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TMI Blog2010 (5) TMI 900X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 avail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. - R. V. Raveendran And H. L. Dattu, JJ. JUDGMENT H. L. Dattu, J. In Civil Appeal Nos. 4220 of 2002, 4213 of 2002 and 4218 of 2002, the appellants have called in question the correctness of the judgment and order in Writ Petition No. 316 of 1998 dated 19/24.4.2001, passed by the High Court of Bombay Panaji Bench, at Goa in a Writ Petition brought in publi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on which electricity supply is made available to such units. 2) This Notification was issued by the State Government in the name of the Governor of the State as per the Rules of Authentication framed under Article 166(2) of the Constitution of India by following the procedure prescribed by the Business Rules framed under the Provisions of Article 166(3) of the Constitution of India after the State Cabinet had approved it. Though the said Notification was in subsistence, except one Industrial Unit, none applied to the State Government for the grant of benefit of the Notification for a long period or at least till 31.03.1995. On 31.03.1995, the said Notification was rescinded by the State Government in purported exercise of power conferred on it under Section 21 of the General Clauses Act read, Sections 23 51-A of the Electricity Act, effect from 01.04.1995, by issuing a Notification dated 31.03.1995 strictly in accordance, the Business Rules and Rules of Authentication pursuant to the decision taken by the State Cabinet. 3) Though the Government rescinded the Notification dated 30.09.1991, number of industrial units approached the State Government and claimed benefit of 25% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngineer of State of Goa, the benefits of rebate granted by the State Government were withdrawn, as it appears that the State Government did a re-thinking over its power to grant such rebate on the Tariff. This action of the State Government led to a spate of litigations by the Industrial Units in the High Court of Bombay Panaji Bench, at Goa, wherein they contended that the benefits granted by the State Government as a policy decision could not be withdrawn by the order dated 31.03.1998, which was merely an administrative order and that they were entitled to the benefits granted by the Notification dated 01.03.1996, as long as the said Notification was not withdrawn by due process of law. 6) During the pendency of these writ proceedings before the High Court, the State Cabinet after addressing itself to the issues raised by the industrial units in the writ proceedings, passed a resolution to withdraw the benefit of 25% rebate and accordingly issued a Notification dated 24.07.1998 and withdrew the rebate of 25%, effect from 01.08.1998. By an order dated 21.01.1999, the High Court disposed of the batch of writ petitions, inter alia holding that the Circular dated 31.03.1998 mentio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Notifications in question were not issued as is contemplated by and under Articles 154 and 166 of the Constitution of India and that they were issued only at the instance of the Minister of Power at the relevant point of time and, hence, Notifications could not be termed as the decisions of the State Government. That the amendment brought by the Notification dated 01.08.1996 has overridden the very scope of the Notification dated 30.09.1991 which is impermissible in law. That the Notification dated 15.05.1996 could not have been issued when the Notification dated 30.09.1991 was already rescinded by Notification dated 31.03.1995 and no life could have been infused into the said notification when it did not exist. Addition to the said notification of Extra High Tension consumers, retrospective effect from 01.10.1991 was beyond the scope of the Notification dated 30.09.1991. 11) The said writ petition was contested by the 2nd respondent, who was the power Minister at the relevant point of time. He mainly contended that there was no illegality in the said Notifications which have been issued by following the prescribed procedure in the normal course of business of the Gov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the issue of maintainability and further addressed arguments based on the principles of res judicata and the concept of merger of the judgment of the High Court dated 21.01.1999, the judgment of this Court dated 13.01.2001. On these premise the respondents sought dismissal of the Writ Petition. It appears from the pleadings before us, that, the High Court had permitted certain Companies including the M.R.F Ltd, to come on record as interveners and oppose the reliefs sought in the Writ Petition. 12) The High Court by its judgment dated 19/24.04.2001 impugned herein allowed the writ petition in part by holding that the Notifications dated 15.05.1996 01.08.1996 could not be termed as Notifications issued by the State Government on account of Non Compliance of the Rules of Business framed under Article 166 (3) of the Constitution of India and therefore non-est and void-ab-initio and that the consequential actions based on these two notifications are null and void. 13) Aggrieved by the said judgment of the High Court, the Appellant [M.R.F. Ltd.] and others are before us in Civil Appeal Nos. 4220 of 2002, 4213 of 2002 and 4218 of 2002. 