Madras H.C : This writ appeal is directed against the judgment dt. 7th March, 1989 of the learned single Judge allowing W.P. No. 3924 of 1988.

High Court Of Madras

Government Of India & Anr. vs. Maxim A. Lobo & Anr.

Sections 269UD, 269UD(1)

Dr. A.S. Anand, C.J. & J. Kanakaraj, J.

WA No. 886 of 1989

20th April, 1990

Counsel Appeared

Mrs. Nalini Chidambaram, for the Appellants : P.S. Raman, for the Respondents

DR. A.S. ANAND, C. J. :

This writ appeal is directed against the judgment dt. 7th March, 1989 of the learned single Judge allowing W.P. No. 3924 of 1988. The appellants herein were respondents 1 and 2 in the writ petition. Respondent 1 herein was the writ petitioner. Respondent 2 herein was the third respondent in the writ petition. For facility of reference, reference to the parties shall be in the same order as in the writ petition.

An order under s. 269UD(1) of the IT Act was issued by the second respondent whereby it was decided to purchase the immovable property belonging to the writ petitioner situated in R.S. No. 4487 and bearing Door No. 126, Santhome High Road, Madras. That order was called in question before the learned single Judge on various grounds. But the writ petition succeeded on a single ground without reference to the other grounds raised in the writ petition.

2. The writ petitioner had entered into an agreement on 29th Jan., 1988 with the third respondent agreeing to transfer 90.505% of his right, title and interest in the property in question for a consideration of Rs. 32,76,733.50. The writ petitioner had retained 9.495% of his right, title and interest out of his entire property and the third respondent had agreed to construct for him a flat of specified dimensions as given in the agreement at a cost of Rs. 3,30,000. The writ petitioner had, therefore, transferred not his entire holding but only 90.505% thereof. A duly verified statement alongwith a copy of the agreement of sale dt. 29th Jan., 1988 in the prescribed Form 37-I was submitted to the second respondent. Vide order dated 28th March, 1988, impugned in the writ petition, the second respondent decided to purchase the property proposed to be transferred by the writ petitioner by virtue of the agreement of sale to the third respondent for a sum of Rs. 32,76,733.50. It was argued before the learned single Judge that though the writ petitioner had agreed to sell only 90.505% of his right, title and interest in the property for the consideration of Rs. 32,76,733.50, the second respondent, without proper application of mind, had, for the said amount, decided to purchase the “entire” property. Reference was made to paragraph 6 of the impugned order of the second respondent before the learned single Judge in support of the submission hereinabove noticed. It was also brought to the notice of the learned single Judge that even in the schedule, which was appended as annexure to the impugned order, it was the “entirety” of the property which was decided to be purchased by the second respondent. On behalf of the Revenue the submission was countered and it was urged before the learned single Judge that paragraph 6 of the order impugned in the writ petition was required to be read alongwith the other paragraphs of the order and when so read it was capable of being understood that second respondent had only decided to purchase 90.505% of the right, title and interest in the property in question, and not 100% as contended. The submission on behalf of the Revenue, however, did not find favour with the learned single Judge, who extracted paragraph 6 of the impugned order and thereafter allowed the writ petition. It would be advantageous at this stage to refer to that part of the judgment of the learned single Judge.

For better appreciation, paragraph 6 is extracted below : “As per the reasons recorded by us separately, we have come to the unanimous conclusion that the said property is fit for purchase by the Central Government for an amount equal to the amount of the apparent consideration. Accordingly, in exercise of the powers vested in us under sub-s. (1) of s. 269UD of the IT Act, we, the Appropriate Authority, IT Department, Madras, order the purchase of the said immovable property situated in R.S. No. 4487 and at No. 126, Santhome High Road, Madras 600 028, by the Central Government for a sum of Rs. 32,76,733.50 (Thirty two lacs seventy six thousand seven hundred and thirty three and paise fifty only) being equal to the amount of the apparent consideration stated in the agreement of sale.

