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Radio House Vs. Union of India and ors. - Court Judgment

LegalCrystal Citation
SubjectCompany
CourtKarnataka High Court
Decided On
Case NumberWrit Petition Nos. 1066, 1739 and 1742 of 1969 and 4377 of 1970
Judge
Reported in[1973]43CompCas157(Kar)
ActsGeneral Clauses Act - Sections 6;Constitution of India - Article 19(1);Emergency Risks (Goods) Insurance Act, 1962 - Sections 1(3), 3, 7 and 8
AppellantRadio House;kullappa Spinning Mills;shankara Textile Mills
RespondentUnion of India and ors.;enforcement Officer, Emergency Risks Insurance Scheme and anr.;enforcement O
Appellant AdvocateK.R.D. Karanath, ;K.S. Savanur and ;K. Srinivasan, Advs.
Respondent AdvocateB. Ramachandra Rao, Adv.
Excerpt:
.....opinion that a special provision has been made to the contrary in section 1(3) and therefore the general rule that after the expiry of the temporary statute no action can be taken under those provisions does not apply. as in all these four writ petitions, action is being taken against the petitioners under section 8 of the act, on the ground that the petitioners have failed to take insurance as was required of them during the period when the act was in force, the enforcement officer's action is not liable to be assailed on the ground of wand of competence. 16. a legislative device of making applicable the provisions of section 6 of the general clauses act to a temporary statute by creating a legal fiction that when the temporary statute expires, there is a repay of a permanent statute..........of sub-rule (2) of rule 132a of the defence of india rules, after the expiry of the said temporary rules. rule 132a ceased to be in existence as a result of clause 2 of a notification issued on 30th march, 1965, which reads as under : 'in the defence of india rules, 1962, rule 132a (relating to prohibition of dealings in foreign exchange) shall be omitted except as respects things done or omitted to be done under that rule.' 18. their lordships held that as clause 2 of the notification saves only things already done or omitted to be done under rule 132a, it was not competent to prosecute anyone for the contravention of rule 132a, after the expiry of the said rules. their lordships of the supreme court distinguished the decision of the federal court and pointed out as follows : 'that case.....
Judgment:

Malimath, J.

1. As common questions of law are involved in all these four cases the same were heard together.

2. Writ petition No. 1066 of 1969 is by M/s Radio House, Bangalore, who has prayed for quashing of the order passed by the Chief Enforcement Officer, bearing No. 5/69, dated 29th January, 1969, under section 8(1) of the Emergency Risks (Goods) Insurance Act, 1962 (hereinafter referred to as 'the Act'), requiring the petitioner to pay a sum of Rs. 2,212 on the ground that the petitioner has evaded payment of premium during the period when the Act was in force.

3. Writ Petition No. 1739 of 1969 is by Kullappa Spinning Mills, Chitradurga, in which the petitioner has challenged the notice dated 26th April, 1969, issued by the Enforcement Office under section 8 of the Act, requiring the petitioner to pay a sum of Rs. 25,499, on the ground that the petitioner has evaded payment of premium money during the period when the Act in force and that if the petitioner has objections to the ascertainment made, to submit his objections for consideration.

4. Writ Petition No. 1742 of 1969 is also by Kullappa Spinning Mills, Chitradurga, in which the petitioner has challenged the notice dated 26th April, 1969, issued by the Enforcement Officer under section 8(1) of the Act, requiring the petitioner to pay a sum of Rs. 4,330, on the ground that the petitioner has evaded payment of premium money during the period when he Act was in force and if the petitioner is not agreeable to the ascertainment of the amount, to submit objections for consideration.

5. Writ Petition No. 4377 of 1970 is by Shri Shankara Textile Mills Ltd., Davangere, which has challenged two orders made by the Enforcement Officer under section 8(1) of the Act on the 25th of June, 1969, requiring the petitioner to pay a sum of Rs. 34,056 and Rs. 4,387, respectively, on the ground that the petitioner has evaded payment of premium money during the period when the Act was in force.

6. In order to appreciate the contentions of the petitioners, it is necessary to briefly set out the circumstances under which the Act came to be passed as well as the salient features of the Act.

7. Consequent upon the aggression by the Chinese'son the northern frontier of India, the President of India issued a proclamation of emergency under article 352(1) of the Constitution of India on the 26th October, 1962. The said proclamation remained in force until the 10th of January, 1968, on which date the same was revoked by the President under article 352(2) of the Constitution.

