Bangalore Medical Trust v. B. S. Muddappa



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46. However, on Contention (D) we hold that the quashing and termination of the criminal proceedings brought about by the orders dated 14th and 15th February, 1989 require to be, and are, hereby reviewed and set aside.

Re: Contention (E)


47. The written memorandum setting out the terms of the settlement filed by the Union of India and the U.C.C. contains certain terms which are susceptible of being construed as conferring a general future immunity from prosecution. The order dated 15th February, 1989 provides in clause 3 (a) and 3 (b):

" ........that any suits, claims or civil or criminal complaints which may be filed in future against any Corporation, Company or person referred to in this settlement are defended by them and disposed of in terms of this order.

Any such suits, claims or civil or criminal proceedings filed or to be filed before any court or authority are hereby enjoined and shall not be proceeded with before such court or authority except for dismissal or quashing in terms of this order".

These provisions, learned Attorney General contends, amount to conferment of immunity from the operation of the criminal law in the future respecting matters not already the subject matter of pending cases and, therefore, partake of the character of a blanket criminal immunity which is essentially a legislative function. There is no power or jurisdiction in the courts, says learned Attorney-General, to confer immunity for criminal prosecution and punishment. Learned Attorney General also contends that grant of immunity to a particular person or persons may amount to a preferential treatment violative of the equality clause.

This position seems to be correct. In Apodaca v. Viramontes, (13 ALR 1427), it was observed:

" ..... The grant of an immunity is in very truth the assumption of a legislative power".

(pa. 1433)

".....The decisive question, then, is whether the district attorney and the district court in New Mexico, absent constitutional provision or enabling statute conferring the power, are authorized to grant immunity from prosecution for an offence to which incriminating answers provoked by questions asked will expose the witness.

We are compelled to give a negative answer to this inquiry. Indeed, sound reason and logic, as well as the great weight of authority, to be found both in text books and in the decided cases, affirm that no such power exists in the district attorney and the district court, either or both, except as placed there by constitutional or statutory language. It is unnecessary to do more in this opinion in proof of the statement made than to give a few references to texts and to cite some of the leading cases ....."

(p. 1431)

After the above observation, the court referred to the words of Chief Justice Cardozo (as he then was in the New York Court of Appeals) in Doyle v. Hafstader (257 NY 244) :

"........The grant of an immunity is in very truth the assumption of a legislative power, and that is why the Legislature, acting alone, is incompetent to declare it. It is the assumption of a power to annul as to individuals or classes the statutory law of crimes, to stem the course of justice, to absolve the grant jurors of the country from the performance of their duties, and the prosecuting officer from his. All these changes may be wrought through the enactment of a statute. They may be wrought in no other way while the legislative structure of our government continues what it is".

In the same case the opinion of Associate Judge Pound who dissented in part on another point, but who entirely shared the view expressed by Chief Justice Cardozo may also be cited:

"The grant of immunity is a legislative function. The Governor may pardon after conviction (Ny Const. Art. 4 & 5), but he may not grant immunity from criminal prosecution or may the courts. Amnesty is the determination of the legislative power that the public welfare requires the witness to speak".

(p. 1433)

Learned Attorney General referred us to the following passage in "jurisprudence" by Wortley:

"Again, if we say that X has an immunity from arrest when a sitting member of the House of Commons, then during its subsistence he has an immunity that is denied to the generality of citizens; there is an inequality of rights and duties of citizens when the immunity is made out ...."

(p. 297)


This inequality must be justified by intelligible differentia for classification which are both reasonable and have a rational nexus with the object.

Article 361 (2) of the Constitution confers on the President and the Governors immunity even in respect of their personal acts and enjoins that no criminal proceedings shall be instituted against them during their term of office. As to the theoretical basis for the need for such immunity, the Supreme Court of the United States in a case concerning immunity from civil liability (Richard Nixon v. Ernest Fitzgerald. (1982) 457 US 731: 73 Law Ed 2d 349) said:

"......This Court necessarily also has weighed concerns of public policy, especially as illuminated by our history and the structure of our government ...."

