A quasi-judicial authority has a duty to disclose the material of adjudication

IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
Dr. Dhananjaya Y. Chandrachud; Sanjiv Khanna, JJ.
Civil Appeal Nos. 487-488 of 2022; February 18, 2022
T. Takano Versus Securities and Exchange Board of India & Anr.
The two judge bench held as below

Principles of Natural Justice - Quasi Judicial Authority - A quasi-judicial authority has a duty to disclose the material that has been relied upon at the stage of adjudication - An ipse dixit of the authority that it has not relied on certain material would not exempt it of its liability to disclose such material if it is relevant to and has a nexus to the action that is taken by the authority. In all reasonable probability, such material would have influenced the decision reached by the authority - The actual test is whether the material that is required to be disclosed
is relevant for purpose of adjudication. If it is, then the principles of natural justice require its due disclosure. (Para 39)

Principles of Natural Justice - Quasi Judicial Authority - The disclosure of material serves a three- fold purpose of decreasing the error in the verdict, protecting the fairness of the proceedings, and enhancing the transparency of the investigatory bodies and judicial institutions. (Para 51)

SEBI (Prohibition of Fraudulent and Unfair Trade Practices) Regulations, 2003 - Regulation 9, 10 - Consideration of the report of the investigating authority which is submitted under Regulation 9 is one of the components guiding the Board's satisfaction on the violation of the regulations - the investigation report is not merely an internal document - The Board forms an opinion regarding the violation of Regulations after considering the investigation report prepared under Regulation 9. (Para 21, 51)

SEBI (Prohibition of Fraudulent and Unfair Trade Practices) Regulations, 2003 - Regulation 9 - Whether an investigation report under Regulation 9 of the PFUTP Regulations must be disclosed to the person to whom a notice to show  cause is issued ? - The Board shall be duty-bound to provide copies of such parts of the report which concern the specific allegations which have been levelled in show cause notice. (Para 52)

SEBI (Prohibition of Fraudulent and Unfair Trade Practices) Regulations, 2003 - Where some portions of the enquiry report involve information on third parties or confidential information on the securities market, the Board cannot for that reason assert a privilege against disclosing any part of the report - Board can withhold disclosure of those sections of the report which deal with third-party personal information and strategic information bearing upon the stable and orderly functioning of the securities market. (Para 51)

SEBI (Prohibition of Fraudulent and Unfair Trade Practices) Regulations, 2003 - The right to disclosure is not absolute. The disclosure of information may affect other third-party interests and the stability and orderly functioning of the securities market. It should prima facie established that the disclosure of the report would affect third-party rights and the stability and orderly functioning of the securities market. The onus then shifts to the noticee to prove that the information is necessary to defend his case appropriately. (Para 51)

A. Factual Background
1. By a judgment dated 29 September 2020, a Division Bench of the Bombay High Court dismissed the petition instituted by the appellant under Article 226 of the Constitution for challenging a show cause notice which was issued by the first respondent [SEBI or the Board] alleging a violation of the provisions of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices) Regulations 2003 [PFUTP Regulations]. A petition seeking a review of thejudgment of the Division Bench was disposed of by an order dated 22  October 2020. The appellant moved a Special Leave Petition against the judgment in the writ petition and the order in review. The principal issue is whether an investigation report under Regulation 9 of the PFUTP Regulations must be disclosed to the person to whom a notice to show cause is issued

.....

