CIVIL

The Meaning of Government

SC(3) O. 27, r. 8B and r 8A r/w O. 41, r. 5 – ‘Government’ – Connotation of – Appeal by Jal Sansthan against order rejecting objection u/s 34 of Arbitration and Conciliation Act – High Court, on an application for stay, directing appellant to deposit entire award amount – Plea that such a
condition could not have been imposed on government organization like appellant –

Held:
“Government” means either a Central Government or a State Government and in certain cases public officer in the service of a State – Legislature has deliberately used a restrictive definition and its scope cannot be expanded to cover an agency or instrumentality of State by interpretative process – It cannot be accepted that appellant Jal Sansthan would come within the extended wing of the Government – However, order of High Court modified and appellant directed to furnish security for entire award amount – Interpretation of statutes – Restrictive construction – Constitution of India,
1950 – Art. 12.
Kanpur Jal Sansthan & Anr. v. M/s. Bapu Construction


 

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 26 OF 2014

(Arising out of S.L.P. (Civil) No. 27572 of 2013

Kanpur Jal Sansthan & Another … Appellants

v.

M/s. Bapu Construction … Respondent

J U D G M E N T

Dipak Misra, J.

Leave granted.

2. Calling in question the defensibility of the order dated
17.7.2013 passed by the High Court of Judicature at Allahabad in FAFO
No. 875 of 2013 whereby the Division Bench, after admitting the
appeal, while dealing with the application for stay, directed the
appellants to deposit the entire amount awarded by the arbitrator in
the court below with a further direction permitting the claimant-
respondent to withdraw half of the said amount without furnishing
security and remaining half after furnishing security to the
satisfaction of the District Judge, Kanpur with a further stipulation
that in case of default in making the deposit, the order of stay shall
automatically stand vacated.

3. The essential facts which are to be stated for adjudication
of this appeal are that an agreement was executed between
Kanpur Jal Sansthan, the appellant herein, with the
respondent, M/s. Bapu Construction, on 10.06.1987 for
“supply of sand for slow sand filter” for a value of
Rs.21,43,200/-. As per the conditions contained in the
agreement the work was to commence 23.5.1987 and was to be
completed within one year. During the subsistence of the
contract disputes arose between the parties as a
consequence of which the respondent moved an application
under Section 11(5) and (6) of the Arbitration and
Conciliation Act, 1996 (for brevity “the Act”) for
appointment of an arbitrator. After the learned Arbitrator
was appointed, he proceeded with the arbitration and,
eventually, passed an award on 20.1.2009 allowing the claim
of the respondent by awarding a total sum of
Rs.32,62,415.30 with a further stipulation that the said
sum shall carry interest at the rate of 18% per annum from
the year 1988. The appellant herein filed an objection
under Section 34 of the Act to set aside the award dated
20.1.2009 in Arbitration Petition No. 32 of 2003 on many a
ground. The learned District Judge, Kanpur, vide order
dated 30.3.2013, rejected the application which was the
subject-matter of Misc. Case No. 40/70 of 2009.

4. The failure in sustaining the objection before the learned
District Judge compelled the appellant to file FAFO No. 875
of 2013 before the High Court of Judicature at Allahabad.
Along with the appeal an application for stay was filed.
The Division Bench passed an interim order, as has been
mentioned hereinbefore.

5. We have heard Mr. Shail Kumar Dwivedi, learned counsel
appearing for the appellants and Mr. Pradeep Kumar Yadav,
learned counsel appearing for the respondent.

6. Criticizing the justifiability of the order, Mr. Dwivedi,
learned counsel for the appellant, has submitted that the
Division Bench has fallen into error by directing deposit
of entire award amount and release of the same in favour of
the claimant-respondent applying the principle of Order XLI
Rule 5 of the Code of Civil Procedure though the said
principle is not applicable to the appellant which is an
extended wing of the State. It is urged by him that the
Division Bench has failed to analyse the merits of the
case, namely, the enormous delay in filing the application
for appointment of an arbitrator, nature of claims which
are absolutely stale and that apart, how the award is
flagrantly violative of public policy. It is further urged
by him that the principle of Order XLI Rule 5 of the Code
has to be read in harmony with Order XXVII Rule 8A of the
Code and on such harmonious reading it is clear as sunshine
that such a condition is not likely to be imposed on a
governmental organization. To buttress his submission he
has commended us to the decision in State of Kerala v.
Kuruvilla[1].

