Holding

The Business Rules framed under Article 166(3) of the Constitution are mandatory, and any decision taken by a minister in violation thereof is not a decision of the State Government; therefore the notifications of 15‑May‑1996 and 1‑Aug‑1996 are void ab initio.

Summary

The Supreme Court examined the validity of two Goa Government notifications (15‑May‑1996 and 1‑Aug‑1996) granting a 25% electricity tariff rebate to industrial consumers. The appellants argued that the notifications were lawful government decisions, while the State contended they were issued by the Power Minister without complying with the mandatory Business Rules under Article 166(3) of the Constitution. The Court held that the Business Rules are mandatory, not merely directory, and any decision taken by an individual minister without the required concurrence of the Finance Department and approval of the Council of Ministers cannot be deemed a State Government decision. Consequently, the notifications were declared void ab initio. The Court also rejected the State’s reliance on res judicata, estoppel, and merger, noting that the issues were not raised in earlier proceedings. The appeals were dismissed.

Issues considered

The notifications issued by the Power Minister were decisions of the State Government within the meaning of Articles 154 and 166 of the Constitution.
Whether the Business Rules framed under Article 166(3) are mandatory or directory and the effect of non‑compliance.
Whether the doctrines of res judicata, estoppel and merger apply to the present public‑interest writ.
The applicability of the doctrine of indoor management to the impugned notifications.

Legislation cited

Code of Civil Procedure, 1908s. 11, s. 2, s. Order II Rule 2
Constitution of Indias. Article 154, s. Article 163, s. Article 166(1), s. Article 166(2), s. Article 166(3)
Electricity Act, 1910s. 21, s. 23, s. 51-A
General Clauses Acts. 21

Subjects

Business RulesArticle 166State Government decisionnotificationselectricity tariff rebateres judicatadoctrine of estoppeldoctrine of mergerindoor managementpublic interest litigationmandatory vs directoryconstitutional lawadministrative law

Judgment

--//
1080 SUPREME·COURT REPORTS [2010] 5 S.C.R. • [2010J '5 S.C.R. 1081

A already clarified about the so-called Offic~ Order dated M/S M.R.F. LTD: ETC. A
30.09.2_0~_2which is overridden by the final decision taken by
v.
the Governme.nt in its letter dated 21.01.2004. . · MANOHAR PARRIKAR AND ORS.
I --
43: On the overail consideration, we are of the clear (Civi!Appeal No. 4220 of 2002 etc.)
B opinion, that these appeals do not have any merits and must MAY 3, 2010 B
be dismissed. There shall be· no order as to costs. · :
.. ;
[R.V. RAVEENDRAN AND H.L. DATTU, JJ.] ·
B.B.B. Appeals dismissed.
( Rules of Business of the Government of Goa:

rr. 3, 6, 7 and 9 - Decision taken by Minister of Power c
allowing rebate in electricity tariff- Matter notreferred to Chief
I Minister or the· Council of Ministers - Nor wa_s_ the concurrence
of Finance Department taken - HELD: Such a decision
cannot be said. to be the deCision 'of the Government -
1 Notifications giving effect to such· decisions without complying D
I
with the Rules of Business framed under Article 166(3) of the
Constitution,· are non-est and void ab initio .:.. High Court has
·.. ,. rightly held the Rules of Business as mandatory - In the
\ instant case, there is sufficient doubt with regard to the conduct
of the Minister of Power in issuing the_ notifications - E
therefore, suspicion of irregularity renders- the doctrine of
.-·. ( indoor management inapplicable - Constitution of India, 1950
- Articles 154 and 166 - Doctrine of indoor Management -
/ Public Interest Litigation.
··--- - -
Code of Civil Procedure, 1908: · F
·•
s.11, 0.2, r.2 - Res judicata - Withdrawal of electri_city
tariff rebate granted as per Notifications challenged in writ·
petitions - Upheld by High Court - But writ petitioners held
entitled to the rebate for the periods indicated in the judgment G
- SLPs dismissed- Subsequent writ petition irrpublic interest
filed challenging validity and legality of the Notifications -
HELD: In the earlier litigation, issue of validity or legality of
the Notifications was never raised, nor the writ petitioner in the
H
1081
1082 SUPREME COURT REPORTS [2010] 5 S.C.R.

A subsequent writ petition was a party thereto - Merely because
the State Government did not agitate legality or validity of the
notifications in earlier round of litigation, it cannot be deemed
to have accepted legality for the .Notifications, or waived its
objection thereto - Therefore, the principles of res judicata
B and the doctrine of estoppel have no application - Since the
issue that was decided by High· Court in earlier round of
litigation and the issue raised and considered in subsequent
public interest 1Yrit petition are entirely different, doctrine of
merger has also no bearing _.: Estoppe/ - Rules of Business ·
c of Government ot Goa 7 Doctrine of merger. .
( . ·.· ··.· . . ·· . .. •. . · . . ...
The Government of Goa issued notification dated
30.9.1991 granting: rebate· of 25% iri •electricity· tariff in
respect of power. supply to the low tensiOn and high
tension industrial ·consurners. The said notification was
D late'r rescinded ·by another Notification. dated• 31.3.1995.

l Howey~r, on 15.5.19~6. an~t.her notification was issued
amending .the not1f1cat1on dated 30.9.1991 and
substituting the words• "high tension or low tensfori
power supply", by words' "high tension/extra high tension
E or low tensiOn p·ower supply". A further notification dated
'.j1.8.1996 was issued ·rest§ring the facility of 25% .reb.ate
w.e.f.1.8.1996. By an order dated 31.3.1998 issued by the
Chief Electrical Engineer,' the benefits of rebate granted
under Notification dated 1r8.1996 were withdrawn, This
F led to a spate of litigation by the industrial units before
the High Court. During the pendency of the writ petitions,
the State Cabinet passed a resolution and,' accordingly,
by issuing the notificatiori"dated 24;7.1998 the State
· Government Withdrew the benefit of 25% rebate. The High
G · Coui1, 1 tiy·its'order dated 21.1.1999, disposed of the writ
petitions holding the circular/order dated 31.3.1998 as
invalid and the notification dated 24.7.1998 as legal, valid
·~md operative. However, the High Court held that all the
petitioners were entitled to 25% rebate in power tariff for
H the periods as indicated in the judgment. The appeals
M.R.F. LTD. ETC. v. MANOHAR PARRIKAR AND 1083
ORS.

challenging the judgment of the High Court were A
dismissed by the Supreme Court by its order dated
13.2.2001. Respondent No. 1 (in CA No. 4220 of 2002)
challenged the correctness of the notifications dated
15.5.1996 and 1.8.1996 by filing a writ petition under
public interest and sought to declare the two notifications B
as null and void. It was stated that as the said
notifications were issued only at the instance of the
Minister of Power, the same could not be terme·d as
decisions of the State Government; and if the said illegal
notifications were allowed to stand, they will cause a loss c
of Rs.50 crores to the States Exchequer. The writ petition
was contested on the ground that the High Court in its
judgment dated 21.1.1999 having upheld the validity of
the notifications dated 15.5.1996 and 1.8.1996 and the
said judgment having been upheld by the Supreme Court D
by its order dated 13.2.2001, the writ petition was barred
by the principle of res judicata and the doctrine of merger.
The High Court by its judgment dated 19/24.4.2001 held
that the notifications dated 15.5.1996 and 1.8.1996 having
been issued without complying with the Rules of
Business of the Government of Goa framed under Article E
166(3) of the Constitution, were non-est and void ab-initio.
Aggrieved, the various industrial units filed the appeals.

Dismissing the appeals, the Court
F
HELD: 1.1. The High Court rightly held that the Rules
of Business of the Government of Goa framed under
Article 166(3) of the.Constitution of India, including Rules
3, 6, 7 and 9 thereof, are mandatory and not directory, and
any decision taken by any individual Minister in violation G
thereof cannot be termed as the decision of the State
Government. The said Rules must be strictly adhered to.
Any decision by the Government in breach of these Rules
will be a nullity in the eyes of law. The decisions of the
State Government have to be in conformity with the
H
1084 SUPREME COURT REPORTS [2010] 5 S.C.R.

A mandate of Articles 154 and 166 ofthe Constitution as
also the Rules framed thereunder, otherwise they would
not have the form of a Government decision and will be
a nullity. The Rules of Business framed under Article
166(3) of the Constitution are for convenient transaction
s of the business of the Government, which has to be
carried out in a just and fit manner in keeping with the
Business Rules and as per the requirement of Articles 154
and 166 of the Constitution. [Para 54, 62-63] (1133-G-H;
1134-A; 1139-E-H; 1140-H; 1141-A]
c State of Kerala vs. A. Lakshmikutty (1987) 1 SCR 136 =
(1986) 4 SCC 632; CBI vs. Ravi Shankar Srivastava, (2006)
4 Suppl. SCR 450 = (2006) 7 SCC 188; Punjab State
Industrial Development Corpn. Ltd. vs. PNFC Karamchari
Sangh 2006 (3 ) SCR 751 = (2006) 4 SCC 367; State of
D Bihar vs. Kripalu Shankar, (1987) 3 SCR 1 = (1987) 3 SCC
34; Haridwar Singh vs. Bagun Sumbrui, (1973) 3 SCC 889;
Gulabrao Keshavrao Patil vs. State of Gujarat, (1995) 6
Suppl. SCR 97 = (1996) 2 SCC 26; K.K. Bhalla vs. State
of M.P. 2006 (3) SCC 581 and State of UP. vs. Neeraj
E Avasthi (2005) 5 Suppl. SCR 906 = 2006 (1) SCC 667,
relied on.

R. Chitralekha vs. State of Mysore (1964) 6 SCR 368,
held inapplicable.
F Dattatraya Moreshwar vs. State of Bombay (1952) SCR
612; Bachhittar Singh vs. State of Punjab (1962) Supp 3
SCR 713 and State of Sikkim vs. Dorjee Tshering Bhutia
(1991) 3 SCR 633 = (1991) 4 sec 243, referred to.

G Bannari Amman Sugars Ltd. vs. Commercial Tax Office
=
(2004) 6 Suppl. SCR 264 (2005) 1 sec 625; and State
of UP. vs. Om Prakash Gupta (1969) 3 SCC 775, cited.

Montreal Street Rely Co. vs. Normandin-1917 A.C. 170;
H R v Immigration Appeal Tribunal Ex parte Jeyeanthan 1999
M.R.F. LTD. ETC. v. MANOHAR PARRIKAR AND 1085
ORS.

(3) AER 231; Attorney General's Reference (No 3 of 1999), A
2001 (1) AER 577 and R v Sekhon and others, 2003(3) AER
508, referred to.

Halsbury's Laws of England, 4th Edition Re issue Vol.
44(1 ), referred to. B

1.2. Clause (1) of Article 166 of the Constitution says
that whenever an executive action is to be taken by way
of an order or instrument, it shall be expressed to be
taken in the name of the Governor in whom the executive
power of the State is vested. Under Clause (2), the orders C
and instruments made and executed in the name of the
Governor shall be authenticated in the manner specified
in the rules. All matters, excepting those in which the
Governor is required to act in his discretion, have to be
allocated to one or the other of the Ministers on the D
advice of the Chief Minister. [para 52] [1131-C-E]

1.3. Any decision taken by the State Government
reflects the collective responsibility of the Council of
Ministers and their participation in such decision making E
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, who, as the Head of the
State, acts with the aid and advice of the Council of
Ministers headed by the Chief Minister. The Rules framed
F
under Article 166 (3) of the Constitution are in aid to fulfill
the constitutional mandate embodied in Chapter II of Pait
VI of the Constitution. The decision of the State
Government must meet the requirement of these Rules
also. Therefore, if the Council of Ministers or Chief
Minister has not been a party to a decision taken by an G
individual Minister, that decision cannot be the decision
of the State Government and it would be non-est and void
ab initio. [para 61 and 62] [1139-A-C, G-H; 1140-A]

1.4. A decision to be the decision of the Government H
1086 SUPREME COURT REPORTS · [2010] 5 S.C.R.

A must satisfy the requirements of the Business Rules
framed by the State Government under the provisions of
Article 166(3) of the Constitution. In the case on hand, the
decisions leading to the notifications dated 15.5.1996 and
1.8.1996 do not comply with the requirements of
B Business Rules framed by the Government 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
c Government and the Notifications issued as a result of
such a decision, are in violation of the Business Rules
and void ab initio; and all actions consequent thereto are
null and void. The fact Lhat the decisions taken by the
Minister alone were acted upon . by issuance of
Notifications dated 15.5.1996 and 1.8.1996 will not render
0
them decisions of the State Government even if it chose
to remain silent for a sufficient period of time or the
Secretary concerned did not take any action under Rule
46 of the Business Rules. [para 53 and 68) [1133-D-E;
E 1147-A-D]

