: By order dated February 12, 1957, this court remanded the
proceeding in this appeal to the High Court of Bombay with a direction that
proper steps be taken for recording a finding on the question whether the
sanction for the prosecution of the appellants was accorded by the Central
Government under Indian Ordinance No. III of 1946 or under the Bhor State
Ordinance, i.e., the Ordinance which was in force in the Bhor State.
Pursuant to this direction, the Special Judicial Magistrate First Class (A.
C. Branch), Poona recorded a finding that sanction had been given by the
Central Govt., under the Indian Ordinance No. III of 1946 and also under
the Bhor State Ordinance of 1946, but primarily the sanction was given
under the Ordinance in force in the Bhor State. The Additional Sessions
Judge, Poona to whom the record was submitted for his opinion recorded a
finding that the sanction was granted under the Ordinance which was in
force in the State of Bhor. The High Court at Bombay did not record any
express finding on this question.
2. To appreciate the pleas raised in this appeal, certain material facts
may be briefly set out.
3. Bhor was one of the Indian States in the Deccan area. The Rajasaheb of
Bhor promulgated Act I of 1942, being "The Government of Bhor State Act,
1942 " with a view to introduce certain constitutional reforms in the State
of Bhor. By S. 25 of the Act, a Council to be constituted under the Act was
subject to the provisions of the Act, given authority to make, repeal or
alter the laws for the whole or any part of the Bhor State and for the
subjects of the Rajasaheb wherever they may be. But by S. 26, from the
competency of the Council to legislate, certain matters set out in sub-s. 1
were excluded, and by S. 30, jurisdiction was conferred on the Rajasaheb to
legislate in respect of the matters so excluded. By S. 31, power was
conferred on the Rajasaheb, if he was satisfied that an emergency existed
which rendered it necessary to take immediate action in matters other than
those falling under S. 26, to frame any measure or regulation for that
purpose. Such measure or regulation on receiving the assent of the
Rajasaheb was to have the force of law for six months from the date of its
promulgation in the official Gazette. By the proviso, the Rajasaheb was
competent to extend the period of the operation of the measure or
regulation for three months. By S. 6, inherent authority executive,
legislative, and judicial, of the Rajasaheb, notwithstanding anything
contained in the Constitution Act was affirmed, and it was expressly
enacted that nothing contained in the Constitution Act or any other Act
shall be deemed to have affected the right and prerogative of the Rajasaheb
to make laws, issue proclamations, orders and ordinances.
4. The Laxmi Textile Mills Ltd., a limited liability company had its
registered office in Bhor State and the two appellants were its Managing
Directors. On January 12, 1946, the Government of India promulgated in
exercise of the powers conferred by S. 72 of the Government of India Act,
1935, as set out in the IXth Schedule Ordinance No. III of 1946 called the
High Denomination Bank Notes (Demonetisation) Ordinance, 1946. By S. 3 of
that Ordinance, after January 12, 1946, all high denomination bank notes,
notwithstanding anything contained in S. 26 of the Reserve Bank of India
Act, 1934 ceased to be legal tender in payment or on account at any place
in British India. By S. 4, transfer to the possession of another person of
any high denomination bank note was prohibited. Provision was made by S. 6
for exchange of high denomination bank notes held by persons other than
banks or Government Treasuries, and by Cl. 9 of S. 6, high denomination
bank notes exceeding in value rupees ten lakhs held by any person were
exchangeable only with the Reserve Bank at Bombay, Calcutta and Madras. By
Cl. 2 of S. 6, every owner of the high denomination bank notes desiring to
tender them for exchange was required to prepare in the form set out in the
schedule a declaration signed by him giving in full the particulars
required by that form. By S. 7, making of a declaration which was known to
be false wholly or partially was penalised. By sub-sec.3 of S. 7,
prosecution for an offence punishable under that Section could be
instituted only with the previous sanction of the Central Government. The
Rajasaheb of Bhor by notification dated January 19, 1946, applied Ordinance
No. III of 1946 "Mutatis Mutandis" to the whole of Bhor State with
immediate effect.
5. It is the case for the prosecution that the two appellants had in their
possession on January 12, 1946, high denomination bank notes of the
aggregate value of Rs. 10, 55, 000 and in order to circumvent the
provisions of S. 6, Cl. 9 of the Ordinance, in conspiracy with one H. R.
Karandikar split up the amount of Rs. 10, 55, 000 into three amounts of Rs.
