12 Jun 2010

Decision of Minister without consulting Cabinet invalid: Supreme Court

Holding that propriety of action and following the Rules of Business for conduct of Governmental action framed in terms of the Constitutional provisions were mandatory and required strict adherence, the Supreme Court in a recent decision has declared that the decision of the Minister and the subsequent Notifications issued thereon without having consulted and obtained the approval of the Cabinet in the State of Goa were violative of the Rules and procedures and thus invalid. 

The Supreme Court, setting to naught the challenge to the correctness of the decision of the Bombay High Court which had set aside the Notifications issued by the Ministry of Power, State of Goa declared the law inter alia as under;
50) The summary of the arguments canvassed by learned senior counsel Shri F.S. Nariman is that, the Rules of Business framed under Article 166(3) of the Constitution is only directory and by no stretch of imagination, it can be said to be mandatory and, therefore, non compliance of the Rules of Business cannot be declared as illegal or void ab-initio. In justification of the judgment of the Bombay High Court, it is the stand of Dr. Rajeev Dhawan, learned senior counsel that at-least some of the provisions of Rules of Business framed by Govt. of Goa are mandatory and non-observation of the same would vitiate the circulars/orders/notifications etc.
51) In order to appreciate the rival contentions canvassed by learned senior counsels, it would be appropriate, to extract Article 166 of the Constitution of India and the same is as under:
Article 166 Conduct of business of the Government of a State - (1) All executive action of the Government of a State shall be expressed to be taken in the name of the Governor.
(2) Orders and other instruments made and executed in the name of the Governor shall be authenticated in such manner as may be specified in rules to be made by the Governor, and the validity of an order or instrument which is so authenticated shall not be called in question on the ground that it is not an order or instrument made on executed by the Governor.
(3) The Governor shall make rules for the more convenient transaction of the business of the Government of the State, and for the allocation among Ministers of the said business insofar as it is not business with respect to which the Governor is by or under this Constitution to act in his discretion.” 
52) Clause (1) of Article 166 of the Constitution says, that, whenever executive action is to be taken by way of an order or instrument, it shall be expressed to be taken in the name of the Governor in whom the executive power of the State is vested. Under Clause (2), the orders and instruments made and executed in the name of the Governor shall be authenticated in the manner specified in the rules. Under Clause (3) of Article 166 of the Constitution, the Governor is authorized to make rules for the more convenient transaction of business of the Government of the State and for the allocation among its Ministers of the business of Government. All matters excepting those in which the Governor is required to act in his discretion have to be allocated to one or the other of the Ministers on the advice of the Chief Minister. Apart from allocating business amongst Ministers, the Governor can also make rules on the advice of the Council of Ministers for more convenient transaction of business.
53) In the case on hand, we are required to examine the contentions of the appellants on this issue with reference to the Business Rules framed by Governor of Goa under Article 166 (3) of the Constitution of India. Rule 7(2) of the Business Rules of the Government of Goa states, that, no proposal which requires previous concurrence of Finance Department under the said Rule, but in which Finance Department has not concurred, may not be proceeded with, unless the Council of Ministers has taken a decision to that effect. The wordings of this Rule are different from the provisions of Rule 9 of the Business Rules of Maharashtra and have to be read in context with the provisions of Rule 3 of the Business Rules of Government of Goa which states that the business of the Government shall be transacted in accordance with the Business Rules. Under Rule 7(2) thereof, the concurrence of the Finance Department is a condition precedent. Likewise Rule 6 of the Business Rules states, that, the Council of Minister shall be collectively responsible for all executive orders passed by any Department in the name of the Governor or contract made in exercise of the power conferred on the Governor or any other officer subordinate to him in accordance with the Rules, whether such orders or contracts are authorized by an individual minister on a matter pertaining to the Department under his charge or as the result of discussion at a meeting of the Council of Minister or otherwise. This Rule requires that an executive order issued from any department in the name of the Governor of the State should be known to the Council of Ministers so as to fulfill the collective responsibility of the Council of Ministers. Further Rule 7 of the Business Rules requires that no Department shall without the concurrence of the