Holding

An order passed in a judicial proceeding, such as the ONGC‑1 decision, cannot be characterized as administrative and does not bar the filing of a suit.

Summary

Respondent No. I (Allahabad Bank) instituted a suit against appellant Punjab & Sind Bank for recovery of a large sum. The appellant moved to dismiss the suit, contending that the Supreme Court's directives in the ONGC‑1 case required disputes involving the Government or its undertakings to be referred first to an in‑house committee, a step that was not taken. The Calcutta High Court single judge rejected this ground, and the Division Bench affirmed, further holding that the ONGC‑1 decision was of an administrative nature and could effectively emasculate the judiciary. On appeal, the Supreme Court held that the ONGC‑1 order is a judicial pronouncement, not an administrative act, and cannot bar a party’s right to sue. Consequently, the Division Bench judgment was set aside and the matter remitted to the High Court for fresh consideration, with the appeal allowed.

Issues considered

Whether the directives in the ONGC‑1 case render a suit inadmissible unless the parties first approach the prescribed in‑house committee.
Whether the ONGC‑1 order is of an administrative nature and can pre‑empt judicial adjudication.

Subjects

civil proceduregovernment undertakingsin‑house committeeONGC caseadministrative vs judicial orderdismissal of suitseparation of powers

Judgment

-- PUNJAB & SINO BANK
v.
A
ALLAHABAD BANK AND ANR.

MARCH 28, 2006

[ARIJIT PASAYA T AND TARUN CHATTERJEE, JJ.] B

Practice and Procedure-Civil dispute between banks-Dismissal of
suit sought by one bank on the ground that procedure indicated by Supreme
Court in ONGC-1 case that when parties are Government or its Undertakings,
dispute is to be resolved before in-house committee not followed-High C
Court holding that decision in ONGC-1 case was administrative in nature
and has force to emasculate judiciary-On appeal, held: Order passed in
judicial proceeding cannot be described to be administrative in nature-
Thus, order of High Court set aside and matter remitted back to it.

Respondent no.I-Bank filed suit for recovery and other reliefs
D
against the appellant-Bank. Appellant-Bank filed application for dismissal
of the suit on the ground that the procedure indicated by this Court in Oi/
and Natural Gas Commission-! case* that when parties are Government or
its Undertakings dispute should be resolved before in-house Committee, were
not followed. Single Judge of High Court held that the decision has to be read E
in the context in which it was passed and this Court never intended to
extinguish the right to sue. Division Bench upheld the order with an additional
view that the decision in the ONGC-1 case is itself of an administrative nature
and has force to emasculate the judiciary. Hence the present appeals.

Allowing the appeals and remitting the matters to High Court, the Court F
HELD: The view expressed by the Division Bench of the High Court
that the decision in the ONGC-1 case is itself of an administrative nature and
has force to emasculate the judiciary, is confusing and patently shows that
the ratio of the various decisions has not been understood in the proper G
perspective. To say that the decision in the ONGC-1 case was of an
administrative nature though a judicial order, shows non-application of mind.
Any order passed in a judicial proceeding, (much less an order passed by
this Court) can by no stretch of imagination be described as one of
"administrative nature". Therefore, the judgment of the Division Bench is
489 H
490 SUPREME COURT REPORTS [2006) 3 S.C.R.

A set aside and the matters are remitted back for fresh consideration.
(496-B-C; C-EI

*Oil and Natural Gas Commission and Anr. v. Collector of Central
Excise, (1992( Supp. 2 SCC 432; Oil and Natural Gas Commission v. C.C.£.
(1995( Supp. 4 SCC 541; Oil and Natural Gas Commission v. C.C.£., (2004(
B 6 SCC 437; Chief Conservator of Forest v. Collector, (2003( 3 SCC 472;
Mahanagar Telephone Nigam Ltd. v. Chairman, Central Board, Direct Taxes
and Anr., (20041 6 SCC 431, distinguished.

U.P.S.E.B. and Anr. v. Sant Kabir Sahakari Katai Mills Ltd., (20051 7
c sec 576, referred to.
CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 9688-9689/
2003.

From the Final Judgment and Order dated 25.6.2003 of the High Court
D of Calcutta in G.A. No. 2162/2002 in APOT No. 809/2002 arising out of Suit
No. 60/1999.

