REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL  APPEAL NO. 1438 OF 2004

M/s Nagarjuna Construction Co. Ltd.   ..Appellant

versus

Govt. of Andhra Pradesh and Ors. ..Respondents              

WITH

CIVIL APPEAL NO. 1439 of 2004 CIVIL APPEAL NO. 1442 of 2004 CIVIL APPEAL NO. 1443 of 2004 CIVIL APPEAL NO. 1444 of 2004

J U D G M E N T

Dr. ARIJIT PASAYAT, J.

1. Since common points are involved in these appeals, they are disposed

of by this common judgment.

2. Writ Petitions were filed by the appellants before the Andhra Pradesh

High Court praying for quashing the order passed by the State Government

in  Memorandum  No.8817/M.II(1)/2001-6,  dated   4.2.2002  and  the

consequent demand notice issued by the Director of Mines and Geology and

the proceedings of the Deputy Director, Mines and Geology. The appellant

in  each case is  engaged in  the business  of  construction,  engineering  and

civil  works.   In  each  case  the  appellant  had  participated  in  the  tenders

invited  by  the  Bharat  Heavy  Electricals  Ltd.  (in  short  ‘BHEL’)  for  the

purpose  of  executing  their  part  of  the  contract  which  is  with  NTPC for

levelling  and grading.  BHEL had  awarded  the  contract  to  the  appellant-

company for execution of the work. According to the appellant, the material

required  for  the  purpose  of  execution  of  the  contract  in  terms  of  the

specifications  prescribed  under  the  contract  is  earth,  morrum gravel  and

mixture of these or any other material approved by the BHEL. The appellant

had obtained rights  for  excavation  of  good earth  from the ryots  of  patta

lands in the vicinity as well as from the quarry lease holders. Each appellant

was supplying the materials from the source in which they obtained right of

excavation  of  materials.   Huge  quantity  of  these  materials  was  supplied

under the contract. The Assistant Director of Mines and Geology required

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BHEL to show cause as to why action should not be initiated to realize a

sum of money towards seigniorage fee which includes five times penalty

over and above the normal seigniorage fee. The Assistant Director required

BHEL to produce documentary evidence, if any, with regard to the source

from where the materials had been procured alongwith the permits issued by

the Department.  BHEL filed a detailed reply disputing the liability in the

matter.   It  was  indicated  that  the  requisite  application  for  allotment  of

quarries  and  other  formalities  were  to  be  done  directly  by  the  sub

contractors concerned. The agencies have been paying the seigniorage fee

directly to the Department of Mines and Geology. In between meeting was

held between the agencies and Department of Mines and Geology, BHEL

and the contractors. Detailed minutes were drawn up according to which the

Director of Mines and Geology expressed that type of filling materials may

have to be decided by the Department of Mines and not by the contractors

themselves.   

3. Subsequently, demands were raised. Reference was made to certain

data supplied by BHEL to the Vigilance and Enforcement Department. It

was observed that filling material was partly gravel and partly ordinary clay

in respect of which seigniorage fee is liable to be paid. The appellant in each

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case requested the authority to withdraw the demands while agreeing to pay

the seigniorage fee under protest.  

4. The Assistant Director, Mines and Geology again sent demand notice.

The Deputy Director of Mines and Geology raised demand notice directing

the appellant to pay a higher sum being the balance of seigniorage fee after

giving credit to the fees already paid.  At this stage  the appellant submitted

detailed representation to the Secretary (Mines), Industries and Commerce

Department, Government of Andhra Pradesh inter-alia highlighting various

contradictory  notices  issued  by  the  Assistant  Director  and  the  Deputy

Director.   The  Government  of  Andhra  Pradesh  in  exercise  of  suo  motu

revisional  jurisdiction   under  Rule  35-A  of  the  Andhra  Pradesh  Minor

Mineral Concession Rules, 1966 (in short the ‘Andhra Pradesh Rules’)  set

aside  the  revised  demand  issued  by  the  Deputy  Director  confirming  the

original demand and the appellant was directed to pay the balance amount.

