Civil Procedure Code, 1908 - s.47 - Suit praying for decree of declaration in regard to entitlement to receive higher pay scales and a decree of mandatory injunction directing release/payment of higher pay scales with interest from due date - Decreed by Civil Court - Execution petition moved by decree-holder - Objection to, by judgment-debtor - Held: On facts, the decree-holder legally would not have been entitled to the reliefs prayed for by it - However, as the decree passed has attained finality, the Executing Court is directed to execute the decree strictly in terms thereof. Appellant-Board has two thermal power plants, one at Faridabad and the other at Panipat. Respondents were employees at the Faridabad plant. Inter alia on the premise that employees similarly situated and working at the Panipat plant were receiving higher salary, they filed suit praying for a decree of declaration in regard to their entitlement to receive higher pay scales and a decree of mandatory injunction directing release/payment of higher pay scales in their favour with interest from the due date. The Trial Court decreed the suit on basis of the judgment and decree passed in Anil Kapoor case which was then pending in second appeal before the High Court. The said second appeal was ultimately dismissed and the Special Leave Petition filed thereagainst was also dismissed. Subsequently, appellant filed appeal against the decree passed in the suit filed by respondents, which was dismissed on the ground of delay. Revision petition filed thereagainst was also dismissed. The decree passed in the suit filed by respondents attained finality. An execution petition in respect of the decree was filed. Appellant filed objection contending that a mere declaratory relief having been passed in favour of the respondents-decree holder, they were not entitled to arrears of pay. The objection petition was dismissed by the Executing Court. Revision petition filed thereagainst was dismissed by the High Court. Hence the present appeal.

Dismissing the appeal, the Court HELD: 1. A decree should ordinarily be confined to the prayer made in the plaint. The respondents not only prayed for a declaration in regard to their entitlement to receive a higher scale of pay but also for a decree of mandatory injunction in their favour directing them to release/pay the said higher scales of pay. They had also prayed for grant of interest on the aforementioned amount. The entitlement of the plaintiffs-respondents to receive the emoluments in the scales of pay mentioned therein and the date from which they had been working was specified. The Trial Judge in no uncertain terms held that no interest shall be payable thereupon. Denial of payment of interest is significant and the same leads to the conclusion that the court was conscious of the fact that not only plaintiffs- respondents were entitled to a declaration but also to a mandatory injunction. [Paras 14, 15 and 16] [945-D-G] State of M.P. v Mangilal Sharma, (1998) 2 SCC 510, distinguished. U.P. State Road Transport Corporation vs Assistant Commnr. of Police (Traffic) Delhi 2009 (2) SCALE 526, referred to. 2.1. For the purpose of allowing an objection filed on behalf of a judgment debtor under Section 47 CPC, it was incumbent on him to show that the decree was ex facie nullity. For the said purpose, the court is precluded from making an indepth scrutiny as regards the entitlement of the plaintiff with reference to not only his claim made in the plaint but also the defence set up by the judgment-debtor. As the judgment of the Trial Court could not have been reopened, the correctness thereof could not have been put to question. Also an Executing Court cannot go behind the decree. If on a fair interpretation of the judgment, order and decree passed by a court having appropriate jurisdiction in that behalf, the reliefs sought for by the plaintiff appear to have been granted, there is no reason as to why the Executing Court shall deprive him from obtaining the fruits of the decree. [Para 20] [948-E-H; 949-A] 2.2. It is also not a case where this Court can exercise its jurisdiction under Article 142 of the Constitution to mould an order. The decree passed by the Trial Court has attained finality. Whether rightly or wrongly, the judgment of the Trial Judge has been affirmed by this court. It is one thing to say that no right having crystalised in favour of a party to the lis, this Court can mould the relief appropriately, but it is another thing to say that despite the decree being found to be an executable one, this Court will refuse to direct execution thereof. Though, on facts, the respondents legally would not have been entitled to the reliefs prayed for by them, however, as a decree has been passed, the Executing Court shall execute the decree strictly in terms thereof. [Paras 21 and 22] [949-C-F] Deepa Bhargave v. Mahesh Bhargava 2008 (16) SCALE 305, relied on. Bhawarlal Bhandari v. Universal Heavy Mechanical Lifting Enterprises (1999) 1 SCC 558, referred to. Case Law Reference: 2009 (2) SCALE 526 referred to Para 16 (1998) 2 SCC 510 distinguished Para 18 (1999) 1 SCC 558 referred to Para 19 2008 (16) SCALE 305 relied on Para 20 CIVIL APPELLATE JURISDICTION : Civil Appeal No. 3306 of 2009. From the Judgment & Order dated 1.2.2006 of the High Court of Punjab & Haryana at Chandigarh in Civil Revision No. 5260 of 2005. WITH C.A. No. 3307, 3308, 3309, 3310 of 2009. Paramjit Singh Patwalia, Salman Khurshid, Neeraj Kumar, Jain, Sandeep Chaturvedi (for Ugra Shankar Prasad), Arunabh Chowdhury, Aman Preet Singh Rahi, Arijit Bhaumik (for Ruby Singh Ahuja), Rishi Malhotra, Prem Malhotra for the Appearing parties. REPORTABLE IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. 3306 OF 2009 [Arising out of SLP (Civil) No. 9134 of 2006] Haryana Vidyut, Parsaran Nigam Limited & Anr. ...Appellants Versus Gulshan Lal & Ors. ...Respondents With CIVIL APPEAL NO. 3307, 3308, 3309 & 3310 OF 2009 [Arising out of SLP (Civil) Nos. 15174, 15204, 15372 and 18470 of 2006] JUDGMENT S.B. SINHA, J : 1. Leave granted. 2. Interpretation of a judgment of Civil Judge, Faridabad in Civil Suit No. 180 of 1999 dated 17-11-2000 is in question in these appeals. 3. Respondents are employees of the appellant-Board, a successor of Haryana State Electricity Board constituted and incorporated under Section 5 and 12 of the Electricity (Supply) Act, 1948. Respondents were employees of a Thermal Power Plant at Faridabad. Indisputably the appellant has another Thermal Power Plant at Panipat. 2 Inter alia on the premise that the employees similarly situated and working at Panipat, Thermal Power Plant were receiving a higher salary, the aforementioned suit was filed praying inter alia for the following reliefs : "(a) a decree of declaration in favour of plaintiffs and against the defendants, declaring the plaintiffs entitled to receive the said higher pay scale of Rs.1400-2600/- w.e.f. 24.10.1991, and of Rs.5000-150-8000 w.e.f. 1.1.1996 alongwith interest @ 18% p.a. from the date of due till actual payment, as given to their co- employees as mentioned in para No. 2 above of the plaint, on the basis of principle of `equal pay for equal work,; (b) a decree of mandatory injunction in favour of plaintiff and against the defendants, directing the defendants to release/pay to the plaintiffs the said higher pay scales of Rs. 1400-2600/- w.e.f. 24.10.1991 and of Rs. 5000-150-8000/- w.e.f. 1.1.96 alongwith interest @ 18% p.a. from the date of due till actual payment, forthwith;" 4. The issues which were framed in the aforementioned suit in terms of the pleadings of the parties were as under : "(1) Whether the plaintiffs are entitled to receive the pay scales of Rs. 1400-2600 w.e.f. 24.10.1991 and of Rs. 5000 to 8000/- w.e.f. 1.1.1996 alongwith interest at the rate of 18% from the defendants? (2) If issue No. 1 is proved, whether the plaintiffs are entitled for mandatory injunction as prayed for?" 3 The learned Trial Judge while determining the said issue Nos. 1 and 2, relying or on the basis of a Judgment and decree passed in the case of Anil Kapoor Vs. Haryana State Electricity Board being RSA No. 800 of 1992 which was then pending in second appeal before the High Court of Haryana held as under : "The plaintiffs are entitled to get the benefit as ordered by the Hon'ble High Court and which would be subject to the decision of RSA No.800/1992. The plaintiffs have proved the legal notice served by them through counsel which is placed on record as Ex. P1, as admitted by DW1 in his cross examination, but no reply was given by the defendants." It was directed : "For the reasons recorded above, issues No. 1 and 2 are decided in favour of the plaintiffs to the effect that the plaintiffs are entitled to receive pay scale of Rs. 1400-2600 w.e.f. 24.10.1991 and Rs.5000-8000 w.e.f. 1.1.1996 subject to decision of RSA No.800/1992." On the aforementioned findings, the following relief was granted : "In sequel of my aforesaid discussion on the aforesaid issues, the suit of the plaintiffs for declaration and mandatory injunction succeeds and the same is hereby decreed to the effect that the plaintiffs are entitled to receive the pay scale of Rs.1400-2600 w.e.f.24.10.1991 and Rs.5000-8000 w.e.f. 1.1.1996. However, the plaintiffs are not entitled to any interest as claimed. Keeping in view of circumstances of the case, both the parties are left to bear their own costs. Decree-sheet be 4 prepared accordingly and file be consigned to the record room." 5. Indisputably the said decree has attained finality as the same has been upheld upto this court. 6. An execution petition was filed. Appellants herein filed an objection to the said execution petition raising a contention that a mere declaratory relief having been passed in the favour of the decree holder, they were not entitled to the arrears of pay, stating : "In view of the judgment dated 9.10.2001 of Hon'ble High Court in RSA-800/92, the present D.Hs are not entitled for any relief and in case they are paid the arrears it will further multiply the litigation as their pay scale shall become higher than their functional cadre post and will adversely effect the entire policy of various categories of staff of the erstwhile Board now Corporation. The said objection petition was dismissed by a reason of an Order dated 23-08-2005 passed by the learned Executing Court upon considering the findings of the Trial Court in the suit, stating : "It is apparent from the bare reading of the aforesaid findings that the grant of pay scales of Rs.1400-2600/- w.e.f. 24.10.1991 and Rs.5000- 8000 w.e.f. 1.1.1996 was subject to the decision of RSA No.800/1992. It is not disputed that the said RSA titled as Haryana State Electricity Board vs. 5 Anil Kapoor and others, was disposed of along with civil writ petition No. 1632 of 1999 titled as Anil Kapoor and others Vs. Haryana Power Generation Corporation and the Hon'ble Punjab and Haryana High Court vide judgment dated 9.10.2001 allowed the said writ petition and dismissed appeal no.800 of 1992. Aggrieved against the aforesaid judgment dated 9.10.2001, the JD had preferred a Special Leave Petition No. 14609-14610/2002 in the Hon'ble Supreme Court which was also dismissed on that 20.1.2003. Learned counsel for the JD has failed to bring on record the fact that the judgment and decree dated 17.11.2000 was ever challenged in any competent court of law, wherein the same was set aside or the operation of the said judgment was ever stayed. Hence, the judgment and decree dated 17.11.2000 must be held to have attained finality. Moreover, JD has not claimed any lack of jurisdiction or legal infirmity making the judgment in question to be unexecutable." 