Holding

Statutory functionaries are equally entitled to the defence of good faith, and the High Court's advance observation must be expunged.

Summary

The respondent, Paresh Nathalal Chauhan, filed a writ petition seeking protection from arrest under the GST Act, prompting the Gujarat High Court to issue an interim order that criticised the prolonged presence of a search party at his residence as unauthorized. The High Court also observed that the good‑faith protection under Section 157 of the Central GST Act might not apply to the officers because their conduct may not be in good faith. The State of Gujarat appealed to the Supreme Court, seeking expunction of that observation. The Supreme Court held that statutory functionaries are entitled to invoke the good‑faith defence and that the High Court’s observation amounted to an advance ruling, inappropriate before any suit or prosecution is instituted. Consequently, the Court expunged the impugned paragraph and disposed of the appeal.

Issues considered

Whether the observation by the Gujarat High Court that Section 157 of the GST Act may not protect officers acting in alleged bad faith is valid and should be expunged.

Legislation cited

Central Goods and Services Tax Act, 2017s. 157
General Clauses Act, 1897s. 3(22)

Subjects

ExpunctionInterim orderStatutory protectionGood faith clauseStatutory functionaryTentative opinionRights and duties regimeImmunity to a statutory functionaryDefence of good faith

Judgment

[2024] 3 S.C.R. 1141 : 2024 INSC 277

The State of Gujarat & Anr.
v.
Paresh Nathalal Chauhan
(Civil Appeal No 4618 of 2024)
12 March 2024
[Pamidighantam Sri Narasimha* and Aravind Kumar, JJ.]

Issue for Consideration
Matter pertains to expunction of the observation by the High Court
in an interim order that statutory protection contemplated u/s. 157
of the GST Act, in the nature of a good faith clause, not available
to the officers of the State conducting search as their conduct,
“may not” justify protection.

Headnotes
Central Goods and Services Tax Act, 2017 – s. 157 – Protection
of action taken under this Act – Interim order by the High
Court, criticising the prolonged stay of the search party at
the residence of the respondents as unauthorized and illegal
– Observation by the High Court that statutory protection
contemplated u/s. 157, in the nature of a good faith clause, may
not be available to the officers of the State conducting search
as their conduct, “may not” justify protection – Challenged to:
Held: Statutory functionary is equally entitled to take a defense of
good faith – It is for the court to adjudicate and decide – High Court
was not conducting a suit, prosecution, or other legal proceeding
against a statutory functionary – High Court was conscious of
the principles governing good faith clauses and thus, couched its
displeasure and distress by stating that such officials “may not”
be protected or that it “may be difficult” to accept the contention of
good faith – Observations were in the nature of advance rulings,
because even before the initiation of a suit, prosecution or legal
proceeding, the High Court expressed a tentative opinion – If
such observations remain, they would affect the integrity and
independence of that adjudication, compromising the prosecution
and the defence equally – Observation of the High Court is
expunged since the context as well as the conclusions of the High
Court were wrong. [Paras 9-12]

* Author
1142 [2024] 3 S.C.R.

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Words and phrases – Good faith – Scope and ambit of:
Held: Good faith clauses in statutes, explained in the vocabulary
of the rights and duties regime, can be said to be a provision
of immunity to a statutory functionary – Such provisions are in
recognition of public interest in protecting a statutory functionary
against suits, prosecution or legal proceedings against officials
exercising statutory power– This immunity is limited – It is confined
to acts done honestly and in furtherance of achieving the statutory
purpose and objective – s. 3(22) explains ‘good faith’ as an act
done honestly, whether it is done negligently or not – Good faith
clause in a statute will be a defense – If successfully pleaded,
it not only legitimises the action but also protects the statutory
functionary from any legal action – If statutory functionary invokes
the defence of good faith, it is for the court or a judicial body to
adjudicate and determine whether the action was done in good
faith or not – Such scrutiny or examination is done only in a
proceeding against the statutory functionary, which would depend
upon the facts and circumstances of each case – General Clauses
Act,1897 – s. 3(22) – Central Goods and Services Tax Act, 2017
– s. 157. [Paras 8, 9]

Case Law Cited
Goondla Venkateswarlu v. State of AP [2008] 12 SCR
608 : (2008) 9 SCC 613; Army Headquarters v. CBI
[2012] 5 SCR 599 : (2012) 6 SCC 228 – referred to.

