Deed of Family Settlement seeking to partition joint family properties cannot be relied upon unless signed by all the co-sharers ? = Deed of Family Settlement seeking to partition joint family properties cannot be relied upon unless signed by all the co-sharers. In the instant case, admittedly, the Respondent No.8, Sau. Pratibha, was not a signatory to the Deed of Settlement dated 8th February, 1967, although, she is the daughter of Bapu Saheb Kante by his first wife. As was held in the case of M.N. Aryamurthy (supra), under the Hindu Law if a Family Arrangement is not accepted unanimously, it fails to become a binding precedent on the co-sharers. Both Mr. Vivek Tankha and Mr. Anoop G. Chaudhary, learned Senior Advocates, brought this point to our notice to indicate that all the co-sharers had not consented to the Deed of Family Settlement which could not, therefore, be relied upon. The argument would have had force had it not been for the fact that acting upon the said Settlement, the appellants had also executed sale deeds in respect of the suit property. Having done so, it would not be open to the appellants to now contend that the Deed of Family Settlement was invalid. As mentioned hereinabove, there is yet another question which goes against the case made out by the appellant, viz., that after the Deed of Family Settlement, even the appellant has executed Conveyances in respect of portions of the suit property, thereby supporting the case of the respondent that the Deed of Family Settlement dated 8th February, 1976, had not only been accepted by the parties, but had also been acted upon.

               IN THE SUPREME COURT OF INDIA

                CIVIL APPELLATE JURISDICTION

         CIVIL APPEAL NO.8290          OF 2009
     (@ SPECIAL LEAVE PETITION (C)NO.27909 OF 2008)



NARENDRA KANTE                                     ... Petitioner

          Vs.


ANURADHA KANTE & ORS.                              ... Respondents




                         J U D G M E N T


ALTAMAS KABIR, J.


1.    Leave granted.


2.    This appeal is directed against the judgment

and order dated 13th October, 2008, passed by the

Gwalior    Bench    of    the   Madhya   Pradesh     High    Court

dismissing      Miscellaneous      Appeal   No.478      of   2007

filed     by     the      appellant      herein.      The     said
                                                               2

Miscellaneous    Appeal       had   been    preferred      by   the

appellant    against    the    order   dated    14th   February,

2007,   passed   by     5th    Additional     District     Judge,

Gwalior, in Civil Suit No.08A of 2006 filed by the

appellant    rejecting        the   appellant's      application

under Order 39 Rules 1 and 2 of the Code of Civil

Procedure.


3.   The    appellant    herein      had    filed    the   above-

mentioned     suit     for     declaration     and     permanent

injunction and also mandatory injunction in respect

of the suit property situated at Nadigate Jayendra

Ganj, Lashkar, Gwalior, bearing Survey No.37/903 on

the ground that the suit property was the ancestral

property of his father, Bapu Saheb Kante, who had

died intestate on 13th May, 1976. The application

for ad-interim injunction had been filed in the

suit which was rejected by the Trial Court on the

ground that a partition had been effected between

the legal heirs of Bapu Saheb Kante.                It was also
                                                             3

held that a Family Settlement had been effected

between the heirs of Bapu Saheb Kante, whereby Smt.

Putli Bai and Surendra Kante, the widow and son of

Bapu Saheb Kante, acquired a 50% share of House

No.95/21. The Respondent Nos.1 and 2 herein are the

widow    and   daughter   of   late   Surendra      Kante,    and

after his death their names were recorded in the

Municipal records.


4.     At this juncture it may be pertinent to mention

that    Bapu   Saheb   Kante   is   said   to    have   had   two

wives, Smt. Putli Bai and the mother of Jai Singh

Rao. The appellant herein is one of the sons of

Bapu Saheb Kante through his wife, Smt. Putli Bai.

When, after the death of Bapu Saheb Kante a son by

his second wife, Jai Singh Rao, came to claim a

share    in    his   estate,   a    family      settlement    was

arrived at by which the properties of Bapu Saheb

Kante were divided amongst the heirs by a Family

Arrangement dated 8th February, 1967, by metes and
                                                                  4

bounds. Under the said arrangement, Jai Singh Rao

was allowed to retain possession of plot No.25/528

and after his death on 15th June, 1971, his wife and

children were allowed to live in the said premises.

However, since the concession granted to them was

misused, Surendra Kante filed a suit against them

for     possession     in     respect        of   the   property       in

dispute and the same was partly decreed on 14th

September, 1993.


5.     First Appeal No.76 of 1993 was filed by the

legal heirs of Jai Singh Rao, wherein it was sought

to be asserted that no partition had at all been

effected in respect of the properties of late Bapu

Saheb     Kante   and       that       the   alleged    document       of

partition could not be acted upon since the same

had not been registered and was not, therefore,

admissible in evidence.                In the First Appeal it was

held    that   there    was        a    previous    oral   partition

which was reduced into writing later on, on 8th
                                                           5

February, 1967, which could in fact be said to be a

Memorandum of Partition in the eyes of law.             It was

observed that while a document of partition does

require registration, the Memorandum of Partition

subsequently     executed     after       an   oral   partition

entered into on the basis of a mutual agreement

could not be said to be inadmissible on account of

non-registration, since the same did not require

registration within the meaning of Section 17 of

the Registration Act, 1908.


6.     The High Court accepted the contention that a

partition had been effected between the heirs of

Bapu    Saheb   Kante   and   that    a   document    had   been

executed in that regard on 8th February, 1967, and

that it was not open to the defendants, as well as

to the predecessor-in-title of Jai Singh Rao, to

wriggle out of the said agreement which had been

admitted by the defendants.          The First Appeal filed

by Surendra Kante was allowed and the other appeal
                                                                        6

filed by the predecessor-in-interest of Jai Singh

Rao was dismissed.                 A Letters Patent Appeal was

filed by Jai Singh Rao questioning the judgment and

decree passed by the Trial Court, which was also

dismissed by the Division Bench of the High Court

upon    holding       that       the     partition     deed      dated       8th

February,          1967,    is     a     Memorandum         of   Partition

pertaining to a previous oral partition.


7.     In    the    present       suit    filed   by    the      appellant

herein an attempt has been made to make out a case

that the alleged partition deed of 8th February,

1967,       was    executed       only     with   the       intention        of

giving a separate share to Jai Singh Rao and the

rest of the properties remained joint as there was

no partition by metes and bounds.                            Accordingly,

the Respondents Nos.1 and 2 had no right to execute

an   agreement        and    Special       Powers      of    Attorney        in

respect      of     the    suit    property       in    favour     of    the

Defendant Nos.8 and 9 on 27th November, 2004, nor
                                                              7

did the Defendant Nos.8 and 9 have any right to

execute a sale deed in favour of Defendant No.10 on

31st March, 2006.       The appellant herein prayed for a

decree      of     permanent     injunction        against     the

defendants not to deal with the property without a

partition having been effected and also prayed for

a mandatory injunction on the defendants to remove

the wall which had been erected in the disputed

property.        The appellant herein also prayed for a

grant of temporary injunction which was rejected by

the Trial Court on 14th February, 2007, upon holding

that    a   partition    had   been     effected    between    the

legal heirs of Bapu Saheb Kante and that the Family

Settlement       had   been   reduced    into   writing   on       8th

February, 1967.


8.     Before the High Court proof of partition and

the Family Settlement, which was also accepted by

the appellant herein without any objection, were

produced, as was the decision of the High Court in
                                                                       8

First   Appeal      No.9    of    1994     in     which    the     learned

Single Judge had held that the documents of 8th

February,     1967,       had    been      held    to     be   a      Family

Settlement for which no registration was required

under Section 17 of the Registration Act, 1908.

