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Saturday, September 20, 2014

Service matter - Diploma Holder - Degree Holder - Engineers - acquisition of AMIE qualification - promotion - challenged against the orders of High court - Apex court held that we find merit in these appeals and they are accordingly allowed to the extent of reversing the views of the High Court in respect of Question no.2 as noted by the Division Bench in the common judgment under appeal. We hold that the Project Engineers (Junior) recruited on the basis of diploma, upon their acquiring the qualification of ‘AMIE’, are not entitled to count their experience of service prior to acquisition of such qualification for the purpose of eligibility for promotion to the post of Project Engineer (Senior) against the 20% quota fixed for promotion of degree holder Project Engineers (Junior). In order to claim promotion against such 20% quota the three years’ experience of service must be acquired after obtaining the qualification or degree of AMIE. We direct the Board and its authorities to treat the writ petitions filed in the High Court as disposed of in the light of our aforesaid views and to determine the controversies raised in the writ petitions in that light by granting relief to the eligible persons expeditiously and preferably within 4 months, without upsetting the transactions which had taken place earlier and were not under challenge in the writ petitions. In other words, the regular promotions made in the past prior to 1992, which were not subject matter of writ petitions filed in 1992 will not be re-opened on account of views expressed in this judgment. In the facts and circumstances of the case, there shall be no order as to costs.=CIVIL APPEAL NOS. 8479-8482 OF 2014 [Arising out of S.L.P.(C)Nos.19220-19223 of 2007] K.K. Dixit & Ors. etc. …..Appellants Versus Rajasthan Housing Board & Anr. etc. …..Respondents = 2014 - Sept. Month - http://judis.nic.in/supremecourt/filename=41882

Service matter - Diploma Holder - Degree Holder - Engineers - acquisition of AMIE qualification - promotion - challenged against the orders of High court - Apex court held that we find merit in these appeals and they are accordingly allowed to the extent of reversing the views of the
High Court in respect of Question no.2 as noted by the Division Bench in the common judgment under appeal. We hold that the Project Engineers (Junior) recruited on the basis of diploma, upon their acquiring the qualification of ‘AMIE’, are not entitled to count their experience of service prior to acquisition of such qualification for the purpose of
eligibility for promotion to the post of Project Engineer (Senior) against the 20% quota fixed for promotion of degree holder Project Engineers (Junior). In order to claim promotion against such 20% quota the three years’ experience of service must be acquired after obtaining the qualification or degree of AMIE. We direct the Board and its authorities to treat the writ petitions filed in the High Court as disposed of in the light of our aforesaid views and to
determine the controversies raised in the writ petitions in that light by granting relief to the eligible persons expeditiously and preferably within 4 months, without upsetting the transactions which had taken place earlier and were not under challenge in the writ petitions. In other words, the regular promotions made in the past prior to 1992, which were not subject matter of writ petitions filed in 1992 will not be re-opened on account of views expressed in this judgment. In the facts and circumstances of the case, there shall be no order as to costs.=

“Diploma
Holder” and “Degree Holder” Engineers in the matter of eligibility for
further promotion.
All the appellants belonged to the category of degree
holder engineers appointed as Project Engineers (Junior) in the service
of Rajasthan Housing Board (for sake of brevity referred to as ‘the Board’).
The contesting
respondents also held the same post but initially only as diploma holder
who later acquired qualification of AMIE which is admittedly equivalent to
degree in Engineering.
Since all the appeals arise out of a common judgment passed by a Division
Bench of the Rajasthan High Court at Jaipur Bench and the facts as well as
issues of law are common, all the appeals have been heard together and are
being disposed of by this common judgment. =

Whether the Division Bench of the High Court has erred in holding that the
Diploma Holder Project Engineers (Junior) upon acquiring degree /
qualification of ‘AMIE’ would be entitled to count their experience of
service prior to acquisition of such qualification for the purpose of
eligibility of 3 years total experience of service for promotion to the
post of Project Engineer (Sr.) in the quota fixed for Degree Holders?

Whether the Division Bench has erred in setting aside the direction of the
learned Single Judge for preparing two separate seniority lists for Diploma
Holders and Degree Holders for the purpose of promotion in their respective
quotas?=

we find merit in these appeals and
they are accordingly allowed to the extent of reversing the views of the
High Court in respect of
Question no.2 as noted by the Division Bench in
the common judgment under appeal.
We hold that the Project Engineers
(Junior) recruited on the basis of diploma, upon their acquiring the
qualification of ‘AMIE’, are not entitled to count their experience of
service prior to acquisition of such qualification for the purpose of
eligibility for promotion to the post of Project Engineer (Senior) against
the 20% quota fixed for promotion of degree holder Project Engineers
(Junior).
In order to claim promotion against such 20% quota the three
years’ experience of service must be acquired after obtaining the
qualification or degree of AMIE.
We direct the Board and its authorities to treat the writ petitions filed
in the High Court as disposed of in the light of our aforesaid views and to
determine the controversies raised in the writ petitions in that light by
granting relief to the eligible persons expeditiously and preferably within
4 months, without upsetting the transactions which had taken place earlier
and were not under challenge in the writ petitions. In other words, the
regular promotions made in the past prior to 1992, which were not subject
matter of writ petitions filed in 1992 will not be re-opened on account of
views expressed in this judgment.
In the facts and circumstances of the case, there shall be no order as to
costs.

2014 - Sept. Month - http://judis.nic.in/supremecourt/filename=41882
REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NOS. 8479-8482 OF 2014
[Arising out of S.L.P.(C)Nos.19220-19223 of 2007]

K.K. Dixit & Ors. etc. …..Appellants

Versus

Rajasthan Housing Board & Anr. etc. …..Respondents

J U D G M E N T

SHIVA KIRTI SINGH, J.

Leave granted.
These appeals are further additions to the long list of service matters
decided by High Courts and this Court resolving disputes between “Diploma
Holder” and “Degree Holder” Engineers in the matter of eligibility for
further promotion. All the appellants belonged to the category of degree
holder engineers appointed as Project Engineers (Junior) in the service
of Rajasthan Housing Board
(for sake of brevity referred to as ‘the Board’). The contesting
respondents also held the same post but initially only as diploma holder
who later acquired qualification of AMIE which is admittedly equivalent to
degree in Engineering.
Since all the appeals arise out of a common judgment passed by a Division
Bench of the Rajasthan High Court at Jaipur Bench and the facts as well as
issues of law are common, all the appeals have been heard together and are
being disposed of by this common judgment.
At the outset, two important issues raised by way of questions of law in
these appeals need to be noticed so that subsequent discussion of facts and
law may be of help in answering both the issues/questions in controversy.
The issues are :
Whether the Division Bench of the High Court has erred in holding that the
Diploma Holder Project Engineers (Junior) upon acquiring degree /
qualification of ‘AMIE’ would be entitled to count their experience of
service prior to acquisition of such qualification for the purpose of
eligibility of 3 years total experience of service for promotion to the
post of Project Engineer (Sr.) in the quota fixed for Degree Holders?
Whether the Division Bench has erred in setting aside the direction of the
learned Single Judge for preparing two separate seniority lists for Diploma
Holders and Degree Holders for the purpose of promotion in their respective
quotas?

In exercise of the powers conferred by Section 53 of the Rajasthan Housing
Board Act, the Board made Rajasthan Housing Board Employees Conditions of
Recruitment and Promotion Regulations, 1976 (hereinafter referred to as
‘the Regulations’). Chapter II of the Regulations contains Clauses (6) to
(10) providing for Conditions of Recruitment and Promotion. Clause (6)
provides the manner of filling up the posts created from time to time. In
the context of absorption of employees working in the Board on deputation,
the word ‘category’ has been used in the context of posts created and
vacant. Clause (7) provides as follows :
“(7) The ratio of direct recruitment and promotion of employees in the
service of the Board and qualification and experience required for various
posts will be in accordance with the ‘Schedule’ appended to these
Regulations.”

Clause (9)(A) of the Regulations pertains to promotion and provides as
under :
“(9)(A) Promotion
In respect of first promotion to higher post, promotion of eligible person
shall be made on the basis of seniority-cum-merit. Second promotion shall
be made on the basis of merit and seniority-cum-merit in the promotion of
50:50.”

Clause (9)(B) provides that “seniority lists for each category of employees
will be prepared and maintained.” Clause (10) pertains to ‘seniority’ and
reads thus:
“(10) Seniority :

Amongst the persons recruited in the same year, the promotees will rank
senior to those who will be appointed by direct recruitment. Amongst the
promotees those who are appointed on the basis of seniority cum merit with
rank senior to those who are appointed on the basis of merit with due
regard to seniority. The inter se seniority of those appointed on the
basis of merit will be in accordance with their relative seniority in the
lower cadre.”

6. Chapter III of the Regulations contains Miscellaneous Provisions and
includes Clause (12) which empowers the Board to issue general instructions
not inconsistent with the Act and the Rules and Regulations made thereunder
for the purpose of removing doubt, lacuna, inconsistency or anomaly which
may arise in interpreting the Regulations or in giving effect to them or in
putting them to application. The Regulations contain various schedules as
appendices. In the case at hand “Schedule Technical” alone is of
significance and that shows the post of Project Engineer (Junior) at the
entry level. 97% of this post is to be filled by direct recruitment and 3%
by Board employees. The basic qualification required is a Degree or Diploma
in Civil Engineering. The next post in hierarchy, promotion to which is
under issue, is Project Engineer (Senior). The source of recruitment for
this post is 50% by direct recruitment, 20% by promotion of degree holder
and 30% by promotion of diploma holder. For direct recruitment, the
essential qualification is a Degree in Civil Engineering in First Division
with at least one year’s experience in design and construction of building.
The 50% posts to be filled up by promotion of Project Engineer (Junior)
require further minimum experience and qualification as laid down in Column
6 of the Schedule Technical. Since the contesting respondents have laid a
great amount of emphasis on several words prescribing the minimum
experience and qualification required for promotion, the provisions of
relevant Column No.6 are extracted hereinbelow :
”Post to be filled in by promotion from amongst the P.E.Jr.’s who are
degree holders with 3 years total experience of service.

Post to be filled in by promotion from P.E.Jr.’s who are diploma holders
with 7 years total experience of service. (137.20)
Govt. approved Dt.25.2.2000 w.e.f. 9.12.87
Or
Qualification recognized by the State Govt. to be equivalent to Degree in
Civil Engineering.”