Arun K. Sinha and G.S. Sistani for the Appellant.

C. Mukund, Bijoy Kumar Jain and Mrs. V.D. Khanna for the
E Respondents.
The Judgment of the Court was delivered by

ARIJIT PASAYAT, J. Challenge in these appeals is to the judgment
delivered by a Division Bench of the Calcutta High Court, in an appeal filed
by the appellant, the defendant in the suit filed by respondent no. I-Bank.
F Learned Single Judge in the said suit held that there was no need to adopt
procedure indicated by this Court in Oil and Natural Gas Commission and
Anr. v. Collector of Central Excise, (1992] Supp. 2 SCC 432 (described
hereinafter case as ONGC-1 Case). The Division Bench affirmed the view of
learned Single Judge. The correctness of the view expressed by the learned
G Single Judge and the Division Bench forms the subject-matter of challenge
in this appeal.

The suit was filed by the respondent no. I-Bank against the appellant-
Bank along with 11 other defendants with the following prayers:-

H (a) Declaration that the Banker's cheque copy whereof is annexed
PUNJAB & SIND BANK v. ALLAHABAD BANK [PASA YAT, J.) 491

Marked A hereto is void and not binding on the plaintiff. A
(b) Decree of Rs. 5,62,66,671 against the defendants jointly and/or
severally and/or such of them for such amount as this Hon'ble
Court may deem fit and proper.

(c) Decree of Rs. 5,62,66,67 l against the defendant no. I together B
with interest.

(d) Interest including interim interest as claimed in paragraph 29;

( e) Receiver;

(t) Costs;

(g) Further any other reliefs.
c
An application was filed by the appellant-Bank for dismissal of the suit
on the ground that the modalities indicated in ONGC-1 case (supra) were not
followed. Learned Single Judge held that the decision has to be read in the
context which was passed. This Court never intended to extinguish the right D
to sue. Intention was to avoid litigation when the parties are government or
its undertakings.

The order was challenged before the Division Bench which, inter-alia,
upheld view of learned Single Judge with some additional reasons. We shall
deal with the reasoning in detail later. E
The view. in ONGC-1 case (supra) was further elaborated in Oil and
Natural Gas Commission v. C.C.E., (1995] Supp. 4 SCC 54I (For sake of
convenience described as ONGC-II). It was noted in Oil and Natural Gas
Commission v. C.C.E., (2004] 6 SCC 437 (for convenience described as ONGC-
III) that some doubts and problems arose in the working out of the F
arrangements in terms of the order of this Court dated l l.I0.1991 ONGC-11
case (supra). It was noted in ONGC-111 case (supra) as follows:

"There are some doubts and problems that have arisen in the working
out of these arrangements which require to be clarified and some
creases ironed out. Some doubts persist as to the precise import and G
implications of the words "and recourse to litigation should be
avoided". It is clear that the order of this Court is not to the effect that
nor can that be done-so far as the Union of India and its statutory
corporations are concerned, their statutory remedies are effaced.
Indeed, the purpose of the constitution of the High-powered-Committee H
492 SUPREME COURT REPORTS [2006] 3 S.C.R.

A was not to take away those remedies. The relevant portion of the
order reads: (SCC pp. 541-42 para 3)

"3. We direct that the Government of India shall set up a committee
consisting of representatives from the Ministry of Industry, the
Bureau of Public Enterprises and the Ministry of Law, to monitor
B disputes between Ministry and Ministry of the Government of
India, Ministry and public sector undertakings of the Government
of India and public sector undertakings in between themselves

c
to ensure that no litigation comes to court or to a tribunal without
the matter having been first examined by the Committee and its
clearance for litigation. The Government may include a
representative of the Ministry concerned in a specific case and
-
one from the Ministry of Finance in the Committee. Senior officers
only should be nominated so that the Committee would function
with status, control and discipline."

It is abundantly clear that the machinery contemplated is only to
D ensure that no litigation comes to court without the parties having
had an opportunity of conciliation before an in-house committee."