Finance Department issue any order which may involve any abandonment of revenue or involve expenditure for which no provisions have been made in the Appropriation Act or involve any grant of land or assignment of revenue or concession, grant, lease or licence in respect of minerals or forest rights or rights to water, power or any easement or privilege or otherwise have a financial implications whether involving expenditure or not. From a combined reading of the provisions of Rules 7, 3 and 6 of the Business Rules of the Government of Goa the conclusion would be irresistible that any proposal which is likely to be converted into a decision of the State Government involving expenditure or abandonment of revenue for which there is no provision made in the Appropriation Act or an issue which involves concession or otherwise has a financial implication on the State is required to be processed only after the concurrence of the Finance Department and cannot be finalized merely at the level of the Minister in charge. The procedure or process does not stop at this. After the concurrence of the Finance Department the proposal has to be placed before the Council of Ministers and/or the Chief Minister and only after a decision is taken in this regard that it will result in the Decision of the State Government. Therefore the High Court has rightly rejected the arguments of the appellants herein based on the judgment of the Full Bench of the High Court. The High Court has observed, that the Rules of Business are framed in such a manner that the mandate of the provisions of Articles 154, 163 and 166 of the Constitution are fulfilled. Therefore, if it is held that the non-compliance of these Rules does not vitiate the decisions taken by an individual Minister concerned alone the result would be disastrous. In a democratic set up the decision of the State Government must reflect the collective wisdom of the Council of Ministers or at least that of the Chief Minister who heads the Council. The fact that the decisions taken by the Minister alone were acted upon by issuance of Notification will not render them decisions of the State Government even if the State Government chose to remain silent for a sufficient period of time or the Secretary concerned to the State Government did not take any action under Rule 46 of the Business Rules. If every decision of an individual Minister taken in breach of Rules are treated to be those of the State Government within the meaning of Article 154 of the Constitution, the result would be chaotic. The Chief Minister would remain a mere figure head and every Minister will be free to act on his own by keeping the Business Rules at bay. Further it would make it impossible to discharge the Constitutional responsibility of the Chief Minister of advising the Governor under Article 163. Therefore, it is difficult to accept the contentions of the appellants that Business Rules are directory. 
54) We also subscribe to and uphold the view of the High Court that the Business Rules 3,6,7 and 9 are Mandatory and not Directory and any decision taken by any individual Minister in violation of them cannot be termed as the decision of the State Government. 
55) We are fortified in our view by several decisions of this Court. In K.K. Bhalla vs. State of M.P., [2006 (3) SCC 581], the facts were that the State of M.P. had allotted certain land under the Jabalpur Development Authority (JDA) to a person at concessional rates to set up a newspaper printing press, though the land was earmarked for commercial use. The Court held :
“The purported policy decision adopted by the State as regards allotment of land to the newspaper industries or other societies was not a decision taken by the appropriate Ministry. If a direction was to be issued by the State to the JDA, it was necessary to be done on proper application of mind by the cabinet, the concerned Minister or by an authority who is empowered in that behalf in terms of the Rules of the Executive Business framed under Article 166 of the Constitution of India. Such a direction could not have been issued at the instance of the Chief Minister or at the instance of any other officer alone unless it is shown that they had such authority in terms of the Rules of the Executive Business of the State. We have not been shown that the Chief Minister was the appropriate authority to take a decision in this behalf.” 
56) In State of U.P. vs. Neeraj Avasthi, [2006 (1) SCC 667], this Court held that the power of the State Government was confined to issuing directions to State Agricultural Produce Market Board on the question of policy and observed :
“Such a decision on the part of the State Government must be taken in terms of the Constitutional scheme, i.e., upon compliance of the requirement of Article 162 read with Article 166 of the Constitution of India. In the instant case, the directions were purported to have been issued by an officer of the State. Such directions were not shown to have been issued pursuant to any decision taken by a competent authority in terms of the Rules of Executive Business of the State framed under Article 166 of the Constitution of India. …. We are therefore of the opinion that the direction by the State was not strictly in accordance with law.”
