Learned counsel for the respondents lastly argued that there was an encroachment made by the appellants on the suit premises and document (Ex-P- 6) was inadmissible in evidence, hence the eviction petition was liable to be dismissed on these two grounds also. These submissions, in our considered view, deserve to be rejected at their threshold because the same were not raised in the written statement filed by the respondents before the Rent Controller and nor were urged at any stage of the proceedings. We cannot, therefore, allow such factual submissions to be raised for the first time in this appeal.- It is also now a settled principle of law that the concept of ownership in a landlord-tenant litigation governed by Rent control laws has to be distinguished from the one in a title suit. Indeed, ownership is a relative term, the import whereof depends on the context in which it is used. In rent control legislation, the landlord can be said to be the owner if he is entitled in his own legal right, as distinguished from for and on behalf of someone else to evict the tenant and then to retain control, hold and use the premises for himself. What may suffice and hold good as proof of ownership in landlord-tenant litigation probably may or may not be enough to successfully sustain a claim for ownership in a title suit.

                                                                  Reportable
                        IN THE SUPREME COURT OF INDIA

                        CIVIL APPELLATE JURISDICTION

                         CIVIL APPEAL No.167 OF 2007

M/s Boorugu Mahadev & Sons & Anr. ……Appellant(s)


                             VERSUS


Sirigiri Narasing Rao & Ors.      ……Respondent(s)


                               J U D G M E N T
Abhay Manohar Sapre, J.
1)    This appeal is filed  against  the  final  judgment  and  order  dated
06.09.2005 of the High Court of Judicature, Andhra Pradesh at  Hyderabad  in
Civil Revision Petition No. 5228 of 2002 whereby the High Court allowed  the
revision petition  filed  by  the  respondents  herein  and  set  aside  the
judgment dated 17.09.2002 passed by the Additional Chief Judge,  City  Small
Causes Court, Hyderabad in R.A. No. 93 of 1998  and  restored  the  judgment
dated 31.12.1997 passed by the Principal  Rent  Controller  Secunderabad  in
R.C. No. 165 of 1993.
2)    In order to appreciate the issue involved in this appeal,  which  lies
in a narrow compass, it is necessary to set out the relevant facts in  brief
infra.
3)     The  premises  bearing  No.  9-3-692  to   694,   Regimental   Bazar,
Secunderabad (hereinafter referred  to  as  “suit  premises”  was  purchased
jointly by the predecessors of the  appellants  herein  under  a  registered
sale deed dated 28.07.1904 from Sirigiri Yellaiah, and  others,  which  they
sold in discharge of pre-existing mortgage debt to  avoid  court  attachment
in O.S. No. 178 of 1900 on the file of the District Court.  Since  the  date
of  sale,  the  respondents’  predecessors  continued  to  occupy  the  suit
premises and thus became the tenants  of  the  appellants’  predecessors-in-
title on a monthly rent of  Rs.10/-  in  addition  to  payment  of  property
taxes, conservancy and electricity charges etc.  under  an  agreement  dated
01.08.1904.  The said agreement was incorporated in  a  book  maintained  by
the appellants’ predecessors in the regular course of business and was  duly
signed by  the respondents’ predecessors by way of rent every month.   After
the death of Sirigiri  Vishwanadham,  i.e.,  respondents’  predecessor,  his
four sons became the tenants and continued to pay monthly rent at  the  rate
of Rs.75/- besides other charges.  The respondents are  the  grand  children
of late Sirigiri Vishwanadham, who continued to occupy the suit premises  as
the tenants of the appellants.   However,  the  respondents  stopped  paying
rent w.e.f. 01.06.1987 to the appellants.   Since the  rent  was  not  being
paid in spite of repeated requests and demands, a legal notice was  sent  by
the appellants to the respondents on 22.07.1992, to which interim reply  was
sent  on  03.08.1992  followed  by  a  detailed  reply  on  30.08.1992   and
thereafter  there  were  exchange  of   legal  notices  ensued  between  the
parties.
4)    Since despite service of the legal notice sent by  the  appellants  to
the respondents demanding arrears of rent, the respondents failed to  comply
with the demand, the appellants filed Eviction Petition being R.C.  No.  165
of 1993 before the  Principal  Rent  Controller,  Secunderabad  against  the
respondents under  Section  10  of  the  A.P.  Buildings  (Lease,  Rent  and
Eviction) Control Act, 1960 (hereinafter referred to  as  “the  Act”).   The
eviction was sought essentially  on the grounds, viz.,  default  in  payment
of monthly rent from 01.06.1987 till  the  time  of  eviction  petition  and
secondly denial of the appellants’ title to the suit premises.
5)     Denying  the  allegations  made  in  the   eviction   petition,   the
respondents stated that the sale  deed  dated  20.07.1904  under  which  the
ancestors of the appellants had purchased the suit premises was  a  mortgage
with  a  right  of  re-conveyance  whereas  the  respondents’   predecessors
continued to be the owners of the suit premises.   According  to  them,  the
suit premises was offered  only  as  a  security  for  borrowed  amount  and
subsequently their forefathers discharged the liability of borrowed  amount.
 However, due to  some  reasons,  the  respondents’  forefathers  could  not
obtain the  re-conveyance  of  the  suit  premises  in  their  name,  though
ownership of suit premises remained with the respondents’  forefathers.   It
was also averred that for the last fifty years,  there  was  no  payment  of
rent either by them or their forefathers in respect  of  the  suit  premises
whereas their forefathers paid the property tax etc. as the owners.  It  was
also averred that the appellants fabricated the records to file an  eviction
petition against the respondents.
6)    Vide  order  dated  31.12.1997,  the  Rent  Controller  dismissed  the
petition filed by the appellants.
7)    Challenging the said order, the appellants filed  first  appeal  being
R.A. No. 93 of 1998 before the Additional Chief  Judge,  City  Small  Causes
Court at Hyderabad.
8)    By order dated 17.09.2002, the Additional Chief  Judge,  Small  Causes
Court allowed the appeal and while setting  aside  the  order  of  the  Rent
Controller directed the  respondents  to  vacate  and  handover  the  vacant
possession of the suit premises to the appellants  within  two  months  from
the date of the judgment. It was  held  by  the  appellate  Court  that  the
appellants’ predecessors were  the  owners  of  the  suit  premises  on  the
strength of sale deed-Ex.P.7.  It was also held that the  sale  in  question
in relation to the suit premises between the parties was not  a  transaction
of mortgage as alleged by the respondents but it was  an  outright  sale  in
favour of the appellants’ predecessors-in-title.  It was also held that  the
respondents failed to adduce any evidence to prove that the  transaction  of
sale of suit premises was a mortgage and the  borrowed  amount  having  been
paid, the mortgage was redeemed.  It was also  held  that  the  respondents’
predecessors were, therefore, in possession of the suit premises as  tenants
and later became the appellants’ tenants by operation of law.  It  was  also
held that the respondents failed to pay the arrears of rent from  01.06.1987
and hence they committed  willful  default  in  payment  of  rent  rendering
themselves liable to be evicted from the suit premises under the  provisions
of the Act.
9)    Against the said  judgment,  the  respondents  herein  filed  revision
petition being C.R.P. No. 5228 of 2002 before the High Court.
10)   Learned Single Judge of the High Court,  by  impugned  judgment  dated
06.09.2005, allowed the revision petition filed by  the  respondents  herein
and set aside the judgment of  the  Additional  Chief  Judge,  Small  Causes
Court and restored the order of the Rent Controller.
11)   Aggrieved by the said judgment, the  appellants  have  preferred  this
appeal by way of special leave.
12)     Heard  Mr.  B.  Adinarayan  Rao,  learned  senior  counsel  for  the
appellants and Mr. A.T.M. Ranga Ramanujam, learned senior  counsel  for  the
respondents.
13)   Mr. B. Adinarayana Rao,  learned  senior  counsel  appearing  for  the
appellants, while assailing the legality and  correctness  of  the  impugned
order urged two submissions. In the first place, he submitted that the  High
Court erred in allowing  the  respondents’  revision  petition  and  thereby
erred in interfering in its revisionary jurisdiction  by  upsetting  a  well
reasoned findings of facts recorded by the first appellate Court  in  favour
of the appellants.  He further submitted  that  the  first  appellate  Court
while hearing the appellants’ appeal was within its  jurisdiction  to  probe
into all issues of facts and the evidence and record  its  finding  de  hors
the findings of the Rent  Controller  and  once  any  finding  of  fact  was
recorded by the first appellate Court then such finding is  binding  on  the
High Court while hearing the revision against such  judgment  of  the  first
appellate Court. Learned counsel pointed  out  from  the  impugned  judgment
that the High Court in this case decided the revision like the first  appeal
without keeping in mind the subtle distinction between the  revisionary  and
the first appellate jurisdiction thereby committed  a  jurisdictional  error
in rendering the impugned judgment.
14)   In the second  place,   learned  senior  counsel  for  the  appellants
submitted that even otherwise, there was no justification  on  the  part  of
the High Court on facts to have reversed the well reasoned findings of  fact
recorded by the first appellate Court  because,  according  to  the  learned
counsel, the appellants were able to prove with  adequate  evidence  adduced
by them that firstly,  they  were  the  owners  of  the  suit  premises  and
secondly, there was a  relationship  of  landlord  and  tenant  between  the
predecessor-in-title of the appellants and the respondents’  predecessor-in-
title in relation to the suit premises.  It  was  also  urged  that  in  the
eviction petition filed  before the  Rent  Controller  under  the  Act,  the
issue of title to the suit premises could not be gone into  like  a  regular
title suit yet the appellants  adduced  adequate  evidence  to  prove  their
title over the suit premises and the relationship  of  landlord  and  tenant
between the parties whereas the respondents failed to prove  that  the  sale
of suit premises in favour of the appellants’ predecessors was  not  a  sale
but was a  transaction  of  mortgage  and  that  their  predecessor-in-title
redeemed the alleged mortgage by repaying the debt.
15)   In support  of  his  submissions,  learned  counsel  relied  upon  the
decision of the Constitution Bench of  this  Court  in  Hindustan  Petroleum
Corporation Limited vs. Dilbahar Singh, (2014) 9 SCC 78.
16)   In contra, Mr. A.T.M. Ranga Ramanujam, learned senior counsel for  the
respondents, supported the impugned judgment and prayed  for  its  upholding
calling no interference therein.
17)   Having heard learned counsel for the parties and  on  perusal  of  the
record of the case, we find force in the submissions of the learned  counsel
for the appellants.
18)   The Constitution Bench of this  Court  settled  the  law  relating  to
exercise of jurisdiction of the High Court while deciding revision  in  rent
matters under the Rent Control  Act  in  the  case  of  Hindustan  Petroleum
Corporation Limited (supra).  Justice R.M. Lodha the learned  Chief  Justice
speaking for the Bench held in para 43 thus:
“43. We hold, as we must, that none of the above Rent Control Acts  entitles
the High Court to interfere with the findings of fact recorded by the  first
appellate court/first appellate authority because on reappreciation  of  the
evidence,  its  view  is  different  from  the  court/authority  below.  The
consideration  or  examination  of  the  evidence  by  the  High  Court   in
revisional jurisdiction under these  Acts  is  confined  to  find  out  that
finding of facts recorded by the court/authority below is according  to  law
and does not suffer from any error of law. A finding  of  fact  recorded  by
court/authority  below,  if  perverse  or  has  been  arrived   at   without
consideration of the material evidence  or  such  finding  is  based  on  no
evidence or misreading of the evidence or  is  grossly  erroneous  that,  if
allowed to stand, it would result in gross miscarriage of justice,  is  open
to correction because it is not treated as a finding according  to  law.  In
that event, the High Court in exercise of its revisional jurisdiction  under
the above Rent Control Acts shall be entitled  to  set  aside  the  impugned
order as being not legal or proper. The High Court is  entitled  to  satisfy
itself as to the correctness or legality or propriety  of  any  decision  or
order impugned before it as indicated above. However, to satisfy  itself  to
the regularity, correctness, legality or propriety of the impugned  decision
or the order, the High Court shall not exercise its power  as  an  appellate
power to reappreciate or reassess the evidence for  coming  to  a  different
finding on facts. Revisional power is not and cannot  be  equated  with  the
power of reconsideration of all questions  of  fact  as  a  court  of  first
appeal. Where the High Court is required to be satisfied that  the  decision
is according to law, it may examine whether the  order  impugned  before  it
suffers from procedural illegality or irregularity.”

