Reasoned orders and judgments: Authorities, Tribunals, Courts and even Supreme Court must pass reasoned and speaking order.

[C.A. DEV KUMAR KOTHARI]

Summary

Courts, Tribunals and Officers must pass reasoned and speaking order for expeditious justice in a meaningful manner. This is required because the orders may be amenable to revision by or appeal before higher authorities and courts. Orders passed by an authority without giving sufficient details of facts, applicable law, reasoning are called cryptic orders and such orders pose difficulty in further consideration in future by the same authority or any senior authority or Court. The reasons must be conveyed. Even in case of appeal before Supreme Court where there is no further appeal we find that the reasons and grounds for allowing or not allowing the appeal and disapproving judgment of high court or dismissing the appeal and approving judgment of the high Court etc. become important because the order of the Supreme Court is to be followed by lower Courts and therefore, particular reasoning must be understandable by the courts and public as well so that one can understand how far that judgment is applicable in other cases. However, many times we find that even judgments of the Supreme Court needs to be interpreted and different courts interpret the same in different manner. Now-a-days, even judgments of the Supreme Court are many times reviewed by larger bench, for this reason also the judgment of the Supreme Court must also be reasoned and speaking.

The matter is discussed in light of a recent judgment of the Supreme Court, in which the Supreme Court set aside the non reasoned and non speaking order of Rajasthan High Court to decide the matter afresh swith reasons.

Purpose of speaking orders and judgments:

In judicial system various orders and judgments are required to be in written form. These orders and judgments are very much different from petty and even substantial social or financial disputes, which are settled mutually by parties themselves or through intervention of friends, because in those cases, the implementation of settlement is immediate and such settlements have no precedence value for public. Whereas an administrative order or judicial judgment is required to be in writing and reasoned for the reason that it is serious dispute between parties which is not settled mutually by consent, it can be challenged in an appeal or by way of prescribed petitions, it can be reviewed and it can have value of precedence for public at large.

Laws are complex so the facts may be. In different facts the same law may be applied differently. Therefore order or judgment is derived based on facts and circumstances, common sense and the applicable law.

It is true that some judgment could be complex, whereas some are of routine type. Deeper thoughts are required in case of complex matter, the routine matter can be disposed of easily. However, both should be reasoned. Purposes of the judgment, inter alia include:

(1) To clarify the facts and circumstances ( it can be by merger of order of lower authority, if that contains full facts and circumstances). These can further be classified as undisputed facts and disputed facts, if any.

(2) To ascertain applicable law- the judgment must be based on correct applicable law,

(3) To state contentions of parties to the suit,

(4) To clarify thoughts of the judges;

(5) To explain decision to the parties;

(6) To communicate the reasons for the decision to the public; and

(7) To provide reasons for an appeal Court to consider, in case of appeal against judgment or its review.

It has been held by courts that failure to give reasons may amounts to denial of justice. Reasons are really linchpin to administration of justice. They are link between the mind of the decision taker and the controversy in question. To justify conclusion in judgment, reasons are essential. Absence of reasoning would render the judicial order liable to interference by the higher Court. Reasons are the soul of the decision and its absence would render the order open to judicial chastism.

The consistent judicial opinion is that every order determining rights of the parties in a Court of law ought not to be recorded without supportive reasons. Issuing reasoned order is not only beneficial to the higher Courts but is even of great utility for providing public understanding of law and imposing self- discipline in the Judge as their discretion is controlled by well established norms.

Orders of officers or courts

While implementing any enactment the appointed officers and Courts pass orders, which may affect interest of concerned parties. The orders may be amenable to revision by or appeal before higher authorities and courts. The order can also be amenable to rectification or review in some circumstances by the authority that passed the original order. Therefore, an order passed by an officer or a Court can be subject to further proceedings at the instance of the authority who passed the order, or at the instance of some senior authority or Court or at the request of concerned parties by way of application before the authority passing the order or before higher authorities or Courts having jurisdiction for appeal, review, revision etc.

Requirement of a reasoned and speaking order

As discussed in earlier para, in view of possibilities of further proceedings it is imperative that any order passed by the authority or court must give facts, reasons and decision in speaking term so that at the time of further proceedings there is no difficulty in ascertaining the facts of the case, related issues and grounds and reasons behind the order as considered by the authority while passing the order.

