Shanti Fragrances v. Union of India and the Unwarranted Reference

Introduction

In 2017, a 2-Judge Bench of the Supreme Court in Shanti Fragrances v. Union of India² (Shanti Fragrances) was dealing with a batch of cases concerning the taxability of pan masala under various State sales tax enactments. During the proceedings, the 2-Judge Bench noticed the “dichotomy between two lines of Supreme Court judgments” holding opposing and conflicting views.³ The first being Kothari Products Ltd. v. State of U.P.⁴ line of judgments and the second being CST v. Agra Belting Works⁵ line of judgments.⁶ Both Kothari Products⁷ and Agra Belting Works⁸ were three-Judge Bench decisions.⁹ Kothari Products¹⁰ was a unanimous decision, while Agra Belting Works¹¹ was decided by a majority of 2:1. Noticing this conflict, the 2-Judge Bench referred this issue to the Chief Justice of India to constitute an appropriate Bench to ascertain which line of judgments lay down the correct law.¹²

However, while delivering its judgment, the 2-Judge Bench delved into another aspect. The Bench questioned that after the decision of Union of India v. Raghubir Singh¹³ (Raghubir Singh) whether it can be stated that Judges of the Supreme Court “do not sit in 2s and 3s for mere convenience but that a Bench which is numerically superior will prevail over a Bench of lesser strength”.¹⁴ In Raghubir Singh¹⁵, the court referred to the observations of Chinnappa Reddy, J. in Javed Ahmed Abdul Hamid Pawala v. State of Maharashtra¹⁶ in which the learned Judge relied on the decision of the Kings Bench in Young v. Bristol Aeroplane Co. Ltd.¹⁷ to observe that it would be “inappropriate for a Division Bench of three Judges” to overrule the decision of the Division Bench of two Judges.¹⁸ However, notwithstanding this observation, the court in Raghubir Singh¹⁹ noted that a practice in Indian courts “sanctified by repeated affirmation” has evolved to the rule that “the statement of law by a Division Bench is considered binding on a Division Bench of the same or lesser number of Judges”.²⁰

Though this aspect was not in direct consideration before the 2-Judge Bench in Shanti Fragrances²¹, the Bench chose to examine the issue further. It referred to the judgment of Beaumon, C.J. in Emperor v. Ningapa Ramappa Kurbar²² (erroneously referred to as Ningapa Ramappa Kurbar v. Emperor by the Bench) in which Beaumon, C.J. stated that “it would seem anomalous to hold that a later Full Bench can overrule an earlier Full Bench merely because the later Bench consists of more Judges than the earlier”.²³

The 2-JudgeBench further noticed that a similar view was echoed by M.B. Lokur, J. in his judgment in Supreme Court Advocates-on-Record Assn. v. Union of India²⁴ in which the learned Judge questioned whether the number of Judges on a Bench governs what is binding upon a subsequent Bench.²⁵ Lastly, the 2-JudgeBench also referred to the provisions of law set out by Lord Denning M.R. in Harper v. National Coal Board²⁶.

After referring to all the aforesaid judgments, the 2-JudgeBench felt that that time had come to “tear the judicial veil” on this issue and also requested the Chief Justice to constitute an appropriate Bench “to lay down, as a matter of law, as to whether and to what extent” the propositions contained in Ningapa Ramappa Kurbar²⁷, Lokur, J.'s observation in Supreme Court Advocates-on-Record Assn.²⁸ and Harper²⁹ judgment of the Court of Appeal in the UK “should guide us for the future”.³⁰

Thus, two issues were referred to the Chief Justice by the 2-Judge Bench.

The author argues that the request made by the 2-Judge Bench to the Chief Justice to constitute a Bench to examine the second issue of the doctrine of precedent was unnecessary because the 2-Judge Bench has not considered law laid down by the seven-Judge Bench of the Supreme Court in A.R. Antulay v. R.S. Nayak.³¹ (Antulay case).

