[1961) x960 _ the amount immediately not expended was not tax- Hoshiarpur Efoc- able as revenue. t.ic supply Co. The receipts though related to the business of the . v'. assessee as distributors of electricity were not inciden-
Commissioncr of t l · th f h f t S . 1 a to norm e course o t e carrymg on o the asses- ncome- ax, im a , b . h _ see s usmess; t ey were receipts for bringing into exist- Shah J.
ence capital of lasting value. Contributions were not ma.de merely for services rendered and to be rendered, but for installation of capital equipment under an agreement for a joint venture. The total receipts being
capital receipts, the fact that in the installation of capital, only a certain amount was immediately ex- pended, the balance remaining in hand, could not be regarded as profit in the nature of a trading receipt.
On that view of the case, in our judgment, the High Court was in error in holding that the excess of the receipts over the amount expended for installation of service lines by the assessee was a trading receipt.
Dacember 7 The appeal is allowed and the question submitted to the High Court is answered in the negative. The assessee is entitled to its costs in this court as well as in the High Court.
Appeal allowed. SHRI MANNA LAL AND ANOTHER v. COLLECTOR OF JHALAW AR AND OTHERS (B. P. SINHA, c. J., s. K. DAS, A. K. SARKAR, N. RAJA- GOPALA AYYANGAR and J. L. MUDHOLKAR, JJ.) Public Demand-Loan due to Jhalawar State Bank-Assets
transferred to United State of Rajasthan under covenant, later vested in State of Rajasthan-If recoverable as a public demand-Certifi- cate–Reqt<irements, if applicable to loans due to Government- Special f~cilities to ~overnment as f!anker, whet':er discriminatory- Constitut1on of India, Art. r4-Ra;asthan Public Demands Recovery Act, r952 (Raj. V of 1952), s. 4·
The Jhalawar State Bank was originally a Bank belonging to the rulin!,l State of Jhalawar and its assets, including moneys ….. • due to it, became vested in the United State of Rajasthan under the covenant executed by the Ruler of Jhalawar along with
other Rulers by which the United State of Rajasthan was form- ed. On the promulgation of the Constitution of India, the United State of Rajasthan became the State of Rajastban in the Indian Union and all its assets, including the Jhalawar State Bank and its dues, vested in the State of Rajasthan.
Moneys due from the appellants in respect of advances made to them by the Jhalawar State Bank at a time when it belonged to the ruling State of Jhalawar, could be recovered by the State of Rajasthan after the Bank had become vested in it, as a public demand under the lfajasthan Public Demands Recovery Act,
i952. The form prescribed in the Rajasthan Public Demands Re- covery Act, in which a certificate has to be drawn up and filed under s. 4 of the Act for commencing proceedings for recovery of public demands under the Act in so far as it required a state- ment as to the period for which a public. demand is due, was not applicable to a public demand like a loan due to the Government in respect of which there is no question of any period for which it is due.
The Rajasthan Public Demands Recovery Act did not offend Art. 14 of the Constitution as giving special facility to the Government as a banker for the recovery of the bank's dues for, the Government can legitimately be-put in a separate class for this purpose.
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 88 of 1957. Appeal from the judgment and order dated January 18, 1956, of the Rajasthan High Court (Jaipur Bench) in D.B.C. Writ Petition No. 262 of 1954.
