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PETITIONER: MAHABIR PRASAD SANTOSH KUMAR

       Vs.

RESPONDENT: STATE OF U.P. AND ORS.

DATE OF JUDGMENT: 02/04/1970

BENCH: SHAH, J.C. BENCH: SHAH, J.C. HEGDE, K.S.

CITATION:  1970 AIR 1302            1971 SCR  (1) 201  1970 SCC  (1) 764  CITATOR INFO :  D          1977 SC 567  (23)  F          1985 SC1121  (5)  R          1986 SC2105  (15)  RF         1990 SC1984  (7,29)

ACT: Sugar  Dealers’  Licensing  Order,  1962-Power  of  District Magistrate to cancel licence-if quasi-judicial. State Government dealing with statutory  appeal-is-Necessity to give reasons.

HEADNOTE: The appellants, who were holders of a licence under the U.P. Sugar  Dealers’ Licensing Order, 1962, to deal in sugar  and were  also licenced to deal in flour, were called upon by  a letter  dated June 5,1967 to explain certain  irregularities detected  on  inspection of their shop.  The next  day  they were  directed to hand over their stocks of sugar and  flour to  a Cooperative Marketing Society.  Their  representations against  this direction to the District Magistrate were  not attended  to, and they were therefore obliged  to  surrender their  stocks.   By  a  letter  dated  June  28,  1967,  the appellants  were informed that the District  Magistrate  had cancelled  their licences as dealers in sugar and flour  but no  reasons  were  given for this order.   An  appeal  under clause  8 of the Order of 1962 to the State  Government  was rejected but no reasons were communicated to the  appellants for this rejection.  A writ petition challenging the  orders of  the  District  Magistrate and the  State  Government  in appeal  was dismissed by the High Court.  On appeal to  this Court, HELD : The orders passed by the District Magistrate and  the State  Government cancelling the licences of the  appellants must be quashed. The  authorities had disclosed by their conduct  a  reckless disregard of the rights of the appellants.  The order passed by  the  District  Magistrate cancelling  the  licences  was quasi-judicial; it could be made only on a consideration  of the  charges  and the explanation given by  the  appellants. That necessarily implied that the District Magistrate had to give  some reasons why he held the charges proved,  and  the

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explanation  unacceptable.   The appellants had a  right  to carry on their business and they could be deprived of  their right  only  by  an order supported  by  good  and  adequate reasons’ Under the rules appellant had a right of appeal  to the  State  Government.  Unless reasons were  given  in  the District  Magistrate’s  Order  the aggrieved  party  had  no opportunity to convince the State Government that the  order was erroneous., if the aggrieved party was not supplied  the reasons the right of appeal was an empty formality. [203  H- 204 D] There   was  nothing  on  the  record  to  show   that   the representations   made  by  the  appellants  to  the   State Government were even considered.  The fact that cl. 7 of the Sugar  Dealers’ Licensing Order to which the High Court  had referred  does not "require the State Government to  pass  a reasoned  order"  is wholly irrelevant.  The nature  of  the proceeding  requires  that the State  Government  must  give adequate reasons which disclose that an attempt was made  to reach  a  conclusion, which was according to law  and  just. [205 H] Opportunity to a party interested in the dispute to  present his case on questions of law as well as fact,  ascertainment of facts from materials L 11 Sup.C 1-14 20 2 before  the Tribunal after disclosing the materials  to  the party  against  whom  it  is  intended  to  use  them,   and adjudication  by a reasoned judgment upon a finding  of  the facts found, are attributes of even a quasi-judicial  deter- mination.   It  must appear not merely  that  the  authority entrusted  with  quasi-judicial  authority  has  reached   a conclusion on the problem before him: it must appear that he has reached a conclusion which is according to law and just, and  for  ensuring that he must record the  ultimate  mental process leading from the dispute to its solution. [204 H] Madhya  Pradesh Industries Ltd. v. Union of India  &  Others (per  Subba  Rao, J.) [1966] 1 S.C.R. 466;  Bhagat  Raja  v. Union of India and Ors. [1967] 3 S.C.R. 302; State of Madhya Pradesh  and Anr. v. Seth Narsinghdas Jankidas  Mehta,  C.A. No.  621  of 1966 decided on April 29, 1969.  The  Slate  of Gujrat v. Patel Raghav Natha and Ors., C.A. No. 723 of  1966 decided  on April 21,1969 and Prag Das Umar Vaishya  v.  The Union  of  India and Ors., C.A. No. 657 of 1965  decided  on Aug. 17, 1967; referred to.

JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeal No. 457 of 1970. Appeals  by special leave from the judgment and order  dated April  24, 1968 of the Allahabad High Court in  Civil  Misc. Writ No). 1401 of 1968. J.   P. Goyal and V. C. Prashar, for the appellant. C.   B. Agarwala and O. P. Rana, for the respondent. The Judgment of the Court was delivered by Shah, J. The appellants held a licence under the U.P.  Sugar Dealers’  Licensing  Order,  1962,  to  deal  in  sugar   as "wholesale distributors" they also held a licence under  the U.P. Food grains Dealers’ Licensing Order, 1964.  By  letter dated  June  5,  1967 the appellants were  called  upon  to explain  certain  irregularities detected on  inspection  of their  shop by the Assistant Commissioner of Food and  Civil Supplies  on  April  24, 1967.  On  the  following  day  the appellants  were directed to hand over all their  stocks  of sugar  and  flour  to  the  Bindki  Co-operative   Marketing

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Society.   Representations against the order  directing  the appellants  to  deliver their stocks made  to  the  District Magistrate,  Fatehpur,  were not even attended to,  and  the appellants  were obliged to surrender their stocks of  sugar and  flour.  By letter dated June 28, 1967,  the  appellants were  informed  that the District Magistrate,  Fathpur,  had cancelled their licences as dealers in sugar and flour.  The appellants  applied for a copy of the order, but it was  not supplied. Against the order of the District Magistrate, the appellants submitted  an  appeal  under cl. 8  of  the  Sugar  Dealers’ Licensing  Order, 1962, on July 19, 1967.  By  letter  dated January 11, 203 1969,  the Deputy Secretary to the Government of U.P.,  Food and  Rationing  Department, intimated  the  appellants  that their appeal against the cancellation of the licence by  the District Magistrate was rejected.  The reasons for the order passed by the State Government were also not communicated to the appellants. The  appellants then moved a petition in the High  Court  of Allahabad  for  a writ quashing the orders of  the  District Magistrate and the State Government in appeal.  The petition was  rejected by a Division Bench of the High  Court.   With special leave, the appellants have appealed to this Court. The  proceedings of the authorities exercising  power  under the Sugar Dealers’ Licensing Order, 1962, and the  Foodgrain Dealers’ Licensing Order,, 1964, strike at the very root  of the  rule  of  law.   The appellants have  by  a  series  of official  acts which flout the rule of law deprived of  even the   semblance   of  protection  they  may  claim   in   an administration functioning under a democratic  Constitution. A  day  after the date on which the appellants  were  called upon    to   submit   their   explanation   regarding    the irregularities alleged to be discovered at the  inspection,, they were ordered to part with the stocks of sugar and flour in  their possession.  Objections raised by  the  appellants before  the District Magistrate were never attended to.   No attempt is made to disclose the source of the power and  the necessity  to  exercise that power.  By the  action  of  the authorities, the appellants were deprived of their right  to carry  on  business  in  sugar and  flour  without  even  an opportunity  to explain the alleged  irregularities.   Their protests addressed to the District Magistrate were  ignored; the  District  Magistrate cancelled their  licences  without disclosing  any reasons, and the State  Government  rejected the  statutory  appeal also without recording  any  reasons. This  series of actions and orders passed by  the  executive authorities require something more than a plea of  ignorance of  law  on  the part of the authorities  to  explain.   The appellants were entitled at least to be told the reasons for cancelling   their   licences.   The   District   Magistrate intimated  the cancellation of the licences by  an  official communication,  giving  no reasons, and the  result  of  the appeal to the State Government was communicated by a  letter from the Deputy Secretary to the Government of U.P., without disclosing  even the identity of the officer who  considered the   objections   and  the,  reasons  for   rejecting   the objections. The  case  discloses a disturbing state  of  affiairs.   The authorities  have  disclosed  by their  conduct  a  reckless disregard of the rights of the appellants.  The order passed by  the  District Magistrate cancelling the licences  was  a quasi-judicial : it could be made only on a consideration of the charges and the explanation