7. A revision application was filed thereagainst which by reason the impugned judgment has been dismissed by a learned Single Judge of the High Court. 8. Mr. Jain, learned counsel appearing on behalf of the appellants would submit that a mere declaratory decree having been passed, the execution petition was not maintainable. In any event, the learned counsel urged, no arrears of pay could have been granted for a period of more than three years. 9. Ms. Indu Malhotra, learned senior counsel appearing on behalf of the respondents, on the other hand, would support the impugned judgment. 6 10. Indisputably, respondents herein in terms of judgment of the Punjab and Haryana High Court passed in RSA No.800 of 1992 titled as Haryana State Electricity Board Vs. Anil Kapoor and Ors. were said to be similarly situated and were granted the following higher grade/pay scales: a) Rs.950-20-1150/25-1500 w.e.f. 1.1.1986 b) Rs.1200-30-1560/40-2040 w.e.f.1.5.1990 c) Rs.1400-2600 w.e.f.24.10.1991 d) Rs.5000-150-8000 w.e.f.1.1.1996. 11. Learned Subordinate Judge decreed the said suit inter alia holding that it was admitted that the respondents had been getting lesser pay as compared to other co-employees and thus on the basis of the principle of equal pay for equal work and being senior to the other employees cannot be deprived of the scales of pay allowed to their juniors. 12. It was furthermore directed that plaintiffs-respondents were entitled to derive the benefit as ordered by the High Court which would be subject to the decision of RSA No.800 of 1992. Indisputably RSA No. 88 of 1992 was dismissed by the High Court by a Judgment and Order dated 9-10-2001 and Special Leave Petition preferred thereagainst had also been dismissed. 13. We may notice that a first appeal preferred against the original judgment and decree passed in the suit filed by the respondent was filed by the appellant only on 24-03-2005 which was dismissed on the ground of 7 delay. A civil revision application filed thereagainst had also been dismissed. 14. Concededly the decree passed by the civil court has attained finality. The only question which arises for consideration is as to whether having regard to the nature of the decree passed, it is executable. A decree, as is well-known, should ordinarily be confined to the prayer made in the plaint. We have noticed hereinbefore, that the respondents herein not only prayed for a declaration in regard to their entitlement to receive a higher scale of pay but also for a decree of mandatory injunction in their favour directing them to release/pay the said higher scales of pay. They had prayed for grant of interest on the aforementioned amount. 15. The entitlement of the plaintiffs-respondents to receive the emoluments in the scales of pay mentioned therein and the date from which they had been working was specified. 16. The learned Judge in no uncertain terms held that no interest shall be payable thereupon. Denial of payment of interest, in our opinion, is significant and the same leads to the conclusion that the court was conscious of the fact that not only plaintiffs-respondents were entitled to a declaration but also to a mandatory injunction. 8 But for the purpose of construction of a judgment, it must be read as a whole. The issues framed in that behalf assumes great significance. We have noticed, hereinbefore, that both the issues framed by the learned Trial Judge had correlation with the reliefs claimed for. In U.P. State Road Transport Corporation v. Assistant Commnr. Of Police (Traffic) Delhi [2009 (2) SCALE 526], this Court held: "A decision is an authority, it is trite, for which it decides and not what can logically be deduced therefrom. This wholesome principle is equally applicable in the matter of construction of a judgment. A judgment is not to be construed as a statute. It must be construed upon reading the same as a whole. For the said purpose, the attending circumstances may also be taken into consideration." 17. Thus, when a relief had been granted upon taking into consideration not only the declaratory relief prayed for but also the relief for mandatory injunction, we are of the opinion, that the learned trial judge and consequently the High Court were correct in their views. 18. Furthermore it is beyond any doubt or dispute that the decree was passed having regard to the decision of the court in Anil Kapoor's case. In the said case, Anil Kapoor not only filed the suit but also filed a writ petition. 9 Once the decision in Anil Kapoor's case was followed that not only they would be entitled to scale of pay but also the other reliefs prayed for by them, there cannot be any doubt whatsoever that having regard to the fact that Anil Kapoor and various other persons being junior to the plaintiffs having been held to be entitled to a relief, respondents were also held to be entitled to the same relief. This court furthermore in State of M.P. v. Mangilal Sharma [(1998) 2 SCC 510] categorically held as under : "6. A declaratory decree merely declares the right of the decree holder vis-a-vis the judgment debtor and does not in terms direct the judgment-debtor to do or refrain from doing any particular act or thing. Since in the present case decree does not direct reinstatement or payment of arrears of salary the executing court could not issue any process for the purpose as that would be going outside or beyond the decree. Respondent as a decree holder was free to seek his remedy for arrears of salary in the suit for declaration. The executing court has no jurisdiction to direct payment of salary or grant any other consequential relief which does not flow directly and necessarily from the declaratory decree. It is not that if in a suit for declaration where the plaintiff is able to seek further relief he must seek that relief though he may not be in need of that further relief. In the present suit the plaintiff while seeking relief of declaration would certainly have asked for other reliefs like the reinstatement, arrears of salary and consequential benefits. He was however, satisfied with a relief of declaration knowing that the Government would honour the decree and would reinstate him. We will therefore assume that the suit for mere declaration filed by the respondent-plaintiff was 10 maintainable, as the question of maintainability of the suit is not in issue before us." However in that case as the decree for reinstatement and back wages had not been granted, the court opined that the Executing Court cannot grant a further relief. Herein, however, as noticed, the respondents not only had prayed for a declaratory decree but also decree for mandatory injunction. 19. Mr. Jain has relied upon a decision of this Court in Bhawarlal Bhandari v. Universal Heavy Mechanical Lifting Enterprises [(1999) 1 SCC 558]. Therein the decree was passed by a court lacking inherent jurisdiction and in that situation this court considered as to whether a decree passed by a court wholly without jurisdiction would be a nullity to hold: "10. The aforesaid decision of this Court squarely applies to the facts of the present case. This is not a case in which the award decree on the face of it was shown to be without jurisdiction. Even if the decree was passed beyond the period of limitation, it would be an error of law or at the highest a wrong decision which can be corrected in appellate proceedings and not by the executing court which was bound by such decree. It is not the case of the respondent that the Court which passed the decree was lacking inherent jurisdiction to pass such a decree. This becomes all the more so when the respondent did not think it fit to file objection against the award which was sought to be made rule of the court." It is on that premise the question which has been raised by Mr. Jain that the court could not have passed a decree for back wages for a period of 11 more than three years assumes importance. Whether by reason of the decree the respondents would be getting some amount by way of backwages for a period of more than three years would depend upon the facts of each case. It would also depend upon the date on which the cause of action of suit arose. 20. As indicated hereinbefore, for the purpose of allowing an objection filed on behalf of a judgment debtor under Section 47 of the Code of Civil Procedure, it was incumbent on him to show that the decree was ex facie nullity. For the said purpose, the court is precluded from making an indepth scrutiny as regards the entitlement of the plaintiff with reference to not only his claim made in the plaint but also the defence set up by the judgment - debtor. As the judgment of the Trial Court could not have been reopened, the correctness thereof could not have been put to question. It is also well-known that an Executing Court cannot go behind the decree. If on a fair interpretation of the judgment, Order and decree passed by a court having appropriate jurisdiction in that behalf, the reliefs sought for by the plaintiff appear to have been granted, there is no reason as to why the Executing Court shall deprive him from obtaining the fruits of the decree. In Deepa Bhargava v. Mahesh Bhargava [2008 (16) SCALE 305], this Court held as under: 12 "11...An executing court, it is well known, cannot go behind the decree. It has no jurisdiction to modify a decree. It must execute the decree as it is. A default clause contained in a compromise decree even otherwise would not be considered to be penal in nature so as to attract the provisions of Section 74 of the Indian Contract Act." 21. It is also not a case where this Court can exercise its jurisdiction under Article 142 of the Constitution of India to mould an order. The decree passed by the learned Trial Court has attained finality. Whether rightly or wrongly, the judgment of the learned Trial Judge has been affirmed by this Court. It is one thing to say that no right having crystalised in favour of a party to the lis, this Court can mould the relief appropriately, but it is another thing to say that despite the decree being found to be an executable one, this Court will refuse to direct execution thereof. 22. We are not oblivious of the fact that the respondents legally would not have been entitled to the reliefs prayed for by them. However, as a decree has been passed, we do not intend to go behind the same. The Executing Court shall, it goes without saying, execute the decree strictly in terms thereof. 13 23. For the reasons aforementioned, there is no merit in this case. The appeal is dismissed. However, in the facts and circumstances of the case, there shall be no order as to costs. ...............................J. [S.B. Sinha] ................................J. [Dr. Mukundakam Sharma] New Delhi; May 06, 2009

Limitation Act, 1963 - s.5 - Condonation of delay - Appeal by Government Corporation against judgment and decree in civil suit - Also application under for condonation of delay of 4 years - Allowed by Division Bench - Justification of - Held: Not justified - Law Department of the Government Corporation did not approach High Court with clean hands - High Court committed grave error by condoning more than four years' delay in filing of appeal ignoring the judicially accepted parameters for exercise of discretion u/s. 5 - Thus, order of High Court set aside - Application for condonation of delay dismissed - Civil Procedure Code, 1908 - O 41 r. 3A. The question which arose for consideration was whether the Division Bench of High Court was justified in condoning more than four years' delay in filing of appeal by the respondents against judgment and decree passed by the Civil Judge in the Special Civil Suit.

