Electronics Corporation of India Ltd vs. UOI (Supreme Court – 5 Judge Bench)

DATE: (Date of pronouncement)
DATE: February 18, 2011 (Date of publication)

Click here to download the judgement (electronics_corp_psu_cod_reversal.pdf)

Supreme Court recalls law requiring PSUs to obtain COD approval

In ONGC vs. CCE 104 CTR (SC) 31, the Supreme Court directed the Central Government to set up a ‘Committee on Disputes’ to monitor disputes between the Government and Public Sector Enterprises and give clearance for litigation. It was held the no litigation could be proceeded with in the absence of COD approval. This was followed in ONGC vs. CIDCO (2007) 7 SCC 39 and it was held that even disputes between PSUs and State Governments would require COD approval.

In CCE vs. Bharat Petroleum Corporation, a 2 Judge Bench of the Supreme Court held that the working of the COD had failed and that the time has come to revisit the law. The matter was referred to a Larger Bench for reconsideration.

HELD by the Larger Bench recalling its orders in ONGC vs. CCE 104 CTR (SC) 31, (2004) 6 SCC 437 and ONGC vs. CIDCO (2007) 7 SCC 39:

The idea behind setting up of the … “Committee on Disputes” (CoD) was to ensure that resources of the State are not frittered away in inter se litigations between entities of the State, which could be best resolved, by an empowered CoD … Whilst the principle and the object behind the aforestated Orders is unexceptionable and laudatory, experience has shown that despite best efforts of the CoD, the mechanism has not achieved the results for which it was constituted and has in fact led to delays in litigation …. on same set of facts, clearance is given in one case and refused in the other.

This has led a PSU to institute a SLP in this Court on the ground of discrimination. We need not multiply such illustrations. The mechanism was set up with a laudatory object. However, the mechanism has led to delay in filing of civil appeals causing loss of revenue. For example, in many cases of exemptions, the Industry Department gives exemption, while the same is denied by the Revenue Department. Similarly, with the enactment of regulatory laws in several cases there could be overlapping of jurisdictions between, let us say, SEBI and insurance regulators. Civil appeals lie to this Court. Stakes in such cases are huge. One cannot possibly expect timely clearance by CoD. In such cases, grant of clearance to one and not to the other may result in generation of more and more litigation. The mechanism has outlived its utility. In the changed scenario indicated above, we are of the view that time has come under the above circumstances to recall the directions of this Court

10 comments on “Electronics Corporation of India Ltd vs. UOI (Supreme Court – 5 Judge Bench)

    The SC Order recalling its Orders pursuant to which the CoD came to be constituted by the government years before, it seems, is bound to give rise to several intricate questions, but with no ready answer.

    TO BRING TO FOCUS, the predominant question is, as to what is the fate of those cases, already finally disposed of, or pending at different stages of appeal, etc. For an appreciation of the point raised, and its legal implications, one may consider the case of Tamil Nadu Warehousing Corporation vs ACIT recently reported in some quarters wherein, the case narration reads, – “Appeal to High court – State owned corporation – Absence clearance from committee on dispute – Appeal not entertained.”


  2. Rangarajan K.E.B says:

    As a departmental representative before the ITAT, Chennai I have heard some Members expressiing their reservations on the requirement of COD approval, which indirectly takes away their jurisdiction otherwise to decide the dispute. In fact the COD is taking purely administrative and not quasi-judicial decision on the application of law on issues between the contending parties. As observed by Apex Court on same set of facts, clearance is given in one case (by one COD) and refused in the other (by another COD). It may be welcome in cases between one department of Central Government and another of Central Government itself but not of State Government. In genera, yet it is a welcome decision only.

  3. Sai Kumar says:

    Our Department has filed appeal in High Court in November,2010 against the order of ITAT where the assessee is a PSU. Due to oversight the approval of COD is not yet sought ie not with in one month time. Now the question is:

    1. In the wake or recent SC judgment still we need to go to COD? Because even we approach COD now, there is no mechanism existing after abolishing of same by SC?