7. Mr. Yadav, learned counsel appearing for the respondent,
resisting the aforesaid submissions, contended that after
the objection preferred under Section 34 of the Act has
been rejected, the award passed by the learned Arbitrator
becomes executable by itself and, therefore, it has the
status of a money decree and hence, the Division Bench has
correctly imposed the conditions and, therefore, no fault
can be found with the said order. It is contended by him
that Order XLI Rule 5 and Order XXVII Rule 8A should be
kept in different compartments failing which the decree
holder would not be able to realize the fruits the decree
for a considerable length of time and eventually it may
become a paper tiger. He has drawn inspiration from the
decision in Sihor Nagar Palika Bureau v. Bhabhlubhai
Virabhai & Co.[2] to highlight that this Court had applied
the principle behind Order XLI Rule 5 to a municipality and
a “Jal Sansthan” does not enjoy a better status than a
municipality.

8. To appreciate the rivalised submissions raised at the Bar
we think it apt to refer to the Scheme of the Act. Under
the Act, after the award is passed by the arbitrator, an
application for setting aside the arbitral award is
permissible under Chapter VII relating to arbitration under
Part I. Chapter VIII occurring in Part I provides about
the finality and enforcement of arbitral awards. Sections
35 and 36 which occur in this Chapter are reproduced below:

“35. Finality of arbitral awards. – Subject to this Part an
arbitral award shall be final and binding on the parties and
persons claiming under them respectively.

36. Enforcement. – Where the time for making an application to
set aside the arbitral award under Section 34 has expired, or
such application having been made, it has been refused, the
award shall be enforced under the Code of Civil Procedure, 1908
(5 of 1908) in the same manner as if it were a decree of the
Court.”

 

9. On a reading of both the provisions it is clear as day that
the award becomes enforceable when the time for making the
application to set aside the arbitral award has expired or
having been filed it has been refused and further it is
enforceable in the same manner as if it were a decree of
the Court. Thus, the award has the potentiality of
enforcement. Hence, when an appeal is filed against the
rejection of the objection preferred under Section 34 of
the Act, the enforceability of the award gains absolute
ground. If an application for stay has to be filed, it has
to be filed relating to stay of the operation of the award
passed by the arbitrator. We are disposed to think so as
the court rejecting the objection only refuses to entertain
the objection and thereafter the award becomes enforceable
as if it were a decree. In the present case, it is not
clear whether there was prayer for stay of the award.
However, we treat it as if there was a prayer for stay of
the award and proceed accordingly.

10. At this juncture, we may refer with profit to Section 19 of
the Act which occurs in Chapter V of the Act that deals
with conduct of arbitral proceedings. It provides for
determination of rules of procedure. It reads as follows:

“19. Determination of rules of procedure. – (1) The arbitral
tribunal shall not be bound by the Code of Civil Procedure, 1908
(5 of 1908) or the Indian Evidence Act, 1872 (1 of 1872).

(2) Subject to this Part, the parties are free to agree on
the procedure to be followed by the arbitral tribunal in
conducting its proceedings.

(3) Failing any agreement referred to in sub-section (2),
the arbitral tribunal may, subject to this Part, conduct the
proceedings in the manner it considers appropriate.

(4) The power of the arbitral tribunal under sub-section
(3) includes the power to determine the admissibility,
relevance, materiality and weight of any evidence.”

 

11. Section 2(e) of the Act defines “Court” to mean the
principal Civil Court of original jurisdiction in a
district and includes the High Court in exercise of its
ordinary original civil jurisdiction, having jurisdiction
to decide the questions forming the subject-matter of
arbitration if the same has been the subject-matter of a
suit but does not include any Civil Court of a grade
inferior to such principal Civil Court or any Court of
Small Causes.

12. Section 37 of the Act deals with appealable orders. For
the sake of completeness it is reproduced below: –
“37. Appealable orders. – (1) An appeal shall lie from the
following orders (and from no others) to the Court authorized by
law to hear appeals from original decrees of the Court passing
the order, namely: –

a) Granting or refusing to grant any measure under section 9;

b) Setting aside or refusing to set aside an arbitral award
under section 34.

(2) An appeal shall also lie to a Court from an order
granting of the arbitral tribunal. –

(a) accepting the plea referred in sub-section (2) or sub-
section (3) of section 16; or

(b) granting or refusing to grant an interim measure under
Section 17.

