Full Judgment Text
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PETITIONER:
ASSISTANT COLLECTOR OF CENTRAL EXCISE CHANDAN NAGAR, WEST BE
Vs.
RESPONDENT:
DUNLOP INDIA LTD. AND ORS .
DATE OF JUDGMENT30/11/1984
BENCH:
REDDY, O. CHINNAPPA (J)
BENCH:
REDDY, O. CHINNAPPA (J)
SEN, A.P. (J)
VENKATARAMIAH, E.S. (J)
CITATION:
1985 AIR 330 1985 SCR (2) 190
1985 SCC (1) 260 1984 SCALE (2)819
CITATOR INFO :
F 1985 SC1289 (10)
R 1986 SC 614 (5,6)
RF 1988 SC2010 (12)
ACT:
Constitution of India 1950 Articles 226 and 141
Interim orders in writ petition-Grant OF-Situations and
circumstances-What are-Matters involving public revenue-Not
sufficient showing a prima facie case-Furnishing of bank
guarantee not a circumstance-Balance of convenience to be in
favour of grant of interim order-Likelihood of prejudice to
public interest to be shown.
Supreme Court decisions binding on all courts-Judgment
per incuriam Principle of-High Court not entitled to
disregard judgment of Supreme Court labeling It per
incuriam.
HEADNOTE:
The Government of India by a notification dated April
6,1984, exempted tyres from a certain percentage of Excise
Duty to the extent that the manufacturers had not availed
themselves of the exemption granted under certain other
earlier notifications.
The Customs and Excise Department was of the view that
the Respondent-company who was a manufacturer of Tyres,
Tubes and various other rubber products was not entitled to
the aforesaid exemption as it had cleared the goods earlier
without paying Central Excise Duty but on furnishing Bank
Guarantees under various interim-orders of courts.
The Company claimed the benefit of exemption to the
tune of about Rs. 6 crores and filed a Writ Petition in the-
High Court and sought an interim order restraining the
Central Excise authorities from the levy and collection of
excise duty. The High Court held that a prima facie case had
been made out in favour of the company and by an interim
order allowed the benefit of the exemption to the tune of
about Rs. 2 crores and directed that the goods be released
on furnishing a Bank Guarantee.
In the Department’s appeal, the Division Bench
confirmed the above order with a slight modification to the
effect that the Collector of Central Excise could encash 30
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per cent of the Bank Guarantee.
Allowing the appeals by the Department, this Court,
^
HELD: 1. The orders of the Single Judge as well as the
Division Bench are wholly unsustainable and should never
have been made, Even assuming the
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company had established a prima facie case, it was not a
sufficient justification A for granting the said interim
orders. There was no question of any balance of convenience
being in favour of the respondent-Company, it was certainly
in favour of the Government of India. [201B-C]
2. Governments are not run on mere Bank Guarantees.
Very often some courts act as if furnishing a Bank Guarantee
would meet the ends of justice. No Governmental business,
for that matter no business of any kind can be run on mere
Bank Guarantees. Liquid cash is necessary for the running of
a Government as indeed any enterprise. [201C]
3. Where matters of public revenue are concerned, it is
of utmost importance that interim orders are not to be
granted merely because prima facie case has been shown. More
is required. The balance of convenience must be clearly in
favour of the making of an interim order and there should
not be the slightest indication of a likelihood of prejudice
to the public interest. [201D1
4. Article 226 is not meant to short circuit or
circumvent statutory procedures. It is only where statutory
remedies are entirely ill-suited to meet the demands of
extraordinary situations, as for instance where the very
vires of the statute is in question or where private or
public wrongs are so inextricably mixed up and the
prevention of public injury and the vindication of public
justice require it, that recourse may be had to Art. 226.