Cryptic orders pose difficulties

Orders passed by an authority without giving sufficient details of facts, applicable law, reasoning are called cryptic orders and such orders pose difficulty in further consideration in future by the same authority or any senior authority or Court. Therefore, it becomes difficult to consider the matter in a reasonable manner in future.

The reasons must be conveyed

The concerned party should also know the reasons for which his claims or rights are denied or rejected wholly or partly. An order adverse to the party which is not a speaking order will pose great difficulty to the concerned party in understanding why he has been denied certain benefits or advantages or why his application or appeal is not allowed. Therefore, it will be difficult for him to understand the reasons for not getting relief. Therefore, in such situations principle of natural justice cannot be said to be satisfied. For these reasons requirement of recording of reasons and communication thereof are considered as an integral part of the concept of just and fair judicial procedure and are very important facets of natural justice.

Possibility of judicial review

The order passed by an administrative authority can be subject to judicial review by the High Court under Article 226 and by the Supreme Court under Article 32 of the Constitution. Acting under this provision the Courts have the power to quash by certiorari a quasi judicial order made by any administrative officer and this power of review by the Courts can be exercised properly only if the administrative officer has passed a speaking order giving the details of facts, reasons, and conclusions. In absence of any such reasons given in the order it will be difficult for the Courts to examine the correctness of the order under review. In absence of speaking order the power of judicial review would be insidious and would encourage to arbitrariness and capsize. Only when the administrative authorities are insisted upon and required to pass reasoned and speaking order that they will be subject to judicial scrutiny and correction.

Routine / settled matters - reasons for applicability is required:

Sometimes authorities or Courts feel that the subject matter or decision to be taken thereon is a routine matter and do not require elaborate discussions. However, in that case also it is necessary that the facts of the case should be mentioned and the reasons and conclusion can be given in a brief manner referring to the settled legal position. However, reasoning as to applicability of settled legal position, in some other cases is to be fairly examined by the authority. Therefore, the reasons for applying some other judgments must be given with reference to the facts of the case. Otherwise the order will be lacking the quality of speaking order.

Non-speaking order may be set aside causing difficulties, loss of time and costs to the parties to the suit and some times justice delayed is justice denied will prove

If the authorities do not pass reasoned and speaking order the superior Court may have to send back the matter to the lower authority for passing a speaking order and thereby the entire proceeding starts again. This causes loss of time and money to the public as well as the exchequer. This is not desirable in the interest of justice and particularly in the interest of expeditious justice. Therefore, by exercising a little care by giving, though briefly facts, reasons, applicability of law, applicability of other rulings, etc. the administrative officers can do a good service to the public so that their orders are understandable by the concerned parties and also senior authorities and Courts.

Appeal

Similarly under the provisions of any tax law there are several appeals provided. The appellate authorities considers the order of lower authorities, material on record, submission and arguments of the parties to the case and decide the appeal in which the order of lower authorities can be confirmed, modified, revised or set aside as per the law and facts and circumstances in particular case.

The order may be further appealable:

Order of appellate authority may be further appealable before a further senior court and therefore it becomes necessary that the order in appeal must be also give the facts and circumstances of the case and reasoning for allowing or disallowing the claims made by the parties. Even in case of appeal before Supreme Court where there is no further appeal we find that the reasons and grounds for allowing or not allowing the appeal and disapproving judgment of high court or dismissing the appeal and approving judgment of the high Court etc. become important because the order of the Supreme Court is to be followed by lower Courts and therefore, particular reasoning must be understandable by the courts and public as well so that one can understand how far that judgment is applicable in other cases. Furthermore, we find that in many cases, the judgments of the Supreme Court are also reviewed by a larger Bench of Supreme Court or Constitutional Bench on the same issue and there are many cases where the judgments rendered by the Supreme Court through the Bench of two or three judges is revised, modified or different opinion is expressed by the larger Bench. Therefore, even at the stage of the appeal before the Supreme Court it has become important that the Supreme Court records its own reasoning and grounds for allowing or disallowing the appeal.

Restoration of matter

In case of cryptic orders it becomes necessary for the higher authority or Court to restore back the matter to the lower authority or Court for fresh decision after consideration of relevant material. Sometimes, further opportunity of hearing is also required to be offered to the concerned parties. Therefore, this causes a new chain of proceedings and litigation. To avoid such happenings it is desirable that the authority or court must at least briefly state the facts, reasoning and grounds for allowing or not allowing the relief.

