- THE INDIAN LEGAL SYSTEM
- The Indian legal system is the product of It is rooted in our soil; nurtured and nourished by our culture, languages and traditions; fostered and sharpened by our genius and quest for social justice; reinforced by history and heritage inspired and strengthened by English Law guided and enriched by concepts and precepts of justice, equity and good conscience which are indeed the hallmarks of the common law.
- DOCTRINE OF BINDING PRECEDENT :
- The doctrine of binding precedent has merit of promoting certainty and consistency in judicial decisions and enables an organic development of law ‘besides providing assurance to an individual as to the consequence of transaction, forming part of his daily UOI v. Raghubir Sing 178 ITR 548 (SC)
- As per the doctrine of precedent, all lower Courts, Tribunals and authorities exercising judicial or quasi-judicial functions are bound by the decisions of the High Court within whose territorial jurisdiction these Courts, Tribunals & authorities functions. CIT v. Thana Electricity Supply Ltd. (1994) 206 ITR 727 (Bom).
Consolidated Pneumatic Tool Co. (India) Ltd. v. CIT (1994) 209 ITR 277 (Bom).
In the case of Shah Faesal (Dr.) v. UOI (2020) 4 SCC 727 (5-Judge Bench) the Hon Court held that the doctrine of precedents and stare decisis are the core values of our legal system. They form the tools which further the goal of certainty, stability and continuity in our legal system. Arguably, Judges owe a duty to the concept of certainty of law, therefore they justify their holdings by relying upon the established tenets of law. Court also held that the decision rendered by a coordinate Bench is binding on the subsequent Benches of equal or lesser strength. Followed National Insurance Co. Ltd v. Pranay Sethi (2017) 16 SCC 680.
- Doctrine OF STARE DECISIS
- ‘Stare decisis’ is a Latin phrase which means ‘to stand by decided cases’ or ‘to uphold precedents’. Doctrine of stare decisis is a general maxim which states that when a point of law has been decided, it takes the form of a precedent which is to be followed subsequently and should not normally be departed
By virtue of Article 141 of the Constitution of India, the judgments pronounced by the Supreme Court have the force of law and are binding on all the Courts in India. However, the Supreme Court itself is free to review its earlier decision and depart from it if the situation so warrants.
- The Madras High Court in Peirce Leslie & v. CIT  216 ITR 176 (Mad.) observed that the doctrine of stare decisis is one of the policy grounded on the theory that security and certainty require that accepted and established legal principles, under which rights may accrue, be recognised and followed, though later found to be not legally sound, but whether a previous holding of the Court shall be adhered to or modified, or over-ruled, is within the Court’s discretion under the circumstances of a case before it.
Income Tax Act, being a Central Act of Parliament, uniformity of construction by the various High Courts should be followed unless there are overriding reasons for taking a divergent view.
- If the revenue has not challenged the correctness of the law laid down by the High Court and has accepted it in the case of one assessee then it is not open to the Revenue to challenge its correctness in the case of other assessee without just
- UOI Satish Panalal 249 ITR 221 (SC);
- UOI Kaumudini N. Dalal 249 ITR 219 (SC)
- CIT J. K. Charitable trust (2008) 308 ITR 161 (SC)
- Difference between “Res Judicata” and “Consistency Principle”
While “res judicate” does not apply to income-tax matters, the principles of consistency does. If the Revenue has accepted a practice and consistently applied and followed it, the Revenue is bound by it. The Revenue can change the practice only if there is a change in law or change in facts and not otherwise PCIT v. Quest Investment Advisors Pvt. Ltd, ITA no. 280 of 2016, dtd: 28/06/2018 (Bombay High Court)
Recently the Mumbai ITAT in case of The Municipal Co-op Bank Ltd., v. DCIT-1(3) (2) [ITA No.6512/Mum/2019 dt 23/5/2022] applied the principle of consistency and observed that “the principle of consistency is required to be maintained by the Revenue. Reliance in this regard is placed on the decision of the Hon’ble Supreme Court in the case of Radhasoami Satsang reported in 193 ITR 321(SC). The facts prevailing in earlier years and subsequent years are exactly identical to the facts in the year under consideration. Hence, we have no hesitation to hold that the receipts from members in the sum of Rs.2,09,32,478/- being amount received from members towards SGF as capital receipts not chargeable to tax.”
- The Supreme Court in Sakhi Union of India AIR 2004 SC 3566 at 3577 observed : “Stare decisis is a well known doctrine in legal jurisprudence. The doctrine of stare decisis, meaning to stand by decided cases, rests upon the principle that law by which men are governed should be fixed, definite and known, and that, when the law is declared by Court of competent jurisdiction authorized to construe it, such declaration is absence of palpable mistake or error, is itself evidence of the law until changed by competent authority. It requires that rules of law when clearly announced and established by a Court of last resort should not be disregarded and set aside but should be adhered to and followed. What it precludes is that where a principle of law has become established by a series of decisions, it is binding on the Courts and should be followed in similar cases. It is a whole-some doctrine which gives certainty to law and guides the people to mould their affairs in future”.
In case of Bajaj Auto Finance Ltd. v. CIT (2018) 404 ITR 564 (Bom.)(HC)
Interpretations given by High Courts and Tribunals cannot be ignored by the Assessing Officers.
- RATIO DECIDENDI
- Ratio decidendi is a Latin phrase meaning “the reason” or “the rationale for the decision”. The ratio decidendi is “the point in a case which determines the judgment” or “the principle which the case establishes”. In other words, ratio decidendi is a legal rule derived from, and consistent with, those parts of legal reasoning within a judgment on which the outcome of the case
- The substance of the above expression means the reasons given by the court or tribunal for deciding the issue and not every The judicial view on this subject is as under:
“The underlying principle of a judicial decision which forms its authoritative element for the future, is termed ratio decidendi. It is contrasted with an obiter dictum or that part of a judgment which consists of the expression of the Judges’s opinion on a point of law which is not directly raised by the issue between the litigants.” [Stephen Commentaries (Vol. I P. 11)]—referred to in CWT v. Dr. Karan Singh (1993) 200 ITR 614 (SC)
The expression ‘ratio decidendi’ means the reasons given by the court for deciding the issue before it. Where two reasons are given for arriving at a particular decision then, both reasons would form the ratio decidendi for the said decision and both reasons would be binding. Fibre Boards (P.) Ltd v. CIT( 2015) 376 ITR 596 ( SC)
- It is well settled that a decision as an authority for what it actually decides. What is of the essence in a decision is its ratio and not every observation found therein nor what logically follows from the various observations made therein… It would, therefore, be not profitable to extract a sentence here and there from the judgment and to build upon it because the essence of the decision is its ratio and not every observation found therein…. The enunciation of the reason or principle on which a question before a court has been decided is alone binding between the parties to it, but it, is the abstract ratio decidendi, ascertained on a consideration of the judgment in relation to the subject matter of the decision, which alone has the force of law [UOI v. Dhanwanti Devi (1996) 6 SCC 44]
At this juncture, would like to refer the decision of the Hon’ble apex court in CIT Sun Engineering Works (1992) 198 ITR (SC) wherein the court observed “while applying the decision to a later cases, the court must carefully try to ascertain the true principal laid down by the decision of the Supreme Court and not to pickout words or sentences from the Judgment divorced from the context of question under consideration by the court to support their reasoning.”
Thus, it is clear that it is the ratio of the decision which must be ascertained by the court/tribunal before applying the same.
