1991 (2) KLT 306 - A Land Mark Decision

(By P.S. Vasavan Pillai, Advocate)

Disputes regarding the flow of natural water are too common now-a-days. Peace of the community is often disturbed on account of such controversies over the passage for water. Property owners usually do not allow water from adjacent properties on a higher level to flow on to their lands and consequently quarrels are galore.

In this context the decision in Yesoda v. YusuffHaji (1991 (2) KLT 306) by His Lordship Justice G. Rajasekharan is a landmark one. It fulfils a long-awaited declaration by the apex Court with regard to the right to drain off water on to the adjacent land owned by another. It should put an end to quarrels between adjacent property owners on account of flow of natural water.

While dismissing the petition to up-hold the right to prevent the flow of water from the high-lying adjacent land, the Learned Judge categorically declared, "Every property owner has a natural right of drainage of surface water to the property lying at a lower level... This is a natural right independent of an easement, grant or custom... ...This right of an owner of a land lying on a higher level could be an easement, quasi-easement right as well. Easement of drainage is the right of the owner of one land to cause the water on his land to flow in defined channel on the land of his neighbour. This is also a natural right of the owner of the higher land that the water rising in or falling on his land, shall be allowed by his neighbour owning the lower land to run naturally thereto. The natural right mentioned above is not restricted to natural drainage of water from higher to lower land but includes discharge, of it through a particular route at a specified point. This natural right is a right which can be claimed in respect of water naturally rising in or falling on one's land and not passing in defined channels. The right of an upper proprietor to throw natural water on the lower land is a natural right inherent in property. The lower riparian proprietor has no right to prevent such natural flow or to throw the flow back on to the upper riparian property".

Such decisions which will foster good neighbourly relations and peace and harmony in society are more and more welcome and it is necessary to highlight such decisions especially in the present day turbid atmosphere of the society.

Tax on Expenditure in Air-conditioned Restaurants

(R. Krishna Iyer, B.Com., F.CA, Chartered Accountant)

"The food items in an Air Conditioned Restaurant to cost more.

A Bill was introduced namely 'EXPENDITURE TAX BILL - 1987'in the Finance Act, in 1987. By this Bill a person who pays a rent of Rs.400/- per day in a hotel has to pay byway of expenditure tax on the room rent. This Act was also brought under Direct Taxes Act (Income Tax Act).

The object of collection of tax are two (1) To collect revenue/funds to meet the expenses of the Government (ii) In the socialistic country to reduce the disparity in income between the rich and poor. Countries who have their own resources do not require to collect taxes. In India in both ways, collection of tax is an essential item and source of funds for the Government. In the Budget Speech in 1987 the Finance Minister has quoted more than once the views of late Jawaharlal Nehru. Jawaharlal Nehru while introducing the second five year plan has observed that ‘the country has to lay great stress on equality, on the removal of disparities, and it has to be remembered always that socialism is not the spreading out of poverty'. The Finance Minister while presenting the Budget in 1987 observed that' those who can afford to patronise high class hotels should also be afforded the further pleasure of contributing to the National Exchequer.

The idea of bringing the new legislation is to raise more funds for the Government. Of course this tax is collected only from the person who can afford or have the capacity to pay. Under the Income-tax Act the levy of tax is on income and since this levy is on expenditure a separate enactment has been made. The concept is entirely different, one is on 'income' and other is on 'Expenditure'.

The expenditure tax is charged at a percentage on any chargeable expenditure incurred in a hotel where the room charges for any unit of residential accommodation is Rs.400/- or more per day per individual. The expenditure includes room rent, food or drink facilities or any other services viz. beauty parlour, swimming pool etc. The rate of tax was only 10%in 1987 which got increased to 20% from 1-6-1989. This tax law is effective from 1-11-1987.

The definition of Direct Tax has been amended to include the "Expenditure Tax". In fact this tax is only an indirect tax, like Sales tax and Customs duty, Central Excise etc. The hotel is only an agent collecting the amounts from the customer and remitting to the Government. Taking into account the definition, this is only an 'indirect tax', even though by the amendment in definition, it has been included in the Direct Tax Act. In this context it has to be noted that all the State Governments are collecting tax on the room rent by way of 'luxury tax'. Recently Kerala Government has increased the rate of luxury tax to 15% for rent above Rs.75/- and 20% on Air-Conditioned rooms. Therefore on the same expenditure the State and the Central Governments are collecting taxes.

