Imbalance of a case = when defendant not filed written statment and participated in cross examination of plaintiff's witness = In our considered opinion, the need to remand the case to the Senior Civil Judge for trying the civil suit afresh on merits has occasioned for more than one reason. 14. First, we find that the trial in the suit has not been done satisfactorily inasmuch as the defendant was not afforded an adequate opportunity to file his written statement. 15. Second, in the absence of any written statement, the defendant could neither adduce proper evidence nor file any documentary evidence in support of his case. 5 16. Third, the rights of the parties were, therefore, decided by the two Courts (Trial Court and First Appellate Court) by decreeing the suit and the High Court by dismissing the suit on the basis of insufficient evidence. In our view, it caused prejudice to both the parties. 17. Fourth, we do not find any justifiable reason to deny the defendant of his right to file the written statement. He was entitled to file the written statement and to adduce oral and documentary evidence for contesting the suit on merits. 18. It is a settled law that all the contesting parties to the suit must get fair opportunity to contest the suit on merits in accordance with law. A decision rendered by the Courts in an unsatisfactory conducting of the trial of the suit is not legally sustainable. It is regardless of the fact that in whose favour the decision in the trial may go. 6 19. It is for these reasons, we are of the view that these appeals deserve to be allowed and matter is remitted to the Trial Court for deciding the civil suit afresh on merits in accordance with law It is a settled law that all the contesting parties to the suit must get fair opportunity to contest the suit on merits in accordance with law. A decision rendered by the Courts in an unsatisfactory conducting of the trial of the suit is not legally sustainable. It is regardless of the fact that in whose favour the decision in the trial may go.

REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL  APPEAL Nos.3282­3283 OF 2019
(Arising out of S.L.P.(C) Nos.20295­20296 of 2017)
Rajinder Tiwari ….Appellant(s)
VERSUS
Kedar Nath(Deceased)
Thr. L.Rs. & Ors.               ….Respondent(s)
               
J U D G M E N T
Abhay Manohar Sapre, J.
1. Leave granted.
2. These appeals are directed against  the final
judgment and order dated 03.11.2016 passed by
the   High   Court   of   Delhi   at   New   Delhi   in   R.S.A.
1
No.188 of 2010 whereby the High Court allowed the
RSA filed by the respondents herein and order dated
26.04.2017 in CM(Application) No.46865 of 2016 by
which the High Court  dismissed the application for
re­hearing   of   the   second   appeal   filed   by   the
appellant herein.
3. A few facts need mention hereinbelow for the
disposal of the appeals, which involve a short point.
4. The appellant is the plaintiff and the original
respondent   (now   represented   by   his   legal
representatives) is the defendant in the civil suit out
of which these appeals arise.
5. The appellant(plaintiff)  filed  Civil Suit No. 147
of 2007  against the original respondent(defendant)
in   the   Court   of   Senior   Civil   Judge­cum­Rent
Controller(North East Dist.),  Karkardooma Courts,
Delhi for permanent injunction in relation to the
suit property.
2
6. It is not in dispute that the defendant’s  right
to   file   the   written   statement   was   closed   by   the
Senior Civil Judge with the result, the defendant
could not file his written statement and nor could
file any documentary evidence. 
7. The plaintiff then adduced his evidence. The
defendant,  however, could only cross­examine the
plaintiff's witnesses without his defence for want of
written statement. 
8.    By judgment/decree dated 01.02.2010, the
Senior   Civil   Judge   decreed   the   plaintiff's   suit   by
passing   a   decree   for   permanent   injunction   as
prayed by him. The defendant felt aggrieved and
filed   first   appeal   before   the   Additional   District
Judge.
9.   By   judgment   dated   26.07.2010,   the   first
Appellate Court dismissed the appeal and upheld
3
the judgment and decree passed by the Senior Civil
Judge. 
10. The defendant felt aggrieved and filed second
appeal in the High Court of Delhi. By order dated
03.11.2016,   the   High   Court   allowed   the   second
appeal, set aside the judgment of the first Appellate
Court   and   dismissed   the   plaintiff's   (appellant’s
herein) suit. Thereafter the plaintiff filed application
for re­hearing of the second appeal but the same
was dismissed by order dated 26.04.2017.  Against
both the orders, the appellant(plaintiff) has filed the
present   appeals   by   way   of   special   leave   in   this
Court.
11. So,     the   short   question,   which   arises   for
consideration in these appeals, is whether the High
Court   was   justified   in   allowing   the   defendant's
second   appeal   and   was,     therefore,     justified   in
dismissing the plaintiff's (appellant’s herein) suit.
4
12. Having   heard   the   learned   counsel   for   the
parties and on perusal of the record of the case, we
are inclined to allow these appeals and while setting
aside the impugned orders, remand the case to the
Trial Court (Senior Civil Judge) for trying the civil
suit afresh on merits in accordance with law.
13. In our considered opinion, the need to remand
the case to the Senior Civil Judge for trying the civil
suit afresh on merits has occasioned for more than
one reason.
14. First, we find that the trial in the suit has not
been done satisfactorily inasmuch as the defendant
was not afforded an adequate opportunity to file his
written statement. 
15. Second,   in   the   absence   of   any   written
statement,   the   defendant   could   neither   adduce
proper evidence nor file any documentary evidence
in support of his case. 
5
16. Third, the rights of the parties were, therefore,
decided by the two Courts (Trial Court and First
Appellate Court) by decreeing the suit and the High
Court   by   dismissing   the   suit   on   the   basis   of
insufficient   evidence.     In   our   view,   it   caused
prejudice to both the parties.
17. Fourth, we do not find any justifiable reason to
deny the defendant of his right to file the written
statement.     He   was   entitled   to   file   the   written
statement   and   to   adduce   oral   and   documentary
evidence for contesting the suit on merits.
18. It is a settled law that all the contesting parties
to the suit must get fair opportunity to contest the
suit on merits in accordance with law. A decision
rendered   by   the   Courts   in   an   unsatisfactory
conducting   of   the   trial   of   the   suit   is   not   legally
sustainable. It is regardless of the fact that in whose
favour the decision in the trial may go.
6
19. It is for these reasons, we are of the view  that
these appeals deserve to be allowed and matter is
remitted to the Trial Court for deciding the civil suit
afresh on merits in accordance with law. 
20. The respondents herein (legal representatives
of original defendant) are accordingly granted liberty
to   file   their   written   statement   within   one   month
from the date of their appearance in the suit. The
Trial Court will thereafter frame issues arising in
the suit on the basis of the pleadings of the parties
and then allow the parties to adduce their evidence
in addition to the evidence already adduced. The
parties   will   also   be   allowed   to   file   additional
documents, if they so wish.
21. The   Trial   Court   will   decide   the   suit   on   the
basis of the pleadings and the evidence adduced by
the parties uninfluenced by any judgment passed
by the Courts in this Case on the earlier occasion.
7
22. We, however, make it clear that we have not
expressed any opinion on the merits of the issue
while having formed an opinion to remand the case
to the Trial Court.
23. Let   the   trial   be   completed   within   one   year.
Parties   to   appear   before   the   Senior   Civil   Judge
(North East District), Karkardooma Courts, Delhi on
02.04.2019.   
24. The appeals thus succeed and are accordingly
allowed. The impugned orders are set aside and the
suit is restored to its original file for being tried on
merits as indicated above.
     
                                   .………...................................J.
                                   [ABHAY MANOHAR SAPRE]   
                               
    …...……..................................J.
             [DINESH MAHESHWARI]
New Delhi;
March 28, 2019
8

High Court has no jurisdiction to allow the second appeal without framing a substantial question of law as provided under Section 100 of the Code.

REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL  APPEAL Nos. 3276­3281 OF 2019
(Arising out of S.L.P.(C) Nos.30383­30388 of 2011)
Chand Kaur (D) Thr.Lrs. ….Appellant(s)
VERSUS
Mehar Kaur (D) Thr.Lrs               ….Respondent(s)
               
J U D G M E N T
Abhay Manohar Sapre, J.
1. Leave granted.
2. These appeals are directed against  the final
judgment and order dated 23.03.2011 passed by
the High Court of Punjab & Haryana at Chandigarh
in RSA Nos. 2066, 2067, 2068, 2292 and 2294 of
1987.
1
3. It is not necessary to set out the facts in detail
for the disposal of these appeals for the reason that
having heard the learned counsel for the parties and
on perusal of the record of the case, we have formed
an opinion to remand the case to the High Court for
deciding   the   second   appeals,   out   of   which   these
appeals arise, for their fresh disposal on merits in
accordance with law.
4. The need to remand these cases to the High
Court is called for because we find that the High
Court though disposed of bunch of second appeals
(RSA Nos.2066 to 2068 of 1987 and RSA 2292 to
2294 of 1987) but it did so without framing any
substantial question(s) of law as is required to be
framed   under   Section   100   of     the   Code   of   Civil
Procedure,   1908   (hereinafter   referred   to   as   “the
Code”).
2
5. In   our   opinion,     framing   of   substantial
question(s)   of   law   in   the   present   appeals   was
mandatory   because   the   High   Court   allowed   the
second appeals and interfered in the judgment of
the First Appellate Court, which was impugned in
the   second   appeals.   It   is   clear   from   the   last
paragraph   of   the   impugned   order   quoted
hereinbelow:
“However,   I   am   unable   to   convince
myself with the latter part of the judgment of
the   ld.   lower  appellate  court  wherein  Chand
Kaur  was  held   to  be  entitled  to  ½  share  of
the property of Jaimal, by placing reliance on
the   judgment   delivered   in   the   previous
litigation   between   Mehar   Singh   and   Chand
Kaur.     Once   the   ld.   lower   Appellate   Court
arrived   at   a   specific   finding   of   fact   that
Chand   Kaur   was   neither   the   daughter   of
Santo  nor  Santo   is  daughter  of  Cheta,  thus,
there was no basis for it to hold that Chand
Kaur was entitled to hold half of the property
of   late   Jaimal.     By   placing   reliance   on   the
previous   judgment,   the   ld.   Lower   Appellate
Court   went   against   its   own   judgment   and
impliedly   admitted   that   Santo   was   the
daughter of Cheta.   It is obvious that such a
status   of   things   cannot   co­exist.     By
necessary   implication,   as   a   result   of   the
finding arrived at by the ld. Lower Appellate
3
Court regarding Santo not being the daughter
of  Cheta, the entitlement of the property of
late  Jaimal  falls  on  Mehar  Singh  and  Mehar
Kaur in equal shares.
In  view  of  above,  RSA  Nos.2066,  2067
and   2068   of   1987   filed   by   Mehar   Kaur
succeed and RSA Nos.2292, 2293 and 2294 of
1987 filed by Chand Kaur are dismissed.  The
findings of the  ld. lower Appellate  Court are
modified to the extent that Mehar Singh and
legal heirs of Mehar Kaur are held entitled to
succeed to the entire property of late Jaimal
Singh   in  equal  shares  and  the   legal  heirs  of
Chand   Kaur   shall   have   no   right   to   such
property at all.”
6. This Court has consistently held that the High
Court has no jurisdiction to allow the second appeal
without framing a substantial question of law as
provided under Section 100 of the Code. In other
words, the  sine   qua   non  for allowing the second
appeal is to first frame the substantial question(s) of
law arising in the case and then decide the second
appeal   by   answering   the   question(s)   framed.(See
Surat Singh(Dead) vs. Siri Bhagwan & Ors., (2018)
4
4 SCC 562 and  Vijay   Arjun   Bhagat   &   Ors.   vs.
Nana Laxman Tapkire & Ors., (2018) 6 SCC 727).
7. Since in this case, we find that the High Court
failed to frame any substantial question either at
the   time   of   admitting   the   appeal   or   before   final
hearing   and   yet   proceeded   to   allow   some   of   the
second   appeals   in   the   bunch   by   modifying   the
judgment   impugned   therein,   the   High   Court
committed jurisdictional error requiring this Court
to interfere.
8. In view of the foregoing discussion, the appeals
succeed and are accordingly allowed. The impugned
order is set aside. All the second appeals, out of
which   these   appeals   arise,   are   restored   to   their
original numbers before the High Court.
9. The High Court will now first frame substantial
question(s) which, according to the appellants of the
5
second   appeals,   arise   in   their   respective   second
appeals.
10. Since we have formed an opinion to remand
the case in the light of what is held above, we have
not   expressed   any   opinion   on   the   merits   of   the
controversy.
11. The   High   Court   will   accordingly   decide   the
appeals on merits strictly in accordance with law
uninfluenced   by   any   observations   made   in   the
impugned order and also in this order.
     
                                   .………...................................J.
                                   [ABHAY MANOHAR SAPRE]   
                               
    …...……..................................J.
             [DINESH MAHESHWARI]
New Delhi;
March 28, 2019
6

powers of revisional court -when appeal was remanded - whether revision court direct the appeal court to decid the appeal afresh or confirm the trial court order after setting aside the order of remand ? = if the High Court had examined the issue of remand and held the same to be legal, it could have directed the Magistrate to decide the complaint in terms of the directions given by the Appellate Court. However, if the remand had been held illegal, the High Court was under a legal obligation to remand the case to the Appellate Court to decide the appeal afresh on merits with a view to decide as to whether the Magistrate was justified in allowing the complaint and awarding sentence. The reason being that the Appellate Court once decided to remand the case to the Magistrate did not go into the merits of the case. 14. In the light of the aforementioned three reasons, we are of the considered opinion that the High Court committed jurisdictional error in 6 allowing the revision filed by respondent No.1. The impugned order, therefore, deserves to be set aside.

REPORTABLE
IN THE SUPREME COURT OF INDIA
CRIMINAL APPELLATE JURISDICTION
CRIMINAL APPEAL No.2103 OF 2008
Susanta Dey              ….Appellant(s)
VERSUS
Babli Majumdar & Anr.           …Respondent(s)
               
