Law Relating To Pecuniary Bias

Administrative law is that branch of law which concerns the functioning of the administration and the relation between individuals and administrative authorities as well as other authorities of the state. [1] The administration in the present day deals with rulemaking, quasi-judicial and purely administrative functions. Thus, natural justice principles need to be applied as a balance between the interests of the individuals and the authorities. Common Law has used the expression natural justice to refer to two distinct presumptions of interpretation; [2] the audi alteram partem rule and the rules against the ‘appearance of bias’ which includes pecuniary bias.

Pecuniary is defined as something related to money or that can be valued in money. [3] Bias is an operative prejudice, whether conscious or unconscious, as a result of some preconceived opinion or predisposition, in relation to a party or an issue. [4] The maxim Nemo in propria causa judex, esse debet, broadly governs the rule against pecuniary bias. [5] Thus, Pecuniary Bias in the ambit of Administrative Law would deal with any operative prejudice that the authority may have against an individual which vitiates the latter’s interests.

Keeping in sync with this line of thought the researcher seeks to chalk out three broad heads in the paper. The first head of the paper seeks to trace the origin of the concept under English Law. The second leg seeks the adaptation of the principle in India. The third leg of the paper deals with a comparative analysis of both the above adaptations. The researcher would then conclude the paper

The scope of the paper remains restricted to a comparative analysis of the jurisprudence qua pecuniary bias in India & England. As the title suggests that the paper discusses the role of pecuniary bias in Administrative Law. Being a student of law in India, the researcher would discuss this role in the Indian setup.

Part A: Origin of Pecuniary Bias under English Law

The rule against bias is a principle of natural justice. Before embarking on a discussion as to what is the actions warrant the application of these principles. There has to be a strong distinction made in the nature of actions undertaken by the administrative bodies. The principles of natural justice would be applied only where the actions are directed against an individual. [6] This may be generally done only in the case there is an exercise of a judicial or quasi-judicial function or in any case of an administrative function affecting the rights of an individual where the very nature of function involves principle of natural justice. [7] 

English law was one of the first legal systems that established a separation of powers setup; however, U.K. is often described as "a weak separation of powers". [8] The Executive in the U.K. reports to the legislature. Furthermore, because Parliamentary sovereignty exists, a system such as that of the UK is more accurately described as a "fusion of powers". [9] The development of the British constitution, which is not a codified document, is based on this fusion in the person of the Monarch, who has a formal role to play in the legislature, the executive and the judiciary.

In light of such ‘fusion of powers’ it becomes slightly difficult to extend principles of Natural Justice across the board with finesse. There would be obstacles on the ground of exceeding jurisdiction. Thus, English law has restricted the application of Rule against pecuniary bias in the cases where an administrative body takes quasi-judicial decisions. The origins of this principle were first seen in C.J. Edward Coke’s opinion in Dr. Bonham Case. [10] Here the appellant was fined by the college of Physicians for practicing in the city of London without licence. Half of the fine was supposed to go to the King’s Exchequer and the other half to the College. The order was struck down by the Court citing that such an order is vitiated that fine may be used as revenue for the exchequer thereby, creating a pecuniary interest.

Though, the maxim of Pecuniary Bias was evolved [again] by Lord Coke in Egerton v. Lord Derby, [11] 

“A judge must be of sterner stuff. His mental equipoise must always remain firm and undeflected. He should not allow his personal prejudice to go

Judicial approach is unanimous and decisive on the point that any financial interest, howsoever small it may be, would vitiate administrative action. The disqualification will not be avoided by non-participation of the biased member in the proceedings if he was present when the decision was reached. [12] 

The rule against bias wouldn’t be applied where the judge though having a financial interest, has no direct financial interest in the outcome of the case. Therefore, the Court of Appeal in R. v. Mulvihill [13] did not set aside the conviction of the accused on a charge of robbery in a bank on the ground that the trial judge had shares in the bank. In such cases unless there is a likelihood of bias administrative action will not be quashed.

Apparent bias has a similar open definition to that described above. The case of Porter v. Magill [14] simply defines it as “where a fair-minded and informed observer would conclude there was a real possibility of bias". This later definition would seem to cover the

pecuniary and non-pecuniary issues established in the earlier cases as well as establishing wider grounds for future appeals. [15] 

Part B: Pecuniary Bias adapted in India

In India, it has been accepted by the Supreme Court that the dividing line between an administrative power and a quasi-judicial power is quite thin and is gradually being obliterated. [16] The obliteration of the distinction between “quasi-judicial" and “administrative" function and invoking the concept of fairness in administrative action has extended the scope of natural justice. [17] Natural justice may have to be observed not only when statutory power is being exercised but even when a decision is taken administratively which involves civil consequences [18] to a person. [19] Any administrative order which involves civil consequences must be made consistently with the rules of natural justice. [20] 

The people subject to the authority of an administrative body have a legitimate expectation that arises from the duty upon the public authority to act fairly by considering all relevant factors that contribute to the expectation. [21] When a legitimate expectation exists, it has to be ascertained whether failure to give an opportunity of hearing before such a decision has resulted in failure of justice and whether on that ground the decision should be quashed. [22] 

Keeping in mind the principles of Natural Justice, any administrative action has to be free of any pecuniary bias. These principles have been attuned in the decisions of the courts in a

catena of decisions. In Jeejabhoy v. Assistant Collector, Thana [23] , the Chief Justice reconstituted the Bench upon finding that one of the members of the Bench was a member of the co-operative society for which the land has been acquired. The decision of the Collector who in his capacity as the Chairman of the Regional Transport Authority had granted a permit in favour of a cooperative society of which he was also the Chairman was quashed by the Hon’ble Madras High Court citing a direct pecuniary interest. [24] In a similar, decision the Andhra Pradesh High Court also quashed the order of the Regional Transport Authority where one of its members had issued a permit in his own favour. [25] The Supreme Court also in J. Mohapatra & Co. v. State of Orissa [26] quashed the decision of the Textbooks’ Selection Committee because some of its members were also authors of books which were considered for selection.

