2001 (7) TMI 1220 - HC - Companies Law

Summary

Issues:
Challenge to order passed by Appellate Authority for Industrial and Financial Reconstruction (AAIFR) in appeal No. 121 of 1999 against the order dated 30-7-1999 in case No. 293 of 1987 of Board of Industrial and Financial Reconstruction (BIFR). Lack of reasoning in the order of AAIFR leading to challenge in the writ petition. Duty to give reasons and rationalize decisions. Importance of providing reasons in legal judgments. Vulnerability of the order passed by AAIFR due to lack of reasoning. Re-hearing of the matter by AAIFR ordered without examining merits of the rival stands. Consideration of actions taken by respondents 3 and 4 subsequent to the order by AAIFR.

Analysis:
The writ petition challenges the order passed by the Appellate Authority for Industrial and Financial Reconstruction (AAIFR) in appeal No. 121 of 1999 against the order dated 30-7-1999 in case No. 293 of 1987 of the Board of Industrial and Financial Reconstruction (BIFR). The main ground of challenge is the lack of reasoning in the order of AAIFR, as it substituted the directions of BIFR without providing any basis or rationale. The respondents argued that the order was passed after considering all relevant aspects, but the petitioner contended that the lack of reasoning makes the order questionable. The duty to give reasons in legal judgments is crucial as it rationalizes decisions, helps structure the exercise of discretion, and provides transparency in the decision-making process.

The order of the AAIFR, which is under challenge, lacks reasoning and fails to explain the basis for substituting the directions of BIFR. Providing reasons in legal judgments is essential to ensure fair play, prevent arbitrary actions, and allow affected parties to understand the decision-making process. The obligation to record reasons acts as a deterrent against possible arbitrary actions by authorities with judicial powers. In this case, the absence of reasons makes it difficult to assess the validity of the decision and hampers the appellate or supervisory power of the Courts and Tribunals.

The importance of giving reasons in legal orders is emphasized to prevent miscarriage of justice, secure fair play, and protect individuals against arbitrary actions. Lack of reasons can render a decision inscrutable and hinder the effective exercise of appellate rights. The order passed by AAIFR is deemed vulnerable due to the absence of reasoning, leading to the decision to set it aside without delving into the merits of the rival stands. A re-hearing of the matter by AAIFR is ordered to address the lack of reasoning and allow parties to present their respective positions. Actions taken by respondents subsequent to the order will be considered in the re-hearing to ensure a fair and just resolution of the dispute.