In the above judgment, this Court was of the view, that it would be open to the High Court to examine, as to whether there was material to substantiate the charge under Section 307 of the Indian Penal Code, and also, to determine whether the prosecution had collected sufficient evidence to substantiate the said charge. And in case sufficient evidence to sustain the charges did not emerge, it would be open to the High Court to quash the proceedings. We are of the view, that the instant judgment had no relevance, to the facts and circumstances of this case. Herein, the investigation has been completed, and the final report was filed before the Chief Judicial Magistrate, Ernakulam, on 22.03.2009. More than 6 years have gone by since then. It is not the case of the accused, that the final report does not contain adequate material to substantiate the charges. J.Ramesh Kamath, appellant no.1 herein, has been cited as charge witness no.5; Giri Nair- appellant No.2 herein, has been cited as charge witness no.6; and Antony Tharian – appellant no.3 herein, has been cited as charge witness no.18. It is their contention, that the charges are clearly made out on the basis of documentary evidence. We would say no more. But that, the inferences are those of the appellants, and not ours. The eventual outcome would emerge from the evidence produced before the trial court. For the reasons recorded hereinabove, we allow the appeal and set aside the impugned order passed by the High Court. CC No.90 of 2009 is accordingly restored on the file of the Chief Judicial Magistrate, Ernakulam. We direct the trial court to proceed further with the matter, in accordance with law.

REPORTABLE

                       IN THE SUPREME COURT OF INDIA

                        CRIMINAL APPELLATE JURISDICTION

                        CRIMINAL APPEAL No.445 OF 2016
                  (Arising out of SLP(Crl.)No.3821 of 2010)



J.RAMESH KAMATH & ORS.                            .......APPELLANTS


                                   VERSUS



MOHANA KURUP & ORS.                              .......RESPONDENTS



                               J U D G M E N T

JAGDISH SINGH KHEHAR, J.


1.          Leave granted.

2.          Respondents nos.4 to 7 herein describing themselves  as  members
of the All Kerala Chemists and Druggists Association  (hereinafter  referred
to as `the Association’), filed a  written  complaint  to  the  City  Police
Commissioner, Ernakulam against respondent nos.1 to  3.  Respondent  No.1  –
Mohana Kurup was the  President  of  the  Association  during  the  relevant
period from 2004 to 2006 and thereafter from 2006 to 2008.  Respondent  No.2
– Raveendran was the Secretary of the Association during  the  same  period,
and respondent no.3 – Sayed was the Treasurer of the Association during  the
relevant period.  It was alleged in the complaint filed by respondent  nos.4
to 7, that respondent nos.1 to 3, in furtherance of a  criminal  conspiracy,
and with common intention, misappropriated huge amounts  of  funds  of  `the
Association',  by  misusing  their  position  as  office  bearers  of   `the
Association'. On the basis of the complaint preferred  by  respondent  nos.4
to 7, First Information Report bearing Crime No.675/2008 was  registered  at
Central Police Station, Ernakulam.
3.          Appellant No.2 in the present appeal – Giri Nair (also  claiming
to be an active member of  the  Association),  likewise  filed  a  complaint
before the City Police Commissioner, Ernakulam, making  similar  allegations
against respondent nos.1 to 3.
4.          The police filed  a  final  report  before  the  Chief  Judicial
Magistrate,  Ernakulam,  on  22.03.2009,  based  on  an  affirmation  during
investigation, for offences under Sections 406, 408, 409, 477A and  120B  of
the Indian Penal Code. Needless to mention, that the  aforesaid  chargesheet
was  based  on  the  complaint  addressed  by  respondents  nos.4  to  7  on
09.04.2008, and not the complaint made by the appellants before this  Court.

5.           Dissatisfied  with  the  initiation  of  action  against  them,
respondent nos.1 to 3 filed Criminal M.C.No.4154 of  2009  before  the  High
Court of Kerala (hereinafter referred to as `the High Court’) under  Section
482 of the Criminal Procedure Code praying for quashing of the final  report
(filed by the police in  C.C.No.90  of  2009,  on  the  file  of  the  Chief
Judicial Magistrate, Ernakulam  arising out of Crime No.675/2008). The  case
projected by respondent nos.1 to 3 before  the  High  Court  was,  that  the
allegations contained in the complaint dated 09.04.2008 were in  the  nature
of a private dispute, and was of  a  purely  personal  nature,  without  any
involvement of public policy, and as  such,  the  matter  could  be  settled
between the parties through an amicable settlement. And that,  it  had  been
so settled.
6.           Along  with  the  aforesaid  Criminal  M.C.No.4154   of   2009,
respondent nos.1 to 9 filed a  joint  petition  seeking  compounding   under
Section 320 of the Criminal Procedure Code. At this juncture,  it  would  be
relevant  to  mention,  that  respondent  nos.4  to  7  were  the   original
complainants on whose complaint, the case  came  to  be  registered  against
respondent nos.1 to 3.  Respondent nos.8 and  9  herein,  were  the  General
Secretary and Treasurer of `the Association',  at  the  time  when  Criminal
M.C.No.4154/2009 was filed.
7.          According to the assertions made before  this  Court,  the  High
Court was informed, that the matter had been settled  between  the  parties,
and that, no useful purpose would be served in continuing  the  prosecution.
The High Court, in the above view of the matter, passed the  impugned  order
dated 22.12.2009, whereby, proceedings in CC No.90/2009, pending before  the
Chief Judicial Magistrate, Ernakulam,  were  quashed.  Paragraph  2  of  the
impugned order is extracted  herein:-
“2.  A  compounding  petition  is  filed  jointly  by  the  petitioners  and
respondents 1 to 6 stating  that  entire  disputes  were  settled  with  the
petitioners, who were the former office bearers and respondents 1 to 4,  the
complainants and respondents  5  and  6,  the  present  office  bearers  and
respondents 1 to 4 admit that there was no misappropriation of  the  amounts
of AKCDA as alleged and respondents 5 and 6 agreed the  same.   In  view  of
the settlement, it is contended that they may be permitted to  compound  the
offences.”
                                      (emphasis is ours)



A perusal of paragraph 2 extracted above,  reveals,  that  the  complainants
(namely, respondent nos. 4 to 7 herein) and the accused (namely,  respondent
nos.1 to 3 herein) had admitted, that there was no misappropriation  of  the
amounts of the Association, and respondents nos.8 and  9  herein,  who  were
the General Secretary and Treasurer (were impleaded in  the  joint  petition
as respondent Nos.5 and 6) endorsed the above position.
8.          Paragraph 5 of the  impugned  order,  is  also  being  extracted
hereunder:
“5. Prosecution case as against the petitioners is that they  committed  the
offences as against AKCDA and its  members.  The  allegation  is  that  they
opened two separate accounts and converted the  cheques  and  demand  drafts
received in the name  of  AKCDA  to  their  personal  accounts  and  thereby
misappropriated the amounts. The offences alleged  are  purely  personal  in
nature as against the Association, represented by respondents 5 and 6.   The
case was investigated on the complaint filed by respondents 1  to  4.   When
compounding petition filed by the petitioners along with respondents 1 to  6
establishes that there has been a complete settlement of  the  disputes  and
the offences alleged are purely personal in nature,  as  held  by  the  Apex
court in Madan Mohan Abbot v. State of Punjab (2008 (3) KLT 19)  it  is  not
in the interest of justice to continue the prosecution. In the light of  the
settlement and the joint petition filed,  even  if  petitioners  are  to  be
tried,  there  is  no  likelihood  of  a  successful  prosecution.  In  such
circumstances, it is  not  in  the  interest  of  justice  to  continue  the
prosecution.

Petition  is  allowed.  C.C.No.90/2009  on  the  file  of   Chief   Judicial
Magistrate’s Court, Ernakulam is quashed.”
                                           (emphasis is ours)

A  perusal  of  paragraph  5  of  the  impugned  order  reveals,  that   the
acknowledged position between the parties (the  accused,  the  complainants,
and the office bearers of `the Association') which was projected before  the
High Court was, that the offences  alleged  in  the  complaint  were  purely
personal in nature.
9.          Premised on the acknowledged admitted position, that  there  was
no misappropriation, as well as, the fact that the offences alleged  in  the
complaint were purely personal in nature, the High  Court  agreed  with  the
settlement  between  the  parties,  and  quashed  the  proceedings   in   CC
No.90/2009.
10.         It is also imperative for us to notice, that in the  compounding
petition, which was filed by respondent nos.1 to 3 herein (the accused),  as
petitioners impleaded respondents nos.4 to 7 herein (the complainants),  and
respondent nos.8 and 9 (the then General Secretary  and  Treasurer  of  `the
Association') herein. A clear and categorical  stance  was  adopted  in  the
compounding petition, that there was no misappropriation  of  the  funds  of
the Association, and that, not only the complainants,  but  also  respondent
nos.8 and 9 herein, namely, the General Secretary and the Treasurer  of  the
Association, confirmed the above position.
11.         The first contention  advanced  at  the  hands  of  the  learned
counsel for the appellants  was,  that  the  respondents-accused  have  been
charged of offences under Sections 406, 408,  409,  477A  and  120B  of  the
Indian Penal Code. It was the pointed contention of the learned counsel  for
the appellants, that  most  of  the  provisions  under  which  the  accused-
respondents had been charged, were non-compoundable  under  Section  320  of
the Criminal Procedure Code. And as such, the matter  could  not  have  been
compounded.
12.         Whilst it is not disputed at the hands of  the  learned  counsel
for respondent nos.1 and 2, that  most  of  the  offences  under  which  the
accused were charged are non-compoundable, yet it was asserted,   that   the
jurisdiction  invoked  by  the  High Court in

quashing the criminal proceedings against respondent nos.1  to  3,  was  not
under Section 320 of the Criminal Procedure Code, but was under Section  482
of the Criminal Procedure Code, as interpreted by this Court.
13.          Insofar  as  the  decisions  of  this  Court   are   concerned,
reference, in the first instance, was made to Madan Mohan Abbot v. State  of
Punjab, (2008) 4 SCC 582,  wherefrom,  our  attention  was  invited  to  the
following observations:
“5.   It is on the basis of this compromise that the application  was  filed
in the High Court for quashing of proceedings which has  been  dismissed  by
the impugned order.  We notice from a reading  of  the  FIR  and  the  other
documents on record that the dispute was purely a personal one  between  two
contesting parties and that it arose  out  of  extensive  business  dealings
between them and that there was absolutely no public policy involved in  the
nature of the allegations made against the accused. We  are,  therefore,  of
the opinion that no useful purpose would be served in  continuing  with  the
proceedings in the light of the compromise and also  in  the  light  of  the
fact that the complainant has on 11-1-2004, passed away and the  possibility
of a conviction being recorded has thus to be ruled out.

