IN THE HIGH COURT OF GUJARAT AT AHMEDABAD GLUTARIC CIVIL REVISION APPLICATION No 1392 of 1996 For Approval and Signature: Hon'ble MR.JUSTICE J.N.BHATT ============================================================ 1. Whether Reporters of Local Papers may be allowed to see the judgements? 2. To be referred to the Reporter or not? 3. Whether Their Lordships wish to see the fair copy of the judgement? 4. Whether this case involves a substantial question of law as to the interpretation of the Constitution of India, 1950 of any Order made thereunder? 5. Whether it is to be circulated to the Civil Judge? -------------------------------------------------------------- GUJARAT FLUOROCHEMICALS LTD. Versus RANJITNAGAR GRAM PANCHAYAT -------------------------------------------------------------- Appearance: K.S.NANAVATI FOR NANAVATI ASSOCIATES for Petitioner M.B.GANDHI WITH MR HR LATHIGARA for Respondent No. 1 ARUN H MEHTA FOR RESPONDENT NO.2. -------------------------------------------------------------- CORAM : MR.JUSTICE J.N.BHATT Date of decision: 21/09/96 ORAL JUDGEMENT What should be the approach of the court in passing interim or interlocutory order in matters where imposition and recovery of tax ,octroi,cess or revenue is questioned by a party ? Can the court be oblivious of the social-economic consequences of its orders ? How and by taking into consideration which factors, the question as to prima facie CASE ,balance of convenience and irretrievable harm ought to be decided ? The petitioner company is engaged in the business of manufacture of refrigeration gas and for the said purpose has its factory premises on Survey No. 16\3,26and 27 within the revenue limits of Respondent No.1 Ranjitnagar Gram Panchayat. The petitioner company instituted a legal battle by filing Regular Civil Suit No. 84 of 1996 in the court of the learned Civil Judge (Junior Division),Devgadh Baria on 12.8.1996 seeking perpetual injunction restraining the Respondent Panchayat from recovering octroi from the petitioner company on the following main two grounds: (1) that the petitioner company is not within the panchayat limit and area and territorial jurisdiction of the Respondent panchayat and,therefore,the company is not liable to pay any octroi duty . (2) that the action of the Respondent panchayat of seeking to recover octroi duty from the petitioner company was without following the mandatory procedures as prescribed under Rules 3 and 4 of the Gujarat Gram and Nagar Panchayat (Taxes and Fees) Rules,1964 ('1964 Rules'). The Trial Court by its order dated 12.8.1996 granted ex-parte (ad-interim) injunction restraining the Respondent panchayat,its officers and servants from recovering octroi duty from the petitioner company in respect of the goods brought by the petitioner company in its factory premises finding that injury would be caused to the petitioner company if the injunction as prayed for was not granted. The Respondent Panchayat questioned the order of ad=interim ex-parte injunction by filing Misc.Civil Appeal No. 104 of 1996 in the District Court,Panchmahals at Godhra under Order 43,Rule 1(r) of the Code of Civil Procedure,1908 ('the Code') which came be allowed on 23.8.1996. Thus, the order of the Trial Court granting ex-parte ad-interim injunction against the Respondent Panchayat from levying and recovering octroi .,dated 12.8.1996 came to be quashed while allowing the appeal filed by the Panchayat.Hence,this revision under Section 115 of the Code at the instance of the petitioner company,original plaintiff. Learned counsel Mr. K.S.Nanavati while appearing for the petitioner company has vehemently contended that the impugned judgment of the Appellate Court in allowing the appeal and thereby setting aside the order of the Trial court granting ex-parte (ad-interim) injunction against the Respondent Panchayat is perverse, unjust and illegal. He has also contended that the action of the Respondent Panchayat of passing a resolution to levy octroi was in gross breach of mandatory statutory provisions and procedure as prescribed in Rules 3 and 4 of the 1964 Rules. He also submitted that premises of the petitioner company are outside the territorial limit of the panchayat area. Thus, it was the forcefully argued that the petitioner company is outside the jurisdiction and octroiable limit of the Respondent panchayat and,therefore,the action of the Respondent panchayat was null and void.In the circumstances, it was submitted that the Trial court rightly granted the ad-interim ex-parte injunction which was wrongly set aside by the District Court. The aforesaid submissions are traversed and controverted by the learned advocate Mr. M.B.Gandhi for Respondent Panchayat and Mr. Arun H.Mehta for Respondent No.2. They have vehemently contended that the impugned judgment of the District Court is fully justified and requires no interference in a limited jurisdictional sweep of revision under Section 115 of the Code. It was repeatedly