It was also urged that since the disputed property

had   come    to    the     share    of     Surendra       Kante,       and,

thereafter, to the Respondents Nos.1 and 2, they

had the right to transfer their share in favour of

the transferees and that the defendant No.10 was a

bona fide purchaser for value.                  It was also pointed

out that the decision of the learned Single Judge

had been upheld by the Division Bench.


9.    The    High   Court       in   the       Miscellaneous          Appeal

observed     that    the     matter       of    grant     of   temporary

injunction had been considered in detail by the

Trial Court which had exercised its jurisdiction in

refusing     to     grant       temporary       injunction         to    the

appellants.          It     also      observed          that     in     case
                                                                    9

injunction was granted, it would be the defendants

who would suffer irreparable loss and injury.                            It

was    observed        that     the     defendant       No.10,        the

transferee from Respondents/defendant Nos.1 and 2,

had acquired a right to the suit property.                               He

was, therefore, allowed to carry out construction

activities      over      the      disputed         land,     but     was

restrained      from      alienating      or     transferring        the

property in question or from creating any third

party rights during the pendency of the civil suit.

The Trial Court was, however, directed to decide

the suit expeditiously and to dispose of the same

within six months from the date of appearance of

the parties before the Trial Court.


10. Questioning the aforesaid decision of the High

Court,    Mr.     Vivek       Kumar    Tankha,       learned    Senior

Advocate, submitted that the High Court had erred

in    accepting    the     stand      taken    on    behalf     of    the

defendants/respondents                herein     that       a       valid
                                                                  10

partition had taken place by metes and bounds, on

account whereof the Respondents/defendant Nos.1 and

2, as the heirs of Surendra Kante, had acquired

title to his share in the suit property and were,

therefore,     competent       to    dispose   of    the    same    in

favour of Defendant No.10.            Mr. Tankha urged that a

partition      of    joint      family    property         could    be

effected only by metes and bounds and by delivery

of actual possession.           In the absence of the same,

it could not be contended that a partition had, in

fact, been effected between the co-sharers.                        Mr.

Tankha urged that both the Trial Court, as well as

the   High     Court,    had     erred   in    pre-supposing            a

partition between the parties simply on the basis

of the Deed of Family Settlement executed on 8th

February,      1967.    It     was   submitted      that     in    the

absence   of    evidence       of    partition      by    metes    and

bounds,   the       learned    Courts    below      had    erred    in

refusing to grant ad-interim injunction as prayed

for by the appellant since once the portion of the
                                                                   11

property        allegedly         transferred       in     favour    of

Respondent No.9 was permitted to be developed, the

very object of the suit would stand frustrated.


11. Apart from the above, Mr. Tankha urged that the

learned Courts below had erred in acting upon the

Deed of Family Settlement executed on 8th February,

1967, which, in fact, was a Deed of Partition and

could     not     have     been    acted     upon    without     being

executed by all the co-sharers and without being

registered as provided for under Section 17 of the

Registration Act, 1908.              Mr. Tankha submitted that

if the Deed of Family Settlement was to be acted

upon, as has been done by the Courts below, it must

also    be     held    that   partition       had    been     effected

thereby         and,     therefore,         the     same      required

registration.          In the absence thereof, the Courts

had wrongly placed reliance on the same in refusing

to     allow     the     appellant's       prayer    for    grant    of

temporary       injunction        pending   the     hearing    of   the
                                                    12

suit. In support of his aforesaid submissions, Mr.

Tankha referred to and relied upon the decision of

this Court in M.N. Aryamurthy vs. M.D. Subbaraya

Setty (dead) through LRs. [(1972) 4 SCC 1], wherein

in the facts of the case it was held by this Court

that under the Hindu Law if a family arrangement is

not accepted unanimously, the Family Settlement has

to fail as a binding agreement.


12. Mr. Tankha urged that there could be little

doubt that in the facts of this case, the balance

of convenience and inconvenience lay in favour of

grant of temporary injunction during the pendency

of the suit, as prayed for by the appellant herein

as   otherwise       the    appellants    would    suffer

irreparable loss and injury.


13. Mr.      Anoop   G.    Chaudhary,    learned   Senior

Advocate, appearing for the Respondent No.6, while

supporting    Mr.    Tankha's   submissions,   reiterated

that the Deed of Family Settlement had not been
                                                                            13

acted upon as would be evident from the Deed of

Settlement itself.                 It would be clear therefrom

that one of the co-sharers, Sau. Pratibha, who was

shown       as    the     eighth    executant        of    the     Deed       of

Settlement dated 8th February, 1967, had, in fact,

not signed the said document.                        She was not also

made     a       party    in     the   First     Appeal,         although,

admittedly she was one of the daughters of Bapu

Saheb Kante through his first wife.


14. On the other hand, Mr. Ranjit Kumar, learned

Senior       Advocate,         appearing       for     the      Respondent

Nos.1, 2, 8, 9 and 10, reiterated that the family

settlement         of    8th   February,   1967,          had    been    duly

acted upon, as would be evident from the sale deeds

executed          by     Narendra      Kante,    which          have     been

exhibited by Narendra Kante in the suit pertaining

to    the    suit        property.       Mr.    Ranjit          Kumar    also

referred to a copy of the agreement made Annexure

P-1    to    the       Special   Leave    Petition,         which       is    an
                                                              14

agreement alleged to have been executed by Udai

Kante, Narendra Kante and Surendra Kante in favour

of one Ram Bharose Lal Aggarwal regarding Municipal

House No.15/642, known as "Kante Saheb Ka Bara".

Reference     was   also   made   to    a    suit,    being    Case

No.32A of 1991, filed by Ram Bharose Lal Aggarwal

in the Court of Third Additional District Judge,

Gwalior, for specific performance of the agreement

dated 8th February, 1967.


15. Similarly, several other documents were also

referred to by Mr. Ranjit Kumar, which were also

executed during the hearing of the suit, in order

to establish the fact that the parties, including

the present appellant, had acted in terms of the

said   Deed   of    Settlement    and   had    dealt    with    the

properties    which    had   fallen     to    their    respective

shares.


16. Mr. Ranjit Kumar submitted that as far as the

second question raised on behalf of the appellant
                                                                   15

was concerned, it was well-settled that a Deed of

Family Settlement which was reduced into writing

was not required to be registered under Section 17

of the Registration Act, 1908.                    Learned counsel

submitted that when an oral settlement had been

arrived at and acted upon and a subsequent document

was prepared only for the purpose of recording such

settlement, the provisions of Section 17 of the

Registration Act were not attracted, since except

for   recording     a     settlement,       no   actual       transfer

takes place by virtue of such document.


17. In    support    of    his    aforesaid      submission,        Mr.

Ranjit Kumar firstly relied on the decision of the

Three    Judge   Bench     in    Kale   vs.      Dy.    Director     of

Consolidation     [(1976        (3)   SCC   119]       in   which   the

question of registration of a family arrangement

had fallen for consideration.                    Their Lordships

held that a family arrangement may be even oral in

which     case      no      registration           is       necessary.
                                                                       16

Registration would be necessary only if the terms

of the family arrangement are reduced into writing

but there also a distinction should be made between

a document containing the terms and recitals of a

family arrangement made under the document and a

mere      Memorandum            prepared       after       the    family

arrangement had already been made, either for the

purpose      of     recording      or   for    information        of    the

Court for making necessary mutation.                           In such a

case,    the      Memorandum       itself     does       not   create    or

extinguish any right in the immovable properties

and, therefore, neither does it fall within the

mischief of Section 17(2) of the Registration Act

nor     is     it     compulsorily         registrable.            Their

Lordships         went     on    further      to    conclude     that        a

document, which was no more than a memorandum of

what     had        been    agreed      to,        did    not    require

registration.
                                                         17

18. While holding as above, Their Lordships also

indicated that even if a Family Arrangement, which

required registration was not registered, it would

operate as a complete estoppel against the parties,

which had taken advantage thereof.


