MAHARASHTRA STATE ELECTRICITY DISTRIBUTION COMPANY LTD. …..APPELLANT(S) VERSUS M/S. DATAR SWITCHGEAR LIMITED & ORS. …..RESPONDENT(S) – the appellant intended to amend the petition which was filed by it under Section 34 of the Act as well as the appeal. The High Court after detailed discussion in the impugned judgment rejected these summons. We find that the amendment sought was highly belated. Arbitration petition filed under Section 34 of the Act was sought to be amended after a delay of eight years. Further, the amendment in the appeal, taking those very grounds on which amendment in the arbitration petition was sought, was sought after a delay of 3½ years. The High Court, thus, rightly rejected these summons and it is not necessary to have any elaborate discussion on these aspects.

REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 10466 OF 2017
MAHARASHTRA STATE ELECTRICITY
DISTRIBUTION COMPANY LTD. …..APPELLANT(S)
VERSUS
M/S. DATAR SWITCHGEAR LIMITED &
ORS. …..RESPONDENT(S)
J U D G M E N T
A.K. SIKRI, J.
The appellant herein had awarded a contract to the
respondent. Dispute had arisen leading to the constitution of an
Arbitral Tribunal (having regard to the Arbitration Agreement
contained in the contract between the parties) and those
arbitration proceedings culminated in the Arbitral Award dated
June 18, 2004. An application under Section 34 of the Arbitration
and Conciliation Act, 1996 (hereinafter referred to as the ‘Act’)
was filed by the appellant, questioning the correctness of the
Award which was dismissed by the learned Single Judge of the
High Court vide orders dated March 18, 2009 and April 30, 2009
Civil Appeal No. 10466 of 2017 Page 1 of 65
thereby affirming the Arbitral Award. Intra-court appeal
thereagainst, which was preferred by the appellant, has been
dismissed by the Division Bench of the High Court vide judgment
dated October 19, 2013. It is the validity of that judgment which
is the subject matter of the instant appeal.
2) With the aforesaid preliminary comments on the nature of
proceedings, we turn to the events that took place, in a
chronological manner, that are relevant for deciding the lis:
EVENTS :
The respondent was awarded a contract for installation of
Low Tension Load Management Systems (LTLMS) at various
locations by the appellant during the year 1993-1994. The
respondent participated in another tender in the year 1996 for
installation of approximately 23000 numbers LTLMS. The
appellant awarded a work order dated January 15, 1997 for
installation of 11760 numbers of LTLMS to the respondent against
the above tender of 1996 and the balance quantities were
awarded to other tenderers. According to the appellant, against
the installation made by the respondent previously in the year
1993-1994, there were large scale complaints and the issue of
defective equipments having been supplied by the respondent
Civil Appeal No. 10466 of 2017 Page 2 of 65
which issue was being raised in the press repeatedly. In view of
the criticism faced by the respondent, the respondent voluntarily
offered to not only supply 11760 LTLMS against the order placed
in January 1997 but also undertook to replace all defective Low
Tension Switched Capacitators (LTSCs) supplied by them against
the previous contract of 1993-1994 with new technology LTLMS
and charge the old lease rentals against the replaced LTSC
during the pendency of the earlier contract. The appellant
accepting the package offer by the respondents issued Letter of
Intent in respect of 12555 numbers panel of 1993-1994 contract
objects to be replaced by new panels along with additional
quantity of 23672 numbers fresh panels. The appellant finally
placed a composite work order dated March 27, 1997 with the
respondent to:
(i) Supply 11,760 numbers equipments against the tender of
1996-1997 contract. B-I Locations;
(ii) 12,555 numbers replacement of equipments against the
1993-1994 contract – B-II locations; and
(iii) 23,672 numbers equipments which was a package
with the B-II locations – B-III locations.
Clause 5.1 of the letter of Work Order dated March 27, 1997
Civil Appeal No. 10466 of 2017 Page 3 of 65
provided as under:
“The supply and installation of the LM Systems
shall commence within four months from the date
of this work order or opening of Letter of Credit or
receipt of complete list of locations of DTCs
whichever is later. The entire supply and
installation of LM System covered under
schedules at Annexure – B-I, Annexure – B-II and
Annexure – B-III shall be completed within twenty
months thereafter.”
3) During the execution of the said contract, some issues arose
between the parties. As per the respondents, the appellant
primarily committed two kinds of breaches, namely, the appellant
did not supply the list of location where the contract objects had
to be installed and, further, the appellant also did not renew the
Letter of Credit (LC) through which the lease rentals were being
paid for the installed objects. A series of correspondence was
exchanged between the parties on the aforesaid two counts as
the appellant maintained that it had not committed any fault in
respect of any of the aforesaid aspects. As against the total
number of 47497 LTLMS to be installed by the respondents, it
installed 17294 numbers and thereafter terminated the contract
vide letter dated February 19, 1999 alleging breaches on the part
of the appellant which according to the respondent entitled the
respondent to terminate the contract. The respondent undertook
to maintain 17,294 contracts objects installed by them on the
Civil Appeal No. 10466 of 2017 Page 4 of 65
condition that lease rental of the same would be paid by the
appellant. The respondent further claimed that they had
manufactured 14,206 numbers objects which were waiting to be
installed for which locations were not intimated by the appellant.
4) As per the appellant, under the original tender of 1996, the
respondent was only entitled to supply and maintain 11760
contract objects and 12555 replacement of 1993/94 contract was
as a package, with 23672 supply of contract objects and, failure
to replace the contract objects of 1993/94 completely disentitled
the respondent from the right to supply any contract object under
the additional quantities of 23672 contract objects awarded as
package beyond the ratio in which the B-II locations were
replaced vis-a-vis the additional quantity awarded in B-III
locations. Thus, the partial termination by the respondent was
illegal and arbitrary because as against 12,555 B-II locations, the
respondent had installed only 2,014 equipments and thus they
were aware of 10,541 B-II locations which were for replacement
basis. Hence it was incorrect on their part to suggest that they
had a right to terminate the contract due to non-supply of list of
locations.
5) A meeting was held between the officials of the appellant and
Civil Appeal No. 10466 of 2017 Page 5 of 65
representatives of the respondent and it was duly recorded in the
Minutes of Meeting dated March 11, 1999 that the Chairman of
the appellant had informed the respondent that the maps were
readily available in the Kolhapur zone and requested the
respondent to take up the work immediately. However, the
respondent stated that it was not in a position to start the work
immediately. The appellant wrote letter dated April 5, 1999 to the
respondent bringing out its extreme dissatisfaction in the manner
in which the work was being carried out by the respondent and
calling upon the respondent to stick to the implementation of the
programme as per the terms and conditions of the Work Order.
The respondent by letter dated April 21, 1999 terminated the
contract in its entirety and refused to maintain even the objects
installed by them.
6) Dispute having arisen; for adjudicating these disputes, Arbitral
Tribunal in terms of Arbitration Agreement was constituted. The
Tribunal commenced its proceedings on February 19, 1999 and
on June 18, 2004 passed a final award directing the appellant to
pay Rs.185,97,86,399/- to the respondent as damages which
included:
(i) Rs. 109 crores towards the installed object.
Civil Appeal No. 10466 of 2017 Page 6 of 65
(ii) Rs. 71 crores towards the objects manufactured by the
respondent which were ready for installation which they
claimed could not be installed due to lack of list of locations;
and
(iii) Rs. 6.52 crores towards raw material allegedly purchased
by the respondent for the manufacture of remaining
equipments.
7) As aforesaid, before the arbitrators, the respondents had primarily
contended two defaults by the appellant. First, that the appellant
did not supply the list of locations where the contract objects had
to be installed and second, that the appellant did not renew the
LC through which the lease rentals were being paid for the
installed objects.
8) The Arbitral Tribunal, however, found no fault with the appellant
as regards non-renewal of the LC observing that the respondent
had terminated the contract in its entirety on April 21, 1999
whereas the LC was valid upto April 30, 1999.
The finding regarding non-renewal of LC by the Arbitral
Tribunal was affirmed by the learned Single Judge (Justice D.K.
Deshmukh) vide judgment dated August 3, 2005 when the Award
was initially set aside. The said finding was also affirmed by the
Civil Appeal No. 10466 of 2017 Page 7 of 65
Ld. Division Bench of the Bombay High Court vide its judgment
dated October 22, 2008. However, partly allowing the appeal of
the respondent, the judgment of the learned Single Judge dated
August 3, 2005 was set aside and the matter was remanded back
for fresh consideration. While adopting this course of action, the
Division Bench in its judgment dated October 22, 2008 observed
as under:
“44. The Court if decides an application under Section
34 should either expressly or impliedly say that the
award was being set aside because it was contrary to
the terms of the contract or the Award was in any way
violative of the public policy or the award was contrary
to the substantive law in India viz., Sections 55 and 73
of the Indian Contract Act or the award was vitiated by
perversity in evidence in contract or the adjudication of
a claim has been made in respect whereof there was
no dispute or difference or the award was vitiated by
internal contradictions. In the present judgment which
is under challenge, we have not found any such
findings either expressly or impliedly though in the
pleadings the issues were raised which should be the
subject matter of a petition under Section 34 of the Act
of 1996. Therefore, we find that it will be necessary for
this Court to set aside the judgment impugned and
remand the case back for adjudication afresh in
accordance with the parameters set out by Section 34
of the 1996 Act.
45. In view of the above, the appeal is allowed.
Impugned judgment and order dated 3rd August 2005
passed by the learned Judge of this Court in Arbitration
Petition No. 374 of 2004 is set aside. The case is
remanded back for adjudication afresh in accordance
with the parameters set out by Section 34 of the
Arbitration and Conciliation Act, 1996.”
9) After the remand, the learned Single Judge (Justice Roshan
Civil Appeal No. 10466 of 2017 Page 8 of 65
Dalvi) by order dated March 18, 2009 rejected the case of the
appellant on the ground that no case under Section 34(2)(iv) of
the Act had been made out by the appellant. The aforesaid order
dated March 18, 2009 of the learned Single Judge was
challenged by the appellant before the Division Bench of the
Bombay High Court. The Division Bench, while hearing the
appeal, passed the following order on April 21, 2009:
“1. Learned counsel for the petitioner has tried to
submit before this Court that certain arguments quoted
by the learned Single Judge in the impugned judgment
were not argued by him and they have been put up by
the learned Single Judge in his mouth. Under these
circumstances we find it appropriate to direct the
petitioner to approach the Ld. Single Judge seeking
correction and/or withdrawal and/or the modification of
the submission which are put up in his mouth. After
appropriate orders are passed by the Ld. Single Judge,
appeal be placed for admission.
2. Appeal No. 165 of 2009 be heard along with this
Appeal.
3. Since contentions raised before the Ld. Single Judge
are in dispute as stated above and the Petitioner has
been directed to approach the Ld. Single Judge for the
purpose of correction and/or modification, and also in
view of the fact that the impugned order has not attained
finality for the purpose of being considered by us, we
find it inappropriate to consider Notice of Motion (being
Notice of Motion No. of 2009) for interim relief at this
stage. The said notice of motion will be considered after
the appropriate orders are passed by the Ld. Single
Judge on approach to the Ld. Single Judge by the
Petitioner.”
10) The learned Single Judge by order dated April 30, 2009
clarified her order by saying that although the appellant has
Civil Appeal No. 10466 of 2017 Page 9 of 65
argued the matter challenging the award being beyond the
contract between the parties and being opposed to public policy,
the learned Single Judge in her considered opinion rejected the
same under Section 34(2)(iv) of the Act.
11) Appeal of the appellant was thereafter listed before the
Division Bench in which order dated May 2, 2009 was passed
staying the Award upon the condition that the appellant deposits
the principal amount and submits bank guarantee qua the interest
awarded by the arbitrators. This order was challenged by both
the parties by filing their respective SLP. This Court while hearing
these SLPs, modified the order of the High Court, directing the
appellant to deposit Rs.65 crores with the Bombay High Court
and furnish a bank guarantee in the sum of Rs.200 crores.
Amount of Rs.65 crores was allowed to be withdrawn by the
appellant upon furnishing bank guarantee subject to the outcome
of the appeal before the High Court.
12) In the appeal before the High Court, the appellant raised
certain additional grounds. Thereafter, the matter was heard
finally and vide impugned judgment, the appeal of the appellant
has been dismissed by the High Court.
Civil Appeal No. 10466 of 2017 Page 10 of 65
ORDER OF THE HIGH COURT
13) Before adverting to the arguments that are advanced by Mr.
Vikas Singh, learned senior counsel appearing for the appellant
and reply thereto of Mr. Rafique Dada, learned senior counsel
who appeared for the respondent, it would be wise to scan
through the impugned judgment of the Division Bench in order to
understand and appreciate the line of reasoning which is the
basis of justifying and upholding the order of the learned Single
Judge and dismissing the objections of the appellant to the award
rendered by the Arbitral Tribunal. In a very elaborate judgment,
which runs into more than 150 pages, the High court has
discussed various facets of the case under the following heads:
1. Brief Synopsis and chronology of events.
2. Remand
3. Submissions and finding on interpretation of the order
of Apex Court dated 25/8/2009 passed in SLP filed by
MSEB, challenging the order of remand passed by the
Division Bench of this Court headed by Bilal Nazki, J
4. Notice of Motion No.3227 of 2010
5. Notice of Motion No.461 of 2010.
6. Scope of interference under Sections 34 and 37 of the
said Act; the interpretation of the term “public policy”
Civil Appeal No. 10466 of 2017 Page 11 of 65
and; power of the Court to interfere on that ground.
7. Points (i) to (vi) extensively urged by MSEB
8. Submissions and finding on Point No.(i) Whether the
Arbitral Tribunal and the learned Single Judge were
justified in coming to the conclusion that the MSEB
had committed breach of contract by not supplying
DTC Lists?
9. Submissions and finding on Point No.(ii) Whether the
contract was one complete contract and the same
could not be split up as argued by the Claimants?
10. Submissions and finding on Point No.(iii) Whether
Claimants/DSL waived their right to receive complete
lists of locations; and on Point No (iv) Whether the
Award is contrary to the public policy as mentioned
under Section 34 of the Arbitration and Conciliation
Act, 1996?
11. Submissions and finding on Point No. (iv) Whether
the Award is contrary to the Public Policy as
mentioned under Section 34 of the Arbitration and
Conciliation Act, 1996? (v) Whether the damages were
properly awarded? and (vi) Whether the aspect of
mitigation was properly considered?
Civil Appeal No. 10466 of 2017 Page 12 of 65
12. Chamber Summonses filed by MSEB
13. Conclusion.
14) After narrating the scope of the work and the gist of the
dispute which led to initiation of arbitration proceedings, the High
Court noted that respondent filed its claims under various heads
aggregating to Rs.1053,06,78,342/- and the counter claims of the
appellant were to the tune of Rs.1273,70,26,669/- crores
approximately. Appellant had examined as many as 26 witnesses
in support of its case whereas the respondent had examined its
Managing Director who was in charge of the project. After
conclusion of the evidence and hearing the arguments, the
Arbitral Tribunal partly allowed the claims of the respondent,
holding that respondent was entitled to a sum of Rs.
1,79,15,87,009/- (Rs. 185,97,86,399 – 6,81,99,390) along with
interest @ 10% per annum payable from the date of the Award till
realisation. Cost of rupees one crore was also awarded. Counter
claims of the appellant were dismissed. After taking note of the
aforesaid facts in brief, the High Court dealt with the contention of
the appellant herein that the matter needed to be remanded back
to the learned Single Judge on the ground that the submission of
the appellant that the Award was against the public policy had not
Civil Appeal No. 10466 of 2017 Page 13 of 65
been considered by the learned Single Judge. After
comprehensive discussion, this argument has been rejected
authoritatively. In the process, the High Court also dealt with the
submissions predicated on Order dated August 25, 2009 passed
by this Court in special leave petition which was filed by the
appellant whereby order of remand passed by Division Bench of
the High Court, in the earlier round was challenged. Notice of
Motion Nos. 3227 of 2010 and 461 of 2010 also came to be
included in the discussion while dealing with the aforesaid issue.
Thereafter, the High Court has discussed the scope of
interference under Sections 34 and 37 of the Act, with particular
reference to the ground of challenge on the basis that the award
is against “Public Policy of India”. After referring to the law on this
pivotal aspect, the High Court noted the points of arguments
advanced by the appellant affirming part of challenge to the
Award. Six points which were advanced by the appellant in this
behalf are as under:
(i) Whether the Arbitral Tribunal and the learned Single Judge
were justified in coming to the conclusion that the MSEB had
committed breach of contract by not supplying DTC Lists?
(ii) Whether the contract was one complete contract and the same
could not be split up as argued by the Claimants?
Civil Appeal No. 10466 of 2017 Page 14 of 65
(iii) Whether Claimants/DSL waived their right to receive complete
lists of locations?
(iv) Whether the Award is contrary to the public policy as
mentioned under Section 34 of the Arbitration and Conciliation
Act, 1996?
(v) Whether the damages were properly awarded?
(vi)Whether the aspect of mitigation was properly considered?
15) Thereafter, discussion ensued on each of the aforesaid
issue, one-by-one. On the first point, the High Court has
concluded that the Arbitral Tribunal was justified in coming to
conclusion that the appellant had committed breach of the
contract by not supplying DTC list. While so concluding, the High
Court went into the events which took place in this behalf, gist of
the evidence as well as the manner in which the issue was
upraised by the Arbitral Tribunal. The High Court has held that
the finding which was given by the Arbitral Tribunal, after taking
into consideration the rival contentions raised in the claim and in
the written statement on this aspect is a finding of fact which was
given after examining the material on record. The High Court
further noted that this finding was upheld by the learned Single
Judge also and the manner in which the learned Single Judge
Civil Appeal No. 10466 of 2017 Page 15 of 65
dealt with the issue has been taken note of. This being a finding
of fact, as per the High Court it was not possible for it to substitute
its own view to the views taken by the Arbitral Tribunal or the
learned Single Judge and arrive at different conclusion, even if
two views were possible. Notwithstanding the same, the Division
Bench again examined this very issue on merits after going
through the various clauses in the contract entered into between
the parties. Taking particular note of clauses 5.2 and 5.3, the
Division Bench has affirmed the findings of the Arbitral Tribunal in
the following manner:
“46. Clause 5.2 is also relevant since it stipulates about
the manner in which installation/replacement work
was to be carried out by DSL. The work was to be
completed in three Zones, viz., Kolhapur Zone, Nasik
Zone and Aurangabad Zone. In clause 5.2 sequence
of Zones was mentioned in which the work was to be
carried out and it was as under:-
(a) Kolhapur Zone
(b) Nasik Zone. Work to be commenced on completion
of work in Kolhapur Zone.
(c) Aurangabad Zone. Work to commence on completion
of work in Nasik Zone.
The sequence therefore was that, first in Kolhapur
Zone B-I, B-II, B-III objects were to be installed and,
thereafter, in Nasik again B-I, B-II, B-III objects were
to be installed and finally in Aurangabad, B-I, B-II and
B-III objects were to be installed. The said schedule
of completion of work, however, was changed from
time to time and, finally, again, in December, 1998
MSEB informed DSL to follow the schedule as per
clause 5.2.
Civil Appeal No. 10466 of 2017 Page 16 of 65
47. Clause 5.3 lays down that supply, erection at site
and commissioning of the contract objects was to be
done within a stipulated time. It also clarified that
time is the essence of the contract and if there was
delay in performance due to any reason MSEB
would be entitled to claim liquidated damages. The
chronology of events indicates that on 14/7/1997,
MSEB by its letter informed DSL that Lists of DTC
locations were ready with the Circle Offices and DSL
should collect the same. The case of DSL in brief is
that though it was represented by MSEB that Lists
were ready and available on 14/7/1997, Lists were
not supplied and, as a result, installations could not
be done and as many as 120 letters had to be written
by DSL to MSEB, requesting them to supply the
Lists. Secondly, sequence of completion of work also
was changed from time to time and suddenly on
21/12/1998 Circle Engineer informed DSL that
sequence as per clause 5.2 of the work order had to
be adhered to and, DSL was therefore constrained to
send a letter of termination dated 19/02/1999 and
even thereafter in a meeting which was held on
11/3/1999 between the Chairman of the MSEB, DSL
and other two parties who were awarded the
contract, as mentioned in clause 17 of the minutes of
the meeting, the Chairman informed DSL that the
Lists were readily available in Kolhapur Zone and
asked Mr. Datar to take up the work under B-II and
B-III schedule immediately and the Chairman
directed that CEs present in the meeting that it was
the Board’s responsibility to give the list with maps to
the agencies and expeditious steps should be taken
in that regard. It was, therefore, contended that as
late as 11/3/1999, the Chairman himself had
conceded that the Lists were not made available to
DSL. In this context, certain letters assume
importance regarding change of sequence of work.
The work order dated 27/3/1997 shows that the
work initially had to be done in Kolhapur Zone, then
in Nasik Zone and finally in Aurangabad Zone.
Thereafter, Chief Engineer, MSEB by his letter dated
4/11/1997 changed the sequence and directed that
the work should be completed initially in Nasik Zone
in respect of B-I, B-II, B-III Lists, then in Kolhapur
Zone and finally in Aurangabad Zone. This sequence
was again modified by the Chief Engineer’s letter
dated 25/5/1998 and modification was made in the
Civil Appeal No. 10466 of 2017 Page 17 of 65
sequence of schedule and sequence of zone
continued and work could be completed at any stage
in any Zone. Again, third modification was made by
Chief Engineer’s letter dated 17/6/1998 and there
was modification in respect of Zones and work could
be carried out in any Zone in any sequence.
Then there was fourth modification by Chief
Engineer’s letter dated 21/12/1998 and direction was
given to strictly adhere to the original work order
sequence. According to DSL, because the Lists were
not supplied though the contract objects/gadgets
were ready for installation and though they were
taken to the sites at the respective Zones, they could
not be installed and were lying stranded causing
monetary loss on account of transportation, manual
labour etc. and non-installation of contract objects
resulted in DSL not getting benefit of lease rentals.”
16) Interestingly, before the Division Bench, the appellant had
raised certain additional points on this aspect, which were not
argued before the Tribunal or even before the learned Single
Judge, viz., the non-supply of DTC locations did not amount to
breach of fundamental term of the contract which led to
termination of contract by the respondent. We would like to
reproduce, at this stage, this part of discussion as well:
“48. It must be noted here that before the learned
Single Judge and before this Court, some of the points
which were never urged before the Tribunal had been
sought to be urged. In the written submissions which
have been tendered before us and what was urged
before us was that the Arbitral Tribunal had committed
serious error by holding that non- supply of DTC
locations amounts to breach of fundamental term of
contract which led to termination of contract by
Respondents/Claimants. It has been contended before
us that since each contract object was a separate lease
contract, the Arbitrator’s Award has to be considered in
Civil Appeal No. 10466 of 2017 Page 18 of 65
three parts (i) qua uninstalled objects, (ii) qua installed
objects and (iii) damages in respect of the objects not
even manufactured and it has to be noted here that
Tribunal has framed one of the points as under:-
(A) Whether the Claimants were ready and willing to
perform their part of the contract and if so, whether
Respondents prevented the Claimants from doing
so?
While answering this point, the point was discussed in
two parts. Firstly, whether the Claimants were ready
and willing to perform their part of the contract and,
secondly, whether Respondents have prevented the
Claimants from doing so. In this context, after having
held that Claimants were ready and willing to perform
their part of the contract, while considering the second
point, the Tribunal had taken into consideration the
question of supply of DTC Lists and whether it was a
fundamental term of the contract. After having held that
MSEB had prevented DSL from performing their part of
the contract even though they were ready and willing to
do so, the question of damages has been thereafter
separately considered and on that point Tribunal has
adopted a particular method of calculation of damages.
In our view, it is not permissible for MSEB to now
change their submissions in this manner. However,
even if the submissions, as advanced before us by
MSEB, are taken into consideration, they are devoid of
merits.”
17) Thereafter, the High Court took note of another argument of
the appellant herein, namely, the contract was terminated by the
respondent on account of non-renewal of Letter of Credit in view
of respondent’s letter dated February 19, 1999. However, the
High Court did not accept the said argument as valid and rejected
the same. Thereafter, the High Court has recorded its specific
findings on Point No. 1 and we reproduce relevant portion thereof
Civil Appeal No. 10466 of 2017 Page 19 of 65
as under:
“In our view from the material on record, it is abundantly
clear that supply of DTC Lists was a fundamental term
of the Work Order and MSEB had miserably failed in
complying with the said fundamental term and there was
a breach on the part of the MSEB in supplying the DTC
locations which eventually prevented DSL from
installation of contract objects. It has to be noted here
that after the work order was issued by MSEB, DSL had
to make necessary arrangements for the purpose of
carrying out the process of installation of the contract
objects. This included procurement of raw material from
a foreign country, starting the process of manufacturing
gadgets, making arrangements for transportation of
these contract objects to the places where the said
gadgets were to be installed, employment of trained,
skilled and other staff, making available vehicles for
transporting these contract objects to the DTC location
where they were to be installed and, finally, coordinating
with the Officers of MSEB so that after the contract
objects were installed, a Certificate of installation could
be given by the Officers of MSEB so that from that point
onwards, lease rentals could become payable to DSL. It
has to be borne in mind that the nature of the Work
Order was such that it was in the interest of DSL to
ensure that the contract objects are installed and
certificates to that effect are obtained from the Officers
of MSEB. It does not sound to reason that after having
invested huge amount of almost Rs 163 crores, as
observed by the Tribunal in the Award, DSL would not
install the objects because it was in their interest to get
the objects installed so that returns on their huge
investment would start thereafter. It is inconceivable
therefore that though DTC Lists were available, DSL
would not install the contract objects. Various facts and
figures were given by MSEB to show that DTC locations
were known to DSL and yet they had failed in installing
the contract objects is without any substance. It cannot
be forgotten that, initially, the sequence of installation
was Kolhapur, Nasik and Aurangabad. This sequence
was later on changed to Nasik, Kolhapur and
Aurangabad. This was again changed and permission
was given to DSL to install the objects at any time at any
place and, lastly, again, this was changed and direction
was given to DSL to adhere to the sequence as per the
Work Order. This being the position, even assuming that
Civil Appeal No. 10466 of 2017 Page 20 of 65
B-II Lists were available, DSL could not have installed
these contract objects because they were asked to
follow the schedule again by letter dated 21/12/1998
and, therefore, even if the lists were available, it was not
possible for DSL to simultaneously install all those
objects since they were told to adhere to the sequence
in the Work Order if the lists of locations under B-I were
not given, even assuming that they had B-II lists of
locations they could not have and were not actually
allowed to install at the said B-II locations. It has come
on record that more than 10,000 objects were
manufactured and ready for installation. There is no
earthly reason why DSL would fail to install the objects
which were inspected and ready for installation. The
only obvious reason would be that they were unable to
do so on account of various orders which were passed
by MSEB from time to time preventing them from
performing their obligation. MSEB has not examined any
of its Superintending Engineers who were in charge of
supplying the Lists. The cumulative effect of all the
material which has been brought on record is that it
clearly demonstrates the failure on the part of MSEB in
supplying the Lists of DTC locations which was a
fundamental term of the contract.”
18) Coming to point no. 2, the High Court noted that this point
was not urged before the Tribunal or before the learned Single
Judge, namely, the contract was not one complete contract. For
this reason, held the High Court, it was not permissible for the
appellant to urge the same for the first time before it.
19) Point nos. 3 and 4 were taken up together for discussion.
Insofar as point no. 3 is concerned, the Court noted that relevant
provisions in the light of which this point was to be examined,
were Sections 39, 53, 55 and 63 of the Contract Act. The High
Civil Appeal No. 10466 of 2017 Page 21 of 65
Court found that when Chief Engineer of the appellant had written
a letter dated December 21, 1998 informing the respondent that
work had to be carried as per the original schedule given in the
Work Order, viz., Kolhapur, Nasik and Aurangabad and a further
direction was given not to install objects at B-III locations, only at
that stage the appellant had refused to perform their part of
promise. Only, thereafter, notice was given by respondent on
February 19, 1999 and finally the contract was terminated on April
21, 1999. Therefore, there was no waiver of right of
acquiescence on the part of the respondent and, thus, argument
of the appellant could not be accepted that the respondent had
waived their right to terminate the contract. The High Court also
held that the question of waiver or acquiescence is a question of
fact and since there was a finding of fact by the Arbitral Tribunal
(which was upheld by the Single Judge as well) that there was no
waiver or acquiescence on the part of the respondent, such an
argument was not even available to the appellant in appeal under
Section 37 of the Act. On this basis, the Division Bench rejected
the contention of the appellant that the respondent waived its
right to receive complete list of locations. In the process, the High
Court has also rejected the contention of the appellant that as a
consequence of waiver of right to receive list of DTC locations,
Civil Appeal No. 10466 of 2017 Page 22 of 65
the only option which was available to the respondent was to
have given notice to the appellant that it was accepting the
performance of the promise other than at the time agreed upon or
that the respondent was entitled to any compensation.
20) With the aforesaid findings on Point no. 3, the High Court
rejected the contention of the appellant that the award of
damages was against the public policy.
21) Thereafter, the High Court discussed the question of
quantum of damages as raised in Point No. 5. It went through the
exercise done by the Arbitral Tribunal in this behalf, i.e., the
manner in which the damages are calculated by the Tribunal. It
found that the Tribunal had appreciated to determine the
damages payable to the respondent in respect of lease rent for
duration of seven years for 17294 contract objects which were
installed and a figure of Rs. 108,02,53,173/- in this behalf was
arrived at. In respect of 14206 stranded objects, the Tribunal held
that the damages which were payable on account of aforesaid
stranded objects were to the tune of Rs. 14,28,55,536/- for a
period of one year at the rate of Rs. 10,056/- per year for each
contract object and for a duration of five years Rs. 71,42,77,680/-.
As regards those objects which were not manufactured, the
Civil Appeal No. 10466 of 2017 Page 23 of 65
Arbitral Tribunal took into consideration the value of unused
imported raw material. On that basis it came to the conclusion
that damages in respect of imported raw material left unused for
16487 contract objects were Rs. 6,52,55,546/-. In this manner, it
arrived at a total figure of Rs. 185,97,86,399/- and deducted a
sum of Rs. 6,81,99,390/- which was paid by the appellant to the
respondent pursuant to interim orders passed by the Tribunal.
22) After taking note of the manner in which the Tribunal
awarded the damages, the High Court noted the challenge of the
appellant’s counsel to the award of damages, which were as
under:
(i) Since there was no breach committed by the appellant
and that the respondent had no right to terminate the
contract, no damages were payable.
(ii) Since the cost of contract object was on an average of
Rs. 9,000/- per object, the respondent, at the best,
was entitled to nominal profit of 10-15% on the said
cost. Therefore, the Arbitral Tribunal had granted
excessive damages.
(iii) The damages were wrongly awarded for objects not
even manufactured and such an award was in
Civil Appeal No. 10466 of 2017 Page 24 of 65
violation of public policy as mentioned in Section 34 of
the Act.
(iv) According to the understanding of the appellant, the
contract was coming to an end on March 19, 1999
and the contract objects, therefore, should have been
manufactured by it. Thus, failure to manufacture the
same did not entitle them to claim any damages qua
the objects not manufactured.
(v) Since the contract was novated, the respondent was
obliged to manufacture the objects as and when the
lists were supplied to it and, therefore, the question of
payment of any compensation qua the objects not
manufactured did not arise.
(vi) There was no default qua the installed or qua
uninstalled objects and on this ground also the
Tribunal was not justified in granting any
compensation whatsoever.
(vii) In respect of the installed objects, the only breach was
non-renewal of the Letter of Credit. Likewise, in
respect of un-installed objects, the only breach was
non-submission of lists of locations. Insofar as
non-renewal of Letter of Credit is concerned Arbitral
Civil Appeal No. 10466 of 2017 Page 25 of 65
Tribunal had decided this issue in favour of the
appellant and, therefore, no damages were
awardable. In respect of uninstalled objects, the
respondent had 16473 lists of location and they were
obliged to maintain 2500 buffer stock. However, the
respondent had manufactured only 14206 objects,
therefore, there was no question of payment of any
damages qua uninstalled objects.
23) Since this issue was connected with Point No. 6, i.e.,
mitigation of damages, the High Court dealt with the argument of
mitigation as well. Here, contention of the appellant was that
according to the respondents the breach, if at all, took place only
on December 21, 1998 when permission for simultaneous
installation in B-III was withdrawn and no steps whatsoever to
remedy the breach thereafter were taken by the respondents.
This showed that the respondents had not tried to mitigate their
loss and were not entitled to get damages. Here the argument of
the respondent was also noted and after considering the
respective arguments, the High court has not found any
substance in the submissions of the appellant. It has given
following reasons for adopting this course of action:
“73. We agree with the submissions made by the
Civil Appeal No. 10466 of 2017 Page 26 of 65
learned Senior Counsel appearing on behalf of DSL for
the following reasons:
First of all, it has to be noted that Arbitral Tribunal in
its Award has recorded a finding of fact that MSEB
had committed breach of the contract by not
supplying the lists of DTC locations and this breach
was a fundamental breach of the agreement.
Secondly, it is held that MSEB had prevented DSL
from performing its part of the contract and,
therefore, they were entitled to get damages. The
Arbitral Tribunal, thereafter, relying on the Judgment
of the Supreme Court in Union of India v/s. Sugauli
Sugar (Pvt.) Ltd. [(1976) 3 SCC 32)] has observed
that innocent party who has proved the breach of
contract to supply what he had contracted to get,
such a party should be placed in as good a situation
as if the contract had been performed and, therefore,
damages which the Claimants/DSL were entitled to
have to be determined on the said principle. The
Tribunal has then held that lease rent is one of the
measures for ascertaining damages and, in that
context, after relying on the Work Order, came to the
conclusion that entitlement of the Claimants was to
secure lease rent accrued from the date of
installation of the contract objects. In this context,
therefore, for the sake of convenience the question
of quantum of damages was considered with
reference to (a) installation of contract objects, (b)
stranded objects and (c) objects not manufactured.
The submission of the learned Senior Counsel
appearing on behalf of MSEB that the Arbitral
Tribunal had split up the contract into three parts,
though the contract was one single contract, is
without any substance. It has to be noted that the
Arbitral Tribunal first came to the conclusion that
there was a breach on the part of MSEB in supplying
the lists of DTC locations. Having held, that there
was a breach and that the Claimants/DSL were
entitled to claim compensation, while ascertaining
the amount of compensation, for the sake of
convenience, it has considered the aspect of
granting damages in the above manner. The entire
thrust of the argument of MSEB, therefore, is
misconceived. MSEB has tried to give a twist to their
tale by contending that 17,294 contract objects being
installed, there was no question of awarding
Civil Appeal No. 10466 of 2017 Page 27 of 65
damages for the installed objects and, secondly,
since termination of Letter of Credit was held not to
be illegal, it was not open for the Arbitral Tribunal to
have awarded damages for the uninstalled objects
and the objects which were not manufactured. This
submission is totally misconceived, firstly because it
has been consistently held that the Arbitral Tribunal
alone is competent to decide the manner of
calculation of damages which are to be awarded as
also the method which is to be adopted by the
Tribunal. In the present case, the Arbitral Tribunal
has held that lease rent is one of the measures for
ascertaining damages. The Apex Court in McDermott
vs. Burn Standard [(2006) 11 SCC 181] has
observed as under:-
“106. We do not intend to delve deep into the
matter as it is an accepted position that different
formulae can be applied in different
circumstances and the question as to whether
damages should be computed by taking
recourse to one or the other formula, having
regard to the facts and circumstances of a
particular case, would eminently fall within the
domain of the arbitrator.
110. As computation depends on circumstances
and methods to compute damages, how the
quantum thereof should be determined is a
matter which would fall for the decision of the
arbitrator. We, however, see no reason to
interfere with that part of the award in view of
the fact that the aforementioned formula
evolved over the years, is accepted
internationally and, therefore, cannot be said to
be wholly contrary to the provisions of the Indian
law.”
24) Citing few more judgments and after extensively quoting
therefrom1
, the High Court proceeded further with the discussion
1 (a) Dwarka Das v. State of M.P. and Another
(b) ONGC v. Comex
(c) Prakash Kharade v. Dr. Vijay Kumar Khandre and Others
(d) Grandhi v. Vissamastti
(e) Mirza Javed Murtaza v. U.P. Financial Corporation Kanpur and another
Civil Appeal No. 10466 of 2017 Page 28 of 65
as follows:
“The Arbitral Tribunal, therefore, after having adopted
lease rent as one of the methods of ascertaining
damages has thereafter considered what damages
should be awarded by way of lease rentals on installed
objects, stranded objects and the objects not
manufactured. In our view, it is not possible to find fault
with the finding of the Arbitral Tribunal on the measure
and method for ascertaining and calculating the
damages which have been adopted by it to arrive at the
final figure of compensation to be payable to the
Claimants/DSL.
It is also quite well settled position in law that once it is
established that the party was justified in terminating
the contract on account of fundamental breach of
contract then, in that event, such an innocent party is
entitled to claim damages for the entire contract, i.e., for
the part which is performed and also for remaining part
of the contract which it was prevented to perform. This
principle is quite well settled in number of cases. The
Tribunal, therefore, was perfectly justified in calculating
the damages in the aforesaid manner. In this view of
the matter we do not propose to deal with the
judgments on which reliance is sought to be placed by
MSEB.
So far as the question of mitigation is concerned, the
Tribunal has specifically held that the contract objects
were unique objects which had to be manufactured
according to the specifications laid down by the MSEB
and, therefore, these contract objects could not be
disposed of in the open market. Even if the said
contract objects were dismantled, value would become
nil. The Tribunal also observed that Datar deposed with
reference to Exhibit-C-16 that efforts were made to sell
the contract objects stranded in the factory to other
Electricity Boards but those efforts did not succeed. The
question of mitigation, therefore, was considered by the
Tribunal and the submissions of MSEB were not
accepted. In our view, reasoning given by the Tribunal
cannot be faulted.”
25) According to the High Court, the Arbitral Tribunal had
Civil Appeal No. 10466 of 2017 Page 29 of 65
awarded damages in a most conservative manner and, thus,
committed no illegalities in awarding these damages. At the end,
the High Court dealt with the Chamber Summons which were
filed by the appellant and on detailed discussion thereupon,
dismissed all these Summons.
26) As a consequence, the appeal of the appellant stood
dismissed.
ARGUMENTS OF THE APPELLANT :
27) Mr. Vikas Singh referred to the tender of 1993-94, pursuant
to which the respondent had installed 12,555 numbers of LTSC,
and submitted that the respondent was maintaining the same but
large scale complaints about the inefficiency of LTSC was
received with the appellant. Having regard to this criticism faced
by the respondent, it volunteered to replace the installations
made in the earlier contract and charge the old rental in respect
of the same. In the meantime, pursuant to tender of the year
1996 for installation, the respondent was awarded work for
installation of 11,760 contract objects. Going by the said
assurance, the appellant awarded a work order dated March 27,
1997 for replacement of 12,555 panels of earlier contract objects
plus installation of 23,672 LTMS panels and the work order finally
Civil Appeal No. 10466 of 2017 Page 30 of 65
became as under:
(i) Supply 11,760 numbers equipments against the tender of
1996-1997 contract. B-I Locations;
(ii) 12,555 numbers replacement of equipments against the
1993-94 contract – B-II locations; and
(iii) 23,672 numbers equipments which was given as a package
with the B-II Locations – B-III locations.
28) Mr. Vikas Singh referred to Clause 5.1 of the contract as per
which entire supply and installation of L.M. Systems covered by
schedules at Annexures – B-I, B-II and B-III was to be completed
within twenty months. He thereafter read out the correspondence
that was exchanged between the parties and on that basis, he
sought to argue that as per the appellant, the list of locations was
ready on July 14, 1997 but it is the respondent who was facing
difficulties in installation of the contract objects and violating the
terms of the contract with impunity. The respondent had even
withdrawn money in excess of its entitlement. Vide letter dated
December 21, 1998, the appellant had written to the respondent
to do installation of B-I and B-II first before B-III locations, as by
that date, the respondent had already installed 17,294 objects out
of which B-II was only 2014. However, the respondents in their
Civil Appeal No. 10466 of 2017 Page 31 of 65
reply dated March 21, 1998 asserted their right to install the
objects at B-III locations simultaneously. He further pointed out
that in their letter dated February 18, 1999, the respondent
admitted having received Rs.4.34 crores in excess of their
entitlement, however, on the very next date, i.e. on February 19,
1999, it sought to terminate the contract qua the uninstalled
objects numbering 30,695 but volunteered to maintain the
installed objects provided that the rent for the same was
forthcoming. It was argued that since the payment of rent was by
means of an irrevocable LC, and since the LC was valid on
February 19, 1999, the offer of maintaining 17,294 objects was
clearly accepted by the appellant as the appellant did not cancel
the LC in spite of termination of the contract qua uninstalled
objects on February 19, 1999. In other words, the LC continued
to remain alive even after termination of the contract on February
19, 1999 in order to make payment of future rentals qua the
uninstalled objects. In spite thereof, the respondent, vide its
communication dated April 21, 1999, terminated the contract. It
was submitted in the aforesaid backdrop that the action of the
respondents was clearly illegal. It was further argued that the
findings of the Arbitral Tribunal that the appellant had committed
the fundamental breach of the contract in not providing the
