Licensing justice

Licensing justice:

Observance of principle of natural justice: Procedural reasonableness

Let us survey as to whether rule of natural justice should be observed in the matter of licensing justice by the statutory authorities. There, an unbroken line of authorities establishes that the “principles of natural justice”, unless excluded, either by the legislature or by the rule making authority, should be invariably followed by the licensing authority and even the appellate authorities set up to decide the statutory appeals. The licensee should always be granted such an opportunity, so that licensee can at least correct or contradict the material, if any, collected or relied upon against him, or that the licensee can at least put forward counter logical defence against the subjective satisfaction. Reported cases go to show that the inspecting authorities often consign the collected material to the experts for the scientific report and conclusion, so that the truth can come out and established. The contents of such reports of the experts should form part of the contents of the show cause notice which should also be simultaneously supplied to the licensee for effective representation. The reason is that the supply of material relied upon is considered to be a part of procedural reasonableness. Omission to hear or omission to supply the material is a bad practice in any Government or not a good practice at all, where the natural justice guards against condemnation. The Licensing authority cannot decide according to what he likes and according to his whim and caprice. The licensing authority should clearly understand his duty that is discharged either under the Act, or the rules made under it. The licensing authority should confine within the four corners of the Act or the rules, where it should never be forgotten to afford reasonable and proper opportunity of being heard, unless excluded. And again, such licensing authority discharging the statutory duties under the Act and the rules is obviously bound to take into account only those considerations permitted under the law or legally acceptable and recognized under the law. Nor can the licensing authority decide any adverse issues behind the back of the licensee, because the procedural reasonableness never permits the licensing authorities to do so.

In a case, petitioner invoked the jurisdiction under Article 226 of the Constitution of India challenging the order passed by the Additional Collector cancelling the fire arm licence together with the order of affirmation passed in appeal by the Commissioner and seeking the relief for quashing the same. The petitioner, who was permanent resident of one village started living in another village involving him in Thekedari work of the railway coal, and also in the business of Tendu leaves. Realizing the need of a fire arm for his protection, he applied for the grant of a licence for a single barrel gun, wherein the petitioner clearly mentioned his present address and the permanent address. The Licensing Authority after obtaining the police report from both the police stations and having satisfied granted him a licence.

Subsequently, the complainant, who was inimical, as observed by the Court, and committed murder of his brother, made an application to the district authorities for cancellation of the fire arm licence of the petitioner saying that the petitioner was original resident of particular village and that the petitioner by showing wrong address of different Village obtained the licence for the said gun. On this application, the proceedings for cancellation of the fire arm licence of the petitioner were set in motion by the Additional District Magistrate, who directed the Sub Divisional Magistrate for making an enquiry with regard to truthfulness of the said complaint and also for issuing a show cause notice to the petitioner for showing cause as to why his licence be not cancelled. Sub Divisional Magistrate submitted ex parte report to the Additional District Magistrate without any enquiry from the petitioner and without serving any show-cause notice on the petitioner. The gun Licence of the petitioner was cancelled by Additional District Magistrate without affording any opportunity of showing cause to the petitioner. On appeal, appellate authority maintained the order.

Submission:

(i) The order of cancellation of the gun licence having been passed in violation of the principles of natural justice is null and void inasmuch as the petitioner was not afforded any opportunity to show cause and no show cause notice was ever served on him.

(ii) In the application form A for the grant of licence the petitioner disclosed his permanent address of Village and present address of Village and no fraud was played by him on obtaining the licence on wrong address and he did not suppress any material information and did not give any wrong information at the time of applying for the grant of licence, and as such the order cannot be sustained under the Arms Act, 1959.

(iii) There was no material whatsoever against the petitioner whereupon any opinion could be formed that the cancellation of licence is necessary for security of public peace and for public safety which fact is apparent from the impugned order which contains no reason as to how the cancellation was considered necessary for the security of public peace or for public safety and the order cannot be sustained under the Act.

It was under that circumstance that the Court held the impugned order completely invalid on the ground of breach of principles of natural justice, or what is called the principle of procedural unreasonableness. The first ground raised by the petitioner got substance. The petitioner clearly stated that no show cause notice was issued and served upon the petitioner and the licence was cancelled behind his back without affording any opportunity. Fact that the petitioner was not served with any show cause notice was substantiated from the order of cancellation, which itself recited that the enquiry officer had given the report that the notice was sent to the Superintendent of Police, but could not be served on the petitioner. Thus, it was clearly established that the petitioner was not served with any show cause notice.

