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PETITIONER: SINHA GOVINDJI

       Vs.

RESPONDENT: THE DEPUTY CHIEF CONTROLLER OFIMPORTS AND EXPORTS AND OTHERS

DATE OF JUDGMENT: 23/03/1961

BENCH:

ACT: Import   Licence-Cancellation-Grounds   for   cancellation-- Licensee  to  be given  a reasonable  opportunity  of  being heard--Principles  of natural  justice-Violation  of-Imports (Control) Order, 1955, cls. 8, 9, 10.

HEADNOTE: The  petitioner  who  was carrying on the  business  of  the manufacture  of  celluloid  and  plastic  bangles  etc.  was granted two licences dated January 18, 1960, and February 2, 1060, for the purpose of importing cellulose nitrate  sheets for  two  licensing  periods,  April/September,  1950,   and October/March,   1960,  On  getting  information  that   the petitioner had no machinery or equipment at the premises nor possessed  any  municipal licence or  factory  licence,  the Imports  and Exports authorities issued a notice  dated  May 27.  1960,  to  the  petitioner  to  the  effect  that   the Government of India proposed to cancel the licences  granted to him, in exercise of the powers conferred by cl. 9 of  the Imports  (Control)  Order,  1955,  unless  sufficient  cause against  this was furnished within ten days of the  date  of issue  of  the notice.  The petitioner replied that  as  the notice did not disclose on which of the grounds specified in cl. 9 the proposed action was sought to be taken, it was not possible  to show cause against it and that in any  case  he had  not  done anything justifying the cancellation  of  the licences  under the said rule.  On July 2, 1060,  the  Chief Controller  of Imports and Exports wrote to  the  petitioner giving  the information received as aforesaid and said:  "In view  of  this  it  is  clear  that  you  had  obtained  the Essentiality  Certificate  from the Director  of  Industries fraudulently   and   by  misrepresentation  of   facts   and thereafter  obtained the licences in question.....  You  are called  upon  under cl. 10 of the Imports  (Control)  Order, 1955,  to show cause, within fifteen days from the  date  of receipt of this letter, as to why further issue of  licences to  you  should not be suspended, under cl. 8  of  the  said Imports (Control) Order, 1955, for contravening the  Imports Trade  Control Regulations......... On August 4,  1960,  the petitioner  received  two orders dated August  3,  1961,  by which  the  two licences in favour of  the  petitioner  were cancelled.   The petitioner challenged the validity  of  the aforesaid  orders on the grounds, inter alia, that  no  real opportunity  at  all  to show  cause  against  the  proposed cancellation  was  given to him in total  disregard  of  the provisions of cl. :co of the Imports (Control) 541 Order,  1955 which required that "No action shall  be  taken under  cls.  7, 8 or 9 unless the  licensee......  has  been

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given a reasonable opportunity of being heard", and that the cancellation  of  the  licences  arbitrarily  deprived   the petitioner of his fundamental right to carry on his business under  Art.  19  of the Depi  Constitution  of  India.   The correspondence  between  the  petitioner,   and  the  Import authorities  showed  that after the receipt  of  the  letter dated  July 2, 1960, the petitioner had no real  opportunity of  being  heard with regard to the ground  alleged  in  the letter,  before the cancellation orders were made on  August 3, 1960. Held,  that  on the facts of the case, there  was  a.  clear violation  of  the  requirements of cl. 10  of  the  Imports (Control)  Order  1955, which "embodied  the  principles  of natural  justice, and that the orders dated August 3,  1960, canceling  the licences granted to the petitioner, were  bad and must be quashed.

JUDGMENT: ORIGINAL JURISDICTION: Petitions Nos. 307 and 308 of 1960. Petitions  under Art. 32 of the Constitution of  India;  for enforcement of Fundamental Rights. Porus A. Mehta, J. B. Gagrat and G. Gopalakrishnan, for  the petitioner. H.   J.  Umrigar,  R.  H.  Dhebar and T.  M,  Sen,  for  the respondents. 1961.  March 23.  The Judgment of the Court was delivered by S. K. DAS, J.-These are two writ petitions in respect of two orders  ’dated  August  3, 1960, b  which  the  Joint  Chief Controller   of  Imports,  Madras,  cancelled   two   import licences, Nos.  A 863296 and 836640 dated January 18,  1960, and February 2, 1960, respectively, granted in favour of the petitioner,  Messrs.   Sinha  Govindji  of  Bangalore  Road, Bellary,  for  the purpose of  importing  cellulose  nitrate sheets  of  the value of Rs. 75,000 each for  two  licensing periods,  April/September,’1959, and October/  March,  1960. The  complaint of the petitioner firm is that respondents  1 and  2  have cancelled the licences in  circumstances  which amounted  to a denial of its right to be given a  reasonable opportunity  of  being heard, as provided by cl. 10  of  the Imports  (Control) Order, 1955, before the impugned  ’orders were passed 542 and  thus arbitrarily and without authority of law  deprived the  petitioner  of its fundamental right to  carry  on  its business under Art. 19 of the constitution.  The  point  for decision is a short one and  we  need  only state  such facts as bear upon that point. The  petitioner’s case  is  that the proprietor of the firm is  a  citizen  of India carrying on a business of the manufacture of celluloid and  plastic bangles, etc, at Bellary in the  Mysore  State. The  petitioner  was granted the two  licences  referred  to above  and thereafter entered into firm commitments for  the import of cellulose sheets to the clause of Rs. 99,000.   On March  4, 1960, the petitioner was surprised to receive  two letters  from the Assistant Controller of  Imports,  Madras, calling  upon the petitioner to let him know the  extent  to which  the  licenses  had  been  utilised  and  asking   the petitioner  not to enter into fresh commitments against  the said  licenses  without specific and prior approval  of  the Controllers’  office.   This  led  to  some   correspondence between the petitioner and the Control authorities,  details whereof are not necessary for our purpose.  On May 27, 1960, the  petitioner received two notices, only one of  which  we

