Sales Tax Officer, Cuttack and Another vs M/S. B. C. Patel and Co

Rewritten Version Notice: This is a rewritten version of the original judgment.

Court: Supreme Court of India

Case Number: Civil Appeal No. 230 of 1956

Decision Date: 15 April 1958

Coram: S.K. Das, A.K. Sarkar

In the case titled Sales Tax Officer, Cuttack and Another versus M/s B C Patel & Co, the Supreme Court of India delivered its judgment on 15 April 1958. The bench that heard the matter included Justice S K Das, Justice A K Sarkar, Justice C J Sudhi Ranjan, Justice T L Aiyyar, Justice Venkatarama Das, and Justice Vivian Bose. The citation for the decision is reported as 1958 AIR 643 and 1959 SCR 520. The case concerned the validity of a notification issued under Section 4 of the Orissa Sales Tax Act, 1947 (Orissa Act XIV of 1947) and the assessment of sales tax for periods both before and after the commencement of the Constitution of India, specifically in relation to Article 186.

This appeal was filed by the sales‑tax authorities against an order of the Orissa High Court, which had been passed under Article 226 of the Constitution. The High Court had set aside five assessment orders covering five quarters that had been made against the respondents, who were engaged in the collection and sale of Kendu leaves in the former Feudatory State of Pallaliara. That princely state had merged into the province of Orissa on 1 January 1948, and the provisions of the Orissa Sales Tax Act were extended to it on 1 March 1949. On that same date the Government of Orissa issued a notification under sub‑section 4(1) of the Act, stating that the 31st of March 1949 would be appointed as the effective date from which any dealer whose gross turnover for the year ending 31 March 1949 exceeded Rs 5,000 would be liable to pay tax under the Act on sales made after that date.

Section 4 of the Act, inter alia, provided that the Provincial Government could, by notification in the Gazette, appoint a date not earlier than thirty days after the notification, from which every dealer whose gross turnover during the year immediately preceding the commencement of the Act exceeded Rs 5,000 would become liable to tax on sales effected after the notified date. Sub‑section 2 further provided that any dealer to whom sub‑section 1 did not apply would become liable with effect from the commencement of the year immediately following the year in which his gross turnover first exceeded Rs 5,000.

The respondents acknowledged that the goods were delivered for consumption at various locations outside the State. Nevertheless, the Sales Tax Officer and the Assistant Collector, who were respondents in the appeal, proceeded on the premise that the sales had taken place within the State. Accordingly, they held that the respondents were liable to sales tax for all five quarters—two quarters that fell before the Constitution came into force and three quarters that fell after.

The respondents argued before the High Court that the notification issued under section 4(1) of the Act was invalid because it contradicted the provisions of that sub‑section. They further contended that, as a result, no portion of the charging provision could legally come into force. Additionally they maintained that the assessment for the three quarters following the commencement of the Constitution was invalid on the ground of Article 286 of the Constitution. The High Court ruled entirely in favour of the assessee, holding that the decision of the Court concerning the three post‑Constitution quarters was correct and must be upheld. The assessment orders for those quarters were found to contravene both Article 286 of the Constitution and section 30(r)(a)(1) of the Orissa Sales Tax Act, rendering them without jurisdiction and subject to set‑aside. Regarding the two quarters that fell before the Constitution, the Court held that the assessee was clearly liable under section 4(2) of the Act. Justice Das C.J. and Justice Venkatarama Aiyar observed that the first part of the impugned notification, which appointed the date from which liability was to commence, complied with section 4(1) and was therefore intra vires. They further stated that the second part, which identified the class of dealers liable, went beyond the authority of that section and was consequently ultra vires and invalid. Because the two parts were severable, the Court concluded that the invalidity of the second part did not affect the validity of the first part. Accordingly, the first part brought the charging provision into operation, making the assessee liable for the two pre‑Constitution quarters under section 4(1). Justices S. K. Das and Vivian Bose added that it would be incorrect to treat the second part of the notification as mere surplusage that could be severed without affecting the rest. They explained that liability under section 4(1) could arise only after a valid notification issued in conformity with that sub‑section. Because no such notification existed, the assessee was not liable under section 4(1), and that provision therefore did not come into operation. The Court held that subsections (1) and (2) of section 4 were mutually exclusive, each applying for different periods. Consequently both could not operate simultaneously, and no notification was required to bring subsection (2) into force. Since the goods had been sold and delivered for consumption outside the State of Orissa, the Court, relying on Article 286(1)(a) with its Explanation, concluded that the sales were outside the State. The Court also applied section 30(1)(a)(1) of the Act and held that, consequently, the assessment for the three post‑Constitution quarters was without jurisdiction. The judgment referred to the decisions in State of Bombay v. United Motors (India) Ltd., [1953] S.C.R. 1069 and The Bengal Immunity Company Limited v. State of Bihar, [1955] 2 S.C.R. 603.

The Court observed that liability under section 4(1) of the Act could arise only after a specific date had been appointed by a notification. In the case before it, the notification that purported to fix such a date did not conform to the wording of that sub‑clause; consequently, no date had actually been fixed. Because the sub‑clause required a fixed date to become operative, it could not be applied and no liability could arise under it. The Court held that it was impossible to disregard the second part of the same notification as a mere surplusage, since the notification read as a whole conveyed a single, coherent meaning. The State could not contend that the language used in the notification did not reflect its true intention. Both sub‑clauses of section 4 had been brought into force simultaneously by the same notification, and therefore they applied to all dealers together. The statutory scheme contemplated a situation in which a dealer might become liable under sub‑clause (1). Moreover, the Court found that, by the design of the Act, sub‑clause (2) was not intended to have any effect until a date had been appointed under sub‑clause (1); only after such a date could liability under sub‑clause (2) arise.

The judgment was rendered in civil appellate jurisdiction for Civil Appeal No. 230 of 1956, which had been filed by special leave against the judgment and order dated 12 April 1955 of the Orissa High Court in O.J.C. No. 60 of 1952. The appeal was presented by counsel for the appellants, while counsel for the respondent appeared on the other side. The decision was delivered on 15 April 1958. The judgment of the Chief Justice and Justice Venkatarama Aiyar was announced by the Chief Justice, and the judgment of Justices S.K. Das and Vivian Bose was read by Justice S.K. Das. Justice Sarkar delivered a separate opinion. The Court noted that the appeal should be allowed in part, but it chose to base its reasoning on a material point that differed from the one adopted by Justice S.K. Das in his opinion. The Court then recounted the legislative history of the Orissa Sales Tax Act, 1947 (Orissa XIV of 1947), which had received the Governor‑General’s assent on 26 April 1947, bringing section I into force. On 1 August 1947, the Government of Orissa issued a notification in the Gazette that brought the remainder of the Act into operation throughout the province as it then existed. The Court reproduced the text of section 4 as it stood at all material times, stating: “4(1) Subject to the provisions of sections 5, 6, 7 and 8 and with effect from such date as the Provincial Government may, by notification in the Gazette, appoint, being not earlier than thirty days after the date of the said notification, every dealer whose gross turnover during the year immediately preceding the commencement of this Act exceeded Rs 5,000…”

