M/S.
M.R.F. LTD. v. MANOHAR PARRIKAR & ORS. [2010] INSC 336 (3 May 2010)
Judgement IN THE
SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO.4220 OF
2002 M/s M.R.F. Ltd. ............Appellant Versus Manohar Parrikar and Ors.
...........Respondents WITH
CIVIL
APPEAL NO.4219 OF 2002 M/s M.R.F. Ltd. & Anr. ..........Appellants Versus
The State of Goa and Anr. ............Respondents WITH CIVIL APPEAL NO.4213 OF
2002 Goa Glass Fibre Ltd. & Anr. ..........Appellants Versus Manohar
Parrikar and Ors. ..........Respondents 1 WITH CIVIL APPEAL NO.4214 OF 2002 Goa
Glass Fibre Ltd. & Anr. ..........Appellants Versus The State of Goa and
Anr. ........ Respondents WITH CIVIL APPEAL NO.4217 OF 2002 Alcon Cement
Company Limited & Anr. ..........Appellants Versus The State of Goa &
Anr. ..........Respondents WITH CIVIL APPEAL NO.4218 OF 2002 Mauvin Godinho
..........Appellant Versus Manohar Parrikar ad Ors. ..........Respondents
H.L.
Dattu,J.
In Civil
Appeal Nos. 4220 of 2002, 4213 of 2002 and 4218 of 2002, the appellants have
called in question the correctness of the judgment and order in Writ Petition
No. 316 of 1998 dated 19/24.4.2001, passed by the 2 High Court of Bombay Panaji
Bench, at Goa in a Writ Petition brought in public interest by one Manohar
Parrikar, a Member of Legislative Assembly, Goa (who later on became the Chief
Minister of the State of Goa) questioning the legality, validity and propriety
of two notifications issued by Government of Goa dated 15.5.1996 and 01.8.1996
in respect of grant of 25% rebate to Low Tension, High Tension and Extra High
Tension Industrial consumers of electricity as a policy of the State
Government.
of Goa
& Anr.), the appellant has called in question the judgment and order passed
by the High Court of Bombay Panaji Bench, at Goa in Writ Petition No. 364 of
1999 dated 24.4.2001, partly allowing the writ petition filed by the appellant.
The State
of Goa & Anr.), the appellant has called in question the correctness or
otherwise of the judgment and order passed by the High Court of Bombay Panaji
Bench, at Goa in Writ Petition No. 254 of 1999 dated 25.4.2001 dismissing the
writ petition filed by the appellant.
3 In
Civil Appeal No. 4217 of 2002 (Alcon Cement Company Limited the correctness of
the judgment and order passed by the High Court of Bombay Panaji Bench, at Goa
in Writ Petition No. 277 of 1999 dated 24.4.2001 partly allowing the writ
petition.
Parrikar
& Ors.), the appellant has called in question the correctness of the
judgment and order passed by the High Court of Bombay Panaji Bench, at Goa in
Writ Petition No. 316 of 1998 dated 19/24.4.2001 The material facts as pleaded
by the Appellants in Civil Appeal Nos.
4220 of
2002, 4213 of 2002 and 4218 of 2002 are as under:
1) The
Government of Goa, in purported exercise powers conferred upon them by Section
23 of the Indian Electricity Act, 1910 (`Electricity Act' for short) issued a
Notification on 30.09.1991, granting rebate of 25% in Tariff in respect of the
power supply to the Low Tension and High Tension Industrial
Consumers/appellants who apply for availing High Tension or Low Tension Power
Supply on or after the 1st of October, 1991 for bona fide industrial activities
and certified by the Industries Department, Government of Goa as eligible for
concessional 4 tariffs for a period of five years from the date on which
electricity supply is made available to such units.
2) This
Notification was issued by the State Government in the name of the Governor of
the State as per the Rules of Authentication framed under Article 166(2) of the
Constitution of India by following the procedure prescribed by the Business
Rules framed under the Provisions of Article 166(3) of the Constitution of
India after the State Cabinet had approved it. Though the said Notification was
in subsistence, except one Industrial Unit, none applied to the State Government
for the grant of benefit of the Notification for a long period or at least till
31.03.1995.
On
31.03.1995, the said Notification was rescinded by the State Government in
purported exercise of power conferred on it under Section 21 of the General
Clauses Act read with Sections 23 & 51-A of the Electricity Act with effect
from 01.04.1995, by issuing a Notification dated 31.03.1995 strictly in
accordance with the Business Rules and Rules of Authentication pursuant to the
decision taken by the State Cabinet.
3) Though
the Government rescinded the Notification dated 30.09.1991, number of
industrial units approached the State Government 5 and claimed benefit of 25%
rebate in terms of Notification dated 30.09.1991 for the period between the
date of supply of electricity and 31.03.1995. Some applications were rejected
by the Chief Electrical Engineer of State of Goa, on the ground, that, they
being in the category of Extra High Tension did not fall within the category of
consumers covered by the Notification dated 30.09.1991. On 29.06.1995, a
Calling Attention Notice in Legislative Assembly was also brought in by Mr.
Manohar
Parrikar, seeking clarification from the State Government as to whether these
industrial units were entitled for the benefits flowing from the Notification
dated 30.09.1991 upto 31.03.1995. The Power Minister gave a reply to the said
Notice which is reproduced in the judgment under appeal. In sum and substance
the Minister stated, that, the Government was committed to honour the
concession granted by the Notification dated 30.09.1991 to the eligible
industrial units who apply for High Tension and low tension power on or after
01.10.1991 till the date of withdrawal, i.e. 01.04.1995.
4) The
Under Secretary to Government of Goa, Department of Power issued a
clarification dated 01.11.1995 to the Chief Electrical Engineer on the lines of
the reply given by the Power Minister to the Calling Attention Motion and
reiterated the same by a communication dated 6 12.12.1995. Later, as the
Government being satisfied that there were certain difficulties in the matter
of clearing cases of claim of rebate for the period upto 31.03.1995, issued
certain clarifications. On 15.05.1996, however, the State Government issued
another Notification in purported exercise of power conferred on it under
Sections 23 & 51-A of the Electricity Act read with Section 21 of the
General Clauses Act, to amend the Notification dated 30.09.1991 which had been
rescinded as per Notification dated 31.03.1995. By the said Notification the
Government substituted the words "High Tension or Low Tension power
supply" by the words "High Tension/Extra High Tension or Low Tension
power supply". The State Government further issued another Notification
dated 01.08.1996 restoring the facility of giving 25% rebate to these three
categories of Industrial consumers and made the said rebate available from
01.08.1996 to those who had either applied or availed the power supply as on
that date.
5) By an
order dated 31.03.1998, issued by the Chief Electrical Engineer of State of
Goa, the benefits of rebate granted by the State Government were withdrawn, as
it appears that the State Government did a re-thinking over its power to grant
such rebate on the Tariff. This action of the State Government led to a spate
of litigations by the 7 Industrial Units in the High Court of Bombay Panaji
Bench, at Goa, wherein they contended that the benefits granted by the State
Government as a policy decision could not be withdrawn by the order dated
31.03.1998, which was merely an administrative order and that they were
entitled to the benefits granted by the Notification dated 01.03.1996, as long
as the said Notification was not withdrawn by due process of law.
6) During
the pendency of these writ proceedings before the High Court, the State Cabinet
after addressing itself to the issues raised by the industrial units in the
writ proceedings, passed a resolution to withdraw the benefit of 25% rebate and
accordingly issued a Notification dated 24.07.1998 and withdrew the rebate of
25% with effect from 01.08.1998.
By an
order dated 21.01.1999, the High Court disposed of the batch of writ petitions,
inter alia holding that the Circular dated 31.03.1998 mentioned supra as
invalid and inoperative and the Notification dated 24.07.1998 as legal, valid
and operative, and that all petitioners therein were entitled to 25% rebate in
power tariff for the periods as indicated in paragraph 56 of the said judgment
etc.
8 7) The
judgment of the High Court was taken up in appeal by both parties to this Court
and this Court by an order dated 13.02.2001 declined to interfere with the said
order of the High Court and rejected both sets of appeals.
8) Mr.
Manohar Parrikar, the 1st respondent herein, in the meantime, had moved the
High Court with a Misc. Civil Application No.637 of 1999, seeking withdrawal of
his writ petition with liberty to challenge the legality or otherwise of the
Notification after this Court decided the above mentioned civil appeals filed
before it against the order of the High Court dated 21.01.1999. The High Court
by its order dated 27.01.2000 rejected the said application. Mr. Manohar
Parrikar had also moved the High Court to hear his petition along with earlier
set of writ petitions disposed of by the High Court on 21.01.1999.
Subsequently, the said prayer was also withdrawn.
9) Before
the High Court, the 1st respondent herein challenged the correctness of the
Notifications dated 15.05.1996 and 01.08.1996, and sought to declare the same
as null and void. He also challenged the guidelines framed in the letter dated
12.12.1995 and sought to declare the said circular was illegal and to quash it
to the extent it goes beyond the 9 scope of Notification of 1991. He also
prayed for certain other reliefs, including initiation of recovery of rebates
paid by the State Government to the beneficiaries.
10)
Though the petitioner had sought many reliefs in his writ petition, the High
Court confined itself to the challenge made to the legality of the
notifications dated 15.05.1996 and 01.08.1996. Before the High Court the 1st
respondent herein contended as under:
7 That
the two notifications were not issued in compliance with the requirements of
Article 154 read with Article 166 of the Constitution of India and the Business
Rules of the Government of Goa framed by the Governor thereunder.
7 That
retrospective benefit of rebate in tariff given by these two notifications was
not bona fide and is illegal.
7 That
there was no Budgetary Provisions made for these benefits to be extended during
the relevant financial years.
7 That
the Notifications in question were not issued as is contemplated by and under
Articles 154 and 166 of the Constitution of India and that they were issued
only at the instance of the Minister of Power at the relevant point of time
and, hence, Notifications could not be termed as the decisions of the State
Government.
7 That
the amendment brought by the Notification dated 01.08.1996 has overridden the
very scope of the Notification dated 30.09.1991 which is impermissible in law.
7 That
the Notification dated 15.05.1996 could not have been issued when the
Notification dated 30.09.1991 was already rescinded by 10 Notification dated
31.03.1995 and no life could have been infused into the said notification when
it did not exist.
7
Addition to the said notification of Extra High Tension consumers with
retrospective effect from 01.10.1991 was beyond the scope of the Notification
dated 30.09.1991.
11) The
said writ petition was contested by the 2nd respondent, who was the power
Minister at the relevant point of time. He mainly contended that there was no
illegality in the said Notifications which have been issued by following the
prescribed procedure in the normal course of business of the Government with a
view to promote industrial growth of the State so as to generate more
employment opportunities and, therefore, there was nothing improper or illegal
about it. It was also contended by the 2nd respondent therein that even if the
said notifications were held to be contrary to the provisions of Article 166 of
the Constitution, the said Rules are only directory and failure to comply with
them did not vitiate the Notifications and in any event, if it was realized by
the State Government that these Notifications were issued contrary to the
Provisions of Article 166 nothing prevented the State Government from
withdrawing them and the fact that no such action was taken by the State
Government for almost two years itself indicated that the State Government was
satisfied with the legality of the Notifications.
11 The
respondent also raised a preliminary objection regarding the maintainability of
the Writ Proceedings on the ground, that, once the Notifications impugned have
been authenticated as per the Business Rules, they are immune from any
challenge and there cannot be a situation where respondent No.1, who at the
relevant point of time, was the Chief Minister of Goa, would be contesting
against the action of the State Government. It was also contended that the
petition lacked bona fides and was moved only to settle political scores and to
gain political mileage. The fact that contradictory stands were taken by the
State Government by filing two affidavits of the Chief Electrical Engineer
itself showed that the State Government walked into the shoes of the 1st
respondent herein and that the Government cannot support the challenge to the
Notifications issued by it and even if the petition was pro bono when filed, it
ceased to be so after the respondent No.1 herein took over as the Chief
Minister of the State of Goa. The further contention advanced was that the High
Court, having conclusively upheld the validity of these two notifications in
its judgment dated 21.01.1999, cannot re-examine the same, more so, in view of
confirmation of the said judgment by this Court in its Order dated 13.01.2001.
The 2nd respondent therefore sought dismissal of the Writ Petition. A number of
judgments 12 were cited and relied upon by the 2nd respondent in support of his
case before the High Court. The other parties including the interveners also
supported the 2nd respondent therein, on the issue of maintainability and
further addressed arguments based on the principles of res judicata and the
concept of merger of the judgment of the High Court dated 21.01.1999 with the
judgment of this Court dated 13.01.2001. On these premise the respondents
sought dismissal of the Writ Petition. It appears from the pleadings before us,
that, the High Court had permitted certain Companies including the M.R.F Ltd,
to come on record as interveners and oppose the reliefs sought in the Writ
Petition.
12) The
High Court by its judgment dated 19/24.04.2001 impugned herein allowed the writ
petition in part by holding that the Notifications dated 15.05.1996 &
01.08.1996 could not be termed as Notifications issued by the State Government
on account of Non Compliance of the Rules of Business framed under Article 166
(3) of the Constitution of India and therefore non-est and void-ab-initio and
that the consequential actions based on these two notifications are null and
void.
13 13)
Aggrieved by the said judgment of the High Court, the Appellant [M.R.F. Ltd.]
and others are before us in Civil Appeal Nos. 4220 of 2002, 4213 of 2002 and
4218 of 2002.
14) In
Civil Appeal Nos. 4219 of 2002, 4214 of 2002 and 4217 of 2002, the appellants -
M/s M.R.F. Limited, Goa Glass Fibre Limited and Alcon Cement Company Limited
are questioning the correctness of judgment of the High Court in partly
allowing the Writ Petition Nos. 364 of 1999 and 277 of 1999 and dismissing the
Writ Petition No. 254 of 1999 respectively.
15) The
facts in Civil Appeal No. 4219 of 2002 are :- Appellant applied for power
supply connection for setting up a factory in the State of Goa on 03.10.1991.
On 02.09.1992, appellant was supplied electricity for the first time. Sometime
in October 1996, the Executive Engineer had acknowledged that the appellant is
entitled for 25% rebate as provided in the notification. The amount of rebate
was computed at Rs.
1,04,70,762
for the period from 02.09.1992 to 01.09.1996 and it was further stated that the
amount of arrears be credited in 60 installments w.e.f. September, 1996 and
each installment was of Rs. 1,74,513. The respondent had adjusted an amount of
Rs. 53,78,594 as against the bills 14 from September, 1996 to August, 1997 and
further adjustment of Rs. 31,41,234 was also done subsequently thus leaving a
balance of Rs. 73,29,528. The benefit of rebate was denied to the appellant for
the remaining period on the basis of the notification dated 31.3.1998, whereby
the extension of rebate in tariff was suspended. Pursuant to the judgment dated
21.1.1999, the appellant raised a fresh demand for rebate before the respondent
no. 2 and as they failed to succeed, they approached the High Court for
directions to seek implementation of the said judgment.
