2008 (12) TMI 729 - SC - Indian Laws

Whether the demand notice dated 17.6.2000 and August 2000 and the circular dated 17.6.1999, 30.7.1999 issued by the Respondents 2, and the demand notice issued by the Respondent No.3 dated 17.6.2000 towards the difference in the salary and wages, w.e.f. 1.1.1996 i.e., retrospective effect towards the supervision charges is illegal, arbitrary and violative of Article 14, 19(1)(g) of the Constitution of India; and therefore be strike down?

Summary

Issues Involved:

1. Legality of the demand for supervision charges with retrospective effect.
2. Applicability of the principle of res judicata.
3. Validity of the Bombay High Court's dismissal of the writ petition.

Issue-Wise Detailed Analysis:

1. Legality of the demand for supervision charges with retrospective effect:

The appellant was granted a license for manufacturing spirit and potable liquor under the Bombay Prohibition Act, 1949. The State revised the salary of its employees with retrospective effect from 1.1.1996 by a Notification dated 10.12.1998, leading to a demand for arrears of supervision charges amounting to Rs. 7,43,666/-. The appellant challenged this demand, arguing it was illegal, arbitrary, and violative of Articles 14 and 19(1)(g) of the Constitution of India. The Bombay High Court initially ruled in favor of the appellant, stating that the demand for supervision charges at revised rates from 1.1.1996 was not recoverable, and the appellant was only liable to pay from 1.7.2000. This decision attained finality as it was not appealed against.

2. Applicability of the principle of res judicata:

The principle of res judicata, which prevents re-litigation of the same issue between the same parties, was a significant point in this case. The Supreme Court noted that the earlier decision of the Bombay High Court, which ruled the retrospective demand for supervision charges illegal, had attained finality and thus operated as res judicata. The Court emphasized that the principle of res judicata applies in writ proceedings, preventing the respondents from raising fresh demands based on the same grounds already settled by the court.

3. Validity of the Bombay High Court's dismissal of the writ petition:

Despite the withdrawal of the demand letter by the respondents during the pendency of the writ application, the Division Bench of the Bombay High Court dismissed the appellant's writ petition, relying on the Supreme Court's judgment in Deokar's Distillery. The High Court opined that since the demand for interest had been withdrawn, nothing further survived in the petition regarding retrospective charges and interest. However, the Supreme Court found that the High Court's dismissal was unsustainable. It held that the earlier High Court order dated 7.12.2005, which declared the retrospective demand illegal, should have been upheld, thereby quashing the subsequent demand notices.

Conclusion:

The Supreme Court set aside the impugned order dated 23.09.2003 and judgment dated 13.11.2003 of the Bombay High Court. It quashed the demand notices impugned in W.P.No.3050 of 2003 and allowed the appeals with costs, assessing the counsel's fee at Rs. 25,000/-. The Court reiterated the applicability of the principle of res judicata in writ proceedings, ensuring that settled matters are not reopened, thereby providing finality to judicial decisions and preventing harassment of the parties involved.