7. There are four higher posts in the hierarchy above the post of
Project Engineer (Senior). All of them are required to be filled up only
by promotion and require a Degree in Engineering in Civil, except the post
of Resident Engineer just above that of Project Engineer (Senior) which
requires filling up “75% by degree holder and 25% by diploma holder by
granting promotion to eligible Project Engineer (Senior)”. Column 6 of the
Schedule Technical provides minimum experience and qualification for
promotion to the post of Resident Engineer as (i) Degree Holder with 5
years’ experience and (ii) Diploma Holder with 13 years experience. A
diploma holder, as noticed earlier, is not qualified for any further
promotion.
8. From the facts available on record it appears that initially only
diploma holders were appointed under the Regulations to the post of Project
Engineer (Junior) and on their acquiring the certificate of AMIE while in
service they were to be given benefit of their past service as diploma
holders in the ratio of 3:7, i.e., 3 years of their service with AMIE was
treated as 7 years of service as diploma holder for the purpose of
eligibility for promotion. This benefit of past service in the prescribed
ratio was on account of a Resolution of the Board dated 17.4.1979 which
records that “the present practice of placing the Diploma Holder Engineers
who have cleared AMIE examination in the bottom of the list of Degree
Holders, is appropriate. But it has also been decided that their
experience should be determinant in the ratio of 3:7 (3 years degree
holders equal to 7 years diploma holders)”. Some diploma holders who were
initially appointed as Project Engineers (Junior) purely on ad-hoc basis
were not only regularized by the Board vide Order dated 18.5.1987 but they
were also given benefit of their past service like the regularly appointed
diploma holders and together with the latter category they also gained ad-
hoc promotion to the post of Project Engineer (Senior) in the year 1992.
In the meantime, pursuant to an advertisement of March 1988 issued by the
Board, the appellants as degree holders applied and on selection, were
appointed to the post of Project Engineer (Junior) on 18.3.1989. It
appears that a common Provisional Seniority List of Project Engineer
(Junior) including diploma, AMIE and degree holders had been issued on
11.8.1989 and although appellants had objected to the said seniority list,
promotions were granted by the Board to few diploma holders on ad-hoc basis
in January and February 1992, as noted above.
9. Appellants – K.K. Dixit and some others preferred writ petition
challenging the Resolution of the Board dated 17.4.1979, the joint
Provisional Seniority List dated 11.8.1989 and ad-hoc promotion of the
Diploma Holders with AMIE. The writ petition was allowed by a learned
Single Judge on 7.7.1993 after deciding only the issue relating to counting
of experience and holding that only such service could count for
eligibility for promotion which was rendered by the ad-hoc Project Engineer
(Junior) after regularization. It was held that their experience as ad-hoc
appointees shall not be taken into consideration.
10. The writ petitioners preferred a review petition praying for passing
of judgment on the other two grievances raised in the writ petition. The
first grievance was that seniority list of degree holders and diploma
holders on the post of Project Engineer (Junior) should be prepared
separately. The other grievance was that in view of the Resolution No.6
dated 17.4.1979 those diploma holders who passed AMIE examination while in
service, should be placed below the degree holders of that year. Both the
aforesaid claims or grievances were based upon the plea that as per
recruitment rules there is separate quota for the degree holders and also a
separate quota for diploma holders. The learned Single Judge, by Order
dated 21.9.1993, allowed the review petition to the extent of directing
that the Board shall prepare separate seniority lists for degree holders
and diploma holders Project Engineer (Junior) and such of the Project
Engineers (Junior) who have passed AMIE examination while in service, shall
be placed lowest in that year in the seniority list of degree holder
Project Engineers (Junior).
11. Aggrieved by the judgment dated 07.07.1993 passed by the learned
Single Judge in the writ petition and also against order dated 21.9.1993
passed by the learned Single Judge in Review Petition, some of the affected
diploma holders preferred D.B. Spl. Appeal (C) No.67 of 1993 and 64 of 1993
respectively. Five other matters including D.B. Civil Writ Petition Nos.20
of 1993 and 7063 of 1993 were also tagged with the Special Appeals. They
were heard together and partly allowed by a common judgment dated 25.5.2007
which is under challenge in these appeals preferred by those who had
entered Board’s service as degree holders on the post of Project Engineers
(Junior). Since these appeals arise from only four out of seven matters
decided by the Division Bench of the High Court, it is not necessary to
indicate details of the remaining three matters which were also disposed of
by the common order under appeal.
12. By the judgment under appeal, the High Court has decided three
questions under controversy between the parties. The High Court has
summarized the three questions thus :
“1. Whether the Project Engineer (Junior) who were initially appointed on
ad-hoc/officiating/urgent temporary basis, upon being screened and made
members of service with reference to clause 3 of the Note below ‘Schedule
Technical’ of the Rajasthan Housing Board Employees Condition of
Recruitment and Promotion Regulations, 1976 are entitled to count the
period of service rendered in that capacity for the purpose of seniority
and experience for eligibility of promotion to the post of Project Engineer
(Senior) as provided for in column No.6 of Sr. No.2 in the ‘Schedule
Technical’ of Regulations of 1976?

2. Whether the Project Engineers (Junior) recruited on the basis of
diploma, upon their acquiring the qualification of ‘AMIE’, are entitled to
count their experience of service prior to acquisition of such
qualification for the purpose of eligibility of ‘three years total
experience of service’ for promotion to the post of Project Engineer
(Senior) as provided for in column No.6 of Sr. No.2 of ‘Schedule Technical’
of Regulations of 1976?

3. Whether according to the Regulations of 1976 the diploma holders Project
Engineers (Junior) on acquiring the qualification of ‘AMIE’ are liable to
be placed in the seniority list of Project Engineers (Junior) below degree
holders available as on the date of their acquiring such qualification and
further whether according to the Regulations of 1976, a separate seniority
list of Project Engineers (Junior) based on their educational
qualification, viz.-degree and diploma, is required to be maintained?”