16) The
present appeal is filed against the High Court's order dated 24.04.2001 and the
letter issued on 25.05.2001 by the Department of Power to the appellant herein
asking for refund of the rebate of Rs.
1,11,35,738
in one installment on or before 15.6.2001 pursuant to the order dated
24.4.2001.
17) The
facts in Civil Appeal No.4214 of 2002 are :- The appellant - Goa Glass Fibre
Ltd. - has set up a manufacturing plant at Colvale, Bardez Goa and it had
applied for electric power connection on 18.7.1994. Pursuant to the agreement
signed on 7.12.1995 between the appellant and the respondent no. 2, the
appellant's factory was 15 given power supply for the first time on 16.3.1996.
The appellant made a representation to respondent no. 2 on or about 3.7.1996
for the benefit of 25% rebate in tariff and another reminder was sent in that
regard on 27.11.1996. The claim for rebate was made on the basis of the
government notification dated 30.09.1991, 15.05.1996 and 01.08.1996. Pursuant
to the Notification dated 01.08.1996, 25% rebate to this industry was granted
w.e.f. February, 1997 along with the arrears of installment @ Rs. 1,24,520.
Such rebate was adjusted in the monthly bill. This rebate was withdrawn by
issuing a circular dated 31.3.1998. This circular was challenged in the High
Court. The High Court in its judgment dated 21.01.1999, held the circular dated
31.3.1998 as invalid and inoperative. The appellant filed a Writ Petition No.
254 of 1999 in the High Court praying for the restoration of the 25% rebate.
18) The
facts in Civil Appeal No.4217 of 2002 are :- The Alcon Cement Company Limited
applied for power supply on 17.9.1992 and entered into an agreement with the
respondent no.2 for supply of power on 29.9.1993. The appellant's factory at
Surla in the State of Goa was given electricity supply for the first time on
1.3.1994. Sometime in October 1996, the Executive Engineer acknowledged the
entitlement of 16 25% rebate and rebate in energy consumption was granted. The
appellant was given adjustment of 13 installments quantified in sum of Rs.
2,90,342/- leaving a balance of 47 installments. In addition, the balance of subsidy
for the months of March 1998 to July 1998 was worked out at the rate of
Rs.4,24,671 thus making a total sum of Rs.
14,74,755.
The benefit of rebate was denied to the appellant for the remaining period on
the basis of the notification dated 31.3.1998, whereby the extension of rebate
in tariff was suspended. Pursuant to the judgment dated 21.1.1999, the
appellant raised a fresh demand for rebate before the respondent no. 2 and as
they failed to succeed, they approached the High Court seeking directions to
implement the said judgment.
19)
Before us the appellants urged various contentions and supported them with
various grounds and the case laws. The questions of law according to the
appellants are as under:
7 Whether
there is any breach of judicial discipline by the High Court in not following
it's own Judgment rendered by a Full Bench in the Case of Kharkanis wherein the
Business Rules framed under Article 166 (3) were held to be directory in
nature, but in holding that the Rules of Business are mandatory? 17 7 Whether
the High Court by the judgment impugned herein has set at naught the judgment
dated 21.01.1999 rendered by the other Division Bench with reference to the
same notifications impugned in Writ Petition No. 316 of 1999, the former of
which has been affirmed by this Court by its order dated 13.02.2001 in Civil
Appeal No. 3206-07 of 1999 and others? 7 Whether the appellants as consumers of
power seeking rebate in terms of the Notifications issued in the name of the
Governor which have been duly gazetted, can be estopped from seeking relief of
rebate under them on the ground that the said Notifications were void ab initio
as they were not issued in compliance of Business Rules? 7 Whether the High
Court, in the writ petition filed by Manohar Parrikar, on the basis of the
files produced before it by the State Government with Manohar Parrikar as the
Chief Minister of the State at the time of such production, erred in concluding
that the impugned notifications are non-est on the basis of such files which
had also been examined by the earlier Division bench of the High Court? 7
Whether the High Court by issuing directions to effect recovery of rebate
granted on the basis of Notifications in issue has over ruled the 18 decision
of the earlier Division Bench which had held that relief under the
notifications would be granted up to the date of rescission of the Notification
by the Gazette dated 27.07.1998? 7 Whether the High Court erred in allowing the
Writ Petition of Manohar Parrikar based on the changed stance of the State
Government contained in its affidavit dated 12.04.2001 which was different from
that which was taken by the State in the Court before the 1st respondent herein
became the Chief Minister of the State of Goa? 7 Whether the High Court was justified
in allowing the Writ Petition of Manohar Parrikar on the ground of
Notifications being null and void for want of compliance with the Business
Rules while its stand before the High Court in the present writ petition and
earlier batch of writ petitions was that the notifications impugned had been
rescinded due to financial crunch and in public interest which was upheld by
the High Court and by this Court? 7 Whether the judgment impugned has been
rendered in a case where the petitioner on his becoming Chief Minister of the
State drew support of the State Government through his own Advocate General to
settle scores with his political rival the 3rd respondent herein? 19 7 Is there
any judicial indiscipline in the High Court in not following the judgment of
this Court dated 13.02.2001 confirming the High Court judgment dated
21.01.1999, more so in view of the consistent stand taken by the State
Government in Parrikar's case that the judgment of the High Court, dated
21.01.1999 covered the issues therein and that the High Court should await the
order of this Court in Appeals pending and which was eventually disposed by
order dated 13.02.2001? 7 Did the High Court erred in not permitting Manohar
Parrikar [1st respondent herein] to withdraw his writ petition, when he himself
had submitted that the issues in his writ petition were covered by the judgment
of the High Court dated 21.01.1999 and that the appeals there against were
pending in this Court? 20) These civil appeals are opposed by the State
Government by filing a detailed Counter Affidavit. The contentions of the State
Government in support of the impugned judgment can be summarized as under:
7 That
the State has a vital interest in the outcome of the proceedings before this
Court which have a bearing on the State's Finances as an order of this Court
setting aside the judgment impugned will result in a loss of Rs. 50 Crores to
the State's Exchequer.
20 7 That
the State has already paid an amount of about 16 crores as rebate and it cannot
afford to pay any more on account of financial crunch faced by it and also on
account of the Notifications not being Government decision in the eyes of law,
in as much as the matter was neither placed before the State Cabinet in terms
of the Business Rules nor was the mandatory concurrence of the Finance
Department under the Business Rules obtained and the High Court has rightly
held that the Notifications cannot be termed as State Government's decisions
for want of non-compliance of mandatory Business Rules and the decision and
actions based on the notification are therefore non-est.
7 That
there is no truth in the contention that the State Government has taken stand
which is inconsistent with and contradictory to the one taken in the earlier
affidavits filed in the proceedings.
7 That
the earlier affidavits for and on behalf of the State were filed by Chief
Electrical Engineer Nagarajan in virtual support of the Notifications impugned.
However, the said Nagarajan himself was party to the entire matter including
moving of the file, initiating the process and that his appointment was on
ad-hoc basis overlooking the just and reasonable claims of various other
senior, eligible and 21 qualified candidates and that he had given benefit of
rebate to an applicant whose application had been rejected by his predecessor.
7 That
investigation on a police complaint lodged by the petitioner in W.P 316 of 1999
disclosed that there was a conspiracy hatched between the said Nagarajan and
the then Power Minister at whose instance the Notifications impugned were
issued and that a charge sheet was laid before the Special Court set up under
the Prevention of Corruption Act for offences under Section 120B of the Indian
Penal Code and other provisions of the Prevention of Corruption Act and the
said Nagarajan who filed the earlier affidavits was an accused in the said
proceedings.
7 That
when it comes to the involvement of public revenue and the effect on the
State's Exchequer to the tune of Rs.50 Crores, one has to be bold enough to
place the correct facts and law before the Court and the earlier affidavits
filed on behalf of the State Government did not place before the Court correct
facts of the matter and that the affidavit of Nagarajan which did not reflect
correct position of law and did not place correct facts before the Court should
be discarded and the one filed subsequently should not be considered as
contradictory or inconsistent as correct facts 22 borne out from the Government
files were placed before the Court by the said affidavits. The said affidavits
also reflected the fact that there was neither financial sanction nor was there
a budgetary provision nor was there a Cabinet approval as mandatorily required
under the provisions of Article 166 (3) of the Constitution and the said Notifications
therefore could not be said to be the decision of the State Government in the
eye of law. The affidavit dated 12.04.2001 was filed before the High Court
after the State re-examined the entire matter at the highest level and after
examining the legal aspects and as it was found that certain matters which go
to the root of the matter and as the earlier affidavits filed before the High
Court did not place all the facts emanating from Government files and records.
The said affidavit was filed explaining the severe financial implications which
the said Notifications incurred on the State in the form of rebate which could
not be borne by the State's interest and which was detrimental to the State's
Interest, more so in view of lack or absence of legal sanctity for the said
notification. The affidavit was filed further to disclose that there was breach
of mandatory Business Rules and to show that neither cabinet approval for the
23 decision as required under law was obtained nor any budgetary allocation made
for the rebate. The affidavit was filed to explain that the State Government
could not bear liability of such magnitude.
21) The
counter-affidavit of the respondent - State herein further reiterates the
position of law flowing from various provisions of the Constitution and the
Business Rules made there under and states that the impugned notifications did
not comply with the requirements of the Business Rule 7 and were therefore
totally vitiated and did not have any binding effect on the State Government.
The decision contained in the said Notifications could not be the decision of
the State Government in the strict and true sense of law. With these
contentions the State Government seeks to support and sustain the judgment of
the High Court against which appeal is filed in this Court.
22) A
rejoinder is filed by the appellant - M.R.F Ltd. to counter various statements
made by the State Government' in its Counter Affidavit filed in the appeal.
23) We
have heard Shri F.S. Nariman, Dr. Rajeev Dhavan, Shri L. Nageshwar Rao, Shri
K.N. Bhatt and Shri Shyam Divan, the learned 24 senior counsel for the parties
who have advanced elaborate arguments in support of the issues respectively
raised by them in the pleadings.
24) The
High Court by its judgment impugned herein has elaborately dealt with each of
the contentions of the parties before it. Before the High Court the Writ
Petition filed in public interest was opposed on various grounds. It was
preliminarily objected to and opposed on the ground of maintainability which
was dealt with by the High Court holding as under:- " We have no
hesitation to hold that the Petition is not required to be dismissed on the
ground of merger of the earlier decision dated 21st January, 1999 with the
order of the Apex court or on the ground of res judicata. There is no dispute
that the illegality of these Notifications were not challenged in the Petitions
which came to be decided on 21st January, 1999 and, in fact, the said challenge
could not have been raised for the simple reason that the Petitioners' claim
was entirely based on the existence of these two Notifications. When the
Petitioner moved Miscellaneous Civil Application No.637 of 1999 with the prayer
to allow him to withdraw the Petition for the reasons stated therein, this
court while rejecting the said application by order dated 27th January, 2000,
gave the following reasoning:- "It appears that at one stage the applicant
had prayed for taking up the Writ Petition No. 316/98 along with the other
batch of Writ Petitions, but the said prayer was withdrawn. In the said batch
of Writ Petitions, challenge had been thrown to the decision of 25 government
of Goa communicated by the Chief Electrical Engineer vide Circular dated 31st
March, 1998 to suspend the release of 25% rebate of power tariff to the
industrial consumers. There was no challenge whatsoever to Notification dated
15th May, 1996, or Notification dated 1st August, 1996, or that the said
Notifications were null and void and to nullify any effect given to them in the
earlier batch of Writ Petitions which declaration is now sought by the Writ
Petition No. 316/98. There was also no challenge to the guidelines framed by
letter dated 12th December, 1995, which is sought to be challenged in the Writ
Petition No. 316/98 on the ground that it is illegal to the extent it goes
beyond the scope of 1991 Notification. No direction had been sought in the
earlier batch of Writ Petitions for investigation into the grant of rebate, or
for initiation of recovery proceedings against those units to whom 25% rebate
had actually been paid, or adjusted, or to fix accountability of the concerned
public servant, or authorities for causing loss to the State exchequer.
After
taking us through the Judgment, learned advocate for the applicant himself
admitted that none of the declarations or directions claimed in Writ Petition
No.316/98 had been sought in the earlier batch of Writ Petitions. Therefore, it
cannot prima facie be said that the controversy in the earlier batch of Writ
Petitions and the Writ Petition in question is the same.
In the
circumstances, in our opinion, there is no case made out for permitting the
applicant to withdraw the Writ Petition No.316/98. Accordingly, the application
is hereby dismissed."
There was
no challenge whatsoever to the Notifications dated 15th May, 1996 and 1st
August, 1996 and the declaration now sought in the 26 instant Writ Petition was
not in issue in the earlier batch of Petitions.
After
taking us through the judgment, the learned senior counsel admitted that none
of the declarations or directions in Writ Petition No.316/98 had been sought in
the earlier batch of Writ Petitions.
Therefore,
it cannot be said that the controversy in the earlier batch of Writ Petitions
and the present Writ Petition in question are the same.
This
Order dated 17th January, 2000 has now become final, though it was an
interlocutory order rejecting Miscellaneous Civil Application No. 637 of 1999.
This Court was more than convinced that the challenge raised in Writ Petition
No. 316 of 1998 was not an issue for consideration before it while handing down
the judgment dated 21st January, 1999, It is for these reasons, the principle
of res judicata will not be applicable in the instant case.
25) As
regards the objections raised by the respondents on the basis of concept of
merger, the High Court has held that though the appeals challenging the
judgment of the High Court dated 21.01.1999 have been dismissed by this Court,
and the findings of the High Court on the relevant issues have been impliedly
confirmed and though the principle Kerala, [(2000) 6 SCC 359], is squarely
applicable on the issue of 27 merger and the judgment dated 21.01.1999 of the
High Court merged with the order of this Court dated 13.02.2001, the concept of
merger will not come in its way in deciding the issues involved in this
petition for the reasons, that, these issues were not raised and therefore not
required to be decided by the High Court in its earlier judgment dated
21.01.1999 as was clear from the order passed by it on 27.01.2000 in Misc.
