“In Dr Pradeep Jain case this Court has observed that in Super Specialities there should really be no reservation. This is so in the general interest of the country and for improving the standard of higher education and thereby improving the quality of available medical services to the people of India. We hope and trust that the Government of India and the State Governments shall seriously consider this aspect of the matter without delay and appropriate guidelines shall be evolved by the Indian Medical Council so as to keep the Super Specialities in medical education unreserved, open and free.”

                                                                  REPORTABLE
                        IN THE SUPREME COURT OF INDIA

                         CIVIL ORIGINAL JURISDICTION


                    WRIT PETITION (CIVIL) NO.444 OF 2015

Dr. Sandeep s/o Sadashivrao Kansurkar   ... Petitioner(s)
and Others
                       Versus
Union of India and Others                    ... Respondent(s)

                               J U D G M E N T

Dipak Misra, J.
      The gravamen of grievance and the  substratum  of  discontent  of  the
petitioners in this  writ  petition,  preferred  under  Article  32  of  the
Constitution of India, is that though the primary eligibility  criteria  for
appearing  in  the  super-specialty  entrance   examination   conducted   in
different States in India for admission to D.M. (Doctorate of Medicine)  and
M.Ch. (Masters of Chirurgiae) course regard being had to  the  purpose  that
it  endows  the  students  an  excellent  opportunity  to  prosecute   super
specialty subjects and  to  fulfill  their  aspirations  for  a  bright  and
vibrant career as well as to serve the society in the institutes  recognized
by the Medical Council of India  (MCI)  and  most  of  the  States,  namely,
Maharashtra, Uttar Pradesh, Gujarat, Rajasthan,  Delhi,  Karnataka,  Kerala,
West Bengal, Bihar and Haryana, conduct the  entrance  examination  for  the
eligible candidates from All Over India and permit them  to  appear  in  the
entrance examination, yet the States like,  Andhra  Pradesh,  Telangana  and
Tamil Nadu, confine the eligibility only to the candidates  having  domicile
in their respective States.   The  fall  out  of  the  restriction  is  that
candidates having the domicile in  the  said  States  can  appear  in  other
States’ entrance examination without any restriction and compete with  other
candidates, and the said situation creates a clear disparity, and further  a
state of inequality has  been  allowed  to  reign  in  the  aforesaid  three
States.  The dissatisfaction is further accentuated by  asserting  that  the
institutes with super-specialty courses are distributed all over India in  a
heterogeneous  manner  and  the  States   like,   Punjab,   Madhya   Prades,
Chhatisgarh,  Manipur,  Arunachal  Pradesh,  Nagaland,   Mizoram,   Tripura,
Sikkim, Uttarakhand are not having any government institutes offering super-
specialty courses and the candidates from the said States have to depend  on
the other States’ entrance examinations to seek a career in  the  discipline
they are interested, but for the restriction imposed  by  the  States  like,
Andhra  Pradesh,  Telangana  and  Tamil  Nadu,  they  are  deprived  of  the
opportunity to participate in the entrance examination and that invites  the
frown of Articles 14 and 16 of the Constitution of India.
2.    It is urged in the writ petition that the  restraint  imposed  by  the
aforesaid three States amounts  to  reservation  in  respect  of  the  post-
graduate level; and as far as the  super-specialty  courses  are  concerned,
the question of reservation based on residence or  institutional  preference
is  totally  impermissible,  for  merit  cannot  be  compromised  by  making
reservation on the consideration,  like  residential  requirement,  as  that
would be  absolutely  against  the  national  interest  and  plays  foul  of
equality clause engrafted in the Constitution.  It is  put  forth  that  the
States  of  Andhra  Pradesh  and  Telangana  have  drawn  support  from  the
Presidential  order,  namely,  Andhra   Pradesh   Educational   Institutions
(Regulations  and  Admissions)  order  1974  (for  short  “the  Presidential
Order”) issued under Article 371-D of the  Constitution  and  G.O.P.  No.646
dated 10th July, 1979 issued by the State  of  Andhra  Pradesh  (for  short,
‘the 1979  circular’),  which  are  really  not  applicable  to  the  super-
specialty courses, for  the  legal  system  which  prevails  throughout  the
territory of India is a singular and indivisible one and Article 14  lays  a
clear postulate for conferment of equal opportunity throughout  the  nation.
It is asseverated that  the  reservations  made  by  the  States  of  Andhra
Pradesh, Telangana and Tamil Nadu,  ushers  in  a  state  of  inequality  by
putting the residents of  the  said  States  in  one  class  solely  on  the
foundation of  domicile  and  others  in  a  different  category  altogether
without  any  rationale  and,  therefore,  the  entire  action   smacks   of
arbitrariness and unreasonableness.
3.    On the basis of aforesaid assertions prayers have been made  to  issue
a command to the Respondent Nos.1 and 6  i.e.  the  Secretary,  Ministry  of
Health and Family Welfare, Union of India and the Medical Council of  India,
respectively,  to  allow  the  petitioners  to  appear   in   the   entrance
examination conducted by the respondent Nos.3 to 5 i.e. the States of  Tamil
Nadu, Andhra Pradesh and Telangana for the year  2015-2016  for  the  super-
specialty courses and further to issue a  writ  of  mandamus  directing  the
respondent Nos.1 and 6,  as  well  as  the  respondent  No.2,  the  Director
General of Health Services of the  Union  of  India,  to  conduct  a  common
entrance test for admission to super-specialty  courses,  like  DM/M.Ch.  at
All India Level, and for certain other ancillary reliefs.
4.    A counter affidavit has been filed by  the  State  of  Andhra  Pradesh
contending, inter alia, that the claim of the petitioners to appear  in  the
entrance test conducted by the State of Andhra Pradesh  for  admission  into
the medical super-specialty  courses  is  contrary  to  the  scheme  of  the
Presidential Order and the 1979 circular.  It is set forth  in  the  counter
affidavit that the  two  categories  of  institutions,  namely,  State  wide
educational Institutions and Non-State wide educational Institutions  (Local
Institutions) existed in the State of undivided Andhra Pradesh  as  per  the
Presidential Order and further clarified by 1979 circular  all  professional
under-graduate and post-graduate courses are  covered  under  the  aforesaid
two categories of institutions.  It is contended that  the  erstwhile  State
of Andhra Pradesh was divided into three local areas that came under  Andhra
University, Osmania University  and  Sri  Venkateswara  University  for  the
purpose of admission into the educational institutions.  Subsequent  to  the
bifurcation of the State, the Andhra University area  and  Sri  Venkateswara
University area have come under the territory of  State  of  Andhra  Pradesh
and the Osmania University area has come under the State  of  Telangana  and
85% of the seats are reserved for the local candidates  in  each  University
area and the said system is to remain in vogue for a period  of  ten  years.
A reference has  been  made  to  paragraph  3  of  the  Presidential  Order,
indicating the division of the local areas.   There  is  also  reference  to
paragraphs 5 and 7 of  the  Presidential  Order,  which  indicate  that  the
reservations are available for the local candidates in the University  areas
in  Non-State-wide  educational  institutions  and  State-wide   educational
institutions.  Placing reliance on the same it is asserted  that  admissions
upto 85% of Non-State-wide seats shall be reserved in favour  of  the  local
areas as per procedure specified in the 1979 circular as amended  from  time
to time and remaining 15% seats are to be treated as  unreserved  seats  for
the  Non-State  candidates  who  have  qualified  in  the   Entrance   Test.
Elaborating the same, it is contended that  admission  upto  85%  State-wide
seats shall be reserved  in  favour  of  Andhra  and  Nagarjuna  University,
Osmania and Kakatiya University  and  Sri  Venkateswara  University  in  the
ratio 42:36:22 respectively as per the procedure specified as per  the  1979
circular.  It is highlighted that paragraph 4  of  the  Presidential  Order,
defines the local candidate in  reference  to  a  local  area  and  how  the
remaining 15% unreserved seats have to be dealt with.   In  essence,  it  is
the stand of the State  of  Andhra  Pradesh  that  according  to  Six  Point
Formula of  the  Constitution  of  India,  as  amended  by  32nd  Amendment,
inserting Article 371-D, special provisions have been  made  in  respect  of
the State of Andhra Pradesh which provide equal opportunities  in  different
parts of the State in the matter of  public  employment  and  education.  To
bolster  the  stand  that  there  is  no  provision  for  admission  to  the
candidates of other States except the candidates belonging to the  State  of
Andhra  Pradesh,  emphasis  is  laid  on  the  schematic  context   of   the
Presidential Order and the 1979 circular and further it is  reiterated  that
in view of the special status conferred on the State by  the  constitutional
norms of equality which has been assiduously  attempted  to  build  is  sans
substance as per the Presidential Order read with 1979 circular.
5.    The State of Telangana has also filed a counter affidavit  wherein  it
has been stressed that the Presidential Order, as well as the 1979  circular
are protective in nature and a distinction has been drawn between the  local
candidates and reservation for local candidates; and the candidates who  are
eligible to apply for admission in respect  of  the  remaining  15%  of  the
unreserved seats.  It is urged that the 15% of unreserved seats as  per  the
Presidential Order and the circular issued by the State Government in  1979,
do not include the candidates from other States.  The  other  grounds  which
have been put forth in the counter affidavit  need  not  be  stated  because
they are in a way repetition of the stand  taken  by  the  State  of  Andhra
Pradesh.
6.    The State of Tamil Nadu has also filed a  counter  affidavit,  but  we
shall not refer to the same in praesenti.  At  the  very  outset,  we  would
like to make it absolutely clear that when we reserved the  matter,  we  had
mentioned in our order that the controversy relating to the State  of  Tamil
Nadu shall be taken up after the judgment is pronounced in  respect  of  the
States of Andhra Pradesh and Telangana.
7.    We have heard Ms. Indu  Malhotra  and  Mr.  B.H.  Marlapalle,  learned
senior counsel for the petitioners,  Mr.  Mukul  Rohatgi,  learned  Attorney
General for Union of India, Mr. H.P. Raval, learned  senior  counsel,  along
with Mr. S. Udaya Kumar Sagar, learned counsel for the State  of  Telangana,
Mr. Guntur Prabhakar, learned counsel for the State of  Andhra  Pradesh  and
Mr. Gaurav Sharma, learned counsel for the Medical Council of India.
8.     It  is  submitted  by  Ms.  Indu  Malhotra,  learned  senior  counsel
appearing for the petitioners that though Article 371-D of the  Constitution
of India makes special provisions for the State, yet that would  not  extend
to cover reservations as regards the  super-specialty  courses  where  merit
alone matters as has been held by  the  Constitution  Bench  in  Dr.  Preeti
Srivastava and Another vs. State of M.P. and Others[1]. It is urged  by  her
that equality before law and equal protection of the law serve  the  purpose
of excellence and if merit is compromised on  the  bedrock  of  geographical
boundary, the  basic  normative  principle  of  equality  would  be  marred.
Learned  senior  counsel  would  further  contend   that   the   residential
requirement or institutional preference should not be allowed  to  have  any
room in this category of admissions in view of the pronouncements in  Nikhil
Himthani  vs.  State  of  Uttarakhand[2]  and  Vishal  Goel  vs.  State   of
Karnataka[3].   It  is  astutely  canvassed  by  her  that   the   principle
pertaining to domicile was laid down more than  a  decade  back  in  Saurabh
Chaudri vs. Union of India[4], but both the States, namely,  Andhra  Pradesh
and Telangana have flagrantly violated  the  said  principle  and  given  an
indecent burial to the guidelines issued by the Medical Council of India.
9.     Mr.  B.H.  Marlapalle,  learned  senior  counsel  appearing  for  the
impleaded petitioners would submit that Rule 9 of  the  Medical  Council  of
India Postgraduate Medical Education Regulations, 2000, as amended  on  21st
December, 2010, deals with the selection of post-graduate  students  by  all
the  medical  educational  institutions  all  over  the  country  and  these
Regulations are indubitably binding on all  the  universities  in  both  the
States and they cannot be allowed to violate the same.  It  is  his  further
submission that the Presidential Order, issued under Article  371-D  of  the
Constitution is primarily aimed at removing disparities  between  the  three
different  regions  of  Andhra  Pradesh,  namely,  Andhra,  Rayalaseema  and
Telangana, as prevailing at the time  of  its  formation  of  the  State  of
Andhra Pradesh consequent upon the  States  Reorganization  Act,  1956,   in
respect of employment and education and the term “education” as finds  place
in Clause 2(1)(a) of the Presidential Order,  defines  the  term  “available
seats”, which means number of seats in a course for admission  at  any  time
after excluding those  reserved  for  candidates  from  outside  the  State.
Learned senior counsel has referred to Clause 3 of  the  Presidential  Order
and highlighted that whatever manner the interpretation is placed  on  those
clauses, 15% has to be demarcated as non-local quota or  available  for  the
candidates who are not residents of the State.  He has  emphatically  argued
that clause 2(1)(a)  of the 1979 circular, is only a  clarifactory  one  and
hence, it cannot convey that the candidates who have passed the  examination
from any State other than Andhra  Pradesh/Telangana,  do  not  fall  in  the
category of candidates from outside the State.   That  apart,  it  is  urged
that  in  the  name  of  clarification  it   cannot   place   an   erroneous
interpretation on the Presidential Order, for that will make the said  Order
unworkable, and also would cause violence to the language  employed  in  the
Presidential Order.
10.   Mr. Marlapalle has referred to paragraph 11 of the  1979  circular  to
buttress his stand that the procedure of implementation  of  reservation  is
clear to the extent  that  15%  reservation  will  be  meant  for  non-local
candidates.  He has given an example by stating that if there are  12  seats
available for a particular  super-specialty  course  in  a  university,  the
available seats will be arrived at by deducting  the  national  quota,  that
may be 2 seats, and from the remaining  10  available  seats,  85%  will  be
earmarked for the local candidates and  remaining  15%  for  those  who  are
listed in Clause 2 of the Presidential Order would go  to  non-local  quota.
He has placed reliance on the prospectus issued for the academic year  2015-
2016  by  Dr.  N.T.R.  University  of  Health  Sciences,   Andhra   Pradesh,
especially on Clause 3.8 to 3.8.6.  Learned senior counsel  has  also  drawn
inspiration from Rule 2(2) of the  Rules  for  Admission  to  Post  Graduate
Courses in the Medical Colleges  in  the  State  of  Andhra  Pradesh,  1983.
Learned senior counsel has criticized that the prospectus  of  the  academic
year 2015-2016 of the universities, namely, Dr. N.T.R. University of  Health
Sciences, Andhra Pradesh and Nizam’s Institute of  Medical  Sciences,  which
do not provide for All India quota  and  only  provide  for  the  “available
seats” and, in that backdrop it is suggested that  the  Medical  Council  of
India  should  issue  appropriate  directions  under  the  approval  of  the
Government of India to earmark national quota outside the  State  of  Andhra
Pradesh and Telangana in the super-specialty post-graduate medical  courses;
and for the current academic year, the Medical Council of  India  should  be
directed to consider to  create  additional  seats  for  national  quota  in
respect of these two States so  that  the  Presidential  Order  is  properly
implemented.
11. Mr. Marlapalle has submitted that to understand the controversy  in  the
proper perspective of the Presidential Order and how the States have  worked
it out, the examination of certain Acts, Rules and Regulations, namely.  (i)
A.P. Educational Institutions (Regulation of Admission  and  Prohibition  of
Capitation Fee) Act, 1983;  (ii)   Rules  for  Admission  to  Post  Graduate
Courses in the Medical Colleges in the State of Andhra Pradesh, 1983;  (iii)
The Andhra Pradesh Regulation of  Admission  to  Super  Specialties  in  the
Medical  Colleges  Rules,  1983;  (iv)  Andhra  Pradesh   Medical   Colleges
(Admission into Post Graduate Medical  Courses),  Rules  1997,  as  modified
from time to time and (v) Medical  Council  of  India  Postgraduate  Medical
Education Regulations, 2000, as amended from time to time  are  necessary  .
We must immediately  state  that  their  relevance  shall  depend  upon  our
eventual analysis of the constitutional provision,  the  Presidential  Order
and the 1979 circular issued by the State of Andhra Pradesh.
12.   Mr. Mukul Rohatgi, learned Attorney General appearing  for  the  Union
of India, would contend that Article 371-D of the Constitution  enables  the
President of India to issue certain category of orders and  in  exercise  of
that power the Presidential Order had been issued in relation to  the  State
of Andhra Pradesh which pertains to the field of education and  that  covers
the super-specialty courses; and further the 1979  circular  issued  by  the
State Government is not an amendment to the  Presidential  Order,  but  only
postulates the manner and method of implementation.  It is canvassed by  him
that there can be no cavil  that  merit  is  the  rule  in  case  of  super-
specialty courses and there cannot be any reservation, as has been  held  in
Preeti Srivastava (supra) and  subsequent  judgments,  but  this  Court  has
consistently held that as far as the State of Andhra Pradesh  is  concerned,
the super-specialty courses would fall  beyond  the  said  concept.   It  is
propounded by Mr. Rohatgi that the submission  that  15%  would  go  to  the
students who have no domicile in the  State,  should  go  to  candidates  of
other  States,  is  absolutely  incorrect  in  view  of  the  procedure  for
implementation  of  the  Presidential  Order,  which  has  been  elaborately
determined by the State of Andhra Pradesh in 1979.  He has commended  us  to
the decisions in Dr.  Pradeep  Jain  and  Others  vs.  Union  of  India  and
Others[5], Reita Nirankari vs. Union  of  India[6],  Dr.  Dinesh  Kumar  vs.
Motilal Nehru Medical College[7], C. Surekha vs. Union of India[8]  and  Dr.
Fazal Ghafoor vs. Union of  India  and  Others[9].   Needless  to  say,  the
learned Attorney General has submitted that the  principles  stated  in  the
said authorities shall apply on all fours to the State of Telangana.
13.   Mr. Harin P. Raval, learned senior counsel, along with  Mr.  S.  Udaya
Kumar Sagar, learned counsel, appearing for  the  State  of  Telangana  have
adopted the submissions advanced by the learned Attorney General.
14.   To appreciate the controversy raised  in  this  writ  petition  it  is
necessary to reflect upon the language employed  in  Article  371-D  of  the
Constitution and the  interpretation  placed  by  this  Court  on  the  said
provision.  That apart, it would also be essential to  understand  the  1979
circular issued by the State of Andhra Pradesh in  the  year  1979  and  how
this Court has perceived the ambit and scope of the same  and  further  also
consider  the concept of non-applicability of reservation in respect of  the
super speciality courses. Having stated so, we may reproduce Clauses  1  and
2 of Article 371-D of the Constitution, which are relevant for  the  present
purpose, They read as follows:-
“371-D. Special provisions with respect to the State of  Andhra  Pradesh  or
the State of Telangana.- (1) The President may by order  made  with  respect
to the State of Andhra Pradesh or the State of  Telangana,  provide,  having
regard to the requirement of each State,  for  equitable  opportunities  and
facilities for the people belonging to different parts  of  such  State,  in
the matter of  public  employment  and  in  the  matter  of  education,  and
different provisions may be made for various parts of the States.

