Case Briefs

Supreme Court: The 3-Judge Bench comprising of Dr Dhananjaya Y Chandrachud*, Vikram Nath and BV Nagarathna, JJ., has held that the question whether tax can be levied on the supply of electricity by a power generator (which also manufactures sugar) supplying electricity to a distributor is a question of law and existence of alternate remedy would not bar the High Court from entertaining the same. The Bench expressed,

“The issues raised by the appellant were questions of law which required, upon a comprehensive reading of the Bihar Electricity Act, a determination of whether tax can be levied on the supply of electricity by a power generator (which also manufactures sugar) supplying electricity to a distributor…”

The crux of the case was that the Patna High Court had declined to entertain writ petition challenging the validity of electricity duty and penalty imposed on the electricity supplied to Bihar State Electricity Board (BSEB) on the ground that the dispute between the parties was factual in nature and was suitable for adjudication in terms of the statutory remedy provided in the Bihar Electricity Duty Act 19481.

Factual Developments

The appellant, a sugar mill company was engaged in the business of manufacture and sale of white crystal sugar. The waste of sugarcane (bagasse) was used for the production of electricity for its own consumption by the appellant and the surplus energy was supplied to BSEB.

In pursuance of its power under Section 3(1) of the Act, the State had issued a notification dated 21-10-2002 which stipulated that the rate of duty applicable on the consumption or sale of electricity would be fixed at six per cent of the value of energy consumed or sold for any other purposes other than irrigation which was later amended on 04-03-2005 which provided that the rate of duty to be levied on consumption of electrical energy generated by captive power plants would be six per cent of the  value of energy, i.e. energy tariff as fixed by the BSEB. Noticeably on 14-01-2011 another notification was issued by the State, granting a blanket exemption from payment of electricity duty on electricity generated by captive plants for self-consumption.

In the above backdrop, the appellant had challenged the notifications dated 21-10-2002, which was struck down by the High Court on the ground that there were no guidelines in the statute or the notifications for construing the expression ‘value of energy’. Subsequently, the State amended the Act through the Bihar Finance Act 2012 with retrospective effect from 17-10-2002 for defining the term ‘value of energy’.

Once again, the appellant challenged the amendment in the High Court, however, while the petition was pending the State issued a notice to the appellant for its failure to file returns under Section 6B (1) of the Act, concealment of the sale of electricity of approximately Rs 56 crores and for raising a demand of electricity duty and penalty of about Rs 67 crores.

Grievance raised by the Appellant

On behalf of the appellant, the following submissions had been made to substantiate the claim that no tax can be levied on the supply of electricity by the appellant to BSEB for the following reasons:

  1. Under Section 3 of the Act, tax was levied on the ‘value of energy’ and Section 2(ee) only brought the sale to a consumer within the ambit of the phrase ‘value of energy’;
  2. BSEB was a ‘licensee’ and not a ‘consumer’ in view of the definition of ‘licensee’ provided under Section 2(d) of the Act; and the term ‘value of energy’ used in Section 3 for the levy of tax was not applicable to BSEB because the definition of ‘consumer’ excluded a licensee, Section 2 (b) states:

“‘Consumer’ means any person who is supplied with energy but does not include either a licensee or the distributing licensee…”

  1. BSEB was already paying electricity duty for the electricity sold by it to consumers, including the electricity supplied by the company to the Board. The levy of tax on the electricity supplied by the company would thus amount to double taxation;
  2. Even if it was conceded that the State had power to levy tax on the supply of electricity by the generator to the licensee, the Government had not exercised its power, since under Section 3, a notification must be issued for specifying the rate of charge. The notification issued on 21-10-2002 was only providing the rate of duty on ‘consumption or sale of electricity’.
  3. Since the power exercised by the State under Section 3 of the Act to levy electricity duty on sale of electricity by the appellant to BSEB was a jurisdictional issue, the rule of alternate remedy would not apply;

Analysis

In a similarly placed case, which was initially tagged with the instant petition but was later de-tagged, National Thermal Power Corporation Ltd. (NTPC) was supplying electricity exclusively to the Electricity Boards, which had challenged the same issue before the Court, the High Court had held that electricity duty could not be imposed under Section 3 (1) of the Act on a power generation company supplying electricity to a licensee like the Electricity Board, concluding that it was beyond the legislative competence of the State to impose a tax on the sale of electricity which was not a sale for consumption. Moreover, the High Court observed that in terms of the provisions of the Bihar Electricity Act, a power generation company is liable to pay duty only if it is selling electricity to the consumer, as defined in the legislation.

