Bangalore Medical Trust v. B. S. Muddappa



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71. In our opinion, the right of the victims read into S. 4 of the Act to express their views on a proposed settlement does not contribute to a position analogous to that in United States in which fairness hearing are imperative. S. 4 of the 'Act' to which the right is traceable merely enjoins Government of India to have 'due-regard' to the views expressed by victims. The power of the Union of India under the Act to enter into a compromise is not necessarily confined to a situation where suit has come to be instituted by it on behalf of the victims. Statute enables the Union of India to enter into a compromise even without such a suit. Right of being heard read into S. 4 - and subject to which its constitutionality has been upheld in Sahu's case - subjects the Union of India to a corresponding obligation. But that obligation does not envisage or compel a procedure like a "Fairness-Hearing" as a condition precedent to a compromise that Union of India may reach, as the situations in which it may do so are not necessarily confined to a suit.

Accordingly Contention (G) is answered against petitioners. We hold that the settlement is not vitiated by reason alone of want of a "Fairness-Hearing" procedure preceding it. Likewise, the settlement is not vitiated by reason of the absence of a "re-opener" clause built into it. But there is one aspect as to medical surveillance costs and as to a provision for possible cases which may become symptomatic after a drawn-out of latency period. We will discuss that aspect under Point (J) infra.

Re: Contention (H)

72. The question is if the settlement is reviewed and set aside what should happen to the funds brought in by the UCC pursuant to the order. This question was raised by the petitioners and argued before us by the parties inviting the stage for giving effect to it has not yet arrived.

The stand of the Union of India and other petitioners is that even upon a setting aside of the settlement, the funds should not be allowed to be repatriated to the Untied States as that would embroil the victims in endless litigations to realise the fruits of the decree that may be made in the suit and to realise the order for interim-payment. The stand of the Union of India as recorded in the proceedings dated 10-4-1990 is as follows:

"1. It is submitted that the Union of India consistent with its duty as parens patriae to the victims cannot consent to the taking away by Carbide of the moneys which are in India outside the jurisdiction in Indian Courts.

2. At this stage, the Union of India is not claiming unilaterally to appropriate the moneys nor to disburse or distribute the same. The moneys can continue to be deposited in the Bank as at present and earn interest subject to such orders that may be passed appropriate proceedings by courts.

3. It is submitted that in view of the facts and circumstances of the case, the previous history of the litigation, the orders passed by the District Court Bhopal, Madhya Pradesh High Court and this Hon'ble court, and the undertakings given by UCIL and Carbide to Courts in respect of their assets, this Hon'ble Court may, in order to do complete justice under Art. 142 of the Constitution, require retention of the moneys for such period as it may deem fit, in order to satisfy any decree that may be passed in the suit including the enforceable order of the M.P. High Court dated 4th April, 1988".


73. It is urged by the learned Attorney General that restitution being in the nature of a proceedings in execution, the party claiming that benefit must be relegated to the Court of first instance to work out its remedies. It is also urged that the UCC did not bring in the funds on the faith of the court's order, but did so deliberately and on its own initiative and choice and deposited the funds to serve its own interest even after it was aware of the institution of the proceedings challenging the settlement in an attempt to effectuate a fait accompli. It is further said that the order of the High Court directing payment of interim compensation of Rs. 250 crores is operative and since the UCC has not sought or obtained any stay of operation of that order, the sums to the extent of Rs. 250 crores should not, at all events, be permitted to be repatriated.

Learned Attorney General also sought to point out that the UCC had, subsequent to the settlement, effected certain corporate and administrative changes and without a full disclosure by the UCC of these changes and their effect on the interests of the claimants, the funds should not be permitted to be taken out of the court's jurisdiction, though, however, Government of India should not also be free to appropriate or use the funds.



74. We are not impressed by any of these contentions. It is not shown that the UCC brought in the monies with any undue haste with a view to confronting Union of India with a fait accompli. The records indicate a different complexion of the matter. The payment appears to have been expedited at instance by the Union of India itself.

