TaxTMI 
TaxTMI 
2006 (9) TMI 293
X X X X Extracts X X X X
X X X X Extracts X X X X
....ative realities and other factors of a given case, can be exasperating. We can neither be finical nor firm in this jurisdiction. No man shall be hit below the belt-that is the conscience of the matter were said in the light of issues as have arisen for consideration in the instant case. The impugned order and action of the respondents seeks to expand the requirement of compliance of principles of natural justice to exercise of purely administrative jurisdiction which results in no civil consequences. 2. By this writ petition, the petitioners assail the order and action of the respondents in requiring them to serve on the other side a copy of their application under section 399(4) seeking leave to maintain a petition under sections 397 and 398 of the Companies Act. The petitioners contend that they are not required to serve notice or grant hearing on such application to the company against whom the applicant is seeking permission to initiate such proceedings. 3. The petitioners are music companies carrying on business, inter alia, of producing, publishing and marketing music albums, cassettes and compact disks. 4. The Indian Performing Rights Society was incorporated on 23-....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t (India) Pvt. Ltd., Centre, South Avenue, Mumbai-400 054 Subject :Application under section 399(4) of the Companies Act, 1956 for Permission to file a Petition under sections 397 and 398 of the Act, in respect of the affairs of the Indian Performing Rights Society Limited. Sir, I am directed to refer to your application dated 10-1-2005 on the above subject and to request you to serve a copy of the petition on the subject Company at an early date under intimation to this Ministry. Thereafter, the matter will be processed further. Yours faithfully, Sd. (N.K. Vig) Under Secretary to the Government of India." 7. The petitioners contend that it has been indicated to their authorised representative that upon completion of service and pleading, there would be a full-fledged hearing of the application in order to determine whether the same should be granted or not. Aggrieved by this threatened action and the requirement of the respondents to serve a copy upon the society, the petitioners have filed the present writ petition. 8. Mr. Ashok Desai, learned senior counsel on behalf of the petitioners has submitted that section 399(4) of the Companies Act and ru....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s that, therefore, at the stage of consideration of this application, no hearing is required to be given to the other side under any statutory provision. 10. It was lastly urged that so far as several comparable statutory provisions which inter alia, include, section 92 of the Code of Civil Procedure; section 10 of the Industrial Disputes Act, 1947; section 197 of the Code of Criminal Procedure etc., where the authorities have been vested with powers similar to those under section 399(4) are concerned, it has been repeatedly held that no prior hearing has to be given to persons who are likely to be affected by the proceedings which are to be instituted if the prohibition is removed under section 399(4) of the Companies Act, 1956. 11. In support of its contention, the petitioners have also relied heavily on the pronouncement of a Single Judge of this Court in Sri Krishna Tiles & Potteries (Madras) (P.) Ltd. v. Company Law Board 1978 (48) Comp. Cas. 728 which was upheld by the Division Bench in the judgment in Sri Krishna Tiles & Potteries (Mad.) (P.) Ltd. v. Company Law Board 1979 (49) Comp. Cas. 409. 12. On the other hand, Mr. Rajiv Shakdhar, learned counsel appearing for ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f a company who complaint that the affairs of the company (are being inducted in a manner prejudicial to public interest or) in a manner oppressive to any member or members (including any one or more of themselves) may apply to the (Tribunal) for an order under this section, provided such members have a right so to apply in virtue of section 399. (2) If, on any application under sub-section (1), the Court is of opinion- (a)that the company's affairs (are being conducted in a manner prejudicial to public interest or) in a manner oppressive to any member or members: and (b)that to wind up the company would unfairly prejudice such member or members, but that otherwise the facts would justify the making of a winding-up order on the ground that it was just and equitable that the company should be wound up; the (Tribunal) may, with a view to bringing to an end the matters complained of, making such order as it thinks fit. 398. Application to (Tribunal) for relief in cases of mismanagement.-(1) Any members of a company who complaint- (a)that the affairs of the company (are being conducted in a manner prejudicial to public; interest or) in a manner prejudicial to the inte....