1.5. Rule 7 (2) of the Business Rules states that a
proposal which re_guires previous concurrence of
Finance Department under the said Rule, but in which
Finance Department has not concurred, may not be
F proceeded with, unless the Council of Ministers has
taken a decision to that effect. From a combined reading
of the provisions of Rules 7, 3 and 6 of the Business
Rules, the conclusion would be irresistible that any
proposal which is likely to be converted into a decision
G of the State Government involving expenditure or
. abandonment of revenue for which there is no provision
made in the Appropriation Act or an issue which involves
concession or otherwise has a financial implication on
the State, is required to be processed only after the
H concurrence of the Finance Department and capnot be
M.R.F. LTD. ETC. v. MANOHAR PARRIKAR AND - 1087
ORS.

finalized merely at the level of the Minister in charge. The A
procedure or process does not stop at this. After the
concurrence of the Finance Department the proposal has
to be placed before the Council of Ministers and/or the
Chief Minister and only after a decision is taken in this
regard, it will result in the decision of the State B
Government. [para 53] [1131-G-H; 1132-A, F-H; 1133-A-B]

1.6. In the instant case, the decisions impugned
involve and concern not only the Department of Power
but also the Departments of Industries and Finance and
in view of the provisions of Rule 20, the decisions by C
Minister of Power to finalize the Notificatio11s at his level
without placing the proposal before the Chief Minister or
the Council of Ministers fell out side the purview of the
Power Minister. When the rescinding Notification dated
31.03. 1995 was issued, the· rebate of 25% was available D
only to Low Tension and High Tension consumers, and
the Extra High Tension Consumers got deleted pursuant
to the Notification dated 6.12.1993. A decision, therefore,
to include a new category of consumers for grant of
rebate which necessarily involved extra financial burden E
on the State's finances, more so, by creation of a new
category, namely, Extra High Tension Consumers
retrospectively, was required to be finalized only after it
was placed before the Council of Ministers or the Chief
Minister in addition to obtaining the previous concurrence F
of the Finance and Industries Departments. [para 59-60]
[1136-H; 1137-A-B, G-H; 1138-A-B]

1. 7. The Notification dated 15.5.1996, which was
claimed by the appellants to be only clarificatory, G
imposed an additional burden on the State's Exchequer
by introducing a new class of consumers for grant of
rebate retrospectively and it was finalized by the Power
Minister at his level. In law, the proposal for the decision
leading to the Notification dated 15.5.1996 should have H
1088 SUPREME COURT REPORTS [2010] 5 S.C.R.

A. been placed before the Council of Ministers or the Chief
Minister and since the same has not been done it is in
violation of the Business Rules and hence the decision
is non-est. Even assuming that the Notification dated
15.5.1996 was clarificatory in nature, th" same violates
B Rule 19 of the Business Rules and there is nothing on
record to show that the department concerned attempted
to seek ratification of the decision taken by the Power
Minister before the Notification dated 15.5.1996 was
issued. The Notification dated 1.8.1996 also cannot be
c treated as mere clarificatory. 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. The
decision cannot be called a government decision as
0
understood under Article 154 of the Constitution. Having
regard to the figures placed on record, which the High
Court has noticed in its judgment, showing the liability
likely to be brought on the State by Notification dated
1.8.1996, it cannot be said that the said Notification did
E 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. Therefore, the Notifications dated 15.5.1996
and 1.8.1996 are unsustainable and the High Court has
F rightly held the same as non-est and void ab initio. [para
60, 64, 69 and 75) [1138-B-E; 1142-B-C; 1147-E-G; 1152-
D-E]

Royal British Bank v. Turquand, [1856) 6 E. & B. 327,
G referred to. ·

2. 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
H contract are suspicious and, therefore, invite inquiry.
M.R.F. LTD. ETC. v. MANOHAR PARRIKAR AND 1089
ORS.
Applying the exception' to the instant matter, there is A
sufficient doubt with regard to the conduct of the Minister
of Power in issuing the Notifications dated 15.5.1996 and
01.08.1996. Therefore, there is definite suspicion of
irregularity which renders the do,ctrine of indoor
management inapplicable to the instant case. [para 71 and B
73) [1149-C-D; 1150-E-F]

B. Anand Behari Lal v. Dinshaw and Co. (Bankers) Ltd,
AIR 1942 Oudh 417; Abdul Rehman Khan & Anr. v. Muffasal
Bank Ltd. and Ors, AIR 1926 All 497; Shrisht Dhwan(Smt.) C
vs. Shaw Bros. (1992) 1 SCC 534; and State of Kamataka
vs. All India Manufacturer Organization and Others, (2006) 1
sec 32, referred to.
R. Chitralekha and Others vs. State of Mysore 1964 (6)
SCR 368, held inapplicable. D

J. C Houghton& Co. v. Noth ard, Lowe & Wills Ltd, [1927)
1 KB 246 (CA) - referred to.

3.1.The subject matter of earlier writ petitions was
completely different and distinct from the public interest E
litigation filed by respondent no.1. In the earlier litigation,
there was no challenge whatsoever to the Notifications
dated 15.5.1996 and 1.8.1996 and the declaration sought
in writ petition No. 316 of 1998 was not in issue in the
earlier batch of petitions. Therefore, it cannot be said that F
the controversy in the earlier batch of writ petitions and
the instant writ petition is the same. The issue regarding
the validity or legality of the Notifications dated 15.5.1996
and 1.8.1996 was never raised in the earlier batch of writ
petitions before the High Court, which never had an G
opportunity or occasion to look into, consider and
pronounce upon the validity of the same with reference
to the Business Rules framed under Article 166 (3) of the
Constitution. The principles of res judicata, Doctrine of
Estoppel and the principles embodied in Order II Rule 2 H
1090 SUPREME COURT REPORTS (2010] 5 S.C.R.

A of the Code of Civil Procedure pressed into service by
the appellants cannot operate against the State.
Government merely because the State did not agitate
either before the High Court or this Court the legality or
validity of these notification in the earlier round of
B litigation when it had an occasion to do so. The State
Government cannot be deemed to have accepted the
legality of the Notifications and waived its objection or
challenge thereto. The doctrine of estoppel, therefore, has
no application at all, more so, in view of the illegality the
c notifications dated 15.05.1996 and 01.08.1996 suffer from
in view of the non-compliance with the provisions of the
Business Rules. The fact that the State Government did
not raise these objections in the earlier batch of writ
petitions does not disentitle it to such a stand or prevent
it from raising its objections based on legal provisions.
0
Respondent No. 1 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
E against him. [para 24, 28, 29 and 75) (1109-G-H; 1110-A-
B; 1113-A; 1114-A-C; 1151-F-H; 1152-A-D]

Madhvi Amma Bhawani Amma and Ors. vs. Kunjikutty
Pillai Meenakshi Pillai and Ors.· (2000) 3 SCR 752 = (2000)
6 sec 301, referred to.
F
3.2. As regards the objections raised on the basis of
concept of merger, tl:!e High Court has held that though
the appeals ch;.~llenging the judgment of the High Court
dated 21.1.1999 have been dismissed by this Court, and
the findings of the High Court on the relevant issues have
G been impliedly confirmed, the concept of merger will not
come in its way in deciding the issues involved in the
instant petition for the reason that the said issues were
not raised and, therefore, not required to be decided by
the High Court in its earlier judgment dated 21.01.1999
H
M.R.F. LTD. ETC. v. MANOHAR PARRIKAR AND 1091
ORS.

inasmuch as legality of Notifications dated 15.5.1996 and A
1.8.1996 was not examined therein. The principle of
merger has no bearing, since, the issue that was decided
by the High Court in the earlier batch of writ petitions and
the issue that was raised and considered in the
subsequent public interest litigation (W.P. No. 316 of B
1998) are entirely different. [para 25, 27-28] [1110-C-F;
1112-F-H; 1113-A]
Shankar Ramachandra Abhyankar vs. Krishnaji
Dattatreya Bapat (1970) 1 SCR 322 = (AIR 1970 SC 1 ),
referred to. C
4. The appellants have not been able to show any
infirmity or illegality in the order of the High Court
warranting interference. [para 77] [1152-G-H]
Case Law Reference: D
1970) 1 SCR 322 referred to Para 27
(2000) 3 SCR 752 referred to para 28
(1952) SCR 612 ..referred to para 30
E
1995 ( 6 ) Suppl. SCR 97 relied on para 31
1964 (6) SCR 368 held inapplicable para 32
(1973) 3 sec 889 relied on para 33
1917 A.C. 170 referred to Para 34 F
1999 (3) AER 231 referred to Para 35
2001 (1) AER 577 referred to Para 36
2003(3) AER 508 referred to Para 37
(1987) 1 SCR 136 relied on para 40 G

(2006) 4 Suppl. SCR 450 relied on para 41
2006 (3) SCR 751 relied on para 42
1987 ( 3 ) SCR 1 relied on para 43
H
1092 SUPREME COURT REPORTS (2010) 5 S.C.R.

A (1973) 3 s cc 889 relied on para 44
1952 SCR 612 cited para 45
(1962) Supp 3 SCR 713 referred to para 46
1991) 3 SCR 633 referred to para 47
B
1995 (6) Suppl. SCR 97 relied on para 48
2004 (6 ) Suppl. SCR 264 cited para 49
(1969) 3 sec 115 cited para 49

c 2006 (3) sec 581 relied on para 55
2005 (5 ) Suppl. SCR 906 relied on para 56
(1992) 1 sec 534 referred to para 70
AIR 1942 Oudh 417 referred to para 73
D AIR 1926 All 497 referred to para 73
CIVIL APPELLATE JURISDICTION : Civil Appeal No.
4220 of 2002.
From the Judgment & Order dated 19/23.04.2001 &
E 24.04.2001 of the High Court of Bombay at Goa in Writ Petition
No. 316 of 1998.
WITH
C.A. Nos. 4219, 4213, 4214, 4217 & 4218 of 2002.
F F.S. Nariman, L.N. Rao, K.N. Bhat, Dr. Rajeev Dhawan,
Shyam Diwan, Deeptakirth Verma, S. Karpe, Subash Sharma,
Binu Tamta, Prashant Kumar, Triveni Poteker, I. Bimola Devi,
Punit Jain, Chander Shekhar Ashri, Anu Mohla, A Subhashini,
Mohit Abraham, Dhruv Mehta, T.S. Sabasish (for K.L. Mehta
G & Co.), Santosh Paul, M.J. Paul, K.K. Bhat, Arvind Gupta,
Sriharsh N. Hundela, Kavin Gulati, Rohina Nath, Rohan
Dhiman, Rashmi Singh, Sharuk Narang, Ashu Kansai, Umesh
Kumar Khaitan for the appearing parties.

H The Judgment of the Court was delivered by
M.R.F. LTD. ETC. v. MANOHAR PARRIKAR AND 1093
ORS.

H.L. DATTU, J. 1. In Civil Appeal Nos. 4220 of 2002, 4213 A
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 Panajj Bench, at Goa in a Writ Petition
brought in public interest by one Manohar Parrikar, a Member B
of Legislative Assembly, Goa (who later on became the Chief
Minister of the State of Goa) questioning the legality, validity
and propriety of two notifications issued by Government of Goa
dated 15.5.1996 and 01.8.1996 in respect of grant of 25%
rebate to Low Tension, High Tension and Extra High Tension c
Industrial consumers of electricity as a policy of the State
Government.

In Civil Appeal No. 4219 of 2002 (M/s M.R.F. Ltd. & Anr.
Vs. State of Goa & Anr.), the appellant has called in question
the judgment and order passed by the High Court of Bombay D
Panaji Bench, at Goa in Writ Petition No. 364 of 1999 dated
24.4.2001, partly ·allowing the writ petition filed by the appellant.

In Civil Appeal No. 4214 of 2002 (Goa Glass Fibre Ltd. &
Anr. Vs. The State of Goa & Anr.), the appellant has called in E
question the correctness or otherwise of the judgment and
order passed by the High Court of Bombay Panaji Bench, at
Goa in Writ Petition No. 254 of 1999 dated 25.4.2001
dismissing the writ petition filed by the appellant.

In Civil Appeal No. 4217 of 2002 (Alcon Cement F
Company Limited & Anr. Vs. The State of Goa & Anr.), the
appellant has called in question the correctness of the judgment
and order passed by the High Court of Bombay Panaji Bench,
at Goa in Writ Petition No. 277 of 1999 dated 24.4.2001 partly
allowing the writ petition. F

In Civil Appeal No. 4218 of 2008 (Mauvin Godinho Vs.
Manohar Parrikar & Ors.), the appellant has called in question
the correctness of the judgment and order passed by the High
Court of Bombay Panaji Bench, at Goa in Writ Petition No. 316 H
1094 SUPREME COURT REPORTS [2010] 5 S.C.R.