suggested during the course of marathon hearing in this court that since the Trial court has yet to decide the merits of the interlocutory injunction application,Ex.5 after hearing all the parties and a reply is also filed by the Respondent panchayat,it would be expedient to get hearing of the said interlocutory injunction application Ex.5 expedited,so as to save time and avoid decision on submissions in this petition. However,the same was not even acceptable to the petitioner company, as a result of which, this court is left with no alternative but to deal with all points and submissions raised during the course of marathon submissions in this revision. The Trial court granted ex-parte injunction restraining the Respondent panchayat from recovering octroi duty till 19.8.1996 by exercising powers under Order 39.,Rule 3 in application below Ex.5 which was under Order 9, rules 1 and 2. Order 39,Rule 1 provide for powers of the court in cases in which temporary injunction may be granted. Order 39,Rule 2 provides for powers of court to grant injunction to restrain repetition or continuance of breach. Order 39,rule 2A provides for consequences of disobedience or breach of injunction. Rule 3 of Order 39 provides that before granting injunction, the court ought to direct notice to the opposite party except as provided in the proviso. Order 39,Rule 3 is very important and relevant . It reads as under : "3. The court shall in all cases,except where it appears that the object of granting the injunction would be defeated by the delay, before granting an injunction, direct notice of the application for the same to be given to the opposite party: Provided that ,where it is proposed to grant an injunction without giving notice of the application to the opposite party, the court shall record the reasons for its opinion that the object of granting the injunction would be defeated by delay,and require the applicant- (a) to deliver to the opposite party,or to send to him by registered post,immediately after the order granting the injunction has been made,a copy of the application for injunction together with- (i) a copy of the affidavit filed in support ofthe application; (ii) a copy of the plaint, and (iii) copies of documents on which the applicant relies,and (b) to file, on the day on which such injunction is granted or on the day immediately following that day,an affidavit stating that the copies aforesaid have been so delivered or sent." It appears from the ex-parte interim injunction order of the Trial court that while exercising powers under Rule 3 of Order 39, it has assumed- (i) that exercise of statutory power by the public authority like that- the Respondent panchayat- is not legal and valid; (ii) that the factory premises of the petitioner company are not within the octroiable limit or territorial area of the Respondent panchayat. (iii) that irreparable harm will be caused in permitting the Respondent panchayat to recover octroi for a short time till the other side is served with notice of hearing. (iv) that balance of convenience is in favour of the petitioner company for granting of ex-parte injunction which otherwise would be defeated if notice is issued and the panchayat is heard. It could prima facie be concluded that the Trial court should not have granted the ex-parte interlocutory injunction restraining the Respondent panchayat from recovering octroi duty from the petitioner company which was in purported exercise of statutory function merely on on the aforesaid assumption and without appreciating the underlying purport and design of the provisions of Order 39,Rule 3 and latest proposition of law on the point. Therefore, the impugned judgment of the District court reversing the said order of the Trial court cannot be said to be unjust,perverse or illegal requiring interference of this court in a revision under Section 115 of the Code wherein the ambit and scope of jurisdiction is very much circumscribed. The apex court had an occasion to consider the question of interim relief being granted against public authorities in the case of Assistant Collector.C.E.Chandan Nagar vs. Dunlop India Ltd.,AIR 1985 SC 330, wherein, it has been observed: "....But since the law presumes that public authorities function properly and bona fide with due regard to the public interest, a court must be circumspect in granting interim orders of far reaching dimensions or orders causing administrative,burdensome inconvenience or orders preventing collection of public revenue for no better reason than that the parties have come to the court alleging prejudice,inconvenience or harm and that a prima facie case has been shown. There can be and there are no hard and fast rules. But prudence,discretion and circumspection are called for. There are several other vital considerations apart from the existence of a prima facie case.There is the question of balance of convenience. There is the question of irreparable injury.,There is