1. Cancellation of import licenses on grounds of fraud under the Imports Control Order, 1955 — Challenge to the validity of the cancellation order and procedural fairness. (Para 1 , 4 , 16 )
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1959 Supreme(SC) 219
SUPREME COURT OF INDIA
9th December, 1959
B.P. SINHA, C.J.I., P.B. GAJENDRAGADKAR, K. SUBBAR RAO, K.C. DAS GUPTA AND J.C. SHAH, JJ.
M/s. Fedco (P) Ltd. and another, Petitioners
Versus
S. N. Bilgrami and others, Respondents.
Petition No. 171 of 1958.
Advocates appeared
Mr. Purushottam Tricumdas, Senior Advocate (Mr. Porus A. Mehta, Advocate and 416 M/s. S. N. Andley, J. B. Dadachanji, Rameshwar Nath and P. L. Vohra, Advocates of M/s. Rajinder Narain and Co. with him), for Petitioners; Mr. C. K. Daphtary, Solicitor General of India and Mr. N. S. Bindra, Senior Advocate (M/s. R. H. Dhebar and T. M. Sen, Advocates, with them), for Respondents.
Advocates:
C.K.DAFTARY, J.B.DADACHAN, N.S.BINDRA, P.L.VOHRA, PORUS A.MEHTA, PURSHOTTAM TRIKAMDAS, R.H.Dhebar, RAJINDAR NARAIN, RAMESHWAR NATH ROY, S.N.ANDLEY, T.M.SEN
C.K.DAFTARY, J.B.DADACHAN, N.S.BINDRA, P.L.VOHRA, PORUS A.MEHTA, PURSHOTTAM TRIKAMDAS, R.H.Dhebar, RAJINDAR NARAIN, RAMESHWAR NATH ROY, S.N.ANDLEY, T.M.SEN
The standard for "reasonable opportunity of being heard" is not invariable but depends on the facts of each case. It is satisfied if the affected party has a fair chance to convince the authority that the grounds for the proposed action are non-existent or unjustified.
Headnote:(A) Constitution of India - Articles 14, 19(1)(f), 19(1)(g) and 31 - Imports Control Order, 1955 - Clauses 9 and 10 - Cancellation of import licenses on grounds of fraud - Whether the provision for cancellation of licenses obtained by fraud or misrepresentation is a reasonable restriction in the interests of the general public - Held, the entire scheme of import regulation is based on the correct statement of relevant facts; if the grant is induced by fraud, the basis disappears, making the cancellation a reasonable restriction on the exercise of fundamental rights. (Paras 5-6)
(B) Administrative Law - Principles of Natural Justice - "Reasonable opportunity of being heard" - No invariable standard for reasonableness - The court's conscience must be satisfied that the person against whom action is proposed had a fair chance of convincing the authority that the grounds for action are either non-existent or do not justify the proposed action - Determination depends on peculiar facts, nature of the action, material relied upon, and the attitude of the party. (Paras 8-9)
Facts of the case:
A company obtained five import licenses which were subsequently cancelled by the relevant authority on the grounds that they were obtained fraudulently. The company challenged the cancellation order, contending that they were denied a reasonable opportunity to be heard as the authority refused to provide specific particulars of the alleged fraud and denied requests for the inspection of documents relied upon for the cancellation.
Findings of Court:
The court held that the provision allowing cancellation of licenses obtained by fraud is constitutional. Regarding the procedural fairness, the authority had issued a show-cause notice and provided personal hearings. The company's conduct during these interviews, where they suggested they might be victims of fraud rather than denying that fraud had occurred, indicated that the omission to provide minute particulars did not deprive them of a fair chance to convince the authority otherwise.
Issues: Whether the provision for cancellation of licenses on grounds of fraud is unconstitutional and whether the failure to provide specific particulars of the fraud and access to documents constitutes a denial of a reasonable opportunity to be heard.
Ratio Decidendi: The requirement of a "reasonable opportunity" is not a rigid formula but a justiciable standard based on the facts of each case. If the affected party is given a fair chance to present their case and the authority acts on a tentative conclusion based on available material, the requirement is satisfied, even if exhaustive particulars or document inspections are not granted.
Result: Petition dismissed with costs.
Legal Category Hierarchy
Table of Contents
2. Constitutionality of license cancellation for fraud — Whether the licensee was provided a reasonable opportunity of being heard as mandated by the governing order. (Para 2 , 4 , 17 )
3. Fraud vitiates the basis of a license grant — Reasonableness of an opportunity to be heard depends on the specific facts and the party's ability to convince the authority. (Para 6 , 8 , 9 , 10 , 11 , 12 , 18 , 19 , 20 )
4. Provision for canceling licenses obtained by fraud is a reasonable restriction under Article 19(1)(f) and (g) — Reasonableness of hearing is a justiciable matter based on circumstances. (Para 6 , 8 , 9 )
5. Petition for issuance of writs quashing the cancellation order dismissed with costs. (Para 13 , 14 , 21 )
6. Is the cancellation of a license on the ground that it was obtained by fraud a reasonable restriction under the Constitution?
