1. This appeal is directed against the order dated 22nd April, 1983 made by the learned Company Judge, in Company Petition No. 8 of 1980, directing advertisement of the winding-up petition filed by the State Bank of India for an order of winding-up of the Company M/s. Hegde and Golay Limited, on grounds that the Company is unable to pay its debts and that it is just and equitable that it should be wound-up under Clauses (e) and (f) of S. 433 of the Companies Act, 1956 (for short, 'the Act').
'Shreeshyla Industries Employees Union (Regd.)' which claims to represent the workmen of the Company is aggrieved by the order of the learned Company Judge directing advertisement of the winding-up petition on the ground that the workmen who had a right to be heard at the stage of issue of the citation and who had made two applications C.A. 109/80 and C.A. 744/80 in that behalf specifically seeking an opportunity of being heard, were not afforded an opportunity of being heard.
2. This appeal was posted along with O.S.A. No. 9 of 1983 preferred by the Company itself against the order of the Company Judge directing advertisement of the petition. Both the appeals were heard together on the merits of the matter even at the stage as we thought that the two appeals should be heard and disposed of finally at that stage itself. Though the appeals were heard together, however, for the sake of convenience the appeals are disposed of by separate judgments.
3. The challenge to the order of the learned Company Judge has been on two grounds and these are the two questions that fall for determination in this appeal :
i) The first that as laid down by the Supreme Court in National Textile Workers' Union v. P. R. Ramakrishnan [1983-I LLJ 45], the workmen of the Company have a right to be heard even at the stage of issue of advertisement of a winding-up petition : that the workmen had by two applications expressly sought an opportunity of being heard and that the order under appeal directing advertisement having been made in violation of the Rule of Natural Justice is void;
ii) The second is that, at all events, on the merits of the company-petition, an order of advertisement of the petition was unwarranted and the winding-up petition requires to be dismissed even at that stage.
4. On the second question, whether on the merits of the case an advertisement should or should not have been ordered, Sri Sampath Kumaran, learned counsel for the appellant-Union, adopted the arguments of Sri M. Raghavan, who argued the Company's appeal, O.S.A. 9 of 1983. The two appeals, as stated earlier, were heard together. By our judgment in O.S.A. 9 of 1983, we have, subject to certain observations made in the course of judgment, dismissed the Company's appeal. We have held that on the merits of the contentions urged, the order of the learned Company Judge directing advertisement of the petition does not call for interference in appeal. That conclusion disposed of the second point in this appeal. That point has accordingly to be held against the appellant. This finding would, of course, be subject to the finding the first point.
5. The facts and circumstances leading upto the filing of the winding-up petition in Company Petition No. 8 of 1980 and the subsequent stages of the proceedings therein culminating in the order dated 22nd April, 1983, directing advertisement of the petition are set-out in our judgment in the connected O.S.A. 9 of 1983; and it is not necessary to traverse them over again here.
6. It is not disputed that the appellant Labour Union resents the workmen of the Company. M/s. Hegde and Golay Ltd., though, however, it is contended by the Bank that the Union also represents the workmen of several associated and ancillary industries also and that the figures as to the strength of the labour force is not correct. The locus stand of the appellant-Union to represent of the workmen of the Company is not disputed though there is an allegation that the Company has itself set up the Union to intervene and contest the matter. That the workmen had a right to be heard before an advertisement of a winding-up petition was ordered; that the workmen expressly sought an opportunity of being heard by C.A. 109/80 and C.A. 774/82 and that they were not actually heard before the order under appeal was passed is not disputed or contested. The learned Company Judge had directed that all 'connected matters to be posted' along with Company Petition No. 8 of 1980. But, the two applications filed by the appellant before the Company Court in C.A. 109/80 and 774/82 were not, unfortunately, posted by the office on 14th December, 1982 when the learned Company Judge heard the arguments in the matter of issued of advertisement.