8. A fresh show cause notice was issued to the appellant on 19 March 2020 under the provisions of Sections 11(1), 11(4), 11(4A), 11B(1) and 11B(2) and 15HA of the SEBI Act and Section 12A(2) read with Section 23H of the Securities Contracts (Regulation) Act 1956 [SCRA] based on the forensic audit report and investigation conducted by the first respondent. With regard to the appellant, it was alleged that :  Mr. T. Takano, during whose tenure the business transactions with FDSL started by virtue of his position as MD & CEO of Ricoh during FY 2012-13 to FY 2014-15, was actively involved in committing the fraud and had knowingly restricted the mandate given to PwC to six month so as to succeed in hiding his role in the commission of fraud of publishing untrue financial statements of Ricoh which resulted in misleading the investors about the financial performance of the
company and thereby resulted in inducement to trades in the scrip. The said acts of the Noticee no. 2 are alleged to be in violation of regulations 3 (b), (c), (d), 4(1) and 4(2)(e), (f), (k) and (r) of SEBI (PFUTP) Regulations, 2003 and clause 49(V) read with 41(Il)(a) of the erstwhile Listing Agreement.
9. The appellant claims that he received the show cause notice by email on 4  August 2020. The appellant responded to the show cause notice on 6 August 2020 stating that though he had received the forensic audit report submitted by Pipara & Co. LLP, he had not received the report of the investigation conducted by SEBI. The appellant sought an opportunity to inspect the following records:
 including but not limited to all material on which reliance was placed Pipara & Co. LLP for the purpose of preparing the forensic audit report, all material on which reliance has been placed while issuing the Show Cause Notice, and on which reliance is intended to be placed while making any adjudication on the Show Cause Notice (material).
10. By its communication dated 13 August 2020, the first respondent stated that the investigation report is an internal document which cannot be shared. The appellant was provided time until 9 August 2020 to inspect the other documents. The first respondent enclosed soft copies of the annexures to the forensic report and called upon the appellant to submit a reply. The appellant reiterated the demand to inspect the investigation report. By an email dated 4 September 2020, the appellant was informed that the investigation report of SEBI was not relied on to issue the show cause notice and hence, would not be provided.
11. The appellant filed a writ petition before the Bombay High Court challenging the show cause notice which was issued on 19 March 2020. In the alternative, inspection of all documents relied on to issue the show cause notice was sought. The appellant submitted before the High Court that to non-disclosure of all relevant documents relied on to issue the show cause notice violated the principles of natural justice

12. By its judgment dated 29 September 2020, the High Court held that the investigation report prepared under Regulation 9 of PFUTP Regulations is solely for internal purposes. In concluding that the investigation report need not be furnished while issuing a show cause notice, the High Court has relied on the decision of this Court in Natwar Singh v. Director of Enforcement, (2010) 13 SCC 255. In sum and substance, the High court has held that the report does not form the basis of the show cause notice and therefore need not be disclosed. The review petition challenging the judgment of the Division Bench of the High Court was rejected
....

C.2 Duty to Disclose Investigative Material
22. While the respondents have submitted that only materials that have been relied on by the Board need to be disclosed, the appellant has contended that all relevant materials need to be disclosed. While trying to answer this issue, we are faced with a multitude of other equally important issues. These issues, all paramount in shaping the jurisprudence surrounding the principles of access to justice and transparency, range from identifying the purpose and extent of disclosure required, to balancing the conflicting claims of access to justice and grounds of public interest such as privacy, confidentiality and market interest. An identification of the purpose of disclosure would lead us closer identifying the extent of required disclosure. There are three key purposes that disclosure of information serves:

(i) Reliability: The possession of information by both the parties can aid the courts in determining the truth of the contentions. The role of the court is not restricted to interpreting the provisions of law but also determining the veracity and truth of the allegations made before it. The court would be able to perform this function accurately only if both parties have access to information and possess the opportunity to address arguments and counter- arguments related to the information;
(ii) Fair Trial: Since a verdict of the Court has far reaching repercussions on the life and liberty of an individual, it is only fair that there is a legitimate expectation that the parties are provided all the aid in order for them to effectively participate in the proceedings;

(iii) Transparency and accountability: The investigative agencies and the judicial institution are held accountable through transparency and not opaqueness of proceedings. Opaqueness furthers a culture of prejudice, bias, and impunity  principles that are antithetical to transparency. It is of utmost importance that in a country grounded in the Rule of Law, the institutions adopt those procedures that further the democratic principles of transparency and accountability. The principles of fairness and transparency of adjudicatory proceedings are the cornerstones of the principle of open justice. This is the reason why an adjudicatory authority is required to record its reasons for every judgement or order it passes. However, the duty to be transparent in the adjudicatory process does not begin and end at providing a reasoned order. Keeping a party bereft of the information that influenced the decision of an authority undertaking an adjudicatory function also undermines the transparency of the judicial process. It denies the concerned party and the public at large the ability to effectively scrutinise the decisions of the authority since it creates an information asymmetry.
23. The purpose of disclosure of information is not merely individualistic, that is to prevent errors in the verdict but is also towards fulfilling the larger institutional purpose of fair trial and transparency. Since the purpose of disclosure of information targets both the outcome (reliability) and the process (fair trial and transparency), it would be insufficient if only the material relied on is disclosed. Such a rule of disclosure, only holds nexus to the outcome and not the process. Therefore, as a default rule, all relevant material must be disclosed.
24. It would be fundamentally contrary to the principles of natural justice if the relevant part of the investigation report which pertains to the appellant is not disclosed. The appellant has to be given a reasonable opportunity of hearing. The requirement of a reasonable opportunity would postulate that such material which has been and has to be taken into account under Regulation 10 must be disclosed to the noticee. If the report of the investigation authority under Regulation 9 has to be considered by the Board before satisfaction is arrived at on a possible violation of the regulations, the principles of natural justice require due disclosure of the report

