Accountability of state and compensation
state is responsible for action of its officers and should compensate
Accountability:- 54. In the case of Lucknow Development Authority vs M.K. Gupta, 1994 SCC (1) 243 (para-8), Hon’ble Supreme Court observed that
“The administrative law of accountability of public authorities for their arbitrary and even ultra vires actions has taken many strides. It is now accepted both by this Court and English Courts that the State is liable to compensate for loss or in' jury suffered by a citizen due to arbitrary actions of its employees. …………………….. Under our Constitution sovereignty vests in the people. Every limb of the constitutional machinery is obliged to be people oriented. No functionary in exercise of statutory power can claim immunity, except to the extent protected by the statute itself. Public authorities acting in violation of constitutional or statutory provisions oppressively are accountable for their behaviour before authorities created under the statute like the commission or the courts entrusted with responsibility of maintaining the rule of law
In the aforesaid judgment in the case of Lucknow Development Authority (supra), vide Paragraph-10 and 11, Hon’ble Supreme Court considered the question of abuse of power by public authorities and held as under:
10. ........................ The jurisdiction and power of the courts to indemnify a citizen for injury suffered due to abuse of power by public authorities is founded as observed by Lord Hailsham in Cassell & Co. Ltd. v. Broome13 on the principle that, an award of exemplary damages can serve a useful purpose in vindicating the strength of law'. An ordinary citizen or a common man is hardly equipped to match the might of the State or its instrumentalities. That is provided by the rule of law. It acts as a check on arbitrary and capricious exercise of power. In Rookes v. Barnard14 it was observed by Lord Devlin, 'the servants of the government are also the servants of the people and the use of their power must always be subordinate to their duty of service'. A public functionary if he acts maliciously or oppressively and the exercise of power results in harassment and agony then it is not an exercise of power but its abuse. No law provides protection against it. He who is responsible for it must suffer it. Compensation or damage as explained earlier may arise even when the officer discharges his duty honestly and bona fide. But when it arises due to arbitrary or capricious behaviour then it loses its individual character and assumes social significance. Harassment of a common man by public authorities is socially abhorring and legally impermissible. It may harm him personally but the injury to society is far more grievous. Crime and corruption thrive and prosper in the society due to lack of public resistance. Nothing is more damaging than the feeling of helplessness. An ordinary citizen instead of complaining and fighting succumbs to the pressure of undesirable functioning in offices instead of standing against it. Therefore the award of compensation for harassment by public authorities not only compensates the individual, satisfies him personally but helps in curing social evil. It may result in improving the work culture and help in changing the outlook. ………………………. 11. …………….. In a modem society no authority can arrogate to itself the power to act in a manner which is arbitrary. It is unfortunate that matters which require immediate attention linger on and the man in the street is made to run from one end to other with no result. The culture of window clearance appears to be totally dead. Even in ordinary matters a common man who has neither the political backing nor the financial strength to match the inaction in public oriented departments gets frustrated and it erodes the credibility in the system. Public administration, no doubt involves a vast amount of administrative discretion which shields the action of administrative authority.
But where it is found that exercise of discretion was mala fide and the
complainant is entitled to compensation for mental and physical harassment
then the officer can no more claim to be under protective cover. When a
citizen seeks to recover compensation from a public authority in respect of
injuries suffered by him for capricious exercise of power and the National
Commission finds it duly proved then it has a statutory obligation to award
the same. It was never more necessary than today when even social
obligations are regulated by grant of statutory powers. The test of permissive
form of grant is over. It is now imperative and implicit in the exercise of
power that it should be for the sake of society. When the court directs
payment of damages or compensation against the State the ultimate sufferer is
the common man. It is the tax payers' money which is paid for inaction of
those who are entrusted under the Act to discharge their duties in accordance
with law. It is, therefore, necessary that the Commission when it is satisfied
that a complainant is entitled to compensation for harassment or mental agony
or oppression, which finding of course should be recorded carefully on
material and convincing circumstances and not lightly, then it should further
direct the department concerned to pay the amount to the complainant from
the public fund immediately but to recover the same from those who are
found responsible for such unpardonable behaviour by dividing it
proportionately where there are more than one functionaries.”
56. 'Sovereignty' and "acts of State" are two different concepts. The
former vests in a person or body which is independent and supreme both
externally and internally whereas latter may be act done by a delegate of
sovereign within the limits of power vested in him. No civilised system can
permit an executive to play with the people of its country and claim that
it is entitled to act in any manner as it is sovereign. No legal or political
system today can place the State above law as it is unjust and unfair for
a citizen to be deprived of his property illegally by negligent act of
officers of the State. The need of the State to have extraordinary powers
cannot be doubted. But with the conceptual change of statutory power being
statutory duty for sake of society and the people the claim of a common
man or ordinary citizen cannot be thrown out merely because it was
done by an officer of the State even though it was against law and
negligent. Needs of the State, duty of its officials and right of the citizens
are required to be reconciled so that the rule of law in a Welfare State is not
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shaken. Principles as stated finds support from the law laid down by Hon’ble
Surpeme Court in N. Nagendra Rao & Co. vs. State of A.P., AIR 1994 SC
2663.
