LAW FOR ALL

Tuesday, September 15, 2015

Section 35G(3) of the Central Excise Act, 1944 (hereinafter referred to as the 'Act'),“Whether Section 11B of the Central Excise Act, as amended, applies to cases where though an order has been passed directing refund, implementation of the order is pending?”= In the first instance, it requires to be remarked that only after amendment in Section 11B of the Act in the year 1991, any person applying for refund has to establish that incidence of such duty has not been passed on by him to any other person. The unamended provision did not contain any such stipulation. Therefore, under the old provision, the only obligation of the person claiming refund was to make such an application before the expiry of six months from the relevant date and to show how the refund was admissible to the applicant. In such a case, the Assistant Collector of Central Excise was to only examine as to whether excise duty was paid in excess etc. and was refundable to the claimant as a result of adjudication of the dispute or otherwise. It is only in the amended provision that additional stipulation is provided as per which the claimant is required to file, along with application for refund, such documentary or other evidence including documents referred to any Section 12A of the Act to establish that the amount of duty of excise was collected from the claimant or paid by the claimant and that “incidence of such duty had not been passed on by him to any other person”. It clearly follows from the above that before the amendment of Section 11B of the Act, principle of unjust enrichment was not incorporated under the unamended provision. In fact that was precisely the reason for amending the provision so that this doctrine of “unjust enrichment” is incorporated, viz., to take care of the mischief that was prevailing under the unamended provision which was removed by making amendment, popularly known as Heydon's Mischief Rule. Proviso to sub-section (1) of Section 11B, as amended, would be applicable in a situation where an application for refund made before the said amendment was still pending at the time when the provisions of Section 11B were amended. This is how the said proviso is interpreted by this Court in Mafatlal Industries Ltd. (supra). Once we find that no such application was pending and the orders on the said application had already been passed, the proviso ceases to have any application. The reason, even otherwise, is very obvious. Section 11B relates to claim for refund of duty and the procedure for such a refund is stipulated in this section. As per sub-section (1) thereof, any person claiming refund of any duty of excise has to move an application for refund of such duty to the Assistant Commissioner of Central Excise. Once such an application is made, the same is to be considered in accordance with this provision. As already pointed out above, under the unamended provision, the Assistant Commissioner was not required to go into the question as to whether incidence of such duty had been passed on by the applicant claiming refund to any other person or not. However, if the application was not decided till the time amendment was incorporated in the year 1991, as per the proviso, while dealing with such an application for refund, the Assistant Commissioner is still empowered to go into this question even when the application was filed before the commencement of the amended provision. This situation would prevail only when there is a pending application before the Assistant Commissioner of Central Excise, which is yet to be decided. If the order for refund on such an application had already been passed before coming into force the amended provision and no application was pending at the commencement of the Central Excise and Customs Laws (Amendment) Act, 1991 before the Assistant Commissioner and, therefore, question of applying the said proviso and going into the issue as to whether incidence of such duty had been passed by the applicant to any other person or not would not arise. Thereafter, order passed on the application is only to be implemented by giving the refund as per that order. By no stretch of imagination, the Officer, at the time of carrying out the orders for refund, which have already been passed, can be invested with the powers to go into the question of unjust enrichment by invoking the proviso to sub-section (1) of Section 11B. In the instant case, the order on the refund application of the respondent had been passed on 06.06.1989, which was much before the amended provision came into operation. In fact, even after the order of refund was passed, the appellant had not refunded the amount and it is in these circumstances that writ petition was filed in the High Court for initiation of contempt proceedings against the defaulting officers. In such proceedings, the High Court had passed the order dated 18.07.1995. In this order, no doubt, the Court observed that the Assistant Commissioner would go into the question if the respondent should be granted the refund in spite of Section 11B of the Act. However, merely because of such observations, it cannot be said that the Assistant Commissioner was entitled to look into the issue of unjust enrichment when if, otherwise, he he was otherwise had no jurisdiction to do so in the facts of the present case. Such observations were given in view of the statement of the counsel for the Government who brought to the notice of the Court the amended provisions contained in sub- section (3) of Section 11B of the Act. The High Court did not go into the issue as to whether such a course of action was permissible or not. Another pertinent aspect which needs to be kept in mind is that the interpretation that is to be accorded to the amended provision had not been decided by this Court till that time and the law on this issue came to be settled in the year 1997 only when the judgment in Mafatlal Industries Ltd. (supra) was pronounced by this Court. Thus, when the order of the Assistant Commissioner was challenged and the matter came before the Tribunal, the Tribunal was duty bound to apply the law laid down in Mafatlal Industries Ltd. (supra), which it did. Similar exercise is done by the High Court in the impugned judgment. We find that the view taken by the High Court is in consonance with the law laid down by this Court in the aforesaid case. We find that there is no scope to interfere with the impugned decision of the High Court and, accordingly, dismiss this appeal. No costs.

'REPORTABLE'

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 3600 OF 2006

|COMMISSIONER OF CENTRAL EXCISE, |.....APPELLANT(S) |
|TIRUCHIRAPALLI | |
|VERSUS | |
|M/S. DALMIA CEMENT (BHARAT) LTD. |.....RESPONDENT(S) |

J U D G M E N T

A.K. SIKRI, J.
On an application under Section 35G(3) of the Central
Excise Act, 1944 (hereinafter referred to as the 'Act'), the Customs Excise
and Gold (Control) Appellate Tribunal (hereinafter referred to as the
'CEGAT') referred the following question to the High Court of Delhi for its
opinion :-
“Whether Section 11B of the Central Excise Act, as amended, applies to
cases where though an order has been passed directing refund,
implementation of the order is pending?”

The High Court has answered the aforesaid question in favour of assessee
holding that since the proceedings under the old Section 11B of the Act had
attained finality, the amended provision of Section 11B of the Act, in
particular, proviso to sub-section (1) shall not apply. In other words, the
principle of 'unjust enrichment' which was introduced by way of amendment
of Section 11B in the year 1991 shall not be attracted in the instant case
as the proceedings under the unamended Section stood finalised with the
direction in the application filed under unamended Section 11B of the Act
to refund the excise duty that was paid by the respondent/assessee. To put
it pithily, the High Court has held that merely because implementation of
the aforesaid order was pending, in the sense that direction to refund the
amount had not been carried out, the authority could not go into the
question of unjust enrichment by invoking the proviso to sub-section (1) of
Section 11B of the Act that had been introduced by that time by way of
amendment in Section 11B of the Act. Therefore, it was not open to the
concerned officer, who was only supposed to carry out the implementation of
the order, to go into the question as to whether there was any unjust
enrichment on the part of the assessee or not. In coming to this
conclusion, the High Court has extensively referred to a 9-Judge Bench of
this Court in the case of Mafatlal Industries Ltd. and Others v. Union of
India and Others[1].

It is not disputed before us that the law laid down in the aforesaid
judgment would be applicable. However, the appellant contends that there is
a small window left open in the said judgment which would cover the
situation that has arisen in the present case. As per the case set up by
the appellant, even where order is yet to be implemented, though passed
under the unamended provision, at this stage of implementation as well the
question of unjust enrichment can be gone into by the concerned authority.

We may point out at this stage itself that Section 11B, as it existed prior
to its amendment in the year 1991, did not contain any provision of unjust
enrichment. Thus, if the assessee was entitled to refund of duty under the
Act, it could make an application for such a refund to the Assistant
Collector of Central Excise before the expiry of six months from the refund
date and the procedure how such application is to be dealt with was
stipulated in the said provision. This Section was amended with effect from
20.09.1991 by Central Excise and Customs Laws (Amendment) Act, 1991. Under
the amended provision, while considering the application for refund, the
Assistant Collector of Central Excise is empowered to go into the question
as to whether incidence of such duty has been passed on by the person
claiming refund to any other person. If the claimant has passed on the
incidence of excise duty to other person then the application for refund
can be rejected on the ground that it would amount to unjust enrichment to
that person who is not out of pocket even when the excise duty was paid in
excess etc. Proviso to this sub-section (1) further provides that even when
application for refund was filed before the amendment of this Section and
still pending, it shall be deemed that such an application made under
amended sub-section (1) of Section 11B of the Act and is to be dealt with
in accordance with the provisions of sub-section (2), substituted by the
amendment. Thus, the applications even filed under the unamended Act, if
not disposed of and still pending, are to be treated as filed under the
amended Section 11B and the consequence thereof is that even in respect of
such applications doctrine of “unjust enrichment” would be applicable. In
this scenario, when an application was not pending, in the sense that
orders thereon had already been passed directing refund but the amount had
not been refunded so far, we have to determine as to whether such a
situation has also to be dealt with under the amended section thereby
bringing into operation the doctrine of “unjust enrichment”? As mentioned
above, the High Court has answered this question in the negative and this
Court is called upon to decide the veracity of the said view taken by the
High Court in the instant appeal.

The facts which need to be noted for the purposes of this appeal do not
need a large canvass and are recapitulated in brief, as under:

The period involved for which the respondent wanted refund of the excise
duty paid by it is 1970-1978. It may be mentioned that there was a dispute
regarding the assessable value of cement cleared by the assessee during the
aforesaid period, when excise duty of cement was ad valorem. The dispute
related to freight involved in the dispatch of the cement to various
destinations. The Department had included the cost of freight as well while
determining the assessable value in terms of Section 4 of the Central
Excise and Salt Act, 1944 (hereinafter referred to as the 'Act'). It was
decided in favour of the assessee vide order dated 06.06.1989 passed by the
CEGAT. In spite of this decision, amount was not refunded. This prompted
respondent to file Civil Writ No. 3225 of 1991 in the High Court of Delhi
seeking writ, order or direction for initiating contempt of court
proceedings against the Collector of Central Excise, Tiruchirapalli and
Assistant Collector of Central Excise, Tiruchirapalli for not granting the
refund despite the order of the CEGAT. The said writ petition was disposed
of on 18.07.1995. Taking note of the statement of counsel for both the
parties that a date may be fixed before the Collector/Assistant Collector
to go into the question if the appellant should be granted refund in spite
of Section 11B of the Act, direction was given to appear before the
Collector/Assistant Collector on 22.09.1995 and the writ petition was
disposed of. Pursuant to the said direction, hearing was granted by the
Assistant Commissioner who passed orders dated 28.03.1996 holding that
assessee was not eligible to get the refund as per amended provisions of
Section 11B of the Act and directed that this amount be credited to the
Consumer Welfare Fund established under Section 12C of the Act. The reason
for rejecting the claim of the assessee was that the case of the respondent
fell within the four walls of the concept of “unjust enrichment”. Feeling
aggrieved by this order, appeal was filed before the Commissioner of
Customs and Central Excise (Appeal) which was dismissed on 20.12.1996.
Further, appeal was preferred before the CEGAT and in this attempt the
assessee triumphed inasmuch as Tribunal decided the case in favour of
assessee holding that since no proceedings were pending before the
Assistant Commissioner as far as application for refund is concerned and it
was only the execution of the order of refund that was passed much prior to
1991, amended provision of Section 11B would not be attracted. The
appellant filed rectification application which was dismissed by the
Tribunal on 20.02.2002. Thereafter, appellant filed reference application
before the High Court of Delhi in terms of 35G(3) of the Act raising the
question of law which has already been reproduced in the earlier part of
this judgment. Again, as pointed out above, the High Court has answered
this question in favour of assessee, recording the following findings:
“(a) It has been held that there are no merits in this reference, as the
question involved is clearly settled by the 9-Judge Bench decision of this
Hon'ble Court in the case of Mafatlal Industries Ltd. (supra) wherein this
Hon'ble Court held that if an application for refund has been disposed off,
and the order had become final before the 1991 amendment to Section 11B
came into force, the principles of unjust enrichment will not apply.

