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arbitration is held in india the provisions of part i would com - pulsorily apply and parties are free to deviate only to the extent permitted by the derogable provisions of part i. in cases of international commercial arbitra - tions held out of india provisions of part i would ap - ply unless the parties by agreement, express or im - 35 plied, exclude all or any of its provisions. in that case the laws or rules chosen by the parties would prevail. any provision, in part i, which is contrary to or excluded by that law or rules will not apply. 37. in view of the aforesaid, it would be necessary to analyze the relevant articles of the psc, to discover the real intention of the parties as to whether the provisions of arbitration act, 1996 have been excluded. it must, immediately, be noticed that articles 32. 1 and 32. 2 deal with applicable law and language of the contract as is evident from the heading of the article which is applicable law and language of the contract. article 32. 1 provides the proper law of the contract i. e. laws of india. article 32. 2 makes a declaration that none of the provisions contained in the contract would entitle either the government or the contractor to exercise the rights, privileges and powers conferred upon it by the contract in a manner which would contravene the laws of india. 38. article 33 makes very detailed provision with regard to the resolution of disputes through arbitration. the two articles do not overlap - one ( art. 32 ) deals with the proper law of the 36 contract, the other ( art. 33 ) deals with adr, i. e. consultations between the parties ; conciliation ; reference to a sole expert and ultimately arbitration. under article 33, at first efforts should be made by the parties to settle the disputes among themselves ( 33. 1 ). if these efforts fail, the parties by agreement shall refer the dispute to a sole expert ( 33. 2 ). the provision with regard to constitution of the arbitral tribunal provides that the arbitral tribunal shall consist of three arbitrators ( 33. 4 ). this article also provides that each party shall appoint one arbitrator. the arbitrators appointed by the parties shall appoint the third arbitrator. in case, the procedure under article 33. 4 fails, the aggrieved party can approach the permanent court of arbitration at hague for appointment of an arbitrator ( 33. 5 ). further, in case the two arbitrators fail to make an appointment of the third arbitrator within 30 days of the

appointment of the second arbitrator, again the secretary general of the permanent court of arbitration at hague may, at the request of either party appoint the third arbitrator. in the face of this, it is difficult to appreciate the submission of the respondent union of india that the arbitration act, 1996 ( part i ) would be applicable to 37 the arbitration proceedings. in the event, union of india intended to ensure that the arbitration act, 1996 shall apply to the arbitration proceedings, article 33. 5 should have provided that in default of a party appointing its arbitrator, such arbitrator may, at the request of the first party be appointed by the chief justice of india or any person or institution designated by him. thus, the permanent court of arbitration at hague can be approached for the appointment of the arbitrator, in case of default by any of the parties. this, in our opinion, is a strong indication that applicability of arbitration act, 1996 was excluded by the parties by consensus. further, the arbitration proceedings are to be conducted in accordance with the uncitral rules, 1976 ( 33. 9 ). it is specifically provided that the right to arbitrate disputes and claims under this contract shall survive the termination of this contract ( 33. 10 ). 39. the article which provides the basis of the controversy herein is article 33. 12 which provides that venue of the arbitration shall be london and that the arbitration agreement shall be governed by the laws of england. it appears, as observed earlier, that by a final partial consent 38 award, the parties have agreed that the juridical seat ( or legal place of arbitration ) for the purposes of arbitration initiated under the claimants notice of arbitration dated 16th december, 2010 shall be london, england. 40. we are of the opinion, upon a meaningful reading of the aforesaid articles of the psc, that the proper law of the contract is indian law ; proper law of the arbitration agreement is the law of england. therefore, can it be said as canvassed by the respondents, that applicability of arbitration act, 1996 has not been excluded? 41. it was submitted by mr. ganguly that the intention of the parties was never to exclude the applicability of arbitration act, 1996. it is submitted that the expression laws of india under article 32. 2 would also include the arbitration act, 1996. this submission is without any merit. in our opinion, the expression laws of india as used in article 32. 1 and 32. 2 have a reference only to the contractual obligations to be performed by the parties under the substantive contract i.

e. psc. in other words, the provisions contained in 33. 12 39 are not governed by the provisions contained in article 32. 1. it must be emphasized that article 32. 1 has been made subject to the provision of article 33. 12. article 33. 12 specifically provides that the arbitration agreement shall be governed by the laws of england. the two articles are particular in laying down that the contractual obligations with regard to the exploration of oil and gas under the psc shall be governed and interpreted in accordance with the laws of india. in contra - distinction, article 33. 12 specifically provides that the arbitration agreement contained in article 33. 12 shall be governed by the laws of england. therefore, in our opinion, the conclusion is inescapable that applicability of arbitration act, 1996 has been ruled out by a conscious decision and agreement of the parties. applying the ratio of law as laid down in bhatia international ( supra ) it would lead to the conclusion that the delhi high court had no jurisdiction to entertain the petition under article 34 of the arbitration act, 1996. 42. article 33 provides for adr its limited application is to dispute resolution through arbitration as opposed to civil 40 litigation. therefore, there is no violation of 32. 2, as arbitration act, 1996, in fact signifies parliamentary sanction of adr. in fact, article 32. 3 indicates that obligations under psc and arbitration agreement are separate. hence, it is provided that english shall be the language of the contract. followed by the stipulation that english shall also be the law of arbitral proceedings. therefore, the conclusion of the high court that psc is a composite contract is not in tune with the approved provisions of the psc. this separateness is further emphasized by article 32. 1 by making the provision subject to the provision of article 33. 12. laws of india have been made applicable to the substantive contract. law of england govern the dispute resolution mechanism. provision for arbitration is a deliberate election of remedy other than usual remedy of a civil suit. the adr mechanism under the arbitral laws of different nations is legally and jurisprudentially accepted, sanctified by the highest law making bodies of the member states, signatories to the new york convention. india is not only a signatory to the new york convention, but it has taken into account the uncitral model laws and the uncitral rules, whilst 41 enacting the arbitration act, 1996. therefore, it would not be possible to accept the submission of mr. ganguly

that the law of the contract is also the law of the arbitration agreement. 43. in our opinion, it is too late in the day to contend that the seat of arbitration is not analogous to an exclusive jurisdiction clause. this view of ours will find support from numerous judgments of this court. once the parties had consciously agreed that the juridical seat of the arbitration would be london and that the arbitration agreement will be governed by the laws of england, it was no longer open to them to contend that the provisions of part i of the arbitration act would also be applicable to the arbitration agreement. this court in the case of videocon industries ltd. ( supra ) has clearly held as follows : - 33. in the present case also, the parties had agreed that notwithstanding article 33. 1, the arbitration agreement contained in article 34 shall be governed by laws of england. this necessarily implies that the parties had agreed to exclude the provisions of part i of the act. as a corollary to the above conclusion, we hold that the delhi high court did not have the jurisdiction to entertain the petition filed by the respondents under section 9 of the act 42 and the mere fact that the appellant had earlier filed similar petitions was not sufficient to clothe that high court with the jurisdiction to entertain the petition filed by the respondents. 44. in coming to the aforesaid conclusion this court interpreted similar if not identical provisions contained in the arbitration agreement. the provision with regard to proper law of the contract and the arbitration agreement was as follows : 3. for the sake of convenience, the relevant clauses of articles 33, 34 and 35 of the psc are extracted below : 33. 1. indian law to govern. subject to the provi - sions of article 34. 12, this contract shall be gov - erned and interpreted in accordance with the laws of india. 33. 2. laws of india not to be contravened. subject to article 17. 1 nothing in this contract shall entitle the contractor to exercise the rights, privileges and powers conferred upon it by this contract in a man - ner which will contravene the laws of india. * * * 34. 3. unresolved disputes. subject to the provi - sions of this contract, the parties agree that any matter, unresolved dispute, difference or claim which cannot be agreed or settled amicably within twenty - one ( 21 ) days may be submitted to a sole expert ( where article 34. 2 applies ) or otherwise to an arbitral tribunal for final decision as hereinafter provided.

* * * 34. 12. venue and law of arbitration agreement. the venue of sole expert, conciliation or arbitration proceedings pursuant to this article, unless the parties otherwise agree, shall be kuala lumpur, malaysia, and shall be conducted in the english lan - guage. insofar as practicable, the parties shall con - tinue to implement the terms of this contract not - withstanding the initiation of arbitral proceedings and any pending claim or dispute. notwithstanding the provisions of article 33. 1, the arbitration agree - ment contained in this article 34 shall be governed by the laws of england. * * * 35. 2. amendment. this contract shall not be amended, modified, varied or supplemented in any respect except by an instrument in writing signed by all the parties, which shall state the date upon which the amendment or modification shall become effective. 45. we are of the opinion that in the impugned judgment the high court has erred in not applying the ratio of law laid down in videocon industries ltd. ( supra ) in the present case. the first issue raised in videocon industries limited ( supra ) was as to whether the seat of arbitration was london or kuala lumpur. the second issue was with regard to the courts that would have supervisory jurisdiction over the arbitration proceedings. firstly, the plea of videocon 44 industries limited was that the seat could not have been changed from kuala lumpur to london only on agreement of the parties without there being a corresponding amendment in the psc. this plea was accepted. it was held that seat of arbitration cannot be changed by mere agreement of parties. in paragraph 21 of the judgment, it was observed as follows : - 46. the other issue considered by this court in videocon industries limited ( supra ) was as to whether a petition under section 9 of the arbitration act, 1996 would be maintainable in delhi high court, the parties having specifically agreed that the arbitration agreement would be 45 governed by the english law. this issue was decided against union of india and it was held that delhi high court did not have the jurisdiction to entertain the petition filed by union of india under section 9 of the arbitration act. 47. in the present appeal, this court is also considering the issue as to whether the petition under section 34 of the arbitration act, 1996 filed by union of india in delhi would be maintainable. the parties have made the necessary amendment in the pscs to provide that the juridical seat of arbitration shall be london

. it is also provided that the arbitration agreement will be governed by laws of england. therefore, the ratio in videocon industries limited ( supra ) would be relevant and binding in the present appeal. 48. the aforesaid judgment ( videocon ) has been rendered by this court upon consideration of venture global engineering ( supra ). venture global engineering and videocon industries ltd. are both judgments delivered by two - judge bench. in our opinion, the factual and legal issues involved in the videocon industries case are very 46 similar to the controversy involved in the present appeal. the arbitration agreement in this appeal is identical to the arbitration agreement in videocon industries. in fact, the factual situation in the present appeal is on a stronger footing than in videocon industries limited ( supra ). as noticed earlier, in videocon industries, this court concluded that the parties could not have altered the seat of arbitration without making the necessary amendment to the psc. in the present appeal, necessary amendment has been made in the psc. based on the aforesaid amendment, the arbitral tribunal has rendered the final partial consent award of 14th september, 2011 recording that the juridical seat ( or legal place ) of the arbitration for the purposes of arbitration initiated under the claimant s notice of arbitration dated 16 th december, 2010 shall be london, england. furthermore, the judgment in videocon industries is subsequent to ventura global. we are, therefore, bound by the ratio laid down in videocon industries limited ( supra ). 49. we may also point out that the judgment in videocon 47 industries has been followed on numerous occasions by a number of high courts. this apart, the judgment of this court in videocon industries ltd. also reflects the view taken by the courts in england on the same issues. in the case of a vs. b9 considering a similar situation, it has been held as follows : 50. this court in dozco india ltd. ( supra ) again reiterated the principle of law laid down in sumitomo heavy industries ltd. ( supra ), wherein the law was very clearly enunciated in para 16 : 51. it is noteworthy that the judgment in sumitomo was not 9 2007 ( 1 ) all e. r. ( comm ) 591 48 dissented from in bhatia international on which the judgment in venture global is based. this again persuades us to follow the law laid down in videocon ( supra ). 52. again this court in yog

##raj infrastructure ( two - judge bench ) considered a similar arbitration agreement. it was provided that the arbitration proceedings shall be conducted in english in singapore in accordance with the singapore international arbitration centre ( siac ) rules. ( clause 27. 1 ). clause 27. 2 provided that the arbitration shall take place in singapore and be conducted in english language. this court held that having agreed that the seat of arbitration would be singapore and that the curial law of the arbitration proceedings would be siac rules, it was no longer open to the appellant to contend that an application under section 11 ( 6 ) of the arbitration act, 1996 would be maintainable. 53. this judgment has specifically taken into consideration the law laid down in bhatia international ( supra ) and venture global ( supra ). the same view has been taken by delhi high court, bombay high court and the gujarat high court, 49 in fact this court in videocon has specifically approved the observations made by the gujarat high court in hardy oil ( supra ). 54. the effect of choice of seat of arbitration was considered by the court of appeal in c vs. d10. this judgment has been specifically approved by this court in balco ( supra ) and reiterated in enercon ( supra ). in c vs. d ( supra ), the court of appeal has observed : - primary conclusion16. i shall deal with mr hirst's arguments in due course but, in my judgment, they fail to grapple with the central point at issue which is whether or not, by choosing london as the seat of the arbitration, the parties must be taken to have agreed that proceedings on the award should be only those permitted by english law. in my view they must be taken to have so agreed for the reasons given by the judge. the whole purpose of the balance achieved by the bermuda form ( english arbitration but applying new york law to issues arising under the policy ) is that judicial remedies in respect of the award should be those permitted by english law and only those so permitted. mr hirst could not say ( and did not say ) that english judicial remedies for lack of jurisdiction on procedural irregularities under sections 67 and 68 of the 1996 act were not permitted ; he was reduced to saying that new york judicial remedies were also permitted. that, however, would be a recipe for litigation and ( what is worse ) confusion which cannot have been 10 [ 2008 ] 1 lloyd s

law rep 239 50 intended by the parties. no doubt new york law has its own judicial remedies for want of jurisdiction and serious irregularity but it could scarcely be supposed that a party aggrieved by one part of an award could proceed in one jurisdiction and a party aggrieved by another part of an award could proceed in another jurisdiction. similarly, in the case of a single complaint about an award, it could not be supposed that the aggrieved party could complain in one jurisdiction and the satisfied party be entitled to ask the other jurisdiction to declare its satisfaction with the award. there would be a serious risk of parties rushing to get the first judgment or of conflicting decisions which the parties cannot have contemplated. 55. the aforesaid observations were subsequently followed by the high court of justice queen s bench division, commercial court ( england ) in sulamerica cia nacional de seguros sa vs. enesa engenharia sa enesa11. in laying down the same proposition, the high court noticed that the issue in this case depends upon the weight to be given to the provision in condition 12 of the insurance policy that the seat of the arbitration shall be london, england. it was observed that this necessarily carried with it the english court s supervisory jurisdiction over the arbitration process. it was observed that this follows from the express terms of the arbitration act, 1996 and, in particular, the provisions of 11 ( 2012 ) wl 14764 51 section 2 which provide that part i of the arbitration act, 1996 applies where the seat of the arbitration is in england and wales or northern ireland. this immediately establishes a strong connection between the arbitration agreement itself and the law of england. it is for this reason that recent authorities have laid stress upon the locations of the seat of the arbitration as an important factor in determining the proper law of the arbitration agreement. 56. in our opinion, these observations are fully applicable to the facts and circumstances of this case. the conclusion reached by the high court would lead to the chaotic situation where the parties would be left rushing between india and england for redressal of their grievances. the provisions of part i of the arbitration act 1996 ( indian ) are necessarily excluded ; being wholly inconsistent with the arbitration agreement which provides that arbitration agreement shall be governed by english law. thus the remedy of the respondent to challenge any award rendered in the arbitration proceedings would lie under the relevant provisions contained in arbitration act, 1996 of england and 52 wales. whether or not such an application would now be entertained by

the courts in england is not for us to examine, it would have to be examined by the court of competent jurisdiction in england. public policy : 57. mr. ganguly has vehemently argued that the issues involved here relate to violation of public policy of india. therefore, the applicability of part i of the indian arbitration act cannot be excluded even if the seat of arbitration is london. it would also, according to mr. ganguly, make no difference that the arbitration agreement specifically provides for the arbitration agreement to be governed by the laws of england. according to mr. ganguly, proper law of the contract would be relevant to determine the question as to whether the interim final award would be amenable to challenge under section 34 of the arbitration act, 1996. in our opinion, the aforesaid submission of the learned counsel runs counter to the well settled law in india as well as in other jurisdictions. as noticed earlier, mr. ganguly has submitted that the disputes in relation to royalties, cess, 53 service tax and the cag audit report are not arbitrable. in support of this submission, he relies on the provisions contained in article 15. 1 read with article 32. 2. relying upon these two articles, mr. ganguly submitted that the obligation with regard to taxes, royalties, rentals etc. are not purely contractual, they are governed by the relevant statutory provisions. he, therefore, placed strong reliance on the judgment in venture global ( supra ) in support of his submission that since the disputes are not arbitrable, the award cannot be enforced under part ii of the arbitration act, 1996 but is amenable to challenge under section 34 of the act. it would be appropriate to point out that the judgment in venture global is in two parts. the first part is based on bhatia international ltd., wherein it is held as follows : - 32.. in cases of international commercial arbit - rations held out of india provisions of part i would apply unless the parties by agreement, express or implied, exclude all or any of its provisions. in that case the laws or rules chosen by the parties would prevail. any provision, in part i, which is contrary to or excluded by that law or rules will not apply. 58. in this case, the parties have by agreement provided that the juridical seat of arbitration will be in london. on the basis of the aforesaid agreement, necessary amendment has been 54 made in the pscs. on the basis

of the agreement and the consent of the parties, the arbitral tribunal has made the final partial consent award on 14th september, 2011 fixing the juridical seat ( or legal place ) of arbitration for the purposes of arbitration initiated under the claimants notice of arbitration dated 16th december, 2010 in london, england. to make it even further clear that the award also records that any hearing in the arbitration may take place in paris, france, singapore or any other location the tribunal considers convenient. article 33. 12 stipulates that arbitration proceedings shall be conducted in english language. the arbitration agreement contained in article 33 shall be governed by the laws of england. a combined effect of all these factors would clearly show that the parties have by express agreement excluded the applicability of part i of the arbitration act, 1996 ( indian ) to the arbitration proceedings. 59. we are also unable to agree with mr. ganguly that part i of the arbitration act, 1996 ( indian ) would be applicable in this case, in view of the law laid down by this court in venture global engineering ( supra ). in our opinion, even the 55 second part of the ratio in venture global engineering ( supra ) from paragraph 32 of the judgment onwards would not be applicable to the facts and circumstances of this case. firstly, in our opinion, all the disputes raised by the petitioners herein are contractual in nature. secondly, the performance of any of these obligations would not lead to any infringement of any of the laws of india per se. thirdly, the non - obstante clause which was under consideration in venture global is non - existent in the present case. in venture global, the court was concerned with direct violation of foreign exchange management act. the actions of the respondents therein would also have been contrary to various provisions of the companies act in the event the shares were to be transferred in accordance with the award. therefore, this court was persuaded to take the view that inspite of the applicability of part i having been excluded as the seat of arbitration was outside nonetheless part i would apply as the transfer of the shares would be against the laws of india and, therefore, violate public policy. in our opinion, such circumstances do not exist in the present case as there is no danger of violation of any statutory provisions. prima 56 facie, it appears that there is no challenge to the gazette notification. in fact, claim statement shows that the amounts of royalties / cess levied have been paid. prayer is for reimbursement of the amounts paid, based on articles

15. 6 and 15. 7 of the psc. there also seems to be a claim for making necessary revisions and adjustment to the contract to off - set the effect of any changes in the law. we fail to see any apparent or so patently obvious violation of indian laws in any of these claims. the basis for filing the petition under section 34 is that the appellants are bound to obey the laws of the country. the appellants have nowhere claimed to be exempted from the laws of india. they claim that the government of india, party to the contract, i. e., psc has failed to seek and obtain exemption as stipulated in the contract. whether or not the claim has substance is surely an arbitral matter. it is not the case of the appellants that they are not bound by the laws of india, relating to the performance of the contractual obligations under the pscs. in view of what we have said earlier, it is not possible to sustain the conclusion reached by the high court. the arbitration agreement can not be jettisoned on the plea that 57 award, if made against the government of india, would violate public policy of india. merely because the arbitral tribunal has held that claims are arbitral does not mean that the claims have been accepted and an award adverse to india has been given. we, therefore, have no hesitation in rejecting the submission made by mr. ganguly. for the same reasons, we are unable to sustain the conclusions reached by the high court of delhi. 60. another good reason for not accepting or approving the conclusions reached by the high court is that it has failed to distinguish between the law applicable to the proper law of the contract and proper law of the arbitration agreement. the high court has also failed to notice that by now it is settled, in almost all international jurisdictions, that the agreement to arbitrate is a separate contract distinct from the substantive contract which contains the arbitration agreement. this principle of severability of the arbitration agreement from the substantive contract is indeed statutorily recognized by section 16 of the indian arbitration act, 1996. section 16 ( 1 ) specifically provides as under : - 5862. this principle of separability permits the parties to agree : that law of one country would govern to the substantive contract and laws of another country would apply to the arbitration agreement. the parties can also agree that even the conduct of the reference would be governed by the law of another country. this would be rare, as it would lead to extremely complex problems. it is expected that reasonable

businessman do not intend absurd results. in the present case, the parties had by agreement provided that the substantive contract ( psc ) will be governed by the laws of india. in contradistinction, it was provided that the arbitration agreement will be governed by laws of england. therefore, there was no scope for any confusion of the law governing the psc with the law governing the arbitration agreement. this principle of severability is also accepted specifically under article 33. 10 of the psc, which is as under : - the right to arbitrate disputes and claims under this contract shall survive the termination of this con - tract. 6063. we are, therefore, unable to uphold the conclusions recorded by the high court that the applicability of the english law would be limited in its application only to the conduct of the reference. for the same reasons, we are unable to accept the submissions made by mr. ganguly on this issue. 64. in 1982, the government provided a model production sharing contract to potential bidders, which provided a governing law clause, which read as follows : - 32. 1 this contract shall be governed and inter - preted in accordance with laws of india. this was specifically amended and incorpor - ated in the present pscs signed on 22nd december, 1994 and provided that the governing law clause ( 32. 1 ) would be subject to the provision of article 33. 12. 65. considering the aforesaid two provisions, it leaves no manner of doubt that article 32. 2 would have no impact on the designated juridical seat as well as governing law of the 61 arbitration agreement. this would become evident from a perusal of the final partial consent award dated 14th september, 2011, signed by all the three members of the arbitral tribunal recording that the juridical seat of the arbitration initiated under the claimant s notice dated 16th december, 2010 shall be london, england. therefore, we are unable to accept the conclusion reached by the delhi high court and the submission made by mr. ganguly that arbitration act, 1996 ( part i ) would be applicable to the arbitration agreement. 66. mr. ganguly has next sought to persuade us that the seat of arbitration shall be in india as the psc is governed by the law of india. according to mr. ganguly, laws of india would include the arbitration act, 1996. therefore, irrespective of the provisions contained in article 33. 12, arbitration act, 1996 would be applicable to arbitration proceedings. the english