List of Acts
Central Goods and Services Tax Act, 2017; General Clauses Act,
1897.

List of Keywords
Expunction; Expunction of the observation by the High Court;
Interim order; Statutory protection; Good faith clause; Statutory
functionary; Tentative opinion; Rights and duties regime; Immunity
to a statutory functionary; Defence of good faith.

Case Arising From
CIVIL APPELLATE JURISDICTION: Civil Appeal No.4618 of 2024
From the Judgment and Order dated 24.12.2019 of the High Court
of Gujarat at Ahmedabad in SCA No. 18463 of 2019
[2024] 3 S.C.R. 1143

The State of Gujarat & Anr. v. Paresh Nathalal Chauhan

Appearances for Parties
Ms. Deepanwita Priyanka, Adv. for the Appellants.
Rahul Narayan, Ms. Harshita Malik, Advs. for the Respondent.
Judgment / Order of the Supreme Court

Judgment
Pamidighantam Sri Narasimha, J.
1. Leave granted.
2. We are called upon to expunge a portion from the interim order of
the High Court and dispose of the appeal as it is represented to us
that the respondent is not interested in initiating proceedings against
the officers in the present matter. We have accepted the request
and hereby dispose of the appeal.
3. The portion sought to be expunged is the observation of the High
Court that the good faith clause in Section 157 of the GST Act1,
may not be available to the officers of the State as their conduct,
according to the High Court, “may not” justify protection. We have
expunged that portion of the order because the context as well as
the conclusions of the High Court are wrong. We will explain this
after indicating the relevant facts.
4. This civil appeal arises out of an interim order passed by the High
Court of Gujarat2 in a writ petition filed by the respondent seeking
a direction for protection from arrest under section 69 read with
section 132 of the GST Act. The High Court is still examining the
writ petition, but by the interim order impugned herein, it criticised
the prolonged stay of the search party at the residence of the
respondents as unauthorized and illegal. We need not deal with
the merits of the issue as the matter is still pending before the High
Court, more so when the respondent has submitted that he is not

1 “157. Protection of action taken under this Act.—(1) No suit, prosecution or other legal proceedings
shall lie against the President, State President, Members, officers or other employees of the Appellate
Tribunal or any other person authorised by the said Appellate Tribunal for anything which is in good faith
done or intended to be done under this Act or the rules made thereunder.
(2) No suit, prosecution or other legal proceedings shall lie against any officer appointed or authorised
under this Act for anything which is done or intended to be done in good faith under this Act or the rules
made thereunder.”
2 In Special Civil Application No. 18463 of 2019, order dated 24.12.2019.
1144 [2024] 3 S.C.R.

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interested in proceeding against the officers and seeks a quietus
to the issue.
5. In fact, while issuing notice in the appeal on 16.07.2021, this Court
passed the following order. The order is indicative of the limited scrutiny
sought to be made by this Court and it is evident from the following:
“Without in any manner condoning the conduct of the
officers which has been commented upon, what persuades
us to issue notice is the fact that there are observations
to the effect that the statutory protection available to the
officers would not be a defence in case proceedings were to
be initiated against those officers by the original petitioners
or their family members and such an observation has been
made in the absence of the officers.
Issue notice limited to the aforesaid aspect returnable in
six weeks.”
6. The relevant portion in the order of the High Court that the statutory
protection should not be made available to the officers is in paragraph
28 and it is relevant for us to extract the same.
“28. Lastly the court may sound a word of caution to
the authorities exercising powers under the GST Acts.
Sub-section (2) of section 157 of the GST Acts says that
no suit, prosecution or other legal proceedings shall lie
against any officer appointed or authorized under the Act
for anything which is done or intended to be done in good
faith under the Act or the rules made thereunder. An action
like the present one which is not contemplated under any
statutory provision and which infringes the fundamental
rights’ of citizens under article 21 of the Constitution of
India may not be protected under this section. An action
taken may be said to be in good faith if the officer is
otherwise so empowered and he exceeds the scope of his
authority. However, in a case like the present one where
the authorization was for search and seizure of goods
liable to confiscation, documents, books or things and the
concerned officer converted it into a search for a person
and in investigation, which is not otherwise backed by
any statutory provision, it may be difficult to accept that
[2024] 3 S.C.R. 1145