- In case of Iskrareco Regent v. CIT (2011) 313 ITR 317 (Mad.)(High Court) it was held that Judgment cannot be read like a statute. Courts should not place reliance on decision without discussing factual situation involved in the said decision and how it would apply to the facts involved in the subsequent case. A ratio laid down by a higher forum should not be taken out context and construed like a statute.
- It is also well settled that the judgment of the Hon’ble Supreme Court or the High Court must be read as a whole and the observations from the judgment have to be considered in the light of the question, context and the facts of that It is neither desirable nor permissible to pick out a word or a sentence from the judgment of the Hon’ble apex Court, divorced from the context of the question under consideration and treat it to be the complete law laid down by the Hon’ble Court. It is also equally well settled that a decision is to be followed for what it actually decides and not necessarily for what logically follows from it.
ACIT v. Affection Investments Ltd. (2003) 80 TTJ 278 / (2004) 2 SOT 165 (Ahd.)(Trib.)
- BINDING NATURE OF ORDER OF ONE BENCH OF TRIBUNAL ON ANOTHER
- A decision of a Division Bench and Third Member Bench is binding on the Single Member A decision of a Special Bench is binding on all the Benches of the Tribunal. A decision of the Special Bench can be distinguished or disregarded if there is any contrary view of the jurisdictional High Court or of the Supreme Court. A co-ordinate Bench should follow the view of another co-ordinate Bench or else refer the matter to a larger Bench through the President.
- For the sake of uniformity, one Bench of the Tribunal is bound to follow the view expressed by another Bench of the Tribunal unless the earlier view is per incurious – CIT L.G. Ramamurthi 110 ITR 453 (Mad) ; CIT v. S. Devaraj 73 ITR 1 (Mad).
- Tribunal should not come to a conclusion totally contradictory to the conclusion reached by the earlier Bench of the Tribunal. Where a Bench differs from an earlier Bench, the matter should be referred to a larger Bench – CIT v. Goodlass Nerolac Paints Ltd. 188 ITR 1 (Bom). UOI v. Paras Laminates Pvt. Ltd. (1990) 186 ITR 722 (SC) ; Pradip Chandra Parija v. Pramod Chandra Patniak (2002) 254 ITR 99 (SC)
- One bench cannot differ from the view of another Co-ordinate Bench. Mercedes Benz India Pvt. Ltd. v. UOI (2010) 252 ELT 168 (Bom) ITO vs Baker Technical Services Pvt. Ltd. (2010) 125 ITD 1 (Mum)(TM)
- In case of Hatkesh Co-op Housing Society v. ACIT (Bom.)(HC);  243 Taxman 213 (Bombay) the court observed that that when an identical issue, which had earlier arisen before the Coordinate Bench of the Tribunal on identical facts and a view has been taken on the issue then judicial discipline would demand that a subsequent bench of the Tribunal hearing the same issue should follow the view taken by its earlier Coordinate Bench. No doubt this discipline is subject to the well settled exceptions of the earlier order being passed per incurim or sub silentio or in the meantime, there has been any change in law, either statutory or by virtue of judicial pronouncement. If the earlier order does not fall within the exception which affects its binding character before a coordinate bench of the Tribunal, then it has to follow it. However, if the Tribunal has a view different then the view taken by its Coordinate Bench on an identical issue, then the order taking such a different view must record its reasons as to why it does not follow the earlier order of the Tribunal on an identical issue, which could only be on one of the well settled exceptions which affect the binding nature of the earlier order. It could also depart from the earlier view of the Tribunal if there is difference in facts from the earlier order of Coordinate Bench but the same must be recorded in the order. The impugned order is blissfully silent about the reason why it chooses to ignore the earlier decision of the Tribunal rendered after consideration of Sind Co. Op. Hsg. Society (Bom High court), and take a view contrary to that taken by its earlier Coordinate Bench. It is made clear that in case a subsequent bench of the Tribunal does not agree with the reasons indicated in a binding decision of a coordinate bench, then for reason to be recorded, it must request the President of the Tribunal to constitute a larger bench to decide the difference of view on the issue.
Non Consideration of decision citied of the Co-ordinate Bench amounts to mistake apparent on record as held in Honda Siel Power Products Ltd. v. CIT (2007) 295 ITR 466 (SC)
- Special Bench decision of three members should have precedence over Third Member
Oman International Bank 286 ITR 8 (AT) (SB). Third Member decision is like the decision of Special Bench should be followed in same manner.
BINDING NATURE OF ORDERS OF TRIBUNAL:
- The First Appellate Authority or the Assessing Officer are bound by the orders of the Even where the assessee or the department has pursued the matter in reference proceedings, it does not act as a kind of stay of operation of the order of the Tribunal.
- The Assessing Officer cannot ignore the decision taken by the Tribunal in favour of the assessee and take a contrary view – ITO v. Siemens India & another 156 ITR 11 (Bom). Bank of Baroda v. H.C. Shrivastava (2002) 256 ITR 385 (Bom).
- The Assessing Officer cannot refuse to follow the order passed by the Commissioner against the application u/s.132(11) on the ground that the Commissioner had no jurisdiction over the matter – Union of India Pradip Kumar Saraf & Others 207 ITR 679 (Cal), Sree Rajindra Mills Ltd. v. CIT (1970) 28 STC 483, Union of India v. Kamlakshi Finance Corpn. Ltd. 1992 AIR SC 711 (712).Sub-Inspector Rooplal & Anr. v. Ltd. Governor & Ors. (2000) 1 SCC 644.; Gammon India Ltd v. Commissioner of Customs (2011) 10 GSTR 134 (SC); Nirma Ltd
- Commissioner of Central Excise, Ahmedabad 2012 (276) ELT 283 (Trib.) (Ahd.)
- It is neither permissible nor legal for any Court and Tribunal to comment upon the decision of the Supreme Court/High Similarly, it is also not permissible for the Tribunal to comment upon the manner in which a particular decision was rendered by the Supreme Court/High Court. It is also not permissible for the Tribunal to sidetrack or/and ignore the decision of the High Court on the ground that it did not take into consideration a particular provision of law. If such an approach is resorted to by subordinate Courts/Tribunals, then it is held to be not in conformity with the law laid down by the Supreme Court. It was deprecated by the Supreme Court as being improper.
National Textile Corporation Ltd., v. CIT (2008) 338 ITR 371 / 5 DTR 117 (MP)(High Court)
- The Hon’ble Bombay High Court in CIT Thana Electricity Supply 206 ITR 727 (738-739) after considering various judgements of Supreme Court laid down the following propositions with regard to binding precedent :
- The law declared by the Supreme Court being binding on all courts in India, the decisions of the Supreme Court are binding on all courts, except, however, the Supreme Court itself which is free to review the same and depart from its earlier opinion if the situation so warrants. What is binding is, of course, the ratio of the decision and not every expression found
- The decision of the High Court are binding on the subordinate courts and authorities or Tribunals under its superintendence throughout the territories in relation to which it exercises It does not extend beyond its territorial jurisdiction.
- The position in regard to the binding nature of the decision of High court on different Benches of the same court may be summed up as follows:
- A Single judge of High Court is bound by the decision of another single judge or a Division Bench of the same High It would be judicial impropriety to ignore that decision. Judicial comity demand that a binding decision to which his attention had been drawn should neither be ignored nor overlooked. If he does not find himself in agreement with the same, the proper procedure is to direct the papers to be placed before the Chief Justice to enable him to constitute a larger bench to examine the question (see, Food Corporation of India v. Yadav Engineering & Contractor, AIR 1982 SC 1302).
- A Division Bench of High Court should follow the decision of another Division Bench of equal strength or a Full Bench of the same High If one division bench differs from another division bench of the same High Court, it has to refer and transfer the case to a large Bench.