The Court must also have good and sufficient reason to by-
pass the alternative remedy provided by statute. Matters
involving the revenue where statutory remedies are available
are not such matters. The vast majority of the petitions
under Art. 226 are filed solely for the purpose of obtaining
interim orders and thereafter to prolong the proceedings by
one device or the other. This practice needs to be strongly
discouraged. [194F-H; 195A] E
5. There are, cases which demand that interim orders
should be made in the interests of justice. Where gross
violations of the law and injustices are about to be, or are
perpetrated, it is the bounden duty of the court to
intervene and give appropriate interim relief. In cases
where denial of interim relief may lead to public mischief,
grave irreparable private injury, or shake a citizen’s faith
in the impartiality of public administration, a court may
well be justified in granting interim relief against public
authority.
Samarias Trading Company Pvt. Ltd. v. S. Samuel and
Ors., [1985] 2 S.C.R. 24, Siliguri Municipality v. Amalendu
Das, [1981] 2 SCC 436, Titaghur Paper Mills Co. Ltd. v.
State of Orissa, [1983] 2 SCC 433, Union of India v. Oswal
Woollen Mills Ltd., [1984] 2 SCC 646 and Union of India v.
Jain Shudh Vanaspati Ltd., C.A. No. 11450 of 1983; referred
to.
6. In India, under Art. 141, the law declared by the
Supreme Court shall be binding on all courts and under Art.
144 all authorities civil and judicial shall act in aid of
the Supreme Court. [200B]
7. In the hierarchical system of Courts which exists in
our country it is
192
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necessary for each lower tier, including the High Courts to
accept loyally the decisions of the higher tiers. The better
wisdom of the Court below must yield to the higher wisdom of
the Court above. [199E-F]
8. The label per incuriam is relevant only to the right
of an appellate court to decline to follow one of its own
previous decisions, not to its right to disregard a decision
of a higher appellate court or to the right of a judge of
the High Court to disregard a decision of the Supreme Court.
[199H; 200A]
Cassel and Co. Ltd. v. Broome, [1972] A C. 1027 and
Rookes v. Barnard, [1964] A.C. 1129, referred to.
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 4742-43
of 1984.
a Appeal by Special leave from the Judgment and order
dated the 9th August, 1984 of the Calcutta High Court in
FMAT No. 2139 of 1984 and 2023 of 1984.
K. Parasaran, Attorney General, V. J. Francis,
Chandrasekharan, N.M. Popli and Miss Savitha Sharma for the
Appellant.
F. S. Nariman, D. N. Gupta and Harish Salve for the
Respondent.
The Judgment of the Court was delivered by
CHlNNAPPA REDDY, J. It is indeed a great pity-and, we
wish we did not have to say it but we are afraid;we will be
signally failing in our duty if we do not do so -some
courts, of late, appear to have developed an unwarranted
tendency to grant interim orders-interim orders with a great
potential for public mischief-for the mere asking. We feel
greatly disturbed. We find it more distressing that such
interim orders, often ex-parte and non-speaking, are made
even by the High Courts while entertaining writ petitions
under Art. 226 of the Constitution, and in the Calcutta High
Court, on oral application too. Recently in Samaries Trading
Company Pvt. Ltd. v. S. Samuel & Ors(l). we had occasion to
condemn and prohibit this practice of entertaining oral
applications under Art. 226 and passing interim orders
thereon. In several other cases, Siliguri Municipality v.
Amelendu Das(2), Titagur Paper Mills Co. Ltd. State of
Orissa,(3) Union
(1) [1985] 2 S.C R. 24.
(2) [1983] 2 S.C.C 436
(3) [1983] 2 S.C.C 433
193
Of India v. Oswal Woollen Mills Ltd(l)., Union of India v.
Jain Shubh A Vanaspati Ltd.(a), this Court was forced to
point out how wrong it was to make interim orders so soon as
an application was but presented, when a second thought (or
a second’s thought) would expose the impairment of the
public interest and often enough the existence of a suitable
alternative remedy. Despite the fact that we have set our 8
face against interfering with interim orders passed by the
High Courts and made it practically a rigid rule not to so
interfere, we were constrained to interfere in those cases.
In Siliguri Municipality v. Amalendu Das, (supra) A. P.
