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W.A. No. 1955 of 2012 - Kerala Public Service Commission Vs. Shaiju, (2012) 281 KLR 065 : 2013 (2) KLT 946

posted Jul 15, 2013, 2:38 AM by Law Kerala   [ updated Jul 15, 2013, 2:39 AM ]


(2012) 281 KLR 065

IN THE HIGH COURT OF KERALA AT ERNAKULAM

PRESENT: THE HON'BLE THE CHIEF JUSTICE MRS. MANJULA CHELLUR & THE HONOURABLE MR.JUSTICE A.M.SHAFFIQUE

TUESDAY, THE 20TH DAY OF NOVEMBER 2012/29TH KARTHIKA 1934

WA.No. 1955 of 2012 ()

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AGAINST THE ORDER/JUDGMENT IN WPC.NO.7309/2010 DATED 03/10/2012

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APPELLANT/RESPONDENT:

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THE KERALA PUBLIC SERVICE COMMISSION, REPRESENTED BY ITS CHAIRMAN, PATTOM, THIRUVANANTHAPURAM-695 001.

BY ADV. SRI.P.C.SASIDHARAN, SC, KPSC

RESPONDENT(S)/PETITIONER:

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SHAIJU T.L., S/O.T.ISSAC, RESIDING AT THYTHOTATHU HOUSE, THOZHUKAL NEYYATTINKARA P.O. - 695 001, THIRUVANANTHAPURAM WEST.

BY ADV. SRI.R.RAJASEKHARAN PILLAI BY ADV. SMT.SABINA JAYAN

THIS WRIT APPEAL HAVING COME UP FOR ADMISSION ON 20-11-2012, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: Kss

MANJULA CHELLUR, C.J & A.M.SHAFFIQUE, J.

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W.A. No. 1955 of 2012

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Dated this the 20th day of November, 2012

Head Note:-

Kerala Public Service Commission Rules of Procedure, 1976 - Rule 11(v), 15A, 22 - Invalidation of the register number - included in the rank list was not on account of a mistake committed by the PSC - technical error - bubbling of the register number - when the instructions are clearly given which were not followed by the candidate he has to blame himself for the rejection of his OMR sheet and not being included in the rank list and the Commission has not arbitrarily exercised any power or authority to create any disadvantage to the applicant.

J U D G M E N T

MANJULA CHELLUR, C.J

Heard learned counsel for the appellant as well as the respondent-petitioner.

2. The writ petition was filed seeking the following reliefs: "(i) Issue a writ of certiorari or other appropriate writ order or direction, calling for the records leading to and culminating in Exts.P3 and P5 and quash the same as arbitrary, illegal, irrational, without the application of mind and unconstitutional; (ii) Issue a writ of mandamus or other appropriate writ order or direction, commanding respondents to maintain Ext.P4 and advise the petitioner to the post of Mechanical Assistant in accordance with his turn; (iii) Issue such other writ order or direction as this Hon'ble Court may deem fit and proper to meet the ends of justice".

3. According to the respondent-writ petitioner, he was an applicant to the post of Work Assistant in the service of the Kerala State Road Transport Corporation pursuant to the notification issued by the appellant - Commission on 12.3.2008. It is also not in dispute that he appeared for the written test (OMR test) with a register number allotted to him as 103195. According to the petitioner, he appeared for the written examination and the valuation has to be completed as per the instructions given in the OMR sheet. It is not at all disputed. He also admits that the candidate has to bubble the relevant portion of the answer sheet of the OMR indicating the register number in the hall ticket, besides writing the same in digits separately. According to him, he has done everything in accordance with the instructions. However, by Ext.P3 notification his answer sheet was rejected. Therefore, he protested against the same. Hence again Commission published another list awarding 50% marks against his name at serial No. 129. However, by Ext.P5 again his name was deleted. Therefore, he has approached the Court.

4. According to the writ petitioner, in spite of following the instructions in strict compliance, the entire mistake was at the hands of the appellant-Commission. For no fault of him his name was removed as per Ext.P5, therefore, he has sought for quashing Exts.P3 and P5 before the learned Single Judge. The learned Single Judge had the opportunity of seeing the original answer scripts as done by us and at paragraph 6 of the judgment, this fact was brought on record. The appellant-Commission, apart from explaining in the counter filed by them, how the examination or the test was conducted and how A and B Parts were to be filled in by the candidate and what was the mistake committed by the present candidate, they also filed an additional counter affidavit explaining with reference to the respondent-writ petitioner with register No. 103195, what exactly was the mistake done.

5. Paragraphs 6 and 7 of the counter and paragraphs 3 and 4 of the additional counter affidavit are very relevant. It is not in dispute that the valuation is computerized. Valuation is done with reference to the number marked with bubbling of Part A of the sheet. As we note from the Part A, though correct register No. 103195 is written in digits, while bubbling the number, the candidate has bubbled 103095 instead of 103195. It is also noticed from the counter and additional counter affidavit of the Commission, after verification, they found the candidate with register No. 103095 did not attend the examination. In other words, learned standing counsel for the Commission, during course of argument, submits that decoding of the answer script for valuation is done only with reference to the register number bubbled at Part A and not the register number written in digits. It is not just one candidate but about 129 candidates with deficits came to be noticed as per Ext. P3 dated 26.8.2009, a notification was issued giving all the details of the register numbers and the reason why their answer scripts are invalidated.

6. In so far as 103195 is concerned, it was on account of register number not either wrongly mentioned or wrongly bubbled. Unfortunately, while publishing the rank list, all the register numbers found at Ext.P3 that were invalidated also came to be included, therefore according to the appellant's counsel this was on account of technical error of the computer. After realizing the mistake, immediately they issued Ext.P5 why 129 candidates whose numbers figuring in the rank list again deserves to be deleted on account of the above deficits found as per Ext.P3. The invalidation of the register number of the respondent-writ petitioner is included in the rank list was not on account of a mistake committed by the appellant - Commission by way of rectifying the mistake at the instance of the writ petitioner, but it was a technical error which came to be rectified as per Ext.P5. Exts.P3 and P5 do not indicate any different reason for such opinion of the Commission. The reason for rejecting the candidature of the respondent-writ petitioner expressed at Exts.P3 and P5 are one and the same. The inclusion of names at Ext.P4 rank list is also explained in the affidavit and in the counter affidavit of the appellant-Commission. Originally, OMR sheet and Part A sheet which are produced before us clearly indicate the bubbling of the register number done by the respondent-writ petitioner pertains to 103095 and the actual candidate who was allotted Reg. No. 103095 never appeared for the test.

In that view of the matter when the instructions are clearly given which were not followed by the writ petitioner he has to blame himself for the rejection of his OMR sheet and not being included in the rank list and the Commission has not arbitrarily exercised any power or authority to create any disadvantage to the respondent-writ petitioner alone. Like him, there were 129 candidates whose names were included in the rank list and later deleted. In that view of the matter, we are of the opinion, there is no justification in the opinion of the learned Single Judge in the judgment impugned before us. Accordingly, the appeal is allowed. The judgment of the learned Single Judge is set aside.

(MANJULA CHELLUR, CHIEF JUSTICE)

(A.M.SHAFFIQUE, JUDGE)

rka


W.A. No. 1599 of 2012 - Misbah Salam Vs. President, 2012 (4) KLT 423 : 2012 (4) KLJ 413 : ILR 2012 (4) Ker. 491

posted Jul 10, 2013, 1:45 AM by Law Kerala   [ updated Jul 10, 2013, 1:49 AM ]


(2013) 272 KLR638

IN THE HIGH COURT OF KERALA AT ERNAKULAM

PRESENT: THE HONOURABLE MR.JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR.JUSTICE C.K.ABDUL REHIM

FRIDAY, THE 28TH DAY OF SEPTEMBER 2012/6TH ASWINA 1934

WA.No. 1599 of 2012 () IN WPC/14977/2012

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AGAINST THE JUDGMENT IN WPC.14977/2012 DT.14.8.2012

APPELLANT/PETITIONER:

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MISBAH SALAM CHAYIPARAMBIL HOUSE, THALAPPALAM KARA ERATTUPETTA VILLAGE, KOTTAYAM DISTRICT.

BY ADVS.SRI.P.V.BABY SRI.A.N.SANTHOSH

RESPONDENTS/RESPONDENTS:

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1. THE PRESIDENT, ERATTUPETTA AIDED SCHOOL TEACHERS CO-OPERATIVE SOCIETY LTD. NO.K-746, P.O.ERATTUPETTA, KOTTAYAM DISTRICT-686121.

2. JOINT REGISTRAR OF CO-OPERATIVE SOCIETIES(GENERAL) KOTTAYAM-686001.

3. REGISTRAR OF CO-OPERATIVE SOCIETIES, TRIVANDRUM. 695 001.

4. STATE OF KERALA, REPRESENTED BY SECRETARY TO CO-OPERATIVE DEPARTMENT SECRETARIAT, TRIVANDRUM-695001.

R1 BY ADV. SRI.K.G.ANIL BABU R2 TO R4 BY SPL. G.P. SRI.D.SOMASUNDARAM

THIS WRIT APPEAL HAVING BEEN FINALLY HEARD ON 13-09-2012, THE COURT ON 28-09-2012 DELIVERED THE FOLLOWING:

APPENDIX

  1. ANNEXURE R2(a): TRUE COPY OF REPORT OF ASSISTANT REGISTRAR(GENERAL), MEENACHIL.
  2. ANNEXURE R2(b): TRUE COPY OF COMMUNICATION TO THE PETITIONER.
  3. ANNEXURE R2(c): TRUE COPY OF COMMUNICATION TO THE SOCIETY. TRUE COPY P.S. TO JUDGE

C.R.

C.N.RAMACHANDRAN NAIR, & C.K.ABDUL REHIM, JJ.

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Writ Appeal No.1599 of 2012

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Dated this the 28th day of September, 2012.

Head Note:-

Co-operative Societies Act, 1969 (Kerala) Section 66A - Co-operative Societies Rules, 1969 (Kerala) - Rule 54 - Every investment by the society in land and building can be only from profits retained in the form of reserve and no investment should be made in land and building or for any other capital outlay from public deposits retained by the society which have to be used only for business purpose i.e. as working capital for making advances on interest.

Held:- Public deposits are debts due to the depositors and societies should not be allowed to borrow for non-productive investments. The funds of the society referred to in Rule 54 is own funds and not borrowed funds which includes public deposits also. We are of the view that the important responsibility under Rule 54 should be conferred on a more competent and responsible body like a committee properly constituted because a low level functionary like the Joint Registrar may not be able to withstand the political pressure that many managing committees of societies elected on political lines are able to exert. In our view, in every District, the District Collector can be authorised to constitute a committee with the General Manager, District Industries Centre or such other responsible officers and the President and representative of the society concerned to conduct study about the need and justification for capital investment and the investment should be permitted only if the committee is satisfied that the investment is going to bring reasonable returns to the society. Since purchase of land and construction of buildings create opportunities for corruption and mismanagement, we feel violation of Rule 54 that is, for execution of agreement for purchase or investment in land or building without prior approval from Registrar, should lead to disqualification of the committee, supercession under Section 32 and statutory liability for surcharge under Section 68. We, therefore, feel amendment is called for, to ensure stability of societies and to retain public faith in these institutions which to a large extent supports the economy of the rural areas in the State.

Co-operative Societies Act, 1969 (Kerala) Section 66A - Co-operative Societies Rules, 1969 (Kerala) - Rule 54 - Instead of permitting construction of office building for societies in busy and expensive areas at heavy cost, societies should be located in convenient but less expensive areas.

Held:- Pending consideration by Government for amendment of the Act and Rules for strict control on non-productive investments by societies, we feel the Registrar should issue binding circular under Section 66A on the above lines for guidance while issuing orders under Rule 54. The Special Government Pleader will forward one copy each of this judgment to the Secretary, Department of Co-operation and also to the Registrar of Co-operative Societies for compliance.

J U D G M E N T

Ramachandran Nair, J.

Investment in land and building is the common channel for diversion of funds of co-operative societies and when the same is done detrimental to the interest of the society, society goes bankrupt, though individuals in management, mainly elected managing committee members and officers of the society may turn to be big beneficiaries. In order to check and prevent misappropriation of funds of co-operative societies in acquisition of land and building, the Legislature in their wisdom thought of making specific regulations requiring previous sanction in writing from the Registrar of Co-operative Societies before the society makes investment of it's funds in land and building. This provision is contained in Rule 54 of the Kerala Co-operative Societies Rules made under the Kerala Co-operative Societies Act, 1969. The first respondent-society entered into agreement with the appellant for purchase of 4 cents of land on the road side at the rate of Rs.27.5 lakhs per cent through a written agreement under which appellant was given an advance of Rs.10 lakhs. Though advance sanction from Registrar was not obtained before executing the purchase agreement as required under Rule 54, the managing committee before executing the sale deed pursuant to the agreement with the appellant applied to the Joint Registrar for permission in terms of the said Rule 54. However, on a detailed consideration of the deal between the appellant and the first respondent-society, the Joint Registrar held that the proposed purchase of property, in the first place, is at exorbitant price i.e much above the prevalent market price and that the deal will adversely affect the interest of the society in as much as it has it's own land for construction of office and the diversion of public deposit will lead to heavy interest burden to the society. Through a detailed order the Joint Registrar declined permission for purchase of appellant's land by the society. The society turned wise through the findings of the Joint Registrar who rejected their application for permission and they, therefore, accepted his orders thereby backing out of the agreement executed between them and the appellant for purchase of latter's property. This led to the appellant filing writ petition before the learned Single Judge challenging the Joint Registrar's order issued under Rule 54 which is produced as Ext.P4 in the W.P.(C). The learned Single Judge, however, upheld the findings of the Joint Registrar against which the Writ Appeal is filed challenging the judgment and Ext.P4.

2. We have heard Adv. Sri.P.V.Baby appearing for the appellant, Adv. Sri.K.G.Anil Babu appearing for the first respondent-society and Special Government Pleader Sri.D.Somasundaram appearing for the remaining respondents. We are told that the society accepted Ext.P4 order issued by the Joint Registrar and has filed suit before the Sub Court for recovery of advance of Rs.10 lakhs paid to the appellant. Even though writ petition is not maintainable for specific relief, that is for direction to the society to purchase appellant's property in terms of the sale agreement, challenge against Ext.P4 order is rightly entertained by the Single Judge in writ proceedings. We, therefore, proceed to consider all the contentions raised in the Writ Appeal on merit. Besides, we feel obliged to explain the scope of Rule 54 because investment in land and building is one unique device adopted by many elected managing committees of co-operative societies to swindle the funds of societies for personal benefits leading to absolute ruin of societies handling public funds sourced both by way of share capital from members and mostly raised through public deposits.

3. Before proceeding to consider the facts of the case and the legality and propriety of the order issued by the Joint Registrar declining permission under Rule 54, we feel the object and scope of the Rule has to be considered first and for easy reference we extract hereunder Rule 54 of the Kerala Co-operative Societies Rules:

"R.54. Manner of investment of funds:-(1) A Society may, with the previous sanction in writing of the Registrar, invest the whole or any portion of it's funds in the purchase or lease of land on the acquisition, construction or renewal of any building that may be necessary to conduct its business. The amount of the funds so invested shall be recouped on such terms as may be determined in each case by the Registrar."

What is clear from sub-section (1) is that no society shall make investment of it's funds in land or building without previous written sanction from the Registrar. The Legislature is well aware of chances of societies making unwise investments in land and building adversely affecting their financial position leading to erosion in capital and failure to repay public deposits which is the main source of funds for the societies. In the first place, Ext.P3 sale agreement executed between appellant and the first respondent-society on 30.1.2012 is illegal and unenforceable for want of previous sanction in writing from the Registrar. Even though counsel for the appellant submitted that appellant has no role in regard to the approval to be taken by the first respondent from the statutory authorities and, therefore, he is entitled to enforce the agreement against the society, we are not able to accept the contention because when the appellant enters into a transaction with the society which is governed by the provisions of the Co-operative Societies Act and Rules, the appellant should have been prudent enough to ensure that the society executed the agreement in accordance with their powers under the statute and by following the procedure prescribed. If only appellant took little care to find out whether first respondent-society is free to execute the agreement for purchase of land for Rs.1.2 crores without approval from the statutory authorities, he would have realised that the society could enter into agreement with him only after getting prior written approval from the Joint Registrar. Assuming sanction could be granted by the Joint Registrar even after execution of sale agreement, the agreement gets validity only if sanction is granted by the Joint Registrar in writing under Rule 54 which is declined by him vide Ext.P4 order. At the maximum the agreement for sale executed between appellant and first respondent- society can be treated as a conditional sale agreement, the enforcement of which will depend on approval from the Joint Registrar under Rule 54. Since the Joint Registrar declined approval, Ext.P3 agreement continues to be invalid and unenforceable against the society. We, therefore, reject the contention raised by the appellant that Ext.P3 sale agreement is enforceable between the parties.

4. We appreciate the approach of the Joint Registrar in the exercise of the discretionary jurisdiction conferred on him under Rule 54 in this case. In our view, he has correctly understood the scope and object of Rule 54 because he has analysed the impact of this unwise investment in land by the society and has rightly drawn the conclusion that the same will lead to loss and probably eventual financial ruin of the society. We completely agree with the suggestion that there is no need for the society to construct office building on the road side and on the other hand, it can utilise it's own land located little inside for construction of it's office. Further, the Joint Registrar rightly estimated the interest burden the society will suffer if deposits are diverted for non-productive investment in land and the saving in interest if amounts are applied in business. On the whole, we place on record our appreciation on the quality of order issued by the Joint Registrar.

5. Several cases are reaching this court wherein several co- operative societies have gone bankrupt on account of diversion of funds for non-productive and unwise investment in land and building. In fact, many sad cases of poor depositors losing their deposits in societies compelled us to pass orders directing Vigilance enquiry against the managing committee members and their predecessors. We, therefore, feel that the Registrar of Co-operative Societies should exercise effective control on deployment of funds by societies, because Rule 54 permits investment of "own funds" in land and building which means that public deposits taken should not be permitted to be applied for investment in land and building. In our view, societies should not go for massive investment in acquisition of land for construction of office on road side. Societies are visited by members, depositors, borrowers and lenders and whoever wants to go to the society will trace the office wherever it is and reach there. Therefore, there is absolutely no necessity for location of a society on important road side and huge investment in land and building on road side for construction of office space for the society is unwise investment. All what is required is to have a proper location with road facility. Land and building on road side is required only for societies which are engaged in trading of goods to the public and unless there is turnover and profit justifying investment, no society should be allowed to make investment in land and building anywhere. We have seen from some cases pending and decided by this court that many societies have become bankrupt on account of construction of Auditoriums, shopping complex etc. Atleast in one of the cases decided by one of us (C.N.Ramachandran Nair, J.) this court had to direct the District Collector to intervene and conduct sale of a commercial building constructed and retained by the society without any returns to save the society. There is nothing wrong in society making capital outlay in the form of construction of building by acquiring land, but the same should be done only after making proper study about market conditions, availability of tenants and business in the area so that the investment brings reasonable return to the society. The basis condition should be that the capital employed should be productive and should bring reasonable return to the society. Unless the Registrar is satisfied on these matters, no approval should be granted under Rule 54, no matter the managing committee of the society has passed resolution approving it and that the Memorandum and Articles of Association of the society may authorise it. Even though Co-operative Societies function like companies wherein the ultimate authority is with the annual general body, it is common knowledge that most of the members are borrowers who have no interest in the management of the society and only for the purpose of taking a loan they take membership. Therefore, much reliance cannot be placed on decisions in the general body meeting of the societies and so much so, there is a necessity for strict control on societies by the statutory authorities, mainly to protect the interest of depositors who are members of the public.

6. Every investment by the society in land and building can be only from profits retained in the form of reserve and no investment should be made in land and building or for any other capital outlay from public deposits retained by the society which have to be used only for business purpose i.e. as working capital for making advances on interest. Public deposits are debts due to the depositors and societies should not be allowed to borrow for non-productive investments. The funds of the society referred to in Rule 54 is own funds and not borrowed funds which includes public deposits also. We are of the view that the important responsibility under Rule 54 should be conferred on a more competent and responsible body like a committee properly constituted because a low level functionary like the Joint Registrar may not be able to withstand the political pressure that many managing committees of societies elected on political lines are able to exert. In our view, in every District, the District Collector can be authorised to constitute a committee with the General Manager, District Industries Centre or such other responsible officers and the President and representative of the society concerned to conduct study about the need and justification for capital investment and the investment should be permitted only if the committee is satisfied that the investment is going to bring reasonable returns to the society. Since purchase of land and construction of buildings create opportunities for corruption and mismanagement, we feel violation of Rule 54 that is, for execution of agreement for purchase or investment in land or building without prior approval from Registrar, should lead to disqualification of the committee, supercession under Section 32 and statutory liability for surcharge under Section 68. We, therefore, feel amendment is called for, to ensure stability of societies and to retain public faith in these institutions which to a large extent supports the economy of the rural areas in the State. In our view, instead of permitting construction of office building for societies in busy and expensive areas at heavy cost, societies should be located in convenient but less expensive areas. Pending consideration by Government for amendment of the Act and Rules for strict control on non-productive investments by societies, we feel the Registrar should issue binding circular under Section 66A on the above lines for guidance while issuing orders under Rule 54. The Special Government Pleader will forward one copy each of this judgment to the Secretary, Department of Co-operation and also to the Registrar of Co-operative Societies for compliance.

Writ Appeal is dismissed but with the above observations and findings.

C.N.RAMACHANDRAN NAIR Judge

C.K.ABDUL REHIM Judge

pms


W.A. No. 557 of 2010 - District Collector Vs. Athickal Muhammed Kunhi, 2012 (4) KLT 360 : 2012 (4) KLJ 480 : ILR 2012 (4) Ker. 540

posted Jul 9, 2013, 11:59 PM by Law Kerala   [ updated Jul 10, 2013, 12:00 AM ]


(2013) 273 KLR 409

IN THE HIGH COURT OF KERALA AT ERNAKULAM

PRESENT: THE HON'BLE ACTING CHIEF JUSTICE MRS.MANJULA CHELLUR & THE HONOURABLE MR.JUSTICE V.CHITAMBARESH

FRIDAY, THE 14TH DAY OF SEPTEMBER 2012/23RD BHADRA 1934

WA.No. 557 of 2010

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AGAINST THE ORDER/JUDGMENT IN WPC.24875/2009 DATED 29/9/2009

APPELLANT(S)/RESPONDENTS IN THE WPC:

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1. THE DISTRICT COLLECTOR, KANNUR.

2. THE SPECIAL TAHSILDAR (LA), EZHIMALA NAVAL ACADEMY, PAYYANNUR.

BY SRI.P.I.DEVIS, GOVERNMENT PLEADER

RESPONDENT(S)/PETITIONER IN THE WPC:

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ATHICKAL MUHAMMED KUNHI, ETTIKULAM P.O., RAMANTHALI, KANNUR.

R1 BY ADV.SRI.SERGI JOSEPH THOMAS R1 BY ADV. SRI.K.M.AUGUSTINE

THIS WRIT APPEAL HAVING BEEN FINALLY HEARD ON 14-09-2012, ALONG WITH WA.NO.761/2010 AND CONNECTED CASES, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: AS

MANJULA CHELLUR, Ag.C.J & V.CHITAMBARESH, J.

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W.A.No. 557 of 2010, W.A.No. 761 of 2010, W.A.No. 1676 of 2010, W.A.No. 1736 of 2010, W.A.No. 1738 of 2010, W.A.No. 1739 of 2010 & W.A.No. 1747 of 2010

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Dated this the 14th day of September, 2012

Head Note:-

Land Acquisition Act, 1894 - Section 28A - Application to the Collector - A person who gets benefit of higher compensation under Sec. 28A(1) of the Act can make an application to the Collector under Sec. 28A(3) for making a reference to the court as defined in Sec. 3(d) of the Act and this right cannot be denied - Once application is filed before the Collector, he has to take into account all relevant facts into consideration such as the latest award, date of award, effective application, enhancement or reduction of compensation - As long as the applicant fulfills the conditions envisaged under Section 28A, there will be no embargo to proceed with the application - If an award is passed by Reference Court after remand of the matter by appellate court, it is also an award under Section 28A.

Land Acquisition Act, 1894 - Section 28A - Interpretation of - Beneficial Legislation - Liberal Interpretation.

Held:- The goal of equality enshrined in the preamble of Constitution and Articles 38, 39 and 46 are attempted to be made a reality by the legislature, so far as payment of compensation to the losers of the land for the benefit of the State, its agencies/instrumentalities and even private parties. Acquisition of land deprives the agriculturist of his livelihood and some times throws them to the streets. Section 28A envisages solace to such owners of land whose lands are also acquired under the same notification but for various reasons like poverty, ignorance and other inabilities could not join others in seeking reference under Section 18 of the Act for enhancement of compensation. The scheme under Section 28A thrives at removing the disability suffered by the owners of land and removes the inequality, if any, so far as payment of compensation. This gives one more opportunity to the land owners who did not or could not seek reference under Section 18 to seek higher compensation. It could be termed as beneficial legislation so far as land losers. Therefore, there has to be liberal interpretation with a purpose to champion the policy of the legislation giving opportunity to the owners of land who miss their chance by not filing an application under Section 18 of the Act.

Land Acquisition Act, 1894 - Section 28A - Reference - Period of Limitation - Redetermination of compensation - The limitation starts from the date of award and not from the date of knowledge of award - Time spent in obtaining copy is to be excluded.

Held:- Redetermination of compensation could be sought on the basis of any one of the awards of the reference court as long as it pertains to other lands but covered under the same notification where the claimant had not sought for reference earlier. The period of limitation would start running from the last award provided the award is subsequent to coming into force of Section 28A of the Act if application is filed within three months from the date of making award on the basis of which redetermination of compensation is sought. Hence there is no restriction so far the earliest award. The limitation starts from the date of award and not from the date of knowledge of award. Time spent in obtaining copy is to be excluded.

J U D G M E N T

Manjula Chellur, Ag.C.J.

Appellants were respondents in the Writ Petitions before learned Single Judge. The Writ Petitions came to be filed by the party respondents seeking reference of applications filed by the writ petitioners to the concerned court having jurisdiction under Section 28A(3) of the Land Acquisition Act (hereinafter referred to as 'the Act'). The learned Single Judge allowed the Writ Petitions holding, an application filed under Section 28A of the Act can be submitted within three months from the date of award passed by a reference court on an application filed under Section 28A(3) of the Act and also on the basis of an award passed by the court after remittance under Section 54 of the Act. Aggrieved by the same, the present appeals are filed by the State.

2. So far as W.A.No.761 of 2010, the land involved is 0.0810 hector in Resurvey No.266/6 of Ramanthali Village. W.A.No.557 of 2010 pertains to 1 acre of land in Resurvey No.74/2 of Ramanthali Amsom acquired under the same notification as the other appeal. W.A.No.1676 of 2010 refers to 1 acre 17 cents in Resurvey No.334 of Ramanthali Village acquired for Naval Base purpose. W.A.No. 1736 of 2010 pertains to 5 acres 40 cents in Resurvey No.344 and 1 acre 34 cents in Resurvey No.331/2 of Ramanthali Village. W.A.No.1738 of 2010 refers to 3.50 acres of land in Resurvey No.332 of Ramanthali Village acquired for Ezhimala Naval Academy. W.A.No.1739 of 2010 pertains to 1.26.5000 acres of land in Resurvey No.344 of Ramanthali Village for Ezhimala Naval Academy. W.A.No.1747 of 2010 is in respect of 1.20 acres of land in Resurvey No.344 of Ramanthali Village.

3. W.A.Nos.557 and 761 of 2010 arise out of a common judgment dated 29.9.2009. In these two appeals, though compensation was received under protest, no application came to be filed for reference under Section 18 of the Act. Under Section 28A of the Act, an application came to be filed on 1.6.1998 before the District Collector, Kannur placing reliance on judgment in LAR.No.120 of 1987 of Sub Court, Payyannur. This came to be rejected as time barred for proceedings dated 21.4.2009, as the original judgment in L.A.No.120 of 1987 came to be passed on 20.3.1990. Second application came to be filed on 1.6.1990 after disposal of LAA.No.229 of 1992. An application came to be filed on 16.6.1990 placing reliance on the judgment in LAR.No.120 of 1987. According to the appellants, in the absence of any challenge against the rejection of the application dated 1.6.1998, the learned Single Judge ought not to have considered the case of the writ petitioners but ought to have dismissed the Writ Petition.

4. So far as W.A.No.557 of 2010, on the basis of award in LAR.No.15 of 1987 at Exhibit P1, an application came to be filed and the same was rejected on 18.9.2006 as barred by limitation. This judgment at Exhibit P3 has reached finality. Another application came to be filed on 22.5.1998 under Section 28A of the Act for redetermination, placing reliance on LAR.120 of 1987. The Writ Petition came to be filed for a direction to consider application filed under Section 28A of the Act. During pendency of the Writ Petition, the application was dismissed as not maintainable. Third application came to be filed on 26.2.2008. However, this Court, as per judgment dated 1.4.2008 in WP(C). No.26153 of 2007, directed the second respondent to dispose of the application filed under Section 28A of the Act. Having regard to the dismissal of application on 18.9.2006, an intimation was sent as per Exhibit P11 that third application cannot be considered.