law would be applicable only in relation to the conduct of the arbitration upto the passing of the partial final award. we are unable to accept the aforesaid submissions of mr. ganguly. as noticed earlier, article 32. 1 itself 62 provides that it shall be subject to the provision of article 33. 12. article 33. 12 provides that the arbitration agreement contained in this article shall be governed by the laws of england. the term laws of england cannot be given a restricted meaning confined to only curial law. it is permissible under law for the parties to provide for different laws of the contract and the arbitration agreement and the curial law. in naviera amazonica sa ( supra ), the court of appeal in england considered an agreement which contained a clause providing for the jurisdiction of the courts in lima, peru in the event of judicial dispute and at the same time contained a clause providing that the arbitration would be governed by the english law and the procedural law of arbitration shall be the english law. the court of appeal observed as follows : - all contracts which provide for arbitration and contain a foreign element may involve three potentially relevant systems of law : ( 1 ) the law governing the substantive contract ; ( 2 ) the law governing the agreement to arbitrate and the performance of that agreement ; ( 3 ) the law governing the conduct of the arbitration. in the majority of cases all three will be the same. but ( 1 ) will often be different from ( 2 ) and ( 3 ). and occasionally, but rarely ( 2 ) may also differ from ( 3 ). 6367. from the above, it is evident that it was open to the parties to agree that the law governing the substantive contract ( psc ) would be different from the law governing the arbitration agreement. this is precisely the situation in the present case. article 32. 1 specifically provides that the performance of the contractual obligations under the psc would be governed and interpreted under the laws of india. so far as the alternative dispute redressal agreement i. e. the arbitration agreement is concerned, it would be governed by laws of england. there is no basis on which the respondents can be heard to say that the applicability of laws of england related only to the conduct of arbitration reference. the law governing the conduct of the arbitration is interchangeably referred to as the curial law or procedural law or the lex fori. the delineation of the three operative laws as given in naviera amazonica ( supra ) has been specifically followed by this court in the case

of sumitomo ( supra ). the court also, upon a survey, of a number of decisions rendered by the english courts and after referring to the views expressed by learned commentators on international commercial 64 arbitration concluded that : - 16. the law which would apply to the filing of the award, to its enforcement and to its setting aside would be the law governing the agreement to arbit - rate and the performance of that agreement. 68. in coming to the aforesaid conclusion, this court relied on a passage from law and practice of commercial arbitration in england, 2nd edn. by mustill and boyd which is as under : an agreed reference to arbitration involves two groups of obligations. the first concerns the mutual obligations of the parties to submit future disputes, or an existing dispute to arbitration, and to abide by the award of a tribunal constituted in accordance with the agreement. it is now firmly established that the arbitration agreement which creates these oblig - ations is a separate contract, distinct from the sub - stantive agreement in which it is usually embedded, capable of surviving the termination of the substant - ive agreement and susceptible of premature termin - ation by express or implied consent, or by repudi - ation or frustration, in much the same manner as in more ordinary forms of contract. since this agree - ment has a distinct life of its own, it may in principle be governed by a proper law of its own, which need not be the same as the law governing the substant - ive contract. the second group of obligations, consisting of what is generally referred to as the curial law of the ar - bitration, concerns the manner in which the parties and the arbitrator are required to conduct the refer - ence of a particular dispute. according to the eng - lish theory of arbitration, these rules are to be ascer - tained by reference to the express or implied terms of the agreement to arbitrate. this being so, it will 65 be found in the great majority of cases that the curi - al law, i. e., the law governing the conduct of the ref - erence, is the same as the law governing the obliga - tion to arbitrate. it is, however, open to the parties to submit, expressly or by implication, the conduct of the reference to a different law from the one govern - ing the underlying arbitration agreement. in such a case, the court looks first at the arbitration agreement to see whether the

dispute is one which should be arbitrated, and which has validly been made the subject of the reference, it then looks to the curial law to see how that reference should be conducted and then returns to the first law in order to give effect to the resulting award. * * * it may therefore be seen that problems arising out of an arbitration may, at least in theory, call for the application of any one or more of the following laws 1. the proper law of the contract, i. e., the law governing the contract which creates the sub - stantive rights of the parties, in respect of which the dispute has arisen. 2. the proper law of the arbitration agree - ment, i. e., the law governing the obligation of the parties to submit the disputes to arbitra - tion, and to honour an award. 3. the curial law, i. e., the law governing the conduct of the individual reference. * * * 1. the proper law of the arbitration agreement gov - erns the validity of the arbitration agreement, the question whether a dispute lies within the scope of 66 the arbitration agreement ; the validity of the notice of arbitration ; the constitution of the tribunal ; the question whether an award lies within the jurisdic - tion of the arbitrator ; the formal validity of the award ; the question whether the parties have been dis - charged from any obligation to arbitrate future dis - putes. 2. the curial law governs the manner in which the reference is to be conducted ; the procedural powers and duties of the arbitrator ; questions of evidence ; the determination of the proper law of the contract. 3. the proper law of the reference governs the question whether the parties have been discharged from their obligation to continue with the reference of the individual dispute. * * * in the absence of express agreement, there is a strong prima facie presumption that the parties in - tend the curial law to be the law of the seat of the arbitration, i. e., the place at which the arbitration is to be conducted, on the ground that that is the country most closely connected with the proceed - ings. so in order to determine the curial law in the absence of an express choice by the parties it is first necessary to determine the seat of the arbitra - tion, by construing the agreement to arbitrate. 69. the same legal position is reiterated by this court in dozco ( supra ). in paragraph 12

of the judgment, it is observed as follows : 12. in the backdrop of these conflicting claims, the 67 question boils down to as to what is the true inter - pretation of article 23. this article 23 will have to be read in the backdrop of article 22 and more particu - larly, article 22. 1. it is clear from the language of article 22. 1 that the whole agreement would be gov - erned by and construed in accordance with the laws of the republic of korea. it is for this reason that the respondent heavily relied on the law laid down in sumitomo heavy industries ltd. v. ongc ltd. 6 this judgment is a complete authority on the pro - position that the arbitrability of the dispute is to be determined in terms of the law governing arbitration agreement and the arbitration proceedings have to be conducted in accordance with the curial law. this court, in that judgment, relying on mustill and boyd : the law and practice of commercial arbitration in england, 2nd edn., observed in para 15 that where the law governing the conduct of the reference is different from the law governing the underlying arbit - ration agreement, the court looks to the arbitration agreement to see if the dispute is arbitrable, then to the curial law to see how the reference should be conducted, and then returns to the first law in order to give effect to the resulting award. in para 16, this court, in no uncertain terms, declared that the law which would apply to the filing of the award, to its enforcement and to its setting aside would be the law governing the agreement to arbitrate and the performance of that agreement. 70. we are in respectful agreement with the aforesaid judgment. 71. in view of the aforesaid binding precedent, we are unable to accept the submission of mr. ganguly that the arbitration act, 1996 has not been excluded by the parties by 68 agreement. for the same reasons, we are unable to approve the conclusions reached by the delhi high court that reference to laws of england is only confined to the procedural aspects of the conduct of the arbitration reference. 72. we are also unable to agree with the submission of mr. ganguly that since the issues involved herein relate to the public policy of india, part i of the arbitration act, 1996 would be applicable. applicability of part i of arbitration act, 1996 is not dependent on the nature of challenge to the award. whether or not the award is challenged

on the ground of public policy, it would have to satisfy the pre - condition that the arbitration act, 1996 is applicable to the arbitration agreement. in our opinion, the high court has committed a jurisdictional error in holding that the provisions contained in article 33. 12 is relevant only for the determination of the curial law applicable too the proceedings. we have already noticed earlier that the parties by agreement have provided that the juridical seat of the arbitration shall be in london. necessary amendment has also been made in the pscs, as 69 recorded by the final partial consent award dated 14th september, 2011. it is noteworthy that the arbitration act, 1996 does not define or mention juridical seat. the term juridical seat on the other hand is specifically defined in section 3 of the english arbitration act. therefore, this would clearly indicate that the parties understood that the arbitration law of england would be applicable to the arbitration agreement. 73. in view of the aforesaid, we are unable to uphold the conclusion arrived at by the delhi high court that the applicability of arbitration act, 1996 to the arbitration agreement in the present case has not been excluded. 74. in view of the above, we hold that : ( iii ) in the event, a final award is made against the respondent, the enforceability of the same in in - dia, can be resisted on the ground of public policy. ( iv ) the conclusion of the high court that in the event, the award is sought to be enforced outside india, it would leave the indian party remediless is without any basis as the parties have consen - sually provided that the arbitration agreement will be governed by the english law. therefore, the remedy against the award will have to be sought in england, where the juridical seat is located. however, we accept the submission of the appel - 71 lant that since substantive law governing the con - tract is indian law, even the courts in england, in case the arbitrability is challenged, will have to decide the issue by applying indian law viz. the principle of public policy etc. as it prevails in indi - an law. 75. in view of the above, the appeal is allowed and the impugned judgment of the high court is set aside.. j. [ surinder singh nijjar ].. j. [ a. k. sikri ] new delhi ; may 28, 2014. ( arising out of s. l. p. ( civil ) no. 20041 of 2013 ) reliance industries ltd.

& anr. appellant ( s ) versus u. o. i. respondent ( s ) date : 28 / 05 / 2014 this matter was called on for pronouncement of judgment today. for appellant ( s ) mr. sameer parekh, adv. mr. utsav trivedi, adv. for m / s p. h. parekh & co. for respondent ( s ) mr. a. k. ganguli, sr. adv. mr. abhijeet sinha, adv. ms. swati sinha, adv. mr. vishal gehrana, adv. for m / s fox mandal & co. hon'ble mr. justice surinder singh nijjar pronounced the judgment of the bench comprising his lordship and hon'ble mr. justice a. k. sikri. leave granted. the appeal is allowed in terms of the signed judgment. [ signed reportable judgment is placed on the file ]

m. y. eqbal, j. : 1. these appeals have been filed against the common judgment and order dated 21. 12. 2000 passed by delhi high court in l. p. a. nos. 4, 43, 139, 148 of 1987, 21 of 1988, 77 of 1993 and 86 of 1994. by the said judgment, the high court allowed the appeals preferred by the respondents and quashed not only their termination orders but also the general court martial ( hereinafter referred to as gcm ) proceedings held against captain ashok kumar rana and captain r. s. rathaur. 2. before we proceed with the matter, it would be appropriate to highlight the factual background and brief history of the case. in february 1971, gunner sarwan dass was cultivated by pakistan intelligence. in 1972 captain ghalwat and gunner sarwan dass crossed the international border. in 1973 captain ghalwat and gunner sarwan dass were posted in babina ( m. p. ). in 1974 gunner aya singh was cultivated by gunner sarwan dass for pak intelligence. captain nagial was then cultivated by aya singh for pak intelligence. in 1975 for the first time the espionage racket came to be noticed. aya singh and sarwan dass were arrested. in 1976 - 77 pursuant to the investigation, three more jawans were arrested. they corroborated the involvement of sarwan dass. sarwan dass and aya singh on further interrogation disclosed the names of captain ghalwat and captain nagial. in 1976 - 77 captain ghalwat and captain nagial were tried by gcm and were convicted. ghalwat was cashiered and given 14 years ri. nagial was given 7 years ri and was also cashiered. in addition, 12 jawans were tried and they were given ri of various descriptions and were dismissed from services. aya singh and sarwan dass were also among the 12 jawans tried and held guilty. later in 1978 it was discovered that aya singh was holding back certain relevant information relating to espionage activities under certain alleged threat and pressure. wife of aya singh claimed to be killed. reeling under the shock of the circumstances, he made further disclosures wherein he named captain rathaur and captain a. k. rana ; disclosed that he had been receiving threats that if he disclosed anything his wife would be killed.

accordingly, in 1978 captain rathaur and captain a. k. rana were interrogated. as a result, 42 army personnel i. e. 19 officers, 4 junior commissioned officers ( jcos ) and 19 other ranks ( ors ), were arrested. out of the 19 officers, 3 officers were tried by gcm, two were convicted, namely, captain ranbir singh rathaur and captain a. k. rana, and one was acquitted. captain ranbir singh rathaur and captain a. k. rana were sentenced to ri for 14 years each and were cashiered. against 13 officers, disciplinary actions were initiated. however, a decision was taken not to try them and an administrative order under section 18 of the army act, 1950 ( in short the army act ) was passed terminating their services. 3. the present appeals arise out of the order passed way back in 1980 terminating the services of the respondents herein which were brought invoking the doctrine of pleasure as enshrined under article 310 of the constitution of india, 1950 ( hereinafter referred to as the constitution ) coupled with the powers to be exercised under section 18 of the army act. initially, the orders of dismissal were passed on 11. 1. 1980, which were assailed in nine writ petitions that were dismissed by the high court of delhi on 21. 4. 1980. the special leave petitions against these writ petitions came to be dismissed by this court on 1. 9. 1980. 4. in the meanwhile, a corrigendum came to be issued, as a result whereof, the orders of dismissal were described as orders of termination. on account of the substituted termination order, a decision for deducting 5 % of the gratuity amount was taken, which was communicated afresh. these orders made a fresh ground of challenge before a learned single judge of the delhi high court. the learned single judge dismissed the petition by a detailed judgment dated 22. 3. 1985. simultaneously, one captain r. s. rathaur had filed a writ petition no. 1577 of 1985 under article 32 of the constitution before this court, which stood dismissed refusing to re - open the issues already decided. 5. against the order of the learned single judge dated 22. 3. 1985, several letters patent appeals were filed. one of the appeals, being lpa no. 116 of 1985, filed by one n. d. sharma, was decided vide judgment dated 19. 8. 1986 upholding the order

of termination approving the applicability of the doctrine of pleasure. however, at the same time, the appeal was partly allowed in relation to the post - retiral benefits keeping in view the provisions under the army act and rules and it was found that the proposed 5 % cut - off was not in accordance with the act / rules applicable therein. 6. several lpas were filed by other officers relying on the division bench judgment extending the post - retiral benefits, and a plea for similar relief was raised. 7. when these appeals came up for hearing, the division bench of the delhi high court hearing the matter differed with the view on the issue of the applicability of doctrine of pleasure and maintainability of the writ petitions on the ground of malafides vide order dated 15. 5. 1991. consequently, this question of law was referred to be decided by a larger bench. 8. the full bench so constituted to answer this reference held that an order under section 18 of the army act invoking the doctrine of pleasure was subject to judicial review if it is assailed on malafides. it was held that the onus lay on the petitioner / person alleging malafides and to bring material on record to satisfy the court in order to justify the interference. aggrieved, the union of india filed the special leave petition, which stood dismissed. 9. it appears that after the answer of reference, the pending appeals were taken up for decision by the high court. on account of the answer given by the full bench, fresh petitions were filed by those officers whose petitions had been dismissed earlier upto this court as referred to hereinabove, in 1980. some writ petitioners, whose petitions had been dismissed by learned single judge, filed letters patent appeals with applications for condonation of delay. appeals were also filed against those judgments that were given in the second round of litigation proposing to refuse 5 % of the terminal benefits referred to hereinabove. these categories of petitions were described by the division bench hearing the matter in its order dated 2. 5. 1995, as under : - 10. thereafter two writ petitions that were filed afresh, namely, in the case of major subhash juneja and harish lal singh, were heard separately and dealt with the principle of res judicata and constructive res judicata. the said writ petitions were held to be barred by law vide judgment dated 8. 3. 1996. the other connected petitions also appeared to have been dismissed as not maintainable by

another division bench vide order dated 7. 9. 1992. 11. the letters patent appeals which were filed with applications for condonation of delay and also against the judgment proposing 5 % cut - off in the terminal benefits were heard by another division bench that reserved the judgment on 14. 8. 1998 by passing the following order : 12. the division bench that went on to reserve the said judgment delivered it after almost 3 years and allowed the appeals. therein, it was held that the proceedings initiated against the writ petitioners as also against other officers, who were appellants in the other lpas, were vitiated as there was no material to support the impugned orders of termination which were camouflaged and thus, the same were subject to judicial review. accordingly, vide judgment dated 21. 12. 2000, the relief of consequential benefits was granted after setting aside the order of termination. the relevant part thereof is extracted herein : 13. another relevant event in this journey of judicial conflict which is worth mentioning is that two officers, namely, subhash juneja and harish lal singh, whose writ petitions had been dismissed on the ground of constructive res judicata, filed special leave petitions that were converted to civil appeal nos. 1931 and 1932 of 1997 and were finally dismissed by a three - judge bench of this court vide order dated 23. 4. 2003, which is quoted as under : 15. the appeals filed by the union of india, pending before this court against the judgment dated 21. 12. 2000, were split into two parts by the order of this court dated 14. 2. 2006, which is extracted herein : 16. accordingly, the arguments were heard and judgment was reserved in the matter arising out of the two writ petitions filed by ranbir singh rathaur and ashok kumar rana alongwith which delinked seven lpas were also disposed of even though it was observed by this court that they arose out of the same incident. this court vide judgment dated 22. 3. 2006 in the case of union of india & ors. vs. ranbir singh rathaur & ors., ( 2006 ) 11 scc 696 reversed the judgment of the high court dated 21. 12. 2000 vis - a - vis the two writ petitions and held as follows : " ( emphasis added ) on remand, the high court dismissed the writ petitions vide judgment dated 20. 12. 2007 and the same has been placed on record by the appellants.

so far these appeals are concerned, the high court by the impugned common order dated 21. 12. 2000, not only quashed the termination orders but also court martial proceedings held against some of the officers. the division bench of this court, after hearing the counsel appearing for the parties and legal contentions urged, formulated the following points for consideration by a larger bench [ union of india vs. s. p. sharma, ( 2013 ) 10 scc 150 ] : - 20. the learned additional solicitor general at the very outset submitted that issues involving security of the state were extremely complex and the issue related to the expediency and desirability of retaining officers in the army who had become security suspects. the instant cases of the respondent officers were examined at various levels in the army headquarters as also in the central government and the final decision to exercise the power to pass an order of termination was taken by it under section 18 of the army act. learned counsel relied upon the judgment of this court in b. p. singhal vs. union of india & ors. ( 2010 ) 6 scc 331 and contended that the parameters that are required to be taken into consideration for exercise of power under article 310 of the constitution are varied. several of these parameters entail evaluation of issues relevant to the security of the state. the factors that form the basis of exercise of power under article 310 of the constitution cannot be said to be objective parameters that are amenable to judicially manageable standards. the reasons that form the basis of exercise of power under article 310 can extend to varied levels of subjective assessments and evaluations in entailing expert knowledge as to issues of security of the state. in that view of the matter it is submitted that exercise of power of judicial review would accord great latitude to the bona fide evaluation made by the competent authorities in the course of discharge of the duties. the correctness of the opinion formed or the sufficiency of material forming the basis of their decision to pass an order of termination would not be subjected to judicial scrutiny of either the high court or this court. further, placing strong reliance upon b. p. singhal case, ( supra ) it is contended by the learned additional solicitor general that exercise of power of judicial review under article 310 is extremely narrow and is limited to only one parameter, namely, violation of fundamentals of constitutionalism. the standard of judicial review which applies to the case of exercise of executive or statutory or quasi - judicial power cannot be extended to the case of judicial review of constitutional power under article 310. learned

counsel submitted that the fact that article 311 does not apply to the case of officers / employees of armed forces, the power under article 309 also cannot be exercised for limiting the ambit of article 310. the army act is an enactment under article 309. the aforesaid legal principle has been followed consistently in all subsequent decisions of this court. in this connection learned counsel relied upon the judgment of this court in moti ram deka vs. north east frontier railways ( 1964 ) 5 scr 683. further, the constitution bench of this court in ram sarup vs. union of india, air 1965 sc 247 with reference to article 33 of the constitution, has laid down limitations provided on the applicability of fundamental rights guaranteed to the officers / employees of the army under articles 14, 16 and 21 of the constitution and under section 21 of the army act. he has further contended that each of the provisions of the army act also carries the sanction of parliament against the applicability of all other fundamental rights contained under part iii of the constitution to the extent to which the rights contained in the fundamental rights are inconsistent with the provisions of the army act. the aforesaid enunciation of law has again been followed consistently by this court in subsequent decisions. 21. the learned additional solicitor general further contended that in a matter of civilian employees, article 311 represents a limitation over the absoluteness of pleasure doctrine contained in article 310. in moti ram deka ( supra ) and in the subsequent cases, this court laid down that article 311 introduces a twofold procedural safeguard in favour of an employee / officer in relation to the exercise of pleasure doctrine. however, article 311 applies only in cases of punishment and not otherwise. the availability of the safeguards provided for under article 311 is contingent upon and limited to cases where the power of termination of services of an employee / officer is exercised by the disciplinary authority by way of punishment. the applicability of article 311 of the constitution being dependent on the factum of the order of termination being in the nature of a punishment, judicial review undertaken in case of civilian employees entails the necessity for and the power of determining as to whether the order impugned is in the nature of a punishment or not. the doctrine of foundation, camouflage and the principles of judicial review, encompassing the necessity and the power of determining, whether the order impugned is by way of a punishment is thus a direct emanation and a logical corollary of the nature of enquiry warranted when article 311 applies to a case. 22. since the provisions of article 311 of

the constitution admittedly do not apply to these cases, it relates to the domain of civilian employees / officers service jurisprudence, which is controlled by article 311, cannot be invoked in the case of employees / officers of armed forces. since the protection of article 311 cannot be claimed in the case of employees of armed forces, no enquiry as to whether the order is by way of a punishment, which is the sine qua non for applicability of article 311, is warranted. the legal issue requires to be considered by this court in the context of the fact as to whether by virtue of anything contained in the language of article 310 or the other provisions of the constitution, the constitutional power under article 310 can be construed to be limited to cases of termination simpliciter. it is contended on behalf of the appellants that neither the language of article 310 nor any other provision of the constitution warrants adoption of such a narrow construction. further, the learned additional solicitor general has contended that this court has consistently held that the ambit of the doctrine of pleasure, contained under article 310, is an absolute power, save to the extent provided otherwise by an express provision of the constitution. the only express limitation on the power of article 310 exists under the constitution in relation to the tenure of certain constitutional functionaries such as the hon ble judges of the high court and the supreme court. he further contends, placing reliance upon moti ram deka ( supra ) that this court has laid down the legal principle ; that the ambit of article 310 is circumscribed only by the provisions of article 311 and that even article 309 does not circumscribe the said power. the conferment of power upon the president of india under article 310 is in absolute terms. therefore, there is no basis for suggesting that the power under article 310 ought to be construed as excluding the power to dismiss an employee or officer for misconduct. the very fact that article 310 makes the tenure subject to the absolute pleasure of the president means that the president can exercise the said power for any reason and without assigning any cause or reason and this is precisely what has been laid down by this court in b. p. singhal ( supra ). he further contends that the power under article 310 also encompasses the power to dismiss an employee or officer for misconduct and article 311 is inapplicable in respect of an employee or officer of the armed forces. it is further submitted that in case of armed forces scrutiny of an order passed under article 310 would neither warrant an enquiry as to the foundation of the order nor an enquir