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the rest, may make the application on behalf and for the benefit of all of them. (4) The Central Government may, if in its opinion circumstances exist which make it just and equitable so to do, authorise any member or members of the company to apply to the (Tribunal) under section 397 or 398, notwithstanding that the requirements of clause (a) or clause (b) as the case may be, of sub-section (1) are not fulfilled. (5) The Central Government may, before authorizing any member or members as aforesaid, require such member or members to give security for such amount as the Central Government may deem reasonable, for the payment of any costs which the (Tribunal) dealing with the application may order such member or members to pay to any other person or persons who are parties to the application." 16. Prior to the amendment being effected by Act 31 of 1988, the power to adjudicate on proceedings under section 397 was vested in the Court. Subsequently, by virtue of section 44 of the Companies (Second Amendment) Act, 2003, 'Court' was substituted by the 'Company Law Board' which is empowered to undertake proceedings under sections 397 and 398 of the Companies Act, 1956. 17. Exa....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the Company Law Board has been vested with wide powers and can regulate its own procedure guided by principles of natural justice and is required to act in its discretion. It is statutorily mandated that it would have the powers vested in a Civil Court for the purposes stated in sub-section (4C) and shall be deemed to be a Civil Court for the specific purposes noted under sub-section (4D). 20. So far as proceedings in respect of complaints under sections 397 and 398 of the Companies Act, 1956 are concerned, section 399 enables a section of the members to bring a complaint thereunder provided they satisfy the conditions laid down in sub-sections (1), (2) and (3) thereunder. Sub-section (4) of section 399 enables any member or members to apply to the Company Law Board under sections 397 and 398 even if they do not satisfy the requirements of clause (a) or (b) of sub-section (1), if they are able to satisfy the Central Government that circumstances exist which make it just and equitable to authorise such member to so apply. 21. The powers of the Company Law Board on receipt of an application under section 397 or 398 of the Companies Act, 1956 have been delegated under section 4....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n the application, require the applicants or any one or more of them, to produce such further documentary or other evidence as the Central Government may consider necessary- (a)for the purpose of satisfying itself as to the truth of the allegations made in the application; or (b)for ascertaining any information which, in the opinion of the Central Government, is necessary for the purpose of enabling it to pass orders on the application." 23. The statutory rules clearly provide the manner in which the Central Government would function in consideration of the application under section 399(4). The applicants can be required to produce documentary evidence as considered necessary to enable the Central Government to form an opinion as to whether circumstances exist which would make it just and equitable to give the authorisation which has been sought. The manner in which the application is to be made and the contents thereof are clearly delineated. Sub-rule (5) of Rule 13 provides the nature of enquiry which the Central Government may conduct and requires production of evidence only by the applicant. 24. Having regard to the statutory scheme, more specifically, the provision....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ircumstances suggesting that the business of the company is being conducted with the intend to defraud its creditors, members or any other persons or otherwise for a fraudulent or unlawful purpose or in an oppressive manner. Other circumstances have been set out in section 237(b). 29. Under section 237 of the Companies Act, the Central Government, inter alia thus may appoint inspectors to investigate the prayers of the company, if, in its opinion, there are circumstances suggesting that the business of the company is being conducted with intend to defraud its creditors, members or other persons etc. Undoubtedly the same is as serious a matter as an application under section 397 or section 398 of the Companies Act, 1956. The expression 'in the opinion of' used in clause (b) of section 237 are similar to the words used in sub-section (4) of section 399 of the Companies Act, 1956. It is a basic principle of statutory interpretation that the words used in the enactment in its various provisions have to be construed as having been used in the same sense at all places where they occur unless the Legislature has specifically otherwise so provided or the context justifies any other inte....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssible for any one to form an opinion therefrom suggestive of the aforesaid, the opinion is then challengeable on the ground of non-application of mind or perversity or on the ground that it was formed on collateral grounds and was beyond the scope of the statute. Thereby, the Apex Court recognised the permissibility of the scrutiny by a Court as to existence of some circumstances within limited parameters and not as to the sufficiency thereof. 