Noticeably, the High Court by its impugned order had declined to entertain the writ petition on two counts: (i) the appellant had an alternate statutory remedy under Section 9A of the Act; and (ii) the dispute involved questions of fact which are not amenable to the writ jurisdiction of the High Court. The Bench observed that it was not the case of the appellant that the respondents had miscalculated the duty and penalty imposed on it. The appellant contended that the State Government did not have power to levy tax on its sale of electricity to BSEB. Thus, the plea stroke at the exercise of jurisdiction by the Government; accordingly, the Bench held,

“The High Court can exercise its writ jurisdiction if the order of the authority is challenged for want of authority and jurisdiction, which is a pure question of law.”

Relying on the decision in Sree Meenakshi Mills Ltd. v CIT, 1956 SCR 691, wherein a three judge Bench had explained succinctly the tests for the identification of questions of fact, questions of law and mixed questions of law and facts, the Bench stated that, “the test that is to be applied for the determination of a question of law is whether the rights of the parties before the court can be determined without reference to the factual scenario.”

Verdict

Hence, the Bench held that the issues raised by the appellant were questions of law which required, upon a comprehensive reading of the Bihar Electricity Act, a determination of whether tax can be levied on the supply of electricity by a power generator (which also manufactures sugar) supplying electricity to a distributor; and whether the State had the legislative competence to levy duty on the sale of electricity to an intermediary distributor.

Resultantly, the Bench was of the view that the High Court made an error in declining to entertain the writ petition and it would be appropriate to restore the proceedings back to the High Court for a fresh disposal. Accordingly, the appeal was allowed and the impugned judgment was set aside.

[M/s Magadh Sugar & Energy Ltd. v. State of Bihar, 2021 SCC OnLine SC 801, decided on 24-09-2021]

___________________________________________________________________________
Kamini Sharma, Editorial Assistant has put this report together

___________________________________________________________________________

Appearance by:

For the Appellant: Advocate SK Bagaria

For the State of Bihar: Sr. Advocate Saket Singh


*Judgment by: Justice Dr Dhananjaya Y Chandrachud

Know Thy Judge| Justice Dr. DY Chandrachud

Case BriefsHigh Courts

Kerala High Court: N. Anil Kumar, J., decided a matter wherein the son-in-law claimed his right on father-in-law’s property while pleading that he was adopted by his wife’s family after marriage and hence had a right on the property.

Plaintiff aged 69 years was the respondent in the appeal claiming for permanent injunction interdicting the defendant from trespassing into the plaint schedule property or interfering with the plaintiff’s peaceful possession and enjoyment of the plaint schedule property and the house therein or committing any waste therein.

The said suit property belonged to the plaintiff by virtue of a gift deed.

Plaintiff also submitted that he had constructed a concrete house spending his own funds and was also residing with his family on the said property.

The defendant was the son-in-law of the plaintiff and he had no manner of right over the property.

Reason for filing the suit was that the defendant was disturbing the plaintiff’s peaceful possession and enjoyment of the suit property.

What was the son-in law’s contention?

Son-in-law contended that he had married the only daughter of the plaintiff and has been practically adopted as a member of the family subsequent to the marriage. Hence, he maintained that he has a right to reside in the house, as of right. He also added that he had constructed a building in the property expending his own money and has no other place of abode.

Trial Court’s decision

Trial Court held that the plaintiff is the owner in possession of the plaint schedule property and the defendant, who is the son-in-law of the plaintiff, has no manner of right in interfering with the possession of the plaint schedule building.

First Appellate Court upheld the trial court’s decision.

Question for Consideration:

Does a son-in-law have any legal right to his father-in-law’s property and building?

High Court expressed that it would be difficult to hold that the defendant was a member of the family.

It was noted by the Court that the defendant’s behaviour became intolerable, due to which the plaintiff filed a suit seeking a permanent prohibitory injunction restraining the defendant from entering into the plaint schedule property and building.

High Court stated that it is a settled principle of law that even a trespasser, who is in established possession of the property, could obtain an injunction.

In the present matter, the matter would have been different if the plaintiff was the true owner of the property.

Defendant was the son-law in the present case, it is shameful for him to plead that he had been adopted as a member of the family, subsequent to the marriage with the plaintiff’s daughter.