An order made under clause (1) may, in particular,-

require the State Government to organise any class or classes of posts in  a
civil service of, or any class or classes of civil posts  under,  the  State
into different local cadres for different parts of the State  and  allot  in
accordance with such principles and procedure as may  be  specified  in  the
order the persons holding such posts to the local cadres so organized;

specify any part or parts of the State which shall be regarded as the  local
area –

for direct recruitment to posts in any local  cadre  (whether  organized  in
pursuance of an order under this article  or  constituted  otherwise)  under
the State Government;

for direct recruitment to posts in  any  cadre  under  any  local  authority
within the State; and

for the purposes of admission to any University within the State or  to  any
other educational institution which is subject to the control of  the  State
Government;

specify the extent to which, the manner in which and the conditions  subject
to which, preference or reservation shall be given or made –

in the matter of direct recruitment to posts in any such cadre  referred  to
in sub-clause (b) as may be specified in this behalf in the order;
in the matter of admission to  any  such  University  or  other  educational
institution referred to in sub-clause  (b)  as  may  be  specified  in  this
behalf in the order,

to or in favour of candidates who have resided or  studied  for  any  period
specified in the  order  in  the  local  area  in  respect  of  such  cadre,
University or other educational institution, as the case may be.”

15.   At this stage we  think  it  appropriate  to  refer  to  the  relevant
clauses of the Presidential Order.  The pertinent clauses, we  are  inclined
to think, are:-
“(2) It extends to the whole of the State of Andhra Pradesh.

(3) It shall come into force on the 1st day of July, 1974.

2.  Interpretation:-  (1)  In  this  Order,  unless  the  context  otherwise
requires:-

(a) “available seats” in relation to any course of study, means  the  number
of seats provided in that course for admission at any time  after  excluding
those reserved for candidates from outside the State.

(b) “Local  area”,  in  respect  of  any  University  or  other  educational
institution, means the local area specified in paragraph  3  of  this  Order
for the purposes of  admission  to  such  University  or  other  educational
institution.

(c) “Local candidate”, in relation to any local area, means a candidate  who
qualifies under paragraph 4 of this Order as a local candidate  in  relation
to such local area:

(d) “State Government” means the Government of Andhra Pradesh.

(e) “State-wide educational institution” means  an  educational  institution
or a department of an educational institution specified in the  Schedule  of
this Order.

(f)  “State-wide  University”  means   the   Andhra   Pradesh   Agricultural
University constituted under  the  Andhra  Pradesh  Agricultural  University
Act, 1963  (Andhra  Pradesh  Act  24  of  1963),  or  the  Jawaharlal  Nehru
Technological   University   constituted   under   the   Jawaharlal    Nehru
Technological University Act, 1972 (Andhra Pradesh Act 16 of 1972).

(2) Any reference to any District in this Order  shall  be  construed  as  a
reference to the area comprised in that District on the  1st  day  of  July,
1974.

(3)  The  General  clauses  Act,  1897(10   of   1897)   applies   for   the
interpretation of this order as it  applies  for  the  interpretation  of  a
Central Act.

3.    Local area:- (1) The part of the  State  comprising  the  district  of
Srikakulam, Visakhapatnam, West Godavari,  East  Godavari,  Krishna,  Guntur
and Prakasam shall be regarded  as  the  local  area  for  the  purposes  of
admission to the Andhra University, (the Nagarjuna University)  and  to  any
other educational institution (other than a State-wide University or  State-
wide educational institution) which is subject to the control of  the  State
Government and is situated in that part.

(2) The part of the State comprising the districts of  Adilabad,  Hyderabad,
Karimnagar, Khammam, Mahaboobnagar, Medak, Nalgonda, Nizamabad and  Warangal
shall be regarded as the local area for the purposes  of  admission  to  the
Osmania University, (the Kakatiya University) and to any  other  educational
institution(other than a State-wide  University  or  State-wide  Educational
institution) which is subject to the control of the State Government and  is
situated in that part.

(3) The part of the State comprising the districts of  Anantapur,  cuddapah,
Kurnool, Chitoor and Nellore shall be regarded as the  local  area  for  the
purposes of admission to  Sri  Venkateswara  University  and  to  any  other
educational institution (other than a State-wide  University  or  State-wide
educational institution) which is  subject  to  the  control  of  the  State
Government and is situated in that part.

4.    Local candidates:- (1) A Candidate for  admission  to  any  course  of
study shall be regarded as a local candidate in relation to a local area

(a)  if  he  has  studied  in  an  educational  institution  or  educational
institutions in such  local  area  for  a  period  of  not  less  than  four
consecutive academic years  ending  with  the  academic  year  in  which  he
appeared or, as the case may be, first appeared in the  relevant  qualifying
examination; or.

(b) Where during the whole of any part  of  the  four  consecutive  academic
years ending with the academic year in which he appeared  or,  as  the  case
may be, first appeared for the relevant qualifying examination, he  has  not
studied in any educational institution.  If he has  resided  in  that  local
area for a period of not less than  four  years  immediately  preceding  the
date of commencement of the relevant  qualifying  examination  in  which  he
appeared or as the case may be first appeared.

(2) A candidate for admission to any course of study who is not regarded  as
a local candidate under sub-paragraph (1) in  relation  to  any  local  area
shall.

(a) if he has studied in educational institutions in the State for a  period
of not less than seven consecutive academic years ending with  the  academic
year in which he appeared or, as the case may be,  first  appeared  for  the
relevant qualifying  examination,  be  regarded  as  a  local  candidate  in
relation to.

(i) such local are where he has studied for the maximum period  out  of  the
said period of seven years; or.

(ii) Where the periods of his study in two or more local  areas  are  equal,
such local area where he has studied last in such equal periods; or.

(b) if during the whole or any part of the seven consecutive academic  years
ending with the academic year in which he appeared or, as the case  may  be,
first appeared for the relevant qualifying examination, he has  not  studied
in the educational institution in any local area, but  has  resided  in  the
State during the whole of the said period of seven years be  regarded  as  a
local candidate in relation to.

(i) such local area where he has resided for the maximum period out  of  the
said period of seven years, or.

(ii) Where the period of “his residence in  two  or  more  local  areas  are
equal, such local area where he has resided last in such equal periods”.]

Explanation – For the purpose of this paragraph.

(i)  “Educational  institution”  means  a  University  or  any   educational
institution recognized  by  the  State  Government  a  University  or  other
competent authority;

(ii) “relevant qualifying examination”  in  relation  to  admission  to  any
course of study, means the examination, a  pass  in  which  is  the  minimum
educational qualification for admission to such course of study;

(iii) in reckoning the consecutive academic years during which  a  candidate
has studied,-

(a) any period of interruption of his study by  reason  of  his  failure  to
pass any examination; and

(b) any period of his study in a  State-wide  University  or  a  State  wide
educational institution, shall be disregarded.

(iv) the question whether any candidate  for  admission  to  any  course  of
study has resided in any local area shall be determined  with  reference  to
the places where the candidate actually resided and not  with  reference  to
the residence of his parent or other guardian.]

5. Reservation in non-State-wide Universities and educational Institutions:-
 (1) Admissions to eighty-five percent  of  the  available  seats  in  every
course  of  study  provided  by  the  *(Andhra  University,  the   Nagarjuna
University,  the  Osmania  University.**  the  Kakatiya  University  or  Sri
Venkateswara University) or by  any  other  educational  institution  (other
than a State-wide University or a Statewide educational  institution)  which
is subject to the control of the  State  Government  shall  be  reserved  in
favour of the local candidates in relation to the local area in  respect  of
such University or other educational institution.

(2) While determining under sub-paragraph (1) the  number  of  seats  to  be
reserved in favour of local candidates any  fraction  of  a  seat  shall  be
counted as one:

Provided that there shall be at least one unreserved seat.

6.    Reservation  in  Statewide  Universities  and  State-wide  educational
institutions (1) Admissions to eighty five percent of  the  available  seats
in every course of study provided by a State-wide  University  or  a  State-
wide educational institution shall be reserved in favour  of  and  allocated
among the local candidates I relation, to the  *(Local  areas  specified  in
sub-paragraph(1), sub-paragraph(2) and sub-paragraph(3) of paragraph  3,  in
the ratio of 42:36:22 respectively:

Provided that this sub-paragraph shall not apply in relation to  any  course
of study in which the total  number  of  available  seats  does  not  exceed
three.

(2) While determining under sub-paragraph(1)  the  number  of  seats  to  be
reserved in favour of the local candidates, any fraction of a seat shall  be
counted as one.

Provided that there shall be at least one unreserved seat.

(3) While allocating under sub-paragraph(1) the  reserved  seats  among  the
local candidates in relation to the different local areas,  fractions  of  a
seat shall be adjusted by counting the greatest  fraction  as  one  and,  if
necessary, also the greater of the  remaining  fractions  as  another;  and,
where the fraction to be so counted cannot be  selected  by  reason  of  the
fractions being equal, the selection shall be by lot.

Provided that there shall be at least  one  seat  allocated  for  the  local
candidate in respect of each local area.

7. Filling of reserved vacant seats.- If a local candidate in respect  of  a
local area is not available to  fill  any  seat  reserved  or  allocated  in
favour of local candidate in respect of that local area, such seat shall  be
filled as if it had not been reserved.

8. Power to authorise issue of directions.  –  (1)  the  president  may,  by
order, require the State Government to  issue  such  directions  as  may  be
necessary or expedient for the purpose of giving effect  to  this  Order  to
any University or to  any  other  educational  institution  subject  to  the
control of the State Government; and the  University  or  other  educational
institution shall comply with such directions.

(2) The State Government may, for the  purpose  of  issuing  any  directions
under sub-paragraph (1) or for satisfying itself that any directions  issued
under that sub-paragraph have  been  complied  with  require,  by  order  in
writing, any University or any other educational institution subject to  the
Control of the State Government to furnish them such information, report  or
particulars as may be specified in the order; and the  University  or  other
educational institution shall comply with such order.”

16.  The State  Government  issued  the  circular  in  1979.   The  relevant
paragraphs of the circular deserve to be reproduced.  They read as follows:-

“2.  The Andhra Pradesh Educational Institutions (Regulation of  Admissions)
Order, 1974 provides for reservation of seats in favour of local  candidates
in courses of study provided  by  the  Universities  and  other  educational
institutions subject to the Control of the State  Government.   Paragraph  9
of the order lays down that the provisions of that order shall  have  effect
notwithstanding  anything  contained  in  any   statute   ordinance,   rule,
regulation or other order(whether made before or after the  commencement  of
the Order)  in  respect  of  admissions  to  any  University  or  any  other
educational institutions subject to the control  of  the  State  Government.
Paragraph 10 of the said Order, however, declares that nothing in the  Order
shall affect the operation of any provisions made by  the  State  Government
or other competent authority (whether before or after  the  commencement  of
the Order) in respect of reservations in the  matter  of  admission  to  any
University or other education Institution in favor or  women,  socially  and
educationally backward classes of citizens, the  Scheduled  Castes  and  the
Scheduled Tribes in so far as such provisions are not inconsistent with  the
Order.

3. After the coming into force of the above Presidential Order, with  effect
from 1-7-1974, admissions to the  educational  institutions  in  the  entire
State are to be made in the light of  the  provisions  of  the  said  order.
According to Paragraph 4 of the Order  a  candidate  for  admission  to  any
course of study shall be regarded as a local candidate in  relation  to  the
local area, -

(a)  If  he  has  studied  in  an  educational  institution  or  educational
institutions in such  local  area  for  a  period  of  not  less  than  four
consecutive academic years  ending  with  the  academic  year  in  which  he
appeared or, as the case may be,  first  appeared  in   relevant  qualifying
examination; or

(b) where during the whole or any part  of  the  four  consecutive  academic
years ending with the academic year in which he appeared  or,  as  the  case
may be, first appeared for the relevant qualifying examination, he  has  not
studied in any educational institution, if he  has  resided  in  that  local
area for a period of not less than  four  years  immediately  preceding  the
date of commencement of the relevant  qualifying  examination  in  which  he
appeared, or, as the case may be, first appeared.

4.  It must be noted that para 4(a) as extracted above covers the  cases  of
those candidates who studied in an educational  institution  or  educational
institutions for a period of not less than four consecutive  academic  years
ending with the academic year in which he appeared or, as the case  may  be,
first appeared in the relevant qualifying  examination,  while  para  4  (b)
applies to  the  case  of  other  candidates.  For  purposes  of  para  4(a)
educational institution has been defined as a University or any  educational
institution recognized by  the  State  Government,  a  University  or  other
competent authority.  The eligibility of a candidate who has studied  during
any part of the four years period in an unrecognized institution  will  have
to be dealt with the under para 4(b).  While considering the eligibility  of
a candidate to be regarded as a local candidate,  under  paragraph  4(a)  of
the Order by virtue of four consecutive years of Study in a local  area,  it
should be noted that in reckoning the consecutive academic years  of  study,
any interruption in the period of his study ,by reason  of  his  failure  to
pass any examination shall be disregarded.  For instance,  a  candidate  who
has studied  in  the  IXth  and  Xth  Classes  and  the  Junior  and  Senior
Intermediate Classes in institutions of the sale local area with a break  of
one year after the Xth class on account of failure to  pass  the  Xth  Class
examination at the first attempt, shall be regarded as a local candidate  in
relation to that local  area  for  admission  to  a  degree  course  in  any
institution in that area.

5. The above definition of the local candidate (as it  stood  until  it  was
amended with effect from 25-11-1976) had given rise  to  certain  situations
wherein some of the candidates belonging to the State of Andhra Pradesh  who
have studied or resided throughout within the State came to be  regarded  as
non-local candidates in all the local areas within the State.  In  order  to
avoid such a situation, the  Government  of  India  have  since  issued  the
Andhra Pradesh Educational Institutions  (Regulation  of  Admission)  Second
Amendment Order, 1976 amplifying the said definition in paragraph 4  of  the
Order

6.  The Andhra Pradesh Educational Institutions (Regulation  of  Admissions)
Second Amendment Order, 1976 inserts a new sub-paragraph in  the  said  1974
Order-viz., sub-paragraph (2) to Paragraph 4 thereby  making  provision  for
considering the claims of persons, who under the old definition  would  have
become non-local in relation to all local areas in the State.  According  to
sub-para (2) (a) of Para  4,  after  amendment,  if  such  a  candidate  has
studied in educational institutions in the State for a period  of  not  less
than seven consecutive academic years  ending  with  the  academic  year  in
which he appeared on, as the case may be, first appeared  for  the  relevant
qualifying examination, he  shall  be  regarded  as  a  local  candidate  in
relation to that local area where he had studied for the longest period  out
of the said period of seven years.  In the event of the periods of study  in
two or more local areas being equal he shall be regarded as local  candidate
in relation to that local area where he studied during the last of the  said
equal periods.  Clause (b) to sub-para  (2)  applies  to  a  candidate  who,
during the whole or any part of the seven consecutive academic years  ending
with the academic year in which he appeared or as the  case  may  be,  first
appeared  for  the  relevant  qualifying  examination  has  not  studied  in
educational institutions in any local area, but has  resided  in  the  State
during the whole of the said seven years, the candidate  shall  be  regarded
as a local candidate in relation to that local area  where  he  has  resided
for the longest period out of the said seven  year  period.  This  residence
test will be applies to candidates in whose cases there is a gap  in  study,
occasioned otherwise than by reason of failure to pass  in  an  examination,
in the prescribed  full  term  of  seven  years  immediately  preceding  the
relevant qualifying examination.  It has also been provided that  where  the
periods of residence in two or more local areas are equal, such a  candidate
shall be regarded as a local candidate in relation to the local  area  where
he resided last in such equal periods.  The application of  the  liberalized
definitions made through the Second Amendment Order are illustrated  by  the
examples given in the Annexure – I.

