Legal Method, Analysing Of The Common Cause

Legal Method Analysing of the "Common Cause Tuesday, October 6, 2009 Dr. Tabrez Ahmad, KLS KIIT.

The "Common Cause" is a registered Society. Under Article 32 of the Indian Constitution the Common Cause and three retired government servants asked for striking down certain provisions of the Commutation of Pension Rules applicable to civilian and defence pensioners, since they permit the Union of India to recover more than what is paid to the pensioners upon commutation. Besides, the petitioners sought for a direction asking the Government to rationalise its scheme of commutation. The Single Judge of theSupreme Court has delivered two judgments — one relating to the civilian employees and the other relating to the defence personnel — and tried to make it a single judgment.
Tuesday, October 6, 2009 Dr. Tabrez Ahmad, KLS KIIT.

During the course of the hearing the Union Government agreed to restore the commuted portion of the pension in respect of "all civilian employees at the age of 70 years or after 15 years whichever is later". The facts are: (1) commutation makes available a lump sum to a pensioner; (2) there is the risk factor involved in case the pensioner dies before full recovery; (3) some Governments including State and Union have formulated a 15-year rule for restoration of the commuted pension; and (4) the 15-year formula is not justifiable because it permits recovery of more than the dues. The court has considered facts (1), (2) and (3) as material and ignored fact (4) in coming to the decision that restoration would take place on the expiry of 15 years from retirement. But this decision is given per incuriam , since it abets "unjust enrichment" banned by Section 70 of the Indian Contract Act, 1872.

As observed by Gajendragadkar, J. of the Supreme Court in State of West Bengal v. B . K . Mondal : "What Section 70 prevents is unjust enrichment and it applies as much to individuals as to Corporations and Government." In this context, Simpson observes: "The ratio of a case is only binding if it is not inconsistent with statute, or inconsistent with the ratio of another decision." And since the 15-year rule in the Common Cause violates both it cannot be the ratio of the case. In the result, it goes out.

We are now concerned with the defence personnel judgment. Here Misra, J. comes to the right point and adopts the "years of purchase" basis and goes back to the 15-year rule by adding two years to the period necessary for the recovery on the basis of years of purchase. It may be noted that this addition of two years is not justifiable because of the existence of the "multiplier effect" involved in the "years of purchase". A multiplier is the number by which the amount of a specific capital investment is multiplied to give the resultant total amount by which the income has increased. Let us take a concrete example. If I-Investment, Y = income or capital value, then the multiplier K = Y/1 or KI = Y. In other words, the multiplier of investment (monthly payment because of commutation) to obtain capital value (lump sum given by way of commutation) is known as the years' purchase. And the number of years' purchase is found by dividing the capital value (lump sum) by investment (monthly payment by pensioner).

The total amount obtained by a pensioner at a time is the product of the monthly payment out of the pension and the number of years necessary for full recovery by Government. In the judgment this has been ignored and the "multiplier" widened so as to make it equal to 15 years. But there is absolutely no scope for the addition of two years to the multiplier as is evident from the above equation. Moreover, this multiplier is a variable in respect of each pensioner, because of the variability of I and Y involved in the commuted pension. Therefore, it cannot be equated with the fixed 15-year rule by the addition of two years to the multiplier. It is a mathematical paradox. Finally, the judgment makes "equity" or equality stand on "the more or less basis". Mathematically this is absurd. For "more" is denoted by the sign > , "less" by < , while equality by =. Now, if > or < remains = cannot take the field. This, it is most respectfully submitted, sounds like an Orwellian paradox: "All animals are equal, but some animals are more equal than others."

In this context we are to extract the ratio from the Common Cause . The Court's decision is the restoration of the commuted portion of the pension on the expiry of 15 years from retirement. This applies to civilian and defence pensioners and is made effective from April 1, 1985. And the question is: what is the ratio decidendi of the case? It has already been shown that the court has accepted the 15-year rule since the Governments have accepted it. This, it is submitted, cannot be called a judicial decision. For Misra, J. concludes: "Many of the State Governments have already formulated schemes accepting the 15-year rule. We do not think we would be justified in disturbing the 15-year rule so far as civilian pensioners are concerned." Here Section 70 banning "unjust enrichment" is violated and the Court is blissfully ignorant of this. The 15-year rule has been challenged by the Common Cause because it abets the commission of this offence. This is the justification for the Court's intervention in the matter.

However, the correct yardstick has been evolved by the court in respect of the defence pensioners: "the ' years of purchase ' basis ". Unfortunately, the court has erred, it is submitted, in adopting two bases on commutation according as the pensioners are civilian or defence while coming to the same decision as to the restoration of the commuted portion of pension. This is wrong. As pointed out by the Supreme Court in D . S . Nakara v. Union of India : "The pensioners for the purpose of pension benefits form a class. The equal treatment guaranteed in Article 14 is wholly violated inasmuch as the pension rules accord differential and discriminatory treatment to equals in the matter of commutation of pension. Division is thus both arbitrary and unprincipled."

