TaxTMI 
TaxTMI 
2006 (4) TMI 515
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....amani, Vasudevan Raghavan, Gaurav, Vijay Kumar, K.T. Anantharaman, R. Vasudevan, N. Suresh, Richa Kapoor, Rahul Narayan, Meenakshi Arora, Vikas Sharma, Anil Katiyar, P. Parmeswaran, V.K. Verma, Prashant Kumar, Triveni Poteker, Kuldeep Singh, Basava Prabhu S. Patil, V.N. Raghupathy, B.S. Prasad, Rutwik Panda, Bimola Devi, Chander Shekhar Ashri, Sapna Malik, G.V. Chandrashekar, Anjana Chandrashekhar, S.K. Kulkarni, M. Gireesh Kumar, Radha Shyam Jena, Anjali K. Verma, Neeraj Gupta, Meera Mathur, Lalit Kumar, Nobin Singh, Senthil Jagadeesan, Advs JUDGMENT: SRIKRISHNA, J. 1. Leave granted in Special Leave Petition (C) Nos. 1562-63/06. 2. Since this matter consists of two sets of distinct but related appeals, for the sake of convenience, they may be considered under the two heads of:(i) the Main Matters and (ii) the Land Acquisition Matters. The Main Matters (Civil Appeal Nos. 3492-3494/2005, 3497/2005, 3842-3844/2005) The Background 3. These appeals are directed against a common judgment of the High Court of Karnataka (dated 3.5.2005) by which three Public Interest Litigations being Writ Petition Nos. 45334/04 (All India Manufacturers Organisation v. State of Kar....
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.... improvement of the Bangalore-Mysore Corridor. It was also suggested that the State Government bear 20% of the project cost, along with the cost of land acquisition, if such a project was to be implemented. The State Government did not have sufficient means and had to look for other alternative ways for implementing this project. The State Government then decided to take up the project on a Build-Own-Operate-Transfer (hereinafter "BOOT") basis with any consortium. The consortium was to carry out the development of the project from its own resources and recoup its investment by collection of tolls along the Express Highway. 6. On 20.2.1995, a Memorandum of Understanding (hereinafter "MOU") was entered into between the State Government and the Consortium of Vanasse Hangen Brustlin Inc. USA (hereinafter "VHB"), Kalyani Group of Companies (hereinafter "Kalyani") and SAB Engineering and Construction Inc. USA (hereinafter "SAB"). The Governor of the State of Massachusetts, U.S.A., Mr. William Weld, and Mr. H.D. Deve Gowda, the then Chief Minister of the State of Karnataka were present and appended their signatures thereto. It was agreed that the State Government would extend support f....
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.... of the Express Highway. As already stated, the Consortium was to recoup its expenditure and obtain profits through tolls the first system of its kind in Karnataka. Consequently, it was felt that the modification of the existing laws might become necessary. The necessary legal changes were to be examined by the concerned administrative departments, who would take " necessary action and also extend co-operation for implementation of the Project." 9. The three members of the Consortium VHB, Kalyani and SAB entered into a "Consent and Acknowledgement Agreement" (hereinafter "the CAA") dated 9.9.1996, specially assigning their respective rights under the Government Order (dated 20.11.1995) and the MOU with regard to the Project, in favour of Nandi Infrastructure Corridor Enterprises Ltd. (hereinafter "Nandi"). Nandi had been registered on 16.1.1996 as a company under the Companies Act, 1956, to serve as a corporate vehicle for the development and implementation of the Project. On 21.12.1996, the CAA was forwarded to the State Government for necessary action. The State Government was advised by its Law Department (through Opinion No. 182 OPN II/97 dated 3/4.3.1997) that since the Gov....
