“10B. Notwithstanding anything contained in section 10 or section 10A, the State Government shall release from requisition any property requisitioned or deemed to be requisitioned under this Act on or before the expiry of a period of twenty-five years from the date of such requisition: Provided that the benefit of this section shall not be available until after the expiry of a period of five years from the date of coming into force of the West Bengal Premises Requisition and Control (Temporary Provisions) (Second Amendment) Act, 1986.”

 “10B. Notwithstanding anything contained in section 10 or section 10A, the State Government shall release from requisition any property requisitioned or deemed to be requisitioned under this Act on or before the expiry of a period of twenty-five years from the date of such requisition: Provided that the benefit of this section shall not be available until after the expiry of a period of five years from the date of coming into force of the West Bengal Premises Requisition and Control (Temporary Provisions) (Second Amendment) Act, 1986.”

REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NOS. 738-739 OF 2021

 (Arising out of SLP (C) Nos. 9834-9835 of 2020)

PUNALUR PAPER MILLS LTD. …APPELLANT

Versus

WEST BENGAL MINERAL DEVELOPMENT

AND TRADING CORPORATION LTD. & ORS. ...RESPONDENTS

WITH

CIVIL APPEAL NOS. 740-741 OF 2021

 (Arising out of SLP (C) Nos.9837-9838 of 2020)

AND

CIVIL APPEAL NOS. 742-744 OF 2021

 (Arising out of SLP (C) Nos.10581-10583 of 2020)

J U D G M E N T

R.F. Nariman, J.

1. Leave granted.

2. In the facts of these appeals, the entire second floor of premises no. 13,

Nellie Sengupta Sarani (Lindsay Street), Calcutta [“the Premises”],

1

measuring approximately 7500 square feet, owned by Punalur Paper

Mills Ltd. [“Appellant”], was requisitioned under the West Bengal

Premises Requisition And Control (Temporary Provisions) Act, 1947

[“West Bengal Requisition Act”] on 16.08.1973. Pursuant to certain

judgments of this Court, section 10B was inserted in the West Bengal

Requisition Act by way of an amendment on 31.03.1987. The said

section reads as follows:

“10B. Notwithstanding anything contained in section 10 or

section 10A, the State Government shall release from

requisition any property requisitioned or deemed to be

requisitioned under this Act on or before the expiry of a

period of twenty-five years from the date of such requisition:

Provided that the benefit of this section shall not be

available until after the expiry of a period of five years from

the date of coming into force of the West Bengal Premises

Requisition and Control (Temporary Provisions) (Second

Amendment) Act, 1986.”

3. As a result of the operation of section 10B of the West Bengal

Requisition Act, any property requisitioned under the Act had to be

released by the State Government on or before the expiry of a period

of 25 years from the date of requisition. For the Premises, this 25-year

period ended on 15.08.1998, obligating the State to release the

Premises. It is common ground between the parties that the Premises

was not in fact released and physical possession remained with the

2

West Bengal Mineral Development and Trading Corporation Ltd.

[“WBMDTCL”].

4. Subsequent to the lapse of such period, by way of a notification under

section 4 of the Land Acquisition Act, 1894 [“Land Acquisition Act”],

published on 12.08.1999, the Premises was sought to be acquired for

the public purpose of providing the permanent office accommodation

of WBMDTCL. This notification of 12.08.1999 was challenged in Writ

Petition No. 1045 of 2000 filed on 18.04.2000 before the High Court of

Calcutta by the Appellant, who owned the said Premises. It may also

be mentioned that Writ Petition No. 1042 of 2000 was also filed by the

Appellant on 17.04.2000, seeking handover of vacant possession of

the Premises since the 25-year period prescribed by section 10B of

the West Bengal Requisition Act had ended.

5. By an order dated 22.06.2000, in Writ Petition No. 1042 of 2000, a

learned Single Judge of the High Court of Calcutta held as follows:

“The learned counsel Mr. Bhattacharji appearing on behalf

of the Respondent no. 4 as well as the learned counsel Mr.

Dutt appearing on behalf of the State submitted that three

months time should be granted to the Respondent no. 4 to

vacate the premises in question without prejudice to its

rights to take such appropriate legal steps as are available

to it to acquire the property in question, accordingly such an

order is passed with the consent of the learned counsel

appearing for the petitioners. The learned counsel have

also submitted that [insofar] as the compensation is

3

concerned the same may be decided by the Court on

materials to be placed by them by filing separate affidavit.

Let such affidavit be filed within three weeks from the date,

reply, if any, within two weeks thereafter with liberty to

mention the matter before me as and when I will be sitting

singly.

The writ petition is kept alive only for the purpose of

determination of the amount of compensation to be paid by

the Respondent No. 4 to the Writ Petitioner for occupying

the property in question subsequent to coming to an end of

the order of requisition until delivery of possession thereof

is effected in terms of this order. This order has been

passed by consent of all the parties and the counsel

appearing for parties have signed a copy of the same in

acknowledgement thereof and the same is kept with the

record.”

6. On the same day, in Writ Petition No.1045 of 2000, the Single Judge

passed the following order:

“The interim order already granted is vacated as the

learned counsel for the petitioner does not press for

continuation of the same after having seen the newspaper

publication of the notification in question. It is made clear

that Court has not decided any issue in the instant writ

petition.

Affidavit-in-opposition to this writ petition shall be filed

[in] 3 (three) weeks from date, reply, if any, within 2 (two)

weeks thereafter and liberty to mention the matter before

the appropriate Bench.

All parties to act on a signed copy of this dictated order

on the usual undertaking.”

4

7. Without pursuing the section 4 notification of 12.08.1999, another

notification for the same property was issued on 04.08.2000, under

section 4 of the Land Acquisition Act, this time invoking the urgency

provision under section 17(4) thereof, as follows:

“In exercise of the powers conferred by Sub-Section (4) of

Section 17 of the Land Acquisition Act, 1894 (Act I of 1894),

the Governor is pleased to direct that the provisions of

Section 5A of the Act shall not apply to the lands as

described in the schedule above to which in the opinion of

the Governor, the provisions of Sub-section (1) of Section

17 of the said Act are applicable”

8. A declaration under section 6 of the Land Acquisition Act soon followed,

on 11.08.2000. These two notifications became the subject of

challenge in Writ Petition No. 3003 of 2000 filed by the Appellant on

05.09.2000, on the ground that the urgency provision was improperly

invoked, and thus the composite notification dated 04.08.2000, under

section 4 read with section 17 of the Land Acquisition Act, would have

to be set aside.

9. A learned Single Judge of the High Court of Calcutta, by an order dated

16.01.2017, disposed of all three writ petitions, namely, Writ Petition

Nos. 1042, 1045 and 3003 of 2000. The learned Single Judge, noting

that the urgency provision had wrongly been invoked in the facts of

this case, followed the judgments of this Court and struck down the

composite notification under section 4 read with section 17 of the Land

5

Acquisition Act, dated 04.08.2000. Consequently, he directed

WBMDTCL to vacate the Premises within three months and handover

vacant possession to the Appellant.

10. On appeal, the learned Single Judge’s judgment and order dated

16.01.2017 was set aside by consent of the parties, and the writ

petitions were to be heard de novo in the six different appeals that

were filed by the Land Acquisition Collector, WBMDTCL and the First

Land Acquisition Collector. As a result, a de novo hearing of the writ

petitions was taken up by the Division Bench of the High Court of

Calcutta, which passed the impugned judgment and order dated

30.09.2019. After setting out the facts of this case, the questions that

the Division Bench put to itself were as follows:

“5. After hearing the rival contentions and considering the

materials on record, we are of the view that the moot

questions to be considered while disposing of the three writ

petitions and the six appeals arising therefrom are as

follows:

a. After the expiry of 25 years from the date of

requisition, were the appellants liable to vacate

the requisitioned property being the said

property?

b. Is respondent / writ petitioner no. 1 entitled to

any compensation on WBMDTCL having

overstayed at the said property after expiry of 25

years from the date?

c. In the facts of the instant case, could the said

respondents acquire the said property by

6

applying the special powers in case of urgency

as provided in section 17 of the 1894 Act

particularly when they had proceeded to acquire

the property by following the normal method and

had in fact given a notice under section 4 of the

1894 Act on 12th August, 1999?

d. Could the right of objection available to the

respondent / writ petitioner no.1 be taken away in

the facts and circumstances of the instance

case?”

11. The Division Bench held:

“6. We take up the two issues together as they are interrelated in the instant case. A conjoined reading of the letters

dated 25th March, 1997 issued by WBMDTCL and 23rd

September, 1997 issued by the Land Acquisition Collector,

it will appear that both the State and the WBMDTCL were

aware of the fact that on completion of 25 years from the

date of requisition, the requisitioned property had to be

released from requisition and had to be vacated. The

provisions of section 10B of the said Act also say so and,

as such, in the letter dated 23rd September, 1997, the Land

Acquisition Collector had specifically indicated that the

requiring body has to vacate possession after completion of

25 years of requisition. Despite such specific knowledge,

WBMDTCL did not vacate the said property on expiry of

15th August, 1998. The said State / respondents who had

requisitioned the property also did not take any step to have

the said property released of the requisition and possession

be returned to the owner of the same.

It also appears that WBMDTCL have been enjoying the

said property without paying any money for the same

subsequent to the expiry of 25 years.”

7

12. Referring to the order of the Single Judge dated 22.06.2000, the

Division Bench then went on to hold:

“It further appears that on 22nd June, 2000 at the invitation

of the State / respondents and WBMDTCL, an order was

passed giving three months’ time to vacate the said

property with the consent of the petitioner. It will also

appear that the compensation to be paid by the WBMDTCL

(respondent no.4 in the said writ petition) to the writ

petitioner for occupying the property in question

subsequent to coming to an end of the order of requisition

until delivery of possession thereof was left to be decided

by the Court. The writ petition being WP No.1042 of 2000

was kept alive only for the purpose of determining the

amount of such compensation. Affidavits were invited and

from the gamut of the said order dated 22nd June, 2000, it

is evident that the affidavits were called for also for the

purpose of determining the compensation. It will also

appear from the said order that the order to vacate the said

property was without prejudice to the rights of the State to

take such appropriate legal steps as available to it to

acquire the property in question. At the time when the said

order dated 22nd June, 2000 was passed, the section 4

notification and the objection under the provisions of

section 5A were already on record. The Court was

conscious about the same. The order thereof has to be

interpreted that the said property had to be vacated within a

period of three months from the date of the order and at the

same time, there was no embargo on the part of the State

to proceed with the acquisition. The view in favour of such

interpretation of the order dated 22nd June, 2000 is further

emboldened from another order, also passed on the same

day in WP No.1045 of 2000 when the Court vacated the

interim order earlier passed staying the hearing of the

objection filed by the respondent / writ petitioner no.1 in

terms of the provisions of section 5A of the 1894 Act. It is,

8

therefore, apparent that the Court while passing the two

orders had clearly meant that WBMDTCL had to vacate the

premises within three months from 22nd June, 2000 and, at

the same time, the State Authorities were free to proceed

with the acquisition proceeding initiated by publication of

the section 4 notice on 12th August, 1999 after hearing out

the objection filed by respondent / writ petitioner under the

provisions of section 5A of the 1894 Act.”

