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2008 DIGILAW 980 (DEL)

Union of India v. Classic Credit Ltd.

2008-10-20

AJIT PRAKASH SHAH, S.MURALIDHAR

body2008
AJIT PRAKASH SHAH, CJ: These are appeals against the common order dated 14th January, 2008 passed by S. Ravindra Bhat, J. By that order the learned Judge, while allowing the recall application of the respondent herein, held that a writ petition under Article 226 of the Constitution of India is maintainable against the order of the Appellate Tribunal for Foreign Exchange whereby the Tribunal had directed pre-deposit of 50% of the demanded penalty imposed by the Special Director. 2.A preliminary point was raised by the appellant herein before the learned single Judge that in view of Section 35 of the Foreign Exchange Management Act, 1999 (for short the Act ), the respondent should have filed an appeal and not the writ petition. The learned single Judge by his order dated 7th November, 2007 directed the writ petition to be treated as an appeal under Section 35 of the Act and listed before the appropriate bench. 3.The respondents herein preferred CMs for recalling the order on the ground that the order rejecting the application for waiver of pre-deposit is not appealable under Section 35 of the Act and the only remedy available with the respondents is to file writ petitions under Article 226 of the Constitution of India. Allowing the applications, the learned single Judged held as under: A plain reading of Section 35 would show that it does not confer any alternative remedy to the petitioner, to question the order of the Appellate Tribunal, declining the relief to the extent sought for. In such circumstances, the power of the court to examine the correctness of the order under Article 226 is always preserved; it is another matter altogether that the court may not chose to exercise the jurisdiction, or decline using it, after examining the merits. If the order of this Court is not reviewed, the petitioner would be remediless, resulting in the rejection of its appeal for non payment of the amounts directed. This court is therefore of the opinion that the ends of justice require that the order dated 7.11.2007 is recalled. 4.The question is whether the order of pre-deposit is appealable under Section 35 of the Act and whether this Court should decline to entertain a writ petition of the respondent 5.Section 35 of the Act which is material for our purpose, inter alia, reads as follows: 35. Appeal to High Court. 4.The question is whether the order of pre-deposit is appealable under Section 35 of the Act and whether this Court should decline to entertain a writ petition of the respondent 5.Section 35 of the Act which is material for our purpose, inter alia, reads as follows: 35. Appeal to High Court. Any person aggrieved by any decision or order of the Appellate Tribunal may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Appellate Tribunal to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. 6.Mr.P.P.Malhotra, learned ASG appearing for the appellant Union of India submitted that the words any decision or order are of wide amplitude and cover the decision of the Appellate Tribunal, which considers the question of pre- deposit by a speaking order considering prima facie case and hardship aspect. If the decision or the order affects the substantial rights of the parties, an appeal is provided by the statute. Such a decision is only appealable on the question of law. According to him the existence of an explicit provision of appeal rules out the jurisdiction of the High Court under Article 226 of the Constitution of India, from exercising its power of judicial review. If appeal lies against such an order before this Court a writ petition under Article 226 on that count would not be maintainable. 7.On the other hand, Mr.Rajiv Nayar, learned senior counsel, submits that under Section 35 of the Act not every order or decision of the Tribunal is appealable before the High Court. Only such orders or decisions which involve a question of law are appealable. The order disallowing the application for waiver of pre- deposit only deals with specific issue qua the financial inability of the respondent to pre-deposit the amount of penalty so demanded. Any challenge to such order was only on the factual matrix on the question of financial / undue hardship of the respondent to pre-deposit the penalty. Such challenge does not fall within the ambit of Section 35 of the Act. Any challenge to such order was only on the factual matrix on the question of financial / undue hardship of the respondent to pre-deposit the penalty. Such challenge does not fall within the ambit of Section 35 of the Act. According to him, Section 35 of the Act is similar to Section 35G of the Central excise Act and various other legislations. It has been a consistent practice of various High Courts all over the country that the appeal would lie to the appellate forum against the final order involving the question of law and the interlocutory orders in the nature of pre-deposit are always challenged by way of writ petition under Article 226 of the Constitution of India. 8.A perusal of Section 35 shows that all orders are not appealable to the High Court but only those orders that involve question of law. An appeal would lie only if the High Court is satisfied that the case involves a question of law. Where the High Court is satisfied that a question of law is involved, it is incumbent upon the High Court to formulate the question and to hear the appeal only on the question so formulated. The impugned order deals with an order of pre-deposit under Section 19 of the Act and is really incidental to the hearing of the appeal and, in any case, would not involve any question of law. Section 19 provides that any person appealing against the order of the Adjudicating Authority or the Special Director (Appeals) levying any penalty, shall while filing the appeal, deposit the amount of such penalty with such authority as may be notified by the Central Government. The second proviso to the Section, however, provides that where in any particular case, the Appellate Tribunal is of the opinion that the deposit of such penalty would cause undue hardship to such person, the Appellate Tribunal may dispense with such deposit subject to such conditions as it may deem fit to impose so as to safeguard the realisation of penalty. 