Commissioner of Income Tax vs Oriental Insurance Co. Ltd.

Badar Durrez Ahmed, J.—I have gone through the opinion (in draft) of my learned brother Thakur J. Regretfully I have failed to persuade myself to agree with it. My views are as under :-

1.1 The question that has arisen for consideration concerns the fate of appeals u/s 260A of the income tax Act, 1961 filed by the revenue against a public sector undertaking (and, vice versa) without the clearance of the High Powered Committee set up pursuant to the direction of the Supreme Court in Oil & Natural Gas Commission v. CCE 1995 Suppl. (4) SCC 541 (hereinafter referred to as ''ONGC-I'') .

1.2 As pointed out by Thakur, J., in similar situations, our predecessor Benches have ''disposed'' of such appeals in the following manner :-

The learned counsel for the appellant states that the Committee on Disputes has been approached for clearance for preferring and prosecuting the appeal. They are awaiting the sanction. Hence, we dispose of this appeal with liberty to the appellant to revive the appeal on obtaining clearance from the Committee on disputes.

To be fair to the learned counsel for the appellants, it must be stated that at the outset they suggested that similar orders may be passed in the present appeals also. In fact, in respect of the earlier orders, no grievance has been vented either by way of review petitions before this Court or special leave petitions before the Supreme Court. The revenue as well as the public sector undertakings had accepted the same. The issue has cropped up only because one of us (Thakur, J.) had doubts about the procedural rectitude and judicial propriety of such an order of disposal and suggested that even an adjournment sine die of the appeals pending the clearance from the Committee on Disputes would serve the purpose. This may well be an available course of action 1 on virgin territory. But, is it now available after earlier Division Benches have disposed of such appeals in the manner indicated above ?

1.3 Judicial discipline envisages that a co-ordinate Bench follow the decision of an earlier co-ordinate Bench. 2 It is not proper to sacrifice certainty of law. Judicial decorum, no less than legal propriety forms the basis of judicial procedure and it must be respected at all cost 3. No Bench can comment on the functioning of a co-ordinate Bench of the same court, much less sit in judgment as an appellate court over its decision 4. In this context, the caveat that was sounded by the Supreme Court in Vikramjit Singh v. State of MP 1992 Suppl. (3) SCC 62 and which must be kept in mind is this :

That which could not be done directly could also not be done indirectly. Otherwise a party aggrieved by an order passed by one Bench of the High Court would be tempted to attempt to get the matter reopened before another Bench, and there would not be any end to such attempts. Besides, it was not consistent with the judicial discipline which must be maintained by Courts both in the interest of administration of justice by assuring the binding nature of an order which becomes final, and the faith of the people in the judiciary.... (p. 64)

And, as regards the virtue of certainty in law, the Supreme Court had this to say in Mahadeolal Kanodia Vs. The Administrator-general of West Bengal, :

If one thing is more necessary in law than any other thing, it is the quality of certainty. That quality would totally disappear if judges of co-ordinate jurisdiction in a High Court start overruling one another''s decisions. If one Division Bench of a High Court is unable to distinguish a previous decision of another Division Bench, and holding the view that the earlier decision is wrong, itself gives effect to that view the result would be utter confusion. The position would be equally bad where a Judge sitting singly in the High Court is of opinion that the previous decision of another single Judge on a question of law is wrong and gives effect to that view instead of referring the matter to a larger Bench. In such a case lawyers would not know how to advise their clients and all courts subordinate to the High Court would find themselves in an embarrassing position of having to choose between dissentient judgments of their own High Court.

Clearly, on grounds of judicial discipline, judicial decorum and certainty, we cannot and ought not to comment upon orders passed by an earlier co-ordinate Bench of this Court and attempt at arriving at a conclusion to establish that such orders were wrong. That would be sacrilege.