The law laid down in Antulay case

The facts of this case are well known but ascertaining the law is a tedious task due to various judicial opinions. This exercise is, however, made easier due to the editorial note in the Supreme Court Cases Reporter, which the author relies on for this column.³²

Seven Judges of the Supreme Court assembled to decide two questions:

(1) Whether the directions of the Constitution Bench of five Judges of the Supreme Court in the previous round of litigation between the parties in Antulay case³³ to transfer the proceedings from the Special Judge, Bombay to the High Court of Bombay itself were “inoperative, invalid or illegal”?

(2) If the directions were invalid, then could the seven-Judge Bench “recall, withdraw, revoke or set aside the directions”?³⁴

The appeal was allowed by a majority of 5:2 and the directions of the five-Judge Bench to transfer the case to the Bombay High Court were set aside and quashed.³⁵ The lead judgment was delivered by Sabyasachi Mukharji, J. for himself, G.L. Oza, J. and S. Natarajan, J.; Ranganathan Misra, J. concurred with Mukharji, J. with a separate opinion and differed with him on certain aspects.³⁶ Even though Oza, J. was a party to the opinion of Mukharji, J., he delivered a short opinion he expressed his dissent with Mukharji, J. and concurred with Ranganathan Misra, J. only on the issue of whether a writ of certiorari by the Supreme Court could be issued to correct its own judgment or order.³⁷ B.C. Ray, J. concurred with Mukharji, J. The dissenters were M.N. Venkatachaliah, J. and S. Ranganathan, J.³⁸

Mukharji, J.

During the course of his judgment, Mukharji, J., speaking for the majority, directly dealt with the issue of whether the size of a Bench matters or not.³⁹ Disagreeing with the observations of Chinnappa Reddy, J. in Javed Ahmed Abdul Hamid Pawala⁴⁰ as well as the decision of Young v. Bristol Aeroplane Co. Ltd.⁴¹ where it was “held that a Division Bench of three Judges should not overrule a Division Bench of two Judges”, Mukharji, J. opined that this principle has not been followed by “our courts”.⁴² The learned Judge went onto opine that the “law laid down” by the Supreme Court “is somewhat different. There is a hierarchy within the court itself here, where larger Benches overrule smaller Benches”. According to the learned Judge, “This is the practice following by this Court and now it is a crystallised rule of law.” Therefore, Mukharji, J. clearly holds that larger Benches overruling smaller Benches is (i) the law laid down by the Supreme Court; and (ii) a practice that is now “rule of law”.⁴³

Ranganath Misra, J.

In his concurring judgment, Ranganath Misra, J. does not disagree with Mukharji, J. and acknowledges that “The practice has developed that a larger Bench is entitled to overrule the decision of a smaller Bench notwithstanding the fact that each of the decisions is that of the Court”.⁴⁴ However, the learned Judge opined that this principle would not apply to the case before the Court and further stated that the seven-Judge Bench was “not entitled to reverse the decision of the Constitution Bench” of five-Judges.⁴⁵

According to the learned Judge, “Overruling when made by a larger Bench of an earlier decision of a small one is intended to take away the precedent value of the decision without affecting the binding effect of the decision in the particular case.”⁴⁶ The learned Judge opined that only the five-Judge Bench could rectify its mistake and a larger Bench was not required to do so. However, he agreed with the “ultimate conclusions” of Mukharji, J.

Venkatachaliah, J.

Venkatachaliah, J. as mentioned earlier delivered a dissenting opinion. According to the learned Judge, “A larger Bench, merely on the strength of its numbers, cannot undo the finality of the decisions of other Division Benches.”⁴⁷ The learned Judge opined that “if the decision suffers from an error the only way to correct it, is to go in review under Article 137⁴⁸” of the Constitution of India⁴⁹ (the Constitution) “read with Order 40 Rule 1⁵⁰” of the Supreme Court Rules framed under Article 145⁵¹ of the Constitution.⁵² The learned Judge further went onto to opine that the seven-Judge Bench “cannot sit in appeal” over what the five-Judge Bench said.⁵³ In order words, according to Venkatachaliah, J., the seven-Judge Bench of the Supreme Court could not undo or overrule the decision of the five-Judge Bench transferring the case from the Special Judge to the Bombay High Court. However, what is crucial to note is that Venkatachaliah, J. has not disagreed with Mukharji, J.'s view that larger Benches overruling smaller Benches is “a crystallised rule of law”.