(3) No second appeal shall lie from an order passed in
appeal under this section, but nothing in this section shall
affect or take away any right to appeal to the Supreme Court.”

 

13. At this stage, we are obliged to refer to the decision in
Paramjeet Singh Patheja v. ICDS Ltd.[3] In the said case
question arose whether an award passed by an arbitral
tribunal under the Act is a decree for the purposes of the
provision of the Presidency Towns Insolvency Act, 1909.
The two Judge Bench referred to various provisions of the
Arbitration Act 1899, The Presidency Towns Insolvency Act,
1909 and the Civil Procedure Code, 1908, the concept of
decree under the Code, the provisions contained as regards
award in Arbitration Act, 1940 and Section 36 of the
Arbitration and Conciliation Act, 1996 and opined as
follows:-
“In fact, Section 36 goes further than Section 15 of the 1899
Act and makes it clear beyond doubt that enforceability is only
to be under CPC. It rules out any argument that enforceability
as a decree can be sought under any other law or that initiating
insolvency proceeding is a manner of enforcing a decree under
CPC.”

 

The learned Judges further discussing the principles proceeded
to state as follows.

“Issuance of a notice under the Insolvency Act is fraught with
serious consequences: it is intended to bring about a drastic
change in the status of the person against whom a notice is
issued viz. to declare him an insolvent with all the attendant
disabilities. Therefore, firstly, such a notice was intended to
be issued only after a regularly constituted court, a component
of the judicial organ established for the dispensation of
justice, has passed a decree or order for the payment of money.
Secondly, a notice under the Insolvency Act is not a mode of
enforcing a debt; enforcement is done by taking steps for
execution available under CPC for realising monies.

42. The words “as if” demonstrate that award and decree or order
are two different things. The legal fiction created is for the
limited purpose of enforcement as a decree. The fiction is not
intended to make it a decree for all purposes under all
statutes, whether State or Central.”

14. We have referred to aforesaid authority solely for the
purpose that whatever may be the status of the award under
the Act in respect of any other Statute, but when it is
challenged in an appeal under Section 37 of the Act the
underlying principle of the Code of Civil Procedure is
applicable. We have thought we should clarify the position
as it may not be understood that the decision in Pramjeet
Singh Patheja (supra) conveys that it is not a decree for
all purposes and the principles under the Code while an
appeal is preferred is not applicable.

15. In M/s. Pandey & Co. Builders Pvt. Ltd. v. State of Bihar
and another[4], it has been held that a forum of an
appellate court must be determined with reference to the
definition thereof contained in the 1996 Act. The
aforesaid decision further reinforces the conclusion that
Order XLI Rule 5 in principle is applicable to an appeal
preferred before the High Court, for there is no provision
in the Act prohibiting the appellate court not to take
recourse to the underlying principles of the Code of Civil
Procedure as long as they are in consonance with the spirit
and principles engrafted under the Act.

16. Presently to the anatomy of Order XLI. It deals with
appeals from original decrees. Order XLI Rule 5 provides
for stay by Appellate Court. To have a complete picture,
it is necessary to reproduce the Rule in entirety: –
“5. Stay by Appellate Court. – (1) An appeal shall not operate
as a stay of proceedings under a decree or order appealed from
except so far as the Appellate Court may order, nor shall
execution of a decree be stayed by reason only of an appeal
having been preferred from the decree; but the Appellate Court
may for sufficient cause order stay of execution of such decree.

(2) Stay by Court which passed the decree. – Where an
application is made for stay of execution of an appealable
decree before the expiration of the time allowed for appealing
therefrom, the Court which passed the decree may on sufficient
cause being shown order the execution to be stayed.

(3) No order for stay of execution shall be made under sub-
rule (1) or sub-rule (2) unless the Court making it is satisfied

(a) that substantial loss may result to the party applying for
stay of execution unless the order is made;

(b) that the application has been made without unreasonable
delay; and

(c) that security has been given by the applicant for the due
performance of such decree or order as may ultimately be
binding upon him.

(4) Subject to the provisions of sub-rule (3), the Court may
make an ex parte order for stay of execution pending the hearing
of the application.

(5) Notwithstanding anything contained in the foregoing sub-
rules, where the appellant fails to make the deposit or furnish
the security specified in sub-rule (3) of rule 1, the Court
shall not make an order staying the execution of the decree.”

