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CASE NO.: Appeal (civil)  1061-62 of 1998

PETITIONER: Union of India and Ors.                            

RESPONDENT: West Coast Paper Mills Ltd. & Anr.                  

DATE OF JUDGMENT: 05/02/2004

BENCH: CJI, S.B. Sinha & S.H. Kapadia.

JUDGMENT: JUDGMENT

S.B. SINHA, J :

       Doubting the correctness of a two-Judge Bench decision  of this Court in P.K. Kutty Anuja Raja & Anr. Vs. State of  Kerala & Anr. [JT 1996 (2) SC 167 : (1996) 2 SCC 496], a  Division Bench of this Court has referred the matter to a  three-Judge Bench.

The factual matrix required to be taken note of is as  under:

       The respondents herein were transporting their goods  through the branch line to the appellants from Alnavar to  Dandeli wherefor the common rate fixed in respect of all  commodities on the basis of weight was being levied as  freight.  However, a revision was made in the rate of  freight w.e.f. 1.2.1964.   

Aggrieved thereby and dissatisfied therewith, the  respondents herein filed a complaint petition before the  Railway Rates Tribunal (hereinafter referred to as ’The  Tribunal’) challenging the same as unjust, unreasonable and  discriminatory as the standard telescopic class rates on  three times of inflated distance was adopted for levy of  freight on goods traffic.  The Tribunal by a judgment dated  18.4.1966 declared the said levy as unreasonable  whereagainst the appellants herein filed an application for  grant of special leave before this Court.

While granting special leave, this Court also passed a  limited interim order which is in the following terms:

"The Railway may charge the usual rates  without inflation of the distance, and  the Respondent will give a Bank  guarantee to the satisfaction of the  Register of this Court for Rupees Two  Lakhs to be renewed each year until the  disposal of the appeal.  One month’s  time allowed for furnishing the Bank  Guarantee.  The stay petition is  dismissed subject to the above."

Eventually, however, the said Special Leave Petition  was dismissed by this Court on 14.10.1970.

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       A writ petition was filed by the respondent herein on  05.01.1972 which was marked as W.P. NO. 210/1972, and the  same was disposed by the High Court on 29.10.1973 observing:

"All these matters, in my opinion,  cannot be properly adjudicated upon in a  Writ Petition filed under Art. 226 of  the Constitution.  If so advised the  petitioner could avail of the ordinary  remedy of filing a suit for appropriate  relief.  If such a suit is filed, it  will be open to the respondents to raise  all available contentions in defence  just as it is open to the petitioner to  raise all available contentions in  support of its claim.  Having considered  all relevant aspects, I am of the  opinion, that this is a case where I  should decline to exercise my discretion  under Art. 226 of the Constitution.

       Subject to the aforesaid  observations, this writ petition is  dismissed."

       Two suits thereafter were filed by the respondents on  12.12.1973 and 18.04.1974 which were renumbered later on as  OS NO. 38/1982 and OS No.39/1982.

       A contention that the said suits were barred by  limitation was raised by the appellants herein stating that  the cause of action for filing the same arose immediately  after the judgment was passed by ’The Tribunal’ on 18.4.1966  and, thus, in terms of Article 58 of the Limitation Act,  1963, they were required to be filed within a period of  three years from the said date, as despite the fact that the  Special Leave Petition was preferred thereagainst, no stay  had been granted by this Court and, thus, the period, during  which the matter was pending before this Court, would not be  excluded in computing the period of limitation. Having  regard to the plea raised by the Plaintiff-Respondent in the  aforementioned suits as regards the applicability of  Sections 14 and 15 of the Limitation Act, 1963, the Trial  Court held that the suits had been filed within the  stipulated period.  The High Court in appeal also affirmed  the said view.

       Mr. P.P. Malhotra, learned senior counsel appearing on  behalf of the appellant, at the outset drew our attention to  the fact that the Union of India has already complied with  the direction of ’The Tribunal’ by refunding the excess  freight charged from the respondent for the period 18.4.1966  to 25.9.1966.  The learned counsel, however, would contend  that the suit for refund of excess amount of the freight for  the disputed periods (a) 24.6.1963 to 1.2.1964, and (b)  1.2.1964 to 18.4.1966 were barred by limitation in terms of  Article 58 of the Limitation Act, 1963, as the cause of  action for filing the suit had arisen on the date on which  such declaration was made by ’The Tribunal.

