Case Law Details
State of Gujarat & Anr. Vs Paresh Nathalal Chauhan (Supreme Court of India)
HC cannot give ruling on availability of good faith clause to GST officers before initiation of a suit, prosecution or legal proceeding: SC
The Supreme Court of India recently rendered a significant decision in the case of State of Gujarat & Anr. Vs Paresh Nathalal Chauhan, regarding the interpretation of the good faith clause under Section 157 of the GST Act. This ruling carries implications for the protection of officers acting under the Act and the principles of accountability in legal proceedings.
The case originated from an interim order of the High Court of Gujarat in response to a writ petition filed by the respondent seeking protection from arrest under section 69 read with section 132 of the GST Act. While the High Court criticized the actions of the officers involved, it also questioned the availability of the good faith clause to these officers. The Supreme Court, upon review, expunged this portion of the order and disposed of the appeal.
The crux of the matter lay in the interpretation of the good faith clause provided under Section 157 of the GST Act. The High Court expressed doubts about whether this protection would extend to officers whose actions may not justify it. However, the Supreme Court clarified that the immunity provided by the good faith clause is not absolute and must be understood within its limitations.
The good faith clause serves as a defense for statutory functionaries against legal proceedings arising from actions taken in the course of their duties. However, this defense is contingent upon the actions being performed honestly and in furtherance of statutory objectives. The Supreme Court emphasized that the scrutiny of whether an action was done in good faith or not is a matter for the courts to determine in legal proceedings brought against the officers.
In its ruling, the Supreme Court underscored the importance of preserving the integrity and independence of legal adjudication. It cautioned against making advance rulings on the availability of defenses such as good faith before the initiation of formal legal proceedings. Such premature opinions could compromise the rights of both the prosecution and the defense and undermine the accountability of statutory functionaries.
The decision reaffirms the principle that every citizen has the right to seek legal remedies and hold statutory functionaries accountable for their actions. It underscores the need for courts to adjudicate claims of good faith on a case-by-case basis, considering the facts and circumstances involved.
In conclusion, the ruling in State of Gujarat & Anr. Vs Paresh Nathalal Chauhan clarifies the application of the good faith clause under the GST Act and underscores the role of the judiciary in upholding accountability and ensuring fair legal proceedings.
FULL TEXT OF THE SUPREME COURT JUDGMENT/ORDER
1. Leave granted.
2. We are called upon to expunge a portion from the interim order of the High Court and dispose of the appeal as it is represented to us that the respondent is not interested in initiating proceedings against the officers in the present matter. We have accepted the request and hereby dispose of the appeal.
3. The portion sought to be expunged is the observation of the High Court that the good faith clause in Section 157 of the GST Act1, may not be available to the officers of the State as their conduct, according to the High Court, “may not” justify protection. We have expunged that portion of the order because the context as well as the conclusions of the High Court are wrong. We will explain this after indicating the relevant facts.
4. This civil appeal arises out of an interim order passed by the High Court of Gujarat2 in a writ petition filed by the respondent seeking a direction for protection from arrest under section 69 read with section 132 of the GST Act. The High Court is still examining the writ petition, but by the interim order impugned herein, it criticised the prolonged stay of the search party at the residence of the respondents as unauthorized and illegal. We need not deal with the merits of the issue as the matter is still pending before the High Court, more so when the respondent has submitted that he is not interested in proceeding against the officers and seeks a quietus to the issue.
5. In fact, while issuing notice in the appeal on 16.07.2021, this Court passed the following order. The order is indicative of the limited scrutiny sought to be made by this Court and it is evident from the following:
“Without in any manner condoning the conduct of the officers which has been commented upon, what persuades us to issue notice is the fact that there are observations to the effect that the statutory protection available to the officers would not be a defence in case proceedings were to be initiated against those officers by the original petitioners or their family members and such an observation has been made in the absence of the officers.
Issue notice limited to the aforesaid aspect returnable in six weeks.”
6. The relevant portion in the order of the High Court that the statutory protection should not be made available to the officers is in paragraph 28 and it is relevant for us to extract the same.