57) In Gulabrao Keshavrao Patil (supra), this Court held that a decision of a Minister was not an order of the Government in view of non-compliance with Article 166.
59) It is appropriate to further consider some of the Business Rules to deal with the issue brought before us. Though the High Court in the judgment impugned has referred to various Rules, we deem it necessary to refer to only those which are relevant for our purpose. Rule 10 of the Business Rule requires submission of all cases referred to in the Schedule to the Chief Minister after consideration by the Minister in charge so as to obtain the Chief Ministers’ orders for circulation of the case or to bring it up for consideration at a meeting of the Council of Ministers. Rule 13 provides that when it is decided to bring the case before the Council, the department concerned should, unless otherwise directed by the Chief Minister, prepare a memorandum indicating precisely the salient facts of the case and points for decision and copies thereof circulated to the Council by the Secretary. Rule 14 requires in a case which involves or concerns more than one Department, the Minister by previous discussion to arrive at an agreement and if such agreement is reached the memorandum referred to in Rule 13 supra should contain the joint recommendations of the Ministers and if no agreement is reached the points of differences and views of each of the Minister should be stated in the memorandum. Items No.5,9 & 30 in the Schedule to the Rules relate to proposal which have a bearing on the Finances of the State and which do not have the concurrence or consent of the Finance Minister’s proposal involving important change in the policy and practice; proposals to vary or reverse a decision previously taken by the Council. Under Rule 16 the decisions of the Council in each case should be recorded and placed with the records of the case after their approval by the Chief Minister. Extracts of the decision should be sent to the Secretary of the Department who should take necessary action thereon. Rule 17 enables a Minister in Charge of a Department on the basis of standing orders to give such directions as he thinks fit for disposal of cases in his department and further requires the Secretary of the Department concerned to simultaneously submit to the Chief Minister and the Governor the statement showing the particulars of any important cases disposed of by the Minister. Rule 20 stipulates, that, when the subject involves or relates to more than one Department, no order should be issued or the case be laid before the council until the case has been considered by all the departments involved or concerned, unless the case is one of extreme urgency. In the case on hand, the decisions impugned involve and concern not only the department of power but also the departments of Industries and Finance and in view of the provisions of Rule 20, the decisions to finalize the Notifications at his level without placing the proposal before the Chief Minister or the Council of Minister fell out side the purview of the Power Minister.
61) At this stage, we find it necessary to refer to some of the Constitutional provisions to deal with the issue raised by the appellants. Under Article 154 of the Constitution of India, the Governor is vested with the Executive Power of the State and he shall exercise them either directly or through Officers subordinate to him in accordance with the provisions of the Constitution. The Governor is advised by the Council of Ministers with the Chief Minister at its head in exercise of his functions except those specifically stated in discharge of his functions as the head of the State. The Council of Minister is collectively responsible to the Legislative Assembly of the State. The Rules of business framed under Article 166(3) of the Constitution are for convenient transaction of the business of the Government and for allocation of the business among the Ministers. Article 166(2) of the Constitution requires the decision of the State Government to be authenticated as per the Rules framed thereunder. Any decision taken by the State Government therefore, reflects the collective responsibility of the Council of Ministers and their participation in such decision making process. The Chief Minister as the Head of the Council of Ministers is answerable not only to the Legislature but also to the Governor of the State. The Governor of the State as the Head of the State acts with the aid and advice of the Council of Ministers headed by the Chief Minister. The Rules framed under Article 166 (3) of the Constitution are in aid to fulfill the Constitutional Mandate embodied in Chapter II, Part III of the Constitution. Therefore, the decision of the State Government must meet the requirement of these Rules also
62) Before the High Court as also before us it was contended by the appellants herein, that, the Rules framed under Article 166(3) are only directory in character and failure to comply with them does not vitiate the decision taken by the State Government. The High Court after considering the various judgments cited before it has repelled the said contention to hold that the said Rules are mandatory and noncompliance thereof would be disastrous. The reasoning adopted by the High Court to arrive at such a conclusion is sound and in accordance with the constitutional mandate. The decisions of the State Government have to be in conformity with the mandate of Article 154 and 166 of the Constitution as also the Rules framed thereunder as otherwise such decision would not have the form of a Government decision and will be a nullity. The Rules of Business framed under Article 166(3) of the Constitution are for convenient transaction of the business of the Government and the said business has to be transacted in a just and fit manner in keeping with the said Business Rules and as per the requirement of Article 154 of the Constitution. Therefore, if the Council of Ministers or Chief Minister has not been a party to a decision taken by an Individual Minister, that decision cannot be the decision of the State Government and it would be non-est and void ab initio. This conclusion draws support from the Judgment of this Court in the case of Haridwar Singh Vs. Bagun Sambrui & ors (1973) 3 SCC 889. This Court in the said case was dealing with the Business Rules of the State Of Bihar framed under Article 166 (3) of the Constitution of India and the observations of this Court on the issue apply to the case on hand in all force. This Court observed:
" 14. Where a prescription relates to performance of a public duty and invalidate acts done in neglect of them would work serious general inconvenience or injustice to persons who have no control over those entrusted with the duty, such prescription is generally understood as mere instruction for the guidance of those upon whom the duty is imposed.