13. After referring to some of the judgments of this Court, the Division

Bench then concluded:

“13. The findings in these judgments, therefore, clearly

answer the question of the scope of judicial review raised

by the appellants. In the instant case, the property was

requisitioned in the year 1973 until a few months prior to

expiry of the 25 years period; no request was made for rerequisitioning of the property. Receiving such request as

discussed hereinabove, the State / respondents gave a firm

view that the property has to be vacated on expiry of the

period of 25 years and the same cannot be re-requisitioned.

However, the State expressed a view that the property can

be acquired if a request to that effect is made. The State /

respondents, thereafter, proceeded to acquire the property

without invoking the extraordinary power available to the

Government under section 17(1) read with section 17(4) of

the said Act. So it is clear that at the relevant point, the

Government did not form an opinion as to invoking of the

urgency clause. The Government, therefore, was of the

view that the acquisition proceedings could wait for few

months for completion of an enquiry under section 5A of the

1894 Act. This is also evident from the steps taken by the

Government on issuance of notice under section 4 and

inviting objections under section 5A of the 1894 Act. After

amendment to the said Act of 1947 made in 1986 with the

introduction of section 10B, it was known to the WBMDTCL

9

being the requiring body as also the Government that on

expiry of 25 years, the property was to be released from

requisition. Even if we consider that a five years gap for the

release of the property after 25 years was available under

the said Act that takes us to the year 1991. There was

ample time between 1991 and 1998 when the 25 years

came to an end to acquire the property in the normal

procedure by conducting an enquiry if the WBMDTCL or the

Government was so keen in maintaining the registered

office of WBMDTCL at the said property or for providing the

said property to maintain the registered office of WBMDTCL

thereat. No steps for acquiring the property were taken for

all these years. The acquisition proceeding too under the

normal mode was commenced on 10th / 12th August, 1999.

Pursuant to such notification, objection under section 5 was

invited and the same was filed by the respondent / writ

petitioner no.1. During the time when the hearing of the

objection of section 5A of the 1894 Act was kept pending,

the respondents / writ petitioners approached this Court by

filing two writ petitions being WP Nos.1042 and 1045 of

2000 in the month of April, 2000. So the challenge to the

notification under section 4 was made within a reasonable

time period from the publication of the notification. The fact

situation at that material point clearly established that no

case of urgency was in the mind of the Government. Only

after the order of 22nd June, 2000, was obtained at the

invitation of the State / respondents and the WBMDTCL,

the three months period to vacate the said premises was

used to invoke the extraordinary powers of urgency to

dispense with the enquiry under section 5A of the 1894

Act.”

“15. The facts of the instant case are also not such that the

acquisition could not brook the delay for even a few weeks

or months. That apart and in any event, using the order

dated 22nd June, 2000 as a fact situation to invoke the

urgency clause smacks of mala fides and is, as such,

10

vitiated. We, therefore, set aside the order of acquisition

invoking the provisions of section 17(1) read with section

17(4) of the 1894 Act. It is declared that the preliminary

notification under section 4 which was cancelled by

invoking the provisions of section 17(1) had stood lapsed

by efflux of time as no section 6 declaration followed within

a period of one year. This will, however, not prevent the

Government from initiating acquisition proceedings afresh,

if entitled to in law. The possession of the said property

should be vacated and possession thereof to be made over

to the respondents / writ petitioners within a period of three

months from date. These directions are peremptory.

16. The Chief Judge, City Civil Court at Calcutta shall also

assess the compensation / rent / occupational charges for

the period of 16th August, 1998 till the possession of the

said property is made over to the respondents / writ

petitioners. Section 11(1)(b) of the 1947 Act provides for the

same.

17. The writ petitions being WP Nos.1042, 1045 & 3003 of

2000 are disposed of in the light of the observations made

hereinabove.”

14. Ms. Liz Mathew, learned advocate appearing on behalf of the State of

West Bengal, assailed the impugned judgment of the Division Bench

by arguing that the order of the Single Judge dated 22.06.2000 had

made it clear that the State could take appropriate steps to initiate land

acquisition proceedings, which were then done pursuant to such order

on 04.08.2000. Taking shelter under this order, she therefore argued

that it would not be possible to strike down the notification under

section 4 read with section 17 of the Land Acquisition Act, since this

11

was done pursuant to the order dated 22.06.2000. For this purpose,

she relied upon the judgments of this Court in State of U.P. v. Keshav

Prasad Singh, (1995) 5 SCC 587 and State of A.P. v. Goverdhanlal

Pitti, (2003) 4 SCC 739.

15. Shri Mukul Rohatgi, learned senior advocate appearing on behalf of

the Appellant, stoutly refuted these arguments and relied upon certain

judgments of this Court which covered the issue in the Appellant’s

favour. In any case, he also argued that given the conduct of the

parties in not vacating the Premises by 15.08.1998 and continuing to

be in unauthorised possession till date, as well as not paying a single

paisa towards compensation, this Court ought not to entertain the

State’s appeals under Article 136 of the Constitution of India.

16. The judgments of this Court relied upon by Ms. Liz Mathew are

distinguishable from the facts of this case. In State of U.P. v. Keshav

Prasad Singh, (1995) 5 SCC 587, this Court dealt with a specific case

of urgency, namely, a mandatory injunction issued by a Civil Court to

demolish a compound wall and to restitute possession. This Court,

thus, had no difficulty in stating that there was a need for immediacy in

the case, as follows:

“5. The next question is whether the Government would be

justified in exercising its power under Section 17(4) and

dispense with the inquiry under Section 5-A of the Act.

Mandatory injunction issued by the civil court to demolish

12

the compound wall and to restitute possession to the

respondent had to be complied with. There is thus urgency.

The public purpose was obvious as the compound was

required to be retained to protect the safety of the office.

The object of Section 5-A enquiry was to show whether

there was no public purpose or the land was not suitable or

some other lands may be acquired. All these relevant and

related facts are redundant due to the facts of the case.”

17. Likewise, in State of A.P. v. Goverdhanlal Pitti, (2003) 4 SCC 739, on

the facts of the case, this Court held that the High Court of Andhra

Pradesh could not have struck down the acquisition of property on the

ground of mala fides only because the State had lost in eviction

proceedings and initiated acquisition proceedings, after giving an

undertaking to vacate a dilapidated 100-year old school building. This

Court therefore held:

“17. The High Court of Andhra Pradesh held the action of

acquisition of the property by the State as malicious in law

only because before passing of adverse orders by the court

against it, no action for acquisition of the building which was

in its occupation since 1954, was initiated. In our opinion,

even if that be the situation that the State as tenant of the

school building took no step to acquire the land before [the]

order of eviction and direction of the High Court, it cannot

be held that when it decided to acquire the building, there

existed no genuine public purpose. If only the possession of

the property could be retained as a tenant, it was

unnecessary to acquire the property. The order of eviction

as well as the direction to vacate issued by the High Court

only provide just, reasonable and proximate cause for

resorting to acquisition under the Land Acquisition Act.

Resort, therefore, to acquisition at a stage when there was

13

no other alternative but to do so to serve a genuine public

purpose which was being fulfilled from 1954 signifies more

a reasonable and just exercise of statutory power. Such

exercise of power cannot be condemned as one made in

colourable or mala fide exercise of it.”

18. This judgment is completely distinguishable also for the reason that

the urgency provision contained in section 17 of the Land Acquisition

Act was not invoked, it being held that the continuance of a school

served a genuine public purpose, which public purpose could not

suddenly be deemed to become non-existent, only because the State

had lost in eviction proceedings.

19. On the facts of this case, the impugned judgment of the Division

Bench is correct in law. In this case, the State was on notice from

31.03.1987, i.e., from the date of insertion of section 10B in the West

Bengal Requisition Act, that the Premises would have to be released

on or before 15.08.1998. This gave the State the time of 11.5 years to

act and acquire the Premises. Such acquisition could easily have been

done by way of a notification under section 4 of the Land Acquisition

Act before the lapse of the 25-year period, and would have also

preserved the valuable right contained in section 5A of the Land

Acquisition Act. As a matter of fact, as correctly held by the Division

Bench, long after the requisition period elapsed on 15.08.1998, the

State issued a notification under section 4 of the Land Acquisition Act,

14

without invoking any urgency provision. To then say that the urgency

provision could be invoked on account of the Single Judge’s order

dated 22.06.2000, is to attempt to infer from the said order, much more

than it actually said. Therefore, the Division Bench rightly held that at

best this order could possibly refer to the acquisition proceedings that

had already been initiated by the notification of 12.08.1999 under

section 4 of the Land Acquisition Act. In any case, this order could not

and did not wash away the lethargy of the State in initiating acquisition

proceedings, which ought to have been done before the 25-year

period elapsed, by preserving the valuable right contained in section

5A of the Land Acquisition Act, which could have been availed of by

the owner of the Premises, i.e., the Appellant.

20. The impugned judgment of the Division Bench is fortified by several

judgments. In Banwarilal & Sons Pvt. Ltd. v. Union of India, C.W.P.

No. 2385 of 1988 reported in 1991 Supp DRJ 317 [“Banwarilal (Delhi

HC)”], a Division Bench of the High Court of Delhi, vide an order dated

04.02.1991, quashed a similar notification in the context of a similar

provision contained in the Requisitioning and Acquisition of Immovable

Properties Act, 1952. The High Court of Delhi held:

“8. In the Notification challenged before us the only thing

that is stated is that the property was required for the

“residential use of government servants.” There is not a

whisper of what was the urgency to take immediate

15

possession and to deny the right of raising [objections] to

the owner under Section 5-A of the Act. The Notification

under Sections 4 and 17(1) in the present case, therefore,

stand vitiated for non-compliance of the requirement of

mentioning urgency in the Notification itself. What is more

objectionable is the fact that the building was already in

occupation of the officers of Delhi Administration and the

Administration knew that the Requisitioning and Acquisition

of Immovable Properties Act was to lapse on 10.3.1987.

Thus, they had sufficient time to make alternate

arrangement for the residence of their officers and there

was no urgency whatsoever for invoking the provisions of

Section 17(1). The provisions of Section 17(1) cannot be

utilised to cover up the laxity or lethargy of the

Administration to take appropriate steps in time for making

available alternate accommodation for its officers.”

(page 320)

“13. In Assam Sillimanita Limited v. Union of India (AIR

1990 SC 1417) the Supreme Court had appointed an

Arbitrator for determining the damages in case of unlawful

termination of a lease. Considering the fact that more than

three years have elapsed since the Requisitioning and

Acquisition of Immovable Property Act has lapsed, it would

be more just and appropriate that an Arbitrator is appointed

in the present case to determine the damages payable by

Delhi Administration instead of making the petitioners run to

the Civil Court for that purpose. We appoint Mr. T.V.R.

Tatachari, former Chief Justice, Delhi High Court, as an

Arbitrator who will enter upon the reference within four

weeks of the communication of this order to him. He may

make the Award within a period of four months thereafter.

