of the 1988 Act, the proceeds of crime and, in the case of the 1994 Act, the proceeds of drug trafficking? …

Headings and Side notes Then there are the headings to each group of sections and the side notes, or marginal notes, to each section. The legislation which is in issue in this case was considered and published with sides notes in the old form. In fact the side notes are side notes no longer. In 2001, due to a change in practice brought about by the Parliamentary Counsel Office, they were moved so that they now appear in bold type as headings to each section in the version of the statute which is published by The Stationery Office: see Bennion, Statutory Interpretation, 4th ed (2002), p 636. They appear in that form in the Bills that are presented to Parliament, and they also appear in that form in amendments which propose the insertion of new clauses into the Bill. But it remains true that, as Lord Reid said in Chandler v Director of Public Prosecutions, [1964] AC 763, 789, these components of a Bill, even in their current form, are not debated during the progress of a Bill through Parliament. They are part of the Act when it has been enacted and they are descriptive of its contents. But they are unamendable: Bennion, pp 608, 635–636. Mr Perry for the Crown submitted that it was well settled that a side note in an Act of Parliament does not constitute a legitimate aid to the construction of the section to which it relates. Mr Grenfell QC for

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the appellants said that he was willing to concede the point. But this is not a concession that can be accepted. It was based on a dictum of Phillimore LJ in In re Woking Urban District Council (Basingstoke Canal) Act 1911 [1914] 1 Ch 300, 322, where he said: I am aware of the general rule of law as to marginal notes, at any rate in public general Acts of Parliament; but that rule is founded, as will be seen on reference to the cases, upon the principle that those notes are inserted not by Parliament nor under the authority of Parliament, but by irresponsible persons.

In R v Hare, [1934] 1 KB 354, 355–356 Avory J said: Headings of sections and marginal notes form no part of a statute. They are not voted on or passed by Parliament, but are inserted after the Bill has become law. Headnotes cannot control the plain meaning of the words of the enactment, though they may, in some case, be looked at in the light of preambles if there is any ambiguity in the meaning of the sections on which they can throw light.

These observations were not wholly inaccurate at the time they were made, and they are out of keeping with the modern approach to the interpretation of statutes and statutory instruments. It is not true that headings and side notes are inserted by “irresponsible persons”, in the sense indicated by Phillimore LJ. They are drafted by Parliamentary Counsel, who are answerable through the Cabinet Office to the Prime Minister. The clerks, who are subject to the authority of Parliament, are empowered to make what are known as printing corrections. These are corrections of a minor nature which do not alter the general meaning of the Bill. But they may very occasionally, on the advice of the Bill's drafter, alter headings which because of amendments or for some other reason have become inaccurate: Bennion, p 609. Nor is it true that headings are inserted only after the Bill has become law. As has already been said, they are contained in the Bill when it is presented to Parliament. Each clause has a heading (previously a side note) which is there throughout the passage of the Bill through both Houses. When the Bill is passed, the entire Act is entered in the Parliamentary Roll with all its components, including those that are unamendable. As Bennion states at p 638, the format or layout is part of an Act. The question then is whether headings and side notes, although unamendable, can be considered in construing a provision in an Act of Parliament. Account must, of course, be taken of the fact that these components were included in the Bill not for debate but for ease of reference. This indicates that less weight can be attached to them than to the parts of the Act that are open for consideration and debate in Parliament. But it is another matter to be required by a rule of law to disregard them altogether. One cannot ignore the fact that the headings and side notes are included on the face of the Bill throughout its passage through the Legislature. They are there for guidance. They provide the context for an examination of those parts of the Bill that are open for debate. Subject, of course, to the fact that they are unamendable, they ought to be open to consideration as part of the enactment when it reaches the statute book. There is a further point that can be made. In Pickstone v Freemans Plc, [1989] AC 66, 127 Lord Oliver of Aylmerton said that the explanatory note attached to a statutory instrument, although it was not of course part of the instrument, could be used to identify the mischief which it was attempting to remedy … In Coventry and Solihull Waste Disposal Co Ltd v Russell, [1999] 1 WLR 2093, 2103, it was said that an explanatory note may be referred to as an aid to construction where the statutory instrument to which it is attached is ambiguous. In R (Westminster City Council) v National Asylum Support Service, [2002] 1 WLR 2956, 2959B–C, Lord Steyn said that, in so far as the Explanatory Notes that since 1999 have accompanied a Bill on its introduction and are updated during the Parliamentary process cast light on the objective setting or contextual scene of the statute and the mischief at which it is aimed, such materials are always admissible aids to construction. It has become common practice for their Lordships to ask to be shown the Explanatory Notes when issues are raised about the meaning of words used in an enactment. The headings and side notes are as much part of the contextual scene as these materials, and there is no logical reason why they should be treated differently. That the law has moved in this direction should

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occasion no surprise. As Lord Steyn said in that case, at p 2958, the starting point is that language in all legal texts conveys meaning according to the circumstances in which it was used. In the present case there are two features about the headings and the side notes that provide guidance. The first is that the subject matter of these sections is “proceeds” — in the one case of drug trafficking, in the other of criminal conduct. The second is that no distinction is made as to subject matter between the various offence-creating subsections within each section. All three, in the case of the 1990 Act, and both, in the case of the 1994 and 1988 Acts, are grouped under the same heading and have the same side note. There is no indication here that the subject matter of the activities that are being criminalised need not, in the case of subsection (2), actually be proceeds of drug trafficking or of criminal conduct. Such indications as can be gathered from the headings and side notes are to the contrary. They indicate that the mischief that Parliament was seeking to address was the concealment, conversion or transfer of actual proceeds for the purpose of avoiding prosecution for the conduct that gave rise to them or the making or enforcement of a confiscation order calculated with reference to the value of those proceeds. In other words, that the fact that the property in question had its origin in drug trafficking or criminal conduct is an essential part of the actus reus of the offence.

PROVISOS & EXPLANATIONS The rule regarding Provisos is most clearly set out by Singh in Principles of Statutory Interpretation (13 ed.) (inter alia citing an old 1880 British case Mullins v. Treasurer of Survey, (1880) 5 QBD 170): The normal function of a proviso is to except something out of the enactment or to qualify something enacted therein which but for the proviso would be within the purview of the enactment. … When one finds a proviso to a section the natural presumption is that, but for the proviso, the enacting part of the section would have included the subject-matter of the proviso.

The purpose of a Proviso and that of an Explanation have been most authoritatively laid down in Sundaram Pillai v. Pattabiraman, (1985) 1 SCC 591 and this case is being examined as a case study as well as for the precedental value that this case holds. CASE – SUNDARAM PILLAI V. PATTABIRAMAN (1985) 1 SCC 591 Bench – Justices S. Murtaza Fazal Ali, A. Varadarajan & Sabyasachi Mukharji Justice Fazal Ali (for himself and Justice Varadarajan) [Justice Mukharji dissenting] These appeals involve more or less an identical point of law relating to the interpretation of the term ‘wilful default’ appearing in the proviso to section 10(2) of the Tamil Nadu Buildings (Lease and Rent Control) Act, 1960 (hereinafter referred to as the ‘Act’) coupled with the Explanation which seeks to explain the intent of the proviso. … In Civil Appeal No. 1178 of 1984, the respondent-landlord let out the suit premises No. 3-B, New No 2-B, Davidson Street, Broadway Madras, to the appellant-tenant on a monthly rent of Rs. 600 for nonresidential use. The appellant, despite repeated reminders, did not pay the rent for the period from October 1978 to August 1979. The respondent filed a suit on December 2, 1979 for evicting the appellant on two grounds: (1) wilful default in payment of rent, and (2) material acts of waste committed in the building. … In Civil Appeal No. 6211 of 1983, the respondent-tenants were given the suit premises No. 171582, Ward B, Old corresponding No. 2, New No. 5181582 Abid Road, Hyderabad, on a monthly rent of Rs.

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225 which was, by mutual consent, increased to Rs. 275 per month in the year 1964. From July 1, 1966, the rent was again agreed to be increased to Rs. 300 per month. The appellants-landlord filed a suit under s. 10 of the Andhra Pradesh Buildings (Lease, Rent and Eviction Control) Act, 1960 on 12.11.71, against the respondents for eviction on three grounds; (1) wilful default by the tenants in payment of rent for the months of September, October and November 1971 (total amount being Rs. 900), (2) the tenants sublet the premises to one Hanumantha, and (3) that the premises were required bona fide for their own use. However, during the pendency of the matter, the original landlords sold away their interest in the property in favour of the present appellants before us and, therefore, the question of bona fide requirement abated there itself. The Rent Controller upheld both the grounds of wilful default and subletting. Aggrieved by the said decision, the respondents-tenant filed an appeal to the Chief Judge, City Small Causes Court, Hyderabad and the learned Chief Judge by his judgment held that wilful default in payment of rent for the month of September 1971 as also the question of subletting was proved. Against this decision of the Chief Judge, City Small Causes, the respondents filed a revision petition in the High Court. It is not in dispute that the rent from September, 1971 onwards has not been paid and that by the time the eviction petition was filed, the default was only for the month of September 1971. The High Court agreed with the lower courts with regard to wilful default for the month of September, 1971 and reversed the finding with regard to subletting but on the ground of wilful default ordered eviction of the respondents. … From a detailed survey of the provisions of the various Rent Act prevailing in the States and various Union Territories of our country, it appears that the provisions regarding eviction for default in payment of rent are not uniform and differ from State to State. Some Acts do not mention ‘wilful default’ at all, some mention it in a negative form while some put it in an affirmative form. To cut the matter short, from a review of the various Rent Act the position that emerges is that the provisions relating to eviction are couched in three different types of default – (1) Acts which expressly mention ‘wilful default’ without defining the same, (2) Acts which do not mention the words ‘wilful default’ at all but confer a right on the landlord to evict the tenant on pure and simple default after a certain period of time when the rent has become due, which is also different in different States, (3) Acts which use the expression ‘wilful default’ but in a negative form rather than in an affirmative form. D These are the A.P. Buildings (Lease, Rent and Eviction) Control Act of 1960, The Orissa House Rent Control Act, 1967 and the Pondicherry Buildings (Lease & Rent Control) Act, 1969 (hereinafter referred to as the ‘A P. Act’, ‘Orissa Act’ and ‘Pondicherry Act’ respectively) The last category of the Acts is the Tamil Nadu Act, which is the Statute in question and which makes a marked improvement by broadening the ambit of ‘wilful default’ in the proviso to s. 10 (2) which is further clarified by virtue of the Explanation added to the said proviso by Act No 23 of 1973. There are other Rent Acts which not only use the expression ‘wilful default’ but which also give a sort of a facility to a tenant even for an ordinary default to pay the entire rent together with interest, on payment of which the suit for eviction is dismissed or, at any rate, they contain provisions by which even if a suit for eviction is filed, the tenant is required to pay the entire arrears of rent, costs and interest, failing which his defence is struck out and the suit for eviction is decreed automatically. In these circumstances, for the purpose of the present cases, it is not necessary for us to make a roving enquiry into or carry on a detailed survey of the Acts which do not use the term ‘wilful default’. We might usefully refer only to those Acts which contain the term ‘wilful default’ either in a negative or in a positive form. These Acts, as already indicated, are the A.P., Orissa, Pondicherry and the Tamil Nadu

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Acts. Though we are concerned mainly with the Tamil Nadu Act yet in order to understand the contextual background of the words ‘wilful default’ and its proper setting, we might briefly examine the relevant provisions of the aforesaid Acts. Section 10 (2) of the A.P. Act is the only provision which confers protection to the tenant from eviction under certain conditions. Proviso to that sub-section runs thus: Provided that in any case falling under clause (i), if the Controller is satisfied that the tenant’s default to pay or tender rent was not wilful, he may notwithstanding anything in section 11, give the tenant a reasonable time, not exceeding fifteen days, to pay or tender the rent due by him to the landlord up to the date of such payment or tender and on such payment or tender, the application shall be rejected.

It may be noticed that although the default contemplated by the Act is wilful yet it has been put in a negative form which undoubtedly gives sufficient leeway to the tenant to get out of the rigours of the statutory provision. The proviso to s. 7(2) of the Orissa Act is similarly worded and the relevant portion of which runs thus: Provided that in any case falling under clause (i) if the Controller is satisfied that the tenant’s default to pay or tender rent was not willful …

Pondicherry Act is another statute which also contains the word 'wilful' in a negative form, the relevant portion of which runs thus: Provided that in any case falling under clause (i) if the Controller is satisfied that the tenant’s default to pay of tender rent was not willful …

The aforesaid Acts undoubtedly contemplate that a default simpliciter would not be sufficient to evict the tenant but it must further be shown that the default was not wilful. The Act, however is silent on the mode and the manner in which a court may decide as to what is wilful and what is not wilful. Thus, the Act has left it to the courts to decide this question. So far as the Tamil Nadu Act is concerned, it clearly defines as to what is ‘wilful default’. Proviso to s. 10 (2) of the Act runs thus: Provided that in any case falling under clause (i) if the Controller is satisfied that the tenant’s default to pay or tender rent was not wilful, he may, notwithstanding anything contained in section 11, give the tenant a reasonable time, t not exceeding fifteen days, to pay or tender the rent due by him to the landlord up to the date of such payment or tender and on such payment or tender, the application shall be rejected.

This proviso was clarified by an Explanation added to it by Act No. 23 of 1973 which provides a clear criterion to determine as to what is wilful default and what is not. In this connection, it was submitted by counsel for the tenants that despite the Explanation it is open to the Court on an appraisement of the circumstances of each case to determine whether or not the default was wilful and in doing, so it cannot be guided wholly and solely by the Explanation which is merely clarificatory in nature. If the Court in the circumstances of each case finds that the default is not wilful then it can come to this finding despite the Explanation. On the other hand, the argument of the counsel for the landlords is that the very purpose of the Explanation is to bring about uniformity in court decisions by laying down a conclusive yardstick in the shape of the Explanation which says that a default would be wilful only if the landlord gives two months’ notice to the tenant and the tenant does not pay the rent after the expiry of this period. In other words, the argument seems to be that the Explanation is to be read into the proviso so that the word ‘wilful’ will have to be defined and interpreted in accordance with the criterion laid down by the said Explanation, i.e., ‘issue of two months’ notice. The arguments merits consideration but before coming to any conclusion it may be necessary for us to examine the exact meaning of the words ‘wilful default’ as also the interpretation and the scope of the Proviso and the Explanation. Prima facie, there

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seems to be some force in the argument of the counsel for the tenants that unless the conditions of the Explanation are fulfilled, whatever may be the nature of the default, it cannot be a ‘wilful default’ as contemplated by the Proviso. Before, however, going into this question further, let us find out the real meaning and content of the word ‘wilful’ or the words ‘wilful default’. In the book A Dictionary of Law by L. B. Curzon, the words ‘wilful’ and ‘wilful default’ have been defined thus: ‘Wilful’ – deliberate conduct of .l person who is a free agent, knows what he is doing and intends to do what he is doing. ‘Wilful default’ – Either a consciousness of negligence or breach of duty; or a recklessness in the performance of a duty.

In other words, ‘wilful default’ would mean a deliberate and intentional default knowing full well the legal consequences thereof. In Words and Phrases, Volume 11-A (Permanent Edition) at page 268 the word ‘default’ has been defined as the non-performance of a duty, a failure to perform a legal duty or an omission to do something required. In volume 45 of Words & Phrases, the word ‘wilful’ has been very clearly defined thus: Wilful – intentional; not incidental or involuntary; - done intentionally, knowingly, and purposely, without justifiable excuse as distinguished from an act done carelessly; thoughtlessly, heedlessly or inadvertently; - in common parlance word ‘wilful’ is used in sense of intentional, as distinguished from accidental or involuntary; P. 296 – “Wilful” refers to act consciously and deliberately done and signifies course of conduct marked by exercise of volition rather than which is accidental, negligent or involuntary.

In Volume III of Webster’s Third New International Dictionary, the word ‘wilful’ has been defined thus: governed by will without yielding to reason or without regard to reason; obstinately or perversely self-willed.

The word ‘default’ has been defined in Vol. I of Webster’s Third New International Dictionary thus: to fail to fulfil a contract or agreement, to accept a responsibility; to fail to meet a financial obligation.

In Black’s Law Dictionary (Fourth Edn.) the word ‘wilful’ has been defined thus: ‘Wilfulness’ implies an act done intentionally and designedly; a conscious failure to observe care; Conscious; knowing; done with stubborn purpose, but not with malice. The word ‘reckless’ as applied to negligence, is the legal equivalent of ‘willful’ or ‘wanton’.

Thus, a consensus of the meaning of the words ‘wilful default’ appears to indicate that default in order to be wilful must be intentional, deliberate, calculated and conscious, with full knowledge of legal consequences flowing therefrom. Taking for instance a case where a tenant commits default after default despite oral demands or reminders and fails to pay the rent without any just or lawful cause, it cannot be said that he is not guilty of wilful default because such a course of conduct manifestly amounts to wilful default as contemplated either by the Act or by other Acts referred to above.

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The next question that arises for consideration is as to what the scope of a proviso is and what is the ambit of an Explanation either to a proviso or to any other statutory provision. We shall first take up the question of the nature, scope and extent of a proviso. The well established rule of interpretation of a proviso is that a proviso may have three separate functions. Normally, a proviso is meant to be an exception to something within the main enactment or to qualify something enacted therein which but for the proviso would be within the purview of the enactment. In other words, a proviso cannot be torn apart from the main enactment nor can it be used to nullify or set at naught the real object of the main enactment. Craies in his book Statute Law (Seventh Edn.) while explaining the purpose and import of a proviso states thus: The effect of an excepting or qualifying proviso, according to the ordinary rules of construction, is to except out of the preceding portion of the enactment, or to qualify something enacted therein, which but for the proviso would be within it … The natural presumption is that, but for the proviso, the enacting part of the section would have included the subject matter of the proviso.

Odgers in Construction of Deeds and Statutes (Fiftth Edn.) while referring to the scope of a proviso mentioned the following ingredients: P. 317. Provisos – These are clauses of exception or qualification in an Act, excepting something out of, or qualifying something in, the enactment which, but for the proviso, would be within it. P. 318. Though framed as a proviso, such a clause may exceptionally have the effect of a substantive enactment.

Sarathi in Interpretation of Statutes at page 294-295 has collected the following principles in regard to a proviso: (a) When one finds a proviso to a section the natural presumption is that, but for the proviso, the enacting part of the section would have included the subject-matter of the proviso. (b) A proviso must be construed with reference to the preceding parts of the clause to which it is appended. (c) Where the proviso is directly repugnant to a section, the proviso shall stand and be held a repeal of the section as the proviso speaks the later intention of the makers. (d) Where the section is doubtful, a proviso may be used as a guide to its interpretation; but when it is clear, a proviso cannot imply the existence of words of which there is no trace in the section. (e) The proviso is subordinate to the main section. (f) A proviso does not enlarge an enactment except for compelling reasons. (g) Sometimes an unnecessary proviso is inserted by way of abundant caution. (h) A construction placed upon a proviso which brings it into general harmony with the terms of section should prevail. (i) When a proviso is repugnant to the enacting part, the proviso will not prevail over the absolute terms of a later Act directed to be read as supplemental to the earlier one. (j) A proviso may sometimes contain a substantive provision.

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… A very apt description and extent of a provio was given by Lord Oreburn in Rhoudda Urban District Council v. Taff Vale Railway Co. [l909] AC 253 where it was pointed out that insertion of a proviso by the draftsman is not always strictly adhered to its legitimate use and at times a section worded as a proviso may wholly or partly be in substance a fresh enactment adding to and not merely excepting something out of or qualifying what goes before. To the same effect is a later decision of the same Court in Jennings v. Kelly, [1940] AC 206 where it was observed: We must now come to the proviso, for there is, I think, no doubt that in the construction of the section the whole of it must be read and a consistent meaning if possible given to every part of it. The words are: … “provided that such licence shall be granted only for premises situate in the ward or district electoral division in which such increase in population has taken place …”. There seems to be no doubt that the words “such increase in population” refer to the increase of not less than 25 per cent of the population mentioned in the opening words of the section

While interpreting a proviso care must be taken that it is used to remove special cases from the general enactment and provide for them separately. In short, generally speaking, a proviso is intended to limit the enacted provision so as to except something which would have otherwise been within it or in some measure to modify the enacting clause. Sometimes a proviso may be embedded in the main provision and becomes an integral part of it so as to amount to a substantive provision itself. Apart from the authorities referred to above, this Court has in a long course of decisions explained and adumbrated the various shades; aspects and elements of a proviso. In State of Rajasthan v. Leela Jain, (1965)1 SCR 276 the following observations were made: So far as a general principle of construction of a proviso is concerned, it has been broadly stated that the function of a proviso is to limit the main part of the section and carve out something which but for the proviso would have been within the operative part.

In the case of STO v. Hanuman Prasad, (1967) 1 SCR 831 Bhargava, J. Observed thus: It is well-recognised that a proviso is added to a principle clause primarily with the object of taking out of the scope of that principal clause what is included in it and what the legislature desires should be excluded.

… We need not multiply authorities after authorities on this point because the legal position seems to be clearly and manifestly well established. To sum up, a proviso may serve four different purposes: (1) qualifying or excepting certain provisions from the main enactment; (2) it may entirely change the very concept of the intendment of the enactment by insisting on certain mandatory conditions to be fulfilled in order to make the enactment workable; (3) it may be so embedded in the Act itself as to become an integral part of the enactment and thus acquire the tenor and colour of the substantive enactment itself; and (4) it may be used merely to act as an optional addenda to the enactment with the sole object of explaining the real intendment of the statutory provision. These seem to be by and large the main purport and parameters of a proviso. So far as the Act in question is concerned, the matter does not rest only on the question of wilful default, but by an amendment (Act No. 23 of 1973) an Explanation, in the following terms, was added to the proviso to section 10 (2) of the Act:

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Explanation. – For the purpose of this sub-section, default to pay or tender rent shall be construed as wilful, if the default by the tenant in the payment or tender of rent continues after the issue of two months’ notice by the landlord claiming the rent.

We have now to consider as to what is the impact of the Explanation on the proviso which deals with the question of wilful default. Before, however, we embark on an enquiry into this difficult and delicate question, we must appreciate the intent, purpose and legal effect of an Explanation. It is now well settled that an Explanation added to a statutory provision is not a substantive provision in any sense of the term but as the plain meaning of the word itself shows it is merely meant to explain or clarify certain ambiguities which may have crept in the statutory provision. Sarathi in Interpretation of Statutes while dwelling on the various aspects of an Explanation observes as follows: (a) The object of an explanation is to understand the Act in the light of the explanation. (b) It does not ordinarily enlarge the scope of the original section which it explains, but only makes the meaning clear beyond dispute.

Swarup in Legislation and Interpretation very aptly sums up the scope and effect of an Explanation thus: Sometimes an explanation is appended to stress upon a particular thing which ordinarily would not appear clearly from the provisions of the section. The proper function of an explanation is to make plain or elucidate what is enacted in the substantive provision and not to add or subtract from it. Thus an explanation does not either restrict or extend the enacting part; it does not enlarge or narrow down the scope of the original section that it is supposed to explain … The Explanation must be interpreted according to its own tenor; that it is meant to explain and not vice versa.

… The principles laid down by the aforesaid authors are fully supported by various authorities of this Court. To quote only a few, in Burmah Shell Oil Storage and Distributing Co. Of India v. CTO, (1961) 1 SCR 902, a Constitution Bench decision, Hidayatullah, J. speaking for the Court observed thus: Now, the Explanation must be interpreted according to its own tenor, and it is meant to explain clause (1)(a) of the Article and not vice versa. It is an error to explain the Explanation with the aid of the Article, because this reverses their roles.

… In Hiralal Rattanlals case, (1973) 1 SCC 216, this Court observed thus: On the basis of the language of the Explanation this Court held that it did not widen the scope of clause (c). But from what has been said in the case, it is clear that if on a true reading of an Explanation it appears that it has widened the scope of the main section, effect be given to legislative intent notwithstanding the fact that the Legislature named that provision as an Explanation.

In Dattatraya Govind Mahajan v. State of Maharashtra, (1977) 2 SCR 790, Bhagwati, J. Observed thus: It is true that the orthodox function of an explanation is to explain the meaning and effect of the main provision to which it is an explanation and to clear up any doubt or ambiguity in it. Therefore, even though the provision in question has been called an Explanation, we must construe it according to its plain language and not on any a priori considerations.

Thus, from a conspectus of the authorities referred to above, it is manifest that the object of an Explanation to a statutory provision is –

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(a) to explain the meaning and intendment of the Act itself, (b) where there is any obscurity or vagueness in the main enactment, to clarify the same so a- to make it consistent with the dominant object which it seems to subserve, (c) to provide an additional support to the dominant object of the Act in order to make it meaningful and purposeful, (d) an Explanation cannot in any way interfere with or change the enactment or any part thereof but where some gap is left which is relevant for the purpose of the Explanation, in order to suppress the mischief and advance the object of the Act it can help or assist the Court in interpreting the true purport and intendment of the enactment, and (e) it cannot, however, take away a statutory right with which any person under a statute has been clothed or set at naught the working of an Act by becoming an hindrance in the interpretation of the same. Having, therefore, fully discussed the main scope and ambit of a proviso and an Explanation, we shall now proceed to elucidate the various provisions of the Act and other Acts. We have already discussed that although almost every State has its own Rent Act, neither the Explanation nor the statutory clause concerning the term ‘wilful default’ is mentained therein. These Acts seem to proceed only on the simple word ‘default’ and perhaps to buttress their intention they have laid down certain guidelines to indicate the grounds of ejectment wherever a default takes place. Looking generally at such Acts, they seem to have first provided statutorily a particular date or time when the tenant on being inducted under the contract of tenancy, is to pay the rent. Such a provision may or may not be against the contract of the tenancy and if it is to that extent, it overrides the contract. This, therefore, gives sufficient notice to any tenant inducted in any premises that he must pay the rent according to the yard-stick set out by the Act, failing which he runs the risk of being evicted for default. Some Acts, however, have provided a particular number of defaults to enable the Rent Controller or Court to find out whether such a default would entitle the landlord to get an order of eviction. There are some other Acts which have made rather ingenious and, if we may say so, apt provisions for expediting the process of eviction in case of default by providing that whenever a suit for eviction is filed against a tenant on the ground of default, the tenant in order to show his bona fides must first deposit the entire rent, arrears and cost in the court of the Rent Controller where the Action is filed on the very first date of hearing, failing which the court or the authority concerned would be fully justified in striking down the defence and passing an order of eviction then and there. The dominant object of such a procedure is to put the tenants on their guard. It is true that such provisions are rather harsh but if a tenant goes on defaulting then there can be no other remedy but to make him pay the rent punctually unless some drastic step is taken. These Acts, therefore, strike a just balance between the rights of a landlord and those of a tenant. For deciding these cases, it is not necessary for us to go either into the ethics or philosophy of such a provision because we are concerned with statutes having different kinds of provisions. With this little preface we would now examine the working and relevant provisions of the Act alongwith similar provisions contained in the other three Acts, viz., A.P., Orissa, and Pondicherry Acts, which are almost in pari materia the proviso to s. 10 (2) of the Act. The only difference between the Act and the other Acts is that where as an Explanation is added to the proviso to s. 10 (2) of the Act, no such

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Explanation has been added to the provisions of the other three Acts; hence we have now to consider the combined effect of the proviso taken in conjunction with the Explanation. We may, therefore, extract the Explanation again to find out what it really means and to what extent does it affect the provisions of the Proviso: Explanation. - For the purpose of this sub-section, default to pay or tender rent shall be construed as wilful, if the default by the tenant in the payment or tender of rent continues after the issue of two months’ notice by the landlord claiming the rent.

If we analyse the various concomitants of the Explanation, the position seems to be that – (a) there should be a default to pay or tender rent, (b) the default should continue even after the landlord has issued two months' notice claiming the arrears or rent, (c) if, despite notice, the arrears are not paid the tenant is said to have committed a wilful default and consequently liable to be evicted forthwith. The question is: do these three conditions whittle down the effect of the proviso or merely seeks to explain the intendment of a wilful default? One view which may be possible and which form the basis of the argument of the counsel for the tenants is that mere non-payment of arrears of rent after issue of two months’ notice cannot in all circumstances automatically amount to a wilful default if the nonpayment does not fulfil the various ingredients pointed out by us while defining the term ‘wilful default’. The other view which has been canvassed before us by the counsel for landlords is that in view of the Explanation once it is proved that after issue of two months' notice if the tenant does not pay the arrears within the stipulated period of two months he is liable to be ejected straightaway. Another view is that such an interpretation would be extremely harsh and penal in nature because if, after receipt of the notice, the tenant is not able to pay the arrears due to circumstances beyond his control, of which the court is satisfied it will be putting a serious premium or handicap on the right of the tenant. In the same token, it was argued that if such an interpretation is put on the Explanation then the entire provisions of the proviso become otiose thus rendering the said proviso nugatory. Another aspect that must be stressed at this stage is that where a tenant has committed default after default without any lawful or reasonable cause and the said defaults contain all the qualities of a wilful default, viz., deliberate, intentional, calculated and conscious, should he be given a further chance of locus poenitentiae? After hearing counsel for the parties at great length, we feel that although the question is difficult one yet it is not beyond solution. If we keep the objects of the proviso and the Explanation separate, there would be no difficulty in deciding these cases. To begin with, s. 10(2)(i) of the Act lays down that where the Controller is satisfied that the tenant has not paid or tendered the rent within 15 days after the expiry of the time fixed in the Agreement of tenancy or in the absence of any such Agreement, by the last date of the month next following that for which the rent is payable, he (tenant) undoubtedly commits a default. Two factors mentioned in s. 10(2)(i) seem to give a clear notice to a tenant as to the mode of payment as also the last date by which he is legally supposed to pay the rent. This, however, does not put the matter beyond controversy because before passing an order of eviction under the proviso, it must also be proved that the default was wilful and if the Controller is of the opinion that the default in the circumstances and facts of the case was not wilful, in the sense that it did not contain any of the qualities or attributes of a wilful default

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as indicated by us above, he may give the tenant a reasonable time, not exceeding 15 days, to pay the entire rent and if this is complied with, the application for ejectment would stand rejected. The difficulty, however, is created by the Explanation which says that once a land lord gives a two months’ notice to his tenant for paying the arrears of rent but the tenant continues in default even thereafter, then he is liable to be evicted. There is a good deal of force in this argument which has its own advantages. In the first place, it protects the court from going into the intricate question as to what is a wilful default and whether or not the conditions of a wilful default have been satisfied which, if permitted would differ from case to case and court to court. But the difficulty is that if such a blanket ban is put on the court for not examining the question of wilful default once the conditions laid down in the Explanation are satisfied then it would undoubtedly lead to serious injustice to the tenant. A subsidiary consequence of such an interpretation would be that even though the tenant, after receipt of the notice, may be wanting to pay the arrears of rent but is unable to do so because of unforeseen circumstances like, death, accident, robbery, etc., which prevent him from paying the arrears, yet under the Explanation he has to be evicted. Another view which, in our opinion, is a more acceptable one and flows from the actual words used by the proviso is that where the Explanation does not apply in the sense that the landlord has not issued two months’ notice, it will be for the Court to determine in each case whether the default is wilful having regard to the tests laid down by us and if the Court finds that default is wilful then a decree for eviction can be passed without any difficulty. Another difficulty in accepting the first view, viz., if two months’ notice is not given, the tenant must not be presumed to be a wilful defaulter, is that in such a case each landlord would have to maintain a separate office so that after every default a two months’ notice should be given and if no notice is given no action can be taken against a tenant. We are unable to place such an unreasonable restriction on the landlord to give two months' notice after every default which may or may not be possible in every case. A correct interpretation, in our opinion, would be that where – (1) no notice, as required by the Explanation, is given to the tenant, the Controller or the court can certainly examine the question whether the default has been wilful and to such a case the Explanation would have no application, (2) where the landlord chooses to issue two months’ notice and the rent is not paid then that would be a conclusive proof of the default being wilful unless the tenant proves his incapability of paying the rent due to unavoidable circumstances. The argument of the counsel for landlords was that even if a notice under the Explanation is given that does not take away the jurisdiction of the proviso to determine whether or not the default has been wilful if it contains the qualities and attributes referred to above because what the Explanation does is merely to incorporate an instance of a wilful default and is not conclusive on the point and would have to be construed by the court in conjunction with the conditions mentioned in the proviso. We are, however unable to go to this extreme extent because that will actually thwart the object of the Explanation. As we read the Explanation, it does not at all take away the mandatory duty cast on the Controller in the proviso to decide if a default is wilful or not. Indeed, if the landlord chooses to give two months’ notice to his tenant and he does not pay the rent, then, in the absence of substantial and compelling reasons, the controller or the court can certainly presume that the default is wilful and order his eviction straightaway. We are unable to accept the view that whether two months’ notice for payment of rent is given or not, it will always be open to the Controller under the proviso to determine the question of

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wilful default because that would render the very object of Explanation otiose and nugatory. We express our view in the matter in the following terms: (1) Where no notice is given by the landlord in terms of the Explanation, the Controller, having regard to the four conditions spelt out by us has the undoubted discretion to examine the question as to whether or not the default committed by the tenant is wilful. If he feels that any of the conditions mentioned by us is lacking or that the default was due to some unforeseen circumstances, he may give the tenant a chance of locus poenitentiae by giving a reasonable time, which the statute puts at 15 days, and if within that time the tenant pays the rent, the application for ejectment would have to be rejected. (2) If the landlord chooses to give two months’ notice to the tenant to clear up the dues and the tenant does not pay the dues within the stipulated time of the notice then the Controller would have no discretion to decide the question of wilful default because such a conduct of the tenant would itself be presumed to be wilful default unless he shows that he was prevented by sufficient cause or circumstances beyond his control in honouring the notice sent by the landlord. … In civil appeal No. 1178 of 1984, it would appear that though the tenant had committed a default but he had paid the entire rent well before the filing of the suit by the landlord. In fact, the suit for eviction was filed by the landlord not on the ground of pending arrears but to penalise the tenant for having defaulted in the past. Such a suit cannot be entertained because once the entire dues are paid to the landlord the cause of action for filing of a suit completely vanishes. Hence, the suit arising out of civil appeal No. 1178 of 1984 must be dismissed as being not maintainable and the order of ejectment passed by the High Court is hereby set aside. In civil appeal No. 6211 of 1983, having regard to the tests and the criteria laid down by us there can be no doubt that wilful default in the payment of arrears to the tune of Rs. 900 has been proved and as there is nothing to show that the arrears were not paid or withheld due to circumstances beyond the control of the tenant, the order of eviction passed by the High Court is confirmed, and the appeal is allowed. …

DEFINITION CLAUSE Most modern statutes and several older ones as well have a definition clause that is usually found at the start of the statute. In the case of the Indian Constitution, article 366 is the Definitions Clause that provides definitions for several key terms. The purpose of a Definition Clause is to avoid repetition of the key terms and phrases occurring in the statutes. Definitions Clauses can also be found in several modern contracts starting from a simple Will or a Rent Agreement going all the way to highly complex Share Purchase Agreements and other such corporate agreements. We are not, however, concerned with interpretations of such contracts here but only with interpretation of statutes. Sometimes the Definition Clause, while defining a term or a phrase may give its definition that is to be used for the purposes of that statute. At other times, it may borrow a definition from any other statute. Reference to pari materia statutes is an accepted method of interpretation and it may fairly be stated that even in the absence of a definition of a term or a phrase in statute X specifically refers to the definition of a similar term or a phrase in statute Y, the courts would inevitably reach that conclusion, but the presence of such a definition might make the job of the courts easier.

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When a term or a phrase is defined, not by reference to another statute, but actually, the definitions may take different types. A definition might be restrictive, inclusive or descriptive. Singh in Principles of Statutory Interpretation (13 ed.) captures this very nicely in the following words: When a word is defined to ‘mean’ such and such, the definition is prima facie restrictive and exhaustive; whereas the word defined is declared to ‘include’ such and such, the definition is prima facie extensive. … Further, a definition may be in the form of ‘means and includes’, where again the definition is exhaustive; on the other hand, if a word is defined ‘to apply to and include’, the definition is understood as extensive. … A definition section may also be worded in the form ‘is deemed to include’ which again is an inclusive or extensive definition and such a form is used to bring in by a legal fiction something which the word defined which according to its ordinary meaning is not included within it.

A slight change in a definition clause, for example, a substitution of the word ‘includes’ in place of ‘means’ might change a lot of things for the litigants involved in a case. In order to appreciate the importance of a definition clause, examine as case-study Shree Gollaleshwar Dev v. G.K.S. Math, (1985) 4 SCC 393, where this slight difference made the difference between the suit being decreed against the suit being dismissed. CASE STUDY 1 – SHREE GOLLALESHWAR DEV V. GANGAWWA KOM SHANTAYYA MATH (1985) 4 SCC 393 Bench – Justices A. P. Sen & D. P. Madon Justice A. P. Sen (for the Court) This appeal on certificate from the judgment and decree of the Karnataka High Court dated April 5, 1971 raises a question of general public importance. The question is whether two or more trustees of a registered public trust can, with the permission in writing of the Charity Commissioner as provided for in 51 of the Act, bring a suit for declaration that certain property belongs to the Public trust and for possession of the same from a person holding it adversely to the trust under s. 50(ii) of the Bombay Public Trusts Act, 1950. That depends on whether the words “persons having interest in the trust” occurring in s. 2(10) and s. 50 of the Act to or do not include the trustees of a registered public trust. If they do not, two or more trustees cannot file a suit as contemplated by s. 50(ii) of the Act. There had been a divergence of opinion in the High Court as to the precise meaning of the words “persons having interest in the trust” in s. 2(10) and s. 50 of the Act and as conflicting views had been expressed by different Benches from time to time … Put very briefly, the essential facts are there. Shree Gollaleshwar Dev is an ancient temple and is situate in Village Golgeri in the district of Bijapur which formed part of the erstwhile State of Bombay prior to the reorganization of the States. Consequent upon the enactment of the Bombay Public Trusts Act, 1950, the temple was registered as a public trust. The district of Bijapur became part of the new State of Karnataka on the appointed day i.e. November 1, 1956 under the States Reorganization Act, 1956. The Act has continued to remain in force in the areas which formed part of the erstwhile state of Bombay. It had been customary for the trustees to permit persons rendering services to the temple to reside in the suit premises on leave and licence. The subject-matter in dispute consisting or arches alongside the eastern, northern and southern walls of the temple are meant for the use of devotees for their temporary rest and stay, when they come to visit the temple. The main temple itself is situated in the middle surrounded by an open courtyard. The suit premises being within the four walls of the temple, they form part of the temple and are entered in the certificate of registration as belonging to the temple.

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It appears that Plaintiff 2’s uncle Mariyappa Lingappa permitted one Balalochanayya Hiremath to reside in a part of the suit premises as he happened to be a man of saintly pursuits and one without a family. Subsequently, Balalochayya left the premises occupied by him. Thereafter, Plaintiff 2’s father as the trustee employed two brothers, Ramchayya and Gurunandayya to perform services for the temple and he assigned the suit premises to them for their residence with a view that they should be allowed to occupy the premises free so long as the trustees allowed them to remain in occupation and so long as they were retained in the service of the temple. They were to remain in occupation of the suit premises as licensees of the trustee of the temple. Rachayya and Gurunandayya started asserting rights derogatory to the trust. Accordingly, Plaintiff 2’s father as the trustee filed civil Suit No, 96 of 1935 in the Court of the Joint Civil Judge, Bijapur and the learned Civil Judge by his judgment dated August 8, 1936 decreed the plaintiffs’ claim. The defendants went up in appeal to the Court of the District Judge in Regular Appeal No. 109 of 1936 but the appeal was dismissed on November 22, 1937. Thereafter, Plaintiff 2’s father terminated the services of Rachayya and Gurunandayya yet called on them to vacate the suit premise, which they did. After Ramchayya and Gurunandayya were removed from service of the temple, Shantayya brother of Rachayya and Smt. Shankarawa, also of Gurunandayya were taken in service of the temple and allowed to reside in the suit premises free of rent on condition that they were to occupy the said premises so long as their services to the temple were required. In 1957, Shantayya along with Smt. Shankarawa also started creating trouble and Plaintiff 2’s father, according terminated their services and asked them to vacate the suit premises. On their failure to do so, he brought two suits being Civil suits Nos. 244 and 255 of 1957 in the name of the idol Shree Gollaleswar Dev as Plaintiff 1 with himself being the trustee as Plaintiff 2. The case of the plaintiffs was that the defendants were in occupation of the said premises with leave and licence of the trustee of the temple and as they refused to deliver possession of the suit premises, the suits had been instituted for a declaration that the property belong to the temple and for possession thereof. The defendants contested the plaintiffs’ claim on various grounds. They pleaded inter alia, that the temple had no right or title to the suit premises which belonged to this by virtue of a registered giftdeed dated February 19, 1917 executed by Mariyappa, uncle of Plaintiff 2 in favour of their predecessorin-title Balalochanayya, that there was no consent in writing given by Charity Commissioner under 8. 51 and therefore the suits brought under s. 50(11) of the Act were not maintainable and further that the Court of the Civil Judge, Senior Division, Bijapur had no jurisdiction to entertain the suits. The learned Civil Judge following the decision of the Mysore High Court in Marikamba Temple Hanumant Temple, Sirsi v. Subrava Venkataramanappa Barkur, ILR 1958 Mys 736, upheld these contentions and dismissed the suit as not maintainable. It was after this that the present suit was brought by the aforesaid plaintiffs in the Court of the District Judge, Bijapur as Civil Suit No. 2 of 1962 under s. 50(ii) of the Act for the aforesaid reliefs, with the consent in writing of the Charity Commissioner granted under. 8. 51. As earlier, the suit was instituted by Appellant 2’s father as Plaintiff 2 in the name of idol Shri Gollaleshwar Dev as Plaintiff 1. Plaintiff 2 was impleaded as the present trustee of the temple and Plaintiff 3 as the grandson of Mariappa, the elder brother of Plaintiff 2 as a beneficiary. Plaintiffs 2 and 3 joined the suit as “persons interested in the trust”. The High Court in the meanwhile had reversed the decision in Marikamba’s case in Ganapathi Ram Naik v. Kumta Shri Venkataraman Dev, (1964) 1 Mys LJ 172. The learned District Judge following the decision in Ganapathi Ram Naik’s case held that although a suit for recovery of property belonging to the idol could be brought either by the idol represented by the trustee or the manager, such a suit is not contemplated by s. 50(li) of the Act and was therefore not maintainable. It was observed:

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The words “persons having interest in the Trust” in s. 50 denote a person whose interest is inferior to that of trustee or manager and it is by reason of the existence of that inferior or that inferior or smaller interest that s. 50 of the Act like s. 92 of the Code of Civil Procedure 1908 authorises the institution of suit regulate it in the manner provided there in. But that section does not govern the institution of a suit by a person possessing higher and higher interest which is not regulated by it.

The learned district Judge accordingly held that such a suit would be governed by the ordinary law and would not lie in the District Court but either in the Court of the Civil Judge, Junior Division or the Court of the Civil Judge, Senior Division, according to the valuation of the subject-matter of the suit. Aggrieved by the judgment of the District Judge the appellants preferred an appeal before the High Court. A Division Bench which heard the appeal felt that the decision in Ganapathi Ram’s case required consideration and framed two questions for the opinion of the full bench, namely: (1) Whether the expression “persons having interested in the trust” occurring in s. 2(10) and s. 50 of the act includes trustees also. (2) Whether two or more trustees of a public trust can file suit for declaration that a property belongs to the public trust and for recovery of possession of the same from a person holding it adversely to trust under s.50 (ii) of the Act.

The Full Bench upon the hypothesis that s 50 of the Act is in pari materia with s. 92 of the Code expressed that the well settled principles governing s. 92 of the Code are equally applicable to s. 50 of the Act. It accordingly held following the decision of Woodroffe, J. in Budree Das Mukim v. Chooni lal Johurry, ILR (1906) 33 Cal 789, 807, and various other decisions of different High Courts laying down the scope and effect of s. 92 of the Code … that the suit contemplated by s. 50 of the act was one representative character. The observations of Woodroffe J. in the case of Budree Das Mukin v. Chooni Lal Johurry which has become the locus classicus were to the effect: The suit contemplated by the section is one of a representative character. It is obvious that the Advocate-General, Collector or other Public Officer can and do sue only as representing the public and if, instead of these public officers, two or more persons having an interest in the trust, sue with their consent, they so sue under a warrant to represent the public as the objects of the trust … It follows from this that when a person or persons sue not to establish the general member or members, but to remedy a particular infringement of their own individual right, the suit is not within or need not be brought under the section.

… The Full Bench approved of the view expressed by Somnath Iyer and Gopivallabha Iyengar, JJ. in Ganpathi Ram Naik v. Kumta Shri Venkataraman Dev, ILR (1963) Mys. 1059, that a suit by a deity for possession being a suit for vindicating its own personal rights was not governed by s. 50 of the Act but disagreed with it on the construction placed by it upon the words “person having interest” in s. 2(10) and s. 50 of the Act. The Division Bench in Ganapathi Ram’s case held that the expression “person having interest” denotes one whose interest is inferior two that of a trustee or a manager and it is by reason of existence of that inferior or smaller interest that s. 50 of the Act, like s. 92 of the Code authorises the institution of a suit and regulates it in the manner provided therein. It was of the view that s. 50 of the Act does not govern institution of a suit by a person possessing larger and a higher interest which is not regulated by it … The Full Bench accordingly held that persons who institute suits in their capacity as trustees do not in their representative capacity representing the interests of the public but in their own individual or personal capacity to vindicate their own rights or that of the idol. That is to say, merely because the trustees were persons having interest in the trust, the provisions of s. 50(ii) of the Act would not be attracted to a suit of this kind. Upon this reasoning, the Full Bench observed:

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It is, therefore, clear that the expression ‘two or more persons having an interest in the trust’ in s. 50 of the Act cannot include the trustees but persons other than the trustees who have as interest in the trust. The reason for holding that the expression ‘two or more persons having an interest in the trust’ cannot be construed to include trustees, is not because the trustees are not persons interested in the trust but because of the character of the suit contemplated under s. 50 of the Act. The remedy of the idol represented by its trustees or of the trustees to enforce their individual rights is not to institute a suit under s. 50 but to sue in the ordinary courts in the usual way as any other citizen, and for such a suit, the trustees are not required to satisfy the conditions of s. 50 of the Act. A suit for recovery of trust property instituted by a trustee t because one for enforcement of the right of the public, but being merely for enforcement of the private rights of the trust or trustees, does not, in our opinion, fall within the scope of s. 50 of the Act.

Upon that view, the Full Bench answered the questions referred as follows: (1) The expression “Persons having interest in the trust” occurring in s. 2(10) and s. 50 of the Act does not include the trustees when they institute the suits in their capacity as trustees for vindicating their private rights. (2) Consequently, two or more trustees of a public trust cannot file a suit under s. 50(ii) of the Act for a declaration that the property belongs to the public trust and for possession of the same from a person holding it adversely to the trust.

In accordance with the opinion of the Full Bench, the Division Bench dismissed the appeal filed by the appellants. Before we advert to the argument based on s. 50 of the Act, it should be mentioned that it is undisputed that the temple of Shree Gollaleswar Dev is a public temple registered as a public trust under the provisions of the Act. The plaintiff suing are, first, the idol, and second, a trustee, and third, a member of the family cresting the endowment i.e. a beneficiary. The question is whether the Plaintiffs 2 and 3 are persons having an interest in the trust within the meaning of s.2(10) which reads : 2. (10) ‘Person having interest’ includes – (a) in the case of a temple, a person who is entitled to attend at or is in the habit of attending the performance of worship or service in the temple, or who is entitled to partake or is in that habit of partaking in the distribution of gifts thereof; (b) in the case of a math, a disciple of the math or a person of the religious persuasion to which the math belongs ; (c) in the case of a wakf a person who is entitled to receive any pecuniary or other benefit from the wakf ant includes a person who has a right to worship or to P perform any religious rite in a mosque, idgah, imambara, dargah, maqbara or other religious institutions connected with the wakf or to participate in any religious or charitable institution under the wakf; (d) in the case of a society registered under the Societies Registration Act, 1860, any member of such society; and (e) in the Case of any other public trust, any beneficiary.

The word ‘trustee’ as defined in s. 2(18) reads: 2. (18) ‘trustee’ means a person in whom either alone or in association with other persons, the trust property is vested and includes a manager;

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By the Bombay Public Trusts (Amendment) Act, 1953, the word ‘includes’ was substituted for the word ‘means’. The definition of the words “person having interest” in s. 2(10) was made inclusive to set at rest all doubts and difficulties as to the meaning of these words, which were intended and meant to be used in a generic sense so as to include not only the trustees but also the beneficiaries and other persons interested in the trust. It would therefore appear that the definition of the expression ‘person having interest’ in s. 2(10) is wide enough to include not merely the beneficiaries of a temple, math, wakf etc. but also the trustees. It must therefore follow that Plaintiffs 2 and 3 who undoubtedly are members of the founder’s family i.e.. beneficiaries, are entitled to attend at performance of worship or service in the temple and also entitled to partake in the distribution of offerings to the deity and thus answer the description ‘person having interest’ as defined in s.2(10) of the Act. S. 50 of the Act on the construction of which the appeal depends, insofar as material, provides as follows: 50. In any case – … (ii) where a declaration is necessary that a particular property is a property belonging to a public trust or where a direction is required to recover the possession of such property or the proceeds thereof or for an account of such property or proceeds from any person including a person holding adversely to the public trust, or (ii) where the direction of the court is deemed necessary for the administration of any public trust. the Charity Commissioner or two or more persons having an interest in the trust and having obtained the consent in writing of that Charity Commissioner as provided in Section 51 may institute a suit whether contentious or not in the court within the local limits of whose jurisdiction the whole or part of the subject matter of the trust is situate, to obtain a decree for any of the following reliefs: (a) an order for the recovery of the possession of such property or proceeds thereof.

Sub-s. (1) of s. 51 of the Act which also has a material bearing, reads: 51. (1) If the persons having an interest in any public trust intend to file a suit of the nature specified in section 50, they shall apply to the Charity Commissioner in writing for his consent. The Charity Commissioner, after hearing the parties and after making such inquiry as he thinks fit, may within a period or six months from the date on which the application is made, grant or refuse his consent to the institution of such suit. The order or the Charity Commissioner refusing his consent shall be in writing and shall state the reasons, for the refusal.

Sub-s. (1) of s. 52 of the Act provides that notwithstanding anything contained in the Code of Civil Procedure, 1908, the provisions of s. 92 of the Code shall not apply to the public trusts governed by the Act. It is clear from these provisions that s. 50 of the Act created and regulated a right to institute a suit by the Charity Commissioner or by two or more person interested in the trusts in the form of supplementary statutory provisions without defeasance of the right of the manager or a trustee or a shebait of an idol to bring a suit in the name of idol to recover the property of the trust in the usual way. There is therefore no reason why the two or re person interested in the trust should be deprived of the right to bring a suit as contemplated by s. 50(ii)(a) of the Act. Although sub-s. (1) of s. 52 makes ss. 92 and 93 of the Code inapplicable to public trues registered under the Act, it has made provision by s. 50 for institution of such suits by the Charity Commissioner or by two or more persons interested in the trust and having obtained the consent in writing of the Charity Commissioner under a. 51 of the Act.

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We are unable to subscribe to the view expressed by the high Court. Although the full Bench rightly adverted to sub- s. (1) of s. 52 of the Act which excludes the applicability of ss. 92 and 93 of the Code to the public trusts governed by the Act, it is not right in its conclusion that a suit instituted by the idol represented by two or more trustees, with the written consent of the Charity Commissioner as provided in s. 51 of the Act, was not within the purview of s. 50(ii)(a) of the Act and therefore could not be brought in the Court of the District Judge. Although s. 50 of the Act is structured upon the pattern of s. 92 of the Code, the Full bench failed to appreciate that there is no provision in s. 92 of the Code analogous to clause (ii) or relief (a) of s. 50 of the Act. It will be seen from s. 50 that the section authorizes the institution of a suit by the charity Commissioner or two or more persons interested in the trust only in the District Court having jurisdiction to try it. The scope of s. 50 of the Act is wider than that of s. 92 of the Code. It applies to a case so long as the relief claimed falls within the scope of the section. One of the reliefs that can be claimed in a suit brought under s. 50 of the Act is that covered by relief (a) set out in cl. (ii) viz. for a declaration that a certain property belong to a public trust and for possession thereof from a person holding it adversely to the trust viz. a suit brought by the Charity Commissioner or two or re persons interested in the trust with his consent in writing as provided in s. 51 of the Act. The fallacy underlying in the reasoning of the Full Bench lies in the wrongful assumption that s. 50 of the Act is in pari materia with s. 92 of the Code. It is upon that erroneous hypothesis that it observes that the suit contemplated by s. 50 of the Act is one of a representative character. It overlooks the scope and effect of s. 50 of the Act which contemplates not only suits of a representative character but also suits by two or re trustees for preservation of the property of the trust. The reasoning of the Full Bench that if the suit is filed by the idol to enforce its private rights, the provisions of s. 92 of the Code are not attracted and a fortiori the same principles equally govern suits under s. 50 of the Act, is not worthy of acceptance. .. There is no warrant for the restrictive construction placed by the Full Bench on the expression “person having interest” in a trust occurring in s. 2(10) and s. 50 of the Act. The definition of the expression “person having interest” in s. 2 (10) being an inclusive one, there is lawful justification to exclude the suit brought by two or more trustees in the name of the idol, to recover possession of its property against a person holding it adversely to the trust from the purview of s. 50(ii) of the Act. In the result, the appeal succeeds ant is allowed with costs. The judgment and decree of the high Court affirming those passed by the District Judge, Bijapur are set aside and the plaintiffs’ suit for declaration of title to and for possession of the suit property together with mesne profits is decreed. …

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UNIT 5 – SUBSIDIARY RULES OF INTERPRETATION MANDATORY AND DIRECTORY PROVISIONS CASE STUDY 1 – AMMAL CHANDRA DUTT V. SECOND ADDITIONAL DISTRICT JUDGE (1989) 1 SCC 1 Bench – Chief Justice R. S. Pathak & Justice S. Natarajan Justice Natarajan (for the Court) This appeal by special leave by a tenant is directed against the dismissal of Civil Miscellaneous Writ No 12204 of 1975 by the High Court of Allahabad. The second respondent became the owner of a house bearing Municipal No. 140 (old No. 94-A) in Hewett Road, Allahabad under a gift deed executed in his favour by his mother in 1945. However even in 1944, his father had leased the house to the appellant on a monthly rent of Rs. 30 which after some years was raised to Rs. 35. The house is a three-storeyed building and the appellant was residing in the first and second floors and running a drug store belonging to his wife in the ground floor. Some years later the second respondent’s father leased out an adjacent building also to the appellant for being used for the drug store business. In 1967 it became necessary for the second respondent to seek recovery of possession of the house because his elder brother, with whom he was living, asked him to find accommodation elsewhere. Therefore the second respondent applied for permission under Section 3 of the U.P. (Temporary) Control of Rent and Eviction Act 1947 (hereinafter referred to as the ‘1947 Rent Act’) to the Prescribed Authority to file a suit for eviction against the appellant on the ground of urgent and reasonable requirement of the house for his own occupation. The Prescribed Authority rejected the application on November 10, 1967. After the 1947 Rent Act came to be replaced by the U.P. Urban Buildings (Regulation of Letting, Rent and Eviction) Act 1972 (hereinafter the ‘1972 Rent Act’), the second respondent again sought the permission of the Prescribed Authority to file a suit against the appellant but this time he sought for recovery of possession of the leased premises either fully or partially. He averred in the application that since his brother had asked him to vacate his house he had taken up residence in a single room in the house of one Srivastava and was living there in great hardship and as such he wanted to recover possession of his house in its entirety failing which at least a portion of it. The Prescribed Authority refused to grant permission on the ground the application had been made within a period of six months from the commencement of the 1972 Rent Act and hence it was barred by Rule 18(1) of the U.P. Urban Buildings (Regulation of Letting, Rent and Eviction) Rules,1972 (hereinafter ‘the Rules’). The Appellate Authority, however, differed from the Prescribed Authority and granted permission to the second respondent to recover possession of the ground floor portion of the house alone. Thereupon the appellant moved the High Court under Article 226 of the Constitution for issuance of a writ to quash the order of the Appellate Authority but did not meet with Success and hence this appeal by special leave. A few facts may first be noticed before the appellant’s contentions are set out and examined. Admittedly, the second respondent became the owner of the leased premises in the year 1945 under a gift settlement made by his mother and except the leased building he has no other house. It is also an admitted fact that when the first Application for permission to sue was made, the second respondent was living with his brother but subsequently he had to move out of that house and take up residence in a single room in a building belonging to one Srivastava. A Commissioner appointed by the Court had inspected the room occupied by the second respondent and found that the second respondent was faced with acute shortage of space and that the bath room and latrine were situated in the ground floor which was in the landlord’s occupation. While the prayer in the first application was for the release of the

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entire house, the prayer in the second application was for release of the whole house or in the alternative for the release of at least a portion of the house. Coming now to the contention of the appellant, who is a member of the bar and who appeared in person and argued the case for himself they were as follows: (1) The application made under the 1972 Rent Act was a second application for release of the house on the same ground of requirement and hence it was barred under Rule 18(1) of the Rules since it had been made within six months from the commencement of the 1972 Rent Act. (2) The High Court’s view that the second application was not barred under Rule 18(1) because it is the circumstances of requirement and not the nature of the requirement that would constitute the ground of eviction is erroneous and unsustainable. (3) The Act and the Rules do not permit the creation of two dwelling units in a building covered by a single tenancy and hence the grant of permission for partial eviction is bad in law. (4) The Appellate Authority has erred in rendering a finding against the appellant in the matter of comparative hardship merely because the appellant had another building adjacent to the leased premises for running the drug store. (5) In any event, the Appellate Authority and the High Court have failed to notice that without the ground floor, the first and second floors cannot be used as residence because the bath and toilet rooms are situated only in the ground floor. The learned counsel for the second respondent besides refuting the above contentions of the appellant argued that the appeal itself has become unsustainable because the appellant has vacated the building in the year 1976 itself and taken up residence in another house belonging to his wife and consequently by reason of Explanation (1) to S. 21 of the 1972 Rent Act, he is disentitled to dispute the second respondent's right to recover possession of the house. We will now consider the contentions of the appellant in seriatum In so far as the first contention is concerned, it suffers from a fallacy in that it is founded upon a misconstruction of Rule 18 (1). The Rule in question is worded as under: 18. Avoidance of multiplicity of proceedings [Sections 38(4) and 41] (1) Where an application of a landlord against any tenant for permission to file a suit for eviction u/s. 3 of the old Act, on any ground mentioned in S. 21(1) has been finally allowed or rejected on merits either before or after the commencement of the Act, whether by the District Magistrate or on revision by the Commissioner or the State Government or u/cl. (i) or cl. (m) of S. 43(2) by the District Judge, and the landlord instead of filing a suit for eviction makes an application under S. 21 on the same ground within a period of six months from such decision or from the commencement of the Act, whichever is later, the Prescribed Authority shall accept the findings in those proceedings conclusive. Provided that the period during which the operation of any permission as aforesaid is stayed by order of any court or authority shall be excluded in computing the said period of six months. (emphasis supplied)

On a reading of Rule 18(1), it may be seen that the Rule does not prohibit or bar the filing of an application for release of any building on any ground mentioned in S. 21(1) within a period of six months from the date on which a final order was passed in the previous application made under Section 3 of the 1947 Rent Act or within a period of six months from the commencement of the Act. All that the Rule says is that it a second application is made for release of the house on which permission to sue was sought in the previous application on the same ground within a period of six months from the date of the final order in that application or within six months from the commencement of the Act whichever

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is later, “the prescribed authority shall accept the findings in those proceedings as conclusive.” The Rule only sets out a rule of presumption to be followed by the Prescribed Authority for dealing with an application for release on the same ground without a sufficient interval of time between the filing of the two petitions The Rule does not mandate that a second application preferred on the same ground within a period of six months from the date of the order in the previous application or from the commencement of the Act must necessarily be dismissed as barred under the Rules. The first contention of the appellant is therefore obviously misconceived and cannot therefore be sustained. In so far as the second contention is concerned, the appellant is right when he says that the earlier application under Section 3 of the 1947 Rent Act and the later application under Section 21(1) of the 1972 Rent Act should be construed as having been made on one and the same ground viz. bona fide requirement of the premises by the second respondent for his own occupation. The High Court has however taken the view that the ground of eviction in the two applications is not the same because different sets of circumstances would constitute different grounds and such a test is satisfied in this case. We do not think it necessary to go into the question whether the High Court’s view is correct or not because even if we treat the two applications as having been made on the same ground, the second application would not attract the operation of Rule 18(1). Since the Rule contains only a formula of presumption based on facts, it goes without saying that the prescription is only of a directory nature and not of a mandatory nature. In this context we may appositely refer to the following passage in Phipson on Evidence (Thirteenth Edition) at pages 4 and 5: Presumptions are either of law or fact. Presumptions of law are arbitrary consequence expressly annexed by law to particular facts; and may be either conclusive, as that a child under a certain age is incapable of committing any crime; or rebuttable, as that a person not heard of for seven years is dead, or that a bill of exchange has been given for value. Presumptions of fact are inferences which the mind naturally and logically draws from given facts, irrespective of their legal effect. Not only are they always rebuttable, but the trier of fact may refuse to make the usual or natural inference notwithstanding that there is no rebutting evidence.

Besides it is a well-known principle that in the interpretation of statutes that where the situation and the context warrants it, the word “shall” used in a Section or Rule of a statute has to be construed as “may”. The present context is one such where the words “the Prescribed Authority shall accept the findings in those proceedings as conclusive” have to be read as “the Prescribed Authority may accept the findings in those proceedings as conclusive” because the findings are based upon existence of facts. We may now set out the reason as to why the prescription in Rule 18(1) should be construed as only directory and not mandatory In the first place, the Rule envisages two kinds of situations, one of them where the second application is made within an interval of six months from the date on which final orders were passed in the previous application and the other where the second application is made beyond an interval of six months, which may even go up to several years, as in this case where the interval was over five years, but within six months of the Act coming into force. Surely, the legislature would not have intended that the interval factor in the two sets of situations should be visited with the same consequences by adopting a rigid and inflexible application of the prescriptive guideline given in Rule 18(1). The second Factor is that even if the interval factor is the sole criterion for the application of the formula contained in Rule 18(1), the legislature could not have intended that even where drastic changes had taken place subsequent to the disposal of the earlier application, the prescribed authority should shut his eyes to the realities of the situation and blindly and mechanically apply the formula in Rule 18(1) and reject the second application.

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To cite a few examples it may be that after the disposal of the first application, the landlord had been rendered houseless due to the house occupied by him falling down due to decay or heavy rains or being destroyed by fire Could anyone say that irrespective of the changes that have taken place, the findings rendered in the previous application would have the force of relevancy till the period of six months fixed under the Rule has expired? It is, therefore, manifest that the rule of presumption enunciated in Rule 18(1) is only to serve as a guideline to be followed by the prescribed authority if he finds the circumstances to remain unchanged and the finding rendered in the earlier application to have relevancy even with reference to the facts set out in the second application the Rule intended to avoid multiplicity of proceeding as the very heading given to the Rule would make it clear It will therefore be inequitable and unrealistic to construe Rule 18(1) as containing an inexorable legal prescription for rejecting a second application filed within the prescribed time limit solely on the basis of the findings rendered in the earlier application. In this case we have already referred to the fact that after the first application was rejected, the living conditions of the second respondent had changed materially He had been turned out of his brother’s house and forced to take up residence in a single room belonging to a third party and live there in great discomfort and hardship In the plight in which he was placed, he was even prepared to accept partial release of the house it' he could not get release of the entire premises. The long interval of time between the rejection of the first application and the date of making the second application viz. about five years and the significant changes that had taken place during the interval in the living conditions of the second respondent undoubtedly rendered irrelevant the earlier findings and such being the case the rule of presumption given in Rule 18(1) can have no application or relevance to the second application. Viewed in this manner, we do not think the Appellate Authority or the High court has committed any error in granting the relief of partial release of the house to the respondent Hence the second contention of the Appellant has also to fail. So far as the third contention is concerned viz. the impermissibility of creating two dwelling units in a single tenanted premises, the argument fails to note that S. 21(1) provides for an order of eviction being passed against a tenant “from the building under tenancy or any specified part thereof” (emphasis supplied). We do not therefore find any error in the second respondent being granted the relief of partial eviction. As regards the fourth contention, it is admitted that the appellant had been given an additional building by the second respondent's father for being used for the drug store business Since the appellant was using the ground floor in the suit premises only for running his wife's drug store and was not living there in the Appellate Authority cannot be said to have committed any error in taking the view that in the matter of comparative hardship the second respondent would be the more affected person if eviction was not ordered than the appellant by an order of partial eviction being passed because he had another building and could conveniently shift his business to that building. Coming to the last contention of the appellant viz. the unsuitability of the first and second floors for residential purpose without the use of the bath and toilet rooms in the ground floor, it is open to the appellant to move the Prescribed Authority for directions being given to the second respondent to make suitable provision in the ground floor for the appellant and his family members to have access to and make use of the bath and toilet rooms in the ground floor. As regards the contention of the respondent that the appellant and his wife are now living in a house belonging to the appellant's wife and as such the appellant is precluded under Explanation (i) to S. 21(1) of the 1972 Rent Act from resisting the second respondent's suit for eviction, we are unable to make any pronouncement on it because of lack of evidence in support of that plea and besides the appellant would say that the house now occupied by him and his wife is the subject matter of a litigation between

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his wife and her uncle. In the light of our conclusions, the appeal fails and is accordingly dismissed. There will, however, be no order as to costs.

GENERAL LAWS VERSUS SPECIAL LAWS CASE STUDY 1 – COMMISSIONER OF CUSTOMS & CENTRAL EXCISE V. HONGO INDIA PVT. LTD. (2009) 5 SCC 791 Bench – Justices K. G. Balakrishnan, P. Sathasivam & J. M. Panchal Justice Sathasivam (for the Court)

In all these appeals, the question for consideration is whether the High Court has power to condone the delay in presentation of the reference application under unamended S. 35 H(1) of the Central Excise Act, 1944 (hereinafter referred to as “the Act”) beyond the prescribed period by applying S. 5 of the Limitation Act, 1963. … [A]ll the above mentioned matters arising from the judgments of the Allahabad High Court on identical issue posted before this Bench for determining the question, namely, “whether the High Court in the reference application under Section 35H (1) of the unamended Act, has power under S. 5 of the Limitation Act, 1963 to condone the delay beyond the period prescribed under the main statute i.e., Central Excise Act.” In all these three matters, Commissioner of Customs & Central Excise approached the High Court of Allahabad by way of reference application under S. 35 H(1) of the unamended Act beyond the prescribed period as provided in the same. The High Court relied on earlier orders and finding that it has no power to condone the delay in filing the reference application under the said provision, dismissed the reference application as barred by limitation. Chapter VI-A of the Act deals with Appeals. As per Section 35, any person aggrieved by any decision or order passed by a Central Excise Officer may file an appeal to the Commissioner of Central Excise (Appeals) within sixty days from the date of the communication to him of such decision or order. Proviso to sub-s. (1) enables the Commissioner (Appeals), if he is satisfied that the appellant was prevented by sufficient cause from presenting the appeal within the aforesaid period of sixty days, allow it to be presented within a further period of thirty days. Section 35B speaks about appeals to the Appellate Tribunal. Any person aggrieved by certain decisions/orders passed by the Commissioner of Central Excise or Commissioner (Appeals), may prefer an appeal to the Appellate Tribunal within three months from the date on which the order sought to be appealed against is communicated to the officer concerned or the other party. Sub-s. (5) enables the Appellate Tribunal to condone delay even beyond the prescribed period if there was sufficient cause for not presenting it within that period. Section 35EE provides revision by Central Government. As per sub-section (2), an application under sub-s. (1) shall be made within three months from the date of the communication. However, proviso to sub-s. (2) enables the revisional authority to condone the delay for a further period of ninety days, if sufficient cause is shown. Unamended Section 35G speaks about Appeal to the High Court. Sub-s. 2(a) enables the aggrieved person to file an appeal to the High Court within 180 days from the date on which the order appealed against is received by the Commissioner of Central Excise or the other party. There is no provision to condone the delay in filing appeal beyond the prescribed period of 180 days.