##y as to whether the order is in the nature of punishment. therefore, he submits that the necessary corollary thereof would be that the competent authority is also free to abandon any statutory procedure at any stage and take resort to the constitutional power under article 310 by the president to terminate the services of an employee / officer of the armed forces. the ambit of such power cannot be circumscribed with reference to the concepts that govern the exercise of the power in relation to civilian employees / officers. 23. learned additional solicitor general put reliance on chief of army staff vs. major dharam pal kukrety, ( 1985 ) 2 scc 412 where this court has also upheld the competent authority s power to switch over to its power under section 18 of the army act upon abandonment of the gcm proceedings against its employees / officers. the authorities are competent to take recourse to their statutory power under section 19 in a case where the court martial exercise initiated by them becomes futile. it cannot be contended by the officer that where alternative powers under the statute can be resorted to in such situations the authority cannot resort to its constitutional power under article 310 but pass an order of termination against the officer of the army. such provision of the statutory power including section 19 of the army act can be said to be subject to the limitations of the scheme of the army act. power under article 310, which is constitutional power, is wider and certainly cannot be subjected to the constraints flowing from the scheme of the army act. it is further contended that this court has examined the legality and validity of similar orders of termination in exercise of power under article 310 of the constitution by the president upholding the orders of termination passed in exercise of the aforesaid constitutional statutory provisions. 24. shri p. p. rao, learned senior counsel appearing for respondent major s. p. sharma, firstly brought to our notice the sequence of the events happened so far as this respondent is concerned. according to the learned counsel in spite of unblemished career and academic experience major sharma was arrested in 1979 and was lodged in a cell and was denied the basic facilities. the said respondent represented to the chief of army staff and deputy chief of army staff - goc about the inhuman treatment. however, in 1979 a charge report was handed over to the respondent on 14. 04. 1979 for which he was arrested. it was alleged by the respondent that the army authorities released false, defamatory and fabricated press release stating that the respondent was the ring leader of the group with 15 others and

was spying for pakistan, having received huge sum in indian currency for passing of information to pakistan about the indian army. a second charge report was handed over to the respondent. later on a summary of evidence was commenced on the basis of false allegation. mr. rao, then contended that about 27 prosecution witnesses were examined and all of them spoke about his honesty and integrity and uprightness. learned senior counsel submitted that when the charges against the present respondent were not substantiated he was released from arrest and suspended from duties. he was granted leave and after that he was recalled for duty and an order of dismissal dated 11. 01. 1980 was served and handed over to the respondent. subsequently, by a corrigendum the order of dismissal of the respondent was substituted by an order of termination. 25. mr. rao, has not disputed the fact that the said respondent major s. p. sharma filed a writ petition being w. p. no. 418 of 1980 challenging the order of dismissal dated 11. 01. 1980. the said writ petition was dismissed by a division bench of the delhi high court and against the said order the respondent preferred a special leave petition before this court being 7225 of 1980 which was also dismissed. when the order of dismissal attained finality, the respondent was served with a show cause notice as to why a cut - off 5 % in the retirement gratuity and death - cum - retirement gratuity be not imposed as his service was not satisfactory. the respondent sharma again challenged the said notice by filing a writ petition in the high court being w. p. no. 1643 of 1982. in the said writ petition the respondent also challenged the order dated 03. 03. 1980 by which the dismissal was substituted by an order of termination. the said writ petition was dismissed by the high court on 22. 03. 1985 holding that the said order of termination is a termination simpliciter without being any stigma attached. the said order was challenged by the respondent by filing lpa no. 77 of 1993. the matter then travelled to a full bench and finally concluded by the impugned order passed by the division bench of the delhi high court. 26. mr. p. p. rao, learned senior counsel advanced his argument on the points formulated by this court and submitted that the second writ petition cannot, at any stretch of imagination, be held to be barred by the principles of res judicata. learned counsel further submitted that by issuing an order of termination in place

of dismissal, the entire finding recorded by the court while considering the order of dismissal got washed off, hence there can be no res judicata. 27. mr. rao then drew our attention to the counter affidavit filed by the appellant union of india before the high court and submitted that if the offence was so grave then the respondent should have been punished instead of dismissal from service. 28. mr. rao vehemently argued by giving reference to the finding recorded by the high court that non - production of records and the materials which are the basis for passing the order of termination is wholly illegal, arbitrary and unjustified. he reiterated that for the non - production of materials and records in spite of being directed by the court, adverse inference has to be drawn. according to the learned senior counsel, withholding of documents by the constitutional authority and the government is a serious matter and, therefore, the high court has rightly held the order of termination bad in law. in this regard learned counsel referred and relied upon the decisions of this court in gopal krishnaji ketkar vs. mahomed haji latif & ors. 1968 ( 3 ) scr 862 and ghaio mall & sons vs. state of delhi & ors., 1959 scr 1424. 29. on the question of doctrine of pleasure, mr. rao firstly contended that the constitutional provisions contained in article 309, 310 and 311 are subject to article 14 of the constitution. according to the learned counsel, article 14, 15 and 21 constitute the core values and such right cannot be taken away on the plea of doctrine of pleasure. in this connection he relied on i. r. coelho vs. state of tamil nadu, ( 2007 ) 2 scc 1. 30. mr. rao then contended that article 33 of the constitution is in the nature of exception but it does not abrogate the fundamental rights. in other words, article 33 does not speak about the basic structure of the constitution. learned counsel relied upon the decision of this court in b. p. singhal vs. u. o. i., ( 2010 ) 6 scc 331. 31. mr. rao then contended that article 33 in any event shall be given restricted interpretation for the reason that any law which restricts the fundamental rights shall be strictly interpreted. in this connection learned counsel referred to ( 1974 ) 1 scc 645 : bhut nath mete vs. state of west bengal. mr. rao addressed

on legal malice and malice in law and referred a decision of this court in ravi yashwant bhoir vs. district collector, raigad & ors., ( 2012 ) 4 scc 407. 32. mr. rao submitted that only notings were produced before the high court but the material on the basis of which opinion was formed was not produced. the detailed summary of evidence, different memos and other documents produced in the court martial proceeding were also not produced before the high court. learned counsel submitted that those notings produced before the high court are not material, rather advisory material. learned counsel referred to some of the paragraphs of the judgment rendered in s. r. bommai and ors. vs. union of india and ors., ( 1994 ) 3 scc 1. learned counsel lastly submitted that although 5 % cut in gratuity has been withdrawn by the appellant, the termination has to be held as bad. 33. mr. deepak bhattacharya, learned counsel appearing on behalf of major ajwani in c. a. no. 2953 of 2001, firstly submitted that the order of termination under section 18 of the army act is a colourable exercise of power which is arbitrary, capricious and unreasonable. learned counsel submitted that the pleasure doctrine is the residual executive power under section 53 of the constitution and hence amenable to judicial review to ensure that the same follows the satisfaction of the president after due application of mind and without any arbitrary, capricious and un - reasonable exercise of power. according to the learned counsel the respondent major ajwani was arrested and kept in solitary confinement without being informed of any reason for the same and, thereafter, criminal proceedings were initiated against him. it was contended that the criminal proceedings against him was abandoned without informing him any reason for the same and finally he was illegally terminated under section 18 of the army act. 34. on the question of res judicata, learned counsel submitted that there is no pleading of res judicata ever raised by the appellant. however, learned counsel adopted the argument advanced by mr. p. p. rao on the question of res judicata. 35. mrs. kiran suri, learned counsel appearing for capt. arun sharma and capt. j. s. yadav in c. a. no. 2954 of 2001 and c. a. no. 2957 of 2001, firstly submitted that there is no decision on merit in the earlier writ petition and

, therefore, the question of application of res judicata does not arise. the writ petition was dismissed since the pleasure doctrine was invoked and it is open to judicial review. learned counsel relied upon the decision of this court in mathura prasad bajoo jaiswal vs. dossibai n. b. jeejeebhoy ( 1970 ) 1 scc 613 ; supreme court employees welfare association vs. union of india and anr. ( 1989 ) 4 scc 187 ; isabella johnson ( smt. ) vs. m. a. susai ( dead ) by lrs. ( 1991 ) 1 scc 494 and kishan lal vs. state of j & k ( 1994 ) 4 scc 422. learned counsel then contended that the issue involved in the later proceedings was not an issue in the earlier proceedings inasmuch as the later writ petition was filed challenging the subsequent order converting the order of dismissal to order of termination and also a notification as to cut of gratuity. 36. mrs. suri then submitted that the order in the first proceeding is an order which has been the result of suppression of documents / facts by the appellant when these facts / documents were only within the knowledge of the appellant. hence suppression of facts and documents would not entitle the appellant to raise the technical plea of res judicata and to take advantage of the same. it was contended that the appellant is under the public duty to disclose the true facts to the court which has not been done and it will amount to obtaining the order by fraud. 37. on the issue of doctrine of pleasure mrs. suri submitted that exercise of doctrine of pleasure in the absence of any material evidence against the respondent and non - production of relevant records of these officers render the order of termination as illegal and invalid. learned counsel submitted that the justiciability of an action by the executive government is open to challenge on the ground of malafide and also that the formation of opinion is on irrelevant material. learned counsel in this regard referred to a decision of this court in the case of b. p. singhal ( supra ) and jay laxmi salt works ( p ) ltd. vs. state of gujarat ( 1994 ) 4 scc 1. lastly, it was contended that the president has been misled without producing the relevant material and on the basis of false and misleading noting, order was obtained which amount to fraud and legal malafide. 38. mr.

a. k. panda, learned senior counsel appearing on behalf of respondent capt. v. k. diwan in c. a. no. 2956 of 2001, made his submission with regard to the interpretation of articles 309, 310 and 311 of the constitution. according to the learned counsel article 310 is not controlled by any legislation, on the contrary it is contended that article 310 is subject to article 309 or 311 of the constitution. it was contended that the respondent would have been exonerated had the court - martial proceedings been continued. but just to avoid court martial the appellant took recourse to terminate the services by applying the pleasure doctrine. on the point of res judicata learned counsel relied upon the decision in the case of v. rajeshwari ( smt ) vs. t. c. saravanabava, ( 2004 ) 1 scc 551 and maneka gandhi vs. union of india & another, ( 1978 ) 1 scc 248. 39. mr. panda, learned senior counsel further contended that in spite of the several opportunities given by the delhi high court, the appellants failed to produce any material against the present respondents to satisfy the court that the termination was justified. learned counsel submitted that the high court has carefully analysed all the facts of the case and recorded a finding that the termination was wholly malafide and devoid of any substance. 40. mr. kameshwar gumber, learned counsel appearing on behalf of ex. major r. k. midha ( now deceased ) in c. a. no. 2952 of 2009, at the very outset submitted that although the respondent is dead now, the instant appeal is contested only with an object to restore the honour and to remove the stigma cast on him and the family. learned counsel, however, admitted that the family of the deceased respondent has been getting all pensionary benefits. 41. ms. amrita sanghi, learned counsel appearing for the respondent in c. a. no. 2955 of 2001 on the issue of res judicata, firstly contended that the earlier writ petition filed by the respondent challenging the order of dismissal was dismissed up to this court without going into the merit of the case and the issue of malafide was not discussed. it was contended that the second writ petition challenging the order of termination and the show cause notice for deducting 5 % of the gratuity was on the basis of a fresh cause of action inasmuch as the dismissal of writ petition up to this court put an

end to the proceedings of dismissal until the government came out with the order of termination with ulterior motives. learned counsel then contended that this court in the order dated 17. 11. 1994 in special leave petition agreed with the full bench and the matter was sent back to the high court for decision on merit. it was for the first time the appellant - union of india made out a case that petitioners had been caught doing espionage activity and thus considered a security suspect. adopting the argument of mr. p. p. rao, learned senior counsel submitted that article 33 of the constitution does not contemplate restricting or abrogating the basic structure of the constitution or the core values of the constitution. 42. first of all, we shall deal with the following important points formulated by this court referred hereinabove i. e. a ) whether the exercise of doctrine of pleasure under section 18 of the army act read with article 310 of the constitution in absence of any material evidence against the respondent - officer and the non production of relevant records / files of these officers rendered the order of termination as illegal and invalid? b ) whether the order of termination is arbitrary, capricious, unreasonable and violative of articles 14, 16, 19 and 21 of the constitution of india. c ) xxxxxxxxd ) whether the order of termination passed by the first appellant in absence of material evidence and improper exercise of power by the first appellant amount to fraud being played on the respondent officers and are vitiated in the law on account of legal malafides and legal malice? 43. all these three points are interconnected and, therefore, will be discussed together. admittedly, the division bench while hearing the matter called for the relevant records from the appellant and same were produced in the court. the division bench took notice of those files and observed : - 44. on the basis of the aforesaid findings, the division bench held that the respondent - appellant has not placed any material justifying their action. the court has, therefore, concluded its findings in para 168 of the judgment which is reproduced hereunder : - 45. mr. paras kuhad, learned additional solicitor general assailed the aforesaid finding as being incorrect and submitted that all the relevant materials were produced before the court and after hearing was concluded, all those original papers were returned back to the appellant. the appellant had submitted the photocopy of all the relevant material. 46. during the course of hearing, learned additional solicitor general produced before us all those files and documents which were produced before the high court

. the additional solicitor general also produced the link file as directed by us. 47. mrs. kiran suri, learned senior counsel appearing in one of the civil appeal no. 2954 of 2001, submitted a note wherein she has mentioned that on 3. 1. 2001 the advocate received back the following original file from the high court as per the receipt produced by the appellant in l. p. a. no. 43 of 1987 and other connected matters. i ) gcm proceedings in respect of capt. a. k. rana ic 23440h ( page 1 - 615 ) ii ) gcm proceedings in respect of capt r. s. rathaur ic 23720 n ( page 1 - 577 ) iii ) file containing analysis of espionage cases in the respect of all the appellants. 48. we have minutely perused all the records including notings along with link file produced by the additional solicitor general. on perusal and scrutiny of all those materials we are of the view that the high court has committed grave error of record and there is total non - application of mind in recording the aforesaid findings. from the record, it is evidently clear that the inquiry against these respondents were initiated by the army headquarters, director of military intelligence. the file traveled from chief of the army staff to ministry of defence with the strong recommendation to terminate the services of the respondents in the interest of security of the state as there was some material to show that these officers were involved in espionage cases. the recommendation for termination of their services up to the defence ministry was finally approved by the prime minister who also happened to be the defence minister of india at that time. the file was then placed before the president of india who in exercise of the constitutional power terminated the services of these officers. 49. the link file further reveals that confessional statements of captain rana and other officers were also recorded and strong prima facie case was found relating to the involvement of these officers in espionage activities and sharing information with the pakistani intruders. 50. on assessing the materials contained in link file and the notings showing the suggestions and recommendations up to the level of defence ministry and the prime minister, it cannot be held that the impugned order of termination of services have been passed without any material available on record. there is no dispute that order of termination passed against the army personnel in exercise of pleasure doctrine, is subject to judicial review, but while exercising judicial review, this court

cannot substitute its own conclusion on the basis of materials on record. the court exercising the power of judicial review has certain limitations, particularly in the cases of this nature. the safety and security of the nation is above all / everything. when the president in exercise of its constitutional power terminates the services of the army officers, whose tenure of services are at the pleasure of the president and such termination is based on materials on record, then this court in exercise of powers of judicial review should be slow in interfering with such pleasure of president exercising constitutional power. in a constitutional set up, when office is held during the pleasure of the president, it means that the officer can be removed by the authority on whose pleasure he holds office without assigning any reason. the authority is not obliged to assign any reason or disclose any cause for the removal. 51. thus, it is not a case where the decisions to terminate the services of these officers were taken under the pleasure doctrine without any material against the officers. on the contrary, as noticed above, charges were leveled that these officers were involved in certain espionage activities. 52. in the instant case, on perusal of the link file it is further revealed that detailed investigation was conducted and all evidence recorded were examined by the intelligence department and finally the authority came to the finding that retention of these officers were not expedient in the interest and security of the state. in our view, sufficiency of ground cannot be questioned, particularly in a case where termination order is issued by the president under the pleasure doctrine. 53. a constitution bench of this court in the case of the state of rajasthan & ors. vs. union of india & ors. 1977 ( 3 ) scc 592, while considering a constitutional power of the president under article 356 of the constitution observed : - 54. in order to appreciate the application of constitutional provisions in respect of defence services, it would be appropriate to quote articles 309, 310 and 311 of the constitution. these articles read as under : - 55. article 309 empowers the appropriate legislature to regulate the recruitment and conditions of services of persons appointed in public services and posts in connection with the affairs of the union or the state. but article 309 is subject to the provisions of the constitution. hence, the rules and regulations made relating to the conditions of service are subject to articles 310 and 311 of the constitution. the proviso to article 309 confers powers upon the president in case of services and posts in connection with the affairs

of the union and upon the governor of a state in connection with the services and posts connected with the affairs of the state to make rules regulating the recruitment and the conditions of services of the persons appointed. the service condition shall be regulated according to such rules. 56. article 310 provides that every person, who is a member of the defence service or of a civil service of the union or all india service, or any civil or defence force shall hold such posts during the pleasure of the president. similarly, every person who is a member of the civil services of a state or holds any civil post under a state, holds office during the pleasure of the governor of the state. it is worth to mention here that the opening word of article 310 except as expressly provided by this constitution makes it clear that a government servant holds the office during the pleasure of the president or the governor except as expressly provided by the constitution. 57. from bare perusal of the provisions contained in article 311 of the constitution, it is manifestly clear that clauses ( i ) and ( ii ) of article 311 impose restrictions upon the exercise of power by the president or the governor of the state of his pleasure under article 310 ( 1 ) of the constitution. article 311 makes it clear that any person who is a member of civil services of the union or the state or holds civil posts under the union or a state shall not be removed or dismissed from service by an authority subordinate to that by which he was appointed. further, clause ( ii ) of article 311 mandates that such removal or dismissal or reduction in rank of the members of the civil services of the union or the state shall be only after giving reasonable opportunity of hearing in respect of the charges leveled against him. however, proviso to article 311 ( 2 ) makes it clear that this clause shall not apply inter - alia where the president or the governor, as the case may be, is satisfied that in the interest of the security of the state it is not expedient to hold such enquiry. 58. the expression except as otherwise provided in the constitution as contained in article 310 ( 1 ) means this article is subject only to the express provision made in the constitution. no provision in the statute can curtail the provisions of article 310 of the constitution. at this juncture, i would like to refer sections 18 and 19 of the army act as under : - 59. the aforesaid two sections i. e. 18 and 19 are distinct and apply in two different stages. section 18 speaks about the absolute discretion of the

president exercising pleasure doctrine. no provisions in the army act curtail, control or limit the power contained in article 310 ( 1 ) of the constitution. article 309 enables the legislature or executive to make any law, rule or regulation with regard to condition of services without impinging upon the overriding power recognized under article 310 of the constitution. a constitution bench of this court in state of uttar pradesh and others vs. babu ram upadhayay, ( 1961 ) 2 scr 679, held that the constitution practically incorporated the provisions of sections 240 and 241 of the government of india act, 1935 in articles 309 and 310 of the constitution. but the constitution has not made the tenure of pleasure subject to any law made by the legislature. on the other hand, article 309 is expressly made subject to the provisions of article 310 which provides for pleasure doctrine. hence, it can safely be concluded that the army act cannot in any way override or stand higher than constitutional provisions contained in article 309 and consequently no provision of the army act could cut down the pleasure tenure in article 310 of the constitution. in another constitution bench judgment of this court in moti ram deka case ( 1964 ) 5 scr, 683, their lordships observed that article 309 cannot impair or affect the pleasure of the president conferred by article 310. there is no doubt, article 309 has to be read subject to articles 310 and 311 and article 310 has to be read subject to article 311. 60. in the case of b. p. singhal ( supra ), a constitution bench of this court has elaborately discussed the application and object of the doctrine of pleasure and considered most of the earlier decisions rendered by this court. some of the paragraphs are worth to be quoted herein below : - 61. in fact the pleasure doctrine is a constitutional necessity, for the reasons that the difficulty in dismissing those servants whose continuance in office is detrimental to the state would, in case necessity arises to prove some offence to the satisfaction of the court, be such as to seriously impede the working of public service. 62. there is no dispute with regard to the legal proposition that illegality, irrationality and procedural non - compliance are grounds on which judicial review is permissible. but the question is as to the ambit of judicial review. this court in civil appeal filed by the respondents challenging the order of termination passed under section 18 of the army act observed that the order of termination can be challenged only on the ground of malaf