The State of Gujarat & Anr. v. Paresh Nathalal Chauhan

such action was in good faith. Protection of such action
under section 157 of the GST Acts may unleash a regime
of terror insofar as the taxable persons are concerned.”
7. In the above-referred paragraph, the High Court was of the view
that the protection contemplated under section 157 of the GST Act,
which is in the nature of a good faith clause, “may not” be available
to the officers. This is the issue with which we are concerned, and
we will dwell upon it.
8. A good faith clause, explained in the vocabulary of the rights and
duties regime, can be said to be a provision of immunity to a
statutory functionary. Such provisions are in recognition of public
interest in protecting a statutory functionary against prosecution or
legal proceedings. This immunity is limited. It is confined to acts
done honestly and in furtherance of achieving the statutory purpose
and objective. Section 3(22) of the General Clauses Act, 1897 best
explains ‘good faith’ as an act done honestly, whether it is done
negligently or not.3 Good faith clauses in statutes providing immunity
against suits, prosecution or other legal proceedings against officials
exercising statutory power are therefore limited by their very nature,
that far, and no further. The scope and ambit of good faith has been
explained in a number of decisions of this Court,4 which need not
be elaborated herein again.
9. A good faith clause in a statute will therefore be a defense. If
successfully pleaded, it not only legitimises the action but also
protects the statutory functionary from any legal action. If a statutory
functionary invokes the defence of good faith in a suit, prosecution
or other legal proceedings initiated against him, it is for the court
or a judicial body to consider, adjudicate, and determine whether
the claim that the action was done in good faith is made out or not.
Such a scrutiny, enquiry, or examination is done only in a proceeding
against the statutory functionary. This Court has held that the scrutiny

3 Section 3(22) of the General Clauses Act, 1897 defines ‘good faith’ as follows:
“3. Definitions.—In this Act, and in all Central Acts and Regulations made after the commencement
of this Act, unless there is anything repugnant in the subject or context,—
(22) a thing shall be deemed to be done in “good faith” where it is in fact done honestly, whether it
is done negligently or not;”
4 See Goondla Venkateswarlu v. State of AP, [2008] 12 SCR 608 : (2008) 9 SCC 613, paras 22 and 23;
Army Headquarters v. CBI [2012] 5 SCR 599 : (2012) 6 SCC 228, paras 69-78
1146 [2024] 3 S.C.R.

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whether the act is done in good faith or not would depend upon the
facts and circumstances of each case.5
10. It is in the above referred context that we have examined the
observations made by the High Court in Paragraph 28 extracted
hereinabove. The High Court was not conducting a suit, prosecution,
or other legal proceeding against a statutory functionary. We have no
doubt that the High Court was conscious of the principles governing
good faith clauses and therefore couched its displeasure and distress
by stating that such officials “may not” be protected or that it “may be
difficult” to accept the contention of good faith. We are of the opinion
that these observations are in the nature of advance rulings. This
is because even before the initiation of a suit, prosecution or legal
proceeding, the High Court expressed a tentative opinion. If such
observations remain, they will affect the integrity and independence
of that adjudication, compromising the prosecution and the defence
equally.
11. We say no more than reiterate that a citizen of this country has a
right of accountability, for which he is entitled to initiate and adopt
such legal remedies as are available to him, and in such proceedings
the statutory functionary is equally entitled to take a defense of good
faith. It is for the court to adjudicate and decide.
12. In view of the above, we expunge paragraph 28 and dispose of the
appeal.

Headnotes prepared by: Nidhi Jain Result of the case:
Appeal disposed of.

5 See, for example, Army Headquarters (supra), paras 76-78.