The decision of the Settlement Commission is subject to judicial review only in case of grave procedural defects, violation of rules of natural justice, or lack of nexus between reasons and decision.

( 1 ) IN these four petitions presented by the same person praying for quashing the order passed by the Settlement Commission (Income-tax and Wealth-tax) constituted under the provisions of the income-tax Act, 1961 ("the Act" for short), the following two questions of law arise for consideration :

" (1) Whether a person who approaches the Income-tax Settlement Commission constituted under the provisions of the Income-tax Act, 1961, seeking a full and final settlement of his case is entitled to question the legality of its decision in a petition under article 226 of the constitution of India ?

(2) If the answer to the first question is in the affirmative, what is the scope for interference under article 226 of the Constitution of India against a decision of the Settlement Commission ?"

( 2 ) THE facts of the case, in brief, are as follows : The petitioner was a regular assessee being assessed to income-tax the provision of the Act. He was the managing director of Internation instruments Limited, a public limited company, established under the technical collaboration with a German-based company VDO Tachometer Werke Gmbh ("vdo" for short ). The petitioner was interested in acquiring a business for manufacturing hose clips, which was being run under the name and style "noridex" by a German national by name Mr. Klug. In view of its superior quality and reputation, the petitioner desired to acquire the business. For that purpose, the petitioner negotiated a loan from VDO. This was approved by the Government of India, subject to the following conditions :

(1) The petitioner should raise the loan personally and the maximum interest payable would be 10 3/4%; (2) The petitioner had to establish a limited company to take over the business; (3) VDO, as a lender, would be empowered to appoint a general manager to look after the affairs of the company till the loan is outstanding; (4) The purchase price of DM 3,80,000 had to be paid in three installments, the first one of DM 2,20,000 and two subsequent equal installments of DM 80,000 each; (5) The principal and the interest had to be paid from out of the profits of the business acquired by the petitioner in Germany and the loan had to be repaid within a period of five years.

( 3 ) SUBSEQUENTLY, the precondition regarding existence of profits was withdrawn by the government of India. Further, the petitioner had to establish a parallel unit for the manufacture of hose clips within a period of three years in India. According to the petitioner, he was constrained by certain conditions to raise a personal loan and to establish a private limited company to take over the business. No foreign exchange was to be released by the Government of India. If there was to be default in repayment and the Government were to release foreign exchange, the petitioner was to pay penalty in an equal amount. These conditions were incorporated in the order of the Government of India dated August 10, 1970 (annexure-A ).

( 4 ) PURSUANT to the directives of the Government of India, a loan agreement was entered into between the petitioner and VDO on October 8, 1970. The stipulation of the Government of India had been incorporated in the agreement dated October 8, 1970, a copy of which is produced as annexure-B of the petitions. The agreement was also ratified by the Government of India. After the agreement, the petitioner carried on business in his individual capacity for a short while. Thereafter, in compliance with the directives of the Government of India, a limited company "noridex Gmbh" was established on November 21, 1970, in Germany, governed by the general law. The company had a share capital of DM 20,000 out of which the petitioner held shares, in his individual capacity, worth DM 18,000 which was 90% of the issued share capital. The remainder of 10% of the total share capital was held by a German national and a representative of VDO. The petitioner transferred the business including raw materi