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204 given by the appellants.  That necessarily implied that  the District Magistrate had to give some reasons why he held the charges proved, and the explanation unacceptable.  When  the matter was carried in appeal, the State Government could  at least  have  acted with some awareness  that  citizens  have rights  which must-be protected against  possible  arbitrary action by subordinate officials.  The District Magistrate is not made the final authority in cancelling the licence.  The appellants had a right to carry on their business, and  they held  a  licence to carry on their business  they  could  be deprived  of their right by an executive order supported  by good  and  adequate reasons.  The relevant rules  granted  a right  of  appeal  to the State.   Government  against  that order,  and that implied that the aggrieved party must  have an  Opportunity  to convince the State Government  that  the order passed by the District Magistrate was erroneous.  That right could be effectively exercised if reasons be  recorded by  the  District Magistrate and supplied to  the  aggrieved party.  If the aggrieved party is not supplied the  reasons, the right to appeal is an empty formality. From the materials on the record it cannot be determined  as to  who  considered  the  appeal  addressed  to  the   State Government,  and  what  was  considered  by  the   authority exercising  power  on behalf of the State  Government.   The practice  of  the executive authority  dismissing  statutory appeals against orders which prima facie seriously prejudice the rights of the aggrieved party without giving reasons  is a  negation of the rule of law.  This Court had occasion  to protest  against  this practice in several decisions  :  see Madhya Pradesh Industries Ltd. v. Union of India & Others(1) (per  Subba  Rao, J.,); Bhagat Raja v. Union  of  India  and Ors(2); State of Madhya Pradesh and Anr. v. Seth Narsinghdas Jankidas  Mehta(2).   The State of Gujarat v.  Patel  Raghav Natha and Ors.(4); and Prag Das Umar Vaishya v. The Union of India and Ors.(5). The power of the District Magistrate  was quasi-judicial  :  exercise  of  the  power  of  the   State Government was subject to the supervisory power of the  High Court  under  Art.  227  of  the  Constitution  and  of  the appellate  power  of  this  Court  under  Art.  136  of  the Constitution.  The High Court and this Court would be placed under a great disadvantage if no reasons are given, and  the appeal is dismissed without recording and communicating  any reasons. Opportunity to a party interested in the dispute to  present his case on questions of law as well as fact,  ascertainment of facts (1) [1966] 1 S.C.R. 466. (2) [1967] 3 S.C.R. 302. (3)  C.A. No. 621 of 1966 decided on April 29, 1969. (4)  C.A. No. 723 of 1966 decided on April 21, 1969. (5)  C.A. No. 657 of 1965 decided on Aug. 17, 1967. 205 from  materials  before the Tribunal  after  disclosing  the materials  to the party against whom it is intended  to  use them, and adjudication by a reasoned judgment upon a finding of  the facts in controversy and application of the  law  to the  facts  found, are attributes of even  a  quasi-judicial determination.  It must appear not merely that the authority entrusted  with  quasi-judicial  authority  has  reached   a conclusion  on the problem before him : it must appear  that he  has reached a conclusion which is according to  law  and just, and for ensuring that end he must record the  ultimate mental  process  leading from the dispute to  its  solution. Satisfactory  decision  of a disputed claim may  be  reached only  if  it be, supported by the most cogent  reasons  that

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appeal to the authority.  Recording of reasons in support of a decision on a disputed claim by a quasi-judicial authority ensures that the decision is reached according to law and is not  the  result  of caprice, whim or fancy  or  reached  on grounds of policy or expediency.  A party to the dispute  is ordinarily  entitled  to  know  the  grounds  on  which  the authority  has rejected his claim.  If the order is  subject to  appeal, the necessity to record reasons is greater,  for without  recorded  reasons the appellate  authority  has  no material  on which it may deter-mine whether the facts  were properly ascertained, the relevant law was correctly applied and the decision was just. The  High  Court  in rejecting the  petition  filed  by  the appellants  has  observed that the  District  Magistrate  in considering   the   explanation  of   the   appellants   has "considered  all  the materials" and also  that  "the  State Government in considering the appeal had considered all  the materials".  We have, however, nothing on the record to show what  materials,  if any, were considered  by  the  District Magistrate  and  the State Government.  The High  Court  has also  observed  that cl. 7 of the Sugar  Dealers’  Licensing Order  does  not  require "the State Government  to  pass  a reasoned  order.   All  that  is  required  is  to  give  an aggrieved  person an opportunity of being heard." We are  of the  view  that  the High Court erred in  so  holding.   The appellants  has a right not only to have an  opportunity  to make  a representation, but they are entitled to have  their representation  considered by an authority unconcerned  with the dispute and to be given information which would show the decision   was   reached   on  the  merits   and   not   on; considerations  of  policy or expediency.  This is  a  clear implication  of the nature of the jurisdiction exercised  by the appellate authority : it is not required to be expressly mentioned  in the statute.  There is nothing on  the  record which shows that the representations made by the  appellants was  even  considered.   The fact that cl. 7  of  the  Sugar Dealers’  Licensing  Order  to  which  the  High  Court  has referred  does not "require the State Government to  pass  a reasoned order" is wholly irrelevant.  The nature of 206 the  proceeding  requires that State  Government  must  give adequate reasons which disclose that an attempt was made  to reach a conclusion according to law and just. Counsel  appearing on behalf of the State has not  attempted to  support the reasons given by the High Court.  He  merely contended  that  there are in the files of  the  Government, orders  passed  by the District Magistrate and also  of  the State  Government  which  gave reasons  in  support  of  the orders.  The orders have, however, not been communicated  to the  appellants, and were not even produced before the  High Court.   Obviously we cannot consider those orders, if  any, at this stage. The  orders passed by the District Magistrate and the  State Government  cancelling  the licences of the  appellants  are quashed.  The State will pay the costs of the appellants  in this Court and in the High Court. R.K.P.S.         Appeal allowed and Orders quashed. 207