32. The same expression also arose for consideration before the Apex Court in Rohtas Industries Ltd. v. S.D. Agarwal AIR 1969 SC 707, wherein the Court was also considering the scope of judicial scrutiny into the opinion formed by the Government under section 237 of the Companies Act. After detailed consideration of the judicial dicta, the Court reconciled the law laid down in various decisions. The court noticed that the subject-matter of a legislation has an important bearing on the interpretation of a provision. It is well-settled that when something is to be done which is within the discretion of the authorities, then that something is to be done according to the rules of reason and justice and not according to private opinion. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ciated in the Barium Chemicals Ltd.'s case (supra); (ii)sub-section (5) of section 399 of the Companies Act empowers the Central Government before authorising any member or members as contemplated by sub-section (4) to require the applicant or applicants to give security for the payment of any costs which the Court dealing with the application may order, such member or members to pay to any other person or persons who are party to that application. This is adequate protection for preventing frivolous application being moved or if moved, then from being granted; (iii)Rule 13 above noticed provides sufficient safeguards. The application of the member/members has to be accompanied by documentary evidence in support of the statements made in the application. The application is required to be signed and verified by an affidavit and the Central Government may, before passing orders thereon, require the applicant(s) or all or one or more of them to produce further documentary or other evidence considered necessary for satisfying itself as to the truth of the allegations made by the applicant; (iv)the Central Government, upon a report being made to it by a member or members, is em....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... The Division Bench divided its consideration into three broad aspects - firstly, the nature of the functions under section 399; secondly, the nature of inquiry to be made by the Government before granting or refusing to grant the authorisation and thirdly, the nature of the right or interest of the company to be heard before the decision was taken by the Government or the Board under section 399(4). The Division Bench rejected all contentions raised on behalf of the company on a consideration of the relevant provisions of the Act and the rules and even on first principles. 36. It is noteworthy that at the relevant point of time when the aforesaid judgments came to be pronounced, the statute contained section 10A to section 10D in the Companies Act, 1956 wherein further powers and functions of the Government were envisaged. So far as the present case is concerned, the amendment to the statute has made no material difference to the state of position as was before the Court in Sri Krishna Tiles and Potteries (Mad.) (P.) Ltd.'s case (supra) and now. There is no change in the provisions of section 399(4) of the Companies Act, 1956. The only difference which has come into effec....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hantaram Wadke AIR 1975 SC 2238, it was held by the Division Bench that a company does not have any common law right not to be sued. In fact, the continuous trend of development of statutory law reflects that it is intended more and more to discourage immunity from being sued. Immunity of persons who could not fairly be sued has been whittled down. For instance, even a sovereign can be sued in respect of non-sovereign functions discharged by him or by a foreign government. (iv)There are no parties while considering of the application under section 399(4) and there is no lis in these proceedings. (v)In fact, it is well-settled that no hearing is given to a person in a preliminary inquiry which is to lead to a regular inquiry or action against such a person during which a full hearing would be available to him. The Bench noticed that this conclusion was arrived at by a Division Bench of this Court and placed upon G.S. Harmal v. Union of India ILR [1971] 2 Delhi 129 wherein reliance was upon Amalendu Ghosh v. District Traffic Superintendent, North Eastern Railway AIR 1960 SC 992; Champaklal Chimanlal Shah v. Union of India AIR 1964 SC 1854; State of U.P. v. Akbar Ali Khan AIR 19....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s to complete their task as speedily as possible. Principles governing exercise of similar discretion under other statutes. 40. At this stage, it would be instructive to notice some pari materia statutory provisions which are provided in other statutes wherein the Legislature has recognised more and more that immunity to protection from judicial scrutiny of the responsibility and actions of a person or body has to be restricted. Such examination would certainly facilitate an understanding of the permissible limits of judicial review when discretion is conferred by legislative exercise on various authorities. In this behalf, an examination of the provisions of sections 92 and 86 of the Code of Civil Procedure and sections 195 and 197 of the Code of Criminal Procedure which envisage authorisation or permission or sanctions to sue or prosecute would be of some relevance. It has been repeatedly held that the authorities who are to give the sanction, authorisation or permission are acting in administrative capacities and not in quasi-judicial capacity. In a Full Bench decision of the Kerala High Court in Mayer Simon v. Advocate General of Kerala AIR 1975 Ker. 57, the Court held....
