Case: M/S. M.R.F. Ltd Vs. Manohar Parrikar

the powers of a managing director in the transaction of the companys affairs. It is, I think, clear that the transaction there would not have been supported had it not been in this ordinary course or had the agent been acting merely as one of the ordinary directors of the company. I know of no case in which an ordinary director, acting without authority in fact, has been held capable of binding a company by a contract with a third party, merely on the ground that that third party assumed that the director had been given authority by the Board to make the contract. A limitation of the right to make such an assumption is expressed in Buckley on the Companies Acts, 10th Edition, at p. 175, in the following concise words: -- And the principle does not apply to the case where an agent of the company has done something beyond any authority which was given to him, or which he was held out as having." 73) This exception to the doctrine of indoor management has been subsequently adopted in many Indian cases. They are B. Anand Behari Lal v. Dinshaw and Co. (Bankers) Ltd, AIR 1942 Oudh 417 and Abdul Rehman Khan & Anr. v. Muffasal Bank Ltd. and Ors, AIR 1926 All 497 . Applying the exception to the present scenario, there is sufficient doubt with regard to the conduct of the Power Minister in issuing the Notifications dated 15.5.1996 and 01.08.1996. Therefore there is definite suspicion of irregularity which renders the doctrine of indoor management inapplicable to the present case. 74) It was also argued by the learned senior counsel for the appellant, that the Notification dated 01.08.1996 was rescinded by Notification dated 24.07.1998 and, therefore, there was no need for the High Court to adjudicate upon the impugned Notification dated 01.08.1996 and, should have dismissed the writ petition filed by way of public interest as having become infructuous. This issue need not detain us for long in view of our answer to the issue of "Doctrine of Merger" canvassed by learned senior counsel. 75) Arguments have been advanced before us based on the principles of res judicata, Doctrine of Estoppel and the principles underlining the provisions of Order II Rule 2 of the Code of Civil Procedure that the High Court in earlier batch of writ petitions has gone into and given findings with regard to the Notifications dated 30.9.1991; 31.3.1995; 15.5.1996; 1.8.1996 and 24.7.1998 and the judgment of the High Court dated 21.1.1999 rendered therein had merged with the order of the Supreme Court dated 13.2.2001 and the Notifications questioned in the present round of litigation are Notifications dated 15.5.1996 and 1.8.1996 and the State at no point of time before any Court having raised the issue of these two Notifications being void ab initio for want of compliance with the provisions of the Business Rules framed under Article 166(3) of the Constitution of India, the High Court ought to have rejected the plea of the State Government that the Notifications were illegal or were in violation of the Rules of Business and dismissed the Writ Petition on the principles of res judicata, Doctrine of Estoppel and the principles embodied in Order II Rule 2 of the Code of Civil Procedure. It was urged that the State not having raised this at any point of time before any court should not be allowed to do so. We do not find any merit in these contentions. As noticed by us earlier in the judgment, the issue regarding the validity or legality of the Notifications dated 15.5.1996 and 1.8.1996 was never raised in the earlier batch of writ petitions before the High Court and the High Court never had an opportunity or occasion to look into, consider and pronounce upon the validity of the same with reference to the Business Rules framed under Article 166 (3) of the Constitution. These principles pressed into service by the appellants cannot operate against the State Government merely because the State did not agitate either before the High Court or this Court the legality or validity of these notification in the earlier round of litigation when it had an occasion to do so and the State Government cannot be deemed to have accepted the legality of the Notification and waived its objection or challenge thereto. The Doctrine of Estoppel therefore has no application at all more so, in view of the illegality the notifications dated 15.05.1996 and 01.08.1996 suffer from in view of their non-compliance with the provisions of the Business Rules. In our opinion the fact that the State Government did not raise these objections in the earlier batch of Writ Ptitions does not disentitle it to such a stand or prevents it from raising its objections based on legal provisions. This contention of the appellants requires to be turned down for yet another reason in that the 1st respondent herein was not a party to the earlier batch of Writ Petitions before the High Court or this Court. Therefore the principles of res judicata or for that matter even the Doctrine of Estoppel will not apply to or operate against him. Further the contention that the Notification dated 1.8.1996 did not create any additional financial liability on the State Government warranting approval by the Cabinet or the compliance of the Business Rules before it was brought into effect deserves to be rejected having regard to the figures placed on record which the High Court has noticed in its judgment. These figures of additional liability likely to be brought on the State by Notification dated 1.8.1996 falsify the statement of the appellants. Therefore the same deserves to be rejected. 76) Before parting with these appeals, we make it clear that the observations made by us in the course of our judgment is only for the purpose of disposing of these appeals and shall not be treated as an expression on the conduct of the then the Power Minister. 77)