The nature of power which is conferred under the Act and the manner of exercise of that power creates a right on the licensee to establish non-existence of the ground. Since the petitioner was not served with a show cause notice and he was not appraised of the grounds of cancellation of licence he was deprived of the opportunity apparently to establish non-existence of the grounds. Observance of the principle of natural justice is a condition of procedural reasonableness. It was established that the petitioner was not served with show cause notice and he was not made known about the fire arm licence cancellation proceedings, nor made known about the ex parte report of the Sub Divisional Magistrate, and nor made known about the application of the Complainant. Therefore, the procedural requirement of reasonableness was also breached in this case.

A Full Bench of Punjab High Court in Mulkh Raj Krishan Kumar & Co. v. State of Punjab ILR (1972) 2 Punjab and Haryana 161= (AIR 1973 Punjab 622 had the occasion to decide the issue that tersely summed up:

“...the cancellation of the liquor licence affects the civil rights of the licensee in so far as he is debarred from carrying on the licence for the unexpired period and becomes liable for the short-fall in case the amount received on re-auction is less than the amount he had bid for that period. It is, therefore, necessary that the licensee must be issued a notice to show cause or to explain why his licence should not be cancelled on the basis of the default committed by him. Section 36 of the Punjab Excise Act does not provide that on such a default being committed, the licence shall stand cancelled or shall be cancelled. Discretion has been given to the licensing authority to cancel or not to cancel the licence even if a default has been committed. That discretion has to be exercised judiciously after taking into consideration the facts of each case. Although power of cancellation has to be exercised by an administrative officer of the Excise department, the proceedings for cancellation of the licence are quasi-judicial in nature. An appeal against such an order is provided by the statute and unless the licensee is afforded an opportunity to place his defence or version before the Collector, it will not be possible for him to determine judicially whether the order of cancellation of the licence is the only order to be passed in the case. He will have to deal with the explanation of the licensee in order to enable the appellate authority to consider whether the Collector had rightly and for good reasons cancelled the licence or had erred in doing so. In quasi-judicial proceedings it is also necessary to pass a speaking order giving reasons in support of the conclusion. The necessity of giving reasons postulates that the authority dealing with the case will weigh objectively all the facts and make a decision on the merits. It is, therefore, necessary in proceedings for the cancellation of a licence that principles of natural justice should be observed and a notice should be issued to the defaulting licensee to show cause why his licence should not be cancelled on account of the defaults alleged to have been committed by him and which defaults are covered by the provisions of Section 36 of the Act. The giving of such a notice is not expressly or by implication excluded by any provision of the Act or the Rules framed thereunder. It is, therefore, to be presumed that the legislature intended that the Collector, before cancelling the licence, should act in accordance with the principles of natural justice.”

In a case, the question was as to whether the rules of natural justice require that before cancelling the liquor licence of an excise licensee under Section 36 (c) of the Punjab Excise Act, a notice for an oral hearing must necessarily be given to him?

Whether the rules of natural justice require that before the security of a licensee is forfeited, he must be given a notice for oral hearing against such forfeiture or whether the necessary result of the cancellation of the licence was automatic forfeiture of the security and, no such notice was essential?

Petitioners obtained liquor licences and due to certain irregularities alleged to have been committed by them, their licences were cancelled and securities deposited by them were forfeited either in whole or in part. Petitioners challenged the orders of cancellation of their licences and the forfeiture of the amounts of securities. Admittedly, they were issued notices to show cause why their licences should not be cancelled. The orders of cancellation were passed after taking into consideration their explanations, but without affording them any opportunity of oral hearing. The petitioners have claimed that they were entitled to hearing before their licences were cancelled and the orders of forfeiture of security deposits were made. As regards the necessity of granting oral hearing to a licensee before an order is passed for the cancellation of his licence, it may be observed that rules of natural justice do not amount to codified law nor can be put into a straitjacket. They do not supplant the law but only supplement it where possible. They are followed with a view to do complete justice to the parties. The most important rule is audi alteram par-tem, that is, no person shall be condemned unheard. The person proceeded against must be afforded an adequate opportunity of defending himself against the charge and proving his innocence.