Civil Application No. 637 of 1999. The High Court held, that, it had no
occasion to address itself on the challenge raised to the notification impugned
in the Writ Petition of Manohar Parrikar and the earlier batch of Writ
Petitions proceeded solely against the order dated 31.03.1998, and subsequent
Notification issued by the State Government on 24.07.1998. It is observed by
the High Court, that, the State Government opposed those Writ Petitions without
examining the legality of the Notifications dated 15.05.1996 and 01.08.1996 and
it had contended that the benefit of rebate was withdrawn as the State
Government was facing financial crunch and that the said benefit had been
introduced as a policy of the State Government and when it was realized by the
State that it was facing financial difficulties in extending the benefit of
rebate it decided to withdraw the same which has been upheld by the High Court
in the earlier batch of writ proceedings. The High Court therefore has 28
concluded that it cannot now be said that State Government cannot take a stand
that the Notifications impugned were issued without following the mandatory
provisions of Rules of Business or that they were not Notifications issued by
the State Government in the eyes of law. The High Court has also observed, that
if the State had no occasion to address itself on the legality of these
Notifications, it is not estopped either from raising a challenge or supporting
the challenge at an appropriate time. It is also held by the High Court that as
the 1st respondent herein was not a party to the earlier batch of Writ
Petitions before the High Court and as his application for hearing his petition
with that batch of petitions was withdrawn, he is not estopped from continuing
with his challenge against the Notifications dated 15.05.1996 and 01.08.1996.
26)
Arguments were also advanced to the effect that the State Government should not
be allowed to take contradictory stand as the stand taken by the State
Government in its two affidavits filed through the Chief Electrical Engineer in
the earlier batch of writ petitions was conflicting with each other. The said
contention was sought to be raised by the respondents in view of the change of
the Government during the intervening period and the 1st respondent herein was
the Chief 29 Minister at the relevant point of time. The High Court has
repelled these contentions by stating that the challenge to the notifications impugned
before by the 1st respondent herein in his petition cannot be decided on the
touch stone of affidavits filed even if they are contradictory in nature and
the challenge had to be decided on its own merits, on the basis of records and
the Constitutional Mandate. The High Court has observed that in a democratic
set up the decisions of the Governments decide the destiny of the people and
therefore the validity of such decisions should be decided not on the basis of
affidavits filed by the Officers of the Governments or on incomplete or
inadequate information made available by them, but on the basis of
Constitutional provisions and Business Rules framed there under. The High Court
further felt that it was duty bound to examine the records to reassure itself that
the decisions purported to have been taken by the Government are, in fact and
in law, the decision of the Government and they are in conformity with the
mandate of the Constitution. Thus the High Court has rejected the preliminary
objection as to the maintainability of the Writ Petition and proceeded to
decide the challenge made to the above mentioned two notifications on its
merits.
30 27) In
our view, the principle of merger essentially refers to the merging of the
orders passed by the superior courts with that of the orders passed by a
subordinate court. This Court in the case of (AIR 1970 SC 1) has laid down the
condition as to when there can be a merger of the orders of the superior court
with that of the orders passed by the lower court. This Court stated, that, if
any judgment pronounced by the superior court in the exercise of its appellate
or revisional jurisdiction after issue of a notice and a full hearing in the
presence of both the parties, then it would replace the judgment of the lower court.
Thus, constituting the judgment of the superior court the only final judgment
to be executed in accordance with law by the Court below. The merger is
essentially of the operative part of the order and the principle of merger of
the order of the subordinate Court with the order of the superior Court cannot
be applied when there is no order made by the superior Court on merits and the
controversy between the parties has not been looked into by the superior Court.
28) The
issue of merger has no bearing in the facts and circumstances of the present
petitions, since, the issue that was 31 decided by the High Court in the
earlier batch of Writ Petitions and the issue that was raised and considered in
the subsequent public interest litigation is entirely different. Secondly, in
our view, the principles of res judicata is also not attracted since the issue
raised and considered in the subsequent public interest litigation had not been
raised and considered in the earlier round of litigation. It would be worthwhile
to recall the observations made by this Court in the Meenakshi Pillai and Ors.
(2000) 6 SCC 301, wherein the Court has observed that in order to apply general
principle of res judicata, Court must find, whether an issue in a subsequent
suit, was directly and substantially in issue in the earlier suit or
proceedings, was it between the same parties, and was it decided by such Court.
Thus, there should be an issue raised and decided, not merely a finding on any
incidental question for reaching such a decision. So, if such issue is not
raised and if on any other issue, if, incidentally any finding is recorded, it
would not come within the periphery of principle of res judicata. However, Shri
K.N. Bhatt, learned Senior Counsel appearing for the former Power Minister,
would submit that the principles of res judicata and constructive res judicata
bars the 32 exercise of jurisdiction by the High Court as there is a bar not
only on issues directly raised in a previous lis but the issue that ought to
have been raised. It is further submitted that the record of decision
culminating in notification dated 24.03.1998 was available and produced before
the High Court in previous writ petitions and the same Finance Secretary who
had opined in his cabinet note that Rules of Business stood violated due to
non-consultation with Finance department had filed affidavit in previous Writ
Petitions on the decision to issue notification dated 24.07.1998. Therefore,
the learned senior counsel would contend that the High Court has erred in
deciding this issue against this respondent. In aid of this submission, the
learned senior counsel has pressed into service the observations made by this
Court in the case of State of Karnataka vs. All India Manufacturer Organization
and Others, [(2006) 1 SCC 32].
29) We
are not impressed by the submission of the learned senior counsel Shri K.N.
Bhatt. In our view, the subject matter of earlier Writ Petitions was completely
different and distinct from the public interest litigation filed by Mr. Manohar
Parrikar. In the earlier Writ Petitions, the challenge was against notification
and the circulars issued by the State Government and in the present Writ
Petitions the 33 High Court was primarily concerned with validity or otherwise
of the notifications dated 15.5.1996 and 01.08.1996. Therefore, we are of the
view that the reasoning and conclusions reached by the High Court, on the
aforesaid issue is in accordance with law and in accordance with the principles
laid down by this Court. Therefore, we agree with the conclusion reached by the
High Court.
30) The
appellants herein have raised an issue with regard to the nature of Business
Rules framed by the Government of Goa i.e.
whether
these Rules are directory or mandatory. Indeed it is their principal contention.
Before the High Court also, their contention was that the Rules of Business of
the State of Goa were directory and not mandatory and failure to comply with
such Rules will not nullify the decision taken by the State Government. Shri
F.S. Nariman, learned senior counsel submitted that it is now settled law,
that, violation of conduct of Business Rules does not vitiate the decision or
order, since the Rules of Business are only directory and not mandatory. The
learned senior counsel has invited our attention to the decision of this court
in the case of Dattatreya Moreshwar Pangarkar vs. State of Bombay - [(1952) SCR
612]. In the said decision, the court has observed :
34
"It is well settled that generally speaking the provisions of a statute
creating public duties are directory and those conferring private rights are
imperative. When the provisions of a statute relate to the performance of a
public duty and the case is such that to hold null and void acts done in
neglect of this duty would work serious general inconvenience or injustice to
persons who have no control over those entrusted with the duty and at the same
time would not promote the main object of the legislature, it has been the
practice of the courts to hold such provisions to be directory only, the
neglect of them not affecting the validity of the acts done. The considerations
which weighed with Their Lordships of the Federal Court in the case referred to
above in the matter of interpretation of Section 40(1)of the 9th Schedule to
the Government of India Act, 1935, appear to me to apply with equal cogency to
Article 166 of the Constitution. The fact that the old provisions have been
split up into two clauses in Article 166 does not appear to me to make any
difference in the meaning of the article.
Strict
compliance with the requirements of Article 166 gives an immunity to the order
in that it cannot be challenged on the ground that it is not an order made by
the Governor. If, therefore, the requirements of that article are not complied
with, the resulting immunity cannot be claimed by the State. This, however,
does not vitiate the order itself. The position, therefore, is that while the
Preventive Detention Act requires an executive decision, call it an order or an
executive action, for the confirmation of an order of detention under Section
11(1) that Act does not itself prescribe any particular form of expression of
that executive decision. Article 166 directs all executive action to be
expressed and authenticated in the manner therein laid down but an omission to
comply with those provisions does not render the executive action a nullity.
35 31)
Reference is also made to the decision of this Court in Gulabrao noted as
follows:
"Article
166(1) and (2) expressly envisage authentication of all the executive action
and shall be expressed to be taken in the name of the Governor and shall be
authenticated in such manner specified in the rules made by the Governor. Under
Article 166(3), the Governor is authorised to make the rules for the more convenient
transaction of the business of the Government of the State, and for the
allocation among Ministers of the said business insofar as it is not a business
with respect to which the Governor is by or under the Constitution required to
act in his discretion. In other words, except in cases when the Governor in his
individual discretion exercises his constitutional functions, the other
business of the Government is required to be conveniently transacted as per the
Business Rules made by Article 166(3) of the Constitution. If the action of the
Government and the order is duly authenticated as per Article 166(2) and the
Business Rule 12, it is conclusive and irrebuttable presumption arises that
decision was duly taken according to Rules."
32) Mr.
F.S. Nariman next relied upon the decision of this Court in R. Chitralekha and
Others vs. State of Mysore, [1964 (6) SCR 368], wherein this Court has stated
that it is "settled law" that provisions of Article 166 of the
Constitution are only directory and not mandatory in character. And if they are
not complied with it can be established as a 36 question of fact that the
impugned order was in fact issued by the Governor."
was noted
as follows.
"Several
tests have been propounded in decided cases for determining the question
whether a provision in a statute, or a rule is mandatory or directory. No
universal rule can be laid down on this matter. In each case one must look to
the subject-matter and consider the importance of the provision disregarded and
the relation of that provision to the general object intended to be secured.
Prohibitive or negative words can rarely be directory and are indicative of the
intent that the provision is to be mandatory.
Where a
prescription relates to performance of a public duty and to invalidate acts
done in neglect of them would work serious general inconvenience or injustice
to persons who have to control over those entrusted with the duty, such
prescription is generally understood as mere instruction for the guidance of
those upon whom the duty is imposed."
34) In
Montreal Street Rely Co. vs. Normandin - 1917 A.C. 170, it is held :
"The
statutes contain no enactment as to what is to be the consequence of
nonobservance of these provisions. It is contended for the appellants that the
consequence is that the trial was coram non judice and must be treated as a
nullity.
37 It is
necessary to consider the principles which have been adopted in construing
statutes of this character, and the authorities so far as there are any on the
particular question arising here. The question whether provisions in a statute
are directory or imperative has very frequently arisen in this country, but it
has been said that no general rule can be laid down, and that in every case the
object of the statute must be looked at. The cases on the subject will be found
collected in Maxwell on Statutes, 5th ed. P. 596 and following pages.
When the
provisions of a statute relate to the performance of a public duty and the case
is such that to hold null and void acts done in neglect of this duty would work
serious general inconvenience, or injustice to persons who have no control over
those entrusted with the duty, and at the same time would not promote the main
object of the Legislature, it has been the practice to hold such provisions to
be directory only, the neglect of them, though punishable not effecting the
validity of the acts done."
(emphasis
supplied) 35) In R v Immigration Appeal Tribunal Ex parte Jeyeanthan 1999 (3)
AER 231, it is observed :
"The
issue is of general importance and has implications for the failure to observe
procedural requirements outside the field of immigration.
The
conventional approach when there has been non-compliance with a procedural
requirement laid down by a statute or regulation is to consider whether the
requirement which was not complied with should be categorised as directory or
mandatory. If it is categorised as directory it is usually assumed it can be
safely ignored. If it is categorised as mandatory then it is usually 38 assumed
the defect cannot be remedied and has the effect of rendering subsequent events
dependent on the requirement a nullity or void or as being made without
jurisdiction and of no effect. The position is more complex than this and this
approach distracts attention from the important question of what the legislator
should be judged to have intended should be the consequence of the
non-compliance. This has to be assessed on a consideration of the language of
the legislation against the factual circumstances of the non-compliance. In the
majority of cases it provides limited, if any, assistance to inquire whether
the requirement is mandatory or directory. The requirement is never intended to
be optional if a word such as 'shall' or 'must' is used.
A
requirement to use a form is more likely to be treated as a mandatory
requirement where the form contains a notice designed to ensure that a member
of the public is informed of his or her rights, such as a notice of a right to
appeal. In the case of a right to appeal, if, notwithstanding the absence of
the notice, the member of the public exercises his or her right of appeal, the
failure to use the form usually ceases to be of any significance irrespective
of the outcome of the appeal. This can confidently be said to accord with the
intention of the author of the requirement.
There are
cases where it has been held that even if there has been no prejudice to the
recipient because, for example, the recipient was aware of the right of appeal
but did not do so, the non- compliance is still fatal. The explanation for
these decisions is that the draconian consequence is imposed as a deterrent against
not observing the requirement. However even where this is the 39 situation the
consequences may differ if this would not be in the interests of the person who
was to be informed of his rights.
Because
of what can be the very undesirable consequences of a procedural requirement
which is made so fundamental that any departure from the requirement makes
everything that happens thereafter irreversibly a nullity it is to be hoped
that provisions intended to have this effect will be few and far between. In
the majority of cases, whether the requirement is categorised as directory or
mandatory, the tribunal before whom the defect is properly raised has the task
of determining what are to be the consequences of failing to comply with the
requirement in the context of all the facts and circumstances of the case in
which the issue arises. In such a situation that tribunal's task will be to
seek to do what is just in all the circumstances (see Brayhead (Ascot) Ltd v
Berkshire CC [1964] 1 All ER 149, [1964] 2 QB 303 applied by the House of Lords
in London and a Clydesidc Estates Ltd v Aberdeen DC [1979] 3 All ER 876, [1980]
lWLR 182).
By
contrast, a requirement may be clearly directory because it lays down a time
limit but a tribunal is given an express power to extend the time for
compliance. If the tribunal grants or refuses an extension of time the position
is clear. If the time limit is extended the requirement is of no Significance.
If an extension is refused the requirement becomes critical. It may, for example,
deprive a member of the public of a right to appeal which if exercised in time
would have been bound to succeed. In the latter situation a directory
requirement has consequences which are as significant as any mandatory
requirement.
40 A far
from straightforward situation is where there is a need for permission to
appeal to a tribunal but this is not appreciated at the time. The requirement
is mandatory in the sense that the tribunal or the party against whom the
appeal was being brought would have been entitled to object to the appeal
proceeding without the permission and if they had done so the appeal would not
have been accepted. However, what is the position if because they were unaware
of the existence of the requirement no objection is made and the appeal is
heard and allowed? Is the appellant, when the mistake is learnt of, to be
deprived of the benefits of the appeal? If the answer is Yes the result could
be very unjust. This would be especially so, if in fact the tribunal in error
had told the appellant that permission is not needed and he would have been in
time to make the application if he had not been misinformed. Could it have been
the intention of the author of the requirement that the requirement should have
the effect of depriving the appellant of the benefit of his appeal? Clearly
not. In such a situation the non-compliance would almost inevitably be regarded
as being without significance. It must be remembered that procedural
requirements are designed to further the interests of justice and any
consequence which would achieve a result contrary to those interests should be
treated with considerable reservation."