Writ  Petition  was  filed  before  the  High Court  challenging  the revisional

order.   The  High  Court  by  its  order  dated  20.7.2001  allowed  the  writ

petition  at  the  admission  stage  holding  that  the  order  of  the  State

Government is misconceived and unsustainable on account of having been

issued  without  any notice  to  the  affected  persons.   However,  leave  was

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granted to the Government to initiate fresh proceedings if so desired and if

so permitted by law after giving notice and opportunity to the appropriate

parties. Notices were issued to all the sub- contractors and after hearing the

parties  the  order  impugned  before  the  High  Court  was  passed.   Again

challenge was made before the High Court.

5. The first stand was that the Government ought not to have passed the

impugned  order  clubbing  the  companies  with  the  other  sub  contractors

inasmuch as demands raised by the Deputy Director in respect of each party

were totally different. Quantity and the nature of materials supplied by each

of them and the sources were different and merits of each case was to be

gone into separately and it was also submitted that the order of the State

Government  was  passed  on surmises  and assumptions  and indicated  non

application of mind.  

6. It  was also  submitted  that  seigniorage fee  on  the  total  quantity  of

earth materials supplied by the company was levied in utter disregard of the

analyst report of the material and without any authority to do so. Finally, it

was submitted that copy of the report submitted by the Deputy Director of

Mines and Geology who was purportedly instructed to inspect the area to

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ascertain the nomenclature of the materials supplied by the sub contractors

to the BHEL was not at point of time supplied to the affected parties. It was

submitted that the Government could not have ignored the test and analyst

report of the Department of Civil Engineering and Soil Mechanics Division

of Andhra Pradesh University which was a relevant piece of evidence.  A

detailed counter affidavit was filed on behalf of the Joint Director of Mines

and Geology, Department of Mines and Geology, Hyderabad. Allegations

were disputed. The High Court observed that the Deputy Director of Mines

and Geology had played havoc in  the matter.  He had been placed under

suspension. He was found guilty of the charges in the matter of short levy

and collection of seigniorage fee. Various charges were framed against him

and the enquiry officer appointed has submitted his report upholding him

guilty of several charges.  

7. The High Court came to hold that the plea of the Government that

said officer had acted in collusion with the appellant was not without any

basis.  The High Court also observed that in reply to the show cause notice

BHEL had furnished a list of five sub-contractors who were entrusted with

the levelling work. In reply it was stated that the agency had paid certain

amounts towards seigniorage fee for the quantities burrowed from the foot

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of the hills. It was further submitted that in line with the provisions of the

contract  the  agencies  are  under  obligation  to  accept  and  deal  with  the

mining department directly. It was therefore the stand of BHEL that it had

no mens rea and had always made conscious effort to   ensure payment of

seigniorage fee by the agencies.   

8. It  was  stated that  BHEL was under  the impression  that  the  matter

would have been decided upon as the department had inspected the sources

presumably in the presence of agencies as agreed in the meeting held on

4.9.1999.

9. In the counter-affidavit it was also submitted that the appellants had

failed to produce documentary evidence. The Deputy Director had acted on

the basis of information furnished by BHEL. The High Court  referred to

BHEL’s  letter  dated  8.3.2000  whereby  the  details  of  total  quantities  of

filling materials supplied by sub contractors were furnished. According to

the data,  various  mines  had been supplied  as  filling materials.  The High

Court noticed that there was no evidence to show that seigniorage fee had

been paid in respect of filling material.  

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10. According  to  the  High  Court  the  main  question  that  arose  for

consideration  was the nature  of  the  soil  utilized  by the appellants  in  the

levelling and grading work undertaken by them under the agreement with

BHEL.

11. Stand of the appellants was that the bulk of the materials used by the

appellants-companies was earth and the same was not subject to seigniorage

fee.  It  was therefore  contended  that  the initiation  of  suo motu revisional

power and the orders passed are illegal as the order ignored the materials

available on record.  

12. It was pointed out that what was supplied was gravel from the quarry

and the ordinary earth from the patta land and therefore the argument that

the total material received by BHEL was partly gravel from sources of foot

hills and partly ordinary clay from the tank beds and, therefore, the material

is subject to seigniorage fee was vitiated for the reason that there was no

material supplied by one of the appellants i.e.  M/s Nagarjuna Construction

Co. Ltd. from the foothills and the tank bed lands.