14) In Civil Appeal Nos. 4219 of 2002, 42 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 25% rebate in tariff and another reminder was sent in that regard on 27.11.1996. The claim for rebate was made on the basis of the government notification dated 30.09.1991, 15.05.1996 and 01.08.1996. Pursuant to the Notification dated 01.08.1996, 25% rebate to this industry was granted w.e.f. February, 1997 along, the arrears of installment @ ₹ 1,24,520. Such rebate was adjusted in the monthly bill. This rebate was withdrawn by issuing a circular dated 31.3.1998. This circular was challenged in the High Court. The High Court in its judgment dated 21.01.1999, held the circular dated 31.3.1998 as invalid and inoperative. The appellant filed a Writ Petition No. 254 of 1999 in the High Court praying for the restoration of the 25% rebate. 18) The facts in Civil Appeal No.4217 of 2002 are :- The Alcon Cement Company Limited applied for power supply on 17.9.1992 and entered into an agreement, the respondent no.2 for supply of power on 29.9.1993. The appellant's factory at Surla in the State of Goa was given electricity supply for the first time on 1.3.1994. Sometime in October 1996, the Executive Engineer acknowledged the entitlement of 25% rebate and rebate in energy consu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e basis of Notifications in issue has over ruled the decision of the earlier Division Bench which had held that relief under the notifications would be granted up to the date of rescission of the Notification by the Gazette dated 27.07.1998? Whether the High Court erred in allowing the Writ Petition of Manohar Parrikar based on the changed stance of the State Government contained in its affidavit dated 12.04.2001 which was different from that which was taken by the State in the Court before the 1st respondent herein became the Chief Minister of the State of Goa? Whether the High Court was justified in allowing the Writ Petition of Manohar Parrikar on the ground of Notifications being null and void for want of compliance, the Business Rules while its stand before the High Court in the present writ petition and earlier batch of writ petitions was that the notifications impugned had been rescinded due to financial crunch and in public interest which was upheld by the High Court and by this Court? Whether the judgment impugned has been rendered in a case where the petitioner on his becoming Chief Minister of the State drew support of the State Government through his own Advoca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... However, the said Nagarajan himself was party to the entire matter including moving of the file, initiating the process and that his appointment was on ad-hoc basis overlooking the just and reasonable claims of various other senior, eligible and qualified candidates and that he had given benefit of rebate to an applicant whose application had been rejected by his predecessor. That investigation on a police complaint lodged by the petitioner in W.P 316 of 1999 disclosed that there was a conspiracy hatched between the said Nagarajan and the then Power Minister at whose instance the Notifications impugned were issued and that a charge sheet was laid before the Special Court set up under the Prevention of Corruption Act for offences under Section 120B of the Indian Penal Code and other provisions of the Prevention of Corruption Act and the said Nagarajan who filed the earlier affidavits was an accused in the said proceedings. That when it comes to the involvement of public revenue and the effect on the State's Exchequer to the tune of ₹ 50 Crores, one has to be bold enough to place the correct facts and law before the Court and the earlier affidavits filed on behalf of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt seeks to support and sustain the judgment of the High Court against which appeal is filed in this Court. 22) A rejoinder is filed by the appellant - M.R.F Ltd. to counter various statements made by the State Government' in its Counter Affidavit filed in the appeal. 23) We have heard Shri F.S. Nariman, Dr. Rajeev Dhavan, Shri L. Nageshwar Rao, Shri K.N. Bhatt and Shri Shyam Divan, the learned senior counsel for the parties who have advanced elaborate arguments in support of the issues respectively raised by them in the pleadings. 24) The High Court by its judgment impugned herein has elaborately dealt, each of the contentions of the parties before it. Before the High Court the Writ Petition filed in public interest was opposed on various grounds. It was preliminarily objected to and opposed on the ground of maintainability which was dealt, by the High Court holding as under:- We have no hesitation to hold that the Petition is not required to be dismissed on the ground of merger of the earlier decision dated 21st January, 1999, the order of the Apex court or on the ground of res judicata. There is no dispute that the illegality of these Notifications were not cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion is hereby dismissed. There was no challenge whatsoever to the Notifications dated 15th May, 1996 and 1st August, 1996 and the declaration now sought in the instant Writ Petition was not in issue in the earlier batch of Petitions. After taking us through the judgment, the learned senior counsel admitted that none of the declarations or directions in Writ Petition No.316/98 had been sought in the earlier batch of Writ Petitions. Therefore, it cannot be said that the controversy in the earlier batch of Writ Petitions and the present Writ Petition in question are the same. This Order dated 17th January, 2000 has now become final, though it was an interlocutory order rejecting Miscellaneous Civil Application No. 637 of 1999. This Court was more than convinced that the challenge raised in Writ Petition No. 316 of 1998 was not an issue for consideration before it while handing down the judgment dated 21st January, 1999, It is for these reasons, the principle of res judicata will not be applicable in the instant case. 25) As regards the objections raised by the respondents on the basis of concept of merger, the High Court has held that though the appeals challenging the judg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or hearing his petition, that batch of petitions was withdrawn, he is not estopped from continuing, his challenge against the Notifications dated 15.05.1996 and 01.08.1996. 