J U D G M E N T
Abhay Manohar Sapre, J.
1. This   appeal   is   directed   against   the   final
judgment and order dated 11.04.2008 passed by
the   High   Court   of   Calcutta   in   Criminal   Revision
No.3048 of 2005 whereby the High Court allowed
the   criminal   revision   filed   by   respondent   No.1
herein   and   while   setting   aside   the   order   of   the
Appellate Court, awarded simple imprisonment for
1
two months to the appellant herein and directed
him   to   pay   a   sum   of   Rs.3   lakhs   by   way   of
compensation to respondent No.1.
2. The appeal involves a short point as would be
clear from the facts mentioned hereinbelow.
3. Respondent   No.1   (complainant)   filed   a
complaint (CR No.298/1995)  under Section 138 of
the   Negotiable   Instrument   Act,   1881   (hereinafter
referred to as “the Act”) against the appellant herein
in the Court of   Judicial Magistrate,   1st   Court,
Jalpaiguri,  West Bengal.
4. By   order   dated     29.06.2004,   the   Judicial
Magistrate   allowed   the   complaint   and   held   the
appellant   guilty   for   commission   of   an   offence
punishable   under   Section   138   of   the   Act   and
sentenced him to undergo simple imprisonment for
two months along with a fine of Rs. 5000/­  and in
default   of   payment   of   fine,     to   further   undergo
2
simple   imprisonment   for   one   month   and   also
awarded  a compensation of Rs. 3 Lakhs payable to
respondent   No.1   (complainant)   by   the   appellant
(accused).
5. The appellant felt aggrieved and filed Criminal
Appeal   No.   7/2005)   in   the   Court   of
Sessions/Magistrate.   By   order   dated   12.07.2005,
the Appellate Court allowed the appeal and while
setting aside the order dated   29.06.2004 of the
Judicial   Magistrate   remanded   the   case   to   the
Judicial Magistrate for giving an opportunity to both
the   parties   to   adduce   fresh   evidence   and   then
decide the complaint.
6. Respondent No.1 (complainant) felt aggrieved
and filed revision in the High Court at Calcutta. By
impugned   order,   the   High   Court   allowed   the
revision and while setting aside the order of the
Appellate Court, awarded simple imprisonment for 2
3
months to the appellant herein and also directed
him to pay Rs. 3 Lakhs by way of compensation to
respondent No.1. 
7. It is against this order,  the appellant (accused)
has felt aggrieved and filed this appeal by way of
special leave  in this Court.
8. Heard Mr. Vijay Kumar, learned counsel for
the appellant, Mr. Pijush K. Roy, learned counsel for
respondent No.1 and Mr. Avishkar Singhvi, learned
counsel for respondent No.2.
9. Having   heard   the   learned   counsel   for   the
parties and on perusal of the record of the case, we
are inclined to allow the appeal and while setting
aside the impugned order remand the case to the
Appellate Court for deciding the appeal afresh on
merits in accordance with law.
10. In   our   opinion,   the   High   Court   was   not
justified in allowing the revision filed by respondent
4
No.1 and awarding sentence to the appellant herein
and compensation to respondent No.1. The reasons
are not far to seek as mentioned hereinbelow.
11. First, the only question before the High Court
in   the   revision   filed   by   respondent
No.1(complainant) was as to whether the Appellate
Court was justified in remanding the case to the
Judicial Magistrate for giving them an opportunity
to adduce evidence. In other words, the question
before   the   High   Court   was   whether   the   remand
order of the Appellate Court was legal or not.
12. Second,   instead   of   deciding   the
aforementioned question, the High Court proceeded
to decide the complaint itself on its merits and while
allowing   the   complaint,   sentenced   the   appellant
(accused) with  simple imprisonment for 2 months
along with a direction to pay compensation of Rs. 3
5
Lakhs to respondent No.1 (complainant). It was,  in
our view,  not legally permissible.
13. Third,   if   the   High   Court   had   examined   the
issue of remand and held the same to be legal, it
could   have  directed   the  Magistrate  to   decide   the
complaint in terms of the directions given by the
Appellate Court. However,  if the remand had been
held   illegal,   the   High   Court   was   under   a   legal
obligation to remand the case to the Appellate Court
to decide the appeal afresh on merits with a view to
decide as to whether the Magistrate was justified in
allowing the complaint and awarding sentence. The
reason being that the Appellate Court once decided
to remand the case to the Magistrate did not go into
the merits of the case.     
14. In   the   light   of   the   aforementioned   three
reasons, we are of the considered opinion that the
High   Court   committed   jurisdictional   error   in
6
allowing the revision filed by respondent No.1. The
impugned order, therefore, deserves to be set aside.
15. We, also perused the order of the Appellate
Court dated 12.07.2005 (running in 25 pages) with
a view to find out as to whether it was justified in
remanding the case to the Magistrate.
16. Having perused the order, we are of the view
that   the  Appellate  Court   erred   in  remanding  the
case to the Magistrate.
17. In our view, there was neither any need and
nor   any   occasion   to   remand   the   case   to   the
Magistrate. In other words, we are of the view that
there   was   enough   material   before   the   Appellate
Court on the basis of which the appeal on merits
could   have   been   decided   one   way   or   the   other
instead of remanding the case to the Magistrate for
deciding it afresh.
7
18. In view of the foregoing discussion, the appeal
succeeds and is accordingly allowed.  The impugned
order   and   the   order   dated   12.07.2005   of   the
Appellate Court are set aside.  Criminal Appeal No.
7/2005 filed by the accused (appellant herein) is
restored to its original file. 
19. The Appellate Court is directed to decide the
appeal afresh on merits in accordance with law on
the basis of the material already on record.
20. It is, however, made clear that the Appellate
Court will decide the appeal strictly in accordance
with   law   without   being   influenced   by   any
observations made by the Appellate Court in the
order dated 12.07.2005 as also in the impugned
order of the High Court and this order.
8
21. Let the appeal be decided within six months
from the date of appearance of the parties before the
Appellate Court on 15.04.2019. 
     
                                     .………...................................J.
                                   [ABHAY MANOHAR SAPRE]   
                               
     …...……..................................J.
                    [DINESH MAHESHWARI]
New Delhi;
March 28, 2019
9

Section 11(6) of the Arbitration and Conciliation Act, = prima facie no dispute subsisted after the discharge voucher being signed by the respondent without any demur or protest and claim being finally settled with accord and satisfaction and after 11 weeks of the settlement of claim a letter was sent on 27th July, 2016 for the first time raising a voice in the form of protest that the discharge voucher was signed under undue influence and coercion with no supportive prima facie evidence being placed on record in absence thereof, it must follow that the claim had been settled with accord and satisfaction leaving no arbitral dispute subsisting under the agreement to be referred to the Arbitrator for adjudication. 22. In our considered view, the High Court has committed a manifest error in passing the impugned order and adopting a mechanical process in appointing the Arbitrator without any supportive evidence on record to prima facie substantiate that an 19 arbitral dispute subsisted under the agreement which needed to be referred to the arbitrator for adjudication. 23. Consequently, the appeals are allowed and the order passed by the High Court is accordingly set aside. No costs.

REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
  CIVIL APPEAL NO(s). 3284  OF 2019
(Arising out of SLP(C ) No(s). 23956 of 2017)
UNITED INDIA INSURANCE CO. LTD.  .…Appellant(s)
VERSUS
ANTIQUE ART EXPORTS PVT. LTD.         .…Respondent(s)
WITH
     CIVIL APPEAL NO(s). 3285  OF 2019
       (Arising out of SLP(C ) No(s). 23963 of 2017)
J U D G M E N T
Rastogi, J.
Leave granted.
2. These appeals have been filed by the Insurance Company
assailing the order dated 30th  May, 2017 passed by the High
Court   of   Delhi   appointing   an   Arbitrator   in   exercise   of   power
under   Section   11(6)   of   the   Arbitration   and   Conciliation   Act,
1
1996(hereinafter being referred to as “the Act”) to adjudicate the
dispute between the parties. 
3. The facts in brief manifest from the record and relevant for
the   present   purpose   are   that   the   respondent   claimant   was
running   its   factory   situated   at   78,   Kilo   Mile   Stone,   Karhans
Village, Main GT Road, Samalakha, Panipat and purchased two
Standard Fire and Special Perils Policies dated 29th June, 2013
and 10th October, 2013.  On 25th September, 2013 and thereafter
on 25th October, 2013, a fire took place in the factory on account
of a short circuit as claimed by the respondent claimant. The
appellant Company on receipt of the information appointed M/s.
Protocol Surveyors & Engineers Pvt. Ltd. as surveyors and also
appointed their investigator to submit the fact finding report.
After the report was submitted by the authorised surveyor, the
appellant Company sent an e­mail to the respondent with an
intimation that it has approved its claim for an amount of Rs.
2,81,44,413/­   on   account   of   fire   dated   25th  October,   2013
towards full and final settlement with complete details of the
amount   computed.     The   extract   of   the   e­mail   sent   by   the
appellant Company to the respondent has been placed on record
2
at Annexure P­2 in Civil Appeal arising out of SLP(C ) No. 23956
of 2017 and is reproduced as under:­
“From: Jaiprakash1@uiic.co.in
Sent: Thursday, May 05, 2016 1:23 PM
To: Vimal Singh
CC: sangeetagupta@uiic.co.in; vijaysharma@uiic.co.in;
   nareshchandolia@uiic.co.in
Subject: Fire Claim dated 25.10.2013
Sir/Madam,
This is to inform you that the Competent Authority has
approved   your   claim   for   an   amount   of   Rs.
2,81,44,413/­ (building Rs. 88,18,691   P & M   Rs.
7,32,382    FFF      Rs.   3,61,049   Finished  Goods,  Rs.
1,95,66,389   Fire   Fighting   Ex.   Rs.   59,000     Cost   of
Debris Removal Rs. 88,187 Total Rs. 2,96,25,698)
Less Excess 5% Rs. 14,81,285 = Rs. 2,81,44,413) of
loss   dated   25.10.2013   (Claim   No.
0407001113C101515001)
In order to release the payment we require following
from your end.
1. Confirmation   from   the   concerned   bank   “Indian
Overseas Bank, Defence Colony Branch.
Through mail that in which Account the payment has
to be made through NEFT.
2. Deposit Re­instatement premium of Rs.19100/­
3. Fire Fighting expenses bills in original
4. Debris Removal bills in original.
5. Full and final settlement discharge voucher for Rs.
2,81,44,413/­ duly endorsed by the bank  also
without any Subjectivity.
Please furnish.
3
Jaiprakash
Divisional Manager
United India Insurance Company Limited
10203, IIIrd Floor, Jamuna House,
Padam Singh Road
New Delhi­110005
Mobile : 9910791508
Phone : 28755967, 28755419
jaiprakash@uiic.co.in”
4. On the same date, i.e. 5th May, 2016, the respondent sent a
reply accepting the computation and provided the desired details
with final discharge voucher and details of the bank account in
which the payment was to be credited.  The extract of the e­mail
and the discharge voucher sent by the respondent is reproduced
hereunder:­
“ANTIQUE ART
Exports Pvt. Ltd.
(A Govt. of India Recognized Export House)
PANIPAT OFFICE: 78 K.M. Stone, G.T. Road, karhans Village, Tehsil
Samalkha, Panipat­132103(INDIA)
T:0091­180­3003300 (100 Lines), F: 0091­180­3003311
E:Info@antiqueartexports.com, :www.antiqueartexports.com
The Divisional Manager 05.05.2016
United India Insurance Co. Ltd.
10203, 3rd Floor, Jamuna House
Padam Singh Road
Karol Bagh, New Delhi.
Kind Attn: Mr. Jaiprakash
Subject : Fire Claim dated 25.10.2013
Dear Sir,
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We   are   in   receipt   of   your   email   of   today’s   date,
wherein   you   have   asked   to   furnish   certain
documents/information for doing the needful at your
end.  Accordingly, we are submitting herewith desired
information/documents for your necessary action.
1. We   have   already   requested   our   bank   to   confirm
account   details,  in which  payment  has  to be made
through NEFT. Hopefully, you must have received the
same directly from Bank on your email.
2. Regarding re­instatement premium of Rs.19100/­, we
request you to deduct the same from claim payment.
3. Original   Fire   Fighting   expenses   bills   are   submitted
herewith for doing the needful at your end.
4. Regarding   Debris   Removal   Bills   in   original,   we   are
enclosing herewith separate letter and contents of the
same   are   self­explanatory.     This   payment   is   to   be
released at later date as per our letter.
5. Full   and   final   settlement   discharge   voucher   for
Rs.2,81,44,413/­   duly   endorsed   by   the   bank   is
attached for doing the needful at your end.
While   hoping   that   you   will   find   above   information/
documents   in   line   of   your   requirement,   we   look
forward to have the immediate transfer of payment of
our claim to our bank.
A line of confirmation in this regard will be highly
appreciated.
Thanking you
Yours faithfully,
For Antique Art Exports Pvt. Ltd.
Ashok Jain
Chairman”
“ANTIQUE ART
Exports Pvt. Ltd.
(A Govt. of India Recognized Export House)
PANIPAT OFFICE: 78 K.M. Stone, G.T. Road, karhans Village, Tehsil
Samalkha, Panipat­132103(INDIA)
T:0091­180­3003300 (100 Lines), F: 0091­180­3003311
E:Info@antiqueartexports.com, :www.antiqueartexports.com
05.05.2016
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Full and Final Settlement Discharge Voucher
We,   Antique   Art   Exports   Pvt.   Ltd.,   78   KM   Stone,
Karhans   Village,   Tehsil   Samalkha,   Panipat­132103,
Haryana   do   hereby   accept   payment   of
Rs.2,81,44,413/­(Rupees Two Crore Eighty One Lacs
Fourty   Four   Thousand   and   Four   Hundred   Thirteen
only) as full and final settlement against our fire claim
No.:0407001113 C101515001 of loss dated 25.10.2013
without any subjectivity.
For Antique Art Exports Pvt. Ltd.
Sd/­
  Ashok Jain
  Chairman”
5.     Civil Appeal arising out of SLP(C ) No. 23963 of 2017 deals
with the fire taken place on 25th  September, 2013.   It is not
disputed between the parties that the facts are similar except
that the claim was settled for Rs. 2,20,36,840/­.
6. Indisputedly,   both   the   claims   were   accepted   by   the
respondent without any demur or protest, and after full and final
settlement and discharge of claim in reference to both the claims
of the incident dated 25th  September, 2013 and 25th  October,
2013, the respondent later through e­mail dt. 11th  July, 2016
desired   certain   details   and   reports   with   a   break   up   of
computation including copy of the preliminary survey report etc.
and there was no whisper that any coercion or undue influence,
6
etc. was used by the appellant company.  The e­mail was replied
by the appellant on 20th July, 2016 giving all details as desired by
the respondent.  Thereafter on 27th July, 2016 for the first time
nearly almost after 11 weeks of the receipt of claim and full and
final   discharge,   respondent   claimed   that   fraud,   coercion   and
undue influence was exercised and he was forced to sign on the
dotted   lines   without   furnishing   any   prima   facie   evidence   in
support thereof.   In furtherance, application came to be filed
before the High Court on 11th January, 2017 under Section 11(6)
of the Arbitration and Conciliation Act, 1996(hereinafter being
referred to as “the Act”) inter alia that the insurer coerced and
forced the respondent to sign on dotted lines on a pre­signed
discharge voucher and claimed for appointment of an Arbitrator.
7. The   appellant   Insurance   Company   in   their   reply   refuted
such   allegations   and   further   stated   that   the   respondent   had
signed a letter of subrogation in accepting the payment in full
and final settlement of its claim.   Discharge Voucher was sent
without any demur or protest and nothing further survives and
no arbitral dispute subsists for adjudication and so far as the
allegation levelled that the insurer has coerced and put undue
7
force upon the respondent to sign on dotted lines on a pre­signed
standard discharged paper is concerned, there is no prima facie
documentary evidence placed on record except the letter dated
27th  July, 2016 which was sent for the first time after almost
more   than   11   weeks   of   the   claim   being   settled   and   the