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Unamended Section 35H speaks about reference application to the High Court. As per sub-section (1), the Commissioner of Central Excise or other party within a period of 180 days of the date upon which he is served with notice of an order under Section 35C direct the Tribunal to refer to the High Court any question of law arising from such order of the Tribunal. Here again as per sub-section (1), application for reference is to be made to the High Court within 180 days and there is no provision to extend the period of limitation for filing the application to the High Court beyond the said period and to condone the delay. In these three appeals, we are concerned with “reference application” made to the High Court under Section 35H (1) of the Act before amendment of Central Excise Act by Act 49/2005 (w.e.f. 28.12.2005) by which several provisions of the Act were omitted including Section 35H. However, in view of the reference made it is but proper to consider the question referred before us. Admittedly in all these matters, the Commissioner of Customs & Central Excise approached the High Court by way of reference application beyond the prescribed period of 180 days. The High Court of Allahabad, with reference to the scheme of the Act and in the absence of specific provision for applying S. 5 of the Limitation Act, took note of other provisions i.e., Sections 35, 35B and 35EE, which enable the other authorities to condone the delay if sufficient cause was shown, accordingly, dismissed the reference application filed by the Commissioner of Central Excise on the ground of limitation. Now let us consider whether S. 5 of the Limitation Act is applicable in respect of reference application filed in the High Court under Section 35H of the unamended Act. Mr. Parag P. Tripathi, learned Additional Solicitor General, appearing for the appellant contended that in view of the fact that the High Court has all inherent and plenary power, is competent to consider the delay even after the prescribed period under the Act. He further contended that in the absence of specific prohibition in the Act for condoning delay particularly in Section 35H in lieu of S. 29(2) of the Limitation Act, S. 5 of the Limitation Act is applicable and the High Court ought to have exercised its power by condoning the delay. He initially contended that since Section 35H speaks about the substantial question of public importance, even the delay, if any, has to be condoned. On the other hand, learned counsel appearing for the respondents supporting the stand taken by the High Court submitted that the Central Excise Act is a self-contained Act and a code by itself and in the absence of specific provision enabling the High Court to exercise its power by condoning the delay, the High Court is justified in refusing to entertain the reference application of the Excise Department filed beyond the prescribed period. He also contended that in the light of the scheme of the Act and of the fact that sufficient period, i.e. 180 days, has been provided for the Commissioner as well as the other party for making reference to the High Court, the legislative intent has to be respected. Art. 214 of the Constitution of India makes it clear that there shall be a High Court for each State and Art. 215 states that every High Court shall be a court of record and shall have all the powers including the power to punish for contempt of itself. Though we have adverted to Section 35H in the earlier part of our order, it is better to extract sub-s. (1) which is relevant and we are concerned with in these appeals: 35-H. Application to High Court. – (1) The Commissioner of Central Excise or the other party may, within one hundred and eighty days of the date upon which he is served with notice of an order under section 35C passed before the 1st day of July, 2003 (not being an order relating, among other things, to the determination of any question having a relation to the rate of duty of excise or to the value of goods for purposes of assessment), by application in the prescribed form, accompanied, where the application is made by the other party, by a fee of two

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hundred rupees, apply to the High Court to direct the Appellate Tribunal to refer to the High Court any question of law arising from such order of the Tribunal.

Except providing a period of 180 days for filing reference application to the High Court, there is no other clause for condoning the delay if reference is made beyond the said prescribed period. We have already pointed out that in the case of appeal to the Commissioner, S. 35 provides 60 days’ time and in addition to the same, Commissioner has power to condone the delay up to 30 days, if sufficient cause is shown. Likewise, Section 35B provides 90 days’ time for filing appeal to the Appellate Tribunal and sub-s. (5) therein enables the Appellate Tribunal to condone the delay irrespective of the number of days, if sufficient cause is shown. Likewise, Section 35EE which provides 90 days’ time for filing revision by the Central Government and, proviso to the same enables the revisional authority to condone the delay for a further period of 90 days, if sufficient cause is shown, whereas in the case of appeal to the High Court under Section 35G and reference to the High Court under Section 35H of the Act, total period of 180 days has been provided for availing the remedy of appeal and the reference. However, there is no further clause empowering the High Court to condone the delay after the period of 180 days. Reliance was placed to S. 5 and S. 29(2) of the Limitation Act which read as under: 5. Extension of prescribed period in certain cases. – Any appeal or any application, other than an application under any of the provisions of Order XXI of the Code of Civil Procedure, 1908, may be admitted after the prescribed period, if the appellant or the applicant satisfies the court that he had sufficient cause for not preferring the appeal or making the application within such period. 29. Savings. – (1) Nothing in this Act shall affect s. 25 of the Indian Contract Act, 1872 (9 of 1872). (2) Where any special or local law prescribes for any suit, appeal or application a period of limitation different from the period prescribed by the Schedule, the provisions of section 3 shall apply as if such period were the period prescribed by the Schedule and for the purpose of determining any period of limitation prescribed for any suit, appeal or application by any special or local law, the provisions contained in sections 4 to 24 (inclusive) shall apply only in so far as, and to the extent to which, they are not expressly excluded by such special or local law.

In this background, let us examine the contentions raised by both sides. Learned Additional Solicitor General relying on the judgment of this Court in Union of India vs. Popular Construction Co., (2001) 8 SCC 470 contended that in the absence of specific exclusion of the Limitation Act in the Central Excise Act, in lieu of S. 29(2) of the Limitation Act, S. 5 of the same is applicable even in the case of reference application to the High Court. The said decision arose under the Arbitration and Conciliation Act, 1996. The question which arose for consideration in that case was whether provisions of S. 5 of the Limitation Act, 1963 are applicable to an application challenging an award under s. 34 of the Arbitration and Conciliation Act, 1996. In that case, award was filed by the appellant-Union of India in the Bombay High Court on 29.3.1999. The appellant filed an application challenging the award on 19.4.1999 under s. 30 read with S. 16 of the Arbitration Act, 1940. Subsequently, the application was amended by inserting the words “Arbitration and Conciliation Act, 1996” in place of “Arbitration Act, 1940”. The application was dismissed by the learned single Judge on 26.10.1999 on the ground that it was barred by limitation under s. 34 of the 1996 Act. The Division Bench rejected the appeal and upheld the findings of the learned single Judge. The said order was challenged in this Court. Though learned counsel for the appellant relied on the said decision in support of his claim, on perusal of the same, we are unable to concur with him. This Court held that as far

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As the language of S. 34 of the 1996 Act is concerned, the crucial words used in the proviso to sub-s. (3) are “but not thereafter” and this phrase would amount to an express exclusion within the meaning of S. 29(2) of the Limitation Act, and would, therefore, bar the application of S. 5 of that Act. Parliament did not need to go further. To hold that the Court could entertain an application to set aside the award beyond the extended period under the proviso, would render the phrase “but not thereafter” wholly otiose. No principle of interpretation would justify such a result.

Ultimately, this Court dismissed the appeal filed by the Union of India and confirmed the order of the High Court holding that the application filed to set aside the award is barred by limitation. … The other decision relied on by the counsel for the appellant is M.V. Elisabeth v. Harwan Investment and Trading Pvt. Ltd, 1993 Supp (2) SCC 433. The learned ASG heavily relied on the following observations: The High Courts in India are superior courts of record. They have original and appellate jurisdiction. They have inherent and plenary powers. Unless expressly or impliedly barred, and subject to the appellate or discretionary jurisdiction of this Court, the High Courts have unlimited jurisdiction, including the jurisdiction to determine their own powers …

Here again, there is no dispute about the above proposition. The High Courts in India are having inherent and plenary powers and as a Court of Record the High Courts have unlimited jurisdiction including the jurisdiction to determine their own powers. However, the said principle has to be decided with the specific provisions in the enactment and in the light of the scheme of the Act, particularly in this case, Sections 35, 35B, 35EE, 35G and 35H of the unamended Central Excise Act, it would not be possible to hold that in spite of the above-mentioned statutory provisions, the High Court is free to entertain reference application even after expiry of the prescribed period of 180 days. … In the earlier part of our order, we have adverted to Chapter VIA of the Act which provides appeals and revisions to various authorities. Though the Parliament has specifically provided an additional period of 30 days in the case of appeal to the Commissioner, it is silent about the number of days if there is sufficient cause in the case of an appeal to Appellate Tribunal. Also an additional period of 90 days in the case of revision by Central Government has been provided. However, in the case of an appeal to the High Court under Section 35G and reference application to the High Court under Section 35H, the Parliament has provided only 180 days and no further period for filing an appeal and making reference to the High Court is mentioned in the Act. In this regard, it is useful to refer to a recent decision of this Court in Punjab Fibres Ltd., (2008) 3 SCC 73. Commissioner of Customs, Central Excise, Noida is the appellant in this case. While considering the very same question, namely, whether the High Court has power to condone the delay in presentation of the reference under Section 35H(1) of the Act, the two-Judge Bench taking note of the said provision and the other related provisions … concluded that … the High Court was justified in holding that there was no power for condonation of delay in filing reference application.

As pointed out earlier, the language used in Sections 35, 35B, 35EE, 35G and 35H makes the position clear that an appeal and reference to the High Court should be made within 180 days only from the date of communication of the decision or order. In other words, the language used in other provisions makes the position clear that the legislature intended the appellate authority to entertain the appeal by condoning the delay only up to 30 days after expiry of 60 days which is the preliminary limitation period for preferring an appeal. In the absence of any clause condoning the delay by showing sufficient cause

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after the prescribed period, there is complete exclusion of S. 5 of the Limitation Act. The High Court was, therefore, justified in holding that there was no power to condone the delay after expiry of the prescribed period of 180 days. Even otherwise, for filing an appeal to the Commissioner, and to the Appellate Tribunal as well as revision to the Central Government, the legislature has provided 60 days and 90 days respectively, on the other hand, for filing an appeal and reference to the High Court larger period of 180 days has been provided with to enable the Commissioner and the other party to avail the same. We are of the view that the legislature provided sufficient time, namely, 180 days for filing reference to the High Court which is more than the period prescribed for an appeal and revision. Though, an argument was raised based on S. 29 of the Limitation Act, even assuming that S. 29(2) would be attracted what we have to determine is whether the provisions of this section are expressly excluded in the case of reference to High Court. It was contended before us that the words “expressly excluded” would mean that there must be an express reference made in the special or local law to the specific provisions of the Limitation Act of which the operation is to be excluded. In this regard, we have to see the scheme of the special law here in this case is Central Excise Act. The nature of the remedy provided therein are such that the legislature intended it to be a complete Code by itself which alone should govern the several matters provided by it. If, on an examination of the relevant provisions, it is clear that the provisions of the Limitation Act are necessarily excluded, then the benefits conferred therein cannot be called in aid to supplement the provisions of the Act. In our considered view, that even in a case where the special law does not exclude the provisions of Ss. 4 to 24 of the Limitation Act by an express reference, it would nonetheless be open to the court to examine whether and to what extent, the nature of those provisions or the nature of the subject-matter and scheme of the special law exclude their operation. In other words, the applicability of the provisions of the Limitation Act, therefore, to be judged not from the terms of the Limitation Act but by the provisions of the Central Excise Act relating to filing of reference application to the High Court. The scheme of the Central Excise Act, 1944 support the conclusion that the time limit prescribed under Section 35H(1) to make a reference to High Court is absolute and unextendable by court under S. 5 of the Limitation Act. It is well settled law that it is the duty of the court to respect the legislative intent and by giving liberal interpretation, limitation cannot be extended by invoking the provisions of S. 5 of the Act. In the light of the above discussion, we hold that the High Court has no power to condone the delay in filing the “reference application” filed by the Commissioner under unamended Section 35H(1) of the Central Excise Act, 1944 beyond the prescribed period of 180 days and rightly dismissed the reference on the ground of limitation. … [W]e confirm the decision of the High Court. Hence, all the appeals are accordingly dismissed.

NON OBSTANTE CLAUSE A non-obstante clause is a legislative device often used in drafting of statutes. It begins with the phrase ‘notwithstanding anything in this Act’ or ‘notwithstanding anything in any law’ and is used at the opening of a statutory provision. A non-obstante clause is used to give the statutory provision it is being used an overriding effect. What is it that the statutory provision is being given an overriding effect on depends on the wording of the non-obstante clause. A non-obstante clause should be understood as distinguished from a ‘without prejudice’ clause, ‘save as otherwise provided’ clause, and ‘subject to’ clause. The purposes of these three clauses are different from a non-obstante clause and they must not be confused as serving the same purpose as

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is served by a non-obstante clause. Clark Ltd. v. IRC, [1973] 2 All.E.R. 513 provides a useful guide to understand this distinction, where it was held: “The phrase ‘subject to’ is a simple provision which merely subjects the provisions of the subject-sub-sections to the provisions of the master-subsections. Where there is no clash, the phrase does nothing; if there is a collision, the phrase shows what is to prevail. The phrase provides no warranty of universal collision.” On a ‘without prejudice’ clause it was held in Andhra Pradesh State Financial Corporation v. Gar Re-Rolling Mills, (1994) 2 SCC 647: “When one remedy is without prejudice to another remedy, the recourse to one remedy does not bar the taking of the other remedy after abandoning the one which is earlier resorted to.” We may begin by nothing an important observation made on the nature of a non-obstante clause by Singh in his authoritative commentary Principles of Statutory Interpretation (13 ed.): The expression ‘notwithstanding anything in any other law’ occurring in a section of an Act cannot be construed to take away the effect of any provision of the Act in which that section appears. In other words ‘any other law’ will refer to any law other than the Act in which that section occurs. In contrast the expression ‘notwithstanding anything contained in this Act’ may be construed to take away the effect of any provision of the Act which the section occurs but it cannot take away the effect of any other law.

It may happen that there might be two statutes, both containing a non-obstante clause. Meanwhile, the purpose of a non-obstante clause is to resolve a conflict between two legislation should it arise, two statutes having a non-obstante clause makes interpreting such statutes very difficult. Singh notes the following rule in this context that provides a very helpful guide: Sometimes one finds two or more enactments operating in the same field and each containing a non obstante clause stating that its provisions will have effect ‘notwithstanding anything inconsistent therewith contained in any other law for the time being in force’. The conflict in such cases is resolved on consideration of purpose and policy underlying the enactments and the language used in them. Another test that is applied is that the later enactment normally prevails over the earlier one. It is also relevant to consider as to whether any of the two enactments can be described a special one; in that case the special one may prevail over the more general one notwithstanding that the general one is later in time.

Let us examine a few cases as case-studies to see how these rules play out in practice. CASE STUDY 1 – DOMINION OF INDIA V. SHIRINBAI A. IRANI AIR 1954 SC 596 Bench – Justices M. C. Mahajan, S. R. Das, N. H. Bhagwati, J. Das & V. Ayyar Justice Bhagwati (for the Court) This appeal by special leave from a judgment of the High Court of Judicature at Bombay in Appeal No. 117 of 1952 raises a short point as to the construction of clause 3 of the Requisitioned. Land (Continuance of Powers) Ordinance, 1946. The suit out of which this appeal arises was commenced by the first respondent against the appellants and the second respondent for delivery of vacant and peaceful possession of the three shops situated 'on the ground floor of the premises known as “Irani Manzil”. The first respondent was the owner of the said immovable property which had been requisitioned on the 15th April, 1943, by the Collector of Bombay in exercise of the powers conferred upon him by, Rule 75-A(1) of the Defence of India Rules read with the Notification of the Government, Defence Co-ordination Department, No. 1336/OR/1/42 dated the 15th April, 1942. The order of requisition was in the following terms:

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Order No. M.S.C. 467/H-Whereas it is necessary for securing the public safety and the efficient prosecution of the war to requisition the property specified in the schedule hereto appended … I, M.A. Faruqui, the Collector of Bombay, do hereby requisition the said property and direct that possession of the said property be delivered forthwith to the Food Controller, Bombay, subject to the following conditions: (1) The property shall be continued in requisition during the period of the present war and six months thereafter, or for such shorter period as may be specified by the Food Controller, Bombay …

The said premises were used for the purpose of housing the Government Grain Shop No. 176. By a letter dated the 30th July, 1946/17th August, 1946, the Controller of Government Grain Shops, Bombay, wrote to the first respondent that as the validity, of the requisitioning order was to expire on the 30th September, 1946, the first respondent should allow the Department to remain as her tenants in respect of the premises. The first respondent replied by her advocate’s letter dated the 27th August, 1946, offering the tenancy to the Department on certain terms. These terms were not accepted but the occupation of the premises continued even after the 30th September, 1946, and the first respondent complained about such occupation after the period of requisition of the said shops had come to an end and also complained that it was contemplated to transfer the said shops to a private party or concern without any reference to her in the matter. By her advocate’s letter dated the 29th August, 1947, she gave to the Collector of Bombay a notice to vacate the said shops giving him two clear calendar months’ time and asking him to deliver over to her peaceful and vacant possession of the said shops. The Controller of Government Grain Shops, Bombay, wrote to the first respondent on the 1st October, 1947, that the second respondent was being handed over the Government Grain Shop No. 176 and that she should give her consent to the electric connection to be carried out in the said shops by the second respondent. The first respondent refused to give her consent and protested against the contemplated action. The Collector, of Bombay by his letter dated the 15th January, 1948, intimated to the first respondent that the requisitioning of the said shops was continued after the 30th September, 1946, by Act XVII of 1947 and as possession of the said shops had been handed over to the second respondent vacant possession of the same could not be given to the first respondent. Further correspondence ensued between the first respondent’s attorneys and the Collector of Bombay in the course of which the Collector of Bombay admitted that the said shops had been sublet to the second respondent but contended that the maintenance of essential supplies was the purpose for which the premises in question were requisitioned and that as the second respondent continued to serve the same purpose the first respondent was not entitled to peaceful and vacant possession of the premises. The first respondent therefore filed a suit on the original side of the High Court of Judicature at Bombay being Suit No. 235 of 1949 claiming vacant and peaceful possession of the premises as also compensation for wrongful use and occupation thereof till delivery of possession was given over to her. The appellants were impleaded as defendants Nos. 1 and 2 in the said suit and the second respondent was impleaded as the third defendant. The suit was contested by the appellants. The second respondent did not file any written statement nor did he contest the suit. The first respondent contended that, the requisitioning order had expired, that the property was no longer under requisition and therefore the possession by the Government was wrongful. She next contended that the order was made for a specific purpose and as that purpose no longer obtained the order was no longer operative. She further contended that after August, 1947, the user of the property was not by the appropriate Government, viz., the Dominion of India, but was by the State Government. She also contended that the requisitioning order had ceased to be operative by reason of Act IX of 1951. The trial Judge, Mr. Justice Coyajee, upheld all these contentions of the first respondent and decreed the suit.

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The appellants preferred an appeal against that decision and the Court of Appeal confirmed the decree passed by the trial. Court on the short point as to whether clause 3 of Ordinance No. XIX of 1946 had the effect of continuing the requisitioning order. It affirmed the conclusion of the trial Court that there was no further extension of the duration of the requisitioning order by the provisions of clause 3 of the Ordinance and declined to go into the other questions which had been mooted before the trial Court and which had been decided by the trial Court in favour of the first respondent. The appellants not being satisfied with that judgment applied for leave to appeal to the Supreme Court, but the High Court rejected that application. The appellants thereupon applied for and obtained special leave under article 136 of the Constitution. It is common ground that the Defence of India Act, 1939 (XXXV of 1939), and the rules made thereunder were to expire on the 30th September, 1946. Various immoveable properties had been requisitioned in exercise of the powers conferred by sub-rule I of rule 75A of Defence of India Rules and all these requisitioning orders would have come to an end and the immoveable properties released from requisition on the, expiration of the Defence of India Act and the rules made thereunder. These requisitions had to be continued and an emergency arose which made it necessary to provide for the continuation of certain powers theretofore exercisable under the said Act and the said rules and the Governor-General in exercise of the powers conferred by section 72 of the Government of India Act promulgated on the 26th September, 1946, an Ordinance being Ordinance No. XIX of 1946, the relevant provisions of which may be set out hereunder: ORDINANCE NO. XIX OF 1946. An Ordinance to provide for the continuance of certain emergency powers in relation to requisitioned land … Whereas an emergency has arisen which makes it necessary to provide, in relation to land which, when the Defence of India Act, 1939 (XXXV of 1939), expires, is subject to any requisition effected under rules made under that Act, for the continuance of' certain powers theretofore exercisable under the said Act or the said rules … the Governor-General is pleased to make and promulgate the following Ordinance: … 2. DEFINITIONS (3) ‘Requisitioned land’ means immoveable property which, when the Defence of India Act, 1939 (XXXV of 1939), expires is subject to any requisition effected under the rules made under this Act … 3. Continuance of requisitions. – Notwithstanding the expiration of the Defence of India Act, 1939 (XXXV. of 1939), and the rules made thereunder, all requisitioned lands shall continue to be subject to requisition until the expiry of this Ordinance and the appropriate Government may use or deal with any requisitioned land in such manner and may appear to it to be expedient.

It is clear from the preamble as also clause 3 of the Ordinance that the occasion for the enactment of the Ordinance was the impending expiration of the Defence of India Act, 1939, and the rules made thereunder. All the requisition orders which had been made under the Act and the rules would have ceased to be operative and come to an end with the expiration of the Act and the rules and the immovable properties which had been requisitioned thereunder would have been released from such requisition. It was in view of that emergency that the Ordinance came to be promulgated and the obvious object of the enactment was to provide for the continuance of the powers exercisable under the Act and the rules and to continue the requisitions of immoveable properties which had been made thereunder. It was therefore argued that those requisition orders which would cease to be operative and come to an end with the expiration of the Act and the rules were the only orders which were intended to be continued by virtue of clause 3 of the Ordinance and clause 3 would accordingly cover only such requisition orders as would have ceased to be operative and come to an end with the expiration of the Act and the rules and not those orders which by reason of their inherent weakness such as the limitation of the period of duration expire ipso facto on the date of the expiration of the Act and the rules. The latter category of

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orders would have ceased to be operative and come to an end by reason of the limitation placed on the period of duration within the terms of the orders themselves and their expiration would not have depended upon the expiration of the Act and the rules and were therefore not touched by clause 3 of the Ordinance. That this was the true construction of clause 3 of the Ordinance was further sought to be supported by the non obstante clause appearing therein, viz., “Notwithstanding the expiration of the Defence of India Act, 1939 (XXXV of 1939), and the rules made thereunder.” The non obstante clause was invoked in support of the submission that those orders which would have ceased to be operative and come to an end with the expiration of the Act and the rules were the only orders which were intended to be, continued under clause 3 of the Ordinance. There is considerable force in the argument and it found favour with the trial Court as well as the Court of appeal. It was recognised that but for the non obstante clause the plain wording of the Ordinance was capable of covering the order in dispute. The preamble in so far as it could be drawn upon for the purpose showed that the Ordinance was being enacted to provide for the continuation of certain powers in relation to land which was subject to any requisition effected under the Act and the rules. The definition of requisitioned lands contained in clause 2(3) also covered immoveable property which when the Defence of India Act, 1939, expired was subject to any requisition effected under the Act and the rules. Clause 3 of the Ordinance covered all requisitioned lands which having regard to the definition above mentioned covered immovable properties which when the Defence of India Act, 1939, expired were subject to any requisition effected under the Act and the rules and such requisitioned lands were to continue to be subject to requisition until the expiry of the Ordinance. On a plain and grammatical construction of these provisions it was obvious that once you had an immovable property which when the Defence of India Act expired, that is on the 30th September, 1946, was subject to any requisition effected under the Act and the rules, that immovable property continued to be subject to requisition until the expiry of the Ordinance, no matter whether the requisition order to which the immovable property was subject was of a limited duration or an indefinite duration. The only test was whether the immovable property in question was on the 30th September, 1946, subject to any requisition effected under the Act and the rules. This construction was sought to be negatived by having resort to the non obstante clause which, it was submitted, restricted the operation of clause 3 of the Ordinance only to those cases where the requisition order would have ceased to be operative or come to an end merely by reason of the expiration of the Act and the rules. If there was in existence on the 30th September, 1946, any requisition order which would have ceased to be operative or come to an end by reason of the fact that it was limited in duration and was to expire on the 30th September, 1946, the non obstante clause saved that from the operation of clause 3 of the Ordinance and such requisition order could not continue in operation until the expiry of the Ordinance as therein provided. Such orders could not have been in the contemplation of the legislative authority because they would cease to be operative and come to an end by reason of the inherent weakness of the orders and not by reason of the fact that the Act and the rules were to expire on the 30th September, 1946, and it would not be at all necessary to make any provision for the continuance of such requisitions, because they could never have been intended to be continued. While recognising the force of this argument it is however necessary to observe that although ordinarily there should be a close approximation between the non obstante clause and the operative part of the section, the non obstante clause need not necessarily and always be co-extensive with the operative part, so as to have the effect of cutting down the clear terms of an enactment. If the words of the enactment are clear and are capable of only one interpretation on a plain and grammatical construction of the words thereof, a non obstante clause cannot out down that construction and restrict the scope of its operation. In such cases the non obstante clause has to be read as clarifying the whole position and must be understood to have been incorporated in the enactment by the Legislature by way of abundant caution and not by way of limiting the ambit and scope of the operative part of the enactment.

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Whatever may have been the presumed or the expressed intention of the legislating authority when enacting the Ordinance No. XIX of 1946, the words of clause 3 read along with the definition of requisitioned land contained in clause 2(3) of the Ordinance are quite clear and it would not be within the province of the Courts to speculate as to what was intended to be covered by clause 3 of the Ordinance when the only interpretation which could be put upon the terms thereof is that all requisitioned lands, that is, all immoveable properties which when the Defence of India Act, 1939, expired were subject to any requisition effected under the Act and the rules were to continue to be subject to requisition until the expiry of the Ordinance. No doubt measures which affect the liberty of the subject and his rights to property have got to be strictly construed. But in spite of such strict construction to be put upon the provisions of this Ordinance one cannot get away from the fact that the express provisions of clause 3 of the Ordinance, covered all cases of immoveable properties which on the 30th September, 1946, were subject to any requisition effected under the Act and the rules, whether the requisition was effected for a limited duration or for an indefinite period. Even those requisition orders, which by accident or design were to expire on the 30th September, 1946, would come to an end not only because the fixed term expired but also because the Act and the Rules expired on that date and were therefore covered by clause 3 read along with the definition in clause 2(3) of the Ordinance and were by the clear terms thereof continued until the expiry of the Ordinance. We are not here concerned with the equities of individual cases. There may be cases in which the Ordinance worked to the prejudice of the owner of the requisitioned land. In such cases the necessary relief could be granted by the appropriate Government by releasing the immoveable property from requisition. But the Courts would be helpless in the matter. Once the conclusion was reached that a particular measure was lawfully enacted by a legislative authority covering the particular case in question the hands of the Court would be tied and the legislative measure would have to be given its legitimate effect, unless mala fides or abuse of power were alleged. We have therefore come to the conclusion that both the trial Court and the Court of appeal were in error when they reached the conclusion that clause 3 of the Ordinance had not the effect of continuing the requisition order in question. … We therefore allow the appeal, set aside the decree passed by the Court of appeal and remand the Appeal No. 117 of 1952 for hearing and final disposal by the Court of appeal on the other points which have been raised in the matter after hearing both the parties. There will be no order as to costs here as well as in the Court of appeal. CASE STUDY 2 – A. G. VARADARAJULU V. STATE OF TAMIL NADU (1998) 4 SCC 231 Bench – Justice K. Venkataswami & M. J. Rao Justice Rao (for the Court) This appeal is preferred by the two appellants namely A. G. Varadarajulu and Srimati V. Jayalakshmi who are respectively. husband and wife, against the order passed by the Tamilnadu Land Reforms Special Appellate Tribunal, Madras in TRP No. 82 of 1994 dated 25th April, 1995. The case arises under the Tamil Nadu Land Reforms(Fixation of Ceiling on land) Act, 1961 (hereinafter called the Act). The 1st appellant is the declarant. The 1st appellant’s plea is that land of an extent of acres 36.74 allotted in favour of his wife, the second appellant Smt. V. Jayalakshmi in a partition Deed dated 25.9.1970 executed between the appellant’s son. Balaguruswamy and his wife should be excluded from his (the 1st appellant) holding as being ‘Stridhana land’ of his wife. Within the meaning of the said expression in S. 3(42) of the Act, to the extent permissible u/s. 5(4) of the Act. The following are the facts:

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There was a partition deed between the first appellant and his son Balaguruswamy in the year 1959. Under the said document, each of them was allotted certain extent of the joint family property on the basis that the wife of the first appellant was not allotted any property towards her right to maintenance against the joint family property, another partition deed dated 24.9.1970 was executed between the minor son, the said Balaguruswamy and his mother i.e. wife of first appellant. Under this document towards the right to maintenance, the said Balaguruswamy allotted acres 36.74 in favour of his mother. At the time of execution of said partition deed dated 24.9.1970 the son Balaguruswamy, being a minor, was represented by his father, the first appellant, as guardian. The land ceiling authorities started proceedings under the Act for computing the admissible ceiling area which could be allocated to the first appellant under the Act. While doing so, the Authorized officer by his order dated 13.9.1985 held that even though the partition deed dated 24.9.1970 was a “valid” document having been executed between 15.2.1970 and 2.10.1970 as permitted by Section 21A. Still inasmuch as the second appellant was not in possession of this allotted land at the time of commencement of this Act on 15.2.1970 as required by s. 3(42), the same could not be treated as her “stridhana”. It was consequently held that no part of it could be excluded from the “holding” of the first appellant even to the extent permitted by s. 5(4) of the Act. This was the decision of the Authorized officer made on 18.9.1985. A preliminary statement to that effect was published in the Gazette in Form 7 on 18.9.1985. No objections were received from the appellants. A final statement was published in the gazette on 22.1.1986 under s. 12 of the Act and thereafter a final notification was published in the Gazette on 12.2.1986 u/s. 18(1) of the Act. Against the said final notification, a revision was preferred by both the appellants before the Land Commissioner at Madras . The revision was rejected on 25.9.1986 holding again that the above-said extent allotted to the second appellant in the partition Deed dated 24.9.1970 could not be treated as “stridhana” inasmuch as it was not in her possession at the time of commencement of the Act i.e. 15.2.1970 as required by s. 3(42) and that it was not sufficient that she had a pre-existing right of maintenance as on 15.2.1970. It was held that it was rightly included in the holding of the first appellant by the Authorized officer. Against the said order of the Land commissioner dated 25.9.86 W.P. No. 11055/86 was filed in the Madras High Court which was transferred to the Tamil Nadu Land Reforms Special Appellate Tribunal, after its Constitution and numbered as TRP No. 82/94. After the TRP was dismissed by the Special Tribunal by its judgment dated 25.4.95, the appellants have preferred this appeal against the said judgment. … Learned senior counsel for the appellants submitted that the Tribunals had accepted that the partition Deed dated 24.9.1970 executed between the second appellant and her son Balaguruswamy was a valid document, - as it was executed between 25.2.1970 and 2.1.1970 during which period such partitions were permitted by the section 21A. It was argued that if the said partition deed was to be deemed to be valid under s. 21A, then it must be held that because of the non-obstante clause in section 21A. The conditions laid down in s. 3(42) for treating the land as stridhana land could not apply and therefore it was not necessary that the eland covered by the partition deed should be “held” by the female as on 15.2.1970, the date of commencement of the Act. Alternatively, it was argued for the appellants that the facts of the case fit into the definition of “stridhana land” in s. 3(42) inasmuch as the allotment of land to the second appellant on 24.9.1970 by her son was in satisfaction of her right to maintenance under Hindu law, which was in existence even on 15.2.1970, the date of commencement of the Act. It must, therefore, be held that she was holding

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this land even from 15.2.1970 even though such right to maintenance crystalised in to the land on 24.9.1970. On the other hand, learned counsel for the State contended that merely because the partition deed dated 24.9.1970 had been accepted as a valid document under section 21A, the land could not be excluded from the holding of the first appellant. The non-obstante clause in section 21A does not override s. 3(42). The alternative submission of the appellants based on s. 3(42) could not also be accepted because the mere existence of a right to maintenance against the joint family property as on 145.2.1970 the date of commencement of the Act, was not sufficient for the purpose of treating the said property as “held” by the 1st appellant’s wife on that date and it must be established that she was in possession of the land as owner and in her own name as on 15.2.1970. Reference was made to s. 3(19) of the Act which defines the words “to hold land”. It was argued that the allotment of the land on 24.9.1970. Under the partition deed with her son, even if it be in recognition of the right of maintenance was not sufficient to satisfy the conditions laid down in s. 3(42). We shall initially refer to the relevant provisions in Ss. 3(19), 3(42), 5(4)(a), and 21A as they stood after the amendment by Amending Act 17/70 (which came into force on 15.2.1970) and before the Amending Act 37/72 (which came into force on 1.3.1972). 3. (19) ‘to hold land’ with its grammatical variations and cognate expressions means to own as owner or to possess or enjoy land as intermediary or in one or more of t hose capacities. (42) ‘stridhana land’ means any land held on the date commencement of this Act by any; female member of a family in her own name. 5. (4)(a) Subject to the provisions of sub-section (5), where the stridhana land held by any female member of a family together with the other land held by all the members of that family is in excess of 15 standard acres the female member concerned may hold, in addition to the extent of land which the family is entitled to hold under sub-section (1), stridhana land not exceeding 10 standard acres: Provided that where any extent of stridhana land held by a female member is included in the extent of land which the family is entitled to hold under sub section (1) and in case where the extent so included is – (i) 10 or more than 10 standard acres, she shall not be entitled to hold any stridhana land in addition to the extent so included; or (ii) less than 10 standard acres, she may hold in addition to the extent so included an extent of stridhana land, which together with the extent so included shall not exceed 10 standard acres. (b) where the extent of stridhana land held under clause (a) by any female member of a family consisting of more than five members … 21-A. Certain partitions and transfers to be valid. – Notwithstanding anything contained in section 22 or in any other provision of this Act and in any; other law for the time being in force, where, after the date of commencement of this Act but before the notified date – (a) any person has effected by means of a registered instrument a partition of his holding or part thereof: or … … such partition or transfer shall be valid.

We shall now deal with the issues raised before us. Do the words “notwithstanding anything in any other provision of this Act” occurring in Section 21-A override Section 3 (42)? It is true that the Tribunals below had accepted that the partition deed dated 24-9-1970 was executed after 15-2-1970 and before 2-10-1970 and was therefore a valid document. Section 21-A says that

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section shall have effect “notwithstanding anything contained in section 22 or in any other provision of this Act and any other law for the time being in force” (emphasis supplied). The contention of the appellants is that if the partition deed is valid in view of section 21-A, then in view of the above non obstante clause, the respondents cannot insist that the land allotted to the second appellant under the deed on 24-9-1990 shall further conform to the conditions contained in the definition of “stridhan land” in section 3(42), namely, that she must be holding the land as on 15-2-1970. It is well settled that while dealing with a non-obstante clause under which the legislature wants to give overriding effect to a section, the court must try to find out the extent to which the legislature has intended to give one provision overriding effect over another provisions. Such intention of the legislature in this behalf is to be gathered from the enacting part of the section. … In Madhav Rao Scindia v. Union of India, (1971) 1 SCC 85 Hidayatullah, C.J. observed that the non-obstante clause is no doubt a very potent clause intended to exclude every consideration arising from other provisions of the same statute or other statute but “for that reason alone we must determine the scope” of that provision strictly, when the section containing the said clause does not refer to any particular provisions which it intends to override but refers to the provisions of the statute generally, it is not permissible to hold that it excludes the whole Act and stands all alone by itself. “A search has, therefore, to be made with a view to determining which provision answers the description and which does not”. It will be noticed that S. 21 A refers specifically to S. 22 of the Act but with regard to other provisions of the Act, it is silent. It says that certain partitions and transfers are to be valid notwithstanding any other provision of the Act. Therefore, basically, section 21A is intended to treat as valid such partitions or transfers as are mentioned in section 21A even if such partitions or transfers would otherwise have been invalid. Now s. 3942) does not deal with invalidity of partition or transfers but deals with stridhana land. The subject matter of the enacting part of section 21A does not have any connection with subject matter of S. 3(42). Hence it is clear that the non-obstante clause in section 21A was not intended to override any thing in s. 3(42). …

NOSCITUR A SOCIIS This is a very important rule of statutory interpretation and simply stated it means – the meaning of a word is to be ascertained by other words that surround that word. The rule of ejusdem generis, that we will examine later on is an instance of specific application of this rule that has now grown into an independent rule itself. But noscitur a sociis is a wider rule as compared to ejusdem generis. Singh in Principles of Statutory Interpretation (13 ed.) quotes the rule, from other authorities, as follows: Associated words take their meaning from one another under the doctrine of noscitur a sociis, the philosophy of which is that the meaning of the doubtful word may be ascertained by reference to the meaning of the doubtful word may be ascertained by reference to the meaning of words associated with it; such doctrine is broader than the maxim ejusdem generis.

The British Queen’s Bench decision in Commissioners of Customs and Excise v. Savoy Hotel, [1966] 2 All.E.R. 299 is perhaps one of the best examples to see this rule of interpretation in action. Can freshly pressed non-sweetened orange juice be called a ‘manufactured beverage’ for the purpose of levy of purchase tax on the same? This was the question before the Queen’s Bench. CASE STUDY 1 – COMMISSIONERS OF CUSTOMS AND EXCISE V. SAVOY HOTEL [1966] 2 All.E.R. 299 (Queen’s Bench Division)

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Justice Sachs … In this case the court is called upon to decide the fascinating and no doubt important problem as to whether the guest who from his bedroom in Claridges (or for that matter the Savoy or the Berkeley hotels) calls at breakfast time for his orange juice and a few minutes later receives the juice of a single orange freshly pressed out for his benefit in its purest form — unsweetened at that — is provided with a manufactured beverage within the meaning of those words in group 35 of the Purchase Tax Act, 1963. Any tendency to approach this question with undue levity was checked by the information that in the course of a single year there were in those three hotels served no less than 100,000 of what it is convenient to call “portions” of orange juice and that the revenue was industriously chasing a sum in the order of £1,500: having previously succeeded in bringing into the purchase tax net the ices consumed by diners at those institutions. To establish that items of this type attract purchase tax upon delivery to the bedrooms the commissioners must show, first, that they were then “chargeable goods” (see section 2 of the Act); next, that the sale was by a manufacturer who was carrying on a business of manufacturing goods (see section 10 (1) and (2) and the definition of “manufacturer” in section 40 (1)); and, thirdly, that the manufacturers' total business in chargeable goods was of the extent (£500 per annum) laid down by section 4 (2). The sole issue in the present case was whether the portions of orange juice as delivered were “chargeable goods.” (No distinction was sought to be drawn between the way in which the portion was prepared and supplied to bedrooms, at a bar, or in the restaurants.) That issue depended on whether such a portion fell within group 35 of Part 1 (List of Chargeable and Exempt Goods and Rates of Tax) of Schedule I to the Act. This group is defined as follows: Group 35. (a) Manufactured beverages, including fruit juices and bottled waters, and syrups, concentrates, essences, powders, crystals or other products for the preparation of beverages, but not including beverages or products in the list set out at the end of this Group. (b) Containers of gas for the preparation of carbonated beverages.

There follows the list of excluded beverages and products. It was common ground between the parties that the issue turned entirely on the interpretation of the relevant words in subparagraph (a) above. In the course of the submissions by both parties reference has been made, inter alia, to the definition of “manufacturer” and “manufacturing process” in section 40(1) and also to section 40(2)†, which defines what treatments of goods shall be deemed to be applications of a process; but in the end Mr. Bridge conceded that the word “manufactured” in “manufactured beverages” must be given its ordinary meaning without reference to other definitions in the Act, and specifically included in that concession that no aid could or should be sought from section 40(2) — a point which Mr. Graham had pressed. No authorities were cited as to that meaning. Turning then to the relevant words in group 35, there inevitably occurs — as Mr. Bridge readily agreed — a strong first impression that a portion of fresh natural orange juice pressed from a single orange for †

[Ed. – The original footnote in the opinion is serial numbered ‘2’, the text of the footnote is reproduced here] –

S. 40 (2): … any treatment of goods which affects the goods or their get-up and which results in the goods becoming chargeable goods … shall be deemed for all the purposes of this Act to be the application of a process in the course of making the goods. In this subsection the reference to get-up includes a reference to marking, labelling, packing or any other treatment adopted for identifying goods or presenting goods to the user or consumer.

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a particular person ordering it cannot in common sense be called a “manufactured beverage.” In part that impression is due to mental resistance to applying the words “manufactured beverage” to something like natural juice that is in no way synthetic, and partly to resistance to the idea that the above extraction of juice specially effected for a particular person comes within the “factory” concept evoked by the word “manufactured.” That concept is one which brings to mind elements that include operations on a scale larger than that employed to produce one portion of orange juice for an individual and (even if the juice need not be synthetic) then at least some intention that the relevant process should form part of a series capable of leading the product to the equivalent of a shelf in a supermarket. But Mr. Bridge firmly pressed that, however incongruous it might appear, yet upon the proper construction of the relevant words of sub-paragraph (a) taken as a whole, the housewife, whenever she in similar fashion provided a member of the family with a glass of fresh orange juice, had “manufactured” it — albeit, of course, not in business, even if she so provided 1,000 or 1,500 portions a year. But, of course, that first impression and initial avulsion from incongruity was formed before Mr. Bridge had deployed his arguments. The first of these was that the word “including” in sub-paragraph (a) of group 35 was used in its extensory meaning and not in that more normal meaning of “such as” which may so often cover matters mentioned ex abundante cautela. He started by citing that passage of the speech of Lord Watson in Dilworth v. Commissioner of Stamps, [1899] AC 99 where he said: The word ‘include’ is very generally used in interpretation clauses in order to enlarge the meaning of words or phrases occurring in the body of the statute; and when it is so used these words or phrases must be construed as comprehending, not only such things as they signify according to their natural import, but also those things which the interpretation clause declares that they shall include.

To that he added the passage in the judgment of Channell J. in the next cited case: Savoy Hotel Co. v. L.C.C, [1900] 1 QB 665 where it is stated that “the result of an interpretation clause is frequently to bring the most incongruous things within the operation of a statute.” Having thus firmly grasped the incongruity nettle flourishing in the centre of that strong first impression, he then uprooted it by apt reference to the effect of the decision in Savoy Hotel Co. v. L.C.C by which it was held that this very establishment, the Savoy Hotel, was a “shop” for the purpose of the Shop Hours Act, 1892. In this way Mr. Bridge for the purposes of the present case consigned common sense to a casualty clearing station. It being clear that, for instance, “crystals or other products for the preparation of beverages” are not of themselves “manufactured beverages” and that quoad those items “including” must obviously have an extensory meaning, Mr. Bridge proceeded as follows. The word “including” being used in its extensory sense, it follows that the words “fruit juices” and “bottled water” must refer to something that would not normally come within the meaning of the words “manufactured beverage.” It followed again that as all fruit juices with additives would automatically be “manufactured beverages” even if not mentioned in the words following “including,” the only thing “fruit juices” could really refer to was pure and natural fruit juice — by whatever method extracted from the fruit, whether by an individual pressing or by some massive mechanical pulping. Moreover, he pointed out, the very use of the word “bottled” in “bottled waters” tended to show that no factory or other bottling was needed to attract natural fruit juice into the realm of chargeable goods. As to “bottled waters,” he similarly contended that as soda water, tonic water and the like are clearly manufactured beverages, thus bottled waters could only refer to those that emerge so naturally, so usefully and so profitably from areas such as Malvern and Vichy — though he conceded that in some way there was excluded natural water sold bottled at a garage or elsewhere for purposes other than that of being drunk.

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“Including” is a word to which parliamentary draftsmen seem considerably addicted: one reason for this may be that in law it can have, according to its context, not only one or other of simple but in essence quite differing effects (for instance, in relation to the words that follow it may be found to have been used simply to enlarge, to limit, to define exhaustively or for the avoidance of doubts to repeat the preceding word or phrase), but it may also be used to secure on one and the same occasion more than one of those effects, thus putting the draftsman, but not necessarily the court, in a happy position. In the present case it in the end became evident that as regards each and every one of the items mentioned after the word “including” that word must, if the argument for the commissioners was to succeed, have exactly the same simple meaning as “and”: and this Mr. Bridge readily agreed. When, however, asked why the draftsman (assuming he had not temporarily lost his capacity to spell) did not then use that simple word of three letters, no satisfactory explanation appeared available. However persuasive may be the exercise in logical approach adopted on behalf of the commissioners, it seems to break down at this point. The approach of the draftsman was probably not, after all, as limpidly lucid as the submissions of Mr. Bridge. So one arrives at the not wholly unknown situation that a word (here “including”) has been used by the draftsman in a schedule in a somewhat ambivalent way; and that the path yet remains open for a modicum of common sense to emerge after its battering. To talk of natural juice extracted by hand from a single orange for the use of the particular person, who wishes to have it fresh to drink, as a “manufactured beverage” does not, as I have already indicated, make sense; and there is nothing here in the use of the word “including” that compels the court to say that “fruit juices” must be construed without reference to the two words with which the sentence begins and which should, where practicable, be given some effect in relation to the words that follow. Whether pure extracted juice can ever form a manufactured beverage any more than milk extracted from cow or coco-nut (or — if it happened to be drinkable — some natural liquid from the earth) it does not seem necessary to decide. Nothing in this judgment is intended unduly to deter the commissioners from pursuing the case of someone who uses mass pulping methods and then puts the product in can, bottle, flagon or cask and from attempting in such a case to establish that manufactured beverages can in certain circumstances include liquids that are in no way synthetic — whatever may be the difficulty of persuading a court that a fruit juice which is natural can yet be manufactured. Suffice it here to say that “manufactured” is, in any event, a word that embodies some elements that are wholly absent in what is simply done for the benefit of the individual guest who asks for the fresh juice of a single orange at breakfast time in any place, be it grand or homely. To my mind, neither the Savoy nor the housewife on such occasions provide a manufactured beverage.

EJUSDEM GENERIS In very simple terms the rule is ejusdem generis means that if general words follow specific words in a text, these general words have to be interpreted in light of the specific words that they follow. In slightly more complex terms we may quote from Singh on Principles of Statutory Interpretation (13 ed.): When particular words pertaining to a class, category or genus are followed by general words, the general words are construed as limited to things of the same kind as those specified. … [T]he rule of ejusdem generis reflects an attempt to reconcile incompatibility between the specific and general words in view of the other rules of

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interpretation that all words in a statute are given effect if possible, that a statute is to be construed as a whole and that no words in a statute are presumed to be superfluous. The rule applies when – (1) the statute contains an enumeration of specific words; (2) the subjects of enumeration constitute a class or category; (3) that class or category is not exhausted by the enumeration; (4) the general terms follow the enumeration; and (5) there is no indication of a different legislative intent. If the subjects of enumeration belong to a broad based genus as also to a narrower genus, there is no principle that the general words should be confined to the narrower genus. … It is essential for application of the ejusdem generis rule that enumerated things before the general words must constitute a category or a genus or a family which admits of a number of species or members.

The rule of ejusdem generis as stated above has three parts. The first is the enunciation of the rule itself. The second is the conditions when the rule may legitimately be invoked as an interpretive tool. The third is the condition where the rule may not be invoked as an interpretive tool. (As a thought experiment, examine this last sentence – even though it uses the word ‘may’ it is fairly clear that it is being used to denote the idea most appropriately captured by the word ‘shall’). The best example to understand when the rule of ejusdem generis cannot be applied, and in deed was squarely rejected by the Supreme Court is the constitution bench opinion in Rajasthan State Electricity Board v. Mohan Lal, AIR 1967 SC 1857, where the rule of ejusdem generis was pleaded at the Bar but the Court refused to invoke it to interpret the phrase ‘other authorities’ in Article 12 of the Constitution. The exposition of the rule and its rejection in this case furnishes perhaps the best example to learn how ejusdem generis is used in practice. CASE STUDY 1 – RAJASTHAN STATE ELECTRICITY BOARD V. MOHAN LAL AIR 1967 SC 1857 Bench – Chief Justice K. Subba Rao, Justices J. C. Shah, J. M. Shelat, V. Bhargava & G. K. Mitter Justice Bhargava (for the Chief Justice, Justices Shelat, himself & Mitter) [Majority Opinion]

The appellant in this appeal is Electricity Board of Rajasthan Jaipur (hereinafter referred to as “the Board”) a body corporate constituted on 1st July 1957, under the Electricity (Supply) Act, 1948 (No. 54 of 1948). Before the constitution of the Board the supply of electricity in the State of Rajasthan was being controlled directly by a department of the State Government named as the Electrical and Mechanical Department. Respondent No. 1 Mohan Lal as well as respondents 4 to 14 were all permanent employees of the State Government holding posts of Foremen in the Electrical and Mechanical Department. On the constitution of the Board the services of most the employees including all these respondents were provisionally placed at the disposal of the Board by a notification issued by the Government on 12th February, 1958 purporting to exercise its power under section 78A of Act 54 of 1948. In this notification a direction was included that the Board was to frame its own new grades and service conditions under its regulations and the employees whose service were transferred to the Board were to exercise option either to accept these new grades and service conditions or to continue in their existing grades and service conditions except in regards to conduct and disciplinary rules or to obtain relief from Government service by claiming pension or gratuity as might be admissible on abolition of post under the Rajasthan Service Rules. The Board however did not frame any new grades and service conditions at least up to the time that the present litigation arose.

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Respondent No. 1 was however deputed by the State Government by its order dated 27th January, 1960 after having worked under the Board for a period of about two years to the Public Works Department of the Government On 10th August, 1960 an order was made by the Government addressed to the Secretary of the Board indicating that respondent no. 1 as well as respondent no. 4 to 14 were to be treated as on deputation to the Board. On 24th November, 1962 the Public Work Department passed an order reverting respondent no. 1 to his parent department with effect from 1st December, 1962 but the period of deputation was later extended till 25th July, 1963. On 11th July, 1963 he was actually reverted to the Board from the Public Works Department and the Board issued orders posting respondents no. 1 as a Foreman. In the interval while respondent No. 1 was working in the Public Works Department respondent 4 to 14 had been promoted by the Board as Assistant Engineers while respondent no. 1 was promoted to work as Assistant Engineer in the Public Works Department. On his reversion, respondent no. 1 claimed that he was also entitled to be promoted as Assistant Engineer under the Board because some of the other respondents promoted were junior to him and in the alternative that in any case he was entitled to be considered for promotion. This request made by him to the Board as well as to the State Government was turned down and thereupon respondent no. 1 filed a petition under Article 226 and 227 of the Constitution in the High Court of Rajasthan. Respondent no. 1 claimed that he was entitled to equality of treatment with respondent 4 to 14 and inasmuch as he had not been considered for promotion with them by the Board, the Board had acted in violation of Article 14 and 16 of the Constitution. The Board contested the petition on two grounds. The first ground was that respondent no. 1 had never become a permanent servant of the Board and never held any substantive post under it so that he could not claim to be considered for promotion with respondents 4 to 14. The second ground was that the Board could not be held to be “State” as defined in Article 12 of the Constitution and consequently no direction could be issued to the Board by the High Court under Art 226 or 227 of the Constitution on the basis that the action of the Board had violated Article 14 and 16 of the Constitution. The High Court rejected both these ground accepted the plea of respondent no. 1 and quashed the order of promotion of respondents 4 to 14 and issued a direction to the Board to consider promotions afresh after taking into account the claims of respondent no. 1. The Board has now come up in appeal to this Court by Special leave against this order of the High Court. Apart from the Board the State of Rajasthan and the Chief Engineer & Technical Member of the Rajasthan State Electricity Board Jaipur were also impleaded as opposite parties in the writ petition and they are respondents 2 and 3 in this appeal. … On the second point that the Board cannot be held to be “State” within its meaning in Art. 12 of the Constitution, Mr. Desai urged that, on the face of it, the Board could not be held to be covered by the authorities named therein, viz., the Government and Parliament of India and the Government and the Legislature of each of the States and local authorities, and the expression “other authorities”, if read ejusdem generis with those named, cannot cover the Board which is a body corporate having a separate existence and has been constituted primarily for the purpose of carrying on commercial activities. In support of his proposition that the expression ‘other authorities’ should be interpreted ejusdem generis, he relied on a decision of the Madras High Court in University of Madras v. Shantha Bai, AIR 1954 Mad. 67. The High Court, considering the question whether a University can be held to be local or other authority as defined in Art. 12, held: These words must be construed ‘ejusdem generis’ with Government or Legislature, and, so construed, can only mean authorities exercising governmental functions. They would not include persons natural or juristic who cannot be regarded as instrumentalities of the Government. The University of Madras is a body corporate created by Madras Act VII of 1923. It is not charged with the execution of any governmental functions; its purpose is purely to promote education. Though section 44 of the Act provides for financial contribution by the local

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Government, the University is authorised to raise its own funds of income from fees, endowments and the like. It is a State-aided institution, but it is not maintained by the State.

In B. W. Devadas v. Selection Committee for Admission of Students to the Karnatak Engineering College, AIR 1964 Mys. 6, the High Court of Mysore similarly held: The term ‘authority’ in the ordinary dictionary sense may comprise not merely a person or a group of persons exercising governmental power, but also any person or group of persons who, by virtue of their position in relation to other person or persons, may be able to impose their will upon that other person or persons. But there is an essential difference between a political association of persons called ‘the State’ giving rise to political power connoted by the well-known expression 'imperative law' and a non-political association of persons for other purposes by contract, consent or similar type of mutual understanding related to the common object of persons so associating themselves together giving rise to a power which operates not in the manner in which imperative law operates, but by virtue of its acceptance by such associating persons based upon contract, consent or mutual understanding.

Proceeding further, the Court held: The term ‘authorities’ occurring in Art. 12 could only mean a person or a group of persons who exercise the legislative or executive functions of a State or through whom or through the instrumentality of whom the State exercises its legislative or executive power.

The latest case on the point cited by Mr. Desai is the decision of the Punjab High Court in Krishan Gopal Ram Chand Sharma v. Punjab University, AIR 1966 P&H 34 where the decision given in the case of University of Madras, AIR 1954 Mad. 67 was followed and the principle laid down therein was approved and applied. On the basis of these decisions, and the principles laid down therein, it was urged that an examination of the provisions of the Electricity Supply Act will show that the Board is an autonomous body which cannot be held to be functioning as an agent of the Executive Government and, consequently, it should be held that it is not “State” within the meaning of Art. 12 of the Constitution. In our opinion, the High Courts fell into an error in applying the principle of ejusdem generis when interpreting the expression “other authorities” in Art. 12 of the Constitution, as they overlooked the basic principle of interpretation that, to invoke the application of ejusdem generis rule, there must be a distinct genus or category running through the bodies already named. Craies on Statute Law summarises the principle as follows: The ejusdem generis rule is one to be applied with caution and not pushed too far... To invoke the application of the ejusdem generis rule there must be a distinct genus or category. The specific words must apply not to different objects of a widely differing character but to something which can be called a class or kind of objects. Where this is lacking, the rule cannot apply, but the mention of a single species does not constitute a genus.

Maxwell in his book on Interpretation of Statutes explained the principle by saying: But the general word which follows particular and specific words of the same nature as itself takes its meaning from them, and is presumed to be restricted to the same genus as those words.... Unless there is a genus or category, there is no room for the application of the ejusdem generis doctrine.

In United Towns Electric Co., Ltd, v. Attorney-General for Newfoundland, (1939) 1 All E.R. 423, the Privy Council held that, in their opinion, there is no room for the application of the principle of ejusdem generis in the absence of any mention of a genus, since the mention of a single species – for example, water rates - does not constitute a genus. In Art. 12 of the Constitution, the bodies specifically named are the Executive Governments of the Union and the States, the Legislature of the Union and the States, and local authorities. We are unable to find any common genus running through these named bodies,

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nor can these bodies be placed in case single on any rational basis. The doctrine of ejusdem generis could not therefore, be applied to the interpretation of the expression “other authorities” in this article. The meaning of the word “authority” given in Webster’s Third New International Dictionary, which can be applicable, is “a public administrative agency or corporation having quasi-governmental powers and authorised to administer a revenue-producing public enterprise.” This dictionary meaning of the word “authority” is clearly wide enough to include all bodies created by a statute on which powers are conferred to carry out governmental or quasi-governmental functions. The expression “other authorities” is wide enough to include within it every authority created by a statute and functioning within the territory of India, or under the control of the Government of India; and we do not see any reason to narrow down this meaning in the context in which the words “other authorities” are used in Art. 12 of the Constitution. … [T]he expression “other authorities” in Art. 12 will include all constitutional or statutory authorities on whom powers are conferred by law. It is not at all material that some of the powers conferred may be for the purpose of carrying on commercial activities. Under the Constitution, the State is itself envisaged as having the right to carry on trade or business as mentioned in Art, 19(1)(g). In Part IV, the State has been given the same meaning as in Art. 12 and one of the Directive Principles laid down in Art. 46 is that the State shall promote with special care the educational and economic interests of the weaker sections of the people. The State, as defined in Art. 12, is thus comprehended to include bodies created for the purpose of promoting the educational and economic interests of the people. The State, as constituted by our Constitution, is further specifically empowered under Art. 298 to carry on any trade or business. The circumstance that the Board under the Electricity Supply Act is required to carry on some activities of the nature of trade or commerce does not, therefore, give any indication that the Board must be excluded from the scope of the word “State” as used in Art. 12. On the other hand, there are provisions in the Electricity Supply Act which clearly show that the powers conferred on the Board include power to give directions, the disobedience of which is punishable as a criminal offence. In [these] circumstances, we do not consider it at all necessary to examine the cases cited by Mr. Desai to urge before us that the Board cannot be held to be an agent or instrument of the Government. The Board was clearly an authority to which the provisions of Part III of the Constitution were applicable. We have already held earlier that, in dealing with the case of respondent No. 1, the Board did not treat him on terms of equality with respondents Nos. 4 to 14 and did not afford to him the opportunity for being considered for promotion to which he was entitled on that basis. The High Court was, therefore, right in allowing the petition of respondent No. 1. The appeal is dismissed with costs. Justice Shah (for himself, Partly Concurring) I agree with the order proposed by Bhargava, J. The Board is an authority invested by statute with certain sovereign powers of the State. It has the power of promoting coordinated development, generation, supply and distribution of electricity and for that purpose to make, alter, amend and carry out schemes under Ch. V of the Electricity (Supply) Act, 1948, to engage in certain incidental undertakings; to organise and carry out power and hydraulic surveys; to conduct investigation for the improvement of the methods of transmission; to close down generating stations; to compulsorily purchase generating stations, undertakings, mains and transmission lines; to place wires, poles, brackets, appliances, apparatus, etc; to fix grid tariff; to issue directions for securing the maximum economy and efficiency in the operation of electricity undertakings; to make rules and regulations for carrying out the purposes of the Act; and to issue directions under certain provisions of the Act and to enforce compliance with those directions. The Board is also invested by statute with extensive powers of control over electricity undertakings. The power to make rules and regulations and to administer the Act is in substance the sovereign power of the State delegated to the Board. The Board is, in my judgment, “other authority” within the meaning of Art. 12 of the Constitution.

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I am unable, however, to agree that every constitutional or statutory authority on whom powers are conferred by law is “other authority” within the meaning of Art. 12. The expression “authority” in its etymological sense means a body invested with power to command or give an ultimate decision, or enforce obedience, or having a legal right to command and be obeyed. The expression “State” is defined in Art. 12 for the purpose of Part III of the Constitution. Article 13 prohibits the State from making any legislative or executive direction which takes away or abridges the rights conferred by Part III and declares any law or executive direction in contravention of the injunction void to the extent of such contravention. In determining what the expression “other authority” in Art. 12 connotes, regard must be had not only to the sweep of fundamental rights over the power of the authority, but also to the restrictions which may be imposed upon the exercise of certain fundamental rights (e.g., those declared by Art. 19) by the authority. Fundamental rights within their allotted fields transcend the legislative and executive power of the sovereign authority. But some of the important fundamental rights are liable to be circumscribed by the imposition of reasonable restrictions by the State. The true content of the expression “other authority” in Art. 12 must be determined in the light of this dual phase of fundamental rights. In considering whether a statutory or constitutional body is an authority within the meaning of Art. 12, it would be necessary to bear in mind not only whether against the authority, fundamental rights in terms absolute are intended to be enforced, but also whether it was intended by the Constitution-makers that the authority was invested with the sovereign power to impose restrictions on very important and basic fundamental freedoms. In my judgment, authorities constitutional or statutory invested with power by law but not sharing the sovereign power do not fall within the expression “State” as defined in Art. 12. Those authorities which are invested with sovereign power i.e., power to make rules or regulations and to administer or enforce them to the detriment of citizens and others fall within the definition of “State” in Art. 12, and constitutional or statutory bodies which do not share that sovereign power of the State are not, in my judgment, “State” within the meaning of Art. 12 of the Constitution. Appeal dismissed.

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UNIT 6 – THE GENERAL CLAUSES ACT CONSTITUTION AND THE GENERAL CLAUSES ACT CASE – KESHAVAN MADHAVA MENON V. STATE OF BOMBAY AIR 1951 SC 128 Bench – Chief Justice H. L. Kania, Justices S. Fazl Ali, Patanjali Sastri, M. C. Mahajan, B. K. Mukherjea, S. R. Das & N. Chandrasekhara Aiyar Justice Das (for himself) [majority opinion; Justice Mahajan wrote a separate concurring opinion] [Justice Fazl Ali wrote a dissenting opinion in which Justice Mukherjea concurred] At all material times the petitioner, who is the appellant before us, was the Secretary of People’s Publishing House, Ltd., a company incorporated under the Indian Companies Act with its registered office at 190B, Khetwadi Main Road in Bombay. In September, 1949, a pamphlet entitled “Railway Mazdooron ke khilaf Nai Zazish” is alleged to have been published in Bombay by the petitioner as the secretary of that company. Learned counsel for the petitioner states that the pamphlet was published as a “book” within the meaning of s. 1 of the Press and Registration of Books Act (XXV of 1867) and that the provisions of that Act had been duly complied with. The Bombay Government authorities, however, took the view that the pamphlet was a “news sheet” within the meaning of s. 2(6) of the Indian Press (Emergency Powers) Act, 1931, and that as it had been published without the authority required by s. 15(1) of that Act, the petitioner had committed an offence punishable under s. 18(1) of the same Act. A prosecution under that Act was accordingly started against the petitioner in the Court of the Chief Presidency Magistrate, Bombay, and was registered as Case No. 1102/P of 1949. During the pendency of the proceedings the Constitution of India came into force on 26 January 1950. On 03 March 1950, the petitioner filed a written statement submitting, inter alia, that the definition of “news sheet” as given in s. 2(6) of the Indian Press (Emergency Powers) Act, 1931, and ss. 15 and 18 thereof were ultra vires and void in view of art. 19(1)(a) read with art. 13 and that the hearing of the case should be stayed till the High Court decided that question of law. This was followed up by a petition filed in the High Court on 07 March 1950, under art. 228 of the Constitution, praying that the record of Case No. 1102/P of 1949 be sent for, that it be declared that ss. 15 and 18 read with s. 2(6) and (10), in so far as they create liability for restrictive measure for a citizen, are ultra vires of art. 19 (1)(a) and are, therefore, void and inoperative and that the petitioner be ordered to be acquitted. During the pendency of this petition the Chief Presidency Magistrate on March 23, 1950, framed a charge against the petitioner under s. 18 of the Press (Emergency Powers) Act. The petition under art. 228 was heard on April 12, 1950, by a Bench of the Bombay High Court consisting of Chagla, C.J. and Bavdekar and Shah, JJ. Two questions were raised before the Bench, namely: (1) Whether ss. 15(1) and 18(1) read with the definitions contained in ss. 2(6) and 2(10) of the Indian Press (Emergency Powers) Act, 1931, were inconsistent with art. 19(1)(a) read with cl. (2) of that article?; and (2) Assuming that they were inconsistent, whether the proceedings commenced u/s. 18(1) of that Act before the commencement of the Constitution could nevertheless be proceeded with? The High Court considered it unnecessary to deal with or decide the first question and disposed of the application only on the second question. The High Court took the view that the word “void” was used

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in art. 13(1) in the sense of “repealed” and that consequently it attracted s. 6 of the General Clauses Act, which Act by art. 367 was made applicable for the interpretation of the Constitution. The High Court, therefore, reached the conclusion that proceedings under the Indian Press (Emergency Powers) Act, 1931, which were pending at the date of the commencement of the Constitution were not affected, even if the Act were inconsistent with the fundamental rights conferred by art. 19 (1)(a) and as such became void under art. 13(1) of the Constitution after January 26, 1950. The High Court accordingly answered the second question in the affirmative and dismissed the petitioner’s application. The petitioner has now come up on appeal before us on the strength of a certificate granted by the High Court under art. 132 (1) of the Constitution Learned counsel appearing in support of this appeal urged that the Indian Press (Emergency Powers) Act, 1931, was one of the many repressive laws enacted by an alien Government with a view to stifle the liberty of the Indian subjects and particularly of the Indian Press; that, with the advent of independence the people of India began to breathe freely and by the Constitution which they gave unto themselves they took care to guarantee to themselves the fundamental rights of free citizens of a democratic republic and that art. 13(1) of that Constitution brushed aside all vestiges of subordination which the tyranny of the alien rulers had imposed upon them and declared all laws inconsistent with the fundamental rights to be void as if they had never been passed and had never existed. It was, therefore, against the spirit of the Constitution, argued the learned counsel, that a free citizen of India should still continue to be persecuted under such a retro grade law which, being inconsistent with the fundamental rights, must be declared to be void. Learned counsel urged that it was not necessary for him to contend that such inconsistent laws became void ab initio or that all past and closed transactions could be reopened but he contended that on and from 26 January 1950, when the Constitution came into force such inconsistent laws which became void could not be looked at for any purpose and far less could they be utilised for the purpose of framing a charge or punishing a free citizen. As the void law cannot be utilised any longer, the pending prosecutions, according to learned counsel, must fall to the ground. To permit pending proceedings under a law which, after the commencement of the Constitution had become void, to proceed further, after the Constitution has taken effect, is to prolong the efficacy of the law notwithstanding that it has become void on and from the date the Constitution came into force and that is against the spirit of the Constitution. An argument founded on what is claimed to be the spirit of the Constitution is always attractive, for it has a powerful appeal to sentiment and emotion; but a court of law has to gather the spirit of the Constitution from the language of the Constitution. What one may believe or think to be the spirit of the Constitution cannot prevail if the language of the Constitution does not support that view. Art. 372(2) gives power to the President to adapt and modify existing laws by way of repeal or amendment. There is nothing to prevent the President, in exercise of the powers conferred on him by that article, from repealing, say the whole or any part of the Indian Press (Emergency Powers) Act, 1931. If the President does so, then such repeal will at once attract s. 6 of the General Clauses Act. In such a situation all prosecutions under the Indian Press (Emergency Powers) Act, 1931, which were pending at the date of its repeal by the President would be saved and must be proceeded with notwithstanding the repeal of that Act unless an express provision was otherwise made in the repealing Act. It is therefore clear that the idea of the preservation of past inchoate rights or liabilities and pending proceedings to enforce the same is not foreign or abhorrent to the Constitution of India. We are, therefore, unable to accept the contention about the spirit of the Constitution as invoked by the learned counsel in aid of his plea that pending proceedings under a law which has become void cannot be proceeded with. Further, if it is against the spirit of the Constitution to continue the pending prosecutions under such a void law, surely it should be equally repugnant to that spirit that men who have already been convicted under such repressive law before the Constitution of India came into force should continue to rot in jail. It is, therefore, quite clear that the court should construe the language of art. 13(1) according to the

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established rules of interpretation and arrive at its true meaning uninfluenced by any assumed spirit of the Constitution. Art. 13 (1) with which we are concerned for the purposes of this application is in these terms: All laws in force in the territory of India immediately before the commencement of this Constitution, in so far as they are inconsistent with the provisions of this Part, shall, to the extent of such inconsistency, be void.