5. The rest of the appeals are based on common judgment dated 26.5.2010. The first judgment of the learned Single Judge is dated 29.9.2009 and other judgments in the Writ Petitions are dated 26.5.2010. The crucial question that has to be decided in these appeals is, when an award of the authority is set aside by the High Court and the matter is remitted, if the reference court again decides the said matter, from what date commencement of period of limitation would occur.

6. In so far as W.A.Nos. 761 and 557 of 2010, the facts are that there was a decision on 20.3.1990 by the reference court and later LAA.No.229/1992 disposed of on 9.11.1996 and the matter was remitted back. Again, it was decided on 3.9.1997 after remand. The question is whether limitation starts running from 20.3.1990 or 3.9.1997. Several questions came up for consideration before the learned Single Judge. In so far as other five Writ Appeals, the learned Single Judge, after referring to Joseph v. District Collector (2004(2) KLT 1029), Annamma Thomas v. State of Kerala (2010(1) KLT 623) and Haji A.Abdul Rashid v. Spl. Tahsildar (2008(1) KLT 974), opined, the appeals deserve to be allowed with a direction to the Land Acquisition Officer to reconsider the matter in accordance with law and pass fresh orders within a period of three months from the date of receipt of a copy of the judgment.

7. Aggrieved by the same, the above appeals are filed, contending that the definition of the word 'award' under Section 28A(1) of the Act is wrongly interpreted, which is quite contra to various decisions and judgments of the Apex Court; the learned Single Judge totally ignored the decisions of the Apex Court holding that an application under Section 28A of the Act can be made only on the basis of an award passed by the Principal Court of Original Jurisdiction and not on the basis of the judgment passed by the Appellate Court; when the Act envisages the application should be within three months from the date of judgment of the reference court and in the light of beneficial provision made under Section 28A of the Act, if the person, who failed to file application under Section 18 of the Act for enhancement of compensation, fails to make application under Section 28A(1) of the Act within the time limit prescribed, second application is not maintainable; similarly, when three months period of limitation expires by efflux of time, none of the later awards could provide any assistance to revive the lapsed time under Section 28A(1), nor provide fresh cause of action. Challenging the judgment of the learned Single Judge on various grounds, the appellants have sought for allowing the appeals by setting aside the judgment of the learned Single Judge.

8. On behalf of the appellants, learned Government Pleader relies upon the following judgments: Babu Ram v. State of U.P [(1995)2 SCC 689], Union of India v. Pradeep Kumari [(1995) 2 SCC 736] and State of A.P v. Marri Venkaiah [(2003)7 SCC 280].

9. In the case of Babu Ram's case (supra), several issues came up for consideration before the Apex Court. In this case it was said, Section 28A of the Act is prospective in operation and the benefit is not applicable to awards made prior to commencement of amendment in 1984, even if three months period prescribed for making an application had not expired by that time. It was further held that a person interested becomes aggrieved, when for other lands covered by the same notification under Section 4(1) of the Act, the court awards higher compensation. The condition is, such aggrieved person ought not to have made an application for reference earlier becomes entitled to invoke Section 28A of the Act. The aggrieved person in Section 28A(1) of the Act covers any interested person as long as he has not made an option for reference under Section 18 of the Act. The right available under Section 28A(1) of the Act is an extra remedy for redetermination of compensation payable to the owner of the land, if he has forgone his right and remedy under Section 18(1) of the Act. The starting point for computation of period of limitation of three months must be computed from the date of earliest award of reference court made under Section 26 of the Act and not from the date of judgment and decree of a court of appeal. Therefore, the remedy is not available to a party, who sought and failed in an appeal under Section 54 of the Act. Section 28 of the Act operates in perpetuation and not a transitional provision.

10. In the case of Paradeep Kumari's case (Supra), Their Lordships held, the benefit of redetermination of quantum of compensation under Section 28A of the Act can be availed on the basis of any one of the awards that has been made by the Court subsequent to coming into force of Section 28A of the Act, provided the applicant seeking such benefit makes an application under Section 28A of the Act within the prescribed period of three months from the date of making award, on the basis of which redetermination is sought. In other words, the right of redetermination is held not confined to the earliest award made by the court. In this case, Their Lordships held, the following six conditions are essential and to be satisfied for redetermination of compensation. They are as follows:

"A person would be able to seek redetermination of the amount of compensation payable to him provided the following conditions are satisfied:

(i) An award has been made by the court under Part III after the coming into force of Section 28-A;

(ii) By the said award the amount of compensation in excess of the amount awarded by the Collector under Section 11 has been allowed to the applicant in that reference;

(iii) The person moving the application under Section 28-A is interested in other land covered by the same notification under Section 4(1) to which the said award relates;

(iv) The person moving the application did not make an application to the Collector under Section 18;

(v) The application is moved within three months from the date of the award on the basis of which the redetermination of amount of compensation is sought; and

(vi) Only one application can be moved under Section 28-A for redetermination of compensation by an applicant.".

11. It was further held, the amended provision is a beneficial one and court should adopt a construction which advances the policy of the legislation to extend the benefit rather than one which curtails the benefit. Therefore, one cannot read words into the provision, which are not there resulting in restricting the scope of the provision. Learned Government Pleader also relies upon Marri Venkaiah's case (Supra). In this case, it was held, limitation of three months for filing application for redetermination of compensation, computation of limitation begins to run from the date of award and not from the date of knowledge of the award. When applications were filed after five years, the applicants either had opportunity of knowing the award or expected to make efforts of knowing the award, and hence a presumption of knowledge of the award arises. Their Lordships specifically held that exclusion of time required for obtaining copy of award is permissible while computing the period of limitation, but it is difficult to infer further exclusion of time on the ground of acquisition of knowledge by the applicant.

12. Sri.O.Ramachandran Nambiar, learned counsel for the respondents places reliance on The Law Lexicon by P.Ramanatha Aiyar to contend that order rejecting a claim petition on the ground, the same is barred by limitation would be an award and appealable. He refers to Krishen Lal v. J.G.Insurance (AIR 1977 J&K 90) to contend that the phrase "sufficient cause" should not be given a narrow construction and should not be treated on par with the provisions of Section 5 of the Limitation Act so far as Motor Vehicles Act. He places reliance on Union of India v. Smt.Pradeep Kumari (1991 LACC 178). He also places reliance on Union of India v. Hansoli Devi [(2002)7 SCC 273]. In this case, Their Lordships held that the expression, "did not make an application" as observed by the Supreme Court in Union of India v. Pradeep Kumari [(1995)2 SCC 736] would mean, did not make an effective application, therefore, when an application under Section 18 of the Act is not entertained on the ground of limitation, the same not fructifying into any reference, then that would not tantamount to an effective application and consequently the rights of such applicant emanating from some other reference being answered to move an application under Section 28A of the Act cannot be denied. Ultimately, it was held that dismissal of an application seeking reference under Section 18 of the Act on the ground of delay would tantamount to not filing an application within the meaning of Section 28A of the Act. It is further held that in such circumstances, on dismissal of an application under Section 18 of the Act on the ground of delay, land owner is entitled to make an application under Section 28A of the Act, if other conditions are fulfilled. Sri.O.Ramachandran Nambiar also places reliance on Somasundaran v. Special Tahsildar (2002(2) KLT 569). In this case, it is held as under:

"6. In this case, the appellants have preferred applications under S.28A claiming the benefit of the award in L.A.R. 5 of 1986. Therefore, unless an application is filed within three months from the date of award in L.A.R. 5 of 1986, it will not be within the period of three months mentioned in S.28A. However, the proviso to S.28A also gives the benefit of excluding the time taken for obtaining the certified copy while reckoning the period of three months. As per sub-s.2, the Collector shall conduct an enquiry and make an award determining the amount of compensation payable to the applicant. If a person is aggrieved by the award of the District Collector under S.28A(2) then he can seek a reference to the court for determination of the quantum and the provisions of S.28-A shall be applied to such reference as though applied to such reference under S.18.

7. It is true that in this case the District Collector has dismissed the application holding that the land acquired from the appellants herein and the land covered by the award in L.A.R. 5 of 1986 are not similarly situated. It was on this ground that the District Collector had rejected the application. In other words, though the District Collector is entitled to dismiss the application either on the ground that the application is beyond time, if the application is filed beyond three months as prescribed under the Act, or it could be dismissed if on enquiry it is found that the land in question is not similar to the land covered by the decree and judgment in L.A.R. 5 of 1986, the benefit of which he has claimed in re-determination. The fact that the District Collector has dismissed the application on the latter ground by itself will not take away the jurisdiction of the court when the matter is ultimately referred to it since the correctness or otherwise of the decision of the District Collector is at large before the reference court. Suppose in a case the District Collector dismissed the application on the ground that it is beyond time that is also a matter which could be referred to the reference court in case the party seeks for such a reference under sub-s.3 of S.28A. Therefore, the court has necessarily to consider as to whether the application is barred by limitation as provided for under S.28Ain such cases. Therefore, the provision under S.28A enables a reference court to re-examine the question and also to examine the correctness or otherwise of the decision rendered by the District Collector. If that be so, to say that the District Collector having entertained the application and rejected the same on the other ground namely, the properties are not similar to the one involved in L.A.R. 5 of 1986, the court had no jurisdiction to consider the other question already decided in favour of the appellants does not appear to be correct. When there are more than one grounds available for rejection the mere fact that the District Collector has mentioned one of the grounds for rejecting the application by itself will not take away the jurisdiction of the Court to consider the very question as to whether the application is filed within time. Since the reference court has to consider ultimately as to whether the appellants are entitled for any enhancement of compensation necessarily it has to consider both these questions. In this case, it is seen that such a contention was raised by the other side and hence the court was perfectly right in considering that issue."

13. In State of Tripura v. Roopchand Das [(2003)1 SCC 421] it is held that when more than one award passed by the reference court under Section 18 of the Act so far as three months period of limitation for determination of compensation would be the date of the latest award on the basis whereof redetermination was sought instead of the date of the earliest award. They further held that as held in Pradeep Kumari's case (Supra), there is nothing to indicate that this right is confined in respect of the earliest award that is made by the court after coming into force of Section 28A of the Act. In Saradha P v. State of Kerala (2008 (1) KHC 738), this Court held that when an application filed under Section 28A of the Act for redetermination of compensation is rejected by the Land Acquisition Officer, application for reference under Section 28A(3) of the Act can be in a case where no award is passed and the Land Acquisition Officer is bound to refer the application and cannot reject the same on the ground that he did not redetermine the compensation. Whether such person is entitled for redetermination or not has to be decided by the Civil Court, which undertakes the adjudication of a reference.

14. Sri.Augustine, learned counsel appearing for other respondents refers to Madhavi v. Special Tahsildar (2003(1) KLT 813). In this case, it is held that the object of Section 28A of the Act was certainly to confer a right of making reference by persons who might not have made a reference under Section 18 of the Act to get the benefit of enhanced compensation, which other similarly situated persons could get. Unless there is a valid application, the Rule of Res judicata does not apply to a second application under Section 28A of the Act, because it is not filed before a court or other authority, to which the provisions of Civil Procedure Code are applicable. He also places reliance on Ramakrishna Rao v. Singareni Collieries Company Ltd. (2010(4) KLT 255 (SC)), wherein the scope of sub-Sections (1), (2) and (3) of Section 28A of the Act were considered. A person, who gets benefit of higher compensation under Section 28A(1) of the Act can also make an application under Section 28A(3) and it is not restricted to cases where amount paid to land owner under Section 28A(1) of the Act, if it is less than the amount awarded by reference court under Section 18. Paragraphs 9 and 11 of the said judgment are relevant, which read as under:

"9. The above reproduced provison represents the Legislature's determination to ensure that the goal of equality enshrined in the Preamble of the Constitution and Arts. 38, 39 and 46 thereof is translated into reality, at least in the matter of payment of compensation to those who are deprived of their land fr the benefit of the State, its instrumentalities/agencies and even private persons. S.28A also represents statutory embodiment of the doctrine of equality in matters relating to the acquisition of land. The Act which was enacted in 1894 and was amended after 90 years has the potential of depriving a large segment of the society i.e the 'agriculturist' of their only source of livelihood. The scheme of S.28A provide some solace to this segment of the society by ensuring that such of the land owners whose land was acquired under the same notification by who could not, on account of poverty, ignorance and other disabilities join others in seeking reference under S.18 get an opportunity to claim compensation at par with others. This section is aimed at removing inequality in the payment of compensation in lieu of acquisition of land under the same notification. To put it differently, this section gives a chance to the land owner, who may not have applied under S.18 for determination of market value by the Court to seek re-determination of the amount of compensation, if any other similarly situated land owner succeeds in persuading the Reference Court to fix higher market value of the acquired land. Therefore, S.28A has to be interpreted in a manner which would advance the policy of legislation to give an opportunity to the land owner who may have, due to variety of reasons not been able to move the Collector for making reference under S.18 of the Act to get higher compensation if market value is revised by the Reference Court at the instance of other land owners, whose land is acquired under the same notification. Of course, this opportunity can be availed by filing application within the prescribed period. In Union of India v. Pradeep Kumari (Supra), a three-Judge Bench of this Court held that S.28A is in the nature of a beneficent provision intended to remove inequality and to give relief to the inarticulate and poor land owners, who are not able to take advantage of the right of reference to the Civil Court under S.18 of the Act and such a provision should be interpreted in a manner which advances the policy of legislation.

xx xx xx

11. If sub-section (3) of S.28A is interpreted keeping in view the object sought to be achieved by enacting the provision for removing inequality in the matter of payment of compensation, it must be held that a person who is not satisfied with an award made under S.28A(2) can make an application to the Collector under S.28A(3) for making a reference to the Court as defined in S.3(d) of the Act and this right cannot be frustrated merely because as a result of a re-determination made under S.28A(2) read with S.28A(1) the applicant becomes entitled to receive compensation at par with other land owners. There is nothing in the plain language of S.28A (3) from which it can be inferred that a peson who has not accepted the award made under S.28A(2) is precluded from making an application to the Collector with the request to refer the matter to the Court. Of course, the Court to which reference is made under S.28A(3) will have to bear in mind that a person who has not sought reference under S.18 cannot get compensation higher than the one payable to those who had sought reference under that section."

15. Sri.Dinesh R.Shenoy, learned counsel appearing for the party respondents places reliance on judgment of the High Court of Judicature, Allahabad in Civil Misc. Writ Petition No.54889 of 2003. In this case, it was held that an applicant is entitled to rely on an award passed by the reference court under Section 28A(3) of the Act. He also places reliance on Joseph v. District Collector (2004(2) KLT 1029) already discussed above.

16. In the case of Union of India v. Munshi Ram [2006 (2) KLT 992(SC)] their Lordships dealt with the issue "what is meant by amount which is finally payable. In that context it was held that it would be the amount determined finally as compensation to be paid to the owners of land who are aggrieved by the award of the Collector and have challenged the same under a reference as envisaged under Section 18 of the Act. It also includes compensation payable to owners of land who approach the court under Section 28A of the Act for enhanced compensation awarded by the Reference Court because it has to be understood as the award of the Reference Court as modified by appellate Court. Therefore it is the amount payable to the claimants finally who seek reference under Section 18 of the Act. Refund of excess amount could be ordered in a situation in case superior court reduces the award amount fixed by the Reference Court.

Section 28A(1) (2)(3) of the Act reads as under:

"28A. Re-determination of the amount of compensation on the basis of the award of the Court.- (1) Where in an award under this Part, the Court allows to the applicant any amount of compensation in excess of the amount awarded by the Collector under Section 11, the persons interested in all the other land covered by the same notification under Section 4, sub- section (1) and who are also aggrieved by the award of the Collector may, notwithstanding that they had not made an application to the Collector under Section 18, by written application to the Collector within three months from the date of the award of the Court require that the amount of compensation payable to them may be re- determined on the basis of the amount of compensation awarded by the Court: Provided that in computing the period of three months within which an application to the Collector shall be made under this sub-section, the day on which the award was pronounced and the time requisite for obtaining a copy of the award shall be excluded.

(2) The Collector shall, on receipt of an application under sub-section (1), conduct an inquiry after giving notice to all the persons interested and giving them a reasonable opportunity of being heard and make an award determining the amount of compensation payable to the applicants.

(3) Any person who has not accepted the award under sub-section (2) may, by written application to the Collector, require that the matter be referred by the Collector for the determination of the Court and the provisions of Sections 18 to 28 shall, so far as may be, apply to such reference as they apply to a reference under Section 18."

17. From the above decisions and provision of law the following principles emerge out. The goal of equality enshrined in the preamble of Constitution and Articles 38, 39 and 46 are attempted to be made a reality by the legislature, so far as payment of compensation to the losers of the land for the benefit of the State, its agencies/instrumentalities and even private parties. Acquisition of land deprives the agriculturist of his livelihood and some times throws them to the streets. Section 28A envisages solace to such owners of land whose lands are also acquired under the same notification but for various reasons like poverty, ignorance and other inabilities could not join others in seeking reference under Section 18 of the Act for enhancement of compensation. The scheme under Section 28A thrives at removing the disability suffered by the owners of land and removes the inequality, if any, so far as payment of compensation. This gives one more opportunity to the land owners who did not or could not seek reference under Section 18 to seek higher compensation. It could be termed as beneficial legislation so far as land losers. Therefore, there has to be liberal interpretation with a purpose to champion the policy of the legislation giving opportunity to the owners of land who miss their chance by not filing an application under Section 18 of the Act.

18. Though in Babu Ram's case (supra) their Lordships held, the starting point for computation of period of three months must be reckoned from the date of earliest award of reference court, later in Pradeep Kumari's case (supra) this view is modified by saying redetermination of compensation could be sought on the basis of any one of the awards of the reference court as long as it pertains to other lands but covered under the same notification where the claimant had not sought for reference earlier. The period of limitation would start running from the last award provided the award is subsequent to coming into force of Section 28A of the Act if application is filed within three months from the date of making award on the basis of which redetermination of compensation is sought. Hence there is no restriction so far the earliest award. The limitation starts from the date of award and not from the date of knowledge of award. Time spent in obtaining copy is to be excluded.

19. So far as not preferring an application it means making an effective application. It does not include an application for reference being dismissed on the ground of limitation, because there is no application fructifying into any reference. In such circumstances, owner can maintain application under Section 28A of the Act as long as other conditions are fulfilled. A person who gets benefit of higher compensation under Sec. 28A(1) of the Act can make an application to the Collector under Sec. 28A(3) for making a reference to the court as defined in Sec. 3(d) of the Act and this right cannot be denied.

20. Once application is filed before the Collector, he has to take into account all relevant facts into consideration such as the latest award, date of award, effective application, enhancement or reduction of compensation. As long as the applicant fulfills the conditions envisaged under Section 28A, there will be no embargo to proceed with the application. If an award is passed by Reference Court after remand of the matter by appellate court, it is also an award under Section 28A.

21. In the case on hand Reference Court decided application by award dated 20.03.1990, but it was set aside by the appellate court by remitting the matter for fresh consideration. Thereafter, again fresh award was passed on 3.9.1997.

In all the above appeals there has to be reconsideration of the applications under Section 28A of the Act in the light of observations above within 4 months from the date of receipt of copy of this judgment. Accordingly appeals are allowed. No order as to costs.

MANJULA CHELLUR, ACTING CHIEF JUSTICE

V.CHITAMBARESH, JUDGE

vgs


W.A. No. 2017 of 2011 - C. Mathesu Vs. Secretary to Government, (2013) 41 KLR 677 : 2013 (2) KLT SN 140

posted Jun 24, 2013, 2:43 AM by Law Kerala   [ updated Jun 24, 2013, 2:45 AM ]


IN THE HIGH COURT OF JUDICATURE AT MADRAS

DATED : 26..04..2013

C O R A M

The Honourable Mr. R.K. AGRAWAL, Acting Chief Justice,

The Honourable Mr. Justice N. PAUL VASANTHAKUMAR

and

The Honourable Mr. Justice K. VENKATARAMAN

Writ Appeal No.2017 of 2011

C. Mathesu                                                                        .. Appellant

Vs.

1.     The Secretary to Government, Revenue Department, Fort St. George,

        Chennai-9.

2.     The Commissioner of Revenue Administration, Chepauk, Chennai-5.

3.     The District Collector, Collectorate, Salem-636 001.

4.     The Revenue Divisional Officer, Mettur Taluk, Salem District.

5.     The District Revenue Officer, Collectors Office, Salem District.

6.     The Tahsildar, Mettur Taluk, Salem District.                                

.. Respondents

Prayer : Writ Appeal filed under Section 15 of the Letters Patent Act against the order passed by a learned single Judge of this Court in Writ Petition No.21089 of 2011 dated 15.9.2011.

Head Note:-

Tamil Nadu Pension Rules, 1978 - Rule 9 - Tamil Nadu Government Fundamental Rules - Rule 56 (1) (c) - Departmental Proceedings - If a Government servant has been placed under suspension and not permitted to retire even after his attaining the age of superannuation in terms of Rule 56(1)(c) of the Fundamental Rules, the enquiry against him can proceed, and in that case, if charges of misconduct are proved, depending upon the nature of the charges, even the extreme penalty of dismissal or removal from service can be imposed. If there is any statutory provision for continuing the departmental proceedings like Rule 9(2) of the Pension Rules even after the Government servant has retired on attaining the age of superannuation, then the departmental proceedings already instituted before the retirement of the Government servant can be continued against the delinquent employee by treating him to be in service. If the Government servant has retired on attaining the age of superannuation and subsequently any departmental proceeding is to be instituted against him, in that event, under Rule 9(2)(b) of the Pension Rules, sanction of the Government is required to be taken and the event in respect of which the departmental proceedings are sought to be initiated should not have taken place more than four years before such institution. In cases where the Government Servant is allowed to retire on attaining the age of superannuation or where the departmental proceedings are to be initiated after the retirement, there is no question of passing the order of dismissal or removal from service and only the pension can be withheld, withdrawn or reduced.  The question of dismissal or removal of the said delinquent employee from service, therefore, does not arise. Since in the present case, the appellant was permitted to retire on attaining the age of superannuation without prejudice to the disciplinary proceedings pending against him, in our considered opinion, the said proceedings can be permitted to be continued in terms of Rule 9(2)(b) of the Pension Rules.

For Petitioner           ::   Mr. Elango        

For Respondent            ::   Mr. T.N. Rajagopalan, Addl. Govt. Pleader.

J U D G M E N T

R.K. Agrawal, Acting Chief Justice

Doubting the correctness of the judgment delivered by a Division Bench of this Court in Writ Appeal (MD) No.669 of 2011 (The District Collector, Tiruchirappalli, District, Tiruchirappalli vs. N. Mohanraj) decided on 22.7.2011, a Co-ordinate Bench had referred the present appeal to a Larger Bench.  The relevant portion of the order passed by the Co-ordinate Bench is reproduced below :-

The question that falls for consideration in this appeal is as to whether even in cases where there are serious charges of misappropriation and loss caused to the Government Exchequer, an employee, on attaining the age of superannuation, could be allowed to retire, without prejudice to the disciplinary proceedings which are contemplated.

2. There are conflicting decisions on this issue.  We doubt the correctness of the judgment rendered by a Division Bench of this Court in W.A. No.669 of 2011 dated 22.7.2011.  Hence, the matter needs to be adjudicated by a Larger Bench.

2. Law laid down by this Court in the case of District Collector, Tiruchirappalli (supra)

In the aforesaid case, the writ petitioner-N. Mohanraj was permitted to retire from service on 30.6.2010 on the attainment of the age of superannuation without prejudice to the disciplinary proceedings which are contemplated.  The learned single Judge had held that unless and until by invoking the powers under Rule 56(1)(c) of the Tamil Nadu Government Fundamental Rules (hereinafter referred to as the Fundamental Rules), the Government passes an order retaining the services of the Government Servants even after their attaining the age of superannuation, for the purpose of facing the disciplinary proceedings, the authority has no power to proceed with the disciplinary proceedings.  The learned single Judge, while holding so, has relied upon a judgment of this Court in P. Muthusamy vs. Tamil Nadu Cements Corporation Limited reported in 2006 (4) M.L.J. 504, wherein a Division Bench of this Court had in categoric terms held that permission to retire an employee without prejudice to the disciplinary proceedings is not authorized under any rule.  The District Collector, Tiruchirappalli preferred an appeal under Clause 15 of the Letters Patent against the judgment and order dated 6.7.2010 passed by the learned single Judge.  The Division Bench, after referring to the decisions of this Court in the case of Kootha Pillai vs. Commissioner, Municipal Administration, Chennai, 2009 (1) M.L.J. 761 and The State of Tamil Nadu vs. R. Karuppiah, 2005 (3) C.T.C. 4, which are both decisions of the Co-ordinate Bench, had dismissed the appeal preferred by the District Collector, Tiruchirappalli against the order of the learned single Judge.  The Division Bench reiterated the observation of the learned single Judge that unless and until an order under Rule 56(1)(c) of the Fundamental Rules is passed, no further proceedings can be continued under the Tamil Nadu Pension Rules, 1978 also.

3. Facts of the case

The appellant/writ petitioner was working as Village Administrative Officer at Olaipatti Village, on reaching the age of superannuation, was allowed to retire vide proceedings of the fourth respondent dated 30.6.2011, without prejudice to the disciplinary proceedings pending against him.  The charge against the appellant was that while he was working as V.A.O. in Navapatti Village, proceedings were initiated against him along with several other V.A.Os. for committing irregularities in disbursement of old age pension to senior citizens.  A charge memo had come to be issued to the appellant on 29.6.2011, just a day before his retirement, stating that while working as V.A.O., Navapatti, he had recommended the case of two unqualified persons for old age pension and had committed serious irregularities, in that he had misused his Government Service by acting in an irresponsible manner and was thereby responsible for causing loss to the State by making such recommendations.  The appellant gave a representation to the fifth respondent herein on 13.5.2011, citing the order passed by this Court in the case of one K. Sivaprakasam, who was one such V.A.O. who was proceeded against departmentally alongside the appellant, allowing him to retire by retaining an amount towards the loss caused by him from his terminal benefits and directing completion of the disciplinary proceedings within a stipulated period.  The appellant also pointed out the instance of one Rathnavel, another V.A.O. who too had been proceeded against, to compensate the loss caused by him by way of deduction of Rs.500/- from his monthly pension.  The appellant thus requested that his case may also be considered on the above lines and he be relieved from service as he was ready and willing to pay the compensation amount of Rs.1,200/- which was the loss allegedly caused by him to the Government.  However, as stated above, by the impugned order dated 30.6.2011, the appellant was permitted to retire from service on 30.6.2011 without prejudice to the disciplinary proceedings pending against him.  Challenging the charge memo dated 29.6.2011 as well as the impugned order dated 30.6.2011, the appellant approached the writ court.  

4. Before the learned single Judge, the appellant/writ petitioner contended that once the respondents had permitted him to retire from service without invoking the powers under Rule 56(1)(c) of the Fundamental Rules to suspend him while he was still in service and extending his service beyond the date of his retirement so as to enable them to proceeded with the disciplinary proceedings pending against him, the Government cannot after his retirement proceed against him.  According to him, mere deployment of the words without prejudice to the disciplinary proceeding will not empower the respondents to proceed against him even after his retirement, as has been held by this Court in the case of K. Durairajan vs. Secretary to Government Commercial Taxes & Registration Department reported in 2010 (4) C.T.C. 504.  The appellant further contended that under Rule 56(1)(c) of the Fundamental Rules, the Government can suspend a Government Servant before the last date of his retirement and can extend his services beyond the date of his retirement, thereby facilitating the Government to complete the departmental proceedings pursuant to the charges framed under Rule 17(b) of the Rules for imposing a major penalty, but the Government cannot continue the departmental proceedings initiated under Rule 17(b) without invoking its power under Rule 56(1)(c).  The fourth respondent having permitted the appellant to retire from service from 30.6.2011, the relationship of employer and employee ceased to exist and the respondents had no disciplinary control over him thereafter, and unless they had exercised their powers under Rule 56(1)(c) above, they had no power to proceed with the disciplinary proceedings under Rule 17(B).  In the present case, the power available to the respondents under Rule 56(1)(c) was not exercised by them before the impugned order dated 30.6.2011 came to be passed and therefore, the respondents had no authority to proceed against him thereafter.  It was also contended that as per the scheme of the Tamil Nadu Pension Rules, 1978 (hereinafter referred to as the Pension Rules), if the departmental proceedings involved pecuniary loss to the Government, the amount so involved can only be withheld from the Gratuity amount due to the Government Servant and apart from that, the Government cannot withhold any other amount due to the Government Servant.  In his case, the petitioner contended, the respondents ought to have paid him the remaining amount after deducting the sum of Rs.1,200/-, which is the alleged loss caused by him to the Government, from his retirement benefits.  

