REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.4220 OF 2002

M/s M.R.F. Ltd.                                                                ..……….Appellant

Versus

Manohar Parrikar and Ors.                                               ..….…..Respondents

WITH

CIVIL APPEAL NO.4219 OF 2002

M/s M.R.F. Ltd. & Anr.                                                     ……….Appellants

Versus

The State of Goa and Anr.                                                ............Respondents

WITH

CIVIL APPEAL NO.4213 OF 2002

Goa Glass Fibre Ltd. & Anr.                                              ……….Appellants

Versus

Manohar Parrikar and Ors.                                                ……....Respondents

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WITH

CIVIL APPEAL NO.4214 OF 2002

Goa Glass Fibre Ltd. & Anr.                                              ……….Appellants Versus

The State of Goa and Anr.                                                  .….... Respondents

   WITH

CIVIL APPEAL NO.4217 OF 2002

Alcon Cement Company Limited & Anr.                          ……….Appellants

Versus The State of Goa & Anr.                                                  ……....Respondents

WITH

CIVIL APPEAL NO.4218 OF 2002

Mauvin Godinho                                                                  ……….Appellant Versus

Manohar Parrikar ad Ors.                                                  ……....Respondents

JUDGMENT  

H.L. Dattu,J.  

In Civil Appeal Nos. 4220 of 2002,  4213 of 2002 and 4218 of 2002,  

the appellants have called in question the correctness of the judgment and  

order in Writ Petition No. 316 of 1998 dated 19/24.4.2001, passed by the  

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High Court of Bombay Panaji Bench, at Goa in a Writ Petition brought in  

public interest by one Manohar Parrikar, a Member of Legislative Assembly,  

Goa  (who  later  on  became  the  Chief  Minister  of  the  State  of  Goa)  

questioning the legality, validity and propriety of two notifications issued by  

Government of Goa dated 15.5.1996 and 01.8.1996 in respect of grant of  

25%  rebate  to  Low  Tension,  High  Tension  and  Extra  High  Tension  

Industrial consumers of electricity as a policy of the State Government.  

In Civil Appeal No. 4219 of 2002 (M/s M.R.F. Ltd. & Anr. Vs. State  

of Goa & Anr.), the appellant has called in question the judgment and order  

passed by the High Court of Bombay Panaji Bench, at Goa in Writ Petition  

No. 364 of 1999 dated 24.4.2001, partly allowing the writ petition filed by  

the appellant.  

In Civil Appeal No. 4214 of 2002 (Goa Glass Fibre Ltd. & Anr. Vs.  

The  State  of  Goa  &  Anr.),  the  appellant  has  called  in  question  the  

correctness or otherwise of the judgment and order passed by the High Court  

of Bombay Panaji Bench, at Goa in Writ Petition No. 254 of 1999 dated  

25.4.2001 dismissing the writ petition filed by the appellant.

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In Civil Appeal No. 4217 of 2002 (Alcon Cement Company Limited  

& Anr. Vs. The State of Goa & Anr.), the appellant has called in question  

the  correctness  of  the  judgment  and  order  passed  by  the  High  Court  of  

Bombay  Panaji  Bench,  at  Goa  in  Writ  Petition  No.  277  of  1999  dated  

24.4.2001 partly allowing the writ petition.      

In Civil  Appeal  No. 4218 of 2008 (Mauvin Godinho Vs. Manohar  

Parrikar & Ors.), the appellant has called in question the correctness of the  

judgment and order passed by the High Court of Bombay Panaji Bench, at  

Goa in Writ Petition No. 316 of 1998 dated 19/24.4.2001  

The material facts as pleaded by the Appellants in Civil Appeal Nos.  

4220 of 2002,  4213 of 2002 and 4218 of 2002 are as under:

1)           The Government of Goa, in purported exercise powers conferred  

upon them by Section 23 of the Indian Electricity Act, 1910 (`Electricity  

Act’ for short) issued a Notification on 30.09.1991, granting  rebate of  

25% in Tariff in respect of the power supply to the Low Tension and  

High  Tension  Industrial  Consumers/appellants  who  apply  for  availing  

High  Tension  or  Low  Tension  Power  Supply  on  or  after  the  1st of  

October,  1991  for  bona  fide  industrial  activities  and  certified  by  the  

Industries Department, Government of Goa as eligible for concessional  

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tariffs for a period of five years from the date on which electricity supply  

is made  available to such units.

2)         This Notification was issued by the State Government in the name  

of the Governor of the State as per the Rules of Authentication framed  

under  Article  166(2)  of  the  Constitution  of  India  by  following  the  

procedure prescribed by the Business Rules framed under the Provisions  

of Article 166(3) of the Constitution of India after the State Cabinet had  

approved it.  Though the said Notification was in subsistence, except one  

Industrial Unit, none applied to the State Government  for the grant of  

benefit of the Notification for a long period or at least till 31.03.1995.  

On  31.03.1995,  the  said  Notification  was  rescinded  by  the  State  

Government in purported exercise of power conferred on it under Section  

21  of  the  General  Clauses  Act  read with  Sections  23 & 51-A of  the  

Electricity  Act  with  effect  from 01.04.1995,  by issuing a  Notification  

dated  31.03.1995  strictly  in  accordance  with  the  Business  Rules  and  

Rules  of  Authentication   pursuant  to  the  decision  taken  by  the  State  

Cabinet.

3)          Though  the  Government  rescinded  the  Notification  dated  

30.09.1991, number of industrial units approached the State Government  

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and  claimed  benefit  of  25%  rebate  in  terms  of  Notification  dated  

30.09.1991 for the period between the date of supply of electricity and  

31.03.1995.   Some applications  were  rejected  by  the  Chief  Electrical  

Engineer of State of Goa,  on the ground, that, they being in the category  

of  Extra  High Tension  did  not  fall  within  the  category  of  consumers  

covered  by the Notification dated 30.09.1991.  On 29.06.1995, a Calling  

Attention Notice in Legislative  Assembly  was also brought in by Mr.  

Manohar Parrikar, seeking clarification from the State Government as to  

whether these industrial units were entitled for the benefits flowing from  

the Notification dated 30.09.1991 upto 31.03.1995.  The Power Minister  

gave a reply to the said Notice  which is reproduced in the judgment  

under  appeal.   In  sum  and  substance  the  Minister  stated,  that,  the  

Government  was  committed  to  honour  the  concession  granted  by  the  

Notification dated 30.09.1991 to the eligible industrial units who apply  

for High Tension and low tension power on or after 01.10.1991 till the  

date of withdrawal, i.e. 01.04.1995.

4)           The Under Secretary to Government of Goa, Department of Power  

issued a clarification dated 01.11.1995 to the Chief Electrical Engineer  

on  the  lines  of  the  reply  given  by the  Power  Minister  to  the  Calling  

Attention  Motion  and  reiterated  the  same  by  a  communication  dated  

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12.12.1995.  Later,  as  the Government  being satisfied that  there were  

certain difficulties in the matter of clearing cases of claim of rebate for  

the period upto 31.03.1995, issued certain clarifications.  On 15.05.1996,  

however, the State Government issued another Notification in purported  

exercise  of  power  conferred  on  it  under  Sections  23  &  51-A  of  the  

Electricity  Act  read  with  Section  21  of  the  General  Clauses  Act,  to  

amend the Notification dated 30.09.1991 which had been rescinded as  

per  Notification  dated  31.03.1995.   By  the  said  Notification  the  

Government substituted the words “High Tension or Low Tension power  

supply” by the words “High Tension/Extra High Tension or Low Tension  

power  supply”.   The  State  Government  further  issued  another  

Notification dated 01.08.1996 restoring the facility of giving 25% rebate  

to these three categories of Industrial consumers and made the said rebate  

available from 01.08.1996 to those who had either applied or availed the  

power supply as on that date.

5)           By an order dated 31.03.1998, issued by the Chief Electrical  

Engineer  of  State  of  Goa,  the  benefits  of  rebate  granted by  the  State  

Government were withdrawn, as it appears that the State Government did  

a  re-thinking over  its  power  to  grant  such rebate  on the Tariff.   This  

action  of  the  State  Government  led  to  a  spate  of  litigations  by  the  

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Industrial  Units  in  the  High Court  of  Bombay  Panaji  Bench,  at  Goa,  

wherein  they  contended  that  the  benefits  granted  by  the  State  

Government as a policy decision could not be withdrawn by the order  

dated 31.03.1998,  which was merely an administrative order and that  

they  were  entitled  to  the  benefits  granted  by  the  Notification  dated  

01.03.1996, as long as the said Notification was not withdrawn by due  

process of law.

6)           During the pendency of these writ proceedings before the High  

Court, the State Cabinet after addressing itself to the issues raised by the  

industrial units in the writ proceedings, passed a resolution to withdraw  

the benefit  of  25% rebate and accordingly issued a  Notification dated  

24.07.1998 and withdrew the rebate of 25% with effect from 01.08.1998.  

By an order dated 21.01.1999, the High Court disposed of the batch of  

writ  petitions,  inter  alia  holding  that  the  Circular  dated  31.03.1998  

mentioned  supra as invalid and inoperative and the Notification dated  

24.07.1998 as legal, valid and operative, and that all petitioners therein  

were entitled to 25% rebate in power tariff for the periods as indicated in  

paragraph 56 of the said judgment etc.

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7)          The judgment of the High Court was taken up in appeal by both  

parties to this Court and this Court by an order dated 13.02.2001 declined  

to interfere with the said order of the High Court and rejected both sets of  

appeals.

8)            Mr. Manohar Parrikar, the 1st respondent herein, in the meantime,  

had moved the High Court  with  a  Misc.  Civil  Application No.637 of  

1999, seeking withdrawal of his writ petition with liberty to challenge the  

legality  or  otherwise  of  the  Notification  after  this  Court  decided  the  

above mentioned civil appeals filed before it against the order of the High  

Court dated 21.01.1999.  The High Court by its order dated 27.01.2000  

rejected the said application.  Mr. Manohar Parrikar had also moved the  

High Court to hear his petition along with earlier set of writ petitions  

disposed of  by  the  High Court  on 21.01.1999.  Subsequently,  the  said  

prayer was also withdrawn.

9)           Before the High Court, the 1st respondent herein challenged the  

correctness  of  the Notifications dated 15.05.1996 and 01.08.1996, and  

sought  to declare the same as null  and void.   He also  challenged the  

guidelines framed in the letter dated 12.12.1995 and sought to declare the  

said circular was illegal and to quash it to the extent it goes beyond the  

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scope of Notification of 1991.   He also prayed for certain other reliefs,  

including initiation of recovery of rebates paid by the State Government  

to the beneficiaries.

10)          Though the petitioner had sought many reliefs in his writ petition,  

the High Court confined itself to the challenge made to the legality of the  

notifications dated 15.05.1996 and 01.08.1996.  Before the High Court  

the 1st respondent herein contended as under:  

• That the two notifications were not issued in compliance with the  requirements  of  Article  154  read  with  Article  166  of  the  Constitution of India and the Business Rules of the Government of  Goa framed by the Governor thereunder.

• That  retrospective benefit  of  rebate in tariff  given by these two  notifications was not bona fide and is illegal.

• That there was no Budgetary Provisions made for these benefits to  be extended during the relevant financial years.

• That  the  Notifications  in  question  were  not  issued  as  is  contemplated  by  and  under  Articles  154  and  166  of  the  Constitution of India and that they were issued only at the instance  of the Minister of Power at the relevant point of time and, hence,  Notifications  could  not  be  termed as  the  decisions  of  the  State  Government.

• That the amendment brought by the Notification dated 01.08.1996  has overridden  the very scope of the Notification dated 30.09.1991  which is impermissible in law.

• That the Notification dated 15.05.1996 could not have been issued  when the Notification dated 30.09.1991 was already rescinded by  

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Notification dated 31.03.1995 and no life could have been infused  into the said notification when it did not exist.

• Addition to the said notification of Extra High Tension consumers  with retrospective effect from 01.10.1991 was beyond the scope of  the Notification dated 30.09.1991.

11)         The said writ petition was contested by the 2nd respondent, who was  

the power Minister at the relevant point of time.  He mainly contended  

that  there  was no illegality  in  the said Notifications  which have been  

issued by following the prescribed  procedure  in  the  normal course  of  

business of the Government with a view to promote industrial growth of  

the State so as to generate more employment opportunities and, therefore,  

there was nothing improper or illegal about it.  It was also contended by  

the 2nd respondent therein that even if the said notifications were held  

to be contrary to the provisions of Article 166 of the Constitution, the  

said Rules are only directory and failure to comply with them did not  

vitiate  the Notifications and in any event,  if  it  was realized by the  

State Government that these Notifications were issued contrary to the  

Provisions  of  Article  166 nothing  prevented  the  State  Government  

from withdrawing them and the fact that no such action was taken by  

the State Government for almost two years itself  indicated that the  

State Government was satisfied with the legality of the Notifications.  

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The  respondent  also  raised  a  preliminary  objection  regarding  the  

maintainability of the Writ Proceedings on the ground, that, once the  

Notifications impugned have been authenticated as per the Business  

Rules,  they  are  immune  from any  challenge  and  there  cannot  be  a  

situation where respondent No.1, who at the relevant point of time, was  

the Chief Minister of Goa, would be contesting against the action of the  

State Government.  It was also contended that the petition lacked bona  

fides and was moved only to settle political scores and to gain political  

mileage.  The  fact  that  contradictory  stands  were  taken  by  the  State  

Government  by  filing  two  affidavits  of  the  Chief  Electrical  Engineer  

itself showed that the State Government walked into the shoes of the 1st  

respondent herein and that the Government cannot support the challenge  

to the Notifications issued by it and even if the petition was pro bono  

when filed, it ceased to be so after the respondent No.1 herein took over  

as  the  Chief  Minister  of  the  State  of  Goa.  The  further  contention  

advanced  was  that  the  High  Court,  having  conclusively  upheld  the  

validity  of  these  two  notifications  in  its  judgment  dated  21.01.1999,  

cannot re-examine the same, more so, in view of confirmation of the said  

judgment by this Court in its Order dated 13.01.2001. The 2nd respondent  

therefore sought dismissal of the Writ Petition. A number of judgments  

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were cited and relied upon by the 2nd respondent in support of his case  

before the High Court. The other parties including the interveners also  

supported the 2nd respondent therein, on the issue of maintainability and  

further addressed arguments based on the principles of  res judicata  and  

the  concept  of  merger  of  the  judgment  of  the  High  Court  dated  

21.01.1999 with the judgment of this Court dated 13.01.2001. On these  

premise the respondents sought dismissal of the Writ Petition. It appears  

from the pleadings before us, that, the High Court had permitted certain  

Companies including the M.R.F Ltd, to come on record as interveners  

and oppose the reliefs sought in the Writ Petition.

12)         The High Court by its judgment dated 19/24.04.2001 impugned  

herein allowed the writ petition in part by holding that the Notifications  

dated 15.05.1996 & 01.08.1996 could not be termed as  Notifications  

issued by the State Government on account of Non Compliance of the  

Rules of Business framed under Article 166 (3) of the Constitution of  

India and therefore non-est and void-ab-initio and that the consequential  

actions based on these two notifications are null and void.

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13)         Aggrieved by the said judgment of the High Court, the Appellant  

[M.R.F.  Ltd.]  and others  are  before  us  in  Civil  Appeal  Nos.  4220 of  

2002, 4213 of 2002 and 4218 of 2002.  

14)         In Civil Appeal Nos. 4219 of 2002, 4214 of 2002 and 4217 of  

2002, the appellants – M/s M.R.F. Limited, Goa Glass Fibre Limited and  

Alcon  Cement  Company  Limited  are  questioning  the  correctness  of  

judgment of the High Court in partly allowing the Writ Petition Nos. 364  

of 1999 and 277 of 1999 and dismissing the Writ Petition No. 254 of  

1999 respectively.  

15)         The facts in Civil Appeal No. 4219 of 2002 are :– Appellant  

applied for power supply connection for setting up a factory in the State  

of Goa on 03.10.1991.  On 02.09.1992, appellant was supplied electricity  

for the first time.  Sometime in October 1996, the Executive  Engineer  

had  acknowledged  that  the  appellant  is  entitled  for  25%  rebate  as  

provided in the notification. The amount of rebate was computed at Rs.  

1,04,70,762 for  the  period from 02.09.1992 to  01.09.1996 and it  was  

further stated that the amount of arrears be credited in 60 installments  

w.e.f. September, 1996 and each installment was of Rs. 1,74,513.  The  

respondent had adjusted an amount of Rs. 53,78,594 as against the bills  

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from September,  1996 to August,  1997 and further  adjustment  of  Rs.  

31,41,234  was  also  done  subsequently  thus  leaving  a  balance  of  Rs.  

73,29,528.   The benefit  of  rebate  was  denied to  the  appellant  for  the  

remaining  period  on  the  basis  of  the  notification  dated  31.3.1998,  

whereby the extension of rebate in tariff was suspended.  Pursuant to the  

judgment dated 21.1.1999, the appellant raised a fresh demand for rebate  

before  the  respondent  no.  2  and  as  they  failed  to  succeed,  they  

approached the High Court for directions to seek implementation of the  

said judgment.  