7. We may now take up the first point for consideration. Sri Sampath Kumaran urged that the order for the Advertisement was passed by the learned Company Judge on 22nd April, 1983 and even before an appeal could be preferred, the petitioning creditor moved with unusual speed and caused the advertisement to be carried out in the newspapers all over the country on the very next and successive days and sought to comfort the workmen with a fait-accompli. Sri Sampath Kumaran submitted that an advertisement of a winding-up petition in relation to a Company does immense harm to the financial stability of the Company and, in turn, to the interests of the workmen, who, in the event of the winding-up of the Company are thrown out of employment. Sri Sampath Kumaran urged that the order of the Company judge which, under certain unfortunate circumstances, has come to be made in violation of the rule of natural justice and in violation of the recognised right stage is 'void' and 'honest' and that the only way in which the justice done to the workmen could be redressed is to reverse the consequences of that order by declaring it to be void and authorising the issue of public-notice recalling or cancelling the earlier advertise-ments. That matter, according to Sri Sampath Kumaran, has thereafter to be remitted to the learned Company Judge to make a fresh order, on the question whether an advertisement should be issued or not, after hearing the workmen.
Sri Sampath Kumaran relied on the following statements of the law on the points in S. L. Kapoor v. Jagmohan : 1SCR746 and in Swadeshi Cotton Mills v. Union of India : 2SCR533 :
'24. .... In our view the principles of the natural justice know of no exclusionary rule dependent on whether if would have made any difference if natural justice had been observed. The non-observance of natural justice is itself prejudice to any man and proof of denial of natural justice is unnecessary. It will come from a person who had denied justice is not prejudiced ......................'
'92. ... In India, this Court has consistently taken the view that a quasi-judicial or administrative decision rendered in violation of the audi alteram rule, wherever it can be read as an implied requirement of the law, is null and void ...............................'
Sri Sampath Kumaran said that the only order that could be made in this appeal consistently with the principle that an order made in violation of the Rule Audi Alteram Partem is 'void' is to declare the order 'void' and direct that the whole proceeding in the matter of advertisement to be taken up afresh before the Company Court.
8. Sri S. G. Sundaraswamy, learned counsel appearing for the petitioning-creditor, said the workmen's entitlement to be heard does not include a right to be impleaded as combine parties to the winding-up proceeding and consistently with this principle they should have ensured their presence at the time of hearing of the company-petition and not stand by after making an application and make the non-hearing a ground for a subsequent attack on the order.
9. Secondly, contends Sri Sundaraswami, an order made in a judicial proceeding, where a party entitled to be heard is not heard, could not be said to be 'void' in an absolute sense that it is 'honest'. His proposition is that where in a full-fledged appellate jurisdiction, a party, who is aggrieved by a breach of the rules of natural justice in the original proceeding is afforded an opportunity to place all the material and to present his case fully and the appellate Court in exercise of its jurisdiction which is co-extensive with that of the original jurisdiction decides a matter on merits, then the consequences of non-compliance of rules of natural justice in the original proceedings may be held to have been cured.
10. Sri Sundaraswami, submitted that in this appeal, the workmen have been afforded all opportunities of being heard on merits as to whether an order of advertisement should or should not issue, and that appellant adopted the arguments of the Company on the merits and had no independent material to place before the Court. If, after such a hearing, the order of advertisement is found justified, that order should not be disturbed on found alone that when it was made if suffered from an infirmity and that therefore the whole process has to be re-enacted formally in the original Court. Sri Sundaraswami says that when the appeal is heard fully on the merits at the instance of the appellant, the appellate Court should not interfere unless the Court holds that this not a case in which Advertisement ought to have been issued.
The first contention that the workmen, despite having made two applications, were yet required to keep a watch over the proceeding and make themselves heard, appears to us place unreasonable demands on the workmen. Their applications were not posted though learned Company Judge had directed all connected matters to be posted.
The second contention has two aspects : Whether the order under appeal which was passed without hearing the workmen can be said to be 'void' and whether in view of the opportunity given to the appellants of being heard on the merits in this appeal the defect and on the original proceedings can be said to have been cured.
11. The case raise some interesting questions which are by means free from difficulty and are 'be delivered by terminological inconsistencies'. They cannot be answered on any all situations. Each case must rest on its own, facts.
