2005(2) ALL MR 113
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
R.M. LODHA AND J.P. DEVADHAR, JJ.
Life Insurance Corporation Of India Vs. M. Ramarao & Ors.
Writ Petition No.1881 of 2004
15th July, 2004
Petitioner Counsel: Mr. SOLI DASTUR,Mr. F. IRANI,Little & Co.
Respondent Counsel: Mr. S. S. PAKALE,Mr. A. S. RAO
Constitution of India, Art.226 - Writ jurisdiction - Dispute between public sector undertaking and Govt. Department - Should be referred to High powered committee and not brought before writ court - Order demanding service tax from Life Insurance Corporation by Excise Authorities - Petition against by LIC without clearance from High Powered Committee - Deprecated being in derogation of directives of Cabinet Secretariat and law laid down by Apex Court.(Paras 8, 10, 11)
Oil and Natural Gas Commission Vs. Collector of Central Excise, 1992 Supp (2) SCC 432 [Para 3]
Oil and Natural Gas Commission Vs. Collector of Central Excise, 1995 Supp (4) SCC 541 [Para 4]
Chief Conservator of Forests, Government of A.P. Vs. Collector, (2003)3 SCC 472 [Para 5]
Mahanagar Telephone Nigam Ltd. Vs. Chairman, Central Board, Direct Taxes, 2004 AIR SCW 2934 [Para 6]
Canara Bank Vs. National Thermal Power Corporation, (2001)1 SCC 43 [Para 6]
Collector of Central Excise Vs. Jessop & Co. Ltd., (1999)9 SCC 181 [Para 6]
R. M. LODHA, J.:- This writ petition illustrates not only the lack of propriety and polity smacking of in discipline but is also contrary to the directives of the Supreme Court and Office Memorandum issued by the Government of India.
2. The Life Insurance Corporation of India - a statutory Corporation established under Section 3 of the Life Insurance Corporation Act, 1956 is the petitioner before us. Invoking Article 226 of the Constitution of India, the petitioner challenges the demand of service tax in respect of renewal commission, hereditary commission and terminated agents commission and levy of consequential interest and penalty by the respondent Nos.1 to 4 herein. The controversy raised in the writ petition by the petitioner, an arm and instrumentality of the Government is against the Department of Central Excise of the Government of India.
3. In Oil and Natural Gas Commission & Anr. Vs. Collector of Central Excise (1992 Supp (2) Supreme Court Cases 432), the Supreme Court observed that the disputes between public sector undertakings and Union of India should not be brought before the Court wasting public money and time. Terming such litigation as frivolous, the Supreme Court observed thus :
"2. The withdrawal was on the basis of the instructions issued by the Ministry of Petroleum and Natural Gas vide their letter dated October 3, 1988. Later on September 28, 1989 the Chairman of the ONGC was intimated to the following effect :
'Please refer to our Do letter No.DBC/Acctts/111/9/87 dated June 24, 1989 regarding excise duty on lean gas supplied to consumers ex-Uran. The suggestion made by you has been examined and in view of the fact that the CBEC is not prepared to withdraw the demand and refer the matter to arbitration, ONGC may approach the Supreme Court for appropriate relief.
3. This Court has on more than one occasion pointed out that Public Sector Undertakings of Central Government and the Union of India should not fight their litigations in Court by spending money on fees of counsel, court fees, procedural expenses and wasting public time. Courts are maintained for appropriate litigations. Court's time is not to be consumed by litigations which are carried on either side at public expenses from the source. Notwithstanding these observations repeated on a number of occasions, the present cases appear to be an instance of total callousness. The letter of October 3, 1988, indicated that the Cabinet Secretary was looking into the matter. That has not obviously been followed up. As an instance of wasting public time and energy this matter involves a principle to be examined at the highest level."