6.    We need to emphasise that it is perhaps  advisable  that  in  disputes
where the question involved is  of  a  purely  personal  nature,  the  Court
should ordinarily accept the terms of  the    compromise  even  in  criminal
proceedings as keeping the matter alive with no possibility of a  result  in
favour  of  the  prosecution  is  a  luxury  which  the   courts,    grossly
overburdened as they are, cannot afford and that the time so  saved  can  be
utilised in deciding more effective and meaningful litigation.   This  is  a
common sense approach to the matter based on ground of realities and  bereft
of the technicalities of the law.”
                                          (emphasis is ours)


A perusal of the conclusions extracted above, with a reading of the FIR  and
the supporting documents in the above case  reveal,  that  the  dispute  was
purely of a personal nature, between two contesting parties.  Further  that,
the dispute arose out of  private  business  dealings  between  two  private
parties. And furthermore, there was absolutely  no  public  involvement,  in
the  allegations  made  against  the  accused.  Based   on   the   aforesaid
considerations, this Court had held, that in  disputes  where  the  question
involved was of a purely personal nature, it was appropriate for  Courts  to
accept the terms of compromise,  even  in   criminal  proceedings.   It  was
sought to be explained, that in such  matters,  keeping  the  matters  alive
would not result, in favour of the prosecution.  We are of  the  view,  that
the reliance on the  above  judgment  would  have  been  justified,  if  the
inferences drawn by the High Court were  correct,  namely,  that  admittedly
there  was  no  misappropriation  of  the  funds  of  the  Association,  and
secondly, the offences alleged were purely  personal  in  nature.  We  shall
examine that, at a later stage.
14.         Having placed reliance on the judgment in the Madan Mohan  Abbot
case (supra), which was determined by a two-Judge  Division  Bench  of  this
Court, learned counsel for respondent nos.1 to 3 went on to  place  reliance
on Gian Singh vs. State of Punajb (2012) 10 SCC 303, which was decided by  a
three-Judge Division Bench.  Insofar as the instant judgment  is  concerned,
learned counsel for respondent Nos.1 to 3, in the  first  instance,  invited
this  Court's  attention  to  paragraph  37  thereof,  wherein  the  earlier
decision rendered by this Court in the Madan  Mohan  Abbot  case,  was  duly
noticed. Thereupon, the Bench recorded its conclusion as under:
“59.  B.S. Joshi (2003) 4 SCC 675, Nikhil Merchant (2008) 9 SCC  677,  Manoj
Sharma (2008) 16 SCC 1 and  Shiji  (2011)  10  SCC  705  do  illustrate  the
principle that the High Court may  quash  criminal  proceedings  or  FIR  or
complaint in exercise of its inherent power under Section 482  of  the  Code
and Section 320 does not limit or affect the powers of the High court  under
Section 482.  Can it be said that by quashing criminal proceedings in B.  S.
Joshi, Nikhil Merchant, Manoj Sharma and Shiji  this  Court  has  compounded
the non-compoundable offences indirectly? We do not  think  so.  There  does
exist the distinction between compounding of an offence  under  Section  320
and quashing of a criminal case by the High Court in  exercise  of  inherent
power under  Section  482.   The  two  powers  are  distinct  and  different
although the ultimate consequence may be the  same  viz.  acquittal  of  the
accused or dismissal of indictment.

60.   We find  no  incongruity  in  the  above  principle  of  law  and  the
decisions of this Court in Simrikhia (1990) 2 SCC 437,  Dharampal  (1993)  1
SCC 435, Arun Shankar Shukla (1999) 6 SCC 146, Ishwar Singh  (2008)  15  SCC
667, Rumi Dhar (2009) 6 SCC 364 and Ashok Sadarangani  (2012)  11  SCC  321.
The principle propounded in Simrikhia that the inherent jurisdiction of  the
High Court cannot be invoked to override express bar provided in law  is  by
now well settled. In Dharampal the Court observed the same  thing  that  the
inherent powers under Section  482  of  the  Code  cannot  be  utilised  for
exercising  powers  which  are  expressly  barred  by  the  Code.    Similar
statement of law is made in Arun  Shankar  Shukla.   In  Ishwaqr  Singh  the
accused was alleged to have committed an offence  punishable  under  Section
307 IPC and with reference to Section 320 of the Code, it was held that  the
offence punishable under Section 307 IPC was not  compoundable  offence  and
there was express bar in Section 320 that no offence shall be compounded  if
it is not compoundable under the Code.  In Rumi Dhar  although  the  accused
had paid the entire due amount as per the settlement with the  bank  in  the
matter of recovery before the  Debts  Recovery  Tribunal,  the  accused  was
being proceeded with for the commission of the offences under Sections  120-
B/420/467/468/471  IPC  along  with  the  bank  officers  who   were   being
prosecuted under Section 13(2) read with 13  (1)(d)  of  the  Prevention  of
Corruption Act.  The Court refused to quash the charge against  the  accused
by holding that the Court would not quash a case involving a  crime  against
the  society when a prima facie case has been made out against  the  accused
for framing the charge. Ashok  Sadarangani  was  again  a  case   where  the
accused  persons  were  charged  of  having  committed  the offences   under
Sections 120-B, 465, 467, 468 and  471,  IPC  and   the   allegations   were
that the accused  secured the  credit  facilities   by   submitting   forged
property documents  as  collaterals  and  utilised  such  facilities  in   a
dishonest  and fraudulent  manner  by   opening   letters   of   credit   in
respect  of  foreign supplies  of  goods,  without  actually  bringing   any
goods  but  inducing  the bank to negotiate the letters of credit in  favour
of foreign  suppliers  and also by misusing the cash-credit   facility.  The
Court  was  alive  to  the reference made in one of the present matters  and
also the decisions in  B.S.Joshi, Nikhil Merchant  and   Manoj   Sharma  and
it  was  held  that B.S.Joshi, and  Nikhil  Merchant  dealt  with  different
factual situation  as  the dispute involved  had  overtures   of   a   civil
dispute  but  the  case  under consideration in Ashok Sadarangani  was  more
on the  criminal  intent  than on a civil aspect.   The  decision  in  Ashok
Sadarangani   supports   the  view  that  the  criminal  matters   involving
overtures of a civil dispute stand on  a different footing.

61.  The position that  emerges   from   the   above   discussion   can   be
summarised  thus:   the  power   of   the   High   Court   in   quashing   a
criminal proceeding  or  FIR  or  complaint  in  exercise  of  its  inherent
jurisdiction is distinct  and  different  from  the   power   given   to   a
criminal  court  for compounding the  offences  under  Section  320  of  the
Code.  Inherent  power is of wide plenitude  with  no  statutory  limitation
but it has  to  be  exercised in accord  with  the  guideline  engrafted  in
such power viz; (i) to secure  the ends  of  justice,  or  (ii)  to  prevent
abuse of the process of  any  Court.  In  what  cases  power  to  quash  the
criminal proceeding or complaint  or  F.I.R   may  be  exercised  where  the
offender and the victim have settled their  dispute   would  depend  on  the
facts and circumstances of each case and no  category  can   be  prescribed.
However, before exercise of such  power,  the  High  Court   must  have  due
regard to the  nature  and  gravity  of  the  crime.  Heinous  and   serious
offences of mental depravity  or  offences  like  murder,   rape,   dacoity,
etc. cannot be  fittingly  quashed  even  though  the  victim  or   victim’s
family  and the offender have settled the dispute. Such  offences  are   not
 private  in nature and  have  serious  impact  on  society. Similarly,  any
 compromise between the victim and the offender in relation to the  offences
under  special statutes like the  Prevention  of  Corruption  Act   or   the
offences  committed  by public servants  while  working  in  that  capacity,
etc; cannot provide   for   any  basis  for  quashing  criminal  proceedings
involving  such  offences.  But  the criminal cases  having   overwhelmingly
and  pre-dominatingly  civil  flavour stand on a different footing  for  the
purposes of  quashing,  particularly  the offences arising from  commercial,
financial, mercantile, civil,  partnership or such like transactions or  the
offences arising out of matrimony  relating to dowry,  etc.  or  the  family
disputes where the wrong is  basically  private or personal  in  nature  and
the parties have resolved  their   entire   dispute.  In  this  category  of
cases, the High Court may quash  criminal  proceedings   if   in  its  view,
because of the compromise  between  the  offender   and   the  victim,   the
possibility of conviction is remote and  bleak  and  continuation   of   the
criminal case would put  the accused  to  great  oppression  and   prejudice
 and  extreme injustice would be caused to him by not quashing the  criminal
 case  despite full and complete  settlement   and   compromise   with   the
victim.  In  other words, the High Court must consider whether it  would  be
unfair  or  contrary to the interest of  justice  to   continue   with   the
criminal  proceeding  or continuation of  the  criminal   proceeding   would
tantamount  to  abuse  of process of law despite settlement  and  compromise
between  the  victim  and the wrongdoer and whether to secure  the  ends  of
justice, it is appropriate  that the criminal case is put to an end  and  if
the answer to  the  above  question(s)  is  in  the  affirmative,  the  High
Court shall  be  well  within  its   jurisdiction   to  quash  the  criminal
proceeding.”

