JUDGMENT
1. The petitioners are a private limited company carrying on business inter alia as exporters and importers and held an import licence dated the 6th of December 1957 permitting them to import goods classified under Serial No. 188/4 of the Import Trade Control Schedule for the period October 1957 to March 1958. By two indents dated 15th November and 21st November 1957 they imported cotton fancy piece-goods under this import licence. The goods arrived per “s.s. Jaladruv” in Bombay on the 19th February 1958.
2. By a show cause notice dated 19th of May 1958 issued by the Assistant Collector of Customs, Bombay, the petitioners were called upon to show cause why penal action should not be taken against them and why the said goods should not be confiscated under Section 167(8) of the Sea Customs Act. In the said show cause notice the petitioners were called upon to give their explanation in writing within 7 days from the date of the show cause notice and to inform the Assistant Collector of Customs if they desired to have a personal hearing before him. By their letter dated the 20th of May 1958 the petitioners stated that the goods imported by them were embroidered all overs and that the goods did not have patterns running lengthwise and repeated at equal distance, that the design stripes in the fabrics could not be easily separated for use as laces and therefore the consignment was covered by their import licence. By their further letter dated the 14th of July 1958 they requested the Assistant Collector of Customs to refer the matter to the Chief Controller of Imports if necessary and again requested him to release the consignment against their licence.
3. By his order dated the 25th of July 1958 the 1st respondent held that the explanation given by the petitioners in their reply dated the 20th of May 1958 was not satisfactory, that the petitioners had committed an offence attracting the provisions of Section 167(8) of the Sea Customs Act and directed that the goods in question should be confiscated. He gave an option to the petitioners under Section 183 of the Act to pay an option fine of Rs. 11,500 in lieu of confiscation and furthermore imposed a personal penalty of Rs. 5,700 on the petitioners. It is against this order that the present petition has been preferred.
4. The petitioners have raised two contentions, first, that the order as to the personal penalty was in excess of jurisdiction inasmuch as under Section 167(8) of the Sea Customs Act the maximum penalty that can be imposed by the 1st respondent would be Rs. 1000 and that therefore the order as regards the personal penalty was bad in law, and secondly that the order was also bad in law inasmuch as the 1st respondent had inspected certain samples of curtain nettings embroidered all overs and lace cloth and based his findings from that inspection without giving an opportunity to the petitioners to rebut that information collected by him. The petitioners urged that in the absence of an opportunity given to them by the 1st respondent to explain the different types of samples inspected and relied upon by the 1st respondent in order to arrive at his conclusion he had failed to observe the rules of natural justice and that therefore the order passed by him was void and illegal.
5. In answer to the case set out by the petitioners in paragraph 7(c) of the petition, which deals with the alleged contravention of the rules of natural justice, the affidavit in reply (which is incidentally not made by the 1st respondent but by the 3rd respondent who admittedly had no personal knowledge as regard the facts of this case) states as follows :-
“I deny that the First Respondent has based his findings in the said order on inspection of certain cloth of curtain nets and embroidered all overs and lace cloth which he is stated to have seen.”
6. That statement obviously suffers, to say the least, from inexactitude inasmuch as the order in question expressly states that the 1st respondent had seen the samples of curtain nettings, embroidered all overs and lace cloth imported in the past, and having done so had come to the conclusion that the consignment in question was lace cloth and not curtain netting or embroidered all overs. As regards the allegation that the 1st respondent had failed to give an opportunity to the petitioner to rebut and explain the samples which the 1st respondent had inspected the affidavit states as follows :-
“With regard to the type of goods imported by them, I say that there was no occasion to give the petitioners any opportunity to explain the different types of samples of goods imported in the past and which may have been inspected by the first respondent. The petitioners were not concerned to explain the different types of past imports. They were concerned to explain the type of their own imports.”
