2025 (3) TMI 491 - HC - Indian Laws

Orders demanding 10% pre-deposit of grant-in-aid quashed for lacking statutory foundation and violating natural justice

HC quashed orders demanding 10% pre-deposit of grant-in-aid amount as precondition for hearing petitioner's representation. Court held the demand lacked ... Challenge to order demanding 10% deposit of the grant-in-aid and interest from the petitioner, as a precondition for considering their representation - breach of terms and conditions of the concession - HELD THAT:- In the present case, this Court finds that the demand to deposit 10% of the total grant-in-aid concession provided to the petitioner, for hearing of the representation is neither founded in the statute nor the same is at an appellate stage. Learned Standing Counsel is unable to point out any provision under law under which the State Government/opposite party No.1 would had demanded the pre-deposit for disposal of the representation of the petitioner. Further, this Court is unable to appreciate the conduct of the opposite parties in demanding the said pre-deposit at the belated stage of April, 2023, especially when the representation had been pending since December, 2020. Further, this Court finds that the impugned order dated 24.04.2023 and consequential order dated 26.05.2023 demanding deposit of 10% of the total amount of grant-in-aid has been passed by the opposite party nos.1 and 3, respectively, without any reasoning or affording any opportunity of hearing to the petitioner. It is a trite law that no order prejudicing the interest of a person resulting in civil consequences can be passed without affording an opportunity of hearing. It is not the case of opposite parties that opportunity of hearing was afforded to the petitioner or that the present case is such wherein notice of hearing is to be dispensed with. This Court finds that no opportunity of hearing was provided to the petitioner before the passing of the impugned order dated 24.04.2023 and consequential order dated 26.05.2023, whereby the petitioner had been directed to deposit Rs. 40,75,035.90 as and towards pre-deposit for hearing of their representation dated 03.12.2021. Conclusion - i) The demand for a pre-deposit must be grounded in statutory provisions and is typically appropriate at the appellate stage, not during initial representation consideration. The orders dated 24.04.2023 and 26.05.2023 demanding a 10% pre-deposit were quashed. ii) The authorities were directed to consider the petitioner's representation dated 03.12.2021 without insisting on any pre-deposit, within three months. iii) The Court refrained from commenting on the merits of the cancellation order dated 05.02.2021, focusing solely on the legality of the pre-deposit demand. Petition allowed. ISSUES PRESENTED and CONSIDEREDThe core legal issues considered in this judgment involve the following:Whether the orders demanding a 10% deposit of the grant-in-aid and interest from the petitioner, as a precondition for considering their representation, are legally justified.Whether the principles of natural justice, particularly the requirement of a hearing before making a decision that affects the petitioner, were adhered to by the authorities.Whether the demand for a pre-deposit is supported by any statutory provision or legal precedent.Whether the authorities acted arbitrarily by demanding a pre-deposit without providing any reasoning or opportunity for the petitioner to be heard.ISSUE-WISE DETAILED ANALYSIS1. Legal Framework and PrecedentsThe Court examined the legal framework surrounding the demand for pre-deposit in administrative and quasi-judicial proceedings. It noted that while pre-deposit requirements are common in appellate stages under specific statutes (e.g., Income Tax Act, Customs Act, CGST Act), such requirements must be grounded in statutory provisions. The Court referenced the principle that decisions affecting civil rights must be reasoned and adhere to principles of natural justice, as established in precedents like Kranti Associates (P) Ltd. v. Masood Ahmed Khan and Dharampal Satyapal Ltd. v. CCE.2. Court's Interpretation and ReasoningThe Court found that the demand for a 10% pre-deposit was neither supported by statute nor appropriate at the stage of representation consideration, which is not an appellate stage. The Court emphasized that any decision affecting the petitioner's rights must be reasoned and that the petitioner must be given an opportunity to be heard, in line with principles of natural justice.3. Key Evidence and FindingsThe Court noted the absence of any statutory provision cited by the State to justify the pre-deposit demand. It also highlighted the lack of reasoning in the impugned orders and the failure to provide the petitioner with an opportunity to be heard before making the demand.4. Application of Law to FactsThe Court applied the principles of natural justice and statutory requirements for reasoned decisions to the facts, concluding that the impugned orders were issued arbitrarily and without legal basis. The demand for pre-deposit was found to be unjustified, as it was not grounded in any statutory provision and was imposed without affording the petitioner a hearing.5. Treatment of Competing ArgumentsThe Court considered the State's argument that the petitioner violated the conditions of the grant-in-aid scheme, leading to revenue loss. However, it focused on the procedural fairness and legality of the pre-deposit demand, ultimately finding the demand procedurally flawed and unsupported by law.6. ConclusionsThe Court concluded that the orders demanding a 10% pre-deposit were unsustainable in law due to the lack of statutory basis, absence of reasoning, and failure to provide a hearing. The Court quashed the orders and directed the authorities to consider the petitioner's representation without insisting on any pre-deposit.SIGNIFICANT HOLDINGSThe Court established several core principles in its judgment:The demand for a pre-deposit must be grounded in statutory provisions and is typically appropriate at the appellate stage, not during initial representation consideration.Decisions affecting civil rights must be reasoned, and parties must be afforded an opportunity to be heard, adhering to principles of natural justice.The absence of statutory support and failure to provide a hearing render administrative demands for pre-deposit arbitrary and unsustainable.Final Determinations on Each IssueThe orders dated 24.04.2023 and 26.05.2023 demanding a 10% pre-deposit were quashed.The authorities were directed to consider the petitioner's representation dated 03.12.2021 without insisting on any pre-deposit, within three months.The Court refrained from commenting on the merits of the cancellation order dated 05.02.2021, focusing solely on the legality of the pre-deposit demand.