 

17. At this stage, regard being had to the schematic content
of order XLI Rule 5, we think it appropriate to refer to
certain authorities how the language employed in the said
Rule has been appreciated and understood by this Court.
In Kayamuddin Shamsuddin Khan v. State Bank of India[5]
while dealing the command of the provision relating to
deposit the Court had to say:

“…that when non-compliance with the direction given regarding
deposit under sub-rule (3) of Rule 1 of Order XLI would result
in the Court refusing to stay the execution of the decree. In
other words, the application for stay of the execution of the
decree could be dismissed for such non-compliance but the Court
could not give a direction for the dismissal of the appeal
itself for such non-compliance.”

 

18. In Sihor Nagar Palika Bureau v. Bhabhlubhai Virabhai &
Co.[6], this Court was dealing with the situation where the
appellant municipality constituted and governed by the
provision of Gujrat Municipalities Act, 1963 had assailed a
money decree in appeal and the High Court in appeal had
directed stay of the execution of operation of the money
decree subject to the condition that the appellant shall
deposit a certain sum with interest by a particular date.
In that context the Court adverted to Order XLI Rule 1(3)
and 5 (5) and opined thus:-
“Order 41 Rule 1(3) CPC provides that in an appeal against a
decree for payment of amount the appellant shall, within the
time permitted by the appellate court, deposit the amount
disputed in the appeal or furnish such security in respect
thereof as the court may think fit. Under Order 41 Rule 5(5), a
deposit or security, as abovesaid, is a condition precedent for
an order by the appellate court staying the execution of the
decree. A bare reading of the two provisions referred to
hereinabove, shows a discretion having been conferred on the
appellate court to direct either deposit of the amount disputed
in the appeal or to permit such security in respect thereof
being furnished as the appellate court may think fit. Needless
to say that the discretion is to be exercised judicially and
not arbitrarily depending on the facts and circumstances of a
given case. Ordinarily, execution of a money decree is not
stayed inasmuch as satisfaction of money decree does not amount
to irreparable injury and in the event of the appeal being
allowed, the remedy of restitution is always available to the
successful party. Still the power is there, of course a
discretionary power, and is meant to be exercised in
appropriate cases.”

[Emphasis supplied]

 

19. The submission advanced by the learned counsel for the
appellants that the provisions contained in Order XLI Rule
5 and XXVII Rule 8A of the Code should be read harmoniously
to avoid any conflict. Rule 8A of Order XXVII reads as
follows:-
“8A. No security to be required from Government or a public
officer in certain cases. – No such security as is mentioned in
rules 5 and 6 of Order XLI shall be required from the Government
or, where the Government has undertaken the defence of the suit,
from any public officer sued in respect of an act alleged to be
done by him in his official capacity.”

 

 

20. As far as the Government is concerned, it has been defined
in Order XXVII Rule 8B. It reads as follows: –
“8B. Definitions of “Government” and “Government pleader”. – In
this order unless otherwise expressly, provided “Government and
“Government pleader” mean respectively –

a) In relation to any suit by or against the Central
Government or against a public officer in the service of
the Government, the Central Government and such pleader as
that Government may appoint whether generally or specially
for the purpose of this Order;

b) (omitted by the A.O. 1948)

c) In relation to any suit by or against a State Government or
against a public officer in the service of a State, the
State Government and the Government pleader as defined in
clause (7) of section 2, or such other pleader as the State
Government may appoint, whether generally or specially, for
the purpose of this order.”

 

21. The legislature has defined the term “Government” not to
allow any room for interpretation and speculation. It
means either a Central Government or a State Government and
in certain cases public officer in the service of a State.
Learned counsel for the appellant has contended that the
appellant “Kanpur Jal Sansthan” is an extended wing of the
State and, therefore, is a part of the Government. On a
bare glance at the aforesaid provisions it is perspicuous
that it categorically lays a postulate that as far as the
Government or a public officer is concerned in certain
cases the stipulations incorporated in Order XLI Rule 5
would not be applicable.