7. It is clear from this part of the affidavit in reply that the plea taken up on behalf of the 1st respondent is that even if the 1st respondent had inspected the samples, as he says he did in his order, the petitioners were not concerned with giving any explanation to the different samples of cloth imported in the past and inspected by the 1st respondent and that the only concern of the petitioners was to explain the type of cloth which they had imported under their licence. This part of the affidavit also makes it clear that the case put up on behalf of the 1st respondent is that there was no occasion to give to the petitioners any chance to explain the samples inspected by the 1st respondent and from which he ultimately came to the conclusion that the goods in question were lace cloth.
8. At the outset Mr. Chagla urged that the petitioners were guilty of delay in this case and that therefore the petition was liable to be dismissed upon that ground alone. The order, as I have said, was passed on the 25th July and a copy thereof was received by the petitioners on the 23rd of August 1958. The petition was filed on the 18th of November 1958 but, says Mr. Chagla, the petitioners have been guilty of delay of two months and five days. In my view the petition, having been filed within a period of three months from the date of the receipt of the copy of the order it cannot be said that there is such delay on the part of the petitioners as would justify its dismissal. But apart from this reason, the question raised in this petition is fundamental in the sense that the challenge to the order in question is based on the ground of contravention of the rules of natural justice and excess of jurisdiction. This is therefore, in any event not a case in which the petitioners should be deprived of a remedy under Art. 226 of the Constitution.
9. Now, the order in question first sets out that when the goods arrived they were as usual, examined by the Customs officers who alleged that the goods in question were lace cloth and as the import licence did not permit lace cloth to be imported thereunder, they were not allowed to be cleared, and, as stated above, a show cause notice was issued by the Asstt. Collector of Customs. In their reply to the show cause notice the case of the petitioners was that the goods were embroidered netting and therefore their import licence should be accepted as the goods would fall under remark No. (iii) against S. No. 188/4 in the Policy book for the period October 1957 to March 1958. The order then states that remark Nos. (i) and (iii) appearing against S. No. 188/4 were relevant. In terms of remark No. (i) certain types of cloth alone can be imported under the quota licence but the cloth imported did not fall under any of the types mentioned in that remark. Dealing with remark No. (iii) the order states that curtain netting and embroidered all overs which have each regular designs cannot be imported, implying thereby that curtain nettings and embroidered all overs if they do not have such regular designs can be imported. In the cloth imported there were no regular designs of the type mentioned in remark No. (iii). The order then proceeds to state that the point to be decided by the 1st respondent was whether the goods in question were curtain nettings or embroidered all overs. The findings of the 1st respondent on this question was :-
“I have therefore, seen the samples of curtain nettings, embroidered all overs and lace cloth imported in the past. Curtain nettings are usually used for mosquito curtains. They have regular and plain pattern. In the present case the cloth imported cannot be used as mosquito curtains. It is costly for one thing and the air space is also too small. Embroidered all overs have regular cloth as its back ground and have embroideries done on the cloth. The cloth imported is clearly not embroidered all over. It is commonly known in the trade as lace cloth and decidedly not as curtain netting or embroidered all over. In view of this the licence produced by the importers cannot be accepted as covering these goods.”