16)           The present appeal is filed against the High Court’s order dated  

24.04.2001 and the  letter  issued  on 25.05.2001 by the  Department  of  

Power  to  the  appellant  herein  asking  for  refund  of  the  rebate  of  Rs.  

1,11,35,738 in one installment  on or before 15.6.2001 pursuant to the  

order dated 24.4.2001.

17)            The facts in Civil Appeal No.4214 of 2002 are :-  The appellant –  

Goa Glass Fibre Ltd. - has set up a manufacturing plant at Colvale,  

Bardez  Goa  and  it  had  applied  for  electric  power  connection  on  

18.7.1994.  Pursuant to the agreement signed on 7.12.1995 between  

the appellant  and the respondent no. 2,  the appellant’s  factory was  

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given power supply for the first time on 16.3.1996.  The appellant  

made a representation to respondent no. 2 on or about 3.7.1996 for the  

benefit of 25% rebate in tariff and another reminder was sent in that  

regard on 27.11.1996.  The claim for rebate was made on the basis of  

the  government  notification  dated  30.09.1991,  15.05.1996  and  

01.08.1996.   Pursuant  to  the  Notification  dated  01.08.1996,  25%  

rebate to this industry was granted w.e.f. February, 1997 along with  

the arrears of installment @ Rs. 1,24,520. Such rebate was adjusted in  

the monthly bill.   This rebate was withdrawn by issuing a circular  

dated 31.3.1998. This circular was challenged in the High Court.  The  

High Court in its judgment dated 21.01.1999, held the circular dated  

31.3.1998  as  invalid  and  inoperative.  The  appellant  filed  a  Writ  

Petition No. 254 of 1999 in the High Court praying for the restoration  

of the 25% rebate.   

18)         The facts in Civil Appeal No.4217 of 2002 are :- The Alcon  

Cement Company Limited applied for power supply on 17.9.1992 and  

entered into an agreement with the respondent no.2 for supply of power  

on 29.9.1993.  The appellant’s factory at Surla in the State of Goa was  

given  electricity  supply  for  the  first  time on  1.3.1994.   Sometime  in  

October 1996, the Executive Engineer acknowledged the entitlement of  

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25%  rebate  and  rebate  in  energy  consumption  was  granted.   The  

appellant was given adjustment of 13 installments quantified in sum of  

Rs.  2,90,342/-  leaving  a  balance  of  47  installments.  In  addition,  the  

balance  of  subsidy  for  the  months  of  March  1998  to  July  1998  was  

worked out at  the rate of Rs.4,24,671 thus making a total  sum of Rs.  

14,74,755.   The benefit  of  rebate  was  denied to  the  appellant  for the  

remaining  period  on  the  basis  of  the  notification  dated  31.3.1998,  

whereby the extension of rebate in tariff was suspended. Pursuant to the  

judgment dated 21.1.1999, the appellant raised a fresh demand for rebate  

before  the  respondent  no.  2  and  as  they  failed  to  succeed,  they  

approached the High Court  seeking directions  to  implement   the said  

judgment.  

19)          Before us the appellants urged various contentions and supported  

them with  various  grounds  and  the  case  laws.  The  questions  of  law  

according to the appellants are as under:

• Whether there is any breach of judicial  discipline by the High  

Court  in  not  following  it's  own Judgment  rendered  by  a  Full  

Bench  in  the  Case  of  Kharkanis  wherein  the  Business  Rules  

framed under Article 166 (3) were held to be directory in nature,  

but in holding that the Rules of Business are mandatory?

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• Whether the High Court by the judgment impugned herein has  

set  at  naught  the  judgment  dated  21.01.1999  rendered  by  the  

other  Division  Bench  with  reference  to  the  same notifications  

impugned in Writ Petition No. 316 of 1999, the former of which  

has been affirmed by this Court by its order dated 13.02.2001 in  

Civil Appeal No. 3206-07 of 1999 and others?

• Whether the appellants as consumers of power seeking rebate in  

terms of the Notifications issued in the name of the Governor  

which have been duly gazetted,  can be estopped from seeking  

relief  of  rebate  under  them  on  the  ground  that  the  said  

Notifications  were  void  ab  initio  as  they  were  not  issued  in  

compliance of Business Rules?

• Whether  the  High  Court,  in  the  writ  petition  filed  by  Manohar  

Parrikar,  on  the  basis  of  the  files  produced  before  it  by  the  State  

Government with Manohar Parrikar as the Chief Minister of the State  

at the time of such production, erred in concluding that the impugned  

notifications are non-est on the basis of such files which had also been  

examined by the earlier Division bench of the High Court?

• Whether the High Court by issuing directions to effect recovery of  

rebate granted on the basis of Notifications in issue has over ruled the  

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decision of the earlier Division Bench which had held that relief under  

the notifications would be granted up to the date of rescission of the  

Notification by the Gazette dated 27.07.1998?

• Whether  the  High  Court  erred  in  allowing  the  Writ  Petition  of  

Manohar  Parrikar  based  on  the  changed  stance  of  the  State  

Government contained in  its  affidavit  dated 12.04.2001 which was  

different from that which was taken by the State in the Court before  

the 1st respondent herein became the Chief Minister of the State of  

Goa?

• Whether the High Court was justified in allowing the Writ Petition of  

Manohar Parrikar on the ground of Notifications being null and void  

for want of compliance with the Business Rules while its stand before  

the High Court in the present writ petition and earlier batch of writ  

petitions was that the notifications impugned had been rescinded due  

to financial  crunch and in public  interest  which was upheld by the  

High Court and by this Court?

• Whether the judgment impugned has been rendered in a case where  

the  petitioner  on  his  becoming  Chief  Minister  of  the  State  drew  

support of the State Government through his own Advocate General  

to settle scores with his political rival the 3rd respondent herein?

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• Is there any judicial indiscipline in the High Court in not following the  

judgment of this Court dated 13.02.2001 confirming the High Court  

judgment dated 21.01.1999, more so in view of the consistent stand  

taken by the State Government in Parrikar's case that the judgment of  

the High Court, dated 21.01.1999 covered the issues therein and that  

the  High  Court  should  await  the  order  of  this  Court  in  Appeals  

pending  and  which  was  eventually  disposed  by  order  dated  

13.02.2001?

• Did the  High Court  erred  in  not  permitting  Manohar  Parrikar  [1st  

respondent herein] to withdraw his writ petition, when he himself had  

submitted  that  the  issues  in  his  writ  petition  were  covered  by  the  

judgment of the High Court dated 21.01.1999 and that  the appeals  

there against were pending in this Court?

20)          These civil appeals are opposed by the State Government by filing  

a detailed Counter Affidavit. The contentions of the State Government in  

support of the impugned judgment can be summarized as under:

• That the State has a vital interest in the outcome of the proceedings  

before this Court which have a bearing on the State's Finances as  

an order of this Court setting aside the judgment impugned will  

result in a loss of Rs. 50 Crores to the State’s Exchequer.

20

• That the State has already paid an amount of about 16 crores as  

rebate and it cannot afford to pay any more on account of financial  

crunch faced by it  and also on account  of  the Notifications not  

being Government decision in the eyes of law, in as much as the  

matter was neither placed before the State Cabinet in terms of the  

Business Rules nor was the mandatory concurrence of the Finance  

Department under the Business Rules obtained and the High Court  

has rightly held that the Notifications cannot be termed as State  

Government's decisions for want of non-compliance of mandatory  

Business  Rules  and  the  decision  and  actions  based  on  the  

notification are therefore non-est.

• That there is no truth in the contention that the State Government  

has taken stand which is inconsistent with and contradictory to the  

one taken in the earlier affidavits filed in the proceedings.

• That the earlier affidavits for and on behalf of the State were filed  

by Chief Electrical  Engineer Nagarajan in virtual support of the  

Notifications impugned. However, the said Nagarajan himself was  

party to the entire matter including moving of the file, initiating the  

process and that his appointment was on ad-hoc basis overlooking  

the just and reasonable claims of various other senior, eligible and  

21

qualified candidates and that he had given benefit of rebate to an  

applicant whose application had been rejected by his predecessor.

• That investigation on a police complaint lodged by the petitioner in  

W.P 316 of 1999 disclosed that  there was a conspiracy hatched  

between the said Nagarajan and the then Power Minister at whose  

instance the Notifications impugned were issued and that a charge  

sheet was laid before the Special Court set up under the Prevention  

of Corruption Act for offences under Section 120B of the Indian  

Penal Code and other provisions of the Prevention of Corruption  

Act and the said Nagarajan who filed the earlier affidavits was an  

accused in the said proceedings.

• That when it comes to the involvement of public revenue and the  

effect on the State's Exchequer to the tune of Rs.50 Crores, one has  

to be bold enough to place the correct  facts  and law before the  

Court  and  the  earlier  affidavits  filed  on  behalf  of  the  State  

Government did  not  place  before  the  Court  correct  facts  of  the  

matter  and that  the affidavit  of  Nagarajan which did not  reflect  

correct position of law and did not place correct facts before the  

Court should be discarded and the one filed subsequently should  

not be considered as contradictory or inconsistent as correct facts  

22

borne out from the Government files were placed before the Court  

by the said affidavits. The said affidavits also reflected the fact that  

there  was  neither  financial  sanction  nor  was  there  a  budgetary  

provision nor was there a Cabinet approval as mandatorily required  

under the provisions of Article 166 (3) of the Constitution and the  

said Notifications therefore could not be said to be the decision of  

the  State  Government  in  the  eye  of  law.  The  affidavit  dated  

12.04.2001  was  filed  before  the  High  Court  after  the  State  

re-examined  the  entire  matter  at  the  highest  level  and  after  

examining the legal aspects and as it was found that certain matters  

which go to the root of the matter and as the earlier affidavits filed  

before the High Court did not place all the facts emanating from  

Government  files  and  records.  The  said  affidavit  was  filed  

explaining  the  severe  financial  implications  which  the  said  

Notifications  incurred on the  State  in  the  form of  rebate  which  

could  not  be  borne  by  the  State's  interest  and  which  was  

detrimental  to  the  State's  Interest,  more  so  in  view  of  lack  or  

absence of legal sanctity for the said notification. The affidavit was  

filed  further  to  disclose  that  there  was  breach  of  mandatory  

Business Rules and to show that neither cabinet approval for the  

23

decision as  required under law was obtained nor  any budgetary  

allocation made for the rebate. The affidavit was filed to explain  

that  the  State  Government  could  not  bear  liability  of  such  

magnitude.

21)        The counter-affidavit  of  the  respondent  -  State  herein  further  

reiterates  the  position  of  law flowing  from various  provisions  of  the  

Constitution and the Business Rules made there under and states that the  

impugned  notifications  did  not  comply  with  the  requirements  of  the  

Business Rule 7 and were therefore totally vitiated and did not have any  

binding effect on the State Government. The decision contained in the  

said Notifications could not be the decision of the State Government in  

the  strict  and  true  sense  of  law.  With  these  contentions  the  State  

Government seeks to support and sustain the judgment of the High Court  

against which appeal is filed in this Court.  

22)          A rejoinder is filed by the appellant - M.R.F Ltd. to counter  

various  statements  made  by  the  State  Government'  in  its  Counter  

Affidavit filed in the appeal.

23)         We have heard Shri F.S. Nariman, Dr. Rajeev Dhavan,           Shri  

L. Nageshwar Rao, Shri K.N. Bhatt and Shri Shyam Divan, the learned  

24

senior counsel for the parties who have advanced elaborate arguments in  

support of the issues respectively raised by them in the pleadings.  

24)          The High Court by its judgment impugned herein has elaborately  

dealt  with each of the contentions of the parties before it.  Before the  

High Court  the  Writ  Petition  filed in  public  interest  was  opposed on  

various grounds.  It  was preliminarily objected to and opposed on the  

ground  of  maintainability  which  was  dealt  with  by  the  High  Court  

holding as under:-

" We have no hesitation to hold that the Petition is not  required to be dismissed on the ground of merger of  the earlier decision dated 21st January, 1999 with the  order  of  the  Apex  court  or  on  the  ground  of  res  judicata. There is no dispute that the illegality of these  Notifications  were  not  challenged  in  the  Petitions  which came to be decided on 21st January, 1999 and,  in fact, the said challenge could not have been raised  for the simple reason that the Petitioners'  claim was  entirely  based  on  the  existence  of  these  two  Notifications.  When  the  Petitioner  moved  Miscellaneous Civil Application No.637 of 1999 with  the prayer to allow him to withdraw the Petition for  the reasons stated therein,  this  court  while rejecting  the  said  application  by  order  dated  27th  January,  2000, gave the following reasoning:-

"It appears that at one stage the applicant had prayed  for taking up the Writ Petition No. 316/98 along with  the other batch of Writ Petitions, but the said prayer  was withdrawn.  In the said batch of  Writ  Petitions,  challenge  had  been  thrown  to  the  decision  of  

25

government  of  Goa  communicated  by  the  Chief  Electrical  Engineer  vide  Circular  dated  31st March,  1998 to suspend the release of 25% rebate of power  tariff  to  the  industrial  consumers.  There  was  no  challenge whatsoever to Notification dated 15th May,  1996, or Notification dated 1st August, 1996, or that  the  said  Notifications  were  null  and  void  and  to  nullify any effect given to them in the earlier batch of  Writ Petitions which declaration is now sought by the  Writ Petition No. 316/98. There was also no challenge  to  the  guidelines  framed  by  letter  dated  12th  December, 1995, which is sought to be challenged in  the Writ Petition No. 316/98 on the ground that it is  illegal to the extent it goes beyond the scope of 1991  Notification.  No  direction  had  been  sought  in  the  earlier  batch of  Writ  Petitions for investigation into  the  grant  of  rebate,  or  for  initiation  of  recovery  proceedings against those units to whom 25% rebate  had  actually  been  paid,  or  adjusted,  or  to  fix  accountability  of  the  concerned  public  servant,  or  authorities  for  causing  loss  to  the  State  exchequer.  After  taking  us  through  the  Judgment,  learned  advocate for the applicant himself admitted that none  of  the  declarations  or  directions  claimed  in  Writ  Petition  No.316/98  had  been  sought  in  the  earlier  batch  of  Writ  Petitions.  Therefore,  it  cannot  prima  facie be said that the controversy in the earlier batch  of Writ Petitions and the Writ Petition in question is  the same.

In  the  circumstances,  in  our  opinion,  there  is  no  case  made  out  for  permitting  the  applicant  to  withdraw the  Writ Petition No.316/98. Accordingly, the application is  hereby dismissed.”

      There was no challenge whatsoever to the Notifications dated 15th  

May, 1996 and 1st August, 1996 and the declaration now sought in the  

26

instant Writ Petition was not in issue in the earlier batch of Petitions.  

After  taking  us  through  the  judgment,  the  learned  senior  counsel  

admitted that none of the declarations or directions in Writ Petition  

No.316/98  had  been  sought  in  the  earlier  batch  of  Writ  Petitions.  

Therefore, it cannot be said that the controversy in the earlier batch of  

Writ Petitions and the present Writ Petition in question are the same.  

This Order dated 17th January, 2000 has now become final, though it  

was an interlocutory order rejecting Miscellaneous Civil Application  

No.  637  of  1999.  This  Court  was  more  than  convinced  that  the  

challenge raised in Writ Petition No. 316 of 1998 was not an issue for  

consideration before it while handing down the judgment dated 21st  

January, 1999, It is for these reasons, the principle of res judicata will  

not be applicable in the instant case.

25)             As regards the objections raised by the respondents on the basis  

of concept of merger, the High Court has held that though the appeals  

challenging the judgment of the High Court dated 21.01.1999 have been  

dismissed  by  this  Court,  and  the  findings  of  the  High  Court  on  the  

relevant issues have been impliedly confirmed and though the principle  

laid  down  by  this  Court  in  the  case  of  Kunhayammed  Vs.  State  of  

Kerala,  [(2000)  6  SCC  359],  is  squarely  applicable  on  the  issue  of  

27

merger and the judgment dated 21.01.1999 of the High Court merged  

with the order of this Court dated 13.02.2001, the concept of merger will  

not come in its way in deciding the issues involved in this petition for the  

reasons, that, these issues were not raised and therefore not required to  

be decided by the High Court in its earlier judgment dated 21.01.1999 as  

was  clear  from the  order  passed  by  it  on  27.01.2000  in  Misc.  Civil  

Application  No.  637  of  1999.  The  High  Court  held,  that,  it  had  no  

occasion  to  address  itself  on  the  challenge  raised  to  the  notification  

impugned in the Writ Petition of Manohar Parrikar and the earlier batch  

of Writ Petitions proceeded solely against the order dated 31.03.1998,  

and  subsequent  Notification  issued  by  the  State  Government  on  

24.07.1998. It is observed by the High Court, that, the State Government  

opposed  those  Writ  Petitions  without  examining  the  legality  of  the  

Notifications dated 15.05.1996 and 01.08.1996 and it had contended that  

the benefit of rebate was withdrawn as the State Government was facing  

financial crunch and that the said benefit had been introduced as a policy  

of the State Government and when it was realized by the State that it was  

facing financial difficulties in extending the benefit of rebate it decided  

to withdraw the same which has been upheld by the High Court in the  

earlier  batch  of  writ  proceedings.  The  High  Court  therefore  has  

28

concluded that it cannot now be said that State Government cannot take  

a stand that the Notifications impugned were issued without following  

the mandatory  provisions of  Rules  of  Business or  that  they were  not  

Notifications issued by the State Government in the eyes of law. The  

High  Court  has  also  observed,  that  if  the  State  had  no  occasion  to  

address itself  on the legality  of these Notifications,  it  is not estopped  

either  from  raising  a  challenge  or  supporting  the  challenge  at  an  

appropriate  time.  It  is  also  held  by  the  High  Court  that  as  the  1st  

respondent herein was not a party to the earlier batch of Writ Petitions  

before the High Court and as his application for hearing his petition with  

that  batch  of  petitions  was  withdrawn,  he  is  not  estopped  from  

continuing with his challenge against the Notifications dated 15.05.1996  

and 01.08.1996.  