This matter has been elaborately dealt with by the Supreme Court in A. K. Kraipak v. Union of India, AIR 1970 SC 150, wherein it was observed:

“The aim of the rules of natural justice is to secure justice or to put it negatively to prevent miscarriage of justice. These rules can operate only in areas not covered by any law validly made. In other words, they do not supplant the law of the land but supplement it.”

The same observations were relied on in Union of India v. J. N. Sinha, AIR 1971 SC 40, in para 7 of the report, wherein it was further said:

“It is true that if a statutory provision can be read consistently with the principles of natural justice, the Courts should do so because it must be presumed that the legislatures and the statutory authorities intend to act is accordance with the principles of natural justice. But, if on the other hand a statutory provision either specifically or by necessary implication excludes the application of any or all the rules or principles of natural justice, then the Court cannot ignore the mandate of the legislature or the statutory authority and read into the concerned provision the principles of natural justice. Whether the exercise of a power conferred should be made in accordance with any of the principles of natural justice or not depends upon the express words of the provision conferring the power, the nature of the power conferred, the purpose for which it is conferred, and the effect of the exercise of that power.”

A Full Bench of Punjab High Court in Mulkh Raj Krishan Kumar & Co. v. State of Punjab ILR (1972) 2 Punjab and Haryana 161 = (AIR 1973 Punjab 62 Full Bench had to decide whether the proceedings for the cancellation of a licence like the one held by the petitioner firms were administrative or quasi-judicial in nature and the procedure that had to the followed by the Deputy Excise and Taxation Commissioner in such a matter. The decision has been tersely summed up in the head-note as under:

“...the cancellation of the liquor licence affects the civil rights of the licensee in so far as he is debarred from carrying on the licence for the unexpired period and becomes liable for the short-fall in case the amount received on re-auction is less than the amount he had bid for that period. It is, therefore, necessary that the licensee must be issued a notice to show cause or to explain why his licence should not be cancelled on the basis of the default committed by him. Section 36 of the Punjab Excise Act does not provide that on such a default being committed, the licence shall stand cancelled or shall be cancelled. Discretion has been given to the licensing authority to cancel or not to cancel the licence even if a default has been committed. That discretion has to be exercised judiciously after taking into consideration the facts of each case. Although power of cancellation has to be exercised by an administrative officer of the Excise department, the proceedings for cancellation of the licence are quasi-judicial in nature. An appeal against such an order is provided by the statute and unless the licensee is afforded an opportunity to place his defence or version before the Collector, it will not be possible for him to determine judicially whether the order of cancellation of the licence is the only order to be passed in the case. He will have to deal with the explanation of the licensee in order to enable the appellate authority to consider whether the Collector had rightly and for good reasons cancelled the licence or had erred in doing so. In quasi-judicial proceedings it is also necessary to pass a speaking order giving reasons in support of the conclusion. The necessity of giving reasons postulates that the authority dealing with the case will weigh objectively all the facts and make a decision on the merits. It is, therefore, necessary in proceedings for the cancellation of a licence that principles of natural justice should be observed and a notice should be issued to the defaulting licensee to show cause why his licence should not be cancelled on account of the defaults alleged to have been committed by him and which defaults are covered by the provisions of Section 36 of the Act. The giving of such a notice is not expressly or by implication excluded by any provision of the Act or the Rules framed thereunder. It is, therefore, to be presumed that the legislature intended that the Collector, before cancelling the licence, should act in accordance with the principles of natural justice.”

It is also clear from Section 40 of the Act that when a license, permit or pass is cancelled or suspended under Clauses of Section 36, the holder shall not be entitled to any compensation for its cancellation or suspension nor to the refund of any fee paid or deposit made in respect thereof. Section 37 empowers the competent authority to cancel any other licence, permit or pass granted to a person whose licence, permit or pass is cancelled under Clauses of Section 36, within the same district, which is an additional penalty imposable on a licensee as a consequence of the cancellation or suspension of his licence under Clauses of Section 36 of the Act.

