An interesting dimension in the Indian regulatory space is that of judicial precedent created by determination of disputes between regulators and those regulated. The value and power of precedent in determination of a legal question is immeasurable. In any dispute, when a court or tribunal rules on a controversy between parties, the determination by the court provides clarity and insight into how the issue in question is to be resolved.
Such clarity pre-empts a bulk of further controversy – most parties placed in identical factual circumstances would normally not agitate a legal dispute since the issue in question would have already been determined. Courts that determine further disputes between parties who seek to differentiate the factual circumstances that they are placed in, would also have guidance from the precedent that has already been set. More importantly, once a precedent is set, society would have to conduct itself in a manner that is in conformity with how the issue has been determined.
Indeed, a party aggrieved by a determination of the controversy may appeal the decision. Appeals would finally end up with a final view from the Supreme Court of India or a decree from a court at some intermediate level, which does not get appealed by any aggrieved party. In other words, the dispute comes to rest at some position. Such a position creates a binding precedent, and our Constitutional structure demands that to have an order rule of law, such precedent ought to be followed.
It is well said that Supreme Court is always right because it is final. It is not final because it is always right. Regardless of whether one agrees with the court’s views, one has to follow the final binding precedent. But for this basic feature of our constitutional legal system, there would be chaos, with every judge below the court that has decreed the interpretation of law, having the liberty to take its own view, or reiterating a view that has already been held to be wrong.
Now, replace the lower court with a regulator – an agency, which unlike a lower court, is itself one of the parties to the dispute, with an interest in furthering its interpretation of the issues in controversy. A regulator is an agency armed by law with powers of running a mini-State with all attendant trappings viz. the power to legislate (write regulations), to enforce (take regulatory action) and adjudicate (in-built quasi-judicial functions – essentially an internal check and balance on the enforcement process). Therefore, the need for a regulator to following binding precedent is greater.
It is indeed open to the regulator to appeal a decision it is aggrieved by. However, unless the decision appealed against is stayed by a higher court, the rule of precedent would require the regulator to follow binding precedent. This requirement is critical to ensure the rule of law and maintenance of predictable public policy in the regulatory system. Sadly, despite a stay not being granted on the regulator’s appeal, merely because the regulator disagrees with the appellate tribunal’s view, rulings are ignored and the regulator continues to pass orders in line with the view already held to be wrong.
The position gets more complicated where the regulator and the private party settle their dispute in a court above the appellate tribunal. The regulator would agree to let go of the controversy but insist that in doing so, the appellate tribunal’s decision should not be regarded as a precedent. The private party would be happy not to expend any further money and energy and would therefore move on.
A regulatory dispute is not like a dispute between two warring factions in a family. On the one side is a regulator, keen to state a particular point of view. On the other side is a private party keen to establish that it was not wrong. When an appellate court has held that the private party is not wrong, the rest of the world would be free to act in accordance with the court’s view. At this stage, it is the appellate court in the regulatory system is laying down the law. The dispute is no longer just a bilateral dispute (“in personnum”) like a money claim, or a defamation suit – it involves the interests of society at large (“in rem”).
Such settlements pose an enormous moral dilemma for the superior court hearing the dispute and for the lawyers representing the parties. Neither can force the parties to litigate and spend time, money and energy. Yet, judicial precedents that bind the world at large cannot be lightly unsettled bilaterally by parties to a specific dispute. Disturbing a judicial precedent sets society back into the controversial state of affairs that preceded the precedent. Insisting that precedent should be disturbed is itself against public policy. As more areas of life shift to the regulatory arena, this is a question that courts will have to increasingly grapple with in future.
(The author is a partner of JSA, Advocates & Solicitors. The views expressed herein are his own.) somasekhar@jsalaw.com