26)           Arguments  were  also  advanced to  the  effect  that  the  State  

Government should not  be allowed to take contradictory stand as the  

stand taken by the State Government in its two affidavits filed through  

the Chief Electrical Engineer in the earlier batch of writ petitions was  

conflicting with each other. The said contention was sought to be raised  

by the respondents in view of the change of the Government during the  

intervening  period  and  the  1st respondent  herein  was  the  Chief  

29

Minister at the relevant point of time. The High Court has repelled  

these  contentions  by  stating  that  the  challenge  to  the  notifications  

impugned before by the 1st respondent herein in his petition cannot be  

decided  on  the  touch  stone  of  affidavits  filed  even  if  they  are  

contradictory in nature and the challenge had to be decided on its own  

merits, on the basis of records and the Constitutional Mandate. The  

High Court has observed that in a democratic set up the decisions of  

the Governments decide the destiny of the people and therefore the  

validity  of  such  decisions  should  be  decided  not  on  the  basis  of  

affidavits filed by the Officers of the Governments or on incomplete  

or inadequate information made available by them, but on the basis of  

Constitutional provisions and Business Rules framed thereunder. The  

High Court further felt that it was duty bound to examine the records  

to reassure itself that the decisions purported to have been taken by  

the  Government  are,  in  fact  and  in  law,  the  decision  of  the  

Government  and  they  are  in  conformity  with  the  mandate  of  the  

Constitution.  Thus  the  High  Court  has  rejected  the  preliminary  

objection as to the maintainability of the Writ Petition and proceeded  

to  decide  the  challenge  made  to  the  above  mentioned  two  

notifications on its merits.  

30

27)           In our view, the principle of merger essentially refers to the  

merging of the orders passed by the superior courts with that of the  

orders  passed  by  a  subordinate  court.   This  Court  in  the  case  of  

Shankar  Ramachandra  Abhyankar  Vs.  Krishnaji  Dattatreya  Bapat  

(AIR 1970 SC 1) has laid down the condition as to when there can be  

a merger of the orders of the superior court with that of the orders  

passed by the lower court.  This Court stated, that, if any judgment  

pronounced by the superior court in the exercise of its appellate or  

revisional jurisdiction after issue of a notice and a full hearing in the  

presence of both the parties, then it would replace the judgment of the  

lower court.  Thus, constituting the judgment of the superior court the  

only final judgment to be executed in accordance with law by the  

Court below.  The merger is essentially of the operative part of the  

order and the principle of merger of the order of the subordinate Court  

with the order of the superior Court cannot be applied when there is  

no order made by the superior Court  on merits and the controversy  

between the parties has not been looked into by the superior Court.   

28)           The  issue  of  merger  has  no  bearing  in  the  facts  and  

circumstances  of  the  present  petitions,  since,  the  issue  that  was  

31

decided by the High Court in the earlier batch of Writ Petitions and  

the  issue  that  was  raised  and considered  in  the  subsequent  public  

interest litigation is entirely different.    Secondly, in our view, the  

principles of  res judicata is also not attracted since the issue raised  

and considered in  the  subsequent  public  interest  litigation had  not  

been raised and considered in the earlier round of litigation.  It would  

be worthwhile to recall  the observations made by this Court in the  

case of Madhvi Amma Bhawani Amma and Ors. Vs. Kunjikutty Pillai  

Meenakshi Pillai and Ors. (2000) 6 SCC 301, wherein the Court has  

observed that in order to apply general principle of res judicata, Court  

must find, whether an issue in a subsequent suit,  was directly and  

substantially in issue in the earlier suit or proceedings, was it between  

the  same parties,  and  was  it  decided  by  such  Court.   Thus,  there  

should be an issue raised and decided, not merely a finding on any  

incidental question for reaching such a decision.  So, if such issue is  

not raised and if  on any other issue,  if,  incidentally any finding is  

recorded, it would not come within the periphery of principle of res  

judicata.  However,  Shri  K.N.  Bhatt,  learned  Senior  Counsel  

appearing  for  the  former  Power  Minister,  would  submit  that  the  

principles  of  res  judicata   and  constructive  res  judicata bars  the  

32

exercise of jurisdiction by the High Court as there is a bar not only on  

issues directly raised in a previous lis but the issue that ought to have  

been  raised.  It  is  further  submitted  that  the  record  of  decision  

culminating  in  notification  dated  24.03.1998  was  available  and  

produced before the High Court  in  previous writ  petitions and the  

same Finance Secretary who had opined in his cabinet note that Rules  

of  Business  stood  violated  due  to  non-consultation  with  Finance  

department  had  filed  affidavit  in  previous  Writ  Petitions  on  the  

decision  to  issue  notification  dated  24.07.1998.   Therefore,  the  

learned senior counsel would contend that the High Court has erred in  

deciding this issue against this respondent.  In aid of this submission,  

the learned senior counsel has pressed into service the observations  

made by this Court in the case of State of Karnataka vs. All  India  

Manufacturer  Organization  and Others, [(2006) 1 SCC 32].

29)          We are not impressed by the submission of the learned senior  

counsel Shri K.N. Bhatt.  In our view, the subject matter of earlier  

Writ Petitions was completely different and distinct from the public  

interest litigation filed by Mr. Manohar Parrikar.  In the earlier Writ  

Petitions,  the  challenge  was  against  notification  and  the  circulars  

issued by the State Government and in the present Writ Petitions the  

33

High Court was primarily concerned with validity or otherwise of the  

notifications dated 15.5.1996 and 01.08.1996. Therefore, we are of  

the  view that  the  reasoning  and  conclusions  reached  by  the  High  

Court,  on  the  aforesaid  issue  is  in  accordance  with  law  and  in  

accordance with the principles laid down by this Court.  Therefore,  

we agree with the conclusion reached by the High Court.  

30)         The appellants herein have raised an issue with regard to the  

nature  of  Business  Rules  framed  by  the  Government  of  Goa  i.e.  

whether  these  Rules  are  directory  or  mandatory.  Indeed it  is  their  

principal  contention.   Before the High Court  also,  their  contention  

was that the Rules of Business of the State of Goa were directory  and  

not mandatory and failure to comply with such Rules will not nullify  

the  decision  taken  by  the  State  Government.   Shri  F.S.  Nariman,  

learned  senior  counsel  submitted  that  it  is  now  settled  law,  that,  

violation of conduct of Business Rules does not vitiate the decision or  

order,  since  the  Rules  of  Business  are  only  directory  and  not  

mandatory. The learned senior counsel has invited our attention to the  

decision of this court in the case of Dattatreya Moreshwar Pangarkar  

vs. State of Bombay – [(1952) SCR 612]. In the said decision, the  

court has observed :  

34

“It is well settled that generally speaking the provisions  of a statute creating public duties are directory and those  conferring  private  rights  are  imperative.  When  the  provisions  of  a  statute  relate  to  the  performance  of  a  public duty and the case is such that to hold null and void  acts  done  in  neglect  of  this  duty  would  work  serious  general inconvenience or injustice to persons who have  no control over those entrusted with the duty and at the  same  time  would  not  promote  the  main  object  of  the  legislature, it has been the practice of the courts to hold  such provisions to be directory only, the neglect of them  not  affecting  the  validity  of  the  acts  done.  The  considerations  which  weighed with  Their  Lordships  of  the  Federal  Court  in  the  case  referred to  above in  the  matter  of  interpretation  of  Section  40(1)of  the  9th  Schedule to the Government of India Act, 1935, appear  to me to apply with equal cogency to Article 166 of the  Constitution. The fact that the old provisions have been  split up into two clauses in Article 166 does not appear to  me to make any difference in the meaning of the article.  Strict  compliance with the requirements of  Article  166  gives  an  immunity  to  the  order  in  that  it  cannot  be  challenged on the ground that it is not an order made by  the  Governor.  If,  therefore,  the  requirements  of  that  article  are  not  complied  with,  the  resulting  immunity  cannot be claimed by the State. This, however, does not  vitiate  the  order  itself.  The  position,  therefore,  is  that  while the Preventive Detention Act requires an executive  decision, call it an order or an executive action, for the  confirmation of an order of detention under Section 11(1)  that Act does not itself prescribe any particular form of  expression of that executive decision. Article 166 directs  all executive action to be expressed and authenticated in  the manner therein laid down but an omission to comply  with  those  provisions  does  not  render  the  executive  action a nullity.

35

31)        Reference is also made to the decision of this Court in Gulabrao  

Keshavrao Patil and Ors. Vs. State of Gujarat (1996) 2 SCC 26.  It was  

noted as follows:    

“Article 166(1) and (2) expressly envisage authentication  of all the executive action and shall be expressed to be  taken  in  the  name  of  the  Governor  and  shall  be  authenticated in such manner specified in the rules made  by the Governor.  Under Article 166(3), the Governor is  authorised  to  make  the  rules  for  the  more  convenient  transaction  of  the  business  of  the  Government  of  the  State, and for the allocation among Ministers of the said  business  insofar  as it  is  not  a  business  with respect  to  which  the  Governor  is  by  or  under  the  Constitution  required to act in his discretion.  In other words, except in  cases  when  the  Governor  in  his  individual  discretion  exercises his constitutional functions, the other business  of  the  Government  is  required  to  be  conveniently  transacted as  per   the Business Rules made by Article  166(3)  of  the  Constitution.   If  the  action  of  the  Government and the order  is  duly authenticated  as per  Article 166(2) and the Business Rule 12, it is conclusive  and  irrebuttable  presumption  arises  that  decision  was  duly taken according to Rules.”

32)          Mr. F.S. Nariman next relied upon the decision of this  Court in R.  

Chitralekha  and  Others  vs.  State  of  Mysore,  [1964  (6)  SCR  368],  

wherein this Court has stated  that it is “settled law” that provisions of  

Article 166 of the Constitution are only directory and not mandatory in  

character.  And if they are not complied with it can be established as a  

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question  of  fact  that  the  impugned  order  was  in  fact  issued  by  the  

Governor.”

33)          In Haridwar Singh Vs. Bagun Sumburui, [(1973) 3 SCC 889], it  

was noted as follows.   

“Several  tests  have  been  propounded  in  decided  cases  for  determining  the  question  whether  a  provision  in  a  statute,  or  a  rule  is  mandatory  or  directory.   No universal  rule can be laid down on  this  matter.   In  each  case  one  must  look  to  the  subject-matter  and  consider  the  importance  of  the  provision  disregarded  and  the  relation  of  that  provision  to  the  general  object  intended  to  be  secured.  Prohibitive or negative words can rarely be  directory  and  are  indicative  of  the  intent  that  the  provision is to be mandatory.   Where  a  prescription  relates  to  performance of  a  public duty and to invalidate acts done in neglect of  them would work serious general inconvenience or  injustice to persons who have to control over those  entrusted  with  the  duty,  such  prescription  is  generally  understood  as  mere  instruction  for  the  guidance of those upon whom the duty is imposed.”

34)          In Montreal Street Rely Co. vs. Normandin – 1917  A.C. 170, it is  

held :

“The statutes contain no enactment as to what is  to be the consequence of nonobservance of these  provisions.  It  is contended for the appellants that  the consequence is that the trial  was coram non  judice and must be treated as a nullity.

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It  is  necessary  to  consider  the  principles  which  have been adopted in construing statutes  of  this  character,  and the authorities so far  as there are  any on the particular  question arising here.  The  question  whether  provisions  in  a  statute  are  directory or imperative has very frequently arisen  in this country, but it has been said that no general  rule can be laid down, and that in every case the  object of the statute must be looked at. The cases  on the subject will be found collected in Maxwell  on Statutes,  5th ed.  P.  596 and following pages.  When  the  provisions  of  a  statute  relate  to  the  performance of a public duty and the case is such  that to hold null and void   acts done in neglect of    this  duty  would  work  serious  general  inconvenience, or injustice to persons who have  no control over  those entrusted with the  duty,  and  at  the  same  time  would  not  promote  the  main object of the Legislature, it  has been the  practice to hold such provisions to be directory  only, the neglect of them, though punishable not  effecting the validity of the acts done.”                                                (emphasis supplied)

35)         In R v Immigration Appeal Tribunal Ex parte Jeyeanthan 1999 (3)  

AER 231, it is observed :  

“The  issue  is  of  general  importance  and  has  implications for the failure to observe procedural  requirements  outside  the  field  of  immigration.  The conventional approach when there has been  non-compliance  with  a  procedural  requirement  laid down by a statute or regulation is to consider  whether the requirement which was not complied  with  should  be  categorised  as  directory  or  mandatory. If it is categorised as directory it is  usually assumed it can be safely ignored. If it is  categorised  as  mandatory  then  it  is  usually  

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assumed the defect cannot be remedied and has  the  effect  of  rendering  subsequent  events  dependent on the requirement a nullity or void or  as  being  made  without  jurisdiction  and  of  no  effect.  The position  is  more complex than this  and  this  approach  distracts  attention  from  the  important question of what the legislator should  be  judged  to  have  intended  should  be  the  consequence of the non-compliance. This has to  be assessed on a consideration of the language of  the legislation against the factual circumstances  of the non-compliance. In the majority of cases it  provides  limited,  if  any,  assistance  to  inquire  whether  the  requirement  is  mandatory  or  directory. The requirement is never intended to  be optional if a word such as 'shall' or 'must' is  used.

A requirement to use a form is more likely to be  treated  as  a  mandatory  requirement  where  the  form contains a notice designed to ensure that a  member of the public is informed of his or her  rights, such as a notice of a right to appeal. In the  case of a right to appeal, if, notwithstanding the  absence of the notice, the member of the public  exercises his or her right of appeal, the failure to  use  the  form  usually  ceases  to  be  of  any  significance  irrespective  of  the  outcome of  the  appeal.  This  can  confidently  be  said  to  accord  with  the  intention  of  the  author  of  the  requirement.

There are cases where it has been held that even  if  there  has  been no  prejudice  to  the  recipient  because, for example, the recipient was aware of  the right of appeal but did not do so, the non- compliance  is  still  fatal.  The  explanation  for  these decisions is that the draconian consequence  is imposed as a deterrent against not observing  the requirement. However even where this is the  

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situation  the  consequences  may  differ  if  this  would not be in the interests of the person who  was to be informed of his rights.

Because  of  what  can  be  the  very  undesirable  consequences of a procedural requirement which  is made so fundamental that any departure from  the requirement  makes everything that  happens  thereafter irreversibly a nullity it is to be hoped  that provisions intended to have this effect will  be few and far between. In the majority of cases,  whether  the  requirement  is  categorised  as  directory  or  mandatory,  the  tribunal  before  whom the defect is properly raised has the task  of determining what are to be the consequences  of failing to comply with the requirement in the  context of all the facts and circumstances of the  case in which the issue arises. In such a situation  that tribunal's task will be to seek to  do what is  just in all the circumstances (see  Brayhead (Ascot)   Ltd  v Berkshire  CC [1964] 1 All ER 149, [1964] 2  QB 303 applied by the House of Lords in  London  and a Clydesidc Estates Ltd v Aberdeen DC [1979]  3 All ER 876, [1980] lWLR 182).

By contrast, a requirement may be clearly directory  because it lays down a time limit but a tribunal is  given  an  express  power  to  extend  the  time  for  compliance.  If  the  tribunal  grants  or  refuses  an  extension of time the position is clear.  If the time  limit  is  extended  the  requirement  is  of  no  Significance.  If  an  extension  is  refused  the  requirement becomes critical.  It may, for example,  deprive a member of the public of a right to appeal  which if exercised in time would have been bound to  succeed.  In  the  latter  situation  a  directory  requirement  has  consequences  which  are  as  significant as any mandatory requirement.

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A far from straightforward situation is where there is  a need for permission to appeal to a tribunal but this  is  not  appreciated  at  the  time.  The  requirement  is  mandatory in the sense that the tribunal or the party  against whom the appeal was being brought would  have been entitled to object to the appeal proceeding  without the permission and if they had done so the  appeal  would  not  have  been  accepted.  However,  what is the position if because they were unaware of  the  existence  of  the  requirement  no  objection  is  made and the appeal  is  heard and allowed? Is the  appellant,  when  the  mistake  is  learnt  of,  to  be  deprived of the benefits of the appeal? If the answer  is Yes the result could be very unjust. This would be  especially so, if in fact the tribunal in error had told  the appellant that permission is not needed and he  would have been in time to make the application if  he had not been misinformed. Could it have been the  intention of the author of  the requirement that  the  requirement should have the effect of depriving the  appellant of the benefit of his appeal? Clearly not. In  such a  situation the  non-compliance would almost  inevitably  be  regarded  as  being  without  significance. It must be remembered that procedural  requirements are designed to further the interests of  justice and any consequence which would achieve a  result  contrary to those interests  should be treated  with considerable reservation.”