75. Strictly speaking no restitution in the sense that any funds obtained and appropriated by the Union of India requiring to be paid back arises. The funds brought in by the UCC are deposited in the Reserve Bank of India and remain under this Court's control and jurisdiction. Restitution is an equitable principle and is subject to the discretion of the Court. S. 144, Code of Civil Procedure, embodying the doctrine of restitution does not confer any new substantive right to the party not already obtaining under the general law. The section merely regulates the power of the Court in that behalf.

76. But, in the present case, S. 144, C.P.C does not in terms apply. There is always an inherent jurisdiction to order restitution a fortiorari where a party has acted on the faith of an order of the court. A litigant should not go back with the impression that the judicial-process so operated as to weaken his position and whatever it did on the faith of the court's order operated to its disadvantage. It is the duty of the Court to ensure that no litigant goes back with a feeling that he was prejudiced by an act which he did on the faith of the court's order. Both on principle and authority it becomes the duty of the Court - as much moral as it is legal - to order refund and restitution of the amount to the UCC - if the settlement is set aside.

In Binayak v. Ramesh, (1996) 3 SCR 24: (AIR 1966 SC 948) this Court dealing with scope of S. 144, C.P.C observed:

" ....The principle of the doctrine of restitution is that on the reversal of a decree, the law imposes an obligation on the party to the suit who received the benefit of the erroneous decree to make restitution to the other party for what he has lost. This obligation arises automatically on the reversal or modification of the decree and necessarily carries with it the right to restitution of all that has been done under the erroneous decree; and the Court in making restitution is bound to restore the parties, so far as they can be restored, to the same position they were in at the time when the Court by its erroneous action had displaced therefrom ...." (p. of SCR) : (at p. 950 of AIR)

In Jai Berham v. Kedar Nath Marwari, AIR 1922 PC 269 at p. 271, the judicial Committee noticed that:

"The auction purchasers have parted with their purchase-money which they paid into Court on the faith of the order of confirmation and certificate of sale already referred to ....".

and said:

".....and it would be inequitable and contrary to justice that the judgment-debtor should be restored to this property without making good to the auction purchaser the moneys which have been applied for his benefit".

In L. Guran Ditta v. T. R. Ditta, AIR 1935 PC 12, Lord Atkin said:

".......The duty of the Court when awarding restitution under S. 144 of the Code is imperative. It shall place the applicant in the position in which he would have been if the order had not made; and for this purpose the Court is armed with powers [the 'may' is empowering, not discretionary] as to mesne profits, interest and so forth. As long ago as 1871 the Judicial Committee in (1871) 3 PC 465 made it clear that interest was part of the normal relief given in restitution: and this decision seems right to have grounded the practice in India in such cases ....." (p. 13)

In Jagendra Nath Singh v. Hira Sahu, AIR 1984 All 252 (FB) Mooham J. observed:

"Every Court has a paramount duty to ensure that it does no injury to any litigant and the provisions of S. 144 lay down a procedure where effect can be given to that general provision of the law. The Court should be slow so to construe this section as to impose a restriction upon its obligation to act right and fairly according to the circumstances towards all parties involved", (P. 253)


77. We are satisfied in this case that the UCC transport the funds to India and deposited the foreign currency in the Reserve Bank of India on the faith of the Court's order. If the settlement is set aside they shall be entitled to have their funds remitted to them back in the United States together with such interest as has accrued thereon. So far as the point raised by the learned Attorney General as to the corporate changes of the UCC is concerned, we think, a direction to the UCC to prove and establish compliance with the District Court's order dated 30th November, 1986, should be sufficient safeguard and should meet the ends of justice.

78. Accordingly in the event of the settlement being set aside the UCC shall be entitled to have 420 million US Dollars brought-in by it remitted to it by the Union of India at the United States along with such interest as has accrued on it in the account.