As per the Income-tax Rules, the expenditure incurred on travelling by an employee including hotel expenses will be restricted to Rs.150/- per day in respect of an employee whose salary is Rs 1,000/- per month or more. For the places Bombay, Calcutta, Delhi the expenditure is restricted to a maximum ofRs.200/-.

Therefore while the Government is collecting tax on expenditure, on the other hand such expenditure actually incurred is not allowed as deduction.

The scope of levy of this tax has been extended in 1991 by the Finance Minister towards expenditure incurred in Air-conditioned restaurants also. According to the Finance Minister this levy is a further measure for discouraging ostentatious and wasteful expenditure. The original proposal was that this levy would be applicable only if the restaurants have any of the three following facilities:-

(1) Air Conditioning

(2) Two or more separate cloak rooms

(3) Telephone

(4) Deep freezing or cold storage facility.

As per the above, this tax can be collected and has to be collected by the person providing the services at the restaurant. The rate of tax is fixed at 15% and will be made applicable from 1-10-1991. Therefore it is not necessary that it must be an Air-conditioned Restaurant, it is sufficient if the remaining three facilities are provided in the restaurants. However it is understood that the said proposal has been amended by which the air-conditioned facility is alone sufficient to attract this levy, irrespective of the availability or not of the other facilities.

In this context it will be appropriate to note that the expenditure tax on rent is applicable for all the expenditure incurred in a hotel. If there is one room costing more than Rs.400/- per day on single occupancy basis, then this tax is payable for all the expenditure incurred in this hotel. On the other hand the tax on restaurant is limited to the expenditure on the air conditioned restaurant only.

Just like luxury tax on room rent collected by Stale Government, the State Governments are also collecting Sales tax on food items. In Kerala the Sales Tax is applicable in 'Star' and 'Bar' Hotels.

The rate of sales tax in Kerala is 6.25%. Therefore in addition to the cost of food, if it is an air-conditioned restaurant in almost all cases the consumer has to pay 6.25% towards sales tax and 15% as expenditure tax.

The Air-conditioning in restaurants cannot be considered as a luxury or wasteful expenditure. In almost all the cities the restaurants which are situated in the heart of the town or in busy centres should have closed halls for restaurants in order to avoid the noise and dust and for privacy and peace. In such circumstances unless it is air-conditioned, it is impossible to sit in the room and for health reasons also. Even the small restaurants in small towns now-a-days are having atleast one air-conditioned room. These Restaurants may not be Income-tax assessees, but this expenditure tax will be applicable to them. As per the Act this expenditure tax is on the expenditure incurred in restaurant. The dictionary meaning of the word restaurant is "a house for the sale of refreshments or an eating house". There is no doubt that the air-conditioned restaurant supplying food and eatables including the ice-cream parlours will come under the purview of the Act. However it has to be examined whether the 'bar' where some eatable is also supplied will be considered as a restaurant for this levy. According to the dictionary meaning of the Bar is "a counter across which drinks are served". Therefore this tax cannot be levied if any eatables are served on the Bar, since the levy is on the expenditure incurred on Restaurants. It is not a case where levy is on food items in an air conditioned room. It is only a tax on the expenditure incurred on the Restaurant.

It is further so be noted that there is no minimum limit for this levy. Even in the Sales Tax Act it is applicable only where the turnover exceeds Rs.2,00,000/- (Two lakhs) per year. The expenditure tax has to be collected on the expenditure incurred on the Restaurant and therefore the said tax has to be paid even on the Sales tax on the food items.

As such this expenditure tax is applicable:

(1) If the rent per day per individual is in excess of Rs.400/- or

(2) If the expenditure is on an air-conditioned restaurant.