In addition to the above, an Annexure is given to the impugned order setting out the schedule as property proposed to be purchased. There also, the entire property is mentioned and not an undivided share of 90.505% as contended by the learned counsel for the respondents 1 and 2. There is force in the contention of the learned counsel for the petitioner that the order has been passed by the 2nd respondent on the last day without proper application of mind which led to this lacuna. I am not prepared to accept the statement in the counter-affidavit to the effect that the decision by the 2nd respondent was to purchase 90.505% of the right, title and interest in the property and not 100% in view of the clear statement in paragraph 6 of the impugned order read with Annexure 1. As I am of the view that the impugned order is liable to be set aside on this error which is apparent on the face of the records, I have not dealt with the other grounds.” Mrs. Nalini Chidambaram, appearing for the appellants, assailed the judgment of the learned single Judge principally on the ground that to record a finding on the basis of paragraph 6 of the order impugned in the writ petition ignoring the other parts of the order was not the proper way in dealing with the order impugned in the writ petition. According to her, a reference to the opening part of the order and paragraphs 3 and 4 thereof, read with paragraph 6, unequivocally established that the second respondent, by the order impugned in the writ petition, had only decided to purchase 90.505% of the property of the writ petitioner and not the entire property as alleged. She argued that the second respondent was conscious of the extent of the property which was sought to be transferred by the writ petitioner to the third respondent and therefore had only decided to purchase the extent of the property decided to be sold to the third respondent and nothing more than that. She submitted that the order impugned in the writ petition should be taken as a whole and not piecemeal.

Mr. Raman, appearing for the writ petitioner, however, submitted that a reference to paragraphs 3 and 4 of the order impugned in the writ petition would only show certain factual assertions and not conclusions which were contained only in paragraph 6 thereof. He, therefore, sought to defend the order on that ground. Mr. Raman further argued that the judgment of the learned single Judge could be sustained even on some other grounds and in support of this submission he made reference to some other pleas raised in the writ petition. We shall refer to those pleas as and when we deal with the same.

In our opinion, the submission of Mrs. Nalini Chidambaram with regard to the manner in which the order impugned in the writ petition has been interpreted cannot be said to be without merits. Reading the order impugned in the writ petition in its entirety, we find it is clear that paragraph 6 contains only the conclusions and those cannot be divorced from the earlier paragraphs of the impugned order. The order has to be read in its entirety. It is not permissible to dissect it by ignoring the earlier portions of the order even if they contained factual matters. Of course, reading of paragraph 6 of the impugned order does support the view expressed by the learned single Judge, but if the said paragraph is read along with the remaining portion of the order it is possible to say that the second respondent had decided to purchase only 90.505% of the estate, and not the estate in its entirety. Had paragraph 6 of the order been worded better, perhaps, this confusion would not have arisen. However, we find that the order of the learned single Judge can be sustained on other grounds.

5. Chapter XX-C consisting of ss. 269U to 269UO was inserted in the IT Act, 1961, by the Finance Act, 1986, w.e.f. 1st Oct., 1986, vide Notification No. S.O. 480(E), dt. 7th Aug.., 1986 [TC3S.1214]. This Chapter deals with the purchase by the Central Government of immovable properties in certain cases of transfer. Sec. 269UC which starts with a non-obstante clause, provides that no transfer of any immovable property of such value exceeding the prescribed value shall be effected except after an agreement of transfer is entered into between the person who intends transferring the immovable property and the person to whom it is proposed to be transferred and the agreement is reduced into writing in the form of a statement of each of the parties to such transfer at least 3 months before the intended date of transfer. The statement which has to be made has to be in the prescribed form and has to set forth such particulars as may be prescribed and is required to be verified in the prescribed manner. It is after the receipt of the statement under s. 269UC that the Central Government may pass an order under s. 269UD, deciding to purchase that property, after providing reasons in writing for the same. Under s. 269UE (1), where an order under sub-s. (1) of s. 269UD is made by the Appropriate Authority in respect of an immovable property such property shall, on the date of such order, vest in the Central Government free from all encumbrances and the transferor or any other person who may be in possession of that property shall surrender or deliver possession thereof to the Appropriate Authority or any other person duly authorised by him in this behalf within 15 days of the service of an order on him. On the failure of the person in possession to comply with the directions, the Appropriate Authority or the person duly authorised by it, may take possession of the immovable property even by use of force and, if necessary, may requisition the services of any police officer to assist it. Under s. 269UF, where an order for the purchase of any immovable property by the Central Government is made under s. 269UD, the Central Government shall pay, by way of consideration for such purchase, an amount equal to the amount of apparent consideration. Sub-s. (2) of s. 269UF deals with damage to the property otherwise than as a result of normal wear and tear and reduction of the consideration payable in respect thereof. The amount of consideration payable in accordance with the provisions of s. 269UF is required to be tendered to the person or persons entitled thereto within a period of one month from the end of the month in which the immovable property becomes vested in the Central Government as per the provisions of s. 269UG. However, if the Central Government fails to so tender, under sub-s. (1) of s. 269UG or deposit under sub-s. (2) or sub-s. (3) of that section, the whole or any part of the amount of consideration required to be tendered or deposited thereunder within the period specified therein in respect of any immovable property which has vested in the Central Government, the order of purchase of the immovable property by the Central Government made under sub-s. (1) of s. 269UD shall stand abrogated and the immovable property shall stand re-vested in the transferor after the expiry of the aforesaid period. Sec. 269UN provides that any order made under sub-s. (1) of s. 269UD or any order made under sub-s. (2) of s. 269UF shall be final and conclusive and shall not be called in question in any proceeding under the Act or under any other law for the time being in force.