8. In order to make provision for the insurance of goods in India against damage by enemy action during the period of emergency, Parliament enacted the Emergency Risks (Goods) Insurance Act, 1962. Sub-section (3) of section 1 provides that the Act shall remain in force during the period of operation of the proclamation of emergency issued on the 26th of October, 1962, and for such further period as the Central Government may, by notification in the Official Gazette, declare to be the period of emergency for the purpose of the Act. Section 3 gives specifies the goods liable to be insured under the Act. Section 5 gives power to the Central Government to put into operation an Emergency Risks (Goods) Insurance Scheme, whereby the Central Government undertakes, in relation to persons carrying on business in India as suppliers of goods, the liability of insurance of such persons against emergency risks in respect of goods insurable under the Act. Section 7 prohibits a person from carrying on business in India as a seller or supplier of goods unless in respect of insurable goods owned by him in the course of that business there is in force an insurance policy issued in accordance with the scheme. The provision, however, does not apply to persons whose insurable goods do not exceed Rs. 30,000 in value. Sub-section (1) of section 8 makes provision for taking action for omission to insure or to insure up to the full amount. It provides that, without prejudice to the right to prosecute under sub-section (2) of section 7, the authorised officer may determine the amount which has been evaded, either by the failure of the person to insure as, or to the full amount required by the Act, and to recover the said amount as arrears of land revenue. Sub-section (2) provides for an appeal against the determination made under sub-section (1) of section 8 of the Act. Section 11 confers power on the Central Government to obtain information for ascertaining as to whether or not the requirements of the Act and the Scheme have been complied with.

9. The Emergency Risks (Goods) Insurance Scheme contemplated under section 5 of the Act was put into operation on the 1st of January, 1963. Under the Scheme, the Central Government undertook, in relation to persons carrying on business in India as sellers or suppliers of goods, the liability of insurance against emergency risk in respect of the goods insurable under the Act. The Scheme makes detailed provisions prescribing the mode of application, the rate of premium, the procedure for issue of policies, form and the duration of policy, the date of effect of the policies and the procedure to be followed for taking action for the failure to pay premium and evasion, etc.

10. The challenge in these four writ petitions is in regard to the action take by the Enforcement Officer under section 8 of the Act. Admittedly, the action is initiated under section 8 of the Act, after the Act ceased to be in force. The contention of the petitioner is that the Enforcement Officer has no jurisdiction or competence to take any action against them under section 8 of the Act, as the said Act automatically expired with the revocation of the proclamation of emergency by the President on the 10th of January, 1968, as provided by section 1(3) of the Act.

11. The Act was undoubtedly a temporary enactment made by Parliament, which expired on the 10th of January, 1968. It is only after that date that the Enforcement Officer has chosen to take action against the petitioners in these cases, on the ground that the petitioners have carried on business in India as sellers or suppliers of goods in respect of goods insurable by them under the Act during the period when the Act was actually in force, without insuring those goods against emergency risk as required by section 7(1) of the Act. It is not disputed that if the Act had continued to remain in force the Enforcement Officer was competent to take action under section 8 of the Act. It cannot also be disputed that if the Act was a permanent Act and the same was repealed, the Enforcement Officer could have taken action under section 8 of the Act after the repeal of the Act by the application of section 6 of the General Clauses Act, but it was submitted that the Act in question was only a temporary Act and it ceased to be in force with effect from 10th January, 1968, by efflux of time and not as result of repeal of the same by another enactment. It was, therefore, urged that the Enforcement Officer was not competent to take action under section 6 of the General Clauses Act after the temporary Act ceased to be in force.

12. The principles of interpretation to be followed in such cases are now well-settled. The Supreme Court in the decision in S. Krishnan v. State of Madras has declared that the general rule in regard to a temporary statute is that, in the absence of special provision to the contrary, proceedings which are being taken against a person under it will ipso facto terminate as soon as the statute expires. As the Act in question is a temporary Act, the principle laid down by the Supreme Court is clearly attracted. But, it is necessary to note that what is laid down is that after a temporary Act has expired no proceedings can be taken upon it only if the Act foes not contain some special provisions to the contrary. It therefore, follows that the petitioners cannot succeed merely by pointing out that the Act is a temporary Act and that the impugned action has been taken after the expiry of the said temporary Act. It has further to be ascertained, if there is any special provision which has the effect of keeping alive all or some of the provisions of the Act for any limited purpose, even after the expiry of the temporary Act.

13. The investigation brings us to sub-section (3) of section 1 of the Act, which reads as follows :

'1. (3) It shall remain in force during the period of operation of the Proclamation of Emergency issued on the 26th October, 1962, and for such further period as the Central Government may, by notification in the Official Gazette, declare to be the period of emergency for the purposes of this Act, but its expiry shall not affect anything done or omitted to be done before such expiry and section 6 of the General Clauses Act, 1897 (10 of 1897), shall apply upon the expiry of this Act as if it had been repealed by a Central Act.'