Sen and M. P. Thakkar, JJ. had to deal with an interlocutory
order passed by the Calcutta High Court restraining the
Siliguri Municipality from recovering a graduated
consolidate rate on the annual value of buildings in terms
of the amended provisions of the Bengal Municipal Act. We
reiterate the following observations made therein:
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"We are constrained to make the observations which
follows as we do feel dismayed at the tendency on the
part of some of the High Courts to grant interlocutory
orders for the mere asking. Normally, the High Court
should not, as a rule, in proceedings under Article 226
of the Constitution grant any stay of recovery of tax
save under very exceptional circumstances. The grant to
stay in such matters, should be an exception and not a
rule.
"It is needless to stress that a levy or impost does
not become bad as soon as a writ petition is instituted
in order to assail the validity of the levy. So also
there is no warrant for presuming the levy to be bad at
the very threshold of the proceedings. The only
consideration at that juncture is to ensure that no
prejudice is occasioned to the rate payers in case they
ultimately succeed at the conclusion of the
proceedings. This object can be attained by requiring
the body or authority levying the impost to give an
undertaking to refund or adjust against future dues,
the levy of tax or rate or a part thereof, as the case
may be, in the event of the entire levy or a part
thereof being ultimately held
(l) [1984l 1.2 S.C.C. 646 t
(2) C, A. No. 11420 of 1983
194
to be invalid by the court without obliging the tax-
payers to institute a civil suit in order to claim the
amount already recovered from them. On the other hand,
the Court cannot be unmindful of the need to protect
the authority levying the tax, for, at that stage the
Court has to proceed on the hypothesis that the
challenge may or may not succeed. The Court has to show
awareness of the fact that in a case like the present a
municipality cannot function or meet its financial
obligations if its source of revenue is blocked by an
interim order restraining the municipality from
recovering the taxes as per the impugned provision. And
that the municipality has to maintain essential civic
services like water supply, street lighting and public
streets etc., apart from cunning public institutions
like schools, dispensaries, libraries etc. What is
more, supplies have to be purchased and salaries have
to paid. The grant of an interlocutory order of This
nature would paralyze the administration and dislocate
the entire working of the municipality. It seems that
these serious ramifications of the matter were lost
sight of while making the impugned order".
In Titaghur Paper Mills Co. Ltd. v. S/ate of Orissa A.
P. Sen E. S. Venkataramiah and R. B. Misra, JJ. held that
where the statute itself provided the petitioners with an
efficacious alternative remedy by way of an appeal to the
Prescribed Authority, a second appeal to the Tribunal and
there after to have the case stated to the High Court, it
was not for the High Court to exercise its extra ordinary
jurisdiction under Art. 226 of the Constitution ignoring as
it were, the complete statuary machinery. That it has become
necessary, even now, to as to repeat this admonition is
indeed a matter of tragic concern to us. Article 226 is not
meant to short circuit of circumvent statutory procedures.
It is only were statutory remedies are entirely ill-suited
to meet the demands of extraordinary situations, as for
instance where the very vires of thee statute is in question
or where private or public wrongs are so inextricably mixed
up and the prevention of public injury and the vindication
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of public justice require it that recourse may be had to
Art. 226 of the Constitution. But then the Court must have
good and sufficient reason to by-pass the alternative remedy
provided by statute. Surely matters involving the revenue
where statutory remedies are available are not such matters.
We can also take judicial notice of the fact that the vast
195
majority of the petitions under Art. 226 o the Constitution
are filed . solely for the purpose of obtaining interim
orders and there after prolong the proceedings by one device
or the other. The practice certainly needs to be strongly
couraged.
In Union of India v. Oswal Woollen Mills Ltd., we had
occasion to consider an interim order passed by the Calcutta
High Court in regard to a matter no part of the cause of
action relating to which appeared to arise within the
jurisdiction of the Calcutta High Court. In that case the
interim order practically granted the very prayers in the
writ petition. We were forced to observe,
"It is obvious that the interim order is of a
drastic character with a great potential for mischief.
