Richa Shailja v. Union of India

16. In Harinagar Sugar Mills Ltd. v. Shyam Sunder Jhunjhunwala, AIR 1961 SC 1669, the question of recording reasons came up for consideration in the context of a refusal by Harinagar to transfer, without giving reasons, shares held by Shyam Sunder. Challenging such refusal, the transferee moved the High Court contending, inter alia, that the refusal is mala fide, arbitrary and capricious. The High Court rejected such pleas and the transferee was asked to file a suit. The transferee filed an appeal to the Central Government under Section 111(3) of the Companies Act, 1956 which was dismissed. Thereafter, the son of the original transferee filed another application for transfer of his shares which was similarly refused by the Company. On appeal, the Central Government quashed the resolution passed by the Company and directed the Company to register the transfer. However, in passing the said order, the Government did not give any reason. The Company challenged the said decision before this Court.

19. Again in Bhagat Raja v. Union of India, AIR 1967 SC 1606, the Constitution Bench of this Court examined the question whether the Central Government was bound to pass a speaking order while dismissing a revision and confirming the order of the State Government in the context of the Mines and Minerals (Development and Regulation) Act, 1957, and having regard to the provision of Rule 55 of the Mineral Concession Rules. The Constitution Bench held that in exercising its power of revision under the aforesaid Rule the Central Government acts in a quasi-judicial capacity (see AIR p. 1610, para 8). Where the State Government gives a number of reasons some of which are good and some are not, and the Central Government merely endorses the order of the State Government without specifying any reason, this Court, exercising its jurisdiction under Article 136, may find it difficult to ascertain which are the grounds on which the Central Government upheld the order of the State Government (see AIR p. 1610, para 9). Therefore, this Court insisted on reasons being given for the order.

20. In Mahabir Prasad Santosh Kumar v. State of U.P.,(1970) 1 SCC 764: AIR 1970 SC 1302, while dealing with the U.P. Sugar Dealers' Licensing Order under which the licence was cancelled, this Court held that such an order of cancellation is quasi-judicial and must be a speaking one. This Court further held that merely giving an opportunity of hearing is not enough and further pointed out where the order is subject to appeal, the necessity to record reason is even greater. The learned Judges held that the recording of reasons in support of a decision on a disputed claim ensures that the decision is not a result of caprice, whim or fancy but was arrived at after considering the relevant law and that the decision was just. (See SCC p. 768, para 7: AIR p. 1304, para 7.)

21. In Travancore Rayon Ltd. v. Union of India,(1969) 3 SCC 868: AIR 1971 SC 862, the Court, dealing with the revisional jurisdiction of the Central Government under the then Section 36 of the Central Excises and Salt Act, 1944, held that the Central Government was actually exercising judicial power of the State and in exercising judicial power reasons in support of the order must be disclosed on two grounds. The first is that the person aggrieved gets an opportunity to demonstrate that the reasons are erroneous and secondly, the obligation to record reasons operates as a deterrent against possible arbitrary action by the executive authority invested with the judicial power (see SCC p. 874, para 11: AIR pp. 865-66, para 11).

22. In Woolcombers of India Ltd. v. Workers Union, (1974) 3 SCC 318: 1973 SCC (L&S) 551: AIR 1973 SC 2758 this Court while considering an award under Section 11 of the Industrial Disputes Act insisted on the need of giving reasons in support of conclusions in the award. The Court held that the very requirement of giving reason is to prevent unfairness or arbitrariness in reaching conclusions. The second principle is based on the jurisprudential doctrine that justice should not only be done, it should also appear to be done as well. The learned Judges said that a just but unreasoned conclusion does not appear to be just to those who read the same. Reasoned and just conclusion on the other hand will also have the appearance of justice. The third ground is that such awards are subject to Article 136 jurisdiction of this Court and in the absence of reasons, it is difficult for this Court to ascertain whether the decision is right or wrong (see SCC pp. 320-21, para 5: AIR p. 2761, para 5).

28. In Gurdial Singh Fijji v. State of Punjab, (1979) 2 SCC 368: 1979 SCC (L&S) 197, this Court, dealing with a service matter, relying on the ratio in Union of India v. Mohan Lal Capoor (1973) 2 SCC 836: 1974 SCC (L&S) 5, held that “rubber-stamp reason” is not enough and virtually quoted the observation in Union of India v. Mohan Lal Capoor (1973) 2 SCC 836: 1974 SCC (L&S) 5, to the extent that: (Capoor case (1973) 2 SCC 836: 1974 SCC (L&S) 5, SCC p. 854, para 28)

29. In a Constitution Bench decision of this Court in H.H. Shri Swamiji of Shri Amar Mutt v. Commr., Hindu Religious and Charitable Endowments Deptt., (1979) 4 SCC 642: 1980 SCC (Tax) 16: AIR 1980 SC 1 while giving the majority judgment Y.V. Chandrachud, C.J. referred to (SCC p. 658, para 29) Broom's Legal Maxims(1939 Edn., p. 97) where the principle in Latin runs as follows: “Cessante ratione legis cessat ipsa lex.”