57. In a recent judgment dated 03.08.2022 in Writ Tax No.997 of 2022
(Nabco Products Private Limited vs. Union of India and 2 others), this
Court considered the prevailing state of affairs in assessment matters and in
Paragraphs 6 and 7 obsrved that prevailing state of affairs clearly reflects
that in the absence of any effective system of accountability of the erring
officers, the harassment of the assessees and breach of principles of
natural justice by the Officers is resulting in uncontrolled situation. The
practice of frequently violating principles of natural justice, non
consideration of replies of assessees under one pretext or the other or
rejecting it with one or two lines orders without recording reasons for
rejection, is gradually increasing which needs to be taken care of
immediately by the respondents at the highest level, otherwise
prevailing situation of arbitrary approach and breach of principles of
natural justice may not only adversely affect the assessees who pay
revenue to the Government, but also may develop a perception amongst
people/assessees that it is difficult to get justice from the authorities in
statutory proceedings.
...
In the case of Punjab State Power
Corporation Ltd. vs. Atma Singh Grewal, (2014) 13 SCC 666 (para 14),
Hon'ble Supreme Court stressed that cost should be in real and
compensatory terms and not mrely symbolic. It further expressed the need to
recover the cost from erring officers. Paragraph-14 of the Punjab State
Power Corporation Ltd. (supra) is reproducecd below:
"14. No doubt, when a case is decided in favour of a party, the Court can
award cost as well in his favour. It is stressed by this Court that such cost
should be in real and compensatory terms and not merely symbolic. There
can be exemplary costs as well when the appeal is completely devoid of any
merit. [See Rameshwari Devi v. Nirmala Devi (2011) 8 SCC 249]. However,
the moot question is as to whether imposition of costs alone will prove
deterrent? We do not think so. We are of the firm opinion that imposition of
cost on the State/PSU's alone is not going to make much difference as the
officers taking such irresponsible decisions to file appeals are not
personally affected because of the reason that cost, if imposed, comes from
the government's coffers. Time has, therefore, come to take next step viz.
recovery of cost from such officers who take such frivolous decisions of
filing appeals, even after knowing well that these are totally vexatious and
uncalled for appeals. We clarify that such an order of recovery of cost from
the officer concerned be passed only in those cases where appeal is found to
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be ex-facie frivolous and the decision to file the appeal is also found to be
palpably irrational and uncalled for."
(Emphasis supplied by us)
59. In a recent judgment dated 12.01.2022 in Special Leave to Appeal
(C) No.21132 of 2021 {Assistant Commissioner (ST) & others vs. M/s
Satyam Shivam Papers Pvt. Limited & another}, Hon'ble Supreme Court,
in the matter of Goods and Services tax; imposed cost upon the authority
by enhancing the cost equivalent to the tax and penalty levied. Relevent
portion of the aforesaid judgment of Hon'ble Supreme Court is reproduced
below:
“The analysis and reasoning of the High Court commends to us, when it is
noticed that the High Court has meticulously examined and correctly found
that no fault or intent to evade tax could have been inferred against the writ
petitioner. However, as commented at the outset, the amount of costs as
awarded by the High Court in this matter is rather on the lower side.
Considering the overall conduct of the petitioner No.2 and the
corresponding harassment faced by the writ petitioner we find it rather
necessary to enhance the amount of costs.
Upon our having made these observations, learned counsel for the petitioners
has attempted to submit that the questions of law in this case, as regards the
operation and effect of Section 129 of Telangana Goods and Services Tax Act,
2017 and violation by the writ petitioner, may be kept open. The submissions
sought to be made do not give rise to even a question of fact what to say of a
question of law. As noticed hereinabove, on the facts of this case, it has
precisely been found that there was no intent on the part of the writ petitioner
to evade tax and rather, the goods in question could not be taken to the
destination within time for the reasons beyond the control of the writ
petitioner. When the undeniable facts, including the traffic blockage due to
agitation, are taken into consideration, the State alone remains responsible
for not providing smooth passage of traffic.
Having said so; having found no question of law being involved; and having
found this petition itself being rather mis-conceived , we are constrained to
enhance the amount of costs imposed in this matter by the High Court.
The High Court has awarded costs to the writ petitioner in the sum of Rs.
10,000/- (Rupees Ten Thousand) in relation to tax and penalty of
Rs.69,000/- (Rupees Sixty-nine Thousand) that was sought to be imposed by
the petitioner No.2. In the given circumstances, a further sum of Rs.
59,000/- (Rupees Fifty-nine Thousand) is imposed on the petitioners toward
costs, which shall be payable to the writ petitioner within four weeks from
today. This would be over and above the sum of Rs. 10,000/- (Rupees Ten
Thousand) already awarded by the High Court.
Having regard to the circumstances, we also make it clear that the State
would be entitled to recover the amount of costs, after making payment to the
writ petitioner, directly from the person/s responsible for this entirely
unnecessary litigation.
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This petition stands dismissed, subject to the requirements foregoing.
Compliance to be reported by the petitioners.”
(Emphasis supplied by us)
60. In view of the detailed findings recorded by us in forgoing paragraphs
of this judgment and our conclusion that the respondents have acted
arbitrarily, illegally without jurisdiction, caused harrassment to the petitioner
and abused power conferred under the Act, 1961, which resulted in creation
of illegal demand of income Tax of Rs.16,90,61,731/-, we find it a fit case to
impose cost of Rs.50,00,000/- (Rupees Fifty Lakhs) upon the respondents
which shall be deposited by the respondents in the Prime Minister National
Relief Fund within three weeks from today.