6. According to Mr. Raman, learned counsel for the writ petitioner, the order passed under s. 269UD stood vitiated due to non-compliance with the principles of natural justice. He referred to the grounds of challenge in the writ petition to urge that the second respondent had failed to comply with the principles of natural justice, firstly, because no opportunity whatever was given to the writ petitioner before the passing of the order impugned and, secondly, because the Appropriate Authority had not recorded any reasons, much less valid, in the impugned order, and further that by merely mentioning in the impugned order that reasons had been separately recorded but without conveying the so-called separately recorded reasons to the writ petitioner, the infirmity in the impugned order could not be cured. He argued that the powers vested in the second respondent under Chapter XX-C are judicial in nature and the second respondent had passed the impugned order without incorporating any reasons and in any event without conveying the reasons to the affected party. The order, in the circumstances, was termed by Mr. Raman to be a “non-speaking” order, and thus bad in the eye of law.

In the counter filed to the writ petition on behalf of the Appropriate Authority it was averred that under s. 269UD of the IT Act, 1961, power had been conferred on the Appropriate Authority to order purchase of an immovable property for an amount equal to the amount of apparent consideration as specified in the agreement of transfer and the second respondent had passed the impugned order in accordance with law. The challenge with regard to the violation of the principles of natural justice was denied. It was submitted that the second respondent had recorded the reasons as required by s. 269UD, but no reply was given with regard to the averments contained in paragraph 9 onwards of the affidavit in support of the writ petition, wherein grievance had been projected with regard to the non-recording of reasons and the failure to give an opportunity prior to the passing of the order, as also the non- communication of the reasons. With the permission of the Court, however, during the course of arguments, Mrs. Nalini Chidambaram filed an additional affidavit of R. Vijayalakshmi, a member of the Appropriate Authority. In the said affidavit, the stand of the Revenue with regard to the compliance with the principles of natural justice and the communication of the reasons has been spelt out in extenso, and in our opinion, it is desirable to extract the same hereunder : “2. As a measure for countering evasion, Parliament inserted Chapter XX-A empowering the Government to acquire an immovable property on its sale or transfer under certain circumstances. The Chapter contemplated a preliminary notice, hearing of objections, communication of reasons for the order of acquisition and right of appeal. The Chapter, however, became unworkable on account of the procedures contemplated. Statistics show that not even a dozen properties were acquired under Chapter XX-A even though the prescribed authority had a wealth of material to prove that there has been gross understatement of consideration in the transfer deeds. Hence Parliament decided to delete Chapter XX-A and introduced Chapter XX-C, by Finance Act, 1986. After great deliberation, Parliament decided that no preliminary notice need be given before order under s. 269UD is passed. The section contemplated recording of reasons before an order of pre-emptive purchase is made. High ranking officials of the rank of Joint Secretary to Government of India, viz., two CITs and one Chief Engineer, CPWD, constitute the Appropriate Authority. They are expected to act fairly, justly and reasonably and not arbitrarily, capriciously or unreasonably. The Appropriate Authority is to exercise the right of pre-emption only in cases where the Appropriate Authority comes to the unanimous conclusion that it is a fit case for purchase on account of undervaluation after considering the entirety of circumstances. Hence it was decided that even though reasons are to be recorded, they will not form part of the order and will not be communicated. But if any judicial proceedings are initiated, the recorded reasons will be produced before the Court for scrutiny. Hence it was provided in the statute that an order for purchase shall be passed for reasons to be recorded in writing. In any case of pre-emptive purchase, the Appropriate Authority invariably records elaborate reasons for the purchase.