Civil Appeal No. 10466 of 2017 Page 32 of 65
complete list of the contract objects to the respondents is clearly
erroneous which is patently illegal and contrary to the terms of the
contract. It was submitted that the entire premise of the Arbitral
Tribunal to record this finding was on the basis of the letter of the
appellant dated December 21, 1998 which had only debarred the
respondent from installing B-III locations as the respondent was
indulging in the malpractice of charging bills higher than what
they were entitled to which is proved by the credit note given by
the respondents themselves on February 18, 1999. The said
letter did not debar the respondent from installing the B-II
locations which were 10,541 remaining to be installed on
February 19, 1999. The Arbitral Tribunal recorded a perverse
finding which resulted in patent illegality in the award that by letter
dated December 21, 1998 the appellant had debarred the
respondent from installing the B-II locations when clearly neither
the same was mentioned in the said letter nor was the same
understood contemporaneously by the respondent in their
response dated December 23, 1999 wherein they merely
protested from being denied the opportunity to install the B-III
objects. The Arbitral Tribunal accordingly committed a grave
mistake in holding that the appellant had committed a
fundamental breach when clearly on the date of termination the
Civil Appeal No. 10466 of 2017 Page 33 of 65
respondent had with them 10541 B-II locations and admittedly
1633 B-I locations in Kolhapur Zone and they were under an
obligation under the contract to maintain 2500 buffer objects and
hence the respondent had only 14026 contract objects at that
time whereas they were required to maintain at least 14,674
contract objects on the said date.
29) Next submission of Mr. Vikas Singh, learned senior counsel,
was that the Arbitral Tribunal gave a specific finding that the LC
was valid till April 30, 1999 and there was no default on the part of
the appellant in this behalf, which finding was also confirmed by
the learned Single Judge as well as by the Division Bench which
had heard the appeal in the first round. Therefore, there was no
occasion whatsoever for the Arbitral Tribunal to award damages
qua the installed objects as there was no default alleged and
there was no default held to have been committed by the
appellant qua the same.
30) Much emphasis was laid by the learned senior counsel for
the appellant on the order dated August 3, 2005 passed by the
learned Single Judge in the appellant’s petition under Section 34
of the Act (in the first round), whereby the learned Single Judge
had decided the case in favour of the appellant holding that there
Civil Appeal No. 10466 of 2017 Page 34 of 65
could not be any direction for payment of damages in respect of
the installed objects as no default was found by the Arbitral
Tribunal and, therefore, the Tribunal committed a grave mistake
in awarding compensation in respect thereof. In order dated
August 3, 2005, the learned Single Judge had also held that the
Arbitral Tribunal had committed illegality by awarding
compensation in respect of the objects manufactured but not
installed while permitting the respondents to retain the same.
Likewise, the award was faulted with to the extent that the Arbitral
Tribunal awarded the amount for the raw material available with
the respondent, without directing the respondent to handover the
said raw material to the appellant. Though, this order dated
August 3, 2005 was set aside by the Division Bench in appeal
which was preferred by the respondent, submission of the
learned senior counsel was that it was erroneously set aside on
the only ground that the Single Judge while allowing Section 34
petition had not specifically mentioned the particular section
under which the petition had been allowed when clearly the order
of the learned Single Judge had been passed on the ground that
the award is against the public policy of India and hence it was
clearly referable to Section 34(2)(b)(ii) of the Act. Hence, there
was no occasion or necessity to remand the matter back to the
Civil Appeal No. 10466 of 2017 Page 35 of 65
Single Judge of the High Court. Since the direction by the
Division Bench were to the Single Judge was to decide the matter
in a time bound manner, even before the appeal against the order
of the Division Bench could be heard by the Supreme Court, the
learned Single Judge of the Bombay High Court rejected Section
34 petition on a completely erroneous premise as if that the
appellant had argued the case under Section 34(2)(iv) when
admittedly no arguments had been raised under the said Section
and the entire arguments as well as the written submission were
only with regard to the award being contrary to the public policy
which is under Section 34(2)(b)(ii). In this manner, submitted the
learned senior counsel, the learned Single Judge went beyond
the mandate of the Division Bench while dismissing the petition of
the appellant in its entirety under Section 34 of the Act and the
Division Bench has also erred in giving its imprimatur to such an
order of the Single Judge.
31) Continuing his submissions with great emphasis, Mr. Vikas
Singh further argued that an important issue which need
consideration is as to whether the contract was one complete
contract and whether the same could or could not be split up as
argued by the respondents. He referred to the provisions of the
Civil Appeal No. 10466 of 2017 Page 36 of 65
contract, the relevant correspondence and the submission of the
respondents witnesses to refute the respondents contention that
the contract was one bargain and there was no right to split up
the same. He also referred to the certain judgments 2
to contend
that the contract in question can be held to be clearly severable
and it is the duty of the Courts to severe the enforceable part
vis-à-vis the unenforceable part.
32) Touching upon the facet of the uninstalled object, it was
submitted that in terms of the work order, the supply and
installation was to commence from the date of the work order or
opening of LC or receipt of complete list of locations of DTCs,
whichever is later. On July 14, 1997, the appellant wrote to the
respondents that the list of locations was available with the circle
office. The respondents assumed July 14, 1997 as the date of
making available the complete list of locations without actually
receiving the said list from the circle office. The clause very
clearly provided the four month period to commence from the
date of receipt of list of complete locations and admittedly the
respondent did not receive the list of locations on July 14, 1997
nor any time thereafter till they started installation on November
2 Firm Bhagwandas Shobhalal Jain, a Registered firm and Anr. v. State of Madhya
Pradesh, AIR 1966 MP 95; Shin Satellite Public Co. Ltd. v. Jain Studios Ltd., (2006) 2 SCC 628; Beed
District Central Coop. Bank Ltd. v. State of Maharashtra & Ors., (2006) 8 SCC 514, Daruka & Co. v.
Union of India & Ors., (1973) 2 SCC 617 and Food Corporation of India v. Yousuff and Co., Kerala
High Court (DB) (17.11.1980) A.S. No. 31 of 1976 at Page 2296 (starting from 2280-2297 of volume X)
Civil Appeal No. 10466 of 2017 Page 37 of 65
18, 1997, considering the four month period to start from July 19,
1997 i.e. the date of receipt of the communication dated July 14,
1997. Clearly, the respondent had enough time after July 14,
1997 to insist upon the complete list of locations before any
installation was started by them on November 18, 1997.
Therefore, argued the learned senior counsel, it is the respondent
which committed breach of contract in not completing the work.
33) Mr. Vikas Singh once again emphasised the submission
which was made before the learned arbitrator as well as the High
Court, that there was a waiver by the respondent in respect of list
of DTC location and the consequences of such a waiver had to
flow as per Section 55 read with Section 63 of the Contract Act. It
was submitted that this Court has held in the case of Waman
Shriniwas Kini v. Ratilal Bhagwandas & Co.3
at para 13 “waiver
is the amendment of a right which normally everybody had a
liberty to waive. A waiver is nothing unless it amounts to a
release it signifies nothing more than an intention to insist upon
the right”. Accordingly, once the waiver takes place, the clause
with regard to providing the complete list does not remain a
fundamental term of the contract and the respondent would not
be entitled to claim any damages for the non-supply of the list.
3 1959 Supp. (2) SCR 217
Civil Appeal No. 10466 of 2017 Page 38 of 65
He also referred to the decision in Jagad Bandhu Chatterjee v.
Smt. Nilima Rani & Ors.4 wherein at para 5, it is stated “it is open
to a promisee to dispense with or remit, wholly or in part, the
performance of the promise made to him or he can accept
instead of it any satisfaction which he thinks fit.” He also relied
upon the judgment in Babulal Badriprasad Varma v. Surat
Municipal Corporation & Ors.5
and pointed out that in that case,
the Court has considered various judgments on the issue of
waiver in paragraph 42 to 49, which laid down that waiver
amounts to abandonment of right in such a way that the other
parties entitled to plead the abandonment by way of confession
and avoidance if the right is thereafter asserted and is either
expressed or implied from the conduct. Number of other
judgments laying down the same proposition of law were also
referred to.
34) Additionally, it was submitted that the appellant had on June
17, 1998 permitted the respondent to make feeder-wise
installation irrespective of B-I, B-II and B-III locations. Between
June 17, 1998 to December 21, 1998 i.e. for a period of more
than six months, the respondents had all the B-II locations
available to them which is 12,555 out of which they only installed
4 (1969) 3 SCC 445
5 (2008) 12 SCC 401
Civil Appeal No. 10466 of 2017 Page 39 of 65
2014 and they did not install 10541 B-II locations which were the
locations where the respondent had themselves installed the
contract objects against tender of 1993 and 1994 and were
maintaining the said objects at the time when the present tender
was awarded and hence were in the complete knowledge of the
said locations. The endeavour was to show that the respondent
was aware of sufficient number of locations, even B-II locations
and, therefore, there was no reason to terminate the contract and,
in fact, it is the respondent which had failed to perform its
obligations under the contract and was, thus, responsible for the
breach thereof. On that premise, the submission was that award
of the Arbitral Tribunal qua the uninstalled object is patently illegal
and it also shocks the conscience of the Court and is liable to be
set aside as being opposed to public policy. Specifically
adverting to the damages awarded qua installed objects, it was
argued that the work order clearly provided that each contract
object was a separate contract between the appellant and the
respondent and, therefore, it was incumbent upon the Arbitral
Tribunal to decide as to what fault had been committed by the
appellant qua the installed objects before granting any damages
for the same. Absence of this exercise, contended the learned
senior counsel, had rendered the award illegal and in violation of
Civil Appeal No. 10466 of 2017 Page 40 of 65
public policy as mentioned in Section 34 of the Act.
35) While questioning the damages awarded in respect of
objects not even manufactured; quantum of damages awarded by
the Tribunal and failure on the part of the respondent to mitigate
the losses, the same arguments were advanced which were
taken before the High Court as well. It is also submitted that the
High Court committed serious error in rejecting the chamber
summons.
ARGUMENTS IN REPLY BY THE RESPONDENT :
36) Mr. Dada, learned senior counsel appearing for the
respondent, strongly refuted all the aforesaid submissions of the
appellant and made earnest effort to show that the entire
approach of the Arbitral Tribunal in dealing with the issues and
awarding the damages was correct in law and this award was
rightly held by the learned Single Judge as well as the Division
Bench of the High Court.
37) At the outset, Mr. Dada emphasized the crucial nature of the
contract in question, which was essentially for operating lease for
ten years in respect of energy saving devices which were to be
installed by respondent No.2 on the locations to be given by the
Civil Appeal No. 10466 of 2017 Page 41 of 65
appellant herein. He pointed out that since it was a contract for
operating these devices on lease basis, entire investment was to
be made by respondent No.2 and the appellant was only to give
the lease rent, that too on the condition that contract objects were
working satisfactorily. Further, the contract being a ‘lease’
contract, the ownership of the equipment had to remain with
respondent No.2 and was never to be transferred to the
appellant. In the aforesaid scenario, argued the learned senior
counsel for respondent No.2, respondent No.2 could perform its
part of the contract of installation of objects only on furnishing the
DTC locations. He argued that the appellant failed to discharge
this obligation and, thus, committed fundamental breach of the
contract. This has been held so by the Arbitral Tribunal and this
very finding was upheld by the High Court as well. Submission
was that this being a finding of fact, the breach of contract on the
part of the appellant stands established.
38) Elaborating on this aspect, it was contended that the
appellant made an unequivocal representation to respondent
No.2 on 14.07.1997 that complete lists for DTC locations,
including Schedule B-II, are ready with the district offices.
Respondent No.2 acted upon the said representation and
Civil Appeal No. 10466 of 2017 Page 42 of 65
commenced installation in November 1997. On 20.04.1998, the
appellant threatened respondent No.2 with liquidated damages
and warned that time will not be extended for installation. This
letter glossed over the fact that DTC locations were withheld by
the district offices of the appellant. Both parties were ad idem
that time had started to run and installation was to be completed
before 18.03.1999 (twenty months from 18.07.1997, i.e. the date
of receipt of the letter dated 14.07.1997 from the appellant).
Despite rigorous follow up and distress appeals by respondent
No.2 through more than 120 letters, the appellant did not furnish
complete lists of DTC locations. On 21.12.1998, the appellant
directed the work to proceed strictly in the sequence – Kolhapur,
Nasik and Aurangabad Zones, with further sequences B-1, B-2
and B-3. The appellant stopped work under B03 indefinitely
without assigning any reason. However, even till 19.02.1999,
respondent No.2 was not provided with complete list of B-I
locations in Kolhapur. Despite representation of 11.02.1999 from
Technical Member of the appellant to give lists within four days,
i.e. by 15.02.1999, no lists were received. Realizing the futility of
expecting cooperation from the appellant, respondent No.2
terminated the contract on 19.02.1999.
Civil Appeal No. 10466 of 2017 Page 43 of 65
39) It was further submitted that respondent No.2 still ‘offered’ to
maintain the 17294 installed objects (however, the appellant was
admitting installation of only 7000 contract objects as of July 199,
as stated by respondent No.2 in the interim application filed
before the Arbitrators), provided that payment was made without
demur or dispute – obviously alluding to the financial blockade by
NIL performance certificates and fabrication of failure reports.
Respondent No.2 gave the appellant seven days to convey if the
said “offer” was acceptable. Admittedly, the appellant did not
accept the offer and proceeded to make a counter claim against
respondent No.2 on the footing that respondent No.2 had
abandoned the entire contract on 19.02.1999, including that for
installed objects.
40) It was next argued by Mr. Dada that after the disputes were
referred to the Arbitral Tribunal, it went into the length and breadth
of each issue in minute detail. This Tribunal consisted of eminent
retired Judges who scanned through the deposition of witnesses
produced before it as well as other documentary evidence. 125
sittings, over a period of five years, were held in the process,
which culminated into a fully reasoned and unanimous award
dated 18.06.2004 running into 150 pages, as per which the
Civil Appeal No. 10466 of 2017 Page 44 of 65
matter was decided in favour of respondent No.2 and against the
appellant. His argument was that most of the submissions of the
appellant were questioning the findings of facts only and this
Court would not embark on such a journey and decide
correctness thereof in exercise of its jurisdiction under Article 136
of the Constitution.
41) We find adequate force in the aforesaid submission of Mr.
Dada. Let us first take note of these findings:
FINDINGS OF FACTS :
42) Reasoning contained in the Award reveals following salient
findings returned by the Arbitral Tribunal:
(i) The appellant prevented respondent No.2 from performing
the contract.
(ii) Respondent No.2 was ready and willing to perform the
contract all throughout.
(iii) The appellant chose not to examine any of its
Superintending Engineers who were in-charge for giving
DTC locations to respondent No.2 and, as found by the
Arbitral Tribunal, they were the kingpins of each circle for
performance of the contract.
(iv) There is considerable merit in the submission of respondent
Civil Appeal No. 10466 of 2017 Page 45 of 65
No.2 that the Minutes of the Meeting dated 24.06.1998 is a
fabricated document.
(v) It is not possible to accede to the submission of the
appellant that respondent No.2 had adequate lists of
locations available and still failed to install the contract
objects.
(vi) It is obvious that there is something seriously wrong in the
working of the appellant. Once a letter is listed in the
affidavit of documents, it is surprising how the letter was not
traceable. Be that as it may, the fact remains that prior to
the date of termination of contract, at least in three Circles,
the appellant had directed stoppage of installation work.
(vii) It is unfortunate that the Head Office of the appellant lacked
control over the field offices and which ultimately led to the
failure of the project. It is futile to even suggest that the
breach was not a fundamental one.
(viii) Respondent No.2 was ready and willing to perform their
part of the contract while the appellant committed a breach
by failure to supply DTC locations as per the terms of the
contract.
(ix) Respondent No.2 invested Rs.163 crores in the project.
(x) The appellant failed to prove that deductions effected in the
Civil Appeal No. 10466 of 2017 Page 46 of 65
Performance Certificates were proper.
(xi) The appellant indulged in tampering the commissioning
reports produced on record. The attempt does not behove
to a statutory body and requires to be deprecated. The
attempt made by the appellant by producing documents
which are tampered with and which are not genuine
indicates that the appellant was willing to go to any extent to
make allegations against respondent No.2.
(xii) The appellant did not make available large number of
documents disclosed in the affidavit of documents on the
ground that the same are not available.
(xiii) Counter claim of the appellant is misconceived and is
nothing short of counter blast to the claim made against
respondent No.2.
(xiv) It was the appellant and appellant alone who had
committed fundamental breaches of the terms of the work
order.
(xv) The appellant has raised untenable and unsustainable
defences which led to considerable delay in concluding the
proceedings.
These are findings of facts based upon the material
Civil Appeal No. 10466 of 2017 Page 47 of 65
evidence that emerged on the record of the case.
TERMINATION OF CONTRACT WAS VALID AND JUSTIFIED :
43) Categorical findings are arrived at by the Arbitral Tribunal to
the effect that insofar as respondent No.2 is concerned, it was
always ready and willing to perform its contractual obligations, but
was prevented by the appellant from such performance. Another
specific finding which is returned by the Arbitral Tribunal is that
the appellant had not given the list of locations and, therefore, its
submission that respondent No.2 had adequate lists of locations
available but still failed to install the contract objects was not
acceptable. In fact, on this count, the Arbitral Tribunal has
commented upon the working of the appellant itself and
expressed its dismay about lack of control by the Head Office of
the appellant over the field offices which led to the failure of the
contract. These are findings of facts which are arrived at by the
Arbitral Tribunal after appreciating the evidence and documents
on record. From these findings it stands established that there is
a fundamental breach on the part of the appellant in carrying out
its obligations, with no fault of respondent No.2 which had
invested whooping amount of Rs.163 crores in the project. A
perusal of the award reveals that the Tribunal investigated the
Civil Appeal No. 10466 of 2017 Page 48 of 65
conduct of entire transaction between the parties pertaining to the
work order, including withholding of DTC locations, allegations
and counter allegations by the parties concerning installed
objects. The arbitrators did not focus on a particular breach qua
particular number of objects/class of objects. Respondent No.2 is
right in its submission that the fundamental breach, by its very
nature, pervades the entire contract and once acted committed,
the contract as a whole stands abrogated. It is on the aforesaid
basis that the Arbitral Tribunal has come to the conclusion that
the termination of contract by respondent No.2 was in order and
valid. The proposition of law that the Arbitral Tribunal is the
master of evidence and the findings of fact which are arrived at by
the arbitrators on the basis of evidence on record are not to be
scrutinised as if the Court was sitting in appeal now stands settled
by catena of judgments pronounced by this Court without any
exception thereto6
.
44) At this stage, we may deal with the contention of the
appellant to the effect that the arbitrators have themselves
recorded a finding that the LC was still in operation and had not
expired and, therefore, the finding of the Tribunal that the contract
was terminated validly was self contradictory.
6 (See – Associate Builders v. Delhi Development Authority, (2015) 3 SCC 49, and
S. Munishamappa v. B. Venkatarayappa & Ors., (1981) 3 SCC 260)
Civil Appeal No. 10466 of 2017 Page 49 of 65
45) Though this contention appears to be attractive in the first
blush, we find no substance in the same on deeper examination
thereof. It was rightly contended by Mr. Dada that the Arbitral
Tribunal has held that since the contract was terminated on
19.02.1999, the appellant was not required to renew the LC. In
other words, since there was no contract in existence after
19.02.1999, there could not be a breach. It is APT to quote the
following discussion from the award of the arbitrators:
“24…The grievance of the Claimants that by not
renewing letter of credit which expired on April 30,
1999, the Respondents have committed the breach,
cannot be accepted. In the first instance, the
Claimants cannot complain about non-renewal of
Letter of Credit on April 30, 1999 when the claimants
themselves have terminated the contract by notice
dated February 19, 1999. Secondly, the claimants
have invoked the arbitration on April 13, 1999 and
these events having taken place prior to April 30,
1999, there was no point in Respondents renewing
Letter of Credit for the benefit of the Claimants.”
46) By the aforesaid analysis, the Arbitral Tribunal did not
accept the contention of respondent No.2, which was predicated
on non-renewal of the LC. However, the context in which these
observations are made is abundantly clear. The Arbitral Tribunal
had confined the discussion revolving around the contention of
respondent No.2 as to why the LC was not extended even after
30.04.1999. In this hue, it was observed that there was no
Civil Appeal No. 10466 of 2017 Page 50 of 65
reason or rationale in doing so when the contract had itself come
to an end as it had been terminated by respondent No.2 itself
vide notice dated 19.02.1999. It would not follow therefrom that
respondent No.2 was wrong in terminating the contract. Insofar
as the termination of the contract is concerned, the Arbitral
Tribunal dealt with the issue specifically and on independent
examination thereof had came to the conclusion that respondent
No.2 was justified in the said action as there were other breaches
on the part of the appellant. It is to be borne in mind that
non-renewal of LC was not the only breach alleged by respondent
No.2, which had asserted various other acts of breach on the part
of the appellant. In this behalf, Mr. Dada drew our attention, and
rightly so, to the letter dated 18.11.1998 which is
contemporaneous to the letter of termination, wherein respondent
No.2 categorically alleged fabrication of Commissioning Reports
of installed objects and the financial blockade created by the
issue of NIL Performance Certificates by the appellant. This letter
is referred to in the letter of 19.02.1999 by incorporating
references contained in the letter dated 23.12.1998. Respondent
No.2, in its Statement of Claim, has also asserted the harassment
and deliberate breach of the appellant in the course of installation
of objects such as fabrication of failure reports and
Civil Appeal No. 10466 of 2017 Page 51 of 65
commissioning reports, obstructing payments by bogus
deductions in performance certificates and other wrong practices
of the appellant staff. The serious grievances of respondent No.2
in respect of installed objects were considered at length by the
Arbitral Tribunal and accepted the same.
47) We have already referred to these findings hereinabove.
Learned senior counsel appearing for respondent No.2 referred to
the judgment of this Court in Juggilal Kamlapat v. Pratapmal
Rameshwar7 wherein it has been held that repudiation of a
contract can be justified on the basis of any ground that existed in
fact, even though not stated in the correspondence. Following
passage from the said judgment needs a quote:
“23. It was also contended that the defendant not
having raised the plea in their correspondence with
the plaintiff that the delivery orders tendered were
defective, was estopped from justifying their
requisition of the contracts on that around. As the High
Court has pointed out no case of estoppel was
pleaded by the plaintiff and, therefore, it was the
plaintiff who should be precluded from raising the
question of estoppel. Apart from that, the law permits
defendant to justify the repudiation on any ground
which existed at the time of the repudiation whether or
not the ground was stated in the correspondence.
(See Nune Sivayya v. Maddu Ranganayakulu, AIR
1935 PC 67 : 62 IA 89, 98).”
48) One more aspect needs to be adverted to at this stage
7 (1978) 1 SCC 69
Civil Appeal No. 10466 of 2017 Page 52 of 65
which incidentally arises in view of the submission of Mr. Vikas
Singh, learned senior counsel appearing for the appellant.
49) It was argued that respondent No.2 should have installed
objects at least under category B-2, even if there was breach on
the part of the appellant in supplying locations for categories B-1
and B-3. This was refuted by learned senior counsel appearing
for respondent No.2 on the round that the Arbitral Tribunal had
specifically considered and rejected this argument and the
approach of the arbitrators is even upheld by the learned Single
Judge as well as the Division Bench of the High Court. We may
point out that the Arbitral Tribunal has dealt with this aspect in the
following manner:
“Datar was asked a specific question as to how the
Claimants did not install the contract objects in
category B-II and the answer of the witness was in
four parts. The witness claimed that (a) the contract
was entered into considering the commercial efficacy
of installing given quantity of B-I and B-III categories to
counter balance low revenue from B-II category. The
witness claimed that as the Respondents did not
supply the list of categories B-I and B-III, the
Claimants were entitled to withhold installation of
category B-II; (b) The annually installed at Nasik under
B-II category was install at Nasik under B-II category
was relatively less obstructive in Nasik Circle; (c) the
locations under category B-II were intervened with
locations of categories B-I and B-III and it was
practically unviable to install objects of category B-II
selectively. The list of B-II category was also required
to be re identified by the Respondents separately as
was done for the Nasik Circle and (d) the
Respondents unilaterally willingly revoked the
Civil Appeal No. 10466 of 2017 Page 53 of 65
permission granted earlier to install simultaneously by
letter dated December 21, 1998. Some of the reasons
given by the witness cannot be termed as
unreasonable in the facts and circumstances of the
case. It cannot be overlooked that in respect of
installation of objects under category B-II, the
Claimants were entitled only to the rates fixed under
year 1993 and 1994 contract till the expiration of six
year period while in respect of categories B-I and B-III,
the lease rentals were considerably high.
In any event, it does not lie in the mouth of the
Respondents to urge that the claimants should have
installed contract objects under category B-II when
specific directions were given on December 21, 1998
to install objects under category B-II only after
completion of installation under category B-I. The
Respondents claimed that 16,477 locations were
available on February 19, 1999 but that is not correct
because taking into consideration 10,541 locations of
category B-II the available locations out of B-I and B-III
categories were 5,932.”
50) The Division Bench dealt with this contention in the
following manner:
“In our view from the material on record, it is
abundantly clear that supply of DTC Lists was a
fundamental term of the Work Order and MSEB had
miserably failed in complying with the said
fundamental term and there was a breach on the part
of the MSEB in supplying the DTC locations which
eventually prevented DSL from installation of contract
objects. It has to be noted here that after the work
order was issued by MSEB, DSL had to make
necessary arrangements for the purpose of carrying
out the process of installation of the contract objects.
This included procurement of raw material from a
foreign country, starting the process of manufacturing
gadgets, making arrangements for transportation of
these contract objects to the places where the said
gadgets were to be installed, employment of trained,
skilled and other staff, making available vehicles for
transporting these contract objects to the DTC location
where they were to be installed and, finally,
Civil Appeal No. 10466 of 2017 Page 54 of 65
co-ordinating with the Officers of MSEB so that after
the contract objects were installed, a Certificate of
installation could be given by the Officers of MSEB so
that from that point onwards, lease rentals could
become payable to DSL. It has to be borne in mind
that the nature of the Work Order was such that it was
in the interest of DSL to ensure that the contract
objects are installed and certificates to that effect are
obtained from the Officers of MSEB. It does not sound
to reason that after having invested huge amount of
almost Rs 163 crores, as observed by the Tribunal in
the Award, DSL would not install the objects because
it was in their interest to get the objects installed so
that returns on their huge investment would start
thereafter. It is inconceivable therefore that though
DTC Lists were available, DSL would not install the
contract objects. Various facts and figures were given
by MSEB to show that DTC locations were known to
DSL and yet they had failed in installing the contract
objects is without any substance. It cannot be
forgotten that, initially, the sequence of installation was
Kolhapur, Nasik and Aurangabad. This sequence was
later on changed to Nasik, Kolhapur and Aurangabad.
This was again changed and permission was given to
DSL to install the objects at any time at any place and,
lastly, again, this was changed and direction was given
to DSL to adhere to the sequence as per the Work
Order. This being the position, even assuming that B-II
Lists were available, DSL could not have installed
these contract objects because they were asked to
follow the schedule again by letter dated 21/12/1998
and, therefore, even if the lists were available, it was
not possible for DSL to simultaneously install all those
objects since they were told to adhere to the sequence
in the Work Order if the lists of locations under B-I
were not given, even assuming that they had B-II lists
of locations they could not have and were not actually
allowed to install at the said B-II locations. It has come
on record that more than 10,000 objects were
manufactured and ready for installation. There is no
earthly reason why DSL would fail to install the objects
which were inspected and ready for installation. The
only obvious reason would be that they were unable to
do so on account of various orders which were passed
by MSEB from time to time preventing them from
performing their obligation. MSEB has not examined
any of its Superintending Engineers who were in
Civil Appeal No. 10466 of 2017 Page 55 of 65
charge of supplying the Lists. The cumulative effect of
all the material which has been brought on record is
that it clearly demonstrates the failure on the part of
MSEB in supplying the Lists of DTC locations which
was a fundamental term of the contract.”
51) We agree with the contention of respondent No.2 that these
are pure findings of facts and there is no perversity therein. It
may, however, be pointed out that out of 12555 B-2 category
objects under the work order, 9515 objects were to be installed in
Kolhapur Zone, i.e. 76% of the said category. Vide letter dated
14.07.1997, the Chief Engineer, Kolhapur Zone admittedly
directed respondent No.2 to first complete new installation (B-1
and B-3) and only thereafter take up installation under category
B-2. The locations for B-1 and B-3 from Kolhapur were
admittedly never furnished. Therefore, this contention of the
appellant also warrants a rejection.
52) The award of the Arbitral Tribunal having been affirmed by
the learned Single Judge as well as the Division Bench of the
High Court, that too after dealing with each and every argument
raised by the appellant in detail, which is negatived, we hold that
Mr. Dada is correct in his argument that there is no question of
law which is involved herein and the only attempt of the appellant
was to re-argue the matter afresh, which was impermissible.
Civil Appeal No. 10466 of 2017 Page 56 of 65
AWARD OF DAMAGES :
53) Refuting the argument of the appellant that there was no
breach in respect of 17294 installed objects and, therefore, no
damages were payable in that behalf, Mr. Dada pointed out that
the appellant had itself submitted before the Arbitral Tribunal as
under:
“The respondents submitted that the claimants at the
most would be entitled to the costs of the objects
installed, i.e. cost of 17294 contract objects.
Alternatively it was submitted that the claimants would
be entitled to lease rent for reasonable period after
deducting the cost of maintenance and taking out of
print outs.”
He also pointed out that identical submission is to be found
in the written submissions filed by the appellant before the Arbitral
Tribunal at para 13. According to him, the arbitrators accepted
the said submission of the appellant and awarded damages. The
appellant is, therefore, not at all entitled to invoke public policy to
challenge the award on the said premise. This aspect has been
considered by the Division Bench at para 73, which has already
been reproduced above.
54) We see substance in the contention of respondent No.2 and
are of the opinion that the appellant cannot now turn around and
raise objection to the award of damages which are measured
Civil Appeal No. 10466 of 2017 Page 57 of 65
having regard to the loss suffered by respondent No.2 in terms of
lease rent for reasonable period for which it would have been
entitled to otherwise.
55) That apart, we also find that the Arbitral Tribunal, while
awarding the damages, has relied upon the judgment of this
Court in Union of India & Ors. v. Sugauli Sugar Works (P) Ltd.8
wherein a cardinal principle of damages had been laid down to
the effect that the injured party should be placed in as good a
position as money could do as if the contract had been
performed. Following passage from the said judgment was kept
in mind by the Arbitral Tribunal:
“22. The market rate is a presumptive test because it
is the general intention of the law that, in giving
damages, for breach of contract, the party complaining
should, so far as it can be done by money, be placed
in the same position as he would have been in if the
contract had been performed. The rule as to market
price is intended to secure only an indemnity to the
purchaser. The market value is taken because it is
presumed to be the true value of the goods to the
purchaser. One of the principles for award of damages
is that as far as possible he who has proved a breach
of a bargain to supply what he has contracted to get is
to be placed as far as money can do it, in as good a
situation as if the contract had been performed. The
fundamental basis thus is compensation for the
pecuniary loss which naturally flows from the breach.
Therefore, the principle is that as far as possible the
injured party should be placed in as good a situation
as if the contract had been performed. In other words,
it is to provide compensation for pecuniary loss which
naturally flows from the breach. The High Court
8 (1976) 3 SCC 32
Civil Appeal No. 10466 of 2017 Page 58 of 65
correctly applied these principles and adopted the
contract price in the facts and circumstances of the
case as the correct basis for compensation.”
56) In the instant case, applying the aforesaid principle, the
Arbitral Tribunal, for the purpose of classification, considered a
30% reduction in lease rent to compute damages for installed
objects, 50% reduction in lease rent to compute damages for
manufactured but uninstalled objects and the bare cost of raw
materials for the objects not manufactured. No pendente lite
interest was awarded, though the proceedings went on for five
and a half years. Thus, the Arbitral Tribunal awarded almost the
same amount as was invested by respondent No.2 for the project.
Interest was awarded only @ 10% per annum from the date of
the award as opposed to the prevailing bank rate of about 21%.
The aforesaid being a reasonable and plausible measure
adopted by the Arbitral Tribunal for awarding the damages, there
is no question of interdicting with the same.
57) It may be noted that Mr. Dada had argued that it was
incumbent upon the Arbitral Tribunal to take into account the
practices of leasing trade when making the award, having regard
to the provisions of Section 28(3) of the Indian Contract Act,
1872. He had drawn our attention to Article 13(2) of UNIDROIT
Civil Appeal No. 10466 of 2017 Page 59 of 65
Convention on international lease, which stipulates as under:
“Where the lessee’s default is substantial, then subject
to paragraph 5 the lessor may also require
accelerated payment of the value of the future rentals,
where the leasing agreement so provides, or may
terminate the leasing agreement and after such
termination:
(a) recover possession of the equipment; and
(b) recover such damages as will place the
lessor in the position in which it would have been
had the lessee performed the leasing agreement in
accordance with its terms.”
58) In the aforesaid backdrop, we agree with the approach of
the High Court in spelling out the proposition of law that once it is
established that the party was justified in terminating the contract
on account of fundamental breach thereof, then the said innocent
party is entitled to claim damages for the entire contract, i.e. for
the part which is performed and also for the part of the contract
which it was prevented from performing. We may usefully refer to
the following dicta laid down in Suisse Atlantique Societe
d’Armament SA v. NV Rotterdamsche Kolen Centrale9
:
“…if facts of that kind could be proved I think it would
be open to the arbitrators to find that the respondents
had committed a fundamental or repudiatory breach.
One way of looking at the matter would be to ask
whether the party in breach has by his breach
produced a situation fundamentally different from
anything which the parties could as reasonable men
have contemplated when the contract was made.
Then one would have to ask not only what had already
9 1966 A.C. 361 (pages 397-398)
Civil Appeal No. 10466 of 2017 Page 60 of 65
happened but also what was likely to happen in future.
And there the fact that the breach was deliberate
might be of great importance.
If fundamental breach is established the next question
is what effect, if any, that has on the applicability of
other terms of the contract. This question has often
arisen with regard to clauses excluding liability, in
whole or in part, of the party in breach. I do not think
that there is generally much difficulty where the
innocent party has elected to treat the breach as a
repudiation, bring the contract to an end and sue for
damages. Then the whole contract has ceased to
exist, including the exclusion clause, and I do not see
how that clause can then be used to exclude an action
for loss which will be suffered by the innocent party
after it has ceased to exist, such as loss of the profit
which would have accrued if the contract had run its
full term…”
(emphasis supplied)
59) We, thus, do not find any infirmity in the manner in which
damages are awarded in favour of respondent No.2.
RE : MITIGATION OF DAMAGES
60) Mr. Rafique Dada also countered the argument of the
appellant on mitigation of damages with the submission that this
aspect was specifically considered and the contention of the
appellant in this behalf was rejected not only by the Arbitral
Tribunal but by the High Court as well. He referred to the relevant
portion of the discussion in the award as well as the judgments.
We find that the Arbitral Tribunal has dealt with this aspect
and held that the contract objects were custom built in the
Civil Appeal No. 10466 of 2017 Page 61 of 65
following manner:
“55. Respondents submitted that the Claimants did
not make any efforts to mitigate the loss suffered. The
submission is without any merit for more than one
reason. In the first instance, the contract objects
manufactured in pursuance of the orders of the
Respondents were custom built i.e. to the
specifications laid down by the Respondents and
these contract objects cannot be disposed in open
market. Datar deposed with reference to Exh. C 16
that efforts were made to sell the contract objects
stranded in the factory to other Electricity Boards but
those efforts did not succeed. It was contended by the
Respondents that the claimants should have
dismantled the stranded contract objects and sold the
components thereof. The submission is only required
to be slated to be rejected. Once an electronic
instrument is dismantled, then the value almost
becomes nil. In any event, the Claimants have
established that efforts were made to mitigate the
loss.”
61) The learned Single Judge as well as the Division Bench of
the High Court has given its imprimatur to the aforesaid findings.
It, therefore, becomes apparent that the objects in question were
manufactured by respondent No.2 to suit the specific needs of the
appellant ad they could not be used otherwise. Therefore, there
was no possibility on the part of respondent No.2 to make an
endeavour to dispose of the same in order to mitigate the loses.
RE : WAIVER
62) The argument of the appellant on waiver is also
successfully met by respondent No.2. Submission of Mr. Dada,
Civil Appeal No. 10466 of 2017 Page 62 of 65
on this argument, was that both parties went to trial before the
Arbitral Tribunal on the basis that the time to start work under the
contract had commenced with reference to letter dated
14.07.1997 of the appellant signed by the Chief Engineer who
was the competent authority under the contract. The same Chief
Engineer insisted, by letter dated 20.04.1998, that liquidated
damages would be imposed if the work was not completed in
time. We may point out that the Arbitral Tribunal considered and
rejected this argument of waiver, as set up by the appellant, in the
following words:
“18… It was then contended that the Claimants had
waived the right to receive the lists of locations from
the Respondents. By reference to clause 5.1 of the
work order, it was submitted that the Claimants were
to commence installation within four months from (a)
the date of the work order; (b) opening of Letter of
Credit and (c) on receipt of complete list of locations,
whichever is later. It was contended that the
Claimants were entitled to wait till all the lists were
supplied to installation, but as the Claimants
commenced installation even though the entire lists
were not supplied, it should be concluded that the
Claimants have waived their right. The submission is
desperate and wholly unfair. The Respondents were
in a hurry to complete the installation within a period of
20 months with an object to save the large amount lost
due to loss of energy. Merely because the Claimants
acted in a reasonable manner and did not insist upon
the terms of the contract, it is absurd to suggest that
the Claimants waived their right to complain about
non-supply of lists of locations. It was then submitted
that the Claimants had installed contract objects on
the oral instructions and on the basis of chits issued
by some of the Officers of the Respondents and that
was contrary to the terms of the work order which
Civil Appeal No. 10466 of 2017 Page 63 of 65
provided that installation should be only on locations,
the lists of which are given in accordance with the
format at Annexure ‘E’ to the work order. It was also
submitted that on 155 locations at Jalgaon, Dhule and
Aurangabad, the lists were received by the Claimants
from Authorities who were not competent to issue
such lists. The submission has no merit because
while undertaking such a huge project, the parties
were not keen on strict compliance of each and every
term and condition of the contract. Such an instance
would have defeated the contract at once because the
contract had to be carried out over a large area and
with the interaction of large number of people. These
factors cannot establish that the claimants have
waived their right to complaint about the failure to
supply lists of location…”
63) Mr. Vikas Singh, learned senior counsel appearing for the
appellant, referred to and relied upon various judgments in
support of his contention. These judgments deal with the scope
of interference in the awards passed by the arbitrators. It is not
even necessary to deal with these judgments inasmuch as, on
the facts of this case, as discussed in detail hereinabove, none of
the judgments gets attracted. Likewise, effort on the part of the
appellant to rely upon the judgment of the learned single Judge of
the High Court in the first round is futile as that was set aside by
the Division Bench and matter was remitted back to the single
Judge of the High Court to decide it afresh.
RE: ORDER ON CHAMBER SUMMONS
64) Three chamber summons were taken out by the appellant
during the pendency of this appeal before the Division Bench. By
Civil Appeal No. 10466 of 2017 Page 64 of 65
these chamber summons, the appellant intended to amend the
petition which was filed by it under Section 34 of the Act as well
as the appeal. The High Court after detailed discussion in the
impugned judgment rejected these summons. We find that the
amendment sought was highly belated. Arbitration petition filed
under Section 34 of the Act was sought to be amended after a
delay of eight years. Further, the amendment in the appeal,
taking those very grounds on which amendment in the arbitration
petition was sought, was sought after a delay of 3½ years. The
High Court, thus, rightly rejected these summons and it is not
necessary to have any elaborate discussion on these aspects.
65) In the ultimate analysis, having found no merit in any of the
arguments raised by the appellant, the appeal is dismissed with
costs.
………………………………………J.
(A.K. SIKRI)
………………………………………J.
(ASHOK BHUSHAN)
NEW DELHI;
JANUARY 18, 2018.
Civil Appeal No. 10466 of 2017 Page 65 of 65