The Arbitrator will not be obliged to give reasons for his

conclusions. The parties will be at liberty to produce their

valuers before the Arbitrator for the assessment of

damages, if they so desire. The petitioners as well as the

Delhi Administration will pay a sum of Rs. 10,000/- each to

16

the Arbitrator as the initial payment towards his fees. A copy

of this order [be] sent to the learned Arbitrator by the

Registry.”

(pages 321-322)

21. This judgment of the High Court of Delhi travelled to this Court, the

Special Leave Petition filed by the Union of India being dismissed on

21.03.1991. In other off-shoot proceedings as well, such as Union of

India v. Shakuntala Gupta, (2002) 10 SCC 694, the judgment in

Banwarilal (Delhi HC) (supra) was again confirmed on 14.11.2000. A

review against the aforesaid order met with the same fate in Union of

India v. Shakuntala Gupta, (2002) 7 SCC 98, in which this Court

dismissed the review on merits on 27.08.2002, stating:

“15. In any event the order dated 14-11-2000 was not

legally erroneous. The notification under Section 4 was a

composite one. The “opinion” of the Lt. Governor that the

provisions of Section 17(1) of the Act were applicable, as

expressed in the last paragraph of the impugned

notification, was relatable in general to the 14 properties

specified in the notification. The impugned notification was

quashed in Banwari Lal case [Banwari Lal & Sons (P) Ltd.

v. Union of India, DRJ 1991 Supp 317] inter alia on the

ground that the “opinion” of the Lt. Governor as expressed

in the notification was insufficient for the purpose of

invoking the provisions of Section 17(1) of the Act. This

ground was not peculiar to the premises in Banwari Lal

case [Banwari Lal & Sons (P) Ltd. v. Union of India, DRJ

1991 Supp 317] but common to all fourteen properties. The

urgency sought to be expressed in the impugned

notification cannot be held to be sufficient for the purposes

of Section 17(1) in this case when it has already been held

17

to be bad in Banwari Lal case. [See observations in Abhey

Ram v. Union of India, (1997) 5 SCC 421 (para 11); Delhi

Admn. v. Gurdip Singh Uban, (2000) 7 SCC 296 (paras 53-

55)] The expression of urgency being one cannot be partly

good and partly bad like the curate's egg. It must follow that

the acquisition in respect of the respondent's premises as

mentioned in the notification which were sought to be

acquired on the basis of such invalid expression of

“urgency” cannot be sustained.”

22. These judgments were then followed in Union of India v. Krishan Lal

Arneja, (2004) 8 SCC 453 [“Krishan Lal Arneja”]. After setting out the

relevant provisions of the Land Acquisition Act, this Court held:

“16. Section 17 confers extraordinary powers on the

authorities under which it can dispense with the normal

procedure laid down under Section 5-A of the Act in

exceptional case of urgency. Such powers cannot be lightly

resorted to except in case of real urgency enabling the

Government to take immediate possession of the land

proposed to be acquired for public purpose. A public

purpose, however laudable it may be, by itself is not

sufficient to take aid of Section 17 to use this extraordinary

power as use of such power deprives a landowner of his

right in relation to immovable property to file objections for

the proposed acquisition and it also dispenses with the

inquiry under Section 5-A of the Act. The authority must

have subjective satisfaction of the need for invoking

urgency clause under Section 17 keeping in mind the

nature of the public purpose, real urgency that the situation

demands and the time factor i.e. whether taking possession

of the property can wait for a minimum period within which

the objections could be received from the landowners and

the inquiry under Section 5-A of the Act could be

completed. In other words, if power under Section 17 is not

exercised, the very purpose for which the land is being

18

acquired urgently would be frustrated or defeated. Normally

urgency to acquire a land for public purpose does not arise

suddenly or overnight but sometimes such urgency may

arise unexpectedly, exceptionally or extraordinarily

depending on situations such as due to earthquake, flood

or some specific time-bound project where the delay is

likely to render the purpose nugatory or infructuous. A

citizen's property can be acquired in accordance with law

but in the absence of real and genuine urgency, it may not

be appropriate to deprive an aggrieved party of a fair and

just opportunity of putting forth its objections for due

consideration of the acquiring authority. While applying the

urgency clause, the State should indeed act with due care

and responsibility. Invoking urgency clause cannot be a

substitute or support for the laxity, lethargy or lack of care

on the part of the State administration.

xxx xxx xxx

21. One more aspect to be noticed is, as observed by the

High Court, that the properties in question continued to be

in possession of the appellants; in other words, there was

no urgency of taking immediate possession nor was there

any immediate threat of dispossessing them from the

properties. At the most, after the lapsing of the

Requisitioning Act on 10-3-1987, their possession over the

properties would have been unauthorised, maybe so long

they continued in unauthorised possession of the

properties, they were liable to pay damages for their

occupation for a few months during which period they could

have completed acquisition proceedings in the normal

course without resorting to provisions of Sections 17(1) and

(4) of the Act. During the course of the hearing, we

specifically asked the learned counsel for the appellants in

this regard, the only answer was that the appellants being

the Union of India and others did not want to remain in the

unauthorised possession of the properties. We are not

19

convinced by this reply so as to justify invoking urgency

clause to acquire the properties. Having regard to the facts

and circumstances of the case in these appeals, the

authorities could have completed acquisition proceedings in

a couple of months even after providing opportunity for

filing objections and holding inquiry under Section 5-A of

the Act if they were really serious.

22. In the objects and reasons of Act 20 of 1985, it is stated

that all the properties which were requisitioned prior to the

amendment of the Act in 1970 were required to be released

from requisition or acquired by 10-3-1985; although the

Government is expeditiously implementing the policy of

acquiring or releasing from requisition the requisitioned

properties, a number of them are expected to be needed by

the Government even after 10-3-1985 for public purposes;

the Ministry of Defence is taking action for either releasing

or acquiring the requisitioned properties. It was, therefore,

decided to extend the maximum period for which the

properties could be retained under requisition by a period of

two years. Thus, it is clear that the authorities were aware

that the properties were to be released or acquired and the

maximum period was extended up to two years for the

purpose. From 1985 to 1987 they had sufficient time to

acquire the properties in question in the usual course. They

had enough time to provide opportunity for filing objections

and holding inquiry under Section 5-A of the Act. There was

no need to invoke Section 17 of the Act. The office

memorandum dated 19-7-1979 extracted above shows that

the Executive Council took the decision in view of the

amendment in the Requisitioning and Acquisition of

Immovable Property Act, 1952 that all the

requisitioned/leased houses which were with the

Administration for more than 10 years were to be released

to their owners immediately and all the occupants of

requisitioned/leased houses were requested to furnish the

relevant information by 16-7-1979 failing which the officer

20

concerned will be liable for eviction from the requisitioned

house without provision for alternative accommodation.

Here again, it is clear that the authorities were in the know

of the situation in the year 1979 itself. Further, the minutes

of the meeting held on 8-4-1985 in the room of the

Secretary (PWD/L&D), Delhi Administration, Delhi show

that the position regarding all the requisitioned properties in

Delhi which were requisitioned under the 1952 Act was

reviewed. The said meeting was attended by: (1) Secretary

(PWD/L&D), (2) Joint Director (Training), (3) Additional

District Magistrate (Registration) and Under-Secretary (LA).

In the said meeting, it was decided that all the pre-1970

residential buildings which were partially requisitioned and

were not in full occupation of the Delhi Administration

should be derequisitioned in stages.

xxx xxx xxx

27. Thus, from the Statement of Objects and Reasons of

Act 20 of 1985, statement by the Minister concerned to the

Lok Sabha on 28-3-1985, the office memorandum

aforementioned and the minutes of meeting dated 8-4-

1985, it is sufficiently clear that the appellants were fully

aware that they had to make arrangements either for

acquiring the properties or derequisitioning them by making

alternate arrangement within a period of two years i.e. up to

10-3-1987 inasmuch as no further extension of the

Requisition Act was possible. Further having regard to the

observations made by this Court in the case of Vora [(1984)

2 SCC 337 : (1984) 2 SCR 693] , there would have been no

justification for the appellants to continue the properties in

question under the Requisitioning Act any more. If the

appellants were really serious in acquiring the properties in

question, they had almost 2 years' time even after taking

the decision to acquire them or derequisition them within

which time, acquisition proceedings could be completed in

the usual course without depriving the respondents of their

21

valuable right to file objections for acquisition and without

dispensing with inquiry under Section 5-A of the Act.

xxx xxx xxx

29. Having regard to the facts and circumstances and the

material available on record, we are of the view that

invocation of urgency clause was without justification and

was untenable as held in Banwari Lal [Banwari Lal & Sons

(P) Ltd. v. Union of India, DRJ 1991 Supp 317 (Del HC)

[Ed.: This order of the High Court was affirmed by the

Supreme Court while dismissing the SLP (No. 4458 of

1991) in Union of India v. Banwarilal & Sons (P) Ltd. by its

order dated 21-3-1991 quoted in para 5 below. See also

para 11 below. See connected case at (2004) 5 SCC 304.]]

and Shakuntala Gupta [Union of India v. Shakuntala Gupta,

(2002) 7 SCC 98 [Ed.: See also the earlier order reported

at (2002) 10 SCC 694.]] . This Court in State of Punjab v.

Gurdial Singh [(1980) 2 SCC 471] as to the use of

emergency power under Section 17 of the Act has

observed that: (SCC p. 477, para 16)

“[I]t is fundamental that compulsory taking of a

man's property is a serious matter and the smaller

the man the more serious the matter. Hearing him

before depriving him is both reasonable and preemptive of arbitrariness, and denial of this

administrative fairness is constitutional anathema

except for good reasons. Save in real urgency

where public interest does not brook even the

minimum time needed to give a hearing land

acquisition authorities should not, having regard to

Articles 14 (and 19), burke an enquiry under

Section 17 of the Act. Here a slumbering process,

pending for years and suddenly exciting itself into

immediate forcible taking, makes a travesty of

emergency power.”

22

30. In Om Prakash v. State of U.P. [(1998) 6 SCC 1]

referring to State of Punjab v. Gurdial Singh [(1980) 2 SCC

471] this Court in para 21 has observed that: (SCC pp. 23-

24)

“[A]ccording to the aforesaid decision of this Court,

inquiry under Section 5-A is not merely statutory

but also has a flavour of fundamental rights under

Articles 14 and 19 of the Constitution though right

to property has now no longer remained a

fundamental right, at least observation regarding

Article 14, vis-à-vis, Section 5-A of the Land

Acquisition Act would remain apposite.”

In the present appeals, the appellants have not been able

to show before the High Court any genuine subjective

satisfaction depending upon any relevant material available

to the State authorities at the time when they issued the

impugned notification under Section 4(1) of the Act and

dispensed with Section 5-A inquiry taking aid of Section

17(4) of the Act. A Bench of three learned Judges of this

Court in Narayan Govind Gavate v. State of Maharashtra

[(1977) 1 SCC 133 : 1977 SCC (Cri) 49] has expressed that

Section 17(4) cannot be read in isolation from Sections 4(1)

and 5-A of the Act and has expressed that having regard to

the possible objections that may be taken by the

landowners challenging the public purpose, normally there

will be little difficulty in completing inquiries under Section

5-A of the Act very expeditiously. In the same judgment, it is

also stated that: (SCC p. 148, para 38)

“The mind of the officer or authority concerned has

to be applied to the question whether there is an

urgency of such a nature that even the summary

proceedings under Section 5-A of the Act should

be eliminated. It is not just the existence of an

23

urgency but the need to dispense with an inquiry

under Section 5-A which has to be considered.””