36)          In Attorney General’s Reference (No 3 of 1999), 2001(1) AER  

577, it is held :  

“My  Lords,  I acknowledge  at  once  that  reasonable  minds  may  differ  as  to  the  correct  interpretation  of  a  subsection  which  has  no  parallel  in  the  1984  Act  or  any  other  statute.  Nevertheless, there do seem to be secure footholds  which may lead to a tolerably clear answer. It is  

41

not along the route adopted by the prosecution of  asking  whether  the  relevant  provision  is  mandatory  or  directory.  In  London  and  Clydeside   Estates Ltd. Vs. Aberdeen DC [1979] 3 All ER 876 at 882- 884, [1980] 1 WLR 182 at 188-190, Lord Hailsham of  St  Marylebone  L.C. considered  this  dichotomy  and  warned  against  the  approach  'of  fitting  a  particular  case  into  one  or  other  of  mutually  exclusive and starkly contrasted compartments'. In  R  v  Immigration  Appeal  Tribunal,  ex  p  Jeycanthan  [1999J 3 All ER 231 at 237, [2000] 1 WLR 354 at  360, Lord Woolf MR, now Lord Chief Justice,  echoed this warning and held that it is 'Much more  important ... to focus on the consequences of non- compliance’.  This  is  how  I  will  approach  the  matter.”  

37)     In R v Sekhon and others, 2003(3) AER 508, it is observed :  

“25.  There  is  no  doubt  that  difficulties  for  courts  exist in applying the distinction between mandatory  requirements  on  the  one  hand,  and  directory  requirements  on  the  other.   Even  if  the  terms  `directory’  and  `mandatory’  are  not  used  the  problem remains of answering the question : what is  the  effect  of  non-compliance  with  procedural  requirements?  What  is  necessary  as  indicated  by  Lord Campbell  LC in Liverpool Borough Bank v.  Turner (1861) 30 LJ Ch 379 at 381, 45 ER 715 at  718,  is  `to  try  to  get  at  the  real  intention  of  the  legislature, by carefully attending to the whole scope  of the statute to be construed.”

38)          Reference can be made to certain passages from HALSBURY’S  

Laws of England, 4th Edition Re issue Vol. 44(1) at para 1237 and  1238 :

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1237. Substantive and procedural enactments. A  distinction is  drawn between enactments  that have  substantive  effect  and  those  that  are  merely  procedural.  Here  'substantive'  means  having  to  do  with  the  substance  of  the  law,  in  particular  the  nature  and  existence  of  legal  rights,  powers  or  duties,  whereas  procedure  is  concerned  with  formalities and technicalities, rather than substance.  A procedural change is expected to improve matters  for  everyone  concerned  (or  at  least  to  improve  matters  for  some,  without  inflicting  detriment  on  anyone else who uses ordinary care, vigilance and  promptness).

The distinction governs such questions as whether  a  statutory  requirement  is  mandatory  or  merely  directory", whether the effect of an enactment is  retrospective' and when a limitation period begins  to run.  

The question may be whether,  on the facts  of  the  instant case, the enactment is substantive or merely  procedural, bearing in mind that an enactment may  be substantive in the light of some facts but merely  procedural  on  others.  Another  use  of  the  term  'substantive' is to indicate a 'permanent' provision of  an  Act,  in  contrast  to  merely  temporary  or  transitional provisions.

1238. Mandatory and directory enactments. The  distinction  between  mandatory  and  directory  enactments concerns statutory requirements and may  have to be drawn where the consequence off ailing  to implement the requirement is not spelt out in the  legislation. The requirement may arise in one of two  ways.  A  duty  to  implement  it  may  be  imposed  directly on a person; or legislation may govern the  doing of an act or the carrying on of an activity, and  compel the person doing the act or carrying on the  activity  to implement  the requirement as part  of a  

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specified  procedure.  The  requirement  may  be  imposed merely by implication.

To remedy the deficiency of the legislature in failing  to  specify  the  intended legal  consequence of  non- compliance  with  such  a  requirement,  it  has  been  necessary for the courts to devise rules. These lay  down that it  must be decided from the wording of  the  relevant  enactment  whether  the  requirement  is  intended to be mandatory or merely directory. The  same  requirement  may  be  mandatory  as  to  some  aspects and directory as to the rest. The court will be  more willing to hold that a statutory requirement is  merely directory if any breach of the requirement is  necessarily followed by an opportunity to exercise  some judicial or official discretion in a way which  can  adequately  compensate  for  that  breach.  Provisions relating to the steps to be taken by the  parties  to legal  proceedings (using the term in the  widest  sense)  are  often  construed  as  mandatory.  Where,  however,  a  requirement,  even  if  in  mandatory  terms,  is  purely  procedural  and  is  imposed for the benefit of one party alone, that party  can  waive  the  requirement.  Provisions  requiring  a  public authority to comply with formalities in order  to render a private individual liable to a levy have  generally been held to be mandatory.

Requirements  are  construed  as  directory  if  they  relate to the performance of a public duty, and the  case is such that to hold void acts done in neglect of  them would work serious general inconvenience or  injustice to persons who have no control over those  entrusted  with  the  duty,  without  at  the  same time  promoting the main object of the legislature.  This is  illustrated  by  many  decisions  relating  to  the  performance of public functions out of time, and by  many  relating  to  the  failure  of  public  officers  to  comply  with  formal  requirements.   On  the  other  hand,  the  view  that  provisions  conferring  private  

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rights have been generally treated as mandatory is  less easy to support; the decisions on provisions of  this type appear, in fact, to show no really marked  leaning either way.

If the requirement is found to be mandatory, then in  a  case  where  a  duty  to  implement  it  is  imposed  directly on a person, non-compliance will normally  constitute the tort of breach of statutory duty, while  in a case where it is to be implemented as a part of a  specified procedure,  non-compliance will  normally  render the act done invalid.  If  the requirement is  found to  be directory  only then in  either  case  the  non-compliance will be without direct legal effect,  though there might be indirect consequences such as  an award of costs against the offender.  It has been  said  that  mandatory  provisions  must  be  fulfilled  exactly,  whereas  it  is  sufficient  if  directory  provisions are substantially fulfilled.

Where  the  requirement  is  complied  with  at  the  relevant  time, the act done is  not vitiated by later  developments which, had they occurred before that  time, would have meant that the duty should have  been performed in a different way.”

39)            Per contra, Dr. Rajeev Dhavan and Shri Shyam Divan, learned  

Senior Counsel for respondents, apart from others, submitted that there  

can be no universal rule with  regard to the violation of the Rules of  

Business and each case must be decided on facts;  where the Rules of  

Business contain prohibitive or negative words, they are indicative of the  

intent that the provision is mandatory; in matters concerning revenue or  

finance rigorous observance of the rules is essential;  when the cabinet  

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alone is competent to take a decision or where the finance department  

has conveyed its  disagreement or where there is  no prior consultation  

with the finance department, the decision of the individual minister  is  

liable  to  be  quashed;  where  the  Rules  of  Business  have  not  been  

complied with, then the decision/communication cannot be termed as a  

Government decision; and an individual functionary cannot by-pass the  

Rules of Business and the requirement for certain matters to be placed  

before the Council of Ministers.  It is further submitted that the decision  

on which reliance is placed by learned senior counsel Shri F.S. Nariman  

does  not  specifically  answer  the  issue whether  the  Rules  of  Business  

framed under Article 166(3) of the Constitution is mandatory or directory  

and in  fact  all  those  decisions  are  rendered  in  the  context  of  Article  

166(1) and (2) of the Constitution and the Courts have held that, the form  

of expression and authentication are only directory, and not mandatory.  

In  aid  of  their  submission,  the  learned  senior  counsel  relies  on  the  

observations made in the following decisions : -  

40)          In State of Kerala vs. A. Lakshmikutty, [(1986) 4 SCC 632], it is  

held :

“It must therefore follow that unless and until the  decision  taken  by  the  Council  of  Ministers  on  January 30, 1985 was translated into action by the  

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issue of a notification expressed in the name of the  Governor as  required by Article  166(1),  it  could  not be said to be an order of the State Government.  Until  then, the earlier  decision of the Council  of  Ministers  was  only  a  tentative  one  and  it  was  therefore fully competent for the High Court (sic  State  Government)  to  reconsider  the  matter  and  come to a fresh decision.” (pr. 41, pp. 659)

41)         In  CBI vs. Ravi Shankar Srivastava,  [(2006) 7  SCC 188], it is  

observed :   

“13…..has  been  rightly  submitted  by  learned  counsel for the appellant,  there is no notification  revoking  the  earlier  notification.  The  letter  on  which great emphasis has been laid by Respondent  1 and highlighted by the High Court, the authority  to  write  the  letter  has not  been indicated.  It  has  also  not  been  established  that  the  person  was  authorised  to  take  a  decision.  In  any  event,  the  same  does  not  meet  the  requirements  of  Article  166  of  the  Constitution.  The  letter  is  not  even  conceptually a notification. The High Court was,  therefore, not justified in holding that there was a  notification rescinding the earlier notification.” (pr.  13, pp. 200)

42)         In Punjab State Industrial Development Corpn. Ltd. vs. PNFC  

Karamchari Sangh, [(2006) 4 SCC 367], it is held :

“11. Reliance was placed on the so-called order of  the Chief Minister permitting PSIDC to raise funds  in  order  to  meet  the  liability  of  PNFC  towards  salary of its workers for at least six months. We  have  carefully  perused  the  note  of  the  Chief  Minister dated 25-8-2001. The said note cannot be  said to be an order of the State Government and  therefore is not binding on PSIDC. The orders of  the  State  Government  are  issued  in  a  prescribed  

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manner  and the  note  dated  25-8-2001 cannot  be  treated as one.” (pr.11, pp. 371)

43)        In State of Bihar vs. Kripalu Shankar, [(1987) 3 SCC 34], it is stated  

:

“15. Article  166(1)  requires  that  all  executive  action of the State Government shall be expressed  to  be  taken  in  the  name  of  the  Governor.  This  clause relates to cases where the executive action  has to be expressed in the shape of a formal order  or notification. It prescribes the mode in which an  executive action has to be expressed. Noting by an  official in the departmental file will not, therefore,  come  within  this  article  nor  even  noting  by  a  Minister. Every executive decision need not be as  laid down under Article 166(1) but when it takes  the form of an order it has to comply with Article  166(1). Article 166(2) states that orders and other  instruments  made  and  executed  under  Article  166(1),  shall  be  authenticated  in  the  manner  prescribed. While clause (1) relates to the mode of  expression,  clause  (2)  lays  down  the  manner  in  which the order is to be authenticated and clause  (3)  relates  to  the  making  of  the  rules  by  the  Governor for  the more  convenient  transaction of  the business  of  the Government.  A study of  this  article, therefore, makes it clear that the notings in  a file get culminated into an order affecting right  of  parties  only  when  it  reaches  the  head  of  the  department  and is  expressed  in  the  name  of  the  Governor, authenticated in the manner provided in  Article 166(2).” (pr. 15, pp. 43)

44)          In Haridwar Singh vs. Bagun Sumbrui, [(1973) 3 SCC 889], Rule  

10 had been formulated under Article 166(3), it is observed :

“16. In this case, we think that a power has been  given  to  the  Minister  in  charge  of  the  Forest  Department  to  do  an  act  which  concerns  the  

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revenue  of  the  State  and  also  the  rights  of  individuals.  The negative or prohibitive language  of rule 10(1) is a strong indication of the intent to  make  the  Rule  mandatory.  Further,  rule  10(2)  makes it  clear that where prior consultation with  the Finance Department is required for a proposal,  and the department on consultation, does not agree  to  the  proposal,  the  department  originating  the  proposal  can  take  no  further  action  on  the  proposal. The cabinet alone would be competent to  take  a  decision.  When  we  see  that  the  disagreement  of  the  Finance  Department  with  a  proposal on consultation, deprives the department  originating  the  proposal  of  the  power  to  take  further action on it, the only conclusion possible is  that prior consultation is an essential pre-requisite  to the exercise of the power.” (pr. 16, pp. 896)

45)         In Dattatraya Moreshwar vs. State of Bombay, [1952 SCR 612] at  

pp. 624-65, per Das, J. :

“The fact that the old provisions have been split up  into two clauses in Article 166 does not appear to  me to make any difference in the meaning of the  article. Strict compliance with the requirements of  Article 166 gives an immunity to the order in that  it cannot be challenged on the ground that it is not  an order made by the Governor. If, therefore, the  requirements of that article are not complied with,  the resulting immunity cannot be claimed by the  State.  This,  however,  does  not  vitiate  the  order  itself.  The  position,  therefore,  is  that  while  the  Preventive  Detention  Act  requires  an  executive  decision, call it an order or an executive action, for  the  confirmation  of  an  order  of  detention  under  Section 11(1) that Act does not itself prescribe any  particular  form  of  expression  of  that  executive  decision. Article 166 directs all executive action to  be  expressed  and  authenticated  in  the  manner  therein laid down but an omission to comply with  

49

those  provisions  does  not  render  the  executive  action a nullity. Therefore,  all  that the procedure  established by law requires is that the appropriate  Government must take a decision as to whether the  detention order should be confirmed or not under  Section  11(1).  That  such  a  decision  has  been  in  fact taken by the appropriate Government is amply  proved on the record.”  

Evidence can be led to show that  these actions are  attributable  to the  

government. But Article 166(3) is not verificatory and has to be followed.  

Even in this case at pp. 632-633, as per Mukherjea, J., it is held :

“I  agree  with  the  learned  Attorney  General  that  non-compliance with the provisions of either of the  clauses would lead to this result that the order in  question would lose the protection which it would  otherwise  enjoy,  had  the  proper  mode  for  expression and authentication been adopted.”

46)     In Bachhittar Singh vs. State of Punjab, [1962 Supp (3) SCR 713] :

“Rules of  business under Article  166(3) required  Revenue  Minister  to  make  the  order  against  the  petitioner,  but  the  same  was  done  by  the  Chief  Minister.  The said order of the CM was rescued  by another rule of business which allowed him to  call any fine before him.  No mention of Article  166(3) being directory or mandatory.”  

47)       In State of Sikkim vs. Dorjee Tshering Bhutia,  [(1991) 4 SCC 243],  

it is observed :

“14…..The  government  business  is  conducted  under  Article  166(3)  of  the  Constitution  in  accordance with the Rules of Business made by the  

50

Governor.  Under  the  said  Rules  the  government  business  is  divided  amongst  the  ministers  and  specific  functions  are  allocated  to  different  ministries.  Each  ministry  can,  therefore,  issue  orders or notifications in respect of the functions  which have been allocated to it under the Rules of  Business.”

48)         In Gulabrao Keshavrao Patil vs. State of Gujarat, [(1996) 2 SCC  

26], it is held :

“14….It  would,  therefore,  be  clear  that  the  decision of a Minister under the Business Rules is  not  final  or  conclusive  until  the  requirements  in  terms  of  clauses  (1)  and  (2)  of  Article  166  are  complied with. Before the action or the decision is  expressed  in  the  name  of  the  Governor  in  the  manner  prescribed under the Business Rules and  communicated  to  the  party  concerned  it  would  always  be  open by necessary  implication,  to  the  Chief  Minister  to  send  for  the  file  and  have  it  examined  by  himself  and  to  take  a  decision,  though  the  subject  was  allotted  to  a  particular  Minister for convenient transaction of the business  of  the  Government.  The  subject,  though  exclusively allotted to the Minister,  by reason of  the  responsibility  of  the  Chief  Minister  to  the  Governor  and  accountability  to  the  people,  has  implied  power  to  call  for  the  file  relating  to  a  decision  taken  by  a  Minister.  The  object  of  allotment  of  the  subject  to  a  Minister  is  for  the  convenient  transaction of  the  business  at  various  levels through designated officers.” (pr. 14, pp.35)

49)       Dr. Rajeev Dhavan, learned senior counsel fairly submits, that, even  

if Article 166(3) were to be held directory, substantial compliance of the  

51

same would be required.  In support of this contention, the learned senior  

counsel relies on the following decisions of this Court :

• Bannari Amman Sugars Ltd. vs. Commercial Tax Office (2005)  1 SCC 625.

• R. Chitralekha vs. State of Mysore (1964) 6 SCR 368

• State of U.P. vs. Om Prakash Gupta (1969) 3 SCC 775

• Dattatraya Moreshwar vs. State of Bombay 1952 SCR 612

50)         The summary  of  the arguments canvassed by learned senior  

counsel Shri F.S. Nariman is that, the Rules of Business framed under  

Article 166(3) of the Constitution is only directory and by no stretch of  

imagination,  it  can  be  said  to  be  mandatory  and,  therefore,  non  

compliance of the Rules of Business cannot be declared as illegal or void  

ab-initio. In justification of the judgment of the Bombay High Court, it is  

the  stand  of  Dr.  Rajeev  Dhawan,  learned  senior  counsel  that  at-least  

some of the provisions of Rules of Business framed by Govt. of Goa are  

mandatory   and  non-observation  of  the  same  would  vitiate  the  

circulars/orders/notifications etc.