9.Whether pre-deposit of a disputed duty or penalty would cause hardship, and if so, to what extent, are essentially matters of facts which are to be taken into account considering various factors including in particular the financial capacity of the appellant and the prima facie case in appeal. 9.Whether pre-deposit of a disputed duty or penalty would cause hardship, and if so, to what extent, are essentially matters of facts which are to be taken into account considering various factors including in particular the financial capacity of the appellant and the prima facie case in appeal. Where the admission of an appeal from an order of Appellate Tribunal is conditional upon satisfaction of the High Court of the existence of a question of law, and, therefore, fraught with uncertainty, it would not be proper for this Court to refuse to exercise its writ jurisdiction on the sole ground of existence of an alternative remedy of appeal. In the case Shaw Wallace and Co. Ltd. v. Income Tax Appellate Tribunal and ors. 240 ITR 579 (Cal), the Calcutta High Court held as follows:- Regarding the point of Section 260A, in my opinion, an appeal would not be permissible from any and every order passed by the Tribunal under this section. If, say, an order of adjournment is passed, the assessee could not come in appeal to the High Court under Section 260A. There are many instances of provisions allowing appeals where words such as every order, any order, all orders, etc. have been interpreted to mean and include only those orders which are substantially final in some sense or the other, and which finally dispose of or affect the parties rights in regard to some important point in controversy. In my opinion, the words every order of the Tribunal has to be passed in appeal. Here the impugned order of the Tribunal was not passed in appeal but in a miscellaneous application directed towards rectifying a mistake apparent from the record. If the order under Section 254(2) had taken the shape of modifying by way of amendment or rectification, the original order to some extent, then both of those jointly might have been appealable under Section 260A; but an order of recall is clearly not appealable. Alternatively, even if appealable, the impugned order being also without jurisdiction, the writ application should be entertained in this case, as an exception, in the interest of expedition of the assessment proceedings. Alternatively, even if appealable, the impugned order being also without jurisdiction, the writ application should be entertained in this case, as an exception, in the interest of expedition of the assessment proceedings. 10.In the case of Ruby Rubber Industries v. Commissioner of Central Excise 1999 ( 63 ) ECC 17, also rendered by the Calcutta High Court, it was held as follows: ...I am unable to accept the contention of the respondents that the writ petition is not maintainable, as an appeal lies under Section 35L, of the Act against an order passed by the Tribunal disposing of the application for stay and pre-deposit. Section 35L(b) clearly provides that any order having a relation to the rate of duty of excise or to the rate of duty of excise or to the value of goods for purposes of assessment will be appealable to the Supreme Court. Although much emphasis has been laid on the expression, ``among other things`, used in the said section by the learned Counsel appearing for the respondent, in my view, such expression does not mean that appeal will lie against all orders passed by the Tribunal including an order passed in the matter of pre-deposit. 11.The judgment in Ruby Industries was followed by the learned single Judge of the same Court in the context of Section 35G of the Central excise Act, 1944 in Tijiya Steel Pvt. Ltd. and anr. v. Union of India and ors. (2007) 2 CALLT 358 . In the said decision it was held that an order directing the pre-deposit or an order waiving pre-deposit may not involve any question of law far less a substantial question of law and hence may not be appealable. In any case, such an order cannot be said to be an order in the appeal but it is an order incidental to the hearing of the appeal. It cannot, therefore, be said that the petitioner has an adequate efficacious alternative remedy. 12.The same learned Judge in Crystal Cable Industries Ltd. and anr. v. Union of India and ors. held that the expression ``every order passed in appeal by the Appellate Tribunal` is qualified by a rider, that is, satisfaction of the High Court that the case involves a substantial question of law. An appeal to the High Court is, therefore, not automatic. v. Union of India and ors. held that the expression ``every order passed in appeal by the Appellate Tribunal` is qualified by a rider, that is, satisfaction of the High Court that the case involves a substantial question of law. An appeal to the High Court is, therefore, not automatic. The condition precedent for entertaining an appeal is the satisfaction of the High Court of the case involving a substantial question of law. 13.Article 226 of the Constitution of India does not impose any limitation on the power of the High Court to issue writs, even where there is an alternative remedy. Where there is an efficacious alternative remedy this Court refrains from exercising its extraordinary jurisdiction. The power regarding alternative remedy has been considered to be a rule of self imposed limitation. It is essentially a rule of policy, convenience and discretion and never a rule of law. This Court should not reject an application under Article 226 of the Constitution of India where the remedy, if any, of appeal is uncertain as in the case appeals under Section 35, which depend on subjective satisfaction of the High Court of existence of a question of law. 14.In Whirlpool Corpn. v. Registrar of Trade Marks, (1998) 8 SCC 1 , the Supreme Court held that: 16. Rashid Ahmed v. Municipal Board, Kairana laid down that existence of an adequate legal remedy was a factor to be taken into consideration in the matter of granting writs. This was followed by another Rashid case, namely, K.S. Rashid and Son v. Income Tax Investigation Commission which reiterated the above proposition and held that where alternative remedy existed, it would be a sound exercise of discretion to refuse to interfere in a petition under Article 226. This proposition was, however, qualified by the significant words, unless there are good grounds therefor , which indicated that alternative remedy would not operate as an absolute bar and that writ petition under Article 226 could still be entertained in exceptional circumstances. 