On behalf of the appellants, learned counsel Ms. Shobha led the arguments.
It was categorical stand of the appellants that since Question no.1 was
decided against the ad-hoc/officiating category of Project Engineer
(Junior) and no one from that category has preferred any appeal, hence
answer to that question has attained finality. Learned counsel for the
appellants has seriously assailed the findings given against the appellants
in respect of Question nos.2 and 3.
According to the High Court the Resolution of the Board dated 17.04.1979
affirming the alleged practice of placing the diploma holder engineers who
have cleared AMIE examination in the bottom of the list of degree holders
and giving them benefit of their experience in service as diploma holders
only in the ratio of 3:7 is neither justified by past practice nor by the
Regulations. It was also held that the learned Single Judge erred in
directing the Board to prepare two separate seniority lists. Thus the
Division Bench answered Questions nos.2 and 3 against the appellants by
reversing the effect of order passed by the learned Single Judge in review
and also by granting the benefit of entire past service once a diploma
holder cleared AMIE examination.
Before deciding the two main issues raised on behalf of the appellants as
noticed earlier, it may be useful to note certain subsequent developments
which are not in dispute. Pursuant to the impugned order of the High Court
the Board issued a provisional common seniority list on 30.06.2007 and
withdrew the Resolution dated 17.04.1979 on 06.07.2007. A final common
seniority list was issued on 27.08.2007 and according to appellants it was
prepared without deciding their objections. Provisional promotions have
been granted to several persons to the post of Project Engineer (Senior)
who cleared AMIE examination while in service and were allegedly much
junior to the appellants with respect to the date of acquiring eligibility
for such promotions. The Special Leave Petitions giving rise to the
present appeals were preferred in this Court on 25.09.2007 or soon
thereafter. While issuing notice in one such matter, on 26.10.2007 this
Court directed that no coercive steps shall be taken in the meantime. On
19.07.2010, 200 posts of Project Engineer (Junior) were upgraded to the
post of Project Engineer (Senior) and 31 such posts were abolished. As a
consequence of upgradation, on 12.08.2010, 168 persons holding the post of
Project Engineer (Junior) came to acquire the upgraded post of Project
Engineer (Senior).
On account of the present dispute raised by appellants K.K. Dixit and some
others through writ petitions filed in the year 1992, inter alia, against
ad-hoc promotions, the Board has granted only ad-hoc promotions even
subsequently and hence resolution of the dispute appears to be necessary to
enable regularization of those promotions in accordance with law and the
Regulations and also for making regular promotions to the next higher post
of Resident Engineer. The issues under consideration relate only to
eligibility for promotion against respective quotas and not to the
Regulations providing for seniority and promotion.
The issues relating to Question no.3 decided by the High Court are not very
contentious and hence those are taken up first. The learned Single Judge
directed for preparation of two seniority lists, one for the degree holders
and another for diploma holders only with a view to give effect to the
Resolution of the Board dated 17.04.1979 without undertaking the necessary
exercise for finding out whether the Resolution was in consonance or in
conflict with the Regulations. Such exercise was undertaken by the
Division Bench of the High Court which did not approve of the Resolution
and held that it was contrary to the Regulations. It also rightly noticed
that the earlier seniority list was only a common seniority list and there
was no past practice of having any seniority lists.
Learned counsel for the appellants did not dispute the relevant facts
noticed by the High Court on this issue. The High Court noticed that
Schedule Technical and the Regulations provide for only one source of
recruitment for the post of Project Engineer (Junior) that is by direct
recruitment and the same selection process was applicable to both, the
degree holders and the diploma holders and, therefore, only on account of
difference in their academic qualification they could not be treated to be
belonging to two different cadres in absence of any provision for this
purpose in the Regulations. They were to be treated as two channels for
next promotion because of separate quota for each channel and different
eligibility criteria.
On behalf of appellants, a submission was advanced that in Clause (9)(B) of
the Regulations there is a mandate that seniority lists for each “category
of employees” will be prepared and maintained and hence the Board should
treat degree holders and diploma holders as separate category of employees
for preparation of separate seniority lists for each of these categories.
We do not find any merit in this submission. The words “category of
employees” used in Clause (9)(B) in the context of the Regulations can only
mean category of posts held by the employees. The word “category” has been
used in the context of posts only in Clause (6) of the Regulations,
although in the matter of absorption of employees working in the Board on
deputation. Clause (9)(A) which provides for promotion when read together
with the Schedule Technical leaves no manner of doubt that in respect of
first promotion to higher post, i.e., promotion from post of Project
Engineer (Junior) to Project Engineer (Senior), promotion of eligible
person is required to be made on the basis of seniority-cum-merit. The
High Court has rightly held that the cadre of Project Engineer (Junior)
cannot be bifurcated for the purpose of seniority alone, only on the ground
that for promotion to the cadre of Project Engineer (Senior) there is
provision for 20% quota for degree holders and 30% quota for diploma
holders. The practical view of the High Court cannot be faulted that the
Board can legitimately prepare separate eligibility lists of Project
Engineer (Junior) holding degree and those holding diploma. Such
eligibility list could not be mistaken for seniority list which must remain
common based upon merit assessed at the time of selection for recruitment.
Only if the selection process had been different, there could have been any
scope to argue for separate seniority lists. In absence of any legal
stipulation for altering the initial seniority, pre-determined on the basis
of merit at the time of initial selection and date of regular appointment,
the seniority list cannot be altered only because some diploma holder
Project Engineers (Junior) acquired the qualification of AMIE equivalent to
a degree. The three years’ or seven years’ experience of service will
entitle the degree holders and the diploma holders respectively only for
inclusion of their names in the eligibility lists for promotion so as to
work out satisfactorily the provision for different quota for the degree
holders and the diploma holders. Hence, we find no good ground to
interfere with the decision of the High Court in respect of Question no.3.
Further dispute between the parties is in respect of issues arising out of
Question no.2. The primal question which requires to be answered is
whether the diploma holders who acquired the qualification of AMIE during
service should be given the benefit of experience of service rendered by
them as diploma holders for promotion to the post of Project Engineer
(Senior) against the 20% quota for the degree holders or they need to
acquire further three years’ experience of service after acquiring the
qualification of AMIE for availing such benefit.
In the context of issue noticed above, the stand of the appellants is that
there is qualitative difference in the service rendered by a degree holder
and that rendered by a diploma holder and, therefore, the Regulations
provide that the degree holder Project Engineers (Junior) with three years’
service and diploma holder Project Engineers (Junior) with seven years’
service shall be eligible for promotion to the higher post of Project
Engineer (Senior). Their further case is that by providing 20% and 30% of
the posts as quota for the degree holders and diploma holders respectively,
the Regulations have created a water-tight compartment for the two classes
because they are entitled for promotion in their respective quota only.
The fact that separate quota for promotion has been fixed for two different
channels of degree holders and diploma holders, according to appellants, is
a clear indication that the service of three years must be rendered as a
degree holder in order to acquire the eligibility for promotion as is the
case with a diploma holder who acquires eligibility only upon rendering
seven years’ service as a diploma holder. The eligibility criterion of
service experience cannot be read differently when the claim for promotion
is made against a fixed quota. The aforesaid stand of the appellants is
based squarely upon judgment of this Court rendered by a three Judges Bench
in the case of Shailendra Dania & Ors. v. S.P. Dubey & Ors. (2007) 5 SCC
535. For providing further support to the conclusions in the case of
Shailendra Dania (supra), reliance has been placed also upon judgments in
the case of N. Suresh Nathan & Anr. v. Union of India & Ors. 1992 Supp.(1)
SCC 584; Indian Airlines Ltd. & Ors. v. S. Gopalakrishnan (2001) 2 SCC 362;
Challa Jaya Bhaskar & Ors. v. Thungathurthi Surender & Ors. (2010) 13 SCC
348; Chandravathi P.K. & Ors. v. C.K. Saji & Ors. (2004) 3 SCC 734 and
Vijay Singh Deora & Ors. v. State of Rajasthan & Anr. (1997) 3 SCC 118.
On the other hand, counsels appearing for the respondents and representing
the interest of the diploma holders who subsequently acquired the
qualification of AMIE while in service, have made a spirited attempt to
distinguish the facts of Shailendra Dania’s case (supra). According to
learned counsel appearing for the diploma holders there was a difference in
the qualification required of degree holders and diploma holders at the
time of very entry into the service in Shailendra Dania’s case; while
degree holders were eligible to apply only with their educational
qualification for the entry post, the diploma holders were required to have
additional two years’ experience and hence the two were treated to be
qualitatively different in the matter of service experience. In other
words, the submission is that the qualitative difference in the services
rendered by degree holders and diploma holders in Shailendra Dania’s case
was primarily on account of their having different birthmarks which does
not exist in the present case. It is also the case of diploma holders that
the words used in the Regulations laying down eligibility for promotion are
different in the present case because of use of the word ‘total’ before the
clause ‘experience of service’ and hence on a literal interpretation, as is
warranted in the present case, the appellants cannot derive any advantage
from the judgment in the case of Shailendra Dania (supra). Much emphasis
has also been laid on the word, ‘with’ used in the Schedule Technical to
contend that it be read as ‘and’ which will then not permit the cumulative
eligibility criteria to be read as three years’ total experience of service
with degree but only as degree and three years’ total experience of
service. It is further case of the diploma holders that the use of the
word ‘total’ clearly indicates the intent of counting not only experience
of service with degree but also experience of service already gained with
diploma. Mr. Manu Mridul, learned Advocate for some of the respondents, in
support of the aforesaid contentions placed reliance upon judgments of this
Court in the case of Anil Kumar Gupta & Ors. v. Municipal Corporation of
Delhi & Ors. (2000) 1 SCC 128; M.B. Joshi & Ors. etc. v. Satish Kumar
Pandey & Ors. etc. 1993 Supp.(2) SCC 419 and A.K. Raghumani Singh & Ors. v.
Gopal Chandra Nath & Ors. (2000) 4 SCC 30. Appearing on behalf of another
set of respondents in one of the appeals, Mr. Abhishek Gupta, Advocate
placed reliance upon case of Roop Chand Adlakha & Ors. v. Delhi Development
Authority & Ors. 1989 Supp.(1) SCC 116.
Mr. Vijay Hansaria, learned Senior Advocate appeared for the Board and
supported the case of diploma holders by taking a stand that different
service experience of three years and seven years for the purpose of
eligibility have been prescribed for degree holders and diploma holders
respectively not upon any qualitative difference in their experience but
upon difference in the educational qualification alone. Thus, the stand of
the Board before this Court which is diametrically opposite to its stand
before the High Court is that a diploma holder who has service experience
of three years and acquires the qualification of AMIE is qualified under
the Regulations to claim eligibility for promotion in the 20% quota
reserved for degree holders with three years’ experience. Learned advocate
appearing for some of the proforma respondents made it clear that the case
of such proforma respondents who were degree holders is same as that of the
appellants.
Before adverting to the rival submissions on the main issue noted above, in
view of submissions advanced on behalf of some of the respondents as if the
issue arising in these appeals relates to seniority position of individuals
in the seniority list, it is necessary to clarify that the High Court was
neither called upon to decide nor it actually decided any issue directly
relating to inter se seniority of Project Engineers (Junior) or Project
Engineers (Senior) and this Court is also not required to go into the
correctness of any seniority list published by the Board. As noticed
earlier, the main issue falling for determination in these appeals only
relates to what value, if any, is to be given to the service experience of
a diploma holder - turned degree holder - Project Engineer (Junior)
rendered by him as a diploma holder for the purpose of claiming eligibility
for promotion as a degree holder Project Engineer (Junior) against 20%
quota allotted for the degree holders.
Initially there was a serious dispute raised on behalf of appellants
whether the word ‘total’ before the clause ‘experience of service’ in the
context of minimum experience and qualification required for promotion of
Project Engineer (Junior) mentioned in the Schedule Technical is an
illegitimate insertion in this Schedule or whether it was actually existing
in the draft of the Schedule which was approved by the Board and the State
Government. Learned senior counsel appearing for the Board placed before
us the original records and made it clear that the word ‘total’ in the
relevant clauses existed in the original draft of Schedule Technical which
was duly approved. Matter has come to rest at that.
Coming to the rival contentions, it will be useful to refer to the
concerned paragraphs from the judgment in the Shailendra Dania’s case
(supra) along with the relevant facts in order to appreciate the contention
of the appellants that even in absence of the birthmark on account of two
years’ experience for diploma holders to enter into the service, which was
peculiar to the facts of that case, the relevant facts and rule position
are materially similar and hence the law laid down in that case is apt for
deciding the present appeals on the same lines. In Shailendra Dania’s case
the rules provided for filling up 50% of total vacancies in the post of
Assistant Engineer by direct recruitment and the remaining were to be
filled up by promotion by providing specific quota for a graduate Junior
Engineer and a diploma holder Junior Engineer. The eligibility criteria
for promotion of diploma holders Junior Engineers was eight years’
qualifying service and for graduate Engineering degree holders three years’
qualifying service. Further promotion from the post of Assistant Engineer
was to the post of Executive Engineer. For this post, the minimum
qualifying experience for graduate engineers was eight years as Assistant
Engineer and for diploma holders it was ten years in the grade of Assistant
Engineer. However, for the initial post in the hierarchy, that is, post of
Junior Engineer, the selection was only through direct recruitment and the
qualification prescribed was “diploma holders in civil engineering with two
years’ experience”. But there was no bar for persons having degree in
engineering in applying for the post of Junior Engineer and they were not
required to have any prior experience.
In Shailendra Dania’s case this Court placed strong reliance upon judgment
in the case of N. Suresh Nathan (supra) and explained that the three Judges
Bench decided that case essentially on the interpretation of the rule and
merely found support to that interpretation from the past practice followed
in the Department. In N. Suresh Nathan (supra), the question involved was
similar as in the case of Shailendra Dania (supra) and the present case.
The relevant rule provided for recruitment by promotion from the grade of
Junior Engineers which consisted of two categories, viz., one of degree
holder Junior Engineers with three years’ service in the grade and the
other of diploma holder Junior Engineers with six years’ service in the
grade. There, the quota was 50% from each category. The Court interpreted
the rule in the light of entire scheme to conclude that the period of three
years can commence only from the date of obtaining the degree and not
earlier. The service in the grade as a diploma holder prior to obtaining
degree cannot be counted as service in the grade with a degree for the
purpose of three years’ service as a degree holder. Besides explaining and
following the judgment in N. Suresh Nathan’s case (supra), the judgment in
Shailendra Dania’s case (supra) also considered and distinguished some
later judgments on the basis of difference in facts and rules such as in
the case of M.B. Joshi (supra); D. Stephen Joseph v. Union of India & Ors.
(1997) 4 SCC 753; Anil Kumar Gupta (supra) and A.K. Raghumani (supra).
In the case of Shailendra Dania (supra), this Court also took note of
judgment in the case of Indian Airlines Ltd. (supra) on which the
appellants have also placed reliance. Para 5 of the judgment in the case
of Indian Airlines Ltd. (supra) begins by holding that “when in addition to
qualification, experience is prescribed, it would only mean acquiring
experience after obtaining the necessary qualification and not before
obtaining such qualification”. No doubt, in that case there was specific
general information/instruction that experience will be computed after the
date of acquiring the necessary qualifications. Instead of dilating the
point further it will be useful to extract paragraphs 43 to 45 of the
judgment in the case of Shailendra Dania (supra) which are as follows :
“43. Taking into consideration the entire scheme of the relevant Rules, it
is obvious that the diploma-holders would not be eligible for promotion to
the post of Assistant Engineer in their quota unless they have eight years’
service, whereas the graduate Engineers would be required to have three
years’ service experience apart from their degree. If the effect and intent
of the Rules were such to treat the diploma as equivalent to a degree for
the purpose of promotion to the higher post, then induction to the cadre of
Junior Engineers from two different channels would be required to be
considered similar, without subjecting the diploma-holders to any further
requirement of having a further qualification of two years’ service. At
the time of induction into service to the post of Junior Engineers, degree
in Engineering is a sufficient qualification without there being any prior
experience, whereas diploma-holders should have two years’ experience apart
from their diploma for their induction in the service. As per the service
rules, on the post of Assistant Engineer, 50% of total vacancies would be
filled up by direct recruitment, whereas for the promotion specific quota
is prescribed for a graduate Junior Engineer and a diploma-holder Junior
Engineer. When the quota is prescribed under the Rules, the promotion of
graduate Junior Engineers to the higher post is restricted to 25% quota
fixed. So far as the diploma-holders are concerned, their promotion to the
higher post is confined to 25%. As an eligibility criterion, a degree is
further qualified by three years’ service for the Junior Engineers, whereas
eight years’ service is required for the diploma-holders. Degree with
three years’ service experience and diploma with eight years’ service
experience itself indicates qualitative difference in the service rendered
as degree-holder Junior Engineer and diploma-holder Junior Engineer. Three
years’ service experience as a graduate Junior Engineer and eight years’
service experience as a diploma-holder Junior Engineer, which is the
eligibility criterion for promotion, is an indication of different quality
of service rendered. In the given case, can it be said that a diploma-
holder who acquired a degree during the tenure of his service, has gained
experience as an Engineer just because he has acquired a degree in
Engineering. That would amount to say that the experience gained by him in
his service as a diploma-holder is qualitatively the same as that of the
experience of a graduate Engineer. The Rule specifically made difference
of service rendered as a graduate Junior Engineer and a diploma-holder
Junior Engineer. Degree-holder Engineer’s experience cannot be substituted
with diploma-holder’s experience. The distinction between the experience
of degree-holders and diploma holders is maintained under the Rules in
further promotion to the post of Executive Engineer also, wherein there is
no separate quota assigned to degree-holders or to diploma-holders and the
promotion is to be made from the cadre of Assistant Engineers. The Rules
provide for different service experience for degree-holders and diploma-
holders. Degree-holder Assistant Engineers having eight years of service
experience would be eligible for promotion to the post of Executive
Engineer, whereas diploma-holder Assistant Engineers would be required to
have ten years’ service experience on the post of Assistant Engineer to
become eligible for promotion to the higher post. This indicates that the
Rule itself makes differentia in the qualifying service of eight years for
degree-holders and ten years’ service experience for diploma-holders. The
Rule itself makes qualitative difference in the service rendered on the
same post. It is a clear indication of qualitative difference of the
service on the same post by a graduate Engineer and a diploma-holder
Engineer. It appears to us that different period of service attached to
qualification as an essential criterion for promotion is based on
administrative interest in the service. Different period of service
experience for degree-holder Junior Engineers and diploma-holder Junior
Engineers for promotion to the higher post is conducive to the post manned
by the Engineers. There can be no manner of doubt that higher technical
knowledge would give better thrust to administrative efficiency and quality
output. To carry out technical specialized job more efficiently, higher
technical knowledge would be the requirement. Higher educational
qualifications develop broader perspective and therefore service rendered
on the same post by more qualifying person would be qualitatively
different.