Allowing the appeal, the Court HELD: 1.1. The law of limitation is founded on public policy. The legislature does not prescribe limitation with the object of destroying the rights of the parties but to ensure that they do not resort to dilatory tactics and seek remedy without delay. The idea is that every legal remedy must be kept alive for a period fixed by the legislature. To put it differently, the law of limitation prescribes a period within which legal remedy can be availed for redress of the legal injury. At the same time, the courts are bestowed with the power to condone the delay, if sufficient cause is shown for not availing the remedy within the stipulated time. The expression "sufficient cause" employed in section 5 of the Limitation Act, 1963 and similar other statutes is elastic enough to enable the courts to apply the law in a meaningful manner which sub serves the ends of justice. Although, no hard and fast rule can be laid down in dealing with the applications for condonation of delay, this Court has justifiably advocated adoption of a liberal approach in condoning the delay of short duration and a stricter approach where the delay is inordinate. [Para 8] [1184-c-e] Collector, Land Acquisition, Anantnag v. Mst. Katiji (1987) 2 SCC 107; N. Balakrishnan v. M. Krishnamurthy (1998) 7 SCC 123; Vedabai v. Shantaram Baburao Patil (2001) 9 SCC 106, relied on. 1.2. In dealing with the applications for condonation of delay filed on behalf of the State and its agencies/instrumentalities this Court has, while emphasizing that same yardstick should be applied for deciding the applications for condonation of delay filed by private individuals and the State, observed that certain amount of latitude is not impermissible in the latter case because the State represents collective cause of the community and the decisions are taken by the officers/agencies at a slow pace and encumbered process of pushing the files from table to table consumes considerable time causing delay. [Para 8] [1184-f-h; 1185-a] G. Ramegowda v. Spl. Land Acquisition Officer (1988) 2 SCC 142; State of Haryana v. Chandra Mani (1996) 3 SCC 132; State of U.P. v. Harish Chandra (1996) 9 SCC 309; State of Bihar v. Ratan Lal Sahu (1996) 10 SCC 635; State of Nagaland v. Lipok Ao (2005) 3 SCC 752; State (NCT of Delhi) v. Ahmed Jaan (2008) 14 SCC 582, relied on. 2.1. A reading of the impugned order makes it clear that the High Court did make a bald reference to the application for condonation of delay filed by the respondents but allowed the same without adverting to the averments contained therein and the reply filed on behalf of the appellant. The High Court erroneously assumed that the delay was of 1067 days, though, as a matter of fact, the appeal was filed after more than four years. Another erroneous assumption made by the High Court was that the appellant had not filed reply to controvert the averments contained in the application for condonation of delay. It may have been possible for this Court to ignore the first error in the impugned order because by deleting the figures and words "4 years and 28" in paragraphs 2 and 3 of the application and substituting the same with the figure 1067, the respondents misled the High Court in believing that the delay was of 1067 days only but it is not possible to fathom any reason why the Division Bench of the High Court omitted to consider the detailed reply which had been filed on behalf of the appellant to contest the prayer for condonation of delay. Notwithstanding this, the impugned order may have been set aside and remitted the case to the High Court for fresh disposal of the application filed by the respondents under section 5 of the Limitation Act but, it is not proper to adopt that course because the respondents did not approach the High Court with clean hands. [Para 10] [1185-a-h; 1186-a] 2.2. It is clear that the Law Department of respondent No.1 was very much aware of the proceedings of the first as well as the second suit. In the first case, RM was appointed as an advocate and in the second case BR was instructed to appear on behalf of the respondents, but none of the officers is shown to have personally contacted either of the advocates for the purpose of filing written statement and preparation of the case and none bothered to appear before the trial Court on any of the dates of hearing. It is a matter of surprise that even though an officer of the rank of General Manager (Law) had issued instructions to RM to appear and file vakalat as early as in May 2001 and Manager (Law) had given vakalat to BR Advocate in the month of May 2005, in the application filed for condonation of delay, the respondents boldly stated that the Law Department came to know about the ex parte decree only in the month of January/February 2008. The respondents went to the extent of suggesting that the parties may have arranged or joined hands with some employee of the corporation and that may be the reason why after engaging advocates, nobody contacted them for the purpose of giving instructions for filing written statement and giving appropriate instructions which resulted in passing of the ex parte decrees. The above statement is not only incorrect but is ex facie false and the High Court committed grave error by condoning more than four years' delay in filing of appeal ignoring the judicially accepted parameters for exercise of discretion under section 5 of the Limitation Act. [Para 13] [1187-g-h; 1188-a] 2.3. The impugned order of the High Court is set aside and the application for condonation of delay filed by the respondents is dismissed. As a corollary, the appeal filed by the respondents against judgment and decree dated 30.10.2004 shall stand dismissed as barred by time. However, it is made clear that the disposal of the instant appeal shall not absolve the higher functionaries of respondent No.1 from the responsibility of conducting a thorough probe into the matter so that accountability of the defaulting officers/officials may be fixed and the loss, if any, suffered by respondent No.1 recovered from them after complying with the rules of natural justice. [Para 14] [1188-b-c] State of Bihar and others v. Kamleshwar Prasad Singh and another 2000 AIR SC 2388; Spl. Tehsildars, Land Acquisition, Kerala v. K.V. Ayisumma AIR 1996 SC 2750; Punjab Small Industries and Export Corporation Ltd. and others v. Union of India and others 1995 Suppl. (4) SCC 681; P.K. Ramachandran v. State of Kerala and another (1997) 7 SCC 566, referred to. Case Law Reference: 2000 AIR SC 2388 Referred to Para 5 AIR 1996 SC 2750 Referred to Para 5 1995 Suppl. (4) SCC 681 Referred to Para 5 (1997) 7 SCC 566 Referred to Para 5 (1987) 2 SCC 107 Relied on Para 8 (1998) 7 SCC 123 Relied on Para 8 (2001) 9 SCC 106 Relied on. Para 8 (1988) 2 SCC 142 Relied on Para 8 (1996) 3 SCC 132 Relied on Para 8 (1996) 9 SCC 309 Relied on Para 8 (1996) 10 SCC 635 Relied on Para 8 (2005) 3 SCC 752 Relied on Para 8 (2008) 14 SCC 582 Relied on. Para 8 CIVIL APPELLATE JURISDICTION : Civil Appeal No. 2075 of 2010. From the Judgment & Order dated 25.3.2009 of the High Court of Gujarat at Ahmedabad in Civil Application No. 14201 of 2008 in First Appeal No. 4180 of 2008. L.N. Rao, Nikhil Goel, Naveen Goel, Marsoak Bafaki, Sheela Goel for the Appellant. Anip Sachthey, Mohit Paul, Shagun Matta, Sherin Daniel for the Respondents. REPORTABLE IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION Civil Appeal No.2075 of 2010 (Arising out of S.L.P. (C) No.10965 of 2009) Oriental Aroma Chemical Industries Ltd. ...Appellant Versus Gujarat Industrial Development Corporation ...Respondents and another J U D G M E N T G.S. Singhvi, J. 1. Leave granted. 2. Whether the Division Bench of Gujarat High Court was justified in condoning more than four years' delay in filing of appeal by the respondents against judgment and decree dated 30.10.2004 passed by Civil Judge (Sr. Division) Gandhinagar (hereinafter referred to as "the trial Court") in Special Civil Suit No.32 of 2001 is the question which arises for consideration in this appeal. 2 3. The appellant was allotted a piece of land for setting up an industrial unit at Ankleshwar subject to the terms and conditions embodied in agreement of licence dated 2.4.1976 which, among other things, provided for consumption of specified quantity of water by the appellant. The agreement also provided for payment of 70% of the cost of agreed quantity of water irrespective of consumption. In 1982, respondent No.1 demanded non utilization charges amounting to Rs.4068/-, which were deposited by the appellant. After some time, respondent No.1 demanded Rs.2,69,895/- towards water charges. For next 10 years, the parties entered into long correspondence on the issue of levy of water charges, etc. Finally, respondent No.1 issued bill dated 13.1.1996 requiring the appellant to pay Rs.22,96,207/- towards water charges. The appellant challenged the same in Special Civil Suit No.32 of 2001. The summons issued by the trial Court were duly served upon the respondents but no written statement was filed on their behalf to controvert the averments contained in the plaint and none appeared on the dates of hearing despite the fact that the case was adjourned on more than one occasion. The suit was finally decreed on 30.10.2004 and it was declared that the appellant is not liable to pay Rs.22,96,207/- by way of minimum charges for water for the period between 1978 and 16.4.2001 and, thereafter, till the water was supplied by respondent No.1. After few months, the appellant filed another suit which was registered as Civil Suit No.222 of 2005 and prayed that respondent 3 No.1 be directed to issue no objection certificate in its favour. The summons of the second suit were also served upon the respondents, but neither the written statement was filed nor any one appeared on their behalf. The second suit was also decreed on 12.12.2007 and respondent No.1 was directed to issue no objection certificate to the appellant. In compliance of the decree passed in the second suit, the concerned authority of the Corporation issued no dues certificate dated 9.7.2008. 4. After four months and fifteen days of taking action in furtherance of the decree passed in the second suit, the respondents filed an appeal against judgment and decree dated 30.10.2004 passed in Special Civil Suit No.32 of 2001. They also filed an application under Order 41 Rule 3A of the Code of Civil Procedure read with Section 5 of the Limitation Act for condonation of delay by making the following assertions: "1. That this appeal is preferred against the judgment and decree of the learned Civil Judge (SD), Gandhinagar passed on 30.10.2004. That the suit was filed for permanent injunction and declaration and on the ground that the advocate of the GIDC has appeared but no written statement was filed and, therefore, the learned Judge resorted to Order 8 Rule 11 of the Civil Procedure Code and granted the declaration as prayed for in the plaint. That after the decree being passed, the present plaintiff filed another suit being Civil Suit No.222 of 2005 and in which the decree was passed on 12.12.2007. That particular decree is to be challenged before this Honourable Court and, therefore, in 2008, after the second decree was passed, it was brought to the notice of the Legal Department as well as to the Executive Engineer at GIDC, Ankleshwar as to how this has happened and it seems that because of numerous transfers as well as it is also 4 possible that the party might have arranged or joined hands with some employee of the Corporation and thereby after engaging advocate, no body has gone to the advocate for the purpose of giving instruction or filing the written statement and as a result thereof, decree is passed and only in the month of January/February, the law department came to know and therefore, an inquiry was made into the matter but the GIDC could not trace out as to at whose hands the mistake or mischief was done, however, when after inquiry everything was noticed and, therefore, the application for certified copy was made on 17.11.2008 and on 18.11.2008, the copy was ready and the same was sent to the advocate and thereafter the present appeal is preferred. 2. That a long span from 30.10.2004 to 18.11.2008, practically four years time is passed and this has happened only because of some mistake or mischief on the part of the staff and, therefore, the appeal could not be preferred, otherwise it is a matter of substantial right of the GIDC where the water charges are leveled in spite of water being used or not and when the bills were already drawn, there was not intention on the part of the GIDC not to contest the suit. But it is difficult to trace out how this has happened and, therefore, when the inquiry was conducted in detail, the facts were brought to the notice and on that basis the cause has arisen to file this appeal and the delay of 1067 days cause in filing the appeal is required to be condoned in the interest of justice." On notice, a detailed reply was filed on behalf of the appellant in the form of an affidavit of its Director, Shri Sanjay Kantilal Shah, paragraphs 4.16, 5 and 6 whereof read as under: "4.16. That the First Appeal preferred by the appellant has been preferred with Civil Application No.14201 of 2008 and the said application for condonation of delay under Order 41 Rule (3A) read with Section 5 of the Limitation Act. As a matter of fact, the petitioner company being a Government Corporation is bound to follow the rules and regulations as it is and cannot deviate itself from the provisions of law. As a matter of fact in filing the present First Appeal there is a delay of more than 4 years. Moreover, in the second suit, the 5 decree and judgment is already passed and thereafter now the petitioner has no right to challenge the order of the Civil Suit No.32/2001. But for the reasons best known to the appellant the correct number of days has not been mentioned in the condonation of delay application. As a matter of fact, the petitioner being a Government Corporation has to follow the rules and regulations strictly and is required to give proper explanation as to why the Appeal has not been preferred within the time frame and if they were so, being aggrieved by the order passed by the Ld. Civil Judge (SD) Gandhinagar. If the condonation of delay is taken into consideration the said page is only a 4 pages wherein no proper explanation as to what the petitioner was doing for the past year has been given in the said and thereby also the said application is required to be dismissed in limine. 