##ide. it was further observed that it is for the person alleging malafide to make out a prima facie case. for better appreciation, the order passed by this court is quoted herein below. 1. special leave granted. 2. heard both sides. according to us, all that the impugned judgment holds is that an order passed under section 18 of the army act can be challenged on the ground of malafides. this statement of law is unexceptional. however, it is for the person who challenges it on the ground of malafides, to make out a prima facie case in that behalf. it is only if he discharges the said burden, that the government is called upon to show that it is not passed in the malafide exercise of its powers. while doing so, the government is not precluded from claiming the privilege in respect of the material which may be in its possession and on the basis of which the order is passed. the government may also choose to show the material only to the court. with regard to the pleadings in respect of the challenge to the order on the ground of malafides, no particular formula can be laid down. the pleadings will depend upon the facts of each case. 3. the appellants are permitted to withdraw from the appeal - memo, pp. 221 to 232 which according to the learned solicitor general have been annexed to the memo inadvertently. 4. the appeals are disposed of accordingly with no order as to costs. 63. the full bench of the delhi high court while answering the reference has observed in paragraphs 37 and 38 which is quoted hereunder : - 64. indisputably, defence personnel fall under the category where president has absolute pleasure to discontinue the services. further in our considered opinion as far as security is concerned, the safeguard available to civil servants under article 311 is not available to defence personnel as judicial review is very limited. in cases where continuance of army officers in service is not practicable for security purposes and there is loss of confidence and potential risk to the security issue then such officers can be removed under the pleasure doctrine. as a matter of fact, section 18 of the army act is in consonance with the constitutional powers conferred on the president empowering the president to terminate the services on the basis of material brought to his notice. in such cases, the army officers are not entitled to claim an opportunity of hearing. in our considered opinion the pleasure doctrine can be invoked by the president at any stage of enquiry on being satisfied that

continuance of any officer is not in the interest of and security of the state. it is therefore not a camouflage as urged by the respondents. 65. the next question that arises for consideration is as to whether the order of dismissal of the earlier writ petitions and confirmation of the same by this court amounts to doctrine of merger and operates as res judicata against the present appeals. as discussed above, the services of the present respondents along with other permanent commissioned officers of the indian army were terminated, since they were found suspected to be involved in espionage activities. aggrieved by the termination order, the present respondents, except major r. k. midha and major n. r. ajwani, filed writ petitions being c. w. p. nos. 418, 419, 421, 424 and 425 of 1980 before the delhi high court. these respondents challenged the said termination order as being illegal and malafide. the high court vide order dated 21. 4. 1980 dismissed the writ petitions. the order dated 21. 4. 1980 reads as under : - 66. respondents then preferred special leave petitions against the aforesaid order dated 21. 4. 1980 being slp nos. 7225 and 7233 of 1980. a three - judge bench of this court dismissed the special leave petition by order dated 1. 9. 1980. in the year 1982, the show cause notices dated 10. 5. 1982 were issued to the officers whose services were terminated informing them that their services were not considered satisfactory by the pensionary authority and, therefore, why not 5 % of the gratuity or pension be deducted. on receipt of the said show cause notices, eight of the officers, whose services were terminated initiated the second round of litigation by filing writ petitions being c. w. p nos. 1643 - 1646 of 1982, 1777 of 1982, 804 of 1982, 1666 of 1982 praying not only to quash the show cause notices, but also to quash the order of termination of their services. all those writ petitions were finally heard and came to be dismissed by the delhi high court vide judgment dated 22. 3. 1985. aggrieved by the said order, the respondents filed letters patent appeal before the delhi high court. the division bench of the high court after hearing the appeal formulated questions of law and referred the same to the full bench by order dated 15. 5. 1991. the question of law framed by the division bench was whether the order of termination

passed by and in the name of president under section 18 of the army act read with article 310 of the constitution invoking doctrine of pleasure of the president be challenged on the ground that it is camouflage and as such is violative of principles of natural justice and the fundamental rights guaranteed under article 14 of the constitution?. 67. from the above, it is clear that the union of india has been consistently contesting these petitions and this court has found substance in the argument of the appellants that the high court while delivering the judgment dated 21. 12. 2000 overlooked this important legal aspect of finality coupled with the doctrine of res judicata. in our considered opinion, this aspect cannot be ignored and the issue of fact cannot be re - opened in the instant case as well as has been done under the impugned judgment by relying on certain material which the high court described to have been fraudulently withheld from the courts. in our opinion, fraud is not a term or ornament nor can it be presumed to exist on the basis of a mere inference on some alleged material that is stated to have been discovered later on. the discovery of a reinvestigated fact could have been a ground of review in the same proceedings, but the same cannot be in our opinion made the basis for re - opening the issue through a fresh round of litigation. a fresh writ petition or letters patent appeal which is in continuation of a writ petition cannot be filed collaterally to set aside the judgment of the same high court rendered in earlier round of litigation upholding the termination order. in our view, the high court has committed a manifest error by not lawfully defining the scope of the fresh round of litigation on the principles of res judicata and doctrine of finality. to establish fraud, it is the material available which may lead to the conclusion that the failure to produce the material was deliberate or suppressed or even otherwise occasioned a failure of justice. this also, can be attempted if legally permissible only in the said proceedings and not in a collateral challenge raised after the matter has been finally decided in the first round of litigation. it is to be noticed that the judgment which had become final in 1980 also included writ petition no. 418 of 1980 filed by the respondent s. p. sharma. once, this court had put a seal to the said litigation vide judgment dated 1. 9. 1980 then a second round of litigation by the same respondents including s. p. sharma in writ petition no. 1643 of 1982 was misplaced. 68. the very genesis of an

identical challenge relating to the same proceedings of termination on the pretext of a 5 % cut in terminal benefits was impermissible apart from the attraction of the principle of merger. this aspect of finality, therefore, cannot be disturbed through a collateral challenge. 69. in naresh shridhar mirajkar vs. state of maharashtra & anr. air 1967 sc 1, this court by a majority decision laid down the law that when a judge deals with the matter brought before him for his adjudication, he first decides the questions of fact on which the parties are at issue, and then applies the relevant law to the said facts. whether the findings of fact recorded by the judge are right or wrong, and whether the conclusion of law drawn by him suffers from any infirmity, can be considered and decided if the party aggrieved by the decision of the judge takes up the matter before the appellate court. 70. a decision rendered by a competent court cannot be challenged in collateral proceedings for the reason that if it is permitted to do so there would be " confusion and chaos and the finality of proceedings would cease to have any meaning ". 71. in the case of mohd. aslam vs. union of india, air 1996 sc 1611, a writ petition under article 32 of the constitution was filed seeking reconsideration of the judgment rendered by this court on the ground that the said judgment is incorrect. rejecting the prayer, this court held that article 32 of the constitution is not available to assail the correctness of the decision on merit or to claim its reconsideration. 72. in the case of babu singh bains etc. versus union of india and others etc., air 1997 sc 116, this court reiterated the settled principal of law that once an order passed on merit by this court exercising the power under article 136 of the constitution has become final no writ petition under article 32 of the constitution on the self - same issue is maintainable. the principle of constructive res judicata stands fast in his way in his way to raise the same contention once over. 73. in khoday distilleries limited & anr. vs. the registrar general, supreme court of india, ( 1996 ) 3 scc 114, this court re - iterated the view as under : 74. in m. nagabhushana vs. state of karnataka & ors., air 2011 sc 1113, this court held that doctrine of res - judicata was not a technical doctrine but a fundamental

principle which sustains the rule of law in ensuring finality in litigation. the main object of the doctrine is to promote a fair administration of justice and to prevent abuse of process of the court on the issues which have become final between the parties. the doctrine was based on two age old principles, namely,'interest reipublicae ut sit finis litium'which means that it is in the interest of the state that there should be an end to litigation and the other principle is'nemo debet bis vexari si constat curiae quod sit pro una et eadem causa'meaning thereby that no one ought to be vexed twice in a litigation if it appears to the court that it is for one and the same cause. 75. thus, the principle of finality of litigation is based on a sound firm principle of public policy. in the absence of such a principle great oppression might result under the colour and pretence of law inasmuch as there will be no end to litigation. the doctrine of res - judicata has been evolved to prevent such an anarchy. 76. in a country governed by the rule of law, finality of judgment is absolutely imperative and great sanctity is attached to the finality of the judgment and it is not permissible for the parties to reopen the concluded judgments of the court as it would not only tantamount to merely an abuse of the process of the court but would have far reaching adverse affect on the administration of justice. it would also nullify the doctrine of stare decisis a well established valuable principle of precedent which cannot be departed from unless there are compelling circumstances to do so. the judgments of the court and particularly the apex court of a country cannot and should not be unsettled lightly. 77. precedent keeps the law predictable and the law declared by this court, being the law of the land, is binding on all courts / tribunals and authorities in india in view of article 141 of the constitution. the judicial system " only works if someone is allowed to have the last word " and the last word so spoken is accepted and religiously followed. the doctrine of stare decisis promotes a certainty and consistency in judicial decisions and this helps in the development of the law. besides providing guidelines for individuals as to what would be the consequences if he chooses the legal action, the doctrine promotes confidence of the people in the system of the judicial administration. even otherwise it is an imperative necessity to avoid uncertainty,

confusion. judicial propriety and decorum demand that the law laid down by the highest court of the land must be given effect to. 78. in rupa ashok hurra v. ashok hurra & anr., air 2002 sc 1771, this court dealt with the issue and held that reconsideration of a judgment of this court which has attained finality is not normally permissible. a decision upon a question of law rendered by this court was conclusive and would bind the court in subsequent cases. the court cannot sit in appeal against its own judgment. 79. in maganlal chhaganlal ( p ) ltd. v. municipal corporation of greater bombay, air 1974 sc 2009, this court held as under : thus, in view of above, it can be held that doctrine of finality has to be applied in a strict legal sense. 80. while dealing with the issue this court in ambika prasad mishra v. state of u. p. & anr., air 1980 sc 1762, held as under : 81. the view has been expressed by a three - judge bench of this court in these very proceedings while dismissing the special leave petitions of subhash juneja and harish lal singh vide order dated 23. 4. 2003. this court applied the doctrine of finality of judgment and res - judicata and refused to reopen these very proceedings. 82. mrs. kiran suri, learned counsel appearing for the respondent, put heavy reliance on a decision of this court in the case of mathura prasad bajoo jaiswal & ors. v. dossibai n. b. jeejeebhoy, ( 1970 ) 1 scc 613, for the proposition that question relating to the jurisdiction of a court cannot be deemed to have been finally determined by an erroneous decision of the court. further by an erroneous decision if the court resumes jurisdiction which it does not possess under the statute, the question cannot operate as res judicata between the same parties whether the cause of action in the subsequent litigation is same or otherwise. in our opinion, the aforesaid decision is of no help to the respondent for the simple reason that the facts and the law involved in the instant case and the earlier round of litigation are the same. in para 5 of the aforesaid judgment, this court has laid down the principle, which reads as under : - 83. in the case arising out of these

very proceedings reported in union of india & ors. v. ranbir singh rathaur & ors., ( 2006 ) 11 scc 696, this court held : a ) that review of the earlier orders passed by this court was " impermissible " : approach of the high court of reopening the case was " erroneous " ; the issue of maintainability of the petitions was of paramount importance : b ) the finding recorded by the high court that the entire record was not produced by the union of india was not factually correct ; c ) to say that " justice stood at the higher pedestal " then the finality of litigation was not an answer enabling the court to reopen a finally decided case ; ( d ) persons behind the false implication were not impleaded as parties ; and ( e ) newspaper reports / statement made by any officer could not be considered as evidence. 84. violation of fundamental rights guaranteed under the constitution have to be protected, but at the same time, it is the duty of the court to ensure that the decisions rendered by the court are not overturned frequently, that too, when challenged collaterally as that was directly affecting the basic structure of the constitution incorporating the power of judicial review of this court. there is no doubt that this court has an extensive power to correct an error or to review its decision but that cannot be done at the cost of doctrine of finality. an issue of law can be overruled later on, but a question of fact or, as in the present case, the dispute with regard to the termination of services cannot be reopened once it has been finally sealed in proceedings inter - se between the parties up to this court way back in 1980. 85. the term dismissal in the original order was substituted by the term termination issuing the corrigendum to ratify a mistake committed while issuing the order. in fact, the competent authority had taken a decision only to terminate, and therefore it was found necessary to issue the corrigendum. however, in view of such substitution of word dismissal by the term termination, does not tilt the balance in favour of the respondents. more so, as pointed out by mr. paras kuhad, learned asg that the proposed 5 % deduction had been withdrawn, and therefore the issue did not survive. 86. analysing entire facts of the case and the material produced in court and upon an exhaustive consideration of the matter, we are of the definite opinion that the power of pleasure exercised by the president in terminating the services of the respondents does not

suffer from any illegality, bias or malafide or based on any other extraneous ground, and the same cannot be challenged on the ground that it is a camouflage. as discussed above, the onus lay on the respondent - officers who alleged malafides. no credible evidence or material produced before the court impels us to come to the conclusion that the order of termination is baseless or malafide. 87. for the reasons aforesaid, these appeals are allowed and the judgment and order passed by the delhi high court is set aside. ordered accordingly. no costs.. j. ( dr. b. s. chauhan ). j. ( j. chelameswar ). j. ( m. y. eqbal ) new delhi, march 6, 2014. - - - - - - - - - - - - - - - - - - - - - - -

1. delay, if any, in filing and refiling the special leave petitions is condoned. 2. leave granted. 3. the issue that falls for our consideration and decision in all these appeals is : at what stage of the proceedings under chapter xiv - b does the assessing authority require to record his satisfaction for issuing a notice under section 158bd of the income tax act, 1961 ('the act'for short ). 4. since the issue is common in all these appeals, after hearing the learned counsel for the parties to the lis, we dispose of all these appeals by this common order. 5. for the purpose of disposal of these appeals, we take the civil appeal @ special leave petition ( civil ) no. 10542 of 2011 as the lead case. civil appeal no. 3958 of 2014 @ s. l. p. ( c ) no. 10542 / 2011 : 6. the respondent in this appeal is a firm engaged in manufacturing hosiery goods in the name and style of m / s. calcutta knitwears. 7. a search operation under section 132 of the act was carried out in two premises of the bhatia group, namely, m / s. swastik trading company and m / s. kavita international company on 05. 02. 2003 and certain incriminating documents pertaining to the assessee firm were traced in the said search. 8. after completion of the investigation by the investigating agency and handing over of the documents to the assessing authority, the assessing authority had completed the block assessments in the case of bhatia group. since certain other documents did not pertain to the person searched under section 132 of the act, the assessing authority thought it fit to transmit those documents, which according to him, pertain to the undisclosed income on account of investment element and profit element of the assessee firm and require to be assessed under section 158bc read with section 158bd of the act to another assessing authority in whose jurisdiction the assessments could be completed. in doing so, the assessing authority had recorded his satisfaction note dated 15. 07. 2005. 9. the jurisdictional assessing authority for the respondent - assessee had issued the show cause notice under section 158bd for the block period 01. 04. 1996 to 05. 02. 2003, dated 10. 02. 2006 to the assessee inter alia directing the assessee to show cause as to why should the proceedings under section 158bc not be completed. after

receipt of the said notice, the assessee firm had filed its return under section 158bd for the said block period declaring its total income as nil and further filed its reply to the said notice challenging the validity of the said notice under section 158bd, dated 08. 03. 2006. the assessee had taken the stand that the notice issued to the assessee is ( a ) in violation of the provisions of section 158bd as the conditions precedent have not been complied with by the assessing officer and ( b ) beyond the period of limitation as provided for under section 158be read with section 158bd and therefore, no action could be initiated against the assessee and accordingly, requested the assessing officer to drop the proceedings. 10. the assessing authority, after due consideration of the reply filed to the show cause notice, has rejected the aforesaid stand of the assessee and assessed the undisclosed income as rs. 21, 76, 916 / - ( rs. 16, 05, 744 / - ( unexplained investment ) and rs. 5, 71, 172 / - ( profit element ) ) by order dated 08. 02. 2008. the assessing officer is of the view that section 158be of the act does not provide for any limitation for issuance of notice and completion of the assessment proceedings under section 158bd of the act and therefore a notice could be issued even after completion of the proceedings of the searched person under section 158bc of the act. 11. disturbed by the orders passed by the assessing officer, the assessee firm had carried the matter in appeal before the commissioner of income tax ( appeal - ii ) ( for short'the cit ( a ) ). the cit ( a ), while rejecting the stand of the assessee in respect of validity of notice issued under section 158bd, has partly allowed the appeal filed by the assessee firm and deleted the additions made by the assessing officer in its assessments, by his order dated 27. 08. 2008. 12. the revenue had carried the matter further by filing appeal before the income tax appellate tribunal ( for short'the tribunal') and the assessee has filed cross objections therein. the tribunal, after hearing the parties to the lis, has rejected the appeal of the revenue and observed that recording of satisfaction by the assessing officer as contemplated under section 158bd was on a date subsequent to the framing of assessment under section 158bc in case of the searched person, that is,

beyond the period prescribed under section 158be ( 1 ) ( b ) and thereby the notice issued under section 158bd was belated and consequently the assumption of jurisdiction by the assessing authority in the impugned block assessment would be invalid, by order dated 23. 04. 2009. 13. aggrieved by the order so passed by the tribunal, the revenue had carried the matter in appeal under section 260a of the act before the high court. the high court, by its impugned judgment and order dated 20. 07. 2010, has rejected the revenue's appeal and confirmed the order passed by the tribunal. 14. that is how the revenue is before us in this appeal. 15. we have heard shri rupesh kumar learned counsel for the revenue and shri r. p. bhatt, shri ajay vohra, shri santosh krishan, learned counsel and other learned counsel for the respective assessees - respondents. 16. shri rupesh kumar, learned counsel for the revenue would contend that the assessing authority, after completion of the assessment proceedings against the searched person under section 158bc, being of the opinion that the other documents which have surfaced at the time of the search under section 132 of the act belong to a person other than the searched person had recorded his satisfaction in the said respect and transmitted the papers to the jurisdictional assessing officer for the assessments of such person other than the searched person. further, he would submit that the assessing officer has complied with the requirements of section 158bd of the act in its entirety while preparing the satisfaction note and transmitting the documents to the jurisdictional assessing officer and therefore, the tribunal and the high court were not justified in holding that the satisfaction note ought to have been prepared by the assessing officer before the completion of the assessment proceedings of the searched person under section 158bc of the act and that the notice issued under section 158bd was belated. 17. per contra, shri bhatt, learned senior counsel and shri ajay vohra and shri santosh krishan learned counsel for the assessees would state that a satisfaction note requires to be made by the assessing officer before the seized documents were transmitted to another assessing officer in whose jurisdiction the person other than the searched person is assessed and submit that the said satisfaction note should be recorded before the assessment proceedings of the searched person are completed under section 158bc of the act and not later in time. by saying so, the learned counsel would justify the reasoning and the conclusion reached

by the tribunal as well as the high court. 18. in order to resolve the controversy, certain provisions of the act require to be noticed by us. 19. chapter xiv - b of the act is a special provision carved out by the legislature for the purpose of the assessments in cases pertaining to sections 132 and 132a of the act. the said chapter was introduced by the finance act, 1995 with effect from 01. 07. 1995 and comprises sections 158b to 158bh of the act. the provisions under this chapter were made inapplicable in case of search initiated under section 132 or section 132a after 31. 05. 2003 by introduction of an amendment to the chapter as section 158bi vide the finance act, 2003 with effect from 01. 06. 2003. the lis before us requires examination of the provisions of the said chapter, particularly section 158bd. 20. section 158b of the act is the dictionary clause. it provides for the definition of block period and undisclosed income. for the purpose of this case, a reference to the definition of the undisclosed income as provided for in section 158b ( b ) is necessary and, therefore, it is noticed. the same reads as under : undisclosed income " includes any money, bullion, jewellery or other valuable article or thing or any income based on any entry in the books of account or other documents or transactions, where such money, bullion, jewellery, valuable article, thing, entry in the books of account or other document or transaction represents wholly or partly income or property which has not been or would not have been disclosed for the purposes of this act [ or any expense, deduction or allowance claimed under this act which is found to be false ]. 21. sections 158bc and 158bd of the act are machinery provisions. section 158bc of the act provides the procedure for block assessment and section 158bd of the act provides for assessments in the case of an undisclosed income of any other person. the said sections are relevant for the purpose of this case and, therefore, they are extracted. they read as under : section 158bc. procedure for block assessment. where any search has been conducted under section 132 or books of account, other documents or assets are requisitioned under section 132a, in the case of any person, then, - [ ( a ) the assessing officer shall, ( i ) in respect of search initiated or books of account or other documents or any assets requisitioned after the 30th

day of june, 1995 but before the 1st day of january, 1997 serve a notice to such person requiring him to furnish within such time not being less than fifteen days ; ( ii ) in respect of search initiated or books of account or other documents or any assets requisitioned on or after the 1st day of january, 1997, serve a notice to such person requiring him to furnish within such time not being less than fifteen days but not more than forty - five days, as may be specified in the notice a return in the prescribed form and verified in the same manner as a return under clause ( i ) of sub - section ( 1 ) of section 142, setting forth his total income including the undisclosed income for the block period : provided that no notice under section 148 is required to be issued for the purpose of proceeding under this chapter : provided further that a person who has furnished a return under this clause shall not be entitled to file a revised return ; ] ( b ) the assessing officer shall proceed to determine the undisclosed income of the block period in the manner laid down in section 158bb and the provisions of section 142, sub - sections ( 2 ) and ( 3 ) of section 143 [ section 144 and section 145 ] shall, so far as may be, apply ; ( c ) the assessing officer, on determination of the undisclosed income of the block period in accordance with this chapter, shall pass an order of assessment and determine the tax payable by him on the basis of such assessment ; ( d ) the assets seized under section 132 or requisitioned under section 132a shall be dealt with in accordance with the provisions of section 132b. ] * * * * * * * * * section 158bd. undisclosed income of any other person. where the assessing officer is satisfied that any undisclosed income belongs to any person, other than the person with respect to whom search was made under section 132 or whose books of account or other documents or any assets were requisitioned under section 132a then, the books of account, other documents or assets seized or requisitioned shall be handed over to the assessing officer having jurisdiction over such other person and that assessing officer shall proceed [ under section 158 bc ] against such other person and the provisions of this chapter shall apply accordingly. 22. section 158bc speaks of procedure for assessment of a person searched under section 132 of the act or books of accounts, other documents or assets are requisitioned under section 132a. the limitation for the purpose of completion of the block assessments

for the purpose of section 158bc of the act is as provided under section 158be ( 1 ) ( a ) of the act, that is the time limit for completion of block assessment. 23. section 158bd of the act provides for undisclosed income of any other person. before we proceed to explain the said provision, we intend to remind ourselves of the first or the basic principles of interpretation of a fiscal legislation. it is time and again reiterated that the courts, while interpreting the provisions of a fiscal legislation should neither add nor subtract a word from the provisions of instant meaning of the sections. it may be mentioned that the foremost principle of interpretation of fiscal statutes in every system of interpretation is the rule of strict interpretation which provides that where the words of the statute are absolutely clear and unambiguous, recourse cannot be had to the principles of interpretation other than the literal rule ( swedish match ab v. securities and exchange board, india, air 2004 sc 4219, cit v. ajax products ltd. [ 1965 ] 55 itr 741 ( sc ) ). 24. we may gainfully refer to the cape brandy syndicate v. inland revenue commissioners [ 1921 ] 1 kb 64 at 71 which involved the finance ( no. 2 ) act 1915 which imposed excess profits duty on trade or businesses commenced after the outbreak of the first world war in 1914. by subjecting the legislation to a strict literal interpretation, rowlatt j. held that the finance ( no. 2 ) act 1915, in isolation, did not apply to businesses that commenced after the outbreak of war in 1914 and observed as follows : the principle in favour of a strict literal approach simply means that in a taxing act one has to look merely at what is clearly said. there is no room for any intendment. there is no equity about a tax. there is no presumption as to a tax. nothing is to be read in, nothing is to be implied. one can only look fairly at the language used. 25. in commissioner of stamp duties ( nsw ) v. simpson, ( 1917 ) 24 clr 209 barton j., citing viscount haldane in lumsden v inland revenue commissioners, [ 1914 ] ac 877, stated the following : the duty of judges in construing statutes is to adhere to the literal construction unless the context renders it plain that such a construction cannot be put on the words. this rule is especially important in cases of statutes which impose taxation. the

court in simpson case ( supra ) sought to determine whether a deed poll constituted a settlement for the purposes of section 49 of the stamp duties act, 1898 ( nsw ). section 3 which defined the word settlement as meaning any contract or agreement was examined. the court by adopting a strict literal approach held that only a contract or an agreement could constitute a settlement and that section 49 providing for deed poll was not applicable and therefore, the taxpayer did not have to pay any stamp duty. 26. lord granworth in grundy v. pinniger, ( 1852 ) 1 lj ch 405 has observed that : to adhere as closely as possible to the literal meaning of the words used, is a cardinal rule from which if we depart we launch into a sea of difficulties which it is not easy to fathom. that is to say, once the literal rule is departed, then any number of interpretations can be put to a statutory provision, each judge having a free play to put his own interpretation as he likes. this would be destructive of the edifice of fiscal legislations which impose economic duties and sanctions. 27. in taxing statutes, even if the literal interpretation results in hardship or inconvenience, it has to be followed ( g. p. singh's principles of statutory interpretations, 12th ed, 2010, lexis nexis butterworths wadhwa nagpur ; bennion on statutory interpretation, 5th ed., lexis nexis, p. 863 ; vepa p. sarathi, interpretation of statutes, 5th ed., easter book company, chapter viii, taxing statutes ). this court in cit v. keshab chandra mandal, air 1950 sc 265 has held that hardship or inconvenience cannot alter the meaning of the language employed by the legislature if such meaning is clear and apparent. hence departure from the literal rule should only be done in very rare cases, and ordinarily there should be judicial restraint to do so. ( pandian chemicals ltd. v. c. i. t., 2003 ( 5 ) scc 590, narsiruddin v. sita ram agarwal, air 2003 sc 1543, bhaiji v. sub - divisional officer, thandla, 2003 ( 1 ) scc 692, j. p. bansal v. state of rajasthan and anr., air 2003 sc 1405, state of jharkhand and anr. v. govind singh : j