It will be noticed that all that this clause declares is that all existing laws, in so far as they are inconsistent with the provisions of Part III shall, to the extent of such inconsistency, be void. Every statute is prima facie prospective unless it is expressly or by necessary implications made to have retrospective operation. There is no reason why this rule of interpretation should not be applied for the purpose of interpreting our Constitution. We find nothing in the language of art. 13(1) which may be read as indicating an intention to give it retrospective operation. On the contrary, the language clearly points the other way. The provisions of Part III guarantee what are called fundamental rights. Indeed, the heading of Part III is “Fundamental Rights”. These rights are given, for the first time, by and under our Constitution. Before the Constitution came into force there was no such thing as fundamental rights. What art. 13(1) provides is that all existing laws which clash with the exercise of the fundamental rights (which are for the first time created by the Constitution) shall to that extent be void. As the fundamental rights became operative only on and from the date of the Constitution the question of the inconsistency of the existing laws with those rights must necessarily arise on and from the date those rights came into being. It must follow, therefore, that art. 13(1) can have no retrospective effect but is wholly prospective in its operation. After this first point is noted, it should further be seen that art. 13 (1) does not in terms make the existing laws which are inconsistent with the fundamental rights void ab initio or for all purposes. On the contrary, it provides that all existing laws, in so far as they are inconsistent with the fundamental rights, shall be void to the extent of their inconsistency. They are not void for all purposes but they are void only to the extent they come into conflict with the fundamental rights. In other words, on and after the commencement of the Constitution no existing law will be permitted to stand in the way of the exercise of any of the fundamental rights. Therefore, the voidness of the existing law is limited to the future exercise of the fundamental rights. Art. 13(1) cannot be read as obliterating the entire operation of the inconsistent laws, or to wipe them out altogether from the statute book, for to do so will be to give them retrospective effect which, we have said, they do not possess. Such laws exist for all past transactions and for enforcing all rights and liabilities accrued before the date of the Constitution. Learned counsel for the appellant has drawn our attention to arts. 249(3), 250, 357, 358 and 369 where express provision has been made for saving things done under the laws which expired. It will be noticed that each of those articles was concerned with expiry of temporary statutes. It is well known that on the expiry of a temporary statute no further proceedings can be taken under it, unless the statute itself saved pending proceedings. If therefore, an offence had been committed under a temporary statute and the proceedings were initiated but the offender had not been prosecuted and punished before the expiry of the statute, then, in the absence of any saving clause, the pending prosecution could not be proceeded with after the expiry of the statute by efflux of time. It was on this principle that express provision was made in the several articles noted above for saving things done or omitted to be done under the expiring laws referred to therein. As explained above, art. 13(1) is entirely prospective in its operation and as it was not intended to have any retrospective effect there was no necessity at all for inserting in that article any such saving clause. The effect of art. 13(1) is quite different from the effect of the expiry of a temporary statute or the repeal of a statute by a. subsequent statute. As already explained, art. 13(1) only has the effect of nullifying or rendering all inconsistent existing laws ineffectual or nugatory and devoid of any

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legal force or binding effect only with respect to the exercise of fundamental rights on and after the date of the commencement of the Constitution. It has no retrospective effect and if, therefore, an act was done before the commencement of the Constitution in contravention of the provisions of any law which, after the Constitution, becomes void with respect to the exercise of any of the fundamental rights, the inconsistent law is not wiped out so far as the past act is concerned, for, to say that it is, will be to give the law retrospective effect. There is no fundamental right that a person shall not be prosecuted and punished for an offence committed before the Constitution came into force. So far as the past acts are concerned the law exists, notwithstanding that it does not exist with respect to the future exercise of fundamental rights. We, therefore, agree with the conclusion arrived at by the High Court on the second question, although on different grounds. In view of that conclusion, we do not consider it necessary to examine the reasons of the High Court for its conclusion. In our opinion, therefore, this appeal fails, and is dismissed. Justice Fazl Ali (dissenting, for Himself; Justice Mukherjea concurring) I regret that I cannot agree with the view which the majority of my colleagues are inclined to take in this case. … One of the points discussed elaborately by the learned counsel appearing for the parties in the course of their arguments was as to what was the effect upon pending proceedings when an Act was repealed or when a temporary Act expired. In Craies on Statute Law, the effect of the expiry of a temporary Act is stated to be as follows: As a general rule, and unless it contains some special provision to the contrary, after a temporary Act has expired no proceedings can be taken upon it, and it ceases to have any further effect. Therefore, offences committed against temporary Acts must be prosecuted and punished before the Act expires, and as soon as the Act expires any proceedings which are being taken against a person will ipso facto terminate.

This statement of law by Craies was referred to with approval and adopted by the Federal Court in J. K. Gas Plant Manufacturing Co v. King Emperor, (1830) 6 Bing. 576. As to the effect of the repeal of an Act, the following passage from Craies book seems to sum up the legal position as it obtained in England before the enactment of the Interpretation Act of 1889: “When an Act of Parliament is repealed,” said Lord Tenterden in Surtees v. Ellison, [1947] F.C.R. 141 at 166, “it must be considered (except as to transactions past and closed) as if it had never existed. That is the general rule.” Tindal C.J. states the exception more widely. He says (in Kay v. Goodwin): “The effect of repealing a statute is to obliterate it as completely from the records of the Parliament as if it had never been passed; and it must be considered as a law that never existed except for the purpose of those actions which were commenced, prosecuted and concluded whilst it was an existing law.”

Again, Crawford in his book on Statutory Construction dealing with the general effect of the repeal of an Act states the law in America to be as follows: A repeal will generally, therefore, divest all inchoate rights which have arisen under the repealed statute, and destroy all accrued causes of action based thereon. As a result, such a repeal, without a saving clause, will destroy any proceedings whether not yet begun, or whether pending at the time of the enactment of the repealing Act, and not already prosecuted to a final judgment so as to create a vested right.

In a footnote relating to the cases which the learned author cites in support of the above proposition, he adds: See Cleveland, etc., R. Co. v. Mumford where the repeal of a statute during the trial prevented a judgment from being rendered. Similarly, there can be no legal conviction for an offence, unless the act be contrary to law at the time it is committed; nor can there be a judgment, unless the law is in force at the time of the indictment and

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judgment. If the law ceases to operate, by its own limitation or by a repeal, at any time before judgment, no judgment can be given. Hence, it is usual in every repealing law to make it operate prospectively only, and to insert a a saving clause, preventing the retroactive operation of the repeal and continuing the repealed law in force as to all pending prosecutions, and often as to all violations of the existing law already committed.

The author then proceeds to quote the following passage from Wall v. Chesapeake & Ohio Ry., Company 125 N.E. 20: It is well settled that if a statute giving a special remedy is repealed without a saving clause in favour of pending suits all suits must stop where the repeal finds them. If final relief has not been granted before the repeal went into effect, it cannot be after. If a case is appealed, and pending the appeal the law is changed, the appellate court must dispose of the case under the law in force when its decision was rendered. The effect of the repeal is to obliterate the statute repealed as completely as if it bad never been passed, and it must be considered as a law which never existed, except for the purposes of those actions or suits which were commenced, prosecuted and concluded while it was an existing law. Pending judicial proceedings based upon a statute cannot proceed after its repeal. This rule holds true until the proceedings have reached a final judgment in the court of last resort, for that court, when it comes to announce its decision, conforms it to the law then existing, and may therefore reverse a judgment which was correct when pronounced in the subordinate tribunal from whence the appeal was taken, if it appears that pending the appeal a statute which was necessary to support the judgment of the lower court has been withdrawn by an absolute repeal.

It is well known that formerly the practice in England used to be to insert in most of the repealing statutes a clause saving anything duly done or suffered under the repealed statutes and any pending legal proceeding or investigations. Ultimately, to dispense with the necessity of having to insert a saving clause in almost every repealing Act, s. 38(2) was inserted in the Interpretation Act, 1889, which provides that a repeal, unless the contrary intention appears, does not affect the previous operation of the repealed enactment or anything duly done or suffered under it and any investigations, legal proceedings or remedies may be instituted, continued or enforced in respect of rights, liabilities and penalties under the ;repealed Act, as if the repealing Act had not been passed. Crawford in his book to which I have referred adverts in these words to a similar difficulty which was experienced in America and to the manner in which it has been met: Due to the numerous troublesome problems which constantly arose with the repeal of statutes, as well as to the numerous cases where hardship was caused, statutes have been enacted in several States expressly providing that the repeal of a statute shall not affect any rights, causes of action, penalties, forfeitures, and pending suits, accrued or instituted under the repealed statute. In India, the earliest attempt that was made to guard against the normal legal effect of a repeal is to be found in s. 6 of Act I of 1868. This provision was further elaborated by s. 6 of the General Clauses Act of 1897 which is on the same lines as s. 38(2) of the Interpretation Act of England. The position therefore now in India as well as in England is that a repeal has not the drastic effect which it used to have before the enactment of the Interpretation Act in England or the General Clauses Act in this country. But this is due entirely to the fact that an express provision has been made in those enactments to counteract that effect. Hence, in those cases which are not covered by the language of the General Clauses Act, the principle already enunciated will continue to operate. The learned Attorney General had to concede that it was doubtful whether s. 6 of that Act is applicable where there is a repeal by implication, and there can be no doubt that the law as to the effect of the expiry of a temporary statute still remains as stated in the books, because s. 6 of the General Clauses Act and s. 38(2) of the Interpretation Act have no application except where an Act is repealed. It should be remembered that the soundness of the law which has been consistently applied to cases governed by statutes which have ceased to be in force, by reason of having been repealed or having expired, has never been questioned, and it cannot be brushed aside as if it embodied some archaic or obsolete rule peculiar only to the

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common law of England. It is the law which has been enunciated by eminent Judges both in England and in America and is based on good sense and reason. I shall now proceed to consider what would be the correct legal position, when a provision of an existing law is held to be void under art. 13(1) of the Constitution. From the earlier proceedings before the Constituent Assembly, it appears that in the original draft of the Constitution, the words “shall stand abrogated” were used instead of “shall be void,” in art. 13 (1), and one of the questions directly before the Assembly was what would be the effect of the use of those words upon pending proceedings and anything duly done or suffered under the existing law. Ultimately, the article emerged in the form in which it stands at present, and the words “shall stand abrogated” were replaced by the words “shall be void.” If the words “stand abrogated” had been there, it would have been possible to argue that those words would have the same effect as repeal and would attract s. 6 of the General Clauses Act, but those words have been abandoned and a very strong expression, indeed the strongest expression which could be used, has been used in their place. The meaning of the word “void” is stated in Black’s Law Dictionary (3rd Edn.) to be as follows: null and void; ineffectual; nugatory; having no legal force or binding effect;unable in law to support the purpose for which it was intended; nugatory and ineffectual so that nothing can cure it; not valid.

A reference to the Constitution will show that the framers thereof have used the word “repeal” wherever necessary (see articles 252, 254, 357, 372 and 395). They have also used such words as “invalid” (see articles 245, 255 and 276), “cease to have effect” (see arts. 358 and 372),' “shall be inoperative”, etc. They have used the word “void” only in two articles, these being art. 13(1) and article 154, and both these articles deal with cases where a certain law is repugnant to another law to which greater sanctity is attached. It further appears that where they wanted to save things done or omitted to be done under the existing law, they have used apt language for the purpose; see for example articles 249, 250, 357, 358 and 369. The thoroughness and precision which the framers of the Constitution have observed in the matters to which reference has been made, disinclines me to read into art. 13 (1) a saving provision of the kind which we are asked to read into it. Nor can I be persuaded to hold that treating an Act as void under art. 13 (1) should have a milder effect upon transactions not past and closed than the repeal of an Act or its expiry in due course of time. In my opinion, the strong sense in which the word “void” is normally used and the context in which it has been used are not to be completely ignored. Evidently, the framers of the Constitution did not approve of the laws which are in conflict with the fundamental rights, and, in my judgment, it would not be giving full effect to their intention to hold that even after the Constitution has come into force, the laws which are inconsistent with the fundamental rights will continue to be treated as good and effectual laws in regard to certain matters, as if the Constitution had never been passed. How such a meaning can be read into the words used in art. 13(1), it is difficult for me to understand. There can be no doubt that art. 13 (1) will have no retrospective operation, and transactions which are past and closed, and rights which have already vested, will remain untouched. But with regard to inchoate matters which were still not determined when the Constitution came into force, and as regards proceedings whether not yet begun, or pending at the time of the enforcement of the Constitution and not yet prosecuted to a final judgment, the very serious question arises as to whether a law which has been declared by the Constitution to be completely ineffectual can yet be applied. On principle and on good authority, the answer to this question would appear to me to be that the law having ceased to be effectual can no longer be applied. In R. v. Mawgan a presentment as to the non-repair of a highway had been made under 13 Geo. 3, c. 78, s. 24, but before the case came on to be tried, the Act was repealed. In that case, Lord Denman C.J. said: If the question had related merely to the presentment, that no doubt is complete. But du loquimur, we have lost the power of giving effect to anything that takes place under that proceeding.

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And Littledale J. added: I do not say that what is already done has become bad, but that no more can be done.

In my opinion, this is precisely the way in which we should deal with the present case. It was argued at the Bar that the logical outcome of such a view would be to hold that all the convictions already recorded and all the transactions which are closed, should be reopened, but, in my opinion, to argue on these lines is to overlook what has been the accepted law for centuries, namely, that when a law is treated as dead, transactions which are past and closed cannot be revived and actions which were commenced, prosecuted and concluded whilst the law was operative cannot be reopened. In the course of the arguments, a doubt was also raised as to what would be the effect in the case of an appeal pending when the Constitution came into force, from a conviction already recorded before the 26th January, 1950. The law applicable to such a situation is well known and has been correctly summed up by Crawford in these words: Pending judicial proceedings based upon a statute cannot proceed after its repeal. The rule holds true until the proceedings have reached a final judgment in the court of last resort, for that court, when it comes to announce its decision, conforms it to the law then existing, and may therefore reverse a judgment which was correct when pronounced in the subordinate tribunal from whence the appeal was taken, if it appears that pending the appeal a statute which was necessary to support the judgment of the lower court has been withdrawn by an absolute repeal. I think I should at this stage deal briefly with two points which were raised in the course of the arguments in support of the opposite view. It was urged in the first place that without there being a saving clause to govern art. 13(1), it can be so construed as to permit offences committed prior to the 26 January, 1950, to be punished. The argument has been put forward more or less in the following form. The law which is said to be in conflict with the fundamental rights was a good law until the 25 January, and, since art. 13(1) is to be construed prospectively, and not retrospectively, every act constituting an offence under the old law remains an offence and can be punished even after the 26 January. It seems to me that the same argument could be urged with reference to matters which constituted offences under a repealed Act or a temporary Act which has expired. But such an argument has never succeeded. The real question is whether a person who has not been convicted before the Act has ceased to exist or ceased to be effectual can still be prosecuted under such an Act. The answer to this question has always been in the negative, and I do not see why a different answer should be given in the case of an Act which has become void, i.e., which has become so ineffectual that it cannot be cured. The second argument which also has failed to impress me is that if s. 6 of the General Clauses Act does not in terms apply, the principle underlying that section should be applied. The answer to this argument is that the Legislature in its wisdom has confined that section to a very definite situation, and, though it was open to it to make the section more comprehensive and general, it has not done so. It is well known that situations similar to those which arise by reason of the repeal of an Act have arisen in regard to Acts which have expired or Acts which have been declared to be void, and, though such situations must have been well known to the Legislature, they have not been provided for. In these circumstances, I do not see how the very clear and definite provision can be enlarged in the manner in which it is attempted to be enlarged.

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Besides, I have not come across any case in which the principle underlying s. 38 (2) of the Interpretation Act or s. 6 of the General Clauses Act has been invoked or applied. In the present case, we have to look at the state of the law at the time when the question arises as to whether a person has committed any offence. If we find that the law which made the act an offence has become completely ineffectual and nugatory, then neither can a charge be framed nor can the accused person be convicted. In my opinion, if the assumption on which the High Court has proceeded is correct, the appellant is entitled to a declaration that he cannot be convicted for the offence of which he is accused.

REPEAL AND SAVINGS CLAUSE CASE STUDY 1 – STATE OF ORISSA V. TULLOCH & CO. AIR 1964 SC 1284 Bench – Chief Justice B. P. Sinha, Justices K. Subba Rao, R. Dayal, N. R. Ayyangar & J. R. Mudholkar Justice Ayyangar (for the Court) These two appeals … raise for consideration the question regarding the continued operation of the Orissa Mining Areas Development Fund Act (Orissa Act 27 of 1952) and the continued exigibility of the fees leviable from mine-owners under the said enactment. Each of the respondents in the two appeals filed a petition before the High Court of Orissa under Art. 226 of the Constitution praying for the issue of a writ of mandamus restraining the two appellants – The State of Orissa and the Administrator, Orissa Mining Areas Development Fund, from applying the provisions of the Orissa Mining Areas Development Fund Act (Orissa Act 27 of 1952) to the respective respondents and to direct the two appellants to cancel the notices of demand requiring the petitioners to pay the fees assessed under the said Act issued by the second appellant and for an injunction etc. restraining them from taking any steps in pursuance of the said notice of demand. The facts giving rise to these petitions were briefly these. … The respondent Tulloch & Co. Private Ltd. – a company incorporated under the Indian Companies Act, works a manganese mine in the State of Orissa under a lease granted by that State under the provision of the Mines & Minerals (Development & Regulation) Act, 1948 (Central Act 53 of 1948), and the rules made thereunder. While the respondent was thus working these mines, the State Legislature of Orissa passed an Act called the Orissa Mining Areas Development Fund Act 1952 (which for shortness we shall refer to as “the Orissa Act”) where under certain areas were constituted as “mining areas” and under the powers Conferred under that enactment the State Government was empowered to levy a fee on a percentage of the value of the mined ore at the pit’s mouth, the collections being intended for the development of the “mining areas” in the State. The necessary steps for bringing these provisions into operation were taken by the State Government who thereafter made demands on the respondent on August 1, 1960 for the payment of the said fees. The present appeal is concerned with the fees which became due for the period July, 1957 to March 1958. When a demand was made for the sum the respondent filed petition 142 of 1960 before the High Court impugning the legality of the demand and claimed the reliefs we have set out earlier. The learned judges allowed the Writ Petition and issued directions to the second appellant in terms of the prayer in the petition. As the grounds on which the said demand of the fees was impugned raised substantial questions touching the interpretation of the Constitution the appellants applied to the Court for a certificate of fitness under Art. 132(1) and (2) and this having been granted, the appeals are now before us. We shall now proceed to set out briefly the grounds upon which the learned Judges of the High Court allowed the petition of the respondents. Stated shortly, the contention which the learned judges of the

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High Court accepted was that the Orissa Act had been rendered ineffective or superseded by a Central enactment – The Mines and Minerals (Regulation and Development) Act, 1957 (Act 67 of 1957), hereinafter called the Central Act, which was brought into force as and from June 1, 1953. The Orissa Act had been enacted by virtue of the legislative power conferred by entry 23 of the State Legislative List reading “Regulation of mines and mineral development subject to the provisions of List I with reference to regulation and development under the control of the Union”. The legislative entry under which the later Central Act was enacted was item 54 of the Union List which ran “Regulation of mines and mineral development to the extent to which such regulation and development under the control of the Union is declared by Parliament by law to be expedient in the public interest”. The Central Act carried in its second section a declaration envisaged by the last words of the entry. Based on these facts the argument to which the learned Judges acceded was that on the coming into force of the Central Act the Orissa Act ceased to be operative by reason of the withdrawal of legislative competence by force of the entry in the State List being subject to the Parliamentary declaration and the law enacted by Parliament. They held that for this reason the Orissa Act should be deemed to be non-existent as and from June 1, 1958 for every purpose, with the consequence that there was lack of power to enforce and realise the demands for the payment of the fee at the time when the demands were issued and were sought to be enforced. It is the correctness of this judgment that is challenged by the State in these appeals. … It does not need much argument to realise that to the extent to which the Union Government had taken under “its control” “the regulation and development of minerals” so much was withdrawn from the ambit of the power of the State Legislature under Entry 23 and legislation of the State which had rested on the existence of power under that entry would to the extent of that “control” be superseded or be rendered ineffective, for here we have a case not of mere repugnancy between the provisions of the two enactments but of a denudation or deprivation of State legislative power by the declaration which Parliament is empowered to make and has made. It would, however, be apparent that the States would lose legislative competence only to the “extent to which regulation and development under the control of the Union has been declared by Parliament to be expedient in the Public interest”. The crucial enquiry has therefore to be directed to ascertain this “extent” for beyond it the legislative power of the State remains unimpaired. As the legislation by the State is in the case before us the earlier one in point of time, it would be logical first to examine and analyse the State Act and determine its purpose, width and scope and the area of its operation and then consider to what " extent" the Central Act cuts into it or trenches on it. The object of the Orissa Act, as disclosed by its preamble, was “the constitution of mining areas” and the creation of “a Mining Area Development Fund” in the State. S. 3 empowers the State Government to constitute and alter the limits of these “mining areas”. The object of the Constitution of these “mining areas” was inter alia the provision of amenities like communications, water-supply and electricity and “the better development of areas wherein any mine was situated” as well as “to prove for the welfare of the residents or workers in any such area within which persons employed in a mine or group of mines reside or work”. S. 4 is the provision empowering the State Government to levy a cess or a fee on all extracted minerals from any mines in “a mining area” with a limit, however, that the rate of such levy should not exceed 5 per cent of the value of the minerals at the pit’s mouth. The cess was to fall due quarterly every year oil 1st of January etc. and was to be computed on the value of the mineral extracted during the three months immediately preceding the dates specified. S. 5 makes provision for the Constitution of the “Development Fund” into which the cesses raised under s. 4 and other moneys received in that behalf might be paid and the section also specifies the purposes for which the Fund may be utilised. These were:

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5. (5) Without prejudice to the generality of the foregoing provisions, the fund may be utilised to defray – (a) the cost of measures for the benefit of labour and other persons residing or working in the mining areas directed towards; (i) the improvement of public health and sanitation, the prevention of disease, and the provision and improvement of medical facilities; (ii) the provision and improvement of watersupplies and facilities for washing; (iii) the provision and improvement of educational, facilities; (iv) the improvement of standards of living including housing and nutrition, the amelioration of social conditions and the provision of recreational facilities, and (v) the provision of roads, tramways and railways and such other communications; (b) the grant to any educational, Institute providing technical education in mining and such other allied subjects; (c) the grant to the Central Government, a local authority or the owner, agent or manager of a mine, in aid of any scheme approved by the State Government for any of the purposes of the Fund; (d) the cost of administering the Fund, including the allowances, if any, of members of the Advisory Committee constituted under s. 6 and the salaries, provident funds,, pensions, gratuity and allowances, if any, of officers appointed under s. 7 ; and (e) any other expenditure which the State Government may direct to be defrayed from the Fund.

… We shall now turn to the Central Act. The long title of the Act specifies that the twin purposes of the Act are: (1) the Regulation of mines, and (2) the development of minerals, both under the control of the Union. S. 2 we have already extracted. S. 3 contains definitions of terms used in the Act and thus may be omitted. Ss. 4 to 10 form a group headed ‘General Restrictions on Undertaking Prospecting and Mining Operations’ and relate to the rules and regulations under which prospecting licences and mining leases might be granted, the period for which they may be granted or renewed, the royalties and fees that would be payable on them etc. The next group consists of three sections. 10 to 12-dealing with the procedure for obtaining prospecting licences or mining leases in respect of land in which minerals vest in the Government. Ss. 13 to 17 are grouped under a caption which reads: Rules for regulating the grant of Prospecting Licences and Mining Leases

S. 13 with which-this group starts empowers the Central Government by notification, to make rules for regulating the grant of prospecting licences and mining leases in respect of minerals and for purposes connected therewith. Sub-s. (2) specifies in particular the matters for which such rules may provide and among them is head (i) reading: (i) The fixing and collection of dead rent, fines, fees or other charges and the collection of royalties in respect of – (i) prospecting licences, (ii) mining leases, (iii) minerals mined, quarried, excavated or collected

Head (m) runs: (m) the construction, maintenance and use of roads, power transmission lines, tramways, railways, aerial ropeways pipelines and the making of passages for water for mining purposes on any land comprised in a mining lease;

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Up to this point the Act was dealing with the first purpose viz. “the Regulation of mines”. S. 18 is the provision relating to the other object of the Act “The Development of minerals”. It would be necessary to set out in some detail some of the terms of this section. S. 18(1) enacts: 18. (1) It shall be the duty of the Central Government to take all such steps as may be necessary for the conservation and development of minerals in India, and for that purpose the Central Government may, by notification in the Official Gazette, make such rules as it thinks fit.

and 18(2): 18. (2) In particular, and without prejudice to the generality of the foregoing power, such rules may provide for all or any of the following matters, namely: (a) to (c) … (d) the development of mineral resources in any area;

S. 25 provides for the recovery of any rent, royalty, tax or other sum due to the Government under this Act or the rules made thereunder, and these are to be recovered in the same manner as an arrear of land revenue. The question for consideration is whether “the extent of control and regulation” provided by the Central Act takes within its fold the area or the subject covered by the Orissa Act. … Lastly, it was urged that the fees, recovery of which was being sought by the State were those which had accrued prior to June 1, 1958 and as the Central Act was not retrospective it could not have operation so as to invalidate the demands for the payment of the fee made on the respondents. It was pointed out that s. 4 of the Orissa Act imposed a charge on the mine owners for the payment of the fee. The liability to pay the fee accrued quarterly and we are concerned in this appeal with the fee due in respect of six quarters from September 30, 1956 to March 31, 1958. The demands for the fee due for these quarters was served on the respondents on August 1, 1960. It was therefore submitted that even on the footing that the Orissa Act stood repealed, superseded or nullified on the enactment of the Central Act, the right to recover the past arrears of fees which had accrued due previous to the repeal or nullification would not be abrogated. Pausing here it is necessary to mention that after the judgment was delivered by the High Court in the two petitions which are the subject of these two appeals before us, setting aside even the notice of demand, applications were made by the State Government to the High Court to review its judgment. The ground urged was that even on the footing that the Orissa Act of 1952 was superseded by Central Act 67 of 1957, the liabilities which had accrued to the State prior to June 1, 1958 could not be deemed to be wiped out because the Central Act was not retrospective and that the Court should modify its orders accordingly. The learned Judges, however, dismissed the applications for two reasons: (1) They had already granted certificates of fitness under Art. 132 of the Constitution and among the grounds raised by the State in its memoranda of appeal was this point about the effect of the Central Act on the continued enforceability of the dues and thus the point was pending consideration by this Court. (2) It had already been held by this Court in a decision in Keshavan Madhava Menon v. State of Bombay, [1951] SCR 228 to which we shall make reference, that when an earlier Act is superseded or rendered null under Art. 13 of the Constitution, nothing done under the old Act would survive except in respect of past and closed transactions, and the present case was thus covered. We shall now turn to the arguments urged before us in support of this contention. Learned Counsel for the State submitted that the supersession of the Orissa Act by the Central Act was neither more nor less than a repeal. If it thus was repeal, then s. 6 of the General Clauses Act 1897 was attracted. S. 6 reads:

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6. Where this Act, or any Central Act or Regulation made after the commencement of this Act, repeals any enactment hitherto made or hereafter to be made, then unless a different intention appears, the repeal shall not – … (b) affect the previous operation of any enactment so repealed or anything duly done or suffered thereunder; (c) affect any right, privilege, obligation or liability acquired, accrued or incurred under any enactment so repealed; or … (e) affect any investigation, legal proceeding or remedy in respect of any such right, privilege, obligation, liability, penalty, forfeiture or punishment as aforesaid; and any such investigation, legal proceeding or remedy may be instituted, continued or enforced … as if the repealing Act or Regulation had not been passed

and the argument on the interpretation of this section was twofold: (1) that the word ‘repeal’ used in the opening paragraph was not confined to express repeals but that the word was comprehensive enough to include cases of implied repeals; (2) alternatively it was submitted that even if the expression ‘repeal’ in s. 6 be understood as being confined to express repeals, still the principle underlying s. 6 was of general application and capable of being attracted to cases of implied repeals also. Before proceeding further it will be convenient to clear the ground by adverting to two matters: (1) The effect of a Central Act under its exclusive legislative power which covers the field of an earlier State Act which was competent and valid when enacted is not open to doubt. The Parliamentary enactment supersedes the State law and thus it virtually effects a repeal (2) The effect in law of a repeal, if it is not subject to a saving as is found in s. 6 of the General Clauses Act is also not a matter of controversy. Tindak C.J. stated this in Kay v. Goodwin, [1830] 6 Bing. 576 at p. 582: I take the effect of repealing a statute to be to obliterate it as completely from the records of the Parliament as if it had never been passed; and it must be considered as a law that never existed except for the purpose of those actions which were commenced, prosecuted and concluded whilst it was an existing law.

It was the same idea that was expressed by Lord Tenterden in, Surtees v. Ellison, [1829] 9 B&C 750 at p. 752: It has long been established that, when an Act of Parliament is repealed, it must be considered (except as to transactions past and closed) as if it had never existed.

This laid down the law as it was prior to the U.K. Interpretation Act, 1890 which by s. 38(2) made provision for a saving of the type we now have in s. 6 of the Indian General Clauses Act, 1897 which we have extracted earlier. The submission of Mr. Setalvad – learned Counsel for the respondent – was very simple. He said that s. 6 on its terms applied only to express repeals. Here we have a case not of an express repeal but of the supersession of a State enactment by a law having by the Constitution superior efficacy. It would, therefore, be mere disappearance or supersession of the State enactment or at the best a case of an implied repeal. In this connection he invited our attention to some observations to be found in the decision of this Court in Keshavan Madhava Menon v. State of Bombay … The Court was there concerned with the legality of the prosecution of the appellant for contravention of the Indian Press (Emergency Powers) Act, 1931. The offence had been committed before the Constitution came into force and a prosecution launched earlier was pending after January 26, 1950. The enactment which created the offence was held to be void under Art. 19(1) (a) read with Art. 13 as

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being inconsistent with one of the Fundamental rights guaranteed by Part III of the Constitution. In the circumstances, the point that was debated before this Court was whether the prosecution could be continued after the enactment became void. The majority of the Court held that the Constitution was prospective in its operation and that – Art. 13(1) would not affect the validity of proceedings commenced under pre-Constitution laws which were valid up to the date of the Constitution coming into force, for to hold that the validity of these proceedings were affected would in effect be treating the Constitution as retrospective. They therefore considered that there was no legal objection to the prosecution continuing. Fazl Ali, J. who dissented from the majority, after discussing the legal effect of a repealing statute in the absence of a saving clause and the history of the provision in regard to the matter in the successive General Clauses Acts in India, observed: The position therefore now in India as well as in England is that a repeal has not the drastic effect which it used to have before the enactment of the Interpretation Act in England or the General Clauses Act in this country. But this is due entirely to the fact that an express provision has been made in those enactments to counteract that effect. Hence, in those cases which are not covered by the language of the General Clauses Act, the principle already enunciated (Kay v. Goodwin and Surtees v. Ellison) will continue to operate. The learned Attorney General had to concede that it was doubtful whether s. 6 of that Act is applicable where there is a repeal by implication, and there can be no doubt that the law as to the effect of the expiry of a temporary statute still remains as stated in the books, because s. 6 of the General Clauses Act and s. 38(2) of the Interpretation Act have no application except where an Act is repealed.

Mr. Setalvad submitted that this was an express decision on the point in his favour. We are, however, not disposed to agree with the submission apart from its being the basis of a dissenting judgment. We might add that this point as to the effect of an implied repeal has arisen in a few other cases before this Court but it has been left open … The question is res integra and has to be decided on principle. We must at the outset point out that there is a difference in principle between the effect of an expiry of a temporary statute and a repeal by a later enactment and the discussion now is confined to cases of the repeal of a statute which until the date of the repeal continues in force. The first question to be considered is the meaning of the expression ‘repeal’ in s. 6 of the General Clauses Act whether it is confined to cases of express repeal or whether the expression is of sufficient amplitude to cover cases of implied repeals. In this connection there is a passage in Craies on Statute Law, Fifth Edition at pages 323 and 324 which appears to suggest that the provisions of the corresponding s. 38 of the English Interpretation Act were confined to express repeals. On page 323 occurs the following: In Acts passed in or since 1890 certain savings are implied by statute in all cases of express repeal, unless a contrary intention appears in the repealing Act,

and on the next page: It had been usual before 1889 to insert provisions to the effect above stated in all Acts by which express repeals were effected. The result or' this enactment is to make into a general rule what had been a common statutory form, and to substitute a general statutory presumption as to the effect of an express repeal for the canons of construction hitherto adopted.

There is, however, no express decision either in England or, so far as we have been able to ascertain, in the United States on this point. Untrammeled, as we are, by authority, we have to inquire the principle on which the saving clause in s. 6 is based. It is manifest that the principle underlying it is that every later enactment which supersedes an earlier one or puts an end to an earlier state of the law is presumed to intend the continuance of rights accrued and liabilities incurred under the superseded enactment unless there were sufficient indications – express or implied – in the later enactment designed to completely obliterate the earlier state of the law. The next question is whether the application of that

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principle could or ought to be limited to cases where a particular form of words is used to indicate that the earlier law has been repealed. The entire theory underlying implied repeals is that there is no need for the later enactment to state in express terms that an earlier enactment has been repealed by using any particular set of words or form of drafting but that if the legislative intent to supersede the earlier law is manifested by the enactment of provisions as to effect such supersession, then there is in law a repeal notwithstanding the absence of the word ‘repeal’ in the later statute. Now, if the legislative intent to supersede the earlier law is the basis upon which the doctrine of implied repeal is founded could there be any incongruity in attributing to the later legislation the same intent which s. 6 presumes where the word ‘repeal’ is expressly used. So far as statutory construction is concerned, it is one of the cardinal principles of the law that there is no distinction or difference between an express provision and a provision which is necessarily implied, for it is only the form that differs in the two cases and there is no difference in intention or in Substance. A repeal may be brought about by repugnant legislation, without even any reference to the Act intended to be repealed, for once legislative competence to effect a repeal is posted, it matters little whether this is done expressly or inferentially or by the enactment of repugnant legislation. If such is the basis upon which repeals and implied repeals are brought about it appears to us to be both logical as well as in accordance with the principles upon which the rule as to implied repeal rests to attribute to that legislature which effects a repeal by necessary implication the same intention as that which would attend the case of an express repeal. Where an intention to effect a repeal is attributed to a legislature then the same would in our opinion, attract the incident of the saving found in s. 6 for the rules of construction embodied in the General Clauses Act are, so to speak, the basic assumptions on which statutes are drafted. If this were the true position about the effect of the Central Act 67 of 1957 as the liability to pay the fee which was the subject of the notices of the demand had accrued prior to June 1, 1958 it would follow that these notices were valid and the amounts due thereunder could be recovered notwithstanding the disappearance of the Orissa Act by virtue of the superior legislation by the Union Parliament. The appeals would, therefore, be allowed and the Writ Petitions would stand dismissed. As the appellants have failed in their main submissions, we make no order as to costs. … CASE STUDY 2 – JAYANTILAL AMRATHLAL V. UNION OF INDIA (1972) 4 SCC 174 Bench – Chief Justice S. M. Sikri, Justices G. K. Mitter, K. S. Hegde, A. N. Grover & P. Jaganmohan Reddy Justice Hegde (for the Court) The President of India promulgated a proclamation of emergency on October 26, 1962 in exercise of the powers conferred on him by cl. (1) of Art. 352 of the Constitution of India. As the Parliament was not in session at that time, the President promulgated the Defence of India Ordinance on the same day (Ordinance No. IV of 1962). That Ordinance was published in the Gazette of India Extraordinary on that very day. In pursuance of the powers given by the said Ordinance, Defence of India Rules, 1962 were framed (to be hereinafter called the “Rules”). The Ordinance in question in question was replaced by the Defence of India Act, 1962 (Act 1 of 1962). That Act came into force on December 12, 1962. The “Rules” framed earlier were continued under that Act. By a notification published in the Gazette of India on January 9, 1963, the “Rules” were amended by incorporating therein Part XII-A. The same is called as “Gold Control Rules, 1963”. Rule 126(1) of those rules required every person not being a dealer to make a declaration within 30 days from the commencement of Part XII-A of the “Rules” or within such period as the Central Government by notification specify, to the administrator in the prescribed form, as to the quantity, description or other particulars of the gold owned by him and sub-rule (11) of that rule lays down that any person in possession or control of gold, not being ornaments shall be presumed, until the contrary is proved, to

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be owner thereof. Under Rule 126(1), the declaration in question was required to be made before February 28, 1963. On February 7, 1963, the appellant made a declaration of 25 sovereigns and six gold bars, each of 26.2/3 Tolas in the prescribed form. On November 18, 1964, a squad of Income Tax officers commenced searching the premises of the appellant. The search continued up to November 21, 1964. On November 20, 1964 the search party discovered huge amount of gold kept buried in one of the rooms of the appellant. The gold bars kept buried weighed 23, 329 grams. Along with those bars 154 gold sovereigns weighing 1223 grams were also discovered. The quantity of the gold so kept buried was of the value of Rs. 2, 83, 320/-. The discovered gold was kept in the Safe Deposit Vault of a bank and later on December 17, 1964, the same was seized by the Deputy Superintendent of Central Excise, Ahmedabad. Thereafter the Assistant Collector, Central Excise, Baroda issued a show cause notice to the appellant on June 5, 1965 requiring the appellant to show cause to the Collector of Central Excise, Baroda within 10 days of the receipt of that notice as to (1) why the gold under seizure should not be confiscated under Rule 126-M of the Gold Control Rules and (2) why penalty under Section 126-L(16) of the said rules should not be imposed on him. The appellant challenged the validity of that notice before the High Court of Gujarat by means of a writ petition under art. 226 of the Constitution. The High Court upheld the validity of the notice in so far as it related to the confiscation of the gold seized but ruled that the proceedings relating to the imposition of penalty were invalid in law. After the judgment of the High Court, the Collector of Central Excise by means of his communication dated December 6, 1968 informed the appellant that the previous notice is confined to show cause as to why the gold seized should not be confiscated. On January 10, 1968, when the writ petition of the appellant was pending before the High Court, the President withdrew the proclamation of emergency. Thereafter the Gold (Control) Ordinance of 1968 was issued. That Ordinance repealed Part XII-A of the “Rules”. The provisions therein were replaced by the provisions of the Ordinance. S. 117(1) of the Ordinance dealt with Repeals and Savings. S. 117 provided: (1) As from the commencement of this Ordinance, the provisions of Part XII-A of the Defence of India Rules, 1962 shall stand repealed and upon such repeal, S. 6 of the General Clauses Act, 1897, shall apply as if the said Part were a Central Act; (2) Notwithstanding the repeal made by sub-s. (1) but without prejudice to the application of S. 6 of the General Clauses Act, 1897, any notification, order, direction, appointment or declaration made or any notice, licence or certificate issued or permission, authorisation or exemption granted or any confiscation adjudged or penalty or fine imposed or any forfeiture ordered or any other thing done or any other action taken under or in pursuance of the provisions of part XII-A of the Defence of India Rules, 1962, so far as it is not inconsistent with the provisions of this Ordinance be deemed to have been made, issued, granted, adjudged, imposed, ordered, done or taken under the corresponding provisions of this Ordinance.

In view of S. 117 of the Gold (Control) Ordinance, the notice issued on June 5, 1965 initiating proceedings for forfeiting the gold seized must be deemed to have continued. The provisions in the “Rules” relating to forfeiture are not inconsistent with any of the provisions of the Gold (Control) Ordinance, 1968. On August 24, 1968, the Parliament passed the Gold (Control) Act, 1968. The same received the assent of the President on September 1, 1968 and came into force on and from that date. By S. 116(1) of that Act, Gold (Control) Ordinance, 1968 was repealed. S. 116(2) provided: Notwithstanding such repeal, anything done or any action taken including any notification, order or appointment made, direction given, notice licence or certificate issued, permission, authorisation or exemption granted, confiscation adjudged, penalty or fine imposed, or forfeiture ordered, whether under the Gold (Control) Ordinance, 1968 or Part XII-A of the Defence of India Rules, 1962, shall in so far as it is not inconsistent with the provisions of this Act, be deemed to have been done, taken, made, given, issued, granted, adjudged, imposed or ordered, as the case may be, under the corresponding provision of this Act, as if this Act had commenced on

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the 29th day of June, 1968.

In view of S. 115(2) of the Gold (Control) Act, 1968, it was urged on behalf of the appellant that the notice issued on June 5, 1965 can no more be operative because under the Gold (Control) Act, 1968, there are no provisions for making a declaration relating to the possession of primary gold. At this stage it may be noticed that under the “Rules” every person who was in possession of primary gold, exceeding the prescribed weight was required to convert the same either into ornaments or sell the same to the licensed dealers within the time prescribed by the “Rules”. Possession of primary gold thereafter exceeding the prescribed limit was an offence. That period had expired long before the Gold (Control) Act, 1968 came into force. Hence the Gold (Control) Act naturally did not make any provision for a declaration of the possession of primary gold. In view of that circumstance it was urged on behalf of the appellant that the provisions in the “Rules” requiring a declaration to be made in respect of the possession of primary gold are inconsistent with the provisions of the Gold (Control) Act and therefore the notice issued under the “Rules” cannot be considered as being continued under the provisions of the Gold (Control) Act, 1968. The above contention is untenable. There are no provisions in the Gold (Control) Act, 1968 which are inconsistent with Rule 126(I)(10) of the “Rules”. That being so, action taken under that rule must be deemed to be continuing in view of S. 6 of the General Clauses Act, 1897. It is true that Gold (Control) Act, 1968 does not purport to incorporate into that Act the provisions of S. 6 of the General Clauses Act. But the provisions therein are not inconsistent with the provisions in S. 6 of the General Clauses Act. Hence the provisions of S. 6 of the General Clauses Act are attracted in view of the repeal of the Gold (Control) Ordinance, 1968. As the Gold (Control) Act does not exhibit a different or contrary intention, proceedings initiated under the repealed law must be held to continue. We must also remember that by Gold (Control) Ordinance, the “Rules” were deemed as an act of Parliament. Hence on the repeal of the “Rules” and the Gold (Control) Ordinance, 1968, the consequences mentioned in S. 6 of the General Clauses Act, follow. For ascertaining whether there is a contrary intention, one has to look to the provisions of the Gold (Control) Act, 1968. In order to see whether the rights and liabilities under the repealed law have been put an end to by the new enactment, the proper approach is not to enquire if the new enactment has by its new provisions kept alive the rights and liabilities under the repealed law but whether it has taken away those rights and liabilities. The absence of saving clause in a new enactment preserving the rights and liabilities under the repealed law is neither material nor decisive of the question. For the reasons mentioned above we agree with the High Court that the proceedings commenced by the Collector of Central Excise by means of the notice dated June 5, 1965 must be deemed to be continuing. In the result this appeal fails and the same is dismissed with costs. …

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UNIT 7 – TAXATION STATUTES Article 265 of the Constitution states that: “No tax shall be levied or collected except by authority of law.” This provision has been interpreted by the Supreme Court as well the meaning of the term ‘tax’ has been interpreted most authoritatively in Shri Digvijay Cement Co. v. Union of India, (2003) 2 SCC 614. Apart from article 265, which is the principle constitutional provision dealing with taxation power, there are several other constitutional provisions that touch upon the taxing powers of the State. Those provisions and the methods of their interpretation are ideally studied elsewhere. So far as taxation statutes are concerned the primary rule of interpretation is the ‘rule of strict interpretation’ according to which a taxation statute is to be interpreted strictly. But this rule is prone to misunderstanding. A taxation statute, in its entirety, is not liable to interpreted strictly. It is only the charging provision of the taxation statute (i.e. the provision that creates the charge of tax), which is required to be strictly interpreted. A related controversy regarding interpretation of taxation statutes is over the ‘form over substance’ rule. This rule may be called derivative of the ‘rule of strict interpretation’. We will pay close attention to these two rules of interpreting a taxation statute. The most celebrated authority for the ‘form over substance’ rule is IRC v. Duke of Westminster, [1936] A.C. 1 (House of Lords) which we will examine for its precedental value. But before reading Westminster we should revisit McDowell & Co. v. Commercial Tax Officer, (1985) 3 SCC 230 that we initially examined in the context of the ‘Use of Foreign Precedents’ as ‘External Aids’ to interpretation.

RULE OF STRICT INTERPRETATION Simply stated the Rule of Strict Interpretation for construing taxation statutes goes as follows (as extracted from Singh, Principles of Statutory Interpretation, 13 ed.): If the person sought to be taxed comes within the letter of the law he must be taxed, however great the hardship may appear to the judicial mind to be. On the hand, if the Crown seeking to recover the tax, cannot bring the subject within the letter of the law, the subject is free, however apparently within the spirit of the law the case might otherwise appear to be.

But before examining the following two case-studies, we may profitably refer to the discussion on the ‘Literal Rule’ in the ‘General Principles of Interpretation’. To understand how this rule is applied in practice the following two case studies. But the opinion delivered by Justice Chandrachud (later Chief Justice) in second of these two cases (Murarilal v. Vad, (1975) 2 SCC 736) is perhaps the most important and the least closely examined opinions on the point that lays down the true scope and effect of the ‘rule of strict interpretation’. CASE STUDY 1 – A. V. FERNANDEZ V. STATE OF KERALA AIR 1957 SC 657 Bench – Justices N. H. Bhagwati, B. Jagannadhadas, Syed Jafar Imam, P. Govinda Menon & J. L. Kapur Justice Bhagwati (for the Court)

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This appeal with a certificate of fitness under Art. 132(1) of the Constitution is directed against the order of the High Court of Travancore-Cochin dismissing the Original Petition No. 53 of 1954 filed by the appellant under Art. 226 for quashing the order of the Sales Tax Officer, 2nd Circle, Quilon, assessing him to sales tax on a net assessable turnover of Rs. 7,54,144-8-4 for the year 1951-52 (1st April, 1951 to 31st March, 1952) and for issuing proper directions to the Sales Tax Authorities to assess the same according to law. The appellant is a registered manufacturer of coconut oil and cake who has obtained a certificate of registration in Form VI as per sub-r. (i) of r. 20 of the Travancore-Cochin General Sales Tax Rules, 1950. The business of the appellant for the purposes of this appeal consisted in the purchase of copra, manufacture of coconut oil and cake and sale of the same to parties inside the State of TravancoreCochin and sale of the oil to parties outside the State. In the year 1951-52, the appellant purchased copra of the value of Rs. 7,16,048-1-4 and after manufacturing oil therefrom in his oil mills he sold the oil partly in the State and partly outside the State and the cake entirely within the State., The total value of the oil sold was Rs. 6,76,719-0-11 out of which the sales outside the State were of the value of Rs. 3,67,816-10-1 and the value of the cake sold in the State was Rs. 67,155-155. The total gross turnover of the appellant was thus Rs. 14,59,923-1-8 and he claimed to deduct therefrom the whole of the purchase price of the copra under r. 7 (1) (k) read with r. 20. The net turnover according to him was therefore only Rs. 7,43,875-0-4 and he claimed to deduct out of this a further sum of Rs. 3,67,816- 10-1 being the sale price of oil in inter-State transactions which could not be taxed under Art. 286 of the Constitution, thus showing a net assessable turnover of only Rs. 3,76 058-6-3. The Sales Tax Officer, 2nd Circle, Quilon, however fixed the net assessable turnover of the appellant at Rs. 7,54,144-8-4. He took the purchase value of the copra at Rs. 7,16,048-1-4 but added thereto Rs. 3,08,902-6-10 and Rs. 67,155-15-5 being the respective values of the oil and the cake sold inside the State, excluding the sale price of inter-State sales of oil, namely, Rs. 3,67,816-10-1, from such computation. Having thus excluded the sale price of inter-State sales of oil, he deducted only the value of the copra corresponding to the oil sold inside the State namely, Rs. 3,35,216-0-0, as against the sum of Rs.7,16,048-1-4 deducted by the appellant. He added a sum of Rs. 3,385-0-3 being the price of gum sold by the appellant and deducted a further sum of Rs. 6,130-15-6 being the sales tax collected by him. He thus arrived at the net assessable turnover of Rs. 7,54,144-8-4 and assessed the appellant for sales tax on the same. The appellant preferred an appeal to the Assistant Sales Tax Commissioner … who dismissed the same by his order dated May 10, 1954. A further petition to the Government for redress met with the same fate and the appellant thereupon filed the petition in the High Court of Travancore. Cochin being O.P. No. 53 of 1954 with the result indicated above. The decision of this appeal turns on the construction of the relevant provisions of the Travancore-Cochin General Sales Tax Act, 1125 (Act XI of 1125 M.E.) and the Travancore-Cochin General Sales Tax Rules, 1950, made thereunder which may be conveniently set out here. The preamble to the Act stated that it was enacted to provide for the levy of a general tax on the sale of goods in the United State of Travancore and Cochin. S. 2 (j) defined a “sale” as under: ‘Sale’ with all its grammatical variations and cognate expressions means every transfer of the property in goods by one person to another in the course of trade or business for cash or for deferred payment or other valuable consideration …

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Explanation (2). – Notwithstanding anything to the contrary in the Sale of Goods Act for the time being in force, the sale or purchase of any goods shall be deemed for the purpose of the Act, to have taken place in the United State wherever the contract of sale or purchase might have been made.

S. 2 (k) defined “turnover” as the aggregate amount for which goods are either bought by or sold by a dealer, whether for cash or for deferred payment or other valuable consideration, provided that the proceeds of the sale by a person of agricultural or horticultural produce grown by himself or grown on any land in which he has an interest whether as owner, usufructuary mortgagee, tenant or otherwise, shall be excluded from his turnover.

… S. 3 was the charging section and it provided for levy of taxes on sales of goods in the terms following: (1) Subject to the provisions of this Act; - (a) every dealer shall pay for each year a tax on his total turnover for such year; and (b) the tax shall be calculated at the rate of three pies for every Indian rupee in such turnover … (3) A dealer whose total turnover in any year is less than ten thousand Indian rupees shall not be liable to pay any tax for that year under sub-section (1) or sub-section (2). (4) For the purposes of this section and the other provisions of this Act turnover shall be determined in accordance with such rules as may be prescribed. (5) The taxes under sub-sections (1) and (2) shall be assessed, levied, and collected in such manner and in such instalments, if any, as may be prescribed. Provided that: (I) in respect of the same transaction of sale, the buyer or the seller but not both, as determined by such rules as may be prescribed, shall be taxed; (II) where a dealer has been taxed in respect of the purchase of any goods in accordance with the rules referred to in clause (i) of this proviso, he shall not be taxed again in respect of any sale of such goods effected by him.

S. 4 enacted that the provisions of the charging section shall not apply to the sale of electrical energy and any goods other than arrack and foreign liquor on which duty is or may be levied under the Travancore or Cochin Abkari Act, or the Travancore or Cochin Opium Act. S. 24 conferred upon the Government power to make rules to carry out the purposes of the Act. The Act as originally enacted received the assent of the Rajpramukh on January 5, 1950. After the advent of the Constitution, however, the Act was amended by the Travancore-Cochin General Sales Tax (Amendment) Act, 1951, and s. 26 was added thereto which ran as under: Notwithstanding anything contained in this Act: (a) a tax on the sale or purchase of goods shall not be imposed under this Act (i) where such sale or purchase takes place outside the State of Travancore-Cochin; or (ii) where such sale or purchase takes place in the course of import of the goods into, or export of the goods out of, the territory of India; (b) a tax on the sale or purchase of any goods shall not, after the 31st day of March, 1951, be imposed where such sale or purchase takes place in the course of inter-State trade or commerce except in so far as Parliament may by law otherwise provide. (2) The explanation to clause (1) of Article 286 of the Constitution of India shall apply for the interpretation of sub-clause (i) of cl.(a) of sub-section (1).

The Travancore-Cochin General Sales Tax Rules, 1950, which were made by the Government under the rule-making power conferred upon it by sub-ss. 4 & 5 of s. 3 read with s. 24 of the Act laid down

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inter alia the provisions in regard to the determination of the total turnover of a dealer which was liable to be taxed. Rule 4 provided for the determination of the gross turnover: (1) Save as provided in sub-rule (2) the gross turnover of a dealer for the purposes of these rules shall be the amount for which goods are sold by him. (2) In the case of the undermentioned goods the gross turnover of a dealer for the purposes of these rules shall be the amount for which the goods are bought by him. (a) Cocoanut, copra, ground-nut and its kernel. (b) Cashew, and its kernel.

Rule 7 provided that the tax or taxes under s. 3 or 5 or the notification, or notifications under s. 6 shall be levied on the net turnover of a dealer. It further provided that in determining the net turnover, the amounts specified in cls. (a) to (k) were, subject to the conditions specified therein, to be deducted from the gross turnover. Cl. (k) is relevant for our purpose. It specified: all amounts which a registered manufacturer of cocoanut and/or groundnut oil and cake may be entitled to deduct from his gross turnover under Rule 20 subject to the conditions specified in the rule.

Rule 20 so far as it is material for our purpose provided: 1. Any dealer who manufactures cocoanut/groundnut oil and cake from cocoanut and/or copra or groundnut and/or/kernel purchased by him may on application to the assessing authority having jurisdiction over the area in which he carries on his business, be registered as a manufacturer of cocoanut/groundnut oil and cake and a certificate issued in Form VI. 2. Every such manufacturer shall be entitled to a deduction under clause (k) of sub-rule (i) of rule 7 equal to the value of the cocoanut and/or copra or groundnut and/or kernel purchased and converted by him into oil and cake provided that the amount for which the oil is sold is included in his turnover.

… The main controversy between the parties centres on the method of calculation of the net turnover. The appellant contends that in the calculation of such net turnover he is entitled to include the total value of the oil sold by him, viz., Rs. 6,76,719-0-11, irrespective of the fact whether these sales were effected inside the State or outside the State and deduct therefrom the total value of copra purchased by him from which the whole quantity of oil sold by him was manufactured, viz., Rs. 7,16,048-1-4. The resultant figure, according to him, represents the net assessable turnover on which the Sales Tax Authorities would be entitled to assess him to sales tax if the position in law was as is stood before the amendment of the Act by the Travancore-Cochin General Sales Tax (Amendment) Act, 1951. He next contends that s. 26 which was added to the Act by the Travancore-Cochin General Sales Tax (Amendment) Act 1951, prohibits the levy amongst others of a tax on the sale or purchase of goods where such sale or purchase takes place in the course of inter-State trade or commerce. This is an overriding provision which, it is contended, entitled him to deduct the value of the oil sold outside the State, viz., Rs. 3,67,816-10-1, from the assessable turnover arrived at as above. The result of this mode of calculation is that he claims to deduct from the gross turnover the whole of the purchase price of copra, viz., Rs. 7,16,048-1-4 and not the purchase price of copra which can be allocated to his sales of oil inside the State. The Sales Tax Authorities on the other hand, contend that the appellant is not entitled to take into computation at all his sales of oil outside the State and is also not entitled to deduct from his gross turnover the purchase price of copra allocated to the oil sold to persons outside the State. They claim to lift the whole of these sales of oil outside the State inclusive of the purchase price of the copra which can be allocated to them out of the calculations of the net turnover because of the provisions of s. 26 set

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out above, relying upon the non-obstante provision contained therein, viz., “Notwithstanding anything contained in this Act, a tax on the sale or purchase of goods shall not be imposed under this Act where such sale or purchase takes place in the course of inter-State trade or commerce.” We have to decide which of these calculations of the net turnover is correct having regard to the relevant provisions of the Act and the rules made there-under. The definition of ‘sale’ contained in s. 2 (j) is wide enough to include, the sales of oil manufactured by the appellant whether these sales are effected inside the State or outside the State. The definition of “turnover” contained in s. 2 (k) of the Act also makes no distinction between the sales inside the State and out, side the State. The “turnover” is there defined as the aggregate amount for which goods are either bought or sold by a dealer and, that definition comprises within its scope both these types of sales whether inside the State or outside the State. This turnover of a dealer is under s. 3, sub-s. (4) to be determined in accordance with such rules as may be prescribed. Rule 4 made by the Government under the rule- making power prescribes that the gross turnover of a dealer for the purposes of the rules shall be the amount for which the goods are sold by him. This rule also does not make any distinction between sales inside the State or outside the State. After having thus provided for the inclusion of all sales within the gross turnover, r. 7 provides that the tax or taxes under s. 3 (which is the charging section) shall be levied on the net turnover of a dealer. Such net turnover is to be arrived at after deducting from the gross turnover various amounts specified in cls. (a) to (k) thereof and cl. (k) provides that a registered manufacturer of cocoanut and/or groundnut oil and cake will be entitled to deduct from his gross turnover such amounts as are mentioned in r. 20 subject to the conditions specified therein. Thededuction under r. 20 is available to a dealer who manufactures cocoanut/groundnut oil and cake from cocoanut and/or copra or groundnut and/or kernel purchased by him and he is entitled to deduct the value of the cocoanut and/or copra or groundnut and/or kernel purchased and converted by him into oil and cake provided that the amount for which the oil is sold is included in his turnover. Here also we find no distinction made between sales inside the State or outside the State. On a prima facie reading of these provisions contained in the Act and the rules made thereunder it would appear that a manufacturer of cocoanut or groundnut oil and cake would be entitled to include in his gross turnover the total value of the oil sold by him Whether inside the State or outside the State and to deduct from such gross turnover the whole of the value of the copra purchased by him and converted into oil and cake irrespective of the fact whether such oil or cake was sold by him inside the State or outside the State. The only thing which he had to do under r. 20, sub-r.(2) was to include the amount for which the oil is sold in his turnover and he would then under r. 7(1)(k) be entitled to deduct from his gross turnover the whole of the price of the copra purchased and converted by him into oil and cake, again irrespective of the fact whether the same had been sold by him inside the State or outside the State. This was certainly the position as it obtained prior to the addition of the s. 26 to the Act by the Travancore-Cochin General Sales Tax (Amendment) Act, 1951. We have, therefore, to consider what is the impact of s. 26 on the other provisions of the Act and the rules made thereunder. The High Court decided against the appellant observing that the definitions given in s. (2)(j) and (k) of the Act applied only in the absence of “anything repugnant in the subject or context”, and on a perusal of the relevant provisions of the Act and the rules made thereunder, it was of opinion that these definitions were clearly inapplicable for the following reasons: There can be no doubt that what has been intended is a taxation of copra at the purchase point and the avoidance of sales tax in respect of the oil extracted by a registered manufacturer from such copra to the extent of the value of the copra used for the said manufacture in all those cases where but for the concession he would have been liable to pay both the purchase tax on copra and the sales tax on oil under the Travancore-Cochin General Sales Tax Act, 1125. In other words, the object is the avoidance of a double taxation by the State, one at the purchase point of copra and the other at the sale point of oil, and it is impossible to invoke the definition and say that the

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concession will be available to a registered manufacturer even in those cases where only one and not both the taxes can be realized from him under the provisions of the Act.

The answer given by the learned counsel for the appellant to the above reasoning was that in fiscal statutes what you have got to look to is not the spirit of the statute but the letter of the law; and if you could not bring a particular tax within the letter of the law, the subject could not be made liable for the same. Our attention was drawn in this connection to the observations of Lord Russell of Killowen in Inland Revenue Commissioners v. Duke of Westminster, [1936] A.C. 1, 24: I confess that I view with disfavour the doctrine that in taxation cases the subject is to be taxed if in accordance with a Court's view of what it considers the substance of the transaction, the Court thinks that the case falls within the contemplation or spirit of the statute. The subject is not taxable by inference or by analogy, but only by the plain words of a statute applicable to the facts and circumstances of his case.

As Lord Cairns said many years ago in Partington v. The Attorney General, (1869-70) L.R. 4 H.L. 100, 122): As I understand the principle of all fiscal legislation it is this: if the person sought to be taxed comes within the letter of the law he must be taxed, however great the hardship may appear to the judicial mind to be. On the other hand, if the Crown, seeking to recover the tax, cannot bring the subject within the letter of the law, the subject is free, however apparently within the spirit of the law the case might otherwise appear to be.

The passage was quoted with approval by the Privy Council in the Bank of Chettinad v. Income Tax Commissioner, AIR (1940) PC 183 and the Privy Council registered its protest against the suggestion that in revenue cases “the substance of the matter” may be regarded as distinguished from the strict legal position. . It is no doubt true that in construing fiscal statutes and in determining the liability of a subject to tax one must have regard to the strict letter of the law and not merely to the spirit of the statute or the substance of the law. If the Revenue satisfies the Court that the case falls strictly within the provisions of the law, the subject can be taxed. If, on the other hand, the case is not covered within the four corners of the provisions of the taxing statute, no tax can be imposed by inference or by analogy or by trying to probe into the intentions of the legislature and by considering what was the substance of the matter. We must of necessity, therefore, have regard to the actual provisions of the Act and the rules made thereunder before we can come to the conclusion that the appellant was liable to assessment as contended by the Sales Tax Authorities. It may be noted at the outset that the main bulk of the Sales Tax Acts enacted by the various Provincial Legislatures was enacted before the Constitution. There were on the Statute Book various Sales Tax Acts enacted by the Provincial Legislatures, viz., Bihar Sales Tax Act, 1947, Bengal Finance (Sales Tax) Act, 1941, Madhya Pradesh Sales Tax Act, 1947, Madras Sales Tax Act, 1939, Mysore Sales Tax Act, 1948, Orissa Sales Tax Act, 1947, East Punjab General Sales Tax Act, 1948, and the Uttar Pradesh Sales Tax Act, 1948, all of which levied sales tax on a more or less uniform basis bringing within their ken not only the sales which were actually effected within the territory but also sales where adopting the nexus theory eve1 one of the ingredients of sale was found to have taken place within the territory. The Assam Sales Tax Act, 1947, and the Hyderabad General Sales Tax Act, 1950, also followed the same pattern. When the Constitution came to be inaugurated on January 26, 1950, Art. 286(2) laid down restrictions on the State Legislatures to enact laws imposing or authorising the imposition of tax on the sale or purchase of goods in certain cases therein specified, so that after January 26, 1950, no State could impose a tax on the sale or purchase of goods falling within these categories. The Sales Tax Acts enacted by the various Provincial Legislatures had, therefore, to be brought in line with this provision of the

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Constitution and various expedients were devised by the State Legislatures in order to effectuate this object. This object was sought to be achieved in the main bulk of the Sales Tax Acts by adding towards the end of the Acts sections like s. 26 of the Travancore-Cochin General Sales Tax Act, 1125, incorporating therein the terms of Art. 286 of the Constitution. The non-obstante provision was thus enacted in the main bulk of the Sales Tax Acts which laid down: “Notwithstanding anything contained in this Act the tax on the sales or purchase of goods shall not be imposed under this Act where … (and the provisions of Art. 286 were in terms incorporated therein).” A different expedient was adopted in the Assam Sales Tax Act, 1947 and the Hyderabad General Sales Tax Act, 1950. The Assam Sales Tax Act, 1947, had incorporated therein an addition to the charging section (s. 3 of the Act) and s. 3 (1-A) which was inserted by s. 3 of the Assam Sales Tax (Amendment) Act, 1947 (Assam Act IV of 1951) was to the following effect: Nothing in sub section (1) shall, except in cases covered by the first proviso to sub-section (12) of section 2 of this Act be deemed to render any dealer liable to tax on the sale of goods-where such sale takes place: (1) outside the State of Assam; (2) in the course of the import of the goods into, or export of the goods out of, the territory of India; or (3) in the course of inter-State trade or commerce except in so far as Parliament may by law otherwise provide.

The Hyderabad General Sales Tax Act, 1950 had a similar provision incorporated in its definition of sale given in s. 2 (k) of the Act. The Explanation (2) which was substituted for the original Explanation (2) by s. 2 of the Hyderabad General Sales Tax (Amendment) Act, 1950 (Hyderabad Act XXXII of 1950) read as under: Explanation (2). – Notwithstanding anything to the contrary in any other law for the time being in force, a transfer of goods in respect of which no tax can be imposed by reason of the provision contained in Art. 286 of the Constitution, shall not be deemed to be "sale" within the meaning of this clause.

A further expedient which was adopted in this connection may be noted in r. 5 of the Bombay Sales Tax Rules, 1952, enacted under the Bombay Sales Tax Act, 1952-(Bombay Act XXIV of 1952), which authorised the deduction of certain sales coming within Art. 286 of the Constitution while calculating the taxable turnover of a dealer. We are not called upon to express any opinion as to whether the incorporation of the provisions of Art. 286 of the Constitution in the charging section as it was done in the Assam Sales Tax Act, 1947, or in the definition of “sale” as it was done in the Hyderabad General Sales Tax Act, 1950, or even in the rules in regard to the calculation of taxable turnover as it was done in the Bombay Sales Tax Rules, 1952, had the effect of taking the sales falling within the categories specified in Art. 286 out of the purview of the respective Sales Tax Acts, so that they would not be included at all within the calculation of the net turnover on which only the sales tax could be levied. What was done in the instant case before us as in the bulk of the Sales Tax Acts above noted was the incorporation of those provisions of Art. 286 of the Constitution therein by adding a non-obstante provision at the end of the respective Sales Tax Acts in the manner above indicated. The definition of “sale” was not amended nor was the charging section. The rules as to the calculation of the net turnover also remained the same, without any deduction in regard to sales coming within Art. 286 of the Constitution being incorporated therein, with the result that the Sales Tax Authorities founded themselves upon the non-obstante provision incorporated in the Act by the addition of s. 26 therein by the Travancore-Cochin General Sales Tax (Amendment) Act, 1951.

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What, then, is the effect of this non-obstante provision? This Court in Aswani Kumar Ghosh v. Arabinda Bose, [1953] S.C.R. 1 21, 22 made the following observations in connection with the non-obstante clause: It should first be ascertained what the enacting part of the section provides on a fair construction of the words used according to their natural and ordinary meaning, and the non-obstante clause is to be understood as operating to set aside as no longer valid anything contained in relevant existing laws which is inconsistent with the new enactment.

The same ratio applies to the construction of the non-obstante provision contained in s. 26 of the Act with reference to all the other provisions of the Act that preceded the same. In our opinion, s. 26 of the Act, in cases falling within the categories specified under Art. 286 of the Constitution has the effect of setting at nought and of obliterating in regard thereto the provisions contained in the Act relating to the imposition of tax on the sale or purchase of such goods and in particular the provisions contained in the charging section and the provisions contained in r. 20 (2) and other provisions which are incidental to the process of levying such tax. So far as sales falling within the categories specified in Art. 286 of the Constitution and the corresponding s. 26 of the Act are concerned, they are, as it were, taken out of the purview of the Act and no effect is to be given to those provisions which would otherwise have been applicable if s. 26 had not been added to the Act. If these provisions of the Act and the rules made thereunder do not apply to the sales falling within those categories, the value thereof cannot be included in the turnover of the dealer and no question would &rise of the applicability of r. 7 (1) (k) and r. 20 (2) at all to these cases. The amount for which the oil is sold in inter-State trade or commerce would not be lawfully included in the turnover of the dealer and if the amount for which such oil is sold cannot thus be included in his turnover no occasion would arise for the deduction under r. 7 (1) (k) of the value of the cocoanut and/or copra or groundnut and/or kernel purchased and converted by the dealer into such oil and cake. A distinction was sought to be made between the inclusion of the value of such oil in the turnover of the dealer for the purpose of assessment and the levy of tax thereupon. It was urged that the inclusion of such oil in the turnover for the purpose of assessment was quite distinct from the liability for tax which was the only thing prohibited by s. 26 of the Act and therefore the value of such oil could be lawfully included in the turnover involving as a necessary consequence the deduction of the value of the copra purchased by the dealer and converted by him into such oil from such turnover, the resultant turnover being the net turnover for the purposes of assessment, the value of the oil sold in the course of inter-State trade or commerce being further deducted there from by reason of the operation of s. 26 of the Act, thus making in effect a distinction between assessable turnover and the taxable turnover. Reliance was placed in support of this position on the observations of this Court in Messrs. Chatturam Horilram Ltd. v. CIT, [1955] 2 S.C.R. 290, 297: As has been pointed out by the Federal Court in Chatturam v. CIT, [1947] F.C.R. 116, 126 (quoting from the judgment of Lord Dunedin in Whitney v. Commissioners of Inland Revenue, [1926] A.C. 37 there are three stages in the imposition of a tax. There is the declaration of liability, that is the part of the statute which determines what person in respect of what property are liable. Next, there is the assessment. Liability does not depend on assessment. That, ex-hypothesi, has already been fixed. But assessment particularises the exact sum which a person liable has to pay. Lastly, come the methods of recovery if the person taxed does not voluntarily pay.