(p. 362)

".....In the case of the President the inquiries into history and policy though mandated independently by our case, tend to converge. Because the Presidency did not exist through most of the development of common law, any historical analysis must draw its evidence primarily from our constitutional heritage and structure. Historical inquiry thus merges almost at its inception with the kind of "public policy" analysis appropriately undertaken by a federal court. This inquiry involves policies and principles that may be considered implicit in the nature of the President's office in a system structured to achieve effective government under a constitutionally mandated separation of powers."

(pp. 362 & 363)

".......In view of the special nature of the President's constitutional office and functions, we think it appropriate to recognise absolute Presidential immunity from damages liability for acts within the "outer perimeter" of his official responsibility.

Under the Constitution and laws of the United States the President has discretionary responsibilities in a broad variety of areas, many of them highly sensitive. In many cases it would be difficult to determine which of the President's innumerable "functions" encompassed a particular action ...."

(p. 367)

Following observations of Justice Storey in his "Commentaries in the Constitution of United States" were referred to:

"There are incidental powers, belonging to the executive department, which are necessarily implied from the nature of the functions, which are confided to it. Among these, must necessarily be included the power to perform them .... The President cannot, therefore, be liable to arrest, imprisonment, or detention, while he is in the discharge of the duties of his office; and for this purpose his person must be deemed, in civil cases at least, to possess an official inviolability".

(p. 363)


48. Indeed, the submissions of learned Attorney General on the theoretical foundations as to the source of immunity as being essentially legislative may be sound. But the question does not strictly arise in that sense in the present case. The direction that future criminal proceedings shall not be instituted or proceeded with must be understood as a concomitant and a logical consequence of the decision to withdraw the pending prosecutions. In that context, the stipulation that no future prosecutions shall be entertained may not amount to conferment of any immunity but only to a reiteration of consequences of such termination of pending prosecutions. Thus understood any appeal to the principle as to the power to confer criminal immunity becomes inapposite in this case.

49. However, in view of our finding on contention (D) that the quashing of criminal proceedings was not justified and that the orders dated 14th and 15th of February 1989 in that behalf require to be reviewed and set aside, the present contention does not survive because as a logical corollary and consequence of such further directions as to future prosecutions earlier require to be deleted. We, therefore, direct that all portions in the orders of this Court which relate to the incompetence of any future prosecutions be deleted.

50. The effect of our order on Contentions (D) and (E) is that all portions of orders dated 14th and 15th February, 1989 touching the quashing of the pending prosecution as well as impermissibility of future criminal liability are set aside. However, in so far as the dropping of the proceedings in contempt envisaged by clause (b) of para 4 of the order dated 15th February, 1989 is concerned, the same is left undisturbed.

Contention (E) is answered accordingly.

Re: Contention (F)

51. As we have seen earlier the memorandum of settlement as well as the orders of the Court contemplates that with a view to effectuation the settlement there be a termination of pending criminal prosecution with a further stipulation for abstention from future criminal proceedings. Petitioners have raised the plea and learned Attorney General supports them - that the language of the memorandum of settlement as well as the orders of the court leave no manner of doubt that a part of the consideration for the payment of 470 million US dollars was the stifling of the prosecution and, therefore, unlawful and opposed to public policy. Relying upon Ss. 23 and 24 of the Indian Contract Act it was urged that if any part of a single consideration for one or more objects or any one or any part of any one of several considerations for a single object is unlawful, the agreement becomes "void".

52. At the outset, learned Attorney General sought to clear any possible objections based on estoppel to the Union of India, which was a consenting party to the settlement raising this plea. Learned Attorney General urged that where the plea is one of invalidity the conduct of parties becomes irrelevant and that the plea of illegality is a good answer to the objection of consent. The invalidity urged is one based on public policy. We think that having regard to the nature of plea - one of nullity - no preclusive effect of the earlier consent should come in the way of the Union of India from raising the plea. Illegalities, it is said, are incurable. This position is fairly well established. In re A Bankruptcy Notice, (1924) 2 Ch D 76 at p. 97 Atkin L.J. said:

"It is well established that it is impossible in law for a person to allege any kind of principle which precludes him from alleging the invalidity of that which the statute has, on grounds of general public policy, enacted shall be invalid".