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suit for declaration that the partition deed executed by him in respect of his properties giving a share to his sons is null and void – maintainable – yes = THEIRY SANTHANAMAL …..APPELLANT(S) VERSUS VISWANATHAN & ORS. = he be declared the absolute owner of the suit property and the Civil Appeal No. 3227 of 2017 Page 2 of 23 Partition Deed dated March 15, 1971 be nullified.= whether such a partition Civil Appeal No. 3227 of 2017 Page 21 of 23 deed could be executed by Oubegaranadin in respect of the properties of which he was the absolute owner. It is to be borne in mind that the properties in question had fallen in the share of Oubegaranadin on the basis of partition deed dated March 23, 1959 between Oubegaranadin and his brothers. As on that date, French Code governed the field as per which customary Hindu Law applies. It is not disputed that Oubegaranadin had become the absolute owner of the property in question. Therefore, the moot question is as to whether he could give away portions of these properties to his sons by entering into a partition deed like the one he executed on March 15, 1971? Even if French Code is not applied, the aforesaid question cannot be answered with reference to the provisions of the Hindu Succession Act. Partition Deed can be entered into between the parties who are joint owners of the property. In case the father, namely, Oubegaranadin herein wanted to give property to his sons, of which he was absolute owner, it could be done by will or by means of gift deed/donation etc. The High Court was, therefore, right in observing that such a partition deed has to be construed either a gift deed or family settlement. However, the claim of the plaintiffs was not on that basis. It was not stated anywhere as to whether necessary formalities, conditions or rules laid down for Civil Appeal No. 3227 of 2017 Page 22 of 23 donation inter vivos or gift so as to enforce said document were complied with in the absence of any pleadings, obviously no evidence was produced to this effect.

