Is it true that our legal system is founded on the premise that no court can do justice? (Read the arguments notes by Shri Nedumpara in challenge of Section 14 of the SARFAESI Act)



  1. Brevity is the soul of wit, said Shakespeare. I would therefore like to keep the instant argument note as brief as possible. I do so for more than one reason.
  2. It is a travesty of justice that today in the 21st century when even jurisdictions other than civil law and common law countries have accepted the observance of the principles of natural justice fundamental, we in India increasingly trample the very first principles.
  3. The Petitioners, MSMEs were constrained to seek a declaration at the hands of this court that Section 14 of the SARFAESI Act which empower the Chief Metropolitan Magistrate/ District Magistrate to take forceful possession of a property of a borrower as unconstitutional because in gross violation of the fundamental principle of law that it is not necessary for the legislature to expressly state in every statute that the powers conferred upon an authority ought to be exercised observing the principles of natural justice since such an obligation ought to be read into the statute, the Magistrates across the width and breadth of the country order forceful taking of possession of a borrower’s property without notice to him, nay, without hearing him.
  4. The obligation to observe the principles of natural justice is as old as the very classical Roman law itself, which is one of the principal sources of common law, which is the law of the land in terms of Article 372 of the constitution.
  5. The Roman lawyers considered the failure to observe the principles of natural justice as a grave error which would render a judicial proceedings void ab initio, non est and stillborn. Qui statuit aliquid, parte inaudita altera, æquum licet statureit, haud æquus est, namely, he who decides anything without the other party being heard though does right does wrong, said Seneca.
  6. The doctrine of ‘res judicata estoppel’ is the foundation of our justice delivery system. The Roman lawyers believed that no judge can ascertain the facts or apply the law to the facts correctly, nay, no man-made institution can unfailingly do justice. In other words no judge can do justice. Only the Pope claimed infallibility.
  7. Ulpian one of greatest of Roman lawyers who lived in the first century AD used a metaphor to elucidate the principle that no court can do justice, at least always. He said Res judicata facit ex albo nigrum, ex nigro album, ex curvo rectum, ex recto curvum. A thing adjudged makes what was white, black; what was black, white; what was crooked straight; what was straight, crooked.
  8. The observance of the principles of natural justice therefore was no obeisance to a useless formality, but an acknowledgment of the limitations of judges, as fallible human beings to do justice- that no judge can assuredly qascertain the fact, nay, truth and apply the law.
  9. The doctrine of ‘res judicata’, sometimes metaphorically put as “fiat justitia ruat caelum” would even mean that an innocent man whom a court has erroneously found to be guilty of murder and sentenced to be hanged, shall hang. Because, the fiat or authority or the decree of a court ought to be enforced regardless of the consequences. Otherwise, legal system cannot function. ‘ Interesto republico ut sit finite litium’,namely, it is in the interest of the republic that there is finality of litigation, said Ulpian.
  10. To constitute a judicial decision as res judicata, the very foundation on which our legal system is built, four conditions should be met namely,
    A) the court shall have jurisdiction of the subject matter.
    B) the court ought to have observed the principles of natural justice, heard both the parties to the lis.
    C) the cause of action should have been adjudicated on its merits.
    D) the cause of action of the previous litigation and the current one ought to be the same.
  11. A judicial decision, right or wrong is final, authoritative and binding between the parties, provided all the four ingredients which constitute the doctrine of res judicata are present, the most important being the observance of doctrine of ‘audi altarem partem’. Where a court has not observed the principles of natural justice, the judgment is one rendered void ab initio, stillborn, which never existed in the eye of law (Ridge vs. Balwin, Antulay, Menaka Gandhi, Kiran Singh, Nawab Khan, etc).
  12. These are first principles of jurisprudence, of which there can be no two opinions. Unfortunately, a large number of judgments have been rendered by various high courts holding that the Magistrates exercising power under Section 14 of the SARFAESI Act need not observe the principles of natural justice. All these judgments are rendered per incurium, contrary to the first principles of jurisprudence and do not constitute binding precedents. The said judgements which are per incurium may be binding to the parties to the lis as ‘res judicata’. We are not presently concerned about that aspect.
  13. Why do the various high courts, for instance the Bombay High Court in Trade well, happen to render judgements which are per incurium, being contrary to the first principles? The reason is simple and at the same time will shock any rational human being. It is so unfortunate and painful. Our lawyers, particularly those practicing in the Supreme Court fail to note the distinction between the doctrines of res judicata and stare decisis. That is the simple reason and because of that a large number of judgements of the Supreme Court are rendered contrary to the first principles of jurisprudence.
  14. Res judicata as aforesaid is that a decision of a court of competent jurisdiction in a case between A and B howsoever erroneous it could be is final, binding and authoritative provided the principles of natural justice was observed. If four out of five judges hold that one plus one is zero, though the decision is manifestly wrong, is binding res judicata. Because a judge is free to err on finding of facts.