Manikantan Pillai Laments I

(Varghese T. Abraham, BA., LLM, Addl. District Judge, Kollam)

Born Manikantan in a blue blood Nair Tarward

Land Reforms in the State snatched away its wealth

Loss of parents eclipsed his mirth

Brought him up his sisters like apple in their eyes

Put two and two together, and went he to Law School

Toiled and moiled he in the class room

Learned he the subjects over head and ears

Secured a top and thought he to make bread and butter

Joined he the bar and weathered storm of infancy period

Burnt he the candles at both ends in the court rooms

Adorned he law as a jealous mistress in mind

Spared he no time for gossip and plays

Fought he battles with elders in the Bar

Brought he success with ease to his clients

Never he demanded fees as per rules

Nor did he chase ambulance for "Claims"

At daggers drawn were youngsters in the bar

Looked at him they with envy and venom

Judges in the Bench and elders in the Bar

Saw in him a future Patriarch in their line

Heard he then about a state-wise RACE

Stood he at sixes and seven to join or not

Judges advised and threw cold water on Grey

haired elders pursuaded him

"Societal Status, you get you know

Certainty in income will avoid your tear

Salutes of Police will put you in cheer

Step by Step to the top you can rise"

Encouraged by these joined he the race

Mediocre friends thought to test their case

Ran he as fast as he could and finished the point

Lagged behind him his friends at far away place

Another hurdle he had to cross - a tough one

Queries they put and gave he answers in hurry

Showered he tit for tat replies to their embarrassing queries

Battle he won and stood first in the victory stand

Conferred on him a seat lowest in the ladder

Sat he in that seat for a decade and more

Answers he wrote to questions beside the mark

Heard he for days lawyers on odds and ends

Wrote he verdicts and quoted he jurists

Never he cared for conjugal happiness

Yet, moved they complaints without rhyme or reason

Dharnas they held and meetings they convened

Took he bag and buggage to different places

Paid he through nose at commercial cities

Pulled he a long face through out the career

Paltry income was his wife's apple of discord

Gone he rack and ruin in finance and romance

Passed he a life through thick and thin

Suffered he all the built castles in the air

For a seat at the top of the ladder

One day he looked upwards and saw to his surprise

Above the ladder his friends who met Waterloo in the RACE

Shed he tears and cursed his caste

Sat for a while and then proceeded with that seat.

Inimitable Sri V.R. Krishna Iyer

(By V. Lakshmanan, Advocate, Tirupur)

Venerable Sri V.R. Krishna Iyer, popularly known as V.R.K. to all is an icon. That he is a recipient of our nation's second highest civilian award Padma Vibhushan, is only a confirmation of his status as a statesman, a renowned retired Supreme Court Judge, a reviewer, a persuasive speaker, a writer par excellence, above all, a humble, noble human being-all rolled into one.

In the field of sports, it is universally accepted that champions are born and not made. Such an observation is bound to be true in the case of Sri Krishna Iyer also. Though this writer has neither the intelligence nor the requisite credentials to write on a great man, it has become necessary that a write-up on this occasion is indispensable. In fact, the great man deserves a thesis.

Sri Iyer is a many-splendoured genius. We come across personalities who excel in a particular field. But Sri Krishna Iyer mastered at least half-a-dozen spheres. On that score, Sri Iyer is unique. That an individual can achieve so much in his life is only a pointer that God's selective creations could be astonishingly amazing.

His impression son social justice, which is pitted against legal justice, are indicative of his legendary vision and gifted mind. He is a firm believer that criticism carries a crusade to cure as well as crucify. A humanist, an activist and a crusader, his ceaseless campaign for human rights and social justice is only well-known.

An illustrious example and the nearest definition of a great judge Sri Krishna Iyer has rendered time-honoured judgments. This writer is reminded of the greatest jurist of the past era, Benjamin Cardozo, who defined a Judge thus:

"The Judge even when he is free, is still not wholly free. He is not to innovate at pleasure. He is not a knight-errant roaming at will in pursuit of his own ideal of beauty or of goodness. He is to draw his inspiration from consecrated principles. He is not to yield to spasmodic sentiments, to vague and unregulated benevolence. He is to exercise a discretion informed by tradition, methodised by analogy, disciplined by system, and subordinated to 'the primordial necessity of order in social life'."