                                           (emphasis is ours)

15.         A perusal of the above determination, leaves  no  room  for  any
doubt, that this Court crystalised the position in  respect  of  the  powers
vested in the High Court under Section 482 of the Criminal  Procedure  Code,
to quash criminal proceedings. It has now been  decisively  held,  that  the
power vested in the High Court under Section 482 of the  Criminal  Procedure
Code, is not limited to quashing proceedings within the ambit and  scope  of
Section 320 of the Criminal Procedure Code. The three-Judge  Division  Bench
in the above case, clearly expounded, that quashing of criminal  proceedings
under Section 482 of the Criminal Procedure Code, could  also  be  based  on
settlements between private parties, and could also on a compromise  between
the offender and the victim. Only that, the above power did  not  extend  to
crimes against the society.  It  is  also  relevant  to  mention,  that  the
jurisdiction vested in the High Court under  Section  482  of  the  Criminal
Procedure  Code,  for  quashing  criminal  proceedings,  was  held   to   be
exercisable in criminal cases having  an  overwhelming  and  predominatingly
civil flavour, particularly offences  arising  from  commercial,  financial,
mercantile, civil, partnership, or such like transactions. Or even  offences
arising out of matrimony relating to dowry etc.  Or  family  disputes  where
the wrong is basically  private  or  personal.   In  all  such  cases,   the
parties should have resolved their entire dispute by themselves, mutually.
16.         The question which emerges for  our  consideration  is,  whether
the allegations levelled in the complaint against  respondent  nos.1  to  3,
would fall within the purview of the High Court,  so  as  to  enable  it  to
quash the same, in exercise of its jurisdiction under  Section  482  of  the
Criminal Procedure Code?
17.         We shall now venture to determine the above  issue.   A  perusal
of the complaint on the basis of  which  criminal  prosecution  came  to  be
initiated against respondent nos.1 to 3 reveals, that  the  accused  persons
were described as office bearers of `the  Association',  during  the  period
from 2004 to 2008.  During the course of hearing, it was not disputed,  that
at the relevant time, respondent no.1 – Mohana Kurup was  the  President  of
`the Association'; respondent no.2 – Raveendran was the  Secretary  of  `the
Association';  and  respondent  no.3  –  Sayed  was  the  Treasurer  of  the
Association.  It was alleged, that during their tenure,  as  office  bearers
of the State Committee of `the Association', they had  exclusive  access  to
the funds of `the Association'.  They, at their own, managed the funds,  for
and on behalf of `the Association'.  Consequent upon  their  resignation  in
2008, when an ad hoc Committee took up charge of  the  State  Committee,  it
discovered serious misappropriation of funds of the State  Committee,  which
were in the name of the State Committee, and were not  accounted  for.  Even
the account books maintained by the State Committee, made  no  reference  to
the receipt of such amounts.  A specific reference was  made  to  M/s  Micro
Labs Ltd., Bangalore, which paid a sum of Rs.19,00,000/- two  demand  drafts
being D.D.No.718573 and D.D.No.718574 in  the  sum  of  Rs.9,50,000/-  each,
drawn on the Canara Bank, both dated 17.04.2007. It  was  also  asserted  in
the complaint, that `the Association' issued two receipts  dated  30.04.2007
and 15.05.2007 in acknowledgement of the receipt of  the  said  amounts.  It
was alleged, that the said amount was  never  incorporated  in  the  account
books of `the Association'.  It was also alleged, that respondent  nos.1  to
3 dishonestly misappropriated the said amount to  themselves,  in  violation
of bye-laws and other regulations/directions  of  the  State  Committee,  by
creating  false  and  fictitious  accounts,  by  altering,  destroying   and
mutilating the original accounts of the  State  Committee,  with  a  willful
intention to obtain illegal  financial  gains,  and  to  defraud  the  State
Committee. It is also relevant to mention, that consequent  upon  completion
of  investigation,  the  chargesheet   dated   22.03.2009,   filed   against
respondent nos.1 to 3, stated thus:-
“The accused persons being the office bearers of the  State  Committee,  All
Kerala Chemists & Druggists Association,  in  furtherance  of  their  common
intention to obtain illegal financial gain conspired conjointly and  cheated
the Association and its members  by  misappropriating  the  funds  given  by
various drug companies to AKCDA  functioning  near  South  Railway  Station,
Ernakulam during the  period  from  17.04.2007  to  11.04.2008.  The  Demand
Drafts and Cheques received were not credited in the account of  AKCDA.  The
accused falsified the accounts of AKCDA and unauthorisedly  opened  accounts
in South Malabar Gramin Bank, Palakkad  Branch  and  ICICI  Bank,  Edappally
Branch and credited the amounts in the said accounts.  The DD's and  cheques
received were encashed in the aforesaid accounts on  various  dates  and  an
amount of Rs.80,00,000/- was  diverted  for  their  own  use.   The  accused
thereby cheated the members  and  the  association  and  committed  criminal
breach of trust.  The accused also committed the offence alleged.”
                                                (emphasis is ours)
18.         In the above view of the  matter,  we  are  satisfied  that  the
allegations levelled against respondent nos.1 to 3 were of a  nature,  which
could  not  be  treated  as  purely  of  a  personal  nature.  We  are  also
astonished, that the complainants, who are arrayed in the present appeal  as
respondent nos.4 to 7  affirmed  (in  the  compounding  petition)  that  “no
misappropriation of  the  amounts  of  All  Kerala  Chemists  and  Druggists
Association is committed by the petitioners/accused persons”.  We  are  also
amazed, that respondent nos.8 and 9 herein, who were the  General  Secretary
and the Treasurer respectively of the Association, at the time of filing  of
the compounding petition, confirmed the stand adopted by  the  complainants,
in the compounding petition. The  accusations  levelled  against  respondent
nos.1 to 3, in our considered view, do not pertain to a  dispute  which  can
be described as purely of a personal nature. It is also not possible for  us
to acknowledge the position  adopted  by  the  complainants,  and  the  then
members of the Association, that no misappropriation had been  committed  by
the accused.  We cannot appreciate how such  a  statement  could  have  been
made after the investigation had been completed, and  charges  were  framed,
which were pending trial before a court of competent jurisdiction.
19.         We are of the view, that the basis on which the  impugned  order
was  passed,  was  incorrectly  determined  as   of   a   personal   nature.
Additionally, the accusations were not of a nature which can  be  classified
by this Court, as were amenable to be quashed,  under  Section  482  of  the
Criminal Procedure Code.
20.         To be fair to the learned counsel for respondent Nos.  1  to  3,
we may also refer to Narinder Singh  vs. State of Punjab, (2014) 6 SCC  466,
wherein one of the offences for which the accused was proceeded against  was
under Section 307 of the Indian Penal Code.  It  was  submitted,  that  even
for such  criminal  offences,  a  Court  of  competent  jurisdiction,  under
Section 482 of  the  Criminal  Procedure  Code,  could  quash  the  criminal
proceedings.  Reference in this behalf was made to the conclusions drawn  by
this Court in paragraphs 29.6 and 29.7, which are extracted hereunder:
“29.6 Offences under Section 307 IPC would fall in the category  of  heinous
and serious offences and therefore are to  be  generally  treated  as  crime
against the society and not against  the  individual  alone.   However,  the
High Court would not rest its decision merely because there is a mention  of
Section 307 IPC in the FIR or the charge is framed under this provision.  It
would be open to the  High Court to examine as to whether  incorporation  of
Section 307 IPC is  there  for  the  sake  of  it  or  the  prosecution  has
collected sufficient evidence, which if proved, would lead  to  proving  the
charge under Section 307 IPC. For this purpose, it  would  be  open  to  the
High court to go by the nature of injury sustained, whether such  injury  is
inflicted  on the vital/delegate  parts  of  the  body,  nature  of  weapons
used, etc. Medical report in respect of injuries suffered by the victim  can
generally be  the  guiding  factor.   On  the  basis  of  this  prima  facie
analysis, the High court can  examine  as  to  whether  there  is  a  strong
possibility of conviction or  the  chances  of  conviction  are  remote  and
bleak.  In the former case it can refuse to accept the settlement and  quash
the criminal proceedings whereas in the latter case it would be  permissible
for the High Court to accept the  plea  compounding  the  offence  based  on
complete settlement between the parties.  At this stage, the court can  also
be swayed by the fact that the settlement between the parties  is  going  to
result in harmony between them which may improve their future  relationship.


29.7 While deciding whether to exercise its power under Section 482  of  the
Code or not, timings of settlement play a crucial role.  Those  cases  where
the settlement is arrived at immediately after  the  alleged  commission  of
offence and the matter is still under investigation, the High court  may  be
liberal   in   accepting   the   settlement   to    quash    the    criminal
proceedings/investigation. It is because of the reason that  at  this  stage
the investigation is still on and even the charge-sheet has not been  filed.
Likewise, those cases where the charge is framed but the evidence is yet  to
start or the evidence is still at infancy stage, the  High  court  can  show
benevolence in exercising its  powers  favourably,  but  after  prima  facie
assessment of the circumstances/material  mentioned  above.   On  the  other
hand, where the  prosecution  evidence  is  almost  complete  or  after  the
conclusion of the evidence the matter is at the stage of argument,  normally
the High Court should refrain from exercising its power  under  Section  482
of the Code, as in such cases the trial court would  be  in  a  position  to
decide the case finally on merits and to come to a conclusion as to  whether
the offence under Section 307 IPC is committed or not.  Similarly, in  those
cases where the conviction is already  recorded by the trial court  and  the
matter is at the appellate stage before  the  High  Court,  mere  compromise
between the parties would not be a ground to accept the  same  resulting  in
acquittal of the offender who has  already   been  convicted  by  the  trial
court. Here charge is  proved  under  Section  307  IPC  and  conviction  is
already recorded of a heinous crime and, therefore, there is no question  of
sparing a convict found guilty of such a crime.”
                                                   (emphasis is ours)
21.   It is not possible for us to accept the submissions  advanced  at  the
hands of the learned counsel for respondent nos.1 to 3, on the basis of  the
observations extracted hereinabove.  In the above judgment,  this Court  was
of the view, that it would be open to the  High  Court  to  examine,  as  to
whether there was material to substantiate the charge under Section  307  of
the Indian Penal Code, and also, to determine whether  the  prosecution  had
collected sufficient evidence to substantiate the said charge. And  in  case
sufficient evidence to sustain the charges did not emerge, it would be  open
to the High Court to quash the proceedings. We are of  the  view,  that  the
instant judgment had no relevance, to the facts and  circumstances  of  this
case. Herein, the investigation has been completed,  and  the  final  report
was filed before the Chief Judicial Magistrate,  Ernakulam,  on  22.03.2009.
More than 6 years have gone by since then.   It  is  not  the  case  of  the
accused, that the  final  report  does  not  contain  adequate  material  to
substantiate the charges.  J.Ramesh Kamath, appellant no.1 herein, has  been
cited as charge witness no.5; Giri Nair- appellant  No.2  herein,  has  been
cited as charge witness no.6; and Antony Tharian –  appellant  no.3  herein,
has been cited as charge witness no.18.  It is their  contention,  that  the
charges are clearly made out on  the  basis  of  documentary  evidence.   We
would say no more. But that, the inferences are  those  of  the  appellants,
and not ours.  The eventual outcome would emerge from the evidence  produced
before the trial court.
22.         For the reasons recorded hereinabove, we allow  the  appeal  and
set aside the impugned order passed by the High Court.  CC No.90 of 2009  is
accordingly  restored  on  the  file  of  the  Chief  Judicial   Magistrate,
Ernakulam.  We direct the trial court to proceed further  with  the  matter,
in accordance with law.

23.         In the peculiar facts and circumstances of this case, we  cannot
endorse or appreciate the  stand  adopted  by  respondent  Nos.4  to  9.  We
accordingly direct further investigation in this matter, pertaining  to  the
role of respondent nos.4 to 9, and direct initiation of proceedings  against
them, if made out, in accordance with law.


                                                ..........................J.
                                           (JAGDISH      SINGH       KHEHAR)





..........................J.
                                 (C.NAGAPPAN)


NEW DELHI;
MAY 04, 2016.