But this right to have the restitution shall be strictly subject to the condition that the UCC shall restore its undertaking dated 27-11-1986 which was recorded on 30-11-1986 by District Court at Bhopal and on the strength of which the Court vacated the order of injunction earlier granted against the UCC. Pursuant to the orders recording the settlement, the said order dated 30-11-1986 of the District Court was set aside by this Court. If the settlement goes, the order dated 30-11-1986 of the District Court will automatically stand restored and the UCC would be required to comply with the order to keep and maintain unencumbered assets of the value of US 3 billion dollars during the pendency of the suit. The right of the UCC to obtain the refund of and repatriate the funds shall be subject to the performance and effectuation of its obligations under the said order of 30-11-1986 of the District Court at Bhopal. Till then the funds shall remain within the jurisdiction of this Court and shall not be amenable to any other legal process. The Contention (H) is disposed of accordingly.

Re: Contention (I)

79. The contention is that notices to and opportunities for hearing of the victims, whom the Union of India claims to represent, were imperative before the proposed settlement was recorded and this, admittedly, not having been done the orders dated 14th and 15th February, 1989 are nullities as these were made in violation of the rules of natural justice. Shri Shanti Bhushan urged that the invalidity of the settlement is squarely covered and concluded, as a logical corollary, by the pronouncement of the Constitution Bench in Sahu case (AIR 1990 SC 1480). He referred to and relied upon the following observations of Chief Justice Sabyasachi Mukharji in Sahu's case (paras 111, 114, 117 and 121):

"It has been canvassed on behalf of the victims that the Code of Civil Procedure is an instant example of what is a just, fair and reasonable procedure, at least the principles embodied therein and the Act would be unreasonable if there is exclusion of the victims to vindicate properly their views and rights. This exclusion may amount to denial of justice. In any case, it has been suggested and in our opinion there is a good deal of force in this contention, that if a part of the claim, good reasons or bad, is sought to be compromised or adjusted without at least considering the views of the victims that would be unreasonable deprivation of the rights of the victims ...."

"......Right to a hearing or representation before entering into a compromise seems to be embodied in the due process of law understood in the sense the term has been used in the constitutional jargon of this country though perhaps not originally intended ......"

"In view of the principles settled by this Court and accepted all over the world, we are of the opinion that in a case of this magnitude and nature, when the victims have been given some say by Section 4 of the Act, in order to make that opportunity contemplated by S. 4 of the Act meaningful and effective, it should be so read that the victims have to be given an opportunity of making their representation before the court comes to any conclusion in respect of any settlement".

"In our opinion, the constitutional requirements, the language of the section, the purpose of the Act and the principles of natural justice lead us to this interpretation of Section 4 of the Act that in case of a proposed or contemplated settlement, notice should be given to the victims who are affected or whose rights are to be affected to ascertain their views. Section 4 is significant. It enjoins the Central Government only to have "due regard" to any matters which such person may require to be urged. So the obligation is on the Central Govt. in the situation contemplated by S. 4 to have due regard to the views of the victims and that obligation cannot be discharged by the Central Government unless the victims are told that a settlement is proposed, intended or contemplated. It is not necessary that such views would require consent of all the victims. The Central Govt. as the representative of the victims must have the views of the victims and place such view before the court in such manner it considers necessary before a settlement is entered into. If the victims want of advert to certain aspects of the matter during the proceedings under the Act and settlement indeed is an important stage in the proceedings, opportunities must be given to the victims. Individual notices may not be necessary. The Court can, and in our opinion should, in such situation formulate modalities of giving notice and public notice can also be given inviting views of the victims by the help of mass media".

".....The Act would be bad if it is not construed in the light that notice before any settlement under S. 4 of the Act was required to be given..."

(Emphasis supplied)

Shri Shanti Bhushan urged that with these findings and conclusions the only logical resultant is that the settlement must be declared a nullity as one reached in violation of the rules of natural justice. For Shri Shanti Bhushan, the matter is as simple as that.

But after making the observations excerpted above, the Constitution Bench, having regard to the nature of this litigation, proceeded to spell out its views and conclusion on the effect of non-compliance of natural justices and whether there were other remedial and curative exercise. Chief Justice Mukharji noticed the problem arising out of non-compliance thus:

"......It further appears that that type of notice which is required to be given had not been given. The question, therefore, is what is to be done and what is the consequence? The Act would be bad if it is not construed in the light that notice before any settlement under S. 4 of the Act was required to be given. Then arises the question of consequences of not giving the notice ..."