15. Where however, a power of authority is conferred with a direction that certain regulation or formality shall be complied with, it seems neither unjust nor incorrect to exact a rigorous observance of it as essential to the acquisition of the right or authority.
16. Further, Rule 10(2) makes it clear that where prior consultation with the Finance Department is required for a proposal, and the department on consultation does not agree to the proposal, the department originating the proposal can take no further action on the proposal. The Cabinet alone would be competent to take a decision. When we see that the disagreement of the Finance Department with a proposal on consultation, deprives the Department originating the proposal of the power to take further action on it, the only conclusion possible is that prior consultation is an essential prerequisite to the exercise of power".
63) As observed by us earlier, these observations apply equally to the case on hand and in light of this view, we have no difficulty in holding that the Business Rules framed under the Provisions of Article 166 (3) of the Constitution are mandatory and must be strictly adhered. Any decision by the Government in breach of these Rules will be a nullity in the eyes of law.
64) It is in this legal background that the issues raised before us have to be dealt with. The High Court has examined the files placed before it by the State Government and noted the facts reflected by the said records. As recorded by the High Court, the rebate of 25% in power tariff was sought to be withdrawn by the State Government with effect from 1.4.1995 pursuant to a Cabinet meeting held on 21.07.1994 and a Notification dated 31.03.1995 was issued therefor. The 1st respondent's motion in the State Assembly for a Calling Attention Notice evidently moved the State Government to evolve a Scheme for grant of rebate of 25% for the period between 1.10.1991 to 31.03.1995. The Power Minister therefore, on 08.07.1995 called upon the Chief Electrical Engineer to formulate such a scheme who prepared accordingly a note regarding the proposed scheme. Since the earlier Notification was rescinded by the Notification dated 31.03.1995, a clarification was sought from the Law Department on the extension of the period of rebate of 25%. On 25.08.1995, a note was put up by the Law Department indicating that the 25% rebate would be available only for the period between 01.10.1991 to 31.03.1995 and industrial units supplied with power on/or after 31.03.1995 would not be entitled for the same. On 14.02.1996, the Chief Electrical Engineer submitted a note containing a proposal to amend the rebate notification requesting to extend the benefit of the rebate of 25% to Extra High Tension consumers and sought approval thereof. The said draft when referred to the Law Department for its opinion, it was opined thereon that it was legally impermissible to give retrospective effect to the proposed Notification. However, though the said amendment was approved by the then power minister, the same was not given effect to in view of the elections scheduled on 02.05.1996. On 03.05.1996, the Power Minister passed an order to issue the amendment Notification as by then the elections were over and the notification dated 15.05.1996 was accordingly issued, though the subject matter was never placed before the Council of Ministers or the Chief Minister. The Notification was issued solely on the directions of the Power Minister despite the opinion of the Law Secretary that retrospective effect to the proposed amendment could not be given as it involved additional class of consumers of power, which is in violation of the Business Rules of Government of Goa. Therefore the said Notification is unsustainable and the High Court has rightly held it be non-est and as void ab initio.

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