51)          In order to appreciate the rival contentions canvassed by learned  

senior counsels,  it  would be appropriate,  to extract  Article 166 of the  

Constitution of India and the same is as under:   

52

“Article  166  Conduct  of  business  of  the  Government of a State - (1)  All executive action  of the Government of a State shall be expressed to  be taken in the name of the Governor.   

(2)  Orders  and  other  instruments  made  and  executed  in  the  name  of  the  Governor  shall  be  authenticated in such manner as may be specified  in  rules  to  be  made  by  the  Governor,  and  the  validity  of  an  order  or  instrument  which  is  so  authenticated shall not be called in question on the  ground that it is not an order or instrument made  on executed by the Governor.  

(3) The Governor shall make rules for the more  convenient  transaction  of  the  business  of  the  Government  of  the  State,  and  for  the  allocation  among Ministers of the said business insofar as it  is not business with respect to which the Governor  is  by  or  under  this  Constitution  to  act  in  his  discretion.”

52)         Clause (1) of Article 166 of the Constitution says, that, whenever  

executive action is to be taken by way of an order or instrument, it shall  

be  expressed  to  be  taken in  the  name of  the  Governor  in  whom the  

executive power of the State is vested.  Under Clause (2), the orders and  

instruments made and executed in the name of the Governor shall  be  

authenticated in the manner specified in the rules. Under Clause (3) of  

Article 166 of the Constitution, the Governor is authorized to make rules  

for the more convenient transaction of business of the Government of the  

State  and  for  the  allocation  among  its  Ministers  of  the  business  of  

53

Government.   All  matters  excepting  those  in  which  the  Governor  is  

required to act in his discretion have to be allocated to one or the other of  

the Ministers on the advice of the Chief Minister.  Apart from allocating  

business amongst Ministers,  the Governor can also make rules on the  

advice of the Council of Ministers  for more convenient transaction of  

business.

53)           In the case on hand, we are required to examine the contentions of  

the appellants on this issue with reference to the Business Rules framed  

by Governor of Goa under Article 166 (3) of the Constitution of India.  

Rule 7 (2) of the Business Rules of the Government of Goa states, that,  

a proposal which requires previous concurrence of Finance Department  

under the said Rule, but in which Finance Department has not concurred,  

may not be proceeded with, unless the Council of Ministers has taken a  

decision to that effect. The wordings of this Rule are different from the  

provisions of Rule 9 of the Business Rules of Maharashtra and have to  

be read in context with the provisions of Rule 3 of the Business Rules of  

Government of Goa which states that the business of the Government  

shall be transacted in accordance with the Business Rules. Under Rule 7  

(2) thereof, the concurrence of the Finance Department is a condition  

precedent.  Likewise  Rule  6  of  the  Business  Rules  states,  that,  the  

54

Council  of Minister  shall  be collectively responsible for all  executive  

orders  passed  by  any  Department  in  the  name  of  the  Governor  or  

contract made in exercise of the power conferred on the Governor or any  

other officer subordinate to him in accordance with the Rules, whether  

such orders or contracts are authorized by an individual minister on a  

matter pertaining to the Department under his charge or as the result of  

discussion at a meeting of the Council  of Minister or otherwise. This  

Rule requires that  an executive order issued from any department in  

the name of the Governor of the State should be known to the Council  

of Ministers so as to fulfill the collective responsibility of the Council  

of Ministers. Further Rule 7 of the Business Rules requires that no  

Department shall without the concurrence of the Finance Department  

issue any order which may involve any abandonment of revenue or  

involve expenditure for which no provisions have been made in the  

Appropriation  Act  or  involve  any  grant  of  land  or  assignment  of  

revenue or concession, grant, lease or licence in respect of minerals or  

forest rights or rights to water, power or any easement or privilege or  

otherwise  have  a  financial  implications  whether  involving  

expenditure or  not.  From a combined reading of  the provisions of  

Rules 7, 3 and  6 of the Business Rules of the Government of Goa the  

55

conclusion would be irresistible that any proposal which is likely to  

be  converted  into  a  decision  of  the  State  Government  involving  

expenditure  or  abandonment  of  revenue  for  which  there  is  no  

provision made in the Appropriation Act or an issue which involves  

concession or otherwise has a financial implication on the State is  

required to be processed only after the concurrence of the Finance  

Department and cannot be finalized merely at the level of the Minister  

in charge. The procedure or process does not stop at this. After the  

concurrence of the Finance Department the proposal has to be placed  

before the Council of Ministers and/or the Chief Minister and only  

after a decision is taken in this regard that it will result in the Decision  

of  the  State  Government.  Therefore  the  High  Court  has  rightly  

rejected the arguments of the appellants herein based on the judgment  

of the Full Bench of the High Court. The High Court has observed,  

that  the  Rules  of  Business  are  framed  in  such  a  manner  that  the  

mandate  of  the  provisions  of  Articles  154,  163  and  166  of  the  

Constitution  are  fulfilled.  Therefore,  if  it  is  held  that  the  non-

compliance of these Rules does not vitiate the decisions taken by an  

individual Minister concerned alone the result would be disastrous. In  

a democratic set up the decision of the State Government must reflect  

56

the collective wisdom of the Council of Ministers or at least that of  

the Chief Minister who heads the Council. The fact that the decisions  

taken  by  the  Minister  alone  were  acted  upon  by  issuance  of  

Notification will not render them decisions of the State Government  

even if the State Government chose to remain silent for a sufficient  

period of time or the Secretary concerned to the State Government did  

not take any action under Rule 46 of the Business Rules. If  every  

decision of an individual Minister taken in breach of Rules are treated  

to be those of the State Government within the meaning of Article  

154  of  the  Constitution,  the  result  would  be  chaotic.  The  Chief  

Minister would remain a mere figure head and every Minister will be  

free to act on his own by keeping the Business Rules at bay. Further it  

would  make  it  impossible  to  discharge  the   Constitutional  

responsibility of the Chief Minister of advising the Governor under  

Article 163. Therefore, it is difficult to accept the contentions of the  

appellants that Business Rules are directory.

54)         We also subscribe to and uphold the view of the High Court that  

the Business Rules 3,6,7 and 9 are Mandatory and not Directory and  

any decision taken by any individual Minister in violation of them  

cannot be termed as the decision of the State Government.

57

55)         We are fortified in our view by several decisions of this Court.  

In K.K. Bhalla vs. State of M.P., [2006 (3) SCC 581], the facts were  

that  the State of M.P. had allotted certain  land under the Jabalpur  

Development Authority (JDA) to a person at concessional rates to set  

up a newspaper printing press,  though the land was earmarked for  

commercial use.  The Court held :

“The purported policy decision adopted by the  State  as  regards  allotment  of  land  to  the  newspaper industries or other societies was not a  decision taken by the appropriate Ministry.  If a  direction was to be issued by the State to  the  JDA,  it  was  necessary  to  be  done  on  proper  application  of  mind  by  the  cabinet,  the  concerned Minister or by an authority who is   empowered in that behalf in terms of the Rules  of the Executive Business framed under Article  166  of  the  Constitution  of  India.   Such  a   direction  could  not  have  been  issued  at  the  instance of the Chief Minister or at the instance  of any other officer alone unless it is shown that  they had such authority in terms of the Rules of  the Executive Business of  the State.  We have  not been shown that the Chief Minister was the  appropriate authority to  take a decision in this  behalf.”

                                                                                 (emphasis supplied)

56)       In State of U.P. vs. Neeraj Avasthi, [2006 (1) SCC 667], this  

Court held that the power of the State Government was confined to  

58

issuing directions to State Agricultural Produce Market Board on the  

question of policy and observed :

“Such  a  decision  on  the  part  of  the  State  Government  must  be  taken  in  terms  of  the  Constitutional scheme, i.e., upon compliance of  the requirement of Article 162 read with Article  166 of the Constitution of India.  In the instant  case, the directions were purported to have been  issued by an officer of the State.  Such directions  were not shown to have been issued pursuant to  any decision taken by a competent authority in  terms of the Rules of Executive Business of the  State  framed  under  Article  166  of  the  Constitution of India. ….  We are therefore of  the opinion that the direction by the State was  not strictly in accordance with law.”

57)        In Gulabrao Keshavrao Patil  (supra), this Court held that a  

decision of a Minister was not an order of the Government in view of  

non-compliance with Article 166.  

58)         The decision of the Constitution Bench in Chitralekha has been  

misinterpreted.  In that case this Court was considering a controversy  

in regard to an order which was not expressed in the name of the  

Governor in  terms of Article  166(1) and (2).   In that  context,  this  

Court observed that it is a settled law that the provisions of Article  

166  of  the  Constitution  are  only  directory  and  not  mandatory  in  

character.   The context clearly  shows that  the  observation that  the  

59

provisions of Article 166 of the Constitution are only directory and  

not mandatory, referred only to clauses (1) and (2) of Article 166 and  

did not refer to clause (3) which was not under consideration at all.  

Chitralekha,  therefore,  cannot  be  relied  upon  to  support  the  

contention that Business Rules made under clause (3) of Article 166  

are directory.  We have earlier referred to all the decisions on which  

reliance was placed by learned senior counsel Shri F.S. Nariman. In  

our view, those decisions would not assist the appellant, since they  

were all rendered in the context of interpretation of Article 166(1) and  

(2) of the Constitution.  

59)      It is appropriate to further consider some of the Business Rules to  

deal  with the  issue brought  before us.  Though the High Court  in the  

judgment impugned has referred to various Rules, we deem it necessary  

to refer to only those which are relevant for our purpose. Rule 10 of the  

Business  Rule  requires  submission  of  all  cases  referred  to  in  the  

Schedule  to the  Chief  Minister  after  consideration by the Minister  in  

charge so as to obtain the Chief Ministers’ orders for circulation of the  

case or to bring it up for consideration at a meeting of the Council of  

Ministers.  Rule 13 provides that when it  is  decided to bring the case  

before the Council, the department concerned should, unless otherwise  

60

directed  by  the  Chief  Minister,  prepare  a  memorandum  indicating  

precisely the salient facts of the case and points for decision and copies  

thereof circulated to the Council by the Secretary. Rule 14 requires in a  

case which involves or concerns more than one Department, the Minister  

by previous discussion to arrive at an agreement and if such agreement is  

reached the memorandum referred to in Rule 13 supra should contain the  

joint recommendations of the Ministers and if no agreement is reached  

the points of differences and views of each of the Minister should be  

stated in the memorandum. Items No.5,9  &  30 in the Schedule to the  

Rules relate to proposal which have a bearing on the Finances of the  

State and which do not have the concurrence or consent of the Finance  

Minister’s  proposal  involving  important  change  in  the  policy  and  

practice; proposals to vary or reverse a decision previously taken by the  

Council. Under Rule 16 the decisions of the Council in each case should  

be recorded and placed with the records of the case after their approval  

by the Chief  Minister.  Extracts  of  the  decision should be sent  to the  

Secretary  of  the  Department  who  should  take  necessary  action  

thereon. Rule 17 enables a Minister in Charge of a Department on the  

basis of standing orders to give such directions as he thinks fit for  

disposal of cases in his department and further requires the Secretary  

61

of the Department concerned to simultaneously submit to the Chief  

Minister and the Governor the statement showing the particulars of  

any important cases disposed of by the Minister. Rule 20 stipulates,  

that,  when  the  subject  involves  or  relates  to  more  than  one  

Department, no order should be issued or the case be laid before the  

council  until  the  case has been considered by all  the  departments  

involved or concerned, unless the case is one of extreme urgency. In  

the case on hand, the decisions impugned involve and concern not  

only the department of power but also the departments of Industries  

and Finance and in view of the provisions of Rule 20, the decisions  

to finalize the Notifications at his level without placing the proposal  

before the Chief Minister or the Council of Minister fell out side the  

purview of the Power Minister.

60)          The State Government in exercise of its power conferred on it  

under Section 23 read with Section 51-A of the Electricity Act issued  

a  Notification dated 29.06.1993,  published in  the  Official  Gazette  

dated 30.06.1993, framing the revised electricity tariff for the State as  

specified in the Schedule appended to the Notification. By another  

Notification dated 6.12.1993, the State Government for the first time  

created a new and separate category viz. Extra High Tension Supply  

62

Consumers  and was included as  item No.  10 in  the  revised tariff  

framed  under  Notification  dated  29.06.1993.  Pursuant  to  the  

Notification dated 6.12.1993, the power department took a stand that  

as  the  Notification  dated  30.09.1991  had  covered  only  the  Low  

Tension and High Tension Consumers of electricity and not the Extra  

High Tension Consumers and the claims of the Extra High tension  

consumers were rejected by specific orders passed in October 1995  

i.e. after the Notification dated 31.03.1995, rescinding Notification  

dated 30.09.1991 was issued and the orders rejecting their claims had  

become final  having  not  been challenged  by  the  units.  The  State  

Government therefore  felt  a  need to  issue  certain  clarifications  to  

process the claims of the units for grant of rebate of 25% for the  

period  between  1.10.1991  to  31.03.1995.  While  issuing  such  

clarification involving additional financial burden on the exchequer,  

the Government was required to process them in keeping with the  

requirements  of  the  Business  Rules.  When  the  Rescinding  

Notification  dated  31.03.1995  was  issued  the  rebate  of  25%  was  

available only to Low Tension and High Tension consumers and the  

Extra  High  Tension  Consumers  got  deleted  pursuant  to  the  

Notification dated 6.12.1993. A decision, therefore, to include a new  

63

category of consumers for grant of rebate which necessarily involved  

extra financial burden on the State's finances more so by creation of a  

new category retrospectively was required to be finalized only after it  

was placed before the Council of Ministers or the Chief Minister in  

addition to  obtaining the previous concurrence of  the  Finance and  

Industries Departments. The Notification dated 15.5.1996 which was  

argued by the appellants herein to be only clarificatory had imposed  

an additional burden on the State's Exchequer by introducing a new  

class  of  consumers  for  grant  of  rebate  retrospectively  and  it  was  

finalized by the Power Minister at his level. In law the proposal for  

the decision leading to the Notification dated  15.5.1996  should have  

been placed before the Council of Ministers or the Chief Minister and  

since the same has not been done it is in violation of the Business  

Rules  and  hence  the  decision  is  non  est.  Even  for  the  sake  of  

arguments if it is assumed that the Notification dated  15.5.1996  was  

c1arificatory  in  nature  the  same  violates  Rule  19  of  the  Business  

Rules and there is nothing on record, as observed by the High Court  

to show that the department concerned attempted to seek ratification  

of the decision taken by the Power Minister before the Notification  

dated 15.5.1996 was issued.   

64

61)        At  this  stage,  we find it  necessary to refer  to  some of  the  

Constitutional  provisions  to  deal  with  the  issue  raised  by  the  

appellants.  Under  Article  154  of  the  Constitution  of  India,  the  

Governor is vested with the Executive Power of the State and he shall  

exercise them either directly or through Officers subordinate to him in  

accordance with the provisions of the Constitution. The Governor is  

advised by the Council  of Ministers with the Chief Minister at  its  

head in exercise of his functions except those specifically stated in  

discharge of his functions as the head of the State. The Council of  

Minister is collectively responsible to the Legislative Assembly of the  

State.  The  Rules  of  business  framed  under  Article  166(3)  of  the  

Constitution  are  for  convenient  transaction  of  the  business  of  the  

Government and for allocation of the business among the Ministers.  

Article 166(2) of the Constitution requires the decision of the State  

Government to be authenticated as per the Rules framed thereunder.  

Any decision taken by the State Government therefore, reflects the  

collective  responsibility  of  the  Council  of  Ministers  and  their  

participation in such decision making process. The Chief Minister as  

the Head of the Council of Ministers is answerable not only to the  

Legislature but also to the Governor of the State. The Governor of the  

65

State as  the Head of the State acts  with the aid and advice of the  

Council of Ministers headed by the Chief Minister. The Rules framed  

under  Article  166  (3)  of  the  Constitution  are  in  aid  to  fulfill  the  

Constitutional  Mandate embodied in Chapter II  of  Part  VI of  the  

Constitution. Therefore, the decision of the State Government must  

meet the requirement of these Rules also.  