10. Mr. Chinoy’s contention in connection with this part of the order was that there could be no question that after the petitioners had sent their written reply to the show cause notice the 1st respondent inspected certain samples of curtain nettings, embroidered all overs and lace cloth imported in the past and relying upon them he came to the conclusion that the consignment in question was of lace cloth, that the 1st respondent could not do so without having given an opportunity to the petitioners either to rebut the effect of the samples inspected by the 1st respondent and to explain them as being not applicable to the consignment in question and that not having done so the 1st respondent had been guilty of contravening the rules of natural justice. Mr. Chagla, on the other hand, contended that the jurisdiction of this court in cases of such writ petitions being of a circumscribed nature and the court would not go behind a finding of fact or a finding that certain goods fell under a certain classification under the schedule in the Import Trade Control policy. That Proposition, as far as it goes, is sound. But Mr. Chinoy argued that the petitioners were not asking the Court to go behind a finding of fact or a finding as to the classification of the goods in question viz. that the goods in this case were lace cloth but that what they were challenging was that the finding was come to by the 1st respondent in clear breach of the rules of natural justice, their grievance being that the 1st respondent behind their back collected and inspected certain samples of curtain nettings, embroidered all overs and lace cloth and from his personal examination of them also done behind their back, he came to the conclusion that the goods were neither embroidered all overs nor curtain nettings but lace cloth. The petitioners urged that if the 1st respondent wanted to rely upon these samples for arriving at his finding, he should have given them an opportunity to explain this evidence in the form of samples and show to him that these samples were not comparable nor were the goods in question equivalent to the samples of lace cloth. This opportunity not having been afforded to them, the order, according to them, was void.
11. But Mr. Chagla urged in the show cause notice dated the 19th of May 1958 the 1st Respondent had not only given an opportunity to the petitioners to give an explanation in writing but had also asked the petitioners, whether they desired to have a personal hearing. As the petitioners did not avail of that opportunity for a personal hearing, the 1st respondent was not bound to give them any further opportunity when he inspected the samples. He also urged that the petitioners cannot now make a grievance of that opportunity not having been given to them. That however is hardly an answer to the contention raised on behalf of the petitioners. The show cause notice, which was read out to me by Mr. Chagla from the record, admittedly did not and could not have informed the petitioners that 1st respondent after receiving the petitioners’ reply dated 20th May was going to rely upon this type of evidence viz. the samples. The reply was given by them on the 20th May, that is to say, the day next after the date of the show cause notice when the petitioners could not possibly have known that the 1st respondent was going to rely upon samples and therefore could not have replied about the samples and which the 1st respondent collected and inspected afterwards.
12. The question, therefore, is a narrow one, viz. can the 1st respondent collect evidence or information, in this case by way of samples from imports made in the past either from his own department or from other resources and come to his finding based upon such information or evidence without giving an opportunity to the petitioners to rebut or explain such evidence ? In my view, the answer must be in the negative for such an action would be in breach of the rules of natural justice. The rules of natural justice require that no man shall be condemned or penalised without having been given a chance to explain.
13. As a broad principle as to in which cases the Court would interfere with the conclusion of a Tribunal their Lordships of the Supreme Court in Dhakeswari Cotton Mills Ltd. v. Commissioner of Income-tax, West Bengal , observed that an assessment made under Section 23(3) of the Indian Income-tax Act of 1922 without disclosing to the assessee information supplied by a departmental representative and without giving an opportunity to the assessee to rebut the information so supplied and declining to take into consideration all materials which the assessees wanted to produce in support of his case constitutes a violation of the fundamental rules of justice and calls for the powers under Art. 136 of the Constitution. In this case the proposition laid down by their Lordships was that an assessment under s. 23, s. 23(3) of the Income-tax Act can be successfully challenged (1) if it is based on mere suspicion and without any evidence or (2) if it is made on information not disclosed to the assessee and without giving him an opportunity to rebut it or (3) if it is made without taking into consideration all materials that the assessee wanted to produce in support of his case. In anyone of these cases the order would be liable to be set aside.
14. In Union of India v. T. R. Varma, , the Supreme Court again observed that although the Evidence Act has no application to enquiries conducted by tribunals, even though they may be judicial in character, the law requires that such tribunals should observe rules of natural justice in the conduct of the enquiries before them and if they do so, their decision is not liable to be impeached on the ground that the procedure followed was not in accordance with that, which obtains in a Court of Law. But they observe that stating it broadly and without intending it to be exhaustive, the rules of natural justice required that a party should have the opportunity of adducing all relevant evidence on which he relied, that the evidence of the opponent should be taken in his presence, and that he should be given the opportunity of cross-examining the witnesses examined by that party, and that no materials should be relied on against him without his being given an opportunity of explaining them.