The statute provided that a dealer whose gross turnover in the year immediately preceding the commencement of the Act exceeded five thousand rupees would become liable to pay tax on all sales made after the date specified in a government notification. The provision also stated that tax would not be payable on any sale that formed part of a contract which the Collector was satisfied had been entered into by the dealer on or before the notified date. The Act further provided that any dealer to whom the first sub‑section did not apply would become liable to pay tax from the beginning of the year following the year in which his gross turnover first exceeded five thousand rupees. Once a dealer became liable to pay tax, he would remain liable until three consecutive years passed during which his gross turnover failed to exceed five thousand rupees, after which a further period prescribed by law could extend the liability; the liability would cease at the end of that latter period. If a dealer’s liability ceased under that provision, he would become liable again from the start of the year immediately after the year in which his gross turnover once more exceeded five thousand rupees. A notification issued on 14 August 1947 by the Government of Orissa declared that 30 September 1947 would be the date from which the relevant sub‑section would take effect throughout the province as it then existed. Subsequently, on 1 January 1948, the feudatory State of Pallahara was merged into the province of Orissa by a covenant of merger executed by its ruler. Exercising powers delegated by the Government of India under the then‑known Extra‑Provincial Jurisdiction Act, 1947, the Government of Orissa issued, on 14 December 1948, a notification under section 4 of that Act to extend the Orissa Sales Tax Act to the territories of the former feudatory States, including the newly merged Pallahara. On 1 March 1949, a further notification under section 1(3) brought sections 2 to 29 of the Sales Tax Act into force in these added territories.

On the same day, the Government of Orissa issued another notification under section 4(1) of the Sales Tax Act. This notification, framed in the language of subsection 1 of section 4, appointed 31 March 1949 as the date from which every dealer whose gross turnover during the year ending on that date exceeded five thousand rupees would be liable to pay tax on sales effected after 31 March 1949. Following the issuance of this notification, the respondents were approached to be made liable for tax under the Act. Accordingly, they were assessed for tax for five... (the text subsequently continues with details of the assessment periods).

The respondents were assessed for five separate quarterly periods, namely the quarters ending on 30 September 1949, 31 December 1949, 30 June 1950, 30 September 1950 and 31 December 1950. It was observed that the first two quarters occurred before the Constitution of India came into force, whereas the remaining three quarters fell after the Constitution had become operational. The Sales Tax Officer of Cuttack had made sales‑tax assessments against the respondents for each of these five quarters under the relevant Act, and the respondents’ multiple appeals against those assessment orders were rejected on 12 April 1952. Consequently, the respondents instituted a petition under Article 226 of the Constitution before the Orissa High Court, seeking, among other relief, a writ of certiorari to set aside the assessment orders and an injunction preventing the appellants from collecting the assessed tax or from making any further assessments against them. The respondents argued before the High Court that the notification issued by the Government of Orissa on 1 March 1949, pursuant to section 4(1), was invalid because it contravened the provisions of that subsection; therefore, the charging provision could not have come into force and the respondents claimed they were not liable for tax in any of the five quarters. Regarding the three quarters that fell after the Constitution’s commencement, the respondents advanced an additional plea that the assessment orders for those periods were void because they violated the provisions of Article 286 of the Constitution. The High Court accepted both arguments and, in its judgment and order dated 12 April 1955, set aside all of the assessments. Both the Sales Tax Officer of Cuttack and the Collector of Commercial Taxes of Cuttack appealed the High Court’s judgment and order. Concerning the assessment orders for the three post‑Constitution quarters, the High Court’s decision was based on the Supreme Court’s earlier ruling in State of Bombay v. United Motors (India) Ltd., reported in 1953 SCR 1069. The Supreme Court, as explained by Justice S. K. Das, held that those assessment orders were invalid under clause (1) of Article 286 as well as under section 30(1)(a) of the Act, and therefore the High Court was correct in finding them without jurisdiction. However, the present Court reached a different conclusion with respect to the assessment orders for the two quarters that preceded the Constitution. The Court now proceeds to explain its reasons. The contested notification, previously noted, had been issued on 1 March 1949 under section 4(1) of the Act. That subsection provides that any dealer whose gross turnover in the year immediately preceding the commencement of the Act exceeds Rs 5,000 shall become liable to tax under the Act on sales made after the date specified in the notification.

Section 4(1) of the Act, by its very language, fixed the category of persons who would be liable to pay the tax, namely those dealers whose gross turnover in the year immediately preceding the commencement of the Act exceeded Rs 5,000. The same provision, however, left to the provincial Government only the authority to specify, by a notification published in the Official Gazette, the particular date from which the liability would become effective. Consequently, the sole power that Section 4(1) conferred on the Government was the power to declare, through an official Gazette notification, the commencement date for the tax liability that would attach to the dealers already identified in the subsection.

The Government of Orissa issued a notification, quoted earlier, stating that it was acting “in exercise of the powers conferred by sub‑section (1) of section 4” and that it appointed 31 March 1949 as the date from which the tax liability would begin. Determining the class of dealers liable to pay the tax was not within the Government’s competence, because that classification had already been settled by Section 4(1) itself. Accordingly, the portion of the notification that fixed 31 March 1949 as the effective date was a proper exercise of the authority granted by the subsection. Nevertheless, the notification went beyond that authority when it declared that all dealers whose gross turnover during the year ending 31 March 1949 exceeded Rs 5,000 should be liable to tax under the Act. This statement contradicted the clear terms of Section 4(1), which limited liability to dealers whose turnover in the year immediately preceding the Act’s commencement—whether that commencement is dated 14 December 1948 under the extension to feudatory States or 1 March 1949 under the later notification—exceeded Rs 5,000. In either case, the relevant prior year was the period from 1 April 1947 to 31 March 1948. Thus, while the first part of the impugned notification correctly exercised the Government’s power by fixing the commencement date, the latter part improperly attempted to redefine the class of liable dealers, a power that the statute did not vest in the Government. The portion of the notification that purports to determine the liable class of dealers is therefore invalid. The immediate issue that arises is whether the entire notification must be declared void, as held by the High Court and suggested by the learned brother, or whether the two parts can be severed, allowing the valid date‑setting portion to remain in force while rejecting the invalid clause that overstepped the Government’s statutory authority.

In considering the notification, the Court examined whether the entire instrument should be declared void, as the High Court had done, or whether it could be partially upheld by separating the portion that conformed with the authority granted under section 4(1) from the portion that exceeded the powers of the Government of Orissa. The question of severability therefore arose. The Court found no obstacle to treating the part of the notification that went beyond the statutory powers as a separate, severable portion, because the authority to designate a commencement date for liability did not depend on the authority to identify the class of persons liable. It could not be said that the Government would have omitted the date altogether had it known that it lacked power to fix the liable class. Consequently, the Court concluded that the segment of the notification appointing 31 March 1949 as the effective date for the liability to pay tax was valid, while the remainder, which attempted to define the liable dealers, was invalid and must be regarded as surplus without any legal effect. As a result, the charging provision was effectively brought into force, becoming operative, and dealers could be charged under the appropriate part of that provision.

