Etah Gramin Bank v. Commissioner Of Income-Tax And Others

1. Heard Sri Ravi Kant, senior advocate, assisted by Sri Shakil Ahmad, advocate on behalf of the petitioner and Sri Bharat Ji Agarwal, senior advocate, assisted by Sri A.N Mahajan, advocate, on behalf of all the contesting respondents Nos. 1, 2 and 3. At the outset, the preliminary objection regarding maintainability of the present writ petition under article 226, Constitution of India, is being raised on behalf of the respondents, relying upon the decision in the case of Chief Conservator of Forests, Government of A.P v. Collector, [2003] 3 SCC 472, wherein vide paragraph 14 of the above reported judgment, the apex court observed “… It is neither appropriate nor permissible for two Departments of a State or the Union of India to fight litigation in a court of law. Indeed, such a course cannot but be detrimental to the public interest as it also entails avoidable wastage of public money and time. Various Departments of the Government are its limbs and, therefore, they must act in co-ordination and not in confrontation. Filing of a writ petition by one Department against the other by invoking the extraordinary jurisdiction of the High Court is not only against the propriety and polity as it smacks of indiscipline but is also contrary to the basic concept of law which requires that for suing or being sued, there must be either a natural or a juristic person. The States/Union of India must evolve a mechanism to set at rest all inter-Departmental controversies at the level of the Government and such matters should not be carried to a court of law for resolution of the controversy. In the case of disputes between public sector undertakings and the Union of India, this court in Oil and Natural Gas Commission v. CCE, [1992] Supp 2 SCC 432 called upon the Cabinet Secretary to handle such matters… this court directed the Central Government to set up a Committee consisting of representatives… to ensure that no litigation comes to court or to a Tribunal without the matter having been first examined by the Committee and its clearance for litigation…….”.

2. The aforesaid decision has been followed by the apex court in the case of Mahanagar Telephone Nigam Ltd. v. Chairman, CBDT, [2004] 267 ITR 647, wherein the apex court observed (page 652):

“We have heard the parties.

Undoubtedly, the right to enforce a right in a court of law cannot be effaced. However, it must be remembered that courts are overburdened with a large number of cases. The majority of such cases pertain to Government Departments and/or public sector undertakings. As is stated in Chief Conservator of Forests' case, [2003] 3 SCC 472 it was not contemplated by the framers of the Constitution or the Civil Procedure Code that two Departments of a State or Union of India and/or a Department of the Government and a public sector undertaking fight a litigation in a court of law. Such a course is detrimental to public interest as it entails avoidable wastage of public money and time. These are all limbs of the Government and must act in co-ordination and not confrontation. The mechanism set up by this court is not, as suggested by Mr. Andhyarujina, only to conciliate between Government Departments. It is also set up for purposes of ensuring that frivolous disputes do not come before courts without clearance from the High Powered Committee. If it can, the High Powered Committee will resolve the dispute. If the dispute is not resolved the Committee would undoubtedly give clearance. However, there could also be frivolous litigation proposed by a Department of the Government or a public sector undertaking. This could be prevented by the High Powered Committee. In such cases there is no question of resolving the dispute. The Committee only has to refuse permission to litigate. No right of the Department/public sector undertaking is affected in such a case. The litigation being of a frivolous nature must not be brought to court. To be remembered that in almost all cases one or the other party will not be happy with the decision of the High Powered Committee. The dissatisfied party will always claim that its rights are affected, when in fact, no right is affected. The Committee is constituted of highly placed officers of the Government, who do not have an interest in the dispute, it is thus expected that their decision will be fair and honest. Even if the Department/public sector undertaking finds the decision unpalatable, discipline requires that they abide by it. Otherwise the whole purpose of this exercise will be lost and every party against whom the decision is given will claim that they have been wronged and that their rights are affected. This should not be allowed to be done.”

3. As in the case of Mahanagar Telephone Nigam Ltd., [2004] 267 ITR 647 (SC), we find that in this case absolutely what is happening. The decisions of the Supreme Court in view of the above settled proposition of law are binding on us. We hold that unless clearance is given to the petitioner, these proceedings cannot be permitted in the High Court.

4. Learned counsel for the petitioner, however, referred to section 3 of the Regional Rural Banks Act, 1976, wherein the petitioner-bank is constituted. For convenience, we produce sections 3, 4, 5 and 9 of the Act:

“3. Establishment and incorporation of Regional Rural Banks.—(1) The Central Government may, if requested so to do by a sponsor bank, by notification in the Official Gazette, establish in a State or Union territory, one or more regional rural banks with such name as may be specified in the notification and may by the said or subsequent notification, specify the local limits within which each regional rural bank shall operate.

(2) Every regional rural bank shall be a body corporate with perpetual succession and a common seal with power, subject to the provisions of this Act, to acquire, hold and dispose of property and to contract and may sue and be sued in its name.