5. With regard to para -1 of the Civil Application, I most humbly and respectfully submit that it is true that the decree passed by the Ld. Civil Judge (S.D) Gandhinagar on 13.10.2004. It is also true that in the said Suit, the advocate for the GIDC had appeared but had not filed written statement and therefore, the Ld. Judge has passed the order under the provisions of the Code of Civil Procedure and granted declaration as prayed for in the plaint. It is also true that after decree was passed, the present respondent filed another suit being Civil Suit No.222/2005 and the said decree was passed on 12.12.2007. It is not true that in the year 2008 after the second decree was passed it was brought to the knowledge of the Legal Department that the earlier decree was required to be challenged. Lack of legal knowledge cannot be said to be ground to condone the delay. If the facts had not been brought well in time then for the said it cannot be said that the respondent company is required to be punished. As a matter of fact nothing has been mentioned on Affidavit as to who did not give proper instructions or as to who had possibly played the mischief and as to who had joined the hand with the respondent company. It is only the blame game which is being played and allegations are being leveled in order to save its own skin but there is no truth behind the facts mentioned therein and thereby there is no way as to how the present application can ever be allowed. Moreover the respondent is not knowing any persons of the G.I.D.C. (as on today or at any time). 6 6. With regard to para-2 of the Civil Application, I most humbly and respectfully say and submit that it is true that more than 4 years time has been passed from the date of the decree but as to who has played the mischief or mistake or had it been intentionally filed within the time frame that is for the reasons best known to the appellant corporation and that is something on which the petitioner company would not like to comment at this juncture. No proper justification or explanation has been brought on record as to what was happening for the past 4 years, has also not given anything in detail and neither true and correct facts have been mentioned nor the calculation in respect of the days have been made properly and thereby also on all the said counts, the present application is required to be dismissed with exemplary cost." 5. The Division Bench of the High Court referred to the judgments of this Court in State of Bihar and others v. Kamleshwar Prasad Singh and another, 2000 AIR SC 2388, N. Balakrishnan v. M. Krishnamurthy, JT 1998 (6) SC 242, State of Haryana v. Chandra Mani and others AIR 1996 SC 1623, Spl. Tehsildars, Land Acquisition, Kerala v. K.V. Ayisumma AIR 1996 SC 2750, Punjab Small Industries and Export Corporation Ltd. and others v. Union of India and others 1995 Suppl. (4) SCC 681, P.K. Ramachandran v. State of Kerala and another (1997) 7 SCC 566 and Collector, Land Acquisition, Anantnag v. Mst. Katiji AIR 1987 SC 1353 and condoned the delay by making a cryptic observation that the cause shown by the respondents is sufficient. The relevant portion of the High Court's order is reproduced below: "Applying the principles laid down by the Supreme Court to the facts of the present case, we are satisfied that sufficient cause 7 is made out by the applicant for condonation of delay. Over and above, in view of the fact that reasons mentioned in this application have not been controverted by the other side and also in view of the principles governing the discretionary exercise of power under Section 5 of the Limitation Act, 1963, we are of the view that sufficient cause has been stated for not filing the appeal in time and hence, delay caused in filing appeal is to be condoned and the application is required to be allowed." (Emphasis supplied) 6. Shri L.N. Rao, learned senior counsel appearing for the appellant argued that the impugned order is liable to be set aside because the High Court allowed the application for condonation of delay by erroneously assuming that the delay was of 1067 days only. Learned senior counsel pointed out that appeal against judgment and decree dated 30.10.2004 was filed on 24.11.2008 i.e., after more than four years, but by scoring out the figures and words "4 years and 28" in paragraphs 2 and 3 of the application and substituting the same with figure "1067", the respondents misled the High Court in believing that delay was of 1067 days. He then referred to affidavit dated 16.2.2009 of Shri Sanjay Kantilal Shah to show that substantial grounds had been put forward on behalf of the appellant for opposing the respondents' prayer for condonation of delay of more than four years and submitted that the Division Bench of the High Court committed serious error in condoning the delay by assuming that no reply had been filed by the appellant. Learned senior counsel also invited the Court's attention to affidavits dated 25.11.2009 and 4.2.2010 of Shri Pravin 8 Keshav Lal Modi and Shri Harishbhai Patel respectively filed in this Court on behalf of the respondents as also the list of events attached with the second affidavit to show that the functionaries of respondent No.1 were very much aware of the proceedings of Special Civil Suit No.32 of 2001 and Civil Suit No.222 of 2005 and submitted that the High Court should not have accepted patently incorrect assertions contained in the application for condonation of delay, which was supported by an affidavit of none else than the General Manager of respondent No.1, Shri R.B. Jadeja, that the Law Department came to know about the judgment of Special Civil Suit No.32/2001 only in January/February, 2008. 7. Shri Anip Sachthey, learned counsel for the respondents fairly admitted that the appeal was filed after lapse of more than four years of judgment dated 30.10.2004 but submitted that this Court should not interfere with the discretion exercised by the High Court to condone the delay and the respondents should not be penalized simply because the advocates appointed by the Corporation did not bother to file written statement and appear before the trial Court on the dates of hearing. Learned counsel emphasized that this Court has repeatedly taken cognizance of the lethargy and callousness with which litigation is conducted on behalf of the State and its agencies/instrumentalities at various levels and condoned the delay so as to enable them to contest the 9 matters on merit and submitted that similar approach may be adopted in the present case and the appellant may be compensated by award of adequate cost. 8. We have considered the respective submissions. The law of limitation is founded on public policy. The legislature does not prescribe limitation with the object of destroying the rights of the parties but to ensure that they do not resort to dilatory tactics and seek remedy without delay. The idea is that every legal remedy must be kept alive for a period fixed by the legislature. To put it differently, the law of limitation prescribes a period within which legal remedy can be availed for redress of the legal injury. At the same time, the courts are bestowed with the power to condone the delay, if sufficient cause is shown for not availing the remedy within the stipulated time. The expression "sufficient cause" employed in Section 5 of the Indian Limitation Act, 1963 and similar other statutes is elastic enough to enable the courts to apply the law in a meaningful manner which sub serves the ends of justice. Although, no hard and fast rule can be laid down in dealing with the applications for condonation of delay, this Court has justifiably advocated adoption of a liberal approach in condoning the delay of short duration and a stricter approach where the delay is inordinate - Collector, Land Acquisition, Anantnag v. Mst. Katiji (1987) 2 SCC 107, N. Balakrishnan v. M. Krishnamurthy (1998) 7 SCC 123 and 10 Vedabai v. Shantaram Baburao Patil (2001) 9 SCC 106. In dealing with the applications for condonation of delay filed on behalf of the State and its agencies/instrumentalities this Court has, while emphasizing that same yardstick should be applied for deciding the applications for condonation of delay filed by private individuals and the State, observed that certain amount of latitude is not impermissible in the latter case because the State represents collective cause of the community and the decisions are taken by the officers/agencies at a slow pace and encumbered process of pushing the files from table to table consumes considerable time causing delay - G. Ramegowda v. Spl. Land Acquisition Officer (1988) 2 SCC 142, State of Haryana v. Chandra Mani (1996) 3 SCC 132, State of U.P. v. Harish Chandra (1996) 9 SCC 309, State of Bihar v. Ratan Lal Sahu (1996) 10 SCC 635, State of Nagaland v. Lipok Ao (2005) 3 SCC 752, and State (NCT of Delhi) v. Ahmed Jaan (2008) 14 SCC 582. 9. In the light of the above, it is to be seen whether the respondents had offered any plausible/tangible explanation for the long delay of more than four years in filing of appeal and the High Court was justified in condoning the delay. 10. A reading of the impugned order makes it clear that the High Court did make a bald reference to the application for condonation of delay filed 11 by the respondents but allowed the same without adverting to the averments contained therein and the reply filed on behalf of the appellant. Not only this, the High Court erroneously assumed that the delay was of 1067 days, though, as a matter of fact, the appeal was filed after more than four years. Another erroneous assumption made by the High Court was that the appellant had not filed reply to controvert the averments contained in the application for condonation of delay. It may have been possible for this Court to ignore the first error in the impugned order because by deleting the figures and words "4 years and 28" in paragraphs 2 and 3 of the application and substituting the same with the figure 1067, the respondents misled the High Court in believing that the delay was of 1067 days only but it is not possible to fathom any reason why the Division Bench of the High Court omitted to consider the detailed reply which had been filed on behalf of the appellant to contest the prayer for condonation of delay. Notwithstanding this, we may have set aside the impugned order and remitted the case to the High Court for fresh disposal of the application filed by the respondents under Section 5 of the Limitation Act but, do not consider it proper to adopt that course, because as will be seen hereinafter, the respondents did not approach the High Court with clean hands. 12 11. The statement containing the list of events annexed with the affidavit of Shri Harishbhai Patel shows that before filing suit, the appellant had issued notice dated 5.2.2001 to which respondent No.1 sent reply dated 13.3.2001. The summons of Special Civil Suit No. 32/2001 instituted by the appellant were served upon the respondents sometime in the month of April/May 2001. On 16.5.2001, General Manager (Law) instructed Ms. Rekhaben M. Patel to appear on behalf of the respondents. Executive Engineer, Ankleshwar was also directed to contact the advocate for preparing the reply affidavit. On 23.5.2001, Deputy Executive Engineer, Ankleshwar forwarded the comments to Ms. Rekhaben M. Patel. On 18.4.2002, the appellant filed an application for ex parte proceedings against the respondents. On 30.11.2002, the trial Court directed the respondents to appear on 12.12.2002 with indication that if they fail to do so, ex parte proceedings will be held. Thereupon, General Manager (Law) wrote letter dated 10.12.2002 to Ms. Rekhaben to remain present on the next date of hearing i.e., 12.12.2002. On 30th December, 2002, Deputy Executive Engineer, Ankleshwar wrote to the advocate in the matter of submission of para-wise comments. On 2.1.2003, the Executive Engineer is said to have sent a letter to the advocate informing her about the next date of hearing i.e., 10.1.2003 and asked her to remain present. After almost one year and ten months, the trial Court pronounced the ex parte judgment and decreed the suit. The summons of the second suit were 13 received sometime in May, 2005. On 20.6.2005, Shri B.R. Sharma, Advocate was instructed to appear on behalf of the respondents. On 10.1.2006, Deputy Executive Engineer, Ankleshwar informed the new advocate about the next date of hearing which was 23.1.2006. The second suit was decreed on 12.12.2007. 12. During the course of hearing, learned counsel for the respondents fairly conceded that in the second suit filed by the appellant there was a specific mention of decree dated 30.10.2004 passed in Special Civil Suit No. 32/2001. He also conceded that even though the first suit remained pending before the trial Court for three years and five months and the second suit remained pending for more than two years, none of the officers of the Law Department or the Engineering Department of respondent No.1 appeared before the Court. 13. From what we have noted above, it is clear that the Law Department of respondent No.1 was very much aware of the proceedings of the first as well as the second suit. In the first case, Ms. Rekhaben M. Patel was appointed as an advocate and in the second case Shri B.R. Sharma was instructed to appear on behalf of the respondents, but none of the officers is shown to have personally contacted either of the advocates for the purpose of filing written statement and preparation of the case and none 14 bothered to appear before the trial Court on any of the dates of hearing. It is a matter of surprise that even though an officer of the rank of General Manager (Law) had issued instructions to Ms. Rekhaben M. Patel to appear and file vakalat as early as in May 2001 and Manager (Law) had given vakalat to Shri B.R. Sharma, Advocate in the month of May 2005, in the application filed for condonation of delay, the respondents boldly stated that the Law Department came to know about the ex parte decree only in the month of January/February 2008. The respondents went to the extent of suggesting that the parties may have arranged or joined hands with some employee of the corporation and that may be the reason why after engaging advocates, nobody contacted them for the purpose of giving instructions for filing written statement and giving appropriate instructions which resulted in passing of the ex parte decrees. In our view, the above statement contained in para 1 of the application is not only incorrect but is ex facie false and the High Court committed grave error by condoning more than four years' delay in filing of appeal ignoring the judicially accepted parameters for exercise of discretion under Section 5 of the Limitation Act. 14. In the result, the appeal is allowed. The impugned order of the High Court is set aside and the application for condonation of delay filed by the respondents is dismissed. As a corollary, the appeal filed by the 15 respondents against judgment and decree dated 30.10.2004 shall stand dismissed as barred by time. However, it is made clear that the disposal of this appeal shall not absolve the higher functionaries of respondent No.1 from the responsibility of conducting a thorough probe into the matter so that accountability of the defaulting officers/officials may be fixed and the loss, if any, suffered by respondent No.1 recovered from them after complying with the rules of natural justice. ......................................J. [G.S. Singhvi] ......................................J. [Asok Kumar Ganguly] New Delhi, Dated: February 26, 2010.