26) Arguments were also advanced to the effect that the State Government should not be allowed to take contradictory stand as the stand taken by the State Government in its two affidavits filed through the Chief Electrical Engineer in the earlier batch of writ petitions was conflicting, each other. The said contention was sought to be raised by the respondents in view of the change of the Government during the intervening period and the 1st respondent herein was the Chief Minister at the relevant point of time. The High Court has repelled these contentions by stating that the challenge to the notifications impugned before by the 1st respondent herein in his petition cannot be decided on the touch stone of affidavits filed even if they are contradictory in nature and the challenge had to be decided on its own merits, on the basis of records and the Constitutional Mandate. The High Court has observed that in a democratic set up the decisions of the Governments decide the destiny of the people and therefore the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earlier round of litigation. It would be worthwhile to recall the observations made by this Court in the case of Madhvi Amma Bhawani Amma and Ors. Vs. Kunjikutty Pillai Meenakshi Pillai and Ors. (2000) 6 SCC 301, wherein the Court has observed that in order to apply general principle of res judicata, Court must find, whether an issue in a subsequent suit, was directly and substantially in issue in the earlier suit or proceedings, was it between the same parties, and was it decided by such Court. Thus, there should be an issue raised and decided, not merely a finding on any incidental question for reaching such a decision. So, if such issue is not raised and if on any other issue, if, incidentally any finding is recorded, it would not come within the periphery of principle of res judicata. However, Shri K.N. Bhatt, learned Senior Counsel appearing for the former Power Minister, would submit that the principles of res judicata and constructive res judicata bars the exercise of jurisdiction by the High Court as there is a bar not only on issues directly raised in a previous lis but the issue that ought to have been raised. It is further submitted that the record of decision culminatin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ttled that generally speaking the provisions of a statute creating public duties are directory and those conferring private rights are imperative. When the provisions of a statute relate to the performance of a public duty and the case is such that to hold null and void acts done in neglect of this duty would work serious general inconvenience or injustice to persons who have no control over those entrusted, the duty and at the same time would not promote the main object of the legislature, it has been the practice of the courts to hold such provisions to be directory only, the neglect of them not affecting the validity of the acts done. The considerations which weighed, Their Lordships of the Federal Court in the case referred to above in the matter of interpretation of Section 40(1)of the 9th Schedule to the Government of India Act, 1935, appear to me to apply, equal cogency to Article 166 of the Constitution. The fact that the old provisions have been split up into two clauses in Article 166 does not appear to me to make any difference in the meaning of the article. Strict compliance, the requirements of Article 166 gives an immunity to the order in that it cannot be challenged ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 33) In Haridwar Singh Vs. Bagun Sumburui, [(1973) 3 SCC 889], it was noted as follows. Several tests have been propounded in decided cases for determining the question whether a provision in a statute, or a rule is mandatory or directory. No universal rule can be laid down on this matter. In each case one must look to the subject-matter and consider the importance of the provision disregarded and the relation of that provision to the general object intended to be secured. Prohibitive or negative words can rarely be directory and are indicative of the intent that the provision is to be mandatory. Where a prescription relates to performance of a public duty and to invalidate acts done in neglect of them would work serious general inconvenience or injustice to persons who have to control over those entrusted, the duty, such prescription is generally understood as mere instruction for the guidance of those upon whom the duty is imposed. 