14. It is obvious that the legislature was aware that on the expiry of the temporary Act, none of the provisions of the Act could be given effect to in respect of anything done or omitted to be done before the expiry of the Act. If the legislature intended that no action should be taken after the expiry of the Act in respect of anything done or omitted to be done under the Act when it was in force, it was not necessary for the legislature to have included the concluding portion of the sub-section commencing from the words 'but its expiry ...' The clear effect of the language employed in sub-section (3) of section 1 is that the expiry of the Act shall not affect anything done or omitted to be done before the expiry of the Act and that section 6 of the General Clauses Act. Section 6 of the General Clauses Act obviously applies only when there is a repeal of one permanent statute by another statute and has obviously no application to a case where a temporary statute expires by efflux of time. The legislature obviously introduced a legal fiction that the Act in question which is a temporary statute must be deemed to be a permanent statute which gets repealed on the date specified in section 1(3). It is by creating such a legal fiction that the provisions of section 6 of the General Clauses Act have been made applicable. Section 6 of the General Clauses Act provides that the repeal shall not affect any right, privilege, obligation or liability acquired, accrued or incurred under the enactment repealed or affect any penalty, forfeiture or punishment incurred in respect of any offence committed against any enactment repealed and that any such investigation, legal proceeding or remedy may be instituted, continued or enforced, and any such penalty, forfeiture or punishment may be imposed as if the Repealing Act or Regulation had not been passed. As section 6 of the General Clauses Act has to be applied on the basis of a legal fiction that the Act in question was a permanent Act which was repealed by a Central Act with effect from the date of expiry mentioned in section 1(3), it follows that in respect of anything done or omitted to be done under the Act if the petitioners have incurred any liability under the Act, the same can be enforced as per the professions of the said Act, notwithstanding the fact that the Act has expired.

15. We are clearly of the opinion that a special provision has been made to the contrary in section 1(3) and therefore the general rule that after the expiry of the temporary statute no action can be taken under those provisions does not apply. As in all these four writ petitions, action is being taken against the petitioners under section 8 of the Act, on the ground that the petitioners have failed to take insurance as was required of them during the period when the Act was in force, the Enforcement Officer's action is not liable to be assailed on the ground of wand of competence.

16. A legislative device of making applicable the provisions of section 6 of the General Clauses Act to a temporary statute by creating a legal fiction that when the temporary statute expires, there is a repay of a permanent statute by another statute with effect from the date of expiry of the temporary statute is a well recognized one, which has been judicially noticed and approved. As an illustration, we may advert to the decision of the Federal Court in J.K. Gas Plant . v. Emperor. In that case, the Federal Court was dealing with the effect of sub-section (4) of section 1 of the Deference of India Act, 1939, and Ordinance No. 42 of 1946. Sub-section (4) of section 1 of the Defence of India Act, which was a temporary statute, reads as follows :

'But its expiry under the operation of this sub-section shall not affect : (a) the previous operation of, or anything duly done or suffered under, this Act or any rule made thereunder or any order made under any such rule, or (b) any right, privilege, obligation or liability acquired, accrued or incurred under this Act or any rule made thereunder or any order made under any such rule, or (c) any penalty, forfeiture or punishment incurred in respect of any contravention of any rule made under this Act or any order made under any such rule, or (d) any investigation, legal proceeding or remedy in respect of any such right, privilege, obligation, liability, penalty, forfeiture or punishment as aforesaid; and any such investigation, legal proceeding or remedy may be instituted, continued or enforced, and any such penalty, forfeiture or punishment may be imposed as if this Act had not expired.'

17. Their Lordships of the Federal Court in that case held that in view of the clear wording of sub-section (4) of section 1 of the said Act, prosecution for an offence committed when the said Act was in force was valid even after the expiry of that Act. It is clear from a reading of sub-section (4) of section 1 of the Defence of India Act that the wording of section 6 of the General Clauses Act has been incorporated in sub-section (4) of section 1 by substituting the expression 'under this Act or any rule made thereunder or any order made under any such rule' for the expression 'any enactment so repealed' occurring in section 6 of the Act. What has been done in sub-section (3) of section 1 of the Act with which we are concerned, is to make applicable the provisions of section 6 of the General Clauses Act, by creating a fiction that the expiry of the temporary statute shall be deemed as repeal of a permanent Act by another enactment. In the decision in Rayala Corporation Ltd. v. Director of Enforcement, New Delhi, their Lordships of the Supreme Court had occasion to consider the aforesaid judgment of the Federal Court. In that case, their Lordships considered the question as to whether a person could be prosecuted for contravention of sub-rule (2) of rule 132A of the Defence of India Rules, after the expiry of the said temporary Rules. Rule 132A ceased to be in existence as a result of clause 2 of a notification issued on 30th March, 1965, which reads as under :

'In the Defence of India Rules, 1962, rule 132A (relating to prohibition of dealings in foreign exchange) shall be omitted except as respects things done or omitted to be done under that rule.'