44. After having an overall consideration of the relevant Rules, we are of
the view that the service experience required for promotion from the post
of Junior Engineer to the post of Assistant Engineer by a degree-holder in
the limited quota of degree-holder Junior Engineers cannot be equated with
the service rendered as a diploma-holder nor can be substituted for service
rendered as a degree-holder. When the claim is made from a fixed quota,
the condition necessary for becoming eligible for promotion has to be
complied with. The 25% specific quota is fixed for degree-holder Junior
Engineers with the experience of three years. Thus, on a plain reading,
the experience so required would be as a degree-holder Junior Engineer.
25% quota for promotion under the rule is assigned to degree-holder Junior
Engineers with three years’ experience, whereas for diploma-holder Junior
Engineers eight years’ experience is the requirement in their 25% quota.
Educational qualification along with number of years of service was
recognized as conferring eligibility for promotion in the respective quota
fixed for graduates and diploma-holders. There is watertight compartment
for graduate Junior Engineers and diploma-holder Junior Engineers. They
are entitled for promotion in their respective quotas. Neither a diploma-
holder Junior Engineer could claim promotion in the quota of degree-holders
because he has completed three years of service nor can a degree-holder
Junior Engineer make any claim for promotion quota fixed for diploma-holder
Junior Engineers. Fixation of different quota for promotion from different
channels of degree-holders and diploma-holders itself indicates that
service required for promotion is an essential eligibility criterion along
with degree or diploma, which is service rendered as a degree-holder in the
present case. The particular years of service being the cumulative
requirement with certain educational qualification providing for
promotional avenue within the specified quota, cannot be anything but the
service rendered as a degree-holder and not as a diploma-holder. The
service experience as an eligibility criterion cannot be read to be any
other thing because this quota is specifically made for the degree-holder
Junior Engineers.

45. As a necessary corollary, we are of the view that the diploma-holder
Junior Engineers who have obtained a degree in Engineering during the
tenure of service, would be required to complete three years’ service on
the post after having obtained a degree to become eligible for promotion to
the higher post if they claim the promotion in the channel of degree-holder
Junior Engineer, there being a quota fixed for graduate Junior Engineers
and diploma-holder Junior Engineers for promotion to the post of Assistant
Engineers.”

On behalf of respondents the difference in qualification at the time of
induction into the service to the post of Junior Engineers as indicated in
paragraph 43 was highlighted to distinguish the present case on the ground
that for induction into the service on the post of Project Engineer
(Junior) there is no requirement that the diploma holders should have two
years’ experience apart from their diploma. Literally, that distinction is
valid but in our considered view the other considerations which were
discussed in paragraph 43 are of much greater significance, particularly
there being specific quota prescribed for graduate Project Engineers
(Junior) and diploma holder Project Engineers (Junior). In the present
case also, as an eligibility criterion, a degree is further qualified by
three years’ service whereas a diploma is further qualified by seven years’
service. These distinctions are of much more vital significance than the
birthmark at the time of induction into service. Absence of such birthmark
in the present case is not material. Such birthmark was only an additional
ground available in the case of Shailendra Dania (supra) but that, in our
considered view, would not make any material difference in coming to the
same conclusion that degree with three years’ service experience and
diploma with seven years’ service experience by itself indicates
qualitative difference in the service rendered as a degree holder and that
rendered as a diploma holder.
As held in paragraph 36 of Shailendra Dania’s case (supra) we are required
to decide the matter on the basis of the entire scheme of the rules, the
facts and circumstances at the relevant time and the rules called in
question, for independently giving meaning to the words, the principle
involved and the past practice, if any. In that view of the matter, the
word ‘with’ occurring before the words, “three years’ service” or “seven
years’ service” has to be given a natural meaning as understood in the
common parlance and in the light of two water tight compartments created
for the two classes for promotion with respective quotas of 20% and 30%, it
must be held that three years’ total experience of service must be service
as a degree holder. This view is fortified by the provision in the
Regulations that for similar promotion a diploma holder has to have seven
years’ total experience of service. The relevant regulation does not
contemplate any reduced total experience for promotion for a diploma holder
who may acquire degree or AMIE qualification while in service. Even on
acquiring such higher qualification the concerned diploma holder is neither
given any advantage vis-à-vis other diploma holders nor is he ousted from
the right of consideration against 30% quota provided for diploma holders.
In such a situation in order to enter into the water-tight compartment of
20% quota for the degree holders with three years’ experience of service, a
diploma holder with AMIE qualification must show that he fulfills the
entire eligibility criterion, i.e., he is a degree holder with three years’
experience of service as a degree holder. Such water-tight compartment and
separate quotas cannot be rendered meaningless so as to affect the prospect
of promotion of the degree holders by inducting into that category a
diploma holder who does not have three years’ experience of service as a
degree holder. In the absence of any such provision in the Regulations, no
equivalence can be permitted in such a situation because even a diploma
holder with seven years’ experience of service is confined to a prospect or
chance of promotion only against 30% quota for the diploma holders.
So far as the word ‘total’ occurring before the words ‘experience of
service’ is concerned, from the circumstances and past history relating to
the service, it must be understood in the context of service rendered in
regular capacity along with service rendered on ad-hoc or officiating or
temporary basis. The word ‘total’ cannot be construed to mean service
rendered either as diploma holder or degree holder. If this had been the
intention, the word ‘total’ would have been included only in the context of
three years’ total experience of service of degree holders and not in the
context of seven years’ experience of service as diploma holders. A
diploma holder in any case is required to have seven years’ experience of
service for being eligible for promotion and hence the word ‘total’ would
be otiose or redundant in the aforesaid context. No doubt, the High Court
has now clarified and held that service rendered on ad-hoc or officiating
basis prior to regularization cannot be counted for acquiring eligibility
for promotion and that aspect is no longer under controversy. Hence the
use of the word ‘with’ or ‘total’ in the relevant regulation does not make
any difference and the judgment in the case of Shailendra Dania (supra)
applies to the present case, as contended by learned counsel for the
appellants.
The other judgments of this Court in the case of Challa Jaya Bhaskar
(supra); Chandravathi P.K. (supra) and Vijay Singh Deora (supra) also
support the view which we have taken on the basis of Shailendra Dania’s
case (supra). Para 29 of the judgment in the case of Challa Jaya Bhaskar
(supra) clearly shows that in the said case this Court followed the views
expressed in N. Suresh Nathan’s case (supra) and Shailendra Dania’s case
(supra). In the case of Chandravathi P.K. (supra) rules for shifting by
exercise of option from the category of diploma holders to that of degree
holders on acquiring AMIE qualification was in place. In that context, in
paragraph 30 this Court held that diploma holder officer on acquiring
higher qualification during service could opt for promotion from the degree
holders’ quota or from diploma holders’ quota but once he opts for
promotion in the degree holders’ quota, rule of seniority would apply as he
acquired the qualification therefor subsequently. He would be placed at
the bottom of the seniority list and his case could be considered only
after the cases of promotion of those who had been holding such degree
qualification had been considered. In the case of Vijay Singh Deora
(supra) the rule position was different but in paragraph 9 this Court
permitted only a limited recognition of service rendered as diploma holder
Junior Engineers for purposes of eligibility and justified the permitted
procedure on the ground that it would do justice to all the three groups
(as existed in that case) and no one would jump over the other and would
not illegitimately steal a march over the legitimate right of the other,
“otherwise, in effect the qualified graduates would be pushed downwards and
unqualified late entrants on acquisition of qualification would steal a
march over the qualified.”
The judgments relied upon by learned advocate for the respondents have been
noticed above. All those cases were noticed and distinguished or explained
in the case of Shailendra Dania (supra) and we find that none of those
cases are of any help to the respondents. In those cases, either there was
no water-tight compartment and fixed quota for different categories or the
advertisement and rules related only to initial recruitment or the contest
was only between two groups of diploma holders. The judgment in the case
of Roop Chand Adlakha (supra) in fact helps the case of the appellants
because in that case this Court held that different service experience
could be prescribed for conferring eligibility for promotion to the degree
holders and diploma holders and such classification on the basis of
educational qualification is permissible under Articles 14 and 16 of the
Constitution of India.
In the light of aforesaid discussions, we find merit in these appeals and
they are accordingly allowed to the extent of reversing the views of the
High Court in respect of Question no.2 as noted by the Division Bench in
the common judgment under appeal. We hold that the Project Engineers
(Junior) recruited on the basis of diploma, upon their acquiring the
qualification of ‘AMIE’, are not entitled to count their experience of
service prior to acquisition of such qualification for the purpose of
eligibility for promotion to the post of Project Engineer (Senior) against
the 20% quota fixed for promotion of degree holder Project Engineers
(Junior). In order to claim promotion against such 20% quota the three
years’ experience of service must be acquired after obtaining the
qualification or degree of AMIE.
We direct the Board and its authorities to treat the writ petitions filed
in the High Court as disposed of in the light of our aforesaid views and to
determine the controversies raised in the writ petitions in that light by
granting relief to the eligible persons expeditiously and preferably within
4 months, without upsetting the transactions which had taken place earlier
and were not under challenge in the writ petitions. In other words, the
regular promotions made in the past prior to 1992, which were not subject
matter of writ petitions filed in 1992 will not be re-opened on account of
views expressed in this judgment.
In the facts and circumstances of the case, there shall be no order as to
costs.

………………….…………………………………...J.
[FAKKIR MOHAMED IBRAHIM KALIFULLA]

………………….…………………………………...J.
[SHIVA KIRTI SINGH]

New Delhi.
September 05, 2014.
-----------------------
28

Development of Industries -New Industrial Policy scheme in North- Eastern Region - some companies availed benefits of the scheme - commencement of Finance Act 2003 - certain benefit notifications were amended retrospectively from the date of original Notifications under the scheme under sec.153 of the Act - the Assistant Commissioner, Central Excise, Jorhat passed orders reviewing the entire refunded amounts under the original notifications - Challenged - High court dismissed the writs - D.B. confirmed the same - Appeals - Apex court held that allowed the appeals directing the parties to deposit the demanded amounts before the commissioner and directed to file regular appeals over the orders of Asst. Commissioner - and directed the department to treat the time consumed in these proceedings be considered as reasonable = CIVIL APPEAL NO. 3380 OF 2010 Hindustan Coca Cola Beverage (P) Ltd. ... Appellant Versus Union of India and others ... Respondents = 2014 - Sept. Month - http://judis.nic.in/supremecourt/filename=41913

Development of Industries -New Industrial Policy scheme in North- Eastern Region - some companies availed benefits of the scheme - commencement of Finance Act 2003 - certain benefit notifications were amended retrospectively from the date of original Notifications under the scheme under sec.153 of the Act - the Assistant Commissioner, Central Excise, Jorhat passed orders reviewing the entire refunded amounts under the original notifications - Challenged - High court dismissed the writs - D.B. confirmed the same - Appeals - Apex court held that allowed the appeals directing the parties to deposit the demanded amounts before the commissioner and directed to file regular appeals over the orders of Asst. Commissioner - and directed the department to treat the time consumed in these proceedings be considered as reasonable =

The facts, in a nutshell, are that with a view to provide necessary impetus
to the development of industries in the north-eastern region a new
Industrial Policy Resolution was notified by the Government of India on
24.12.1997.
In pursuance of the said policy, a Notification was issued on
8.7.1999 and thereafter further Notifications were issued on 29.06.2001 and
23.12.2002.
Pursuant to the said Notifications, certain benefits were
availed of by the assessees.
At that juncture, The Finance Act, 2003 (for
brevity “the Act”) was brought into force and by virtue of Section 153 of
the Act certain Notifications were amended with retrospective effect from
08.07.1999, i.e. the date of original Notification which we have mentioned
hereinabove.=

After the amendment came into force, the Assistant Commissioner, Central
Excise, Jorhat referred to the amendment and the notifications and
eventually passed the following order on 3.6.2003:-
“In consideration of the above the entire refund amount sanctioned with
effect from 8.7.99 is required to be reviewed in terms of the provision of
the Eighth Schedule of the Finance Act, 2003 which on being re-assessed, it
appears that an amount of Rs.2.20,18.124.00 is required to be recovered
from the said unit being the refund granted earlier which have become not
eligible by virtue of the Clause 145 of the Finance Bill, 2003. Details of
duty paid month wise, refund sanctioned and amount required to be realized
are furnished in Annexure-1 to the Order enclosed.

