REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 8485 OF 2011

M/S SHANTI FRAGRANCES                                 …APPELLANT  

VERSUS

UNION OF INDIA AND ORS.              …RESPONDENTS  

WITH

CIVIL APPEAL NO. 8486 OF 2011

CIVIL APPEAL NO. 8487 OF 2011

CIVIL APPEAL NO. 8488 OF 2011

CIVIL APPEAL NO. 8491-8494 OF 2011

CIVIL APPEAL NO. 8495 OF 2011

CIVIL APPEAL NOS. 8496-8501 OF 2011

CIVIL APPEAL NO. 8502 OF 2011

CIVIL APPEAL NO. 8617 OF 2014

CIVIL APPEAL NOS. 10374-10379 OF 2014

J U D G M E N T

R.F. Nariman, J.    

1) This batch of cases concerns Pan Masala containing tobacco

and Gutka and their taxability under three State legislations, namely,

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the Delhi Sales Tax Act, 1975, the U.P. Trade Tax Act, 1948 and the

Tamil Nadu General Sales Tax Act, 1959.  The central question raised

in all  these appeals is the same.  We shall  first  take up the Delhi

case.  

2) Under the Delhi Sales Tax Act,  1975, all  sales (of goods) that

are effected after the commencement of the Act, are made to suffer

tax under Section 3(1) of the Delhi Act, whose marginal note reads

“incidence of tax”.  Section 3 (1) states as under:-

                 “3. Incidence of Tax

(1)  Every  dealer  whose  turnover  during  the  year immediately  preceding  the  commencement  of  this  Act exceeds the taxable quantum and every dealer who at the commencement of this Act, is registered or is liable to pay tax under the Central Sales Tax Act, 1956 (74 of 1956) shall  be  liable  to  pay  tax  under  this  Act  on  all  sales effected by him on or after such commencement.”

The  obverse  side  of  incidence  of  tax  is  provided  by Section 7 of the said Act, which reads as under:-

“7. Tax free goods

(1) No tax shall be payable under this Act on the sale of goods  specified  in  the  Third  Schedule  subject  to  the conditions and exceptions, if any, set out therein.

(2)  The Lieutenant  Governor  may by notification in  the Official Gazette, add to, or omit from, or otherwise amend, the Third Schedule either retrospectively or prospectively, and thereupon the Third Schedule shall be deemed to be amended accordingly:

PROVIDED  that  no  such  amendment  shall  be  made retrospectively if  it  would have the effect of prejudicially affecting the interests of any dealer.”

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3) Under Section 4, the marginal note of which reads “rate of tax”,

if tax is payable by a dealer under the Act, various rates in respect of

taxable turnover are set out depending upon whether the goods are

“declared goods” under the Central Sales Tax Act, 1956 or are goods

which suffer tax at the rate of either twelve paise or twenty paise in

the rupee, depending upon whether they are specified in the First

Schedule or Fourth Schedule of the Act.  In addition, food or drink

served for consumption in a hotel or restaurant with which a cabaret,

floor show or similar entertainment is provided, is taxed at the rate of

forty paise in the rupee.  All cases not covered by the above are then

covered by a residuary sub-clause, in which the relevant rate at the

given time was eight paise in the rupee.  Section 4 of the said Act

reads as under:

“4. Rate of tax (1) The tax payable by a dealer under this Act shall be levied –

(a) in the case of taxable turnover in respect of the goods specified in the First Schedule, at the rate of twelve paise in the rupee;

(b) in the case of taxable turnover in respect of the goods specified in Schedule II, at such rate not exceeding four paise in rupee as the Central Government  may,  from  time  to  time,  by notification in the official Gazette, determine;

(c) in the case of taxable turnover in respect of any food or  drink  served for  consumption in  a hotel or restaurant or part thereof, with which a cabaret,  floor  show  or  similar  entertainment  is provided therein, at the rate of forty paise in the rupee;

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[(cc)  in  the  case of  taxable  turnover  in  respect  of  the goods specified in  the Fourth Schedule,  at  the rate of twenty paise in the rupee;]  

[(ccc) [***] (d) in the case of taxable turnover of any other goods, at the rate of eight paise in the rupee:

[PROVIDED that the Lieutenant Governor may, by notification in the Official Gazette, add to, or omit  from,  or  otherwise  amend,  the  First Schedule,  the  Second  Schedule  or  the  Fourth Schedule, either retrospectively or prospectively, and there upon the First Schedule or the Second Schedule  or,  as  the  case  may  be,  the  Fourth Schedule,  shall  be  deemed  to  be  amended accordingly:]