22. Having regard to the aforesaid provisions it is necessary
to appreciate the definitive character of the Government in
the context it has been used. In Utkal Contractors &
Joinery Pvt. Ltd. and others v. State of Orissa and
others[7], it has been laid down that while the words of an
enactment are important the context is not less important.
It has also been stated that no provision in the statute
and no word of the statute may be construed in isolation.
The importance of setting and the pattern are to be kept in
mind. In Dy. Chief Controller of Imports & Exports, New
Delhi v. K.T. Kosalram and others[8] this Court has
observed as under:
“What particular meaning should be attached to words and phrases
in a given instrument is usually to be gathered from the
context, the nature of the subject-matter, the purpose or the
intention of the author and the effect of giving to them one or
the other permissible meaning on the object to be achieved.
Words are after all used merely as a vehicle to convey the idea
of the speaker or the writer and the words have naturally,
therefore, to be so construed as to fit in with the idea which
emerges on a consideration of the entire context. Each word is
but a symbol which may stand for one or a number of objects. The
context, in which a word conveying different shades of meanings
is used, is of importance in determining the precise sense which
fits in with the context as intended to be conveyed by the
author….”

 

23. As we perceive, the legislature has used the word
“Government” in Order XXVII Rule 8A and defined the same in
Order XXVII Rule 8B. The intention is absolutely clear and
unambiguous. It means the “Government” in exclusivity.
The submission of the learned counsel for the appellants
that the appellant being a Jal Sansthan it would come
within the extended wing of the Government does not commend
acceptation.

24. We have reasons to so conclude. In State of Punjab and
others v. Raja Ram and others[9], a two-Judge Bench, after
referring to a passage from Ramana Dayaram Shetty v.
International Airport Authority of India and others[10] and
stating what makes a corporation an agency or
instrumentality of the Central Government, opined thus: –

“Even the conclusion, however, that the Corporation is an agency
or instrumentality of the Central Government does not lead to
the further inference that the Corporation is a Government
department.”

 

25. In Pashupati Nath Sukul v. Nem Chandra Jain and others[11],
a question arose whether the Secretary of a State
Legislative Assembly is qualified or not to be appointed as
the Returning Officer at an election held to fill a seat in
the Rajya Sabha. The High Court of Allahabad had returned
a finding that the Secretary of the Legislative Assembly
was neither an officer of the Government nor of a local
authority and hence, could not have been appointed as the
Returning Officer under Section 21 of the Representation of
the People Act, 1951. Dealing with the said issue, the
three-Judge Bench proceeded to analyse whether the
expression “Government” used in Section 21 would mean the
“Executive Government” in the narrow sense or a liberal
construction should be placed. The Court referred to
Section 3(23) of the General Clauses Act, 1897 which
defines “Government” to mean “Government” or “the
Government” to include both the Central Government and any
State Government. Thereafter, the Court referred to
certain constitutional provisions, namely, Articles 12,
102(1)(a), 191(1)(a), 98, 187, 146, 229, 148(5), 311 and
318 and the decision in Pradyat Kumar Bose v. Hon’ble Chief
Justice of Calcutta High Court[12] and adverted to the
concept of local Government, as understood in the context
of Entry 5 of List II of the Seventh Schedule to the
Constitution, the concept of State in International Law and
thereafter to the conception of the federal construction of
the Constitution and the conception of governance under the
Constitution and, eventually, opined that: –

“From the legal point of view, government may be described as
the exercise of certain powers and the performance of certain
duties by public authorities or officers, together with certain
private persons or corporations exercising public functions.
The structure of the machinery of Government and the regulation
of the powers and duties which belong to the different parts of
this structure are defined by the law which also prescribes to
some extent the mode in which these powers are to be exercised
or these duties are to be performed (see Halsbury’s Laws of
England, Fourth Edition, Vol. 8, para 804). Government
generally connotes three estates, namely, the Legislature, the
Executive and the Judiciary while it is true that in a narrow
sense it is used to connote the Executive only. The meaning to
be assigned to that expression, therefore, depends on the
context in which it is used.”

 

Thereafter the Court proceeded to further rule thus: –

“We are of the view that the word ‘Government’ in Article
102(1)(a) and in Article 191(1)(a) of the Constitution and the
word ‘Government’ in the expression “an officer of Government”
in Section 21 of the Act should be interpreted liberally so as
to include within its scope the Legislature, the Executive and
the Judiciary. The High Court erred in equating the word
‘Government’ occurring in Section 21 of the Act to the Executive
Government only and in further holding that the officers of the
State Legislature could not be treated as officers of Government
for purposes of that section.”