19)   It is also now  a  settled  principle  of  law  that  the  concept  of
ownership in a landlord-tenant litigation governed by Rent control laws  has
to be distinguished from the one in a title suit.  Indeed,  ownership  is  a
relative term, the import whereof depends on the  context  in  which  it  is
used. In rent control legislation, the landlord can be said to be the  owner
if he is entitled in his own legal right, as distinguished from for  and  on
behalf of someone else to evict the tenant and then to retain control,  hold
and use the premises for himself.  What may suffice and hold good  as  proof
of ownership in landlord-tenant  litigation  probably  may  or  may  not  be
enough to successfully sustain a claim for ownership in a title suit.  (vide
Sheela & Ors. vs. Firm Prahlad Rai Prem Prakash, (2002) 3 SCC 375).
20)   Coming now to the facts of this case, keeping in  view  the  principle
of law laid down in the aforementioned two  cases  and  on  perusal  of  the
order of the first appellate Court, we find that the first  appellate  Court
properly appreciated the facts and evidence adduced by the  parties  and  on
that basis recorded all necessary findings (detailed  above)  in  favour  of
the appellants.  This the appellate Court could  do  and,  in  our  opinion,
rightly did in the facts of this case.
21)   Likewise, when we peruse the  impugned  order,  we  find,  as  rightly
urged by the learned counsel for the appellants, that  the  High  Court  did
not  keep  in  mind  the  aforesaid  principle  of  law  laid  down  by  the
Constitution Bench in the  case  of  Hindustan  Petroleum  Corporation  Ltd.
(supra) while deciding the revision petition and  proceeded  to  decide  the
revision petition like the first appellate  Court.  The  High  Court  as  is
clear from the judgment probed in all  the  factual  aspects  of  the  case,
undertook the appreciation of whole  evidence  and  then  reversed  all  the
factual findings of the appellate Court and restored the order of  the  Rent
Controller. This, in our view, was a jurisdictional error,  which  the  High
Court committed while deciding the revision petition and hence  it  deserves
to be corrected in this appeal.  In other words, the High Court should  have
confined its inquiry to examine as to whether any jurisdictional  error  was
committed by the first appellate Court while deciding the first appeal.   It
was, however, not done and hence interference in this appeal is called  for.

22)    That apart, we find that the appellants  were  able  to  prove  their
ownership through their predecessor-in-title on the strength  of  sale  deed
(Ex-P.6/7) of the suit premises whereas  the  respondents  failed  to  prove
their defence. Indeed, the burden being on them, it was  necessary  for  the
respondents to prove that the sale in favour of the appellants’ predecessor-
in-title of suit premises was a transaction of mortgage and not an  outright
sale.  Since  the  respondents  did  not  adduce  any  documentary  or  oral
evidence to prove their defence, the first appellate Court was justified  in
allowing the eviction petition.  In our view, the evidence  adduced  by  the
appellants to prove their title over the suit  premises  was  sufficient  to
maintain eviction petition against the respondents and  it  was,  therefore,
rightly accepted by the first appellate Court.
23)    As  observed  supra,  the  first  appellate  Court  having   recorded
categorical findings that the relationship  of  landlord-tenant  was  proved
and secondly, the respondents had committed a willful default in payment  of
monthly rent and its arrears from 01.06.1987, these  findings  were  binding
on the High Court while deciding the revision petition. It was more so  when
these findings did not suffer with  any  jurisdictional  error  which  alone
would have entitled the High Court to interfere.
24)   Learned counsel for the respondents lastly argued that  there  was  an
encroachment made by the appellants on the suit premises and document (Ex-P-
6) was inadmissible in evidence, hence the eviction petition was  liable  to
be  dismissed  on  these  two  grounds  also.  These  submissions,  in   our
considered view, deserve to be rejected at their threshold because the  same
were not raised in the written statement filed  by  the  respondents  before
the Rent Controller and nor were urged at any stage of the  proceedings.  We
cannot, therefore, allow such factual  submissions  to  be  raised  for  the
first time in this appeal.
25)   In the light of foregoing  discussion,  the  appeal  succeeds  and  is
hereby allowed. The impugned judgment is set aside and that of the  judgment
of the first appellate Court dated 17.09.2002 in R.A.  No.  93  of  1998  is
restored. As a consequence thereof,  the  eviction  petition  filed  by  the
appellants against the respondents in  relation  to  the  suit  premises  is
allowed. The respondents are, however, granted three months’ time to  vacate
the suit premises from the date of this order subject to furnishing  of  the
usual undertaking in this Court to vacate the suit premises within 3  months
and further the respondents would deposit all arrears of rent till  date  at
the same rate at which they had been paying monthly rent to  the  appellants
(if there are arrears) and would also deposit three months’ rent in  advance
by way of damages for use and occupation as permitted by  this  Court.   Let
the undertaking, arrears of rent, damages for three months and cost  awarded
by this Court be deposited within 15 days from the date of this order.
26)   The  appeal  is  accordingly  allowed  with  cost  which  quantify  at
Rs.5000/- to be paid by the respondents to the appellants.