Now in terms of the provision of Finance Act, 2003 M/s. Hindustan Coca Cola
Beverages Pvt. Ltd., P.O. R.R.L., Jorhat is hereby required to make payment
of the said amount of Rs.2,20,18,124.00 within a period of 30 (thirty) days
with effect from 13th May, 2003. Failure to comply with this Order with
the specified date an interest @ 15% p.a. shall be payable from the date
immediately after the expiry of the said period of thirty days till the
payment is made.” =

The validity of Notification No. 65/03
dated 06.08.2003 and certain other notifications including the original
notification No. 33/99 dated 3.7.99 were called in question.
Before the
High Court, the constitutional validity of the amendment of the Finance Act
was also called in question.
In the course of hearing, the challenge to the validity was abandoned.
It was contended in the writ petition that
without affording an opportunity of hearing to the appellant and without
issuance of the notice, the Assistant Commissioner had passed an order of
recovery which was absolutely impermissible.
The High Court did not address to the retrospective application of the
provision as the assail to the same was abandoned.
It also did not address
to the impact of non-issuance of notice prior to passing an order of
recovery.
It adverted to the merits of the case, that is,
whether the recovery could have been directed by the Assistant Commissioner or not and
repelling the proponements advanced by the assessee accepted the stand of
the revenue. =

The appeals shall be disposed
of within a period of three months from the date of its presentation after
giving opportunity of hearing to the parties. Needless to clarify, we have
not expressed any opinion whatsoever on the merits of the case. There will
be no order as to costs.

2014 - Sept. Month - http://judis.nic.in/supremecourt/filename=41913
REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 3380 OF 2010

Hindustan Coca Cola Beverage (P) Ltd. ... Appellant

Versus

Union of India and others ... Respondents

WITH

CIVIL APPEAL NO. 3381 OF 2010,
CIVIL APPEAL NO. 3383 OF 2010,
CIVIL APPEAL NO. 3384 OF 2010,
CIVIL APPEAL NO. 3385 OF 2010,
CIVIL APPEAL No. 3386 OF 2010,
CIVIL APPEAL NO. 3387 OF 2010,
CIVIL APPEAL NO. 3388 OF 2010 and
CIVIL APPEAL NO. 3389-3392 OF 2010

J U D G M E N T

Dipak Misra, J.

The present appeals, by special leave, have been preferred against the
judgment and order dated 24th June, 2009 passed by the Division Bench of
the High Court of Gauhati in Writ Appeal No. 435 of 2006 and other
connected appeals whereby it has affirmed the common judgment and order
dated 21.09.2006 passed by the learned Single Judge in a batch of writ
petitions. For the sake of clarity and convenience we shall advert to the
facts in Civil Appeal No. 3380 of 2010 and at the relevant time we shall
refer to quantum involved in other appeals.
The facts, in a nutshell, are that with a view to provide necessary impetus
to the development of industries in the north-eastern region a new
Industrial Policy Resolution was notified by the Government of India on
24.12.1997. In pursuance of the said policy, a Notification was issued on
8.7.1999 and thereafter further Notifications were issued on 29.06.2001 and
23.12.2002. Pursuant to the said Notifications, certain benefits were
availed of by the assessees. At that juncture, The Finance Act, 2003 (for
brevity “the Act”) was brought into force and by virtue of Section 153 of
the Act certain Notifications were amended with retrospective effect from
08.07.1999, i.e. the date of original Notification which we have mentioned
hereinabove.
After the amendment came into force, the Assistant Commissioner, Central
Excise, Jorhat referred to the amendment and the notifications and
eventually passed the following order on 3.6.2003:-
“In consideration of the above the entire refund amount sanctioned with
effect from 8.7.99 is required to be reviewed in terms of the provision of
the Eighth Schedule of the Finance Act, 2003 which on being re-assessed, it
appears that an amount of Rs.2.20,18.124.00 is required to be recovered
from the said unit being the refund granted earlier which have become not
eligible by virtue of the Clause 145 of the Finance Bill, 2003. Details of
duty paid month wise, refund sanctioned and amount required to be realized
are furnished in Annexure-1 to the Order enclosed.

Now in terms of the provision of Finance Act, 2003 M/s. Hindustan Coca Cola
Beverages Pvt. Ltd., P.O. R.R.L., Jorhat is hereby required to make payment
of the said amount of Rs.2,20,18,124.00 within a period of 30 (thirty) days
with effect from 13th May, 2003. Failure to comply with this Order with
the specified date an interest @ 15% p.a. shall be payable from the date
immediately after the expiry of the said period of thirty days till the
payment is made.”

Being aggrieved by the aforesaid order, the appellant preferred a writ
petition before the High Court. The validity of Notification No. 65/03
dated 06.08.2003 and certain other notifications including the original
notification No. 33/99 dated 3.7.99 were called in question. Before the
High Court, the constitutional validity of the amendment of the Finance Act
was also called in question. In the course of hearing, the challenge to
the validity was abandoned. It was contended in the writ petition that
without affording an opportunity of hearing to the appellant and without
issuance of the notice, the Assistant Commissioner had passed an order of
recovery which was absolutely impermissible.
The High Court did not address to the retrospective application of the
provision as the assail to the same was abandoned. It also did not address
to the impact of non-issuance of notice prior to passing an order of
recovery. It adverted to the merits of the case, that is, whether the
recovery could have been directed by the Assistant Commissioner or not and
repelling the proponements advanced by the assessee accepted the stand of
the revenue.
Mr. S.K. Bagaria, learned senior counsel appearing for the appellant very
fairly stated that the assessee had correctly abandoned the challenge
pertaining to the constitutional validity of the provision. Learned senior
counsel submitted that an order of recovery could not have been
straightaway passed without issuing notice to the appellant as that
violates the principles of natural justice. The learned senior counsel
further contended that the High Court has dwelled upon the merits of the
case on an erroneous footing inasmuch as the assessee-appellant had totally
utilized the CENVAT Credit and not taken the refund of the same. It is
further urged that in view of the amendment made by the Finance Act, it was
not payable and consequently not recoverable.
Mr. Mukul Rohtagi, learned Attorney General appearing for the Union of
India submitted that as the time schedule is fixed under Section 153 (4)
for recovery is thirty days, by implication, the principle of issue of any
show cause notice is not attracted. To support the said submission, he has
drawn strength from the decision in R.C. Tobacco (P) Ltd. v. Union of
India[1], especially paragraph 41 of the said pronouncement. Additionally,
it is submitted by him that post facto hearing may be thought of after the
amount is deposited and the sphere of hearing may be limited with regard to
payability or the refund of the sum.
To appreciate the controversy from a proper perspective it is seemly to
reproduce Section 153 of the Act which reads as under:
“Section 153. Amendment of notifications issued under Section 5A of the
Central Excise Act for certain period.

The notification of the Government of India in the erstwhile Ministry of
Finance (Department of Revenue), Nos. G.S.R. 508 (E), dated the 8th July,
1999 and G.S.R. 509 (E), dated the 8th July, 1999, issued under sub-section
(1) of Section 5A of the Central Excise Act read with sub-section (3) of
Section 3 of the Additional Duties of Excise (Goods) of Special Importance)
Act, 1957 (58 of 1957) and sub-section (3) of Section 3 of the Additional
Duties of Excise (Textiles and Textile Articles) Act, 1978 (40 of 1978) by
the Central Government shall stand amended and shall be deemed to have been
amended in the manner as specified in the Eighth Schedule, on and from the
8th day of July, 1999 to the 22nd day of December, 2002 (both days
inclusive) retrospectively, and accordingly notwithstanding anything
contained in any judgment, decree or order of any court, tribunal or other
authority, any action taken or anything done or purported to have been
taken or done under the said notifications, shall be deemed to be and
always to have been, for all purposes, as validly and effectively taken or
done as if the notifications as amended by this sub-section had been in
force at all material times.

For the purposes of sub-section(1), the Central Government shall have and
shall be deemed to have the power to amend the notifications referred to in
the said sub-section with retrospective effect as if the Central Government
had the power to amend the said notifications under sub-section (1) of
Section 5A of the Central Excise Act read with sub-section (3) of Section 3
of the Additional Duties of Excise (Goods of Special Importance) Act, 1957
(58 of 1957) and sub-section (3) of Section 3 of the Additional Duties of
Excise (Textiles and Textile Articles) Act, 1978 (40 of 1978),
retrospectively at all material times.

Notwithstanding the cessation of the amendment under sub-section (1) of the
22nd day of December, 2002, no suit or other proceedings shall be
maintained or continued in any court, tribunal or other authority for any
action taken or anything done or omitted to be done, in respect of any
goods under the said notifications, and no enforcement shall be made by any
court, tribunal or other authority of any decree or order relating to such
action taken or anything done or omitted to be done as if the amendment
made by sub-section (1) had been in force at all material times.

Notwithstanding the cessation of the amendment under sub-section (1) on the
22nd day of December, 2002, recovery shall be made of all amounts of duty
or interest or other charges which have not been collected or, as the case
may be, which have been refunded but which would have been collected, or,
as the case may be, which would not have been refunded if the provisions of
this section had been in force at all material times, within a period of
thirty days from the day on which the Finance Bill, 2003 receives the
assent of the President, and in the event of non-payment of duty or
interest or other charges so recoverable, interest at the rate of fifteen
per cent, per annum shall be payable, from the date immediately after the
expiry of the said period of thirty days, till the date of payment.

Explanation- For the removal of doubts, it is hereby declared that no act
or omission on the part of any person shall be punishable as an offence
which would not have been so punishable if the notifications referred to in
sub-section (1) had not been amended retrospectively by that sub-section.”

As the provision contained under Section 153(1) would reveal the
effect of the amendment has to be understood in the backdrop of the EIGHTH
SCHEDULE. THE EIGHTH SCHEDULE reads as follows:
“[See Section 153(1)]
|Sl.No. |Notification No. and |Amendment |Date of effect |
| |date | |of amendment |
|(1) |(2) |(3) |(4) |
|1. |G.S.R. 508(E) dated the|In the said |8th July, 1999 |
| |8th July, 1999 -– |notification, in | |
| |Central Excise, dated |paragraph 2, in | |
| |the 8th July, 1999) |clause (b), the | |
| | |following proviso | |
| | |shall be inserted, | |
| | |namely:- | |
| | | | |
| | |Provided that such | |
| | |refund shall not | |
| | |exceed the amount of| |
| | |duty paid less the | |
| | |amount of the CENVAT| |
| | |credit availed of, | |
| | |in respect of the | |
| | |duty paid in the | |
| | |inputs used in or in| |
| | |relation to the | |
| | |manufacture of goods| |
| | |cleared under this | |
| | |notification.” | |
|2. |G.S.R. 509 (E), dated |In the said |8th July, 1999 |
| |the 8th July, 1999 |notification, in | |
| |{33/1999-Central |paragraph 2, in | |
| |Excise, dated the 8th |clause (b), the | |
| |July, 1999} |following proviso | |
| | |shall be inserted, | |
| | |namely:- | |
| | | | |
| | |“Provided that such | |
| | |refund shall not | |
| | |exceed the amount of| |
| | |duty paid less the | |
| | |amount of the CENVAT| |
| | |credit availed of, | |
| | |in respect of the | |
| | |duty paid on the | |
| | |inputes used in or | |
| | |in relation to the | |
| | |manufacture of goods| |
| | |cleared under this | |
| | |notification.” | |

9. The first submission, as we find centres round the issue whether
whether the appellant-assessee was entitled to be given notice to show
cause before proceeding for recovery in view of the language employed under
Section 153(4) of the Act. In R.C. Tobacco (P) Ltd. (supra) the court
interpreting Section 153(4) has observed as follows:-
“In the present case Section 153(4) specifically and expressly allows
amounts to be recovered within a period of thirty days from the day Finance
Bill, 2003 received the assent of the President. It cannot but be held
therefore that the period of six months provided under Section 11-A would
not apply.”