In Maritime Electric Co. Ltd. v. General Dairies Ltd., AIR 1937 PC 114 at 116-117 a similar view finds expression:

"..... and estoppel is only a rule of evidence which under certain special circumstances can be invoked by a party to an action; it cannot therefore avail in such a case to release the plaintiff from an obligation to obey such a statute, nor can it enable the defendant to escape from statutory obligation of such a kind on his part. It is immaterial whether the obligation is onerous or otherwise to the party suing. The duty of each party is to obey the law.

......The court should first of all determine the nature of the obligation imposed by the statute, and then consider whether the admission of an estoppel would nullify the statutory provision.

........there is not a single case in which an estoppel has been allowed in such a case to defeat a statutory obligation of an unconditional character".

The case of this Court in point is of the State of Kerala v. The Gwalior Rayon Silk Manufacturing (Wvg.) Co. Ltd. (1974 1 SCR 671 at p. 688 : (AIR 1973 SC 2734 at p. 2745) where this court repelled the contention that an agreement on the part of the Government not to acquire, for a period of 60 years the lands of the company did not prevent the State from enacting or giving effect to a legislation for acquisition and that the surrender by the Government of its legislative powers which are intended to be used for public good cannot avail the company or operate against the Government as equitable estoppel. It is unnecessary to expand the discussion and enlarge authorities.

We do not think that the Union of India should be precluded from urging the contention as to invalidity in the present case.



53. The main arguments on invalidity proceed on the premise that the terms of the settlement and the orders of the court passed pursuant thereto contemplate, amount to and permit a compounding of non-compoundable offences which is opposed to public policy and, therefore, unlawful. The orders of the court based on an agreement whose or part of whose consideration is unlawful have, it is urged, no higher sanctity than the agreement on which it is based. The orders of the court based on consent of parties do not, so goes the argument, reflect an adjudicative imposition of the court, but merely set the seal of the court on what is essentially an agreement between the parties. It is urged that the validity and durability of a consent order are wholly dependant on the legal validity of the agreement, on which it rests. Such an order is amenable to be set aside on any ground which would justify a setting aside of the agreement itself.

These principles are unexceptionable. Indeed, in Huddersfield Banking Company Ltd. v. Herry Lister & Son Ltd., (1895) 2 Ch. 273 at p. 76 Vaughan Williams J. said:

"..........it seems to me that the clear result of the authorities is that, notwithstanding the consent order has been drawn up and completed, and acted upon to the extent that the property has been sold and the money has been paid into the hands of the receiver, I may now set aside the order and arrangement upon any ground which would justify me in setting aside an agreement entered into between the parties.

The real truth of the matter is that the order is a mere creature of the agreement, and to say that the court can set aside the agreement and it was not disputed that this could de done if a common mistake were provided - but that it cannot set aside an order which was the creature of that agreement, seems to me to be giving the branch of existence which is independent of the tree". (Emphasis added)

This was affirmed in appeal by Lindley I.J. in the following words:

"the appellants, contend that there is no jurisdiction to set aside the consent order under such materials as we have to deal with; and they go so far as to say that a consent order can only be set aside on the ground of fraud. I dissent from that proposition entirely. A consent order, I agree, is an order; and so long as it stands it must be treated as such, and so long as it stands I think it is as good an estoppel as any other order. I have not the slightest doubt on that; nor have I the slightest doubt that a consent order can be impeached, not only on the ground of fraud, but upon any grounds which invalidate the agreement it expresses in a more formal way than usual."


(Para 280)

In Great North-West Central Railway Co. v. Charlebois, 1899 AC 114 at 124, the Privy Council stated the proposition thus:

"It is quite clear that a company cannot do what is beyond its legal powers by simply going into court and consenting to a decree which orders that the thing shall be done ....... Such a judgement cannot be of more validity than the invalid contract on which it was founded".

(Emphasis added)

It is, indeed, trite proposition that a contract whose object is opposed to public policy is invalid and it is not any the less so by reason alone of the fact that the unlawful terms are embodied in a consensual decree. In State of Punjab v. Amar Singh (1974) 2 SCC 70 at p. 90: (AIR 1974 SC 994 at p. 1007, para 33) this court said:

"After all, consent or agreement, parties cannot achieve what is contrary to law and a decree merely based on such agreement cannot furnish a judicial amulet against statutory violation ...... The true rule is that the contract of the parties is not the less a contract, and subject to the incidents of a contract, because there is superadded the command of the judge".