the Tamilnadu Buildings (Lease and Rent Control) Act, (hereinafter referred to as the ‘Act’) =In the result, the Civil Revision petition is allowed and the impugned orders are set aside and RCOP.No.37 of 1986, is allowed and eviction is ordered on the ground of subletting. The respondents shall vacate and hand over vacant possession of the petition premises to the petitioners/landlords within a period of two months from the date of receipt of a copy of this order. No costs. =(i) In order to prove mischief of subletting as a ground for eviction under rent control laws, two ingredients have to be established, (one) parting with possession of tenancy or part of it by tenant in favour of a third party with exclusive right of possession and (two) that such parting with possession has been done without the consent of the landlord and in lieu of compensation or rent. (ii) Inducting a partner or partners in the business or profession by a tenant by itself does not amount to subletting. However, if the purpose of such partnership is ostensible and a deed of partnership is drawn to conceal the real transaction of sub-letting, the court may tear the veil of partnership to find out the real nature of transaction entered into by the tenant. (iii) The existence of deed of partnership between tenant and alleged sub-tenant or ostensible transaction in any other form would not preclude the landlord from bringing on record material and circumstances, by adducing evidence or by means of cross-examination, making out a case of sub-letting or parting with possession in tenancy premises by the tenant in favour of a third person. (iv) If tenant is actively associated with the partnership business and retains the control over the tenancy premises with him, may be along with partners, the tenant may not be said to have parted with possession. (v) Initial burden of proving subletting is on landlord but once he is able to establish that a third party is in exclusive possession of the premises and that tenant has no legal possession of the tenanted premises, the onus shifts to tenant to prove the nature of occupation of such third party and that he (tenant) continues to hold legal possession in tenancy premises. (vi) In other words, initial burden lying on landlord would stand discharged by adducing prima facie proof of the fact that a party other than tenant was in exclusive possession of the premises. A presumption of sub-letting may then be raised and would amount to proof unless rebutted.

IN THE H IGH COURT OF JUDICATURE AT MADRAS DATED:07.02.2012 CORAM THE HONOURABLE Mr. JUSTICE T.S.SIVAGNANAM CRP (NPD) No.1317 of 1995 1.M.S.Hohammed Jahabar Kadiri (Deceased) 2.Ummal Bajira 3.M.J.K.Haja Shaik Alloudeen 4.Mumtaz Begam ... Petitioners P2 to P4 as legal heirs of the deceased 1st petitioner vide order of this Court, dated 24.12.2003 made in CMP.14127/2003 Vs. 1.G.Govindaraju 2.Pangajam Ammal 3.R.Prabakaran 4.Ramadoss (Died) 5.R.Neelavathi 6.Vinayakamurthy 7.Senthamarai 8.Mala 9.Kavitha ... Respondents R5 to R9 as legal heirs of the deceased fourth respondent vide order of this Court, dated 05.11.2011, made in CMP.886/2010. Prayer: Civil Revision Petition filed against the order and decreetal order dated 18.10.1994, made in RCA.NO.12 of 1990, on the file of Rent Control Appellate Tribunal (Sub Court), Nagapattinam, confirming the judgment and decree dated 24.10.1989, made in RCOP.No.37 of 1986, on the file of Rent Controller (District Munsif), Tiruvarur. For Petitioners : Mr.K.Chandrasekaran For Respondents : Mr.P.Gopalan for RR3,5&6 RR7-9 Given up O R D E R This revision petition filed, under Section 25 of the Tamilnadu Buildings (Lease and Rent Control) Act, (hereinafter referred to as the 'Act') is directed against the order dated 18.10.1994, made in RCA.No.12 of 1990, on the file of the of Rent Control Appellate Tribunal (Sub Court), Nagapattinam, confirming the judgment and decree dated 24.10.1989 in RCOP NO.37 of 1986 on the file of Rent Controller (District Munsif), Tiruvarur. 2. The Revision petitioner (since deceased) is the landlord and the respondents herein were the respondents in the eviction petition. The landlord filed RCOP No.37 of 1986, for eviction of the respondents from the petition premises on the ground of subletting and for his own use and occupation. It is stated that during 1960, the property was leased out to Manickam Chettiyar and Sundresa Mudaliyar for running coffee power business on a monthly rent of Rs.60/-. The terms and conditions of the lease were reduced into writing by two registered lease deeds dated 18.07.1960 and 06.01.1966. Subsequently, two other unregistered lease agreements were executed on 01.07.1970 and 01.06.1978. Initially the lease was in respect of Door No.64, and after 01.06.1978, the adjacent door No.64/1 was also given on lease. The landlord further stated that after the demise of the registered leases though no lease agreements were entered into between the respondents 1 and 2 as they were the legal heirs of the said Manickam Chettiyar and Sundresh Mudaliyar and being partners of the coffee power business, they were in occupation of the petition premises, (the first respondent is the son in law of Mainckam Chettiyar and the second respondent is the wife of Sundresa Mudaliyar). The landlord further stated that there was no right conferred on the tenants to sublet the property, however the respondents 1 and 2 stopped carrying on business and sublet the premises to the third respondent, who is running the business along with the fourth respondent, his father. Therefore, the landlord contended that the respondents are liable to be evicted on the ground of subletting. The landlord further sought for eviction on the ground of requirement of the premises for his own use and occupation, by stating that the shop in which he was running a provision store, had been given to son-in-law and therefore, he is desirous of staring a new business in the petition premises as he does not own any other shop. 3. The first respondent filed a counter statement denying the allegation of subletting. It was stated that the fourth respondent alone was running the business even during the life time of Manickam Chettiyar and Sundresa Mudaliyar and he was running the same in the capacity as partner, though the business was in the name of Manickam Chettiyar and Sundresa Mudaliyar. Since the lease agreement could be entered into only in the name of the partners, it was entered into in the names of Manickam Chettiyar and Sundresa Mudaliyar, however they were not involved in the business. After the demise of the partners of Bharath Coffee Works, the respondents 1 and 2 became partners and subsequently, retired from the partnership business after receiving consideration from the fourth respondent and thereafter, the respondents 3 and 4 along with their family members, are running the business as partners. That on and after 01.10.1984, the respondents 1 and 2 are no manner involved with the business and since the fourth respondent was running the business, there is no subletting. The plea of the landlord that he requires petition premises was denied as lacking in bonafides. The fourth respondent filed separate counter statement virtually reiterating the stand of the first respondent. 4. Before the learned Rent Controller, the landlord examined himself as PW-1 and three other witness were examined as PW-2 to 4 and thirty documents were exhibited as Exhibits A1 to A30. The respondents 1 and 4 were examined as RW-1 &2 and one Packrisamy was examined as RW-3 and nine documents were marked as Exhibits R1 to R9. The learned Rent Controller framed three questions for consideration, whether, the landlord requires the premises for own use and occupation, whether the respondents 3 &4 are sub-tenants and whether the eviction petition is liable to be dismissed for non-joinder of necessary party. The learned Rent Controller decided all the three questions against the landlord and dismissed the eviction petition. 5. The landlord preferred an appeal in RCA.No.12 of 1990, and the learned Appellate Authority concurred with the findings of the learned Rent Controller and the appeal was dismissed. Aggrieved by the same, the present revision has been filed by the landlord. 6. It is seen that during the pendency of the revision petition, the landlord died and his legal representatives have been brought on record. Likewise the fourth respondent died and his legal representatives have been brought on record. Since the landlord claimed that he requires the petition premises for his own business, the landlord having died pending this revision petition, there would not be any necessity to decide the said issue. Therefore, the only question to be decided in this revision is whether, the respondents 3 & 4 are sub-tenants. Before deciding this issue, it has to be seen as to under what circumstances this Court would be justified in interfering with the concurrent findings of the Courts below in exercise of the powers conferred under Section 25 of the Act. 7. I have elaborately heard Mr.K.Chandrasekaran, learned counsel for the petitioner and Mr.P.Gopalan learned counsel for respondents and carefully perused the materials available on record. 8. The power conferred under Section 25 of the Act, is undoubtedly wider that the power provided in Section 115 of the Civil Procedure Code. This Court while exercising its revisional jurisdiction under Section 25 of the Act, has to satisfy itself as to the correctness, propriety and legality of any decision. When the Courts failed to appreciate the oral and documentary evidence in its entirety and when it rendered a finding not warranted on the materials available, such orders though may be concurrent are liable to be interfered with. The Hon'ble Supreme Court has held that the revisional power is not be exercised to upset concurrent findings of fact merely on the ground that different view is possible. However, when the findings are perverse even such concurrent findings are not immune from challenge. The learned counsel for the petitioner placed reliance on the decision of this Hon'ble Full Bench of this Court in A.Aishath Najiya vs. Messrs. Lalchand Kewalram & Ors, 1989 2 L.W. 123, wherein the Hon'ble Full Bench held as follows:- 27. In this case, I make it very clear that I am not reappraising the evidence on record. I am only pointing out as to how both the Rent Controller and the Appellate Authority in disregard of the statutory provisions, proceeded to assess the evidence from angles which are not warranted by the statute, from perspectives which are not contemplated under the statute. In such a case, certainly the revisional power could be exercised where the approach itself is totally wrong. Hence this decision cannot help the respondents. 9. Further, this Court in P.K.Vijayan and Ors. vs. M/s.Kalaimagal Account Book Shop, (2000) 2 MLJ 495, and P.K.M.S. Jailani Beevi vs. J.Mohan Lal, 2001 (2) CTC 22, laid down the circumstances in which this Court would be justified in interfering with concurrent findings recorded by the Rent Controller and the Appellate Authority. At this stage, it would be beneficial to quote the relevant paragraphs of the judgment in the case of Jailani Beevi:- 25. The learned counsel for the petitioner/respondent cited a number of decisions of the Supreme Court and this Court for the position that interference under Section 25 of the Tamil Nadu Buildings (Lease and Rent Control) Act, 1960, is clearly circumscribed. The decisions relied on by the petitioner/respondent are listed below: 1. Phiroze Bamanji Desai v. Chandrakant, AIR 19743SCR267 ; 2. Mattulal v. Radhe Lal, AIR 1974 SC 1596; 3.Children's Choice v, Adiseshiah, 1982 (1) MLJ 411; 4.Hameedia Hardware Stores v. Mohan Lal Sowcar, AIR 1988 SC 1060 ; 5. Gajendra Sha v. Govindarajan, 1996 (1) CTC 492 ; 6. Hotel De-Broadway, Etc. v. M/s Snow White Industrial Corporation, 1997 (1) CTC 193; 7. Mohammed @ Bawa Sahib v. Vimalckand, 1998 (II) MLJ 619; 8. The South India Corporation Agencies Ltd. v. Chandrakanth C. Bandani, 1998 (1) CTC 674; 9. Jothi Ammal v. Kulandai Vadivel, 1999 (II) MU 35; 10. Munawar Jan Begum v. Subramaniam, 2000 (1) MLJ 19. Dealing with the revisionary powers under the Bombay Rents, Hotel and Lodging House Rates control Act (57 of 1947). the Supreme Court in Phiroze Bamanji Desai v. CM. Patel, AIR 1974 SC 1059 has held that the High Court cannot reassess the value of the evidence and interfere with the finding of fact merely because it thinks that the appreciation of the evidence by the lower court is wrong and the court should have reached a different conclusion of fact from what it did. Only if the lower Court had applied a wrong test on a misconstruction of the word 'requires' the finding recorded by it would have been vitiated by an error of law. In Mattulal v. Rade Lal, AIR 1974 SC 1596, the Supreme Court held that the finding reached by the First Appellate Court on an appreciation of evidence that the landlord does not bona fide require the premises in question for the purpose of starting business as a dealer in iron and steel materials is a finding of fact and not a finding of mixed law and fact and it cannot be interfered with by the High court in second appeal unless it is shown that in reaching it a mistake of law is committed by the Appellate Authority or it ia based on no evidence or is such as no reasonable man can reach, In Children's Choice v. Adiseshana, 1982 (1) MLJ 411, T.N.Singaravelu, J. has