PROVIDED FURTHER that no such amendment shall be made retrospectively if it would have the effect of prejudicially affecting the interests of any dealer:

PROVIDED ALSO that in respect of any goods or class of goods if  the Lieutenant Governor is of the opinion that it is expedient in the interest of the  general  public  so  to  do,  he  may,  by notification in the Official Gazette, direct that the tax in respect of taxable turnover of such goods or  class  of  goods  shall,  subject  to  such conditions as may be specified, be levied at such modified rate not exceeding the rate applicable under  this  section,  as  may be  specified in  the notification.

(2) For the purpose of this Act, “taxable turnover” means that  part  of  a  dealer’s  turnover  during  the  prescribed period in any year which remains after  deducting there from:

(a) his turnover during that period on-

(i) sale of goods, the point of sale at which such goods  shall  be  taxable  is  specified  by  the Lieutenant  Governor  under  section  5  and  in respect  of  which  due  tax  is  shown  to  the satisfaction of the Commissioner to have been paid;

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(ii)  sale  of  goods  declared  tax-free  under section 7;

(iii) sale of goods not liable to tax under section 8;

(iv)  sale  of  goods  which  are  proved  to  the satisfaction of the Commissioner to have been purchased  within  a  period  of  twelve  months prior to the date of registration of the dealer and subjected  to  tax  under  the  Bengal  Finance (Sales Tax) Act, 1941 (Bengal Act VI of 1941), as it was then in force, or under this Act;

(v) sale to a registered dealer;

(A) of  for  “the Administrator  is of opinion that  it  is  expedient  in  the interest  of  the general  public  to  do,  he  may,  with  the previous  approval  of  the  Central Government  and”  goods  of  the  class  or classes  specified  in  the  certificate  of registration  of  such  dealer,  as  being intended for use by him as raw materials in the manufacture in Delhi of any goods, other  than  goods  specified  in  the  Third Schedule or newspapers, –

(1) for sale by him inside Delhi; or

(2)  for  sale  by  him  in  the  course  of inter-State trade or commerce, being a sale  occasioning,  or  effected  by transfer  of  documents of  title to such goods  during  the  movement  of  such goods from Delhi; or

(3)  for  sale  by  him  in  the  course  of export  outside  India  being  a  sale occasioning  the  movement  of  such goods from Delhi, or a sale affected by transfer  of  documents of  title to such goods effected during the movement of such  goods  from  Delhi,  to  a  place outside India and after the goods have crossed the customs frontiers of India; or

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(B)  of  goods  of  the  class  or  classes specified in the certificate of registration of such dealer as being intended for  resale by him in Delhi, or for sale by him in the course of inter-State trade or commerce or in the course of export outside India in the manner  specified in  sub-item (2)  or  sub- item (3) of item (A), as the case may be; and

(C) of containers or other materials used for the packing of goods, of the class or classes  specified  in  the  certificate  of registration  of  such  dealer,  other  than goods  specified  in  the  Third  Schedule, intended for sale or resale;

(vi)  such  other  sales  as  are  exempt  from payment of tax under section 66 or as may be prescribed:

PROVIDED that no deduction in respect of any sale  referred  to  in  sub-clause  (iv)  shall  be allowed unless the goods, in respect of which deduction is claimed, are proved to have been sold  by  the  dealer  within  a  period  of  twelve months from the date of his registration and the claim  for  such  deduction  is  included  in  the return required to be furnished by the dealer in respect of the said sale:

[PROVIDED  FURTHER  that  no  deduction  in respect of any sale referred to in sub-clause (v) shall be allowed unless a true declaration duly filled  and  signed  by  the  registered  dealer  to whom the goods are sold and containing the prescribed  particulars  in  the  prescribed  form obtainable from the prescribed authority in the manner and subject to such condition as may be  prescribed  is  furnished  in  the  prescribed manner and within the prescribed time, by the dealer who sells the goods:]

PROVIDED ALSO that  where  any  goods  are purchased by a registered dealer for any of the purposes mentioned in sub-clause (v), but are not so utilised by him, the price of the goods so

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purchased  shall  be  allowed  to  be  deducted from the turnover of the selling dealer but shall be  included  in  the  taxable  turnover  of  the purchasing dealer; and

(b) the tax collected by the dealer under this Act, as  such  and  shown  separately  in  cash memoranda or bills, as the case may be.”