The appellant, however, forgets that the three stages in the imposition of a tax which are laid down here predicate, in the first instance, a declaration of liability as the starting point. If there is a liability to tax, imposed under the terms of the taxing statute, then follow the provisions in regard to the assessment of such liability. If there is no liability to tax there cannot be any assessment either. Sales or purchases in respect of which there is no liability to tax imposed by the statute cannot at all be included in the

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calculation of turnover for the purpose of assessment and the exact sum which the dealer is liable to pay must be ascertained without any reference whatever to the same. There is a broad distinction between the provisions contained in the statute in regard to the exemptions of tax or refund or rebate of tax on the one hand and in regard to the non-liability to tax or non-imposition of tax on the other. In the former case, but for the provisions as regards the exemptions or refund or rebate of tax, the sales or purchases would have to be included in the gross turnover of the dealer because they are prima facie liable to tax and the only thing which the dealer is entitled to in respect thereof is the deduction from the gross turnover in order to arrive at the net turnover on which the tax can be imposed. In the latter case, the sales or purchases are exempted from taxation altogether. The Legislature cannot enact a law imposing or authorising the imposition of a tax thereupon and they are not liable to any such imposition of tax. If they are thus not liable to tax, no tax can be levied or imposed on them and they do not come within the purview of the Act at all. The very fact of their non-liability to tax is sufficient to exclude them from the calculation of the gross turnover as well as the net turnover on which sales tax can be levied or imposed. If this distinction is borne in mind, it is clear that s. 26 of the Act enacts a provision with regard to non-liability of these transactions to tax and these transactions were therefore taken out of the purview of the Act. We are therefore of opinion that the non-obstante provision contained in s. 26 of the Act has the effect of taking these transactions out of the purview of the Act with the result that the dealer is not required nor is he entitled to include them in the calculations of his turnover liable to tax thereunder. This position is not at all affected by the provision with regard to registration and submissions of returns of the sales tax by the dealers under the Act. The legislature, in spite of its disability in the matter of the imposition of sales tax by virtue of the provisions of Art. 286 of the Constitution, may for the purposes of the registration of a dealer and submission of the returns of sales tax include these transactions in the dealer’s turnover. Such inclusion, however, for the purposes aforesaid would not affect the non-liability of these transactions to levy or imposition of sales tax by virtue of the provisions of Art. 286 of the Constitution and the corresponding provision enacted in the Act, as above. We are, therefore, of opinion that the conclusion reached by We are therefore, of opinion that the conclusion reached by the High Court was correct; the calculations of the net turnover made by the Sales Tax Authorities were also correct; and this appeal must stand dismissed with costs. …

CASE STUDY – MURARILAL V. VAD (1975) 2 SCC 736 Bench – Justices Y. V. Chandrachud, R. S. Sarkaria & A. C. Gupta Justice Chandrachud (for himself & Justice Sarkaria) [Justice Gupta partly concurring] The question which arises for decision in this appeal is whether under the Bombay Sales Tax Act, 1953 and the Bombay Sales Tax Act, 1959 a dissolved firm can be assessed or reassessed to sales-tax in respect of its pre-dissolution turnover. The first appellant M/s. Murarilal Mahabirprasad was a partnership firm constituted under a deed of partnership dated December 3, 1953. It was doing business at 30, Commercial Chambers, Masjid Bunder Road, Bombay, as importers, commission agents, indenting agents, del creders agents and financiers and also as wholesale dealers in colours, chemicals, dyes etc. The firm consisted of 5 partners: appellants 2 to 5 and one other who died in 1965. The firm was, registered as a dealer under the Acts of 1953 and 1959.

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Under diverse orders of assessment passed prior to its dissolution, the firm was assessed to sales-tax for the period July 1953 to March 31, 1958. On November 10, 1960 the Sales Tax officer (VIII), Enforcement Branch, Bombay, seized certain documents from the firm’s office. Notices were issued to the firm from time to time for attendance to explain these documents. Over sixty meetings took place between the firm’s representatives and the authorities, at the end of which, two notices dated November 20, 1963 came to be issued to the firm. By the first of these notices, the firm was asked to explain certain discrepancies in its hooks of account. The second notice was issued u/s. 15 of the Act of 1953, by which the firm was asked to show cause why the assessment already made for the period 1-4-1957 to 31-31958 should not be reopened on the ground that certain sales were suppressed by the firm as a result of which a part of its turnover had escaped assessment. Respondent 1, the Sales Tax officer (VIII), Enforcement Branch Greater Bombay, fixed the hearing of the assessment proceeding on April 1, 1965 but the firm requested by its letter dated April 3, for an adjournment till May on the ground that one of the partners had died suddenly in Delhi and that the other partners would be back in Bombay by May. On May 26, 1965 respondent addressed a notice to the firm stating that the hearing would be taken up from day to day from June 14, 1965 and that the partners should remain present at the hearings. There was considerable difficulty in serving the aforesaid notice, as another firm by the name of M/s. Murarilal Balkrishna had apparently started doing business at the place where the assessee firm was carrying on its business. Intimations were sent to the registered address of the firm and an Inspector of the Department went personally to effect the service. Eventually, on August 31, 1965 respondent 1 passed ex-parte orders of re-assessment for the period 1-4-1957 to 31-3-1958 and ex-parte orders of assessment for the period 1-4-1958 to 31-3-1961. The assessment of the firm for the period subsequent to 31-3-1958 was pending ever since, as it had to await the result of inspection of the incriminating documents seized from the firm's office in November, 1960. On October 22, 1965 demand notices were pasted on the office of the firm at its Masjid Bunder Road address. M/s. Murarilal Balkrishna who were doing business there are said to have informed a partner of the firm that demand notices were so pasted. By the revised assessment order, respondent 1 held that for the period 1-4-1957 to 31-1-1958, the turnover of suppressed sales which had escaped assessment was Rs. 41,47,090. He assessed on this turnover an additional tax of Rs. 1,95,582.47. Respondent 1 found that for subsequent periods also a large part of the turnover was suppressed by the firm. On that footing, he assessed the sales tax for the period 1-4-1958 to 31-3-1961, breaking up the period in fore assessments. By the demand notices, the firm was called upon to pay a total tax of Rs. 6,70,969.96, inclusive of the sales tax quantified in the revised assessment. The notices apprised the firm of its liability to pay penalty if the tax was not paid within the stated period. The assessment for the period 1-4-1957 to 31-12-1959 was made under the Act of 1953. The tax due for this period comes to Rs. 5,63,900 and odd. The assessment for the period 1-1-1960 to 31-3-1961 was made under the Act of 1959 The tax due for this period comes to Rs. 92,300 and odd. The firm has filed appeals against the aforesaid orders, which are pending before the Assistant Commissioner, Sales Tax, Bombay. In view or those appeals the recovery proceedings were stayed by the appellate authority. 7. During the pendency of the assessment proceedings, no formal intimation appears to have been given by or on behalf of the firm to the assessing authority that the firm was dissolved. It was on December 21, 1964 that in a letter written to respondent 1, one of the partners made a casual and fleeting reference to that fact: “you will also appreciate that the firm was dissolved 4 years back”. It is however futile to pursue this line of inquiry because, on being called upon to produce the deed of dissolution, the partners did produce a deed showing that the firm was dissolved on May 20, 1962. Respondent 1 appears to have accepted the authenticity of the deed of dissolution and in fact, acting upon it, the sales-tax authorities can called the registration of the firm under the Sales Tax Acts with effect from June 16, 1962. We cannot now go behind the position that the firm was dissolved on May 20, 1962. On November 24, 1965 the appellants filed a writ petition in the High Court of Bombay challenging the orders of re-

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assessment and assessment on various grounds. In view of the fact that the appeals filed by the firm before the Assistant Commissioner of Sales Tax were pending, the High Court did not decide the question whether the procedure prescribed by law was followed in the assessment proceedings and whether the orders were justified on merits. The only question which the High Court considered was whether the impugned orders were without jurisdiction as having been passed against a dissolved firm. By its judgment dated December 8, 1969 the High Court rejected the contention of the firm and held that in view of the provisions contained in the Bombay Sales Tax Act, 1953 and 1513, it was permissible to assess a dissolved firm. The correctness of that finding is challenged by the appellants in this appeal by special leave. The only question with which we are concerned in this appeal is whether the orders of re-assessment and assessment passed by respondent 1 are without jurisdiction by reason of the fact that the assessee firm was dissolved prior to the date on which those orders were passed. In fact, the very assessment and re-assessment proceedings for the relevant years were commenced after the dissolution of the firm. The notice under which those proceedings were started is dated November 20, 1963 while the firm was dissolved on May 20, 1962. We may mention that in a judgment to which we must immediately turn, this Court has taken the view that if under a statute a dissolved firm cannot be assessed to Sales Tax, it does not make any difference whether the proceeding was initiated before or after the dissolution Thus, the true question for decision is whether a dissolved firm can be assessed or re-assessed under the Bombay Sales Tax Act, 1953 and the Bombay Sales Tax Act, 1959. A similar question came up for decision before this Court in State of Punjab v. Jullundur Vegetables Syndicate, (1966) 2 SCR 457. That was case under the East Punjab General Sales Tax Act, 1948. The respondent firm therein was assessed to sales tax in 1953 but that order was set aside for want of jurisdiction. Fresh proceedings were then started for assessment but the firm was dissolved before the commencement of those proceedings. The firm was thereafter assessed and the order of the Sales Tax Officer was confirmed in further proceedings with some modifications. On a reference the Punjab High Court set aside the assessment on the ground that the East Punjab General Sales Tax Act, 1948 did not provide for a machinery for assessment a dissolved firm in respect of its pre-dissolution turnover. The judgment of the High Court was confirmed by this Court. Since the learned counsel for the appellants has relied heavily on the aforesaid decision, it is necessary to analyse it closely. The Court. speaking through Subba Rao, J., observed at the outset that the question as regards the validity of the assessment depended upon the relvant provisions of the particular Act. On examining the relevant provisions, namely, ss. 2(d), 4(1), 7(1), 16(b), 17 and Rule 40 the court held that there was no provision in the statute expressly authorising the assessing authority to assess a dissolved firm. The Court then proceeded to find whether such a power could be gathered by necessary implication from the other provisions of, the Act and held in the negative. Thus, by reason of the language and scheme of the Punjab Act, a dissolved firm could not be assessed. Relying on s. 2(d) which defined a dealer to include a firm, the Court held that though under the partnership law a firm was not a legal entity, the firm was an independent assessable unit for the purposes of the Punjab Act. If that be so, on dissolution, the firm ceased to be a legal entity and could not be assessed in the absence of a statutory provision permitting the assessment of a dissolved firm. The Court found that there was a lacuna in the Punjab Act of 1948 which was filled up later by an amendment but that amendment was not retrospective. Finally, the Court touched upon the conflicting decisions of the High Courts on the point and observed that all of those decisions were over-burdened with the consequences of a contrary construction on the, incidence of taxation and also their mixing up the question of the statutory power of assessing a dissolved firm with the liability of the partners to pay the tax so assessed on the firm before its dissolution. The reasons given by some of the High Courts in support of a contrary conclusion were rejected by this Court.

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The Jullundur Vegetables Syndicate case is a clear and direct authority for the following propositions: (1) A dissolved firm cannot be assessed to sales tax unless the statute under which the assessment is made authorises the assessment either expressly or by necessary implication; (2) If, by definition, a firm is a dealer under an Act, it becomes a legal entity or an independent assessable unit for the purposes of that Act. If that be so, the firm ceases to be a legal entity on dissolution and thereafter, on principle it cannot be assessed to sales tax unless the statute so authorises expressly or by necessary implication; (3) Neither a provision requiring a dealer to inform the authorities, if it discontinues its business, nor a provision imposing a joint and several liability on the dealer and its partners for the payment of tax, penalty or any other amount due under the Act or rules can be interpreted as conferring jurisdiction to assess a dissolved firm; (4) In interpreting a fiscal statute the Court cannot proceed to make good the deficiencies, if any, in the statute: it shall interpret the statute as it stands and in case of doubt, it shall interpret it in a manner favourable to the tax payer. The language of a taxing Act cannot be strained in order to hold a subject liable to tax. … Applying the ratio in the Jullundur case was must examine me provisions of the two Bombay Acts in order to find whether those provisions, expressly or by necessary implication, authorise the assessment of a dissolved firm. Turning first to the Act of 1953, s. 2(6) of that Act defines a ‘dealer’, in so far as relevant, to mean any ‘person’ who carries on the business of selling or buying goods. This definition does not by itself make the firm a distinct assessable entity and the position obtaining under the general law that a firm is but compendious name for the partners who compose it remains outstanding. But s. 3(35) of the Bombay General Clauses Act, 1904 defines ‘person’ as including “any company or association or body of individuals, whether incorporated or not”. The provisions of the Bombay General Clauses Act apply to the interpretation of the Bombay Acts unless there is anything repugnant in the subject or context of the Act under review. There is no such repugnancy and therefore the word ‘person’ in s. 2(6) of the Act of 1953 must be taken to include a ‘body of individuals’ that a firm is. Not only is there nothing in the Act of 1953 which is repugnant to the notion that the firm could be a dealer, but s. 24 or that Act furnishes a strong indication for saying that the framers of the Act intended to recognise firms as a legal entity. That section provides that every dealer who is liable to pay the tax and who is an undivided Hindu family, an association or a club, society, firm or company, shall send to the prescribed authority a declaration stating the name of the person who shall be deemed to be the manager of such dealer’s business. S. 24 would be meaningless in its reference to a ‘firm’, unless the fundamental assumption of the provision was that a firm as distinct from its partners is an independent assessable entity. That assumption is made good by the combined operation of s. 2(6) of the Act of 1953 and s. 3(35) of the Bombay General Clauses Act. Since the Act of 1953 considers a partnership firm to be a legal entity, on the dissolution of the firm its legal personality would cease to exist. On the firm ceasing to have existence in the eye of law, there can be no assessment of the firm as such for, in the absence of an express statutory provision or a clear statutory intendment, a dead person cannot be assessed. S. 2(2) of the Income-tax Act, 1922 defined an assessee as “a person by whom income-tax is payable”. The Bombay High Court, in Ellis C. Reid v. CIT, [1930] ITC 100 held that the definition in terms applied to living persons only, that the treasury had no power to tax without the express permission to the legislature and therefore if an assessee failed to make a return of his income u/s. 22(2), the income-tax officer had no power to make as assessment u/s. 23(4) after the assessee’s death. Seeing that, originally, in the Income-tax Act, 1922 there was no reference to the decease of a person on whom the tax was charged, the learned Chief Justice observed: “It must have been present to the mind of the legislature that whatever privileges the payment of income-tax may confer, the privilege of immortality is not

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amongst them”, and that it was very difficult to assume that the omission in the Act as regards the power to tax a dead assessee was unintentional. Section 24B which was introduced in the Income-tax Act, 1922 to remove the lacuna pointed out in the Bombay judgment extends the legal personality of a deceased assessee for the duration of a previous year, so that income received by an assessee during the previous year and the income received by his heirs and legal representatives after his death but in the previous year can be brought to tax after his death. In CIT v. Amarchand N. Shroff, [1963] 48 ITR 59 1962 this Court observed that the individual assessee under the Income-tax Act has ordinarily to be a living person, that there can normally be no assessment of a person after his legal personality ceases and that, apart from section 24B, no assessment could be made on a dead person. We must therefore proceed of the basis that the first appellant firm was an independent assessable entity under the Act of 1953 and that on its dissolution on May 20, 1962 its legal personality ceased to have existence. Is there then any provision in the 1953 Act which permits or contemplates the assessment of a firm after its dissolution? If not, the general rule would apply that a dead person cannot be assessed. It is plausible that a distinction ought to be made between the death of an individual and the dissolution of a firm. Human beings, as assessees, are not generally known to court death to evade taxes. Death, normally, is not volitional and it is understandable that on the death of an individual, his liability to be assessed to tax should come to an end unless the statute provides to the contrary. With firms it is different, because a firm which incurs during its existence a liability to pay sales-tax may, with a little ingenuity evade its liability by the voluntary act of dissolution. The dissolution of a firm could therefore be viewed differently from the death of an individual and the partners could be denied the advantage of their own wrong. But we do not want to strike this new path because the Jullundur case and the two cases which follow it have likened the dissolution of a firm to the death of an individual. Let us therefore proceed to examine the other provisions of the 1953 Act. S. 5 of the 1953 Act provides that every dealer whose turn over exceeds the limits therein mentioned shall be liable to pay sales tax. Sub-s. (3) of s. 5 says that every dealer who has thus become liable to pay the tax “shall continue to be so liable until cancellation of his registration under sub-s. (6) of section 11, and upon such cancellation his liability to pay the tax shall cease”. This provision shows that if a firm has incurred the liability to pay sales tax, that liability continues until the cancellation of the registration. There may be a hiatus between the dissolution of the firm and the cancellation of its registration and during this interregnum the liability of the firm is expressly kept alive by the statute. U/s. 11(6), the prescribed authority has to cancel the registration with effect from the prescribed date if, inter alia, the business in respect of which a certificate has been granted u/s. 11 has been discontinued or transferred. On being satisfied that the business has been discontinued or transferred, the authority concerned has undoubtedly to cancel the registration but the obligation to cancel the registration would arise not on the statement of an assessee that the business has been discontinued or transferred but on the satisfaction of the authority that this is truly so. In other words, by virtue of s. 5(3), the mere fact of dissolution does not by itself bring to an end the firm's liability to be taxed. S. 15(1) of the 1953 Act has an important bearing on the question under consideration. That section reads thus: 15. (1) If in consequence of any information which has come into his possession the Collector is satisfied that any turnover in respect of sales or purchases of any goods chargeable to the tax has escaped assessment in any year or has been under assessed or assessed at a lower rate or any deductions have been wrongly made therefrom, the Collector may, in any case were such turnover has escaped assessment or has been under-assessed or assessed at a lower rate for the reason that the provisions of sub-s. (1) of s. 2 of the Bombay Sales Tax (Validating Provisions) Act, 1957 were not then enacted, at any time within eight years, and in any case where he has reason to believe that the dealer has concealed the particulars of such sales or purchases or has knowingly furnished incorrect returns, at any time within eight years and in any other case, at any time within five years of the end of that year, serve on the dealer liable to pay the tax in respect of such turnover a notice containing all or any of the requirements which may be included in a notice under sub-s. (3) of s. 14 and may proceed to assess or reassess the amount of

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the tax due from such dealer and the provisions of this Act shall apply accordingly as if the notice were a notice served under that sub-section: Provided that the amount of the tax shall be assessed after making the deductions permitted from time to time under the Bombay Sales Tax Act, 1946, the Bombay Sales Tax (No. 2) Ordinance, 1952. and this Act, as the case may be, at the rates at which it would have been assessed had the turnover not escaped assessment or full assessment as the case may be: Provided further that where in respect of such turnover or deduction, as the ease may be, an order has already been passed under s. 30 or s. 31, the Collector shall make a report to the appropriate appellate or revising authority, as the case may be, which shall thereupon after giving the dealer concerned a reasonable opportunity of being heard, pass such order as it deems fit.

This provision leaves no doubt that the dissolution of a firm cannot operate as a bar to a fresh assessment of the turnover which had escaped assessment, provided that the action contemplated therein is taken within the specified period. In substance, s. 15(1) provides that if the Collector is satisfied that any turnover has escaped assessment or has been under assessed or assessed at a lower rate or any deductions have been wrongly made therefrom, he can after serving a notice on the assessee proceed to assess or re-assess the amount of the tax due from him. It is a clear and necessary implication of s. 15(1) that even a dissolved firm can be assessed or re assessed within the period mentioned therein. The dissolution cannot operate as a bar to the exercise by the collector of his power to re-open an assessment and indeed it is difficult to conceive that in matters as vital to the administration of sales-tax as the assessment of suppressed turnovers, the legislature could have contemplated that the liability to reassessment could be avoided by the erring firm by the simple expedient of winding up its affairs. S. 15(1) contains an important clause that action thereunder can be taken by the Collector after giving a notice to the assessee under s. 14(3) of the Act within the prescribed period. Once such a notice is given, the Collector gets the jurisdiction to assess or re-assess the amount of tax due from the dealer and all the provisions of the Act “shall apply accordingly as if the notice were a notice served under” s. 14(3). S. 14(3) speaks of the power of the Collector to assess the amount of tax due from the dealer after giving notice to him, if the Collector is not satisfied that the returns furnished are correct and complete. The jurisdiction to assess or re assess which is conferred by s. 15(1) is thus equated with the original jurisdiction to assess the dealer under s. 14. By this method, the continuity of the legal personality of the assessee is maintained in order to enable the assessment of turnover which has escaped assessment. It is no answer to a notice under s. 15 that the partners having dissolved the firm, the assessment cannot be reopened. It puts a premium on one’s credulity to accept that having created a special jurisdiction to assess or re-assess an escaped turnover, the legislature permitted that salutary jurisdiction to be defeated by the device of dissolution. The argument of the appellants really comes to this: suppress the turnover, evade the sales-tax, dissolve the firm and earn your freedom from taxation. Importantly, the notice dated November 21, 1963 for re-opening the assessment for the period 1-4-1957 to 31-3-1958 was served on the firm under s. 15. On re-assessment, the firm was assessed to a sales-tax of Rs. 1,95,582.47 on sales suppressed during that period. Section 15A confers on the Collector analogous powers to asses or re-assess a dealer for taxes due prior to November 21, 1956 when the States were reorganised, if either no assessment was made for the prior period or if any turnover had escaped assessment. This provision like the one contained in section 15, is of general application and makes no exception in favour of dissolved firm. Therefore, if a firm was not assessed prior to the re-organisation of States or if any part of its turnover had escaped assessment, it is competent to the Collector to assess or re-assess the firm notwithstanding its subsequent dissolution. This is the necessary implication of section 15A. It must follow as a corollary that the power to rectify a mistake apparent from the record can he exercised by the Collector under s. 35 of the Act of 1953

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even after the dissolution of an assessed firm, though on conditions specified in the section. The section contains a compelling implication that evident errors can be corrected no matter whether the firm is in existence or is dissolved. Dissolution is not a panacea for liability to pay sales-tax. A difficulty was raised on behalf of the appellants that on the dissolution of the firm the principle of agency would cease to apply as amongst the partners and therefore no partner would have the right to represent either the firm or any of the other partners in the proceeding under section 15, commenced or continued after the dissolution of the firm. This question does not bear on the liability of a dissolved firm to be assessed or the power of the Collector to assess a dissolved firm under s. 15. It may perhaps be that in the assessment of a dissolved firm, each of the erstwhile partners may have a right to be heard because each of them would be interested in warding off a liability which may fall on them jointly and severally. But that is more a matter of procedure which the assessing authority must adopt in the assessment proceedings in order to give efficacy to the order which may eventually be passed in the proceedings. Who, in the assessment proceedings against a dissolved firm, has the right to be heard will not determine whether a dissolved firm can be assessed under the Act of 1953. Sub-ss. 3(1) and 3(ii) of s. 26 provide that when a firm liable to pay the tax is dissolved, it shall be liable to pay the tax on the goods allotted to any partner “as if” the goods had been sold to such partner, unless he holds a. certificate of registration or obtains it within the prescribed period. This provision in terms envisages the assessment of a dissolved firm, though only to the limited extent and for the limited purpose that the goods allotted to a partner at the time of dissolution shall be deemed to have been sold to that partner. By the use of the words “as if”, s. 26(3) (ii) creates a fiction that the allotment of goods to a partner on dissolution of the firm shall be deemed to be a sale made by the dissolved firm to that partner. The fiction cannot be extended further than the sub-section warrants but there is no fiction in regard to the liability of the dissolved firm to the assessed to sales-tax in respect of the goods thus deemed to be sold. The imposition of such a liability is in keeping with the general scheme of the Act, the various provisions of which show that the assessment of a dissolved firm is within the clear intendment of the statute. The construction which we have placed on these provisions of the 1953 Act does no violence to the familiar principle which in Cape Brandy Syndicate v. Commissioner of Inland Revenue, [1921] 12 Tax Cases 358, was expressed thus by Rowlatt, J.: In a taxing statute one has to look at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a lax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used.

This principle was approved and adopted by this Court in several decisions … The principle is variously expressed by saying that in fiscal statutes one must have regard to the letter of the law and not to the spirit of the law, that the subject cannot be taxed by inference or analogy, that in a taxing Act there is no governing principle to look at and one has simply to go on the Act itself to see whether the tax claimed is, that which the statute imposes, that while construing taxing Acts it is not the function of the court to give to the words used a strained and unnatural meaning and that the subject can be taxed only, if the revenue satisfies the court that the case falls strictly within the provisions of the law. The principle thus stated has hardly ever been doubted but it is necessary in the application of that principle to remember that though the benefit of an ambiguity in a taxing provision must go to the subject and the taxing provision must receive a strict construction “that is not the same thing as saying that a taxing provision should not receive a reasonable construction.” … If the statute contains a lacuna or a loophole, it is not the function of the court to plug it by a strained construction in reference to the supposed intention of the legislature. The legislature must then step in to resolve the ambiguity and so

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long as it does not do so, the tax-payer will get the benefit of that ambiguity. But, equally, courts ought not to be astute to hunt out ambiguities by an unnatural construction of a taxing section. Whether the statute, even a taxing statute, contains an ambiguity has to be determined by applying normal rules of construction for inter petition of statutes. As observed by Lord Cairns in Pryce v. Mommonthshire Canal and Railway Companies, [1879] 4 A.C. 197, cases which have decided that taxing acts are to be construed with strictness, and that no payment is to he exacted from the subject which is not clearly and unequivocally required by Act of Parliament to be made, probably meant little more than this, that, inasmuch as there was not any a priori liability in a subject to pay any particular tax, nor any antecedent relationship between the tax payer and the taxing authority no reasoning founded upon any supposed relationship of the tax-payer and the taxing authority could be brought to bear upon the construction of the Act and therefore, the tax-payer had a right to stand upon a literal construction of the words used, whatever might be the consequences. The true implication of the principle that a taxing statute must be construed strictly is often misunderstood and the principle is unjustifiably extended beyond the legitimate field of its operation. Indeed, the more well-expressed the principle as in the Cape Brandy case, greater the reluctance to see its limitations. In that famous passage marked by a happy turn of phrase, Rowlatt J. said, “there is no equity about a tax. There is no presumption as to a tax.” There is no equity about a tax in the sense that a provision by which a tax is imposed has to be construed strictly, regardless of the hardship that such a construction may cause either to the treasury or to the tax-payer. If the subject falls squarely within the letter of law he must be taxed, however inequitable the consequences may appear to the judicial mind. If the Revenue seeking to tax cannot bring the subject within the letter of law, the subject is free no matter that such a construction may cause serious prejudice to the Revenue. In other words, though what is called equitable construction may be admissible in relation to other statutes or other provisions of a taxing statute such a construction is not admissible in the interpretation of a charging or taxing provision of a taxing statute. … We are concerned in this case to determine not whether a particular turnover can be brought to salestax but whether if the turnover was liable to be charged to sales-tax, the firm can be assessed to tax after its dissolution. In other words, we are concerned with a provision which prescribes the machinery for the computation of tax and not with a charging provision of the Sales Tax. … S. 19.(3) being quite clear and explicit, it is unnecessary to dwell on the other provisions of the Act of 1959 in order to show that a dissolved firm can he assessed under it. …

FORM OVER SUBSTANCE What should be given more importance while interpreting a taxation statute? The letter of the law or its spirit? This question keeps on raising its head every time there is taxation statute involved, especially if the facts involve a tax avoidance questions. The most celebrated and most cited British authority on this point is the House of Lord’s opinion in Commissioner of Inland Revenue v. Duke of Westminster, [1936] AC 1. The rule of interpretation that has come to be recognized by the case it was laid down in – the Westminster rule – says that it is the ‘form’ of the transaction that the Court is concerned with and not the substance. Singh in his Principles of Statutory Interpretation (13 ed.) notes this principle in the following words: In fiscal legislation a transaction cannot be taxed on any doctrine of “the substance of the matter” as distinguished from its legal signification, for a subject is not liable to tax on supposed “spirit of the law” or “by inference or by analogy”.

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The Westminster rule has been subjected to multiple interpretations and the ever elusive line between a tax evasive transaction versus only a tax avoidant one is extremely hard to draw. Also, this continues to be one of the most under theorized parts of Indian common law. Successive governments have tried to legislate different versions of GAAR (General Anti Avoidance Rules) and this discussion becomes increasingly significant in today’s time, especially after the famous Vodafone case, (2012) 6 SCC 613. Westminster being the most heavily cited authority on the point, let us being our discussion of the ‘form over substance’ rule with reading this case itself. On the other hand, the most heavily cited American decision on the point is the US Supreme Court’s opinion in Gregory v. Helvering, 293 US 465 (1935). Gregory seemed to reject the ‘form over substance’ rule in Westminster and laid down the foundation for what would eventually be known as the Economic Substance Test in US law. The Economic Substance Test says that the transaction must have some kind of economic substance to justify itself apart from the consequent tax benefit that the taxpayer derives from the same. It is very interesting to see how Westminster and Gregory both being decided in almost identical time frames (Westminster in 1936 and Gregory in 1935) lay down two different rules for the same legal problem. CASE – COMM’RS OF INLAND REVENUE V. DUKE OF WESTMINSTER [1936] AC 1 (House of Lords) Bench – Lord Atkin, Lord Tomlin, Lord Russell of Killowen, Lord Macmillan & Lord Wrigh Lord Tomlin (for himself) My Lords, it cannot I think be doubted that each one of the annuities payable under the deeds of covenant brought to your Lordships’ attention, if considered with reference to the deed creating it and without regard to the other matters upon which the appellants rely, falls into that class of payments which are treated as part of the taxable income of the payee and not of the payer. Each annuity is on this footing therefore an item from which the payer is entitled to deduct income tax and which he is entitled to treat as deductible from his total income in making his return for surtax purposes. So far as concerns the annuity payable to Detmar Jennings Blow I can discover no element in the case which upon any view of the law or facts can alter the position as I have stated it, and in my opinion the appeal in regard to this annuity must fail. With regard to the other annuities, the correspondence in each case contemporaneous with or following upon the execution of the deed of covenant, together with the fact that after the deed the payee, being in the Duke's employment, was in fact getting under the deed (with or without other moneys) the amount which he would have received as salary or wages if no deed had been executed, is said by the appellants to alter the whole position and, so long as the payee continues in the Duke’s service, to render it impossible for the Duke to treat the annuity under the deed as a deductible item in his return of income for surtax purposes. It is agreed that as between the annuities under consideration (other than that of Blow) no distinction can be drawn and that Allman's annuity is typical. A decision in Allman's case must therefore govern the remainder. Now so far as I understand the argument the appellants, while admitting that Allman's annuity is payable under the deed, say that there is, having regard to the correspondence and in all the circumstances, another collateral contract between the Duke and the payee to the effect that the payee will serve the Duke in consideration of a salary or wage equal to the salary or wage he was receiving before the deed of covenant was executed, and that he will accept what he receives under the deed in part satisfaction of this salary or wage; and therefore that the annuity, so long as the payee remains in the Duke’s service,

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is of a changed nature and is no longer a payment which the Duke is entitled to deduct from his income for the purposes of surtax. In the first place I would observe that, if any such contract is proper to be inferred from the correspondence and circumstances, the contract must be a separate independent contract in the case of each payee and could only be inferred from a full examination of each case separately, and, unless the contract alleged is wholly in the correspondence, only after hearing evidence from the parties to the alleged contract or their representatives. In fact no evidence of this kind was called before the Commissioners and the Commissioners have not found that any such contract existed. Their only finding is expressed in para. 11 of the case stated and is as follows:We, the Commissioners who heard the appeal, held that in construing the true effect and substance of the deeds under which payments are made to the appellant's 9 employees, we were entitled to consider together with these deeds the letters of explanation and form of acknowledgment which were sent to the covenantees. These letters, like the deeds themselves, were not in one stereotyped form, but were*18 sufficiently to the same effect to enable us to arrive at a decision in respect of them all. We held that the payments made under these deeds to persons who remain in the appellant's employ were, in substance, payments for continuing service ejusdem generis with wages or salaries so long as the recipients in fact remain in the appellant's service and as such were not annual payments which were a proper deduction from his assessment to surtax.

I will deal later with that part of the finding which says that the payments were “in substance” payments for continuing service ejusdem generis with salaries or wages. In the next place I would note that a contract in the terms alleged is nothing more than a contract that the payee will serve the Duke for a salary or wage equal to the difference between the amount received under the deed and the amount of the original salary or wage. In any event, whether he serves the Duke or not, the payee is entitled under the deed to the amount of the annuity less tax, and the annuity already legally payable cannot become part of the consideration for a new contract of service. Again, such a contract if it could be inferred at all is in flat contradiction of the deed. Under the deed the payments are expressed to be without prejudice to such remuneration as the annuitant would become entitled to in respect of such services (if any) as the annuitant might thereafter render to the Duke. It is also in flat contradiction of the terms of the letter to which I will presently refer. In fact I do not think that upon the true construction of the relevant letter and written acknowledgment, even when regarded in the light of such facts as are admitted or found in para. 6 of the case stated, there was any such collateral contract as alleged. The letter of August 13, 1930, told the annuitant that there was nothing in the deed to prevent his being entitled to and claiming full remuneration for such future work as he might do, though it was expected that in practice he would be content in effect with the difference between the annuity and salary or wages which he had been lately receiving. I cannot think that a letter so framed can be construed as constituting a contract that the payee would serve the Duke upon terms in contradiction of the language of the letter - namely, that he should be entitled to less than the salary or wages which he had been then lately receiving. Further, the arrangement which the annuitant is stated in the letter to have accepted must, I think, on a proper reading of the letter refer to all that is set out in the letter as well as what is contained in the deed, and includes his right to full remuneration over and above what is received under the deed. Again, the acknowledgment signed by the annuitant at the foot of the letter is that he accepts the provision made for him by the deed, and that is a provision without prejudice to his right to full remuneration over and above what he receives under the deed. In short, it seems to me that there is no such contract as that which the appellants suggest can be inferred.

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Apart, however, from the question of contract with which I have dealt, it is said that in revenue cases there is a doctrine that the Court may ignore the legal position and regard what is called “the substance of the matter,” and that here the substance of the matter is that the annuitant was serving the Duke for something equal to his former salary or wages, and that therefore, while he is so serving, the annuity must be treated as salary or wages. This supposed doctrine (upon which the Commissioners apparently acted) seems to rest for its support upon a misunderstanding of language used in some earlier cases. The sooner this misunderstanding is dispelled, and the supposed doctrine given its quietus, the better it will be for all concerned, for the doctrine seems to involve substituting “the incertain and crooked cord of discretion” for “the golden and streight metwand of the law.” Every man is entitled if he can to order his affairs so as that the tax attaching under the appropriate Acts is less than it otherwise would be. If he succeeds in ordering them so as to secure this result, then, however unappreciative the Commissioners of Inland Revenue or his fellow taxpayers may be of his ingenuity, he cannot be compelled to pay an increased tax. This so-called doctrine of “the substance” seems to me to be nothing more than an attempt to make a man pay notwithstanding that he has so ordered his affairs that the amount of tax sought from him is not legally claimable. The principal passages relied upon are from opinions of Lord Herschell and Lord Halsbury in your Lordships’ House. Lord Herschell L.C. in Helby v. Matthews, [1895] A.C. 471, 475 observed: “It is said that the substance of the transaction evidenced by the agreement must be looked at, and not its mere words. I quite agree;” but he went on to explain that the substance must be ascertained by a consideration of the rights and obligations of the parties to be derived from a consideration of the whole of the agreement. In short Lord Herschell was saying that the substance of a transaction embodied in a written instrument is to be found by construing the document as a whole. Support has also been sought by the appellants from the language of Lord Halsbury L.C. in Secretary of State in Council of India v. Scoble, [1903] A.C. 299, 302. There Lord Halsbury said: “Still, looking at the whole nature and substance of the transaction (and it is agreed on all sides that we must look at the nature of the transaction and not be bound by the mere use of the words), this is not the case of a purchase of an annuity.” Here again Lord Halsbury is only giving utterance to the indisputable rule that the surrounding circumstances must be regarded in construing a document. Neither of these passages in my opinion affords the appellants any support or has any application to the present case. The matter was put accurately by my noble and learned friend Lord Warrington of Clyffe when as Warrington L.J. in In re Hinckes, Dashwood v. Hinckes, [1921] 1 Ch. 475, 489 he used these words: “It is said we must go behind the form and look at the substance … but, in order to ascertain the substance, I must look at the legal effect of the bargain which the parties have entered into.” So here the substance is that which results from the legal rights and obligations of the parties ascertained upon ordinary legal principles, and, having regard to what I have already said, the conclusion must be that each annuitant is entitled to an annuity which as between himself and the payer is liable to deduction of income tax by the payer and which the payer is entitled to treat as a deduction from his total income for surtax purposes. There may, of course, be cases where documents are not bona fide nor intended to be acted upon, but are only used as a cloak to conceal a different transaction. No such case is made or even suggested here. The deeds of covenant are admittedly bona fide and have been given their proper legal operation. They cannot be ignored or treated as operating in some different way because as a result less duty is payable than would have been the case if some other arrangement (called for the purpose of the appellants’ argument “the substance”) had been made.

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I find myself, therefore, in regard to the annuities other than that of Blow, unable to take the same view as the noble and learned Lord upon the Woolsack. In my opinion in regard to all the annuities the appeal fails and ought to be dismissed with costs. Lord Russell of Killowen My Lords, I would dismiss this appeal. It is conceded that the deeds are genuine deeds, i.e., that they were intended to create and do create a legal liability on the Duke to pay in weekly payments the annual sum specified in each deed, whether or not any service is being rendered to the Duke by the covenantee. Further, it is conceded that the sums specified in the deeds were paid to the covenantees under the deeds. The question for our decision is whether those sums so paid constitute part of the Duke’s income for the purpose of computing his liability for surtax in the particular years in question. I need not consider in detail the various statutory provisions which are relevant to the consideration of this matter. The result may for the purposes of this case be summarized thus: If the payment of these sums is payment of salary or wages within Sch. E 14, from which tax is not deductible by the Duke, then he is not entitled to exclude the amounts paid in ascertaining his total income for surtax purposes, but if the payment is an annual payment within Sch. D, from which tax is deductible by the Duke, then he is entitled to exclude the amounts paid in ascertaining such total income. There can I think be no doubt that if the deeds stood alone the payments are annual payments within Sch. D. Indeed, this is not I think disputed. It is, however, argued that certain letters written by the Duke’s solicitor to the covenantees and certain acknowledgments signed by the covenantees at the foot of those letters, effect a complete change in the situation, and turn the payments made under the deeds into payments of salary and wages within Sch. E. I will consider this suggestion in relation to the case of Frank Allman. The argument centred round his case, and it was common ground that all the cases (with the exception of the case of Mr. Blow) stood or fell together notwithstanding any difference of wording which might exist among them. The legal position created by Allman’s deed is clear. He is entitled during the defined period to his annual sum of 98l. 16s. by weekly payments of 1l. 18s., commencing on August 9, 1930. He is not bound to do a stroke of work in order to be entitled to payment. If he does in the future render any service to the Duke, he will be legally entitled to claim remuneration for it, over and above the payments under the deed, which are to be without prejudice to his remuneration for future services. The deed expressly so provides. The letter to Allman states the effect of the deed, but says that it is expected that in practice he will be content with the legal provision made by the deed “with the addition of such sum (if any) as may be necessary to bring the total periodical payment while you are still in the Duke’s service up to the amount of the salary or wages which you have lately been receiving.” That is an expression of hope or anticipation, that the covenantee will not enforce his legal right to remuneration for future services beyond a certain amount. The letter states that the covenantee had “accepted this arrangement” and asks him to sign an acknowledgment in a form already written out at the foot of the letter. The arrangement said to have been accepted can be nothing more than what the letter states - namely, the execution of a deed which was to be binding and in full force, coupled with an expectation on the part of the Duke that the covenantee’s legal right to full remuneration for future services would not be enforced. There is no evidence of any other arrangement. Acceptance of that arrangement cannot turn the expectation into an

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enforceable legal right. The acknowledgment signed by the covenantee is in strictly limited terms. It accepts the provision made by the deed; it in no way admits or suggests that the deed has to any extent been qualified by the letter. My Lords, for myself I can find nothing in the letter and acknowledgment which constitutes or resembles a contract, notwithstanding the fact that the names of the solicitors were written across an adhesive stamp. There is an expression of a hope or anticipation or expectation that the covenantee will pursue a certain line of conduct, but he nowhere binds himself to do so, nor indeed is he even asked to do so. In my opinion the letter has no operation at all, and has no effect upon the legal rights and liabilities of the parties created by the deed. But if I am wrong in this view, and some contract dehors the deed was brought into existence by means of the letter and acknowledgment, it can be no more than a contract by Allman that his remuneration for future services shall not be full remuneration but only the additional sum referred to in the letter. I can see no grounds for extracting from the language used a contract that the remuneration for future services shall, despite the deed, be the sums payable under the deed in respect of past services plus the additional sum mentioned in the letter. I can find no possible justification for this. A suggestion was made that such a contract can be found by reason of the presence in the letter of the words “to bring the total periodical payment up to the amount of the salary which you were receiving previously to the deed of covenant.” I fail to see how these words can bear this strain. Indeed, to me they seem to point in the opposite direction. They recognize that full remuneration for future services will not be paid, and that the total periodical payment will be composed in part of salary and in part of something which is not salary at all. If the true view is that (contrary to my opinion) a contract has been made to accept less than full remuneration for future services, the position is still the same - namely, that the legal rights and liabilities of the parties created by the deed remain unqualified and unaffected. The result is that payments, the liability for which arises only under the deed, are not and cannot be said to be payments of salary or wages within Sch. E. They cannot with any regard to the true legal position be said to arise from an employment. They are, and can only be said to be, annual payments within Sch. D. Tax was deductible on payment; they are income of the recipient, and are accordingly not part of the Duke's total income for the purpose of calculating his liability for surtax. The Commissioners and Finlay J. took the opposite view on the ground that (as they said) looking at the substance of the thing the payments were payments of wages. This simply means that the true legal position is disregarded, and a different legal right and liability substituted in the place of the legal right and liability which the parties have created. I confess that I view with disfavour the doctrine that in taxation cases the subject is to be taxed if, in accordance with a Court's view of what it considers the substance of the transaction, the Court thinks that the case falls within the contemplation or spirit of the statute. The subject is not taxable by inference or by analogy, but only by the plain words of a statute applicable to the facts and circumstances of his case. As Lord Cairns said many years ago in Partington v. Attorney-General, (1869) L.R. 4 HL 100, 122: “As I understand the principle of all fiscal legislation it is this: If the person sought to be taxed comes within the letter of the law he must be taxed, however great the hardship may appear to the judicial mind to be. On the other hand, if the Crown, seeking to recover the tax, cannot bring the subject within the letter of the law, the subject is free, however apparently within the spirit of the law the case might otherwise appear to be.” If all that is meant by the doctrine is that having once ascertained the legal rights of the parties you may disregard mere nomenclature and decide the question of taxability or non-taxability in accordance with the legal rights, well and good. That is what this House did in the case of Secretary of State in Council of India v. Scoble, [1903] AC 229; that and no more. If, on the other hand, the doctrine means that you may brush aside deeds, disregard the legal rights and liabilities arising under a contract between parties, and decide the

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question of taxability or non-taxability upon the footing of the rights and liabilities of the parties being different from what in law they are, then I entirely dissent from such a doctrine. The substance of the transaction between Allman and the Duke is in my opinion to be found and to be found only by ascertaining their respective rights and liabilities under the deed, the legal effect of which is what I have already stated. The case of Mr. Blow’s deed, which is uncomplicated by any letter, is necessarily decided, in my view, in the same way as Allman's case. For these reasons I am of opinion that the order of the Court of Appeal was right and ought to be affirmed.

CASE – GREGORY V. HELVERING 293 US 463 (1935) [United States Supreme Court] Justice Sutherland (for the Court) Petitioner in 1928 was the owner of all the stock of United Mortgage Corporation. That corporation held among its assets 1,000 shares of the Monitor Securities Corporation. For the sole purpose of procuring a transfer of these shares to herself in order to sell them for her individual profit, and, at the same time, diminish the amount of income tax which would result from a direct transfer by way of dividend, she sought to bring about a ‘reorganization’ under section 112(g) of the Revenue Act of 1928, c. 852, 45 Stat. 791, 816, 818, set forth later in this opinion. To that end, she caused the Averill Corporation to be organized under the laws of Delaware on September 18, 1928. Three days later, the United Mortgage Corporation transferred to the Averill Corporation the 1,000 shares of Monitor stock, for which all the shares of the Averill Corporation were issued to the petitioner. On September 24, the Averill Corporation was dissolved, and liquidated by distributing all its assets, namely, the Monitor shares, to the petitioner. No other business was ever transacted, or intended to be transacted, by that company. Petitioner immediately sold the Monitor shares for $133,333.33. She returned for taxation, as capital net gain, the sum of $76,007.88, based upon an apportioned cost of $57,325.45. Further details are unnecessary. It is not disputed that if the interposition of the so-called reorganization was ineffective, petitioner became liable for a much larger tax as a result of the transaction. The Commissioner of Internal Revenue, being of opinion that the reorganization attempted was without substance and must be disregarded, held that petitioner was liable for a tax as though the United corporation had paid her a dividend consisting of the amount realized from the sale of the Monitor shares. In a proceeding before the Board of Tax Appeals, that body rejected the commissioner’s view and upheld that of petitioner. 27 B.T.A. 223. Upon a review of the latter decision, the Circuit Court of Appeals sustained the commissioner and reversed the board, holding that there had been no ‘reorganization’ within the meaning of the statute. 69 F. (2d) 809. Petitioner applied to this court for a writ of certiorari, which the government, considering the question one of importance, did not oppose. We granted the writ. Section 112 of the Revenue Act of 1928 deals with the subject of gain or loss resulting from the sale or exchange of property. Such gain or loss is to be recognized in computing the tax, except as provided in that section. The provisions of the section, so far as they are pertinent to the question here presented, follow: Sec. 112. (g) Distribution of Stock on Reorganization. If there is distributed, in pursuance of a plan of reorganization, to a shareholder in a corporation a party to the reorganization, stock or securities in such corporation or in another corporation a party to the reorganization, without the surrender by such shareholder of stock or securities in such a corporation, no gain to the distributee from the receipt of such stock of securities shall be recognized. …

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(i) Definition of Reorganization. As used in this section … (1) The term ‘reorganization’ means … (B) a transfer by a corporation of all or a part of its assets to another corporation if immediately after the transfer the transferor or its stockholders or both are in control of the corporation to which the assets are transferred. …

It is earnestly contended on behalf of the taxpayer that since every element required by the foregoing subdivision (B) is to be found in what was done, a statutory reorganization was effected; and that the motive of the taxpayer thereby to escape payment of a tax will not alter the result or make unlawful what the statute allows. It is quite true that if a reorganization in reality was effected within the meaning of subdivision (B), the ulterior purpose mentioned will be disregarded. The legal right of a taxpayer to decrease the amount of what otherwise would be his taxes, or altogether avoid them, by means which the law permits, cannot be doubted. … But the question for determination is whether what was done, apart from the tax motive, was the thing which the statute intended. The reasoning of the court below in justification of a negative answer leaves little to be said. When subdivision (B) speaks of a transfer of assets by one corporation to another, it means a transfer made ‘in pursuance of a plan of reorganization’ [§ 112(g)] of corporate business; and not a transfer of assets by one corporation to another in pursuance of a plan having no relation to the business of either, as plainly is the case here. Putting aside, then, the question of motive in respect of taxation altogether, and fixing the character of the proceeding by what actually occurred, what do we find? Simply an operation having no business or corporate purpose-a mere device which put on the form of a corporate reorganization as a disguise for concealing its real character, and the sole object and accomplishment of which was the consummation of a preconceived plan, not to reorganize a business or any part of a business, but to transfer a parcel of corporate shares to the petitioner. No doubt, a new and valid corporation was created. But that corporation was nothing more than a contrivance to the end last described. It was brought into existence for no other purpose; it performed, as it was intended from the beginning it should perform, no other function. When that limited function had been exercised, it immediately was put to death. In these circumstances, the facts speak for themselves and are susceptible of but one interpretation. The whole undertaking, though conducted according to the terms of subdivision (B), was in fact an elaborate and devious form of conveyance masquerading as a corporate reorganization, and nothing else. The rule which excludes from consideration the motive of tax avoidance is not pertinent to the situation, because the transaction upon its face lies outside the plain intent of the statute. To hold otherwise would be to exalt artifice above reality and to deprive the statutory provision in question of all serious purpose. …

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UNIT 8 – PENAL AND REMEDIAL STATUTES What is the difference between a Penal and a Remedial Statute? On a first reading of the phrase the natural response of anyone versed in legal English would be straightforward. A Penal statute is one that defines certain acts (offences) and provides for punishments (fines, incarcerations or both) if those acts are done. A very simple example is the Indian Penal Code (the title of the statute has the word ‘Penal’ in its title). A Remedial statute is one that would try to address itself to remedy some wrong considered worth remedying by the legislature by creating new remedies (for example providing for a new kind of remedy for a tort; or by defining a new tort and letting it addressed by a traditional remedy) or providing for a certain response to a traditional remedy (for example by providing for a certain amount of compensation to be paid in the even a tort is proved). Most Rent Control legislations are a good example of Remedial statutes. The rule of interpretation with regards to Penal and Remedial statutes and the difficulty of interpreting them is captured authoritatively by Singh in Principles of Statutory Interpretation (13 ed.): A remedial statute receives a liberal construction, whereas a penal statute is strictly construed. … In case of remedial statutes the doubt is resolved in favour of the class of persons for whose benefit the statute is enacted; whereas in case of penal statutes the doubt is resolved in favour of the alleged offender. Difficulty arises in classifying modern welfare legislations which are designed for the benefit of a class of persons such a labourers, workmen, tenants and the like, but which often contain penal provisions.

REMEDIAL STATUTES The difficulty as pointed out by Singh is exposed most clearly in a case decided by the House of Lords in London & North Eastern Railway Co. v. Berriman, [1946] 1 All.E.R. 255. Let us first examine this case as a case-study as well as for the principles of statutory construction used in this case to interpret the Railway Employment (Prevention of Accidents) Act, 1900, which was a beneficial or remedial piece of legislation. After this we will examine, as a cases studies two cases of the Supreme Court of India. In the first case, Rita Devi v. New India Assurance Co., (2000) 5 SCC 113 the Supreme Court interpreted the word ‘accident’ in the phrase ‘accident arising out of the use of motor vehicle’ in the Motor Vehicles Act, 1988 in a liberal way mindful of the beneficial objective of the legislation. In the second case, Union of India v. P. V. Kumar, (2008) 9 SCC 527, the Supreme Court adopted the rule of liberal construction while interpreting section 123(c) of the Railways Act, 1989 and held that an ‘untoward accident’ includes accidental falling of a passenger from a train carrying passengers. The holding of law and observations in the principles of interpretation to be used for Remedial statutes as laid down by the Supreme Court in both these case-studies may fairly be taken to be accurately reflecting the legal position on this point in India. CASE STUDY 1 – LONDON & NORTH EASTERN RAILWAY CO. V. BERRIMAN [1946] 1 All.E.R. 255 (House of Lords) Bench – Lord Jowitt, L.C., Lord Macmillan, Lord Wright, Lord Porter & Lord Simonds Lord Jowitt, L.C. (for himself) My Lords, on December 27, 1943, Frederick John Berriman, deceased, who was then a labourer in the employment of the appellant company, was knocked down by a train and killed whilst working in the

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course of his employment. His widow, the respondent, brings this action alleging that his death was due to the failure of the railway company to observe r. 9 of the Prevention of Accidents Rules, 1902. The Railway Employment (Prevention of Accidents) Act, 1900, provides by s. 1, sub-s. 1, as follows: The Board of Trade may, subject to the provisions of this Act, make such rules as they think fit with respect to any of the subjects mentioned in the schedule to this Act, with the object of reducing or removing the dangers and risks incidental to railway service.

No. 12 of the schedule is in the following terms: “Protection to permanent way men when relaying or repairing permanent.” Pursuant to the powers contained in the Act, rules were made in 1902 and the material words of r. 9 are as follows: With the object of protecting men working singly or in gangs on or near lines of railway in use for traffic for the purpose of relaying or repairing the permanent way of such lines, the railway companies shall, after the coming into operation of these rules, in all cases where any danger is likely to arise, provide persons or apparatus for the purpose of maintaining a good look-out or for giving warning against any train or engine approaching such men so working.

On the day in question the deceased man Berriman, in conjunction with another employee named Rowe, was engaged in cleaning and oiling a certain apparatus between or near to the running lines. There were a considerable number of trains passing upon these lines. The engine driver of the train leaving Brough at 1.20 p.m. on its way to Hull when approaching the West Parade Junction signal cabin saw two men who appeared to be just getting up from a stooping position. They were knocked down and killed by the on-coming train: they were Berriman and his mate Rowe. It was admitted that no protection had been given to these men by means either of persons or apparatus whilst they were doing their work: and it was not contested that they were working at a place where danger was likely to arise. The work which they were doing was connected with the signalling apparatus. The signalman in his box is able by pulling a lever to move signals and to deflect points so as to transfer a train from one running line to another. The mechanism which ensures, for example, that the result of pulling a lever in the signal box is that points are deflected, consists of a series of rods, cranks and levers. Some part of this mechanism is embedded in the ground actually between the running lines and other parts are so close to these lines as to cause men working thereon to be in danger from passing trains in the absence of a proper look out. The question that arises is whether there was or was not a duty on the part of the railway company to give protection to these men by means of persons or apparatus, for if so there is no question but that the duty was neglected. Upon these facts as it appears to me the following three questions arise:1. What is the meaning of the words “permanent way” in the Act of 1900? 2. Was the deceased workman a “permanent way man” within the meaning of that Act? 3. Was he at the material time engaged in repairing the permanent way? I proceed to consider these three points in order, and first as to the meaning of the phrase “permanent way.” It is, I think, legitimate in construing a statute relating to a particular industry to give to the words used a special technical meaning if it can be established that at the date of the passing of the statute such special meaning was well understood and accepted by those conversant with the industry. In the present case in the endeavour to prove that the words “permanent way” had at the date of the passing of the Act acquired a special or technical meaning the appellants, in the court below, called a Mr. Thompson, the engineer of the appellant company in charge of their engineering work in the North Eastern Area, and a Mr. Wallace, the Chief Civil Engineer of the London, Midland and Scottish Railway Co. Even if we disregard the fact that these railway companies were not established until many years after the year 1900 it seems to me that the evidence called completely failed to establish that the words “permanent way” had at any time acquired any special technical meaning. Mr. Wallace was asked to give his

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definition of the words and his answer was as follows:- “The permanent way is the final track laid down at the opening of the line and then subsequently renewed, as compared with the overland route of the contractors at its construction.” Mr. Thompson gave the same answer and when asked where the permanent way ended on either side replied:- “The broad answer is that it ends where the ballast ends, which is sloped down to the natural earth at the sleepers end.” The most that the evidence of these two witnesses established was that for the purposes of the internal organization of the engineering work of their companies the work which had to do with signals and signalling apparatus was kept separate and distinct from the work which was concerned with the track. It seems to me quite illegitimate to spell out from this eminently practical division of work any definition of the words “permanent way” and indeed the attempt to do so leads to ridiculous conclusions. Thus the points which deflect a train from one running line to another are admittedly part of the permanent way, whilst the mechanism which pulls the points over - even although fastened in the ground between the lines on which the train runs - is said not to be part of the permanent way. A hand-operated lever, such as is frequently to be seen in shunting yards, is said to be part of the permanent way even although it is placed completely outside the extremities of the sleepers simply because it is not connected with the signalling system. I asked - and I asked in vain - during the course of the argument whether the water trough, which is placed between the running lines to enable an engine to pick up water whilst in motion, was or was not part of the “permanent way”? My Lords, I confess that I can get no assistance in construing the words “permanent way” from this evidence and without attempting any definition of my own I am clearly of the opinion that a man working on a piece of mechanism embedded in the ground either between the running lines or so near to the running lines that he would be knocked down by a passing train is working on the permanent way. I confess that I am relieved to be able to come to this conclusion, for were it otherwise no man working on such a piece of mechanism, no matter how exacting or absorbing his work might be and no matter that it was undoubtedly a work of repair, would be within the protection of the statute. I find it difficult to believe that the legislature in passing the Act of 1900 can have intended any such result. For these reasons I agree with the Court of Appeal that the deceased man was at the time of the accident working on the permanent way. Having reached this conclusion, it seems to me to follow that a workman whose regular and habitual duty was to attend to mechanism which I have decided forms part of the permanent way is a “permanent way man.” There remains the third and to my mind the only difficult question, namely, whether at the relevant time the deceased workman was engaged in repairing the permanent way. There is no evidence to show that on the day in question he was attending to any mechanism which had broken down or proved faulty. He had indeed left behind him the tool box which he was accustomed to take with him in such cases. His work was described in the evidence as “routine oiling and cleaning”; for this purpose he and his fellow workman would take with them a feeder, a tin of oil and a brush. The evidence further established that this oiling and cleaning required to be done about once a week and that it was essential for the proper working of the system. It is, I should suppose, impossible to lay down with any precision the periods of time within which this work of oiling and cleaning must be undertaken; much must depend upon the circumstances; but it seems clear that moving parts of the gear exposed to the weather would tend to get rusted and to attract dust and debris. If they were left unattended to they would gradually begin to work stiffly and at last would work so stiffly that they would be regarded as out of order and would be noted as a subject for repair. The Court of Appeal took the view that “repairing” as used in the Railway Employment (Prevention of Accidents) Act, 1900, must be construed as including the work of maintaining in good working order; I agree with them and I agree with them largely because I can find no satisfactory criterion to tell me at what point that which is called repair as opposed to maintenance begins. It would, I suppose, be conceded that if a nut had worked loose and required to be tightened the work involved would be a work of “repair,” even although the actual work occupied only

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a few seconds of time. Oiling and cleaning may take longer than tightening a nut and in the course of oiling and cleaning something which is “repair” in any sense of the word may be discovered. It might, for instance, be seen that a split pin which had sheered off required to be replaced. To limit the word “repair” in the sense contended for by the appellants seems to me to make the duty imposed by the statute quite impracticable. At one moment of time a man might merely be oiling and cleaning and at another moment he might be doing something which is repair in the narrow sense of the word that is in making good something which has developed a fault. It would be impracticable for the railway company whenever he did repair work in this sense to afford him protection which they failed to give him in the course of his oiling and cleaning. There is a further consideration which leads me to agree with the decisions of the Court of Appeal. I have already reminded your Lordships of the evidence that this oiling and cleaning was necessary about every week. Supposing it was neglected - what would happen? The mechanism would begin sooner or later to work stiffly, but the signalman would still be able to pull over his lever without much difficulty. After a short while he would notice that it was working very stiffly and in time it would not work at all. Then I presume, it would he conceded that it was a case calling for “repair”; but it would seem that the question is essentially one of degree, and that it is impossible to fix any definite point at which “maintenance” ends and “repair” begins. The word “repairing” is in my view a word sufficiently wide, if the context so requires, to include “maintaining.” Having regard to the fact that the primary intendment of the Act in question was to provide more adequate protection for railway servants, I think it should be so construed in this case. Accordingly, in my view a man engaged in oiling and cleaning the moving parts of the machinery which enables the signalman to adjust the points is engaged in the work of repair. … For these reasons I would dismiss the appeal. Lord Macmillan (for himself) … There was much argument as to whether what I may call this switching apparatus formed any part of the permanent way and whether the men whose duty it was to attend to it were permanent way men. It was said that the expression “permanent way” was a term of art in railway parlance and evidence was adduced by the appellant company to the effect that in the vernacular of railway men the permanent way comprises only the ballast and sleepers, chairs, rails and fastenings of which the track is composed, while the apparatus for working the signals and points with which the system is equipped is never referred to as part of the permanent way, except in the case of points operated by hand levers and unconnected with any signals. This distinction, it appears, is reflected in the organization of railway administration in which the departments concerned respectively with the permanent way and with signals and points are clearly differentiated and separately staffed. I recognize that when Parliament employs technical terms without definition in a statute dealing with a particular art or industry courts of law are entitled to have the assistance of skilled persons in the interpretation of such terms and indeed the present statute and rules contain numerous technical terms as to whose meaning in railway parlance evidence would be almost indispensable. But assuming that evidence was admissible as to the meaning of “permanent way” I am not satisfied, on the evidence adduced in this case, which was largely based on administrative practice and convenience, that the expression “permanent way” as used in the statute and rule ought to be read in the limited sense for which the appellant company contended. The movable tapering rails which form the points are as much part of the running track as the immovable rails and the apparatus of rods attached to these movable rails for the purpose of actuating them is a necessary part of the equipment of the running track. The relaying or repairing of this apparatus is an operation attended with the same danger as the relaying or repairing of the rails themselves and, having regard to the purpose of the statute and rule, I can see no adequate reason for providing protection in the one case and not in the other.

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I do not, however, find it necessary to pronounce finally on this matter for in my opinion, even if the system of connecting rods forms part of the permanent way, the deceased was not engaged in relaying or repairing these rods. He was oiling and cleaning them. There is of course no question that he was not doing any work of relaying the permanent way. The critical word for the present purpose is “repairing.” I am unable having regard to the ordinary usage of the English language, to characterize the work of oiling and cleaning as a work of repair. The collocation of the words “relaying or repairing” is significant. Relaying is the major operation of renewing what is so defective as to be past repair; repairing is the minor operation of making good remediable defects. There was nothing wrong with the points which the deceased was oiling and cleaning, nothing requiring repair. The engineer who oils his engines would certainly be surprised to be told that he was repairing them. Oiling and cleaning, to my mind, are operations designed to keep plant in good running order and to prevent the development of defects necessitating repair. There may well have been a good reason for limiting the requirement of protection to the case of men engaged in the work of relaying and repairing, for these operations suggest tasks occupying time and requiring concentration of attention, precluding those engaged in them from looking after their own safety. If the word “repairing” were to be extended to include the simple and routine matter of oiling and cleaning, the railway companies would require to provide persons or apparatus for the purpose of maintaining a good look-out or for giving warning of an approaching train or engine every time one of their servants oiled a single bearing in the system of points and connecting rods and this under the sanction of prosecution and penalties. For it must be borne in mind that while the statute and rule have the beneficent purpose of providing protection for workmen, their contravention involves penal consequences under s. 11 of the Act. Where penalties for infringement are imposed it is not legitimate to stretch the language of a rule, however beneficent its intention, beyond the fair and ordinary meaning of its language. I quote and adopt the words of Alderson B.: “The rule of law, I take it, upon the construction of all statutes … is, whether they be penal or remedial, to construe them according to the plain, literal, and grammatical meaning of the words in which they are expressed, unless that construction leads to a plain and clear contradiction of the apparent purpose of the Act, or to some palpable and evident absurdity:” (Attorney-General v. Lockwood, (1842) 9 M. & W. 378, 398). It appears from the evidence that it has not been the practice of the appellant company, although the rule in question has been in operation for over forty years, to provide a look-out man when oiling is being done. On the other hand when a job of repair has to be done on the points which may take some time, a look-out man is asked for and provided. If it is thought desirable to extend the protection of a look-out to the case of men engaged in oiling and cleaning it is for the legislature to do so, after investigation of all relevant considerations. The present rule in my opinion does not cover the case. I am accordingly in favour of allowing the appeal and restoring the judgment of Stable J.. Lord Porter (for himself) … [T]he deceased man was killed when engaged on his duties as a signal fitter and whilst, as I think, oiling the point rods either in or alongside the track, and his widow sues the appellants on the ground that they did not provide persons for the purposes of maintaining a good look-out or for giving warning against any train or engine approaching such a man so working. This contention depends upon the wording of the Railway Employment (Prevention of Accidents) Act, 1900, and the rules made thereunder. The Act itself is entitled “an Act for the better prevention of accidents on railways” and s. 1, sub-s. 1, provides, “The Board of Trade may, subject to the provisions of this Act, make such rules as they think fit with respect to any of the subjects mentioned in the schedule to this Act, with the object of reducing or removing the dangers and risks incidental to railway service.” The schedule refers to a number of topics mostly concerned with the safety of mechanical apparatus used in railway working. Amongst other matters it mentions: “(6) Protection of point rods and signal wires, and position of

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ground levers working points.” The only reference to the safety of men as such, as opposed to the safety of the appliances they use, is contained in No. 12, which mentions: “Protection of permanent way men when relaying or repairing permanent way.” Under the powers conferred by the Act, rules were made in 1902 and reliance is placed upon r. 9 which so far as is material is in the following terms: “With the object of protecting men working singly or in gangs on or near lines of railway in use for traffic for the purpose of relaying or repairing the permanent way of such lines, the railway companies shall, after the coming into operation of these rules, in all cases where danger is likely to arise, provide persons or apparatus for the purpose of maintaining a good look-out or for giving warning against any train or engine approaching such men so working. …” This rule is obviously meant to deal with topic 12 of the schedule to the Act, whereas the safety of the apparatus with which the deceased man was concerned is provided for by r. 5 which runs as follows: Where point rods and signal wires are in such a position as to be a source of danger to persons employed on a railway whilst in the execution of their duty, such point rods and signal wires must, within two years from the coming into operation of these rules, be sufficiently covered or otherwise guarded. Within the same period ground levers working points must be so placed that men when working there are clear of adjacent lines, and shall be placed in a position parallel to the adjacent lines, or in such other position and be of such form, as to cause as little obstruction as possible to persons employed on the railway whilst in the execution of their duty.