The principal prayer in the writ petition is the
challenge to the order made or proposed to be made
under Clause 8 of the Import Control order. The interim
order in terms of prayers (j) and (k) has the effect of
practically allowing the writ petition at the stage of
admission without hearing the opposite parties. While
we do not wish to say that a drastic interim order may
never be passed without hearing the opposite parties
even if the circumstances justify it, we are very
firmly of the opinion that a statutory order such as
the one made in the present case under Clause 8-B of
the Import Control order ought not to have been stayed
without at least hearing those that made the order.
Such a stay may lead to devastating consequences
leaving no way of undoing the mischief. Where a
plentitude of power is given under a statute, designed
to meet a dire situation, it is no answer to say that
the very nature of the power and the consequences which
may ensue is itself a sufficient justification for the
grant of a stay of that order, unless, of course, there
are sufficient circumstances to justify a strong Prima
facie inference that the order was made in abuse of the
power conferred by the statute. A statutory order such
as the one under Clause 8-B purports to be made in the
public interest and unless there are even stronger
grounds of public interest an expert interim order will
not be justified. The only appropriate order to make in
such cases is to issue notice to the respondent and
make it returnable within a short period. This should
particularly be so where the offices of the principals
respondents and relevant records
196
lie outside the ordinary jurisdiction of the court. To
grant interim relief straightaway and leave it to the
respondents to move the court to vacate the interim
order may jeopardise the public interest. It is
notorious how if an interim order is once made by a
court, parties employ every device and tactic to ward
off the final hearing of the application. It is,
therefore, necessary for the courts to be circumspect
in the matter of granting interim relief, more
particularly so where the interim relief is directed
against orders or actions of public officials acting in
discharge of their public duty and in exercise of
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statutory powers. On the facts and circumstance of the
present case, we are satisfied that no interim relief
should have been granted by the High Court in the terms
in which it was done",
We repeat and deprecate the practice of granting
interim order which practically give the principal relief
sought in the petition for no better reason than that a
prima facie case has been made out, without being concerned
about the balance of convenience, the public interest and a
host of other relevant considerations. Regarding the
practice of some clever litigants of resorting to filing
writ petitions in the far-away courts having doubtful
jurisdiction, we had this to observe:
"..... Having regard to the fact that the registered
office of the Company is at Ludhiana and the principal
respondents against whom the primary relief is sought
are at New Delhi, one would have expected the writ
petition to be filed either in the High Court of Punjab
and Haryana or p in the Delhi High Court. The writ
petitioners however, have chosen the Calcutta High
Court as the forum perhaps because one of the
interlocutory reliefs which is sought is in respect of
a consignment of beef tallow which has arrived at the
Calcutta Port. An inevitable result of the filing of
writ petitions elsewhere than at the place where the
concerned offices and the relevant records are located
is to delay prompt return and contest. We do not desire
to probe further into the question whether the writ
petition was filed by design or accident in the
Calcutta High Court when the office of the Company is
in the State of Punjab and all the principal
respondents are in Delhi. But we do feel disturbed that
such writ petitions are of ten deliberately
197
filed in distant High Courts, as part of a manoeuvre in
a A legal battle, so as to render it difficult for the
officials at Delhi to move applications to vacate stay
where it becomes necessary to file such applications".
In Union of India v. Jain Shudha Banaspati Ltd.
(supra), Chandrachud, CJ., A. P. Sen, R. N. Misra, JJ.
allowed an appeal against an interim order making the
following observations:
"After hearing learned counsel for the rival
parties, we are of the opinion that the interim order
passed by the High Court on November 29, 1983 is not
warranted since it virtually grants to the respondents
a substantial part of the relief claimed by them in
their writ petition. Accordingly, we set aside the said
order".