The question that has been raised in the present appeals relates to

“tobacco” specified in the Third Schedule, read with Section 7, as tax

free goods as follows:-

“22. Tobacco as defined under the Central Excises and Salt Act, 1944 (1 of 1944).”

4) We have been taken to the Central Excises and Salt Act, 1944

as it obtained in the year 1975.  The relevant entry in the said Act

contained in the First Schedule reads as follows:-

“4. TOBACCO -

“Tobacco”  means  any  form  of tobacco whether cured or uncured and whether manufactured or not, and  includes  the  leaf,  stalks  and stems  of  the  tobacco  plant,  but does  not  include  any  part  of  a tobacco plant while still attached to the earth.

Item Description of goods                  Rate of duty No.

I.      Unmanufactured tobacco - Per kilogram

       (1) if flue cured and used in the          Five rupees               manufacture of cigarettes.  

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(2) if flue cured and used for the Forty rupees manufacture of smoking mixtures for  pipes and cigarettes.

(3) If flue cured and not otherwise specified. Four rupees

(4) if other than flue cured and used for the manufacture of –  

       (a) cigarettes or (b) smoking mixtures for Four rupees          pipes and cigarettes.

(5) If other than flue cured and not actually Three rupees used for the manufacture of (a) cigarettes or (b) smoking mixtures for pipes and cigarettes or (c) biris-

(i) stems of tobacco larger than 6.35 milli- meters in size, (ii) dust of tobacco. (iii)  xx    xx     xx    xx (iv) tobacco cured in whole leaf form and packed or tied in bundles, hanks or bunches or in the form of twists or coils.

(6) if other than flue cured and not otherwise  Four rupees specified.  

(7) if used for agricultural purposes Nil

(8) stalks.         One rupee &ninety         paise.

II. Manufactured tobacco-

(1) Cigars and cheroots.   Twenty-five rupees  per hundred

(2) Cigarettes.          Two hundred and fifty             percent.  ad valorem.

(3) (i) Biris in the manufacture of which    Three rupees and eighty any process has been conducted with   paise per thousand the aid of machines operated with or           without the aid of power.

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    (ii) other biris Eighty paise per           thousand

(4) Smoking mixtures for pipes and    Two  hundred  per cigarettes.  cent. ad valorem

(5) Chewing tobacco. Ten per cent. ad                                                                     valorem

(6) Snuff. Two rupees and fifty    paise per kilogram”*1*

This is obviously a case of legislation by incorporation as a result of

which the only thing that is to be looked at is “tobacco” contained in

this Schedule and not subsequent amendments that have been made

after  the introduction of  the Central  Excise (Tariff)  Act,  1985 w.e.f.

February, 1986.  It has, in any event, been argued before us that the

subsequent legislation would throw light on what is contained in the

earlier legislation, for  subsequently under the Central  Excise Tariff,

Pan Masala which contains tobacco, commonly known as Gutka, is

specified under Entry 2404.49 under the heading “Chewing Tobacco

and  preparations  containing  chewing  Tobacco;  Pan  Masala

containing Tobacco”.  In addition, it was pointed out that under the

Chapter notes, para 3 in particular, the definition of “tobacco” remains

exactly what it was in 1975, which now subsumes Pan Masala which

includes tobacco.  

1 Effective from 1-3-75

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5) The  impugned  judgment  of  the  Delhi  High  Court  dated

05.11.2004 has held, on a reading of the aforesaid provisions, that a

notification dated 31.03.2000, which introduced as Item 46 in the First

Schedule “Pan Masala and Gutka” w.e.f. 01.04.2000, would have to

be read as eating into the exemption for “tobacco” generally, and that

therefore, on and from this date, Pan Masala which includes tobacco

would become exigible to sales tax.  This was done on two bases;

first, that, as was held by the Kerala High Court in Reliance Trading

Company  vs.  State of Kerala, (2000) 119 STC 321 (Ker.), if there

are two entries, one general and another specific, the general entry

must  give  way  to  the  specific  entry.   The  exemption  entry  being

general  in  nature,  therefore,  must  give  way  to  the  specific  entry

contained in the First Schedule, and that therefore, sales tax became

payable on Pan Masala which includes tobacco.  The other basis of

the  judgment  is  that  there  is  a  dichotomy  between  two  lines  of

Supreme Court  judgments.   The  first  line  is  contained  in  Kothari

Products Ltd. vs. Government of A.P., (2000) 9 SCC 263 and State

of Orissa  vs.  Radheshyam Gudakhu Factory, (1987) 68 STC 92;

the second line of decisions being  Commissioner, Sales Tax U.P.

vs. M/s Agra Belting Works, Agra (1987) 3 SCC 140 as followed in

Sales Tax Officer, Section IX, Kanpur vs. Dealing Dairy Products

and Another,  1994 Supp.  (2)  SCC 639 and  State  of  Bihar  and

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Others vs. Krishna Kumar Kabra and Another, (1998) 108 STC 1.