36) In
Attorney General's Reference (No 3 of 1999), 2001(1) AER 577, it is held :
"My
Lords, I acknowledge at once that reasonable minds may differ as to the correct
interpretation of a subsection which has no parallel in the 1984 Act or any
other statute.
Nevertheless,
there do seem to be secure footholds which may lead to a tolerably clear
answer. It is 41 not along the route adopted by the prosecution of asking
whether the relevant provision is mandatory or directory. In London and
Clydeside 884, [1980] 1 WLR 182 at 188-190, Lord Hailsham of St Marylebone L.C.
considered this dichotomy and warned against the approach 'of fitting a
particular case into one or other of mutually exclusive and starkly contrasted
compartments'. In R v Immigration Appeal Tribunal, ex p Jeycanthan [1999J 3 All
ER 231 at 237, [2000] 1 WLR 354 at 360, Lord Woolf MR, now Lord Chief Justice,
echoed this warning and held that it is 'Much more important ... to focus on
the consequences of non- compliance'. This is how I will approach the
matter."
37) In R
v Sekhon and others, 2003(3) AER 508, it is observed :
"25.
There is no doubt that difficulties for courts exist in applying the
distinction between mandatory requirements on the one hand, and directory
requirements on the other. Even if the terms `directory' and `mandatory' are
not used the problem remains of answering the question : what is the effect of non-compliance
with procedural requirements? What is necessary as indicated by Lord Campbell
LC in Liverpool Borough Bank v.
Turner
(1861) 30 LJ Ch 379 at 381, 45 ER 715 at 718, is `to try to get at the real
intention of the legislature, by carefully attending to the whole scope of the
statute to be construed."
38)
Reference can be made to certain passages from HALSBURY'S Laws of England, 4th
Edition Re issue Vol. 44(1) at para 1237 and 1238 :
42 1237.
Substantive and procedural enactments. A distinction is drawn between
enactments that have substantive effect and those that are merely procedural.
Here 'substantive' means having to do with the substance of the law, in
particular the nature and existence of legal rights, powers or duties, whereas
procedure is concerned with formalities and technicalities, rather than
substance.
A
procedural change is expected to improve matters for everyone concerned (or at
least to improve matters for some, without inflicting detriment on anyone else
who uses ordinary care, vigilance and promptness).
The
distinction governs such questions as whether a statutory requirement is
mandatory or merely directory", whether the effect of an enactment is
retrospective' and when a limitation period begins to run.
The
question may be whether, on the facts of the instant case, the enactment is
substantive or merely procedural, bearing in mind that an enactment may be
substantive in the light of some facts but merely procedural on others. Another
use of the term 'substantive' is to indicate a 'permanent' provision of an Act,
in contrast to merely temporary or transitional provisions.
1238.
Mandatory and directory enactments. The distinction between mandatory and
directory enactments concerns statutory requirements and may have to be drawn
where the consequence off ailing to implement the requirement is not spelt out
in the legislation. The requirement may arise in one of two ways. A duty to
implement it may be imposed directly on a person; or legislation may govern the
doing of an act or the carrying on of an activity, and compel the person doing
the act or carrying on the activity to implement the requirement as part of a
43 specified procedure. The requirement may be imposed merely by implication.
To remedy
the deficiency of the legislature in failing to specify the intended legal
consequence of non- compliance with such a requirement, it has been necessary
for the courts to devise rules. These lay down that it must be decided from the
wording of the relevant enactment whether the requirement is intended to be
mandatory or merely directory. The same requirement may be mandatory as to some
aspects and directory as to the rest. The court will be more willing to hold
that a statutory requirement is merely directory if any breach of the requirement
is necessarily followed by an opportunity to exercise some judicial or official
discretion in a way which can adequately compensate for that breach.
Provisions
relating to the steps to be taken by the parties to legal proceedings (using
the term in the widest sense) are often construed as mandatory.
Where,
however, a requirement, even if in mandatory terms, is purely procedural and is
imposed for the benefit of one party alone, that party can waive the
requirement. Provisions requiring a public authority to comply with formalities
in order to render a private individual liable to a levy have generally been
held to be mandatory.
Requirements
are construed as directory if they relate to the performance of a public duty,
and the case is such that to hold void acts done in neglect of them would work
serious general inconvenience or injustice to persons who have no control over
those entrusted with the duty, without at the same time promoting the main
object of the legislature. This is illustrated by many decisions relating to
the performance of public functions out of time, and by many relating to the
failure of public officers to comply with formal requirements. On the other
hand, the view that provisions conferring private 44 rights have been generally
treated as mandatory is less easy to support; the decisions on provisions of
this type appear, in fact, to show no really marked leaning either way.
If the
requirement is found to be mandatory, then in a case where a duty to implement
it is imposed directly on a person, non-compliance will normally constitute the
tort of breach of statutory duty, while in a case where it is to be implemented
as a part of a specified procedure, non-compliance will normally render the act
done invalid. If the requirement is found to be directory only then in either
case the non-compliance will be without direct legal effect, though there might
be indirect consequences such as an award of costs against the offender. It has
been said that mandatory provisions must be fulfilled exactly, whereas it is
sufficient if directory provisions are substantially fulfilled.
Where the
requirement is complied with at the relevant time, the act done is not vitiated
by later developments which, had they occurred before that time, would have
meant that the duty should have been performed in a different way."
39) Per
contra, Dr. Rajeev Dhavan and Shri Shyam Divan, learned Senior Counsel for
respondents, apart from others, submitted that there can be no universal rule
with regard to the violation of the Rules of Business and each case must be
decided on facts; where the Rules of Business contain prohibitive or negative
words, they are indicative of the intent that the provision is mandatory; in
matters concerning revenue or finance rigorous observance of the rules is
essential; when the cabinet 45 alone is competent to take a decision or where
the finance department has conveyed its disagreement or where there is no prior
consultation with the finance department, the decision of the individual minister
is liable to be quashed; where the Rules of Business have not been complied
with, then the decision/communication cannot be termed as a Government
decision; and an individual functionary cannot by-pass the Rules of Business
and the requirement for certain matters to be placed before the Council of
Ministers. It is further submitted that the decision on which reliance is
placed by learned senior counsel Shri F.S. Nariman does not specifically answer
the issue whether the Rules of Business framed under Article 166(3) of the
Constitution is mandatory or directory and in fact all those decisions are
rendered in the context of Article 166(1) and (2) of the Constitution and the
Courts have held that, the form of expression and authentication are only directory,
and not mandatory.
In aid of
their submission, the learned senior counsel relies on the observations made in
the following decisions : - 40) In State of Kerala vs. A. Lakshmikutty, [(1986)
4 SCC 632], it is held :
"It
must therefore follow that unless and until the decision taken by the Council
of Ministers on January 30, 1985 was translated into action by the 46 issue of
a notification expressed in the name of the Governor as required by Article
166(1), it could not be said to be an order of the State Government.
Until
then, the earlier decision of the Council of Ministers was only a tentative one
and it was therefore fully competent for the High Court (sic State Government)
to reconsider the matter and come to a fresh decision." (pr. 41, pp. 659)
41) In CBI vs. Ravi Shankar Srivastava, [(2006) 7 SCC 188], it is observed :
"13.....has
been rightly submitted by learned counsel for the appellant, there is no
notification revoking the earlier notification. The letter on which great
emphasis has been laid by Respondent 1 and highlighted by the High Court, the
authority to write the letter has not been indicated. It has also not been
established that the person was authorised to take a decision. In any event,
the same does not meet the requirements of Article 166 of the Constitution. The
letter is not even conceptually a notification. The High Court was, therefore,
not justified in holding that there was a notification rescinding the earlier
notification." (pr. 13, pp. 200) 42) In Punjab State Industrial
Development Corpn. Ltd. vs. PNFC Karamchari Sangh, [(2006) 4 SCC 367], it is
held :
"11.
Reliance was placed on the so-called order of the Chief Minister permitting
PSIDC to raise funds in order to meet the liability of PNFC towards salary of
its workers for at least six months. We have carefully perused the note of the
Chief Minister dated 25-8-2001. The said note cannot be said to be an order of
the State Government and therefore is not binding on PSIDC. The orders of the
State Government are issued in a prescribed 47 manner and the note dated
25-8-2001 cannot be treated as one." (pr.11, pp. 371) 43) In State of
Bihar vs. Kripalu Shankar, [(1987) 3 SCC 34], it is stated :
"15.
Article 166(1) requires that all executive action of the State Government shall
be expressed to be taken in the name of the Governor. This clause relates to
cases where the executive action has to be expressed in the shape of a formal
order or notification. It prescribes the mode in which an executive action has
to be expressed. Noting by an official in the departmental file will not,
therefore, come within this article nor even noting by a Minister. Every
executive decision need not be as laid down under Article 166(1) but when it
takes the form of an order it has to comply with Article 166(1). Article 166(2)
states that orders and other instruments made and executed under Article
166(1), shall be authenticated in the manner prescribed. While clause (1)
relates to the mode of expression, clause (2) lays down the manner in which the
order is to be authenticated and clause (3) relates to the making of the rules
by the Governor for the more convenient transaction of the business of the
Government. A study of this article, therefore, makes it clear that the notings
in a file get culminated into an order affecting right of parties only when it
reaches the head of the department and is expressed in the name of the
Governor, authenticated in the manner provided in Article 166(2)." (pr.
15, pp. 43) 44) In Haridwar Singh vs. Bagun Sumbrui, [(1973) 3 SCC 889], Rule
10 had been formulated under Article 166(3), it is observed :
"16.
In this case, we think that a power has been given to the Minister in charge of
the Forest Department to do an act which concerns the 48 revenue of the State
and also the rights of individuals. The negative or prohibitive language of
rule 10(1) is a strong indication of the intent to make the Rule mandatory.
Further, rule 10(2) makes it clear that where prior consultation with the Finance
Department is required for a proposal, and the department on consultation, does
not agree to the proposal, the department originating the proposal can take no
further action on the proposal. The cabinet alone would be competent to take a
decision. When we see that the disagreement of the Finance Department with a
proposal on consultation, deprives the department originating the proposal of
the power to take further action on it, the only conclusion possible is that
prior consultation is an essential pre-requisite to the exercise of the
power." (pr. 16, pp. 896) 45) In Dattatraya Moreshwar vs. State of Bombay,
[1952 SCR 612] at pp. 624-65, per Das, J. :
"The
fact that the old provisions have been split up into two clauses in Article 166
does not appear to me to make any difference in the meaning of the article.
Strict compliance with the requirements of Article 166 gives an immunity to the
order in that it cannot be challenged on the ground that it is not an order
made by the Governor. If, therefore, the requirements of that article are not
complied with, the resulting immunity cannot be claimed by the State. This,
however, does not vitiate the order itself. The position, therefore, is that
while the Preventive Detention Act requires an executive decision, call it an
order or an executive action, for the confirmation of an order of detention
under Section 11(1) that Act does not itself prescribe any particular form of
expression of that executive decision. Article 166 directs all executive action
to be expressed and authenticated in the manner therein laid down but an
omission to comply with 49 those provisions does not render the executive
action a nullity. Therefore, all that the procedure established by law requires
is that the appropriate Government must take a decision as to whether the
detention order should be confirmed or not under Section 11(1). That such a
decision has been in fact taken by the appropriate Government is amply proved
on the record."
Evidence
can be led to show that these actions are attributable to the government. But
Article 166(3) is not verificatory and has to be followed.
Even in
this case at pp. 632-633, as per Mukherjea, J., it is held :
"I
agree with the learned Attorney General that non-compliance with the provisions
of either of the clauses would lead to this result that the order in question
would lose the protection which it would otherwise enjoy, had the proper mode
for expression and authentication been adopted."
46) In
Bachhittar Singh vs. State of Punjab, [1962 Supp (3) SCR 713] :
"Rules
of business under Article 166(3) required Revenue Minister to make the order
against the petitioner, but the same was done by the Chief Minister. The said
order of the CM was rescued by another rule of business which allowed him to call
any fine before him. No mention of Article 166(3) being directory or
mandatory."
47) In
State of Sikkim vs. Dorjee Tshering Bhutia, [(1991) 4 SCC 243], it is observed
:
"14.....The
government business is conducted under Article 166(3) of the Constitution in
accordance with the Rules of Business made by the 50 Governor. Under the said
Rules the government business is divided amongst the ministers and specific
functions are allocated to different ministries. Each ministry can, therefore,
issue orders or notifications in respect of the functions which have been
allocated to it under the Rules of Business."
48) In
Gulabrao Keshavrao Patil vs. State of Gujarat, [(1996) 2 SCC 26], it is held :
"14....It
would, therefore, be clear that the decision of a Minister under the Business
Rules is not final or conclusive until the requirements in terms of clauses (1)
and (2) of Article 166 are complied with. Before the action or the decision is
expressed in the name of the Governor in the manner prescribed under the
Business Rules and communicated to the party concerned it would always be open
by necessary implication, to the Chief Minister to send for the file and have
it examined by himself and to take a decision, though the subject was allotted
to a particular Minister for convenient transaction of the business of the
Government. The subject, though exclusively allotted to the Minister, by reason
of the responsibility of the Chief Minister to the Governor and accountability
to the people, has implied power to call for the file relating to a decision
taken by a Minister. The object of allotment of the subject to a Minister is
for the convenient transaction of the business at various levels through
designated officers." (pr. 14, pp.35) 49) Dr. Rajeev Dhavan, learned senior
counsel fairly submits, that, even if Article 166(3) were to be held directory,
substantial compliance of the 51 same would be required. In support of this
contention, the learned senior counsel relies on the following decisions of
this Court :
7 Bannari
Amman Sugars Ltd. vs. Commercial Tax Office (2005) 1 SCC 625.
7 R.
Chitralekha vs. State of Mysore (1964) 6 SCR 368 7 State of U.P. vs. Om Prakash
Gupta (1969) 3 SCC 775 7 Dattatraya Moreshwar vs. State of Bombay 1952 SCR 612
50) The summary of the arguments canvassed by learned senior counsel Shri F.S.
Nariman is that, the Rules of Business framed under Article 166(3) of the
Constitution is only directory and by no stretch of imagination, it can be said
to be mandatory and, therefore, non compliance of the Rules of Business cannot
be declared as illegal or void ab-initio. In justification of the judgment of
the Bombay High Court, it is the stand of Dr. Rajeev Dhawan, learned senior
counsel that at-least some of the provisions of Rules of Business framed by
Govt. of Goa are mandatory and non-observation of the same would vitiate the
circulars/orders/notifications etc.