We have come across cases where the collection of
public revenue has been seriously jeopardised and budgets of
Governments and Local Authorities affirmatively prejudiced
to the point of precariousness consequent upon interim
orders made by courts. In fact instances have come to our
knowledge where Governments have been forced to explore
further sources for raising revenue, sources which they
would rather well leave alone in the public interest,
because of the stays granted by courts. We have come across
cases where an entire Service is left in a stay of flutter
and unrest because of interim orders passed by courts,
leaving the work they are supposed to do in a state of
suspended animation. We have come across cases where buses
and lorries are being run under orders of court though they
were either denied permits or their permits had been
canceled or suspended by Transport Authorities. We have come
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across cases where liquor shops are being run under interim
orders of court. We have come across cases where the
collection of monthly rentals payable by Excise Contractors
has been stayed with the result that at the and of the year
the contractor has paid nothing but made his profits from
the shop and walked out. We have come across cases where
dealers in food grains and essential commodities have been
allowed to take back the stocks seized from them as if to
permit them to continue to indulge in the very practices
which were to be prevented by the seizure. We have come
across cases where land reform and important welfare
legislations have been stayed by courts. Incalculable harm
has been done by such interim orders. All this is not to say
that interim orders may never be
198
made against public authorities. There are, of course, cases
which demand that interim orders should be made in the
interests of justice. Where gross violations of the law and
injustices are perpetrated or are about to be perpetrated,
it is the bounden duty of the court to intervene and give
appropriate interim relief. In cases where denial of interim
relief may lead to public mischief, grave irreparable
private injury or shake a citizen’s faith in the
impartiality of public administration, a Court may well be
justified in granting interim relief against public
authority. But since the law presumes that public
authorities function properly and bonafide with due regard
to the public interest, a court must be circumspect in
granting interim orders of far reaching dimensions or orders
causing administrative, burdensome inconvenience or orders
preventing collection of public revenue for no better reason
than that the parties have come to the Court alleging
prejudice, inconvenience or harm and that a prima facie case
has been shown. There can be and there are no hard and fast
rules. But prudence, discretion and circumspection are
called for. There are several other vital considerations
apart from the existence of a prima facia case. There is the
question of balance of convenience. There is the question of
irreparable injury. There is the question of the public
interest There are many such factors worthy of
consideration. We often wonder why in the case indirect
taxation where the burden has already been passed on to the
consumer, any interim relief should at all be given to the
manufacturer, dealer and the like !
There is just one more thing that we wish to say. In
Siliguri v. Amalendu Das, the Court was put to the necessity
of pointing out the following:
"We will be failing in our duty if we do not advert
to feature which causes us dismay and distress. On a
previous occasion, a Division Bench had vacated an
interim order passed by a learned single Judge on
similar facts in a similar situation. Even so when a
similar matter giving rise to the present appeal came
up again, the same learned judge whose order had been
reversed earlier, granted a non-speaking interlocutory
order of the aforesaid nature. This order was in turn
confirmed by a Division Bench without a speaking order
articulating reasons for granting a stay when the
earlier Bench had vacated the stay. We
199
mean no disrespect to the High Court in emphasizing the
necessity for self-imposed discipline in such matters
in obeisance to such weighty institutional
considerations like the need to maintain decorum and
comity. So also we mean no disrespect to the High Court
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in stressing the need for self-discipline on the part
of the High Court in passing interim orders without
entering into the question of amplitude and width of
the powers of the High Court to grant interim relief.
The main purpose of passing an interim order is to
evolve a workable formula or a workable arrangement to
the extent called for by the demands of the situation
keeping in mind the presumption regarding the
constitutionality of the legislation and the
vulnerability of the challenge, only in order that no
irreparable injury is occasioned. The Court has
therefore to strike a delicate balance after
considering the pros and cons of the matter lest larger
public interest is not jeopardized and institutional
embarrassment is eschewed".
We desire to add and as was said in Cassel and Co. Ltd.
v. Broome(l) we hope it will never be necessary for us to
say so again that ’in the hierarchical system of Courts’
which exists in our country, ’it is necessary for each lower
tier’, including the High Court, ’to accept loyally the
decisions of the higher tiers’. "It is inevitable in a
hierarchical system of Courts that there are decisions 11 of
the Supreme appellate tribunal which do not attract the
unanimous approval of all members of the
judiciary...............