NON-REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 3227 of 2006
THEIRY SANTHANAMAL …..APPELLANT(S)
VERSUS
VISWANATHAN & ORS.
…..RESPONDENT(S)
J U D G M E N T
A.K. SIKRI, J.
The property with which this appeal is concerned is
described in the suit as ‘B’ Schedule Property (henceforth,
referred to as the ‘suit property’). The said suit property originally
belonged to Mr. Mariasusai Mudaliar who was grandfather of
respondent nos. 3 to 5 and father of Oubegaranadin (since
deceased). Mariasusai Mudaliar died intestate on October 23,
1953 leaving behind two sons viz. Oubegaranadin and Simon.
2) In 1959, the suit property and other properties which were
inherited by the two sons of Mr. Mariasusai Mudaliar, came to be
partitioned between them by a registered deed of partition dated
Civil Appeal No. 3227 of 2017 Page 1 of 23
March 23, 1959. Under the said deed of partition,
Oubegaranadin was allotted certain properties.
3) After the partition between the two brothers, as aforesaid, some
difficulties in the enjoyment of the allotted properties arose which
necessitated the two brothers to exchange between themselves
certain properties. Under the Exchange Agreement dated March
15, 1971, the suit property came to be allotted to Oubegaranadi.
4) On getting the suit property under the said exchange and in
respect of the other properties got under the partition dated
March 23, 1959, Oubegaranadin and his sons, namely,
respondent nos. 3 to 5 entered into a Deed of Partition dated
March 15, 1971. Under the said deed, respondent nos. 3 to 5
were allotted larger share jointly, since they were minors, and to
expend money towards education and maintenance. Further, it
was also recited that respondent nos. 3 to 5 would take the suit
property as allotted to them, absolutely.
5) Nearly after three years from the date of having entered into a
partition with his sons, Oubegaranadin filed a suit on February 02,
1974 (being O.S. No. 70 of 1974) against respondent nos. 3 to 5
and another, on the file of the learned Additional Subordinate
Judge, Pondicherry (now known as ‘Puducherry’), praying that he
be declared the absolute owner of the suit property and the
Civil Appeal No. 3227 of 2017 Page 2 of 23
Partition Deed dated March 15, 1971 be nullified. Respondent
Nos. 3 to 5 were minors when the suit was instituted and they
were sought to be represented through their mother and
guardian, respondent no. 6 herein. Based on the statement of
the guardian (respondent no. 6) who submitted to the decree
thereupon, the learned Additional Subordinate Judge,
Puducherry, decreed the suit as prayed for, vide judgment and
decree dated June 24, 1974.
6) Oubegaranadin claiming himself to be the absolute owner of the
suit property, sold of the portions thereof, namely, Nos. 76C and
76D at Mahatma Gandhi Road, Puducherry to respondent nos. 1
and 2 under sale deed dated March 29, 1980.
7) On the other hand, respondent no. 3, on the strength of having
allotted the suit property along with his two younger brothers
(respondent nos. 4 and 5) under the Partition Deed dated March
15, 1971, sold his 1/3rd share in the suit property to the appellant
herein vide registered Sale Deed dated December 11, 1980.
Thereafter, on December 11, 1980, respondent no. 4 also sold his
1/3rd share in the suit property to the appellant on the basis of the
joint allotment of the suit property under the deed of partition
dated March 15, 1971. Even respondent no. 5, while he was still
minor, executed a sale deed in favour of the appellant, acting
Civil Appeal No. 3227 of 2017 Page 3 of 23
through respondent no. 6 as his guardian in respect of his 1/3rd
share in the suit property.
8) From the facts noted uptill now, it gets revealed that in respect of
the property which had fallen in the share of Oubegaranadin,
partition was effected between him and his sons (respondent nos.
3 to 5) vide Partition Deed dated March 15, 1971. However, in the
suit for declaration filed by him thereafter, he got the decree vide
which the said partition suit was nullified. Thereafter, claiming
himself to be the complete and exclusive owner of the property,
Oubegaranadin sold part of those properties (Nos. 76C and 76D,
Mahatma Gandhi Road, Puducherry) to respondent nos. 1 and 2
therein. On the other hand, respondent nos. 3 to 5, still claiming
themselves to be the owner of the properties, on the basis
Partition Deed dated March 15, 1971, sold their respective
portions to the appellant herein. Thus, the appellant as well as
respondent nos. 1 and 2 have purchased the same suit property.
Which sale is to be recognised is the question. The answer to
this now hinges upon the validity of the decree dated June 24,
1974 vide which the partition deed dated March 15, 1971 was
nullified and Oubegaranadin was declared as the absolute owner
of the suit property. However, as would be noticed hereinafter,
validity of the Partition Deed dated March 15, 1971 itself is in
Civil Appeal No. 3227 of 2017 Page 4 of 23
issue.
9) Proceeding further to complete the factual narration, it so
happened that respondent nos. 3 to 5 instituted a suit, as indigent
persons on January 03, 1983 (O.P. No. 1 of 1983) before the
Principal Subordinate Judge, Puducherry against their father
Oubegaranadin, their mother (Defendant No. 6) as well as the
respondent nos. 1 and 2 to whom Oubegaranadin had sold part
of the property. In this suit, respondent nos. 6 to 9 as well as
appellant, Selvanathan (since deceased whose legal heirs are
respondent nos. 10 to 13 herein) and one Mr. M.B. Vaithilingam
(since deceased whose legal heirs are respondent nos. 14 to 16
herein), were also impleaded as defendants. In this suit,
respondent nos. 3 to 5 sought decree for declaration of title in
respect of not only the suit property but also other properties.
They also sought declaration to the effect that decree dated June
24, 1974 passed in the favour of their father was not binding and
be set aside. As a consequence, they also sought declaration
that sale deed dated March 29, 1980 executed by their father in
favour of respondent nos. 1 and 2 be set aside. They went to the
extent of seeking cancellation of three sale deeds dated
December 11, 1980, December 11, 1980 and April 29, 1981
executed by them in favour of appellant herein.
Civil Appeal No. 3227 of 2017 Page 5 of 23
10) In the plaint it was averred by respondent nos. 3 to 5 that
they were children of Oubegaranadin and respondent no. 6
herein and their succession was governed by French Civil Law.
They also traced the history of events (which have already been
noted above). It was contended that as far as suit for declaration,
i.e. O.S. No. 70 of 1974 filed by Oubegaranadin is concerned, he
had obtained the decree therein by fraudulent misrepresentation
of facts and that their mother (respondent no. 6), who
represented them in the said suit, was coerced to submit to the
decree and, therefore, such a decree was not binding on them.
Likewise, insofar as three sale deeds executed by them in favour
of the appellant are concerned, it was alleged that their father
coerced them to sell the property to the appellant which were
voidable.
11) Respondent nos. 1 and 2 resisted the suit by contending
that decree passed in O.S. No. 70 of 1974 was valid decree
which was not obtained by fraud or misrepresentation and since
Oubegaranadin was the absolute owner of the properties in
question he had right to sell the same and, therefore, sale deed
executed in their favour in respect of property nos. 76C and 76D
was valid. The appellant also resisted the suit by contending that
he had purchased the property from respondent nos. 3 to 5 for a
Civil Appeal No. 3227 of 2017 Page 6 of 23
valuable consideration and had also paid the full consideration.
After purchasing the same he had leased out the property and
was collecting rents. The appellant, therefore, pleaded that sale
deed in his favour was valid and sale deed in favour of
respondent nos. 1 and 2 by Oubegaranadin was illegal.
12) On the basis of pleadings, issues were drawn by the trial
court. Parties led their evidence and after hearing the arguments,
the trial court passed the judgment and decree dated January 17,
1986 holding that decree passed in O.S. No. 70 of 1974 was valid
since no prejudice had been caused to the interest of the then
minors, i.e., respondent nos. 3 to 5 herein. He also held that
three sale deeds executed by respondent nos. 3 to 5 were not
under coercion but were executed to meet the family debts and
out of necessity. Since, respondent nos. 3 to 5 have been left
without any property, the learned Subordinate Judge, opined that
an additional 10% of the sale consideration for the suit property
and 5% of the sale consideration for the land be paid over by the
appellant and respondent nos. 1 and 2 to respondent nos. 3 to 5
and on the said basis, quantified the sum to be paid.
13) Aggrieved by the partial decree of suit, as full relief prayed
for not having been granted, respondent nos. 3 to 5 preferred the
appeal (A.S. No. 1052 of 1986) on the file of the High Court of
Civil Appeal No. 3227 of 2017 Page 7 of 23
Madras. Respondent nos. 1 and 2 preferred cross-objection
insofar as the sale consideration in respect of the land (it is not
the subject matter of the present appeal). Insofar as the direction
to pay an additional 10% of the sale consideration for the building
to respondent nos. 3 to 5, the appellant preferred an independent
appeal in A.S. No. 335 of 1987 in the High Court of Madras.
14) The learned Single Judge of the High Court vide judgment
dated March 19, 1988 reversed the judgment of the Trial Court on
certain counts and allowed A.S. Nos. 1052 of 1986 and A.S. No.
335 of 1987. Holding that respondent nos. 3 to 5 were the
absolute owners and Oubergaranadin had no right over the same
property, it was concluded that the judgment and decree passed
in O.S. No. 70 of 1974 was fraudulent and not binding on
respondent nos. 3 to 5 and that respondent nos. 3 to 5 were
entitled to be declared owners of the suit property subject to sale
deeds executed by them. Though, the learned Single Judge held
that in view of the fact that the appeal preferred by respondent
nos. 3 to 5 are allowed, respondent nos. 1 and 2 are not liable to
pay any compensation and, ultimately, dismissed the
cross-objection.
15) Aggrieved by the said judgment, respondent nos. 1 and 2
filed LPA Nos. 113 to 115 of 1999 before the Division Bench of the
Civil Appeal No. 3227 of 2017 Page 8 of 23
High Court. These appeals are allowed by the Division Bench
vide impugned judgment dated March 04, 2004 in the following
terms:
“20. In view of the foregoing discussion, the judgment
and decree allowing the appeal in A.S. No. 1052/86 is
set aside. Equally the dismissal of Cross Objection
filed by the Appellant regarding the levy of
compensation cannot be sustained, as the Learned
Judge himself found that such a decree for damage by
the trial court cannot be sustain. Though the
appellants have challenged the judgment and decree
made in A.S. No. 335/1987 filed by the 10th defendant,
the appellants are not aggrieved persons and hence
we are inclined to dismiss the appeal in L.P.A. No.
114/1999. Accordingly, L.P.A. Nos. 113 and 115 of
1999 are allowed and L.P.A. No. 114/1999 is
dismissed. No costs.”
16) The High Court has held that by Regulation dated January
06, 1817, the French Code was applicable and by Regulation
dated April 24, 1880, Civil Procedure Code was made applicable
to Puducherry. As per the said French Code, customary Hindu
Law was applicable. Applying that law, the High Court has
concluded that since Oubegaranadin was the absolute owner of
the said property, as per Hindu law sons cannot seek partition in
the property of their father. Therefore, the Partition Deed dated
March 15, 1971 was not a valid instrument and the findings of the
Single Judge that Oubegaranadin had lost his right by virtue of
partition deed is contrary to law.
Civil Appeal No. 3227 of 2017 Page 9 of 23
17) It may be mentioned at this stage that the entire suit
property belonged to Oubegaranadin absolutely, which fell in his
share after partition between him and his brother Simon.
However, Oubegaranadin partitioned the said property by
executing Deed of Partition dated March 15, 1971. Under this
partition deed, some of the properties were given by
Oubegaranadin to his sons, namely, respondent Nos. 3 to 5.
Respondent Nos. 3 to 5, therefore, claim their right on the basis
of this partition deed. No doubt, Oubegaranadin got that partition
deed cancelled by filing a suit in this behalf ad obtaining decree
therein. However, as per the High Court, the first question was as
to whether respondent Nos. 3 to 5 were entitled to claim any right
under the partition deed dated March 15, 1971.
18) The High Court noted that the family of Oubegaranadin, and
his children i.e. respondent Nos. 3 to 5, belong to Christianity in
religion. The High Court further noted that by Regulation dated
January 06, 1817, the French Code to the exception of the Code
of Criminal Procedure, containing the totality of the substantive
and objective laws of France, including the personal law, have
been made applicable to Puducherry. According to Section 3 of
the said Regulation, Indians, whether Hindus, Muslims or
Christians would continue to be governed by usage and customs
Civil Appeal No. 3227 of 2017 Page 10 of 23
of their respective castes. In that way, French law has become
the law of the land though in matter of personal law it was
applicable only to settlers and their descendants. The Regulation
dated April 25, 1880 made the provisions of Code of Civil
Procedure, 1908 (CPC) relating to civil status, namely, the
declaration of births and deaths of marriage applicable to
Puducherry territory, but a saving clause left it open to Indians to
marry as per their customs. The said saving clause did not apply
to Christians who were from that time governed by French law in
respect of marriage and divorce but in respect of all other matters
pertaining to personal law. Christians continue to be governed by
the customary Hindu Law.
19) The High Court also pointed out that though Hindu
Succession Act, 1956 was made applicable in Puducherry, insofar
as Christians are concerned, they continued to be governed by
customary law, inasmuch as, Hindu Succession Act was not
applicable to Christians by virtue of Section 2(1)(c) thereof which
made the Act applicable only to Hindus. Therefore, Christians in
Puducherry continued to be governed by customary law, i.e.
customary Hindu law that was prevalent in Puducherry as the law
of succession. Thus, rights of the parties were to be determined
on the basis of the said Hindu customary law. Taking extensive
Civil Appeal No. 3227 of 2017 Page 11 of 23
note of this customary Hindu Law in Puducherry, as per various
decisions as well as Book on Hindu Laws by French writer J.
Sanner, the High Court has come to the conclusion that during
the lifetime of the father, sons cannot ask for partition of the
ancestral property or property of the father. It further held that still
the father is entitled to distribute or give away his properties to his
children. However, according to the High Court, it could not be
done in the manner it was done in the instant case and Partition
Deed dated March 15, 1971 was not a valid document.
20) Before proceeding further, it would be appropriate to
mention as to how different parties were described in the original
suit and their respective position in these proceedings:
Name In Original Suit Before this Court
Oubegaranadin Defendant No.1 Since deceased
Thierysanthamal Defendant No.10 Petitioner
Viswanathan Defendant No.4 Respondent No.1
A Andal Defendant No.5 Respondent No.2
Savarimouthurayan Plaintiff No. 1 Respondent No.3
John Kennedy Plaintiff No. 2 Respondent No.4
Robert Kennedy Plaintiff No. 3 Respondent No.5
Marie Rosalie Defendant No.2 Respondent No.6
Kumar Manjini Defendant No.3 Respondent No.7
Babu Defendant No.8 Respondent No.8
RathinavelMudaliar Defendant No.9 Respondent No.9
Mrs Elizabeth Defendant No.6 Respondent No.10
Civil Appeal No. 3227 of 2017 Page 12 of 23
(Selvanthan)
Joseph Elango
Defendant No.6
(Selvanthan)
Respondent No.11
Albert
Defendant No.6
(Selvanthan)
Respondent No.12
Francis
Defendant No.6
(Selvanthan)
Respondent No.13
Rukmaniammal
Defendant No.7
(M.B. Vaithilingam)
Respondent No.14
21) Mr. K. Ramamoorthy, learned senior counsel appearing for
the appellants, advanced the following propositions:
(a) The partition deed dated March 15, 1971 is valid in law.
(b) It was submitted that the appellant was not disputing the
legal position that as per customary Hindu law during the
lifetime of their father, sons cannot ask for partition. His
submission, however, was that it is not respondent Nos. 3 to 5
(sons) who asked for partition. On the contrary,
Oubegaranadin himself executed the partition deed.
Therefore, this partition deed was valid in law. The High Court
wrongly applied French Code and Hindu Succession Act had
already come into force in Puducherry.
(c) The decree in OS No. 70/1974 is not binding on the
plaintiffs as Order XXXII Rule 7 CPC had not been followed.
Civil Appeal No. 3227 of 2017 Page 13 of 23
Submission in this behalf was that sub-rule 1A was
added to Rule 7 of Order XXXII by the Act of 1976. In Tamil
Nadu, earlier State of Madras (Puducherry), amendment to
this effect was inserted way back in the year 1910, which is
in the following form:
“(1A) Where an application is made to the Court for
leave to enter into an agreement or compromise or for
withdrawal of a suit in pursuance of a compromise or
for taking any other action on behalf of a minor or
other person under disability and such minor or other
person under disability is represented by counsel or
pleader, the counsel or pleader shall file in Court with
the application a certificate to the effect that the
agreement or compromise or action proposed is in his
opinion for the benefit of the minor or other person
under which a minor or other person under disability is
a party shall recite the sanction of the Court thereto
and shall set out the terms of the compromise as in
Form No. 24 in Appendix D to this Schedule.” (Dis No.
1647 of 1910)”
On the basis of the above, submission was that the
judgment and decree in OS No. 70 of 1974 was passed
without following the procedure contained in Order XXXII
Rule 7 CPC and, therefore, not valid in law. According to
the learned senior counsel, the decree in the said suit was a
consent decree and, therefore, leave of the Court should
have been obtained, as required under Order XXXII Rule
7(1A) CPC.
(d) The mortgage deed dated October 22, 1979 A10 by
Defendant Nos. 1 to 4 and 5 is not valid as Defendant No.1
Civil Appeal No. 3227 of 2017 Page 14 of 23
has no title;
(e) The sale deed dated 1980 by Defendant No.1 in favour of
Defendant Nos. 4 and 5 is not valid.
(f) The sale deeds by plaintiffs to Defendant No.10 are valid
(g) In view of the fact that Defendant No.4 and Defendant No.5
are barred by the principles of res judicata, the findings of the
Single Judge cannot be challenged by them. He also cited the
following judgments in support of the submission predicated on
res judicata: Badri Naraya Singh v. Kamdeo Prasad Singh
& Anr.1
; Lonankutty v. Thomman & Anr.2
; Narayana Prabhu
Venkateswara Prabhu v. Narayana Prabhu Krishna Prabhu
(Dead) By LRs.3
; and Sri Gangai Vinayagar Temple & Anr. v.
Meenakshi Ammal & Ors.4
22) Refuting the aforesaid submissions, argument advanced by
learned counsel for respondent Nos. 1 and 2 was that since the
customary Hindu law in Puducherry applicable to the parties do
not recognise any entitlement or right of the children to claim and,
therefore, demand any interest or share in the property, no
partition can legally take place between the father and
respondent Nos. 3 to 5. Any partition, even if effected, would,
1 AIR 1962 SC 338
2 (1976) 3 SCC 528
3 (1977) 2 SCC 181
4 (2015) 3 SCC 624
Civil Appeal No. 3227 of 2017 Page 15 of 23
therefore, be inconsistent with the law. The father was, therefore,
entitled to seek a declaration that he continued to be the absolute
owner of the properties in question. The father sought such a
declaration and obtained it. He submitted that in the absence of
any right or any entitlement in favour of the said respondents
under the customary Hindu law, the partition cannot create a right
in their favour more particularly when the partition was set at
naught at the instance of the father. If at all the partition was the
product of the absolute right of the father, he had the authority to
recall it. This he did through judicial process. In the aforesaid
circumstances, the transfer or alienation of property effected by
the father towards the family necessity would stand on a higher
footing compared to the alienation made by the abovesaid
respondents without any authority whatsoever.
23) He also submitted that if only respondent Nos. 3 to 5 have
any right to demand a share in the property in question during the
lifetime of father, the question of applicability of Order XXXII Rule
7 CPC will arise. In the absence of any such right, no claim can
be founded only on the basis of alleged procedural impropriety.
According to him, following salient features of the case were
material to decide the issue:
(a) This is a case admittedly governed by the customary Hindu
Civil Appeal No. 3227 of 2017 Page 16 of 23
law as was obtaining in Puducherry.
(b) Under the customary Hindu Law in Puducherry (which
corresponds in some respects to the position obtaining in the
Dayabagha School), the father is the absolute owner of the
property in his hand. The sons do not derive any right in the
family property by reason of their birth which is different from
the position in the Mitakshara School. In other words, the sons
rights arise on the demise of the father and not prior thereto.
Consequently, anything happening during the lifetime of the
father does not confer any right or interest in them.
(c) The father has, thus, an unfettered power of disposition of
the property in his hands. The sons do not have the right to
demand partition or to ask for any share in the family property
during the father’s lifetime. They do not inherit any interest or
right during the lifetime of the father. Consequently, during
their lifetime, they have no interest in any estate which can be
defended or protected.
(d) In the above context, the principle of conflict of interest or
adverse interest dealt with in Order XXXII Rules 3A and Rule 7
CPC relevant in other schools of law would not be relevant in
proceedings involving minors in the Union Territory of
Puducherry, particularly concerning cases involving the
Civil Appeal No. 3227 of 2017 Page 17 of 23
application of customary Hindu Law.
(e) The plaintiffs have not placed reliance on the provisions of
the French Civil Code in support of the argument that insofar
as the partition deed dated March 15, 1971 is concerned, it
complied with mandatory formalities of the Code and the
Division Bench rightly rejected arguments in this regard.
24) Having regard to the respective submissions, it is clear that
first and foremost it needs to be determined as to whether
partition deed dated March 15, 1971 is valid in law, inasmuch as,
this issue will have bearing on the remaining case.
25) As already pointed out above, the foremost question
pertains to the validity of the Partition Deed dated March 15, 1971
and other arguments would arise for consideration only if the
appellant is able to cross this hurdle. At this stage, it would be
pertinent to point out that even after holding that during the
lifetime of their father sons cannot claim partition of the properties
as per the said customary Hindu Law, the High Court has
accepted the fact that the father is still enabled to distribute and
partition his property between the children and the descendants.
As per the High Court, this can be done either by instruments
inter vivos or by Will and further that the settlement or Will must
comply with the formalities, conditions and rules laid down for
Civil Appeal No. 3227 of 2017 Page 18 of 23
donations inter vivos and Wills and the partitions made by
donation inter vivos must include only those properties which the
donor then possesses. In respect of this assertion, the High
Court has referred to Article Nos. 1075 and 1076 of the French
Code. From the aforesaid, the High Court has observed that the
father can distribute or partition the property between the children
and the descendants only by gift or family settlement between the
parties themselves. According to it, the plaintiffs had not set up
their claim on that basis as they did not rely on Articles 1075,
1076 or 1077 of the French Code in respect of their claim.
26) We may reproduce Articles 931, 1075, 1076 and 1077 of
the French Code at this juncture:
“931. Every instrument containing a donation inter
vivos shall be executed before notaries in the ordinary
from the contracts, and the original shall remain with
them; otherwise such instruments shall be void. Civ.
C. 894, 948, 949, 1339, 1340.
1075. Fathers and mothers and other ascendants may
make a distribution and division of their property
between their children and descendants Civ.C. 745,
914, 968, 1076 et seq.
1076. These divisions may be made by donations
or by wills in accordance with the formalities
conditions and rules laid down for donations inter
vivos and wills.
1077. If all the property which are ascendants leaves
at the time of his death has not been included in the
division, such property as has not been included in the
division, such property as has not been included shall
be divided according to law. Civ. C. 723 et seq., 815
Civil Appeal No. 3227 of 2017 Page 19 of 23
et seq., 887 et. seq.”
27) Questioning the aforesaid approach of the High Court, the
submission of the learned senior counsel for the appellant was
that the High Court committed error in deciding the issue by
applying the French Code, which was not applicable in the instant
case. As per him, the Hindu Succession Act was made
applicable to the territory of Puducherry in the year 1963 and,
therefore, relationship of the parties was governed as per the said
Succession Act and not the French Code.
28) The aforesaid argument is misconceived for more than one
reason. First of all, the argument ignores that Oubegaranadin
and his sons (respondent Nos. 3 to 5) are Christian by religion.
Therefore, Hindu Succession Act would not govern, even if it has
been enforced in the territory of Puducherry in the year 1963.
The High Court has dealt with this aspect in detail in its judgment,
as pointed out above, and has come to the conclusion that insofar
as Christians are concerned, old Customary Law continue to
apply. No attempt was made by the learned senior counsel for
the appellant to dislodge the same. Even otherwise, it is the
Customary Hindu Law which has been applied to decide the case
which approach is perfectly justified.
29) We also find that the plea to the effect that Hindu
Civil Appeal No. 3227 of 2017 Page 20 of 23
Succession Act to be enforced in the Union Territory of
Puducherry w.e.f. 1963 and, therefore, French Code was not
applicable thereafter, has taken for the first time in this Court that
too during the arguments. Interestingly, even in the Special
Leave Petition, it is accepted that in the plaint filed by respondent
Nos. 3 to 5, it was specifically mentioned that they were governed
by French Civil Law. The learned Single Judge while deciding
appeals filed by the appellant herein as well as respondent Nos. 3
to 5 (plaintiffs) in the suit have also dealt with the matter in the
light of French Code. Even if it is assumed that Oubegaranadin
and his sons are governed by the Hindu Succession Act, this Act
has no applicability to the transaction in question. The said Act
governs the succession of the property when a Hindu dies
interstate. The manner in which his properties would devolve on
his successors is laid down in the scheme of the said Act. Here,
the plaintiffs did not claim (nor could they claim) that they became
owner of the property by way of succession as per the provisions
of Hindu Succession Act. On the contrary, they claimed right in
the property on the basis of Partition Deed dated March 15, 1971
which was executed by their father, namely, Oubegaranadin
during his life time.
30) Therefore, the main issue is as to whether such a partition
Civil Appeal No. 3227 of 2017 Page 21 of 23
deed could be executed by Oubegaranadin in respect of the
properties of which he was the absolute owner. It is to be borne
in mind that the properties in question had fallen in the share of
Oubegaranadin on the basis of partition deed dated March 23,
1959 between Oubegaranadin and his brothers. As on that date,
French Code governed the field as per which customary Hindu
Law applies. It is not disputed that Oubegaranadin had become
the absolute owner of the property in question. Therefore, the
moot question is as to whether he could give away portions of
these properties to his sons by entering into a partition deed like
the one he executed on March 15, 1971? Even if French Code is
not applied, the aforesaid question cannot be answered with
reference to the provisions of the Hindu Succession Act. Partition
Deed can be entered into between the parties who are joint
owners of the property. In case the father, namely,
Oubegaranadin herein wanted to give property to his sons, of
which he was absolute owner, it could be done by will or by
means of gift deed/donation etc. The High Court was, therefore,
right in observing that such a partition deed has to be construed
either a gift deed or family settlement. However, the claim of the
plaintiffs was not on that basis. It was not stated anywhere as to
whether necessary formalities, conditions or rules laid down for
Civil Appeal No. 3227 of 2017 Page 22 of 23
donation inter vivos or gift so as to enforce said document were
complied with in the absence of any pleadings, obviously no
evidence was produced to this effect.
31) We, therefore, for our aforesaid reasons, agree with the
conclusions arrived at by the High Court in the impugned
judgment. As a result, this appeal is dismissed.
………………………………………J.
(A.K. SIKRI)
………………………………………J.
(ASHOK BHUSHAN)
NEW DELHI;
JANUARY 18, 2018.
Civil Appeal No. 3227 of 2017 Page 23 of 23

Posted in Uncategorized

Narcotic Drugs and Psychotropic Substances Act (for short “the N.D.P.S. Act”). = in order to satisfy the requirement of Section 55 of N.D.P.S. Act, the case property was accordingly tampered by the police. It is also relevant to mention here that in the prescribed form, the place of seizure was mentioned as Nagwain and not Panarsa Bridge and the name of only one accused i.e. Santosh Kumar was shown from whom the contraband was said to have been seized while he was carrying three gunny bags. As rightly observed by the High Court, it appears that the name of other accused was added afterwards to justify the fact that one person could not have carried three bags of contraband at a time. – It is imperative that the law the Court should follow for awarding conviction under the provisions of N.D.P.S. Act is “stringent the punishment stricter the proof.” In such cases, the prosecution evidence has to be examined very zealously so as to exclude every chance of false implication. But, in the case on hand, under the above explained circumstances, the prosecution story cannot be believed to award conviction to the accused— respondents. They deserve benefit of doubt. – STATE OF HIMACHAL PRADESH Appellant(s) VERSUS TRILOK CHAND & ANR. Respondent(s)

1
REPORTABLE
IN THE SUPREME COURT OF INDIA
CRIMINAL APPELLATE JURISDICTION
Criminal Appeal No(s). 2133-2134/2011
STATE OF HIMACHAL PRADESH Appellant(s)
VERSUS
TRILOK CHAND & ANR. Respondent(s)
JUDGMENT
N.V. RAMANA, J.
1. These appeals are filed by the State having aggrieved by
the judgment and order dated 14th October, 2009 passed by the
High Court of Himachal Pradesh, allowing the Criminal Appeals
filed by the accused—respondents herein against their conviction
passed by the trial Court under the Narcotic Drugs and
Psychotropic Substances Act (for short “the N.D.P.S. Act”). By the
said order, the High Court set aside the order of conviction and
sentence passed by the trial Court against the accused—
respondents herein.
2
2. In order to appreciate the merits of these appeals, brief
facts as emerged from the prosecution case need to be noted at the
outset. On 10th July, 2004, Anjani Kumar, Inspector, CID, Shimla
(PW12), upon receiving a secret information that some people are
pursuing the unlawful business of charas, proceeded towards
Panarsa Bridge along with ASI Gian Chand (PW 9) and Constable
Rakesh Kumar (PW 8) and some other police personnel. Amar
Chand (PW 1) and Kuldeep Kumar (PW 2) who were going on that
route at that time, also joined them as witnesses. At around 11.30
p.m. in the night, the accused—respondents herein arrived at that
place carrying with them three gunny bags of contraband (Charas)
and upon seeing police, they tried to run away. Police overpowered
the accused and seized the contraband from their possession,
prepared samples, sealed and marked them and registered the case.
After investigation, charges were framed against the accused and
upon their denial, the case was committed for trial.
3. The Trial Court convicted the accused for the offence
punishable under Section 20 of the N.D.P.S. Act and sentenced
them to undergo rigorous imprisonment for a period of ten years
and to pay a fine of Rs.1,00,000/- each and in default of payment of
fine, to undergo further imprisonment for two years.
3
4. Aggrieved by the order of conviction and sentence passed
by the trial Court, the accused filed appeals before the High Court
and the High Court after analyzing the evidence allowed their
appeals and set aside the conviction. Dissatisfied with the acquittal
order passed by the High Court, the State is in appeal before us.
5. We have heard learned counsel appearing for the
appellant – State of Himachal Pradesh and the learned counsel
appearing for the respondents as well, and carefully gone through
the material on record.
6. It is submitted before us by the learned counsel for the
State that while dealing with the appeals of the accused, the High
Court has given greater importance to trivial discrepancies in the
prosecution case. Ignoring the cogent evidence advanced by official
witnesses, the High Court simply held that there were material
contradictions in their depositions and without assigning any
plausible reason allowed the appeals of the accused and thereby
committed an error of law.
4
7. Learned counsel appearing for the accused—respondents,
however, supported the view taken by the High Court in acquitting
the accused.
8. Having given our thoughtful consideration to the rival
submissions and after going through the material available on
record, we notice the following discrepancies in the prosecution
case, which in our considered opinion, bear greater importance in
dealing with the case on hand :
(i) The evidence of Tulsi Ram (DW 2) makes it clear that on the
day of incident i.e. 10-7-2004, when he was going to his house
through Panarsa Bridge at about 4/5 p.m., police officials met
him on the way near Panarsa Bridge. They asked him to load
three gunny bags lying outside an abandoned house, into the
vehicle. Accordingly he carried two gunny bags while one bag
was carried by the police officials and loaded them in the
vehicle. He has also deposed that the police officials told him
that the bags contained contraband material ‘charas’ and the
same was recovered from the abandoned house.
5
(ii) PW 1 (Amar Chand) and PW 2 (Kuldip Kumar) who were said
to be the independent witnesses, did not support the case of
prosecution. They clearly stated that they were not present at
the spot when the incident took place and denied the
detaining of accused—respondents in their presence and
alleged recovery of contraband from the accused. In categorical
terms, they deposed that they were called to the police station
and their signatures were taken on some papers. Moreover,
they have admitted that earlier also they were used by the
police as prosecution witnesses in some other cases.
(iii) According to the depositions of police officials PW 9 (Gian
Chand) was sent to shopkeeper Hem Raj (PW5) to borrow scale
and weights on the intervening night of 10th & 11th July, 2004,
and the seized material was sent to malkhana. Contrary to
this, PW 5 (Hem Raj) stated that the scale and weights were
borrowed from him by the police officials in the morning 9 or
10 am on 11th July, 2004. The said PW5 was also declared
hostile. Not only this, according to Anjani Kumar (PW 12),
Gian Chand (PW 9) left the spot to get scale and weights at
11.30 p.m. returned to the spot at 8.15 p.m., ante time.
Whereas another witness Constable Rakesh Kumar (PW 8)
6
deposed that Gian Chand (PW 9) left the spot to bring scale
and weights at 1 a.m.
(iv) According to Anjani Kumar (PW 12), he called Rajinder Kumar
(PW11) on his cell phone and asked to join him at Kullu
whereas the record shows that Rajinder Kumar (PW 11) joined
PW 12 at Panarsa and he has clearly denied to have received
any call from PW 12.
(v) It is the case of the accused—respondents that while they were
taking tea at a Dhaba, police arrived there and taken them to
police station and falsely implicated them in the case. This fact
corroborates with the deposition of Bihari Lal (DW 3), a tea
vendor, who stated that police officials came to his shop and
took away the accused on 11-7-2004.
9. Besides the above noted inadequacies, there are also
certain other contradictory statements by the prosecution witnesses
relating to other aspects of the case, per se, according to Rakesh
Kumar (PW8), he carried the report (Ex.PH) to police station in a
truck, whereas PW-9 (Gaian Chand) states that PW8 travelled by a
scooter and the prime witness Anjani Kumar (PW12) says that PW8
went to police station and returned to the spot by foot.
7
10. One more important discrepancy in the prosecution case
that gives rise to suspicion of truthfulness of police officers is that,
as deposed by Anjani Kumar (PW 12) the entire seized case property
together with six sample parcels was deposited by him with Gandhi
Ram (PW 6). Whereas Dabe Ram, SHO (PW4) says that Anjani
Kumar (PW12) produced three bags and three sample parcels before
him at 8.30 pm. On the other hand, the material on record proves
the same wrong as at the relevant time, PW12 was present at Sadar
Police Station, Mandi and sent special report to Superintendent of
Police (Ext. PW 11/A).
11. It also appears from the record that in order to satisfy the
requirement of Section 55 of N.D.P.S. Act, the case property was
accordingly tampered by the police. It is also relevant to mention
here that in the prescribed form, the place of seizure was mentioned
as Nagwain and not Panarsa Bridge and the name of only one
accused i.e. Santosh Kumar was shown from whom the contraband
was said to have been seized while he was carrying three gunny
bags. As rightly observed by the High Court, it appears that the
name of other accused was added afterwards to justify the fact that
one person could not have carried three bags of contraband at a
time.
8
12. Going by the number of discrepancies in the prosecution
case coupled with the contradictory statements by prosecution
witnesses, the entire prosecution story vitiates and leads for
discrediting its version. Contradictions in the statement of the
witnesses are fatal for the case, though minor discrepancies or
variance in their evidence will not disfavour [See: State of H.P. Vs.
Lekh Raj (2000) 1 SCC 247]. Considering the circumstances of the
case on hand, it can be said that the discrepancies are
comparatively of a major character and go to the root of the
prosecution story. We cannot therefore ignore them to give undue
importance to the prosecution case. It is well settled that the Court
can sift the chaff from the grain and find out the truth from the
testimony of the witnesses. The evidence is to be considered from
the point of view of trustworthiness and once the same stands
satisfied, it ought to inspire confidence in the mind of the Court to
accept the stated evidence [See: Sukhdev Yadav v. State of Bihar,
(2001) 8 SCC 86].
13. In the light of the above discussion, in our considered
opinion, the prosecution has failed to establish the commission of
alleged offence by the accused—respondents beyond reasonable
doubt. The evidence is scanty and lacking support to establish that
9
the contraband was really recovered from the possession of the
respondents in the manner alleged by the prosecution on the said
date and time. It is imperative that the law the Court should follow
for awarding conviction under the provisions of N.D.P.S. Act is
“stringent the punishment stricter the proof.” In such cases, the
prosecution evidence has to be examined very zealously so as to
exclude every chance of false implication. But, in the case on hand,
under the above explained circumstances, the prosecution story
cannot be believed to award conviction to the accused—
respondents. They deserve benefit of doubt. We are, therefore, in
complete agreement with the view taken by the High Court and see
no reason to interfere with the order impugned herein.
14. Accordingly, the Criminal Appeals stand dismissed.
…………………………..J.
(N.V. RAMANA)
………………………….J.
(S. ABDUL NAZEER)
NEW DELHI,
JANUARY 17, 2018.