       Mr. Malhotra would further contend that in absence of  an order staying the operation of the judgment, it became  enforceable and, thus, the plaintiff-respondent was required

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to file the suit within the period of limitation specified  therefor.  Furthermore, the learned counsel would urge that  in terms of Section 46A of the Indian Railways Act, the  judgment of the Tribunal being final, the starting period of  limitation for filing the suit would be three years from the  said date.  Strong reliance in this behalf has been placed  on Juscurn Boid and Another Vs. Pirthichand Lal [L.R. Indian  Appeals 1918-1919 page 52], P.K. Kutty (supra), Maqbul Ahmad  and others Vs. Onkar Pratap Narain Singh and others [AIR  1935 PC 85] and Secretary, Ministry of Works & Housing Govt.  of India and Others Vs. Mohinder Singh Jagdev and  Others[(1996) 6 SCC 229].

       Mr. Harish N Salve, learned senior counsel appearing on  behalf of the respondents, on the other hand, would submit  that having regard to the fact situation obtaining in this  case Article 113 of the Limitation Act shall apply and not  Article 58 thereof.  The learned counsel would urge that as  admittedly this Court granted Special Leave to Appeal in  favour of the appellants and passed a limited interim order,  the judgment of the Tribunal was in jeopardy and, thus,  cannot be said to have attained finality.  Furthermore, the  learned counsel would submit that when the doctrine of  merger applies, the period of limitation would begin to run  from the date of passing the appellate decree and not from  the date of passing of the original decree.  In support of  the said contention, reliance has been placed on a decision  of this Court in Kunhayammed and Others Vs. State of Kerala  and Another [(2000) 6 SCC 359].   

       The plaintiff in this case has filed a suit for refund  of the excess amount collected by the defendant-Railways for  the period 24.6.1963 to 1.2.1964 and 1.2.1964 to 18.4.1966   with interest accrued thereupon.  It is not in dispute that  in terms of the provisions of the Indian Railways Act, as  thence existing ’The Tribunal’ was only entitled to make a  declaration to the effect that the freight charged was  unreasonable or excessive.  It did not have any jurisdiction  to execute its own order.

       It may be true that by reason of Section 46A of Indian  Railways Act the judgment of the Tribunal was final but by  reason thereof the jurisdiction of this Court to exercise  its power under Article 136 of the Constitution of India was    not and could not have been excluded.

       Article 136 of the Constitution of India confers a  special power upon this Court in terms whereof an appeal  shall lie against any order passed by a Court or Tribunal.   Once a Special Leave is granted and the appeal is admitted  the correctness or otherwise of the judgment of the Tribunal  becomes wide open. In such an appeal, the court is entitled  to go into both questions of fact as well as law. In such an  event the correctness of the judgment is in jeopardy.  

       Even in relation to a civil dispute, an appeal is  considered to be a continuation of the suit and a decree  becomes executable only when the same is finally disposed of  by the Court of Appeal.

       The starting point of limitation for filing a suit for  the purpose of recovery of the excess amount of freight  illegally realised would, thus, begin from the date of the  order passed by this Court.  It is also not in dispute that  the respondent herein filed a writ petition which was not

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entertained on the ground stated hereinbefore. The  respondents were, thus, also entitled to get the period  during which the writ petition pending, excluded for  computing the period of limitation. In that view of the  matter, the civil suit was filed within the prescribed  period of limitation.

       The Trial Judge as also the High Court have recorded a  concurrent opinion that the respondents were entitled to the  benefits of Sections 14 and 15 of the Limitation Act, 1963.  We have no reason to take a different view.

       It is beyond any cavil that in the event, the  respondent was held to have been prosecuting its remedy bona  fide before an appropriate forum, it would be entitled to  get the period in question excluded from computation of the  period of limitation.  