Needless to state, Sri Krishna Iyer was the quintessential Judge, stately, dispassionate, knowledgeable, well-liked, humane, rangy, resourceful and ready-witted, with performance always matching his potential. Nothing surprising that he is too familiar a name to bear repetition.

A profile on Sri Krishna Iyer must be a combined study of his Judgeship and the quality of his judgments. A savant of several innate gifts, Sri Iyer has laid down judgments of unmistakable punditry. Gliding through the length and breadth of law with precision of a master craftsman, he would bring the best of any pro vision of law with the result the subsequent judgment on the said point had no scope to emulate Sri Krishna Iyer's observation. And, his ability as a Judge is displayed in no uncertain terms in cases where he was governed by a precedent. The wizard of the art of creativity would not only restore the precedents, but would further revitalise and refurbish them with his poetry-like prose. One, on reading his judgments, has a feeling that his judgments are narratives of a poem, nay, the poem itself. The literary attainments of the Judge coupled with his ability to delicately blend law with the lusture of language guaranteed the preservation of the judgment for posterity as they are fine-tuned for the future. They are full of intense expressiveness and are infused with refinement and vitality. His English, assimilative and amorphous, had no inhibitions. This enabled Sri Krishna Iyer to lay down law not only fairy-tale creativity but also with cast-iron certainty. He never indulged in artificial and attempted expressions. They were always natural. This ability greatly enhanced the value of his judgments. The impassioned presentation in delectable diction is an unqualified tribute to his popularity.

The ability to understand the facts well and the law better enabled Sri Krishna Iyer to pronounce ageless judgments, punctuated by brilliance. His judgments are still vibrantly alive as they are a celebration of his judicial valour and prowess. They are binding precedents, the catalytic factor being judicial brilliance coupled with luminous lucidity. Those judgments are lasting works. As one reads his innumerable judgments, there is no intellectual exhaustion principally due to his virtuosity. A versatile talent with a literary bent of mind, his is a name to conjure with as he had pronounced judgments of enduring significance and pervasive influence. In short, his judgments are of all times and not of the hour.

Arguably the most original and perfound thinker within the legal firmament, Sri Krishna Iyer was destined to solve some of the intractable intricacies of law. The intrinsic principles of law were not of any challenge to him. The deeper phases of lav. foundthemselvesreborninhisjudgmentsaslawwasofunceasinginteresttohim. Small wonder that various legal vicissitudes were nowhere portrayed, explained and answered more overtly than in his judgments.

A visionary judge and venerated representation of fearless and free judiciary, he was an exponent and defender of the finest legal principles. Endowed with inexhaustible knowledge of law, his judgments were finished products, unflawed in their constructive principles of law, his governing vision of law unmistakably legendary. His judgments carry intimations of unlimited judicial energy, they resonate with powerful dynamism. An institution by himself, his style had certain austere majesty that it extorted (still extorting) a reverential awe. Not one to be shackled by dogma of tradition and whose attitude had never been one of servile acceptance, his judgments continue to be refreshingly different. A Judge of exceptional ability, he experimented with the content, form and language of his judgments that they displayed new dimensions. His endeavour was to break away from the confining walls of words (catch phrases) that the impact of his judgments, both actual and likely, echoes down the years. Sri Iyer has given us a corpus of rich heritage of judgments with heightened excellence. What sustains his judgments is the inner core of embedded erudition. Behind the glitz, grandeur and glamour his lasting judgments, one can find the spark of endearing individuality. Ably supported by stimulating eminence and erudition, and supplemented by knife-edge analytical mind (which are indispensable of his persona) he was able to pick up the crux of the litigation very early. He would understand intimately the background of facts leading up to the case. The scholar in him was always alive to the law involved with his desire to pay attention to the minutes but important details that the judgments never led to grotesque results. Hollow legal platitudes, misleading analogies, skill in meandering outside the facts of the case and astuteness in creating a labyrinth of confusion never stood a ghost of a chance of winning his approval much less his admiration. Countless were the cases/replete with knotty questions of fact and thorny questions of law-that had come up for treatment on his judicial anvil and his masterful judgments remain as irresistible precedents for the generations to come. His judgments are exotic indeed. They also have practical applications to human life.