                           xxxxx            xxxxx

9.  The Government have directed that for  the  purpose  of  admission  into
educational institutions, those  who  claim  to  be  local  candidates  with
reference to  para  4(1)  (a)  or  para  4(2)  (a)  of  the  Andhra  Pradesh
Educational Institutions  (Regulation  of  Admissions)  Order,  1974  should
produce evidence in the form of study certificates issued by  the  heads  of
the educational institutions concerned indicating the details  of  the  year
or years in which the candidate has studied in  an  educational  institution
or institutions in such local area for a period of not  less  that  four  or
seven consecutive academic years ending  with  academic  year  in  which  he
appeared or, as the case may be, first appeared in the  relevant  qualifying
examination. Those who do not qualify as local candidates  under  para  4(1)
(a) or 4(2) (a) but claim to qualify  by  virtue  of  residence  under  para
4(1)(b) or para 4 (2) (b) of the said order  should  produce  a  certificate
issued by an Officer of  the  Revenue  Department  not  below  the  rank  of
Tahsildar in the form annexed vide Annexure – II.


                           xxxxx            xxxxx

11. As clarifications were being sought on the question as to who should  be
considered eligible to apply as candidates belonging to the State of  Andhra
Pradesh for the purpose of  admission  to  courses  of  studies  offered  by
educational institutions, subject to the control  of  the  State  Government
against 15% of the available  seats  kept  unreserved  in  terms  of  Andhra
Pradesh Educational Institutions (Regulations  of  Admissions)  Order,  1974
the Government after careful consideration have directed that the  following
categories of candidates may be treated as eligible to apply for  admissions
to educational institutions in the State  subject  to  the  control  of  the
State Government, as candidates belonging to the  State  of  Andhra  Pradesh
against the 15% of the available seats  left  unreserved  in  terms  of  the
Presidential Order:

(i) All local candidates defined in the Presidential Order.

(ii) Candidates who have resided in the State for  a  total  period  of  ten
years excluding periods of study outside  the  State;  or  either  of  whose
parents have resided in the State for a total period of ten years  excluding
periods of employment outside the state;

(iii) Candidates who are children of parents who are in  the  employment  of
this State or Central Government, Public Sector corporation,  Local  Bodies,
Universities and other similar quasi-public institutions within  the  State;
and

(iv) Candidates who are spouses of those in the employment of this State  or
Central Government, Public Sector Corporations, Local  Bodies,  Universities
and educational institutions recognized by the Government  a  University  or
other competent authority and similar  other  quasi-Government  institutions
within the State.

12. It has been decided that persons in the  employment  of  this  State  or
Central Government, Public Sector Corporations, Local  Bodies,  Universities
and other  similar  Quasi-Public  Institutions,  within  the  State  may  be
treated as eligible to apply for admission to the part-time course of  study
offered by the educational institutions in the State subject to the  control
of the state government as candidates  belonging  to  the  State  of  Andhra
Pradesh.

13.  The Government consider that in the large  majority  of  cases  falling
under the above categories, “nativity” may not be in doubt.   The  Heads  of
Educational  Institutions  or  other  admission  authorities  may  call  for
appropriate certificates  of  study/residence  or  employment  in  cases  of
doubt.”

      We shall, as we are obliged to in the instant case,  proceed  to  deal
with the purport of the said circular on the  bedrock  of  the  Presidential
Order.  Be it  clarified,  we  are  not  called  upon  to  decide  upon  the
constitutional validity of the circular, but to understand  the  purport  of
the same through the interpretative purpose.
17.   In Chief Justice of A.P. vs. L.V.A. Dixitulu[10], the  question  arose
before the Constitution Bench of this  Court  as  to  whether  Clause  3  of
Article 371-D of the Constitution that deals  with  civil  services  of  the
State would include the staff of the  High  Court  or  of  the  Sub-ordinate
judiciary. The Constitution Bench held that the statements  and  objects  of
reasons do not indicate that there was any intention whatsoever on the  part
of the legislature to  impair  or  derogate  from  the  scheme  of  securing
independence of the judiciary as enshrined in  Articles  229  and  225;  and
indeed the amendment or abridgment of this basic scheme was never  an  issue
of debate in Parliament.  The Constitution Bench  while  commenting  on  the
Article 371-D had to say this:-

“73.  It will be seen from the above extract, that the  primary  purpose  of
enacting  Article  371-D  was  two  fold:  (i)   To   promote   “accelerated
development of the backward areas of the State of Andhra  so  as  to  secure
the balanced development of the State as  a  whole”,  and  (ii)  to  provide
“equitable opportunities to different areas of the State in  the  matter  of
education, employment and career prospects in public service”.

74. To achieve this primary object, clause (1)  of  Article  371-D  empowers
the  President  to  provide  by  order,  “for  equitable  opportunities  and
facilities for the people belonging to different parts of the State  in  the
matter of public employment and in the matter of education”. Clause  (2)  of
the article is complementary to clause (1). It  particularises  the  matters
which an order made under clause (1) may provide.  For  instance,  its  sub-
clause (c)(i) enables the President to specify in his Order, “the extent  to
which, the manner in which and the conditions subject to which”,  preference
or reservation shall be given or made in the matter  of  direct  recruitment
to posts in any local cadre under the State Government or  under  any  local
authority. Sub-clause (c) further  makes  it  clear  that  residence  for  a
specified period in the local area, can be made a condition for  recruitment
to any such local cadre. Thus, clause  (4)  also  is  directly  designed  to
achieve the primary object of the legislation.”


18.   After so stating the Constitution Bench has ruled that the  evil  that
was sought  to  be  remedied  pertained  to  inequitable  opportunities  and
facilities for the people belonging to  different  parts  of  the  State  of
Andhra Pradesh in  matters  of  public  employment  and  in  the  matter  of
education and had no causal nexus whatever to the independence of  the  High
Court and subordinate judiciary which the Founding Fathers have with  solemn
concern vouchsafed in Articles 229 and 235 of the Constitution.   The  Court
also opined that the public agitation which led to the enactment of  Article
371-D did not have any grievance against the basic scheme of Chapters V  and
VI in Part VI of the Constitution.  The Court interpreting  the  Article  in
entirety eventually  expressed  the  view  that  the  Parliament  never  had
intended to confer a wide,  liberal  interpretation  which  will  defeat  or
render otiose the scheme of Chapters IV and V,  Part  VI  particularized  in
Articles 229 and 235 of the Constitution.
19.   In Dr. Pradeep Jain (supra), a  three-Judge  Bench  was  dealing  with
admissions to medical colleges, both at the undergraduate and at  the  post-
graduate levels.  The question that  arose  for  consideration  was  whether
regard  being  had  to  the  constitutional  values,  admission  to  medical
colleges or any other institution of higher learning  situated  in  a  State
can be confined to those who have their domicile within  the  State  or  who
are residents within the State for a specified number of years  or  can  any
reservation in admissions be made for them so as  to  given  the  precedence
over those who do not possess domicile or residential  qualification  within
the State, irrespective of merit.  After referring  to  various  aspects  in
the Constitution and authorities  rendered  in  N.  Vasundara  v.  State  of
Mysore[11],   Jagdish  Saran  v.  Union  of  India[12]  and  various   other
authorities the three-Judge Bench came to hold thus:-
“We are therefore of the view that so far  as  admissions  to  post-graduate
courses, such as MS, MD and the like are concerned, it  would  be  eminently
desirable not to provide for any reservation based on residence  requirement
within the State or on  institutional  preference.  But,  having  regard  to
broader  considerations  of  equality  of  opportunity   and   institutional
continuity in education which has its own importance  and  value,  we  would
direct that though residence requirement within the State  shall  not  be  a
ground for reservation in admissions to  post-graduate  courses,  a  certain
percentage of seats may in the present circumstances,  be  reserved  on  the
basis of institutional preference in  the  sense  that  a  student  who  has
passed MBBS course from a  medical  college  or  university,  may  be  given
preference for admission to the post-graduate course  in  the  same  medical
college or university but such reservation on  the  basis  of  institutional
preference should not in any event exceed 50 per cent of  the  total  number
of open seats available for admission  to  the  post-graduate  course.  This
outer limit which we are fixing will also be  subject  to  revision  on  the
lower side by the Indian Medical Council in the same manner as  directed  by
us in the case of admissions to the MBBS course.  But,  even  in  regard  to
admissions to the post-graduate course, we  would  direct  that  so  far  as
super specialities such  as  neuro-surgery  and  cardiology  are  concerned,
there should be no reservation at all even on  the  basis  of  institutional
preference and admissions should be granted purely  on  merit  on  all-India
basis.”

20.   After the said judgment was  delivered,  the  said  three-Judge  Bench
passed a clarificatory order in Reita Nirankari (supra)  wherein  the  Court
considered three aspects one of which is relevant for the present case.   We
reproduce the same:-
“We may make it clear that the judgment will not  apply  to  the  States  of
Andhra Pradesh and Jammu and Kashmir because at the time of hearing  of  the
main writ petitions, it was pointed out  to  us  by  the  learned  advocates
appearing on behalf of those States that there were  special  constitutional
provisions in regard to them which would need independent  consideration  by
this Court.”

21.   The aforesaid clarificatory order has its  own  significance,  for  it
undeniably excludes the applicability of the domicile  test  stated  in  Dr.
Pradeep Jain (supra) in respect of the State of  Andhra  Pradesh.   At  this
stage, it would be appropriate to refer to the case of C.  Surekha  (supra).
The said  case  arose  from  Osmania  University  in  Andhra  Pradesh.   The
petitioner therein had passed from the said University and  he  intended  to
take the All India  Entrance  Examination  for  admission  to  P.G.  medical
course in 1988.  He had challenged the constitutional  validity  of  Article
371-D(2)  (b)  (iii)  and  C  (ii)  of  the  Constitution  as  well  as  the
Presidential Order as a consequence of which the students of Andhra  Pradesh
have been excluded for competing in the  aforesaid  examination.   The  two-
Judge Bench referred to the decisions in Dr.  Pradeep  Jain  (supra),  Reita
Nirankari (supra), noted the stand of the Union  of  India  and  the  Andhra
Pradesh in their  respective  counter  affidavits  that  had  asserted  that
institutions in the State of Andhra  Pradesh  were  kept  out  of  from  the
purview of the scheme in view of the decision rendered in the  case  of  Dr.
Pradeep Jain (supra).  The Court also took note of the fact that  the  issue
was kept open in Reita Nirankari (supra), referred to the pronouncements  in
P. Sambamurthy v. State of Andhra Pradesh[13], Minerva Mills Ltd.  v.  Union
of India[14], P. Sampath Kumar v. Union  of  India[15]  and  reiterated  the
principle that Article  371-D(3)  was  valid  because  clause  (10)  of  the
Article 371-D provides as follows:-
“The provisions of this article and of  any  order  made  by  the  President
thereunder  shall  have  effect  notwithstanding  anything  in   any   other
provision of this Constitution or in any other law for  the  time  being  in
force.”

22.   As has been  stated  earlier,  Clause  5  of  the  Article  371-D  was
declared ultra vires earlier with which we are not concerned  with  in  this
case.   Thereafter,  the  Court  posed  the  question  whether  within   the
Presidential Order, the Scheme in Dr. Pradeep Jain  (supra)  can  be  worked
out.  After so stating, the Court noted thus:-
5. .....“The Presidential  Order  of  1974  defines  “available  seats”  and
“local area” as also “statewide  educational  institutions”  in  sub-clauses
(a), (b) and (e) of clause 2. Clause 3  describes  the  three  local  areas.
Clause 9 gives overriding  effect  to  the  Presidential  Order.  Under  the
Presidential Order, admission to the  educational  institutions  is  limited
only to local and nonlocal candidates. It does not contemplate of  admission
into educational institutions otherwise.  The  contention  of  Mr  Choudhary
that if the Presidential Order has got to be given effect  to  in  its  true
spirit, the scheme in Dr Pradeep Jain case  cannot,  consistently  with  the
Presidential Order,  be  implemented  cannot  be  brushed  aside  and  bears
serious examination on certain important aspects. If the 15 per  cent  seats
are not treated as reserved in terms  of  the  Presidential  Order  and  are
intended to go to those who qualify at the All  India  Entrance  Examination
it is a statable possibility that the Presidential Order might  be  diluted.
It may be doubtful if, in ascertaining the import of ‘available  seats’,  it
would be permissible  to  deduct  the  15  per  cent  seats  for  non-locals
applying the formula of Dr Pradeep Jain case. We are inclined to think  that
the contention advanced by Mr Choudhary on behalf  of  the  respondent-State
that within the ambit of the Presidential Order, the scheme adopted by  this
Court in Dr Pradeep Jain case  is  eminently  arguable  and  raises  certain
important issues. It  is,  however,  not  necessary  to  pronounce  on  this
question finally as the petitioner, admittedly, has  already  been  provided
admission in one of the Medical Colleges.

6. Before we part with the case we would, however,  like  to  indicate  that
the Scheme in Dr Pradeep Jain case is, in the  opinion  of  this  Court,  in
national interest as also in the interest of the States. Competition at  the
national level is bound to  add  to  and  improve  quality.  Andhra  Pradesh
students on the whole are not at all backward and  we  are  of  the  opinion
that they would stand well on comparative basis. It is  for  the  State  and
the Central Governments, apart from the  legal  issues  involved  to  decide
whether  in  the  general  interest  of  the  State,  the  scheme   in   the
Presidential  Order  should  either  be  so  understood  as  to  permit  and
assimilate the Pradeep Jain principle or should be explained, if  necessary,
by an appropriate amendment of the Presidential Order.  We  would,  however,
leave it to the respondents to take their decision in the matter.  We  would
not like, therefore, to pronounce on the  legal  question  finally  in  this
case.

23.   Relying on the said passages,  it  is  submitted  by  Mr.  Marlapalle,
learned senior counsel that the observations made in  1988,  despite  expiry
of two decades  and  seven  years,  has  not  been  taken  note  of  by  the
authorities which indicates an apathetic attitude.  Learned  senior  counsel
would contend that the State of Andhra Pradesh by no stretch of  imagination
can be regarded as an educationally backward region compared to rest of  the
country.  It is also contended  by  him  that  the  Presidential  Order  was
issued at a stage feeling the need of the State but  the  same  is  not  the
condition after passage of  more  than  40  years.   In  fact,  submits  Mr.
Marlapalle, renouncing the merit criteria on the domicile  basis  especially
in respect of post graduate and super speciality courses   would  tantamount
to denouncing the concept of merit which has been enshrined commencing  from
Dr. Pradeep Jain (supra) to many a judgment rendered thereafter  in  respect
of the medical education.  The protective affirmation meant  for  the  State
of Andhra Pradesh by the  Presidential  Order  issued  in  1974  has  to  be
interpreted in such a manner so that  the  50%  which  has  been  demarcated
should go to otherwise meritorious  candidates  who  have  taken  All  India
Entrance  Examination  for  super  speciality  courses.   The   concept   of
continuity of education, its progress and the  rise  in  time,  submits  Mr.
Marlapalle, requires this Court to give a broader interpretation to the  15%
quota and not to be guided by  the  1979  clarificatory  circular  which  is
otherwise indefensible in law.
24.   It is apt to note here that Mr. Marlapalle has  commended  us  to  the
authority in Dr. Dinesh Kumar  (supra), but we need not refer  to  the  same
as it dealt with the reservation on the domicile basis, regard being had  to
the principle stated in Dr. Pradeep Jain (supra) and as far as the State  of
Andhra Pradesh (undivided) is concerned, the said  authority  was  not  made
applicable as stated in Reita Nirankari (supra).
25.   At this juncture, it is absolutely necessitous to refer  to  a  three-
Judge Bench decision in  NTR  University  of  Health  Sciences  v.  G.  Babu
Rajendra Prasad and Anr.[16]  In the said case, the question that was  posed
was whether  the  Government  of  Andhra  Pradesh  while  framing  the  1979
circular in terms of Presidential Order issued in 1974 under  Article  371-D
of the Constitution of India was bound to provide  reservation  for  15%  of
non-local seats, although reservation in terms of the  policy  decision  had
been taken in respect of the seats available for local  candidates.   It  is
worth mentioning here that the  controversy  had  travelled  to  this  Court
questioning the validity of the policy of the State  of  Andhra  Pradesh  as
regards the  non-reservation  of  scheduled  castes,  scheduled  tribes  and
backward classes within  15%  that  has  been  separately  demarcated.   The
learned Single Judge of the High Court had directed  to  reserve  15%  seats
reserved for the reserved category.  The Division Bench  in  Letters  Patent
appeal noted the conflict of views in earlier Division Bench  judgments  and
referred the matter to the Full Bench on the issue whether the  reservations
in terms of Article  15(4)  of  the  Constitution  of  India  in  favour  of
scheduled castes, scheduled tribes and backward classes  could  be  provided
in respect of 15% of the unreserved  seats  under  the  Presidential  Order,
1974.   The Full  Bench  analyzing  the  law  in  the  field  dismissed  the
appeals.  This Court dealing with the controversy referred to Article  371-D
of the Constitution, the Presidential Order, reproduced  various  paragraphs
from the same, took note of the 1979 circular issued by  the  Government  of
Andhra Pradesh, noted the  submissions  of   the  learned  counsel  for  the
parties, took into  consideration  the  formation  of  Universities  by  the
undivided State of Andhra Pradesh after the Presidential  Order  and  stated
thus:-
“10. A bare perusal of the definition of local area read  with  paras  3,  4
and 5 of the Presidential Order, as referred to hereinbefore,  it  would  be
evident that 85% of the seats are reserved for local candidates in  relation
to local areas. So far as a university area is concerned, a local  candidate
in one particular university area would be a non-local one in  another.  The
criteria for admission of a candidate in the superspeciality courses in  the
university on the ground of being local or non-local is, therefore  directly
referable to the university area and not the  boundaries  of  the  State  of
Andhra Pradesh.