.……...................................J.
                                     [J. CHELAMESWAR]


                     ………..................................J.
                                      [ABHAY MANOHAR SAPRE]
      New Delhi,
      January 18, 2016.

-----------------------
19

Civil Procedure Code (Act V. 1908), section 35A, Order VII, rule 11 and 10-Duties of the court in curbing frivolous and vexatious cases. HEADNOTE: Respondent No. 2 in partnership, with his minor son the petitioner contested an eviction petition filed by the landlord-respondent No. 1 in respect of the premises where the partnership firm was located, and lost it at the trial, appellate and revisional stages. The High Court gave six months' time to vacate the premises. Thereafter, the petitioners filed a suit before the Fourth Additional First class Munsif, Bangalore for a declaration that the order of eviction which has been confirmed right upto the High Court and resisted by the second respondent throughout was one obtained by fraud and collusion and sought an injunction against the execution of the eviction order. During the hearing of the prayer for further time to vacate the premises filed by respondent No. 2, the learned Judge of the High Court, taking pity on the tenant persuaded the landlord for giving time for vacating the premises on the basis that the suit newly and sinisterly filed by the petitioner would be withdrawn. Another five months' time was granted accordingly. But, the petitioner instituted another suit before another Munsif making a carbon copy of the old plaint and obtained an ex-parte injunction which was, however, got vacated later by the respondent No. 1. An appeal against the said order having failed, the petitioner managed to get an ex-parte injunction once over again in revision from the High Court. At the hearing of the application for vacating the temporary injunction filed by respondent No. 1, the petitioner submitted that the said learned Judge having decided the earlier revision case should not hear the petition on the plea of bias referring to an affidavit filed by him to that effect. But the learned Judge heard the arguments, went into the merits and dismissed the revision. Dismissing the, petition for special leave, the Court, HELD : (1) If on a meaningful-nor formal-reading of the plaint it is manifestly vexatious, and meritless, in the sense of not disclosing a clear right to sue, he (Munsif) should exercise his power under Order VII rule 11, C.P.C. taking care to see that the ground mentioned therein fulfilled. And, if clever drafting has created the illusion of a cause of action, it should be nipped in the bud at the first hearing by examining the party searchingly under Chapter X, C.P.C. An activist Judge is the answer to irresponsible law suits. The trial court should insist imperatively on examining the party at the first hearing so that bogus litigation can be shot-down at the earliest stage. The penal Code (Chapter XI) is also resourceful enough to meet such men and must be triggered against them. In the instant case, the suit pending before the First Munsif's Court, Bangalore being a flagrant misuse of the mercies of the law in receiving plaints having no survival value, the court directed the Trial Court to dispose of it forthwith after giving an immediate hearing of the parties concerned and to take deterrent action if it is satisfied that the litigation was inspired by vexatious motives and is altogether groundless, reminding itself of sec. 35A of the C.P.C. [744 E-G, 745 A] Observation : The pathology of litigative addition ruins the poor of this country and the Bar has a role to cure this deleterious tendency of parties to launch frivolous and vexatious cases. The sharp practice or legal legerdemain stultifies the court process and makes a decree with judicial seals brutum fulmen. It may be a valuable contribution to the cause of justice if counsel screen wholly fradulent and frivolous litigation refusing to be beguiled by dubious clients and remembering that an advocate is an officer of justice and its society not to collaborate in shady actions. [743 B, C, 745 B] 743 [The Court expressed its hope that the Bar Council of India Would activate this obligation.]

PETITIONER:
T. ARIVANDANDAM

Vs.

RESPONDENT:
T.   V. SATYAPAL & ANOTHER

DATE OF JUDGMENT14/10/1977

BENCH:
KRISHNAIYER, V.R.
BENCH:
KRISHNAIYER, V.R.
SINGH, JASWANT

CITATION:
 1977 AIR 2421  1978 SCR  (1) 742
 1977 SCC  (4) 467


ACT:
Civil Procedure Code (Act V. 1908), section 35A, Order VII,
rule 11 and 10-Duties of the court in curbing frivolous and
vexatious cases.



HEADNOTE:
Respondent  No. 2 in partnership, with his  minor  son the
petitioner contested an  eviction petition filed by the
landlord-respondent  No. 1 in respect of the premises  where
the partnership firm was located, and lost it at the  trial,
appellate and  revisional  stages. The High Court  gave six
months' time  to  vacate  the premises.  Thereafter, the
petitioners filed a suit before the Fourth Additional  First
class Munsif, Bangalore for a declaration that the order  of
eviction which    has been confirmed right upto the High
Court  and resisted by the second respondent throughout was
one obtained by fraud and collusion and sought an injunction
against the execution of the eviction order.      During
the hearing    of the prayer for further time to vacate the
premises filed by respondent No. 2, the learned Judge of the
High Court, taking pity on the tenant persuaded the landlord
for giving time for vacating the premises on the basis that
the suit newly and sinisterly filed by the petitioner  would
be   withdrawn. Another  five months' time  was   granted
accordingly.  But,  the petitioner instituted  another suit
before another Munsif making a carbon copy of the old plaint
and obtained   an  ex-parte injunction which  was,  however,
got vacated later by the respondent No. 1. An appeal against
the said order having failed, the petitioner managed to get
an ex-parte injunction once over again in revision from the
High  Court. At the hearing of the application for  vacating
the  temporary injunction filed by respondent No.  1, the
petitioner  submitted  that the said  learned  Judge  having
decided the  earlier  revision case  should  not  hear the
petition on the plea of bias referring to an affidavit filed
by  him to  that effect. But the learned  Judge  heard the
arguments, went into the merits and dismissed the revision.
Dismissing the, petition for special leave, the Court,
HELD  : (1) If on a meaningful-nor  formal-reading  of the
plaint it  is manifestly vexatious, and meritless,  in the
sense  of not disclosing a clear right to sue, he  (Munsif)
should exercise his power under Order VII rule 11,  C.P.C.
taking care  to  see  that  the  ground  mentioned  therein
fulfilled. And, if clever drafting has created the  illusion
of a cause of action, it should be nipped in the bud at the
first  hearing by  examining the  party  searchingly  under
Chapter X,  C.P.C.  An activist Judge is  the  answer  to
irresponsible  law  suits.  The trial  court  should  insist
imperatively on examining the party at the first hearing  so
that  bogus  litigation can be shot-down  at  the  earliest
stage. The  penal  Code (Chapter XI)  is  also resourceful
enough to meet such men and must be triggered against them.
In  the instant  case, the suit pending  before  the  First
Munsif's  Court,  Bangalore being a flagrant misuse  of the
mercies of the law in receiving plaints having no  survival
value, the court directed the Trial Court to dispose of  it
forthwith  after giving an immediate hearing of the  parties
concerned  and to take deterrent action if it  is  satisfied
that the litigation was inspired by vexatious motives and is
altogether  groundless, reminding itself of sec. 35A of the
C.P.C. [744 E-G, 745 A]
Observation :
The pathology of litigative addition ruins the poor of this
country and the Bar   has  a  role  to cure this
deleterious tendency of parties to launch frivolous    and
vexatious  cases.  The sharp practice or  legal legerdemain
stultifies the court process and makes  a  decree
with  judicial seals brutum fulmen. It may  be a  valuable
contribution  to  the  cause of justice if  counsel  screen
wholly  fradulent and frivolous litigation refusing to  be
beguiled  by  dubious  clients and   remembering  that  an
advocate  is  an officer of justice and its society  not  to
collaborate in shady actions. [743 B, C, 745 B]
743
[The Court expressed its hope that the Bar Council of  India
Would activate this obligation.]