S. K. Kapur and Ganpat Rai, for the appellants. N. S. Bindra and D. Gupta, for the respondents. 1960. December 7. The Judgment of the Court was delivered by SARKAR, J.-The appellants are traders of Jhala-
war. Respondent No. 1, the Collector of Jhalawar, served on the appellants a notice under s. 6 of the Rajasthan Public Demands Recovery Act, 1952, here- after called the Act, for the recovery from them as a
public demand, of Rs. 2,24,607 /6/6 said to be due on account of loans taken by them from the Jh~lawar State Bank. The appellants filed a petition under s. 8 of the Act contending, among other things, that
Shri Manna Lal a;. Another v. Collector of jhalawar a;. Others Sarkar j. [1961] i96o the amount sought to be recovered from them was Sh . M L 1 not a public demand. Respondent No. 1 appears to
rt anna a d .,. Another have calle upon the appellants to prove that 1t was v. not a public demand. The appellants without pro- Collector of ceeding further before respondent No. 1, filed a peti-
Jhalawar tion in the High Court of Rajasthan for the issue of "' Others a writ quashing the proceedings under the Public Sarllar J. Demands Recovery Act. The High Court dismissed the petition but granted a certificate that the case was
fit for an appeal to this Court. Hence the present appeal. The only question raised in this appeal is whether any loan due to the Jha.lawa.r State Bank could be recovered as a. public demand. A "public demand"
within the meaning of the Act is "any money payable to the Government or to a department or a.n officer of Government under or in pursuance of a written instru- ment or agreement". The Government here means
the Government of Rajasthan for the Act was passed in 1952 by the Rajasthan State Legislature. The question then is whether money due to the Jhalawar State Bank, is money payable to the Government of
Rajasthan. Now, the Jhalawar State Bank was started in 1932. At that time Jhalawar was a ruling State. Sometime in or about April, 1948, the State of Jhalawar, a.long with nine other ruling States of Rajputana, integrated
and formed the United State of Rajasthan under a covenant executed by the Rulers of these States. One of the articles of this covenant provided, "All the assets and liabilities of the covenanting States shall
be the assets and liabilities of the United State." Sub- sequently, on March 30, 1949, the States of Bikaner, Jaipur, Jaisalmer and Jodhpur joined the United State of Rajasthan. On the promulgation of the Con-
stitution of India, the United State of Rajasthan became a Part B State in the Indian Union. The assets of the previous ruling State of Jhalawar, which had earlier vested in the United State of Rajasthan,
thereupon passed to and devolved upon the State of Rajasthan in the Indian Union. i The proceedings under the Act against the appel- x960 lants were started by the filing of a requisition with Sh . M L 1
b . rs anna a respondent No. 1 by respondents os. 2 and 3, emg & Another respectively the Treasury Officer, Jhalawar, and the v. Recovery Officer, Jhalawar State Bank, under s. 3 of
Collector of the Act stating that the amount earlier mentioned Jhalawar was due from the appellants to the Government 'of & Others Rajasthan in respect of the claims of the Jhalawar
Sarkar J. State Bank against them. This was done presumably shortly prior to June 16, 1953, on which date respon- dent No. 1 signed a certificate specifying the amount of the demand and certain other particulars and filed
it in his own office under s. 4 of the Act. A notice of the signing and filing of the certificate was served upon the appellants under s. 6 of the Act. This notice and the subsequent proceedings have been referred _to
in the beginning of this judgment. 'l'he claim thus is in respect of moneys due to the Jhalawar State Bank. If that Bank was not the pro- perty of the Jhalawar State, then its dues cannot of
course be said to have merged in the present State of Rajasthan. The appellants first contended that the Jhalawar State Bank was not the. property of the State of Jhalawar. The only material to which we
have been referred by the appellants in support of this contention is certain rules framed by the Ruler of Jhalawar in respect of the Bank. It was pointed out that the rules showed that the Bank was like any
other commercial enterprise. We are unable to agree that for this reason it could not be an institution belonging to the State. There was nothing to prevent the Jhalawar State carrying on a commercial under-
taking. If it did so, the assets of that undertaking would be those of tlie State and, in the circumstances earlier mentioned, must now be held to be vested in the State of Rajasthan.