11. ...... In the matter of admission, the Health  University  had  followed
the procedure provided in Annexure  III  of  GOP  No.  646  dated  10-7-1979
having regard to the fact that by reason of  the  Presidential  Order,  1974
only 85% of the seats are reserved in favour of the local  candidates  which
are required to be confined to the university area only. We,  thus,  do  not
find any  legal  infirmity  in  the  action  of  the  appellants  herein  in
directing that 15% reserved for candidates of non-local area may  be  filled
up only on merit.

12. Article 371-D of the Constitution of India contains a special  provision
applicable to the State of Andhra Pradesh only. 54% of  seats  are  required
to be filled up from open categories and 46% of seats are to  be  filled  up
from the reserved category candidates in each of the three regions from  the
medical  colleges  and  engineering   colleges.   Having   regard   to   the
reservations made regionwise, indisputably 85% of seats are to be filled  up
from amongst local candidates whereas only 15% of seats are to be filled  up
from amongst outside candidates.”
                                                         [Emphasis Supplied]

26.   Be it noted, it was contended on behalf of the appellant therein  that
the High Court had committed a manifest error by directing  for  reservation
of seats for reserved category from 15% open seats also on the  ground  that
such a reservation would exceed 50% which is  not  permissible.   The  Court
referred to the Presidential Order and eventually opined thus:-
“In the event, the ratio of the impugned  judgment  of  the  High  Court  is
given effect to having regard to the limited number of  seats  available  by
providing reservation of an additional seat,  principle  of  reservation  to
the extent is 50% would be violated. Furthermore, it is  not  for  the  High
Court to say as to the efficacy or otherwise of the policy of the  State  as
regards providing for reservation for the reserved category  candidates  and
in that view of the matter the High Court, in our opinion must  be  held  to
have committed a manifest error in issuing the  impugned  directions,  as  a
result whereof percentage of reservation would exceed 46%. Such a  direction
by the High Court is not contemplated in law.”

27.    Though  the  said  authority  had  understood  local  area  and   the
boundaries of the State, it was instructive to refer to  the  said  passage.
It is clear that it was addressing the controversy as regards  the  15%  but
dealing with the reservation  of  scheduled  castes,  scheduled  tribes  and
other backward classes within the said 15%  percentage  in  the  context  of
instructions/circular of 1979 issued  by  the  State  Government.        The
aforesaid decision makes it graphically clear that the 85%  reservation  has
been in respect of local areas and non-locals area is directly referable  to
the University area.  One has to bear in  mind  that  the  local  areas  and
local candidates have been defined in the Presidential  Order  and  it  also
empowers the State  Government  to  issue  appropriate  directions  for  the
purpose of giving effect to the Presidential Order.   In  pursuance  of  the
power conferred in the said Presidential Order,  the  State  Government  has
issued the Circular in 1979.  The Circular, as is manifest,  reiterates  the
definitions of “local area” and “local  candidates”  and  simultaneously  it
also lays the postulate the  manner  of  implementation  of  reservation  of
local candidates as stipulated in the Presidential Order.  As far as 15%  of
the available seats which are  kept  unreserved  in  terms  of  Presidential
Order, the State Government relies on the power conferred  on  it  that  the
15% of the available seats are kept unreserved subject  to  the  control  of
the State Government.  The  State  Government  has  clarified  the  position
about  the  local  candidates  in  respect  of  15%  as  provided   in   the
Presidential Order.  It covers certain categories but  the  cavil  does  not
relate to the same.  In fact, on a keen scrutiny, it  is  demonstrable  that
it  engulfs  certain  categories  which  takes  within  its  umbrella   such
candidates who are working in the State of Andhra Pradesh in  certain  State
Government or  Central  Government  or  other  public  undertakings  or  the
candidates whose spouses are in the  employment  of  the  State  or  Central
Government or  public  sector  corporation,  etc.   It  does  not  refer  to
candidates who are from outside.  That is the only interpretation which  can
be placed on the circular.  It is the situation in vogue  in  the  State  of
Andhra Pradesh since 1979 and  in  the  absence  of  any  challenge  to  the
circular, there is no need to get into  it.   Therefore,  reference  to  the
other Acts, Rules, Regulations which have been so done by Mr. Marlapalle  do
not require to be dwelt upon.
28.   One aspect that has been highlighted by Mr. Marlapalle that almost  27
years back, this Court in C. Surekha (supra) had  expressed  the  view  that
the scheme indicated in Dr. Pradeep Jain (supra)  is  in  national  interest
and competition at the national  level  is  bound  to  add  to  and  improve
quality and Ahdra Pradesh students on the whole are not at all backward  and
they would stand well on the comparative basis. The  need  for  assimilation
of the principles stated in Dr. Pradeep Jain (supra) was  felt  and  it  was
observed that there should be an appropriate amendment of  the  Presidential
Order.  However, as the Court  cannot  do  it,  it  left  to  the  competent
authorities.
29.   In this context, the decisions that have been  cited  by  the  learned
counsel for the petitioner become relevant.  In Preeti  Srivastava  (supra),
the Constitution Bench expressed that the object  of  Article  15(4)  is  to
advance  the   equality   of   principle   by   providing   for   protective
discrimination in favour of the weaker sections  so  that  they  may  become
stronger and may be able to compete equally with others more fortunate,  but
simultaneously one cannot  ignore  the  wider  interests  of  society  while
devising such special provisions.   The Court highlighted on the concept  of
national interest such as promoting excellence  at  the  highest  level  and
providing the  best  talent  in  the  country  with  the  maximum  available
facilities to excel and contribute to society which are also to be borne  in
mind.  Analysing further, the majority stated thus:-
“In the case of Dr Jagadish Saran v. Union  of  India  this  Court  observed
that at the highest scales of speciality, the best skill or talent  must  be
hand-picked by selection according to capability. Losing a  potential  great
scientist or technologist would be a national loss. That is  why  the  Court
observed that the higher the level of education the  lesser  should  be  the
reservation. There are similar observations in Dr Pradeep Jain v.  Union  of
India. Undoubtedly, Dr Pradeep Jain v. Union of  India  did  not  deal  with
reservation in favour of the Scheduled Castes and the Scheduled  Tribes.  It
dealt with reservation in favour of  residents  and  students  of  the  same
University. Nevertheless it correctly extended the principle  laid  down  in
Dr Jagadish Saran v. Union of India to  these  kinds  of  reservation  also,
holding that at the highest levels of medical  education  excellence  cannot
be compromised to the detriment of the nation.  Admissions  to  the  highest
available medical courses in the  country  at  the  superspeciality  levels,
where even the facilities for training are limited, must be  given  only  on
the basis of competitive merit. There can be no relaxation at this level.”

30.   In  Saurabh  Chaudri   (supra),  the  core  question  that  arose  for
consideration centered around the  constitutional  validity  of  reservation
whether based on domicile or institution in the  matter  of  admission  into
post-graduate courses in Government  run  medical  colleges.   In  the  said
case, the court referred to the writ petition filed by  the  candidates  who
were residents of Delhi.  They had joined various  medical  colleges  within
Delhi for undertaking their MBBS courses against the 15% all-India quota  on
being qualified in the All-India Entrance  Examination.   They  intended  to
join medical colleges in Delhi  for  their  post-graduate  medical  courses.
They were issued admission forms regard being had to the decision  in  Parag
Gupta (Dr.) v. University of Delhi[17].  The University also  informed  them
that the candidates would be entitled  to  admission  in  the  post-graduate
courses subject to the decision in the matter pending before this  Court  in
Magan Mehrotra v. Union of India[18].
31.   In Magan Mehrotra (supra) a three-Judge Bench of this Court held  that
reservation by way  of  institutional  preference  be  maintained  but  also
directed certain States to follow the pattern of  institutional  preferences
as has been indicated in Dr. Pradeep Jain (supra).  Delhi University  issued
a notification on the basis of  the  judgment  rendered  in  Magan  Mehrotra
(supra).  The writ petitioners  assailed  the  notification  issued  by  the
Delhi University as reservation was made by way of institutional  preference
for admission to post graduate courses.  After the decision was rendered  in
Magan Mehrotra (supra), a two-Judge Bench referred the matter  to  a  three-
Judge Bench which ultimately directed it to be placed  before  a  five-Judge
Bench.  The reservation of any  kind,  namely,  residence  or  institutional
preference in the constitutional backdrop was the subject matter of  assail.
 The first question posed for consideration was whether the  reservation  on
the basis of a domicile is permissible in terms of Clause 1  of  Article  15
of the Constitution of India.  The Court referred to the  decision  in  D.P.
Joshi v. State of Madhya Bharat[19] and State of U.P. v. Pradip  Tandon[20],
and answered the issue in the negative.  The second  issue  that  the  Court
addressed was whether reservation by way of institutional  preference  comes
within the suspected classification warranting strict  scrutiny  test.   The
Court referred to Ram Krishna  Dalmia  v.  Justice  S.R.  Tendolkar[21]  and
various other authorities and opined that no case  had  been  made  out  for
invoking the doctrine of strict construction or  intermediate  construction.
The third issue that the Court dwelled upon was whether the  reservation  by
institutional preference is valid.  The Court referred  to  the  authorities
in Jagadish Saran (supra), Dr. D.P. Joshi (supra), Chitra Ghosh v. Union  of
India[22] and various other decisions including that  of  Dr.  Pradeep  Jain
(supra) and opined that in Dr. Pradeep Jain (supra) a distinction  was  made
between the undergraduate course i.e. MBBS course and post-graduate  medical
course as also super specialist courses and, therefore, the  said  authority
sought to strike a balance  of  rights  and  interests  of  concerned.   The
Constitution Bench took note of the fact that the percentage of seats to  be
allotted on all-India basis, however, came to  be  modified  in  Dr.  Dinesh
Kumar  (supra).  It also took note of the fact that  the  directions  issued
from time to time regulating the admissions in different  courses  of  study
in the said case, the deviation of the said dicta by the two-Judge Bench  in
Dr. Parag Gupta (supra) wherein it created  reservation  on  domicile  which
was forbidden in Dr. Pradeep Jain (supra).  The larger Bench  also  referred
to the authority in AIIMS Students’ Union v AIIMS[23], T.M.  Pai  Foundation
v. State of Karnataka[24] and eventually held as follows:-
70. We, therefore, do not find any reason to  depart  from  the  ratio  laid
down by this Court in Dr Pradeep Jain. The logical corollary of our  finding
is that reservation by way of institutional preference must be  held  to  be
not offending Article 14 of the Constitution of India.

71. However, the test to uphold the validity of a statute on  equality  must
be judged on the touchstone of reasonableness. It was noticed in Dr  Pradeep
Jain case that reservation to the extent of 50% was held to  be  reasonable.
Although subsequently, in Dr Dinesh Kumar (II) case[25] it  was  reduced  to
25% of the total  seats.  The  said  percentage  of  reservation  was  fixed
keeping in view the situation  as  then  existing.  The  situation  has  now
changed to a great extent. Twenty years have passed. The country has  during
this time produced a large number of postgraduate doctors. Our  Constitution
is organic in nature. Being a living organ,  it  is  ongoing  and  with  the
passage of time,  law  must  change.  Horizons  of  constitutional  law  are
expanding.

32.   In Nikhil Himthani  (supra), the Court was dealing with the  grievance
that related to equality  in  the  matter  of  admissions  to  post-graduate
medical  course  in  the  medical  college  in  the  State  of  Uttarakahand
guaranteed by Article 14 of the  Constitution  which  was  violated  by  the
respondents.  After noting the contentions of the learned  counsel  for  the
parties, the Court referred to the Constitution Bench  judgment  in  Saurabh
Chaudri  (supra) and the pronouncements in Jagadish Saran  (supra)  and  Dr.
Pradeep Jain (supra) and came to hold thus:-
“We now come to  Clauses  2  and  3  of  the  eligibility  criteria  in  the
Information Bulletin. Under Clauses 2 and 3, a domicile of  Uttarakhand  who
has passed MBBS from a medical college  of  some  other  State  having  been
admitted either through the 15% all-India quota or through  the  pre-medical
test conducted by the State Government concerned has been made eligible  for
admission to a postgraduate medical course in the State quota. Obviously,  a
candidate who is not a domicile of Uttarakhand State  is  not  eligible  for
admission  to  the  postgraduate  course  under  Clauses  2  and  3  of  the
eligibility criteria. Preference, therefore is given only on  the  basis  of
residence or domicile in the State of Uttarakhand under Clauses 2 and  3  of
the eligibility criteria and such preference on the basis  of  residence  or
domicile within a State has been held to be violative of Article 14  of  the
Constitution in Pradeep Jain v. Union of India and Magan Mehrotra  v.  Union
of India.

33.   In Vishal Goel (supra), the two-Judge Bench reiterated  the  principle
laid down in Nikhil Himthani  (supra).
34.   At this  juncture,  we  may  also  refer  to  the  Constitution  Bench
decision in Faculty Association of All India Institute of  Medical  Sciences
v.  Union  of  India[26].   In  the  said  case  issue   arose   about   the
applicability of reservation in respect of speciality and  super  speciality
faculty posts in all-India Institute of Medical Sciences.   The  matter  was
referred to a  larger  Bench  by  the  three-Judge  Bench  in  view  of  the
decisions rendered in Jagadish Saran (supra), Dr. Pradeep Jain  (supra)  and
Indra Sawhney v. Union of India[27].  The Constitution  Bench  after  noting
various contentions ruled that:-
“22. Although the matter has been argued at  some  length,  the  main  issue
raised regarding reservation at the superspeciality level has  already  been
considered in Indra Sawhney case  by  a  nine-Judge  Bench  of  this  Court.
Having regard to such decision, we are not inclined to take any  view  other
than the view expressed by the nine-Judge Bench on  the  issue.  Apart  from
the decisions rendered by this Court in  Jagadish  Saran  case  and  Pradeep
Jain case, the issue also fell for consideration in Preeti  Srivastava  case
which was also decided by a Bench of five Judges. While  in  Jagadish  Saran
case and in Pradeep Jain case it was categorically held that there could  be
no compromise with merit at the superspeciality stage, the  same  sentiments
were also expressed in Preeti Srivastava case as well.

23. In Preeti Srivastava case, the Constitution Bench  had  an  occasion  to
consider Regulation 27 of the Post Graduate Institute of  Medical  Education
and Research, Chandigarh Regulations, 1967, whereby 20% of  seats  in  every
course of  study  in  the  institute  was  to  be  reserved  for  candidates
belonging to the Scheduled Castes, Scheduled Tribes or other  categories  of
persons, in accordance with the general  rules  of  the  Central  Government
promulgated  from  time  to  time.  The  Constitution  Bench  came  to   the
conclusion that Regulation 27 could not have any application at the  highest
level of superspeciality as this would defeat the very object  of  imparting
the best possible training to selected  meritorious  candidates,  who  could
contribute to the advancement of knowledge in the field of medical  research
and its applications. Their Lordships ultimately went on to hold that  there
could not be any type of relaxation at the superspeciality level.”

35.   Be it noted, the Court laid  immense  emphasis  on  paragraph  836  of
Indra Sawhney (supra) wherein the nine-Judge Bench has observed:-
“...that there were certain services and posts where either  on  account  of
the nature of duties attached to them or  the  level  in  the  hierarchy  at
which they stood, merit alone counts.  In  such  situations,  it  cannot  be
advised to  provide  for  reservations.  In  the  paragraph  following,  the
position was made even more clear when Their Lordships  observed  that  they
were of the opinion that in certain services in respect  of  certain  posts,
application of rule of  reservation  may  not  be  advisable  in  regard  to
various technical posts including  posts  in  superspeciality  in  medicine,
engineering and other scientific and technical posts.”