19. Learned counsel urged that as had been held by

this Court in Mandali Ranganna vs. T. Ramachandra

[(2008) 11 SCC 1], while considering an application

for grant of injunction, the Court has not only to

take   into     consideration      the    basic     elements

regarding existence of a prima face case, balance

of convenience and irreparable injury, it has also

to   take   into   consideration    the   conduct    of   the

parties since grant of injunction is an equitable

relief.     It was observed that a person who had kept

quiet for a long time and allowed another to deal

with the property exclusively, ordinarily would not

be entitled to an order of injunction.            Mr. Ranjit

Kumar also referred to the recent decision of this
                                                             18

Court in Kishorsinh Ratansinh Jadeja                vs. Maruti

Corpn. & Ors. [(2009) 5 Scale 229], in which the

observation made in Mandali Ranganna's case (supra)

was referred to with approval.


20. From    the    submissions     made   on    behalf   of   the

respective parties and the materials on record, we

have to see whether the Courts below, including the

High     Court,     were   justified      in    refusing      the

appellant's       prayer   for   grant    of   interim   orders

pending the hearing of the suit.               Though the Deed

of Family Settlement has been heavily relied upon

by the Courts below and the Respondents herein, it

will have to be considered whether reliance could

have been placed on the same since the same was not

registered,       though   it    sought   to    apportion     the

shares of the respective co-sharers.              It has also

to be seen whether the document could at all be

relied    upon    since    all   the   co-sharers    were     not

signatories thereto.
                                                                 19

21. As far as the first point is concerned, since

the same is a question of fact and has, on a prima

facie basis, been accepted by the Courts below, we

are not inclined to interfere with the prima facie

view taken that an oral partition had been effected

which had been subsequently reduced into writing as

a   Memorandum        and     not    as   an   actual     Deed     of

Partition.       Of course, these observations are made

only for the purpose of disposal of the Special

Leave Petition and not for disposal of the suit

itself.


22. As far as the second question is concerned, a

Deed    of    Family    Settlement        seeking   to    partition

joint     family      properties      cannot   be   relied       upon

unless       signed    by    all    the   co-sharers.       In    the

instant case, admittedly, the Respondent No.8, Sau.

Pratibha,      was     not    a    signatory   to   the    Deed    of

Settlement dated 8th February, 1967, although, she

is the daughter of Bapu Saheb Kante by his first
                                                               20

wife.   As was held in the case of M.N. Aryamurthy

(supra),     under     the    Hindu     Law     if     a   Family

Arrangement is not accepted unanimously, it fails

to become a binding precedent on the co-sharers.

Both Mr. Vivek Tankha and Mr. Anoop G. Chaudhary,

learned Senior Advocates, brought this point to our

notice to indicate that all the co-sharers had not

consented to the Deed of Family Settlement which

could not, therefore, be relied upon. The argument

would have had        force had it not been for the fact

that    acting    upon       the    said      Settlement,       the

appellants had also executed sale deeds in respect

of the suit property.         Having done so, it would not

be open to the appellants to now contend that the

Deed of Family Settlement was invalid.


23. Now,     coming    to    the   question    of     balance    of

convenience and inconvenience and irreparable loss

and injury, it has to be kept in mind that the

Respondent    No.10    has    already      acquired    rights    in
                                                               21

respect of the share of the Respondent Nos.8 and 9

to the suit property and in the event an interim

order   is   passed        preventing      development    of     the

portion of the property acquired by it, it would

suffer irreparable loss and injury since it would

not be able to utilize the property till the suit

is disposed of, which could take several years at

the original stage, and, thereafter, several more

years   at   the    appellate     stages.          The   appellant

herein has been sufficiently protected by the order

of the High Court impugned in this appeal.                     While

the Respondent No.10 has been permitted to carry

out construction activities over the disputed land,

it   has     been        restrained     from       alienating     or

transferring       the    property    or    from    creating     any

third party right therein during the pendency of

the suit.


24. As mentioned hereinabove, there is yet another

question which goes against the case made out by
                                                                   22

the appellant, viz., that after the Deed of Family

Settlement,        even   the     appellant         has      executed

Conveyances    in    respect     of   portions        of    the     suit

property,     thereby     supporting         the     case     of     the

respondent that the Deed of Family Settlement dated

8th February, 1976, had not only been accepted by

the parties, but had also been acted upon.


25. In such circumstances, we are not inclined to

interfere with the order passed by the High Court,

but we are also concerned that the suit should not

be delayed on one pretext or the other, once such

interim order is granted.


26. We,     accordingly,       dispose    of       the     appeal     by

directing the Trial Court to dispose of the pending

suit within a year from the date of communication

of this judgment.         In the meantime, the co-sharers

to the suit property shall not create any third

party     rights     or   encumber       or        transfer        their

respective    shares      in    the   suit     property       in    any
                                                                        23

manner whatsoever and all transactions undertaken

in respect thereof shall be subject to the final

decision in the suit.


27. There will be no order as to costs.




                                 ................................................J.
                                          (ALTAMAS KABIR)



                                 ................................................J.
                                          (CYRIAC JOSEPH)
New Delhi,



Dated: December 15, 2009.

availability of alternative remedy of criminal revision under Section 397 Cr.P.C. by itself cannot be a good ground to dismiss an application under Section 482 of Cr.P.C.=In our considered opinion the learned Single Judge of the High Court should have followed the law laid down by this Court in the case of Dhariwal Tobacco Products Ltd. (supra) and other earlier cases which were cited but wrongly ignored them in preference to a judgment of that Court in the case of Sanjay Bhandari (supra) passed by another learned Single Judge on 05.02.2009 in S.B. Criminal Miscellaneous Petition No. 289 of 2006 which is impugned in the connected Criminal Appeal arising out of Special Leave Petition No. 4744 of 2009. As a result, both the appeals, one preferred by Prabhu Chawla and the other by Jagdish Upasane & Ors. are allowed. The impugned common order dated 02.04.2009 passed by the High Court of Rajasthan is set aside and the matters are remitted back to the High Court for fresh hearing of the petitions under Section 482 of the Cr.P.C. in the light of law explained above and for disposal in accordance with law. Since the matters have remained pending for long, the High Court is requested to hear and decide the matters expeditiously, preferably within six months. Since that order has been set aside while allowing those appeals hence the order impugned in this appeal also has to be set aside for the same very reasons and for the view taken by us in respect of scope and ambit of Section 482 of the Cr.P.C. Accordingly this appeal is also allowed and impugned order is set aside with the same directions as in the other two appeals.

                                                                  REPORTABLE

                        IN THE SUPREME COURT OF INDIA

                       CRIMINAL APPELLATE JURISDICTION

                      CRIMINAL APPEAL NO.  842  OF 2016
               [Arising out of S.L.P.(Crl.) No. 3314 of 2009]

Prabhu Chawla                                           …..Appellant

      Versus

State of Rajasthan & Anr.                           …..Respondents


                                   W I T H


                      CRIMINAL APPEAL NO.  844  OF 2016
               [Arising out of S.L.P.(Crl.) No. 4744 of 2009]


                                     AND


                   CRIMINAL APPEAL NOS.  845-846  OF 2016
            [Arising out of S.L.P.(Crl.) Nos. 1554-1555 of 2011]




                               J U D G M E N T




SHIVA KIRTI SINGH, J.