[Emphasis supplied]

26. In R.S. Nayak v. A.R. Antulay[13], the Court was dealing
with as to what the expression “Government” exactly
connotes in the context of Indian Penal Code. Answering
the issue the Constitution Bench stated thus: –

“There is a short and a long answer to the problem. Section 17
IPC provides that “the word ‘Government’ denotes the Central
Government or the Government of a State”. Section 7 IPC provides
that “every expression which is explained in any part of the
Code, is used in every part of the Code in conformity with the
explanation”. Let it be noted that unlike the modern statute
Section 7 does not provide “unless the context otherwise
indicate” a phrase that prefaces the dictionary clauses of a
modern statute. Therefore, the expression “Government” in
Section 21(12)(a) must either mean the Central Government or the
Government of a State.”

 

After so stating the Larger Bench referred to many an authority
and proceeded to rule thus: –

“56. There thus is a broad division of functions such as
executive, legislative and judicial in our Constitution. The
Legislature lays down the broad policy and has the power of
purse. The Executive executes the policy and spends from the
Consolidated Fund of the State what Legislature has sanctioned.
The Legislative Assembly enacted the Act enabling to pay to its
members salary and allowances. And the members vote the grant
and pay themselves. In this background even if there is an
officer to disburse this payment or that a pay bill has to be
drawn-up are not such factors being decisive of the matter. That
is merely a mode of payment, but the MLAs by a vote retained the
fund earmarked for purposes of disbursal for pay and allowances
payable to them under the relevant statute. Therefore, even
though MLA receives pay and allowances, he is not in the pay of
the State Government because Legislature of a State cannot be
comprehended in the expression “state Government”.

57. This becomes further clear from the provision contained in
Article 12 of the Constitution which provides that “for purposes
of Part III, unless the context otherwise requires, “the State”
includes the Government and Parliament of India and the
Government and the Legislature of each of the States and all
local or other authorities within the territory of India or
under the control of the Government of India”. The expression
“Government and Legislature”, two separate entities, are sought
to be included in the expression “state” which would mean that
otherwise they are distinct and separate entities. This
conclusion is further reinforced by the fact that the Executive
sets up its own secretariat, while Article 187 provides for a
secretarial staff of the Legislature under the control of the
Speaker, whose terms and conditions of the service will be
determined by the Legislature and not by the Executive. When all
these aspects are pieced together, the expression “Government”
in Section 21(12)(a) clearly denotes the Executive and not the
Legislature.”

[Underlining is ours]

 

27. We have referred to the aforesaid authorities to highlight
that in certain contexts the term “Government” may be
required to be liberally construed and under certain
circumstances it has to be understood in a narrow spectrum.
The concept of “State” as used under Article 12 is quite
different than what is meant by an “Executive Government”.
In fact to determine whether a body is an instrumentality
or agency of the Government this Court has laid down
general principles but no exhaustive tests have been
specified. As has been held in Chander Mohan Khanna v.
National Council of Educational Research and Training and
others[14], even in general principles there is no cut and
dried formula which would provide correct division of
bodies into those which are instrumentalities or agencies
of the Government and those which are not. In that case
the Court opined that where the financial assistance from
the State is so much as to meet almost entire expenditure
of the institution, or the share capital of the corporation
is completely held by the Government, it would afford some
indication of the bodies being impregnated with
governmental character. It may be a relevant factor if the
institution or the corporation enjoys monopoly status which
is State conferred or State protected. Existence of deep
and pervasive State control may afford an indication. It
has been laid down therein that if the functions of the
institution are of public importance and related to
governmental functions, it would also be a relevant factor
and these are merely indicative indicia and are by no means
conclusive or clinching in any case. It has been further
opined therein, after referring to host of decisions, that
a wide enlargement of the meaning must be tempered by a
wise limitation, for the State control does not render such
bodies as “State” under Article 12 of the Constitution.
The State control, however, vast and pervasive is not
determinative; the financial contribution by the State is
also not conclusive. If the Government operates behind a
corporate veil, carrying out governmental functions of
vital public importance, there may be little difficulty in
identifying the body as “State”.

28. At this stage, we may usefully refer to a three-Judge Bench
decision in Ramana Dayaram Shetty (supra) wherein Bhagwati,
J. (as his Lordship then was) opined that where a
corporation is an instrumentality or agency of Government,
it would, in the exercise of its power or discretion, be
subject to the same constitutional or public law
limitations as Government. The rule inhibiting arbitrary
action by Government must apply equally where such
corporation is dealing with the public, whether by way of
giving jobs or entering into contracts or otherwise, and it
cannot act arbitrarily and enter into relationship with any
person it likes at its sweet will, but its action must be
in conformity with some principle which meets the test of
reason and relevance. This rule also flows directly from
the doctrine of equality embodied in Article 14.