36.   Thereafter, the Court proceeded to state further:-
“We cannot take a different view, even though it  has  been  suggested  that
such an observation was not binding,  being  obiter  in  nature.  We  cannot
ascribe to such a  view  since  the  very  concept  of  reservation  implies
mediocrity and we will have to take note of the caution indicated  in  Indra
Sawhney case. While reiterating the views expressed by the nine-Judge  Bench
in Indra Sawhney case, we dispose of the two civil appeals in the  light  of
the said views, which were also expressed in Jagadish  Saran  case,  Pradeep
Jain case, Preeti Srivastava case. We impress upon  the  Central  and  State
Governments  to  take  appropriate  steps  in  accordance  with  the   views
expressed in Indra Sawhney  case  and  in  this  case,  as  also  the  other
decisions referred to above, keeping in mind the provisions of  Article  335
of the Constitution.”

37.   We have referred to the aforesaid  judgments  in  extenso  as  learned
counsel appearing for the petitioners have laid immense emphasis that  there
cannot be reservation of any kind  in  respect  of  post-graduate  or  super
speciality courses regard being had to the law laid down by many a  judgment
of this Court.  It is urged that the State of Andhra Pradesh  and  Telangana
cannot apply the domicile test only to admit its own students and  that  too
also in respect of 15%  quota  meant  for  non-local  candidates.   We  have
already analysed the factual score and the legal  position.   The  undivided
State of Andhra Pradesh enjoys a  special  privilege  granted  to  it  under
Article  371-D  of  the  Constitution  and  the  Presidential  Order.    The
judgments of the larger Bench do not refer to the said Article nor  do  they
refer to the Presidential Order, for the said issue did  not  arise  in  the
said cases.  A scheme has been laid down in the case  of  Dr.  Pradeep  Jain
(supra) and the concept of percentage had  undergone  certain  changes.   In
Reita Nirankari (supra), the same three-Judge Bench clarified  the  position
which we have already  reproduced  hereinbefore.   However,  in  C.  Surekha
(supra), the Court had  expressed  its  view  about  the  amendment  of  the
Presidential Order  regard  being  had  to  the  passage  of  time  and  the
advancement in the State of Andhra Pradesh.  It has  been  vehemently  urged
by Mr. Marlapalle that despite 27 years having been elapsed,  the  situation
remains the same.   We take note of the said  submission  and  we  are  also
inclined to echo the observation that was made in the case of Fazal  Ghafoor
(supra) wherein it has been stated thus:-
“In Dr Pradeep Jain case this Court has observed that in Super  Specialities
there should really be no reservation. This is so in  the  general  interest
of the country and for  improving  the  standard  of  higher  education  and
thereby improving the quality of available medical services  to  the  people
of India. We hope and trust that the  Government  of  India  and  the  State
Governments shall seriously consider  this  aspect  of  the  matter  without
delay and appropriate guidelines shall be  evolved  by  the  Indian  Medical
Council  so  as  to  keep  the  Super  Specialities  in  medical   education
unreserved, open and free.”

38.   The fond hope has remained in the sphere  of  hope  though  there  has
been a progressive change.  The said privilege remains unchanged, as  if  to
compete with eternity.  Therefore, we echo the same  feeling  and  reiterate
the aspirations of others so that authorities  can  objectively  assess  and
approach the situation so that the national interest can  become  paramount.
We do not intend to add anything in this regard.
39.   Consequently, the writ petition as far as it pertains to the State  of
Andhra Pradesh and Telangana, is  dismissed.   As  regards  State  of  Tamil
Nadu, the matter be listed on November 4, 2015 for hearing.


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



                                             ..........................., J.
    [Prafulla C. Pant]
New Delhi
October 27, 2015

-----------------------
[1]     (1999) 7 SCC 120
[2]     (2013) 10 SCC 237
[3]     (2014) 11 SCC 456
[4]     (2003) 11 SCC 146
[5]     (1984) 3 SCC 654
[6]     (1984) 3 SCC 706
[7]     (1986) 3 SCC 727
[8]     (1988) 4 SCC 526
[9]     (1988) Supp SCC 794
[10]    (1979) 2 SCC 34
[11]    (1971) 2 SCC 22
[12]    (1980) 2 SCC 768
[13]    (1987) 1 SCC 362
[14]    (1980) 3 SCC 625
[15]    (1985) 4 SCC 458
[16]    (2003) 5 SCC 350
[17]    (2000) 5 SCC 684
[18]    (2003) 11 SCC 186
[19]    (1955) 1 SCR 1215 = AIR 1955 SC 334
[20]    (1975) 1 SCC 267
[21]    AIR 1958 SC 538
[22]    (1969) 2 SCC 228
[23]    (2002) 1 SCC 428
[24]    (2002) 8 SCC 481
[25]    (1986) 3 SCC 727
[26]    (2013) 11 SCC 246
[27]    (1992) Supp (3) 217

-----------------------
17

“The approver and one of the appellants were arrested practically red- handed. They made statements to the officer who arrested them involving admissions of guilt. They went further and gave a list of the other members of the gang. Thereupon the officer made a report in writing to his superior, containing the information which he had received, including the names of those other persons received from the two men arrested. Somehow or other, the learned Judge has described this police report, which is merely the report of a confession, as “the first information report.” Now the first information report is a well known technical description of a report under section 154, Criminal Procedure Code, giving first information of a cognizable crime. This is usually made by the complainant, or by some one on his behalf. The language is inapplicable to a statement made by the accused. The novelty of a statement by an accused person being called the first information report was to me so strange, that when counsel for the appellants addressed the argument to me attacking the Judge’s use of the first information report, I took no notice of the argument. The learned Judge realized that he was dealing with a confession, but he momentarily failed to appreciate that the document itself was inadmissible, and that the only way in which the information relied upon could be used was by section 27. That is to say, with regard to the other accused, the officer giving evidence might say : “I arrested them in consequence of information received from Narain and Thakuri. When I arrested them they made a statement to me which caused me to arrest these people”. The use which can legitimately be made of such information is merely this, that when direct evidence is given against the accused at the trial and there was evidence against the accused, it is open to the defence to check such evidence by asking whether the name of a particular accused was mentioned or not at the time….” 20. Considering the aforesaid dictums, it is apparent that there was discovery of a fact as per the statement of Mehmood Ali and Mohd. Firoz. Co- accused was nabbed on the basis of identification made by the accused Mehboob and Firoz. He was dealing with fake currency notes came to the knowledge of police through them. Recovery of forged currency notes was also made from Anju Ali. Thus the aforesaid accused had the knowledge about co-accused Anju Ali who was nabbed at their instance and on the basis of their identification. These facts were not to the knowledge of the Police hence the statements of the accused persons leading to discovery of fact are clearly admissible as per the provisions contained in section 27 of the Evidence Act which carves out an exception to the general provisions about inadmissibility of confession made under police custody contained in sections 25 and 26 of the Evidence Act.

                                                                  Reportable
                        IN THE SUPREME COURT OF INDIA
                       CRIMINAL APPELLATE JURISDICTION
                       CRIMINAL APPEAL NO.808 OF 2010


Mehboob Ali & Anr.                           … Appellants
Vs.
State of Rajasthan                                 … Respondent
[With Crl.A. No. 1088 of 2010]



                               J U D G M E N T


ARUN MISHRA, J.

1.    The appeals have been preferred against the common judgment and  order
dated 28.5.2009 passed by  the  High  Court  of  Judicature  for  Rajasthan,
Jaipur Bench in Criminal Appeal Nos.39/2006 and 40/2006 and other  connected
matters, thereby upholding conviction and sentence  of  the  appellants  for
commission of offence under section 489C for 3 years’ RI, for  section  489B
read with section 120B IPC of IPC five  years’  RI  and  fine  of  Rs.1000/-
each;  in  default  to  further  undergo  one  month  simple   imprisonment.
Appellants Mehboob Ali and Firoz were convicted and sentenced under  section
489B read with section 120B IPC for 5 years’ RI and fine of  Rs.1,000/-;  in
default to suffer one  month  simple  imprisonment.  Other  accused  persons
Liyakat Ali and Puran Mal were also convicted.
2.    As per the prosecution case,  on  6.1.2004  FIR  No.459  of  2003  was
registered at Police Station Ramganj, Jaipur in  State  of  Rajasthan.  From
possession of accused Puran Mal, 5 currency  notes  of  Rs.100  denomination
were found. Three currency notes were of  the  same  number.  Remaining  two
currency notes also bore the same number which were  apparently  forged.  He
was arrested vide Memo P-6 and recovery  memo  P-7  was  drawn.  Case  under
section 489C read with section 120B IPC  was  registered.  On  interrogation
Puran Mal informed that he had received the  currency  notes  from  Mehboob,
Firoz and  Ram  Gopal.  Mehboob  and  Firoz  were  arrested  on  information
furnished by accused Puran Mal. From Ram Gopal’s house currency notes  worth
Rs.41,900/- were recovered from the possession of  Puran  Mal.  Mehboob  and
Firoz informed the Police that they have obtained the  currency  notes  from
Anju Ali, and they would identify Anju Ali. They were  taken  to  Delhi.  On
identification made by them Anju Ali was arrested and  fake  currency  notes
of the value of Rs.1,75,000/- were recovered from his possession.  Anju  Ali
in turn informed that he used to receive the  currency  notes  from  accused
Majhar. On the information  and  identification  of  Anju  Ali,  Majhar  was
arrested and on his search, fake currency notes of the value of  Rs.48,220/-
were recovered. Majhar in  turn  informed  that  he  used  to  receive  fake
currency notes from Liyakat Ali. Liyakat  Ali  was  arrested  and  from  his
possession currency notes of the  value  of  Rs.2,39,500/-  were  recovered.
Some semi-made currency notes of  Rs.500  denomination  and  equipments  for
fabricating notes were also recovered from his possession and on  the  basis
of the information furnished by him, additional  forged  currency  notes  of
the value of Rs.2 lakhs were recovered from his Indica car.
3.    The fake currency notes have been recovered  from  the  possession  of
Puran Mal, Anju Ali, Majhar and Liyakat Ali. The  recovered  currency  notes
were sent to Indian Security Press, Nasik. Shyam Singh,  PW-16,  Manager  of
RBI stated that the seized currency notes were counterfeit. Report P-34  was
submitted. The evidence with respect to how material was  deposited  in  the
store house had also been  adduced  by  the  prosecution.  Reports  sent  by
Security Press are exhibits P-46, P-47,  P-48  and  P-51.  Raghuveer  Singh,
SHO, identified the articles recovered from  Puran  Mal,  Anju  Ali,  Majhar
etc.
4.    Accused Mehboob was arrested vide memo P4.  He  submitted  information
vide Memo Ex. P41. Accused Firoz submitted information  vide  Memo  Ex.  P42
under section 27 of the Evidence Act. Both  of  them  informed  that  forged
currency notes were supplied to them by Usman Bhai and  Anju  Ali  residents
of Delhi, and they would identify them.  The  information  was  recorded  by
Raghuveer Singh, IO. He had taken the accused Mehboob and  Firoz  to  Delhi.
There both of them identified one Maruti car DL-3C-V-2927 in  Street  No.13,
Seelampur, Delhi. They also identified the person who  was  sitting  in  the
car as Anju Ali for which memo Ex. P16 was prepared and  signatures  of  two
witnesses Mukesh  Yadav-PW13  and  Vinod  Sharma-PW11  were  also  obtained.
Mahaveer PW24 accompanied Raghuveer Singh, IO.  Vinod  Sharma,  PW11  though
turned hostile, admitted his signatures on memo Ex. P16 and  also  supported
the factum of visiting Delhi along with Police. He  drove  Vehicle  No.RJ-14
7C 4668 and took the policemen from Jaipur to Delhi. Mukesh Yadav PW13  also
supported that he had taken the Police to  Delhi  by  his  Qualis  No.RJ14T-
5649. Identification  of  Anju  Ali  by  Mehboob  Ali  and  Firoz  was  also
supported. On arrest of Anju Ali vide memo P13 and on search from his  right
side pocket of Pant, 350  forged  currency  notes  in  the  denomination  of
Rs.500 totalling Rs.1,75,000/- were recovered which were also  found  to  be
forged.
5.    Accused Anju Ali had furnished information  memo  P43  dated  7.1.2004
that he had obtained the currency notes in the denomination of  Rs.500  from
Majhar and he would identify Majhar. On the  basis  of  his  information  on
being identified by Anju Ali, Majhar was arrested on 9.1.2004 at  8.15  p.m.
when he was standing near ISBT, where Metro Railway was under  construction.
  Both PW11 and PW13 have confirmed their signatures on  the  memos.  Majhar
was arrested vide Memo P-31. On search  of  Majhar  currency  notes  of  the
denominations of Rs.500, Rs.100 and Rs.20 were recovered vide memo P19  from
the small bag kept by him in the socks of his  left  foot.   Besides,  Vinod
Sharma PW11, Mukesh Yadav PW13 and Mahaveer Singh PW24 have  also  supported
the factum of recovery and furnishing of information. Currency  notes  worth
Rs.48,220 were recovered from Majhar.
6.    The prosecution examined in all 28 witnesses  and  53  documents  were
exhibited. In defence 3 witnesses were examined. The trial court as well  as
the High Court have convicted and sentenced  the  appellants  as  aforesaid,
hence the appeals.
7.    It was submitted on behalf of the appellants  Mehboob  Ali  and  Mohd.
Firoz that  the confessional statement of  accused  persons  recorded  under
section 27 of Evidence Act is not admissible as  the  accused  persons  were
under the custody of Police. No recovery has been made from accused  Mehboob
Ali and Mohd. Firoz. As such their conviction is illegal and  is  liable  to
be set aside. On behalf of the accused Anju  Ali  and  Majhar  it  has  been
submitted that recovery from them has not been proved and  their  conviction
is bad in law.
8     With respect to the appeal of Anju Ali  and  Majhar,  it  is  apparent
that Anju Ali was arrested on the basis of information furnished by  Mehboob
and Firoz vide memos Ex. P41 and P42 and he was identified by the  aforesaid
accused persons while he was in  Maruti  car  in  Street  No.13,  Seelampur,
Delhi. Vinod PW-11 and Mukesh Yadav PW13 have signed the memo P16. The  fact
is also supported by Mahaveer Singh PW24. Though Vinod  turned  hostile  but
he has admitted his signatures on memo P16 and has supported the  factum  of
visiting Delhi along with Police. Mukesh Yadav, PW-13,  has  also  supported
that he had taken the Police to Delhi and Mehboob  and  Firoz  have  pointed
out that Anju Ali was in the car on the basis of that he was  arrested  vide
memo P30.  On  search  of  Anju  Ali,  350  forged  currency  notes  in  the
denomination of Rs.500 worth Rs.1,75,000/- were seized vide recovery memo P-
26.
9.    With respect to accused  Majhar,  information  P43  was  furnished  by
accused Anju Ali. Anju Ali identified Majhar  while  he  was  standing  near
ISBT. Mukesh PW-13 has proved memo P43. Vinod PW11, has  also  admitted  his
signatures  on  P-31.  Vide  recovery  memo  P19,  currency  notes  in   the
denominations of Rs.500, Rs.100 and Rs.20 aggregating  to  Rs.48,220/-  were
recovered from Majhar. They have been proved to be fake on the basis of  the
aforesaid reports submitted by the Indian Security Press,  Nasik  Road.  All
the currency notes were found to be forged. Shyam Singh, Manager, PW16,  has
proved the sending of the currency  notes  to  Indian  Security  Press.  The
currency notes have been proved to be forged and correctness of  reports  in
this regard has not been questioned in the appeals.
10.   In the appeal preferred by Mehboob Ali and Firoz, it was submitted  by
learned senior counsel appearing  on  their  behalf  that  the  confessional
statement of the accused recorded under section 27 of Evidence Act  was  not
admissible as there  is  no  recovery  of  the  currency  notes  from  their
possession. The confession made under the Police  custody  was  inadmissible
thus, there was no evidence to convict  the  appellants  Mehboob  and  Mohd.
Firoz.
11.    It is apparent from the facts of  the  case  that  initially  accused
Puran Mal was arrested and from his possession forged  currency  notes  were
recovered. On the basis of information furnished by him  that  the  currency
notes were handed over to him by accused Mehboob and Firoz, they,  in  turn,
have unfolded the entire sequence leading to arrest  of  accused  Anju  Ali.
Anju Ali was arrested on being identified by  Mehboob  Ali  and  Firoz  when
they were taken from Jaipur to Delhi and the  recovery  of  forged  currency
notes was made from Anju Ali. Anju Ali  identified  yet  another  co-accused
Majhar from whose possession also fake currency  notes  were  recovered  and
information supplied by Majhar ultimately led to arrest of Liyakat Ali  from
whose possession also forged currency notes and semi-printed currency  notes
were recovered along with instrument of printing fake currency notes.
12.      Section 25 of the Evidence Act provides that no confession made  to
a Police Officer shall be   proved  as  against  a  person  accused  of  any
offence. Section 26 provides that no confession made by any person while  he
is in the custody of a police officer, unless it be made  in  the  immediate
presence of a Magistrate, shall be proved as against  such  person.  Section
27 is in the form of a proviso, it lays down  how  much  of  an  information
received from accused may be proved.
13.   For application of section 27 of Evidence Act, admissible  portion  of
confessional statement has  to  be  found  as  to  a  fact  which  were  the
immediate cause of the discovery, only that would be part of legal  evidence
and not the  rest.  In  a  statement  if  something  new  is  discovered  or
recovered from the accused which was not in  the  knowledge  of  the  Police
before disclosure statement of the accused is  recorded,  is  admissible  in
the evidence.
14.   Section 27 of Evidence Act refers when any  “fact”  is  deposed.  Fact
has been defined in section 3 of the Act. Same is quoted below :

“Fact” means and includes—
(1) any thing, state of things, or relation of things, capable of being   by
the senses;
(2) any mental condition of which any person is conscious. Illustrations:
(a) That there are certain objects arranged in a certain order in a  certain
place, is a fact.
(b) That a man heard or saw something, is a fact.
(c) That a man said certain words, is a fact.
(d) That a man holds a certain opinion, has a  certain  intention,  acts  in
good faith, or fraudulently, or uses  a  particular  word  in  a  particular
sense, or  is  or  was  at  a  specified  time  conscious  of  a  particular
sensation, is a fact.
(e) That a man has a certain reputation, is a fact.  “Relevant”.  —One  fact
is said to be relevant to another when the one is connected with  the  other
in any of the ways referred to in the provisions of  this  Act  relating  to
the relevancy of facts.”