51) In
order to appreciate the rival contentions canvassed by learned senior counsels,
it would be appropriate, to extract Article 166 of the Constitution of India
and the same is as under:
52
"Article 166 Conduct of business of the Government of a State - (1) All
executive action of the Government of a State shall be expressed to be taken in
the name of the Governor.
(2)
Orders and other instruments made and executed in the name of the Governor
shall be authenticated in such manner as may be specified in rules to be made
by the Governor, and the validity of an order or instrument which is so
authenticated shall not be called in question on the ground that it is not an
order or instrument made on executed by the Governor.
(3) The
Governor shall make rules for the more convenient transaction of the business
of the Government of the State, and for the allocation among Ministers of the
said business insofar as it is not business with respect to which the Governor
is by or under this Constitution to act in his discretion."
52)
Clause (1) of Article 166 of the Constitution says, that, whenever executive
action is to be taken by way of an order or instrument, it shall be expressed
to be taken in the name of the Governor in whom the executive power of the
State is vested. Under Clause (2), the orders and instruments made and executed
in the name of the Governor shall be authenticated in the manner specified in
the rules. Under Clause (3) of Article 166 of the Constitution, the Governor is
authorized to make rules for the more convenient transaction of business of the
Government of the State and for the allocation among its Ministers of the business
of 53 Government. All matters excepting those in which the Governor is required
to act in his discretion have to be allocated to one or the other of the
Ministers on the advice of the Chief Minister. Apart from allocating business
amongst Ministers, the Governor can also make rules on the advice of the
Council of Ministers for more convenient transaction of business.
53) In
the case on hand, we are required to examine the contentions of the appellants
on this issue with reference to the Business Rules framed by Governor of Goa
under Article 166 (3) of the Constitution of India.
Rule 7
(2) of the Business Rules of the Government of Goa states, that, no proposal
which requires previous concurrence of Finance Department under the said Rule,
but in which Finance Department has not concurred, may not be proceeded with,
unless the Council of Ministers has taken a decision to that effect. The
wordings of this Rule are different from the provisions of Rule 9 of the
Business Rules of Maharashtra and have to be read in context with the
provisions of Rule 3 of the Business Rules of Government of Goa which states
that the business of the Government shall be transacted in accordance with the
Business Rules. Under Rule 7 (2) thereof, the concurrence of the Finance Department
is a condition precedent. Likewise Rule 6 of the Business Rules states, that,
the 54 Council of Minister shall be collectively responsible for all executive
orders passed by any Department in the name of the Governor or contract made in
exercise of the power conferred on the Governor or any other officer
subordinate to him in accordance with the Rules, whether such orders or
contracts are authorized by an individual minister on a matter pertaining to
the Department under his charge or as the result of discussion at a meeting of
the Council of Minister or otherwise. This Rule requires that an executive
order issued from any department in the name of the Governor of the State
should be known to the Council of Ministers so as to fulfill the collective responsibility
of the Council of Ministers. Further Rule 7 of the Business Rules requires that
no Department shall without the concurrence of the Finance Department issue any
order which may involve any abandonment of revenue or involve expenditure for
which no provisions have been made in the Appropriation Act or involve any
grant of land or assignment of revenue or concession, grant, lease or licence
in respect of minerals or forest rights or rights to water, power or any
easement or privilege or otherwise have a financial implications whether
involving expenditure or not. From a combined reading of the provisions of
Rules 7, 3 and 6 of the Business Rules of the Government of Goa the 55
conclusion would be irresistible that any proposal which is likely to be
converted into a decision of the State Government involving expenditure or
abandonment of revenue for which there is no provision made in the
Appropriation Act or an issue which involves concession or otherwise has a
financial implication on the State is required to be processed only after the
concurrence of the Finance Department and cannot be finalized merely at the
level of the Minister in charge. The procedure or process does not stop at
this. After the concurrence of the Finance Department the proposal has to be
placed before the Council of Ministers and/or the Chief Minister and only after
a decision is taken in this regard that it will result in the Decision of the
State Government. Therefore the High Court has rightly rejected the arguments
of the appellants herein based on the judgment of the Full Bench of the High
Court. The High Court has observed, that the Rules of Business are framed in
such a manner that the mandate of the provisions of Articles 154, 163 and 166
of the Constitution are fulfilled. Therefore, if it is held that the non-
compliance of these Rules does not vitiate the decisions taken by an individual
Minister concerned alone the result would be disastrous. In a democratic set up
the decision of the State Government must reflect 56 the collective wisdom of
the Council of Ministers or at least that of the Chief Minister who heads the
Council. The fact that the decisions taken by the Minister alone were acted
upon by issuance of Notification will not render them decisions of the State Government
even if the State Government chose to remain silent for a sufficient period of
time or the Secretary concerned to the State Government did not take any action
under Rule 46 of the Business Rules. If every decision of an individual
Minister taken in breach of Rules are treated to be those of the State
Government within the meaning of Article 154 of the Constitution, the result
would be chaotic. The Chief Minister would remain a mere figure head and every
Minister will be free to act on his own by keeping the Business Rules at bay.
Further it would make it impossible to discharge the Constitutional
responsibility of the Chief Minister of advising the Governor under Article
163. Therefore, it is difficult to accept the contentions of the appellants that
Business Rules are directory.
54) We
also subscribe to and uphold the view of the High Court that the Business Rules
3,6,7 and 9 are Mandatory and not Directory and any decision taken by any
individual Minister in violation of them cannot be termed as the decision of
the State Government.
57 55) We
are fortified in our view by several decisions of this Court.
In K.K.
Bhalla vs. State of M.P., [2006 (3) SCC 581], the facts were that the State of
M.P. had allotted certain land under the Jabalpur Development Authority (JDA)
to a person at concessional rates to set up a newspaper printing press, though
the land was earmarked for commercial use. The Court held :
"The
purported policy decision adopted by the State as regards allotment of land to
the newspaper industries or other societies was not a decision taken by the
appropriate Ministry. If a direction was to be issued by the State to the JDA,
it was necessary to be done on proper application of mind by the cabinet, the
concerned Minister or by an authority who is empowered in that behalf in terms
of the Rules of the Executive Business framed under Article 166 of the
Constitution of India. Such a direction could not have been issued at the
instance of the Chief Minister or at the instance of any other officer alone
unless it is shown that they had such authority in terms of the Rules of the
Executive Business of the State. We have not been shown that the Chief Minister
was the appropriate authority to take a decision in this behalf."
(emphasis
supplied) 56) In State of U.P. vs. Neeraj Avasthi, [2006 (1) SCC 667], this
Court held that the power of the State Government was confined to 58 issuing
directions to State Agricultural Produce Market Board on the question of policy
and observed :
"Such
a decision on the part of the State Government must be taken in terms of the
Constitutional scheme, i.e., upon compliance of the requirement of Article 162
read with Article 166 of the Constitution of India. In the instant case, the
directions were purported to have been issued by an officer of the State. Such
directions were not shown to have been issued pursuant to any decision taken by
a competent authority in terms of the Rules of Executive Business of the State
framed under Article 166 of the Constitution of India. .... We are therefore of
the opinion that the direction by the State was not strictly in accordance with
law."
57) In
Gulabrao Keshavrao Patil (supra), this Court held that a decision of a Minister
was not an order of the Government in view of non-compliance with Article 166.
58) The
decision of the Constitution Bench in Chitralekha has been misinterpreted. In that
case this Court was considering a controversy in regard to an order which was
not expressed in the name of the Governor in terms of Article 166(1) and (2).
In that context, this Court observed that it is a settled law that the
provisions of Article 166 of the Constitution are only directory and not
mandatory in character. The context clearly shows that the observation that the
59 provisions of Article 166 of the Constitution are only directory and not
mandatory, referred only to clauses (1) and (2) of Article 166 and did not
refer to clause (3) which was not under consideration at all.
Chitralekha,
therefore, cannot be relied upon to support the contention that Business Rules
made under clause (3) of Article 166 are directory. We have earlier referred to
all the decisions on which reliance was placed by learned senior counsel Shri
F.S. Nariman. In our view, those decisions would not assist the appellant,
since they were all rendered in the context of interpretation of Article 166(1)
and (2) of the Constitution.
59) It is
appropriate to further consider some of the Business Rules to deal with the
issue brought before us. Though the High Court in the judgment impugned has
referred to various Rules, we deem it necessary to refer to only those which
are relevant for our purpose. Rule 10 of the Business Rule requires submission
of all cases referred to in the Schedule to the Chief Minister after
consideration by the Minister in charge so as to obtain the Chief Ministers'
orders for circulation of the case or to bring it up for consideration at a
meeting of the Council of Ministers. Rule 13 provides that when it is decided
to bring the case before the Council, the department concerned should, unless
otherwise 60 directed by the Chief Minister, prepare a memorandum indicating
precisely the salient facts of the case and points for decision and copies
thereof circulated to the Council by the Secretary. Rule 14 requires in a case
which involves or concerns more than one Department, the Minister by previous
discussion to arrive at an agreement and if such agreement is reached the
memorandum referred to in Rule 13 supra should contain the joint
recommendations of the Ministers and if no agreement is reached the points of
differences and views of each of the Minister should be stated in the
memorandum. Items No.5,9 & 30 in the Schedule to the Rules relate to
proposal which have a bearing on the Finances of the State and which do not
have the concurrence or consent of the Finance Minister's proposal involving
important change in the policy and practice; proposals to vary or reverse a
decision previously taken by the Council. Under Rule 16 the decisions of the
Council in each case should be recorded and placed with the records of the case
after their approval by the Chief Minister. Extracts of the decision should be
sent to the Secretary of the Department who should take necessary action
thereon. Rule 17 enables a Minister in Charge of a Department on the basis of
standing orders to give such directions as he thinks fit for disposal of cases
in his department and further requires the Secretary 61 of the Department
concerned to simultaneously submit to the Chief Minister and the Governor the
statement showing the particulars of any important cases disposed of by the
Minister. Rule 20 stipulates, that, when the subject involves or relates to
more than one Department, no order should be issued or the case be laid before
the council until the case has been considered by all the departments involved
or concerned, unless the case is one of extreme urgency. In the case on hand,
the decisions impugned involve and concern not only the department of power but
also the departments of Industries and Finance and in view of the provisions of
Rule 20, the decisions to finalize the Notifications at his level without
placing the proposal before the Chief Minister or the Council of Minister fell
out side the purview of the Power Minister.
60) The
State Government in exercise of its power conferred on it under Section 23 read
with Section 51-A of the Electricity Act issued a Notification dated
29.06.1993, published in the Official Gazette dated 30.06.1993, framing the
revised electricity tariff for the State as specified in the Schedule appended
to the Notification. By another Notification dated 6.12.1993, the State
Government for the first time created a new and separate category viz. Extra
High Tension Supply 62 Consumers and was included as item No. 10 in the revised
tariff framed under Notification dated 29.06.1993. Pursuant to the Notification
dated 6.12.1993, the power department took a stand that as the Notification
dated 30.09.1991 had covered only the Low Tension and High Tension Consumers of
electricity and not the Extra High Tension Consumers and the claims of the
Extra High tension consumers were rejected by specific orders passed in October
1995 i.e. after the Notification dated 31.03.1995, rescinding Notification
dated 30.09.1991 was issued and the orders rejecting their claims had become
final having not been challenged by the units. The State Government therefore
felt a need to issue certain clarifications to process the claims of the units
for grant of rebate of 25% for the period between 1.10.1991 to 31.03.1995.
While issuing such clarification involving additional financial burden on the
exchequer, the Government was required to process them in keeping with the
requirements of the Business Rules. When the Rescinding Notification dated
31.03.1995 was issued the rebate of 25% was available only to Low Tension and
High Tension consumers and the Extra High Tension Consumers got deleted
pursuant to the Notification dated 6.12.1993. A decision, therefore, to include
a new 63 category of consumers for grant of rebate which necessarily involved
extra financial burden on the State's finances more so by creation of a new
category retrospectively was required to be finalized only after it was placed
before the Council of Ministers or the Chief Minister in addition to obtaining
the previous concurrence of the Finance and Industries Departments. The
Notification dated 15.5.1996 which was argued by the appellants herein to be
only clarificatory had imposed an additional burden on the State's Exchequer by
introducing a new class of consumers for grant of rebate retrospectively and it
was finalized by the Power Minister at his level. In law the proposal for the
decision leading to the Notification dated 15.5.1996 should have been placed
before the Council of Ministers or the Chief Minister and since the same has
not been done it is in violation of the Business Rules and hence the decision
is non est. Even for the sake of arguments if it is assumed that the
Notification dated 15.5.1996 was c1arificatory in nature the same violates Rule
19 of the Business Rules and there is nothing on record, as observed by the
High Court to show that the department concerned attempted to seek ratification
of the decision taken by the Power Minister before the Notification dated
15.5.1996 was issued.
64 61) At
this stage, we find it necessary to refer to some of the Constitutional
provisions to deal with the issue raised by the appellants. Under Article 154
of the Constitution of India, the Governor is vested with the Executive Power
of the State and he shall exercise them either directly or through Officers
subordinate to him in accordance with the provisions of the Constitution. The
Governor is advised by the Council of Ministers with the Chief Minister at its
head in exercise of his functions except those specifically stated in discharge
of his functions as the head of the State. The Council of Minister is
collectively responsible to the Legislative Assembly of the State. The Rules of
business framed under Article 166(3) of the Constitution are for convenient
transaction of the business of the Government and for allocation of the
business among the Ministers.
Article
166(2) of the Constitution requires the decision of the State Government to be
authenticated as per the Rules framed there under.
Any
decision taken by the State Government therefore, reflects the collective responsibility
of the Council of Ministers and their participation in such decision making
process. The Chief Minister as the Head of the Council of Ministers is
answerable not only to the Legislature but also to the Governor of the State.
The Governor of the 65 State as the Head of the State acts with the aid and
advice of the Council of Ministers headed by the Chief Minister. The Rules
framed under Article 166 (3) of the Constitution are in aid to fulfill the
Constitutional Mandate embodied in Chapter II, Part III of the Constitution.
Therefore, the decision of the State Government must meet the requirement of
these Rules also.
62)
Before the High Court as also before us it was contended by the appellants
herein, that, the Rules framed under Article 166(3) are only directory in
character and failure to comply with them does not vitiate the decision taken
by the State Government. The High Court after considering the various judgments
cited before it has repelled the said contention to hold that the said Rules
are mandatory and non- compliance thereof would be disastrous. The reasoning
adopted by the High Court to arrive at such a conclusion is sound and in
accordance with the constitutional mandate. The decisions of the State
Government have to be in conformity with the mandate of Article 154 an 166 of
the Constitution as also the Rules framed thereunder as otherwise such decision
would not have the form of a Government decision and will be a nullity. The
Rules of Business framed under Article 166(3) of the Constitution are for
convenient transaction of the 66 business of the Government and the said
business has to be transacted in a just and fit manner in keeping with the said
Business Rules and as per the requirement of Article 154 of the Constitution.