34) In Montreal Street Rely Co. vs. Normandin - 1917 A.C. 170, it is held : The statutes contain no enactment as to what is to be the consequence of nonobservance of these provisions. It is contended for the appellants that the con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uire whether the requirement is mandatory or directory. The requirement is never intended to be optional if a word such as 'shall' or 'must' is used. A requirement to use a form is more likely to be treated as a mandatory requirement where the form contains a notice designed to ensure that a member of the public is informed of his or her rights, such as a notice of a right to appeal. In the case of a right to appeal, if, notwithstanding the absence of the notice, the member of the public exercises his or her right of appeal, the failure to use the form usually ceases to be of any significance irrespective of the outcome of the appeal. This can confidently be said to accord, the intention of the author of the requirement. There are cases where it has been held that even if there has been no prejudice to the recipient because, for example, the recipient was aware of the right of appeal but did not do so, the non-compliance is still fatal. The explanation for these decisions is that the draconian consequence is imposed as a deterrent against not observing the requirement. However even where this is the situation the consequences may differ if this would not b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fact the tribunal in error had told the appellant that permission is not needed and he would have been in time to make the application if he had not been misinformed. Could it have been the intention of the author of the requirement that the requirement should have the effect of depriving the appellant of the benefit of his appeal? Clearly not. In such a situation the non-compliance would almost inevitably be regarded as being without significance. It must be remembered that procedural requirements are designed to further the interests of justice and any consequence which would achieve a result contrary to those interests should be treated, considerable reservation. 36) In Attorney General's Reference (No 3 of 1999), 2001(1) AER 577, it is held : My Lords, I acknowledge at once that reasonable minds may differ as to the correct interpretation of a subsection which has no parallel in the 1984 Act or any other statute. Nevertheless, there do seem to be secure footholds which may lead to a tolerably clear answer. It is not along the route adopted by the prosecution of asking whether the relevant provision is mandatory or directory. In London and Clydeside Estates Lt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may be substantive in the light of some facts but merely procedural on others. Another use of the term 'substantive' is to indicate a 'permanent' provision of an Act, in contrast to merely temporary or transitional provisions. 1238. Mandatory and directory enactments. The distinction between mandatory and directory enactments concerns statutory requirements and may have to be drawn where the consequence off ailing to implement the requirement is not spelt out in the legislation. The requirement may arise in one of two ways. A duty to implement it may be imposed directly on a person; or legislation may govern the doing of an act or the carrying on of an activity, and compel the person doing the act or carrying on the activity to implement the requirement as part of a specified procedure. The requirement may be imposed merely by implication. To remedy the deficiency of the legislature in failing to specify the intended legal consequence of non- compliance, such a requirement, it has been necessary for the courts to devise rules. These lay down that it must be decided from the wording of the relevant enactment whether the requirement is intended to be mandatory ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vant time, the act done is not vitiated by later developments which, had they occurred before that time, would have meant that the duty should have been performed in a different way. 39) Per contra, Dr. Rajeev Dhavan and Shri Shyam Divan, learned Senior Counsel for respondents, apart from others, submitted that there can be no universal rule, regard to the violation of the Rules of Business and each case must be decided on facts; where the Rules of Business contain prohibitive or negative words, they are indicative of the intent that the provision is mandatory; in matters concerning revenue or finance rigorous observance of the rules is essential; when the cabinet alone is competent to take a decision or where the finance department has conveyed its disagreement or where there is no prior consultation, the finance department, the decision of the individual minister is liable to be quashed; where the Rules of Business have not been complied with, then the decision/communication cannot be termed as a Government decision; and an individual functionary cannot by-pass the Rules of Business and the requirement for certain matters to be placed before the Council of Ministers. It is fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he State Government and therefore is not binding on PSIDC. The orders of the State Government are issued in a prescribed manner and the note dated 25-8-2001 cannot be treated as one. (pr.11, pp. 371) 43) In State of Bihar vs. Kripalu Shankar, [(1987) 3 SCC 34], it is stated : 15. Article 166(1) requires that all executive action of the State Government shall be expressed to be taken in the name of the Governor. This clause relates to cases where the executive action has to be expressed in the shape of a formal order or notification. It prescribes the mode in which an executive action has to be expressed. Noting by an official in the departmental file will not, therefore, come within this article nor even noting by a Minister. Every executive decision need not be as laid down under Article 166(1) but when it takes the form of an order it has to comply, Article 