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]In our view, the principle of merger essentially refers to the merging of the orders passed by the superior courts withthat of theorders passed by a subordinate court. This Court in the case of Shankar Ramachandra Abhyankar Vs. Krishnaji Dattatreya Bapat (AIR 1970 SC 1 ) has laid down the condition as to when there can be a merger of the orders of the superior court withthat of theorders passed by the lower court. This Court stated, that, if any judgment pronounced by the superior court in the exercise of its appellate or revisional jurisdiction after issue of a notice and a full hearing in the presence of both the parties, then it would replace the judgment of the lower court. Thus, constituting the judgment of the superior court the only final judgment to be executed in accordance with law by the Court below. The merger is essentially of the operative part of the order and the principle of merger of the order of the subordinate Court with the order of the superior Court cannot be applied when there is no order made by the superior Court on merits and the controversy between the parties has not been looked into by the superiorissue of merger has no bearing in the facts and circumstances of the present petitions, since, the issue that was decided by the High Court in the earlier batch of Writ Petitions and the issue that was raised and considered in the subsequent public interest litigation is entirely different. Secondly, in our view, the principles of res judicata is also not attracted since the issue raised and considered in the subsequent public interest litigation had not been raised and considered in the earlier round of litigation. It would be worthwhile to recall the observations made by this Court in the case of Madhvi Amma Bhawani Amma and Ors. Vs. Kunjikutty Pillai Meenakshi Pillai and Ors. (2000) 6 SCC 301 , wherein the Court has observed that in order to apply general principle of res judicata, Court must find, whether an issue in a subsequent suit, was directly and substantially in issue in the earlier suit or proceedings, was it between the same parties, and was it decided by such Court. Thus, there should be an issue raised and decided, not merely a finding on any incidental question for reaching such a decision. So, if such issue is not raised and if on any other issue, if, incidentally any finding is recorded, it would not come within the periphery of principle of resis clear that a decision to be the decision of the Government must satisfy the requirements of the Business Rules framed by the State Government under the provisions of Article 166(3) of the Constitution of India. In the case on hand, as have been noticed by us and the High Court, the decisions leading to the notifications do not comply with the requirements of Business Rules framed by the Government of Goa under the provisions of Article 166(3) of the Constitution and the Notifications are the result of the decision taken by the Power Minister at his level. The decision of the individualcannot be treated asthe decision of the State Government and the Notifications issued as a result of the decision of the individual Minister which are in violation of the Business Rules are void ab initio and all actions consequent thereto are null andhave been advanced before us based on the principles of res judicata, Doctrine of Estoppel and the principles underlining the provisions of Order II Rule 2 of the Code of Civil Procedure that the High Court in earlier batch of writ petitions has gone into and given findings with regard to the Notifications dated 30.9.1991; 31.3.1995; 15.5.1996; 1.8.1996 and 24.7.1998 and the judgment of the High Court dated 21.1.1999 rendered therein had merged with the order of the Supreme Court dated 13.2.2001 and the Notifications questioned in the present round of litigation are Notifications dated 15.5.1996 and 1.8.1996 and the State at no point of time before any Court having raised the issue of these two Notifications being void ab initio for want of compliance with the provisions of the Business Rules framed under Article 166(3) of the Constitution of India, the High Court ought to have rejected the plea of the State Government that the Notifications were illegal or were in violation of the Rules of Business and dismissed the Writ Petition on the principles of res judicata, Doctrine of Estoppel and the principles embodied in Order II Rule 2 of the Code of Civil Procedure. It was urged that the State not having raised this at any point of time before any court should not be allowed to do so. We do not find any merit in these contentions. As noticed by us earlier in the judgment, the issue regarding the validity or legality of the Notifications dated 15.5.1996 and 1.8.1996 was never raised in the earlier batch of writ petitions before the High Court and the High Court never had an opportunity or occasion to look into, consider and pronounce upon the validity of the same with reference to the Business Rules framed under Article 166 (3) of the Constitution. These principles pressed into service by the appellants cannot operate against the State Government merely because the State did not agitate either before the High Court or this Court the legality or validity of these notification in the earlier round of litigation when it had an occasion to do so and the State Government cannot be deemed to have accepted the legality of the Notification and waived its objection or challenge thereto. The Doctrine of Estoppel therefore has no application at all more so, in view of the illegality the notifications dated 15.05.1996 and 01.08.1996 suffer from in view of their non-compliance with the provisions of the Business Rules. In our opinion the fact that the State Government did not raise these objections in the earlier batch of Writdoes not disentitle it to such a stand or prevents it from raising its objections based on legal provisions. This contention of the appellants requires to be turned down for yet another reason in that the 1st respondent herein was not a party to the earlier batch of Writ Petitions before the High Court or this Court. Therefore the principles of res judicata or for that matter even the Doctrine of Estoppel will not apply to or operate against him. Further the contention that the Notification dated 1.8.1996 did not create any additional financial liability on the State Government warranting approval by the Cabinet or the compliance of the Business Rules before it was brought into effect deserves to be rejected having regard to the figures placed on record which the High Court has noticed in its judgment. These figures of additional liability likely to be brought on the State by Notification dated 1.8.1996 falsify the statement of the appellants. Therefore the same deserves to be rejected.