(b) Section 11-B, after the 1991 amendment, stated that the party applying
for refund had to establish that the incidence of such duty had not been
passed on by him to any other person. It follows, therefore, that
Parliament did not apply the principles of unjust enrichment to cases
covered by the unamended Section11B and it was the reason that the
amendment was made in Section 11-B in 1991.”

On the basis of what is pointed out above, it is clear that the exercise to
be undertaken is to find out the ratio laid down in Mafatlal Industries
Ltd. (supra) in the given situation. Before we advert to the same, we deem
it appropriate to refer to, at this stage, unamended and amended provisions
of Section 11B.
“Section 11B: Claim for refund of duty (1) Any person claiming refund of
any duty of excise may make an application for refund of such duty to the
Assistant Collector of Central Excise before the expiry of six months from
the relevant date.

Provided that the limitation of six months shall not apply where any
duty has been paid under protest.

(2) If on receipt of any such application, the Assistant Collector of
Central Excise is satisfied that the whole or any part of the duty of
excise paid by the applicant should be refunded to him, he may make an
order accordingly.

(3) Where as a result of any order passed in appeal or revision under this
Act refund of any duty of excise becomes due to any persons the Assistant
Collector of Central Excise may refund the amount to such person without
his having to make any claim in that behalf.

(4) Save as otherwise provided by or under this act, no claim for refund
of any duty of excise shall be entertained.

(5) Notwithstanding anything contained in any other law, the provisions
of this Section shall also apply to a claim for refund of any amount
collected as duty of excise made on the ground that the goods in respect of
which such amount was collected were no excisable or were entitled to
exemption from duty and no court shall have any jurisdiction in respect of
such claim.”

After 1991 amendment, the material part of Section 11B reads as follows:
“11B. Claim for refund of duty and interest, if any, paid on such duty.—(1)
Any person claiming refund of any duty of excise and interest, if any, paid
on such duty may make an application for refund of such [duty and interest,
if any, paid on such duty to the Assistant Commissioner of Central Excise
or Deputy Commissioner of Central Excise before the expiry of one year from
the relevant date in such form and manner as may be prescribed and the
application shall be accompanied by such documentary or other evidence
(including the documents referred to in section 12A) as the applicant may
furnish to establish that the amount of duty of excise and interest, if
any, paid on such duty in relation to which such refund is claimed was
collected from, or paid by, him and the incidence of such duty and
interest, if any, paid on such duty had not been passed on by him to any
other person:

Provided that where an After 1991 amendment, the material part
of Section 11B reads as follows:application for refund has been made before
the commencement of the Central Excises and Customs Laws (Amendment) Act,
1991 (40 of 1991), such application shall be deemed to have been made under
this sub-section as amended by the said Act and the same shall be dealt
with in accordance with the provisions of sub-section (2) as substituted by
that Act:

Provided further that the limitation of one year shall not
apply where any duty and interest, if any, paid on such duty has been paid
under protest.

(2) If, on receipt of any such application, the Assistant Commissioner of
Central Excise or Deputy Commissioner of Central Excise is satisfied that
the whole or any part of the duty of excise and interest, if any, paid on
such duty paid by the applicant is refundable, he may make an order
accordingly and the amount so determined shall be credited to the Fund:

Provided that the amount of [duty of excise and interest, if
any, paid on such duty as determined by the Assistant Commissioner of
Central Excise or Deputy Commissioner of Central Excise under the foregoing
provisions of this sub-section shall, instead of being credited to the
Fund, be paid to the applicant, if such amount is relatable to--

(a) rebate of duty of excise on excisable goods exported out of India or on
excisable materials used in the manufacture of goods which are exported out
of India;

(b) unspent advance deposits lying in balance in the applicant's account
current maintained with the Commissioner of Central Excise or Commissioner
of Central Excise;

(c) refund of credit of duty paid on excisable goods used as inputs in
accordance with the rules made, or any notification issued,After 1991
amendment, the material part of Section 11B reads as follows: under this
Act;

(d) the duty of excise and interest, if any, paid on such duty paid by the
manufacturer, if he had not passed on the incidence of such duty and
interest, if any, paid on such duty to any other person;

(e) the duty of excise and interest, if any, paid on such duty borne by the
buyer, if he had not passed on the incidence of such duty and interest, if
any, paid on such duty to any other person;

(f) the duty of excise and interest, if any, paid on such duty borne by any
other such class of applicants as the Central Government may, by
notification in the Official Gazette, specify:

Provided further that no notification under clause (f) of the
first proviso shall be issued unless in the opinion of the Central
Government the incidence of duty and interest, if any, paid on such duty
has not been passed on by the persons concerned to any other person.

(3) Notwithstanding anything to the contrary contained in any judgment,
decree, order or direction of the Appellate Tribunal or any Court in any
other provision of this Act or the rules made thereunder or any other law
for the time being in force, no refund shall be made except as provided in
sub-section (2).

(4) Every notification under clause (f) of the first proviso to sub-section
(2) shall be laid before each House of Parliament, if it is sitting, as
soon as may be after the issue of the notification, and, if it is not
sitting, within seven days of its reassembly, and the Central Government
shall seek the approval of Parliament to the notification by a resolution
moved within a period of fifteen days beginning with the day on which the
notification is so laid before the House of the People and if Parliament
makes any modification in the notification or directs that the notification
should cease to have effect, the notification shall thereafter have effect
only in such modified form or be of no effect, as the case may be, but
without prejudice to the validity of anything previously done thereunder.

(5) For the removal of doubts, it is hereby declared that any notification
issued under clause (f) of the first proviso to sub-section (2), including
any such notification approved or modified under sub-section (4), may be
rescinded by the Central Government at any time by notification in the
Official Gazette.

Explanation.--For the purposes of this section,--

(A) "refund" includes rebate of duty of excise on excisable goods exported
out of India or on excisable materials used in the manufacture of goods
which are exported out of India;

(B) "relevant date" means,--

(a) in the case of goods exported out of India where a refund of excise
duty paid is available in respect of the goods themselves or, as the case
may be, the excisable materials used in the manufacture of such goods,--

(i) if the goods are exported by sea or air, the date on which the ship or
the aircraft in which such goods are loaded, leaves India, or

(ii) if the goods are exported by land, the date on which such goods pass
the frontier, or

(iii) if the goods are exported by post, the date of dispatch of goods by
the Post Office concerned to a place outside India;

(b) in the case of goods returned for being remade, refined, reconditioned,
or subjected to any other similar process, in any factory, the date of
entry into the factory for the purposes aforesaid;

(c) in the case of goods to which banderols are required to be affixed if
removed for home consumption but not so required when exported outside
India, if returned to a factory after having been removed from such factory
for export out of India, the date of entry into the factory;

(d) in a case where a manufacturer is required to pay a sum, for a certain
period, on the basis of the rate fixed by the Central Government by
notification in the Official Gazette in full discharge of his liability for
the duty leviable on his production of certain goods, if after the
manufacturer has made the payment on the basis of such rate for any period
but before the expiry of that period such rate is reduced, the date of such
reduction;

(e) in the case of a person, other than the manufacturer, the date of
purchase of the goods by such person;

(ea) in the case of goods which are exempt from payment of duty by a
special order issued under sub-section (2) of section 5A, the date of issue
of such order;

(eb) in case where duty of excise is paid provisionally under this Act or
the rules made thereunder, the date of adjustment of duty after the final
assessment thereof;

(ec) in case where the duty becomes refundable as a consequence of
judgment, decree, order or direction of appellate authority, Appellate
Tribunal or any court, the date of such judgment, decree, order or
direction;

(f) in any other case, the date of payment of duty.”

We have already narrated the facts and events in the instant case in detail
above. However, it is pertinent to keep in mind that applications for
refund of excise which were preferred by the assessee had already been
allowed finally by the orders of CEGAT dated 01.06.1989 and 06.06.1989.
This obviously happened before the amendment in the Section in the year
1991. At the same time, the refund had not been actually paid to the
assessee till 1991 when the provisions of Section 11B came to be amended.
We now advert to the decision in the case of Mafatlal Industries Ltd.
(supra).

It is a nine Judge Bench decision. Majority opinion was delivered by B.P.
Jeevan Reddy, J. for himself and on behalf of four other Judges. K.S.
Paripoornan, J. and S.C.Sen, J. wrote their separate opinions. Hansaria,
J. agreed with the conclusions and reasoning of Paripoornan, J. However,
insofar as issue at hand is concerned, they concurred with the majority
opinion rendered by B.P. Jeevan Reddy, J. Thus, eight out of nine Judges
have taken the same view. A.M. Ahmadi, the then Chief Justice, was the only
dissenting Judge, who took contrary view on this particular issue. With
this background in mind, we reproduce the following relevant portions from
the opinion of B.P. Jeeven Reddy, J.:
“57. The first decision of this Court to consider the amended Section 11-B
is in Union of India v. Jain Spinners Ltd (1992) 4 SCC 389 The validity of
the 1991 (Amendment) Act was, however, neither raised nor considered by the
court. The impugned orders of the High Court, made before the coming into
force of the 1991 (Amendment) Act, directing refund of the excess duty
collected to the manufacturers, this Court held, would defeat the
provisions of amended Section 11-B which had come into force during the
pendency of the refund proceedings. The Court held that so long as the
refund proceedings are pending, the amended provisions get attracted and
disentitle the manufacturer-payer from claiming any refund contrary to the
said provisions. In other words, the contention of the manufacturers that
the amended Section 11-B applies only to claims of refund arising after the
coming into force of the said Amendment Act was rejected.