5. The learned single Judge, relying upon the decisions of the Hon'ble Supreme Court in the cases of State of U.P. vs. Brahm Datt Sharma, (1987) 2 S.C.C. 179; Special Director vs. Mohd. Ghulam Ghouse, (2004) 3 S.C.C. 440 and Union of India vs. Kunisetty Satyanarayana, (2006) 12 S.C.C. 28, had held that neither the charge memo issued against the petitioner can be quashed as he is found to have indulged in corrupt practice nor can any relief be granted on the ground that some other person got such benefit by an order of this Court.   Feeling aggrieved, the writ petitioner had preferred the present appeal under Clause 15 of the Letters Patent, on the ground that the Government had no jurisdiction to proceed with the charges framed under Section 17(b) against the delinquent servant unless the powers under Rule 56(1)(c) of the Fundamental Rules are invoked by the Government.  Further, a Division Bench decision of this Court to the effect that once the Government had allowed its servant to retire from service without invoking the power under Rule 56(1)(c) of the Fundamental Rules the Government cannot proceed with the 17(b) enquiry, has not been considered by the learned single Judge, which was specifically raised in the grounds in the writ petition.  It may be mentioned here that the learned single Judge had dismissed the writ petition in limine.

6. Rival Submissions

We have heard Mr. Elango, learned counsel for the appellant and Mr. T.N. Rajagopalan, Additional Government Pleader for the respondents.

7. Mr. Elango, learned counsel for the appellant submitted that the writ petitioner/appellant was allowed to retire on 30.6.2011 without invoking the powers under Rule 56(1)(c) of the Fundamental Rules, even though the charge sheet was issued to him on 29.6.2011, i.e., he was not retained in service after 30.6.2011 and therefore, the departmental proceedings could not have been continued against him.  According to the learned counsel, the provisions of Rule 9(2)(a) of the Pension Rules cannot be pressed into service.  He further submitted that in respect of two such V.A.Os., viz. Thiru. K. Sivaprakasam and Thiru. Rathnavel, they were allowed to retire by retaining an amount towards the loss caused from the terminal benefits and by directing to compensate the loss caused by way of deduction from the monthly pension respectively.  According to the learned counsel, while giving such benefit to the aforesaid employees, the respondents cannot adopt a different approach towards the appellant, which would be violative of Article 14 of the Constitution of India.  In support of his aforesaid plea, the learned counsel for the appellant has relied upon the following decisions :-

(v) Bhagirathi Jena vs. Board of Directors, O.S.F.C., (1999) 3 S.C.C. 666;

(vi) State of Tamil Nadu vs. R. Karuppiah, 2005 (3) C.T.C. 4;

(vii) K. Durairajan vs. Secretary to Government, Commercial Taxes & Registration Department, 2010 (4) C.T.C. 504; and                                

(viii) The District Collector, Tiruchirappalli, District, Tiruchirappalli vs. N. Mohanraj, Writ Appeal (MD) No.669 of 2011 dated 22.7.2011                

8. On the contrary, Mr. T.N. Rajagopalan, learned Additional Government Pleader appearing for the respondents submitted that even though the powers under Rule 56(1)(c) of the Fundamental Rules have not been exercised in the present case, as the writ petitioner/appellant was permitted to retire from service in the afternoon on 30.6.2011 without prejudice to the departmental proceedings pending against him, in view of the provisions of Rule 9(2)(a) of the Pension Rules, the departmental proceedings would continue and therefore, the writ petitioner/appellant cannot contend that the departmental proceedings against him had lapsed.  He further submitted that the learned single Judge had rightly declined to interfere with and quash the charge memo issued against the appellant and the provisions of Article 14 of the Constitution are not attracted to a case where the Government, for some reason, had not initiated the departmental proceedings against its erring officials by accepting the amount towards the loss suffered by it.  In support of his aforesaid submissions, he has relied upon the following decisions :-

(ix) Ramesh Chandra Sharma vs. Punjab National Bank, (2007) 9 S.C.C. 15;

(x) V. Padmanabham vs. Government of Andhra Pradesh, (2009) 15 S.C.C. 537; and                                                                                 

(xi) Y. Raja vs. Joint Registrar of Co-op. Societies, 2011 (1) C.T.C. 18

9.  Before considering the submissions advanced by the learned counsel for the parties, for a better understanding of the issues involved in this case, we feel it appropriate to reproduce below the relevant provisions of the Fundamental Rules and the Pension Rules applicable to the employees of the Government of Tamil Nadu.  

10.         Statutory Provisions

I.          Tamil Nadu Government Fundamental Rules

56(1) Retirement on Superannuation.(a) Every Government servant in the superior service shall retire from service on the afternoon of the last day of the month in which he attains the age of fifty-eight years. He shall not be retained in service after that age except with the sanction of the Government on public grounds, which must be recorded in writing but he shall not be retained after the age of sixty years except in very special circumstances:

Provided that this clause shall not apply to Government servants who are treated as in superior service for the purpose of these rules but as in the Tamil Nadu Basic Service for the purpose of pension. Such Government servants as well as all basic servants shall retire on attaining the age of sixty years :

Provided further that on and from the 1st January 1993, a District Judge, Chief Judicial Magistrate, Sub-ordinate Judge or District Munsif-cum-Judicial Magistrate, who, in the opinion of the High Court, Madras, has potential for continued useful service beyond the age of fifty-eight years, shall retire from service on attaining the age of sixty years.

Explanation I.When a Government servant is required to retire, revert or cease to be on leave on attaining a specific age, the day on which he attains that age is reckoned as a non-working day and the Government servant shall retire, revert or cease to be on leave, with effect on and from that day.

Explanation II.The grant under rule 86 or corresponding other rules of leave extending beyond the date on which a Government servant must retire or beyond the date upto which a Government servant has been permitted to remain in service shall not be treated as sanctioning an extension of service for the purpose of Pensionary or Contributory Provident Fund benefits or retention of lien. The Government servant shall, for purpose of pensionary benefits, be deemed to have retired from service on the date of retirement or on the expiry of the extension of service, if any, and shall become eligible to all pensionary benefits from the date of retirement or from the day following the date of termination of extension of service, as the case may be.

(b) [ Omitted ]

(c) Notwithstanding anything contained in clause (a), a Government servant who is under suspension,

(i) on a charge of misconduct; or

(ii) against whom an enquiry into grave charges of criminal misconduct or allegations of criminal misconduct, is pending; or

(iii) against whom an enquiry into grave charges is contemplated or is pending; or

(iv) against whom a complaint of criminal offence is under investigation or trial

shall not be permitted by the *appointing authority to retire on his reaching the date of retirement, but shall be retained in service until the enquiry into the charge of misconduct or criminal misconduct or the enquiry into allegations of criminal misconduct or the enquiry into contemplated charges or disciplinary proceeding taken under rule 17(c) of the Tamil Nadu Civil Services (Discipline and Appeal) Rules or rule 3(c) of the Tamil Nadu Police Sub-ordinate service (Discipline and Appeal) Rules, as the case may be, in respect of item (iv) above is concluded and a final order passed thereon by the competent authority or by any higher authority.

Explanation. For the purpose of this clause, the expression criminal misconduct shall have the same meaning as in Section 13 of the Prevention of Corruption Act, 1988 (Central Act 49 of 1988).

Instruction under Rule 56 (1) (c).Whether a Government servant referred to in clause (c) is fully exonerated or not, he shall be considered to have been on extension of service for the period from the date of retirement to the date of termination of the proceedings. During such an extension of service, the service rights which have accrued to the Government servant shall freeze at the level reached on the date of retirement and the salary during that period shall not exceed the pension which has accrued to the Government servant on that date.                

II.         Tamil Nadu Pension Rules, 1978

Rule 9(1)(a). The Government reserve to themselves the right of withholding or withdrawing a pension or part thereof, whether permanently or for a specified period if, in any departmental or judicial proceeding, the pensioner is found guilty of grave misconduct or negligence during the period of his service, including service rendered upon re-employment after retirement, and such withholding or withdrawing the pension may be effected irrespective of the fact whether or not any pecuniary loss on account of such grave misconduct or negligence was caused to the Government, to any local body or to any co-operative society comprising of government servants and registered under the Tamil Nadu Co-operative Societies Act, 1961;

(Provided that before passing an order under this sub-rule withholding or withdrawing the pension of a pensioner, the Tamil Nadu Public Service Commission shall be consulted if the pensioner does not agree to such withholding or withdrawal of the pension. The Tamil Nadu Public Service Commission need not be consulted in cases where the pensioner agrees to withholding or withdrawal of the pension but a copy of the order passed by the Government in such cases shall be sent to the commission:)

Provided further that where a part of pension is withheld or withdrawn, the amount of such pension shall not be reduced below the limit specified in sub-rule (5) of Rule 43.

(b) In case there is any pecuniary loss caused to the Government, to any local body or to any co-operative society comprising of Government servants and registered under the Tamil Nadu Co-operative Societies Act, 1961, and if, in any departmental or Judicial proceedings, the pensioner is found guilty of grave misconduct or negligence during the period of his service including service rendered upon re-employment after retirement, the Government shall also have the right of ordering recovery from the pension (or Death-cum-Retirement Gratuity) of the whole or part of the pecuniary loss caused by such grave misconduct or negligence:

Provided that the Tamil Nadu Public Service Commission shall be consulted before any final orders under this clause are passed.

Explanation.- "Judicial proceeding" shall include proceedings before any Tribunal constituted by an Act of Parliament or the State Legislature or by a Rule.)

(2)(a) The departmental proceeding referred to in sub-rule (1), if instituted while the Government servant was in service, whether before his retirement or during his re-employment, shall, after the final retirement of the Government servant be deemed to be proceedings under this rule and shall be continued and concluded by the authority by which they were commenced in the same manner as if the Government servant had continued in service:

Provided that where the departmental proceedings are instituted by an authority subordinate to the Government, that authority shall submit a report recording its findings to the Government.

(b) The departmental proceedings, if not instituted while the Government servant was in service, whether before his retirement or during his re-employment,-

(i) shall not be instituted save with the sanction of the Government;

(ii) shall not be in respect of any event which took place more than four years before such institution; and

(iii) shall be conducted by such authority and in such place as the Government may direct and in accordance with the procedure applicable to departmental proceedings in which an order of dismissal from service could be made in relation to the Government servant during his service.

(3) [ Omitted ]

(4) In the case of a Government servant who has retired on attaining the age of superannuation or otherwise and against whom any departmental proceedings are continued under sub-rule (2), a provisional pension as provided in Rule 60 or Rule 69, as the case may be, shall be sanctioned.

(5) Where the Government decide not to withhold or withdraw pension but order recovery of pecuniary loss from pension, the recovery shall not ordinarily be made at a rate exceeding one-third of the pension admissible on the date of retirement of a Government servant.

(6) For the purpose of this rule, -

[(a) departmental proceedings shall be deemed to include the enquiry pending before the Tribunal for Disciplinary Proceedings;

(b) departmental proceedings shall be deemed to be instituted on the date on which the statement of charges is issued to the Government servant or pensioner or if the Government servant has been placed under suspension from an earlier date, on such date; and

(c) judicial proceedings shall be deemed to be instituted,-

(i) in the case of criminal proceedings, on the date of the complaint or report of a police officer, of which the Magistrate take cognizance, is made; and

(ii) in the case of civil proceedings, on the date on which plaint is presented in the Court.

NOTE.

(1) As soon as proceeding of the nature referred to in the above rule are instituted, the authority which institutes such proceedings should without delay, intimate the fact to the Accountant-General concerned.

(2) If an officer against, whom an enquiry is held is unable to satisfactorily account for possession by himself or by any other person on his behalf, e.g., dependants, or pecuniary resources or property disproportionate to his known sources of income, a charge of corruption should be presumed to have been proved against him and the case will come within the purview of this rule. The position is that the term "grave misconduct" used in this rule is wide enough to include corrupt practices. In cases where the charge of corruption is proved only after pension has been sanctioned, and it is not therefore possible to invoke the provisions of Rule 6, action to withhold or withdraw pension may be taken under this rule. In this connection Substituted for the expression "the provisions of Rule 9(2) and 9(3) are" vide S.R.O. No. B- 83/94. [the provisions of Rule 9(2) is] to be noted carefully. In accordance with these provisions the property or pecuniary resources in respect of Substituted for the expression "the departmental or judicial proceeding" vide SRO B-83/94. [the departmental proceedings] are instituted under Rule 9 should have been acquired by the person concerned or any other person on his behalf any time within the period of four years before the institution of such proceedings if not instituted while the officer was on duty either before retirement or during re-employment.        

Rule 32. Superannuation Pension. A superannuation pension is granted to a Government servant entitled or compelled, by rule, to retire at a particular age.

Explanation.- For purposes of this rule,

(xii) The date of compulsory retirement of a Government Servant in superior service is the date on which he attains the age of 58 years.  The date of compulsory retirement of a Government servant in Last Grade Service is the date on which he attains the age of 60 years.                                

(xiii) The age of retirement of trained teachers in the education institution under the management of Government is the date on which he attains the age of 58 years.                                                

(xiv) The date of retirement in the case of persons who had taken part in the freedom struggle and courted imprisonment and who have been, appointed to the posts of social workers up to the end of December 1965, shall be the date on which they attain the age of 60 years.

NOTE. A Government servant under suspension, on a charge of misconduct, shall not be required or permitted to retire but shall be retained in service until the enquiry into the charge is concluded and final order is passed by a competent authority.                

11. Discussion        

As regards the Fundamental Rules, from a perusal of Rule 56(1)(a) reproduced above, we find that ordinarily every Government servant is superannuated from service on the afternoon of the last day of the month in which he attains the age of 58 years.  However, he can be retained in service for additional two years with the sanction of the Government on public grounds, which must be recorded in writing. Under the first proviso to Rule 56, the Government servants who are treated as in superior service shall retire on attaining the age of 60 years.  Under the second proviso, the judicial officers in the State Service who in the opinion of this Court has potential for continued useful service beyond the age of 58 years shall retire from service on attaining the age of 60 years.  Explanation-I provides that if a Government servant is required to retire, revert or cease to be on leave on attaining a specific age, the day on which he attains that age is reckoned as a non-working day, then the Government servant shall retire, revert or cease to be on leave, with effect on and from that day, i.e., the non-working day. Explanation-II provides that the date upto which a Government servant has been permitted to remain in service beyond the date of his retirement shall not be treated as sanctioning an extension of service for the purpose of pensionary or contributory provident fund benefits or retention of lien and he shall, for purpose of pensionary benefits, be deemed to have retired from service on the date of retirement or on the expiry of the extension of service, if any, and shall become eligible to all pensionary benefits from the date of retirement or from the day following the date of termination of extension of service, as the case may be.  Sub-clause (c) of Rule 56(1) starts with a non-obstante clause.  It provides that a Government servant who is under suspension either on a charge of misconduct or against whom an enquiry into grave charges of criminal misconduct or allegations of criminal misconduct is pending or against whom an enquiry into grave charges is contemplated or is pending or against whom a complaint of criminal offence is under investigation or trial, then such a Government servant shall not be permitted by the appointing authority to retire on his reaching the date of retirement, but shall be retained in service until the enquiry into the charge of misconduct or criminal misconduct or the enquiry into allegations of criminal misconduct or the enquiry into contemplated charges or disciplinary proceeding taken under rule 17(c) of the Tamil Nadu Civil Services (Discipline and Appeal) Rules or rule 3(c) of the Tamil Nadu Police Sub-ordinate service (Discipline and Appeal) Rules, as the case may be, in respect of a complaint of criminal offence is under investigation or trial is concluded and a final order passed thereon by the competent authority or by any higher authority, and the provisions of sub-clause (a) of Rule 56 would not apply.  The State Government had issued instructions under Rule 56(1)(c) of the Fundamental Rules to the effect that whether a Government servant referred to in clause (c) is fully exonerated or not, he shall be considered to have been on extension of service for the period from the date of retirement to the date of termination of the proceedings and during such an extension of service, the service rights which have accrued to the Government servant shall freeze at the level reached on the date of retirement and the salary during that period shall not exceed the pension which has accrued to the Government servant on that date.

12. As far as the Pension Rules are concerned, under Rule 9(1)(a), the Government has reserved to it the right of withholding or withdrawing a pension or part thereof, whether permanently or for a specified period if, in any departmental or judicial proceeding, the pensioner is found guilty of grave misconduct or negligence during the period of his service.  It is also applicable in respect of service rendered upon re-employment after retirement.  The Government can withhold or withdraw the pension irrespective of the fact whether any pecuniary loss on account of the misconduct or negligence was caused to the Government or not.  However, the order withholding or withdrawing the pension can be passed only after consultation with the Tamil Nadu Public Service Commission, in case the pensioner does not agree to such a proposal.  Under the second proviso, it has been stipulated that withholding or withdrawing a part of the pension cannot reduce the pension payable below the limit specified in sub-rule (5) of Rule 43.  Clause (b) of Rule 9(1) provides that if any pecuniary loss has been caused to the Government and in any departmental or judicial proceedings, the pensioner is found guilty of grave misconduct or negligence during the period of his service, including the service rendered upon re-employment after retirement, then the Government shall have the right of ordering recovery of the whole or part of the pecuniary loss caused by such grave misconduct or negligence from the pension or Death-cum-Retirement Gratuity.  However, this can be done only after consultation with the Tamil Nadu Public Service Commission. Clause (a) of sub-rule (2) of Rule 9 provides that the departmental proceedings referred to in sub-rule (1), whether instituted while the Government servant was in service, whether before his retirement or during his re-employment, shall, after the final retirement of the Government servant, be deemed to be proceedings under this rule and shall be continued and concluded by the authority by which they were commenced in the same manner as if the Government servant had continued in service.  Under the proviso, it has been stipulated that if an authority subordinate to the Government has instituted the departmental proceedings, then the report has to be submitted to the Government.  Clause (b) of sub-rule (2) of Rule 9 provides that if the departmental proceedings have not been instituted while the Government servant was in service or during his re-employment, it shall not be instituted without the sanction of the Government and further, the departmental proceedings shall not be in respect of any event which took place more than four years before such institution and it shall be conducted by such authority and in such place as the Government may direct, which should be in accordance with the procedure applicable to departmental proceedings in which an order of dismissal from service could be made in relation to the Government servant during his service.  Sub-rule (4) of Rule 9 provides that where a Government servant has retired on attaining the age of superannuation or otherwise and against whom any departmental proceedings are continued under sub-rule (2), a provisional pension as provided in Rule 60 or Rule 69, as the case may be, shall be sanctioned.  Under sub-rule (5), the Government has been empowered to order recovery of pecuniary loss from the pension at a rate not exceeding 1/3rd of the pension admissible on the date of retirement of a Government servant.  Under sub-rule (6), it has been provided that the departmental proceedings shall be deemed to include the enquiry pending before the Tribunal for Disciplinary Proceedings and it shall be deemed to be instituted on the date on which the statement of charges is issued to the Government servant or pensioner or if the Government servant has been placed under suspension from an earlier date, on such date.   Further, the judicial proceedings shall be deemed to be instituted, in the case of criminal proceedings, on the date of the complaint or report of a police officer, of which the Magistrate take cognizance, is made and in the case of civil proceedings, on the date on which the plaint is presented in the Court.  The Note found after sub-rule (6) of Rule 9 provides that as soon as the proceedings of the nature referred to in Rule 9 are instituted, the authority which institutes such proceedings has to intimate the fact to the Accountant-General concerned without any delay.  The Note further provides that if an officer against whom an enquiry is held is unable to satisfactorily account for possession by himself or by any other person on his behalf, e.g., dependants, or pecuniary resources or property disproportionate to his known sources of income, a charge of corruption should be presumed to have been proved against him and the case will come within the purview of Rule 9.  Where the charge of corruption is proved only after pension has been sanctioned and it is not possible to invoke the provisions of Rule 6, then action to withhold or withdraw the pension may be taken under Rule 6.  

13. Rule 32 of the Pension Rules provides for grant of superannuation pension to a Government servant who retires at a particular age.  The Explanation to Rule 32 provides the different age when a Government servant would retire.  The Note at the end of Rule 32 provides that a Government servant who is under suspension on a charge of misconduct shall not be required or permitted to retire, but shall be retained in service until the enquiry into the charge is concluded and a final order is passed by a competent authority.

14. The provisions of Rule 56(1) under the Fundamental Rules deal with retirement on superannuation.  It only provides that a Government servant who has been placed under suspension shall not be permitted to retire, but shall be retained in service until the enquiry into the charge of misconduct etc. is concluded and a final order is passed by the competent authority.  Whereas, under Rule 9 of the Pension Rules, the Government has been given a right to withhold or withdraw pension.  It provides for continuance of the departmental proceedings instituted while the Government servant was in service or even after his retirement and if the Government servant is found guilty of causing loss of revenue to the Government or otherwise found guilty of grave misconduct or negligence during the period of his service, then the Government can withhold or withdraw, either in part or full, his pension.  Thus, the two provisions operate in different fields.  

15. In Bhagirathi Jenas case (supra), the Hon'ble Supreme Court, while considering the provisions of the Regulations framed under the Orissa State Financial Corporation Employees Provident Fund Regulations, 1959 and the Orissa State Financial Corporation Staff Regulations, 1975, has held that there is no specific provision for deducting any amount from the provident fund consequent to any misconduct determined in the departmental enquiry nor was any provision made for continuance of the departmental enquiry after superannuation.  In paragraphs 7 and 8 of the reports, the Hon'ble Supreme Court has observed as follows :-

7. In view of the absence of such provision in the abovesaid regulations, it must be held that the Corporation had no legal authority to make any reduction in the retiral benefits of the appellant. There is also no provision for conducting a disciplinary enquiry after retirement of the appellant and nor any provision stating that in case misconduct is established, a deduction could be made from retiral benefits. Once the appellant had retired from service on 30.6.95, there was no authority vested in the Corporation or continuing the departmental enquiry even for the purpose of imposing any reduction in the retiral benefits payable to the appellant. In the absence of such authority, it must be held that the enquiry had lapsed and the appellant was entitled to full retiral benefits on retirement.

8. Learned senior counsel for the respondent placed reliance on the judgment of this Court in T.S. Mankad vs. State of Gujarat reported in [1989] 3 SCR 214.  It is true that that was a case of imposing a reduction in the pension and gratuity on account of unsatisfactory service of the employee as determined in an enquiry which was extended beyond the date of superannuation. But the above decision cannot help the respondent inasmuch as in that case there was a specific rule namely Rule 241-A of the Junagadh State Pension and Parwashi Allowance Rules, 1932 which enabled the imposition of a reduction in the pension or gratuity of a person after retirement. Further, there were rules in that case which enabled the continuance of departmental enquiry even after superannuation for the purpose of finding out whether any misconduct was established which could be taken into account for the purpose of Rule 241-A. In the absence of a similar provision with Regulations of the respondent Corporation, the above judgment of Mankad's case cannot help the respondent.

16. In R. Karuppiahs case (supra), a Division Bench of this Court was seized of a matter where the respondent had been placed under suspension while working as Inspector of Police, Manamadurai Circle on certain grave charges with effect from 20.11.1989.  He was retired from service on 31.5.1990 and the departmental enquiry was initiated by referring the matter to the Tribunal for Disciplinary Proceedings on 30.7.1990.  While the matter was pending before the Tribunal for Disciplinary Proceedings, the respondent approached the Tamil Nadu Administrative Tribunal, which by its order dated 19.10.2011, allowed the two applications preferred by the respondent and set aside the suspension order as well as the charge memo  dated 30.7.1990 and directed the respondent be paid all the retirement benefits within a period of six months.  The order dated 19.10.2011 passed by the Tamil Nadu Administrative Tribunal was under challenge before the Division Bench in the above case.  The Division Bench, after referring to Rule 56(1)(a) and (c) of the Fundamental Rules, had held that without fulfilling the requirement of Rule 56(1)(c) of the Fundamental Rules which is mandatory, the initiation of departmental proceedings against the first respondent is not sustainable under law and therefore, the very proceedings are liable to be set aside.  The Division Bench has relied upon the following observations of an earlier Division Bench decision of this Court in the case of N.M. Somasundaram vs. The Director General of Police, Madras-4 reported in 1997 W.L.R. 120 :-

"A reading of Rule 56(a) and (c) together would lead to an irresistible conclusion that in order to retain a public servant or a Government servant in service on attaining his age of superannuation, a positive order in writing shall have to be passed by the Government giving the reasons as to on what grounds which should be on public grounds, a Government servant is retained in service. No doubt Rule 56(c) says that a Government servant under suspension on a charge of misconduct should not be required or permitted to retire of his reaching the date of compulsory retirement. It further says that he should be retained in service until the enquiry into the charge is conducted and a final order passed thereon by the Competent Authority. Therefore, even though it may not be necessary to permit to Government servant against whom a disciplinary proceeding is pending, to retire from service, in order to retain him in service for the purpose of disciplinary proceedings, a positive order in writing is required to be passed. The public ground for passing the said order is the pendency of the disciplinary proceeding. But, what is necessary is that there should be an order passed by the Government not permitting a Government Servant to retire from service. The instruction under Rule 56(c) also does not help the State Government. The instruction reads thus:-

"Whether a Government servant referred to in clause (c) is fully exonerated or not he shall be considered to have been on extension of service for the period from the date of compulsory retirement to the date of termination of the proceedings. During such an extension of service, the service rights which have accrued to the Government servant, shall freeze at the level reached on the date of compulsory retirement and the salary during the period shall not exceed the pension which has accrued to the Government servant on the date."

It only provides that in a case where a Government servant is exonerated or not, he shall be considered to have been on extension of service for the period from the date of termination of the proceedings. The further words in this instruction are, during such an extension of service, the service rights which have accrued to the Government servant shall freeze at the level reached on the date of compulsory retirement and the salary during that period shall not exceed the pension, which has accrued to the Government servant on the date. The instruction only takes away the effect, if any, of the orders passed by the State Government in writing, retaining a Government servant even after attaining the age of superannuation. Therefore, it states that even retention does not help him for obtaining any service benefits and those service benefits will freeze on the date he attains the age of superannuation."

Referring to sub-rules 2(a) and 6(b)of Rule 9 of the Pension Rules, the Division Bench had held that they come into existence only in the event of fulfilling the requirements under Rule 56(1)(c) of the Fundamental Rules even if it can be said that they are extension of Rules 56(1)(a) and (c) of the Fundamental Rules and in the event of non-compliance of Rule 56(1)(c) of the Fundamental Rules, the petitioners cannot seek the aid of the above said rules for the unjust acts.  

17. In K. Durairajans case (supra), the petitioner was served with three charge memos and while two such charge memos were still pending, he was permitted to retire without prejudice to the disciplinary proceedings in respect of the pending charges.  In that case, the learned single Judge observed as follows :-

14. At the outset, it is to be stated that there is absolutely no provision of any law or regulation enabling the first respondent to keep the disciplinary proceedings alive even after allowing the government servant concerned to retire. If the disciplinary authority decides to continue the disciplinary proceedings even beyond the due date of retirement the only option is to invoke Rule 56(1)(c) of the Fundamental Rules.

However, in paragraph 34 of the reports, the learned Judge had permitted the respondents to take recourse to Rules 9(2)(a) read with 9(1)(b) of the Pension Rules as per the terms and conditions of the services of the petitioner therein.  

18. In the case of The District Collector, Tiruchirappalli, District, Tiruchirappalli (supra), the Division Bench, as stated hereinabove, following the earlier Division Bench decision in R. Karuppiahs case (supra), had held that unless and until an order under Rule 56(1)(c) of the Fundamental Rules is passed, no further proceedings can be continued under the Tamil Nadu Pension Rules, 1978.

19. In Ramesh Chandra Sharmas case (supra), the Hon'ble Supreme Court was considering the question whether in terms of the rules governing the terms and conditions of service of employees of Punjab National Bank, it was permissible for the Bank to continue the departmental proceedings despite the fact that the respondent attained the age of superannuation.  Regulation 20(3)(iii) of the Punjab National Bank Officer Employees (Discipline & Appeal) Regulations, 1977, which are statutory in nature, reads thus :-

20(3)(iii). The officer against whom disciplinary proceedings have been initiated will cease to be in service on the date of superannuation but the disciplinary proceedings will continue as if he was in service until the proceedings are concluded and final order is passed in respect thereof. The concerned officer will not receive any pay and /or allowance after the date of superannuation. He will also not be entitled for the payment of retirement benefits till the proceedings are completed and final order is passed thereon except his own contribution to CPF.

The Hon’ble Supreme Court observed that the said Regulation clearly envisages continuation of a disciplinary proceeding despite the officer ceasing to be in service on the date of superannuation. For the said purpose a legal fiction has been created providing that the delinquent officer would be deemed to be in service until the proceedings are concluded and final order is passed thereon. The said Regulation being statutory in nature should be given full effect.  The Hon'ble Supreme Court, after referring to several earlier decisions of the Apex Court, including Bhagirathi Jena (supra), has concluded that it was permissible for the Bank to continue with the disciplinary proceedings relaying on or on the basis of Regulation 20(3)(iii) of the aforesaid Regulations.