1.4 This discussion is sufficient for me to conclude that we must stay on the path laid out by our predecessor co-ordinate Benches and not stray from it. However, because brother Thakur, J. has expressed his views on the propriety of such an order, it would be best if I also present my contrary opinion. The genesis of the High Powered Committee is this. It was set up "to ensure that no litigation comes to Court or to a Tribunal without the matter having been first examined by the Committee and its clearance for litigation 1. The Supreme Court further stipulated that "it shall be the obligation of every Court and every Tribunal where such a dispute is raised hereafter to demand a clearance from the Committee in case it has not been so pleaded and in the absence of the clearance, the proceedings would not be proceeded with" 1. Some difficulties had sprung up 2 in implementing these directions and it necessitated the issuance of clarifications. This, the Supreme Court did in Oil and Natural Gas Commission Vs. Collector of Central Excise, (hereinafter referred to as ''ONGC-2'') . It clarified that:-

(i) the constitution of the High Powered Committee did not imply that the statutory remedies of the Union of India and its public sector undertakings were taken away or effaced;

(ii) the machinery contemplated was only to ensure that no litigation comes to court without the parties having had an opportunity of conciliation 3 before an in-house committee;

(iii) pending matters (as on the date of the ONGC-2 order) before any Court or Tribunal should also be the subject-matter of deliberations of the High Powered Committee;

3 (iv) there should be no bar to the lodgement of an appeal or petition either by the Union of India or the public sector undertakings 1 before any Court or Tribunal so as to save limitation. But, before such filing every endeavour should be made to have the clearance of the High Powered Committee;

(v) wherever appeals, petitions, etc. are filed without the clearance of the High Powered Committee so as to save limitation, the appellant or the petitioner, as the case may be, shall within a month from such filing, refer the matter to the High Powered Committee, with prior notice to the designated authority in the Cabinet Secretariat of the Government of India authorised to receive notices in that behalf;

(vi) it is only after such reference to the High Powered Committee is made in the manner indicated that the operation of the order or proceedings under challenge shall be suspended till the High Powered Committee resolves the dispute or gives clearance to the litigation. If the High Powered Committee is unable to resolve the matter for reasons to be recorded by it, it shall grant clearance for the litigation." [Emphasis supplied]

1.5 Thus, where, in order to save limitation, an appeal such as one u/s 260A of the income tax Act, 1961 is filed without first getting a clearance from the High Powered Committee, it is imperative that within one month of such filing, the appellant refers the matter to the said Committee in the manner indicated. If such a reference is made then the operation of the impugned order or proceedings shall be suspended till the committee resolves the dispute or gives clearance to the litigation. A question that arises is what is to happen to such an appeal if the appellant has not referred the matter to the High Powered Committee within the stipulated period of one month from the date of filing'' Clearly, the appeal would have to be dismissed. But, what does the court do with such an appeal (a) where the period of one month has not elapsed from the date of filing, or, (b) where the appellant has approached the High Powered Committee within the stipulated period of one month but no decision has been taken by it. In case (a) the answer is obvious, the court would have to adjourn the appeal to a date after the said period of one month elapses so as to enable the appellant to comply with the direction of referring the matter to the High Powered Committee. Case (b) , however poses some difficulty. Does the appeal in the court remain pending in suspense till the High Powered Committee takes a decision - In his opinion, my learned brother, Thakur, J. has indicated that "in case, a reference is made within the said period, the proceedings in the case shall have to remain suspended till such time the Committee resolves the disputes or gives clearance to the litigation in the Court." This, he opines, is manifest from a reading of the Supreme Court order in ONGC-2''s case (supra) . With the greatest of respect, I am unable to subscribe to this view. What the Supreme Court directed in ONGC-2''s case (supra) was that where a reference is made "the operation of the order or proceedings under challenge shall be suspended till the High Powered Committee resolves the dispute or gives clearance to the litigation." The Supreme Court did not say that the appeal, petition, etc., wherein an order or proceeding is challenged would also be suspended. It is the operation of the order impugned in an appeal or petition which gets suspended not the appeal or petition.

1.6 So, the question arises, what does one do with an appeal which has been filed without a clearance and where a reference is pending - The four alternatives that present themselves are :-

(i) The appeal be decided on merits;

(ii) The appeal be dismissed for want of the requisite clearance;

(iii) The appeal be adjourned sine die to await the decision of the High Powered Committee;

(iv) The appeal be disposed of with liberty to the appellant to revive the same in case clearance is given by the High Powered Committee.