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need set out in full.  It stated:               "It is hereby notified that in exercise of the               powers  conferred  by  cl. 9  of  the  Imports               (Control)  Order,  1955,  the  Government   of               India,  in  the  Minis. try  of  Commerce  and               Industry  propose  to  cancel  licence  No.  A               836640/60/AU/M  dated  the  Second   February,               1960,  valued  at Rs. 75,000  (Rupees  Seventy               five  thousand only) for import  of  Cellulose               Nitrate  Sheets  from the Soft  Currency  area               except  South  Africa, granted  by  the  Joint               Chief  Controller  of  Imports  and   Exports,               Madras  to  Messrs.  Sinha Govindji,  No.  18,               Bangalore  Road, Bellary-2, unless  sufficient               cause  against this is furnished to the  Joint               Chief  Controller  of  Imports  and   Exports,               Madras,  within ten days of the date of  issue               of  this  notice, by the said  Messrs.   Sinha               Govindji, No. 18, Bangalore Road, Bellary-2 or               any  Bank,  or  any other  party  who  may  be               interested in it.               In  view  of  what is  stated  above,  Messrs.               Sinha               543               Govindji,  Bellary or any Bank, or  any  other               party  who  may  be  interested  in  the  said               licence     No.836640/60/AU/M   dated   Second               February,  1960,  are hereby directed  not  to               enter into any commit- Departments against the               said license and return it immediately to  the               Joint Chief Controller of Imports and Exports,               Madras.                               (Sd.) J. K. Sarkar,                               Deputy Chief Controller of                               Imports and Exports." The  notices,  be it noted, did not state  on  what  grounds falling  within cl. 9 of the Imports (Control) Order,  1955, it  was proposed to cancel the licences of  the  petitioner. Clause  9  of  the Control Order  states  four  grounds  for cancellation  of a licence, and we may read the clause  here omitting those grounds which are not relevant for our case:               "9.  Cancellation  of  Licences:  The  Central               Government or any other officer authorised  in               this  behalf  may cancel any  licence  granted               under  this  Order  or  otherwise  render   it               ineffective:               (a)   if the licence has been granted  through               inadvertence  or mistake or has been  obtained               by fraud or misrepresentation;                (b)                (c)               (d) By  a letter dated May 30, 1960, the petitioner referred  to the  earlier  correspondence on the subject and  said  inter alia:               "Now  clause (9) of the Import Control  Order,               1955,  under  which action is proposed  to  be               taken envisages the cancellation of a  licence               on  various  grounds.  Your  notice  does  not               disclose   on  which  of  these  grounds   the               proposed   action  is  sought  to  be   taken.               Without  knowing on what ground  the  proposed               cancellation  is to be effected it  is  impos-               sible for me to show cause against it.  I may,               however,  state that I have not done  anything