The legislature in its wisdom decided in public interest to dispense with right of hearing. The validity of procedure should be tested with reference to particular set of facts and the object for which the particular mode of procedure is evolved. The procedure normally followed in administrative and quasi-judicial proceedings can be departed from under special circumstances. It has been found that Chapter XX-C has been very effective and the objective of the legislature has been achieved to a great extent.

With the above objective in view, the legislature has specifically provided under s. 269UN that orders made under ss. 269UD and 269UF shall be final and conclusive and shall not be called in question in any proceedings under the Act or any other law for the time being in force….” Mrs. Nalini Chidambaram sought to meet the argument raised by Mr. Raman by reiterating the stand as reflected in the above affidavit. According to her, since the Parliament had consciously not specifically provided for any right of hearing before an order under s. 269UD(1) of the Act came to be passed, it was not permissible for the Court to extend the application of the “rules of natural justice” to the cases covered under Chapter XX-C of the Act. She argued that the requirement of s. 269UD(1) of the Act was only to the extent of recording of reasons before passing an order under that section and that no obligation was cast on the Appropriate Authority to either incorporate those reasons in the order itself or to communicate them separately to the affected party. She referred to the provisions of s. 269UN to urge that the Parliament had provided for exclusion of judicial review of an order passed under s. 269UD and, therefore, the Court was precluded from testing the validity of the order on the touch-stone of the “principles of natural justice”, where its constitutionality was not in question. She, however, did not dispute, and rightly so, that the power exercised by the Appropriate Authority while passing an order under s. 269UD(1) of the Act was “quasi-judicial” in nature.

The admitted factual position in the case is : (1) That the Appropriate Authority did not provide any opportunity of hearing either predecisionally or post- decisionally to the writ petitioner before passing an order under s. 269UD(1) of the Act; (2) that the order impugned in the writ petition did not contain any reasons for the passing of the order; (3) that the reasons for purchasing the property in exercise of the powers under s. 269UD(1) which had been separately recorded by the Appropriate Authority were not conveyed to the writ petitioner either along with the impugned order or separately; and (4) that an order passed under s. 269UD(1) is neither appealable nor revisable under the IT Act. It transpires from the affidavit filed on behalf of the Revenue by R. Vijayalakshmi that the Parliament had introduced Chapter XX-C by the Finance Act, 1986 as a measure for countering evasion and empowering the Government to acquire an immovable property on its sale or transfer under certain circumstances where the Appropriate Authority came to the conclusion that on account of undervaluation, the said property was fit for purchase by the Central Government.

With a view to appreciate the rival contentions raised at the Bar, in the light of the fact situation noticed above, it is necessary to take note of the provisions of s. 269UD of the Act. They provide : “(1) The appropriate authority, after the receipt of the statement under sub-s. (3) of s. 269UC in respect of any immovable property may, notwithstanding anything contained in any other law or any instrument or an agreement for the time being in force, and for reasons to be recorded in writing, make an order for the purchase by the Central Government of such immovable property at an amount equal to the amount of apparent consideration : Provided that no such order shall be made in respect of any immovable property after the expiration of a period of two months from the end of the month in which the statement referred to in s. 269UC in respect of such property is received by the appropriate authority: Provided further that in a case where the statement referred to in s. 269UC in respect of the immovable property concerned is given to an appropriate authority, other than the appropriate authority having jurisdiction in accordance with the provisions of s. 269UB to make the order referred to in this sub-section in relation to the immovable property concerned, the period of limitation referred to in the preceding proviso shall be reckoned with reference to the date of receipt of the statement by the appropriate authority having jurisdiction to make the order under this sub-section. (2) The appropriate authority shall cause a copy of its order under sub-s. (1) in respect of any immovable property to be served on the transferor, the person in occupation thereof, the transferee, and on every other person whom the appropriate authority knows to be interested in the property.”

Sec. 269UD(1), in terms, it is seen does not provide for any pre- decisional or post-decisional hearing being granted to the affected party. It casts an obligation on the authority to record reasons in writing before passing an order under sub-s. (1) of s. 269UD and vide sub-s. (2) thereof mandates the communication of the order to the affected party.