9, 69, 000 Rs. 24, 000 and Rs. 62, 000 and by making declarations known by
them to be false exchanged the high denomination bank notes from the Bhor
Treasury through the Reserve Bank of India, Bombay on January 21, 1946, and
received payment on February 4, 1946. It was the case for the prosecution
that the appellants and Karandikar declared that out of the sum of Rs. 10,
55, 000, Rs. 9, 69, 000 were received in deposit with the Laxmi Textile
Mills, though it was known by them that there were no such deposits
received by the company; that they declared that Rs. 24, 000 were received
in the cloth import department of the Laxmi Textile Mills Ltd. on January
9, 1946, from one Keshav Govind Agashe when in fact no such amount was
received, and that it was declared that Rs. 62, 000 were received by Laxmi
Trading Company from one Mrs. C. Vimal Ben of Kurundwad on January 9, 1946
and the same amount was obtained by the 1st appellant on January 11, 1946
for a theatre belonging to the Laxmi Trading Company when in fact no such
amount was received by the Laxmi Trading Company.
6. On February 23, 1953, the Central Government granted sanction to
prosecute the appellants and Karandikar for the offence punishable under
sub-sec. 1 of S. 7 of Ordinance No. III of 1946 and on July 9, 1953, a
charge sheet was lodged in the court of the Special Judicial Magistrate
First Class (A. C. Branch), Poona charging the appellants and Karandikar
with submitting false declarations and getting exchanged contrary to S. 6,
Cl. (9) of Ordinance No. III of 1946 high denomination bank notes of Rs.
10, 55, 000 on February 4, 1946, from the Reserve Bank of India, Bombay
through the Bhor Treasury and with fabricating false documents by showing
fictitious deposits for getting exchange of the said bank notes from the
Reserve Bank of India, Bombay through the Bhor Treasury and thereby
committing an offence punishable under S. 7 of Ordinance No. III of 1946
and also with committing offences punishable under ss. 420, 467 and 468 of
the Indian Penal Code read with S. 34 of the Indian Penal Code.
7. At the trial before the Special Judicial Magistrate First class, Poona,
the appellants submitted, (1) that the charge against them for alleged
breach of Ordinance No. III of 1946 was not maintainable, because the
Ordinance had lapsed long before the investigation was commenced ; (2) that
the false representation, if any, was made in the territory of Bhor State
in which the Ordinance promulgated by the Rajasaheb of Bhor was in
operation and they could , if at all, be prosecuted under that Ordinance;
(3) that even under the Bhor State Ordinance, no prosecution could be
launched as that Ordinance had expired many years before the initiation of
the proceeding against the appellants; and (4) that at the material time,
the Bhor State was an independent Indian State and the appellants were not
liable to be prosecuted in a court in the Bombay State without the
requisite sanction under S. 188 of the Code of Criminal Procedure. The
learned Magistrate negatived the contentions raised by the appellants and
held that the prosecution was 'valid and according to law'. In a revision
application against that order, the Court of Session at Poona rejected the
contentions and declined to refer the case against the appellants and
Karandikar to the High Court for quashing the proceeding. The appellants
then invoked the jurisdiction of the High Court at Bombay under S. 561A of
the Code of Criminal Procedure, but without success.
8. Against the order passed by the High Court, this appeal by special leave
has been preferred. By order dated February 12, 1957, this court remanded
the proceedings in the appeal to the High Court at Bombay as hereinbefore
stated. Pursuant to the order passed by this Court, the High Court called
upon the Special Judicial Magistrate First Class, Poona to determine the
question whether the sanction dated February 23, 1953, was given under the
Bhor State Ordinance or the Ordinance operative in British India. As
hereinbefore observed, the Magistrate held that the sanction may be
regarded as given under both the Ordinances, but primarily under the Bhor
State Ordinance. The Court of session at Poona was of the view that the
sanction must be regarded as given under the Bhor State Ordinance.
9. The sanction granted by the Central Government for the prosecution of
the appellants and Karandikar may, for appreciation of its true effect, be
set out :
Government of India,
Ministry of Finance.
Department of Economic Affairs.
New Delhi, dated the 23rd February, 1953.
ORDER
Under sub-sec. (3) of S. 7 of the High Denomination Bank Notes
(Demonetisation) Ordinance, 1946 (No. III of 1946) , the Central Government
hereby grants sanction to the institution of prosecution against (1) Shri
M., G. Desai, (2) Shri D. B. Pathak and (3) Shri H. R. Karandikar who
alleged to have contravened the provisions of the said Ordinance in the
circumstances set forth below constituting offences punishable under Sub-
sec. (1) of S. 7 of the said Ordinance and other provisions of law.