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27. The submission of Mr C U Singh, learned senior counsel is that only those materials which are relied upon should be disclosed to the first respondent. Regulation 10, as we have noted earlier, stipulates that the satisfaction of the Board whether there has been a violation of the regulations has to be arrived at:
(i) after considering the report of the investigating authority referred to in
Regulation 9; and

(ii) after giving a reasonable opportunity of hearing to the person concerned.
Once the subordinate legislation mandates that the investigating authoritys report is an essential ingredient for the Board to arrive at the satisfaction, it requires due disclosure.

28. Now in the above context, it would be material to advert to the decision of this court in Natwar Singh (supra). The issue before the two-judge Bench of this Court was whether a noticee who is served with a show cause notice under Rule 4(1) of the Foreign Exchange Management (Adjudication Proceedings and Appeal) Rules 2000 [FEMA Rules 2000], is entitled to demand all the documents in the possession of the adjudicating authority including those documents upon which no reliance has been placed while issuing a notice to show cause as to why an enquiry should not be initiated against him. Rule 4 is in the following terms:
(1) For the purpose of Adjudicating under section 13 of the Act whether any person has committed any contravention as specified in that section of the Act, the Adjudicating Authority shall, issue a notice to such person requiring him to show cause within such period as may be specified in the notice (being not less than ten days from the date of service thereof) why an inquiry should not be held against him.
(2) Every notice under sub-rule (1) to any such person shall indicate the nature of contravention alleged to have been committed by him.

(3) After considering the cause, if any, shown by such person, the Adjudicating Authority is of the opinion that an inquiry should be held, he shall issue a notice fixing a date for the appearance of that person either personally or through his  legal practitioner or a chartered accountant duly authorised by him. Rule 4(1) of the FEMA Rules 2000 indicates that in the first instance, the adjudicating authority has to issue a notice requiring the person to show cause why an enquiry should not be held against him. The stage of the notice under Rule 4(1) is not for  adjudication but is for the purpose of deciding whether an enquiry should be held. If after considering the cause which is shown, the adjudicating authority is of the opinion that an enquiry should be held, thereupon under Rule 4(3), a notice is issued for the appearance of the person. Sub-Rule
(4) provides that on the date fixed, the adjudicating authority shall explain the contravention alleged to have been committed and under sub-Rule (5) an opportunity of producing documents or evidence has to be given. Under sub-Rule (8), the adjudicating authority is empowered to impose a penalty if it is satisfied, upon considering the evidence produced that there has been a contravention.
29. Now in this backdrop, Justice B. Sudarshan Reddy speaking for the two-
judge Bench of this Court interpreted Rule 4 as follows:

23. The Rules do not provide and empower the Adjudicating Authority to straightaway make any inquiry into allegations of contravention against any person against whom a complaint has been received by it. Rule 4 of the Rules mandates that for the purpose of adjudication whether any person has committed any contravention, the Adjudicating Authority shall issue a notice to such person requiring him to show cause as to why an inquiry should not be held against him. It is clear from a bare reading of the rule that show cause notice to be so issued is not for the purposes of making any adjudication into alleged contravention but only for the purpose of deciding whether an inquiry should be held against him or not. Every such notice is required to indicate the nature of contravention alleged to have been committed by the person concerned. That after taking the cause, if any, shown by such person, the Adjudicating Authority is required to form an opinion as to whether an inquiry is required to be held into the allegations of contravention. It is only then the real and substantial inquiry into allegations of contravention begins.
The above extract clearly indicates that the show cause notice under Rule 4(1) is  not for the purpose of making an adjudication into the alleged contravention but only for deciding whether an enquiry must be conducted. The stage when an enquiry is held is subsequent to the initial stage contemplated by Rule 4(1). During the course of the adjudication, the fundamental principle is that material which is used against a person must be brought to notice. As this Court observed:
30. The right to fair hearing is a guaranteed right. Every person before an authority exercising the adjudicatory powers has a right to know the evidence to be used against him. This principle is firmly established and recognised by this Court in Dhakeswari Cotton Mills Ltd. v. CIT [AIR 1955 SC 65 : (1955) 1 SCR 941] . However, disclosure not necessarily involves supply of the material. A person may be allowed to inspect the file and take notes. Whatever mode is used, the  fundamental principle remains that nothing should be used against the person
which has not been brought to his notice. If relevant material is not disclosed to a party, there is prima facie unfairness irrespective of whether the material in question arose before, during or after the hearing. The law is fairly well settled if prejudicial allegations are to be made against a person, he must be given particulars of that before hearing so that he can prepare his defence. However, there are various exceptions to this general rule where disclosure of evidential material might inflict serious harm on the person directly concerned or other persons or where disclosure would be breach of confidence or might be injurious to the public interest because it would involve the revelation of official secrets, inhibit frankness of comment and the detection of crime, might make it impossible to obtain certain clauses of essential information at all in the future (see R. v. Secy. of State for Home Deptt., ex p H [1995 QB 43 : (1994) 3 WLR 1110 : (1995) 1 All ER 479 (CA)] ).
31. The concept of fairness may require the adjudicating authority to furnish copies of those documents upon which reliance has been placed by him to issue show-cause notice requiring the noticee to explain as to why an inquiry under Section 16 of the Act should not be initiated. To this extent, the principles of natural justice and concept of fairness are required to be read into Rule 4(1) of the Rules. Fair procedure and the principles of natural justice are in-built into the  Rules. A noticee is always entitled to satisfy the adjudicating authority that those very documents upon which reliance has been placed do not make out even a prima facie case requiring any further inquiry. In such view of the matter, we hold that all such documents relied on by the authority are required to be furnished to the noticee enabling him to show a proper cause as to why an inquiry should not be held against him though the Rules do not provide for the same. Such a fair reading of the provision would not amount to supplanting the procedure laid down and would in no manner frustrate the apparent purpose of the statute.(emphasis supplied)
30. The decision of this Court distinguishes between the initial stage under
Rule 4(1) which is only for the purpose of deciding whether an enquiry has
to be held and the subsequent stage of adjudication into the allegations of
contravention. This Court further held:
34. As noticed, a reasonable opportunity of being heard is to be provided by the adjudicating authority in the manner prescribed for the purpose of imposing any penalty as provided for in the Act and not at the stage where the adjudicating authority is required merely to decide as to whether an inquiry at all be held into the matter. Imposing of penalty after the adjudication is fraught with grave and serious consequences and therefore, the requirement of providing a
reasonable opportunity of being heard before imposition of any such penalty is to be met. In
contradistinction, the opinion formed by the adjudicating authority whether an inquiry should be
held into the allegations made in the complaint are not fraught with such grave consequences
and therefore the minimum requirement of a show-cause notice and consideration of cause
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shown would meet the ends of justice. A proper hearing always include, no doubt, a fair
opportunity to those who are parties in the controversy for correcting or contradicting anything
prejudicial to their view.
31. On the facts of that case, the Court held that the enquiry against the
noticee was yet to commence:
36. In the present case, the inquiry against the noticee is yet to commence. The evidence as
may be available upon which the adjudicating authority may place reliance, undoubtedly,