##t 2004 ( 10 ) sc 349, jinia keotin v. k. s. manjhi, 2003 ( 1 ) scc 730, shiv shakti co - operative housing society v. swaraj developers, air 2003 sc 2434, grasim industries limited v. collector of customs, 2002 ( 4 ) scc 297 and union of india v. hamsoli devi, 2002 ( 7 ) scc 273 ) 28. the australian high court in federal commissioner of taxation v. westraders pty ltd, ( 1980 ) 144 clr 55 considered the scope of section 36a of the income tax assessment act, 1936 ( cth ), which on a literal interpretation allowed the taxpayer to make a profit and still claim a loss for tax purposes. the commissioner argued the taxpayer s conduct amounted to a tax avoidance scheme and should therefore be disallowed under section 260 of the income tax assessment act, 1936 ( cth ). the court held that under a literal interpretation section 36a could apply to allow the taxpayer to claim a loss. barwick cj, speaking for the majority relied on the decision in inland revenue commissioners v. westminster ( duke ), [ 1936 ] ac 1 which advocated the literal approach be applied when interpreting taxation legislation and stated the following : it is for the parliament to specify, and to do so, in my opinion, as far as language will permit, with unambiguous clarity, the circumstances which will attract an obligation on the part of the citizen to pay tax. the function of the court is to interpret and apply the language in which the parliament has specified those circumstances. the court is to do so by determining the meaning of the words employed by the parliament according to the intention of the parliament which is discoverable from the language used by the parliament. it is not for the court to mould or to attempt to mould the language of the statute so as to produce some result which it might be thought the parliament may have intended to achieve, though not expressed in the actual language employed 29. in cooper brookes ( wollongong ) pty ltd v. federal commissioner of taxation ( 1981 ) 147 clr 297 it is held that in a taxing statute if the language is unambiguous, departing from the literal approach may lead judges to put their own ideas of justice or social policy in place of the words of the statute. similar view was espoused in c & j clark ltd v. inland revenue commissioners, [ 1975 ] 1 wlr

413 and bp refinery ( westernport ) pty ltd v. hastings shire, ( 1977 ) 180 clr 266. 30. in hepples v. fct, ( 1991 ) 173 clr 492, the high court of australia unequivocally favoured the principle that taxation legislation should be subject to a strict literal interpretation and opined that such an approach was supported by common sense. therein, the taxpayer, on ceasing to be employed, was paid $ 40, 000 by his employer in exchange for the taxpayer agreeing that he would not carry on or be interested in certain businesses and would not divulge any trade secrets. the issue before the court was whether or not such payment would form part of the taxpayer s assessable income for the purposes of the income tax assessment act, 1936 ( cth ). it was held that since the act did not provide for such payments to form part of a taxpayer s assessable income, the payment would not be assessable. 31. this court in tata consultancy services v. state of andhra pradesh has ascribed plain meaning to the terms computer and computer programme in a fiscal statute and reiterating the proposition laid down in inland revenue commissioner case ( supra ), observed that a court should not be over zealous in searching ambiguities or obscurities in words which are plain. 32. in prakash nath khanna v. c. i. t., 2004 ( 9 ) scc 686, this court has explained that the language employed in a statute is the determinative factor of the legislative intent. the legislature is presumed to have made no mistake. the presumption is that it intended to say what it has said. assuming there is a defect or an omission in the words used by the legislature, the court cannot correct or make up the deficiency. where the legislative intent is clear from the language, the court should give effect to it ( delhi financial corporation v. rajiv anand, 2004 ( 11 ) scc 625 ; government of andhra pradesh v. road rollers owners welfare association, 2004 ( 6 ) scc 210 ). 33. in b. premanand and ors. v. mohan koikal and ors., ( 2011 ) 4 scc 266 this court has observed as follows : 32. the literal rule of interpretation really means that there should be no interpretation. in other words, we should read the statute as it is, without distorting or twisting its language. 33. we may

mention here that the literal rule of interpretation is not only followed by judges and lawyers, but it is also followed by the lay man in his ordinary life. to give an illustration, if a person says " this is a pencil ", then he means that it is a pencil ; and it is not that when he says that the object is a pencil, he means that it is a horse, donkey or an elephant. in other words, the literal rule of interpretation simply means that we mean what we say and we say what we mean. if we do not follow the literal rule of interpretation, social life will become impossible, and we will not understand each other. if we say that a certain object is a book, then we mean it is a book. if we say it is a book, but we mean it is a horse, table or an elephant, then we will not be able to communicate with each other. life will become impossible. hence, the meaning of the literal rule of interpretation is simply that we mean what we say and we say what we mean. 34. thus, the language of a taxing statute should ordinarily be read understood in the sense in which it is harmonious with the object of the statute to effectuate the legislative animation. a taxing statute should be strictly construed ; common sense approach, equity, logic, ethics and morality have no role to play. nothing is to be read in, nothing is to be implied ; one can only look fairly at the language used and nothing more and nothing less. ( j. srinivasa rao v. govt. of a. p. and anr. 2006 ( 13 ) scale 27, raja jagadambika pratap narain singh v. c. b. d. t., [ 1975 ] 100 itr 698 ( sc ) ) 35. it is also trite that while interpreting a machinery provision, the courts would interpret a provision in such a way that it would give meaning to the charging provisions and that the machinery provisions are liberally construed by the courts. in mahim patram private ltd. v. union of india ( uoi ) and ors., ( 2007 ) 3 scc 668 this court has observed that : 20. a taxing statute indisputably is to be strictly construed. [ see j. srinivasa rao v. govt. of andhra pradesh and anr., 2006 ( 13 ) scale 27 ]

. it is, however, also well - settled that the machinery provisions for calculating the tax or the procedure for its calculation are to be construed by ordinary rule of construction. whereas a liability has been imposed on a dealer by the charging section, it is well - settled that the court would construe the statute in such a manner so as to make the machinery workable. 21. in j. srinivasa rao ( supra ), this court noticed the decisions of this court in gursahai saigal v. commissioner of income - tax, punjab, [ 1963 ] 1 itr 48 ( sc ) and ispat industries ltd. v. commissioner of customs, mumbai, 2006 ( 202 ) elt561 ( sc ). in gursahai saigal ( supra ), the question which fell for consideration before this court was construction of the machinery provisions vis - - vis the charging provisions. schedule appended to the motor vehicles act is not machinery provision. it is a part of the charging provision. by giving a plain meaning to the schedule appended to the act, the machinery provision does not become unworkable. it did not prevent the clear intention of the legislature from being defeated. it can be given an appropriate meaning. 36. a reference to the observations of this court in j. k. synthetics limited and birla cement works and another v. commercial taxes officer and another, ( 1994 ) 4 scc 276 would be apposite : 13. it is well - known that when a statute levies a tax it does so by inserting a charging section by which a liability is created or fixed and then proceeds to provide the machinery to make the liability effective. it, therefore, provides the machinery for the assessment of the liability already fixed by the charging section, and then provides the mode for the recovery and collection of tax, including penal provisions meant to deal with defaulters. ordinarily the charging section which fixes the liability is strictly construed but that rule of strict construction is not extended to the machinery provisions which are construed like any other statute. the machinery provisions must, no doubt, be so construed as would effectuate the object and purpose of the statute and not defeat the same. ( whitney v. commissioners of inland revenue 1926 a c 37, cit v. mahaliram ramjidas ( 1940 ) 8 itr 442, indian united mills ltd. v. commissioner of excess profits tax,

bombay, [ 1955 ] 27 itr 20 ( sc ) and gursahai saigal v. cit, punjab, [ 1963 ] 1 itr 48 ( sc ). 37. it is the duty of the court while interpreting the machinery provisions of a taxing statute to give effect to its manifest purpose. wherever the intention to impose liability is clear, the courts ought not be hesitant in espousing a commonsense interpretation to the machinery provisions so that the charge does not fail. the machinery provisions must, no doubt, be so construed as would effectuate the object and purpose of the statute and not defeat the same ( whitney v. commissioners of inland revenue 1926 a c 37, cit v. mahaliram ramjidas ( 1940 ) 8 itr 442, indian united mills ltd. v. commissioner of excess profits tax, bombay [ 1955 ] 27 itr 20 ( sc ), and gursahai saigal v. cit, punjab [ 1963 ] 1 itr 48 ( sc ) ; commissioner of wealth tax, meerut v. sharvan kumar swarup & sons, ( 1994 ) 6 scc 623 ; cit v. national taj traders, ( 1980 ) 1 scc 370 ; associated cement company ltd. v. commercial tax officer, kota and ors., ( 48 ) stc 466 ). francis bennion in bennion on statutory interpretation, 5th ed., lexis nexis in support of the aforesaid proposition put forth as an illustration that since charge made by the legislator in procedural provisions is excepted to be for the general benefit of litigants and others, it is presumed that it applies to pending as well as future proceedings. 38. having said that, let us revert to discussion of section 158bd of the act. the said provision is a machinery provision and inserted in the statute book for the purpose of carrying out assessments of a person other than the searched person under sections 132 or 132a of the act. under section 158bd of the act, if an officer is satisfied that there exists any undisclosed income which may belong to a other person other than the searched person under sections 132 or 132a of the act, after recording such satisfaction, may transmit the records / documents / chits / papers etc to the assessing officer having jurisdiction over such other person. after receipt of the aforesaid satisfaction and upon examination of the

said other documents relating to such other person, the jurisdictional assessing officer may proceed to issue a notice for the purpose of completion of the assessments under section 158bd of the act, the other provisions of xiv - b shall apply. 39. the opening words of section 158bd of the act are that the assessing officer must be satisfied that undisclosed income belongs to any other person other than the person with respect to whom a search was made under section 132 of the act or a requisition of books were made under section 132a of the act and thereafter, transmit the records for assessment of such other person. therefore, the short question that falls for our consideration and decision is at what stage of the proceedings should the satisfaction note be prepared by the assessing officer : whether at the time of initiating proceedings under section 158bc for the completion of the assessments of the searched person under section 132 and 132a of the act or during the course of the assessment proceedings under section 158bc of the act or after completion of the proceedings under section 158bc of the act. 40. the tribunal and the high court are of the opinion that it could only be prepared by the assessing officer during the course of the assessment proceedings under section 158bc of the act and not after the completion of the said proceedings. the courts below have relied upon the limitation period provided in section 158be ( 2 ) ( b ) of the act in respect of the assessment proceedings initiated under section 158bd, i. e., two years from the end of the month in which the notice under chapter xiv - b was served on such other person in respect of search initiated or books of account or other documents or any assets are requisitioned on or after 01. 01. 1997. we would examine whether the tribunal or the high court are justified in coming to the aforesaid conclusion. 41. we would certainly say that before initiating proceedings under section 158bd of the act, the assessing officer who has initiated proceedings for completion of the assessments under section 158bc of the act should be satisfied that there is an undisclosed income which has been traced out when a person was searched under section 132 or the books of accounts were requisitioned under section 132a of the act. this is in contrast to the provisions of section 148 of the act where recording of reasons in writing are a sine qua non. under section 158bd the existence of cogent and demonstrative material is germane to the assessing officers satisfaction in concluding that the seized documents

belong to a person other than the searched person is necessary for initiation of action under section 158bd. the bare reading of the provision indicates that the satisfaction note could be prepared by the assessing officer either at the time of initiating proceedings for completion of assessment of a searched person under section 158bc of the act or during the stage of the assessment proceedings. it does not mean that after completion of the assessment, the assessing officer cannot prepare the satisfaction note to the effect that there exists income tax belonging to any person other than the searched person in respect of whom a search was made under section 132 or requisition of books of accounts were made under section 132a of the act. the language of the provision is clear and unambiguous. the legislature has not imposed any embargo on the assessing officer in respect of the stage of proceedings during which the satisfaction is to be reached and recorded in respect of the person other than the searched person. 42. further, section 158be ( 2 ) ( b ) only provides for the period of limitation for completion of block assessment under section 158bd in case of the person other than the searched person as two years from the end of the month in which the notice under this chapter was served on such other person in respect of search carried on after 01. 01. 1997. the said section does neither provides for nor imposes any restrictions or conditions on the period of limitation for preparation the satisfaction note under section 158bd and consequent issuance of notice to the other person. 43. in the lead case, the assessing officer had prepared a satisfaction note on 15. 07. 2005 though the assessment proceedings in the case of a searched person, namely, s. k. bhatia were completed on 30. 03. 2005. as we have already noticed, the tribunal and the high court are of the opinion that since the satisfaction note was prepared after the proceedings were completed by the assessing officer under section 158bc of the act which is contrary to the provisions of section 158bd read with section 158be ( 2 ) ( b ) and therefore, have dismissed the case of the revenue. in our considered opinion, the reasoning of the learned judges of the high court is contrary to the plain and simple language employed by the legislature under section 158bd of the act which clearly provides adequate flexibility to the assessing officer for recording the satisfaction note after the completion of proceedings in respect of the searched person under section 158bc. further, the interpretation placed by the courts below by reading into

the plain language of section 158be ( 2 ) ( b ) such as to extend the period of limitation to recording of satisfaction note would run counter to the avowed object of introduction of chapter to provide for cost - effective, efficient and expeditious completion of search assessments and avoiding or reducing long drawn proceedings. 44. in the result, we hold that for the purpose of section 158bd of the act a satisfaction note is sine qua non and must be prepared by the assessing officer before he transmits the records to the other assessing officer who has jurisdiction over such other person. the satisfaction note could be prepared at either of the following stages : ( a ) at the time of or along with the initiation of proceedings against the searched person under section 158bc of the act ; ( b ) along with the assessment proceedings under section 158bc of the act ; and ( c ) immediately after the assessment proceedings are completed under section 158bc of the act of the searched person. 45. we are informed by shri santosh krishan, who is appearing in seven of the appeals that the assessing officer had not recorded the satisfaction note as required under section 158bd of the act, therefore, the tribunal and the high court were justified in setting aside the orders of assessment and the orders passed by the first appellate authority. we do not intend to examine the aforesaid contention canvassed by the learned counsel since we are remanding the matters to the high court for consideration of the individual cases herein in light of the observations made by us on the scope and possible interpretation of section 158bd of the act. 46. with these observations, the appeals are disposed of. the matters are remanded to the respective high courts for deciding the matters afresh after affording an opportunity of hearing to the parties. ordered accordingly. with c. a. no. 3991 of 2014 @ s. l. p. ( c ) no. 15368 of 2013 : in view of the order passed in civil appeal @ s. l. p. ( c ) no. 10542 of 2011, these appeals are also disposed of in the same terms, conditions, observations and directions contained therein. ordered accordingly. s. l. p. ( c ) no. 7741 / 2013 : ( s. a. bobde ) new delhi ; march 12, 2014

1. leave granted. 2. the issue that arise for our consideration and decision in this batch of appeals is, whether the revenue is legally responsible under section 244a of the income tax act, 1961 ( for short, the act ) for payment of interest on the refund of tax made to the resident / deductor under section 240 of the act. 3. at the outset, it is relevant to notice that the assessment years in all these appeals are on and after 01. 04. 1989, that is after the admittance of section 244a of the act by direct tax laws ( amendment ) act, 1987 ( 4 of 1988 ) with effect from 01. 04. 1989, whereby provision for interest on refunds on any amount due to the assessee under the act was introduced. facts : - 4. we would refer to the facts in civil appeal no. 6301 of 2011. the respondent is a company incorporated under the provisions of companies act, 1956. it is engaged in the manufacture of nitrogenous fertilizer. during the assessment year 1997 - 98, the respondent - company had commissioned its naptha desulphurization plant and to oversee the operation of the said plant it had sought the assistance of two technicians from m / s. haldor topsoe, denmark. m / s. haldor topsoe had raised an invoice aggregating to us $ 43, 290, 06 / - as service charges for services of the technicians ( us $ 38, 500 / - ) and reimbursements of expenses ( us $ 4, 790 / - ). 5. the resident / deductor had approached the income tax officer under section 195 ( 2 ) of the act inter alia requesting him to provide information / determination as to what percentage of tax should be withheld from the amounts payable to the foreign company, namely, m / s. haldor topsoe, denmark. on the request so made, the assessing officer / income tax officer had determined and passed special order under section 195 ( 2 ) of the act directing the resident / deductor to deduct / withhold tax at the rate of 20 % before remitting aforesaid amounts to m / s. haldor topsoe. accordingly, the resident / deductor had deducted tax of rs. 1, 98, 878 / - on the entire amount of us $ 43, 290. 00 / - and credited the same in favour of the revenue. 6. after such deposit, the resident /

deductor had preferred an appeal before the commissioner of income tax ( appeals ) against the aforesaid order passed by the assessing officer / income tax officer under section 195 ( 2 ) of the act. the appellate authority while allowing the appeal so filed by the resident / deductor, had concluded, that, the reimbursement of expenses is not a part of the income for deduction of tax at source under section 195 of the act and accordingly, directed the refund of the tax that was deducted and paid over to the revenue on the amount of us $ 4790. 06 / - representing reimbursement of expenses by order dated 12. 07. 2002. 7. after disposal of the appeal, the resident / deductor had claimed the refund of tax on us $ 4790 / - ( amounting to rs. 22, 005 / - ) with the interest thereon as provided under section 244a ( 1 ) of the act by its letter dated 09. 12. 2002. 8. the assessing officer / income tax officer while declining the claim made, has observed, that, section 244a provides for interest only on refunds due to the assessee under the act and not to the deductor and since the refund in the instant case is in view of the circulars viz. circular no. 769 and 790 issued by the central board of direct taxes ( for short the board ) and not under the statutory provisions of the act, no interest would accrue on the refunds under section 244a of the act. therefore, the assessing officer / income tax officer while granting refund of the tax paid on the aforesaid amount has refused to entertain the claim for interest on the amount so refunded by order dated 29. 07. 2003. 9. since the assessing officer / income tax officer had declined to grant the interest on the amount so refunded, the resident / deductor had carried the matter by way of an appeal before the commissioner of income tax ( appeals ). the first appellate authority by its order dated 28. 03. 2005 has approved the orders passed by the assessing officer / income tax officer and declined the claim of the deductor / resident on two counts : ( a ) that the refund in the instant case would fall under two circulars viz. circular no. 769 and 790 issued by the board which specifically provide that the benefit of interest under section 244a of the act on such refunds would not be available to the deductor / resident and ( b ) that a conjoint reading of section 156 and the explanation appended to section 244a (

1 ) ( b ) of the act would indicate that the amount refunded to the deductor / resident cannot be equated to the refund of the amount ( s ) envisaged under section 244a ( 1 ) ( b ) of the act, wherein only the interest on refund of excess payment made under section 156 of the act pursuant to a notice of demand issued on account of post - assessment tax is contemplated and not the interest on refund of tax deposited under self - assessment as in the instant case. 10. the deductor / resident, aggrieved by the aforesaid order, had carried the matter before the income tax appellate tribunal ( for short, the tribunal ). the tribunal while reversing the judgment and order passed by the commissioner of income tax ( appeals ) has opined, that, the tax was paid by the deductor / resident pursuant to an order passed under section 195 ( 2 ) of the act and the refund was ordered under section 240 of the act, therefore, the provisions of section 244a ( 1 ) ( b ) are clearly attracted and the revenue is accountable for payment of interest on the aforesaid refund amount. accordingly, the tribunal has allowed the appeal of the deductor / resident and directed the assessing officer / income tax officer to acknowledge the claim and allow the interest as provided under section 244a ( 1 ) ( b ) of the act on the aforesaid amount of refund, by order dated 28. 06. 2008. 11. the revenue being of the view that they are treated unfairly by the tribunal had carried the matter by way of income tax appeal before the high court. the high court has refused to accept the appeal filed by the revenue by the impugned judgment and order, dated 18. 06. 2009. that is how the revenue is before us in these appeals. 12. we have heard the learned counsel appearing for the revenue and the respondent - assessee in these appeals and also carefully perused the orders passed by the forums below. relevant provisions : - 13. to appreciate the view point of the learned counsel for the revenue, we require to notice certain provisions of the act prior to the insertion of section 244a of the act. the sections that require to be noticed are ; sections 156, 195 ( 2 ), 240 and 244 of the act. a perusal of these sections essentially would indicate the procedure whereby the tax amount is paid and the refund of excess amount is claimed by the assessee. the relevant part of the said sections is sequentially reproduced :

tax thereon at the rates in force : 14. section 156 of the act talks about payment of tax, interest, penalty, fine or any other sum payable in consequence of any order passed under the act on service of notice of demand issued by the assessing officer to the assessee specifying the said amounts. 15. section 195 ( 1 ) casts an obligation upon every person in this country to deduct tax at the prevailing rates from out of any sum which is remitted to a non resident / foreign company. sub section ( 2 ) of section 195 provides that where a person responsible for paying any such sum chargeable under the act to a non resident / foreign company considers that the whole of such sum would not be the income chargeable in the case of recipient, he may make an application to the assessing officer / income tax officer to determine, by general or special order, the appropriate proportion of such sum so chargeable. the assessing officer is expected to determine such sum / tax which are deductible out of remittance to be sent to the recipient and only after deduction and payment of such sum / tax, the balance amount is to be remitted to the non - resident. we clarify here that it is the statutory obligation of the person responsible for paying such sum to deduct tax thereon before making payment, if such application is not filed. 16. section 240 of the act provides for refund on appeal etc. the section envisages that if an amount becomes due to the assessee by virtue of an order passed in appeal, reference, revision, rectification or amendment proceedings, the assessing officer is bound to refund the amount to the assessee without the assessee being required to make any claim in that behalf. the expression other proceedings under the act used in section 240 of the act, are wide enough to include any order passed in proceedings other than the appeals under the act. 17. section 244 of the act provides for interest on refunds where no claim is made or required to be made by the assessee. the said section envisages that where a refund is due to the assessee in pursuance of an order passed under section 240 of the act, and the assessing officer does not grant the refund within a period of three months from the end of the month in which such order is passed, the central government shall pay to the assessee a simple interest of 15 % per annum on the amount of refund due from the date immediately following the expiry of the period of three months as aforesaid to the date on which the refund is granted.