the question of public interest. There are many such factors worthy of considerations...". Presumption or assumption about the impugned action of the Respondent-panchayat prima facie raised by the Trial court is contrary to the general presumption of law. Presumption of law is other way round. The law ordinarily presumes that public bodies or statutory authorities function in accordance with law properly.It cannot be presumed at an interlocutory stage without hearing the other side that decision of the Respondent Corporation in levying octroi duty is not in accordance with law.. It is,therefore,necessary to emphasise that the presumption is that action or decision of a public authority or statutory functionary in levying tax.octroi,cess or any other revenue in discharge of statutory function, is prima facie presumed to be in accordance with law,unless otherwise shown.It appears that while passing the ad-interim injunction order,the learned Trial judge failed to appreciate this vital aspect. It must also be remembered that the functioning of the public authorities or bodies is like an open book. The persons in charge of such public bodies are constantly in the public gaze.They are subjected to open criticisms by the Press as well. Again, they are subjected to the supervision either by the Public Accounts committee or Estimate Committee or higher authority,as in the present case, the District Development officer who is empowered to answer such compliance.Statutory provision is also very clear. An aggrieved party or dissatisfied person can also go to a statutory authority like the District Development officer who is empowered to hear and take appropriate action. The public authorities are again subjected to limitations and restrictions imposed upon them under the relevant statutory provisions. The public bodies do not work for private gain. Interference in the day to day working of the public authorities and much more in the sphere of business world where the financial and administrative consequences are likely to be far reaching should be resorted to as a last resort. in rarest of rare cases. Interference by way of judicial review should be restraining the public authority from recovering revenue in form of tax,cess or octroi,as the case may be and that too at a stage of ex-parte ad-interim injunction ought to be considered an extra ordinary remedy to be used sparingly rather than wielding it lightly just for asking at the request of the aggrieved party like the plaintiff-petitioner or a business company who ,as such,once takes a chance without incurring any risk whatsoever. This aspect ought to have been examined while passing the ex-parte interim injunction restraining the Respondent panchayat from recovering levy of octroi duty from the petitioner whose share in the earning of octroi is reported to be almost 90%. It must also be strictly realised that when the taxing authority decides to levy or collect tax or duty like octroi, the authority expresses the common will of the people. In democracy, a person in power has obligation towards the people.When such persons decide to tax the people, a strong presumption would arise that the decision is taken to achieve the objects enshrined in the law or the Constitution as per planned programme. In a Republic democratic set up which is wedded to the doctrine of welfare State,the authority has to perform various socio-economic welfare activities out of such revenue so long as the authority has mandate of the people.Needless to state that moment the taxing authority is prevented from recovering levy of tax or cess or octroi,the mandate given by the people which has been articulated by the Taxing authority by taking decision to levy and recovery tax, is frustrated. Therefore, it cannot be gainsaid that something which is against the basic canons of democracy happens and that too at an interim stage when the validity or otherwise of the impugned action taken by the taxing authority is yet to be resolved and adjudicated upon. Therefore, while considering prima facie case and balance of convenience, at interlocutory stage, the court is obliged to address itself to the following vital aspects : 1 Why tax is being levied and collected ? Is the collection of revenue,only to run the administrative machinery of taxing authority or it has some other socio-economic purpose also ? When and how the amount collected by way of tax is required to be spent ? Can the collection and spending thereof be postponed ? If yes, what will be the effect of the same ? (2) Who bears the burden of tax ? Is it he,who has moved the court to bear the burden of tax, or is it to be borne by the numerous unidentified consumers in the society? (3) If one who has moved the court is not going to suffer the burden of tax,can he claim that he maybe permitted to collect the tax from the people (society) but the society (taxing authority) be restrained from collecting the same amount of tax from