23. Justifying the quashing of the notification under section 4 of the Land

Acquisition Act along with the invocation of urgency under section 17

thereof, this Court then concluded:

“35. The alternative argument urged on behalf of the

appellants that if the impugned notification suffers from

infirmity in relation to invoking urgency clause, it can be

quashed only to the extent of invoking the aid of Section 17

and the said notification can be sustained confining it to

Section 4 of the Act, cannot be accepted. Otherwise, the

same common notification stands quashed in respect of a

few parties as in the cases of Banwari Lal [Union of India v.

Banwarilal & Sons (P) Ltd., SLP (C) No. 4458 of 1991

dated 21-3-1991] and Shakuntala Gupta [Union of India v.

Shakuntala Gupta, (2002) 7 SCC 98 [Ed.: See also the

earlier order reported at (2002) 10 SCC 694.]] and it stands

sustained in respect of others i.e. the respondents in these

appeals leading to anomalous situation. Added to this, if the

argument, as advanced on behalf of the Union, is accepted,

the notification under Section 17 of the Act invoking

urgency clause would stand quashed but the landowner

would nonetheless be deprived of the possession of the

property as also payment of 80% of compensation under

Section 17(3-A) of the Act. Such an unjust result cannot be

allowed to happen by quashing the notification in part only

to the extent of Section 17 of the Act and maintaining it for

the purpose of Section 4 of the Act. Thus, having regard to

the facts and circumstances brought on record in these

appeals, it is not possible to accept this argument

particularly when the very foundation of invoking Section 17

was invalid and unjustified as upheld by this Court in

Banwari Lal‡ and Shakuntala Gupta [Union of India v.

24

Shakuntala Gupta, (2002) 7 SCC 98 [Ed.: See also the

earlier order reported at (2002) 10 SCC 694.]].”

24. Given the aforesaid, it is clear that the appeals filed by the State,

namely, civil appeals arising out of SLP(C) No.10581-10583 of 2020

have to be dismissed.

25. Coming to the appeals filed by the Appellant,1

 the said appeals are

only on a limited ground, namely, that compensation for the illegal

occupation of the Premises cannot be assessed by the District Judge

under section 11(1)(b) of the West Bengal Requisition Act, as section

11(1) refers to compensation during the period of requisition and not

after the property continues to remain with the State without any

authority of law even after the requisition period ends. Section 11(1) of

the West Bengal Requisition Act reads as follows:

“Provisions regarding compensation.

11. Procedure for fixing compensation.-

(1) Where any premises are requisitioned under this Act,

there shall be paid to all persons interested compensation

the amount of which shall be determined in the manner,

and in accordance with the principles hereinafter set out,

namely:

(a) where the amount of compensation can be fixed by

agreement, it shall be paid in accordance with such

agreement;

1 Civil appeals arising out of SLP (C) Nos.9834-9835 of 2020 and SLP (C) Nos.9837-

9838 of 2020.

25

(b) where no such agreement can be reached, the

State Government shall appoint a District Judge or an

Additional District Judge as arbitrator;…”

26. A cursory reading of the aforesaid provision will make it clear that the

Appellant is correct in its submission, which is therefore accepted and

the impugned judgment of the Division Bench is set aside to this

extent. Civil appeals arising out of SLP (C) Nos. 9834-9835 of 2020

and SLP (C) Nos. 9837-9838 of 2020 are thereby allowed.

27. A very disturbing feature of these appeals is the fact that WBMDTCL,

which is “State” within the meaning of Article 12 of the Constitution of

India, has continued in unlawful possession of the Premises since

15.08.1998 without paying a single pice towards compensation till

date. Following the judgments of this Court, most notably, Assam

Sillimanite Ltd. v. Union of India, (1990) 3 SCC 182 (see paragraphs

13 and 14) and Krishan Lal Arneja (supra), we appoint Shri Soumitra

Pal (Retd. Judge, High Court of Calcutta) as arbitrator to determine

compensation that is payable by way of damages for occupation of the

Premises without any authority of law. A written authority to appoint

such arbitrator is to be furnished to us immediately, i.e., within a week

from 23.02.2021. If not so furnished, WBMDTCL will be liable to pay a

sum of Rs. 100 per square foot, per month (being the average of the

rental amounts paid by other tenants in the same building since August

26

1998 as per the Valuation Report dated 30.11.2019 prepared by

Banibrata Mukherjee, Chartered Engineer, Engineer Commissioner &

Valuer of Alipore Judges’ Court) for the entire period of illegal

occupation of the Premises within four months from the date of this

judgment.

28. If written authority for appointment of the arbitrator is received within

time, the learned arbitrator is to proceed on a prima facie view of the

case submitted to him by the parties to determine interim

compensation payable within a period of two months of entering upon

the reference. This is owing to the fact that not a single pice has been

paid for the last 22 years for the illegal occupation of the Premises by

WBMDTCL. Further, neither party is to take any adjournment before

the arbitrator within this period of two months, so that the arbitrator can

decide the interim compensation that is to be paid. After such interim

order, the learned arbitrator will proceed to deliver a final award.

29. WBMDTCL has asked for reasonable time to vacate the premises.

However, in light of the fact that WBMDTCL has been in possession of

the Premises without any authority of law for the last 22 years, we do

not feel that it is justified to give time as prayed for, till the end of this

year. Thus, we only grant time of four months from the date of this

judgment to vacate the Premises, conditional upon the responsible

officer filing an undertaking before this Court, that they will vacate the

27

Premises within four months and handover vacant possession of the

Premises to the Appellant, and that the interim compensation, if

ordered before such date, will be paid within the time stipulated by the

arbitrator so appointed.

Civil Appeals @ SLP (C) Nos. 9837-9838 of 2020

30. In these appeals,2

 though no one appears on behalf of West Bengal

Sugar Industries Development Corporation Ltd. [“WB Sugar

Industries”], who have been in illegal occupation of a portion of the

fifth floor of premises no. 13, Nellie Sengupta Sarani (Lindsay Street),

Calcutta [“Fifth Floor Premises”], measuring approximately 1350

square feet, the same directions apply qua WB Sugar Industries. Thus,

WB Sugar Industries is also to submit a written authority to appoint the

arbitrator within a week from 23.02.2021, failing which they shall pay a

sum of Rs. 100 per square foot, per month, for the entire period of

illegal occupation of the Fifth Floor Premises, within four months from

the date of this judgment. Further, WB Sugar Industries is given four

months to vacate the Fifth Floor Premises, upon the submission of an

undertaking to vacate and handover vacant possession of the Fifth

Floor Premises to the Appellant, and to pay the interim compensation

within the time to be stipulated by the arbitrator.

2 Civil appeals arising out of SLP (C) Nos. 9837-9838 of 2020.

28

31. These appeals are disposed of accordingly.

………………………………J.

(R.F. Nariman)

………………………………J.

(B.R. Gavai)

New Delhi;

March 01, 2021.

29

Kerala Building Tax Act, 1975. Under Section 3(1)(b) buildings that are used principally for religious, charitable or educational purposes or as factories or workshops are exempted from building tax under the Act.

Kerala Building Tax Act, 1975. Under Section 3(1)(b) buildings  that are used principally for religious, charitable or educational purposes or as factories or workshops are exempted from building tax under the Act.

REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 202 OF 2012

GOVERNMENT OF KERALA & ANR. …APPELLANT

VERSUS

MOTHER SUPERIOR ADORATION CONVENT …RESPONDENT

WITH

CIVIL APPEAL NO. 6589 OF 2015

CIVIL APPEAL NO. 10298 OF 2016

CIVIL APPEAL NO. 10297 OF 2016

CIVIL APPEAL NO. 10881 OF 2016

CIVIL APPEAL NO. 203 OF 2012

CIVIL APPEAL NO. 204 OF 2012

CIVIL APPEAL NO. 207 OF 2012

CIVIL APPEAL NO. 206 OF 2012

CIVIL APPEAL NO. 205 OF 2012

1

CIVIL APPEAL NO. 745 OF 2021

(ARISING OUT OF SLP (CIVIL) NO.905 OF 2012)

CIVIL APPEAL NO. 5036 OF 2015

CIVIL APPEAL NO. 8351 OF 2014

CIVIL APPEAL NO. 746 OF 2021

(ARISING OUT OF SLP (CIVIL) NO.12235 OF 2014)

CIVIL APPEAL NO. 747 OF 2021

(ARISING OUT OF SLP (CIVIL) NO.13874 OF 2014)

CIVIL APPEAL NO. 8352 OF 2014

CIVIL APPEAL NO. 4445 OF 2015

CIVIL APPEAL NO. 4446 OF 2015

CIVIL APPEAL NO. 4447 OF 2015

CIVIL APPEAL NO. 7368 OF 2016

J U D G M E N T

R.F. Nariman, J.

1. Leave granted.

2. All these appeals pertain to an exemption provision contained

in the Kerala Building Tax Act, 1975. Under Section 3(1)(b) buildings

2

that are used principally for religious, charitable or educational

purposes or as factories or workshops are exempted from building

tax under the Act. All of the appeals, except one, are by the State of

Kerala against a judgment dated 22.11.2007 passed by a Division

Bench of the Kerala High Court in Government of Kerala & Anr v.

Mother Superior Adoration Convent (Civil Appeal No.202 of 2012)

and a Full Bench judgment in State of Kerala & Ors v. Unity Hospital

(P) Ltd. (Civil Appeal No. 207 of 2012), being a judgment dated

21.12.2010. Both judgments decided to exempt the buildings in

question. The other appeals by the State contain judgments which

follow either or both of these judgments. The only appeal by an

assessee namely, Administrator, Jos Giri Hospital v. Government of

Kerala (Civil Appeal No.204 of 2012), is from a judgment of the

Division Bench of the Kerala High Court deciding the case in favour

of the State. However, this judgment was referred to the Full Bench

which decided the judgment in State of Kerala & Ors v. Unity

Hospital (P) Ltd. (Civil Appeal No. 207 of 2012) and has been stated

to have reached an incorrect conclusion.

3

3. On facts, there is a similarity in most of the cases before us.

Either there are residential accommodations for nuns as in the first

appeal before us or there are hostel accommodations which are

attached to various educational institutions. In both cases, the State

claims that no exemption should be granted as residential

accommodation for nuns and hostels for students would be for

residential as apart from religious or educational purposes and

would not therefore be covered by the exemption contained in

Section 3(1)(b) of the Act.