4. In Oil and Natural Gas Commission Vs. Collector of Central Excise (1995 Supp (4) SCC 541), the Supreme Court held that in every case where a dispute is between Government Departments and/or between a Government Department and a Public Sector Undertaking, the matter should be referred to the High Powered Committee established by the Government pursuant to an order of the Court dated September 11, 1991.
5. In Chief Conservator of Forests, Government of A.P. Vs. Collector & Others ((2003)3 Supreme Court Cases 472), the Supreme Court reiterated its observations made in the cases cited supra and held that the disputes between the Government Departments cannot be decided in Court and need to be resolved by a mechanism for resolving interdepartmental controversies.
6. Recently in the case of Mahanagar Telephone Nigam Ltd. Vs. Chairman, Central Board, Direct Taxes & Anr. (2004 AIR SCW 2934), the Supreme Court reminded the Government Departments and Public Sector Undertakings its earlier decision referred above and the cases namely Canara Bank Vs. National Thermal Power Corporation ((2001)1 SCC 43) and Collector of Central Excise Vs. Jessop & Co. Limited ((1999)9 SCC 181) and observed that the controversy arising between various Departments of the States or the State and any of its Undertakings must be first endeavoured to be resolved through the High Powered Committee. In paragraphs 8 and 9, the Supreme Court held thus :
"8. 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 (supra) it was not contemplated by the framers of the Constitution or C.P.C 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 the 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 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.
9. In this case this is absolutely what has happened. The Appellants wanted to approach the court only against a show-cause-notice. It is settled law that against a show-cause-notice litigation should not be encouraged. The decision of the High Powered Committee, set out hereinabove, merely emphasizes the well settled position. It is an eminently fair and correct decision. The purpose of the decision was to prevent frivolous litigation. No right of the Appellants is being affected. It has been clarified that the Appellants could move a Court of law against an appelable order. By not maintaining discipline and abiding by the decision, the Appellants have wasted public money and time of the Court. The clarificatory order, relied upon by Mr. Andhyarujina, clarifies in Para 5 as to what is to happen if clearance is not given by the Committee. It is set out that in the absence of the clearance the proceedings must not be proceeded with. This position is further clarified in Chief Conservator of Forests' case (supra) where again this Court has held that the decision taken by such a Committee is binding on all Departments concerned and it is the stand of the Government."
7. When we invited the attention of the learned Senior Counsel to the aforesaid legal position, Mr. Dastur initially submitted that there was no bar in lodging the petition under Article 226 by a Public Sector Undertaking raising the dispute against the Government but then prayed for withdrawal of the writ petition.
8. The Supreme Court way back in the year 1992 in the case of ONGC observed that the controversy arising between various Departments of the Government or the Government and any of its Undertakings must be resolved through the High Powered Committee and if the dispute is not resolved, get clearance from the said Committee. In the backdrop of the said position reiterated time and again, the filing of the writ petition by the Life Insurance Corporation under Article 226 at least without clearance from the High Powered Committee has to be deprecated. The procedure directed by the Supreme Court for resolution of the controversy arising between the Departments of the Government or the Government and its Undertakings has to be followed without exception. Filing of such writ petition by the Corporation results in loss of public money and time and that must be avoided.
9. As a matter of fact the Government of India issued a Office Memorandum No.53/3/10/94-Cab. in the matter of settlement of disputes between the Government Department and another and one Government Department and a Public Enterprises and Public Enterprises and another. The said Office Memorandum reads thus :
" No.53/3/10/94-Cab. CABINET SECRETARIAT RASHTRAPATHI BHAVAN OFFICE MEMORANDUM
Subject : Settlement of Disputes between the Government Department and another and one Government Department and a Public Enterprises and Public Enterprises and another.