In view of the discussion above, alternatives I and II are clearly not tenable. For, without the clearance, the matter cannot be proceeded with and pending the clearance the matter cannot be dismissed for want of it. Alternative III (i.e., adjourn sine die) does not appeal to me. Taking this route entails that an appeal which has been lodged in the High Court is not to be disposed of till the executive takes a decision in the matter. Pushing this further, would it not mean that delay on the part of the High Powered Committee to take a decision in the matter would show up as a pending appeal in the High Court'' And, would such a course not be counter to the very object of the Supreme Court directions in the two ONGC cases - The object being "to ensure that no litigation comes to Court or to a Tribunal without the matter having been first examined by the Committee and its clearance for litigation". Alternative IV seems to me to be the right and the only course to follow. There are several reasons for it. Firstly, the very object of the Supreme Court directions is satisfied. Secondly, while saving limitation of a statutory remedy the Government or the public sector undertaking, as the case may be, is asked to get a clearance from the committee before seeking revival of the appeal. Thirdly, and, most importantly, earlier orders of Division Benches of this Court are in this line and departing from such orders would not be appropriate as consistency and certainty are the hallmarks of a sound judicial system. As indicated above, succeeding Benches of equal strength cannot and ought not to brush aside orders passed by a previous Bench or Benches just because they have a different mind-set.

1.7 With humility and regret, I am also unable to agree with the observation of my brother, Thakur, J. in his opinion to the following effect:- "On a proper construction of the directions issued by the Supreme Court in the second ONGC case, disposal of the appeals merely because the same are not accompanied by the permission of the COD is not envisaged." Because, if this were so then the Supreme Court in CCE v. Jeesop & Co. Ltd. [1999] 9 SCC 181 would not have passed the following order of ''disposal'' of appeals :-

The dispute is between the revenue and M/s. Jeesop & Co. Ltd. and Richardson & Cruddus (1972) Ltd. and the nature of the question for decision is such that it would arise only in respect of the liability of the public sector companies for the payment of the duty. The course to be followed when the parties resort to litigation of this kind has been indicated by this Court in Oil & Natural Gas Commission v. CCE 1 which has later been clarified with an order of the same type in Oil and Natural Gas Commission v. CCE 2. In short, litigation of this kind between the Central Government and the public sector undertakings is not to be resorted to without the matter being examined by a High Powered Committee of Secretaries and with its clearance. This has not been done in the present cases. The course indicated in those orders passed by this Court has to be adopted by the revenue.

These appeals have, therefore, to be disposed of in terms of those orders. It is directed accordingly." [Emphasis supplied]

In the light of the above discussion it is clear that where the appellants have made a reference to the High Powered Committee within one month of the filing (or prior thereto) of their respective appeals, the appeals will have to be disposed of with liberty to the appellants to revive the appeals on obtaining clearance from the said Committee. Where the references have not been made within the stipulated period of one month from the date of filing, the appeals would have to be dismissed. Now, the dates of filing of the present appeals are known. But, the dates on which the references (if any) were made to the High Powered Committee are not disclosed. Since this is crucial to the fate of the appeals, it would be appropriate to allow the appellants two weeks time to furnish the details. Whereupon, orders in terms indicated above could be passed. Accordingly, list these appeals for orders after two weeks.

My opinion, originally terminated with the preceding paragraph. I deem it necessary to add to it because, after my opinion was seen by my learned brother, Thakur, J., I find that he has made a substantial addition to his draft which was earlier circulated to me. The addition finds place in paragraph 6 thereof under the heading ''Re: Category (III) '' and is contained in pages 10, 11, 12 and 13 of his opinion. Since there is a cleavage of opinion on this issue and the matter is to be referred to a Third Judge, it would be appropriate if I expressed my views on the additions contained in, the finalised opinion of Thakur, J.

2.1 At the outset, I make it clear that my opinion remains the same and the directions as indicated in paragraph 2 above would continue to hold good insofar as I am concerned.

2.2 Essentially, in the additional portion, brother, Thakur, J., has sought to buttress his views by some new thoughts. He is of the view that a disposal of an appeal in the manner adopted by earlier Division Benches in similar circumstances would amount to summarily throwing out the matter. However, at the same time his view is that such an order would be in the nature of an interim order and, therefore, would not operate as a binding precedent on subsequent Division Benches. With respect, these two concepts, to my mind do not get together. On the one-hand finality is being attached to an order and on the other it is described as an interim order.