       Articles 58 and 113 of the Limitation Act read thus:

"Description of  Suit Period of  Limitation Time from which  period begins to run

58. To obtain any  other declaration Three years When the right to  sue first accrues

113. Any suit for which  no period of  limitation is  provided elsewhere  in this Schedule Three years When the right to  sue accrues"

       It was not a case where the respondents prayed for a  declaration of their rights.  The declaration sought for by  them as regard unreasonableness in the levy of freight was  granted by the Tribunal.

       A distinction furthermore, which is required to be  noticed is that whereas in terms of Article 58 the period of  three years is to be counted from the date when ’the right  to sue first accrues’; in terms of Article 113 thereof, the  period of limitation would be counted from the date ’when  the right to sue accrues’.  The distinction between Article  58 and Article 113 is, thus, apparent inasmuch as the right  to sue  may accrue to a suitor in a given case at different  points of time and, thus, whereas in terms of Article 58 the  period of limitation would be reckoned from the date on  which the case of action arose first whereas, in the latter  the period of limitation would be differently computed  depending upon the last day when the cause of action

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therefor arose.

       The fact that the suit was not filed by plaintiff- respondent claiming existence of any legal right in itself  is not disputed.  The suit for recovery of money was based  on the declaration made by ’The Tribunal’ to the effect that  the amount of freight charged by the appellant was  unreasonable. It will bear repetition to state that a  plaintiff filed a suit for refund and a cause of action  therefor arose only when its right was finally determined by  this Court and not prior thereto.  This Court not only  granted special leave but also considered the decision of  the Tribunal on merit.   

In Kunhayammed (supra), this Court held: "12. The logic underlying the doctrine  of merger is that there cannot be more  than one decree or operative orders  governing the same subject-matter at a  given point of time. When a decree or  order passed by an inferior court,  tribunal or authority was subjected to a  remedy available under the law before a  superior forum then, though the decree  or order under challenge continues to be  effective and binding, nevertheless its  finality is put in jeopardy. Once the  superior court has disposed of the lis  before it either way - whether the  decree or order under appeal is set  aside or modified or simply confirmed,  it is the decree or order of the  superior court, tribunal or authority  which is the final, binding and  operative decree or order wherein merges  the decree or order passed by the court,  tribunal or the authority below.  However, the doctrine is not of  universal or unlimited application. The  nature of jurisdiction exercised by the  superior forum and the content or  subject-matter of challenge laid or  which could have been laid shall have to  be kept in view."         It was further observed: "41. Once a special leave petition has  been granted, the doors for the exercise  of appellate jurisdiction of this Court  have been let open. The order impugned  before the Supreme Court becomes an  order appealed against. Any order passed  thereafter would be an appellate order  and would attract the applicability of  doctrine of merger. It would not make a  difference whether the order is one of  reversal or of modification or of  dismissal affirming the order appealed  against. It would also not make any  difference if the order is a speaking or  non-speaking one. Whenever this Court  has felt inclined to apply its mind to  the merits of the order put in issue  before it though it may be inclined to  affirm the same, it is customary with

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this Court to grant leave to appeal and  thereafter dismiss the appeal itself  (and not merely the petition for special  leave) though at times the orders  granting leave to appeal and dismissing  the appeal are contained in the same  order and at times the orders are quite  brief. Nevertheless, the order shows the  exercise of appellate jurisdiction and  therein the merits of the order impugned  having been subjected to judicial  scrutiny of this Court.  42."To merge" means to sink or disappear  in something else; to become absorbed or  extinguished; to be combined or be  swallowed up. Merger in law is defined  as the absorption of a thing of lesser  importance by a greater, whereby the  lesser ceases to exist, but the greater  is not increased; an absorption or  swallowing up so as to involve a loss of  identity and individuality.(See Corpus  Juris Secundum, Vol. LVII, pp. 1067- 68)"  

       (See also Raja Mechanical Company Pvt. Ltd. Vs.  Commissioner of Central Excise, 2002 (4) AD (Delhi) 621)          The question as regard applicability of merger with  reference to the provisions for departmental appeal and  revision had first been considered by this Court in Sita Ram  Goel Vs. Municipal Board, Kanpur [1959 SCR 1148] stating :

"The initial difficulty in the way of  the appellant, however, is that  departmental enquiries even though they  culminate in decisions on appeals or  revision cannot be equated with  proceedings before the regular courts of  law."