    2. Is there any rule in COD guidelines that allow us to file reference even after one month of filing of appeal?

    Please help us…

  4. vswaminathan says:

    @Sai Kumar

    Ostensibly, as common sense tells one, the SC’s Order calls for a prompt and serious follow-up action. to the end of finding a suitable solution(s) as to how best all or any such or like ‘fall out’ problems – as one can imagine, they are bound to be galore, and of varying texture, and sure to be confronted with by both the sides,- could be resolved, without detriment to the interests of the ‘litigants’. But then any such action could only be taken by none other than the central government, in consultation with the SC itself, should that be called for. In the interim, the litigants , it would appear, are left with no option at all, except to ‘wait and see’ – but seriously consider moving the government, through all available forums and avenues, and keep pursuing relentlessly, until the stalemate is brought to a desirable end.


  5. Tapas Misra says:

    The direction of the Supreme Court for the disputes between the government and PSUs to be resolved through a high powered committee was doomed from the beginning in the manner it was being implemented. While this mechanism could work welll in matters of contractual disputes between these parties, this ruling was being applied to even statutory disputes. For instance, challenge to a penalty order under section 271(1)(c) of the Income-tax Act, 1961 was also being made subject to CoD approval. That was faulty as the Central Government has no power under law to waive a penalty that has been confirmed by the CIT (A) notwithstanding the fact that the penalty order and the appellate order may be erroneous. The only way the dispute could be resolved was to brow-beat the PSU to accept the penalty. That would not be very fair on the PSU. Besides, with public shareholding in some PSUs, the shareholders are deprived of defending their right against an erroneous order.

    The present ruling of the Supreme Court is a welcome step in the right direction.

    As regards disputes of the nature such as NTPC not paying Coal India in time, the Government can intervene at a Ministerial level and resolve the issue, if it has the will to govern.


    @Tapas Misra

    The view to the effect that tax disputes where the assessee is a PSU – especially if it is not an entity wholly owned by the government – should not have been made subject to CoD cannot be faulted but is well founded. It is this very same view which was adequately stressed in my comments on the article @ the link- http://indiacorplaw.blogspot.com/2009/02/resurgence-of-bank-nationalisations.html


  7. Supreme Court has recalled its direction of requirement of COD meaning therby that as if no such direction ever existed.Recall of an order is always retrospective therefore in pending appeals no COD appoval will be required even if Applications are pending before COD (Now not in existence)

  8. vswami says:


    Hasten to draw attention to a recently reported development on the topic, -“Ruling of SC applies to all cases irrespective of their stage of pendency unless prospective effect is indicated” . That has, after a gap of over 3 years, brought about in its wake some clarity to the thus far prevailing imponderables. The court’s verdict, which as read and understood, has, in effect, HELD : Its orders which required CoD clearance having been recalled, the said Decision is applicable to all cases, irrespective of stage of pendency thereof. Accordingly, even appeal filed before the crucial date of 17-2-2011 could not be dismissed for want of CoD clearance.

    Be that as may, special noting is called for, of the court’s observation to the effect that, – a decision of the Supreme Court “enunciating a principle of law” is applicable to all cases, irrespective of stage of pendency,; for, the later ruling has to be taken to apply from the inception, unless the Court has expressly indicated that it would have prospective effect. Nonetheless, one is not clear in own mind, on an independent thinking, why the subject matter of the decision happens to be referred to / construed as a ‘principle of law’ , within its strict legal sense.

    Quite possible, experts may have a different angle to view up their sleeves; and may care to throw proper light.

  9. vswami says:

    To add: Citation of the decision of Calcutta HC is, – [2014] 50 taxmann.com 327 (Calcutta); the ruling is in a case under the law of Excise & Customs.

  10. vswami says:

    ‘Posted on February 18, 2011’

    Puzzled ! why the need felt for a repeat ?

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