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CASE NO.: Appeal (civil)  9688-9699 of 2003

PETITIONER: Punjab & Sind Bank

RESPONDENT: Allahabad Bank & Anr

DATE OF JUDGMENT: 28/03/2006

BENCH: ARIJIT PASAYAT & TARUN CHATTERJEE

JUDGMENT: J U D G M E N T

ARIJIT PASAYAT, J.

Challenge in these appeals is to the judgment delivered  by a Division Bench of the Calcutta High Court, in an appeal  filed by the appellant, the defendant in the suit filed by  respondent no.1-Bank. Learned Single Judge in the said suit  held that there was no need to adopt procedure  indicated by  this Court in Oil and Natural Gas Commission and Anr. v.  Collector of Central Excise (1992 Supp. (2) SCC 432)  (described hereinafter case as ONGC \026I Case ).  The Division  Bench affirmed the view of learned Single Judge.  The  correctness of the view expressed by the learned Single Judge  and the Division Bench forms the subject-matter of challenge  in this appeal.   

The suit was filed by the respondent no.1-Bank against  the appellant-Bank along with 11 other defendants with the  following prayers:-

(a)     Declaration that the Banker’s cheque copy  whereof is annexed Marked A hereto is void  and not binding on the plaintiff. (b)     Decree of Rs.5,62,66,671/- against the  defendants jointly and/or severally and/or  such of them for such amount as this Hon’ble  Court may deem fit and proper. (c)     Decree of Rs.5,62,66,671/- against the  defendant no.1 together with interest. (d)     Interest including interim interest as claimed  in paragraph 29; (e)     Receiver; (f)     Costs; (g)     Further any other reliefs.

       An application was filed by the appellant-Bank for  dismissal of the suit on the ground that the modalities  indicated in ONGC-I case (supra) were not followed.  Learned  Single Judge held that the decision has to be read in the  context which was passed.  This Court never intended to  extinguish the right to sue. Intention was to avoid litigation  when the parties are government or its undertakings.   

       The order was challenged before the Division Bench  which, inter-alia, upheld view of learned Single Judge with

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some additional reasons.  We shall deal with the reasoning in  detail later.

       The view in ONGC-I case (supra) was further elaborated  in Oil and Natural Gas Commission v. C.C.E. 1995 (Supp.) 4  SCC 541) (For sake of convenience described as ONGC-II).  It  was noted in Oil and Natural Gas Commission v. C.C.E.  (2004(6) SCC 437) (for convenience described as ONGC-III)  that some doubts and problems arose in the working out of  the arrangements in terms of the order of this Court dated  11.10.1991 ONGC-II case (supra). It was noted in ONGC-III  case (supra) as follows:          "There are some doubts and problems that  have arisen in the working out of these  arrangements which require to be clarified and  some creases ironed out.  Some doubts persist  as to the precise import and implications of the  words "and recourse to litigation should be  avoided".  It is clear that the order of this  Court is not to the effect that \026 nor can that be  done \026 so far as the Union of India and its  statutory corporations are concerned, their  statutory remedies are effaced. Indeed, the  purpose of the constitution of the High- powered Committee was not to take away  those remedies.  The relevant portion of the  order reads: (SCC pp. 541-42 para 3)

"3.     We direct that the Government  of India shall set up a committee  consisting of representatives from  the Ministry of Industry, the Bureau  of Public Enterprises and the  Ministry of Law, to monitor disputes  between Ministry and Ministry of  the Government of India, Ministry  and public sector undertakings of  the Government of India and public  sector undertakings in between  themselves to ensure that no  litigation comes to court or to a  tribunal without the matter having  been first examined by the  Committee and its clearance for  litigation.  The Government may  include a representative of the  Ministry concerned in a specific case  and one from the Ministry of  Finance in the Committee.  Senior  officers only should be nominated so  that the Committee would function  with status, control and discipline."

It is abundantly clear that the machinery  contemplated is only to ensure that no  litigation comes to court without the parties  having had an opportunity of conciliation  before an in-house committee."