The respondent says that her husband was a permanent way man, that he was repairing the permanent way when he was killed and that contrary to r. 9 the railway company did not provide any person for the purpose of maintaining a good look-out. It is admitted that no look-out was provided and no question arises as to the likelihood of danger arising but the appellants maintain (1) that the deceased man was not a permanent way man; (2) that he was not at the time of the accident relaying or repairing anything; and (3) that in any case he was not at that time repairing the permanent way. The respondents asserted that the proper sequence of approach to the contentions was to ask first whether Mr. Berriman was engaged in working on the permanent way, secondly whether, in the light of the answer to that question, he was a permanent way man and thirdly whether he was repairing the permanent way. As, for reasons which I give later, I think that the dead man was not repairing the permanent way or indeed engaged on work of repair at the time of his death, the other two questions are not strictly material to this decision, but they have been fully argued and I think it desirable to express a tentative though not necessarily a final view upon them. Prima facie of course words whether in an Act of Parliament or elsewhere must be construed as bearing their natural meaning, and in the present case if unassisted by any evidence, I should take the “permanent way” to include the track, i.e. the rail and sleepers and that which supports them together with its immediate equipment such as at least signal wires and point rods and their supports; and “permanent way men” I should take to be those whose duty it was to attend to the track so defined and the equipment referred to. The technical division adopted by the railway for the purpose of its organization I should regard as having no material bearing on this result. It is, however, true that any occupation may employ terms in a technical sense and if it be shown that they normally have a technical sense se in any industry then that is the sense and the only sense which they must be considered to bear when used in reference to that industry. It is said that the evidence of the railway witnesses has established such a special meaning for the words “permanent way” and “permanent way men” in the present instance and if I thought that the effect of the evidence was to establish such a meaning in general railway parlance, I should give effect to it. But I do not think that a technical meaning has been proved. The evidence seems to me to establish no more than that railway managers have for their own purposes of management divided their staff into various categories one of which they dub permanent way men. They do not establish that the phrase is used in this sense throughout the railway world; still less that

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that is its only general use. Similarly I cannot find that the meaning of “permanent way” is limited to that portion of the line of which they employ these words. The fact that the use of a phrase in a limited sense is convenient to the management does not prove that it bears that meaning throughout the industry and short of an allegation that the railway world throughout its various branches of management and men use the relevant words as excluding men whose duty it is to see to the signals points and their equipment I prefer to attribute to them the wider meaning which in my view they more naturally bear. “Permanent way” in my opinion includes not only the track itself but also all the equipment for guiding a train on its proper course and on to its proper track as well as the metals on which it runs and the ground or structure supporting them, and I feel great difficulty in saying that the point lines are part of the permanent way whereas the point rods which move them and are permanently fastened to them for that purpose are not. The principle and its limitation are I think well expressed by Lord Esher M.R in Unwin v. Hanson, [1891] 2 Q.B. 115, 119. If the Act is one passed with reference to a particular trade, business, or transaction, and words are used which everybody conversant with that trade, business, or transaction, knows and understands to have a particular meaning in it, then the words are to be construed as having that particular meaning, though it may differ from the common or ordinary meaning of the words. … Now dealing with the cutting of trees in the country, is there not a language which all people in the country conversant with trees know and understand? It is not a question of mere forestry, but of what people generally living in the country know and understand by the use of a particular term with respect to the cutting of trees there.

The class whose understanding is to be taken into consideration includes all those conversant with the industry concerned. It is not enough for the evidence to establish that a portion only, namely, the management, limit the expression permanent way men to a particular body. But though the deceased man may have been included amongst permanent way men, the question remains to be answered, was he laying or repairing the permanent way. It appears to be established that he and his mate were, engaged in oiling or cleaning and oiling either the signal lines or the point rods. They had not taken their tools with them, and were equipped only with an oil can, a brush and a feeder. Moreover there was no record on the slate of any other work which they were required to do. In these circumstances the evidence establishes that they were engaged on routine oiling, which might include brushing the dust from the signal wires or point rods, but no more. It was no doubt established that in working they were exposed to danger, that their task took them alongside or inside the track, and it was urged that they required protection just as much as a platelayer working on the track itself. Moreover it was pointed out that according to the appellant's evidence the men who oiled the point slides were classed as permanent way men, and as such, it was said, within the mischief of the Act and rules. My Lords, just as I think the expression permanent way men is to be used in its normal and natural meaning, so to my mind repairing the permanent way must be similarly construed. I cannot think that the ordinary man, if asked whether the deceased man was engaged in repairing the permanent way when he was brushing down and oiling the signal wires and point rods, would say that he was. The exact meaning of repair is perhaps not easy to define, but it contains, I think, some suggestion of putting right that which has gone wrong. It does not include the mere keeping in order by oiling, brushing or cleaning something, which is otherwise in perfect repair and only requires attention to prevent the possibility of its going wrong in the future. Moreover, the combining of “repairing” with “relaying,” if it has any effect at all, seems to me to narrow, not to widen the meaning of the former word. The one word suggests renewal, the other the putting of something into proper order, not the prevention of some future fault. The combined words suggest the putting of the track into proper order, either by renewing or mending. In this last expression of opinion I do not find myself able to accept the view of the members of the

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Court of Appeal, who, as I understand, regard the words as pointing to a wide contrast between two activities. To me, on the contrary, they seem to point to the one general activity of putting in order, an activity which may, however, be carried out in one of two ways, either by renewing or mending. … I do not find much assistance from the construction of other words in another collocation and dealing with another state of affairs. It is, however, suggested that it would be unfortunate if men engaged in oiling the point slides, if rightly classed as permanent way men, should be protected, whereas men employed in oiling the point rods alongside them should not be, or that men working hand signals or point rods should be classed as permanent way men whereas men dealing with mechanical signals or point rods should not be. In either case, however, in my view the question is not are the one or the other permanent way men, but are they repairing the permanent way, and in either case I think they are not. If reason for the limitation of protection to men relaying or repairing the permanent way be required, it is, I think, to be found in the consideration that such men will for extended periods be concentrated on their work and unable to watch for oncoming trains whilst so engaged, whereas men cleaning, oiling or changing points by hand are only momentarily engaged and can ensure their own safety by looking to see the state of the line or lines before they undertake their job. I have only to add that, as in my view no repair within the meaning of the rule was being done, it becomes unnecessary to discuss the principle and limitation of the rule that, where a statute imposes a penalty (as this one does) and the obligation in respect of which the penalty is imposed is expressed in ambiguous terms, the more lenient construction of the section should be adopted so that the penalty may not be incurred in a doubtful case. For the reasons, however, stated above I would allow the appeal.

CASE STUDY 2 – RITA DEVI V. NEW INDIA ASSURANCE CO. (2000) 5 SCC 113 Bench – Justices D. P. Wadhwa & N. Santosh Hegde Justice Hegde (for the Court) One Dasarath Singh was a driver of an auto rickshaw owned by Lalit Singh. The vehicle in question was registered as a public carrier vehicle used for hire by the passengers. This vehicle was insured with the respondent Insurance Company. On 22nd of March, 1995, it is stated that some unknown passengers hired the above auto rickshaw from rickshaw stand at Dimapur between 5 to 6 p.m. It is also not in dispute that the said auto rickshaw was reported stolen and the dead body of driver Dasarath Singh was recovered by the police on the next day, the auto rickshaw was never recovered and the claim of the owner for the loss of auto rickshaw was accepted by the respondent Insurance Company and a sum of Rs.47,220/- was settled by the said company towards the loss suffered by the owner. One Darshan Singh claiming to be a Power of Attorney holder of the present appellants filed a claim petition along with the present appellants under Section 163A of the Motor Vehicles Act, 1988 (for short “the Act”) claiming damages for the death caused to the deceased Dasarath Singh during the course of his employment under Lalit Singh as a death caused in an accident arising out of the use of vehicle. The Motor Accidents Claims Tribunal, Nagaland as per its judgment dated 24th of June, 1996 came to the conclusion that the death of the driver of the auto rickshaw (Dasarath Singh) was caused by an accident coming within the purview of the Motor Vehicles Act, therefore, held that the owner of the vehicle was liable to compensate the death of the driver in money value. Since there was an agreement between the vehicle owner and the respondent Insurance Company to compensate the employer of the vehicle, said legal and statutory liability stood fastened on the respondent Insurance Company. The tribunal also held that the quantum of claim of the claimants stood established and consequently it awarded a sum of Rs. 2,81,500/ against the Insurance Company with interest @ 12% on the amount

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awarded from the date of application till payment. The Insurance Company preferred an appeal by itself before the Gauhati High Court (Kohima Bench) … The High Court … came to the conclusion that there was no motor accident as contemplated under the Act. The High Court further held that the case in hand was a case of murder and not of an accident, hence a petition for claim under the provisions of the Act did not arise. The High Court, accordingly, allowed the appeal and set aside the judgment and the award made by the tribunal. Originally, the above mentioned Power of Attorney holder had preferred the above appeal making the wife and children of the deceased as proforma respondents along with the other respondent. … [T]his Court felt that to protect the interest of the heirs of the deceased the wife and children of the deceased should be first impleaded as appellants to this appeal and the cause title be amended, which having been done and notice being issued, the respondent Insurance Company is represented before us. We have heard the parties. … On behalf of the appellants, Shri Anurabh Chowdhury contends that the deceased was employed to drive the auto rickshaw for ferrying passengers on hire and on the fateful day the auto rickshaw was parked at the rickshaw stand at Dimapur and at about 5 to 6 p.m. some unknown passengers had engaged the said auto rickshaw for their journey towards Singrijan area and thereafter nothing was known of the driver or rickshaw. It is only on the next day that the authorities were able to recover the body of the deceased and the auto rickshaw in question was never traced till date. The owner of the auto rickshaw has, therefore, been compensated by the Insurance Company for the loss of the said auto rickshaw, therefore, the murder of the deceased Dasarath Singh squarely comes within the word death due to accident arising out of the use of motor vehicle found in Section 163A(1) of the Act. Consequently the tribunal was justified in awarding the compensation claimed by the appellants. He contended the word accident has not been defined under the Motor Vehicles Act and the said Act being a beneficial legislation, a liberal interpretation should be given so as to achieve the objects of the Act. He contended that the deceased being an employee was entitled for compensation both under the Motor Vehicles Act and also under the Workmens Compensation Act, 1923. However, under Section 167 of the Motor Vehicles Act, the heirs of the deceased had a choice either to claim compensation under that Act or under the Workmens Compensation Act. The appellants having chosen to invoke the provisions of the Motor Vehicles Act, the Tribunal was wholly justified in awarding the compensation, while the High Court, according to him, without properly appreciating the reasonings adopted by the tribunal has interfered with the just order of the tribunal. … Ms. Pankaj Bala Verma, appearing for the respondent Insurance Company … contends that the meaning ascribed to the word accident in the Workmens Compensation Act by judicial pronouncements cannot be applied to the word accident in the Motor Vehicles Act because the object of the two Acts are different. She supported the judgment of the High Court by contending that on the facts of the present appeal, the death of the driver of the auto rickshaw was caused by felonious acts of certain unknown persons and the same is not caused by an accident arising out of the use of the vehicle. Regarding the maintainability of the appeal, she submits the judgment of this Court was reported subsequent to the High Court Judgment, hence no fault could be found with the impugned judgment on that score and no such objection was taken in regard to the maintainability before the High Court. As pointed out by the learned counsel for the appellants, the Motor Vehicles Act does not define the word accident. However, Section 163A of the Motor Vehicles Act provides for payment of compensation for the death or injury suffered in a motor vehicle accident on a structured formula basis in Section 163A of the Act. Sub-section (1) of the said Section says that 163-A. (1) Notwithstanding anything contained in this Act or in any other law for the time being in force or instrument having the force of law, the owner of the motor vehicle or the authorised insurer shall be liable to pay in the case of death or permanent disablement due to accident arising out of the use of motor vehicle, compensation, as indicated in the Second Schedule, to the legal heirs or the victim, as the case may be.

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Sub section (2) of the said Section also provides: 163-A. (2) In any claim for compensation under that sub section, the claimant shall not be required to plead or establish that the death or permanent disablement in respect of which the claim has been made was due to any wrongful act or neglect or default of the owner of the vehicle or vehicles concerned or of any other person. (emphasis supplied)

A conjoint reading of the above two sub clauses of Section 163A shows that a victim or his heirs are entitled to claim from the owner/Insurance Company a compensation for death or permanent disablement suffered due to accident arising out of the use of the motor vehicle (emphasis supplied), without having to prove wrongful act or neglect or default of any one. Thus it is clear, if it is established by the claimants that the death or disablement was caused due to an accident arising out of the use of motor vehicle then they will be entitled for payment of compensation. In the present case, the contention of the Insurance Company which was accepted by the High Court is that the death of the deceased (Dasarath Singh) was not caused by an accident arising out of the use of motor vehicle. Therefore, we will have to examine the actual legal import of the words death due to accident arising out of the use of motor vehicle. The question, therefore, is can a murder be an accident in any given case? There is no doubt that murder, as it is understood, in the common parlance is a felonious act where death is caused with intent and the perpetrators of that act normally have a motive against the victim for such killing. But there are also instances where murder can be by accident on a given set of facts. The difference between a murder which is not an accident and a murder which is an accident, depends on the proximity of the cause of such murder. In our opinion, if the dominant intention of the Act of felony is to kill any particular person then such killing is not an accidental murder but is a murder simpliciter, while if the cause of murder or act of murder was originally not intended and the same was caused in furtherance of any other felonious act then such murder is an accidental murder. … [W]e find that the deceased, a driver of the auto rickshaw, was duty bound to have accepted the demand of fare paying passengers to transport them to the place of their destination. During the course of this duty, if the passengers had decided to commit an act of felony of stealing the auto rickshaw and in the course of achieving the said object of stealing the auto rickshaw, they had to eliminate the driver of the auto rickshaw then it cannot but be said that the death so caused to the driver of the auto rickshaw was an accidental murder. The stealing of the auto rickshaw was the object of the felony and the murder that was caused in the said process of stealing the auto rickshaw is only incidental to the Act of stealing of the auto rickshaw. Therefore, it has to be said that on the facts and circumstances of this case the death of the deceased (Dasarath Singh) was caused accidentally in the process of committing the theft of the auto rickshaw. Learned counsel for the respondents contended before us that since the Motor Vehicles Act has not defined the word death and the legal interpretations relied upon by us are with reference to definition of the word death in Workmen’s Compensation Act the same will not be applicable while interpreting the word death in Motor Vehicles Act because according to her, the objects of the two Acts are entirely different. She also contends on the facts of this case no proximity could be presumed between the murder of the driver and the stealing of the auto rickshaw. We are unable to accept this contention advanced on behalf of the respondents. We do not see how the object of the two Acts, namely, the Motor Vehicles Act and the Workmens Compensation Act are in any way different. In our opinion, the relevant object of both the Act are to provide compensation to the victims of accidents. The only difference between the two enactments is that so far as the Workmen’s Compensation Act is concerned, it is confined to workmen as defined under that Act while the relief provided under Chapter X to XII of the Motor Vehicles Act is available to all the victims of accidents involving a motor vehicle. In this conclusion of ours we are supported by

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Section 167 of the Motor Vehicles Act as per which provision, it is open to the claimants either to proceed to claim compensation under the Workmen’s Compensation Act or under the Motor Vehicles Act. A perusal of the objects of the two enactments clearly establishes that both the enactments are beneficial enactments operating in the same field, hence judicially accepted interpretation of the word death in Workmen’s Compensation Act is, in our opinion, applicable to the interpretation of the word death in the Motor Vehicles Act also. In the case of Shivaji Dayanu Patil v. Vatschala Uttam More, (1991) (3) SCC 530 this Court while pronouncing on the interpretation of Section 92A of the Motor Vehicles Act, 1939 held as follows: Section 92 A was in the nature of a beneficial legislation enacted with a view to confer the benefit of expeditious payment of a limited amount by way of compensation to the victims of an accident arising out of the use of a motor vehicle on the basis of no fault liability. In the matter of interpretation of a beneficial legislation the approach of the courts is to adopt a construction which advances the beneficent purpose underlying the enactment in preference to a construction which tends to defeat that purpose.

In that case in regard to the contention of proximity between the accident and the explosion that took place this Court held: This would show that as compared to the expression caused by, the expression arising out of has a wider connotation. The expression caused by was used in Sections 95(1)(b)(i) and (ii) and 96(2)(b)(ii) of the Act. In Section 92 A, Parliament, however, chose to use the expression arising out of which indicates that for the purpose of awarding compensation under Section 92 A, the casual relationship between the use of the motor vehicle and the accident resulting in death or permanent disablement is not required to be direct and proximate and it can be less immediate. This would imply that accident should be connected with the use of the motor vehicle but the said connection need not be direct and immediate. This construction of the expression arising out of the use of a motor vehicle in Section 92 A enlarges the field of protection made available to the victims of an accident and is in consonance with the beneficial object underlying the enactment.

In the instant case, as we have noticed the facts, we have no hesitation in coming to the conclusion that the murder of the deceased (Dasarath Singh) was due to an accident arising out of the use of motor vehicle. Therefore, the trial court rightly came to the conclusion that the claimants were entitled for compensation as claimed by them and the High Court was wrong in coming to the conclusion that the death of Dasarath Singh was not caused by an accident involving the use of motor vehicle. … [T]his appeal succeeds, the judgment and order of the High Court dated 9.3.1998 is set aside and that of the Tribunal dated 24.6.1996 is restored. The appellants are entitled to costs in all the counts.

CASE STUDY 3 – UNION OF INDIA V. P. V. KUMAR (2008) 9 SCC 527 Bench – Justice H. K. Sema & Markandey Katju Justice Katju (for the Court) … The facts of the case are that a claim petition was filed before the Railway Claims Tribunal, Ernakulam Bench (hereinafter referred to as the ‘Tribunal’) by the husband, mother and minor son of one Smt. Abja who died on 23.5.1996 in a train accident at Varkala Railway station. The Claims Tribunal disallowed the claim, but the appeal against the said decision was allowed by the Kerala High Court by the impugned judgment dated 25.6.2001 and compensation of Rs. 2 lacs with interest @ 12% from the date of the petition till the date of payment was granted. Aggrieved, this appeal has been filed by the appellant.

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There is no dispute that Smt. Abja was a bona fide passenger holding a second class season ticket and an identity card issued by the Southern Railway. As per the forensic report the cause of death was due to multiple injuries due to the accident. The deceased fell on to the railway track and was run over by train No.6349 Parasuram Express. The Tribunal found that Smt. Abja was a bona fide passenger traveling by the train. Before the Tribunal PW-2, K. Rajan, deposed that while he was at Varkala railway station he found one passenger falling from the Parasuram Express and that the train had stopped. He further stated in his evidence that he went to the north side of the platform and saw the injured lying on the platform. He further stated that the person falling down was the lady who died on the spot. He also stated that the deceased fell down from the compartment of the train when the train was moving. The Tribunal strangely enough held that PW-2 was an interested witness because if he was present on the spot he would have definitely helped the Station Master in removing the dead body from the railway track. Further, the police would have definitely recorded his evidence. For this reason, the Tribunal disbelieved the evidence of PW-2. We are, however, of the opinion that there was no good reason to disbelieve PW-2 because there is nothing to show that he had any motive to give false evidence, or that he was an interested witness. Further, his evidence could not have been discarded merely because he did not go to the spot and help removing the dead body from the railway track. Moreover, merely because the police did not record his statement does not mean that he was not present or gave false evidence. It is common knowledge that in our country often there is a large crowd on railway platforms, and it is simply not possible for the police to take the statement of everyone there. However, the evidence of DW-1, D. Sajjan, who was the Station Master at the railway station, corroborates the evidence of PW-2. DW-1 had deposed that he saw one girl running towards the train and trying to enter the train and she fell down. He has further stated that the deceased Abja had attempted to board the train and fell down from the running train. For this reason, the Tribunal held that this was not an ‘untoward incident’ within the meaning of the expression in S. 123(c) of the Railways Act, 1989 as it was not an accidental falling of a passenger from a train carrying passengers. In appeal, the Kerala High Court was of the view that the deceased sustained injuries, even according to the respondents, in her anxiety to get into the train which was moving. Hence, the High Court held that the deceased came within the expression ‘accidental falling of a passenger from a train carrying passengers’ which is an ‘untoward incident’, as defined in S. 123(c) of the Railways Act, 1989. We are of the opinion that it will not legally make any difference whether the deceased was actually inside the train when she fell down or whether she was only trying to get into the train when she fell down. In our opinion in either case it amounts to an ‘accidental falling of a passenger from a train carrying passengers’. Hence, it is an ‘untoward incident’ as defined in S. 123(c) of the Railways Act. No doubt, it is possible that two interpretations can be given to the expression ‘accidental falling of a passenger from a train carrying passengers’, the first being that it only applies when a person has actually got inside the train and thereafter falls down from the train, while the second being that it includes a situation where a person is trying to board the train and falls down while trying to do so. Since the provision for compensation in the Railways Act is a beneficial piece of legislation, in our opinion, it should receive a liberal and wider interpretation and not a narrow and technical one. Hence in our opinion the latter of the abovementioned two interpretations i.e. the one which advances the object of the statute and serves its purpose should be preferred … It is well settled that if the words used in a beneficial or welfare statute are capable of two constructions, the one which is more in consonance with the object of the Act and for the benefit of the person for whom the Act was made should be preferred. In other words, beneficial or welfare statutes should be given a liberal and not literal or strict interpretation …

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In Hindustan Lever Ltd. v. Ashok Vishnu Kate, 1995 (6) SCC 326 this Court observed: In this connection, we may usefully turn to the decision of this Court in Workmen v. American Express International Banking Corporation, (1985) 4 SCC 71, wherein Chinnappa Reddy, J. in the Report has made the following observations: The principles of statutory construction are well settled. Words occurring in statutes of liberal import such as social welfare legislation and human rights’ legislation are not to be put in Procrustean beds or shrunk to Lilliputian dimensions. In construing these legislations the imposture of literal construction must be avoided and the prodigality of its misapplication must be recognized and reduced. Judges ought to be more concerned with the ‘colour’, the ‘content’ and the ‘context’ of such statutes. … Semantic luxuries are misplaced in the interpretation of ‘bread and butter’ statutes. Welfare statutes must, of necessity, receive a broad interpretation. Where legislation is designed to give relief against certain kinds of mischief, the Court is not to make inroads by making etymological excursions.

… In our opinion, if we adopt a restrictive meaning to the expression ‘accidental falling of a passenger from a train carrying passengers’ in S. 123(c) of the Railways Act, we will be depriving a large number of railway passengers from getting compensation in railway accidents. It is well known that in our country there are crores of people who travel by railway trains since everybody cannot afford traveling by air or in a private car. By giving a restrictive and narrow meaning to the expression we will be depriving a large number of victims of train accidents (particularly poor and middle class people) from getting compensation under the Railways Act. Hence, in our opinion, the expression ‘accidental falling of a passenger from a train carrying passengers’ includes accidents when a bona fide passenger i.e. a passenger traveling with a valid ticket or pass is trying to enter into a railway train and falls down during the process. In other words, a purposive, and not literal, interpretation should be given to the expression. 15. S. 2(29) of the Railways Act defines ‘passenger’ to mean a person traveling with a valid pass or ticket. S. 123(c) of the Railways Act defines ‘untoward incident’ to include the accidental falling of any passenger from a train carrying passengers. Section 124A of the Railways Act with which we are concerned states: 124A. Compensation on account of untoward incident. - When in the course of working a railway an untoward incident occurs, then whether or not there has been any wrongful act, neglect or default on the part of the railway administration such as would entitle a passenger who has been injured or the dependant of a passenger who has been killed to maintain an action and recover damages in respect thereof, the railway administration shall, notwithstanding anything contained in any other law, be liable to pay compensation to such extent as may be prescribed and to that extent only for loss occasioned by the death of, or injury to, a passenger as a result of such untoward incident: Provided that no compensation shall be payable under this section by the railway administration if the passenger dies or suffers injury due to (a) Suicide or attempted suicide by him; (b) Self-inflicted injury; (c) His own criminal act; (d) Any act committed by him in a state of intoxication or insanity; (e) Any natural cause or disease or medical or surgical treatment unless such treatment becomes necessary due to injury caused by the said untoward incident. Explanation For the purposes of this section, “passenger” includes (i) a railway servant on duty; and (ii) a person who has purchased a valid ticket for traveling by a train carrying passengers, on any date or a valid platform ticket and becomes a victim of an untoward incident.

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(Emphasis supplied)

The accident in which Smt. Abja died is clearly not covered by the proviso to 124A. The accident did not occur because of any of the reasons mentioned in cls. (a) to (e) of the proviso to Section 124A. Hence, in our opinion, the present case is clearly covered by the main body of Section 124A of the Railways Act, and not its proviso. Section 124A lays down strict liability or no fault liability in case of railway accidents. Hence, if a case comes within the purview of Section 124A it is wholly irrelevant as to who was at fault. .. [I]t is the duty of the State under our Constitution to function as a Welfare State, and look after the welfare of all its citizens. In various social welfare statutes the principle of strict liability has been provided to give insurance to people against death and injuries, irrespective of fault. Thus, S. 3 of the Workmen’s Compensation Act 1923 provides for compensation for injuries arising out of and in the course of employment, and this compensation is not for negligence on the part of the employer but is a sort of insurance to workmen against certain risks of accidents. Similarly, Section 124A of the Railways Act 1989, Ss. 140 and 163A of the Motor Vehicles Act, 1988, the Public Liability Insurance Act, 1991 etc. incorporate the principle of strict liability. … In view of the above, we are of the opinion that the submission of learned counsel for the appellant there was no fault on the part of the Railways, or that there was contributory negligence, is based on a total misconception and hence has to be rejected. Thus, there is no force in this appeal which is accordingly dismissed. There shall be no order as to costs. …

PENAL STATUTES The general rule regarding interpretation of Penal statutes is very clear – they have to be interpreted strictly. We have already examined above the House of Lords’ opinion in London & North Eastern Railway Co. v. Berriman, [1946] 1 All.E.R. 255 that provides some guidance in this respect. Stated simply by Singh in Principles of Statutory Interpretation (13 ed.) the rule is as follow: If there is a reasonable interpretation which will avoid the penalty in any particular case we must adopt that construction. If there are two reasonable constructions we must give the more lenient one. … If two possible and reasonable constructions can be put upon a penal provision, the court must lean towards that construction which exempts the subject from penalty rather than the one which imposes penalty. It is not competent to the courts to stretch the meaning of an expression used by the Legislature in order to carry out the intention of the Legislature.

There are several reported British and Indian cases where this principle has been iterated again and again. This is a principle squarely accepted as the most fundamental rule of interpretation of criminal statutes. However, this rule is not always followed. To understand what the rule says and how the rule is actually practiced let us examine the Supreme Court’s opinion in State of Maharashtra v. Tapas D. Neogy, (1999) 7 SCC 685 where the expression ‘any property’ in section 102 of the Criminal Procedure Code was construed to include a ‘bank account’ thus entitling the investigation officer to seize the same when investigating a case under the Prevention of Corruption Act, 1988. We may restate the rule in the following words before we start our examination of Neogy in order to understand where the line is drawn when it comes to strict interpretation of Penal statutes. The rule, taken from Singh’s Principles of Statutory Interpretation (13 ed.) is based on an old 1872 British case Dyke v. Elliot, (1872) LR 4 PC 184 and it goes:

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No doubt all penal statutes are to be construed strictly, that is to say, the court must see that the thing charged as an offence is within the plain meaning of the words used, and must not strain the words on any notion that there has been a slip; that there has been a casus omissus; that the thing is so clearly within the mischief that it must have been included if thought of. On the other hand, the person charged has a right to say that the thing charged although within the words, is not within the spirit of the enactment. But where the thing is brought within the words, and within the spirit, there is a penal enactment is to be construed, like any other instrument, according to fair commonsense meaning of the language used, and the court is not to find or make any doubt or ambiguity in the language of a penal statute, where such doubt or ambiguity would clearly not be found or made in the same language in any other enactment.

After Negoy we will examine State of U.P. v. R. S. Vaidya, AIR 1965 SC 78, where a three judge bench had to interpret Clauses 5 and 7 of the Iron and Steel (Control) Order, 1956. This case was a prosecution involving the charge that the accused had obtained iron but didn’t use the iron for actual construction of the building for the purpose of which it was issued to him. The accused was held not guilty by applying the rule of strict interpretation to the law. CASE STUDY 1 – STATE OF MAHARASHTRA V. TAPAS D. NEOGY (1999) 7 SCC 686 Bench – Justices G. B. Pattanaik & N. Santosh Hegde Justice Pattanaik (for the Court) … This appeal by special leave is directed against the judgment and order dated 9.4.97 of the Bombay High Court … The short question that arose before the High Court [was] whether a Police Officer, investigating into an offence can issue prohibitory order in respect of the bank account of the accused in exercise of power under s. 102 of the Criminal Procedure Code? … [T]he short facts are that one Tapas D. Neogy was an Architect & Town Planner in the Department of Town Planning of the Union Territory of Daman and Diu. The CBI, ACB, Mumbai registered three First Information Reports against the said Tapas Neogy and three others for offences under Sections 120-B, 467, 468, 471 and 420 IPC and S. 13(2) read with S. 13(1)(d) of the Prevention of Corruption Act, 1988. It was alleged that the accused committed the offence while on duty and while he was posted as Architect and Town Planner under Government of Daman. The original plan of Daman was prepared by the Department of Architecture and Planning and was approved by the Town and Country Planning Board. In the approved plan, various zones were earmarked for industries, roads, defence, agriculture etc. It was further alleged that out of total area of land, 7.25% was earmarked for industries and 41.21% for agriculture and open space. The zoning could be changed by the Town and Country Planning Board. The procedure to alter the agricultural land into non-agricultural land was that the land owners who wish to change their land to non-agricultural use were required to apply to the Collector, who was the competent authority to grant such permission. Such applications were then forwarded to Town Planning Department for the purpose of clearance. It was further alleged that Tapas Neogy and accused Narayan Divakar entered into a conspiracy by which Divakar caused a forged map of Daman to be prepared, thereby increasing industrial zone. On the basis of the same forged map, accused Tapas Neogy issued false certificates indicating that the land fell within the industrial zone. On account of such act, the land prices shot up from Rs.100/- to Rs.110/- per square meter to Rs.800/- to Rs.1,600/- per sq. meter, and in the process, accused Divakar and accused Tapas Neogy caused pecuniary advantage to be gained by the land owners. Pursuant to the First Information Report, the premises of Tapas Neogy at Daman were searched on 12-10-1993 and several incriminating documents were seized. On the same day, the premises of the mother of accused Tapas Neogy at Calcutta was also searched and certain documents

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were seized. The locker in Indian Bank at Calcutta, jointly held by Tapas Neogy’s mother and his brother was also searched and was sealed and another locker held by the mother and sister of Tapas was searched and was also sealed. The Investigating Officer issued instructions to Managers of different banks not to allow the accounts to be operated upon. The mother of Tapas then filed an application before the Additional Chief Metropolitan Magistrate, 37th Court, Esplande, Mumbai, under s. 457 of the Cr.P.C. to allow her to operate the bank account and for return of the documents and articles seized, claiming that they belonged to her. The Magistrate by his Order dated 13-10-1995, granted the relief in respect of the locker in question but refused to allow the mother of said Tapas Neogy to operate the bank account. The Magistrate was of the view that he had no inherent power and, therefore, has no jurisdiction to allow to grant the relief sought under s. 457 of the Criminal Procedure Code. Against the said order of the learned Magistrate, the matter was carried to the Bombay High Court. The High Court in the impugned judgment analysed the provisions of S. 102 of the Criminal Procedure Code and after noticing several judgments of different High Courts, came to the conclusion that the bank account of an accused or any relation of the accused cannot be held to be ‘property’ within the meaning of S. 102 of the Code of Criminal Procedure and, therefore, the Investigating Officer has no powers either to seize the said bank account or to issue any prohibitory order, prohibiting the operation of the bank account. In coming to this conclusion, the learned Single Judge followed the Division Bench decision of the Bombay High Court in Lloyds Bank’s case and some other decisions of some other High Courts, taking the similar view. The State of Maharashtra in this appeal assails the correctness of the view taken by the learned Single Judge of the Bombay High Court. At the outset, it may be stated that there is no decision of this Court on the point in issue. When Mr. Shukla, the learned Senior Counsel, appearing for the appellant began his submissions, Mr. Mariarputham, the learned counsel for the respondent pointed out that pursuant to the impugned judgment of the Bombay High Court, the bank accounts in question have been allowed to be operated upon and, therefore, the question of law raised does not survive for consideration. But since the High Courts in the country have taken divergent views on the interpretation of S. 102 of the Code of Criminal Procedure and since there is no decision of this Court on the question, we indicated that notwithstanding the fact that the order has been allowed to be operated upon, it will be appropriate for this Court to entertain and decide the question. The law relating to the prevention of corruption and matters connected therewith were being dealt with by the Prevention of Corruption Act, 1947, which was amended in the year 1964 based on the recommendations of the Santhanam Committee. In the Criminal Law Amendment Ordinance, 1944, there are provisions to enable attachment of illgotten wealth obtained through corrupt means, including from transferees of such wealth. To make the existing anti-corruption laws more effective by widening their coverage and by strengthening the provisions, the Parliament enacted the Prevention of Corruption Act, 1988, which received the assent of the President of India on September the 9th, 1988. Under the Act, the definition of the expression “public servant” stood widened and penalty for offences under ss. 161 to 165A of the Indian Penal Code was enhanced. Under s. 13 of the Act, a public servant who commits criminal misconduct, is liable to be punished with imprisonment for a term which shall be not less than one year but which may extend to seven years and shall also be liable to fine. Without providing the amount of fine which could be imposed under sub-s. (2) of S. 13 the legislature have indicated the matters to be taken into consideration for fixing the fine under s. 16 of the Act and it categorically provides that for fixing the amount of fine under sub-s. (2) of S. 13 or Section 14, the Court shall take into consideration the amount or the value of the property which the accused person has obtained by committing the offence. Under s. 18 of the Act, power has been conferred on the Police Officer to inspect any bankers’ book and to take or cause to be taken certified copies of the relevant entries therefrom, and the bank concerned shall be bound to

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assist the police officer in the exercise of his powers under s. 18. Under s. 22 of the Act, the provisions of the Code of Criminal Procedure have been made applicable to any proceeding in relation to an offence punishable under the Act. We have analysed the aforesaid provision of the Prevention of Corruption Act, 1988 as in our view the object engrafted in the different provisions of the Prevention of Corruption Act, 1988 has to be taken into account while interpreting the provisions contained in S. 102 of the Code of Criminal Procedure. It may be stated that though the Prevention of Corruption Act has been enacted to deal with the ‘public servants’ who receive gratification other than legal remuneration in respect of an official act and who by corrupt or illegal means or by abusing his position obtains for himself or for any other person any pecuniary advantage or valuable thing, or such public servant who is found to be in possession or has at any time during the period of his office been in possession of property for which he cannot satisfactorily account, of pecuniary resources or property disproportionate to his known sources of income, yet there is no specific provision in the Act itself as to how or in what manner the said property can be dealt with by the Investigating Officer even if he comes to the conclusion that the assets in the possession of the ‘public servant’ is directly linked with the commission of the offence. It is therefore, only by applying the provisions of S. 102 of the Criminal Procedure Code if the said provision is held to be conferring power of seizing and/or prohibiting operation of bank account, the Investigating Officer can pass orders of seizing the bank account or issue prohibitory order to the banks not to allow the account holder to operate the account. Coming now to the provisions of S. 102 of the Code of Criminal Procedure, the said provisions are extracted herein below in extenso: 102. Power of Police Officer to seize certain property. - (1) Any police officer may seize any property which may be alleged or suspected to have been stolen, or which may be found under circumstances which create suspicion of the commission of any offence. (2)Such police officer, if subordinate to the officer in charge of a police station shall forthwith report the seizure to that officer. (3) Every Police Officer acting under sub-section (1) shall forthwith report the seizure to the Magistrate having jurisdiction and where the property seized is such that it cannot be conveniently transported to the Court, he may give custody thereof to any person on his executing a bond undertaking to produce the property before the Court as and when required and to give effect to the further orders of the Court as to the disposal of the same.

A plain reading of sub-section (1) of S. 102 indicates that the Police Officer has the power to seize any property which may be found under circumstances creating suspicion of the commission of any offence. The legislature having used the expression “any property” and “any offence” have made the applicability of the provisions wide enough to cover offences created under any Act. But the two preconditions for applicability of S. 102(1) are that it must be ‘property’ and secondly, in respect of the said property there must have suspicion of commission of any offence. In this view of the matter the two further questions that arise for consideration are whether the bank account of an accused or of his relation can be said to be ‘property’ within the meaning of sub-s.(1) of S. 102 of the Cr.P.C. and secondly, whether circumstances exist, creating suspicion of commission of any offence in relation to the same. Different High Courts in the country have taken divergent views in this regard. In the case of Swaran Sabharwal v. Commissioner of Police, 1988 Cri. L.J. 241 (Del) (DB) a Division Bench of Delhi High Court examined the question whether bank account can be held to be ‘property’ within the meaning of S. 102 of the Cr.P.C. In the said case, proceeds realised by sale of official secrets were deposited by the accused in his wife’s account. The Court in that case came to hold that it is not quite sure whether

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monies deposited in a bank account can be seized by means of a prohibitory order under the provisions of S. 102 but even assuming that a bank account is a ‘property’ within the meaning of S. 102 of the Code of Criminal Procedure, the further consideration must be satisfied namely the property has been found under circumstances which create the suspicion of the commission of an offence. But in that case it is not the discovery of the property that has created suspicion of commission of an offence but on the other hand the discovery of the bank account is a sequel to the discovery of commission of offence inasmuch as the police suspected that some of the proceeds realised by the sale of the official secrets have been passed on to the bank account of the wife of the accused. Therefore, the Court was of the opinion that the provisions of S. 102 cannot be invoked. In the case of Purbanchal Road Service v. State, 1991 Cri L.J. 2798 (Gau) a learned Single Judge of the Gauhati High Court examined the provisions of S. 102 of the Criminal Procedure Code and the validity of an order by a Police Officer, prohibiting the bank from paying amount to the accused from his account. The learned Judge came to the conclusion that word ‘seize’ used in S. 102 Cr.P.C. means actual taking possession in pursuance of a legal process and, therefore, in exercise of the said power, a bank cannot be prohibited not to pay any amount out of the account of the accused to the accused nor can the accused be prohibited from taking away any property from the locker, as such an order would not be a ‘seizure’ within the meaning of S. 102 of the Criminal Procedure Code. The learned Single Judge agreed with the view taken by Allahabad High Court in the case of Textile Traders Syndicate v. State of UP, AIR 1960 All 405. In the Allahabad Case on which Gauhati High Court relied upon, what was decided by the Court is, once money passes on from the accused to some other person or to the bank, money itself becomes unidentifiable and, therefore, there cannot be any question of seizure of the same by the Police Officer. In the case of Malnad Construction v. State of Karnataka, 1994 Cri L.J. 645 (Kant) a learned Single Judge of Karnataka High Court examined the provisions of S. 102 of the Criminal Procedure Code and relying upon the Gauhati High Court’s decision, referred to supra, came to hold that the ‘seizure’ in S. 102 would mean taking actual physical possession of the property and such a prohibitory order to the banker of the accused not to operate the account is not contemplated under the Code and consequently, the police has no power to issue such order. Thus the High Courts of Karnataka, Allahabad, Gauhati and Delhi have taken the view that the provisions of S. 102 of the Criminal Procedure Code cannot be invoked by the Police Officer in course of investigation to issue any prohibitory order to the banker or the accused from operating the bank account. In P. K. Parmar v. Union of India, 1992 Cri. L.J. 2499 (Del) a learned Single Judge of Delhi High Court considered the power of police officer under s. 102 of the Criminal Procedure Code, in connection with the fraudulent acquisition of properties and opening of fictitious bank accounts and withdrawal of huge amounts as subsidy from Government by producing bogus documents by the accused. The learned Judge took note of the earlier decision of Delhi High Court in Swaran Sabharwal vs. Commissioner of Police and analysed the provisions of S. 102 of the Criminal Procedure Code and the facts of the case were as under. It was revealed that during investigation the prosecution came to know that without actually manufacturing phosphate and fertilizers, the accused withdrew as much as Rs.3.39 crores as subsidy from the Govt. of India by producing bogus documents. The Court ultimately came to the conclusion that the recovery of assets in the bank links prima facie with the commission of various offences with which they have been charged by the CBI and, therefore, the police officer could issue directions to various banks/financial institutions freezing the accounts of the accused. The learned Judge in the aforesaid case has really considered the amount of money which the accused is alleged to have swindled by producing bogus documents which prompted him to hold that the power u/s. 102 Cr.P.C. can be exercised.

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In Bharath Overseas Bank v. Minu Publication, 1988 MLW (Cri) 106 a learned Single Judge of the Madras High Court considered the same question and came to the conclusion that the expression ‘property’ would include the money in the bank account of the accused and there cannot be any fetter on the powers of the police officer in issuing prohibitory orders from operating the bank account of the accused when the police officer reaches the conclusion that the amount in the bank is the outcome of commission of offence by the accused. The Court considered the fact as to how in modern days, commission of white collar crimes and bank frauds are very much on the increase and banking facilities have been extended to the remotest rural areas and, therefore the expression ‘property’ may not be interpreted in a manner so as to exclude the money in a bank which in turn would have the effect of placing legal hurdles, in the process of investigation into the crimes. According to the learned Judge, such literal interpretation of the expression 'property' could not have been the intent of the framers of the Criminal Procedure Code. In paragraph 11 of the said judgment, the learned Judge referred to the object behind investing the police with powers of seizure. It will be appropriate to extract the same in extenso: It would now be useful to refer to the object behind investing the police with powers of seizure. Seizure and production in court of any property, including those regarding which an offence appears to have been committed or which appears to have been used for the commission of any offence or any other property will have a two-fold effect. Production of the above property may be necessary as evidence of the commission of the crime. Seizure may also have to be necessary, in order to preserve the property, for the purpose of enabling the Court, to pass suitable orders under S.452 of the Criminal Procedure Code at the conclusion of the trial. This order would include destruction of the property, confiscation of the property or delivery of the property to any person claiming to be entitled to possession thereto. It cannot be contended that the concept of restitution of property to the victim of a crime, is totally alien to the Criminal Procedure Code. No doubt, the primary object of prosecution is punitive. However, Criminal Procedure Code, does contain several provisions, which seek to reimburse or compensate victims of crime, or bring about restoration of property or its restitution. As S. 452, Crl.P.C. itself indicates, one of the modes of disposing of property at the conclusion of the trial, is ordering their return to the person entitled to possession thereto. Even interim custody of property under Ss. 451 and 457, Crl.P.C., recognises the rights of the person entitled to the possession of the properties. An innocent purchaser for value is sought to be reimbursed by S. 453, Crl.P.C. Restoration of immovable property under certain circumstances, is dealt with under S.456, Crl.P.C. Even, monetary compensation to victims of crime or any bona fide purchaser of property, is provided for under S.357, Crl.P.C. Wherein when a Court while convicting the accused imposes fine, the whole or any part of the fine, if recovered, may be ordered to paid as compensation to any person, for any lose or injury, caused by the offence or to any bona fide purchaser of any property, after the property is restored to the possession of the person entitled thereto. This two fold object of investing the police with the powers of seizure, have to be borne in mind, while setting this legal issues.

This Judgment of the learned Single Judge of the Madras High Court was followed in a later decision in the case of Bharat Overseas Bank v. Prema Ramalingam, 1991 MLW (Cri) 353, wherein the learned Judge agreeing with Padmini Jesudurai, J in Bharat Overseas Bank’s case came to hold that money in bank account is ‘property’ within the meaning of S. 102 of the Criminal Procedure Code, which could be seized by prohibiting order. In the aforesaid case, the learned Judge has also noticed the fact that the Judgment of Padmini Jesudurai, J, … was upheld by the Division Bench subsequently. In the case of Gurcharan Singh v. State of Punjab, 1978 (80) PLR 514 (DB), a Division Bench of the Punjab & Haryana High Court differing with the view taken by the Allahabad High Court in Textile Traders, came to hold that the bank account would be ‘property’ and as such would be capable of being seized under s. 102 of the Code of Criminal Procedure. Having considered the divergent views taken by different High Courts with regard to the power of seizure under s. 102 of the Code of Criminal Procedure, and whether the bank account can be held to

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be ‘property’ within the meaning of said S. 102(1), we see no justification to give any narrow interpretation to the provisions of the Criminal Procedure Code. It is well known that corruption in public offices has become so rampant that it has become difficult to cope up with the same. Then again the time consumed by the Courts in concluding the trials is another factor which should be borne in mind in interpreting the provisions of S. 102 of the Criminal Procedure Code and the underlying object engrafted therein, inasmuch as if there can be no order of seizure of the bank account of the accused then the entire money deposited in a bank which is ultimately held in the trial to be the outcome of the illegal gratification, could be withdrawn by the accused and the Courts would be powerless to get the said money which has any direct link with the commission of the offence committed by the accused as a public officer. We are, therefore, persuaded to take the view that the bank account of the accused or any of his relation is ‘property’ within the meaning of S. 102 of the Criminal Procedure Code and a police officer in course of investigation can seize or prohibit the operation of the said account if such assets have direct links with the commission of the offence for which the police officer is investigating into. The contrary view expressed by Karnataka, Gauhati and Allahabad High Courts, does not represent the correct law. It may also be seen that under the Prevention of Corruption Act, 1988, in the matter of imposition of fine under sub-s. (2) of Section 13, the legislatures have provided that the Courts in fixing the amount of fine shall take into consideration the amount or the value of the property, which the accused person has obtained by committing the offence or where the conviction is for an offence referred to in cl. (e) of sub- s.(1) of Section 13, the pecuniary resources or property for which the accused person is unable to account satisfactorily. The interpretation given by us in respect of the power of seizure under s. 102 of the Criminal Procedure Code is in accordance with the intention of the legislature engrafted in S. 16 of the Prevention of Corruption Act referred to above. In the aforesaid premises, we have no hesitation to come to the conclusion that the High Court of Bombay committed error in holding that the police officer could not have seized the bank account or could not have issued any direction to the bank officer, prohibiting the account of the accused from being operated upon. Though we have laid down the law, but so far as the present case is concerned, the order impugned has already been given effect to and the accused has been operating upon his account, and so, we do not interfere with the same. …

CASE STUDY 2 – STATE OF U.P. V. R. S. VAIDYA AIR 1966 SC 78 Bench – Justices K. N. Wanchoo, J. R. Mudholkar & S. M. Sikri Justice Sikri (for the Court) This appeal by special leave is directed against the judgment of the Allahabad High Court dismissing the appeal of the State against the judgment of the Sessions Judge allowing the appeal of the respondent and acquitting him. The respondent obtained permits under the Iron and Steel (Control) Order, 1956 hereinafter referred to as the Control Order for about 28 tons of iron, including 6 tons of rods, 151/2 tons of joints and 2 tons of G.C. Sheets. He is alleged to have purchased these articles on the basis of the above permits between July 1957 and March 1958. The permits were obtained on three applications made by the respondent. Only two applications are in the printed record. The first application is dated May 23, 1957, and is addressed to the Provincial Iron and Steel Controller, Kanpur, through the District Magistrate, Deoria. In this application the respondent stated that he was a political sufferer and he was constructing a public temple for which he required five tons of M.S. Round and eight tons of Girder. He further stated that the requirements were [not] available at Deoria and as such the application should be considered and forwarded to the Controller for consideration and orders. It appears that this application was forwarded, duly recommended, by the District Supply Officer. Deoria, and ultimately a permit was given to him by the Controller. He made another application dated September 7, 1957. In

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this application he again stated that he was a political sufferer and he was constructing a public temple and dharamshala for which he required certain quantities of iron. He further stated that the requirements were not available at Deoria and as such the application should be forwarded to the Controller. This application was also recommended and forwarded and ultimately a permit was given to him. On January 2, 1958, the accused made another application … and a permit was given to him by the District Supply Officer himself. … It is the case of the prosecution that the respondent after obtaining the materials sanctioned to him under the permits did not construct any temple or dharamshala building at Barhaj Bazar or at any other place. We may mention that Barhaj Bazar is the place where he lives and the applications which are in the record also mention this address. Before the Magistrate who tried the case the respondent was put the following question: It is alleged that the iron obtained under the permits mentioned in questions 2, 3 and 4 was not utilised for the purpose for which it was taken. What have you to say in this respect?

The respondent's reply was: No. Whatever iron I got, I used it in the temple situate in mauza Tinbari, P.S. Madhubam district Azamgarh, which is my place of residence as well.

Before the Magistrate the accused had admitted to have purchased about 17 tons of iron. The Magistrate held it proved that the accused had at least purchased one ton more from one Mishri Lal, P.W. 7. Thus, he came to the conclusion that the accused had purchased at least 18 tons of iron. He further held that on the evidence it was clear that only 3/4 ton of rods had been utilised in the building constructed at Tinhari, but as the building had been constructed between 1943-52, no portion of the iron obtained by the accused had been utilised for the purpose for which it was procured. He further held that the accused had disposed of the iron wrongfully at Kanpur and did not even bring the same to Barhaj Bazar or Tinhar. Accordingly he held that the respondent had contravened the provisions of cl. 7 of the Control Order. The respondent filed an appeal before the Sessions Judge. The Sessions Judge held that barring a very small quantity of iron, the remaining quantity that was received by the respondent had not been utilised in the temple or dharmashala at Tinhari. Differing from the Magistrate, he held that it was not proved by any evidence that the respondent had actually sold the excess quantity at Kanpur. He then observed that “in the absence of any such evidence the possibility of the appellant retaining the iron at some other place is not completely excluded.” Then construing cl. 7 of the Control Order, he observed that “in the aforesaid section there is no mention that the iron purchased should be utilised at any particular place or within a particular period. The condition in the various permits granted to the appellant was simply this that he should utilise the iron in erecting a temple or dharamshala in the town of Barhai. It may be noted that the main purpose was the construction of a temple and dharamshala; the place where it was to be constructed does not appear to have much significance. Further no time-limit is given during which the entire quantity of iron should be utilised.” Accordingly he held that there had been no contravention of cl. 7 of the Control Order. The State appealed to the High Court. Srivastava, J. dismissed the appeal holding that there had been no contravention of cl. 7 of the Control Order. According to him, two essentials are necessary before there can be contravention of. “In the first place the iron and steel should be ‘used’; secondly it should be used otherwise than in accordance with the conditions contained or incorporated in the document which was the authority for the acquisition.” He held that the first condition had not been fulfilled because it had not been proved that the respondent had used the iron which he had obtained on the basis

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of the permit. It appears that the findings of the learned Sessions Judge, as well as the Magistrate, that he had not used or utilised the remaining portions of the iron and steel at all were not questioned before him. According to him, if the remaining quantity of iron was still unutilised or unused, then the respondent could not be said to have done anything contrary to cl. 7. He further held that the second condition had also not been fulfilled because the permit itself contained only one condition printed on its back. This condition was “that the materials required against the permit will be used only for the purpose for which it was asked for and has been given.” According to him, it is not permissible to refer to the application made for the permit because the only document that can be looked at is the permit. He was, however, prepared to concede that “it is also open to the officer to mention in the permit that it is being granted for the purpose mentioned in the application. That may be a shortcut for avoiding the trouble of entering in the permit the details of the purpose. In that case it may be permissible to refer to the application.” In spite of this concession, he concluded that “when even that is not done in fact no condition is mentioned in the permit at all about the manner in which the iron or steel is to be utilised it cannot be said that a condition of the permit has been broken because the assurance given in the application has not been carried out.” Mr. B.C. Misra, learned counsel for the appellant has urged before us that on the facts found by the learned Sessions Judge. cl. 7 of the Control Order has been contravened. He says that the word “use” in cl. 7 includes “kept for eventual use for another purpose.” He says that if one stores iron and steel one uses it and the word “use” does not imply consumption only. Relying on Maxwell on Interpretation of Statutes, Eleventh Edition, p. 266, he says that we should give a wide construction to the word “use” in cl. 7. Clause 5 and the relevant portion of cl. 7 of the Control Order are as follows: 5. Disposals. – No person, who acquires iron or steel under clause 4, or no producer shall dispose of or agree to dispose of or export or agree to export from any place to which this Order extends any iron or steel, except in accordance with the conditions contained or incorporated in a special or general written order of the Controller 7. Use of Iron and Steel to conform to conditions governing acquisition. – A person acquiring iron or steel in accordance with the provisions of clause 4 shall not use the iron or steel otherwise than in accordance with any conditions contained or incorporated in the document which was the authority for the acquisition …

We are unable to accede to the above contentions. There is no provision in the Control Order requiring that iron or steel acquired under the Control Order should be utilised within a specified time. If it had been the intention to include keeping or storing within the word ‘use’ there would have been some provision regarding the period during which it would be permissible to keep or store the iron, for it is common knowledge that building operations take some considerable time and are sometimes held up for shortage of material or other reasons. Further the word ‘use’ must take its colour from the context in which it is used. In cl. 7 the expression “use … in accordance with the conditions contained” suggests something done positively, e.g. utilisation or disposal. Mere ‘non-use’, in our opinion, is not included in the word ‘use’. The passage relied on by the learned counsel in Maxwell is as follows: Wide Sense given to words: The rule of strict construction, however, whenever invoked, comes attended with qualifications and other rules no less important, and it is by the light which each contributes that the meaning must be determined. Among them is the rule that the sense of the words is to be adopted which best harmonises with the context and promotes in the fullest manner the policy and object of the legislature. The paramount object, in construing penal as well as other statutes, is to ascertain the legislative intent, and the rule of strict construction is not violated by permitting the words to have their full meaning, or the more extensive of two meanings, when best effectuating the intention. They are, indeed, frequently taken in the widest sense, sometimes even in a sense more wide than etymological

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belongs or is popularly attached to them, in order to carry out effectually the legislative intent, or, to use Sir Edward Coke’s words, to suppress the mischief and advance the remedy.

But this passage does not warrant the giving of a meaning to a word apart from the context in which it is used. There is no doubt that the legislative intent of the Control Order is that this essential commodity should be utilised in accordance with the conditions contained in the permit, but no clause in this Control Order evinces a legislative intent that a mere non-user is also prohibited and made punishable. The learned counsel referred to London County Council v. Wood, (1897) 2 QB 482, but we do not derive any assistance from that case. The head-note brings out the point decided in that case as follows: The Highways and Locomotives Act, 1878, provides by s. 32 that ‘A country authority may … make … by-laws for granting annual licences to locomotives used within their country.’ And by a by-law made by the London County Council under that section it was provided that ‘No locomotive shall be used on any highway within the county of London until an annual licence for the use of the same shall have been obtained from the council by the owner thereof Held, that a steam-roller which was not at the time being employed in road-making, but was merely passing through the county to a destination outside was being ‘used within the country’ within the meaning of the section and the by-law.’ In the context, the word ‘used’ was, with respect, properly construed. Collins, J., held that ‘the object of the Act was evidently to protect the highways, and the effect of a steam-roller upon the highways may be just the same whether it be engaged in mending the roads or not’.

In conclusion we hold that it has not been established that the respondent had used the iron acquired by him in contravention of cl. 7 of the Control Order. … Accordingly we hold that the respondent has not contravened cl. 7 of the Control Order. The appeal accordingly fails and is dismissed. …

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UNIT 9 – CONSTITUTIONAL INTERPRETATION AN ECONOMIC INTERPRETATION OF THE CONSTITUTION RICHARD POSNER, THE CONSTITUTION AS AN ECONOMIC DOCUMENT 56 George Washington Law Review 4 (1987) [Some parts of the article have been edited, all footnotes have been removed]

There was a time when an ‘economic’ theory of the Constitution meant the theory, expounded years ago by Charles Beard, that the purpose of the Constitution was to redistribute wealth from the poorer segments of society to the upper class, to which the Framers belonged. This was an extremely narrow view, both of economics (implicitly viewed by Beard as the unmasking of exploitation) and of the Constitution, and is now discredited. Today when one thinks of how economics might be used to study the Constitution, no fewer than eight distinct (though overlapping) topics come to mind: (1) The economic theory of constitutionalism; that is, the economic properties, and likely consequences, of requiring a supermajority for some kinds of political change. (2) The economics of constitutional design—of the constitutive rules of a political system—and thus (a) of the separation of powers within the federal government and (b) of federalism (i.e., the overlapping sovereighty of the federal government and the states). (3) The economic effects (broadly defined) of specific constitutional doctrines, such as the exclusionary rule or the limitations *5 that the Supreme Court has imposed in the name of the First Amendment on suits against the media for defamation, whether or not the doctrines themselves are founded on sound, or on any, economic principles. (4) The interpretation of constitutional provisions or doctrines that may have an implicit economic logic—for example, freedom of speech, when conceived of as a guarantor of a free market in ideas; the commerce clause, when conceived of as a guarantor of a national common market; and the takings clause, when conceived of as a guarantor of property rights. (5) Proposals to refashion constitutional law to make it a comprehensive protection of free markets, whether through reinterpretation of existing provisions or through new amendments, such as a balancedbudget amendment. (6) The problem of ‘dualism,’ by which I mean the paradox of the Supreme Court's being passionately committed to liberty in the personal sphere and almost indifferent to liberty in the economic sphere. (7) The relationship (if any) between the Constitution, as drafted and as interpreted, and the economic growth of the United States. (8) The extent to which judges should feel themselves free to use economic analysis as an overarching guide to constitutional interpretation (that is, beyond the limits of points (3) and (4)); in other words, the relationship between economics and interpretation. I shall touch on each of these eight areas, though the touch will at times be light. I. The Economics of Constitutionalism

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Words like ‘constitution’ and ‘constitutionalism’ have multiple rather than single meanings. They can refer to the principle of limited government, to the constitutive rules of government, to the most important rules — constitutive and otherwise — of government, and to legislation that cannot be revised by the ordinary legislative process. It is with the last of these meanings that I shall begin, for it is perhaps the most distinctive feature of the United States Constitution that it can be changed only by a supermajority. This feature raises the question — on which there is a substantial economic literature — of what constitutive rules and what rights ought to be placed beyond the power of a majority to correct. I shall take up that question after first examining a largely unexamined, but I think logically prior, economic problem inherent in the decision to have a written constitution that cannot be changed through the ordinary legislative process. This is the problem of governance by rules over time. The problem has been discussed extensively in relation to long-term contracts and (a substitute for longterm contracts, as we shall see) public-utility regulation. A contract cannot (in general) be lawfully revoked or modified without the unanimous consent of the parties. In this respect it is more like a constitution, which requires a supermajority to amend, than like a statute, which requires only a majority to amend and is therefore relatively easy to alter as changed circumstances may require. Like a constitution, but unlike a statute, a contract establishes a rule that is difficult to change yet is designed to govern the future. The name given in the contract setting to governance by rules over time is ‘contingent contracting’ — contracting with reference to contingencies that may never occur. The cost of anticipating and providing explicitly for all possible contingencies is very high; in the case of a contract designed to remain in force for the indefinite future and govern a wide range of social interactions, it is for all practical purposes infinite. So, if some contingency arises, there may very well be no contractually specified response to it. What to do? One possibility is a supplementing interpretation by a court — an effort to supply the solution the parties might have been expected to supply if they had negotiated with reference to the contingency. The difficulty is that if the contingency occurs many years after the contract was made, a court may find it impossible to figure out what the parties would have decided to do about the contingency had they foreseen it and contracted with specific reference to it. Another possibility is renegotiation by the parties. This solution may be reasonably satisfactory if the situation is one of bilateral monopoly, and thus mutual dependence, which creates pressure for a solution (while also, however, making negotiation costly). But it has seemed inadequate where only one party to the contract is going to have a monopoly when the contingency occurs—for example, where a single firm (street railway, retail supplier of electricity, local telephone company, etc.) is going to confront a mass of unorganized consumers for the indefinite future. That essentially would be the situation in constitutional law if the Constitution just ‘ran out,’ in the sense of being deemed inoperative if problems not foreseen and provided for by the Framers arose, leaving the society's constitutional arrangements to a renegotiation between the government and the people. Another possible solution — the regulatory solution of having a permanent agency act (in principle, though generally not in practice) as the consumers' representative — is approximated in the constitutional setting by the Supreme Court, which is designed to be independent, so far as possible, from the other branches of government. When viewed so, as a kind of regulatory protector of the citizenry, the Court cannot adopt a narrow interpretation of the constitutional text, because that text will not provide for all possible contingencies, especially ones that arise over a period of what is now two hundred years. On this view, the significance of the constitutional text as a constraint on courts is in setting broad outer bounds to the exercise of judicial discretion rather than in prescribing the actual rules of decision. As a realistic matter, this approach describes much of constitutional law; it is a body

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of judge-made law, constrained by the constitutional text but not derived from it or prescribed by it in a substantial sense. The regulatory analogy is reinforced by consideration of the economic tradeoffs between rules and standards as methods of controlling behavior. A rule is a precise directive that leaves little discretion to those charged with applying it; a standard provides some direction but delegates considerable discretion to those charged with applying it. A standard is more adaptable to changed circumstances than a rule and is therefore preferred when the indefinite future is being regulated. Public-utility statutes usually (but not always) contain broad standards such as ‘public convenience and necessity.’ The Constitution, too, contains many broadly worded provisions that invite or at least permit interpretation as standards — ‘freedom of speech,’ ‘respecting an establishment of religion,’ ‘general welfare,’ ‘necessary and proper,’ ‘due process,’ ‘cruel and unusual punishments,’ etc. — and many of its rule-like provisions have become either obsolete, irksome, or irrelevant (e.g., the right to bear arms, the right to jury trial in civil cases at law if the stakes exceed $20, the requirement that the President be native-born and at least thirty-five years old). The problem with a standard is that often its practical effect is to delegate the real policymaking authority to the persons who administer the standard—in the present setting, the judges. Because of this problem it may well be descriptively more accurate to view the Supreme Court as the (constrained) agent of the present generation than as the agent of the Constitution’s Framers, the latter view being unrealistic because of an insurmountable agency-cost problem. The Framers are dead; the ‘instructions’ they left, the most important of which are in any event (and inevitably) vague, are losing pertinence with every passing year; and the Framers’ agents — if this is how the judges should be viewed normatively — have weak incentives to be faithful agents. Although, as Professor Landes and I have argued, an independent judiciary is a necessary condition for enforcing legislative ‘deals’ (including the original ‘deal’ embodied in the Constitution and Bill of Rights) in accordance with their original tenor rather than current political preferences, it is not a sufficient condition, because it does not by itself create strong incentives for judges to carry out the will of the Framers rather than their own will. The question of judicial incentives is a baffling one because judicial employment, especially at the federal level, is hedged with restrictions designed to reduce, though they can never eliminate, the role of self-interest in judicial decision-making. One is led to ask such questions as: Why should minorities entrust their protection to judges — what incentive has the judiciary, which is not likely to be drawn predominantly from members of minority groups, to side with those groups rather than the majority? Shouldn't minorities be expected to do well in the legislative arena, where, as we know, special interest groups, invariably minority groups of some sort, generally do well? About all that can be said in our present and inadequate state of knowledge of judicial incentives is that the stripping away of the usual incentives to self-advancement makes it somewhat more likely that judges will actually try to conform their decisions to the law; so if the law contains protections for minorities, those protections are more likely to be enforced by judges than by legislators. More on this in Part VIII. Although agency costs are the subject of an extensive economic literature, they have been ignored in economic writing about constitutionalism. Libertarian economists, and (a largely overlapping group) members of the balanced-budget amendment school, often evince an unwarranted faith in the power of the written word to anticipate contingencies and constrain responses to them, making the judges’ role mechanical and their incentives an uninteresting question. Economists and other non-lawyers tend to exaggerate the objectivity of judicial decisions, i.e., the degree to which those decisions are determined by nondiscretionary application of clear and settled principles. Not so Richard Epstein, a lawyer who recognizes the slipperiness of legal text and wants the judges to make new constitutional law — aggressively designed to promote free markets — by freely interpreting the Constitution. More on his proposal in Part IV.