96. There is yet another circumstance: Section 12-B does not create a new
presumption unknown till then; it merely gives statutory shape to an
existing situation, as explained hereinbefore. At the most, it can be said
that there were two views on the subject and Section 12-B affirms one of
them. Even without Section 12-B, the true position is the same, as held by
us in the earlier part of this judgment. The obligation to prove that duty
has not been passed on to another person is always there as a precondition
to claim of refund. It cannot also be said that by giving retrospective
effect to Section 11-B, any vested rights or substantive rights are being
taken away. The deprivation, if at all, is not real. The manufacturer has
already collected the duty from his purchaser and has thus reimbursed
itself. By applying for refund yet, he is trying to reap a windfall;
deprivation of that cannot be said to be real or substantial prejudice or
loss. A manufacturer had no vested legal right to refund even when he had
passed on the burden of duty to others. No law conferred such a right in
him — not Article 265, nor Section 11-B. It was only on account of an
incorrect view of law taken in Kanhaiya Lal 1959 SCR 1350 : AIR 1959 SC 135
: (1958) 9 STC 747 and that cannot be treated as a vested legal right.
Correction of judicial error does not amount to deprivation of
vested/substantive rights, even though a person may be deprived of an
unwarranted advantage he had under the overruled decision. In cases, where
the burden is not passed on, there is no prejudice; he can always get the
refund.

97. There is yet another circumstance: Section 12-B does not create a new
presumption unknown till then; it merely gives statutory shape to an
existing situation, as explained hereinbefore. At the most, it can be said
that there were two views on the subject and Section 12-B affirms one of
them. Even without Section 12-B, the true position is the same, as held by
us in the earlier part of this judgment. The obligation to prove that duty
has not been passed on to another person is always there as a precondition
to claim of refund. It cannot also be said that by giving retrospective
effect to Section 11-B, any vested rights or substantive rights are being
taken away. The deprivation, if at all, is not real. The manufacturer has
already collected the duty from his purchaser and has thus reimbursed
itself. By applying for refund yet, he is trying to reap a windfall;
deprivation of that cannot be said to be real or substantial prejudice or
loss. A manufacturer had no vested legal right to refund even when he had
passed on the burden of duty to others. No law conferred such a right in
him — not Article 265, nor Section 11-B. It was only on account of an
incorrect view of law taken in Kanhaiya Lal 1959 SCR 1350 : AIR 1959 SC 135
: (1958) 9 STC 747 and that cannot be treated as a vested legal right.
Correction of judicial error does not amount to deprivation of
vested/substantive rights, even though a person may be deprived of an
unwarranted advantage he had under the overruled decision. In cases, where
the burden is not passed on, there is no prejudice; he can always get the
refund.

98. A major attack is mounted by the learned counsel for petitioners-
appellants on Section 11-B and its allied provisions on the ground that
real purpose behind them was not to benefit the consumers by refusing
refund to manufacturers (on the ground of passing on the burden) but only
to enable the Government to retain the illegally collected taxes. It is
suggested that the creation of the Consumer Welfare Fund is a mere pretence
and not an honest exercise. By reading the Rules framed under Section 12-D,
it is pointed out, even a consumer, who has really borne the burden of tax
and is in a position to establish that fact, is yet not entitled to apply
for refund of the duty since the Rules do not provide for such a situation.
The Rules contemplate only grants being made to Consumer Welfare Societies.
Even in the matter of making grants, it is submitted, the Rules are so
framed as to make it highly difficult for any consumer organisation to get
the grant. There is no provision in the Act, Shri Nariman submitted, to
locate the person really entitled to refund and to make over the money to
him. “We expect a sensitive Government not to bluff but to hand back the
amounts to those entitled thereto”, intoned Shri Nariman. It is a
colourable device — declaimed Shri Sorabjee — “a dirty trick” and “a shabby
thing”. The reply of Shri Parasaran to this criticism runs thus: It ill-
becomes the manufacturers/assessees to espouse the cause of consumers, when
all the while they had been making a killing at their expense. No
consumers’ organisation had come forward to voice any grievance against the
said provisions. Clause (e) of the proviso to sub-section (2) of Section 11-
B does provide for the buyer of the goods, to whom the burden of duty has
been passed on, to apply for refund of duty to him, provided that he has
not in his turn passed on the duty to others. It is, therefore, not correct
to suggest that the Act does not provide for refund of duty to the person
who has actually borne the burden. There is no vice in the relevant
provisions of the Act. Rules cannot be relied upon to impugn the validity
of an enactment, which must stand or fall on its own strength. The defect
in the Rules, assuming that there is any, can always be corrected if the
experience warrants it. The Court too may indicate the modifications needed
in the Rules. The Government is always prepared to make the appropriate
changes in the Rules since it views the process as a “trial and error”
method — says Shri Parasaran.

105. It would be evident from the above discussion that the claims for
refund under the said two enactments constitute an independent regimen.
Every decision favourable to an assessee/manufacturer, whether on the
question of classification, valuation or any other issue, does not
automatically entail refund. Section 11-B of the Central Excises and Salt
Act and Section 27 of the Customs Act, whether before or after the 1991
Amendment — as interpreted by us herein — make every refund claim subject
to proof of not passing on the burden of duty to others. Even if a suit is
filed, the very same condition operates. Similarly, the High Court while
examining its jurisdiction under Article 226 — and this Court while acting
under Article 32 — would insist upon the said condition being satisfied
before ordering refund. Unless the claimant for refund establishes that he
has not passed on the burden of duty to another, he would not be entitled
to refund, whatever be the proceeding and whichever be the forum. Section
11-B/Section 27 are constitutionally valid, as explained by us
hereinbefore. They have to be applied and followed implicitly wherever they
are applicable.

108. The discussion in the judgment yields the following propositions. We
may forewarn that these propositions are set out merely for the sake of
convenient reference and are not supposed to be exhaustive. In case of any
doubt or ambiguity in these propositions, reference must be had to the
discussion and propositions in the body of the judgment.

(i) Where a refund of tax/duty is claimed on the ground that it has been
collected from the petitioner/plaintiff — whether before the commencement
of the Central Excises and Customs Laws (Amendment) Act, 1991 or thereafter
— by misinterpreting or misapplying the provisions of the Central Excises
and Salt Act, 1944 read with Central Excise Tariff Act, 1985 or Customs
Act, 1962 read with Customs Tariff Act or by misinterpreting or misapplying
any of the rules, regulations or notifications issued under the said
enactments, such a claim has necessarily to be preferred under and in
accordance with the provisions of the respective enactments before the
authorities specified thereunder and within the period of limitation
prescribed therein. No suit is maintainable in that behalf. While the
jurisdiction of the High Courts under Article 226 — and of this Court under
Article 32 — cannot be circumscribed by the provisions of the said
enactments, they will certainly have due regard to the legislative intent
evidenced by the provisions of the said Acts and would exercise their
jurisdiction consistent with the provisions of the Act. The writ petition
will be considered and disposed of in the light of and in accordance with
the provisions of Section 11-B. This is for the reason that the power under
Article 226 has to be exercised to effectuate the rule of law and not for
abrogating it.

The said enactments including Section 11-B of the Central Excises and Salt
Act and Section 27 of the Customs Act do constitute “law” within the
meaning of Article 265 of the Constitution of India and hence, any tax
collected, retained or not refunded in accordance with the said provisions
must be held to be collected, retained or not refunded, as the case may be,
under the authority of law. Both the enactments are self-contained
enactments providing for levy, assessment, recovery and refund of duties
imposed thereunder. Section 11-B of the Central Excises and Salt Act and
Section 27 of the Customs Act, both before and after the 1991 (Amendment)
Act are constitutionally valid and have to be followed and given effect to.
Section 72 of the Contract Act has no application to such a claim of refund
and cannot form a basis for maintaining a suit or a writ petition. All
refund claims except those mentioned under Proposition (ii) below have to
be and must be filed and adjudicated under the provisions of the Central
Excises and Salt Act or the Customs Act, as the case may be. It is
necessary to emphasise in this behalf that Act provides a complete
mechanism for correcting any errors whether of fact or law and that not
only an appeal is provided to a Tribunal — which is not a departmental
organ — but to this Court, which is a civil court.

(ii) Where, however, a refund is claimed on the ground that the provision
of the Act under which it was levied is or has been held to be
unconstitutional, such a claim, being a claim outside the purview of the
enactment, can be made either by way of a suit or by way of a writ
petition. This principle is, however, subject to an exception: Where a
person approaches the High Court or the Supreme Court challenging the
constitutional validity of a provision but fails, he cannot take advantage
of the declaration of unconstitutionality obtained by another person on
another ground; this is for the reason that so far as he is concerned, the
decision has become final and cannot be reopened on the basis of a decision
on another person’s case; this is the ratio of the opinion of Hidayatullah,
C.J. in Tilokchand Motichand (1969) 1 SCC 110 : (1969) 2 SCR 824 : AIR 1970
SC 898 and we respectfully agree with it. Such a claim is maintainable
both by virtue of the declaration contained in Article 265 of the
Constitution of India and also by virtue of Section 72 of the Contract Act.
In such cases, period of limitation would naturally be calculated taking
into account the principle underlying clause (c) of sub-section (1) of
Section 17 of the Limitation Act, 1963. A refund claim in such a situation
cannot be governed by the provisions of the Central Excises and Salt Act or
the Customs Act, as the case may be, since the enactments do not
contemplate any of their provisions being struck down and a refund claim
arising on that account. In other words, a claim of this nature is not
contemplated by the said enactments and is outside their purview.
(iii) A claim for refund, whether made under the provisions of the Act as
contemplated in Proposition (i) above or in a suit or writ petition in the
situations contemplated by Proposition (ii) above, can succeed only if the
petitioner/plaintiff alleges and establishes that he has not passed on the
burden of duty to another person/other persons. His refund claim shall be
allowed/decreed only when he establishes that he has not passed on the
burden of the duty or to the extent he has not so passed on, as the case
may be. Whether the claim for restitution is treated as a constitutional
imperative or as a statutory requirement, it is neither an absolute right
nor an unconditional obligation but is subject to the above requirement, as
explained in the body of the judgment. Where the burden of the duty has
been passed on, the claimant cannot say that he has suffered any real loss
or prejudice. The real loss or prejudice is suffered in such a case by the
person who has ultimately borne the burden and it is only that person who
can legitimately claim its refund. But where such person does not come
forward or where it is not possible to refund the amount to him for one or
the other reason, it is just and appropriate that that amount is retained
by the State, i.e., by the people. There is no immorality or impropriety
involved in such a proposition.

The doctrine of unjust enrichment is a just and salutary doctrine. No
person can seek to collect the duty from both ends. In other words, he
cannot collect the duty from his purchaser at one end and also collect the
same duty from the State on the ground that it has been collected from him
contrary to law. The power of the Court is not meant to be exercised for
unjustly enriching a person. The doctrine of unjust enrichment is, however,
inapplicable to the State. State represents the people of the country. No
one can speak of the people being unjustly enriched.