The Court has proceeded from the start on the two yardsticks — one for the civilian pensioners and the other for the defence personnel. The civilian yardstick is the 15-year rule, while the defence yardstick is "the years purchase' basis". Thereafter, the latter has been equated with the former by the addition of two years. But this does more injustice than justice. Yet the Court claims that this is 'equitable'. This is, to say the least, unfair.

Now, the question is: what is the ratio ? It has already been shown that there has been a double-think in the adoption of two yardsticks on the restoration of the commuted portion of pension. For, the 15-year rule and "the 'years of purchase' basis" are two contradictory ideas and they remain irreconcilable. Secondly , double-talk appears in lengthening the procrustian bed of the years of purchase basis so as to make it fit in with the 15-year rule. Thirdly , the case gives the impression of two judgments, concurrent and dissentient. And the concurrent judgment has been arrived at without any legal reasoning. It is the function of the "hunch" in judicial decision. Here the Judge decides by feeling , and not by judgment; by " hunching " and not by ratiocination . As observed by Hutcheson

"The vital, motivating impulse for the decision is an intuitive sense of what is right and wrong for that cause. And that Judge having so decided enlists his every faculty and belabours his laggard mind, not only to justify that intuition to himself, but to make it pass muster with his critics. Judges really do try to select categories or concepts into which to place a particular case so as to produce what the judge regards as a righteous result." Since the decision on the 15-year rule is given per incuriam , it has no binding effect at all. Fourthly , in case the one goes out, the other remains. Hence, the dissentient judgment, namely, "the 'years purchase' basis" remains and attains the status of concurrent judgment.

And the question of its expansion into the 15-year rule does not arise, since the latter violates Section 70 of the Contract Act and is not enforceable. Finally , "the 'years purchase' basis" becomes the ratio decidendi leading to the order for restoration of the commuted portion of pension to the pensioners. And the 15 years' limitation does not apply. In other words, the number of years necessary to repay the total lump sum would govern the recovery and no pensioner can be made to pay more than what is paid to him. And this is what the Common Cause has asked for.

ratio in the "Common Cause" Tuesday, October 6, 2009 Dr. Tabrez Ahmad, KLS KIIT.

Theories falling under quasi-contract are founded on a broad principle that unjust enrichment should not be retained at the expense of one who has suffered. In French law this principle is known by the name of actio de in rem verso , which "is founded on the principle of equity which forbids one man to enrich himself at the expense of another". This is applicable where "the estate of one person being enriched without lawful cause at the expense of another person, the latter, in order to obtain what is due to him, does not enjoy the benefit of any action based on contract, quasi-contract, delict or quasi-delict".

Some recent codes provide for the return of unjust benefit. This may be seen in Article 123 of the Polish Code, Article 703 of the Japanese Civil Code, Articles 399-402 of the Civil Code of Soviet Russia, Article 62 of the Swiss Federal Code of Obligations, Article 812 of the German Civil Code and Article 179 of the Chinese Code. The American Restatement of the Law of Restitution , 1937 at p. 634 provides for an accounting by the plaintiff as a condition for restitution . Lord Wright in England has pleaded for a new law of restitution in place of the fiction of the implied contract, where it is unreasonable and unjust for the defendant to retain the benefit he has received.

The doctrine of unjust enrichment flowing from quasi-contract was partially stated in Section 70 of the Indian Contract Act, 1872. And the Supreme Court noticed it in State of West Bengal v. B . K . Mondal in which it was applied to Government. Subsequently, the concept of unjust enrichment has suffered a sea change at the hands of the Supreme Court in Mulamchand v. M . P . State The Court has held that Section 70 is based on a different kind of obligation: "The juristic basis of the obligation in such a case is not founded upon any contract or tort but upon a third category of law, namely, quasi-contract or restitution." In this connection the Supreme Court has quoted with approval the observations of Lord Wright in Fibrosa v. Fairbairn

thus: "Any civilised system of law is bound to provide remedies for unjust enrichment or unjust benefit, that is, to prevent a man from retaining the money or some benefit derived from another which it is against conscience that he should keep. Such remedies in English law are different from remedies in contract or in tort and fall within a third category of the common law called quasi-contract or restitution." The concept has been further widened so as to include both law and equity. Hence the Indian Supreme Court has been pleased to note the latest development of the law by quoting the observations of Lord Denning in Nelson v. Larholt

"It is no longer appropriate to draw a distinction between law and equity. Principles have now to be stated in the light of their combined effect. Remedies now depend on the substance of their right, not on whether they can be fitted into a particular framework . The right here is not peculiar to equity or contract or tort, but falls naturally within the important category of cases where the court orders restitution if the justice of the case so requires ." And the principle of restitution has been brought on a par with the American Restatement of the Law of Restitution. This means according to the Supreme Court that "a person (seeking) restitution has a duty to account to the defendant for what he has received in the transaction from which his right to restitution arises". This is the present position of the law of restitution since Section 70 of the Contract Act started on its journey in 1872. And the Common Cause v. Union of India has been decided on this law, though the Court has not uttered a single word in this regard. Lord Denning's expression summarises the law: "restitution if the justice of the case so requires". And the Indian Supreme Court has approved of this in Mulamchand .