- Where there are conflicting decision of courts of coordinate jurisdiction, the later decision is to be preferred if reached after full consideration of the earlier
- The decision of the High Court is binding precedent neither for another High Court nor for courts or Tribunal outside its own territorial It is well settled that the decision of a High Court will have the force of binding precedent only in the State or territories over which the Court has jurisdiction. In other States outside the territorial jurisdiction of that High Court it may, at best, have only persuasive effect. By no amount of stretching of the doctrine of stare decisis, can judgments of one High Court be given the status of a binding precedent so far as other High Courts or Courts or Tribunals within their territorial jurisdiction are concerned. Any such attempt will go counter to the very doctrine of stare decisis and also the various decisions of the Supreme Court which have interpreted the scope and ambit thereof. The fact that there in only one decision of any one High Court on a particular point or that a number of different High Courts have taken identical views in that regard is not at all relevant of that purpose. Whatever may be the conclusion, the decisions cannot have the force of binding precedent on other High Courts or on any subordinate courts or Tribunals within their jurisdiction. That status is reserved only for the decisions of the Supreme Court which are binding on all court s in the country by virtue of article 141 of the Constitution.
[CIT v. Thana Electricity Supply Ltd., (1994) 206 ITR 727, 7380-39 (Bom). Also see, Consolidated Pneumatic Tool Co. (India) Ltd. v. CIT. (1994) 209 ITR 277, 282 (Bom)].
- BINDING NATURE OF HIGH COURT DECISION :
- A High Court must not brush aside the binding precedent or the judgment of a co-ordinate Bench simply because some of the arguments were either not canvassed or if canvassed were not considered. The binding precedent can be ignored only if it is per incurium
CIT v. Impact Containers Pvt. Ltd. (2014) 367 ITR 346 (Bom.) (HC)
- It is clear that when there are conflicting judgements of the jurisdictional High Court, normally the latter judgement would prevail provided it has referred to the earlier decision and distinguished the However, if the earlier judgement is not referred to at all, and there are two conflicting judgements, it is open to the Tribunal to follow that judgement, the reasoning of which appeals to the Tribunal. Since both the jurisdictional High Court judgement are binding the Tribunal has to prefer one or the other judgment and in such a case it can prefer either of the two judgments. Amarsingh Yadav v. Santi Devi AIR (1987) Patna 191 and CIT v. Madhukant M. Mehta (1981) 132 ITR 159 (Guj).
- Tribunal has to follow the decision of the jurisdictional High Court without making any comment upon the said decision, it is not permissible for the Tribunal to sidetrack and / or ignore the decision of the jurisdictional High Court on the ground that it did not take into consideration a particular provision of Dy. CIT v. Gujarat Ambuja Cements Ltd. (2011) 57 DTR 179 (Mum.)(Trib.)
Department cannot reargue settled/ concluded issues :
In the case of PCIT v. JWC Logistics Park Pvt. Ltd (2018) 404 ITR 310 (Bom.)(HC) the Court has passed, strictures against Department’s Advocate for “most unreasonable attitude” of seeking to reargue settled concluded issues and not following the judicial discipline and law of precedents.
Also see CIT v. Dedicated Healthcare Services (TPA) India Pvt. Ltd. (2018) 408 ITR 36 (Bom.) (HC)
- FAILURE TO FOLLOW HIGH COURT ORDER – PRIMA FACIE AMOUNTS TO CONTEMPT OF:
- The Sales Tax Officer passed an order refusing to follow the judgment of Bombay High Court in CST v. Pee Textiles 26 VST 281 on the ground that the said judgment “is not accepted by the sales tax department and the department has appealed against the same”. On a writ petition filed by the assessee, the High Court has taken the view that as the said judgment in Pee Vee Textiles is not stayed “the refusal to follow and implement the judgment of this Court by the Sales Tax officer in our considered view prima facie amounts to contempt of this Court” Garware Polyester v. State of Maharashtra and Ors. Source : www.itatonline.org
- Not following Binding decision of High Court will amount to “Judicial Indiscipline”:
The ITAT passed an order in HDFC Bank Limited v. DCIT (2015) 155 ITD 765 (Mum)
(Trib) in which it held that the presumption laid down in CIT v. HDFC Bank Ltd (2014) 366 ITR 505 (Bom.) and CIT v. Reliance Utilities and Power Ltd (2009) 313 ITR 340 (Bom) that investments in tax-free securities must be deemed to have come out of own funds and (ii) Law laid down in CIT v. India Advantage Securities Ltd ( 2016) 380 ITR 471 (Bom) that s. 14A and Rule 8D does not apply to securities held as stock- in-trade cannot be applied as both (2015) propositions are contrary to Godrej & Boyce Mfg. Co Ltd v. Dy. CIT ( 2010) 328 ITR
81 (Bom). On a Writ Petition filed by the assesse the court held reversed the ITAT’s order on the ground that it is “Judicial Indiscipline” leading to complete chaos and anarchy in the administration of law. The court also held that, Tribunal to decide it afresh on its own merits and in accordance with law. However the Tribunal would scrupulously follow the decisions rendered by this Court wherein a view a has been taken on identical issues arising before it. It is not open to the Tribunal to disregard the binding decisions of this Court, the grounds indicated in the impugned order which are not at all sustainable. Unless the Tribunal follows this discipline, it would result in uncertainty of the law and confusion among the tax paying public as to what are their obligations under the Act. Besides opening the gates for arbitrary action in the administration of law, as each authority would then decide disregarding the binding precedents leading to complete chaos and anarchy in the administration of law. When the assessee have more interest free funds than interest bearing funds, presumption is that investment in tax free securities has been made from interest free funds hence no disallowance is permissible. (AY.2008-09)
HDFC Bank Ltd. v. DCIT (2016) 383 ITR 529 (Bom.)(HC) Editorial: Order of Tribunal in HDFC Bank v. Dy CIT (2015) 155 ITD 765/ 173 TTJ 810/ 130 DTR 21 (Mum)(Trib) is set aside.
- The law laid down by the High Court must be followed by all authorities and subordinate Tribunals and they cannot ignore it either in initiating proceedings or deciding the rights involved in such a If in spite of the earlier exposition of law by the High Court having been pointed out and attention being pointedly drawn to that legal position, proceedings are initiated, it must be held to be a wilful disregard of the law laid down by the High Court and would amount to civil contempt as defined in section 2(b) of the Contempt of Courts Act, 1971.
Kaira District Co-op. Milk Producers Union Ltd v. Dy. CIT (2016) 386 ITR 633 (Guj)(HC)
30. Binding order – Larger Bench – On Division Bench :
Similarly a Division bench of a High Court is fully bound by the view taken by a larger Bench of the Court, regardless of the fact that another High Court prefers a different view. (A.Ys. 2002-03 & 2003-04)
KLM Royal Dutch Airlines v. ADIT (2007) 292 ITR 49 (Delhi)(High Court)
- BINDING NATURE OF HIGH COURT DECISION ON OTHER HIGH COURT Although the judgments given by a High Court is not binding on another High Court(s), they hold persuasive A High Court when not following another High Court should record its dissent along with the reasons therefore. Pradip J. Mehta v. CIT (2008) 300 ITR 231 (SC)
- The decision of one High Court is not a binding precedent upon another High Court and at best can only have persuasive Humayun Suleman Merchant v. CCIT (2016) 387 ITR 421/ 242 Taxman 189/140 DTR 209 (Bom)(HC)
- The law laid down by the High Court is binding on all the State CIT v. Raghuvir Synthetics Ltd( 2017) 394 ITR 1 (SC)
- BINDING NATURE OF NON JURISDICTIONAL HIGH COURT ON TRIBUNAL
- In the absence of any contrary view, decisions of non jurisdictional High Court have to be followed by the
The Mumbai ITAT in case of ACIT v. Dish TV India Ltd. (2018) 194 TTJ 897 / 169 DTR
253 (Mum.)(Trib.) held that in Absence of any decision by jurisdictional High Court, decision of non-jurisdictional High Court which is favorable to the assessee has to be accepted
MERELY FILING OF APPEAL WILL NOT AFFECT BINDING PRECEDENT :
- It is not permissible for the authorities below to ignore the decision of the higher forum on pretext that an appeal is filed in the Supreme Court, which is pending or that steps are to be taken to file an appeal.