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In analogizing the Constitution to a long-term contract, I do not mean to embrace the fallacy pointed out recently by Russell Hardin of supposing that constitutions rest on the same solidly consensual foundations as contracts between adequately informed adults. Apart from the facts that the Constitution was not ratified by popular vote, that voters are often poorly informed and rarely unanimous, and that many who supported the Constitution did so because it seemed better than the Articles of Confederation rather than because it was their preferred set of arrangements, there is the elementary fact that the vast majority of people who have lived under the Constitution have never had a chance to vote, directly or indirectly, for or against it. Acquiescence is not necessarily consent. For some purposes the Constitution can be analogized to a contract, but it is not a contract. Having considered the costs created by having rules or standards that are difficult to change — costs in inflexibility in the case of rules, agency costs in the case of standards — I am now prepared to consider when those costs are worth incurring and when therefore the super-majoritarian feature that principally distinguishes constitutions from other forms of legislation should be used to place a subject outside the ordinary political arena. The easiest case is where inflexibility is unimportant because the required rule is by its nature arbitrary: e.g., two senators from each state. The harder but more important case is where allowing a topic to be the subject of ordinary majority-vote politics would invite very costly rent seeking. If the vote of a simple majority could change the basic form of government or expropriate the wealth of a minority, enormous resources might be devoted to seeking and resisting such legislation. In a sense, a supermajoritarian constitutional provision confines legislative discretion to matters that do not matter all that much; the stakes are not large enough to evoke a disproportionate expenditure of resources on redistributing wealth or utility. A qualification should be noted: Resources deflected by the Constitution from investment in making fundamental changes or dispossessing minorities of their wealth will be redirected not only into commercial or other presumptively efficient private activity but also into efforts to obtain ‘ordinary’ legislative redistributions. And this brings me to the difficult question that underlies the proposals for a balanced-budget amendment, whether there should be a general constitutional prohibition of rentseeking, or (in other words) purely redistributive, legislation. A purely redistributive statute by definition does not increase the size of the social pie, but actually shrinks it because resources will be expended on obtaining and resisting the enactment of the statute. So there is an economic argument for outlawing such legislation, and it can be done only by constitutional provision. The counterargument (more on this later) is that courts cannot readily identify purely redistributive legislation, in part because much redistributive legislation may be defensible on efficiency grounds by reference to problems of social peace, free-rider problems, and so forth. One may be led by this discussion to wonder how a constitution could ever come to contain substantial protections for disfavored minorities, such as criminal defendants or members of fringe religious sects; any minority powerful enough to obtain constitutional protection need hardly fear — one might think — adverse legislation. Three answers come to mind. First, persons who might fear one day becoming members of a disfavored minority might support constitutional protection for minorities even at the cost of extending protection to people they did not like. This does not explain how, for example, the equal protection clause — designed primarily though not exclusively for the protection of racial minorities and in particular blacks — got into the Constitution, but may explain why the clause is drafted in general terms: so that it can cover groups to which members of the majority might someday belong. Moreover (and this is my second point), the interests of minority and majority groups, or of minority groups that in the aggregate form a majority, may be so intertwined that there is majority (more precisely, supermajority) support for a constitutional provision because members of these groups fear that the balance of political power may someday shift against them. Third, special interest groups are not

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excluded from constitutional deliberation, and a minority group may have the political muscle to obtain a constitutional provision that a majority of voters do not want. II. The Constitutive Principles of the Constitution Besides protecting rights, the Constitution establishes the basic constitutive rules of American government (some scholars would regard some of the rights, such as free speech, as constitutive also). I shall discuss these rules under two headings: ‘separation of powers' and ‘federalism’. A. Separation of Powers I use this term loosely; I realize that the Framers rejected separation of powers in its purest form. The most striking example of this rejection is the provision giving the President a veto power over legislation; this makes him a part of the legislative process. The requirement of senatorial advice and consent brings the Senate into the executive process. These are details, though not unimportant ones; by increasing the number of persons whose views must be taken seriously, the provisions on sharing power reduce the dangers of mistake and impetuosity. The essential point, however, is that the parceling out of legislative, executive, and judicial powers among different branches, with or without much overlap, increases the transaction costs of governing. Effective government requires the concurrence of all three branches. Hence, separation brings about a situation analogous to bilateral (or ‘trilateral’) monopoly. Analogous — not identical. Because none of the branches is a profit maximizer, both the incentives to withhold agreement and the incentives to negotiate to a mutually beneficial solution are different than in the usual case of bilateral monopoly. But it seems a fair guess that the transaction costs of governing are indeed higher than they would be in a unitary system. They are higher, moreover, for wealth-enhancing programs as well as for redistributive or exploitive ones. This makes unclear as a matter of theory whether the separation of powers results in a net improvement in social welfare compared to a system such as England’s, where the executive and legislative powers are combined (in principle in the House of Commons, in practice in the Cabinet) and where the courts, though independent in much the same sense as our courts, do not have power to invalidate legislation. The question has not been examined empirically. Another wrinkle is that separation of powers can lower as well as raise the costs of government, not only by increasing deliberation (the point I began this section with) but also by enabling a more efficient exploitation of the division of labor. If judges’ tenure were subject to the vicissitudes of legislative politics, it would be difficult to attract able people to a career in judging; law would be even less stable than it is, because it would change with changes in the opinions or desires of powerful legislators; and the quality of justice meted out by dependent courts would be low in cases in which the legislature had an interest. It might even be difficult for the legislature to make the interest group ‘deals’ that are such a staple of legislative activity. An independent judiciary is more likely to enforce such a deal according to its original terms than a judiciary that bends with every breeze from Congress, and an interest group is more likely to make a deal if it has some confidence that it will obtain benefits that extend beyond the two-year term of the enacting Congress. Similarly, though less certainly, if Congress took upon itself the executive role, that role might be performed badly (as the Continental Congress discovered), because the effective execution of policy requires unity of command; I say ‘might’ because this is a problem that most parliamentary systems have solved. And some observers believe that experience has demonstrated that courts are not well equipped to make and execute laws outside the scope of traditional judicial power — though that has

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not kept them from trying, others believe, with great success. The executive branch may be at a comparative disadvantage to the legislative branch in legislating and to the judicial branch in judging; yet this is not certain, either, because much of what the executive branch does is legislating (through the promulgation of regulations) and judging (through administrative agencies and Article I courts). … B. Federalism The system of power sharing between the federal government and the states — the system that has come to be called ‘federalism’ — might seem to be just another aspect of the separation of powers. This is true in one sense but not another. It is true in the sense that decentralizing government, like creating specialized branches, may increase efficiency. Federalism enables the massive diseconomies of scale that would be encountered by any effort to govern so large, populous, and complex a society as ours from Washington, D.C., the way France is governed from Paris or England from London, to be avoided. It also encourages experimentation with different methods of providing governmental services and may foster the provision of services tailored to differing local conditions — although these are really just aspects of avoiding diseconomies of scale. Yet federalism does not substantially increase the transaction costs of governing, the way the separation of powers within the federal government does, because, as we are about to see, the federal government can always override the states in matters within the scope of its authority. If the federal government could govern only with the concurrence of the state governments, we would have a federation, not a nation, and the transaction costs of governing would be exceedingly high. But of course federalism is not costless; one cost is a more complex legal system than if we had a unitary judiciary enforcing a uniform body of law. The point I want to emphasize is the efficiency of parceling out governmental powers among competing (not merely independent) institutions. With regard to governmental powers exercised on the state level, or even more clearly on the local level, there is competition among governments to provide good service at low (tax) cost; those governments that do not will tend to lose residents to the others. (Such competition exists at the international level as well, but in severely attenuated form.) The competition is not perfect (what is?). Not only are there costs of relocation, but some taxable assets are immobile — land, for example. The Framers were therefore wise not to stop with creating a competitive structure. In the commerce clause they authorized Congress to regulate interstate and foreign commerce and thus to prevent states from imposing harmful externalities on other states and to internalize beneficial externalities; several other provisions also restrict the power of states to tax or otherwise burden interstate or foreign commerce. The due process and equal protection clauses of the Fourteenth Amendment provide some protection to owners of immobile resources, who without these federal protections might be at the mercy of state expropriation. Consistent with these observations I have tried to construct a theory of federal law in relation to the states that would define the federal government’s mission as one of overcoming the externalities that a system of competing governments fosters. But in my previous work I treated the sovereignty of the states (limited as that sovereignty has become as a result of successive amendments to and interpretations of the Constitution) as being irrelevant to economic analysis. It is not; it is what assures a genuine competition among states. If state and local governments merely were administrative conveniences decreed by the central government, they would be no obstacle to centralization, i.e., to monopoly government. To the extent they are independent of the central government they provide real, if today very limited, competitive alternatives for consumers of governmental services. This point may seem inconsistent with my previous point that the federal government can override the states in any area within the capacious scope of its authority. There is indeed little if any constitutional impediment to the federal government’s preempting a specific area of governance, but the structure of the Senate, as well as the states' quasi-sovereign status in the constitutional scheme, discourages a wholesale transfer of functions from the states to the federal bureaucracy. The federal system provides

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a more secure basis for decentralized government than a formally centralized system that the central government might (or might not) choose, for reasons of convenience, to decentralize administratively. But like separation of powers in its economies-of-specialization aspect, decentralization is a two-edged sword. It makes government more efficient, but all this means is that it enables government to do more with a given amount of resources. The result may not be a smaller government with the same output of services but an equally large or larger government with a higher output of services — and the higher output may be inefficient because it may take the form of economically unwarranted interferences (redistributive or paternalistic) with free markets and personal liberty. III. The Economic Criticism of Specific Constitutional Doctrines Despite what I have said so far, I certainly do not believe that every provision of the Constitution is efficiency enhancing. An example of one that is not is the provision that the President must be at least thirty-five years old. This is rank paternalism. It is true that, for a variety of good economic reasons, voters lack good information about candidates; but the one fact a voter is well able to assess in evaluating a candidate’s qualifications is the candidate’s age. A more important example is the selfincrimination clause of the Fifth Amendment; no economic reason has ever been offered for why government should not be allowed to penalize a person who refuses to give testimony, merely because the testimony might show that the person has committed a crime. And in an age when constitutional tort suits are a reality, the exclusionary rule — an inefficient sanction for violations of the Fourth Amendment's prohibition against unreasonable searches and seizures — no longer has a persuasive economic justification. But a legal doctrine is not beyond the range of fruitful economic analysis just because the doctrine lacks a core of economic good sense, especially if, as is often the case, the doctrine has an implicit economic logic — only a bad one. The greatest triumphs of ‘law and economics’ have come in demonstrating the economic sense-lessness of well-established legal doctrines in such fields as antitrust and corporation law. So when, as in the Supreme Court’s efforts to defend more extensive regulation of broadcast than of print media by reference to the inherent ‘scarcity’ of the electromagnetic spectrum, the Court neglects greater scarcities that afflict the production of newspapers, or when it makes arbitrary distinctions between personal and economic rights (see Part V), its economic blunders should be pointed out — and maybe eventually the doctrines will be changed, just as many antitrust doctrines have been changed under the pressure (it seems) of careful economic thinking. Here are two more examples of judge-made constitutional doctrines that seem to rest, in part anyway, on bad economic thinking. First, the presumption that due process of law in repossessing property obtained on credit requires a hearing before rather than after repossession is defended by asserting that property rights will be impaired without such a hearing. Second, the principle that legislation which seems irrational must therefore violate the due process or equal protection clauses is defended by reference to a model of the legislative process in which the characteristic product of the process is legislation that promotes the general welfare. In truth, requiring ‘predeprivation’ hearings in credit-sale cases will just raise interest rates, to the detriment of the class ostensibly protected by additional procedural safeguards. And the interest group theory of politics — revived, refined, and expanded by economists — suggests that it is quixotic to invalidate all legislation that is not welfare maximizing. The point is not that no legislation promotes the general welfare, but that the legislative process is a market in which legislation is in effect auctioned off to the highest bidders, and often these are compact interest groups scheming to transfer wealth to themselves from diffuse, uninformed, and for both reasons under-represented groups, such as consumers and taxpayers. An unknown but possibly quite large fraction of legislation reduces the total wealth of society without making the distribution of that wealth any more ‘equitable’ according to any defensible criterion of distributive justice. A consistent judicial commitment to good-faith ‘rationality review,’ designed to identify and invalidate ‘nakedly’

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redistributive legislation, would therefore portend an enormous increase in the already overextended role of the courts in our society, and might, indeed, require a return to the Lochner era (see Part V). A more modest function of economic analysis in relation to noneconomic dictrines is to remind the courts that all legal doctrines have costs. By displaying those costs, whether analytically or quantitatively, the economist can place warranted pressure on the supporters of the doctrines to establish the existence of offsetting benefits. For example, the exclusionary rule leads to overdeterrence of police searches. The resulting costs to the legal process, and to the community (in the form of a higher crime rate, because criminal investigations are made more cumbersome and uncertain), cannot easily be justified if there exists — and there does — an alternative sanction, the tort suit, which if properly configured would provide a deterrent more likely to approximate the optimum. IV. Implicitly Economic Constitutional Doctrines A number of provisions of the Constitution seem to have an implicit economic logic. This is perhaps clearest with respect to the ‘negative’ or ‘dormant’ commerce clause, which is to say the interpretation of the commerce clause as forbidding states to erect barriers to interstate commerce unless Congress authorizes them. When so interpreted, the commerce clause becomes a charter of free trade — a subject of detailed economic analysis since Adam Smith — and, relatedly, an element of an efficient federalism. By preserving the sovereignty of the states the Framers of the Constitution created a danger that, like independent nations, states might be pressured by interest groups to establish trade barriers. This would be of no concern if competition among states were perfect, for that would imply that any consumer or supplier in a state who was harmed by such a barrier would move immediately and costlessly to another state; the trade barrier would be ineffective. But as mentioned earlier, interstate competition is not perfect; there are significant immobilities. If Wisconsin, say, forbids the importation of milk in order to protect its dairy farmers, the price of milk in Wisconsin will rise, and although Wisconsin consumers will be hurt, they may lack sufficient political ‘clout’ (being a diffuse and unorganized group) to undo the prohibition, while the costs of relocating to another state may be too great for them to vote against the prohibition with their feet. The ‘negative’ commerce clause is one device (and the privileges and immunities clause in Article IV is another—and one better grounded in the text and history of the Constitution) for preventing states from abusing their ‘market power’ and thus for ensuring that the federal principle is used to promote rather than retard interstate competition aimed at optimizing the cost and quality of governmental services. The takings clause of the Fifth Amendment also seems founded on economic considerations — and so indeed does the Fourth Amendment (and not just the exclusionary rule that has been grafted onto it by the courts). In forbidding only unreasonable searches and seizures, the Fourth Amendment requires courts to balance the costs, to privacy and property, of searches and seizures against the benefits in reducing the incidence of crime, and therefore to use an essentially economic calculus in applying the amendment to specific conduct. In so arguing, I do not mean to suggest that any time a legal doctrine requires judgments of more and less, as almost any doctrine that speaks in terms of reasonableness does, it is economic in character. All rational activity involves a balancing of pros and cons, and while economics is in its broadest sense the science of rational choice, it does not follow that every rational choice is in an interesting sense economic. Moreover, the things balanced might not be monetizable even in principle, or might be weighted in a manner remote from utilitarian or economic calculation. It is an empty form of economic analysis of law that is content to attach the economic label to every balancing test in law. However, as I have argued elsewhere in discussing the Fourth Amendment, economics does more than identify the interests to be balanced. It teaches that the exclusionary rule leads to overdeterrence by creating a sanction that costs more to society than the social (not private) cost of an illegal search to the criminal defendant, and it teaches that, other things being equal, the graver the crime being investigated the lower should be the level of probable cause that the police need

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establish in order to be authorized to conduct a search. These are not truisms; they are nonobvious implications of economic analysis. I even believe that the speech and religion clauses of the First Amendment can be interpreted to require that the government allow the operation of a free market in ideas and religion respectively, so that no regulation of these markets that cannot pass a strict efficiency test should be allowed to stand. Such an interpretation seems broadly consistent not only with the delphic text and equivocal background of these provisions, but with much, though not all, of the vast interpretive superstructures that have been erected on them. Again, I am not suggesting that (for example) just because the courts balance the interest in a fair trial against the interest in freedom of the press in deciding what restrictions can be placed on news coverage of a trial, what they are doing is economics in an interesting sense. But I do think that economics is useful in explaining the situations in which censorship is allowed and not allowed, the differential treatment of commercial and noncommercial speech, and such interpretive concepts under the First Amendment's religion clauses as ‘neutrality’ and ‘accommodation.’ But these are stories for another day. I realize that in speaking of constitutional rights in economic terms I open myself up to the accusation that I am distorting the meaning of the word ‘right’ by viewing it as instrumental rather than ultimate, a means rather than an end, a ground for resisting governmental action rather than an absolute barrier to it. But the truth is that the boundary of every constitutional right is drawn at the point of balance between conflicting social goals; no right is absolute. The reason that the Constitution’s prohibitions of such practices as torture and slavery seem absolute is that the inevitable balancing act is built into the definition of the practice. ‘Torture’ and ‘slavery’ are not neutral, referential terms; they are the names of the forms of practices (coercing statements and involuntary servitude, respectively) that we abhor. We do not call the methods by which we permit confessions to be extracted against the better judgment of the suspect torture even though it is plain that there would be fewer confessions if all custodial interrogation were forbidden. And we do not call the forms of involuntary servitude that we condone slavery—whether that servitude takes the form of involuntary military service, compulsory labor by prison inmates and prisoners of war, school attendance under compulsory schooling laws, parents making their children perform household chores, dangerous or demeaning work that workers ‘agree’ to do only under the compulsion of economic necessity, or adherence procured only by threat of monetary or injunctive sanctions to a long-term employment contract that has turned disadvantageous to the employee. I claim, indeed, that both the prohibition against extracting evidence by torture (one meaning that has been given to the Fifth Amendment’s self-incrimination clause) and the prohibition against slavery (the Thirteenth Amendment) can be given an economic grounding. A long history of using torture to extract evidence has shown that it is an inefficient method of criminal investigation and proof. It has very high error costs, creates much gratuitous suffering, and deflects law enforcers from devoting adequate resources to solving difficult crimes; it is sometimes easier to extract a confession from an innocent person by torture than to convict a guilty person. As for slavery, it is abundantly clear that involuntary slavery is the antithesis of the free market model that underlies most concepts of economic efficiency. And while in principle it might occasionally be efficient for a person to sell himself into slavery, at least temporarily (as in eighteenth-century contracts of indentured servitude), so unlikely is such a case today that it makes good sense to ban self-enslavement; the probability is overwhelming that a case ostensibly of self-enslavement would in fact be a case of enslavement by force or fraud. Much could be said on each of the implicitly economic doctrines of constitutional law, but they have been considered in some detail elsewhere and I shall therefore pass on to — V. Proposals to Constitutionalize Laissez-Faire

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I refer to the proposals by legal scholars such as Bernard Siegan and Richard Epstein to interpret the Constitution as a general guarantor of free markets, and by some economists to strengthen this aspect of our constitutional system by amending the Constitution: for example to require a balanced federal budget in the hope that this would reduce the role of government, and thus increase that of private markets, in the allocation of resources. Obviously the merit of proposals to reinterpret the Constitution cannot be appraised on economic grounds alone, even if the purpose and substance of the reinterpretation are economic to the core; for, as I shall argue, the first task of interpretation is interpretation, rather than the choice of optimal policies. Yet must of the argument in support of such proposals is of course economic. And economics does not just suggest the desirability of using free markets to allocate resources; it also points out the illogical features in existing interpretations of the ‘economic’ clauses of the Constitution. As Professor Epstein has stressed, to limit the takings clause to the physical seizure of private property and ignore completely the effects of regulation in diminishing or even destroying property values is problematic, because the consequences of the two types of seizure are often the same. True, there are also differences. Many more people are affected by a regulation than by a taking, and therefore the organizing of political resistance is more feasible. And the costs of rendering compensation are greater the more people the ‘taking’ affects, holding constant the total value affected. But the differences must be brought into the analysis explicitly before the traditional distinction between physical takings and regulatory impairments can be validated on functional grounds. Like any form of aggressive constitutionalism, whether left-wing or right-wing, the economic libertarian approach (whether it takes the form of reinterpretation of the existing Constitution, amendment, or both) diminishes the role of democracy — potentially dramatically. The approach does not entail merely a redirection of constitutional protection from so-called personal liberties to economic liberties, for the consistent libertarian believes as strongly in the former as in the latter. To him the ‘marketplace in ideas’ is a reality and not a metaphor, and sexual freedom, provided it does not cause harm to third parties, is as worthy of constitutional protection as freedom to choose an occupation or decide how much rent to charge a tenant. What is envisaged therefore is a drastic curtailment, across the board, in the scope of permissible legislative, executive, and administrative action. Not only much ‘moral’ regulation, but all redistributive measures, would be forbidden unless justifiable on efficiency grounds, as the basic criminal laws can be justified as measures against a crude but highly inefficient form of ‘rent seeking,’ or as the charitable deduction from income tax can be justified as a measure for overcoming the free-rider problem that depresses charitable giving below the optimal level. The scope of democratic government would not quite be limited to the selection and oversight of persons administering a small number of relatively uncontroversial governmental functions, such as internal and external security the prevention of (other) harmful externalities, and the encouragement of beneficial ones. But that is the direction in which the proposal tends. And as both the regulation of morals and the redistribution of wealth are commonplace activities of modern government (whether they should be is a separate question), there is tension between the economic approach on the one hand and democratic political theory — not to mention democratic political practice — on the other. The tension illustrates how economic analysis challenges conventional pieties. If E.M. Forster was unable to give more than two cheers for democracy, the economic analyst is unlikely to be able to give more than one. The economist recognizes that government can do some things better than the free market can do but he has no reason to believe that democratic processes will keep government from exceeding the limits of optional intervention. On the contrary, the acute free-rider problem of democratic voting (the benefits of voting are too small to make it worthwhile to incur the considerable costs of becoming a well-informed voter) ensures that compact interest groups will be able to use the democratic process to redistribute wealth in their favor, often at great social cost. So, for Proudhon’s

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‘property is theft,’ the economist is likely to substitute ‘government is theft.’ This insight provides the essential underpinning for proposals to constitutionalize laissez-faire. To grasp the nature and extent of the tension between laissez-faire and democratic political or legal theory it is necessary to distinguish between two fundamental political conceptions that are sometimes confused: limited government and democratic government. The proponents of limited government want the government to be relatively powerless and, partly for this reason, are not much interested in how the people who run the government are chosen; their interest is in preserving a large sphere for private action free of governmental interference. The proponents of democratic government want to make sure that the government is in some sense in the hands of the people and are confident that if it is placed there it can be trusted to promote the general welfare, without having to be limited. Among economists, Bentham was the most emphatic advocate of the position that a democratic government, unimpeded by constitutional limitations, would indeed promote the general welfare. But of course modern economic libertarians do not believe this. They believe that unfettered democratic government leads to the special interest state. They are of the limited-government school, and it might almost be a detail whether the government being limited is democratic or monarchical. In fact, economists have little to say about forms of government. Because our government is democratic, the economic criticisms of government have focused on democratic government. Economists have pointed out that because an individual’s vote in a political election has little instrumental value (one vote is not going to change the outcome), voters have only weak incentives to become informed about the impact of public policy on them unless they can be molded into effective interest groups. The result is a strong bias in favor of legislation that favors such groups, regardless of the general will. This bias is an embarrassment to democratic theory, because, other things being equal, the smaller a group is the easier it will be for its members to organize an effective interest group, while the larger and more diffuse the group is that the interest group seeks to plunder, the harder it will be for the members of the victimized group to concert resistance. But as there is no reason to believe that monarchy or dictatorship or oligarchy or other nondemocratic forms of government are less susceptible to interest group pressures, the economic criticism may be a criticism of government rather than of democracy. And democracy does have important advantages over the other forms of government. It is the most riskaverse form (and most people are risk averse), and it solves better than any other the problem of arranging an orderly succession of government officials. The more aggressive one’s constitutionalism the more the risk-averse character of democratic government is compromised, however, as the locus of power shifts to a small, unelected, life-tenured committee — the Supreme Court. It is not possible to limit government tout court; it is only possible to tell one branch to limit the others. The branch with this fortunate assignment is part of limiting, not limited, government. A pragmatist must agree with Charles Evans Hughes that the Constitution is what the judges say it is; the practical effect of constitutionalizing laissez-faire would be to make the Justices even more powerful oligarchs than they are today. This point can be made more concrete by noting that the line between efficient public policy (which the laissez-faire Constitution would permit) and purely redistributive policy (which it would forbid) is not clear in practice or even in theory. In particular, a good deal of compelled redistribution of wealth may be the cheapest method of preserving social peace and so may be cost-justified; plausible examples are pro-union legislation designed to head off labor violence, generous welfare allotments designed to head off riots in the slums, and make-work public employment designed to reduce the incidence of crime by enlarging the opportunities of potential criminals to obtain lawful income, thereby increasing the opportunity costs of crime. Moreover, some, perhaps much, ‘immoral’ behavior between consenting adults may, like pollution, have third-party effects warranting regulation. Indeed, economists cannot even agree on what shall count as a third-party effect. If I am offended by your reading pornography,

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does this mean that you are imposing a cost on me and I am therefore entitled on strictly libertarian grounds to advocate a law against the sale of pornography even to consenting adults? Finally, voluntary democracies, such as condominium associations, use majority-voting principles that allow for some redistribution of wealth among members of the association. Far from fixing clear limits to the welfare state the libertarian approach may, paradoxical though this must seem, lay a theoretical foundation for inferring a constitutional obligation to provide basic, and perhaps other, government services. After all, the libertarian approach, at least in the form pressed by its most ardent proponent among lawyers, Professor Epstein, is rooted in the political philosophy of Hobbes and Locke, and latterly of Robert Nozick, all of whom believe that the legitimacy of the state depends on our being able to say that people would give up the liberties they enjoy in the state of nature in exchange for the state’s guarantees of internal and external security. The ‘nightwatchman state’ is the consideration for the surrender of these liberties. What if the state fails to carry out its part of the social contract? What if, for example, it provides ineffectual police protection, a common situation in the United States today? Does not the social contract theory that underlies the libertarian approach to constitutional interpretation imply that the state has violated the Constitution (viewed in that approach as the embodiment and guarantor of the social contract)? But why stop with police protection? What about fire protection, public education, and even welfare—all services that the state provides in lieu of private services? To the extent that public provision of these services cannot be justified in laissez-faire terms, Epstein might reply that the Constitution forbids their provision, and hence the issue of their adequate provision does not arise. But as I said earlier, the boundaries of the nightwatchman state are uncertain, and a variety of services not envisaged by Hobbes and Locke, ranging from pollution control to public support of the arts, may be reconcilable with it. Does not the libertarian approach therefore open up vast possibilities for a most aggressive constitutionalism—one that does not just tell the state to leave people alone but tells it to allocate more resources to particular public uses? I fear so. A final objection to libertarian proposals for reinterpreting the Constitution to make it a charter of laissez-faire is the cost of judicial decision-making. Courts have limited competence to make economic (as other) decisions; and once it is recognized that constitutional doctrines are not self-defining or selfenforcing, the risk of heavy error costs and heavy litigation costs in any ambitious expansion of constitutional regulation becomes apparent. Courts seem to do well in developing common law principles that allocate resources efficiently; whether they would do well in shifting the boundary between common law and statutory regulation is more doubtful. The courts may not be competent to oversee the return of the nation to laissez-faire principles, however desirable those principles are. VI. Personal Versus Economic Liberties: The Double Standard The recent upsurge of interest in remaking the Constitution into a charter of economic liberties has brought to the fore the fascinating issue of the contemporary dualism in constitutional interpretation. However, discussion of that issue is not new; indeed, the dualism is not new. Between the 1890s and the late 1930s the Supreme Court was extremely solicitous of infringements of economic liberty but paid little attention to infringements of civil rights or civil liberties; since the 1950s the reverse has been true. No satisfactory explanation for this about-face has ever been offered — though if it is interpreted, as it can be in part, as a change from emphasizing efficiency to emphasizing distributive values, it is consistent with broader changes in the role of government over this interval. The reversal is not total, and indeed recent years have seen an epicyclical movement. The Supreme Court in the name of the First Amendment has partially deregulated commercial advertising, and in the process has gone far to deregulate the legal profession. And in cutting back on some of the excesses of the ‘Warren Court’ in the field of criminal and welfare rights the Court has sometimes employed a rough version of costbenefit analysis. Nevertheless the tendency to upgrade ‘personal’ rights such as the right to an abortion, and to downgrade ‘economic’ rights such as the right not to have one’s property taken without just

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compensation, the right to occupational liberty, and the right to transact interstate business without discrimination by reason of being a nonresident, persists. Efforts to justify the contemporary dualism are no more convincing than efforts to explain it. Constitutional provisions protecting personal liberties are no more emphatic or more broadly worded than those protecting economic liberties. Article I, for example, flatly forbids the states to pass any ‘ex post facto Law,’ or any ‘Law impairing the Obligation of Contracts.’ The courts have rewritten the first of these provisions to put ‘criminal’ before ‘ex post facto,’ and the second to put ‘unreasonably’ before ‘impairing.’ Imagine what a similar program of watering down clear constitutional language would have done to the First Amendment! And it is not true that the Framers thought that personal liberties were worthier of constitutional protection than economic liberties or that the competition of interest groups would somehow produce a social optimum. Nor is it true that courts know more about the personal and social realm than about the economic realm, though they think they do — confusing the technical with the difficult, as if evaluating the consequences of a rent-control ordinance, which is a form of tax on landlords and the subject of a vast and convergent economic literature, were more difficult than evaluating a tax on newspapers or the ethical implications and social consequences of abortion on demand. It is not even true that racial and religious minorities, women, homosexuals, criminal defendants, advocates of unpopular causes, or other groups whose members make aggressive claims of civil rights and civil liberties necessarily have less political ‘clout,’ and therefore are more needful of judicial protection, than the victims of constitutionally dubious economic regulations. The victims of oppressive economic regulations are mainly consumers, marginal workers (predominantly female or nonwhite), poor tenants, and other people of average or low income who — and this is the most important point — are diffuse, inarticulate, unorganized, and therefore politically weak. That is why they are the victims of redistributive legislation. Here, by the way, is a possibility for linking up the economic-libertarian approach to the Constitution with the more fashionable approach of John Ely, who argues that the grand design of the Constitution is to assure representation, if need be by judicial action, for persons and groups who are underrepresented in the ordinary political process. He thinks that blacks, homosexuals, aliens, and adherents to unpopular religions or ideologies are typical examples of underrepresented groups; implicitly he believes that economic interests are well represented. But that is because he either is not familiar with or does not agree with interest group theories of the political process; maybe he also does not realize that corporations are not economic persons but merely conduits to persons (workers, shareholders, employees) who may not be wealthy or well organized. Only some economic interests are well represented — those that are espoused by effective interest groups (e.g., by farmers, retail druggists, physicians, and lawyers). The interests of consumers, taxpayers, marginal workers, victims of crime, and housewives are seriously underrepresented. And on the other side, the advocacy of personal liberties by ‘single-interest’ groups is often potent politically even though not supported by a majority; it would be incorrect to think that blacks, or supporters or opponents of abortion, or for that matter opponents of teaching the theory of evolution, are not effective interest groups. VII. The Macroeconomic Effects of the Constitution I now want to shift gears and consider the overall economic effects of the Constitution. Stated concretely, would the United States be less, more, or just as wealthy if, like England, we had no written constitution? Before taking a stab at this question I must revisit the ambiguity in the idea of a ‘constitution.’ Obviously, England has a constitution, in the sense of a set of basic governing arrangements; its parliamentary system is constitutional in this sense even though Parliament could change it without worrying about judicial review. One thing our Constitution did was to create a set of arrangements — the separation of powers system discussed earlier — that was (and is) different from that of England and most of the rest of the world. Another important structural feature is, of course, the

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federal system, with all its refinements, such as the commerce clause. In addition, the Constitution established a uniquely powerful judiciary to police adherence to these arrangements and enforce the various rights created by the Constitution and later by the Bill of Rights and other amendments. The original Constitution, together with all of its amendments and the interpretive glosses (often radical) that the Supreme Court and the other courts have placed on the written Constitution as it has been amended, is what I shall mean by ‘the Constitution’ in asking what its effects on economic progress have been. A distinct and even more speculative question, which I shall not essay, is what the effects of the Constitution on progress would have been if the courts had adhered to its pristine terms or at least interpreted it with greater restraint than they have shown. The reasons why some nations are wealthier than others are not well understood. Obviously the difference depends in the long run largely on national differences in the rate of economic growth, but that just pushes the inquiry back a step, to the causes of those differences. We know in a general way that economic growth depends on such things as the rate of saving, the rate of investment, receptivity to technological change, changes in the composition of the work force (e.g., because of immigration or emigration), and changing attitudes toward work, but again this knowledge just pushes the inquiry back a step, to why some nations invest more than others, and so forth. The role of legal institutions in all this is obscure. It is highly plausible, however, that economic growth will be helped if the government protects property and contract rights through a system of impartial courts enforcing property, contract, tort, and basic criminal law against not only private but also public misconduct (e.g., expropriation). Such protections for economic freedom would seem to encourage hard work and investment for the future — yet even this is not certain, given Mancur Olson’s ‘destabilization’ hypothesis, which is that stable institutions foster interest groups and that war and other sudden shocks may set the stage for rapid economic growth by making it more difficult for interest groups to form. I shall put Olson’s hypothesis aside and assume that effective protection of basic economic rights promotes economic growth. Although the basic protection of such rights is traditionally a function of state rather than federal law, the Constitution is not irrelevant to this function. As I mentioned earlier, the Constitution guarantees a limited sovereignty to the states and thereby increases the likelihood that governmental services, notably including the provision of a court system, police, etc., for the protection of basic property (including tort) and contract rights, will be provided efficiently. Given the federal concept — itself a force for efficiency, I have argued — the Constitution has then to make provision for preventing the federal system from degenerating into a loose confederation, riddled with externalities. The commerce clause and the privileges and immunities clause are devices to this end, as is the clause enabling Congress to issue patents and copyrights and the clause giving the federal government a monopoly of bankruptcy law in order to prevent debtors from fleeing to states where they might dominate the government and obtain forgiveness of their debts. The Constitution has other economic effects. By placing the basic governmental arrangements beyond the power of the normal political process, the Constitution (in its structural aspect) has freed the people’s energies for productive private activities. Basic political questions have simply been removed from the agenda by making the fundamental arrangements too difficult to change. This illustrates a point too often ignored in discussions of rules: Rules can liberate as well as repress. The rules of contract law are another example of this point. In addition, a government strong enough to maintain law and order, but too weak to launch and implement ambitious schemes of economic regulation or to engage in extensive redistribution, is probably the optimal government for economic growth. The Constitution as originally drafted would have kept the United States Government on approximately this even keel, for reasons explained earlier; but judicial interpretations have, by authorizing a ‘Fourth Branch’ of administrative agencies, by expansively construing congressional power over interstate and foreign commerce and congressional

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power to enact statutes that purportedly promote the general welfare, greatly strengthened the power of the federal government to regulate markets. As discussed earlier, the net impact of the separation of powers on the power of government is uncertain, because while in one respect it reduces that power by increasing the transaction costs within government, in another it increases that power by enabling government to exploit economies of specialization. Some of the specific rights guaranteed by the Constitution may have had good effects from an economic standpoint. Plausible examples are the religion clauses of the First Amendment, which may have reduced the amount of religious strife in this country — strife antithetical to economic growth because it is destructive, time consuming, and rooted in nonmarket values; the speech and press clauses of the First Amendment, which promote scientific and technical progress by protecting the marketplace in ideas; the takings clause, which protects property rights (though incompletely); and the due process clauses, which forbid the federal government and the states to deprive persons of property without due process of law. The problem is that a glance around the civilized world suggests that a written constitution may not be necessary to secure these rights. Countries at the same level of development as the United States generally are free from serious religious strife, do not restrict the production or dissemination of scientific or technical ideas, and do not confiscate private property without compensation. The compensation is not always adequate — but neither is compensation under the ‘just compensation’ clause of the Fifth Amendment as the clause has been interpreted. Although the separation of powers envisaged two hundred years ago has been greatly relaxed, the structure of the federal government is still distinguishable, at least in table-of-organization terms, from that of the domination form of government in other countries at our stage of development — the parliamentary system. In such a system the legislature is supreme. Judges may, and in most advanced nations do, enjoy independence similar to that of our federal judges, but they are not authorized to invalidate legislative acts. The executive is a member of, and serves at the pleasure of, the legislature. There are many variants of the standard arrangement. In England, by virtue of its highly disciplined parties, the Cabinet is supreme. France has a unique system of power sharing between the president and prime minister, and Germany has a constitutional court. But virtually no advanced country has a system that looks much like our system, even countries whose contemporary governmental structures were influenced by the United States as an occupying power after World War II. The Philippines, along with some South American nations — as well as, of course, all of our own states, with the partial exception of Nebraska, which has a unicameral legislature — has imitated the structure created by the Constitution, but minus its most distinctive and perhaps valuable feature — federalism; and whether with good results can only be conjectured. It would be perilous to infer from the failure of the leading foreign countries to imitate our system of government that it must not be a good system. But there is no solid evidence that it is superior to a parliamentary system. Whether one tries to imagine what this country would have been like under such a system or to compare it with other countries, holding constant other determinants of wealth and freedom besides constitutional structure, it is hard to be confident that ours is a better — or even, having regard for output rather than input, for accomplishments rather than aspirations, a different — system. We are marginally less collectivist than most advanced countries but the margin is small and there are counterexamples, including Japan, which has a parliamentary system. Such a system might, to be sure, be expected to exhibit faster and wider swings of public policy than would a separated system, and with destabilizing effects. Casual comparison with England supports this conjecture, but most parliamentary systems do not seem to experience such swings and some experience fewer and narrower ones than we. Moreover, studies of England’s surprising decline do not ascribe it to the parliamentary system. And to the extent that a parliamentary system enables government to turn on a dime, this has its upside (corresponding to our system’s downside), illustrated by the swift replacement of Chamberlain by Churchill in 1940 as compared with our inability to replace promptly such fainéants as Buchanan,

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Andrew Johnson, Wilson, Hoover, and Nixon. So far as size of government is concerned, when due regard is had for regulation as well as expenditures (regulation in effect shifts part of the cost of government from the taxpayer to the shareholders, employees, and consumers of the regulated firm), our government seems to be as large as that of most parliamentary systems and no more efficient. I come back to my earlier suggestion that federalism may be the most important contribution of American constitutionalism to economic growth. So vast, complex, and heterogeneous is this nation that it is hard to imagine providing basic governmental services efficiently on a uniform, centralized, nationwide basis. Although the federal government is of higher quality than most state governments, it would not be of higher quality if it absorbed every function now performed by state government; this seems to be the lesson of social security. I expect that it would be of lower quality than what the average of all the governments in this country now, is, because the spur of competition would be missing. Not only is the upside of our Constitution somewhat uncertain (despite the last point) from an economic standpoint, but there is a downside. By making American law more complicated than it would otherwise be, and by enhancing the prestige of lawyers, the Constitution may have contributed to an exaggerated concern with legality and legal rights in this country, a concern that is a drag on economic growth. In addition, the Constitution as interpreted has helped give us one of the world’s most costly and least effective criminal justice systems. It has also (in the name of equal protection of the laws, freedom of speech, and religious freedom) interfered profoundly with the employment policies of American government at all levels, and this too may have been a source of social costs with little offsetting social benefit — though one cannot be confident of this, because principles of efficiency do not dominate public employment. VIII. Economics and Interpretation The last question I shall consider, the role of economics in constitutional decision-making, is a question about the proper limits of adjudication. Merely because economics may have many insights to contribute to understanding constitutional questions (as I hope I have shown), it does not follow that a judge, at any level in the judicial hierarchy, is entitled to use these insights to resolve all such questions. Although this point is simple and should be obvious, it is sometimes misunderstood by critics of economic analysis of law and perhaps by some defenders, and there may be some utility therefore in repeating and amplifying it. I am aware of the tension between this part of my paper and the earlier parts. Earlier I took the hardnosed approach to judicial interpretation of the Constitution, emphasizing the absence of incentives for judges to act as honest agents, whether of the Framers or of the present generation. And in the absence of incentives what is the point of exhorting judges to conform to some preordained concept of the judicial role? For two hundred years now, the federal courts in general and the Supreme Court in particular have been ‘activist.’ Often they have pushed their own power just as far as the political system would permit (and that is far) and sometimes even farther. What ground is there for expecting any change? One possible answer is that, with the usual spurs to self-interest ruled out by the terms and conditions of judicial employment, judges can be expected to be more than ordinarily concerned with reputation. If, therefore, the climate of professional opinion changes (as a result, perhaps, of articles such as this, though of course the impact of a single article is apt to be minuscule) and judicial activism is seen to be a vice rather than a virtue, we can (without straying from the economic model of human behavior) expect that more judges will forswear or at least reduce activism.

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There are two fundamental normative approaches to constitutional adjudication. The first regards the Constitution as essentially an empty vessel into which the judge pours his own ideas of sound policy. No judge avows such an approach, but there are a fair number of judicial decisions that cannot be otherwise explained and there is a fair amount of implicit and explicit scholarly support for it. The age of the Constitution, the generality of many of its provisions, the rejection (indeed infeasibility) of strict construction of constitutional language, the absence of clear-cut ‘legislative history’ for many of the Constitution's provisions, the tradition, the popularity, and the occasional pragmatic triumphs of judicial activism, the vast accumulation of constitutional precedents (many inconsistent and all subject, in principle, to reexamination by the Supreme Court), the political character of judicial appointments, the rise of interpretive skepticism — this medley of forces and conditions has created a situation in which a Supreme Court Justice can go in virtually any direction that his personal political philosophy moves him without appearing to violate his oath of office. A Justice who took up the invitation thus extended and believed that normative economics (say, the idea of wealth maximization that I have defended) provided the best orientation for public policy would feel himself free — at least insofar as he was able to persuade enough of his brethren to constitute a majority and able to avoid being overruled by constitutional amendment — to decide constitutional cases in such a way as to make constitutional law economically efficient. For such a Justice, economics would provide a virtually complete guide to adjudication. The other fundamental approach to constitutional adjudication regards the judge as constrained, most of the time anyway, by the text, structure, and history of the Constitution, and by certain general jurisprudential principles such as judicial self-restraint and decision according to precedent (stare decisis), in deciding constitutional cases. Realistic practitioners of this approach recognize that the constraints are far from total; not every decision (to put it mildly) is dictated. Moreover, important constraints, such as the idea of judicial self-restraint, are themselves political principles, chosen by judges rather than prescribed in the constitutional text. And I have stressed that a legislative text cast in general terms — establishing standards rather than rules — invariably delegates substantial discretionary authority to the judges. So text, structure, history, etc., provide starting points but often not ending points for decision. And therefore notions of economic efficiency might legitimately be used to resolve some, perhaps many, constitutional questions; I have given examples. But the first task of constitutional adjudication is interpretation of a written text. Interpretation is a problem in epistemology rather than economics, though economics is not irrelevant. Economics helps identify the consequences of alternative interpretations, and consequences are an important element in interpretation. One reason that no one will interpret me literally if I say, ‘I'll eat my hat,’ is that it would be a painful and protracted experience actually to eat a hat. Also, many honestly interpretive decisions are influenced by judges' implicit economic views and might therefore change if the judges were economically literate and realized for example that usury laws do not help debtors and rent control laws do not help tenants. Moreover, the interest group theory of politics, a theory to which economics has made important contributions, has much to say about the nature of the legislative enactments that courts are called on to interpret. Nevertheless, the act of interpretation is not just a form of economic policy analysis. The justifications for viewing the task of constitutional adjudication as interpretive rather than (purely) creative or wealth-maximizing have more to do with the theory and practice of politics than with economics. People who are not lawyers, and in fact most lawyers, believe that most courts, most of the time anyway, decide cases in accordance with law, viewed as a body of principles external to the policy preferences of the individual judges. The legitimacy, prestige, and ultimately the authority of the Supreme Court appear to derive in significant part from this belief. If Lincoln was correct that you can't fool all of the people all of the time, this belief had better be true if the Court is to have a bright future, free of debilitating political controversy and popular suspicion. And if this is correct then it would be a

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serious mistake for the Supreme Court or any other court implicitly or explicitly to embrace the view that constitutional law is merely the expression in legal decisions of judges' views of public policy. It makes no difference whether those views come from Friedrich Hayek or Friedrich Engels. An economic point reinforces this conclusion. A body of constitutional law tied, albeit by a loose tether, to an unchanging text is likely to be more stable than a body of law that the judges make up as they go along, unless, as in the case of the common law, the values understood to shape their lawmaking are themselves stable. The stability of the constitutional framework has economic value; by reducing uncertainty it facilitates investment. Stability is not the only value served by law, which is why a rigid policy of stare decisis is not optimal; but it is a value and it therefore weighs on the side of a policy of constrained constitutional lawmaking. Not only is the proper starting point in formulating the principles of constitutional law the text, structure, and history of the documents that make up the Constitution, and the interpretive principles (broadly conceived) that translate text, structure, and history into contemporary meaning, but sometimes the starting point is the ending point. The Constitution provides that no one is eligible to be President who has not reached the age of thirty-five. This provision is perfectly clear (not because the words are clear, but because the purpose is clear), so whether such a limitation on eligibility is economically efficient (it is not, as I said earlier) is irrelevant to the task of adjudication. Many other provisions of the Constitution, though of course not all of them, are also clear, at least tolerably so, and at least with regard to some of the questions about their meaning. It is reasonably clear for example that capital punishment today does not violate the Eighth Amendment's prohibition against cruel and unusual punishments. Not only is capital punishment presupposed by the due process clauses of the Fifth and Fourteenth Amendments (the latter promulgated long after the Eighth Amendment); not only was it a common form of punishment throughout the period from the adoption of the Bill of Rights to the adoption of the Fourteenth Amendment; not only are there respectable retributive as well as utilitarian arguments for it; but it has been supported continuously by the vast majority of the people of the United States from the founding of the nation up to the present day, so that it cannot be dismissed as the product of a temporarily inflamed majority. The only candid basis on which it could be held unconstitutional would be that it revolted a majority of Supreme Court Justices. The refusal of two Justices to accept its constitutionality in the face of overwhelming case law merely underscores the fact that the constitutionality of capital punishment is also supported by the principle of stare decisis. These Justices’ steadfast opposition may do them credit as sensitive men of advanced ethical views, but it is difficult to ground in law. There are, however, many issues of constitutional law to which the documents do not speak with clarity; and with every passing year the documents recede further into the past and speak to us with a fainter voice. Remember that the Framers faced the uncomfortable choice between drafting rules, which would obsolesce rapidly, and standards, which would endure but only because standards, by their very nature, delegate much of the actual policymaking function to the judges who apply the standards in circumstances that the Framers did not foresee. This point must not be pressed too far. I do think it is important to insist that the Constitution is a communication from the adopters to the judges and that the judges’ duty is to decode the communication as best they can. But often this is difficult or even impossible, and then the judges must have recourse to ‘interpretive’ principles that may actually be substitutes for interpretation in a narrow sense. The Framers both expected the Constitution to endure (this is apparent from the obstacles that they created to amending it) and must have known, being highly intelligent men and, many of them, experienced lawyers, that many of its most important provisions were unspecific and would become even less directive as time passed and social change threw up new and unforeseen problems within the general scope of the provisions. They left many important details to be filled in through the adjudicative process over which the Supreme Court was to preside.

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Consider, by way of example, the clause in the First Amendment that forbids Congress to make any law respecting an establishment of religion. ‘[E]stablishment’ is not defined. At the time the First Amendment was drafted and ratified there were established churches in some of the states and of course in England (as there is today). Although the principal purpose of the clause apparently was to confirm the federal government's lack of authority in matters religious, unquestionably the clause by its terms forbids Congress to establish one of the Christian sects as the national church, as Massachusetts, for example, had established the Congregational Church as its state church. Can the clause be interpreted as going further and forbidding Congress to declare Christianity the official religion of the United States? The nation was overwhelmingly Christian in 1789; there were few Jews or acknowledged atheists, and virtually no Moslems; and there is some doubt whether the religion clauses were intended to protect any ‘infidel.’ Today the country is vastly more diverse religiously, and an attempt to establish Christianity as the national religion would be enormously resented even in the unlikely event that it could command the assent of a majority of both houses of Congress and avoid or override a presidential veto. Does the concept of ‘establishment’ have sufficient play in its joints that it can be interpreted to forbid the establishment of Christianity, not just the establishment of a particular sect? I think it does, when one considers the general terms in which the establishment clause is written (‘Congress shall make no law respecting an establishment of religion’) and its underlying objective of keeping government from taking sides in religious controversies. But I reach this conclusion by interpreting the clause in a manner designed to fit its underlying purposes or principles to current conditions, irrespective of my notions of sound policy, or economically efficient policy, whereas I think that, however abhorrent one may personally find capital punishment, there is no persuasive interpretive route by which to invalidate it under the Constitution. The task of constitutional interpretation is not exhausted by study of the text, context, and background of the Constitution, for it is influenced by certain large jurisprudential principles, of which the two most important are judicial self-restraint and stare decisis. As I have explained elsewhere, judicial selfrestraint, if it is to have any concrete meaning, cannot be equated to caution, prudence, moderation, or refusal to innovate. That would simply run it together with stare decisis. It properly means a disposition to limit the power of the courts (in the realm of federal constitutional law, the power of the federal courts and above all the Supreme Court) vis-a-vis the other organs of government — Congress, the President, the federal administrative agencies, and all branches of state government. It means pulling in the federal judicial horns. The federal courts are overextended today and may eventually find it difficult to maintain their effectiveness unless they learn to defer more to the other branches of government. But the force of the principle of self-restraint is necessarily limited. It cannot properly be used to override relatively clear constitutional directives; otherwise it would nullify the Constitution. It is usable only in very close cases. In my establishment clause hypothetical the restrained solution would be to allow Congress to establish Christianity as the nation’s official religion; but I cannot believe it would be the correct solution; the arguments for interpreting the clause to forbid such a measure are powerful. The principle of judicial self-restraint is properly a tie-breaker. The principle of stare decisis, so far as pertinent here, is that Justices of the Supreme Court should stand by the existing interpretations of the Constitution unless a powerful reason for departing from them is shown. Because it is so difficult to undo a constitutional decision by the amending process, a rigid adherence to precedent in this area would be unsound. This is provided one thinks that a later decision, informed as it is by experience not available to the authors of the earlier decision, is therefore more likely to be right than its predecessors. Either decision — the original, or the overruling — will, if wrong, be equally difficult to correct through the amending process. But the overruling decision is somewhat more likely to be correct than the overruled one, if only because the former will be based on more experience than the latter.

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The opposite extreme, which involves treating every constitutional question as being up for grabs however often it has been decided in the past, is also untenable. There are three related reasons for this conclusion. The first is that an area of law will never be settled if opponents of existing doctrines believe that a mere change in the membership of a court will wipe the slate clean and make every legal question one of first impression; and there is value in legal stability, as I said earlier. Second, the idea of decision according to law, on which popular belief in the legitimacy of constitutional adjudication rests, is weakened if decisions are conceived of as having no binding effect on judges who did not actually vote for them. This suggests that a decision should not be overruled if (1) none of the judges who joined it originally has changed his mind and (2) no relevant circumstances have changed since the original decision, so that it is impossible to say that the original decision may have been correct when decided and has merely become obsolete. These grounds are roughly reciprocal. Usually, (2) will be available only if, through passage of time, few if any participants in the original decision are still on the court. And if (1) is available, chances are that not enough time has elapsed since the original decision for (2) to be. Third, a decent respect for the possibility that one’s own constitutional notions may be wrong should make a judge hesitate to set them up in opposition to the contrary views of many previous judges who have wrestled with the same question and come to a different answer. There is an obvious tension between the idea of judicial self-restraint and the idea of decision according to precedent. If (the position we are in today) the body of judge-made constitutional law contains a high proportion of aggressive doctrines created during a long period in which judicial activism was in the ascendancy, to make self-restraint effective would require overruling a lot of cases and thereby damage the principle of stare decisis — which is also an important principle. There is no satisfactory general resolution of this tension. The task of interpretation in light of general jurisprudential principles such as self-restraint and stare decisis is logically prior to the application of economic theory to constitutional adjudication. It would be irresponsible to approach the task of constitutional adjudication by asking how constitutional law can be made to conform to the dictates of economic efficiency, even if, as I believe, efficiency provides the best single guide to public policy in general and judicial doctrine (i.e., common law, state or federal) in particular. The limits of an economic approach to deciding constitutional cases are set by the Constitution interpreted in light of the principles I have discussed. Yet within those limits much can be done with economics. Consider again whether capital punishment violates the Eighth Amendment. The case for such a conclusion would be strengthened if it turned out that capital punishment had no incremental deterrent effect over life imprisonment, for this would suggest that it was being imposed out of sheer bloodthirstiness. I do not think the case would be conclusive even so, for one man’s bloodthirstiness is another’s (Kant’s, for example) just retribution. In any event the economic model of crime and punishment suggests, and there is some confirmation in empirical research by economists, that capital punishment does have an incremental deterrent effect. So although the Eighth Amendment has no clear economic interpretation, economics may provide insight into questions that bear on the proper legal interpretation. CAST STUDY 1 – LOCKNER V. NEW YORK 198 U.S. 45 (1905) Justice Peckham (for the Court) [Justices Harlan, White Day & Holmes dissenting]

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This is a writ of error to the county court of Oneida county, in the state of New York (to which court the record had been remitted), to review the judgment of the court of appeals of that state, affirming the judgment of the supreme court, which itself affirmed the judgment of the county court, convicting the defendant of a misdemeanor on an indictment under a statute of that state, known, by its short title, as the labor law. The section of the statute under which the indictment was found is § 110, and is reproduced in the margin† (together with the other sections of the labor law upon the subject of bakeries, being §§ 111 to 115, both inclusive). The indictment averred that the defendant ‘wrongfully and unlawfully required and permitted an employee working for him in his biscuit, bread, and cake bakery and confectionery establishment, at the city of Utica, in this county, to work more than sixty hours in one week,’ after having been theretofore convicted of a violation of the name act; and therefore, as averred, he committed the crime of misdemeanor, second offense. The plaintiff in error demurred to the indictment on several grounds, one of which was that the facts stated did not constitute a crime. The demurrer was overruled, and, the plaintiff in error having refused to plead further, a plea of not guilty was entered by order of the court and the trial commenced, and he was convicted of misdemeanor, second offense, as indicted, and sentenced to pay a fine of $50, and to stand committed until paid, not to exceed fifty days in the Oneida county jail. A certificate of reasonable doubt was granted by the county judge of Oneida county, whereon an appeal was taken to the appellate division of the supreme court, fourth department, where the judgment of conviction was affirmed. … A further appeal was then taken to the court of appeals, where the judgment of conviction was again affirmed. … The indictment, it will be seen, charges that the plaintiff in error violated the 110th section of article 8, chapter 415, of the Laws of 1897, known as the labor law of the state of New York, in that he wrongfully †

§ 110, Hours of labor in bakeries and confectionery establishments.-No employee shall be required or permitted to work in a biscuit, bread, or cake bakery or confectionery establishment more than sixty hours in any one week, or more than ten hours in any one day, unless for the purpose of making a shorter work day on the last day of the week; nor more hours in any one week than will make an average of ten hours per day for the number of days during such week in which such employee shall work.‘§ 111. Drainage and plumbing of buildings and rooms occupied by bakeries.-All buildings or rooms occupied as biscuit, bread, pie, or cake bakeries, shall be drained and plumbed in a manner conducive to the proper and healthful sanitary condition thereof, and shall be constructed with air shafts, windows, or ventilating pipes, sufficient to insure ventilation. The factory inspector may direct the proper drainage, plumbing, and ventilation of such rooms or buildings. No cellar or basement, not now used for a bakery, shall hereafter be so occupied or used, unless the proprietor shall comply with the sanitary provisions of this article.‘§ 112. Requirements as to rooms, furniture, utensils, and manufactured products.-Every room used for the manufacture of flour or meal food products shall be at least 8 feet in height and shall have, if deemed necessary by the factory inspector, an impermeable floor constructed of cement, or of tiles laid in cement, or an additional flooring of wood properly saturated with linseed oil. The side walls of such rooms shall be plastered or wainscoted. The factory inspector may require the side walls and ceiling to be whitewashed at least once in three months. He may also require the wood work of such walls to be painted. The furniture and utensils shall be so arranged as to be readily cleansed and not prevent the proper cleaning of any part of the room. The manufactured flour or meal food products shall be kept in dry and airy rooms, so arranged that the floors, shelves, and all other facilities for storing the same can be properly cleaned. No domestic animals, except cats, shall be allowed to remain in a room used as a biscuit, bread, pie, or cake bakery, or any room in such bakery where flour or meal products are stored.‘§ 113. Wash rooms and closets; sleeping places.-Every such bakery shall be provided with a proper wash room and water-closet, or water-closets, apart from the bake room, or rooms where the manufacture of such food product is conducted, and no water-closet, earth closet, privy, or ashpit shall be within, or connected directly with, the bake room of any bakery, hotel, or public restaurant.‘No person shall sleep in a room occupied as a bake room. Sleeping places for the persons employed in the bakery shall be separate from the rooms where flour or meal food products are manufactured or stored. If the sleeping places are on the same floor where such products are manufactured, stored, or sold, the factory inspector may inspect and order them put in a proper sanitary condition.‘§ 114. Inspection of bakeries.-The factory inspector shall cause all bakeries to be inspected. If it be found upon such inspection that the bakeries so inspected are constructed and conducted in compliance with the provisions of this chapter, the factory inspector shall issue a certificate to the person owning or conducting such bakeries.‘§ 115. Notice requiring alterations.-If, in the opinion of the factory inspector, alterations are required in or upon premises occupied and used as bakeries, in order to comply with the provisions of this article, a written notice shall be served by him upon the owner, agent, or lessee of such premises, either personally or by mail, requiring such alterations to be made within sixty days after such service, and such alterations shall be made accordingly.’ [N. Y. Laws 1897, chap 415.]

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and unlawfully required and permitted an employee working for him to work more than sixty hours in one week. There is nothing in any of the opinions delivered in this case, either in the supreme court or the court of appeals of the state, which construes the section, in using the word ‘required,’ as referring to any physical force being used to obtain the labor of an employee. It is assumed that the word means nothing more than the requirement arising from voluntary contract for such labor in excess of the number of hours specified in the statute. There is no pretense in any of the opinions that the statute was intended to meet a case of involuntary labor in any form. All the opinions assume that there is no real distinction, so far as this question is concerned, between the words ‘required’ and ‘permitted.’ The mandate of the statute, that ‘no employee shall be required or permitted to work,’ is the substantial equivalent of an enactment that ‘no employee shall contract or agree to work,’ more than ten hours per day; and, as there is no provision for special emergencies, the statute is mandatory in all cases. It is not an act merely fixing the number of hours which shall constitute a legal day’s work, but an absolute prohibition upon the employer permitting, under any circumstances, more than ten hours’ work to be done in his establishment. The employee may desire to earn the extra money which would arise from his working more than the prescribed time, but this statute forbids the employer from permitting the employee to earn it. The statute necessarily interferes with the right of contract between the employer and employees, concerning the number of hours in which the latter may labor in the bakery of the employer. The general right to make a contract in relation to his business is part of the liberty of the individual protected by the 14th Amendment of the Federal Constitution. … Under that provision no state can deprive any person of life, liberty, or property without due process of law. The right to purchase or to sell labor is part of the liberty protected by this amendment, unless there are circumstances which exclude the right. There are, however, certain powers, existing in the sovereignty of each state in the Union, somewhat vaguely termed police powers, the exact description and limitation of which have not been attempted by the courts. Those powers, broadly stated, and without, at present, any attempt at a more specific limitation, relate to the safety, health, morals, and general welfare of the public. Both property and liberty are held on such reasonable conditions as may be imposed by the governing power of the state in the exercise of those powers, and with such conditions the 14th Amendment was not designed to interfere. … The state, therefore, has power to prevent the individual from making certain kinds of contracts, and in regard to them the Federal Constitution offers no protection. If the contract be one which the state, in the legitimate exercise of its police power, has the right to prohibit, it is not prevented from prohibiting it by the 14th Amendment. Contracts in violation of a statute, either of the Federal or state government, or a contract to let one’s property for immoral purposes, or to do any other unlawful act, could obtain no protection from the Federal Constitution, as coming under the liberty of person or of free contract. Therefore, when the state, by its legislature, in the assumed exercise of its police powers, has passed an act which seriously limits the right to labor or the right of contract in regard to their means of livelihood between persons who are sui juris (both employer and employee), it becomes of great importance to determine which shall prevail, – the right of the individual to labor for such time as he may choose, or the right of the state to prevent the individual from laboring, or from entering into any contract to labor, beyond a certain time prescribed by the state. This court has recognized the existence and upheld the exercise of the police powers of the states in many cases which might fairly be considered as border ones, and it has, in the course of its determination of questions regarding the asserted invalidity of such statutes, on the ground of their violation of the rights secured by the Federal Constitution, been guided by rules of a very liberal nature, the application of which has resulted, in numerous instances, in upholding the validity of state statutes thus assailed. Among the later cases where the state law has been upheld by this court is that of Holden v. Hardy, 169 U. S. 366 … A provision in the act of the legislature of Utah was there under consideration, the act

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limiting the employment of workmen in all underground mines or workings, to eight hours per day, ‘except in cases of emergency, where life or property is in imminent danger.’ It also limited the hours of labor in smelting and other institutions for the reduction or refining of ores or metals to eight hours per day, except in like cases of emergency. The act was held to be a valid exercise of the police powers of the state. A review of many of the cases on the subject, decided by this and other courts, is given in the opinion. It was held that the kind of employment, mining, smelting, etc., and the character of the employees in such kinds of labor, were such as to make it reasonable and proper for the state to interfere to prevent the employees from being constrained by the rules laid down by the proprietors in regard to labor. The following citation from the observations of the supreme court of Utah in that case was made by the judge writing the opinion of this court, and approved: ‘The law in question is confined to the protection of that class of people engaged in labor in underground mines, and in smelters and other works wherein ores are reduced and refined. This law applies only to the classes subjected by their employment to the peculiar conditions and effects attending underground mining and work in smelters, and other works for the reduction and refining of ores. Therefore it is not necessary to discuss or decide whether the legislature can fix the hours of labor in other employments.’ It will be observed that, even with regard to that class of labor, the Utah statute provided for cases of emergency wherein the provisions of the statute would not apply. The statute now before this court has no emergency clause in it, and, if the statute is valid, there are no circumstances and no emergencies under which the slightest violation of the provisions of the act would be innocent. There is nothing in Holden v. Hardy which covers the case now before us. Nor does Atkin v. Kansas, 191 U. S. 207 … touch the case at bar. The Atkin Case was decided upon the right of the state to control its municipal corporations, and to prescribe the conditions upon which it will permit work of a public character to be done for a municipality. Knoxville Iron Co. v. Harbison, 183 U. S. 13 … is equally far from an authority for this legislation. The employees in that case were held to be at a disadvantage with the employer in matters of wages, they being miners and coal workers, and the act simply provided for the cashing of coal orders when presented by the miner to the employer. The latest case decided by this court, involving the police power, is that of Jacobson v. Massachusetts, decided at this term and reported in 197 U. S. 11 … It related to compulsory vaccination, and the law was held vaild as a proper exercise of the police powers with reference to the public health. It was stated in the opinion that it was a case ‘of an adult who, for aught that appears, was himself in perfect health and a fit subject of vaccination, and yet, while remaining in the community, refused to obey the statute and the regulation, adopted in execution of its provisions, for the protection of the public health and the public safety, confessedly endangered by the presence of a dangerous disease.’ That case is also far from covering the one now before the court. … It must, of course, be conceded that there is a limit to the valid exercise of the police power by the state. There is no dispute concerning this general proposition. Otherwise the 14th Amendment would have no efficacy and the legislatures of the states would have unbounded power, and it would be enough to say that any piece of legislation was enacted to conserve the morals, the health, or the safety of the people; such legislation would be valid, no matter how absolutely without foundation the claim might be. The claim of the police power would be a mere pretext, – become another and delusive name for the supreme sovereignty of the state to be exercised free from constitutional restraint. This is not contended for. In every case that comes before this court, therefore, where legislation of this character is concerned, and where the protection of the Federal Constitution is sought, the question necessarily arises: Is this a fair, reasonable, and appropriate exercise of the police power of the state, or is it an unreasonable, unnecessary, and arbitrary interference with the right of the individual to his personal liberty, or to enter into those contracts in relation to labor which may seem to him appropriate or necessary for the support of himself and his family? Of course the liberty of contract relating to labor includes both parties to it. The one has as much right to purchase as the other to sell labor.

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This is not a question of substituting the judgment of the court for that of the legislature. If the act be within the power of the state it is valid, although the judgment of the court might be totally opposed to the enactment of such a law. But the question would still remain: Is it within the police power of the state? and that question must be answered by the court. The question whether this act is valid as a labor law, pure and simple, may be dismissed in a few words. There is no reasonable ground for interfering with the liberty of person or the right of free contract, by determining the hours of labor, in the occupation of a baker. There is no contention that bakers as a class are not equal in intelligence and capacity to men in other trades or manual occupations, or that they are not able to assert their rights and care for themselves without the protecting arm of the state, interfering with their independence of judgment and of action. They are in no sense wards of the state. Viewed in the light of a purely labor law, with no reference whatever to the question of health, we think that a law like the one before us involves neither the safety, the morals, nor the welfare, of the public, and that the interest of the public is not in the slightest degree affected by such an act. The law must be upheld, if at all, as a law pertaining to the health of the individual engaged in the occupation of a baker. It does not affect any other portion of the public than those who are engaged in that occupation. Clean and wholesome bread does not depend upon whether the baker works but ten hours per day or only sixty hours a week. The limitation of the hours of labor does not come within the police power on that ground. It is a question of which of two powers or rights shall prevail, – the power of the state to legislate or the right of the individual to liberty of person and freedom of contract. The mere assertion that the subject relates, though but in a remote degree, to the public health, does not necessarily render the enactment valid. The act must have a more direct relation, as a means to an end, and the end itself must be appropriate and legitimate, before an act can be held to be valid which interferes with the general right of an individual to be free in his person and in his power to contract in relation to his own labor. This case has caused much diversity of opinion in the state courts. In the Supreme Court two of the five judges composing the court dissented from the judgment affirming the validity of the act. In the court of appeals three of the seven judges also dissented from the judgment upholding the statute. Although found in what is called a labor law of the state, the court of appeals has upheld the act as one relating to the public health,-in other words, as a health law. One of the judges of the court of appeals, in upholding the law, stated that, in his opinion, the regulation in question could not be sustained unless they were able to say, from common knowledge, that working in a bakery and candy factory was an unhealthy employment. The judge held that, while the evidence was not uniform, it still led him to the conclusion that the occupation of a baker or confectioner was unhealthy and tended to result in diseases of the respiratory organs. Three of the judges dissented from that view, and they thought the occupation of a baker was not to such an extent unhealthy as to warrant the interference of the legislature with the liberty of the individual. We think the limit of the police power has been reached and passed in this case. There is, in our judgment, no reasonable foundation for holding this to be necessary or appropriate as a health law to safeguard the public health, or the health of the individuals who are following the trade of a baker. If this statute be valid, and if, therefore, a proper case is made out in which to deny the right of an individual, sui juris, as employer or employee, to make contracts for the labor of the latter under the protection of the provisions of the Federal Constitution, there would seem to be no length to which legislation of this nature might not go. The case differs widely, as we have already stated, from the expressions of this court in regard to laws of this nature, as stated in Holden v. Hardy … and Jacobson v. Massachusetts …

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We think that there can be no fair doubt that the trade of a baker, in and of itself, is not an unhealthy one to that degree which would authorize the legislature to interfere with the right to labor, and with the right of free contract on the part of the individual, either as employer or employee In looking through statistics regarding all trades and occupations, it may be true that the trade of a baker does not appear to be as healthy as some other trades, and is also vastly more healthy than still others. To the common understanding the trade of a baker has never been regarded as an unhealthy one. Very likely physicians would not recommend the exercise of that or of any other trade as a remedy for ill health. Some occupations are more healthy than others, but we think there are none which might not come under the power of the legislature to supervise and control the hours of working therein, if the mere fact that the occupation is not absolutely and perfectly healthy is to confer that right upon the legislative department of the government. It might be safely affirmed that almost all occupations more or less affect the health. There must be more than the mere fact of the possible existence of some small amount of unhealthiness to warrant legislative interference with liberty. It is unfortunately true that labor, even in any department, may possibly carry with it the seeds of unhealthiness. But are we all, on that account, at the mercy of legislative majorities? A printer, a tinsmith, a locksmith, a carpenter, a cabinetmaker, a dry goods clerk, a bank’s, a lawyer’s, or a physician’s clerk, or a clerk in almost any kind of business, would all come under the power of the legislature, on this assumption. No trade, no occupation, no mode of earning one's living, could escape this all-pervading power, and the acts of the legislature in limiting the hours of labor in all employments would be valid, although such limitation might seriously cripple the ability of the laborer to support himself and his family. In our large cities there are many buildings into which the sun penetrates for but a short time in each day, and these buildings are occupied by people carrying on the business of bankers, brokers, lawyers, real estate, and many other kinds of business, aided by many clerks, messengers, and other employees. Upon the assumption of the validity of this act under review, it is not possible to say that an act, prohibiting lawyers’ or bank clerks, or others, from contracting to labor for their employers more than eight hours a day would be invalid. It might be said that it is unhealthy to work more than that number of hours in an apartment lighted by artificial light during the working hours of the day; that the occupation of the bank clerk, the lawyer’s clerk, the real-estate clerk, or the broker’s clerk, in such offices is therefore unhealthy, and the legislature, in its paternal wisdom, must, therefore, have the right to legislate on the subject of, and to limit, the hours for such labor; and, if it exercises that power, and its validity be questioned, it is sufficient to say, it has reference to the public health; it has reference to the health of the employees condemned to labor day after day in buildings where the sun never shines; it is a health law, and therefore it is valid, and cannot be questioned by the courts. It is also urged, pursuing the same line of argument, that it is to the interest of the state that its population should be strong and robust, and therefore any legislation which may be said to tend to make people healthy must be valid as health laws, enacted under the police power. If this be a valid argument and a justification for this kind of legislation, it follows that the protection of the Federal Constitution from undue interference with liberty of person and freedom of contract is visionary, wherever the law is sought to be justified as a valid exercise of the police power. Scarcely any law but might find shelter under such assumptions, and conduct, properly so called, as well as contract, would come under the restrictive sway of the legislature. Not only the hours of employees, but the hours of employers, could be regulated, and doctors, lawyers, scientists, all professional men, as well as athletes and artisans, could be forbidden to fatigue their brains and bodies by prolonged hours of exercise, lest the fighting strength of the state be impaired. We mention these extreme cases because the contention is extreme. We do not believe in the soundness of the views which uphold this law. On the contrary, we think that such a law as this, although passed in the assumed exercise of the police power, and as relating to the public health, or the health of the employees named, is not within that power, and is invalid. The act is not, within any fair meaning of the term, a health law, but is an illegal interference with the rights of individuals, both employers and employees, to make contracts regarding labor upon such terms as they may think best, or which they may agree upon with the other parties to such contracts.

