This document provides an overview of the principles of natural justice in the context of managerial decision making. It discusses key concepts like procedural fairness, lawfulness, evidence-based decisions, reasons for decisions, and accountability. It defines natural justice and its key features. The essential ingredients of natural justice are discussed as the rule against bias, the right to be heard, and the requirement for reasoned decisions. Exceptions to the right to be heard are outlined. The document also discusses the duty to act fairly, the validity of decisions that violate natural justice, and concludes with some case law examples.

1. Principles
of
Natural
Justice
Assignment Topic On
Business Law
Presented By
Alexander T C ,
IInd Semester
MBA Evening Batch
2010-2012

2. Assignment on Business Laws - Principles of Natural Justice
Presented By Alexander T C
MBA 2nd Semester IMK –UoK
1. Introduction :-
Why Application of Principles of Natural Justice in Managerial Decisions is
important? Most Managerial decisions that affect individuals and organisations are made by
primary decision makers i.e. front-line administrators and managers. Only a minority of these
decisions are reviewed by internal review officers, ombudsmen, courts or tribunals. The
quality of administrative justice experienced by the public depends largely on primary decision
makers ‘getting it right’. Central to good decision making is decision makers’ understanding of
the legal and administrative framework in which decisions should be made. In turn, this
depends on whether primary decision makers have adequate knowledge of that framework.
While taking a decision a manager has to have the following in his mind to have his decision
justified.
 Procedural Fairness
 Lawfulness
 Evidence, Facts And Findings
 Reasons
 Accountability
2. Definition:-
Justice is of two types namely Legal Justice and Natural Justice. Legal justice refers
to justice governed by the law of the state and natural Justice refers to moral justice and is
governed by the Laws of Equity. Justice done to one seems not injustice to another. So the
goodness of a law is in maximizing the pleasure of the beneficiaries with minimized pain to
the others.
According to Aristotle, law inspired by reason is the natural law and when ever the
general preposition of legal law is found to work hardship to a particular case, equity must be
applied to mitigate (make less severe or painful) and rectify the harshness. It’s the natural
law that provides the frame work of principles and it is left to the legal law to supply flesh and
blood to the legal system.
“The Principles of Natural Justice are easy to proclaim, but their precise extent is far
less easy to define” . No precise definition is possible for Natural Justice. The word ‘Natural
Justice’ is derived from the Roman word ‘Jus Naturale’, which means principles of natural
law, justice, equity, and good conscience. Natural Justice is not something derived from Laws
of nature. Laws of nature promote the survival rather than justice. Therefore, ‘natural’ justice
is not justice found in nature; it is a compendium (collection) of concepts which must be
naturally associated with justice, whether these concepts are incorporated in law or not.
Natural Justice is also known as substantial justice, fundamental justice, universal justice or
fair play in action. Rules of natural justice are the minimum standards of fair decision-making
imposed on persons or bodies acting in a judicial capacity. Rules of natural justice are not rules
embodied in any statute
3. Features:
 An important concept in administrative law.
 Fundamental rules of justice, breach of which will prevent justice being seen
done.
2