Posted in Uncategorized

once on comparing the language of Section 69 and that of Section 70 as amended by the first amendment, a conclusion is reached that both Sections are akin to each other till 20.06.2000, a fortiori, the law laid down in Dharappa’s case insofar as it interprets Section 70 as it originally stood and amended by Amendment Act 19/1976 would apply to Section 69 of the KCS 50 Act. On the other hand, the ratio will not apply after 20.06.2000 because from that date, there was a change in the language of Section 70 which provided a clause to exclude the Jurisdiction of other Courts in express terms by Amendment Act of 2/2000.- the Labour Court in this case was competent to decide the service dispute raised by the Employee (appellant herein) under the ID Act. – Smt. K.A. Annamma ….Appellant(s) VERSUS The Secretary, Cochin Co-operative Hospital Society Ltd. …Respondent(s)

1
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL No. 197 OF 2018
(Arising out of S.L.P.(C) No.29765 of 2016)
Smt. K.A. Annamma ….Appellant(s)
VERSUS
The Secretary, Cochin
Co-operative Hospital Society Ltd. …Respondent(s)
J U D G M E N T
Abhay Manohar Sapre, J.
1. Leave granted.
2. This appeal is directed against the final
judgment and order dated 21.12.2015 passed by
the High Court of Kerala at Ernakulam in W.P.(C)
No.18354 of 2010 whereby the High Court allowed
the writ petition filed by the respondent herein and
2
set aside the award dated 23.09.2009 of the Labour
Court, Ernakulam in I.D.No.32 of 2006.
3. In order to appreciate the controversy involved
in the appeal, which is essentially legal in nature,
mentioning of few undisputed facts would suffice.
Facts in brief
4. The respondent is the Cooperative Society
registered under the Kerala Co-operative Societies
Act, 1969 (hereinafter referred to as “the KCS Act”).
The appellant was an employee of the
respondent-Society. By order dated 22.03.2005, the
respondent-Society dismissed the appellant from
service.
5. The appellant, felt aggrieved of her dismissal
order, filed a complaint with the State Government
against the respondent-Society under the Industrial
Dispute Act, 1947 (hereinafter referred to as “the ID
Act”). The conciliation having failed, the appropriate
Government made an industrial reference to the
Labour Court, Ernakulum under Section 10 of the
3
ID Act for deciding the legality and correctness of
the appellant’s dismissal and to pass appropriate
consequential orders, if any.
6. The Labour Court, by award dated 23.09.2009
answered the reference in appellant’s favour. It was
held that the dismissal order is bad in law and was
accordingly set aside. It was held that during the
pendency of the reference, the appellant has
attained the age of superannuation on 31.05.2007,
therefore, she was entitled to get all monetary and
other service benefits as are permissible in law.
7. The respondent, felt aggrieved of the award of
the Labour Court, filed Writ Petition (Civil)
No.18354 of 2010 in the High Court of Kerala and
questioned its legality and correctness.
8. At this stage, it is necessary to state as to how
the question involved in the writ petition, which
eventually reached to this Court was decided by the
different Benches of the Kerala High Court prior to
4
respondent’s filing the writ petition and during its
pendency.
9. The question, which frequently came up for
consideration before the different Benches of the
High Court of Kerala since 1978, was “when a
service dispute arises between an Employee of any
Co-operative Society and his Employer (Co-operative
Society), whether such dispute is triable by the forum
prescribed under the ID Act or under the KCS Act or
under both the Acts as per the choice of an aggrieved
person to select the forum under any of the two Acts
for deciding such service dispute”.
10. In other words, the question was “whether a
service dispute arising between the Cooperative
Society’s Employee and his Employer is capable of
being tried by the forum prescribed under the KCS
Act or by the machinery provided under the ID Act or
it is capable of being tried under both the Acts leaving
the aggrieved person to select one forum under any of
5
the Acts of his choice out of the two for getting his/her
service dispute decided by such forum.”
11. The aforesaid question was first decided by two
Full Benches of the Kerala High Court in K.
Balachandran vs. The Dy. Registrar, Co-operative
Societies & Ors., AIR 1978 Kerala 126 = 1978 KLT
249 and Sherly M.U. vs. The President,
Parappuram Milk Producers Co-op. Society Ltd.
& Ors., 2007(1)KLT 809 wherein it was held on the
facts involved in both the cases that the dispute,
which had arisen between the Co-operative Society’s
Employee and his/her Employer, was not capable of
being decided under Section 69 of the KCS Act as it
stood then.
12. This question again came up for consideration
before a Single Judge of the High Court in Board of
Directors, Edava Service Co-operative Bank vs.
The Co-operative Arbitration Court & Ors.,
2008(3) KLT 780 wherein it was held that a service
dispute between a Co-operative Society’s employee
6
and his/her employer is capable of being tried
under both the Acts inasmuch as both the Acts
enjoy concurrent jurisdiction to try and decide such
service dispute.
13. In other words, according to the Single Judge,
one Act does not exclude the other and, therefore,
both the Acts possess concurrent jurisdiction to
decide such dispute leaving the aggrieved person to
choose the forum of his/her choice under any Act
out of the two Acts.
14. This question was again considered by the
Division Bench in Thodupuzha Taluk General
Marketing Co-operative Society vs. Michael
Sebastian, 2010 (1) KLT 938 wherein the Division
Bench concurred with the view of the Single Judge
taken in Board of Directors, Edava Service
Co-operative Bank (supra). It was accordingly
reiterated.
15. Lastly, this question was considered by
another Single Bench in W.P.(C) No.30854/2007
7
entitled Chirayinkeezhu Service Co-operative
Bank Ltd. No.115 vs. K. Santosh & Anr. and then
by the Division Bench in Writ Appeal
No.2516/2009, arising out of the said writ petition.
While hearing the writ appeal, a doubt was raised
before the Division Bench about the correctness of
the earlier decision rendered in the case of
Thodupuzha Taluk General Marketing
Co-operative Society(supra) contending that the
said decision requires reconsideration for various
reasons.
16. Acceding to this prayer, the case was referred
to the larger Bench to reconsider the law laid down
in Thodupuzha Taluk General Marketing
Co-operative Society(supra). This is how the case
was placed before the larger Bench comprising of
three learned Judges.
17. While the larger Bench was hearing the case, it
was noticed that the earlier two decisions of the Full
Bench also need reconsideration because the Single
8
Judge and the Division Bench, subsequent to the
decisions of the Full Bench, have taken a slightly
different view, which appears to be in conflict with
the two Full Bench decisions, resulting in cleavage
of opinions amongst the various Benches of the
same High Court on one question. It is for this
reason, there arose a need to constitute a larger
Bench comprising of five Judges to examine the
question afresh to settle the controversy.
18. The Bench of three Judges then formulated as
many as 9 questions to enable the Bench of five
Judges to answer the questions referred by the
Three-Judge Bench.
19. By order dated 14.09.2015, the Five-Judge
Bench answered the questions referred in the case
of Chirayinkeezhu Services Cooperative Bank
Ltd. vs. Santosh, 2015(4) KLT 163(LB). However,
there was a difference of opinion amongst the five
Judges (3:2) on the questions referred.
9
20. So far as the majority view of three Judges is
concerned, it held that the service dispute arising
between the Co-operative Society’s Employee and
the Employer (Co-operative Society) is triable only
by the forum prescribed under the KCS Act, 1969
and the jurisdiction of the ID Act is excluded and
barred to try such service dispute.
21. So far as the minority view of two Judges is
concerned, it held that such service dispute is
triable under both the Acts, i.e., the KCS Act and
the ID Act. In other words, it held that both the Acts
possess and enjoy concurrent jurisdiction to decide
such service dispute and it is for the aggrieved
person to choose the forum of his/her choice out of
the two Acts to get the service dispute settled
subject to proving the ingredients of the definition of
“Workman”, “Industrial Dispute” and the
cooperative Society to be the “Industry” as defined
under the ID Act, if he/she desires to invoke the
10
jurisdiction of the ID Act for deciding the service
dispute.
22. Relying upon the majority view, the writ
petition filed by the respondent(employer) in the
case at hand was allowed by the learned Single
Judge, resulting in setting aside of the award of the
Labour Court, giving rise to filing of this appeal by
way of special leave before this Court by the
employee.
23. Heard Mr. P.V. Surendranath, learned senior
counsel for the appellant and Mr. Ramesh Babu,
learned counsel for the respondent.
24. Learned counsel for the appellant (employee)
while assailing the legality, correctness and the
reasoning of the majority Judges (3) contended that
the majority view does not appear to be in
conformity with the law laid down by this Court in
Dharappa vs. Bijapur Coop. Milk Producers
Societies Union Ltd. (2007) 9 SCC 109 whereas
the view taken by the minority Judges (2) appears to
11
be in conformity with the law laid down in the case
of Dharappa(supra) and, therefore, the minority
view, according to learned counsel, deserves to be
upheld by this Court.
25. Placing strong reliance on the ratio laid down
in the case of Dharappa(supra), learned counsel
contended that if the ratio of Dharappa’s case is
applied in its correct perspective to the facts of the
case at hand, the question involved in the appeal
has to be answered in appellant’s favour by
upholding the view of the minority Judges which
rightly held that both the Acts, i.e., the KCS Act and
the ID Act, possess and enjoy concurrent
jurisdiction to decide the service disputes arising
between the Co-operative Society’s Employee and
his/her Employer-Cooperative Society.
26. Learned counsel urged that the award of the
Labour Court impugned in the writ petition by the
respondent, therefore, deserves to be upheld and
the case needs to be remanded to the writ court
12
(Single Judge) for deciding the writ petition on
merits.
27. It is this submission, which the learned
counsel elaborated by placing reliance on the
decision of Dharappa(supra), the relevant provisions
of the KCS Act, 1969 and the Karnataka
Co-operative Societies Act, 1959 (hereinafter
referred to as “Karnataka CS Act”).
28. In reply, learned counsel for the
respondent-Society (Employer) contended that the
view taken by the majority of the Judges (3) being in
accordance with law, it does not call for any
interference.
29. Learned counsel elaborated his submission by
referring to the ratio of Dharappa’s case, relevant
provisions of KCS Act and Karnataka CS Act in
support of his submission.
30. Having heard the learned counsel for the
parties and on perusal of the record of the case, we
13
find force in the submission of learned counsel for
the appellant (Employee).
31. In our considered view, we are inclined to
uphold the minority view for the reasons given infra.
32. At the outset, it is considered necessary to set
out the relevant Sections of the KCS Act, which
have bearing over the controversy:
“Section 2(i)
2(i) “dispute” means any matter touching the
business, constitution, establishments or
management of a society capable of being the
subject of litigation and includes a claim in
respect of any sum payable to or by a society,
whether such claim be admitted or not”.
Un-amended Section 69
“69.Disputes to be referred to Registrar-(1)
Notwithstanding anything contained in any
law for the time being in force, if a dispute
arises(a)
among members, past members and persons
claiming through members, past members
and deceased members; or
(b) between a member, past members or person
claiming through a member, a past member
or deceased member and the society, its
committee or any officer, agent or employee
of the society; or
(c) between the society or its committee and any
past committee, any officer, agent or
employee or any past officer, past agent or
past employee or the nominee, heirs or legal
14
representatives of any deceased officer,
deceased agent or deceased employee of the
society; or
(d) between the society and any other society; or
(e) between a society and the members of a
society affiliated to it; or
(f) between the society and a person other than
a member of the society, who has been
granted a loan by the society or with whom
the society has or had business transactions
or any person claiming through such a
person; or
(g) between the society and a surety of a
member, past member, deceased member or
employee or a person other than a member,
who has been granted a loan by the society
whether such a society is or is not a member
of the society; or
(h) between the society and a creditor of the
society, such dispute, shall be referred to the
Registrar for decision, and no court shall
have jurisdiction to entertain any suit or
other proceeding in respect of such dispute.
Explanation:- In this section and in Section
70, the term “Registrar” means the Registrar
of Co-operative Societies appointed under
sub-section (1) of Section 3 and includes any
person on whom the powers of the Registrar
under this Section and Section 70 are
conferred.
(2) For the purposes of sub-section (1), the
following shall also be deemed to be disputes,
namely:-
(a) a claim by the society for any debt or
demand due to it from a member or the
nominee, heirs or legal representatives of a
deceased member whether such debt or
demand be admitted or not;
15
(b) a claim by a surety against the
principal debtor where the society has
recovered from the surety any amount in
respect of any debt or demand due to it from
the principal debtor as a result of the default
of the principal debtor, whether such debt or
demand is admitted or not;
(c) any dispute arising in connection with
the election of the Board of Management or
any officer of the society;
Explanation:- A dispute arising at any stage
of an election commencing from the
convening of the general body meeting for
the election shall be deemed to be a dispute
arising in connection with the election.
(3) No dispute arising in connection with
the election of the Board of Management or
an officer of the society shall be entertained
by the Registrar unless it is referred to him
within one month from the date of the
election.
(4) If any, question arises whether a
dispute referred to the Registrar under the
section is a dispute as defined in clause (i) of
Section 2 the decision thereon of the
Registrar shall be final.”
Amended Section 69 by Amending Act
1/2000 w.e.f. 02.01.2003
“69. Disputes to be decided by Co-operative
Arbitration Court and Registrar(1)
Notwithstanding anything contained in any
law for the time being in force, if a dispute
arises(a)
Among members, past members and persons
claiming through members, past members
and deceased members; or
(b) Between a member, past member or person
claiming through a member, a past member
or deceased member and the society, its
16
committee or any officer, agent or employee
of the society; or
(c) Between the society or its committee and
any past committee, any officer, agent or
employee or any past officer, past agent or
past employee or the nominee, heirs or legal
representatives of any deceased officer,
deceased agent or deceased employee of the
society; or
(d) Between the society and any other society; or
(e) Between a society and the members of a
society affiliated to it; or
(f) Between the society and a person, other than
a member of the society, who has been
granted a loan by the society or with whom
the society has or had business transactions
or any person claiming through such a
person; or
(g) Between the society and a surety of a
member, past member, deceased member or
employee or a person, other than a member,
who has been granted a loan by the society,
whether such a surety is or is not a member
of the society; or
(h) Between the society and a creditor of the
society, such dispute shall be referred to the
Co-operative Arbitration Court constituted
under Section 70A in the case of
non-monetary disputes and to the Registrar,
in the case of monetary disputes and the
Arbitration Court, or the Registrar, as the
case may be, shall decide such dispute; and
no other Court or other authority shall have
jurisdiction to entertain any suit or other
proceedings in respect of such dispute.
(2) For the purposes of sub-section (1), the
following shall also be deemed to be disputes,
namely:-
(a) a claim by the society for any debt or demand
due to it from a member or the nominee,
heirs or legal representatives of a deceased
17
member, whether such debt or demand be
admitted or not;
(b) a claim by a surety against the principal
debtor, where the society has recovered from
the surety any amount in respect of any debt
or demand due to it from the principal
debtor, as a result of the default of the
principal debtor, whether such debt or
demand is admitted or not;
(c) any dispute arising in connection with the
election of the Board of Management or any
officer of the society;
Explanation- A dispute arising at any stage
of an election commencing from the
convening of the general body meeting for
the election, shall be deemed to be a dispute
arising in connection with the election;
(d) Any dispute arising in connection with
employment of officers and servants of the
different classes of societies specified in
sub-section(1) of S.80, including their
promotion and inter se seniority.
(3) No dispute arising in connection with the
election of the Board of Management or an
officer of the society shall be entertained by
the Co-operative Arbitration Court unless it
is referred to it within one month from the
date of the election.”
Unamended Section 70
70. Decision and award on disputes:-
(1) The Registrar may, on receipt of the
reference of a dispute under Section 69:-
(a) elect to decide the dispute himself; or
(b) transfer it for disposal to any person
who has been invested by the Government
with powers in that behalf; or
(c) refer it for disposal to an arbitrator
appointed by the Registrar.
18
Provided that a transfer under clause (b)
or a reference under clause (c) shall not be
made to a person equal or superior to him in
rank.
(2) The Registrar may withdraw any reference
transferred under clause (b) of sub-section (1)
or referred under clause (c) of that
sub-section and he may elect to decide the
dispute himself or transfer it to any other
person under clause (b) of sub-section (1) or
refer it to any other arbitrator under clause
(c) of that sub-section.
(3) The Registrar or such person shall decide the
dispute, or the arbitrator shall pass an award,
in accordance with the provisions of this Act
and the rules and the bye-laws and such
decision or award shall, subject to the
provisions of S.82, be final. Pending decision
or award, the Registrar, such person or
arbitrator as the case may be, may make such
interlocutory orders as he may deem
necessary in the interest of justice.
(a) the nature of the allegations showing that the
elections were vitiated.
(b) the existence of prima facie case which
means whether respondents have a chance of
success and
(c) whether the interest of justice require that
an interlocutory order must be made.
Amended Section 70 by Amending Act
1/2000
70. Award on disputes:- (1) the Co-operative
Arbitration Court, on receipt of reference of a
dispute under sub-section (1) of Sec. 69, shall
pass an award within one year in accordance
with the provisions of this Act and the rules
and the bye-laws made thereunder and such
award shall, subject to the provisions of Sec.
82, be final.
19
(2) The Co-operative Arbitration Court
may, pending award of a dispute referred to it
under Section 69, make such interlocutory
orders as it may deem necessary in the
interests of justice.
(3) The Co-operative Arbitration Court
shall have the same powers as are vested in a
civil court under the Code of Civil Procedure,
1908 (Central Act 5 of 1908), while trying a
suit in respect of the following matters,
namely:-
(i) the summoning and enforcing the
attendance of any defendant or witness and
examining the witness on oath;
(ii) the discovery and production of any
document or other material object producible
as evidence;
(iii) the reception of evidence on
affidavits;
(iv) issuing of any commission for the
examination of any witness; and
(v) any other matter which may be
prescribed.
(4) The Registrar may, on receipt of the
reference of a dispute under sub-section(1) of
Sec. 69-
(a) elect to decide the dispute himself;
or
(b) transfer it for disposal to any person
who has been invested by the Government
with powers in that behalf; or
(c) refer it for disposal to an arbitrator
appointed by the Registrar:
Provided that a transfer under clause (b)
or a reference under clause (c) shall not be
made to a person equal or superior to him in
rank.
(5) The Registrar may withdraw any
reference transferred under clause (b) of
sub-section (4) or referred under clause (c) of
that sub-section and he may elect to decide
the dispute himself or transfer it to any other
20
person under clause (b) of sub-section (4) or
refer it to any other arbitrator under clause
(c) of that sub-section.
(6) The Registrar or the person
invested with powers in this behalf shall,
decide the dispute or the arbitrator shall pass
an award in accordance with the provisions of
this Act and the rules and the bye-laws and
such decision or award shall, subject to the
provisions of Sec. 82, be final. Pending
decision or award, the Registrar, such person
or the Arbitrator, as the case may be, may
make such interlocutory orders as he may
deem necessary in the interests of justice.
100. Bar of jurisdiction of courts:- No civil or
revenue court shall have any jurisdiction in
respect of any matter for which provision is
made in this Act.”
(Emphasis supplied)
33. Before we examine the question, it is apposite
to take note of the findings of the majority as well as
minority Judges on the question.
34. We find that both majority and minority
Judges examined the questions largely in the light
of the ratio laid down by this Court in Dharappa’s
case (supra). Indeed, the learned counsel, in their
submissions before us, did not make any attempt to
contend that the law laid down in the case of
Dharappa (supra) needs reconsideration on any
issue. On the other hand, both sides proceeded to
21
make their submissions that, firstly, Dharappa’s
case has laid down the correct principle of law on
facts involved therein and secondly, what needs to
be examined is whether its ratio applies to the facts
of this case and, if so, how and to what extent.
35. In our opinion also, it may not be necessary to
examine the issue involved in this case in the light
of any other decision except confining its
examination to the ratio laid down in Dharappa’s
case because Dharappa’s case has discussed all
earlier decisions of this Court on the subject in
extenso.
36. So far as the view of majority (3) Judges, one
concurring with two, is concerned, though they
discussed several issues in detail in their
concurring opinion but in substance, in our view,
their findings on material issues are as under:
37. First, the language of Section 69 of the KCS
Act as it originally stood is materially different from
the language used in its counter part Sections of
22
two earlier repealed Kerala Co-operative Societies
Acts of 1932 and 1951. This departure made in the
language employed in Section 69 of the KCS Act qua
language of earlier two repealed Acts is significant
and has a material bearing while answering the
questions. (Para 17/18)
38. Second, since the KCS Act, 1969 has received
the Assent of the President on 11.04.1969, it was
not necessary for the State to have obtained another
Assent of the President for enacting Amending Act
(1/2000) by which some provisions of the KCS Act,
1969 were amended w.e.f. 02.01.2003.
39. In other words, once the KCS Act of 1969 has
received the Assent of the President, it is not
necessary for the State to obtain another Assent of
the President for passing the Amendment Act
1/2000. It is more so when it has received the
Assent of the Governor (Para 45).
40. Third, on interpreting the relevant provisions
of the KCS Act, whether independently or/and in
23
juxtaposition, it is clear that the KCS Act, 1969 as
originally stood and as amended by Act (1/2000)
overrides any other law for the time being in force
including the ID Act, 1947 insofar as it deals with
the service disputes arising between the
Co-operative Society’s Employee and his/her
Employer.
41. In other words, the KCS Act, 1969 has an
overriding effect on the ID Act 1947 since its
inception insofar as it deals with the service
disputes arising between a Co-operative Society’s
Employee and his/her Employer and thus excludes
the applicability of the ID Act.
42. Any service dispute arising between a
Co-operative Society’s Employee and his/her
Employer (Co-operative Society) is, therefore, triable
only by the authorities and the forum specified
under the KCS Act 1969, whether prior to or after
the amendments made by the Amendment Act No.1
24
of 2000 and not by any authority/Court/Tribunal
under any law for the time being in force.
43. A fortiori, the jurisdiction of the Labour Court
and Industrial Tribunal under the ID Act is,
excluded and barred to decide any such service
dispute.
44. Fourth, the language of Section 69 of the KCS
Act, 1969 as it originally stood including the
amended one and that of Section 70 of the
Karnataka CS Act which fell for interpretation in
Dharappa’s case is not in pari meteria with each
other and not being identical, the ratio of
Dharappa’s case may not apply to that extent while
interpreting Section 69 of the KCS Act.
45. Fifth, the Amendment Act (1 of 2000), which
amended Section 69(2)(d) of the KCS Act, is only by
way of an abundant caution and it has no effect on
Section 69 of the KCS Act.
46. So far as the view of minority Judges (2) is
concerned, in substance, it held:
25
47. First, the question involved in the case is
squarely covered by the ratio laid down in
Dharappa’s case.
48. Second, Section 69 of the KCS Act and Section
70 as it originally stood and as amended by first
Amendment Act (19 of 1976) of the Karnataka CS
Act, are identically worded and, therefore, the ratio
of Dharappa’s case would apply while interpreting
Section 69 of the KCS Act.
49. Third, the Assent of the President was required
for passing the Amendment Act No.1 of 2000 of the
KCS Act.
50. Fourth, since no Assent of the President was
obtained, the Amendment Act (1 of 2000) did not
make any effect on the exclusion of the jurisdiction
of the forum under the ID Act. That apart, Section
69 or Section 100 of the KCS Act also does not have
a clause akin to Section 70 of the Karnataka CS Act
as amended by Amendment Act (2 of 2000)
providing therein a clause for express exclusion of
26
the jurisdiction of the Civil Court, the Labour Court
and the Industrial Tribunal from deciding the
service dispute.
51. Fifth, the jurisdiction of Section 69 under the
KCS Act before and after the amendment of the KCS
Act by Amendment Act (1 of 2000) remains intact.
52. Sixth, the jurisdiction of both the Acts, i.e., the
KCS Act and the ID Act is concurrent.
53. A fortiori, any service dispute arising between a
Co-operative Society’s Employee and his/her
Employer (Co-operative Society) is triable under
both the Acts and it is for the aggrieved person to
select one forum of his/her choice out of the two to
get his/her dispute settled subject to proving that
he/she is a workman, the dispute is an industrial
dispute and the Cooperative Society is an industry
as defined in the ID Act.
54. Seventh, notwithstanding the amendment
brought about in Section 69 of the KCS Act by
Amendment Act (1 of 2000), the jurisdiction of the
27
Labour Court under the ID Act is not excluded and
thus not barred.
55. And lastly, in the light of these findings, all
decided cases taking this view are held correctly
decided and, therefore, do not need any
reconsideration.
56. In our opinion, the fate of this appeal depends
upon the question as to what extent the ratio of
Dharappa’s case applies to the issues involved in
the case at hand.
57. It is, therefore, necessary to first examine the
facts and the ratio of Dharappa’s case.
58. Dharappa was a daily wager working in the
Karnataka Milk Federation Unit Bijapur (hereinafter
referred to as “the Federation”), which is a
Co-operative Society registered under the Karnataka
CS Act. The Federation on 01.03.1980 terminated
Dharappa’s services.
59. Dharappa felt aggrieved of his termination,
filed an application to the Labour Court, Hubli
28
under the ID Act. The application was later
transferred to the Labour Court, Bijapur. According
to Dharappa, his termination order was bad and
illegal inasmuch as the Federation failed to ensure
compliance of mandatory requirements of Section
25-F of the ID Act prior to passing his termination
order. According to Dharappa, he had continuously
worked for more than 240 days in one calendar
year, hence he was entitled to enjoy the protection
available to a workman under the ID Act before
terminating his services.
60. The respondent-Federation denied Dharappa’s
claim. Parties adduced their evidence. The Labour
Court, by award dated 15.10.1996, allowed
Dharappa’s application and set aside the
termination order. The Labour Court held that the
termination order was bad because Dharappa had
worked for more than 240 days continuously in one
calendar year and yet the Federation prior to his
termination did not pay him any retrenchment
29
compensation as provided in the ID Act. The Labour
Court, however, awarded 50% back wages to
Dharappa because it was noticed that he
approached the Labour Court almost after 10 years
from the date of his termination.
61. The Federation, felt aggrieved of the award of
the Labour Court, filed a writ petition in the
Karnataka High Court questioning therein the
legality and correctness of the award. During the
pendency of the writ petition, the Division Bench of
the same High Court in another case (Veerashaiva
Co-op. Bank Ltd. vs. Presiding Officer, Labour
Court, (2001) 3 Kar.LJ 519) held that since the
remedy and the procedure prescribed under the
Karnataka CS Act was comprehensive, the service
disputes arising between a Co-operative Society’s
Employee and his Employer (Co-operative Society)
has to be tried under the Karnataka CS Act and the
jurisdiction of the Labour Court under the ID Act to
decide such disputes is barred.
30
62. The Full Bench of the same High Court in
another case in Karnataka Sugar Workers
Federation vs. State of Karnataka, (AIR 2003 Kar
HCR 1802) later approved this view of the Division
Bench.
63. Relying upon the aforesaid view of the Division
Bench and the Full Bench, the learned Single Judge
allowed the Federation’s writ petition and quashed
the award of the Labour Court. It was held that the
provisions of the ID Act are not applicable to a
service dispute raised by an Employee of a
Co-operative Society against his Employer. A liberty
was granted to Dharappa to take recourse to the
appropriate remedy under the Karnataka CS Act to
challenge his termination order.
64. Dharappa felt aggrieved and filed a writ appeal
before the Division Bench. The Appellate Court
placing reliance on the view of the Full Bench in
Karnataka Sugar Workers Federation’s case
(supra) dismissed the appeal. It was inter alia held
31
that the appropriate remedy of Dharappa lies in
invoking Section 70 of the Karnataka CS Act by
filing a dispute before the specified authority for its
adjudication. It is against this decision, Dharappa
felt aggrieved and filed appeal by special leave in
this Court.
65. Before this Court, Dharappa raised two
points, out of which we are concerned only with one
point, viz., whether jurisdiction of the Labour Court
under the ID Act for deciding the service dispute
arising between a Co-operative Society’s Employee
and his Employer is barred by virtue of Section 70
of the Karnataka CS Act and, if so, from which date.
66. It is this question, which was examined by this
Court extensively in the light of the relevant
provisions including Section 70 of the Karnataka CS
Act as it stood originally and later amended twice
coupled with a question as to what is the effect of
the grant of the Assent of the President given to the
second amendment of Section 70 made in the
32
Karnataka CS Act by Amendment Act (2/2000) and
the previous case law on the subject.
67. It was noticed that the Karnataka CS Act was
enacted by the State of Karnataka after obtaining
the Assent of the President on 11.08.1959. Section
70 of the Act as it originally stood deals with the
disputes arising between the parties named therein
and provides a forum for the adjudication of such
disputes, which also includes service disputes.
68. Section 70 was first amended by the State of
Karnataka by the Amendment Act (19/1976). It
received the Assent of the Governor on 07.03.1976.
The Amending Act came into force on 21.01.1976.
By this Amending Act, two clauses, namely, clauses
(d) and (e) were added to Section 70.
69. Section 70 was then amended second time by
the State in 1997 by Amendment Act (2 of 2000).
This Amending Act, however, received the Assent of
the President on 18.03.2000 and was thereafter
brought in force with effect from 20.06.2000. This
33
Amending Act specifically provided therein for the
first time “no Civil or Labour or Revenue Court or
Industrial Tribunal shall have jurisdiction to entertain
any suit or other proceedings in respect of any
dispute specified in Section 70”.
70. The learned Judge Raveendran, J. speaking for
the two Judge Bench succinctly dealt with the issue
in question in Paras 13, 14, 16 and 17 and held as
under:
“13. The effect of the amendments to
Section 70 of the KCS Act, by Act 2 of
2000 is that if any dispute (including any
dispute relating to the terms of
employment, working conditions and
disciplinary action), arose between a
cooperative society and its employees or
past employees or heirs/legal
representatives of a deceased employee,
on and from 20-6-2000, such dispute had
to be referred to the Registrar for decision
and no civil court or Labour Court or
Industrial Tribunal would have jurisdiction
to entertain any suit or proceeding in
respect of such dispute.
14. Even prior to 20-6-2000, having regard
to the amendment to Section 70 of the
KCS Act by Act 19 of 1976 with effect
from 20-1-1976, any dispute between a
cooperative society and its employees or
past employees or heirs/legal
representatives of a deceased employee
including a dispute regarding the terms of
employment, working conditions and
34
disciplinary action taken by a cooperative
society, was deemed to be a dispute
touching the constitution, management,
or business of a cooperative society which
had to be referred to the Registrar for
adjudication. But prior to 20-6-2000, there
was no express exclusion of the
jurisdiction of the Labour Court and
Industrial Tribunal. As a result, if an
employee of a cooperative society
answered the definition of “workman” and
the dispute between the cooperative
society and its employee fell within the
definition of an “industrial dispute”, then
the employee had the choice of two
alternative forums — either to raise a
dispute before the Registrar under Section
70 of the KCS Act or seek a reference to
the Labour Court/Industrial Tribunal
under Section 10(1)(c) of the ID Act [or
approach the Labour Court by an
application under Section 10(4-A) of the ID
Act].
16. Though the Karnataka Cooperative
Societies Act, 1959 was reserved for the
assent of the President and received his
assent on 11-8-1959, the Amendment Act
19 of 1976 which added Clause (d) to
sub-section (2) of Section 70 (whereby a
dispute between a cooperative society and
its present or past employee(s) in regard to
any disciplinary action or working
conditions was deemed to be a dispute
touching the constitution, management,
or the business of a cooperative society),
was neither reserved for, nor received the
assent of the President. In the absence of
the assent of the President, Clause (d) of
Section 70(2) could not be called in aid to
contend that Section 70(1)(c) of the KCS
Act would prevail over the provisions of
the Industrial Disputes Act. Consequently,
even after the 1976 Amendment to the
KCS Act, the Labour Courts and Industrial
Tribunals functioning under the ID Act
35
continued to have jurisdiction in regard to
disputes between a society and its
workmen if the cooperative society
answered the definition of an “industry”
and the dispute was an “industrial
dispute”. But when sub-section (1) of
Section 70 of the KCS Act was further
amended by Act 2 of 2000 by specifically
excluding the jurisdiction of Labour Courts
and Industrial Tribunals with the
simultaneous addition of the words
“notwithstanding anything contrary
contained in the Industrial Disputes Act,
1947” in Clause (d) of Section 70(2) of the
KCS Act, the said Amendment Act (Act 2
of 2000) was reserved for the assent of the
President and received such assent on
18-3-2000. The amended provisions were
given effect from 20-6-2000. Therefore,
only with effect from 20-6-2000, was the
jurisdiction of Labour Courts and
Industrial Tribunals excluded in regard to
disputes between a cooperative society
and its employees (or past employees)
relating to terms of employment, service
conditions or disciplinary action. It follows
therefore that in the year 1996, the
Labour Court had the jurisdiction to make
an award in regard to such a dispute. The
High Court could not have interfered with
it on the ground that Section 70 of the
KCS Act was a bar to the jurisdiction of
the Labour Court to decide the dispute.
17. The 1976 Amendment to the KCS Act
did not bring about any inconsistency with
the provisions of the ID Act nor did it
purport to prevail over the provisions of
the ID Act. Its effect was merely to provide
an additional or alternative forum for
adjudication of the disputes between
cooperative societies and its employees,
relating to employment, working
conditions and disciplinary action. The
1976 Amendment Act, therefore, was
valid, even in the absence of the assent of
36
the President. On the other hand, the
2000 Amendment specifically excluded the
jurisdiction of Industrial Tribunals and
Labour Courts under the ID Act, and
intended to prevail over the provisions of
the ID Act in regard to adjudication of
disputes. The said Amendment required
the assent of the President and was, in
fact, reserved for the assent of the
President and obtained his assent. If the
1976 Amendment was to be read as
excluding the jurisdiction of the Industrial
Tribunals and Labour Courts, then it was
necessary to read the provisions of Section
70, as amended by the 1976 Act, as
prevailing over the provisions of the ID
Act. In which event, it would have required
the President’s assent, and in the absence
of such assent, the amendment to the
extent it purported to prevail over the
Central enactment, would have been void.
Therefore, the only way to read the 1976
Amendment is to read it in a literal and
normal manner, that is, as not excluding
the jurisdiction of the Industrial Tribunals
and Labour Courts but as merely
conferring a concurrent jurisdiction on the
Registrar under Section 70 of the KCS
Act.”
71. The learned Judge then in concluding Paras 24
and 25 held as under :
“24. The resultant position can be
summarised thus:
(a) Even though Clause (d) was added in
Section 70(2) with effect from 20-1-1976,
Section 70(1) did not exclude or take away
the jurisdiction of the Labour Courts and
Industrial Tribunals under the ID Act to
decide an industrial dispute between the
society and its employees. Consequently,
even after insertion of Clause (d) in
Section 70(2) with effect from 20-1-1976,
37
the Labour Courts and Industrial Tribunals
under the ID Act, continued to have
jurisdiction to decide disputes between
societies and their employees.
(b) The jurisdiction of Labour Courts and
Industrial Tribunals to decide the disputes
between cooperative societies and their
employees was taken away only when
sub-section (1) and sub-section (2)(d) of
Section 70 were amended by Act 2 of 2000
and the amendment received the assent of
the President on 18-3-2000 and was
brought into effect on 20-6-2000.
(c) The jurisdiction to decide any dispute
of the nature mentioned in Section 70(2)
(d) of the KCS Act, if it answered the
definition of industrial dispute, vested
thus:
(i) exclusively with Labour Courts and
Industrial Tribunals till 20-1-1976;
(ii) concurrently with Labour
Courts/Industrial Tribunals under the ID
Act and with Registrar under Section 70 of
the KCS Act between 20-1-1976 and
20-6-2000; and
(iii) exclusively with the Registrar under
Section 70 of the KCS Act with effect from
20-6-2000.
25. We therefore hold that the award of
the Labour Court was not without
jurisdiction. We, however, make it clear
that this decision shall not be applied to
reopen matters decided relying on
Veerashaiva Coop. Bank1 and Karnataka
Sugar Workers Federation2 which have
attained finality.”
38
72. In our considered opinion, the ratio of
Dharappa’s case is that firstly, Section 70 of the
Karnataka CS Act as it originally stood and
amended by first Amendment Act 19 of 1976 adding
therein two clauses (d) and (e) to Section 70,
whether one reads it independently or/and in
juxtaposition with other Sections would find that it
did not provide for express ouster or exclusion of
the jurisdiction of the Labour Court/Industrial
Tribunal under the ID Act.
73. In other words, it did not create any express
bar for the Labour Court/Industrial Tribunal from
deciding the service disputes arising between a
Cooperative Society’s Employee and his/her
Employer (Co-operative Society).
74. Second, any Co-operative Society’s Employee
satisfying the definition of the expression
“Workman”, “Industrial Dispute” and the
Co-operative Society to be an “Industry” as defined
under the ID Act has the choice to select one forum
39
out of the two forums for filing a case in relation to
his service dispute, i.e., either to file a case under
the Karnataka CS Act or to seek an industrial
reference under Section 10 of the ID Act or to file an
application under Section 10(4-A) of the ID Act.(Para
14).
75. Third, both the Acts, namely, Karnataka CS
Act and the ID Act possessed and enjoyed
concurrent jurisdiction over such service disputes
till 20.06.2000.
76. Fourth, consequent upon the second
amendment made by the State of Karnataka in
Section 70 by Amendment Act 2/2000, which
received the Assent of the President on 18.03.2000
and was brought into force on 20.06.2000, the State
legislature, for the first time, provided an express
provision for exclusion of the jurisdiction of the Civil
Court or Labour Court or Industrial Tribunal to
decide any service dispute arising between a
40
Co-operative Society’s Employee and his/her
Employer (Co-operative Society).
77. The effect of introducing such amended
provision was that the provisions of the ID Act were
held no longer applicable for deciding such service
disputes. In other words, jurisdiction of the ID Act
then stood excluded from deciding such service
disputes from 20.06.2000 onwards. A fortiori, only
the authorities specified under the Karnataka CS
Act were held competent and possessed jurisdiction
to try such disputes from 20.06.2000 onwards.
78. Fifth, by way of rule of caution, the question of
such nature should be decided by the Courts
primarily keeping in view the language employed in
the concerned State Act.
79. Sixth, Article 254 of the Constitution is
attracted when there is a repugnancy between any
provision(s) of the State Act such as Karnataka CS
Act and the provision(s) of any existing law enacted
41
by the Parliament on the subject falling in
concurrent list such as the ID Act.
80. The inconsistency should be so irreconcilable
that it must come in direct head on collusion with
any provision of the Central Act in the field thereby
creating a situation that obeying one Act would
result in disobeying the other.
81. Seventh, if such a situation arises in any case,
the State law (Karnataka CS Act) which is reserved
for President’s Assent and on receiving the
President’s Assent, will prevail over the Central law
(ID Act) in that State by virtue of Article 254 (2) of
the Constitution.
82. Now coming to the facts of the case at hand,
when we examine the question in the light of the
ratio of Dharappa’s case, culled out above, on
comparison, we find substantial similarity between
the language of Section 69 of the KCS Act as it
originally stood and later amended by the
Amendment Act 1 of 2000 with that of the language
42
employed in Section 70 of the Karnataka CS Act as
it originally stood along with amended one by first
Amendment Act 19/ 1976.
83. In other words, we notice that the phraseology
and language of both unamended and amended
Section 69 of KCS Act and Section 70 of the
Karnataka CS Act as amended by first amendment
by Act 1/2000 are in pari materia with each other.
84. First, the KCS Act and the Karnataka CS Act
have received the Assent of the President at the time
of their respective enactment.
85. Second, the KCS Act-Amendment Act 1/2000
received the Assent of the Governor so also
Amendment Act 19/76 of Karnataka CS Act
received the Assent of the Governor.
86. Third, Section 69 and Section 70 start with a
non-obstante clause, viz., “Notwithstanding anything
contained in any law for the time being in force, if a
dispute arises …………….”
43
87. Fourth, Section 69 and Section 70 end with
the words “such dispute shall be referred to the
Registrar and no court shall have jurisdiction to
entertain any suit or other proceeding in respect of
such dispute”.
88. Fifth, (the KCS Act and the Karnataka CS Act)
had no provision expressly providing for ouster of
the jurisdiction of Civil Court, Labour Court and the
Industrial Tribunal from deciding service disputes
alike the one introduced by Karnataka State for the
first time in Section 70 by the Amendment Act of 2
of 2000 with effect from 20.06.2000 with the Assent
of the President.
89. This, in our view, indicates that till
20.06.2000, there was similarity between the KCS
Act and Karnataka CS Act. However, after Section
70 was amended by Act No.2/2000 w.e.f.
20.06.2000 providing therein a specific clause
expressly excluding the jurisdiction of the Civil,
Labour and Revenue Court and Industrial Tribunal
44
to decide the service disputes, the scheme of the two
Acts no longer remained similar.
90. Similarly, we find that the identical wording
occurring in the beginning and the end of Section
69 and Section 70 was interpreted in Dharappa’s
case wherein it was held that such provisions
cannot be construed as providing an express
exclusion of the jurisdiction of other Courts
including that of the Labour Court and the
Industrial Tribunal under the ID Act. On the other
hand, it was held that the Karnataka CS Act
possesses concurrent jurisdiction for deciding the
services disputes upto 20.06.2000. (see para 14/16
of Dharappa)
91. This interpretation of Dharappa’s case, in our
view, would squarely apply to the provisions of the
KCS Act if Section 69 is also suitably amended by
the State of Kerala by making Section 69 at par with
amended Section 70 of Karnataka CS Act. As on
date, it is not so.
45
92. Though the KCS Act was amended by
Amendment Act 1 of 2000 (w.e.f. 02.01.2003) but it
did not bring about any kind of inconsistency or
repugnancy in the KCS Act qua any provision of the
ID Act, 1947. Had the KCS Act including the
amending one by Act 1/2000 brought about any
kind of inconsistency or repugnancy between the
provisions of the KCS Act and the ID Act such as
the one brought about by the second Amendment
Act (2/2000) in Section 70 of Karnataka CS Act
w.e.f. 20.06.2000 qua the ID Act and had such
amended provisions of the KCS Act received the
Assent of the President, the provisions of the KCS
Act too would have prevailed over the ID Act in the
State by virtue of Article 254 (2) of the Constitution.
93. Such is not the case here because though the
KCS Act received the Assent of the President at the
time of its enactment so also the Karnataka CS Act
received, this Court while interpreting Section 70 as
amended by Act No.19/1976 of the Karnataka CS
46
Act with the Assent of the Governor, has held in
Dharappa’s case that Section 70 did not create any
inconsistency or/and repugnancy with any
provisions of the ID Act and possessed concurrent
jurisdiction over such service dispute. This ratio of
Dharappa’s case would apply to Section 69 of the
KCS Act because we have held that Section 69 is in
pari materia with Section 70 of the Karnataka CS
Act.
94. That apart, the amending KCS Act (1 of 2000)
having received the Assent of the Governor did not
bring about any inconsistency or repugnancy with
the provisions of the ID Act. In any event, in the
absence of the Assent of the President to the
amending KCS Act 1/2000, even if any
inconsistency or repugnancy exists between the
provisions of the KCS Act and the ID Act, it is the ID
Act which will prevail over the KCS Act by virtue of
Article 254 (1) of the Constitution but not
vice-a-versa.
47
95. The law in relation to Article 254 of the
Constitution and how it is applied in a particular
case is fairly well settled by the series of decisions of
this Court. This Article is attracted in cases where
the law is enacted by the Parliament and the State
Legislature on the same subject, which falls in List
III – Concurrent list.
96. In such a situation arising in any case, if any
inconsistency or/and repugnancy is noticed
between the provisions of the Central and the State
Act, which has resulted in their direct head on
collusion with each other which made it impossible
to reconcile both the provisions to remain in
operation inasmuch as if one provision is obeyed,
the other would be disobeyed, the State Act, if it has
received the Assent of the President will prevail over
the Central Act in the concerned State by virtue of
Article 254 (2) of the Constitution.
97. A fortiori, in such a situation, if the State Act
has received the Assent of the Governor then the
48
Central Act would prevail over the State Act by
virtue of Article 254 (1) of the Constitution.
98. It is this principle, which was applied by this
Court in the case of Dharappa while comparing the
provisions of the Karnataka CS Act including its two
amendments with that of the provisions of the ID
Act.
99. This takes us to examine another question.
The majority Judges, as we find, proceeded to
examine the questions by attempting to compare
the language employed in the relevant Sections of
the two repealed KCS Acts of 1932 and 1951 with
that of the language of Section 69 of the KCS Act
1969 and noticing some departure in the language
employed in Section 69, came to a conclusion that
the language of Section 69 is comprehensive enough
to exclude the jurisdiction of the Labour Court
under the ID Act. The majority Judges also took
note of some more Sections of the KCS Act and
noticing some dis-similarity in the scheme of the
49
KCS Act and Karnataka CS Act held that Section 69
of the KCS Act overrides the provisions of the ID Act
since inception. We find ourselves unable to agree
with the approach of the majority.
100. In our view, when this Court in Dharappa’s
case has interpreted the language of Section 70 of
the Karnataka CS Act, the questions involved herein
should have been examined by comparing the
language employed in Section 69 of the KCS Act
with the language employed in Section 70 of the
Karnataka CS Act rather than to compare with the
repealed provisions.
101. In other words, once on comparing the
language of Section 69 and that of Section 70 as
amended by the first amendment, a conclusion is
reached that both Sections are akin to each other
till 20.06.2000, a fortiori, the law laid down in
Dharappa’s case insofar as it interprets Section 70
as it originally stood and amended by Amendment
Act 19/1976 would apply to Section 69 of the KCS
50
Act. On the other hand, the ratio will not apply after
20.06.2000 because from that date, there was a
change in the language of Section 70 which
provided a clause to exclude the Jurisdiction of
other Courts in express terms by Amendment Act of
2/2000.
102. In the light of foregoing discussion, we are of
the considered opinion that the view of majority
Judges cannot be upheld whereas the view of the
minority Judges deserves to be upheld and is
accordingly upheld.
103. We accordingly hold that the KCS Act and the
ID Act both possess and enjoy the concurrent
jurisdiction to decide any service dispute arising
between the Co-operative Society’s Employee and
his/her Employer (Co-operative Society).
104. We also hold that it is the choice of the
Employee concerned to choose any one forum out of
the two forums available to him/her under the two
Acts (the KCS Act and the I.D. Act) to get his/her
51
service dispute decided. It is, however, subject to
satisfying the test laid down under the ID Act that
the employee concerned is a “workman”, the dispute
raised by him/her is an “industrial dispute” and the
Co-operative Society (Employer) is an “Industry” as
defined under the ID Act.
105. In the light of the aforesaid finding, all those
cases, which have taken contrary view, stand
overruled.
106. As a result of our conclusion, in our view, the
Labour Court in this case was competent to decide
the service dispute raised by the Employee
(appellant herein) under the ID Act. The case is
accordingly remanded to the writ Court to decide
the respondent’s writ petition for examining the
legality and correctness of the award of the Labour
Court on merits in accordance with law.
107. In view of foregoing discussion, the appeal
succeeds and is, accordingly, allowed. The
impugned judgment is set aside.
52