4. We may take up the facts in Civil Appeal No.202 of 2012. In

this case, by an order of assessment dated 14.03.2002, building tax

was levied on residential accommodation for nuns who underwent

religious training to become nuns in a convent. Against the

aforesaid assessment to tax, the respondent filed O.P. No.11246 of

2002 and the High court vide its judgment and order dated

29.5.2002 quashed the aforesaid assessment order and directed the

Tehsildar to refer the case to the Government for its decision. A

representation was made to the Government by the respondent on

10.2.2004 in which it was stated:

4

“2. At present we the 8 sisters residing here are

deputed to render services in religious as well as

charitable needs of the Vinjan Matha Church, East

Thodupuzha and the people around the Church,

irrespective of caste, creed and community.

xxx xxx xxx

In order to become sisters, we had undergone 8

years rigorous religious education and training and

then decided to lead a life of a SANYASINI

throughout our life.

xxx xxx xxx

8. The vow of obedience, is intended to make use of

the individual sisters by their elected superior

sisters, where their services are most needed. It

means, we the present sisters attached to this

convent at present are not permanent members

here. We have come from different places, and each

one of us will be individually transferred to other

places, as our Superior’s Council decides.

9. So much so, the convent is a permanent set up

here to render the religious and charitable needs of

the locality, whereas the members are individually

deputed to render the services for a period found

proper.

xxx xxx xxx

11. The convent was established by the Council

decision of the St. Mary’s Province of the

Congregation of the Sisters of Adoration of the

Blessed Sacrament.

12. The building is also intended for accommodating

the junior sisters who are undergoing their college

education in the nearby Newman College -

5

Thodupuzha. Thus, at present 8 students-sisters

also are residing here.

13. The Building is two storeyed and measures

approximately 5000sq.ft. The ground floor contains a

prayer hall, kitchen, refectory, study hall and small

rooms for sisters. The upper floor contains 5 rooms

for sisters, a dormitory and study hall.

14. The building is not at all given for amount at any

time, and it will not be given so in the future also. It

will be used only as a religious house.”

5. This representation was turned down by the Government’s

order dated 11.09.2006 as follows:

“The Government has examined the matter in detail.

The petitioner was heard on 16.9.2004 and he

claimed that the building is exclusively used for

accommodating the nuns who are engaged in

religious and charitable activities. No part of the

building is rented out or used for any other purpose.

On perusal of the records the documents produced

at the time of hearing it has become evident that the

convent is not principally used for any religious or

charitable purpose. The District Collector, Idukki as

per letter read as fourth paper above has also

informed that no charitable activities are undertaken

in the convent and the building is used for the

residential purpose of nuns.

xxx xxx xxx

It includes professing once used in public expressing

it by private and public worship, practicing rituals

and ceremonies. It also includes observances,

ceremonies and functions which are being

customarily performed by members of a particular

religion. If the main use of the major portion of a

6

building is for the above then that building can be

said to be used principally for religious purposes.

xxx xxx xxx

In the above circumstances, Government Order that

the building in Survey No. 206 Thodupuzha village,

Thodupuzha Taluk having plinth area of 903.24 M2

owned by the Adoration Convent, Shanti Bhavan,

Thodupuzha is not eligible for exemption under

Section 3 of the Kerala Building Tax Act, 1975.”

6. A writ petition being Writ Petition No.27108 of 2006 was filed

against the said order before a learned Single Judge who then

referred the matter to a Division Bench as he did not agree with an

earlier judgment of a learned Single Judge of the Kerala High Court.

By the impugned judgment dated 22.11.2007, a Division Bench of

the Kerala High Court held as follows:

“8. If the activities that are going on in the convent

are predominantly religious, then, normally, buildings

of the convent used for the said purpose should also

qualify for exemption. Of course, if any particular

building is used for any commercial activity, such

buildings could be segregated. It is not in dispute

that a chapel is used for religious purposes.

Attached to that, there may be a room for the

Chaplain for taking rest etc. Can that room be

segregated and said that it is not used for religious

purposes. We feel that the answer should be in the

negative. If the buildings of convents are generally

used for religious purposes and one of the buildings

is used for residence of an inmate there, it shall also

be treated as one, used for religious purposes. Any

7

interpretation to the contrary will be irrational. So, we

are of the view that the buildings, used for the

residence of the nuns in a convent, is principally

used for religious purposes and therefore, should

also qualify for exemption. We are in respectful

agreement with the views expressed by

C.N. Ramachandran Nair, J., in Writ Petition (C)

No.27250/06. The judgment in W.A.2424/05 deals

with the case of a boarding and lodging house for

students run by a convent where rooms are let out

collecting a fee. If the convent is running a

commercial or industrial unit, the building housing

that establishment will not qualify for exemption.

That principle cannot be applied in the case of the

building used for accommodating nuns in the

convent. The decision of the Apex Court relied on by

the learned Government Pleader also does not have

any application to the facts of this case. The point

considered therein was whether the building used

for accommodating a school can be treated as a

building used for charitable purposes or religious

activities. The principle stated therein does not have

any application to the facts of this case.”

7. The Full Bench judgment of 2010 contained in Civil Appeal

No.207 of 2012 was as a result of a Division Bench doubting the

correctness of the Division Bench judgment in Administrator, Jos Giri

Hospital v. Government of Kerala that is contained in Civil Appeal

No.204 of 2012. Paragraphs 2 and 3 of the Full Bench posed the

question raised thus:

“2. The question raised is whether hostel building of

an educational institution is entitled for exemption

8

from building tax under Section 3(1)(b) of the Kerala

Building Tax Act, 1975 (hereinafter referred to as the

Act for short), which provides for building tax

exemption for buildings used for “educational

purposes”.

3. While the building involved in Writ Appeal

No.1648/2009 is a hostel building owned by a

nursing school, the building involved in Writ Appeal

No.2495/2009 is a hostel building attached to a

Residential Higher Secondary School owned by a

private management.”

The Full Bench held:

“6. The short question that arises for consideration is

whether “educational purposes” referred to in the

above Section has only a restricted meaning

covering buildings, where students are imparted

education; or whether it has a wider meaning

covering hostel buildings owned by educational

institutions to provide accommodation to students in

the premises of the educational institutions. The

Division Bench of this Court in the above referred

judgment held that “educational purposes” cover

only purposes which have integral, immediate and

proximate connection to education. In the reference

order, another Division Bench of which one of us is a

member [CNR(J)], took the view that the above test

laid down by the other Division Bench in the earlier

judgment is satisfied at least in respect of hostels

run by nursing schools and medical educational

institutions and probably mistake is there only in the

conclusion drawn in that judgment. What we notice

is that the Division Bench while deciding the matter

did not consider the educational Regulations of the

Medical Council of India and Nursing Council of

India, which make it mandatory that in order to get

approval for a medical college or a nursing college,

9

hospital for patients and hostel facilities for students

are mandatory. The State also does not controvert

this position and in fact all the medical colleges and

nursing colleges run in the State including those run

by the Government have hospitals of their own or

attached hospitals, and have hostels providing

accommodation to all students. Except probably few

students who hail from the areas very close to the

colleges, all the nursing and medical students reside

in the hostels attached to their colleges. The

students of both medical and nursing colleges

require clinical training in hospitals, and students in

senior classes are deployed on a turn basis in

hospitals. Unless accommodation is provided to the

students in the college campus or nearby, it would

not be possible for them, particularly for girls, to

reach the hospitals attached to the medical and

nursing colleges for duty at odd hours in the night.

Therefore, the Medical Council of India and Nursing

Council of India have made it mandatory for every

medical college and nursing college to have hostel

facilities, and without such facility no medical or

nursing college will get approval from the Medical

Council or Nursing Council of India, and only on their

approval, the medical educational institution can get

affiliation to the University. So much so, in our view,

the test laid down by the Division Bench i.e. integral,

immediate and proximate connection of the hostel

building with education, is squarely satisfied in the

cases of hostels attached to nursing schools and

other medical educational institutions which require

compulsory hostel facility for students for their

approval. We, therefore, hold that wherever hostel is

compulsory for approval of a course study or an

educational institution by the regulatory body as in

the case of medical and nursing colleges, hostel

building is an integral part of the educational

institution, and so much so, accommodation to

students provided in the hostel building is for

10

educational purpose and therefore the hostel

building qualifies for exemption from building tax. In

view of the above finding, we are unable to agree

with the conclusion drawn by the Division Bench i.e.

denial of exemption to hostel building attached to the

nursing school.

7. The next question to be considered is whether

hostel facility to students provided by other

educational institutions, which are not compulsorily

required under the educational regulations to

provide accommodation to students, is an

educational purpose qualifying the hostel buildings

for tax exemption. In this context, we have to

necessarily consider the object and scope of the

exemption clause provided in the statute. While

learned counsel for the appellants have relied on

Section 235 of the Kerala Municipalities Act, which

provides for exemption to buildings used for

educational purposes including hostel buildings

owned by the same educational institutions, learned

Government Pleader has relied on the decision of

the Supreme Court in Municipal Corporation of Delhi

v. Children Book Trust, reported in AIR 1992 SC

1456, where the Supreme Court held that school

buildings are not entitled to exemption from

municipal tax under the Delhi Municipal Corporation

Act. On going through the judgment of the Supreme

Court, we notice that the provision for exemption

from property tax under the Delhi Municipal

Corporation Act is not similar to the provisions of the

Kerala Building Tax Act, and so much so, in our view,

the decision cannot be applied while deciding the

claim of exemption made by the appellants in these

cases. Even though Section 235 of the Kerala

Municipalities Act specifically provides for property

tax exemption for hostel buildings owned by the very

same educational institutions, there is no specific

exemption for hostel buildings in Section 3 (1)(b) of

11

the Kerala Building Tax Act. Therefore, we have to

examine whether “educational purposes” referred to

in Section 3(1)(b) has only restricted meaning or it

has a wider meaning covering all buildings directly

or indirectly catering to the needs of student

community. In this context, we have to necessarily

consider the general pattern of hostel facility

provided by education institutions in the State. In the

recent past, large number of educational institutions,

particularly engineering colleges are established all

over Kerala including remote areas and hill stations,

where the students admitted are not from local area

and they have to necessarily depend on hostel

facility to be provided by the educational institution.

In fact admissions to medical and engineering

colleges are given on central allotment basis and

hardly any student can get admission in a college

near to his/her house. Therefore, necessarily, the

students have to depend on hostel accommodation

to pursue their studies. Colleges will not get students

if they do not provide hostel accommodation to

students near to the College. Therefore, hostel

buildings are constructed by educational institutions

to attract students to their institutions. Many

educational institutions provide only basic facilities

like building, electricity and water connections for

hostels and in fact, students are running mess on

sharing basis. So much so, the State’s contention

that hostels attached to educational institutions are

commercial ventures intended to make profit, in our

view, is unacceptable. In order to consider whether

hostel provided by an educational institution is for

educational purpose or not, we have to consider the

consequences if such educational institution does

not have hostel facility to provide accommodation to

its students. Obviously, such educational institutions

have to source students locally, which may be

possible only in the case of Schools. In fact,

thousands of schools and colleges in the State do

12

not have hostel facility because they depend on

students from the local area only. However,

wherever an educational institution has students

from different parts of the State, and Non Resident

Indians sending their children for studies in Kerala,

necessarily the educational institution has to provide

hostel facility to the students. In fact, without hostel

facility, many educational institutions will not have

required number of students to run it. We, therefore,

feel accommodation is a necessary facility, which an

educational institution is required to provide to it's

students; and so long as the purpose of stay of

students in the hostel is to study in the educational

institution, the purpose of such building, which is

used for accommodation of students, qualifies as

educational purpose.

xxx

9. We are therefore of the view that buildings owned

by educational institutions for providing hostel

accommodation to students qualify for building tax

exemption under clause (b) of Section 3(1) of the

Act. However all buildings accommodating students

do not qualify for building tax exemption because

there are so many lodge buildings constructed by

various people around educational institutions which

do not have hostel facility, to rent out to students in

such educational institutions. Letting out of buildings

by private agencies is a commercial activity whether

tenants are students or not. In other words, only

hostel buildings owned by educational institutions for

accommodating it's own students in such hostels will

qualify for exemption under clause (b) of Section

3(1) the Act.”