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             justifying  the  cancellation of  the  licence               under  the said Rule and that as far as I  can               see,  there is no ground whatsoever  for  such               cancellation."               544               Then,  on  August  4,  1960,  the   petitioner               received two orders dated the previous day  by               which  the  two  licences  in  favour  of  the               petitioner were cancelled.  The orders  stated               (we are quoting only one of the  orders  which               are similar in terms):               "Whereas M/s.  Sinha Govindji, Bangalore Road,               Bellary  or any bank or any other person  have               not come forward furnishing sufficient  cause,                             against  Notice No. 1/LCL/60/CDN(1)  dt.  27-5 -               1960,  proposing  to  cancel  licence  No.   A               863296/60/AU/Mdt.   18-1-60,  valued  at   Rs.               75,000  for  the import of  Cellulose  Nitrate               Sheets  from  the Soft  Currency  Area  except               South  Africa granted to the said M/s.   Sinha               Govindji,  Bangalore  Road,  Bellary,  by  the               Joint Chief Controller of Imports and Exports,               Madras,  Government of India, in the  Ministry               of  Commerce and Industry in exercise  of  the               powers  conferred by clause 9 of  the  Imports               (Control) Order, 1955, hereby cancel the  said               licence  No.  A  863296/60/AU/M  dt.   18-1-60               issued  to  the  said  M/s.   Sinha  Govindji,               Bellary." It  will  be noticed that the orders also did not  state  on what  ground  the licences were cancelled.   The  petitioner complained that the cancellation of the two licences led the Customs authorities to hold back the goods of the petitioner which  had  already  arrived  at  port  and  were   awaiting clearance, resulting in heavy demurrage, etc.; but the  real ground   on   which  the  petitioner  challenges   the   two cancellation  orders  is  that (to quote the  words  of  the petition) "no real opportunity at all to show cause  against the  proposed  cancellation was given to the  petitioner  in total  disregard of the provisions of cl. 10 of the  Imports (Control) Order, 1955".  We may read here that clause.               "10.   Applicant or licensee to be heard.   No               action shall be taken under Clauses 7, 8 or  9               unless the licensee/importer has been given  a               reasonable opportunity of being heard." On  behalf of the respondents it has been stated that  after the  issue of the two licences a letter dated  February  16, 1960,  was  received  from the  Director,  Small  Industries Service Institute, Bangalore, to the 545 effect that the petitioner had no machinery and equipment to manufacture  the  relevant articles from  the  imported  raw material.   On receipt of this letter a joint  investigation was held by the Assistant Director of Industries, Bell,-try, and   the   Deputy  Director,  Small,   Industries   Service Institute, Hubli, and it was found at the time of inspection that  the petitioner firm had no machinery and equipment  at the premises, nor did they possess any municipal licence  or factory  licence.  On July 2, 1960, the Chief Controller  of Imports  & Exports wrote to the petitioner giving the  above information  and  asking the petitioner to  show  cause  why further issue of licences should not be suspended under  cl. 8 of the Imports (Control) Order, 1955.  We quote below  the relevant extracts from this letter:

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"Gentleman, I  write to refer to your letter dated the 21st  May,  1960, and 30th May, 1960, on the above subject, and to say that  a joint investigation conducted by the Deputy Director,  Small Industries Service Institute, Hubli, and Assistant  Director of Industries, Government of Mysore, Bellary, revealed  that at the time of inspection of your firm by them, no machinery and  equipment existed in your premises and that you had  no Municipal  licences or Factory licence or Factory.  In  view of this, it is clear that you had obtained the  Essentiality Certificate from the Director of Industries fraudulently and by  misrepresentation of facts and thereafter  obtained  the licences  in question by producing the said  Certificate  to the Joint Controller of Imports & Exports, Madras. The  above  action  on your part  directly  contravenes  the Import  Trade  Control Regulations, within  the  meaning  of para.  6(vii) of Chapter V of the Import Trade Control  Hand Book of Rules and Procedure, 1956, read with clause 8(b)  of the  Imports  (Control)  Order  No.  17/55  dated  the   7th December, 1955.  In view of this, the request made by you in the letters under reference cannot be acceded to. 69 546               On the other hand, you are called upon,  under               clause 10 of the said Imports (Control) Order,               1955, to show cause, within 15 (fifteen)  days               from the date of receipt of this letter, as to               why  further issue of licences to  you  should               not  be suspended, under clause 8 of the  said               Imports  (Control) Order No. 17/55  dated  the               7th  December,  1955,  for  contravening   the               Import  Trade  Control Regulations.   If  your               reply  does not reach the  undersigned  within               the stipulated period it will be assumed  that               you have no defence to urge in your favour and               this office will proceed to adjudicate  action               against   you,  without  making  any   further               reference to you." The  contention urged on behalf of the respondents  is  that the  letter dated July 2, 1960, stated the necessary  ground for the cancellation of the licences to the petitioner,  and as  the  petitioner furnished no  sufficient  cause  against cancellation, the orders of cancellation were made on August 3, 1960.  The argument on behalf of the respondents is  that the  provisions  of cl. 10 of the Imports  (Control)  Order, 1955, have been sufficiently complied with by reason of what was stated in the letter of July 2, 1960. On a careful consideration of the facts and circumstances as stated in the affidavits of the parties we have come to  the conclusion  that  the  petitioner  has  had  no   reasonable opportunity  of being heard before the  cancellation  orders were  made on August 3, 1960.  The cancellation orders  are, therefore,  bad  and must be quashed.  Our reasons  are  the following. It  is not disputed that the notice dated May 27, 1960,  did not  state  any  ground for the  proposed  cancellation;  it merely referred to cl. 9 without stating on which of   the four grounds mentioned therein it was proposed    to    take action.  Naturally, the petitioner stated in its      letter dated May 30, 1960, that without knowing     on what  ground the proposed cancellation was to be     made, the petitioner firm  was not in a position to show cause.  So far there  is no  dispute  between the parties, and it  is  not  seriously urged by the respondents that if the notice stood by itself, it could be held to have given the petitioner a reasonable