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.... While all these frenetic activities were going on for the successful and timely implementation of the Project, the FWA was challenged in a Public Interest Writ Petition No. 29221/97 in November 1997 (reported as H.T. Somashekar Reddy v. Government of Karnataka and Anr. ) by one H.T. Somashekar Reddy, a retired Chief Engineer. The State Government and Nandi were the two respondents thereto. The FWA was challenged on all conceivable grounds and the writ petition was vigorously opposed by the State Government and also by Nandi. Both the State Government and Nandi contended that the FWA was valid and that it had been entered into in larger public interest. It was also successfully pleaded on the part of the State Government that it had agreed to provide the "minimum extent of land" for the Project, which was 20,193 acres of land and that no excess land was being acquired. 14. The Division Bench of the Karnataka High Court hearing the said writ petition formulated for its consideration, the following questions: "(a) Whether the Government has acted arbitrarily in entering into the agreement with Respondent No. 2? (b) Whether agreement is illegal as being opposed to....
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.... (v) Development of five identified local areas into townships with all infrastructure for habitation and economic activities. (vi) Utilisation of sewage water being put to no productive use by BWSSB. (vii) Development of tourism to augment the State's revenues." 18. Thus, through an exhaustive consideration of all the background material and documents presented to it, the High Court dismissed the writ petition by holding against the petitioner on all the contentions urged. The judgment in Somashekar Reddy (supra) was challenged before this Court (in SLP (Civil) CC 1423/99) but was dismissed in limine on 26.3.1999. The judgment in Somashekar Reddy (supra) thus reached finality. The Present Litigation 19. Although the writ petition in Somashekar Reddy (supra) was dismissed by the High Court by its judgment dated 21.9.1998, it is of relevance to notice that between November 1997, when this writ petition was filed, and when the petition was dismissed, the work of implementing the Project was going on in view of the stand of the State Government and Nandi. Accordingly, a number of notifications were issued for acquisition of the land required under the F....
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.... High Court also directed the prosecution of K.K. Misra, Chief Secretary of the Government of Karnataka and M. Shivalingaswamy, Under Secretary, Department of Industries and Commerce, as envisaged by Section 340 of the Code of Criminal Procedure, 1973, for certain offences which came to its notice as a result of the affidavits filed by them. K.K. Misra and M. Shivalingaswamy have filed separate appeals with regard to the direction of their prosecution with which we are not concerned at present. The Contentions of the Appellants 23. The main arguments in the present Civil Appeal Nos. 3492-3494 of 2005 were addressed on behalf of the State of Karnataka by Mr. Anil B. Divan, learned Senior Counsel, whose main contentions are as under: 1. That the dispute between the State of Karnataka and Nandi is not barred by the principle of res judicata, constructive res judicata or estoppel arising from the judgment and proceedings in Somashekar Reddy (supra). 2. That the principle of res judicata cannot be inflexibly applied to Public Interest Litigations, especially when a re-examination of decided issues might be in public interest. 3. To the bar of res judicat....
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....persistence, we will deal with it subsequently. 25. On the merits of the argument of fraud/misrepresentation, the High Court has gone into it at great length and has demonstrated the hollowness of this contention. We are in complete agreement with the views expressed therein on this issue but we wish to highlight the following aspects to illustrate how the argument of mala fides is actually the boot on the other foot. 26. The High Court has come to the categorical conclusion that the flip- flop on the part of the State Government occurred only because of politicians, that the mala fides, if any, appears to be on the part of the State Government for political reasons. The High Court has pointed out that the FWA did not materialise out of the blue. The FWA was negotiated over several months; it came to be drafted by considering several points that the Cabinet Sub-Committee had raised. As we have already highlighted, it was only thereafter, when detailed deliberations had taken place at the highest levels of the State Government that the MOU was signed and the Project Report accepted. A Government Order (dated 20.11.1995) was issued requiring the Public Works Department to enter....