20. In V. Padmanabhams case (supra), the Hon'ble Supreme Court was considering a case where the appellant was placed under suspension on 29.1.1993.  A departmental proceedings was initiated.  An Enquiry Officer was appointed for the said purpose.  The appellant was found guilty in the said departmental proceedings and an order of dismissal from service was passed on 21.10.1994.  The appeal preferred by the appellant was also dismissed.  The appellant filed a Original Application before the Andhra Pradesh Administrative Tribunal, which set aside the order of dismissal.  The State filed a writ petition thereagainst before the High Court.  The High Court set aside the order passed by the Tribunal.  The appellant preferred a Special Leave Petition before the Supreme Court.  It may be mentioned here that the appellant was allowed to superannuate pending the enquiry proceedings.  The contention of the appellant before the Supreme Court was that the impugned judgment of the High Court should be set aside and the departmental proceedings may not be directed to be continued.  The case set up by the State was that despite superannuation of the appellant, the departmental proceedings which were pending against him must be held to be continuing in terms of the Andhra Pradesh Pension Code and thus, there is no legal impediment in imposing any punishment withdrawing the whole or part of the pension so as to enable the State to recover the amount which had suffered owing to the acts of omission and commission on the part of the appellant.  In this context, it must be noted that Rule 9(2) of the Andhra Pradesh Pension Code is in pari materia with the Tamil Nadu Pension Rules.  The Hon'ble Supreme Court has held that the Pension Code raises a legal fiction in terms whereof, the departmental proceedings would be deemed to have continued against the delinquent employee.  

21. In the case of State of U.P. vs. Harihar Bholenath reported in (2006) 13 S.C.C. 460, the Hon'ble Supreme Court, in paragraph 10 of the reports, has laid down as follows :-

10. A departmental proceeding can be initiated for recovery of amount suffered by the State Exchequer owing to the acts of omission or commission of a delinquent employee in three different situations:

i) When a disciplinary proceeding is initiated and concluded against a delinquent employee before he reaches his age of superannuation;

ii) When a proceeding is initiated before the delinquent officer reached his age of superannuation but the same has not been concluded and despite superannuation of the employee, an order of recovery of the amount from the pension and gratuity is passed; and

iii) An enquiry is initiated after the delinquent employee reaches his age of superannuation.

22. In Y. Rajas case (supra), a Division Bench of this Court, while considering Rules 9(2)(a) and 9(2)(b) of the Pension Rules, has held as follows:-

From the above, it could be understood that for the purpose of continuing such proceedings, it shall be treated as if the Government Servant has been continuing in service. It also states that the departmental proceedings instituted under the relevant Rule applicable to the Government Servant shall be deemed to be a proceeding issued under Rule 9 of the Pension Rules. In the case on hand, the departmental proceedings against the appellant was instituted under Section 17(b) of the Rules, which provides for various punishments, such as dismissal, removal from service etc., Now on account of his retirement, as per the impugned order, there can be no impediment to continue the proceedings, but it shall be deemed that it is a proceeding initiated under Rule 9 of the Pension Rules. In effect, on completion of such enquiry, the respondent cannot impose any punishment upon the appellant, as provided in Rule 17(b) of the Rules.  Instead, the Government can withhold or withdraw the pension as provided in Rule 9(1)(a) of the Rules.

Referring to Rule 56(c) of the Fundamental Rules, the Division Bench has held as follows :-

Since the Government Servant was on suspension on the date of his attaining the age of superannuation, the Division Bench held that such proceedings cannot be continued after his retirement, because there was no order passed retaining him in service. But, in the case on hand, the appellant was not under suspension, and therefore, question of retaining him in service and continuing his suspension does not arise. If only the appointing authority decides to continue to deal with the charges under Rule 17(b) of the Rules, it is necessary to retain the Government Servant in service by passing an order required under Rule 56(c) of the Fundamental Rules and to keep him under suspension. When it is otherwise proposed to continue the proceedings under Rule 9(2)(a) of the Pension Rules, there is no need to pass any order retaining the Government Servant in service and to continue to place him under suspension.

The Division Bench also referred to the decision of the Supreme Court in the case of UCO Bank vs. Rajinder Lalcapoor reported in (2008) 5 S.C.C. 257, where the Hon'ble Supreme Court, after analyzing various judgments on the subject, has ultimately held in paragraph 29 of the reports as follows :-

We have noticed in para 15 of our Judgment that ordinarily no disciplinary proceedings can be continued in absence of any rule after an employee reaches his age of superannuation. A rule which would enable the disciplinary authority to continue a disciplinary proceeding despite the officers reaching the age of superannuation must be a statutory rule. A fortiori it must be a rule applicable to disciplinary proceedings.

23. The Hon'ble Supreme Court in the case of State of Rajasthan vs. Gopi Kishan Sen reported in 1993 Supp (1) S.C.C. 522, has held that the rule of harmonious construction of apparently conflicting statutory provisions is well established for upholding and giving effect to all the provisions as far as it may possible, and for avoiding the interpretation which may render any of them ineffective or otiose.  Similarly, in the case of Jagdish Singh vs. Lt. Governor, Delhi reported in (1997) 4 S.C.C. 435, the Hon'ble Supreme Court has held that it is a cardinal principal of construction of a statute or the statutory rule that efforts should be made in construing the different provisions, so that, each provision will have its play and in the event of any conflict, a harmonious construction should be given.  It has been further held in that case as follows :-

A statute or a rule made thereunder should be read as a whole and one provision should be construed with reference to the other provision so as to make the rule consistent and any construction which would bring any inconsistency or repugnancy between one provision and the other should be avoided. One rule cannot be used to defeat another rule in the same rules unless it is impossible to effect harmonisation between them. The well-known principle of harmonious construction is that effect should be given to all the provisions, and therefore, this Court had held in several cases that a construction that reduces one of the provisions to a 'dead letter' is not a harmonious construction as one part is being destroyed and consequently court should avoid such a construction.

24. We may mention here that the Fundamental Rules of the Tamil Nadu Government have come into force with effect from 1.1.1922.  They are referable to the powers exercised under Section 96-B of the Government of India Act, 1919, which is akin to Article 309 of the Constitution of India.  Similarly, the Tamil Nadu Pension Rules, 1978 have been framed by the Governor of Tamil Nadu in exercise of the powers under Article 309 of the Constitution of India.  Thus, it is evident that both the rules are statutory in nature.  Applying the rule of harmonious construction, we are of the considered opinion that both the rules apply in different circumstances  the Fundamental Rules, making provision for treating the Government employee in service even after he reaches the date of superannuation in case he has been placed under suspension and to permit the departmental proceedings to continue and brought to its logical end, while the Pension Rules take care of a situation where a Government employee has retired on attaining the age of superannuation and the disciplinary proceedings have either been instituted prior to the date of retirement or can be instituted in specified circumstances after his retirement.  

25. This Court has taken a dramatically opposite view. One line of decisions, which have been heavily relied upon by the learned counsel for the appellant, are to the effect that unless a Government Servant facing departmental proceedings is placed under suspension and an order is passed under Rule 56(1)(c) of the Fundamental Rules not permitting him to retire till the completion of proceedings, the departmental proceedings against such delinquent employee, who has retired and recourse to Rule 9(2)(a) of the Pension Rules cannot be taken, thus making the Rule 9 inapplicable.

26. The other line of decisions, which have been heavily relied upon by the learned counsel for the respondents, are to the effect that the provisions of Rule 56(1)(c) of the Fundamental Rules are applicable to a Government Servant, who has been placed under suspension before his retirement and has not been permitted to retire till the completion of the departmental proceedings, and the extreme punishment of dismissal from service can also be awarded, whereas in cases where the Government Servant has been allowed to retire, without there being an order for continuity in service during the pendency of the departmental proceedings or in contemplation of the departmental proceedings, then under Rule 9 of the Pension Rules the departmental proceedings can be continued/initiated as the case may be and the punishment of recovery of the loss of Revenue caused to the Government, withholding or withdrawing the pension, whether in full or in part, depending upon the gravity of the charges proved, can be awarded. The former view, if accepted, makes the provisions of Rule 9 totally otiose. The latter view makes both the provisions workable. The principle of harmonious construction of two different statutes has to be applied in the present case.

27. Thus, the view taken by the Court which makes both the provisions viz., Rule 56(1)(c) of the Fundamental Rules and Rule 9 of the Pension Rules workable is to be preferred.

28. From the aforesaid discussion, the following broad principles emerge :

(xv) If a Government servant has been placed under suspension and not permitted to retire even after his attaining the age of superannuation in terms of Rule 56(1)(c) of the Fundamental Rules, the enquiry against him can proceed, and in that case, if charges of misconduct are proved, depending upon the nature of the charges, even the extreme penalty of dismissal or removal from service can be imposed.

(xvi) If there is any statutory provision for continuing the departmental proceedings like Rule 9(2) of the Pension Rules even after the Government servant has retired on attaining the age of superannuation, then the departmental proceedings already instituted before the retirement of the Government servant can be continued against the delinquent employee by treating him to be in service.

(xvii) If the Government servant has retired on attaining the age of superannuation and subsequently any departmental proceeding is to be instituted against him, in that event, under Rule 9(2)(b) of the Pension Rules, sanction of the Government is required to be taken and the event in respect of which the departmental proceedings are sought to be initiated should not have taken place more than four years before such institution.

(xviii) In cases where the Government Servant is allowed to retire on attaining the age of superannuation or where the departmental proceedings are to be initiated after the retirement, there is no question of passing the order of dismissal or removal from service and only the pension can be withheld, withdrawn or reduced.  The question of dismissal or removal of the said delinquent employee from service, therefore, does not arise.

(xix) Since in the present case, the appellant was permitted to retire on attaining the age of superannuation without prejudice to the disciplinary proceedings pending against him, in our considered opinion, the said proceedings can be permitted to be continued in terms of Rule 9(2)(b) of the Pension Rules.  

29. Insofar as the contention of the appellants counsel that two similarly placed persons, viz. Tvl. K. Sivaprakasam and Rathnavel were allowed to compensate the loss suffered by the Government and permitted to retire on attaining the age of superannuation without any disciplinary proceedings and the same principle be also applied to the case of the appellant is concerned, we may mention here that the appellant cannot obtain such a benefit in disregard of the law by invoking the right to equality before the law and equal protection of the laws guaranteed under Article 14 of the Constitution of India.  In the case of Narain Dass vs. Improvement Trust, Amritsar reported in (1973) 2 S.C.C. 265, it was contended that while administering Section 56 of the Punjab Town Improvement Act, 1922, there had been hostile discrimination against the appellants therein, because lands under orchards belonging to persons similarly placed had been exempted, whereas the appellants had been refused such exemption.  Rejecting this contention, the Hon'ble Supreme Court, in paragraph 6 of the reports, had observed as follows :-

In any event if the appellants have failed to bring their case within Section 56 of the Act then merely because some other party has erroneously succeeded in getting his lands exempted ostensibly under that section that by itself would not clothe the present appellants with a right to secure exemption for their lands. The rule of equality before the law or of the equal protection of the laws under Article 14 cannot be invoked in such a case.

In the case of Eskayef Limited vs. Collector of Central Excise reported in (1990) 4 S.C.C. 680, the Hon'ble Supreme Court has held that it is impermissible to grant such benefit as other persons have been granted wrongly.  

30. Conclusion

In view of the foregoing discussion, we hold that the decision to the contrary taken in Writ Appeal (MD) No.669 of 2011 (The District Collector, Tiruchirappalli, District, Tiruchirappalli vs. N. Mohanraj) dated 22.7.2011, as also in The State of Tamil Nadu vs. R. Karuppiah, 2005 (3) C.T.C. 4 and in     K. Durairajan vs. Secretary to Government Commercial Taxes & Registration Department, 2010 (4) C.T.C. 504, in our humble opinion, do not lay down the correct law.                         

31. The present writ appeal is, therefore, devoid of merit and is liable to be dismissed and is accordingly dismissed.  However, there will be no order as to costs.  Consequently, M.P. Nos.1 and 2 of 2011 are closed.

ab


W.A. No. 1394 of 2012 - Sudha Panner Vs. Kerala Public Service Commission, (2013) 302 KLR 240 : 2013 (2) KLT 632

posted Jun 1, 2013, 9:04 AM by Law Kerala   [ updated Jun 1, 2013, 9:04 AM ]


(2013) 302 KLR 240

IN THE HIGH COURT OF KERALA AT ERNAKULAM

PRESENT:- THE HON'BLE THE CHIEF JUSTICE DR. MANJULA CHELLUR & THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN

MONDAY, THE 1ST DAY OF APRIL 2013/11TH CHAITHRA 1935

W.A.No.1394 of 2012

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AGAINST THE JUDGMENT IN W.P.(C).No.24914/2011-L, OF HIGH COURT OF KERALA, DATED 29-03-2012.

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APPELLANT/ PETITIONER:-

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SMT.SUDHA PANNERI, PANNERI HOUSE, P.O, AROLI, KANNUR DT. - 670 566.

BY ADVS.SRI.A.MOHAMED MUSTAQUE SRI.K.R.AVINASH (KUNNATH).

RESPONDENT/ RESPONDENT:-

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THE KERALA PUBLIC SERVICE COMMISSION, REPRESENTED BY SECRETARY, PATTOM, TRIVANDRUM - 695 004.

BY STANDING COUNSEL SRI.P.C.SASIDHARAN.

THIS WRIT APPEAL HAVING BEEN FINALLY HEARD ON 01-04-2013, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:-

Manjula Chellur, C.J. & K.Vinod Chandran, J.

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W.A.No.1394 of 2012

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Dated this, the 1st day of April, 2013

Head Note:-

Kerala State and Subordinate Services Rules, 1958 - Rule 10(ab) - Legal Entity - Meaning of - The grant of recognition by Departments or autonomous bodies in which the State or the Central Government has a pervasive control cannot by itself deem the status of a "legal entity" on a proprietary concern as distinguished from its proprietor.  Merely for reason alone of a business being conducted in a name; by a sole proprietor, that alone cannot confer on the business the status of a legal entity, which normally would not be conferred with such character.

J U D G M E N T

K.Vinod Chandran,J.

The appellant is aggrieved by the action of the Kerala Public Service Commission (hereinafter referred to as "the Commission"), in not considering her experience, evidenced by Exhibit P6 Certificate, as one required under Exhibit P1 notification. 2. The appellant was an applicant to the post of Computer Assistant in the Kerala Live Stock Development Board Limited; called for by Exhibit P1 notification of the Commission. The qualifications prescribed under Exhibit P1 notification was as under:

"7. Qualifications

1. B.Sc. (Computer Science)

OR

B.A/B.Sc/B.Com degree from a recognized University with Post Graduate Diploma in computer Application from an Institution approved by Government/AICTE.

2. Typewriting English (KGTE/MGTE) Lower or its equivalent.

3. Minimum experience of three years in Computer Operation in a reputable Institution".

The appellant's claim was under the second category and the dispute is with respect to the experience required thereon. Exhibit P6 evidenced her experience as a "Programmer-cum-Faculty" in Universal Institute of Information Technology, Fort Road, Kannur-1. Finding that the experience is with a private establishment and that the declaration has not been countersigned by the Labour Officer, the appellant was refused to be considered in the rank list prepared pursuant to Exhibit P1 notification.

3. The learned counsel for the appellant before the learned Single Judge and also before us contended that the institute in which the appellant had experience was a "legal entity" as required under paragraph 21 of the General Conditions published by the Commission; which is verbatim reproduction of Rule 10(ab) of Part II of the Kerala State & Subordinate Services Rules, 1958 (for short "KS & SSR"). It is also contended that the further reason for rejection being that the Labour Officer has not countersigned; is also not sustainable, since the Inspector under the Employees' State Insurance Act is an officer designated as Social Security Officer having powers of inspection of relevant material relating to employment of a person in an establishment and the establishment; by the said statute is enjoined upon to maintain certain books of accounts which, inter alia, is subject to verification by the Inspector appointed under the Act.

4. The learned counsel for the Commission, however, maintains that a threadbare analysis of the term "legal entity" is not called for, since this Court is exercising circumscribed jurisdiction of review and the recruiting agency has to have sufficient elbow room in reasonably deciding the eligibility with respect to a candidate who has applied for public employment. The learned Standing Counsel also contends that the experience, in any event, is of a Programmer-cum-Faculty, as is evidenced by Exhibit P6, and the same cannot be equated with the job of a Computer Operator. The learned counsel for the appellant, however, would strenuously contend that the job responsibilities of a Computer Operator or equation thereof to the experience acquired by the appellant was not a reason for rejection by the Commission.

5. We would first look at the question whether the institute in which the appellant is said to have acquired experience, is one which comes within the General Conditions relating to the employment aspired to by the appellant. We extract hereunder Rule 10(ab) of Part II of KS & SSR:

"R.10(ab) Where the Special Rules or Recruitment Rules for a post in any service prescribe qualification of experience, it shall, unless otherwise specified, be one gained by persons on temporary or regular appointment in capacities other than paid or unpaid apprentices, trainees and Casual Labourers in Central or State Government Service or in Public Sector Undertaking or Registered Private Sector Undertaking, after acquiring the basic qualification prescribed for the post. Provided that the experience gained as factory workers on daily wages of a permanent nature may be accepted, if the service is continuous and not of a casual nature.

Explanation.- For the purpose of this sub-rule, 'Registered Private Sector Undertaking' means.-

(i) Co-operative Societies registered under the Kerala Co-operative Societies Act, 1969, Societies Registered under the Societies Registration Act, 1860 or the Travancore-Cochin Literary, Scientific and Charitable Societies Registration Act, 1955 or Companies registered under the Companies Act, 1956 or any Institution, firm or company which has a legal entity under any law for the time being in force;

(ii) xxx

(iii) xxx".

The contention of the appellant is that the Institute in which the appellant worked comes within the scope of "any Institution, firm or company which has a legal entity under any law for the time being in force". The learned counsel would take us through a judgment of this Court reported in Ittiavira Thomas v. Sankaranarayanan [AIR 1964 Kerala 144] and that of the Supreme Court in Shiromani Gurdwara Prabandhak Committee v. Som Nath Dass [(2000) 4 SCC 146], to contend that the aforementioned Institute is a "legal entity". To buttress his contention, the learned counsel also points to Exhibits P8 and P9, by which the said Institute has been permitted to conduct courses by an autonomous body as also the Regional Directorate of Technical Education, Kozhikode, the latter of which is a Directorate functioning under the Government of Kerala.

6. We are afraid that none of these certificates can lead to a conclusion that the Institute has the status of "a legal entity under any law for the time being in force". The society which has issued Exhibit P8 is an autonomous body of the Department of Information Technology, Government of India, which conducts computer courses and has, by the said letter, granted accreditation to the courses conducted by the Institute aforesaid for a period of three years. Similarly, Exhibit P9 is a recognition for the academic year 2006-2008 to conduct K.G.C.E. Courses. Admittedly the institute is not a Corporate body; nor a firm and is merely a proprietory concern. The grant of recognition by Departments or autonomous bodies in which the State or the Central Government has a pervasive control cannot by itself deem the status of a "legal entity" on a proprietary concern as distinguished from its proprietor. The corollary drawn by the learned counsel for the appellant regarding the status of a school under the Kerala Education Act, 1958, we notice, cannot be countenanced, since a school recognized under the Kerala Education Rules has a status conferred by statute/statutory Rules, which is absent in the above case. The accreditation or recognition granted by the executive Government cannot confer a status in law; unless otherwise than by statutory force.

7. Ittiavira Thomas (supra) considered the issue whether a joint Hindu family is like a Corporation, a legal person; an altogether different person from the natural persons composing it. Distinguishing the words "entity" and "persons", which the learned Judge noticed have often been mistakenly used as synonymous terms, the Court found:

"... a legal entity means only a thing recognized by the law as real in itself and distinct from its qualities and attributes, and, while every legal person is necessarily a legal entity, the converse is not true".

It was also held so in paragraph 10:

"But, it seems to me that the true position is that a joint family is a group of persons, the membership of which, and the manner in which the members whereof hold joint property and joint rights, are regulated by law. It is a concept or institution which is a creature of the law and not of act of parties (though act of parties can put an end to it) and that is why it is called a legal entity.

Property and other rights are jointly held by all the members of the family and, surely, those rights cannot disappear by reason of an arrangement between the members whereby certain rights are thereafter to be held by one or more of the members to the exclusion of the rest. The right to avoid an alienation made by a manager is a right which inheres personally in each individual member of a joint family although he must exercise it not for himself alone but for the benefit of all, and, if a partition, any particular right is not the subject matter of allotment, it seems to me that it must still belong to all the members of the original joint family, whether as tenants-in-common or as co-parceners is a matter of no consequence".

We cannot understand the Institute in the present case to be a 'concept or institution which is a creature of law', as has been found in the above cited case, to necessarily confer the character of a 'legal entity' on it. Merely for reason alone of a business being conducted in a name; by a sole proprietor, that alone cannot confer on the business the status of a legal entity, which normally would not be conferred with such character.

8. Shiromani Gurdwara Prabandhak Committee (supra) was a case in which the meaning and concept of "juristic person" was elaborately considered to resolve the dispute whether "Guru Granth Sahib" installed in a Gurdwara has a separate juristic personalty from Gurdwara. Though the issue resolved may not be of any import in the instant case, the reiteration of well settled principles based on the authorities on jurisprudence in paragraph 19 is relevant:

"19. Thus, it is well settled and confirmed by the authorities on jurisprudence and courts of various countries that for a bigger thrust of socio-political-scientific development evolution of a fictional personality to be a juristic person became inevitable. This may be any entity, living, inanimate, object or thing. It may be a religious institution or any such useful unit which may impel the courts to recognise it. This recognition is for subserving the needs and faith of the society. A juristic person, like any other natural person is in law also conferred with rights and obligations and is dealt within accordance with law. In other words, the entity acts like a natural person but only through a designated person, whose acts are processed within the ambit of law. When an idol was recognised as a juristic person, it was known it could not act by itself. As in the case of a minor a guardian is appointed, so in the case of an idol, a Shebait or manager is appointed to act on its behalf. In that sense, relation between an idol and Shebait is akin to that of a minor and a guardian. As a minor cannot express himself, so the idol, but like a guardian, the Shebait and manager have limitations under which they have to act. Similarly, where there is any endowment for a charitable purpose it can create institutions like a church, hospital, gurdwara etc. The entrustment of an endowed fund for a purpose can only be used by the person so entrusted for that purpose inasmuch as he receives it for that purpose alone in trust. When the donor endows for an idol or for a mosque or for any institution, it necessitates the creation of a juristic person. The law also circumscribes the rights of any person receiving such entrustment to use it only for the purpose of such a juristic person. The endowment may be given for various purposes, may be for a church, idol, gurdwara or such other things that the human faculty may conceive of, out of faith and conscience but it gains the status of a juristic person when it is recognised by the society as such".

The conferment of a juristic personality or a status of a legal entity have often been extended, as noticed herein, to subserve public needs to cater to public law requirements and in the larger public interest. We do not find any such interest in treating the Institute aforesaid as a "legal entity" or a "juristic person".

9. Having found that the institute in which the appellant is said to have acquired experience is not one conferred with the status of "legal entity" under any law for the time being in force, we are of the definite opinion that the judgment of the learned Single Judge is not liable to be interfered with. We, hence, do not go into the other grounds raised either by the Commission or by the appellant herein.

The Writ Appeal is, accordingly, dismissed. No costs.

Sd/- Manjula Chellur, Chief Justice

Sd/- K.Vinod Chandran, Judge.

vku/- ( true copy )


W.A. No. 2865 of 2007 - Manoharan Vs. Government of India, (2013) 299 KLR 464 : 2013 (2) KLT SN 81

posted May 22, 2013, 5:26 AM by Law Kerala   [ updated May 22, 2013, 5:29 AM ]


(2013) 299 KLR 464


IN THE HIGH COURT OF KERALA AT ERNAKULAM

PRESENT:

THE HON'BLE THE CHIEF JUSTICE DR. MANJULA CHELLUR

&

THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN

 

MONDAY, THE 18TH DAY OF MARCH 2013/27TH PHALGUNA 1934

 

WA.No. 2865 of 2007 IN WP(C).29611/2007

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AGAINST THE JUDGMENT IN WP(C).29611/2007 DATED 08-10-2007

 

APPELLANTS/PETITIONERS:

-----------------------------

 

1. MANOHARAN T.B., AGED 38 YEARS, S/O.

T.G.BHASKARAN, THUNDIPARAMBIL, SOUTH PUTHUVYPU

PUTHUVYPU P.O.-682 508.

 

2. CHANDRAN M.K., S/O. KRISHNAN,

AGED 64, RESIDING AT MADATHIPARAMBIL HOUSE

OCHANTHURUTH P.O., PUTHUVYPU.

 

3. JAYAN P.N., AGED 38 YEARS, S/O.

NARAYANAN, PUTHUVALSTHALATHU, THEKKAN MALIPRAM

AZHIKKAL P.O.- 682 510.

 

4. K.L.VISWAN, AGED 38, S/O. LEKSHMANAN,

KOLAPARAMBIL, SOUTH PUTHUVYPU, PUTHUVYPU P.O.

PIN-682 508.

 

5. V.L.GOPALAN, AGED 33, S/O. LEKSHMANAN,

VADAKKETHERUVIL, THEKKAN MALIPURAM, AZHEEKAL P.O.

PIN-682 510.

 

6. P.G.RAJAN, AGED 57, S/O. GOVINDAN,

PUTHUVALSTHALTHU HOUSE, MURIKKUMPADOM, AZHEEKAL P.O.

 

7. K.G.NARAYANAN, AGED 59, S/O. GOVINDAN,

KANIYAMPARAMBIL, APPANGADU, NARAKKAL P.O.

PIN-682 005.

 

8. P.V.DINESAN, AGED 42, S/O. VELAYUDHAN,

PUTHUVALSTHALATHU, MURIKKUMPADAM, AZHEEKAL P.O.

 

9. P.B.VIJAYAN, AGED 50, S/O. BHAVAN,

PUTHUVALSTHALTH HOUSE, MURIKKUMPADAM, AZHEEKAL P.O.

 

10. T.G.VIJAYAN, AGED 53, S/O. GOVINDAN,

THAREPARAMBIL HOUSE, AZHEECKAL, AZHEECKAL P.O.

 

11. P.S.VENU, AGED 35, S/O. SANKARAN,

PALIYAMPARAMBIL, AZHEEKAL, AZHEEKAL P.O.

 

12. P.K.SAJEEVAN, AGED 35, S/O. KRISHNAN,

PUTHUVALSTHATH HOUSE, SOUTH PUTHUVYPU, PUTHUVYPU P.O.

 

13. P.G.ANU, AGED 30, S/O. GOPALAN,

PUTHUVALSTHALATH HOUSE, MURIKKUMPADAM, AZHEEKAL P.O.

 

14. P.B.BALAMURALI, AGED 35, S/O.

BALAKRISHNAN, PUTHUVALSTHALATHU, SOUTH PUTHUVYPU

PUTHUVYPU P.O.

 

15. P.S.SIVARAMAN, AGED 58, S/O. SANNALAN,

PUTHUVALSTHALATHU, THEKKENMALIPURAM, AZHEEKAL P.O.

 

16. P.S.LOHIDAKSHAN, AGED 56, S/O. SANNALAN,

PUTHUVALSTHALTHU, THEKKENMALIPURAM, AZHEEKAL P.O.

 

17. M.K.RAMACHANDRAN, AGED 42, S/O.

KRISHNAN, MADATHIPARAMBIL, SOUTH PUTHUVYPU

PUTHUVYPU P.O.

 

18. P.R.GOPI, AGED 49, S/O. RAMAN,

PUTHUVALSTHALATHU HOUSE, MURIKKUMPADAM, AZHEEKAL P.O.

 

19. P.V.VINU, AGED 31, S/O. VELAYUDHAN,

PUTHUVALSTHALATH, SOUTH PUTHUVYPU, PUTHUVYPU P.O.

 

20. P.B.BALATHILAK, AGED 32, S/O.

BALAKRISHNAN, PUTHUVALSTHALATHU, SOUTH PUTHUVYPU

PUTHUVYPU P.O.

 

21. P.D.GOPI, AGED 47, S/O. DUDACHAN,

PUTHUVALSTHALATHU HOUSE, MURIKKUMPADAM, AZHEEKAL P.O.

 

22. P.S.SANTHOSH, AGED 43 YEARS,

S/O. SANNAPUTHI, PUTHUVALSTHALATHU, THEKKANMALIPURAM

AZHEEKAL P.O., THEKKANMALIPURAM, AZHEEKAL P.O.

 

23. P.R.BABU, AGED 44, S/O. RAMAN,

PUTHUVALSTHALATH HOUSE, THEKKANMALIPURAM

AZHEEKAL P.O.

 

24. M.K.RAVI, AGED 47, S/O. KRISHNAN,

MADATHIPARAMBIL, SOUTH PUTHUVYPU, PUTHUVYPU P.O.

 

25. P.M.SEKHARAN, AGED 39, S/O. MADHAVAN,

PUTHUVALSTHALATH HOUSE, THEKKANMALIPURAM

AZHEEKAL P.O.

 

26. P.R.RADHAKRISHNAN, AGED 40, S/O. RAMAN,

PUTHUVALSTHALATH HOUSE, SOUTH PUTHUVYPU

PUTHUVYPU P.O.

 

27. P.B.REMESAN, AGED43, S/O. BALAN,

PUTHUVALSTHALATH HOUSE, MURIKKUMPADOM, AZHEECKAL P.O.

 

28. K.K.LOHIDHAKSHAN, AGED 46, S/O.KRISHNAN,

KANDATHIPARAMBIL, AZHEECKAL, AZHEECKAL P.O.

 

29. P.B.NAVEENKUMAR, AGED 37, S/O. BHAVAN,

PUTHUVALSTHALATH, MURIKKUMPADOM, AZHEEKAL P.O.

 

30. P.V.MANILAL, AGED 33, S/O. VELAYUDHAN,

PUTHUVALSTHALATHU, SOUTH PUTHUVYPU, PUTHUVYPU P.O.