JUDGMENT:
CIVIL  APPELLATE  JURISDICTION :  Special  Leave   Petition
(Civil) No. 4483 of 1977.
From the Judgment and Order dated 19-7-1977 of the Karnataka
High Court in Civil Misc.  Petition No. 943 of 1977
P. R. Ramasesh for the Petitioner.
The Order of the Court was delivered by-
KRISHNA IYER, J. The pathology of litigative addiction ruins
the poor of this country and the Bar has a role to cure this
deleterious  tendency  of parties to  launch  frivolous and
vexatious cases.
Here is an audacious application by a determined engineer of
fake litigations asking for special leave to appeal  against
an  order of the High Court on an interlocutory application
for injunction. The sharp practice or legal legerdemain  of
the  petitioner,  who  is the son  of  the  2nd respondent,
stultifies the court process and makes decrees with judicial
seals brutum fulmen.  The long arm of the law must  throttle
such, litigative   caricatures  if  the   confidence and
credibility  of the  community in  the  judicature  is  to
survive.  The contempt power of the Court is meant for such
persons as the present petitioner.  We desist from  taking
action because of the sweet reasonableness of counsel Sri
Ramasesh.
What  is the horrendous enterprise of the  petitioner? The
learned Judge has,  with a touch  of personal  poignancy,
Judicial  sensitivity  and anguished anxiety,  narrated the
sorry story of a long-drawn out series of legal proceedings
revealing  how the father of the  petitioner  contested  an
eviction  proceeding,  lost it, appealed  against  it, lost
again, moved  a  revision only to be  rebuffed by  summary
rejection by the High Court.  But the Judge, in his  clement
jurisdiction  gratuitously granted over six months' time  to
vacate the premises.  After having enjoyed the benefit  of
this  indulgence the maladroit party moved for further time
to  vacate.  AR these proceedings were being carried  on  by
the  2nd  respondent who was the father of  the petitioner.
Finding that the court's generosity had been  exploited  to
the  full, the 2nd respondent and the petitioner,  his son,
set  upon a clever adventure by abuse of the process of the
court. The  petitioner  filed a  suit before the  Fourth
Additional First Class Munsif, Bangalore, for a declaration
that  the order of eviction, which had been confirmed  right
up  to the High Court and resisted by the  2nd  respondent
throughout,  was one obtained by 'fraud and collusion'.  He
sought an injunction against the execution of the  eviction
order. When this fact was brought to the notice of the High
Court, during the hearing of the prayer for further time: to
vacate, instead of frowning upon the fraudulent stroke, the
learned judge took pity on the tenant and  persuaded the
landlord to give more time for vacating the premises on the
basis  that  the suit newly and sinisterly filed  would be.
withdrawn  by the petitioner.  Gaining time by another five
months on this score, the father and son belied the hope  of
the learned judge who thought that the litigative skirmishes
would come to an end, but hope can be dupe when the customer
concerned is a crook.
744
The  next  chapter  in the  litigative acrobatics  of the
petitioner   and  father  soon followed  since they were
determined  to dupe and defy the process of  the  court  to
cling  on  to  the  shop.  The trick  they  adopted  was  to
institute  another  suit before another Munsif making a
carbon copy as it were of the old plaint and  playing upon
the likely gullibility of the new Munsif to grant an exparte
injunction.   The  1st respondent  entered  appearance and
expose the, hoax played upon the court by the petitioner and
the 2nd respondent.  Thereupon the Munsif vacated the  order
of injunction he had already granted.  As appeal was carried
without success.   Undaunted  by  all these  defeats the
petitioner came to the High Court in revision and managed to
get  an injunction   over  again.   The  1st respondent
promptly  applied for vacating the temporary injunction and
when  the  petition came up for hearing before Mr.  justice
Venkataramayya, counsel for the petitioner submitted that he
should not hear the case, the pretext put forward being that
the petitioner had cutely mentioned the name of the judge in
the  affidavit while describing the prior proceedings. The
unhappy Judge, who had done all he could to help the  tenant
by  persuading the landlord, found himself  badly  betrayed.
He  adjourned  the  case to the next day.   The torment  he
underwent is obvious from his own order where he stated :
 "I spent a sleepless night yesterday."
Luckily,  he  stabilised  himself the  next  day  and  heard
arguments  without yielding to the bullying tactics  of the
petitioner  and impropriety of his advocate.  He  went into
the  merits  and dismissed the revision.  Of  course,  these
fruitless  proceedings in the High Court did not  deter the
petitioner from daring to move this Court for special  leave
to appeal.
We  have  not  the slightest hesitation in  condemning the
petitioner  for the gross abuse of the process of the  court
repeatedly   and  unrepentantly resorted  to.  From the
statement  of  the facts found in the judgment of  the High
Court, it  is perfectly plain that the suit  now,  pending
before the First Munsif's Court, Bangalore, is a  flagrant
misuse of the mercies of the law in receiving plaints. The
learned Munsif must remember that if on  a  meaningful-not
formal-reading of the plaint it is manifestly vexatious, and
meritless,  in the sense of not disclosing a clear right  to
sue,  be  should exercise his power under Or.  VII  r. 1  1
C.P.C. taking care to see that the ground mentioned  therein
is  fulfilled. And, if clever, drafting  has created the
illusion  of  a cause of action, nip it in the bud  at the
first hearing by examining the party searchingly under Order
X  C.P.C. An activist Judge is the answer  to  irresponsible
law  suits.  The trial court should insist  imperatively  on
examining  the party  at the first bearing  so that  bogus
litigation  can be shot down at the  earliest stage. The
Penal Code (Ch. XI) is also resourceful enough to meet such
men, and must be triggered against them.  In this case, the
learned Judge to his cost realised what George Bernard Shaw
remarked on the assassination of Mahatma Gandhi
"It is dangerous to be too good."
The  trial court in this case will remind itself of s. 35-A
C.P.C. and take deterrent action if it is satisfied that the
litigation was inspired by vexatious motives and  altogether
groundless.  In any view, that suit
 745
has  no survival value and should be disposed of  forthwith
after giving an immediate hearing to the parties concerned.
We  regret  the infliction of the ordeal upon  the  learned
Judge  of the High-Court by a callous party.  We  more than
regret the circumstance that the party concerned  has been
able  to prevail upon one lawyer or the other to present  to
the court a case which was disingenuous or worse.  It may be
a  valuable contribution to the cause of justice if  counsel
screen wholly fraudulent and frivolous litigation  refusing
to be beguiled by dubious clients.  And remembering that  an
advocate is an officer of justice he owes it to society not
to collaborate in shady actions.  The Bar Council of  India,
we  hope will activate this obligation. We are constrained
to make these observations and hope that the co-operation of
the  Bar  will be  readily forthcoming to  the  Bench for
spending  judicial time on worthwhile disputes and  avoiding
the  distraction of sham litigation such as the one  we are
disposing  of. Another moral of  this  unrighteous  chain
litigation  is the gullible grant of ex parte orders  tempts
gamblers  in  litigation  into easy  courts.   A  judge who
succumbs  to  ex  parte pressure in  unmerited cases  helps
devalue the  judicial process.  We  must  appreciate Shri
Ramasesh for his young candour and correct advocacy.
S.R.       Petition dismissed.
746

whether there was a depression of the sale price on account of receipt of advance. In the case of Metal Box India Ltd. (supra), the facts were extremely clear as there was an agreement that M/s. Ponds (I) Ltd. had given 50% advance with a stipulation that it would purchase 90% of the manufactured goods. It was a case where a separate price was charged. In the case of Hero Honda Motors Ltd. (supra), the facts, as we perceive, were not clear and, therefore, there was a remit. Be it noted, sale price agreed between two competing parties may get depressed, when substantial and huge advances are periodically extended and given with the objective and purpose that the sale price paid or charged would be lowered, to set off the consideration paid by grant of advances. There should be a connect and link between the two i.e. the money advanced it should be established was a consideration paid which could form the basis for depression of sale price. Evidence and material to establish the said factual matrix has to be uncovered and brought on record to connect and link the sale price paid on paper and the “other” consideration, not gratis, but by way of interest free advances.