2.3 It is then suggested that there is no provision in the income tax Act, 1961 or the Code of Civil Procedure, 1908 empowering the Court to dispose of an appeal with liberty to revive the same at the will of the appellant. And that, cases must be decided rather than be disposed of. My views on these are two-fold. Firstly, we are in this position not because of any statutory provision but because of explicit directions of the Supreme Court, which, it is our duty to follow. Can we say that we need not follow the directions of the Supreme Court requiring a peremptory clearance from the Committee on Disputes and instead, go ahead and decide the appeal on merits because there is no statutory provision requiring a reference to the COD'' I think not. So, in this backdrop, a hunt for statutory provisions would be an exercise in futility. Secondly, a complete answer is given in the Supreme Court decision in MTNL''s case (supra) which clearly indicated that the directions given in the earlier cases (including ONGC-2) were to set a mechanism not only to conciliate between Government Departments but also for "ensuring that frivolous disputes do not come before Courts without clearance from the High Powered Committee.'''' The Supreme Court reiterated that:-

The litigation.... of a frivolous nature must not be brought to Court.

The Supreme Court went on to specify that if the COD refuses permission, that would put a lid on the matter and "even if the department/public sector undertaking finds the decision unpalatable, discipline requires that they abide by it. Otherwise the whole purpose of this exercise will be lost and every party against whom the decision is given will claim that they have been wronged and that their rights are affected. This should not be allowed to be done." The thread of reasoning is that Courts should not be burdened with litigation (a) where conciliation is possible, the COD acting as the conciliator and (b) which is of a frivolous nature. If a case is of a frivolous nature, the COD would refuse permission and that would put an end to the matter. In other cases, if conciliation is possible the COD will take care of it. In all such cases the Courts would not be required to deal with the same. It is only when the COD considers a case to be ''non-frivolous'' and beyond the pale of conciliation that the COD would grant approval for litigation and it is then that the Court would have to take a decision in the matter. Hence, in this scheme of things disposal of appeals as hitherto being done by earlier Division Benches is apposite. In fact, as pointed out earlier the Supreme Court, itself has taken this course in the case of Jeesop & Co. Ltd. (supra) .

2.4 I am also not in agreement with the view of brother Thakur, J. that rather than disposing the appeals they should be kept pending before us, awaiting the decision of the COD, so that we can issue appropriate directions and monitor the same. These are all appeals u/s 260A of the income tax Act, 1961 where this Court''s interference is limited to substantial questions of law. In exercise of this jurisdiction, this Court ought not to be concerned about monitoring the cases before the COD. If the approval is there, we decide the appeal on merit. If it is not there, we, in view of the Supreme Court decisions, dismiss the same for lack of it. Moreover, the argument of prejudice being caused to the respondent also does not appeal to me. These are not cases of private citizens or companies. These are a special group of cases where departments or undertakings of the same Government are pitted against each other. In a sense, the same ''person'' is both the appellant and the respondent. It is only because of this nature of the litigants that the Supreme Court has given directions to deal with them in a special way. Once again, the Supreme Court decision in MTNL''s case (supra) would dispel the fear of prejudice to the respondent:-

...in almost all cases one or the other party will not be happy with the decision of the High Powered Committee. The dissatisfied party will always claim that its rights are affected, when in fact, no right is affected. The Committee is constituted of highly placed officers of the Government, who do not have an interest in the disputes, it is thus expected that their decision will be fair and honest.... (p. 436)

And, in this context, when the appellant, who has been given the go-ahead by the COD, does seek revival of its appeal, the respondent cannot claim any prejudice.

2.5 It would be pertinent to point out that disposal of matters with liberty to revive the same is a mechanism which is not alien to this Court. This very Bench has passed orders in numerous old income tax references, returning the references unanswered for want of filing of paper books with liberty to seek revival of the same in case the paper books are filed within six months. Such a manner of disposal, if it is good for old income tax reference should also apply to income tax appeals. The whole idea being that Courts should be relieved of the burden and tag of pendency in respect of cases which, in reality, is the making of the litigants - appellants in this case. Court time is too precious to waste on such cases when, in point of fact, it must be singularly spent on those cases which raise serious disputes and are crying for justice.

2.6 Lastly, with all due respect to the view held by Thakur, J., there is no conflict between the procedure prescribed by the Supreme Court and the course undertaken by earlier Division Benches of this Court. On the contrary, as indicated above, the Supreme Court itself, in Jeesop & Co. Ltd.''s case (supra) ''disposed'' of appeals. Moreover, there is no direction of the Supreme Court to the effect that once a reference to the COD is made, an appeal or petition must be kept pending before a Court till the reference is disposed of by the said Committee.

For all these additional reasons I reiterate the directions contained in Paragraph 2 above.