(Emphasis supplied)

Learned Chief Justice proceeded to say:

"......In this adjudication, we are not strictly concerned with the validity or otherwise of the settlement, as we have indicated hereinbefore. But constitutional adjudication cannot be divorced from the reality of a situation, or the impact of an adjudication. Constitutional deductions are never made in the vacuum. These deal with life's problems in the reality of a given situation. And no constitutional adjudication is also possible unless one is aware of the consequences of such an adjudication. One hesitates in matters of this type where large consequences follow one way or the other to put as under what others have put together. It is well to remember, as old Justice Holmes, that time has upset many fighting faiths and one must always wager one's salvation upon some prophecy based upon imperfect knowledge. Our knowledge changes; our perception of truth also changes ..."

"....No man or no man's right should be affected without an opportunity to ventilate his views. We are also conscious that justice is a psychological yearning, in which men seek acceptance of their view point by having an opportunity of vindication of their view point before the forum or the authority enjoined or obliged to take a decision affecting their right. Yet, in the particular situations, one has to bear in mind how an infraction of that should be sought to be removed in accordance with justice. In the facts and the circumstances of this case where sufficient opportunity is available when review application is heard on notice, as directed by Court, no further opportunity is necessary and it cannot be said that injustice has been done. “To do a great right, after all, it is permissible sometime to do little wrong”. In the facts and circumstances of the case, this is one of those rare occasions ..."

(Emphasis supplied)

Chief Justice Mukharji also observed:

"......But having regard to the urgency of the situation and having regard to the need for the victims for relief and help and having regard to the fact that so much effort has gone in finding a basis for the settlement, we at one point of time, thought that a post-decisional hearing in the facts and circumstances of this case might be considered to be sufficient compliance with the requirements of principles of natural justice as embodied under S. 4 of the Act ...." (p. 63)

"In the facts and the circumstances of this therefore, we are of the opinion, to direct that notice should be given now, would not result in doing justice in the situation. In the premises, further consequential order is necessary by this Court ....". (p. 65)

While Shri Nariman understandably strongly relies on these observations as the law of the case, Shri Shantibhushan seeks to deny them any binding force on the ground that they were mere passing observation inasmuch as the question of validity of the settlement was not before the court in Sahu case (AIR 1990 SC 1480). Shri Shantibhushan relied upon several pronouncements of this Court viz. National Textile Workers Union v. P. R. Ramakrishnan (1983) 1 SCC 228: (AIR 2983 SC 75), Institute of Chartered Accountants v. L. K. Ratna (1986) 4 SCC 537: (AIR 1987 SC 71), K. I. Shepherd v. Union of India, (1987) 4 SCC 431: (AIR 1988 SC 686), R. B. Shreeram Durga Prasad v Settlement Commissioner, (1989) 1 SCC 628: (AIR 1989 SC 1038) and H. L. Trehan v. Union of India, (1989) 1 SCC 764: (AIR 1989 SC 568) to emphasise the imperatives of observance of natural justice and the inevitability of the consequences that flow from a non-compliance of the requirements of a pre-decisional hearing.

These are all accepted principles. Their wisdom, variety and universality in the discipline of law are well established. Omission to comply with the requirements of the rule of Audi Alteram Partem, as a general rule, vitiate a decision. Where there is violation of natural justice no resultant or independent prejudice need be shown, as the denial of natural justice is, in itself, sufficient prejudice and it is no answer to say that even with observance of natural justice the same conclusion would have been reached. The citizen "is entitled to be under the Rules of Law and not the Rule of Discretion" and "to remit the maintenance of constitutional right to judicial discretion is to shift the foundations of freedom from the rock to the sand". But the effects and consequences of non-compliance may alter with situational variations and particularities, illustrating a "flexible use of discretionary remedies to meet novel legal situations". "One motive" says Prof. Wade "for holding administrative acts to be voidable where according to principle they are void may be a desire to extend the discretionary powers of the Court". As observed by Lord Reid in Wiseman v. Borneman, 1971 AC 297, natural justice should not degenerate into a set of hard and fast rules. There should be a circumstantial flexibility.