S. Ranganathan, J.

S. Ranganathan, J. did not opine on this issue.

Is the opinion of Mukharji, J. on the issue the majority view in Antulay case?

The reader of this column would be entitled to ask that if the opinion of Mukharji, J. has been delivered for himself and two other Judges, then would the learned Judge's opinion constitute the majority view having fallen one short of the magic figure of four? The answer to this question lies in the opinions of Misra, J. and Venkatachaliah, J.

We have already seen that Misra, J. has not differed with Mukharji, J. on the position of law, namely, that a larger Bench is entitled to overrule the decision of a smaller Bench notwithstanding the fact that each of the decisions is that of the Court. The learned Judge has only opined that “this principle” (which is not disputed by him) would not apply to the case before the Court. The general principle of law and the law laid down by Mukharji, J. has not been countered by Misra, J.

Venkatachaliah, J. on the other hand has stated that a larger Bench cannot “undo the finality of the decisions of other Division Benches”; but the learned Judge has not expressly disputed the statement of law, set out by Mukharji, J. that larger Benches overrule smaller Benches. What the learned Judge has disputed is that the larger Benches cannot undo the finality of the decision or the ultimate decision of a smaller Bench. The learned Judge has not stated that the principle of law laid down by a smaller Bench cannot be overruled by a larger Bench. There is a difference between the principle of law and the actual decision in a judgment. Therefore, it is submitted that Mukharji, J.'s opinion has in effect not been countered either by Misra, J. or Venkatachaliah, J.

However, supposing the reader of this column is of the opinion that Venkatachaliah, J. has expressly disagreed on this issue with Mukharji, J., even then, the concurring opinion of Misra, J. on this issue would be sufficient to conclude that in Antulay case⁵⁴, the Supreme Court has by a majority of 4:3 opined that the practice of larger Benches of the Supreme Court overruling smaller Benches is a crystallised rule of law and therefore, the Supreme Court in Shanti Fragrances⁵⁵ ought not to have referred this issue to the Chief Justice to constitute a larger Bench.

But let us assume for a moment that Misra, J. has neither concurred with Mukharji, J. nor dissented with his opinion. Would it still be open to conclude that the opinion of Mukharji, J. would be the majority view on this issue? Reliance may be placed on the judgments of the Gujarat High Court in Goswami Kalyanraiji Govindraiji v. Goswami Vallabraiji Govindraiji⁵⁶ and Gajubha (Gajendrasinh) Bhimaji Jadeja v. Union of India⁵⁷ in which the High Court has held that it is a settled principle of law when the other Judges of a Bench do not dissent from or contravene the view of a particular Judge on the same Bench, then it is presumed that the other Judges who have not expressed contrary views have agreed with the view expressed by the said Judge. Both judgments of the Gujarat High Court have placed reliance on a passage from the decision of the Queen's Bench in Guardians of the Poor of the West Derby Union v. Guardians of the Poor of the Atcham Union⁵⁸ in which Lord Esher M.R. has opined as under:

The question is, what is the true construction of the 35th section of the Act of Parliament which is before us, and, when we have got at the true construction, what is the application of it to this case? …The House of Lords heard the cases, and did not give judgment at once, but considered the matter carefully, and four of the learned Judges in the House of Lords gave judgment. Now we know that each of them considers the matter separately, and they then consider the matter jointly, interchanging their judgments, so that every one of them has seen the judgments of the others. If they mean to differ in their view, they say so openly when they come to deliver their judgments, and if they do not do this, it must be taken that each of them agrees with the judgments of the others.

