Partly allowed

Water Millers Power Company Pvt.Ltd v. State

Himachal Pradesh HC11 Sept 2017CWP/7316/2012

Case brief

AI extract

What is this about?

The High Court, on a writ petition challenging the cancellation of a small hydroelectric project allotment, held that the respondent authorities acted arbitrarily by passing the termination order without affording the petitioner a hearing. The court emphasized the necessity of fairness in administrative proceedings.

What did the court decide?

The Cabinet decision dated 30.4.2012 and the Termination Order dated 13.08.2012 are quashed and set aside; the matter is allowed to be considered afresh in accordance with law.

Water Millers Power Company Pvt.Ltd Vs State — Writ and Judicial Review | Himachal Pradesh HC (2017)

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IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA

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CWP No. 7316 of 2012

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Date of decision: 11.09. 2017

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Water Millers Power Company Pvt. Ltd. ...Petitioner

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Versus

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State of H.P. & Ors. …Respondents

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Coram

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The Hon’ble Mr. Justice Tarlok Singh Chauhan, Judge.

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Whether approved for reporting?¹ No.

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For the petitioner : Mr. Sunil Mohan Goel, Advocate.

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For the respondents : Ms. Meenakshi Sharma, Addl. A.G. with Mr. Neeraj K. Sharma, Dy. A.G. for respondent No. 1.

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Mr. Vijay Arora, Advocate, for respondent No. 2.

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Mr. G.D. Verma, Sr. Advocate, with Mr. B.C. Verma, Advocate, for respondents No. 3 to 7.

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Tarlok Singh Chauhan, Judge (Oral)

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This writ petition has been filed for the following

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substantive prayers:-

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“a) That this Hon’ble Court may be pleased to issue a writ of Certiorari quashing Termination Order dated 13.8.2012 appended with the petition as Annexure P-14, vide which the respondent State has cancelled the allotment of Chorr (1MW) Small Hydro

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Whether the reporters of the local papers may be allowed to see the Judgment?yes.

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Electric Project in District Kullu which was allotted in favour of the petitioner company and has also terminated Implementation Agreement signed on 25.7.2006.

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b) This Hon’ble Court may be pleased to issue a writ of mandamus directing the Respondents to allow the petitioner Company to implement Chorr (1MW) Small Hydro Electric Project in District Kullu which was allotted in favour of the petitioner company vide Implementation Agreement signed on 25.7.2006 as per the provisions of Implementation Agreement signed on 25.7.2006.”

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A memorandum of understanding was entered into between the Petitioner and the Government of India on 13.06.2006 for setting up 1 MW Beas Chhor Small Hydro Power Project in Tehsil Manali, District Kullu. Consequent thereupon, Implementation Agreement was entered between the Petitioner and the State on 25.07.2006.

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As certain persons had started causing interference in the construction work being carried out by the petitioner, it constrained the petitioner to file a suit in the Court of learned District Judge against such an illegal interference and the Court gave interim protection to the petitioner company.

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However, on 8.11.2011, the HIMURJA i.e. respondent No. 2 directed the petitioner company to stop its construction activities and further directed it to hold meeting with the elected representatives and community leaders to settle the issue. Similar instructions were issued by SDM (Civil), Manali vide his letter dated

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18.11.2011 and thereafter by the Deputy Commissioner, Kullu, vide letter dated 30.11.2011. This constrained the petitioner to file CWP No. 10885 of 2011, wherein the aforesaid orders dated 8.11.2011 and 18.11.2011 were stayed by this Court.

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Later, it appears that the Cabinet vide its decision dated 30.4.2012 approved the cancellation of the Hydro Project allotted in favour of the petitioner though no such decision was conveyed to the petitioner at that time. However, surprisingly the petitioner was thereafter served with Show Cause Notice dated 24.5.2012 calling upon it to Show Cause why the Implementation Agreement signed on 25.7.2006 between the State and the Petitioner Company for the Project in question be not cancelled for failing to comply with the obligation assigned as per clause (4) of the Implementation Agreement.

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However, subsequently the petitioner was issued Termination Order dated 13.8.2012 vide which the respondent has cancelled the allotment made in favour of the petitioner.

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Evidently, the Cabinet had already approved the cancellation of the Project granted in favour of the petitioner and therefore, the Show Cause Notice issued to the petitioner was merely an empty formality, as the State being the highest authority, left no discretion or scope of adjudication with any of the authority

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of the State to take any other decision save and except to cancel the allotment made in favour of the petitioner.

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It is evidently clear that no opportunity was afforded by the respondents before the Cabinet approved the cancellation of the Project granted in favour of the petitioner and obviously, therefore, the principles of natural justice have been violated. It is well established principle of law that an order made effecting the interest of persons which results in civil consequences, the person effected is required to be heard before passing such an order.