62)          Before the High Court as also before us it was contended by the  

appellants herein, that, the Rules framed under Article 166(3) are only  

directory in character and failure to comply with them does not vitiate  

the decision taken by the State Government. The High Court after  

considering the various judgments cited before it has repelled the said  

contention  to  hold  that  the  said  Rules  are  mandatory  and  non-

compliance thereof would be disastrous. The reasoning adopted by  

the  High  Court  to  arrive  at  such  a  conclusion  is  sound  and  in  

accordance with the constitutional mandate. The decisions of the State  

Government have to be in conformity with the mandate of Article 154  

an 166 of the Constitution as  also the Rules framed thereunder as  

otherwise such decision would not have the form of a Government  

decision  and  will  be  a  nullity.  The  Rules  of  Business  framed  under  

Article 166(3) of the Constitution are for convenient transaction of the  

66

business of the Government and the said business has to be transacted in  

a just and fit manner in keeping with the said Business Rules and as per  

the  requirement  of  Article  154  of  the  Constitution.  Therefore,  if  the  

Council of Ministers or Chief Minister has not been a party to a decision  

taken by an Individual Minister, that decision cannot be the decision of  

the State Government and it would be non-est and void ab initio. This  

conclusion draws support from the Judgment of this Court in the case of  

Haridwar Singh Vs. Bagun Sambrui & ors (1973) 3 SCC 889. This Court  

in the said case was dealing with the Business Rules of the State  Of  

Bihar framed under Article 166 (3) of the Constitution of India and the  

observations of this Court on the issue apply to the case on hand in all  

force. This Court observed:

" 14. Where a prescription relates to performance  of a public duty and invalidate acts done in neglect  of them would work serious general inconvenience  or injustice to persons who have no control over  those entrusted with the duty, such prescription is  generally  understood  as  mere  instruction  for  the  guidance of those upon whom the duty is imposed.

15.  Where  however,  a  power  of  authority  is  conferred with a direction that certain regulation or  formality shall be complied with, it seems neither  unjust nor incorrect to exact a rigorous observance  of it as essential to the acquisition of the right or  authority.

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16. Further, Rule 10(2) makes it clear that where  prior  consultation with the Finance Department is  required  for  a  proposal,  and  the  department  on  consultation  does  not  agree  to  the  proposal,  the  department  originating  the  proposal  can  take  no  further action on the proposal. The Cabinet alone  would be competent to take a decision. When we  see  that  the  disagreement  of  the  Finance  Department  with  a  proposal  on  consultation,  deprives  the Department  originating the proposal  of the power to take further action on it, the only  conclusion possible is that prior consultation is an  essential prerequisite to the exercise of power".

63)         As observed by us earlier, these observations apply equally to the  

case on hand and in light of this view, we have no difficulty in holding  

that the Business Rules framed under the Provisions of Article 166 (3) of  

the  Constitution  are  mandatory  and  must  be  strictly  adhered.  Any  

decision by the Government in breach of these Rules will be a nullity in  

the eyes of law.

64)           It is in this legal background that the issues raised before us have  

to be dealt with. The High Court has examined the files placed before it  

by  the  State  Government  and  noted  the  facts  reflected  by  the  said  

records.  As recorded by the High Court,  the rebate of 25% in power  

tariff was sought to be withdrawn by the State Government with effect  

from 1.4.1995 pursuant to a Cabinet meeting held on 21.07.1994 and a  

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Notification dated 31.03.1995 was issued therefor. The 1st respondent's  

motion in the State Assembly for a Calling Attention Notice evidently  

moved the State Government to evolve a Scheme for grant of rebate of  

25%  for  the  period  between  1.10.1991  to  31.03.1995.  The  Power  

Minister  therefore,  on  08.07.1995  called  upon  the  Chief  Electrical  

Engineer to formulate such a scheme who prepared accordingly a note  

regarding  the  proposed  scheme.  Since  the  earlier  Notification  was  

rescinded  by  the  Notification  dated  31.03.1995,  a  clarification  was  

sought from the Law Department on the extension of the period of rebate  

of  25%.  On  25.08.1995,  a  note  was  put  up  by  the  Law Department  

indicating that the 25% rebate would be available only for the period  

between  01.10.1991  to  31.03.1995  and  industrial  units  supplied  with  

power on/or after  31.03.1995  would not be entitled for the same. On  

14.02.1996, the Chief Electrical Engineer submitted a note containing a  

proposal  to  amend the  rebate  notification requesting  to  extend the  

benefit  of the rebate of  25%  to Extra High Tension consumers and  

sought  approval  thereof.  The said  draft  when referred  to  the  Law  

Department for its opinion, it was opined thereon that it was legally  

impermissible  to  give  retrospective  effect  to  the  proposed  

Notification. However, though the said amendment was approved by  

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the then power minister, the same was not given effect to in view of  

the  elections  scheduled  on  02.05.1996.  On  03.05.1996,  the  Power  

Minister passed an order to issue the amendment Notification as by  

then the elections were over and the notification dated 15.05.1996 was  

accordingly issued, though the subject matter was never placed before  

the Council of Ministers or the Chief Minister. The Notification was  

issued  solely  on  the  directions  of  the  Power  Minister  despite  the  

opinion of the Law Secretary that retrospective effect to the proposed  

amendment  could  not  be  given  as  it  involved  additional  class  of  

consumers of power, which is in  violation of the Business Rules of  

Government of Goa. Therefore the said Notification is unsustainable  

and the High Court has rightly held it be non-est and as void ab initio.  

65)          The Power Department once again took up the subject of re-

introduction of  25%  of rebate in power tariff  at  the instance of the  

Industries Department and in view of the continued demands from the  

Industrial Units for such a rebate. This was considered by the Power  

department and proposal therefor was called from the Chief Electrical  

Engineer. A query was also raised regarding the role of the Industries  

and Electricity Departments in issuing the eligibility certificates. A note  

dated 25.07.1996 submitted by the Chief Electrical Engineer indicated  

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that such certificates shall be issued by the Electricity Department as it  

was  that  Department  which  was  giving  the  subsidy.  Thereafter  the  

Commissioner  and  Secretary  (Power)  submitted  a  detailed  note  on  

30.07.1996 to the Minister of Power and the latter conveyed his approval  

with the substitution of words “all industrial units who apply for availing  

power on or after 1.10.1991” with the words "all industrial units who  

apply or avail on or after 10.01.1991" and the rebate was to be given on  

the energy charges on the prevailing tariff from time to time as against  

the earlier Notification where the rebate of 25% was to be given on tariff  

as per Notification dated 27.06.1988. As per the decision/approval of the  

Power  Minister, the  Notification  dated  1.08.1996  came to  be  issued  

without there being any consultation with the Council  of Ministers or  

without  the  proposal  being  placed  before  it  or  the  Chief  Minister  or  

without the consultation with the Finance Department, though the draft  

of  the  notification  was  referred  to  the  Law  Department  before  its  

issuance.

66)           It is also to be noted that by the Notification dated 01.08.1996 the  

State Government intended to re-introduce the benefit of 25% rebate in  

power tariff. If the State Government as a policy decision desired to re-

introduce  the  said  rebate,  it  was  imperative  that  the  said  decision  

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complied with the requirement of a Government decision and that it did  

not  remain  a  Departmental  Order  or  Instruction.  The High Court  has  

recorded after verifying the notes on record that the re-introduction of  

rebate was initiated at the instance of Industries Department and that the  

proposal for re-introduction attracted the provisions of Rules 9 & 10 of  

the Business Rules and it did not seek the concurrence of the Finance  

Department. From the file produced before it the High Court has found  

that the decision was finalized by the Power Minister at his level without  

any reference  to  the  Council  of  Ministers  or  the  Chief  Minister.  The  

High Court has also referred to the Statement in writing given by the  

Chief  Minister  to  the  Investigating  Officer  during  the  course  of  

investigation  launched  pursuant  to  the  complaint  given  by  the  1st  

respondent, that the Power Minister at no point of time had placed the  

proposal regarding decisions dated 15.5.1996 and 1.8.1996. This apart,  

from the  records  the  High Court  finds  that  the  agency  to  certify  the  

eligibility  of  industrial  units  for  concessional  tariff  was  yet  to  be  

identified  and  the  issue  whether  the  rebate  for  the  period  between  

01.10.1991  to  31.03.1995  was  to  be  made  available  as  per  the  

Notification dated 27.6.1988 or  with reference to the tariff  prevailing  

from time to time. The Note dated 8.7.1996 is referred to by the High  

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Court. The High Court also refers to the reply of the Electrical Engineer  

dated  10.7.1996  wherein  it  was  clarified  that  only  the  prospective  

industrial consumers who has applied and availed power supply on or  

after  1.10.1991  were  eligible  for  concession.  From  the  note  of  the  

Commissioner and Secretary, Department of Power dated 30.7.1996 the  

High Court  records that  the certification/  verification of the industrial  

units could be done by the Electricity Department as the concession was  

to be extended by the said department to the consumers. The said note  

refers to the meetings held in the chamber of Minister of Power. The  

Note  also  mentions  about  a  constitution  of  a  Screening  Committee  

consisting of the Secretary of Ministry of Power,  the Chief Electrical  

Engineer, Director of Industries and Joint Secretary, Finance, to ensure  

that  only  genuine  and  bona  fide  claims  are  entertained  and  paid  the  

rebate and also examine and verify all doubtful claims. The Note also  

refers to a decision taken in one of such meetings to the effect that rebate  

should be given to units on energy charges only as per the prevailing  

tariff in force from time to time on which they are billed for a period of  

five  years  on  the  recommendations  made  by  the  Chief  Electrical  

Engineer. The recommendations and/or  the decisions did have bearing  

on the finances of the State Government and also amounted to change in  

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policy decisions. Even then neither did the Minister of Power think it  is  

proper  and  appropriate  to  place  the  proposals  before  the  Council  of  

Ministers or the Chief Minister, nor did the Secretary concerned deemed  

it  appropriate  to  do  so.  The  proposals  were  finalized  by  the  Power  

Minister  at  his  level  as  per  the  modifications  suggested  by  him  on  

30.7.1996 which in our opinion are in violation of the Business Rules.

67)          The High Court has perused the files relating to the issue and from  

them it  has  noticed  that  the  file  was  forwarded  to  the  Development  

Commissioner  on  or  about  17.03.1998  as  they  were  required  for  

preparation of reply to a question in the Assembly and the Commissioner  

on 25.03.1998 submitted a note referring to the complaint filed by 1st  

respondent  herein  alleging  illegalities  and corruption  in  the  matter  of  

grant  of  rebate.  The  complaint  of  the  1st respondent  was  about  the  

amendment  of  the  Notification  dated  31.09.1991  which  had  been  

rescinded by the Notification dated 31.3.1995 and he had alleged that  

the amendment was made with a mala fide intention of including a  

specific category of consumer and the amending notification had led  

to  manipulation  of  records  to  the  extent  that  some  people  had  

attempted to become beneficiaries of the Scheme within the notified  

period of 01.10.1991 and 31.03.1995. The note of the Commissioner  

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raised certain issues relating to grant of rebate to industrial units after  

31.03.1995. As per the objections raised in the note the cases of units  

which had applied for power but could not be supplied with power by  

31.03.1995 were to be referred to the State Government. However, it  

was later decided to leave it to the Chief Electrical Engineer to allow  

release  of  said  subsidy  to  all  such  units.  The  Note  of  the  

Commissioner had also raised an issue touching upon the number of  

industrial units entitled to subsidy and the liability per month on that  

count and fixed the same at Rs 80 lakhs per month and opined that the  

total amount of the subsidy by way of adjustment of bills would be in  

excess  of  Rs.  50  Crores.  Having  regard  to  these  aspects  the  note  

suggested suspension of the rebate scheme immediately until the legal  

issues were sorted out. On 03.04.1998, the Joint Law Secretary gave  

his  clarification  after  examining  the  matter  in  the  light  of  the  

provisions of the Electricity Act and opined that a Cabinet Decision  

was necessary for suspension of the rebate scheme and that before the  

notification dated 01.08.1996 was issued it required a decision of the  

cabinet  and  the  concurrence  of  the  Finance  Department  as  it  fell  

within  the  meaning  of  a  policy  decision  involving  financial  

implications. The note in conclusion said that the Notification dated  

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01.08.1996  was  not  in  accordance  with  law and this  conclusion  was  

agreed to by the Law Secretary. The Development Commissioner further  

felt that the in view of this lacuna in the Notification dated 1.08.1996,  

the matter required a review by the Cabinet and that it should be taken to  

the  Cabinet  for  its  ratification  or  otherwise.  The  note  of  the  

Commissioner  was  placed  before  the  Power  Minister  as  the  Chief  

Secretary was away on tour and the Power Minister directed the matter  

to be placed before the Cabinet and also directed the files of the Finance  

& Industries Department on the subject to be placed before the Chief  

Minister for his perusal. The file was placed before the Chief Minister on  

27.05.1998 for his perusal who thereafter called for the opinion of the  

Finance  Department  and  on  the  same  day  the  Finance  Secretary  

submitted the opinion of the Finance Department and the next day the  

matter was placed before the Cabinet. Ultimately the State Government  

took  a  decision  to  withdraw  the  benefit  of  rebate  and  issued  the  

Notification dated 24.07.1998. This apart the material placed by the 1st  

respondent herein also indicated that there was an attempt to ratify the  

notification date 1.08.1996 and the same could have been done but for  

the legal hurdle and the State Government realized the legal hurdles in  

continuing with the rebate scheme on the basis of the Notification dated  

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01.08.1996. We fail to understand as to why the State Government did  

not bring these facts before this Court or the High Court in the earlier  

round of litigation where its power to withdraw the subsidy in exercise  

of its power under Section 21 of the General Clauses Act was upheld.  

Instead it chose to plead financial crunch faced by the State Government  

as the reason for withdrawal of rebate.  It  is further to be noted with  

regard  to  the  Notification  dated  01.08.1996,  that  it  re-introduced  the  

benefit of rebate on tariff and made it available to units on the prevailing  

tariff  in force from time to time at which the units  were billed for a  

period of five years from the date of supply of power was made available  

to  them  and  who  had  applied  or  availed  power  supply  on  or  after  

01.10.1991. The notification dated 30.09.1991 on the other hand made  

available the rebate on the basis of tariff set out in the Notification dated  

27.06.19888 and to Low and High Tension Power consumers who had  

applied for supply of power and were given power supply on or after  

01.10.1991. The Notification dated 01.08.1996, it is seen, extended the  

scope  of  benefit  of  rebate  as  compared  to  the  Notification  dated  

30.09.1991  which  had  been  rescinded  by  the  Notification  dated  

31.03.1995. It is on record and we notice from the judgment of the High  

Court that the State Government had paid as a result of the Notification  

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dated 01.08.1996 a sum or Rs. 8 crores in excess as compared to the  

benefit available under the Notification of 1991 and the total amount of  

rebate would have been more than 30 crores had the benefit  as made  

available by the 1996 Notification been continued.

68)         Thus from the foregoing, it is clear that a decision to be the decision  

of the Government must satisfy the requirements of the Business Rules  

framed by the State Government under the provisions of Article 166(3)  

of the Constitution of India. In the case on hand, as have been noticed by  

us and the High Court, the decisions leading to the notifications do not  

comply  with  the  requirements  of  Business  Rules  framed  by  the  

Government of  Goa under  the  provisions  of  Article  166(3)  of  the  

Constitution and the Notifications are the result of the decision taken  

by the Power Minister at  his level. The decision of the individual  

Minister cannot be treated as the decision of the State Government  

and  the  Notifications  issued  as  a  result  of  the  decision  of  the  

individual Minister which are in violation of the Business Rules are  

void ab initio and all actions consequent thereto are null and void.

69)          The  appellants  contended  before  this  court  that  another  

Division Bench of the High Court in its earlier judgment of 21.1.1999  

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had held that  the Notification dated  1.8.1996  was clarificatory and  

that  it  did  not  create  any  extra  financial  liability  on  the  State  

Government requiring approval of the Cabinet in compliance with  

the Business Rules before it was brought into force. In our opinion  

the said Notification cannot be treated as mere c1arificatory. It is a  

notification issued purportedly in terms of a Government decision. It  

was a decision finalized at the level of the Minister of Power alone  

and was taken in violation of the Rules of Business framed under  

Article  166(3)  of the Constitution of India. The decision cannot be  

called a government decision as understood under Article 154 of the  

Constitution,  though  it  may  satisfy  the  requirements  of  

authentication.  Nevertheless  mere  authentication  as  required  under  

Article 166(2) of the Constitution did not make it a government decision  

in  law nor  would  it  validate  a  decision  which  is  void  ab  initio.  The  

validity of the notification will have to be tested with reference to the  

constitutional  provisions and Business rules  and not  by their  form or  

substance.  Therefore,  this  contention  of  the  appellants  is  liable  to  be  

rejected.

70)         The learned  senior counsel Shri F.S. Nariman submitted that the  

doctrine  of  indoor  management  drawn from private  law would  apply  

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analogously in the facts and circumstances of this case. In response to  

this  submission,  the learned senior counsel Dr. Rajeev Dhavan would  

submit that the concept of private law is not readily applicable in public  

law.   It  is  further  submitted  that  often  private  law  and  public  law  

concepts  are  similar  in  name and text  but  needs  to  be  differentiated.  

Reference is made to the observations of this Court in Shrisht Dhawan  

(Smt.) Vs. Shaw Bros. (1992) 1 SCC 534, wherein it is observed:        

“20…..But fraud in public law is not the same  as fraud in private law. Nor can the ingredients  which establish fraud in commercial transaction  be  of  assistance  in  determining  fraud  in  Administrative Law. It has been aptly observed  by Lord Bridge in Khawaja that it is dangerous  to  introduce  maxims  of  common  law  as  to  effect  of  fraud  while  determining  fraud  in  relation to statutory law.”  

