45 AA – Part V: And, the ire of the British Judges on the law-makers

Law making is always a serious matter. But, it had been done in a casual manner when the Amendments were made in the year 2010 in the ESI Act, 1948. Sec. 45AA of the ESI Act is not an example to be emulated but a warning to be shunned by any organization that wants to have an in-house Appellate Authority. The ESI authorities did not care for the consequences of their proposal. The Advice department of the Ministry of Law, simply, did not pay attention to the subtleties of law. The Parliamentary Standing Committee on Labour which examined the proposal for amendments was cheated. The Members of Parliament, as usual, concentrated on the ‘Sibu Soren issue’ with gusto and created a furore in the House and allowed the ESI Amendment Act to sail through, amidst din,  without any discussion.

No compulsion to explain

We have so far published four posts on Sec. 45 AA alone. Some more analysis is due. This week we deal with the admissibility of new evidence or additional evidence by the Appellate Authority under Sec. 45 AA.  Proper course of action for an Appellant to produce new or additional evidence before any Appellate Authority is to produce evidence before the Appellate Authority as to why the said evidence could not be produced by him, earlier, before the concerned authority which passed the original order.

Such a provision is available in Sec. 7B (4) (b) of the EPF Act, 1952 for entertaining the new or additional evidence on Review. This provision says “no such application shall be granted on the ground of discovery of new matter or evidence which the applicant alleges was not within his knowledge or could not be produced by him when the order was made, without proof of such allegation.” But, in the ESIC there is nothing in the Act, to that effect. Instead of the Regulations referred to in Sec. 45AA, the process of administrative law-making had been resorted to. The administrative instructions issued, thus, on 04.11.2010 in an improper manner, gives a carte blanche to the Appellate Authority in this regard.

Rule 29 of the Income Tax Appellate Tribunal Rules, 1963 says, “The parties to the appeal shall not be entitled to produce additional evidence either oral or
documentary before the Tribunal, but if the Tribunal requires any document to be produced or any witness to be examined or any affidavit to be filed to enable it to pass orders or for any other substantial cause, or, if the Income-tax authorities have decided the case without giving sufficient opportunity to the assessee to adduce evidence either on the points specified by them, or not specified by them, the Tribunal for reasons to be recorded, may allow such document to be produced or witness to be examined or affidavit to be filed or may allow such evidence to be adduced.”

Consequences of the carte blanche

“The appellant may not be permitted to file additional evidence. However, the appellate Authority may at their discretion permit or disallow such additional evidences submitted by the appellant, for the reason recorded in writing”, says Para 7 of the Hqrs. instructions dated 04.11.2010.

This can make the entire proceedings under Sec. 45 A a mockery. An employer need not produce many things before the original quasi-judicial authority. He can produce them later before the 45 AA Appellate Authority. Or, if the order of the 45 A authority was not to his liking, he can plead before the 45AA authority to order re-hearing  the case as he can produce some more documents. The proceedings under Sec. 45 AA need not be taken seriously by the employer and consequently the Branch Officer and his Branch would be wasting their time issuing a 45 A order which would, mostly, be remitted back with directions for considering further evidence. It has been left to the discretion of the Appellate Authority. He is not required even to ask how and why the employer did not produce the new evidence or additional evidence when the hearing took place under Sec. 45 A.

This kind of anomaly is not there in any statute in India that deals with the powers of the Appellate Authority. We have already cited the relevant provisons of EPF Act, 1952  and the I.T. Act in this regard.  The discretion here in the ESI Act is unlimited and arbitrary. Unless the Appellate Authority takes personal care to maintain a system for himself, he will soon find himself drawn before the Courts of Law for exercising his discretion in different ways in different cases. Yet, his arbitrary discretions and contradictory decisions can be impeached only by citing the provisions of equity and equality. There is no safeguard in-built in the ESI Act, 1948.  The amended provision is so loosely worded.

Discretion sky high

1. “Blanket discretionary power” has been held to be unconstitutional in State of  Bihar Vs. K.K. Mishra 1969 3 SCC 337 and Khwaja Ahmed Abbas Vs. Union of India  1970 2 SCC 780);
2. “Unguided discretionary power” has been held to be unreasonable in (Himat Lala K Shah Vs. Commissioner of Police 1973  1 SCC 227);
3. “Wide discretionary power” (State of Madras Vs. V.G. Row 1952 AIR SC 1976) is unconstitutional because it allows the administrative authority to exercise this discretion on subjective satisfaction without permitting the grounds to  be judicially tested;
4. “Wide discretion without procedural  safeguards” had been held as unconstitutional in State of M.P Vs. Bharat Singh AIR 1967 SC 1170.
   (Page 68- Administrative Law – I.P.  Massey)
5. “Vague expressions may result in the arbitrary exercise of power”   (Harakchand Ratanchand Banthia Vs. Union of India 1969 2 SCC 166)                                             (Page 69- Administrative Law – I.P.  Massey)
6. Exercise of discretionary power can be set aside if there is manifest error in the exercise of such power or the exercise of such power is manifestly arbitrary or mala fide or unreasonable. The caste based hierarchic view of administrative responsibility to presume that ‘high’ authority is unlikely to use its discretionary power injudiciously or arbitrarily is a presumption that is certainly conjectural and not tenable.
   (State of Punjab Vs. Dial Chand Gian Chand & Co. – AIR – 1983 referred to in Page 78- Administrative Law – I.P.  Massey)
7. “While the technique of administrative rule-making is to serve its laudable task, the norms of the jurisprudence of delegation of legislative power must be dutifully observed. These norms include a clear statement of policy, procedural safeguards and control mechanisms”.
   (Page 87- Administrative Law – I.P.  Massey)

But, before uploading further posts on other important aspects on this issue, it is felt appropriate to recall what two famous British jurists have said about the law made by Parliament without adequate analysis of the issues involved.

Impose costs on the draftsmen and the M.Ps.

Lord Justice Scrutton says the following in Roe vs. Russel (1928):

“I regret that I cannot order the costs to be paid by the draftsmen of the Rent Restriction Acts, and the members of the Legislature who passed them, and are responsible for the obscurity of the Acts.” (Page 94- The Closing Chapter – Lord Dennings).

The Act passed by the British Parliament was so ambiguous that Lord Scrutton regretted his inability to impose penalty (cost) on the persons who brought into existence such a loosely drafted law.

Proper analysis before making law

Another Judge Sir Ernest Gowers who said the following in the Plain Words case in the year 1948 as the duty of the draftsmen (Page 95 ibid.):

“…. to try to imagine every possible combination of circumstances to which his words might apply and every conceivable misinterpretation that might be put on them, and to take precaution accordingly. ….All the time he must keep his eyes on the rules of legal interpretation and the case law on the meaning of particular words [and on the previous statutes on the same subject-matter] and choose his phraseology to fit them.”

Indians,  who are  said to have adopted the British system of governance more, have to travel a longer distance, still, to demonstrate that they are capable of framing laws in a proper manner.