Opinion: N Srinivasan Case Judgment- Adding an Explanation to the Exercise of Quasi- Legislative Functions

In the previous post, I had discussed the issue with respect to BCCI’s amenability to Writ Jurisdiction of the Supreme Court under Article 32 by addressing the queries raised in the Zee Telefilms case from the observations in the present case.

There was also reference to the BCCI’s amenability to the Jurisdiction of High Courts under Article 226 on the ground of its performance of ‘public functions’. Once the Court had established this (which was easy, since the Constitution Bench decision in Zee Telefilms had held the same), it made the BCCI’s administrative actions open to judicial review.

The present post deals with its one such administrative function, i.e., the Amendment to Rule 6.2.4 of the IPL Regulations. The Bombay High Court had earlier repelled the challenge and upheld the amendment in question by its judgment and order impugned in the present Civil Appeal.

In this post only first strand of the Court’s reasoning would be analysed, i.e., striking down the provision for perpetrating Conflict of Interests. The second independent strand is of the amendment contravening public policy, which will not be dealt in this post.

A. Impugned Provision

The Rule prior to the amendment stated:

“No Administrators shall have, directly or indirectly, any commercial interest in the matches or events conducted by the Board.”

Later the following phrase was added to it:

“excluding events like IPL or Champions League Twenty 20.”

B. Issue

While there was no problem with (a) the competency of the authority amending the Regulations, and (b) the procedure fairness involved in carrying out the same; there was issue of infirmity in whether the amendment falls foul of any statute or principle of law, violation whereof cannot be countenanced.

C. Contention

It was contended that the as much as the amendment permits commercial interest to be held by administrators in the events organised by BCCI it violates a fundamental tenet of law that no one can be a judge in his own cause, a facet which must guide every action that BCCI takes in the discharge of its public functions.

D. Decision

The Court in its first strand of reasoning held that the impugned Rule has caused the present situation of Conflict of Interests where Mr. N. Srinivasan, being the Head of BCCI, was involved in many situations where his own team CSK was being compensated for losses incurred by it at various junctures. One of the three instances, the Court mentions is one where BCCI awarded compensation of a sum of Rs.10.40 crores to Chennai Super Kings – on account of the cancellation of the Champions League Tournament 2008. The Court noted that it is not in dispute that Mr. Srinivasan was one of those who contributed to the taking of the decision to award that amount towards compensation to his own team.

In other words, Court stated:

“This enabling provision disregards the potential conflict of interest which will arise between an administrator’s duty as a functionary of the BCCI on the one hand and his interest as the holder of any such commercial interest on the other.”

The Court differentiated between the scenario where conflict may arise even when rules do not specifically permit such a conflict situation with that of a scenario of permitting acts which will per se bring about such a conflict.

E. Analyses

The first strand of the Court’s reasoning is important for the jurisprudence of Administrative law. Administrative Actions can be classified into 3 types: (a) Quasi- Legislative, (b) Quasi- Judicial and (c) Pure Administrative Actions with or w/o Civil Consequences.

Principles of Natural Justice are not required to be followed in the first type, since being a policy decision there is a creation of rights and liabilities and no issue of either deciding or affecting the rights and liabilities of the parties involved. The act of amending the Rules is a Quasi- Legislative Action, therefore, cannot be found foul of violating the PNJs.

It should be noted that the Court rejected the contention that the amendment is bad for it was carried in a hasty manner without giving adequate notice to the members of the Organisation while stating:

“…[though there can be] suspicion as to bonafides of the exercise but a mere suspicion may not be enough…so long as the forum where the matter was taken-up, discussed and a resolution passed was competent to deal with the subject, procedural deficiencies which do not affect the competence of the authority do not matter much.”

Clearly, the Court has not commented on whether bona fide of the administrative rule making is a relevant consideration for judicial review of Quasi- legislative action. It merely stated that a mere suspicion of absence of bonafide is not enough. In my opinion, the Court misconstrued the argument of procedural deficiencies highlighting malafide of the administration to that of the argument of procedural deficiencies striking at the competence of the administration to engage in quasi legislative action. The Court did not address if the bonafide of the administration, if proved to be absent, could be a ground of striking down the Quasi- legislative action. It merely termed the activities of hastily proceeding with the amendment as a "procedural deficiency" which did not strike at the competency of the Administration's action, whereas, the argument was that such activities show the malafide intention in carrying out this Amendment operation.

So far so good, but for the Supreme Court the problem arises when such action is the cause of violation of PNJs, i.e., even though good faith or other PNJs are not required to be followed while exercising such power, the exercise of such power when leads to situations of biasness or conflict of interests situations, then, there is a problem.

Therefore, there cannot be a rule permitting those acts and transactions which would by their very nature bring about a conflict of interest. Such rules therefore, hinder the ability to undertake Pure Administrative actions by not giving due credence to PNJs. The test is not whether there is any bias when Pure Admin Action is undertaken, but whether there is any reasonable likelihood of bias that determines whether the action can be faulted. The instances where the BCCI (including Srinivasan) compensated CSK for losses, are instances of Pure Administrative Action affecting rights and liabilities, which are foul of non- adherence to the PNJs. Hence, in my opinion the judgment is landmark for adding an explanation to the exercise of Quasi- Legislative actions, that such actions should not promote violation of PNJs, even though to exercise such actions there is no need to follow PNJs.