15. A similar principle was also laid down in Errington v. Minister of Health (1935) 1 K.B., 249. The facts in that case were that on the 23rd of February 1933 the Jarrow Corporation, acting under the Housing Act, 1930, made a clearance order in respect of certain buildings in a certain area and submitted the same as required by the Act, for confirmation to the Minister of Health. On April 13, 1933, a notice thereof was published by the local authority and served upon the owners of the property comprised within the clearance order. On April 26, the appellants gave notice of objection to the clearance order. The Minister of Health in accordance with the provisions of the Act – caused a public local inquiry to be held by one Mr. Collin, an Inspector. At a meeting held on September 6, 1933, at Jarrow at which the representatives of the owners as well as representatives of the Corporation were present. Mr. Collin suggested that the owners should submit particulars of what repairs they were prepared to make to the properties so that they might not have to be cleared off. Though some agreement was arrived at, the Corporation maintained that the proper thing to do was to have the clearance order confirmed by the Minister. On November 8, 1933, a letter from the Ministry requested the Corporation that their officials should call at the Ministry so that at the interview the situation might be properly explained. The officials of the Corporation attended at the Ministry on November 17 where the Minister proposed that the owners should be asked to carry out substantial repairs but the Corporation would not agree. On January 17, 1934 the Ministry wrote to the Corporation that the Principal Asstt. Secretary-in-Charge of housing had arranged to visit with Mr. Collin various towns including Jarrow and that the members of the Council and the officers, who were to form the deputation should meet them and discuss the matter. On January 23, 1934, the officials from the Ministry visited Jarrow and inspected the area in question in company with the Corporation officials, no representatives of the owners being present at that time. On February 24, 1934, the Corporation wrote to the Ministry for confirmation of the order and stated that the Borough Engineer was of the view that it would not suffice if the properties were repaired by the owners. The Engineer had no been called as a witness at the public inquiry and the owners therefore had not chance of cross-examining him on his opinion as regards the properties. On March 27, 1934, the clearance order was confirmed by the Minister of Health. The owners moved the High Court against that order on the ground that interests of the appellants had been prejudiced, in that, between the date of the holding of the public inquiry and the confirmation of the order the Minister and the Council, by their representatives met and discussed together the condition of the houses in the area and whether the order should be confirmed, made an inspection of the houses in the area, and held communications in writing discussing the matters without giving any notice to the appellants of the said meetings or the discussions or the inspection, or any opportunity to attend thereat, or to see the written communications or to reply thereto. Mr. Justice Swift dismissed the application precisely on the ground submitted in the affidavit in reply in this case that the 1st respondent was entitled to satisfy himself and use his own knowledge in arriving at his conclusion. Greer L.J. who heard the appeal against that order of dismissal after approving the observations of Viscount Haldance L.C. and Lord Parmoor in Local Government Board v. Arlidge (1915) A.C. 120, that the procedure of a semi-judicial tribunal in detail must depend on the nature of such tribunal and that therefore they can obtain information in any way they think best, always giving a fair opportunity to those who are parties in the controversy for correcting or contradicting any relevant statement prejudicial to their view, held that in the case before him there was a breach of the rules of natural justice and reversed the order of dismissal passed by Mr. Justice Swift. It may be observed that in the same case dealt with by Greer L.J. as in the case before me, an opportunity was in effect given to the appellants in the beginning but it was at a subsequent stage that an ex parte information was received; yet the Court of Appeal came to the conclusion that there was thereby a breach of the rules of natural justice. Therefore, although an opportunity to explain is given at the outset but if thereafter a semi-judicial tribunal were to collect information which is not disclosed to the party affected thereby, and an opportunity is not given to such a party to rebut or explain it, the order would still be bad on the ground of contravention of the rules of natural justice.