18. since there was disconcert in the minds of both the assessee and the revenue regarding the cases where payment of interest was required to be made to the assessee by the revenue, the parliament has thought it fit to insert a new section 244a in the place of sections 214, 243 and 244 in respect of assessments for the assessment year 1989 - 90 and onwards. the section is extracted : 19. the objects and reasons for introduction of the aforesaid section is clarified by the board in its circular no. 549, dated 31. 10. 1989. relevant paragraphs of which are as under : 11. 3. these provisions, apart from being complicated left certain gaps for which interest was not paid by the department to the assessee for money remaining with the government. to remove this inequity, as also to simplify the provisions in this regard, the amending act, 1987, has inserted a new section 244a in the income tax act, applicable from the assessment year 1989 - 90 and onwards which contains all the provisions for payment of interest by the department for delay in the grant of refunds. the rate of interest has been increased from the earlier 15 per cent annum to 1. 5 % per month or part of a month, comprised in the period of delay in the grant of refund. the amending act, 1987, has also amended sections 214, 243 and 244 to provide that the provisions of these sections shall not apply to the assessment year 1989 - 90 or any subsequent assessment years. ( emphasis supplied ) submissions : - 20. shri arijit prasad, learned counsel appearing for the revenue would submit, that, if the tax is paid under section 195 ( 2 ) of the act, then while refunding the amounts so paid, the revenue need not be burdened with payment of interest on the amount so refunded. he would submit that while section 244a ( 1 ) ( a ) specifically provides for the four instances under specific provisions where the interest would be payable on the refund of tax paid, section 244a ( 1 ) ( b ) does not provide for any specific instance but mentions any other cases and the explanation appended to the said section requires payment of refund to be made in cases where notice of demand was issued under section 156 of the act and since no demand notice was issued to the assessee under section 156 of the act the assessee would not be covered even by the aforesaid provision and hence, no interest is payable to the assesse

##e by the revenue. it is further submitted that interest under section 244a is to be granted in case where refund of any amount becomes due to an assessee under this act and the refund of tax deducted at source made to the deductor / resident is not under any statutory provisions of the act, the deductor / resident is not entitled for interest on the amount of tax deducted and deposited with the revenue. 21. per contra, learned senior counsel appearing for the resident / deductor would submit that since the payment made under section 195 ( 2 ) is payment made under the act pursuant to an order passed by the assessing officer which in turn would be sheltered under the provisions of section 156 of the act, by virtue of clause ( b ) of sub - section ( 1 ) of section 244a of the act, the revenue is obliged to refund the tax with interest. discussion : - 22. it is cardinal principle of interpretation of statutes that the words of a statute must be understood in their natural, ordinary or popular sense and construed according to their grammatical meaning unless such construction leads to some absurdity or unless there is something in the context or in the object of the statute to the contrary. the golden rule is that the words of a statute must prima facie be given their ordinary meaning. it is yet another rule of construction that when the words of a statute are clear, plain and unambiguous, then the courts are bound to give effect to that meaning irrespective of the consequences. it is said that the words themselves best declare the intention of the law giver. the courts have adhered to the principle that efforts should be made to give meaning to each and every word used by the legislature and it is not a sound principle of construction to brush aside words in a statute as being inapposite surpluses, if they can have proper application in circumstances conceivable within the contemplation of the statute ( see gurudevdatta vksss maryadit v. state of maharashtra [ 2001 ] 4 scc 534 ). 23. it is also well settled principle that the courts must interpret the provisions of the statute upon ascertaining the object of the legislation through the medium or authoritative forms in which it is expressed. it is well settled that the court should, while interpreting the provisions of the statute, assign its ordinary meaning. 24. this court in shyam sunder vs. ram kumar ( 2001 ) 8 scc 24 has observed that in relation to benefice

##nt construction, the basic rules of interpretation are not to be applied where ( i ) the result would be re - legislation of a provision by addition, substitution or alteration of words and violence would be done to the spirit of legislation, ( ii ) where the words of a provision are capable of being given only one meaning and ( iii ) where there is no ambiguity in a provision, however, the court may apply the rule of beneficent construction in order to advance the object of the act. 25. before the insertion of section 244a as a composite section by the direct tax laws ( amendment ) act, 1987, the liability to pay interest on refund of pre - paid taxes was contained in sections 214, 243 read with section 244 ( 1a ) of the act. the parliament has introduced a new section in the place of sections 214, 243 and 244 in respect of assessment for the assessment year 1989 - 90 and onwards. 26. the language of the section is precise, clear and unambiguous. sub - section ( 1 ) of section 244a speaks of interest on refund of the amounts due to an assessee under the act. the assessee is entitled for the said amount of refund with interest thereon as calculated in accordance with clause ( a ) & ( b ) of sub - section ( 1 ) of section 244a. in calculating the interest payable, the section provides for different dates from which the interest is to be calculated. 27. clause ( a ) of sub - section ( 1 ) of section 244a talks of payment of interest on the amount of tax paid under section 155wj, tax collected at source under section 206c, taxes paid by way of advance tax, taxes treated as paid under section 199 during the financial year immediately preceding the assessment year. under this clause, the interest shall be payable for the period starting from the first day of the assessment year to the date of the grant of refund. no interest is payable if the excess payment is less than 10 % of the tax determined under section 143 ( 1 ) of the act or on regular assessment. clause ( b ) of sub - section ( 1 ) of section 244a opens with the words " in any other case " that means in any case other than the amounts paid under clause ( a ) of sub - section ( 1 ) of section 244a. under this clause, the rate of interest is to be calculated at the rate of one and a half per cent per month or a part of a month

comprised in the period or the periods from the date or, as the case may be, either the dates of payment of the tax or the penalty to the date on which the refund is granted. an explanation is appended to clause ( b ) of the aforesaid sub - section to explain the meaning of the expression " date of payment of tax or penalty ". it clarifies that the date of payment of tax or penalty would mean the date on and from which the amount of tax or penalty specified in the notice of demand issued under section 156 is paid in excess of such demand. 28. having glanced through the relevant sections and the settled legal principles of interpretation of statute, let us revert back to the factual situation placed before us in this appeal. 29. in the present case, the resident / deductor had approached the assessing authority inter alia requesting him to determine the tax that requires to be deducted at source before the payment is made to a non - resident / foreign company. on such a request the assessing officer had passed an order under section 195 ( 2 ) of the act directing the resident / deductor to deduct tax at a particular rate. the resident / deductor had appealed against the said order, but had deposited the tax as directed by the assessing officer / income tax officer by the aforesaid order in accordance with the provisions of section 200 of the act. when the resident / deductor succeeded in the appeal, a direction was issued by the appellate authority for refund of tax so paid. in observance of the same, the assessing authority had granted the refund of the tax amount under section 240 of the act, but declined to grant interest on the said refund amount. the conclusion arrived at by the assessing officer was accepted by the first appellate authority on the ground, inter alia, that the conjoint reading of section 156 and the explanation appended to section 244a ( 1 ) ( b ) of the act would indicate that the amount refunded to the resident / deductor cannot be equated to the refund contemplated under section 244a ( 1 ) ( b ) of the act, whereunder only the interest on refund of excess payment made under section 156 of the act on account of post - assessment tax is contemplated and not the interest on refund of tax deposited under self - assessment. however, the tribunal has rejected the aforesaid rationale of the assessing authority as well as the first appellate authority and granted the claim of the resident / deductor. the high court has endorsed the view of the tribunal and dismissed the appeals filed the revenue.

30. the refund becomes due when tax deducted at source, advance tax paid, self assessment tax paid and tax paid on regular assessment exceeds tax chargeable for the year as a result of an order passed in appeal or other proceedings under the act. when refund is of any advance tax ( including tax deducted / collected at source ), interest is payable for the period starting from the first day of the assessment year to the date of grant of refund. no interest is, however, payable if the excess payment is less than 10 percent of tax determined under section 143 ( 1 ) or on regular assessment. no interest is payable for the period for which the proceedings resulting in the refund are delayed for the reasons attributable to the assessee ( wholly or partly ). the rate of interest and entitlement to interest on excess tax are determined by the statutory provisions of the act. interest payment is a statutory obligation and non - discretionary in nature to the assessee. in tune with the aforesaid general principle, section 244a is drafted and enacted. the language employed in section 244a of the act is clear and plain. it grants substantive right of interest and is not procedural. the principles for grant of interest are the same as under the provisions of section 244 applicable to assessments before 01. 04. 1989, albeit with clarity of application as contained in section 244a. 31. the department has also issued circular clarifying the purpose and object of introducing section 244a of the act to replace sections 214, 243 and 244 of the act. it is clarified therein, that, since there was some lacunae in the earlier provisions with regard to non - payment of interest by the revenue to the assessee for the money remaining with the government, the said section is introduced for payment of interest by the department for delay in grant of refunds. a general right exists in the state to refund any tax collected for its purpose, and a corresponding right exists to refund to individuals any sum paid by them as taxes which are found to have been wrongfully exacted or are believed to be, for any reason, inequitable. the statutory obligation to refund carried with it the right to interest also. this is true in the case of assessee under the act. 32. the question before us is, whether the resident / deductor is also entitled to interest on refund of excess deduction or erroneous deduction of tax at source under section 195 of the act. 33. we would begin our discussion by referring to circular no. 790, dated 20. 04.

2000, issued by the board. omitting what is not necessary, the material portion of the circular is extracted : 34. what the deductor / resident primarily contend is that, what has been deposited by him is a tax, may be for and on behalf of non - resident / foreign company and when the beneficial circular provides for refund of tax to the deductor under certain circumstances, the refund of tax should carry interest. 35. the circular issued by central board of direct taxes ( the board for short ) is binding on the department. binding nature of the circular is explained by this court in the case of uco bank v. cit 237 itr 889, wherein this court has observed that the circulars issued by the board in exercise of its powers under section 119 of the act would be binding on the income tax authorities even if they deviate from the provisions of the act, so long as they seek to mitigate the rigour of a particular section for the benefit of the assessee. therefore, we cannot be taking exception to the reasoning and conclusion reached by the authorities under the act. however, the tribunal and the high court, have granted interest on the amount of tax deposited by the resident / deductor from the date of payment on the ground, firstly, the refund of tax is directed by the first appellate authority in the appeal filed by the deductor / resident under section 240 of the act and secondly, the revenue for having retained the sum by way of tax has to compensate the person who had deposited the tax. 36. section 240 of the act provides for refund of any amount that becomes due to an assessee as a result of an order in appeal or any other proceedings under the act. the phrase other proceedings under the act is of wide amplitude. this court has observed, that, the other proceedings under the act would include orders passed under section 154 ( rectification proceedings ), orders passed by the high court or supreme court under section 260 ( in reference ), or order passed by the commissioner in revision applications under section 263 or in an application under section 273a. 37. a tax refund is a refund of taxes when the tax liability is less than the tax paid. as per the old section an assessee was entitled for payment of interest on the amount of taxes refunded pursuant to an order passed under the act, including the order passed in an appeal. in the present fact scenario, the deductor / assessee had paid taxes pursuant to a special order passed by the assessing officer / income

tax officer. in the appeal filed against the said order the assessee has succeeded and a direction is issued by the appellate authority to refund the tax paid. the amount paid by the resident / deductor was retained by the government till a direction was issued by the appellate authority to refund the same. when the said amount is refunded it should carry interest in the matter of course. as held by the courts while awarding interest, it is a kind of compensation of use and retention of the money collected unauthorizedly by the department. when the collection is illegal, there is corresponding obligation on the revenue to refund such amount with interest in as much as they have retained and enjoyed the money deposited. even the department has understood the object behind insertion of section 244a, as that, an assessee is entitled to payment of interest for money remaining with the government which would be refunded. there is no reason to restrict the same to an assessee only without extending the similar benefit to a resident / deductor who has deducted tax at source and deposited the same before remitting the amount payable to a non - resident / foreign company. 38. providing for payment of interest in case of refund of amounts paid as tax or deemed tax or advance tax is a method now statutorily adopted by fiscal legislation to ensure that the aforesaid amount of tax which has been duly paid in prescribed time and provisions in that behalf form part of the recovery machinery provided in a taxing statute. refund due and payable to the assessee is debt - owed and payable by the revenue. the government, therebeing no express statutory provision for payment of interest on the refund of excess amount / tax collected by the revenue, cannot shrug off its apparent obligation to reimburse the deductors lawful monies with the accrued interest for the period of undue retention of such monies. the state having received the money without right, and having retained and used it, is bound to make the party good, just as an individual would be under like circumstances. the obligation to refund money received and retained without right implies and carries with it the right to interest. whenever money has been received by a party which ex ae quo et bono ought to be refunded, the right to interest follows, as a matter of course. 39. in the present case, it is not in doubt that the payment of tax made by resident / depositor is in excess and the department chooses to refund the excess payment of tax to the depositor. we have held the interest requires to be

paid on such refunds. the catechize is from what date interest is payable, since the present case does not fall either under clause ( a ) or ( b ) of section 244a of the act. in the absence of an express provision as contained in clause ( a ), it cannot be said that the interest is payable from the 1st of april of the assessment year. simultaneously, since the said payment is not made pursuant to a notice issued under section 156 of the act, explanation to clause ( b ) has no application. in such cases, as the opening words of clause ( b ) specifically referred to as in any other case, the interest is payable from the date of payment of tax. the sequel of our discussion is the resident / deductor is entitled not only the refund of tax deposited under section 195 ( 2 ) of the act, but has to be refunded with interest from the date of payment of such tax. 40. in the result, the appeals fail. accordingly, the appeals are dismissed. no order as to costs...................... j. ( h. l. dattu )..................... j. ( s. a. bobde ) new delhi ; february 26, 2014.

dipak misra, j. ram niwas bansal, the predecessor - in - interest of the respondents 1 to 4, the legal heirs who have been brought on record after his death during the pendency of this appeal, while posted as accountant at the narnaul branch of the appellant - bank in the officer cadre, was served with a charge - sheet dated 20. 10. 1980 for certain financial irregularities. two supplementary charge - sheets dated 15. 1. 1981 and 8. 1. 1982 were also issued to the said officer. after explanation was offered by late ram niwas bansal, the disciplinary authority appointed an enquiry officer who, after conducting the enquiry, submitted his report to the general manager ( operations ) of the bank holding that certain charges had been proved, some charges had been partly proved and some charges had not been proved. the disciplinary authority concurred with the findings recorded by the enquiry officer and recommended for removal of the delinquent officer from the bank s service to the appointing authority in accord with the terms of regulation 68 ( 1 ) ( ii ) of the state bank of patiala ( officers ) service regulations, 1979 ( for short the 1979 regulations ) and the appointing authority, i. e., managing director, agreeing with the findings recorded by the enquiry officer and the recommendations of the disciplinary authority, imposed the penalty of removal vide order dated 23. 4. 1985. the order imposing punishment of removal from service along with a copy of the enquiry report was sent to late bansal who preferred an appeal under regulation 70 of the 1979 regulations before the executive committee which, vide order dated 18. 7. 1986, rejected the appeal. 2. being grieved by the aforesaid orders, he preferred cwp no. 4929 of 1986 before the high court for issuance of a writ of certiorari for quashment of all the orders and for issue of appropriate direction to reinstate him in service with full service benefits. on 1. 10. 1993 the learned single judge referred the matter to the larger bench and ultimately the matter was placed before the full bench. 3. the full bench, vide order dated 22. 5. 1998, ruled that non - supply of comments of the general manager had caused serious prejudice to the delinquent officer and there was denial of fair and reasonable opportunity and on that basis set aside the order of punishment. however, it directed the disciplinary authority to grant an opportunity to the petitioner therein to reply to the enquiry report

and pass appropriate orders after granting personal hearing to the petitioner therein in accordance with law. 4. dissatisfied with the aforesaid judgment and order, the appellant - bank preferred special leave petition ( c ) no. 2442 of 1998 and after grant of leave the same was registered as civil appeal no. 773 of 1998. on 12. 4. 1999 this court directed stay of reinstatement of the respondent therein with the direction that the bank would comply with the provisions of section 17 - b of the industrial disputes act, 1947 ( for brevity, the act ). it was further observed that the bank and its functionaries would be at liberty to proceed with the enquiry in terms of the permission granted by the high court and any decision taken would be without prejudice to the outcome of the appeal. it may be noted that this order was passed when a prayer for stay of the contempt proceeding that was initiated by said bansal before the high court was made before this court. be it stated, this court directed stay of further proceedings of the contempt petition. 5. on 20. 8. 1999 the bank filed interlocutory application no. 4 of 1999 for modification of the order dated 12. 4. 1999 on the ground that section 17 - b of the act was not applicable. on 7. 9. 1999 the employee filed another contempt petition no. 396 of 1999 for non - implementation of the order passed by this court. on 6. 12. 1999 this court, leaving the question of law open, dismissed the civil appeal as well as the contempt petition. 6. as the factual score would further unfold, on 10. 7. 2000 the bank in compliance with the order dated 22. 5. 1998 passed by the full bench of the high court, sent a copy of the enquiry report to the employee wherein it was mentioned that he should appear before the disciplinary authority on the date fixed for personal hearing. in the meantime, on 24. 7. 2000 the application for contempt was dismissed by the high court on the foundation that there was no direction for payment of any salary to the employee or grant of any consequential benefits in the writ petition. against the aforesaid order, the employee preferred special leave petition ( c ) no. 15098 of 2000 and the same stood dismissed as withdrawn vide order dated 27. 9. 2000 granting liberty to the employee to approach the high court for consequential reliefs. 7. on 14. 10. 2000 cm no. 1965 of 2001 was filed by the writ petitioner therein seeking clarification of the order dated 22. 5

. 1998 with a further direction to the bank to reinstate him in service with full back wages. during the pendency of the said application in the writ petition the appointing authority passed the order of removal on 22. 11. 2001 with effect from 23. 4. 1985. 8. on 23. 11. 2001 the cm no. 1965 of 2001 was disposed of by the full bench by the impugned order. a contention was raised by the bank that the respondent - employee stood superannuated in the year 1992 after completion of thirty years of service. the full bench, after adverting to the facts in chronology and referring to the observations made by this court in special leave petition no. 15098 of 2000 and placing reliance on various decisions, took note of certain aspects which we think is necessary to be reproduced : - 9. thereafter, the full bench referred to the decision in managing director, ecil, hyderabad v. b. karunakar and others [ 1 ] and came to hold that : 10. after so stating the full bench observed that on the date of non - 11. at this juncture, it is essential to state the facts in transfer case ( c ) no. 79 of 2013. be it noted, when the civil appeal was listed for hearing on 16. 1. 2013, this court, while hearing the appeal, was apprised about the subsequent development that had taken place in pursuance of which the original respondent no. 1 had preferred civil writ petition no. 11412 of 2003 in the high court of punjab and haryana, chandigarh. learned counsel for the respondents agreed for transfer of the writ petition to this court and on that day learned counsel for the bank took time to obtain instructions and, eventually, on 24. 1. 2013 agreed to the transfer of the writ petition to this court to be heard along with the civil appeal. thereafter, by virtue of order dated 30. 4. 2013 it has been registered as transfer case ( c ) no. 79 of 2013. 12. on a perusal of the writ petition it transpires that the petitioner therein referred to the order passed by the full bench on 23. 11. 2001 and thereafter stated about the disciplinary action taken against him after the initial judgment and order passed by the full bench on 22. 5. 1998 and receipt of the order dated 22. 11. 2001 along with a cover letter dated 26. 11. 2001 whereby the bank had removed him from service with retrospective effect from 23. 4. 1985, i. e

., the date of earlier removal. it was contended in the writ petition that the said order was unsustainable, because the order of termination could have not been given retrospective effect ; that the conduct of the bank was far from being laudable and replete with legal mala fide and colourable exercise of power ; that the order of dismissal was violative of principles of natural justice and further the grounds mentioned in the order were totally unjustified ; and that an attempt had been made by the bank to overreach the judgment of the full bench. on the aforesaid basis, a prayer was made for quashing the order dated 22. 11. 2001 and directing the bank to reinstate him in service with entire benefits with effect from 23. 4. 1985 along with interest and to pass such other orders as it may deem fit and proper in the facts and circumstances of the case. 13. we have heard mr. vikas singh, learned senior counsel for the appellant bank and mr. p. s. patwalia, learned senior counsel for the legal heirs of the deceased - employee in the appeal as well as the in the transfer petition. 14. the three issues that eminently emerge for consideration are, ( i ) whether the employer bank could have, in law, passed an order of dismissal with retrospective effect ; ( ii ) whether the delinquent officer stood superannuated after completion of thirty years as provided under the regulations on 25. 2. 1992 ; and ( iii ) whether the legal heirs of the deceased - employee are entitled to get the entire salary computed till the actual passing of the order of dismissal, that is, 22. 11. 2001 or for that matter till the date of superannuation, that is, 25. 2. 1992. 15. regard being had to nature of controversy, we shall proceed to deal with first point first, that is, whether the order of removal could have been made with retrospective effect. mr. patwalia, learned senior counsel appearing for the employee, has submitted that the disciplinary authority could not have passed an order of removal by making it operational from a retrospective date. he has commended us to a three - judge bench decision in r. jeevaratnam v. state of madras [ 2 ]. in the said case, the appellant - therein instituted a suit for a declaration that the order of dismissal from service was illegal and void. the trial court dismissed the suit and the said decree was affirmed in appeal by the high court. one of the contentions raised before this court

that the order of dismissal dated october 17, 1950 having been passed with retrospective effect, i. e., may 29, 1949, was illegal and inoperative. this court opined that an order of dismissal with retrospective effect is, in substance, an order of dismissal as from the date of the order with the superadded direction that the order should operate retrospectively as from an anterior date. the two parts of the order are clearly severable. assuming that the second part of the order is invalid, there is no reason why the first part of the order should ot be given the fullest effect. the said principle has been followed in the gujarat mineral development corporation v. shri p. h. brahmbhatt [ 3 ]. 16. mr. vikas singh, learned senior counsel has heavily relied on the constitution bench decision in p. h. kalyani v. m / s. air france, calcutta [ 4 ], wherein the employee had challenged the order of the labour court relating to his dismissal by the employer, the respondent company therein. he was served a charge - sheet containing two charges of gross dereliction of duty inasmuch as he had made mistakes in the preparation of load - sheets on one day and a balance chart on another day, which mistakes might have led to a serious accident to the aircraft. an enquiry was fixed by the station manager. his authority was questioned by the appellant but his objection was overruled and the enquiry was held and completed. the enquiry officer forwarded the findings and his recommendations to the competent authority of the company, on the basis of which he was dismissed from service. the order of dismissal provided for payment of one month s wages for the appellant and also stated that an application was made before the industrial tribunal for the approval of the action taken, apparently as some industrial dispute was pending before the tribunal. in accordance with the order of dismissal, the respondent company filed an application before the labour court seeking approval of the action. the appellant thereafter filed an application under section 33 - a of the act challenging the legality of the actions taken on many a ground. the grounds were considered by the labour court and all of them were substantially decided against the appellant. the labour court held that the dismissal of the appellant was justified and accordingly accorded approval to the order of dismissal passed by the management. while dealing with various points raised by the appellant, the labour court held that the application under section 33 ( 2 ) ( b