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13. The State’s stand as highlighted before the High Court was about the

so-called  collusion  between  the  concerned  Deputy  Director  and  the

appellants and his giving No Objection for the release of the amounts by

BHEL. The High Court referred to para 3.03.01 of the specifications of the

contract. We will deal with this aspect later.

14. The High Court primarily focused on the role allegedly played by the

concerned Deputy Director. It was observed that no permission was taken

by any of the appellants to quarry mining as required under law and they

had also not  made available  the details  of  purchase and lease of  private

lands for the purpose of excavation of materials. It did not accept the stand

that what was utilized was only earth material for filling purpose and the

same was not subject to seigniorage fee.  The High Court observed that this

version  of  the  appellants  cannot  be  accepted  as  a  gospel  truth  and  the

conduct of the appellants showed that they were playing hide and seek with

the statutory authorities.  

15. The  High  Court  noted  objection  of  appellants  that  the  inspection

report was not made available either by the Department or the Government

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as to enable the appellant to file its objections. It rejected the plea with the

following observations:  

“However,  it  is  urged  that  the  said  inspection report is not made available either by the Department or the Government so as to enable the petitioner-company to file its objections. The petitioner-company admittedly supplied some quantity of gravel also. The source from whom the gravel  is purchased and the details of transit waybills are not furnished by the petitioner-company at any point of time. No efforts ever have been made by the petitioner-company to identify and reveal the source of supply of material  consumed and utilized by it  for  the purpose  of  filling  in  fulfillment  of  its  contractual obligation.  Everything  is  shrouded  in  mystery.  Neither the  petitioner-company  nor  the  other  sub  contractors responded to the repeated queries of the department. The record  contains  the  inspection  notes  of  the  sites  from where  the  petitioner-company  excavated  the  material. The memorandum of grounds, which has been treated as an explanation, does not contain any objection as to the non supply of the inspection report. There is no plea of any  prejudice  having  been  caused  on  account  of  non supply of  the  said  inspection  notes.  It  is  not  as  if  the petitioner-company  demanded  for  the  inspection  notes during the hearing of the revision and the Government failed to  furnish the  same. In  the absence of any such plea  and  demonstration  of  any  prejudice  having  been caused on account of non supply of the inspection notes the impugned order cannot be set aside on that score.”

16. The High Court also did not find any substance in the plea relating to

non consideration of the test and analysis report of the Civil Engineering

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Department  of  Andhra  University.  It  was  held  that  it  was  a  self  service

devise  adopted  by  the  appellant.  Therefore,  it  was  held  that  since  the

Government  had  arrived  at  to  its  decision  after  hearing  the  parties  no

interference is called for.

17. So far as the question of penalty is concerned, it was held that though

mens rea is an essential ingredient but the fatual position left no manner of

doubt that the appellant was not acting bona fide. The High Court did not

also attach importance to the stand taken by the Department in the earlier

writ petitions. Accordingly, all the writ petitions were dismissed.  

18. The  basic  stand  of  the  appellants  in  the  appeals  is  that  the  basic

principles of natural justice have not been followed in the present case. The

authorities have acted on certain materials which were collected behind the

back of the appellants and the reports submitted by certain authorities.  The

High Court’s  conclusion  that  no  prejudice  was  caused  by non  supply is

really a conclusion without any foundation. Finally, in view of the accepted

stand of the State Government in the earlier writ petitions it would not be

open for the State Government to take diametrically opposite stand to levy

the seigniorage fee. It was also submitted that the report of the Department

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of  Civil  Engineering  of  Andhra  Pradesh  University  was  obtained  by

Governmental  authorities.  The  High  Court  should  not  have  accepted  the

stand  of  the  State  Government  as  to  why  the  report  was  not  to  be

considered. It was also pointed out that the portion of the contract as quoted

by the High Court was incomplete.  Therefore, it was submitted that view of

the High Court is clearly unsustainable.  