18. Their Lordships held that as clause 2 of the notification saves only things already done or omitted to be done under rule 132A, it was not competent to prosecute anyone for the contravention of rule 132A, after the expiry of the said Rules. Their Lordships of the Supreme Court distinguished the decision of the Federal Court and pointed out as follows :

'That case is, however, distinguishable from the case before us in two respects. In that case, the prosecution had been started before the Defence of India Act ceased to be in force and, secondly, the language introduced in the amended sub-section (4) of section 1 of the Act had the effect of making applicable the principles laid down in section 6 of the General Clauses Act, so that a legal proceeding could be instituted even after the repeal of the Act in respect of an offence committed during the time when the Act was in force. As we have indicated earlier, the notification of the Ministry of Home Affairs omitting rule 132-A of the D.I.Rs. did not make any such provision similar to that contained in section 6 of the General Clauses Act. Consequently, it is clear that, after the omission of rule 132-A of the D.I.Rs., on prosecution could be instituted even in respect of an act which was an offence when that rule was in force.'

19. The clear principle deducible from the judgment of the Supreme Court is that if a provision is made in a temporary statute making applicable the principles laid down in section 6 of the General Clauses Act, legal proceedings can be instituted even after the expiry of the Temporary Act in respect of an offence committed during the time when the Act was in force. Sub-section (3) of section 1 of the Act, with which we are concerned, in terms, makes section 6 of the General Clauses Act applicable as if there has been a repeal of the Act by another Central Act. If the principle laid down by the Federal Court and the Supreme Court in the aforesaid two decisions is applied, the only inference possible is that in respect of things done or omitted to be done when the temporary Act in question was in force, legal proceedings can be initiated and concluded even after the expiry of the said Act.

20. The view which we have taken accords with the view taken by the High Court of Judicature at Allahabad in Writ Petition No. 2261 of 1970 and connected writ petitions between Rajaram Om Prakash v. Union of India decided on the 16th of December, 1970, as well as the decision of the High Court of Judicature at Patna in Civil Writ Jurisdiction Case No. 1149 of 1969 and connected writ petitions, between Eastern Bihar Divisional Chamber of Commerce and Industry, Bhagalpur v. Chief Enforcement Officer, rendered on the 17th February, 1972. The High Court of Andhra Pradesh has also taken a similar view dealing with similar provisions of the Emergency Risks (Factories) Insurance Act, 1962, in the decision in Union of India v. Thammana Sitaramanjaneyulu.

21. On behalf of the petitioners, reliance was placed on the decision of the Madras High Court in Stoneware Pipes (Madras) Ltd. v. Union of India. Their Lordships of the Madras High Court, in that case, have considered similar provisions occurring in the Emergency Risks (Factories) Insurance Act, 1962. In that case, the Madras High Court, while construing sub-section (3) of section 1 of the Emergency Risks (Factories) Insurance Act, 1962, which is analogous to sub-section (3) of section 1 of the Act, with which we are concerned, held as follows :

'The liability to pay the premium evaded arises only on its determination and a demand being made on the defaulter. Where, therefore, proceedings for determination of premium evaded and for its recovery have been taken under section 11 of the Act after expiry of the Act, those cannot be saved under section 1(3) as those are not in respect of liability incurred or right accrued prior to repeal contemplated by section 6 of the General Clauses Act. The phraseology that expiry of Act shall not affect anything done or omitted to be done is also not helpful to save the proceedings as that phraseology will be apposite to things contemplated ether by a positive act or by an omission before expiry of the Act.'

22. Though reference has been made to be judgment of the Supreme Court in Rayala Corporation's case, we do not find any reference to the principle laid down by the Supreme Court that if the principles of section 6 of the General Clauses Act are made applicable to a temporary statute, legal proceedings can be instituted even after the expiry of the Act in respect of anything done or omitted to be done when the Act was in force. In our opinion, the view taken by the Madras High Court conflicts with the principle enunciated by the Supreme Court in Rayala Corporation's case. With respect, therefore, we find ourselves unable to agree with the views expressed in the said decision of the Madras High Court.