application   for   appointment   of   Arbitrator   is   ill   founded   and
deserves to be rejected.
8. The High Court taking note of the rival contentions of the
parties and of sub­section (6A) of Section 11 of the Act which has
been introduced by virtue of Amendment Act, 2015 observed that
once there is existence of arbitration agreement,  acceptance of
the payment disbursed by the appellant company, whether it was
under coercion or undue influence, is a matter to be examined by
the   Arbitrator   and   accordingly   proceeded   to   appoint   the   sole
arbitrator to adjudicate the dispute between the parties. 
9. Shri   Vineet   Malhotra,   learned   counsel   for   the   appellant
submits   that   once   the   claim   was   settled   and   the   claimant
received compensation and issued a discharge voucher in full
and final settlement of its claim, there was a discharge of the
8
contract by accord and satisfaction.   As a result, neither any
contract nor any claim survived.   It was also contended that
having received the payment under the said discharge voucher
without any demur or protest, it was not open for the respondent
after 11 weeks of the receipt of the claim and full and final
discharge, to raise a voice that the discharge was obtained under
coercion and undue influence without furnishing any prima facie
evidence in support thereof and placed reliance of the judgment
of this Court in  New   India  Assurance  Company  Limited  Vs.
Genus  Power   Infrastructure  Limited 2015(2) SCC 424 which
according   to   him   is   almost   on   the   same   set   of   facts   and
circumstances. 
10. Learned counsel for the appellant further submits that subsection (6A) of Section 11 of the Act has been introduced by
Amendment Act, 2015 with a limited purpose for expediting the
arbitral disputes in a time bound manner provided there is a
prima   facie   arbitral   claim/dispute   subsist   under   the   arbitral
agreement for adjudication by the Arbitrator.  In the instant case,
as there was no arbitral dispute subsisting after the claim being
finally settled with consent of the parties with due accord and
9
satisfaction, Section 11(6) was not available to be invoked by the
respondent in raising a dispute after more than 11 weeks of the
settlement of the claim to the satisfaction of the parties. 
11. Per Contra, Shri Dhruv Mehta, learned senior counsel for
the respondent submitted that he is not disputing as far as the
settlement of the claims are concerned but his objection is that
the respondent was not in a bargaining position and being in
financial stress, he had no option but to accept the claim on the
dotted   lines   settled   by   the   appellant   in   an   arbitrary   manner
leaving   no   choice   and   mere   acceptance   in   the   given
circumstances will not take away the right of the respondent to
establish that it was not voluntary but under undue influence
and coercion and since there is a clause of arbitration in the
agreement, it will be for the Arbitrator to examine as to whether
the acceptance of the claim by the respondent has been voluntary
or   under   undue   influence   or   coercion   and   in   the   given
circumstances, no error has been committed by appointing the
Arbitrator under the impugned judgment.
10
12. The existence of an arbitration clause in the contract of
insurance is not in dispute.  The question does arise whether the
discharge   in   the   present   case   upon   acceptance   of   the
compensation and signing of the discharge letter was voluntary
or under coercion or undue influence and the respondent was
justified in invoking Section 11(6) of the Act.   It is true that
execution   of   full   and   final   agreement,   receipt   or   a   discharge
voucher in itself cannot be a bar to arbitration and it has been
observed   by   this   Court   in  National   Insurance   Company
Limited Vs. Boghara Polyfab Private Limited 2009(1) SCC 267
at para 44 as under:­
“44. None   of   the   three   cases   relied   on   by   the
appellant lay down a proposition that mere execution
of a full and final settlement receipt or a Discharge
Voucher is a bar to arbitration, even when the validity
thereof is challenged by the claimant on the ground of
fraud, coercion or undue influence.   Nor do they lay
down   a   proposition   that   even   if   the   discharge   of
contract is not genuine or legal, the claims cannot be
referred to arbitration.  In all the three cases, the Court
examined the facts and satisfied itself that there was
accord and satisfaction or complete discharge of the
contract and that there was no evidence to support the
allegation of coercion/undue influence.”
13. It further laid down the illustrations as to when claims are
arbitrable and when they are not.  This may be illustrative (not
11
exhaustive) but beneficial for the authorities in taking a decision
as to  whether in a given  situation  where no claim/discharge
voucher has been furnished what will be its legal effect and still
there is any arbitral dispute subsists to be examined by the
arbitrator in the given facts and circumstances and held in para
52   of  National   Insurance   Co.   Ltd.  Vs.  Boghara   Polyfab
Private Limited (supra) as follows:­
“52. Some   illustrations   (not   exhaustive)   as   to   when
claims are arbitrable and when they are not, when
discharge of contract by accord and satisfaction are
disputed, to round up the discussion on this subject
are:
(i) A claim is referred to a conciliation or a pre­litigation
Lok   Adalat.   The   parties   negotiate   and   arrive   at   a
settlement. The terms of settlement are drawn up and
signed   by   both   the   parties   and   attested   by   the
conciliator or the members of the Lok Adalat. After
settlement by way of accord and satisfaction, there can
be no reference to arbitration.
(ii) A claimant makes several claims. The admitted or
undisputed claims are paid. Thereafter negotiations are
held for settlement of the disputed claims resulting in
an agreement in writing settling all the pending claims
and disputes. On such settlement, the amount agreed
is   paid   and   the   contractor   also   issues   a   discharge
voucher/no­claim   certificate/full   and   final   receipt.
After the contract is discharged by such accord and
satisfaction,   neither   the   contract   nor   any   dispute
survives   for   consideration.   There   cannot   be   any
reference of any dispute to arbitration thereafter.
(iii) A contractor executes the work and claims payment
of say rupees ten lakhs as due in terms of the contract.
The   employer   admits   the   claim   only   for   rupees   six
lakhs and informs the contractor either in writing or
12
orally   that   unless   the   contractor   gives   a   discharge
voucher   in   the   prescribed   format   acknowledging
receipt of rupees six lakhs in full and final satisfaction
of the contract, payment of the admitted amount will
not be released. The contractor who is hard­pressed for
funds and keen to get the admitted amount released,
signs on the dotted line either in a printed form or
otherwise, stating that the amount is received in full
and final settlement. In such a case, the discharge is
under   economic   duress   on   account   of   coercion
employed by the employer. Obviously, the discharge
voucher cannot be considered to be voluntary or as
having resulted in discharge of the contract by accord
and satisfaction. It will not be a bar to arbitration.
(iv) An insured makes a claim for loss suffered. The
claim is neither admitted nor rejected. But the insured
is   informed   during   discussions   that   unless   the
claimant gives a full and final voucher for a specified
amount (far lesser than the amount claimed by the
insured),  the  entire claim  will  be  rejected.  Being  in
financial   difficulties,   the   claimant   agrees   to   the
demand and issues an undated discharge voucher in
full and final settlement. Only a few days thereafter,
the admitted amount mentioned in the voucher is paid.
The   accord   and   satisfaction   in   such   a   case   is   not
voluntary but under duress, compulsion and coercion.
The   coercion   is   subtle,   but   very   much   real.   The
“accord”   is   not   by   free   consent.   The   arbitration
agreement can thus be invoked to refer the disputes to
arbitration.
(v) A claimant makes a claim for a huge sum, by way of
damages.   The   respondent   disputes   the   claim.   The
claimant who is keen to have a settlement and avoid
litigation, voluntarily reduces the claim and requests
for settlement. The respondent agrees and settles the
claim and obtains a full and final discharge voucher.
Here   even   if   the   claimant   might   have   agreed   for
settlement   due   to   financial   compulsions   and
commercial pressure or economic duress, the decision
was his free choice. There was no threat, coercion or
compulsion by the respondent. Therefore, the accord
and satisfaction is binding and valid and there cannot
be any subsequent claim or reference to arbitration.”