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That apart the non-observance of natural justice is itself prejudice to any man and proof of prejudice independently of proof of denial of natural justice is unnecessary. It is here then that the action of the respondent is required to be tested on the touchstone of justice, equity, fair play and in case its decision is not based on justice, equity and fair play and has been taken after taking into consideration other material, then even though on the face of it, the decision may look to the legitimate, but as a matter of fact the reasons are not based on values but on extraneous consideration that decision cannot be allowed to stand.

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In this connection, the decision in S. L. Kapoor vs.

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Jagmohan, AIR 1981 SC 136 is relevant for our purpose. In paragraph 16 of the judgment, their Lordships have held as follows:-

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".....In our view, the requirements of natural justice are met only if opportunity to represent is given in view of proposed action. The demands of natural justice are not met even if the very person proceeded against has furnished the information on which the action is based if it is furnished in a casual way or for some other purpose. We do not suggest the opportunity need be a 'double opportunity' that is one opportunity on the factual allegations and another on the proposed penalty. Both may be rolled into one. But the person proceeded against must know that he is being required to meet the allegations which might lead to a certain action being taken against him. If that is made known the requirements are met. ..."

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(Emphasis added)

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…….In our view the principles of natural justice know of no exclusionary rule dependent on whether it would have made any difference if natural justice had been observed. The nonobservance of natural justice is itself prejudice to any man and proof of prejudice independently of proof of denial of natural justice is unnecessary. It ill comes from a person who has denied justice that the person who has been denied justice is not prejudiced. As we said earlier where on the admitted or indisputable facts only one conclusion is possible and under the law only one penalty is permissible, the court may not issue its writ to compel the observance of natural justice, not because it is not necessary to observe natural justice but because courts do not issue futile writs. We do not agree with the contrary view taken by the Delhi High Court in the judgment under appeal."

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(Emphasis supplied)

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In Wade & Forsyth -- 'Administrative law', the learned

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Authors have said thus :-

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"A proper hearing must always include a 'fair opportunity to those who are parties in the controversy for correcting or contradicting anything prejudicial to their view'. Lord Denning has added :

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'If the right to be heard is to be a real right which is worth anything, it must carry with it a right in the accused man to know the case which is made against him. He must know what evidence has been given and what statements have been made affecting him: and then he must be given a fair opportunity to correct or contradict them.' ...."

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(Emphasis supplied)

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12 . In De Smith, Woolf and Jowell’s --Judicial Review of

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Administrative Action, under the caption ‘Duty of adequate disclosure', it is said thus :-

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"If prejudicial allegations are to be made against a person, he must normally, as we have seen, be given particulars of them before the hearing so that he can prepare his answers. In order to protect his interests he must also be enabled to controvert, correct or comment on other evidence or information that may be relevant to the decision; indeed, at least in some circumstances [here will be a duty on the decision maker to disclose information favourable to the applicant, as well as information prejudicial to his case. If material is available before the hearing, the right course will usually be to give him advance notification; .....

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If relevant evidential material is not disclosed at all to a party who is potentially prejudiced by it, there is prima facie unfairness, irrespective of whether the material in question arose before, during or after the hearing. ,, .. ..."

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The Principal that justice must not only be done but it

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must manifestly appear to have been done is equally

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applicable to the administrative proceedings, in such a proceeding has to inspire confidence in the mind of those who are subjects to it.

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In Management of M/s M.S. Nally Bharat Engineering Co. Ltd. vs. State of Bihar and others, (1990) 2 SCC 48 , the Hon’ble Supreme Court observed that it is a fundamental principle of good administration showing that justice not only done but seen to have been done. It was further manifested that the action should be fair so as to eliminate the element of arbitrariness. The State functionaries must act fairly and reasonably. It is apt to reproduce the relevant observations, which reads thus:-

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“[13] What is thus important in the modern administration is the fairness of procedure with elimination of element of arbitrariness. The State functionaries must act fairly and reasonably. That is, however, not the same thing to state that they must act judicially or quasi-judicially. In Keshav Mills Co. Ltd. v. Union of India (1973) 1 SCC 380 Mukherjea, J. said

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"The administrative authority concerned should act fairly, impartially and reasonably. Where administrative officers are con- cerned, the duty is not so much to act judicially as to act fairly. "

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[14] The procedural standards which are implied by the duty to act fairly has been explained by Lord Pearson in Peartberg v. Varty (1972) 1 WLR 534, 547 .

