Principles of Natural Justice in Various Laws
The author is a member of the Institute. He can be reached at abhishek.raja@icai.org and eboard@icai.in.
1. Types of Legislation & The Foundational Rules of Natural Justice
Every modern legislation can be grouped in two types:
Taxation laws are of the first category and therefore the Department should follow “Principles of Natural Justice” by providing a hearing. 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:
Rule I: Nemo debet esse judex in propria causa
No one shall be a judge in his own cause (Rule against Bias).
Rule II: Audi alteram partem
No decision shall be given against a party without affording him a reasonable hearing (Rule of Fair Hearing).
“Qui aliquid, parte inaudita altera aequum licet dixerit, haud aequum fecerit”
That is: “He who shall decide anything without the other side having been heard, although he may have said what is right, will not have been what is right”, or in modern expression, “Justice shall not only be done but should manifestly be seen to be done.”
Very soon thereafter a third rule was envisaged: that quasi-judicial enquiries must be held in good faith, without bias and not arbitrarily or unreasonably. But in the course of years, many more subsidiary rules came to be added to the rules of natural justice.
2. What is “Principle of Natural Justice”?
The Thorough-Bred Metaphor
The “Principles of Natural Justice”, as they are called, must be kept within their limits, and should not be allowed to roam free. This nation is riding on the magnificent horse of natural justice, which is a powerful and well-trained thoroughbred to achieve its goal of “Justice, Social, Economic, and Political”. This thoroughbred must not be allowed to turn into a wild and unruly horse, carrying off where it lists, unsaddling its rider, and bursting into fields where the sign “no passage” is put up.
In a judgment, the Apex Court has held that principles of natural justice are not intended to operate as roadblocks to obstruct statutory inquiries. The extent of applicability of principles of natural justice depends upon the nature of the inquiry, and the consequences that may visit a person after such inquiry from out of the decision pursuant to such inquiry. The right to a fair hearing is a guaranteed right. An appellant, however, will not be permitted to raise different pleas in different proceedings.
The Three Essential Principles of Natural Justice:
- Prior Notice: The person whose rights are to be affected must be given notice of the case or the charges which he is to meet.
- Opportunity to Explain: He must be given an opportunity to make representation, explain the allegations made against him, and have his say in the matter.
- Good Faith & Non-Bias: The authority conducting the proceedings must not be biased and should act in good faith.
3. Evolution of Natural Justice & Judicial Benchmarks
The principles of natural justice are not the creation of Article 14 of the Constitution. Article 14 is not the begetter of the principles of natural justice but is their Constitutional guardian. Both in England and India, it is well-established that natural justice principles can be adapted to different situations. They are neither cast in a rigid mould nor can they be put in a legal straitjacket. They are not immutable but flexible and can be adapted, modified or excluded by statute and statutory rules as also by the constitution of the tribunal which has to decide a particular matter and the rules by which such tribunal is governed.
Audi Alteram Partem in Tulsi Ram Patel’s Case (Apex Court):
- Person against whom an order to his prejudice may be passed should be informed of the charges against him.
- Such person should be given an opportunity of submitting his explanation, which also includes the right to know the oral and documentary evidence which are to be used against him.
- Witnesses who are to give evidence against him must be examined in his presence with the right to cross-examine them.
- He must be allowed to lead his own evidence, both oral and documentary, in his defence.
Application of the “Principle of Prejudice”:
In Aligarh Muslim University v. Mansoor Ali Khan, the Apex Court observed that it has consistently applied the principles of prejudice across cases, as exhaustively elaborated in State Bank of Patiala v. S.K. Sharma [(1996) 3 SCC 364: 1996 SCC (L&S) 717] and reiterated in Rajendra Singh v. State of M.P. [(1996) 5 SCC 460].
“The fundamental rule is that if a person may be subjected to pains or penalties, or be expected to prosecution or proceedings, or deprived of remedies or redress, or in some such way adversely affected by an investigation and report. Then he should be told the case made against him and be afforded a fair opportunity of answering it.”
4. Article 21 of the Constitution & “Procedural Due Process”
Article 21: Protection of Life and Personal Liberty
“No person shall be deprived of his life or personal liberty except according to procedure established by law.”
Landmark Interpretation: Maneka Gandhi vs Union of India (AIR 1978 SC 597)
The Supreme Court laid down that Article 21 is not only a guarantee against executive action unsupported by law but is also a restriction on law-making. The procedure contemplated by Article 21 must answer the test of reasonableness in order to conform with Article 14 of the Constitution. The principle of reasonableness—which legally as well as philosophically is an essential element of equality or non-arbitrariness—pervades Article 14 like a brooding omnipresence.
5. Notice, Service of Summons & Disclosure of Evidence
Notice: The First Limb of Audi Alteram Partem
“Notice” is knowledge of facts which would lead a person to make inquiry. In another sense, “notice” means information, an advice or written warning, in a more or less formal shape intended to apprise a person of some proceeding in which his interests are involved or informing him of some fact which is his right to know and the duty of the notifying authority to communicate.
Since in the absence of notice, hearing becomes hollow and the right becomes a mere ritual, the court may invalidate a decision for lack of pre-decisional notice.