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14. It is true that there cannot be a rule of thumb and each
case has to be looked into on its own facts and circumstances,
taking note of the broad principles, it was observed by this Court
in  Union   of   India  and  Others  Vs.  Master   Construction   Co.
2011(12) SCC 349 at para 18 as under:­
“18. In our opinion, there is no rule of the absolute
kind.   In a case where the claimant contends that a
discharge   voucher   or   no­claim   certificate   has   been
obtained by fraud, coercion, duress or undue influence
and the other side contests the correctness thereof, the
Chief Justice/his designate must look into this aspect
to find out at least, prima facie, whether or not the
dispute is bona fide and genuine.  Where the dispute
raised by the claimant with regard to validity of the
discharge voucher or no­claim certificate or settlement
agreement,   prima   facie,   appears   to   be   lacking   in
credibility, there may not be a necessity to refer the
dispute for arbitration at all.”
15. From the proposition which has been laid down by this
Court, what reveals is that a mere plea of fraud, coercion or
undue influence in itself is not enough and the party who alleged
is under obligation to prima facie establish the same by placing
satisfactory material on record before the Chief Justice or his
Designate to exercise power under Section 11(6) of the Act, which
has been considered by this Court in  New   India   Assurance
Company Ltd. case (supra) as follows:­
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“9.  It is therefore clear that a bald plea of fraud,
coercion, duress or undue influence is not enough
and the party who sets up a plea, must prima
facie establish the same by placing material before
the Chief Justice/his designate…..”
16. In the instant case averment was made for the first time
after 11 weeks of the settlement of claim & release of discharge
voucher   in   the   petition   filed   by   the   respondent   seeking
appointment   of   Arbitrator   of   undue   influence/coercion   being
used by the appellant in signing the papers on dotted lines is
reproduced as under:­
“xiii. It is stated that the Respondent occupying a
bargaining position as an Insurer coerced and forced
the Petitioner to sign on dotted lines on a Pre­signed
Standard   Discharge   Voucher.     The   petitioner   facing
severe financial distress gave in to the pressure tactics
of the Respondent and was made to sign a purported
Discharge Voucher dated 24.06.2016 for an amount of
Rs.   2,20,36,840/­(Rupees   Two   Crore   Twenty   Lakhs
Thirty Six Thousand, Eight Hundred Forty Only) as
against the Claim of Rs. 5,12,49,241/­ (Rupees Five
Crore Twelve Lakhs Forty Nine Thousand Two Hundred
Forty   One   Only)   as   a   pre­condition   for   release   of
money.
xvii. It is stated that Petitioner vide its Letter dated
27.07.2016   rescinded   the   purported   Discharge
Voucher as illegal and void as it was forced on coerced
into signing the same in the face of extreme financial
duress.     The   petitioner   vide   the   said   letter   dated
27.07.2016   called   upon   the   Respondent   to   pay   the
balance   amount   of   Rs.   2,92,12,401/­   (Rupees   Two
Crore   Ninety   Two   Lakhs   Twelve   Thousand   Four
Hundred and One Only) on account of loss suffered by
the  petitioner  as  result   of  fire.    The   petitioner  also
claimed an interest @ 18% per annum from the date of
incident as well as on the paid amount till date of
payment i.e. up to 06.07.2016.”
15
17. It is true that there cannot be a rule of its kind that mere
allegation   of   discharge   voucher   or   no   claim   certificate   being
obtained by fraud/coercion/undue influence practised by other
party   in   itself   is   sufficient   for   appointment   of   the   arbitrator
unless the claimant who alleges that execution of the discharge
agreement or no claim certificate was obtained on account of
fraud/coercion/undue influence practised by the other party is
able to produce prima facie evidence to substantiate the same,
the correctness thereof may be open for the Chief Justice/his
Designate to look into this aspect to find out at least prima facie
whether the dispute is bonafide and genuine in taking a decision
to invoke Section 11(6) of the Act.
18. In the instant case, the facts are not in dispute that for the
two incidents of fire on 25th September, 2013 and 25th October,
2013, the appellant Company based on the Surveyor’s report sent
e­mails on 5th May, 2016 & 24th June, 2016 for settlement of the
claims for both the fires dated 25th  September, 2013 and 25th
October, 2013 which was responded by the respondent through
e­mail   on   the   same   date   itself   providing   all   the   necessary
16
information   to   the   Regional   Office   of   the   Company   and   also
issued   the   discharge   voucher   in   full   &   final   settlement   with
accord   and   satisfaction.     Thereafter,   on   12th  July,   2016,   the
respondent desired certain information with details that too was
furnished and for the first time on 27th July, 2016, it took a Uturn and raised a voice of undue influence/coercion being used
by the appellant stating that being in financial distress left with
no   option   than   to   proceed   to   sign   on   the   dotted   lines.     As
observed, the phrase in itself is not sufficient unless there is a
prima facie evidence to establish the allegation of coercion/undue
influence, which is completely missing in the instant case.
19. In the given facts and circumstances, we are satisfied that
the   discharge   and   signing   the   letter   of   subrogation   was   not
because of any undue influence or coercion as being claimed by
the   respondent   and   we   find   no   difficulty   to   hold   that   upon
execution of the letter of subrogation, the claim was settled with
due accord and satisfaction leaving no arbitral dispute to be
examined by an Arbitrator to be appointed under Section 11(6) of
the Act.
17
20. The submission of the learned counsel for the respondent
that   after   insertion   of   sub­section   (6A)   to   Section   11   of
Amendment Act, 2015 the jurisdiction of this Court is denuded
and the limited mandate of the Court is to examine the factum of
existence of an arbitration and relied on the judgment in Duro
Felguera S.A. Vs. Gangavaram Port Limited 2017(9) SCC 729.
The exposition in this decision is a general observation about the
effect of the amended provisions which came to be examined
under reference to six arbitrable agreements (five agreements for
works   and   one   corporate   guarantee)   and   each   agreement
contains a provision for arbitration and there was serious dispute
between   the   parties   in   reference   to   constitution   of   Arbitral
Tribunal whether there has to be Arbitral Tribunal pertaining to
each agreement.  In the facts and circumstances, this Court took
note of sub­section (6A) introduced by Amendment Act, 2015 to
Section   11   of  the   Act   and  in   that   context   observed  that  the
preliminary disputes are to be examined by the arbitrator and are
not   for   the   Court   to   be   examined   within   the   limited   scope
available for appointment of arbitrator under Section 11(6) of the
Act.   Suffice it to say that appointment of an arbitrator is a
judicial power and is not a mere administrative function leaving
18
some   degree   of   judicial   intervention   when   it   comes   to   the
question to examine the existence of a prima facie arbitration
agreement, it is always necessary to  ensure that  the dispute
resolution process does not become unnecessarily protracted.
21. In the instant case, prima facie no dispute subsisted after
the discharge voucher being signed by the respondent without
any demur or protest and claim being finally settled with accord
and satisfaction and after 11 weeks of the settlement of claim a
letter was sent on 27th July, 2016 for the first time raising a voice
in the form of protest that the discharge voucher was signed
under undue influence and coercion with no supportive prima
facie evidence being placed on record in absence thereof, it must
follow   that   the   claim   had   been   settled   with   accord   and
satisfaction   leaving   no   arbitral   dispute   subsisting   under   the
agreement to be referred to the Arbitrator for adjudication.
22. In our considered view, the High Court has committed a
manifest error in passing the impugned order and adopting a
mechanical   process   in   appointing   the   Arbitrator   without   any
supportive evidence on record to prima facie substantiate that an
19
arbitral dispute subsisted under the agreement which needed to
be referred to the arbitrator for adjudication.
23. Consequently, the appeals are allowed and the order passed
by the High Court is accordingly set aside.  No costs.
24. Pending application(s), if any, also stand disposed of.
…………………………J.
(A.M. KHANWILKAR)
…………………………J.
(AJAY RASTOGI)
NEW DELHI
March 28, 2019
20