Since the law of restitution is applicable to commutation, the 15-year rule is arbitrary and it causes injustice. Here it is necessary to bring out the distinction between ratio decidendi and obiter dictum . As observed by H.J. Abraham: " Ratio decidendi refers to the essence, the vitals, the necessary core of the decision; obiter dictum is more or less extraneous, presumably unnecessary-to-the decision point made by the author of an opinion. In other words, the former constitutes the legal rule to be followed and adhered to below; the latter is an expression of a brief viewpoint, or sentiment, which at least in theory, has no binding effect

Of the two reasons — "the 15-year rule" and "the 'years of purchase' basis" — the first cannot be justified since it incarnates injustice in the shape of unjust enrichment. In other words, the 15-year rule is an " unnecessary to the decision point made by the author of an opinion: ( it ) is an expression of a brief sentiment (having) no binding effect". Hence, it is an obiter dictum . On the other hand, "the 'years' purchase' basis" is "the necessary core of the decision : ( it ) constitutes the legal rule to be followed and adhered to below". In other words, this is the ratio decidendi , having the binding effect. As pointed out by Simpson: "the reason why a judge enunciates the rule of law upon which he acts is that the rule justifies his action : not any rule will serve as a justification, but only a rule which is acceptable as a rule of the legal system ."

There is perpetual flux in the total push and pull of the universe and a judge faces a twofold task: ( 1 ) he must first extract from the precedents the underlying principle, the ratio decidendi ; ( 2 ) he must then determine the path or direction along which the principle is to move and develop. Unfortunately Misra, J. has not in the Common Cause followed the salutory advice given by Cardozo. In case of conflict of principles, one may point to one conclusion and another may point to a second conclusion. A judge is to choose between two paths, selecting one or the other and in some cases he is to hit upon a third, which will be the resultant of the two forces in combination or will represent the mean between the extremes. This is illustrated by the case of Riggs v. Palmer

wherein it was decided that a legatee murdering his testator would not be permitted to enjoy the benefits of the will. Three principles contended for mastery. The first was the principle of the binding force of a will disposing of the testator's estate in conformity with law. This pushed to the limit of its logic seemed to uphold the title of the murderer. The second principle was that Civil Courts might not add to the pains and penalties of crimes. This pushed to the limit of its logic seemed to uphold his title. Over against these two was the third principle rooted in justice, namely, that no man should profit from his own iniquity. And the logic of this principle prevailed over the logic of the other two. In the Common Cause also the same may be noticed. The logic of "the years' purchase basis" is to prevail over the logic of the 15-year rule, since the former is rooted in justice while the latter is not. And the ratio decidendi of the case is "the 'years purchase' basis". In the words of the Supreme Court: "A decision is binding not because of its conclusion but in regard to its ratio and the principle laid down therein."

Conclusion
In a famous dictum Lord Halsbury said: "A case is only authority for what it actually decides. I entirely deny that it can be quoted for a proposition that may seem to follow logically from it. Such a mode of reasoning assumes that the law is necessarily a logical code, whereas ( it ) is not always logical at all." Literally interpreted it would be fatal to any system of precedents. But what Halsbury meant is that there is more to the law than a mechanical process of logical deduction. It is obvious that the Judge has in every case to decide for himself which of the circumstances of the alleged precedent were relevant to the decision and whether the circumstances of his own case are in their essentials similar. Once he has decided which principle to apply, a bit of logic may enter into his application of principles. But there cannot always be a principle which imposes itself or an absolutely inescapable logical deduction. Generally there is a choice

And this has been explained by Chandrachud, C.J. in Deena v. Union of India thus: "Any case, even a locus classicus , is an authority for what it decides. It is permissible to extend the ratio of a decision to cases involving identical situations, factual and legal, but care must be taken to see that this is not done mechanically, that is, without a close examination of the rationale of the decision cited as a precedent."
In this context the role of the Judge is described by Lord Wright while discussing Bell v. Lever Bros thus

The judge could go step by step with previous authorities to the point that an agreement based on mistake ( is ) unenforceable. Then he would have to decide whether the same result followed when the prior contract was indeed existing, but could be cancelled without compensation and was voidable. Here the ways parted, and the judge had to make up his mind by analogical reasoning , and by his perception of what was just or convenient ."
And the Common Cause , it is submitted, leaves much to be desired insofar as the "analogical reasoning" and the "perception of what was just" are concerned.

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Legal Method, Analysing Of The Common Cause

by Dr Tabrez Ahmad

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Legal Method, Analysing Of The Common Cause Presentation Transcript