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2010 (5) TMI 900 - SC - Indian LawsWrit Petition - questioning the legality, validity and propriety of two notifications - issued by Government of Goa dated 15.5.1996 and 01.8.1996 - grant of 25% rebate to Low Tension, High Tension and Extra High Tension Industrial consumers of electricity as a policy of the State Government - ''Doctrine of indoor management''- ' 'doctrine of constructive notice''- The doctrine of indoor management is in direct contrast to the doctrine or rule of constructive notice, which is essentially a presumption operating in favour of the company against the outsider. It prevents the outsider from alleging that he did not know that the constitution of the company rendered a particular act or a particular delegation of authority ultra vires. The doctrine of indoor management is an exception to the rule of constructive notice. It imposes an important limitation on the doctrine of constructive notice. According to this doctrine, persons dealing, the company are entitled to presume that internal requirements prescribed in memorandum and articles have been properly observed. Therefore doctrine of indoor management protects outsiders dealing or contracting, a company, whereas doctrine of constructive notice protects the insiders of a company or corporation against dealings, the outsiders. However suspicion of irregularity has been widely recognized as an exception to the doctrine of indoor management. The protection of the doctrine is not available where the circumstances surrounding the contract are suspicious and therefore invite inquiry. HELD THAT - the Notification dated 01.08.1996, that it re-introduced the benefit of rebate on tariff and made it available to units on the prevailing tariff in force from time to time at which the units were billed for a period of five years from the date of supply of power was made available to them and who had applied or availed power supply on or after 01.10.1991. The notification dated 30.09.1991 on the other hand made available the rebate on the basis of tariff set out in the Notification dated 27.06.19888 and to Low and High Tension Power consumers who had applied for supply of power and were given power supply on or after 01.10.1991. The Notification dated 01.08.1996, it is seen, extended the scope of benefit of rebate as compared to the Notification dated 30.09.1991 which had been rescinded by the Notification dated 31.03.1995. It is on record and we notice from the judgment of the High Court that the State Government had paid as a result of the Notification dated 01.08.1996 a sum or ₹ 8 crores in excess as compared to the benefit available under the Notification of 1991 and the total amount of rebate would have been more than 30 crores had the benefit as made available by the 1996 Notification been continued. Thus from the foregoing, it is clear that a decision to be the decision of the Government must satisfy the requirements of the Business Rules framed by the State Government under the provisions of Article 166(3) of the Constitution of India. In the case on hand, as have been noticed by us and the High Court, the decisions leading to the notifications do not comply, the requirements of Business Rules framed by the Government of Goa under the provisions of Article 166(3) of the Constitution and the Notifications are the result of the decision taken by the Power Minister at his level. The decision of the individual Minister cannot be treated as the decision of the State Government and the Notifications issued as a result of the decision of the individual Minister which are in violation of the Business Rules are void ab initio and all actions consequent thereto are null and void. In our opinion the fact that the State Government did not raise these objections in the earlier batch of Writ Ptitions does not disentitle it to such a stand or prevents it from raising its objections based on legal provisions. This contention of the appellants requires to be turned down for yet another reason in that the 1st respondent herein was not a party to the earlier batch of Writ Petitions before the High Court or this Court. Therefore the principles of res judicata or for that matter even the Doctrine of Estoppel will not apply to or operate against him. Further the contention that the Notification dated 1.8.1996 did not create any additional financial liability on the State Government warranting approval by the Cabinet or the compliance of the Business Rules before it was brought into effect deserves to be rejected having regard to the figures placed on record which the High Court has noticed in its judgment. These figures of additional liability likely to be brought on the State by Notification dated 1.8.1996 falsify the statement of the appellants. Therefore the same deserves to be rejected. The Appellants have not been able to show any infirmity or illegality in the order of the High Court warranting our interference. In the result, civil appeals are dismissed. Parties are directed to bear their own costs.
Issues Involved:
1. Validity of the Notifications dated 15.05.1996 and 01.08.1996. 2. Compliance with Business Rules framed under Article 166(3) of the Constitution. 3. Doctrine of Merger and Res Judicata. 4. Doctrine of Indoor Management. 5. Financial implications and approval by the State Government. 6. Political motivations and judicial discipline. Issue-wise Detailed Analysis: 1. Validity of the Notifications dated 15.05.1996 and 01.08.1996: The High Court held that the Notifications dated 15.05.1996 and 01.08.1996 were non-est and void ab initio due to non-compliance with the Business Rules framed under Article 166(3) of the Constitution. The Power Minister issued these notifications without placing the proposals before the Council of Ministers or obtaining the concurrence of the Finance Department, which was mandatory. The notifications were thus not considered decisions of the State Government. 2. Compliance with Business Rules framed under Article 166(3) of the Constitution: The High Court ruled that the Business Rules 3, 6, 7, and 9 are mandatory and not directory. Any decision taken by an individual Minister in violation of these rules cannot be termed as the decision of the State Government. The Rules of Business are essential for ensuring that decisions reflect the collective wisdom of the Council of Ministers or at least the Chief Minister. 3. Doctrine of Merger and Res Judicata: The High Court rejected the application of the Doctrine of Merger and Res Judicata, stating that the issues raised in the current writ petition were not addressed in the earlier round of litigation. The previous judgment dated 21.01.1999 did not consider the legality of the Notifications dated 15.05.1996 and 01.08.1996, and thus, these issues were not barred from being re-examined. 4. Doctrine of Indoor Management: The doctrine of indoor management, which protects outsiders dealing with a company, was argued by the appellants. However, the High Court found sufficient doubt regarding the conduct of the Power Minister in issuing the notifications, invoking the exception to this doctrine. The suspicious circumstances surrounding the notifications rendered the doctrine inapplicable. 5. Financial implications and approval by the State Government: The notifications involved significant financial implications and required the concurrence of the Finance Department and approval by the Council of Ministers. The High Court noted that the notifications extended the scope of benefits and imposed an additional financial burden on the State's Exchequer without proper approval, making them unsustainable. 6. Political motivations and judicial discipline: The High Court addressed the contention that the writ petition was politically motivated and lacked bona fides. It concluded that the challenge to the notifications had to be decided on its own merits, based on records and constitutional mandates, rather than on the basis of affidavits filed by government officers or political considerations. Conclusion: The Supreme Court upheld the High Court's judgment, affirming that the notifications dated 15.05.1996 and 01.08.1996 were void ab initio due to non-compliance with mandatory Business Rules. The appeals were dismissed, and the Court emphasized the importance of adhering to constitutional provisions and Business Rules in government decision-making processes.
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