19. Reference  was  also  made  to  the  judgment  dated  3.3.1999  in  Writ

Petition Nos. 1990, 2271 and 2741 of 1999 filed by the appellant where it

was held as follows:

“the power to collect seigniorage fee at the rates mentioned in Schedule I read with Rule 10 is subject to filling  material  being  declared  as  minor  mineral  under Section 3(c)  as the fact that earth is a “filling material” cannot   be  disputed.  As  the  State  Government  under Section 15 has the power to levy fee in respect  of the minor  mineral  as  declared  by the  Central  Government under  Section  3(c)  by  a  notification  published  in  the official gazette, and since no proceeding is placed before me  declaring  Earth  as  minor  mineral  by  the  Central Government  by a  notification  published  in  the  official gazette, and in the absence of a notification issued by the Central  Government  declaring  earth  as  minor  mineral, the  State  Government  is  not  competent  to  collect seigniorage fee under Rule 10 read with Schedule 1”.  

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20. The  Central  Government  by  Notification  No.GSR  No.95(E)  dated

3.2.2000  had notified the earth as a minor mineral and has enabled the State

Government  to levy seigniorage fee under Rule 10 of the Rules on earth

also.  The  schedule  was  amended  and  the  entry  was  re-numbered  in  the

following manner:

“Item 8:  Morram/Gravel-Rs.13-(Rupees  thirteen) per cubic meter”.

21. The  High  Court  noted  that  since  the  amendment  came  after  the

contract period was over, it was really of no consequence.  

22. It, however, accepted the stand of the State Government that only that

ordinary earth which does not contain any mineral content whatsoever alone

was exempted from payment of   seigniorage fee and there is hardly any

earth which does not contain fine particles or other minerals in respect of

which seigniorage fee is liable to be charged.  

23. Learned  counsel  for  the  State,  on  the  other  hand,  supported  the

judgment of the High Court and stated that the conduct of the appellants

disentitled them from getting inequitable relief. Further more, there was no

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foundation  in  the plea that  what  the  State Government  had stated  earlier

would act as an estoppel.  

24. We shall first deal with the plea relating to incorrect reflection of the

conditions in the contract.  The High Court has referred to para 3.03.01 of

the specifications of the contract. It reads as follows:

“The  material  used  for  constructing  the embankment by earth filling shall be Morram, Gravel, a mixture of these or any other material approved by the Engineer.”

25. This is not the correct quotation. In the instant case the expression

“earth” is missing. The actual clause reads as follows:

“The material  used for  constructing embankment by  earth  filling  shall  be  earth,  morrum,  gravel  and mixture of these or any other material approved by the engineers.   The  materials  shall  be  free  from  lumps, clouds,  boulders  or  rock  pieces  roots  and  vegetations, harmful salts  and chemicals,  organic material,  silt,  fine sand  expansive  clays  in  order  to  provide  stable embankment.  Further,  in  the  said  specification,  it  is clearly mentioned that the material for embankment shall be  as  obtained  from  a  particular  source  with  the preference  given  to  material  becoming  available  from nearby road excavation under the same contract or any other excavation under the same contract.”

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26. Additionally, it is noticed the High Court has relied on certain records

which purportedly contain the inspection notes of the sites from where the

appellants had excavated the material.  It is to be noted that for the first time

before the High Court these records were produced.   Since there was no

reference to the so called inspection notes at any point of time the question

of the appellant pleading prejudice because of non-supply of the same does

not  arise.   The  High  Court  observed  that  since  the  appellant  had  not

demanded for the inspection notes during hearing of the revision there was

no question of any prejudice. The approach is clearly wrong.  At no point of

time, not even at the time of hearing of revision petition or in the revisional

order there is any reference to the so called inspection notes.  Added to that,

the  High  Court  did  not  consider  the  effect  of  the  stand  taken  by  the

Government earlier.   