' no mens rea no crime' has long ago been eroded and several laws in India and abroad, especially regarding economic crimes and departmental penalties, have created severe punishments even where the offences have been defined to exclude mens rea. Therefore, the contention that Section 37(1) fastens a heavy liability regardless or fault has no force......"= 'blameworthy' conduct of the occupier which resulted in the commission of the statutory offence and not his criminal intent to commit that offence. The rule of strict liability is attracted to the offences committed under the Act and the occupier is held vicariously liable along with the Manager and the actual offender, as the case may be. Penalty follows actus reus, mens-rea being irrelevant.” In view of the above declaration by this Court, we are of the view, that it is not possible for us to interfere with the impugned order passed by the High Court, wherein the prayer made by the appellants for quashing the proceedings initiated against them, was declined.

                                                        REPORTABLE
                 IN THE SUPREME COURT OF INDIA

                 CRIMINAL APPELLATE JURISDICTION

                 CRIMINAL APPEAL NO.442 OF 2016
            (Arising from SLP(Criminal) No. 6410/2015)

Hemant Madhusudan Nerurkar                        ..Appellant

                       versus

State of Jharkhand and another                    ..Respondents
                                  WITH

                 CRIMINAL APPEAL NO. 443  OF 2016
            (Arising from SLP(Criminal) No. 6406/2015)

                                  J U D G M E N T


JAGDISH SINGH KHEHAR, J.

            Leave granted in both the special leave petitions.

            The  controversy  arising  for  adjudication  emerges  from  the
provisions of the Factories Act, 1948 (hereinafter  referred  to  as  '  the
Act'), and the Bihar Factories Rules, 1950 (as applicable to  the  State  of
Jharkhand).  Insofar as the alleged violations committed by  the  appellants
are concerned, a summary of the same stands recorded in paragraph 3  of  the
impugned judgment, which is extracted hereunder:
“3.   It appears that an inspection carried out in the Growth  Shop  of  M/s
Tata Steel Limited on 14.09.2013 and in course of inspection, it  was  found
that in Fabrication Yard  No.1  about  100  numbers  of  contract  labourers
engaged.  However, on inquiry, it came to the notice of the Inspecting  Team
that though the Management took overtime service from them, but in terms  of
Factories Rules, 1950 (Form-10A) overtime slip not provided to  them,  which
is violative of Rule 103A of the  Factories  Rules,  1950.   The  Inspecting
Team further found that the  contract  labourers  were  not  provided   with
leave book in Form-15 of the Factories Rules, which is violative of Rule  88
of  Jharkhand  Factories  Rules,  1950.   It  is  further  alleged  that  on
inspection of canteen, the following shortcomings defected:
(a)         There is no partition for the female workers in the dining  hall
and service counter.

(b)         Doors and windows of the canteen are not fly proof.

(c)         Menu Chart, rate and  the  names  of  members  Canteen  Managing
Committee has not disclosed on the board.

(d)         for washing of utensils no arrangement of  hot  water  has  been
made.”


            Based on the above allegations,  cognizance  was  taken  against
the occupier – Hemant Madhusudan Nerurkar (the appellant in Criminal  Appeal
No. 442 of 2016 - arising out of SLP(Criminal) No. 6410 of  2015),  and  the
manager – Rupam Bhaduri ( the appellant in Criminal Appeal No. 443  of  2016
- arising out of SLP(Criminal) No. 6406 of 2015).
             Keeping  in  mind  the  apparently  trivial  issues,  on  which
proceedings were taken out against the appellants, this Court on  the  first
date of hearing, i.e., on 14.08.2015, recorded the following order:
“Heard Mr. K.V. Vishwanathan, learned senior counsel for the petitioner  and
Mr.  Tapesh  Kumar  Singh,  learned  Standing  Counsel  for  the  State   of
Jharkhand.

            Having heard learned counsel for the  parties,  it  is  directed
that the concerned Inspector shall verify the factory premises and find  out
whether the defects pointed out by him have been rectified or not.

            List the matter in the first week of September, 2015.

            The Registry is directed to  reflect  the  name  of  Mr.  Tapesh
Kumar Singh in the Cause List on the next date of hearing.”


A perusal of the above order reveals, that the  entire  purpose  of  passing
the same, was to ensure that violations if any are  rectified.    It  seems,
that the aforesaid course of action was taken on the basis of  the  decision
rendered by this Court in the Delhi Cloth and General Mils Co. Ltd. vs.  The
Chief Commissioner, Delhi and others, reported in (1970) 2 SCC 172, for  the
reason, that the appellants asserted that they needed to have been  afforded
an opportunity to cure the  defects  and  irregularities  found  during  the
course of  inspection,  and  only  if  they  had  failed  to  abide  by  the
provisions of the Factories Act, 1948 and the Rules, it  would  be  open  to
the authorities to proceed against the appellants.
            After 14.08.2015,  the  matter  came  up  for  consideration  on
30.11.2015, on which date the motion Bench passed the following order:
“It is submitted by learned counsel for the petitioner that  the  petitioner
has removed all the defects pertaining to  infrastructure  but  two  defects
pertaining to contract labour are not yet been removed  because  the  burden
lies on the contractor under the law.
Mr. Sinha, learned  senior  counsel  along  with  Mr.  Tapesh  Kumar  Singh,
learned counsel for the State shall obtain instructions in this regard.

Let the mater be listed in the third week of January, 2016.”


A perusal of the  above  order  reveals,  that  two  defects  pertaining  to
contract labour had not been removed. Insofar as the instant aspect  of  the
matter is concerned, it has been the submission of the learned  counsel  for
the appellants, that these two allegations leveled against  the  appellants,
were the responsibility of the contractor  who  had  provided  the  contract
labour.  And, not of the appellants.
            Lastly, the matter came up for consideration on 27.4.2016,  when
this Court ordered as under:
“Learned counsel for the  petitioner(s)  states,  that  the  violation  with
reference to  the  contract  labourers,  depicted  in  paragraph  3  of  the
impugned judgment, will be rectified within four days from today,  and  that
the matter may be taken up for hearing again on 4.5.2016.

List again on 4.5.2016.”


            In compliance with the directions issued  by  the  motion  Bench
order dated 27.4.2016, an affidavit has been filed on  behalf  of  both  the
appellants, affirming that  the  two  defects  pertaining  to  the  contract
labour have also been rectified.
            Given the aforesaid factual position, the question  which  arose
for consideration is, whether the appellants could still be  punished  under
Section 92 of the Act, which provides as under:
“92.  General  penalty  for  offences  –  Save  as  is  otherwise  expressly
provided in this Act and subject to the provisions of Section 93, if in,  or
in respect of, any  factory  there  is  any  contravention  of  any  of  the
provisions of this Act or of any rules made thereunder or of  any  order  in
writing given thereunder, the occupier and  manager  of  the  factory  shall
each be guilty of an offence and punishable with  imprisonment  for  a  term
which may extend to two years or with fine which  may  extend  to  one  lakh
rupees  or  with  both,  and  if  the  contravention  is   continued   after
conviction, with a further fine which may extend to one thousand rupees  for
each day on which the contravention is so continued:

Provided that where contravention of any of the provisions of Chapter IV  or
any rule made thereunder or under section 87 has  resulted  in  an  accident
causing death or serious bodily injury, the fine  shall  not  be  less  than
twenty five thousand rupees in the case of an accident  causing  death,  and
five thousand rupees in the case  of  an  accident  causing  serious  bodily
injury.

Explanation – In this section and in  section  94  “serious  bodily  injury”
means an injury which involves, or in  all  probability  will  involve,  the
permanent loss of the use of, or  permanent  injury  to,  any  limb  or  the
permanent loss of, or injury to, sight or hearing, or the  fracture  of  any
bone, but shall not include, the  fracture  of  bone  or  joint  (not  being
fracture of more than one bone or joint) of any phalanges  of  the  hand  or
foot.”


            Insofar as the seriousness of the issues is  concerned,  learned
counsel for the State of  Jharkhand,  Mr.  Tapesh  Kumar  Singh,  vehemently
contends, that the violations committed  at  the  hands  of  the  appellants
should not be termed as trivial. It was submitted, that the enactment  under
reference has a laudable role, inasmuch as, the same extends to  ensure  due
facilities to the labour engaged in  factories,  and  provides  measures  to
regulate emoluments of factory employees.  In this behalf,  learned  counsel
for the respondents  has  placed  reliance  on  a  decision  of  this  Court
rendered in J.K. Industries  Limited  and  others  vs.  Chief  Inspector  of
Factories and Boilers and others, reported in (1996) 6 SCC 665,  and  placed
reliance on the following observations recorded thereunder:
 “40. In keeping with the aim and object of the Act which is essentially  to
safeguard the  interests  of  workers, stop their  exploitation,   and  take
care of their safety,  hygiene  and  welfare   at  their   place  of   work,
numerous restrictions have been  enacted in  public  interest  in  the  Act.
Providing restrictions in    a Statute  would  be  a  meaningless  formality
unless the statute also contains a provision for penalty for the breach   of
the  same.  No   restriction  can   be   effective  unless  there   is  some
sanction compelling its observance  and  a  provision   for  imposition   of
penalty  for breach  of the obligations under  the Act  or  the  rules  made
thereunder is a concomitant and necessary incidence  of  the   restrictions.
Such a      provision is  contained in   Section  92       of  the      Act,
which  contains  a  general  provision  for  penalties  for  offences  under
the Act      for which  no express provision has been  made   elsewhere  and
seeks to  lay down uniform  penalty  for  all     or  any  of  the  offences
committed under  the  Act.  The  offences  under   the  Act      consist  of
contravention of  (1)  any  provision  of   the  Act;(2)  any  rules  framed
thereunder; and (3) any     order in writing made thereunder.  It  comprises
both acts of      omission and  commission.  The persons   punishable  under
the  Section are occupiers and managers, irrespective  of  the  question  as
to who  the  actual  offender  is.      The  provision,  is   in  consonance
with the    scheme of the  Act  to  reach  out   to  those   who  have   the
ultimate control over the affairs of   the  factory   to  see      that  the
requirements      for safety and  welfare of the  employees  are  fully  and
properly  carried  out    besides     carrying    out   various       duties
and obligations under  the Act.  Section 92 contemplates a  joint  liability
of  the occupier  and the  manager for any offence  committed  irrespective,
  of  the       fact  as   to  who  is  directly  responsible    for     the
offence.    The    fact     that       the  notified/identified     director
is   ignorant      about  the  'management'  of    the  factory   which  has
been entrusted to a manager  or   some  other   employee  and    is  himself
not  responsible  for      the  contravention  cannot  absolve  him  of  his
liability.  The  identified /notified   director   is      held  vicariously
liable  for the  contravention of the provisions  of  the  Act,  the   rules
made thereunder or of any order made in writing  under it  for the  offender
company, which is the occupier of the factory.