Although the notification also stipulated that dealers whose gross turnover exceeded Rs 5,000 during the year ending 31 March 1949 would be liable to pay tax, the sales tax authorities examined only the turnover for that year and did not investigate the turnover for the year immediately preceding the commencement of the Act, namely the financial year from 1 April 1947 to 31 March 1948. Had that issue required resolution, the case would have needed to be remanded to the Sales Tax Officer to determine whether the respondents’ turnover for the 1947‑1948 year surpassed Rs 5,000. However, a remand was unnecessary because the appeal judgment indicated that the respondents would have been liable for the period from 1 April 1949 to 26 January 1950, provided a valid notification under subsection (1) of section 4 had been issued. This concession effectively admitted that the respondents’ turnover for the financial year ending 31 March 1948, the year immediately before 31 March 1949, exceeded Rs 5,000.

The Court observed that the gross turnover of the respondents for the financial year that ended on March 31 1949 had exceeded Rs 5,000. It had previously held that the notification issued under section 4(1), which designated March 31 1949 as the date from which liability to pay sales tax would arise, was legally valid and enforceable. That determination, together with the concession already admitted, eliminated any need to remit the matter back to the sales‑tax authorities for further inquiry. The Court further noted that even if, contrary to the concession, it were assumed that the respondents’ turnover for the financial year ending March 31 1948 had not crossed the Rs 5,000 threshold and consequently section 4(1) would not apply to them, the respondents would nonetheless remain liable to pay sales tax for the two quarters that fell before the commencement of the Constitution, pursuant to section 4(2). On the basis of the reasons previously articulated, the Court concluded that the assessment orders issued for the three quarters occurring after the Constitution had come into force were invalid. Accordingly, the appeal was dismissed insofar as it challenged the portion of the High Court’s order that had set aside those three post‑Constitution assessment orders. Conversely, the Court found that the assessments for the two quarters preceding the Constitution were valid for the reasons already explained, and therefore the appeal was allowed to the extent that it contested the High Court’s order cancelling those two pre‑Constitution assessments on the ground that the notification under section 4(1) of the Act was wholly invalid. In view of these findings, the Court directed that each party bear its own costs in both the High Court and the present proceedings. The appeal, filed on behalf of the assessing authorities of Cuttack, had been instituted under the special leave granted on January 17 1956 to challenge the judgment and order of the Orissa High Court dated April 12 1955, which had set aside certain sales‑tax assessment orders against the respondent. The respondent, Messrs B.C. Patel and Co., was a partnership engaged in the collection and sale of Kendu leaves, with its headquarters at Pallahara – a former Feudatory State of Orissa that had been merged into the province by a merger agreement dated January 1 1948. The Cuttack sales‑tax authorities had assessed the respondent for sales of Kendu leaves covering five quarters that ended on September 30 1949, December 31 1949, June 30 1950, September 30 1950 and December 31 1950. The Court noted that two of these quarters fell before the Constitution’s commencement, while the remaining three were post‑Constitutional periods. The authorities had found, among other facts, that the respondent collected Kendu leaves in Orissa and sold them.

The respondent sold Kendu leaves to various merchants in Calcutta, Madras and other locations after receiving orders from those merchants. The goods were dispatched either for Talcher or for Calcutta, and the sale price was collected by sending the purchasers bills for payment. It was admitted that the leaves were ultimately delivered for consumption at places outside the State of Orissa. Nevertheless, the Sales Tax authorities proceeded on the premise that all of those sales were deemed to have taken place in Orissa, even though the actual consumption occurred elsewhere. On the basis of this premise, the Sales Tax Officer of Cuttack issued five separate assessment orders dated 31 May 1951, concluding that because the sales were held to have taken place in Orissa, the respondent was clearly liable to pay sales tax for the period before the Constitution came into force. For the period after the Constitution, although the sales fell within clause (2) of Article 286 of the Constitution, the Officer held that the respondent remained liable to sales tax under the Sales Tax Continuance Order, 1950, issued by the President. These findings were upheld by the Assistant Collector of Sales Tax, Orissa, when he affirmed the assessments by order dated 12 April 1952.

Subsequently, the respondent filed a petition under Article 226 of the Constitution in the High Court of Orissa, seeking a writ of certiorari or any other appropriate writ to quash the assessment orders. The respondent contended that both the pre‑Constitution and post‑Constitution assessment orders were invalid and beyond the jurisdiction of the tax authorities. The High Court accepted this contention and declared that the assessment orders for the entire period were indeed invalid and without jurisdiction. The present appeal challenges that judgment and order of the High Court dated 12 April 1955. Although the respondent had earlier attempted, before the tax authorities and before the High Court, to demonstrate that no completed sales occurred in Orissa and that the transactions merely constituted agreements to sell, that issue no longer remains for consideration. The tax authorities had rejected that argument, and the High Court chose not to address it in its decision. Instead, the High Court relied on other grounds presented by the respondent, and the present Court now examines the validity of those grounds. The grounds differ for the two distinct periods—pre‑Constitution and post‑Constitution—and it is convenient to address each period separately. Before doing so, it is necessary to set out certain facts concerning the enactment and enforcement of the Orissa Sales Tax Act, 1947 (Orissa Act XIV of 1947), hereafter referred to as “the Act,” both in the old province of Orissa and in the former Feudatory State of Pallahara. The Act received the assent of the Governor‑General on 26 April 1947 and was first published in the Orissa Gazette on 14 May 1947.

The Orissa Sales Tax Act, 1947 was first published in the Orissa Gazette on 14 May 1947. Section I of the Act became effective immediately throughout the old province of Orissa. Sub‑section (3) of that same section provided that the remainder of the Act would become operative only on a date that the Provincial Government might specify by issuing a notification in the Gazette. Accordingly, the Provincial Government of Orissa issued a notification on 1 August 1947 declaring that the rest of the Act would come into force in the province on a date to be fixed later. At this point the Court found it necessary to refer to the charging clause of the Act, namely section 4, as it stood at the relevant time. Section 4 read as follows: “4. (1) Subject to the provisions of sections 5, 6, 7 and 8 and with effect from such date as the Provincial Government may, by notification in the Gazette, appoint, being not earlier than thirty days after the date of the said notification, every dealer whose gross turnover during the year immediately preceding the commencement of this Act exceeded Rs 5,000 shall be liable to pay tax under the Act on sales effected after the date so notified. (2) Every dealer to whom subsection (1) does not apply shall be liable to pay tax under this Act with effect from the commencement of the year immediately following that during which his gross turnover first exceeded Rs 5,000. (3) Every dealer who has become liable to pay tax under this Act shall continue to be so liable until the expiry of three consecutive years, during each of which his gross turnover has failed to exceed Rs 5,000 and such further period after the date of such expiry as may be prescribed and on the expiry of this latter period his liability to pay tax shall cease. (4) Every dealer whose liability to pay tax has ceased under the provision of sub‑section (3) shall again be liable to pay tax under this Act with effect from the commencement of the year immediately following that during which his gross turnover again exceeds Rs 5,000.”

The Court noted that liability under sub‑section (1) of section 4 could arise only after the Provincial Government issued a notification fixing the date from which dealers whose gross turnover in the year immediately preceding the commencement of the Act exceeded Rs 5,000 would become liable to pay tax on sales made after that date. Such a notification was indeed issued for the old province of Orissa on 30 August 1947. The notification fixed 30 September 1947 as the date from which every dealer whose gross turnover for the year ending 31 March 1947 exceeded Rs 5,000 became liable to pay tax under the Act on sales effected thereafter. This established the tax liability regime in the old province of Orissa. The Court also recalled that the ex‑Feudatory State of Pallahara had subsequently been merged into the old province of Orissa, a fact that would affect the application of the Act to that territory.