(iv) It is not open to any person to make a refund claim on the basis of a
decision of a court or tribunal rendered in the case of another person. He
cannot also claim that the decision of the court/tribunal in another
person’s case has led him to discover the mistake of law under which he has
paid the tax nor can he claim that he is entitled to prefer a writ petition
or to institute a suit within three years of such alleged discovery of
mistake of law. A person, whether a manufacturer or importer, must fight
his own battle and must succeed or fail in such proceedings. Once the
assessment or levy has become final in his case, he cannot seek to reopen
it nor can he claim refund without reopening such assessment/order on the
ground of a decision in another person’s case. Any proposition to the
contrary not only results in substantial prejudice to public interest but
is offensive to several well-established principles of law. It also leads
to grave public mischief. Section 72 of the Contract Act, or for that
matter Section 17(1)(c) of the Limitation Act, 1963, has no application to
such a claim for refund.

(v) Article 265 of the Constitution has to be construed in the light of the
goal and the ideals set out in the Preamble to the Constitution and in
Articles 38 and 39 thereof. The concept of economic justice demands that in
the case of indirect taxes like Central Excises duties and Customs duties,
the tax collected without the authority of law shall not be refunded to the
petitioner-plaintiff unless he alleges and establishes that he has not
passed on the burden of duty to a third party and that he has himself borne
the burden of the said duty.

(vi) Section 72 of the Contract Act is based upon and incorporates a rule
of equity. In such a situation, equitable considerations cannot be ruled
out while applying the said provision.

(vii) While examining the claims for refund, the financial chaos which
would result in the administration of the State by allowing such claims is
not an irrelevant consideration. Where the petitioner-plaintiff has
suffered no real loss or prejudice, having passed on the burden of tax or
duty to another person, it would be unjust to allow or decree his claim
since it is bound to prejudicially affect the public exchequer. In case of
large claims, it may well result in financial chaos in the administration
of the affairs of the State.

(viii) The decision of this Court in STO v. Kanhaiya Lal Mukundlal Saraf
must be held to have been wrongly decided insofar as it lays down or is
understood to have laid down propositions contrary to the propositions
enunciated in (i) to (vii) above. It must equally be held that the
subsequent decisions of this Court following and applying the said
propositions in Kanhaiya Lal have also been wrongly decided to the above
extent. This declaration — or the law laid down in Propositions (i) to
(vii) above — shall not however entitle the State to recover the
taxes/duties already refunded and in respect whereof no proceedings are
pending before any authority/Tribunal or Court as on this date. All pending
matters shall, however, be governed by the law declared herein
notwithstanding that the tax or duty has been refunded pending those
proceedings, whether under the orders of an authority, Tribunal or Court or
otherwise.

(ix) The amendments made and the provisions inserted by the Central Excises
and Customs Law (Amendment) Act, 1991 in the Central Excises and Salt Act
and the Customs Act are constitutionally valid and are unexceptionable.

(x) By virtue of sub-section (3) to Section 11-B of the Central Excises and
Salt Act, as amended by the aforesaid Amendment Act, and by virtue of the
provisions contained in sub-section (3) of Section 27 of the Customs Act,
1962, as amended by the said Amendment Act, all [pic]claims for refund
(excepting those which arise as a result of declaration of
unconstitutionality of a provision whereunder the levy was created) have to
be preferred and adjudicated only under the provisions of the respective
enactments. No suit for refund of duty is maintainable in that behalf. So
far as the jurisdiction of the High Courts under Article 226 of the
Constitution — or of this Court under Article 32 — is concerned, it remains
unaffected by the provisions of the Act. Even so, the Court would, while
exercising the jurisdiction under the said articles, have due regard to the
legislative intent manifested by the provisions of the Act. The writ
petition would naturally be considered and disposed of in the light of and
in accordance with the provisions of Section 11-B. This is for the reason
that the power under Article 226 has to be exercised to effectuate the
regime of law and not for abrogating it. Even while acting in exercise of
the said constitutional power, the High Court cannot ignore the law nor can
it override it. The power under Article 226 is conceived to serve the ends
of law and not to transgress them.

(xi) Section 11-B applies to all pending proceedings notwithstanding the
fact that the duty may have been refunded to the petitioner/plaintiff
pending the proceedings or under the orders of the Court/Tribunal/Authority
or otherwise. It must be held that Union of India v. Jain Spinners and
Union of India v. ITC have been correctly decided. It is, of course,
obvious that where the refund proceedings have finally terminated — in the
sense that the appeal period has also expired — before the commencement of
the 1991 (Amendment) Act (19-9-1991), they cannot be reopened and/or
governed by Section 11-B(3) [as amended by the 1991 (Amendment) Act]. This,
however, does not mean that the power of the appellate authorities to
condone delay in appropriate cases is affected in any manner by this
clarification made by us.

(xii) Section 11-B does provide for the purchaser making the claim for
refund provided he is able to establish that he has not passed on the
burden to another person. It, therefore, cannot be said that Section 11-B
is a device to retain the illegally collected taxes by the State. This is
equally true of Section 27 of the Customs Act, 1962.”

It is clear from the above that in no unambiguous terms and with utmost
clarity and certainty, the majority interpreted amended provisions of
Section 11B including proviso to sub-section (1) thereof to hold that so
long as refund proceedings are pending, the amended provision would get
attracted and would disentitle the manufacturer/payer from claiming any
refund contrary to the said proviso. However, in those cases where the
refund proceedings had finally been terminated, in the sense – that the
appeal period has also expired – before the commencement of the amended
provision, these cannot be re-opened and/or governed by the amended
provision. Concurring with the aforesaid view, K.S. Paripoornan, J.
expressed his opinion in the following manner:
“342.…..Sections 11-B(2) and (3) cannot be made applicable to refunds
already ordered by the court or the refund ordered by the statutory
authorities which have become final. It follows from a plain reading of
Section 11-B, clauses (1), (2) and (3) of the Act. The provisions
contemplate the pendency of the application on the date of the coming into
force of the Amendment Act or the filing of an application which is
contemplated under law to obtain a refund after the Amendment Act comes
into force. I am of the opinion that if the said provisions are held
applicable, even to matters concluded by the judgments or final orders of
courts, it amounts to stating that the decision of the court shall not be
binding and will result in reversing or nullifying the decision made in
exercise of the judicial power. The legislature does not possess such
power. The court’s decision must always bind parties unless the condition
on which it is passed are so fundamentally altered that the decision could
not have been given in the altered circumstances.........”

The same view has been expressed by S.C. Sen, J.:
“255. I shall now examine the other provisions of the newly-added sections.
Sub-section (1) of Section 11-B requires an application for refund to be
made. Sub-section (2) requires the Assistant Commissioner to pass an order
of refund provided the conditions set out therein are fulfilled. Sub-
section (3) merely lays down that no refund shall be made except as
provided in sub-section (2). There is a non obstante clause that this will
operate notwithstanding anything to the contrary contained in any judgment,
decree, order etc. It is obvious that new provisions will apply in cases
where applications for refund were made before the new provisions came into
force and also subsequently. Sub-section (3) has no retrospective effect.
When a case has been finally heard and disposed of and no application for
refund need be made, sub-section (3) cannot apply. If there is a judgment,
decree or order which has to be carried out, the legislature cannot take
away the force and effect of that judgment, decree or order, except by
amending the law retrospectively on the basis of which the judgment was
pronounced.”

Notwithstanding, the aforesaid dicta, Mr. Panda, learned senior counsel
appearing for the appellant, still sees some light coming through a small
window as he wants pending proceedings to include a situation where refund
had not been granted, even when the order was passed, with the submission
that the Assistant Commissioner even at this stage was competent to go into
the question of unjust enrichment as order regarding grant of refund was
post 1991 event. To buttress this submission, he argued that the principle
of unjust enrichment was in the domain of public interest and intention by
incorporating provisions like proviso to sub-section (1) of Section 11 was
clear, namely, so far as amount is not actually refunded, the authorities
were competent to invoke this doctrine of “unjust enrichment”. It was
argued that it will be totally inequitable and unfair to the public as the
party (assessee herein) would be unjustly enriched. He also relied upon the
orders dated 18.07.1995 by the High Court in Civil Writ No. 3225 of 1991
specifically permitting the Assistant Collector to go into the question
whether the assessee is to be granted the refund in spite of amended
Section 11B of the Act with the following observation :
“Both the Counsel agree that a date may be fixed when the petitioner shall
appear before the collector/Assistant Collector, Central Excise,
Trichiapalli, to go into the question if petitioner should be granted the
refund in spite of Section 11B of the Central Excise and Salt Act. We,
accordingly, direct that petitioner shall appear before the concerned
Collector/Assistant Collector, Central Excise, Trichirapalli on 22nd
September 1995. no further orders are required in this petition, which
stands disposed of.”

After examining the matter in its entirely, we find that it is not possible
to countenance the aforesaid submission of Mr. Panda. In the first
instance, it requires to be remarked that only after amendment in Section
11B of the Act in the year 1991, any person applying for refund has to
establish that incidence of such duty has not been passed on by him to any
other person. The unamended provision did not contain any such stipulation.
Therefore, under the old provision, the only obligation of the person
claiming refund was to make such an application before the expiry of six
months from the relevant date and to show how the refund was admissible to
the applicant. In such a case, the Assistant Collector of Central Excise
was to only examine as to whether excise duty was paid in excess etc. and
was refundable to the claimant as a result of adjudication of the dispute
or otherwise. It is only in the amended provision that additional
stipulation is provided as per which the claimant is required to file,
along with application for refund, such documentary or other evidence
including documents referred to any Section 12A of the Act to establish
that the amount of duty of excise was collected from the claimant or paid
by the claimant and that “incidence of such duty had not been passed on by
him to any other person”. It clearly follows from the above that before
the amendment of Section 11B of the Act, principle of unjust enrichment
was not incorporated under the unamended provision. In fact that was
precisely the reason for amending the provision so that this doctrine of
“unjust enrichment” is incorporated, viz., to take care of the mischief
that was prevailing under the unamended provision which was removed by
making amendment, popularly known as Heydon's Mischief Rule.

Proviso to sub-section (1) of Section 11B, as amended, would be applicable
in a situation where an application for refund made before the said
amendment was still pending at the time when the provisions of Section 11B
were amended. This is how the said proviso is interpreted by this Court in
Mafatlal Industries Ltd. (supra).

