M/s Harinagar Sugar Mills Ltd v Shyam Sundar Jhunjhunwala (1961)

This is a company-law dispute about registering share transfers, but you study it in labour law for its answer to a general question: when is a body that is not a court still a "tribunal" whose decisions can be brought to the Supreme Court under Article 136? The Court held that even the Central Government, when it hears an appeal and decides a dispute between parties on evidence, acts as a tribunal. It also held that such a tribunal must give reasons, or the Supreme Court cannot exercise its appellate power effectively.

Both points matter for industrial adjudication. The Court drew on Bharat Bank Ltd v Employees of Bharat Bank, which brought industrial tribunals within Article 136. The case was later relied on in Engineering Mazdoor Sabha v The Hind Cycles Ltd, Bombay (1962).

Article 47B of the company's Articles gave the directors "absolute discretion" to refuse to register any share transfer "without giving any reason".

In 1953 Banarasi Prasad Jhunjhunwala transferred 2500 shares to his son Shyam Sunder and 2100 to his daughter-in-law Savitadevi. The directors refused to register the transfers. The Bombay High Court dismissed rectification petitions under s. 38 of the Companies Act 1913, holding that disputed questions had to go to a civil suit. A first appeal to the Central Government under the new s. 111(3) of the Companies Act 1956 failed for the same reason.

He then transferred 100 shares to each of them. The directors again refused. The transferees appealed under s. 111(3), saying the refusal was "without any reason, arbitrary and untenable". In their rejoinder they expressly said they did not allege that the refusal was capricious or mala fide. By orders dated 29 May 1957 the Deputy Secretary, Ministry of Finance, set aside the directors' resolution and directed registration. He gave no reasons. The company appealed with special leave under Article 136.

1. Is the Central Government, hearing an appeal under s. 111 (before its 1960 amendment), a tribunal exercising judicial functions, so that its decision is open to appeal under Article 136?
2. Did the Central Government exceed its jurisdiction or otherwise act illegally in directing registration?

The Central Government's orders were quashed and the appeals were sent back to be reheard and decided according to law. Costs were to be costs in the appeals before the Central Government.

The Central Government acted as a tribunal (Shah J)

The Attorney-General argued that the Central Government exercised only administrative power, since the directors' own discretion was absolute. The Court rejected this. Section 111 was an alternative remedy to rectification by the court under s. 155, where the court must act judicially. In an appeal under s. 111(3) "there is a lis or dispute between the contesting parties relating to their civil rights", and the Central Government must decide it according to law, on evidence, "and not on grounds of policy or expediency."

The Court applied the test from Province of Bombay v Kusaldas S. Advani: "The mere fact that an executive authority has to decide something does not make the decision judicial. It is the manner in which the decision has to be arrived at which makes the difference, and the real test is: Is there any duty to decide judicially?" It also relied on Mahajan J in Bharat Bank: bodies "invested with certain functions of a Court of Justice and have some of its trappings" fall within Article 136.

Here, "the proceedings before the Central Government have all the trappings of a judicial tribunal. Pleadings have to be filed, evidence in support of the case of each party has to be furnished and the disputes have to be decided according to law". So: "If it be granted that the Central Government exercises judicial power of the State to adjudicate upon rights of the parties in civil matters when there is a lis between the contesting parties, the conclusion is inevitable that it acts as a tribunal and not as an executive body." The preliminary objection was overruled. That the proceedings were confidential under s. 111(7) did not dispense with a judicial approach.

The limits of the appellate power

The directors' power under the Articles is presumed to be exercised in good faith. The Central Government's power on appeal carries the same limits as the court's power under s. 155. It may order registration only "if it is satisfied that the exercise of the discretion is mala fide, arbitrary or capricious and that it is in the interest of the company that the transfer should be registered."

Reasons are required

The Deputy Secretary gave no reasons, and nothing on the record showed he was satisfied that the refusal was arbitrary. The Court said: "If the Central Government acts as a tribunal exercising judicial powers and the exercise of that power is subject to the jurisdiction of this court under Art. 136 of the Constitution, we fail to see how the power of this court can be effectively exercised if reasons are not given by the Central Government in support of its order." It concluded "that there has been no proper trial of the appeals, no reasons having been given in support of the orders by the Deputy Secretary who heard the appeals."

Hidayatullah J (separate judgment)

Hidayatullah J agreed that the appeals were competent, but reasoned more fully about what a tribunal is. "All tribunals are not Courts, though all Courts are tribunals." Courts are the ordinary courts of civil judicature; tribunals are bodies set up to decide controversies under special laws, sharing the judicial power of the State. When Government "embarks upon curial functions, and proceeds to exercise judicial power and decide disputes", it is legitimate to treat the deciding officer, and even Government itself, as a tribunal.

He differed on two points: - Practice on special leave. Because the law makes the allegations confidential, he thought the Supreme Court should generally not grant special leave in such cases, unless it could look behind the confidentiality without breaking the law. - Result. The transferees had dropped any charge of mala fides; there was no evidence; and the directors are presumed to act honestly. He would have allowed the appeals outright with costs. He added that "the fact that no reasons have been given when nothing was confidential, leads to the only inference that there was none to give."

The order of the Court followed the majority: the orders were quashed and the appeals remitted for rehearing.

An authority that is not a court — even the Central Government — acts as a tribunal within Article 136 when it is invested with the judicial power of the State to decide a lis between parties about their civil rights, according to law, on pleadings and evidence. The test is whether it has a duty to decide judicially. Such a tribunal must give reasons for its decision; without them the Supreme Court's appellate power under Article 136 cannot be effectively exercised, and the absence of reasons means there has been no proper trial.

• Unit 5 link: use this case, with Bharat Bank, for the proposition that bodies deciding disputes judicially — industrial tribunals, labour courts, even Government hearing an appeal — are "tribunals" open to appeal under Article 136. Mention that it was relied on in Engineering Mazdoor Sabha v Hind Cycles (1962).
• Short note: What is a "tribunal" under Article 136? Give the Kusaldas Advani test (duty to decide judicially), the "trappings of a court" idea from Bharat Bank, and Hidayatullah J's line: all courts are tribunals, but not all tribunals are courts.
• Reasons: Must a quasi-judicial authority give reasons? This case links the duty to give reasons to the Supreme Court's ability to hear an appeal: an unreasoned order leaves nothing to review, so it is quashed and remitted.
• Caution: the underlying dispute is about registration of share transfers under company law. Say so, and explain why it matters in labour law.