……………………………………..J.
[R.K. AGRAWAL]
…………………………………….J.
[ABHAY MANOHAR SAPRE]
New Delhi;
January 12, 2018

Posted in Uncategorized

admission process for MBBS/BDS and PG courses pursuant to a circular dated 14.11.1995 of the State Government.= Due to the MRC’s choice, one reserved category seat is occupied, and one seat among the choices available to general category candidates remains unoccupied. Consequently, one lesser-ranked reserved category candidate who had choices among the reserved category is affected as he does not get any choice anymore. To remedy the situation i.e. to provide the affected candidate a remedy, the 50th seat which would have been allotted to X – MRC, had he not opted for a seat meant for the reserved category to which he belongs, shall now be filled up by that candidate in the reserved category list who stands to lose out by the choice of the MRC. This leaves the percentage of reservation at 50% undisturbed. We reiterate that, 50% reservation rule should not be breached under any circumstance. – Tripurari Sharan and Anr. ….Appellants Versus Ranjit Kumar Yadav & Ors. ….Respondents

 

1
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. _157 OF 2018
(Arising out of SLP (Civil) No. 7756 of 2017)
Tripurari Sharan and Anr. ….Appellants

Versus
Ranjit Kumar Yadav & Ors. ….Respondents
With
CIVIL APPEAL NO. 158 OF 2018
(Arising out of SLP(C) No.21019 of 2017)
J U D G M E N T
MOHAN M. SHANTANAGOUDAR, J.
Leave granted.
2. Judgment dated 28.10.2016 passed by the High Court of
Judicature at Patna in MJC No. 3680 of 2016 in CWJC No.16673 of
2016 and connected matters is called in question in these appeals. By
the said judgment, the full Bench of the High Court answered the
2
reference made to it by the Division Bench of the Patna High Court in
the matter of validity or otherwise of admission process for MBBS/BDS
and PG courses pursuant to a circular dated 14.11.1995 of the State
Government.
3. Before proceeding further it would be pertinent to note the
relevant circular i.e. circular no. 226(24) dated 14.11.1995 which reads
as under:
“According to this new system, applicable with
immediate effect, candidates of reserved classes, who on
the basis of merit, are entitled to get admission against
50% seats of the general category, having transferred
them in the list of their respective reserved class, they
will be facilitated with admission in college and subject
of their choice on the basis of their merit in at
(respective) list. Thus, after transfer from one to another
list, those candidates of that (respective) reserved class,
who found place in the bottom of the separate list,
prepared for that (respective) class, naturally will come
down and can come out of the seats available in the
ratio of the percentage prescribe for that (respective)
reserved class. To avoid this situation and in any case
to avoid the adverse impact on the number of seats
prescribed for reserved class after transferring
candidates of that class only into that list and so that
candidates in the bottom of the list also could not be
deprived of admission and so that candidates of reserves
class, selected on the basis of merit could not be
deprived of being consolidated in general seats. To
ensure it, this system will be applicable that after above
stated transfer, candidates at the bottom of list of their
respective reserved class, though being at the bottom of
the merit list of this list, shall be absorbed against 50%
3
seats, available for general category and they shall be
allotted colleges and subject available for the general
seats on the basis of choice in the order of merit in that
list. Thus, the list which will be prepared against 50%
seats, available for general category, candidates
transferred by above stated method from the list of
reserved class will be absorbed in that list only and they
will also be facilitated admission.”
As per the aforementioned circular, a Meritorious Reserved
Candidate (MRC) is treated as general merit candidate and is allotted a
seat in the general merit category; such MRC may instead choose to
take up a seat from amongst the seats earmarked for that particular
reserved category to which he belongs to gain admission in the college of
his preference; on doing so, the choice of seat in the general category left
by the MRC will go to a candidate of the reserved category.
4. It was contended before the Patna High Court by the
appellants that the seat which remained unfilled because of
migration/shifting of a MRC to the reserved category should be filled up
by the candidates from the general category list inasmuch as the MRC
virtually shifts himself to the reserved category. Per contra it was
contended by the contesting respondents that such seat should
continue to be filled up by the ousted candidates at the bottom of the
reserved category list, in view of the fact that the MRC continues to be a
4
general category candidate. By the impugned judgment, the Patna High
Court answered the reference in favour of the respondents as under:
“15. In view of the discussions above and what has
been held by Supreme Court in cases of Ramesh Ram
(supra) and Ritesh R. Sah (supra) we arrive at the
following conclusion(s) :-
(i) There is an obvious distinction between qualifying
through a common entrance test for securing admission
to medical courses in various institutions vis-a-vis a
common competitive examination held for filling up
vacancies in various services.
(ii) This distinction arises because all candidates receive, in
a case of common entrance test held for securing
admission in medical institutions, the same benefits of
securing admission in one of the medical institutions, in
a particular course, whereas in the case common
selection process adopted for filling up vacancies in
various services, there are variations, which accrue to
the successful candidates, because the services may
differ in terms of status and conditions of service
including pay scale, promotional avenues, etc.
Consequence of migration of an MRC to the concerned
reserved category shall be, therefore, different in case of
the admission to various medical institutions vis-a-vis
selection to various posts.
(iii) In case of admission to medical institutions, an MRC
can have in, for the purpose of allotment of institutions,
of his choice, the option of taking admission in a college,
where a seat in his category is reserved. Though
admitted against a reserved seat, for the purpose of
computation of percentage of reservation, he will be
deemed to have admitted as an open category candidate,
rather he remains an MRC. He cannot be treated to
5
have occupied a seat reserved for the category of
reservation he belongs to. Resultantly, this movement
will not lead to ouster of the reserved candidate at the
bottom on the list of that reserved category. While
his/her selection as reserved category candidate shall
remain intact, he/she will have to adjusted against
remaining seats, because of movement of an MRC
against reserved seats, only for the purpose of allotment
of seats.
(iv) In the case of filling up of posts based on common
competitive selection process in different services,
situation will be entirely different, when an MRC opts to
move to the reserved category, which he belongs to, for
getting a service/post of his choice. In such a situation,
the candidate, at the bottom of list of the concerned
category, will have to move out and the slot, in the
general merit list, will stand vacated, because of
migration of the MRC will have to be filled up from
general merit list. Otherwise, if the open seats are
allowed to be filled up by candidates of reserved
categories, it will result into extending the benefit of
reservation beyond fifty percent, which is
constitutionally impermissible.
16. The reference is answered accordingly.”
While deciding the reference as mentioned supra, the full
Bench of the Patna High Court has distinguished between two sets of
cases viz. (a) case of securing admission to medical courses in various
institutions through a common entrance test; and (b) case of filling up of
vacancies in various civil services through common competitive
examination.
6
5. In the matter on hand, we are concerned with securing
admission to medical courses through a common entrance test and the
procedure to be followed in case of a MRC and allotment of seat in
college.
6. It was submitted by Shri Shekhar Naphade and Shri
Subramonium Prasad, learned Senior Counsel, on behalf of the
appellants, that the reservation cap in admissions to medical colleges
cannot exceed 50% in any case. They argued that a MRC migrates to
the reserved category when he chooses a seat earmarked for the
reserved category. Resultantly, the seat vacated by MRC being a general
category seat must necessarily be filled up by general category
candidates.
For the respondents, Shri Prashant Bhushan, learned
Counsel, supporting the decision of the Patna High Court argued that
the MRC continues to be part of the general category even after opting
for a seat in the reserved category. He contended that the reserved
category candidate who is affected by the choice of the MRC must be
given a choice of seats in the general category. Ms. Meenakshi Arora,
learned Senior Counsel, submitted that by the process adopted, the 50%
reservation is not breached.
7
7. Often, in a competitive examination held for the purpose of
admission in technical and medical institutions etc. some candidates
belonging to reserved category/categories, qualify for the higher ranking
on the basis of their own merit and depending on their performance in
the common entrance test, are placed in the general merit list. Such
class of candidates belonging to reserved categories who qualify on their
own merit, to be placed in general merit list, are described, for the
purpose of convenience, as Meritorious Reserved Candidate (MRC). It is
by now well settled that a MRC who goes on to occupy a general
category seat is not counted against the quota reserved for a reserved
category candidates, but is treated as an open competition candidate or
general merit candidate. This Court in the case of Indra Sawnhey v.
Union of India, 1992 Supp (3) SCC 217 has observed thus:
“In this connection it is well to remember that the
reservations under Article 16 (4) do not operate like a
communal reservation. It may well happen that some
members belonging to, say, Scheduled Castes get selected
in the open competition field on the basis of their own
merit; they will not be counted against the quota reserved
for Scheduled Castes; they will be treated as open
competition candidates” (emphasis
supplied)
8
Even in service matters, the same principle is made applicable. The
aforementioned principle of Indra Sawnhey (supra) is followed for
admissions to seats in medical colleges, and the same was followed in
the case of R.K. Sabharwal v. State of Punjab, (1995) 2 SCC 745.
However, the issue before us is more nuanced – whether MRC can opt
for a seat earmarked for reserved category? “If answer is yes” then since
MRC exercises the option of admission to the seats in different colleges
earmarked for reserved category candidates, should a less meritorious
reserved category candidate who is affected by such process be given
admission to the college left over by MRC consequently?
This would be better understood by a simplified example. Let
it be assumed that there are 100 seats available through one common
entrance examination to PG courses in various medical colleges across
the country. Of these, 50 are general category seats and the remaining
50 are reserved category seats. X, a reserved category candidate, is
assigned rank number 50 on account of his performance in the entrance
examination. Thus he is just above the cut-off for reserved category
candidates, and has got an open merit rank. Hence, X is a MRC;
however, X being in general category is not willing to accept the seat
available for general category at the time of his counselling. He wants
9
admission in another college of his preference which is incidentally
reserved for reserved category candidates, and a seat in the same is
available in the reserved category. Consequently, X chooses a seat
available in the college meant for reserved category candidate based on
his merit among the reserved category candidates. As he does so, one
seat in the general category list of 50 candidates remains unoccupied. In
that context, two questions arise for consideration:
i. Whether X – MRC can opt for a seat earmarked for reserved
category?
ii. If answer is yes; what happens to the 50th seat which was to be
allotted to X – MRC (i.e. 50th general merit candidate) had he opted
for a seat meant for the reserved category to which he belongs?
8. This court has repeatedly including the judgment in the case
of Indra Sawhney (supra), has concluded that the aggregate reservation
should not exceed 50%. Therefore, even when a MRC opts for a seat
reserved for reserved category candidates, caution has to be exercised to
maintain the reservation to 50%. So also it is not open for the
authorities to deny a MRC a seat in the college of his preference based
on his merit, if such seat is available at the relevant point of time and
the same is reserved for candidates of the reserved category to which the
10
MRC belongs. This is because there may be instances where a MRC
may not get a seat in the institution of his choice on the basis of his own
merit in the general merit. Under such circumstances, he may opt to be
treated notionally as a candidate belonging to the reserved category only
for the purpose of getting a seat in the college reserved for reserved
category students. If such MRC is to be placed in the reserved merit list
of his category, he would be ranking high and may get better choice of
institution or course. A MRC cannot be placed in a disadvantageous
position by not permitting him to be treated as reserved candidate, as
that would amount to making him suffer for his better performance in
the competitive examination.
In the case of Shri Ritesh R. Sah v. Dr. Y.L. Yamul, (1996)
3 SCC 253, this Court has had an occasion to deal with both the above
questions. This Court held that a MRC who has opted for a seat in the
college reserved for reserved category will not migrate/shift to reserved
category but should be treated as part of the general category only.
However, only for the purpose of getting better choice of seat in the
college, he may opt to take a seat in the college reserved for the reserved
category. This Court observed thus:
11
“17…In view of the legal position enunciated by this
Court in the aforesaid cases the conclusion is irresistible
that a student who is entitled to be admitted on the
basis of merit though belonging to a reserved category
cannot be considered to be admitted against seats
reserved for reserved category. But at the same time the
provisions should be so made that it will not work out to
the disadvantage of such candidate and he may not be
placed at a more disadvantageous position than the
other less meritorious reserved category candidates. The
aforesaid objective can be achieved if after finding out
the candidates from amongst the reserved category who
would otherwise come in the open merit list and then
asking their option for admission into the different
colleges which have been kept reserved for reserved
category and thereafter the cases of less meritorious
reserved category candidates should be considered and
they will be allotted seats in whichever colleges the seats
should be available. In other words, while a reserved
category candidate entitled to admission on the basis of
his merit will have the option of taking admission to the
colleges where a specified number of seats have been
kept reserved for reserved category but while computing
the percentage of reservation he will be deemed to have
been admitted as a open category candidate and not as
a reserved category candidate.”
Right from the year 1996, the law is well settled that the provisions
should be so made that they will not work out to the disadvantage of a
MRC and he would not be placed at a more disadvantageous position
than the less meritorious reserved category candidates. Aforementioned
objective can be achieved if, after finding out the candidates from
amongst the reserved category who would otherwise come in the open
12
merit list and then asking their option for admission into the different
colleges which have been kept reserved for reserved category, the cases
of less meritorious reserved category candidates are considered.
In other words, the reserved category candidate is entitled to
admission on the basis of his merit, and he will have the option of
taking admission to the colleges where a specified number of seats are
kept reserved for the reserved category. However, while computing the
percentage of reservation, he will be deemed to have been admitted as
an open category candidate and not as a reserved category candidate.
9. Shri Shekhar Naphade and Shri Subramonium Prasad,
learned Senior Counsel on behalf of the appellants, relying upon the
Constitution Bench judgment in the case of Union of India v. Ramesh
Ram and Others, (2010) 7 SCC 234, contended that a seat left over in
the general category by a MRC because of his option of a seat in the
reserved category, should be filled up by a general merit candidate and
not by a reserved category candidate. They relied upon paragraph 39 of
the said judgment, which reads as follows:
“39. A significant aspect which needs to be discussed is
that the aggregate reservation should not exceed 50% of
all the available vacancies, in accordance with the
decision of this Court in Indra Sawhney v. Union of
13
India, (1992) Supp 3 SCC 217. If the MRC candidates
are adjusted against the Reserved Category vacancies
with respect to their higher preferences and the seats
vacated by them in the General Category are further
allotted to other Reserved Category candidates, the
aggregate reservation could possibly exceed 50 % of all
of the available posts.”
Before commenting on the judgment of the Constitution
Bench in Ramesh Ram (supra), it would be beneficial if the facts and
contexts referred thereto are looked into.
In the said matter, the Constitutional validity of Sub-Rules (2)
to (5) of Rule 16 of the Civil Services Examination Rules, for the civil
services examinations from 2005 to 2007, was involved. Rule 16(2) was
as follows,
“16(2) While making service allocation, the candidates
belonging to the Scheduled Castes, the Scheduled Tribes
or Other Backward Classes recommended against
unreserved vacancies may be adjusted against reserved
vacancies by the Govt. if by this process they get a
service of higher choice in the order of their preference.”
This Court, after examining the rival contentions on record, held that a
MRC opting for a reserved category seat should be treated as a reserved
category candidate, which means that he is deemed to have
migrated/shifted from the general category to the reserved category to
14
which he belongs once and for all, and that the vacant general category
seat left by a MRC should be filled by a general category candidate. It
arrived at the following findings:
“50. We sum up our answers-:
i) MRC candidates who avail the benefit of Rule 16 (2)
and adjusted in the reserved category should be counted
as part of the reserved pool for the purpose of
computing the aggregate reservation quotas. The seats
vacated by MRC candidates in the General Pool will be
offered to General category candidates.
ii) By operation of Rule 16 (2), the reserved status of an
MRC candidate is protected so that his/ her better
performance does not deny him of the chance to be
allotted to a more preferred service.
iii) The amended Rule 16 (2) only seeks to recognize the
inter se merit between two classes of candidates i.e. a)
meritorious reserved category candidates b) relatively
lower ranked reserved category candidates, for the
purpose of allocation to the various Civil Services with
due regard for the preferences indicated by them.
iv) The reserved category candidates “belonging to OBC,
SC/ ST categories” who are selected on merit and placed
in the list of General/Unreserved category candidates
can choose to migrate to the respective reserved
category at the time of allocation of services. Such
migration as envisaged by Rule 16 (2) is not inconsistent
with Rule 16 (1) or Articles 14, 16 (4) and 335 of the
Constitution.”
In Ramesh Ram (supra), this Court has seemingly and
intrinsically arrived at a diametrically opposite decision from Ritesh R.
15
Sah (supra). Indeed, the aggregate reservation should not exceed 50%
of the available vacancies. While we are undoubtedly bound by Ramesh
Ram (supra), the very judgment justified why it is so different from
Ritesh R. Sah (supra). It categorically held that there is a distinction
between selection and admission of PG candidates as in Ritesh R. Sah
(supra), and selection and appointment of UPSC candidates as in
Ramesh Ram (supra). While in postgraduate admissions, the results
will grant all the candidates the same benefit irrespective of rank (i.e.,
admission in medical colleges), the results in UPSC selections give
varying benefits to varying rank-holders, as the allocation of services is
based on rank. This Court thus held that in case of UPSC selections, the
general category seat vacated by a MRC to occupy a reserved category
seat, must be filled up by candidates from the general category. It also
held that such MRC should be counted in the reserved category (and not
in the general category, as Ritesh R.Sah (supra) did) in order to prevent
the reservation cap from exceeding 50%. It would be beneficial to look
into Paragraphs 31, 32, 66 and 67 of Ramesh Ram (supra) for the
purpose of distinguishing the said matter from the matter on hand and
they read as follows:
16
“31. The respondents have also placed strong reliance
on this Court’s decision in Ritesh R. Sah v.
Dr.Y.L.Yamul (1996) 3 SCC 253). The question in that
case was whether a Reserved Category candidate who is
entitled to be selected for admission in open competition
on the basis of his/her own merit should be counted
against the quota meant for the Reserved Category or
should he be treated as a general candidate. The Court
reached the conclusion that when a candidate is
admitted to an educational institution on his own merit,
then such admission is not to be counted against the
quota reserved for Scheduled Castes or any other
Reserved Category. However, it is pertinent to note that
this decision was given in the context of admissions to
medical colleges …”
“32. There is an obvious distinction between qualifying
through an entrance test for securing admission in a
medical college and qualifying in the UPSC
examinations since the latter examination is conducted
for filling up vacancies in the various civil services. In
the former case, all the successful candidates receive
the same benefit of securing admission in an
educational institution. However, in the latter case there
are variations in the benefits that accrue to successful
candidates because they are also competing amongst
themselves to secure the service of their choice. For
example, most candidates opt for at least one of the first
three services [i.e. Indian Administrative Service (IAS),
Indian Foreign Service (IFS) and Indian Police Service
(IPS)] when they are asked for preferences. A majority of
the candidates prefer IAS as the first option. In this
respect, a Reserved Category candidate who has
qualified as part of the general list should not be
disadvantaged by being assigned to a lower service
against the vacancies in the General Category especially
because if he had availed the benefit of his Reserved
Category status, he would have got a service of a higher
preference. With the obvious intention of preventing
such an anomaly, Rule 16 (2) provides that an MRC
17
candidate is at liberty to choose between the general
quota or the respective Reserved Category quota.”
“66. The decision in Anurag Patel in turn referred to the
earlier decision in Ritesh R. Sah v. Dr. Y.L. Yamul.
However, we have already distinguished the judgment in
Ritesh R. Sah. That decision was given in relation to
reservation for admission to post graduate medical
courses and the same cannot be readily applied in the
present circumstances where we are dealing with the
examinations conducted by UPSC. The ultimate aim of
civil services aspirants is to qualify for the most coveted
services and each of the services have quotas for
reserved classes, the benefits of which are availed by
MRC candidates for preferred service. As highlighted
earlier, the benefit accrued by different candidates who
secure admission in a particular educational institution
is of a homogeneous nature. However, the benefits
accruing from successfully qualifying in UPSC
examination are of a varying nature since some services
are coveted more than others.
67. The order of CAT is valid to the extent that it relied
on the ratio propounded by this Court in Anurag Patel v.
U.P. Public Service Commission. Even though that
decision had in turn relied on the verdict of this Court in
Ritesh R. Sah v. Dr. T.L. Yamul, the latter case is
distinguishable from the present case with respect to
the facts in issue. However, we cannot approve of the
conclusions arrived at in the Central Administrative
Tribunal order as it failed to take note of the unique
characteristics of UPSC examinations.”
(Emphasis supplied)
Hence it is amply clear that, the Constitution Bench makes a
distinction between two types of selections, i.e., selection to medical
colleges through a common entrance test, and selection to posts in
services through the UPSC examination.
18
It is also pertinent to note that the Constitution Bench has
virtually but impliedly approved Ritesh R. Sah (supra) insofar as the
procedure to be adopted in cases of admissions to medical colleges
through a common competitive examination is concerned. In view of the
above, the principles laid down in Ramesh Ram (supra) may not be
applicable to the facts of this case, inasmuch as this is a case pertaining
to admission in medical colleges and whereas Ramesh Ram (supra)
pertains to selections to the posts for services through the UPSC
examination.
This Court, in the case of Alok Kumar Pandit v. State of
Assam & Ors. 2012 (13) SCC 516, has reiterated that the dictum laid
down in Ramesh Ram (supra) is applicable only to admission to various
services in the UPSC.
10. Ritesh R. Sah (supra) was subsequently followed in Samta
Aandolan Samiti v. Union of India, (2014) 14 SCC 745 wherein this
Court observed thus:
“22. No doubt, while doing so, the Court in Ramesh Ram
case was of the opinion that such meritorious reserved
candidates (MRC) who avail the benefit of Rule 16(2) of
the Civil Services Examination Rules (which permitted
such inter-se transfer) and are eventually adjustment in
the reserved category, they should be counted part of
reserved category for the purpose of computing
19
aggregate reservation quota. However, it was
categorically stated that this proposition applies when
there is an appointment to a service under the State and
categorically excluded the cases of admission in
educational institutions. In so far as admission in
educational institutions is concerned, such a MRC was
to continue to be treated as belonging to general
category, which position he attained because of his
initial merit. The Court noted that this was so held in
Ritesh R. Sah v. Dr. Y.L. Yamul (1996) 3 SCC 253.”
… … …
“24. Since, we are concerned with the admission to
medical course, aforesaid judgment squarely applies to
the present case. Thus we find that neither upper limit
of 50% reservation is breached, nor any rights of the
Petitioners are violative or the action of the Respondents
have been to their prejudice in any manner. Thus, we do
not find any merit in the present petition, which is
accordingly dismissed. No costs.”
(Emphasis supplied).
11. Shri Naphade and Shri Prasad also sought to rely upon the
decision of a Coordinate bench of this Court in State of Bihar v. M.
Neethi Chandra, (1996) 6 SCC 36, wherein this Court observed as
follows:
“10. Let us take a situation in which in a particular
reserved category there are x number of seats but the
candidates qualifying according to criteria fixed for that
category are X+5 with the best among them also
qualifying on merit as general candidates. According to
the arrangement made by circular No. 20, the first
candidate gets a choice along with the general category
candidate but being not high enough in the list, gets a
20
choice lesser than what he could secure in the reserved
category to which he was entitled. The x number of
seats could then be filled up with the four qualifying
candidate being denied admission for want of seats. This
would have been harsh for the best candidate as well as
violative of Articles 14 and 16 of the Constitution. On
the other hand, if the direction of the High Court is
followed, the first x number of candidates get seats
according to merit against the reserved seats but the
remaining 5 will also have to be ‘adjusted’ against the
open seats of regular candidates. These 5 will be those
who are not qualified according to the general merit
criteria and so will necessarily displace 5 general
candidates who would be entitled to seats on merit.”
… … …
“12. In a particular year, the number of such candidates
may be much larger and thus the method evolved by the
High Court may create much hardship. The method will
also not be in tune with the principles of equality. Hence
the method evolved by the High Court will have to be
struck down.
13. At the same time, as pointed out above, all is not
well with the Government circular No. 20 as it operates
against the very candidates for whom the protective
discrimination is devised. The intention of the circular
No. 20 is to give full benefit of reservation to the
candidates of the reserved categories. However, to the
extent the meritorious among them are denied the
choice college and subject which they could secure
under the rule of reservation, the circular cannot be
sustained. The circular, therefore, can be given effect
only if the reserved category candidate qualifying on
merit with general candidates consents to being
considered as a general candidate on merit-cum-choice
basis for allotment of college/institution and subject.”
(emphasis supplied)
21
M. Neethi Chandra (supra) was upheld by a three-Judge
bench of this Court in Dr. Anil Kumar v. State of Bihar, (1998) 9 SCC
405, but to the extent that it held that a MRC should not be forced to
choose seat from the general category. However, it needs to be
mentioned that M. Neethi Chandra (supra) may not be applicable to the
facts of this case. In the case of M. Neethi Chandra (supra), this Court
was concerned with a different circular altogether, i.e., Circular No.
11/K1 -1022/91-K20 (“Circular No. 20”), issued by the Government of
Bihar, Department of Personnel and Administrative Reforms on
07.02.1992 on the subject of “provision for reservation for nominating
(admission) of Scheduled Caste/Tribes/Backward class/Extremely
Backward Class/Female into the Professional Training Institutes.” That
circular was challenged on the basis that MRCs were not allowed to
choose the seats kept reserved for the reserved category. Paragraph 6 of
that circular reads as follows:
“6. As there is provision in direct appointment to the
effect that the candidates belonging to reserved classes,
who are selected on the basis of merit, would not be
adjusted against reserved seats, similarly maintaining
the same arrangement here also the candidates selected
on the basis of merit for admission into professional
training institutes would not be adjusted against the
reserved quota for the candidates of reserved classes.”
22
The judgment of the High Court that was set aside by this
Court in M. Neethi Chandra (supra) had devised a completely different
way of conducting PG admissions, which was not at all akin to the
present case. The High Court in the said matter has sought to fill up
reserved category posts first and adjust any reserved category
candidates not allotted a seat in the general category. This Court in M.
Neethi Chandra (supra) summarized the method of allotment of seats
adopted by the High Court thus,
“To remove the anomalies, the High Court devised a
method of allotment of seats by which the reserved seats
are offered first (i.e. before the general seats are filled) to
the candidates of the reserved category on merit, and
after all the reserved seats are so filled up, all other
qualifying candidates of the reserved category are
“adjusted” against open seats in the general category
along with the general merit candidates and offered
seats on merit-cum- choice basis (see para 11 of the
judgment).”
12. In the matter on hand, it is not the case that any other
candidate of the reserved category, other than the candidate taking up
the MRC’s general category place in choosing general category seat, will
be adjusted. Moreover this issue is not under challenge in the present
case, as both sides are admittedly not contesting the right of a MRC to
23
choose a seat earmarked for the reserved category. On the other hand,
it is fairly submitted by Shri Naphade and Shri Prasad that a MRC has
got a right to choose a seat earmarked for reserved category/categories.
However, they are only worried that the aggregate reservation should not
exceed 50%.
It follows from the cases cited above that the 50% reservation
rule should not be breached under any circumstances. As mentioned
supra, a MRC in medical admissions has more marks than the last
general merit candidate, hence he shall be treated as a general category
candidate. Only a choice of college seats in the reserved category is open
to him. In this manner, the number of seats in each category remains
constant and the upper limit of 50% reservation is not breached.
13. It is clear from Ritesh R. Sah (supra), that in the case of
admission to postgraduate medical institutions, a MRC who chooses to
avail of the option of admission to a college with seats kept for the
reserved category is deemed to have been admitted as an open category
candidate. He continues to be open category candidate. There is no
migration into the reserved category even if a MRC opts for a seat
earmarked for reserved category candidates. The lowest-ranking
24
candidates who qualified in the reserved category, cannot hence have
option for colleges/seats in reserved category on account of the MRC’s
choice, may be adjusted against the choices of college seats then
available in the general category left over by MRC. However such
reserved category candidates continue in reserved category, except for
such option. Thus, by treating a MRC as a general category candidate,
the number of reserved seats remains the same, and reservations do not
exceed 50%. This is also consistent with the principles of equity. In view
of the above, we could not find any reason to disagree with the
conclusions reached by the full Bench of the High Court.
14. In light of the cases discussed hereinabove, both questions
are answered as follows:
i) A MRC can opt for a seat earmarked for the reserved category,
so as to not disadvantage him against less meritorious reserved
category candidates. Such MRC shall be treated as part of the
general category only.
ii) Due to the MRC’s choice, one reserved category seat is
occupied, and one seat among the choices available to general
category candidates remains unoccupied. Consequently, one
25
lesser-ranked reserved category candidate who had choices
among the reserved category is affected as he does not get any
choice anymore.
To remedy the situation i.e. to provide the affected candidate a
remedy, the 50th seat which would have been allotted to X –
MRC, had he not opted for a seat meant for the reserved
category to which he belongs, shall now be filled up by that
candidate in the reserved category list who stands to lose out by
the choice of the MRC.
This leaves the percentage of reservation at 50% undisturbed.
15. We reiterate that, 50% reservation rule should not be
breached under any circumstance.
16. The High Court has succinctly dealt with the issue as well as
the case law on the point. It has rightly held that Ritesh R. Sah (supra)
governs admissions in medical institutions. We see no reason to
interfere.
26
17. Appeals are accordingly dismissed. No order as to costs.
………………………………………….J.
(ARUN MISHRA)
………………………………………….J.
(MOHAN M. SHANTANAGOUDAR)
New Delhi;
January 11, 2018