(emphasis supplied)

The view of the Gujarat High Court and the Queen's Bench has also been echoed by the Supreme Court in the decision delivered in Kaikhosrou (Chick) Kavasji Framji v. Union of India⁵⁹ in which the Court rejected the objection raised by the respondent in the said case that the view expressed by A.P. Sen, J. in Express Newspapers (P) Ltd. v. Union of India⁶⁰ was his own view and not the majority view as two other learned Judges on the Bench did not express any opinion on a particular question. By relying of the aforequoted decision of the Queen's Bench, the Court held that since the two other Judges on the Bench did not dissent with A.P. Sen, J. while expressing their concurrent opinions, the view of A.P. Sen, J. was the law laid down under Article 141⁶¹ of the Constitution.

Therefore, by this logic, even if it is presumed Misra, J. did not express any clear opinion, the fact that the learned Judge did not disagree with Mukharji, J. would be enough to leave the statement of law set out by Mukharji, J. untouched. This is also fortified by the fact that Ranganathan, J. in his dissenting opinion has not expressed any view on the statement of law set out by Mukharji, J.

Is the reference in Shanti Fragrances on the second issue necessary in light of Mukharji, J.’s opinion in Antulay case

Once the majority view by Mukharji, J. in Antulay case⁶² holds the field, the reference by the 2-Judge Bench in Shanti Fragrances⁶³ would be unnecessary. In a recent decision of the Supreme Court in Shah Faesal v. Union of India⁶⁴, a five-Judge Bench of the Court opined:

19. When a decision is rendered by this Court, it acquires a reliance interest and the society organises itself based on the present legal order. When substantial judicial time and resources are spent on references, the same should not be made in a casual or cavalier manner. It is only when a proposition is contradicted by a subsequent judgment of the same Bench, or it is shown that the proposition laid down has become unworkable or contrary to a well-established principle, that a reference will be made to a larger Bench.⁶⁵

Albeit in the context of Article 145(3)⁶⁶, a three-Judge Bench of the Supreme Court in Shrimanth Balasaheb Patil v. Karnataka Legislative Assembly⁶⁷ opined:

160. Any question of law of general importance arising incidentally, or any ancillary question of law having no significance to the final outcome, cannot be considered as a substantial question of law. The existence of substantial question of law does not weigh on the stakes involved in the case, rather, it depends on the impact the question of law will have on the final determination. If the questions having a determining effect on the final outcome have already been decided by a conclusive authority, then such questions cannot be called as “substantial questions of law”.⁶⁸

“A substantial question of law, therefore, cannot arise where that law has been finally and authoritatively decided” by the Supreme Court.⁶⁹ Though the reference in Shanti Fragrances⁷⁰ does not appear to have been made under Article 145(3) of the Constitution but under Order 6 Rule 2⁷¹ of the Supreme Court Rules, 2013⁷², the principal of law set out in both judgments above would certainly guide the Court in cases which are referred to a larger Bench.

Conclusion

R.S. Pathak, C.J. in Raghubir Singh⁷³ while examining whether the Supreme Court is bound by its own decisions painstakingly referred to the law laid down in different jurisdictions in certain common law countries. While examining the law laid down on this issue by the House of Lords, reference was made to Dr Alan Paterson's The Law Lords which summarises the guidelines framed by the House of Lords. One such guideline is that “a decision ought not to be overruled if it would be impracticable for the Lords to foresee the consequences of departing from it” or “if to do so would involve a change that ought to be part of a comprehensive reform of the law”.⁷⁴ While this is in the context of overruling decisions, it is submitted that these guidelines are relevant to the issue at hand. The consequence of attempting to unsettle with the law laid down in Antulay case⁷⁵ would shake the very foundation of the law of precedent as it stands today which would certainly entail unforeseen consequences which even the Supreme Court would not be able to imagine. Therefore, unless a comprehensive law reform is undertaken, (which seems highly unlikely), it would be advisable for the Supreme Court not to stir up a hornet's nest and lay the issue to rest.