The observance of the principles of natural justice is the pragmatic requirement of fair play in action. The purpose of following the principles of natural justice is the prevention of miscarriage of justice. The rules of natural justice operate as implied mandatory processual requirements, nonobservance whereof invalidates the exercise of power. Indeed, the content of natural justice is a dependent variable, conditioned by the facts and circumstances of each situation. The application of the rules of natural justice in quasi-judicial actions has always been accepted by Courts in this country. One of the essential postulates of a quasi-judicial enquiry is the grant of an opportunity of hearing, oral or in writing, before the conclusion is arrived at by the authority exercising those powers. In this country the Courts have applied the rules even to “administrative enquiries.” As a result of the law laid down by the apex Court in State of Orissa vs. Dr. Binapani Dei AIR 1967 SC 1269; A.K. Kraipak vs. Union of India AIR 1970 SC 150; Maneka Gandhi vs. Union of India AIR 1978 SC 597 and National Textile Workers’ Union vs. P.R. Ramakrishnan (1983) 1 SCC 220 it is now well settled that no order involving adverse consequences can be passed against any person without giving him an opportunity to be heard against the passing of such an order. In Maneka Gandhi’s case (supra) the passport of the petitioner therein was impounded by the Government of India under s. 10(3)(c) of the Passports Act, 1967. The petitioner, under Art. 32 of the Constitution, challenged the action of the Government as being null and void for denial of an opportunity of hearing. The apex Court ruled that although there were no positive words in the statute requiring that the party shall be heard, yet, the justice of common law would supply the omission of the legislature. Their Lordships held that if the statute was silent with regard to the observance of the rules of natural justice, those principles shall be “read” into the statute. Bhagwati, J., emphasised that audi alteram partem is a rule devised by Courts to ensure a just decision by the statutory authority and is calculated to act as a healthy check on the abuse or misuse of power and its reach and applicability cannot be allowed to be circumscribed. Thus, it is too late in the day to urge that since the legislature did not specifically provide in Chapter XX-C of the IT Act that the affected party shall have a right of hearing before an order under s. 269UD(1) is passed, the Courts would not insist upon compliance with at least the minimal rules of audi alteram partem to be followed particularly by an authority exercising quasi-judicial powers. We are unable to accept the argument that since the decision to act under s. 269UD(1) is taken by “senior officials of the Revenue” who are supposed to act “fairly, justly and reasonably and not arbitrarily” there is no need to follow the audi alteram partem rule. Fair hearing is a postulate of decision making by a statutory authority exercising quasi-judicial powers. Of course, undue expansion of natural justice without reference to administrative realities and other factors of a given case is not desirable, but the fact remains that it is “untenable heresay to lock- jaw the victim or act behind his back” by tempting invocation of administrative necessity. Even where there is a clearest case of public interest or public injury, there is no justification for non-observance of even an abridged form of fair hearing, preferably pre-decisional or, at any rate, post- decisional, where pre-decisional hearing for practical reasons cannot be granted. A hearing, an essential attribute of a quasi-judicial action, would cease to be fair if apprising the affected is wanting.

One principle which is now well settled by a catena of authorities is that even if the statute is silent with regard to grant of hearing to the person affected but decision taken by the authority involves civil consequences or adverse consequences, at least a minimal hearing is necessary, and not only desirable. An order suffering from non- observance of the principles of natural justice would, under the circumstances, be void and nullity. Neither in the affidavit filed by R. Vijayalakshmi nor from the submissions made by Mrs. Chidambaram we have been able to extract any principle of “public interest” or “public good” which could be pressed in aid of the nonobservance of the audi alteram partem rule. Keeping in view the far-reaching consequences of an order passed under s. 269UD(1) of the Act and the fact that such an order is not even “appealable” or “revisable” under the Act, it casts even a greater obligation on the authorities exercising powers under that section, to at least give a hearing to the party likely to be adversely affected by the order proposed to be passed. The denial of opportunity of hearing in such a case offends seriously against fair play in action. By not granting any hearing nor giving any opportunity to the writ petitioner to explain his case either before passing the proposed order or even an opportunity to show cause against the proposed order, the principles of natural justice, which must be “read” into Chapter XX-C, have undoubtedly been violated, affecting the validity of the impugned order. The justification given in the affidavit for not following the rules of audi alteram partem, viz., that earlier by following that rule, not even a dozen of properties could be purchased under Chapter XXA of the Act is a self-defeating justification. If by getting a reply from the affected party, the proposal to purchase the property was given up by the authorities, it justifies the giving of such an opportunity, rather than denial of it. Surely, the Revenue does not mean to suggest that once they decide to purchase any property, the lack of justification for its action is irrelevant.