Nair Service Society Ltd. v. K.C. Alexander, AIR 1968 SC 1165, in this decision the 3-Judge Bench of the Supreme Court reiterated the principle that possession is good against all but the true owner.

Therefore,

“A person in possession of the land in the assumed character of owner and exercising peaceably the ordinary rights of ownership has a perfectly good title against all the world but the rightful owner.”

The rightful owner filed a suit for injunction restraining him from entering into the property. The residence of the defendant, if any, in the plaint schedule building is only permissive in nature. The defendant cannot contend that he is in legal possession of the suit property or the building.

Further, the Court opined that it was not necessary to decide the validity of the Gift Deed executed by the Church in favour of the plaintiff.

Contention that the plaintiff was a man of bad character and not on good terms with family members was rejected in view of Section 52 of the Indian Evidence Act which provides that in civil cases, a fact pertaining to the character of an individual is not relevant.

The said section lays down the principle that the character of a party as a piece of evidence cannot be used to manifest that conduct attributed to him is not probable or improbable.

 To be a question of law involved in the case, there must be first, a foundation for it laid in the pleadings, and the question should emerge from the sustainable findings of fact, arrived at by Courts of facts, and it must be necessary to decide that question of law for a just and proper decision of the case.

Bench dismissed the appeal on finding no error in the decision of lower courts. [Davis Raphel v. Hendry Thomas, 2021 SCC OnLine Ker 3491, decided on 6-09-2021]


Advocates before the Court:

For Appellant:

Blaze K. Jose, Advocate

Deepa Narayanan, Advocate

For Respondent:

V.A. Satheesh, Advocate

V.T. Madhavanunni

Case BriefsSupreme Court

Supreme Court: In an important ruling on Res Judicata, the 3-judge bench of Dr. DY Chandrachud*, Vikram Nath and Hima Kohli, JJ has held that the issues that arise in a subsequent suit may either be questions of fact or of law or mixed questions of law and fact.

“Issues that arise in a subsequent suit may either be questions of fact or of law or mixed questions of law and fact. An alteration in the circumstances after the decision in the first suit, will require a trial for the determination of the plea of res judicata if there arises a new fact which has to be proved. However, the plea of res judicata may in an appropriate case be determined as a preliminary issue when neither a disputed question of fact nor a mixed question of law or fact has to be adjudicated for resolving it.”

“Best method” to decide the question of res judicata:

The court while undertaking an analysis of the applicability of the plea of res judicata determines first, if the requirements of section 11 CPC are fulfilled; and if this is answered in the affirmative, it will have to be determined if there has been any material alteration in law or facts since the first suit was decreed as a result of which the principle of res judicata would be inapplicable.

In Syed Mohd. Salie Labbai (dead) by L.Rs v. Mohd. Hanifa, (1976) 4 SCC 780, it was enunciated that before a plea of res judicata can be given effect, the following conditions must be proved:

(1) that the litigating parties must be the same;

(2) that the subject-matter of the suit also must be identical;

(3) that the matter must be finally decided between the parties; and

(4) that the suit must be decided by a court of competent jurisdiction.

The verdict in Alka Gupta v. Narender Kumar Gupta, (2010) 10 SCC 141, further made clear that

“The plea must be clearly established, more particularly where the bar sought is on the basis of constructive res judicata. The plaintiff who is sought to be prevented by the bar of constructive res judicata should have notice about the plea and have an opportunity to put forth his contentions against the same.”

Twin test for the identification of whether an issue has been conclusively decided in the previous suit is:

  1. The necessity test: Whether the adjudication of the issue was ‘necessary’ for deciding on the principle issue.
  2. The essentiality test: Whether the judgment in the suit is based upon the decision on that issue.

Res Judicata: Question of fact or law or mixed question of law and fact?

It has earlier been held by the Supreme Court that a determination of whether res judicata is attracted raises a mixed question of law and facts [Madhukar D Shende v. Tarabai Aba Shedage, (2002) 2 SCC 85 ; Ram Harakh v. Hamid Ahmed Khan, (1998) 7 SCC 484].

However, Justice K. Ramaswamy writing for a three-judge bench of this court in Sushil Kumar Mehta v. Gobind Ram Bohra, (1990) 1 SCC 193 held that the principle of res judicata cannot be fit into the pigeonhole of ‘mixed question of law and facts’ in every case. Rather, the plea of res judicata would be a question of law or fact or a mixed question of both depending on the issue that is claimed to have been previously decided.