Once we find that no such application was pending and the orders on the
said application had already been passed, the proviso ceases to have any
application. The reason, even otherwise, is very obvious. Section 11B
relates to claim for refund of duty and the procedure for such a refund is
stipulated in this section. As per sub-section (1) thereof, any person
claiming refund of any duty of excise has to move an application for refund
of such duty to the Assistant Commissioner of Central Excise. Once such an
application is made, the same is to be considered in accordance with this
provision. As already pointed out above, under the unamended provision,
the Assistant Commissioner was not required to go into the question as to
whether incidence of such duty had been passed on by the applicant claiming
refund to any other person or not. However, if the application was not
decided till the time amendment was incorporated in the year 1991, as per
the proviso, while dealing with such an application for refund, the
Assistant Commissioner is still empowered to go into this question even
when the application was filed before the commencement of the amended
provision. This situation would prevail only when there is a pending
application before the Assistant Commissioner of Central Excise, which is
yet to be decided. If the order for refund on such an application had
already been passed before coming into force the amended provision and no
application was pending at the commencement of the Central Excise and
Customs Laws (Amendment) Act, 1991 before the Assistant Commissioner and,
therefore, question of applying the said proviso and going into the issue
as to whether incidence of such duty had been passed by the applicant to
any other person or not would not arise. Thereafter, order passed on the
application is only to be implemented by giving the refund as per that
order. By no stretch of imagination, the Officer, at the time of carrying
out the orders for refund, which have already been passed, can be invested
with the powers to go into the question of unjust enrichment by invoking
the proviso to sub-section (1) of Section 11B. In the instant case, the
order on the refund application of the respondent had been passed on
06.06.1989, which was much before the amended provision came into
operation. In fact, even after the order of refund was passed, the
appellant had not refunded the amount and it is in these circumstances that
writ petition was filed in the High Court for initiation of contempt
proceedings against the defaulting officers. In such proceedings, the High
Court had passed the order dated 18.07.1995. In this order, no doubt, the
Court observed that the Assistant Commissioner would go into the question
if the respondent should be granted the refund in spite of Section 11B of
the Act. However, merely because of such observations, it cannot be said
that the Assistant Commissioner was entitled to look into the issue of
unjust enrichment when if, otherwise, he he was otherwise had no
jurisdiction to do so in the facts of the present case. Such observations
were given in view of the statement of the counsel for the Government who
brought to the notice of the Court the amended provisions contained in sub-
section (3) of Section 11B of the Act. The High Court did not go into the
issue as to whether such a course of action was permissible or not.
Another pertinent aspect which needs to be kept in mind is that the
interpretation that is to be accorded to the amended provision had not been
decided by this Court till that time and the law on this issue came to be
settled in the year 1997 only when the judgment in Mafatlal Industries Ltd.
(supra) was pronounced by this Court.

Thus, when the order of the Assistant Commissioner was challenged and the
matter came before the Tribunal, the Tribunal was duty bound to apply the
law laid down in Mafatlal Industries Ltd. (supra), which it did. Similar
exercise is done by the High Court in the impugned judgment. We find that
the view taken by the High Court is in consonance with the law laid down by
this Court in the aforesaid case.

We find that there is no scope to interfere with the impugned decision of
the High Court and, accordingly, dismiss this appeal.
No costs.

.............................................J.
(A.K. SIKRI)

.............................................J.
(ROHINTON FALI NARIMAN)

NEW DELHI;
SEPTEMBER 02, 2015.
-----------------------
[1] (1997) 5 SCC 536

It is well settled that there is a sharp distinction between “merit- cum-seniority” and “seniority-cum-merit”. In the former case, the merit shall have to be given preference over the seniority. It is only when the senior-most candidate has no merit and he is not suitable to be appointed on the selection post, merely because of seniority, then the Committees have to select a meritorious candidate. The question as to the distinction between the two is no longer res integra. 14. In the case of B.V. Sivaiah vs. Addanki Babu, (1998) 6 SCC 720, while considering the principle of promotion on merit-cum-seniority and seniority- cum-merit, this Court held that the principle of merit-cum-seniority lays greater emphasis on merit and ability and seniority plays a less significant role. Seniority is to be given weight only when merit and ability are approximately equal. The principles of seniority-cum-merit and merit-cum-seniority are conceptually different. For the former, greater emphasis is laid on seniority, though it is not the determinative factor, while in the latter, merit is the determinative factor. In State of Mysore v. Syed Mahmood it was observed that in the background of Rule 4(3)(b) of the Mysore State Civil Services (General Recruitment) Rules, 1957 which required promotion to be made by selection on the basis of seniority-cum-merit; that the rule required promotion to be made by selection on the basis of “seniority subject to the fitness of the candidate to discharge the duties of the post from among persons eligible for promotion”. It was pointed out that where the promotion is based on seniority-cum-merit the officer cannot claim promotion as a matter of right by virtue of his seniority alone and if he is found unfit to discharge the duties of the higher post, he may be passed over and an officer junior to him may be promoted. But these are not the only modes for deciding whether promotion is to be granted or not.”=After giving our anxious consideration in the matter, we are of the definite opinion that the High Court should not have entered into the arena of the experts and to reassess the merit of the candidates when it is finally decided by a duly constituted Committee of experts in the same field. 19. In that view of the matter, the impugned order cannot be sustained in law. Therefore, for the aforesaid reasons, this appeal is allowed and the impugned order passed by the High Court is set aside

REPORTABLE

IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.843 OF 2012

|U.V. MAHADKAR |Appellant(s) |

Versus

|SUBHASH ANAND CHAVAN AND OTHERS |Respondent(s) |

W I T H

CIVIL APPEAL NO.844 OF 2012

MAHARASHTRA COUNCIL OF AGRICULTURAL
EDUCATION AND RESEARCH, PUNE Appellant(s)

Versus

DR. SUBHASH ANAND CHAVAN AND OTHERS Respondent(s)

JUDGMENT

We have heard learned counsel for the parties.
Civil Appeal No. 843 of 2012:
2. Aggrieved by the judgment and order dated 24.11.2009 passed by the
High Court of Judicature at Bombay in Writ Petition No. 5231 of 2008
setting aside the selection of the present appellant to the post of Head of
Department of Agronomy of Respondent No.2 - Maharashtra Council of
Agricultural Education
and Research, the present appeal has been filed.

3. The facts are not much in dispute.

4. In the year 1986, the appellant was appointed as Assistant Professor,
College of Agriculture, Dapoli under Dr. Balasaheb Sawant Konkan Krishi
Vidyapeeth Dapoli. He was selected and promoted as a Professor of Agronomy
in Mahatma Phule Krishi Vidyapeeth, Rahuri on 17.8.2001. For the purpose
of appointing a Head of Department of Agronomy, a Selection Committee was
constituted in the year 2008. The Committee, considered Statute 41 of the
Maharashtra Agricultural Universities Statutes, 1990. The Committee after
assessing the merit and other criteria of the appellant vis-a-vis
contesting respondent selected the appellant to the post of Head of
Department of Agronomy in the University.

5. Respondent No.1 challenged the said decision of the Committee by
filing a writ petition being Writ Petition No. 5231 of 2008. Although the
High Court noticed the proviso of Statute 41 of the aforesaid Statute, set
aside the selection on the grounds noted in para 4 of the impugned order.
For better appreciation, para 4 of the impugned order passed by the High
Court is quoted herein below :-
“4. Further it is to be seen that after having found that on the basis of
service record, both the petitioner and the respondent No.3 are equal and
that the respondent No.3 is more meritorious because he had more experience
in the post of Professor, the second aspect which requires consideration in
view of the provision of sub-rule (5) of Statute 41 was the aspect of
seniority. In the seniority list, the petitioner was at serial No.1
whereas the respondent No.3 was at serial No.2. Perusal of the minutes of
the Selection Committee shows that the Selection Committee has not at all
allowed this consideration to enter in their mind. In our opinion, the
submission of the learned counsel that seniority is not relevant when the
criteria for promotion is merit cum seniority for carving out zone of
consideration is not well founded especially because in the present case so
far as the aspect of merit is concerned, on the basis of service record,
both the candidates are found to be equal and the respondent No.3 has been
found more meritorious only because his experience in the post of
Professor, therefore, the next consideration that should have entered in
the mind of the Selection Committee was their placement in the seniority
list. We do not want to suggest that the Selection Committee could not
have selected the respondent No.3 because he was junior to the petitioner.
The Selection Committee should have applied its mind to that aspect of the
matter and given reasons why though the petitioner is senior according to
them, selection of respondent No.3 is necessary. We thus find that in
selecting the respondent No.3 for the post of Head of Department of
Agronomy, the Selection Committee has ignored or has not taken into
consideration relevant aspects which are required to be considered in
accordance with law and therefore, in our opinion, the selection and
consequent appointment of the respondent No.3 as Head of Department of
Agronomy will have to be set aside. In our opinion, following order would
meet the ends of justice.”

6. While setting aside the selection of the appellant, a direction was
issued to the Maharashtra Council of Agricultural Education and Research to
hold a fresh meeting for consideration of the candidates for selection to
the post of Head of Department of Agronomy.

7. It has been brought to our notice by the learned counsel appearing
for the parties that during the pendency of this appeal, a fresh Committee
was constituted by the Maharashtra Council of Agricultural Education and
Research and the Committee reconsidered the candidature of all the
candidates including the appellant and finally selected him to the post of
Head of Department. The said appointment has again been challenged by the
respondent in the High Court, which is pending.

8. At the very outset, we are of the view that in the matter of
selection and promotion to the higher post, if a Committee of experts is
constituted then normally, the Court should not interfere in such decision
unless mala fide is attributed or allegations of arbitrariness is proved.

9. Statute 41 under which selections are made is reproduced herein
below:-
“Statute 41:- The post of Director (other than Director of Students
Welfare), Dean of Faculties and other equivalent posts shall be filled in
the nomination or transfer by the Pro-Chancellor. The posts of Associate
Deans, Head of Departments, Professors and other equivalent post shall be
filled in by promotion and nomination in the ratio of 50 : 50 percent of
the vacant post as the Vice Chancellor may, from time to time determine.
Provided that, such posts shall be filled in by promotion through the
recommendation of the Selection Committee on the basis of merits and
seniority in the discipline or group of disciplines, departments or sector
and minimum academic qualifications and experiences, as prescribed by the
statutes.”

10. From bare perusal of the aforesaid provision, it is manifest that the
proviso to Statute 41 make it clear that recommendation of the Committee
shall be on the basis of “merit and seniority”.

11. In the instant case, we found that the Committee was constituted of
the following members:-
(i) The Vice Chairman of the State Council
(ii) The Vice Chancellor of the University concerned
(iii) One non-official to be nominated by the Pro-Chancellor, from amongst
the non-official members of the Executive Councils of the agricultural
Universities in the State
(iv) Two experts to be nominated by the Chancellor
(v) Two representatives of the Indian Council of Agricultural
Research to be appointed by the State Government, one of whom shall be a
Specialist in the particular field for which the recruitment is to be made.

12. The members of the said Committee, in compliance of the High Court's
order, reconsidered the merit of the appellant vis-a-vis Respondent No.1
and again selected the appellant to the post of Head of Department.