In the said case while dealing with the question of notice prior the
recovery the court ruled:-
“On the question of notice prior to the recovery irrespective of Section 11-
A, it is contended by the petitioners relying on the decision of this Court
in East India Commercial Co. Ltd. v. Collector of Customs4 SCR at p. 361
that whether a statute provides for notice or not, it was incumbent upon
the respondents to issue notice to the petitioners disclosing the
circumstance under which proceedings are sought to be initiated against
them and that any proceedings taken without such notice would be against
the principles of natural justice. Assuming that the principles were
applicable to the case before us, in fact notices of personal hearing were
served on the petitioners by the Assistant Collector for a personal hearing
before the Assistant Collector passed the orders by which the petitioners
were held liable to repay the refunds made and to pay the excise on the
goods cleared for the [pic]subsequent periods.”

Relying on the same it is submitted by Mr. Rohatagi that as the
computation and the recovery are to be made within a time frame of thirty
days, issue of a show cause notice cannot be read into such a provision.
In essence, the submission is that the principles of natural justice have
been kept at bay by implication. Per contra, Mr. Bagaria has submitted
that in the above-referred decision notices have already been given and,
therefore, issuance of notice is a must. Ordinarily we would have adverted
to said submission advanced at the bar but we find, the assessee had not
demonstrably argued this ground and addressed the lis on merits before the
High Court and, therefore, we are not inclined to interpret whether the
concept of natural justice would be read into the said provision or not.
The said question is left open.
10. The next submission pertains to the issue whether the High Court was
justified addressing the lis on merits when series of factual aspects are
involved. We are disposed to think that the High Court should not have
entered into the factual score to decline the relief to the appellants. We
are obliged to say so as Mr. Bagaria, learned senior counsel has contended
that it can only be adjudicated upon with reference to the documents on
record. The documents mean the transactions, quantum of CENVAT availed of,
the amount that was taken as refund by paying from the P.L.A. and further
not availing refund of CENVAT credit at any point of time. Needless to
emphasise, the said aspect are in the realm of facts which could not have
been adjudged or adjudicated by the High Court under Article 226 of the
Constitution as the order of recovery was challenged on the ground that no
notice was issued to the appellant and that it was not liable to pay in the
obtaining factual matrix.
11. Be it stated, there is no cavil over the fact that an appeal lies
under Section 35 of the Central Excise Act, 1944 to the Commissioner
(Appeals) who can address both the issues relating to facts and law keeping
in view the applicability of the relevant notifications. It is borne out
from the record that the assessee-appellant had furnished a bank guarantee
amounting to Rs.2,20,18,124/- for obtaining an order of stay. In our
considered opinion it would not be appropriate to give an opportunity to
the appellant to prefer statutory appeals and allow it to enjoy the benefit
of stay of recovery on the basis of a bank guarantee. Therefore, we would
direct the assessee to deposit Rs.2.5 crores before the adjudicating
authority within six weeks and after the said deposit is made and the
receipt obtained, the appeal would be entertained within the said period.
On an appeal being filed, the Commissioner (Appeals) shall deal with the
matter on merits. Learned Attorney General very fairly stated that the
Revenue would not raise the issue of limitation as the period spent before
the High Court and this Court and the time granted for depositing of the
amount would stand excluded for the purpose of preferring the appeal.
12. At this juncture, it is apposite to mention here that the bank
guarantees furnished by the other appellants in respect of their respective
appeals. They are as under:
CIVIL APPEAL NO. NAME OF ASSESSEE AMOUNT(Rs.)
C.A. No. 3381/10 Assam Roofing 16,62,336/-
C.A. No. 3383/10 Ozone Pharmaceuticals 1,01,20,672/-
C.A. No. 3384/10 Ozone Ayurvedics 1,01,20,672/-
C.A. No. 3385/10 Herbo Foundation 39,81,566/-
C.A. No. 3386/10 Belle Herbals 4,44,740/- C.A. No.
3387/10 Eminent Healthcare 22,01,868/-
C.A. No. 3388/10 Tread & Patels 42,44,456/-
C.A.Nos.3389/92/10 Godres Sara Lee 36,51,495/-

19,12,132/-

Considering the amount in question in various appeals it is directed
that in case the bank guarantees furnished by the assessees have been
encashed no deposit shall be made. If the bank guarantees have not yet
been encashed the amount as mentioned hereinabove plus rupees five lakhs
shall be deposited within the stipulated time frame of six weeks. As we
have directed for deposition of the amount, it is directed that after
deposit of the said amount, the bank guarantees furnished in favour of the
jurisdictional Commissioner shall be returned to the assessee-appellants.
13. In the result, the appeals stand allowed in part. The judgment and
orders of the High Court in writ petitions and writ appeals are set aside
and the assessee/appellants are directed to prefer appeals with the
conditions precedent as imposed hereinabove. The appeals shall be disposed
of within a period of three months from the date of its presentation after
giving opportunity of hearing to the parties. Needless to clarify, we have
not expressed any opinion whatsoever on the merits of the case. There will
be no order as to costs.

.............................J.
[Dipak Misra]

.............................J.
[Abhay Manohar
Sapre]
New Delhi;
September 04, 2014

-----------------------
[1] (2005) 7 SCC 725

-----------------------
14

Friday, September 19, 2014

Income Tax Act - Section 45(5) - compensation of land under sec.23 , 23 A, 28 & 34 of L.A.Act by brothers as legal heirs for the land of father - whether all the brothers can be considered as AoP and whether interest is also taxable and payable by spread over the period - A.O. held that the brothers as AoP not individuals & held that taxable is payable by the date of receipt of interest - High court consider them as Individuals but not A.o.P. and held that it should be spread over from the date of dispossession to till the date of actual payment - Apex court held that since the property came from inheritance but not by formation in to association of persons - the question of Association of Persons not applicable - for the second point - interest is not taxable as it is derived from business - so the interest paid under sec.34 of LA Act is not taxable but the interest paid under Sec.28 is a part of compensation and is liable to be taxed - tax is payable whenever received but not for a spread over period - allowed the appeal = CIVIL APPEAL NO(S). 8103/2009 COMMR.OF INCOME TAX,RAJKOT Appellant(s) VERSUS GOVINDBHAI MAMAIYA Respondent(s) = 2014 - Sept. Month - http://judis.nic.in/supremecourt/filename=41908

Income Tax Act - Section 45(5) - compensation of land under sec.23 , 23 A, 28 & 34 of L.A.Act by brothers as legal heirs for the land of father - whether all the brothers can be considered as AoP and whether interest is also taxable and payable by spread over the period - A.O. held that the brothers as AoP not individuals & held that taxable is payable by the date of receipt of interest - High court consider them as Individuals but not AoP. and held that it should be spread over from the date of dispossession to till the date of actual payment - Apex court held that since the property came from inheritance but not by formation in to association of persons - the question of Association of Persons not applicable - for the second point - interest is not taxable as it is derived from business - so the interest paid under sec.34 of LA Act is not taxable but the interest paid under Sec.28 is a part of compensation and is liable to be taxed - tax is payable whenever received but not for a spread over period - allowed the appeal =

The respondents are three brothers. Their father died leaving
the land admeasuring 17 acres and 11 gunthas to the three brothers and two
other persons who relinquished their rights in favour of the three
brothers. A part of this bequeathed land was acquired by the State
Government and compensation was paid for it. On appeal, the compensation
amount was enhanced and additional compensation alongwith interest was
awarded.

3. The respondents filed their return of income for each
assessment years claiming the status of 'individual'.
Two questions arose for consideration before the Assessing Officer.
One was as to whether these
three brothers could file separate returns claiming the status of the
'individual' or they were to be treated as 'Association of Persons' (AoP).

Second question was regarding the taxability of the interest on enhanced
compensation and this interest which was received in a particular year was
to be assessed in the year of receipt or it could be spread over the period
of time.=

Assessing Officer had passed the assessment order by treating their status
as that of a AoP. The Assessing Officer had also refused to spread the
interest income over the years and treated it as taxable in the year of
receipt.
Ultimately, the High Court has decided that these persons are to
be given the status of 'individual' and assessed accordingly and not as AoP
and that the interest income is to be spread over from the year of
dispossession of land, that is the assessment year 1987-88 till the year of
actual payment which was received in the assessment year 1999-2000 applying
the principles of accrual of income.
It is in this backdrop that the
Revenue has approached this Court challenging the decision of the High
Court.=
  In the present case, the admitted facts are that the property in
question which was acquired by the Government, came to the respondents on
inheritance from their father i.e. by the operation of law.
Furthermore,
even the income which is earned in the form of interest is not because of
any business venture of the three assessees but it is the result of the act
of the Government in compulsorily acquiring the said land.
In these
circumstances, the case is squarely covered by the ratio of the judgment
laid down in Meera & Company (supra) inasmuch as it is not a case where any
“Association of Persons” was formed by volition of the parties for the
purpose of generation of income.
This basic test to determine the status of AoP is absent in the present case.

7. Insofar as the second question is concerned, that is also covered by
another judgment of this Court in Commissioner of Income Tax, Faridabad vs.
Ghanshyam (HUF) reported in (2009) 8 SCC 412,  albeit, in favour of the
Revenue.
In that case, the court drew distinction
between the “interest” earned under Section 28 of the Land Acquisition Act and the “interest” which is under Section 34 of the said Act.
The Court clarified that
whereas compensation given to the assessee of the land acquired would be
'income', the enhanced compensation/consideration becomes income by virtue
of Section 45(5)(b) of the Income Tax Act.
The question was whether it
will cover “interest” and if so, what would be the year of taxability.
The
position in this respect is explained in paras 49 and 50 of the judgment
which make the following reading:

“49. As discussed hereinabove,
Section 23(1-A) provides for additional
amount. It takes care of the increase in the value at the rate of 12% per
annum.
Similarly, under Section 23(2) of the 1894 Act there is a provision
for solatium which also represents part of the enhanced compensation.
Similarly, Section 28 empowers the court in its discretion to award
interest on the excess amount of compensation over and above what is
awarded by the Collector.
It includes additional amount under Section 23(1-
A) and solatium under Section 23(2) of the said Act.
Section 28 of the
1894 Act applies only in respect of the excess amount determined by the
court after reference under Section 18 of the 1894 Act.
It depends upon
the claim, unlike interest under section 34 which depends on undue delay in
making the award.

50. It is true that “interest” is not compensation.
It is equally true
that Section 45(5) of the 1961 Act refers to compensation.
But as
discussed hereinabove, we have to go by the provisions of the 1894 Act
which awards “interest” both as an accretion in the value of the lands
acquired and interest for undue delay.
Interest under Section 28 unlike
interest under Section 34 is an accretion to the value, hence it is a part
of enhanced compensation or consideration which is not the case with
interest under Section 34 of the 1894 Act.
So also additional amount under
Section 23 (1-A) and solatium under Section 23(2) of the 1961 Act forms
part of enhanced compensation under Section 45(5)(b) of the 1961 Act.”