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....on was clearly an afterthought and it was conveniently raised by the State Government through the petitioners in Writ Petition No. 45386/04, who were rightly described by the High Court as the State Government's "mouth piece" (vide Paragraph 22). 28. The High Court has also totally disbelieved the affidavits of the Chief Secretary, K.K. Misra, and the Under Secretary, M. Shivalingaswamy on this issue. We have refrained from commenting on the merits of their affidavits since their appeals against prosecution for perjury are pending separately. We may, however, point out that both the affidavits of the two senior bureaucrats are on the issue that certain facts which had been suppressed from the Government had come to light after the judgment in Somashekar Reddy (supra) and that these indicated fraud and misrepresentation on the part of Nandi. Indeed, this was the central argument put forward for impugning the FWA. 29. The FWA was executed on 3.4.1997 and implemented by the parties for at least seven years. Several obligations under the FWA were carried out by the State Government and its instrumentalities and also by Nandi, which had invested a large amount of money in the ....
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.... also illustrates the mala fides with which the State Government has approached the Project. Thus, the utter irresponsibility with which the theory of fraud/misrepresentation was put forward is thoroughly exposed by the High Court in its impugned judgment. Res Judicata 32. Res judicata is a doctrine based on the larger public interest and is founded on two grounds: one being the maxim nemo debet bis vexari pro una et eadem causa ("No one ought to be twice vexed for one and the same cause" ) and second, public policy that there ought to be an end to the same litigation . It is well settled that Section 11 of the Civil Procedure Code, 1908 (hereinafter "the CPC") is not the foundation of the principle of res judicata, but merely statutory recognition thereof and hence, the Section is not to be considered exhaustive of the general principle of law. The main purpose of the doctrine is that once a matter has been determined in a former proceeding, it should not be open to parties to re- agitate the matter again and again. Section 11 of the CPC recognises this principle and forbids a court from trying any suit or issue, which is res judicata, recognising both 'cause of action e....
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....ere "directly and substantially in issue" in the previous proceeding will constitute res judicata in the subsequent proceeding. Explanation III to Section 11 provides that for an issue to be res judicata it should have been raised by one party and expressly denied by the other: Explanation III.-The matter above referred to must in the former suit have been alleged by one party and either denied or admitted, expressly or impliedly, by the other. Further, Explanation IV to Section 11, states: Explanation IV. Any matter which might and ought to have been made ground defence or attack in such former suit shall be deemed to have been a matter directly and substantially in issue in such suit. The spirit behind Explanation IV is brought out in the pithy words of Wigram, V.C. in Henderson v. Henderson as follows: "The plea of res judicata applies, except in special case (sic), not only to points upon which the court was actually required by the parties to form an opinion and pronounce a judgment, but to every point which properly belonged to the subject of litigation and which the parties, exercising reasonable diligence, might have brought forw....
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....ase of Mr. Madhuswamy and others. The prayers in Somashekar Reddy's petition were: (a) for quashing the FWA and (b) for directing an inquiry by the CBI in the matter and to prosecute the offenders. In Mr. Madhuswamy's petition, the prayers were: (a) to direct the CBI to conduct inquiries to various acts as enumerated by items 1 to 16 (specifically the issue of excess land) and (b) for quashing the various agreements, and acts done in pursuance of the Project and consequently, to denotify the land of all farmers situated away from the peripheral road and link road. We are therefore, satisfied that the prayers made in Somashekar Reddy (supra) and in Mr. Madhuswamy's writ petitions are substantially the same. 36. Second, the cause of action in both Somashekar Reddy (supra) and the present cases is the FWA, which includes the provisions for acquiring 20,193 acres of land for the Project (comprising 13,237 acres of private land and 6,956 acres of Government land). Indeed, it was stated in Somashekar Reddy's Writ Petition that the land requirement in Schedule I of the FWA was "highly exaggerated" and would illegally create "huge profits" for Nandi. Somashekar Reddy thu....
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....rket rates. Crucially, two very striking findings have been made by the High Court in Somashekar Reddy (supra) as follows: So out of 20,193 acres, land required for the Expressway would be 6999 acres leaving 13,000 acres for development of townships. Government of Karnataka in its written statement has said that it has agreed to provide minimum extent of land for the project partly out of the land owned by the Government and by acquiring the balance. Permission has been given to develop the five township instead of 7, proposed by respondent No. 2 to make the Project viable. [Emphasis supplied] The submission that the contract was entered in a clandestine manner also cannot be accepted Respondents in their statement of objections have admitted that this point was raised on the floor of the House and the respondent made detailed presentation on this subject in the House Every minute detail was explained including the scientific method adopted by the respondent for identification of the land for the Project. 38. All of these unequivocally show that the issue of excess land (and connected issues) was specifically raised by the petitioner in Somashekar R....