pointed that if the bona fides of the landlords had been proved, the relative hardship of the parties in the event of eviction should also be considered before ordering eviction under Section 10(3)(c) of the Act. It has been held in Hammedia Hardware Stores v. Mohan Lal Sowcar, AIR 1988 SC 1060 that the landlord should establish that he bona fide requires premises, in addition to proving other ingredients referred to in Sec. 10(3)(a)(iii) for getting an order of eviction. In Gajendra Sha v. Govindarajan, 1996, (1) CTC 492, Abdul Wahab, J. (as the learned Judge then was) considered the requirement of the petition building by the landlord for the purpose of carrying on his own business under Section 10(3)(a)(iii), the tenant disputing the claim of the landlord as lacking in bona fides. Factually it was found that it was highly impossible to apprehend that such a flourishing business would be shifted to a narrow lane, especially when there was no threat of eviction and the accommodation was much more than what the landlord was going to get in the petition building. The learned Judge found that the petition was lacking in bona fides. In Hotel De-Broadway Etc. v. M/s. Snow White Industrial Corporation, Etc, 1997 (1) CTC 193: 1997 (1) LW 421 it has been held by K.Govindarajan, J. that mere inconvenience of tenant cannot deprive, landlord of his bona fide right to have additional accommodation. The concurrent findings about bona fides of landlord cannot be disturbed merely on the plea of the tenant as to difficulty of finding alternative accommodation in the area and it is not a relevant ground for rejecting the claim of the landlord. The mere fact that the tenant cannot get alternative accommodation alone cannot be the basis to reject landlord's claim. It is not the object of S. 10(3)(c) to weigh the hardship to tenant as against advantage of landlord on the delicate scales of giving benefit of a slight tilt in favour of the tenant. In Mohammed @ Bawa Sahib v. Vimalchand, 1998 (II) MLJ 619 the same learned Judge has held that eviction petition by the landlord as kartha of joint family seeking premises for his brother's requirement is not maintainable under Section 10(3)(a)(iii). It was also held that the requirement was not bona fide. In The South India Corporation Agencies v. Chandrakanth C.Badani, 1998 (1) CTC 674, the same learned Judge has held that unless there is perversity in the matter of appreciation of evidence by authorities revisional court will not interfere with concurrent findings. In Jothi Ammal v. Kulandai Vadivel, 1999 (II) MLJ 35 the learned Judge has considered the scope of applicability of Sec. 10(3)(c). In Munawar Jan Begum v. Subramaniam, 2000 (1) MLJ 19 has held that unless perversity is writ large on the face of the judgments rendered by the lower authorities, it is not desirable for the revisional court to interfere with the concurrent findings of the lower authorities. 10. Thus, the legal principle which could be culled out from the aforementioned decision are that if the findings of the authorities below though concurrent, if had been rendered without looking into the evidence, such decision can never be said as in accordance with law and this Court is fully justified in interfering with the concurrent findings. 11. The learned counsel for the petitioner strenuously contended that the authorities below concurrently erred in disregarding the evidence and failed to apply the law relating to subletting, which have been crystallized in various decisions of the Hon'ble Supreme Court and this Court. After having gone through the pleadings and the evidence, more particularly, the evidence of PW-1 (landlord) and RW-1 (first respondent) and RW-2 (fourth respondent), the controversy to be decided lies in a very narrow campus. It is not in dispute that the lease agreement both the registered and unregistered documents stood in the name of Manickam Chettiyar and Sundresa Mudaliyar. It is also not in dispute that the first respondent is the son-in-law of Manickam Chettiyar and the second respondent is the wife of Sundresa Mudaliyar. After the demise of the tenants (Manickam Chettiyar and Sundresa Mudaliyar) respondents 1 & 2, continued in the capacity of legal heirs of the original tenants. During that period, there appears to have been a dispute as regards the quantum of rent and RCOP No.4 of 1980, was filed by Bharath Coffee Works, represented by its Managing Partner, S.Govindaraju, (1st respondent) under Section 8(5) of the Act, to deposit the rent into Court. 12. Admittedly, no lease agreement was entered into respondents 1 and 2. Likewise, there is no material to show that the respondents 1 and 2 organised themselves into a registered partnership and such registration, which was done during 1975 under Exhibit R7 was with the knowledge of the landlord. In other words, there is no evidence to show that the landlord was aware that the respondents 1 and 2 constituted themselves into a partnership, which was registered on 13.08.1975. From the cross examination of PW-1, it appears that the landlord was aware that the fourth respondent was assisting the tenants (Manickam Chettiyar and Sundresa Mudaliyar) in running the Coffee works business and another by-cycle business. 13. The crucial question which has to be seen here is whether the respondents 3 and 4 became sub-tenants to respondents 1 and 2, there would not have been any difficulty if the respondents 1 and 2 continued the business and the fourth respondent was assisting them in the business. However, from the evidence of RW-1, it is clear that on and after 01.10.1984, the respondents 1 and 2 retired from the partnership business after receiving consideration from the fourth respondent and the firms stood re-constituted by making the respondents 3 and 4 along with their family members as partners of the business. Admittedly, such re-constitution was without the knowledge and consent of the landlord. Therefore, the question is whether this would amount to subletting. The Hon'ble Supreme Court in Ms.Celina Coelho Pereira & Ors vs. Ulhas Mahabaleshwar Kholkar & Ors, (2010) 2 L.W. 414, was considering a Rent control proceedings, where eviction was sought for on the ground of subletting. The Hon'ble Supreme Court after analyzing elaborately the case laws on the said point, summarized the legal position on the following lines:- 28. The legal position that emerges from the aforesaid decisions can be summarised thus: (i) In order to prove mischief of subletting as a ground for eviction under rent control laws, two ingredients have to be established, (one) parting with possession of tenancy or part of it by tenant in favour of a third party with exclusive right of possession and (two) that such parting with possession has been done without the consent of the landlord and in lieu of compensation or rent. (ii) Inducting a partner or partners in the business or profession by a tenant by itself does not amount to subletting. However, if the purpose of such partnership is ostensible and a deed of partnership is drawn to conceal the real transaction of sub-letting, the court may tear the veil of partnership to find out the real nature of transaction entered into by the tenant. (iii) The existence of deed of partnership between tenant and alleged sub-tenant or ostensible transaction in any other form would not preclude the landlord from bringing on record material and circumstances, by adducing evidence or by means of cross-examination, making out a case of sub-letting or parting with possession in tenancy premises by the tenant in favour of a third person. (iv) If tenant is actively associated with the partnership business and retains the control over the tenancy premises with him, may be along with partners, the tenant may not be said to have parted with possession. (v) Initial burden of proving subletting is on landlord but once he is able to establish that a third party is in exclusive possession of the premises and that tenant has no legal possession of the tenanted premises, the onus shifts to tenant to prove the nature of occupation of such third party and that he (tenant) continues to hold legal possession in tenancy premises. (vi) In other words, initial burden lying on landlord would stand discharged by adducing prima facie proof of the fact that a party other than tenant was in exclusive possession of the premises. A presumption of sub-letting may then be raised and would amount to proof unless rebutted. 14. The Hon'ble Supreme Court after analyzing the facts of the said case, discussed the effect of constituting partnership by a tenant and held as follows:- 30. If the purpose of constituting partnership by the tenant is ostensible and a deed of partnership is drawn to conceal the real transaction of subletting in a given case, the court may be required to tear the veil of partnership to find out the real nature of transaction entered into by the tenant and in such circumstances the evidence let in by the landlord cannot be ignored on the ground that there is some variance between pleading and proof. In a case such as the present one, the rule of secundum allegata et probata is not strictly applicable as the tenant cannot be said to have been put to any prejudice. 15. Thus, the Court is entitled to tear the veil of partnership to find out the real nature of transaction. The case of the RW-1 and RW-4 is that after the demise of Manickam Chettiyar and Sundresa Mudaliyar, the respondents 1 and 2, continued the business in the capacity of the legal heirs of the said persons, who were the tenants. The business was not a registered partnership firm. For the first time, the respondents 1 and 2 constituted themselves into a registered partnership firm on 13.08.1975, Exhibit R-7. This constitution of partnership business was without notice to the landlord. This came to light when the first respondent filed RCOP.No.4 of 1980, under Section 8(5) of the Act, wherein the firm was the petitioner, represented by the first respondent, Managing Partner. There is no record placed before the Courts below that the fourth respondent was in fact a partner initially with Manickam Chettiyar and Sundresa Mudaliyar and after their demise, along with respondents 1 and 2. 16. As admitted by RW-1, the registered firm was re-constituted on 01.10.1984, and the respondents 1 and 2 retired from the partnership business for consideration and respondents 3 and 4 became partners and the firm stood re-constituted with the respondents 3 & 4 and their family members as partners. Thus the reconstitution of the partnership is undoubtedly a transaction made to conceal subletting. Therefore, the contention raised by the learned counsel for the respondents that the respondents 3 and 4 have nothing to do with the landlord, deserved to be rejected. The decision of the Hon'ble Division Bench of this Court, Devarajulu Naidu vs. Ethirajavalli Thayaramma, (1949) 2 MLJ 423, relied on by the learned counsel for the respondents, has absolutely no application to the facts of the present case, since the tenancy in the said case was with partners of the firm and after winding up, one partner was allowed to use the business premises and therefore, the Hon'ble Division Bench held that it is not a case of subletting or transfer. The facts of the present case is entirely different in the said judgment is of no assistance to the respondents. At this stage, it would be beneficial to refer certain decisions of this Court, wherein this Court analyzed various aspects on the ground of subletting, S.Jainmul Jain & another vs. A.R.Nagaraja & another, 1997-2-L.W 386; V.T.Asokan & another vs. Bowjiya Begam, 1998-3-L.W. 661 and A.R.V. Venkatasamy Naicker and sons vs. V.S.Krishnamoorthy, 2005 (4) CTC 583. 17. For all the above reasons, it has to be held that the Courts below misread the evidence and over looked the law declared by the Courts on the ground of subletting and what are the tests to decide a case of subletting and therefore, this Court is convinced that the findings rendered by the Courts below being perverse and legally unsustainable, deserves to be interfered with. 18. In the result, the Civil Revision petition is allowed and the impugned orders are set aside and RCOP.No.37 of 1986, is allowed and eviction is ordered on the ground of subletting. The respondents shall vacate and hand over vacant possession of the petition premises to the petitioners/landlords within a period of two months from the date of receipt of a copy of this order. No costs. 07.02.2012 Index :Yes/No Internet:Yes/No pbn T.S.SIVAGNANAM, J. pbn To 1)The Rent Control Appellate Tribunal (Sub Court), Nagapattinam. 2)The Rent Controller (District Munsif), Tiruvarur. Pre-Delivery Order in CRP (NPD) No.1317 of 1995 07.02.2012

income tax =manufacturing and exporting leather garments. For the assessment years 2001-2002 and 2004-2005, the appellant filed returns of income claiming deductions in respect of profits retained for export business under Section 80HHC of the Income Tax Act, 1961 (for short `the Act'). The Assessing Officer held in the assessment orders that the entire sale value of Duty Entitlement Pass Book (for short `DEPB') represents profit on transfer of DEPB under Section 28(iiid) of the Act= We have today delivered judgment in Civil Appeal arising out SLP (C) No.26558 of 2010 (M/s Topman Exports v. Commissioner of Income Tax, Mumbai) and other connected appeals setting aside the judgment of the Bombay High Court in Commissioner of the Income Tax v. Kalpataru Colours and Chemicals. We have also delivered a separate judgment in Civil Appeal arising out of S.L.P. (C) No.32450 of 2010 (M/s ACG Associated Capsules Private Limited v. Commissioner of Income Tax, Central-IV, Mumbai) and other connected appeal affirming the judgment of the Delhi High Court in Commissioner of Income Tax v. Shri Ram Honda Power Equip (supra). These two appeals are disposed of in terms of our

