Supreme Court: Prior Order Modified Under Inherent Powers (Order LV Rule 6 SC Rules) Due to Natural Justice Breach & Inadvertent Directions Impacting High Court Adjudication. - 2025-05-14

Supreme Court Modifies Own Order, Cites Breach of Natural Justice and Oversight

New Delhi: The Supreme Court of India, in a significant ruling, has modified its own earlier order dated July 4, 2023, citing a breach of natural justice principles and inadvertent errors in its directions. The judgment, authored by Justice Sanjay Kumar , emphasized the Court's inherent powers to rectify mistakes to prevent abuse of process and ensure the ends of justice, particularly when a party has not been heard or when its directions might unduly influence High Court proceedings.

The original order was passed in a writ petition filed by Gagan Banga and Indiabulls Housing Finance Limited, who sought guidelines to prevent criminal proceedings by defaulting borrowers and the quashing of several First Information Reports (FIRs) and an Enforcement Case Information Report (ECIR).

Background: The Original Directive and Subsequent Challenges

In its order dated July 4, 2023, the Supreme Court had disposed of the writ petition filed by Indiabulls. It had permitted the petitioners to approach the respective jurisdictional High Courts (Calcutta, Allahabad, and Delhi) to challenge four FIRs and one ECIR registered against them. The Court had also directed that an earlier interim stay on three FIRs would continue until the High Courts disposed of the petitions. For a fourth FIR and the ECIR (which were added later), the Supreme Court had ordered that no coercive steps be taken against the financial institution and its officers until the High Court's final disposal, while also allowing them to seek a stay from the High Court.

Subsequently, miscellaneous applications were filed seeking modification and recall of this July 4th order. The Enforcement Directorate (ED), New Delhi, sought a recall, arguing it was not heard before directions concerning the ECIR (ECIR/HIU-1/06/2023) were passed, despite being impleaded as a respondent on the very day the writ petition was disposed of. Another respondent, Amit Walia, also sought modification regarding the bar on investigation.

Supreme Court's Rationale for Modification

The Supreme Court, upon reviewing the applications, acknowledged several critical issues with its July 4th order.

1. Violation of Natural Justice: The Court found merit in the ED's plea. Justice Sanjay Kumar noted, "It is a settled principle that no adverse order should be passed against a party without hearing it. This is the fundamental principle of natural justice..." The judgment highlighted that the ED was impleaded and the final order passed on the same day (04.07.2023) without affording it an opportunity of hearing concerning the ECIR. Furthermore, the ECIR and one FIR (No. 197 of 2023) were not even formally made subject matter of challenge in the writ petition as the prayer for amendment was not explicitly ordered.

2. Inadvertent Errors and Oversight: The Court identified "certain errors [that] crept in by oversight":

* Contradictory Directions: Regarding FIR No. 197 of 2023, the Court had directed no coercive steps but also permitted the petitioners to seek a stay from the High Court, which was deemed "unnecessary" once protection from coercive action was already granted.

* Binding High Courts: The continuation of the Supreme Court's stay on the first three FIRs "till the disposal of the writ petitions to be filed before the High Courts" was found to be improper. The Court reasoned, "When a party is relegated to the High Court to pursue its remedies, it would not be proper, in the normal course, to bind the said High Court with directions in relation to the proceedings to be impugned before such Court." This could be "misconstrued by the High Courts to be observations by this Court on the merits of the matter, thereby influencing the adjudication." The Court referred to the principles in Neeharika Infrastructure Pvt. Ltd. vs. State of Maharashtra , which caution against scuttling criminal investigations.

3. Invocation of Inherent Powers: While acknowledging the general principle that post-disposal applications for modification are entertained rarely (citing Jaipur Vidyut Vitran Nigam Ltd. and Supertech Ltd. ), the Court underscored its inherent powers under Rule 6 of Order LV of the Supreme Court Rules, 2013. "If any such abuse of process is noticed after the disposal of the case or if a modification is found essential to meet the ends of justice, this Court would be justified in entertaining an application...". The Court also cited V.K. Jain vs. High Court of Delhi , acknowledging the "fallibility of Judges" and the duty of Constitutional Courts to "recognize errors that may have crept into their judicial orders and rectify the same."

The Corrective Measures

Based on this reasoning, the Supreme Court ordered the following:

Recall concerning ECIR: The order dated July 4, 2023, stands recalled insofar as it pertains to ECIR No. ECIR/HIU-1/06/2023. The Allahabad High Court is to consider the challenge to the ECIR (in Criminal Miscellaneous Writ Petition No. 10893 of 2023) on its merits and in accordance with law, uninfluenced by any observations in the recalled order.

Modification of Stay for FIRs: The interim protection (stay of proceedings) granted for the first three FIRs (FIR No. 646 of 2022, West Bengal; FIR No. 427 of 2023, Ghaziabad; FIR No. 25 of 2021, EOW Delhi) by the July 4th order will now continue only "till the filing of the respective petitions" before the High Courts, instead of "till final disposal of the respective petitions."

High Court Autonomy: The jurisdictional High Courts (Allahabad, Delhi, Calcutta) are now at liberty to entertain applications for interim relief concerning these FIRs and consider such applications and the main cases on their own merits, in accordance with law, and uninfluenced by any observations in the Supreme Court's July 4th order.

The Supreme Court directed its Registry to upload and attach a corrigendum to the order dated July 4, 2023, reflecting these modifications.

Significance of the Judgment

This judgment reiterates the paramount importance of the principles of natural justice, particularly the right to be heard ( audi alteram partem ). It also showcases the Supreme Court's commitment to judicial propriety by acknowledging and correcting its own oversights, thereby strengthening the administration of justice. Importantly, the ruling clarifies that when matters are relegated to High Courts, the higher court should typically refrain from passing extensive interim orders that could pre-empt or influence the High Court's independent assessment of the case on its merits. This ensures that High Courts can exercise their jurisdiction freely and effectively.