However, the said view was later on not accepted to be   correct.

       Despite the rigours of Section 3 of the Limitation Act,  1963, the provisions thereof are required to be construed in  a broad based and liberal manner.  We need not refer to the  decisions of this Court in the matter of condoning delay in  filing appeal or application in exercise of its power under  Section 5 of the Limitation Act.

       In The State of Uttar Pradesh Vs. Mohammad Nooh [1958  SCR 595] Vivian Bose, J. held that justice should be done in  a common sense point of view stating: "I see no reason why any narrow or  ultra technical restrictions should be  placed on them. Justice should, in my  opinion be administered in our courts in  a common sense liberal way and be  broadbased on human values rather than  on narrow and restricted considerations

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hedged round with hair-splitting  technicalities...."

       However, in that case also a distinction was sought to  be made between a judgment of a ’Court’ and ’Tribunal’.

In S.S. Rathore Vs. State of Madhya pradesh [(1989) 4  SCC 582], noticing the earlier Constitution Benches decision  of this Court in Mohammad Nooh (supra), Madan Gopal Rungta  Vs. Secy. To the Government of Orissa [1962 Supp 3 SCR 906],  Collector of Customs, Calcutta Vs. East India Commercial Co.  Ltd. [(1963) 2 SCR 563] as well as 3-Judge Bench of this  Court in Somnath Sahu Vs. State of Orissa [(1969) 3 SCC  384], this Court observed:

"14. The distinction adopted in  Mohammad Nooh case (1958 SCR 595 : AIR  1958 SC 86) between a court and a  tribunal being the appellate or the  revisional authority is one without any  legal justification. Powers of  adjudication ordinarily vested in courts  are being exercised under the law by  tribunals and other constituted  authorities. In fact, in respect of many  disputes the jurisdiction of the court  is now barred and there is a vesting of  jurisdiction in tribunals and  authorities. That being the position, we  see no justification for the distinction  between courts and tribunals in regard  to the principle of merger. On the  precedents indicated, it must be held  that the order of dismissal made by the  Collector did merge into the order of  the Divisional Commissioner when the  appellant’s appeal was dismissed on  August 31, 1966."  

       Rathore’s case (supra) was followed in Mohd.  Quaramuddin (Dead) By LRS. Vs. State of A.P. [(1994) 5 SCC  118] and noticed in Kunhayammed (supra).

       We may now, keeping in view the law laid down by this  Court, as noticed hereinbefore, consider the decisions  relied upon by Mr. Malhotra.

       In Juscurn Boid (supra) the question which arose for  consideration was as to in a suit for recovery of the  purchase money paid for sale of a patni taluk under Bengal  Regulation VIII of 1819, which had been set aside; what  would be the date when cause of action therefor can be said  to have arisen?  

In that case several suits were filed.  The sale was  reversed in its entirety in the first suit.  Stay was not  granted in the other suits.  In the peculiar fact situation  obtaining therein it was held that under the Indian law and  procedure when a original decree is not questioned by  presentation of an appeal nor is its operation interrupted;  where the decree on appeal is one of dismissal, the running  of the period of limitation did not stop.

       In Maqbul Ahmad (supra) the question which arose for  consideration was as to whether subsequent to the passing of

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a preliminary decree in the mortgage suit, an application to  obtain execution under the preliminary decree can be  dismissed. In that case a preliminary mortgage decree was  obtained on 7th May, 1917 which was amended in some  respects on 22nd May, 1917.  Some of the mortgagors who  were interested in different villages comprised in the  mortgage, appealed to the High Court against the preliminary  decree.  Two such appeals were filed.  One appeal succeeded  while the other failed.  The decrees of the High Court  disposing of those appeals were made on 7th June, 1920  whereafter the decree-holder proceeded to seek execution  under the preliminary decree.  In the aforementioned  situation, it was held:

"It is impossible to say, apart from  any other objection, that the  application to obtain execution under  the preliminary decree was an  application for the same relief as the  application to the Court for a final  mortgage decree for sale in the suit.   That being so, it is not permissible, on  the basis of S. 14 in computing the  period of limitation prescribed, to  exclude that particular period."