17. A specific and clear rule was laid down in State of U.P. v. Mohd. This proposition was, however, qualified by the significant words, unless there are good grounds therefor , which indicated that alternative remedy would not operate as an absolute bar and that writ petition under Article 226 could still be entertained in exceptional circumstances. 17. A specific and clear rule was laid down in State of U.P. v. Mohd. Nooh as under: But this rule requiring the exhaustion of statutory remedies before the writ will be granted is a rule of policy, convenience and discretion rather than a rule of law and instances are numerous where a writ of certiorari has been issued in spite of the fact that the aggrieved party had other adequate legal remedies. 18. This proposition was considered by a Constitution Bench of this Court in A.V. Venkateswaran, Collector of Customs v. Ramchand Sobhraj Wadhwani and was affirmed and followed in the following words: The passages in the judgments of this Court we have extracted would indicate (1) that the two exceptions which the learned Solicitor General formulated to the normal rule as to the effect of the existence of an adequate alternative remedy were by no means exhaustive, and ( 2 ) that even beyond them a discretion vested in the High Court to have entertained the petition and granted the petitioner relief notwithstanding the existence of an alternative remedy. We need only add that the broad lines of the general principles on which the Court should act having been clearly laid down, their application to the facts of each particular case must necessarily be dependent on a variety of individual facts which must govern the proper exercise of the discretion of the Court, and that in a matter which is thus pre-eminently one of discretion, it is not possible or even if it were, it would not be desirable to lay down inflexible rules which should be applied with rigidity in every case which comes up before the Court. 15.In U.P. State Cooperative Land Development Bank Ltd. v. Chandra Bhan Dubey and others (1999) 1 SCC 741 , scope and ambit of Article 226 of the Constitution of India was explained as follows: ...The Constitution is not a Statute. It is fountainhead of all the Statutes. 15.In U.P. State Cooperative Land Development Bank Ltd. v. Chandra Bhan Dubey and others (1999) 1 SCC 741 , scope and ambit of Article 226 of the Constitution of India was explained as follows: ...The Constitution is not a Statute. It is fountainhead of all the Statutes. When the language of Article 226 is clear, we cannot put shackles on the High Courts to limit their jurisdiction by putting an interpretation on the words which would limit their jurisdiction. When any citizen or person is wronged, the High Court will step in to protect him, be that wrong be done by the State, an instrumentality of the State, a company or a co-operative society or association or body of individuals, whether incorporated or not, or even an individual. Right that is infringed may be under Part III of the Constitution or any other right which the law validly made might confer upon him....` 16.In the said judgment, while enunciating the wide scope of Article 226 of the Constitution, the Court nevertheless reiterated the self-imposed restrictions on the exercise of such right in the following words:- ... But then the power conferred upon the High Courts under Article 226 of the Constitution is so vast, this Court has laid down certain guidelines and self-imposed limitations have been put there subject to which the High Courts would exercise jurisdiction, but those guidelines cannot be mandatory in all circumstances. The High Court does not interfere when an equally efficacious alternative remedy is available or when there is an established procedure to remedy a wrong or enforce a right. A party may not be allowed to bypass the normal channel of civil and criminal litigation. The High Court does not act like a proverbial ``bull in a china shop` in the exercise of its jurisdiction under Article 226.` 17.In Ram and Shyam Company v. State of Haryana and others (1985) 3 SCC 267 , the Court explained the rule of exhaustion of alternative remedy in the following terms: The rule which requires the exhaustion of alternative remedies is a rule of convenience and discretion, a self-imposed restraint on the court, rather than rule of law. It does not oust the jurisdiction of the Court. It does not oust the jurisdiction of the Court. Where the order complained against is alleged to be illegal or invalid as being contrary to law, a petition at the instance of person adversely affected by it, would lie to the High Court under Article 226 and such a petition cannot be rejected on the ground that an appeal lies to the higher officer or the State Government. An appeal in all cases cannot be said to provide in all situations an alternative effective remedy keeping aside the nice distinction between jurisdiction and merits. 18.In our considered opinion, an appeal under Section 35 is not ordained or an automatic procedure. The condition precedent for entertaining an appeal is the satisfaction of the High Court that the case involves a question of law as contemplated by Section 35 of the Act. The relief under Article 226 can be refused on the ground of existence of alternative remedy only if that alternative remedy is effective and equally efficacious. Evaluation of circumstances which warrant waiver of pre-deposit would fall within the purview of Article 226 of the Constitution of India. 19.In view of the foregoing discussion, in our opinion, a writ petition against an order of pre-deposit under Section 35 of the Act is clearly maintainable. The appeals are accordingly dismissed.