Addl. CIT v. Royal Bank of Scotland N. V. (2011) 130 ITD 305 (Kol.)(Trib.) Similarly in case of MSD Pharmaceuticals (P) Ltd. v. Add.CIT (2018) 162 DTR 149 / 191 TTJ 702 (Delhi) (Trib.) it was held that merely because a binding judicial precedent from jurisdictional High Court had been challenged by revenue authorities before Supreme Court—Binding nature of a judicial precedent, as long as it hold field i.e. was not overturned, remained unaffected Similarly in case of PCIT v. Associated Cable Pvt. Ltd. (Bom.)(HC), (ITXA. No. 293 of 2016 dt. 03.08.2018) it was held that merely filing of an SLP would not make the order of this Court bad in law or give a license to the Revenue to proceed on the basis that the order is stayed and/or in abeyance.
Also Assessing Officer is bound by decision of Tribunal-Pendency of an appeal would not amount to an order of stay. LIC Employees Co-Operative Bank Ltd. v. ACIT (2018) 408 ITR 287 (Mad) (HC)
- Judgement of a non-jurisdictional High Court has to be preferred over the judgement of a Special Bench of the ITAT . Nanubahi D. Desai v. ACIT (2014) 149 ITD 16 (SB)(Ahd)(Trib) Minda Sai Ltd. v. ITO (Delhi)(Trib.); www.itatonline.org
- BINDING NATURE OF SUPREME COURTS’ JUDGMENT– OTHER PARTIES [ART. 141, 226]
- In matters arising under public law, when the validity of a particular provision or levy is challenged, the legal position is that when the Supreme Court declares the law and holds either a particular levy to be valid or invalid it is wrong to contend that the law laid down by the Supreme Court in that judgment would bind only those parties who were before the court and not others in respect of whom appeal had not been To do so would be to ignore the binding nature of a judgement of the Supreme Court under article 141 of the Constitution of India. To contend that the conclusion reached by the Supreme Court in a case relating to the validity of a levy would apply only to the parties before the court is to destroy the efficacy and integrity of the judgement and to make the mandate of Article 141 illusory. U P. Pollution Control Board & Others v. Kanoria Industries Ltd. & Anr. (2003) 259 ITR 321 (SC)
- Decision of Supreme Court interpreting Excise Act – Not binding in interpreting provisions of Income-tax Act – Object of legislation.
- While it is true that any law declared by the Supreme Court is one to be followed and applied by all courts in the country in view of the mandate under article 141 of the Constitution of India, it is only such law that is declared in a particular context and in respect of the particular statutory provisions and not in general. An interpretation placed on a particular enactment cannot be just engrafted to the provisions of another
CIT v. Ecom Gill Coffee Trading P.Ltd. (2014) 362 ITR 204 (Karn.)(HC) CIT v. B. Fouress P. Ltd. (2014) 362 ITR 204 (Karn.)(HC)
In the case of UOI v. M. V. Mohan Nair (2020) 5 SCC 421 the Supreme court observed that the pronouncement of the law on point shall operate as a binding precedent on all courts within India. Law declared by the Supreme Court has to be essentially understood as a principle laid down by the Court and it is this principle which has the effect of a precedent. A principle as understood from the word itself, is a proposition which can only be delivered after examination of the matter on merits. It can never be a summary manner, much less be rendered in a decision delivered on technical grounds, without entering in to merits at all. A decision unaccompanied by reasons can never be said to be a law declared by the Supreme Court, though it will bind the parties inter se in drawing the curtain on the litigation. (CA No. 2016 of 2020 dt 5-3-2020)
- PRECEDENT – ADVANCE RULINGS
- Decision of Advance rulings Authority on similar facts in respect of same subject matter can be followed DIT v. Dun and Brand Street Information Services India P. Ltd. (2011) 338 ITR 95 (Bom.)(High Court)
- Similarly the Andhra Pradesh High Court held that the Advance Ruling Authorities order under section 67(4)(11) was binding not only on the applicant but also similar situated other dealers.
Tirupati Chemicals, Vijaywada & Anr. v. Dy. Commercial Tax Officer (2011) 52 APSTJ P. 48 (AP)(High Court)
DOCTRINE OF “PROSPECTIVE OVERRULING” :
- A judicial decision acts According to Blackstonian theory, it is not the function of the Court to pronounce a “new rule” but to maintain and expound the “old one”. In other words, judges do not make law they only discover or find the correct law. The law has always been the same. If a subsequent decision alters the earlier one, it (the later decision) does not make new law. It only discovers the correct principle of law which has to be applied retrospectively. To put it differently, even where an earlier decision of the court operated for quite some time, the decision rendered later on would have retrospective effect clarifying the legal position which was earlier not correctly understood.
- It is no doubt true that the Court has accepted the doctrine of “prospective overruling”. It is based on the philosophy; “the past cannot always be erased by new judicial declaration”. It may, however, be stated that this is an exception to the general rule of doctrine of (A.Y. 1996-97) ACIT v. Saurashtra Kutch Stock Exchange Ltd. (2008) 305 ITR 227 SC
- Normally, a decision of the Supreme Court enunciating a principle of law is applicable to all cases irrespective of the stage of pendency, because it is assumed that what is enunciated by the Supreme Court is in fact, law from inception. It is for the Supreme Court to indicate whether the decision in question will operate In other words, there shall be no prospective overruling unless it is so indicated in the particular decision. Murthy M.A. v. State of Karnataka & Others (2003) 264 ITR 1 (SC)
- It is axiomatic that a decision of the Supreme Court does not make the law but it only declares the law as always existing since its inception .
Mark (India) Ltd v. CIT (2017) 393 ITR 91 (Bom)(HC)
- RULE OF PRECEDENT – AND RULE OF PER INCURIAM
- The discipline demanded by a precedent or the disqualification or diminution of a decision on the application of the per incuriam rule is of great importance, since without it, certainty of law consistency of rulings and comity of Courts would become a costly casualty. A decision or judgment can be per incuriam if any provision in a statute, rule or regulation, which was not brought to the notice of the Court. A decision or judgement can also be per incuriam if it is not possible to reconcile its ratio with that of a previously pronounced judgement of a Co-equal or Larger Bench; or if the decision of a High Court is not in consonance with the views of Supreme Court. The per incuriam rule is strictly and correctly applicable to the ratio decidendi and not to obiter dicta. Sundeep Kumar Bafna v. State of Maharashtra & Anr. AIR 2014 SC 1745
- WHEN A PRECEDENT CEASES TO BE BINDING
- The Andhra Pradesh High Court in CIT B.R. Constructions  202 ITR 222 states that a precedent ceases to have a binding force in the following situations –
- if it is reversed or over-ruled by a higher court;
- when it is affirmed or reversed on a different ground;
- when it is inconsistent with the earlier decisions of the same rank;
- when it is sub silentio (non- speaking judgment)
- when it is rendered per incuriam (decision decided without referring to a statutory provision or a precedent).