9. That apart, we find that in the impugned order no reasons have been given by the Appropriate Authority. Indeed, the reasons for passing an order under s. 269UD(1) after arriving at the “unanimous conclusion that it is a fit case for purchase on account of undervaluation” have been separately recorded, but those reasons admittedly were neither incorporated in the impugned order nor conveyed separately to the writ petitioner along with the impugned order. The argument of Mrs. Chidambaram that since high ranking officials constitute “the Appropriate Authority” under the Act it had been decided by them that the reasons, though required to be recorded, “shall not form a part of the order and will not be communicated” cannot justify the serious omission of not communicating the reasons in support of the order under s. 269UD(1) of the Act.

The purpose of recording reasons which lead to the passing of the order and conveying the same to the affected party by an authority exercising quasi-judicial powers is basically intended to serve two fold : (1) that the party aggrieved in the proceedings acquires knowledge of the reasons and in a proceeding before the High Court or the Supreme Court (since there is no right of appeal or revision) it has an opportunity to demonstrate that the reasons which persuaded the authority to pass an order adverse to his interests were erroneous, irrational or irrelevant, and (2) that the obligation to record reasons and convey the same to the party concerned, operates as a deterrent against possible arbitrary action by the quasi-judicial or the executive authority invested with judicial powers.

In Travancore Rayons Ltd. vs. Union of India AIR 1971 SC 862 this position was clearly stated thus : “11. In this case the communication from the Central Government gave no reasons in support of the order; the appellant- company is merely intimated thereby that the Government of India did not see any reasons to interfere “with the order in appeal.” The communication does not disclose the “points” which were considered, and the reasons for rejecting them. This is totally unsatisfactory method of disposal of a case in exercise of the judicial power vested in the Central Government. Necessity to give sufficient reasons which disclose proper appreciation of the problem to be solved, and the mental process by which the conclusion is reached in cases where a non- judicial authority exercises judicial functions, is obvious. When judicial power is exercised by an authority normally performing executive or administrative functions, this Court would require to be satisfied that the decision has been reached after due consideration of the merits of the dispute, uninfluenced by extraneous considerations of policy or expediency. The Court insists upon disclosure of reasons in support of the order on two grounds; one, that the party aggrieved in a proceeding before the High Court or this Court has the opportunity to demonstrate that the reasons which persuaded the authority to reject his case were erroneous, the other, that the obligation to record reasons operates as a deterrent against possible arbitrary action by the executive authority invested with the judicial power.” (Emphasis, italicized in print, supplied) Again, in Liberty Oil Mills vs. Union Of India AIR 1984 SC 1271, while dealing with cl. 8B of the Imports and Exports (Control) Act, which does not provide for a pre-decisional opportunity to the affected party and also lays down that an order may be made “without assigning any reason”, their Lordships opined thus (paragraph 22) : “Ours is a constitutional Government, an open democracy founded upon the rule of law and not a cloak and dagger regime. It is inconceivable that under our constitutional scheme a decision of the kind contemplated by cl. 8B which may have the effect of bringing to a standstill the entire business activity of the person affected and which may even spell ruin to him, should be made and implemented without being communicated to that person. Intertwined is the question of observance of natural justice and how can natural justice be satisfied if the decision is not even communicated? It would be most arbitrary and quite clearly violative of Arts. 14 and 19(1)(g) of the Constitution if cl. 8B is to be interpreted as including communication of the decision taken. There is nothing in cl. 8B to suggest that the decision is not to be communicated. On the other hand, the expression ‘without assigning any reason’ implies that the decision has to be communicated, but reasons for the decision have not to be stated. Reasons, of course, must exist for the decision since the decision may only be taken if the authority is satisfied that the grant of licence or allotment of imported goods will not be in the public interest. We must make it clear that ‘without assigning reasons’ only means that there is no obligation to formulate reasons and nothing more. Formal reasons may lead to complications when the matter is still under investigation. So the authority may not give formal reasons, but the skeletal allegations must be mentioned in order to provide an opportunity to the person affected to make his representation. Chapter and verse need not be quoted. Details may not be mentioned and an outline of the allegations should be sufficient.” (Emphasis, italicized in print, supplied) The recording of reasons and conveying the same, thus, is one of the norms of “natural justice”.