54. We do not think that the plea of “Accord and Satisfaction” raised by the UCC is also of any avail to it. UCC contends that the funds constituting the subject-matter of the settlement had been accepted and appropriated by Union of India and that, therefore, there was full accord and satisfaction. We find factually that there is no appropriation of the funds by the Union of India. The funds remain to the credit of the Reserve Bank of India. That apart as observed in Corpus Juris Secundum, Vol. I:

"An illegal contract or agreement, such as one involving illegality of the subject matter, one involving the unlawful sale or exchange of intoxicating liquors, or a subletting, sub-leasing, or hiring out of convicts, held under lease from the State, in violation of statute, or stifling a prosecution for a public offence, or one which is against public policy, cannot constitute or effect an accord and satisfaction".

(Emphasis added)


55. The main thrust of petitioners' argument of unlawfulness of consideration is that the dropping of criminal charges and undertaking to abstain from bringing criminal charges in future were part of the consideration for the offer of 470 million US dollars by the UCC and as the offences involved in the charges were of public nature and non-compoundable, the consideration for the agreement was stifling of prosecution and, therefore, unlawful. It is a settled proposition and of general application that where the criminal charges are matters of public concern there can be no diversion of the course of public justice and cannot be the subject matters of private bargain and compromise.

56. Shri Nariman urged that there were certain fundamental misconceptions about the scope of this doctrine of stifling of prosecution in the arguments of the petitioners. He submitted that the true principle was that while non-compoundable offences which are matter of private bargains and that administration of criminal justice should not be allowed to pass from the hands of Judges to private individuals, the doctrine is not attracted where side by side with criminal liability there was a pre-existing civil liability that was also settled and satisfied. The doctrine, he said, contemplates invalidity based on the possibility of the element of coercion by private individuals for private gains taking advantages of the threat of criminal prosecution. The whole idea of applicability of this doctrine in this case becomes irrelevant having regard to the fact that the Union of India as Dominus Litis moved in the matter and that administration of criminal justice was not sought to be exploited by any private individual for private gains. Shri Nariman submitted that distinction between "motive" and "consideration" has been well recognised in distinguishing whether the doctrine is or is not attracted.

57. The question that arise in the present case are, first, whether putting an end to the criminal proceedings was a part of the consideration and bargain for the payment of 470 million US dollars or whether it was merely one of the motives for entering into the settlement and, secondly, whether the memorandum of settlement and orders of this court, properly construed, amount to a compounding of the offences. If, on the contrary, what was done was that Union of India invited the court to exercise its powers under Art. 142 to permit a withdrawal of the prosecution and the expedient of quashing was a mere procedure of recognising the effect of withdrawal, could the settlement be declared void?

We think that the main settlement does not suffer from this vice. The pain of nullity does not attach to it flowing from any alleged unlawfulness of consideration. We shall set out our reasons presently.

Stating the law on the matter, Fry LJ in Windhil Local Board of Health v. Vint, (1890) 45 Ch. D. 351 at p. 366 said:

"We have therefore a case in which a contract is entered into for the purpose of diverting - I may say perverting - the course of justice; and although I agree that in this case it was entered into with perfect good faith and with all the security which could possibly be given to such an agreement, I nevertheless think that the general principle applies, and that we cannot give effect to the agreement, the consideration of which is the diverting the course of public justice".

In Keir v. Leeman, (1844) 6 Queen's Bench 308 at 316, 322, Lord Denman, C.J. said:

"The principle of law is laid down by Wilmot C.J. in Collins v. Blantern, (1767) (2) Wils 341) that a contract to withdraw a prosecution for perjury, and consent to give no evidence against the accused, is founded on an unlawful consideration and void.

On the soundness of this decision no doubt can be entertained, whether the party accused were innocent, the law was abused for the purpose of extortion; if guilty the law was eluded by a corrupt compromise, screening the criminal for a bribe.

.......But, if the offence is of a public nature, no agreement can be valid that is founded on the consideration of stifling a prosecution for it.

In the present instance, the offence is not confined to personal injury, but is accompanied with riot and obstruction of a public officer in the execution of his duty. These are matters of public concern, and therefore not legally the subject of a compromise.

The approbation of the Judge (whether necessary or not) may properly be asked on all occasion where an indictment is compromised on the trial; plainly it cannot make that legal which the law condemns".