- PRECEDENT – POWER OF SUPREME COURT TO DEPART FROM EARLIER DECISIONS: CONSTITUTION OF INDIA ART 141 AND 145 :
- If a principle laid down by SC is demonstrably inconsistent with the scheme of the Constitution, it becomes the duty of court to correct the wrong principle laid down. It is also the duty of SC to correct itself as early as possible in the matters of the interpretation of constitution “as perpetuation of mistake will be harmful to public interest”.
Desiya Murpokko Dravida Kazhagam & Anr v. Election Commission of India (2012) AIR Supreme Court 2191
- BINDING – SUBSEQUENT DECISION OF SMALLER BENCH OF SUPREME COURT – ARTICLE 149 OF THE CONSTITUTION OF INDIA
- If subsequent decision of smaller Bench of Supreme Court interpreting decision of larger Bench of Supreme Court is placed before a High Court, latter is bound to follow subsequent decision by smaller Bench which interprets decision of Larger Bench because that is interpretation of larger Bench of Supreme Court and High Court cannot make a different interpretation than one made by subsequent decision of Supreme Court which is binding upon CIT v. Oberoi Hotels (P) Ltd. (2011) 334 ITR 293 (Cal.)(High Court)
- OBITER dicta ARE NOT BINDING:
- Word ‘Obiter’ means ‘by the way’, ‘in passing’, ‘incidentally’. Obiter dictum is the expression of opinion stated in the judgment by a Judge on a question immaterial to the ratio However, these are of persuasive value. They are unnecessary for the decision of a particular case.
- In Mohandas Issardas Santhanam (A.N.) AIR 1955 Bom. 113 it was held that it would be incorrect to say that every opinion of the Supreme Court would be binding on the High Courts. Only the opinion expressed on a question that arose for the determination of a case is binding
RES JUICATA v. RULE OF CONSISTENCY:
- Finality to assessment facilitates the assessee to plan his affairs and to decide the business planning for long term However tax authorities feel that there is no finality to any assessment as the principle of Res Judicata is not applicable to tax proceedings.
- The word ‘Res Judicata’ is derived from the Latin language. It means a case or suit already The principles of Res Judicata, in the eye of law, is that if on any facts and/or law, a particular decision is made than subsequently if any lis on similar facts and/or law is to be decided between the same parties, it should be same as made earlier.
- As per The Law Lexicon “Res adjudicata” means “A matter adjudged; a thing judicially acted upon or decided; a thing or matter settled by judgment; a thing definitely settled by judicial decision, the thing adjudged”.
- Section 11 of The Code of Civil Procedure, 1908, defines “Res Judicata” as under:- “No court shall try any suit or issue in which the matter directly and substantially in issue has been directly and substantially in issue in a former suit between the same parties, or between parties under whom they or any of them claim, litigating under the same title, in a court competent to try such subsequent suit or the suit in which such issue has been subsequently raised, and has been heard and finally decided by such court.”
- The doctrine of Res Judicata is based on three maxims:
- Nemo debet lis vaxari pro eadem causa (no man should be vexed twice for the same cause);
- Interest republicae ut sit finis litium (it is in the interest of the state that there should be an end to a litigation); and
- Re judicata pro veritate occipitur (a judicial decision must be accepted as correct).
- The Bombay High Court, in A. Shah and Co. v. CIT (1956) 30 ITR 618 (Bom.) has held that “the principle of estoppel or res judicata does not strictly apply to the Income Tax authorities” and yet declaring that:
“An earlier decision on the same question cannot be reopened if that decision is not arbitrary or perverse, if it had been arrived at after due inquiry, if no fresh facts are placed before the Tribunal giving the later decision and if the Tribunal giving the earlier decision has taken into consideration all material evidence.”
- The courts have cautioned that the doctrine of Res Judicata should not be stretched too far under direct tax laws. A Tribunal should extremely be slow to depart from its earlier
- In Radhasoami Satsang CIT (1992) 193 ITR 321 (SC) the Hon’ble Apex Court observed as under:
“16. We are aware of the fact that strictly speaking res judicata does not apply to income tax proceedings. Again, each assessment year being a unit, what is decided in one year may not apply in the following year but where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year”.
- In the case of Municipal Corporation of City of Thane Vidyut Metallics Ltd & Anr. (2007) 8 SCC 688, wherein the facts were that in earlier litigation, the court had considered the evidence of Quality control Manager who was described as “expert” on the point and accepting his evidence, the court held that the goods imported by the company were ferrous in nature and not non ferrous and the company was right in paying octroi under item 71. It was thus a “fundamental factor” and the nature of goods imported by the company was directly and substantially in issue, on the basis of which the decision was taken. The Hon’ble Supreme Court observed that in taxation matters, the strict rule of res judicata as envisaged by section 11, CPC 1908 has no application. As a general rule, each year’s assessment is final only for that year and does not govern later years, because it determines the tax for a particular period.
The Hon’ble Supreme Court further observed that in facts of present case it was not possible to hold that the earlier decision would not continue to operate in subsequent years unless it is shown that there are changed circumstances or the goods imported by the company in subsequent years was different than the one which was imported earlier and in respect of which decision had been arrived at by the court. Therefore, it was held that the Revisional Court as well as the High Court were right in giving benefit of the decision in the earlier litigation to the respondent company. The Hon’ble Supreme Court upheld the observation of Supreme Court in case of Radhaswami Satsang (Supra).
- Further principles of res judicata not applicable in cases where order is passed without jurisdiction. Hence would not be binding on other party even if no appeal filed against the UOI & Anr v. Association of Unified Telecom Service Providers of India & Ors AIR 2012 SC 1693
- On going through the various judicial pronouncement following principles emerge:
- As a general rule principle of res judicata or estoppel is not applicable to income-tax An assessment of particular year is final and binding in relation to the assessment year in which the decision is given.
- In income-tax proceedings though the principle of res judicata does not apply, yet rule of consistency does apply e., if no fresh facts come to light on investigation, the Assessing Officer is not entitled to reopen the same question on mere ground of suspicion or change of opinion. This is based on principle of natural justice and expediency. The principle of comity lends weight to this preposition.
- A finding arrived at in a subsequent year ignoring, without material, the conclusion arrived at earlier would be vitiated in law. There should be no deviation/variation from earlier year’s decision unless there are fresh circumstances to warrant a deviation from such previous decision unless it otherwise emerges that the previous decision is wrong.
- Principle of res judicata or estoppel and principle of consistency or expediency apply with equal force to both Income-tax authorities on one hand and the Tribunal/High Courts on the other.
- This principle broadly safeguards the interests of the assessees against arbitrary actions arising out of prerogative interpretations and biased action.
- Principle of res judicata does not apply in matters pertaining to tax of different assessment The reason for following the earlier year decision is not because of principle of res judicata but because of theory of precedent. This is subject only to the gateways of distinguishing the earlier decisions and where the earlier decision is per incuriam. Bharat Sanchar Nigam Ltd. & Anr. v. UOI & Ors. (2006) 282 ITR 273 (SC)
EFFECT OF DISMISSAL OF SPECIAL LEAVE PETITION :
- A mere dismissal of SLP does not mean that High Court decisions is approved on merits so as to be a judicial precedent. In Tej Kumari v. CIT (2001) 247 ITR 210 Full Bench of the Patna High Court held that when a SLP is summarily rejected or dismissed under Art 136 of the Constitution such dismissal does not lay down any law. The decision of the High Court against which the SLP is dismissed in limine would not operate as res-judicata.