A of 1998 dated 19/24.4.2001

The material facts as pleaded by the Appellants in Civil
Appeal Nos. 4220 of 2002, 4213 of 2002 and 4218 of 2002
are as under:
B 1. The Government of Goa, in purported exercise powers
conferred upon them by Section 23 of the Indian Electricity Act,
1910 ('Electricity Act' for short) issued a Notification on
30.09.1991, granting rebate of 25% in Tariff in respect of the
power supply to the Low Tension and High Tension Industrial
C Consumers/appellants who apply for availing High Tension or
Low Tension Power Supply on or after the 1st of October, 1991
for bona fide industrial activities and certified by the Industries
Department. Government of Goa as eligible for concessional
tariffs for a period of five years from the date on which electricity
D 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
E 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
F 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 with Sections 23 & 51-A of the Electricity Act with
effect from 01.04.1995, by issuing a Notification dated
G 31.03.1995 strictly in accordance with the Business Rules and
Rules of Authentication pursuant to the decision taken by the
State Cabinet.

3. Though the Goverriment rescinded the Notification dated
H 30.09.1991, number of industrial units approached the State
M.R.F. LTD. ETC. v. MANOHAR PARRIKAR AND 1095
ORS. [H.L. DATTU, J.]

Government and claimed benefit of 25% rebate in terms of A
Notification dated 30.09.1991 for the period between the date
of supply of electricity and 31.03.1995. Some applications were
rejected by the Chief Electrical Engineer of State of Goa, on
the ground, that, they being in the category of Extra High Tension
did not fall within the category of consumers covered by the B
Notification dated 30.09.1991. On 29.06.1995, a Calling
Attention Notice in Legislative Assembly was also brought in
by Mr. Manohar Parrikar, seeking clarification from the State
Government as to whether these industrial units were entitled
for the benefits flowing from the Notification dated 30.09.1991 c
upto 31.03.1995. The Power Minister gave a reply to the said
Notice which is reproduced in the judgment under appeal. In
sum and substance the Minister stated, that, the Government
was committed to honour the concession granted by the
Notification dated 30.09.1991 to the eligible industrial units who D
apply for High Tension and low tension power on or after
01.10.1991 till the date of withdrawal, i.e. 01.04.1995.

4. The Under Secretary to Government of Goa,
Department of Power issued a clarification dated 01.11.1995
to the Chief Electrical Engineer on the lines of the reply given E
by the Power Minister to the Calling Attention Motion and
reiterated the same by a communication dated 12.12.1995.
Later, as the Government being satisfied that there were certain
difficulties in the matter of clearing cases of claim of rebate for
the period upto 31.03.1995, issued certain clarifications. On F
15.05.1996, however, the State Government issued another
Notification in purported exercise of power conferred on it under
Sections 23 & 51-A of the Electricity Act read with Section 21
of the General Clauses Act, to amend the Notification dated
30.09.1991 which had been rescinded as per Notification G
dated 31.03.1995. By the said Notification the Government
substituted the words "High Tension or Low Tension power
supply" by the words "High Tension/Extra High Tension or Low
Tension power supply". The State Government further issued
another Notification dated 01.08.1996 restoring the facility of H
1096 SUPREME COURT REPORTS (201 O] 5 S.C.R.

A giving 25% rebate to these three categories of Industrial
consumers and made the said rebate available from
01.08.1996 to those who had either applied or availed the
power supply as on that date.

B 5. By an order dated 31.03.1998, issued by the Chief
Elec.trical Engineer 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
C 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
D 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
E 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% with effect from 01.08.1998. By an
order dated 21.01.1999, the High Court disposed of the batch
F of writ petitions, inter alia holding that the Circular dated
31.03.1998 mentioned supra as invalid and inoperative and the
Notification dated 24.07 .1998 as legal, valid and operative, and
that all petitioners therein were entitled to 25% rebate in power
tariff for the periods as indicated in paragraph 56 of the said
G judgment etc.

7. The judgment of the High Court was taken up in appeal
by both parties to this Court and this Court by an order dated
13.02.2001 declined to interfere with the said order of the High
Court and rejected both sets of appeals.
H
M.R.F. LTD. ETC. v. MANOHAR PARRIKAR AND 1097
ORS. [H.L. DATTU, J.]
8. Mr. Manohar Parrikar, the 1st respondent herein, in the A
meantime, had moved the High Court with a Misc. Civil
Application No.637 of 1999, seeking withdrawal of his writ
petition with liberty to challenge the legality or otherwise of the
Notification after this Court decided the above mentioned civil
appeals filed before it against the order of the High Court dated B
21.01.1999. The High Court by its order dated 27.01.2000
rejected the said application. Mr. Manohar Parrikar had also
moved the High Court to hear his petition along with earlier set
of writ petitions disposed of by the High Court on 21.01.1999.
Subsequently, the said prayer was also withdrawn. c
9. Before the High Court, the 1st respondent herein
challenged the correctness of the Notifications dated
15.05.1996 and 01.08.1996, and sought to declare the same
as null and void. He also challenged the guidelines framed in
the letter dated 12.12.1995 and sought to declare the said D
circular was illegal and to quash it to the extent it goes beyond
the scope of Notification of 1991. He also prayed for certain
other reliefs, including initiation of recovery of rebates paid by
the State Government to the beneficiaries.
E
10. Though the petitioner had sought many reliefs in his
writ petition, the High Court confined itself to the challenge made
to the legality of the notificafions dated 15.05.1996 and
01.08.1996. Before the High Court the 1st respondent herein
contended as under: F
That the two notifications were not issued in
compliance with the requirements of Article 154
read with Article 166 of the Constitution of India and
the Business Rules of the Government of Goa
fram~d by the Governor there11nder. G
' .
That retrospective benefit of rebate in tariff given by
these two notifications was not bona fide and is
illegal.
H
1098 SUPREME COURT REPORTS [2010) 5 S.C.R.

A That there was no Budgetary Provisions made for
these benefits to be extended during the relevant
financial years.

That the Notifications in question were not issued
as is contemplated by and under Articles 154 and
B
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.
c
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.
D
That the Notification dated 15.05.1996 could not
have beer_i 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
E
exist.

Addition to the said notification of Extra High
Tension consumers with retrospective effect from
01.10.1991 was beyond the scope of the
F 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
G said Notifications which have been issued by following the
prescribed procedure in the normal course of business of the
Government with a view to prqmote industrial growth of the
State so as to generate more employment opportunities and,
therefore, there was nothing improper or illegal about it. It was
H also contended by the 2nd respondent therein that even if the
M.R.F. LTD. ETC. v. MANOHAR PARRIKAR AND 1099
ORS. [H.L. DATTU, J.]

said notifications were held to be contrary to the provisions of A
Article 166 of the Constitution, the said Rules are only directory
and failure to comply with them did not vitiate the Notifications
and in any event, if it was realized by the State Government that
these Notifications were issued contrary to the Provisions of
Article 166 nothing prevented the State Government from B
withdrawing them and the fact that no such action was taken
by the State Government for almost two years itself indicated
that the State Government was satisfied with the legality of the
Notifications. The respondent also raised a preliminary
objection regarding the maintainability of the Writ Proceedings c
on the ground, that, once the Notifications impugned have been
authenticated as per the Business Rules, they are immune from
any challenge and there cannot be a situation where respondent
No.1, who at the relevant point of time, was the Chief Minister
of Goa, would be contesting against the action of the State
D
Government. It was also contended that the petition lacked bona
fides and was moved only to settle political scores and to gain
political mileage. The fact that contradictory stands were taken
by the State Government by filing two affidavits of the Chief
Electrical Engineer itself showed that the State Government
walked into the shoes of the 1st respondent herein and that the E
Government cannot support the challenge to the Notifications
issued by it and even if the petition was pro bono when filed, it
ceased to be so after the respondent No.1 herein took over as
the Chief Minister of the State of Goa. The further contention
advanced was that the High Court, having conclusively upheld F
the validity of these two notifications in its judgment dated
21.01.1999, cannot re-examine the same, more so, in view of
confirmation of the said judgment by this Court in its Order
dated 13.01.2001. The 2nd respondent therefore sought
dismissal of the Writ Petition. A number of judgments were cited G
and relied upon by the 2nd respondent in support of his case
before the High Court. The other parties including the
interveners also supported the 2nd respondent therein, on the
issue of maintainability and further addressed arguments based
on the principles of res judicata and the concept of merger of H
1100 SUPREME COURT REPORTS (2010] 5 S.C.R.

A the judgment of the High Court dated 21.01.1999 with 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
B 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
C 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.
D
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, 4214 of 2002 and
E 4217 of 2002, the appellants- M/s M.R.F. Limited, Goa Glass
Fibre Limited and Alcon Cement Company Limited are
questioning the correctness of judgment of the High Court in
partly allowing the Writ Petition Nos. 364 of 1999 and 277 of
1999 and dismissing the Writ Petition No. 254 of 1999
F respectively.

15. The facts in Civil Appeal No. 4219 of 2002 are :-
Appellant applied for power supply connection for setting up a
factory in the State of Goa on 03.10.1991. On 02.09.1992,
G appellant was supplied electricity for the first time. Sometime
in October 1996, the Executive Engineer had acknowledged
that the appellant is entitled for 25% rebate as provided in the
notification. The amount of rebate was computed at Rs.
1,04,70,762 for the period from 02.09.1992 to 01.09.1996 and
H it was further stated that the amount of arrears be credited in
M.R.F. LTD. ETC. v. MANOHAR PARRIKAR AND 1101
ORS. [H.L. DATTU, J.]

60 installments w.e.f. September, 1996 and each installment A
was of Rs. 1,74,513. The respondent had adjusted an amount
of Rs. 53,78,594 as against the bills from September, 1996 to
August, 1997 and further adjustment of Rs. 31,41,234 was also
done subsequently thus leaving a balance of Rs. 73,29,528.
The benefit of rebate was deni~d to the appellant for the B
remaining period on the basis! of the notification dated
31.3.1998, whereby the extension of rebate in tariff was
suspended. Pursuant to the judgment dated 21.1.1999, the
appellant raised a fresh demand for rebate before the
respondent no. 2 and as they failed to succeed, they c
approached the High Court for directions to seek
implementation of the said judgment.

16. The present appeal is filed against the High Court's
order dated 24.04.2001 and the letter issued on 25.05.2001
by the Department of Power to the appellant herein asking for D
refund of the rebate of Rs. 1, 11,35,738 in one installment on
or before 15.6.2001 pursuant to the order dated 24.4.2001.

17. The facts in Civil Appeal No.4214 of 2002 are:- The
appellant - Goa Glass Fibre Ltd. - has set up a manufacturing E
plant at Colvale, Bardez Goa and it had applied for electric
power connection on 18. 7 .1994. Pursuant to the agreement
signed on 7 .12.1995 between the appellant and the respondent
no. 2, the appellant's factory was given power supply for the
first time on 16.3.1996. The appellant made a representation F
to respondent no. 2 on or about 3.7.1996 for the benefit of 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, G
25% rebate to this industry was granted w.e.f. February, 1997
along with the arrears of installment @ Rs. 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
H
1102 SUPREME COURT REPORTS [2010] 5 S.G.R.

A 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 ..

B 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 with 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
C Engineer acknowledged the entitlement of 25% rebate and
.rebate in energy consumption was granted. The appellant was
given adjustment of 13 installments quantified in sum of Rs.
2,90,342/- leaving a balance of 47 installments. In addition, the
balance of subsidy for the months of March 1998 to July 1998
D was worked out at the rate of Rs.4,24,671 thus making a total
sum of Rs. 14,74,755. The benefit of rebate was denied to the
appellant for the remaining period on the basis of the
notification dated 31.3.1998, whereby the extension of rebate
in tariff was suspended. Pursuant to the judgment dated
E 21.1.1999, the appellant raised a fresh demand for rebate
before the respondent no. 2 and as they failed to succeed, they
approached the High Court seeking directions to implement the
said judgment.

F 19. Before us the appellants urged various contentions and
supported them with various grounds and the case laws. The
questions of law according to the appellants are as under:

Whether there is any breach of judicial discipline by
the High Court in not following it's own Judgment
G rendered by a Full Bench in the Case of Kharkanis
wherein the Business Rules framed· under Article
166 (3) were held to be directory in nature, but in
holding that the Rules of Business are mandatory?

H Whether the High Court by the judgment impugned
M.R.F. LTD. ETC. v. MANOHAR PARRIKAR AND 1103
ORS. [H.L. DATTU, J.]

herein has set at naught the judgment dated A
21.01.1999 rendered by the other Division Bench
with reference to the same notifications impugned
in Writ Petition No. 316 of 1999, the former of
which has been affirmed by this Court by its order
dated 13.02.2001 in Civil Appeal No. 3206-07 of B
1999 arid others?

Whether the appellants as consumers of power
seeking rebate in terms of the Notifications issued
in the name of the Governor which have been duly
gazetted, can be estopped from seeking relief of C
rebate under them on the ground that the said
Notifications were void ab initio as they were not
issued in complianc!'J of Business Rules?