166(1). Article 166(2) states that orders and other instruments made and executed under Article 166(1), shall be authenticated in the manner prescribed. While clause (1) relates to the mode of expression, clause (2) lays down the manner in which the order is to be authenticated and clause (3) relates to the making of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion. Article 166 directs all executive action to be expressed and authenticated in the manner therein laid down but an omission to comply, those provisions does not render the executive action a nullity. Therefore, all that the procedure established by law requires is that the appropriate Government must take a decision as to whether the detention order should be confirmed or not under Section 11(1). That such a decision has been in fact taken by the appropriate Government is amply proved on the record. Evidence can be led to show that these actions are attributable to the government. But Article 166(3) is not verificatory and has to be followed. Even in this case at pp. 632-633, as per Mukherjea, J., it is held : I agree, the learned Attorney General that non-compliance, the provisions of either of the clauses would lead to this result that the order in question would lose the protection which it would otherwise enjoy, had the proper mode for expression and authentication been adopted. 46) In Bachhittar Singh vs. State of Punjab, [1962 Supp (3) SCR 713] : Rules of business under Article 166(3) required Revenue Minister to make the order against the petition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Bombay 1952 SCR 612 50) The summary of the arguments canvassed by learned senior counsel Shri F.S. Nariman is that, the Rules of Business framed under Article 166(3) of the Constitution is only directory and by no stretch of imagination, it can be said to be mandatory and, therefore, non compliance of the Rules of Business cannot be declared as illegal or void ab-initio. In justification of the judgment of the Bombay High Court, it is the stand of Dr. Rajeev Dhawan, learned senior counsel that at-least some of the provisions of Rules of Business framed by Govt. of Goa are mandatory and non-observation of the same would vitiate the circulars/orders/notifications etc. 51) In order to appreciate the rival contentions canvassed by learned senior counsels, it would be appropriate, to extract Article 166 of the Constitution of India and the same is as under: Article 166 Conduct of business of the Government of a State (1) All executive action of the Government of a State shall be expressed to be taken in the name of the Governor. (2) Orders and other instruments made and executed in the name of the Governor shall be authenticated in such manner as may be specifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... concurrence of the Finance Department is a condition precedent. Likewise Rule 6 of the Business Rules states, that, the Council of Minister shall be collectively responsible for all executive orders passed by any Department in the name of the Governor or contract made in exercise of the power conferred on the Governor or any other officer subordinate to him in accordance, the Rules, whether such orders or contracts are authorized by an individual minister on a matter pertaining to the Department under his charge or as the result of discussion at a meeting of the Council of Minister or otherwise. This Rule requires that an executive order issued from any department in the name of the Governor of the State should be known to the Council of Ministers so as to fulfill the collective responsibility of the Council of Ministers. Further Rule 7 of the Business Rules requires that no Department shall without the concurrence of the Finance Department issue any order which may involve any abandonment of revenue or involve expenditure for which no provisions have been made in the Appropriation Act or involve any grant of land or assignment of revenue or concession, grant, lease or licence in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y keeping the Business Rules at bay. Further it would make it impossible to discharge the Constitutional responsibility of the Chief Minister of advising the Governor under Article 163. Therefore, it is difficult to accept the contentions of the appellants that Business Rules are directory. 54) We also subscribe to and uphold the view of the High Court that the Business Rules 3,6,7 and 9 are Mandatory and not Directory and any decision taken by any individual Minister in violation of them cannot be termed as the decision of the State Government. 55) We are fortified in our view by several decisions of this Court. In K.K. Bhalla vs. State of M.P., [2006 (3) SCC 581], the facts were that the State of M.P. had allotted certain land under the Jabalpur Development Authority (JDA) to a person at concessional rates to set up a newspaper printing press, though the land was earmarked for commercial use. The Court held : The purported policy decision adopted by the State as regards allotment of land to the newspaper industries or other societies was not a decision taken by the appropriate Ministry. If a direction was to be issued by the State to the JDA, it was necessary to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion that Business Rules made under clause (3) of Article 166 are directory. We have earlier referred to all the decisions on which reliance was placed by learned senior counsel Shri F.S. Nariman. In our view, those decisions would not assist the appellant, since they were all rendered in the context of interpretation of Article 166(1) and (2) of the Constitution. 