Devilal Modi v Sales Tax Officer, Ratlam (1964)

This is the decision which carries the constructive branch of res judicata across from suits into writ proceedings. The earlier authority had established that a writ petition decided on the merits binds the parties; the question left was whether a litigant who kept a ground in reserve could revive it in a second writ petition attacking the very same order. The answer given here — that he cannot, because the rule rests on the same considerations of public policy as the general doctrine — is the foundation on which the later cases on constructive res judicata outside the Code are built.

The appellant, proprietor of a trading concern, had been assessed to sales tax for the year 1957-58 under the Madhya Bharat Sales Tax Act 1950. That Act was repealed by the Madhya Pradesh General Sales Tax Act 1958 with effect from 1 April 1959. On 31 December 1960 the Assistant Commissioner of Sales Tax issued a notice under the 1958 Act reciting that he was satisfied that the appellant's sales during the period from 1 April 1957 to 31 March 1958 had escaped assessment and that the appellant was liable to be reassessed under s. 19(1). Fresh assessment proceedings followed, and by an order of 31 March 1961 an additional tax of Rs. 31,250 and a penalty of Rs. 15,000 were imposed. That single order was the subject-matter of both the writ petitions which followed.

The first round. On 25 April 1961 the appellant challenged the order by a writ petition in the High Court of Madhya Pradesh, raising substantially two contentions: first, that although s. 30 of the Act provided for delegation of the Commissioner's duties, the Commissioner had in fact delegated to the Assistant Commissioner his power under s. 19 but not his duties, so that the proceedings taken by the Assistant Commissioner were invalid; and secondly, that the sales in question had already been assessed under the Act of 1950 and could not be reassessed under the later Act, the order cancelling the earlier assessment under s. 39(2) being itself invalid. The High Court dismissed the petition. On appeal by special leave, the Supreme Court rejected both contentions and dismissed the appeal with costs on 8 March 1963.

The two reserved points. At the hearing of that appeal counsel for the appellant sought to raise two additional points, and was not permitted to do so on the ground that they had not been specified in the writ petition filed before the High Court and had not been raised at an earlier stage. The Court nevertheless indicated what they were: that under s. 19(1) of the 1958 Act only sales chargeable to tax under that Act could be reassessed, whereas the sales brought to tax were of sugar, which was not chargeable under that Act; and that the penalty imposed under s. 14 of the 1950 Act was illegal, that Act having been repealed and the right to impose a penalty not having been saved by s. 52 of the 1958 Act. Refusing permission, the Court expressed no opinion on the tenability of the points on the merits.

The second round. On 23 April 1963 the appellant filed a fresh writ petition in the same High Court, attacking the validity of the same order of assessment and raising precisely those two contentions. The High Court examined them on the merits and rejected them, dismissing the petition on 29 April 1963. The appellant came again by special leave.

Is it permissible to attack the validity of the same order of assessment for the same year by two consecutive writ petitions under Art. 226 — that is, does the principle of constructive res judicata apply to writ petitions of this kind?

For the appellant it was contended that where a citizen seeks redress by invoking the High Court's high prerogative jurisdiction under Art. 226 it would be inappropriate to invoke res judicata against him; he had been exposed to the risk of paying a large sum by way of tax and penalty which had not been lawfully incurred, and a citizen aggrieved by an illegal order should be allowed to challenge it even by a second writ petition.

The Court accepted the premise that fundamental rights are a significant feature of the Constitution and that the High Courts under Art. 226 are bound to protect them; if a case is made out for the exercise of that jurisdiction the High Court will not hesitate to exercise it. But the question whether a citizen should be allowed to challenge the validity of the same order by successive petitions cannot be answered merely in the light of the significance of fundamental rights. The general principle underlying res judicata is ultimately based on considerations of public policy: that decisions pronounced by courts of competent jurisdiction should be final unless modified or reversed by appellate authorities, and that no one should be made to face the same kind of litigation twice over, because such a process would be contrary to considerations of fair play and justice.

The concession, and why it did not help. The Court was willing to concede that the rule of constructive res judicata is in a sense a somewhat technical or artificial rule prescribed by the Code of Civil Procedure. The rule postulates that if a plea could have been taken by a party in a proceeding between him and his opponent, he would not be permitted to take that plea against the same party in a subsequent proceeding which is based on the same cause of action. But basically, the Court said, even this view is founded on the same considerations of public policy; for if the doctrine were not applied to writ proceedings, it would be open to the party to take one proceeding after another and urge new grounds every time, and that plainly is inconsistent with those considerations.

Assessments for different years. The position may be different where the orders relate to different years. Even if passed under the same provisions, it may theoretically be open to a party to contend that the liability being recurring from year to year the cause of action is not the same, so that the rejection of a petition against one year's assessment may not bar a challenge to the next year's. The court may then adopt the same view as before; but if a new ground is urged it may have to consider it on the merits, because strictly speaking res judicata may not apply. That, the judgment says, is the effect of the earlier decision in The Amalgamated Coalfields Ltd. v The Janapada Sabha, Chhindwara, where the tax challenged in the second proceeding was levied for a different period. The general observations in that case — that constructive res judicata is an artificial form of res judicata enacted by s. 11 and should not generally be applied to writ petitions under Art. 32 or Art. 226 — must be read in the light of that important fact.

The finality of the earlier decision. The result of the dismissal of the appellant's earlier appeal was clear and unambiguous: he had failed to challenge the validity of the impugned order, and was liable to pay the tax and penalty imposed by it. It would be unreasonable to suggest that he could still file a subsequent writ petition in the High Court urging that the same order was invalid on additional grounds. Had the High Court upheld those contentions, its order would have been plainly inconsistent with the earlier decision of the Supreme Court, and inconsistent with the finality which must attach to that Court's decisions as between the parties.

The conduct the rule is aimed at. The proceedings themselves illustrated how a citizen ordered to pay a tax can postpone payment by prolonging legal proceedings interminably. The appellant did not take all his points in the writ petition; he thought of new points in appeal; refused leave to raise them, he filed a fresh petition in the High Court taking them; defeated there on the merits, he came in appeal; and at the hearing of that appeal he filed yet another application for leave to take further additional points. If constructive res judicata were not applied, a party could file as many writ petitions as he liked, taking one or two points every time — which means harassment and hardship to the opponent, and materially affects the doctrine of finality of judgments.

The appeal was dismissed, with no order as to costs. The second writ petition was barred by constructive res judicata. Though courts dealing with questions of infringement of fundamental rights must consistently endeavour to sustain those rights and strike down their unconstitutional invasion, it would not be right to ignore the principle of res judicata altogether in dealing with writ petitions; considerations of public policy and the basic doctrine that judgments of competent courts are final and binding between the parties must receive due consideration.

The two points had been disallowed, not decided: the Court that refused leave expressly said it expressed no opinion on their tenability. The bar therefore does not rest on any adjudication of those grounds. It rests on the party's failure to take them when he could and should have, coupled with the finality of the decision which disposed of his challenge to the order.