Whether the High Court, in the writ petition filed by D
Manohar Parrikar, on the basis of the files
produced before it by the State Government with
Manohar Parrikar as the Chief Minister of the State
at the time of such production, erred in concluding
that the impugned notifications are non-est on the E
basis of such files which had also been examined
by the earlier Division bench of the High Court?

Whether the High Court by ~uing directions to
effeCt recovery of rebate granted on the basis of
Natifications in issue has over ruled the decision of
F
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?
G
V.Vhe".ther the h1gh,,Court erred in allowing the Writ
Petitibn 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 H
1104 SUPREME COURT REPORTS [2010] 5 S.C.R.

A 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
B
compliance with the Business Ruleswhile 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
c 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
D of the State Government through his own Advocate
General to settle scores with his political rival the
3rd respondent herein?

Is there any judicial indiscipline in the High Court
in not following the judgment of this Court dated
E
13.02.2001 confirming the High Court judgment
dated 21.01.1999, more so in view of the consistent
stand taken by the State Government in Parrikar's
case that the judgment of the High Court, dated
21.01.1999 covered the issues therein and that the
F High Court should await the order of this Court in
Appeals pending and which was eventually
disposed by order dated 13.02.2001?

Did the High Court erred in not permitting Manohar
G Parrikar [1 s,t respondent herein] to withdraw his writ
petition, when he himself had submitted that the
issues in his writ petition were covered by the
judgment of the High Court dated 21.01.1999 and
that the appeals there against were pending in this
H Court?
M.R.F. LTD. ETC. v. MANOHAR PARRIKAR ANG· 1105
ORS. [H.L. DATTU, J.]

20. These civil appeals are opposed by the State A
Government by filing a detailed Counter Affidavit. The
contentions of the State Government in support of the impugned
judgment can be summarized as under:

That the State has a vital interest in the outcome of B
the proceedings before this Court which have a
bearing on the State's Finances as an order of this
Court setting aside the judgment impugned will
result in a loss of Rs. 50 Crores to the State's
Exchequer.
c
That the State has already paid an amount of about
16 crores as rebate and it cannot afford to pay any
more on account of financial crunch faced by it and
also on account of the Notifications not being
Government decision in the eyes .of law, in as much D
as the matter was neither placed before the State
Cabinet in terms of the Business Rules nor was the
mandatory concurrence of the Finance Department
under the Business Rules obtained and the High
Court has rightly held that the Notifications cannot E
be termed as State Government's decisions for
want of non-compliance of mandatory Business
Rules and the decision and actions based on the
notification are therefore non-esl
F
That there is no truth in the contention that the State
Government has taken stand which is inconsistent
with and contradict9ry to the one taken In the earlier
affidavits filed in the proceedings.

That the earlier affidavits for and on behalf of the G
State were filed by Chief Electrical Engineer
Nagarajan in virtual support of the Notifications
impugned. However, the said Nagarajan himself
was party to the entire. matter including moving of
the file, initiating the process and that his H
- .,.,----- -· I\
1106 SUPREME COURT REPORTS [201 OJ 5 S.C.R.

A 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.
B
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
c and that a charge sheet was·laid before the Special
Court set up under the Prevention of Corruption Ac;:t
for offences under Section 1208 of the Indian Penal
Code and other provisions of the Prevention of
Corruption Act and the said Nagarajan who filed
D 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
E . the tune of Rs.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 the
State Government did not place before the Court
correct facts of the matter and that the affidavit of
F Nagarajan which did not reflect correct position of
law and did not place correct facts before the Court
should be discarded and the one filed subsequently
should not .be considered as contradictory or
inconsistent as correct facts borne out from the
Government files were placed before the Court by
G
the said affidavits. The said affidavits also reflected
the fact that there was neither financial sanction nor
was there a budgetary provision nor was there a
Cabinet approval as mandatorily required under the
provisions of Article 166 (3) of the Constitution and
H
M.R.F. LTD. ETC. v. MANOHAR PARRIKAR AND 1107
ORS. [H.L. DATTU, J.]

the said Notifications therefore could not be said A
to be the decision of the State Government in the
eye of law. The affidavit dated 12.04.2001 was filed
before the High Court after the State re-examined
the entire matter at the highest level and after
examining the legal aspects and as it was found B
that certain matters which go to the root of the
matter and as the earlier affidavits filed before the
High Court did not place all the facts emanating from
Government files and records. The said affidavit
was filed explaining the severe financial c
implications which the said Notifications incurred
on the State in the form of rebate which could not
be borne by the State's interest and which was
detrimental to the St~te's Interest, more so in view
of lack or absence of legal sanctity for the said
D
notification. The affidavit was filed further to
disclose that there was breach of mandatory
Business Rules and to show that neither cabinet
approval for the decision as required under law was
obtained nor any budgetary allocation made for the
rebate. The affidavit was filed to explain that the
E
State Government could not bear liability of such
magnitude.

21. The counter-affidavit of the respondent - State herein
further reiterates the position of law flowing from various F
provisions of the Constitution and the Business Rules made
there under and states that the impugned notifications did not
comply with the requirements of the Business Rule 7 and were
therefore totally vitiated and did not have any binding effect on
the State Government. The decision contained in the said G
Notifications could not be the decision of the State Government
in the strict and true sense of law. With these contentions the
State Government seeks to support and sustain the judgment
of the High Court against which appeal is filed in this Court.
H
1108 SUPREME COURT REPORTS [2010] 5 S.C.R.

A 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,
B 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
C elaborately dealt with each of the cori•entions 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 with by the High Court holding as under:-
D
" 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 with the order
of the Apex court or on the ground of res judicata. There
is no dispute that the illegality of these Notifications were
E
not challenged in the Petitions which came to be decided
on 21st January, 1999 and, in fact, the said challenge
could not have been raised for the simple reason that the
Petitioners' claim was entirely based on the existence of
these t'\'P Notifications. When the Petitioner moved
F Miscellar\leous Civil Application No.637 of 1999 with the
prayer to allow him to withdraw the Petition for the reasons
I

stated therein: this court while rejecting the said
application by order dated 27th January, 2000, gave the
following reasoning:-
G
."It appears that at one stage the applicant had prayed for
f,taking up the Writ Petition No. 3.16/98 along with the other
batch of Writ Petitions, but the said prayer was withdrawn.
In the said batch of Writ Petitions,
I
challenge had been
H thrown to the aecision of government of Goa
M.R.F. LTD. ETC. v. MANOHAR PARRIKAR AND 1109
ORS. [H.L. DATIU, J.]

communicated· by the Chief Electrical Engineer vide A
Circular dated 31st March, 1998 to suspend the release
of 25% rebate of power tariff to the industrial consumers.
There was no challenge whatsoever to Notification dated
15th May, 1996, or Notification dated 1st August, 1996,
or that the said Notifications were null and void and to 8
nullify any effect given to them in the earlier batch of Writ
J:_etitions which declaration is now sought by the Writ
Petition No. 316/98. There was also no challenge to the
guidelines framed by letter dated 12th December, 1995,
which is sought to be challenged in the Writ Petition No. c
316/98 on the ground that it is illegal to the extent it goes
beyond the scope of 1991 Notification. No direction had
been sought in the earlier batch of Writ Petitions for
investigation into the grant of rebate, or for initiation of
recovery proceedings against those units to whom 25% D
rebate had actually been paid, or adjusted, or to fix
accountability of the concerned public servant, or
authorities for causing loss to the State exchequer. After
taking us through the Judgment, learned advocate for the
applicant himself.admitted that none of the declarations or
E
directions claimed in Writ Petition No.316/98 had been
sought in the earlier batch of Writ Petitions. Therefore, it
cannot prima facie be said thal the controversy in the
earlier batch of Writ Petitions and the Writ Petition in
question is the same.
F
In the circumstances, in our opinion, there is no case made
out for permitting the applicant to withdraw the Writ Petition
No.316/98. Accordingly, the application is hereby
dismissed."
G
There was no challenge whatsoever to the Notifications
dated 15th May, 1996 and 1st August, 1996 and the declamtion
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
H
1110 SUPREME COURT REPORTS [2010] 5 S.C.R.

A 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
B 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
c reasons, the principle of res judicata will not be applicable in
the instaflt 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 judgment of the High Court
D dated 21.01.1999 have been dismissed by this Court, and the
findings of the High Court on the relevant issues have been
impliedly confirmed and though the principle laid down by this
Court in the case of Kunhayammed Vs. State of Kera/a,
[(2000) 6 sec 359], is squarely applicable on the issue of
E merger and the judgment dated 21.01.1999 of the High Court
merged with the order of this Court dated 13.02.2001, the
concept of merger will not come in its way in deciding the
'
issues involved in this petition for the reasons, that, these issues
were not raised and therefore not required to be decided by
F the High Court in its earlier judgment dated 21.01.1999 as was
clear from the order passed by it on 27.01.2000 in Misc. Civil
Application No. 637 of 1999. The High Court held, that, it had
no occasion to address itself on the cballenge raised to the
notification impugned in the Writ Petition of Manohar Parrikar
G and the earlier batch of Writ Petitions proceeded solely against
the order dated 31.03.1998, and subsequent Notification
issued by the State Government on 24.07 .1998. It is observed
by the High Court, that, the. State Government opposed those
Writ Petitions without examining the legality of the Notifications
H dated 15.05.1996 and 01.08.1996 and it had contended that
M.R.F. LTD. ETC. v. MANOHAR PARRIKAR AND 1111
ORS. [H.L. DATTU, J.]

the benefi~ of rebate was withdrawn as the State Government A
was facing financial crunch and that the said benefit had been
introduced as a policy of the State Government and when it was
realized by the State that it was facing financial difficulties in
extending the benefit of rebate it decided to withdraw the same
which has been upheld by the High Court in the earlier batch B
of writ proceedings. The High Court therefore has concluded
that it cannot now be said that State Government cannot take
a stand that the Notifications impugned were issued without
following the mandatory provisions of Rules of Business or that
they were not Notifications issued by the State Government in c
the eyes of law. The High Court has also observed, that if the
State had no occasion to address itself on the legality of these
Notifications, it is not estopped either from raisin~ a challenge
or supporting the challenge at an appropriate time. It is also
held by the High Court that as the 1st respondent herein was
D
not a party to the earlier batch of Writ Petitions before the High
Court and as his application for hearing his petition with that
batch of petitions was withdrawn, he is not estopped from
continuing with his challenge against the Notifications dated
15.05.1996 and 01.08.1996.
E
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 with each other. F
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 G
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 H
1112 SUPREME COURT REPORTS [2010] 5 S.C.R.

A a democratic set up the decisions of the Governments decide
the destiny of the people and therefore the validity of such
decisions should be decided not on the basis of affidavits filed
by the Officers of the Governments or on incomplete or
inadequate information rrtade available by them, but on the
B basis of Constitutional pro~~sions and Business Rul~s framed
thereunder. The High Court further felt that it was duty bound to
examine the records to reassure itself that the decisions
purported to have been taken by the Government are, in fact
and in law, the decision of the Government and they are in
C conformity with the mandate of the Constitution. Thus the High
Court has rejected the preliminary objection as to the
maintainability of the Writ Petition and proceeded to decide the
challenge made to the above mentioned two notifications on
its merits.

D 27. In our view, the principle of merger essentially refers
to the merging of the orders passed by the superior courts with
that of the orders passed by a subordinate court. This Court in
the case of Shankar Ramachandra Abhyankar Vs. Krishnaji
Dattatreya Bapat (AIR 1970 SC 1) has laid down the condition
E as to when there can be a merger of the orders of the superior
court with that of the orders _passed by the lower court. This
Court stated, that, if any judgment pronounced by the superior
court in the exercise of its appellate or revisional jurisdiction
after issue of a nbtice and a full hearing in the presence of both
F the parties, then it would replace the judgment of the lower
court. Thus, constituting the judgment of the superior court the
only final judgment to be executed in accordance with law by
the Court below. The merger is essentially of the operative part
of the order and the principle of merger of the order of the
G subordinate Court with the order of the superior Court cannot
be applied when there is no order made by the superior Court
on merits and the controversy between the parties has not been
looked into by the superior Court.

28. The issue of merger has no bearing in the facts and
H
M.R.F. LTD. ETC. v. MANOHAR PARRIKAR AND 1113
ORS. [H.L. DATTU, J.]

circumstances of the present petitions, since, the issue that was A
decided by the High Court in the earlier batch of Writ Petitions
and the issue that was raised and considered in the subsequent
public interest litigation is entirely different. Secondly, in our
view, the principles of res judicata is also not attracted since
the issue raised and considered in the subsequent public, . B
interest litigation had not been raised and considered in the
earlier round of litigation. It would be worthwhile to recaiJ 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 C
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
D
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 resjudicata.
However, Shri K.N. Bhatt, learned Senior Counsel appearing
for the former Power Minister, would submit that the principles E
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 culminating in notification dated 24.03.1998 was F
available and produced before the High Court in previous writ
petitions and the same Finance Secretary who had opined in
his cabinet note that Rules of Business stood violated due to
non-consultation with Finance department had filed affidavit in
previous Writ Petitions on the decision to issue notification G
dated 24.07.1998. Therefore, the learned senior counsel would
contend that the High Court has erred in deciding this issue
against this respondent. In aid of this submission, the learned
senior counsel has pressed into service the observations made
by this Court in the case of State of Karnataka vs. All India H
1114 SUPREME COURT REPORTS [2010] 5 S.C.R.