3. Assignment on Business Laws - Principles of Natural Justice
Presented By Alexander T C
MBA 2nd Semester IMK –UoK
 It’s a great humanising principle intended to invest law with fairness, to secure
justice and prevent miscarriage of justice.
 Implied mandatory requirement, non observance of which invalidates the
exercise of power.
 It will always apply , however silent a statue may be
4. Doctrine of Natural Justice – Is it Mandatory?
In strict sense where there is a valid law, principles of natural justice is not applicable.
These rules can operate only in areas not covered by any law validly made, in other words,
Rules of Natural Laws do not supplant law, but supplement it. (A.K. Kraipak Vs. Union of India
(AIR 1970 SC 150))
Rules of Natural Justice are procedural in nature and are applied where an authority
takes a decision which involves civil rights of individual(s). Earlier the rules of Natural Justice
were binding only to judicial and quasi judicial bodies (Kishan Chand V. Commissioner of Police - 1961
3SCR-165) but later on SC of India held that even an administrative order which involves civil
consequences must be made consistently with rules of natural justice. In Maneka Gandhi V Union of
India (A I R 1978) SC held that the Rules of Natural Justice are applicable to judicial, Quasi Judicial
and Administrative authorities.
Rules of natural justice are flexible in nature and can change with the exigencies of time,
and circumstances of each case. The rules of fairness or natural justice were not rigid but
depended on their context. The extent of application of rules of Natural justice can not have a
rigid formula and will depend on the
1. Nature of Jurisdiction conferred on the administrative authority
2. Character of the rights of the person s affected
3. Scheme and Policy of the Statue applicable.
4. Other relevant circumstance of the case.
5. Essential Ingredients of Natural Justice:-
The essential ingredients of Natural Justice are the following
1 Rule Against Bias A person will not judge a case in which he is himself interested
2 Right To Be Heard No one should be condemned unheard
3 Reasoned Decisions An order passed must be a speaking order, supported by reasons
I.Rules Against Bias:-
This rule originates from the Latin Maxim nemo judex in causa sua” which means
that a person will not judge a case in which he is himself interested.
The fundamental principle of justice is that justice should not only be done but
undoubtedly be seen to be done. To serve this purpose it is necessary that a person who decides
on matter should not have any substantial interest either in the subject matter to the parties in
dispute. In short this rule states the first requirement of Natural Justice that the judge must be
impartial and neutral and must be free from bias. Some instances where this rule can be applied
are given below.
3

4. Assignment on Business Laws - Principles of Natural Justice
Presented By Alexander T C
MBA 2nd Semester IMK –UoK
Pecuniary Bias arises from monetary interest in the subject
1 Pecuniary Bias
matter
Personal Bias arise from friendship , personal or
2 Personal Bias professional relationship, personal hostility, personal
prejudices
3 Judge witness combination Person acts in double role as judge and witness
4 Judge Prosecutor combination Person framing the charges act as the enquiry officer
Judge Prosecutor & witness Single person can not be a complainant –witness
5
combination ,Prosecutor and Judge
6 Judge ones own case A person can not sit as judge in his on cause
An extra ordinary interest shown by the judge on the
7 Bias relating to subject matter
subject matter
A person who made a prior statement on the subject matter
8 Pre judgement of issues
can not be a judge on disputes on the same subject matter.
A person to decide on the subject matter acts upon the
9 Acting under dictation
dictation from the superior.
Test of Bias: A question of bias can be tested by applying the following tests.
a) Test of real likelihood
b) Test of reasonable suspicion
These tests are done in combination by courts in India. A question of bias is
decided by the court on the ground that whether a reasonable man could suspect bias in the
given circumstances.
Waiver of right to question bias:- An allegation of bias if not raised at the proper time, the
right to object will be lost by principle of waiver,. Where fear or ignorance can be proved, principle
of waiver may not apply.
II. Right to be Heard:-
The rule has its origin in the Latin Maxim ‘Audi alteram partem” which means ‘Hear the other
party”. According to this rule any person whose rights or interest is being affected should be
given reasonable opportunity to defend him. Natural Justice requires that the person who is likely
to be affected by the decision must be heard before a decision is given. The hearing may be oral
or it can be through a written representation. This, in turn entails that such a person must be
informed about the nature of the enquiry and if any charges have been framed against him, of
the charges.
The ingredients of fair hearing are as follows.
Reasonably prior Notice to be issued with time place and nature of hearing. No
Reasonable specific statutory requirement of notice in India. Depending on factual situations
1
Notice adequacy of notice can be decided. If party does not respond, can proceed “ex
parte”
4