 

31. K.G.MANI, AGED 46, S/O. GOVINDAN,

KANIAMPARAMBIL, APPANGAD, NARAKKAL P.O.

 

32. P.K.ASOKAN, AGED 43, S/O. KRISHNAN,

PUTHUVALSTHALATHU HOUSE, THEKKANMALIPURAM

AZHEECKAL P.O.

 

33. P.B.ANIL, AGED 29, S/O. BALAKRISHNAN,

PUTHUVALSTHALATH, MURIKKUMPADOM, AZHEECKAL P.O.

 

34. P.T.UNNI, AGED 41, S/O. THANKAPPAN,

PALIYAMPARAMBIL, SOUTH PUTHUVYPU, PUTHUVYPU P.O.

 

35. P.S.MANOJ, AGED 30, S/O. SOMAN,

PUTHUVALSTHALATH HOUSE, MURIKKUMPADOM, AZHEECKAL P.O.

 

BY ADVS.SRI.A.X.VARGHESE

SRI.A.V.JOJO

 

RESPONDENT(S)/RES. 1 TO 6 & PETITIONERS:

---------------------------------------------------

 

1. THE GOVERNMENT OF INDIA,

REPRESENTED BY MINISTRY OF OIL AND NATURAL GAS

DEPARTMENT, NEW DELHI.

 

2. STATE OF KERALA, REPRESENTED BY

CHIEF SECRETARY, SECRETARIAT, THIRUVANANTHAPURAM.

 

3. THE KOCHI REFINERIES LTD.,

REPRESENTED BY ITS MANAGING DIRECTOR, AMBALAMUGAL.

 

4. CHAIRMAN,

KOCHI PORT TRUST, WILLINGTON ISLAND.

 

5. LIQUEFIED NATURAL GAS LTD.,

REPRESENTED BY ITS MANAGING DIRECTOR

7 D PEEVEES TRITON APARTMENTS, SHANMUGHOM ROAD

MARINE DRIVE, KOCHI-682 031.

 

6. THE DISTRICT COLLECTOR,

ERNAKULAM.

 

#7. VENU P.V., AGED 17 YEARS, S/O.

VELAYUDHAN, PUTHUVALSTHALATHU, MURIKKUMPADOM

AZHIKKAL P.O.-682 510.

 

8. P.S.BABU, AGED 43, S/O. SREENIVASAN,

PALIYAMPARAMBIL, AZHEEKAL, AZHEEKAL P.O.

 

9. P.N.MOHANAN, AGED 51, S/O. NARAYANAN,

PULIMCHUVATTIL, APPANGAD, NARACKAL P.O.

 

10. P.G.CHANDRAMOHANAN, AGED 39, S/O.

GOVINDAN, PUTHUVALSTHALATH, THEKKENMALIPURAM

AZHEEKAL P.O.

 

11. P.R.ASOKAN, AGED 42, S/O. RAMACHANDRAN,

PALIYAMPARAMBIL, AZHEEKAL, AZHEEKAL P.O.

 

12. P.P.SURESH, AGED 45, S/O. PINNAN,

PALIYAMPARAMBIL, AZHEEKAL, AZHEEKAL P.O.

 

13. T.S.PADMANABHAN, AGED 56, S/O.

SREENIVASAN, THUNDIPARAMBIL, AZHEEKAL

AZHEEKAL P.O.

 

14. T.R.SIVAJI, AGED 42, S/O. RAMAN,

THAREPARAMBIL, SOUTH PUTHUVYPU, PUTHUVYPU P.O.

 

15. P.J.VIJAYAN, AGED 37, S/O. JANARDHANAN,

PUTHANVEETTIL, SOUTH PUTHUVYPU, PUTHUVYPU P.O.

 

16. P.R.CHANDRAN, AGED 62, S/O. RAMAN,

PUTHUVALSTHALATHU HOUSE, THEKKANMALIPURAM

AZHEEKAL P.O.

 

17. P.R.SASI, AGED 16, S/O. RAMAN,

PALIAMPARAMBIL, AZHEEKAL, AZHEEKAL P.O.

 

18. K.V.BAVAN, S/O. VATTU,

KALLUVEETTIL, AZHEEKAL, AZHEEKAL P.O.

 

19. P.K.PRAKASAN, AGED 38, S/O. KRISHNAN,

PUTHUVALSTHALATHU HOUSE, SOUTH PUTHUVYPU

PUTHUVYPU P.O.

 

20. K.M.SURESH, AGED 37, S/O. MINNA,

KUZHIPARAMBIL, AZHEEKAL, AZHEEKAL P.O.

 

21. P.M.SIVAN, AGED 42, S/O. MADHAVAN,

PALIYAMPARAMBIL, AZHEEKAL, AZHEEKAL P.O.

 

22. P.R.PAVITHRAN, AGED 38, S/O. RAMAN,

PUTHENPURAYKAL, SOUTH PUTHUVYPU, PUTHUVYPU P.O.

 

23. K.H.PRAMOD, AGED 27, S/O. HARIDAS,

KANDATHIPARAMBIL, AZHEEKAL, AZHEEKAL P.O.

 

24. K.P.VIJAYAN, AGED 37, S/O. PRABHAKARAN,

KOLAPARAMBIL, SOUTH PUTHUVYPU, PUTHUVYPU P.O.

 

25. P.S.JAYAPPAN, AGED 57, S/O. SREENIVASAN,

PALIYAMPARAMBIL, AZHEEKAL, AZHEEKAL P.O.

 

26. K.P.RAVI, AGED 34, S/O. K.L.PRABHAKARAN,

KOLAPARAMBIL, SOUTH PUTHUVYPU, PUTHUVYPU P.O.

 

27. P.G.SANILKUMAR, AGED 31, S/O. GOPALAN,

PUTHANPURYKAL, MURIKKUMPADAM, AZHEEKAL P.O.

 

# 28. P.R.ANANDAN, AGED 45, S/O. RAMAN,

PUTHUVALSTHALATH HOUSE, MURIKKUMPADAM, AZHEEKAL P.O.

 

* ADDL.R29 TO R37 IMPLEADED

 

ADL.R29: T.B.REKHU, S/O.BHASKARAN, AGED 33 YEARS,

THUNDIPARAMBIL HOUSE, SOUTH PUTHUVYPE PO.,

KOCHI TALUK, PIN: 682 508.

 

ADDL.R30: P.G.BABU, S/O.LATE GOVINDAN, AGED 52 YEARS,

PUTHUVALSTHALATH HOUSE, SOUTH PUTHVYPE P.O,

KOCHI TALUK, PIN 682 508.

 

ADDL.R31: T.K.VENUGOPALAN, S/O.LATE KRISHNAN, AGED 55 YEARS,

THAREAPARAMBIL HOUSE, THEKKAN MALIPURAM,

AZHEECKAL P.O, KOCHI TALUK PIN - 682 510.

 

ADDL.R32: M.B.DEVANANDAN, S/O.LATE BHAVAN, AGED 45 YEARS,

MADATHIPARAMBIL HOUSE, MURUKKUMPADAM,

AZHEECKAL P.O, KOCHI TALUK PIN - 682 510.

 

ADDL.R33: K.R.RAVI. S/O.LATE RAMAN, AGED 63 YEARS,

KUZHUPARAMBIL HOUSE, SOUTH PUTHUVYPE P.O,

KOCHI TALUK, PIN:682 508.

 

ADDL.R34: K.R.ULLASAN, S/O.LATE RAMAN, AGED 42,

KANDATHIPARAMBIL HOUSE, VYPEEN,

AZHEECKAL P.O, KOCHI TALUK, PIN - 682 510.

 

ADDL.R35: P.B.RAJU, S/O.BABBYAN, AGED 48 YEARS,

PUTHUVALSTHALATH HOUSE, MURUKKUMPADAM,

PUTHUVYPE VILLAGE, KOCHI TALUK, PIN 682 510.

 

ADDL.R36: P.L.SURESH, S/O.LATE LAKSHMANAN, AGED 33 YEARS,

PUTHUVALSTHALATH HOUSE, MURIKKUMPADAM,

PUTHUVYPE VILLAGE, KOCHI TALUK.

 

ADDL.R37: T.K.SUBRAMANIAN, S/O.KRISHNAN, AGED 61 YEARS,

THAREAPARAMBIL HOUSE, THEKKAN MALIPURAM,

PUTHUVYPE VILLAGE, KOCHI TALUK.

 

*ADDL.R29 TO R37 IMPLEADED AS PER ORDER DATED 11.02.2008 IN

I.A.NO.134/2008.

 

# R7 TO R 28 DELETED FROM PARTY ARRAY AT THE RISK OF THE APPELLANTS.


R3 T0 R5 BY ADV. SRI.E.K.NANDAKUMAR

BY ADV. SRI.A.K.JAYASANKAR NAMBIAR

BY ADV. SRI.K.JOHN MATHAI

BY ADV. SRI.P.BENNY THOMAS

BY ADV. SRI.ANIL D. NAIR

R1, BY ADV. SRI.ABRAHAM THOMAS, CGC

ADDL.R7 TO 15 BY ADV. SRI.MAJNU KOMATH

ADDL.R7 TO 15 BY ADV. SRI.SHAHIN.M.KOMATH

R2 & R6 BY GOVERNMENT PLEADER SRI.P.I.DAVIS

BY SRI.P.PARAMESWARAN NAIR,ASST.SOLICITOR

 

THIS WRIT APPEAL HAVING BEEN FINALLY HEARD ON 23-01-2013, ALONG

WITH WA. 238/2008, THE COURT ON 18.03.2013 DELIVERED THE FOLLOWING:

 

MANJULA CHELLUR, C.J

&

K.VINOD CHANDRAN, J.

 

----------------------------------------------

 

W.A.No. 2865 of 2007

&

W.A.No. 238 of 2008

 

----------------------------------------------

 

Dated this the 18th day of March, 2013

Head Note:-

Constitution of India, 1950 – Article 21 – Special Economic Zone Act, 2005 – Ports Act, 1908 - Right to collect seashells from the bed of seacoast - area falls under the Cochin Port Trust limits and is exclusively reserved for port related activities, including development work - Cochin Port Trust reserves the right to terminate the permission at any point of time giving one month notice and the permission was not renewed at the option of the Co-operative Society - permission did not create any obligation on the Port to provide employment to the members of the Society - They did not saddle themselves with the liability of paying compensation or meeting any claim in the event of refusal of permission - The project under the Integrated Development Plan of Cochin Port Trust was also indicated as related activities of the Port - None of the activities of the Society should cause in any way obstruction or hurdle for the operations of the Port - No exclusive right was reserved to the Society to collect seashells from the area - The permission to mine seashells was again subjected to clearance from other statutory authorities - Society has given an undertaking to the Port accepting the above terms and conditions and also assurance to comply with any other conditions issued from time to time - in the event of refusal of permission, the Port will not be liable for any claim for compensation by the Society - Hence the mining activity carried on with the permission of the Port was terminable without any reason and on that contingency no claim for compensation could arise, from the Society or its members. Hence the formation of a Special Economic Zone, the construction of berths to facilitate availability of fuel, that too nature friendly fuel, and the consequential restriction of entry, on grounds of safety and security; surely cannot give rise to claim for security - The permissive grant for mining shells created no vested right and the cancellation or refusal of further grant neither violate the right to live nor gives rise to a claim for compensation.

J U D G M E N T

Manjula Chellur, C.J.

These two Writ Appeals are filed against the common judgment in W.P(C).No. 29611 of 2007. The writ petitioners approached the learned Single Judge contending, their livelihood is taken away by declaring the seashore in Puthuvypu as Special Economic Zone, resulting in prohibition to enter the said area. According to the writ petitioners, they are eking out their livelihood right from 1976 onwards by mining shells from the Arabian seashore in and around Puthuvypu. After declaring the said area as a Special Economic Zone, the impending work of Liquefied Natural Gas (LNG) has started for the purpose of construction of a berth. With this construction of berth for LNG, no space would be available for the petitioners to place their mined seashells on the shore which results in total deprivation of their livelihood. The action of the respondents putting up berth and plants on the shores of Arabian Sea would come in the way of livelihood of the petitioners, therefore, it is unconstitutional, unjust and is against the principles of public law, is the contention of the writ petitioners. This results in infringement of fundamental rights guaranteed under Article 21 of the Constitution of India. By act of nature, Kochi Estuary had been created more than 600 years ago which resulted in accumulation of seashells on the right side of Kochi Estuary and the work of mining seashells had been carried on from time immemorial by ancestors of the writ petitioners and later on by the writ petitioners. On account of accumulation of lime shells, Cochin Port Trust was continuously giving no objection certificates to the Society of the writ petitioners for mining seashells. This bountiful gift of nature is obstructed on account of construction of berth, compound wall and oil plants at the instance of the Cochin Port Trust, Kochi Refineries Ltd. and Petronet LNG Ltd. in Puthuvypu after declaring the said area as a prohibited area being a Special Economic Zone.

2. The respondents proceeded with their work of construction of berth etc. totally ignoring the plight of the writ petitioners and their families unmindful of their action depriving their livelihood. If their only means of livelihood is taken away, it would be impossible for them to make both ends meet and they will be threatened with utter starvation, is the contention raised. With the above averments, they have sought the following reliefs:

"i) Issue a Writ of Mandamus directing the respondents to allow the petitioners to continue the present work of mining shells on the sea shore in Puthuvypu in the right side of Kochi Estuary.

ii) Issue a Writ of Mandamus directing the Respondents to pay Rs.10 lakhs to each petitioners as compensation by way of public law remedy in the event of loss of employment and livelihood in the coming days on account of the construction and installation of berth and oil tanks in and around Special Economic Zones at Puthuvypu at the instance of the respondents.

iii) Issue a Writ of Mandamus directing the respondents to rehabilitate the petitioners in any of the employments emanated on account of this construction of the installations of LNG and KRL.

iv) Such other reliefs that this Hon'ble Court deems fit and proper."

3. The second respondent, Additional Secretary to Government, Industries Department, filed a counter affidavit in response to the averments indicated in the Writ Petition. After referring to the process how Cochin Port Trust allotted land to the Petronet LNG Ltd. in Re-Survey No.347 at Puthuvype area, she contends that the approach road to the project site has to be constructed by the Cochin Port Trust. She further contends that as the project involves conversion of Liquefied Natural Gas to Re- gasified Liquefied Natural Gas to be sold to various companies, who, in turn, transport the said product through GAIL pipeline to various customers like power producers, fertilizer manufacturers and other industrial units, the area deserves to be safeguarded, hence it necessitated construction of a boundary wall and declaration of the area as a Special Economic Zone. According to respondents, the major investment would enhance development of infrastructure in and around Kochi which would facilitate promotion of new gas-based-industries in the State of Kerala. This again would result in creation of employment. The terminal is proposed to be in operation by 2012.

4. According to the respondents, the Society, to which all the writ petitioners belonged to, was permitted to collect seashells from the sea coast of Elamkunnapuzha Village for a period of 11 months commencing from 1.8.2006 to 30.6.2007. The said permission is also subject to terms and conditions. The permission is liable to be terminated. It is clearly mentioned in the said permission that the area falls under port limits and the area concerned is exclusively reserved for port related activities and the permission is only a provisional one. Permission to collect seashells was valid upto 30.6.2007, therefore, the writ petitioners cannot claim unfettered right to collect seashells from the port area. Having agreed to the terms and conditions at Exhibit P5, there is no justification in the contention of the writ petitioners raised now. Construction of compound wall is almost at the verge of completion. The contention that once the construction of berth commences, there will not be any space for the appellants to store their mined seashells is denied, as the said mining of seashells was subject to permission. According to them, there will be enough and sufficient space available in the beach to store such seashells. But, however, there has to be restricted entry into the berth and other areas of Petronet LNG Ltd. for reasons of security to avoid any untoward incident. The terminal deals with products that require handling with great care and caution. The contention that only in a small stretch of area the seashells are available on the shore of Puthuvype is also challenged. According to them, the Special Economic Zone Act of 2005 does not envisage any provision for rehabilitation of displaced persons. So far as restriction to enter the port area, it is not new as always such restrictions were imposed by Statute ever since the area was declared as a port area under the Indian Ports Act, 1908. Collection of seashells within the port area was subject to various restrictions. Restrictive right cannot be termed as infringement of fundamental right or deprivation of livelihood, is the contention. The claim for compensation is without any basis and similarly claim for rehabilitation is also untenable. With these averments, they had sought for dismissal of the Writ Petition.

5. The learned Single Judge dismissed the Writ Petition after adverting to the pleadings raised by the parties. The learned Single Judge opines, in the absence of the writ petitioners having any legal right, once the area is declared as Special Economic Zone under a legislation, consequences prescribed under the Act follows and the same cannot be termed as violation of the writ petitioners' right under Article 21 of the Constitution, as the declaration in question is under a special law. Aggrieved by the dismissal of the Writ Petition, the present Writ Appeals are filed contending that the request for rehabilitation of lime shell mining workers was totally ignored by the respondent authorities concerned, in spite of several requests and representations sent to them.

6. According to the appellants-writ petitioners, though the representatives of the Co-operative Department visited the site and conducted enquiries for the purpose of reporting to Government, no step whatsoever was taken by the authorities concerned to solve the burning problem of eminent threat to the livelihood of the appellants. The vast coast area mentioned by the appellants hitherto would be cut short on account of the construction activities and declaration of the area as Special Economic Zone, is the contention. According to them, the learned Single Judge ought to have found that there is no efficacious alternative remedy available for the appellants, except filing the Writ Petition. The appellants claim, the Constitutional Court has a duty to protect fundamental rights of the citizens, even if deprivation of life has occurred on account of enactment of legislation, as Article 21 of the Constitution does not refer only to the necessity to comply with the procedural requirement, but also substantive right of the citizens. Contending that when the constitutional guarantees rights are being infringed the violators and abettors of the violations have to be dealt with by protecting the rights of the victims. With these averments, the appellants seek to allow the Writ Appeals setting aside the judgment of the learned Single Judge.

7. Learned counsel Sri.A.X.Varghese arguing for the appellants, substantiating his contentions as stated above, placed several citations. Olga Tellis and others v. Bombay Municipal Corporation and others (AIR 1986 SC 180) is relied upon to contend that the doctrine of estoppel can have no application to representations made regarding the assertion or enforcement of fundamental rights, as there can never be waiver of fundamental rights and no individual can barter away the freedom conferred upon him by the Constitution. Chameli Singh and others v. State of U.P and another [(1996)2 SCC 549] was pressed into service to contend that right to food, water, decent environment, education, medical care and shelter are components of right to live and mere right to shelter does not mean a mere right to a roof over one's head, but it is something more than a mere protection of one's life and limb. Duty of State encompasses providing housing facilities to Dalits and Tribes in the light of universal declaration of human rights. He also placed reference to Bandhua Mukti Morcha v. Union of India and others (AIR 1984 SCC 802), to contend that public interest litigation is not in the nature of adversary litigation but it is a challenge and an opportunity to the Government and its officers to make basic human rights meaningful to the deprived and vulnerable sections of the community and to assure to them social and economic justice which is the signature tune of our Constitution. Reliance is also placed on Indra Sawhney v. Union of India (AIR 1993 SC 477) to contend that the doctrine of equality and its scope enshrined in the Constitution in Articles 14 to 18 are to be understood in the light of Articles contained in Part IV of the Constitution. In a case of claim in public employment what applies to the claim of Scheduled Castes and Scheduled Tribes will equally apply to backward classes and other weaker sections. Bodhisattwa Gautam v. Subhra Chakraborty [(1996)1 SCC 490] is a case where interim compensation came to be awarded to the victim of a rape during the pendency of the proceedings for an offence punishable under Section 376 IPC. It was held that right to live includes dignity of women and if rape is committed on her, it is nothing, but violative of right to live, which includes right to live with human dignity. Reliance is placed on Consumer Education & Research Centre and others [(1995) 3 SCC 42], wherein Their Lordships, while considering the occupational health hazards of employees working in mines, had an occasion to deal with the right to health and medical aid of workers during service and thereafter and held that to be a fundamental right. Therefore, Court can give directions in appropriate cases to the State or its instrumentalities or private employer to make the right meaningful and to pay compensation to affected parties. In Secretary, HSEB v. Suresh and others [(1999)3 SCC 601], Their Lordships, while dealing with the claim made by a person engaged under contract labour on a bogus contract, as against the relationship of employer and employee, opined that doctrine of "lifting of the veil" though applied in corporate jurisprudence can be imported in the context of social evils, and Courts must decide in the interest of public inspired by principles of justice, equity and good conscience especially in the context of labour welfare legislation.

8. As against this, the learned Government Pleader contends that though the present case is filed in the nature of public interest litigation, the Court cannot ignore the facts of the present case, which govern the rights and duties of the parties with reference to terms and conditions of the permission under which the writ petitioners and other members of the Society they belonged to are mining the seashells. Ananda Behera and another v. State of Orissa and another (AIR 1956 SC 17) was relied upon to contend that a right to catch and carry away fish in specific portions of the lake is nothing, but a 'profit a prendre'. If the State refuses to recognise a contract, it is not infringement of fundamental right. Shivji Nathubhai v. Union of India and others (AIR 1959 PUNJAB 510) is pressed into service to contend that right under lease to work mines is not property and cancellation by government under due process of law is no infringement of Article 19(1)(f) or (g) or Art.31(1) of the Constitution.

9. In the light of the principles enunciated as stated above, we have to examine the facts of the present case. The appellants relate their claim to Exhibit P5 dated 17.1.2007. Exhibit P5 is a letter addressed to the Secretary, Kakka Vyavasaya Co-operative Society Ltd., Thekken Malippuram, Azheekkal P.O., Kochi by the Cochin Port Trust. It says, in response to the request dated 1.9.2005 made by the Society, it was decided to permit the Society to collect seashells from the bed of sea coast West of Re- Sy.Nos.394, 470, 471, 473, 474, 475 and 476 of Elamkunnappuzha Village. It further indicates the terms and conditions to which the said permission to collect seashells is subjected to, which reads as under:

"1. The area falls under the Port limits and is exclusively reserved for Port related activities/development work only. As such this permission is purely provisional/ temporary.

2. This permission will be for a period of 11 months from 1.8.2006 to 30.6.2007.

3. This permission will not be renewable at the option of the Co.op. Society and the Port reserves the right to terminate the permission at any point of time by giving 1 month notice.

4. The permission does not entail any obligation to the Port to provide any employment to the members of the Society.

5. In an event of refusal of permission Port will not be liable for any claim or compensation, what so ever of any nature to the Society.

6. The permission shall be revoked at any point of time if the area is required for the port related development work including the Projects under the integrated Development Plan of Cochin Port.

7. The permission does not grant any exclusive right to the Society to collect the shells from the area.

8. The engagements of the society should not in any way cause any obstruction what so ever to the Port operations, at any point of time.

9. Statutory clearance as required under law from appropriate authority including that of from the Directors of Mining & Geology may also be obtained by the Society and a copy of the same should be submitted to this office for records.

10. The Society will give an undertaking to the Port accepting the above terms and conditions and also give an assurance to comply with any directions issued by the Port from time to time in this regard."

10. True, the Society was formed as a Co-operative Society for the welfare of its members. It was the Society in whose favour permission was granted to collect seashells from the bed of seacoast in certain re-survey numbers as stated above. However, it was subject to terms and conditions. In the light of the terms and conditions, the facts in the present petitions have to be analysed with reference to the law declared by the Apex Court referred to above. So far as Olga Telli's case (Supra), the petitioners were persons, who were living on pavements and slums in Bombay city, constituting nearly half of the population of the city. Though Their Lordships while summarising opined that no person has the right to encroach by erecting a structure of any nature on places which are meant for public purposes like footpaths, pavements, garden, playground etc. in terms of the Bombay Municipal Corporation Act, on account of assurances given by the State Government in their pleadings thereunder, the authorities concerned were held to be obliged to comply with the promises made. The situation which persuaded Their Lordships to give directions to the authorities concerned to provide alternative sites or accommodation to the pavement and slum dwellers came in the light of certain undertakings in those matters. In 1976, the pavement dwellers were taken note of and included in the census. Slum dwellers were given identity cards and even numbering of their dwellings was carried on way back in 1976 census. The above two kinds of dwellers were in existence for a long time. They had acquired a certain status, recognised by the local authority, though their encroachment was essentially illegal. Moreover, in the pleadings, assurance was given to create alternative place or accommodation. The facts of the present case are entirely different.

11. So far as Chameli Singh and others v. State of U.P and another [(1996)2 SCC 549), it was a case of compulsory acquisition of land by the State for public purpose in exercise of its power of eminent domain. Their Lordships opined that exercise of power of eminent domain does not amount to deprivation of right to livelihood (Article 21 of the Constitution of India). Acquisition of land was in accordance with the procedure depending upon its compulsory nature, because of involvement of public interest. In the light of provision for payment of solatium to the owner who declines to voluntarily part with the possession of land as enunciated under Section 23 of the Land Acquisition Act as also compensation for the land acquired at the price prevailing as on the date of publishing preliminary notification under Section 4(1) of the Land Acquisition Act, question of deprivation of right to livelihood would not ensue. On account of displacing the owner or occupier from enjoying the fruits of the land, interest is also payable apart from recompensating the loss of enjoyment of property, therefore, it does not amount to deprivation of right to livelihood, was the clear finding.

12. In the case of Bandhua Mukti Morcha v. Union of India and others (AIR 1984 SC 802), it was a lis pertaining to certain workmen living in bondage and under inhuman conditions. In the said case Their Lordships said, in a public interest litigation of such nature the Government should welcome an enquiry by the Court into the inhuman conditions of the workmen living as bondaged labours. Public interest litigation was described as a challenge and an opportunity to the Government and its officers to make basic human rights meaningful to the deprived and vulnerable sections of the society resulting in assurance of social and economic justice to its subjects. In that context, Their Lordships, while referring to Article 21 of the Constitution, proceeded to opine that Article 21 not only assures the right to livelihood, but it assures the right to live with human dignity free from exploitation. Their Lordships emphasises that the State is under a constitutional obligation to see that there is no violation of the fundamental right of any person, particularly when he belongs to the weaker sections of the community and is unable to wage a legal battle against a strong and powerful opponent who is exploiting them.

13. In the case of Indra Sawhney's case (Supra) with reference to Scheduled Castes and Scheduled Tribes' claim in public employment, Their Lordships considered various aspects of the matter and opined that similar consideration has to be applied while considering the claim of backward classes and other weaker sections of the society, as the provisions of Article 46 of the Constitution are entirely different from provisions of Article 16(4) as Article 16(4) restricts its application so far as adequate representation in the services of the State to that class which has no such representation. The concept of "weaker sections" in Article 46 of the Constitution has no bounds, therefore, any individual belonging to the weaker section though they do not form a class, they could claim as weaker section of the society, though it is not relatable to their past social and economic backwardness or discrimination. In that context, Their Lordships said, weaker sections of the people include educationally and economically backwardness.

14. In Bodhisattwa Gautam v. Subhra Chakraborty [(1996)1 SCC 490], while referring to Article 21 of the Constitution - Right to Life, Their Lordships elaborated its applicability even to the victims of rape as right to life includes right to live with dignity. Therefore, in an offence of rape, the act itself is violative of the right to life which includes right to live with human dignity, therefore, under Article 32 of the Constitution, the Court has jurisdiction to enforce the fundamental rights even against private bodies and individuals and while enforcing fundamental rights, the Court can award compensation for violation of the fundamental right of Right to Life.

15. In the case of Consumer Education & Research Centre and others v. Union of India and others [(1995)3 SCC 42], Their Lordships were dealing with the plight of workers employed in asbestos industries, who not only would be affected by asbestosis, but become prone to lung cancer and related ailments. While laying down that sovereign immunity cannot be a defence where fundamental rights are sought to be enforced, Their Lordships proceeded to opine that right to life under Article 21 of the Constitution has a wider meaning including right to livelihood, better standard of living, hygienic conditions in the workplace and need for adequate leisure. As right to life envisaged under Article 21, enlarges its sweep to encompass human personality in its full blossom with invigorated health which is a wealth to the workman to earn his livelihood.

16. In Secretary, HSEB v. Suresh and others [(1999)3 SCC 601], it was a case of abolition of contract labour. The Haryana State Electricity Board being a licensee under the Electricity Act, had the responsibility of supplying power throughout the State to various plants and stations. So far as clearing those plants and stations, the Electricity Board had awarded contracts to contractors, who are required to engage certain minimum number of workmen for cleaning the main plant building at Panipat for a period of one year. On facts, when the terminated employees approached the Court contending that they had worked for more than 240 days, it was found that the contractor was only a name lender and there was no genuine contract with him. Their Lordships upheld the opinion of the High Court that the employees are to be treated as employees of the Board, therefore, they were entitled for reinstatement without resort to Section 10 of the Contract Labour (Regulation and Abolition) Act.