13. It is well settled that there is a sharp distinction between “merit-
cum-seniority” and “seniority-cum-merit”. In the former case, the merit
shall have to be given preference over the seniority. It is only when the
senior-most candidate has no merit and he is not suitable to be appointed
on the selection post, merely because of seniority, then the Committees
have to select a meritorious candidate. The question as to the distinction
between the two is no longer res integra.

14. In the case of B.V. Sivaiah vs. Addanki Babu, (1998) 6 SCC 720, while
considering the principle of promotion on merit-cum-seniority and seniority-
cum-merit, this Court held that the principle of merit-cum-seniority lays
greater emphasis on merit and ability and seniority plays a less
significant role. Seniority is to be given weight only when merit and
ability are approximately equal.

15. The Constitution Bench of this Court in the case of Guman Singh vs.
State of Rajasthan, (1971) 2 SCC 452, was considering a question as to
whether promotion based on merit, as embodied in the Rajasthan
Administrative Service Rules, 1954, is violative of Articles 14 and 16 of
the Constitution. This Court held that:
“33. We are unable to accept this contention. The State Government has
taken a decision in 1965 that selection to the service and promotion have
to be on the basis of merit and seniority-cum-merit. There can be no
controversy that the main object in such matters is to serve public
interest and not the personal interest of the members of the official group
concerned. As stated by Leonard D. White in his Introduction to the Study
of Public Administration, 4th Edn., p. 380: “The Public interest is best
secured when reasonable opportunities for promotion exist for all qualified
employees, when really superior civil servants, are enabled to move as
rapidly up the promotion ladder as their merits deserve and as vacancies
occur, and when selection for promotion is made on the sole basis of merit.
For the merit system ought to apply as specifically in making promotions as
in original recruitment”.

16. In the case of Ayurveda & Siddha vs. K. Santhakumari (Dr), (2001) 5
SCC 60, this Court, considering the similar question, held

“6. The principle of merit-cum-seniority is an approved method of selection
and this Court in Sant Ram Sharma v. State of Rajasthan, AIR 1967 SC 1910,
held that promotion to “selection grade posts” is not automatic on the
basis of ranking in the gradation list and the promotion is primarily based
on merit and not on seniority alone. At p. 1914 of the judgment, it is
stated as under: (AIR para 6)
“The circumstance that these posts are classed as ‘selection grade posts’
itself suggests that promotion to these posts is not automatic being made
only on the basis of ranking in the gradation list but the question of
merit enters in promotion to selection posts. In our opinion, the
respondents are right in their contention that the ranking or position in
the gradation list does not confer any right on the petitioner to be
promoted to selection post and that it is a well-established rule that
promotion to selection grades or selection posts is to be based primarily
on merit and not on seniority alone. The principle is that when the claims
of officers to selection posts is under consideration, seniority should not
be regarded except where the merit of the officers is judged to be equal
and no other criterion is, therefore, available.”

17. Reference may also be made to a decision of this Court in the case of
K. Samantaray vs. National Insurance Co. Ltd., (2004) 9 SCC 286, observed
as under:
“7. The principles of seniority-cum-merit and merit-cum-seniority are
conceptually different. For the former, greater emphasis is laid on
seniority, though it is not the determinative factor, while in the latter,
merit is the determinative factor. In State of Mysore v. Syed Mahmood it
was observed that in the background of Rule 4(3)(b) of the Mysore State
Civil Services (General Recruitment) Rules, 1957 which required promotion
to be made by selection on the basis of seniority-cum-merit; that the rule
required promotion to be made by selection on the basis of “seniority
subject to the fitness of the candidate to discharge the duties of the post
from among persons eligible for promotion”. It was pointed out that where
the promotion is based on seniority-cum-merit the officer cannot claim
promotion as a matter of right by virtue of his seniority alone and if he
is found unfit to discharge the duties of the higher post, he may be passed
over and an officer junior to him may be promoted. But these are not the
only modes for deciding whether promotion is to be granted or not.”

18. After giving our anxious consideration in the matter, we are of the
definite opinion that the High Court should not have entered into the arena
of the experts and to reassess the merit of the candidates when it is
finally decided by a duly constituted Committee of experts in the same
field.

19. In that view of the matter, the impugned order cannot be sustained in
law. Therefore, for the aforesaid reasons, this appeal is allowed and the
impugned order passed by the High Court is set aside.

Civil Appeal No. 844 of 2012:
20. In view of the order passed in Civil Appeal No. 843 of 2012, this
appeal is also allowed.

........................J.
(M.Y. EQBAL)

.........................J.
(C. NAGAPPAN)
New Delhi,
September 02, 2015

Suit for specific performance - Sec.20 of Specific Relief Act - Sec.13 of Indian Evidence Act - whether criminal court finding is binding on civil court - Apex court held that when it is quater white paper and when the original agreement of sale mentioned in it not produced - Court has to exercise it's discretion under sec.20 of Specific Relief Act - Court can not come to a conclusion on criminal court findings as it is not final conclusion one , with out giving an independent finding. - High court committed wrong - suit is dismissed as held by trial court - 2015 S.C. MSKLAWREPORTS

Suit for specific performance - Sec.20 of Specific Relief Act - Sec.13 of Indian Evidence Act - whether criminal court finding is binding on civil court - Apex court held that when it is quater white paper and when the original agreement of sale mentioned in it not produced - Court has to exercise it's discretion under sec.20 of Specific Relief Act - Court can not come to a conclusion on criminal court findings as it is not final conclusion one , with out giving an independent finding. - High court committed wrong - suit is dismissed as held by trial court - 2015 S.C. MSKLAWREPORTS

High Court partly allowed the appeal, set aside the judgment of
the trial court and decreed the suit of the plaintiff-respondents herein
for specific performance as well as for recovery of possession of suit
items I, II and III.

The children of late Jambusab could not agree to divide
the properties of late Jambusab. They litigated and ultimately in R.A.
133/49-50 on the file of the High Court, a final decree was passed and the
properties described in the Schedule to the plaint fell to the joint share
of the first plaintiff and his younger brother R.A. Rasheed. The date of
the decree is 22.08.1950.
The first plaintiff and his younger brother thus
became the exclusive joint owners of the suit schedule property and from
the date of the High Court decree namely 22.08.1950.

The first item of the
suit schedule which was designed as a Cinema building was leased jointly by
the first plaintiff and his younger brother R.A. Rasheed to late N.K.
Subbaiah Shetty and one Rattanhalli Ramappa jointly by means of a
registered lease deed dated 26.02.1951 specifying therein a period of 15
years for the running of the lease.
The said lease by the terms provided
inter alia for a monthly rent of Rs. 400/- to be paid in equal halves to
the first plaintiff and R.A. Rasheed.
The lessees had to advance
Rs.10,000/- which will be treated as a charge on item no. 1 of suit
Schedule.
All the equipments such as cinema projector, electric generator,
furniture and other accessories were purchased by the said lessees which
they had to provide under the contract and the theatre was equipped for
showing films. It was also a term under the lease that these equipments
projector, generator etc., should become the property of the first
plaintiff and his brother R.A. Rasheed on the termination of the lease.
While only Rs. 5,000/- was given as advance, the expenses of the balance of
Rs. 5,000/- which was retained by N.K. Subbaiah Shetty and Rattanhalli
Ramappa has been accounted for and thus only Rs. 5000/- is the actual
amount of advance.

1) Whether the 1st defendant was the Power of Attorney Holder of the 2nd
Defendant?

2) Whether the 1st defendant for himself and as Power of Attorney Holder of
2nd defendant executed an agreement of sale dated 2.9.1967 agreeing to
convey the plaint schedule properties in favour of the plaintiff?

3) Whether under the said agreement the plaintiff paid the amount to the
1st defendant as mentioned in para 11(a) (b) (c) (d) of the plaint?

4) Whether the plaintiffs are entitled to the specific performance of the
agreement of the sale and for possession of the schedule properties?

While deciding issue Nos. 2-4 together, the trial court came to the
conclusion that the plaintiff-respondent failed to prove that the agreement
of sale dated 2.9.1967 was executed by the defendants-appellants and,
therefore, got entitled to the specific performance of agreement to sell.
The reasoning given in deciding the issues inter alia are that the alleged
agreement was executed in a quarter sheet of paper written in small
letters. No reason has been attributed as to why a small piece of paper
was used for writing the agreement ExP-1.
The relevant portion of the
finding arrived at by the trial court can be extracted hereunder :-
“If we carefully go through the document at Ex. P.4 it is clearly stated
that the defendant 1 as the power of attorney of the 2nd defendant and
Subramanya Shetty as executed Ex.P.1 in favour of the first and the 2nd
plaintiff, after taking Rs.4,500/- this documents has been written on very
old quarter sheet piece of paper which is written in very small letters.
Ex.P.1 is not at all written in usual course. No reasons are assigned in
the evidence of the PW.1,2 and 5 as to why a small piece of paper is used
for writing Ex.P.1. Ex.P.1 is written in a city like Mysore. It is not
written in a remote small village, wherein the scarcity of paper can be
expected. It is further pertinent to note here that the shop premises of
the first defendant was situate admittedly in Santhepete which is very near
to Devaraja Market and Srirampet, which are heart of business centers of
Mysore. Further, Ex.P.1 is admitted written before Noon. ….. time P.W.1
has stated that between 9 a.m. to 1 p.m. he has written Ex.P.1. Further
P.W.5 has stated by about 2-30 p.m. Ex. P.1 is written, P.W.2 has stated by
about 12 noon Ex.P.1 is written, that means Ex.P.1 is written in a broad
day light. If the handwriting contained in Ex.P.1 in small letters reduced
to writing atleast the same will cover 2 full sheets of papers meaning
thereby it may go to cover 4 pages of hill size papers. No reasons are
assigned as to why Ex.P.1 is written in such a congested manner. Non
availability of the paper to write Ex.P.1 cannot at all be expected nor
anticipated in a city of Mysore, that too near the first defendants shop
which is in the business centre of Mysore City. It is admitted by all the
witnesses that there are several shops of stamps vendors and advocates
offices. If that be the case, that would not have been any difficulty to
secure the required paper to write Ex.P.1. Further, if we carefully go
through the contents of Ex.P.1, it goes to show that all the suit
properties are agreed to have been sold for Rs.25,000/- and the amount of
Rs.20,500/- has been paid to the defendant earlier to 02-09-67. Further,
it is also clear that the amount of Rs.4,500/- was also paid to the
defendant 1. That means only the stamp papers to get the registered sale
deed were required to be obtained. No reasons are assigned the any of the
plaintiffs witnesses as to what was the difficulty in purchasing the stamp
paper to execute the reg. Sale deed regarding the sale mentioned in Ex.P.1.
It is not the case of the plaintiff, that they were unable to purchase
required stamp papers on the date of Ex.P.1 due to paucity of the funds.
If it was really a genuine sale or tried to be depicted before Court,
definitely the reg. Sale deed itself would have been got executed since
except appearing before the sub-registrar the first defendant is not
required to do anything else but to sign the reg. Sale deed and if the sale
was really a genuine sale nothing prevented the plaintiff to take the first
defendant to the office of the Sub-Registrar and to get executed the reg.
Document in the office of the concerned/Sub-registrar Pandavapura but no
reasons assigned as to why the reg. Sale deed is not got executed from the
1st defendant who is admittedly the holder of the general power of attorney
from the 1st defendant and Subramanya Shetty, who were the owners of the
suit schedule properties on 02-09-67. Further, it is pertinent to note
here that though it is mentioned in Ex.P.1 that the plaintiffs were
required to make some arrangements regarding the amount to purchase the
stamp papers and the registration fees etc. but none of the witnesses P.Ws.
1,2 and 5 speak about this aspect of the case.”