Whereas the  Kothari Products (supra) line of judgments had held

that  an  entry  under  a  sales  tax  statute  which  only  specifies  rate

cannot  be used to  eat  into  an exemption entry,  the  Agra Belting

Works (supra) line of judgments states the exact opposite, which is

that the charging section, the rate of tax section, and the exemption

section all form part of one scheme, and when a notification is issued

under  a  rate  of  tax  section,  which  is  subsequent  to  a  notification

exempting certain goods, the intention of the legislature is that such

exemption then gets withdrawn and makes the sale of such goods

liable to tax.  The High Court preferred to follow the  Agra Belting

Works (supra) line, and therefore, dismissed the writ petition of the

assessees.  

6) To  similar  effect  are  the  impugned  judgments  from  the

Allahabad and Madras High Courts which are contained in C.A. No.

8617/2014 and C.A. No. 8502/2011.  It may only be noted that in the

Madras High Court judgment, though this point was squarely raised

and argued, the Madras High Court has preferred to rest its decision

on only one point, which is that even though additional duty of excise

may  be  levied  on  Pan  Masala  containing  tobacco,  the  legislative

competence of the State to enact a State sales tax levying sales tax

on the same goods is not taken away.  

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7) It  is  well  settled that  in  the area of  taxation,  the question of

going to the measure of a tax would arise only if it is found that the

charge  of  tax  is  attracted.  [See  Tata  Sky  Limited vs.  State  of

Madhya Pradesh and Others, (2013) 4 SCC 656 at para 29]  Also,

in a recent Constitution Bench judgment delivered by this Court in

Commissioner  of  Income Tax (Central)-I,  New Delhi vs.  Vatika

Township Private Limited, (2015)  1 SCC 1,  after  referring to  an

earlier judgment of this Court, this Court stated that the components

which enter into the concept of taxability are well known and distinct.

The first is the imposition of tax which prescribes the taxable event

attracting  the  levy.   The  second  is  an  indication  of  the  “taxable

person”  i.e.  the person on whom the levy is  imposed and who is

obliged to pay the tax.  The third is the rate at which tax is imposed.

The fourth is the measure or value to which the levy will be applied

for computing tax liability.  

8) Keeping these parameters in mind, a three-Judge Bench of this

Court  held,  in  Reliance  Trading  Company,  Kerala vs.  State  of

Kerala, (2011) 15 SCC 762 at 766-767, on pari materia provisions of

the Kerala General Sales Tax Act, that there can be no confusion or

mixing up between the incidence of tax and exemption of tax on the

one hand and the rate of tax on the other.  On the facts of that case,

“Tarpaulin” was separately classified under the First Schedule to the

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Kerala Act and was made taxable at a certain specified rate.  The

Third  Schedule,  which  contained  entries  enumerating  exempted

goods from sales tax, contained entry 7 which read, inter alia, “cotton

fabrics”.  The case of the assessee was that so far as cotton based

Tarpaulin  is  concerned,  it  was exempted from the payment  of  tax

since it fell within the term “cotton fabrics” under the relevant entry

contained in the Third Schedule to the Kerala Act.  On the other hand,

the  Revenue urged that  since  “Tarpaulin”  was  a  specific  entry  as

opposed to “cotton fabrics” which was general, the latter must give

way to the former.  

9) This Court repelled the aforesaid argument of the Revenue, and

set aside the Kerala High Court judgment, which was referred to and

relied upon by the Delhi High Court in the impugned judgment dated

05.11.2004, as follows:  

“15.  The High Court  seems to have brushed aside the argument  of  the  appellant  by  merely  focusing  on  the general principle that when there are two taxing entries – one  general  and  the  other  specific  –  then  the  specific entry would have to be given priority as compared to the general entry. In our view, this principle has no application in the facts of the present appeal as it was not a case of goods  being  exigible  to  tax  under  two  entries.  On  the other hand, the appellant’s case is one where the goods had been granted a special exemption provided they were already subjected to tax under the ADEA. The High Court fell into the error of assuming that the problem presented to it with regard to exemption could be solved by resort to the general principle of specific entry versus general entry of a taxable head.”