) of the act was validly made even though it had been made after the order of dismissal had been passed. it also opined that the case was not covered by section 33 ( 1 ) of the act and it was not necessary to obtain the previous permission of the tribunal before dismissing the appellant, for he was not a protected workman. after dealing with the other legal facets, the labour court dismissed the application of the appellant - employee under section 33 - a of the act. before the constitution bench, it was urged that the domestic enquiry held by the employer was defective as no approval of the action taken in connection with enquiry and further the labour court, even if held that the dismissal was justified, it should have held that the order of dismissal would become operative from the date of the award. in support of the said submission, reliance was placed on m / s. sasa musa sugar works ( p ) ltd. v. shobrati khan [ 5 ] wherein it was observed as follows : - 17. referring to the said case, the constitution bench observed that in shobrati khan ( supra ), an application was made under section 33 ( 1 ) of the act for permission to dismiss the employees and such permission was asked for though no enquiry whatsoever had been held by the employer and no decision was taken that the employees be dismissed and it was in those circumstances that a case for dismissal was made out only in the proceedings under section 33 ( 1 ) and, therefore, the employees were held entitled to their wages till the decision on the application under section 33 of the act. the constitution bench observed that the matter would have been different if in that case an enquiry had been held and the employer had come to the conclusion that dismissal was proper punishment and then they had applied under section 33 ( 1 ) for permission to dismiss and, in those circumstances, the permission would have related back to the date when the employer came to the conclusion after an enquiry that the dismissal was the proper punishment and had applied for removal of the ban by an application under section 33 ( 1 ). 18. the larger bench, in that context, made a reference to the to the decision in management of ranipur colliery v. bhuban singh [ 6 ] and thereafter held thus : - 19. in this regard, we may refer to a two - judge bench decision in r. thiruvirkolam v. presiding officer and another [ 7 ]. in the said case, the appellant was dismissed

from service and a domestic enquiry was instituted on 18. 11. 1981 on proof of misconduct and he had challenged his dismissal before the labour court which found that the domestic enquiry to be defective and permitted the management to prove the misconduct before it. on the basis of the evidence adduced before the labour court, it came to the conclusion that the misconduct was duly proved. when the matter travelled to this court, leave granted in the appeal was confined only to the question : whether the dismissal would take effect from the date of the order of the labour court, namely, 11. 12. 1985 or it would relate to the date of order of dismissal passed by the employer, namely, 18. 11. 1981. the court distinguished the decision in gujarat steel tubes limited and others v. gujarat steel tubes mazdoor sabha and others [ 8 ] on the basis of the principles stated in p. h. kalyani s ( supra ). 20. at this stage, we may refer with profit to the authority in punjab dairy development corporation ltd. and another v. kala singh and others [ 9 ] wherein a three - judge bench was dealing with a reference made by a bench of three judges to consider the correctness of the decision in desh raj gupta v. industrial tribunal iv, u. p. [ 10 ]. the three - judge bench referred to the necessitous facts that the respondent therein, kala singh, was working as a dairy helper - cum - cleaner for collecting the milk from various centres. he was charged with misconduct and after conducting due domestic enquiry, the disciplinary authority dismissed him from service. on reference, the labour court found that the domestic enquiry conducted by the employer - appellant was defective. consequently, opportunity was granted to the management to adduce evidence afresh to justify the order of dismissal and, accordingly, the evidence was adduced by the appellant and the delinquent - respondent. on consideration of the evidence the labour court found that the charge had been proved against the respondent and opined that the punishment was not disproportionate to the magnitude of misconduct of the respondent. in a writ petition the high court set aside the award of the labour court to the extent of confirmation of the dismissal from service with effect from the date of the judgment of the labour court and not from any date earlier thereto. the three - judge bench noted that subsequent to the reference pertaining to correctness of the decision in desh raj gupta ( supra ) the decision has been rendered by a two -

judge bench in r. thiruvirkolam ( supra ) and thereafter proceeded to state as follows : - 21. at this juncture, we may notice what was the perception at the subsequent stage. in vishweshwaraiah iron and steel ltd. v. abdul gani and others [ 11 ], a two - judge bench observed as follows : - 22. thereafter, it granted leave and directed the appeals to be placed for final disposal before a constitution bench. when the matter came before the constitution bench in vishweshwaraiah iron and steel ltd. v. abdul gani and others [ 12 ], the larger bench, on 31. 1. 2002, passed the following order : - 23. in this context, a reference to a three - judge bench decision in engineering laghu udyog employees union v. judge, labour court and industrial tribunal and another [ 14 ] would be apt. in the said case a contention was canvassed on behalf of the workmen that the view taken by the high court to the extent it held that the order of termination would relate back to the date of the original order of termination, was erroneous and to bolster the said submission reliance was placed on gujarat steel tubes ltd. ( supra ). the court, after referring to earlier decisions, opined that section 11 - a of the act confers a wide power upon the labour court, industrial tribunal or the national tribunal to give appropriate relief in case of discharge or dismissal of workman. while adjudicating on a reference made to it, the labour court, tribunal or the national tribunal, as the case may be, if satisfied that the order of discharge or dismissal was not justified, may, while setting aside the same, direct reinstatement of the workman on such terms and conditions, if any, as it thinks fit, or give such other relief to the workman including the award of any lesser punishment in lieu of discharge or dismissal as the circumstances of the case may require. only in a case where the satisfaction is reached by the labour court or the tribunal, as the case may be, that an order of dismissal was not justified, the same can be set aside. so long as the same is not set aside, it remains valid. but once whether on the basis of the evidence brought on record in the domestic inquiry or by reason of additional evidence, the employer makes out a case justifying the order of dismissal the stand that such order of dismissal can be given effect to only from the date of

the award and not from the date of passing of the order of punishment was not legally acceptable. the court further ruled that the distinction sought to be made by this court in some of the matters including gujarat steel tubes was not based on a sound premise, particularly when the binding decisions of the court in workmen v. motipur sugar factory [ 15 ] and workmen v. firestone tyre & rubber co. of india ( p ) ltd. [ 16 ] had not been taken note of. 24. thereafter, the three - judge bench referred to the decision in motipur sugar factory ( p ) ltd. ( supra ) and it was ruled that the employer has got a right to adduce evidence before the tribunal justifying its action, even where no domestic inquiry whatsoever has been held. reference was also made to the decision in firestone tyre & rubber co. of india ( p ) ltd. ( supra ) wherein the court formulated the proposition of law emerging from earlier decisions. the relevant propositions are as follows : - 26. we have referred to the aforesaid line of judgments to highlight that these authorities pertain to the lis under the act. the doctrine of relation back of an imposition of punishment in case of a labour court finding the domestic enquiry as defective and granting opportunity to the employer to substantiate the same either under section 10a or proceedings under section 33 of the act, in our considered opinion, in the present case, need not be gone into as the nature of controversy is quite different. suffice it to say, the aforesaid authorities have to be restricted to the disputes under the act. 27. at this juncture, we think it appropriate to state in detail what the full bench had ruled on the first occasion on 22. 5. 1998. we have already stated as to what directions it had passed and how the civil appeal stood dismissed keeping the law open as far as applicability of section 17b of the act is concerned. the fact remains, the said judgment had attained finality inter se parties. the full bench took note of the fact that the report of the enquiry officer which ran into 68 pages was not furnished to the delinquent officer as a result of which he was deprived of the benefit of knowing the contents of the report and submitting his version with regard to the correctness of the findings of the enquiry report. the high court opined that the delinquent officer had suffered serious prejudice. thereafter, the court referred to the order of punishment passed by the managing director which apparently shows that the recommendations of the

general manager ( operation ) were taken into consideration. proceeding further it expressed as follows : - 28. in this context, it is instructive to reproduce the observations made by the constitution bench in b. karunakar ( supra ) which adverted to the question that relates to the effect on the order of punishment when the report of the enquiry officer is not furnished to the employee and what relief should be granted to him in such cases. answering the question, the court observed that the answer to the said question has to be relative to the punishment awarded. when the employee is dismissed or removed from service and the inquiry is set aside because the report is not furnished to him, in some cases the non - furnishing of the report may have prejudiced him gravely while in other cases it may have made no difference to the ultimate punishment awarded to him and hence, to direct reinstatement of the employee with back - wages in all cases is to reduce the rules of justice to a mechanical ritual. the theory of reasonable opportunity and the principles of natural justice have been evolved to uphold the rule of law and to assist the individual to vindicate his just rights. they are neither incantations to be invoked nor rites to be performed on all and sundry occasions. whether in fact, prejudice has been caused to the employee or not on account of the denial to him of the report, has to be considered on the facts and circumstances of each case. in case where even after the furnishing of the report, no different consequence would have followed, it would be a perversion of justice to permit the employee to resume duty and to get all the consequential benefits as it would amount to rewarding the dishonest and the guilty and stretching the concept of justice to illogical and exasperating limits. 29. after so stating the larger bench proceeded to rule that in all cases where the enquiry officer s report is not furnished to the delinquent employee in the disciplinary proceedings, the courts and tribunals should cause the copy of the report to be furnished to the aggrieved employee if he has not already secured it before coming to the court / tribunal and give the employee an opportunity to show how his or her case was prejudiced because of the non - supply of the report. if after hearing the parties, the court / tribunal comes to the conclusion that the non - supply of the report would have made no difference to the ultimate findings and the punishment given, the court / tribunal should not interfere with the order of punishment. the court / tribunal should not mechanically set aside the order of

punishment on the ground that the report was not furnished. this court further observed that since it is the courts / tribunals which will apply their judicial mind to the question and give their reasons for setting aside or not setting aside the order of punishment, there would be neither a breach of the principles of natural justice nor a denial of the reasonable opportunity. it is only if the court / tribunal finds that the furnishing of the report would have made a difference to the result in the case that it should set aside the order of punishment. thereafter, the constitution bench opined thus : - 30. in the case at hand, the said stage is over. the full bench on the earlier occasion had already rendered a verdict that the serious prejudice had been caused and, accordingly, had directed for reinstatement. the said direction, if understood and appreciated on the principles stated in b. karunakar ( supra ), is a direction for reinstatement for the purpose of holding a fresh enquiry from the stage of furnishing the report and no more. in the case at hand, the direction for reinstatement was stayed by this court. the bank proceeded to comply with the order of the high court from the stage of reply of enquiry. the high court by the impugned order had directed payment of back wages to the delinquent officer from the date of dismissal till passing of the appropriate order in the disciplinary proceeding / superannuation of the petitioner therein whichever is earlier. the bank has passed an order of dismissal on 22. 11. 2001 with effect from 23. 4. 1985. the said order, as we perceive, is not in accord with the principle laid down by the constitution bench decision in b. karunakar ( supra ), for it has been stated there that in case of non - furnishing of an enquiry report the court can deal with it and pass as appropriate order or set aside the punishment and direct reinstatement for continuance of the departmental proceedings from that stage. in the case at hand, on the earlier round the punishment was set aside and direction for reinstatement was passed. thus, on the face of the said order it is absolutely inexplicable and unacceptable that the bank in 2001 can pass an order with effect from 23. 4. 1985 which would amount to annulment of the judgment of the earlier full bench. as has been held by the high court in the impugned judgment that when on the date of non - furnishing of the enquiry report the delinquent officer was admittedly not under suspension, but was in service and, therefore, he would continue in service till he

is dismissed from service in accordance with law or superannuated in conformity with the regulations. how far the said direction is justified or not or how that should be construed, we shall deal with while addressing the other points but as far as the order of removal being made retrospectively operational, there can be no trace of doubt that it cannot be made retrospective. 31. presently, we shall proceed to deal with the issue of superannuation as envisaged under the regulations. regulation 19 ( 1 ) deals with superannuation of an employee. the relevant part of regulation 19 ( 1 ) is as follows : - 32. on a careful reading of the first proviso to regulation 19 ( 1 ) it is quite clear that the period of service can be extended by the discretion of the competent authority and such extension has to be desirable in the interest of the bank. the second proviso provides that an officer who has joined the service of the bank either as an officer or otherwise on or after 19. 7. 1969 and attained the age of 58 years shall not be granted any further extension in service. by this proviso the power of the competent authority in respect of officers who had joined as officers or otherwise after the cut - off date, i. e. 19. 7. 1969 and have attained the age of 58 years of service, is curtailed. the delinquent officer joined the service as a clerk in the bank on 26. 2. 1962 and was promoted as grade - ii officer in 1971 and as grade - i officer in 1977. even if this provision is extended to him, he could not have been granted extension of service after completion of 58 years of age. the said officer attained the age of 58 years on 24. 2. 2002. be that as it may, the grant of extension is dependent on satisfaction the conditions as laid down in the first proviso. as is seen from the earlier round of litigation, the full bench had quashed the punishment and directed for reinstatement. in the second round in cm no. 1965 of 2000 the high court has directed that the employee shall continue till passing of the appropriate orders in the disciplinary proceedings or superannuated as per rules. it has not commented on the validity of superannuation in the year 1992 as pleaded by the bank and left it to be agitated in appropriate proceeding. mr. vikas singh, learned senior counsel appearing for the employer - bank, has submitted that the delinquent employee completed thirty years of service in 1992 and regard being had to the stipulation in the regulation 19 ( 1

), he stood superannuated. learned senior counsel would further submit that for extension of the period an affirmative act by the competent authority of the bank is imperative. mr. patwalia, learned senior counsel appearing for the employee submitted that the delinquent officer could not have been superannuated on completion of thirty years of service as it was obligatory on the part of the bank to intimate the officer that he had reached the stage of superannuation and, in any case, as the bank continued the proceedings in pursuance of the liberty granted by the high court, the relationship between the employer and employee had not come to an end. 33. at this juncture, it is noteworthy to refer to regulation 19 ( 2 ) of the regulations. it reads as follows : - 34. the aforesaid regulation, as it seems to us, deals with a different situation altogether. it clearly lays down that if the disciplinary proceedings have been initiated against an officer during the period when he is in service, the said proceedings can continue even after his retirement at the discretion of the managing director and for the said limited purpose the officer shall be deemed to be in service. in this regard it is worthwhile to refer to the decision in uco bank and another v. rajinder lal capoor [ 19 ], wherein the appellant - bank was grieved by the decision of the high court whereby the order of punishment of removal imposed on an officer was modified to one of compulsory retirement with effect from the date of superannuation. in the said case, the employee attained the age of superannuation on 1. 11. 1996 and charge - sheet was issued on 13. 11. 1998. the disciplinary proceeding was initiated against the employee in terms of regulation 20 ( 3 ) ( iii ) of the uco bank officer employees service regulations, 1979 which reads as follows : - further proceeding, the two - judge bench observed thus : - 35. in this context, reference to the authority in ramesh chandra sharma v. punjab national bank and another [ 20 ] would be fruitful. in the said case the high court had ruled that the appellant therein could not have been dismissed from service after his retirement. this court referred to regulation 20 ( 3 ) ( iii ) of the punjab national bank officer employees ( discipline & appeal ) regulations, 1977 which reads as follows : - 36. interpreting the said regulation the two - judge bench held thus : - 37. slightly more recently in state bank

of india v. ram lal bhaskar and another [ 21 ], a three - judge bench, placing reliance on rule 19 ( 3 ) of the state bank of india officers service rules, 1992, opined that in view of the language employed in rule 19 which stipulated that in case the disciplinary proceedings under the relevant rules of service have been initiated against an officer before he ceases to be in the bank s service by the operation of, or by virtue of, any of the rules or the provisions of the rules, the disciplinary proceedings may, at the discretion of the managing director, be continued and concluded by the authority by whom the proceedings were initiated in the manner provided for in the rules as if the officer continues to be in service. he shall be deemed to be in service only for the purpose of the continuance and conclusion of such proceedings and the punishment could be imposed. 38. in the case at hand, the disciplinary proceeding was initiated against the delinquent officer while he was in service. the first order of dismissal was passed on 23. 4. 1985. the said order of punishment was set aside by the high court and the officer concerned was directed to be reinstated for the limited purpose, i. e., supply of enquiry report and to proceed in the disciplinary proceeding from that stage. the said order was not interfered with by this court. the bank continued the proceeding. needless to emphasise, the said continuance was in pursuance of the order of the court. under these circumstances, it has to be accepted that the concept of deemed continuance in service of the officer would have full play and, therefore, an order of removal could have been passed after finalization of the departmental proceeding on 22. 11. 2001. we have already held that the said order would not have been made retrospectively operative, but that will not invalidate the order of dismissal but it would only have prospective effect as has been held in r. jeevaratnam ( supra ). 39. having said that, it becomes necessary to determine the date of retirement and thereafter delve into how the period from the date of first removal and date of retirement would be treated. we may hasten to add that for the purpose of deemed continuance the delinquent officer would not be entitled to get any benefit for the simple reason, i. e., the continuance is only for finalisation of the disciplinary proceedings, as directed by the full bench of the high court. hence, the effect and impact of regulation 19 ( 1 ) of the regulations comes into full play. on a seem

##ly construction of the first proviso we are of the considered view that it requires an affirmative act by the competent authority, for it is an exercise of power of discretion and further the said discretion has to be exercised where the grant of extension is deemed desirable in the interest of the bank. the submission of mr. patwalia to the effect that there should have been an intimation by the employer - bank is founded on the finding recorded by the high court in the impugned order that no order had been brought on record to show that the delinquent officer had retired. as the facts would reveal, in the year 1992 the concerned officer stood removed from service and at that juncture to expect the bank in law to intimate him about his date of superannuation or to pass an order would be an incorrect assumption. the conclusion which appears logical and acceptable is that unless an extension is granted by a positive or an affirmative act by the competent authority, an officer of the bank retires on attaining age of 58 years or upon the completion of 30 years of service, whichever occurs first. in this regard the pronouncement in c. l. verma v. state of madhya pradesh and another [ 22 ] is apt to refer. in the said case the effect of rule 29 of madhya pradesh state municipal service ( executive ) rules, 1973 fell for interpretation. in the said rule it was provided that a member of the service shall attain the age of superannuation on the date he completes his 58 years of age. the proviso to the said rule stipulated that the state government may allow a member of the service to continue in employment in the interest of municipal council or in public interest and, however, no member of service shall continue in service after he attains the age of 60 years. the appellant therein had attained the age of 58 years two days prior to the order of dismissal. the court opined that the tenor of the proviso clearly indicates that it is intended to cover specific cases and individual employees. be it noted, on behalf of the government a notification was issued by the concerned department. the court opined that the said circular was not issued under the proviso to rule 29 but was administrative in character and that on the face of mandate in rule 29 the administrative order could not operate. the court further ruled that as the appellant therein had attained the age of superannuation prior to the date of passing the order of dismissal, the government had no right to deal with him in its disciplinary jurisdiction

available in regard to employees. we have referred to this decision to highlight that the regulation herein also is couched in similar language and, therefore, the first proviso would have full play and it should be apposite to conclude that the delinquent officer stood superannuated on completion of 30 years of service on 25. 2. 1992. it is because the conditions stipulated under the first proviso to the said regulation deal with a conditional situation to cover certain categories of cases and require an affirmative act and in the absence of that it is difficult to hold that the delinquent officer did not retire on completion of thirty years of service. 40. the next issue pertains to how the period from the date of order of first removal, i. e., 23. 4. 1985 till 25. 2. 1992 would be treated and to what benefits the officer concerned would be entitled to. the order of removal from service, as we have already opined, would come into effect from the date of passing of the order, i. e., 22. 11. 2001 as it has to be prospectively operative and, therefore, as a natural corollary he remained in service from 23. 4. 1985 till he attained the age of superannuation, i. e., 25. 2. 1992 or till the end of february, 1992, being the last day of the month. in the transfer case relief has been sought for grant of full salary for the whole period. mr. patwalia, learned senior counsel appearing for the legal representatives of the original petitioner, would contend that they should be entitled to get the full salary till the order of removal. we are unable to accept the said submission because we have already ruled that the officer stood superannuated on completion of thirty years and his continuance by virtue of the order passed by the high court has to be treated as a deemed continuance for the purposes of finalization of the disciplinary proceeding. the submission put forth by mr. vikas singh that the order of removal would relate back to the date of the earlier order, i. e., 23. 4. 1985 has already been repelled by us. thus, we are to restrict the period for grant of benefit till the date of retirement. mr. singh in course of hearing has alternatively submitted that under no circumstances back wages in entirety should be paid as the concerned officer had not worked. to bolster his submission he has commended us to the decisions in a. p. state road transport corporation and others v. abdul kareem