The rule of natural justice

The rule of natural justice inter alia requires that every judicial or quasi-judicial authority must pass a reasoned order reflecting application of mind by the concerned authority to the issues and points raised before it. The requirement of recording of reasons and also communication thereof to the concerned parties is an integral part of the concept of fair procedure. In our constitutional set up the giving of reasons while passing order becomes necessary to meet the requirement of rule of law, which is one of corner stone of, the constitutional set up.

Recent judgment of Supreme Court:

Asstt. Commissioner, Commercial Tax Deptt. v. Shukla & Brothers [2010 -TMI - 76374 - SUPREME COURT OF INDIA]

This judgment is in an appeal under Article 136 of the Constitution of India against the Judgment dated 29th February, 2008 passed by Rajasthan High Court , Jaipur Bench in a Sales Tax Revision Petition. The impugned Order reads as under:-

"After having carefully gone through the material on record, since after due consideration proper discretion has already been used by the Deputy Commissioner (Appeals) as also Rajasthan Tax Board, in the facts and circumstances, no further interference is called for by this Court. The revision petition is dismissed accordingly as having no merits."

In the appeal before the Rajasthan High Court the following important questions of law were raised:-

A. Whether the Rajasthan Tax Board Ajmer was justified in dismissing the appeal of the petitioner in the facts and as mentioned above?

B. Whether the iron rolling shutters & doors were fixed by the assessee on the shops are taxable or not, when no tax was paid by the assessee on the construction of iron rolling shutters and doors?

The Supreme Court observed and held on the following lines:

No order on merits:

Supreme Court did not comment upon the correctness or otherwise of the contentions of law raised before the High Court in the present petition.

Expectation from High Court:

It was certainly expected of the High Court to record some kind of reasons for rejecting the revision petition filed by the Department at the very threshold.

Expectation of litigants: a litigant has a legitimate expectation of knowing reasons for rejection of his claim/prayer. It is then alone, that a party would be in a position to challenge the order on appropriate grounds.

For benefit of higher authority or court:

Arguments bring things hidden and obscure to the light of reasons, reasoned judgment where the law and factual matrix of the case is discussed, provides lucidity and foundation for conclusions or exercise of judicial discretion by the courts.

Reason is the very life of law. When the reason of a law once ceases, the law itself generally ceases (Wharton's Law Lexicon). Such is the significance of reasoning in any rule of law.

To advance cause of justice:

Reasoned order furthers the cause of justice as well as avoids uncertainty it helps in the observance of law of precedent.

Lack of reasons introduces an element of uncertainty, dis-satisfaction and give entirely different dimensions to the questions of law raised before the higher/appellate courts.

The court should provide its own grounds and reasons for rejecting claim/prayer of a party whether at the very threshold i.e. at admission stage or after regular hearing, howsoever precise they may be.

Obligations of court to record reasons:

Our procedural law and the established practice, imposes unqualified obligation upon the Courts to record reasons. There is hardly any statutory provision under the Income Tax Act or under the Constitution itself requiring recording of reasons in the judgments but it is no more res integra and stands unequivocally settled by different judgments of the Supreme Court holding that, the courts and tribunals are required to pass reasoned judgments/orders.

Order XIV Rule 2 read with Order XX Rule 1 of the Code of Civil Procedure requires that, the Court should record findings on each issue and such findings which obviously should be reasoned would form part of the judgment, which in turn would be the basis for writing a decree of the Court.

After discussing various judgments rendered in India elsewhere on issues of reasoned orders the Supreme Court in context of the order/ judgment of Rajasthan high Court under consideration observed and held as follows:

There is no infirmity in the arguments advanced on behalf of the Department, that no reasons have been recorded for rejecting the contentions raised.

The legal infirmity of lack of reasons has, in fact, prejudicially affected the case of the appellant.

The judgment of the High Court must speak for itself to enable the higher Court (Supreme Court in this case) to do complete and effective justice between the parties.

For the reasons afore-recorded the Supreme Court set aside the order dated 29th February, 2008 and remitted the case to the High Court with a request to hear the case de novo and pass appropriate order in accordance with law and therefore the appeal was allowed to that extent.