Leave granted.
First we take up appeals of Prabhu Chawla and Jagdish Upasane  and  ors.  as
these two criminal appeals seek to assail a common  order  dated  02.04.2009
whereby the High Court of Judicature for Rajasthan at Jodhpur dismissed  the
petitions preferred by the appellants under  Section  482  of  the  Code  of
Criminal Procedure (for brevity ‘Cr.P.C.’). High Court  held  the  petitions
to be not maintainable in view of judgment of Rajasthan High  Court  in  the
case of Sanjay Bhandari v. State of  Rajasthan[1]  (impugned  in  the  other
connected appeal) holding that availability  of  remedy  under  Section  397
Cr.P.C. would make a petition under Section 482 Cr.P.C. not maintainable.
While considering all these matters at  the  SLP  stage,  on  05.07.2013,  a
Division Bench found the impugned order of the High Court to be against  the
law  stated  in  Dhariwal  Tobacco  Products  Ltd.  and  Ors.  v.  State  of
Maharashtra and another[2]. In that case the Division Bench  concurred  with
the proposition of law that availability of alternative remedy  of  criminal
revision under Section 397 Cr.P.C. by itself cannot  be  a  good  ground  to
dismiss an application under Section 482 of Cr.P.C. But it  noticed  that  a
later Division Bench judgment of this Court in the case of Mohit alias  Sonu
and another v. State of Uttar Pradesh and another[3] apparently held to  the
contrary that when an order under assail is not interlocutory in nature  and
is amenable to the revisional jurisdiction of  the  High  Court  then  there
should be a bar in invoking the inherent jurisdiction of the High Court.  In
view of such conflict, these cases were directed to  be  placed  before  the
Hon’ble Chief Justice for reference to a larger Bench and that  is  how  the
matters are before this Bench for resolving the conflict.
The facts of these appeals need not detain  us  because  in  our  considered
opinion the view taken by the Rajasthan High Court in the impugned order  is
contrary to law and therefore matters will have to be remanded back  to  the
High Court for fresh consideration on merits within the  scope  of  inherent
powers available to the High  Court  under  Section  482  Cr.P.C.  It  would
suffice to note that in both  these  appeals,  the  miscellaneous  petitions
before the High Court arose out of  an  order  dated  30.11.2006  passed  by
learned Judicial Magistrate No. 3, Jodhpur in  the  complaint  no.  1669  of
2006, whereby it took cognizance against the appellants under  Section  228A
of the Indian Penal Code and summoned  them  through  bailable  warrants  to
face further proceedings in the case.
Mr. P.K. Goswami learned senior advocate for the  appellants  supported  the
view taken by  this  Court  in  the  case  Dhariwal  Tobacco  Products  Ltd.
(supra). He pointed out that in paragraph 6 of this judgment Justice  S.  B.
Sinha took note of several earlier judgments of this  Court  including  that
in R.P. Kapur v. State of Punjab[4] and Som Mittal v. Govt. of  Karnataka[5]
for coming to the conclusion that  “only  because  a  revision  petition  is
maintainable, the same by itself,  ………,  would  not  constitute  a  bar  for
entertaining an application under Section 482  of  the  Code.”  Mr.  Goswami
also placed strong reliance upon judgment of Krishna Iyer, J. in a  Division
Bench in the case of Raj Kapoor and Ors v. State and Ors[6].   Relying  upon
judgment of a Bench of three Judges in the  case  of  Madhu  Limaye  v.  The
State of Maharashtra[7] and quoting  therefrom,  Krishna  Iyer,  J.  in  his
inimitable style made the law crystal clear in paragraph 10  which  runs  as
follows:
“10.    The first question is as to whether the inherent power of  the  High
Court under Section 482 stands repelled  when  the  revisional  power  under
Section 397 overlaps. The opening  words  of  Section  482  contradict  this
contention because nothing of the Code, not even  Section  397,  can  affect
the amplitude of the inherent power  preserved  in  so  many  terms  by  the
language of Section 482. Even so, a general principle pervades  this  branch
of law when a specific provision is made: easy resort to inherent  power  is
not right except under compelling circumstances. Not that there  is  absence
of jurisdiction but that inherent power should not invade  areas  set  apart
for specific power under the same Code. In Madhu  Limaye  v.  The  State  of
Maharashtra  this Court has exhaustively and, if I may  say  so  with  great
respect, correctly discussed and delineated the law  beyond  mistake.  While
it is true that Section  482  is  pervasive  it  should  not  subvert  legal
interdicts written into the  same  Code,  such,  for  instance,  in  Section
397(2). Apparent conflict may arise  in  some  situations  between  the  two
provisions and a happy solution
“would be to say that the bar provided in sub-section  (2)  of  Section  397
operates only in exercise  of  the  revisional  power  of  the  High  Court,
meaning thereby that the High Court  will  have  no  power  of  revision  in
relation to any interlocutory order. Then in  accordance  with  one  or  the
other principles enunciated above, the inherent power will come  into  play,
there being no other provision in the Code for the redress of the  grievance
of the aggrieved party. But then, if the order  assailed  is  purely  of  an
interlocutory  character  which  could  be  corrected  in  exercise  of  the
revisional power of the High Court under the 1898 Code, the High Court  will
refuse to exercise its inherent  power.  But  in  case  the  impugned  order
clearly brings about a situation which is an abuse of  the  process  of  the
Court or for the purpose of securing the ends  of  justice  interference  by
the High Court is absolutely necessary, then nothing  contained  in  Section
397(2) can limit or affect the exercise of the inherent power  by  the  High
Court. But such cases would be few and far  between.  The  High  Court  must
exercise the inherent power very sparingly.  One  such  case  would  be  the
desirability of the quashing of a criminal proceeding  initiated  illegally,
vexatiously or as being without jurisdiction”.
In short, there is no total ban on the  exercise  of  inherent  power  where
abuse of the process of the court or other extraordinary  situation  excites
the court’s jurisdiction. The limitation is  self-restraint,  nothing  more.
The policy of the law is clear that interlocutory orders, pure  and  simple,
should  not  be  taken  up  to  the  High  Court  resulting  in  unnecessary
litigation and delay.  At  the  other  extreme,  final  orders  are  clearly
capable of being considered  in  exercise  of  inherent  power,  if  glaring
injustice stares the court in the face. In between is  a  tertium  quid,  as
Untwalia, J. has pointed out as for example, where it is more than a  purely
interlocutory order and less than a final disposal. The present  case  falls
under that category where the accused complain  of  harassment  through  the
court’s process. Can we state that  in  this  third  category  the  inherent
power can be exercised? In the words of Untwalia, J.: (SCC p. 556, para 10)
“The answer is obvious that the bar will not operate to  prevent  the  abuse
of the process of the Court and/or to secure the ends of justice. The  label
of the petition filed by an aggrieved party is immaterial.  The  High  Court
can examine the matter in an appropriate case  under  its  inherent  powers.
The present case undoubtedly falls for exercise of the  power  of  the  High
Court in accordance with Section  482  of  the  1973  Code,  even  assuming,
although not accepting, that invoking  the  revisional  power  of  the  High
Court is impermissible.”
I am, therefore clear in my mind that the inherent power is not rebuffed  in
the case situation before us. Counsel on both sides, sensitively  responding
to  our  allergy  for  legalistics,  rightly  agreed  that   the   fanatical
insistence on the formal filing of a copy of the order under cessation  need
not take up this court’s time. Our conclusion concurs  with  the  concession
of counsel on both sides that merely because a copy of  the  order  has  not
been produced, despite its presence in the records in the court, it  is  not
possible for me to hold that the entire  revisory  power  stands  frustrated
and the inherent power stultified.”