13

8. Shri Jaideep Gupta, learned senior advocate appearing on

behalf of the State of Kerala, assailed the correctness of these

judgments. According to him, an exemption provision contained in a

fiscal statute must be construed strictly and in the case of doubt or

ambiguity must be construed in favour of the State. For this

proposition, he cited a number of judgments. He then analysed

Section 3(1)(b) of the Act and argued that a building used principally

for religious or educational purposes can only be a building that is

used for religious/educational activity and not for activity which has

no direct connection with religious/educational activity, such as

residential quarters for nuns, priests or hostel accommodation for

students. He argued that even assuming that there is ambiguity in

Section 3(1)(b), in that a purpose connected with the

religious/educational activity may be included, yet the ambiguity has

to be resolved in favour of the State and this being so, on this short

ground, the judgment of the Division Bench and the judgment of the

Full Bench are incorrect. He further went on to argue that the term

“building” has been defined in Section 2(e) of the Act as meaning a

separate house, out-house, etc. and that in the present case as no

religious/educational activities are carried on at all in the buildings

14

which house nuns and hostel accommodation which houses

students, such buildings, not being principally used for religious

purposes, cannot possibly be exempt under the Act.

9. Learned counsel for the respondents supported the judgment

of the Division Bench and the Full Bench, arguing that on facts, a

beneficial legislation which is meant to further religious, charitable

and educational purposes should not be construed in a narrow

fashion, and should be construed in accordance with the object

sought to be achieved, and this being the case, the aforesaid

judgments do not require to be disturbed.

10. Having heard learned counsel appearing for all parties, we

must first set out the relevant provisions of the Kerala Building Tax

Act, 1975:

“2. Definitions - In this Act, unless the context

otherwise requires,

(e) "building" means a house, out-house, garage, or

any other structure, or part thereof, whether of

masonry, bricks, wood, metal or other material, but

does not include any portable shelter or any shed

constructed principally of mud, bamboos, leaves,

grass or thatch or a latrine which is not attached to

the main structure.

15

(i) "owner" includes a person who for the time being

is receiving, or is entitled to receive, the rent of any

building, whether on his own account or on account

of himself and others or as an agent, trustee,

guardian or receiver for any other person or who

should so received the rent or be entitled to receive

it if the building or part thereof were let to a tenant;

(l) "residential building" means a building or any

other structure or part thereof built exclusively for

residential purpose including outhouses or garages

appurtenant to the building for the more beneficial

enjoyment of the main building but does not include

hotels, boarding places, lodges and the like.]

3. Exemptions - (1) Nothing in this Act shall apply

to-

(a) buildings owned by the Government of Kerala or

the Government of India or any local authority; and

(b) buildings used principally for religious, charitable

or educational purposes or as factories or

workshops.

Explanation. - For the purposes of this sub-section,

"charitable purpose" includes relief of the poor and

free medical relief.

5. Charge of building tax - (1) Subject to the other

provisions contained in this Act, there shall be

charged a tax (hereinafter referred to as "building

tax") based on the plinth area at the rate specified in

the Schedule on every building the construction of

which is completed on or after the appointed day.

5A. Charge of luxury tax - [1) Notwithstanding

anything contained in this Act, there shall be

charged a luxury tax based on the plinth area at the

rate specified in Schedule II, annually on all

16

residential buildings having a plinth area of 278.7

square metres completed on or after the 1st day of

April, 1999.”

11. Before coming to the case law that has been cited before us, it

is important to first analyse Section 3(1)(b) with which we are

directly concerned. First and foremost, the subject matter is

“buildings” which as defined, would include a house or other

structure. Secondly, the exemption is based upon user and not

ownership. Third, what is important is the expression “principally”,

showing thereby that the legislature decided to grant this exemption

qua buildings which are “principally” and not exclusively used for the

purposes mentioned therein. Dominant object therefore is the test to

be applied to see whether such building is or is not exempt.

Fourthly, religious, charitable or educational purposes are

earmarked by the legislature as qualifying for the exemption as they

do not pertain to business or commercial activity. Fifthly, what is

important is that even factories or workshops which produce goods

and provide services are also exempt, despite profit motive, as the

legislature obviously wishes to boost production in factories and

services in workshops. What is important to note is that the

17

expression “used principally for” is wider than the expression “as”

which precedes the words “factories or workshops”.

12. A reading of the provision would show that the object for

exempting buildings which are used principally for religious,

charitable or educational purposes would be for core religious,

charitable or educational activity as well as purposes directly

connected with religious activity. One example will suffice to show

the difference between a purpose that is directly connected with

religious or educational activity and a purpose which is only

indirectly connected with such activity. Take a case where, unlike

the facts in Civil Appeal No. 202 of 2012, nuns are not residing in a

building next to a convent so that they may walk over to the convent

for religious instruction. Take a case where the neighbouring building

to the convent is let out on rent to any member of the public, and the

rent is then utilised only for core religious activity. Can it be said that

the letting out at market rent would be connected with religious

activity because the rental that is received is ploughed back only into

religious activity? Letting out a building for a commercial purpose

would lose any rational connection with religious activity. The indirect

18

connection with religious activity being the profits which are

ploughed back into religious activity would obviously not suffice to

exempt such a building. But if on the other hand, nuns are living in a

neighbouring building to a convent only so that they may receive

religious instruction there, or if students are living in a hostel close to

the school or college in which they are imparted instruction, it is

obvious that the purpose of such residence is not to earn profit but

residence that is integrally connected with religious or educational

activity.

13. A reading of the other provisions of the Act strengthens the

aforesaid conclusion. “Residential building” is defined separately

from “building” in Section 2(l). A “residential building” means a

building or any other structure or part thereof built exclusively for

residential purpose. It is important to note that “residential building”

is not the subject matter of exemption under Section 3 of the Act.

Quite the contrary is to be found in Section 5A of the Act, which

starts with a non-obstante clause, and which states that a luxury tax

is to be charged on all residential buildings having a plinth area of

278.7 square meters and which have been completed on or after

19

1.4.1999. If we were to accept the contention of the State, buildings

in which nuns are housed and students are accommodated in

hostels which have been completed after 1.4.1999 and which have a

plinth area of 278.7 square meters would be liable to pay luxury tax

as these buildings would now no longer be buildings used principally

for religious or educational purposes, but would be residential

buildings used exclusively for residential purposes. This would turn

the object sought to be achieved in exempting such buildings on its

head. For this reason also, we cannot countenance a plea by the

State that buildings which are used for purposes integrally

connected with religious or educational activity are yet outside the

scope of the exemption contained in Section 3(1)(b) of the Act. We

may now examine the case law.

14. In Union of India v. Wood Papers Ltd (1990) 4 SCC 256 the

rule as to exemption notifications in tax statutes was felicitously laid

down as follows:

“4. Entitlement of exemption depends on

construction of the expression “any factory

commencing production” used in the Table extracted

above. Literally exemption is freedom from liability,

tax or duty. Fiscally it may assume varying shapes,

specially, in a growing economy. For instance tax

20

holiday to new units, concessional rate of tax to

goods or persons for limited period or with the

specific objective etc. That is why its construction,

unlike charging provision, has to be tested on

different touchstone. In fact an exemption provision

is like an exception and on normal principle of

construction or interpretation of statutes it is

construed strictly either because of legislative

intention or on economic justification of inequitable

burden or progressive approach of fiscal provisions

intended to augment State revenue. But once

exception or exemption becomes applicable no rule

or principle requires it to be construed strictly. Truly

speaking liberal and strict construction of an

exemption provision are to be invoked at different

stages of interpreting it. When the question is

whether a subject falls in the notification or in the

exemption clause then it being in nature of exception

is to be construed strictly and against the subject but

once ambiguity or doubt about applicability is lifted

and the subject falls in the notification then full play

should be given to it and it calls for a wider and

liberal construction. Therefore, the first exercise that

has to be undertaken is if the production of packing

and wrapping material in the factory as it existed

prior to 1964 is covered in the notification.”

15. This statement of the law was followed in a number of

judgments. Suffice it to say that in Star Industries v. Commr. of

Customs (Imports) (2016) 2 SCC 362, a large number of

judgments are referred to for the same proposition (see paragraphs

32 to 34).

21

16. However, there is another line of authority which states that

even in tax statutes, an exemption provision should be liberally

construed in accordance with the object sought to be achieved if

such provision is to grant incentive for promoting economic growth

or otherwise has some beneficial reason behind it. In such cases,

the rationale of the judgments following Wood Papers (supra) does

not apply. In fact, the legislative intent is not to burden the subject

with tax so that some specific public interest is furthered. Thus, in

CST v. Industrial Coal Enterprises (1999) 2 SCC 607, this Court

held:

“11. In CIT v. Straw Board Mfg. Co. Ltd. 1989 Supp

(2) SCC 523 this Court held that in taxing statutes,

provision for concessional rate of tax should be

liberally construed. So also in Bajaj Tempo Ltd. v.

CIT (1992) 3 SCC 78 it was held that provision

granting incentive for promoting economic growth

and development in taxing statutes should be

liberally construed and restriction placed on it by

way of exception should be construed in a

reasonable and purposive manner so as to advance

the objective of the provision.

12. We find that the object of granting exemption

from payment of sales tax has always been for

encouraging capital investment and establishment of

industrial units for the purpose of increasing

production of goods and promoting the development

of industry in the State. If the test laid down in Bajaj

22

Tempo Ltd. case (1992) 3 SCC 78 is applied, there

is no doubt whatever that the exemption granted to

the respondent from 9-8-1985 when it fulfilled all the

prescribed conditions will not cease to operate just

because the capital investment exceeded the limit of

Rs 3 lakhs on account of the respondent becoming

the owner of land and building to which the unit was

shifted. If the construction sought to be placed by

the appellant is accepted, the very purpose and

object of the grant of exemption will be defeated.

After all, the respondent had only shifted the unit to

its own premises which made it much more

convenient and easier for the respondent to carry on

the production of the goods undisturbed by the

vagaries of the lessor and without any necessity to

spend a part of its income on rent. It is not the case

of the appellant that there were any mala fides on

the part of the respondent in obtaining exemption in

the first instance as a unit with a capital investment

below Rs 3 lakhs and increasing the capital

investment subsequently to an amount exceeding

Rs 3 lakhs with a view to defeat the provisions of

any of the relevant statutes. The bona fides of the

respondent have never been questioned by the

appellant.”