                                 Reportable

                        IN THE SUPREME COURT OF INDIA
                        CIVIL APPELLATE JURISDICTION
                        CIVIL APPEAL NO.1829 OF 2008

Commissioner of Central Excise,              Appellant(s)
Pune

                                   Versus

Hindustan National Glass and                        Respondent(s)
Industries Limited


                                  O R D E R
Dipak Misra, J.
      A show cause notice under F. No.  Prev/CEX/AEI/OBL/  141/99/797  dated
16th August, 2002, was issued to M/s. Owens  Brockway  (I)  Pvt.  Ltd.,  the
predecessor-company of the respondent which is presently known as  Hindustan
National Glass and  Industries  Limited,  by  the  Commissioner  of  Central
Excise, Pune-I, alleging that the manufacturing company was not  adding  the
additional consideration received from the customers in the form of  advance
and, therefore, the notional interest accrued thereon is to be added to  the
sale price,  for  such  non-addition  had  resulted  in  depression  of  the
assessable value of the goods,  namely,  the  bottles  manufactured  by  the
respondent-assessee.
2.    In the show cause notice, it  was  mentioned  that  the  assessee  had
short paid the duty on its products, that  is,  printed  glass  bottles,  by
under-valuing the same at the time of clearance from  its  factory  inasmuch
as it did not add “additional consideration” received from  M/s.  Coca  Cola
India and M/s. Pepsico India Holdings  Pvt.  Ltd.   The  show  cause  notice
referred to the statement of the Manager (Sales) of the Company  from  which
it was discernible that the respondent-assessee  had  received  90%  advance
from M/s. Coca Cola India and 100% advance from M/s. Pepsico India  Holdings
Pvt. Ltd. for the goods  and  it  was  giving  3-4%  discount  to  the  said
Companies.
3.    After the reply to the  show  cause  was  received,  the  adjudicating
authority passed an order on 28th November, 2003, making  a  demand  of  Rs.
33,91,934,00/- under Section 11A(1) of the Central  Excise  Act,  1944  (for
short “the Act”) being the duty  payable  on  the  additional  consideration
received by the  assessee  from  the  customers  in  the  form  of  notional
interest accrued on advance payments and also imposed penalty for  the  same
amount under Section 11AC of the Act.  Apart  from  that,  the  adjudicating
authority confirmed certain other demands.
4.    Being grieved by the aforesaid order of  the  adjudicating  authority,
the respondent-assessee preferred an appeal before the Customs,  Excise  and
Service Tax Appellate Tribunal, West Zonal Bench, Mumbai  (for  short,  'the
tribunal').  Initially, the matter was heard by two  Members  consisting  of
Member (Judicial) and Member (Technical).  The Member  (Technical)  came  to
hold that the revenue had not been able to discharge the  onus  by  adducing
cogent material evidence that the advances obtained from a buyer had  really
been instrumental in  depression  of  the  price.   Learned  Member  further
opined that there was no nexus of interest with the  price  and  hence,  the
demand was not acceptable and consequently, no penalty could be levied.
5.     The  Member  (Judicial)  adverted  to  the  order   passed   by   the
Commissioner  wherein  the  statement  of  the  Manager  (Sales)  had   been
adumbrated in detail, referred to the other documents  that  had  been  put-
forth by the revenue before the adjudicating  authority  and  in  course  of
discussion adverted to the  principle  stated  in  Commissioner  of  Central
Excise, New Delhi vs. Hero Honda Motors Ltd.[1] and opined as follows:
“In view of the above decision, I am of the opinion that  the  matter  needs
to be remanded to the Commissioner for fresh examination  in  the  light  of
the observation made by the Hon'ble Supreme Court in the case of Hero  Honda
Motors Ltd. vs. CCE referred supra and after examining the entire aspect  of
the use of the advances, income generated  from  the  said  advances,  their
contribution of the pricing structure and their reflection in  the  Balance-
sheet or the Annual Reports of the appellants, and  the  deployment  of  the
funds so received by them, as I agree with the learned brother  Shri  Sekhon
that onus to prove so is on the Revenue.  However, the appellants  would  be
at liberty to produce relevant evidences before the  adjudicating  authority
in support of their contention that the interest accrued  on  such  advances
have not in any way resulted  in  depreciation  of  the  price.   All  other
issues are left open for the appellants to address before  the  adjudicating
authority.”


6.    As there was difference of opinion, the matter  was  referred  to  the
third Member and the third Member, who was a  Judicial  Member,  vide  order
dated 29th August, 2007, cogitated on the concept of assessable value  under
the Act, the concept of two prices and eventually opined that the  decisions
in Hero Honda Motors Ltd. (supra) and Metal Box India Ltd. vs. Collector  of
Central Excise, Madras[2] are  not  applicable  to  the  case  at  hand  and
accordingly concurred with the opinion expressed by the Member  (Technical).
 Hence, the revenue is before this Court in appeal.
7.    We have heard Mr. Yashank Adhyaru,  learned  senior  counsel  for  the
appellant-revenue and Mr. Aarohi Bhalla, learned counsel for the respondent-
assessee.
8.    On a scrutiny  of  the  factual  score,  it  is  noticeable  that  the
respondent-assessee  had   obtained   certain   advance   sums   from   some
companies/users to supply the bottles and on that count it had  granted  3-4
per cent discount.  Though the quantum had not been  stated  precisely,  yet
it has been found as a matter of fact that M/s. Coca  Cola  India  and  M/s.
Pepsico India Holdings Pvt.  Ltd.  had  given  advances  for  90%  and  100%
respectively for their purchases.
9.    In Metal Box India Ltd. (supra), the  Court  while  dealing  with  the
transaction between the appellant therein and M/s. Ponds (I) Ltd.,  who  was
a whole-sale buyer of the appellant's goods, had accepted the  view  of  the
tribunal and expressed thus:

“On the facts on record, therefore, it must be held that  the  Tribunal  was
perfectly justified in taking the view that charging a  separate  price  for
the metal containers supplied to M/s  Ponds  (I)  Limited  could  not  stand
justified under Section 4(1)(a) proviso and,  therefore,  to  that  separate
price charged from the Ponds (I) Limited, the extent of benefit obtained  by
the assessee on interest-free loan was required to  be  reloaded  by  hiking
the price charged from M/s. Ponds (I) Limited to that extent.  Contention  2
also, therefore, fails and is rejected.”

10.   In Hero Honda  Motors  Ltd.  (supra),  the  question  that  arose  for
determination  is  whether  receipt  of  advance  and  the  income  accruing
thereon, had gone towards the depreciation  of  the  sale  price.   In  that
context, the Court opined  that  there  is  conspectus  of  decisions  which
clearly establish that inclusion of  notional  interest  in  the  assessable
value or wholesale price will depend upon  the  facts  of  each  case.   The
three-Judge Bench adverted to the facts of the case, the agreement  existing
between the parties and the lower price  at  which  the  respondent-assessee
therein had sold the motor-cycles and after  analysing  the  factual  matrix
opined as follows:

“For the above reasons, we hold  that  the  tribunal  has  disposed  of  the
appeal before it in  a  most  perfunctory  manner  without  going  into  any
figures at all but by merely on the statement made by  counsel  and  on  the
basis of material which appears to have been produced first time before  the
tribunal. We, therefore, set aside the order of the tribunal and remand  the
matter back to the tribunal.  The  tribunal  will  consider  in  detail,  if
necessary, by taking the help of a Cost Accountant and  after  looking  into
the accounts of the respondent whether or  not  the  advances  or  any  part
thereof have been used in  the  working  capital  and  whether  or  not  the
advances received by the respondent and/or the interest earned thereon  have
been used in the working  capital  and/or  whether  it  has  the  effect  of
reducing the price of the motorcycle. The  tribunal  to  so  decide  on  the
material which was placed before the  Commissioner  and  not  to  allow  any
additional  documents/materials  to  be  filed  before  it.  None   of   our
observations made herein shall bind the  tribunal  to  which  this  case  is
remitted.”