In our considered view any attempt to explain the  law  further  as  regards
the issue relating to  inherent  power  of  High  Court  under  Section  482
Cr.P.C. is unwarranted. We would simply reiterate that  Section  482  begins
with a non-obstante clause to state: “Nothing in this Code shall  be  deemed
to limit or affect the inherent powers  of  the  High  Court  to  make  such
orders as may be necessary to give effect to any order under this  Code,  or
to prevent abuse of the process of any Court  or  otherwise  to  secure  the
ends of justice.” A fortiori, there can be no total ban on the  exercise  of
such wholesome jurisdiction where, in the words of Krishna Iyer,  J.  “abuse
of the process of the Court or other  extraordinary  situation  excites  the
court’s jurisdiction. The limitation is self-restraint,  nothing  more.”  We
venture to add a further reason in support.  Since Section  397  Cr.P.C.  is
attracted against all orders  other  than  interlocutory,  a  contrary  view
would limit the availability of inherent powers under  Section  482  Cr.P.C.
only to petty interlocutory  orders!  A  situation  wholly  unwarranted  and
undesirable.
As  a  sequel,  we  are  constrained  to  hold  that  the  Division   Bench,
particularly in paragraph 28, in the case of Mohit alias  Sonu  and  another
(supra) in respect of inherent power of the High Court  in  Section  482  of
the Cr.P.C. does not state the  law  correctly.  We  record  our  respectful
disagreement.


In our considered opinion the learned Single Judge of the High Court  should
have followed the law laid down by  this  Court  in  the  case  of  Dhariwal
Tobacco Products Ltd. (supra) and other earlier cases which were  cited  but
wrongly ignored them in preference to a judgment of that Court in  the  case
of Sanjay Bhandari  (supra)  passed  by  another  learned  Single  Judge  on
05.02.2009 in S.B. Criminal Miscellaneous Petition No. 289 of 2006 which  is
impugned in the connected Criminal  Appeal  arising  out  of  Special  Leave
Petition No. 4744 of 2009. As a result, both the appeals, one  preferred  by
Prabhu Chawla and the other by Jagdish  Upasane  &  Ors.  are  allowed.  The
impugned  common  order  dated  02.04.2009  passed  by  the  High  Court  of
Rajasthan is set aside and the matters are remitted back to the  High  Court
for fresh hearing of the petitions under Section 482 of the Cr.P.C.  in  the
light of law explained above and for disposal in accordance with law.  Since
the matters have remained pending for long, the High Court is  requested  to
hear and decide the matters expeditiously, preferably within six months.


The impugned order in the third appeal, dated 05.02.2009 passed by the  High
Court of Judicature for Rajasthan  at  Jodhpur  has  been  relied  upon  and
followed while passing the order dated 02.04.2009 impugned in the other  two
appeals. Since that order has been set aside while  allowing  those  appeals
hence the order impugned in this appeal also has to be  set  aside  for  the
same very reasons and for the view taken by  us  in  respect  of  scope  and
ambit of Section 482 of the Cr.P.C. Accordingly this appeal is also  allowed
and impugned order is set aside with the same directions  as  in  the  other
two appeals.

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


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


                       ……………………………………..J.
                            [ABHAY MANOHAR SAPRE]

New Delhi.
September 05, 2016.

-----------------------
[1]
      [2] 2009 (1) CrLR (Raj.) 282
[3]
      [4] (2009) 2 SCC 370
[5]
      [6] (2013) 7 SCC 789
[7]
      [8] AIR 1960 SC 866
[9]
      [10] (2008) 3 SCC 574
[11]
      [12]  (1980) 1 SCC 43
[13]
      [14]  (1977) 4 SCC 551

Karnataka Sales Tax Act,= (i) Is the assessee liable to turnover tax under Section 6-B of the Karnataka Sales Tax Act, 1957 on the payment made to the sub-contractor in spite of the fact that the sub-contractor had declared the turnover and paid taxes? (ii) Since the payment made to the sub-contractor does not amount to turnover within Section 2(i)(v) of the Karnataka Sales Tax Act, 1957, can such payment be part of total turnover as per Section 2(1)(u-2) of the Karnataka Sales Tax Act, 1957? = since the transfer of property involved in such execution had already been taxed, the appellant cannot be taxed again under Section 6-B of the Karnataka Act there being only one taxable event for the purpose of Article 366(29A)(b) of the Constitution of India.= the assessee had assigned parts of the construction work to sub- contractors who were registered dealers. These sub-contractors had purchased goods and chattels like bricks, cement and steel and, where necessary, supply and erect equipments such as lifts, hoists, etc. The materials were brought to the site and they remain the property of the sub- contractor. The site was occupied by the sub-contractor and the materials were erected by the sub-contractor. In this backdrop, after taking note of some provisions of the Andhra Pradesh Act, the Court explained the legal position in the following manner: “16. By virtue of Article 366(29-A)(b) of the Constitution, once the work is assigned by the contractor (L&T), the only transfer of property in goods is by the sub-contractor(s) who is a registered dealer in this case and who claims to have paid taxes under the Act on the goods involved in the execution of the works. Once the work is assigned by L&T to its sub- contractor(s), L&T ceases to execute the works contract in the sense contemplated by Article 366(29-A)(b) because property passes by accretion and there is no property in goods with the contractor which is capable of a retransfer, whether as goods or in some other form. 17. The question which is raised before us is whether the turnover of the sub-contractors (whose names are also given in the original writ petition) is to be added to the turnover of L&T. In other words, the question which we are required to answer is whether the goods employed by the sub- contractors occur in the form of a single deemed sale or multiple deemed sales. In our view, the principle of law in this regard is clarified by this Court in Builders' Assn. of India as under: (SCC p. 673, para 36) “36 … Ordinarily unless there is a contract to the contrary in the case of a works contract, the property in the goods used in the construction of a building passes to the owner of the land on which the building is constructed, when the goods or materials used are incorporated in the building.” (emphasis supplied by us) 18. As stated above, according to the Department, there are two deemed sales, one from the main contractor to the contractee and the other from sub-contractor(s) to the main contractor, in the event of the contractee not having any privity of contract with the sub-contractor(s). 19. If one keeps in mind the above quoted observation of this Court in Builders' Assn. of India the position becomes clear, namely, that even if there is no privity of contract between the contractee and the sub- contractor, that would not do away with the principle of transfer of property by the sub-contractor by employing the same on the property belonging to the contractee. This reasoning is based on the principle of accretion of property in goods. It is subject to the contract to the contrary. Thus, in our view, in such a case, the work executed by a sub- contractor, results in a single transaction and not as multiple transactions. This reasoning is also borne out by Section 4(7) which refers to the value of goods at the time of incorporation in the works executed. In our view, if the argument of the Department is to be accepted, it would result in plurality of deemed sales which would be contrary to Article 366(29-A)(b) of the Constitution as held by the impugned judgment of the High Court. Moreover, it may result in double taxation which may make the said 2005 Act vulnerable to challenge as violative of Articles 14, 19(1)(g) and 265 of the Constitution of India as held by the High Court in its impugned judgment.” This raison d'etre shall apply, in full force, while answering the question even in the context of the Karn5ataka Act. We, therefore, hold that the value of the work entrusted to the sub- contractors or payments made to them shall not be taken into consideration while computing total turnover for the purposes of Section 6-B of the Karnataka Act. As a consequence, the two appeals which are filed by the assessee are allowed and the appeal preferred by the Revenue is dismissed. In the facts and circumstances of the case, there shall be no order as to costs.