Reportable IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL No. 1915 OF 2012 (Arising out of SLP (C) NO. 16403 of 2011) Vikas Kalra ... Appellant Versus The Commissioner of Income Tax-VIII, New Delhi ... Respondent WITH CIVIL APPEAL No. 1916 OF 2012 (Arising out of SLP (C) NO. 20270 of 2011) J U D G M E N T A. K. PATNAIK, J. Leave granted. 2. These are the appeals against the order dated 18.02.2011 as modified by the order dated 22.03.2011 of the Delhi High Court in ITA No.185 of 2011 and the order 2 dated 21.02.2011 as modified by the order dated 22.03.2011 of the Delhi High Court in ITA No.308 of 2011. 3. The facts very briefly are that the appellant is engaged in manufacturing and exporting leather garments. For the assessment years 2001-2002 and 2004-2005, the appellant filed returns of income claiming deductions in respect of profits retained for export business under Section 80HHC of the Income Tax Act, 1961 (for short `the Act'). The Assessing Officer held in the assessment orders that the entire sale value of Duty Entitlement Pass Book (for short `DEPB') represents profit on transfer of DEPB under Section 28(iiid) of the Act and did not allow the amount of deduction claimed by the appellant under Section 80HHC. The appellant filed appeals before the Commissioner of Income Tax (Appeals) but the Commissioner of Income Tax (Appeals) sustained the orders of the Assessing Officer. The appellant filed appeals before the Income Tax Appellate Tribunal (for short `the Tribunal') and the Tribunal following the order dated 11.08.2009 of the Special Bench of the Tribunal at 3 Mumbai in the case of M/s Topman Exports allowed the appeals and held that the face value of the DEPB will be `cash assistance' against export and will fall under Section 28(iiib) of the Act and the sale value less the face value of the DEPB will be profit on transfer of DPB and will fall under Section 28(iiid) of the Act. 4. Aggrieved, the Revenue preferred the appeals ITA No.185 of 2011 in respect of assessment year 2001-2002 and ITA No.308 of 2011 in respect of assessment year 2004-2005 before the Delhi High Court against the orders of the Tribunal. In both the appeals, the High Court held in the impugned orders that the Tribunal simply followed the decision of the Special Bench of the Tribunal at Mumbai in M/s Topman Exports and the decision of the Special Bench in M/s Topman Exports has been reversed by the Bombay High Court in Commissioner of the Income Tax v. Kalpataru Colours and Chemicals (ITA(L) 2887 of 2009). The High Court accordingly set aside the orders of the Tribunal and remitted the case to the Tribunal to decide the appeals of the appellant on merits after taking into account the facts of the cases. In ITA No.308 of 4 2011, an additional issue raised before the High Court was whether the Tribunal was correct in law in ignoring Explanation (baa) under Section 80HHC of the Act which specially excludes profits of DEPB from total turnover and the High Court held that this issue was covered by its judgment in the case of Commissioner of Income-Tax v. Shri Ram Honda Power Equip [(2007) 289 ITR 475 (Delhi)]. 5. We have today delivered judgment in Civil Appeal arising out SLP (C) No.26558 of 2010 (M/s Topman Exports v. Commissioner of Income Tax, Mumbai) and other connected appeals setting aside the judgment of the Bombay High Court in Commissioner of the Income Tax v. Kalpataru Colours and Chemicals. We have also delivered a separate judgment in Civil Appeal arising out of S.L.P. (C) No.32450 of 2010 (M/s ACG Associated Capsules Private Limited v. Commissioner of Income Tax, Central-IV, Mumbai) and other connected appeal affirming the judgment of the Delhi High Court in Commissioner of Income Tax v. Shri Ram Honda Power Equip (supra). These two appeals are disposed of in terms of our 5 aforesaid two judgments. There shall be no order as to costs. ..........................CJI. (S. H. Kapadia) .............................J. (A. K. Patnaik) .............................J. (Swatanter Kumar) New Delhi, February 08, 2012.

income tax= two issues against the assessee. On the first issue, the High Court has held, relying on its judgment in Commissioner of the Income Tax vs. Kalpataru Colours and Chemicals (ITA(L) 2887 of 2009), that the entire amount received by an assessee on sale of the Duty Entitlement Pass Book (for short `the DEPB') represents profit on transfer of DEPB under Section 28(iiid) of the Income Tax Act, 1961 (for short `the Act'). We have already decided this issue in favour of the assessee in a separate judgment in M/s Topman Exports vs. Commissioner of Income Tax, Bombay, and other connected matters and we have held that not the entire amount received by the assessee on sale of DEPB, but the sale value less the face value of the DEPB will represent profit on transfer of DEPB by the assessee. The first issue is, therefore, decided accordingly. 3. For appreciating the second issue, we may refer very briefly to the facts of the case. For the assessment year 2003-04, the assessee filed a return of income claiming a deduction of Rs.34,44,24,827/- under =We have held in our judgment in the case of M/s ACG Associated Capsules Pvt. Ltd. v. Commissioner of Income Tax that ninety per cent of not the gross interest but only the net interest, which has been included in the profits of the business of the assessee as computed under the heads `Profits and Gains of Business or Profession' is to be deducted under clause (1) of Explanation (baa) to Section 80HHC for determining the profits of the business. Since, the view taken by the High Court in the impugned order is consistent with our aforesaid view, we find no merit in this appeal and we accordingly dismiss the same. There shall be no order as to costs.

Reportable IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL No. 1914 OF 2012 (Arising out of SLP (C) NO. 32450 OF 2010) M/s ACG Associated Capsules Pvt. Ltd. (Formerly M/s Associated Capsules Pvt. Ltd.) ... Appellant Versus The Commissioner of Income Tax, Central-IV, Mumbai ... Respondent WITH CIVIL APPEAL No. 4534 OF 2008 The Commissioner of Income Tax, New Delhi ... Appellant Versus Bharat Rasayan Limited ... Respondent J U D G M E N T A. K. PATNAIK, J. CIVIL APPEAL No. OF 2012 (Arising out of SLP (C) No. 32450 of 2010) Leave granted. 2. This is an appeal against the judgment and order dated 06.08.2010 of the Bombay High Court in ITA(L) 2 No. 1276 of 2010 deciding two issues against the assessee. On the first issue, the High Court has held, relying on its judgment in Commissioner of the Income Tax vs. Kalpataru Colours and Chemicals (ITA(L) 2887 of 2009), that the entire amount received by an assessee on sale of the Duty Entitlement Pass Book (for short `the DEPB') represents profit on transfer of DEPB under Section 28(iiid) of the Income Tax Act, 1961 (for short `the Act'). We have already decided this issue in favour of the assessee in a separate judgment in M/s Topman Exports vs. Commissioner of Income Tax, Bombay, and other connected matters and we have held that not the entire amount received by the assessee on sale of DEPB, but the sale value less the face value of the DEPB will represent profit on transfer of DEPB by the assessee. The first issue is, therefore, decided accordingly. 3. For appreciating the second issue, we may refer very briefly to the facts of the case. For the assessment year 2003-04, the assessee filed a return of income claiming a deduction of Rs.34,44,24,827/- under 3 Section 80HHC of the Act. The Assessing Officer passed the assessment order deducting ninety per cent of the gross interest and gross rent received from the profits of business while computing the deduction under Section 80HHC and accordingly restricted the deduction under Section 80HHC to Rs.2,36,25,053/-. The assessee filed an appeal against the assessment order before the Commissioner of Income-Tax (Appeals), who confirmed the order of the Assessing Officer excluding ninety per cent of the gross interest and gross rent received by the assessee while computing the profits of the business for the purposes of Section 80HHC. Aggrieved, the assessee filed an appeal before the Income Tax Appellate Tribunal (for short `the Tribunal'). The Tribunal held, relying on the decision of the Delhi High Court in Commissioner of Income-Tax v. Shri Ram Honda Power Equip [(2007) 289 ITR 475 (Delhi)], that netting of the interest could be allowed if the assessee is able to prove the nexus between the interest expenditure and interest income and remanded the matter to the file of the Assessing 4 Officer. The Tribunal also remanded the issue of netting of the rent to the Assessing Officer with the direction to find out whether the assessee has paid the rent on the same flats against which rent has been received from the staff and if such rent was paid then such rent is to be reduced from the rental income for the purpose of exclusion of business income for computing the deduction under Section 80HHC. Against the order of the Tribunal, the Revenue filed an appeal before the High Court and the High Court has directed that on remand the Assessing Officer will decide the issue in accordance with the judgment of the High Court in Commissioner of Income-Tax v. Asian Star Co. Ltd. [(2010) 326 ITR 56 (Bom)] in which it has been held that while determining the profits of the business as defined in Explanation (baa) to Section 80HHC, ninety per cent of the gross receipts towards interest and not ninety per cent of the net receipts towards interest on fixed deposits in banks received by the assessee would be excluded for the purpose of working out the deduction under Section 80HHC of the 5 Act. 4. Learned counsel for the appellant submitted that it will be clear from the Explanation (baa) that ninety per cent of any receipts by way of brokerage, commission, interest, rent, charges or any other receipt of a similar nature included in such profits will be excluded for determining the profits and gains of business or profession. He argued that as the net receipts and not the gross receipts towards interest and rent are included in profits and gains of business or profession, ninety per cent of such net interest and net rent and not ninety per cent of gross interest and gross rent are to be excluded for determining the profits of the business under Explanation (baa) to Section 80HHC of the Act. 5. In support of this argument, learned counsel for the appellant relied on the decision of this Court in Distributors (Baroda) P. Ltd. v. Union of India and Others [(1985) 155 ITR 120] in which a Constitution Bench of this Court has held that only the dividends computed in accordance with the provisions of the Act, 6 which is included in the gross total income of the domestic company, shall be taken into account for working out the relief under Section 80M of the Act. He cited the judgment in Commissioner of Income-Tax v. Shri Ram Honda Power Equip (supra) in which the Delhi High Court has taken a view that the word `interest' in Explanation (baa) to Section 80HHC connotes `net interest' and not `gross interest' and, therefore, in deducting such interest, the Assessing Officer will have to take into account the net interest, i.e. gross interest as reduced by expenditure incurred for earning such interest. He submitted that the Karnataka High Court in Commissioner of Income-Tax v. Gokuldas Exports, etc. [(2011) 333 ITR 214 (Karn)] has taken a similar view relying on the decision of the High Court in Commissioner of Income-Tax v. Shri Ram Honda Power Equip (supra). 6. Learned counsel for the appellant referred to the Memorandum to Finance (No.2) Bill, 1991 explaining the rationale of Explanation (baa) in which inter alia it is stated that as some expenditure might be incurred 7 in earning such incomes, which in the generality of cases is part of common expenses, and thus ad-hoc 10 per cent deduction from such incomes have been provided for to account for these expenses. He submitted that the High Court has not correctly appreciated the Memorandum and has held, relying on the Memorandum, that gross interest and gross rent have to be deducted under Explanation (baa) to Section 80HHC to avoid a distorted figure of export profits. 7. Learned counsel for the Revenue, on the other hand, relied on the reasons given by the Bombay High Court in Commissioner of Income-Tax v. Asian Star Co. Ltd. (supra) and submitted that the Bombay High Court has rightly held that ninety per cent of the gross amount received towards interest and rent have to be excluded from the profits and gains of business for computing the profits of the business as defined in Explanation (baa) to Section 80HHC of the Act. He also relied on the Memorandum to the Finance (No.2) Bill 1991 in support of his submission that ninety per 8 cent of the gross interest and gross rent has to be deducted from the profits of the assessee under Explanation (baa). 