In Mathura Prasad Bajoo Jaiswal v. Dossibai N.B Jeejeebhoy, (1970) 1 SCC 613, it was held that,

“A decision of a competent Court on a matter in issue may be res judicata in another proceeding between the same parties: the “matter in issue” may be an issue of fact, an issue of law, or one of mixed law and fact. An issue of fact or an issue of mixed law and fact decided by a competent Court is finally determined between the parties and cannot be re-opened between them in another proceeding. The previous decision on a matter in issue alone is res judicata: the reasons for the decision are not res judicata.

(…)

The matter in issue, if it is one purely of fact, decided in the earlier proceeding by a competent Court must in a subsequent litigation between the same parties be regarded as finally decided and cannot be reopened. A mixed question of law and fact determined in the earlier proceeding between the same parties may not, for the same reason, be questioned in a subsequent proceeding between the same parties. But, where the decision is on a question of law i.e. the interpretation of a statute, it will be res judicata in a subsequent proceeding between the same parties where the cause of action is the same, for the expression “the matter in issue” in Section 11 of the Code of Civil Procedure means the right litigated between the parties i.e. the facts on which the right is claimed or denied and the law applicable to the determination of that issue. Where, however, the question is one purely of law and it relates to the jurisdiction of the Court or a decision of the Court sanctioning something which is illegal, by resort to the rule of res judicata a party affected by the decision will not be precluded from challenging the validity of that order under the rule of res judicata, for a rule of procedure cannot supersede the law of the land.”

Can res judicata be decided as a preliminary issue?

Yes. In certain cases, particularly when a mixed question of law or fact is raised, the issue should await a full-fledged trial after evidence is adduced.

[The Jamia Masjid v. KV Rudrappa,  2021 SCC OnLine SC 792, decided on 23.09.2021]

______________________________________________________________

Appearances before the Court:

For appellant: Senior Advocate V Mohana

For respondents: Senior Advocate Basava Prabhu Patil and Advocate Balaji Srinivasan


*Judgment by: Justice Dr. DY Chandrachud

Know Thy Judge| Justice Dr. DY Chandrachud

Case BriefsSupreme Court

Supreme Court: A 3-Judge Bench of N.V. Ramana, CJI and A.S. Bopanna and Hrishikesh Roy, JJ. upheld the judgment of the Madras High Court passed in a second appeal whereby it had reversed the order of the first appellate court granting injunction in favour of the appellant−plaintiff in a property dispute. Rejecting the contentions of the appellant regarding propriety of High Court’s exercise of jurisdiction in second appeal under Section 100 CPC, the Supreme Court observed:

“[M]erely because the High Court refers to certain factual aspects in the case to raise and conclude on the question of law, the same does not mean that the factual aspect and evidence has been reappreciated.”

The Supreme Court was deciding an appeal filed against the judgment of the Madras High Court passed in the second appeal preferred by the respondent−defendant. The plaintiff had filed an original suit seeking perpetual injunction to restrain the defendant from interfering with his peaceful possession and enjoyment of the suit property. The plaintiff claimed that he had been enjoying the suit property for a period of forty years by paying kist. The defendant disputed the right claimed over the suit property by the plaintiff.

The trial court dismissed the suit. The plaintiff preferred a regular first appeal under Section 96 CPC before the first appellant court. Placing much reliance on the kist receipts produced by him, the first appellate court concluded that the plaintiff was in possession of the suit property. Thereafter, the defendant filed a second appeal under Section 100 CPC before the High Court. The High Court framed a substantial question of law, as to whether the suit without the prayer for declaration is maintainable when especially the title of the plaintiff is disputed. Having taken note of rival contentions, the High Court concluded that the substantial question of law had substance, and therefore set aside the judgment of the first appellate court. Aggrieved, the plaintiff approached the Supreme Court.

The appellant contended that the parameter for interference by the High Court in the second appeal under Section 100 CPC is well established and the High Court cannot travel beyond the same and advert to reappreciate the evidence on factual aspects. It was contended that when the first appellate court, which was the last court for appreciated of facts, had recorded its finding, the same could not be interfered by the High Court on reappreciation of evidence.