him ? It is also a matter of common understanding that in a welfare State like ours, the amount of tax is collected by the authority not only for the purpose of raising revenue to run the administrative machinery but the taxes are collected mainly with a view to carry out the socio-economic development. The amount so collected out of tax or revenue is required to be spent urgently. Normally in all types of indirect taxes,the burden of tax is not borne by the person who initially pays the tax. The burden is, as such,borne by innumerable unidentifiable members of the society. Generally,a person who moves the court is not likely to suffer the burden of tax alone. It is in this context that once it is recognised that the court is under an obligation to keep in mind the socio-economic needs of the society and the court is bound to be aware of its obligations towards the society that the problem of balancing the social interest and individual interest of a party to the litigation would become very easy to be resolved. Needless,therefore, to stress that if the aforesaid considerations are clear in mind, then in such matters ordinarily at interim stage and that too at an ad-interim stage, taxing authority should not be restrained from recovering tax or levying octroi. In a situation like one in the present case, ultimately social interest must prevail over the private interest. It is in these circumstances that the court must cautiously address itself to the vital questions than for private interest. Then why the private interests should prevail with the protection of court's order at the interim stage ? What harm would have been caused if ad-interim injunction would have been granted and order of short notice would have been issued? .The observations of the Trial court that if ad-interim injunction is not granted in favour of the petitioner restraining the Respondent panchayat from recovering octori duty, the petitioner company is likely to suffer injury and,therefore,ad-interim injunction came to be granted are,with due respect, contrary to the celebrated principles of law governing grant of interlocutory injunction and unsupported in light of the facts of the case. If injunction order is not granted at interlocutory stage, there will be no loss or injury to the plaintiff which can be said to be irretrievable. On the other hand, there will be incalculable loss to the society and irreparable damage may be caused to many such public welfare or public utility activities and projects. The court should desist from granting interim orders-injunction and stay orders in a mechanical manner as they cause harm to the other side and in some cases to public interest. It is this context,therefore,that the Honourable apex court has rightly observed in D.D.A.vs. Skipper Construction Co.(p) Ltd.(1996) 4 SCC 622, as under : "It is no answer to say that 'let us make the order and if the other side is aggrieved,let it come and apply for vacating it'" It is observed by the Honourable apex court that such is not a correct attitude. Before making the order, the court must be satisfied that it is a case which calls for such an order. This obligation cannot be jettisoned and the onus placed on the respondents/defendants to apply for vacating it. The principles governing grant of temporary injunction are very well explained and established in catena of judicial pronouncements and,therefore,they do not require any meticulous elaboration.The court cannot ignore undisputable legal position that grant of temporary injunction is always governed by Order 39 Rule 1 and 2. The principles governing grant of temporary injunction are too well settled to require any further elaboration. However, to recapitulate, these are- existence of (i) prima facie case; (ii) balance of convenience in favour of the plaintiff before he can ask for interim injunction and (iii) consideration of balance of convenience necessarily bring into concept of irreparable injury. Needless to add that the very first principle on which interlocutory injunction can be granted is that the court will not grant interlocutory injunction to restrain any wrong for which damage might be the proper remedy. The court is obliged to consider the comparative mischief or inconvenience of both the parties. In order to succeed, the party must establish that inconvenience likely to be caused to him would be greater than which the other side would suffer. This aspect should not have been lost sight of by the learned Trial Judge while passing the ad-interim injunction order below Ex.5 on 12.8.1996. The powers of court under Order 39,Rules 1 and 2 are discretionary and equitable. The principles on which exercise of equitable and discretionary powers rest are very well established. They are- (i) in the facts and circumstances of a given case, there ought to exist strong prima facie case for the plaintiff or petitioners's ultimate chance of success. This principle has been explained and expressed by saying that there is a prima facie case.