27. In the earlier round of proceedings the respondents had categorically

admitted that  the appellants  utilized earth  only as  filling material.  In the

additional  counter-affidavit  filed  by the  Joint  Secretary  of  Mines,  in  the

present case it was explained that in the counter affidavit  filed on behalf of

the  respondents  dated  18.2.1999  in  Writ  Petition  No.1990/99,  the  then

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Assistant  Director  made a  statement  that  the  excavated  material  is  earth

which is also liable to levy seigniorage fee.  This was a mistake.  By the

time  the  counter-affidavit  was  filed,  the  Department  had  no  precise

knowledge of the locations where excavation was going on or the nature of

the soil  which was being excavated.  It  was much later i.e.  in December,

1999  pursuant  to  a  meeting  between  the  various  contractors  and  the

concerned officials during which it was decided that the locations should be

disclosed  to  the  Department.  Then  the  Deputy  Director  and  Assistant

Director inspected the areas and opined that the excavated material was not

simply earth but gravel and clay. The High Court found the explanation to

be convincing.  What the High Court seems to have overlooked is that there

was a specific admission in the earlier cases. It is also not borne out from

the records as to when the so called inspection notes of the Deputy Director

and  the  Assistant  Director  were  made and  what  was  the  nature  of  their

report. The High Court’s  observation that the counter affidavit earlier was

on account of inadvertence is without  any basis.  The observations of the

High  Court  that  there  was  no  question  of  sending  the  samples  to  the

Department of Civil Engineering are also unsustainable. As a matter of fact

it is not a case that the appellants themselves had sent the samples. In fact,

the samples were sent by the Department apart from the samples being sent

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by the appellants.   The High Court’s observations  that  they were rightly

ignored by Government do not stand to reason. The report was available on

record and was not by an ordinary authority, and was by the Department of

Andhra Pradesh University.  

28. The High Court did not accept the view expressed by a learned Single

Judge while disposing of writ petition No.4579 of 2001 filed by one of the

sub  contractors  M/s  Gayatri  Projects  Ltd.  Though  that  order  was  not

challenged by the Department, the Division Bench thought that the decision

was not proper.  In any event, that question is of no relevance in the present

case. The High Court rightly observed that since the amendments referred

to, were introduced after the expiry of the contract period they were really

of non consequence.  

29. Looked  at  from  any  angle  the  judgment  of  the  High  Court  is

unsustainable.  

30. The basic principles of natural justice seem to have been disregarded

by the  State  Government  while  revising  the  order.  It  acted  on  materials

which were not supplied to the appellants. Additionally the High Court for

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the first time made reference to the report/inspection notes which was not

even referred to by the State Government while exercising revisional power.

31. The  obligation  to  act  fairly  on  the  part  of  the  administrative

authorities was evolved to ensure the rule of law and to prevent failure of

justice. This doctrine is complementary to the principles of natural justice

which the quasi-judicial authorities are bound to observe. It is true that the

distinction  between  a  quasi-judicial  and  the  administrative  action  has

become thin,  as  pointed  out  by this  Court  as  far  back  as  1970  in  A.K.

Kraipak v.  Union  of  India  (1969  (2)  SCC  262).  Even  so  the  extent  of

judicial scrutiny/judicial review in the case of administrative action cannot

be larger than in the case of quasi-judicial action. If the High Court cannot

sit as an Appellate Authority over the decisions and orders of quasi-judicial

authorities,  it  follows  equally  that  it  cannot  do  so  in  the  case  of

administrative authorities. In the matter of administrative action, it is well

known, more than one choice is available to the administrative authorities;

they have a certain amount of discretion available to them. They have “a

right to choose between more than one possible course of action on which

there is room for reasonable people to hold differing opinions as to which is

to be preferred” (as per Lord Diplock in  Secy. of State for Education and

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Science v. Metropolitan Borough Council of Tameside, 1976(3) All ER 665

at pp.695f).  The court cannot substitute its  judgment for the judgment of

administrative  authorities  in  such  cases.  Only  when  the  action  of  the

administrative  authority  is  so  unfair  or  unreasonable  that  no  reasonable

person would have taken that action, can the court intervene. To quote the

classic  passage  from the  judgment  of  Lord  Greene,  M.R.  in  Associated

Provincial Picture Houses Ltd. v. Wednesbury Corpn: (1947 (2) all All ER

pp.682H-683A)

“It is  true the discretion must  be exercised reasonably. Now what  does  that  mean?  Lawyers  familiar  with  the phraseology  commonly  used  in  relation  to  exercise  of statutory discretions often use the word ‘unreasonable’ in a  rather  comprehensive  sense.  It  has  frequently  been used and is frequently used as a general description of the things that must not be done. For instance, a person entrusted  with  the  discretion  must,  so  to  speak,  direct himself properly in law. He must call his own attention to the matters which he is  bound to consider. He must exclude  from  his  consideration  matters  which  are irrelevant to what he has to consider. If he does not obey those rules, he may truly be said, and often is said, to be acting ‘unreasonably’. Similarly, there may be something so absurd that no sensible person could ever dream that it lay within the powers of the authority.”