the expression ‘total turnover’ has been referred to for the purpose of identification/classification of dealers for prescribing various rates/slabs of tax leviable to the dealer and read with first and second proviso to Section 6­B(1), this makes the intention of the legislature clear and unambiguous that except the deductions provided under the first proviso to Section 6­B(1) nothing else can be deducted from the total turnover as defined under Section 2(u­2) for the purpose of levy of turnover tax under Section 6­B of the Act. The submission of learned counsel for the appellant that the ‘total turnover’ in Section 6­B(1) is to be read as ‘taxable turnover’ and the determination of the rate of the turnover tax is to be ascertained on the ‘taxable turnover’ on the face of it is unsustainable and deserves outright rejection.

REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO(s). 4837 OF 2011
M/s. ACHAL INDUSTRIES .…..Appellant(s)
VERSUS
STATE OF KARNATAKA ….Respondent(s)
WITH
CIVIL APPEAL NO(s). 4838 OF 2011
J U D G M E N T
Rastogi, J.
The   present   appeals   have   been   preferred   against   the
impugned judgment dated 17th  April, 2007 passed by the High
Court of Karnataka disposing of the Sales Tax Revision Petition
examining the applicability of the turnover tax as defined under
1
Section 6­B(1) by the Karnataka Sales Tax Act, 1957(hereinafter
being referred to as “KST Act”).
2. The brief facts of the case which may be relevant for the
present purpose are that the appellant is a manufacturer and
registered  dealer of  the  cashew  kernels  cashew shell  oil, etc.
Assessments were made for the years 1990­91 to 1999­2000 by
the respective assessing authorities under Section 12(3) of the
Act.  Against the assessment orders of the assessing authorities,
appeals/revision   petitions   were   preferred   before   the
appellate/revisional authority and the contention advanced by
the learned counsel for the appellant was that levy of tax under
Section 6­B of the Act, on the total turnover is a misconstruction
of the provision and it has to be on the “taxable turnover” which
may be in conformity with Article 286 of the Constitution of India
but that was neither accepted by the assessing authority nor at
the appellate/revisional stage against which the present appeals
have been preferred impugning the assessments made for the
years 1990­91 to 1999­2000 in the instant appeals.
2
3. The main thrust of the submission of Mr. Mohit Chaudhary,
learned   counsel   for   the   appellant   is   that   Courts   below   have
manifestly   erred   in   appreciating   that   the   ‘total   turnover’   as
defined under Section 6­B(1) for the purpose of levy turnover tax
can in no event include the ‘turnover’ with reference to which the
State has no power to levy tax under the constitutional scheme
and the submission proceeds that the levy of tax under Section
6­B can be on the ‘taxable turnover’ alone.   Though the first limb
of the Section has adopted the word ‘total turnover’ but it is only
for the limited purpose of identifying the dealers and further
submits that the ‘turnover’ which is not liable to tax under the
provisions of the Act, cannot be included in the calculation of
‘total turnover’ for the purpose of assessment of turnover tax and
that   is   according   to   him   the   basic   error   which   has   been
committed in interpreting Section 6­B(1) of the KST Act. 
4. Learned counsel submits that the interpretation which has
been advanced by the respondent State if taken at its face value,
would amount to permitting the State to indirectly levy turnover
tax on part of a dealer’s total turnover which is non exigible to
3
intra   sales   tax   and   indeed   would   be   beyond   the   legislative
competence of the State.
5. Learned   counsel   further   submits   that   although   the
constitutional validity of the provision has been upheld but still
open to the Court to read down the provision in a manner that it
do not offend the Constitutional scheme.   The concept of ‘total
turnover’  has  been  incorporated  under  Section  6­B(1)  for  the
purpose   of   identification   of   the   dealers   and   for   prescribing
rate/slabs and the actual levy is intended only on intra­state
turnover   by   reason   of   the   proviso,   it   may   be   within   the
competence of the State Legislature.  In support of submission,
learned counsel has placed reliance on the decision of this Court
in Indra Das Vs. State of Assam 2011(3) SCC 380 and Rakesh
Kumar Paul Vs. State of Assam 2017(15) SCC 67.
6. Per contra, Mr. Devadatt Kamat, learned AAG appearing for
the   respondent   State   submits   that   the   issue   in   the   instant
appeals   stands   conclusively   answered   by   this   Court   in  M/s.
Hoechst Pharmaceuticals Ltd. and Others Vs. State of Bihar
4
and Others 1983(4) SCC 45 and further submits that once the
constitutional validity of Section 6­B has been upheld by the
jurisdictional High Court in the series of decisions, wherein the
challenge to Section 6­B(1) offending Article 14 and 19(1)(g) of the
Constitution of India regarding the classification of dealers being
repelled and it was held that the inclusion of inter­state export
and import turnover is only for the purpose of identifying dealers
and not for levying tax, that was within the competence of the
State Legislature.   This Court has explained in  M/s.   Hoechst
Pharmaceuticals   Ltd.   and   Others  Vs.  State   of   Bihar   and
Others(supra) to reiterate the principle of economic superiority
for the purpose of levying turnover tax. 
7. Learned counsel for the respondent State further submits
that   in   the   instant   case,   the   appellant   filed   returns   for   the
assessment years in question claiming certain deductions.  When
such returns were assessed by the assessing authorities, it was
noticed that as far as the determination of the rate at which
‘turnover tax’ was to be levied, the dealer has made incorrect
deductions and in turn has furnished returns at a lower rate.
5
Upon assessment, the assessing authority determined the actual
slab applicable to the assessee for each assessment year and
levied the turnover tax accordingly and it is in conformity with
Section 6­B(1) of the KST Act. 
8. Before   we   proceed   to   examine   the   question   raised   any
further, it will be relevant to note the pre­amendment (1st April,
2000) of the KST Act, as under:­
“2. Definitions. – (1) In this Act, unless the context
otherwise requires, ­­
…
“(u) "tax" means a tax leviable under the provisions of
this Act;
 [(u­1) "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 inter­State 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;
(u­2) "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 inter­State 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
6
others, whether for cash or for deferred payment or
other valuable consideration;
….
[6­B.   Levy   of   Turnover   Tax.­  [(1)   [Every   registered
dealer and every dealer who is liable to get himself
registered under sub­sections (1) and (2) of Section 10]
whose total turnover in a year is not less than [ten
lakh] rupees 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 a quarter per cent of his total
turnover, if his total turnover is not less than ten lakh
rupees but is less than two hundred lakh rupees in a
year; or
(ii) at the rate of one and three­fourths per cent of his total
turnover,   if   his   total   turnover   is   not   less   than   two
hundred lakh rupees [but is less than five hundred
lakh rupees in a year; or]
(iii) at the rate of [two and three fourth per cent] of his total
turnover,   if   his   total   turnover   is   not   less   than   five
hundred lakh rupees in a year]:
Provided that no tax under this sub­section shall
be payable on that part of such turnover which relates
to,­
(i) sale   or   purchase   of   goods   specified   in   the   Fifth
Schedule;
(ii) sale   or   purchase   of   good   specified   in   the   Fourth
Schedule;
(iii) sale or purchase of goods in the course of inter­State
trade or commerce;
….
Provided further that save as otherwise provided
in this sub­section, no other deduction shall be made
7
from the total turnover of a dealer for the purposes of
this Section.”
9. The expression “total turnover” + “turnover” which has been
used under Section 6­B has the same meaning as defined under
Section 2(1)(u­2) and 2(v) of the Act.  It may be further noticed
that under Section 6­B, reference is made on ‘total turnover’ and
not the ‘turnover’ as defined under Section 2(v) of the KST Act
and taking note of the exemption provided under first proviso
clause(iii), exclusion has been made in reference to use of sale or
purchase of goods in the course of inter­state trade or commerce.
It clearly indicates that the expression ‘total turnover’ which has
been incorporated as referred to under Section 6­B(1) is for the
purpose   of   identification   of   the   dealers   and   for   prescribing
different rates/slabs.  The first proviso to Section 6­B(1) provides
an   exhaustive   list   of   deductions   which   are   to   be   made   in
computation   of   such   turnover   with   a   further   stipulation   as