On the question of payment of the consideration amount, the trial
court gave finding against the respondents.
Finally, the trial court held
that since issue nos. 2 to 4 have been decided against the plaintiffs, the
relief for specific performance cannot be granted.

High Court

being the first appellate court, re-appreciated the
evidence and came to the conclusion that the findings recorded by the trial
court are perverse in law.

The Appellate Court dealt with the relevancy of the evidence and the
judgment recorded by the Criminal Court and held as under:
“17. The conclusion drawn by the Criminal Court with regard to the
document – Ex.P.1 in regard to its execution etc. are certainly relevant
and it can be relied upon as a piece of evidence by the plaintiffs in
support of their case. The observations made by the Criminal Court
regarding execution of agreement – Ex.P.1 in its judgment – Ex. P.4 are
certainly admissible U/s 13 of the Indian Evidence Act in support of the
claim of the plaintiffs regarding execution of the document – Ex.P.1 by
defendant No.1. Therefore, the Trial Court was not at all justified in
ignoring such evidence on the ground that the judgment of the Criminal
Court is not binding on the Civil Court. May be, that the judgment of the
Criminal Court is not binding on the Civil Court. But, the observations
made by a competent Court with reference to certain document would
certainly be relevant even in a civil case, where the very same document
was a subject matter of challenge.
In the instant case, it is not in dispute that the very same document
– Ex.P.1 was produced before the Criminal Court wherein, plaintiff No.1 was
prosecuted on the charge of trespass and the Criminal Court having examined
the said document has made certain observations with reference to such
document and that being so, when the very same document sought to be
questioned in a civil case, the observations by a Criminal Court will
certainly have relevance. In fact, the learned counsel for the respondents
had advanced a contention that this document was created/concocted for the
purpose of defence in the criminal case
The observations made by the Criminal
Court in its judgment – Ex.P.4 regarding the execution of the document –
Ex.P.1 lends credence to the evidence of PWs 1,2 & 5. There could be no
serious dispute that the plaintiffs were the original owners of the suit
properties and that the same were lost in a series of litigation and
ultimately the said properties which were once lost to the plaintiffs were
sought to be reconveyed to the plaintiffs by virtue of this agreement –
Ex.P.1, executed in their favour by defendant No.1. Under the
circumstances, there is no reason to disbelieve the execution of the
document – Ex.P.1 in favour of plaintiffs. No doubt it was executed on a
quarter sheet of paper and not on a proper stamp paper and that further the
contents of the document – Ex.P.1 have been written in small letters. But
then it cannot be said, that is not a document. It has to point out that
the document is defined under the Indian Evidence Act and it means, “any
matter expressed or described upon any substance by means of letters,
figures or marks or by more than one of those means intended to be used or
which may be used for the purpose of recording that matter”. A writing is
a document, whether writing is made on a quarter sheet or paper or a full
sheet, it is a document within the meaning of the Evidence Act and that
merely because the writing is on a quarter sheet of paper, it does not
cease to be a document. The only requirement is that the party relying
upon a document must prove the same in accordance with law. The mode of
proving the contents of a document has been dealt with, in Sections 61 to
66 of the Indian Evidence Act. The contents of a document may be proved
either by the primary or secondary evidence. Primary evidence means, the
document itself produced for the inspection of the Court. In the instant
case, it is not in dispute that the original agreement itself was produced
for the inspection of the Court as per Ex. P.1. The document in question
being an agreement of sale or a reconveyance agreement, it does not require
attestation. Section 67 of the Evidence Act refers to document other the
document required by Law to be attested. It shows that the signature of
the person alleged to have signed a document i.e. execution must be proved
by the evidence with the signature purporting to be that of the executants
is in his handwriting and the other matter in the document i.e. its body
must also be proved by proof of handwriting of a person purporting to have
written the document. In the instant case, the agreement – Ex.P.1 was
stated to have been written by its scribe – PW.1 at the instructions of
defendant No.1 and after the document was written, it was signed by
defendant No.1. Therefore, what was required to be proved in the instant
case by the plaintiffs to prove the execution of document – Ex.P.1 was that
it contains the signature of defendant No.1.”
Apex court
There is no dispute that even a decree for specific performance can
be granted on the basis of oral contract. Lord Du Parcq in a case (AIR
1946 Privy Council) observed, while deciding a suit for specific
performance, that an oral contract is valid, binding and enforceable. A
decree for specific performance could be passed on the basis of oral
agreement.
This view of a Privy Council was followed by this Court in the
case of Koillipara Sriramulu vs. T. Aswatha Narayana, AIR 1968 SC 1028, and
held that an oral agreement with a reference to a future formal contract
will not prevent a binding bargain between the parties.

The appellant court discussed the evidence of
PW-1, the scribe of the document, who deposed that the agreement was
written as per instructions given by appellant No.1

However, in a case where the plaintiff come forward to seek a decree
for specific performance of contract of sale of immoveable property on the
basis of an oral agreement or a written contract, heavy burden lies on the
plaintiff to prove that there was consensus ad idem between the parties for
the concluded agreement for sale of immoveable property.
Whether there was
such a concluded contract or not would be a question of fact to be
determined in the facts and circumstances of each individual case. It has
to be established by the plaintiffs that vital and fundamental terms for
sale of immoveable property were concluded between the parties.

In a suit for specific performance of a contract, the Court has to
keep in mind Section 20 of the Specific Reliefs Act. This Section
preserves judicial discretion to grant decree for Specific performance.
However, the Court is not bound to grant specific performance merely
because it is lawful to do so. The Court should meticulously consider all
facts and circumstances of the case and to see that it is not used as an
instrument of oppression to have an unfair advantage not only to the
plaintiff but also to the defendant

“8. In a case of specific performance it is settled law, and indeed it
cannot be doubted, that the jurisdiction to order specific performance of a
contract is based on the existence of a valid and enforceable contract. The
Law of Contract is based on the ideal of freedom of contract and it
provides the limiting principles within which the parties are free to make
their own contracts. Where a valid and enforceable contract has not been
made, the court will not make a contract for them. Specific performance
will not be ordered if the contract itself suffers from some defect which
makes the contract invalid or unenforceable. The discretion of the court
will be there even though the contract is otherwise valid and enforceable
and it can pass a decree of specific performance even before there has been
any breach of the contract. It is, therefore, necessary first to see
whether there has been a valid and enforceable contract and then to see the
nature and obligation arising out of it. The contract being the foundation
of the obligation the order of specific performance is to enforce that
obligation.”

“33. The equitable discretion to grant or not to grant a relief for
specific performance also depends upon the conduct of the parties. The
necessary ingredient has to be proved and established by the plaintiff so
that discretion would be exercised judiciously in favour of the plaintiff.
At the same time, if the defendant does not come with clean hands and
suppresses material facts and evidence and misleads the court then such
discretion should not be exercised by refusing to grant specific
performance.”
In the instant case while deciding the issue as to whether the
agreement of 1967, allegedly executed by the defendants, can be enforced,
the Court had to consider various discrepancies and series of legal
proceedings before the agreement alleged to have been executed. In the
agreement dated 2.9.1967, there is reference of earlier agreement dated
29.11.1965 where under Rs. 18,000/- was paid to the defendant-appellant
which was denied and disputed.
Curiously enough that agreement dated
29.11.1965 was neither filed nor exhibited to substantiate the case of the
plaintiff.
The High Court put reliance on the agreement dated 2.9.1967
written in a quarter sheet of paper merely because of the fact that said
quarter sheet of paper was produced before the Magistrate in a criminal
proceeding.

Indisputably, various documents including order-sheets in the earlier
proceedings including execution case were filed to nullify the claim of the
plaintiff regarding possession of the suit property but these documents
have not been considered by the High Court.
In our considered opinion the
evidence and the finding recorded by the criminal courts in a criminal
proceeding cannot be the conclusive proof of existence of any fact,
particularly, the existence of agreement to grant a decree for specific
performance without independent finding recorded by the Civil Court.

In our view, the High Court is not correct in holding that
there is no reason to disbelieve the execution of the document although it
was executed on a quarter sheet of paper and not on a proper stamp and also
written in a small letter.
The High Court also misdirected itself in law
in holding that there was no need of the plaintiff to have sought for the
opinion of an expert regarding the execution of the document.

After examining the entire facts of the case and the evidence
produced on record, we are of the definite opinion that it is not a fit
case where the discretionary relief for specific performance is to be
granted in favour of the plaintiff-respondent.
The High Court in the
impugned judgment has failed to consider the scope of Section 20 of the
Specific Relief Act and the law laid down by this Court.

For all these reasons, this appeal is allowed and the impugned
judgment passed by the High Court is set aside. Consequently, the judgment
of the learned trial court is restored. Hence, the suit is liable to be
dismissed.

2015 http://judis.nic.in/supremecourt/imgst.aspx?filename=42911

Promotion in Promotion quota - the appellants are Master Degree/Degree Holders serving in the Public Health Engineering Department as Section Officers Grade-I. The next higher promotional post for them is the post of Assistant Engineer, which is to be filled up in terms of the recruitment rules known as PWD, IFCD and PHED, Manipur Assistant Engineer (Civil/ Mechanical) /Assistant Surveyor of Works Recruitment Rules, 2009 (in short “Rules of 2009”). As per the aforesaid recruitment rules, 60% of the posts of Assistant Engineers are to be filled up by promotion and the remaining 40% by direct recruitment. As regards the 60% promotional quota, 50% of the vacancies thereof are to be filled by Degree Holders Section Officers Grade-I and the remaining 50% by Diploma Holders and others.=still there are 16 vacancies available against the promotion quota and the appellants come within eight in the seniority list. They shall automatically get promotion. Having regard to the fair submissions made by Mr. Gupta, learned counsel, we do not want to go into the question raised by Mr. Rao, learned counsel appearing for the appellants.- 16 vacancies for promotion against the promotion quota are available and in any case the appellants shall be considered for promotion. In that view of the matter, we are not inclined to interfere with the impugned order passed by the High Court. However, we dispose of the appeals holding that the appellants' case shall be considered for promotion against the promotion quota as they are much above in the seniority list. The question of law raised by the appellants shall be kept open.

REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION

CIVIL APPEAL No.6783 OF 2015
(Arising out of S.L.P.(Civil) No.35459 of 2013)

KSH. LAKSHAHEB SINGH
AND OTHERS …..Appellant(s)
versus

STATE OF MANIPUR AND OTHERS ..Respondent(s)

WITH
CIVIL APPEAL NO.6784 OF 2015
(Arising out of S.L.P.(Civil) No.21904 of 2014)

LAISHRAM GOKULCHANDRA
SINGH AND OTHERS …Appellant(s)
versus
STATE OF MANIPUR AND OTHERS ..Respondent(s)

WITH
CIVIL APPEAL NO.6785 OF 2015
(Arising out of S.L.P. (Civil) No. 21910 of 2014)

LAIRIKYENGBAM TAMOCHA ROY
AND OTHERS …..Appellant(s)
versus
STATE OF MANIPUR AND OTHERS ..Respondent(s)

JUDGMENT

M. Y. EQBAL, J.

Leave granted.

2. The appeal arising out of S.L.P.(Civil) No.35459 of 2013 is directed
against the Judgment and order dated 25.09.2013 passed by the learned
Single Judge of High Court of Manipur, who disposed of the writ petition
preferred by the appellants seeking quashing of the letter dated 02.02.2013
issued by the Department of Personnel & Administrative Reforms, Government
of Manipur to the Manipur Public Service Commission to initiate the process
for direct recruitment to the post of Assistant Engineers in the Public
Health Engineering Department, Government of Manipur.

3. The facts of the case in brief are that the appellants are Master
Degree/Degree Holders serving in the Public Health Engineering Department
as Section Officers Grade-I. The next higher promotional post for them is
the post of Assistant Engineer, which is to be filled up in terms of the
recruitment rules known as PWD, IFCD and PHED, Manipur Assistant Engineer
(Civil/ Mechanical) /Assistant Surveyor of Works Recruitment Rules, 2009
(in short “Rules of 2009”). As per the aforesaid recruitment rules, 60%
of the posts of Assistant Engineers are to be filled up by promotion and
the remaining 40% by direct recruitment. As regards the 60% promotional
quota, 50% of the vacancies thereof are to be filled by Degree Holders
Section Officers Grade-I and the remaining 50% by Diploma Holders and
others.

4. It has been pleaded that due to certain financial crunch faced by the
State Government in the past, the State Government took a policy decision
in the year 1999 by which a total ban was imposed on appointment under
direct recruitment quota. Thereafter, the State Government, considering the
continuing acute financial condition of the State Government, issued an
order on 19.03.2001 by which all appointments made on part-time, contract,
adhoc, substitute, casual basis, etc. on direct recruitment were to be
terminated and various Government Departments were also subjected to
downsizing of staffs.

5. Before the High Court, the writ petitioners pleaded that although
there were 27 vacancies in the grade of Assistant Engineer in the Public
Health Engineering Department most of which were to be filled up by
promotion, the office of the Chief Engineer, PHED, Manipur vide his letter
dated 29.8.2012 submitted a proposal to the Principal Secretary (PHE),
Government of Manipur for filling up 25 of the vacant posts by way of
direct recruitment. The writ petitioners contended that till the ban is
lifted on direct recruitment, the Department cannot proceed to initiate any
action for filling up the vacant posts by direct recruitment and as such,
the aforesaid action on the part of the authorities to fill up the vacant
posts by way of direct recruitment is not permissible. It has also been
contended on behalf of the appellants that as per the office memorandum
dated 29.4.1999 issued by the Department of Personnel & Administrative
Reforms, Personnel Division, Government of Manipur the vacancies are to be
filled up on year wise basis and quota for promotion vis-à-vis the direct
recruitment is to be worked out on year wise basis. It has been further
pleaded that those vacancies which became available prior to the
enforcement of the Rules of 2009 for the Assistant Engineers i.e. 29.7.2009
cannot be counted in the determination of number of vacancies for direct
recruitment quota. According to them, the number of vacancies for direct
recruitment quota under the 2009 Rules should be calculated on the basis of
vacancies available after 28.7.2009. However, the authorities have not
followed any norm for determination of vacancies to the post of Assistant
Engineer which are to be filled up by way of direct recruitment.

6. After hearing learned counsel on either side and perusing a copy of
the Government order dated 12.8.2013 placed on record by the learned Govt.
Advocate appearing for the State, which showed that the Government of
Manipur had relaxed the ban on direct recruitment partially in respect of
certain services/posts including the post of Assistant Engineer for
Power/Works/PHE/IFC departments, learned Single Judge of the High Court
disposed of the writ petition observing as under:

“Since the Government has already taken a decision as evident from the
order dated 12.8.2013 for lifting the ban on direct recruitment partially
in respect of certain posts including the post of Assistant Engineer for
Public Health Engineering Department, the action taken by the Department
for filling up the vacancies in the grade of Assistant Engineer against
direct recruitment quota as mentioned in the impugned letter dated
02.02.2013 cannot be faulted with and accordingly, no writ can be issued to
set aside/ quash the impugned letter dated 02.02.2013. However, as regards
the actual number of vacancies to the post of Assistant Engineer in the
Public Health Engineering Department which may be filed up by direct
recruit, it is clarified that the State authorities would re-examine the
exact number of vacancies falling under direct recruitment quota before any
appointment is made to the post of Assistant Engineer in terms of the
recommendation of the Manipur Public Service Commission on direct
recruitment quota, so that any vacancy, which otherwise would fall under
the promotion quota is not filled up by direct recruitment. Accordingly, if
any appointment is made under the direct recruitment quota in excess of the
direct recruitment quota as per the relevant recruitment rules, the
petitioners, if aggrieved, would be at liberty to approach this Court
again.”

7. Aggrieved by the decision of the High Court, the three writ
petitioners preferred this appeal by special leave. While issuing notice
in the matter on 29.11.2013, this Court directed that the result of the
selection shall remain pending subject to final decision of the special
leave petition. Thereafter, respondents-State moved an interlocutory
application being IA No.1/2014 for vacating stay, upon which learned senior
counsel on both sides were heard and following order was passed by this
Court on 3.7.2014:

“Our order dated 29.11.2013 is modified to the following extent:

The State shall be free to fill up the vacancies advertised in the direct
recruitment quota subject to the condition that three out of such vacancies
are left unfilled.

Appointment against the advertised vacancies, if any, shall remain subject
to the ultimate outcome of these proceedings.

Appointment orders issued to the selected candidates shall specifically
mention that their appointments are subject to the outcome of this
petition.

Post the petition for final disposal after six weeks. Counter
affidavits and rejoinder, if any, be filed in the meantime if not already
filed.”

8. Other Section Officers Grade-I also preferred writ petitions before
the High Court with a prayer for direction to the respondents to keep posts
vacant for the writ-petitioners. Upon this prayer, learned Single Judge
of the High Court on 25.7.2014 observed that it would not be appropriate on
the part of the High Court to direct that some post be kept unfilled and,
therefore, refused to pass any interim order except that any appointment
made in pursuance of the advertisement shall be subject to outcome of the
writ application.

9. Aggrieved by the decision of the High Court to not grant interim
order, aforesaid two groups of Section Officers Grade-I are also before us
by way of appeals under Article 136 of the Constitution. We have heard
learned counsel appearing for the parties at length.

10. Mr. P.P. Rao, learned counsel appearing for the appellants, made the
following submissions:

(I) The statutory Recruitment Rules dated 27.07.2009 and the Rules in
force even earlier mandate that 60% of the vacancies shall be filled by
promotion and 40% by direct recruitment and not the posts in the cadre. But
the Chief Engineer, the Government and the Public Service Commission have
applied the quotas to the 'cadre strength' of Assistant Engineers and not
to the vacancies which is contrary to the statutory rules.

(II) The respondents herein have not only applied the quota to the cadre
strength as stated above but also carried forward almost all the vacancies
on the erroneous supposition that they are meant for direct recruitment and
filled up 22 out of the 27 accumulated vacancies by direct recruitment
subject to the outcome of the SLP, keeping three vacancies for the
appellants in terms of the interim order. This is a clear violation of not
only the statutory rules and administrative instructions but also Articles
14 and 16(1) of the Constitution.

(III) According to Mr. Rao, learned Senior Counsel for the appellants, the
quota prescribed for promotion and direct recruitment will apply to
vacancies and not to posts in the cadre.

(IV) For the last 30 years, there is not a single promotion given to
candidates eligible for promotion as Assistant Engineers. An officer should
get at least two promotions in his career as per law declared by this
Court. But the respondent-Government has acted most arbitrarily by allowing
stagnation of officers eligible for the post of Assistant Engineer for the
last 30 years in violation of Articles 14 and 16(1) of the Constitution.

(V) The High Court failed to decide the issues arising in the Writ
Petitions. The impugned judgment is liable to be set aside. This Court may
be pleased to grant special leave, allow the appeals and direct the
respondents to fill up the vacancies of 2007, 2009, 2010 and 2012 by
promotion with retrospective effect and fill the remaining vacancies
according to the respective quotas i.e. 60% by promotion and 40% by direct
recruitment.

11. On the other hand, Mr. Jaideep Gupta, learned senior counsel
appearing for the respondent-State, firstly drawn our attention to the
operative portion of the impugned judgment and submitted that the
appellants raised only one question before the High Court which has been
decided by the impugned judgment.

12. Mr. Gupta, learned counsel, denied the submissions made by Mr. Rao,
learned senior counsel appearing for the appellants that no promotions have
been given to the candidates eligible for promotion for the last 30 years.
He also denied that there is stagnation in the service inasmuch as the
appellants and other similarly situated persons have been granted benefits
under the ACP scheme.

13. In course of arguments, Mr. Gupta, learned senior counsel, submits
that still there are 16 vacancies available against the promotion quota and
the appellants come within eight in the seniority list. They shall
automatically get promotion. Having regard to the fair submissions made by
Mr. Gupta, learned counsel, we do not want to go into the question raised
by Mr. Rao, learned counsel appearing for the appellants.

14. As notice above, Mr. Gupta, learned counsel, very fairly submitted
that 16 vacancies for promotion against the promotion quota are available
and in any case the appellants shall be considered for promotion. In that
view of the matter, we are not inclined to interfere with the impugned
order passed by the High Court. However, we dispose of the appeals holding
that the appellants' case shall be considered for promotion against the
promotion quota as they are much above in the seniority list. The
question of law raised by the appellants shall be kept open.

……………………J.
(M.Y. Eqbal)

……………………J.
(C. Nagappan)
New Delhi
September 02, 2015

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Tuesday, September 15, 2015