17. Likewise, in State of Jharkhand v. Tata Cummins Ltd (2006)

4 SCC 57 in dealing with a tax exemption for setting up an industry

in a backward area, this Court held as follows:

“16. Before analysing the above policy read with the

notifications, it is important to bear in mind the

connotation of the word “tax”. A tax is a payment for

raising general revenue. It is a burden. It is based on

the principle of ability or capacity to pay. It is a

manifestation of the taxing power of the State. An

23

exemption from payment of tax under an enactment

is an exemption from the tax liability. Therefore,

every such exemption notification has to be read

strictly. However, when an assessee is promised

with a tax exemption for setting up an industry in the

backward area as a term of the industrial policy, we

have to read the implementing notifications in the

context of the industrial policy. In such a case, the

exemption notifications have to be read liberally

keeping in mind the objects envisaged by the

industrial policy and not in a strict sense as in the

case of exemptions from tax liability under the taxing

statute.”

18. Similarly, in Pondicherry State Coop. Consumer Federation

Ltd. v. Union Territory of Pondicherry (2008) 1 SCC 206 this

Court held:

“5. Learned Senior Counsel Shri Venkatraman

appearing for the appellant assessee submitted that

this question was no more res integra and was

covered by the judgment of this Court in Vadilal

Chemicals Ltd. v. State of A.P. (2005) 6 SCC 292. It

was pointed out that in that case an identical

question fell for consideration under the similar

circumstances. There also, the question was as to

whether the small-scale industry which was engaged

in bottling of anhydrous ammonia could be said to

be entitled to the exemption from payment of sales

tax on the ground that it was manufacturing such

goods since there was a general exemption offered

by the Andhra Pradesh Government by GOMs No.

117 dated 17-3-1993 to the small-scale industry.

There also it was found on inspection that the

24

assessee industry was allowed irregular tax

exemption on the first sales of anhydrous liquefied

ammonia as it was found that the commodity that

was purchased and sold was one of the same and

there was no new commodity that had emerged and

that the assessee had only done bottling of

ammonia. The show-cause notices were issued to

the assessee in that case suggesting therein that the

activity of bottling/packing of gases into unit

containers from bulk quantities was not recognised

as “manufacture” even under the Central Excise Act.

In that view the question which fell for consideration

before this Court was as to whether under the

circumstances the assessee could claim the

exemption. This Court firstly held that the exemption

certificate was granted by the authorities after due

consideration. It was then noted that though the

exemption was available on the products

“manufactured” in industrial units, the interpretation

put forth by the authorities on the word

“manufacture” was incorrect. This Court took the

view that the authorities had based the interpretation

of word “manufacture” on the law relating to excise

and that it was erroneous to do so. It was observed

that in the State Sales Tax Act there was no

provision relating to “manufacture” and the concept

was to be found only in the 1993 G.O. which had

provided the exemption. The Court further took the

view that the exemption was granted with a view to

give a fillip to the industry in the State and also for

the industrial units of the State. The Court, therefore,

took the view that a liberal interpretation of the term

“manufacture” should have been adopted by the

State authorities, more particularly, when the State

authorities had granted the certificate of eligibility

after due consideration of the facts.

6. In our view the law laid down in this decision is

applicable to the present case on all fours. Here also

25

the authorities had firstly certified the assessee's

industry to be small-scale industry and had then

proceeded to grant exemption to it from payment of

sales tax on the goods manufactured. The said

certificate was not found to have been erroneously

issued and was very much in vogue when the showcause notices came to be served on the assessee.

The G.O. providing exemption clearly suggested that

such exemption was given in the public interest.

Therefore, it is obvious that the decision in Vadilal

Chemicals case (2005) 6 SCC 292 would be equally

applicable as even in that case what the industry did

was to bottle the ammonia gas purchased in bulk. In

the present case it is palmolive oil which is

purchased in bulk and is repacked so as to facilitate

its sale in the retail market.

7. Shri T.L.V. Iyer, Senior Advocate appearing on

behalf of the Union Territory of Pondicherry,

however, tried to suggest that the exemption from

payment of tax granted on 19-5-1989 was granted

by the Director of Industries and it was clear from

that exemption that it was only on the basis of

GOMs No. 15/74 dated 25-6-1974. Our attention

was invited to the last lines of the aforementioned

G.O. dated 19-5-1989. The last portion is as under:

“The unit is exempted from payment of sales

tax for five years vide GOMs No.

15/74/FIN(CT) dated 25-6-1974.”

On this the learned Senior Counsel argued that,

therefore, it had to be proved that the goods were

manufactured by the assessee and in the present

case since the palmolive oil did not change its

character on its being repacked by the assessee, it

could not be said that the assessee had

manufactured any goods. Learned counsel also

urges that in the absence of any definition of

26

“manufactured goods” in the Sales Tax Act, we

would have to fall back upon either the dictionary

meaning of the term or to borrow it from the Central

Excise Act. We are afraid, the contention cannot be

accepted in the wake of clear law laid down by this

Court in Vadilal Chemicals case (2005) 6 SCC 292.

We have already shown as to how the decision in

that case is applicable to the present situation. In

that view we are of the clear opinion that since in the

present case the exemption was granted to all smallscale industrial units registered with the Director of

Industries and since the assessee was recognised

and certified as a small industrial unit, engaged in

the activity of repacking of edible oil and further

since the exemption was granted with the open eyes

to this particular industry, the State cannot be

allowed to turn around and take a stance that the

appellant assessee was not entitled to the

exemption on the ground that it did not manufacture

any goods. We are in respectful agreement with the

view taken in Vadilal Chemicals case (2005) 6 SCC

292 which is more particularly reflected in paras 19

and 20 of that decision where this Court observed as

under: (SCC p. 298, para 20)

“20. In this case the State Sales Tax Act

contains no provision relating to ‘manufacture’.

The concept only finds place in the 1993 G.O.

issued by the Department of Commerce and

Industries. It appears from the context of the

other provisions of the 1993 G.O. that the word

‘manufacture’ had been used to exclude

dealers who merely purchased the goods and

resold the same on retail price. What the State

Government wanted was investment and

industrial activity. It is in this background that

the 1993 G.O. must be interpreted. (See CST v.

Industrial Coal Enterprises (1999) 2 SCC 607).

The exemption was granted in terms of the

27

1993 G.O. the thrust of which was to increase

industrial development in the State.”

8. We respectfully agree with the aforesaid

observations and would choose to take the same

view by accepting the contention of the appellant

that a liberal view of GOMs No. 15/74 dated 25-6-

1974 would have to be taken. We accordingly allow

the appeal, set aside the order passed by the High

Court and restore that of the Tribunal but without any

order as to costs.”

19. While construing an exemption in a sales tax statute, this

Court in CST v. Amara Raja Batteries Ltd (2009) 8 SCC 209 held:

“21. An exemption notification should be given a

literary (sic literal) meaning. Recourse to other

principles or canons of interpretation of statute

should be resorted to only in the event the same

give rise to anomaly or absurdity. The exemption

notification must be construed having regard to the

purpose and object it seeks to achieve. The

Government sought for increase in industrial

development in the State. Such a benevolent act on

the part of the State, unless there exists any

statutory interdict, should be given full effect. (See

Vadilal Chemicals Ltd. v. State of A.P. (2005) 6 SCC

292)”

20. Likewise, even under the Customs Act, this Court in Commr.

of Customs (Preventive) v. M. Ambalal & Co. (2011) 2 SCC 74

made a clear distinction between exemptions which are to be strictly

interpreted as opposed to beneficial exemptions having as their

28

purpose - encouragement or promotion of certain activities. This

case felicitously put the law thus follows:

“16. It is settled law that the notification has to be

read as a whole. If any of the conditions laid down in

the notification is not fulfilled, the party is not entitled

to the benefit of that notification. The rule regarding

exemptions is that exemptions should generally be

strictly interpreted but beneficial exemptions having

their purpose as encouragement or promotion of

certain activities should be liberally interpreted. This

composite rule is not stated in any particular

judgment in so many words. In fact, majority of

judgments emphasise that exemptions are to be

strictly interpreted while some of them insist that

exemptions in fiscal statutes are to be liberally

interpreted giving an apparent impression that they

are contradictory to each other. But this is only

apparent. A close scrutiny will reveal that there is no

real contradiction amongst the judgments at all. The

synthesis of the views is quite clearly that the

general rule is strict interpretation while special rule

in the case of beneficial and promotional exemption

is liberal interpretation. The two go very well with

each other because they relate to two different sets

of circumstances.”

21. This judgment was followed in CCE v. Favourite Industries

(2012) 7 SCC 153 (see paragraph 42).

22. A recent 5-Judge Bench judgment was cited by Shri Gupta in

Commr. of Customs v. Dilip Kumar & Co. (2018) 9 SCC 1. The 5-

Judge Bench was set up as a 3-Judge Bench in Sun Export

29

Corporation v. Collector of Customs 1997 (6) SCC 564 was

doubted, as the said judgment ruled that an ambiguity in a tax

exemption provision must be interpreted so as to favour the

assessee claiming the benefit of such exemption. This Court after

dealing with a number of judgments relating to exemption provisions

in tax statutes, ultimately concluded as follows:

“66. To sum up, we answer the reference holding as

under:

66.1. Exemption notification should be interpreted

strictly; the burden of proving applicability would be

on the assessee to show that his case comes within

the parameters of the exemption clause or

exemption notification.

66.2. When there is ambiguity in exemption

notification which is subject to strict interpretation,

the benefit of such ambiguity cannot be claimed by

the subject/assessee and it must be interpreted in

favour of the Revenue.

66.3. The ratio in Sun Export case [Sun Export

Corpn. v. Collector of Customs, (1997) 6 SCC 564]

is not correct and all the decisions which took similar

view as in Sun Export case stand overruled.”

23. It may be noticed that the 5-Judge Bench judgment did not

refer to the line of authority which made a distinction between

exemption provisions generally and exemption provisions which

30

have a beneficial purpose. We cannot agree with Shri Gupta’s

contention that sub-silentio the line of judgments qua beneficial

exemptions has been done away with by this 5-Judge Bench. It is

well settled that a decision is only an authority for what it decides

and not what may logically follow from it (see Quinn v. Leathem

[1901] AC 495 as followed in State of Orissa v. Sudhansu Sekhar

Misra (1968) 2 SCR 154 at 162,163)

24. This being the case, it is obvious that the beneficial purpose of

the exemption contained in Section 3(1)(b) must be given full effect

to, the line of authority being applicable to the facts of these cases

being the line of authority which deals with beneficial exemptions as

opposed to exemptions generally in tax statutes. This being the

case, a literal formalistic interpretation of the statute at hand is to be

eschewed. We must first ask ourselves what is the object sought to

be achieved by the provision, and construe the statute in accord with

such object. And on the assumption that any ambiguity arises in

such construction, such ambiguity must be in favour of that which is

exempted. Consequently, for the reasons given by us, we agree with

31

the conclusions reached by the impugned judgments of the Division

Bench and the Full Bench.