“28. Lastly the court may sound a word of caution to the authorities exercising powers under the GST Acts. Sub-section (2) of section 157 of the GST Acts says that no suit, prosecution or other legal proceedings shall lie against any officer appointed or authorized under the Act for anything which is done or intended to be done in good faith under the Act or the rules made thereunder. An action like the present one which is not contemplated under any statutory provision and which infringes the fundamental rights’ of citizens under article 21 of the Constitution of India may not be protected under this section. An action taken may be said to be in good faith if the officer is otherwise so empowered and he exceeds the scope of his authority. However, in a case like the present one where the authorization was for search and seizure of goods liable to confiscation, documents, books or things and the concerned officer converted it into a search for a person and in investigation, which is not otherwise backed by any statutory provision, it may be difficult to accept that such action was in good faith. Protection of such action under section 157 of the GST Acts may unleash a regime of terror insofar as the taxable persons are concerned.”
7. In the above-referred paragraph, the High Court was of the view that the protection contemplated under section 157 of the GST Act, which is in the nature of a good faith clause, “may not” be available to the officers. This is the issue with which we are concerned, and we will dwell upon it.
8. A good faith clause, explained in the vocabulary of the rights and duties regime, can be said to be a provision of immunity to a statutory functionary. Such provisions are in recognition of public interest in protecting a statutory functionary against prosecution or legal proceedings. This immunity is limited. It is confined to acts done honestly and in furtherance of achieving the statutory purpose and objective. Section 3(22) of the General Clauses Act, 1897 best explains ‘good faith’ as an act done honestly, whether it is done negligently or not.3 Good faith clauses in statutes providing immunity against suits, prosecution or other legal proceedings against officials exercising statutory power are therefore limited by their very nature, that far, and no further. The scope and ambit of good faith has been explained in a number of decisions of this Court,4 which need not be elaborated herein again.
9. A good faith clause in a statute will therefore be a defense. If successfully pleaded, it not only legitimizes the action but also protects the statutory functionary from any legal action. If a statutory functionary invokes the defence of good faith in a suit, prosecution or other legal proceedings initiated against him, it is for the court or a judicial body to consider, adjudicate, and determine whether the claim that the action was done in good faith is made out or not. Such a scrutiny, enquiry, or examination is done only in a proceeding against the statutory functionary. This Court has held that the scrutiny whether the act is done in good faith or not would depend upon the facts and circumstances of each case.5
10. It is in the above referred context that we have examined the observations made by the High Court in Paragraph 28 extracted hereinabove. The High Court was not conducting a suit, prosecution, or other legal proceeding against a statutory functionary. We have no doubt that the High Court was conscious of the principles governing good faith clauses and therefore couched its displeasure and distress by stating that such officials “may not” be protected or that it “may be difficult” to accept the contention of good faith. We are of the opinion that these observations are in the nature of advance rulings. This is because even before the initiation of a suit, prosecution or legal proceeding, the High Court expressed a tentative opinion. If such observations remain, they will affect the integrity and independence of that adjudication, compromising the prosecution and the defence equally.
11. We say no more than reiterate that a citizen of this country has a right of accountability, for which he is entitled to initiate and adopt such legal remedies as are available to him, and in such proceedings the statutory functionary is equally entitled to take a defense of good faith. It is for the court to adjudicate and decide.
12. In view of the above, we expunge paragraph 28 and dispose of the appeal.
Notes
1 “157. Protection of action taken under this Act.—(1) No suit, prosecution or other legal proceedings shall lie against the President, State President, Members, officers or other employees of the Appellate Tribunal or any other person authorised by the said Appellate Tribunal for anything which is in good faith done or intended to be done under this Act or the rules made thereunder.
(2) No suit, prosecution or other legal proceedings shall lie against any officer appointed or authorised under this Act for anything which is done or intended to be done in good faith under this Act or the rules made thereunder.”
2 In Special Civil Application No. 18463 of 2019, order dated 24.12.2019.
3 Section 3(22) of the General Clauses Act, 1897 defines ‘good faith’ as follows:
“3. Definitions.—In this Act, and in all Central Acts and Regulations made after the commencement of this Act, unless there is anything repugnant in the subject or context,— (22) a thing shall be deemed to be done in “good faith” where it is in fact done honestly, whether it is done negligently or not;”
4 See Goondla Venkateswarlu v. State of AP, (2008) 9 SCC 613, paras 22 and 23; Army Headquarters v. CBI (2012) 6 SCC 228, paras 69-78.
5 See, for example, Army Headquarters (supra), paras 76-78.
Author Bio