Yes. The grant of a license is based on correct statements of facts. If induced by fraud or misrepresentation, the basis of the grant disappears, making cancellation a reasonable restriction in the interests of the general public under Article 19(1)(f) and (g). (Para 6 )
7. What is the standard for determining whether a party has been given a reasonable opportunity of being heard in administrative actions?
There is no invariable standard. The court must be satisfied that the person had a fair chance of convincing the authority that the grounds for action are non-existent or unjustified, depending on the peculiar facts, nature of the action, and the party's response. (Para 8 , 9 )
8. Does a reasonable opportunity of being heard necessarily require the disclosure of all particulars and inspection of documents in cases of alleged fraud?
The majority held that omission of minute particulars or inspection does not necessarily deprive a party of a fair chance if the general nature of the fraud is communicated and the party's conduct indicates awareness of the issue. However, the dissent argued such safeguards are elementary and essential. (Para 10 , 11 , 12 , 19 , 20 )
9. Is the act of canceling a license under the Imports Control Order an administrative or quasi-judicial act?
The court (in dissent) identified it as quasi-judicial because the authority has legal power to determine questions affecting the rights of subjects and a mandatory duty to act judicially by providing a reasonable opportunity of being heard. (Para 18 )
Judgment
DAS GUPTA, J. (For himself, Sinha, C.J.I., and Gajendragadkar and J. C. Shah, JJ.) : The first petitioner is a Company registered under the Indian Companies Act having its registered office in Bombay and is engaged in the business of dyes, chemicals, plastics, and various other goods, the second petitioner is the Chairman and a Director of the first petitioner Company. In this petition for enforcement of fundamental rights under the Constitution they pray for the issue of a writ of certiorari or other appropriate writ, direction or order quashing an order made by the first respondent, the Chief Controller of Imports and Exports, Government of India, New Delhi, by which he cancelled five import licences which had been granted to the first petitioner by the Joint Chief Controller of Imports and Exports, Bombay. There is also a prayer for an order on the second respondent, the Collector of Customs, Bombay directing him to assess the goods of the petitioner Company which have been landed in Bombay having been imported on the strength of these licences and allow the petitioner company to clear them. Of these five licences, two were dated 24-7-1958, two dated 16-8-1958, and the fifth dated 4-9-1958. The total value of the imports authorised by these five licences was Rs. 25,75,000. The petitioners contend that these five licences were granted to the petitioner Company on five applications sent by them by registered post to the Chief Controller of Imports and Exports, Government of India, New Delhi- three sent on 17-6-1958, one on 26-6-1958, and the last on 22-7-1958. It is further stated that in respect of each of these applications a letter was received by the Company from the office of the Chief Controller of Imports and Exports, Government of India, New Delhi, intimating that their application had been forwarded to the Joint Chief Controller of Imports and Exports, Bombay with the necessary comments and asking the Company to contact this officer, the Joint Chief Controller of Imports and Exports, Bombay direct in the matter. The petitioner Company wrote in each case to the Chief Controller of Imports and Exports, New Delhi, acknowledging receipt of these letters and at the same time to the Joint Chief Controller of Imports and Exports, Bombay, requesting that the licences should be issued to them at an early date. After the licences were received by the Company the office of the Joint Chief Controller of Imports and Exports, Bombay, the Company placed orders for the goods covered by these licences & some of the goods actually arrived at Bombay. Before however any of these goods could be cleared the Company received a notice dated 24-9-1958, stating that whereas there was reason to believe that these five licences had been obtained fraudulently, the Government in the exercise of the powers specified in para. 9 of the IMPORTS CONTROL ORDER , 1955, proposed to cancel the said licences unless sufficient cause against that was furnished to the Chief Controller of Imports and Exports, New Delhi, within 10 days of the date of the issue of the said notice. On September 26, the petitioner Company s solicitors sent a telegram to the Chief Controller of Imports and Exports, New Delhi, requesting him to give particulars of the alleged fraud and to give them an appointment for inspection of papers and documents relied upon by him. On September 27, the Company wrote a letter to the same officer in which they gave a written explanation pointing out various facts and stating that they were victims of foul play by some person interested in causing damage to them and involving their reputation and in order to bring them in bad books with the authorities. In the concluding portion of this letter the Company stated : "We also reserve our right to add to, amend or alter the explanations contained in this letter hereafter and to submit such further explanations as may become necessary after taking inspection of all the papers and after gettin