Posted in Uncategorized

I.C. Sharma …. Appellant(s) Versus The Oriental Insurance Co. Ltd. … Respondent(s) = a householder insurance policy – a burglary took place = The claim should not have been rejected only on the ground that invoices were not produced. = It is not the case of the Insurance Company that these items were not stolen. The claim should not have been rejected only on the ground that invoices were not produced. The affidavit of the appellant clearly indicates both the nature of the items lost and the value thereof. This is supported by corroborative evidence of the list of items given to the police. Once the insurance company itself changed its policy from ‘as per list policies’ to ‘policies for consolidated amounts’, then an insured is not expected to give the item-wise details along with the valuation. We may also add that if the insurance company desires that item-wise valuation should be given for items over and above a certain value then it is the duty of the insurance company to advise the insured at the time of issuing the first policy of insurance and at the time of each renewal. The 12 insurance company must at the time of accepting the premium advise the policy holder properly. The insurance company cannot accept the premium without asking for any details and later deny its liability on the ground that such details were not given.

1
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 3167 OF 2017
I.C. Sharma …. Appellant(s)
Versus
The Oriental Insurance Co. Ltd. … Respondent(s)
J U D G M E N T
Deepak Gupta J.
1. This appeal filed by the complainant/consumer is directed
against the order dated 29.09.2014 passed by the National
Consumer Disputes Redressal Commission (for short ‘the National
Commission’), New Delhi, disposing of the revision petition filed by
the parties and also against the order dated 22.02.2016 disposing
of the review petition filed by the appellant.
2. Briefly stated the facts of the case are that the appellant had
first purchased a householder insurance policy from the Oriental
2
Insurance Company (‘the Insurance Company’ for short) on
23.12.2000. This policy was renewed till 22.12.2005. As per this
policy the coverage of articles/items in the house of the appellant
was “as per list”. It is not disputed that thereafter the Insurance
Company discontinued “as per list” policies and instead started
issuing policies for consolidated amounts. The original policy had
expired on 22.12.2005 and fresh policy as per new scheme was
taken out on 19.01.2006 and this was renewed from time to time.
The last renewal was from 19.01.2007 to 18.01.2008.
3. The appellant had gone to the United Kingdom. Some time,
between 27.01.2008 to 30.01.2008, a burglary took place inside the
premises of the appellant, and he was informed about the same by
a neighbor on 31.01.2008. The appellant requested his nephew to
inform the Insurance Company and an FIR was also registered with
the Mehrauli Police Station in South Delhi. The Insurance
Company was also informed about the burglary on 31.01.2008 or
on the next day. The police could not trace out the crime.
3
4. The Insurance Company first offered a sum of Rs. 3,500/- to
the appellant sometime in November, 2008 which he refused to
accept. He, thereafter, met certain higher officials of the Insurance
Company and an amount of Rs.29,920/- was offered to him. Being
dissatisfied, the appellant filed a claim before the District Consumer
Disputes Redressal Forum (for short ‘the District Forum’), which
was disposed of by the District Forum on the ground that the
articles mentioned therein were not mentioned in the list.
Thereafter, the appellant filed an appeal before the State Consumer
Disputes Redressal Commission (for short ‘the State Commission’)
which was allowed on 15.01.2014 and he was awarded a sum of
Rs.4,03,150/-.
5. Revision petitions were filed both by the appellant claiming
interest and compensation and by the Insurance Company against
the order of the State Commission. The main ground in the petition
filed by the Insurance Company was that a large number of items
which had been claimed to be stolen were not insured and there
was a lot of under-insurance. The National Commission held that
once the appellant had supplied a list of articles for the first policy,
4
if there was any change he should have filed a fresh list and since a
large number of articles were not mentioned in the list the claimant
was only entitled to an amount of Rs.21,000/- towards the value of
stolen gold articles; Rs.5,929/- towards the depreciated
value of Citizen watch; Rs.7,000/- for repair of door latches etc.;
and Rs.16,000/- towards the value of stolen clothes after making
appropriate deduction for under-insurance of clothing. The
complainant was also awarded compensation of Rs.5,000/- towards
the cost of litigation etc. The appellant filed an SLP before this
Court and he was granted liberty to file a review petition before the
National Commission mainly on the ground that the policy of
2008-2009 was not considered by the National Commission.
6. The National Commission in the review petition took into
consideration the fact that the new insurance policy did not require
a list of items to be given. It, thereafter, awarded amounts under
various heads as follows:-
i) Jewellery and valuables – Claimant claimed that the
jewellery lost was worth Rs.1,84,150/- but the insurance package
was only for Rs.1,00,500/-. The National Commission ordered the
5
Insurance Company to pay the amount after making adjustment for
under-insurance;
ii) Two cutlery sets in silver valuing Rs.31,000/- – The
National Commission held that these items were not insured and
did not fall under the heading of ‘kitchenware/crockery/cutlery
sets’.
iii) Clothing – The insured value of clothing was
Rs.55,000/- and the claimant claimed Rs.87,000/-. The National
Commission directed payment of this amount after making
adjustment for under-insurance.
iv) Electrical/Mechanical appliances – The appellant
claimed a sum of Rs.66,000/- for loss of electrical and mechanical
appliances, as against the coverage of Rs.1,82,500/-. This claim
was rejected on the ground that the claimant failed to produce bills
of invoices towards this amount.
v) Miscellaneous items – The appellant claimed
Rs.28,000/- for loss of miscellaneous items including watches
valuing Rs.20,000/- as against the coverage of Rs.41,000/-. He
6
has been awarded only Rs.8,000/- and the claim for watches of
Rs.20,000/- has been rejected on the ground that he failed to
produce purchase invoices.
vi) Repair of locks, doors, latches, safe etc. – The appellant
was awarded Rs.7,000/- for repair of locks, doors, latches, safe etc.,
as claimed by him.
vii) The claimant was also awarded compensation of
Rs.10,000/- and interest @ 9% per annum.
7. Aggrieved, the appellant is before this Court.
8. The only legal issue which arises for consideration is “what is
under-insurance – and the effect thereof?”. Under-insurance
basically means that the insured has taken out an insurance policy
in which he has valued the insured items for a sum which is less
than the actual value of the insured item. In a country like India
this is normally done to pay a lesser premium. This is, in fact,
harmful to the policy holder and not to the Insurance Company
because even if the entire insured property is lost, the policy holder
will only get the maximum sum for which the property has been
7
insured and not a paisa more than the sum insured. To give an
example, in case a person takes out the householder policy covering
fire insurance and gives the value of the structure of his house and
goods stored therein at Rs.50,00,000/- even though the value of the
same is Rs.1,00,00,000/- then even if the entire house and goods
are completely lost in a fire, he cannot get an amount above
Rs.50,00,000/- even though the value may be more.
9. If all the insured goods are lost then there is no problem. The
insured is entitled to the amount for which the goods were insured
even if that be less than the actual value of the goods. In case a
person gets a painting insured for Rs.1,00,000/- though the value
of the same is Rs.10,00,000/-, if the painting is lost the insured is
entitled to Rs.1,00,000/- only. If all the insured goods falling under
one head are stolen or lost then the insurance company cannot
apply the principle of averaging out because, though the loss may
be Rs.10,00,000/-, the claimant will get only one Rs.1,00,000/-as
per the value assessed and the insurance premium paid by him.
10. The Insurance Company can however apply the principle of
averaging out when all the goods are not destroyed. Supposing the
8
entire house was insured for Rs.50,00,000/-, but on valuation it is
found that the value of the structure and the goods was
Rs.1,00,00,000/- and if the policy holder claims that he has
suffered loss of Rs.40,00,000/- then he will be entitled to only
Rs.20,00,000/-, by applying the principle of averaging out. What
this means is that if the value of the goods is more than the sum for
which they are insured then it is presumed that the policy holder
has not taken out insurance policy for the un-insured value of the
goods. The claim is allowed by applying the principle of averaging
out, i.e. the insured is paid an amount proportionate to the extent
of insurance as compared to the actual value of the goods insured.
11. To clarify the matter further, we may give another example.
Supposing, the insurer owns two paintings of Rs.5,00,000/- each
but pays premium for insurance cover of Rs.1,00,000/- for both the
paintings. If one painting is lost, even though the value of the
painting may Rs.5,00,000/- he will not get Rs.1,00,000/- but will
get only Rs.50,000/-, as proportionate amount. Therefore, when a
group of items is insured under one heading and only some of the
items and not all items are lost/stolen then the principle of
9
under-insurance will apply. However, if all or most of the items of
value covered under the policy are stolen, then the insurance
company is bound to pay the value of the goods insured.
12. Applying this principle we may now deal with this case.
i) Jewellery and valuables – The entire jewellery and
valuables were insured for Rs.1,00,500/- but the claimant claimed
that the value of jewellery stolen was Rs.1,84,150/-. In this case
the entire jewellery was stolen. Therefore, the averaging out clause
will not apply and the claimant is entitled to a sum of Rs.1,00,500/-
under this head.
ii) Silver cutlery sets – The case of the claimant is that
these were insured under the head of ‘kitchenware/crockery/
cutlery’ items. According to him, the value of these sets is
Rs.31,000/-. Obviously kitchenware/crockery/cutlery will include
many other items lying in the kitchen and in the dining room.
Silver cutlery sets would normally fall under the head ‘jewellery and
valuables’ and since the claimant has been awarded the maximum
amount payable under that head, now he cannot divert the claim
for silver cutlery to the head ‘kitchenware/crockery/cutlery’. This
10
Court can take judicial notice of the fact that in any middle class
household kitchenware/crockery/cutlery would value more than
Rs.18,000/-. It is obvious that silver cutlery valuing Rs.31,000/-
could not be insured under the head kitchenware/crockery/cutlery’
which was valued only for Rs.18,000/-. Therefore, the National
Commission was right in holding that there was no coverage for this
item.
iii) Clothing – The appellant claims that he has suffered a
loss of Rs.87,000/- , as against the coverage of Rs.55,000/-.
However, on perusing the statement of the appellant himself we find
that he has shown Rs.87,000/- to be the value of only six items of
clothing. There must have been many other items of clothing in the
house and when all the clothing has been insured under one
heading, it will include clothing items of all types, both expensive
and in-expensive. Admittedly, all items of clothing were not stolen
and, therefore, in this case the principle of under-insurance will
have to apply and the National Commission was right in directing
that the payment be made after applying principle of
under-insurance.
11
iv) Electrical/Mechanical appliances – The coverage
under this head was Rs.1,82,500/- and the claimant claimed only
Rs.66,000/- and he gave the details of the items. This claim has
been rejected only on the ground that he had not produced invoices
of the same. The case of the appellant was that those items were
gifted by his son. The items such as CD changer, video camera,
DVD player, Camera etc. could be found in any middle class
household. It is not the case of the Insurance Company that these
items were not stolen. The claim should not have been rejected
only on the ground that invoices were not produced. The affidavit
of the appellant clearly indicates both the nature of the items lost
and the value thereof. This is supported by corroborative evidence
of the list of items given to the police. Once the insurance company
itself changed its policy from ‘as per list policies’ to ‘policies for
consolidated amounts’, then an insured is not expected to give the
item-wise details along with the valuation. We may also add that if
the insurance company desires that item-wise valuation should be
given for items over and above a certain value then it is the duty of
the insurance company to advise the insured at the time of issuing
the first policy of insurance and at the time of each renewal. The
12
insurance company must at the time of accepting the premium
advise the policy holder properly. The insurance company cannot
accept the premium without asking for any details and later deny
its liability on the ground that such details were not given.
Therefore, we accept the claim of the claimant and he is entitled to
Rs.66,000/- under this head.
v) Miscellaneous items – On the same reasoning as
given for electrical/mechanical appliances we accept the claim of
the appellant of Rs.20,000/- for loss of four watches and, therefore,
he is entitled to Rs.28,000/- under this head.
vi) Repair of locks, doors, latches, safe etc. – The claimant
has already been awarded Rs.7,000/-under this head.
13. In addition thereto, we are of the view that the claimant
should be awarded Rs.25,000/-towards compensation and
litigations expenses etc. On the aforesaid amounts the appellant
shall be entitled to an interest @12% per annum w.e.f. 01.01.2009
till payment. The Insurance Company shall be entitled to
adjust/deduct the amounts already paid/deposited by it.
13
14. The appeal is disposed of in the above terms. Pending
applications, if any, shall also stand disposed of.
15. The Registry is directed to send a certified copy of this
judgment to the appellant, who appeared in person.
………………………..J.
(Madan B. Lokur)
…………………………J.
(Deepak Gupta)
New Delhi
January 10, 2018

Posted in Uncategorized

THE SECRETARY, KERALA STATE COASTAL MANAGEMENT AUTHORITY ….Appellant versus DLF UNIVERSAL LIMITED (Formerly known as Adelie Builders and Developers Pvt. Ltd.) & ORS. ….Respondents – Notification dated 14.9.2006 issued by the Ministry of Environment and Forests in furtherance of the environment protection in exercise of power conferred by sub-section (1) and clause (v) of subsection (2) of Section 3 of the Environment Protection Act, 1986 (hereinafter referred to as the ‘said Act’) read with clause (d) of sub-rule (3) of Rule 5 of the Environment Protection Rules, 1986. This Notification was in supersession of the earlier Notification of 27.1.1994. The Notification states that the process was followed duly and in accordance with the objective of the National Environment Policy as approved by the Union Cabinet on 18.5.2006, such process was being modified. All new projects required prior environmental clearance from the Central Government as applicable or as the case may be the State Environment Impact Assessment Authority (for short ‘SEIAA’) duly constituted by the Central Government under sub-section (3) of Section 3 of the said Act.- In conclusion we set aside the findings of the impugned order while sustaining the fine of Rs.1 crore with the direction for strict adherence to the norms in future and avoidance of such contradictions by the authorities. We also feel it appropriate that in view of the professed policy to have more single window clearance, the methodology of such processing of such applications should be endeavoured to be simplified so that there is less uncertainty and better enforcement. The same may be done within a period three months from the receipt of the copy of the order.

REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL Nos.117-120 of 2018
[Arising from SLP (Civil) Nos.6929-6932/2017]
THE SECRETARY,
KERALA STATE COASTAL
MANAGEMENT AUTHORITY ….Appellant
versus
DLF UNIVERSAL LIMITED
(Formerly known as Adelie Builders and
Developers Pvt. Ltd.) & ORS. ….Respondents
With
CIVIL APPEAL No.121 of 2018
@SLP(C) No.6861/2017
CIVIL APPEAL No.122 of 2018
@SLP(C) No.7306/2017
CIVIL APPEAL No.123 of 2018
@ SLP(C) No.9929/2017
J U D G M E N T
Page 1 of 39
SANJAY KISHAN KAUL, J.
1. Leave granted.
2. The battle of environment protection against development is a never
ending one and the present dispute primarily is an offshoot of such a
conflict. The dispute between the developers of a housing project and
the environment authorities is also one where different authorities
have taken variant stands. It is the say of the developer that they
obtained all requisite permissions and have proceeded with the project
in pursuance thereof while the coastal management authority and the
environment authority plead otherwise. From the perspective of the
Kerala State Coastal Management Authority, which is the main
appellant before us, it has been a saga of a sleeping authority – not
having an afternoon siesta but a Kumbhakarna sleep albeit of almost
four years. On being woken up, it suddenly seeks to see various
violations wanting to put the clock back. In this period things have
been done and dusted and a huge project has taken shape, which is at
the final stage.
3. Now coming to the facts of the case at hand, the project in question is
of respondent No.1, which purchased nearly 5.12 acres of property
Page 2 of 39
from different vendors in the year 2006 envisaging a multi-storey
residential complex of about 185 units located on the eastern bank of
Chilavannurkayal (backwaters) in Kerala. The area in question, as
apparent from the status report of the Coastal Regulation Zone
(‘CRZ’) itself shows that the area falls in the Kochi Corporation and
the said area, along with the adjoining panchayats is highly
developed. A lot of low lying areas including tidal marshes and
filtration ponds bordering the backwaters are alleged to have been
reclaimed for construction and other development activities by
various third parties and the area close to the site in question is well
developed and built up.
4. Respondent No.1 obtained a building permit for the project in
question issued by the Corporation of Cochin (hereinafter referred to
as the ‘Corporation’) on 22.10.2007 under the Kerala Building Rules,
1984. It is also not really disputed that the other linked permissions
such as NOC from State Pollution Control Board, NOC from the Fire
& Rescue Department and height clearance from the Navy was also
obtained. The builders DLF Universal Limited (formerly known as
‘Adelie Builders & Developers Private Limited’) (hereinafter referred
Page 3 of 39
to as ‘DLF’) applied for environment clearance to the Ministry of
Environment and Forests on 27.11.2007. The intervening factor was a
Notification dated 14.9.2006 issued by the Ministry of Environment
and Forests in furtherance of the environment protection in exercise of
power conferred by sub-section (1) and clause (v) of subsection (2) of
Section 3 of the Environment Protection Act, 1986 (hereinafter
referred to as the ‘said Act’) read with clause (d) of sub-rule (3) of
Rule 5 of the Environment Protection Rules, 1986. This Notification
was in supersession of the earlier Notification of 27.1.1994. The
Notification states that the process was followed duly and in
accordance with the objective of the National Environment Policy as
approved by the Union Cabinet on 18.5.2006, such process was being
modified. All new projects required prior environmental clearance
from the Central Government as applicable or as the case may be the
State Environment Impact Assessment Authority (for short ‘SEIAA’)
duly constituted by the Central Government under sub-section (3) of
Section 3 of the said Act. The Notification also provided that the
SEIAA would base its decision on the recommendation of the State or
Union Territory Level Expert Appraisal Committee ( for short
Page 4 of 39
‘SEAC’) as to be constituted following the Notification and in the
absence of the setting up of these authorities, a category provided
would be treated as category ‘A’ project. Clause 8 dealt with the
Grant or Rejection of Prior Environmental Clearance (EC) and the
relevant clauses of the same are reproduced hereunder:
“8. Grant or Rejection of Prior Environmental Clearance (EC):
(i) The regulatory authority shall consider the recommendations of
the EAC or SEAC concerned and convey its decision to the
applicant within forty five days of the receipt of the
recommendations of the Expert Appraisal Committee or State
Level Expert Appraisal Committee concerned or in other words
within one hundred and five days of the receipt of the final
Environment Impact Assessment Report, and where
Environmental Impact Assessment is not required, within one
hundred and five days of the receipt of the complete application
within requisite documents, except as provided below.
xxxx xxxx xxxx xxxx
(iii) In the event that the decision of the regulatory authority is not
communicated to the applicant within the period specified in
sub-paragraphs (i) or (ii) above, as applicable, the applicant may
proceed as if the environment clearance sought for has been
granted or denied by the regulatory authority in terms of the final
recommendations of the Expert Appraisal Committee or State
Level Expert Appraisal Committee concerned.”
5. As we have been informed, these authorities have been constituted
subsequently only on 19.12.2011 and, thus, logically in view of what
has been set out hereinabove, the project in question could possibly
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have been treated as a category ‘A’ project. The project of DLF was
examined by the Central Expert Appraisal Committee (for short
‘CEAC’) in its 63rd meeting and was approved as a “Silver Grading”
project. A suggestion was made by the CEAC that some of the project
area falls under the Coastal Regulation Zone (‘CRZ’) and thus, the
details of the project may be examined by the CRZ Committee of the
Ministry and a separate clearance should be acquired under the CRZ
project. In furtherance of this recommendation DLF was required to
obtain the CRZ status report from the Centre for Earth Science
Studies (for short ‘CESS’), Thiruvanathapuram, which is stated to be
one of the seven authorised/identified agencies. An application is
stated to have been made by DLF on 23.9.2008 to CESS, which in
turn made a positive recommendation in May, 2009, stating that the
project land was situated at CRZ II and there was no area in CRZ (I
and i) in the project area or close to it. It may be noted at this stage
that there have been some subsequent reports by CESS in September,
2011 and a communication dated 11.8.2014 but the project was more
or less over even by the first date or was sufficiently advanced. The
purport of the subsequent developments will be considered hereinafter
Page 6 of 39
but suffice to say that the first report sought to point out reclamation
of backwater by DLF after 2009, earlier reclamation of filtration
ponds and paddy fields and shifting of high tide lines. The
communication dated 11.8.2014 pertained to alleged replacement of
some photographs from the CESS report of May, 2009 and referred to
a stream/natural canal at site that had been mapped by the CESS.
6. It appears that DLF, however, did not wait for the environment
clearance and the construction activity went on at rapid pace at site
ostensibly on a perceived deemed clearance since there was no
communication during this period of time. This is apparent from a
visit report dated 29.10.2009 of Kerala Coastal Zone Management
Authority (for short ‘KCZMA’)/appellant. This resulted in the
KCZMA/appellant issuing a letter dated 21.1.2010, seeking
explanation for having started construction without obtaining the
necessary permissions/approval/clearance from KCZMA/appellant.
However, subsequently on 20.3.2010 in its 40th meeting the
KCZMA/appellant, post discussion of the site inspection report,
decided to recommend the project proposal to the MoEF. The
relevant portion of this is extracted hereinafter:
“KCZMA has discussed the site inspection report in detail and
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decided to recommend the project proposal to MoEF. The
contention of the Subcommittee that, the narrow canal
encountered in the imaginary line drawn parallel to the High
Tide Line from the Choice Garden building is only a drainage
canal as has been agreed by the meeting, since the narrow
drainage canal need not be considered as a canal. The
Authority also decided to collect a full set of modified
documents as per provisions of CRZ Notification, including
existing FSI & FAR as on 19th February, 1991.”
7. A sub-committee appointed by KCZMA/appellant visited the site
again and made certain recommendations dated 19.7.2010. A perusal
of the report of the sub-committee states that the construction had
already commenced and the structure of a sizeable number of floors
of a multi-storey residential project was nearing completion. This is
stated to have caused some impediment to the mandate to evaluate the
proposed site for CRZ clearance. It, however, records that the site
falls in CRZ II category and does not have any CRZ I(i) areas, such as
mangroves. In Survey No.1019 Choice Garden Apartments existed
which was, however, in existence prior to 19.2.1991. Insofar as the
narrow canal was concerned it is noted that the same functioned as a
municipal drain for waste water drainage from urban conglomeration
of the northern side of the project site. The residential apartment
construction NCR II was found to be permissible but the proposed
Page 8 of 39
construction has to be on the landward side of the existing road. The
clarifications given by the MoEF were also noted that the imaginary
line to be drawn should not cut across any river, creek, backwater,
estuary,sand beach or mangroves. The recommendations were made
and there were two significant aspects:
i. The shortest distance from the high tide line to existing authorised
building of the adjoining plot (Choice Garden Apartments), being
13.5 mtrs., the imaginary line was drawn parallel to the HTL towards
seaward side of the existing authorised building.
ii. DLF should have obtained CRZ clearance from KCZMA/appellant
before starting the construction, which was a procedural violation.
8. In a nutshell while all aspects including the narrow canal was found
not to be an impediment, there was a violation of lack of prior
approval.
9. The aforesaid report of the sub-committee was examined and minutes
drawn on 31.8.2010. The salient aspect recorded in these minutes is
that the sub-committee examined the documents submitted by DLF
and also obtained clarifications in respect of SFI from the City Town
Planners. The case was examined in the light of recent amendments
Page 9 of 39
of the MoEF with regard to CRZ-II region and a site visit was also
made on 19.7.2010. On a detailed examination, two aspects, which
once again emerge are: (i) Any portion protruding beyond the
imaginary line towards backwaters may be demolished (which has
apparently been done); (ii) In view of “procedural violations” found
by the sub-committee, a penalty for the same should be imposed.
10. The matter somehow did not end at this since the CESS is stated to
have visited the site again in June, 2011 and submitted a report in
September, 2011. This was in a sense the beginning of some further
adverse observations for DLF. It was now opined that apparently land
reclamation was carried out by DLF from 2009 onwards which had
caused the shifting of the backwater’s banks by five metres. A major
part of the area, which was reclaimed was found to be part of low
lying areas such as filtration ponds/paddy fields and lastly the lay out
building complex needed to be superimposed on the local level CRZ
map to get the exact distance from HTL.
11. The Revenue Divisional Officer, Fort Kochi on 21.11.2011 issued a
provisional stock memo to DLF to hold back construction on the
project land. There was an allegation made by the village officer that
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about 50 cents of the Chilavannur river had been illegally reclaimed,
which the RDO on 17.12.2011 reported to the Cochin Corporation.
12. The trigger for this letter was stated to be a complaint received from
one Mr. Antony A.V. of Chilavannur, Kochi pursuant whereto a team
of experts from KCZMA/appellant had visited the site. Mr. Antony is
the original petitioner in the petition from which the present
proceedings arise. The site was visited on 9.11.2012 by CESS on
intimation by KCZMA/appellant and a report was submitted seeking
to cast certain question marks over its own earlier reports. Thus
issues, such as the status of the plot prior to 2009 having not been
considered while delineating the HTL, reclamation/modification of
the backwater site, area being part of water body were all sought to be
raised. This was followed by a petition filed on 15.11.2012 by Mr.
Antony, being Writ Petition No.27248/2012, seeking to interdict DLF
from effecting any further construction and to direct Cochin
Corporation to implement the various directions of
KCZMA/appellant. The said Mr. Antony approached the Court
alleging to be living in the vicinity of the area and being affected by
the construction. Interestingly, why he chose to remain silent when
Page 11 of 39
the vast area of construction was coming up right next to his property,
is a mystery. So is it a mystery, why DLF was singled out while no
mention was made of the whole area which was highly constructed as
noticed in the reports. The learned single Judge granted interim
orders on 4.12.2012 against progress of the project.
KCZMA/appellant also became active at that stage, asking DLF to
submit a CRZ map of the project site with construction superimposed
on it and addressed to the MoEF a letter dated 29.12.2012 for
necessary action alleging that there was a land reclamation by DLF.
The CEAC in its 124th meeting held on 13/14.5.2013 decided to
consider the environment clearance and noted certain violations by
DLF. However, since the SEIAA was set up in the meantime vide
Notification dated 19.12.2011, file of the project was transferred to it.
On 31.10.2013, the project was cleared by the SEIAA qua
environment clearance but it also decided to issue a show cause notice
to DLF as to why violation proceedings should not be initiated against
it before issuance of EC. Finally on 11.12.2013, SEIAA issued an
integrated CRZ-cum-environment clearance dated 11.12.2013 to the
project subject to the outcome of the writ proceedings pending before
Page 12 of 39
the learned single Judge of the Kerala High Court. We may note here
itself that one of the aspects pointed out by DLF is that this clearance
has not been challenged in any proceedings nor were the writ
proceedings amended to challenge the same.
13. It is the case of the KCZMA/appellant that there were complaints
preferred by other persons with regard to the project of DLF and thus,
in its meeting held on 17.2.2014 it was decided to constitute a three
member committee to inquire into the CRZ status of the project.
Apparently on 30.6.2014, the Chief Secretary submitted a report to
the Chief Minister reporting certain violations and a three member
committee report was available on 21.7.2014 alleging illegal
reclamation of the land and other violations. CESS also sought to
change its course on 11.8.2014 alleging that there was a natural
stream canal from the CRZ map submitted to the MoEF for CRZ
clearance and that some two photographs had been replaced. The
challenge laid to the report by DLF by way of writ petition
No.18483/2014 was disposed of on 19.8.2014 observing that the
report of the Chief Secretary dated 30.6.2014 could only be treated as
a piece of information.
Page 13 of 39
14. The learned single Judge rendered his verdict on 8.12.2014 finding
practically everything against DLF and categorised the whole
construction as illegal and in violation of law, particularly the CRZ
notification, and was thus not capable of being regularised. The
illegal structure was directed to be demolished. This order was
assailed in writ appeal No.1987/2014 by DLF. A separate writ
petition was also filed, being writ petition No.20555/2015,
challenging the report dated 21.7.2014 by the three member
committee appointed by the KCZMA/appellant. The construction
being complete and the flat buyers interest being involved, these
apartment buyers also filed writ petition Nos.2810/2015 and
3375/2015 praying for issuance of occupancy certificates.
15. The Division Bench ultimately by the impugned order while broadly
upholding the findings of the learned single Judge and setting aside
the order of demolition, directed regularisation subject to
fine/compensation amount of Rs.1 crore. This amount was to be
deposited before the District Collector, Ernakulam to be kept in a
separate account for being used exclusively for building up the
environment, maintaining ecological balance in the area situated on
Page 14 of 39
the eastern side of the Chilavannur river, with a further direction to
the District Collector to submit periodic reports before the Court as to
the utilisation of the amount for the activities undertaken, in every six
months. The writ petitions filed by the prospective buyers were
dismissed but without prejudice to get the occupancy certificates for
the building from the local authority subject to the satisfaction of the
costs. Writ petition No.20555/2015 was also dismissed.
Stand of KCZMA/Appellant
16. The KCZMA/appellant are before us by appeal with Mr. Shyam
Divan, learned Senior Advocate seeking to vehemently canvas that the
various violations required the building to be demolished or in the
alternative, the fine substantially enhanced. He took us meticulously
through the development in the case as discussed above with each of
the events to canvas the violations which have taken place. On the
Court query about the silence of this important authority for such a
long period of time, the only answer available was that it did not have
an enforcement mechanism and is dependent on the Corporation for
the same. That, in our view, could hardly be an answer for such
inaction if there were violations. Enforcement is different from
Page 15 of 39
detection of violations. There can hardly be any doubt about the
bounden duty of this authority to play a crucial role in preserving the
environment in the coastal area and it cannot wash its hands off by
giving an explanation for inaction as the alleged absence of an
enforcement force. Had this authority kept an eye open right from the
beginning and played the role which it was required to play, the
situation which has come to pass would not have so occurred and the
identification of the violations, if any, would have been made at the
threshold stage itself. This did not happen here.
17. The reliance by the learned counsel has been on the subsequent report,
after the horses had bolted from the stable, to allege violations from
the beginning. The case, which was sought to be put up and
canvassed, was that no reclamation was permissible since 1991, but
land was actually reclaimed in 2005-06 and 2009-11. The aspects
pointed out in the subsequent reports including of the natural stream,
as to how the HTL measuring norms were violated in coming to
conclusions, were pointed out.
18. One of the main bedrocks of DLF, of having obtained the integrated
environment/CRZ clearance granted by SEIAA on 11.12.2013 was
Page 16 of 39
not denied but it was sought to be contended that the clearances ought
to have been obtained prior to the commencement of construction
which would at the relevant stage have been granted by the MoEF. In
any case SEIAA ought to have based its decisions on the
recommendations of the SEAC, which was not done. The SEAC had
only considered the environment clearance and not the CRZ clearance
for the project. That file ought not to have been transferred to SEIAA
by the MoEF.
19. Learned counsel also sought to contend that insofar as CRZ status of
the project land and its implications are concerned, the project area in
question included backwater and pokkali fields (filtration ponds) by
referring to various documents, which also show that land reclamation
was undertaken at the project site from 2005 onwards, which was a
prohibited activity. It was also submitted that the imaginary line to be
drawn was cutting across a natural backwater canal and not a
manmade drainage canal as alleged by DLF.
20. An issue was also sought to be raised about the FSI and FAR status of
the project as the same had been granted of 1.99 while the Town and
Country Plan Regulation only provided for 1.5.
Page 17 of 39
21. In the written synopsis filed, it has been stated that some action has
been taken against some erring officials of Cochin Corporation and
the former Chairman of the KCZMA/appellant, and vigilance cases
are pending. It is admitted that a vigilance case is pending against the
Chief Secretary who addressed the communication dated 10.12.2014,
though not in respect of the project in question.
22. In order to establish that the action was not restricted to the project in
question, actions taken against other violators also sought to be set up.
23. KCZMA/appellant sub-committee report of 31.8.2010 giving in
principle approval/recommendation to the project and recommending
imposition of fine is stated to be based on CESS report of May, 2005,
which was based on HTL, which was subsequently found on
superimposition, to involve land reclamation and resulted in a three
member committee report dated 21.7.2014.
24. Learned senior counsel also referred to a catena of judgments to
advance the proposition that in the ‘no development zone’ there could
not be permissions granted and that this Court has frowned upon the
practice of regularisation of unauthorised construction where
environment issues are involved.
Page 18 of 39
Stand of the Cochin Municipal Corporation:
25. The Corporation has largely confined itself to the issue of FAR
sanction of 1.99. It is stated that the maximum FAR of the
Corporation of Cochin is 2.5 as clarified by MoEF. In the Kerala
Building Rules, 1999, the maximum FAR of 1.5 was extended to 2.5
FAR, which continued till 22.2.2001 when Rule 31 was amended and
maximum FAR was increased to 3.00 extendable on payment of
additional fee to 4.00.
26. The building permit in question was issued on 22.10.2007, when the
maximum FAR for central city of Kochi was reduced to 2. It was in
these circumstances that the FAR of 1.99 was made available.
Stand of the State of Kerala:
27. The State of Kerala has more or less supported the stand of KCZMA
but in the course of arguments it does appear that one aspect which
had really troubled it was the directions whereby the Collector was
sought to be made responsible for the management of Rs.1 crore fine
to be deposited as also the feasibility of utilising the same.
Stand of the Ministry of Environment and Forests:
Page 19 of 39
28. The Ministry of Environment and Forests has indulged in a complete
flip-flop-flip in its affidavit without even explaining the reasons for
the same. The original affidavit was filed before the High Court on
19.5.2016 by one Dr. S.K. Susarla, Advisor with the Ministry. The
affidavit records that the Ministry was made a party to the
proceedings by the orders of the Court in the writ proceedings. The
affidavit states that based on the recommendations of the KCZMA,
SEIAA, Kerala, it was found that the project came under category ‘B’
and the project proponents adhered to the conditions laid down and
the construction is in order. The relevant paras 19 & 20 are
reproduced hereinbelow:
“19. That the project proponents have adhered to the conditions
laid down by the SEIAA and have not violated any of the
provisions.
20. That the said constructions are technically as per the
provisions of the CRZ Notifications 1991 and EIA Notifications
2006.”
29. In the present proceedings also an affidavit dated 6.11.2017 is
available, which affirms that SEIAA, Kerala was in place in 2013 and
the project was a category ‘B’ project as per EIA notification of 2006,
the appraisal was to be done at the State level by the SEIAA. The
Page 20 of 39
averments in para 17 are as under:
“17. It is submitted that SEIAAs/SEACs comprises of members
who are well qualified and have requisite expertise in various
sectors to examine, appraise the projects and recommend them for
grant of Environmental Clearance imposing all suitable
environmental conditions to ensure sustainable environmental
management. The consideration of such projects at SEIAA/SEAC
level is to decentralise the powers confined to the Union
Government and to streamline and expedite the process of grant of
Environmental Clearance to building construction projects in view
of the growing demand of housing to all.”
30. On the conclusion of the hearing, when crystallised written synopsis
had to be filed, an affidavit is sought to be slipped in by one Mr.
Ritesh Kumar Singh, Joint Secretary of the MoEF, stating that this
affidavit is in “continuation” of the earlier affidavit dated 6.11.2017
filed on 7.11.2017. For the first time, it is sought to be now pleaded
that CRZ Notification, 1991, CRZ Notification, 2011 and EIA
Notification, 2006 have been violated and that prior clearance under
the Notifications before the commencement of construction activity
was mandatory. It is also sought to be alleged that reclaimed water
bodies and land falling under CRZ for housing projects is prohibited
under CRZ Notification. The post construction environment
clearance is stated to have been granted to the project by SEIAA
without appraisal and recommendations of SEAC and in the absence
Page 21 of 39
of approval of KCZMA. This affidavit runs into 31 paragraphs with
annexures.
31. We fail to appreciate the contradictory stands of the authority and the
endeavour to set up a different case after the conclusion of the
hearing. Such conduct is unacceptable.
DLF’s stand:
32. DLF has sought to emphasise that while an entrepreneur is obliged to
obtain all the requisite permissions, there is also a corresponding
obligation on the Regulatory Authorities to facilitate informed
decisions and compliances by the entrepreneur. DLF is stated to have
obtained all the requisite permissions for construction of the site from
various authorities including the Municipal Authorities. The issue
pertains only to the environment clearance and the CRZ on which
aspects there have been varying stands by different authorities and
also changing stands of the same authority.
33. The allegation of reclamation of land in 2005-2006 and 2009-2011 is
strongly rebutted. It is pointed out that since there are registered sale
deed documents of land, assuming without admitting, that there is any
Page 22 of 39
reclamation, DLF had no role to play in the same as the transactions
took place in 2006. The Revenue Authority would certainly know
what is the nature of the area, i.e., whether it is land or not. Linked to
this issue, it is pointed out, that the Coastal Regulation Zone Land
Use Map No.34A prepared in 1996, which had been received by DLF
under RTI directly from CESS clearly mentions the nature of the
property. The filtrations ponds are marked as ‘FP’. There is no such
FP marked in the area where DLF has constructed. The finding by the
Court below is, thus, assailed as contrary to record.
34. The aforesaid fact is sought to be buttressed by a reference to a recital
in the sale deeds where the district, sub-districts, taluk, village, kara,
firka, tenure and survey numbers are all mentioned. Thus, the land
certainly existed at the time of purchase. Not only that the sale deed
dated 20.10.2006 mentions the boundary of the land with building
Nos.CC 29/288 in Item No.7 and 29/201 in item No.9, thereby
suggesting that a part of the land had housed two buildings.
35. Insofar as the Google maps images of February, 2005 and December,
2005 are concerned, it is sought to be denied that the dark area in the
images is a water body as is sought to be made out by the KCZMA.
Page 23 of 39
In this behalf a reference has been made to the Google map of
September, 2002 not suggesting any water body. The report of the
Institute of Remote Sensing, where a closer study of Google map of
February, 2005, through the process of separate enlargement would
show that the embankment is well protected without any change that
there was a large massof stagnant water in the property, which has
shallow depth as vegetation below the water, could easily be noticed.
This is not stated to have any permanent link with the back water of
the Chillavannur canal. The Google map of 26.12.2005 was also
enlarged by the Institute of Remote Sensing and the entire
Chillavannur lake is seen to have green patches of Colocasia trees
surviving in low salinity. The property is stated to have lush and thick
vegetation and coconut trees in the middle, western, and southern side
of the property and the Google map clearly distinguishes the geo
morphology of the land which is totally different from the
Chillavannur canal and confirms the well marked boundary line with
the water body in the Chillavannur canal.
36. The December, 2012 map is stated to show thick vegetation with no
mark of water body and the coastal line abutting Chillavannur canal is
Page 24 of 39
well defined and marked. It is also pointed out that the CESS in its
report of May, 2009 published the coastal regulation zone status
report for an apartment complex as Vytilla, Cochi and the photograph
of the front page itself shows that the land in question before the
construction in May, 2009 next to Choice Garden is full of coconut
trees thereby suggesting that in May, 2009, it was clearly not a water
body. Such coconut trees could not have come up overnight as they
have a gestation period of 10-15 years.
37. The development arising from the successive CESS report is sought to
be analysed and it is alleged that Mr. K.V. Thomas was a party to
these reports. The reports were with KCZMA and, thus, there could
not be any issue of replacement of photographs. The photograph on
the front cover of the report also shows the coconut trees on the
property. The CESS report prepared by the same Mr. Thomas and
others in 2009 marks the drain in red colour and describes it as
inter-tidal zone falling under CRZ-I(ii). In the 2010 report to which
Mr. Joseph is a party while referring to the HTL, the canal is referred
to as a drainage canal and, thus, the requirement of imaginary line not
to cut across the water body would not be invoked. In another report
Page 25 of 39
in January, 2011, Mr. Thomas gave recommendations by naming
various projects, which had committed CRZ violations on the banks
of Chillavannur lake, which had committed violations by either
constructing on a reclaimed filtration pond or backwater side of
authorised buildings and respondent No.1 project was not named in
the same. Thus, right till February, 2011 at least, it is submitted, that
in the opinion of the KCZMA/appellant, DLF was stated to be in
compliance of all statutory provisions.
38. DLF draws strength from the fact that only part of the area was found
to be in CRZ-II, municipal authorities granted approvals and that no
statutory provisions in 1991 Notification or of September, 2006, made
prior CRZ approval before commencement of construction
mandatory. Once KCZMA itself recommended the proposal to MoEF,
it was submitted by respondent No.1 that there was no impediment in
the way of proceeding further with the project and there was really no
occasion for the CESS to revisit the issue.
39. It has been sought to be emphasised by Mr. Kapil Sibal, learned senior
counsel on behalf of DLF that no explanation was sought from DLF
Page 26 of 39
in respect of the observations of September, 2011. The 2012 report
was also never put to the DLF. Why these aspects were not so put is
unexplained.
40. Learned senior counsel sought to emphasise that the churning and the
rigmarole ultimately did produce a clearance of the project at least on
11.12.2013 and it was only after construction was complete, the
different aspects were triggered off at the behest of Mr. Antony, who
had seen the whole project develop near his property as alleged
without raising a finger on the issue over a number years. The FSI
position stands explained by the Corporation. Lastly, however, it was
conceded that though the fine was uncalled for, DLF has not sought
overturning of the fine as it did not file an appeal against the
impugned order.
Conclusion:
41. We commenced this order pointing out the sleeping role of the
authorities which developed into contradictory claims by different
authorities over factual issues and finally even by the same authority,
like MoEF taking contradictory stands, even trying to slip in a further
additional stand after conclusion of hearing. It is a matter of concern
Page 27 of 39
to us that authorities have not performed their task with promptitude,
not realising the importance of the role they play including
KCZMA/appellant.
42. We would like to deal with this matter on two planes – one is the
general plane; and the other is in the given facts of the case.
43. It is trite to say that the importance of environment and ecological
balance requires the enforcement of various Regulations, Rules and
enactments to be strictly followed. Specialised bodies like the
KCZMA/appellant have been created to deal with the CRZ
Regulations for greater sensitivity. It is, thus, no answer to say that it
does not have an enforcement mechanism and thus, cannot act.
44. The case law, which Mr. Shyam Divan took us through itself brings
forth the importance of compliances.
45. In Anil Hoble v. Kashinath Jairam Shetye1
, it was held that any
illegal structure falling within the ‘No Development Zone’ (200 mtrs.
from the HTL) in a CRZ III area was directed to be demolished and
even the permission granted by the Coastal Zone Management
Authority was of no avail. Similarly, the practice of regularising
1 (2016) 10 SCC 701
Page 28 of 39
unauthorised constructions effected by erring buildings in violation of
law has not found approval from this Court and humanitarian and
equitable grounds found no place in the same. In Union Territory of
Lakshadweep v. Seashells Beach Resort2
, it has been observed as
under:
“30. The High Court’s order proceeds entirely onhumanitarian and
equitable considerations, in the process neglecting equally, if
notmore,important questions that have an impact on the future
development and management of theLakshadweep Islands. We are
not, therefore, satisfied with the manner in which the High
Courthas proceeded in the matter.
31. The High Court obviously failed to appreciate that
equitableconsiderations were wholly misplaced in a situation
where the very erection of the building to beused as a resort
violated the CRZ requirements or the conditions of land use
diversion. No onecould in the teeth of those requirements claim
equity or present the administration with a faitaccompli. The
resort could not be commissioned under a judicial order in
disregard of seriousobjections that were raised by the
Administration, which objections had to be answered beforeany
direction could issue from a writ Court.”
46. To the aforesaid extent are also the observations in Esha Ekta
Apartments Cooperative Housing Society v. Municipal Corporation
of Mumbai3
.
47. In Piedade Filomena Gonsalves v. State of Goa4
, it has been
2 (2012) 6 SCC 136
3 (2013) 5 SCC 257
4 (2004) 3 SCC 445
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observed as under:
“5. It is pertinent to note that during the pendency of the writ
petition, the appellant had moved two applications, one of which
is dated 11.7.1995, for the purpose of regularisation of the
construction in question. The Goa State Coastal Committee for
Environment, the then competent body constituted a
sub-committee which inspected the site and found that the entire
construction raised by the appellant fell within 200 metres of HTL
and the construction had been carried out on existing sand dunes.
The Goa State Coastal Committee for Environment, in its meeting
dated 20.10.1995, took a decision inter alia holding that the entire
construction put up by the appellant was in violation of the
Coastal Regulation Zone Notification.
6. The Coastal Regulation Zone Notifications have been issued in
the interest of protecting environment and ecology in the coastal
area. Construction raised in violation of such regulations cannot
be lightly condoned. We do not think that the appellant is entitled
to any relief. No fault can be found with the view taken by the
High Court in its impugned judgment.”
48. We are of the view that if the allegation of large scale violations by
DLF were to be correct there would be no alternative but to bring
down the structure. The moot point, however, remains is as to what is
the correct analysis of the factual position in the case.
49. We would also like to emphasise that there has to be undoubtedly
greater clarity on the processes and a better understanding between
various authorities so that developers are not left in the lurch –
violators have to be punished but it cannot be that the authorities
continue to do a flip-flop-flip putting the large investments at stake in
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a jeopardy. This is what appears to have happened in the present case.
50. We also make it clear that in the future, wherever permissions are
required to come and are to be obtained before commencement of
construction, it would be no answer that activity can be carried on
without obtaining the permissions. Simultaneously, the permissions
itself are envisaged in a time bound schedule and not through
improvement of cases by authorities running into years. Thus, from
the inception itself, there should be clarity on what is permissible and
what is not.
51. In the aforesaid conspectus, if the present project is seen, there is
really no question mark over the various permissions to carry on
construction having been obtained by DLF. The land was purchased
through sale deeds and the sale deeds specified the nature of the area.
It would, thus, be no answer to state that even the Revenue authorities
are oblivious to what is the nature of the land. DLF, thus, purchased
the land legally and obtained requisite permissions including qua the
FAR, which aspect stands explained by the Corporation as to why it is
not 1.50 as alleged by KCZMA/appellant nor 2.5 as is alleged by DLF
but in the given case was taken as 2 and that is why 1.99 FAR was
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permitted so that there is no doubt about the legality of the FAR
granted. We may not delve further on this aspect as the crucial
question is relating to the environment clearance and the clearance
required for the CRZ area.
52. The possibility of some area being CRZ-I area had given rise to the
observations by the CEAC in its 63rd meeting on 16-18.8.2008 for the
project to take CRZ clearance as well while granting environmental
clearance. Thus, the environmental clearance was also granted and
the aspect which remained was relating to the CRZ area.
53. There are stated to be notified authorities numbering seven at that
stage, who would prepare reports for analysis by the
KCZMA/appellant and one such notified agency was CESS. The
CESS did give a report in May, 2009 categorically stating that there
was no CRZ-I (i) land in project area or close to it but it was situated
in CRZ-II. The well developed, constructed area in the large expanse
around the property in question, also stood enumerated in that report.
54. The fault of DLF was that it should have stayed its hand till CRZ
permission had also been obtained but the fact remains that on
account of delay in the same it was perceived as a deemed permission
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case – rightly or wrongly. The construction in between was also
stopped but the appellant itself decided to recommend the project
proposal to MoEF on 20.3.2010 on the basis that the narrow canal was
a drainage canal. If there was any doubt about the same, it should
have been settled at that stage itself. The sub-committee appointed by
the appellant also categorically observed that the narrow canal was a
drainage canal but recommended a fine being imposed for not
obtaining prior approval/clearance. Really speaking the matter should
have ended with that, with a quantification of the fine to be imposed.
55. As to why after the initial report of CESS of May, 2009, should
CESS,after two years be again asked to visit at the request of the
appellant is not really understood. In the meantime most of the
construction was apparently done. The complaints made by Mr.
Antony started playing a role from 2012, a person who, also for
reasons best known to him, decided to knock at the doors of the
authority and the Court when most of the project was over.
Interestingly CESS, once again, visited based on recommendation of
the appellant in November, 2012 at the same time when Mr. Antony
filed the petition.
56. In our view it is undoubtedly the specialised authorities who have to
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carry out the task, but with promptitude. Their lackadaisical attitude
has permitted DLF to raise the issue of a deemed environment
clearance by virtue of Clause 8(3) of the EIA Notification of 2006,
which has already been extracted hereinabove. While the
environment clearance was applied on 27.11.2007, the integrated
clearance was granted on 11.12.2013 after six years, while by 2012,
the project stood completed.
57. Insofar as the nature of the area is concerned, we have given due
weightage to the revenue records, which are reflected in the sale deeds
executed. Some of the aspects which have weighed with the Courts
below do not find favour with us. The reason is that the alleged
violations have not emerged with clarity.
58. The Coastal Regulation Zone land use map 34A produced before us
by DLF and as explained by Mr. Kapil Sibal, learned senior counsel
shows that wherever filtration ponds existed they were so recorded.
In 1995-96 much prior to the year 2000 no such filtration ponds are
recorded in the area constructed upon. Therefore, the findings to the
contrary cannot be sustained. There could not have been a
reclamation of the filtration pond by DLF.
59. In the course of arguments, Mr. Shyam Divan, learned senior counsel
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has sought to rely upon the Google images of February, 2005 and
December, 2005 to suggest that there has been obviously large scale
reclamation. On behalf of DLF, Mr. Sibal has been able to throw
grave doubts over reliance of such Google images for the purposes of
coming to the conclusion that the dark area in the image is a water
body apart from the fact that in the sale deed dated 20.10.2006 it is
not so mentioned as per the revenue record. The Google images
produced on behalf of DLF show that in September, 2003 there was
no suggestion of a water body. DLF has also taken the assistance of a
report of the Institute of Remote Sensing in respect of two Google
images relied upon by the appellant to substantiate its case and
explain that there was a large mass of stagnant water in the property
of shallow depth with vegetation below the water visible. This water
appears not to have any permanent link with the backwater of the
Chillannavur canal. The existence of the coconut trees is another
aspect which throws doubt on the submissions made on behalf of the
appellant.
60. As noticed above, if the appellant had acted with promptitude at the
relevant time, we are sure that the correct picture would have been
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available whether for or against.
61. On behalf of CESS also there have been meanderings and
contradictions in the approach, even though Mr. K.V. Thomas was
party to all of them. In the context of the drain, in the 2009 report it is
clearly stated to be an inter tidal zone falling under CRZ 1(ii). The
report has been prepared after inspection. The HTL from the Choice
Garden building was found cutting the canal, which was labelled as a
drainage canal and thus, was not cutting a water body. It is not
understood how the contradictions arose subsequently in the 2011 and
2012 reports.
62. The approach of MoEF also appears to be strange and a complete
contradiction between what was stated before the High Court, before
us three weeks before the conclusion of hearing and then the
endeavour to slip in an additional affidavit post conclusion of hearing.
63. The CEAC in 2008 itself had suggested that the CRZ Committee may
examine the proposal which was so done. This was discussed with
the appellant and further requisite information was also sought. The
report from the CESS was obtained in May, 2009 and only a part of
the project area was found in CRZ II category. After going through
all the procedural requirements, the appellant made a recommendation
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on 31.8.2010 that the construction falls in CRZ II areas and the
narrow canal was not an impediment to the construction. The
appellant itself decided to recommend the proposal to the MoEF.
64. It is the own wisdom of the MoEF that with the establishment of
SEIAA the whole file should be forwarded to it and this was sought to
be justified on the basis of the experts available with SEIAA. What
weighs with us most is that post transfer of the file on 11.12.2013, the
proposal was cleared by SEIAA, being the final authority, and that has
never been withdrawn or cancelled or challenged. This clearance was
post a show cause notice seeking explanation from DLF and on
explanation being offered, was issued. Now for the authorities to say
otherwise or contradict themselves would not be fair to DLF and
would cause grave uncertainty if such an approach was to be
permitted.
65. We are, thus, not in agreement with the findings of the Courts below
on the violations alleged against DLF except to the extent that there is
a question mark on the issue of not having obtained prior clearance
and proceeding on the basis of a deemed clearance, which aspect, at
least for the future we have clarified that whatever be the manner in
which Clause 8(3) of Notification of 2006 is worded, it should imply
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henceforth a prior clearance and necessary clarifications should be
issued by the concerned authorities in a time bound manner to obviate
such situations to arise in the future. We feel that the direction
contained in the impugned order to deposit Rs.1 crore (stated to be
already deposited) can be treated as a fine for the said purpose.
66. We are also of the view that the operative directions against the
Collector of the State Government to monitor and do this task would
be non-workable and it is appropriate that this amount is transferred to
the KCZMA/appellant for purposes of better enforcement and
development of CRZ area.
67. In conclusion we set aside the findings of the impugned order while
sustaining the fine of Rs.1 crore with the direction for strict adherence
to the norms in future and avoidance of such contradictions by the
authorities. We also feel it appropriate that in view of the professed
policy to have more single window clearance, the methodology of
such processing of such applications should be endeavoured to be
simplified so that there is less uncertainty and better enforcement.
The same may be done within a period three months from the receipt
of the copy of the order.
68. The appeals are disposed of in the aforesaid terms. The parties are
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left to bear their own costs.
……….….….…………………….J.
(ROHINTON FALI NARIMAN)
………..…………………………J.
(SANJAY KISHAN KAUL)
New Delhi.
January 10, 2018.
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