11.   In the case at hand, the Member (Judicial) has remitted the matter  to
the competent authority to deal with it afresh in the light of the  decision
rendered in Hero Honda Motors Ltd. (supra).
12.   Mr. Aarohi Bhalla, learned counsel for the  respondent-assessee  would
submit that when no evidence was adduced by the  revenue  at  any  point  of
time and the law is settled that the onus is on  the  revenue  to  establish
that there has been depression of assessable value,  the  majority  view  of
the tribunal cannot be found fault with.
13.    Mr.  Yashank  Adhyaru,  learned  senior  counsel  appearing  for  the
appellant-revenue would submit that the documents were produced  before  the
adjudicating authority as well  as  the  tribunal  to  show  the  nature  of
advance and the manner of transaction from which  it  is  demonstrable  that
there has been depression of the assessable value.
14.   On a perusal of the order passed by the Commissioner, it is seen  that
observations have been made on certain  aspects  and  inferences  have  been
drawn. It cannot be said that no material was produced by the  revenue.  The
concerned Commissioner has taken note of the statement made by  the  Manager
(Sales) of the assessee-Company.  An aspect raised relates to percentage  of
total sales made to two companies, but the core issue is whether  there  was
a depression of the sale price on account of receipt  of  advance.   In  the
case of Metal Box India Ltd. (supra), the  facts  were  extremely  clear  as
there was an agreement that M/s. Ponds (I) Ltd. had given 50%  advance  with
a stipulation that it would purchase 90% of the manufactured goods.  It  was
a case where a separate price was  charged.   In  the  case  of  Hero  Honda
Motors Ltd. (supra),  the  facts,  as  we  perceive,  were  not  clear  and,
therefore, there was a remit.  Be it noted, sale price  agreed  between  two
competing parties may get depressed, when substantial and huge advances  are
periodically extended and given with the  objective  and  purpose  that  the
sale price paid or charged would be lowered, to set  off  the  consideration
paid by grant of advances.  There should be a connect and link  between  the
two i.e. the money advanced it should be  established  was  a  consideration
paid which could form the basis for depression of sale price.  Evidence  and
material to establish the said  factual  matrix  has  to  be  uncovered  and
brought on record to connect and link the sale price paid on paper  and  the
“other” consideration, not gratis, but by way of interest free advances.


15.   In our considered opinion, in  the  present  case,  there  has  to  be
application of mind by the tribunal regard being had to the amount of  money
paid by purchasers, namely, M/s. Coca Cola  India  and  M/s.  Pepsico  India
Holdings Pvt. Ltd. and what is the effect of  the  sales  made  to  the  two
companies in percentile terms, whether this had  the  effect  of  depressing
the sale price.   The onus would be on the revenue.  That being  the  thrust
of the matter, liberty is granted to the revenue to  produce  the  documents
in this regard to discharge the onus.  As we are remitting  the  matter,  we
may note one submission of the respondent-assessee.   It  is  urged  by  the
learned counsel that when the entire activities were  within  the  knowledge
of the excise authorities, penalty is not leviable.  Needless to  emphasize,
the tribunal shall advert to  the  said  submission,  if  required,  in  the
ultimate eventuate, in proper perspective.
16.   In the result,  the  appeal  is  allowed,  the  order  passed  by  the
tribunal is set aside and the matter is remitted to the tribunal  for  fresh
disposal keeping in view the observations made herein-above.  We may  hasten
to clarify that we have not expressed any opinion on  any  of  the  aspects.
There shall be no order as to costs.


                                                    ......................J.
                                                               (Dipak Misra)



                                                    ......................J.
                                                               (N.V. Ramana)

New Delhi;
January 14, 2016.
-----------------------
[1]     (2005) 4 SCC 182
[2]     (1995) 2 SCC 90

critical spare parts for the defence and in particular, in developing submarine batteries under the aegis of the Defence Ministry and the High Court erred in directing the appellants to issue an advertisement giving details about the technical specifications for submarine batteries and in selecting the product submitted in response to the advertisement and the impugned order is not sustainable.= If the country wishes to play a substantial role in the Indian Ocean and Arabian Sea, India must ensure high standards of defence power comparing with the neighbouring countries and it should have modernized submarines. Modernized submarines require submarine batteries with high sophisticated standard under the aegis of DGQA. The Government cannot put the life of its defence personnel and submarine worth crores of rupees to risk simply because the respondent claims to have the capability and can supply submarine batteries. For such defence critical spare parts like submarine batteries, there cannot be any open advertisement inviting tenders. Advertisements are issued calling for tenders only for common use items which are normally available in the open market with a wide range of sources. Submarine batteries do not fall under this category of common use items. The respondent cannot claim any vested right to be issued a development indent or RFP or a supply order simply because it has made investments to manufacture submarine batteries. Straightway RFP cannot be issued to the respondent by ignoring the procedure for issuing a development indent and testing the batteries. The aforesaid discussion and also the written submission as to how the respondent developed the batteries over a period of time reiterate that the development of second source could only be as per the guidelines of DGQA and under the supervision and inspection of the officials of the DGQA and not independently. The High Court did not keep in view the policy of the Government in purchasing the critical spare parts for the defence and in particular, in developing submarine batteries under the aegis of the Defence Ministry and the High Court erred in directing the appellants to issue an advertisement giving details about the technical specifications for submarine batteries and in selecting the product submitted in response to the advertisement and the impugned order is not sustainable. The impugned order of the High Court is set aside and this appeal is allowed. In the facts and circumstances of the case, we make no order as to costs.