But the judicial system only works if someone is allowed to
have the last word and that last word, once spoken, is
loyally accepted"(2). The better wisdom of the Court below
must yield to the higher wisdom of the Court above. That is
the strength of the hierarchical judicial system. In Cassel
v. Broome, commenting on the Court of Appeal’s comment that
Rookes v. Barnard(3) was rendered per incuriam Lord Diplock
observed,-
"The Court of Appeal found themselves able to
disregard the decision of this House in Rookes v.
Barnard by applying to it the label per incuriam That
label is relevant only to the right of an appellate
court to decline to
(1) [1972] AC 1027
(2) (See observations of Lord Hailsham and Lord Dipock in
Broome v. Cassell).
(3) [1984] A.C. 1129.
200
follow one of its own previous decisions, not to its
right to disregard a decision of a higher appellate
court or to the right of a judge of the High Court to
disregard a decision of the Court of Appeal."
It is needless to add that in India under Act. 141 of
the Constitution the law declared by the Supreme Court shall
be binding on all courts within the territory of India and
under Art. 144 all authorities, civil and judicial in the
territory of India shall act in aid of the Supreme Court.
Now coming to the facts of the present case, the
respondent, Dunlop India Limited is a manufacturer of types,
tubes and various other rubber products. By a notification
dated April 6, 1984 issued by the Government of India,
Ministry of Finance (Department of Revenue) in exercise of
the powers conferred by Rule 8 (1) of the Central Excise
Rules, 1944, types, falling under item No. 16 of the First
Schedule to the Central Excise and Salt Act, 1944, were
exempt from a certain percentage of excise duty to the
extent that the manufacturers had not availed themselves of
the exemption granted under certain other earlier
notifications The Department was of the view that the
Company was not entitled to the exemption as it had cleared
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the goods earlier without paying central excise duty, but on
furnishing Bank Guarantees under various interim orders of
courts. The Company claimed the benefit of the exemption to
the tune of Rs. 6.05 crores and filed a writ petition in the
Calcutta High Court and sought an interim order restraining
the central excise authorities from the levy and collection
of excise duty. The learned single judge took the view that
a prima facie case had been made out in favour of the
Company and by an interim order allowed the benefit of the
exemption to the tune of Rs. two crores ninety three lakhs
and eighty five thousand for which amount the company was
directed to furnish a Bank Guarantee, that is to say, the
goods were directed to be released on the Bank Guarantee
being furnished. An appeal was preferred by the Assistant
Collector of Central Excise under clause 10 of the Letters
Patent and a Division Bench of the Calcutta High Court
confirmed the order of the learned single Judge, but made a
slight modification in that the Collector of Central Excise
was given the liberty to encash 30% of the Bank Guarantee.
The Assistant Collector of Central Excise has preferred this
appeal by special leaue. By our interim order dated November
15, 1984, we vacated the orders granted by the learned
single Judge
201
as well as by the Division Bench. We gave two weeks’ time to
the A respondent Company to file a counter No. counter has,
however been filed. Shri F.S. Nariman, learned counsel,
however appeared for the respondent. We do not have the
slightest doubt that the orders of the learned single judge
as well as Division Bench are wholly unsustainable and
should never been made. Even assuming that the company had
established a prima facie case, about which we do not
express any opinion, we do not think that it was sufficient
justification for granting the interim orders as was done by
High Court. There was no question of any balance of
convenience being in favour of the respondent-Company. The
balance of convenience was certainly in favour of the
Government of India. Governments are not run on mere Bank
Guarantees. We notice that very often some courts act as if
furnishing a Bank Guarantee would meet the ends of justice.
No governmental business or for that matter no business of
any kind can be run on mere Bank Guarantees. Liquid cash is
necessary for the running of a Government as indeed any
other enterprise. We consider that where matters of public
revenue are concerned, it is of utmost importance to reales
that interim orders ought not to be granted merely because a
prima facie case has been shown. More is required. The
balance of convenience must be clearly in favour of the
making of an interim order and there should not be the
slightest indication of a likelihood of prejudice to the
public interest. We are very sorry to remark that these
considerations have not been borne in mind by the High Court
and interim order of this magnitude had been granted for the
mere asking. The appeal is allowed with costs. E
N.V.K. Appeal allowed.
202