15.   It is apparent that on the  basis  of  the  information  furnished  by
accused Mehboob Ali and Firoz other accused,  Anju  Ali  was  arrested.  The
fact that Anju Ali was dealing with forged currency notes  was  not  to  the
knowledge of the Police. The statement of both accused has led to  discovery
of fact and arrest of co-accused not known to police.  They  identified  him
and ultimately statements have led to unearthing the racket of use  of  fake
currency notes. Thus the information  furnished  by  the  aforesaid  accused
persons vide information memos is clearly admissible which has  led  to  the
identification and arrest of accused Anju Ali and  as  already  stated  from
possession of Anju Ali fake  currency  notes  had  been  recovered.  As  per
information furnished by accused Mehboob and Firoz vide memos P41  and  P42,
the fact has been discovered by Police as  to  the  involvement  of  accused
Anju Ali which was not to the knowledge of the Police. Police was not  aware
of accused Anju Ali as well as the  fact  that  he  was  dealing  with  fake
currency notes which were recovered from him.  Thus  the  statement  of  the
aforesaid accused Mehboob and Firoz is clearly saved by section  27  of  the
Evidence Act. The embargo put by section 27 of the Evidence Act was  clearly
lifted in the instant case. The statement of the accused persons has led  to
the discovery of fact proving complicity of other accused  persons  and  the
entire chain of circumstances  clearly  makes  out  that  accused  acted  in
conspiracy as found by the trial court as well as the High Court.
16.   This Court in State (NCT of Delhi) v. Navjot Sandhu alias  Afsan  Guru
[(2005) 11 SCC 600] has considered the  question  of  discovery  of  a  fact
referred  to  in  section  27.    This  Court  has  considered  plethora  of
decisions and explained the decision in Pulukuri Kottaya & Ors.  V.  Emperor
[AIR 1947 PC 67]  and held thus :
“125. We are of the view that Kottaya case [AIR 1947 PC 67] is an  authority
for the proposition that “discovery  of  fact”  cannot  be  equated  to  the
object produced or found. It is  more  than  that.  The  discovery  of  fact
arises by reason of the fact that  the  information  given  by  the  accused
exhibited the knowledge or the mental awareness of the informant as  to  its
existence at a particular place.

126. We now turn our  attention  to  the  precedents  of  this  Court  which
followed the track of Kottaya case. The ratio of  the  decision  in  Kottaya
case reflected in the underlined passage extracted supra was highlighted  in
several decisions of this Court.

127. The crux of the ratio in Kottaya case was explained by  this  Court  in
State of Maharashtra v. Damu. Thomas J. observed that:  (SCC  p.  283,  para
35)

“The decision of the Privy Council in Pulukuri Kottaya  v.  Emperor  (supra)
is the most quoted authority for  supporting  the  interpretation  that  the
‘fact discovered’ envisaged in the section embraces  the  place  from  which
the object was produced, the knowledge of the accused  as  to  it,  but  the
information given must relate distinctly to that effect.”

In Mohd. Inayatullah v. State of Maharashtra [1976 1 SCC 828], Sarkaria,  J.
while clarifying that the expression “fact discovered” in Section 27 is  not
restricted to a physical or material fact which  can  be  perceived  by  the
senses, and that it does include a mental fact,  explained  the  meaning  by
giving the gist of what was laid down in Pulukuri Kottaya case (supra).  The
learned Judge, speaking for the Bench observed thus: (SCC p. 832, para 13)

“Now it is fairly settled that the  expression  ‘fact  discovered’  includes
not only the physical object produced, but also the place from which  it  is
produced and the knowledge of the accused as to this (see  Pulukuri  Kottaya
v. Emperor (supra); Udai Bhan v. State of U.P. [1962 Supp (2) SCR 830]).”

17.   In State of Maharashtra v. Damu Gopinath Shinde & Ors.  [AIR  2000  SC
1691] the statement made by the accused that the dead body of the child  was
carried up to a particular spot and a broken glass piece recovered from  the
spot was found to be part of the tail lamp of the motorcycle  of  co-accused
alleged to be used for the  said  purpose.  The  statement  leading  to  the
discovery of a fact that accused had  carried  dead  body  by  a  particular
motorcycle up to the said spot would be admissible in evidence.  This  Court
has laid down thus :

“36. The basic idea embedded in Section  27  of  the  Evidence  Act  is  the
doctrine of confirmation by subsequent events. The doctrine  is  founded  on
the principle that if any fact  is  discovered  in  a  search  made  on  the
strength of any information obtained from a prisoner, such a discovery is  a
guarantee that the  information  supplied  by  the  prisoner  is  true.  The
information might be confessional or non-inculpatory in nature,  but  if  it
results in discovery of a fact it becomes a reliable information. Hence  the
legislature  permitted  such  information  to  be  used   as   evidence   by
restricting the admissible portion to the minimum. It is  now  well  settled
that recovery of an object is not discovery of a fact as  envisaged  in  the
section. The decision of the Privy Council in Pulukuri  Kottaya  v.  Emperor
AIR  1947  PC  67  is  the  most  quoted  authority   for   supporting   the
interpretation that the “fact discovered” envisaged in the section  embraces
the place from which the object was produced, the knowledge of  the  accused
as to it, but the information given must relate distinctly to that effect.

37. No doubt, the information  permitted  to  be  admitted  in  evidence  is
confined to that portion of the information  which  “distinctly  relates  to
the fact thereby discovered”. But the information to get admissibility  need
not be so truncated as  to  make  it  insensible  or  incomprehensible.  The
extent of information admitted should be consistent with  understandability.
In this case, the fact discovered by PW 44 is that A-3  Mukinda  Thorat  had
carried the dead body of Dipak to the spot on the motorcycle.

38. How did the particular information led to the discovery of the fact?  No
doubt, recovery of dead body of Dipak from the same canal was antecedent  to
the information  which  PW  44  obtained.  If  nothing  more  was  recovered
pursuant to and subsequent to obtaining the information  from  the  accused,
there would not have been any discovery of any fact at  all.  But  when  the
broken glass piece was recovered from that spot and that piece was found  to
be part of the tail lamp of the motorcycle of A-2 Guruji, it can  safely  be
held that the Investigating Officer discovered the fact that A-2 Guruji  had
carried the dead body on that particular motorcycle up to the spot.

39. In view of the said discovery of the fact, we are inclined to hold  that
the information supplied by A-2 Guruji that  the  dead  body  of  Dipak  was
carried on the motorcycle  up  to  the  particular  spot  is  admissible  in
evidence. That information, therefore, proves the prosecution  case  to  the
abovementioned extent.”


18.   In Ismail v. Emperor [AIR 1946 Sind 43] it was held that  where  as  a
result of information given by the accused another co-accused was  found  by
the police the statement by the  accused  made  to  the  Police  as  to  the
whereabouts of the co-accused was held to be admissible under section 27  as
evidence against the accused.
19.   In Subedar & Ors. v. King-Emperor [AIR 1924  All.  207]  it  was  held
that a statement made by the accused implicating himself and  others  cannot
be called ‘first information report’. However it was  held  that  though  it
could not be treated as first  information  report  but  could  be  used  as
information furnished under section 27 of Evidence Act. It was held thus :

“The approver and one of  the  appellants  were  arrested  practically  red-
handed. They made statements to the  officer  who  arrested  them  involving
admissions of guilt. They went further and gave a list of the other  members
of the gang.  Thereupon  the  officer  made  a  report  in  writing  to  his
superior, containing the information which he had  received,  including  the
names of those other persons received from the two men arrested. Somehow  or
other, the learned Judge has described this police report, which  is  merely
the report of a confession, as  “the  first  information  report.”  Now  the
first information report is a well known technical description of  a  report
under section 154, Criminal Procedure Code, giving first  information  of  a
cognizable crime. This is usually made by the complainant, or  by  some  one
on his behalf. The language is inapplicable  to  a  statement  made  by  the
accused. The novelty of a statement by an accused person  being  called  the
first information report was to me so strange, that  when  counsel  for  the
appellants addressed the argument to me attacking the  Judge’s  use  of  the
first information report, I took no notice  of  the  argument.  The  learned
Judge realized that he was dealing with a  confession,  but  he  momentarily
failed to appreciate that the document itself  was  inadmissible,  and  that
the only way in which the information relied  upon  could  be  used  was  by
section 27. That is to say, with regard to the other  accused,  the  officer
giving evidence might say : “I arrested them in consequence  of  information
received from  Narain  and  Thakuri.  When  I  arrested  them  they  made  a
statement to me which caused me to arrest these people”. The use  which  can
legitimately be made of such information is merely this,  that  when  direct
evidence is given against the accused at the trial and  there  was  evidence
against the accused, it is open to the defence to  check  such  evidence  by
asking whether the name of a particular accused was mentioned or not at  the
time….”

20.   Considering the aforesaid dictums,  it  is  apparent  that  there  was
discovery of a fact as per the statement of Mehmood Ali and Mohd. Firoz. Co-
accused was nabbed on the  basis  of  identification  made  by  the  accused
Mehboob and Firoz. He was dealing with  fake  currency  notes  came  to  the
knowledge of police through them. Recovery  of  forged  currency  notes  was
also made from Anju Ali. Thus the aforesaid accused had the knowledge  about
co-accused Anju Ali who was nabbed at their instance and  on  the  basis  of
their identification. These facts were not to the knowledge  of  the  Police
hence the statements of the accused persons leading  to  discovery  of  fact
are clearly admissible as per the provisions contained in section 27 of  the
Evidence Act which carves out an exception to the general  provisions  about
inadmissibility  of  confession  made  under  police  custody  contained  in
sections 25 and 26 of the Evidence Act.

21.   As a result, we find no merit in the appeals. The judgment  and  order
of sentence passed by the trial court and confirmed by the  High  Court  are
found to be appropriate. Thus the appeals being devoid of merit, are  hereby
dismissed.



                                        ………………………CJI
                                        (H.L. Dattu)



New Delhi;                              ……………………..J.
October 27, 2015.                            (Arun Mishra)

insurer cannot escape the liability, when ownership changes due to the hypothecation agreement. In the case of hire also, it cannot escape the liability, even if the ownership changes. Even though, KSRTC is treated as owner under Section 2(30) of the Act of 1988, the registered owner continues to remain liable as per terms and conditions of lease agreement lawfully entered into with KSRTC.= In view of the aforesaid discussion, we hold that registered owner, insurer as well as KSRTC would be liable to make the payment of compensation jointly and severally to the claimants and the KSRTC in terms of the lease agreement entered into with the registered owner would be entitled to recover the amount paid to the claimants from the owner as stipulated in the agreement or from the insurer.

Reportable



IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.5293 OF 2010



Managing Director, K.S.R.T.C.                            ... Appellant



Versus

New India Assurance Co.Ltd. & Anr.                         ... Respondents

With

Civil Appeal No.6641 of 2010

MD Karnataka Road Transport Corpn. & Anr.          … Appellants

Versus

Thippamma & Ors.                             … Respondents



J U D G M E N T



ARUN  MISHRA, J.



1.    The questions involved in the appeals are  whether   in  the  wake  of
lease agreement entered into by registered owner with Karnataka  State  Road
Transport  Corporation  (hereinafter  referred  to  as  the  ‘KSRTC’),   the
registered owner and insurer along with  KSRTC  can  be  fastened  with  the
liability to make payment to the claimants and  whether  KSRTC  can  recover
the  amount  from   registered   owner   and   its   entitlement   to   seek
indemnification from insurer?

2.    The facts giving rise to Civil Appeal No.5293  of  2010  reflect  that
the accident in question was caused by the bus which was  driven  under  the
control of KSRTC.  The bus was owned  by  respondent  no.2,  T.M.  Ganeshan,
insured by the New India Assurance Co. Ltd.  Admittedly, an agreement  dated
28.2.2002 was entered into between the  KSRTC  and  owner  respondent  no.2.
The  MACT,  Tumkur,  Karnataka  on  25.6.2007  allowed  the  claim  petition
preferred by the claimants and awarded a sum of Rs.4,09,000/- with  interest
@ 6% p.a.

3.    In view of the agreement between KSRTC and the owner of the  bus,  the
liability was fastened upon  the  owner  and  the  insurer  of  the  vehicle
jointly and severally to make the payment of  compensation,  not  on  KSRTC.
Aggrieved thereby, the insurer preferred an appeal before the High Court  of
 Karnataka.  The same has been allowed by the impugned  judgment  and  order
dated 20.2.2009.  The High  Court  has  allowed  the  appeal  filed  by  the
insurer and held that the liability to make the payment of compensation   is
that of KSRTC alone.  Aggrieved thereby,  the  KSRTC  has  come  up  in  the
appeal before us.

4.    In Civil Appeal No.6641 of 2010, the bus was plied similarly  on  hire
agreement by the KSRTC.  The Claims  Tribunal  has  fastened  the  liability
jointly and severally upon  the  KSRTC  and  upon  Internal  Security  Fund,
Bangalore.  Aggrieved thereby, the appeal was preferred in the  High   Court
and the same has been dismissed.  Hence, Civil  Appeal No.6641 of  2010  has
been filed  in this Court.

5.    It was submitted by Shri S.N. Bhat, learned counsel for the  appellant
that the High Court has erred in fastening the liability   upon  the  KSRTC.
In view of the lease agreement for hire entered into between the  KSRTC  and
the owner, the owner could not escape the liability to make the  payment  of
compensation.  As such, the insurer was liable to indemnify  the  owner  and
to make the payment of compensation.  The  liability  could  not  have  been
fastened upon the  KSRTC.   Learned  counsel  has  placed  reliance  on  the
decision of this Court in Uttar Pradesh State Road Transport Corporation  v.
Kulsum & Ors., (2011) 8 SCC 142.

6.    Shri Vishnu Mehra, learned counsel appearing on behalf  of  New  India
Assurance Co. Ltd. contended that in view of the fact that the  vehicle  was
plied under the complete control and supervision of KSRTC, it cannot  escape
from the liability to make the payment of compensation.  He has relied  upon
the decision of this Court in Rajasthan State Road Transport Corporation  v.
Kailash Nath Kothari & Ors., (1997) 7 SCC 481  and  the  definition  of  the
owner under Section 2(30) of  the  Motor  Vehicles  Act,  1988  (hereinafter
referred to as the ‘Act’).  He has consequently  submitted  that  owner  and
insurer have rightly been exonerated by the High Court.

7.    It was submitted on behalf of the claimants that they can recover  the
compensation from the KSRTC, owner and insurer jointly and severally.

8.    The owner has been defined under Section 2(30) of the  Motor  Vehicles
Act, 1988 (hereinafter referred to as the Act of 1988).  The  definition  in
the Act of 1988 is extracted hereunder :

“2(30)  “owner” means  a  person  in  whose  name  a  motor  vehicle  stands
registered, and where such person is a minor, the guardian  of  such  minor,
and in relation to a motor vehicle which is the subject of  a  hire-purchase
agreement, or an agreement of lease or an agreement  of  hypothecation,  the
person in possession of the vehicle under that agreement;”



9.    The definition of owner under Section 2(19)  of   the  Motor  Vehicles
Act, 1939 read as under:-

“2(19) "owner" means, where the person, in possession of a motor vehicle  is
a minor, the guardian of such minor, and in  relation  to  a  motor  vehicle
which is the subject of a hire purchase agreement, the person in  possession
of the vehicle under that agreement.”