5. Assignment on Business Laws - Principles of Natural Justice
Presented By Alexander T C
MBA 2nd Semester IMK –UoK
Conduct of Not to condemn with out hearing. Hearing can be Oral or Written depending upon
2
Hearing the facts of each case.
Right to It gives the right to produce evidence in one’s favour. But the authority can decide
3 adduce whether evidence produced is material & relevant or not. . But can not use
evidence coercive process to bring evidence.
Where an adjudicating authority relay on some material against adpersons, such
Disclosure of
4 material must be shown to the person stoat he can explain, criticise or rebut the
Evidence
evidence.
General principle is that taking evidence from witness or relying ex parte
Absence of
5 statements in the absence of party is violation of Natural justice. Not applicable in
other party
extra ordinary circumstances. E.g. Sexual Harassment by teacher
Cross Right to cross examine the witness where oral evidence is given. If the hearing is
6
examination oral and enquiry is mere fact finding in nature, cross examination be avoided.
Right to legal aid is a fundamental right. But where appearance of legal
Right to legal practitioners is explicitly avoided, person has to defend his own case. But even if
7 Representati right o legal representation is denied in a statue, in can be allowed in special
on cases. E.g. where an Employer having legal department to proceed an enquiry
against worker , worker has the right to be represented through an advocate
One who A judicial proceeding adheres to the rule strictly. But in Administrative adjudication
8 decides must one person hers and another decides and such decisions are called Institutional
hear decisions.
Exceptions to the Rule of Right to be Heard:-
The exceptions to the rule of fair hearing as recognised by courts are as follows.
a) Public Interest: - Where defence and state secrets are involved. In certain cases
post decisional hearing has been held relevant.
b) Emergency: Urgency is pleaded as an excuse for not complying the principles of
Natural Justice. In such cases also Post Decisional hearing is approved as good
substitute.
c) Impracticability: In extreme situations it may highly impracticable to comply the
rules. In Rahda Krishna V. Osmaina University (AIR 1974) the decision of the university
cancelling the entire MBA examination on the reason of mass copying with out
hearing students held valid.
d) Legislative Sections:- In Supreme and Subordinate legislative sections, rules of
natural justice cant be applied.
e) Statutory Exclusions: There can be provisions expressly negating natural justice
but such exclusion if found arbitrary , unreasonable and unfair courts may quash
it giving wider importance to Article 14(Equality before law) and Article 21 (No person
shall be deprived of his life and property except according to procedure established by law) of
Constitution of India .
5

6. Assignment on Business Laws - Principles of Natural Justice
Presented By Alexander T C
MBA 2nd Semester IMK –UoK
III. Reasoned Decisions:-
The doctrine of reasoned decisions was not considered a part of Natural Justice and
adjudicatory bodies were not obliged to give reasons for their decisions. In UK legal
provisions made to this effect in Tribunals and Inquiries Act 1971 and in USA Administrative
Procedure Act under Sec 8B it is stipulated that administrative decisions must be
accompanied by findings and conclusions as well as reasons upon all material issues of law,
facts or discretion.
In India there is no such statutory requirement of giving reasons. In Maneka Gandhi V
Union of India (A I R 1978) SC held
that giving reasons is a healthy check against abuse or misuse
of power. An order passed by an enquiry officer or administrative agency must be a speaking
order. If the order is not supported by reasons, it will amount to violation of the rules of natural
justice. When a higher authority reverses the order of lower authority, reasons must be clearly
stated But when appellate authority affirms and order, need to state reasons.
6. Duty To Act Fairly: -
The Decision in Kraipak V. Union of India AIR 1970) by Supreme Court of India
established the principle that duty to act fairly lies on any authority whether administrative or
Quasi Judicial. The duty to act fairly may not cover all principles of natural justice but it
imposes an obligation on the authority to be fair. The question whether an authority had acted
fairly or not will depend on the circumstances of the case.
7. Validity of an order on failure to observe natural justice:-
Failure to observe the principles of natural justice will make a decision null & void
abinitio. A quasi Judicial or Administrative decision made in violation of the principles of
natural justice wherever in can be read as an implied requirement of law is null and void.
(Swedeshi Cotton Mills v. Union of India (1981) 1 SCC)
8. Case Laws:-
a) TVS Finance and Service Limited vs H. Shiva Kumar [SUPREME COURT OF INDIA, 01 Oct
2010]Labour & Industrial Law - Practice & Procedure - Violation of principles of natural justice :-
Single Judge Directive the appellants to pay to the respondent 50 per cent of the last
drawn salary as interim measure. Appellate Bench while partly allowing the appeal filed
by the respondent against order had modified the said order to the effect that the interim
relief to the respondent would be payable from the date of his application before the
Labour Court. Question before the SC was whether impugned order deserved to be set
aside on the ground that the order passed by the Single Judge was modified to the
detriment of the appellant without notice to them?
Allowing the appeal SC Held that impugned order could not be sustained as the same
was passed in clear violation of the principles of natural justice. Given an opportunity, the
appellants might have explained that the directions issued by the Single Judge were fully
justified and did not require any variation .There were no exceptional circumstances in
the case warranting non-compliance with the cardinal rule of Audi alterant partetn and
therefore, the impugned order deserved to be quashed - Appeal allowed.
a. S. B. I. vs Hemant Kumar [SUPREME COURT OF INDIA, 06 Apr 2011]
Labour & Industrial Law - Domestic enquiry - Violation of principles of natural
justice:-
6