X X X X Extracts X X X X
X X X X Extracts X X X X
....as the right to say that no suit should be filed against him. ****** 16. . . .The Advocate-General acts as a statutory administrative authority performing the parens partriae jurisdiction of the State in regard to public trusts and while acting thus can and does cause substantial injury at times : preventing the taking of a step in aid of vindicating a right and this can cause injury for section 92(2) bars any action for the reliefs mentioned in section 92(1). Nor are we able with equal respect to agree with the decision in AIR 1962 Ker. 90 (FB). The support sought to be derived for the conclusion arrived at in that decision from the decision in State of Madras v. C.P. Sarathy AIR 1953 SC 53 is no more available. The Supreme Court in Rohtas Industries Ltd. v. S.D. Agarwal AIR 1969 SC 707 has explained that decision. The Court said that the decision in AIR 1953 SC 53 'cannot be considered as an authority for the proposition that whenever a provision of law confers certain power on an authority on its forming a certain opinion on the basis of certain facts, the Courts are precluded from examining whether the relevant facts on the basis of which the opinion is said to have been ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f Bihar AIR 1989 SC 1565. 42. While considering the question raised with regard to exercise of the power of the Central Government under section 19 of the Army Act, 1950 with rule 14 of the Army Rules, 1954, the Apex Court in Union of India v. Harjeet Singh Sandhu AIR 2001 SC 1772, held that the parameters of administrative law governing the judicial review of administrative action are well-settled. Such power to review administrative action shall be undertaken when the exercise of power is shown to have been vitiated by mala fides or is found to be a clear case of colourable exercise of/or abuse of power or what is sometimes called fraud power i.e., where the power is exercised for achieving an oblique end. The truth of correctness or the adequacy of the material available before the authority exercising the power cannot be revalued or weighed by the Court while exercising power of judicial review. Even if some of the material, on which the action is taken is found to be irrelevant, the Court would still not interfere so long as there is some relevant material available on which the action can be sustained. The Court would presume the validity of the exercise of power but shall....
X X X X Extracts X X X X
X X X X Extracts X X X X
....h Das v. Chief District Medical Officer AIR 1992 SC 1020, the Court was concerned with a challenge to an order of compulsory retirement from service passed against the appellant. It was held by the Court that an order for compulsory retirement was not a punishment which did not imply stigma. It was to be passed by the Government on forming the opinion that it was in public interest to retire the Government servant. The order was passed on the subjective satisfaction of the Government. The Court held that therefore principles of natural justice would have no place in the context of the order of compulsory retirement. Judicial scrutiny would not be excluded altogether. The Court can interfere if it was satisfied that the order was passed mala fide or that it was based on no evidence or was arbitrary in the sense that no reasonable person would form the requisite opinion on the given material; in short, if it was found to be a perverse order. The Court held that the nature of the notification of the Government was not quasi-judicial in nature and because action had to be taken on the subjective satisfaction of the Government, there was no room, for importing the facet of natural justi....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Sheo Nath Singh v. AAC [1972] 3 SCC 234/AIR 1971 SC 2451. 'Reasons to believe' conveys that there must be some rational basis to form the belief. Reasonable grounds necessarily postulate that they must be germane to the formation of the belief. If the grounds are of an extraneous character, the same would not warrant initiation of proceedings. However, if the grounds are relevant and have a nexus with the formation of the belief, then the authority would be clothed with the jurisdiction to take action under the statutory provisions. [Re: CST v. Bhagwan Industries (P.) Ltd. AIR 1973 SC 370]. The expression 'reasons to believe' means that even though the formation of the opinion may be subjective, it must be based on material on the record. There is thus a check on the exercise of peremptory powers. [Re: N. Nagendra Rao & Co. v. State of A.P. AIR 1994 SC 2663]. Therefore, sufficiency of reasons is not a justiciable issue but existence of reasons is. These principles would guide examination of a challenge to the exercise of discretion and formation of opinion by an authority as well. 46. In the opinion of signifies the subjective opinion of the Government and not an opini....