41.    Mr.  Jain,   Mr.  Nariman   and  Mr.  Tripathi,  appearing  for   the
appellants,   however,   argued   that   since     Section   92  imposes   a
liability for   imprisonment  and/or   fine,  both  on  the  occupier   (the
notified director) and the manager of the factory,  jointly  and  severally,
for the contravention of any of the    provisions of the  Act  or  any  rule
made thereunder  or  of  any    order  in   writing  given       thereunder,
irrespective of the fact  whether the   occupier  (the   notified  director)
or manager, had  any mens-rea  in respect of that contravention or that  the
contravention  was not  committed by him or  was  committed  by   any  other
person in  the factory  without his knowledge, consent  or  connivance,   it
is  an      unreasonable  restriction.  Learned   counsel  argued   that  in
criminal law, the doctrine  of vicarious  liability is  unknown and   if   a
director is to be punished for some  thing  of  which  he  is  not  actually
guilty,  it would  violate his fundamental right as  enshrined  in   Article
21  of the  Constitution. It was urged that on     account  of   advancement
in   science  and   technology,   most   of       the   companies,   appoint
professionally qualified men to run    the factories  and nominate   such  a
person to be the 'occupier' of  the factory  and    make   him   responsible
 for proper implementation  of the  provisions of  the  Act  and  it  would,
therefore,  be harsh  and unreasonable  to   hold    any  director  of   the
company, who may be wholly  innocent,  liable  for  the       contraventions
committed under the Act etc. when he may be totally  ignorant  of  what  was
going on in the factory, having vested  the control  of the affairs  of  the
factory to such an      officer or  employee, by  ignoring the liability  of
that officer  or employee.  The argument  is  emotional  and attractive  but
not sound.

42.   The offences  under the  Act are  not a  part  of  general  penal  law
but arise from the breach of a duty provided in a special beneficial  social
defence legislation, which creates absolute  or   strict  liability  without
proof of any mens rea. The  offences   are  strict  statutory       offences
 for  which establishment of  mens rea  is  not   an  essential  ingredient.
The omission or commission of the statutory breach is  itself  the  offence.
Similar type of offences based on the principle of strict  liability,  which
means liability without fault or mens rea, exist  in many statutes  relating
to economic crimes as  well   as  in    laws   concerning    the   industry,
food adulteration, prevention  of pollution  etc.  In   India   and  abroad.
'Absolute offences' are not criminal offences in any real  sense   but  acts
which are prohibited in the interest of welfare of  the public      and  the
 prohibition  is  backed   by  sanction  of   penalty.  Such   offences  are
generally knows as public welfare offences. A  seven  Judge  Bench  of  this
Court in R.S. Joshi Vs.  Ajit Mills (AIR 1977 (SC), 2279, at page 2287:  SCC
p. 110, para 19):

"Even here we may reject the notion that   a   penalty   or   a   punishment
cannot be   cast in  the form  of an absolute  or   no-fault  liability  but
must be  proceeded by mens rea. The      classical view   that  '   no  mens
rea no crime' has long ago been eroded and  several   laws  in   India   and
abroad,     especially regarding      economic   crimes   and   departmental
   penalties,      have      created    severe punishments  even  where  the
offences have been defined to  exclude mens rea. Therefore,  the  contention
that Section  37(1)   fastens  a    heavy  liability  regardless   or  fault
has no force......"


43.    What   is    made   punishable     under    the       Act    is   the
'blameworthy' conduct  of the occupier which resulted in the  commission  of
the statutory  offence  and   not  his   criminal  intent  to   commit  that
offence.  The  rule  of  strict  liability  is  attracted  to  the  offences
committed under the Act and the occupier is  held vicariously  liable  along
with   the Manager and the actual offender, as  the  case  may  be.  Penalty
follows actus reus, mens-rea being irrelevant.”


      In view of the above declaration by this Court, we are  of  the  view,
that it is not possible for us to interfere with the impugned  order  passed
by the High Court, wherein the prayer made by the  appellants  for  quashing
the proceedings initiated against them, was declined.  We  therefore  hereby
confirm the same.
                 Despite our  above  conclusion,  learned  counsel  for  the
appellants points out, that the factual position is clear, and that,  rather
than requiring the appellants to face a protracted  trial,  this  Court  may
consider the appropriateness of imposing  a  reasonable  punishment  on  the
appellants, by accepting the aforesaid violations , summarised in  paragraph
3 of the impugned order.
                 Learned counsel for the respondents – State  of  Jharkhand,
states that he has no objections to  the  suggestion  made  by  the  learned
counsel for the appellants.
                  Having  given  our   thoughtful   consideration   to   the
allegations levelled against the  appellants,  we  are  satisfied,  that  in
terms of the mandate of section 92 of the Act,  ends  of  justice  would  be
met, if a  penalty  of  Rs.50,000/-  each  is  imposed  on  the  appellants.
Ordered accordingly.  The aforesaid amount of penalty shall be deposited  by
the appellants before the trial Court, within four weeks from today.
                 The instant  order  shall  also  dispose  of  the  criminal
proceedings against the appellants in G.O. Case No.  252  of  2013,  pending
before the Judicial Magistrate, First Class, Seraikella, after  the  penalty
amount is deposited by the appellants before the trial Court.
                 Disposed of in the aforesaid terms.


                                                  …......................J.
                                                  [JAGDISH SINGH KHEHAR]


NEW DELHI;                             …......................J.
MAY 04, 2016.                                [C. NAGAPPAN]

ITEM NO.3               COURT NO.3               SECTION IIA
               S U P R E M E  C O U R T  O F  I N D I A
                       RECORD OF PROCEEDINGS

PETITION(S) FOR SPECIAL LEAVE TO APPEAL (CRIMINAL) NO.6410/2015
(from the judgment and order dated 9.3.2015 in Crl.MP No. 1987/2014 of the
HIGH COURT OF JHARKHAND AT RANCHI)

HEMANT MADHUSUDAN NERURKAR                         Appellant(s)

                                VERSUS
STATE OF JHARKHAND & ANR.                          Respondent(s)
(with appln(s) for exemption from filing c/c of the  impugned  judgment  and
exemption from filing OT  and  permission  to  bring  additional  facts  and
documents on record and interim relief and office report)
WITH
SLP(CRIMINAL) NO. 6406 OF 2015
(With (With (With appln.(s) for permission to bring additional facts and
documents on record and appln.(s) for c/delay in refiling SLP and appln.(s)
for exemption from filing O.T. and Interim Relief and Office Report)

Date : 04/05/2016 These petitions were called on for hearing today.

CORAM :
         HON'BLE MR. JUSTICE JAGDISH SINGH KHEHAR
         HON'BLE MR. JUSTICE C. NAGAPPAN

For Petitioner(s)      Mr. K.V. Vishwanathan, Sr. Adv.
                       Mr. Abhijeet Sinha, Adv.
                       Mr. Arijit Mazumdar, Adv.
                       Mr. Abhinav Mukerji,Adv.
                       Mr. Shambo Nandy, Adv.

For Respondent(s)      Mr. Tapesh Kumar Singh,Adv.
                       Mr. Mohd. Waquas, Adv.

          UPON hearing the counsel the Court made the following
                             O R D E R

            Leave granted.

             The  appeals  are  disposed  of  in  terms  of  the  Reportable
Judgment, which is placed on the file.
            As a sequel to the above,  pending  miscellaneous  applications,
if any, also stand disposed of.
(Renuka Sadana)                        (Parveen Kumar)
 Court Master                                   AR-cum-PS

oil-cake and de-oiled cake being different products as per the notification dated 31st May, 2002 is correct.= the assessing authority had expressed the opinion with regard to the rate of tax on the de-oiled cake while scrutinizing ‘C’ Forms which is an expression of opinion on the available materials brought on record and, therefore, the first appellate authority as well as the tribunal was justified in concurring with the said order. It is worthy to note that the revenue had not challenged the order passed by the Joint Commissioner. The High Court has not expressed any opinion on this score. Considering the cumulative effect of the facts and law we have stated, we have not an iota of doubt in our mind that there should not have been reopening of assessment. However, the finding recorded by the High Court overturning the view of the tribunal that oil-cake and de-oiled cake are the same product and, therefore, both are liable to reduced rate of tax despite the notification only mentions oil-cake, is not defensible. Consequently, the appeal filed by the assessee is allowed in part. The finding of the High Court as regards oil-cake and de-oiled cake being different products as per the notification dated 31st May, 2002 is correct. However, the assessee shall reap the benefit of initial assessment as the same could not have been reopened.

                                                                  REPORTABLE

                       IN THE  SUPREME COURT OF INDIA

                        CIVIL APPELLATE JURISDICTION

                        CIVIL APPEAL NO.4760 OF 2016
                (Arising out of S.L.P.(C) No. 21015 of 2012)



|                                            |                       |
|M/S RAVI PRAKASH REFINERIES (P) LTD.        |.. APPELLANT(S)        |



                                       VERSUS

|STATE OF KARNATAKA                             |.. RESPONDENT(S)            |






                               J U D G M E N T



DIPAK MISRA, J.