32. The  conclusions  regarding  absence  of  prejudice  are,  therefore,  not

sustainable.  

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33. Natural  justice  is  another  name for  commonsense  justice.  Rules  of

natural justice are not codified canons. But they are principles ingrained into

the conscience of man. Natural justice is the administration of justice in a

commonsense liberal  way. Justice is  based substantially on natural ideals

and human values.  The administration  of  justice  is  to  be  freed  from the

narrow and restricted  considerations  which  are  usually  associated  with  a

formulated law involving linguistic technicalities and grammatical niceties.

It is the substance of justice which has to determine its form.  

34. The expressions “natural justice” and “legal justice” do not present a

water-tight  classification.  It  is  the  substance  of  justice  which  is  to  be

secured  by both,  and whenever  legal  justice  fails  to  achieve  this  solemn

purpose,  natural  justice  is  called  in  aid  of  legal  justice.  Natural  justice

relieves legal justice from unnecessary technicality, grammatical  pedantry

or logical prevarication. It supplies the omissions of a formulated law. As

Lord Buckmaster said, no form or procedure should ever be permitted to

exclude the presentation of a litigants’ defence.  

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35. The adherence  to  principles  of  natural  justice  as recognized  by all

civilized  States  is  of  supreme  importance  when  a  quasi-judicial  body

embarks on determining disputes between the parties, or any administrative

action involving civil  consequences  is in issue. These principles  are well

settled. The first and foremost principle is what is commonly known as audi

alteram partem rule.  It  says  that  no  one  should  be  condemned  unheard.

Notice  is  the  first  limb  of  this  principle.  It  must  be  precise  and

unambiguous. It should appraise the party determinatively the case he has to

meet. Time given for the purpose should be adequate so as to enable him to

make his representation. In the absence of a notice of the kind and such

reasonable opportunity, the order passed becomes wholly vitiated. Thus, it

is but essential that a party should be put on notice of the case before any

adverse  order  is  passed  against  him.  This  is  one  of  the  most  important

principles of natural justice. It is after all an approved rule of fair play. The

concept  has gained significance and shades with time. When the historic

document was made at Runnymede in 1215, the first statutory recognition

of  this  principle  found  its  way  into  the  “Magna  Carta”.  The  classic

exposition  of  Sir  Edward  Coke  of  natural  justice  requires  to  “vocate

interrogate and adjudicate”. In the celebrated case of Cooper v. Wandsworth

Board of Works (1963 (143) ER 414), the principle was thus stated:

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“Even God did not pass a sentence upon Adam, before he was called upon to make his defence. “Adam” says God, “where art thou has thou not eaten of the tree whereof I commanded thee that though should not eat”.

Since then the principle has been chiselled, honed and refined, enriching its

content. Judicial treatment has added light and luminosity to the concept,

like polishing of a diamond.  

36. Principles  of  natural  justice  are  those  rules  which  have  been  laid

down by the Courts as being the minimum protection of the rights of the

individual against the arbitrary procedure that may be adopted by a judicial,

quasi-judicial and administrative authority while making an order affecting

those rights. These rules are intended to prevent such authority from doing

injustice.  

37. What is meant by the term ‘principles of natural justice’ is not easy to

determine. Lord Summer (then Hamilton, L.J.) in Ray v. Local Government

Board (1914) 1 KB 160 at p.199:83 LJKB 86) described the phrase as sadly

lacking  in  precision.  In  General  Council  of  Medical Education  &

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Registration of U.K. v.  Sanckman (1943 AC 627: (1948) 2 All ER 337),

Lord Wright observed that it was not desirable to attempt ‘to force it into

any procusteam bed’ and mentioned that one essential requirement was that

the  Tribunal  should  be  impartial  and  have  no  personal  interest  in  the

controversy, and further that it should give ‘a full and fair opportunity’ to

every party of being heard.  