10. Unlike cl. 8B of the Imports and Exports (Control) Act, which was under consideration in Liberty Oil Mills’ case (supra) and which provided for the making of an order “without assigning any reason”, s. 269UD(1), in express terminology, provides that the Appropriate Authority may make an order for the purchase of the property “for reasons to be recorded in writing.” There is, thus, no escape from the recording of the reasons by the Appropriate Authority where it proceeds to act under that section. Sec. 269UD(2) casts a mandatory obligation on the authority that it “shall cause a copy of its order under sub-s. (1) in respect of any immovable property to be served on the transferor……” It is, therefore, inconceivable that the order which is required to be served by the Appropriate Authority under sub-s. (2) would be the one which does not contain the reasons for passing of the order or is not accompanied by the reasons recorded in writing. It may be permissible to record reasons separately but the order would be an incomplete order unless either the reasons are incorporated therein or are served separately along with the order on the affected party. Reasons for the order must be communicated to the affected party. An order of a quasi-judicial nature without reasons is a wholly defective order in the eye of law. To interpret the section in any other manner would not only be doing violence to the plain phraseology of the section, but also defeating the very purpose for which the Parliament provided for “recording of reasons” while making an order and conveying a copy of that order to the affected party. It is an essential attribute of a quasi-judicial order that it shall disclose the material to the party against whom it is intended to be used. In Mahabir Prasad vs. State of U.P. AIR 1970 SC 1302, Shah, J., speaking for the Bench, opined that recording of reasons in support of a decision by a quasi-judicial authority is obligatory as it ensures that the decision is reached according to law and is not a result of caprice, whim or fancy or reached on ground of policy of expediency. A party to the dispute, observed Shah, J., is entitled to know the grounds on which the order adverse to his interests had been passed. It would serve no purpose if the reasons are recorded but the party to the dispute is kept in the dark about the same. Non-communication of reasons deprives the affected party of knowing the grounds on which the authority exercising quasi-judicial powers had acted adverse to his interests and lands him into a serious handicap for further course of action. Koshal, J., in Uma Charan vs. State of MP AIR 1981 SC 1915, speaking for the apex Court, once again, emphasised the importance of the communication of reasons in an order affecting the rights of a person in the following terms: “Reasons are the links between the materials on which certain conclusions are based and the actual conclusions. They disclose how the mind is applied to the subject matter for a decision whether it is purely administrative or quasi-judicial. They should reveal a rational nexus between the facts considered and the conclusions reached. Only in this way can opinions or decisions recorded be shown to be manifestly just and reasonable.”

It is, therefore, no longer res integra that a reasoned order is the essential condition of judicial disposal because the obligation to give reasons introduces clarity and excludes, or, at any rate, minimises chances of arbitrariness. It gives satisfaction to the party against whom the order is made and enables an appellate or a supervisory Court to keep the Tribunals within bounds by testing the correctness of those reasons. Communicating an order, withholding the reasons for the order, is thus an idle and a meaningless formality of conveying the order. Since an order under s. 269UD(1) is neither appealable nor revisable, its validity can only be tested by the High Courts under Arts. 226 and 227 and by the Supreme Court under Art. 136 of the Constitution. The non-disclosure of reasons in the order impugned or non-communication of the same, where separately recorded, is not a proper compliance with the requirements of s. 269UD(2). The aggrieved party is handicapped inasmuch as it is unable to question the order with reference to the reasons given by the authority. Where the reasons are withheld, both the High Court and the Supreme Court are also placed at a great disadvantage to examine whether the reasons given are sufficient for the purpose of upholding the decision. An affected party, in all fairness to him, is entitled to know the “reasons” to be able to appreciate as to how the matter has been considered by the Appropriate Authority, and to question its validity by reference to those reasons. That the Revenue can produce the already recorded reasons for scrutiny of the Court, whenever demanded by the Court, is not a substitute for passing and communicating a reasoned order to the affected party. Neither on the plain language of the section nor on the application of the rule of “natural justice”, can the stand of the Revenue be countenanced.