It is, therefore, all the more necessary that before taking such drastic action, which results in far-reaching consequences involving a pretty heavy financial loss, a fair and proper enquiry into the culpable allegations levelled against a licensee, should be made after affording him an adequate opportunity of hearing. If the licensee raises controversial issues and asks for an oral hearing, it must be granted. Nay, if the controversial facts can be resolved on taking evidence, an opportunity to lead evidence on such matters should also be allowed to him. Similarly, the department can also lead evidence to prove the defaults committed by the licensee and to rebut his defence in order to enable the authority to take action for cancellation or suspension of the licence.

After inspection a notice was issued to the petitioner to show cause why his licence should not be cancelled. In response to that notice the petitioner submitted his explanation and the Assistant Excise and Taxation Officer was satisfied that the petitioner's stock was correct except to the extent of three pints which were in excess. The case of the department was that 12 pints of Diplomat Whisky were handed over to the petitioner by the previous licensee instead of 15 shown by him and 145 pints in all, instead of 148, were delivered. It was said that 5 had been over-written by 8 and to support this plea reference was made to the Department's own registers. Evidently, in this case, the petitioner had to be granted an oral hearing in order to prove his defence that he had received 15 pints of Diplomat Whisky from the previous licensee. From the order of the Collector, it is not clear whether he had examined Shri Tilak Chand in order to find how many pints of Diplomat Whisky were handed over by him to the petitioner and whether there was any overwriting. This was a very important fact to be proved in the case in order to enable the petitioner to show his innocence and to prove that he had not committed any default which entailed the penalty of cancellation of the licence or the forfeiture of the security deposit. Effect of the order was that this licence was cancelled and the licence fee paid and the security amount deposited by him were also forfeited without affording him any real and fair opportunity by merely describing his explanation as unsatisfactory. In such a case the licensee must not only be heard orally but he should be afforded an opportunity to produce evidence to substantiate his plea in defence. It is thus clear that in order to comply with the principle of natural justice, audi alteram partem, and the licensee must be given a full and true disclosure of the facts sought to be used against him and the hearing afforded must be adequate and substantial in order to enable him to safeguard his rights.

In other words, the hearing must be fair, proper and in substance and not mere form. If such a hearing is denied, the action will be struck down as void. Under the requirements of a full hearing, a party has the right to defend himself against the charges levelled against him by arguments, proof and examination of witnesses where necessary. Then and then alone will it be said that the hearing has been a proper, fair and meaningful one. The licensee must state in his explanation to the show-cause notice that he wants an oral hearing and or an opportunity to adduce evidence. In short, the procedure before the Collector in proceedings under Section 36 of the Act must conform to the procedure before a judicial tribunal.

Reading of Section 40 of the Act shows that the licensee is debarred from claiming the refund of any fee paid or deposit made in respect of the licence which has been cancelled or suspended.

The Court observed:

We do not agree with the learned counsel for the petitioners that the words “in respect thereof” at the end of the section refer to fee paid. In our view, these words refer to the licence cancelled or suspended… counsel argued that the words “deposit made” refer to any fee paid, that is, if the licensee had made any deposit on account of the fee leviable but they have not been able to refer to any provision in the Act or the Rules where under such a deposit can be made. The security deposit is mentioned in Section 34 of the Act and Rule 27-A (2) of the Punjab Liquor Licence Rules, 1956, and evidently the words “deposit made” refer to such a deposit.

In order to understand the meaning of the words “in respect thereof” the sentence can be split up as under:

“The holder shall not be entitled to the refund of any fee paid in respect thereof and the holder shall not be entitled to the refund of any deposit made in respect thereof.”

Thus the words “in respect thereof” clearly relate to the words “licence, permit or pass is cancelled or suspended” which occur in the beginning of the section and not to “any fee paid.” It thus follows that the licensee has been debarred from claiming the refund of any fee or deposit made by him in respect of the licence cancelled or suspended. Licence fee is paid under Rule of the Punjab Liquor License Rules, while security deposit is made under Sub-rule of Rule. Section 40 does not cast any obligation on the competent authority to forfeit the entire amount of the fee paid or deposit made. The authority can forfeit the entire amount of the fee paid or deposit made or a part of it or refund it in full. Therefore, if it is intended to forfeit the entire or any part of the amount of the fee paid or deposit made, the intention must be indicated in the show-cause notice which is issued for cancellation or suspension of the licence and if it is not mentioned in that notice, then after the order of cancellation or suspension of the licence is made, another notice will have to be issued to the licensee to show cause why the fee paid or the deposit made in respect of the cancelled or suspended licence be not forfeited in whole or in part. It is also open to the competent authority not to pass any order regarding the forfeiture of the entire amount or part of the amount of the fee paid or the deposit made and if the licensee makes an application for refund thereof, it may be refused or granted in full or in part after a due consideration of the facts pleaded. The penalty under Section 40 is in addition to and as a consequence of the order of cancellation or suspension of the licence and involves a fair amount of financial loss to the licensee. It is, therefore, desirable that this additional penalty should not be imposed without issuing to the licensee a notice or making him aware of the fact that the authority wants to impose this penalty also.