After the former Feudatory State of Pallahara was merged into the old province of Orissa by a merger agreement dated 1 January 1948, the Government of Orissa, acting under the delegated authority of the Central Government and exercising the powers granted by section 4 of the Extra Provincial Jurisdiction Act, 1947 (then numbered XLVII of 1947), extended the application of the Orissa Sales Tax Act, 1947 to the former Orissa States, including Pallahara, by issuing a notification on 14 December 1948. The only alteration made in that extension was to replace the expression “Province of Orissa” with the expression “Orissa States” wherever the former phrase appeared in the Act. The mere extension of the Act to the Orissa States on 14 December 1948 did not automatically bring all its provisions into operation in that territory, because a separate notification under sub‑section (3) of section 1 was required to commence sections 2 to 29. Accordingly, on 1 March 1949 the Government issued the following notification: “In exercise of the powers conferred by sub‑section (3) of section 1 of the Orissa Sales Tax Act, 1947 (Orissa Act XIV of 1947), as applied to Orissa States, the Government of Orissa are pleased to appoint the 1st day of March, 1949, as the date on which sections 2 to 29 of the said Act shall come into force.” Thus, section 1 of the Act became operative in Pallahara on 14 December 1948, while the remaining provisions—those dealing with a dealer’s liability to pay sales tax, the mechanisms for tax collection, and other ancillary matters—came into force on 1 March 1949. In addition, a notification under sub‑section (1) of section 4 was necessary to create liability under that subsection in the area, and such a notification was also issued on 1 March 1949. The full text of that notification, which is a material point for the Court’s decision on its validity, reads: “In exercise of the powers conferred by sub‑section (1) of section 4 of the Orissa Sales Tax Act, 1947 (Orissa Act XIV of 1947), as applied to Orissa States, the Government of Orissa are pleased to appoint the 31st March, 1949, as the date with effect from which every dealer whose gross turnover during the year ending the 31st March, 1949, exceeded Rs. 5,000 shall be liable to pay tax under the said Act on sales effected after the said date.” Finally, it is necessary to note the definition of “dealer” contained in section 2(c), which provides that a “dealer” means any person who carries on the business of selling or supplying goods in Orissa, whether for commission, remuneration or otherwise, and includes any firm or a Hindu joint family, as well as any society, club or association that sells or supplies goods to its members.

The term “year” was specifically defined in subsection 2(j) of the Act to mean the financial year. Concerning the period that preceded the Constitution, the High Court determined that the notification issued under subsection (1) of section 4 on 1 March 1949 was invalid. Because the notification was held to be invalid, the Court concluded that the respondent could not be said to be liable for tax under that subsection for any transactions that occurred during the pre‑Constitution period. The Court then explained the precise reason for declaring the notification invalid. Subsection (1) of section 4 was designed to achieve two separate objectives. First, it was intended to set a “relevant date” – a date that could not be earlier than thirty days after the issuance of the notification – from which point onward the tax liability would commence. Second, it sought to impose a liability on every dealer whose gross turnover in the “relevant period”, namely the financial year immediately preceding the commencement of the Act, exceeded the sum of Rs 5,000. Accordingly, the tax liability attached only to sales that took place after the notified date, a date that necessarily fell after the Act had come into force. However, to decide which dealers fell within the scope of the tax, the crucial factor was the turnover during the year immediately before the Act’s commencement, as expressly stated in the subsection. Thus, the provision contemplated two distinct elements: a relevant date and a relevant period. In the case of the former province of Orissa, no difficulty arose because the notification identified 30 September 1947 as the relevant date, and the year immediately preceding the Act’s commencement in that province – the financial year 1946‑47, spanning 1 April 1946 to 31 March 1947 – as the relevant period. Consequently, any dealer whose turnover exceeded Rs 5,000 during 1946‑47 became liable under subsection (1) of section 4 for tax on sales made after 30 September 1947 in the old province of Orissa. By contrast, the notification applicable to the Orissa States fixed 31 March 1949 as the relevant date, but incorrectly used the financial year ending on that same date, i.e., 1 April 1948 to 31 March 1949, as the relevant period for identifying liable dealers. This error was material because subsection (1) required the relevant period to be the financial year immediately preceding the Act’s commencement. The Act in the Orissa States had commenced either on 14 December 1948 or on 1 March 1949, making the financial year immediately prior to commencement the year 1947‑48 (1 April 1947 to 31 March 1948). Had the notification correctly referred to the year ending 31 March 1948 instead of 31 March 1949, it would have complied with the statutory scheme. The High Court therefore held that the mistake in the notification rendered the assessments for the two quarters of the pre‑Constitution period invalid and beyond the jurisdiction of the assessing authority. The learned Solicitor‑General, who appeared for the appellants, acknowledged that such a mistake occurred.

In this case the counsel appearing for the appellants admitted that the notification contained a mistake. However, he advanced two arguments. First, he contended that the mistake was immaterial because the liability to tax arose under the relevant subsection and not from the notification itself, and therefore any error in the notification could not affect the liability. He further submitted that the words and figures that caused the mistake were merely surplusage and could be severed from the remainder of the notification. The Court was not persuaded by this submission. It held that, for a liability to arise under subsection (1) of section 4, the issuance of a valid notification is an essential prerequisite. Without a notification that complies with the statutory requirements, no tax liability can arise. The notification not only fixed the applicable date but also determined the period for identifying the class of dealers subject to liability. By making an error in fixing that period, the notification failed to conform with the law, and it could not be severed in the manner suggested by the learned solicitor‑general.

The second argument concerned whether the assessment orders for the pre‑Constitution period could be justified under subsection (2) of section 4. The High Court had held that they could not, offering two reasons: that subsections (1) and (2) were mutually exclusive, and that the opening words of subsection (2) – “every dealer to whom subsection (1) does not apply …” – barred its operation in this case. The High Court reasoned that had the notification under subsection (1) been correctly drafted, it would have applied to the respondent, and consequently the opening words of subsection (2) would exclude the respondent from its operation. While this reasoning appeared to have some force at first glance, the Court, upon closer examination, rejected it. It clarified that the two subsections are mutually exclusive only in the sense that they operate in different fields, because the periods to which they apply are different. Subsection (1) applies to the year immediately preceding the commencement of the Act, whereas subsection (2) does not require any notification and imposes liability on every dealer from the commencement of the year immediately following the year in which his gross turnover first exceeded Rs 5,000. Thus, the crucial year for subsection (1) is the year before the Act began, while for subsection (2) it is the year after a dealer’s turnover first crosses the threshold. This distinction undermines the High Court’s view that the pre‑Constitution assessments could be justified under subsection (2).

In the present matter the Court explained that the crucial year for sub‑section (1) is the year immediately preceding the commencement of the Act, whereas the crucial year for sub‑section (2) is the year in which a dealer’s gross turnover first exceeds Rs 5,000. The Court accepted that both sub‑sections cannot operate for the same relevant year because sub‑section (2) expressly provides that it applies only to dealers to whom sub‑section (1) does not apply.

To illustrate the distinction, the Court referred to the year 1946‑47 in the former Province of Orissa. That year was the year immediately before the Act took effect in that area, and consequently sub‑section (1) applied to every dealer whose gross turnover exceeded Rs 5,000, whether the turnover was first‑time or not. Sub‑section (2) did not apply to those dealers even if their turnover first exceeded Rs 5,000 in that year, because where sub‑section (1) is in force, sub‑section (2) is excluded.