The exclusionary provision contained in s. 269UN of the Act casts even a greater obligation on the authority passing an order under s. 269UD(1) to record and communicate the reasons for the decisions to the affected party. Learned counsel for the appellants, rightly, did not urge the applicability of the exclusionary clause in so far as the residuary jurisdiction of the Supreme Court under Art. 136 and of the supervisory and extraordinary jurisdiction of the High Courts under Arts. 226 and 227 of the Constitution of India are concerned. Judicial review, it is well settled, is available on grounds of arbitrariness in petitions under Art. 226 and 227 of the Constitution of India irrespective of the presence of a statutory exclusionary clause. The reason being, that arbitrariness which results from non-observance of the principles of natural justice leads to infringement of Art. 14 of the Constitution of India and any act, which is repugnant to the fundamental law of the land, is null and void. The powers of the High Court under Arts. 226 and 227 of the Constitution of India to declare such orders as null and void are unaffected by the presence of any exclusionary clause in a statute. Indeed, in the exercise of its supervisory jurisdiction, this Court will not review findings of fact reached by quasi-judicial authorities, even if erroneous, but a writ of certiorari can be issued when the decision of a quasi- judicial authority suffers from an error of law manifest on the face of the record. It is the duty of the Court to examine whether the order is backed by appropriate legal foundations and has been passed fairly, justly, reasonably and not arbitrarily or capriciously for extraneous reasons. The law as settled by the apex Court now admits of no doubt that the violation of the principles of natural justice being an infringement of Art. 14 of the Constitution, an order which infringes Art. 14 is an order which suffers from an error of law apparent on the face of it calling for interference by the High Court.

13. From the above discussion, it follows that the impugned order which did not incorporate the reasons for taking action under s. 269UD(1) and the action of the Appropriate Authority of not even conveying the reasons, separately recorded, to the affected party either along with the impugned order or otherwise, is not only a violation of the statutory provisions of s. 269UD(1) and (2) but also is against the established principles of natural justice. Such an order is a nullity and cannot be sustained.

14. Learned counsel for the Revenue, lastly, submitted that even if the impugned order had violated the rule of audi alteram partem and the Appropriate Authority by withholding the reasons from the affected party had not acted strictly in accordance with the provisions of s. 269UD(1) and (2) or had infringed the principles of fair play and natural justice, the impugned order could still be sustained because the Appropriate Authority had proceeded to purchase the immovable property on the same consideration as recorded in the agreement of sale and the order, therefore, had not visited the petitioner, strictly speaking, with any adverse consequences. We are afraid, we cannot agree. Undoubtedly, from the very nature of the proceedings under Chapter XX-C of the IT Act, the Appropriate Authority proceeds to act under that Chapter only after coming to a conclusion that it was a fit case for purchase of the property on account of “undervaluation” of the property, implying thereby an effort on the part of the transferor to conceal the true value of the property to “evade tax.” An action under s. 269UD(1), therefore, prima facie casts a stigma on the affected party of deliberately undervaluing the property for the purpose of tax evasion. When such a property after it vests in the Central Government is put to auction by notification, it is an information to the people at large that the property in question had been acquired on account of its “undervaluation” by the transferor. The action certainly affects the image and reputation of the party concerned and the loss of image and reputation is to be viewed far more seriously than mere monetary loss. The mere fact that the same price is being paid to the transferor does not take away the stigma of “undervaluation” or “tax evasion” and, therefore, it is futile to contend that an order under s. 269UD(1) does not visit an affected party with civil consequences or adverse consequences merely because the purchase is made by the Central Government by paying or tendering the apparent consideration. Thus, for what we have noticed above, we find that, in the instant case, there has been a flagrant violation of the rules of natural justice both with regard to violation of the rule of audi alteram partem and the denial of a fair opportunity to the affected party to question the order by withholding from him the reasons which led to the passing of the order impugned in the writ petition by reference to those reasons. The order also violates the mandatory requirements of s. 269UD(1) and (2) inasmuch as while communicating the order, the reasons for passing the order had been withheld from the affected party. The order impugned in the writ petition, therefore, could not be sustained and was rightly quashed by the learned single Judge.

As a result, the judgment of the learned single Judge is upheld, though for reasons different from the ones given by him. The writ appeal, consequently, fails and is dismissed but in the peculiar circumstances without any order as to costs.

[Citation : 190 ITR 101]

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