The matter was again examined in the case of Chief Conservator of
Forest v. Collector. [2003] 3 SCC 472. In Para 14 and 15 it was noted as
E follows:
"Under the scheme of the Constitution, Article 131 confers original
jurisdiction on the Supreme Court in regard to a dispute between two
States of the Union of India or between one or more States and the
Union of India. It was not contemplated by the framers of the
p Constitution or the C.P.C. that two departments of a State or the
Union of India will fight a litigation in a court of law. It is neither
appropriate nor permissible for two departments of a State or the
Union of India to fight litigation in a court of law. Indeed, such a
course cannot but be detrimental to the public interest as it also
entails avoidable wastage of public money and time. Various
G departments of the Government are its limbs and, therefore, they
must act in co-ordination and not in confrontation. Filing of a writ
petition by one department against the other by invoking the
extraordinary jurisdiction of the High Court is not only against the
propriety and polity as it smacks of indiscipline but is also contrary
H to the basic concept of law which requires that for suing or being
PUNJAB & SINO BANK v. ALLAHABAD BANK [PASA YAT, J.) 493
sued, there must be either a natural or a juristic person. The States/ A
Union of India must evolve a mechanism to set at rest all inter-
departmental controversies at the level of the Government and such
matters should not be carried to a court of law for resolution of the
controversy. In the case of disputes between public sector undertakings
and Union of India, this Court in Oil and Natural Gas Commission B
v. Collector of Central Excise, [1992] Suppl. 2 SCC 432 called upon
the Cabinet Secretary to handle such matters. In Oil and Natural Gas
Commission & Anr. v. Collector of Central Excise, [1995] Suppl. 4
SCC 541, this Court directed the Central Government to set up a
Committee consisting of representatives from the Ministry oflndustry,

- the Bureau of Public Enterprises and the Ministry of Law, to monitor C
dispute between Ministry and Ministry of the Government of India,
Ministry and public sector undertakings of the Government of India
and public sector undertakings in between themselves, to ensure that
no litigation comes to court or to a Tribunal without the matter having
been first examined by the Committee and its clearance for litigation.
The Government may include a representative of the Ministry D
concerned in a specific case and one from the Ministry of Finance in
the Committee. Senior officers only should be nominated so that the
Committee would function with status, control and discipline.

The facts of this appeal, noticed above, make out a strong case
that there is felt need of setting up of similar committees by the State E
Government also to resolve the controversy arising between various
departments of the State or the State and any of its undertakings. It
would be appropriate for the State Governments to set up a Committee
consisting of the. Chief Secretary of the State, the Secretaries of the
concerned departments, the Secretary of Law and where financial F
commitments are involved, the Secretary of Finance. The decision
taken by such a committee shall be binding on all the departments
concerned and shall be the stand of the Government."

The directions as noted above were quoted in Mahanagar Telephone
Nigam Ltd. v. Chairman, Central Board, Direct Taxes and Anr., [2004] 6 G
sec 431 and were adopted in paragraph 8. It was noted as follows:

"Undoubtedly, the right to enforce a right in a court of law cannot
be effaced. However, it must be remembered that courts are
overburdened with a large number of cases. The majority of such
H
494 SUPREME COURT REPORTS [20061 3 S.C.R.