8. It is clear from the above that whereas interest under Section
34 is not treated as a part of income subject to tax,
the interest earned
under Section 28, which is on enhanced compensation, is treated as a
accretion to the value and therefore, part of the enhanced compensation or
consideration making it exigible to tax.
After holding that interest on
enhanced compensation under Section 28 of 1894 Act is taxable, the Court
dealt with the other aspect namely,
the year of tax and answered this
question by holding that it has to be tested on receipt basis, which means
it would be taxed in the year in which it is received.
It would mean that
converse position i.e. spread over of this interest on accrual basis is not
permissible.
Here again, we would like to reproduce the discussion
contained in paras 53 and 54 which gives the rational in coming to the
said conclusion. Paras 53 and 54 read as under:

“53. The scheme of Section 45(5) of the 1961 Act was inserted w.e.f. 1-4-
1988 as an overriding provision. As stated above, compensation under the
L.A.Act, 1894, arises and is payable in multiple stages which does not
happen in cases of transfers by sale, etc.
Hence, the legislature had to
step in and say that as and when the assessee claimant is in receipt of
enhanced compensation it shall be treated as “deemed income” and taxed on
receipt basis.
Our above understanding is supported by insertion of clause
(c) in Section 45(5) w.e.f. 1-4-2004 and Section 155(16) which refers to a
situation of a subsequent reduction by the court, tribunal or other
authority and recomputation/ amendment of the assessment order.

54. Section 45 (5) read as a whole [including clause (c)] not only deals
with reworking as urged on behalf of the assessee but also with the change
in the full value of the consideration (computation) and since the enhanced
compensation/consideration (including interest under Section 28 of the 1894
Act) becomes payable/ paid under the 1894 Act at different stages, the
receipt of such enhanced compensation/ consideration is to be taxed in the
year of receipt subject to adjustment, if any, under Section 155(16) of the
1961 Act, later on.
Hence, the year in which enhanced compensation is received is the year of taxability. Consequently, even in cases where
pending appeal, the court/tribunal/authority before which appeal is
pending, permits the claimant to withdraw against security or otherwise the
enhanced compensation (which is in dispute), the same is liable to be taxed
under Section 45(5) of the 1961 Act.
This is the scheme of Section 45(5)
and Section 155(16) of the 1961 Act. We may clarify that even before the
insertion of Section 45(5)(c) and Section 155(16) w.e.f. 1-4-2004, the
receipt of enhanced compensation under Section 45(5)(b) was taxable in the
year of receipt which is only reinforced by insertion of clause (c) because
the right to receive payment under the 1894 Act is not in doubt.”

0. In view of the above discussion, we allow these appeals in part and
set aside that portion of the impugned judgment of the High Court whereby
spread over of the interest received under section 28 of the 1894 Act, on
the enhanced income is allowed with the direction that it would be taxed in
the year in which such interest on enhanced compensation was received.

2014 - Sept. Month - http://judis.nic.in/supremecourt/filename=41908

   Non-Reportable
IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO(S). 8103/2009

COMMR.OF INCOME TAX,RAJKOT Appellant(s)

VERSUS

GOVINDBHAI MAMAIYA Respondent(s)

WITH
CIVIL APPEAL No. 8104/2009
CIVIL APPEAL No. 8105/2009
CIVIL APPEAL No. 8106/2009
CIVIL APPEAL No. 8107/2009
CIVIL APPEAL No. 8108/2009
CIVIL APPEAL No. 8109/2009
CIVIL APPEAL No. 8110/2009

J U D G M E N T

A.K. SIKRI, J.

The question of law that arises for consideration in all these
appeals which are filed by the Commissioner of Income Tax, Rajkot
(hereinafter referred to as the 'Revenue') is common. The respondents in
all these appeals are also common. The three respondents (hereinafter
referred to as the 'assessee') are brothers. The issue raised is identical
in all these appeals which pertains to different assessment years and that
is the reason that there are eight appeals before us. For the sake of
convenience, we will refer to the facts emerging from the records of Civil
appeal No.8103 of 2009.

2. The respondents are three brothers. Their father died leaving
the land admeasuring 17 acres and 11 gunthas to the three brothers and two
other persons who relinquished their rights in favour of the three
brothers. A part of this bequeathed land was acquired by the State
Government and compensation was paid for it. On appeal, the compensation
amount was enhanced and additional compensation alongwith interest was
awarded.

3. The respondents filed their return of income for each
assessment years claiming the status of 'individual'. Two questions arose
for consideration before the Assessing Officer. One was as to whether these
three brothers could file separate returns claiming the status of the
'individual' or they were to be treated as 'Association of Persons' (AoP).
Second question was regarding the taxability of the interest on enhanced
compensation and this interest which was received in a particular year was
to be assessed in the year of receipt or it could be spread over the period
of time.

4. Without going into the detail as to how this question traversed
and decided by one forum to other, suffice it is to state that the
Assessing Officer had passed the assessment order by treating their status
as that of a AoP. The Assessing Officer had also refused to spread the
interest income over the years and treated it as taxable in the year of
receipt. Ultimately, the High Court has decided that these persons are to
be given the status of 'individual' and assessed accordingly and not as AoP
and that the interest income is to be spread over from the year of
dispossession of land, that is the assessment year 1987-88 till the year of
actual payment which was received in the assessment year 1999-2000 applying
the principles of accrual of income. It is in this backdrop that the
Revenue has approached this Court challenging the decision of the High
Court.

5. Insofar as the treatment of the respondents giving the status of
'individual' and assessing on that basis is concerned, the issue is no more
res integra. Learned counsel for the Revenue candidly and fairly conceded
that this aspect stands conclusively determined by various judgments. It
would be suffice to refer to the judgment of this Court in Meera and
Company, Ludhiana vs. Commissioner of Income Tax, Punjab, J & K and
Chandigarh, Patiala reported in (1997) 4 SCC 677. After taking note of
some previous judgments on this issue, the Court summed up the legal
position in paras 19 and 20 which are reproduced below::
“19. In the case of CIT v. Indira Balkrishna, AIR 1960 SC 1172, this Court
held that "association of persons" meant an association in which two or
more persons joined in a common purpose or common action. As the words
occurred in a section which imposed a tax on income, the association must
be one the object of which was to produce income, profits or gains. In
that case, the co-widows of a Hindu governed by Mitakshara law inherited
his estate which consisted of immovable properties, shares, money lying in
deposit and a share in a registered firm. The Appellate Tribunal found that
they had not exercised their right to separate enjoyment and that except
for jointly receiving the dividends from the shares and the interest from
the deposits, they had done no act which had helped to produce income. This
Court held that the co-widows succeeded as co-heirs to the estate of the
deceased husband. It was held that since the widows had an equal share in
the income from immovable properties, Section 9(3) of the Indian Income Tax
Act, 1922 will apply. So far as other incomes were concerned, it was held:

"Coming back to the facts found by the Tribunal, there is no finding that
the three widows have combined in a joint enterprise to produce income.
The only finding is that they have not exercised their right to separate
enjoyment, and except for receiving the dividends and interest jointly, it
has been found that they have done no act which has helped to produce
income in respect of the shares and deposits. On these findings it cannot
be held that the three widows had the status of an association of persons
within the meaning of section 3 of the Indian Income Tax Act."

20. The meaning of "an association of persons" was also examined by this
Court in the case of G. Murugesan & Brothers v. CIT, (1973) 4 SCC 211. It
was held in that case that an association of persons could be formed only
when two or more individuals voluntarily combined together for certain
purposes. Volition on the part of the members of the association was an
essential ingredient. It was further held that even a minor could join "an
association of persons" if his lawful guardian gave his consent. The income
in that case arose under two heads - house property and dividends from
shares. The question before this Court was whether the dividend income
should be assessed in the hand of an association of persons or individuals.
One Sinnamani Nadar executed a settlement deed in favour of his four
grandsons. The property covered by the settlement deed comprised of a house
property which had been let out and some shares. The donees were to enjoy
the income of these properties during their lifetime. Thereafter, the
properties were to devolve on their children. In that case, it was pointed
out that Income Tax return was filed in the status of association of
persons prior to the assessment year 1959-60 to 1962-63, the returns were
submitted as individuals specifically stating that the donees were not
functioning as an association of persons.”

6. In the present case, the admitted facts are that the property in
question which was acquired by the Government, came to the respondents on
inheritance from their father i.e. by the operation of law. Furthermore,
even the income which is earned in the form of interest is not because of
any business venture of the three assessees but it is the result of the act
of the Government in compulsorily acquiring the said land. In these
circumstances, the case is squarely covered by the ratio of the judgment
laid down in Meera & Company (supra) inasmuch as it is not a case where any
“Association of Persons” was formed by volition of the parties for the
purpose of generation of income. This basic test to determine the status
of AoP is absent in the present case.

7. Insofar as the second question is concerned, that is also covered by
another judgment of this Court in Commissioner of Income Tax, Faridabad vs.
Ghanshyam (HUF) reported in (2009) 8 SCC 412, albeit, in favour of the
Revenue. In that case, the court drew distinction between the “interest”
earned under Section 28 of the Land Acquisition Act and the “interest”
which is under Section 34 of the said Act. The Court clarified that
whereas compensation given to the assessee of the land acquired would be
'income', the enhanced compensation/consideration becomes income by virtue
of Section 45(5)(b) of the Income Tax Act. The question was whether it
will cover “interest” and if so, what would be the year of taxability. The
position in this respect is explained in paras 49 and 50 of the judgment
which make the following reading:

“49. As discussed hereinabove, Section 23(1-A) provides for additional
amount. It takes care of the increase in the value at the rate of 12% per
annum. Similarly, under Section 23(2) of the 1894 Act there is a provision
for solatium which also represents part of the enhanced compensation.
Similarly, Section 28 empowers the court in its discretion to award
interest on the excess amount of compensation over and above what is
awarded by the Collector. It includes additional amount under Section 23(1-
A) and solatium under Section 23(2) of the said Act. Section 28 of the
1894 Act applies only in respect of the excess amount determined by the
court after reference under Section 18 of the 1894 Act. It depends upon
the claim, unlike interest under section 34 which depends on undue delay in
making the award.

50. It is true that “interest” is not compensation. It is equally true
that Section 45(5) of the 1961 Act refers to compensation. But as
discussed hereinabove, we have to go by the provisions of the 1894 Act
which awards “interest” both as an accretion in the value of the lands
acquired and interest for undue delay. Interest under Section 28 unlike
interest under Section 34 is an accretion to the value, hence it is a part
of enhanced compensation or consideration which is not the case with
interest under Section 34 of the 1894 Act. So also additional amount under
Section 23 (1-A) and solatium under Section 23(2) of the 1961 Act forms
part of enhanced compensation under Section 45(5)(b) of the 1961 Act.”

8. It is clear from the above that whereas interest under Section
34 is not treated as a part of income subject to tax, the interest earned
under Section 28, which is on enhanced compensation, is treated as a
accretion to the value and therefore, part of the enhanced compensation or
consideration making it exigible to tax. After holding that interest on
enhanced compensation under Section 28 of 1894 Act is taxable, the Court
dealt with the other aspect namely, the year of tax and answered this
question by holding that it has to be tested on receipt basis, which means
it would be taxed in the year in which it is received. It would mean that
converse position i.e. spread over of this interest on accrual basis is not
permissible. Here again, we would like to reproduce the discussion
contained in paras 53 and 54 which gives the rational in coming to the
said conclusion. Paras 53 and 54 read as under:

“53. The scheme of Section 45(5) of the 1961 Act was inserted w.e.f. 1-4-
1988 as an overriding provision. As stated above, compensation under the
L.A.Act, 1894, arises and is payable in multiple stages which does not
happen in cases of transfers by sale, etc. Hence, the legislature had to
step in and say that as and when the assessee claimant is in receipt of
enhanced compensation it shall be treated as “deemed income” and taxed on
receipt basis. Our above understanding is supported by insertion of clause
(c) in Section 45(5) w.e.f. 1-4-2004 and Section 155(16) which refers to a
situation of a subsequent reduction by the court, tribunal or other
authority and recomputation/ amendment of the assessment order.