Summarising the legal position on the subject, the Supreme Court reasserted the position that in a second appeal under Section 100 CPC there is very limited scope for reappreciating the evidence or interfering with findings of fact rendered by trial court or the first appellate court, and therefore it was necessary to see whether the High Court in the instant case breached the settled principle.

The Supreme Court noted that the findings by the trial court and the first appellate court were divergent. The trial court concluded that the kist receipts would not establish plaintiff’s possession, whereas the first appellate court in fact placed heavy reliance solely on the kist receipts. The Court observed:

“When such divergent findings on fact were available before the High Court in an appeal under Section 100 CPC though reappreciation of the evidence was not permissible, except when it is perverse, but it was certainly open for the High Court to take note of the case pleaded, evidence tendered, as also the findings recorded by the two courts which was at variance with each other and one of the views taken by the courts below was required to be approved.”

The Court said that question of law for consideration will not arise in abstract but in all cases will emerge from the facts peculiar to that case and there cannot be a strait jacket formula.

Even otherwise, the Supreme Court found that the plaintiff’s possession of the suit property was not established. Further, the Court was of the view that the first appellate court misdirected itself and proceeded at a tangent by placing burden on the defendant.

In such view of the matter, the Supreme Court held that it would not be appropriate to interfere with the judgment of the High Court which was in consonance with the fact situation in the case. The appeal was dismissed. [Balasubramanian v. M. Arockiasamy, 2021 SCC OnLine SC 655, decided on 2-9-2021]


Tejaswi Pandit, Senior Editorial Assistant has reported this brief.

Case BriefsHigh Courts

Himachal Pradesh High Court: Tarlok Singh Chauhan, J., allowed an appeal against the judgment of the first appellate court.

The plaintiff had filed a suit for recovery of Rs 1,63,520 from the defendant being the price of fuel wood with interest at the rate of 12% per annum. The defendant had failed to pay the price of wood by the due date and hence, the suit was filed by the plaintiff in the trial court. The defendant whereas while denying the allegations stated that the plaintiff had not approached the court with clean hands. The trial court had dismissed the suit constraining the plaintiff to file an appeal before the first appellate Court. The first appellate Court reversed the findings of the trial Court that too on surmises and conjectures. The first appellate Court proceeded to question the execution of the subsequent receipt Ex. R-1 itself. The plaintiff while filing replication did not deny the execution of the receipt Ex. R-1 and the only defence put up by him was that he had not received Rs 14,451 subsequent to the agreement. It would be evident from a perusal of the receipt that it had been specifically stated therein that the plaintiff had nothing to recover from the defendant of the previous year.

The Court while allowing the appeal explained that the first appellate Court had failed to appreciate documents Ex. A-1 and Ex. R-1 in their right perspective. [Satish Kumar v. Mahant Ram, 2019 SCC OnLine HP 1952, decided on 18-11-2019]

Case BriefsHigh Courts

Bombay High Court at Goa: A Single Judge Bench comprising of C.V. Bhadang, J., dismissed an appeal filed against the concurrent findings of the courts below that resulted in decreeing the suit of the respondents.

The matter related to the validity of the Will in question. The respondents had filed a regular civil suit against the appellant, contending that the said Will was obtained by undue influence exercised by the appellants over the testator. The trial court framed as many as eight issues. And after appreciation of evidence, decreed the suit of the respondents. Appellant preferred an appeal before the district judge. However, the same got dismissed. Aggrieved thus, the appellant approached the High Court. It was submitted that the Appellate Court did not frame proper points which violated Order 41 Rule 31 CPC.

The High Court, on a careful consideration of rival submissions made on behalf of the parties, was of the view that appeal did not raise any substantial question of law. The Court observed that when an appeal is heard on merits, the High Court has to examine whether the failure of the first Appellate Court to formulate the questions as required by Order 41 Rule 31 has resulted in miscarriage of justice. The Court was of the opinion that the points framed by the Appellate Court showed that all the necessary issues were covered. Further, the Court observed that Section 99 of CPC inter alia provides that no decree shall be reversed or substantially varied, nor shall any case be remanded in appeal on account of any error not affecting the merits of the case or the jurisdiction of the court. The Court held that in the instant case there was no such miscarriage of justice that affected the merits of the case. The Court did not find it a fit case to interfere with the impugned judgment. Therefore, the appeal was dismissed. [Shablo Govind Gaude v. Kashinath Govind Gaude,2018 SCC OnLine Bom 1239, dated 14-6-2018]