        Delay condoned.
2.      Leave granted.
3.      The assessee-appellant is engaged in the  manufacturing  of  refined
edible oil by solvent extraction process and refining along with trading  in
edible oil and oil-cake.  For  the  assessment  year  ending  31-3-2003  the
assessee had filed Revised Annual Return in  Form  4,  declaring  the  Gross
Taxable Turnovers at Rs.19,76,37,615-00 and Rs.1,60,93,055-00 respectively.
4.      As the factual narration would show the appellant sold Sunflower De-
oiled Cake (SF DOC) and several other goods in  the  course  of  inter-State
trade and commerce and in the course of the said transaction  the  appellant
produced 'C' Forms obtained from the  dealers  in  inter-State  sales.   The
assessee had admitted the liability of tax at 2 per cent on the sale  of  SF
DOC  in  the  course  of  inter-State  trade  and   commerce.   The   Deputy
Commissioner of Commercial Taxes  (Assessment)  Chitradurga,  the  assessing
authority, had passed an order of  assessment  under  Section  9(2)  of  the
Central Sales Tax Act, 1956 (for brevity, 'the CST Act')  on  29th  January,
2005, whereby it had expressed the view that a sum of  Rs.4,75,68,764/-  was
subjected to tax              at 2 per  cent.   The  assessing  officer  had
granted the benefit on production of 'C' Form in terms of  the  Notification
No.FD 119 CSL 2002 (2) dated 31st May, 2002.
5.      After the order of assessment was passed, the  succeeding  assessing
officer formed an opinion that there was an escapement of  tax  due  to  the
reason that the inter-State sales of SF DOC was actually liable to tax at  4
per cent and not at 2 per cent, which had been erroneously  adopted  by  the
earlier assessing authority.  Following the principles of  natural  justice,
he levied the tax at 4 per cent on the inter-State sales of SF DOC.
6.      The aforesaid order was called in question in an appeal  before  the
Joint Commissioner  of   Commercial  Taxes  (Appeals),  Davansere  Division,
Davangere under Section 20(5) read with Section 9 (2) of the CST  Act.   The
Appellate  Authority  noted  the  submissions  advanced  on  behalf  of  the
assessee as well as the revenue and thereafter referred to Section  12-A  of
the Karnataka Sales Tax Act, 1957 (for short, 'KST Act')  and   referred  to
the decisions in the cases of Nagaraja Overseals Traders vs.  The  State  of
Mysore,[1] Mahaveer Drug House vs. ACCT Gandhinagar,  Bangalore,[2]    State
of Andhra Pradesh vs. Ampro Food Products,[3] Giridharial Co. vs.  State  of
Andhra Pradesh,[4] C. Sathiragu and Sons vs.  State  of  Andhra  Pradesh,[5]
Somani Brothers vs. State of Bihar,[6] Eureka Forbes vs. State  of  Bihar[7]
and came to hold that the change of opinion could not  have  been  a  ground
for reopening of assessment in exercise of power under Section 12-A  of  the
KST Act and, accordingly, set aside the order of re-assessment.
7.      Though the assessee succeeded, yet it  preferred  an  appeal,  being
STA No.425 of 2006 before the Karnataka Appellate Tribunal,  Bangalore  (for
short, 'the tribunal'), as the first Appellate Authority had  not  expressed
any opinion with regard to rate of tax on oil-cake and  de-oiled  cake.   It
was contended before the Tribunal  that   the oil cake and de-oiled cake  as
per the commercial parlance are one and the same and,  therefore,  the  rate
of tax has to be at 2 per cent and not  4  per  cent.   The  tribunal  after
noting the submissions referred to the schedule in the notification and  the
decision in  M/s  Sterling  Foods  vs.  State  of  Karnataka,[8]   State  of
Karnataka vs. M/s  Goa Granites[9], M/s Habeeb Protiens and  Fats  Extracts,
Hiriyur,  Chitradurga  District  vs.  Commissioner  of   Commercial   Taxes,
Bangalore and Anr.[10] and came to hold  as under :
“Thus, we hold that the expression 'oil  cake  in  sl.  No.  6  of  the  CST
Notification No. FD 119 CSL 2002(2) dated 31.5.2002 would include  also  de-
oiled cake and that therefore the reassessment order passed by the AA  under
CST Act, 1956 for the year 2002-03 in so far as it concerned levy of CST  at
4% on inter-State Sales of sunflower de-oiled cake covered  by  C  Forms  by
denying the benefit of reduction in  the rate of CST to 2%  granted  in  the
Notification dated 31.05.2002 is liable to be  held  unsustainable  and  set
aside.
                                     ….

Consequential to the decision taken by us as above, the appellate  order  of
the learned FAA is liable for  modification  accordingly.   As  regards  the
reassessment order set aside by the learned FAA on the  basis  of  lay  that
reassessment is not permissible by change of pinion, which is  supported  by
the several case laws cited in the appellate order itself,  it  need  to  be
placed on record that Hon’ble Supreme Court  of  India  has  reiterated  the
said legal position that reopening of an assessment by change of opinion  is
not permissible in the recent judgment rendered in the case  of  M/s  Binani
Industries Ltd. Vs. Assistant Commissioner of Commercial Taxes,  VI  Circle,
Bangalore and others (2007) 6 VST 783.”

8.      On  the  aforesaid  analysis,  the  tribunal  issued  the  following
directions:
“(i) Reassessment order passed by the DCCT (Transition),  Chitradurga  under
CST Act, 1956 for the year 2002-03 in respect of rate of CST  levied  at  4%
on  the  turnover  of  Rs.4,75,68,764  relating  to  inter-State  sales   of
sunflower de-oiled cake covered by C Forms is modified to  2%  allowing  the
benefit of reduction in the rate of CST to 2% granted  in  the  Notification
No.FD 119 CSL 2002 (2) dated 31-5-2002.

(ii) The appellate order passed by the FAA in CST AP 27/2005-06 dated  20-4-
2006 shall stand modified accordingly.

(iii) Directions are issued that the  AA  shall  accordingly  issue  revised
demand notice.”

9.      The aforesaid order of tribunal was assailed before the  High  Court
in Revision Petition being STRP No. 32 of  2009.   Be  it  noted,  the  High
Court had formulated the following two substantial questions of law:-
(i)     Whether, on the facts and in circumstances of the case,  can  it  be
held that the order  dated  12.7.2007  passed  by  the  Karnataka  Appellate
Tribunal in STA 425/2006 allowing the appeal is correct  and  in  accordance
with law?

(ii)    Whether on the fact and in circumstances of  the  case,  can  it  be
held that the Appellate Tribunal was right in law  in  ignoring  that  under
the KST Act in the Second Schedule in serial No.1 of Part O,  oil  cake  and
de-oiled cake are listed under two separate sub-headings  as  two  different
commodities?

10.     After deliberating on the aforesaid two questions,  the  High  Court
referred to the provisions of the KST Act and the Notification issued  under
Section 8(5) of the CST Act, distinguished  the  decisions  placed  reliance
upon by the first Appellate Authority  and  the  tribunal  as  well  as  the
decision rendered by this Court in M/s Sterling Foods (supra)  and  came  to
hold that there is distinction between oil cake and de-oiled cake  and  they
are two different commodities and not one and  the  same.   Elaborating  the
discussion, the Division Bench held thus:-
“The contention that the commodities will have to be  understood  in  common
parlance as understood by a common man is even harder  to  accept.   What  a
common man understands need not  necessarily  mean  what  is  understood  in
accordance with law.  In the instant case, the framers of the schedule  were
aware of the distinction between oil cake and de-oiled  case.   Accordingly,
they have treated it as two different commodities.  Therefore, to hold  that
the view of a common man has to  necessarily  over  ride  the  view  of  the
Legislature is difficult to accept.  The Distinction in law  has  been  made
which requires to be followed.  Oil cake  and  de-oiled  case  cannot  stand
extended to de-oiled cake.  The impact of the notification reducing the  tax
impact was every well known when the benefit  was  granted.  A  notification
has to be strictly construed.  The Court cannot read into  the  notification
what is not there. The notification is clear and unambiguous.   Any  attempt
to read  it  otherwise  is  not  only  uncalled  for  but  would  amount  to
redrafting the notification.”


        Being of this view, it answered the two questions that  were  framed
by it in favour of the Revenue and against the Assessee.  The said  judgment
 and order is the subject matter of  challenge in  this  appeal  by  special
leave.
11.     We have heard Shri Dhruv Mehta, learned senior  counsel  along  with
Ms. Anupama, learned counsel for the appellant and  Shri  Basava  Prabhu  S.
Patil, learned senior counsel  along  with  Shri  V.N.  Raghupathy,  learned
counsel for the State.
12.       First,   we   shall   take   up   the    issue    pertaining    to
Section 12-A of the KST Act.  Section 12-A(1)  which  is  relevant  for  the
present purpose is extracted below:
“12-A. Assessment of escaped turnover-(1) If  the  assessing  authority  has
reason to believe that the whole or any part of the turnover of a dealer  in
respect of any period has escaped assessment  to  tax  or  has  been  under-
assessed or has been assessed at a rate lower than the rate at which  it  is
assessable under this Act or any deductions or exemptions have been  wrongly
allowed in respect thereof, the  assessing  authority  may,  notwithstanding
the fact that the whole or part of such escaped turnover was already  before
the said authority at the time of the original assessment  or  re-assessment
but subject to the provisions of  subsection  (2),  at  any  time  within  a
period of [eight years] from the  expiry  of  the  year  to  which  the  tax
relates, proceed to assess or re-assess to the best of its judgment the  tax
payable by the dealer in respect of such turnover after issuing a notice  to
the dealer and after making such enquiry as it may consider necessary.”