16. The case of Rex V. Paddington and St. Marylebone Rant Tribunal (1949) 1 K.B. 666 is case of a reverse position in the sense that the ex parte information received improperly was before the hearing and not after as in the case of Errington v. Minister of Health. There the Rent Tribunal appointed under the Furnished Houses (Rent Control) Act, 1946, heard certain cases referred to them. As a result of a visit paid to the flats in question by members of the Tribunal before the hearing the tribunal formed an opinion that by reason of the height of the ceiling of the flats they were not up to modern standards and reduced the rents in the eight cases before them. In these circumstances the applicants applied for an order of certiorari to bring up and quash the order of the tribunal. It was held that the applicants would be entitled to the writ on the ground that the tribunal, after inspecting the flats before the hearing had largely based their decision on the fact that the flats were not up to modern standards in regard to height, without making any reference to that matter at the hearing or giving the applicants any opportunity of dealing with it.
17. It is clear form all these cases that where a tribunal passes an order on certain information of which no notice has been given to the party affected thereby and no opportunity is given to such a party to rebut or explain such information or evidence, the order is liable to be set aside under Art. 226. This is the position accepted and approved of in several decisions of this Court as also the two decisions of the Supreme Court referred to above.
18. But it was contended that if setting aside an order based on a finding of fact involves disturbance of that finding, the High Court cannot interfere unless such finding was arrived at capriciously or arbitrarily or mala fide. This is not a correct statement of law. If an order, though based on a finding of fact, is made without giving an opportunity to the party affected thereby, such an order would be in contravention of the rules of natural justice especially when it seeks to impose a penalty on such a party. Mr. Chagla, however, relied upon the decision in Nagendra Nath v. The Commissioner of Hills Division, , where it is observed that the rules of natural justice vary with the varying constructions of statutory bodies and the rules prescribed by the Act under which they function. The question whether or not any rules of natural justice had been contravened should be decided not under any pre-conceived notions, but in the light of the statutory rules and provisions. The Supreme Court there observed that in the case before them no such rules had been brought to their notice which could be said to have been contravened by the appellate authority. It observed therefore that simply because the tribunal had viewed the matter in a light which is not acceptable to another independent tribunal is no ground for interference under Art. 226 of the Constitution.
19. It is no doubt true that the petitioners in this case have not shown any rules made under the Sea Customs Act for the procedure to be followed by the Customs Authorities on inquiries held before them from which it can be said that any particular rule had been contravened by the 1st respondent. Mr. Chagla in fact told me that there were no such rules but that the practice followed by the Customs Authorities in these inquiries for a number of years had been to serve a show cause notice and to give an opportunity to the parties for personal hearing. But however informal an inquiry may be and whatever discretion is left to tribunal to follow any particular procedure, surely tribunal cannot come to a conclusion involving penalty unless it hears that party. An argument of this very same nature was sought to be advanced in Dagadu Kushaba v. Labour Appellate Tribunal, 56 Bom. L. R. 138, viz that there was no provision in Section 22 of Industrial Disputes (Appellate Tribunal) Act, 1950, making it incumbent upon the Appellate Tribunal to hear all parties who may be affected by its order, but that argument was repelled by the Court of Appeal. In that case Chagla C.J. who delivered the judgment of the Bench observed that no judicial tribunal should pass an order affecting a person without giving that person an opportunity to be heard, that this principle is so deeply embodied in our jurisprudence that it has come to be looked upon as a rule of natural justice. Unless therefore a statute permits a tribunal to act contrary to the rules of natural justice, it must always be assumed that when a judicial tribunal is set up by a legislature, the Legislature intends and expects the tribunal to act in confirmity with the rules of natural justice.