The factual situation before the Court, however, concerned the Pallahara area. In that area the year immediately preceding the commencement of the Act was 1947‑48. Sub‑section (1) would have applied to the respondent only if the notification issued by the Provincial Government had specified that year. No such notification was issued, and therefore the Court did not need to determine whether the respondent’s turnover exceeded Rs 5,000 in 1947‑48.

The Court found that the respondent’s gross turnover first exceeded Rs 5,000 in the year ending 31 March 1949, that is, in the financial year 1948‑49. This year was not the year immediately preceding the commencement of the Act in the Pallahara area, and consequently sub‑section (1) could not be invoked against the respondent. Nonetheless the respondent clearly fell within the operation of sub‑section (2). The Act became operative in the Orissa States on 1 March 1949, and by 31 March 1949 the respondent’s turnover had surpassed Rs 5,000. Accordingly, the respondent became liable to pay tax under sub‑section (2) with effect from the commencement of the year immediately following 31 March 1949, namely from 1 April 1949.

The respondent argued that the term “first” in sub‑section (2) should be interpreted as “first after the commencement of the Act.” Even if that interpretation were accepted, the Court observed that the respondent’s turnover first exceeded Rs 5,000 in the year ending 31 March 1949, which was after the Act had come into force on 1 March 1949. Hence the respondent nonetheless satisfied the condition of “first” under sub‑section (2) and remained liable under that provision.

Having examined the facts, the Court concluded that all the conditions of sub‑section (2) were fulfilled. Therefore the two assessment orders issued against the respondent for the pre‑Constitution period were validly made under sub‑section (2) of section 4 of the Act. The Court noted that the invalid notification under sub‑section (1) merely meant that no liability arose under that sub‑section and no dealer could be held liable under it. However, this failure did not relieve any dealer who properly fell within sub‑section (2) from the obligation to pay tax. In other words, the absence of a valid notification for sub‑section (1) did not create a loophole that would allow a dealer subject to sub‑section (2) to escape liability.

The Court then turned its attention to the period after the Constitution came into force. The High Court had declared the assessment orders issued in that period to be invalid, basing its short ground on a previous Supreme Court decision in The State of Bombay v. The United Motors (India) Ltd. (1). The High Court quoted the earlier decision, stating that clause (1) of Article 286 prohibited a State from imposing tax on a sale unless the sale occurred within the State, as clarified by the Explanation to that clause. It further observed that clause (2) of the same Article restricted a State’s power to tax a sale that took place in the course of inter‑State trade or commerce. The High Court noted that, by virtue of the proviso to clause (2), an order issued by the President could preserve the power to tax such inter‑State sales until 31 March 1951. The Court then referred to a recent Supreme Court judgment recorded at page 252 of the Supreme Court Reporter, which settled the true scope of the two clauses of Article 286. According to that judgment, when a transaction of sale includes inter‑State elements and the goods are delivered for consumption in a particular State, that State alone may tax the sale under clause (1) by treating the transaction, through a legal fiction, as an “intra‑State sale.” Clause (2) applies only to sales involving inter‑State elements that do not fall within the scope of clause (1). Applying these principles to the facts admitted in the present case, the Court found that clause (1) of Article 286 was applicable because the buyers were outside Orissa, the price was paid outside Orissa, and, as cited in [1953] S.C.R. 1069, the goods were delivered for consumption outside Orissa. Consequently, by virtue of clause (1) as explained by the Supreme Court, the State of Orissa did not have the competence to levy tax on those sales.

The learned Solicitor General correctly pointed out that a later Supreme Court decision, The Bengal Immunity Company Limited v. The State of Bihar and Others (1), which the High Court had not considered, departed from the view expressed in United Motors (2). The later judgment held that clause (2) of Article 286 did not negate the power of the State in which the goods were delivered to tax inter‑State sales or purchases that fell within the Explanation to clause (1); the effect of the Explanation was that such transactions were saved from the prohibition imposed by clause (2) of Article 286. Relying on this later authority, the Solicitor General argued that the assessment orders should be upheld as valid under the Sales Tax Continuance Order 1950, issued by the President, even though the sales occurred in the course of inter‑State trade or commerce. The Court noted that it was necessary to state that, by the Adaptation of Laws (Third Amendment) Order, 1951, made by the President in exercise of the

Section 30 was added to the Act after the President exercised the power granted by clause (2) of Article 372 of the Constitution. The purpose of this amendment was to align the Act with the Constitution from 26 January 1950. In substance, Section 30 reproduced the text of Article 286 as it then stood. The provision reads as follows: “30. (1) Notwithstanding anything contained in this Act— (a) a tax on sale or purchase of goods shall not be imposed under this Act, (i) where such sale or purchase takes place outside the State of Orissa; or (ii) where such sale or purchase takes place in the course of import of the goods into, or export of the goods out of, the territory of India; (b) a tax on the sale or purchase of any goods shall not, after the thirty‑first day of March 1951, be imposed where such sale or purchase takes place in the course of inter‑State trade or commerce except insofar as Parliament may by law otherwise provide. (2) The explanation to clause (1) of Article 286 of the Constitution shall apply for the interpretation of sub‑clause (i) of clause (a) of sub‑section (1).” The Court quoted the relevant case law citations accompanying the text, namely [1955] 2 S.C.R. 603 and [1953] S.C.R. 1069, to indicate the sources of the legal principles discussed.

The Court held that the decision in Bengal Immunity (1) did not support the Solicitor‑General’s argument that the post‑Constitution assessments were valid. The factual record showed that the goods in question were delivered for consumption at various locations outside the State of Orissa. Accordingly, applying clause (1)(a) of Article 286 together with its Explanation, and also Section 30 of the Act, the sales were deemed to have occurred outside Orissa. While the Bengal Immunity judgment had earlier departed from a previous decision by holding that the Explanation converted inter‑State sales into intra‑State sales, the Court noted that the majority opinion in that case also emphasized that a State’s power concerning a sale or purchase could be limited by one or more of the bans enumerated in Article 286. The Court quoted the majority judgment, which explained that “these several bans may overlap in some cases but in their respective scope and operation they are separate and independent. They deal with different phases of a sale or purchase but, nevertheless, they are distinct and one has nothing to do with and is not dependent on the other or others.” The judgment further illustrated the principle by describing a scenario in which Parliament declares certain goods essential, a seller in West Bengal sells those goods to a purchaser in Bihar, and the goods are delivered for consumption in Bihar. In such a case, any law enacted by West Bengal without the President’s assent that imposed a tax on the sale would be invalid, because the State’s legislative power would be barred by the relevant provisions of Article 286. This reasoning underpinned the Court’s conclusion that the assessments challenged could not be sustained.

In the Court’s analysis the impugned law was declared unconstitutional for three separate reasons. First, the Court pointed out that the law violated Article 286 (1) (a) because the sale on which the tax was imposed had taken place outside the territorial limits of the State, a circumstance explained in the case reported in the second volume of the Supreme Court Reporter for the year 1935 at page 603. Second, the Court observed that the same law also contravened Article 286 (2) since the sale occurred in the course of inter‑State trade or commerce. Third, the Court noted that the law ran afoul of Article 286 (3) because the goods involved were essential commodities and the law had been enacted without the President’s assent, a requirement expressly stipulated in clause (3) of Article 286. The Court described this three‑fold conflict as representing the general scheme of Article 286, referring to pages 638‑639 of the report for the detailed discussion.