In Sahu case (AIR 1990 SC 1480) this court held that there was no compliance with the principles of natural justice but also held that the result of the non-compliance should not be a mechanical invalidation. The Court suggested curatives. The Court was not only sitting in judicial review of legislation; but was a court of construction also, for, it is upon proper construction of the provisions, questions of constitutionality come to be decided. The Court was considering the scope and content to the obligations to afford a hearing implicit in Section 4 of the Act. It cannot be said to have gone beyond the pale of the enquiry when it considered further question as to the different ways in which that obligation could be complied with or satisfied. This is, in substance, what the Court has done and that is the law of the case. It cannot be said that these observations were made by the way and had no binding force.

Sri Garg submitted that when the Union of India did not, even prima facie, probabilise that the quantification reflected in the settlement was arrived on the basis of rational criteria relevant to the matter, the determination fails as the statutory authority had acted ultra vires its powers and trusts under the statutory scheme. Sri Garg said that it would be a perversion of the process to call upon the victims to demonstrate how the settlement is inadequate. There was, according to Sri Garg, no material to shift the risk of non-persuasion. Sri Garg urged that unless the elements, of reasonableness and adequacy even to the extent a settlement goes - are not established and the quantification shown to be justified on some tenable basis the settlement would incur the criticism of being the result of an arbitrary action of Government.

Shri Shanti Bhushan, however, strongly commended the following observations of Megarry J. in Leary v. National Union of Vehicle Builders, (1971) Ch 34, which were referred to with approval by the court in Institute of Chartered Accountants v. L. K. Ratna (1986) 4 SCC 537: (AIR 1987 SC 71) as to the effect of non-observance of natural justice (at p. 78 of AIR):

"If one accepts the contention that a defect of natural justice in the trial body can be cured by the presence of natural justice in the appellate body, this has the result of depriving the member of his right of appeal from the expelling body. If the rules and the law combine to give the member the right to a fair trial and the right of appeal, why should he be told that he ought to be satisfied with an unjust trial and a fair appeal? Even if the appeal is treated as a hearing de novo, the member is being stripped of his right to appeal to another body from the effective decision to expel him. I cannot think that natural justice is satisfied by a process whereby an unfair trial, though not resulting in a valid expulsion, will nevertheless have the effect of depriving the member of his right of appeal when a valid decision to expel him is subsequently made. Such a deprivation would be a powerful result to be achieved by what in law is a mere nullity; and it is no mere triviality that might be justified on the ground that natural justice does not mean perfect justice. As a general rule, at all events, I hold that a failure of natural justice in the trial body cannot be cured by a sufficiency of natural justice in an appellate body".

Prof Wade in his treatise on Administrative Law observes:

"If natural justice is violated at the first stage, the right of appeal is not so much a true right of appeal as a corrected initial hearing; instead of fair trial followed by appeal, the procedure is reduced to unfair trial followed by fair trial".

We might recall here that the Privy Council in Calvin v. Carr, 1980 AC 574 (576) had expressed its reservations about Megarry J.'s 'General Rule' in Leary's case. However, the reservations were in the area of domestic jurisdiction, where contractual or conventional Rules operate. The case did not involve a public law situation. But the House of Lords in Lloyd v. McMahon, 1987 AC 625 applied the principle to a clearly public law situation. The principle in Leary's might, perhaps, be too broad a generalisation.

But the question here is not so much as to the consequences of the omission on the part of the Union of India to have "due regard" to the views of the victims on the settlement or the omission on the part of the Court to afford an opportunity to the victims of being heard before recording a settlement as it is one of the effects and implications of the pronouncements in Sahu case (AIR 1990 SC 1480) which is the law of the case. In Sahu case the Court expressly held that the non-compliance with the obligation to issue notices did not by such reason alone, in the circumstances of the case, vitiate the settlement, and that the affected persons may avail themselves of an opportunity of being heard in the course of the review petitions. It is not proper to isolate and render apart the two implications and hold the suggested curative as a mere obiter.





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