  15. Unfortunately the concept of the strength of the bench and the authoritativeness of the decision of the majority, a concept which belonged to the province of res judicata is being imported, erroneously by our lawyers to the province of ‘stare decisis’. The concept of stare decisis, nay, the ratio decidendi, the reason for the decision was substituted by the strength of the bench. We contrary to the first principles consider Kesavananda Bharati as binding precedent not because of the validity of the reason but it was a judgment of the majority of 7 judges of bench of 13.
  16. Why do all these misconception prevail? Because Article 141 has been misunderstood. As a result, judicial decisions have become de facto legislations. What a tragedy, what else to say!
  17. Because the concept of precedent has been misunderstood, erroneous decisions in a case between A and B that 1+1 is zero has become binding as precedent in a future case between C and D who were not parties to the lis between A and B, nay, even to the posterity. There can be no quarrel in it being binding on A and B who were parties to the case.
  18. Look the sorry state of affairs, today. Even contempt of court cases were initiated against subordinate judiciary for violating the “binding judgements of the High Court and Supreme Court”. The fact that precedent is the reason for decision and not the decision on the facts was forgotten. That judicial decision will bind only the parties to the case are forgotten. The resultant scenario is terrifying. We live in an era where nobody knows law and the litigation is nothing but gathering a large number of judgements which often cannot stand together. The arguments are stretched to days and judgements running into hundreds of pages are rendered. Am reminded of the words of Horace, ‘parturient montes nascetur ridiculus mus’.
  19. The current scenario where the Petitioner to his horror is made to face a large number of judgements of the High Courts which declare that the borrower has no right to be heard in a proceedings under Section 14 of the SARFAESI Act is the result of the total misconception of the doctrine of stare decisis, res judicata, so too, of the failure to comprehend the true meaning of the doctrine of election of remedies qua election of forum or procedure.
  20. The genesis of the large number of judgments of the High Courts which hold that the borrower has no right to be heard is certain erroneous observations of the Supreme Court in Transcore. In Transcore, Section 14 did not at all fall for consideration. The only question that fell for consideration was whether notice under Section 13(2) is an “action taken” or not within the meaning of the first proviso of Section 19 of the RDBA 1993. The Supreme Court in Transcore mistook the concept of election of remedies and election of forum and erroneously held that based on the same cause of action multiple proceedings can lay. That decision meant the destruction of the concept of res judicata and the pyramidal structure of administration of justice. In the said judgement the Supreme Court erroneously took the view that the very initial demand notice under Section 13(2) equal to recovery notice under Section 156 of the Income Tax Act which is issued at the recovery stage after adjudication of the lis.
  21. The errors made by the Supreme Court in Transcore would not have caused the damage it did had the High Courts did not mistake Transcore as a binding precedent, considered that they are bound by a catena of judgements of the Supreme Court in Kripack, Menaka Gandhi, Olga Tellis, Antulay, I. R. Coelho, N. Nagaraj, etc. which all had in categorical terms held that the distinction between administrative and judicial function has been obliterated and no matter whether the function is judicial or administrative the principles of natural justice has to be observed, nay, read into the statute.
  22. The High Courts which held that the Magistrate need not hear the borrower had justified the said stand on the premise that the function of the Magistrate under Section 14 is administrative. The function is judicial and administrative, both. However even assuming that it is purely administrative then also the High Courts were bound by the catena of judgements referred above which hold that no distinction can be made between judicial and administrative function if the action results in adverse civil consequences. The judgements of the High Court therefore are all rendered per in curiam.
  23. The High Courts have failed to notice the real distinction between judicial and quasi-judicial functions. Where there is a lis involved, namely, assertion of a right or obligation by one as against the other and the denial of the same which will render it necessary for both parties to aduce evidence in support of their case as well as to contradict the case appearing against them is judicial. A quasi-judicial function contrary to the common misconception involved no adjudication of lis, for instance, an enquiry conducted by a commission headed by a judge to decide where an airport is to be located is a quasi-judicial enquiry.
  24. Section 14 of the Act mandate authorized officer to file an affidavit asserting inter alia – existing of a mortgage, failure to service the account, service of the notice demanding payment and the like which certainly involved determination of a lis though on a narrow domain. Therefore, in such an enquiry the borrower has the right to be heard and where it has been denied to him the enquiry is one rendered void ab initio. To repeat, even assuming the enquiry was purely administrative which it is not then also the Magistrate is duty bound to observe the principles of natural justice as he is bound by the ratio of the large number of judgements of the Supreme Court stated above, particularly Kripack, Menaka Gandhi, Antulay, IR Coelho, M .Nagaraj etc.
  25. Therefore interest of justice requires that this Court be pleased to hold that the obligation toi observe the principles of natural justice is liable to be read into Section 14 of the SARFAESI Act, or otherwise declare it to be unconstitutional.

    Mathews J Nedumpara