At the outset, we must notice that the expressions 'void' and 'avoidable' which have their genesis in private-law are some what in opposite in their application to a public-law situation. But, a breach of rules of natural justice - a procedural failure - was elevated to an error of jurisdiction on the ground that Rules of natural justice are read into the statue and omission to, comply was therefore ultra vires.
12. In Wade on 'Administrative Law' (5th Edn.), it is observed vide Page 310 :
'A source of complication introduced in certain decisions of recent years is the question whether unlawful administrative acts are void or avoidable. Upto a point there is a sound basis for this distinction ....... 'Void or avoidable' is a distinction which applies naturally and without difficulty to the basic distinction between the action which is ultra vires and action which is liable to be quashed for error on the face of the record.'
'Ridge v. Baladwin vide page 468 brought with it a rash of conflicting opinions about whether failure to give a fair hearing rendered the dismissal of the chief constable void or avoidable. In the long history of the cases on natural justice as applied to administrative action this question has never before been agitated, for the simple reason that the logic of the situation excluded it. It had always previously been held that a breach of the rules of natural justice resulted in the determination being null and void, in the same way as any other act which was ultra vires. For the duty to act fairly, just like the duty to act reasonably, was enforced as an implied statutory requirement, so that failure to observe it Meant that the administrative decision was outside the statutory power, unjustified by law, and therefore ultra vires and void.'
De Smith's Judicial Review of Administrative Action (IV Edn.) says vide Page 241 :
'Although breaches of natural justice used to be assignable as 'errors in fact,' a ground of challenge presupposing that the impugned order may merely voidably, there is a substantial body of recent judicial decisions to the effect that breach of the audi alteram partem rule does to jurisdiction (or is akin to a jurisdictional defect) and renders an order or determination void.'
'Void' indeed, it may be but in what sense The expression 'void' in this context became only a relative term and does not carry any absolutes with it. There is no stereo-type or arithmetical equation in the same way. Prof. Paul Jackson poses this question thus Vide Page 187 :
'Are all decisions affected in the same way when vitiated by a failure to observe the rules of natural justice, where they are applicable And, if so, should such decisions be characterised as void or avoidable ?'
The words the Lord chancellor in Chief Constable of the North Wales Police v. Evans, reported in (1982) 1 W.L.R. 155, are worth recalling :
'Like my noble and learned friend, I find much more difficult in deciding the order which it is appropriate for the House to make in a case as the present. In Ridge v. Baldwin (1964) A.C. 40, a majority of the House in not dissimilar circumstances, granted a declaration that the decision of the Chief constable was 'void'. This was the language adopted by the Court of appeal in the instant case. Personally, I find difficulty in applying the language of 'void' and 'avoidable' (appropriate enough in situations of contract of or alleged nullity of marriage) to administrative decisions which give rise to practical and legal consequences which cannot be reversed.'
(Prof. Wade says in Administrative Law : 5th Edn., page 471).
'In natural justice cases, just as much as in the others already discussed, it is essential to remember that 'void' is not an absolute but a relative term : a decision or act may be void against one person and valid against another.'
13. That what is 'void' in this context not necessarily and in all cases equipollent to what is 'honest' is again brought out in Clavin v. Carr, reported in (1980) A.C., 574, ar page (589)
'Their Lordships' opinion would be, if it became necessary to fix upon one or other of these expressions, that a decision made contrary to natural justice is void, but that, until it is so declared by a competent body or court, it may have some effect, or existence, in law. This condition might be better expressed by saying that the decision is invalid or vitiated.'
The observations of Megarry, J., in Hounslow L.B.C. Twickenham G.D. Ltd., reported in (1971) 1 Ch. 233, at page 259 :
'A decision reached by a tribunal wholly outside its jurisdiction and complete defiance of natural justice is about as void as anything can be but if nobody who is entitled to challenge or question it, chooses to do so, it remains in being. Yet to describe such a decision as being 'avoidable' is to use that word in a sense that is not only very special but also liable to mislead.'
14. Indeed, one of the incidents of importing the concept of 'void' expressed itself in the contention that against a 'void' decision on appeal lies as there is 'nothing' to appeal from. In Calvin v. Carr (supra), the Privy Council rejected this theory and at page 590 :
'Passing from this analogy to authorities directly relevant in the field of civil proceedings their Lordships consider that these support the proposition that a decision of an administrative or domestic tribunal, reached in breach of natural justice, though it may be called, indeed may I for certain purposes 'void' is nevertheless susceptible of an appeal.'