       The matter was again examined in the case of Chief  Conservator of Forest v. Collector (2003(3) SCC 472). In Para

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14 and 15 it was noted as follows:

"Under the scheme of the Constitution, Article  131 confers original jurisdiction on the  Supreme Court in regard to a dispute between  two States of the Union of India or between  one or more States and the Union of India. It  was not contemplated by the framers of the  Constitution or the C.P.C. that two  departments of a State or the Union of India  will fight a litigation in a court of law. It is  neither appropriate nor permissible for two  departments of a State or the Union of India to  fight litigation in a court of law. Indeed, such a  course cannot but be detrimental to the public  interest as it also entails avoidable wastage of  public money and time. Various departments  of the Government are its limbs and, therefore,  they must act in co-ordination and not in  confrontation. Filing of a writ petition by one  department against the other by invoking the  extraordinary jurisdiction of the High Court is  not only against the propriety and polity as it  smacks of indiscipline but is also contrary to  the basic concept of law which requires that  for suing or being sued, there must be either a  natural or a juristic person. The States/Union  of India must evolve a mechanism to set at rest  all inter-departmental controversies at the  level of the Government and such matters  should not be carried to a court of law for  resolution of the controversy. In the case of  disputes between public sector undertakings  and Union of India, this Court in Oil and  Natural Gas Commission v. Collector of  Central Excise (1992 Suppl. (2) SCC 432)  called upon the Cabinet Secretary to handle  such matters. In Oil and Natural Gas  Commission & Anr. v. Collector of Central  Excise (1995 Suppl. (4) SCC 541), this Court  directed the Central Government to set up a  Committee consisting of representatives from  the Ministry of Industry, the Bureau of Public  Enterprises and the Ministry of Law, to  monitor dispute between Ministry and Ministry  of the Government of India, Ministry and  public sector undertakings of the Government  of India and public sector undertakings in  between themselves, to ensure that no  litigation comes to court or to a Tribunal  without the matter having been first examined  by the Committee and its clearance for  litigation. The Government may include a  representative of the Ministry concerned in a  specific case and one from the Ministry of  Finance in the Committee. Senior officers only  should be nominated so that the Committee  would function with status, control and  discipline.

       The facts of this appeal, noticed above,  make out a strong case that there is felt need  of setting up of similar committees by the State  Government also to resolve the controversy

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arising between various departments of the  State or the State and any of its undertakings.  It would be appropriate for the State  Governments to set up a Committee consisting  of the Chief Secretary of the State, the  Secretaries of the concerned departments, the  Secretary of Law and where financial  commitments are involved, the Secretary of  Finance. The decision taken by such a  committee shall be binding on all the  departments concerned and shall be the stand  of the Government. "

       The directions as noted above were quoted in Mahanagar  Telephone Nigam Ltd. v. Chairman, Central Board, Direct  Taxes and another (2004(6) SCC 431) and were adopted in  paragraph 8. It was noted as follows:

       "Undoubtedly, the right to enforce a right  in a court of law cannot be effaced. However, it  must be remembered that courts are  overburdened with a large number of cases.  The majority of such cases pertain to  Government Departments and/or public sector  undertakings. As is stated in Chief  Conservator of Forests’ case [2003] 3 SCC 472  it was not contemplated by the framers of the  Constitution or the Civil Procedure Code that  two departments of a State or Union of India  and/or a department of the Government and a  public sector undertaking fight a litigation in a  court of law. Such a course is detrimental to  public interest as it entails avoidable wastage  of public money and time. These are all limbs  of the Government and must act in co- ordination and not confrontation. The  mechanism set up by this court is not, as  suggested by Mr. Andhyarujina, only to  conciliate between Government Departments.  It is also set up for purposes of ensuring that  frivolous disputes do not come before courts  without clearance from the High Powered  Committee. If it can, the High Powered  Committee will resolve the dispute. If the  dispute is not resolved the Committee would  undoubtedly give clearance. However, there  could also be frivolous litigation proposed by a  department of the Government or a public  sector undertaking. This could be prevented by  the High Powered Committee. In such cases  there is no question of resolving the dispute.  The Committee only has to refuse permission  to litigate. No right of the Department/public  sector undertaking is affected in such a case.  The litigation being of a frivolous nature must  not be brought to court. To be remembered  that in almost all cases one or the other party  will not be happy with the decision of the High  Powered Committee. The dissatisfied party will  always claim that its rights are affected, when  in fact, no right is affected. The Committee is  constituted of highly placed officers of the  Government, who do not have an interest in  the dispute, it is thus expected that their  decision will be fair and honest. Even if the