A cases pertain to Government Departments and/or public sector
undertakings. As is stated in Chief Conservator of Forests' case
[2003] 3 sec 472 it was not contemplated by the framers of the
Constitution or the Civil Procedure Code that two departments of a
State or Union of India and/or a department of the Government and
a public sector undertaking fight a litigation in a court of law. Such
B a course is detrimental to public interest as it entails avoidable wastage
of public money and time. These are all limbs of the Government and
must act in co-ordination and not confrontation. The mechanism set
up by this court is not, as suggested by Mr. Andhyarujina, only to
conciliate between Government Departments. It is also set up for
c purposes of ensuring that frivolous disputes do not come before
-
courts without clearance from the High Powered Committee. If it can,
the High Powered Committee will resolve the dispute. If the dispute
is not resolved the Committee would -undoubtedly give clearance.
However, there could also be frivolous litigation proposed by a
department of the Government or a public sector undertaking. This
D could be prevented by the High Powered Committee. In such cases
there is no question of resolving the dispute. The Committee only has
to refuse pern1ission to litigate. No right of the Department/public
sector undertaking is affected in such a case. The litigation being of
a frivolous nature must not be brought to court. To be remembered
E that in almost all cases one or the other party will not be happy with
the decision of the High Powered Committee. The dissatisfied party
will always claim that its rights are affected, when in fact, no right is
affected. The Committee is constituted of highly placed officers of
the Government, who do not have an interest in the dispute, it is thus
expected that their decision will be fair and honest. Even if the
F Department/public sector undertaking finds the decision unpalatable,
discipline requires that they abide by it. Otherwise the whole purpose
of this exercise will be lost and every party against whom the decision
is given will claim that they have been wronged and that their rights
are affected. This should not be allowed to be done."
G The ONGC I to Ill cases (supra), Chief Conservator's case (supra) and
Mahanagar Telephone's case (supra) deal with disputes relating to Central
Government, State Government and Public Sector Undertakings. They have
no application to the facts of these cases as the High Court has not indicated
any reason for its abrupt conclusion that the writ petitioners are Public Sector
H Undertakings. In the absence of a factual determination in that regard, the
PUNJAB & SIND BANK v. ALLAHABAD BANK [PASAYAT, J.] 495

· decisions can have no application. A
These aspects were recently highlighted in U.P.S.E.B. and Anr. v. Sant
Kabir Sahakari Katai Mills Ltd., (2005] 7 SCC 576.

The Division Bench of the High Court did not adopt the modalities
indicated by this Court in the various decisions referred to above with the · B
following reasoning:

"Mr. Mitra supported the judgment of the Hon 'ble Mr. Justice Dilip
Kumar Seth delivered in the court below and, with respect; we do not
find anything to differ from His Lordship's views in this matter. We
would, however, have to add only one point thereto which we consider C
to be the deciding factor.

The respondent/plaintiff here has alleged that the Punjab & Sind
Bank (no doubt vicariously, and because of persons working of the
Bank) acted fraudulently, or at least negligently, and sent for clearing D
a cheque which was worthless, and thus brought into circulation
Rs.3. I 0 crore which should not have been brought into. circulation at
all.

These allegations have not yet been pronounced upon by any
Civil Court.
E
If the above decision of the Government Committee for settlement
of disputes is binding on the High Court, then and in that event, the
High ~ourt is not entitled to try the suit, and must exonerate the
Punjab & Sind Bank (and therefore indirectly all its tlien concerned
employees) of both fraud and negligence. F
Mr. Chatterjee submitted that one is not remedy Jess, and in case
the decision is not reasonable, it could be challenged in appropriate
writ proceedings.

But the point which falls for decision is, can a Government G
Committee, which is only a part of the administrative machinery of
the Union of India, stop by its administrative decision, the judicial
process of adjudication, which is the job of that wing ofthe Union of
India, which is known as the judiciary.

We are of the opinion that the dicta in the ONGC's case, if given H
their interned meaning, would, have the above effect, of impeding the
496 SUPREME COURT REPORTS [2006) 3 S.C.R.

A judicial process by having recourse to decision of an adm.inistrative
body, as the first and permanent deciding body.

We are of the opinion, and we scy this with the greatest of
respect, which is at our command. that this is wholly unconstitutional.
It is not necessary to enlarge on a matter so fundamental because the
B separation of the legislature, the judiciary and the executive is more
basis than anything else in our Constitution as it stands today. We are
accordingly of the opinion, and this is again said with as much respect
before, that the decision in the ONGC's case is itself of an
tidministrative nature ·and has the force to emasculate the judiciary."
c (Underlined for emphasis)

To say the least the view expressed by the Division Bench of the High
Court is confusing and patently shows that the ratio of the various decisions
has not been understood in the proper perspective. To say that the decision
in the ONGC-I case (supra) was of an administrative nature though a judicial
D
order shows non-application of mind. Any order passed in a judicial
proceeding, (much less an order passed by this Court) can by no stretch of
imagination be described as one of "administrative nature".

In the circumstances we set aside the judgment of the Division Bench,
E remit the matter to the High Court for fresh consideration keeping in view the
modalities and principles set out by this Court in the various decisions referred
to above.

Appeals are allowed to the aforesaid extent with no order as to costs.

F N.J. Appeals allowed.