Adverse decision in absence of material provided:

The notice and the order issued by the respondent in cancelling the licence granted to the petitioner to run restaurant were sought to be quashed by the petitioners. The petitioner was part of an international chain of restaurants and that it strictly and vigilantly complied with all the applicable health standards and regulations as prescribed by and required under the local laws of India. Designated officers visited the premises to collect samples under the provisions of Prevention of Food Adulteration Act and took certain samples of raw materials and cooked food.

The fried chicken was sent to the Public Analyst and he was stated to have submitted report to the respondent. In view of the report, the respondent issued a notice to the petitioner that the fried and raw chicken samples were collected from the restaurant of the petitioner for analysis and on such analysis, fried chicken was found to be adultered, misbranded and unfit for human consumption due to use of excess of Monosodium Glutamate as per PFA Act 1954 and Rules, and called upon the petitioners to explain as to why their licence should not be cancelled for the said offence.

The petitioner by a letter informed that they were neither aware of the report of the Public Analyst, nor do they have any report of the Public Analyst. The petitioners requested not to proceed further in the matter and to grant them adequate opportunity and time to respond to the said notice. The petitioners also sought for a personal hearing in the matter. Again by a letter addressed to Commissioner, the petitioners disputed allegations made in the notice. Thereafter the respondent issued a memo cancelling the licence granted to the petitioners to run restaurant as per Section 443(4) of the Act and the Bye-laws.

Petitioners assailed the show-cause notice and impugned Order of cancellation of licence on the grounds:

(1) The Commissioner is the only authority under the provisions of the Act empowered to cancel the licence of the restaurant. The order of cancellation issued by the Health Officer is without the authority of law; the impugned show-cause notice and the order of cancellation are therefore invalid, inoperative and liable to be quashed.

(2) The order of cancellation is bad for non-compliance with the principles of natural justice, inasmuch as the petitioners have not been given a copy of the analysis report nor a personal hearing inspite of a request.

Respondents refuted the contention of the petitioners as regards the non-compliance of principles of natural justice on the ground that the conduct of the petitioners disentitles them for any hearing as they did not ask for copy of the report nor complain in their objections that they were prejudiced for non-supply of report nor the bye-laws provide for any personal hearing before the impugned order was made.

Show cause notice simply stated that the fried chicken sample was found to be adulterated, misbranded and unfit for human consumption due to excess of MSG as per PFA Act 1954 and the Rules 1955. The said notice was based on the analysis report of the Public Analyst. Even though the show-cause notice was based on the report of the Public Analyst, the respondents did not mention the contents of the report of the Public Analyst in the show-cause notice nor annexed a copy of the report of Public Analyst to the show-cause notice.

The petitioners were deprived of an opportunity to make an effective representation in respect of the allegations made by the respondents.

It was held: It is well established that where an action has to be taken against any person by an authority on the basis of any violation of statutory provision or for commission of an offence, a show-cause notice is necessary in respect of the very act alleged to have been committed or in respect of the provisions which are alleged to have been violated is a must. In the absence of any notice to the petitioners on these aspects the petitioners were deprived of an opportunity of making an effective representation which has resulted in an arbitrary order. In the facts and circumstances of this case, where the show-cause notice was purely based on the report of the Public Analyst, the Court observed that the show-cause notice should have been accompanied with a copy of the report of the Public Analyst. Admittedly the report of Public Analyst is the basis of the decision of the third respondent to revoke the licence and it was not furnished to the petitioners. Thus the petitioners were deprived of an opportunity to make an effective representation in support of their defence.