59) It is appropriate to further consider some of the Business Rules to deal, the issue brought before us. Though the High Court in the judgment impugned has referred to various Rules, we deem it necessary to refer to only those which are relevant for our purpose. Rule 10 of the Business Rule requires submission of all cases referred to in the Schedule to the Chief Minister after consideration by the Minister in charge so as to obtain the Chief Ministers' orders for circulation of the case or to bring it up for consideration at a meeting of the Council of Ministers. Rule 13 provides that when it is decided to bring the case before the Council, the department concerned should, unless otherwise directed by the Chief Minister, prepare a memorandum indicating precisely the salient facts of the case and points for decisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in the Schedule appended to the Notification. By another Notification dated 6.12.1993, the State Government for the first time created a new and separate category viz. Extra High Tension Supply Consumers and was included as item No. 10 in the revised tariff framed under Notification dated 29.06.1993. Pursuant to the Notification dated 6.12.1993, the power department took a stand that as the Notification dated 30.09.1991 had covered only the Low Tension and High Tension Consumers of electricity and not the Extra High Tension Consumers and the claims of the Extra High tension consumers were rejected by specific orders passed in October 1995 i.e. after the Notification dated 31.03.1995, rescinding Notification dated 30.09.1991 was issued and the orders rejecting their claims had become final having not been challenged by the units. The State Government therefore felt a need to issue certain clarifications to process the claims of the units for grant of rebate of 25% for the period between 1.10.1991 to 31.03.1995. While issuing such clarification involving additional financial burden on the exchequer, the Government was required to process them in keeping, the requirements of the Bus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usiness of the Government and for allocation of the business among the Ministers. Article 166(2) of the Constitution requires the decision of the State Government to be authenticated as per the Rules framed thereunder. Any decision taken by the State Government therefore, reflects the collective responsibility of the Council of Ministers and their participation in such decision making process. The Chief Minister as the Head of the Council of Ministers is answerable not only to the Legislature but also to the Governor of the State. The Governor of the State as the Head of the State acts, the aid and advice of the Council of Ministers headed by the Chief Minister. The Rules framed under Article 166 (3) of the Constitution are in aid to fulfill the Constitutional Mandate embodied in Chapter II of Part VI of the Constitution. Therefore, the decision of the State Government must meet the requirement of these Rules also. 62) Before the High Court as also before us it was contended by the appellants herein, that, the Rules framed under Article 166(3) are only directory in character and failure to comply, them does not vitiate the decision taken by the State Government. The High Court a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tent to take a decision. When we see that the disagreement of the Finance Department, a proposal on consultation, deprives the Department originating the proposal of the power to take further action on it, the only conclusion possible is that prior consultation is an essential prerequisite to the exercise of power . 63) As observed by us earlier, these observations apply equally to the case on hand and in light of this view, we have no difficulty in holding that the Business Rules framed under the Provisions of Article 166 (3) of the Constitution are mandatory and must be strictly adhered. Any decision by the Government in breach of these Rules will be a nullity in the eyes of law. 64) It is in this legal background that the issues raised before us have to be dealt with. The High Court has examined the files placed before it by the State Government and noted the facts reflected by the said records. As recorded by the High Court, the rebate of 25% in power tariff was sought to be withdrawn by the State Government, effect from 1.4.1995 pursuant to a Cabinet meeting held on 21.07.1994 and a Notification dated 31.03.1995 was issued therefor. The 1st respondent's motion in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Chief Electrical Engineer. A query was also raised regarding the role of the Industries and Electricity Departments in issuing the eligibility certificates. A note dated 25.07.1996 submitted by the Chief Electrical Engineer indicated that such certificates shall be issued by the Electricity Department as it was that Department which was giving the subsidy. Thereafter the Commissioner and Secretary (Power) submitted a detailed note on 30.07.1996 to the Minister of Power and the latter conveyed his approval, the substitution of words all industrial units who apply for availing power on or after 1.10.1991 , the words all industrial units who apply or avail on or after 10.01.1991 and the rebate was to be given on the energy charges on the prevailing tariff from time to time as against the earlier Notification where the rebate of 25% was to be given on tariff as per Notification dated 27.06.1988. As per the decision/approval of the Power Minister, the Notification