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More importantly, the Revenue’s contention that when an exemption

has already been granted, if the State legislature amended Schedule

I, which only deals with the rate of tax, such amendment would take

away exemption of tax of the same goods, was directly turned down

by this Court, stating as under:  

“16. The Revenue’s contention that when an exemption had already been granted to the goods concerned, if the State Legislature had specifically amended Schedule I so as to include the said goods in Schedule I and make it exigible to tax, it would be incorrect to interpret an entry in a manner so as to defeat the object of the statute, is also not tenable. In the first place, there could be nothing like exemption  from  tax  unless  goods  are  exigible  to  tax. Thus, unless the goods were specified in Schedule I or II of the KGST Act the goods would not be liable to tax at all and,  therefore,  there  would  be  no  question of  granting exemption  from tax.  Thus,  it  would  be  unnecessary  to specify them in the Third Schedule, unless by reason of Section  5  read  with  Schedule  I  or  II,  the  goods  were exigible to tax. The fact that “tarpaulin” was included in the First Schedule does not carry the matter any further in favour of the Revenue as it  is clear that the exemption operating in favour of  cotton-based tarpaulin as covered by “cotton fabrics” in the Third Schedule continues as no corresponding  change  has  been  made  therein  by  the legislature  even  after  the  amendment  of  the  First Schedule  by  the  introduction  of  “tarpaulin”.  The  legal result, consequently, is that  cotton-based tarpaulin would continue to be leviable to tax under the ADEA, and by reason of Entry 7/Entry 11 of the Third Schedule the said goods  would  be  exempted  from exigibility  to  sales  tax under  the  KGST  Act.  This  legal  result  would  follow irrespective of whatever might have been the presumed intention of the legislature in amending Schedule I. The intention of the legislature has to be gathered from the words used in the statute, and as long as Entry 11 in the Third Schedule remains unamended, the legal  result  of exemption  of  cotton-based  tarpaulin from  exigibility  to sales tax under the KGST Act cannot be avoided.”  

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10) It does appear that there is a direct conflict between  Kothari

Products (supra),  Radheshyam  Gudakhu  Factory  (supra)  and

Reliance Trading Company  (supra)  judgments  on  the one  hand,

and  Agra Belting Works (supra), which was also  followed by two

other judgments, on the other.  We may hasten to add that there are

three Judge Bench decisions on both sides.  Interestingly enough, in

Agra Belting Works (supra), this Court held by a majority of two to

one as follows:

“6.  As  has  been  pointed  out  above,  Section  3  is  the charging provision; Section 3-A authorises variation of the rate of tax and Section 4 provides for exemption from tax. All  the  three  sections  are  parts  of  the  taxing  scheme incorporated in the Act and the power both under Section 3-A as also under Section 4 is exercisable by the State Government only. When after a notification under Section 4  granting  exemption  from  liability,  a  subsequent notification under Section 3-A prescribes the rate of tax, it is  beyond  doubt  that  the  intention  is  to  withdraw  the exemption  and  make  the  sale  liable  to  tax  at  the  rate prescribed in the notification.  As the power both for the grant  of  exemption and the variation of  the rate  of  tax vests  in  the  State  Government  and  it  is  not  the requirement of the statute that a notification of recall of exemption is a condition precedent to imposing tax at any prescribed rate by a valid notification under Section 3-A, we see no force in the contention of the assessee which has been upheld by the High Court. In fact, the second notification  can  easily  be  treated  as  a  combined notification-both for withdrawal of exemption and also for providing higher tax. When power for both the operations vests in the State and the intention to levy the tax is clear we see no justification for not giving effect to the second notification. We would like to point out that the exemption was in regard to a class of goods and while the exemption

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continues,  a specific  item has now been notified under Section 3-A of the Act.”

