Facts of the Case

The Revenue filed several appeals before the Delhi High Court against Public Sector Undertakings (PSUs), including International Airport Authority of India Ltd., without producing the mandatory clearance from the Committee on Disputes (COD)/High Powered Committee as required by the Supreme Court’s directions in the ONGC cases.

The Court was required to determine the proper course of action in situations where appeals are instituted without obtaining such clearance. Earlier, appeals were often disposed of with liberty to revive them after obtaining COD clearance. The Court examined whether such a procedure was legally appropriate and consistent with the Supreme Court’s directions.

Issues Involved

  1. Whether appeals filed by Government Departments or Public Sector Undertakings without prior COD clearance are liable to be dismissed outright.
  2. Whether such appeals can be disposed of with liberty to seek revival after obtaining COD clearance.
  3. What procedure should be adopted by courts where appeals are filed merely to save limitation and COD clearance is pending.
  4. Whether proceedings should remain suspended pending consideration by the Committee on Disputes.

Petitioner’s Arguments (Revenue)

  • The Revenue submitted that the appeals should not be dismissed merely because COD clearance had not yet been obtained.
  • It was argued that the appeals could be adjourned or kept pending until the required clearance was produced.
  • The Revenue contended that the appeals had been filed to safeguard limitation and that an opportunity should be granted to obtain and place the necessary approval on record.

Respondent’s Arguments

  • The respondents did not enter appearance in some of the matters.
  • The issue before the Court primarily concerned compliance with the Supreme Court’s mandatory directions regarding COD clearance before litigation between Government departments and PSUs could proceed.

Court Order / Findings

The Delhi High Court extensively reviewed the Supreme Court judgments governing disputes between Government Departments and Public Sector Undertakings.

Purpose of COD Clearance

The Court noted that the Supreme Court established the Committee on Disputes mechanism to prevent wasteful litigation between Government entities and PSUs, thereby conserving public resources and encouraging resolution through administrative mechanisms rather than court proceedings.

Classification of Cases

The Court classified such matters into four categories:

Category I

Cases pending on the date the Committee was constituted.

Category II

Cases filed after constitution of the Committee with the Committee’s permission.

Category III

Cases filed without Committee clearance merely to save limitation.

Category IV

Cases where the Committee considered the matter and either declined permission for litigation or failed to resolve the controversy.

Treatment of Category III Cases

The Court held that appeals filed without COD clearance merely to save limitation should not be dismissed outright, provided the appellant has made a proper reference to the Committee within the period stipulated by the Supreme Court.

In such cases:

  • Proceedings should remain suspended.
  • The appeal should stay pending until the Committee takes a decision.
  • Dismissal with liberty to revive is not the proper course because it creates procedural complications and is not contemplated by the Supreme Court’s directions.

Effect of Failure to Make Reference

The Court clarified that where no proper reference has been made to the Committee or no evidence of such reference is produced, the appeal may be dismissed for failure to comply with the mandatory requirement laid down by the Supreme Court.

Important Clarification

The Court made the following important clarifications:

  1. Filing an appeal without COD clearance solely to save limitation is not prohibited.
  2. However, a proper reference to the Committee must be made within the time prescribed by the Supreme Court.
  3. Once such reference is made, court proceedings should remain suspended pending the Committee’s decision.
  4. Courts should avoid disposing of appeals with liberty to revive later, as such a procedure is not expressly sanctioned and may create practical difficulties.
  5. If no evidence of a valid reference to the Committee is produced, the appeal is liable to dismissal.

Final Directions Issued by the Court

The Court directed that:

  • The appellants must furnish within four weeks evidence showing that a reference had been made to the Committee on Disputes in accordance with the Supreme Court’s procedure.
  • Where such evidence is furnished, further proceedings in the appeals shall remain suspended until the Committee takes a decision.
  • Cases in which such evidence is not produced shall be listed for appropriate orders, including dismissal.

Sections / Legal Provisions Involved

  • Directions issued by the Supreme Court in Oil and Natural Gas Commission v. Collector of Central Excise, 1992 Supp (4) SCC 541
  • Oil and Natural Gas Commission v. Collector of Central Excise, (1994) 116 CTR (SC) 643
  • Collector of Central Excise, Calcutta v. Indian Oil Corporation Ltd., (1999) 9 SCC 181
  • Canara Bank v. National Thermal Power Corporation, (2001) 1 SCC 43
  • Chief Conservator of Forests v. Collector & Others, (2003) 3 SCC 472
  • Mahanagar Telephone Nigam Ltd. v. Chairman, Central Board, Direct Taxes & Anr., (2004) 5 SCALE 705

Link to Download the Order   https://delhihighcourt.nic.in/app/case_number_pdf/2005:DHC:241-DB/61322092005ITA4642005_154214.pdf

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