Therefore, if the Council of Ministers or Chief Minister has not been a party
to a decision taken by an Individual Minister, that decision cannot be the
decision of the State Government and it would be non-est and void ab initio.
This conclusion draws support from the Judgment of this Court in the case of in
the said case was dealing with the Business Rules of the State Of Bihar framed
under Article 166 (3) of the Constitution of India and the observations of this
Court on the issue apply to the case on hand in all force. This Court observed:
"
14. Where a prescription relates to performance of a public duty and invalidate
acts done in neglect of them would work serious general inconvenience or
injustice to persons who have no control over those entrusted with the duty,
such prescription is generally understood as mere instruction for the guidance
of those upon whom the duty is imposed.
15. Where
however, a power of authority is conferred with a direction that certain
regulation or formality shall be complied with, it seems neither unjust nor
incorrect to exact a rigorous observance of it as essential to the acquisition
of the right or authority.
16.
Further, Rule 10(2) makes it clear that where prior consultation with the
Finance Department is required for a proposal, and the department on
consultation does not agree to the proposal, the department originating the
proposal can take no further action on the proposal. The Cabinet alone would be
competent to take a decision. When we see that the disagreement of the Finance
Department with a proposal on consultation, deprives the Department originating
the proposal of the power to take further action on it, the only conclusion
possible is that prior consultation is an essential prerequisite to the
exercise of power".
63) As
observed by us earlier, these observations apply equally to the case on hand
and in light of this view, we have no difficulty in holding that the Business
Rules framed under the Provisions of Article 166 (3) of the Constitution are
mandatory and must be strictly adhered. Any decision by the Government in
breach of these Rules will be a nullity in the eyes of law.
64) It is
in this legal background that the issues raised before us have to be dealt
with. The High Court has examined the files placed before it by the State
Government and noted the facts reflected by the said records. As recorded by
the High Court, the rebate of 25% in power tariff was sought to be withdrawn by
the State Government with effect from 1.4.1995 pursuant to a Cabinet meeting
held on 21.07.1994 and a 68 Notification dated 31.03.1995 was issued there for.
The 1st respondent's motion in the State Assembly for a Calling Attention
Notice evidently moved the State Government to evolve a Scheme for grant of
rebate of 25% for the period between 1.10.1991 to 31.03.1995. The Power
Minister therefore, on 08.07.1995 called upon the Chief Electrical Engineer to
formulate such a scheme who prepared accordingly a note regarding the proposed
scheme. Since the earlier Notification was rescinded by the Notification dated
31.03.1995, a clarification was sought from the Law Department on the extension
of the period of rebate of 25%. On 25.08.1995, a note was put up by the Law
Department indicating that the 25% rebate would be available only for the
period between 01.10.1991 to 31.03.1995 and industrial units supplied with
power on/or after 31.03.1995 would not be entitled for the same. On 14.02.1996,
the Chief Electrical Engineer submitted a note containing a proposal to amend
the rebate notification requesting to extend the benefit of the rebate of 25%
to Extra High Tension consumers and sought approval thereof. The said draft
when referred to the Law Department for its opinion, it was opined thereon that
it was legally impermissible to give retrospective effect to the proposed
Notification. However, though the said amendment was approved by 69 the then
power minister, the same was not given effect to in view of the elections
scheduled on 02.05.1996. On 03.05.1996, the Power Minister passed an order to
issue the amendment Notification as by then the elections were over and the
notification dated 15.05.1996 was accordingly issued, though the subject matter
was never placed before the Council of Ministers or the Chief Minister. The
Notification was issued solely on the directions of the Power Minister despite
the opinion of the Law Secretary that retrospective effect to the proposed
amendment could not be given as it involved additional class of consumers of
power, which is in violation of the Business Rules of Government of Goa.
Therefore the said Notification is unsustainable and the High Court has rightly
held it be non-est and as void ab initio.
65) The
Power Department once again took up the subject of re- introduction of 25% of
rebate in power tariff at the instance of the Industries Department and in view
of the continued demands from the Industrial Units for such a rebate. This was
considered by the Power department and proposal therefor was called from the
Chief Electrical Engineer. A query was also raised regarding the role of the
Industries and Electricity Departments in issuing the eligibility certificates.
A note dated 25.07.1996 submitted by the Chief Electrical Engineer indicated 70
that such certificates shall be issued by the Electricity Department as it was
that Department which was giving the subsidy. Thereafter the Commissioner and
Secretary (Power) submitted a detailed note on 30.07.1996 to the Minister of
Power and the latter conveyed his approval with the substitution of words "all
industrial units who apply for availing power on or after 1.10.1991" with
the words "all industrial units who apply or avail on or after
10.01.1991" and the rebate was to be given on the energy charges on the
prevailing tariff from time to time as against the earlier Notification where
the rebate of 25% was to be given on tariff as per Notification dated
27.06.1988. As per the decision/approval of the Power Minister, the
Notification dated 1.08.1996 came to be issued without there being any
consultation with the Council of Ministers or without the proposal being placed
before it or the Chief Minister or without the consultation with the Finance
Department, though the draft of the notification was referred to the Law
Department before its issuance.
66) It is
also to be noted that by the Notification dated 01.08.1996 the State Government
intended to re-introduce the benefit of 25% rebate in power tariff. If the
State Government as a policy decision desired to re- introduce the said rebate,
it was imperative that the said decision 71 complied with the requirement of a
Government decision and that it did not remain a Departmental Order or
Instruction. The High Court has recorded after verifying the notes on record
that the re-introduction of rebate was initiated at the instance of Industries
Department and that the proposal for re-introduction attracted the provisions
of Rules 9 & 10 of the Business Rules and it did not seek the concurrence
of the Finance Department. From the file produced before it the High Court has
found that the decision was finalized by the Power Minister at his level
without any reference to the Council of Ministers or the Chief Minister. The
High Court has also referred to the Statement in writing given by the Chief
Minister to the Investigating Officer during the course of investigation
launched pursuant to the complaint given by the 1st respondent, that the Power
Minister at no point of time had placed the proposal regarding decisions dated
15.5.1996 and 1.8.1996. This apart, from the records the High Court finds that
the agency to certify the eligibility of industrial units for concessional
tariff was yet to be identified and the issue whether the rebate for the period
between 01.10.1991 to 31.03.1995 was to be made available as per the Notification
dated 27.6.1988 or with reference to the tariff prevailing from time to time.
The Note dated 8.7.1996 is referred to by the High 72 Court. The High Court
also refers to the reply of the Electrical Engineer dated 10.7.1996 wherein it
was clarified that only the prospective industrial consumers who has applied
and availed power supply on or after 1.10.1991 were eligible for concession.
From the note of the Commissioner and Secretary, Department of Power dated
30.7.1996 the High Court records that the certification/ verification of the
industrial units could be done by the Electricity Department as the concession
was to be extended by the said department to the consumers. The said note
refers to the meetings held in the chamber of Minister of Power. The Note also
mentions about a constitution of a Screening Committee consisting of the
Secretary of Ministry of Power, the Chief Electrical Engineer, Director of
Industries and Joint Secretary, Finance, to ensure that only genuine and bona
fide claims are entertained and paid the rebate and also examine and verify all
doubtful claims. The Note also refers to a decision taken in one of such
meetings to the effect that rebate should be given to units on energy charges
only as per the prevailing tariff in force from time to time on which they are
billed for a period of five years on the recommendations made by the Chief
Electrical Engineer. The recommendations and/or the decisions did have bearing
on the finances of the State Government and also amounted to change in 73
policy decisions. Even then neither did the Minister of Power think it is
proper and appropriate to place the proposals before the Council of Ministers
or the Chief Minister, nor did the Secretary concerned deemed it appropriate to
do so. The proposals were finalized by the Power Minister at his level as per
the modifications suggested by him on 30.7.1996 which in our opinion are in
violation of the Business Rules.
67) The
High Court has perused the files relating to the issue and from them it has
noticed that the file was forwarded to the Development Commissioner on or about
17.03.1998 as they were required for preparation of reply to a question in the
Assembly and the Commissioner on 25.03.1998 submitted a note referring to the
complaint filed by 1st respondent herein alleging illegalities and corruption
in the matter of grant of rebate. The complaint of the 1st respondent was about
the amendment of the Notification dated 31.09.1991 which had been rescinded by
the Notification dated 31.3.1995 and he had alleged that the amendment was made
with a mala fide intention of including a specific category of consumer and the
amending notification had led to manipulation of records to the extent that
some people had attempted to become beneficiaries of the Scheme within the
notified period of 01.10.1991 and 31.03.1995. The note of the Commissioner 74
raised certain issues relating to grant of rebate to industrial units after
31.03.1995. As per the objections raised in the note the cases of units which
had applied for power but could not be supplied with power by 31.03.1995 were
to be referred to the State Government. However, it was later decided to leave
it to the Chief Electrical Engineer to allow release of said subsidy to all
such units. The Note of the Commissioner had also raised an issue touching upon
the number of industrial units entitled to subsidy and the liability per month
on that count and fixed the same at Rs 80 lakhs per month and opined that the
total amount of the subsidy by way of adjustment of bills would be in excess of
Rs. 50 Crores. Having regard to these aspects the note suggested suspension of
the rebate scheme immediately until the legal issues were sorted out. On
03.04.1998, the Joint Law Secretary gave his clarification after examining the
matter in the light of the provisions of the Electricity Act and opined that a
Cabinet Decision was necessary for suspension of the rebate scheme and that
before the notification dated 01.08.1996 was issued it required a decision of
the cabinet and the concurrence of the Finance Department as it fell within the
meaning of a policy decision involving financial implications. The note in
conclusion said that the Notification dated 75 01.08.1996 was not in accordance
with law and this conclusion was agreed to by the Law Secretary. The
Development Commissioner further felt that the in view of this lacuna in the
Notification dated 1.08.1996, the matter required a review by the Cabinet and
that it should be taken to the Cabinet for its ratification or otherwise. The
note of the Commissioner was placed before the Power Minister as the Chief
Secretary was away on tour and the Power Minister directed the matter to be
placed before the Cabinet and also directed the files of the Finance &
Industries Department on the subject to be placed before the Chief Minister for
his perusal. The file was placed before the Chief Minister on 27.05.1998 for
his perusal who thereafter called for the opinion of the Finance Department and
on the same day the Finance Secretary submitted the opinion of the Finance
Department and the next day the matter was placed before the Cabinet.
Ultimately the State Government took a decision to withdraw the benefit of
rebate and issued the Notification dated 24.07.1998. This apart the material placed
by the 1st respondent herein also indicated that there was an attempt to ratify
the notification date 1.08.1996 and the same could have been done but for the
legal hurdle and the State Government realized the legal hurdles in continuing
with the rebate scheme on the basis of the Notification dated 76 01.08.1996. We
fail to understand as to why the State Government did not bring these facts
before this Court or the High Court in the earlier round of litigation where
its power to withdraw the subsidy in exercise of its power under Section 21 of
the General Clauses Act was upheld.
Instead
it chose to plead financial crunch faced by the State Government as the reason
for withdrawal of rebate. It is further to be noted with regard to the
Notification dated 01.08.1996, that it re-introduced the benefit of rebate on
tariff and made it available to units on the prevailing tariff in force from
time to time at which the units were billed for a period of five years from the
date of supply of power was made available to them and who had applied or
availed power supply on or after 01.10.1991. The notification dated 30.09.1991
on the other hand made available the rebate on the basis of tariff set out in
the Notification dated 27.06.19888 and to Low and High Tension Power consumers
who had applied for supply of power and were given power supply on or after
01.10.1991. The Notification dated 01.08.1996, it is seen, extended the scope
of benefit of rebate as compared to the Notification dated 30.09.1991 which had
been rescinded by the Notification dated 31.03.1995. It is on record and we
notice from the judgment of the High Court that the State Government had paid
as a result of the Notification 77 dated 01.08.1996 a sum or Rs. 8 crores in
excess as compared to the benefit available under the Notification of 1991 and
the total amount of rebate would have been more than 30 crores had the benefit
as made available by the 1996 Notification been continued.
68) Thus
from the foregoing, it is clear that a decision to be the decision of the
Government must satisfy the requirements of the Business Rules framed by the
State Government under the provisions of Article 166(3) of the Constitution of
India. In the case on hand, as have been noticed by us and the High Court, the
decisions leading to the notifications do not comply with the requirements of
Business Rules framed by the Government of Goa under the provisions of Article
166(3) of the Constitution and the Notifications are the result of the decision
taken by the Power Minister at his level. The decision of the individual
Minister cannot be treated as the decision of the State Government and the
Notifications issued as a result of the decision of the individual Minister
which are in violation of the Business Rules are void ab initio and all actions
consequent thereto are null and void.
69) The
appellants contended before this court that another Division Bench of the High
Court in its earlier judgment of 21.1.1999 78 had held that the Notification
dated 1.8.1996 was clarificatory and that it did not create any extra financial
liability on the State Government requiring approval of the Cabinet in
compliance with the Business Rules before it was brought into force. In our
opinion the said Notification cannot be treated as mere c1arificatory. It is a
notification issued purportedly in terms of a Government decision. It was a
decision finalized at the level of the Minister of Power alone and was taken in
violation of the Rules of Business framed under Article 166(3) of the
Constitution of India. The decision cannot be called a government decision as
understood under Article 154 of the Constitution, though it may satisfy the
requirements of authentication. Nevertheless mere authentication as required
under Article 166(2) of the Constitution did not make it a government decision
in law nor would it validate a decision which is void ab initio. The validity
of the notification will have to be tested with reference to the constitutional
provisions and Business rules and not by their form or substance. Therefore,
this contention of the appellants is liable to be rejected.
70) The
learned senior counsel Shri F.S. Nariman submitted that the doctrine of indoor
management drawn from private law would apply 79 analogously in the facts and
circumstances of this case. In response to this submission, the learned senior
counsel Dr. Rajeev Dhavan would submit that the concept of private law is not
readily applicable in public law. It is further submitted that often private
law and public law concepts are similar in name and text but needs to be
differentiated.
Reference
is made to the observations of this Court in Shrisht Dhawan "20.....But
fraud in public law is not the same as fraud in private law. Nor can the
ingredients which establish fraud in commercial transaction be of assistance in
determining fraud in Administrative Law. It has been aptly observed by Lord
Bridge in Khawaja that it is dangerous to introduce maxims of common law as to
effect of fraud while determining fraud in relation to statutory law."