Service of Summons & Natural Justice
A Summons is served to inform the party to be charged of the offence which he has to meet, when to meet it, and to require his attendance. In other words, the object of serving a summons is to notify the defendant of the charge and to give him the opportunity to defend the charge.
A summons’ primary purpose is to ensure that natural justice is accorded to a defendant by giving the defendant notice of the subject of the complaint and an opportunity to be heard.
Disclosure of Evidence: An Additional Dimension
Each person who appears before an Authority with adjudicatory power has the right to see the evidence being used against him. The disclosure does not have to involve the physical supply of every piece of evidence, but all documents relied on by the Authority are required to be furnished to the noticee enabling him to show proper cause as to why an inquiry should not be held against him—even though statutory rules may not expressly provide for the same.
Such a fair reading of the provision would not amount to supplanting the procedure laid down and would in no manner frustrate the apparent purpose of the statute. An accused of mis-declaration has the right to know the grounds on which he will be punished—he might have an answer, or he may not.
6. Right to Cross-Examination: Landmark Supreme Court Decisions
It was observed by the Supreme Court in Tulsi Ram Patel’s case that witnesses who give evidence against a person must be examined in his presence with the right to cross-examine them. The affected party has an inherent right to cross-examine witnesses.
Swadeshi Polytex Ltd. v Collector of Central Excise
Civil Appeal Nos. 3988-90 of 1988, decided on 23-Nov-1989Lays down that whenever any statement is relied upon by the Revenue, an opportunity of cross-examining the maker of the statement must be given to the person against whom it is being used.
Lakshman Exports Limited vs Collector of Central Excise
Civil Appeal Nos. 14424-25 of 1996, decided on 18-Apr-2002Not allowing the assessee to cross-examine witnesses whose statements formed the foundation of the impugned order is a fatal flaw that renders the entire order a nullity.
Consequence of Denial: Refusal by the Adjudicating Authority to allow cross-examination of adverse witnesses amounts to a direct violation of natural justice, vitiating the entire adjudication.
7. Natural Justice in Quasi-Judicial Proceedings & Abuse of Discretion
Conferment of quasi-judicial power further implies that the person concerned must follow the rules of Natural Justice and must give reasons (speaking order) for making the order which he is empowered to make. Purely administrative bodies are also bound to act justly and fairly, which brings in the requirement of natural justice as also the duty to give reasons.
Exception During Criminal Investigations
The rule of audi alteram partem is however not attracted during the investigation of a crime under the Criminal Procedure Code, even when the investigating agency applies to the court for the issuance of a Letter of Rogatory to a Court in a foreign country. Speaking generally, a person is not entitled to be heard in a preliminary enquiry or investigation when at a later stage he is to receive full opportunity of defending himself before any final decision is taken against him—yet there is no universal rule to that effect.
Abuse of Discretion
A judicial abuse of discretion occurs when the trial judge acts in an arbitrary or unreasonable way that results in unfairly denying a person an important right or causes an unjust result. For example, the trial judge’s decision to award or deny attorney fees will be upheld unless there was an abuse of discretion.
Doctrine of Harmless Error
The appellate court will not overturn a judgment on the basis of any error that is harmless. A harmless error is an insignificant error that does not change the outcome of the case (e.g., introduction of improper evidence that goes to motive in a criminal offence requiring no motive).
8. Natural Justice in Taxation Laws: Income Tax vs. GST
Mandatory Hearing under Section 274(1) of the Income Tax Act, 1961
Section 274(1) mandates that no order imposing penalty under various sections of Chapter XXI (i.e. Section 271, etc., and now also Section 270A) shall be made unless:
- (i) The assessee has been heard, or
- (ii) The assessee has been given a reasonable opportunity of being heard.
Statutory Removal of Pre-Decisional Hearing in GST: Rules 21A & 86A
In certain statutory situations under GST, the opportunity of being heard has been deliberately excluded:
- Rule 21A of CGST Rules, 2017 (Suspension of Registration): For suspension of GST registration, prior notice to the registered person is now not required.
- Rule 86A of CGST Rules, 2017 (Blocking of Input Tax Credit): Where the Commissioner or an authorized officer has reasons to believe that ITC has been fraudulently availed, they can disallow debit of the electronic credit ledger (block ITC) without providing any pre-decisional opportunity of being heard. Such block remains valid for up to one year from the date of imposition.
9. Landmark Judicial Decisions on Natural Justice in Tax & Excise
10. Doctrines of Reasonableness, Legitimate Expectation & The Four Core Essentials
Good administration demands the observance of the doctrine of reasonableness in other situations also where citizens may legitimately expect to be treated fairly. The doctrine of legitimate expectation has been developed directly in the context of the Principles of Natural Justice.
Rules of Natural Justice are Not Embodied Rules: Suresh Koshy George v. University of Kerala
[(1969) 1 SCR 315 / AIR 1969 SC 198]As observed by the Supreme Court, the rules of natural justice are not embodied rules. What particular rule of natural justice shall apply to a given case must depend to a great extent on the facts and circumstances of that case, the framework of the law under which the inquiry is held, and the constitution of the Tribunal or body of persons appointed for that purpose. Whenever a complaint is made before a court that some principles of natural justice have been contravened, the court has to decide whether the observance of that rule was necessary for a just decision on the facts of that case.