30. The English version of the said principle given by the Chief Justice is that: (H.H. Shri Swamiji case, (1979) 4 SCC 642: 1980 SCC (Tax) 16: AIR 1980 SC 1, SCC p. 658, para 29)

towards an increasing recognition of the duty of court to give reasons (see North RangeShipping Ltd. v. Seatrans Shipping Corpn., (2002) 1 WLR 2397: (2002) 4 All ER 390: (2002) 2 All ER (Comm) 103 (CA)). It has been acknowledged that this trend is consistent with the development towards openness in the Government and judicial administration.

45. In English v. Emery Reimbold and Strick Ltd. (2002) 1 WLR 2409: (2002) 3 All ER 385 (CA), it has been held that justice will not be done if it is not apparent to the parties why one has won and the other has lost. The House of Lords in Cullen v. Chief Constable of the Royal Ulster Constabulary, (2003) 1 WLR 1763: (2004) 2 All ER 237 (HL), Lord Bingham of Cornhill and Lord Steyn, on the requirement of reason held: (WLR p. 1769, para 7)

46. The position in the United States has been indicated by this Court in S.N. Mukherjee v. Union of India, (1990) 4 SCC 594: 1990 SCC (Cri) 669: 1991 SCC (L&S) 242: (1991) 16 ATC 445: AIR 1990 SC 1984] in SCC p. 602, para 11: AIR para 11 at p. 1988 of the judgment. This Court held that in the United States the courts have always insisted on the recording of reasons by administrative authorities in exercise of their powers. It was further held that such recording of reasons is required as “the courts cannot exercise their duty of review unless they are advised of the considerations underlying the action under review”. In S.N. Mukherjee, (1990) 4 SCC 594: 1990 SCC (Cri) 669: 1991 SCC (L&S) 242: (1991) 16 ATC 445: AIR 1990 SC 1984, this Court relied on the decisions of the US Court in Securities and Exchange Commission v. Chenery Corpn., 87 L Ed 626: 318 US 80 (1942) and Dunlop v. Bachowski, 44 L Ed 2d 377: 421 US 560 (1974) in support of its opinion discussed above.

47. Summarising the above discussion, this Court holds: (a) In India the judicial trend has always been to record reasons, even in administrative decisions, if such decisions affect anyone prejudicially. (b) A quasi-judicial authority must record reasons in support of its conclusions.

(c) Insistence on recording of reasons is meant to serve the wider principle of justice that justice must not only be done it must also appear to be done as well.

(d) Recording of reasons also operates as a valid restraint on any possible arbitrary exercise of judicial and quasijudicial or even administrative power. (e) Reasons reassure that discretion has been exercised by the decision-maker on relevant grounds and by disregarding extraneous considerations. (f) Reasons have virtually become as indispensable a component of a decision-making process as observing principles of natural justice by judicial, quasi-judicial and even by administrative bodies. (g) Reasons facilitate the process of judicial review by superior courts. (h) The ongoing judicial trend in all countries committed to rule of law and constitutional governance is in favour of reasoned decisions based on relevant facts. This is virtually the lifeblood of judicial decision-making justifying the principle that reason is the soul of justice.

(i) Judicial or even quasi-judicial opinions these days can be as different as the judges and authorities who deliver them. All these decisions serve one common purpose which is to demonstrate by reason that the relevant factors have been objectively considered. This is important for sustaining the litigants' faith in the justice delivery system. (j) Insistence on reason is a requirement for both judicial accountability and transparency. (k) If a judge or a quasi-judicial authority is not candid enough about his/her decision-making process then it is impossible to know whether the person deciding is faithful to the doctrine of precedent or to principles of incrementalism.

(l) Reasons in support of decisions must be cogent, clear and succinct. A pretence of reasons or “rubber-stamp reasons” is not to be equated with a valid decision-making process.

(m) It cannot be doubted that transparency is the sine qua non of restraint on abuse of judicial powers. Transparency in decision-making not only makes the judges and decisionmakers less prone to errors but also makes them subject to broader scrutiny. (See David Shapiro in Defence of Judicial Candor, (1987) 100 Harvard Law Review 731-37) (n) Since the requirement to record reasons emanates from the broad doctrine of fairness in decision-making, the said requirement is now virtually a component of human rights and was considered part of Strasbourg Jurisprudence. See Ruiz Torija v. Spain (1994) 19 EHRR 553, EHRR, at 562 para 29 and Anya v. University of Oxford, 2001 EWCA Civ 405 (CA), wherein the Court referred to Article 6 of the European Convention of Human Rights which requires, “adequate and intelligent reasons must be given for judicial decisions”. (o) In all common law jurisdictions judgments play a vital role in setting up precedents for the future. Therefore, for development of law, requirement of giving reasons for the decision is of the essence and is virtually a part of “due process”.”

16. Applying the law to the facts of the present case, we are of the considered view that the learned Tribunal should have applied its mind independently and should have considered the rival submissions of both the parties and thereafter decided the application seeking stay of transfer by a reasoned order. For the reasons aforegoing, we set aside the order dated 24.04.2018 and direct the Tribunal to hear M.A. no.1392/2018 afresh and pass a reasoned order.

17. The writ petition and CM No.18309/2018 are disposed of in the above terms.

18. The parties will appear before the Central Administrative Tribunal Principal Bench, New Delhi on 09.05.2018.

19. Copy of this order be given dasti under the signature of the Court Master.

G. S. SISTANI, J

SANGITA DHINGRA SEHGAL, J MAY 04, 2018 afa