[ 23 ], a. p. srtc and another v. b. s. david paul [ 24 ] and j. k. synthetics ltd. v. k. p. agrawal and another [ 25 ] wherein grant of back wages has been restricted on certain parameters. he has also urged that in pursuance of the order dated 15. 12. 2003 the bank has deposited rs. 5. 00 lacs in the high court which was permitted to be withdrawn by the delinquent officer furnishing adequate security to the satisfaction of the registrar general of the high court and under the circumstances the said amount may be treated as back wages and be paid to the legal heirs, if not withdrawn by the original petitioner. 41. it is worthy to note here that during the continuance of the disciplinary proceeding the delinquent officer was not put under suspension. after the order of punishment passed by the disciplinary authority and affirmed by the appellate authority was quashed by the high court on 22. 5. 1998, the concerned officer has to be treated to be in service from his date of first removal till his date of retirement. had the bank brought to the notice of the full bench about the legal position under the regulations, in all probability, the matter would have been dealt with differently. be that as it may, grant of salary in entirety for the period as determined by us to be the period of continuance in service would not be apposite and similarly, the submission advanced on behalf of the bank that payment of rupees five lacs would meet the ends of justice does not deserve acceptance. ordinarily, we would have directed the bank to pay fifty per cent of the back wages for the period commencing 23. 4. 1985 till the end of february, 1992, with some interest but we do not want that the legal heirs of the delinquent officer should further go through any kind of tribulation in computation and face further legal hassle as regards the quantum. we are of the considered opinion that the controversy should be given a quietus and, therefore, instead of fixing fifty per cent of the back wages we direct that the bank shall deposit a further sum of rupees five lacs with the registrar general of the high court within two months hence and the respondents shall be entitled to withdraw the same. we may hasten to clarify that if the amount earlier deposited has not been withdrawn by the original respondent, ram niwas bansal, the same shall also be withdrawn by the legal heirs. 42. in view of the aforesaid directions

, the judgment and order passed by the high court is modified and the civil appeal and the transfer case are disposed of leaving the parties to bear their respective costs.. j. [ h. l. gokhale ]. j. [ dipak misra ] new delhi ; march 3, 2014. - - - - - - - - - - - - - - - - - - - - - - - [ 1 ] ( 1993 ) 4 scc 727 [ 2 ] air 1966 sc 951 [ 3 ] ( 1974 ) 3 scc 601 [ 4 ] air 1963 sc 1756 [ 5 ] air 1959 sc 923 [ 6 ] air 1959 sc 833 [ 7 ] ( 1997 ) 1 scc 9 [ 8 ] ( 1980 ) 2 scc 593 [ 9 ] ( 1997 ) 6 scc 159 [ 10 ] ( 1991 ) 1 scc 249 [ 11 ] air 1998 sc 185 : ( 1997 ) 8 scc 713 [ 12 ] ( 2002 ) 10 scc 437 [ 13 ] ( 2002 ) 1 scc 1 [ 14 ] ( 2003 ) 12 scc 1 [ 15 ] air 1965 sc 1803 [ 16 ] ( 1973 ) 1 scc 813 [ 17 ] ( 2002 ) 2 scc 244 [ 18 ] ( 1978 ) 2 scc 144 [ 19 ] ( 2007 ) 6 scc 694 [ 20 ] ( 2007 ) 9 scc 15 [ 21 ] ( 2011 ) 10 scc 249 [ 22 ] 1989 supp ( 2 ) scc 437 [ 23 ] ( 2005 ) 6 scc 36 [ 24 ] ( 2006 ) 2 scc 282 [ 25 ] ( 2007 ) 2 scc 433

t. s. thakur, j. 1. leave granted. 2. these appeals are directed against an order dated 9th march, 2007 passed by the high court of judicature, andhra pradesh at hyderabad whereby the high court has set aside the order passed by the state administrate tribunal in oa no. 6334 of 1997 to the extent the same holds the judgment of this court in v. jagannadha rao and ors. v. state of andhra pradesh and ors. ( 2001 ) 10 scc 401, to be prospective in its application. an order dated 3rd november, 2010 passed by the high court dismissing a review petition filed by the appellants against the said order has also been assailed. the facts in the backdrop are as under : 3. in v. jagannadha rao and ors. v. state of andhra pradesh and ors. ( 2001 ) 10 scc 401, a three - judge bench was examining whether special rules framed by the governor of andhra pradesh under proviso to article 309 of the constitution to the extent the same permitted appointment by transfer to a higher category on the basis of seniority - cum - efficiency were violative of para 5 ( 2 ) of the presidential order issued under article 371 - d of the constitution of india, 1950. answering the question in the affirmative this court held that the presidential order dated 18th october, 1975 issued under article 371 - d of the constitution was aimed at providing equitable opportunities and facilities to the people belonging to different parts of the state in the matter of public employment, education etc. and that the rules framed by the state government under proviso to article 309 whereby udcs of the labour department, and factories and boilers department were made eligible for recruitment by transfer to the posts of assistant inspector of labour / assistant inspector of factories were violative of the presidential order. the question had arisen on account of a challenge mounted by the ministerial employees of the labour department against goms no. 72 dated 25th february, 1986 and goms no. 117 dated 28th may, 1986 whereunder udcs in the labour department and those working in factories and boilers department were made eligible for recruitment by transfer to the posts of assistant inspectors of labour and assistant inspectors of factories. a full bench of tribunal before whom the challenge came up for consideration declared that the impugned rules to the extent they enabled the ministerial employees of the factories

and boilers department or any other department to be considered for appointment to the posts in the labour department were violative of paras 3 and 5 of the presidential order and hence void. the view taken by the tribunal was questioned before this court by the aggrieved employees. dismissing the appeals, this court held that according to the scheme of the presidential order, local cadre was the unit under para 5 ( 1 ) thereof for recruitment, appointment, seniority, promotion and transfers. this court further held that while para 5 ( 2 ) authorised the state government to make provisions for transfer in certain specified circumstances, yet the term transfer could not be enlarged in its amplitude so as to include promotional aspects. this court observed : 4. overruling the decisions rendered by this court in state of andhra pradesh and anr. v. v. sadanandam and ors. 1989 supp. ( 1 ) scc 574, and in govt. of a. p. and anr. v. b. satyanarayana rao ( dead ) by lrs. and ors. ( 2000 ) 4 scc 262, this court held that in terms of article 371 - d ( 10 ) of the constitution any order made by the president shall have effect notwithstanding anything in any other provision of the constitution or in any law for the time being in force. this implies that if the presidential order prohibits consideration of employees from the feeder category from other units then any rule made by the governor in exercise of powers vested in him under the proviso to article 309 of the constitution will be bad in law, hence, liable to be struck down. so also if the state government makes any provision which is outside the purview of the authority of the government under para 5 ( 2 ) of the order, any such provision shall also be legally bad and liable to be struck down. this court on that logic held : 5. the current controversy does not relate to goms no. 72 dated 25th february, 1986 and goms no. 117 dated 28th may, 1986 which fell for consideration before this court in v. jagannadha rao s case ( supra ). the case at hand arises out of slightly different though essentially similar circumstances. the present batch of cases relates to g. o. m. no. 14, labour employment & training ( ser. iv ) department, dated 26th november, 1994, as amended by g. o. m. no. 22 dated 9th may, 1996. these two g.

o. ms. provide that while senior assistants and senior stenographers working in the subordinate offices of the labour department constitute the feeding channel under rule 3 of andhra pradesh labour subordinate service rules, senior assistants and senior stenographers working in the head offices shall also be eligible for appointment by transfer to the post of assistant labour officer. aggrieved by the g. o. ms. some of the employees approached the andhra pradesh administrative tribunal for redressal. their grievance primarily was that since the post of assistant labour officer is a zonal post, employees working in the respective zones alone were entitled to be included in the feeding channel. inclusion of other categories from outside the zone in the feeding channel for purposes of promotion or appointment by transfer was offensive to paras 3 ( 3 ) and 5 ( 1 ) of the andhra pradesh public employment ( organisation of local cards and regulation of direct recruitment ) order, 1975 referred to hereinabove as the presidential order against the employees. these petitions were partly allowed by the tribunal in terms of its order dated 7th march, 2003 and g. o. m. no. 14, dated 26th november, 1994, as amended by g. o. m. no. 22 dated 9th may, 1996 struck down as unconstitutional to the extent the same provided a channel for senior assistant and senior stenographer in andhra pradesh ministerial service working in the head offices of labour department and those in factories and boiler departments besides those in the subordinate offices in the said departments for appointment by transfer to the post of assistant labour officer. the tribunal also struck down related provisions in the impugned g. o. ms. stipulating quota and rotation etc. for these categories as being in violation of the presidential order with a direction that the respondents shall not give effect to the said provisions. having said that the tribunal directed that the striking down of the impugned g. o. ms. would only be prospective and that any action taken in compliance with the said rules till 7th november, 2001 shall not be disturbed nor any employee promoted on the basis of the legal position that prevailed earlier to the decision of this court in v. jagannadha rao s case ( supra ) reverted. 6. the aggrieved employees, who had approached the tribunal having succeeded but only in part, filed writ petitions no. 6163 and 6068 of 2004 whereby they challenged the judgment of the tribunal to the extent it saved the promotions

already made on the basis of the impugned g. o. ms. writ petition no. 16890 of 2006 was also filed against the very same judgment by some of the employees who felt aggrieved by the view taken by the tribunal that the impugned g. o. ms. were in violation of the presidential order hence unconstitutional. a division bench of the high court of andhra pradesh has, in terms of the judgment and order under challenge before us, allowed writ petitions no. 6123 and 6068 of 2004 but dismissed writ petition no. 16890 of 2006 relying upon certain decisions rendered by this court. the high court has taken the view that the doctrine of prospective overruling could be invoked only by the apex court and not by other court including high courts exercising powers under article 226 of the constitution. the net effect of the view taken by the high court, therefore, is that not only are the impugned g. o. m. held to be unconstitutional, but any action taken pursuant thereto is also declared to be unconstitutional. 7. the appellants in these appeals are employees who were not arrayed as parties to the writ petition filed before the high court. feeling aggrieved of the judgment and order passed by the high court they filed review wpmp no. 3576 of 2010, inter alia, contending that the judgment under review had been passed without impleading employees like the appellants as parties to the case even though they were bound to be adversely affected by any modification that the high court may have made. it was contended that the review petitioners - appellants before us in these appeals were necessary parties not only to the o. as filed before the state administrative tribunal but even to the writ petitions filed before the high court and that in the absence of necessary parties to the proceedings the petitions challenging the rules were liable to be dismissed. that contention was, however, rejected by the high court on the ground that the order passed by the tribunal ought to have been challenged in a separate and independent writ petition by anyone aggrieved by the same. the review petitions were, accordingly, dismissed and the prayer for grant of leave to appeal to this court rejected. the present appeals have been filed by the appellants in the above backdrop to assail the correctness of the two judgments and orders passed by the high court. 8. we have heard learned counsel for the parties at length. the doctrine of prospective overruling has its origin in american jurisprudence. it was first invoked in this country in c. golak

nath & ors. v. state of punjab & anr. air 1967 sc 1643, with this court proceeding rather cautiously in applying the doctrine, was conscious of the fact that the doctrine had its origin in another country and had been invoked in different circumstances. the court sounded a note of caution in the application of the doctrine to indian conditions as is evident from the following passage appearing in golak nath s case ( supra ) where this court laid down the parameters within which the power could be exercised. this court said : 9. it is interesting to note that the doctrine has not remained confined to overruling of earlier judicial decision on the same issue as was understood in golak nath s case ( supra ). in several later decisions, this court has invoked the doctrine in different situations including in cases where an issue has been examined and determined for the first time. for instance in india cement ltd. & ors. v. state of tamil nadu & ors. ( 1990 ) 1 scc 12, this court not only held that the levy of the cess was ultra vires the power of state legislature brought about by an amendment to madras village panchayat amendment act, 1964 but also directed that the state would not be liable for any refund of the amount of that cess which has been paid or already collected. in orissa cement ltd. v. state of orissa & ors. 1991 suppl. ( 1 ) scc 430, this court drew a distinction between a declaration regarding the invalidity of a provision and the determination of the relief that should be granted in consequence thereof. this court held that it was open to the court to grant, mould or restrict the relief in a manner most appropriate to the situation before it in such a way as to advance the interest of justice. 10. reference may also be made to the decision of this court in union of india & ors. v. mohd. ramzan khan ( 1991 ) 1 scc 588 where non - furnishing of a copy of the enquiry report was taken as violative of the principles of natural justice and any disciplinary action based on any such report was held liable to be set aside. the declaration of law as to the effect of non supply of a copy of the report was, however, made prospective so that no punishment already imposed upon a delinquent employee would be open to challenge on that account. 11. in ashok kumar gupta & anr. v. state of u. p

. & ors. ( 1997 ) 5 scc 201, a three judge bench of this court held that although golak nath s case regarding unamendabiltiy of fundamental rights under article 368 of the constitution had been overruled in kesavananda bharati sripadagalvaru & ors. v. state of kerala ( 1973 ) 4 scc 225 yet the doctrine of prospective overruling was upheld and followed in several later decisions. this court further held that the constitution does not expressly or by necessary implication provide against the doctrine of prospective overruling. as a matter of fact articles 32 ( 4 ) and 142 are designed with words of width to enable the supreme court to declare the law and to give such directions or pass such orders as are necessary to do complete justice. this court observed : 12. dealing with the nature of the power exercised by the supreme court under article 142, this court held that the expression complete justice are words meant to meet myriad situations created by human ingenuity or because of the operation of statute or law declared under articles 32, 136 or 141 of the constitution. this court observed : 13. in m / s somaiya organics ( india ) ltd. etc. etc. v. state of u. p. & anr. 2001 ( 5 ) scc 519, this court held that the doctrine of prospective overruling was in essence a recognition of the principle that the court moulds the relief claimed to meet the justice of the case and that the apex court in this country expressly enjoys that power under article 142 of the constitution which allows this court to pass such decree or make such order as is necessary for doing complete justice in any case or matter pending before this court. this court observed : 14. the doctrine of prospective overruling was, observed by this court as a rule of judicial craftsmanship laced with pragmatism and judicial statesmanship as a useful tool to bring about smooth transition of the operation of law without unduly affecting the rights of the people who acted upon the law that operated prior to the date of the judgment overruling the previous law. 15. in kailash chand sharma v. state of rajasthan & ors. ( 2002 ) 6 scc 562, the constitutional validity of rules providing for weightage based on domicile of the candidates was assailed before the high court of rajasthan. the high court while reversing its earlier decisions, upholding the grant of such weightage declared the rule

to be unconstitutional. in an appeal before this court one of the questions that fell for consideration was whether the selection made on the basis of the impugned rule could be saved by invoking the doctrine of prospective overruling. answering the question in the affirmative, this court cited two distinct reasons for invoking the doctrine. firstly, it was pointed out that the law on the subject was in a state of flux inasmuch as the previous decisions of the high court had approved the award of such weightage. this court observed that on the date, the selection process started and by the time it was completed, the law as declared in the earlier decisions of the high court held the field. reversal of that legal position on account of a subsequent decision overruling the earlier decisions was considered to be a sufficient reason for complying with the doctrine of prospective overruling to save the selection process and the appointments made on the basis thereof. reliance in support was placed upon the decision of this court in managing director, ecil hyderabad v. b. karunakar ( 1993 ) 4 scc 727. secondly, this court held that candidates who stood appointed on the basis of the selection process had not been impleaded as parties to the writ petitions that challenged the rules providing for marks based on the domicile of the candidates. that being so a judgment treading a new path should not as far as result in detriment to the candidates already appointed. the following observations made by this court are apposite in this regard : 16. there was some debate at the bar whether the high court could have invoked the doctrine of prospective overruling even if the state administrative tribunal was incompetent to do so. it was contended by the counsel appearing for the respondents that the predominant legal opinion emerging from the pronouncements of this court limited the application of the doctrine of prospective overruling only by the supreme court. neither the tribunal nor the high court could, according to the learned counsel, have invoked the doctrine assuming that there was any justification for such invocation in the facts and circumstances of the case. 17. mr. jayant bhushan, learned senior counsel appearing on behalf of the respondent, on the other hand, argued and, in our opinion, rightly so that it was unnecessary for this court to go into the question whether the doctrine of prospective overruling was available even to the high court. he urged that there could be no manner of doubt that even if the high court was not competent to invoke the doctrine, nothing prevented this court from doing so having regard to the fact that those promoted under the

impugned rules had held their respective positions for a considerable length of time making reversion to their parent zone / cadre not only administratively difficult but unreasonably harsh and unfair. it was argued by mr. jayant bhushan that the law as to the validity of the rules impugned in the present case was in a state of flux till the judgment of this court in jagannadha rao s case ( supra ) finally declared that provisions like the one made by the rules in the instant case are constitutionally impermissible being in violation of the presidential order. that apart no promotion had been made after the 7th november, 2001, the date when the judgment of this court in jagannadha rao s case ( supra ) was pronounced. such of the promotions as were already made could therefore be saved to balance equity and prevent miscarriage of justice vis - - vis those who had on the basis of a rule considered valid during the relevant period been promoted against posts outside their zone / cadre. 18. in jagannadha rao s case ( supra ), the petitions were filed in the year 1987. the state administrative tribunal had declared the rule providing for inter - department transfer by promotion to be bad by its order dated 17th april, 1995. the legal position eventually came to be settled by the decision of this court in the case on 7th november, 2001. the petitions in the present case were filed before the state administrative tribunal in the year 1997. the tribunal had on the authority of the judgment aforementioned struck down the rules providing for ex - cadre / zone promotions by its order dated 27th march, 2003, but saved the promotions already made. the judgment of the high court of andhra pradesh challenging the order passed by the tribunal to the extent it saved the promotions earlier made was pronounced on 9th march, 2007. the review petition filed by those affected by the striking down to the rules and facing the prospects of reversion were dismissed by the high court on 3rd november, 2010. promotions made before the pronouncement of the order in jagannadha rao s case ( supra ) i. e. before 7th november, 2001 have, thus, continued for nearly ten years till the review petition filed by the petitioners was dismissed and the matter brought up before this court. we had in that backdrop asked learned counsel for the respondent - state to take instructions whether the state government was ready to create supernumerary posts to accommodate the petitioners and prevent their reversion. an additional affidavit

filed by the commissioner of labour, government of andhra pradesh, however, does not appear to be supportive of what could be a solution to the stalemate arising out of the impugned judgment. the affidavit states that there is no need to create supernumerary posts to accommodate the petitioners in their original posts i. e. senior assistants and senior stenographers. it also declines creation of supernumerary posts in the directorate for the petitioners who were working as assistant labour officers, assistant commissioners of labour and deputy commissioners of labour. the affidavit states that the petitioners while working as senior assistants and senior stenographers had opted to go as assistant labour officers outside the regular line on executive posts where the incumbents enforce the labour laws. the affidavit suggests as though the petitioners had taken a calculated risk in going out of their cadres by accepting higher positions as assistant labour officers in another zone. suffice it to say that the respondent - state has not expressed its willingness to create supernumerary positions. we have, therefore, no option but to examine the question of invoking the doctrine of prospective overruling on the merits of the case having regard to the facts and circumstances in which the question arises. while doing so we must at the threshold point out that the respondents are not correct in suggesting as though the petitioners had taken any deliberate or calculated risk by opting for promotion outside their cadres. the respondents have while making that assertion ignored the fact that promotions were ordered by the state and not snatched by the petitioners. that apart on the date the promotions were made there was no element of risk nor were the promotions made subject to the determination of any legal controversy as to the entitlement of the incumbents to such promotion. not only that, the incumbents who had been sent out on promotion as assistant labour officers had subsequently been promoted as assistant labour commissioners or deputy labour commissioners. such being the position reverting these officers at this distant point of time, to the posts of senior stenographers in their parent cadre does not appear to us to be either just, fair or equitable especially when upon reversion the state does not propose to promote them to the higher positions within their zone / cadre because such higher posts are occupied by other officers, most if not all of whom are junior to the petitioners and who may have to be reverted to make room for the petitioners to hold those higher posts. reversion of the petitioners to their parent cadre is therefore bound to have a cascading effect

, prejudicing even those who are not parties before us. the fact that the petitioners were not arrayed as parties before the tribunal or before the high court also brings the fact situation of the present case closer to that in kailash chand s case ( supra ). the law in the present case was, as in kailash chand s case ( supra ), in a state of flux. such being the position, we see no reason why the doctrine of prospective overruling cannot be invoked in the instant case. just because, this court had not addressed that question in jagannadha rao s case ( supra ) is also no reason for us to refuse to do so in the present case. that apart, jagannadha rao s case ( supra ) was dealing with a different set of norms comprising goms no. 14 and 22 referred to earlier. while the basic question whether such goms permitting promotion by transfer from one department to the cadre or zone to another may have been the same, it cannot be denied that the rules with which this court was concerned in jagannadha rao s case ( supra ) were different from those with which we are dealing in the present case. we feel that on the question of application of doctrine of prospective overruling, the judgment in jagannadha rao s case ( supra ) will not stand as an impediment for this court. 19. in the result, we allow these appeals, set aside the orders passed by the high court and hold that while goms no. 14 and 22 have been rightly declared to be ultra vires of the presidential order by the state administrative tribunal, the said declaration shall not affect the promotions and appointments made on the basis of the said goms prior to 7th november, 2001, the date when jagannadha rao s was decided by this court. parties are left to bear their own costs. contempt petitions ( c ) no. 445 - 449 of 2013 in the light of the above order passed by us, we see no reason to continue with these proceedings which are hereby closed and the contempt petitions dismissed..... j. ( t. s. thakur )..... j. ( c. nagappan ) new delhi april 29, 2014

n. v. ramana, j. leave granted. 2. the present civil appeals arise out of the common order dated 4th may, 2010 passed by the high court of judicature for rajasthan at jaipur bench, jaipur. the facts as culled out from the impugned order dated 4th may, 2010 are the appellant herein filed a public interest litigation i. e. d. b. ( civil ) writ petition no. 2321 / 2006 alleging misappropriation of property of galta peeth / thikana ( 3rd respondent herein ) ; whether mahanth appointed vide order dated 09. 06. 1943 was to administer the properties during his life time or there was a right of succession. d. b. ( civil ) writ petition no. 5111 of 2004 was also filed by one mahanth ram saran das as a public interest litigation, whereas d. b. ( civil ) writ petition no. 6607 of 2004 was filed by mahant shri ramodaracharya challenging the notifications dated 17. 09. 2004 whereby chapter 10 of the rajasthan public trust act, 1959 was made applicable to the trust and notification dated 18. 09. 2004 whereby a committee under section 53 of the act was appointed in respect of the trust. d. b. ( civil ) writ petition no. 5650 of 2007 was filed by the mandir thikana shri galtaji. though d. b. ( civil ) w. p. no. 6607 of 2004 and d. b. ( civil ) w. p. no. 5650 of 2007 were filed before the learned single judge, as all the issues revolve around galta peeth and properties of thikana galta, the writ petitions before the learned single judge were called and a common order was passed by the high court. 3. for better appreciation of facts, the relief sought in d. b. ( civil ) w. p. no. 2321 of 2006, which is a public interest litigation, the order which is impugned in the civil appeal @ slp ( c ) no. 28021 of 2010 is extracted below : 4. the high court, after taking into consideration the material placed before it, disposed of all the four writ petitions by a common order. 5. the high court has framed two issues in the public interest litigation. it summarized the first issue as to whether the properties of galta peeth have to be treated