Dismissal of SLP in limine at threshold without giving any detailed reasons , does not constitute declaration of law or binding precedent . State of Orissa v. Dhirendra Sundar Das (2019) AIR SC 2331
However, when Supreme court dismisses an SLP with reason it might be taken as the affirmation of the High Court views on merits of the case, thus there is no reason to dilute the binding nature of precedents in such cases.
The fact that the Special leave petition against the decision of the High Court was dismissed by the Supreme Court would not amount to a confirmation of the view of the High Court. Palam Gas Service v. CIT (2017) 394 ITR 300 (SC)
In case of Khoday Distilleries Ltd. v. Sri Mahadeshware Sahakara Sakkare Kharkhane Ltd (LB) ( 2019) 262 Taxman 279/ 308 CTR 1 104 (SC) it was held that Special leave petition was dismissed against High Court order in limine without giving any reasons, review petition filed by appellant, in High Court would be maintainable.
[Followed in Dhiraj Manoharro Chore v. State of Maharashtra AIR 2020 Bom 65 (FB)] / Zahedabi Abdul Razaque Shete and Ors. v. Maharashtra State Board of Waqf Pan Chakki Aurangabad AIR 2020 Bom. 100]
- Under Article 136 of the Constitution the Supreme Court may reverse, Modify or affirm the judgement-decree or order appealed against while exercising its appellate jurisdiction and not while exercising the discretionary jurisdiction disposing the petition for special leave to
- The Hon’ble Bombay High Court in the case of CIT M/s. Pamwi Tissues Ltd. (2008) 3 DTR 66 (Bom) / 215 CTR 150 (Bom) while considering the issue of interpretation of Sec. 43B, 2(24)(x) r/w sec. 36(1)(va) as to the claim of deductions in respect of PF, ESIC Contribution held that the Hon’ble Supreme Court in CIT v. M/s. Vinay Cement Ltd. had dismissed the SLP, [(2007) 213 CTR 268] as it was not a fit case for grant of a SLP therefore cannot be said to be the law decided on the subject and it was not a binding precedent as per Article 141 of the Constitution of India.
- In State of Orissa & v. M.D. Illyas, (2006) 1 S.C.C.275 the Supreme Court has held that a decision is a precedent on its own facts and that for a judgment to be a precedent it must contain the three basic postulates. A finding of material facts, direct and inferential. An inferential finding of fact is the inference which the Judge draws from the direct or perceptible facts; (ii) statements of the principles of law applicable to the legal problems disclosed by the facts; and (iii) Judgment based on the individual effect of the above.
- In Delhi Administration Madan Lal Nangia AIR 2003 SC 4672 it was held that if a SLP is summarily dismissed, this cannot prevent other parties from filing a SLP against the same judgement.
- The Supreme Court in Indian Oil Corporation v. State of Bihar & Ors. (1987) 167 ITR 897 (SC) has clarified that the dismissal of a special leave petition by the Supreme Court by a non-speaking order would not operate as res judicata by observing that- “When the order passed by this Court was not a speaking one, it is not correct to assume that this Court had necessarily decided implicitly all the questions in relation to the merits of the award, which was under challenge before this Court in the special leave petition. A writ proceeding is a wholly different and distinct proceeding. Questions which can be said to have been decided by this Court expressly, implicitly or even constructively while dismissing the special leave petition cannot, of course, be reopened in a subsequent writ proceeding before the High Court. But neither on the principle of res judicata nor on any principle of public policy analogous thereto, would the order of this Court dismissing the special leave petition operate to bar the trial of identical issues in a separate proceeding, namely, the writ proceeding before the High Court merely on the basis of an uncertain assumption that the issues must have been decided by this Court at least by implication. It is not correct or safe to extend the principles of res judicata or constructive res judicata to such an extent so as to found it on mere guesswork”.
- In all cases of admission of the SLP the further decision on merits follows whereas in every case of dismissal there is no question of further decision or proceedings from the Supreme Court and effectively the order of the lower Court/authority which is challenged before the apex Court is affirmed and becomes In such a situation the question whether the person/s aggrieved by the order of the lower Court could agitate his grievance by way of an application for review or rectification of mistakes apparent from record so as to pursuade the lower authority to modify its final order in the light of the application for rectification or review, to the extent and in the manner found appropriate is still open for consideration. The respondent often pleads that the order of the lower Court having been affirmed by the Supreme Court it is no more open to the lower authority, after the dismissal of the SLP to entertain any application and/or decide the same for the purpose of review, revision or modification of the order which has been upheld by the Supreme Court. The controversy is not free from doubt. The effect of dismissal of SLP by the Supreme Court is that the order of the Supreme Court does not constitute res judicata to deny the petitioner the right to agitate matters on merits before the competent Court / Tribunal.
- Before the Delhi Tribunal Special Bench in the case of CIT Circle II Meerut v. Padam Prakash (HUF)  117 ITD 129 (Del.) (SB) the assessee had filed a Miscellaneous Application against the decision of the Special Bench alleging certain mistake in the decision. On the date of hearing it was noticed that the decision of Special Bench was challenged in appeal before High Court u/s. 260A of the Act and the Hon’ble High Court held that the order of Spl. Bench was not sustainable. In view of the above the Tribunal held that as the Special Bench decision was merged with the order of High Court there was no question of rectification.
- Similarly where a question has been decided in favour of the assessee or the Department, as the case may be by the High Court, the mere fact that a SLP from the judgment of the High Court is pending before the Supreme Court will not be a ground for allowing an application u/s. 256(2) of the Act, for directing the Tribunal to state the case and refer a question of law to the High Court because, until the question is finally decided by the Supreme Court, the High Court would be bound by its own earlier decision. [See CIT v. Desai Brothers Ltd. (1991) 189 ITR 88 (Bom) and CIT v. Godavari Sugar Mills Ltd. (1992) 198 ITR 196 (Bom)]
- EFFECT OF DISMISSAL OF APPEAL BY HIGH COURT HOLDING THAT NO SUBSTANTIAL QUESTION OF LAW AROSE:
- Before the Delhi Special Bench in the case of Medicare Investments v. Jt. CIT Sp.
- 20 (2008) 114 ITD 34 the issue arose for consideration was, whether the decision of Hon’ble Delhi High Court dismissing the appeal filed by the Revenue against the order of the Tribunal passed in the case of Abhinandan Investment Ltd. & Ors.  254 ITR 538 (Del.) holding that no substantial question of law arose, is a decision on merits and constitutes a binding precedent which this Special Bench is bound to follow.
- The Delhi Bench relied on the judgement Hon’ble Gujarat High Court (2006) 283 ITR 402 (Guj), wherein it had been held that dismissal of tax appeal by the High Court holding that no substantial question of law arises implies that the order of the Tribunal on the issue stands merged in the order of the High Court and for all intents and purposes, it is the decision of the High Court which is operative and which is capable of being given effect to. The Hon’ble Gujarat High Court, observed that a plain reading of
- 260A inclusive of sub-sections of the said section makes it clear that the only jurisdictional powers that the High Court can exercise are to hear an appeal and the High Court does not have any powers under the statute to grant any leave as such for filing an appeal. Explaining further, it was observed by their Lordships that the person filing the appeal is not required to seek any leave from any authority much less the High Court prior to filing of the appeal and it is, therefore, not possible to bifurcate the jurisdiction or powers available to the High Court while dealing with an appeal under s. 260A of the Act.