38. Lord Wright referred to the leading cases on the subject. The most

important of them is the Board of Education v. Rice (1911 AC 179:80 LJKB

796), where Lord Loreburn, L.C. observed as follows:

“Comparatively recent statutes have extended, if they  have  originated,  the  practice  of  imposing  upon departments or offices of State the duty of deciding or determining  questions  of  various  kinds.  It  will,  I suppose  usually  be  of  an  administrative  kind,  but sometimes,  it  will  involve  matter  of  law  as  well  as matter of fact, or even depend upon matter of law alone. In  such  cases,  the  Board  of  Education  will  have  to ascertain the law and also to ascertain the facts. I need not and that in doing either they must act in good faith and fairly listen to both sides for that  is  a duty lying upon everyone who decides anything. But I do not think they are bound to treat such a question as though it were a  trial....The  Board  is  in  the  nature  of  the  arbitral tribunal, and a Court of law has no jurisdiction to hear appeals from the determination either upon law or upon fact. But if the Court is satisfied either that the Board have not acted judicially in the way I have described, or have  not  determined  the  question  which  they  are

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required by the Act to determine, then there is a remedy by mandamus and certiorari”.    

Lord Wright also emphasized from the same decision the observation of the

Lord  Chancellor  that  the  Board  can  obtain  information  in  any way they

think best, always giving a fair opportunity to those who are parties to the

controversy  for  correcting  or  contradicting  any  relevant  statement

prejudicial to their view”. To the same effect are the observations of Earl of

Selbourne, LO in  Spackman v.  Plumstead District Board of Works (1985

(10) AC 229:54 LJMC 81), where the learned and noble Lord Chancellor

observed as follows:

“No doubt, in the absence of special provisions as to how the person who is to decide is to proceed, law will  imply  no  more  than  that  the  substantial requirements of justice shall not be violated. He is not a judge in the proper sense of the word; but he must give the  parties  an  opportunity  of  being  heard  before  him and  stating  their  case  and  their  view.  He  must  give notice  when  he  will  proceed  with  the  matter  and  he must  act  honestly  and  impartially  and  not  under  the dictation of some other person or persons to whom the authority  is  not  given  by  law.  There  must  be  no malversation of any kind.  There would be no decision within the meaning of the statute if there were anything of that sort done contrary to the essence of justice”.

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Lord Selbourne also added that the essence of justice consisted in requiring

that all parties should have an opportunity of submitting to the person by

whose  decision  they  are  to  be  bound,  such  considerations  as  in  their

judgment ought to be brought before him. All these cases lay down the very

important rule of natural justice contained in the oft-quoted phrase ‘justice

should not only be done, but should be seen to be done’.  

39. Concept  of natural justice has undergone a great deal of change in

recent  years.  Rules  of  natural  justice  are  not  rules  embodied  always

expressly in a statute or in rules framed thereunder. They may be implied

from the nature of the duty to be performed under a statute. What particular

rule of natural justice should be implied and what its context should be in a

given case must depend to a great extent on the fact and circumstances of

that case, the frame-work of the statute under which the enquiry is held. The

old distinction between a judicial act and an administrative act has withered

away. Even an administrative order which involves civil consequences must

be  consistent  with  the  rules  of  natural  justice.  Expression  ‘civil

consequences’  encompasses infraction of not  merely property or personal

rights  but  of  civil  liberties,  material  deprivations,  and  non-pecuniary

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damages. In its wide umbrella comes everything that affects a citizen in his

civil life.  

40. Natural justice has been variously defined by different Judges. A few

instances  will  suffice.  In  Drew v.  Drew and Lebura (1855(2) Macg. 1.8,

Lord Cranworth defined it as ‘universal justice’.  In James Dunber Smith v.

Her  Majesty the Queen (1877-78(3) App.Case 614, 623 JC) Sir Robort P.