17. In the case of Ananda Behera and another v. State of Orissa and another (AIR 1956 SC 17), an agreement was entered into granting a right to catch and carry away fish from specific portions of the lake over a specified future period for certain amounts. This right obtained as a licence, was to enter on the land coupled with a grant to catch and carry away fish. The petitioner in the said case had entered into a contract with an ex- proprietor of an estate prior to its vesting in the State of Orissa. That contract permitted the petitioner to pay certain amounts for certain period to grant licence to catch and carry away fish from specific portion of lake situated in the said estate. Subsequent to its vesting with the State, the State of Orissa refused to recognise these licences and proceeded to re-auction the rights. At that point of time, they approached the Court seeking writ under Article 32 of the Constitution contending that their fundamental rights under Articles 19(1)(f) and 31(1) of the Constitution were about to be infringed. Their Lordships held that even assuming that 'contract' is 'property' within the meaning of Articles 19(1)(f) and 31(1) of the Constitution, no question under those Articles would arise because the State refused to recognise the existence of the contract and it does not amount to confiscation or taking possession of the contract as such, hence, the Writ Petition came to be dismissed.

18. In the case of Shivji Nathubhai v. Union of India (AIR 1959 Punjab 510), it was a licence to work in mines of Government property. The right to work in a mine upon another's land does not exist before the licence or lease is granted to him and cannot be treated as a right analogous to the fundamental right of a citizen to trade and buy and sell in open market. The fundamental rights as contemplated by the Constitution were rights which already existed and no rights which are created by a contract whether that contract be between private individuals or between the Government and a private individual.

19. In the light of the principles laid down by the Apex Court and other Courts as enunciated above, it is crystal clear that one has to look at the nature of the right acquired by these petitioners. It is not in dispute that the right to collect seashells from the bed of seacoast is created under Exhibit P5. The terms and conditions enumerated at Exhibit P5 referred to above clearly indicate that the Society was aware of the fact that said area falls under the Cochin Port Trust limits and is exclusively reserved for port related activities, including development work. It was made clear, the permission was purely a temporary one for a period of 11 months ending with 30.6.2007. The Cochin Port Trust made it obvious that the Cochin Port Trust reserves the right to terminate the permission at any point of time giving one month notice and the permission was not renewed at the option of the Co-operative Society. The permission under Exhibit P5 did not create any obligation on the Port to provide employment to the members of the Society. They did not saddle themselves with the liability of paying compensation or meeting any claim in the event of refusal of permission. The project under the Integrated Development Plan of Cochin Port Trust was also indicated as related activities of the Port. None of the activities of the Society should cause in any way obstruction or hurdle for the operations of the Port. No exclusive right was reserved to the Society to collect seashells from the area. The permission to mine seashells was again subjected to clearance from other statutory authorities. It is not in dispute that the Society has given an undertaking to the Port accepting the above terms and conditions and also assurance to comply with any other conditions issued from time to time.

20. It is very pertinent that Exhibit P5 by clause/condition No.5 prescribed that in the event of refusal of permission, the Port will not be liable for any claim for compensation by the Society. Hence the mining activity carried on with the permission of the Port was terminable without any reason and on that contingency no claim for compensation could arise, from the Society or its members. Hence the formation of a Special Economic Zone, the construction of berths to facilitate availability of fuel, that too nature friendly fuel, and the consequential restriction of entry, on grounds of safety and security; surely cannot give rise to claim for security. The permissive grant for mining shells created no vested right and the cancellation or refusal of further grant neither violate the right to live nor gives rise to a claim for compensation.

21. Having agreed to above terms and conditions, when the Kochi Refineries Ltd. and the Petronet LNG Ltd. commenced their work, the petitioners are seeking several reliefs including compensation contending that their right to life is jeopardised with the ongoing construction of work undertaken by the Petronet LNG Ltd. and Kochi Refineries Ltd. No one can dispute the importance of the project, conversion of Liquefied Natural Gas to Re-gasified Liquefied Natural Gas, which would help several industries. The nature of work requires the area to be declared as a Special Economic Zone having regard to vulnerable nature of product. Definitely safeguarding the area is a must. The so-called right to collect seashells is subject to terms of Exhibit P5 which is the permission to collect seashells. The terms and conditions enumerated thereunder do not give any unbridled right of any legal nature to petitioners or Society, which cannot be withdrawn. In the absence of appellants having such unlimited and unrestricted right, once the area is declared as a Special Economic Zone under a legislation, consequences prescribed thereunder naturally have to follow, it cannot be termed as violation of right to life of the appellants under Article 21 of the Constitution. The various decisions relied on by the petitioners, on facts, noticed above, are clearly distinguishable.

22. However the dismissal of the Writ Appeals shall not preclude the State or the appropriate authorities, from examining the grievances of the appellants and if found genuine and capable of redressal; from taking necessary steps to alleviate such grievances. The contours of our jurisdiction fetters us from issuing any directions to formulate policy, neither is there available a legal right to the petitioners; but the welfare State always can draw from its eternal fountain of sovereignty and eminent domain.

23. Viewed from any angle, none of the contentions raised by the appellants could be sustained for the reasons mentioned above.

Accordingly, the Writ Appeals are dismissed.

MANJULA CHELLUR,

CHIEF JUSTICE

K.VINOD CHANDRAN,

JUDGE

vgs 


W.A. No. 974 of 2012 - State Bank of Travancore Vs. Vasantha Kumari, 2013 (1) KLT 649

posted Mar 13, 2013, 1:36 AM by Law Kerala   [ updated Mar 13, 2013, 1:38 AM ]

(2012) 294 KLR 294

IN THE HIGH COURT OF KERALA AT ERNAKULAM

PRESENT: THE HON'BLE ACTING CHIEF JUSTICE MRS.MANJULA CHELLUR & THE HONOURABLE MR.JUSTICE A.M.SHAFFIQUE

FRIDAY, THE 14TH DAY OF SEPTEMBER 2012/23RD BHADRA 1934

WA.No. 974 of 2012 () IN WPC/270/2012

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AGAINST THE JUDGMENT IN WPC.270/2012 DATED

APPELLANT/ 1st PETITIONER:

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STATE BANK OF TRAVANCORE, KARUNAGAPPALLY BRANCH, REPRESENTED BY ITS MANAGER, PIN-690 518.

BY ADVS.SRI.R.S.KALKURA SRI.KURIAN GEORGE KANNANTHANAM (SR.) SMT.A.V.PRIYA SRI.HARISH GOPINATH SRI.V.VINAY MENON

RESPONDENTS/PETITIONERS AND RESPONDENTS 2 TO 4:

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1. VASANTHA KUMARI, AGED 50 YEARS W/O.RAVI, RESIDING AT RENJIN NIVAS KALLELI BHAGUM P.O., KARUNAGAPPALLY-690 518.

2. RAVI.K.N RENJIN NIVAS, KALLELI BHAGUM P.O. KARUNAGAPPALLY-690 518.

3. THE DISTRICT COLLECTOR KOLLAM-691 101.

4. THE TAHSILDAR (AUTHORISED OFFICER (DTRR) KARUNAGAPPALLY, KOLLAM DISTRICT-690 518.

5. THE VILLAGE OFFICER, KALLELI BHAGUM, VILLAGE OFFICE, KALLELI BHAGUM P.O. KARUNAGAPPALLY-690 518.

R BY ADV. SRI. A SHAFEEK KAYAMKULAM R3 TO R5 BY GOVERNMENT PLEADER, SMT. GIRIJA GOPAL. THIS WRIT APPEAL HAVING BEEN FINALLY HEARD ON 06/07/2012 , THE COURT ON 14-09-2012 THE SAME DAY DELIVERED THE FOLLOWING: BP

'C.R.'

Manjula Chellur, Ag. C.J. & A.M. Shaffique, J.

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W.A.No. 974 OF 2012

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Dated this the 14th day of September, 2012

Head Note:-

Banking Regulation Act, 1949 - Sections 21 & 35A - directions or guidelines issued by the RBI - Whether binding force of guidelines issued by RBI would result in invalidating a contract which was entered into with volition by third parties with a bank?

Held:- Though the directions of RBI has binding force on the banking companies in general or the banking company in particular, it cannot invalidate the terms of contract where the party voluntarily agrees to waive the benefit accrued to him by virtue of directions or guidelines.

J U D G M E N T

Manjula Chellur, Ag. C.J.

This appeal is preferred by the 1st respondent before the learned single Judge in W.P.(C) No.270/12. Respondents 1 and 2 herein are the parents of one Ms. Jwala who approached the appellant/bank for an education loan. It is not in dispute, a sum of Rs.3,32,000/- was sanctioned as education loan as early as 2004. They borrowed the said loan for the purpose of their daughter's B.Sc. Nursing Course at the Vivekananda College of Nursing, Bangalore. After completing the three years course of study, as the institution imparting the course did not have recognition by the authority concerned, the daughter of the writ petitioners was not allowed to appear for the public examination. Ms. Jwala and other similarly placed students got admitted to other institutions having recognition. Therefore, she joined another college in September 2007. By this time the entire loan was availed of. Later when the loan was not repaid, revenue recovery proceedings were initiated against Ms. Jwala and her father.

2. The writ petitioners approached the learned single Judge challenging the revenue recovery proceedings on various grounds. According to them, in terms of the Scheme, repayment of loan would start only one year after completion of studies or after 6 months of getting employment. The second contention is that the writ petitioners, though parents of Ms.Jwala, are in no way connected with the loan availed of. Therefore, they are not liable for any action under revenue recovery proceedings. The authorities in charge of the revenue recovery proceedings are not entitled to attach the property of the parents of the student and they have only one property, their residential house, where they are residing. It is further contended that the property belongs to the 1st petitioner - the mother of Ms. Jwala, who has nothing to do with the loan and she did not even stand as surety or guarantor for the borrowers.

3. The defence of the appellant/bank is that the duration of the course was 4 years and the loan was availed of in 2004. The moratorium period of one year has already expired and even after the expiry of such period, no repayment was made. Hence the bank was entitled to proceed against the writ petitioners. According to the appellant/bank, loan was availed of by the student as well as the guardian. It is stated that the documents indicate that the 2nd writ petitioner, the father of the student, had also singed the loan papers as guardian of his daughter and therefore the appellant/bank was justified in proceeding against the 2nd writ petitioner as well.

4. After strenuous arguments advanced on behalf of the writ petitioners and the 1st respondent/bank, the learned Single Judge proceeded to consider the entire matter and ultimately allowed the writ petition quashing the revenue recovery proceedings initiated against the parents of Ms. Jwala and held that the appellant bank is entitled to continue recovery proceedings against Ms. Jwala.

5. According to learned Single Judge, a Model Educational Loan Scheme has been approved by the Reserve Bank of India(for short 'RBI') with necessary modification and no surety can be insisted upon for loan upto Rs.4 lakhs. Further it is clear that collateral security or co-obligation of parents/guardian need be furnished only for loans above Rs.4 lakhs. Therefore, the bank was bound by the directions issued by the Reserve Bank of India. Hence the appellant/bank ought not have initiated proceedings under the Revenue Recovery Act against the parents of the students as they will not be liable in any manner if the loan amount was less than Rs.4 lakhs. The learned Single Judge further opined that the loan should have been granted to the student on her own application only and without surety of the parents. Therefore the bank was not entitled to proceed against the 2nd writ petitioner - father of the student who had signed the loan documents and such action on the part of the appellant/bank amounts to illegality.

6. Aggrieved by the judgment of the learned single Judge, the appellant/bank is before us. Learned counsel appearing for the appellant/bank contends that interpretation of the Model Educational Loan Scheme produced at Ext.R1(a) by the learned single Judge was wrong and unsustainable. According to the appellant/bank, the learned single Judge failed to appreciate that though the appellant/bank need not insist security of the parents for the loan upto Rs.4 lakhs; but it would not cover cases where parents voluntarily executed the documents along with their child. The Indian Banks' Association (for short 'IBA') came out with a scheme for granting education loan with the approval of the Reserve Bank of India. It was with the sole purpose of proving financial assistance from the banking institutions to the meritorious students for higher education who are unable to pursue education on account of non-availability of financial support. One of the guidelines is, loan has to be sanctioned subject to re-paying capacity of the parents/students. This was totally ignored by the learned single Judge. It is further contended that the appellant/bank was dealing with public money of depositors which had to be repaid by the bank with interest to the respective depositors. Before sanctioning loan, the appellant/bank makes enquiry about the salary/payment made by the various hospitals in Kerala and such enquiry led to ascertaining the average income expected by the Nurses with B.Sc. degree was between Rs.4,000/- and Rs.6,000/- per mensem. Therefore, they fixed the E.M.I. at Rs.1,712/- for loan of Rs.1 lakh. This proposal was arrived at to accommodate the students to repay the loan in monthly instalments from the income which they received from future employment.

7. According to learned counsel Mr.R.S. Kalkura, the learned single Judge ought not to have gone into the Reserve Bank of India instructions as no challenge was made against such instructions. Further the agreement between the parents and the appellant/ bank was not against public policy. Similarly, surety or guarantor is different from co-obligant or co-borrower. Co-obligant means the liability is equivalent to that of a borrower. The appellant/bank being a commercial organization, their credit decisions have to be taken in accordance with the norms of the bank. It was further contended that in the absence of no express prohibition in the Reserve Bank of India circular or in the Indian Banks' Association Education Scheme that the bank should not obtain loan documents of parents of a student borrower, the learned single Judge was not justified in excluding the liability of the father of the student. The commercial bank cannot take the role of a State as the purpose and obligation of commercial bank in its business transactions is entirely different from the duties of a State.

8. The modification of the Scheme in 2004 as well as in 2011 indicates that loan upto Rs.4 lakhs, parents has to be co-borrowers. In the absence of either IBA or RBI being a party to the proceedings, the interpretation of the Scheme mooted by the IBA with the approval of RBI ought not to have been the subject matter of this judgment. The opinion of the learned single Judge would give premium to the defaulters deterring from repayment of loan. The learned Single Judge, according to the appellant, ignored the law laid down by the Supreme Court in Syndicate Bank v. Estate Officer & Manager [2007 (8) SCC 361]. The 2nd petitioner signed the loan documents as co-borrower and not a surety. This was totally ignored by the learned single Judge. Having executed the loan documents by the father of the borrower, this Court cannot set aside the contract entered into between him and the bank. The interpretation of the learned single Judge is superfluous and render the education loan scheme inviable, is the argument of counsel for the appellant/bank. With these contentions learned counsel for the appellant/bank seriously challenged the opinion of the learned single Judge.

9. As against this, learned counsel appearing for respondents 1 and 2 contended that the fresh Model Education Loan Scheme gives concession to students belonging to lower income group for loan below a sum of Rs.4 lakhs. The writ petitioners' daughter was not able to fulfill the terms of the agreement for reasons beyond her control as she joined the nursing course in another college which postponed the completion of the course by her. Revenue recovery proceedings could not be taken as a re-course as the bank has to file a suit for realising the amount. The amounts from the students could be recovered after the borrower secures a job. Without waiting for such happening in future, they have highhandedly taken revenue recovery proceedings. The appellant/bank, according to them, could only proceed against the borrower and the properties of the parents could not be proceeded against as it is purely an education loan. None of the movables in the house and the residential property was the contribution of the student who availed the loan and therefore the respondents/writ petitioners were in no way liable to pay the loan amount. According to learned counsel, the model scheme aims at providing financial support from the banking system to deserving/meritorious students for pursuing higher education where the parents were not able to financially support them; but not at the cost of the parents. With these arguments, learned counsel for 1st and 2nd respondents sought for dismissal of the writ appeal.

10. Before the learned single Judge the appellant/bank had produced several documents. Ext.R1(a) is the application form for 'Gyan Jyothi Education Loan Scheme'. As per the said document, Ms. Jwala and her father both had signed the document. Ext.R1(b) is the agreement for term loan for education (Gyan Jyothi). This document is also signed by both the student and the guardian i.e., the father. Revival letters sent from time to time as noted at Ext.R1(b)/5 & 6 were also singed by the borrower and the co-obligant. Ext.R1(c) is the education loan scheme brought in 2001. Clause 2(iii) refers to non-insistence of security for loan up to Rs.4 lakhs which reads as follows:

"2. Government of India, Ministry of Finance, Department of Economic Affairs (Banking Division) has considered and decided to accept the Model Scheme prepared by IBA for implementation, subject to the following modifications:

(i) x x x x x

(ii) x x x x x

(iii) No security may be insisted upon for loans upto Rs.4 lakhs. However, for loans above this amount, collateral security of suitable value or co-obligation of parents/ guardians/ third party along with the assignment of future income of the student for payment of instalments may be obtained." 

11. Ext.R1(c)/3 in detail refers to the purpose why such Scheme was introduced, Objectives of the Scheme, applicability of the Scheme, eligibility criteria, quantum of finance, margin, security, rate of interest and other general conditions. This document indicates why such a Scheme has to be introduced. The Finance Minister along with Executives of the Public Sector Banks met on 13.06.2000 and the role of commercial banks in facilitating pursuit of higher education by poor, but meritorious students was highlighted. The meeting brought out a comprehensive educational loan scheme to be adopted by all banks. The objectives of the Scheme was financial support to deserving/meritorious students for pursuing higher education who did not have self financial support. The object is to cater to the poor and needy students to undertake basic education and so as also to the meritorious students to pursue higher/professional/ technical education. So far as the applicability of the Scheme, it could be adopted by all commercial banks and the Scheme provides broad guidelines to the banks for operationalising the educational loan scheme and the implementing bank also has the discretion to make changes suiting to the convenience of the parents to make it more customer friendly. So far as security is concerned, it says, above Rs.2 lakhs collateral security equal to 100% of the loan amount or guarantee of third person known to bank for 100% of the loan can be insisted. It further says, security can be in the form of land/building/Government securities/Public Sector Bonds/Units of UTI, NSC, LIC etc., gold, shares/debentures, bank deposit in the name of student/parent/guardian or in any other third party with suitable margin.

12. Ext.R1(d) is the revised education loan scheme which also refers to various Clauses and so far as security, it says, upto Rs.4 lakhs no security, co-obligation of parent/guardian/spouse as the case may be taken. Ext.R1(e) is the master circular - lending to priority sector. The important Clauses and the main heading "Categories of Priority Sector" as sub-category (iv) which deals with educational loans including loans and advances granted to only individuals for educational purposes upto Rs.10 lakhs for studies in Indian and Rs.20 lakhs for studies abroad.

13. So far as the loan documents are concerned, it is purely an agreement which amounts to contract between parties. In 2001 no security or no third party security could be insisted upon upto Rs.2 lakhs and the revised scheme in 2004 it was enhanced to Rs.4 lakhs. The writ petitioners are banking upon this Clause in the guidelines of the RBI contending that there was no liability on the part of the writ petitioners/ parents to offer themselves as collateral security and therefore the bank was not entitled to take such loan documents from the parents. In the present case it was the father who signed all the loan documents as a co-obligant. Liability of the co-obligant is that of a borrower. He can be termed as co-borrower/sureties of a third party. Such third party could be a parent as well. But in the present case the father of the borrower signed the documents as co-obligant. Once the documents are executed and acted upon the terms and conditions imposed by the lending bank, becomes terms of contract. Having agreed to repay the loan amount as co-obligant, the father who signed the loan document is liable to pay the loan amount and he stands on par with the borrower. The argument is, if the 2nd writ petitioner/ father of the student was not desirous of executing these documents, he ought not to have signed the documents and having signed the documents, he cannot go back as he accepted the terms and conditions imposed by the appellant bank. The learned counsel for the appellant contends having signed the loan documents, the 2nd petitioner, father of the student cannot waive the terms of agreement.

14. This stand of the appellant Bank has to be taken into consideration with reference to several provisions of the statute applicable to the facts of the present case as well as the law laid down by the Apex Court. The Scheme of IBA, so far as educational loan in India, came to be introduced having regard to financial difficulties of the student population to meet the cost of education with the meagre income of the parents. The guidelines framed by IBA came to be circulated by the Reserve Bank of India as per notification dated 28.04.2011. The nationalised Banks are directed to implement the guidelines framed by IBA while granting education loan to students. The question is whether these guidelines have to be implemented in its strict sense by the nationalised banks. In other words, whether they have statutory force or not. No doubt, the Scheme mentioned above indicates attempts to remove the handicap of financial difficulties so far as meritorious students are concerned. Except this financial handicap, if a student suffers from any other deficit like lack of merit it is well within the reach of the Bank to reject the application. The Scheme definitely envisages how loan has to be recovered after completion of the studies i.e. after the moratorium period. Then coming to the guidelines, Reserve Bank of India in its power may from have time to time issue guidelines and directions as it deems fit to banking company in particular or banking companies in general and the same have to be followed by the banking company or companies. This power of RBI cannot be restricted to suo motu decisions. It could be on its own or on representation made to it, modify or cancel any of its directions. As long as the directions or guidelines are in force, the same have to be implemented.

15. The Reserve Bank of India, having the prime banking institution of the country, is entrusted with several powers both directory and regulatory. Therefore, it has the authority of issuing binding guidelines having statutory force keeping in view the interest of the public in general so as to prevent or prohibit working culture in banking affairs from deterioration without prejudice to the security and proper management of the banking institutions. Sections 21 and 35A of the Banking Regulation Act of 1949 are relevant for consideration which read as under:

"21. Power of Reserve Bank to control advances by banking companies.- 

(1) Where the Reserve Bank is satisfied that it is necessary or expedient in the public interest or in the interests of depositors or banking policy so to do, it may determine the policy in relation to advances to be followed by banking companies generally or by any banking company in particular, and when the policy has been so determined, all banking companies or the banking company concerned, as the case may be, shall be bound to follow the policy as so determined.

(2) Without prejudice to the generality of the power vested in the Reserve Bank under sub-section(1) the Reserve Bank may give directions to banking companies, either generally or to any banking company or group of banking companies in particular, as to -

(a) the purposes for which advances may or may not be made,

(b) the margins to be maintained in respect of secured advances,

(c) the maximum amount of advances or other financial accommodation which, having regard to the paid-up capital, reserves and deposits of a banking company and other relevant considerations, may be made by that banking company to any one company, firm, association of persons or individual,

(d) the maximum amount up to which, having regard to the considerations referred to in clause (c), guarantees may be given by a banking company on behalf of any one company, firm, association of persons or individual, and

(e) the rate of interest and other terms and conditions on which advances or other financial accommodation may be made or guarantees may be given.

(3) Every banking company shall be bound to comply with any directions given to it under this section.

xx xx xx xx xx

35A. Power of the Reserve Bank to give directions.- (1) Where the Reserve Bank is satisfied that -

(a) in the public interest; or

(aa) in the interest of banking policy; or

(b) to prevent the affairs of any banking company being conducted in a manner detrimental to the interests of the depositors or in a manner prejudicial to the interests of the banking company; or

(c) to secure the proper management of any banking company generally, it is necessary to issue directions to banking companies generally or to any banking company in particular, it may, from time to time, issue such directions as it deems fit, and the banking companies or the banking company, as the case may be, shall be bound to comply with such directions.

(2) The Reserve Bank may, on representation made to it or on its own motion, modify or cancel any direction issued under sub- section (1), and in so modifying or cancelling any direction may impose such conditions as it thinks fit, subject to which the modification or cancellation shall have effect."

16. Section 21(1) of the Banking Regulation Act entrusts the Reserve Bank with the power to determine a policy in relation to advances which have to be implemented by banking companies generally or banking company in particular. Section 21(2) (d) deals with nature and scope of the directives enabling Reserve Bank of India to give directions in respect of any or all the issues mentioned thereunder. It refers to the purpose for which advance is made or may not be made. It determines the boundaries to be maintained in respect of secured advances. It has the power to determine maximum amount of advance or paid-up capital, reserves etc. It has the power to determine maximum amount up to which guarantees could be insisted upon and it has the power to determine rate of interest and other terms of conditions on which advances or other accommodations could be made in respect of a guarantee. Section 35(A) deals with a situation where Reserve Bank of India if satisfied, in a particular situation, in the interest of banking policy directions could be necessarily issued to banking companies and the same has a binding nature on the banking companies. Sections 21 and 35 refer to directions having statutory force of law to be issued by the Reserve Bank of India.

17. Reliance is placed on ICICI Bank Limited v.Official Liquidator of APS Star Industries Limited and others [(2010) 10 SCC 1]; Sardar Associates and others v. Punjab & Sind Bank and others [(2009) 8 SCC 257]; Canara Bank v. P.R.N. Upadhyaya and others [AIR 1998 SC 3000] and an unreported decision in W.P.(C) Nos. 11556, 12299, 13860 and 11595 of 2001 on the file of High Court of Karnataka dated 19.04.2001.

18. When once we hold that the R.B.I directions issued from time to time have binding effect on the banking companies or a banking company in particular, in case a particular banking institution insists on the parent of the student/ borrower to offer a security, could we consider this as a waiver of benefit envisaged in the guidelines of the RBI and extend the benefit of guidelines to such persons, is the controversy to be considered here. The argument of the learned counsel for the appellant is, having signed the documents as a guarantor or co-obligant it is not open to the father or parent of the student to go back on the agreement and contend that the Bank cannot proceed against them. For this the learned counsel for the appellant relies upon Lachoo Mal v. Radhey Shyam [(1971) 1 SCC 619]; B.O.I. Finance Limited v. Custodian and others [(1997) 10 SCC 488] and Sita Ram Gupta v. Punjab National Bank and others [(2008) 5 SCC 711].

19. [(1971) 1 SCC 619] deals with a situation wherein a landlord waives personal benefit accrued to him by virtue of Section 1-A of Rent Control-U.P.(Temporary) Control of Rent and Eviction Act, 1947. In this case the landlord entered into an agreement with the tenant wherein the old tenant agreed with the landlord that he would vacate the shop room for one month to enable respondent to construct an upstair portion for his own use, but he should resume possession of the shop after the period at the same old rent. After construction the tenant took possession of the premises. When the landlord refused to take the rent, he deposited the rent in terms of the concerned Rent Act. Thereafter the landlord served a notice to quit the shop and later filed a suit for ejectment of the appellant and for arrears of rent. The suit came to be dismissed as the appellant tenant was entitled to protection under Section 3 of the Act. The first appellate Court reversed the opinion of the Trial Court by allowing the appeal and same view was confirmed by the High Court in the second appeal. When the matter came up before their Lordships for consideration, Supreme Court held, the landlord cannot claim the benefit of Section 1-A of the Act on the plea of new construction after January, 1961 as he relinquished his personal benefit by the agreement with the appellant.

20. (1997) 10 SCC 488 refers to Section 23 of the Contract Act. In this case the appellant bank entered into a contract with different brokers for the purchase and sale of certain securities which were not listed on any Stock Exchange. The question that arose before their Lordships was, if transaction arising out of an agreement envisages to do an act which is against the statute, if signs the agreement as valid, then it has to be regarded as valid notwithstanding the illegality of the agreement. Paragraphs 26 to 33 are relevant which read as under:

"26. There can obviously be no doubt, as is evident from the plain reading of the said provisions, that the directions issued under Sections 21 and 35A are binding on the banking companies. Section 36(1)(a) (1)(b), on which reliance is placed, reads thus :

"36(1) The Reserve Bank may -

(a) caution or prohibit banking companies generally or any banking company in particular against entering into any particular transaction or class of transactions and generally give advice to any banking company;

(b) on a request by the companies concerned and subject to the provisions of [Section 44A] assist as intermediary or otherwise in proposals for the amalgamation of such banking companies."

27. Referring to Section 36(1)(a), we find that it empowers the Reserve Bank to "caution or prohibit" the banking companies from entering into any particular type of transaction or generally to give advice to the said banking companies. This provision not only enables the Reserve Bank to assume an advisory role but it also gives it the power to prohibit a banking company against entering into any particular transactions or class of transactions. The use of words "caution or prohibit" in Section 36(1)(a) clearly implies that when the Reserve Bank of India prohibits the banking companies from entering into any particular transaction then such a direction which is issued would be binding on the banks and has to be complied with. While the Reserve Bank of India has the power, under Section 36(1)(a) of the Act, to give advice or to caution the banking companies which may not be binding on the banking companies, but when the Reserve Bank prohibits the banking companies against their entering into any particular transaction or class of transactions, the said prohibition has to be regarded as being binding. The power to prohibit, given by Section 36, will be meaningless if it was not meant to be binding on the banking companies.

28. It is no doubt true that the circular dated 15-4-1987 states that the banks are "advised" to follow the guidelines given thereunder, but para 2A of the said circular clearly contains the prohibition relating to the buy -back arrangements. Similarly, under para 2B, which is applicable in the present case, by use of the words "should be" the circular clearly implies that the direction contained thereunder is meant to be binding. The word "advised" used in para 2 of the first circular, cannot be read in isolation. Reading the said circular, as a whole, it can leave no doubt in any one's mind that what was stated in the said document was meant to be binding on the banking companies and, was not merely an 'advice' or a 'caution' which could be ignored.

29. It was then submitted that even if it is held that the said circulars were binding they could only bind the banks and not the third parties. The submission was that by contravening the direction contained in the said circulars, the contracts which were entered into between the banks and the third parties could not be invalidated and the only result of such contravention would be the levy of penalty under Section 46 of the said Act.

30. It is not in dispute that the said circulars which have been issued were not made public. The said circulars were confidential documents and required the banking companies to transact their business in a particular manner namely they should not enter into any buy-back contracts which were not according to the terms of the circulars. The Act itself does not provide that, where the directions issued by the confidential circulars are violated by the bank, the contracts entered into with the third parties would in any way be invalidated. The said circulars also, did not say that the consequence of the directions contained therein not being followed by the Banking Companies will result in such transaction being regarded as void. Indeed, no such stipulation could be made which would adversely affect third parties to whom no directions have been or could be issued and who were not aware of such directions issued to the banks.