referred to in second proviso that except for the manner provided
for in Section 6­B(1), no other deduction shall be made from the
total turnover of a dealer.
8
10. This Court, in  M/s.  Hoechst  Pharmaceuticals  Ltd.  and
Others case(supra), while examining the pari meteria provision of
sub­Section   (1)   of   Section   5   of   the   Bihar   Finance   Act   which
provides for levy of surcharge on gross turnover in relation to the
tax payable in reference to Article 286 of the Constitution of India
read   with   Entry   54   under   List   II   of   Seventh   Schedule   into
consideration held as under:­
90. The decision in Fernandez case [AIR 1957 SC 657]
is therefore clearly an authority for the proposition that
the State Legislature notwithstanding Article 286 of the
Constitution while making a law under Entry 54 of List
II of the Seventh Schedule can, for purposes of the
registration of a dealer and submission of returns of
sales tax, include the transactions covered by Article
286   of   the   Constitution.   That   being   so,   the
constitutional validity of sub­section (1) of Section 5 of
the Act which provides for the classification of dealers
whose gross turnover during a year exceeds Rs 5 lakhs
for the purpose of levy of surcharge, in addition to the
tax payable by him, is not assailable. So long as sales
in the course of inter­State trade and commerce or
sales   outside   the   State   and   sales   in   the   course   of
import into, or export out of the territory of India are
not   taxed,   there   is   nothing   to   prevent   the   State
Legislature   while   making   a   law   for   the   levy   of   a
surcharge under Entry 54 of List II of the Seventh
Schedule to take into account the total turnover of the
dealer within the State and provide, as has been done
by sub­section (1) of Section 5 of the Act, that if the
gross turnover of such dealer exceeds Rs 5 lakhs in a
year,   he   shall,   in   addition   to   the   tax,   also   pay   a
surcharge at such rate not exceeding 10 per centum of
the   tax   as   may   be   provided.   The   liability   to   pay   a
surcharge is not on the gross turnover including the
transactions   covered   by   Article   286   but   is   only   on
inside sales and the surcharge is sought to be levied on
9
dealers who have a position of economic superiority.
The definition of gross turnover in Section 2(j) of the
Act   is   adopted   not   for   the   purpose   of   bringing   to
surcharge inter­state sales or outside sales or sales in
the course of import into, or export of goods out of the
territory   of   India,   but   is   only   for   the   purpose   of
classifying dealers within the State and to identify the
class   of   dealers   liable   to   pay   such   surcharge.   The
underlying object is to classify dealers into those who
are economically superior and those who are not. That
is to say, the imposition of surcharge is on those who
have the capacity to bear the burden of additional tax.
There   is   sufficient   territorial   nexus   between   the
persons sought to be charged and the State seeking to
tax  them.   Sufficiency   of   territorial  nexus   involves   a
consideration of two elements viz.: (a) the connection
must   be   real   and   not   illusory,   and   (b)   the   liability
sought   to   be   imposed   must   be   pertinent   to   that
territorial   connection: State   of   Bombay v.R.M.D.
Chamarbaugwala [AIR 1957 SC 699], Tata Iron & Steel
Co.   Ltd. v. State   of   Bihar[(1958)   SCR   1355]
and International   Tourist   Corporation v. State   of
Haryana [(1981) 2 SCC 318].  The gross turnover of a
dealer   is   taken   into   account   in   sub­section   (1)   of
Section 5 of the Act for the purpose of identifying the
class of dealers liable to pay a surcharge not on the
gross turnover but on the tax payable by them.
11. This Court also noticed the economic superiority principle
for the purpose of levy of turnover tax while holding that the
interpretation of statute would not depend upon contingency.  It
is trite law which the Court would ordinary take recourse to
golden   rule   of   strict   interpretation   while   interpreting   taxing
statutes.  In construing penal statutes and taxation statutes, the
Court has to apply strict rule of interpretation and this is what
10
has   been   considered   by   this   Court   in  Commissioner   of
Customs(Import), Mumbai Vs. Dilip Kumar and Company and
Others 2018(9) SCC 1 in para 24 and 34 as under:­
“24. In   construing   penal   statutes   and   taxation
statutes,   the   Court   has   to   apply   strict   rule   of
interpretation.   The   penal   statute   which   tends   to
deprive a person of right to life and liberty has to be
given   strict   interpretation   or   else   many   innocents
might   become   victims   of   discretionary   decisionmaking.  Insofar  as  taxation  statutes   are  concerned,
Article 265 of the Constitution prohibits the State from
extracting tax from the citizens without authority of
law. It is axiomatic that taxation statute has to be
interpreted strictly because the State cannot at their
whims   and   fancies   burden   the   citizens   without
authority of law. In other words, when the competent
Legislature   mandates   taxing   certain   persons/certain
objects   in   certain   circumstances,   it   cannot   be
expanded/interpreted to include those, which were not
intended by the legislature.
34. The passages extracted above, were quoted with
approval   by   this   Court   in   at   least   two   decisions
being CIT v. Kasturi and Sons Ltd. (1999) 3 SCC 346
and State of W.B. v. Kesoram Industries Ltd. (2004) 10
SCC   201   (hereinafter   referred   to   as   “Kesoram
Industries case”, for brevity). In the later decision, a
Bench of five Judges, after citing the above passage
from   Justice   G.P.   Singh's   treatise,   summed   up   the
following principles applicable to the interpretation of a
taxing statute:
“(i)   In   interpreting   a   taxing   statute,   equitable
considerations   are   entirely   out   of   place.   A   taxing
statute cannot be interpreted on any presumption or
assumption. A taxing statute has to be interpreted in
the light of what is clearly expressed; it cannot imply
anything   which   is   not   expressed;   it   cannot   import
provisions in the statute so as to supply any deficiency;
11
(ii) Before taxing any person, it must be shown that he
falls within the ambit of the charging section by clear
words used in the section; and (iii) If the words are
ambiguous and open to two interpretations, the benefit
of interpretation is given to the subject and there is
nothing unjust in a taxpayer escaping if the letter of
the   law   fails   to   catch   him   on   account   of   the
legislature's failure to express itself clearly.”
12. In the instant scheme of the Act of which reference has been
made in detail, the expression ‘total turnover’ has been referred
to for the purpose of identification/classification of dealers for
prescribing various rates/slabs of tax leviable to the dealer and
read with first and second proviso to Section 6­B(1),  this makes
the   intention   of   the   legislature   clear   and   unambiguous   that
except the deductions provided under the first proviso to Section
6­B(1) nothing else can be deducted from the total turnover as
defined under Section 2(u­2) for the purpose of levy of turnover
tax under Section 6­B of the Act. 
13. The submission of learned counsel for the appellant that the
‘total   turnover’   in   Section   6­B(1)   is   to   be   read   as   ‘taxable
turnover’ and the determination of the rate of the turnover tax is
to be ascertained on the ‘taxable turnover’ on the face of it is
unsustainable and deserves outright rejection.
12
14. The   judgments   on   which   learned   counsel   has   placed
reliance in Indra Das Vs. State of Assam (supra) is in context of
the fundamental rights in reference to the provisions of Terrorists
&   Disruptive   Activities   (Prevention)   Act,   1987,   and   it   was
observed that the endeavour of the court should be to try to
sustain the validity of the statute by reading it down as possible.
15. The judgment in  Subramanian   Swamy   and   others  Vs.
Raju through  Member,  Juvenile  Justice Board and Another
2014(8) SCC 390 was in reference to a challenge to the validity of
the Juvenile Justice(Care and Protection of Children) Act, 2000.
Though the validity was repelled by this Court, the doctrine of
‘reading down’ was discussed.  It was held to be inapplicable in
the facts of the said case.
16. In  Rakesh  Kumar  Paul  Vs.  State  of  Assam(supra), this
Court has examined the interpretation of Section 167(2) of the
Code of Criminal Procedure, 1973 which has a reference to the
liberty of a citizen.  Either of the cases referred to may not have
any remote relevance to the question which has come up before
us for consideration.
13
17. Consequently,   in   our   considered   view,   the   appeals   are
without substance and the same are dismissed accordingly.  No
costs.
18. Pending application(s), if any, stand disposed of.
…………………………J.
(A.M. KHANWILKAR)
………………………….J.
(AJAY RASTOGI)
NEW DELHI
March 28, 2019
14