On 21st January, 1946, (1) Shri M. C. Desai, (2) Shri D. B. Pathak and (3)
Shri H. R. Karandikar submitted false declaration under S. 6 of the said
Ordinance knowing them to be false, and committed forgery of documents by
showing fictitious depositors for getting exchange of high Denomination
Bank Notes of Rs. 1, 000 each of the total value of Rs. 10, 55, 000 from
the Reserve Bank of India through the Bhor Treasury and actually got
exchange of the said amount on the 4th February, 1946. The Treasuary would
have refused payment if they had stated the true facts regarding the
possession of the amount. They have thus cheated the Reserve Bank of India
and the Bhor Treasury and are therefore, punishable for offences under S. 7
of the said Ordinance.
Sd. (N. C. Sen Gupta)
Deputy Secretary to the Government of India.
10. By his notification dated January 19, 1946, the Rajasaheb of Bhor had
applied "Mutatis Mutandis" Ordinance No. III of 1946 promulgated by the
Central Government to the whole of Bhor State with immediate effect and the
bare reference to Ordinance No. III of 1946 in the body of the sanction
will not justify an inference that the sanction was accorded under the
Ordinance in operation in British India and not granted under the Bhor
State Ordinance. The recitals in the Ordinance make it abundantly clear
that the Central Government was seeking to exercise authority under the
Bhor State Ordinance. It is recited that the Reserve Bank of India, Bombay
and the Bhor State Treasury were cheated, because of the false declaration
made by the appellants and Karandikar. A reference to the alleged deception
practised on the Bhor State Treasury was material only if the sanction was
given for breach of the Bhor State Ordinance. There is again nothing in the
recitals which supports the view that the authority under Ordinance No. III
of 1946 conferred by S. 7, sub-s. 3 as in operation in British India was
intended thereby to be exercised. In the absence of any sufficient ground
indicating that the authority exercised by the Central Government in
granting sanction to prosecute the appellants and Karandikar was not
exercised under the Bhor State Ordinance for breach of which alone they can
be prosecuted, but was exercised under the Ordinance in operation in
British India, the inference inevitably arises that it was in pursuance of
the authority vested in the Central Government under the Bhor State
Ordinance that the sanction was given.
11. The contention that the Bhor State Ordinance had lapsed before the
initiation of prosecution against the appellants is without substance. The
Rajasaheb of Bhor expressly exercised in issuing the Ordinance his inherent
power under S. 6 of Act 1 of 1942 of the Bhor State. The legislative act of
the Rajasaheb of Bhor in exercise of the inherent power is not subject,
unless expressed otherwise, to any temporal limitation. The argument raised
by counsel for the appellants that S. 31 overrides S. 6 of Act I of 1942 is
plainly unsustainable. In terms, it is provided by S. 6 :
Notwithstanding anything contained in this or any other Act, all powers-
legislative, executive and judicial- in relation to the Bhor State and its
Government are hereby declared to be and to have always been inherent in
and possessed and retained by the Ruler for the time being of the Bhor
State; and nothing contained in this or any other Act shall be deemed to
have affected the right and prerogative of the Ruling Prince to make laws,
and issue proclamations, orders and ordinances by virtue of his inherent
authority
.
By S. 6, the inherent right and prerogative to exercise legislative powers
remained uncontrolled, any provision of the Act notwithstanding.
12. Undoubtedly, in respect of the same legislative field, authority could
be exercised under S. 6 as well as under S. 31, but that did not affect the
competency of the Rajasaheb to make laws or issue ordinances in exercise of
his inherent authority when he so chose. It was open to the Rajasaheb to
exercise his authority either under S. 6 or S. 31. Promulgation of the
ordinance applying "Mutatis Mutandis" Ordinance No. III of 1946 issued by
the Central Government to the whole of the Bhor State was expressly made in
exercise of an authority under S. 6 of Act I of 1942, and accordingly that
Ordinance did not lapse on the expiry of six months from the date of its
promulgation.
13. Whether on the merger of the Bhor State with the Dominion of India, the
Bhor State Ordinance lapsed may now be considered. Before 1947, the Bhor
Ruler was one of the treaty chiefs exercising jurisdiction in criminal and
civil cases. With the enactment of the Indian Independence Act, 1947, the
suzerainty of the British crown over the Indian States lapsed as from
August 15, 1947, and with it all the treaties and agreements in force
between the British Crown and the Rulers of the Indian States; and all the
functions exercisable by the British Crown and obligations of the British
Crown existing on August 15, 1947, towards the Indian States or the Rulers
thereof and powers, rights or the jurisdiction exercised by the British
Crown also lapsed. But by the Instruments of Accession, the Dominion
Government of India was competent to exercise all powers and jurisdiction
which the Crown Representative previously exercised. To regulate the
exercise of the powers and jurisdiction granted to the Dominion Government
under the Instrument of Accession and Stand-still Agreements executed by
the Rulers of Indian States, Extra-Provincial (later called "Foreign")
Jurisdiction Act XLVII of 1947 was enacted. By this Act, the Central
Government could exercise or delegate to any officer or authority the
exercise of the 'foreign jurisdiction' vested in it by virtue of treaties,
agreement, grants, usage, sufferance or other lawful means. In February
1948, the Ruler of the Bhor State decided upon integration with the Bombay
Province and signed a merger agreement. By Cl. 1 of the agreement the form
whereof is set out in Appendix 13 to the White Paper on Indian States
issued by the Government of Indian Ministry of States at p. 183, the Bhor
State ceded to the Dominion Government full and exclusive authority,
jurisdiction and powers for and in relation to the governance of the State
and agreed to transfer the administration of the State to the Dominion
Government on the date specified and as from the said day, the Dominion
Government was invested with the said powers, authority and jurisdiction in
such manner and through such agency as it thought fit. By notification No.