As a speaker, he is an instant draw. His oratorial skills contain the right intonations and pauses. Even today, he is participating atleast in one meeting per day (at times two per day). His elastic intelligence absorbs all types of subjects that he could address any type of audience. He is travelling extensively with infectious enthusiasm and boyish zeal. Nothing surprising that he is extempore.

As a writer, he is simply peerless. Whether it is an article or a book review, his contributions have a touch of class. He could write on staggeringly diverse aspects. The wealth of informations, the delightful style of narrative and wide coverage of ^ observations only prove the liveliness of his faculties and sharpness of his observations. His writings are always stately, complex ideas being rendered in uncluttered, perfectly-nuanced prose, which involves careful deployments of memorable lines and use of echoing phrases, making his writings as resonant as his speech. Whether it is a judgment, a speech or a write-up, one would only be amazed at Sri Krishna Iyer's fecund farsightedness. It is difficult to make out whether his style triumphes over substance or the substance triumphes over his style.

No sad mousings. No cane chair conferences and arm chair advices but an eventful journey from a vibrant present for the future good of India. Comparisons are odious. It is incorrect that he is first among equals as he is incomparable. He is all alone in an exalted position shedding light on very many aspects of life and living. Oscar Wilde comes handy:

"It is the personality and not the principle that moves the time".

About Dishonour of Cheques

(Joseph Varghese Thattacherry, Advocate, Changnacherry)

A few questions regarding dishonour of cheques are discussed below:

1. Is a Judicial First Class Magistrate competent to try a person accused of an offence punishable u/s. 138 of Negotiable Instrument (Amendment) Act 1988, (in short the "Act") the cheque amount of which exceeds Rs.2500/-?.

2. Which is the place of offence under the Act?

3. If there is no strict compliance of the pre-conditions contained in clause (a) to (c) of S. 138 of the Act, will the section apply?

1. Competancy of the Judicial First Class Magistrate to try the offence under the Act.

The Act is one which comes under "any other law" under S.4(2) of the Criminal Procedure Code. Since the Act does not contain any provision for regulating the manner or place of inquiring into or trying the offence, it has to be dealt with according to the provisions of the code.S.5 of the code has no application as no special jurisdiction or power is conferred or any special form of procedure prescribed by the Act. So the provisions of the code are to be applied to cases under the Act, subject only to S.142 of the Act, which has only limited operation. S.142(c) says that "No court inferior to that of Metropolitan Magistrate or Judicial Magistrate of the First Class shall try any offence punishable u/s 138 of the Act." It means that courts superior to them are also empowered M try such offences. As per S.26 (b) of the code when any court is mentioned in any other law, cases under it are to be tried in such court only. By S.29 of the code the First Class Magistrate is empowered to impose a maximum fine of Rs.5000/- only, whereas the Chief Judicial Magistrate has powers to impose unlimited fine. As the drawer of a dishonoured cheque is liable to a fine of twice the amount of the cheque and the First Class Magistrate could not impose fine exceeding Rs.5000/-, he has no jurisdiction to try those cases the amount of which exceeds Rs.2500/-. His powers are limited only to cases involving cheques the amounts of which do not exceed Rs.2500/ -. Other cheque cases are exclusively trial by the Chief Judicial Magistrate.

The purpose and object of the legislation is not only to punish the accused but also for the speedy recovery of the cheque amount to the payee or the holder in due course, applying S.357ofthecode. That exactly is the reason why the quantum of fine is tagged to the amount of cheque. So out of the fine realised compensation due u/s 30 of the Negotiable Instruments Act could be paid to the complainant. If it is not so paid or could not be paid the very purpose of the legislation will be defeated and justice will not be meeted out to the complainant. Taking these aspects also into consideration and in view of S.29 of the code, if the amount of the dishonoured cheque exceeds Rs.2500/- such cases shall have to be tried exclusively by the Chief Judicial Magistrate.