       The question which falls for consideration in this case  did not arise therein.

       Before we advert to P.K. Kutty (supra) we may notice  another decision of this Court in Sales Tax Officer, Banaras  and others Vs. Kanhaiya Lal Makund Lal Saraf [AIR 1959 SC  135].  In that case an order of assessment was in question  which came up before this Court.  The question which arose  for consideration therein was as to whether Section 72 of  the Indian Contract Act had any application.  This Court  held that cause of action for filing the suit for recovery  would arise from the date when such payment of tax made  under a mistake of law became known to the party.   

       In P.K. Kutty (supra) an order of assessment under the  Agricultural Income Tax was set aside by the High Court by a  judgment dated 1st January, 1968. A civil suit was filed  in the year 1974.  The suit was held to be barred by  limitation.  A Contention was raised therein that the  appellant had discovered the mistake on 5th October, 1971  when the Court dismissed the appeal filed by the State  against the order passed by the High Court dated 1st  January, 1968.  This Court negatived the said plea stating:

"3...We are unable to agree with the  learned counsel. It is not in dispute  that at his behest the assessment was  quashed by the High Court in the  aforesaid OP on 1-1-1968. Thereby the  limitation started running from that  date. Once the limitation starts  running, it runs its full course until  the running of the limitation is  interdicted by an order of the Court."

       Distinguishing Kanhaiya Lal (supra), it was observed:

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"5.. .We do not have that fact  situation in this case. The appellant is  a party to the proceedings and at his  instance the assessment of agricultural  income tax was quashed as referred to  hereinbefore and having had the  assessment quashed the cause of action  had arisen to him to lay the suit for  refund unless it is refunded by the  State. The knowledge of the mistake of  law cannot be countenanced for extended  time till the appeal was disposed of  unless, as stated earlier, the operation  of the judgment of the High Court in the  previous proceedings were stayed by this  Court."

       In Mohinder Singh Jagdev (supra) also this Court held: "7. The crucial question is whether the  suit is barred by limitation ? Section 3  of the Limitation Act, 1963 (for short,  "the Act") postulates that the  limitation can be pleaded. If any  proceedings have been laid after the  expiry of the period of limitation, the  court is bound to take note thereof and  grant appropriate relief and has to  dismiss the suit, if it is barred by  limitation. In this case, the relief in  the plaint, as stated earlier, is one of  declaration. The declaration is clearly  governed by Article 58 of the Schedule  to the Act which envisages that to  obtain "any other" declaration the  limitation of three years begins to run  from the period when the right to sue  "first accrues". The right to sue had  first accrued to the respondent on 10-9- 1957 when the respondent’s services came  to be terminated. Once limitation starts  running, until its running of limitation  has been stopped by an order of the  competent civil court or any other  competent authority, it cannot stop. On  expiry of three years from the date of  dismissal of the respondent from  service, the respondent had lost his  right to sue for the above  declaration."  

       Unfortunately in P.K. Kutty (supra) and Mohinder Singh  Jagdev (supra) no argument was advanced as regard  applicability of doctrine of merger.  The ratio laid down by  the Constitution Benches of this Court had also not been  brought to the court’s notice.

       In the aforementioned cases, this Court failed to take  into consideration that once an appeal is filed before this  Court and the same is entertained, the judgment of the High  Court or the Tribunal is in jeopardy.  The subject matter of  the lis unless determined by the last Court, cannot be said  to have attained finality.  Grant of stay of operation of  the judgment may not be of much relevance once this Court  grants special leave and decides to hear the matter on

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merit.         It has not been and could not be contended that even  under the ordinary civil law the judgment of the appellate  court alone can be put to execution.  Having regard to the  doctrine of merger as also the principle that an appeal is  in continuation of suit, we are of the opinion that the  decision of the Constitution Bench in S.S. Rathore (supra)  was to be followed in the instant case.

       The facts obtaining in Mohinder Singh Jagdev (supra)  being totally different, the same cannot said to have any  application in the facts obtaining in the present case.

       We, therefore, are of the opinion that P.K. Kutty  (supra) does not lay down the law correctly and is overruled  accordingly.  

The matter may now be placed before an appropriate  Bench for disposal of the appeals on merits.