150-1B dated February 25, 1948, the Government of India delegated to the
Government of Bombay the powers under S. 4 of the Foreign Jurisdiction Act
in respect of the Deccan States respecting any matters enumerated in List
II or List III of the seventh schedule to the Government of India Act,
1935.
14. On June 2, 1948, the Government of Bombay issued an Order called "The
Administration of the Indian States Order" in exercise of the powers
conferred by S. 4 of the Extra-Provincial Jurisdiction (Foreign) Act of
1947 and it was provided by paragraph 4 of the Order that
"Such provisions ....of any law......as were in force immediately before
the appointed day in any Indian State (which included Bhor State) shall
continue in force until altered, repealed or amended by an order under the
Extra Provincial Jurisdiction Act."On July 28, 1948, another Order called"
The Indian States (Application of Laws) Order, 1948"
was issued. This Order applied among others to the Bhor State and laws
which were in force in the Province of Bombay were extended to the area of
the Bhor State and corresponding laws in force in that State prior to the
merger stood repealed. But the Bhor State Ordinance was not repealed by
that Order; nor was Ordinance No. III of 1946 made applicable to the Bhor
State in supersession of the Bhor State Ordinance. On July 27, 1949, the
"States Merger (Governor's Provinces) Order, 1949" was issued by the
Governor General and by paragraph 4 of that Order, all the laws in force in
the merged States immediately before the appointed day, i.e., August 1,
1949, continued to remain in force until repealed, modified or amended by a
competent legislature. By Cl. 1 of Art. 372 of the Constitution of India,
all the laws in force in the territory of India immediately before the
Constitution remained in force until repealed or amended by a competent
legislature or competent authority. The Bhor State Ordinance continue to
remain in operation notwithstanding merger of the Bhor State by virtue of
the order issue under S. 4 of the Foreign Jurisdiction Act, 1947 and under
Art. 372 of the Constitution it remained in operation even after the
Constitution was enacted. The High Court was therefore, in our judgment,
right in holding that the Ordinance had not ceased to be in operation on
the date of the commencement of the prosecution against the appellants and
Karandikar.
15. There is no substance in the contention that in the absence of
adaptations which the President of India is competent to make under Cl. 2
of the Art. 372, the Bhor State Ordinance lapsed. By Cl. 2 of Art. 372, the
President is authorised to adapt existing laws; but the application of the
existing laws is not conditioned by the making of adaptations or
modifications in that law by the President.
16. The plea that the Province of Bombay was incompetent to extend the Bhor
State Ordinance to the area which was formerly administered by the Bhor
State, its competence to enact laws being restricted to laws specified in
schedules 2 and 3 of the Government of India Act, 1935 is also without
substance, because the Bhor State Ordinance remained in operation by virtue
of the order issued under S. 4 of the Extra Provincial Jurisdiction Act and
not by any express enactment by the Government of the Province of Bombay in
exercise of delegated authority from the Central Government. Nor is there
any force in the contention that the sanction should have been given by the
Provincial Government for the prosecution of the appellants. By the merger
agreement, the Central Government was invested with all the powers of the
Ruler of Bhor State, and because of the delegation of its authority by the
Central Government to the Provincial Government, that authority did not
become ineffective. The Central Government still retained its right to
sanction prosecution for infringement of the provisions of the Bhor State
Ordinance.
17. The plea that the appellants could not be prosecuted in the absence of
a sanction under S. 188 of the code of Criminal Procedure was not set up
before this court.
18. The High Court was accordingly right in holding that no case was made
out for quashing the proceedings commenced against the appellants in the
court of the Special Judicial Magistrate First Class (A. C. Branch), Poona.
The appeal therefore fails and is dismissed.
19. We hope that the proceedings commenced against the appellants and
Karandikar will be taken up for hearing without avoidable delay, and heard
expeditiously.