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....1. As we have pointed out, the cause of action, the issues raised, the prayers made, the relief sought in Somashekar Reddy's petition and the findings in Somashekar Reddy (supra), and the claims and arguments in the present petitions were substantially the same. Therefore, it is not possible to accept the contention of the appellants before us that the judgment in Somashekar Reddy (supra) does not operate as res judicata for the questions raised in the present petitions. Excess Land and the Expert Committee 42. There was considerable time taken by the learned counsel for the appellants in trying to persuade us that excess land had actually been delivered to Nandi under the FWA. A subsidiary argument was that even though the actual area of land delivered might not have been in excess, since land in prime areas had improperly been acquired for Nandi's benefit, the issue needed to be re-examined. In our view, this argument too is not open to be agitated at this point. As we have already pointed out, the writ petition in Somashekar Reddy (supra) was the culmination of all such allegations which had been successfully refuted even on the floor of the Legislature. Finally, h....
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....e State Cabinet in its meeting dated 26.10.2004 accepted the report but reaffirmed its support to the Project and expressed some reservations on the acquisition of more lands than what was necessary for the Project. In this regard, the High Court critically comments (vide Paragraph 26) that: By constituting this Committee the State Government has ensured that the Project gets stalled. It is interesting to note that Sri K.C. Reddy who is the Chairman of the Expert Committee was also a Member of the HLC which had approved the Project and was associated with it till the signing of the FWA which provides for 20,193 acres of land to be made available. Sri K.C. Reddy did not record his dissent in those proceedings and at no stage did he ever point out that the land that was sought to be provided for the Project was in excess of what was required but now as the Chairman of the Expert Committee he has, without identifying the excess lands which he has left for the Board to identify, opined that excess land has been acquired for the Project. We cannot appreciate such a conduct. We too cannot appreciate the conduct on the part of K.C. Reddy or the State Government. The inference ....
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....ntalities (including the KIAD Board) were enjoined by Clause 5.1.1.1 of the FWA, to make "best efforts" to acquire the land required for the Project. Indeed, till the State itself changed its stand with regard to the Project, nothing was heard from the KIAD Board about lands being acquired in excess of the public purpose. Further, as an instrumentality of the State, the KIAD Board cannot have a case to plead different from that of the State of Karnataka. Thus, we are unable to countenance the arguments of Mr. Venugopal on behalf of the KIAD Board. 47. Considering the facts as a whole, the High Court came to the conclusion that since the Project had been implemented and Nandi had invested a large amount of money and work had been carried out for more than seven years, the State Government could not be permitted to change its stand and to contend that the land allotted for the Project was in excess of what was required. Having perused the impugned judgment of the High Court, we are satisfied that there is no need for us to interfere therewith. Thus, there is no merit in this contention, which must consequently fail. The Relief Granted by the High Court 48. One final argument....
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....t the transaction was purely a contractual arrangement between the parties and, therefore, not amenable to writ jurisdiction, was categorically rejected by the following observations: Now if appellant entered into a solemn contract in discharge and performance of its statutory duty and the respondent acted upon it, the statutory corporation cannot be allowed to act arbitrarily so as to cause harm and injury, flowing from its unreasonable conduct, to the respondent. In such a situation, the court is not powerless from holding the appellant to its promise and it can be enforced by a writ of mandamus directing it to perform its statutory duty. A petition under Article 226 of the Constitution would certainly lie to direct performance of a statutory duty by 'other authority' as envisaged by Article 12. 50. Kumari Shrilekha Vidyarthi and Ors. v. State of U.P. and Ors. is another authority for the proposition that the State Government has to act reasonably and without arbitrariness even with regard to the exercise of its contractual rights. In M/s Dwarkadas Marfatia and Sons v. Board of Trustees of the Port of Bombay the situation was one in which a lease between the B....