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ani Dei's case (supra) and A.K. Kraipak's case (supra). It has been contended that in view of the law laid down by the Apex Court in these judgments, the Government is bound to comply with the principles of natural justice even when it is considering an application made under section 399 of the Companies Act, 1956. So far as the pronouncement of the Apex Court in Dr. (Miss) Binapani Dei's case (supra) was concerned, the case related to an inquiry conducted by the Government of Orissa on the issue relating to the correctness of the date of birth of the respondent who was employed with it. The State of Orissa conducted the enquiry but the report of the enquiry was not made available to the respondent and an order of compulsory retirement based on such enquiry was passed. This order of compulsory retirement was challenged by the petitioner on the ground that the same was arbitrary and mala fide and violative of the principles of natural justice inasmuch as the order of retirement amounted to a punishment involving consequences such as loss of pay, status and deprivation of service. It was in these circumstances held by the Apex Court that the decision of the State could be based up....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nd junior service of the service on the ground that the selections which were notified were vitiated by the contravention of the principles of natural justice as the power conferred on the selection board was a quasi-judicial power. The Court held that dividing line between the administrative power and quasi-judicial power was being gradually obliterated. So far as the submission that the selection was in violation of rules of natural justice was concerned, the Court held thus : "20. The aim of the rules of natural justice is to secure justice or to put it negatively to prevent miscarriage of justice. These rules can operate only in areas not covered by any law validly made. In other words they do not supplant the law of the land but supplement it. The concept of natural justice has undergone a great deal of change in recent years. In the past it was thought that it included just two rules namely : (1) no one shall be a Judge in his own case (Nemo debet esse judex propria causa) and (2) no decision shall be given against a party without affording him a reasonable hearing (audi alteram partem). Very soon thereafter a third rule was envisaged and that is that quasi-judicial enquir....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... (supra) the Apex Court had observed that general observations relating to principles of natural justice must be tested on the concrete facts of each case and every minuscule violations do not spell illegality. In the totality of circumstances satisfy the Court that the party visited with adverse order has not suffered from denial of reasonable opportunity the Court will decline to be punctilious or fanatical as if the rules of natural justice sacred scriptures. 54. The petitioner before this Court has approached this Court at the stage when the Government of India vide a communication dated 19-1-2005 has required it to serve a copy of the petition on the special company and it stated that the matter would be processed thereafter. The petitioner has contended that it was informed that the Government would follow principles of natural justice in deciding upon the application filed by them under section 399(4) of the Companies Act, 1956. 55. Before this Court, Mr. Shakdhar, learned counsel for the respondent has submitted that in the light of the Supreme Court in Dr. Binapani's case (supra) and A.K. Kraipak's case (supra), the requirement to comply with the principles of natura....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 70/AIR 1975 SC 266. The Court noticed that since a disability is created by an order of blacklisting, it is indicative of the requirement that the relevant authority is to have an objective satisfaction. Fundamentals of fair play requires that the person concerned should be given an opportunity to represent his case before he is put on a black list. 58. This issue has been elaborated in later judgments wherein the Courts have been called upon to consider as to what would constitute adequate opportunity to represent against impugned action. 59. In Union of India v. G.R. Prabhavalkar AIR 1973 SC 2102, the Apex Court held that it is not implicit in every decision that there is an obligation on the authority to give personal hearing to the officers concerned in the matter. Principles of natural justice cannot be put in any straitjacket. Their applicability depends upon the context and the facts and circumstances of each case, the objective being to ensure a fair hearing and a fair deal to a person whose rights are going to be affected. In Ganesh Santa Ram Sirur v. State Bank of India AIR 2005 SC 314, the Court cited with approval the principles laid down in ECIL v. B. Karunak....