(3) It shall be the duty of the sponsor bank to aid and assist the regional rural bank, sponsored by it, by—

(a) subscribing to the share capital of such regional rural bank,

(b) training personnel of such regional rural bank; and

(c) providing such managerial and financial assistance to such regional rural bank during the first five years of its functioning, as may be mutually agreed upon between the sponsor bank and regional rural bank:

Provided that the Central Government may, either on its own motion or on the recommendation of the National Bank, extend the said period of five years by such further period, not exceeding five years at a time, subject to such conditions as it may deem fit to impose.

4. Offices and agencies.—(1) A regional rural bank shall have its head office at such place in the notified area as the Central Government may, after consultation with the (National) Bank and the sponsor bank, specify by notification in the Official Gazette…

5. Authorised capital.—The authorised capital of each regional rural bank shall be (five crores of rupees, divided into five lakhs) of fully paid-up shares of one hundred rupees each:

Provided that the Central Government may, after consultation with the (National) Bank and the sponsor bank, increase or reduce such authorised capital; so, however, that the authorised capital shall not be reduced below twenty-five lakhs of rupees, and the shares shall be in all cases, fully paid-up shares of one hundred rupees each…

9. Board of directors.—(1) The board of directors shall consist of the Chairman appointed under sub-section (1) of section 11, and the following other members, namely:—

(a) two directors, who are not officers of the Central Government, State Government, Reserve Bank, National Bank, sponsor bank or any other bank, to be nominated by the Central Government;

(b) one director, who is an officer of the Reserve Bank, to be nominated by that bank;

(c) one director, who is an officer of the National Bank, to be nominated by that bank;

(d) two directors, who are officers of the sponsor bank, to be nominated by that bank; and

(e) two directors, who are officers of the concerned State Government, to be nominated by that Government.

(2) The Central Government may increase the number of members of the board so, however, that the number of directors does not exceed fifteen in the aggregate and also prescribe the manner in which the additional number may be filled in.”

5. From the aforesaid provision, there is no doubt that the bank is established by the Central Government and it acts as limb of the Central Government. Apart from it the petitioner-bank virtually functions as an organisation of the Central Government. It is virtually a Department of the Central Government since its management and function is completely in the control of the Central Government. The aforesaid facts are also admitted by the petitioner in paragraphs 3, 4 and 6 of the writ petition, which are reproduced:

“3. That the petitioner-bank is a rural bank established by the Central Government by a notification under section 3 of the Regional Rural Banks Act, 1976 (called the Act for short). The capital of the petitioner-bank comprises as follows:

(i) Union Government of India 50% (ii) Government of U.P 15% (iii) Canara Bank 35%

4. That it may be stated here that the petitioner-bank is State within the meaning of article 12 of the Constitution of India. It is fully owned and controlled by the Government……

6. That it may be stated here that under the Act, the Central Government exercises a very close control and supervision over the activities of the bank. Under section 5 of the Act, the authorised capital of each regional rural bank is Rs. 5 crores. However, under the proviso thereto the Central Government may, in consultation with the National Bank and the sponsoring bank, increase or reduce the authorised capital.”

6. Here itself we also note the argument made on behalf of the petitioner that in case the petitioner goes to obtain clearance from the High Powered Committee, the same has no jurisdiction to pass stay/interim order and secondly, there is a long queue and the application of the petitioner (for seeking appropriate permission to approach the court) itself may be rendered infructuous by passage of time since the impugned order itself may be exhausted.

7. We have considered the aforesaid submission. We do not agree that the High Powered Committee has no authority or jurisdiction to pass appropriate order may be of ad interim measure, in the given facts of the case so that real relief of the aggrieved party is not lost. The High Powered Committee may be functioning purely as an administrative body but when the petitioner and the respondents both are under the control of the Central Government, we have no doubt that such High Powered Committee can issue instructions/order which shall be binding in administrative exigency upon both and we have no doubt that the Department against which such order is passed shall honour the same. As far as the question of long queue is concerned, the Supreme Court already observed in the above-noted case that courts are also overburdened and in that background this self-mechanism was provided to shed unnecessary litigation between the Departments.

8. In that view of the matter, the petitioner may approach the High Powered Committee by filing appropriate application for seeking permission along with an application for interim relief, if any. We have no doubt that the High Powered Committee shall consider the interim application on the merits exercising its unfettered discretion on the basis of material on record before it. Since the interim order is required imminently and in order to save the lis, we have no doubt that the High Powered Committee shall consider the application for interim order and pass appropriate order as may be warranted under the facts and circumstances of the case within 10 days of the receipt of the application provided it is filed within one week from today. In view of the above, we uphold the preliminary objection raised by the respondent. It is not disputed before us that no clearance from the High Powered Committee is obtained.

9. The writ petition is dismissed as not maintainable.