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Statutes of the nature of that under review, limiting the hours in which grown and intelligent men may labor to earn their living, are mere meddlesome interferences with the rights of the individual, and they are not saved from condemnation by the claim that they are passed in the exercise of the police power and upon the subject of the health of the individual whose rights are interfered with, unless there be some fair ground, reasonable in and of itself, to say that there is material danger to the public health, or to the health of the employees, if the hours of labor are not curtailed. If this be not clearly the case, the individuals whose rights are thus made the subject of legislative interference are under the protection of the Federal Constitution regarding their liberty of contract as well as of person; and the legislature of the state has no power to limit their right as proposed in this statute. All that it could properly do has been done by it with regard to the conduct of bakeries, as provided for in the other sections of the act, above set forth. These several sections provide for the inspection of the premises where the bakery is carried on, with regard to furnishing proper wash rooms and water-closets, apart from the bake room, also with regard to providing proper drainage, plumbing, and painting; the sections, in addition, provide for the height of the ceiling, the cementing or tiling of floors, where necessary in the opinion of the factory inspector, and for other things of that nature; alterations are also provided for, and are to be made where necessary in the opinion of the inspector, in order to comply with the provisions of the statute. These various sections may be wise and valid regulations, and they certainly go to the full extent of providing for the cleanliness and the healthiness, so far as possible, of the quarters in which bakeries are to be conducted. Adding to all these requirements a prohibition to enter into any contract of labor in a bakery for more than a certain number of hours a week is, in our judgment, so wholly beside the matter of a proper, reasonable, and fair provision as to run counter to that liberty of person and of free contract provided for in the Federal Constitution. It was further urged on the argument that restricting the hours of labor in the case of bakers was valid because it tended to cleanliness on the part of the workers, as a man was more apt to be cleanly when not overworked, and if cleanly then his ‘output’ was also more likely to be so. What has already been said applies with equal force to this contention. We do not admit the reasoning to be sufficient to justify the claimed right of such interference. The state in that case would assume the position of a supervisor, or pater familias, over every act of the individual, and its right of governmental interference with his hours of labor, his hours of exercise, the character thereof, and the extent to which it shall be carried would be recognized and upheld. In our judgment it is not possible in fact to discover the connection between the number of hours a baker may work in the bakery and the healthful quality of the bread made by the workman. The connection, if any exist, is too shadowy and thin to build any argument for the interference of the legislature. If the man works ten hours a day it is all right, but if ten and a half or eleven his health is in danger and his bread may be unhealthy, and, therefore, he shall not be permitted to do it. This, we think, is unreasonable and entirely arbitrary. When assertions such as we have adverted to become necessary in order to give, if possible, a plausible foundation for the contention that the law is a ‘health law,’ it gives rise to at least a suspicion that there was some other motive dominating the legislature than the purpose to subserve the public health or welfare. This interference on the part of the legislatures of the several states with the ordinary trades and occupations of the people seems to be on the increase. In the supreme court of New York, in the case of People v. Beattie, appellate division, first department, decided in 1904 (96 App. Div. 383, 89 N. Y. Supp. 193), a statute regulating the trade of horseshoeing, and requiring the person practising such trade to be examined, and to obtain a certificate from a board of examiners and file the same with the clerk of the county wherein the person proposes to practise such trade, was held invalid, as an arbitrary interference with personal liberty and private property without due process of law. The attempt was made, unsuccessfully, to justify it as a health law. The same kind of a statute was held invalid (Re Aubry) by the supreme court of Washington in December, 1904. 78 Pac. 900. The court held that the act deprived citizens of their liberty and property without due process of law, and denied to them the

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equal protection of the laws. It also held that the trade of a horseshoer is not a subject of regulation under the police power of the state, as a business concerning and directly affecting the health, welfare, or comfort of its inhabitants; and that, therefore, a law which provided for the examination and registration of horseshoers in certain cities was unconstitutional, as an illegitimate exercise of the police power. The supreme court of Illinois, in Bessette v. People, 193 Ill. 334, 56 L. R. A. 558, 62 N. E. 215, also held that a law of the same nature, providing for the regulation and licensing of horseshoers, was unconstitutional as an illegal interference with the liberty of the individual in adopting and pursuing such calling as he may choose, subject only to the restraint necessary to secure the common welfare. … It is impossible for us to shut our eyes to the fact that many of the laws of this character, while passed under what is claimed to be the police power for the purpose of protecting the public health or welfare, are, in reality, passed from other motives. We are justified in saying so when, from the character of the law and the subject upon which it legislates, it is apparent that the public health or welfare bears but the most remote relation to the law. The purpose of a statute must be determined from the natural and legal effect of the language employed; and whether it is or is not repugnant to the Constitution of the United States must be determined from the natural effect of such statutes when put into operation, and not from their proclaimed purpose. … The court looks beyond the mere letter of the law in such cases. … It is manifest to us that the limitation of the hours of labor as provided for in this section of the statute under which the indictment was found, and the plaintiff in error convicted, has no such direct relation to, and no such substantial effect upon, the health of the employee, as to justify us in regarding the section as really a health law. It seems to us that the real object and purpose were simply to regulate the hours of labor between the master and his employees (all being men, Sui juris), in a private business, not dangerous in any degree to morals, or in any real and substantial degree to the health of the employees. Under such circumstances the freedom of master and employee to contract with each other in relation to their employment, and in defining the same, cannot be prohibited or interfered with, without violating the Federal Constitution. The judgment of the Court of Appeals of New York, as well as that of the Supreme Court and of the County Court of Oneida County, must be reversed and the case remanded to the County Court for further proceedings not inconsistent with this opinion. Reversed. Justice Holmes (for himself, dissenting) I regret sincerely that I am unable to agree with the judgment in this case, and that I think it my duty to express my dissent. This case is decided upon an economic theory which a large part of the country does not entertain. If it were a question whether I agreed with that theory, I should desire to study it further and long before making up my mind. But I do not conceive that to be my duty, because I strongly believe that my agreement or disagreement has nothing to do with the right of a majority to embody their opinions in law. It is settled by various decisions of this court that state constitutions and state laws may regulate life in many ways which we as legislators might think as injudicious, or if you like as tyrannical, as this, and which, equally with this, interfere with the liberty to contract. Sunday laws and usury laws are ancient examples. A more modern one is the prohibition of lotteries. The liberty of the citizen to do as he likes so long as he does not interfere with the liberty of others to do the same, which has been a shibboleth for some well-known writers, is interfered with by school laws, by the Post office, by every state or municipal institution which takes his money for purposes thought desirable, whether he likes it or not. The 14th Amendment does not enact Mr. Herbert Spencer’s Social Statics. The other day we sustained the Massachusetts vaccination law. Jacobson v. Massachusetts, 197 U. S. 11 … United States and state statutes and decisions cutting down the liberty to contract by way of combination are familiar

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to this court. … Two years ago we upheld the prohibition of sales of stock on margins, or for future delivery, in the Constitution of California. Otis v. Parker, 187 U. S. 606 … The decision sustaining an eight-hour law for miners is still recent. Holden v. Hardy, 169 U. S. 366 … Some of these laws embody convictions or prejudices which judges are likely to share. Some may not. But a Constitution is not intended to embody a particular economic theory, whether of paternalism and the organic relation of the citizen to the state or of laissez faire. It is made for people of fundamentally differing views, and the accident of our finding certain opinions natural and familiar, or novel, and even shocking, ought not to conclude our judgment upon the question whether statutes embodying them conflict with the Constitution of the United States. General propositions do not decide concrete cases. The decision will depend on a judgment or intuition more subtle than any articulate major premise. But I think that the proposition just stated, if it is accepted, will carry us far toward the end. Every opinion tends to become a law. I think that the word ‘liberty,’ in the 14th Amendment, is perverted when it is held to prevent the natural outcome of a dominant opinion, unless it can be said that a rational and fair man necessarily would admit that the statute proposed would infringe fundamental principles as they have been understood by the traditions of our people and our law. It does not need research to show that no such sweeping condemnation can be passed upon the statute before us. A reasonable man might think it a proper measure on the score of health. Men whom I certainly could not pronounce unreasonable would uphold it as a first instalment of a general regulation of the hours of work. Whether in the latter aspect it would be open to the charge of inequality I think it unnecessary to discuss. Justice Harlan (for himself and Justices White & Day, dissenting) … I take it to be firmly established that what is called the liberty of contract may, within certain limits, be subjected to regulations designed and calculated to promote the general welfare, or to guard the public health, the public morals, or the public safety. ‘The liberty secured by the Constitution of the United States to every person within its jurisdiction does not import.’ this court has recently said, ‘an absolute right in each person to be at all times and in all circumstances wholly freed from restraint. There are manifold restraints to which every person is necessarily subject for the common good.’ Jacobson v. Massachusetts, 197 U. S. 11 … Granting, then, that there is a liberty of contract which cannot be violated even under the sanction of direct legislative enactment, but assuming, as according to settled law we may assume, that such liberty of contract is subject to such regulations as the state may reasonably prescribe for the common good and the well-being of society, what are the conditions under which the judiciary may declare such regulations to be in excess of legislative authority and void? Upon this point there is no room for dispute; for the rule is universal that a legislative enactment, Federal or state, is never to be disregarded or held invalid unless it be, beyond question, plainly and palpably in excess of legislative power. In Jacobson v. Massachusetts … we said that the power of the courts to review legislative action in respect of a matter affecting the general welfare exists only ‘when that which the legislature has done comes within the rule that, if a statute purporting to have been enacted to protect the public health, the public morals, or the public safety has no real or substantial relation to those objects, or is, beyond all question, a plain, palpable invasion of rights secured by the fundamental law,’ … If there be doubt as to the validity of the statute, that doubt must therefore be resolved in favor of its validity, and the courts must keep their hands off, leaving the legislature to meet the responsibility for unwise legislation. If the end which the legislature seeks to accomplish be one to which its power extends, and if the means employed to that end, although not the wisest or best, are yet not plainly and palpably unauthorized by law, then the court cannot interfere. In other words, when the validity of a statute is questioned, the burden of proof, so to speak, is upon those who assert it to be unconstitutional. …

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Let these principles be applied to the present case. By the statute in question it is provided that ‘no employee shall be required, or permitted, to work in a biscuit, bread, or cake bakery, or confectionery establishment, more than sixty hours in any one week, or more than ten hours in any one day, unless for the purpose of making a shorter work day on the last day of the week; nor more hours in any one week than will make an average of ten hours per day for the number of days during such week in which such employee shall work.’ It is plain that this statute was enacted in order to protect the physical well-being of those who work in bakery and confectionery establishments. It may be that the statute had its origin, in part, in the belief that employers and employees in such establishments were not upon an equal footing, and that the necessities of the latter often compelled them to submit to such exactions as unduly taxed their strength. Be this as it may, the statute must be taken as expressing the belief of the people of New York that, as a general rule, and in the case of the average man, labor in excess of sixty hours during a week in such establishments may endanger the health of those who thus labor. Whether or not this be wise legislation it is not the province of the court to inquire. Under our systems of government the courts are not concerned with the wisdom or policy of legislation. So that, in determining the question of power to interfere with liberty of contract, the court may inquire whether the means devised by the state are germane to an end which may be lawfully accomplished and have a real or substantial relation to the protection of health, as involved in the daily work of the persons, male and female, engaged in bakery and confectionery establishments. But when this inquiry is entered upon I find it impossible, in view of common experience, to say that there is here no real or substantial relation between the means employed by the state and the end sought to be accomplished by its legislation. … Nor can I say that the statute has no appropriate or direct connection with that protection to health which each state owes to her citizens … or that it is not promotive of the health of the employees in question … or that the regulation prescribed by the state is utterly unreasonable and extravagant or wholly arbitrary … Still less can I say that the statute is, beyond question, a plain, palpable invasion of rights secured by the fundamental law. … Therefore I submit that this court will transcend its functions if it assumes to annul the statute of New York. It must be remembered that this statute does not apply to all kinds of business. It applies only to work in bakery and confectionery establishments, in which, as all know, the air constantly breathed by workmen is not as pure and healthful as that to be found in some other establishments or out of doors. … In the Eighteenth Annual Report by the New York Bureau of Statistics of Labor it is stated that among the occupations involving exposure to conditions that interfere with nutrition is that of a baker. (p. 52.) In that Report it is also stated that, ‘from a social point of view, production will be increased by any change in industrial organization which diminishes the number of idlers, paupers, and criminals. Shorter hours of work, by allowing higher standards of comfort and purer family life, promise to enhance the industrial efficiency of the wage-working class,-improved health, longer life, more content and greater intelligence and inventiveness.’ (p. 82.) Statistics show that the average daily working time among workingmen in different countries is, in Australia, eight hours; in Great Britain, nine; in the United States, nine and three-quarters; in Denmark, nine and three-quarters; in Norway, ten; Sweden, France, and Switzerland, ten and one-half; Germany, ten and one-quarter; Belgium, Italy, and Austria, eleven; and in Russia, twelve hours. We judicially know that the question of the number of hours during which a workman should continuously labor has been, for a long period, and is yet, a subject of serious consideration among civilized peoples, and by those having special knowledge of the laws of health. Suppose the statute prohibited labor in bakery and confectionery establishments in excess of eighteen hours each day. No one, I take it, could dispute the power of the state to enact such a statute. But the statute before us does not embrace extreme or exceptional cases. It may be said to occupy a middle ground in respect of the

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hours of labor. What is the true ground for the state to take between legitimate protection, by legislation, of the public health and liberty of contract is not a question easily solved, nor one in respect of which there is or can be absolute certainty. There are very few, if any, questions in political economy about which entire certainty may be predicated. One writer on relation of the state to labor has well said: ‘The manner, occasion, and degree in which the state may interfere with the industrial freedom of its citizens is one of the most debatable and difficult questions of social science.’ … We also judicially know that the number of hours that should constitute a day’s labor in particular occupations involving the physical strength and safety of workmen has been the subject of enactments by Congress and by nearly all of the states. Many, if not most, of those enactments fix eight hours as the proper basis of a day’s labor. I do not stop to consider whether any particular view of this economic question presents the sounder theory. What the precise facts are it may be difficult to say. It is enough for the determination of this case, and it is enough for this court to know, that the question is one about which there is room for debate and for an honest difference of opinion. There are many reasons of a weighty, substantial character, based upon the experience of mankind, in support of the theory that, all things considered, more than ten hours’ steady work each day, from week to week, in a bakery or confectionery establishment, may endanger the health and shorten the lives of the workmen, thereby diminishing their physical and mental capacity to serve the state and to provide for those dependent upon them. If such reasons exist that ought to be the end of this case, for the state is not amenable to the judiciary, in respect of its legislative enactments, unless such enactments are plainly, palpably, beyond all question, inconsistent with the Constitution of the United States. We are not to presume that the state of New York has acted in bad faith. Nor can we assume that its legislature acted without due deliberation, or that it did not determine this question upon the fullest attainable information and for the common good. We cannot say that the state has acted without reason, nor ought we to proceed upon the theory that its action is a mere sham. Our duty, I submit, is to sustain the statute as not being in conflict with the Federal Constitution, for the reason-and such is an all-sufficient reason-it is not shown to be plainly and palpably inconsistent with that instrument. Let the state alone in the management of its purely domestic affairs, so long as it does not appear beyond all question that it has violated the Federal Constitution. This view necessarily results from the principle that the health and safety of the people of a state are primarily for the state to guard and protect. I take leave to say that the New York statute, in the particulars here involved, cannot be held to be in conflict with the 14th Amendment, without enlarging the scope of the amendment far beyond its original purpose, and without bringing under the supervision of this court matters which have been supposed to belong exclusively to the legislative departments of the several states when exerting their conceded power to guard the health and safety of their citizens by such regulations as they in their wisdom deem best. Health laws of every description constitute, said Chief Justice Marshall, a part of that mass of legislation which ‘embraces everything within the territory of a state, not surrendered to the general government; all which can be most advantageously exercised by the states themselves.’ … A decision that the New York statute is void under the 14th Amendment will, in my opinion, involve consequences of a far-reaching and mischievous character; for such a decision would seriously cripple the inherent power of the states to care for the lives, health, and wellbeing of their citizens. Those are matters which can be best controlled by the states. The preservation of the just powers of the states is quite as vital as the preservation of the powers of the general government. … The judgment, in my opinion, should be affirmed.

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CAST STUDY 2 – CHINTAMAN RAO V. STATE OF MADHYA PRADESH AIR 1951 SC 118 Bench – Chief Justice H. L. Kania, Justices Mahajan, Mukherjea, Das & Aiyar Justice Mahajan (for the Court) These two applications for enforcement of the fundamental right guaranteed under article 19(1)(g) of the Constitution of India have been made by a proprietor and an employee respectively of a bidi manufacturing concern of District Sagar (State of Madhya Pradesh). It is contended that the law in force in the State authorizing it to prohibit the manufacture of bidis in certain villages including the one wherein the applicants reside is inconsistent with the provisions of Part III of the Constitution and is consequently void. The Central Provinces and Berar Regulation of Manufacture of Bidis (Agricultural Purposes) Act, LXIV of 1948, was passed on 19th October 1948 and was the law in force in the State at the commencement of the Constitution. Sections 3 and 4 of the Act are in these terms: 3. The Deputy Commissioner may by notification fix a period to be an agricultural season with respect to such villages as may be specified therein. 4. (1) The Deputy Commissioner may, by general order which shall extend to such villages as he may specify, prohibit the manufacture of bidis during the agricultural season. (2) No person residing in a village specified in such order shall during the agricultural season engage himself in the manufacture of bidis, and no manufacturer shall during the said season employ any person for the manufacture of bidis.

On the 13th June 1950 an order was issued by the Deputy Commissioner of Sagar under the provisions of the Act forbidding all persons residing in certain villages from engaging in the manufacture of bidis. On the 19th June 1950 these two petitions were presented to this Court under article 32 of the Constitution challenging the validity of the order as it prejudicially affected the petitioners' right of freedom of occupation and business. During the pendency of the petitions the season mentioned in the order of the 13th June ran out. A fresh order for the ensuing agricultural season - 8th October to 18th November 1950 - was issued on 29th September 1950 in the same terms. This order was also challenged in a supplementary petition. … The point for consideration in these applications is whether the Central Provinces and Berar Act LXIV of 1948 comes within the ambit of this saving clause or is in excess of its provisions. The learned counsel for the petitioners contends that the impugned Act does not impose reasonable restrictions on the exercise of the fundamental right in the interests of the general public but totally negatives it. In order to judge the validity of this contention it is necessary to examine the impugned Act and some of its provisions. In the preamble to the Act, it is stated that it has been enacted to provide measures for the supply of adequate labour for agricultural purposes in bidi manufacturing areas. Sections 3 and 4 cited above empower the Deputy Commissioner to prohibit the manufacture of bidis during the agricultural season. The contravention of any of these provisions is made punishable by section 7 of the Act, the penalty being imprisonment for a term which may extend to six months or with fine or with both. It was enacted to help in the ‘grow more food’ campaign and for the purpose of bringing under the plough considerable areas of fallow land. The question for decision is whether the statute under the guise of protecting public interests arbitrarily interferes with private business and imposes unreasonable and unnecessarily restrictive regulations upon lawful occupation; in other words, whether the total prohibition of carrying on the business of manufacture of bidis within the agricultural season amounts to a reasonable restriction on the fundamental rights mentioned in article 19(1)(g) of the Constitution. Unless it is shown that there is a

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reasonable relation of the provisions of the Act to the purpose in view, the right of freedom of occupation and business cannot be curtailed by it. The phrase “reasonable restriction” connotes that the limitation imposed on a person in enjoyment of the right should not be arbitrary or of an excessive nature, beyond what is required in the interests of the public. The word “reasonable” implies intelligent care and deliberation, that is, the choice of a course which reason dictates. Legislation which arbitrarily or excessively invades the right cannot be said to contain the quality of reasonableness and unless it strikes a proper balance between the freedom guaranteed in article 19(1)(g) and the social control permitted by clause (6) of article 19, it must be held to be wanting in that quality. Clause (6) in the concluding paragraph particularizes certain instances of the nature of the restrictions that were in the mind of the constitution-makers and which have the quality of reasonableness. They afford a guide to the interpretation of the clause and illustrate the extent and nature of the restrictions which according to the statute could be imposed on the freedom guaranteed in clause (g). The statute in sub-stance and affect suspends altogether the right mentioned in article 19(1)(g) during the agricultural seasons and such suspension may lead to such dislocation of the industry as to prove its ultimate ruin. The object of the statute is to provide measures for the supply of the adequate labour for agricultural purposes in bidi manufacturing areas of the Province and it could well be achieved by legislation restraining the employment of agricultural labour in the manufacture of bidis during the agricultural season. Even in point of time a restriction may well have been reasonable if it amounted to a regulation of the hours of work in the business. Such legislation though it would limit the field for recruiting persons for the manufacture of bidis and regulate the hours of the working of the industry, would not have amounted to a complete stoppage of the business of manufacture and might well have been within the ambit of clause (6). The effect of the provisions of the Act, however, has no reasonable relation to the object in view but is so drastic in scope that it goes much in excess of that object. Not only are the provisions of the statute in excess of the requirements of the case but the language employed prohibits a manufacturer of bidis from employing any person in his business, no matter wherever that person may be residing. In other words, a manufacturer of bidis residing in this area cannot import labour from neighbouring places in the district or province or from outside the province. Such a prohibition on the face of it is of an arbitrary nature inasmuch as it has no relation whatsoever to the object which the legislation seeks to achieve and as such cannot be said to be a reasonable restriction on the exercise of the right. Further the statute seeks to prohibit all persons residing in the notified villages during the agricultural season from engaging themselves in the manufacture of bidis. It cannot be denied that there would be a number of infirm and disabled persons, a number of children, old women and petty shop keepers residing in these villages who are incapable of being used for agricultural labour. All such persons are prohibited by law from engaging themselves in the manufacture of bidis; and are thus being deprived of earning their livelihood. It is a matter of common knowledge that there are certain classes of persons residing in every village who do not engage in agricultural operations. They and their womenfolk and children in their leisure hours supplement their income by engaging themselves in bidi business. There seems no reason for prohibiting them from carrying on this occupation. The statute as it stands, not only compels those who can be engaged in agricultural work from not taking to other avocations, but it also prohibits persons who have no connection or relation to agricultural operations from engaging in the business of bidi making and thus earning their livelihood. These provisions of the statute, in our opinion, cannot be said to amount to reasonable restrictions on the right of the applicants and that being so, the statute is not in conformity with the provisions of Part III of the Constitution. The law even to the extent that it could be said to authorize the imposition of restrictions in regard to agricultural labour cannot be held valid because the language employed is wide enough to cover restrictions both within and without the limits of constitutionally permissible legislative acting affecting the right. So long as the possibility of its

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being applied for purposes not sanctioned by the Constitution cannot be ruled out, it must be held to be wholly void. Mr. Sikkri for the Government of Madhya Pradesh contends that the legislature of Madhya Pradesh was the proper judge of the reasonableness of the restrictions imposed by the statute, that that legislature alone knew the conditions prevailing in the State and it alone could say what kind of legislation could effectively achieve the end in view and would help in the grow more food campaign and would help for bringing in fallow land under the plough and that this Court sitting at this great distance could not judge by its own yardstick of reason whether the restrictions imposed in the circumstances of the case were reasonable or not. This argument runs counter to the clear provisions of the Constitution. The determination by the legislature of what constitutes a reasonable restriction is not final or conclusive; it is subject to the supervision by this Court. In the matter of fundamental rights, the Supreme Court watches and guards the rights guaranteed by the Constitution and in exercising its functions it has the power to set aside an Act of the Legislature of it is in violation of the freedoms guaranteed by the Constitution. We are therefore of opinion that the impugned statute does not stand the test of reasonableness and is therefore void. The result therefore is that the orders issued by the Deputy Commissioner on 13th June 1950 and 26th September 1950 are void, inoperative and ineffective. We therefore direct the respondents not to enforce the provisions contained in section 4 of the Act against the petitioners in any manner whatsoever. The petitioners will have their costs of these proceedings in the two petitions. …

STRUCTURE AND HISTORY AS METHODS OF CONSTITUTIONAL INTERPRETATION CASE STUDY – KESAVANANDA BHARTI V. STATE OF KERALA AIR 1974 SC 1461, (1973) 4 SCC 225 Bench - Chief Justice S. M. Sikri, Justices A. N. Grover, A. N. Ray, D. G. Palekar, H. R. Khanna, J. M. Shelat, K. K. Mathew, K. S. Hegde, M. Hameedullah Beg, P. Jaganmohan Reddy, S. N. Dwivedi, A. K. Mukherjea & Y. V. Chandrachud Chief Justice Sikri (for himself) I propose to divide my judgment into eight parts. Part I will deal with Introduction; Part II with interpretation of Golakhnath case; Part III with the interpretation of the original Article 368, as it existed prior to its amendment; Part IV with the validity of the Constitution (Twenty-fourth Amendment) Act; Part V with the validity of Section 2 of the Constitution (Twenty-fifth Amendment) Act; Part VI with the validity of Section 3 of the Constitution (Twenty-fifth Amendment) Act; Part VII with Constitution (Twenty-ninth Amendment) Act; and Part VIII with conclusions. Part I – Introduction All the six writ petitions involve common questions as to the validity of the Twenty-fourth, Twentyfifth and Twenty-ninth Amendments of the Constitution. … The Constitution (Twenty-fifth Amendment) Act came into force on November 5, 1971, the Constitution (Twenty-fifth Amendment) Act came into force on April 20, 1972 and the Constitution (Twenty-ninth Amendment) Act came into force on June 9, 1972. The effect of the Twenty-ninth Amendment of the Constitution was that it inserted the following Acts in the Ninth Schedule to the Constitution: 65. The Kerala Land Reforms (Amendment) Act, 1969 (Kerala Act 35 of 1969) 66. The Kerala Land Reforms (Amendment) Act, 1971 (Kerala Act 25 of 1971)

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… It was then felt that it would be necessary to decide whether Golak Nath v. State of Punjab, [1967] 2 SCR 762 was rightly decided or not. However, as I see it, the question whether Golak Nath was rightly decided or not does not matter because the real issue is different and of much greater importance, the issue being: what is the extent of the amending power conferred by Article 368 of the Constitution, apart from Article 13(2), on Parliament? The respondents claim that Parliament can abrogate fundamental rights such as freedom of speech and expression, freedom to form associations or unions, and freedom of religion. They claim that democracy can even be replaced and one-party rule established. Indeed, short of repeal of the Constitution, any form of Government with no freedom to the citizens can be set up by Parliament by exercising its powers under Article 368. On the side of the petitioners it is urged that the power of Parliament is much more limited. The petitioners say that the Constitution gave the Indian citizen freedoms which were to subsist forever and the Constitution was drafted to free the nation from any future tyranny of the representatives of the people. It is this freedom from tyranny which, according to the petitioners, has been taken away by the impugned Article 31C which has been inserted by the Twenty-fifth Amendment. If Article 31C is valid, they say, hereafter Parliament and State Legislatures and not the Constitution, will determine how much freedom is good for the citizens. These cases raise grave issues. But however grave the issues may be, the answer must depend on the interpretation of the words in Article 368, read in accordance with the principles of interpretation which are applied to the interpretation of a Constitution given by the people to themselves. I must interpret Article 368 in the setting of our Constitution, in the background of our history and in the light of our aspirations and hopes, and other relevant circumstances. No other Constitution in the world is like ours. No other Constitution combines under its wings such diverse peoples, numbering now more than 550 millions, with different languages and religions and in different stages of economic development, into one nation, and no other nation is faced with such vast socio-economic problems. I need hardly observe that I am not interpreting an ordinary statute, but a Constitution which apart from setting up a machinery for government, has a noble and grand vision. The vision was put in words in the Preamble and carried out in part by conferring fundamental rights on the people. The vision was directed to be further carried out by the application of directive principles. … PART III – Interpretation of Article 368 Let me now proceed to interpret Article 368. Article 368, as originally enacted, read as follows: An amendment of this Constitution may be initiated only by the introduction of a Bill for the purpose in either House of Parliament, and when the Bill is passed in each House by a majority of the total membership of that House and by a majority of not less than two-thirds of the members of that House present and voting, it shall be presented to the President for his assent and upon such assent being given to the Bill, the Constitution shall stand amended in accordance with the terms of the Bill: Provided that if such amendment seeks to make any change in(a) Article 54, Article 55, Article 73, Article 162 or Article 241, or (b) Chapter IV of Part V, Chapter V of Part VI, or Chapter I of Part XI, or (c) any of the Lists in the Seventh Schedule, or (d) the representation of States in Parliament, or (e) the provisions of this article,

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the amendment shall also require to be ratified by the Legislatures of not less than one-half of the States specified in Parts A and B of the First Schedule by resolutions to that effect passed by those Legislatures before the Bill making provision for such amendment is presented to the President for assent.

It will be noticed that Article 368 is contained in a separate part and the heading is “Amendment of the Constitution”, but the marginal note reads “Procedure for amendment of the Constitution”. The expression “amendment of the Constitution” is not defined or expanded in any manner, although in other parts of the Constitution, the word “Amend” or “Amendment” has, as will be pointed out later, been expanded. In some parts they have clearly a narrow meaning. The proviso throws some light on the problem. First, it uses the expression “if such amendment seeks to make any change in”; it does not add the words “change of”, or omit “in”, and say “seeks to change” instead of the expression “seeks to make any change in”. The articles which are included in the proviso may be now considered. Part V, Chapter I, deals with “the Executive”. Article 52, provides that there shall be a President of India, and Article 53 vests the executive power of the Union in the President and provides how it shall be exercised. These two articles are not mentioned in the proviso to Article 368 but Articles 54 and 55 are mentioned. … Why were Articles 52 and 53 not mentioned in the proviso to Article 368 if the intention was that the States would have a say as to the federal structure of the country? One of the inferences that can be drawn is that the Constitution-makers never contemplated, or imagined that Article 52 will be altered and there shall not be a President of India. In other words they did not contemplate a monarchy being set up in India or there being no President. Another article which has been included in the proviso to Article 368 is Article 73 which deals with the extent of executive powers of the Union. As far as the Vice-President is concerned, the States have been given no say whether there shall be a Vice-President or not; about the method of his election, etc. But what is remarkable is that when we come to Part VI of the Constitution, which deals with the “States”, the only provision which is mentioned in the proviso to Article 368 is Article 162 which deals with the extent of executive power of States. The appointment of a Governor, conditions of service of a Governor, and the Constitution and functions of the Council of Ministers, and other provisions regarding the Ministers and the conduct of government business are not mentioned at all in the proviso to Article 368. Another article which is mentioned in Clause (a) of the proviso to Article 368 is Article 241 which originally dealt with High Courts for States in Part C of the First Schedule. Chapter IV of Part V of the Constitution which deals with the Union Judiciary, and Chapter V of Part VI which deals with the High Courts in the State are included in the proviso to Article 368 but it is extra-ordinary that Chapter VI of Part VI which deals with subordinate Judiciary is not mentioned in Clause (b). Chapter I of Part XI is included and this deals with the Legislative Relations between the Union and the States, but Chapter II of Part XI which deals with Administrative Relations between the Union and the States, and various other matters in which the States would be interested are not included. Provisions relating to services under the State and Trade and Commerce are also not included in the proviso. This analysis of the provisions contained in Clauses (a) and (b) of the proviso to Article 368 shows that the reason for including certain articles and excluding certain other from the proviso was not that all articles dealing with the federal structure or the status of the States had been selected for inclusion in the proviso. Clause (c) of the proviso mentions the Lists in the Seventh Schedule, Clause (d) mentions the representation of States in Parliament, and Clause (e) the provisions of Article 368 itself. The

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provisions of Sub-clauses (c), (d) and (e) can rightly be said to involve the federal structure and the rights of the States. What again is remarkable is that the fundamental rights are not included in the proviso at all. Were not the States interested in the fundamental rights of their people? The omission may perhaps be understandable because of the express provision of Article 13(2) which provided that States shall not make any law which takes away or abridges the rights conferred by Part III and any law made in contravention of this clause shall to the extent of the contravention be void, assuming for the present that Article 13(2) operates on Constitutional amendments. In construing the expression “amendment of this Constitution” I must look at the whole scheme of the Constitution. It is not right to construe words in vacuum and then insert the meaning into an article. Lord Greene observed in Bidie v. General Accident, Fire and Life Assurance Corporation, [1948] 2 All E.R. 995: The first thing one has to do, I venture to think, in construing words in a section of an Act of Parliament is not to take those words in vacuo, so to speak, and attribute to them what is sometimes called their natural or ordinary meaning. Few words in the English language have a natural or ordinary meaning in the sense that they must be so read that their meaning is entirely independent of their context. The method of construing statutes that I prefer is not to take particular words and attribute to them a sort of prima facie meaning which you may have to displace or modify. It is to read the statute as a whole and ask oneself the question: In this state, in this context, relating to this subject-matter, what is the true meaning of that word?

I respectfully adopt the reasoning of Lord Greene in construing the expression “the amendment of the Constitution.” … In the Constitution the word “amendment” or “amend” has been used in various places to mean different things. In some articles, the word “amendment” in the context has a wide meaning and in another context it has a narrow meaning. In Article 107, which deals with legislative procedure, Clause (2) provides that “subject to the provisions of Articles 108 and 109, a Bill shall not be deemed to have been passed by the House of Parliament unless it has been agreed to by both Houses, either without amendment or with such amendments only as are agreed to by both Houses.” It is quite clear that the word “amendment” in this article has a narrow meaning. Similarly, in Article 111 of the Constitution, whereby the President is enabled to send a message requesting the Houses to consider the desirability of introducing amendments, the “amendments” has a narrow meaning. The opening of Article 4(1) reads: 4(1) Any law referred to in Article 2 or Article 3 shall contain such provisions for the amendment of the First Schedule and the Fourth Schedule as may be necessary to give effect to the provisions of the law…

Here the word “amendment” has a narrower meaning. “Law” under Articles 3 and 4 must “conform to the democratic pattern envisaged by the Constitution; and the power which the Parliament may exercise… is not the power to over-ride the Constitutional scheme. No state can, therefore, be formed, admitted or set up by law under Article 4 by the Parliament which has no effective legislative, executive and judicial organs”. (Per Shah J., Mangal Singh v. Union of India, [1967] 2 SCR 109) Article 169(2) reads: Any law referred to in Clause (1) shall contain such provisions for the amendment of this Constitution as may be necessary to give effect to the provisions of the law and may also contain such supplemental, incidental and consequential provisions as Parliament may deem necessary.

Here also the word “amendment” has a narrow meaning.

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Para 7 of Part D, Fifth Schedule, which deals with amendment of the schedule, reads: 7. Amendment of the Schedule. - (1) Parliament may from time to time by law amend by way of addition, variation or repeal any of the provisions of this Schedule and, when the Schedule is so amended, any reference to this Schedule in this Constitution shall be construed as a reference to such schedule as so amended.

Here the word “amend” has been expanded by using the expression “by way of addition, variation or repeal”, but even here, it seems to me, the amendments will have to be in line with the whole Constitution. Similarly, under para 21 of the Sixth Schedule, which repeats the phraseology of para 7 of the Fifth Schedule, it seems to me, the amendments will have to be in line with the Constitution. I may mention that in the case of the amendments which may be made in exercise of the powers under Article 4, Article 169, para 7 of the Fifth Schedule, and para 21 of the Sixth Schedule, it has been expressly stated in these provisions that they shall not be deemed to be amendments of the Constitution for the purposes of Article 368. It is also important to note that the Constituent Assembly which adopted Article 368 on September 17, 1949, had earlier on August 18, 1949, substituted the following section in place of the old Section 291 in the Government of India Act, 1935: 291. Power of the Governor-General to amend certain provisions of the Act and orders made thereunder(1) The Governor-General may at any time by order make such amendments as he considers necessary whether by way of addition, modification or repeal, in the provisions of this Act or of any order made thereunder in relation to any Provincial Legislature with respect to any of the following matters, that is to say (a) the composition of the Chamber or Chambers of the Legislature; (b) the delimitation of territorial constituencies for the purpose of elections under this Act.

Here, the word “amendment” has been expanded. It may be that there really is no expansion because every amendment may involve addition, variation or repeal of part of a provision. According to Mr. Seervai, the power of amendment given by Article 4, read with Articles 2 and 3, Article 169, Fifth Schedule and Sixth Schedule, is a limited power limited to certain provisions of the Constitution, while the power under Article 368 is not limited. It is true every provision is prima facie amendable under Article 368 but this does not solve the problem before us. I may mention that an attempt was made to expand the word “amend” in Article 368 by proposing an amendment that “by way of variation, addition, or repeal” be added but the amendment was rejected. Again, in Article 196(2), the word “amendment” has been used in a limited sense. Article 196(2) reads: 196(2). Subject to the provisions of Articles 197 and 198, a Bill shall not be deemed to have been passed by the Houses of the Legislature of a State having a Legislative Council unless it has been agreed to by both Houses, either without amendment or with such amendments only as are agreed to by both Houses.

Similar meaning may be given to the word “amendment” in Article 197(2), which reads: 197(2). If after a Bill has been so passed for the second time by the Legislative Assembly and transmitted to the Legislative Council(a) the Bill is rejected by the Council; or (b) more than one month elapses from the date on which the Bill is laid before the Council without the Bill being passed by it; or

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(c) the Bill is passed by the Council with amendments to which the Legislative Assembly does not agree, (d) the Bill is passed by the Legislative Assembly does not agree, the Bill shall be deemed to have been passed by the Houses of the Legislature of the State in the form in which it was passed by the Legislative Assembly for the second time with such amendments, if any, as have been made or suggested by the Legislative Council and agreed to by the Legislative Assembly.

Under Article 200 the Governor is enabled to suggest the desirability of introducing any such amendments as he may recommend in his message. Here again “amendment” has clearly a limited meaning. In Article 35(b) the words used are: Any law in force immediately before the commencement of this Constitution … subject to the terms thereof and to any adaptations and modifications that may be made therein under Article 372, continue in force until altered or repealed or amended by Parliament.

Here, all the three words are used giving a comprehensive meaning. Reliance is not placed by the draftsman only on the word “amend”. Similar language is used in Article 372 whereby existing laws continue to be in force until “altered or repealed or amended” by a competent Legislature or other competent authority. In the original Article 243(2), in conferring power on the President to make regulations for the peace and good government of the territories in part D of the First Schedule, it is stated that “any regulation so made may repeal or amend any law made by Parliament.” Here, the two words together give the widest power to make regulations inconsistent with any law made by Parliament In Article 252 again, the two words are joined together to give a wider power. … In Article 320(5), "all regulations made under the proviso to Clause (3)" can be modified “whether by way of repeal or amendment” as both Houses of Parliament or the House or both Houses of the Legislature of the States may make during the session in which they are so laid. I have referred to the variation in the language of the various articles dealing with the question of amendment or repeal in detail because our Constitution was drafted very carefully and I must presume that every word was chosen carefully and should have its proper meaning. I may rely for this principle on the following observations of the United States Supreme Court in Holmes v. Jennison, (10) L. Ed. 579 and quoted with approval in William v. United States, (77) L. Ed. 1372: In expounding the Constitution of the United States, every word must have its due force, and appropriate meaning: for it is evident from the whole instrument, that no word was unnecessarily used, or needlessly added…

Reference was made to Section 6(2) of the Indian Independence Act, 1947, in which the last three lines read: … and the powers of the Legislature of each Dominion include the power to repeal or amend any such Act, order, rule or regulation in so far as it is part of the law of the Dominion.

Here, the comprehensive expression “repeal or amend” gives power to have a completely new Act different from an existing act of Parliament. So, there is no doubt from a perusal of these provisions that different words have been used to meet different demands. In view of the great variation of the phrases used all through the Constitution it follows that the word “amendment” must derive its colour from Article 368 and the rest of the provisions

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of the Constitution. There is no doubt that it is not intended that the whole Constitution could be repealed. This much is conceded by the learned Counsel for the respondents. Therefore, in order to appreciate the real content of the expression “amendment of this Constitution”, in Article 368 I must look at the whole structure of the Constitution. The Constitution opens with a preamble which reads: WE THE PEOPLE OF INDIA, having solemnly resolved to constitute India into a SOVEREIGN DEMOCRATIC REPUBLIC and to secure to all its citizens: JUSTICE, social, economic and political; LIBERTY of thought, expression, belief, faith and worship; EQUALITY of status and of opportunity; and to promote among them all; FRATERNITY assuring the dignity of the individual and the unity of the Nation; IN OUR CONSTITUENT ASSEMBLY this Twenty-sixth day of November, 1949, do HEREBY ADOPT, ENACT AND GIVE TO OURSELVES THIS CONSTITUTION.

This Preamble, and indeed the Constitution, was drafted in the light and direction of the Objective Resolutions adopted on January 22, 1947, which runs as follows: (1) THIS CONSTITUENT ASSEMBLY declares its firm and solemn resolve to proclaim India as an Independent Sovereign Republic and to draw up for her future governance a Constitution: (2) wherein the territories that now comprise British India, the territories that now form the Indian States, and such other parts of India as are outside British India and the States, as well as such other territories as are willing to be constituted into the Independent Sovereign India, shall be a Union of them all; and (3) wherein the said territories, whether with their present boundaries or with such others as may be determined by the Constituent Assembly and thereafter according to the law of the Constitution, shall possess and retain the status of autonomous units, together with residuary powers, and exercise all powers and functions of government and administration, save and except such powers and functions as are vested in of assigned to the Union, or as are inherent or implied in the Union or resulting therefrom; and (4) wherein all power and authority of the Sovereign Independent India, its constituent parts and organs of government, are derived from the people; and (5) wherein shall be guaranteed and secured to all people of India justice, social, economic and political; equality of status, of opportunity, and before the law; freedom of thought, expression, belief, faith, worship, vocation, association and action, subject to law and public morality; and (6) wherein adequate safeguards shall be provided for minorities backward and tribal areas, and depressed and other backward classes; and (7) whereby shall be maintained the integrity of the territory of the Republic and its sovereign rights on land, sea, and air according to justice and the law of civilized nations, and (8) this ancient land attains its rightful and honoured place in the world and makes its full and willing contribution to the promotion of world peace and the welfare of mankind.

While moving the resolution for acceptance of the Objectives Resolution, Pandit Jawaharlal Nehru said:

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It seeks very feebly to tell the world of what we have thought or dreamt for so long, and what we now hope to achieve in the near future. It is in that spirit that I venture to place this Resolution before the House and it is in that spirit that I trust the House will receive it and ultimately pass it. And may I, Sir, also with all respect, suggest to you and to the House that, when the time comes for the passing of this Resolution let it be not done in the formal way by the raising of hands, but much more solemnly, by all of us standing up and thus taking this pledge anew.

I may here trace the history of the shaping of the Preamble because this would show that the Preamble was in conformity with the Constitution as it was finally accepted. Not only was the Constitution framed in the light of the Preamble but the Preamble was ultimately settled in the light of the Constitution. This appears from the following brief survey of the history of the framing of the Preamble extracted from the Framing of India’s Constitution by B. Shiva Rao. In the earliest draft the Preamble was something formal and read: “We, the people of India, seeking to promote the common good, do hereby, through our chosen representatives, enact, adopt and give to ourselves this Constitution.” (Shiva Rao’s Framing of India's Constitution, p. 127) After the plan of June 3, 1947, which led to the decision to partition the country and to set up two independent Dominions of India and Pakistan, on June 8, 1947, a joint sub-committee of the Union Constitution and Provincial Constitution Committees, took note that the objective resolution would require amendment in view of the latest announcement of the British Government. The announcement of June 3 had made it clear that full independence, in the form of Dominion Status, would be conferred on India as from August 15, 1947. After examining the implications of partition the sub-committee thought that the question of making changes in the Objectives Resolution could appropriately be considered only when effect had actually been given to the June 3 Plan. (Special Sub-Committee minutes June 9, 1947). Later on July 12, 1947, the special sub-committee again postponed consideration of the matter. Select Documents II, 20(ii), p. 617. (Shiva Rao, Framing of India’s Constitution, p. 127 footnote). The Union Constitution Committee provisionally accepted the Preamble as drafted by B.N. Rao and reproduced it in its report of July 4, 1947 without any change, with the tacit recognition at that stage that the Preamble would be finally based on the Objectives Resolution. In a statement circulated to members of the Assembly on July 18, 1947 Pandit Jawaharlal Nehru inter alia, observed that the Preamble was covered more or less by the Objectives Resolution which it was intended to incorporate in the final Constitution subject to some modification on account of the political changes resulting from partition. Three days later, moving the report of the Union Constitution Committee for the consideration of the Assembly, he suggested that it was not necessary at that stage to consider the draft of the Preamble since the Assembly stood by the basic principles laid down in the Objectives Resolution and these could be incorporated in the Preamble in the light of the changed situation (Shiva Rao, Framing of India’s Constitution, pp. 127-128, also see footnote 1 p. 128). The suggestion was accepted by the Assembly and further consideration of the Preamble was held over. We need not consider the intermediate drafts, but in the meantime the declaration (See Constituent Assembly Debates, Vol. 8, page 2) was adopted at the end of April, 1949 by the Government of the various Commonwealth countries and the resolution was ratified by Constituent Assembly on May 17; 1949 after two days’ debate. In the meantime the process of merger and integration of Indian States had been completed and Sardar Vallabhbhai Patel was able to tell the Constituent Assembly on October 12, 1949, that the new Constitution was “not an alliance between democracies and dynasties, but a real union of the Indian people, built on the basic concept of the sovereignty of the people” (Shiva Rao, Framing of India’s Constitution, pp. 130-132).

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The draft Preamble was considered by the Assembly on October 17, 1949. Shiva Rao observes that “the object of putting the Preamble last, the President of the Assembly explained, was to see that it was in conformity with the Constitution as accepted.” Once the transfer of power had taken place the question of British Parliament’s subsequent approval which was visualised in the British Cabinet Commission’s original plan of May 1946 could no longer arise. The sovereign character of the Constituent Assembly thus became automatic with the rapid march of events without any controversy, and the words in the Preamble “give to ourselves this Constitution” became appropriate. The Preamble was adopted by the Assembly without any alteration. Subsequently the words and figure “this twenty-sixth day of November 1949” were introduced in the last paragraph to indicate the date on which the Constitution was finally adopted by the Constituent Assembly. Regarding the use which can be made of the preamble in interpreting an ordinary statute, there is no doubt that it cannot be used to modify the language if the language of the enactment is plain and clear. If the language is not plain and clear, then the preamble may have effect either to extend or restrict the language used in the body of an enactment. “If the language of the enactment is capable of more than one meaning then that one is to be preferred which comes nearest to the purpose and scope of the preamble.” (See Tribhuban Parkash Nayyar v. Union of India, [1970] 2 SCR 732) We are, however, not concerned with the interpretation of an ordinary statute. As Sir Alladi Krishnaswami, a most eminent lawyer said, “so far as the Preamble is concerned, though in an ordinary statute we do not attach any importance to the Preamble, all importance has to be attached to the Preamble in a Constitutional statute”. (Constituent Assembly Debates, Vol. 10, p. 417). Our Preamble outlines the objectives of the whole Constitution. It expresses what we had thought or dreamt for so long. … It is urged in the written submission of Mr. Palkhivala that there is a distinction between the Indian Constitution Statute and the Constitution of India. He urges as follows: This Constitution is the Constitution which follows the Preamble. It starts with Article 1 and ended originally with the Eighth Schedule and now ends with the Ninth Schedule after the First Amendment Act, 1951. The way the Preamble is drafted leaves no doubt that what follows, or is annexed to, the Preamble, is the Constitution of India.

He has also urged that the Preamble came into force on November 26, 1949 alongwith Articles 5, 6, 7 etc. as provided in Article 394 because Articles 5, 6, 7 and the other Articles mentioned therein could hardly come into force without the enacting clause mentioned in the Preamble having come into force. He says that the Preamble is a part of the Constitution statute and not a part of the Constitution but precedes it. There is something to be said for his contention but, in my view, it is not necessary to base my decision on this distinction as it is not necessary to decide in the present case whether Article 368 enables Parliament to amend the Preamble. Parliament has not as yet chosen to amend the Preamble. The Preamble was used by this Court as an aid to construction in Behram Khurshed Pasikaka v. State of Bombay, 1955 Cri L.J. 215. After referring to Part III, Mahajan, C.J., observed: We think that the rights described as fundamental rights are a necessary consequence of the declaration in the preamble that the people of India have solemnly resolved to constitute India into a sovereign democratic republic and to secure to all its citizens justice, social, economic and political; liberty of thought, expression, belief, faith and worship; equality of status and of opportunity. These fundamental rights have not been put in the Constitution merely for individual benefits, though ultimately they come into operation in considering individual rights. They have been put there as a matter of public policy and the doctrine of waiver can have no application to provisions of law which have been enacted as a matter of Constitutional policy.

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… In Sajjan Singh v. State of Rajasthan, [1965] 1 SCR 933 Mudholkar, J. after assuming that the Preamble is not a part of the Constitution, observed: While considering this question it would be of relevance to bear in mind that the preamble is not of the common run such as is to be found in an Act of a legislature. It has the stamp of deep deliberation and is marked by precision. Would this not suggest that the framers of the Constitution attached special significance to it?

… It seems to me that the Preamble of our Constitution is of extreme importance and the Constitution should be read and interpreted in the light of the grand and noble vision expressed in the Preamble. … I may here mention that while our fundamental rights and directive principles were being fashioned and approved of by the Constituent Assembly, on December 10, 1948 the General Assembly of the United Nations adopted a Universal Declaration of Human Rights. The Declaration may not be a legally binding instrument but it shows how India understood the nature of Human Rights. … Do rights remain inalienable if they can be amended out of existence? The Preamble Articles 1, 55, 56, 62, 68 and 76 of the United Nations Charter had provided the basis for the elaboration in the Universal Declaration of Human Rights. Although there is a sharp conflict of opinion whether respect for human dignity and fundamental human rights is obligatory under the Charter (see Oppenheim’s International Law; 8th ed. Vol. 1, pp. 740-41; footnote 3), it seems to me that, in view of Article 51 of the directive principles, this Court must interpret language of the Constitution, if not intractable, which is after all a municipal law, in the light of the United Nations Charter and the solemn declaration subscribed to by India. … I may here notice some relevant facts which constitute the background of the process of drafting the Constitution. The British Parliament knowing the complexities of the structure of the Indian people expressly provided in Section 6(6) of the Indian Independence Act, 1947, that “the powers referred to in Sub-section (1) of this section extends to the making of laws limiting for the future the powers of the legislature of the Dominion.” Sub-section (1) of Section 6 reads: The legislature of each of the new Dominions shall have full power to make laws for that Dominion, including laws having extraterritorial operation.

That Section 6(1) included making provision as to the Constitution of the Dominion is made clear by Section 8(1) which provided: In the case of each of the new Dominions, the powers of legislature of the Dominion shall for the purpose of making provision as to the Constitution of the Dominion be exercisable in the first instance by the Constituent Assembly of that Dominion, and references in this Act to the legislature of the Dominion shall be construed accordingly.

… These provisions of the Indian Independence Act amply demonstrate that when the Constituent Assembly started functioning, it knew, if it acted under the Indian Independence Act, that it could limit the powers of the future Dominion Parliaments. No similar provisions exists in any of the Independence Acts in respect of other countries, enacted by the British Parliament, e.g., Ceylon Independence Act, 1947, Ghana Independence Act, 1957, Federation of Malaya Independence Act, 1957, Nigeria Independence Act, 1960, Sierra Leone Independence Act, 1961, Tanganyika Independence Act, 1961, Southern Rhodesia Act, 1965, Jamaica Independence Act, 1962.

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I may mention that the aforesaid provisions in the Indian Independence Act were enacted in line with the Cabinet Statement dated May 16, 1947 and the position of the Congress Party. Para 20 (See: Shiva Rao, Framing of India’s Constitution, Vol. I, p. 216) of the Statement by the Cabinet Mission provided: The Advisory Committee on the rights of citizens, minorities, and tribal and excluded areas should contain full representation of the interests affected, and their function will be to report to the Union Constituent Assembly upon the list of Fundamental Rights, the clauses for the protection of minorities, and a scheme for the administration of the tribal and excluded areas, and to advise whether these rights should be incorporated in the Provincial, Group, or Union Constitution.

In clarifying this statement Sir Stafford Cripps at a Press Conference dated May 16, 1946 stated: But in order to give these minorities and particularly the smaller minorities like the Indian Christians and the Anglo-Indians and also the tribal representatives a better opportunity of influencing minority provisions, we have made provision for the setting up by the Constitution-making body of an influential advisory Commission which will take the initiative in the preparation of the list of fundamental rights, the minority protection clauses and the proposals for the administration of tribal and excluded areas. This Commission will make its recommendations to the Constitution making body and will also suggest at which stage or stages in the Constitution these provisions should be inserted, that is whether in the Union, Group or Provincial Constitutions or in any two or more of them. (P. 224, Supra).

In the letter dated May 20, 1946, from Maulana Abul Kalam Azad to the Secretary of State, it is stated: The principal point, however, is, as stated above, that we look upon this Constituent Assembly as a sovereign body which can decide as it chooses in regard to any matter before it and can give effect to its decisions. The only limitation, we recognise is that in regard to certain major communal issues the decision should be by a majority of each of the two major communities. (P. 251, Supra).

In his reply dated May 22, 1946, the Secretary of State observed: When the Constituent Assembly has completed its labours, His Majesty’s Government will recommend to Parliament such action as may be necessary for the cession of sovereignty to the Indian people, subject only to two provisos which are mentioned in the statement and which are not, we believe, controversial, namely, adequate provision for the protection of minorities and willingness to conclude a treaty to cover matters arising out of the transfer of power.

In the Explanatory statement dated May 22, 1946, it was again reiterated as follows: When the Constituent Assembly has completed its labours, His Majesty’s Government will recommend to Parliament such action as may be necessary for the cession of sovereignty to the Indian people, subject only to two matters which are mentioned in the statement and which, we believe are not controversial, namely, adequate provision for the protection of the minorities (paragraph 20 of the statement) and willingness to conclude a treaty with His Majesty’s Government to cover matters arising out of the transfer of power (paragraph 22 of the statement) (P. 258, Supra).

In pursuance of the above, a resolution for the setting up of an Advisory Committee on fundamental rights was moved by Govind Ballabh Pant in the Constituent Assembly on January 24, 1947. He laid special importance on the issue of minorities. The Advisory Committee met on February 27, 1947 to constitute various sub-committees including the Minorities Sub-Committee. The Sub-Committee on Minorities met later the same day. A questionnaire was drafted to enquire about political, economic, religious, educational and cultural safeguards. In other words all these safeguards were considered. Divergent views were expressed, and the Minorities Sub-Committee met on April 17, 18 and 19, 1947 to consider this important matter. At these meetings the sub-committee considered the interim proposals

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of the fundamental rights Sub-Committee in so far as these had a bearing on minority rights. These discussions covered such important matters as the prohibition of discrimination on grounds of race, religion, caste, etc.; the abolition of untouchability and the mandatory requirements that the enforcement of any disability arising out of untouchability should be made an offence punishable according to law; freedom to profess, practise and propagate one's religion; the right to establish and maintain institutions for religious and charitable purposes; the right to be governed by one’s personal, law; the right to use one’s mother-tongue and establish denominational communal or language schools etc. Having dealt with the question of fundamental rights for minorities, the Minorities Sub-Committee met again on July 21, 1947, to consider the political safeguards for minorities and their presentation in the public services. In forwarding the report of the Advisory Committee on the subject of Minority Rights, Sardar Vallabhbhai Patel, in his report dated August 8, 1947, said: … It should be treated as supplementary to the one forwarded to you with my letter No. CA/24/Com./47, dated the 23rd April 1947 and dealt with by the Assembly during the April session. That report dealt with justiciable fundamental rights; these rights, whether applicable to all citizens generally or to members of minority communities in particular offer a most valuable safeguard for minorities over a comprehensive field of social life. The present report deals with what may broadly be described as political safeguards of minorities and covers the following points: (i) Representation in Legislature; joint versus separate electorates; and weightage. (ii) Reservation of seats for minorities in Cabinets. (iii) Reservation for minorities in the public services. (iv) Administrative machinery to ensure protection of minority rights.

Sardar Patel, while moving the report for consideration on August 27, 1947, said: You will remember that we passed the Fundamental Rights Committee's Report which was sent by the Advisory Committee; the major part of those rights has been disposed of and accepted by this House. They cover a very wide range of the rights of minorities which give them ample protection; and yet there are certain political safeguards which have got to be specifically considered. An attempt has been made in this report to enumerate those safeguards which are matters of common knowledge, such as representation in legislatures, that is, joint versus separate electorate.

The above proceedings show that the minorities were particularly concerned with the fundamental rights which were the subject-matter of discussion by the Fundamental Rights Committee. The above brief summary of the work of the Advisory Committee and the Minorities Sub-Committee shows that no one ever contemplated that fundamental rights appertaining to the minorities would be liable to be abrogated by an amendment of the Constitution. The same is true about the proceedings in the Constituent Assembly. There is no hint anywhere that abrogation of minorities rights was ever in the contemplation of the important members of the Constituent Assembly. It seems to me that in the context of the British Plan, the setting up of Minorities Sub-Committee, the Advisory Committee and the proceedings of these Committees, as well as the proceedings in the Constituent Assembly mentioned above, it is impossible to read the expression “Amendment of the Constitution” as empowering Parliament to abrogate the rights of minorities. Both sides relied on the speeches made in the Constituent Assembly. It is, however, a sound rule of construction that speeches made by members of a legislature in the course of debates relating to the enactment of a statute cannot be used as aids for interpreting any of provisions of the statute. The same rule has been applied to the provisions of this Constitution by this Court in State of Travancore-Cochin

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v. Bombay Co. Ltd., [1952] 1 SCR 1112. … In Golak Nath Subba Rao, C.J., referred to certain portions of the speeches made by Pandit Nehru and Dr. Ambedkar but he made it clear at p. 792 that he referred to these speeches “not with a view to interpret the provisions of Article 368, which we propose to do on its own terms, but only to notice the transcendental character given to the fundamental rights by two of the important architects of the Constitution.” … There is an additional reason for not referring to debates for the purpose of interpretation. The Constitution, as far as most of the Indian States were concerned, came into operation only because of the acceptance by the Ruler or Rajpramukh. … [D]eclarations were issued by the Rulers or Rajpramukhs accepting the Constitution. It seems to me that when a Ruler or Rajpramukh or the people of the State accepted the Constitution of India in its final form, he did not accept it subject to the speeches made during the Constituent Assembly debates. The speeches can, in my view, be relied on only in order to see if the course of the progress of a particular provision or provisions throws any light on the historical background or shows that a common understanding or agreement was arrived at between certain sections of the people. … In this connection reference was made to Article 305 of the draft Constitution which provided that notwithstanding anything contained in Article 304 of the Constitution, the provisions of the Constitution relating to the reservation of seats for the Muslims etc., shall not be amended during the period of ten years from the commencement of the Constitution. Although this draft Article 305 has no counterpart in our Constitution, it was sought to be urged that this showed that every provision of the Constitution was liable to be amended. I have come to the conclusion that every provision is liable to be amended subject to certain limitations and this argument does not affect my conclusion as to implied limitations. A very important decision of the Judicial Committee of the Privy Council in Bribery Commissioner v. P. Ranasinghe, [1965] A.C. 172 throws considerable light on the topic under discussion. The import of this decision was not realised by this Court in Golak Nath. Indeed, it is not referred to by the minority in its judgments, and Subba Rao, C.J., makes only a passing reference to it. In order to fully appreciate the decision of the Privy Council it is necessary to set out the relevant provisions of the Ceylon Independence Order in Council, 1947, hereinafter referred to as the ‘Ceylon Constitution’. Part III of the Ceylon Constitution deals with “Legislature”. Section 7 provides that "there shall be a Parliament of the Island which shall consist of His Majesty, and two Chambers to be known respectively as the Senate and the House of Representatives. … Section 29 deals with the power of Parliament to make laws. It reads: 29(1) Subject to the provisions of this Order, Parliament shall have power to make laws for the peace, order and good government of the Island. (2) No such law shall(a) prohibit or restrict the free exercise of any religion, or (b) make persons of any community or religion liable to disabilities or restrictions to which persons or other communities or religions are not made liable; or (c) confer on persons of any community or religion any privilege or advantage which is not conferred on persons of other communities or religions; or (d) alter the Constitution of any religious body except with the consent of the governing authority of that body. So, however, that in any case where a religious body is incorporated by law, no such alteration shall be made except at the request of the governing authority of that body. Provided, however, that the preceding provisions of this subsection shall not apply to any law making provision for, relating to, or connected with the, election of Members of the House of Representatives, to represent persons registered as citizens of Ceylon under the Indian & Pakistani Residents (Citizenship Act).

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This proviso shall cease to have effect on a date to be fixed by the Governor-General by Proclamation published in the Gazette. (3) Any law made in contravention of Sub-section (2) of this section shall, to the extent of such contravention, be void. (4) In the exercise of its powers under this section, Parliament may amend or repeal any of the provisions of this Order, or of any other Order of Her Majesty in Council in its application to the Island: Provided that no Bill for the amendment or repeal of any of the Provisions of this Order shall be presented for the Royal Assent unless it has endorsed on it a certificate under hand of the Speaker that the number of votes cast in favour thereof in the House of Representatives amounted to not less than twothirds of the whole number of members of the House (including those not present). Every certificate of the Speaker under this sub-section shall be conclusive for all purposes and shall not be questioned in any court of law.

According to Mr. Palkhivala, Section 29(1) corresponds to Articles 245 and 246, and Section 29(4) corresponds to Article 368 of our Constitution, and Sections 29(2) and 29(3) correspond to Article 13(2) of our Constitution, read with fundamental rights. The question which arose before the Judicial Committee of the Privy Council was whether Section 41 of the Bribery Amendment Act, 1958 contravened Section 29(4) of the Ceylon Constitution, and was consequently invalid. The question arose out of the following facts. The respondent, Ranasinghe, was prosecuted for a bribery offence before the Bribery Tribunal created by the Bribery Amendment Act, 1958. The Tribunal sentenced him to a term of imprisonment and fine. The Supreme Court on appeal declared the conviction and orders made against him null and inoperative on the ground that the persons composing the Tribunal were not validly appointed to the Tribunal. Section 52 of the Ceylon Constitution provided for the appointment of the Chief Justice and Puisne Judges of the Supreme Court. Section 53 dealt with the setting up of the Judicial Service Commission, consisting of the Chief Justice, a Judge of the Supreme Court, and one other person who shall be, or shall have been, a Judge of the Supreme Court. It further provided that no person shall be appointed as, or shall remain, a member of the Judicial Service Commission, if he is Senator or a Member of Parliament. Section 55 provided for the appointment of other Judicial Officers. Section 55(1) reads: 55. (1) The appointment, transfer, dismissal and disciplinary control of judicial officers is hereby vested in the Judicial Service Commission.

The Judicial Committee deduced from these provisions thus: Thus there is secured a freedom from political control, and it is a punishable offence to attempt directly or indirectly to influence any decision of the Commission (Section 56).

The Judicial Committee then described the position of the Bribery Tribunal as follows: A bribery tribunal, of which there may be any number, is composed of three members selected from a panel (Section 42). The panel is composed of not more than 15 persons who are appointed by the Governor-General on the advice of the Minister of Justice (Section 41). The members of the panel are paid remuneration (Section 45).

The Judicial Committee held that the members of the Tribunal held judicial office and were judicial officers within Section 55 of the Ceylon Constitution. They found that there was a plain conflict between Section 55 of the Constitution and Section 41 of the Bribery Amendment Act under which the panel was appointed.

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Then the Judicial Committee examined the effect of this conflict. After setting out Section 18, Section 29(1) and Section 29(2)(a), the Judicial Committee observed: There follow (b), (c) and (d), which set out further entrenched religious and racial matters, which shall not be the subject of legislation. They represent the solemn balance of rights, between the citizens of Ceylon, the fundamental conditions on which inter se they accepted the Constitution; and these are, therefore unalterable under the Constitution.

After making these observations, the Judicial Committee set out Sub-sections (3) and (4) of Section 29 of the Ceylon Constitution. The observations, which I have set out above, are strongly relied on by Mr. Palkhivala in support of his argument that Part III similarly entrenched various religious and racial and other matters and these represented solemn balance of rights between the citizens of India, the fundamental conditions on which inter se they accepted the Constitution of India and these are, therefore, unalterable under the Constitution of India. Mr. Seervai, in reply, submitted that the word “entrenched” meant nothing else that than these provisions were subject to be amended only by the procedure prescribed in Section 29(4) of the Ceylon Constitution. But I am unable to accept this interpretation because in that sense other provisions of the Constitution were equally entrenched because no provision of the Ceylon Constitution could be amended without following the procedure laid down in Section 29(4). The interpretation urged by Mr. Palkhivala derives support in the manner the Judicial Committee distinguished McCawley’s case, [1920] A.C. 691 (McCawley v. King). I may set out here the observations of the Judicial Committee regarding McCawley. They observed: It is possible now to state summarily what is the essential difference between the McCawley case (supra) and this case. There the legislature, having full power to make laws by a majority, except upon one subject that was not in question, passed a law which conflicted with one of the existing terms of its Constitution Act. It was held that this was valid legislation, since it must be treated as pro tanto an alteration of the Constitution, which was neither fundamental in the sense of being beyond change nor so constructed as to require any special legislative process to pass upon the topic dealt with.

It is rightly urged that the expression “which was neither fundamental in the sense of being beyond change” has reference to Section 29(2) of the Ceylon Constitution. I have no doubt that the Judicial Committee held that the provisions of Section 29(2) in the Ceylon Constitution were unamendable. I may mention that Prof. S A de Smith in reviewing the book “Reflections on the Constitution and the Constituent Assembly (Ceylon's Constitution)” by L.J.M. Cooray, reads the obiter dicta in Bribery Commissioner v. Ranasinghe, [1965] A.C. 172 indicating that certain provisions of the Constitution were unalterable by the prescribed amending procedure. It may be that these observations are obiter but these deserve our careful consideration, coming as they do from the Judicial Committee. Why did the Judicial Committee say that the provisions of Section 29(2) were “unalterable under the Constitution” or “fundamental in the sense of being beyond change”? There is nothing in the language of Section 29(4) to indicate any limitations on the power of the Ceylon Parliament. It could “amend or repeal” any provision of the Constitution, which included Section 29(2) and Section 29(4) itself. The reason could only be an implied limitation on the power to amend under Section 29(4) deducible from “the solemn balance of rights between the citizens of Ceylon, the fundamental conditions on which inter se they accepted the Constitution”. Unless there was implied a limitation on the exercise of the

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amending power under Section 29(4), Section 29(4) could itself be amended to make it clear that Section 29(2) is amendable. This case furnishes an exact example where implied limitations on the power to amend the Constitution have been inferred by no less a body than the Judicial Committee of the Privy Council. … I may mention that the Judicial Committee while interpreting the British North America Act, 1867 had also kept in mind the preservation of the rights of minorities for they say In re The Regulation and Control of Aeronautics in Canada, [1933] A.C. 54: Inasmuch as the Act (British North America Act) embodies a compromise under which the original Provinces agreed to federate, it is important to keep in mind that the preservation of the rights of minorities was a condition on which such minorities entered into the federation, and the foundation upon which the whole structure was subsequently erected. The process of interpretation as the years go on ought not to be allowed to dim or to whittle down the provisions of the original contract upon which the federation was founded, nor is it legitimate that any judicial construction of the Provisions of Sections 91 and 92 should impose a new and different contract upon the federating bodies.

The words of the Judicial Committee in Ranasinghe, are apposite and pregnant. “They represent the solemn balance of rights between the citizens of Ceylon, the fundamental conditions on which inter se they accepted the Constitution and these are, therefore unalterable under the Constitution.” It is true that the Judicial Committee in the context of minorities and religious rights in Ceylon used the word “unalterable”. But the India context is slightly different. The guarantee of fundamental rights extends to numerous rights and it could not have been intended that all of them would remain completely unalterable even if Article 13(2) of the Constitution be taken to include Constitutional amendments. A more reasonable inference to be drawn from the whole scheme of the Constitution is that some other meaning of “Amendment” is most appropriate. This conclusion is also reinforced by the concession of the Attorney-General and Mr. Seervai that the whole Constitution cannot be abrogated or repealed and a new one substituted. In other words, the expression “Amendment of this Constitution” does not include a revision of the whole Constitution. If this is true – I say that the concession was rightly made – then which is that meaning of the word “Amendment” that is most appropriate and fits in with the while scheme of the Constitution. In my view that meaning would be appropriate which would enable the country to achieve a social and economic revolution without destroying the democratic structure of the Constitution and the basic inalienable rights guaranteed in Part III and without going outside the contours delineated in the Preamble. I come to the same conclusion by another line of reasoning. In a written Constitution it is rarely that everything is said expressly. Powers and limitations are implied from necessity or the scheme of the Constitution. … What is the necessary implication from all the provisions of the Constitution? It seems to me that reading the Preamble, the fundamental importance of the freedom of the individual, indeed its inalienability, and the importance of the economic, social and political justice mentioned in the Preamble, the importance of directive principles, the non-inclusion in Article 368 of provisions like Articles 52, 53 and various other provisions to which reference has already been made an irresistible conclusion emerges that it was not the intention to use the word "amendment" in the widest sense. It was the common understanding that fundamental rights would remain in substance as they are and they would not be amended out of existence. It seems also to have been a common understanding that the fundamental features of the Constitution, namely, secularism, democracy and the freedom of the individual would always subsist in the welfare state.