71) The
doctrine of indoor management is also known as the Turquand rule after the case
of Royal British Bank v. Turquand, [1856] 6 E. & B. 327. In this case, the
directors of a company had issued a bond to Turquand. They had the power under
the articles to issue such bond provided they were authorized by a resolution
passed by the shareholders at a general meeting of the company. But no such resolution
was passed by the company. It was held that Turquand could recover the amount
of the bond from the company on the ground that he was entitled to assume 80
that the resolution was passed. The doctrine of indoor management is in direct
contrast to the doctrine or rule of constructive notice, which is essentially a
presumption operating in favour of the company against the outsider. It
prevents the outsider from alleging that he did not know that the constitution
of the company rendered a particular act or a particular delegation of
authority ultra vires. The doctrine of indoor management is an exception to the
rule of constructive notice. It imposes an important limitation on the doctrine
of constructive notice. According to this doctrine, persons dealing with the
company are entitled to presume that internal requirements prescribed in
memorandum and articles have been properly observed. Therefore doctrine of
indoor management protects outsiders dealing or contracting with a company,
whereas doctrine of constructive notice protects the insiders of a company or
corporation against dealings with the outsiders. However suspicion of
irregularity has been widely recognized as an exception to the doctrine of
indoor management. The protection of the doctrine is not available where the
circumstances surrounding the contract are suspicious and therefore invite
inquiry.
72) This
exception was highlighted in the English case of J.C Houghton& Co. v.
Nothard, Lowe & Wills Ltd, [1927] 1 KB 246 (CA) 81 where the case involved
an agreement between fruit brokers and fruit importing company. There was an
allegation that the agreement was entered into by the company's directors
without authority. It was held that the nature of transaction was found to have
been such as to put the plaintiffs on inquiry. To this effect Lord Justice
Sargant held:- "Cases where the question has been as to the exact
formalities observed when the seal of a company has been affixed, such as Royal
British Bank v.
Turquand,
6 E. & B. 327, or the County of Gloucester Blank v. Rudry Merthyr, &c.,
Co., [1895] 1 Ch 629, are quite distinguishable from the present case. In re
Fireproof Doors, Ltd., sup., tends rather against than in favour of the
plaintiffs, since if a single director has as towards third parties the
authority now contended for, the whole of the elaborate investigation of the
facts in that case was entirely unnecessary. Perhaps the nearest approach to
the present case is to be found in Biggerstaff v. Rowlatt's Wharf, [1896] 2 Ch.
93.
But there
the agent whose authority was relied on had been acting to the knowledge of the
company as a managing director, and the act done was one within the ordinary
ambit of the powers of a managing director in the transaction of the company's
affairs. It is, I think, clear that the transaction there would not have been
supported had it not been in this ordinary course or had the agent been acting
merely as one of the ordinary directors of the company. I know of no case in
which an ordinary director, acting without authority in fact, has been held
capable of binding a company by a contract with a third party, merely on the
ground that that third party assumed that the director had been given authority
by the Board to make the contract. A limitation of the right to 82 make such an
assumption is expressed in Buckley on the Companies Acts, 10th Edition, at p.
175, in the following concise words: -- And the principle does not apply to the
case where an agent of the company has done something beyond any authority which
was given to him, or which he was held out as having."
73) This
exception to the doctrine of indoor management has been subsequently adopted in
many Indian cases. They are B. Anand Behari Lal v. Dinshaw and Co. (Bankers)
Ltd, AIR 1942 Oudh 417 and Abdul Rehman Khan & Anr. v. Muffasal Bank Ltd.
and Ors, AIR 1926 All 497.
Applying
the exception to the present scenario, there is sufficient doubt with regard to
the conduct of the Power Minister in issuing the Notifications dated 15.5.1996
and 01.08.1996. Therefore there is definite suspicion of irregularity which
renders the doctrine of indoor management inapplicable to the present case.
74) It
was also argued by the learned senior counsel for the appellant, that the
Notification dated 01.08.1996 was rescinded by Notification dated 24.07.1998
and, therefore, there was no need for the High Court to adjudicate upon the
impugned Notification dated 01.08.1996 and, should have dismissed the writ
petition filed by way of public interest as having become infructuous. This
issue need not detain us for long in view of 83 our answer to the issue of
"Doctrine of Merger" canvassed by learned senior counsel.
75)
Arguments have been advanced before us based on the principles of res judicata,
Doctrine of Estoppel and the principles underlining the provisions of Order II
Rule 2 of the Code of Civil Procedure that the High Court in earlier batch of
writ petitions has gone into and given findings with regard to the
Notifications dated 30.9.1991; 31.3.1995;
15.5.1996;
1.8.1996 and 24.7.1998 and the judgment of the High Court dated 21.1.1999
rendered therein had merged with the order of the Supreme Court dated 13.2.2001
and the Notifications questioned in the present round of litigation are
Notifications dated 15.5.1996 and 1.8.1996 and the State at no point of time
before any Court having raised the issue of these two Notifications being void
ab initio for want of compliance with the provisions of the Business Rules
framed under Article 166(3) of the Constitution of India, the High Court ought
to have rejected the plea of the State Government that the Notifications were
illegal or were in violation of the Rules of Business and dismissed the Writ
Petition on the principles of res judicata, Doctrine of Estoppel and the principles
embodied in Order II Rule 2 of the Code of Civil 84 Procedure. It was urged
that the State not having raised this at any point of time before any court
should not be allowed to do so. We do not find any merit in these contentions.
As noticed by us earlier in the judgment, the issue regarding the validity or
legality of the Notifications dated 15.5.1996 and 1.8.1996 was never raised in
the earlier batch of writ petitions before the High Court and the High Court
never had an opportunity or occasion to look into, consider and pronounce upon
the validity of the same with reference to the Business Rules framed under
Article 166 (3) of the Constitution. These principles pressed into service by
the appellants cannot operate against the State Government merely because the
State did not agitate either before the High Court or this Court the legality
or validity of these notification in the earlier round of litigation when it
had an occasion to do so and the State Government cannot be deemed to have
accepted the legality of the Notification and waived its objection or challenge
thereto. The Doctrine of Estoppel therefore has no application at all more so,
in view of the illegality the notifications dated 15.05.1996 and 01.08.1996
suffer from in view of their non-compliance with the provisions of the Business
Rules. In our opinion the fact that the State Government did not raise these
objections in the earlier batch of Writ Ptitions does not disentitle it to such
a stand 85 or prevents it from raising its objections based on legal
provisions. This contention of the appellants requires to be turned down for
yet another reason in that the 1st respondent herein was not a party to the
earlier batch of Writ Petitions before the High Court or this Court. Therefore
the principles of res judicata or for that matter even the Doctrine of Estoppel
will not apply to or operate against him. Further the contention that the
Notification dated 1.8.1996 did not create any additional financial liability
on the State Government warranting approval by the Cabinet or the compliance of
the Business Rules before it was brought into effect deserves to be rejected
having regard to the figures placed on record which the High Court has noticed
in its judgment. These figures of additional liability likely to be brought on
the State by Notification dated 1.8.1996 falsify the statement of the
appellants. Therefore the same deserves to be rejected.
76)
Before parting with these appeals, we make it clear that the observations made
by us in the course of our judgment is only for the purpose of disposing of
these appeals and shall not be treated as an expression on the conduct of the
then the Power Minister.
86 77)
The Appellants have not been able to show any infirmity or illegality in the
order of the High Court warranting our interference. In the result, civil
appeals are dismissed. Parties are directed to bear their own costs.
....................................J.
[ R.V. RAVEENDRAN ]
....................................J.
[ H.L. DATTU ]
New
Delhi,
May 03,
2010.
87
REPORTABLE IN THE SUPREME COURT OF INDIA CIVIL ORIGINAL JURISDICTION WRIT
PETITION ) NO.200 OF 2002 Goa Glass Fibre Ltd. ........ Petitioner Versus State
of Goa and Anr. ........ Respondents WITH
WRIT PETITION ) NO.199 OF 2002 M.R.F. Ltd. ........ Petitioner Versus State of
Goa and Anr. ........ Respondents
H.L.
Dattu,J.
The above
writ petitions are filed under Article 32 of the Constitution of India, inter
alia calling in question the vires and 88 Constitutional validity of "The
Goa (Prohibition of Further Payment and Recovery of Rebate Benefits) Act, 2002
(hereinafter referred to as `the Act') enacted by the Legislature of the State
of Goa. The petitioners seek a declaration from this court that the Act is
ultra vires of the Constitution of India and in the alternative seek a limited
declaration that Sections 2,3,5 and 6 of the Act are unconstitutional and
liable to be struck down.
2) The
Act is attacked as unconstitutional mainly on the following grounds:
7 That it
seeks to nullify a judgment of this Court dated 13.02.2001 affirming the view
taken by High Court of Bombay Goa Bench, in its judgment dated 21.01.1999.
7 That it
seeks to give effect to the decision of the High Court of Bombay dated 19/24th
April 2001, which judgment has the effect of over ruling the judgment of this
Court dated 13.02.2001.
7 That it
seeks to give effect to the judgment of High Court of Bombay Panaji Bench,
dated 19/24th April 2001, when the said judgment is the subject matter of
appeal before this Court in several Special Leave Petitions and thus seeks to
frustrate the 89 rights of the petitioners herein under Article 136 of the
Constitution of India.
7 That it
seeks to take away the fundamental rights guaranteed to the petitioners under
Article 14 and 19(1)(g) of the Constitution of India.
7 That it
is contrary to plethora of judgments of this Court.
7 That as
an Explanatory Memorandum and the Statement of Objects and Reasons of the Act
relies upon the decision of the High Court of Bombay Panaji Bench, rendered on
19/24th April 2001 which held the Notifications dated 15.5.1996 and 1.8.1996
were issued without complying with the requirements of Article 166 (3) of the
Constitution of India, when the very judgment is under appeal before this Court
and the State without getting a Judgment rendered by this Court and frustrating
adjudication by this Court has passed the Act impugned.
7 That
the Act does not seek to validate any action which has been held to be invalid
by any Court of Law, but only seeks to nullify the judgment of this Court
[under Section 2 of the Act].
90 7 That
the Act under Section 3 gives power to the State to recover rebate already
given to consumer like petitioners, which grant has already been upheld by the
High Court by its judgment dated 21.1.1999 and affirmed by this Court by its
judgment dated 13.2.2001.
7 That
the Act is unconstitutional because of non-application of mind, as Section 5
thereof speaks of consequences of non- refund and Section 2 which prohibits
further payments.
7 That
the Act seeks to nullify a judgment of this Court and to give effect to
judgment of High Court which has the effect of overruling the judgment of this
Court, inasmuch as, the law of validation as settled by this Court in a catena
of decisions stipulates that the Legislature is not competent to nullify a
judgment of a Court of competent jurisdiction except where the judgment is
rendered by a Court of law on the basis of any invalidity or illegality in the
Act because of which the Statute or Act is declared invalid, in which event the
Legislature is Competent to enact a validating Act by removing the basis of
that invalidity or illegality in the earlier Statute. If the 91 Legislature
chooses to enact a law only for the purpose of nullifying a judgment that the
same is impermissible.
3) The
respondent - State of Goa has joined issues with petitioners and has filed a
detailed Counter-Affidavit, inter alia, in support of the constitutionality of
the impugned Act.
4) The
State in its Counter-Affidavit after setting out the factual background leading
to the issue of the Notifications dated 15.05.1996 and 01.08.1996 and the
filing of Writ Petition No. 316 of 1998 and the judgment of the High Court of
Bombay Panaji Bench therein, has contended, that, the State deemed it expedient
not only to prohibit any further payment under the said Notification, but also
deemed it expedient to recover the benefits already availed of by certain
consumers including the petitioners in terms of the earlier Notifications,
having regard to the fact that the action in issuing the notifications was
unauthorized and wholly illegal and that the parties could not be allowed to
reap the benefits of an illegal act. It is stated by the respondent State,
that, with this intent and object, the State Assembly passed the Bill known as
Goa (Prohibition of Further Payments and Recovery of Rebate Benefits) Bill
2002, which was introduced in the House on 16.01.2002.
92 5)
With reference to the principal contention of the petitioners that the Act impugned
is unconstitutional and it seeks to nullify the judgment of this Court in G.R.
Ispat's case, the State contends that the Act impugned is constitutionally
valid and has been passed by the Legislature keeping in view the objects behind
the Bill; that even assuming but not admitting in any manner that the impugned
Act nullifies the judgment of this Court, the Legislature under the
Constitution of India has the power to enact a law which may result in
nullifying the Judgment or Order passed by the Courts, if the public interest
and public welfare demands the Legislature to exercise its legislative power
within the constitutional parameters as held by this Court in various
pronouncements on the issue.
6) It is
further stated that what is sought to be achieved by the impugned Act is to
declare that the two notifications dated 15.05.1996 and 01.08.1996 as illegal,
unauthorized, and to prohibit any further payments thereunder, in order to save
public exchequer from getting denuded of its coffers. It is further stated,
that, the decision of the State Government to issue Notifications mentioned
above was not authorized by law in as much as the Council of Ministers had
rescinded the Notification and despite this, the Power Minister himself had
issued a Notification at his own level without making a reference to either the
Chief Minster or the 93 Council of Ministers or consulting the Finance
Department as mandatorily required under the Rules of Business. The decision of
the then Minister for Power to issue the Notifications was wholly unauthorized
as he had no authority in law to issue them at his level and as the subject
matter was required to be placed before the Cabinet in view of the huge
financial implication involved therein and in view of the fact that the Cabinet
had earlier rescinded the Notification giving rebate and any modification or
variation of such decision of the Council of Ministers, it had to place it
before the Council of Ministers in view of the Business Rules framed under
Article 166 (3) of the Constitution of India.
The two
notifications had imposed a heavy burden on the State Exchequer and under the
Rules Of Business, concurrence of Finance Department of the State Government
was mandatory and there was neither concurrence of the said Department nor was
there any reference of the said Notifications to the said Department. The then
Power Minister had made a note on the file concerned that he had consulted the
Chief Minister which was found to be false as per the police investigation
conducted and that the then Chief Minister had clearly stated that neither he
was ever consulted by the Power Minister nor was the file ever shown to him and
that this fact was taken note of by the High Court of Bombay 94 Panaji Bench in
its Judgment dated 19/24.04.2001 in Writ Petition No. 316 of 1998, which is
appealed against and pending in SLP (Civil) No. 4233 of 2001 before this Court.
7) The
State also contends, that, the impugned Act is not aimed at giving effect to
the Order of the High Court of Bombay dated 19/24.04.2001 in W.P No.316 of 1998
nor is it passed because the abovementioned Special Leave Petition is pending
before this Court, but has been passed and aimed to save the coffers of the
State and to prevent further abuse and payment out of the State Funds which the
State can ill afford. The State had lost almost an amount of about Rs.16 Crores
and a further sum of Rs.50 Crores of public money might have to be paid and
there was neither any budgetary allocation nor any provision made for such
payments and therefore instead of the monies coming into the State Exchequer by
way of receipts by Government in accordance with Article 266 (1) of the
Constitution of India, these payments were sought to be diverted to the private
industrialists by virtue of the two notifications mentioned above and with a
view to put an end to this illegality the impugned Act has been enacted in the
larger public interest to safe the Public Exchequer from being drained off.