It was also said that the rules showed that the management of the Bank was in the hands of a board of which certain non-officials were members. It was contended that this showed that the Bank was not the
property of the State. It is clear, however, from the [1961) z96o rules that the Bank was not the properiy of the board. Shri Manna Lal Again, the board was constituted from time to time by & Another
the Ruler and the majority of its members were offi- v. cers of the State. This would show that the Ruler Colleetor of was in full control of the management of the Jhalawar Bank as a State undertaking. It is true that the
& Others rules indicate that the Bank might sue or be sued Sarkar J. in respect of transactions made by or with it. That, however, would not indicate that the Bank had a separate identity. The rules in this connection only
indicate in what name suits could be brought by or against the State's banking business. On the other hand, it is perfectly clear that the capital of the Bank was derived solely from the funds of the Jhalawar
State. No part of it was contributed by anyone else. One of the objects of the Bank was to invest the sur- plus funds of the State. The entire transaction of the business of the Bank was in the ultimate control of
the Ruler. The Jhalawar State guaranteed the finan- cial liabilities of the Bank. The name "Jhalawar State Bank" also indicates that the institution belong- ed to the State of Jhalawar. About the time of the
formation of the United State of Rajasthan in 1948, the Chief Executive Officer, Jhalawar, issued a public notification in which, after referring to the article in the Covenant which provided that the assets and
liabilities of the covenanting States would be the assets and liabilities of the United State, he proceeded to state that by virtue of this article, on the formation of the new State, the responsibility and guarantee of
the existing transactions with the different depart- ments of Jhalawar State or the Jhalawar State Bank, would be of the newly formed United State of Rajas- than. This would show that the assets of the Jhala-
war State Bank were being treated by all concerned as assets of the former Jhalawar State, which, upon the formation of the United State of Rajasthan, had vested in the latter State. Further, no one else has at
any time made any claim to the assets of the Jhala- war State Bank. It is, therefore, clear beyond all doubt, that the Jhalawar State Bank was one of the assets of Jhalawar State and is now vested in the
State of Rajasthan. ,f -t The second point argued for the appellants is that the dues of the Jhalawar State Bank have in any case been transferred by the Government of Rajas- than to the Bank of Rajasthan Ltd. under certain
Notifications to which we shall presently refer. It is said that the Bank of Rajasthan Ltd. is, as its name shows, obviously a limited company having an inde- pendent existence and is not a department of the
Government of Rajasthan State. It is also contended that this vesting took place before the proceedings under the Act had started. Therefore, it is said that at the commencement of those proceedings, the amount
claimed from the appellants as due to the Jhalawar State Bank, was not a public demand within the meaning of the Act. This contention which is based on the Notifications, earlier mentioned, does not seem to us to be well
founded. We will assume for the present purpose that the Bank of Rajasthan Ltd. is not a department of the Government of Rajasthan State. The question is whether the effect of these Notifications, which
were two -in number, was to vest the dues of the Jhalawar State Bank in the Bank of Rajasthan Ltd. The first Notification is dated February 15, 1951. It stated that the Government of the State of Rajasthan
had decided to transfer, among others, the Jhalawar State Bank, to the Bank of Rajasthan Ltd. It was contended that by this Notification the assets of the Jha.lwar State Bank were transferred to the Bank of
Rajasthan Ltd. We do not think that that was the effect of this Notification. It contained two very signi- ficant provisions which we set out below: "All debtors of the State Banks irrespective of
the class, category and nature of the debt are hereby informed that within one month from the date of publication of this notice they should clear accounts with the aforesaid State Banks which will continue
to function only to clear the old accounts, and there- after their accounts with the securities pledged will automatically be transferred to the Bank of Rajas- than Ltd., who will be authorised on behalf of the
State, to effect necessary recoveries and settle ac- counts. Shri Manna Lal & Another v. Collector of Jhalawar a;. Others Sarkar]. .1960 Shri Manna !,al 0- Another v. Collector of
Jhalawar &- Others Sarkar ]. [1961] The transfer of these debts to the Bank of Ra.ja.s- than Ltd. will not, on any account, take a.way the inherent right which the Raja.sthan Govt. possess in
these various transactions ma.de on the guarantee of the respective convenanting States to make recoveries and settle accounts in accordance with the existing rules or laws that may hereafter be made to effect
recovery of State dues or State debts." It is clear from these provisions that the Bank of Rajasthan Ltd. was being authorised "on behalf of the State", that is, the Government of the State of
Rajasthan, to recover the amounts due to the Jha.la.- war State Bank. The transfer of the latter Bank to the Bank of Raja.sthan Ltd. was to be subject to this qualification that its dues would remain the dues of
the Government of the State of Rajasthan and would only be recovered by the Bank of Ra.jasthan Ltd. as the agent of that Government. The last para.graph set out above emphasises this position. It preserves
the right of the Government of the State of Raja.stha.n to recover the a.mounts due to the Jha.la.wa.r State Bank in accordance with any law that might be made after the date of the Notification. The position then
is that under this Notification the debts due to the Jhalawar Bank were not transferred to the Bank of Rajasthan Ltd: and remained payable to the Govern- ment of Rajastha.Ii. The other Notification is dated
April 16, 1952, and it repeats that the banks mention- ed in the earlier Notification, including the Jha.la.wa.r State Bank, "will be merged in the Bank of Rajas. than Limited". It is said that the effect of this Noti-
fication was in any event to cancel the earlier Notifi- cation, in so far as the latter preserved the power of the State to collect the debts of the J hala.wa.r State Bank. We are wholly unable to agree. This Notifi.