X X X X Extracts X X X X
X X X X Extracts X X X X
....al justice are not applicable to legislative action, plenary or subordinate. The procedural requirement of hearing is not implied in the exercise of legislative powers, unless hearing was expressly prescribed. 64. The scope and applicability of the principles of natural justice and the requirement of a hearing in different eventualities have also arisen for consideration before the Courts. In James Edward Jeffs v. New Zealand Dairy Production & Marketing Board [1966] 3 All ER 863, the Court made observations of a general nature indicating circumstances when evidence could be recorded and submissions of the parties heard by a person other than the decision making authority. 65. In Chandra Bhavan Boarding & Lodging v. State of Mysore AIR 1970 SC 2042, the Supreme Court found that the procedure adopted by the Government in fixing the minimum wage under section 5(1) of the Minimum Wages Act, 1948 was not vitiated merely on the ground that the Government had failed to constitute a committee under section 5(1)(a) of the Statute. In this case, the Court found that reasonable opportunity had been given to all the concerned parties to read their case before the Government made the imp....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... respected and public trusted professional is prima facie found guilty of misconduct resulting in the penalty of expulsion. The damage which is thus caused to the professional by a decision taken in violation of principles of natural justice would be irreparable after the blow has been suffered on account of the initial decision. There can be no complete restitution through any appellate decision, unlike restitution in the case of a money decree where interest etc. may adequately compensate or cause restitution of the loss suffered. 70. In this behalf, Sir William Wade in his classic treatise "Administrative Law" 5th edition observed at page 487 "in principle there ought to be an observance of natural justice equally at both stages". It was so observed because the erudite author observed that "if natural justice is violated at the first stage, the right of appeal is no so much a true right of appeal as a corrected initial hearing : instead of fair trial followed by appeal, the procedure is reduced to unfair trial followed by fair trial. Such a view was taken by Megarry, J. in Leary v. National Union of Vehicle Builders [1971] Ch 34, 49, wherein it was held by the learned Judg....
X X X X Extracts X X X X
X X X X Extracts X X X X
....property or personal rights but of the civil liberties, material deprivation and non-pecuniary damages. In its comprehensive connotation, everything that affects a citizen in his civil life inflicts a civil consequence. The Court has also cited the observation of one of the judges of the House of Lords in Ridge v. Baldwin for the purpose that the administrative body may in a proper case be bound to give a person who is affected by their decision, an opportunity of making representation. But all depends on whether he has some right or interest or some legitimate expectation of which it would not be fair to deprive him. Similarly, the Privy Council's decision in Alfred Thangarajah Jaurayappah v. W.J. Fernado has also been referred to show that there are three matters which should always be borne in mind while considering whether the principle audi alteram partem should be complied with or not. First, what is the nature of property, the office held, the status enjoyed or services to be performed by the complainant of injustice. Secondly, in what circumstances or upon what occasions is the person claiming to be entitled to exercise the measure of control entitled to intervene. Thirdly,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d before the Service Tribunal and the order of termination was set aside as the principle of natural justice was not followed. This Court had found in an appeal that the original petitioners did not possess the pre-requisite qualifications viz., 10 + 2 with Physics. Chemistry and Biology as subjects. The rules specifically provided that qualification as condition for appointment to the post. Since the prescribed qualifications had not been satisfied, the appointment and training was per se illegal and therefore, the Tribunal was not right in directing their reinstatement. Shrawan Kumar case was distinguished on the ground that they were not disqualified to be appointed but they had not undergone the training and the appointment was set aside on the ground of want of training. The Court has drawn a distinction between the initial disqualification for appointment and irregularity in the appointment and subsequent training for application of the principle of natural justice. (17) In M.C. Mehta v. Union of India (AIR 1999 SC 2583) this Court has laid down that there can be a certain situation in which an order passed in violation of natural justice need not be set aside under Articl....