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.... accordance with the applicable rules. 52. In these circumstances, we find no reason to interfere with the said directions of the High Court. In the future also, we make it clear that while the State Government and its instrumentalities are entitled to exercise their contractual rights under the FWA, they must do so fairly, reasonably and without mala fides; in the event that they do not do so, the Court will be entitled to interfere with the same. 53. The High Court also found, justifiably in our view, that the writ petitioners had been sponsored by the State Government to put forward its changed stand in the garb of a Public Interest Litigation. In the opinion of the High Court (vide Paragraph 29): "The court cannot allow its process to be abused by politicians and others to delay the implementation of a public project which is in larger public interest nor can the court allow anyone to gain a political objective. These legislators who have not been successful in achieving their objective on the floor of the Assembly have now chosen this forum to achieve their political objective which cannot be allowed." 54. Although this should have really put an end to the wr....
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....093/2005, 7024-7040/2005, 7591/2005, 7592/2005, 61/2006, 73/2006, 74-76/2006, SLP 1562-63/2006). The Background 57. In all these appeals, another attempt by a side wind, was made to scuttle the Project. The attempt, this time, was primarily on the part of the landowners, whose lands were acquired for implementation of the Project and who challenged the same before the High Court of Karnataka. A learned Single Judge of the Karnataka High Court, through judgment dated 18.12.2003, disposed of these petitions. The learned Judge took the view that acquisition of 60% of the land by the State Government, insofar as it related to the formation of roads and infrastructure development was valid, while the acquisition of the remaining 40% meant for the development of townships and convention centres was invalid and to that extent the acquisition was quashed. The landowners, the State Government, the KIAD Board and also Nandi were aggrieved by the judgment of the learned Single Judge and filed separate writ appeals challenging the judgment. The stand of the State Government in its writ appeal was that the learned Single Judge was wrong in quashing 40% of the acquisition of land. This was....
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....ction 28(1) of the KIAD Act, appears to be factually incorrect. Even the learned Single Judge who partially allowed the writ petition came to the conclusion (vide Paragraph 22) in his judgment (dated 18.12.2003) that the " petitioners in all these cases have filed objections on several grounds." Even in the appeal before the Division Bench, the High Court observed (vide Paragraph 30) that it was " not in dispute that the land owners were served with notices and the objections filed by them have been considered." Even before us, when these appeals were argued, no attempt was made by any of the learned counsel to satisfy us that the appellants had not actually been served notice of the acquisition. Neither was the finding of the learned Single Judge or the Division Bench impugned on this point. We are, therefore, unable to accept the contention that notices were not served on the appellants as required under Section 28(1) of the KIAD Act. Vagueness of Notice of Acquisition 62. The next contention is that the notice of acquisition was vague and consequently prejudiced any effective objection being made by the landowners whose lands were sought to be acquired. The vagueness of th....
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.... urged that even if the implementation of the Highway Project is assumed to be for a public purpose, acquisition of land far away therefrom would not amount to a public purpose nor would it be covered by the provisions of the KIAD Act. 66. In our view, this was an entirely misconceived argument. As we have pointed out in the earlier part of our judgment, the Project is an integrated infrastructure development project and not merely a highway project. The Project as it has been styled, conceived and implemented was the Bangalore- Mysore Infrastructure Corridor Project, which conceived of the development of roads between Bangalore and Mysore, for which there were several interchanges in and around the periphery of the city of Bangalore, together with numerous developmental infrastructure activities along with the highway at several points. As an integrated project, it may require the acquisition and transfer of lands even away from the main alignment of the road. 67. The various changes brought about to the KIAD Act, also reflect the intention of the State's Legislature to provide for land acquisition for the Project. The expressions "Industrial area" and "Industrial Infras....