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Department/public sector undertaking finds  the decision unpalatable, discipline requires  that they abide by it. Otherwise the whole  purpose of this exercise will be lost and every  party against whom the decision is given will  claim that they have been wronged and that  their rights are affected. This should not be  allowed to be done."

       The ONGC I to III cases (supra), Chief Conservator’s case  (supra) and Mahanagar Telephone’s case (supra) deal with  disputes relating to Central Government, State Government  and Public Sector Undertakings. They have no application to  the facts of these cases as the High Court has not indicated  any reason for its abrupt conclusion that the writ petitioners  are Public Sector Undertakings. In the absence of a factual  determination in that regard, the decisions can have no  application.     These aspects were recently highlighted in U.P.S.E.B.  and Anr. v. Sant Kabir Sahakari Katai Mills Ltd. (2005 (7) SCC  576).

       The Division Bench of the High Court did not adopt the  modalities indicated by this Court in the various decisions  referred to above with the following reasoning:

"Mr. Mitra supported the judgment of the  Hon’ble Mr. Justice Dilip Kumar Seth delivered  in the court below and, with respect; we do not  find anything to differ from His Lordship’s  views in this matter.  We would, however, have  to add only one point thereto which we  consider to be the deciding factor.

       The respondent/plaintiff  here has alleged  that the Punjab & Sind Bank (no doubt  vicariously, and because of persons working of  the Bank) acted fraudulently, or at least  negligently, and sent for clearing a cheque  which was worthless, and thus brought into  circulation Rs.3.10 crore which should not  have been brought into circulation at all.

       These allegations have not yet been  pronounced upon by any Civil Court.

       If the above decision of the Government  Committee for settlement of disputes is  binding on the High Court, then and in that  event, the High Court is not entitled to try the  suit, and must exonerate the Punjab & Sind  Bank (and therefore indirectly all its then  concerned employees) of both fraud and  negligence.

       Mr. Chatterjee submitted that one is not  remedy less, and in case the decision is not  reasonable, it could be challenged in  appropriate writ proceedings.

       But the point which falls for decision is,  can a Government Committee, which is only a  part of the administrative machinery of the

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Union of India, stop by its administrative  decision, the judicial process of adjudication,  which is the job of that wing of the Union of  India, which is known as the judiciary.

       We are of the opinion that the dicta in the  ONGC’s case, if given their interned meaning,  would, have the above effect, of impeding the  judicial process by having recourse to decision  of an administrative body, as the first and  permanent deciding body.

We are of the opinion, and we say this  with the greatest of respect, which is at our  command, that this is wholly unconstitutional.   It is not necessary to enlarge on a matter so  fundamental because the separation of the  legislature, the judiciary and the executive is  more basis than anything else in our  Constitution as it stands today. We are  accordingly of the opinion, and this is again  said with as much respect before, that the  decision in the ONGC’s case is itself of an  administrative nature and has to force to  emasculate the judiciary."

                               (Underlined for emphasis)

To say the least the view expressed by the Division Bench  of the High Court is confusing and patently shows that the  ratio of the various decisions has not been understood in the  proper perspective.  To say that the decision in the ONGC-I  case (supra) was of an administrative nature though a judicial  order shows non-application of mind.  Any order passed in a  judicial proceeding, (much less an order passed by this Court)  can by no stretch of imagination be described as one of  "administrative nature".

In the circumstances we set aside the judgment of the  Division Bench, remit the matter to the High Court for fresh  consideration keeping in view the modalities and principles set  out by this Court in the various decisions referred to above.

Appeal is allowed to the aforesaid extent with no order as  to costs.