                                                                  REPORTABLE

                        IN THE SUPREME COURT OF INDIA
                        CIVIL APPELLATE JURISDICTION

                        CIVIL APPEAL NO. 3193 OF 2006


       UNION OF INDIA & ANR.                              ..Appellants

                                   Versus

       HBL NIFE POWER SYSTEMS LTD.                        ..Respondent



                               J U D G M E N T

R. BANUMATHI, J.



            This appeal assails the order dated  27.10.2005  passed  by  the
High Court of Delhi allowing the appeal  in  LPA  No.2448  of  2005  thereby
directing  the  Union  of  India  to  issue  an  advertisement  in   leading
newspapers having  wide  circulation  inviting  tenders  for  the  submarine
batteries  mentioning  the  detailed  technical   specifications   and   the
appellants  to  consider  all  the  products  which   meet   the   technical
specifications and thereby proceed to select the best product in  accordance
with law.
2.          The subject-matter involved in the  present  case  is  submarine
batteries required for the Indian Navy.  Indian  Navy  has  three  types  of
submarines for which three different types of  batteries  are  used.  Type-I
battery for EKM submarines, Type-II battery for  SSK  class  submarines  and
Type-III battery for Foxtrot class submarines.  Initially,  these  batteries
were imported from the Original  Equipment  Manufacturer.  In  view  of  the
recurring requirement of the batteries, subsequently a  decision  was  taken
to progress their indigenisation. Director General Quality Assurance  (DGQA)
working  under  the  Ministry  of  Defence  has  a  detailed  procedure   to
‘develop/indigenise’ critical items/spares. As per the said  procedure,  the
Government   identifies   the   possible   vendors   and   assesses    their
capacity/technical qualifications and  thereafter  a  development  order  is
placed on the proposed supplier.  During this period of development  of  the
spares, the Government carries out regular inspection  and  the  product  is
developed under the aegis of officials of the Defence Ministry and  officers
of the DGQA are associated throughout the  development  process  right  from
the time of sourcing of raw materials to ensure that the  product  not  only
meets the technical qualifications but is fully reliable and free  from  any
errors in actual performance.
3.          By following the above  rigorous  procedure,                M/s.
Standard Batteries Ltd. was developed  as  an  indigenous  manufacturer  for
supplying Type-III  submarine  batteries.          M/s.  Standard  Batteries
Ltd. was subsequently  developed  as  a  manufacturer  of  Type-I  submarine
batteries in the year 1988.   M/s. Exide Industries Ltd.  was  developed  as
an indigenous manufacturer of Type-II submarine batteries in 1989.   In  the
year 1998, M/s. Standard Batteries Ltd. sold  its  business  to  M/s.  Exide
Industries Ltd.  Since then, M/s.  Exide  Industries  Ltd.   has  become   a
single vendor in supplying batteries for all three classes of submarines  to
the Indian Navy.  Officers  of  DGQA  are  constantly  associated  with  the
manufacturing of the submarine batteries in Exide  Industries  Ltd.  as  and
when they are required by the Indian Navy.  As M/s.  Exide  Industries  Ltd.
has become the single vendor, in  2004,  Government  started  exploring  the
possibility of developing another supplier as second  source  for  submarine
batteries. But as per the policy, the Government cannot register anyone  for
supply of submarine batteries without following  the  procedure  or  putting
the vendor through the process  of  the  development.   In  any  event,  the
requirement of the supervision of DGQA in development  of  the  product  and
thirteen quality tests intended to test submarine batteries could  never  be
dispensed with.
4.          The respondent made its representation in October  2004  to  the
Ministry of Defence claiming that it had developed submarine  batteries  and
that they are under  internal  evaluation.  On  31.03.2005,  the  respondent
requested the Ministry of Defence  for  a  development  order  so  that  the
respondent can be developed as the second source of submarine batteries  and
the respondent  agreed  to  undergo  stringent  tests  before  it  could  be
registered for supplying the product. As the residual life of  the  existing
batteries was coming to an end,  in  July  2005,  the  Government  has  been
processing the request by the Navy to purchase submarine  batteries.   Since
only M/s. Exide Industries Ltd. was then the only approved supplier  of  all
types of  submarine  batteries,  it  was  proposed  to  issue  ‘Request  For
Proposal’ (RFP)  to  M/s.  Exide  Industries  Ltd.  alone  and  the  Defence
Minister gave approval to issue  RFP  to  M/s.  Exide  Industries  Ltd.  for
supplying eleven sets of submarine batteries.
5.          Respondent filed writ petition before the Delhi  High  Court  on
17.09.2005 claiming that it should be  issued  a  request  for  proposal  as
well,  as  it  was  registered  for  some  other  products  namely   torpedo
batteries.  Be it noted that the submarine batteries claimed  to  have  been
developed by the respondent were neither developed under the  aegis  of  the
DGQA nor the Government paid for development of  the  prototype  cells.  The
learned  Single  Judge  vide  order  dated  05.10.2005  dismissed  the  writ
petition  observing  that  if  the  extant  policy  envisages  selection  or
shortlisting of a party for purposes of raising a development indent for  an
alternative indigenous source of equipment, this stage must be  successfully
crossed before venturing further into the issuance of request  for  proposal
and thereafter issuance of a PAC. The  learned  Single  Judge  further  held
that procurement method was a policy matter and the policy  did  not  suffer
from any illegality and in any event, the policy has not been challenged  by
the respondent in the writ petition.  Aggrieved by  dismissal  of  the  writ
petition, the respondent filed LPA No.2448/2005 which was allowed  vide  the
impugned judgment dated 27.10.2005 and the High Court issued  directions  to
the Ministry of Defence to  procure  even  the  critical  spare  parts  like
submarine batteries only after issuing advertisement and  calling  for  open
tender. Assailing the impugned judgment, the appellant-Union  of  India  has
preferred this appeal.
6.          Ms. Pinky Anand,  learned Additional Solicitor General of  India
alongwith Mr. Qadri  appearing  for  the  appellants  contended  that  while
tender is  issued  for  common  use  items,  purchase  of   specialized  and
critical spare parts for the Defence Ministry cannot  be  done  by  an  open
tender and in the instant case,  there  were  justifiable  reasons  for  the
Government to classify  submarine  batteries  as  critical  and  specialized
defence product and to procure the same only from those suppliers  who  have
developed the submarine batteries under the  aegis  of  DGQA  and  are  duly
approved/registered  with  DGQA.  It  was  submitted  that  in  relation  to
essential defence supplies/critical spare parts, the Government must  ensure
that   the   supplier   has   the   necessary   technical    qualifications,
infrastructure and capacity to develop the product  and  in  critical  spare
parts like submarine batteries, the Government cannot put the  life  of  its
defence personnel and submarine worth  several  crores  of  rupees  to  risk
simply because the  respondent  claims  to  have  the  capability.   It  was
submitted that the High Court was not right in directing the Government  for
issuing tenders for critical spare parts like  submarine  batteries  without
knowing whether the said product can  withstand  all  the  thirteen  quality
tests and render reliable performance on board.
7.          Per contra, learned counsel for the  respondent  submitted  that
the respondent for the first time  vide  its  letter  dated  06.10.1999  had
shown its intention to develop the submarine  batteries  and  requested  the
appellant to provide the specifications of the same and in response  to  the
same,  appellants vide letter dated 22.11.1999 duly provided  the  technical
specifications and on the  basis  of  the  same,  respondent  had  developed
prototype cells of the said batteries for testing which were offered to  the
appellants for evaluation way back in March 2004 and despite such  offering,
the appellants did not carry out any test. Contention of the  respondent  is
that they continued to invest huge sums for developing  prototype  cells  of
submarine batteries under legitimate expectation that the  respondent  would
be considered as an alternative source for  supplying  submarine  batteries.
Further contention of the respondent is that  the  goods  purchased  without
any tender  on  proprietary  basis  only  from  one  source  is  a  flagrant
violation of the constitutional mandate of Article 14 and  by  directing  to
issue an advertisement, the High Court rightly held against the monopoly  of
single source for supply of submarine batteries.
8.          We have carefully considered the  rival  contentions    advanced
by the parties and perused the details of the procedure for  development  of
submarine batteries and various  tests  required  to  be  conducted  on  the
submarine batteries and other material on record.
9.          The defence procurement can be classified into two broad heads:-

(i)    First  category  are  common  use  items  of  generic  or  commercial
specifications and these are available  in  open  market.  For  example  car
batteries, spare of various vehicles etc.  These items are procured  by  the
Ministry of Defence by Open Tender Enquiry (OTE) i.e. by  advertisements  in
the press and website.

(ii)  Second category are those materials  which  do  not  fall  within  the
above ‘common use’ category. These spares are ‘mission  critical’  strategic
defence products, which  are  procured  only  from  those  firms  which  are
registered  with  Director  General  of  Quality  Assurance   (DGQA)   which
functions under the Ministry of Defence. The supplier has to  be  registered
with DGQA for the supply of that specific product.