is required to be furnished to the person proceeded against at the second stage of inquiry
into allegations of contravention. It is at that stage, the adjudicating authority is not only
required to give an opportunity to such person to produce such documents as evidence as he
may consider relevant to the inquiry, but also enforce attendance of any person acquainted with
the facts of the case to give evidence or to produce any document which in its opinion may be
useful for or relevant to the subject-matter of the inquiry. It is no doubt true that natural justice
often requires the disclosure of the reports and evidence in the possession of the deciding
authority and such reports and evidence relevant to the subject-matter of the inquiry may
have to be furnished unless the scheme of the Act specifically prohibits such disclosure.
(emphasis supplied)
This Court further noted that the documents which the appellant wanted were
documents upon which no reliance was placed by the authority for setting
the law into motion. Consequently, this Court concluded that:
48. On a fair reading of the statute and the Rules suggests that there is no duty of disclosure of
all the documents in possession of the adjudicating authority before forming an opinion that an
inquiry is required to be held into the alleged contraventions by a noticee. Even the principles of
natural justice and concept of fairness do not require the statute and the Rules to be so read. Any
other interpretation may result in defeat of the very object of the Act. Concept of fairness is not a
one-way street. The principles of natural justice are not intended to operate as roadblocks to
obstruct statutory inquiries. Duty of adequate disclosure is only an additional procedural
safeguard in order to ensure the attainment of the fairness and it has its own limitations. The
extent of its applicability depends upon the statutory framework.
32. The issue in Natwar Singh (supra) was whether the authority was bound
to disclose to the noticee all the documents in its possession before forming
an opinion on whether an enquiry is required to be held into the alleged
contravention by the noticee. The Court held that at that stage there was no
requirement of furnishing all such documents to the noticee since the only
purpose of the notice under Rule 4(1) was for deciding whether an enquiry
should be held. Rule 4(1), in other words, was not a final adjudication and
consequently the requirement of a disclosure of all materials in the
possession of the authority was not attracted. At that stage, it was sufficient
that only documents that have been relied on are disclosed.
33. The High Court in the present case has palpably misconstrued the
judgment in Natwar Singh (supra). The High Court has failed to notice that
the issue in that case was whether at the stage when the authority decides
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under Rule 4(1) of the FEMA Rules 2000 whether an enquiry should be held,
a disclosure of all documents in the possession of the authority to the noticee
is warranted. This was answered in the negative. This Court distinguished
the stage of adjudication as distinct from the initial stage under Rule 4(1). At
the stage of adjudication, all documents useful or relevant to the subject-
matter have to be disclosed to the notice, subject to exceptions noticed by
the court.
34. On behalf of the Board, it has been urged that the investigation report is
in the nature of an inter-departmental communication and need not be
disclosed. Reliance was placed on the judgment of this Court in Krishna
Chandra Tandon (supra) to buttress the submission. However, it is clear
from the judgment that even if the documents are merely inter-departmental
communications, there is a duty to disclose such documents if they have
been relied upon by the enquiry officer. A two-Judge Bench of this observed:
16. Mr Hardy next contended that the appellant had really no reasonable opportunity to defend
himself and in this connection he invited our attention to some of the points connected with the
enquiry with which we have now to deal. It was first contended that inspection of relevant records
and copies of documents were not granted to him. The High Court has dealt with the matter and
found that there was no substance in the complaint. All that Mr Hardy was able to point out to us
was that the reports received by the CIT from his departmental subordinates before the charge-
sheet was served on the appellant had not been made available to the appellant. It appears that
on complaints being received about his work the CIT had asked the Inspecting Assistant
Commissioner Shri R.N. Srivastava to make a report. He made a report. It is obvious that the
appellant was not entitled to a copy of the report made by Mr Srivastava or any other officer unless
the enquiry officer relied on these reports. It is very necessary for an authority which orders an
enquiry to be satisfied that there are prima facie grounds for holding a disciplinary enquiry and,
therefore, before he makes up his mind he will either himself investigate or direct his subordinates
to investigate in the matter and it is only after he receives the result of these investigations that
he can decide as to whether disciplinary action is called for or not. Therefore, these documents
of the nature of inter-departmental communications between officers preliminary to the
holding of enquiry have really no importance unless the Enquiry Officer wants to rely on
them for his conclusions. In that case it would only be right that copies of the same should
be given to the delinquent. It is not the case here that either the Enquiry Officer or the CIT relied
on the report of Shri R.N. Srivastava or any other officer for his finding against the appellant.
Therefore, there is no substance in this submission.
(emphasis supplied)
35. However, merely because the investigating authority has denied placing