X X X X Extracts X X X X
X X X X Extracts X X X X
....workmen are governed by the U.P. Industrial Disputes Act, they are protected under that law. Rules 42 and 43 of the U.P. Industrial Disputes Rules lay down that before effecting any retrenchment the employees concerned would be entitled to notice of one month or in lieu thereof pay for one month and 15 days' wages for each completed year of service by way of compensation. If retrenchment is to be effected under the Industrial Disputes Act, the question of complying with the principles of natural justice would not arise. The principles of natural justice would be attracted only when the services of some persons are terminated by way of a punitive measure or thereby a stigma is attached. Applying this principle, it could very well be seen that discontinuation of the service of the appellants in the present case was not as a punitive measure but they were discontinued for the reason that they were not qualified and did not possess the requisite qualifications for appointment." Upon consideration of the case of the petitioners, it was held that no prejudice had been caused by the appellants in similar circumstances by not serving notice for the date of hearing before the order of ca....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tances and exigencies of each case. The authority may design its own procedure to suit the requirements of an individual case. The procedure must be fair and not so designed as to defeat well-known principles of justice and thus deny justice. That is all. If the procedure is fair it matter not whether the investigation is preceded, interjected or succeeded by a show-cause notice. The word 'Investigation' is not defined but in the context it means no more than the process of collection of evidence or the gathering of material. It is not necessary that it should commence with the communication of an accusation to the person whose affairs are to be investigated. That may follow later." We do not think that it is permissible to interpret any statutory instrument so as to exclude natural justice, unless the language of the instrument leaves no option to the Court. Procedural fairness embodying natural justice is to be implied whenever action is taken affecting the rights of parties. It may be that the opportunity to be heard may not be pre-decisional: It may necessarily have to be post-decisional where the danger to be aerated or the act to be prevented is imminent or where the actio....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ies which are final in nature (Re : Queen's case (supra) . In Furnell's case (supra) the Privy Council upheld the suspension of a teacher pending determination of charges against him. It was held that suspension in such a case is merely done in the interest of the public payments and of the public and a situation has arisen in which something must be done at once. However in Lewis's case (supra) Denning MR distinguished the observations of Megarry, J. in John v. Rees [1969] 2 All ER 274 to point out the difference between suspension which is inflicted by way of punishment, as for instance when a member of the Bar is suspended from practice for six months when principles of audi alteram partem would mandatorily apply. But they would not apply to suspensions made pending enquiries as for irregularities allegedly done by an employee in a Government department or in a business house. In the later case, the suspension is effected only by way of good administration. The Apex Court also considered the decision rendered by the High Court of Australia (Dixon, C. J. and Webb, J.) in the Tanos' case (supra). The Court was considering the question whether an ex parte order of closure ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....reasonable man properly directed on the law would arrive at on the material facts it will be open for the party to seek the intervention of the Court, at that stage. Our attention was drawn to the well known cases of Barium Chemicals Ltd. v. Company Law Board MANU/SC/0037/1966 : (AIR 167 SC 295), Rohtas Industries Ltd. v. S.D. Agarwal MANU/SC/0020/1968 : (AIR 1969 SC 707), M.A. Rasheed v. State of Kerala MANU/SC/0051/1974 : (AIR 1974 SC 2249), and the recent cases of Shalini Soni v. Union of India MANU/SC/0227/1980 : (AIR 1981 SC 431), and CIT v. Mahindra and Mahindra Ltd. MANU/SC/0181/1983 : (AIR 1984 SC 1182) and we have considered all of them in arriving at our conclusion." 78. A question arose before the Apex Court as to whether the power exercised by the Chief Justice of India or by the Chief Justice of the High Court under section 11(6) of the Arbitration & Conciliation Act, 1996 is a judicial power or exercise of merely administrative power. The reasons and findings of the Apex Court in this case have material bearing on the questions raised before this Court as well. In the Constitution Bench pronouncement in SBP & Co. v. Patel Engineering Ltd. [2005] 8 SCC 618, it was h....