10.   Under the Act of 1988, the owner means a registered  owner  and  where
the agreement on hire-purchase or an agreement of   hypothecation  has  been
entered into or lease agreement, the person in possession of the vehicle  is
treated as an owner.

11.   Section 146 of the Act of 1988 prescribe the necessity  for  insurance
against third party risk.  Motor vehicle cannot be used in  a  public  place
without policy of insurance complying with the requirement  of  Chapter  X1.
Exemption has been carved out to the vehicles owned by the Central or  State
Governments and used for government  purposes.   Under  sub-Section  (3)  of
Section 146, it is open to the appropriate Government to exempt the  vehicle
owned by the Central or State Governments  if  it  is  used  for  Government
purposes or any local authority or any State transport undertaking.

12.   Section 147 of the Act of 1988 deals with the requirements  of  policy
and limits of liability.  The statutory requirement  under  Section  147  is
that policy of insurance must be a policy  which  is  issued  by  authorised
Insurer and insures the person or class of persons specified in  the  policy
to the extent specified in sub-section (2)(i) against  any  liability  which
may be incurred by him in respect of the death of or bodily  injury  to  any
person, including owner of  the  goods  or  his  authorised   representative
carried in the vehicle or damage to any property of a third party caused  by
or arising out of the use of  the  vehicle  in  a  public  place;  and  (ii)
against the death of or bodily injury to any passenger of a  public  service
vehicle caused by or arising out of the use  of  the  vehicle  in  a  public
place.

13.   Certain exception have been carved out in the proviso  to  sub-section
(1) of section 147.  It is contained in proviso (ii) that the  policy  shall
not  be  required  to  cover  any  contractual  liability.   Limits  of  the
liability have  been  provided  in  Section  147(2).   The  liability  under
Section 147(2)(1)(b)  is the amount of liability incurred and  with  respect
to any damage to any property of a  third  party,  a  limit  of  Rs.6,000/-.
Section 147(5) provides that notwithstanding anything contained in  any  law
for the time being in force, an insurer shall be liable  to  indemnify   the
person or classes of persons specified in  the  policy  in  respect  of  any
liability which the policy purports to cover in the case of that  person  or
those classes of persons.

14.   Section 157 of  the  Act  1988  deals  with  the  deemed  transfer  of
certificate of insurance.  Provisions of Section 157  are as under:

“157. Transfer of certificate of insurance.—

(1) Where a person in whose favour the certificate  of  insurance  has  been
issued in accordance with  the  provisions  of  this  Chapter  transfers  to
another person the ownership of the motor vehicle in respect of  which  such
insurance was taken together with the policy of insurance relating  thereto,
the certificate of insurance and the policy  described  in  the  certificate
shall be deemed to have been transferred in favour of  the  person  to  whom
the motor vehicle is transferred with effect from the date of its  transfer.


(2) The transferee shall  apply  within  fourteen  days  from  the  date  of
transfer in the prescribed form to the insurer for making necessary  changes
in regard to the fact of transfer in the certificate of  insurance  and  the
policy described in the certificate in his  favour  and  the  insurer  shall
make the necessary changes in the certificate and the  policy  of  insurance
in regard to the transfer of insurance.”

It is apparent from Section 157(1) of the  Act  of  1988   that  certificate
shall be deemed to have been transferred in favour of  the  person  to  whom
the motor vehicle is transferred with effect from the date of its  transfer.
 Section 157(2) of the Act provides that the transferee to apply  within  14
days from the date of transfer in the  prescribed  form  to  make  necessary
changes in the certificate of insurance.

15.   Before dilating further, we deem  it  appropriate  to  advert  to  the
certain clauses in the lease agreement on the basis of  which  vehicles  are
plied on hire by the KSRTC.  The owner of the private  bus  has  to  provide
new bus to KSRTC for the purpose of hire.

16.   As per clause 6, the owner of the private bus to  discharge  statutory
liability.  Clauses 6(i) and (ii) of lease agreement are quoted below:

“6(i)  In case the owner of the private bus defaults  in  the  discharge  of
any of his statutory liability, KSRTC reserves  the  right  to  deduct  such
amounts from the amount  payable  to  the  owner  as  it  is  sufficient  to
discharge the liability, and if the  liability  is  more  than  the  amounts
payable by KSRTC to the owner, the owner alone shall be liable to  discharge
the liability and/or to make good the amount  to  KSRTC,  if  discharged  by
KSRTC.

6(ii)    If  because  of  any  default  by  the  bus  owner  or  by  his/her
drivers/other  employees,  agent  representative,  any  liability  comes  on
KSRTC, the KSRTC has the right to recover the amount either from  the  bills
payable or the security deposit and to take further  steps  to  recover  the
balance from the private owner by any lawful means.”



17.   The Conductor was to be provided under clause 7(iv) by the  KSRTC  and
was entitled to collect the fare and luggage charges etc. for and on  behalf
of KSTRC.

18.   As per clause 8, Drivers were  to  be  engaged  and  provided  by  the
owner.  Salary etc. was also to be paid by  the  owner  and  is  subject  to
other  conditions such as they should  not  have  been  dismissed  from  the
services of  the  Central  Government  etc.  and  should  possess  requisite
licence.

19.   Clause 14 of lease agreement with respect  to  insurance  coverage  is
also relevant which is extracted as under:

“14. The owner of the private bus shall keep  the  hired  bus  duly  insured
under a Motor Vehicle comprehensive insurance police covering all risks  and
all such costs shall be born by the owner of the private bus.   In  case  of
failure to have a valid comprehensive insurance policy.  The  bus  will  not
be used for KSRTC’s operations and it will be deemed that the  bus  has  not
been made available to KSRTC for scheduled operations, with  all  consequent
of effects.  The insurance shall cover 61passengers.”



20.   Clause 16 relating to liability as to accidents is also important  for
the purpose of decision  of  the  case.   Clauses  16(a)  (b)  and  (c)  are
extracted as under:-

“(a) The owner of the bus  alone  shall  be  solely  liable  for  any  claim
arising out of any accident, damages or  loss  or  hurt  caused  during  the
operation of the bus.  The KSRTC shall not be liable for any claims  arising
out of the use of the buses, including claims made in  connection  with  the
impurities or loss of life sustained by passengers, bus crew  or  any  other
road user or to any property/person.  Besides,  all  tortuous  liability  if
any, shall be borne by the owner or the insurer of the  vehicle  themselves.
However the accidents should be reported to the KSRTC office/Depot.

(b) KSRTC may make payment of ex-gratia amount to the victims  in  event  of
accident of such private hired buses while on KSRTC operations  as  per  the
KSRTC’s prevailing norms which shall be recovered from any  amounts  due  to
the owner of such private buses or from security Deposit etc.  Further,  the
owner  of  such  private  bus  should  make  prompt  payment  of  ‘no  fault
liability’ or any other claim under the law for such accident  victims.   In
case KSRTC is compelled to make such payment  on  behalf  of  the  owner  of
private buses, it shall be recovered from any amount due  to  the  owner  by
KSRTC or receivable to him from Insurance Company or other debtors etc.   In
case of non-payment to non-recovery of such amount by KSRTC within 15  days,
interest at 15% per annum shall also be recoverable.  For delays beyond   30
days KSRTC may amount or adjustment thereof towards hire charges payable.

(c) It shall be the responsibility of the  owner  of   the  private  bus  to
produce at his own cost, the driver/bus before the court of ………  and  before
the police authorities whenever required in case of accident  or  any  other
contingencies or on order  or  directions  by   the  Judicial  Or  Executive
authorities …….   charges shall be payable by KSRTC in such cases.”



It is apparent from clause 16(a) that in case of accident claim,  the  KSRTC
shall not be liable for any claim arising out  of  use  of  buses  including
loss  of  life  sustained  by  passengers  or  any  other  user  or  to  any
property/person.  If KSRTC makes any  ex  gratia  payment  in  the  case  of
accident, the same shall be recovered from any amount due to  the  owner  in
case KSRTC is made liable to make  payment  of  compensation  on  behalf  of
private buses it shall be recovered from any amount  due  to  the  owner  by
KSRTC or receivable to him from Insurance Company  etc.

21.   Clauses 17, 18, 19 and 20 are also relevant they are extracted below:

“17.  The KSRTC shall not be liable for any loss caused to the buses  hired,
at any point of time including during the  period  of  agitations,  strikes,
accidents, natural calamities etc.

18. The owner of the private bus shall be liable for shall  alone  discharge
or meet all claims including fines and penalties arising  out  of  violation
of traffic Rules, and Regulations, Statutes,  Acts,  Rules  and  Regulations
etc., in force for act of  omissions  or  commissions  committed  either  by
his/her drivers or by any other person not authorised to drive.   The  owner
of the private bus shall be liable and shall meet and  discharge  any  claim
for compensation or damages on account of tortuous liability.

19(a) The owner  of  the  private  bus  shall  provide  and  make  available
bus/buses as per the contract to KSRTC on all days or operation in  time  as
per the schedule departing time and also  as  so  as  to  cover  the  entire
schedule Kms. Duty.

(b) The owner of the private  bus  shall  not  withdraw  any  bus  from  the
operation except with advance notice before 24 hours and with prior  written
consent of the depot manager concerned of KSRTC  to  do  so.   In  case  any
violation of this clause, the  owner  shall  be  liable  for  imposition  of
penalties by the KSRTC.

20(1)(a) The KSRTC on its part agrees to pay hire charges to  the  owner  at
the rates inculcation in the hiring rate  charts  at  Annexure  A1  and  A2,
subject to the rules, terms and conditions  of  the  contract.   The  hiring
rate applicable shall be based on the schedule Kms. of  the  route  allotted
to the hired bus, except as otherwise provided herein.”



22.   The main question for consideration is whether  the  registered  owner
and insurer can escape the liability in view of the provisions contained  in
the Act and in view of the aforesaid  terms  and  conditions  of  the  lease
agreement.  The question also arise whether claimants can also  recover  the
amount from KSRTC.

23.   The High Court has held that actual control of the bus  was  with  the
KSRTC and the driver was driving the bus under its  control.   Relying  upon
the decisions in National Insurance Co. Ltd. V. Deepa Devi & Ors., (2008)  1
SCC 414 and Rajasthan State  Road  Transport  Corporation  v.  Kailash  Nath
Kothari & Ors., (1997) 7 SCC 481, it was held that KSRTC  to  be  the  owner
under Section 2(30) of the Act.  There is no  liability  of  the  registered
owner as such  insurer  cannot  be  saddled  with  liability  to  indemnify.
Hence, the registered owner and  the  insurer  have  been  exonerated.   The
KSRTC has been fastened with the liability.

In our opinion, decision of High Court is not sustainable.   The  provisions
contained in the Act are clear.  No vehicle can be driven without  insurance
as provided in Section 147 whereas clause  14  of  lease  agreement  between
KSRTC and the owner clearly stipulate that it shall be the liability of  the
owner to  provide  the  comprehensive  insurance  covers  for  all  kind  of
accidental risks to the passengers, other persons/property.  The  provisions
of said clause of  the  agreement  are  not  shown  to  be  opposed  to  any
provision in the Contract Act or any of the provisions contained  under  the
Act of 1988.  Hiring of public service vehicles is not prohibited under  any
of the provisions of the aforesaid  laws.   It  could  not  be  said  to  be
inconsistent user by KSRTC. The agreement is not shown to be illegal in  any
manner whatsoever nor shown to be opposed to the public policy.

24.   The policy of insurance is contractual obligation between the  insured
and the insurer.  It has  not  been  shown  that  while  entering  into  the
aforesaid agreement of lease for hiring the buses,  any  of  the  provisions
contained in the insurance policy has been violated. It has not  been  shown
that owner could not have given bus on hire as per any provision of  policy.
 It was the liability of the registered owner to provide the bus  regularly,
to employ a driver, to make the payment of salary  to  the  driver  and  the
driver should be duly licenced and  not  disqualified  as  provided  in  the
agreement though buses were to be plied  on the routes as specified  by  the
KSRTC and hiring charges were required to be paid to the  registered  owner.
In the absence of any stipulation prohibiting such  an  arrangement  in  the
insurance policy, we find that in view of agreement of lease the  registered
owner has owned the liability to pay. The insurer  cannot  also  escape  the
liability.

25.   Apart from that what is provided under Section 157 of the Act of  1988
is that the certificate  of  insurance  and  the  policy  described  in  the
certificate shall be deemed to  have  been  transferred  in  favour  of  the
person  to whom the motor vehicle is transferred with effect from  the  date
of its transfer.  Even if there is a transfer of the vehicle  by  sale,  the
insurer cannot escape  the liability  as there is  deemed  transfer  of  the
certificate of insurance.  In the instant case it is not  complete  transfer
of the vehicle it has been given on hire for which there is  no  prohibition
and no condition/policy of insurance as shown to prohibit plying of  vehicle
on hire. The vehicle was not used for inconsistent  purpose.  Thus,  in  the
absence of any legal prohibition and any violation of terms  and  conditions
of the policy, more so, in view of the provisions of Section 157 of the  Act
of 1988, we are of considered opinion that the  insurer  cannot  escape  the
liability.

26.   Now, we come to the question of  exclusion  of  contractual  liability
under second proviso to Section 147(1).  When we read provisions of  Section
147 with Section 157 together, it leaves no room for any  doubt  that  there
is deemed transfer of  policy  in  case  of  transfer  of  vehicle.   Hence,
liability of insurer continues notwithstanding the contract of  transfer  of
vehicle, such contractual liability cannot be said to be excluded by  virtue
of second proviso  to  Section  147(1)  of  Act  of  1988.  Higher  purchase
agreement, an agreement for lease or  an  agreement  for  hypothecation  are
covered under Section 2(30) of the Act of 1988.  A person in  possession  is
considered to be an owner of the vehicle under such agreements.     In  case
such contractual liability is excluded then anomalous  results  would  occur
and financer under higher purchase agreement would be  held  liable  and  so
on.  In our view, an agreement for lease  on  hire  cannot  be  said  to  be
contract envisaged for  exclusion  under  contractual  liability  in  second
proviso to Section 147(1) of the Act of 1988. The High Court  has  erred  in
holding otherwise.
27.   The KSRTC can also be treated as owner for  the  purposes  of  Section
2(30) of the Act of 1988  plying  the  buses  under  lease  agreement.   The
insurance  company  admittedly  has  insured  the  vehicle  and  taken   the
requisite premium and  it  is  not  a  case  set  up  by  the  insurer  that
intimation was not given to the insurance company of the hiring  arrangement
.  Even if the intimation had not been given, in our  opinion,  the  insurer
cannot escape the liability  to indemnify  as  in  the  case  of  hiring  of
vehicle intimation is not required to be given.  It is only in the  case  of
complete transfer of the vehicle when  change  of  registration  particulars
are required under Section 157 of the Act, an intimation has to be given  by
the  transferee  for  effecting  necessary  changes  in  the  policy.   Even
otherwise, that would be a ministerial act and  the  insurer  cannot  escape
the liability for that reason.  When the KSRTC has become the owner  of  the
vehicle during the period it was on hire with it for the purpose of  Section
2(30) of the Act by  virtue of provisions contained in Section  157  of  the
Act, the insurance policy shall be  deemed  to  be  transferred.   As  such,
insurer is liable to make indemnification and cannot  escape  the  liability
so incurred by the KSRTC.

28.   In RSRTC v. Kailash Nath Kothari (supra),  question  of  liability  of
insurance company did not come up for consideration.  The vehicle was  taken
by RSRTC from its owner Sanjay Kumar and it was being plied on the route  by
RSRTC.  The case arose out of accident  date  17.7.1981  under  the  Act  of
1939.  The definition of second owner under section 2(19)  of  Act  of  1939
came up for consideration before this Court, and conditions 4 to  7  and  15
of agreement between RSRTC and the owner, this Court held  that  vehicle  in
question  was in possession and actual control of  RSRTC as such  it  cannot
escape from liability.  Relevant portion of decision is extracted below:-




“15. Conditions 4 to 7 and 15  of  the  agreement  executed     between  the
RSRTC and the owner read:

“4. The Corporation shall appoint the conductor for  the  operation  of  the
bus given on  contract  by  the  second  party  and  the  conductor  of  the
Corporation shall do the work of  issuing  tickets  to  the  passengers,  to
receive the fare, to let all the passengers get in and get out of  the  bus,
to help the passengers to load and unload their goods, to stop  the  bus  at
the stops fixed by the Corporation and to operate the bus according to time-
table.
5. The tickets, waybills and other  stationery  shall  be  supplied  by  the
Corporation to the said conductor of the Corporation.
6. The driver of the bus shall have to follow all such instructions  of  the
conductor, which shall be necessary under the rules  for  the  operation  of
the bus.
7. The  driver  of  the  bus  shall  comply  with  all  the  orders  of  the
Corporation or of the officers appointed by the Corporation.
15. Upon the accident of the bus taking place the owner of the bus shall  be
liable for the loss, damages and for the liabilities relating to the  safety
of the passengers. The Corporation shall not be liable for any accident.  If
the Corporation is required to  make  any  payment  or  incur  any  expenses
through some court or under some mutual compromise,  the  Corporation  shall
be able to recover such amounts from the owner of the  bus  after  deducting
the same from the amounts payable to him.”