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"A tribunal to whom judicial or quasi-judicial functions are entrusted is held to be required to apply those principles (i. e. the rules of natural justice) in performing those functions unless there is a provisions to the contrary. But where some person or body is entrusted by Parliament with administrative or executive functions there is no presumption that compliance with the principles of natural justice is required although, as 'parliament is not to be presumed to act unfairly', the courts may be able in suitable cases (perhaps always) to imply an obligation to act with fairness. "

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[15] In Mohinder Singh Gill v. Chief Election Commissioner(1978) 1 scc 478, Krishna lyer, J. commented that natural justice though varying is the soul of the rule as fair play in action. It extends to both the Fields of judicial and administrative. The administrative power in a democratic set up is not allergic to fairness in action and discretionary executive justice cannot degenerate into unilateral injustice. Good administration demands fair play in action and this simple desideratum is the fount of natural justice. Fiarness is flexible and it is intended for improving the quality of government by injecting fair play into its wheels.

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[16] In Maneka Gandhi v. Union of India (178) 1 SCC 248, Bhagwati, J. , expressed similar thought that audi alteram partem is a highly effective rule devised by the courts to ensure that a statutory authority arrives at a just decision and it is calculated to act as a healthy check on the abuse or misuse of power.

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[17] In Swadeshi Cotton Mills v. Union of India (1981) 1 scc 664, Sarkaria, J., speaking for himself and Desai, J" said that irrespective of whether the power conferred on a statutory body or tribunal is administrative or quasI Judicial, a duty to act fairly, that is, in consonance with the fundamental principles of substantive justice is generally implied. The presumption is that in a democractic polity wedded to the rule of law, the State or the legislature does not intend that in the exercise of their statutory powers its functionaries should act unfairly or unjustly. In the same case, Chinnappa Reddy, J" added that the principles of natural justice are now considered so fundamental as to be 'implicit in the

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concept of ordered liberty'. They are, therefore, implicit in every decision making function, call it judicial, quasi-judicial or administrative. The learned Judge went on to state that where the statute is silent about the observance of the principles of natural justice, such statutory silence is taken to imply compliance with the principles of natural justice. The implication of natural justice being presumptive, it should be followed by the authorities unless it is excluded by express words of statute or by necessary implication.

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[18] Citations could be multiplied since there is fairly abundant case law which has come into existence : See, for example , E. P. Royappa v. State of Tamil Nada (1974) 4 SCC 3, and Union of India v. Tulsiram Patel (1985) 3 SCC 398 . More recently in a significant judgment in Charan Lal Sahu v. Union of India (1990) 1 SCC 613finding learned chief justice Sabyasachi Mukharji has referred to almost all the authorities of this court on this aspect and emphasized that the principles of natural justice are fundamental in the constitutional set up of this country. No man or no mans right should be affected without an opportunity to ventilate his views. Justice is a psychological yearning, in which men seek acceptance of their viewpoint by having an opportunity before the forum or the authority enjoined or obliged to take a decision affecting their right.

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[19] It may be noted that the terms 'fairness of procedure, fair play in action, 'duty to act fairly are perhaps used as alternatives to "natural justice" without drawing any distinction. But Prof. Paul Jackson points out that Such phrases may sometimes be used to refer not to the obligation to observe the principles of natural justice but, on the contrary, to refer to a standard of behaviour which, increasingly, the courts require to be followed even in circumstances where the duty to observe natural justice is inapplicable".

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[20] We share the view expressed by Professor Jackson. Fairness, in our opinion, is a fundamental principle of good administrator. It is a

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rule to ensure the vast power in the modern State is not abused but properly exercised. The State power is used for proper and not for a proper purposes. The authority is not misguided by extraneous or irrelevant considerations. Fairness is also a principle to ensure that statutory authority arrives at a just decision either in promoting the interest or affecting the rights of persons. To use the time hallowed phrase "that justice should not only be done but be seen to be done" is the essence of fairness equally applicable to administrative authorities. Fairness is thus a prime test for proper and good administration. It has no set form or procedure. It depends upon the facts of each case. As Lordpearson said in Pearlberg v. Varty (1957) 31 ITR 565 (at p. 547) , fairness does not necessarily require a plurality of hearings or representations and counter representations. Indeed, it cannot have too much elaboration of procedure since wheels of administration must move quickly.

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In view of the aforesaid discussion, decision by the respondents to cancel the allotment is accentuated with extreme arbitrariness and it is high time that the respondents rise above the nepotism and eschew window- dressing as the principles of governance have to be tested on the touchstone of justice, equity and fair play.

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Having said so, I find merit in this petition and the same is partly allowed and consequently decision of government dated 30.4.2012 and the termination order dated 13.08.2012 are quashed and set aside, however, this will not

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prevent the respondents for considering and deciding the

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case of the petitioner afresh in accordance with law.

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