31. It will be appropriate at this stage, to consider the decision of this Court in the case of Banarsi Das v. Cane Commissioner, 1963 Supp (2) SCR 760 : (AIR 1963 SC 1417). In that case an agreement was entered into between the appellant and the cane marketing society for supply of sugarcane. The appellant claimed that there was short supply of sugarcane and the society moved the Cane Commissioner for arbitration. These proceedings were sought to be challenged by the appellant by contending that the Cane Commissioner had no right to assume the office of arbitrator in this dispute because no valid agreement had been entered into between the parties, as contemplated by Section 18(2) of the Uttar Pradesh Sugar Factories Control Act, 1938 and in the Form XII as prescribed under the rules made thereunder. It was also contended that there were some blanks which were left to be filled in the prescribed form and it also did not have the signature of any representative of the sugar mill. On behalf of the appellant it was contended in this Court that the provisions of Section 18(2) of Uttar Pradesh Sugar Factories Control Act were mandatory and had to be followed to the letter. Inasmuch as the Act and the Rules prescribed a penalty for breach of the said section, it could not but be regarded as mandatory in all its parts. Therefore, assuming that the appellant may be guilty and could be punished but, it was submitted, the mandatory provision not having been followed no valid contract could come into existence and, consequently, the Cane Commissioner had no jurisdiction to proceed in the matter for appointment of an arbitrator. While repelling the contention, this Court at page 780 observed as follows :

"This rule has been applied in many cases both in India and in England. In State of U.P. v. Manbodhan Lal Srivastava (AIR 1957 SC 912), this Court observed that no general rule can be laid down but the object of the statute must be looked at and even if the provision be worded in a mandatory form, if its neglect 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 is to be treated only as directory and the neglect of it though punishable would not affect the validity of the acts done. These observations have been followed in other cases and recently in Bhikraj Jaipuria v. Union of India (AIR 1962 113), it was observed that where a statute requires that a thing shall be done in a particular manner or form but does not itself set out the consequences of non-compliance the question whether the prescription of law shall be treated as mandatory or directory could only be solved by regarding the object, purpose and scope of that law. If the statute is found to be directory a penalty may be incurred for non-compliance but the act or thing done is regarded as good. It is unnecessary to multiply these cases which are based upon the statement in Maxwell which is quoted over and over again."

32. It will also be useful to refer to the decision of the High Court of Australia in the case of Yango Pastoral Company Pty. Limited v. First Chicago Australia Limited, 1978 (139) CLR 411 where Mason, J. made observations in this regard. That was a case where Section 8 of the Banking Act, 1959 prohibited a body corporate from carrying on the business of banking without a licence. The question arose whether a mortgage and guarantees given to an unlicensed corporation in the course of carrying on business were void or unenforceable. The High Court unanimously held that nothing in the statute made them void and that the separate question of illegal performance should be determined by examining the terms of the statute to determine the impact of illegality on the enforceability of the contract. At p. 428, it was observed as follows :

"The weighing of considerations of public policy in this case and the decision in favour of enforcing the contract is influenced by the form of the particular legislation. In this case the Act, as I have mentioned, is to a large extent directed to aiding the Government in executing its fiscal policy rather than regulating the relationship between banker and customer per se, a feature which lends support for the view that the provision of a large recurrent penalty for offences against Section 8 is Parliament's determination of the consequences of breach of the section and as the only legal consequences thereof. There is much to be said for the view that once a statutory penalty has been provided for an offence, the rule of the common law in determining the legal consequences of commission of the offence is thereby diminished - see my judgment in Jackson v. Harrison, (1978) 138 CLR 438, CLR at p. 452. See also the suggestions that the principle cannot apply to all statutory offences (Beresford v. Royal Insurance Co. Ltd. (1937) 2 KB 197, KB at P.222, per Lord Wright; Marles v. Philip Trant and Sons Ltd., (1954) 1 QB 29, at p. 37, per Denning L. J., and that it would be a curious thing if the offender is to be punished twice, civilly as well as criminally (St. John Shipping Corporation v. Joseph Rank Ltd., (1957) 1 QB 267, QB at p. 292, per Devlin J.). The main considerations from which the principle ex turpi causa arose can be seen in the reluctance of the Courts to be instrumental in offering an inducement to crime or removing a restraint to crime; Beresford's case (1938 AC 586) at pp 586, 599; Amicable Society v. Boiland (1830) 4 Bligh (NS) 194 at p. 211.

However, in the present case Parliament has provided a penalty which is a measure of the deterrent which it intends to operate in respect of non compliance with Section 8. In this case it is not for the Court to hold that further consequences should flow, consequences which in financial terms could well far exceed the prescribed penalty and could even conceivably lead the plaintiff to insolvency with resultant loss to innocent lenders or investors. In saying this I am mindful that there could be a case where the facts disclose that the plaintiff stands to gain by enforcement of rights gained through an illegal activity far more than the prescribed penalty. This circumstance might provide a sufficient foundation for attributing a different intention to the legislature. It may be that the true basis of the principle is that the Court will refuse to enforce a transaction with a fraudulent or immoral purpose; Beresford v. Royal Insurance Co. Ltd., (1937) 2 KB 197 at p. 220. On this basis the common law principle of ex turpi causa can be given an operation consistent with, though subordinate to, the statutory intention, dying relief in those cases where a plaintiff may otherwise evade the real consequences of a breach of a statutory prohibition."

33. The aforesaid principles will clearly be applicable in the present case as well. The non-compliance of the directions issued by the Reserve Bank may result in prosecution/or levy of penalty under Section 46, but it cannot result in invalidation of any contract by the bank with the third party. If the contention of the Custodian is accepted it will result in invalidation of agreements by the banks, even where the third parties may not be aware of the directions which are being violated. To give an example if the Reserve Bank by confidential circulars fixes the limit in excess of which the banks cannot give any loan but, without informing the third party, the bank while exceeding its limit gives a loan which is then utilised by the bank's customer. It will be inequitable and improper to hold that as the directions of the Reserve Bank had not been complied with by the bank, the grant of loan cannot be regarded as valid and, as a consequence thereof, the customer must return the amount received even though he may have utilised the same in his business. Yet another instance may be where the bank advances loan by charging interest at a rate lower than the minimum which may have been fixed by the Reserve Bank, in a direction issued under Section 36(1)(a). As far as the customer is concerned, it may not be aware of the direction fixing the minimum rate of interest. Can it be said, in such a case, that the advance of loan itself was illegal or that the bank would be entitled to receive the higher rate of interest? In our opinion, it will be wholly unjust and inequitable to hold that such transactions entered into by the bank with a customer, which transactions are otherwise not invalid, can be regarded as void because the bank did not follow the directions or instructions issued by the Reserve Bank of India."

21. Sita Ram Gupta v. Punjab National Bank [(2008) 5 SCC 711] was a case where the liability of guarantor and the protection available to the guarantor under Section 130 of the Contract Act came up for consideration, where a defence was raised on behalf of the guarantor that due to waiver of the right he was not entitled for the protection available under Section 130 of the Contract Act. Having executed guarantee documents it was held that it was not open to the appellant guarantor to revoke guarantee as the appellant had agreed to treat the guarantee as a continued one. Relevant paragraphs are 7, 8 and 10 which read as under:

"7. We have carefully examined the submissions made on behalf of the parties and also the relevant clauses in the agreement of guarantee. In our view, the High Court was perfectly justified in holding that the appellant was liable to pay the decretal amount to the Bank in view of the clause, as mentioned herein earlier, in the agreement of guarantee itself. The agreement of guarantee clearly provides that the guarantee shall be a continuing guarantee and shall not be considered as cancelled or in any way affected by that fact the at any time, the said accounts may show no liability against the borrower or may even show a credit in his favour but shall continue to be a guarantee and remain in operation in respect of all subsequent transactions. This was an agreement entered into by the appellant with the Bank, which is binding on him. Therefore, the question arises whether the statutory provision under Section 130 of the Act shall override the agreement of guarantee. In our view, the agreement cannot be said to be unlawful nor the parties have alleged that it was unlawful either before the trial court or before the High Court. Let us, therefore, keep in mind that the agreement of guarantee entered into by the appellant with the Bank was lawful.

8. The question is whether the appellant, having entered into such an agreement of guarantee with the Bank, had waived his right under the Act. In our view, the High Court has rightly held and we too are of the view that the appellant cannot claim the benefit under Section 130 of the Act because he had waived the benefit by entering into the agreement of guarantee with the Bank. In Lachoo Mal v. Radhey Shyam (1971) 1 SCC 619 this Court observed that the general principle is that every one has a right to waive and to agree to waive the advantage of a law or rule made solely for the benefit and protection of the individual in his private capacity which may be dispensed with without infringing any public right or public principle. In Halsbury's Laws of England, Vol.8, 3rd Edn., it has been stated in Para 248 at p.143 as under:

"248. Contracting out.- As a general rule, any person can enter into a binding contract to waive the benefits conferred upon him by an Act of Parliament, or, as it is said, can contract himself out of the Act, unless it can be shown that such an agreement is in the circumstances of the particular case contrary to public policy. Statutory conditions may, however, be imposed in such terms that they cannot be waived by agreement, and, in certain circumstances, the legislature has expressly provided that any such agreement shall be void."

xx xx xx xx

10. Keeping this principle in mind, we now took at the clause in the agreement of guarantee, as noted hereinearlier. There cannot be any dispute that the appellant had clearly agreed that the guarantee that he had entered into with the Bank was a continuing guarantee and the same was to continue and remain in operation for all subsequent transactions. Having entered into the agreement in the manner indicated above, in our view, it was, therefore, not open to the appellant to turn around and say that in view of Section 130 of the Act, since the guarantee was revoked before the loan was advanced to Defendants 1 to 4 and 6, he was not liable to pay the decretal amount as a guarantor to the Bank as his guarantee had already stood revoked. In this view of the matter, we are not in a position to accept the submissions of the learned counsel for the appellant and we hold that in view of the nature of guarantee entered into by the appellant with the Bank, the statutory provisions under Section 130 of the Act shall not come to his help. The findings arrived at by the High Court while deciding the first appeal were that the amount shown due in the accounts of the Bank against the appellant and the defendants was neither cleared by the defendants nor by the appellant. Therefore, even if a letter was written to the Bank by the appellant on 31.07.1980 withdrawing the guarantee given by him, it was contrary to the clause in the agreement of guarantee, as noted hereinearlier. Therefore, it was not open to the appellant to revoke the guarantee as the appellant had agreed to treat the guarantee as a continuing one and was bound by the terms and conditions of the said guarantee. For this reason, it is difficult to accept the submissions of the learned counsel for the appellant that in view of the statutory provision under Section 130 of the Act, after the revocation of the guarantee by the appellant, he was not liable to pay the decretal amount to the Bank. No other point was raised by the learned counsel for the appellant. Accordingly, there is no merit in this appeal. The appeal is thus dismissed. There will be no order as to costs."

22. Reliance was also placed on Waman Shriniwas Kini v. Ratilal Bhagwandas & Co. [AIR 1959 SC 689=1959 Supp (2) SCR 217]. The relevant paragraphs are 9, 10, 11, 12 and 13 which read as under:

"9. The respondent's suit for ejectment was brought under S. 13(1)(e) which provides:

"Notwithstanding anything contained in this Act (but subject to the provisions of section 15), a landlord shall be entitled to recover possession of any premises if the Court is satisfied

...... ...... ...... ...... ...... ........

...... ...... ...... ...... ...... ........

...... ...... ...... ...... ...... ........

(e) that the tenant has, since the coming into operation of this Act, sublet the whole or part of the premises or assigned or transferred in any other manner his interest therein."

10. It was contended that S. 13(1)(e) had to be read separately and not in conjunction with S. 15 of the Act. The section itself makes it quite clear that it is subject to the provision of S. 15 and the two sections must therefore be read together. The appellant pleaded that under the agreement between him and the respondent he was entitled to sublet the premises. Such an agreement, in our opinion, is void because of the provisions of S. 15 of the Act and S. 23 of the Contract Act and enforcement of the agreement would produce the very result which the law seeks to guard against and to prevent and by sustaining the plea of the appellant the Court would be enforcing an agreement which is prohibited and made illegal.

11. The appellant relied on the maxim in pari delicto potior est conditio posidentis to support his plea that the respondent could not enforce his right under S. 13(1)(e). But this maxim "must not be understood as meaning that where a transaction is vitiated by illegality the person left in possession of goods after its completion is always and of necessity entitled to keep them. Its true meaning is that, where the circumstances are such that the Court will refuse to assist either party, the consequence must, in fact, follow that the party in possession will not be disturbed". (Per Du Pareq L. J. in Bowmakers Ltd., v. Barnet Instruments Ltd., 1945-l KB 65, 72. The respondent in the present case did not call upon the Court to enforce any agreement at all. When the instrument of lease was executed and possession given and subletting done it received its full effect; no aid of the Court was required to enforce it. The respondents' suit for ejectment was not brought for the enforcement of the agreement which recognised subletting but he asked the Court to enforce the right of eviction which flows directly from an infraction of a provision of the Act (S. 15) and for which the Act itself provides a remedy. There is thus a manifest distinction between this case where the plaintiff asked the Court to afford him a remedy against one who by contravening S. 15 of the Act has made himself liable to eviction and those cases where the Court was called upon to assist the plaintiff in enforcing an agreement the object of which was to do an illegal act. The respondent is only seeking to enforce his rights under the statute and the appellant cannot be permitted to assert in a Court of justice any right founded upon or growing out of an illegal transaction: Gibbs and Sterret Manufacturing Co. v. Brucker, (1884) 111 US 597, 601: 28 Law Ed 534, 535. In our opinion S. 15 of the Act is based on public policy and it has been held that if public policy demands it even an equal participant in the illegality is allowed relief by way of restitution or rescission, though not on the contract.

12. It was next contended that S. 13(1) (e) is a provision for the protection of private rights of the landlord and unless there is in the Act itself any provision to the contrary such rights as far as they were personal rights may be parted with or renounced by the landlord. In other words the right of the respondent to sue for ejectment on the ground of subletting being a personal right for his benefit, the landlord must be taken to have waived it as by an express contract he had allowed the tenant to sublet and consequently he could not evict the appellant under S. 13(1)(e) of the Act.

13. The plea of waiver was taken for the first time in this Court in arguments. Waiver is not a pure question of law but it is a mixed question of law and fact. This plea was neither raised nor considered the courts below and therefore ought not to be allowed to be taken at this stage of the proceedings. But it was argued on behalf of the appellant that according to the law of India the duty of a pleader is to set up the facts upon which he relied and not any legal inference to be drawn from them and as he had set up all the circumstances from: which the plea of waiver could be inferred he should be allowed to rise and argue it at this stage even though it had not been raised at any previous stage not even in the statement of case filed in this Court and he relied upon Gouri Dutt Ganesh Lal Firm v. Madho Prasad, AIR 1943 PC 147. Assuming that to be so and proceeding on the facts found in this case the plea of waiver cannot be raised because as a result of giving effect to that plea the Court would be enforcing an illegal agreement and thus contravene the statutory provisions of S. 15 based on public policy and produce the very result which the statute prohibits and makes illegal. In Surajmull Nagoremull v. Triton Insurance Co., 52 Ind App 126: (AIR 1925 PC 83) Lord Sumner said: "No Court can enforce as valid that which competent enactments have declared shall not be valid, nor is obedience to such an enactment a thing from which a Court can be dispensed by the consent of the parties, or by a failure to plead or to argue the point at the outset: Nixon v. Albion Marine Insurance Co., (1867) 2 Ex 338. The enactment is prohibitory. It is not confined to affording a party a protection of which he may avail himself or not as he pleases. It is not framed solely for the protection of the revenue and to be enforced solely at the instance of the revenue officials, nor is the prohibition limited to cases for which a penalty is exigible."

In the instant case the question is not merely of waiver of statutory rights enacted for the benefit of an individual but whether the Court would aid the appellant in enforcing a term of the agreement which S. 15 if the Act declares to be illegal. By enforcing the contract the consequence will be the enforcement of an illegality and infraction of a statutory provision which cannot be condoned by any conduct or agreement of parties. Dhanukdhari Singh v. Nathima Sahu, 11 Cal WN 848, 852. In Corpus Juris Secundum Vol. 92 at p. 1068 the law as to waiver is stated as follows:-

"....a waiver in derogation of a statutory right is not favoured, and a waiver will be inoperative and void if it infringes on the rights of others, or would be against public policy or morals. . . . .. .. . ..."

In 1945-1 KB 65 the same rule was laid down. Mulla in his Contract Act at page 198 has stated the law as to waiver of an illegality as follows:-

"Agreements which seek to waive an illegality are void on grounds of public policy. Whenever an illegality appears, whether from the evidence given by one side or the other, the disclosure is fatal to the case. A stipulation of the strongest form to waive the objection would be tainted with the vice of the original contract and void for the same reasons. Wherever the contamination reaches, it destroys."

This, in our opinion, is a correct statement of the law and is supported by high authority. Field J. in Oscanyan v. Winchester Arms Co., (1881) 103 US 261 (268): 26 Law Ed 539 quoted with approval the observation of Swayne J. in Hall Coppell, (1872) 7 Wallace 542:-

"The principle is indispensable to the purity of its administration. It will not enforce what it has forbidden and denounced. The maxim Ex dolo malo non oritur actio, is limited by no such qualification. The proposition to the contrary strikes us as hardly worthy of serious refutation. Wherever the illegality appears, whether the evidence comes from one side or the other, the disclosure is fatal to the case. No consent of the defendant can neutralise its effect. A stipulation in the most solemn form, to waive the objection, would be tainted with the vice of the original contract, and void for the same reasons. Wherever the contamination reaches, it destroys."

Waiver is the abandonment of a right which normally everybody is at liberty to waive. A waiver is nothing unless it amounts to a release. It signifies nothing more than an intention not to insist upon the right. It may be deduced from acquiescence or may be implied. Chitty on Contract 21st Ed. p. 381 Stackhouse v. Barnston, (1805) 10 Ves 453, 466: 32 ER 921. But an agreement to waive an illegality is void on grounds of public policy and would be unenforceable."

23. After referring to the above decisions it is crystal clear that the directions or guidelines issued by the RBI have to be followed in respect of all the items referred to at Section 21 and so also Section 35A of the Act. Once in the public interest or in the interest of banking policy pertaining to advances, directions are given, if such directions by volition is waived by a party what would happen has to be seen. The principle laid down in the decisions above would confirm the binding nature of the directions or guidelines issued from time to time by RBI which binds the banking companies in general or a banking company in particular. There cannot be any serious dispute with regard to the binding force of these guidelines issued by RBI. The controversy is whether such binding force would result in invalidating a contract which was entered into with volition by third parties with a bank.

24. The respondent parent contends, in spite of signing the agreement while availing loan by the daughter of the respondents, the same is not binding on the 2nd respondent as it is against the guidelines of RBI. According to the Bank, such benefit is waived voluntarily by the 2nd respondent, therefore it is not open to him to contend that the directions or guidelines alone would apply and not the terms of agreement. The right envisaged under the guidelines can it be waived by the parties to the agreement? Waiver is nothing short of abandoning a right.

25. We have two judgments of constitutional Bench of Apex Court, i.e. 1959 Supp (2) SCR 217 and (1997) 10 SCC 488 stated supra. In 1959 Supp (2) SCR 217, the question was whether Court can insist a party to enforce the terms of agreement where terms or conditions could be declared as illegal by virtue of Section 15 of the Tenancy Act. Their Lordships held that on enforcement of contract, consequences will be enforcement of illegality and infringement of a statutory provision which cannot be condoned by any contract or agreement by parties.

26. In (1997) 10 SCC 488, paragraph 33, as indicated above, clearly envisages the subsequent view of the Apex Court which says, if there is disobedience of directions of RBI, it may result in prosecution or levy of penalty but it cannot result in invalidation of any contract by the bank with the third party. As far as the customer is concerned, he may be aware of the directions or not, and their Lordships held that it would be wholly unjust and inequitable to hold that such advances to a third party in violation of the directions of RBI, which are otherwise not invalid, can be regarded as void only because bank did not follow the directions or instructions issued by RBI, whereas the directions issued are required to be complied with by banking companies only and do not have any binding force on third parties. Their Lordships said, even if the bank had entered into an agreement which was prohibited by the directions of RBI, it would not invalidate the contracts though the infringement of directions may lead to serious action against defaulting bank.

27. In that view of the matter, we are of the opinion, though the directions of RBI has binding force on the banking companies in general or the banking company in particular, it cannot invalidate the terms of contract where the party voluntarily agrees to waive the benefit accrued to him by virtue of directions or guidelines. In that view of the matter, we have to hold that the 2nd respondent-father cannot take protection that he need not honour the terms of loan agreement having executed the loan papers as co-obligant along with his daughter Ms.Jwala. So as far as the 1st respondent-Mother of Ms.Jwala, it is made clear that the Bank cannot proceed against her as she is neither a co-obligant nor surety for the loan of her daughter and husband.

Accordingly, we allow the writ appeal setting aside the judgment of the learned Single Judge.

Manjula Chellur, Ag. Chief Justice.

A.M. Shaffique, Judge.

Nan/ttb


W.A. No. 1526 of 2012 - Bank of India Vs. Barry Sebastian, 2013 (1) KLT 645 : 2013 (1) KHC 584

posted Mar 12, 2013, 3:51 AM by Law Kerala   [ updated Mar 12, 2013, 3:51 AM ]

(2013) 296 KLR 099

IN THE HIGH COURT OF KERALA AT ERNAKULAM

PRESENT: THE HON'BLE THE CHIEF JUSTICE MRS. MANJULA CHELLUR & THE HONOURABLE MR.JUSTICE A.M.SHAFFIQUE

MONDAY, THE 4TH DAY OF FEBRUARY 2013/15TH MAGHA 1934 

WA.No. 1526 of 2012 () IN WP(C).9925/2012

------------------------------------------

AGAINST THE JUDGMENT IN WP(C).9925/2012 of HIGH COURT OF KERALA DATED 16-07-2012

APPELLANT(S)/APPELLANT/PETITIONER:-

---------------------------------

BANK OF INDIA PUTHENCHANTHAI BRANCH, REP. BY ITS BRANCH MANAGER THIRUVANANTHAPURAM-695035.

BY ADV. SRI.P.P.JOYI

RESPONDENT(S)/RESPONDENT NO.1/PETITIONER, RESPONDENTS 2:-

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1. BARRY SEBASTIAN J.J.COTTAGE, MOONGODU P.O., OTTOOR THIRUVANANTHAPURAM.

2. THE DISTRICT COLLECTOR THIRUVANANTHAPURAM-695001.

3. THE DEPUTY TAHSILDAR (RR) CHIRAYINKIZHU-695304.

R1 BY ADV. SRI.K.PAUL KURIAKOSE R1 BY ADV. SRI.K.A.ANISH R BY SPL.GOVT.PLEADER SMT.GIRIJA GOPAL.

THIS WRIT APPEAL HAVING BEEN FINALLY HEARD ON 06-12-2012, THE COURT ON 04-02-2013, DELIVERED THE FOLLOWING:

MANJULA CHELLUR, CJ & A.M.SHAFFIQUE, J.

* * * * * * * * * * * * *

W.A.No.1526 of 2012

----------------------------------------

Dated this the 4th day of February 2013

Head Note:-

Micro, Small and Medium Enterprises Development Act, 2006 - Kerala Revenue Recovery Act, 1968 - Section 71 - Retail trade upto Rs.20 lakhs is treated as priority sector lending.

Held:- If Reserve Bank of India had treated retail trade upto Rs.20 lakhs as priority sector lending, it cannot be treated that the loan granted to the petitioner is not a priority sector loan. One has to look at the notification which permits Revenue Recovery proceedings and to understand what is a 'development scheme' as contemplated in the notification SRO 1465/1987. If the development scheme includes "all priority sector advances" and Reserve Bank of India circular stipulates so, we have no hesitation to hold that the loan given to the 1st respondent herein can also be recovered by invoking revenue recovery proceedings by virtue of the notification produced as Ext.R1 (a). Under these circumstance the writ appeal is only to be allowed, the judgment of the learned Single Judge is set aside and the writ petition is dismissed.

J U D G M E N T

SHAFFIQUE, J

The 1st respondent in the writ petition is the appellant.

2. Writ petition is filed by the 1st respondent challenging the action initiated by the appellant to recover the amounts due to the bank by initiating revenue recovery proceedings. The facts as disclosed in the writ petition would reveal that the petitioner obtained a loan of Rs.8,00,000/- from the appellant bank as working capital. There was delay in remitting the payments and ultimately the amounts became overdue. The bank filed a suit against the petitioner as O.S.No.856/2011 for recovering the outstanding balance amount of Rs.8.41 lacs. In the meantime, at the instance of the bank, the 3rd respondent initiated revenue recovery proceedings by way of Ext.P4 and P5. This was challenged by the 1st respondent/petitioner on the ground that revenue recovery proceedings cannot be initiated as the loan advanced by the 1st respondent to the petitioner is not an agricultural loan nor was it advanced under any development schemes.

3. The appellant filed a counter affidavit before the learned Single Judge inter alia contending that by virtue of the notification issued by the Government of Kerala in exercise of power under Section 71 of the Kerala Revenue Recovery Act, amount due to the bank under various development schemes including priority sector advances and all financial assistance given through the banks under the schemes approved by the State/Central Government or other Government agencies or the scheme administrated by the Development department with a view to improving the living condition of the economically and socially weaker sections of the community is permitted to be recovered by virtue of provisions to the Revenue Recovery Act. They relied upon two Government Notifications Exts.R1(a) and R1(b), i.e SRO No.1465/1987 and SRO No.797/1979 respectively.

4. Learned Single Judge relied upon the judgment in Jabbar v. Dhanalakshmi Bank Ltd. [2005(3) KLT 510] wherein it has been held that the loans extended to the traders, fixing a ceiling upto Rs.5 lakhs will be liable to be declared as 'priority sector' and therefore revenue recovery proceedings could be initiated. However since the loan availed by the petitioner was for Rs.8 lakhs, the learned Single Judge held that the said judgment cannot have any application and that the respondents were not justified in recovering the amount by way of revenue recovery proceedings. It was further held that only after obtaining a decree from the civil court the bank was entitled to initiate revenue recovery proceedings as held in the judgment in Syndicate Bank v. Sheriff [2007(1) KLT Short Note 63].

5. Though a review petition was filed relying upon the Master Circular of 01/07/2009 issued by the Reserve Bank of India wherein the various categories of priority sector loans have been mentioned which included direct finance to small enterprises including all loans to micro and small (manufacturing) enterprises and such service enterprises, the review was also dismissed on the ground that the petitioner can seek proper remedy by filing an appeal.

6. Annexure B is produced by the appellant along with I.A.No.944 of 2012. It is a Master Circular issued by Reserve Bank of India consolidating the lending in priority sector. Retail Trade is treated as one among the priority sector and reads as under:

3. Retail Trade

3.1 Advances granted to retail traders dealing in essential commodities (fair price shops), consumer co-operative stores and ;

3.2 Advances granted to private retail traders with credit limits not exceeding Rs.20 lakh."

7. Annexure A notification issued by the Reserve Bank of India on 18/9/2009 under the Micro, Small and Medium Enterprises Development Act 2006 (hereinafter referred to as MSMED Act) is also produced. The notification deals with various services of Priority sector- Lending and Categorization of activities and services which inter alia includes retail trade also. In Clause (3) of the said Annexure it indicates that there will be no separate category for "Retail Trade" under priority sector and loans granted by banks for retail trade with credit limits not exceeding Rs.20 lakhs would henceforth be part of Small (Service) Enterprises. Since Reserve Bank of India had modified the earlier guidelines and had included loans upto Rs.20 lakhs for retail traders as priority sector lending as evident from Annexure A and B, we are of the view that the loan grated to the petitioner has to be treated as priority sector lending.

8. Having come to such a conclusion when we consider the notification issued under Section 71 of the Kerala Revenue Recovery Act, SRO 1465/87, the loans advanced by the banks under the development scheme is permitted to be recovered by Revenue Recovery proceedings. It is specifically mentioned that the development scheme shall include all priority sector advances. It cannot be disputed that the loan granted to the petitioner is a priority sector advance as the learned Single Judge had also come to such a finding. The only reason for allowing the writ petition was that the loan advanced to the petitioner exceeds the limit of Rs.5 lakhs. In view of Annexure A and B it is evident that any loan advanced to a retail trader upto Rs.20 lakhs forms part of a priority sector advance.