13.     On a perusal of the  aforesaid  provision,  it  is  limpid  that  it
permits re-opening of an assessment on the ground that if the  assessee  has
been assessed at a rate lower than the rate at which it is assessable  under
Act.  The rate of tax is four per cent.  The assessee had filed  the  return
and the 'C' Forms claiming the benefit of the Notification dated  31.05.2002
in respect of inter-State sale  of  oil-cakes.  The  assessing  officer  had
accepted the 'C'  Forms  on  verification  and  granted  the  benefit.   The
assessing officer on a proper security has  accept  the  ‘C’  Forms  on  the
basis of which  reduced  rate  of  tax  was  claimed.   The  assessment  was
reopened as there was no escapement of tax due  in  respect  of  inter-State
sale in respect of SF DOC.
14.     Mr. Dhruv Mehta, learned senior counsel  for  the  appellant,  would
submit that once  an  assessment  order  was  framed  on  all  the  material
available on record and the rate of tax was accepted, the view expressed  by
the 1st appellate authority which had got the stamp  of  affirmance  by  the
tribunal should be accepted to be correct more for the  reason  the  revenue
had not challenged the order of assessment and that  apart  the  High  Court
has not appositely dealt with it. He  would  place  heavy  reliance  on  the
pronouncement in M/s. Binani Industries Limited  v.  Assistant  Commissioner
of Commercial Taxes, VI Circle, Bangalore[11].
15.     It is submitted by  Mr.  Basava  Prabhu  S.  Patil,  learned  senior
counsel, that claiming of benefit on production of 'C' Forms had nothing  to
do with the nature of product that was sold.  Learned senior  counsel  would
contend that the first Appellate Authority, as well  as  the  tribunal,  has
been erroneously guided that there has  been  change  of  opinion.   Learned
senior counsel has submitted that the words “reason to believe” have  to  be
expansively understood to import a meaning to the provision,  for  when  the
assessment has taken place at a rate  lower  than  the  rate  at  which  the
turnover of a dealer is assessable, there can be reopening of assessment.
16.     First, we  shall  proceed  to  consider  the  acceptability  of  the
opinion expressed by  the  High  Court.   The  Government  of  Karnataka  in
exercise of its powers conferred by Section 8 (5) of  the  CST  Act,  issued
Notification No.119 FD 119 CSL 2002(2) dated 31.05.2002  granting  reduction
in the rate of central sales tax  payable  on  inter-State  sales  of  goods
specified in Serial  Nos.1  to  11  of  the  notification,  subject  to  the
condition that the Dealer  produces declarations in Forms 'C' obtained  from
the registered Dealers/Government to whom the goods are sold.  Be  it  noted
oil cake is one of the goods specified in serial No. 6 of the  notification.
 Submission of Mr. Mehta, learned senior counsel is that the High Court  has
clearly erred in law by distinguishing the  facts and by  opining  that  the
judgment in the case of M/s Habeeb Protiens  (supra) is not  a  decision  in
issue and an obiter.  In  the  case  of  M/s  Sterling  Foods  (supra),  the
question that arose  for  consideration  was  whether  shrimps,  prawns  and
lobsters subjected to processing like cutting of heads and  tails,  peeling,
deveining, cleaning and freezing ceased to be the same commodity and  became
a different commodity for the purpose of the Central  Sales  Tax  Act.   The
Court posed the question whether they still go  under  the   description  of
shrims, prawns and lobsters or in other words, shrimps, prawns and  lobsters
would mean only raw shrimps, prawns and lobsters as caught from the  sea  or
they also include process and frozen shrimps, prawns  and  lobsters.   After
referring to the various provisions and placing reliance on the decision  in
Dy. CST vs. Pio Food Packers[12] the Court held as under:-
“…..when the State Legislature excluded processed or frozen shrimps,  prawns
and lobsters from the ambit and coverage of Entry 13a, its object  obviously
was that the last purchases of  processed  or  frozen  shrimps,  prawns  and
lobsters in the State should not be exigible to State Sales Tax under  Entry
13a. The State Legislature was not at all concerned with the question as  to
whether processed or frozen shrimps, prawns and  lobsters  are  commercially
the same commodity as raw shrimps, prawns and lobsters or  are  a  different
commodity and merely  because  the  State  Legislature  made  a  distinction
between the two for the purpose of determining exigibility  to  State  Sales
Tax, it cannot be said that in commercial parlance or according  to  popular
sense, processed or frozen shrimps, prawns and lobsters  are  recognised  as
different commodity distinct from raw  shrimps,  prawns  and  lobsters.  The
question  whether  raw  shrimps,  prawns  and   lobsters   after   suffering
processing retain their original character  or  identity  or  become  a  new
commodity has to be determined not on the basis of  a  distinction  made  by
the State Legislature for the purpose of  exigibility  to  State  Sales  Tax
because even where the commodity is the same in  the  eyes  of  the  persons
dealing  in  it  the  State  Legislature  may  make  a  classification   for
determining liability to sales tax. This question, for the  purpose  of  the
Central Sales Tax Act, has  to  be  determined  on  the  basis  of  what  is
commonly known or  recognised  in  commercial  parlance.  If  in  commercial
parlance and according to what is understood in the trade by the dealer  and
the consumer, processed or frozen shrimps, prawns and lobsters retain  their
original character and identity as shrimps, prawns and lobsters and  do  not
become a new distinct  commodity  and  are  as  much  'shrimps,  prawns  and
lobsters', as raw shrimps, prawns and lobsters, sub-section (3)  of  section
5 of the Central Sales Tax Act would be attracted and  if  with  a  view  to
fulfilling the existing contracts for export,  the  assessee  purchases  raw
shrimps, prawns and lobsters and processes and freezes them, such  purchases
of raw shrimps, prawns and lobsters would be  deemed  to  be  in  course  of
export so as to be exempt from liability to State Sales Tax.”

17.     Relying  on the said passage, it is  contended  by  Mr.  Mehta  that
when identity of the goods on the basis of commercial parlance  is  similar,
the High Court would have been well advised to  follow  the  principles  set
out in the aforesaid decision  and  should  not  have  been  guided  by  the
concept of enumeration in the Notification. In essence,  the  submission  is
that there is no distinction between the oil cake and the de-oiled cake  and
both should be perceived as one in commercial parlance.  Thus, the  emphasis
is on the commercial parlance test.  To bolster  the  said  stand,  reliance
has been placed on M/s Habeeb Protiens case, wherein the Division  Bench  of
the High Court of Karnataka has drawn a distinction  between  sunflower  oil
cake and groundnut oil cake on the one hand and de-oiled sunflower cake  and
groundnut oil cake on the other.  The aforesaid analysis made  in  the  said
judgment should not detain us long, for Mr.  Patil  learned  senior  counsel
for the State has brought to our notice a recent decision of this  Court  in
the case of Agricultural Produce  Market  Committee  vs.  Biotor  Industries
Limited and Anr.[13] .  In the said case,  the  two-Judge  Bench  had  posed
five questions and the question pertinent for our purpose reads thus:-
“13.4   Whether the Division Bench is justified in recording the finding  on
the second issue (see para 7, above at p.737 c-d)  in  connection  with  LPA
NO. 195 of 2006 that the respondent concern is not liable to pay any  market
fee on the de-oiled cakes sold by it which are stated to be  the  by-product
in the course of manufacturing castor oil which is  not  one  of  the  items
enumerated in the Schedule to the Act and the  notification  issued  by  the
Directorate?”


18.     Dealing with the distinction between the oil-cake and  the  de-oiled
cake, the Court referred  to  the  process  and  quoted  from  the  findings
referred by  the  learned  Single  Judge.   Though  the  said  decision  was
rendered in the backdrop of Gujarat Agricultural Produce Markets  Act,  1963
to levy of market fee, it is  absolutely  distinctly  perceptible  from  the
judgment that the Court has arrived at a definite conclusion that  there  is
a distinction between the oil-cake  and  de-oiled  cake  and  they  are  two
different commercial products. Thus, when the difference has been  drawn  by
this Court, the assessee herein cannot be allowed to  advance  a  plea  that
the said test should not  be  applied,  but  the  commercial  parlance  test
should be adopted to determine the said goods for the  purposes  of  Central
Sales Tax Act. To have a complete picture, we may refer to the  Notification
dated 31.05.2002.  The relevant part of it reads as follows :
“In exercise of the powers conferred by sub-Section (5) of Section 8 of  the
Central Sales Tax,  1956  (Central  Act  74  of  1956),  the  Government  of
Karnataka, being satisfied that it is necessary  so  to  do  in  the  public
interest, hereby directs that which effect  from  the  First  day  of  June,
2002, the tax payable by a dealer under Section 8 of the  said  Act  on  the
sale of goods specified below, made in the course of  inter-State  trade  or
commerce, to a registered dealer or the Government shall  be  calculated  at
the rate of two per cent subject to production of declaration  in  Form  'C'
or certificate in Form 'D' duly filed and signed by  the  registered  dealer
or the Government to whom the said goods are sold:-

1.      Cotton Yarn

2.      Bicycles

3.      Chemical fertilizers and chemical fertilizer mixtures

4.      Edible oil-refined and non-refined

5.      Khandasari Sugar

6.      Liquid Glucose, Dextrine, Maixe Starch, gluten, grits, maize,  husk,
oil cake, corn steep liquor, dextrose, corn  oil,  maixe  hydrol  and  maize
germs.”

19.     From the  said  Notification,  it  is  evident  that  the  competent
authority while exercising power under sub-section (5) of Section 8  of  the
CST Act, has kept the reduction of tax qua de-oiled cake  from  the  purview
of Notification and has only provided oil cake to be taxed  at  the  reduced
rate of tax.  In  view  of  the  fact  that  the  goods  have  distinct  and
different identity which also get recognition from the Notification, we  are
obliged to  hold  that  the  High  Court  has  correctly  distinguished  the
authority in M/s Sterling Foods (supra) and  we  unhesitatingly  agree  with
the same.
20.     Though we have agreed with the said conclusion of  the  High  Court,
yet the fact remains that the assessing authority had expressed the  opinion
with regard to the rate of tax on the de-oiled cake while  scrutinizing  ‘C’
Forms which is an expression of opinion on the available  materials  brought
on record and, therefore, the first  appellate  authority  as  well  as  the
tribunal was justified in concurring with the said order. It  is  worthy  to
note that the revenue had not challenged  the  order  passed  by  the  Joint
Commissioner.  The High Court has not expressed any opinion on  this  score.
Considering the cumulative effect of the facts and law we  have  stated,  we
have not an iota of doubt in our  mind  that  there  should  not  have  been
reopening of assessment. However, the finding recorded  by  the  High  Court
overturning the view of the tribunal that oil-cake  and  de-oiled  cake  are
the same product and, therefore, both are liable  to  reduced  rate  of  tax
despite the notification only mentions oil-cake, is not defensible.
21.     Consequently, the appeal filed by the assessee is allowed  in  part.
The finding of the High Court as regards oil-cake and  de-oiled  cake  being
different products as per the notification dated 31st May, 2002 is  correct.
However, the assessee shall reap the benefit of initial  assessment  as  the
same could not have been reopened.   In the facts of the case,  there  shall
be no order as to costs.


                                            ….............................J.
                                                          [DIPAK MISRA]




                                            ….............................J.
NEW DELHI,                                         [SHIVA KIRTI SINGH]

MAY 03, 2016.
-----------------------
[1]     JJ STC 315
[2]     [1994] 93 STC 51 (Kar)
[3]     96 STC 618
[4]     97 STC 442
[5]     111 STC 703
[6]     99 STC 47
[7]     119 STC 460
[8]     (1986) 63 STC 239
[9]         2007 (5) VST 434 (Kar)
[10]    2005 (58) Kar.L.J. 155
[11]      (2007) 6 VST 783
[12]     1980 Supp. SCC 174
[13]    (2014)  3 SCC 732

whether the sale is mortgage by conditional sale or sale with a condition to repurchase=Distinguishing features between ‘mortgage by conditional sale’ and ‘sale with an option to repurchase’ are enumerated in Mulla’s Transfer of Property Act (11th Edition) as under:- “(i) In a mortgage with conditional sale, the relation of a debtor and a creditor subsists while in a sale with an option of re-purchase, there is no such relationship and the parties stand on an equal footing. (ii) A mortgage by conditional sale is effected by a single document, while a sale with an option of repurchase is generally effected with the help of two independent documents. (iii) In a mortgage with conditional sale the debt subsists as it is a borrowing arrangement, while in a sale with an option of repurchase, there is no debt but a consideration for sale. (iv) In a mortgage with conditional sale, the amount of consideration is far below the value of the property in the market but in a sale with an option of repurchase the amount of consideration is generally equal to or very near to the value of the property. (v) In a mortgage with conditional sale, since this is a mortgage transaction, the right of redemption subsists in favour of the mortgagor despite the expiry of the time stipulated in the contract for its payment. The mortgagor has the option to redeem the mortgage and take back the property on the payment of the mortgage money, after the specified time, but in a sale with an option of re-purchase, the original seller must re- purchase the property within the stipulated time period. If he commits a default the option of re-purchase is lost.”= mortgage by way of conditional sale = “In this deed condition is that the said amount of Rs.10,000.00 when we pay back to you within five years from today, you shall give back the said property to us with possession. And in the same manner, we shall have no right to ask back the same after expiry of the time limit.” The above condition in Exh.23 that if the plaintiffs (respondents) make repayment of Rs.10,000/- within a period of five years, the defendants shall handover the possession of property in suit back to the plaintiffs, reflects that the actual transaction between the parties was of a loan, and the relationship was of debtor and creditor existed, as such, we are of the view that the High Court has rightly held that the deed in question Exh.23 read with Exh. 37 is a mortgage by way of conditional sale and the decree passed in favour of the plaintiffs does not require to be interfered with. Needless to say, since the possession of the land was handed over to the mortgagee, no interest was charged. It has also come on record that the defendants leased the land to third parties, after possession was given by the plaintiffs in 1960. In the circumstances, after perusal of the evidence on record, we agree with the view taken by the High Court. For the reasons as discussed above, we find no force in this appeal. Accordingly, the appeal is dismissed with no order as to costs.