95 8) The
State also contends, that, this Court and the High Court in the earlier round
of litigation have dealt with and interpreted the rights of the Consumer to be
paid the rebate on electricity tariff in view of the two notification being in
force and not their validity and that such benefits could not be withdrawn by a
mere administrative circular. In fact what was challenged in those writ
petitions was the administrative order of the Chief Electrical Engineer dated
31.03.1998 and that the High Court held in those writ petitions that the two
notifications could not be withdrawn by a mere administrative Order and it was
on that basis, the High Court had sustained those two notifications. Now what
is sought to be done by the present legislation, it is contended by the State,
to cure the defect of any kind and thereby to ensure that public funds are not
drained by resorting to dubious methods and it is in larger public interest
that this Act is enacted.
9) It is
reiterated by the State, that, the State of Goa is facing financial crunch and
it is not possible for the State Government to bear such financial burden and
therefore it is imperative that the amounts paid are recovered and further loss
of public funds avoided and its payment prohibited and that it is on this
ground that the legislation impugned has been enacted.
96 10)
The State reiterates that there is nothing illegal about the impugned
legislation and that the same has been passed in the larger public interest and
with a view to sub serve the pubic cause and to prevent abuse of public
exchequer and to remedy the fraud played by an individual Minister on the
public exchequer. It is further urged by the State Government that the balance
of interest is in favour of the State as the petitioners on their own showing
have become the beneficiaries of an illegal act of an individual Minister which
cannot be allowed.
11) The
State further asserts in response to the challenge made by the petitioners to
the validity of the Act, that, it is a well settled law that the legislature
can render the judicial decision ineffective by enacting a valid law on the
subject within its legislative field by removing the base on which the decision
was rendered and that the impugned Act squarely meets and satisfies the
Constitutional Test and parameters laid down by this Court in various judgments
and as illustration have referred to the reported in AIR 1997 Supreme Court
3127 and Indian Aluminium & by the State, that, the State Legislature is
competent to enact the Act 97 impugned under Entry 38 of List III to the VIIth
Schedule of the Constitution of India.
12) The
petitioner has filed a rejoinder which reiterates more or less what is stated
in the Writ Petition. In short, in the rejoinder the petitioner seeks to
counter the reason and other grounds offered by the State Government in support
of the Legislation impugned. It also disputes the correctness of certain
statements made by the State Government in its affidavit in reply to the Writ
Petition.
13) We
have heard learned senior counsel Shri F.S. Nariman for the petitioners and Dr.
Rajeev Dhavan and Shri Shyam Diwan, learned senior counsel for State of Goa. We
also had the advantage of going through several rulings of this court cited by
the learned counsels.
14) The
Act impugned is attacked principally on the ground, that, it seeks to nullify a
judgment of this Court dated 13.02.2001, affirming the view taken by High Court
of Bombay Panaji Bench, in its judgment dated 21.01.1999 and that it seeks to
give effect to the decision of the High Court of Bombay dated 19/24th April 2001,
which judgment has the effect of over ruling the judgment of this Court dated
13.02.2001, more so when the said judgment is the subject matter of appeal
before this Court in 98 several Special Leave Petitions and thus seeks to
frustrate the rights of the petitioners herein under Article 136 of the
Constitution of India.
15) It is
well settled that a Statute can be invalidated or held unconstitutional on
limited grounds viz., on the ground of the incompetence of the Legislature
which enacts it and on the ground that it breaches or violates any of the
fundamental rights or other Constitutional Rights and on no other grounds. (See
State of A.P. vs. McDowell and Co., [(1996) 3 SCC 709], Kuldip Nayar vs. Union
of India and Ors., [(2006) 7 SCC 1].
16) The scheme
of the Act appears to be simple. The Act imposes a Prohibition [under Section
2], requires recovery [under Section 3] and "extinguishes" all
liabilities of the State that accrue or arise from the Notifications dated
15.05.1996 and 01.08.1996.
17) From
the language of the Act it becomes clear that the Act is not influenced by the
out come of the Judgment of the High Court in Manohar Parrikar's case. By the
enactment, the Legislature has imposed prohibition of further payments under
the Notifications, provides for recovery of rebate benefits from the
beneficiaries and extinguishes the State's Liability under the Notifications
mentioned supra. This exercise by the Legislature is independent of and de hors
the results of the PIL of 99 Manohar Parrikar and can be said to be
uninfluenced by the said judgment. It was well within the Legislative power of
the State to respond to the undisputed and disturbing facts which had enormous
financial implication on the State's Finances to enact the Law with an object of
remedying the unsatisfactory state of affairs which were known to the
Legislature.
18) That
the object of the Act is not to undo or reverse the judgments of either this
Court or that of the High Court. On a reading of the Act as a whole, it does
not appear that the Legislature seeks to undo any judgment or any directions
contained therein. As observed earlier the Act imposes a Prohibition [under
Section 2], requires recovery [under Section 3] and "extinguishes"
all liabilities of the State that accrue or arise from the Notifications dated
15.05.1996 and 01.08.1996. Therefore, no exception can be taken to the
constitutionality of the Act impugned, on the ground, that it seeks to undo or
reverse any judgment. The Legislature in its competence has enacted the Act to
achieve the purposes indicated therein and not to frustrate any judgment of any
court including that of this Court. It is to be noted that State Legislature
was competent to enact the Act in its present form even before the judgment of
the High Court in the PIL and the fact that it has come after the judgment in
PIL does not 10 render it unconstitutional on the ground that it seeks to
nullify the judgment of this Court in the earlier proceedings.
19) The
State, in the factual background leading to the issue of the Notifications
dated 15.5.1996 and 01.08.1996 and the filing of Writ Petition No. 316 of 1998
and the judgment of the High Court of Bombay Panaji Bench therein, thought it
fit and expedient to prohibit any further payment under the said Notifications
and to recover the benefits already availed of by certain consumers including
the petitioners towards the rebate in terms of these two notifications and
having regard to the fact that the action in issuing the notifications was
unauthorized and wholly illegal and that the parties could not be allowed to
reap the benefits of an illegal act enacted the Act impugned. Thus the intent
and object of the State Legislature in enacting the Act impugned is clear and
unassailable.
Therefore,
the contention of the petitioners that the Act impugned is unconstitutional and
it seeks to nullify the judgment of this Court requires to be rejected.
20) The
impugned Act is not aimed at giving effect to the Order of the High Court of
Bombay dated 19/24.04.2001 in W.P No.316 of 1998 nor is it passed because the
abovementioned Special Leave Petition is pending before this Court, but has
been passed with an object or aim to 10 sustain the State Coffers and to
prevent further abuse and payment out of the State Funds. It has been enacted
in the larger public interest to save the Public Exchequer from being drained
off. These amounts always belonged to the State and, therefore, it has every
right to recover the same, by resorting to legislative measures within the
parameters of the Constitutional provision from the beneficiaries who cannot be
permitted to retain the benefits.
21) The
impugned Act is not aimed at giving effect to the order of the High Court of
Bombay dated 19/24.04.2001 in W.P No.316 of 1998 as has been argued by the
learned senior counsel for the petitioner. It is not passed because the
abovementioned Special Leave Petition is pending before this Court. It has been
passed with an aim to sustain the State Coffers and to prevent further abuse
and payment out of the State's Exchequer. It is placed on record by the State
Government, that, the coffers of the State had already lost an amount of almost
16 Crores which the State could not afford and a further sum of Rs. 50 Crores
of public money would have been lost, had it not been checked and prevented by
the Act impugned. In this regard it is necessary take notice of the reiteration
of the State in its affidavit that the earlier affidavits filed for and on
behalf of the State Government before the High Court in the 10 earlier round of
litigations did not reflect correct and true factual position, It is stated by
the State Government that there was neither financial sanction nor budgetary
provision nor cabinet approval as required under Article 166(3) of the Constitution
of India and therefore the two notifications dated 15.05.1996 and 01.08.1996 in
issue could not be said to be the decision of the State Government in the
strict sense of law and the claims for rebate under these Notifications which
run into several Crores of Rupees could not be borne by the exchequer, more so
when they are devoid of any legal sanctity and that it was impossible for the
State to meet or bear such an enormous liability of such a magnitude. The
respondent State in its affidavit draws support from certain observations from
the Judgment of the High Court of Bombay dated 19/24.04.2001, to say that the
Notifications mentioned above were non-est and action taken thereunder was null
and void. It is the stand of the State, that, the High Court in W.P. No. 316 of
1998 has also dealt with the issue as to why the State had failed to bring
before the High Court in the earlier batch of Writ Petition decided on
21.01.1999, wherein the High Court upheld the power of the State Government to
withdraw the rebate by invoking provisions of Section 21 of the General Clauses
Act. According to the State, the High Court in the earlier round of litigation
gave a decision as 10 regards the financial crunch faced by the Court and that
the affidavits filed for and on behalf of the State Government therein by the
then Chief Electrical Engineer of Goa Mr. T. Nagarajan, who as disclosed from
the police investigations was himself a supporter of the illegal act of abuse
of power and he could not be expected to place all facts before the High Court.
The State further contends that the High Court in its judgment in W.P No. 316
of 1998, has noted that even the attempts to have the Notifications ratified by
the cabinet failed and there being legal dissent, the Cabinet refused to ratify
the decision and withdrew the same.
Therefore,
it cannot be said that the State had enacted the Act impugned to give effect to
the judgment of the High Court in Writ Petition No. 316 of 1998.
22) It is
also placed on record that there was neither any budgetary allocation nor any
provision made for such payments and these payments were sought to be diverted
to the private industrialists by virtue of the two notifications mentioned
above and with a view to put an end to this illegality, the impugned Act has
been enacted in the larger public interest to save the Public Exchequer from
being drained off. These amounts always belonged to the State Government and
the State had every right to recover the same, by resorting to legislative
measures from the 10 beneficiaries of an illegal Act, who cannot be allowed to
retain the benefits. In the earlier round of litigation before the High Court,
the State had taken the stand that there was financial crunch being faced by
the State Government and that it was the primary reason for the State
Government to withdraw the rebate. This Court and the High Court in the earlier
round of litigation merely dealt with and interpreted the rights of the
Consumer to recover and be paid the rebate on electricity tariff in view of the
two notifications being in force. This Court and the High Court in those
proceedings did not deal with or decide their validity. The question there was,
whether the benefits granted by the Notifications could be withdrawn by a mere
administrative circular of the Chief Electrical Engineer dated 31.03.1998 and
the High Court held in those writ petitions that the two notifications could
not be withdrawn by a mere administrative Order and on that premise the High
Court had directed the State to pay the amounts and this Court confirmed the
same in its Order.
What the
Legislature seeks to do by the Act impugned is to cure the defect of any kind
and thereby to ensure that public funds are not drained and it is in larger
public interest that this Act is enacted. The Act which has been passed in the
larger public interest and with a view to sub serve the public cause and to
prevent abuse of public exchequer and to remedy 10 the fraud played by an
individual on the public exchequer and to recover the amounts paid under these
two Notifications and to prevent further loss of pubic funds cannot be termed
as unconstitutional. It cannot therefore be said that the Act impugned is aimed
at nullifying a judgment of this Court dated 13.02.2001, affirming the view
taken by High Court of Bombay Panaji Bench, in its judgment dated 21.01.1999.
It can not also be said that the Act impugned seeks to give effect to the
decision of the High Court of Bombay dated 19/24th April 2001, in Writ Petition
No 316 of 1998.
23) The
Act stands totally on a different footing and the judgment of the High Court
dated 19/24.04.2001 has no bearing on it. The Act stands independent of the
judgment of the High Court and its validity cannot be tested on these grounds.
The petitioners have strongly relied upon the different stands allegedly taken
by the State in the earlier proceedings and the present proceedings in support
of their challenge to the constitutionality of the Act. This Court in Sanjeev
Coke Manufacturing (172)], has held that the validity of the Legislation is not
to be judged by what is stated in an affidavit filed on behalf of the State and
that it should fall or stand on the strength of its provisions.
10 24) It
is no doubt true that the Judgment dated 19/24.04.2001 is in appeal before this
Court in a batch of Special Leave Petitions and the validity of the impugned
Act does not depend upon the result of the said Special Leave Petitions. In our
opinion, the Act must stand or fall on its own strength. It cannot also be said
that the Act seeks to give effect to the judgment dated 19/24.04.2001 of the
High Court having regard what the State aims at or seeks to achieve by it. It
is a well settled law that the legislature can render the judicial decision
ineffective by enacting a valid law on the subject within its legislative field
by removing the base on which the decision was rendered. The impugned Act meets
and satisfies the Constitutional Test completely. The Act also satisfies
parameters laid down by this Court in various judgments. Further the competence
of the State Legislature to enact the Act impugned is traceable to Entry No. 38
in List III to the VII Schedule of the Constitution of India. The petitioners
have not challenged the competence of the State Legislature to enact the Act
impugned. Therefore, the challenge made by the petitioners to the
constitutionality of the Act on this ground must fall.
25) The
next contention urged by the petitioners is that, the Act does not seek to
validate any action which has been held to be invalid by any Court of Law, but
only seeks to nullify the judgment of this Court. This 10 contention should
also fail for the reasons already explained in the preceding paragraphs.
26) The
next contention of the petitioners is that the impugned Act is
unconstitutional, because it seeks to take away the fundamental rights
guaranteed to the petitioners under Article 14 and 19(1)(g) of the Constitution
of India. While the argument based on Article 19(1)(g) of the Constitution of
India was not urged seriously by the petitioners and rightly so, as no citizen
is before this Court with a complaint that his fundamental rights guaranteed
under this Article of the Constitution is violated by the State under the Act
impugned. As regards the challenge to the validity of the Act on the
allegations of violation of Article 14 of the Constitution of India, the
petitioners have laid no basis thereof. There is nothing in the Act which
suggests invidious discrimination, unreasonable classification or manifest violation
of equality clause. In the absence of any valid ground under Article 14 of the
Constitution of India, the Writ Petition under Article 32 itself is not
maintainable and liable to be dismissed.
27) In
view of the above discussion, we are of the opinion that the Act impugned does
not suffer from any invalidity and the challenge made 10 by the petitioners to
its constitutionality fails. Accordingly, the Writ Petitions are dismissed
without any order as to costs.
....................................J. [ R.V. RAVEENDRAN ]
....................................J. [ H.L. DATTU ]
New Delhi,
May 03, 2010.
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