reliance on the report would not mean that such material cannot be disclosed
to the noticee. The court may look into the relevance of the material to the
proposed action and its nexus to the stage of adjudication. Simply put, this
entails evaluating whether the material in all reasonable probability would
influence the decision of the authority. The above position was laid down by
this Court in Khudiram Das v. State of West Bengal, (1975) 2 SCC 81. Ruling
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in the context of preventive detention, a four-judge Bench of this Court
observed:
15. Now, the proposition can hardly be disputed that if there is before the District
Magistrate material against the detenu which is of a highly damaging character and having
nexus and relevancy with the object of detention, and proximity with the time when the
subjective satisfaction forming the basis of the detention order was arrived at, it would be
legitimate for the Court to infer that such material must have influenced the District
Magistrate in arriving at his subjective satisfaction and in such a case the Court would
refuse to accept the bald statement of the District Magistrate that he did not take such
material into account and excluded it from consideration. It is elementary that the human
mind does not function in compartments. When it receives impressions from different sources, it
is the totality of the impressions which goes into the making of the decision and it is not possible
to analyse and dissect the impressions and predicate which impressions went into the making of
the decision and which did not. Nor is it an easy exercise to erase the impression created by
particular circumstances so as to exclude the influence of such impression in the decision making
process. Therefore, in a case where the material before the District Magistrate is of a character
which would in all reasonable probability be likely to influence the decision of any reasonable
human being, the Court would be most reluctant to accept the ipse dixit of the District Magistrate
that he was not so influenced and a fortiori, if such material is not disclosed to the detenu, the
order of detention would be vitiated, both on the ground that all the basic facts and materials which
influenced the subjective satisfaction of the District Magistrate were not communicated to the
detenu as also on the ground that the detenu was denied an opportunity of making an effective
representation against the order of detention.
(emphasis supplied)
The principle that the material that may influence the decision of a quasi-
judicial authority to award a penalty must be disclosed to a delinquent was
affirmed by this Court in Union of India and Ors. v. Mohd. Ramzan Khan,
(1991) 1 SCC 588. In that case, this Court laid down that a delinquent officer is
entitled to receive the report of the enquiry officer which has been furnished
to the disciplinary authority. This principle was affirmed by a Constitution
Bench of this Court in Managing Director, ECIL, Hyderabad v. B.
Karunakar, (1993) 4 SCC 727. The rationale behind the right to receive the report
of the enquiry officer was explained by this Court in the following terms:
26. The reason why the right to receive the report of the enquiry officer is considered an
essential part of the reasonable opportunity at the first stage and also a principle of natural
justice is that the findings recorded by the enquiry officer form an important material
before the disciplinary authority which along with the evidence is taken into consideration
by it to come to its conclusions. It is difficult to say in advance, to what extent the said
findings including the punishment, if any, recommended in the report would influence the
disciplinary authority while drawing its conclusions. The findings further might have been
recorded without considering the relevant evidence on record, or by misconstruing it or
unsupported by it. If such a finding is to be one of the documents to be considered by the
disciplinary authority, the principles of natural justice require that the employee should
have a fair opportunity to meet, explain and controvert it before he is condemned. It is
negation of the tenets of justice and a denial of fair opportunity to the employee to consider
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the findings recorded by a third party like the enquiry officer without giving the employee
an opportunity to reply to it. Although it is true that the disciplinary authority is supposed
to arrive at its own findings on the basis of the evidence recorded in the inquiry, it is also
equally true that the disciplinary authority takes into consideration the findings recorded
by the enquiry officer along with the evidence on record. In the circumstances, the findings
of the enquiry officer do constitute an important material before the disciplinary authority
which is likely to influence its conclusions. If the enquiry officer were only to record the
evidence and forward the same to the disciplinary authority, that would not constitute any
additional material before the disciplinary authority of which the delinquent employee has no
knowledge. However, when the enquiry officer goes further and records his findings, as stated
above, which may or may not be based on the evidence on record or are contrary to the same or
in ignorance of it, such findings are an additional material unknown to the employee but are taken
into consideration by the disciplinary authority while arriving at its conclusions. Both the dictates
of the reasonable opportunity as well as the principles of natural justice, therefore, require that
before the disciplinary authority comes to its own conclusions, the delinquent employee should
have an opportunity to reply to the enquiry officer's findings. The disciplinary authority is then
required to consider the evidence, the report of the enquiry officer and the representation of the