This was affirmed in appeal by Tindal C.J. who said (p. 393): (1846 (9) Qb 371)

"It seems clear, from the various authorities brought before us on the argument, that some misdemeanours are of such a nature that a contract to withdraw a prosecution in respect of them, and to consent to give no evidence against the parties accused, is founded on an illegal consideration. Such was the case of Collins v. Blantern, (1767) 2 Wils, 341, 347), which was the case of a prosecution for perjury. It is strange that such a doubt should ever have been raised. A contrary decision would have placed it in the power of a private individual to make a profit to himself by doing a great public injury".


58. V. Narasimha Raju v. V. Gurumurthy Raju, (1963) 3 SCR 687: (AIR 1963 SC 107) of this court is a case in point. The first respondent who had filed a criminal complaint in the Magistrate's Court against the appellant and his other partners alleging of commission of offences u/Ss. 420, 465, 468 and 477 read with Ss. 107, 120B of the Indian Penal Code entered into an agreement with the accused persons under which the dispute between the appellant and the first respondent and others was to be referred to arbitration on the first respondent agreeing to withdraw his criminal complaint. Pursuant to that agreement the complaint was got dismissed, on the first-respondent abstaining form educing evidence. The arbitration proceedings, the consideration for which was the withdrawal of the complaint, culminated in an award and the first respondent applied to have the award made a rule of the court. The appellant turned around and challenged the award on the ground that the consideration for the arbitration agreement was itself unlawful as it was one not to prosecute a non compoundable offence. This court held that the arbitration agreement was void u/S 23 of the Indian Contract Act as its consideration was opposed to public policy. The award was held void.

59. Even assuming that the Union of India agreed to compound non-compoundable offences, would this constitute a stifling of prosecution in the sense in which the doctrine is understood. The essence of the doctrine of stifling of prosecution is that no private person should be allowed to take the administration of criminal justice out of the hands of the Judges and place it is his own hands. In Rameshwar v. Upendranath, AIR 1926 Calcutta 455, 456 the High Court said:

"Now in order to show that the object of the Agreement was to stifle criminal prosecution, it is necessary to prove that there was an agreement between the parties express or implied, the consideration for which was to take the administration of law out of the hands of the Judges and put it into the hands of a private individual to determine what is to be done in particular case and that the contracting parties should enter into a bargain to that effect".

(Emphasis added)

In V. Narasimha Raju (1963) (3) SCR 687: AIR 1963 SC 107) (Supra) this Court said (p. 693) (of SCR): (at p. 110 para 8 of AIR):

"The principle underlying this provision is obvious. Once the machinery of the Criminal Law is set into motion on the allegation that a non-compoundable offence has been committed, it is for the criminal courts and criminal courts alone to deal with that allegation and to decide whether the offence alleged has in fact been committed or not. The decision of this question cannot either directly or indirectly be taken out of the hands of criminal courts and dealt with by private individuals".

(Emphasis added)

This was what was reiterated in Ouseph Poulo v. Catholic Union Bank Ltd., (1964) 7 SCR 745: (AIR 1965) SC 166):

"With regard to non-compoundable offence, however, the position is clear that no court of law can allow a private party to take the administration of law in its own hands and settle the question as to whether a particular offence has been committed or not for itself".

(Emphasis added)

In this sense, a private party is not taking administration of law in its own hands in this case. It is the Union of India, as the Dominus Litis, that consented to the quashing of the proceedings. We have said earlier that what was purported to be done was not a compounding of the offences. Though, upon review, we have set aside that part of the order, the consequences of the alleged unlawfulness of consideration must be decided at the time of the transaction. It is here that we see the significance of the concurring observations of Chapman J. in Majibar Rahman v. Muktashed Hossein, (1913) ILR 40 Calcutta 113 at page 118 who said:

"I agree, but desire to carefully confine my reason for holding that the bond was void on the ground that the consideration for the bond was found by the lower Court to be a promise to withdraw from the prosecution in a case the compromise of which is expressly forbidden by the Code of Criminal Procedure".

As stated earlier, the arrangement which purported to terminate the criminal cases was one of a purposed withdrawal not forbidden by any law but one which was clearly enabled. Whether valid grounds to permit such withdrawal existed or not is another matter.





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