7. Assignment on Business Laws - Principles of Natural Justice
Presented By Alexander T C
MBA 2nd Semester IMK –UoK
Respondent Cashier-cum-Clerk allegedly misappropriated cash from appellant bank -
Respondent was charge-sheeted and enquiry proceedings were initiated - Since
respondent was absent on various dates of hearing, enquiry officer passed ex parte
order holding that respondent was guilty of charges - Respondent's departmental appeal
was dismissed - Respondent raised an industrial dispute - Industrial Tribunal directed
reinstatement of respondent holding that departmental enquiry suffered from violation of
principles of natural justice - HC upheld Tribunal order in appellant's writ petition –
SC examined Whether there was any violation of principles of natural justice in instant
case - Held, principles of natural justice should not be stretched to a point where they
would render in-house proceedings unworkable . Respondent had not appeared for
enquiry on two earlier dates and he was absent on third appointment day also.
Respondent adopted dilatory tactics and in-house proceedings should be conducted
expeditiously and without any undue loss of time. Tribunal's observation that three barren
dates in an in-house proceeding did not amount to delay, was unfortunate. Further,
respondent had already tendered two admissions of guilt in writing and one orally before
management witness and there was hardly anything that could be said on his behalf to
repel charges - Tribunal's findings, therefore, were wholly unreasonable and perverse
and HC, unfortunately, did not consider matter properly - Hence, impugned Tribunal and
HC orders were set aside - Appeal allowed.
9. Administrative Fairness Guidelines
1. Proper authority to decide: - What legislation created the authority or power
(direct or delegated ) to make a decision and to which decision-maker was the power
granted?
2. Duty of fairness in procedure: - The decision-making which affects the rights
of individuals must follow a fair process. This duty of fairness means there must be
procedural fairness in decision-making.
3. Participation rights:- Was the complainant given a full and fair opportunity to
present their case to the decision-maker? Was there full disclosure of the case
against the person, to the person?
4. Adequate reasons:- There must be a rational connection between the evidence
presented and the conclusions reached by the decision-maker. The decision and the
reasons must be communicated clearly and identified by the decision-maker.
5. Reasonable apprehension of bias:- We look for impartiality and independence of
the decision-maker including relationships to all parties in the matter, both internally
and externally.
6. Legitimate expectation:- Did the decision-maker fail to honour a commitment
or follow regular procedures?
7. Exercising discretionary power:- We look to see how the discretion is
established in the Act, Regulation, or Policy Guidelines, etc. Discretionary decisions
are reviewed to determine if there is evidence of bad faith, improper purpose, or
irrelevant considerations.
8. Was the decision reasonable? A reasonable decision does not equate to
whether the decision is wrong or whether it might have been decided in a different
way. A reasonable decision should indicate how the decision-maker(s) considered
and assessed the arguments and evidence.
These eight fairness factors form the nucleus of a procedural guide to a manager when
determining if natural justice and administrative fairness prevailed in coming to a decision.
7