71)         The doctrine of indoor management is also known as the Turquand  

rule after the case of Royal British Bank v. Turquand, [1856] 6 E. & B.  

327.  In  this  case,  the  directors  of  a  company  had  issued  a  bond  to  

Turquand.  They had the  power  under  the  articles  to  issue  such  bond  

provided they were authorized by a resolution passed by the shareholders  

at a general meeting of the company. But no such resolution was passed  

by the company. It was held that Turquand could recover the amount of  

the bond from the company on the ground that he was entitled to assume  

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that the resolution was passed. The doctrine of indoor management is in  

direct  contrast  to the doctrine or  rule of constructive notice,  which is  

essentially a presumption operating in favour of the company against the  

outsider. It prevents the outsider from alleging that he did not know that  

the constitution of the company rendered a particular act or a particular  

delegation of authority ultra vires. The doctrine of indoor management is  

an exception to the rule of constructive notice. It imposes an important  

limitation  on  the  doctrine  of  constructive  notice.  According  to  this  

doctrine, persons dealing with the company are entitled to presume that  

internal requirements prescribed in memorandum and articles have been  

properly  observed.  Therefore  doctrine  of  indoor  management  protects  

outsiders  dealing or  contracting  with  a  company,  whereas doctrine  of  

constructive  notice  protects  the  insiders  of  a  company or  corporation  

against dealings with the outsiders. However suspicion of irregularity has  

been  widely  recognized  as  an  exception  to  the  doctrine  of  indoor  

management.  The protection of the doctrine is not available where the  

circumstances  surrounding  the  contract  are  suspicious  and  therefore  

invite inquiry.

72)         This  exception  was  highlighted  in  the  English  case  of  J.C  

Houghton& Co. v. Nothard, Lowe & Wills Ltd, [1927] 1 KB 246 (CA)  

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where the case involved an agreement between fruit  brokers and fruit  

importing  company.  There  was  an  allegation  that  the  agreement  was  

entered into by the company’s directors without authority. It was held  

that the nature of transaction was found to have been such as to put the  

plaintiffs on inquiry. To this effect Lord Justice Sargant held:-

“Cases where the question has been as to the exact  formalities observed when the seal of a company  has  been affixed,  such as  Royal  British  Bank v.  Turquand,  6  E.  &  B.  327,  or  the  County  of  Gloucester  Blank  v.  Rudry  Merthyr,  &c.,  Co.,  [1895] 1 Ch 629, are quite distinguishable from the  present  case.  In  re  Fireproof  Doors,  Ltd.,  sup.,  tends rather against than in favour of the plaintiffs,  since  if  a  single  director  has  as  towards  third  parties the authority now contended for, the whole  of the elaborate  investigation of  the facts  in that  case was entirely unnecessary. Perhaps the nearest  approach  to  the  present  case  is  to  be  found  in  Biggerstaff v. Rowlatt's  Wharf,  [1896] 2 Ch. 93.  But there the agent whose authority was relied on  had been acting to the knowledge of the company  as a managing director, and the act done was one  within  the  ordinary  ambit  of  the  powers  of  a  managing  director  in  the  transaction  of  the  company's  affairs.  It  is,  I  think,  clear  that  the  transaction there would not  have been supported  had it not been in this ordinary course or had the  agent  been acting merely as  one of  the ordinary  directors  of  the  company.  I  know of  no  case  in  which  an  ordinary  director,  acting  without  authority in fact, has been held capable of binding  a company by a contract with a third party, merely  on the ground that that third party assumed that the  director had been given authority by the Board to  make  the  contract.  A  limitation  of  the  right  to  

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make such an assumption is expressed in Buckley  on the Companies Acts, 10th Edition, at p. 175, in  the following concise words: -- And the principle  does not apply to the case where an agent of the  company  has  done  something  beyond  any  authority which was given to him, or which he was  held out as having.”

73)          This exception to the doctrine of indoor management has been  

subsequently adopted in many Indian cases. They are B. Anand Behari  

Lal v. Dinshaw and Co. (Bankers) Ltd, AIR 1942 Oudh 417 and Abdul  

Rehman Khan & Anr. v. Muffasal Bank Ltd. and Ors, AIR 1926 All 497.  

Applying the exception to the present scenario, there is sufficient doubt  

with  regard  to  the  conduct  of  the  Power  Minister  in  issuing  the  

Notifications dated 15.5.1996 and 01.08.1996. Therefore there is definite  

suspicion  of  irregularity  which  renders  the  doctrine  of  indoor  

management inapplicable to the present case.

74)         It was also argued by the learned senior counsel for the appellant,  

that  the  Notification  dated  01.08.1996  was  rescinded  by  Notification  

dated 24.07.1998 and, therefore, there was no need for the High Court to  

adjudicate upon the impugned Notification dated 01.08.1996 and, should  

have dismissed the writ petition filed by way of public interest as having  

become infructuous.  This issue need not detain us for long in view of  

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our answer to the issue of “Doctrine of Merger” canvassed by learned  

senior counsel.

75)          Arguments have been advanced before us based on the principles  

of  res judicata, Doctrine of Estoppel and the principles underlining the  

provisions of Order II Rule 2 of the Code of Civil Procedure that the  

High Court in earlier  batch of writ  petitions has gone into and given  

findings  with  regard  to  the  Notifications  dated  30.9.1991;  31.3.1995;  

15.5.1996; 1.8.1996 and 24.7.1998 and the judgment of the High Court  

dated  21.1.1999  rendered  therein  had  merged  with  the  order  of  the  

Supreme Court dated 13.2.2001 and the Notifications questioned in the  

present  round  of  litigation  are  Notifications  dated  15.5.1996  and  

1.8.1996 and the State at no point of time before any Court having raised  

the  issue of  these  two Notifications  being void  ab  initio  for  want  of  

compliance  with  the  provisions  of  the  Business  Rules  framed  under  

Article 166(3) of the Constitution of India, the High Court ought to have  

rejected the plea  of the State  Government that  the Notifications were  

illegal or were in violation of the Rules of Business and dismissed the  

Writ Petition on the principles of res judicata, Doctrine of Estoppel and  

the  principles  embodied  in  Order  II  Rule  2  of  the  Code  of  Civil  

84

Procedure. It was urged that the State not having raised this at any point  

of time before any court should not be allowed to do so. We do not find  

any merit in these contentions. As noticed by us earlier in the judgment,  

the  issue  regarding  the  validity  or  legality  of  the  Notifications  dated  

15.5.1996 and 1.8.1996 was never  raised  in  the  earlier  batch  of  writ  

petitions  before  the  High  Court  and  the  High  Court  never  had  an  

opportunity or occasion to look into, consider and pronounce upon the  

validity of the same with reference to the Business Rules framed under  

Article 166 (3) of the Constitution. These principles pressed into service  

by the appellants cannot operate against the State Government merely  

because the State did not  agitate  either  before the High Court or  this  

Court the legality or validity of these notification in the earlier round of  

litigation when it had an occasion to do so and the State Government  

cannot be deemed to have accepted the legality of the Notification and  

waived  its  objection  or  challenge  thereto.  The  Doctrine  of  Estoppel  

therefore has no application at all more so, in view of the illegality the  

notifications dated 15.05.1996 and 01.08.1996 suffer from in view of  

their non-compliance with the provisions of the Business Rules. In our  

opinion the fact that the State Government did not raise these objections  

in the earlier batch of Writ Ptitions  does not disentitle it to such a stand  

85

or prevents it from raising its objections based on legal provisions. This  

contention of the appellants requires to be turned down for yet another  

reason in that the 1st respondent herein was not  a party to the earlier  

batch of Writ Petitions before the High Court or this Court. Therefore the  

principles of res judicata or for that matter even the Doctrine of Estoppel  

will not apply to or operate against him. Further the contention that the  

Notification  dated  1.8.1996  did  not  create  any  additional  financial  

liability on the State Government warranting approval by the Cabinet or  

the compliance of the Business Rules before it was brought into effect  

deserves to be rejected  having regard to the figures placed on record  

which  the  High  Court  has  noticed  in  its  judgment.  These  figures  of  

additional liability likely to be brought on the State by Notification dated  

1.8.1996  falsify  the  statement  of  the  appellants.  Therefore  the  same  

deserves to be rejected.

76)          Before parting with these appeals, we make it clear that the  

observations made by us in the course of our judgment is only for the  

purpose  of  disposing  of  these  appeals  and shall  not  be  treated  as  an  

expression on the conduct of the then the Power Minister.  

86

77)          The Appellants have not been able to show any infirmity or  

illegality in the order of the High Court warranting our interference. In  

the result, civil appeals are dismissed.  Parties are directed to bear their  

own costs.         

  ………………………………J.

                                                                        [ R.V. RAVEENDRAN ]

                                                                       ………………………………J.                                                                          [ H.L. DATTU ] New Delhi, May 03, 2010.

87

    REPORTABLE

 IN THE SUPREME COURT OF INDIA

CIVIL ORIGINAL JURISDICTION

          WRIT PETITION © NO.200 OF 2002

Goa Glass Fibre Ltd.               ……..    Petitioner

Versus   

State of Goa and Anr.                       ……..    Respondents

WITH

WRIT PETITION © NO.199 OF 2002

M.R.F. Ltd.             ……..    Petitioner

Versus

State of Goa and Anr.                                 ……..    Respondents

JUDGMENT  

H.L. Dattu,J.  

The  above  writ  petitions  are   filed  under  Article  32  of  the  

Constitution  of  India,  inter  alia  calling  in  question  the  vires  and  

88

Constitutional  validity  of  "The  Goa (Prohibition  of  Further  Payment  

and Recovery of Rebate Benefits) Act, 2002 (hereinafter referred to as  

`the  Act’)  enacted  by  the  Legislature  of  the  State  of  Goa.  The  

petitioners seek a declaration from this court that the Act is ultra vires  

of  the  Constitution  of  India  and  in  the  alternative  seek  a  limited  

declaration that Sections 2,3,5 and 6 of the Act are unconstitutional and  

liable to be struck down.  

2) The Act is  attacked as unconstitutional  mainly on the following  

grounds:

• That  it  seeks  to  nullify  a  judgment  of  this  Court  dated  

13.02.2001 affirming the view taken by High Court of Bombay  

Goa Bench, in its judgment dated 21.01.1999.

• That it seeks to give effect to the decision of the High Court of  

Bombay  dated  19/24th  April  2001,  which  judgment  has  the  

effect  of  over  ruling  the  judgment  of  this  Court  dated  

13.02.2001.

• That it seeks to give effect to the judgment of High Court of  

Bombay Panaji Bench, dated 19/24th April 2001, when the said  

judgment is the subject matter  of appeal before this Court in  

several Special Leave Petitions and thus seeks to frustrate the  

89

rights  of  the  petitioners  herein  under  Article  136  of  the  

Constitution of India.

• That it seeks to take away the fundamental rights guaranteed to  

the petitioners under Article 14 and 19(1)(g) of  the Constitution  

of India.

• That it is contrary to plethora of judgments of this Court.

• That  as  an  Explanatory  Memorandum  and  the  Statement  of  

Objects and Reasons of the Act relies upon the decision of the  

High  Court  of  Bombay  Panaji  Bench,  rendered  on  19/24th  

April  2001 which held the Notifications dated 15.5.1996 and  

1.8.1996 were issued without complying with the requirements  

of Article 166 (3) of the Constitution of India, when the very  

judgment  is  under  appeal  before  this  Court  and  the  State  

without  getting  a  Judgment  rendered  by  this  Court  and  

frustrating  adjudication  by  this  Court  has  passed  the  Act  

impugned.  

• That the Act does not seek to validate  any action which has  

been held to be invalid by any Court of Law, but only seeks to  

nullify the judgment of this Court [under Section 2 of the Act].

90

• That the Act under Section 3 gives power to the State to recover  

rebate already given to consumer like petitioners, which grant  

has  already  been upheld by  the  High Court  by  its  judgment  

dated  21.1.1999 and affirmed  by  this  Court  by  its  judgment  

dated 13.2.2001.  

• That the Act is unconstitutional because of non-application of  

mind,  as  Section  5  thereof  speaks  of  consequences  of  non-

refund and   Section 2 which prohibits further payments.  

• That the Act seeks to nullify a judgment of this Court and to  

give effect to judgment of High Court which has the effect of  

overruling the judgment of this Court, inasmuch as, the law of  

validation  as  settled  by  this  Court  in  a  catena  of  decisions  

stipulates  that  the  Legislature  is  not  competent  to  nullify  a  

judgment of a Court of competent jurisdiction except where the  

judgment is  rendered by a Court  of  law on the basis  of any  

invalidity or illegality in the Act because of which the Statute or  

Act  is  declared  invalid,  in  which  event  the  Legislature  is  

Competent to enact a validating Act by removing the basis of  

that  invalidity  or  illegality  in  the  earlier  Statute.  If  the  

91

Legislature  chooses  to  enact  a  law  only  for  the  purpose  of  

nullifying a judgment that the same is impermissible.

3) The respondent - State of Goa has joined issues with petitioners  

and has filed a detailed Counter-Affidavit,  inter alia, in support of the  

constitutionality of the impugned Act.  

4) The  State  in  its  Counter-Affidavit  after  setting  out  the  factual  

background leading to the issue of the Notifications dated 15.05.1996 and  

01.08.1996  and  the  filing  of  Writ  Petition  No.  316  of  1998  and  the  

judgment  of  the  High  Court  of  Bombay  Panaji  Bench  therein,  has  

contended, that, the State deemed it expedient not only to prohibit any  

further payment under the said Notification, but also deemed it expedient  

to recover the benefits already availed of by  certain consumers including  

the petitioners in terms of the earlier Notifications, having regard to the  

fact  that  the  action  in  issuing  the  notifications  was  unauthorized  and  

wholly  illegal  and  that  the  parties  could  not  be  allowed  to  reap  the  

benefits of an illegal act. It is stated by the respondent State, that, with  

this intent and object, the State Assembly passed the Bill known as Goa  

(Prohibition of Further Payments and Recovery of Rebate Benefits) Bill  

2002, which was introduced in the House on 16.01.2002.  

92

5) With reference to the principal contention of the petitioners that the  

Act impugned is unconstitutional and it seeks to nullify the judgment of  

this Court in G.R. Ispat's case, the State contends that the Act impugned  

is constitutionally valid and has been passed by the Legislature keeping  

in view the objects behind the Bill; that even assuming but not admitting  

in any manner that the impugned Act nullifies the judgment of this Court,  

the Legislature under the Constitution of India has the power to enact a  

law which may result in nullifying the Judgment or Order passed by the  

Courts, if the public interest and public welfare demands the Legislature  

to exercise its legislative power within the constitutional parameters as  

held by this Court in various pronouncements on the issue.

6)  It  is  further  stated  that  what  is  sought  to  be  achieved  by  the  

impugned Act is to declare that the two notifications dated 15.05.1996  

and 01.08.1996  as  illegal,  unauthorized,  and  to  prohibit  any  further  

payments  thereunder,  in  order  to  save  public  exchequer  from getting  

denuded of its coffers. It is further stated, that, the decision of the State  

Government to issue Notifications mentioned above was not authorized  

by  law  in  as  much  as  the  Council  of  Ministers  had  rescinded  the  

Notification and despite this,  the Power Minister himself had issued a  

Notification at his own level  without making a reference to either the  

93

Chief  Minster  or  the  Council  of  Ministers  or  consulting  the  Finance  

Department as mandatorily  required under the Rules of Business.  The  

decision of the then Minister for Power to issue the Notifications was  

wholly unauthorized as he had no authority in law to issue them at his  

level  and  as  the  subject  matter  was  required  to  be  placed  before  the  

Cabinet in view of the huge financial implication involved therein and in  

view of the fact that the Cabinet had earlier rescinded the Notification  

giving rebate and any modification or variation of such decision of the  

Council of Ministers, it had to place it before the Council of Ministers in  

view  of  the  Business  Rules  framed  under  Article  166  (3)  of  the  

Constitution of India. The two notifications had imposed a heavy burden  

on the State Exchequer and under the Rules Of Business, concurrence of  

Finance Department of the State Government was mandatory and there  

was  neither  concurrence  of  the  said  Department  nor  was  there  any  

reference  of  the  said  Notifications  to  the  said  Department.  The  then  

Power  Minister  had  made  a  note  on  the  file  concerned  that  he  had  

consulted the Chief  Minister  which was found to be false  as per the  

police  investigation  conducted  and  that  the  then  Chief  Minister  had  

clearly stated that neither he was ever consulted by the Power Minister  

nor was the file ever shown to him and that this fact was taken note of by  

94

the  High  Court  of  Bombay  Panaji  Bench  in  its  Judgment  dated  

19/24.04.2001  in  Writ  Petition  No.  316  of  1998,  which  is  appealed  

against and pending in SLP (Civil) No. 4233 of 2001 before this Court.