15. The inevitable inter-changeability of some elements of 'void' and 'avoidable' is, it is said, the result of an interesting inter-action of the consequences of breach of natural justice on the one hand and the conscious efforts of courts to preserve a discretion to decline interference in appropriate or inappropriate cases, on the other Indeed, Paul Jackson said (at page 187 : Natural Justice) :
'..... Unless the outcome of a particular case will be affected by whether a breach of natural justice renders a decision void or avoidable the question is little more than meaningless. The conflict between dicta in different cases is explicable, it is suggested on this very basis, that often it does not really matter how a court characterises an offending decision.'
16. What emerges from the foregoing is that the effect of non-observance of the auditorium partem rule in relation to the question of remedies for the breach cannot be in capsulated in legal or terminological absolutisms. Though a decision arrived at in breach of rules of natural justice is characterised as 'void' very often the remedy suggested and applied could only be consistent with the decision being merely 'avoidable'.
In our view, in relation to decisions in judicial proceedings. The principles are somewhat different the deployment of the terminology of 'void', with what it is known to convey in private law is rendered inappropriate in the context of judicial proceedings.
We are unable, therefore, to subscribe to the board proposition of Sir Sampath Kumaran that by reason of the non-hearing of the appellant-Union at the stage of ordering advertisement, the order of the learned Company Judge became 'void', in the sense that it compels in appeal, the only course of declaring it so with the attendant and inevitable consequence of asking the Company Court to re-enact the whole proceedings from the stage where the alleged fatal infirmity was introduced.
17. We may now advert to the question whether the affording to the appellant in the appeal an opportunity of being heard could cure the infirmity in the original proceedings attaching from a breach of the audi alteram partem rule.
Sri Sampath Kumaran says that only way in which the injury occasioned by the breach of the audi alteram partem rule is to set aside the decision and remit the matter back.
Megarry J. in Leary v. Nat Union of Vehicle Builders reported in (1971) 1 Ch. 34 adverting to the effect of breach of rules of natural justice at the stage of the trial whether the effects of that breach could at all be made good by a fair and full hearing in an appeal said :
'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 ...... 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.'
But Sri Sundaraswami contends that the above is not generally accepted proposition of law and that amongst the recognised remedies for breach of rules of natural justice is the 'solvent' of a full hearing to the aggrieved-party in an appeal where the jurisdiction of the appellate body co-extensive with that of the original authority and the matter is decided on the merits.
18. Indeed, the difficulties besetting the task was set out by the House of Lords thus (Calvin v. Carr (supra) at page 592).
Although, as will appear, some of the suggested inconsistencies of decisions disappear, or at least diminish, on analysis, their Lordships recognise and indeed assert that no clear and absolute rule can be laid down on the question whether defects in natural justice appearing at an original hearing, whether administrative or quasi-judicial can be 'cured' through appeal proceedings ....'
Wade in 'Administrative Law' (5th Edn.) said at page 487)
'Whether a hearing given on appeal is an acceptable substitute for a hearing not given, or not properly given, before the initial decision is in some cases an arguable question ...........................'
De Smith's Judicial Review of Administrative action (IV Edn.,) at page 242, says :
'Firstly, whether a decision vitiated by a breach of the rules of natural justice can be made good by a subsequent hearing does not admit of a single answer applicable to all situations in which the issue may arise. While it is different to reconcile all the relevant cases, recent case-law indicates that the courts are increasingly favouring an approach bases in large part upon an assessment of whether in a particular context, the procedure as a whole gave the individual an opportunity for a fair hearing.'
19. The answer to the question whether the vitiating factor introduced in the original proceedings by breach of natural justice could be cured and a combination of principles. These factors are set out by De Smith at page 242 :
'But where the reaching is appellate in matter it becomes difficult to do more than to indicate the factors that are likely to be taken into consideration by a court before whom the original decision is challenged. Of particular importance are the gravity of the error committed at first instance, the likelihood that the prejudicial effects of the error may also have permeated the rehearing the seriousness of the consequences for the individual, the width of the powers of the appellate body and whether it decided only on the basis of the material before the original tribunal or entertained the appeal by way of rehearing de novo.'