(at pages 142-143)

B.C. Ray, J. dissented from this view and followed the view of the

Allahabad High Court,  which accords the view of  this Court in the

Kothari Products (supra) and Reliance Trading Company (supra)

judgments.  One other interesting feature of this case is whether, after

Union of India vs. Raghubir Singh, 1989 (3) SCR 316 at 335-337, it

can be stated that Judges of this Court do not sit in 2’s and 3’s for

mere convenience, but that a Bench which is numerically superior will

prevail over a Bench of lesser strength.  If the doctrine of precedent,

as  applied  by  this  Court,  is  to  be  a  matter  of  numbers,  then,

interestingly  enough,  as  has  been  held  by  Beaumont  C.J.  in

Ningappa Ramappa Kurbar and Another vs.  Emperor,  AIR 1941

Bombay 408 at 409, the position in law could be as under:

“... The Court in that case consisted of five Judges, one of whom,  Shah  J.,  dissented  from  that  proposition.  The authority of the case may be open to question, since there had been a previous decision of a Full Bench of this Court of four Judges in  Queen-Empress v.  Mugappa,  (1894) 18  Bom  377  (FB),  which  had  reached  a  different conclusion. Apparently it was considered that five Judges, by a majority of four to one, could overrule a unanimous decision  of  four  Judges,  the  net  result  being  that  the opinion of four Judges prevailed over the opinion of five Judges of co-ordinate jurisdiction. There seems to be very little  authority  on  the  powers and constitution  of  a  Full Bench.

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There can be no doubt that a Full Bench can overrule a Division Bench,  and that  a  Full  Bench must  consist  of three or more Judges; but it  would seem anomalous to hold that a later Full Bench can overrule an earlier Full Bench, merely because the later bench consists of more Judges  than  the  earlier.  If  that  were  the  rule,  it  would mean that a bench of seven Judges, by a majority of four to three, could overrule a unanimous decision of a bench of six Judges, though all the Judges were of co-ordinate jurisdiction. In  Enatullah v.  Kowsher Ali, (1926) 54 Cal 266,  Sanderson  C.J.,  stating  the  practice  in  Calcutta, seems to have been of opinion that a decision of a Full Bench could only be reversed by the Privy Council or by a bench specially constituted by the Chief Justice. Even if this  be the true rule,  there is  nothing to show that  the Chief  Justice acted upon it  in  Emperor v.  Purshottam Ishwar (1921) 45 Bom 834. I do not recollect myself ever to have constituted a Special Bench to consider the ruling of  a  Full  Bench,  though  I  have  constituted  many  Full Benches  to  consider  rulings  of  Division  Benches. However, I need not pursue this subject further, since, for the  purpose  of  the  present  appeal,  I  am  prepared  to assume that an alternative charge of perjury lies, and that it was a charge of that nature which the learned Additional Sessions  Judge  contemplated.  The  question  then  is whether it is expedient in the interests of justice that such a charge should be made.”  

11) This  conundrum  was  also  addressed  by  M.B.  Lokur,  J.  in

Supreme Court Advocates-on-Record Association and Another

vs. Union of India, (2016) 5 SCC 1 at 577-578 as follows:  

“669.  One  of  the  more  interesting  aspects  of  Pradeep Kumar  Biswas (Pradeep  Kumar  Biswas v.  Indian Institute of Chemical Biology, (2002) 5 SCC 111) is that out  of  the  7  (seven)  learned  Judges  constituting  the Bench,  5  learned  Judges  overruled  the  unanimous decision of another set of 5 learned Judges in  Sabhajit Tewary (Sabhajit  Tewary  v.  Union  of  India,  (1975)  1 SCC 485).  Two of the learned Judges in Pradeep Kumar Biswas found  that  Sabhajit  Tewary had  been  correctly

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decided. In other words, while a total of 7 learned Judges took a particular view on an issue of fact and law, that view  was  found  to  be  incorrect  by  5  learned  Judges, whose  decision  actually  holds  the  field  today.   Is  the weight of numbers irrelevant? Is it that only the numbers in a subsequent Bench are what really matters?  What would have been the position if only 4 learned Judes in Pradeep Kumar Biswas had decided to overrule Sabhajit Tewary while the remaining 3 learned Judges found no error  in  that  decision?   Would  a  decision  rendered unanimously  by  a  Bench  of  5  learned  Judges  stand overruled  by  the  decision  of  4  learned  Judges  in  a subsequent Bench of 7 learned Judges?  Pradeep Kumar Biswas presents  a  rather  anomalous  situation  which needs to be addressed by appropriate rules of procedure. If  this  anomaly  is  perpetuated  then  the  unanimous decision of  9 learned Judges in the  Third Judges case (Special Reference No. 1 of 1998, In Re, (1998) 7 SCC 739) can be overruled (as sought by the learned Attorney General) by 6 learned Judges in a Bench of 11 learned Judges, with 5 of them taking a different view, bringing the total  tally of  Judges having one view to 14 and having another view to 6, with the view of the 6 learned Judges being taken as the law!”  