- It was held that in all eventualities, what merges is the operative part of the order under appeal after its confirmation, reversal or modification and there would be a merger even in a case where the reasoning of the subordinate forum is not expressly It was held that if the merger is issue-specific, there is fusion of order only to that limited extent but it cannot be successfully contended that where the appellate Court merely accords approval to the reasoning of the lower Court or forum, there is no decision of the appellate Court or forum. It was also clarified by the Hon’ble Gujarat High Court that where the appeal is dismissed on account of being barred by limitation, being defective in nature or the appellant having no locus standi to prefer the appeal, the theory of merger of the order of the subordinate forum in the order of the superior forum cannot be applied because there is no “order” made by the superior forum on merits and the controversy between the parties has not been gone into by the appellate forum. It was also held that it is thus not open to any person to contend that there is no decision of the High Court and the subordinate forum is entitled to take a contrary view than the one adopted in the earlier proceedings which has been affirmed by the High Court by a process of dismissal of appeal simpliciter.
- In view of the above Gujarat High Court decision the Spl. Bench held that Hon’ble Delhi High Court in the case of Abhinandan Investment & Ors. (supra), upholding the order of the Tribunal and dismissing the appeal filed by the Revenue on a similar issue holding that no substantial question of law arose, is a decision on merits and since the issue involved in the present case as well as all the material facts relevant thereto, as discussed above, are similar to that of Abhinandan Investment Ltd. & Ors. (supra), the said decision is binding on the subordinate forums within the jurisdiction of Hon’ble Delhi High Court including this Special Bench.
- DOCTRINE OF MERGER: SPEAKING & NON-SPEAKING ORDER:
- The term merger means to sink or disappear in something else, to become absorbed or extinguished to be combined or be swallowed Merger in law is defined as the absorption of a thing of lesser importance by a greater, whereby the lesser ceases to exist. The doctrine is neither a doctrine of Constitutional law nor a doctrine statutorily recognized. It is a common law doctrine founded on the principles of propriety in the hierarchy of justice delivery system.
- It is a settled law that when the SLP is dismissed, whether by a speaking or non-speaking order whether in limine or on contest, second SLP would not lie. However the statement cannot be stretched and applied to hold that such an order attracts applicability of doctrine of merger and excluded jurisdiction of the court or authority passing the order to review the
- It may be that inspite of having granted leave to appeal , the Court may dismiss the appeal on such grounds as may have provided foundation for refusing the grant at the earlier But that will be a dismissal of appeal. The decision of the Supreme Court would result in superseding the decision under appeal attract doctrine of merger. But if same reason has prevailed with the Court for refusing leave to appeal, the order would not have been an appellate order but only an order refusing to grant the leave to appeal.
- The Supreme Court considered the scope of Article 136 in a case Kunhayammed v. State of Kerala (2000) 245 ITR 360 (SC) where the main issue related to the doctrine of merger and the effect of dismissing a special leave petition by either a speaking or non speaking order. After a brief discussion of the earlier case law on the subject, the court summarized its conclusions as under:-
- Where an appeal or revision is provided against an order passed by a court, tribunal or any other authority before superior forum and such superior forum modifies, reverses or affirms the decision put in issue before it, the decision by the subordinate forum merges in the decision by the superior forum and it is the latter which subsists, remains operative and is capable of enforcement in the eye of
- When the leave to appeal is granted the special leave petition is converted into an
- An order refusing special leave to appeal may be a non speaking order or a speaking one. In either case it does not attract the doctrine of If the Petition seeking grant of leave to appeal is dismissed, it is an expression of opinion by the Court that a case for invoking appellate jurisdiction of the Court was not made out. Therefore, neither the doctrine of merger nor Article 141 of the Constitution will apply to such a case.
- If the order refusing leave to appeal is a speaking order e. gives reasons for refusing the grant of leave, then the order has two implications. Firstly, the statement of law contained in the order is a declaration of law by the Supreme Court within the meaning of Article 141 of the Constitution. Secondly, other than the declaration of law, whatever is stated in the order are the findings recorded by the Supreme Court which would bind the parties thereto and also the court, tribunal or authority in any proceedings subsequent thereto by way of judicial discipline, the Supreme Court being the Apex Court of the country.
- Once leave to appeal has been granted and appellate jurisdiction of supreme court has been invoked the order passed in appeal would attract the doctrine of merger; the order may be of reversal, modification or merely
- On an appeal having been referred or a petition seeking leave to appeal having been converted into an appeal before Supreme Court the jurisdiction of the High Court to entertain a review petition is lost thereafter as provided by sub rule(1) of Rule (1) of order 47 of the
- Inspite of a petition for special leave to appeal having been filed, the judgment, decree or order against which leave to appeal has been sought for continues to be final, effective and binding as between the Once leave to appeal has been granted, the finality of the judgement, decree or order appealed against is put in jeopardy though it continues to be binding and effective between the parties unless it is a nullity or unless the court may pass a specific order staying or suspending the operation or execution of the judgment, decree or order under challenge.
- The Hon’ble Apex Court in case of M. Salgaocar & Bros. P. Ltd. (2000) 243 ITR 384 (SC) held that when an appeal is dismissed by the Supreme Court by a non speaking order the order of the High Court or the Tribunal from which the appeal arose, merges with that of the Supreme Court. In such a case the Supreme Court upholds the decision of the High Court or the Tribunal from which the appeal is provided under clause (3) of Article 133 of the Constitution.
Foreign Judgement: Execution and enforcement : Civil Procedure Code, 1908 sec. 44A, Order 21 Rule 22 :
- The CPC provides specific provisions for execution of the decree passed by the court in reciprocating The reciprocating territory means the territory as is defined under section 44-A of the CPC. It is clear even from the specific provision that any foreign judgment or decree cannot be put for execution unless there is reciprocating agreement or treaty as contemplated. The national or international treaties and or conventions and or agreements have their own value for the purposes of inter-border transactions and various such jurisdictional aspects. Everything is under control of the respective provisions of the respective States and the countries. Nothing is free and or no one can take any steps in any country without the sanction/permission and or the filtrations so contemplated under the respective acts of the country. Section 13 contemplates when a foreign judgment shall be conclusive so that appropriate suits and or proceedings can be initiated by the concerned court/ parties in India. It provides the procedure to be followed before accepting the foreign judgment’s conclusiveness. It also means the merits of such judgments. Section 14 contemplates presumption so far as the foreign judgments are concerned. Section 114 of the Evidence Act deals with the presumptive value, even of the foreign judgment. The concept presumption itself means that it is always rebuttable if a case is made out. Therefore, merely because it is a foreign judgment and or decree, that itself is not conclusive judgment for the purpose of final execution in India. Both required pre testing or pre filtrations as provided under the CPC and other relevant laws and rules. There are no provisions whereby any party/person can directly invoke the insolvency Act, based upon such foreign ex-parte judgment/ decree. Even the foreign award cannot be executed in such fashion in India. It is also subject to the procedural filtration and the challenge.
Abraaj Investment Management Ltd v. Neville Tuli & Ors. AIR 2013 (NOC) 91 (Bom.)
Foreign judgement is enforceable before court in India. Foreign judgement passed after considering evidence on merits, hence enforceable.
Masterbaker Marketing Ltd. v. Noshir Mohsin Chinwalla. AIR 2015 (NOC) 771 (Bom.)