16. The admitted facts unmistakably show that the vehicle  in  question  was
in possession and under the actual control  of  RSRTC  for  the  purpose  of
running on the specified route and was being used  for  carrying,  on  hire,
passengers by the RSRTC. The driver was to carry  out  instructions,  orders
and directions of  the  conductor  and  other  officers  of  the  RSRTC  for
operation of the bus on the route specified by the RSRTC.

17. The  definition  of  owner  under  Section  2(19)  of  the  Act  is  not
exhaustive. It has, therefore to be construed, in  a  wider  sense,  in  the
facts and circumstances of a given case. The expression owner must  include,
in a given case, the person who has the actual  possession  and  control  of
the vehicle and under whose directions and commands the  driver  is  obliged
to operate the bus. To confine the meaning  of  “owner”  to  the  registered
owner only would in a case where the vehicle is  in  the  actual  possession
and control of the hirer not be proper  for  the  purpose  of  fastening  of
liability in case of an accident. The liability of the “owner” is  vicarious
for the tort committed by its employee during the course of  his  employment
and it would be a question of fact in each case as to on whom can  vicarious
liability be fastened in the case of an accident. In this case, Shri  Sanjay
Kumar, the owner of the bus could not ply the bus on  the  particular  route
for which he had no permit and he in fact was not plying  the  bus  on  that
route. The services of the  driver  were  transferred  along  with  complete
“control” to RSRTC, under whose directions,  instructions  and  command  the
driver was to ply or not to ply the ill-fated bus on the  fateful  day.  The
passengers were being carried by RSRTC on receiving  fare  from  them.  Shri
Sanjay Kumar was therefore not concerned with the passengers  travelling  in
that bus on the particular route on payment of fare to RSRTC. Driver of  the
bus, even though an  employee  of  the  owner,  was  at  the  relevant  time
performing his duties under the order and command of the conductor of  RSRTC
for operation of the bus. So far as the passengers of the ill-fated bus  are
concerned, their privity of contract was only with the RSRTC  to  whom  they
had paid the fare for travelling in that  bus  and  their  safety  therefore
became the responsibility of the RSRTC while travelling  in  the  bus.  They
had no privity of contract with Shri Sanjay Kumar, the owner of the  bus  at
all. Had it been a case only of transfer of services of the driver  and  not
of transfer of control of the driver from the owner  to  RSRTC,  the  matter
may have been somewhat different. But on facts in this case and in  view  of
Conditions 4 to 7 of the agreement (supra), the RSRTC must  be  held  to  be
vicariously liable for the tort committed by the  driver  while  plying  the
bus under contract of the RSRTC. The general  proposition  of  law  and  the
presumption arising therefrom that an employer, that is the person  who  has
the  right  to  hire  and  fire  the  employee,  is  generally   responsible
vicariously for the tort committed by  the  employee  concerned  during  the
course of his employment and  within  the  scope  of  his  authority,  is  a
rebuttable presumption. If the original employer is able to  establish  that
when the  servant  was  lent,  the  effective  control  over  him  was  also
transferred to the hirer, the original owner can  avoid  his  liability  and
the temporary employer or the hirer, as  the  case  may  be,  must  be  held
vicariously liable for the tort committed by the employee concerned  in  the
course of his employment while under the command and control  of  the  hirer
notwithstanding the fact that  the  driver  would  continue  to  be  on  the
payroll of  the  original  owner.  The  proposition  based  on  the  general
principle as noticed above is adequately rebutted in this case not  only  on
the basis of the evidence led by the  parties  but  also  on  the  basis  of
Conditions 6 and 7 (supra), which go to show that the owner had  not  merely
transferred the services of the driver to the RSRTC but actual  control  and
the driver was to act under the instructions, control  and  command  of  the
conductor and other officers of the RSRTC.

18. Reliance placed by learned counsel for the appellant  on  Condition  No.
15 of the agreement (supra) in our view  is  misconceived.  Apart  from  the
fact that this clause in the agreement between the owner and the  RSRTC,  to
the extent it shifts the liability for the accident from the  RSRTC  to  the
owner, may be against the public policy as opined by the High Court,  though
we are not inclined to test the  correctness  of  that  proposition  of  law
because on facts, we find that RSRTC cannot  escape  its  liability  to  pay
compensation. The second part of Condition No. 15 makes it abundantly  clear
that the RSRTC did not completely shift the liability to the  owner  of  the
bus because it provided for reimbursement to  it  in  case  it  has  to  pay
compensation arising out of an accident. The words “if  the  Corporation  is
required to make any payment or incur any expenses  through  some  court  or
under some mutual compromise, the Corporation shall be able to recover  such
amounts from the owner of the bus after deducting the same from the  amounts
payable to him” in the later part of Condition No. 15 leave no ambiguity  in
that behalf and clearly go to show  the  intention  of  the  parties.  Thus,
RSRTC cannot escape its liability under Condition No. 15  of  the  agreement
either. Thus, both on facts and in law the  liability  to  pay  compensation
for the accident must fall on the RSRTC.”

    It is apparent that question of the liability of  the  insurer  did  not
come up  for  consideration  and  also  the  relevant  statutory  provisions
relating thereto in aforesaid decision.  This Court, considering  clause  16
of the agreement entered into by RSRTC and owner, held that  RSRTC  did  not
completely shift the liability to the owner of the bus in  case  it  has  to
pay compensation arising out of an accident.   In  the  instant  cases  also
there are certain clauses referred to  above  which  indicate  that  if  the
KSRTC has to make the payment, it can recover the same from  the  owner  out
of the amount payable by it or from the amount payable  by  the  insurer  to
the owner.  On the strength of decision in RSRTC  v.  Kailash  Nath  Kothari
(supra), the KSRTC being in actual control of  the  vehicle  would  also  be
liable to make the compensation, however, in our opinion it can recover  the
amount from the registered owner or insurer, as the case may  be.   In  fact
of the case, vis-à-vis, the claimants’ liability would be joint and  several
upon the KSRTC, registered owner and the insurer.
29.   In National Insurance Co. v. Deepa Devi  (supra),  vehicle  was  under
requisition by the State Government and that possession on  requisition  was
not covered by the definition of the owner under section 2(30)  in  the  Act
of 1988 or the Act of 1939.   It  was  held  by  this  Court  as  the  Motor
Vehicles Act did not envisage such a situation.  Owner in such  a  case  has
to be understood  from common sense point of  view.   Thus,  the  State  was
held  liable  to  make  the  payment  of  compensation.   The  question  was
altogether different in the aforesaid case.
30.   In Godavari Finance Company v. Degala Satyanarayanamma & Ors.,  (2008)
5 SCC 107, definition of owner came up for consideration.  It was held  that
the name of the financer  was  incorporated  in  the  registration  book  as
owner.  The respondent was held  to  be  owner  of  the  vehicle  which  was
purchased by him  on  being  financed  by  Godavari  Finance  Company.   The
financer could not be held liable to make the  payment  of  compensation  as
definition of the owner in the  Act  of  1939  is  a  comprehensive  one  as
vehicle which is the subject matter of hire purchase agreement,  the  person
in possession of the vehicle  under  that  agreement  shall  be  the  owner.
Thus, the name of the financer in the certificate would not be decisive  for
determination as to who was the owner of the vehicle.  In the case  of  hire
purchase agreement, financer cannot ordinarily be treated to  be  the  owner
and the person in possession  is  liable   to  pay  damages  for  the  motor
accident.  This Court has held thus:

“15. An  application  for  payment  of  compensation  is  filed  before  the
Tribunal constituted under Section 165 of the Act for adjudicating upon  the
claim for compensation in respect of accident involving  the  death  of,  or
bodily injury to, persons arising out of  the  use  of  motor  vehicles,  or
damages to any property of a third party so arising, or  both.  Use  of  the
motor vehicle is a sine qua non for entertaining a claim  for  compensation.
Ordinarily if driver of the vehicle  would  use  the  same,  he  remains  in
possession or control thereof. Owner of the vehicle, although may  not  have
anything to do with the  use  of  vehicle  at  the  time  of  the  accident,
actually he may be held to be constructively liable as the employer  of  the
driver. What is, therefore, essential for passing an award is  to  find  out
the liabilities of the persons who are involved in the use  of  the  vehicle
or the persons who are vicariously liable. The insurance company  becomes  a
necessary party to such claims as in the event the owner of the  vehicle  is
found to be liable, it would have to  reimburse  the  owner  inasmuch  as  a
vehicle is compulsorily insurable so far as a third party is  concerned,  as
contemplated under Section 147  thereof.  Therefore,  there  cannot  be  any
doubt whatsoever that the possession or control of a vehicle plays  a  vital
role.”
                                        (emphasis supplied by us)

This Court has observed in Godavari Finance Company (supra)  that  insurance
company in such a case becomes  a  necessary  party  as  it  would  have  to
reimburse the owner.
31.   In Uttar Pradesh State Road Transport Corporation v.  Kulsum  &  Ors.,
(2011) 8 SCC 142, this Court has considered the question  of  vehicle  given
on hire by owner of the vehicle to UPSRTC  with  its  existing  and  running
insurance policy.  It was held that the UPSRTC have become the owner of  the
vehicle during the specified period and vehicle having been insured  at  the
instance of the  original  owner,  it  would  be  deemed  that  vehicle  was
transferred alongwith  insurance  policy  to  UPSRTC.   The  insurer  cannot
escape the liability to pay  the  compensation.   The  appeal  preferred  by
UPSRTC was allowed.  The instant cases are more or less  the  same  and  the
decision of this Court  in  UPSRTC  v.  Kulsum  (supra)  also  buttress  the
submission raised by KSRTC.  This Court has held as under:

“30. Thus,  for  all  practical  purposes,  for  the  relevant  period,  the
Corporation had become the owner of the vehicle for the specific period.  If
the Corporation had become the owner even for the specific  period  and  the
vehicle having been insured at the instance of original owner,  it  will  be
deemed that the vehicle was transferred along with the insurance  policy  in
existence to the Corporation and thus the Insurance  Company  would  not  be
able to escape its liability to pay the amount of compensation.

31. The liability to pay compensation is based  on  a  statutory  provision.
Compulsory insurance of the vehicle is meant for the benefit  of  the  third
parties. The liability of the owner to have compulsory insurance is only  in
regard to third party and not to the property. Once the vehicle is  insured,
the owner as well as any other person can use the vehicle with  the  consent
of the owner. Section 146 of the Act does not provide that  any  person  who
uses the vehicle  independently,  a  separate  insurance  policy  should  be
taken. The purpose of compulsory insurance in the Act has been enacted  with
an object to advance social justice.”

32.   In HDFC Bank Limited v. Reshma & Ors., (2015) 3  SCC  679,  definition
of owner under the provisions of Section 2(30) of the Act of  1988  came  up
for consideration before a bench of 3 judges  of  this  Court.   This  Court
referred to the decisions of Godavari Finance  Company  (supra)  and  Pushpa
alias Leela & Ors. v. Shakuntala & Ors., (2011) 2 SCC 240 etc. in which  the
question  arose  whether  the  liability  to  pay  compensation  amount   as
determined by the Tribunal was of the purchaser  of  the  vehicle  alone  or
whether the  liability  of  the  recorded  owner  of  the  vehicle  was  co-
extensive. This Court in HDFC Bank Limited  v.  Reshma  &  Ors.(supra)  held
thus:

“22. In the present case, as the facts have  been  unfurled,  the  appellant
Bank had financed the owner for purchase of the vehicle and  the  owner  had
entered into a hypothecation agreement with the Bank. The borrower  had  the
initial obligation to insure the vehicle, but  without  insurance  he  plied
the vehicle on the road and the accident took place. Had  the  vehicle  been
insured, the insurance company would have been liable  and  not  the  owner.
There is no cavil over the fact that the  vehicle  was  the  subject  of  an
agreement of hypothecation and was in possession and control  of  Respondent
2. The High Court has proceeded both in the main judgment as well as in  the
review that the financier steps  into  the  shoes  of  the  owner.  Reliance
placed on Mohan Benefit (P) Ltd. V. Kachraji Raymalji (1997) 9 SCC  103,  in
our considered opinion, was inappropriate because in the  instant  case  all
the documents were filed by the Bank. In the said case, the two-Judge  Bench
of this Court had doubted the relationship between  the  appellant  and  the
respondent therein from the hire-purchase agreement. Be that as it may,  the
said case rested on its own facts. In the  decision  in  Rajasthan  SRTC  v.
Kailash Nath Kothari,(1997) 7 SCC 481 the Court fastened  the  liability  on
the Corporation regard being had to the definition of the  “owner”  who  was
in control and possession of the vehicle.  Similar  to  the  effect  is  the
judgment in National Insurance Co. Ltd. V. Deepa Devi, (2008) 1 SCC 414.  Be
it stated, in the said case the Court ruled that the State shall  be  liable
to pay the amount of compensation to the claimant  and  not  the  registered
owner of the vehicle and the insurance  company.  In  Pushpa  v.  Shakuntala
case,  (2011) 2 SCC 240 the learned Judges distinguished the ratio in  Deepa
Devi on the ground that it hinged on its  special  facts  and  fastened  the
liability on the insurer. In UPSRTC  v.  Kulsum,  (2011)  8  SCC  142,   the
principle stated in Kailash Nath Kothari was distinguished and  taking  note
of the fact that at the relevant time, the vehicle in question  was  insured
with it and the policy was very much in force and  hence,  the  insurer  was
liable to indemnify the owner.

23. On a careful analysis of the principles stated in the  foregoing  cases,
it is found that there is a common thread that the person in  possession  of
the vehicle under the  hypothecation  agreement  has  been  treated  as  the
owner. Needless to emphasise, if the vehicle  is  insured,  the  insurer  is
bound to indemnify unless there is violation of  the  terms  of  the  policy
under which the insurer can seek exoneration.

24. In Purnya Kala Devi v. State of Assam, (2014) 14 SCC 142, a  three-Judge
Bench has categorically held that the person in control  and  possession  of
the vehicle under an agreement of hypothecation should be construed  as  the
owner and not alone the  registered  owner  and  thereafter  the  Court  has
adverted to the legislative intention, and ruled that the  registered  owner
of the vehicle should not be held liable  if  the  vehicle  is  not  in  his
possession and control. There is reference to Section 146 of  the  Act  that
no person shall use or cause or allow  any  other  person  to  use  a  motor
vehicle in a public  place  without  insurance  as  that  is  the  mandatory
statutory  requirement  under  the  1988  Act.  In  the  instant  case,  the
predecessor-in-interest  of  the  appellant,   Centurion   Bank,   was   the
registered owner along with Respondent 2. Respondent 2 was  in  control  and
possession of the vehicle. He had taken the vehicle from the dealer  without
paying the full premium to the insurance company  and  thereby  getting  the
vehicle insured. The High Court has erroneously opined  that  the  financier
had the responsibility to get the vehicle insured, if  the  borrower  failed
to insure it. The said term in the hypothecation agreement does  not  convey
that the appellant financier had become the owner and  was  in  control  and
possession of the vehicle. It was the absolute  fault  of  Respondent  2  to
take the vehicle from the dealer without  full  payment  of  the  insurance.
Nothing has been  brought  on  record  that  this  fact  was  known  to  the
appellant financier or it was done in collusion  with  the  financier.  When
the intention of the legislature is quite clear to the effect, a  registered
owner of the vehicle should not be held liable if the vehicle is not in  his
possession and control and there is evidence on record  that  Respondent  2,
without the insurance plied  the  vehicle  in  violation  of  the  statutory
provision contained in Section 146 of the 1988 Act,  the  High  Court  could
not have mulcted the liability on the financier.  The  appreciation  by  the
learned  Single  Judge  in  appeal,  both  in  fact  and  law,   is   wholly
unsustainable.”

This Court has held that even when there was an agreement  of   and  vehicle
has been insured and  agreement holder is  treated  an  owner,  the  insurer
cannot escape the liability to make indemnification.

33.   In view of the decision in HDFC Bank Limited v. Reshma &  Ors.(supra),
the insurer cannot escape the liability, when ownership changes due  to  the
hypothecation agreement.  In the case of hire also,  it  cannot  escape  the
liability, even if the ownership changes.  Even though, KSRTC is treated  as
owner under  Section  2(30)  of  the  Act  of  1988,  the  registered  owner
continues to remain liable as per terms and conditions  of  lease  agreement
lawfully entered into with KSRTC.

34.   In view of the aforesaid discussion, we hold  that  registered  owner,
insurer  as  well  as  KSRTC  would  be  liable  to  make  the  payment   of
compensation jointly and severally to the claimants and the KSRTC  in  terms
of the lease agreement entered into  with  the  registered  owner  would  be
entitled to recover the amount paid to  the  claimants  from  the  owner  as
stipulated in the agreement or from the insurer.

      35.   The appeals are, accordingly, allowed.  Parties  to  bear  their
own costs.





 ........................................CJI.
                                             (H.L. Dattu)




New                                                                   Delhi;
….......................................J.
October 27, 2015.                            (Arun Mishra)