7) The State also contends, that, the impugned Act is not aimed at  

giving  effect  to  the  Order  of  the  High  Court  of  Bombay  dated  

19/24.04.2001  in  W.P  No.316  of  1998  nor  is  it  passed  because  the  

abovementioned Special Leave Petition is pending before this Court, but  

has been passed and aimed to save the  coffers of the State and to prevent  

further abuse and payment out of the State Funds which the State can ill  

afford. The State had lost almost an amount of about Rs.16 Crores and a  

further sum of Rs.50 Crores of public money might have to be paid and  

there was neither any budgetary allocation nor any provision made for  

such payments and therefore instead of the monies coming into the State  

Exchequer by way of receipts by Government in accordance with Article  

266 (1) of the Constitution of India, these payments were sought to be  

diverted  to  the  private  industrialists  by  virtue  of  the  two notifications  

mentioned  above and with  a  view to  put  an end to  this  illegality  the  

impugned Act has been enacted in the larger public interest to safe the  

Public Exchequer from being drained off.  

95

8) The State also contends, that, this Court and the High Court in the  

earlier round of litigation have dealt with and interpreted the rights of the  

Consumer to be paid the rebate on electricity tariff in view of the two  

notification being in force and not their validity and that such benefits  

could not be withdrawn by a mere administrative circular. In fact what  

was challenged in those writ petitions was the administrative order of the  

Chief Electrical Engineer dated 31.03.1998 and that the High Court held  

in those writ petitions that the two notifications could not be withdrawn  

by a mere administrative Order and it was on that basis, the High Court  

had sustained those two notifications. Now what is sought to be done by  

the present legislation, it is contended by the State, to cure the defect of  

any  kind  and  thereby  to  ensure  that  public  funds  are  not  drained  by  

resorting to dubious methods and it is in larger public interest that this  

Act is enacted.  

9) It is reiterated by the State, that, the State of Goa is facing financial  

crunch  and  it  is  not  possible  for  the  State  Government  to  bear  such  

financial burden and therefore it is imperative that the amounts paid are  

recovered  and  further  loss  of  public  funds  avoided  and  its  payment  

prohibited and that it is on this ground that the legislation impugned has  

been enacted.  

96

10) The State reiterates that there is nothing illegal about the impugned  

legislation and that the same has been passed in the larger public interest  

and with a view to sub serve the pubic cause and to prevent abuse of  

public  exchequer  and  to  remedy  the  fraud  played  by  an  individual  

Minister  on  the  public  exchequer.  It  is  further  urged  by  the  State  

Government that the balance of interest is in favour of the State as the  

petitioners  on their  own showing have become the beneficiaries  of an  

illegal act of an individual Minister which cannot be allowed.

11) The State further asserts in response to the challenge made by the  

petitioners to the validity of the Act, that, it is a well settled law that the  

legislature can render the judicial decision ineffective by enacting a valid  

law on the subject within its legislative field by removing the base on  

which the  decision was rendered  and that  the  impugned Act  squarely  

meets and satisfies the Constitutional Test and parameters laid down by  

this Court in various judgments and as illustration have referred to the  

Judgments  of  this  Court  in  the  case  of  S.S  Bola  Vs.  B.D.  Saldhana  

reported  in  AIR 1997 Supreme Court  3127  and  Indian  Aluminium  &  

Others Vs. State Of Kerala reported in 1996(1) SCC 637.  It is reiterated  

by the State,  that,  the State  Legislature  is  competent  to enact  the Act  

97

impugned  under  Entry  38  of  List  III  to  the  VIIth  Schedule  of  the  

Constitution of India.

12) The petitioner has filed a rejoinder which reiterates more or less  

what is stated in the Writ Petition. In short, in the rejoinder the petitioner  

seeks  to  counter  the  reason  and  other  grounds  offered  by  the  State  

Government in support of the Legislation impugned. It also disputes the  

correctness of certain statements made by the State Government in its  

affidavit in reply to the Writ Petition.

13) We have heard learned senior counsel Shri F.S. Nariman for the  

petitioners and Dr. Rajeev Dhavan and Shri Shyam Diwan, learned senior  

counsel for State of Goa. We also had the advantage of going through  

several rulings of this court cited by the learned counsels.  

14) The Act impugned is attacked principally on the ground, that, it  

seeks to nullify a judgment of this Court dated 13.02.2001, affirming the  

view taken by High Court of Bombay Panaji Bench, in its judgment dated  

21.01.1999 and that it  seeks to give effect to the decision of the High  

Court of Bombay dated 19/24th April 2001, which judgment has the effect  

of over ruling the judgment of this Court dated 13.02.2001, more so when  

the  said  judgment  is  the  subject  matter  of  appeal  before  this  Court in  

98

several Special Leave Petitions and thus seeks to frustrate the rights of  

the petitioners herein under Article 136 of the Constitution of India.  

15) It  is  well  settled  that  a  Statute  can  be  invalidated  or  held  

unconstitutional  on  limited  grounds  viz.,  on  the  ground  of  the  

incompetence of the Legislature which enacts it and on the ground that it  

breaches or violates any of the fundamental rights or other Constitutional  

Rights and on no other grounds. (See State of A.P. vs. McDowell and  

Co.,  [(1996) 3 SCC 709],  Kuldip Nayar  vs.  Union of India and Ors.,  

[(2006) 7 SCC 1].  

16) The scheme of the Act appears to be simple. The Act imposes a  

Prohibition [under Section 2], requires recovery [under Section 3] and  

“extinguishes"  all  liabilities  of  the  State  that  accrue  or  arise  from the  

Notifications dated 15.05.1996 and 01.08.1996.  

17) From the language of the Act it becomes clear that the Act is not  

influenced  by  the  out  come  of  the  Judgment  of  the  High  Court  in  

Manohar Parrikar's case. By the enactment, the Legislature has imposed  

prohibition  of  further  payments  under  the  Notifications,  provides  for  

recovery of rebate benefits from the beneficiaries and extinguishes the  

State's Liability under the Notifications mentioned supra. This exercise  

by the Legislature is independent of and de hors the results of the PIL of  

99

Manohar  Parrikar  and  can  be  said  to  be  uninfluenced  by  the  said  

judgment.  It  was  well  within  the  Legislative  power  of  the  State  to  

respond  to  the  undisputed  and  disturbing  facts  which  had  enormous  

financial  implication on the State's Finances to enact the Law with an  

object of remedying the unsatisfactory state of affairs which were known  

to the Legislature.

18) That the object of the Act is not to undo or reverse the judgments  

of either this Court or that of the High Court. On a reading of the Act as a  

whole, it does not appear that the Legislature seeks to undo any judgment  

or any directions contained therein.  As observed earlier the Act imposes  

a Prohibition [under Section 2], requires recovery [under Section 3] and  

“extinguishes”  all  liabilities  of  the  State  that  accrue  or  arise  from the  

Notifications dated 15.05.1996 and 01.08.1996. Therefore, no exception  

can be taken to the constitutionality of the Act impugned, on the ground,  

that  it  seeks  to  undo or  reverse  any judgment.  The  Legislature  in  its  

competence has enacted the Act to achieve the purposes indicated therein  

and not  to  frustrate  any  judgment  of  any  court  including  that  of  this  

Court. It is to be noted that State Legislature was competent to enact the  

Act in its present form even before the judgment of the High Court in the  

PIL and the fact  that  it  has come after  the  judgment in PIL does not  

10

render  it  unconstitutional  on  the  ground  that  it  seeks  to  nullify  the  

judgment of this Court in the earlier proceedings.  

19) The State,  in the factual  background leading to the issue of the  

Notifications  dated  15.5.1996  and 01.08.1996  and  the  filing  of  Writ  

Petition No. 316 of 1998 and the judgment of the High Court of Bombay  

Panaji Bench therein, thought it fit and expedient to prohibit any further  

payment under the said Notifications and to recover the benefits already  

availed  of  by  certain  consumers  including  the  petitioners  towards  the  

rebate in terms of these two notifications and having regard to the fact  

that the action in issuing the notifications was unauthorized and wholly  

illegal and that the parties could not be allowed to reap the benefits of an  

illegal act enacted the Act impugned. Thus the intent and object of the  

State Legislature in enacting the Act impugned is clear and unassailable.  

Therefore,  the  contention  of  the  petitioners  that  the  Act  impugned  is  

unconstitutional  and  it  seeks  to  nullify  the  judgment  of  this  Court  

requires to be rejected.

20) The impugned Act is not aimed at giving effect to the Order of the  

High Court of Bombay dated 19/24.04.2001 in W.P No.316 of 1998 nor  

is  it  passed  because  the  abovementioned  Special  Leave  Petition  is  

pending before this Court, but has been passed with an object or aim to  

10

sustain the State Coffers and to prevent further abuse and payment out of  

the State Funds.  It has been enacted in the larger public interest to save  

the  Public  Exchequer  from being  drained  off.  These  amounts  always  

belonged to the  State  and,  therefore,  it  has every right  to recover  the  

same, by resorting to legislative measures within the parameters of the  

Constitutional provision from the beneficiaries who cannot be permitted  

to retain the benefits.

21) The impugned Act is not aimed at giving effect to the order of the  

High Court of Bombay dated 19/24.04.2001 in W.P No.316 of 1998 as  

has been argued by the learned senior counsel for the petitioner. It is not  

passed because the abovementioned Special  Leave Petition is  pending  

before this  Court.  It  has been passed with an aim to sustain the State  

Coffers  and  to  prevent  further  abuse  and  payment  out  of  the  State's  

Exchequer.  It  is  placed  on record  by  the  State  Government,  that,  the  

coffers of the State had already lost an amount of almost 16 Crores which  

the State could not afford and a further sum of Rs. 50 Crores of public  

money would have been lost, had it not been checked and prevented by  

the  Act  impugned.  In  this  regard  it  is  necessary  take  notice  of  the  

reiteration of the State in its affidavit that the earlier affidavits filed for  

and on behalf  of  the  State  Government  before  the  High Court  in  the  

10

earlier round of litigations did not reflect correct and true factual position,  

It  is  stated  by  the  State  Government  that  there  was  neither  financial  

sanction nor budgetary provision nor cabinet approval as required under  

Article  166(3)  of  the  Constitution  of  India  and  therefore  the  two  

notifications dated 15.05.1996 and 01.08.1996 in issue could not be said  

to be the decision of the State Government in the strict sense of law and  

the claims for rebate  under these Notifications which run into several  

Crores of Rupees could not be borne by the exchequer, more so when  

they are devoid of any legal sanctity and that it was impossible for the  

State to meet or bear such an enormous liability of such a magnitude. The  

respondent State in its affidavit draws support from certain observations  

from the Judgment of the High Court of Bombay dated 19/24.04.2001, to  

say that the Notifications mentioned above were non-est and action taken  

thereunder was null and void. It is the stand of the State, that, the High  

Court in W.P. No. 316 of 1998 has also dealt with the issue as to why the  

State had failed to bring before the High Court in the earlier batch of Writ  

Petition  decided  on  21.01.1999,  wherein  the  High  Court  upheld  the  

power  of  the  State  Government  to  withdraw  the  rebate  by  invoking  

provisions of Section 21 of the General Clauses Act. According to the  

State, the High Court in the earlier round of litigation gave a decision as  

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regards the financial  crunch faced by the Court and that the affidavits  

filed for and on behalf of the State Government therein by the then Chief  

Electrical Engineer of Goa Mr. T. Nagarajan, who as disclosed from the  

police investigations was himself a supporter of the illegal act of abuse of  

power and he could not be expected to place all facts before the High  

Court. The State further contends that the High Court in its judgment in  

W.P  No.  316  of  1998,  has  noted  that  even  the  attempts  to  have  the  

Notifications ratified by the cabinet failed and there being legal dissent,  

the  Cabinet  refused  to  ratify  the  decision  and  withdrew  the  same.  

Therefore, it cannot be said that the State had enacted the Act impugned  

to give effect to the judgment of the High Court in Writ Petition No. 316  

of 1998.  

22) It  is  also placed on record that there was neither any budgetary  

allocation nor any provision made for such payments and these payments  

were sought to be diverted to the private industrialists by virtue of the  

two notifications mentioned above and with a view to put an end to this  

illegality, the impugned Act has been enacted in the larger public interest  

to  save the  Public  Exchequer  from being drained  off.  These  amounts  

always belonged to the State Government and the State had every right to  

recover  the  same,  by  resorting  to  legislative  measures  from  the  

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beneficiaries  of  an  illegal  Act,  who  cannot  be  allowed  to  retain  the  

benefits. In the earlier round of litigation before the High Court, the State  

had taken the stand that there was financial crunch being faced by the  

State  Government  and  that  it  was  the  primary  reason  for  the  State  

Government to withdraw the rebate. This Court and the High Court in the  

earlier round of litigation merely dealt with and interpreted the rights of  

the Consumer to recover and be paid the rebate on electricity tariff in  

view of the two notifications being in force. This Court and the High  

Court in those proceedings did not deal with or decide their validity. The  

question  there  was,  whether  the  benefits  granted  by  the  Notifications  

could  be  withdrawn  by  a  mere  administrative  circular  of  the  Chief  

Electrical Engineer dated 31.03.1998 and the High Court held in those  

writ petitions that the two notifications could not be withdrawn by a mere  

administrative Order and on that premise the High Court had directed the  

State to pay the amounts and this Court confirmed the same in its Order.  

What  the Legislature seeks to do by the Act impugned is  to cure the  

defect of any kind and thereby to ensure that public funds are not drained  

and it is in larger public interest that this Act is enacted. The Act which  

has been passed in the larger public interest and with a view to sub serve  

the public cause and to prevent abuse of public exchequer and to remedy  

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the fraud played by an individual on the public exchequer and to recover  

the amounts paid under these two Notifications and to prevent further  

loss  of  pubic  funds  cannot  be  termed  as  unconstitutional.  It  cannot  

therefore be said that the Act impugned is aimed at nullifying a judgment  

of this Court dated 13.02.2001, affirming the view taken by High Court  

of Bombay Panaji Bench, in its judgment dated 21.01.1999. It can not  

also be said that the Act impugned seeks to give effect to the decision of  

the High Court of Bombay dated 19/24th April 2001, in Writ Petition No  

316 of 1998.  

23) The Act stands totally on a different footing and the judgment of  

the High Court dated 19/24.04.2001 has no bearing on it. The Act stands  

independent of the judgment of the High Court and its validity cannot be  

tested on these grounds. The petitioners have strongly relied upon the  

different stands allegedly taken by the State in the earlier proceedings  

and  the  present  proceedings  in  support  of  their  challenge  to  the  

constitutionality of the Act. This Court in Sanjeev Coke Manufacturing  

Company Vs. MIs. Bharat Coking Cool Ltd & Anr, [(1983) 1  SCC  147  

(172)], has held that the validity of the Legislation is not to be judged by  

what is stated in an affidavit filed on behalf of the State and that it should  

fall or stand on the strength of its provisions.

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24) It  is  no doubt  true that  the Judgment  dated 19/24.04.2001 is  in  

appeal before this Court in a batch of Special  Leave Petitions and the  

validity of the impugned Act does not depend upon the result of the said  

Special Leave Petitions. In our opinion, the Act must stand or fall on its  

own strength. It cannot also be said that the Act seeks to give effect to the  

judgment dated 19/24.04.2001 of the High Court having regard what the  

State aims at or seeks to achieve by it. It is a well settled law that the  

legislature can render the judicial decision ineffective by enacting a valid  

law on the subject within its legislative field by removing the base on  

which the decision was rendered. The impugned Act meets and satisfies  

the Constitutional Test completely. The Act also satisfies parameters laid  

down by this Court in various judgments. Further the competence of the  

State Legislature to enact the Act impugned is traceable to Entry No. 38  

in List III to the VII Schedule of the Constitution of India. The petitioners  

have not challenged the competence of the State Legislature to enact the  

Act impugned. Therefore, the challenge made by the petitioners to the  

constitutionality of the Act on this ground must fall.

25) The next contention urged by the petitioners is that, the Act does  

not seek to validate any action which has been held to be invalid by any  

Court of Law, but only seeks to nullify the judgment of this Court. This  

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contention  should  also  fail  for  the  reasons  already  explained  in  the  

preceding paragraphs.

26) The next contention of the petitioners is that the impugned Act is  

unconstitutional,  because it  seeks to take away the fundamental  rights  

guaranteed  to  the  petitioners  under  Article  14  and 19(1)(g)  of  the  

Constitution of India. While the argument based on Article 19(1)(g) of  

the Constitution of India was not urged seriously by the petitioners and  

rightly so, as no citizen is before this Court with a complaint that his  

fundamental  rights guaranteed under this Article of the Constitution is  

violated by the State under the Act impugned. As regards the challenge to  

the validity of the Act on the allegations of violation of Article 14 of the  

Constitution of India, the petitioners have laid no basis thereof. There is  

nothing in the Act which suggests invidious discrimination, unreasonable  

classification or manifest violation of equality clause. In the absence of  

any valid ground under Article 14 of  the Constitution of India, the Writ  

Petition  under  Article  32  itself  is  not  maintainable  and  liable  to  be  

dismissed.

27) In view of the above discussion, we are of the opinion that the Act  

impugned does not suffer from any invalidity and the  challenge made  

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by  the  petitioners  to  its  constitutionality  fails.  Accordingly,  the  Writ  

Petitions are dismissed without any order as to costs.

  ………………………………J.

                                                                        [ R.V. RAVEENDRAN ]

                                                                       ………………………………J.                                                                          [ H.L. DATTU ]      New Delhi,      May 03, 2010.

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