12) It may be pointed out that in the present case, if numbers are

toted  up,  the  Kothari  Products (supra)  line,  as  followed  in

Radheshyam  Gudakhu  Factory (supra)  and  Reliance  Trading

Company (supra), will go to a Bench strength, numerically speaking,

of eight learned Judges, as against the Agra Belting Works (supra)

line, which goes up to a numerical strength of six learned Judges.  If

the dissenting judgment of B.C. Ray, J. is to be added to the Kothari

Products (supra) line, then we have a numerical strength of 9:6. The

question of numerical strength gains poignancy when one judgment

is overruled by another, as has been pointed by Beaumont C.J. in

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Ningappa Ramappa Kurbar  (supra), and by Lokur, J. in  Supreme

Court Advocates-on-Record (supra).  

13)   Let us consider a hypothetical example, where a 2 Judge Bench

has laid down the law in a particular  way.   If  nine other  2 Judge

Benches have followed the first 2 Judge Bench decision, is it open for

three  learned  Judges to  overrule  all  of  the  2  Judge Benches i.e.

twenty learned Judges?   The obvious answer would be yes, because

the  3  Judge  Bench  is  really  overruling  the  first  2  Judge  Bench

decision, which was merely followed by nine other 2 Judge Benches.

As against this, however, if a unanimous 5 Judge Bench decision is

overruled by a 7 Judge Bench, with four learned Judges speaking for

the majority, and three learned Judges speaking for the minority, can

it be said that the 5 Judge Bench has been overruled?  Under the

present  practice,  it  is  clear  that  the  view  of  four  learned  Judges

speaking  for  the  majority  in  a  7  Judge  Bench  will  prevail  over  a

unanimous 5 Judge Bench decision, because they happen to speak

for a 7 Judge Bench.  Has the time come to tear the judicial veil and

hold that in reality a view of five learned Judges cannot be overruled

by a view of four learned Judges speaking for a Bench of 7 learned

Judges?  This is a question which also needs to be addressed and

answered.   

14) An allied question, which often arises, is the discovery of the

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true  ratio  decidendi  in  a  given  case.   In  Harper  and  Others  vs.

National Coal Board [1974] 2 All ER 441, the Court of Appeal was

faced with a judgment of the House of Lords in Central Asbestos Co

Ltd vs. Dodd [1972] 2 All ER 1135 by five learned Judges.  Whereas

Lord Reid and Lord Morris took a particular view of the law in favour

of  Dodd,  stating that  his  claim was not  barred,  two other  learned

Judges namely, Lord Simon and Lord Salmon disagreed on the law,

and held that his claim was barred.  Lord Pearson was stated to be

the odd man out.  He held that time did not run against Dodd, since

Dodd did not appreciate that the appellants were at fault and that his

injuries were attributable to their fault.  On that ground, he agreed

with Lord Reid and Lord Morris, as a result of which Dodd succeeded.

However, he went on to say that he agreed with the opinion of the

minority as to the proper construction of the statute in law.  Faced

with this, Lord Denning M.R. set out four interesting propositions on

how a ratio is to be discovered and or read in a judgment.  He stated:

“How then do we stand on the law? We have listened to a most  helpful  discussion  by  counsel  for  the  proposed plaintiffs on the doctrine of precedent. One thing is clear. We can only accept a line of reasoning which supports the  actual  decision  of  the  House  of  Lords.  By  no possibility  can  we  accept  any  reasoning  which  would show  the  decision  itself  to  be  wrong.  The  second proposition is that, if  we can discover the reasoning on which the majority based their decision, then we should accept that as binding on us.  The third proposition is that, if  we can discover the reasoning on which the minority based their decision, we should reject it. It must be wrong

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because  it  led  them  to  the  wrong  result.  The  fourth proposition is that if we cannot discover the reasoning on which the majority based their decision we are not bound by it. We are free to adopt any reasoning which appears to  us  to  be  correct,  so  long  as  it  supports  the  actual decision of the House.”