20. Mr. Chagla, however, relied upon certain observations made in Province of Bombay v. Madhukar Ganpat, 53 Bom. L.R. 754. He argued that so long as a domestic tribunal has observed its own rules and acted honestly and in good faith with a sense of responsibility its decision cannot be questioned on the ground of breach of the rules of natural justice. But it is pertinent to observe that in that case there were in fact statutory rules made under the Bombay District Police Act of 1890 which laid down a procedure to be followed in enquiries against the members of the police ranks governed by that Act. At p. 768 of the report Mr. Justice Vyas, has himself observed that he had no doubt that the rules framed under the Police Act were based on the principles of natural justice and that therefore it was not necessary to deal with the question of natural justice apart from the question of compliance or non-compliance with the rules under the Police Act. After however analysing the various decisions cited before them, he has thus summed up (p. 769).
“From a careful consideration of these authorities it is clear that all that is meant by compliance with rules of natural justice by a domestic tribunal is that the tribunal must act honestly and with good faith, and must give a delinquent a chance of explanation and defence. If its rules postulate an enquiry, the delinquent must have a reasonable opportunity of being heard and of correcting and contradicting a relevant statement prejudicial to his view.”
21. The view therefore expressed in Province of Bombay v. Madhukar Ganpat, 53 Bom. L.R. 754 is not in any way different from that laid down in 56 Bom. L.R. 138 or the other cases already referred to.
22. On the principles laid down in these authorities both of our High Court as also of the Supreme Court the 1st respondent contravened the rules of natural justice in failing to give an opportunity to the petitioners to rebut or explain the effect of the samples which he inspected behind their back. The result of that omission was that the order passed by him depending upon the inspection of the samples made by him was vitiated and was therefore void.
23. Mr. Chagla however contended that a mere examination of the samples by the 1st respondent with a view to arrive at a finding of fact in the absence of the petitioners would not amount to violation or contravention of the rules of natural justice. In my view, this proposition is also not sound being contrary to the principles laid down in the various authorities I have referred to.
24. The last contention of Mr. Chagla was that the petitioners did not expressly complain in their attorney’s letter dated 3rd November, 1958 which they addressed to the 1st respondent after they had received his order, that the order was in breach of the rules of natural justice and that in view of this omission they cannot be granted the discretionary remedy by way of writ. It is no doubt true that this grievance has not been expressly stated in this letter and it was directed more towards the personal penalty having been in excess of jurisdiction of the 1st respondent. Nonetheless, the letter does state that the order was void and bad in law. But the object of the principle that such a grievance ought to have been made at the very first opportunity is based on the ground that the authority concerned may have a chance of redressing the grievance before the petitioner has a recourse to a legal remedy. In this case the 1st respondent had already become functus officio after he had passed the order. The next opportunity that petitioners had for raising this grievance was in the present petition. But in my view, it is not correct to say that because the petitioners did not raise the point in that letter, this Court should not use its discretion especially when in its opinion the elementary rule of jurisprudence is contravened. In these circumstances, I have come to the conclusion that the Collector of Customs violated the rules of natural justice under which it was incumbent upon him to give an opportunity to the petitioners to explain that the samples which he had inspected were such as would not permit him to draw the conclusion which he ultimately did or that those samples were not applicable to the consignment in question or to give such other explanation that they might have desired to give in respect of these samples. That being the position, the order passed by the 1st respondent was invalid and bad in law must be set aside.
25. Apart from this question, it was also argued on behalf of the petitioners that the personal penalty imposed upon them by the 1st respondent of Rs. 5,700 was in excess of jurisdiction in view of the interpretation placed by this Court in several decisions on Section 167(8) of the Sea Customs Act. Mr. Chagla stated that in view of the recent Appeal Court judgment on Section 167(8) laying down that the maximum penalty that the Customs Authorities can impose by way of personal penalty is Rs. 1,000, he would not be in a position to argue contrary to the decision. In view of that judgment, obviously the order of personal penalty was in excess of jurisdiction to the extent that it was over Rs. 1,000. In the view that I have taken regarding the invalidity of the order, the question of personal penalty is of secondary importance.
26. For the reasons aforesaid the rule is made absolute in terms of prayer (a) of the petition.