Defence Ministry/DGQA has a very stringent procedure before  any  vendor  is
registered with DGQA for supplying the  product.  In  the  second  category,
though the product is manufactured by a private supplier, it is  not  as  if
the Government is totally disassociated from the production process  of  the
product.  As is seen from the Standing Orders of the  DGQA  (Annexure  P-1),
prior to grant of registration, the Government pays the vendor to  ‘develop’
the product under its supervision for over a period of time.   Officials  of
the DGQA are posted at the factory of the supplier to ensure that the  goods
so produced are absolutely in order. The inspectors of  DGQA  inspect  every
stage of production right from the sourcing of  the  raw  materials  by  the
vendor as it is  quite  possible  that  the  vendor  may  purchase  inferior
quality material which may be difficult to  detect  in  the  final  product.
Development of the second source would  require  upto  a  maximum  of  three
years, as the development process involves drawing up of detailed  technical
specifications and performance criteria based  on  which  the  firm  has  to
prepare a  detailed  design  for  each  and  every  component  to  meet  the
stringent military standards.
10.         The subject-matter of the present case is  submarine  batteries.
The  importance  of  submarine  batteries   to   a   submarine   cannot   be
underestimated as it is strategically  a  vital  equipment  for  submarines.
Submarines or diesel electrical vessels run on battery power. Power  to  the
submarine is provided by about 240 to 528 batteries, weighing about 800  kgs
each, depending on the nature of submarine.  The only source of power  to  a
submarine when it dives beyond  nine  metres  into  sea/ocean  is  submarine
batteries.  Improvement in battery technology  and  capacity  is  always  an
important  goal  in  submarine  design.   Batteries  are  unique  source  of
electric  energy  in  underwater  navigation.  When  a  submarine  is  under
surface, all  its  equipments  are  powered  from  the  batteries,  electric
machines, lights, internal communication etc. which means  that  right  from
the first stage, the submarine batteries are vital for operating  submarine.
 Survival of submarine depends on its radio noise levels which are  directly
related to the efficient functioning  of  onboard  equipment  and  machinery
especially when the batteries which is the only source of power and  energy.
 If the batteries fail, submarine will be without  power  and  it  can  have
catastrophic consequences on men as  also  submarine  would  be  lost.  DGQA
therefore ensures that  it  is  associated  during  the  production  of  the
batteries by the approved vendor and only those  batteries  which  pass  the
thirteen tests are purchased by the Navy. In case  of  submarine  batteries,
before a particular vendor is approved for supply  of  submarine  batteries,
as per the policy, first the government issues  development  indent  to  the
lowest bidder and the Government pays the proposed  vendor  to  develop  the
product and the product is developed by the vendor under the supervision  of
the DGQA officials. Product so developed under the supervision of  DGQA  has
to undergo thirteen  tests  as  stipulated  in  Annexure  P-2.  Ministry  of
Defence/Navy authorities cannot  accept  the  final  product  without  being
fully associated with the development of the product right  from  the  stage
of procurement of raw material to the stage of final product.   As  per  the
policy, RFP could be issued only to a firm which  is  duly  registered  with
DGQA for supply of the product after development of the  product  under  the
aegis of DGQA.  Having regard to  the  requirements  of  a  highly  critical
spare part like submarine batteries, the Government has  framed  the  policy
for  issuance  of  the  development  indent,  developing  the   source   and
registration with DGQA. It is pertinent to note that in the  writ  petition,
policy itself was not under challenge.   In  fact,  in  the  writ  petition,
respondent-company itself prayed only for issuance of request  for  proposal
under the policy.  The High Court did not keep in view  the  policy  of  the
Government and the mandatory requirement of DGQA being associated  with  the
development of submarine batteries which is a critical defence  spare  part.

11.         If the country wishes to play a substantial role in  the  Indian
Ocean and Arabian Sea, India must ensure high  standards  of  defence  power
comparing with the neighbouring countries  and  it  should  have  modernized
submarines. Modernized submarines  require  submarine  batteries  with  high
sophisticated standard under the aegis of DGQA.  The Government  cannot  put
the life of its defence personnel and submarine worth crores  of  rupees  to
risk simply because the respondent claims to have  the  capability  and  can
supply submarine batteries.  For such  defence  critical  spare  parts  like
submarine  batteries,  there  cannot  be  any  open  advertisement  inviting
tenders. Advertisements are issued calling for tenders only for  common  use
items which are normally available in the open market with a wide  range  of
sources. Submarine batteries do not fall under this category of  common  use
items. The  respondent  cannot  claim  any  vested  right  to  be  issued  a
development indent or RFP or a supply  order  simply  because  it  has  made
investments to manufacture submarine batteries.  Straightway RFP  cannot  be
issued  to  the  respondent  by  ignoring  the  procedure  for   issuing   a
development indent and testing the batteries.
12.         As the matter was pending for over a decade, we have  asked  the
appellant-Union of India about the  subsequent  development  of  the  second
source for  supply  of  submarine  batteries  and  for  the  status  of  the
respondent.  In response, on instruction Mr. S.W.A. Qadri, onbehalf  of  the
appellant has filed elaborate written submission.  It is stated  that  after
grant of stay order dated 16.12.2005 by  this  Court  against  the  impugned
order, the appellant initiated  a  case  for  development  of  an  alternate
vendor for submarine batteries seeking development indents from IHQ  (N)/DEE
as per directives of Ministry of Defence  vide  ID  No.3536/04/D(N-I)  dated
08.02.2005.   Accordingly,  open  tender  was  issued   in   newspapers   on
29.05.2006 wherein several firms including the  respondent  responded.   For
development of a second source of Type-I batteries,  development  order  was
placed on the respondent HBL Ltd. on 22.03.2007, as per which the  firm  was
to develop four Type-I cells at a cost of Rs.11.16  lakhs  with  a  delivery
schedule  of  eighteen  months.  The  prototype  batteries  manufactured  by
respondent-HBL failed  to  meet  DGQA’s  stipulated  standard  for  relevant
discharge (C2) test. Thereafter, on 12.07.2011, a meeting was held with  the
participants  of  DEE  and   M/s.   HBL   representatives.   Post   detailed
deliberation, the respondent was asked to manufacture four cells afresh  and
present them for type testing.  Test  of  batteries  was  completed  at  the
factory premises in June 2012 and batteries were transferred to  BCF,  Sewri
in January 2013. However, on receipt at  BCF,  Sewri,  visible  bulging  was
observed in all batteries and lead tape discontinuity in one battery  during
first maintenance charge. During analysis  in  February  2013,  bulging  was
found to exceed permissible limit of 12 mm on all batteries post first  full
charge.  However, respondent opined that the bulging  was  due  to  improper
packaging whilst transporting batteries from  the  premises  (Hyderabad)  to
Mumbai. Thereafter, respondent firm–HBL agreed  on  certain  conditions  for
manufacturing of four new prototype cells with  a  lead  time  of  three-six
months and agreed to complete manufacturing of test cells by February  2014.
 However, there was delay on the part of  the  respondent  and  finally  the
trial of test  cells  was  completed  on  14.11.2014  and  the  trials  were
validated by CQAE, Secunderabad.  Test cells were received at BCF, Sewri  in
January  2015.  Charging/discharging  trials  commenced   wherein   charging
parameters were examined and found to be satisfactory.  In this  regard,  in
the written submission filed by UOI, it is stated as under:-
“8.  …The  performance  report  forwarded  by  ASD  (Mbi)/BCF  wherein   all
parameters of the cells were examined, indicates satisfactory test  results.
 In view  of  the  satisfactory  completion  of  indigenization  efforts  by
respondent herein (M/s. HBL, Hyderabad) the firm was nominated  as  IHQ  MOD
(N) approved vendor  for  supply  of  Type-I  submarine  batteries  for  EKM
submarines on 28.05.2015

9. ..the next procurement case shall have  an  additional  qualified  vendor
for Type-I submarine batteries to increase the market  competence  for  both
technical and financial aspects.”

Though the subsequent developments may not  be  relevant  to  determine  the
issue, we have referred to the written submission in extenso  for  the  sake
of completion.
13.         The aforesaid discussion and also the written submission  as  to
how the respondent developed the batteries over a period of  time  reiterate
that the development of second source could only be as  per  the  guidelines
of DGQA and under the  supervision and inspection of the  officials  of  the
DGQA and not independently.  The High Court did not keep in view the  policy
of the Government in purchasing the critical spare  parts  for  the  defence
and in particular, in developing submarine batteries under the aegis of  the
Defence Ministry and the High Court erred in  directing  the  appellants  to
issue an advertisement giving details  about  the  technical  specifications
for submarine batteries and in selecting the product submitted  in  response
to the advertisement and the impugned order is not sustainable.
14.         The impugned order of the High  Court  is  set  aside  and  this
appeal is allowed. In the facts and circumstances of the case,  we  make  no
order as to costs.




                                                             ..…………………….CJI.
           (T.S. THAKUR)


                                                              ..……………………….J.
                                 (R. BANUMATHI)
New Delhi;
January 20, 2016