There are cases illustrative of the extreme positions the situation admits of the view of Megarry, J., in Leary's case is at one extreme. The general proposition in Leary's case was referred to by Wade in a general sense of approval thus (in Administrative law : 5th Edn., page 487) :
'... In principle there ought to be an observance of natural justice equally at both stages; and accordingly natural justice is violated if the true charge is put forward only at the appeal stage. 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 ...........'
20. But we think that what emerges from a conspectus of the case-law is that the proposition in Leary's case is too broadly stated. There are cases and cases and though no general principle or universal validly, valid for all situations, cannot be predicate yet it is possible to say even in cases of statutory or 'Domestic' appeals, that a fair appellate procedure can the infirmity in the original proceedings resulting from breaches of the rules of natural justice. Each case to be decided on its own facts and on the existence of the requisites curative element and factors in the appellate procedure including the natural and width of the appellate jurisdiction; the natural, depth and intensity of the infirmity and the operative remedial factors in the appeal. The rule that where rules of natural justice are concerned, a fair appellate proceeding cannot be substituted for an unfair trail, is one of application in the generally of cases and does admit of and is not inconsistent with a rule of equal validity that a satisfactory appellate procedure might also be a cure. Then again distinctiveness of judicial proceedings must be kept clearly distinguished. The principle that an appropriate appellate procedure is and can be creative, in our opinion, operates a fortiori in context of purely judicial proceedings, if there is, as of right, an appeal on facts and law to an appellate forum with plenary appellate jurisdiction co-extensive with that of the original Court if the aggrieved party had a full opportunity of presenting its whole case and a decision on merits made.
Since some sustenance to the basis of the proposition could be had from the decision of the House of Lords in Calvin v. Carr. (supra), we might refer to that case here.
Mr. Calvin, part-owner of a race horse called 'court Mayo' from New Zealand, and Mr. Peter William Cuddihy its Jocky, were accused by the stewards of the Randwick Racecourse, that the horse, which was a hot favourite, had not been 'run on its merits' on 13th May, 1976, the day of its first public appearance in Australia. After some enquiry, the Stewards disqualified Mr. Calvin and Mr. Cuddihy for breach of rule 135 (a) of the Australia Jockey Club Rules of Racing. Both Mr. Calvin and Mr. Cuddihy appealed to the Committee of the Jockey Club according to the procedure laid down in the Rules of Racing. After affording ample opportunity to the appellants to present their case and cross-examine the witnesses, the committee dismissed the appeals. Thereafter, Mr. Calving brought an action for a declaration that the disqualification was void and for a consequential injunction. It was urged for the plaintiff that the Steward's enquiry was vitiated by breach of natural justice and was therefore void and that there could be no appeal from 'void' decision. Mr. Calvin's action failed.
The Judicial Committee, in appeal held on the second aspect that though a decision reached on branch of rules of natural justice might for certain purposes, he void, it was nevertheless susceptive of an appeal.
On the first aspect, the Privy Council held that though there was no general rule as to whether appellate court could cure a delete due to a failure of natural justice in original proceedings, however, since the disputes and the discipline in that case were in a consensual category and since on the facts, the committee had given the plaintiff's case a full and fair consideration over-all, any failure of natural justice by the stewards at the inquiry stage, became irrelevant.
21. Referring to the observation of Megarry. J. in Leary's case that 'a failure of natural justice in the trial body cannot be cured by a sufficiency of natural justice in an appellate body', the Privy Council observed :
'In their Lordships' opinion this is too broadly stated. It affirms a principle which may be found correct in a category of cases ......'
'.... Whether these intermediate cases are to be registered as exceptions from a general rule, as stated by Megarry, J., or as a parallel category covered by a rule of equal status, is not in their Lordships' judgment necessary to state, or indeed a matter of great importance. What is important is the recognition that such cases exist and that it is undesirable in many cases of domestic disputes, particularly in which an inquiry and appeal process has been established, to introduce too great a measure of formal judicialisation.'