A Manufacturer Organization and Others, [(2006) 1 SCC 32].

29. We are not impressed by the submission of the
learned senior counsel Shri K.N. Bhatt. In our view, the subject
matter of earlier Writ Petitions was completely different and
B distinct from the public interest litigation filed by Mr. Manohar
Parrikar. In the earlier Writ Petitions, the challenge was against
notification and the circulars issued by the State Government
and in the present Writ Petitions the High Court was primarily ·
concerned with validity or otherwise of the notifications dated
15.5.1996 and 01.08.1996. Therefore, we are of the view that
C the reasonil')g and conclusions reached by the High Cou1rt, on
the aforesaid issue is in accordance with law and in
accordance with the principles laid_ down by this Court.
Therefore, we agree with the conclusion reached by the High
Court.
D
30. The appellants herein have raised an issue with regard
to the nature of Business Rules framed by the Government of
Goa i.e. whether thes~ Rules are directory or mandatory.
Indeed it is their principal contention. Before the High Court
E also, their contention was that the Rules of Business of the State
of Goa were directory and not mandatory and failure to comply
with such Rules will not nullify the decision taken by the State
Government. Shri F.S_ Nariman, learned senior counsel
submitted that it is now settled law, that, violation of conduct of
F Business Rules does not vitiate the decision or order, since the
Rules of Business are only directory and not mandatory. The
learned senior counsel has invited our attention to the decision
of this court in the case of Dattatreya Moreshwar Pangarkar
vs. State of Bombay- [(1952) SCR 612]. In the said decision,
G the court has observed :

"It is well settled 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
H duty and !h~ case is such that to hold null and void acts
M.RF. LTD. ETC. v. MANOHAR PARRIKAR AND 1115
ORS. [H.L. DATTU, J.]

c;ione in neglect of this duty would work serious general A
inconvenience or injustice to persons who have no control
over those entrusted with 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 B
validity of the acts done. The considerations which weighed
with 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 with equal cogency to Article c
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 with the requirements of
Article 166 gives an immunity to the order in that it cannot D
be challenged on the ground that it is not an order made
by the Governor. If, therefore, the requirements of that
article are not complied with, the resulting immunity cannot
be claimed by the State. This, however, does not vitiate
the order itself. The position, therefore, is that while the
Preventive Detention Act requires an executive decision,
E
call it an order or an executive action, for the confirmation
of an order of detention under Section 11 (1) that Act does
not itself prescribe any particular form of expression of that
executive decision. Article 166 directs all executive action
to be expressed and authenticated in the manner therein F
laid down but an omission to comply with those provisions
does not render the executive action a nullity.

31. Reference is also made to the decision of this Court
in Gulabrao Keshavrao Patil and Ors. Vs. State of Gujarat G
(1996) 2 sec 26. It was noted as follows:

"Article 166(1) and (2) expressly envisage authentication
of all the executive action and shall be expressed to be
taken in the name of the Governor and shall be
H
1116 SUPREME COURT REPORTS [2010] 5 S.C.R.

A authenticated in such manner specified in the rules made
by the Governor. Under Article 166(3), the Governor is
authorised to make the rules for the more co,nvenient
transaction of the business of the Government of the State,
and for the allocation among Ministers of the said business
B insofar as it is not a business with respect to which the
Governor is by or under the Constitution required to act in
his discretion. In other words, except in cases when the
Governor in his individual discretion exercises his
constitutional functions, the other business of the
c Government is required to be conveniently transacted as
per the Business Rules made by Article 166(3) of the
Constitution. If the action of the Government and the order
is duly authenticated as per Article 166(2) and the
Business Rule 12, it is conclusive and irrebuttable
presumption arises that decision was duly taken according
D
to Rules."

32. Mr. F.S. Nariman next relied upon the decision of this
Court in R. Chitralekha and Others vs. State of Mysore, [1964
(6) SCR 368], wherein this Court has stated that it is "settled
E law" that provisions of Article 166 of the Constitution are only
directory and not mandatory in character. And if they are not
complied with it can be established as a question of fact that
the impugned order was in fact issued by the Governor."

F 33. In Haridwar Singh Vs. Bagun Sumburui, [(1973) 3
sec 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
G 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
H indicative of the intent that the provision is to be mandatory.
M.R.F. LTD. ETC. v. MANOHAR PARRIKAR AND 1117
ORS. [H.L. DATTU, J.]

Where a prescription relates to performance of a public A
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 with the duty, such
prescription is generally understood as mere instruction for
the guidance of those upon whom the duty is imposed." B

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 C
contended for the appellants that the consequence is that
the trial was coram non judice and must be treated as a
nullity.

It is necessary to consider the principles which have been D
adopted in construing statutes of this character, and the
authorities so far as there are any on the particular question
arising here. The question whether provisions in a statute
are directory or imperative has very frequently arisen in this
country, but it has been said that no general rule can be
E
laid down, and that in every case the object of the statute
must be looked at. The cases on the subject will be found
collected in Maxwell on Statutes, 5th ed. P. 596 and
following pages. 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
F
would work serious general inconvenience, or injustice to
persons who have no control over those entrusted with
the duty, and at the same time would not promote the
main object of the Legislature, it has been the practice
to hold such provisions to be directory only, the neglect G
·of them, though punishable not effecting the validity of
the acts done."

(emphasis supplied)
H
1118 SUPREME COURT REPORTS (2010] 5 S.C.R.

A 35. In R v Immigration Appeal Tribunal Ex parte
Jeyeanthan 1999 (3) AER 231, it is observed :

"The issue is of general importance and has implications
for the failure to observe procedural requirements outside
the field of immigration. The conventional approach when
B
there has been non-compliance with a procedural
requirement laid down by a statute or regulation is to
conc;ider whether the requirement which was not complied
with should be categorised as directory or mandatory. If it
is categorised as directory it is usually assumed it can be
c safely ignored. If it is categorised as mandatory then it is
usually assumed the defect cannot be remedied and has
the effect of rendering subsequent events dependent on
the requiremeni a nullity or void or as being made without
jurisdiction and of no effect. The position is more complex
D than this and this approach distracts attention from the
important question of what the legislator should be judged
to have intended should be the consequence of the non-
compliance. This has to be assessed on a consideration
of the language of the legislation aga_inst the factual
E circumstances of the non-compliance. In the majority of
cases it provides limited, if any, assistance to inquire
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.
F
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 meinber' 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
G
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 with the intention of the author of the requirement.
H
M.R.F. LTD. ETC. v. MANOHAR PARRIKAR AND 1119
ORS. [H.L. DATTU, J.]

There are cases where it has been held that even if there A·
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 stiH fatal. The
explanation for these decisions is that the draconian
consequence is imposed as a deterrent against not B
observing the requirement. However even where this is the
situation the consequences may differ if this would not be
in the interests of the person who was to be informed of
his rights.

Because of what can be the very undesirable C
consequences of a procedural requirement which is made
so fundamental that any departure from the requirement
makes everything that happens thereafter irreversibly a
nullity it is to be hoped that provisions intended to have this
effect will be few and far between. In the majority of cases, D
whether the requirement is categorised as directory or
mandatory, the tribunal before whom the defect is properly
raised has the task of determining what are to be the
consequences of failing to comply with the requirement in
the context of all the facts and circumstances of the case E
in which the issue arises. In S!JCh a situation that tribunal's
task will be to seek to do what is just in all the
circumstances (see Brayhead (Ascot) Ltd. v Berkshire CC
(1964] 1 All ER 149, [1964] 2 QB 303 applied by the
House of Lords in London and a Clydesidc Estates Ltd. F
v. Aberdeen DC [1979] 3 All ER 876, [1980] IWLR 182).

By contrast, a requirement may be clearly directory
because it lays down a time limit but a tribunal is given an
express power to extend the time for compliance. If the G
tribunal grants or refuses an extension of time the position
is clear. If the time limit is extended the requirement is of
no Significance. If an extension is refused the requirement
becomes critical. It may, for example, deprive a member
of the public of a right to appeal which if exercised in time
H
1120 SUPREME COURT REPORTS [2010] 5 S.C.R.

A would have been ·bound to succeed. In the latter situation
a directory requirement has consequences which are as
significant as any mandatory requirement.

A far from straightforward situation is where there is a need
for permission to appeal to a tribunal but this is not
B
appreciated at the time. The requirement is mandatory in
the sense that the tribunal or the party against whom the
appeal was being brought would have been entitled to
object to the appeal proceeding without the permission and
if they had done so the appeal would not have been
c accepted. However, what is the position if because they
were unaware of the existence of the requirement no
objection is made and the appeal is heard and allowed?
Is the appellant, when the mistake is learnt of, to be
deprived of the benefits of the appeal? If the answer is Yes
D the result could be very unjust. This would be especially so,
if in 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 misinform'ed-.
Could it have been the intention of the author of the
E 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
F designed to further the interests of justice and any
consequence which would achieve a result contrary to
those interests should be treated with considerable
reservation."

G 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.
H Nevertheless, there do seem to be secure footholds which
M.R.F. LTD. ETC. v. MANOHAR PARRIKAR AND 1121
ORS. [H.L. DATTU, J.]

may l'ead to a tolerably clear answer. It is not along the route A
adopted by the prosecution of asking whether the relevant
pr'ovision is mandatory or. directory. In London and
Clydeside Estates Ltd. vs. Aberdeen DC [1979] 3 All ER
876 at 882-884, {1980} 1 WLR 182 at 188-190, Lord
Hailsham of St Marylebone L.C. considered this dichotomy B
and warned against the approach 'of fitting a particular
case into one or other of mutually exclusive and starkly
contrasted compartments'. In R v Immigration Appeal
Tribunal, exp Jeycanthan [1999J 3 All ER 231 at 237,
[2000] 1 WLR 354 at 360, Lord Woolf MR, now Lord c
Chief Justice, echoed this warning and held that it is 'Much
more important ... to focus on the consequences of non-
compliance'. This is h~ I will approach the matter."

37. In R v Sekhon and others, 2003(3) AER 508, it is
observed : D

"25. There is no doubt that difficulties for courts exist in
applying the distinction between mandatory requirements
on the one hand, and directory requirements on the other.
Even if the terms 'directory' and ·mandatory' are not used E
the problem remains of answering the question : what is
the effect of non-compliance with procedural requirements?
What is necessary as indicated by Lord Campbell LC in
Liverpool Borough Bank v. Turner (1861) 30 LJ Ch 379
at 381, 45 ER 715 at 718, is 'to try to get at the real F
intention of the legislature, by carefully attending to the
whole scope of the statute to be construed."

38. Reference can be made to certain passages from
HALSBURY'S Laws of England, 4th Edition Re issue Vol. 44(1)
at para 1237 and 1238: · · G

1237. Substantive and procedural enactments. A
distinction is drawn between enactments that have
substantive effect and those that are merely procedural.
Here 'substantive' means having to do with the substance H
1122 SUPREME COURT REPORTS [2010) 5 S.C.R. -

A of the law, in particular the nature and existence of legal
rights, powers or duties, whereas procedure is concerned
with formalities and technicalities, rather than substance.
A procedural change is expected to improve matters for
everyone concerned (or at least to improve matters for
B some, without inflicting detriment on anyone else who uses
ordinary care, vigilance and promptness).

The distinction governs such questions as whether a
statutory requirement is mandatory or merely directory",
whether the effect of an enactment is retrospective' and
c when a limitation period begins tb run.

The question may be whether, on the facts of the instant
case, the enactment is substantive or merely procedural,
bearing in mind that an enactment may be substantive in
D 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.
l

1238. Mandatory and directory enactments. The
E
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
F 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
carryin9' on the ~ctivity to implement the requirement as
part o( a specified {)rocedure. The requirement may be
G impbsed merely by implication.

To remedy the deficiency of the legislature in failing to
specify the intended legal consequence of non-compliance
with such a requirement, it has been necessary for the
H courts to devise rules. These lay down that it must be
M.R.F. LTD, ETC. v. MANOHAR PARRIKAR AND 1123
. ORS. [H.L. DATTU, J.]

decided from the wording of the relevant enactment A
whether the requirement is intended to be mandatory or
merely directory. The same requirement may be
mandatory as to some aspects and directory as to the rest.
The court will be more willing to hold that a statutory
requirement is merely directory if any breach of the B
requirement is necessarily followed by an opportunity to
exercise some judicial or official discretion in a way which
can adequately compensate for that breach. Provisions
relating to the steps to be taken by the parties to legal
proceedings (using the term in the widest sense) are often c
construed as mandatory. Where, however, a requirement,
even if in mandatory terms, is purely procedural and is
imposed for the benefit of one party alone, that party can
waive the requirement. Provisions requiring a public
authority to comply with formalities in order to render a
D
private individual liable to a levy have generally been t:ield
to be mandatory.