Some examples of non-speaking orders causing difficulties and further litigation:

Simple case restored by the High Court CIT v. Palwal Co-operative Sugar Mills Ltd. [2008 -TMI - 9682 - PUNJAB AND HARYANA High Court]

In this case the matter of application of S. 43B on account of production incentive (may be distributed as bonus) was concerned. The assessee claimed the deduction on actual payment basis under section 43B. The assessing officer disallowed the claim under section 43B in the year of payment i.e. in a year other than the year of accrual. The Ld. CIT (A) allowed the same u/s 43B without giving any reason; the Tribunal also confirmed the order of the CIT (A) but without giving any reason. In this case it was necessary to examine whether the production incentive was in nature of bonus to which section 43B can be applied. However, from the order of the CIT (A) as well as the Tribunal it appears that no such exercise was made or in any case from the order it was not revealed that how the CIT (A) and the Tribunal considered the production incentive as bonus and allowed claim in the year of actual payment.

In such circumstances, the High Court held that the orders of the Tribunal and CIT (A) grossly violated the rule of natural justice and the orders do not meet the requirement of speaking order and the orders passed by the Commissioner of appeals and Tribunal were set aside and the case was remanded to the Commissioner (Appeal) for fresh adjudication.

Production incentive - different approach by assessing officers

It is surprising that the Revenue Authorities applied different standards when case comes about the same thing but the result may be different. It seems in this case the assessing officer did not allow production incentive as bonus in the year of actual payment as claimed by the assessee because application of section 43B would have resulted in to reduction of income of the assessee whereas in many cases the assessing officers used to disallow production incentive as bonus in the year of accrual (but not actually paid) by applying section 43B e.g. see CIT v. Kisan Sahakari Chini Mills Ltd. 284 ITR 418 (All) in which productivity bonus was held to be subject to S. 43B. Therefore, when matter comes to disallow for non-payment section 43B is applied and when matter comes for allowance on actual payment basissection 43B is not applied by the A.O. This is really not just and fair on the part of the authorities that are acting under a central legislation.

Vipul Fashions P. Ltd. v. Assistant Commissioner of Income tax 2008 -TMI - 9705 - GUJARAT High Court In this case it was held that in an appeal before the Appellate Tribunal, it is duty of Tribunal to give reasons for its decision while passing an order on the appeal as required under the Income-tax Act, 1961, vide section 254. It is necessary that every fact for and against the assessee must have been considered with due care and the Tribunal must have given its finding in a manner which would clearly indicate what were the points for determination before it, and what was the evidence pro and contra in regard to each of the issues and what were the findings reached on the evidence on record before it. When the Tribunal was to consider and decide, whether, the order made of the first appellate authority was correct or not, the assessment order had already merged in the order of the Commissioner (Appeals) and had no independent existence. Therefore, in case the Tribunal was inclined to reverse the order of the Commissioner (Appeals), it was necessary for the Tribunal to record, though may be in a brief manner, the reasons for the same. The order of the Tribunal nowhere reflected as to why the basis on which the Commissioner (Appeals) accepted the explanation of the assessee was not correct. Therefore the High Court set aside the order and remanded the matter for fresh consideration.

In Nirman Textile Mills P. Ltd. v. Assistant Commissioner of Income-tax 2008 -TMI - 9704 - GUJARAT High Court also it was held that Tribunal needs to record reasons while reversing order of Commissioner (Appeals). In this case the Commissioner (Appeals) accepted retraction of assessee from statements recorded at the time of survey and produced evidence for such retraction and deleted additions. On revenues appeal the Tribunal restored additions but did not made any discussion of evidence and reasons why retraction coupled with evidence accepted by the Commissioner (appeals) was not acceptable to the Tribunal. Such approach was held to be improper and the High Court remanded the matter to the Tribunal.

Conclusions:

The officers and courts must pass reasoned and speaking orders in the interest of justice and also to meet expectations of the public and litigant. The above instances shows that a simple carelessness or laxity on the part of authorities passing any order without mentioning facts, circumstances, and reasons for deciding any matter in a particular manner can adversely affect the concerned parties by starting afresh a new set of procedure and new chain of litigation. By giving a reasoned order in speaking terms the officers and courts can really do wonderful job in the interest of expeditious justice.