Whenever the legislature intends to invest the Magistrate with enhanced powers in excess of the powers under S.90 of the code it does so by making provisions to that effect in that special Act itself. Examples are many. S.21 of the Prevention of Food Adulteration Act, 1954, S.36ofthe Drugs and Cosmetics Act 1940, S.104-E of the Karnataka Forest Act are some of them. Identical section as we find in S. 142(c) of the Act, viz "No court inferior .... shall try any offence" are contained in those Acts also. At the same time those acts contain special provision investing Metropolitan and First Class Magistrate with enhanced powers of sentencing. As such a provision is conspicuously absent in the present Act, the powers of sentencing by those Magistrates are governed only by S.29(2) of the code. Support for the above view could be found in a recent decision reported in 1990 CRL. L.J. 989. In that case it was held that, where it was crystal clear that quantum of sentence sought to be imposed was beyond the power of the Magistrate u/s. 29 of the Code, he shall commit the case to the court of session.

It is idle to contend that, if the Magistrate at the end of the trial is of opinion that the accused ought to receive more severe punishment than he is empowered to inflict he could submit the proceedings and forward the accused to the Chief Judicial Magistrate u/S.325 of the code. In that case, the case may have to be tried denovo which would be a waste of public time and money and it would also cause harassment and hardship to the accused as well as the complainant. In respect of cases u/s.138 of the Act which are beyond his jurisdiction to try and which are pending before him, the Magistrate may invoke S.201 or S.322 of the code. He may either return the complaint u/s.201 for presentation to the proper court or stay the proceeding and submit the case to the Chief Judicial Magistrate along with a brief report under S.22.

2. Coming to teritorical jurisdiction the question is, which is the place of offence. In order to fix the place of offence we have to ascertain what exactly is the offence under the Act, First paragraph ofS.138 and the heading of the Act speak eloquently as to what exactly is the offence. The heading is "Of penalties in case of Dishonour of certain cheques for insufficiency of funds in the account". Penalty is for offence, and that is described therein as, dishobour of cheque. So the offence contemplated in the Act is dishobour of cheque. Again the section says" where any cheque drawn by a person.......is returned by the Bank unpaid........, such person shall be deemed to have committed an offence". So the act says, the moment a cheque is returned unpaid, the offence is committed. Thus dishonour of the cheque is the gravamen of the offence and the place of offence is where the cheque is dishonoured. If the payment is made in response to the notice of demand with in the prescribed time the offence is excused and no action would lie. It is submitted, non payment is not the offence and dishobour of the cheque alone is the offence. Non payment is only a condition precedent for lodging the complaint.

In 1989 (2) KLT 740 and 1991 (1) KLT 893 it was held that on failure to make the payment, the offence is completed. Even if failure to pay is the offence or part of the offence, the question arises which is the place where the failure to pay took place?. It is at the place of residence of the drawer and not where the payee or holder in due course resides. Because it is the "non-payment" and not the "non-receipt" that is made an offence. Also it is pertinent to note that the words used in the sub clause (c) of S.138 are "the drawer of the cheque fails to make the payment of the said amount" and not "the payee or holder in due course fails to receive the said amount". Again if a payee in Trivandrum endorses a cheque to somebody in Delhi or Calcutta and on presentation the cheque is dishonoured and the holder in due course files a complaint, the drawer in Trivandrum will be put to the ordeal of appearing and contesting the case in that far off place. If that be so, even if the cheque is a bogus one or that the drawer has very valid contentions to make, many will not be able to defend their case. That is not a situation which the Parliament ever intend to happen. However it is a cardinal principle of interpretation that, in interpreting a statute, that interpretation which causes lesser hardship to the accused has to be accepted. Viewed in that aspect also the offence shall be deemed to have been committed at the place of residence of the accused. Payment is usually made by sending a demand draft or making a telegraphic transfer from the place of residence of the drawer. Thus in any view of the matter the place of offence shall be deemed to be where the cheque is dishonoured or if non payment is deemed to be the offence at the place of residence of the drawer.

3. Next, the act being a special one its provisos are to be strictly complied with, so if the time stipulated therein are not strictly adhered to, nothing in the Section will apply and the court shall not take cognizance of the offence. Similarly if the payee or the holder in due course makes a demand for any sum in excess of the cheque amount like interest, bank commission, notice charge etc. it will not be in compliance with clause (b) and hence invalid. In that case also S.138 of the Act will not apply.