Later, at page 647 of the same report, the Court reiterated that the operative provisions of Article 286—specifically clause (1) (a), clause (1) (b), clause (2) and clause (3)—were intended to address distinct subjects. Accordingly, one provision could not be read into another. After a careful and thorough consideration of the fresh arguments presented on the present occasion, the Court expressed a clear view that the Explanation attached to clause (1) (a) could not be legitimately extended to clause (2). The Explanation could not function as an exception, a proviso, or a limitation upon the reach of clause (2).

The Court further examined the President’s order, quoting from page 656 of the report. It observed that the proviso to the President’s order stated that the order would take effect “notwithstanding that the imposition of such tax is contrary to the provisions of this clause.” The Court held that this non‑obstante clause did not, in substance, override clause (1). Consequently, on its face, the President’s order remained subject to the prohibition contained in clause (1) (a) when read together with its Explanation.

Applying the reasoning from the Bengal Immunity decision, the Court concluded that the assessments made for the post‑Constitution period in the present case were struck down by clause (1) (a) of Article 286 as well as by section 30 (1) (a) (i) of the applicable Act. These assessments were, therefore, without jurisdiction. Conversely, the Court held that the assessments for the two quarters falling in the pre‑Constitution period were valid, being made under subsection (2) of section 4 of the Act, as reflected in the 1955 Supreme Court Reporter at page 603. On this basis, the appeal was allowed in part: the post‑Constitution assessments were declared invalid, while the pre‑Constitution assessments were upheld. Because each party succeeded on some points and failed on others, the Court ordered that each should bear its own costs in both the High Court and the Supreme Court.

The judgment then turned to the factual background of the respondents. The respondents were identified as a firm of merchants conducting business in a portion of the State of Orissa that had formerly been the feudatory State of Pallahara. That former State of Pallahara had merged with the Province of Orissa under an agreement with the Government of India dated 1 January 1948. Subsequently, on 14 December 1948, the Government of Orissa, exercising the powers conferred by section 4 of the Extra‑Provincial Jurisdiction Act, 1947, and with the permission of the Government of India, issued a notification extending the Orissa Sales Tax Act, 1947 (Orissa XIV of 1947) to the territories that previously comprised the feudatory States, including Pallahara, which had by then been incorporated into Orissa.

With the permission of the Government of India, the Government of Orissa issued a notification under the authority granted by section four of the Extra Provincial Jurisdiction Act, 1947. That notification applied the Orissa Sales Tax Act, 1947 (Orissa XIV of 1947) – a statute enacted by the Legislature of Orissa – to the territories that had previously been feudatory states, including Pallahara, which had merged into Orissa. Consequently, the respondents were subjected to sales‑tax assessment under this Act for sales made during five successive quarters covering the period from 1 July 1949 to 31 December 1950. The respondents challenged the assessment orders by invoking the remedial provisions contained in the Act and appealed to higher authorities, but those appeals were dismissed. Thereafter, on 11 November 1952, the respondents instituted proceedings in the High Court of Orissa, seeking a writ that would direct the Sales Tax Officer, who acted as the assessing authority, and one of the appellants in the present case, to refrain from collecting the tax, to set aside the assessment orders in any manner, and to prohibit any future assessment against them.

The High Court, by its judgment dated 12 April 1955, granted the petition, set aside the assessment orders and discharged the respondents from the tax liability. The present appeal arose from that judgment and was brought before this Court. The issue to be examined in this judgment was whether, under the facts of the case, the respondents were liable to pay tax under the provisions of the Orissa Sales Tax Act, 1947. The relevant provisions of the Act were then reproduced for consideration. Section 1(1) declared the short title of the statute as the Orissa Sales Tax Act, 1947; section 1(2) stated that the Act extended to the whole of the Province of Orissa; and section 1(3) provided that the section would take effect immediately, while the remainder of the Act would become operative on a date prescribed by the Provincial Government through a Gazette notification. Section 2 clarified that, unless the context indicated otherwise, the term “year” referred to the financial year. Section 4(1) stipulated that, subject to sections 5, 6, 7 and 8, and effective from a date appointed by the Provincial Government in the Gazette, any dealer whose gross turnover in the year immediately preceding the commencement of the Act exceeded Rs 5,000 would be liable to pay tax on sales made after the notified date, except for sales arising from contracts that, to the satisfaction of the Collector, had been entered into on or before that date. Section 4(2) provided that a dealer who did not fall within subsection (1) would become liable to tax from the commencement of the year immediately following the year in which his gross turnover first exceeded Rs 5,000. Section 4(3) continued that a dealer who had become liable under the Act would remain liable thereafter.

According to sub‑section (3) of Section 4, a dealer continued to be liable for the tax until three consecutive years had passed in which his gross turnover in each year failed to exceed Rs 5,000; thereafter a further period prescribed by law could be allowed, and on the expiration of that additional period the dealer’s liability to pay tax would cease. Sub‑section (4) provides that any dealer whose liability has ceased under sub‑section (3) would become liable again from the start of the first year after the year in which his gross turnover once more exceeded Rs 5,000. The Court noted that the respondents admitted they fell within the definition of “dealer” under the Act. While the Act defines the term “turnover”, for the purpose of this judgment the term may be understood in its ordinary sense. The Court further observed that it was unnecessary to examine sections 5, 6, 7 and 8 of the Act because none of those provisions were material to the appeal. Section I of the Act was brought into force in the Pallahara area on 14 December 1948 by a notification mentioned earlier. On 1 March 1949 the Government of Orissa issued, under section 1(3) of the Act, Notification No. 2267/F which appointed that date as the one on which the remainder of the Act would become operative in the Pallahara area. It was not disputed that 1 March 1949 must be treated as the commencement date of the Act in that area, the conclusion being derived from the definition of the commencement of an enactment contained in section 2(8) of the Orissa General Clauses Act, 1937. Section 4(1) of the Act required that a specific date be fixed before any liability could arise. The Government of Orissa had fixed such a date before the Act was applied to territories that formerly belonged to feudal states, and it was considered that this appointment would not automatically apply to those territories. The present case was argued on the basis that the appointment of a date was not proper under section 4(1) for the former feudatory areas. In fact, on 1 March 1949 the Government of Orissa issued Notification No. 2269/F, purporting to appoint a date under section 4(1) for the areas that had previously been covered by feudatory states, including Pallahara State which had been merged into Orissa. The text of that notification read: “In exercise of the powers conferred by sub‑section (1) of Section 4 of the Orissa Sales Tax Act, 1947 (Orissa Act XIV of 1947), as applied to Orissa States, the Government of Orissa are pleased to appoint 31 March 1949 as the date with effect from which every dealer whose gross turnover during the year ending 31 March 1949 exceeded Rs 5,000 shall be liable to pay tax under the said Act on sales effected after that date.”