- On bare reading of Order 21, Rule 22, it is clear that where an application is made for execution of a decree filed under the provisions of 44-A, the Court executing the decree has to issue a notice to the person against whom execution is applied for requiring him to show cause as to why the decree should not be executed against him. On conjoint reading of sec. 44A with order 21, Rule 22, it is clear that unless execution application for enforcement of cost certificates issued by foreign Court was filed in the court having jurisdiction and unless notice under Order 21, Rule 22 of Code of Civil Procedure 1908 is filed by the decree holder for enforcement of such decree and/or order passed by foreign court and unless show cause notice is issued by court having jurisdiction, such foreign decree and/or order cannot be executed. Filing notice under Order 21, Rule 22 and issuance of show cause notice by court is mandatory and till such notice is allowed, such decree and/or order passed by foreign court cannot be enforced.
Cost imposed by English Court and Execution in India. The relevant date for determining rate of conversion of Sterling Pounds into Indian Rupees would be date on which decree became executable and not the date of issuance of cost certificate by foreign court. Janardhan Mohandas Rajan Pillai v. Madhubhai Z. Patel & Ors AIR 2014 (NOC) 374 (Bom.)
- In Coal India Ltd v. Canadian Commercial Corporation AIR 2013 (NOC) 265 (Cal.) the parties had agreed, that the arbitration would be held at Geneva, Hence, the Swiss law could be the curial law. The parties agreed, rules framed by ICC, Paris would be the appropriate procedure. In any event, Indian law would have no role to play when the parties expressly agreed that they would have sitting of arbitration abroad where Indian law would have no force. When there was no express designated venue the law applicable to the seat of arbitration would be the curial law
If a contracting party feels, his counter part in contract committed any breach, place of committing of breach would be ordinarily place where he should ventilate his grievance. Similarly, when arbitration is held in a particular place and losing party feels, the Tribunal did not decide issue in way it ought to have, he has to approach Court where arbitration was held and/ or award was published unless parties mutually agreed to be guided by another law or law of place where contract was performed.
- Similarly in case of Alcon Electronics Ltd v. Celem S A AIR 2013 Bom 108. The Defendant-Judgment Debtor challenged the order dated 15th April, 2011 passed by the learned District Judge-2, Nashik, rejecting the Petitioner’s Application for declaration that the recovery proceeding filed by the Respondents-original Plaintiffs be disposed off/dismissed for lack of jurisdiction or even otherwise on facts and holding that the execution proceeding filed by Respondents being maintainable and the judgment and order dated 19th October, 2006 passed by High Court of Justice, Chancery Division, Patents Court is executable before District Court at Nashik.
The Respondents-original Plaintiffs filed a Suit against the Petitioner-original Defendant in the High Court of Justice, Chancery Division, Patents Court in the England. In the said Suit, the Petitioner preferred Application dated 11th May, 2006 for declaration that the High Court of Justice, Chancery Division, Patents Court, U.K. have no jurisdiction to entertain the Claim. The said Application was rejected by the Hon’ble High Court of Justice, Chancery Division, by an order dated 19th October, 2006 and imposed a costs in the sum of £ 12,429.75 equivalent to Rs. 10,16,753.55 paise with interest at the rate of 8% per annum. Thereafter, the Respondents-original Plaintiffs filed Special (Civil) Darkhast in the Court of District Judge -2, Nashik for execution of the order passed by the Foreign Court, for recovery of sum of Rs. 10,16,753.55 towards decretal amount under Order dated 19th October, 2006 (costs) and
Rs. 67,786/- towards interest at the rate of 8% per annum on the principal amount from the date of the order date i.e. 19th October, 2006 to 14th August, 2007 and further interest till the recovery of the amount. In the said Execution Petition, the Petitioner preferred on 1st March, 2008 for declaration that the Execution Application filed by the Respondents is not maintainable as the same is in respect of the costs imposed by the foreign Court at the time of dismissing the Petitioner’s Interim Application, whereas, the main matter is still pending for hearing and final disposal on its own merits. The said Application is rejected by the District Judge-2, Nashik by impugned order dated 15th April, 2011 and hence, the Civil Revision Application was filed before the Hon’ble Court.
The Hon’ble Court observed that the explanation in section 44A of Code of Civil Procedure shows that legislation intentionally has included even judgment within the meaning of the term decree for purpose of section 44A of CPC. The intention was to expand or enlarge the scope of term decree for the purpose of this section. Therefore, an order which may not amount to a decree but may amount to judgment would be a judgment for the purpose of Section 44A of CPC. Thus, awarding costs would amount to decree within the meaning of section 44A and can be recovered by executing order under section 44A of CPC.
The issue of jurisdiction of the Court to execute order/decree of a country having reciprocal arrangement with our country was decided by the Division Bench of the Court in the matter of Janardhan Mohandas Rajan Pillai (deceased through Lrs.) & Anr. (2010) 4 AIR Bom R. 230.
Therefore, the Execution Petition filed by the Respondents for execution of the order dated 19th October, 2006 passed by the English Court was maintainable in law.
Reliance on foreign Judgement as precedent not related to a parties :The courts in independent India have repeatedly relied on decisions from other common law jurisdictions, mostly of the United Kingdom, United States of America, Canada and Australia. The opinions of foreign courts have been readily cited and relied on in landmark constitutional cases dealing with questions such as –
- Ambit of the right to privacy (Kharak Singh v. State of Uttar Pradesh) AIR 1963 SC 1295
- Freedom of press (Bennett & Coleman v. Union of India) AIR 1973 SC 106
- Restraints on foreign travel (Maneka Gandhi v. Union of India) AIR 1978 SC 597
- Constitutionality of the death penalty (Bachan Singh v. Union of India) AIR 1980 SC 898
In M.H. Hoskot v. State of Maharashtra AIR 1978 SC 802 the Supreme Court explicitly relied on American decisions to hold that indigent persons were entitled to receive free legal services. The idea of ‘substantive due process’ was interpreted so as to imply that free legal services are an ‘imperative processual piece of criminal justice’ implicit in Art. 21. A few years later, the Court reinforced this entitlement in Khatri v. State of Bihar AIR 1981 SC 928 wherein it held that the state cannot plead lack of financial resources as a ground for not extending legal services to indigent persons.
With regard to the extent of ‘freedom of speech and expression’, the Indian Courts have repeatedly cited decisions related to the First Amendment to the
U.S. Constitution. In Indian Express Newspapers v. Union of India AIR 1986 SC 515 the Supreme Court held that the imposition of a tax on the publication of newspapers violated the constitutional right to freedom of expression, which also incorporates freedom of the press. In Rangarajan v. Jagjivan Ram and Union of India (1989) 2 SCC 574 the Court ruled that the censorship of a film which criticized the policy of caste-based reservations in public employment is inconsistent with the principle of freedom of expression. In this case reliance was placed on the ‘clear and present danger’ test for placing restraints on speech that was developed in Schenck v. United States. 247 U.S. 4 (1919)
In this era of globalization of legal standards, there is no reason to suppress the judicial dialogue between different legal systems which build on similar values and principles. But, undoubtedly, none of these foreign decisions are binding upon the Indian Supreme Court but they are authorities of high persuasive value to which Courts may legitimately turn for assistance.
- Execution of power of attorney authenticated by foreign notary – Recognition of notarial act : Notaries Act sec 14 Acceptance of notarial attestation and notarial certificates of Notary public of India by reciprocal country. Mutual reciprocity being established, notification in official gazette to declare notrial acts as legal, not required. Notarial attestation on power of attorney, proper.
Jaldhi Overseas PTE. Ltd. v. Bhushan Power & Steel Ltd. : AIR 2017(NOC) 1111 (CAL)
Thus Doctrine of precedent has various facets, and one needs to understand each such principle in harmonious manner. The doctrine of binding precedent promotes certainty and consistency in judicial decisions.