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547 opportunity  of  being heard within the meaning of  cl.  10. The  respondents, however, rely on the letter dated July  2, 1960, in support of their contention that the petitioner has had  a reasonable opportunity of showing cause  against  the cancellation of the two licences. On  behalf  of  the petitioner it has  been  submitted,  not without  justification, that the letter dated July 2,  1960, related  to a different matter, viz., the suspension of  the grant  of  further  licences under cl. 8 for  which  also  a reasonable  opportunity to be heard had to be given  to  the petitioner  under cl. 10.  In its operative part the  letter stated:  "you are called upon to show cause, within 15  days from  the  date of this letter, as to why further  issue  of licences  to you should not be suspended under cl. 8".   It, therefore,  related  to  proposed action under  cl.  8.  The respondents,  have,  however, pointed out that  the  subject matter  of the letter as indicated therein referred  to  the notices dated May 27, 1960, for cancellation of the licences and  it also referred to the earlier, correspondence on  the same  subject, viz., the petitioner’s letters dated May  21, 1960,  and May 30, 1960; therefore, the, contention is  that the petitioner must Know as a result of the reference to the subject-matter  and earlier correspondence that the  grounds given  in the letter related to proposed action  both  under cl.  8 and cl. 9, even though the operative portion  related to  cl. 8 only.  It is true that the contents of the  letter dated  July 2, 1960, should be considered from the point  of view  of  substance rather than that of technical  rules  of construction of statutory instruments.  So considered, it is difficult  to hold that the letter asked the  petitioner  to show  cause  against cancellation of  its  licences,  parti- cularly  in  the  light of the contents  of  the  subsequent letters  of  the  Department  which  would  be  referred  to presently.   Even if we assume that it did so, what  is  the position?   Within  10  days of the receipt  of  the  letter (which  was received by the petitioner on July 5, 1960)  the petitioner’s  solicitor  asked  for  a  copy  of  the  joint investigation  proceeding  and  the report  submitted  as  a result thereof The letter also asked for 548 other  relevant documents in order to enable the  petitioner to show cause.  It said that the petitioner would show cause as soon as the relevant documents were received and it  also said that 6. personal hearing would  be asked for and prayed that in the meantime no further action should be taken.   No reply  was given by the respondents to the aforesaid  letter of the petitioner’s solicitor till August 6, 1960, that  is, three days after the cancellation orders had been made.  The petitioner  was  not  given  a copy of  the  report  of  the investigation  till  as  much later date, nor  was  any  in- formation given to the petitioner that the copy would not be available and the petitioner must show cause at once.  As  a matter  of fact the petitioner was told nothing in reply  to the  letter dated July 15, 1960, till three days  after  the cancellation orders had been made.  ’the cancellation orders blandly  stated that no cause had been shown, when  in  fact the petitioner had specifically asked for an opportunity  to show  cause.   By  their letter dated August  6,  1960,  the respondents  said  that the matter would  be  considered  on receipt  of  a  letter of authority from  the  solicitor  in proper  form and on stamped paper, without stating  that  in the  meantime  cancellation order, had  been  made.  without waiting  for  any  explanation.  on  August  10,  1960,  the solicitor submitted a written authority, saying that it  was

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unnecessary  to (,all for it arid that the two licences  had been cancelled arbitrarily and without giving the petitioner an  opportunity  of being heard.  The  correspondence,  then continued with regard to the proposed action under cl. 8 and the  petitioner challenged the correctness of the report  of the   joint  investigation  proceeding  on  many   essential particulars including the alleged absence of machinery  arid equipment.   It, is not necessary to enter into  details  of that correspondence, because the proposed action under cl. 8 is not the subject-matter of the present proceeding.  It  is enough to state that from what happened after the receipt of the  letter dated July 2, 1960, it is abundantly clear  that the  petitioner has bad no real opportunity of  being  heard with regard to the ground alleged in the letter, before  the cancellation orders were made                             549 on  August  3,  1960.  There was, in our  opinion,  a  clear violation  of the requirement of cl. 10, which embodies  the principles of natural justice.  The cancellation orders are, therefore,  bad  and must be quashed.  We    allow  the writ petitions and order accordingly.  The petitioner is entitled to its costs; there will be one rearing fee. Petitions allowed.