Supreme Court Upholds Reciprocal Agreement for Bus Permits: Ambala Bus Syndicate vs. Chandigarh Administration (26 September 2018)

Date of the Judgment: 26 September 2018
Citation: 2018 INSC 848
Judges: Justice Kurian Joseph and Justice Sanjay Kishan Kaul
Can a unilateral scheme override a bilateral reciprocal agreement between states regarding bus permits? The Supreme Court of India recently addressed this question in a case concerning the operation of non-air-conditioned buses between Punjab and Chandigarh. The Court had to determine whether the Chandigarh Administration could deny counter-signatures on permits issued by Punjab, based on a 1998 scheme that restricted private bus operations, despite a 2008 reciprocal agreement allowing such operations. The judgment was delivered by a bench comprising Justice Kurian Joseph and Justice Sanjay Kishan Kaul, with Justice Kurian Joseph authoring the opinion.

Case Background

The appellant, Ambala Bus Syndicate Pvt. Ltd., operated stage carriage buses. Despite a 1998 scheme by the Chandigarh Administration that restricted private bus operations, they continued to operate until 2008. This operation was based on permits issued by the State of Punjab. On 04 June 2008, a reciprocal agreement came into effect between the Union Territory of Chandigarh and the State of Punjab. This agreement specifically allowed for counter-signatures of permits for non-air-conditioned buses that were initially issued before 01 November 1966 and were being renewed by the State of Punjab.

The Chandigarh Administration, however, sought to deny counter-signatures to the appellant based on the 1998 scheme, arguing that it had an overriding effect. The appellant challenged this decision, leading to the present case.

Timeline:

Course of Proceedings

The case initially came before a Single Judge of the High Court of Punjab and Haryana at Chandigarh, who ruled in favor of the appellant. However, the Division Bench of the High Court overturned this decision, holding that the 1998 Scheme, as amended in 2001, prohibited the operation of private non-air-conditioned buses in Chandigarh. The Division Bench reasoned that the scheme, framed under Section 99 read with Section 100 of the Motor Vehicles Act, 1988, had an overriding effect. The appellant then appealed to the Supreme Court.

Legal Framework

The case primarily revolves around the interpretation of the Motor Vehicles Act, 1988, specifically the interplay between Chapter V (relating to permits and reciprocal agreements) and Chapter VI (relating to schemes for regulating road transport). The following provisions are relevant:

• Section 66 of the Motor Vehicles Act, 1988: This section prohibits the use of a motor vehicle as a transport vehicle in a public place without a permit granted or counter-signed by the competent authority.
• Section 88 of the Motor Vehicles Act, 1988: This section provides for counter-signatures of permits granted in one state to be valid in another state. Subsections (5) and (6) detail the process for entering into and publishing reciprocal agreements between states.
  • “88 (5) Every proposal to enter into an agreement between the States to fix the number of permits which is proposed to be granted or countersigned in respect of each route or area, shall be published by each of the State Governments concerned in the Official Gazette and in any one or more of the newspapers in regional language circulating in the area or route proposed to be covered by the agreement together with a notice of the date before which representations in connection therewith may be submitted, and the date not being less than thirty days from the date of publication in the Official Gazette, on which, and the authority by which, and the time and place at which, the proposal and any representation received in connection therewith will be considered.”
  • “(6) Every agreement arrived at between the States shall, insofar as it relates to the grant of countersignature of permits, be published by each of the State Governments concerned in the Official Gazette and in any one or more of the newspapers in the regional language circulating in the area or route covered by the agreement and the State Transport Authority of the State and the Regional Transport Authority concerned shall give effect to it.”
• Section 98 of the Motor Vehicles Act, 1988: This section states that the provisions of Chapter VI (relating to schemes) and the rules and orders made thereunder shall have effect notwithstanding anything inconsistent therewith contained in Chapter V or in any other law.
  • “98. Chapter to override Chapter V and other laws.- The provisions of this Chapter and the rules and orders made thereunder shall have effect notwithstanding anything inconsistent therewith contained in Chapter V or in any other law for the time being in force or in any instrument having effect by virtue of any such law.”

The core issue was whether the unilateral scheme of 1998, as amended in 2001, framed under Chapter VI, could override the bilateral reciprocal agreement of 2008 under Chapter V.

Arguments

Arguments of the Chandigarh Administration (Respondent Nos. 1 and 3):

• The 1998 Scheme and the modified Scheme of 2001 do not permit non-air-conditioned buses of private operators to operate in the Union Territory of Chandigarh.
• Section 66 of the Motor Vehicles Act, 1988, requires a permit for a vehicle to be used as a transport vehicle.
• Section 98 of the Motor Vehicles Act, 1988, stipulates that Chapter VI (Schemes) has an overriding effect over Chapter V (Reciprocal Agreements).
• The reciprocal agreement does not allow for counter-signatures for private non-air conditioned buses.

Arguments of the Ambala Bus Syndicate (Appellant):

• The reciprocal agreement of 2008 specifically allows for counter-signatures of non-A.C. buses that had permits issued before 1966 and are being renewed by the State of Punjab.
• The reciprocal agreement is a bilateral agreement and should be given effect.
• The overriding effect of Section 98 of the Motor Vehicles Act, 1988, applies only in cases of inconsistency, which is not present here as the reciprocal agreement is on mutually beneficial terms.
• The reciprocal agreement was entered into consciously by both the Union Territory of Chandigarh and the State of Punjab.
• The mileage of the buses has been taken into consideration for the mileage entitlement of the Union Territory of Chandigarh.