8. Before we deal with the contentions of learned counsel for the parties, we may extract Explanation (baa) to Section 80HHC of the Act. "Explanation:- For the purposes of this section,- (baa) "profits of the business" means the profits of the business as computed under the head "Profits and gains of business or profession" as reduced by- (1) ninety per cent of any sum referred to in clauses (iiia), (iiib), (iiic), (iiid) and (iiie) of Section 28 or of any receipts by way of brokerage, commission, interest, rent, charges or any other receipt of a similar nature included in such profits; and (2) the profits of any branch, office, warehouse or any other establishment of the assessee situate outside India". 9. Explanation (baa) extracted above states that "profits of the business" means the profits of the business as computed under the head "Profits and Gains of Business or Profession" as reduced by the receipts of the nature mentioned in clauses (1) and (2) of the Explanation (baa). 9 Thus, profits of the business of an assessee will have to be first computed under the head "Profits and Gains of Business or Profession" in accordance with provisions of Section 28 to 44D of the Act. In the computation of such profits of business, all receipts of income which are chargeable as profits and gains of business under Section 28 of the Act will have to be included. Similarly, in computation of such profits of business, different expenses which are allowable under Sections 30 to 44D have to be allowed as expenses. After including such receipts of income and after deducting such expenses, the total of the net receipts are profits of the business of the assessee computed under the head "Profits and Gains of Business or Profession" from which deductions are to made under clauses (1) and (2) of Explanation (baa). 10. Under Clause (1) of Explanation (baa), ninety per cent of any receipts by way of brokerage, commission, interest, rent, charges or any other receipt of a similar nature included in any such profits are to be deducted from the profits of the business as computed under the head "Profits and Gains of Business or Profession". The 1 expression "included any such profits" in clause (1) of the Explanation (baa) would mean only such receipts by way of brokerage, commission, interest, rent, charges or any other receipt which are included in the profits of the business as computed under the head "Profits and Gains of Business or Profession". Therefore, if any quantum of the receipts by way of brokerage, commission, interest, rent, charges or any other receipt of a similar nature is allowed as expenses under Sections 30 to 44D of the Act and is not included in the profits of business as computed under the head "Profits and Gains of Business or Profession", ninety per cent of such quantum of receipts cannot be reduced under Clause (1) of Explanation (baa) from the profits of the business. In other words, only ninety per cent of the net amount of any receipt of the nature mentioned in clause (1) which is actually included in the profits of the assessee is to be deducted from the profits of the assessee for determining "profits of the business" of the assessee under Explanation (baa) to Section 80HHC. 1 11. For this interpretation of Explanation (baa) to Section 80HHC of the Act, we rely on the judgment of the Constitution Bench of this Court in Distributors (Baroda) P. Ltd. v. Union of India and Others (supra). Section 80M of the Act provided for deduction in respect of certain intercorporate dividends and it provided in sub-section (1) of Section 80M that "where the gross total income of an assessee being a company includes any income by way of dividends received by it from a domestic company, there shall, in accordance with and subject to the provisions of this Section, be allowed, in computing the total income of the assessee, a deduction from such income by way of dividends an amount equal to" a certain percentage of the income mentioned in this Section. The Constitution Bench held that the Court must construe Section 80M on its own language and arrive at its true interpretation according to the plain natural meaning of the words used by the legislature and so construed the words "such income by way of dividends" in sub-section (1) of Section 80M must be referable not only to the category of income included in 1 the gross total income but also to the quantum of the income so included. Similarly, Explanation (baa) has to be construed on its own language and as per the plain natural meaning of the words used in Explanation (baa), the words "receipts by way of brokerage, commission, interest, rent, charges or any other receipt of a similar nature included in such profits" will not only refer to the nature of receipts but also the quantum of receipts included in the profits of the business as computed under the head "Profits and Gains of Business or Profession" referred to in the first part of the Explanation (baa). Accordingly, if any quantum of any receipt of the nature mentioned in clause (1) of Explanation (baa) has not been included in the profits of business of an assessee as computed under the head "Profits and Gains of Business or Profession", ninety per cent of such quantum of the receipt cannot be deducted under Explanation (baa) to Section 80HHC. 12.If we now apply Explanation (baa) as interpreted by us in this judgment to the facts of the case before us, if the rent or interest is a receipt chargeable as profits and 1 gains of business and chargeable to tax under Section 28 of the Act, and if any quantum of the rent or interest of the assessee is allowable as an expense in accordance with Sections 30 to 44D of the Act and is not to be included in the profits of the business of the assessee as computed under the head "Profits and Gains of Business or Profession", ninety per cent of such quantum of the receipt of rent or interest will not be deducted under clause (1) of Explanation (baa) to Section 80HHC. In other words, ninety per cent of not the gross rent or gross interest but only the net interest or net rent, which has been included in the profits of business of the assessee as computed under the head "Profits and Gains of Business or Profession", is to be deducted under clause (1) of Explanation (baa) to Section 80HHC for determining the profits of the business. 13. The view that we have taken of Explanation (baa) to Section 80HHC is also the view of the Delhi High Court in Commissioner of Income-Tax v. Shri Ram Honda Power Equip (supra) and the Tribunal in the present case has followed the judgment of the Delhi High Court. On appeal being filed 1 by the Revenue against the order of the Tribunal, the High Court has set aside the order of the Tribunal and directed the Assessing Officer to dispose of the issue in accordance with the judgment of the Bombay High Court in Commissioner of Income-Tax v. Asian Star Co. Ltd. (supra). We must, thus, examine whether reasons given by the High Court in its judgment in Commissioner of Income-Tax v. Asian Star Co. Ltd. (supra) were correct in law. 14. On a perusal of the judgment of the High Court in Commissioner of Income-Tax v. Asian Star Co. Ltd. (supra), we find that the reason which weighed with the High Court for taking a different view, is that rent, commission, interest and brokerage do not possess any nexus with export turnover and, therefore, the inclusion of such items in the profits of the business would result in a distortion of the figure of export profits. The High Court has relied on a decision of this Court in Commissioner of Income-Tax v. K. Ravindranathan Nair [(2007) 295 ITR 228 (SC)] in which the issue raised before this Court was entirely different from the issue raised in this case. In that case, the assessee owned a factory in which he processed cashew nuts grown in his 1 farm and he exported the cashew nuts as an exporter. At the same time, the assessee processed cashew nuts which were supplied to him by exporters on job work basis and he collected processing charges for the same. He, however, did not include such processing charges collected on job work basis in his total turnover for the purpose of computing the deduction under Section 80HHC (3) of the Act and as a result this turnover of collection charges was left out in the computation of profits and gains of business of the assessee and as a result ninety per cent of the profits of the assessee arising out of the receipt of processing charges was not deducted under clauses (1) of the Explanation (baa) to Section 80HHC. This Court held that the processing charges was included in the gross total income from cashew business and hence in terms of Explanation (baa), ninety per cent of the gross total income arising from processing charges had to be deducted under Explanation (baa) to arrive at the profits of the business. In this case, this Court held that the processing charges received by the assessee were part of the business turnover and accordingly the income arising therefrom should have been included in the 1 profits and gains of business of the assessee and ninety per cent of this income also would have to be deducted under Explanation (baa) under Section 80HHC of the Act. In this case, this Court was not deciding the issue whether ninety per cent deduction is to be made from the gross or net income of any of the receipts mentioned in clause (1) of the Explanation (baa). 15. The Bombay High Court has also relied on the Memorandum explaining the clauses of the Finance Bill, 1991 contained in the circular dated 19.12.1991 of the Central Board of Direct Taxes to come to the conclusion that the Parliament intended to exclude items which were unrelated to the export turnover from the computation of deduction and while excluding such items which are unrelated to export for the purpose of Section 80HHC, Parliament has taken due note of the fact that the exporter assessee would have incurred such expenditure in earning the profits and to avoid a distorted figure of export profits, ninety per cent of the receipts like brokerage, commission, interest, rent, charges are sought to be excluded from the profits of the business. In our considered opinion, it was 1 not necessary to refer to the explanatory Memorandum when the language of Explanation (baa) to Section 80HHC was clear that only ninety per cent of receipts by way of brokerage, commission, interest, rent, charges or any other receipt of a similar nature included in such profits computed under the head profits and gains of business of an assessee could be deducted under clause (1) of Explanation (baa) and not ninety per cent of the quantum of any of the aforesaid receipts which are allowed as expenses and therefore not included in the profits of business of the assessee. 16. In the result, we allow the appeal and set aside the impugned order of the High Court and remand the matter to the Assessing Officer to work out the deductions from rent and interest in accordance with this judgment. No costs. CIVIL APPEAL No. 4534 OF 2008 This is an appeal against the order dated 19.01.2007 of the Delhi High Court in I.T.A. No. 541 of 2006. 1 2. The facts of this case very briefly are that Bharat Rasayan Limited (for short `the assessee') filed a return of income tax claiming a deduction of Rs.72,76,405/- under Section 80HHC of the Act. In the assessment order, the Assessing Officer held that ninety per cent of the gross interest has to be excluded from the profits of the business of the assessee under Explanation (baa) to Section 80HHC of the Act and deducted ninety per cent of the gross interest of Rs.50,26,284/- from the profits of the business of the assessee. The assessee preferred an appeal contending that only ninety per cent of the net interest should have been deducted from the profits of the business of the assessee under Explanation (baa) to Section 80HHC, but the Commissioner of Income Tax (Appeals) rejected this contention of the assessee. Aggrieved, the assessee filed an appeal before the Income Tax Appellate Tribunal (for short `the Tribunal') and the Tribunal allowed the appeal of the assessee and held that the assessee was entitled to deduct the expenses from the interest received and only ninety per cent of the net amount of interest could be excluded under Explanation (baa) to Section 80HHC and remitted the 1 matter to the Assessing Officer to examine whether there is factually an excess between the interest paid and interest received and take a fresh decision. The Revenue filed an appeal against the order of the Tribunal before the High Court, but by the impugned order the High Court following its decision in Commissioner of Income-Tax v. Shri Ram Honda Power Equip (supra) sustained the order of the Tribunal and dismissed the appeal. 3. We have held in our judgment in the case of M/s ACG Associated Capsules Pvt. Ltd. v. Commissioner of Income Tax that ninety per cent of not the gross interest but only the net interest, which has been included in the profits of the business of the assessee as computed under the heads `Profits and Gains of Business or Profession' is to be deducted under clause (1) of Explanation (baa) to Section 80HHC for determining the profits of the business. Since, the view taken by the High Court in the impugned order is consistent with our aforesaid view, we find no merit in this appeal and we accordingly dismiss the same. There shall be no order as to costs. 2 ..........................CJI. (S. H. Kapadia) .............................J. (A. K. Patnaik) .............................J. (Swatanter Kumar) New Delhi, February 08, 2012.