Requirements are construed as directory if they relate to
the performance of a public duty, and the case is such that
to hold void acts done in neglect of them would work E
serious general inconvenience or injustice to persons who
have no control over those entrusted with the duty, without
at the same time promoting the main object of the
legislature. This is illustrated by many decisions relating
to the performance of public functions out of time, and by F
many relating to the failure of public officers to comply with
formal requirements. On the other hand, the view that
provisions conferring private rights have been generally
treated as mandatory is less easy to support; the decisions
on provisions of this type appear, in fact, to show no really G
marked leaning either way.

If the .requirement is found to be mandatory, then in a case
where a duty to implement it is imposed directly on a
person, non-compliance will normally constitute the tort of
H
1124 SUPREME COURT REPORTS [2010] 5 S.C.R.

A breach of statutory duty, while in a case where it is to be
implemented as a part of a specified procedure, non-
compliance will normally render the act done invalid. If the
requirement is found to be directory only then in either case
the non-compliance will be without direct legal effect,
B though there might be indirect consequences such as an
award of costs against the offender. It has been said that
mandatory provisions must be fulfilled exactly, whereas it
is sufficient if directory provisions are substantially fulfilled.

Where the requirement is complied with at the relevant
c 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."

D 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 with regard to the
violation of the Rules of Business and each case must be
decided on facts; where the Rules of Business contain
E 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
F there is no prior consultation with 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
G placed before the Council of Ministers. It is further submitted
that the decision on which reliance is placed by learned senior
counsel Shri F.S. Nariman does not specifically answer the
issue whether the Rules of Business framed under Article
166(3) of the Constitution is mandatory or directory and in fact
H
M.R.F. LTD. ETC. v. MANOHAR PARRIKAR AND 1125
ORS. [H.L. DATTU, J.]

all those decisions are rendered in the context of Article 166(1) A
and (2) of the Constitution and the Courts have held that; the
form of expression and authentication are only directory, and
not mandatory. In aid of their submission, the learned senior
counsel relies on the observations made in the following
decisions : - B

40. In State of Kera/a vs. A. Lakshmikutty, [(19:86) 4 SCC
632], it is held :

"It must therefore follow that unless and until the decision
taken by the Council of Ministers on January 30, 1985 was c
translated into action by the issue of a notification
expressed in the name of the Governor as required by
Article 166(1 ), it could not be said to be an order of the
State Government. Until then, the earlier decision of the
Council of Ministers was only a tentative one and it was D
therefore fully competent for the High Court (sic State
Government) to reconsider the matter and come to a fiesh
decision." (pr. 41, pp ..659)

41. In CB/ vs. Ravi Shankar Srivastava, [(2006) 7 SCC
r 88], it is observed : E

"13 ..... has been rightly submitted by learned counsel for
the appellant, there is no notification revoking the earlier
notification. The letter on which great emphasis has been
laid by Respondent 1 and highlighted by the High Court, F
the authority to write the letter has not been indicated. It
has also not been established that the person was
authorised to take a decision. In any event, the same does
not meet the requirements of Article 166 of the Constitution.
The letter is not even conceptually a notification. The High G
Court was, therefore, not justified in holding that there was
a notification rescinding the earlier notification." (pr. 13, pp.
200)

42. In Punjab State Industrial Development Corpn. Ltd.
H
1126 SUPREME COURT REPORTS [2010] 5 S.C.R.

A vs. PNFC Karamchari Sangh, [(2006) 4 SCC 367]; it is held :

"11. Reliance was placed on the so-called order of the
Chief Minister permitting PSIDC to raise funds in order to
meet the liability of PNFC towards salary of its workers for
at least six months. We have carefully perused the note of
B
the Chief Minister dated 25-8-2001. The said note cannot
be said to be an order of the State Government and
therefore is not binding on PSIDC. The orders of the State
Government are issued ir:i a prescribed manner and the
note dated 25-8-2001 cannot be treated as one." {pr.11,
c pp. 371)

43. In State of Bihar vs. Kripa/u Shankar, [(1987) 3 SCC
34], it is stated :

D "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 actiof1 has to be expressed. Noting by
E 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 forn:i of an order it has to
comply with Article 166( 1). Article 166(2) states that orders
F 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 the
G rules by the Governor for th.e more convenient transaction
of the business of the Government. A study of this article,
therefore, makes it clear that the notings in a ffle get
culminated into an order affecting right of parties only when
it reaches the head of the department and is expressed in
H the name of the Governor, authenticated in the manner
M.R.F. LTD. ETC. v. MANOHAR PARRIKAR AND 1127
ORS. [H.L. DATTU, J.]

provided in Article 166(2)." (pr. 15, pp. 43) A

44. In Haridwar Singh vs. Bagun Sumbrui, ((1973) 3 SCC
889], Rule 10 had been formulated under Article 166(3), it is
Qbserved :

"16. In this case, we think that a power has been given to B
the Minister in charge of the Forest Department to do an
act which concerns the revenue of the State and also the
rights of individuals. The negative or prohibitive language
of rule 10(1) is a strong indication of the intent to make
the Rule mandatory. Further, rule 10(2) makes it clear that C
where prior consultation with the Finance Department is
required for a proposal, and the department o.n
consultation, does not agree to the proposal, the
department originating the proposal can take no further
action on the proposal. The cabinet alone would be D
competent to take a decision. When we see that the
disagreement of the Finance Department with 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 E
essential pre-requisite to the exercise of the power." (pr.
16, pp. 896)

45. In Dattatraya Moreshwar vs. State.of Bombay, (1952
3CR 612] at pp. 624-65, per Das, J. :
F
'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
with the requirements of Article 166 gives an immunity to
the order in that it cannot be challenged on the ground that G
it is not an order made by the Governor. If, therefore, the
requirements of that article are not complied with, the
resulting immunity cannot be claimed by the State. This,
however, does not vitiate the order itself. The position,
therefore, is that while the Preventive Detention Act requires
H
1128 SUPREME COURT REPORTS [201 O] 5 S.C.R.

A an executive decision, ·call it an order or an executive
action, for the confirmation of an order of detention under
Section 11 (1) that Act does not itself prescribe any
particular form of expression of that executive decision.
Article 166 directs all executive action to be expressed and
B authenticated in the manner therein laid down but an
omission to comply with 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
c under Section 11 (1 ). That such a decision has been in fact
taken by the appronriate Government is amply proved on
the record."

Evidence can be led to show that these actions are
D 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:
E "I agree with the learned Attorney General that non-
compliance with 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
F adopted."

46. In Bachhittar Singh vs. State of Punjab, [1962 Supp
(3) SCR 713]:

"Rules of business under Article 166(3) required Revenue
G Minister to make the order against the petitioner, but the
same was done by the Chief Minister. The said order of
the CM was rescued by another rule of business which
allowed him to call any fine before him. No mention of
Article 166(3) being directory or mandatory."
H
M.R.F. LTD. ETC. v. MANOHAR PARRIKAR AND 1129
ORS. [H.L. DATTU, J.]
47. In State of Sikkim vs. Dorjee Tshering Bhutia, [(1991) A
'4 sec 243], it is observed :

"14 ..... The government business is conducted under
Article 166(3) of the Constitution in accordance with the
Rules of Business made by the Governor. Under the said B
Rules the government business is divided amongst the
ministers and specific functions are allocated to different
ministries. Each ministry can:, therefore, issue orders or
notifications in respect of the functions which have been
allocated to it under the Rules of Business;"
c
48. In Gu/abrao Keshavrao Patil vs. State of Gujarat,
[ (1996) 2 sec 26], it is held :

"14 .... lt would, therefore, be clear that the decision of a
Minister under the Business Rules is not final or conclusive D
until the requirements in terms of clauses (1) and (2) of
Article 166 are complied with. Before the action or the
decision is expressed in the name of the Governor in the
manner prescribed under the Business Rules and
communicated to the party concerned it would always be E
open by necessary implication, to the Chief Minister to
send for the file and have it examined by himself and to
take a decision, though the subject was allotted to a
particular Minister for convenient transaction of the
business of the Government. The subject, though
F
exclusively allotted to the Minister, by reason of the
responsibility of the Chief Minister to the Governor and
accountability to the people, has implied power to call for
the file relating to a decision taken by a Minister. The
object of allotment of the subject to a Minister is for the
convenient transaction of the business at various levels G
through designated officers." (pr. 14, pp.35)

49. Dr. Rajeev Dhavan, learned senior counsel fairly
submits, that, even if Article 166(3) were to be held directory,
substantial compliance of the same would be required. In H
1130 SUPREME COURT REPORTS [2010] 5 S.C.R.

A support of this contention, the learned senior counsel relies on
the following decisions of this Court :

Bannari Amman Sugars Ltd. vs. Commercial Tax
Office (2005) 1 sec 625.
B R. Chitralekha vs. State of Mysore (1964) 6 SCR
368

State of UP. vs. Om Prakash Gupta (1969) 3 SCC
775
c Dattatraya Moreshwar vs. State 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
D framed under Article 166(3) of t~e 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.
E 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.

F 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
G 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
H manner as may be specified in rules to be made by the
M.R.F. LTD. ETC. v. MANOHAR PARRIKAR AND 1131
ORS. [H.L. DATTU, J.]
Governor, and the validity of an order or instrument which A
is so authenticated shall not be called in question on the
ground that it is not an order or instrument made on
executed by the Governor.

(3) The Governor shall make rules for the more convenient
B
transaction of the business of the Government of the State,
and for the allocation among Ministers of the said business
insofar as it is not business with respect to which the
Governor is by or under this Constitution to act in his
discretion."
c
52. Clause (1) of Article 166 of the Constitution says, that,
whenever executive action is to be taken by way of an order or
instrument, it shall be expressed to be taken in the name of the
Governor in whom the executive power of the State is vested.
Under Clause (2), the orders and instruments made and D
executed in the name of the Governor shall be authenticated
in the manner specified in the rules. Under Clause (3) of Article
166 of the Constitution, the Governor is authorized to make
rules for the more convenient transaction of business of the
Government of the State and for the allocation among its E
Ministers of the business of Government. All matters excepting
those in which the Governor is required to act in his discretion
have to be allocated to one or the other of the Ministers on the
. advice of the Chief Minister. Apart from allocating business
amongst Ministers, the Governor can also make rules on the
F
advice of the Council of Ministers for more convenient
transaction of business.

53. In the case on hand, we are required to examine the
contentions of the appellants on this issue with reference to the
Business Rules framed by Governor of Goa under Article 166 G
(3) of the Constitution of India. Rule 7 (2) of the Business Rules
of the Government of Goa states, that, no proposal which
requires previous concurrence of Finance Department under
the said Rule, but in which Finance Department has not
concurred, may not be proceeded with, unless the Council of H
1132 SUPREME COURT REPORTS [2010] 5 S.C.R.

A Ministers has taken a decision to that effect. The wordings of
this Rule are different fro111 the provisions of Rule 9 of the
Business Rules of Maharashtra and have to be read in context
with the provisions of Rule 3 of the Business Rules of
Government of Goa which states that the business of the
B Government shall be transacted in accordance with the
Business Rules. Under Rule 7 (2) thereof, the 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
C 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 with 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
D the Council of Minister or otherwise. This Rule r~quires 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
E · 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,
F grant, lease or licence in respect of minerals or forest rights or
rights to water, power or any easement or privilege or otherwise
have a financial implications whether involving expenditure or
not. From a combined reading of the provisions of Rules 7, 3
and 6 of the Business Rules of the Government of Goa the
G conclusion would be irresistible that any proposal which is likely
to be converted into a decision of the State Government
involving expenditure or abandonment of revenue for which
there is no provision made in the Appropriation Act or an issue
which involves concession or otherwise has a financial
H implication on the State is required to be processed only after
M.R.F. LTD. ETC. v. MANOHAR PARRIKAR AND 1133
ORS. [H.L. DATTU, J.]

the concurrence of the Finance Department and cannot be A
finalized merely at the level of the Minister in charge. The
procedure or process does not stop at this. After the
concurrence of the Finance Department the proposal has to be
placed before the Council of Ministers and/or the Chief Minister
and only after a decision is taken in this regard that it will result B
in the Decision of the State Government. Therefore the High
Court has rightly rejected the arguments of the appellants herein
based on the judgment of the Full Bench of the High Court. The
High Court has observed, that the Rules of Business are framed
in such a manner that the mandate of the provisions of Articles c
154, 163 and 166 of the Constitution are fulfilled. Therefore, if
it is held that the noncompliance of these Rules does not vitiate
the decisions taken by an individual Minister concerned alone
the result would be disastrous. In a democratic set up the
decision of the State Government must reflect the collective
wisdom of the Council of Ministers or at least that of tl)e Chief
0
Minister who heads the Council. The fact that the decisions
taken by the Minister alone were acted upon by issuance of
Notification will not render them decisions of the State
Government even if the State Government chose to remain
silent for a sufficient period of time or the Secretary concerned
E
to the State Government did not take any action under Rule 46
of the Business Rules. If every decision of an individual Minister
taken in breach of Rules are treated to be those of the State
Government within the meaning of Article 154 of the
Constitution, the result would be chaotic. The Chief Minister F
would remain a mere figure head and every Minister will be free
to act on his own by 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
u·nder Article 163. Therefore, it is difficult to accept the G
contentions of the appellants that Business Rules ~re directory.

