The Managing Director vs. The Commissioner Of Commercial Taxes

It is noticed that the present dispute is by the Government of Karnataka Undertaking vis-à-vis charge of tax by the respondents.

After hearing the matter for sometime, the court is of the opinion that effort could be made for resolution of the dispute keeping in mind the Karnataka State Dispute Resolution Policy-2021, this court in W.P.No.20905/2022 had reiterated the legal position that dispute between the State Entities or State controlled Entities are matters that could be resolved amicably.

As regards the mechanism under the Karnataka State Dispute Resolution Policy-2021, the observations made in the said order at para 5 to 13 which are of relevance are extracted as follows:

It is to be noticed that the petitioner is an entity which is State for the purpose of Article 12 of the Constitution of India. The dispute is between the petitioner and BMRCL. The BMRCL also for all practical purposes can be construed to be an Entity for the purpose of Article 12 of the NC: 2024:KHC:29364 Constitution of India in light of the control follows:

Under the scheme of the Constitution, Article 131 confers original juri iction on the Supreme Court in regard to a dispute between two States of the Union of India or between one or more States and the Union of India. It was not contemplated by the framers of the Constitution or CPC that two departments of a State or the Union of India will fight a litigation in a court of law. It is neither appropriate nor permissible for two departments of a State or the Union of India to fight litigation in a court of law. Indeed, such a course cannot but be detrimental to the public interest as it also entails avoidable wastage of public money and time. Various departments of the Government are its limbs and, therefore, they must act in coordination and not in confrontation. Filing of a writ petition by one department against the other by invoking the extraordinary juri iction of the High Court is not only against the propriety and polity as it smacks of indiscipline but is also contrary to the basic concept of law which requires that for suing or being sued, there must be either a natural or a juristic person. The States/Union of India must evolve a mechanism to set at rest all interdepartmental controversies at the level of the Government and such matters should not be carried to a court of law for resolution of the controversy. In the case of disputes between public sector undertakings and the Union of India, this Court in Oil and Natural Gas Commission v. CCE [1992 Supp (2) SCC 432] called upon the Cabinet Secretary to handle such matters. In Oil and Natural Gas Commission v. CCE [1995 Supp (4) SCC 541] this Court directed the Central Government to set up a committee consisting of representatives from 1 2003(3) SCC 472 NC: 2024:KHC:29364 the Ministry of Industry, the Bureau of Public Enterprises and the Ministry of Law, to monitor disputes between Ministry and Ministry of the Government of India, Ministry and public sector undertakings of the Government of India and public sector undertakings in between themselves, to ensure that no litigation comes to court or to a tribunal without the matter having been first examined by the Committee and its clearance for litigation. The Government may include a representative of the Ministry concerned in a specific case and one from the Ministry of Finance in the Committee. Senior officers only should be nominated so that the Committee would function with status, control and discipline.

This position has been noticed by the Division Bench of this Court in W.P.No.28040/2009. In Paragraph No.17 of the said case, it is observed that where there is an interdepartmental dispute, the same must be resolved in terms of the observations of the Apex Court in the case of Chief Conservator of Forests (Supra).

It must also be noted that the State of Karnataka has adopted and formulated the "Karnataka State Dispute Resolution Policy- 20212" (2021 Policy) in supersession of the "Karnataka State Litigation 2011" (2011 Policy), to combat the rise in pendency of cases where the State Government/ Instrumentalities is a party in the litigation.

It is also pertinent to note that the Apex Court in Gurgaon Gramin Bank v. Khazani3 has disapproved the practice by Government instrumentalities coming before the courts to litigate on trivial and frivolous matters without there being any serious question of law. The relevant observations are as follows:

The number of litigations in our country is on the rise, for small and trivial matters, people and sometimes the Central and the State Governments and their instrumentalities like banks, nationalised or private, come to courts may be due to ego clash or to save the officers' skin. The judicial system is overburdened which naturally causes delay in adjudication of disputes. Mediation Centres opened in various parts of our country have, to some extent, eased the burden of the courts but we are still in the tunnel and the light is far away. On more than one occasion, this Court has reminded the Central 3 (2012) 8 SCC 781 NC: 2024:KHC:29364 Government, the State Governments and other instrumentalities as well as to the various banking institutions to take earnest efforts to resolve the disputes at their end. At times, some give and take attitude should be adopted or both will sink. Unless serious questions of law of general importance arise for consideration or a question which affects a large number of persons or the stakes are very high, the courts' juri iction cannot be invoked for resolution of small and trivial matters"

Accordingly, it would be appropriate to refer the subject matter of present dispute to a Committee consisting of the following:

The said Committee would be headed by the Chief Secretary, Government of Karnataka and the other entities referred NC: 2024:KHC:29364 to above would be the participants. The Chief Secretary is at liberty to enlarge the constitution of the Committee if found necessary. The said Committee to be constituted to endeavour to settle the dispute amicably taking note of the constituent entities all being State Authorities. Needless to state that if the Chief Secretary, Government of Karnataka, is of the opinion that the matter cannot be resolved due to any legal impediment and is a matter to be decided by the Court, the matter may be referred back to the Court.

All contentions of the parties are kept open. It is clarified that all disputes and contentions of the petitioner and respondents which is the subject matter of present proceedings, stand referred to the Committee referred to above. The Chief Secretary, Government of Karnataka to endeavour to resolve the dispute within a period of 3 months from the date of receipt of copy of this order.

The above approach is not only the mandate of the law, but would go a long way towards avoiding disputes between State and its entities contributing to increased work load. Further, differences between State and its entities ought to be resolved in a separate platform and cannot land up for adjudication before the Courts which even otherwise are over burdened. The State and its entities are to contribute to lowering matters that end up before Courts for adjudication in a meaningful manner. NC: 2024:KHC:29364

Reserving liberty as mentioned above, the present petition is disposed off."

Taking note of the observations made above, it would be appropriate to refer the subject matter of the present dispute to a Committee constituted by the Chief Secretary, Government of Karnataka, Managing Director of the petitioner Corporation and the Additional Chief Secretary, Finance Department, Commissioner of Commercial Taxes. The Chief Secretary is reserved liberty to expand the Committee as may be required. The said Committee would be headed by the Chief Secretary, Government of Karnataka and other entities referred to above would be participants. The said committee to endeavour to settle the dispute amicably taking note that the entities are State Entities. Needless to state if the Chief Secretary is of the opinion that the matter could not be resolved, the matter may be referred back to the court. NC: 2024:KHC:29364

All contentions of the parties are kept open. It is clarified that all disputes and contentions of the petitioner and respondents which is the subject matter of present proceedings, stand referred to the Committee referred to above. The Chief Secretary, Government of Karnataka to endeavour to resolve the dispute within a period of 3 months from the date of receipt of copy of this order.

Needless to state, till the Committee resolves the dispute, the respondents may not take any precipitative steps. Accordingly, the petition is disposed off. (S SUNIL DUTT YADAV) JUDGE NP