In this case, the Court considered that when a candidate who had previously given notice of retirement from an election re‑examines his prospects after the death of another candidate, he may conclude that, compared with the remaining contestants, his chance of winning is now reasonable. If the returning officer subsequently cancels the poll and a fresh election is ordered, the retired candidate may again submit his nomination and, under the law, he is not disqualified from being nominated after such cancellation. The reason for allowing this is that treating a withdrawal as a disqualification would effectively penalise a candidate who merely decided not to continue his campaign. The Court then turned to the statutory provisions dealing with retirement from contest under section 55A of the Representation of the People Act. A candidate who has not withdrawn his candidature within the time prescribed remains on the list of contesting candidates published by the returning officer under section 38 and is therefore entitled to poll. During the campaign such a candidate may find that his chances of success are very slim and that he could even lose his security deposit if he proceeds to poll. For a variety of reasons, which need not be examined, the candidate may decide to withdraw and retire from the field. Section 55A therefore creates a locus poenitentiae, permitting the candidate to retire by delivering a notice in the prescribed form to the returning officer on any day not later than ten days before the polling date. When a candidate retires, he chooses not to vote and the rules require correction of the list of contesting candidates so that voters are not misled. The retiring candidate’s notice must be displayed on the returning officer’s notice board, posted at the polling station, supplied to each remaining candidate or his agent, and published in the official gazette. If the retirements leave a number of remaining candidates equal to the number of seats to be filled, sections 55A(6) and (7), read with sections 53 and 54, direct the returning officer to declare those remaining candidates duly elected.

In this case the Court explained that when a retiring candidate reduces the number of candidates to a level equal to the number of seats to be filled, the returning officer is required under sections 55A(6) and 55A(7) to declare the remaining candidates duly elected and to cancel the poll; a fresh election would be needed only if any seats still remained vacant. However, where a poll must be conducted pursuant to section 53(1) even though one or more candidates have withdrawn, the election proceeds despite the retirement and the Court considered the question of what happens if a candidate who has withdrawn subsequently dies before the poll commences. Absent any special provision, section 52 would apply: the returning officer, upon being satisfied that the candidate has died, would be obliged to cancel the poll, to notify the Election Commission and to inform the appropriate authority. To address this situation, section 55A(5) declares that any person who has given a notice of retirement under section 55A(2) is not to be treated as a contesting candidate for the purposes of section 52. The Court characterized this as a deeming provision that creates a legal fiction, whereby a situation that would not otherwise arise is regarded as existing. The effect of this fiction is that, although a candidate who has retired would otherwise continue to be a contesting candidate for the purposes of the election, the law now treats him as excluded from that category, thereby making it unnecessary to apply section 52 to his death. Consequently, the legislature found it necessary to enact section 55A(5) because a retiring candidate, while still listed under section 38 as a validly nominated candidate who has not withdrawn within the prescribed period and whose name appears in the list prepared and published by the returning officer, would otherwise remain a contesting candidate for the purposes of the Act. The Court concluded that a candidate whose name appears in the list under section 38 but who retires under section 55A(2) continues to be a contesting candidate for the purposes of the Act, even though his retirement makes it unnecessary for voters to cast a vote for him at the poll. Therefore, such a candidate remains a contesting candidate for statutory purposes despite his retirement under section 55A(2). Finally, the Court noted that Part VI of the Act, which deals with election disputes, does not provide a definition of the term “contesting candidate” in section 79, although it does define “candidate” and “returned candidate.”

In this case the Court explained that the Act defined the expression “returned candidate” but did not define “contesting candidate” in section 79. The Court stated that an election petition questioning any election could be filed by any candidate in that election or by any elector on any of the grounds listed in sections 100(1) and 101 before the Election Commission. In addition to challenging the election of the returned candidate or candidates, a petitioner could also seek a declaration that he himself or another candidate had been duly elected. When a petitioner claimed such a further declaration, the Court required the petitioner to join as respondents all contesting candidates other than the petitioner himself, as well as any other candidate against whom the petition alleged corrupt practices. The phrase “other than the petitioner” was intended to exclude the petitioner when the petitioner was himself a contesting candidate who had been defeated at the polls, and it did not apply when the petition was filed by an elector. An elector filing such a petition was required to join as respondents every contesting candidate whose name appeared in the list of contesting candidates prepared and published by the returning officer in accordance with section 38, that is, every candidate who had been validly nominated and who had not withdrawn his candidature within the prescribed period. The Court emphasized that these contesting candidates had to be joined as respondents regardless of whether any of them had retired from the contest under section 55A(2). The Court further noted that if the provisions of section 82, which prescribe who must be joined as respondents, were not complied with, the Election Commission was mandated by section 85 to dismiss the petition, and similar dismissal followed from non‑compliance with section 117 concerning the deposit of security for costs. However, if the Election Commission nonetheless accepted the petition, it was obliged to cause a copy of the petition to be published in the official Gazette, to serve a copy by post on each respondent, and to refer the petition to an election tribunal for trial. Section 90(3) likewise required the election tribunal to dismiss any petition that failed to comply with sections 82 or 117, even if the Election Commission had not dismissed it under section 85; this requirement was mandatory and the tribunal was bound to dismiss the petition upon application. Turning to section 117, the Court observed that it dealt with the deposit of security for petition costs. When a petitioner presented an election petition under section 81, he was required to enclose a Government Treasury receipt showing that a deposit of one thousand rupees had been made either in a Government Treasury or in the Reserve Bank of India in favour of the Secretary to the Election Commission as security for the petition’s costs.

The Court explained that under section 117 an election petitioner must deposit one thousand rupees either in a Government Treasury or in the Reserve Bank of India and must obtain a Government Treasury receipt showing three things: first, that the deposit was actually made by the petitioner in one of the two authorised places; second, that the deposit was made in favour of the Secretary to the Election Commission; and third, that the deposit was intended as security for the costs of the petition. These three conditions constitute the mandatory requirements of the provision. The Court then posed the question whether the phrase “in favour of the Secretary to the Election Commission” is of a mandatory character, such that a deposit made in the Treasury or the Reserve Bank of India but not expressly in favour of the Secretary would be void and of no legal effect, even though the deposit would otherwise satisfy the remaining requirements. To illustrate the issue, the Court considered a hypothetical situation in which a petitioner deposited the required amount in a Government Treasury or in the Reserve Bank of India but directed the deposit to the Election Commission itself, and subsequently obtained a Government Treasury receipt for that transaction. The Court asked whether, despite the deposit having been made, the receipt could be said to fail to meet the requirements of section 117, thereby allowing the petitioner to be held non‑compliant and opening the way for dismissal of the petition under section 85 or section 90 (3). The Court clarified that this extreme example was presented only to show how far a literal interpretation of section 117 could be stretched. It noted that the petition must be presented to the Election Commission, that security for the costs of the petition must be given to the Election Commission, and that section 121 provides for a written application to the Election Commission for payment of costs by the person in whose favour the costs have been awarded. Nevertheless, the Court observed that even if the petitioner made the deposit in favour of the Election Commission and attached a receipt evidencing such deposit to the petition, the provisions of section 117 could still be said to have been breached solely because the deposit was not made in favour of the Secretary to the Election Commission. The Court stressed that it was unnecessary to examine the relationship between the Election Commission and its Secretary for the purpose of rejecting this contention; it was sufficient to state that the contention could be dismissed. Finally, the Court warned that it would be absurd to imagine that a deposit made in a Government Treasury or in the Reserve Bank of India in favour of the Election Commission itself would not satisfy the essential requirement of section 117 and would consequently lead to dismissal of the petition under section 85 or section 90 (3).