                                                                  REPORTABLE

                        IN THE SUPREME COURT OF INDIA

                        CIVIL APPELLATE JURISDICTION

                        CIVIL APPEAL NO. 2956 OF 2007


|LARSEN & TOUBRO LIMITED                    |.....APPELLANT(S)            |
|VERSUS                                     |                             |
|ADDITIONAL DEPUTY COMMISSIONER             |                             |
|OF COMMERCIAL TAXES & ANR.                 |.....RESPONDENT(S)           |

                                   W I T H
                        CIVIL APPEAL NO. 2318 OF 2013

                                    A N D

                        CIVIL APPEAL NO. 7241 OF 2016


                               J U D G M E N T

A.K. SIKRI, J.
                 Same parties are entangled in  these  three  appeals  which
arise  out  of  the  provisions  of  the  Karnataka  Sales  Tax  Act,   1957
(hereinafter  referred  to  as  the  'Karnataka  Act').   Two  appeals   are
preferred by the assessee, viz. Larsen & Toubro  Ltd.,  and  one  appeal  is
filed by the Revenue, i.e. the Sales Tax Department of Karnataka.

The assessee is doing the business of engineers and contractors and in  this
process it, inter  alia,  executes  projects  under  contracts  with  public
sector undertakings, local bodies  as  well  as  the  Union  and  the  State
Governments, besides private sector.  The assessee is registered  under  the
Karnataka Act and files its returns for payment  of  sales  tax  thereunder.
The contracts which are secured by the assessee are the works contracts  and
a part thereof is generally assigned to sub-contractors.   For  example,  in
Civil Appeal No. 2956 of 2007,  the  assessee  had  secured  a  contract  to
construct an indoor stadium  styled  'Sree  Kanteerava  Indoor  Stadium'  in
Bengaluru and the assessee assigned the work of finding their own  materials
and laying foam concrete to M/s. Lloyd  Insulation  (India  Limited).   This
sub-contractor was registered with the  Deputy  Commissioner  of  Commercial
Taxes, Assessment-IX  City  Division,  Bengaluru,  and  accordingly  it  had
submitted returns and paid taxes for the execution  of  the  works  contract
and was duly assessed under Sections 5-B and 6-B of the  Karnataka  Act.   A
certificate dated April 10, 1998 to that effect had been marked  before  the
authorities.
      Likewise, returns are filed by the assessee as well on regular  basis.
In the course of the  assessment,  the  assessee  submitted  that  the  sub-
contractors were the parties who executed the works contract and  since  the
transfer of property involved in such execution had already been taxed,  the
appellant cannot be taxed again under  Section  6-B  of  the  Karnataka  Act
there being only one taxable event for the purpose  of  Article  366(29A)(b)
of the Constitution of India.  In nutshell, it was  the  submission  of  the
assessee that value of the work entrusted to the  sub-contractor  could  not
be taken into account while computing total turnover  of  the  assessee  for
the purpose of taxation under the Karnataka Act.   This  submission  of  the
assessee was, however, negatived by the Assessing Officer  as  well  as  the
Karnataka Appellate Tribunal.  In the revision filed  under  Section  23  of
the Karnataka Act, the appellant raised the following questions:
(i) Is the assessee  liable  to  turnover  tax  under  Section  6-B  of  the
Karnataka Sales Tax Act, 1957 on the payment made to the  sub-contractor  in
spite of the fact that the sub-contractor  had  declared  the  turnover  and
paid taxes?
(ii)  Since the payment made  to  the  sub-contractor  does  not  amount  to
turnover within Section 2(i)(v) of the Karnataka Sales Tax  Act,  1957,  can
such payment be part of total turnover  as  per  Section  2(1)(u-2)  of  the
Karnataka Sales Tax Act, 1957?

            The High Court  decided  the  aforesaid  questions  against  the
assessee and thereby affirmed the  view  taken  by  the  Appellate  Tribunal
which resulted in dismissing the revision  petition  of  the  assessee  vide
judgment dated February 03, 2006.  This judgment is the  subject  matter  of
challenge  in  Civil  Appeal  No.  2956  of  2007,  which  pertains  to  the
Assessment Year 1997-1998.

Likewise, for the Assessment  Year  2002-2003  (Civil  Appeal  No.  2318  of
2013), the assessee has been meted out the same treatment whereby  the  work
awarded to the sub-contractors, who are  the  registered  dealers  and  have
paid sales tax in respect of the works undertaken by them,  has  been  added
in the total turnover of the assessee  for  the  purposes  of  levying  tax.
However,  here  the  matter  is  remanded  to  the  Assessing  Officer   for
ascertaining the liability of the assessee under  Section  5-B  as  well  as
Section 6-B of the Karnataka  Act  in  respect  of  total  turnover  of  the
assessee.

On the other hand, outcome of the proceedings in respect of  the  Assessment
Year 1999-2000 (Civil Appeal No. 7241 of 2016)  has  taken  a  U-turn.   For
this Assessment Year, though the Assessing Officer as well as the  Appellate
Tribunal had included the cost of work awarded to the  sub-contractors,  the
High Court has held that value of the work awarded  to  the  sub-contractors
cannot be included for computing the total  turnover  of  the  assessee  and
has, thus, allowed the revision petition preferred by the assessee.  Against
that order, the Revenue is in appeal.

The aforesaid brief resume of the three appeals  makes  it  clear  that  the
question of law involved in all these three cases is the  same,  though  the
two sets of judgments of the High Court are contrary to each other.

It may be pointed out at this juncture itself that in the case of this  very
assessee same question of law had arisen, albeit in the  context  of  Andhra
Pradesh Value Added Tax Act, 2005 (hereinafter referred to  as  the  'Andhra
Pradesh Act').  This Court has decided the issue in its  judgment  known  as
State of Andhra Pradesh  &  Ors.  v.  Larsen  &  Toubro  Limited  &  Ors.[1]
(hereinafter referred to as 'Andhra Pradesh  judgment').   The  question  of
law is answered  in  favour  of  the  assessee.   Taking  aid  of  the  said
judgment, the assessee  has  argued  that  the  instant  appeals  should  be
decided in its favour.  On the other hand, plea of the Revenue is that  that
view taken by the High Court, which is in favour  of  the  Revenue,  is  the
correct view and should be maintained having regard  to  the  provisions  of
the Karnataka Act.  The endeavour of the Revenue is to demonstrate that  the
provisions of the Andhra Pradesh Act are materially different than  that  of
the Karnataka Act and, therefore, the judgment in the  Andhra  Pradesh  case
need not be followed.
            Before adverting to the aforesaid judgment  of  this  Court,  it
would be advisable to take note of the various provisions of  the  Karnataka
Act.