9. The contention urged by the respondent who is the petitioner in the writ petition is that Annexure A master circular has no application to the loan granted to the petitioner as the loan granted is not coming within the purview of retail trade. It is the argument of the learned counsel for the 1st respondent that the explanation given in paragraphs 2 and 3 of Annexure A letter would take the establishment of the 1st respondent beyond the purview of retail trade as defined in Annexure A. In paragraph 2 of the Annexure A it is mentioned that activities made mention of thereunder would be included within the priority sector only if such enterprises satisfies the definition of Micro and Small Service Enterprises' as laid down under the MSMED Act, 2006. In paragraph 3 of Annexure A letter, no separate category for Retail Trade is mentioned. It is therefore the argument that a conjoint reading of Paragraphs 2 and 3 of Annexure A letter would make it evident that only an advance availed by an enterprise which would fall within the definition of the term enterprises as defined under Section 2(e) of the MSMED Act, 2006 would come within the purview of priority sector lending. Hence it is the argument that the provisions of Revenue Recovery Act cannot be invoked as there is no specific notification to recover the amount advanced by the bank to the 1st respondent. Learned counsel also relied upon the definition of enterprises in Section 2(e) of the MSMED Act in order to contend for the above position. Even without going into the provisions of the MSMED Act, on a reading of Master Circular dated 01/07/2009 of Reserve Bank of India - Annexure B, retail trade upto Rs.20 lakhs is treated as priority sector lending. Hence this contention of the 1st respondent is not sustainable.

10. The only other point that requires to be considered is whether notification issued by the Government under Section 71 of the Kerala Revenue Recovery Act, that is Exts.R1(a) and R1(b) enables the bank to recover the loan advanced to the petitioner by resorting to revenue recovery proceedings. It is not in dispute that in respect of any loan advanced by the bank under various development schemes the bank can recover the amount by resorting to revenue recovery proceedings. Development scheme is explained under the very same notification and it includes all priority sector advances.

11. If Reserve Bank of India had treated retail trade upto Rs.20 lakhs as priority sector lending, it cannot be treated that the loan granted to the petitioner is not a priority sector loan. One has to look at the notification which permits Revenue Recovery proceedings and to understand what is a 'development scheme' as contemplated in the notification SRO 1465/1987. If the development scheme includes "all priority sector advances" and Reserve Bank of India circular stipulates so, we have no hesitation to hold that the loan given to the 1st respondent herein can also be recovered by invoking revenue recovery proceedings by virtue of the notification produced as Ext.R1 (a). Under these circumstance the writ appeal is only to be allowed, the judgment of the learned Single Judge is set aside and the writ petition is dismissed.

(sd/-) (MANJULA CHELLUR, CHIEF JUSTICE)

(sd/-) (A.M.SHAFFIQUE, JUDGE)

jsr


W.A. No. 1290 of 2012 - Southern Refineries Vs. State of Kerala, 2013 (1) KLT SN 100 (C.No. 84)

posted Mar 12, 2013, 2:20 AM by Law Kerala   [ updated Mar 12, 2013, 2:21 AM ]

(2013) 291 KLR 771

IN THE HIGH COURT OF KERALA AT ERNAKULAM

PRESENT: THE HONOURABLE MR.JUSTICE PIUS C.KURIAKOSE & THE HON'BLE MR. JUSTICE A.V.RAMAKRISHNA PILLAI

THURSDAY, THE 17TH DAY OF JANUARY 2013/27TH POUSHA 1934

WA.No. 1290 of 2012 (C)

-------------------------------------------

AGAINST THE JUDGMENT IN WP(C).NO.5226/2010 DATED 14-03-2012

........

APPELLANT(S):PETITIONER:

--------------------------------------------

SOUTHERN REFINERIES LTD., TC. 3/1557 (4),IST FLOOR,KESAVADASAPURAM, M.G COLLEGE HOSTEL ROAD,PATTOM, THIRUVANANTHAPURAM - 695 003, REPRESENTED BY ITS GROUP MANAGER (MIS. & FINANCE), MR.SREEKUMAR J.

BY SRI.A.K.JAYASANKARAN NAMBIAR,SENIOR ADVOCATE BY ADVS.SRI.P.BENNY THOMAS SRI.P.GOPINATH MENON

RESPONDENT(S):RESPONDENTS:

--------------------------------------------------

1. STATE OF KERALA, REPRESENTED BY THE CHIEF SECRETARY TO GOVERNMENT, SECRETARIAT,THIRUVANANTHAPURAM - 695 001.

2. SECRETARY TO GOVERNMENT, TAXES DEPARTMENT,SECRETARIAT, THIRUVANANTHAPURAM 695 001.

3. COMMISSIONER OF COMMERCIAL TAXES, THIRUVANANTHAPURAM 695 033.

4. ASSISTANT COMMISSIONER OF COMMERCIAL TAXES (ASSMT) II, SPECIAL CIRCLE,THIRUVANANTHAPURAM 695 035.

5. BOARD FOR INDUSTRIAL AND FINANCIAL RECONSTRUCTION (BIFR), GOVERNMENT OF INDIA,MINISTRY OF FINANCE, DEPARTMENT OF ECONOMIC AFFAIRS, JAWAHAR VYAPAR BHAWAN 1,TOLSTOY MARG, NEW DELHI 110 001.

R2 TO R4 BY SRI.SOJAN JAMES, SPL.GOVT.PLEADER (TAXES) R5 BY SRI.P.PARAMESWARAN NAIR,ASG OF INDIA

THIS WRIT APPEAL HAVING COME UP FOR ADMISSION ON 17/08/2012, THE COURT ON 17/01/2013 DELIVERED THE FOLLOWING: Kss W.A.NO.1290/2012

APPENDIX

PETITIONER'S ANNEXURES:

  1. ANNEX.A: COPY OF THE KGST ASSESSMENT ORDER DTD. 29/12/2011 FOR THE YEAR 2000-01 ISSUED BY THE ASSISTANT COMMISSIONER I, TO THE APPELLANT.
  2. ANNEX.B: COPY OF THE CST ASSESSMENT ORDER DTD. 28/12/2011 FOR THE YEAR 2000-01 ISSUED BY THE ASSISTANT COMMISSIONER I, TO THE APPELLANT.
  3. ANNEX.C: COPY OF THE KGST ASSESSMENT ORDER DTD. 29/12/2011 FOR THE YEAR 2001-02 ISSUED BY THE ASSISTANT COMMISSIONER I, TO THE APPELLANT.
  4. ANNEX.D: COPY OF THE CST ASSESSMENT ORDER DTD. 28/12/2011 FOR THE YEAR 2001-02 ISSUED BY THE ASSISTANT COMMISSIONER I, TO THE APPELLANT.
  5. ANNEX.E: COPY OF THE KGST ASSESSMENT ORDER DTD. 30/12/2011 FOR THE YEAR 2002-03 ISSUED BY THE ASSISTANT COMMISSIONER I, TO THE APPELLANT.
  6. ANNEX.F: COPY OF THE CST ASSESSMENT ORDER DTD. 30/12/2011 FOR THE YEAR 2002-03 ISSUED BY THE ASSISTANT COMMISSIONER I, TO THE APPELLANT.
  7. ANNEX.G: COPY OF THE KGST ASSESSMENT ORDER DTD. 05/03/2012 FOR THE YEAR 2003-04 ISSUED BY THE ASSISTANT COMMISSIONER I, TO THE APPELLANT.
  8. ANNEX.H: COPY OF THE KGST ASSESSMENT ORDER DTD. 28/03/2012 FOR THE YEAR 2004-05 ISSUED BY THE ASSISTANT COMMISSIONER I, TO THE APPELLANT.
  9. ANNEX.I: COPY OF THE CST ASSESSMENT ORDER DTD. 28/03/2012 FOR THE YEAR 2004-05 ISSUED BY THE ASSISTANT COMMISSIONER I, TO THE APPELLANT.

RESPONDENT'S ANNEXURES:

  1. N I L

/TRUE COPY/ P.S.TO JUDGE Kss

C.R.

PIUS C. KURIAKOSE & A.V.RAMAKRISHNA PILLAI, JJ. ------------------------------------------------------

W.A No.1290 of 2012

-----------------------------------------------------

Dated this the 17th day of January, 2013

J U D G M E N T

Ramakrishna Pillai, J.

Whether the State Government after having participated in the proceedings before the Board for Industrial and Financial Re- Construction, for short, BIFR, can resile from giving sales tax exemption and concessional Central Sales Tax (CST) for a further period in the light of the sickness of the appellant company and proceed to act in a manner contrary to the directions contained in the order of BIFR without having preferred an appeal against the said order, is the short question which we are called upon to answer in this intra court appeal.

2. Briefly put, the appellant's case is as follows:- The appellant company, a medium scale industrial undertaking which was set up for re-refining and repossessing of waste lubricating oil into various grades of useful oil, fell sick due to initial problems like shortage of raw materials, ban on import of used oil, want of clearance from local bodies, pollution control board etc. and the lowering of import duty on waste oil from 85% to 30% in February, 1994 which resulted in the back out of other companies from their commitment to buy locally produced re-refined base stock. For the reasons aforesaid and the consequential underutilization of capacity, the appellant company could avail only one third of the sales tax and central sales tax exemption limit of the Rs.366.44 lakhs which was fixed as per Ext.P1 order of the Board of Revenue, Government of Kerala.

3. BIFR, to which the company was referred under Section 15 of the Sick Industrial Companies (Special Provisions) Act, 1985, for short, the Act, after making necessary enquiries into the matter declared the company sick vide Ext.P2 order and placed the company under the control of the board from the date of Ext.P2 order. Though the scheme for revival was drawn up by the operating agency (ICICI), it could not take off and, therefore, BIFR in its meeting held on 6.7.1999 directed the ICICI to formulate a fresh rehabilitation scheme based on the company's revised proposal and based on that, BIFR approved the rehabilitation scheme on 26.12.2000 vide Ext.P3 order which, inter alia, provided for specific relief to the company in the form of sales tax exemption and concessional Central Sales Tax (CST) under the Kerala Government Notifications No.SRO 520/1992 & 521/1992 without any ceiling. This was circulated among all concerned.

4. However, during January 2001, i.e., while the draft rehabilitation scheme was under consideration, the sales tax authorities under the State Government raised demands against the appellant company and initiated steps for revenue recovery, besides freezing the company's bank accounts. As the appellant company felt that this action was in contravention of Section 22 of the Act which suggests that, where a scheme is under preparation, consideration or implementation in a sick industrial company, no proceedings for execution or recovery of money can be initiated against it notwithstanding anything contained in any other law except with the consent of the Board, the appellant company moved this Court by filing O.P.No.10157 of 2001, which was disposed of vide Ext.P5 judgment directing the appellant company to approach the Government for implementation of BIFR direction. In the meanwhile, the ICICI which is the operating agency submitted the draft rehabilitation scheme with changes ordered by BIFR Bench on 28.5.2001 and accordingly, Ext.P6 scheme was sanctioned by BIFR directing the State Government to consider extending of sale tax exemption and concessional CST till 31.3.2006 without ceiling. By implementing the rehabilitation scheme, appellant company was able to achieve positive net worth during 2005-2006 and accumulated losses were wiped off during the next accounting period.

5. The appellant company would allege that in view of the sales tax exemption envisaged in paragraph 39 (a) of Ext.P6 revised scheme, the company had not collected any sales tax on its products from 1.10.2010. However, CST was paid at concessional rate of 2% as envisaged in the sanctioned scheme.

6. The further case of the appellant company is that taking note of reluctance on the part of the sales tax authority to extend the relief envisaged in the sanctioned scheme, BIFR Bench vide Ext.P7 order dated 20.6.2005 issued the following revised direction under Section 22A and 22(3) of the Act, for compliance.-

"The ST Authorities, Government of Kerala, in order to ensure long-term viability of the company, would consider granting the reliefs, as envisaged from them in Para - 13.9(a), page-13 of the SS for the period commencing from 1.10.2000 to 31.3.2005 (instead of upto 31.3.2006) and would also not raise any further demand/claim on the company for the said period. The company would, however, continue to pay the new value added sales tax introduced by the Govt. of Kerala w.e.f 1.4.05 onwards."

7. While reviewing the implementation of the sanctioned scheme, BIFR Bench vide Ext.P8 order dated 20.6.2006 re-iterated that un- implemented provisions of the sanctioned scheme and the un- implemented portions of subsequent directions issued by the Board vide Ext.P7 would continue to remain in full force.

8. The case of the appellant company is that though the company approached the State Government, pursuant to Ext.P8 order with the request for extending the exemption of KGST and concessional rate of CST till 31.3.2005 as contemplated in the order of BIFR, the State Government by Ext.P9 communication informed the appellant company that in view of the reduced rates of tax introduced by the Government with effect from 1.4.2005 under the KVAT Act its request for extension of exemption and concessional rate of CST could not be agreed to.

9. The appellant company took up the matter before the Ministry of Finance, Government of Kerala by submitting Ext.P10 representation, but without success. While so, the Tax Department issued Exts.P11 to P16 pre-assessment notices under the Kerala General Sales Tax(KGST) for the years 2000-01, 2001-02, 2002-03 demanding sales tax from the appellant company, both under the KGST as well as CST without extending the benefits of exemption under SRO 521/1992 as also the concessional rate of CST at the rate of 2%.

10. With this background the appellant company approached this Court requesting to quash Ext.P9 order passed by the Government, as well as Exts.P11 to P16 notices and also seeking for the benefit of Ext.P6 scheme formulated by the BIFR contending that the same is binding on the State Government. The learned Single Judge, who heard the writ petition dismissed the same by the impugned order. Hence this appeal.

11. Arguments have been heard and the impugned judgment was perused.

12. The appellant company was non suited by the learned Single Judge mainly on two grounds. (a) Ext.P6 scheme and the consequential orders passed by the BIFR only directs the Government to have the matter considered and there is no positive order to provide any exemption as a matter of right and that the said direction itself is with reference to the benefit extendable under SRO 520 and 521. (b) The question whether the claim for exemption as sought for could be granted, had come up for consideration in Prima Industries Ltd. v. State of Kerala [2005 (4) KLT 253] and the same stands answered against persons like the appellant company.

13. The learned senior counsel appearing for the appellant company would argue that Ext.P9 communication and the resultant pre- assessment notices are illegal and arbitrary in so far as they have been issued in gross violation of the direction contained in the order of the BIFR dated 20.6.2006 (Ext.P7). It was argued that the State Government cannot, in the absence of an appeal against the order of the BIFR, proceed to act in a manner contrary to the direction contained in the BIFR's order, after having participated in the proceedings before the BIFR.

14. The learned Special Government Pleader (Taxes), per contra, would argue that the beneficiary of a concession has no legally enforceable right against the Government to grant a concession except to enjoy the benefits of the concession during the period of its grant. In support of the argument, the learned Special Government Pleader invited our attention to the decision of the Apex Court in State of Haryana & Ors. v. Mahabir Vegetable Oils Pvt. Ltd. [(2011) 19 KTR 221 (SC)].

15. Before we proceed to examine the merit of the said argument, we would like to refer to the decision of this Court in Prima Industries Ltd. v State of Kerala (supra) relied on by the learned Single Judge. In that case the petitioner claimed that a benefit conferred by an SRO be extended to the petitioner unit. The order was issued by the Government to give extension of exemption from tax to certain industrial units manufacturing cement using fly ash. It was in tune with the policy of the Government of India to avoid environmental pollution due to the piling up of hazardous fly ash in the country and considering the role of fly ash based industries in checking environmental pollution. As the petitioner company did not fall in that class, their claim was negatived by the authorities and it was upheld by this Court. 'Prima Industries' case rests on its own peculiar and extraordinary facts and cannot possibly be considered to lay down any general rule of law.

16. Now we will examine the decision referred to by the learned Special Government Pleader. In Mahabir Vegetable Oils' case (supra) the State of Haryana announced an industrial policy in the year 1988 which, inter alia, brought incentive by way of sales tax exemption to industries set up in backward areas in the State. Schedule III appended to the Rules provided for a negative list of industries and/or class of industries which were not entitled to tax exemption. At the initial stage, solvent extraction plants were not included in the negative list. However, in the year 1996, the State amended the rules to include solvent extraction plants also in the negative list which are not entitled to tax exemption. The request for exemption placed by the respondent dealer, who initiated steps to establish his solvent extraction plant before the amendment, was rejected by the High Level Screening Committee which was confirmed in writ petition by the High Court. On a further appeal before the Supreme Court, it was held that the dealer was eligible for exemption. With regard to the quantum of exemption, the matter was remanded by the Supreme Court asking the Director of industries for fresh adjudication. The Lower Level screening Committee made a recommendation for grant of eligibility certificate with reference to the investment made by the dealer prior to the date of the amendment and putting the unit in the negative list. This was confirmed by the Appellate Authority. The matter was taken in writ petition before High Court which allowed the writ petition. On appeal by the Department to the Supreme Court, it was held that the withdrawal of exemption "in public interest" is a matter of policy and the courts should not bind the Government in its policy decision. Unfortunately, the said decision cannot be read into the present case. The reason for not interfering with the policy of the Government by the Apex Court in that case was that it has never been the case of the dealer that the solvent extraction plant was a non-polluting industry. Moreover, there was no allegation that the decision to put the solvent extraction plant in the negative list was actuated by fraud or that the said decision was not bona fide.

17. During the course of argument, we had the good fortune to come across with the decision of the Apex Court in State of Punjab v. Nestle India Ltd. and Another [(2004) 6 Supreme Court Cases 465], pointed out by Mr.Jayasankar Nambiar, the learned Senior counsel appearing for the appellant company. In that case the Highest State Authorities, including Finance Minister in the budget speech for 1996-97 made representation to the effect that the State Government had abolished the purchase tax on milk. The manufacturers of milk products therefore did not pay purchase tax on milk for the assessment year 1996-97. This fact was mentioned in their returns. These returns were entertained by the tax authorities. The said manufacturers passed on the benefit of exemption to dairy farmers and milk producers. After the expiry of the assessment year, Government took a decision not to abolish purchase tax on milk and the taxing authority therefore raised demands for the assessment year 1996-97.

18. The validity of the subsequent decision was considered by the Apex Court and held that State Government cannot resile from its decision to exempt milk and demand purchase tax. The development and growth of the doctrine of promissory estoppel in India was also traced in that case. The appellant State contended that there could be no estoppel against the statute and the decision not to abolish purchase tax on milk had been taken in public interest. The said contention was repelled by the Apex Court finding that the Government had not been able to establish any overriding public interest which would make it inequitable to enforce estoppel against it. The Apex Court having found that the essential pre- requisite for the operation of the promissory estoppel had been established, dismissed the appeal preferred by the State.

19. In Mahabir Vegetable Oils' case (supra) also the Apex Court had considered the doctrine of promissory estoppel. It was observed by the Apex Court as under:-

"The doctrine of promissory estoppel is an equitable remedy and has to be moulded depending on the facts of each case and not straight jacketed into pigeon holes. In other words, there cannot be any hard and fast rule for applying the doctrine of promissory estoppel but the doctrine has to evolve and expand itself so as to do justice between the parties and ensure equity between the parties, i.e. both the promiser and the promissee."

20. In the present case, the respondent State participated in the proceedings before the BIFR. Taking note of the reluctance by the sales tax authorities to extend the relief envisaged by the sanctioned scheme, BIFR vide Ext.P7 order issued revised directions under Sections 22A and 22B of the Act. It is relevant to note that though the Act envisages an appeal under Section 25 of the Act, the State Government did not prefer an appeal. It is also crucial to note that in view of the sales tax exemption envisaged in paragraph (13.9A) of Ext.P6 scheme, the company had not collected any sales tax on its products from 1.10.2000 onwards. This has not been denied.

21. If Ext.P9 and the consequential demand notices are allowed to stand, the same would put things out of gear and the entire efforts taken so far by the BIFR for reviving the appellant company from sickness would terribly be watered down. The burden is heavily on the Government to establish that it would be inequitable to hold the Government bound by the promise on account of public interest. That is the settled law. The respondent State has been unable to establish overriding public interest, which makes it inequitable to enforce the estoppel against them. It would, in the circumstances, be inequitable to allow the State Government to act in a manner contrary to the directions contained in Ext.P6 scheme as well as Exts.P7 and P8 orders. We, therefore, have to uphold the plea of promissory estoppel raised by the appellant company.

22. Though, it was strenuously argued by the Special Government Pleader (Taxes) that the Board as per Ext.P6 scheme and Ext.P7 order has left the matter to the discretion of the State Government, we are not impressed by the said argument. What was directed by the Board as per Ext.P7 was that the sales tax authorities would consider the reliefs in order to ensure long term viability of the appellant company and would also not raise any further demand (emphasis added). The discretion whatever left with the respondent Government as per Ext.P6 scheme and Ext.P7 had to be exercised in a reasonable manner. We have no hesitation to hold that the refusal of the State Government to exercise its discretion to extend the benefit as envisaged by Ext.P6 scheme and Ext.P7 order to the appellant company was not reasonably exercised.

23. In the result, we allow the appeal as under:

a) The impugned judgment is set aside.

b) Ext.P9 order as well as Exts.P11 to P16 and subsequent notices issued consequently are quashed.

c) We direct the respondent State to reconsider the matter and pass fresh orders in the light of the observations made above and guided by the directions in Ext.P6 scheme as well as Exts.P7 and P8 orders.

Parties shall suffer their costs.

sd/- PIUS C. KURIAKOSE JUDGE

sd/- A.V.RAMAKRISHNA PILLAI JUDGE

//TRUE COPY// P.A. TO JUDGE krj


W.A. No. 1785 of 2012 - State of Kerala Vs. Babu John, 2012 (4) KLT 877 : 2012 (4) KHC 735

posted Feb 22, 2013, 2:28 AM by Law Kerala   [ updated Feb 22, 2013, 2:29 AM ]

(2012) 280 KLR 932

IN THE HIGH COURT OF KERALA AT ERNAKULAM 


PRESENT: THE HONOURABLE MR.JUSTICE THOTTATHIL B.RADHAKRISHNAN & THE HON'BLE MR. JUSTICE A.V.RAMAKRISHNA PILLAI 

TUESDAY, THE 20TH DAY OF NOVEMBER 2012/29TH KARTHIKA 1934 

WA.No.1785 of 2012 ( ) 

----------------------------------------- 

(AGAINST THE ORDER/JUDGMENT IN WP(C) NO.32560/2009 DATED 09-03-2012) 


APPELLANT(S)/RESPONDENTS IN WPC: 

--------------------------------------------------------- 

1. STATE OF KERALA REPRESENTED BY SECRETARY TO GOVERNMENT, TAXES DEPARTMENT, SECRETARIAT, THIRUVANANTHAPURAM-695001. 
2. THE COMMISSIONER OF EXCISE, COMMISSIONERATE OF EXCISE, THIRUVANANTHAPURAM-695001. 
3. THE JOINT COMMISSIONER OF EXCISE, SOUTH ZONE, THIRUVANANTHAPURAM. 
4. THE DEPUTY COMMISSIONER OF EXCISE, PATHANAMTHITTA. 
5. THE CIRCLE INSPECTOR OF EXCISE, THIRUVALLA. 
BY SENIOR GOVERNMENT PLEADER SRI.SUJITH MATHEW JOSE. 

RESPONDENT(S)PETITIONER IN WPC: 

------------------------------- 

BABU JOHN, MANAGING PARTNER, SKY HOTEL CUM SHOPPING ARCADE THIRUVALLA-689101. 
BY ADVS.SRI.C.C.THOMAS (SR.), SRI.M.G.KARTHIKEYAN, SRI.NIREESH MATHEW. 

THIS WRIT APPEAL HAVING BEEN FINALLY HEARD ON 20-11-2012, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: WA.No.1785 of 2012 ( ) 

APPENDIX 

APPELLANTS' ANNEXURES: 

  • ANNEXURE-1:- TRUE COPY OF THE ORDER DATED 31.10.2012 IN C.C(C) NO.1277/2012. 

RESPONDENT'S ANNEXURES:- 

  • ANNEXURE-R1: PHOTOCOPY OF THE APPLICATION FOR EXTENSION OF TIME, I.A.NO.6495/2012 IN W.P(C) NO.32560/2009 FILED BY THE APPELLANTS HEREIN. 
  • ANNEXURE-R2:-PHOTOCOPY OF THE APPLICATION FOR EXTENSION OF TIME, I.A.NO.10118/2012 IN W.P(C) 32560/2009 FILED BY THE APPELLANTS HEREIN. 
  • ANNEXURE-R3:-PHOTOCOPY OF THE APPLICATION FOR EXTENSION OF TIME, I.A.NO.11982/2012 IN W.P(C) NO.32560/2009 FILED BY THE APPELLANTS HEREIN. 

C.R 

THOTTATHIL B.RADHAKRISHNAN & A.V.RAMAKRISHNA PILLAI, JJ. 

--------------------------------------------- 

W.A.No.1785 of 2012 

----------------------------------------- 

Dated this the 20th day of November, 2012 

Head Note:-

Kerala Foreign Liquor Rules, 1953 - Rule 13(3) - Granting bar licence to hotels located in the vicinity of educational institutions, places of worship etc. - Method of calculating the prohibited distance - Hotel is positioned in the floors 3 to 6 of a commercial complex - the distance has to be measured from gate to gate along the shortest way used by the public - the distance between the entrance at the third floor of the commercial complex and the gate of the lower primary school has to be taken into account for considering the application. 

JUDGMENT 

Ramakrishna Pillai, J. 


The long and short of this intra court appeal filed by the State and its officers, the respondents in the writ petition, revolves round the interpretation of Rule 13(3) of Foreign Liquor Rules which prescribes the method of calculating the prohibited distance while granting bar licence to hotels located in the vicinity of educational institutions, places of worship etc. 


2. The respondent's request (Ext P3 application) for grant of bar licence (FL-3) for a hotel housed on the top four floors of a seven storied commercial complex in Thiruvalla town was rejected by the second appellant on the ground that the site is located within the prohibited distance from a primary school in the locality. 


3. This case has a chequered history. The Assistant Excise Commissioner, Pathanamthitta, who made a local inspection consequent to Ext.P3 application, found that the total distance between a lower primary school which is the nearest educational institution and the entrance to the hotel of the respondent is 206 meters. Ext.P4 is the report filed by the Assistant Commissioner. However, by Ext P4, he recommended for the sanction of FL-3 licence to the hotel. In paragraphs (3) and (4) of Ext.P4 report, the Assistant Excise Commissioner has stated the reason why he recommended for sanction. 


4. The Deputy Commissioner of Excise, South Zone on receipt of Ext.P4 report, took exception to it and found that, certain educational institutions come within the objectionable limits and accordingly declined recommendation as per Ext.P5 report. Based on Ext.P5 report, the second appellant rejected Ext.P3 application by Ext.P6 proceedings. 


5. Ext.P6 was put to challenge by the respondent in W.P(C) No.23319 of 2008. By Ext.P7 judgment in the aforesaid writ petition, Ext.P6 was quashed directing the second appellant to reconsider the matter after affording the respondent an opportunity of hearing on all matters, including the applicability of certain decisions referred to in Ext.P7 judgment. A time limit was also fixed for this exercise.


6. The reason for quashing Ext.P6 was that the second appellant had essentially culled out of the report of the Assistant Excise Commissioner (Ext.P4) only that portion which relates to the existence of the educational institution, totally ignoring the views of the Assistant Excise Commissioner in paragraphs (3) and (4) of Ext.P4 and then, accepted the views of the Deputy Excise Commissioner. 


7. The second appellant, after completing the process as directed in Ext.P7 judgment, again rejected Ext.P3 by Ext.P9 proceedings. This was challenged by the appellants in W.P(C) No.32560 of 2009, which resulted in the impugned judgment. 


8. By the impugned judgment, the learned Single Judge quashed Ext.P9 and directed the second appellant to reconsider the application filed by the respondent for grant of FL-3 licence. It was specified that the distance contemplated by Rule 13(3) of Foreign Liquor Rules has to be measured from the third floor of the building where the hotel of the respondent is positioned to the gate of the lower primary school reckoning the law as on the date on which Exts.P6 and P9 were issued.


9. Arguments have been heard and the impugned judgment was perused. 


10. Admittedly, the nearest educational institution in the vicinity of the hotel of the respondent is a lower primary school having a gate. The hotel is positioned in the floors 3 to 6 of a commercial complex. For the purpose of Rule 13(3) of Foreign Liquor Rules the distance has to be measured from gate to gate along the shortest way used by the public. That is the reason why the learned Single Judge found that the point from which the distance has to be measured is the entrance on the third floor of the commercial complex where the hotel is housed. In other words, the distance between the entrance at the third floor of the commercial complex and the gate of the lower primary school has to be taken into account for considering Ext.P3 application. 


11. It is relevant to note that in Ext.P7 judgment, this Court directed the second appellant to take note of certain decisions of this Court, viz., State of Kerala v. Vijayakumar [2009 (1) KLT 578], Ravindran v. George [1993 (1) KLT 792], Mohan v. Moidu [1993 (1) KLT 425], K.V.Ramakrishnan v. State [1993 (2) KLJ 1033] and Joseph v. Excise Commissioner [1988 (2) KLT 913], while re-computing the distance. We endorse the view expressed by the learned Single Judge that the second appellant, while of passing Ext.P9, has not noticed the relevant aspects. 


12. We, therefore, see no justifiable reason to interfere with the impugned judgment. We also uphold the direction in the impugned judgment to reconsider Ext.P3 application in the light of the law, as on the date of Exts.P6 and P9 orders drawing support from the decision of this Court in Kallada Hotels and Resorts v. State of Kerala [2012 (2) KLT 167], which was confirmed by the Apex Court in S.L.P(C) No.18392 of 2012. 


In the result, the appeal fails and accordingly, it is dismissed. No costs. 


sd/- THOTTATHIL B.RADHAKRISHNAN JUDGE 

sd/- A.V.RAMAKRISHNA PILLAI JUDGE 

//TRUE COPY// P.A. TO JUDGE krj 


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