cation only reiterates the intention of the Government of the State of Rajastha.n to merge the banks named, in the Bank of Ra.ja.sthan Ltd. It says nothing speci- fically about the dues of these banks or as to their
recoveries, with regard to which, therefore, the provi- sions of the previous Notification must have effect. Furthermore, there is nothing to show that the debts • .. due to the Jhalawar State Bank were by .any docu-
I960 ment specifically transferred to or vested in the Bank Shri J\-;::;;,..a Lal of Rajasthan Ltd. and thereupon became its property. & Another That being ~so, there is no basis for the contention
v. that the debts due from the appellants are now due Collector o/ to the Bank of Rajasthan Ltd. in its own right. It Jhalawa• would follow that such debts remained debts due to Sarkar ].
the Government of the State of Rajasthan. The third point argued was that the moneys claim- ed from the appellants were not payable under a written instrument or agreement. This contention is
wholly unfounded. It appears that the loans were granted by the Jhalawar State Bank to the appellants on their own applications. In each application the appellants stated that they wanted a loan from the
Jhalawar State Bank and promised to repay it with interest at the x:ate mentioned in it. By these applications the appellants also proposed to hypothe- cate various properties belonging to them as security
for the due repayment of the loans taken. They sign- ed the applications and the receipts, which latter also bore the signatures of the officers of the Bank in token of the sanction of the loan. In our view, the
money payable by the appellants was payable under these applications and receipts and was, therefore, payable under written instruments or agreements. A point was sought to be made that in each case there
were two documents, namely, the application by the appellants and the receipt for the moneys advanced signed by them, whereas a public demand as defined in the Act, required one instrument. It is enough to
say in regard to this contention that the Act does not say that the moneys shall be due .under a single instrument. It is well-known that in a statute a sin- gular includes the plural. In any case, the two docu-
ments constituted the written agreement between the parties and that is enough to satisfy the requirement of the Act, even if read in the way suggested by the appellants. The fourth point advanced was that the certificate
under the Act was defective and therefore the pro- ceedings were a nullity. Section 4 of the Act requires that the certificate shall be in the prescribed form. z960 Shri Manna Lal
& Another v. C olleelo,, of ]halawar cS- Others Sarkar ]. (1961] One of the particulars to be stated in the form, requi- res that the period for which the demand was due should be specified. That period was not specified in
the certificate in the present case. It seems to us however that this is no defect. In the case of loans due, there is no question of any period for which the demand is due. Obviously, the requirement as to the
specification of the period was meant to apply where the demand consisted of a claim for revenue or rent or the like, which could be due for a period. It is clear to us that the requirement as to stating the period
for which the demand is due, as appears from the prescribed form, does not arise in the case of a loan due to the Government which is a public demand within the Act and in such a case no question of
stating the period arises. The certificate was not, therefore, defective. The last point argued was that in so far as the Act enables moneys due to the Government in respect of its trading activities to be recovered by way of public
demand, it offends Art. 14 of the Constitution. It is said that the Act makes a distinction between other bankers and the Government as a banker, in respect of the recovery of moneys due. It seems to us that
the Government, even as a banker, can be legitimately put in a separate class. The dues of the Government of a State are the dues of the entire people of the State. This being the position, a law giving special
facility for the recovery of such dues cannot, in any event, be said to offend Art. 14 of the Constitution. We have now discussed all the points raised in this appeal and are unable, for the reasons earlier men-
tioned, to find merit in any of them. In the result we come to the conclusion that the amount claimed from the appellants was a public demand within the meaning of the Act and was legally recoverable by
the impugned proceedings. This appeal therefore must be dismissed with costs and we order accord- ingly Appeal dismissed.