For  our  purposes,  definitions  of  'sale',  'taxable  turnover',   'total
turnover' and 'turnover' are material, which are reproduced below:
“2(i)(t)  “Sale” with all its grammatical variation and cognate  expressions
means every transfer of the property in  goods  (other  than  by  way  of  a
mortgage, hypothecation, charge or plede) by one person to  another  in  the
course of trade or business for  cash  or  for  deferred  payment  or  other
valuable consideration, and includes, –

(i)  a transfer otherwise than in pursuance of a  contract  of  property  in
any goods for cash, deferred payment or other valuable consideration;

(ii)  a transfer of property in goods (whether as goods  or  in  some  other
form) involved in the execution of a works contract;

                          xx          xx         xx

2(i)(u-1)  “Taxable turnover” means the turnover on which a dealer shall  be
liable to pay tax as determined after making such deductions from his  total
turnover and in such manner as may be prescribed, but shall not include  the
turnover of purchase or sale in the course of inter-State trade or  commerce
or in the course of export of the goods out of the territory of India or  in
the course of import of the gods into the territory of India;

(u-2)  “Total turnover” means the aggregate  turnover  in  all  goods  of  a
dealer at all places of business in the State, whether or not the  whole  or
any portion of such turnover is liable to tax,  including  the  turnover  of
purchase or sale in the course of inter-State trade or commerce  or  in  the
course of export of the goods out of  the  territory  of  India  or  in  the
course of import of the goods into the territory of India;

(v)  “Turnover” means the aggregate amount for which  goods  are  bought  or
sold, or supplied or distributed or delivered or otherwise  disposed  of  in
any of the ways referred to in clause (t) by a dealer,  either  directly  or
through another, on his own account or on account  of  others,  whether  for
cash or for deferred payment or other valuable consideration.”

Since we are dealing with the sales tax under the Karnataka  Act,  obviously
the said tax is on 'sale'.  'Sale' is defined as transfer  of  the  property
in goods by one person to another in the course of  trade  or  business  for
consideration and it, inter alia, includes a transfer of property  in  goods
(whether as goods or in some other form) involved  in  the  execution  of  a
works contract.  Thus, even in respect of works contract whenever  there  is
a transfer of property in goods, that is deemed as 'sale'.
An essential element to constitute a transaction as 'sale' is  the  transfer
of property in goods.  Aggregate amount for which the goods  are  bought  or
sold, or supplied or distributed or delivered or otherwise disposed  of,  in
any of the ways referred to under Section 2(t), by a dealer  is  treated  as
'turnover' within the meaning of Section 2(v) of the Karnataka  Act.   There
are two variants of this turnover known as  'taxable  turnover'  and  'total
turnover', the definitions whereof  are  already  reproduced  above.  'Total
turnover' is defined as aggregate turnover in all goods of a dealer  at  all
places of business in the State.  However,  from  this  aggregate  turnover,
certain deductions are permissible under the  provisions  of  the  Karnataka
Act and when those deductions are allowed from the total  turnover,  we  get
'taxable turnover' on which a dealer is liable to pay tax.

Section 5-B of the Karnataka Act is  the  charging  section  in  respect  of
execution of the works contract and it reads as under:
“5-B  Levy of tax on transfer of property in goods (whether as goods  or  in
some  other  form)  involved  in  the  execution  of   works   contracts   –
Notwithstanding anything contained in sub-section (1) or sub-section (3)  or
sub-section (3-C) of Section 5, but subject to sub-section (4), (5)  or  (6)
of the said section, every dealer shall pay for each year, a tax under  this
act on his taxable turnover of transfer of property  in  goods  (whether  as
goods or in some other form) involved in the  execution  of  works  contract
mentioned in column (2) of the Sixth Schedule at the rates specified in  the
corresponding entries in column (3) of the said Schedule.”

There is a levy of turnover tax as well, which is provided under Section  6-
B of the Karnataka Act.  At the relevant time, this  provision  was  in  the
following form:
“6-B  Levy of Turnover Tax. – (1) Every registered dealer and  every  dealer
who is liable to get himself registered under sub-section  (1)  and  (2)  of
Section 10 whose total turnover in a year is not  less  than  the  turnovers
specified in the said sub-sections, whether or not the whole or any  portion
of such turnover is liable to tax under any other provisions  of  this  Act,
shall be liable to pay tax. –

(i)  at the rate of one and half per cent of  the  total  turnover,  if  the
total turnover is not more than one thousand lakh rupees in a year; or

(ii)  at the rate of three per cent of the  total  turnover,  if  the  total
turnover is more than one thousand lakh rupees in a year;

Provided that the rate of tax payable for any year shall be at one and  half
per cent on the turnovers up to one thousand lakh rupees and  at  three  per
cent on the turnovers exceeding one thousand  lakh  rupees,  if,  the  total
turnover in the year immediately preceding that year was not more  than  one
thousand lakh rupees.”

On a plain reading of Sections 5-B and 6-B of the Karnataka Act, it  can  be
seen that Section 5-B deals with levy of tax  on  transfer  of  property  in
goods involved in the execution of the  works  contract.   It  is,  thus,  a
special provision made for imposing sales tax on works contract and  tax  is
payable  on  'taxable  turnover  of  transfer   of   property   in   goods'.
Additionally, in those cases where total turnover of a registered dealer  in
an year is not less than the turnover specified in sub-sections (1) and  (2)
of Section 10, such a dealer is liable to pay tax at the rate  specified  in
Section 6-B of the Karnataka Act.

The question for determination is: for  calculating  the  turnover  for  the
purpose of payment of turnover tax under Section 6-B of the  Karnataka  Act,
whether  payments  made  to  sub-contractor  are  to   be   included   while
calculating the total turnover?

Mr.   N.   Venkatraman,   learned   senior   counsel   appearing   for   the
appellant/assessee, made a fervent plea  for  not  including  such  payments
made to the sub-contractor, as component of total turnover, because  of  the
reason that the sales tax is payable on the transfer  of  property  and  the
'turnover' also meant aggregate amount for which goods are bought  or  sold,
etc.   Therefore,  transfer  of  property  in  goods   was   the   necessary
concomitant in ascertaining the sale and, thus, in the  process  calculating
the turnover/total turnover.  It was submitted that there  was  no  sale  of
goods involved in the execution of a works contract  as  in  such  contracts
the property does not pass  as  movables.   Tracing  the  history  of  works
contract, the learned senior counsel submitted  that  in  the  case  of  The
State of Madras  v.  Gannon  Dunkerley  &  Co.  (Madras)  Limited[2],  while
speaking of a building contract, this Court held that the property in  goods
involved in the execution of a works contract does not pass as movables  but
on the theory of accretion on the principle quicquid  plantatur  solo,  solo
cedit, i.e. whatever is attached to the  soil,  becomes  part  of  it.   The
Constitution (Forth-Sixth Amendment)  Act,  1982  inserted  Article  366(29-
A)(b) to neutralise the judgment in Gannon  Dunkerley  &  Co.  only  to  the
extent that an indivisble contract was deemed to be divisible  and  did  not
undo the principle.  He argued that this Court, interpreting Article 366(29-
A)(b) in Builders' Association of India & Ors. v. Union of India &  Ors.[3],
reiterated that in a works contract property in goods passes out as  movable
but on the theory of accretion.  It was further submitted that the  property
passes by accession just once which, by a fiction, is taxed as a sale.   The
Article also identifies the transferor and transferee effecting  the  deemed
sale and deemed purchase.  The taxable person is  the  contractor  executing
the works contract so that the main contractor,  who  assigns  the  work  to
another person to  execute  the  work,  cannot  be  a  transferor,  nor  any
property in goods  vest  in  the  main  contractor,  when  the  contract  is
executed by a sub-contractor.

Proceeding further,  by taking the aforesaid line of argument,  the  learned
senior counsel submitted that if  the  point  of  view  of  the  Revenue  is
accepted, it would amount to double  taxation  inasmuch  as  sub-contractors
were also registered dealers who had paid sales tax under the Karnataka  Act
and by including the payments made to them in  the  total  turnover  of  the
assessee, tax was sought to be levied on the same  amount  all  over  again.
On the aforesaid premise,  the  learned  senior  counsel  for  the  assessee
submitted that precisely this argument in law  has  been  accepted  by  this
Court in the  Andhra  Pradesh  judgment.   He  referred  to  the  discussion
contained in the said judgment in extenso.