employee against it.
(emphasis supplied)
For the purpose of determining if prejudice has been caused by a non-
disclosure, this Court held that the report must be furnished to the aggrieved
person and the employee must shoulder the burden of proving on facts that
his case was prejudiced  either the outcome or the punishment  by the
non-disclosure:
30. [v] ] The next question to be answered is what is the effect on the order of punishment when
the report of the enquiry officer is not furnished to the employee and what relief should be granted
to him in such cases. The answer to this question has to be relative to the punishment awarded.
When the employee is dismissed or removed from service and the inquiry is set aside because
the report is not furnished to him, in some cases the non-furnishing of the report may have
prejudiced him gravely while in other cases it may have made no difference to the ultimate
punishment awarded to him. Hence to direct reinstatement of the employee with back-wages in
all cases is to reduce the rules of justice to a mechanical ritual. The theory of reasonable
opportunity and the principles of natural justice have been evolved to uphold the rule of law and
to assist the individual to vindicate his just rights. They are not incantations to be invoked nor rites
to be performed on all and sundry occasions. Whether in fact, prejudice has been caused to
the employee or not on account of the denial to him of the report, has to be considered on
the facts and circumstances of each case. Where, therefore, even after the furnishing of
the report, no different consequence would have followed, it would be a perversion of
justice to permit the employee to resume duty and to get all the consequential benefits. It
amounts to rewarding the dishonest and the guilty and thus to stretching the concept of justice to
illogical and exasperating limits. It amounts to an unnatural expansion of natural justice which in
itself is antithetical to justice.
31. Hence, in all cases where the enquiry officer's report is not furnished to the delinquent
employee in the disciplinary proceedings, the Courts and Tribunals should cause the copy of the
report to be furnished to the aggrieved employee if he has not already secured it before coming
to the Court/Tribunal and give the employee an opportunity to show how his or her case was
prejudiced because of the non-supply of the report. If after hearing the parties, the
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Court/Tribunal comes to the conclusion that the non-supply of the report would have made
no difference to the ultimate findings and the punishment given, the Court/Tribunal should
not interfere with the order of punishment. The Court/Tribunal should not mechanically set
aside the order of punishment on the ground that the report was not furnished as is regrettably
being done at present.
(emphasis supplied)
36. In State Bank of Patiala v. SK Sharma, (1996) 3 SCC 364 this Court noted
that if a facet of a rule of natural justice is violated on grounds of preserving
public interest, the entire proceeding is not vitiated unless prejudice has been
caused to the delinquent. A distinction was made between the complete non-
abidance of the principles of natural justice, that is where no information was
disclosed and arguments of insufficient disclosure. It was held that when the
latter argument is made, the Court must determine if the insufficient
disclosure caused prejudice. This Court observed:
28. The decisions cited above make one thing clear, viz., principles of natural justice cannot be
reduced to any hard and fast formulae. As said in Russell v. Duke of Norfolk [(1949) 1 All ER 109
: 65 TLR 225] way back in 1949, these principles cannot be put in a strait-jacket. Their applicability
depends upon the context and the facts and circumstances of each case. (See Mohinder Singh
Gill v. Chief Election Commr. [(1978) 1 SCC 405 : (1978) 2 SCR 272] ) The objective is to ensure
a fair hearing, a fair deal, to the person whose rights are going to be affected. (See A.K. Roy v.
Union of India [(1982) 1 SCC 271 : 1982 SCC (Cri) 152] and Swadeshi Cotton Mills v. Union of
India [(1981) 1 SCC 664] .) As pointed out by this Court in A.K. Kraipak v. Union of India [(1969)
2 SCC 262] , the dividing line between quasi-judicial function and administrative function (affecting
the rights of a party) has become quite thin and almost indistinguishable  a fact also emphasised
by House of Lords in Council of Civil Service Unions v. Minister for the Civil Service [(1984) 3 All
ER 935 : (1984) 3 WLR 1174 : 1985 AC 374, HL] where the principles of natural justice and a fair
hearing were treated as synonymous. Whichever the case, it is from the standpoint of fair hearing
 applying the test of prejudice, as it may be called  that any and every complaint of violation
of the rule of audi alteram partem should be examined. Indeed, there may be situations where
observance of the requirement of prior notice/hearing may defeat the very proceeding  which
may result in grave prejudice to public interest. It is for this reason that the rule of post-decisional
hearing as a sufficient compliance with natural justice was evolved in some of the cases, e.g.,
Liberty Oil Mills v. Union of India [(1984) 3 SCC 465] . There may also be cases where the
public interest or the interests of the security of State or other similar considerations may
make it inadvisable to observe the rule of audi alteram partem altogether [as in the case of
situations contemplated by clauses (b) and (c) of the proviso to Article 311(2)] or to
disclose the material on which a particular action is being taken. There may indeed be any
number of varying situations which it is not possible for anyone to foresee. In our respectful
opinion, the principles emerging from the decided cases can be stated in the following terms in
relation to the