X X X X Extracts X X X X
X X X X Extracts X X X X
....urisdiction for the exercise of the power conferred by the statute or to perform the duties imposed by the statute. Unless the authority satisfies itself that the conditions for exercise of its power exist, it could not accede to a request made to it for the exercise of the conferred power. While exercising the power or performing the duty under section 11(6) of the Act, the Chief Justice has to consider whether the conditions laid down by the section for the exercise of that power or the performance of that duty exist. Therefore, unaided by authorities and going by general principles, it appears to us that while functioning under section 11(6) of the Act, a Chief Justice or the person or institution designated by him, is bound to decide whether he has jurisdiction, whether there is an arbitration agreement, whether the applicant before him is a party, whether the conditions for exercise of the power have been fulfilled, and if an arbitrator is to be appointed, who is the fit person, in terms of the provision. Section 11(7) makes his decision on the matters entrusted to him, final. 10. The very scheme, if it involves an adjudicatory process, restricts the power of the Chief Just....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n the existence of an arbitration agreement, the Chief Justice when confronted with two points of view presented by the rival parties, is called upon to decide between them and the decision vitally affects the rights of the parties in that, either the claim for appointing an Arbitral Tribunal leading to an award is denied to entertaining a claim is facilitated by the Chief Justice. In this context, it is not possible to say that the Chief Justice is merely exercising an administrative function when called upon to appoint an arbitrator and that he need not even issue notice to the opposite side before appointing an arbitrator. 37. It is fundamental to our procedural jurisprudence, that the right of no person shall be affected without he being heard. This necessarily imposes an obligation on the Chief Justice to issue notice to the opposite party when he is moved under section 11 of the Act. The notice to the opposite party cannot be considered to be merely an intimation to that party of the filing of the arbitration application and the passing of an administrative order appointing an arbitrator or an Arbitral Tribunal. It is really the giving of an opportunity of being heard. The....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Court in Financial Corporation v. Jagdamba Oil Mills AIR 2002 SC 834 are of irreplaceable and irrefutable topicability :- "19. Courts should not place reliance on decisions without discussing as to how the factual situation fits in with the fact situation of the decision on which reliance is placed. Observations of Courts are not to be read as Euclid's theorems nor as provisions of the statute. These observations must be read in the context in which they appear. Judgments of Courts are not to be construed as statutes. To interpret words, phrases and provisions of a statute, it may become necessary for judges to embark into lengthy discussions but the discussion is meant to explain and not to define. Judges interpret statutes, they do not interpret judgments. They interpret words of statutes, their words are not to be interpreted as statutes. In London Graving Dock Co. Ltd. v. Horton (1951 AC 737 at p. 761), Lord Mac Dermot observed :- 'The matter cannot, of course, be settled merely by treating the ipsissima verira of Willes, J. as though they were part of an Act of Parliament and applying the rules of interpretation appropriate thereto. This is not to detract, from the grea....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Court had warned the Courts how over judicialization can be subversive of the justice of law. This note of caution would clearly apply to the instant case. In view of the above, the contentions of the respondent that the judgment of the Division Bench in Sri Krishna Tiles & Potteries (Madras) (P.) Ltd.'s case (supra) is per incuriam for the reason that it has ignored principles laid down by the Apex Court in A.K. Kraipak's case (supra) and Dr. (Miss) Binapani Dei's case (supra) has to be rejected. It was already been noticed hereinabove that while granting the permission under section 399(4), the Central Government merely removes the prohibition which would obstruct an opportunity to the members of a company from making a complaint against the company with regard to matters set out in sections 397 and 398 of the Companies Act, 1956. There is no adjudication on the merits of the case or of the dispute. So far as the jurisdiction of the Government under section 399 is concerned, there is no finality to its order. This is also no adjudication nor is there any binding decision affecting rights of any party rendered by the Government on the matters raised by the petitioner seeking le....
X X X X Extracts X X X X
X X X X Extracts X X X X
....olous and the scrutiny by the Central Government does not involve any finding about the merits of the case. It has been held by the Division Bench in Sri Krishna Tiles & Potteries (Madras) (P.) Ltd.'s case (supra) that it would be desirable that the Central Government should not be required to give reasons for grant of the authorization under section 399(4) for such reasons would needlessly prejudge the merits of the case. It would be rather in the interest of the company or the management of the company that no observations on merits should be made by the Government at that stage. 84. I am in respectful agreement with the reasoning given by the learned Single Judge in Sri Krishna Tiles & Potteries (Madras) (P.) Ltd.'s case (supra) and I am bound by the authoritative pronouncement by the Division Bench in the appeal which was filed assailing the judgment of the learned Single Judge. As noticed hereinabove, there is nothing which affects the reasoning or the principles of law laid down by the Bench in Sri Krishna Tiles & Potteries (Madras.) (P.) Ltd.'s case (supra) which could make any material difference to the conclusions which I have arrived at. In the light of the de....