22. It is no doubt true that the analogy of the principles in Calvin's case is not complete and that these observations were made in a case where the parties were held, by consensual principles of a domestic jurisdiction, to be found by the Committee's fair decisions and in that view, any earlier failure of natural justice by the stewards became, irrelevant.
It is also true that any over-emphasis on the curatives for breach of natural justice might attract, and perhaps justify, the criticism that the Court may be tempted to emphasise not on the rights of parties but on only the remedies.
The view that a fair appellate procedure can, in a conceivable case, be a cure for an unfair trial does not tend to belittle the imperatives of a fair procedure at both stages. It may also be said that in a case where there is failure of natural justice in the original proceedings, the 'appeal' ceases to be an appeal and reduces itself to a corrected original hearing and no appeal.
It is, no answer also to a complaint of breach of the audi alteram partem rule that the same decision would in any event, have been reached even after the hearing.
The principle that in judicial proceedings a full pledged appellate hearing where opportunity is afforded to an aggrieved party to present his case and evidence and the appellate Court in exercise of a jurisdiction, co-extensive with that of the original jurisdiction, decides a matter on the merits, then the consequences of non-compliance of rules of natural justice in the original proceedings may be held to have been cured, is a recognised principle. We think this principle should operate here.
That such a curative principle is so recognised in law, is inferable by the implications of the following observations of the Supreme Court in State of Bihar v. Mohamadnooh, reported in A.I.R. 1958 S.C. 86 :
(11) On the authorities referred to above it appears to us that there may conceivable be cases - and the instant case is in point - where the error, irregularity or illegality touching jurisdiction on procedure committed by an inferior court or tribunal of first instances is so patent & loudly obtrusive that it leaves on its decision and indelible stamp of infirmity or vice which cannot be obliterated or cured on appeal or revision. This would be so all the more if the tribunals holding the original trial and the tribunals hearing the appeal or revision were merely department tribunals composed of persons belonging to the departmental hierarchy without adequate legal training and background and whose glaring lapses occasionally come to our notice ............'
Again, Bernar Schwartz in 'the Text Book of Administrative Law', at page 209, says :
'Where the requisite due process hearing is not included in the ....... administrative process, it may be adequately supplied by a judicial proceeding in which new evidence may be supplied and full opportunity afforded for exploration of the bases of the disputed order. This does not mean that, as justice Douglas asserted, judicial review satisfies the requirements of procedural due process. If, as Douglas implied, an agency need never afford a hearing whenever judicial review is available, this all but does away with the right to be heard as a constitutional requirement, since judicial review is almost always available in our administrative law. Judicial review should serve as a substitute for an agency hearing only where it is broad enough to allow the private party to present his case adequately with full opportunity to submit evidence and arguments. In addition, the court must be able to decide the merits of the case on its own independent judgment; where due process requires a hearing it must be on the merits of the controversy.'
There may however, be cases where this rule may not operate. General rule, of course is insistence on compliance with the rules of natural justice at both stages.
23. In the present case, the grievance of the appellant-union is that it was not heard by the learned Company Judge before making the order. In appeal, we have heard the appellant fully and considered all its contentions. It is not the case of the appellant that it has or had any material or evidence other than that was placed before us in appeal. The appellate jurisdiction is co-extensive with the original jurisdiction and the appellant has availed himself of this jurisdiction. The jurisdiction we exercise in this appeal is not akin to judicial review where, generally speaking, what is examined is not the decision but the decision making process. This appeal is both on facts and law akin to a first-appeal under the Code of Civil Procedure. An appeal is a continuation of the original proceedings; in effect, the entire proceedings are before the appellate court and it has the power to review the evidence. The right of appeal is one of entering the appellate court and invoking its aid and interposition to redress the error of the original proceeding. In these circumstances, we think that we ought to hold that the defect in the original proceedings before the Company Court is cured.
24. It is also to be noticed that no winding-up order is yet made. It is open to the workmen to urge all contentions which are relevant to be taken into account at that stage before the company court.
25. In the result, we hold that the order directing advertisement of the winding-up petition does not call for interference in appeal.
26. The appeal is, accordingly dismissed but without an order as to costs.