Part C: Comparative Jurisprudence: India vis-à-vis England

It has to be seen that Administrative Law governs its subjects with the fundamental canon of Natural Justice, viz. fairness, which is synonymous with reasonableness. Bias stands included within the attributes and broader purview of the word ''malice'' which in accepted parlance means and implies ''Spite'' or ''ill-will''. A redeeming feature in the matter of attributing bias or malice is now well settled that mere general statement would not be sufficient for the purposes of indication of ill will. There must be cogent evidence available on the record to come to a conclusion as to whether in fact there did exist a bias (or a mala fide move), which resulted in the miscarriage of Justice.

It has to be kept in mind that there exists a stark difference between the separation of powers between India and England, therefore the take on pecuniary bias by the adjudicatory bodies has been slightly different. As shown above the courts in England have tried to create demarcating lines between administrative and quasi-judicial functions whereas Indian courts have obliterated that distinction.

Secondly, the courts in India do not strictly follow the automatic disqualification rule. It is well settled in English jurisprudence that as regards pecuniary interest, the least pecuniary interest in the subject matter of the litigation will disqualify any person from acting as a Judge. This principle is so strictly applied that a pecuniary interest, however slight, will disqualify, even though it is not proved, that the decision is in any way affected because of such interest. The classic illustration are those where the Judge having some shareholding in a company which is one of the parties to dispute. In the leading case of Dimes v. Grant Function Canal [27] , where the judge had shareholding in the company, the House of Lords observed as under:

“No one can suppose that the Lord Cottenham could be in the remotest degree, influenced by the interest he had in this concern, but, my Lords, it is of the last importance that the maxim, that no one is to be a judge in his own case, should be held sacred…. This will be lesson for all inferior Tribunals to take care not only that in the decrees they are not influenced by personal interest, but to avoid the appearance labouring under such an influence."

Under the Indian setup where there is allegation of bias including inter alia pecuniary interest the tests applicable are ''Real Likelihood of Bias'' & ''Reasonable Suspicion of Bias''. [28] It is on a collective reading of these tests that the Indian courts would disqualify an authority from acting. In light of this evolution in jurisprudence even English courts have diluted their stance.

The Hon’ble Supreme Court in State of Punjab v. V. K. Khanna [29] recently observed, that the English courts have sounded a different note though may not be substantial but the automatic disqualification theory to some extent stands diluted. But despite of such dilution, the theory of automatic disqualification is applicable in case where there is evidence of the adjudicatory authority having even minor pecuniary interest in the subject matter in dispute.

Though, the principle was strictly observed by English courts to clear away everything which might engender suspicion and distrust of the Tribunal and so to promote the feeling of confidence in the administration of Justice. Logistical hindrances within the Indian setup such as the need for informal redressal setups, consideration of administrative policy et al. require the Administrative Bodies to dilute the meaning of pecuniary interests. [30] Though, this may be considered as a critique to the Indian adaptation that we have drifted from the traditional adaptation of the principle that nothing is to be done which creates even suspicion, that there has been an improper interference with the course of justice. As the Hon’ble Supreme Court observed in Manek Lal vs. Premchand [31] : “It is obvious that pecuniary interest, however small it may be in a subject-matter of the proceedings, would wholly disqualify a member from acting as a Judge."

 

Unlike cases of personal bias or bias as to subject-matter pecuniary bias cases are far more direct. The test in the former is whether there is a likelihood of bias in the Judge. A distant possibility will not prove bias. In that case, the test is not whether in fact a bias has affected the judgement; the test always is and must be whether a litigant could reasonably apprehend that the bias attributable to a member of the Tribunal might have operated against him in the final decision of the Tribunal. As far as the test for the latter is concerned, however slight the interest may be, a violation of the principles of natural justice exists.

Conclusion

Unlike laws in other jurisdictions laws governing the functioning of administration and its relationship with individuals, the law in India is largely not codified and relies heavily on judicial interpretation. The administration thus, in dealing with rulemaking, quasi-judicial and purely administrative functions has to carefully observe natural justice principles. The Common Law tradition has used the expression natural justice to refer to two distinct presumptions of interpretation; the audi alteram partem rule and the rules against the ‘appearance of bias’ which includes pecuniary bias.

The maxim Nemo in propria causa judex, esse debet, broadly governs the rule against pecuniary bias. Thus, Pecuniary Bias in the ambit of Administrative Law would deal with any operative prejudice that the authority may have against an individual which vitiates the latter’s interests. As illustrated in the paper there are two broad interpretations of the rule against pecuniary bias – the British interpretation and the Indian interpretation.

The English system while dealing with a small and focused jurisdiction in terms of subjects has come up with a very strict interpretation of the rule against Pecuniary Bias. Any slight albeit direct pecuniary interest in the outcome of the quasi-judicial verdict dismisses the presence of the judge in a case. As cited above, the Indian principle is a lot more diluted. Firstly, post the Kraipak verdict the thin line between administrative actions and quasi-judicial functions has been done away with. Therefore, any pecuniary interest while performing a pure administrative action would also vitiate the principles of natural justice. Though, this seems a far more stricter interpretation of the principle against pecuniary bias, the courts have softened their stand and the tests for the rule against bias in India have a reduced standard when it comes to judging the role of bias.