dated 1.08.1996 came to be issued without there being any consultation, the Council of Ministers or without the proposal being placed before it or the Chief Minister or without the consultation, the Finance Department, tho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also mentions about a constitution of a Screening Committee consisting of the Secretary of Ministry of Power, the Chief Electrical Engineer, Director of Industries and Joint Secretary, Finance, to ensure that only genuine and bona fide claims are entertained and paid the rebate and also examine and verify all doubtful claims. The Note also refers to a decision taken in one of such meetings to the effect that rebate should be given to units on energy charges only as per the prevailing tariff in force from time to time on which they are billed for a period of five years on the recommendations made by the Chief Electrical Engineer. The recommendations and/or the decisions did have bearing on the finances of the State Government and also amounted to change in policy decisions. Even then neither did the Minister of Power think it is proper and appropriate to place the proposals before the Council of Ministers or the Chief Minister, nor did the Secretary concerned deemed it appropriate to do so. The proposals were finalized by the Power Minister at his level as per the modifications suggested by him on 30.7.1996 which in our opinion are in violation of the Business Rules. 67) The High ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... velopment Commissioner further felt that the in view of this lacuna in the Notification dated 1.08.1996, the matter required a review by the Cabinet and that it should be taken to the Cabinet for its ratification or otherwise. The note of the Commissioner was placed before the Power Minister as the Chief Secretary was away on tour and the Power Minister directed the matter to be placed before the Cabinet and also directed the files of the Finance Industries Department on the subject to be placed before the Chief Minister for his perusal. The file was placed before the Chief Minister on 27.05.1998 for his perusal who thereafter called for the opinion of the Finance Department and on the same day the Finance Secretary submitted the opinion of the Finance Department and the next day the matter was placed before the Cabinet. Ultimately the State Government took a decision to withdraw the benefit of rebate and issued the Notification dated 24.07.1998. This apart the material placed by the 1st respondent herein also indicated that there was an attempt to ratify the notification date 1.08.1996 and the same could have been done but for the legal hurdle and the State Government realized t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 69) The appellants contended before this court that another Division Bench of the High Court in its earlier judgment of 21.1.1999 had held that the Notification dated 1.8.1996 was clarificatory and that it did not create any extra financial liability on the State Government requiring approval of the Cabinet in compliance, the Business Rules before it was brought into force. In our opinion the said Notification cannot be treated as mere c1arificatory. It is a notification issued purportedly in terms of a Government decision. It was a decision finalized at the level of the Minister of Power alone and was taken in violation of the Rules of Business framed under Article 166(3) of the Constitution of India. The decision cannot be called a government decision as understood under Article 154 of the Constitution, though it may satisfy the requirements of authentication. Nevertheless mere authentication as required under Article 166(2) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tive 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. 72) This exception was highlighted in the English case of J.C Houghton Co. v. Nothard, Lowe Wills Ltd, [1927] 1 KB 246 (CA) where the case involved an agreement between fruit brokers and fruit importing company. There was an allegation that the agreement was entered into by the company's directors without authority. It was held that the nature of transaction was found to have been such as to put the plaintiffs on inquiry. To this effect Lord Justice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s also argued by the learned senior counsel for the appellant, that the Notification dated 01.08.1996 was rescinded by Notification dated 24.07.1998 and, therefore, there was no need for the High Court to adjudicate upon the impugned Notification dated 01.08.1996 and, should have dismissed the writ petition filed by way of public interest as having become infructuous. This issue need not detain us for long in view of our answer to the issue of Doctrine of Merger canvassed by learned senior counsel. 75) Arguments have been advanced before us based on the principles of res judicata, Doctrine of Estoppel and the principles underlining the provisions of Order II Rule 2 of the Code of Civil Procedure that the High Court in earlier batch of writ petitions has gone into and given findings, regard to the Notifications dated 30.9.1991; 31.3.1995; 15.5.1996; 1.8.1996 and 24.7.1998 and the judgment of the High Court dated 21.1.1999 rendered therein had merged, the order of the Supreme Court dated 13.2.2001 and the Notifications questioned in the present round of litigation are Notifications dated 15.5.1996 and 1.8.1996 and the State at no point of time before any Court having raised the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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