(at page 446)

He then went on to state as follows:

“Applying  the  propositions  to  the  decision  in  Central Asbestos Co Ltd v Dodd the position stands thus. (1) The actual decision of the House in favour of Dodd must be accepted  as  correct.   We  cannot  accept  any  line  of reasoning which would show it to be wrong.  We cannot therefore accept the reasoning of a minority of two – Lord Simon of Glaisdale and Lord Salmon – on the law. It must be wrong because it led them to the wrong result. (2) We ought to accept the reasoning of the three in the majority if we can discover it.  But it is not discoverable. The three were divided. Lord Reid and Lord Morris of Borth-y-Gest took one view of the law. Lord Pearson took another. We cannot  say that  Lord Reid  and Lord Morris  of  Borth-y- Gest were correct, because we know that their reasoning on the law was in conflict with the reasoning of the other three.   We cannot  say  that  Lord  Pearson  was  correct because we know that the reasoning which he accepted on the law led the other two (Lord Simon of Glaisdale and Lord Salmon) to a wrong conclusion. So we cannot say that any of the three in the majority was correct. (3) The result  is  that  there  is  no  discernible  ratio  among  the majority of the House of Lords. In these circumstances I think  we  are  at  liberty  to  adopt  the  reasoning  which appears to us to be correct.

In my opinion we should adopt the reasoning which was accepted in this court in the long line of cases before the decision  of  the  House  of  Lords.   None  of  these  was overruled.  They may therefore be said to be binding on us.   But  in  any case we should follow their  reasoning, especially as it  was accepted by two of their  Lordships who were in the majority and was expressed convincingly by  Lord  Morris  of  Borth-y-Gest  in  the  passage  I  have quoted.”   

(at page 446)

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Stephenson LJ. concurred.  The learned Lord stated:  

“I  agree.  I  cannot  find  any  discernible  ratio  decidendi common to the majority of the House of Lords in deciding Dodd’s case. Their Lordships were divided three to two in the decision to affirm the judgment of the Court of Appeal; but in the reasons for their decision they appeared to be divided two to two, Lord Pearson taking a third view which perhaps came closer to the view of the minority. In those circumstances  I  do  not  think  that  we  can  treat  the reasoning of the majority of the majority – Lord Reid and Lord Morris of Borth-y-Gest – as the ratio decidendi of the house. It is the ratio given by only two out of five. Still less can we treat  the ‘ratio  dissentiendi’ appearing from the speeches of the minority - Lord Simon of Glaisdale and Lord Salmon - as binding if added to Lord Pearson’s. That seems to have been the view of Thesiger J; but having had the advantage denied to him of counsel’s argument, I respectfully disagree with him. We are therefore bound by the decision of the House of Lords affirming the decision of this court, but not by the reasoning in the speeches of their Lordships. That, in my judgment, sends us back to the decision of this court2 and the ratio of its decision. If there is in the Court of Appeal a discernible reason for their decision common to the majority, it stands and binds us. I think that there is. I agree that we should take the same view of the 1963 Act as was taken by the Court of Appeal  in  Dodd’s  case,  confirmed  as  it  is  most persuasively by the approval of Lord Reid and Lord Morris of  Borth-y-Gest  in  the  House  of  Lords.  Applying  that construction of the Act to the circumstances of this case, I agree with Lord Denning MR that they are stronger on the facts, as we have them on affidavit only, than those which enabled Dodd to bring himself, not without difficulty, within the  Act.  I  therefore  concur  in  allowing  this  appeal  and giving the appellants leave.

(at page 447)

2 [1971] 3 All ER 204, [1972] 1 QB 244

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15) Given  the  head  on  conflict  between  the  Kothari  Products

(supra) line of judgments and the Agra Belting Works (supra) line of

judgments,  together  with  the  aforesaid  conundrum  insofar  as  the

doctrine of precedent  qua this Court is concerned, we request the

Hon’ble Chief Justice of India to constitute an appropriate Bench in

order to decide as to whether the  Kothari Products (supra) line or

the Agra Belting Works (supra) line is correct in law, and also to lay

down,  as  a  matter  of  law,  as  to  whether  and  to  what  extent  the

propositions  contained  in  Ningappa  Ramappa  Kurbar  (supra),

Lokur,  J.’s  observation  in  Supreme  Court  Advocates-on-Record

Association (supra), and the Harper (supra) judgment of the Court

of Appeal in U.K. should guide us for the future.      

                                                             .…………………………J. (R.F. Nariman)

………….………………J. (Sanjay Kishan Kaul)

New Delhi; September 21, 2017

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