M/s. Sainik Motors, Jodhpur v. The State of Rajasthan (1961)

This is the working authority for the subsidiary rule on mandatory and directory provisions. Students reach for the word "shall" as though it settled the question; the Court here states the presumption and then refuses to apply it, because the parent section created an option and a subordinate rule cannot take that option away.

It is also the cleanest small illustration of two further ideas that belong to the same unit — that an Act and the rules made under it must be read harmoniously, and that subordinate legislation takes its colour and meaning from the section it is made under.

The petitioners were partners of a registered firm holding public carrier and stage carriage permits. They challenged provisions of the Rajasthan Passengers and Goods Taxation Act, 1959, the Rules of the same year, and a notification made under r. 8, on several constitutional grounds; the point that concerns this unit was the last of them.

The charging section levied a tax on all fares and freights in respect of passengers carried and goods transported by motor vehicles. The collection provision — set out in the report as sub-section (4) of the charging section and referred to in the judgment as s. 4 — required the tax to be collected by the owner and paid to the State Government in the prescribed manner, with two provisos saying that in the case of public carriers and of contract carriages the State Government "may accept a lump sum in lieu of the tax chargeable".

The Rules spoke very differently. The second proviso to r. 8(i) said that the tax payable on fare by the owner of a motor-cycle, rickshaw or motor cab "shall be paid to the State Government in lump sum"; r. 8(ii) said that the owner of a public carrier "shall pay to the State Government a lump sum in lieu of the tax chargeable under the Act on freight"; and r. 8-A provided that the lump sum so fixed "shall be deposited in cash" into a Treasury in equal quarterly instalments.

The petitioners put the contradiction squarely. The Act, they said, allows an option to pay a lump sum in lieu of the tax, but the Rules and the notification make the payment of the lump sum compulsory. Attention was drawn to the word "shall" in rr. 8 and 8-A and in the notification, as against the words "may accept" in the two provisos.

The Court accepted the face of the difficulty: "There is no doubt that ex facie the two provisos to a. 4 employ language which is permissive, while the two Rules and the notification employ language which is imperative."

First, the character of the parent provision. The two provisos were held to be enabling, authorising the State Government to accept a lump sum in lieu of the tax actually chargeable. The Court fixed on a single word: the word "accept" shows that the election to pay a lump sum is with the taxpayer, who may choose one method of payment or the other. The purpose was convenience on both sides — the operator escapes keeping accounts and filing returns, and the Government escapes inspecting accounts and keeping a check.

Second, the presumption about "shall", and its limit. The Court then stated the rule in the form the syllabus wants: the word "shall" is ordinarily mandatory, but it is sometimes not so interpreted if the context or the intention otherwise demands. It supported this from the English authority, where Lord Esher, M.R. had observed that "the word 'shall' is not always obligatory. It may be directory", and Lopes, L.J. had added: "It is clear that the word 'shall' is not always used in a mandatory sense. There is abundance of authority to the contrary in cases where it has been held to be directory only". The Court noted that the same conclusion had been reached in a line of Indian decisions and by the Judicial Committee.

Third, the hierarchy. Rules 8 and 8-A and the notification only lay down what the lump sum payment has to be in each case, if a lump sum is being paid. The mandatory language, the Court said, is used to fix peremptorily the amount of the lump sum. Rules and a notification "cannot be said to overreach the section to which they are subordinate and from which they must take their colour and meaning. If the Act creates an option, it cannot be negatived by the Rules."

Fourth, harmonious reading. The Act and the Rules must be read harmoniously, and so read, the apparently mandatory language of the Rules and the notification still retains the permissive character of the section, laying down only what the amount of the lump sum must be if a lump sum payment is made instead of tax calculated on actual fares and freights.

The word "shall" in rr. 8 and 8-A and in the notification was directory, not mandatory, because the section from which the Rules and the notification derive their authority creates an option by using the words "may accept". The mandatory language was confined to fixing the amount of the lump sum. The Rules and the notification were accordingly not void and not contradictory of the Act.

On the connected points, the Court also held that the lump sum figure, being based on averages, could not be impeached by pointing to a possibility that on some days no business might be done, since there might equally be days on which the tax on actual business would exceed the lump sum; and that there was no compulsion on any operator to elect to pay a lump sum.