Mr. K.N. Bhat,  learned  senior  counsel  appearing  for  the  Revenue,  per
contra, heavily relied upon the reasoning given by the  High  Court  in  the
judgment which has taken the view in favour of the  Revenue.   He  submitted
that one had to keep  in  mind  the  distinction  between  Section  5-B  and
Section 6-B of the Karnataka Act by pointing out that when it comes to  levy
of turnover tax, it speaks of 'total turnover', whereas  tax  payable  under
Section 5-B is on the 'taxable turnover'.  He submitted that  since  we  are
concerned with the levy of tax under  Section  6-B  of  the  Karnataka  Act,
total turnover becomes relevant  and,  therefore,  the  value  of  the  work
entrusted  to  the  sub-contractors  is  includible  at  the  hands  of  the
assessee.  He further submitted that the High Court was  right  in  pointing
out that sales tax is leviable at a single point, whereas  turnover  tax  is
leviable at a multi-point, both at the hands of the main contractor and sub-
contractor and, therefore, the question of double taxation does not arise.

After bestowing our due consideration  to  the  respective  submissions,  we
find that the position taken by the assessee has to prevail,  which  appears
to be meritorious.  This result follows even from the bare  perusal  of  the
Karnataka Act and Rules.  For this purpose, it becomes  important  to  refer
to clause (c) of sub-Rule (1) of Rule 6 of the Karnataka  Sales  Tax  Rules,
1957.  Rule 6 deals with determination of total  and  taxable  turnover  and
clause (c) reads as under:
“6.  Determination of total and taxable turnover. – (1) The  total  turnover
of a dealer, for the purposes of the Act, shall be the aggregate of. –

                          xx          xx         xx

(c)  the total amount paid or payable to the  dealer  as  the  consideration
for transfer of property in goods (whether as goods or in some  other  form)
involved in the execution of works contract; and includes  any  amount  paid
as advance to the dealer as a part of such consideration.

                         xx          xx         xx”

What is significant is that total amount paid or payable to the dealer as  a
consideration for 'transfer of property in  goods',  which  is  involved  in
execution of the works contract, is  to  be  treated  as  'total  turnover'.
This Rule, thus, specifically restricts the total  turnover  in  respect  of
those  goods,  alone,  where  the  property  has  been  transferred.   Thus,
transfer of property in goods, becomes necessary event and unless  there  is
a transfer of property, the amount paid is not to be included in  the  total
turnover.  The amount paid to the sub-contractor  is  not  for  transfer  of
property in goods.  When matter is examined from this angle, the ratio  laid
down by this Court in the Andhra Pradesh judgment clearly  applies  inasmuch
as in that case also the Court noticed  that  Section  4(7)  of  the  Andhra
Pradesh Act indicated that the taxable event is the transfer of property  in
goods involved in the execution of a works contract and  the  said  transfer
of property in such goods takes place when the  goods  are  incorporated  in
the works.  The Court held that the value of the goods which constitute  the
measure for the levy of tax is the  value  of  goods  at  the  time  of  the
incorporation of the goods in the works.  The Court further found that  same
was the position contained in Rule 17(1)(a)  of  the  Andhra  Pradesh  Value
Added Tax Rules, 2005.

It is not in dispute that the facts and the issue involved  were  identical,
i.e. the assessee had assigned  parts  of  the  construction  work  to  sub-
contractors  who  were  registered  dealers.   These   sub-contractors   had
purchased goods and chattels  like  bricks,  cement  and  steel  and,  where
necessary, supply and erect equipments such  as  lifts,  hoists,  etc.   The
materials were brought to the site and they remain the property of the  sub-
contractor. The site was occupied by the sub-contractor  and  the  materials
were erected by the sub-contractor.  In this backdrop, after taking note  of
some provisions of the Andhra Pradesh Act, the  Court  explained  the  legal
position in the following manner:
“16.  By virtue of Article 366(29-A)(b) of the Constitution, once  the  work
is assigned by the contractor (L&T), the only transfer of property in  goods
is by the sub-contractor(s) who is a registered dealer in this case and  who
claims to have paid taxes under  the  Act  on  the  goods  involved  in  the
execution of the works. Once the  work  is  assigned  by  L&T  to  its  sub-
contractor(s), L&T ceases  to  execute  the  works  contract  in  the  sense
contemplated by Article 366(29-A)(b) because property  passes  by  accretion
and there is no property in goods with the contractor which is capable of  a
retransfer, whether as goods or in some other form.

17. The question which is raised before us is whether the  turnover  of  the
sub-contractors (whose names are also given in the original  writ  petition)
is to be added to the turnover of L&T. In other words,  the  question  which
we are required to  answer  is  whether  the  goods  employed  by  the  sub-
contractors occur in the form of a single deemed  sale  or  multiple  deemed
sales. In our view, the principle of law in  this  regard  is  clarified  by
this Court in Builders' Assn. of India  as under: (SCC p. 673, para 36)

“36 … Ordinarily unless there is a contract to the contrary in the  case  of
a works contract, the property in the goods used in the  construction  of  a
building passes  to  the  owner  of  the  land  on  which  the  building  is
constructed, when the goods  or  materials  used  are  incorporated  in  the
building.”

                                                   (emphasis supplied by us)

18.  As stated above, according to the  Department,  there  are  two  deemed
sales, one from the main contractor to the contractee  and  the  other  from
sub-contractor(s) to the main contractor, in the  event  of  the  contractee
not having any privity of contract with the sub-contractor(s).

19.  If one keeps in mind the  above quoted  observation  of  this  Court  in
Builders' Assn. of India the position becomes clear, namely,  that  even  if
there is no  privity  of  contract  between  the  contractee  and  the  sub-
contractor, that would not  do  away  with  the  principle  of  transfer  of
property by the  sub-contractor  by  employing  the  same  on  the  property
belonging to the contractee. This reasoning is based  on  the  principle  of
accretion of property in goods.  It  is  subject  to  the  contract  to  the
contrary. Thus, in our view, in such a case, the work  executed  by  a  sub-
contractor,  results  in  a  single  transaction   and   not   as   multiple
transactions. This reasoning is also borne out by Section 4(7) which  refers
to the value of goods at the time of incorporation in  the  works  executed.
In our view, if the argument of the Department is to be accepted,  it  would
result in plurality of deemed sales  which  would  be  contrary  to  Article
366(29-A)(b) of the Constitution as held by the  impugned  judgment  of  the
High Court. Moreover, it may result in double taxation which  may  make  the
said 2005 Act vulnerable to challenge as violative of Articles 14,  19(1)(g)
and 265 of the Constitution of India as  held  by  the  High  Court  in  its
impugned judgment.”


            This raison d'etre shall apply, in full force,  while  answering
the question even in the context of the Karn5ataka Act.

We, therefore, hold that the  value  of  the  work  entrusted  to  the  sub-
contractors or payments made to them shall not be taken  into  consideration
while computing total turnover for  the  purposes  of  Section  6-B  of  the
Karnataka Act.  As a consequence, the two appeals which  are  filed  by  the
assessee are allowed and the appeal preferred by the Revenue  is  dismissed.
In the facts and circumstances of the case, there shall be no  order  as  to
costs.

                             .............................................J.
                                                                (A.K. SIKRI)



                             .............................................J.
                                                     (ROHINTON FALI NARIMAN)


NEW DELHI;
SEPTEMBER 05, 2016.

-----------------------
[1]   (2008) 9 SCC 191
[2]   AIR 1958 SC 560
[3]   (1989) 2 SCC 645