54. We also subscribe to and uphold the view of the High
Court that the Business Rules 3,6, 7 anti '9 are Mandatory and
not Directory and any decision taken by any individual Minister H
1134 SUPREME COURT REPORTS [2010] 5 S.C.R.

A 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],
B the facts were that the State of M.P. had allotted certain land
under the Jabalpur Development Authority (JOA) to a person
at concessional rates to set up a newspaper printing press,
though the land was earmarked for commercial use. The Court
held:

c ''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
JOA, it was necessary to be done on proper application
D of mind by the cabinet, the concerned Minister or by an
authority who is empowered in that behalf in terms of the
Rules of the Executive Business framed under Article
166 of the Constitution of India. Such a direction could
not hc.ve been issued at the instance of the Chief Minister
E or at the instance of any other officer alone unless it is
shown that they had such authority in terms of the Rules
of the Executive Business of the State. We have not been
shown that the Chief Minister was the appropriate authority
to take a decision in this behalf."
F (emphasis supplied)

56. In State of UP. vs. Neeraj Avasthi, [2006 (1) SCC
667], this Court held that the power of the State Government
was confined to issuing directions to State Agricultural Produce
G Market Hoard on the question of policy and observed :

"Such a decision on the part of the State Government must
be taken in terms of the Constitutional scheme, i.e., upon
compliance of the requirement of Article 162 read with
Article 166 of the Constitution of India. In the instant case,
H
M.R.F. LTD. ETC. v. MANOHAR PARRIKAR AND 1135
ORS. [H.L. DATTU, J.)

the directions were purported to have been issued by an A
officer of the State. Such directions were not shown to
have been issued pursuant to any decision taken by a
competent authority in terms of the Rules of Executive
Business of the State framed under Article 166 of the
Constitution of India ..... We are therefore of the opinion B
that the direction by the State was not strictly in accordance
with law."

57. In Gulabrao Keshavrao Patil (supra), this Court held
that a decision of a Minister was not an order of the Government
in view of non-compliance with Article 166. C

58. The decision of the Constitution Bench in Chitralekha
has been misinterpreted. In that case this Court was
considering a controversy in regard to an order which was not
expressed in the name of the Governor in terms of Article D
166(1) and (2). In that context, this Court observed that it is a
settled law that the provisions of Article 166 of the Constitution
are only directory and not mandatory in character. The context
clearly shows that the observation that the provisions of Article
166 of the Constitution are only directory and not mandatory, . E
referred only to clauses (1) and (2) of Article 166 and did not
refer to clause (3) which was not under consideration at all.
Chitralekha, therefore, cannot be relied upon to support the
contention that Business Rules made under clause (3) of Article
166 are directory. We have earlier referred to all the decisions F
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 G
Business Rules to deal with 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 H
1136 SUPREME COURT REPORTS [2010) 5 S.C.R.

A 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
8 should, unless otherwise directed by the Chief Minister, prepare
a memorandum indicating precisely the salient facts of the case
and points for decision and copies thereof circulated to the
Council by the Secretary. Rule 14 requires in a case which
involves or concerns more than one Department, the Minister
C by previous discussion to arrive at an agreement and if such
agreement is reached the memorandum referred to in Rule 13
supra should contain the joint recommendations of the Ministers
and if no agreement is reached the points of differences and
views of each of the Minister should be stated in the
memorandum. Items No.5,9 & 30 in the Schedule to the Rules
D relate to proposal which have a bearing on the Finances of the
State and which do not have the concurrence or consent of the
Finance Minister's proposal involving important change in the
policy and practice; proposals to vary or reverse a decision
previously taken by the Council. Under Rule 16 the decisions
E of the Council in each case should be recorded and placed
with the records of the case after their approval by the Chief
Minister. Extracts of the decision should be sent to the
Secretary of the Department who should take necessary action
thereon. Rule 17 enables a Minister in Charge of a Department
F on the basis of standing orders to give such directions as he
thinks fit for disposal of cases in his department and further
requires the Secretary of the Department concerned to
simultaneously submit to the Chief Minister and the Governor
the statement showing the particulars of any important cases
G disposed of by the Minister. Rule 20 stipulates, that, when the
subject involves or relates to more than one Department, no
order should be issued or the case be laid before the council
until the case has been considered by all the departments
involved or concerned, unless the case is one of extreme
H urgency. In the case on hand, the decisions impugned involve
M.R.F. LTD. ETC. v. MANOHAR PARRIKAR AND 1137
ORS. [H.L. DATTU, J.]

and concern not only the department of power but also the A
departments of Industries and Finance and in view of the
provisions of Rule 20, the decisions to finalize the Notifications
at his level without placing the proposal before the Chief
Minister or the Council of Minister fell out side the purview of
the Power Minister. B

60. The State Government in exerc!,~e of its power
conferred on it under Section 23 read with Set:tion 51-A of the
Electricity Act issued a Notification dated 29.06.1993,
published in the Official Gazette dated 30.06.1993, framing the
revised electricity tariff for the State as specified in the Schedule C
append~d 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 D
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 E
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 F
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 with the requirements of the Business Rules. When the G
Rescinding Notification dated 31.03.1995 was issued the
rebate of 25% was available only to Low Tension and High
Tension consumers and the Extra High Tension Consumers got
deleted pursuant to the Notification dated 6.12.1993. A
decision, therefore, to include a new category of consumers for H
1138 SUPREME COURT REPORTS [2010] 5 S.C.R.

A grant of rebate which necessarily involved extra financial burden
on the State's finances more so by creation of a new category
retrospectively was required to be finalized only after it was
placed before the Council of Ministers or the Chief Minister in
addition to obtaining the previous concurrence of the Finance
B and Industries Departments. The Notification dated 15.5.1996
which was argued by the appellants herein to be only
clarifjcatory had imposed an additional burden on the State's
Exchequer by introducing a new class of consumers for grant
of rebate retrospectively and it was finalized by the Power
c Minister at his level. In law the proposal for the decision leading
to the Notification dated 15.5.1996 should have been placed
before the Council of Ministers or the Chief Minister and since
the same has not been done it is in violation of the Business
Rules and hence the decision is non est. Even for the sake of
arguments if it is assumed that the Notification dated 15.5.1996
0
was c1 arificatory in nature the same violates Rule 19 of the
Business Rules and there is nothing on record, as observed
by the High Court to show that the department concerned
attempted to seek ratification of the decision taken by the
Power Minister before the Notification dated 15.5.1996 r:as
E issued.

61. At this stage, we find it necessary to refer to some of
the Constitutional provisions to deal with the issue raised by
the appellants. Under Article 154 of the Constitution of India,
F the Governor is vested with the Executive Power of the State
and he shall exercise them either directly or through Officers
subordinate to him in accordance with the provisions of the
Constitution. The Governor is advised by the Council of
Ministers with the Chief Minister at its head in exercise of-his
G functions except those specifically stated in discharge of his
functions as the head of the State_ The Council of Minister is
collectively responsible to the Legislative Assembly of the
State. The Rules of business framed under Article 166(3) of the
Constitution are for convenient transaction of the business of
H the Government and for allocation of the business among the
M.R.F. LTD. ETC. v. MANOHAR PARRIKAR AND 1139
ORS. [H.L. DATTU, J.)

Ministers. Article 166(2) of the Constitution requires the decision A
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 B
bf 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 with 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 C
Constitutional Mandate embodied in Chapter II, Part Ill 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 D
under Article 166(3) are only directory in character and failure
to comply with them does not vitiate the decision taken by the
State Government. The High Court after considering the various
judgments cited before it has repelled the said contention to
hold that the said Rules are mandatory and non-compliance E
thereof would be disastrous. The reasoning adopted by the
High Court to arrive at such a conclusion is sound and in
accordance with the constitutional mandate. The decisions of
the State Government have to be in conformity with the mandate
of Article 154 an 166 of the Constitution as also the Rules F
framed thereunder as otherwise such decision would not have
the form of a Government decision and will be a nullity. The
Rules of Business framed under Article 166(3) of the
Constitution are for convenient transaction of the business of
the Government and the said business has to be transacted in G
a just and fit manner in keeping with the said Business Rules
and as, per the requirement of Article 154 of the Constitution.
Therefore, if the Council of Ministers or Chief Minister has not
been a party to a decision taken by an Individual Minister, that
decision cannot be the decision of the State Government and
H
1140 SUPREME COURT REPORTS [2010) 5 S.C.R.

A it would be non-est and void ab initio. This conclusion draws
support from the Judgment of this Court in the case of Haridwar
Singh Vs. Bagun Sambrui & ors (1973) 3 SCC 889. This Court
in the said case was dealing with the Business Rules of the
State Of Bihar framed under Article 166 (3) of the Constitution
8 of India and the observations of this Court on the issue apply
to the case on hand in all force. This Court observed:

" 14. Where a prescription relates to performance of a
public duty and invalidate acts done in neglect of them
would work serious general inconvenience or injustice to
c persons who have no control over those entrusted with the
duty, such prescription is generally understood as mere
instruction for the guidance of those upon whe>m the duty
is imposed.

D 15. Where however, a power of authority is conferred with
a direction that certain regulation or formality shall be
complied with, it seems neither unjust nor incorrect to exact
a rigorous observance of it as essential to the acquisition
of the right or authority.
E 16. Further, Rule 10(2) makes it clear that where prior
consultation with the Finance Department is required for
a proposal, and the department on consultation does not
agree to the proposal, the department originating the
proposal can take no further action on the proposal. The
F Cabinet alone would be competent to take a decision.
When we see that the disagreement of the Finance
Department with 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
G 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 nave
H no difficulty in holding that the Business Rules framed under the
M.R.F. LTD. ETC. v. MANOHAR PARRIKAR AND 1141
ORS. [H.L. DATTU, J.]

Provisions of Article 166 (3) of the Constitution are mandatory A
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 8
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 with 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 C
respondent's motion in the State Assembly for a Calling
Attention Notice evidently moved the State Government to
evolve a Scheme for grant of rebate of 25% for the period
between 1.10.1991 to 31.03.1995. The Power Minister
therefore, on 08.07.1995 called upon the Chief Electrical D
Engineer to formulate such a scheme who prepared accordingly
a note regarding the proposed scheme. Since the earlier
Notification was rescinded by the Nodfication dated
31.03.1995, a clarification was sought from the Law
Department on the extension of the period of rebate of 25%. E
On 25.08.1995, a note was put up by the Law Department
indicating that the 25% rebate would be available only for the
period between 01.10.1991to31.03.1995 and industrial units
supplied with power on/or after 31.03.1995 would not be entitled
for the same. On 14.02.1996, the Chief Electrical Engineer F
submitted a note containing a proposal to amend the rebate
notification requesting to extend the benefit of the rebate of
25% to Extra High Tension consumers and sought approval
thereof. The said draft when referred to the Law Department
for its opinion, it was opined thereon that it was legally G
impermissible to give retrospective effect to the proposed
Notification. However, though the said amendment was
approved by the then power minister, the same was not given
effect to in view of the elections scheduled on 02.05.1996. On
03.05.1996, the Power Minister passed an order to issue the H
1142 · SUPREME COURT REPORTS [2010) 5 S.C.R.

A amendment Notification as by then the elections were over and
the notification dated 15.05.1996 was accordingly issued,
though the subject matter was never placed before the Council
of Ministers or the Chief Minister. The Notification was issued
solely on the directions of the Power Minister despite the
B opinion of the Law Secretary that retrospective effect to the
proposed amendment could not be given as it involved
additional class of consumers of power, which is in violation of
the Business Rules of Government of Goa. Therefore the said
Notification is unsustainable and the High Court has rightly held
c it be non-est and as void ab initio.
65. The Power Department once again took up the subject
of reintroduction of 25% of rebate in power tariff at the instance
of the Industries Department and in view of the continued
demands from the Industrial Units for such a rebate. This was
D considered by the Power department and proposal therefor was
called from the 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
E 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 with the substitution
F of words "all industrial units who apply for availing power on or
after 1.10.1991" with 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
G to be given on tariff as per Notification dated 27 .06.1988. As
per the decision/approval of the Power Minister, the Notific~tion
dated 1.08.1996 came to be issued without there being any
consultation with the Council of Ministers or without the
proposal being placed before it or the Chief Minister or without
H the consultation with the Finance Department, though the draft
M.R.F. LTD. ETC. v. MANOHAR PARRIKAR AND 1143
ORS. [H.L. DATTU, J.]

of the notification was referred to the Law Department before A
its issuance.