23. We do not also find it possible to agree with the view expressed by their Lordships of the Madras High Court that no liability is incurred by persons who are liable to take insurance until determination is made of the premium amount that is liable to be paid. The liability under the Act in question is created by section 7 which provides that no person shall carry on any business as seller or supplier of goods unless in respect of insurable goods owned by him in the course of that business there is in force a policy of insurance against emergency risks issued in accordance with the Scheme. If a person carries on business in contravention of section 7, the liability is incurred by the person concerned. The liability will be incurred the moment that person carries on business as a seller or supplier of goods without there being a policy of insurance in respect of the goods, as required by section 7 of the Act. The evasion, therefore, takes place when the person carries on business in contravention of section 7 of the Act. Though the actual amount of evasion is a matter for determination by following the prescribed procedure, it cannot said that the person concerned does not incur any liability by the omission to take an insurance policy which he is under an obligation to take as required by section 7 of the Act. With great respect, we do not agree with a view expressed by their Lordships of the Madras High Court that the proceedings for recovery of the amount evaded cannot be initiated after the expiry of the Act, unless the amount of evasion was already determined.

24. Reliance was placed on behalf of the petitioners on a decision in R. C. Jall Parsi v. Union of India. In that case, a permanent Ordinance was repealed by another Ordinance of temporary duration which by express terms provided that section 6 of the General Clauses Act shall apply in respect of the repeal. Their Lordships in that case considered as to what is the effect of the expiry of the repealing Ordinance on the liability continued after the repeal in respect of prior transactions. Their Lordships held that the repeal of the Ordinance being a temporary one, expired after it fulfilled its purpose and that as it has continued the life of the original Ordinance, which was a permanent one, in respect of past transaction, the expiry of its life could not have any effect on that law to the extent saved. The principle laid down in that decision cannot be invoked, as there is no repeal of any permanent statute by a temporary statute in these cases.

25. It was next urged that section 8 of the Act is void, as it imposes and unreasonable restriction on the petitioners' fundamental right guaranteed under article 19(1)(f) of the Constitution. It was submitted that no provision is made under the Act or under the Scheme providing an opportunity to the person concerned to place material in regard to the determination of the amount alleged to have been evaded. It was also submitted that the determination made by the officer under section 8 is not liable to judicial review. It was also submitted that the person against whom and order is made under section 8 of the Act is not entitled to any personal hearing before the appellate authority.

26. We do not find any substance in the contention that there has been any unauthorised infraction of the fundamental rights of the petitioners. Section 8 of the Act is a provision to proceed against persons who have evaded their statutory liability under section 7 of the Act. The Third Schedule to the Scheme makes detailed provisions in regard to he procedure to be followed for the determination of the premium payable by the person concerned. Clause 1 of the Third Schedule requires the officer to give a notice calling upon the person concerned to submit his objections and to place evidence in support of his case. Clause 2 requires the officer to give the defaulter an opportunity of being heard and to make the determination. Clause 4 requires the officer to furnish the defaulter a copy of his recorded assessment and determination, specifying the amount payable by him, the date within which it shall be paid and the treasury into which it shall be paid. Sub-section (2) of section 8 provides for an appeal against the determination under sub-section (1) of section 8 to the Central Government. Clause 7 of the Third Schedule to the Scheme provides that the appeal shall contain all material statements and arguments relied upon by the appellant and shall be accompanied by a copy of the statement served on him. These provisions, in our opinion, afford sufficient and satisfactory opportunity to the defaulter of placing his material before the authorities concerned and putting forward his case. The determination is subject to an appeal to no higher authority than the Central Government itself. It is, no doubt, true that before the appellate authority the defaulter is not entitled to a personal hearing as provided in clause 9 of the Third Schedule to the Scheme. Having regard to the nature of the enquiry that is required to be made by the appellate authority, we do not consider that the denial of personal hearing is unreasonable or unjustified. Having regard to the detailed provisions in the Scheme as well as the right of appeal that is provided to the Central Government, we do not find any substance in the contention of the petitioners that section 8 of the Act is void as offending article 19(1)(f) of the Constitution.

27. For the reasons stated above, we hold that the Enforcement Officer was competent to take action against the petitioners in these four cases under section 8 of the Act. In the result, we dismiss all these four writ petitions. No costs.

28. The learned Central Government Pleader submits that if the petitioners pay the amount determined with two weeks, no action will be taken to prosecute them.


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