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TMI Blog2006 (9) TMI 293X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 23-8-1969 as a company limited by guarantees, havin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... umbai-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 rule 13 of the Companies (Central Government) General Rul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his 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 the respondents has opposed the writ pet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... int 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 interests of the company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. Examination of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aw 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 402. Peru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 ..... ere are circumstances 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 justifie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t or that they are such that it is impossible 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 just ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... challenge the subjective decision by invoking the rule enunciated 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 Gover ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on in Sri Krishna Tiles and Potteries (Mad.) (P.) Ltd. s case ( supra ). 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng reliance on the principles laid down in Premier Automobiles Ltd. v. Kamlakar Shantaram 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; Ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an accusational one so as to defeat the public interest in encouraging witnesses to be frank and in enabling the inspectors 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e said to be such a prejudice which will enable to sustain a petition under Article 226 of the Constitution. After all no one has 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 ce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion v. Ajit Kumar Barat AIR 2000 SC 915; Ram Avtar Sharma v. State of Haryana AIR 1985 SC 915; Telco Convey Drivers Mazdoor Sangh v. State of 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uired by the statute to act judicially." Therefore, the correctness of the material or the truth thereof is not material at the stage of formation of the opinion. 43. In Baikuntha Nath 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are satisfied, actually exist or not. It is however well-settled that the declaration or sufficiency of the reasons to believe cannot be investigated by the Court. (Re: ITO v. Lakhmani Mewal Das AIR 1976 SC 1753, 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. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... becomes necessary now to deal with the contention of learned counsel for the respondent that the judgment of the Division Bench is per incuriam on the ground that it had ignored the law laid down by the Apex Court in Dr. (Ms.) Binapani 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 j ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... justice had to be abided by. 51. In A.K. Kraipak s case ( supra ), the Court was concerned with a challenge by the petitioners for quashing the notification notifying the list of officers of State forest service for appointment to post in senior and 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 h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar as consideration of an application under section 399(4) of the statute is concerned, rule 13 of the Companies (Central Government) General Rules and Forms, 1956 specifically provides the procedure which is required to be followed. 53. Even in Ramjee s case ( 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing an opportunity for an oral hearing. It will depend on the nature of interest to be affected, the circumstances in which a power is exercised and the nature of the sanctions involved therein. It was so observed in Erusian Equipment Chemicals Ltd. v. State of West Bengal [1975] 1 SCC 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wers to establish a Corporation; the Government is not required to comply with the rules of natural justice any more than the Legislature itself. This was because the rules of natural justice were not applicable to legislative action, plenary or subordinate, of the Government. 63. It is well-settled that rules of natural 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 unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... les of natural justice is an absolute must and failure to do so would vitiate the action. 69. Such principles would hold where, for instance, the order by the trial body has the effect of expelling a member from membership of the expelling body. Denial of principles of natural justice by such trial body would have the far-reaching effect if a 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 f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Court has relied upon the decision given in State of Orissa v. Dr. Binapani Dei (AIR 1967 SC 1269) for the proposition that even if an administrative action involves civil consequences it must observe the rules of natural justice. Mohinder Singh Gill v. Chief Election Commr. has also been cited, as civil consequences undoubtedly cover infraction of not merely 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 whil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in State of M.P. v. Shyama Pardhi (AIR 1996 SC 2219). In this case, the persons not possessing the pre-requisite qualifications prescribed by the statutory rules, were wrongly selected. They have completed their training and were appointed as Auxiliary Nurse- cum -Midwife. Their services were terminated without giving any prior notice. Holding it to be illegal, the termination was challenged 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 ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (2006 AIR SCW 123) while considering the argument that the principle of natural justice had been ignored before terminating the service of the employees and therefore, the order terminating the service of the employees was bad in law, this Court has considered the principles of natural justice and the extent and the circumstances in which they are attracted. This Court has found in Neeraj Awasthi case that if the services of the 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 discontinua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion is concluded and the person concerned is tasked to explain the evidence gathered against him? When may investigation be said to be have commenced? Should investigation be necessarily preceded by a show-cause notice? We do not think that the Central Government or the Chief Controller is bound to follow any rigid, hide-bound, pre-determined procedure. The procedure any be different in each case and may be determined by the facts, circumstances 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 statut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The Court considered the law laid in several judicial precedents including Queen v. Randolph et. al. 56 DLR (2d) 283; Commissioner of Police v. Tanos , 98 CLR 383; Lewis v. Heffer (1978) 3 All ER 354 (CA); Furnell v. Whangarei High Schools Board [1973] 1 All ER 400 and Chingleput Bottlers v. Majestic Bottling Co. [1984] 3 SCC 258 : AIR 1984 SC 1030. 76. The maxim audi alteram partem has reference to the making of decisions affecting rights of parties 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 par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vour. That is the real remedy of the party. Courts do not enter the picture at that stage unless the action is mala fide or patently, without jurisdiction. The action will be patently without jurisdiction if it is not based on any relevant material whatsoever. If the authority declines to consider the representation, or if the authority after consideration of the representation eschews relevant consideration and prefers to act on irrelevant considerations or from oblique motive, or the decision is such as no 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 arrivin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal, unless it is made so by the Act constituting the Tribunal. Here, sub-section (7) of section 11 has given a finality to the decisions taken by the Chief Justice or any person or institution designated by him in respect of matters falling under sub-sections (4), (5) and (6) of section 11. Once a statute creates an authority, confers on it power to adjudicate and makes its decision final on matters to be decided by it, normally, that decision cannot be said to be a purely administrative decision. It is really a decision on its own jurisdiction 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ustice exercises his power of appointing an arbitrator. Even otherwise, when a statute confers a power or imposes a duty on the highest judicial authority in the State or in the country, that authority, unless shown otherwise, has to act judicially and has necessarily to consider whether his power has been rightly invoked or the conditions for the performance of his duty are shown to exist. ****** 36. Going by the above test it is seen that at least in the matter of deciding his own jurisdiction and in the matter of deciding on 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case, the rights of the parties are not finally affected. 79. The respondents have urged that principles of natural justices would have to be complied with in view of the law laid down by the Apex Court in A K. Kraipak s case ( supra ) or in Dr. Binapani s case ( supra ). It is trite that no judgment can be read or applied without reference to the factual context in which it was rendered. In this behalf, it would be useful to advert to the words of the Apex Court which indubitably make relevant reading. The following passages of the Apex 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 dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 80. From the above discussion, it is apparent that the absolute proposition urged on behalf of the respondent that principles of natural justice would have to apply in every case where a decision was to be taken by an authority was not laid down by the Apex Court in either A.K. Kraipak s case ( supra ) or in Dr. (Miss) Binapani Dei s case ( supra ). The parameters of discretion and requirement of compliance of the principles of natural justice have been laid down in the aforenoticed binding judicial precedents. In the Ramjee s case ( supra ) the Supreme 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... found in the object and reasons for incorporating section 399(1) and section 399(4). The Government is required to have only a preliminary look at the application proposed to be made by the member under sections 397 and 398 with a view to see whether the application can be said to be a frivolous one by a disgruntled member. The petitioners are required to have provided all the information required to be furnished under rule 13 aforenoticed. Very little scrutiny is required to know whether the same is a frivolous application. An application without merits would not necessarily be frivolous 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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