Fraud on power vitiates the impugned orders if they were not exercised bona tide for the purpose for which the power was conferred. Professor de Smith in his monumental work the Judicial Review of Administration Action, 4th edition at pp.335-36 says in his own terse language:
“The concept of bad faith eludes precise definition, but in relation to the exercise of statutory powers it may be said to comprise dishonesty (or fraud) and malice. A power is exercised fraudulently if its repository intends to achieve an object other than that for which he believes the power to have been conferred…… A power is exercised maliciously if its repository is motivated by personal animosity towards those who are directly affected by its exercise. He then goes on to observe:
“If the Court concludes that the discretionary power has been used for an unauthorized purpose it is generally immaterial whether its repository was acting in good or bad faith. But there will undoubtedly remain areas of administration where the subject matter of the power and the evident width of the discretion reposed in the decision maker render its exercise almost wholly beyond the reach of judicial review.
In these cases, the courts have still asserted jurisdiction to determine whether the authority has endeavoured to act in good faith in accordance with the prescribed purpose. In most instances the reservation for the case of bad faith is hardly more than a formality. But when it can be established, the courts will be prepared to set aside a judgment or order procured or made fraudulently despite the existence of a generally worded formula purporting to exclude judicial review.”
Bad faith is here understood by the learned author to mean intentional usurpation of, power motivated by considerations that are incompatible with the discharge of public responsibility. In requiring statutory powers to be exercised reasonably, in good faith, and on correct grounds, the Courts are still working within the bounds of the familiar principle of ultra vires. The Court assumes that Parliament cannot have intended to authorize unreasonable action which is therefore ultra vires and void. This is the express basis of the reasoning in many well-known cases, on the subject.
A necessary corollary is that, as usual throughout administrative law, we are concerned only with acts of legal power i.e. acts which, if valid, themselves produce legal consequence. In general, however, the Courts adhere firmly to the wide meaning of ‘jurisdiction’ since this is the sheet- anchor of their power to correct abuses. They appear to be willing to stretch the doctrine of ultra vires to cover virtually all situations where statutory power is exercised contrary to some legal principles. There are many cases in which a public authority is held to have acted for improper motives or irrelevant considerations, or have failed to take account of relevant considerations, that its action is ultra vires and void.
The learned author aptly sums up situations in which error of Jurisdiction may arise, at p.42:
“Lack of jurisdiction may arise in many ways. There may be an absence of those formalities or things which are conditions precedent to the tribunal having any jurisdiction to embark on an inquiry. Or the tribunal may at the end made an order that it has no jurisdiction to make. Or in the intervening stage, while engaged on a proper inquiry, the tribunal may depart from the rules of natural justice; or it may ask itself the wrong questions; or it may take into account matters which it was not directed to take into account. Thereby it would step outside its Jurisdiction. It would turn its inquiry into something not directed by Parliament and fail to make the inquiry which Parliament did direct. Any of these things would cause its purported decision to be a nullity.”
Fraud on power voids the order if it is not exercised bona fide for the end design. There is a distinction between exercise of power in good faith and misuse in bad faith. The former arises when an authority misuses its power in breach of law, say, by taking into account bona fide, and with best of intentions, some extraneous matters or by ignoring relevant matters. That would render the impugned act or order ultra vires. It would be a case of fraud on powers. The misuse in bad faith arises when the power is exercised for an improper motive, say, to satisfy a private or personal grudge.
A power is exercised maliciously if its repository is motivated by personal Animosity towards those who are directly affected by its exercise. Use of a power for an ‘alien’ purpose other than the one for which the power is conferred in mala fide use of that power. Same is the position when an order is made for a purpose other than that which finds place in the order. The ulterior or alien purpose clearly speaks of the misuse of the power and it was observed as early as in 1904 by Lord Lindley in General Assembly of Free Church of Scotland v. Overtown, L.R. [1904] A.C. 515,
‘that there is a condition implied in this as well as in other instruments which create powers, namely, that the powers shall be used bona fide for the purpose for which they are conferred’.
It was said that Warrington, C.J., in Short v. Poole Corporation, L.R. [1926] Ch. D.66, that:
“No public body can be regarded as having statutory authority to act in bad faith or from corrupt motives, and any action purporting to be of that body, but proved to be committed in bad faith or from corrupt motives, would certainly be held to be inoperative.”
In Lazarus Estates Ltd. v. Beasley, [1956] 1 Q.B. 702 at pp.712-13, Lord Denning, LJ. said:
“No judgment of a court, no order of a Minister, can be allowed to stand if it has been obtained by fraud. Fraud unravels everything. “‘Fraud’ vitiates all transactions known to the law of however high a degree of solemnity.
In Dr. Ram Manohar Lohia v. State of Bihar & Ors., [1966] 1 S.C.R. 708, it was laid down that the Courts had always acted to restrain a misuse of statutory power and more readily when improper motives underlie it. Exercise of power for collateral purpose has similarly been held to be a sufficient reason to strike down the action.
In State of Punjab v. Ramjilal & Ors., [1971] 2 S.C.R. 550, it was held that it was not necessary that any named officer was responsible for the act where the validity of action taken by a Government was challenged as mala fide as it may not be known to a private person as to what matters were considered and placed before the final authority and who had acted on behalf of the Government in passing the order. This does not mean that vague allegations of mala fide are enough to dislodge the burden resting on the person who makes the same a though what is required in this connection is not a proof to the hilt as held in Barium Chemicals Ltd. & Anr. v. Company Law Board, [1966] Supp. S.C.R. 311, the abuse of authority must appear to be reasonably probable.