In this case the Court observed that a deposit made either in a Government Treasury or in the Reserve Bank of India in favour of the Election Commission itself would not satisfy the requirements of section 117 and would consequently lead to the dismissal of the petition under section 85 or section 90(3). The illustration provided was intended to show that the words “in favour of the Secretary to the Election Commission” appearing in section 117 are directory rather than mandatory. The essential requirement of section 117, the Court explained, is that the petitioner must provide security for the costs of the petition and must attach to the petition a Government Treasury receipt indicating that a sum of one thousand rupees has been deposited by the petitioner either in a Government Treasury or in the Reserve Bank of India. That receipt must be at the disposal of the Election Commission, capable of being used by the Commission in the manner authorized by law, remain under its control, and be payable on a proper application made on behalf of the Commission to either the Commission itself or to any person duly authorised by it to receive the money, whether that person is the Secretary to the Election Commission or any other authorised individual. Accordingly, if evidence presented before the Election Tribunal demonstrates that the Government Treasury receipt or the chalan obtained by the petitioner and enclosed with the petition enables the Election Commission, upon a necessary application, to realise the one‑thousand‑rupee sum for payment of the costs to the successful party, such evidence would satisfy the requirements of section 117. The Court held that strict literal compliance with every term of section 117 is not essential, contrary to the contention advanced on behalf of the appellant.

Regarding the amendment of a petition by deleting the averments and the prayer that either the petitioner or another candidate had been duly elected, with a view to cure the defect of non‑joinder of necessary parties as respondents, the Court referred to its earlier judgment delivered in Civil Appeal No. 76 of 1958, where the issue was examined in detail. The Court summarized that the Election Tribunal possesses no authority to permit such an amendment, whether by withdrawal, abandonment of part of the claim, or any other means, once an election petition has been presented to the Election Commission claiming a further declaration. In light of the observations made earlier, the Court considered the facts of Civil Appeal No. 763 of 1957 and found that Sundararaja Pillai, whose name had been listed among the contesting candidates by the returning officer under section 38 but who had retired from the contest under section 55A(2) before polling began, was nevertheless included within the expression “contesting candidate” used in the relevant provisions. This inclusion highlighted the necessity of proper joinder of all necessary parties to avoid dismissal of the petition.

The Court observed that the first respondent had sought a further declaration that the second respondent had been duly elected. Because the second respondent was a necessary party to the petition under section 82, his failure to be joined as a respondent rendered the petition liable to dismissal in accordance with section 90(3) of the Act. The Court emphasized that this defect could not be remedied by amending the petition to remove the claim for the further declaration. Accordingly, the Election Tribunal’s decision to allow such an amendment, whether on the basis set out in Application No. 3 of 1957 or otherwise, was held to be erroneous.

With respect to the deposit of security, the Court noted that the evidence of K. Nataraja Mudaliar, the head accountant of the Madurai Taluk Sub‑Treasury, indicated that the amount in question had been placed in the Election Revenue Deposit and was under the control of the Election Commission. The evidence further showed that the Election Commission, or any person authorized by it, was entitled to draw the monies, and that no other person could withdraw them without such authority. The Court cited the authority of Basappa v. Ayyappa (see page 6ii) to support this view. In light of these facts, the Court concluded that the requirements of section 117 had been satisfied and that there was no ground for dismissing the petition on the basis of non‑compliance with that provision. Consequently, having found a defect in the compliance with section 82, the Court allowed Civil Appeal No. 763 of 1957, set aside the High Court’s dismissal orders in writ petitions Nos. 531 of 1957 and 532 of 1957, vacated the Election Tribunal’s orders dated 5 July 1957, and dismissed Election Petition No. 147 of 1957 with costs. Since the appellant’s argument concerning section 117 had failed, the Court ordered that each party bear its own costs in both the appeal and the High Court proceedings.

The Court then turned to Civil Appeal No. 764 of 1957, which presented a parallel situation. In that appeal, the first respondent had not joined as respondents the two candidates whose names had been included by the returning officer in the list of contesting candidates but who had retired from the contest before polling began. Because the first respondent sought a further declaration that he himself be declared duly elected under section 101, those two retired candidates were necessary parties to the petition. Their non‑joinder rendered Election Petition No. 74 of 1957 liable to dismissal under section 90(3) of the Act. Accordingly, the Court allowed the appeal, set aside the High Court’s orders in writ petitions Nos. 573 and 574 of 1957, vacated the Election Tribunal’s orders dated 13 July 1957, and dismissed Election Petition No. 74 of 1957. The Court also ordered that the first respondent pay the appellant’s costs throughout the proceedings.

The Court dismissed the election petition of 1957 and ordered that the first respondent should bear the appellant’s costs throughout the proceedings. Regarding Civil Appeal No 48 of 1958, the appellant faced a difficulty because the appeal record contained no information showing the precise terms of the deposit that the second respondent had made under the applicable statutory provision. The copy of the challan reproduced on page 45 of the record was incomplete; it omitted essential particulars and therefore failed to clarify the issue. The appellant had, however, filed an application with the Election Tribunal seeking to raise a preliminary objection concerning the second respondent’s alleged non‑compliance with that provision and requesting that the Tribunal determine whether the second respondent had complied with section 117 and, if not, dismiss the petition. The Election Tribunal did not entertain this preliminary objection; instead, it ordered that the trial of the petition should proceed. Similarly, the High Court, when hearing Writ Petition M J No 480 of 1957, reached the same conclusion, holding that the matter could be decided during the hearing and consequently dismissed the appellant’s application. The Court expressed the view that both the Election Tribunal and the High Court were incorrect in adopting that approach. If the preliminary objection were left unconsidered, the subsequent proceedings in the election petition would amount to a full trial, requiring the examination of a large number of witnesses on behalf of the respondent to support numerous allegations of corrupt practices levelled against the appellant, his agents or others acting for him; it would also necessitate the examination of many witnesses on behalf of the appellant to rebut those allegations and to support the recrimination he lodged against the second respondent. In addition, the appellant would have to travel repeatedly from far‑off places such as Delhi and Bombay to Ranchi, incurring heavy expenses, loss of time, and distraction from his public duties, including his responsibilities in the House of the People. The Court therefore held that such harassment and expense could have been avoided had the preliminary objection been resolved at the initial stage by the Election Tribunal. Consequently, the orders issued by the High Court in M J C No 480 of 1957 and by the Election Tribunal in Election Petition No 341 of 1957 were set aside as erroneous. The Election Tribunal was directed to consider the preliminary objection regarding the second respondent’s alleged non‑compliance with section 117 in light of the observations made, and to deal with it according to law. The parties were permitted to lead any further evidence before the Tribunal as may be advised.

The Court observed that the parties might be advised on the procedural steps that remain to be taken. It further held that the expenses incurred by each party in the present proceedings, as well as those incurred in the subordinate courts, shall be treated as costs of the Election Petition. These costs will be dealt with by the Election Tribunal when it examines the matter in the future. Both parties were instructed to accept and be bound by whatever decision the Tribunal reaches on the preliminary objection that has been raised. In addition, the Court granted leave for the appeals that were filed, indicating that the appeals were allowed. Consequently, the matter identified as Appeal No 48 of 1958 was sent back for further consideration, that is, the appeal was remanded.