                        IN THE SUPREME COURT OF INDIA

                        CIVIL APPELLATE JURISDICTION

                      CIVIL APPEAL NO.  4683   OF 2016
              (Arising out of S.L.P. (Civil) No. 9513 of 2013)

  Patel Ravjibhai Bhulabhai (D) Thr. LRS.                …..Appellants

                                   Versus

   Rahemanbhai  M.  Shaikh  (D)  Thr.  LRS.  &   Ors.         .….Respondents







                               J U D G M E N T

Prafulla C. Pant, J.

      Leave granted.

This appeal is directed against judgment and decree dated  20/21/24-09-2012,
passed by High Court of Gujarat at Ahmedabad, whereby Second Appeal No.  107
of 1994 is allowed, and dismissal of suit by  trial  court  as  affirmed  by
First Appellate Court is reversed. The suit  of  the  respondents/plaintiffs
for redemption of suit property is decreed by High Court on the  payment  of
Rs.10,000/- within a period of six months by the plaintiffs  from  the  date
of the decree.

We have heard learned counsel for the parties  and  perused  the  papers  on
record.

Brief facts of the case are  that  original  plaintiffs  Shaikh  Rahemanbhai
Mohamadbhai (since died) and  Shaikh  Ismailbhai  Moahamadbhai,  executed  a
deed dated 30.12.1960 in favor of defendant nos.  1  and  2,  namely,  Patel
Ravjibhai Bhulabhai (since died) and Patel Dahyabhai Bhudarbhai,  which  was
titled as conditional sale, for a sum of Rs.10,000/- providing therein  that
if the repayment is made within a  period  of  five  years,  the  defendants
shall give back the property in suit with possession to the plaintiffs  with
further stipulation that the plaintiffs would have no right to get back  the
property after the expiry of  the  period  of  five  years.  The  plaintiffs
instituted Civil Suit No. 156 of 1984 before Civil Judge,  Junior  Division,
Dakor, for  redemption  of  property  in  question  (i.e.  Survey  No.  148,
admeasuring 3 acres 29 guntas situated in Village Rustampura, Taluk  Thasra)
on repayment of the mortgage money under  the  deed  dated  30.12.1960,  and
further sought  to  recover  the  possession  of  the  property  with  mesne
profits.  The plaintiffs pleaded that the deed in question  was  a  mortgage
deed, and as such they have right to redeem the same.

The defendants contested the suit, and pleaded that  deed  dated  30.12.1960
is not a mortgage transaction but a conditional  sale  with  stipulation  of
repurchase within a period of five years.  Denying that the plaintiffs  have
any right to redeem the property, it is stated by the  defendants  that  the
land was purchased by the defendants for a consideration of Rs.10,000/-  and
possession was delivered to them in 1960 along with execution of the deed.

The trial court after framing issues, and recording of evidence,  held  that
plaintiffs have failed to prove that the transaction  was  a  mortgage.  The
trial court further held  that  suit  is  barred  by  time,  and,  as  such,
dismissed the suit on 27.11.1987.  The  First  Appellate  Court  (2nd  Joint
District Judge, Nadiad) affirmed the decree of dismissal of suit  passed  by
the trial  court,  vide  its  judgment  and  order  dated  30.09.1993.   The
plaintiffs preferred Second Appeal (S.A. No. 107 of 1994)  before  the  High
Court, and the High Court after hearing  the  parties  reversed  the  decree
passed by the two courts below. Hence the defendants are  in  appeal  before
this Court.

At the outset we may state that issue of limitation is  not  pressed  before
us as Article 60(a) of Limitation Act, 1963  provides  thirty  years  period
for filing the suit for redemption.  The question before us is that  whether
document Exh. 23, in its true interpretation,  is  mortgage  by  conditional
sale, as interpreted by High Court, or the sale with  option  to  repurchase
as held by the two courts subordinate to it.


Section 58 (c) of The Transfer of Property Act,  1882  defines  mortgage  by
conditional sale, and reads as under:-
“(c) Mortgage by conditional sale.—Where,  the  mortgagor  ostensibly  sells
the mortgaged property—

on condition that on default of payment of the mortgage-money on  a  certain
date the sale shall become absolute, or

on condition that on such payment being made the sale shall become void,  or


on condition that on such payment being made the buyer  shall  transfer  the
property to the seller,

the transaction is called mortgage by conditional sale, and  the  mortgagee,
a mortgagee by conditional sale:

Provided that no such transaction shall be deemed to be a  mortgage,  unless
the condition is embodied in the  document  which  effects  or  purports  to
effect the sale.”

Section 60  of  The  Transfer  of  Property  Act,  1882  provides  right  of
mortgagor to redeem the property.

Distinguishing features between ‘mortgage by  conditional  sale’  and  ‘sale
with an  option  to  repurchase’  are  enumerated  in  Mulla’s  Transfer  of
Property Act (11th Edition) as under:-
“(i)  In a mortgage with conditional sale, the relation of a  debtor  and  a
creditor subsists while in a sale with an option of  re-purchase,  there  is
no such relationship and the parties stand on an equal footing.

(ii)  A mortgage by conditional sale  is  effected  by  a  single  document,
while a sale with an option of repurchase is  generally  effected  with  the
help of two independent documents.

(iii) In a mortgage with conditional sale the  debt  subsists  as  it  is  a
borrowing arrangement, while in a sale with an option of  repurchase,  there
is no debt but a consideration for sale.

(iv)  In a mortgage with conditional sale, the amount  of  consideration  is
far below the value of the property in the market but  in  a  sale  with  an
option of repurchase the amount of consideration is generally  equal  to  or
very near to the value of the property.

(v)   In a  mortgage  with  conditional  sale,  since  this  is  a  mortgage
transaction, the right of redemption subsists in  favour  of  the  mortgagor
despite the expiry of the time stipulated in the contract for  its  payment.
The mortgagor has the option to  redeem  the  mortgage  and  take  back  the
property on the payment of the mortgage money,  after  the  specified  time,
but in a sale with an option of re-purchase, the original  seller  must  re-
purchase the property within the stipulated time period.  If  he  commits  a
default the option of re-purchase is lost.”

In  Tulsi  and  Others  vs.  Chandrika  Prasad  and  Others[1],  this  Court
explaining difference between mortgage by  conditional  sale  or  sale  with
condition to repurchase has observed as under:
“15. A distinction exists between a mortgage by way of conditional sale  and
a sale with condition of purchase.  In the former the debt  subsists  and  a
right to redeem remains with the debtor  but  in  case  of  the  latter  the
transaction does not evidence an arrangement of lending and  borrowing  and,
thus, right to redeem is not reserved thereby”.


In P.L. Bapuswami vs. N. Pattay Gounder[2], it is held that:
“The definition of a mortgage by conditional sale  postulates  the  creation
by the transfer of a relation of mortgagor and mortgagee,  the  price  being
charged on the property conveyed. In a sale coupled  with  an  agreement  to
reconvey there is no relation of  debtor  and  creditor  nor  is  the  price
charged  upon  the  property  conveyed,  but  the  sale  is  subject  to  an
obligation  to  retransfer  property  within  the  period   specified.   The
distinction between the two transactions is the relationship of  debtor  and
creditor and the transfer being a security for the debt. The form  in  which
the deed is clothed is not decisive. The question in each  case  is  one  of
determination of the real character of the  transaction  to  be  ascertained
from the provisions of the document viewed,  in  the  light  of  surrounding
circumstances. If the language is plain  and  unambiguous  it  must  in  the
light of the evidence of surrounding circumstances, be given its true  legal
effect”.

In Vishwanath Dadoba Karale vs. Parisa Shantappa Upadhya[3],  the  facts  of
the case were somewhat similar to the present case, and as is  evident  from
paragraph 2 in said case,  the  Court  held  the  deed  was  a  mortgage  by
conditional sale, and upheld the decree of redemption for mortgage.

In C.Cheriathan vs. P. Narayanan Embranthiri [4], the principle relating  to
interpreting of document as to whether the sale is mortgage  by  conditional
sale or sale with a condition to repurchase was discussed,  and  this  Court
held as under:

“12.   A document, as is well known, must be  read  in  its  entirety.  When
character of a document is in question, although the heading  thereof  would
not be conclusive, it plays a significant role.  Intention  of  the  parties
must be  gathered  from  the  document  itself  but  therefor  circumstances
attending  thereto  would  also   be   relevant;   particularly   when   the
relationship between the parties is in question. For the  said  purpose,  it
is essential that all parts of the deed should be read in their entirety”.

In the case at  hand  the  document  in  question  (Exh.  23)  contains  the
condition as under: -
“In this deed condition is that the said amount of Rs.10,000.00 when we  pay
back to you within five years from today,  you  shall  give  back  the  said
property to us with possession.  And in the same manner, we  shall  have  no
right to ask back the same after expiry of the time limit.”


The above condition in Exh.23 that  if  the  plaintiffs  (respondents)  make
repayment of Rs.10,000/- within a  period  of  five  years,  the  defendants
shall handover the possession of property in suit back  to  the  plaintiffs,
reflects that the actual transaction between the parties was of a loan,  and
the relationship was of debtor and creditor existed, as such, we are of  the
view that the High Court has rightly held that the deed in  question  Exh.23
read with Exh. 37 is a mortgage by way of conditional sale  and  the  decree
passed in favour of the plaintiffs does not require to be  interfered  with.
Needless to say, since the possession of the land was  handed  over  to  the
mortgagee, no interest was charged. It has also  come  on  record  that  the
defendants leased the land to third parties, after possession was  given  by
the plaintiffs in 1960. In the circumstances, after perusal of the  evidence
on record, we agree with the view taken by the High Court.

For the reasons as discussed  above,  we  find  no  force  in  this  appeal.
Accordingly, the appeal is dismissed with no order as to costs.

……………………………..J.
                                                              [Ranjan Gogoi]



                                                             ……………………………..J.
                                                          [Prafulla C. Pant]
New Delhi;
May 02, 2016.
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[1]    (2006) 8 SCC 322
[2]    AIR 1966 SC 902
[3]    (2008)11 SCC 504
[4]    (2009) 2 SCC 673