Collier,  speaking  for  the  judicial  committee  of  Privy  council,  used  the

phrase  ‘the  requirements  of  substantial  justice’,  while  in  Arthur  John

Specman v.  Plumstead District  Board of  Works (1884-85(10)  App.  Case

229,  240),  Earl  of  Selbourne,  S.C.  preferred  the  phrase  ‘the  substantial

requirement of justice’. In Vionet v. Barrett (1885(55) LJRD 39, 41), Lord

Esher, MR defined natural justice as ‘the natural sense of what is right and

wrong’. While, however, deciding Hookings v.  Smethwick Local Board of

Health (1890  (24)  QBD  712),  Lord  Fasher,  M.R.  instead  of  using  the

definition  given  earlier  by  him in  Vionet’s case  (supra)  chose  to  define

natural justice as ‘fundamental justice’. In  Ridge v.  Baldwin (1963(1) WB

569, 578), Harman LJ, in the Court of Appeal countered natural justice with

‘fair-play in action’ a phrase favoured by Bhagawati, J. in Maneka Gandhi

v.  Union of  India (1978  (2)  SCR 621).  In  re  R.N. (An Infaot) (1967(2)

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B617, 530), Lord Parker, CJ, preferred to describe natural justice as ‘a duty

to  act  fairly’.  In  fairmount Investments  Ltd.  v.  Secretary  to  State  for

Environment (1976  WLR  1255)  Lord  Russell  of  Willowan  somewhat

picturesquely described natural justice as ‘a fair crack of the whip’ while

Geoffrey Lane,  LJ.  In  Regina v.  Secretary of  State  for Home Affairs  Ex

Parte Hosenball (1977 (1) WLR 766) preferred the homely phrase ‘common

fairness’.  

41. How then have the principles of natural justice been interpreted in the

Courts and within what limits are they to be confined? Over the years by a

process  of  judicial  interpretation  two  rules  have  been  evolved  as

representing the principles of natural justice in judicial process, including

therein quasi-judicial and administrative process. They constitute the basic

elements of a fair hearing, having their roots in the innate sense of man for

fair-play  and  justice  which  is  not  the  preserve  of  any particular  race  or

country but is shared in common by all men. The first rule is ‘nemo judex in

causa  sua’  or  ‘nemo debet  esse  judex  in  propria  causa  sua’  as  stated  in

(1605) 12 Co.Rep.114 that is, ‘no man shall be a judge in his own cause’.

Coke used the form ‘aliquis non debet esse judex in propria causa quia non

potest esse judex at pars’ (Co. Litt. 1418), that is, ‘no man ought to be a

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judge in his own case, because he cannot act as Judge and at the same time

be a party’. The form ‘nemo potest esse simul actor et judex’, that is, ‘no

one can be at once suitor and judge’ is also at times used.  The second rule

is  ‘audi  alteram  partem’,  that  is,  ‘hear  the  other  side’.  At  times  and

particularly  in  continental  countries,  the  form ‘audietur  at  altera  pars’  is

used,  meaning very much the same thing.  A corollary has been deduced

from the  above  two  rules  and  particularly  the  audi  alteram partem rule,

namely ‘qui  aliquid  statuerit  parte  inaudita  alteram actquam licet  dixerit,

haud  acquum facerit’  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’ (See Bosewell’s case (1605) 6 Co.Rep. 48-b,

52-a) or in other words, as it is now expressed, ‘justice should not only be

done but should manifestly be seen to be done’. Whenever an order is struck

down as invalid being in violation of principles of natural justice, there is no

final decision of the case and fresh proceedings are left upon.  All that is

done is to vacate the order assailed by virtue of its inherent defect, but the

proceedings are not terminated.    

42. We, therefore, set aside the impugned order of the High Court. The

matter is remitted to the State Government to re-consider the matter after

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supplying to the appellants copies of reports/inspection notes on which the

Department case rests.  It  shall  also consider  the effect  of  the concession

made by the  Department  in  the  earlier  rounds  of  proceedings  before  the

High Court.  

43. The appeals are allowed but without any order as to costs.  

…….............................J. (Dr. ARIJIT PASAYAT)

.…….............................J. (P. SATHASIVAM)

New Delhi, October 20, 2008    

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