Innovativeness of the argument: The appellant’s argument was innovative in that it emphasized the bilateral nature of the reciprocal agreement and argued that the overriding effect of Section 98 of the Motor Vehicles Act, 1988, should not apply when the agreement is mutually beneficial and not inconsistent with the scheme.

Issues Framed by the Supreme Court

The Supreme Court did not explicitly frame issues in a separate section. However, the core issue was:

1. Whether the 1998 Scheme of the Union Territory of Chandigarh, as amended in 2001, could override the reciprocal agreement of 2008 between the Union Territory of Chandigarh and the State of Punjab, specifically regarding the operation of non-air-conditioned buses with permits issued before 1966 and renewed by the State of Punjab.

Treatment of the Issue by the Court

The following table demonstrates how the Court decided the issue:

Authorities

The Court did not rely on any specific case laws or books in its reasoning. However, it considered the following legal provisions:

• Section 66 of the Motor Vehicles Act, 1988: Regarding the necessity of permits for transport vehicles.
• Section 88 of the Motor Vehicles Act, 1988: Relating to counter-signatures of permits and reciprocal agreements.
• Section 98 of the Motor Vehicles Act, 1988: Regarding the overriding effect of Chapter VI (Schemes) over Chapter V (Reciprocal Agreements).

Judgment

The Supreme Court set aside the order of the Division Bench of the High Court and restored the order of the Single Judge. The Court held that the reciprocal agreement of 2008 was valid and binding on both the Union Territory of Chandigarh and the State of Punjab. The Court emphasized that the reciprocal agreement specifically provided for counter-signatures of non-A.C. buses with permits issued before 1966 and renewed by the State of Punjab.

The authorities were viewed as follows:

• Section 66 of the Motor Vehicles Act, 1988: The Court acknowledged the need for permits but did not find it to be an impediment to the reciprocal agreement.
• Section 88 of the Motor Vehicles Act, 1988: The Court upheld the validity of reciprocal agreements and the counter-signatures of permits.
• Section 98 of the Motor Vehicles Act, 1988: The Court clarified that the overriding effect of Chapter VI applies only in cases of inconsistency, and the reciprocal agreement was not inconsistent with the scheme.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the following factors:

• Bilateral Nature of the Reciprocal Agreement: The Court emphasized that the reciprocal agreement was a bilateral agreement entered into consciously by both the Union Territory of Chandigarh and the State of Punjab. This indicated a mutual understanding and agreement between the parties.
• Specific Provision for Non-A.C. Buses: The reciprocal agreement specifically provided for counter-signatures of non-A.C. buses with permits issued before 1966 and renewed by the State of Punjab. This was a key factor in the Court’s decision, as it showed a clear intention to allow such operations.
• No Inconsistency: The Court found that the reciprocal agreement was not inconsistent with the 1998 Scheme. The overriding effect of Section 98 of the Motor Vehicles Act, 1988, was deemed inapplicable because the agreement was on mutually beneficial terms.
• Mileage Entitlement: The Court noted that the mileage of the buses was taken into consideration for the mileage entitlement of the Union Territory of Chandigarh, indicating that the agreement was not detrimental to Chandigarh’s interests.

The Court’s reasoning was that the reciprocal agreement was a conscious decision by both parties and that “the overriding effect provided in Section 98 of the said Act operates only in case of an inconsistency on a legal position. There is no such situation in the present case.” The Court further noted that “the reciprocal agreement is on mutually beneficial terms” and that the Union Territory of Chandigarh had taken into account the mileage of the buses in the reciprocal agreement. The Court also observed that “the buses operated by the appellant, which had permits issued prior to 1.11.1966 and so long as they are renewed by the State of Punjab, the Union Territory of Chandigarh cannot refuse counter signature.”

There were no dissenting opinions in this case. The decision was unanimous.

Key Takeaways

• A bilateral reciprocal agreement between states regarding bus permits will generally prevail over a unilateral scheme, provided there is no inconsistency.
• The overriding effect of Section 98 of the Motor Vehicles Act, 1988, applies only in cases of inconsistency between a scheme and other laws or agreements.
• Reciprocal agreements should be interpreted in a manner that gives effect to their mutually beneficial terms.
• Permits issued before 1966 and renewed by the State of Punjab, the Union Territory of Chandigarh cannot refuse counter signature.

Directions

The Supreme Court directed that the necessary actions should be taken within four weeks from the date of the judgment to give effect to the decision.

Specific Amendments Analysis

There is no specific amendment discussed in the judgment.

Development of Law

The ratio decidendi of this case is that a bilateral reciprocal agreement between states will generally prevail over a unilateral scheme, provided there is no inconsistency. This clarifies the interpretation of Section 98 of the Motor Vehicles Act, 1988, by stating that the overriding effect of Chapter VI only applies in cases of inconsistency and not in cases where the reciprocal agreement is mutually beneficial. This case reinforces the importance of giving effect to reciprocal agreements between states.

Conclusion

The Supreme Court’s judgment in Ambala Bus Syndicate vs. Chandigarh Administration upholds the validity of reciprocal agreements between states. It clarifies that a unilateral scheme cannot override a bilateral agreement unless there is a clear inconsistency. The Court emphasized the importance of giving effect to mutually beneficial agreements and ensuring that the parties adhere to their commitments.