54. Section 45 (5) read as a whole [including clause (c)] not only deals
with reworking as urged on behalf of the assessee but also with the change
in the full value of the consideration (computation) and since the enhanced
compensation/consideration (including interest under Section 28 of the 1894
Act) becomes payable/ paid under the 1894 Act at different stages, the
receipt of such enhanced compensation/ consideration is to be taxed in the
year of receipt subject to adjustment, if any, under Section 155(16) of the
1961 Act, later on. Hence, the year in which enhanced compensation is
received is the year of taxability. Consequently, even in cases where
pending appeal, the court/tribunal/authority before which appeal is
pending, permits the claimant to withdraw against security or otherwise the
enhanced compensation (which is in dispute), the same is liable to be taxed
under Section 45(5) of the 1961 Act. This is the scheme of Section 45(5)
and Section 155(16) of the 1961 Act. We may clarify that even before the
insertion of Section 45(5)(c) and Section 155(16) w.e.f. 1-4-2004, the
receipt of enhanced compensation under Section 45(5)(b) was taxable in the
year of receipt which is only reinforced by insertion of clause (c) because
the right to receive payment under the 1894 Act is not in doubt.”

0. In view of the above discussion, we allow these appeals in part and
set aside that portion of the impugned judgment of the High Court whereby
spread over of the interest received under section 28 of the 1894 Act, on
the enhanced income is allowed with the direction that it would be taxed in
the year in which such interest on enhanced compensation was received.

.........................J.
[ J. CHELAMESWAR ]

…........................J.
[ A.K. SIKRI ]
NEW DELHI
SEPTEMBER 04, 2014

Divorce - Permanent alimony - Divorce granted - Permanent alimony granted at 24 lakhs - High court enhanced the same to Rs. 40 lakhs - Apex court reduced the same to Rs.15 lakhs = CIVIL APPEAL NOS. 8459-8462 OF 2014 (Arising out of Special Leave petition (Civil) Nos.9694-9697 of 2012) V.K. Vasantha Kumari …Appellant Versus R. Sudhakar …Respondent = 2014 - Sept. Month - http://judis.nic.in/supremecourt/filename=41881

Divorce - Permanent alimony - Divorce granted - Permanent alimony granted at 24 lakhs - High court enhanced the same to Rs. 40 lakhs - Apex court reduced the same to Rs.15 lakhs =

The said interlocutory application came to
be disposed of by an order dated 3.11.2009 by the IInd Additional Family
Court, Chennai granting an amount of Rs.24 lakhs as permanent alimony.=

High court-

“36. Since the appellant is having three children, in the event of
vacating the existing premises, if she takes on lease at least a three bed
room flat in a decent locality, she would have to spend at least Rs.25,000/-
per month, apart from the other expenses.
But the appellant is occupying
the respondent house. Since, the appellant had submitted that her first
daughter is employed, she would also be earning. The appellant, as pointed
out above is having two properties at Injambakkam and sea Shore town worth
about Rs.2 crores.
Taking into consideration all these aspects, we are of
the considered view that the appellant may require at least Rs.40,000/- per
month to meet the expenses.
For getting Rs.40,000/- per month as return
she may have to invest Rs.40,00,000/-. The Family court awarded a sum of
Rs.24,00,000/- as permanent alimony.
Considering the present cost of
living, we are of the considered view that the permanent alimony awarded by
the IInd Additional Family Court, Chennai is on the lower side and the same
should be increased to Rs.40,00,000/-.
Accordingly, the permanent alimony
awarded by the Family Court is increased to Rs.40,00,000/-.

37. Therefore, the fair and final order of the Family Court passed in IA
No.409 of 2009 in H.M.O.P. No.571 of 2004 on the file of the IInd
Additional Family Court, Chennai is modified by awarding Rs.40,00,000/-
(Rupees Forty Lacs only) as permanent alimony to the appellant/petitioner.
38. In the result, C.M.A. No.933 of 2010 is partly allowed and C.M.A.
No.543 of 2010 stands dismissed. M.P. (MD) No.1 of 2011 in CMA No.543 of
2010 is dismissed and M.P. (MD) No.1 of 2010 is closed. No costs.”

Apex court

In the facts and circumstances of the case, we find justification in
the demand made by the appellant. We, therefore, direct the respondent to
pay another Rs.15,00,000/- (rupees fifteen lakhs) to the appellant wife
towards permanent alimony within a period of thirty days from today.

2014 - Sept. Month - http://judis.nic.in/supremecourt/filename=41881

Reportable
IN THE SUPREME COUR OF INDIA
CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NOS. 8459-8462 OF 2014
(Arising out of Special Leave petition (Civil) Nos.9694-9697 of 2012)

V.K. Vasantha Kumari …Appellant

Versus

R. Sudhakar …Respondent

J U D G M E N T

Chelameswar, J.

1. Leave granted.

2. The instant appeal is filed by the appellant wife being not satisfied
with the order of the High Court of Madras in CMA Nos.543 and 933 of 2010
and M.P. No.1 of 2010 and M.P. No.1 of 2011 in the above mentioned CMAs.

3. The appellant and the respondent were wife and husband. Their
marriage took place in 1986. It is an unfortunate case where the
relationship between the appellant and respondent ran into trouble. There
are three grown up children out of the said wedlock.

4. In the year 2004, the respondent husband filed FCOP No.571 of 2004
before the IInd Additional Family Court at Chennai seeking divorce from the
appellant on the ground of cruelty. The said FCOP was allowed on
3.11.2009. But both the parties carried the appeals No.544 and 932 of
2010. Both the appeals were disposed of by a common order dated 25.1.2011.
The appellate decree insofar it is relevant for our purpose reads thus:
“2. That the Judge and Decree of Court below in respect of clause (1)
i.e., the marriage dissolved by the decree of divorce on the ground of
cruelty be and hereby is set aside and the marriage is dissolved based on
the ‘no objection’ endorsement made by petitioner in the petition.”

5. The children of the parties filed Suit No.677 of 2004 before the High
Court of Madras for partition of the plaint scheduled property.

6. From the impugned order it can be seen that there are thirteen items
in the partition suit referred to above. According to the respondent, some
of these items are already sold off. Admittedly, even according to the
respondent the family has been maintaining five vehicles.

7. The partition suit is still pending after a decade. During the
pendency of the above mentioned two proceedings, innumerable interlocutory
applications came to be filed by various parties. It may not be necessary
and profitable to describe all the proceedings.

8. The appellant moved an interlocutory application under Section 24 of
the Hindu Marriage Act, 1955 for grant of interim maintenance in the
divorce original petition filed by the husband. The said Interlocutory
Application No.3475 of 2004 was dismissed by the Family Court on 3.2.2007.
Against the said order, the appellant herein filed a Civil Revision being
CRP (PO) No.1168 of 2007 before the High Court of Madras which was disposed
of by an order dated 15.10.2008. The relevant portion of the order is as
follows:
“5. In the result, this Civil Revision Petition is disposed of with a
direction to the IInd Additional Judge, Family court, Chennai to dispose of
the divorce petition along with application for permanent alimony, that
would be filed by the petitioner herein/wife and also the arrears of
maintenance on the basis of the details that would be filed by her, within
the period stipulated by the Hon’ble 1st Bench of this court, while
disposing of the OSA No.179 of 2008 on 14.07.06.”

9. Pursuant to the said direction of the High Court, the appellant
herein filed another Interlocutory Application No.409 of 2009 in the
Original Petition No.571 of 2004 referred to above seeking permanent
alimony of Rs.1 lakh per month. The said interlocutory application came to
be disposed of by an order dated 3.11.2009 by the IInd Additional Family
Court, Chennai granting an amount of Rs.24 lakhs as permanent alimony.

10. Aggrieved by the said order, the respondent husband herein carried
the matter in appeal (by CMA No.543 of 2010) to the High Court. Not
satisfied with the amount granted, the appellant wife also carried the
matter in appeal (by CMA No.933 of 2010) before the High Court. Both these
matters came to be disposed of by the impugned order. The operative
portion of the impugned order reads as under:
“36. Since the appellant is having three children, in the event of
vacating the existing premises, if she takes on lease at least a three bed
room flat in a decent locality, she would have to spend at least Rs.25,000/-
per month, apart from the other expenses. But the appellant is occupying
the respondent house. Since, the appellant had submitted that her first
daughter is employed, she would also be earning. The appellant, as pointed
out above is having two properties at Injambakkam and sea Shore town worth
about Rs.2 crores. Taking into consideration all these aspects, we are of
the considered view that the appellant may require at least Rs.40,000/- per
month to meet the expenses. For getting Rs.40,000/- per month as return
she may have to invest Rs.40,00,000/-. The Family court awarded a sum of
Rs.24,00,000/- as permanent alimony. Considering the present cost of
living, we are of the considered view that the permanent alimony awarded by
the IInd Additional Family Court, Chennai is on the lower side and the same
should be increased to Rs.40,00,000/-. Accordingly, the permanent alimony
awarded by the Family Court is increased to Rs.40,00,000/-.

37. Therefore, the fair and final order of the Family Court passed in IA
No.409 of 2009 in H.M.O.P. No.571 of 2004 on the file of the IInd
Additional Family Court, Chennai is modified by awarding Rs.40,00,000/-
(Rupees Forty Lacs only) as permanent alimony to the appellant/petitioner.

38. In the result, C.M.A. No.933 of 2010 is partly allowed and C.M.A.
No.543 of 2010 stands dismissed. M.P. (MD) No.1 of 2011 in CMA No.543 of
2010 is dismissed and M.P. (MD) No.1 of 2010 is closed. No costs.”

11. Aggrieved by the said order the respondent herein carried the
matter to this Court in SLP Nos. 2506-2507 of 2012 which was dismissed by
an order of this Court on 30.01.2012. Thereafter, the respondent deposited
the amount of Rs.40 lakhs and the same is recorded by this Court vide order
dated 26.11.2013. Therefore, the finding of the High Court, while
determining the question of permanent alimony of the appellant, that the
appellant requires the amount of Rs.40,000/- per month has become final.
The issue in the instant appeal is limited. The appellant has prayed that
having regard to the fluctuating rate of interest on fixed deposits, the
amount of Rs.40 lakhs will not constantly fetch an interest of Rs.40,000/-
per month, an appropriate order be passed to ensure that she gets a monthly
sum of Rs.40,000/- towards her maintenance.

12. We have heard the learned counsel for the respondent.

13. In the facts and circumstances of the case, we find justification in
the demand made by the appellant. We, therefore, direct the respondent to
pay another Rs.15,00,000/- (rupees fifteen lakhs) to the appellant wife
towards permanent alimony within a period of thirty days from today.

14. The appeals are accordingly disposed of with no order as to
costs.

………………………….J.
(J. Chelameswar)

.……………………..….J.
(A.K. Sikri)
New Delhi;
September 04, 2014

IN THE SUPREME COUR OF INDIA
CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NOS. 8459-8462 OF 2014
(Arising out of Special Leave petition (Civil) Nos.9694-9697 of 2012)

V.K. Vasantha Kumari …Appellant

Versus

R. Sudhakar …Respondent

J U D G M E N T

After the order is pronounced, a prayer is made by Mr. Ankur
Saigal, learned counsel appearing for the respondent husband that the
respondent be given a period of two months to comply with the direction
given today. We, therefore, direct the husband to make the payment within
a period of 8 weeks from today instead of 30 days, as directed in the
judgment.

………………………….J.
(J. Chelameswar)

.……………………..….J.
(A.K. Sikri)
New Delhi;
September 04, 2014

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