2022 (10) TMI 1230 - SC - Indian Laws

Sealed-cover evidence use violates natural justice; fair disclosure required before denying Navy Permanent Commission to officers

SC held that reliance on sealed-cover material by AFT in denying Permanent Commission in the Navy violated principles of natural justice. It ruled that ... Denial of Permanent Commission (PC) in the Indian Navy - disclosure of sensitive information - whether the Armed Forces Tribunal (AFT) could have adjudicated on the validity of the selection proceedings when relevant material was disclosed only to the AFT in a sealed cover? - HELD THAT:- This court observed that the right to disclosure is not absolute. Portions that involve information on third-parties or confidential information on the securities market may be withheld by SEBI. The court directed that the Board is duty bound to disclose parts of the investigative report that concern the specific allegations that have been levelled in the show cause notice. However, the court also observed that it does not entitle a person to whom the notice is issued to receive unrelated sensitive information. The court held that it must first be prima facie established by SEBI that the disclosure of the information would affect third party rights. Once a prima facie case of sensitivity is established, the onus would then shift to the appellant to prove that the information is necessary to defend his case appropriately. The elementary principle of law is that all material which is relied upon by either party in the course of a judicial proceeding must be disclosed. Even if the adjudicating authority does not rely on the material while arriving at a finding, information that is relevant to the dispute, which would with ‘reasonable probability’ influence the decision of the authority must be disclosed. A one-sided submission of material which forms the subject matter of adjudication to the exclusion of the other party causes a serious violation of natural justice. In the present case, this has resulted in grave prejudice to officers whose careers are directly affected as a consequence. The non-disclosure of relevant material to the affected party and its disclosure in a sealed-cover to the adjudicating authority (in this case the AFT) sets a dangerous precedent. The disclosure of relevant material to the adjudicating authority in a sealed cover makes the process of adjudication vague and opaque. The disclosure in a sealed cover perpetuates two problems. Firstly, it denies the aggrieved party their legal right to effectively challenge an order since the adjudication of issues has proceeded on the basis of unshared material provided in a sealed cover. The adjudicating authority while relying on material furnished in the sealed cover arrives at a finding which is then effectively placed beyond the reach of challenge. Secondly, it perpetuates a culture of opaqueness and secrecy. It bestows absolute power in the hands of the adjudicating authority. It also tilts the balance of power in a litigation in favour of a dominant party which has control over information - The measure of nondisclosure of sensitive information in exceptional circumstances must be proportionate to the purpose that the non-disclosure seeks to serve. The exceptions should not, however, become the norm. The AFT has not had the benefit of considering the objections of the appellants to the manner in which the exercise was carried out by the authorities. The objections of the appellants noted above would have been set out before the AFT if the material was disclosed to the appellants. The failure to disclose relevant material has caused substantial prejudice to the appellants. This case exposes the danger of following a sealed cover procedure. The AFT carried out a painstaking exercise while disposing of the OAs but there has been a clear breach of the principles of natural justice - the AFT should be directed to reconsider the entire matter afresh - appeal allowed. Issues: Whether the Armed Forces Tribunal's reliance on material and selection-board proceedings disclosed to it in a sealed cover, without disclosure to affected officers, was permissible; whether non-disclosure of such material violated principles of natural justice and caused material prejudice requiring setting aside the AFT judgment and remand for fresh adjudication.Analysis: The Court examined the sealed-cover practice against the duty to disclose material that would, in reasonable probability, influence adjudication. It applied principles that disclosure promotes reliability, fair trial and transparency, while acknowledging limited exceptions for genuinely sensitive third-party or strategic information. The AFT had relied extensively on vacancy calculations and Board proceedings placed in sealed envelopes and recorded findings of no mala fides and no gender bias without those materials being accessible to the appellants. The Court held that one-sided submission of material to the adjudicating authority, to the exclusion of affected parties, undermines effective challenge and creates opacity in the adjudicatory process. Given the appellants lacked access to the data on vacancies, weightages and inter-se merit that was relied upon, they were deprived of an opportunity to contest critical facts relevant to their claims for Permanent Commission.Conclusion: The sealed-cover disclosure to the AFT without providing relevant material to the affected officers constituted a breach of natural justice and caused material prejudice; the appeals are allowed, the impugned AFT judgment is set aside and the matters are remanded to the AFT for fresh adjudication with appropriate disclosure safeguards.