(ii) as injunction is granted during pendency of the suit,the court shall interfere to protect a party upon injuries which are irreparable. Thus, the expression 'irreparable injury' means that it must be material one which cannot be properly compensated in terms of money by way of damages.The injury need not be actual but may be apprehended' (iii) The court is bound to balance and weigh the mischief or inconvenience to either side before issuing or withholding the injunction. This principle is otherwise expressed by saying that the court is to look to the balance of convenience. It must also be strictly remembered that mere existence of prima facie case is not meant to ipso facto grant of interim injunction. The factors like prima facie case, balance of convenience and irreparable irretrievable harm should co-exist.Even if prima facie case is made out and no balance of convenience is shown,the court cannot grant interlocutory injunction. It must be successfully shown to the satisfaction of the court that all the three factors co-eixst in a case for grant of interlocutory injunction against a party in litigation. In exercising discretionary power, the court should be guided by the settled and celebrated principles of law of interlocutory injunction. There is no power the exercise of which is more delicate which requires greater caution, deliberation and sound disicretion is more dangerous in a case of levy of revenue or doubtful case,than issuing of an injunction. It is a strong arm of equity that never ought to be extended unless to cases of great injury,where courts of law cannot afford an adequate or commensurate remedy in damages. The right must be clear, the injury impending or threatened,so as to be averted only by the protecting preventive process of injunction. But that will not be awarded in doubtful cases or new ones not coming within well established principles; for if it issues erroneously, an irreparable injury is inflicted for which there can be no redress,it being the act of a court,not of the party who prays for it. It will be refused till the courts are satisfied that the case before them is of a right about to be destroyed,irreparably injured, or great and lasting injury about to be done by an illegal act. It is also well established that in such a case, the court owes it to its suitors and its own principles to administer the only remedy which the law allows to prevent the commission of such act. The discretionary power must be exercised with extreme caution and applied only in rarest of rare cases to prevent the authority from imposing or recovering tax,cess or revenue. If discretionary powers are not properly exercised ,instead of becoming an instrument to promote the public cause as well as private welfare,it may become a means of extensive and perhaps an irreparable injustice.These principles are very well explained and expounded in many case law. It would be extremely expedient and appropriate at this juncture to refer to the observations of this court in the judgment rendered in "Anupam Renkdi Cabin Association vs. Jamnagar Municipal Cororation."1995(1) GLH,586,. wherein this court ,after referring similar view of the apex court in the case of Morgan Stanley Mutual Fund vs. Kartick Das,(1994) 4 SCC 225,observed in para 27 thereof as under : "27. The aforesaid observations were quoted with approval in Morgan Stanley 's case and S.Mohan,J. speaking for the court in MorganStanley's case,summarised the principles for the grant of an ex parte injunction as follows : '36. A principle ex-parte injunction could be granted only under exceptional circumstances .The factors which should weigh with the court in the grant of ex parte injunction are: (a) whether irreparable or serious mischief will ensue to the plaintiff. (b) whether the refusal of ex parte injunction would involve greater injustice than the grant of it would involve; (c) the court will also consider the time at which the plaintiff first had notice of the act complained so that the making of improper order against a party in his absence is prevented; (d) the court will consider whether the plaintiff had acquiesced for some time and in such circumstances it will not grant ex parte injunction; (e) the court would expect a party applying for ex parte injunction to show utmost good faith in making the application; (f) even if granted, the ex parte injunction would be for a limited period of time; (g) general principles like prima facie case,balance of convenience and irreparable loss would also be considered by the court.' In the case of Assistant Collecotor of Central Excise,West Bengal vs Dunlop India,AIR 1985 SC 330, a caution is sounded by the Honourable Supreme court that ordinarily, the court should not grant injunction against collection of public revenue.This very important principle was not appreciated by the learned Trial Judge while passing the ex-parte injunction