Misconception and non-application of mind:

It was a case of “non-application of mind”, “total confusion” and a “complete misconception” on the part of the original authority as well as the appellate authority, while reaching at a decision making process in the matter of granting and renewing the dance floor licences to the petitioners. That goes to the root of the matter. This is how the authorities committed errors in fact and law, and thereby, took into account totally irrelevant and extraneous considerations.

Dance floor licences of the petitioners were cancelled by the Collector. There were three allegations levelled against the petitioners. Let us see what were those allegations levelled:

Firstly, they had not observed “time restriction”.

The Division Bench observed that even if it was conceded that time restriction had been violated, keeping in view several decisions of this Court to which reference was made, an action of cancellation of licences must be held to be “grossly excessive and disproportionate to the allegations levelled and proved” and, hence, it was liable to be set aside.

The second ground, which weighed with the authorities related to allegation as to “fire-fighting equipment being insufficient”.

Court observed that at one stage, it was alleged by authorities that there were “no fire-fighting equipments at all”, and at a later stage, it was averred that the “fire-fighting equipments were insufficient”. It was also stated that the Panchnama showed that “fire-fighting machines were installed”, but they were not sufficient. It was, therefore, held that cancellation of licences was not called for in the circumstances, and contradictory findings were recorded by the authorities.

The third ground, which persuaded the Collector to pass an order of cancellation of licences, was statements of two customers (i) Shantaram Mahadev Bhosekar and (ii) Prabhakar Rajaram Karbane. It was submitted on behalf of the petitioners that apart from the fact that there was subjective element in those statements, even from the record of respective panchayats, the “names of the two persons said to be residing in that village were not found”, and, hence, their “statements could not have been relied upon”. Moreover, the Appellate Authority neither referred to nor relied upon those allegations and illegal acts alleged to have been committed by the appellants.

In the circumstances, the Division Bench remanded the matters to the Appellate Authority, so that an appropriate order could be passed by considering the arguments of the appellants.

And, therefore, the petitioners preferred appeals against the original order of cancellation passed by the Collector. The Appellate authority dismissed the appeal against which appeals were filed. They were dismissed by the Appellate Authority. The matters were remanded to the Appellate Authority to decide the same in accordance with law, which were dismissed by the Appellate Authority and the petitioners approached the Court.

Firstly, it was submitted that what was alleged against the appellants was that they had not observed “time restriction”. The Division Bench observed that even if it was conceded that time restriction had been violated, keeping in view several decisions of the Court to which reference was made, an action of cancellation of licences must be held to be “grossly excessive and disproportionate to the allegations levelled and proved” and it was liable to be set aside.

The second ground, which weighed with the authorities related to allegation as to “fire-fighting equipment being insufficient”. Court observed that at one stage, it was alleged by the authorities that there were “no fire-fighting equipments at all”, and at a later stage, it was averred that the “fire-fighting equipments were insufficient”. It was stated that Panchnama showed that “fire-fighting machines were installed”, “but they were not sufficient”. It was, therefore, held that cancellation of licences was not called for in the circumstances and the contradictory findings were recorded by the authorities.

The third ground, which persuaded the Collector to pass an order of cancellation of licences, was statements of two customers (i) Shantaram Mahadev Bhosekar and (ii) Prabhakar Rajaram Karbane. Apart from the fact that there was subjective element in those statements, even from the record of respective panchayats, the “names of the two persons said to be residing in that village were not found”, and their “statements could not have been relied upon”. Appellate Authority neither referred to nor relied upon those allegations and illegal acts alleged to have been committed by the appellants. In the circumstances, Division Bench had remanded the matters to the Appellate Authority, so that an appropriate order could be passed by considering the arguments of the appellants.

Keeping in view the allegations leveled against the appellants, though the Court set aside the order of cancellation of licence, it continued the order of suspension, which was passed earlier. Matters were remitted to the Appellate Authority and the proprietors of the hotels filed affidavits stating that Shantaram Mahadev Bhosekar and Prabhakar Rajaram Kadbane, said to be residing at Kanhe Phata or Kanhe Village, “were not residents of that village and their names did not appear in the voters list of the said village”. An attempt on the part of the petitioners was that in the circumstances, their statements were not true and could not have been relied upon as they “did not inspire confidence”.