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In view of the above reasons, a necessary implication arises that there are implied limitations on the power of Parliament that the expression “amendment of this Constitution” has consequently a limited meaning in our Constitution and not the meaning suggested by the respondents. This conclusion is reinforced if I consider the consequences of the contentions of both sides. The respondents, who appeal fervently to democratic principles, urge that there is ho limit to the powers of Parliament to amend the Constitution. Article 368 can itself be amended to make the Constitution completely flexible or extremely rigid and unamendable. If this is so, a political party with a two-third majority in Parliament for a few years could so amend the Constitution as to debar any other party from functioning, establish totalitarianism, enslave the people, and after having effected these purposes make the Constitution unamendable or extremely rigid. This would no doubt invite extra-Constitutional revolution. Therefore, the appeal by the respondents to democratic principles and the necessity of having absolute amending power to prevent a revolution to buttress their contention is rather fruitless, because if their contention is accepted the very democratic principles, which they appeal to, would disappear and a revolution would also become a possibility. However, if the meaning I have suggested is accepted a social and economic revolution can gradually take place while preserving the freedom and dignity of every citizen. For the aforesaid reasons, I am driven to the conclusion that the expression “amendment of this Constitution” in Article 368 means any addition or change in any of the provisions of the Constitution within the broad contours of the Preamble and the Constitution to carry out the objectives in the Preamble and the Directive Principles. Applied to fundamental rights, it would mean that, while fundamental rights cannot be abrogated reasonable abridgements of fundamental rights can be effected in the public interest. It is of course for Parliament to decide whether an amendment is necessary. The Courts will not be concerned with wisdom of the amendment. If this meaning is given it would enable Parliament to adjust fundamental rights in order to secure what the Directive Principles direct to be accomplished, while maintaining the freedom and dignity of every citizen. It is urged by Mr. Seervai that we would be laying down a very unsatisfactory test which it would be difficult for the Parliament to comprehend and follow. He said that the Constitution-makers had discarded the concept of “due process” in order to have something certain, and they substituted the words “by authority of law” in Article 21. I am unable to see what bearing the dropping of the words “due process” has on this question. The Constitution itself has used words like “reasonable restrictions” in Article 19 which do not bear an exact meaning, and which cannot be defined with precision to fit in all cases that may come before the courts; it would depend upon the facts of each case whether the restrictions imposed by the Legislature are reasonable or not. It seems to me that the concept of amendment within the contours of the Preamble and the Constitution cannot be said to be a vague and unsatisfactory idea which Parliamentarians and the public would not be able to understand. The learned Attorney-General said that every provision of the Constitution is essential; otherwise it would not have been put in the Constitution. This is true. But this does not place every provision of the Constitution in the same position. The true position is that every provision of the Constitution can be amended provided in the result the basic foundation and structure of the Constitution remains the same. The basic structure may be said to consist of the following features:

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(1) Supremacy of the Constitution; (2) Republican and Democratic form of Government. (3) Secular character of the Constitution; (4) Separation of powers between the Legislature, the executive and the judiciary; (5) Federal character of the Constitution. The above structure is built on the basic foundation, i.e., the dignity and freedom of the individual. This is of supreme importance. This cannot by any form of amendment be destroyed. The above foundation and the above basic features are easily discernible not only from the preamble but the whole scheme of the Constitution, which I have already discussed. In connection with the question of abrogation of fundamental rights, Mr. Seervai boldly asserted that there was no such thing as natural or inalienable rights because the scheme of Part III itself shows that non-citizens have not been given all the fundamental freedoms; for example, Article 19 speaks of only citizens. He says that if there were natural rights, why is it that they were not conferred on non-citizens. The answer seems to be that they are natural rights but our country does not think it expedient to confer these fundamental rights, mentioned in Article 19, on non-citizens. Other rights have been conferred on non-citizens because the Constitution-makers thought that it would not be detrimental to the interests of the country to do so. He then said that even as far as citizens are concerned, there is power to modify those rights under Article 33 of the Constitution, which enables Parliament to modify rights in their application to the Armed Forces. This power has been reserved in order to maintain discipline among the armed forces, which is essential for the security of the country. But it does not mean that the rights cease to be natural or human rights. He then said that similarly Article 34 restricts fundamental rights while martial law is in force in any area. This again is a case where the security of the country is the main consideration. Citizens have to undergo many restrictions in the interest of the country. He then pointed out Articles 358 and 359 where certain rights are suspended during Emergency. These provisions are again based on the security of the country. He also relied on the words “rights conferred” in Article 13(2) and “enforcement of any rights conferred by this Part” to show that they were not natural or inalienable and could not have been claimed by them. There is no question of the sovereign people claiming them from an outside agency. The people acting through the Constituent Assembly desired that the rights mentioned in Part III shall be guaranteed and, therefore, Part III was enacted. In the context ‘conferred’ does not mean that some superior power had granted these rights. It is very much like a King bestowing the title of ‘His Imperial Majesty’ on himself. I am unable to hold that these provisions show that some rights are not natural or inalienable rights. As a matter of fact, India was a party to the Universal Declaration of Rights which I have already referred to and that Declaration describes some fundamental rights as inalienable.

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UNIT 10 – OTHER DISCIPLINES AND LEGAL INTERPRETATION POST-MODERNISM AND LEGAL INTERPRETATION STEPHEN M. FELDMAN, PLAYING WITH THE PIECES: POSTMODERNISM IN THE LAWYER’S TOOLBOX 85 Virginia Law Review 151 (1999) [The text of the article has been edited and all footnotes have been removed.] … For over a century, modernist scholars have constructed legal arguments by earnestly invoking lawyerly tools such as stare decisis, logical consistency, and original intent. Many scholars have assumed that these tools can be used as legitimate means for achieving goals justified either as substantively objective or as determined through some neutral processes. Recently, however, postmodern scholars have questioned the normative foundations for this view of the lawyer's toolbox. Goals, they argue, are never objective or neutrally determined; rather, all substantive ends and legal processes reflect distinctive cultural values and social positions. Interestingly, some modernist scholars have partially accepted this postmodern insight. These scholars acknowledge that neutral baselines do not truly ground lawyerly arguments and judicial decision making. Yet, these scholars in the end always somehow reach a modernist conclusion; often, through some slight of hand, they deem a particular result objectively desirable or justified. Thus, they manage to avoid the most troubling aspects of postmodern theory such as the deconstruction of textual meaning and the post-structural fixation on the pervasiveness of power. They domesticate postmodern insights by putting them in the lawyer's toolbox, to be taken out and used only when needed. Even more interestingly, perhaps, postmodern scholars come close to replicating this modernist move. They use their postmodern insights to critique modernist arguments and positions, but they then fail to follow the implications of postmodernism to its outer reaches. In this Essay, I argue that these postmodernists are not lacking in nerve or perspicacity but rather that they are themselves enmeshed within the structures of scholarly and lawyerly discourse. As such, they must construct narratives and arguments that use the available rhetorical tools or modes of discourse--namely, they must use modernist and postmodernist concepts to present their views. But whereas modernist scholars use similar tools with earnestness (an earnestness, however, often accompanied by anxiety), postmodernist scholars use these tools with irony. Postmodernists use the tools despite knowing that they cannot perform as promised; in particular, modernist tools cannot deliver any indubitably grounded results. Yet for the postmodernists, no other options exist. There are no other rhetorical or discursive devices that can be grasped. In this sense, then, postmodern scholarship amounts to playing with the pieces – even the fallen pieces that remain from deconstructed modernist positions. … Before proceeding, one point should be clarified. The distinction between modernism and postmodernism in legal scholarship is highly complex, yet for the purposes of this Essay, I do not need to explore this problem in depth. It is sufficient to recognize that most modernist scholars expressly articulate and defend normative values and goals, while postmodern scholars rarely do so. Modernists typically respond to some specified legal and social problem by recommending, for example, that Congress enact some proposed statute or that the Supreme Court adopt some doctrinal framework. Postmodernists refrain from such explicit normative recommendations, but they are neither politically apathetic nor unmindful of the possibility that their words might influence others. Postmodernists seek

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to intervene in ways other than overtly recommending particular social or legal changes. Thus, to be clear, postmodernists might be said to be playing with scholarly tools or pieces, but such play is not necessarily frivolous (though sometimes it can be); much postmodern scholarship is politically and morally charged. I. Looking in the Lawyer’s Toolbox Modernist lawyers and scholars carry a toolbox containing devices such as stare decisis, logical consistency, the plain meaning of the text, the intentions of the framers or the parties, policy arguments, and balancing tests. Modernists reach in and pull out the tools they need to suit their particular instrumental purposes, to construct arguments for or against certain substantive positions. Learning to choose the right tools and to use them well is part of learning to think like a lawyer. Recently, some broad-minded modernist scholars have sifted through the burgeoning production of postmodern scholarship and have recognized that certain postmodern insights might be useful for constructing modernist arguments. In particular, these modernist scholars usually have seized upon one oft-discussed aspect of postmodern theory and have tossed it into their toolbox. Postmodernists from Stanley Fish to Jacques Derrida maintain that the traditions and culture of a community simultaneously enable and constrain all communication and understanding. Thus, for the individual within the community, one’s current horizon of sociocultural prejudices and interests always shapes understanding, communication, and perception in general, including normative values and goals. This postmodern insight can have radical implications: Derridean deconstructionists, for example, maintain that meaning is never grounded on a stable signified (an object that fixes meaning), but rather that there “is always already” a play of signifiers. Yet, despite its radical potential, modernists can appropriate this postmodern insight and use it as an instrument – a new doodad that can be wielded when constructing legal arguments. Indeed, some modernists have now put this postmodern insight into their lawyer’s toolbox, storing it securely and taking it out only as needed. And for these modernists, this insight (or tool) can be most fruitfully exploited to criticize the normative positions of other modernists. But then, once the values and goals of others have been neatly deconstructed and swept away, the modernist writer typically begins to articulate his or her own normative position. Quickly, the tool must be returned to its box; otherwise, it might threaten the coherence of the writer's own express objectives. Steven D. Smith is a modernist legal scholar who uses this postmodern tool. In his recent book on the separation of church and state, Foreordained Failure, he argues that the Constitution does not embody a principle of religious freedom. Of course, judges and constitutional scholars have long been asking “something like the following question: ‘What is the meaning and scope of the principle of religious freedom embodied in the Constitution?”’ If, as Smith maintains, no such principle exists, then this question becomes unanswerable. Smith argues that many constitutional scholars use some type of theory to explicate a supposed principle of religious freedom in the First Amendment. To refute such theoretical approaches, Smith reaches into his toolbox and pulls out his postmodern doohickey. He contends that a general theory of religious freedom is impossible: Any such theory inevitably founders on a logical conundrum. Thus, according to Smith, [t]he function of a theory of religious freedom is to mediate among a variety of competing religious and secular positions and interests, or to explain how government ought to deal with these competing positions and interests. To perform that function, however, the theory will tacitly but inevitably privilege, or prefer in advance, one of those positions while rejecting or discounting others. But a theory that privileges one of the competing positions

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and rejects others a priori is not truly a theory of religious freedom at all – or, at least, it is not the sort of theory that modern proponents of religious freedom have sought to develop.

In other words, Smith here draws upon the postmodern assertion that all normative values or positions are culturally and socially contingent. To postmodernists, all theory – indeed, all communication and understanding--arises from one’s current horizon of sociocultural prejudices and interests. Likewise, Smith readily argues that any theory of religious freedom--as a distinctive normative position-necessarily rests upon certain (often tacit) background beliefs or assumptions. Those background beliefs or assumptions always remain controversial and are exactly the types of assertions that the theory itself supposedly reconciles neutrally with other competing beliefs. But, of course, the theory cannot neutrally reconcile its own assumptions with other competing beliefs exactly because the theory rests on those very assumptions. Smith concludes, “The problem, simply put, is that theories of religious freedom seek to reconcile or to mediate among competing religious and secular positions within a society, but those competing positions disagree about the very background beliefs on which a theory of religious freedom must rest.” At this point, though, Smith tosses his postmodern gizmo back into the toolbox. He wants to critique the jurisprudence of the religion clauses but not to become embroiled in larger jurisprudential controversies regarding theory: “I do not want to deny in any universal way that ‘theory’ may be possible and desirable in the law; my challenge here is directed only to theories of religious freedom.” Smith’s reluctance to follow the extended implications of his postmodern insight enables him to conclude with a normative recommendation for the Supreme Court. Although he qualifies this recommendation, he nonetheless suggests that the Court should consider refusing to enforce a principle of religious freedom, leaving the protection of religious liberty and equality to the “political process.” Hence, Smith manages to sidestep the potentially radical political implications that postmodernism might imply for constitutional jurisprudence in general and instead reaches a politically conservative conclusion. Cass Sunstein, perhaps more so than any other modernist writer, masterfully uses the postmodern insight into the contingency of normative values and goals. As a general principle, according to Sunstein, many constitutional provisions require that governmental actions be neutral. The problem, then, is to identify how neutrality can be determined. Neutrality can be measured only if one has some starting point, some baseline from which to calculate. Sunstein persuasively argues that many other scholars, as well as Supreme Court Justices, have assumed that the current status quo provides the appropriate baseline for decision. He explains that others commonly have defined “neutrality by taking, as a given and as the baseline for decision, the status quo, or what various people and groups now have: existing distributions of property, income, legal entitlements, wealth, so-called natural assets, and preferences.” The status quo, in this sense, is deemed natural and just. Hence, a governmental action that respects the status quo appears to be neutral, while one that disturbs the status quo seems partisan and thus constitutionally suspect. In fact, as Sunstein recognizes, this form of reasoning is often used to determine whether the government has acted at all. If a governmental decision leaves the status quo intact, then the decision is “perceived to stay close to nature and thus to amount to no action at all.” And of course, in most instances, if the government is deemed not to have acted, then there can be no constitutional violation. At this point in his argument, Sunstein reaches into his lawyer’s toolbox and pulls out that most remarkable doohickey: the postmodern insight that all values and goals are socially and culturally contingent. With this tool in hand, Sunstein readily demonstrates – time after time – that various positions which take the status quo as a baseline are mistaken exactly because all baselines are always contingent. For example, during the Lochner era of the early twentieth century, the Supreme Court assumed that the common law “was prepolitical and natural.” The common law of property and contract

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rights was therefore deemed to be the proper baseline from which to judge the constitutionality of governmental actions. This view led (or allowed) the Court to strike down many legislative actions that had been intended to improve the general welfare of a large segment of American society, such as a federal statute that restricted the use of child labor, because such enactments disturbed the status quo of property and contract rights. Sunstein applies his postmodern tool to this Lochner-era reasoning. He argues that if all normative values and goals are shaped by sociocultural prejudices and interests, then all legal rights are socially and culturally produced. Certainly, then, the common law of property and contract is not part of nature but rather is produced by American culture and society--in particular, by an American legal culture that includes the governmental sanction of property and contract rights. Consequently, the Lochner-era reliance on the common law as a baseline for constitutional decision was unjustified and improper. Sunstein’s use of postmodernism is most clear in his discussion of constitutional interpretation in general. Originalists such as Robert Bork argue that the requirement of neutrality demands that constitutional meaning be fixed by the intentions of either the framers or the ratifiers of the Constitution. Sunstein observes that “[t]his process, it is often thought, does not authorize interpreters to use their own values, commitments, or principles. Neutrality in interpretation consists precisely in the abandonment of the interpreter's own views.” But, of course, any postmodernist would recognize that the originalist’s ideal of neutrality is nonsensical. We are always and already interpreting: All textual understanding arises from one’s horizon of sociocultural prejudices and interests. In Sunstein’s words, “[t]here is simply no such thing as preinterpretive meaning, or meaning without resort to interpretive principles.” Interpretation is “inevitably situated” and never rests on “external foundations.” Therefore, in the specific context of constitutional interpretation, the originalist’s “conception of neutrality in interpretation is implausible [because it] is built on a conceptual mistake; it aspires to a form of neutrality that is literally impossible.” As Sunstein himself recognizes, his postmodern doodad is an extraordinarily powerful instrument, but exactly because of its latent power, it is potentially dangerous. It can lead to an antifoundationalism that contravenes objectivity and modernist knowledge. In law, it can be turned against the idea of baselines in constitutional law, and more broadly, it threatens to disrupt the practice of modernist jurisprudence altogether. The postmodern insight into sociocultural contingency, according to Sunstein, “offers obscure guidance for constitutional courts; it counsels a general rejection both of neutrality and of baselines, but at least in some forms, it offers no alternative position from which to decide cases.” Sunstein, though, does not wish to go down this path to postmodernism. He wants to retain the idea of “objectivity in law” and, through neo-pragmatic arguments, to advocate explicitly for certain normative positions. Consequently, once he has used his postmodern tool to deconstruct the positions of other modernist writers, he must quickly return it to his toolbox. Sunstein’s belief that the postmodern notion of sociocultural contingency can be used only when desired and can be, at other times, tucked safely away emerges most clearly in his discussion of the concept of “naked preferences.” He argues that the judicial role is to assure that legislative acts result from the articulation and pursuit of public values rather than from the exercise of naked preferences or, in other words, “raw political power.” Public values arise from political deliberation, while naked preferences are exogenous to social and political influences and are chosen autonomously by individuals. Naked preferences, in short, are “preexisting private interests.” As such, naked preferences provide, according to Sunstein, neutral and objective Archimedean points for judicial decision-making. Courts supposedly can recognize naked preferences, and if a court concludes that a legislative act arose from a naked preference, then the act should be held unconstitutional. Quite clearly, Sunstein’s concept of naked preferences contravenes the postmodern emphasis on the sociocultural contingency of normative goals and values. To a postmodernist, an individual cannot

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possibly choose a preference outside the context of social structures and cultural commitments. Sunstein himself, at times, appears to recognize the tenuousness of his concept of naked preferences. Indeed, he occasionally seems to dwell on the many social and political factors that can contribute to the “distortion” of “private” or naked preferences. While this line of reasoning might lead one to surmise that preexisting private interests or preferences, exogenous to social influences, do not truly exist, Sunstein resists this conclusion. Instead, he warns: Lurking beneath the surface . . . is a serious risk: the recognition that desires are social constructs, or are distorted by various factors, may tend to undermine the notion of autonomy altogether. If the ideas of endogenous preferences and cognitive distortions are carried sufficiently far, it may be impossible to describe a truly autonomous preference. No desire is unaffected by social forces. If the notion of autonomy is abandoned, the realm of permissible legal interferences may become limitless--hardly a comforting prospect.

Thus, to retain the idea of individual autonomy, to retain the idea of objectivity, and to Sunstein's mind, to retain the very idea of legitimate constitutional decision-making, he must limit the use of his postmodern tool. It can be used periodically, but we must carefully protect against its apparent potential for chaotic disruption. In general, the domestication of a postmodern insight for the purpose of constructing a modernist argument can seriously skew a writer’s conclusions, as revealed by the earlier discussions of Smith and Sunstein. Smith applied his postmodern doohickey and found that a constitutional principle of religious liberty does not exist. If it were the case that other constitutional principles truly exist (which Smith seems to assume but does not address), then perhaps Smith’s normative suggestion that the Court should consider not enforcing a principle of religious liberty might be sensible. After all, one might reasonably conclude that the Court can enforce only existent constitutional principles. Yet, if Smith’s postmodernlike argument were expanded to suggest that no constitutional principles at all truly exist-- at least not in the traditional sense--then Smith’s normative suggestion becomes highly questionable. Religious liberty would be on no weaker footing than any other liberty or right. Thus, unlike Smith, one might suggest that the concept of constitutional principles needs to be completely rethought or that a coherent abstract constitutional principle is unnecessary to the pragmatic enforcement of general norms. Sunstein, meanwhile, uses his postmodern doodad to slash through the modernist positions of others but then refuses to thoroughly rethink constitutional jurisprudence from a postmodern perspective. Instead, he retreats to the comfortable Archimedean point of naked preferences and pronounces that there is indeed objectivity in law. In sum, the selective use of postmodernism as a critical tool – wielded against the views of other writers – still ostensibly allows the creative modernist author either to recommend a desired normative goal or to ground some preferred governmental process or normative value on a firm foundation.

II. Postmodern Deconstructions A. Schlag Deconstructs Langdell Pierre Schlag stands perhaps as the most unmitigated postmodernist and severest critic of modernist legal thought in the academy today. In a recent attack on modernist jurisprudence and, in particular, its progenitor, Langdellian legal science, Schlag imaginatively and provocatively analogizes legal thought to the nineteenth-century pseudo-science of phrenology. He begins by describing phrenology: This discipline of phrenology was devoted to the identification of basic brain functions and their manifestations in cranial features. The basic principles and framework were established by Dr. Franz Joseph Gall. By sifting

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through an impressive array of empirical data, Gall sought to uncover the fundamental affective, moral, and intellectual faculties of human beings.

For example, Gall accounted for behavior such as aggression by attributing it to a faculty for aggression. He attributed altruistic behavior to a faculty for benevolence, and so forth. How did Gall and the other phrenologists supposedly discover the specific fundamental faculties? Schlag explains that behaviors were “classified into descriptive categories. The descriptive categories [then were] hypostatized and projected back onto an agency, a potentiality, or a faculty whose defining character [was] its ostensible capacity to produce the behavior in question. The agency, potentiality, or faculty [was] then offered as an explanatory cause of the behavior.” Gall and the other phrenologists enjoyed an extended period of enormous scientific prestige. Yet, ultimately, phrenology ended as a “grand failure” largely because “Gall and the other phrenologists had their ontology wrong. The fundamental faculties (as such) did not exist.” The phrenologists mistakenly had transformed descriptive classifications of behavior into ontological agencies--into, that is, the fundamental faculties-- that were then, in turn, deemed to be causes of the initial behavior. Moreover, because the faculties, in Schlag’s words, “lacked any robust or stabilized referent, virtually anything could be said about how they were related to each other.” Phrenologists therefore were able to construct complex analytical schemes that supposedly traced the interrelationships among the various faculties. After critiquing phrenology, Schlag turns to the Langdellian jurisprudence that emerged during the later nineteenth century. Just as Gall was instrumental in the early stages of phrenology, Christopher Columbus Langdell was central to the development of modernist legal thought: “Both played a crucial part in establishing their respective disciplines as sciences.” Schlag continues: Phrenology and law both emerged as disciplinary knowledges through attempts to cast them in the form of sciences. Both “sciences” were aesthetically organized around a fundamental ontology of reifications and animisms-- “faculties” in the case of phrenology, “doctrines” and “principles” in the case of law. Each discipline developed into an extremely intricate production of self-referential complexity.

Thus, Langdell and his colleagues studied the decided cases in their efforts to discover legal principles and doctrines. They then organized these principles and doctrines into intricate and complex frameworks that supposedly maintained an internal logical consistency. Finally, they deemed these principles and doctrines to be, in effect, causal or controlling agencies, “at once generative of and constraining upon the official decisions of judges and other officials.” In Langdellian legal science, Schlag observes, “doctrines and principles were doing some amazing things--and doing them, fully animated, all by themselves.” Hence, for instance, Langdell said, “‘Equity will . . . annex to such a contract an obligation directly to B,”’ as if equity were an autonomous and self-motivated agent. The critical bite of Schlag’s argument lies, of course, in his paralleling Langdellian legal science with the pseudo-science of phrenology. Just as the phrenologists failed to ground the fundamental faculties on any stabilized referent, modernist legal scholars have failed to ground legal rules and principles on “any robust or stabilized referent.” Langdellian legal scientists and their successors have written endlessly about legal doctrines as if the doctrines actually existed as “robust object-forms with stabilized identities.” But when examined from Schlag’s postmodern perspective, we see that nothing solid and stable is there. In another recent essay, Schlag elaborated on the ontological vacuousness of the law. Certain distinctive methods of legal education, according to Schlag, induce students to develop an abiding faith in the substantive existence of law. In particular, the abstruseness of Socratic questioning often leads law students to suspect that their professors are “hiding the ball”--where the ball metaphorically represents

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the law. Professors seem to move the ball around adeptly, flipping it from one hand to the other, sliding it behind the back, and always keeping it just out of the anxious sight of the (sometimes) attentive students. Watching this deft display, the students believe that the professors must be hiding the ball, since they never quite see it. Thus, the students implicitly assume that some ball actually exists: How could (and why would) professors perform such tricks if there were no ball? In this way, future attorneys develop “a pious faith in the ontological and epistemic character of law.” They deeply believe in the ball, in a “stabilized preinterpretive” law. But of course, Schlag raises the postmodern deconstructionist point: Regardless of the faith or belief of attorneys and scholars, there just is no stabilized preinterpretive law. It does not exist. In phrenology, the ontological emptiness of the so-called fundamental faculties allowed Gall and his followers to weave the faculties into intricate analytical frameworks. In a similar fashion, Langdellian legal scientists and other modernist scholars have devoted entire careers to the construction of increasingly elaborate doctrinal frameworks, neatly and logically relating the various principles and rules to each other. From Schlag’s postmodern viewpoint, though, legal scholars can say just about anything they want about the principles and rules because--like the phrenological faculties--they do not actually exist (as stabilized referents). It is quite easy to construct a most imaginative and even elegant doctrinal edifice if one is working with that most pliant of materials--non-existent rules and principles. Ultimately, Schlag urges that just as we now recognize phrenology to have been a grand failure, we should recognize that Langdellian legal science and its successor forms of modernist legal scholarship are also failures, pseudo-sciences. Modernist legal scholars may believe that they know something--the doctrines and principles of the law--but they are as mistaken (or self-delusional) as the phrenologists once were. Schlag underscores the significance of his postmodern point by arguing that most current legal scholars still operate within the “Langdellian paradigm.” Thus, the elaborate structures of legal rules and policy arguments that continue to fill law reviews and treatises are, at best, comforting myths. Schlag, though, seeks to dispel the myths--and any possible comfort--because “unlike phrenology, tremendous consequences--mandatory incarceration, forcible reallocation of wealth, even death--often turn upon ‘the doing of law.”’ B. Deconstructing Schlag’s Deconstruction of Langdell Schlag’s critique of Langdellian legal science suggests that Langdell and his colleagues, like Gall and the phrenologists, made some incredible mistake. To Schlag, Langdellian legal science and, indeed, all of the modernist legal thought that succeeds it are largely “nonsense”--“almost entirely bereft of knowledge or insight.” And, it follows, if only Langdell had not been so “essentially stupid,” to use Grant Gilmore's phrase, American legal thought would have developed in some radically different – and better – direction. Perhaps strangely, because I consider myself a postmodernist, this conclusion – this condemnation of Langdellian legal science and modernist legal scholarship in general – causes me to pause. To be sure, I do not wish to resurrect, justify, or celebrate Langdellianism. But I am interested in understanding how Langdell and his colleagues developed American jurisprudence and why the Langdellian paradigm has so strongly persisted in the academy. To suggest, as Schlag does, that Langdell was stupid and his legal science was nonsense, that his modernist successors have repeated for over a century the same gross errors, and that finally today a small group of elite (postmodern) professors can recognize this enormous mistake, sounds just a bit too Whiggish for my (postmodern) sensibilities. Ironically, Schlag seems to replicate the moves of current modernist scholars, such as Sunstein and Smith, who domesticate postmodernism by selectively using it as a critical tool in the construction of legal arguments. As discussed in Part I of this Essay, these modernist scholars sometimes skew their

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conclusions exactly because they have tried to domesticate postmodern insights. For a similar reason, Schlag seems to have skewed his conclusion regarding Langdell and modernist scholarship. In other words, Schlag readily suggests that Langdellian legal scientists and their successors were grand failures exactly because Schlag focuses his deconstructive gaze too narrowly on Langdellian legal science. Because Schlag is intent on deconstructing Langdellian legal science, he takes radical postmodern insights and uses them, in effect, as mere tools to critique Langdellianism. For example, Schlag criticizes the Langdellian legal scientists and their successors for mistakenly assuming that legal rules and principles have stabilized referents that firmly ground a preinterpretive meaning for the law. I agree completely with Schlag that no such stabilized referents exist in the law. But, as Schlag is certainly aware, this deconstructive critique is standard postmodernist fare; one could make (and postmodernists do it all the time) the same point about any text, not just legal texts. No principle, no concept, no text, in any field or discipline, has a stable referent that fixes or determines a preintrepretive meaning. Whether we are focusing on law or on anything else, we are always and already interpreting. At another point, Schlag criticizes the Langdellians and their modernist successors for failing to recognize that there is “no specified method for distinguishing the doctrines, principles, or units of [legal] analysis that are authentic from those that are spurious.” Again, I agree with Schlag. But again, it is important to recognize that this point is standard postmodernist fare. In Truth and Method, HansGeorg Gadamer argued that no precise method or mechanical technique can lead to truth or to understanding in interpretation. Modernists might believe that the correct method will lead to an objective interpretation of a text, but postmodernists contend otherwise. Hence, Schlag correctly observes that, in jurisprudence, no method can lead to objective meaning or truth, but the same is equally true in history, economics, psychology, or any other discipline. So what? Should Schlag be faulted for focusing on jurisprudence instead of examining all disciplines or modernist thought in general? Well, yes and no. On the one hand, Schlag is a law professor writing for a law journal, so his concentration on jurisprudence is understandable. Furthermore, his critique of Langdellian legal science is provocative and full of insights. On the other hand, his narrow spotlight on jurisprudence tends to skew his conclusions. For instance, if it were the case that only jurisprudence lacked stabilized referents while other disciplines actually had them, then one might suggest, as Schlag does, that Langdell was stupid and that his jurisprudence and its later modernist derivations were nonsense. From this perspective, Langdellians and other modernist legal scholars appear to be making a huge mistake that is not replicated in most other disciplines (excepting phrenology). Yet, if it were instead the case that jurisprudence lacked stabilized referents and all other disciplines also lacked stabilized referents, then one might reach a very different conclusion. One might instead suggest that all modernist disciplines need to be rethought from a postmodern perspective, or one might suggest that modernist elements in academic disciplines are intractable, or a host of other possibilities. Most important, from this latter perspective, jurisprudence does not look so unique. Certainly, law is different in important ways from other disciplines, but it is also similar in important ways. And those aspects of modernist jurisprudence that Schlag most often deconstructs, such as the lack of stabilized referents, typically are shared with other disciplines. This recognition suggests that maybe Langdell was not so stupid after all. Perhaps Langdell and his colleagues merely were doing what modernist academicians, in other fields, were doing at that time. In fact, jurisprudence can be compared more fruitfully to the social or human sciences such as history and sociology than to phrenology. In 1870, when Langdell first became dean of the Harvard Law School, American universities were just entering an important transitional period; they were reforming and ascending as major institutions within American society. Moreover, at that time, the faculty and leaders of these new universities confronted a rapidly changing intellectual landscape. In particular,

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American academicians faced two interrelated developments: “the collapse of older theologies,” and the emergence of a new “historicist sensibility.” The collapse of older theologies meant that secularization was advancing; intellectuals could no longer readily attribute natural and social events to God’s will. The new historicist sensibility reflected an increasing awareness that, because of human willpower and creativity, the world could continually change and, in fact, improve. American intellectuals reacted anxiously to these developments by seeking objectivity and control. Most academicians in the human sciences were no longer comfortable grounding knowledge on God, but this secularization did not diminish their desire for objectivity. Fearful of, and thus unwilling to accept, a world of radical subjectivity, relativism, and arbitrariness, they embarked on a modernist quest for some new source (or sources) of objectivity. This quest for objectivity provided the broad agenda for modernist research, a primary mission of the burgeoning universities. If God was dead (at least for epistemological purposes), then a God-substitute had to be found. Even in the discipline of history, which would seem most likely to accept the possibility of radical historical contingency, the ideal of objectivity became “the central norm of the profession.” Initially, many academic disciplines, claiming the authoritativeness of a science, sought objectivity in some type of formalism, a focus on axiomatic principles and logically coherent systems. According to George M. Marsden, postbellum academicians displayed a “passion for order, systematizing, efficiency, scientific principle, [and] personal discipline.” Quite clearly, Langdellian legal science fit neatly within the late-nineteenth-century university. And one should not have expected otherwise. The president of Harvard, Charles Eliot, was at the forefront of the movement to create the new type of university, and he personally chose Langdell to run the law school. Like other disciplines, jurisprudence sought to confront the collapse of an old theology. Specifically, in law, the old theology was natural law, and the new outlook was positivism; the Civil War marked a watershed in the transition from a natural law to a positivistic orientation. Langdell and his colleagues were the first American jurisprudents who needed to understand and legitimate the common law system in a now-positivist world. And the Langdellians confronted this challenge with the tools, methods, and claims that typified the period: They wore the mantle of scientific authority, they sought objective knowledge of reality, and they logically systematized their findings. Hence, when Langdell argued that the law professor should be a legal scientist focused on research and not an attorney experienced in practice, when he stressed the need to sift through thousands of cases to find the “exceedingly small proportion” that are “useful and necessary” for the study of law, and when he emphasized that there were but a few axiomatic principles of law that could be logically systematized, Langdell did no more than duplicate the claims and actions of similarly-situated academicians in other disciplines. III. Conclusion: Picking up the Pieces Langdellian jurisprudence does not seem at all odd when it is understood within the contemporary history of the human sciences in America. Moreover, Langdell’s modernist successors in jurisprudence, who continued to seek objectivity (though in other ways), generally fit just as closely with their contemporaries. As Peter Novick says of the history profession, the ideal of objectivity sometimes has been questioned, attacked, and modified, but it still remains “remarkably enduring.” Pierre Schlag’s misleading characterization of Langdellian legal science and its modernist progeny as “nonsense” that is “almost entirely bereft of knowledge or insight” flows from his overly narrow focus – from his failure to examine Langdellian jurisprudence in its own context. Once understood in a broader context, the modernist adherents of the Langdellian paradigm do not seem quite so stupid (unless everyone in all academic disciplines was similarly stupid for at least a century, and again, this view seems a bit too Whiggish).

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Ironically, just as I criticize Schlag for focusing too narrowly on Langdellian jurisprudence, he similarly criticizes modernist legal thinkers for “indulging an instinct for the small scale.” These modernists misleadingly ignore their context and implicitly assume certain answers to “large-scale questions” that remain hidden in the background. Ultimately, Schlag declares, this narrow focus skews the modernists' conclusions: “[T]he value of any conclusion they draw depends upon the strength of the large-scale answers that they unwittingly provide to questions they have not asked.” The recognition that both Schlag and I make similar critical moves suggests the conventionality of this very move within postmodern theory. All writers, including postmodernists as well as modernists, express a position or point of view. The point of view of modernist writers may be more obvious since they often expressly recommend a normative goal or value, but postmodernists too try to communicate some idea or critical theme that necessarily arises from a distinctive position or point of view. Even the most steadfast postmodernist who successfully conveys an unmodern sense of openness or tentativeness--for example, by explicitly narrating instead of arguing, or by interpreting instead of describing--always has at least an implicit position or point of view. And from a postmodern perspective, any position or point of view necessarily rests on certain background assumptions--a background context. Hence, one sure-fire way to critique another writer, whether modernist or postmodernist, is simply to point out how that writer has certain unexamined background assumptions. Of course, from a postmodern standpoint, having unexamined background assumptions is unavoidable, but nonetheless, this recognition does not in any way help fortify those assumptions. Thus, the postmodernist can always bring somebody else's background assumptions to the forefront and subject them to critique. Any text, even a postmodern deconstructive text, can be deconstructed. In a sense, then, I can even deconstruct my own Essay. Just as I assert that Schlag focuses too narrowly on Langdellian legal science when his deconstructive points apply across a much larger field (to modernist scholarship in general), I can now argue that I also focus too narrowly. I unduly stress Schlag and his essay on law and phrenology when my deconstructive points actually apply across a much larger field (to postmodernist scholarship in general). Put in different words, I express a particular point of view in this Essay because, in part, I am writing about Schlag and not about something else, and in doing such writing, I accept (at least temporarily) certain background assumptions. Those background assumptions, of course, could be brought to the foreground and critiqued (but, of course, other background assumptions would then stand behind the critique, and so on, ad infinitum). Regardless of how postmodern a writer seeks to be, if she writes an essay or, for that matter, communicates in any manner at all, then she must somehow domesticate postmodernism. If one doggedly tried to follow postmodern insights to their furthest reaches, then everything would be deconstructed, including those postmodern insights; imagine traveling continually outward until being caught suddenly in the gravitational field of an interstellar black hole that was sucking everything, including yourself, into its abyss. So, to avoid such a deconstructive implosion, we always at some point manage to stop: to talk, to communicate, to write, to whatever. For this reason, Schlag could not avoid domesticating postmodernism in some manner. If he writes anything, he must at some point stop the deconstruction. And since he must do so, someone else--like me--can always come along and deconstruct Schlag’s essay. Even the most unmitigated postmodernist ultimately uses some postmodern insights as if they were tools or instruments--to express a point of view. Hence, the use of postmodern insights in such an instrumental manner does not necessarily render a writer's position or point of view prosaic. In fact, for what it's worth, although I have criticized Sunstein and Smith as modernist writers who domesticate postmodern insights, I usually find their work more interesting than that of other modernist writers who seem to have no grasp of postmodernism at all. And I typically find the work of a thorough-going postmodernist such as Schlag even more interesting and provocative. Most important, the work of postmodern deconstruction does not become trite merely because any text can be deconstructed. To the contrary, if there are postmodern paths to

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justice, they lie in the deconstructive disclosure of the ever-present tacit assumptions and cultural values that always hide or marginalize some metaphorical Other--an oppressed and subjugated subcultural group. Finally, if postmodernist as well as modernist writers inevitably domesticate postmodern insights, then what differentiates them from each other (besides the fact that modernists overtly articulate and defend normative values and goals)? In part, the difference lies in their attitudes. The modernist writer uses postmodern insights, like any other tool in the toolbox, with anxiety. Anxiety arises because the modernist uses her tools earnestly in the pursuit of objectivity even as she constantly doubts the efficacy of those tools--even doubts the possibility of objectivity. Consequently, we find a writer as sophisticated as Sunstein anxiously brooding that if his postmodern doohickey fell into the wrong hands, it might leave no legitimate “position from which to decide cases.” [FN115] The postmodern writer meanwhile uses postmodern insights as well as traditional modernist tools with irony. The postmodernist selfreflexively uses tools even as she recognizes that they cannot accomplish what she seeks. They always end up doing something else, going elsewhere, communicating some unintended meaning. But even with this recognition, the postmodernist uses the tools all the same, because that is the experience of postmodernism. In the words of Jean Baudrillard, “One plays … with things that one doesn’t believe in anymore.”

ECONOMICS AND LAW JONATHAN KLICK & FRANCESCO PARISI, WEALTH, UTILITY AND THE HUMAN DIMENSION 1 New York University Journal of Law & Liberty 590 (2005) Introduction During its relatively short history, the law and economics movement has developed three distinct schools of thought. The first two schools of thought, the Chicago or positive school and the Yale or normative school, developed almost concurrently. The positive school restricts itself to the descriptive study of the incentives produced by the legal system largely because its adherents believe that efficient legal rules evolve naturally. On the other hand, the normative school sees the law as a tool for remedying “failures” that arise in the market. The functional school of law and economics, which developed subsequently, draws from public choice theory and the constitutional perspective of the Virginia school of economics to offer a third perspective that is neither fully positive nor fully normative. Recognizing that there are structural forces that can often impede the development of efficient legal rules, the functional school allows for the possibility of using insights from economics to remedy faulty legal rules at a meta level. However, unlike the Yale school, the functional school also recognizes that there are failures in the political market that make it unlikely that changes will be made on a principled basis. Also, it is difficult to identify all the ultimate consequences of corrective legal rules. This skepticism induces the functional school to focus on using economic theory to design legal meta-rules that lead to efficiency ex ante. Achieving this ex ante efficiency requires the design of legal institutions that induce individuals to internalize the effects of their private activities, as well as to induce them to reveal their true preferences in situations where collective decisions must be made. In addition to these over-arching differences about the role of law and economics in the design of legal institutions, there are other methodological divides among the schools of thought. These differences roughly boil down to disagreements about how to define efficiency on the individual decision level and

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in the aggregate. Specifically, the schools differ on how social preferences should be evaluated and what exactly should be maximized to achieve an optimal legal system. In the sections that follow, we lay out the development of these schools of thought, detailing where they differ methodologically. We then discuss how the ex ante efficiency goal of the functional school parallels the moral framework found in the Judeo-Christian tradition. I. Pursuing Well-Being: Methodological Problems in Law and Economics Most practitioners of law and economics believe that there is an important common ground that unifies all scholars in the discipline, regardless of their ideological creed: a search for new insights into the law by applying economic concepts and theories. Despite this common statement of purpose, various schools of law and economics can be identified, each with an elaborate research program and a distinct methodological approach. A. Positive versus Normative Approaches to Law and Economics During the early period of the discipline, law and economics scholarship was labeled as Chicago-style or Yale-style. These labels made reference to the respective dominant positive or normative approach utilized by each school. The origins of the Chicago and Yale schools of law and economics are attributable to the early work of a handful of scholars, including the pioneering work of Ronald Coase and Guido Calabresi in the early 1960s. A difference in approach is detectable between the law and economics scholarship of the early 1960s, and that of the 1970s. The earlier studies appraised the effects of legal rules on the normal functioning of the economic system. By contrast, the subsequent generation of studies used economic analysis to achieve a better understanding of the legal system. Indeed, in the 1970s, a number of important applications of economics to law gradually exposed the economic structure of basically every aspect of a legal system: from its origin and evolution to its substantive, procedural, and constitutional rules. In many respects, the impact of law and economics has exceeded its planned ambitions. One effect of the incorporation of economics into the study of law was to transform traditional legal methodology irreversibly. Legal rules began to be studied as an organic system. Economics provided the analytical rigor necessary for the study of the vast body of rules present in a modern legal system. This intellectual revolution came at an appropriate time, when legal academia was actively searching for a tool that permitted critical appraisal of the law, rather than merely strengthening the dogmatic consistencies of the system. At this point, methodological differences came to surface with substantive practical differences. The Chicago school laid most of its foundations on the work carried out by Richard Posner in the 1970s. An important premise of the Chicago approach to law and economics is the idea that the common law is the result of an effort, conscious or not, to induce efficient outcomes. This premise is known as the efficiency of the common law hypothesis. According to this hypothesis, first intimated by Coase, and later systematized and greatly extended by Posner, common law rules attempt to allocate resources in either a Pareto or Kaldor-Hicks efficient manner. Posner endorses a scientific approach that uses economics to study the legal system and the behavior it regulates objectively. He believes that positive economic analysis is immune to most abuse and misuse because it is merely used to explain or predict what incentives guide individuals and institutions under alternative legal rules.

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The primary hypothesis advanced by positive economic analysis of law is the notion that efficiency is the predominant factor shaping the rules, procedures, and institutions of the common law. Posner contends that efficiency is a defensible criterion in the context of judicial decision-making because “justice” considerations, on the content of which there is no academic or political consensus, introduce unacceptable ambiguity into the judicial process. In arguing for positive use of economics, Posner is not denying the existence of valuable normative law and economics applications. In fact, law and economics often has many objective things to say that will affect one's normative analysis of a policy. Despite the powerful analytical reach of economic analysis, Chicago scholars acknowledged from the outset that the economist's competence in the evaluation of legal issues was limited. While the economist's perspective could prove crucial for the positive analysis of the efficiency of alternative legal rules and the study of the effects of alternative rules on the distribution of wealth and income, Chicagostyle economists generally recognized the limits of their role in providing normative prescriptions for social change or legal reform. To the contrary, the Yale school of law and economics, often described as the “normative” school, believes that there is a larger need for legal intervention in order to correct for pervasive forms of market failure. Distributional concerns are central to the Yale-style literature. The overall philosophy of this group is often presented as more value-tainted and more prone to policy intervention than the Chicago law and economics school. Unlike its Chicago counterpart, this school has attracted liberal practitioners who employ the methodology of the Chicago school, but push it to formulate normative propositions on what the law ought to be like. Given the overriding need to pursue justice and fairness in distribution through the legal system, most Yale-style scholars would suggest that efficiency, as defined by the Chicago school, could never be the ultimate end of a legal system. B. The Functional Approach and the Return to a Human-Centered Economic Analysis As the domain of law and economics expanded, its perspective on methodological issues has not stagnated. In the 1990s, a new generation of literature, developed at the interface of law, economics, and public choice theory, pushed the boundaries of economic analysis of law, studying the origins and formative mechanisms of legal rules. The resulting approach, which we describe as the “functional” approach to legal analysis, is quite skeptical of both the normative and the positive alternatives. The systematic incorporation of public choice theory into the economic approach to law may serve to bridge the conflicting normative perspectives in law and economics, at least by bringing the debate onto the more solid ground of collective choice theory. The functional approach is wary of the generalized efficiency hypothesis espoused by the positive school. In this respect, the functionalists share some of the skepticism of the normative school. Nothing supports a generalized trust in the efficiency of the law in all areas of the law. Even more vocally, the functional school of law and economics is skeptical of a general efficiency hypothesis when applied to sources of the law other than common law (e.g., legislation or administrative regulations). The functional approach is also critical of the normative extensions and ad hoc corrective policies often advocated by the normative school. Economic models are a simplified depiction of reality. Thus, functionalists think it is generally dangerous to use such tools to design corrective or interventionist policies. In this respect, the functionalists are aligned with the positive school in their criticism of the normative approach. According to both the positivists and the functionalists, normative economic analysis often risks overlooking the many unintended consequences of legal intervention.

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Public choice theory provides strong methodological foundations for the functional school of law and economics. The findings of public choice theory, while supporting much of the traditional wisdom, pose several challenges to neoclassical law and economics. In spite of the sophisticated mathematical techniques of economic analysis, judges and policymakers in many situations still lack the expertise and methods for evaluating the efficiency of alternative legal rules. Courts and policymakers should thus undertake a functional analysis. Such an analysis requires them to first inquire into the incentives underlying the legal or social structure that generated the legal rule, rather than directly attempting to weigh the costs and benefits of individual rules. In this way, the functionalist approach to law and economics can extend the domain of traditional law and economics inquiry to include both the study of the influence of market and non-market institutions (other than politics) on legal regimes, and the study of the comparative advantages of alternative sources of centralized or decentralized lawmaking in supplying efficient rules. With this focus on the underlying legal and social structure, there is less of an impetus to micro-manage individual rules. Such micro-management is likely to suffer from the rent-seeking activities of interested parties. II. The Dilemma of Preference Aggregation: Pareto, Bentham, and Rawls The need to make comparative evaluations between different rules motivates much of law and economics. Consequently, the second methodological problem in law and economics concerns the choice of criteria for carrying out such comparative analysis. In practical terms, this problem concerns the method of aggregation of individual preferences into social preferences. This problem is not unique to law and economics. It is part of a much larger methodological debate in economic philosophy and welfare economics. Already, in 1881, F.Y. Edgeworth stated the moral dilemma of social welfare analysis, observing that a moral calculus should proceed with a comparative evaluation of the happiness of one person with the happiness of another. [FN14] Such comparison can no longer be shirked if there is to be any systematic morality at all. The problem obviously arises from the fact that economists do not have any reliable method for measuring individuals' utility, let alone for making interpersonal comparisons of utility. Economic analysis generally utilizes one of the three fundamental criteria of preference aggregation: A. Ordinal Preferences and the Pareto Criterion The first criterion of social welfare is largely attributable to Italian economist and sociologist Vilfredo Pareto. The Pareto criterion limits the inquiry to ordinal preferences of the relevant individuals. According to Pareto, an optimal allocation is one that maximizes the well-being of one individual relative to the well-being of other individuals being constant. In normal situations, there are several possible solutions that would qualify for such a criterion of social optimality. For example, if the social problem is that of distributing a benefit between two parties, any hypothetical distribution would be Pareto optimal, since there is no possible alternative redistribution that would make one party better off without harming another party. The Pareto criterion has been criticized for two main reasons: (a) it is status quo dependent, in that different results are achieved depending on the choice of the initial allocation; and (b) it only allows ordinal evaluation of preferences, since it does not contain any mechanism to induce parties or decision makers to reveal or evaluate cardinal preferences (i.e., the intensity of preferences). As a result of these shortcomings, several scholars have questioned the usefulness of the Pareto criterion in its applications to law and economics. B. Utilitarian Tests: Bentham and Kaldor-Hicks

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In the nineteenth and early twentieth centuries, economists and philosophers developed welfare paradigms according to what degree all affected individuals had to be taken into account in any comparative evaluation of different states of the world. This methodological trend, related to utilitarian philosophy, is best represented by philosophers and jurists such as Jeremy Bentham and later economists such as Nicholas Kaldor and J.R. Hicks, who in different ways formulated criteria of social welfare that accounted for the cardinal preferences of individuals. In Principles of Morals and Legislation, Bentham (1789) presents his theory of value and motivation. He suggests that mankind is governed by two masters: ‘pain’ and ‘pleasure’. The two provide the fundamental motivation for human action. Bentham notes that not all individuals derive pleasure from the same objects or activities, and not all human sensibilities are the same. Bentham’s moral imperative, which has greatly influenced the methodological debate in law and economics, is that policymakers have an obligation to select rules that give the greatest happiness to the greatest number. As pointed out by Paul Kelly, this formulation is quite problematic, since it identifies two maximands (i.e., degree of pleasure and number of individuals) without specifying the tradeoff between one and the other. Bentham’s utilitarian approach is thus, at best, merely inspirational for policy purposes. Later economists, including Kaldor, Hicks, and Tibor Scitovsky, formulated more rigorous welfare paradigms, which avoided the theoretical ambiguities of Bentham’s proposition. However, these formulations presented a different set of difficulties in their implementation. The core idea of their approach is that state A is to be preferred to state B if those who gain from the move to A gain enough to compensate those who lose. The test is generally known as the Kaldor-Hicks test of potential compensation. It is one of “potential” compensation because the compensation of the losers is only hypothetical and does not actually need to take place. In practical terms, the Kaldor-Hicks criterion requires a comparison of the gains of one group and the losses of the other group. As long as the gainers gain more than the losers lose, the move is deemed efficient. Mathematically, both the Bentham and the Kaldor-Hicks versions of efficiency are carried out by comparing the aggregate payoffs of the various alternatives and selecting the option that maximizes such summation. C. Non-Linear Social Preferences: Nash and Rawls Other paradigms of social welfare depart from the straight utilitarian approach, suggesting that social welfare maximization requires something more than the maximization of total payoffs for the various members of society. Societies are formed by a network of individual relations, and there are some important interpersonal effects that are part of individual utility functions. Additionally, human nature is characterized by diminishing marginal utility, which gives relevance to the distribution of benefits across members of the group. Imagine two hypothetical regimes: (a) in which all members of society eat a meal a day; and (b) in which only a random one-half of the population gets to eat a double meal while the other unlucky half remains starving. From a Kaldor-Hicks perspective, the two alternatives are not distinguishable from the point of view of efficiency because the total amount of food available remains unchanged. In a Kaldor-Hicks test, those who get a double meal have just enough to compensate the others, and thus society should remain indifferent between the two allocational systems. Obviously, this indifference proposition would leave most observers unsatisfied. In the absence of actual compensation, the criterion fails to consider the diminishing marginal benefit of a second meal and the increasing marginal pain of starvation. Likewise, the randomized distribution of meals fails to consider the inter-personal effects of unfair allocations. Fortunate individuals suffer a utility loss by knowing that other individuals are starving while they enjoy a double meal. Because of the diminishing marginal utility of wealth and

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interpersonal utility effects, from an ex ante point of view, no individual would choose allocation system (b), even though the expected return from (b) is equal to the return from (a). Scholars that try to evaluate the welfare implications of distributional inequalities generally do so by invoking John Rawls’ theories of justice or by using Nash’s framework of welfare. The intuition underlying these criteria of welfare is relatively straightforward: the well-being of a society is judged according to the well-being of its weakest members. The use of an algebraic product to aggregate individual preferences captures that intuition. Like the strength of a chain is determined by the strength of its weakest link, so the chain of products in an algebraic multiplication is heavily affected by the smallest multipliers. Indeed, at the limit, if there is a zero in the chain of products, the entire grand total will collapse to zero. This means that the entire social welfare of a group approaches zero as the utility of one of its members goes to zero. In the law and economics tradition, these models of social welfare have not enjoyed great popularity. This is not so much for an ideological preconception, but rather for a combination of several practical reasons. These reasons include the general tendency to undertake a two-step optimization in the design of policies and the difficulties of identifying an objective criterion for assessing interpersonal utility and diminishing marginal utility effects. From a methodological point of view, distributional concerns are generally kept separate from the pursuit of efficiency in policymaking. Such separation has been rationalized on the basis that the legal system is too costly an instrument for distribution, given the advantage of the tax system for wholesale reallocation of wealth. Some of the tension among these three social welfare standards is dissipated by the functional school's focus on ex ante welfare. That is, ideally, legal meta-rules should be designed to maximize expected welfare, not realized welfare. From the ex ante perspective, there is no tension between the Pareto and the Hicks-Kaldor standard. Further, while the ex ante perspective does not require the generalized risk aversion posited in the Rawlsian veil of ignorance decision rule, it does allow for the protection of the “worst-off” member of society along dimensions where a representative individual would rationally choose such protections ex ante. This notion is implicit in the Buchanan and Tullock derivation of optimal constitutional rules, which serves as part of the foundation of functional law and economics. III. Wealth, Utility, and the Human Dimension There is a third methodological problem. What should the legal system try to maximize? In this debate, even strict adherents to the instrumentalist view of the law may question whether the objective of the law should be the maximization of aggregate wealth or the maximization of aggregate utility. If the scholars involved in this debate could look at the issue as neutral spectators, consensus could likely be reached on the idea that the ultimate policy goal is the maximization of human happiness and well-being. Consequently, the human dimension cannot be bypassed in policy evaluation. But regardless of such an observation, economic analysis of law rarely uses utility-based methods of evaluation. The reason for this is, once again, mostly pragmatic. Unlike wealth (or quantities of physical resources), utility cannot be objectively measured. Furthermore, interpersonal comparisons of utility are impossible, rendering any balancing across groups or individuals largely arbitrary. These limitations make utility maximization unviable for practical policy purposes. Given the above limitations, practitioners of the economic analysis of law have departed from the nineteenth century utilitarian ideal of utility maximization. Rather, they have increasingly used a paradigm of wealth maximization. Posner is the most notable exponent of the wealth maximization paradigm. Under wealth maximization principles, a transaction is desirable if it increases the sum of

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wealth for the relevant parties (where wealth is meant to include all tangible and intangible goods and services). The early years of law and economics were characterized by some uneasiness in accepting the notion of wealth maximization as an ancillary paradigm of justice. Although most of the differences proved to be largely verbal, and many others were dispelled by the gradual acceptance of a distinction between paradigms of utility maximization and wealth maximization, two objections continue to affect the lines of the debate. The first objection relates to the need for specifying an initial set of individual entitlements or rights as a necessary prerequisite for operationalizing wealth maximization. In this context, one can think of the various criticisms of wealth maximization by property rights advocates who perceive the social cost of adopting such criterion of adjudication as very high, given wealth maximization's instrumentalist view of individual rights and entitlements. These critics argue that rights have value that must be accounted for, regardless of how useful they might be to the accumulation of wealth. Along similar lines, these critics suggest that the wealth maximization criterion of economic analysis is comparable to the methodological approach of economics prior to the advent of public choice theory, insofar as an understanding of “political failures” was missing from the study of collective decision-making. The second objection springs from the theoretical difficulty of defining the proper role of efficiency as an ingredient of justice, vis-à-vis other social goals. Legal scholars within the law and economics tradition have claimed that an increase in wealth cannot constitute social improvement unless it furthers some other social goal, such as utility or equality. Denying that one can trade off efficiency against justice, these scholars argue instead that efficiency and distribution are equally essential elements of justice, which is seen as a goal of a different order than either of its constitutive elements. In several of his writings, Posner stands as the most notable defender of the criterion of wealth maximization, addressing these important questions and justifying wealth maximization as a worthy standard for evaluating legal rules. Posner explicitly advocates wealth maximization as a criterion that should guide judicial rule-making. In order to make the case for wealth maximization, he defines it and compares it with the alternative theories of utilitarianism and libertarianism. As mentioned earlier, wealth maximization occurs when a transaction increases the total amount of goods and services, weighted by offer prices and demand prices. Because of the market's ability to capture subjective values and preferences, wealth maximization is a comprehensive measure of social welfare. A. Utilitarianism, Libertarianism, and Efficiency Much of the criticism of law and economics lies in the mistaken belief that wealth maximization is a form of utilitarianism. Prior to his important article on utilitarianism and legal theory, Posner himself had been wrongly characterized as acknowledging utilitarianism as the inspiration of law and economics. Posner distinguishes utilitarianism from the methodological premises of law and economics, arguing in favor of wealth maximization as a superior normative theory of law. According to Posner, utilitarianism holds that the worth of a law should be judged by its effect in promoting the surplus of pleasure over pain across society. Normative economics holds that a law should be judged by its effects in promoting social welfare, a term which when broadly defined almost means the same as utilitarian happiness. In this context, Posner suggests that economists' use of “utility” as a synonym for “welfare” adds to the confusion. Utilitarianism is distinct from wealth maximization because it seeks to maximize aggregate “happiness,” while wealth maximization seeks to maximize aggregate economic utility, called “wealth.” While happiness is a philosophical concept that cannot be easily measured, wealth is more practical and

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measurable. More fundamentally, happiness is an insufficient social goal because happiness is passive and focuses on consumption. Wealth maximization, on the other hand, is dependent on productive effort. While aware of the limits of a concept of wealth as a good in itself, Posner believes that wealth maximization results in a work ethic that is in fact necessary for utilitarian happiness to be brought about and thus is an important mechanism for the advancement of society. While not precluding an instrumentalist maximization of wealth, Posner’s theory does not rely on utilitarianism as a necessary methodological assumption. There is a possible intuitive justification for wealth maximization. This intuitive foundation was first emphasized by Richard Posner, who argued that wealth maximization can be regarded as a superior ethical principle because it is more consistent with ethical intuitions, provides for a more sound theory of justice, and yields more definite results than the alternative economic views on justice. By promoting the efficient use of resources, wealth maximization encourages traditional capacities, such as intelligence, and traditional virtues, such as honesty. An important part of the debate on the paradigm of wealth maximization relates to its ethical and normative justification. This foundational work in law and economics has been described as a form of normative analysis that “turns the mirror of analysis inward,” attempting to answer the fundamental question of “why the law or public policy should promote efficiency.” Advocates of wealth maximization generally offer two basic arguments in support of such a normative goal: a teleological justification and a consent justification. These justifications have come under the scrutiny of wellknown legal and economic theorists. According to Coleman, wealth maximization is a form of Kaldor-Hicks maximization under disguise. The practical advantages of wealth-maximization over utility-maximization relate to the fact that it is easier to ascertain actual changes in wealth as opposed to utility. In spite of such practical superiority, Posner's normative criterion remains subject to several of the shortcomings of the Kaldor-Hicks criterion, including its difficult moral defensibility. Posner’s defense of wealth maximization has been further criticized for building upon notions of implied, rather than actual, consent. Coleman recognizes the usefulness of tests of hypothetical consent, à la Rawls, but questions the uniqueness of wealth maximization as a dominant criterion of justice from the perspective of ex ante social choice. The indeterminacy of such hypothetical social choice poses a challenge to the consent-based moral justification of wealth maximization. B. Efficiency, Morality, and Economic Theories of Justice In spite of the articulate defense of the criterion of efficiency in legal and policy decisions, most law and economics scholars do not argue that efficiency concerns should replace morality. However, whenever moral or ethical theories of justice fail to generate unambiguous results that could guide policy choices and, more generally, in the absence of trumping moral or ethical concerns, efficiency provides the most appropriate criterion for allocating limited resources among competing claims. Legal scholars (e.g., Malloy), however, have often argued that efficiency-based and utilitarian theories of justice promote “disrespect for individual liberty,” are “indeterminative and elitist,” and “can hardly be viewed as anything other than amoral, if not immoral.” [FN39] Posner, in his reply to Malloy, once again, takes issue. He suggests that these critiques miss the mark in that they treat the methodology of law and economics as a political theory. Indeed, Posner, while arguing that wealth maximization is the best normative and positive theory of common law rights and remedies, never suggested that wealth maximization should be the only social value or principle of justice.

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Even the most extreme advocates of wealth maximization do not contend that such criterion should override moral concerns. The preference for wealth maximization over other criteria of welfare derives from the general suspicion against paternalistic governmental intervention (which would unavoidably be triggered if morality were recognized as the sole criterion of legal interpretation and judicial action) and the risks involved in shifting the burden on the judiciary in asking judges to decide controversies on the basis of distributive considerations. Wealth maximization sometimes runs contrary to moral guides such as natural rights. The natural rights perspective views society as a compact in which people surrender just enough of their own natural liberties as necessary to protect everyone else’s equal natural liberties. Posner believes that because the notion of natural rights can be expanded so readily, it is too unstable a foundation to build upon. He also believes that it is fundamentally anti-democratic because it holds that the more rights people have, the smaller the permissible scope of public policy deliberation. Many of the arguments made by natural rights proponents rely on examples for which there is moral consensus. Posner points out that the power of natural rights moral discourse runs out when one faces controversial moral issues. Thus, paradoxically, whenever an analytical perspective is most needed to frame policy questions, natural rights emerge as non-dispositive, and thus hardly valuable, instruments of adjudication. Functional law and economics bypasses the wealth/utility divide by focusing on choice or revealed preference as the criterion of decision. That is, by designing mechanisms through which parties are induced to reveal their subjective preferences, the functional law and economics approach obviates the need for third parties, such as judges or legislators, to decide between wealth and utility as the appropriate maximand. The institutions favored by the functional approach minimize the impediments to the full revelation of the subjective preferences of the parties to a transaction by focusing on incentive compatibility mechanisms. This mechanism-design approach tends to align individual and social optimality. IV. The Human-Centered Approach of Functional Law and Economics The ex ante efficiency perspective of the functional school of law and economics can in many ways be analogized to the human-centered functional perspective of the moral precepts of the Judeo-Christian tradition. Just as functional law and economics favors the “rule of law” over the “law of rules” in its focus on the structural origin of the law as opposed to its practical application, the foundation of the moral precepts of the Biblical tradition show this more general concern. This concern is illustrated quite clearly in Mark 2:23-28, in which the Pharisees questioned Jesus about his disciples’ choice to pluck grain on the Sabbath. Jesus replied, “The Sabbath was made for man, not man for the Sabbath.” Similar proclamations are made in the story of Jesus curing the man with the withered hand on the Sabbath, as well as in Jesus’ response to the question of why His disciples did not fast as John’s disciples and those of the Pharisees did. However, the Biblical Jesus makes clear that he does not reject the structure of the law, as expressed forcefully in his discussion on the law and the prophets. Here the instrumental value of moral laws for the ultimate fulfillment of humanity’s highest aspirations is revealed by the text: “Think not that I have come to abolish the law and the prophets; I have come not to abolish them but to fulfill them.” In many other contexts, the human-centered approach of functional law and economics uses instruments that are germane to some well-known precepts of Judeo-Christian ethics. The Biblical Golden Rule is an example of this approach. In spite of great variation of ethical values from one culture to another, norms of reciprocity stand as universal principles in virtually every human society, both historical and contemporary. No single principle or judgment is as widely and universally accepted as the reciprocity

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principle, in both its positive and negative versions. The relative importance of the positive and negative components of the reciprocity principle appears to depend on the state of advancement of society and administration of justice. More notably, reciprocity norms first materialize in their negative form in lesser developed societies, while norms of positive reciprocity dominate in more developed societies. In early codes of the Babylonian and Biblical tradition, the reciprocity principle takes the first form as a principle of negative reciprocity or retaliation. The talionic principle of “an eye for an eye, a tooth for a tooth,” is the most notable illustration of the early principles of negative reciprocity. Similar incarnations of principles of retributive justice emerge in virtually every early legal system for the treatment of wrongdoing, both voluntary and involuntary. These rules in turn represent a broader concept of reciprocity, which was subsequently articulated as a positive mandate. The command to “love thy neighbor as thyself” sums up the positive and prescriptive nature of the rule of positive reciprocity. Economists and behavioral scientists have devoted considerable attention to both positive and negative versions of reciprocity and revealed that negative reciprocity may be as important as honesty and positive reciprocity for the evolution of cooperation. Positive and negative reciprocity are complementary instruments that provide the best strategic attitudes in different sets of social interactions. This leads us to suggest that there may be an important relationship between the establishment of norms of negative reciprocity and the subsequent positive corollaries. In evolutionary terms, positive reciprocity without a complementary attitude for negative reciprocity would not be sustainable. In both its negative and positive versions, the Biblical Golden Rule of treating others the way you wish to be treated embodies one of the fundamental precepts of the functional law and economics movement. That is, ex ante efficiency requires that an individual internalizes the effects of his actions. By treating others the way you would have yourself treated, internalization necessarily occurs. This golden rule mirrors the functional model of reciprocity provided in Fon and Parisi (2003). In many other contexts, functional law and economics identifies principles that could govern human action, starting from the observation and recognition of the fundamental needs and shortcomings of human nature. Functional law and economics attempts to activate mechanisms that give greatest freedom to individual choice, guiding such choice by means of structural principle, rather than specific normative prescriptions, to induce individuals to act as if they were internalizing the direct consequences of their actions, such as when acting under reciprocity constrains in the above illustrations. Other illustrations of functional principles of law and economics include the following: mechanism design to induce incentive alignment, preference revelation mechanism for subjective value, and freedom of contract and parties' autonomy in private contracting. We shall briefly illustrate these principles drawing some analogies with other well-known parables of the Biblical tradition. The mechanism design perspective of economics attempts to channel the intrinsic behavioral tendencies of individuals to reach a desired social outcome. That is, rather than attempt to alter individual behavior, functional law and economics suggests that institutions should provide incentives such that individuals will naturally act in a desired way without any external monitoring or coercion. This necessarily requires that individuals have the ability and incentive to reveal their own subjective values and preferences, and that all costs and benefits generated by an individual's actions accrue to that individual. This implies that individuals will only achieve socially optimal outcomes when they act for their own gain, and incentives are not attenuated by principal agent problems whereby an individual is directed to fulfill some social goal directly. This notion also permeates the Biblical message: “No one can serve two masters; for either he will hate the one and love the other, or he will be devoted to one and despise the

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other.” A similar sentiment is declared in the proclamation that “Every kingdom divided against itself is laid waste, and no city or house divided against itself will stand.” This individual-centered focus also solves another seemingly intractable problem encountered in a corporate approach to law. Utility maximization necessarily requires that subjective values be attributed to human action. However, it is not possible for an outside observer to evaluate these subjective values and draw the appropriate legal or policy conclusions to maximize social welfare. To avoid this information problem, the functional law and economics approach relies on institutions that provide individuals with the opportunity to express their own values truthfully. These revealed preferences are then granted complete validity in normative terms with law and policy makers taking them as a given. Along these subjective value lines, there is a great deal of economic intuition in many of the parables contained in the passages of the New Testament. This intuition reflects the great power of the methodological individualism paradigm in explaining human behavior. Although the Bible is replete with examples of this, we focus on two illustrations drawn from the New Testament. In the so-called story of the widow's mite, Jesus embraces a subjective theory of value. “He looked up and saw the rich putting their gifts into the treasury; and he saw a poor widow put in two copper coins. And he said, “Truly I tell you, this poor widow has put in more than all of them for they all contributed out of their abundance, but she out of her poverty put in all the living that she had.” This respect of subjective value flows also to the functional law and economics treatment of exchange between parties. Instead of evaluating the “fairness” or “justice” of individual transactions, the functional approach respects individuals' freedom of contract, taking the fact that individuals agree to an arrangement as evidence of the transaction's intrinsic value for the parties. The same sentiment is expressed in the parable about the laborers in the vineyard, in which the various workers are paid an effectively differential wage since all receive the same nominal wage but some worked longer than others. Rather than see this as unjust, Jesus has the vineyard owner reply to the disgruntled workers in the following way: “Friend, I am doing you no wrong; did you not agree with me for a denarius?” The parallels between the teachings of Judeo-Christian ethics and the insights of functional law and economics are striking. Indeed, functional law and economics analysis exposes the internal consistency of many normative religious teachings that would otherwise appear to be at odds with each other. V. Conclusion Functional law and economics avoids paternalism and methodological imperialism by formulating value-neutral principles of collective choice. Functional law and economics builds upon the methodological premises of normative individualism, giving greatest freedom to individual choice, and fostering socially desirable human action by establishing structural principles to induce individuals to take into account private information and subjective values and truthfully reflect such information and values in their behavioral choices. Functional law and economics represents a mode of analysis that bridges and, in some sense, improves upon both the Chicago and Yale schools of thought in law and economics. Through its ex ante perspective, the functional school focuses on mechanism design issues to explain the origins of law, capturing both the efficiency and non-efficiency perspectives of the other two schools. Functional law and economics provides a framework to understand not only the development of formal legal systems but also ethical and moral codes.

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