The undersigned is directed to refer to this Sectt.O.M.No.53/3/6891-Cab., dated 31st December, 1991 whereby a Committee was constituted to give clearance to the disputes between a Government Department and another and one Government Department and a Public Sector Enterprises and Public Enterprises themselves, before these are agitated in a Court/Tribunal. The Hon'ble Supreme Court had an occasion to go into the working of the Committee in the Civil Appeal Nos.2058-59/1988 (IA Nos.3 & 4 of 1992) between Oil & Natural Gas Commission Vs. Collector of Central Excise and has further directed vide its order, dated 7-1-1994 as follows :-
(i) All the pending matters before any Court or Tribunal should also be subject matter of the deliberations of the Committee. All the matters pending as on 7-1-1994 either instituted by the Union of India or any of the Public Sector Undertakings, shall within one month from the said date i.e. 7-1-1994 be referred by the appellant or the petitioner, as the case may be, to the High Power Committee.
(ii) There should be no bar to the lodgement of an appeal or petition either by the Union of India or by the Public Sector Undertakings before any Court or Tribunal, so as to save limitation. But, before such filing every endeavour should be made to have the clearance of the Committee. However, as to what the Court or Tribunal should do if such judicial remedies are sought before such a Court or Tribunal, the Supreme Court's order of 11th October, 1991 clarifies :-
"It shall be the obligation of every High Court and every Tribunal where such a dispute is raised hereafter to demand a clearance from the Committee in case it has not been so pleaded and in the absence of the clearance, the proceeding would not be proceeded with."
(iii) Wherever appeals/petition etc., are filed without the clearance of the High Power Committee, so as to save limitation, the appellant or the petitioner, as the case may be, shall within one month from such filing, refer the matter to the High Power Committee, with prior notice to the designated authority in Cabinet Secretariat (Under Secretary (Co-ordination) authorised to receive notices in that behalf. The reference shall be deemed to have been made and become effective only after the notice of the reference is lodged with the Under Secretary (Co-ordination) in the Cabinet Secretariat. The reference shall be deemed to be valid if made in the case of Union of India by its Secretary, in the Ministry of Finance, Department of Revenue and in the case of Public Sector Executive, as the case may be. It is only after such reference to the Committee is made in the manner indicated that the operation of the order or proceedings under challenge, shall be suspended till the Committee resolves the dispute or gives clearance to the litigation. If the High Power Committee is unable to resolve the matter for reasons to be recorded by it, it shall grant clearance for the litigation.
2. In view of the directions of the Hon'ble Supreme Court mentioned above, it is requested that the Ministry/Department of Government of India and Public Sector Undertakings should refer the dispute to the Committee in a self-contained note. It is also requested that while forwarding the requisite note (15 copies) to this Secretariat, the note may also be circulated to the Members of the committee viz., Secretary, Department of Industrial Development, Secretary, Department of Public Enterprises, Secretary, Department of Legal Affairs, Finance Secretary, Secretary of the administrative Ministry/Department of Public Sector Undertakings and Chief Executive of the concerned Public Sector Undertakings viz. Public Sector Undertakings which are parties to the dispute/or concerned in that matter.
3. The foregoing instructions may be brought to the notice of all concerned for guidance and strict compliance."
10. The petitioner - Life Insurance Corporation has certainly ignored the aforesaid Office Memorandum and for the reasons best known to it filed the present writ petition in derogation to the directives of the Cabinet Secretariat and the law laid down by the highest Court of the land.
11. We direct the Chairman, Life Insurance Corporation of India to order inquiry into the conduct of the Officers and Officials who acted contrary to law in filing the present writ petition and take corrective measures so that in future the public money and time is not wasted by filing such avoidable petitions.
12. Since the learned Senior Counsel finally prayed for withdrawal of the writ petition, we allow the writ petition to be withdrawn. The petitioner-Corporation shall be at liberty to have the controversy resolved and settled through interdepartmental mechanism as provided in the Office Memoramdum noticed above. We record the statement of Mr. S.S. Pakale, the learned Counsel for the respondents that no coercive process shall be taken against the petitioner-Corporation for recovery of the disputed service tax until the dispute is considered by the High Powered Committee.