The appellate authority, by the orders that were impugned in petitions, “observed that several complaints were filed and illegal activities have been committed by the petitioners and continued with such activities”. He was, therefore, of the firm opinion that the action taken by the Collector “canceling dance floor licences was proper”. It was also observed by the appellate authority that from the point of view of maintaining "law and order" and "public peace", the action was required to be taken. He stated that after the order of the High Court, once again, hearing was afforded to the appellants, but “no satisfactory or supportive proof was produced on behalf of the Appellant or his Lawyer”. He, therefore, held that there was no difference in the circumstances between the time when he passed the order earlier and at a subsequent stage when he heard the appellants. Accordingly, the appeals were dismissed.

So far as the first two grounds of the order passed by the Collector and confirmed by the Appellate Authority are concerned, final order was passed by the Court holding that no order of cancellation of licences could have been made. It was in view of the fact that “there was no discussion regarding the statements of two witnesses that the matters were remanded, and the Appellate Authority was directed to re-consider the matter. The appellate authority did not consider the affidavits filed by the proprietors, nor stated anything whether the statements could be relied upon. Not only that but a grievance was made that a “totally new ground was put forward by the Appellate Authority observing therein that an action was necessary with a view to maintain "law and order" and "public peace". Neither in the show cause notice, nor in the earlier order, any such ground was made out. It was, therefore, totally on a new allegation put forward on which the petitioners were never informed or called upon nor explanation was sought. The grievance of the petitioners is that the Appellate Authority was under misconception that if there was some difference in the circumstances, then only he was required to re-consider the matters; not otherwise.

It was submitted that when the High Court remitted the matters to the Appellate Authority by quashing and setting aside the orders, and directing the Appellate Authority to re-consider them, it was incumbent on him to pass fresh orders, which was not done. It was, therefore, submitted that in the facts and circumstances, the matters be finally disposed of by this Court, without remanding them to the Appellate Court. So far as the first two grounds were concerned, it was unequivocally held by the Division Bench that action of cancellation of licences could not have been taken by Appellate Authority. Regarding third ground, the orders were liable to be set aside and in fact, they were set aside, and the matters were remanded to the Appellate authority with a direction to reconsider the statements keeping in view the contention of the appellants. The Appellate Authority did not consider the affidavits filed by the proprietors of the petitioners and once again, confirmed the orders of the Collector.

Appellate Authority pressed into service additional circumstances such as “law and order” and “public peace” for which the petitioners were never informed, nor their explanation sought. In the circumstances, the Court observed that no purpose would be served in sending the matters to the Appellate Authority for re-consideration. The petitions were, therefore, allowed.

“Existence or non-existence” of facts and circumstances:

There was no allegation of misuse of the weapon or an iota of criminal incidence against the petitioner regarding the said weapon and the Licensing Authority erred in law in cancelling the licence of the petitioner under the Act. The order of cancellation did not disclose any material whatsoever against the petitioner whereupon one could come to the opinion that there was any danger or threat to public peace or public safety necessitating the cancellation of fire arm licence. Mentioning of present and permanent addresses in the application, which is requirement under the prescribed form, could not be taken to be the material endangering the security of public peace or public safety, and no opinion can be formed in the absence of any material. The ground for cancellation of licence on danger to the public peace and public safety cannot be sustained as there existed no material. The cancellation of the licence of the petitioner was thus not covered under the Act and the order was held to be illegal.

Balancing the public interest:

The judicial review of the licensing authority is denied, whenever, it is found that the decision making process of the Licensing authority is not unjust, unreasonable, arbitrary or fanciful. The judicial review is also denied, when the Licensing authority has taken into account relevant consideration. It is also seen that the Courts would lay their hands back to quash the cancellation of licences on account of the fact that the Licensing authority should maintain and balance the “public interest” as against the “individual interest”. And, the Indian Courts have time and against said that the cancellation of licence for breach of conditions that the traders shall not trade those things that are “contraband or prohibited” is, in fact, administratively and judicially justified. There, the Courts, while undertaking the judicial review of administrative action, would say the entire process as preserving the rationality or proportionality. In a case7, arrack and spirit are banned in the State and several human tragedies have been reported on account of marketing illicit spirit and arrack. Therefore, the Commissioner of Excise cannot shut his eyes to the reality. He should not be hyper technical and take the view that only if arrack or spirit is seized from the toddy shop alone he can suspend or cancel the licence. Every licensee of a toddy shop has responsibility to see that no contraband item like arrack or spirit is stored or sold near the toddy shop and nobody is engaged in such business near the toddy shop. It is not as if the licensees cannot prevent the employees and others from selling arrack near the toddy shop if they really wanted to stop them. Therefore, the natural presumption in the case of sale of arrack or spirit around the toddy shop is that the licensee has complicity and he is the beneficiary and the customers targeted in such business are the customers of the toddy shop and this is the only realistic approach to the issue. The Commissioner rightly concluded that the licensees have complicity in the arrack found near the toddy shops. Technical arguments of the petitioners could not save their licenses and the Court did not find justification to interfere with the Commissioner's Orders.

Beside this, the process of adjudication with which the Commissioner was invested with is an independent statutory duty and there was ample justification with the Commissioner of Excise to exercise the authority having regard to the fact that the “conviction” in a criminal case was not necessarily a pre-condition for exercise of power, authority and the jurisdiction. Arrack and the spirit being the contraband and prohibited items were seized from the employees of the licence holder and near the place where the shop was situated. The reason for cancellation of license was seizure of arrack or spirit and consequent registration of crime against the licence holder along with their employees.

The Commissioner of Excise issued notices to the licensees and called for their objections, heard them and cancelled the licences in exercise of his powers conferred under the Act and the Rules made thereunder. The orders were issued based on the prima facie case established in the form of registration of crime against the petitioners/licensees before the Magistrate Court for the offences punishable under the Act.

Licensees denied the transactions and according to them unless the seizure of contraband item is from the licensee, the licences cannot be cancelled or suspended. Though in some cases, the seizure is from persons stated to be employees or acting for the licensees the licensees have denied the same. It was contended that even if the employee is engaged in sale of contraband item, the same should not be a ground for cancellation of licence of the petitioners unless it is established that such business is carried on behalf of the petitioners or at least with the knowledge of the petitioners. The licensees contended that mere filing of FIR was not a ground to establish the “charge” against them, and so much so, the cancellation of licences is absolutely unjustified. According to them, under the Act, licence can be cancelled only if the person is convicted for the offence and not merely on the basis of registration of a crime.

The conviction by the Judicial Magistrate is different from cancellation of license and Section 26(a) to (d) other than Sub-clause (c) of Section 26 the provisions of which authorize suspension or cancellation of licence for reasons other than conviction in a criminal case. There, the Court held that conviction in a criminal case is not a necessary precondition for suspension or cancellation of license, while acting administrative or under the provisions of the Act. The licence can be suspended or cancelled on establishing a case of dealing in contraband item like arrack or spirit. The proceedings before the Judicial Magistrate where the degree or level of evidence required for punishment is different from proceedings for cancellation or suspension of licence and conviction by criminal court is not a necessary precondition for cancellation of license. Even if the licensee is later acquitted, the order cancelling the licence would not automatically, stand vacated. Even before the criminal court decides the case charged and conviction by the criminal court, though the same constitutes an independent ground for cancellation of licence under Section 26(c), it is not a precondition for cancellation of licence. If a case is established that the licensee, who is authorized to vend only toddy under the licence, is engaged in business of contraband item, like arrack or spirit, then the licence is liable to be cancelled in exercise of the powers conferred on the Excise Commissioner under the Rules.

There was no allegation of misuse of the weapon or an iota of criminal incidence against the petitioner regarding the said weapon and the Licensing Authority erred in law in cancelling the licence of the petitioner under the Act. The order of cancellation did not disclose any material whatsoever against the petitioner whereupon one could come to the opinion that there was any danger or threat to public peace or public safety necessitating the cancellation of fire arm licence. Mentioning of present and permanent addresses in the application, which is requirement under the prescribed form, could not be taken to be the material endangering the security of public peace or public safety, and no opinion can be formed in the absence of any material. The ground for cancellation of licence on danger to the public peace and public safety cannot be sustained as there existed no material. The cancellation of the licence of the petitioner was thus not covered under the Act and the order was held to be illegal.

Author: Hemang D. Rana, Advocate

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