29. The reference to the aforesaid authorities by us is only
for the purpose that an authority or instrumentality of the
State or agency of the State has to act in a fair, non-
arbitrary and reasonable manner and, in fact, is controlled
by Chapter III of the Constitution but it does not assume
the character of “Government” for all purposes. As we find
from the language employed in Order XXVII Rules 8A and 8B,
it only means the “Government”. In fact, Rule 8B clearly
states “in relation to any suit by or against the Central
Government or against a public officer in the service of
the Government” and similar language is used for the State
Government. Hence, the legislature has deliberately used a
restrictive definition and its scope cannot be expanded to
cover an agency or instrumentality of the State by
interpretative process.

30. Learned counsel for the appellants, as stated earlier, has
commended us to the decision in Kuruvilla (supra) of the
High Court of Kerala wherein the Division Bench placing
reliance on the decision in Collector, Cuttack v. Padma
Charan Mohanty[15] has basically dealt with the
applicability of Order XXVII Rule 8A and grant of stay
under Order XLI Rule 5 when the State is the appellant. We
do not intend to express any opinion on the correctness of
the said decisions as the controversy does not arise in the
present case because it is neither the Central Government
nor the State Government in that sense in appeal before us.
It is the “Jal Sansthan” which claims to be an extended
wing or agency of the State has preferred the appeal. We
have clearly ruled that Order XXVII Rules 8A and 8B are
applicable only to the Government and not to
instrumentality or agency of the State. That is the
specific and definite language employed by the legislature
and for that purpose we have drawn a distinction between
the concept of “State” under Article 12 and the
“Government” as used in Order XXVII Rules 8A and 8B.

31. Coming to the legal validity of the impugned order we find
that the High Court has directed for deposit of the money
and withdrawal of the 50% of the same without furnishing
security and remaining half after furnishing security. The
High Court has not given any justifiable reason for
permitting such withdrawal. Without commenting on the
merits of the grounds sought to be urged before us (to
which we have not referred to in detail not being
necessary) we only modify the order that the appellant
shall furnish the security for the entire amount to the
satisfaction of the concerned District Judge within a
period of six weeks. As the scope of appeal is very
limited, we would request the High Court to dispose of the
appeal by the end of June, 2014.

32. Resultantly, with the aforesaid modifications in the order passed by High Court, the appeal stands disposed without any order as to costs.

……………………………….J.
[Anil R. Dave]

……………………………….J.
[Dipak Misra]

 

New Delhi;
January 03, 2014.


ITEM NO.1A COURT NO.11
SECTION XI

S U P R E M E C O U R T O F I N D I A

RECORD OF PROCEEDINGS

Petition(s) for Special Leave to Appeal (Civil) No(s).27572/2013

(From the judgement and order dated 17/07/2013 in FAFO No.875/2013 of The
HIGH COURT OF JUDICATURE AT ALLAHABAD)

KANPUR JAL SANSTHAN AND ANR Petitioner(s)

VERSUS

M/S BAPU CONSTRUCTIONS Respondent(s)

Date: 03/01/2014 This Petition was called on for Judgment today.

For Petitioner(s) Mr. Gunnam Venkateswara Rao,Adv.

For Respondent(s) Mr. Purvish Jitendra Malkan, Adv.

Mr. Pradeep Kumar Yadav, Adv.

 

Hon’ble Mr. Justice Dipak Misra pronounced the reportable Judgment
of the Bench comprising of Hon’ble Mr. Justice Anil R. Dave and His
Lordship.

Leave granted.

The Civil Appeal is disposed of.

|(Jayant Kumar Arora) | |(Sneh Bala Mehra) |
|Sr. P.A. | |Assistant Registrar |

(Signed Reportable Judgment is placed on the file)


foot notes
[1] AIR 2004 Ker 233
[2] (2005) 4 SCC 1
[3] (2006) 13 SCC 322
[4] AIR 2007 SC 465
[5] (1998) 8 SCC 676
[6] (2005) 4 SCC 1
[7] AIR 1987 SC 1454
[8] (1970) 3 SCC 82
[9] (1981) 2 SCC 66
[10] (1979) 3 SCC 489
[11] (1984) 2 SCC 404
[12] (1955) 2 SCR 1331
[13] (1984) 2 SCC 183
[14] (1991) 4 SCC 578
[15] 50 1980 CLT 191