25. The matter can also be seen from a slightly different angle.

Where a High Court construes a local statute, ordinarily deference

must be given to the High Court judgments in interpreting such a

statute, particularly when they have stood the test of time (see State

of Gujarat v. Zinabhai Ranchhodji Darji (1972) 1 SCC 233 at

paragraph 10, Bishamber Dass Kohli v. Satya Bhalla (1993) 1

SCC 566 at paragraph 11, Duroflex Coir Industries Ltd. v. CST

1993 Supp (1) SCC 568 at paragraph 2, State of Karnataka v. G.

Seenappa 1993 Supp (1) SCC 648 at paragraph 3 and Bonam

Satyavathi v. Addala Raghavulu 1994 Supp (2) SCC 556 at

paragraph 4). This is all the more applicable in the case of tax

statutes where persons arrange their affairs on the basis of the legal

position as it exists.

32

26. In the result, the appeals filed by the State of Kerala are

dismissed. The appeal filed in Civil Appeal No.204 of 2012 is

allowed and the judgment of the Division Bench is set aside.

……………..………………J.

(R. F. Nariman)

………………………………J.

(B.R. Gavai)

New Delhi.

March 01, 2021.

33

Sections 419, 420, 323, 504 and 506 IPC,= Section 482 Cr.P.C. to quash chargesheet = the ingredients to constitute an offence under Section 420 are as follows: i) a person must commit the offence of cheating under Section 415; and ii) the person cheated must be dishonestly induced to a) deliver property to any person; or b) make, alter or destroy valuable security or anything signed or sealed and capable of being converted into valuable security. Thus, cheating is an essential ingredient for an act to constitute an offence under Section 420 IPC. Cheating is defined under Section 415 of the IPC. The ingredients to constitute an offence of cheating are as follows: 4 i) there should be fraudulent or dishonest inducement of a person by deceiving him: The person who was induced should be intentionally induced to deliver any property to any person or to consent that any person shall retain any property, or the person who was induced should be intentionally induced to do or to omit to do anything which he would not do or omit if he were not so deceived. Thus, a fraudulent or dishonest inducement is an essential ingredient of the offence under Section 415 IPC. A person who dishonestly induced any person to deliver any property is liable for the offence of cheating. 6. Now, keeping in mind the relevant ingredients for the offences under Sections 419 & 420 IPC, as noted hereinabove, it is required to be considered whether the averments in the complaint taken on their face do constitute the ingredients necessary for the offences under Sections 419 & 420 IPC, as alleged. Having gone through the complaint/FIR and even the chargesheet, it cannot be said that the averments in the FIR and the allegations in the complaint against the appellant constitute an offence under Section 419 & 420 IPC. Whatever allegations are made for the offence with respect to inducement and/or even giving Rs.5,00,000/- for obtaining the job, are made against the 5 appellant’s husband, co-accused.

Sections 419, 420, 323, 504 and 506 IPC,=  Section 482 Cr.P.C. to quash chargesheet = the ingredients to constitute an offence under Section 420 are as follows: i) a person must commit the offence of cheating under Section 415; and ii) the person cheated must be dishonestly induced to a) deliver property to any person; or b) make, alter or destroy valuable security or anything signed or sealed and capable of being converted into valuable security. Thus, cheating is an essential ingredient for an act to constitute an offence under Section 420 IPC. Cheating is defined under Section 415 of the IPC. The ingredients to constitute an offence of cheating are as follows: 4 i) there should be fraudulent or dishonest inducement of a person by deceiving him: The person who was induced should be intentionally induced to deliver any property to any person or to consent that any person shall retain any property, or the person who was induced should be intentionally induced to do or to omit to do anything which he would not do or omit if he were not so deceived. Thus, a fraudulent or dishonest inducement is an essential ingredient of the offence under Section 415 IPC. A person who dishonestly induced any person to deliver any property is liable for the offence of cheating. 6. Now, keeping in mind the relevant ingredients for the offences under Sections 419 & 420 IPC, as noted hereinabove, it is required to be considered whether the averments in the complaint taken on their face do constitute the ingredients necessary for the offences under Sections 419 & 420 IPC, as alleged. Having gone through the complaint/FIR and even the chargesheet, it cannot be said that the averments in the FIR and the allegations in the complaint against the appellant constitute an offence under Section 419 & 420 IPC. Whatever allegations are made for the offence with respect to inducement and/or even giving Rs.5,00,000/- for obtaining the job, are made against the 5 appellant’s husband, co-accused.

 NON-REPORTABLE

IN THE SUPREME COURT OF INDIA

CRIMINAL APPELLATE JURISDICTION

CRIMINAL APPEAL NO. 167 OF 2021

Archana Rana …Appellant

Versus

State of Uttar Pradesh and another …Respondents

J U D G M E N T

M.R. SHAH, J.

1. Feeling aggrieved and dissatisfied with the impugned judgment and order

dated 27.11.2019 passed by the High Court of Judicature at Allahabad in

Criminal Miscellaneous Application No. 5213 of 2018, by which the High

Court has dismissed the said application preferred by the appellant herein to

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quash chargesheet dated 10.05.2017 as well as the entire proceedings of Case

Crime No. 153 of 2016 under Sections 419, 420, 323, 504 and 506 IPC, P.S.

Kotwali, District Azamgarh, pending in the Court of learned Chief Judicial

Magistrate, Azamgarh, the appellant-original accused No. 2 has preferred the

present appeal.

2. That respondent no.2 – complainant lodged an FIR against the appellant

herein and her husband for the offences under Sections 419, 420, 323, 504 and

506 IPC alleging, inter alia, that the appellant’s husband had taken a sum of

Rs.5,00,000/- from him for getting his son employed. However, his son did not

get any employment and subsequently when they went to the house of the

appellant to ask for the return of the money, the appellant assaulted the

complainant and threatened to get them falsely implicated in criminal cases and

the appellant pushed/thrown him and his son from her house. The same was

registered as Case Crime No. 153/2016 with P.S. Kotwali, District Azamgarh.

Thereafter, the investigating officer filed the chargesheet against the appellant

herein and one another for the offences under Sections 419, 420, 323, 504 and

506 IPC.

2.1 That the appellant herein approached the High Court by way of criminal

miscellaneous application No. 5213 of 2018 under Section 482 Cr.P.C. to quash

chargesheet dated 10.05.2017 as well as the entire criminal proceedings. By the

impugned judgment and order, the High Court has dismissed the said

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application and has refused to quash the criminal proceedings/chargesheet.

Hence, the appellant has preferred the present appeal.

3. Learned counsel appearing on behalf of the appellant herein has

vehemently submitted that on a bare reading of the FIR and even the

chargesheet and the allegations taken on their face, no case is made out against

the appellant herein. It is submitted that at least no case is made out against the

appellant for the offences under Sections 419 & 420 IPC. It is submitted that

even if the averments in the complaint taken on their face do not constitute the

ingredients necessary for the offence or do not disclose the commission of an

offence under IPC. It is submitted that therefore the High Court ought to have

quashed the criminal proceedings against the appellant herein for the offences

under Sections 419, 420, 323, 504 and 506 IPC. Heavy reliance is placed on the

decision of this Court in the case of Prof. R.K. Vijayasarathy v. Sudha

Seetharam (2019) 16 SCC 739 and Dr. Lakshman v. State of Karnataka (2019)

9 SCC 677.

4. Learned counsel appearing on behalf of the respondent-State is not in a

position to satisfy the Court how a case is made out against the appellant herein

for the offences under Sections 419 & 420 IPC. However, it is submitted that at

least a case is made out against the appellant herein for the other offences, i.e.,

for the offences under Sections 323, 504 & 506 IPC.

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4.1 Though served, nobody appears on behalf of respondent no.2 –

complainant.

5. Having heard learned counsel appearing on behalf of the appellant and

learned counsel appearing on behalf of the respondent-State and having gone

through the averments in the complaint and the chargesheet, even if the

averments made in the complaint are taken on their face, they do not constitute

the ingredients necessary for the offence under Sections 419 & 420 IPC. As

observed and held by this Court in the case of Prof. R.K. Vijayasarathy (supra),

the ingredients to constitute an offence under Section 420 are as follows:

i) a person must commit the offence of cheating under Section 415; and

ii) the person cheated must be dishonestly induced to

a) deliver property to any person; or

b) make, alter or destroy valuable security or anything signed or

sealed and capable of being converted into valuable security.

Thus, cheating is an essential ingredient for an act to constitute an offence under

Section 420 IPC. Cheating is defined under Section 415 of the IPC. The

ingredients to constitute an offence of cheating are as follows:

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i) there should be fraudulent or dishonest inducement of a person by

deceiving him:

The person who was induced should be intentionally induced to deliver

any property to any person or to consent that any person shall retain any

property, or

the person who was induced should be intentionally induced to do or to

omit to do anything which he would not do or omit if he were not so deceived.

Thus, a fraudulent or dishonest inducement is an essential ingredient of

the offence under Section 415 IPC. A person who dishonestly induced any

person to deliver any property is liable for the offence of cheating.

6. Now, keeping in mind the relevant ingredients for the offences under

Sections 419 & 420 IPC, as noted hereinabove, it is required to be considered

whether the averments in the complaint taken on their face do constitute the

ingredients necessary for the offences under Sections 419 & 420 IPC, as

alleged.

Having gone through the complaint/FIR and even the chargesheet, it

cannot be said that the averments in the FIR and the allegations in the complaint

against the appellant constitute an offence under Section 419 & 420 IPC.

Whatever allegations are made for the offence with respect to inducement

and/or even giving Rs.5,00,000/- for obtaining the job, are made against the

5

appellant’s husband, co-accused. There are no allegations at all that the

appellant herein induced the complainant to get the job and the amount of

Rs.5,00,000/- was given to the appellant herein. Therefore, even if all the

allegations in the complaint taken at the face value are true, in our view, the

basic essential ingredients of cheating are missing. Therefore, this was a fit case

for the High Court to exercise the jurisdiction under Section 482 Cr.P.C. and to

quash the criminal proceedings against the appellant herein for the offences

under Section 419 & 420 IPC. The High Court has failed to exercise the

jurisdiction vested in it by not quashing the criminal proceedings against the

appellant herein for the offences under Sections 419 & 420 IPC.

7. Now so far as the FIR/chargesheet/criminal proceedings against the

appellant herein for the other offences, namely, under Sections 323, 504 & 506

IPC are concerned, the High Court has rightly not quashed the criminal

proceedings qua the said offences.

8. In view of the above and for the reasons stated above, the present appeal

is allowed in part. The criminal proceedings against the appellant herein for the

offences under Section 419 & 420 IPC arising out of Case Crime No. 153/2016,

registered with P.S. Kotwali, District Azamgarh, pending in the Court of learned

Chief Judicial Magistrate, Azamgarh are hereby quashed and set aside.

The criminal proceedings against the appellant herein for the offences

under Sections 323, 504 & 506 IPC, pending in the Court of learned Chief

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Judicial Magistrate, Azamgarh, shall be continued as per the chargesheet and

shall be disposed of in accordance with law, on their own merits.

………………………………….J.

[Dr. Dhananjaya Y. Chandrachud]

New Delhi; …………………………………J.

March 01, 2021. [M.R. Shah]

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