66. It is also to be noted that by the Notification dated
01.08.1996 the State Government intended to re-introduce the
benefit of 25% rebate in power tariff. If the State Government
8
as a policy decision desired to reintroduce the said rebate, it
was imperative that the said decision complied with the
requirement of a Government decision and that it did not
remain a Departmental Order or Instruction. The High Court has
recorded after verifying the notes on record that the re-
introduction of rebate was initiated at the instance of Industries C
Department and that the proposal for re-introduction attracted
the provisions of Rules 9 & 1O of the Business Rules and it did
not seek the concurrence of the Finance Department. From the
file produced before it the High Court has found that the
decision was finalized by the Power Minister at his level without D
any reference to the Council of Ministers or the Chief Minister.
The High Court has also referred to the Statement in writing
given by the Chief Minister to the Investigating Officer during
the course of investigation launched pursuant to the complaint
given by the 1st respondent, that the Power Minister at no point E
of time had placed the proposal regarding decisions dated
15.5.1996 and 1.8.1996. This apart, from the records the High
Court finds that the agency to certify the eligibility of industrial
units for concessional tariff was yet to be identified and the
issue whether the rebate for the period between 01.10.1991
to 31.03.1995 was to be made available as per the Notification
dated 27.6.1988 or with reference to the tariff prevailing from
time to time. The Note dated 8.7.1996 is referred to by the High
Court. The High Court also refers to the reply of the Electrical
Engineer dated 10.7.1996 wherein it was clarified that only the G
prospective industrial consumers who has applied and availed
power supply on or after 1.10.1991 were eligible for
concession. From the note of the Commissioner and Secretary,
Department of Power dated 30.7.1996 the High Court records
that the certification/ verification ofthe industrial units could be H
1144 SUPREME COURT REPORTS [2010) 5 S.C.R.

A done by the Electricity Department as the concession was to
be extended by the said department to the consumers. The
said note refers to the meetings held in the chamber of Minister
of Power. The Note also mentions about a constitution of a
Screening Committee consisting of the Secretary of Ministry
B 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
c 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 de<;:isions.
D 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
E suggested by him on 30. 7.1996 which in our opinion are in
violation of the Business Rules.
67. The High Court has perused the files relating to the
issue and from them it has noticed that the file was forwarded
F to the Development Commissioner on or about 17.03.1998 as
they were required for preparation of reply to a question in the
Assembly and the Commissioner on 25.03.1998 submitted a
note referring to the complaint filed by 1st respondent herein
alleging illegalities and corruption in the matter of grant of
G rebate. The complaint of the 1st respondent was about the
amendment of the Notification dated 31.09.1991 which had
been rescinded by the Notification dated 31.3.1995 and he had
alleged that the amendment was made with a mala fide
intention of including a specific category of consumer and the
H amending notification had led to manipulation of records to the
M.R.F. LTD. ETC. v. MANOHAR PARRIKAR AND 1145
ORS. rH.L. DATTU, J.]

extent that some people had attempted to become A
beneficiaries of the Scheme within the notified period of
01.10.1991 and 31.03.1995. The note of the Commissioner
raised certain issues relating to grant of rebate to industrial units
after 31.03.1995. As per the objections raised in the note the
cases of units which had applied for power but could not be B
supplied with power by 31.03.1995 were to be referred to the
State Government. However, it was later decided to leave it to
the Chief Electrical Engineer to allow release of said subsidy
to all such units. The Note of the Commissioner had also raised
an issue touching upon the number of industrial units entitled c
to subsidy and the liability per month on that count and fixed
the same at Rs 80 lakhs per month and opined that the total
amount of the subsidy by way of adjustment of bills would be
in excess of Rs. 50 Crores. Having regard to these aspects
the note suggested suspension of the rebate scheme D
immediately until the legal issues were sorted. out. On
03.04.1998, the Joint Law Secretary gave his clarification after
examining the matter in the light of the provisions of the
Electricity Act and opined that a Cabinet Decision was
necessary for suspension of the rebate scheme and that before
E
the notification dated 01.08.1996 was issued it required a
decision of the cabinet and the concurrence of the Finance
Department as it fell within the meaning of a policy decision
involving financial implications. The note in conclusion said that
the Notification dated 01.08.1996 was not in accordance with
law and this conclusion was agreed to by the Law Secretary. F
The Development 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 G
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 H
1146 SUPREME COURT -REPORTS [2010] 5 S.C.R.

A 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
s the ben~fit 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
c realized the legal hurdles in continuing with the rebate schem~
on the basis of the Notification dated 01.08.1996. We fail to
understand as to why the State Government did not bring these
facts before this Court or the High Court in the earlier round of
litigation where its power to withdraw the subsidy in exercise
D of its power under Section 21 of the General Clausel) Act was.
upheld. Instead it chose to plead financial crunch faced by the
State Government as the reason for withdrawal of rebate. It is
further to be noted with regard to the Notification dated
01.08.1996, that it re-introduced the benefit of rebate on tariff
E 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
F 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
G 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 Rs. 8 crores in
excess as compared to the benefit available under the
H Notification of 1991 and the total amount of rebate would have
M.R.F. LTD. ETC. v. MANOHAR PARRIKAR AND 1147
ORS. [H.L. DATTU, J.]

been more than 30 crores had the benefit as made available A
by the 1996 Notification been continued.
68. 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 fram'ed by the State
B
Government under the provisions of Article 166(3) of the
Constitution of India. In the case on hand, as have been noticed
by us arid the High Court, the decisions leading to the
notifications do not comply with 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 C
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 initlo D
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 E
clarificatory and that it did not create any extra financial liability
on the State Government requiring approval of the Cabinet in
compliance with the-Business Rules before it was brought into
force. In our opinion the said Notification cannot be treated as
mere clarificatory. It is a notification issued purportedly in terms
F
of a Government decision. It was a rlecision 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 G
authentication. Nevertheless mere authentication as required
under Article 166(2) of the Constitution did not make it a ,
government decision in law nor would it validate a decision
which is void ab initio. The validity of the notification will have
to be tested with reference to the constitutional provisions and H
1148 . Sl,JPREME COURT REPORTS [2010] 5 S.C.R.

A Business rules and not by their form or substance. Therefore,
this contention of the appellants is liable to be rejected.

70. The learned senior counsel Shri F.S. Nariman
submitted that the doctrine of indoor management drawn from
. private law would apply analogously in the facts and
8
circumstances of this case. In response to this submission, the
learned senior counsel Dr. Rajeev Dhavan would submit that
the concept of private law is not readily applicable in public law.
It is further submitted that often private law and public law
concepts are similar in name and text but needs to be
C differentiated. Reference is made to the observations of this
Court in Shrisht Ohawan (Smt.) Vs. Shaw Bros. (1992) 1 SCC
534, wherein it is observed:
"20 ..... But fraud in public law is not the same as fraud in
D private law. Nor can. the ingredients which establish fraud
in commercial transaction be of assistance in determining
fraud in Administrative Law. It has been aptly observed by
Lord Bridge in Khawaja that it is dangerous to introduce
maxims of common law as to effect of fraud while
E determining fraud in relation to statutory law."

71. The doctrine of indoor management is als.o known as
the Turquand rule after the ca,se of Royal British Bank v.
Turquand, [1856] 6 E. & B. 327. In this case, the directors of
a company had issued a bond to Turquand. They had the power
F under the articles to issue such bond provided they were
authorized by a resolution passed by the shareholders at a
general meeting of the company. But no such resolution was
passed by the company. It was held that Turquand could recover
the amount of the bond from the company on the ground that
G he was entitled to assume that the resolution was passed. 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
H know that the constitution of the company rendered a particular
M.R.F. LTD. ETC. v. MANOHAR PARRIKAR AND 1149
ORS. [H.L. DATTU, J.]

act or a particular delegation of authority ultra vires. The doctrine A
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 dee1ling
with the company are entitled to presume that infernal
requirements prescribed in memorandum and articles have B
been properly observed. Therefore doctrine of indoor
management protects outsiders dealing or contracting with a
company, whereas doctrine of constructive notice protects the
insiders of a company or corporation against dealings with the
outsiders. However suspicion of irregularity has been widely c
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 D
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 E
found to have been such as to put the plaintiffs on inquiry. To
this effect Lord Justice Sargant held:-

"Cases where the question has been as to the exact
formalities observed when the seal of a company has F
been affixed, such as Royal British Bank v. Turquand, 6
E. & B. 327, or the County of Gloucester Blank v. Rudry
Merthyr, &c., Co., (1895] 1 Ch 629, are quite
distinguishable from the present case. In re Fireproof
Doors, Ltd., sup., tends rather against than in favour of the G
plaintiffs, since if a single director has as towards third
parties the authority now contended for, the whole of the
elaborate investigation of the facts in that case was entirely
unnecessary. Perhaps the nearest approach to the present
case is to be found in Biggerstaff v. Rowlatt's Wharf,
H
1150 SUPREME COURT REPORTS [2010] 5 S.C.R.

A [1896] 2 Ch. 93. But there the agent whose authority was
relied on had been acting to the knowledge of the company
as a managing director, and the act done was one within
the ordinary ambit of the powers of a managing director
in the transaction of the company's affairs. It is, I think, clear
B that the transaction there would not have been supported
had it not been in this ordinary course or had the agent
been acting merely as one of the ordinary directors of the
company. I know of no case in which an ordinary director,
acting without authority in fact, has been held capable of
binding a company by a contract with a third party, merely
c on the ground that that third party assumed that the director
had been given authority by the Board to make the
contract. A limitation of the right to make such an
assumption is expressed in Buckley on the Companies
Acts, 10th Edition, at p. 175, in the following concise
D words: - And the principle does not apply to the case
where an agent of the company has done something
beyond any authority which was given to him, or which he
was held out as having."

E 73. This exception to the doctrine of indoor management
has been subsequently adopted in many Indian cases. They are
B. Anand Behari Lal v. Dinshaw and Co. (Bankers) Ltd, AIR
1942 Oudh 417 and Abdul Rehman Khan & Anr. v. Muffasal
Bank Ltd. and Ors, AIR 1926 All 497. Applying the exception
F to the present scenario, there is sufficient doubt with regard to
the conduct of the Power Minister in issuing the Notifications
dated 15.5.1996 and 01.08.1996. Therefore there is definite
suspicion of irregularity which renders the doctrine of indoor
management inapplicable to the present case.
G 74. It was 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
H dismissed the writ petition filed by way of public interest as
M.R.F. LTD. ETC. v. MANOHAR PARRIKAR AND 1151
ORS. [H.L. DATTU, J.]

having become infructuous. This issue need not detain us for A
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 B
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 with 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 with the order C
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 issue of these two
Notifications being void ab initio for want of compliance with D
the provisions of the Business Rules framed under Article
166(3) of the Constitution of India, the High Court ought to have
rejected the plea of the State Government that the Notifications
were illegal or were in violation of the Rules of Business and
dismissed the Writ Petition on the principles of res judicata, E
Doctrine of Estoppel and the principles embodied in Order II
Rule 2 of the Code of Civil Procedure. It was urged that the
State not having raised this at any point of time before any court
should not be allowed to do so. We do not find any merit in
these contentions. As noticed by us earlier in the judgment, the F
issue regarding the validity or legality of the Notifications dated
15.5.1996 and 1.8.1996 was never raised in the earlier batch
of writ petitions before the High Court and the High Court never
had an opportunity or occasion to look into, consider and
pronounce upon the validity of the same with reference to the G
Business Rules framed under Article 166 (3) of the Constitution.
These principles pressed into service by the appellants cannot
operate against the State Government merely because the
State did not agitate either before the High Court or this Court
the legality or validity of these notification in the earlier round H
1152 SUPREME COURT REPORTS [2010] 5 S.C.R.

A of litigation when it had an occasion to do so and the State
Government cannot be deemed to have accepted the legality
of the Notification and waived its objection or challenge thereto.
The Doctrine of Estoppel therefore has no application at all
more so, in view of the illegality the notifications dated
B 15.05.1996 and 01.08.1996 suffer from in view of their non-
compliance with the provisions of the Business Rules. 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
C 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 aga,inst him. Further the
0 , 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
E 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.

F 76. Before parting with these appeals, we make it clear
that the observations made by us in the course of our judgment
is only for the purpose of disposing of these appeals and shall
not ,be treated as an expression on the conduct of the then the
Power Minister.
G 77. 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.

H R.P. Appeals dismissed.