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IN THE HIGH COURT OF PATNA
N.L. UNTWALIA AND S. SARWAR ALI, JJ.
M/s. Richpal Birmadutta and Ors. – Appellants
Vs.
The State of Bihar and Ors. – Respondents
C.W.J.C. No. 856 of 1969, C.W.J.C. No. 146 of 1970
Decided On: 21.04.1971
LICENSING - FOODGRAINS - ESSENTIAL COMMODITIES ACT, 1955 - BIHAR FOODGRAINS DEALERS' LICENSING ORDER, 1967 - CLAUSE 6 - VALIDITY - REQUIREMENT OF INCOME TAX AND SALES TAX CLEARANCE CERTIFICATES - VALIDITY - CIRCULAR OF FINANCE DEPARTMENT DATED 10.9.49 - VALIDITY - REFUSAL TO RENEW LICENCE - GROUNDS - REASONABLENESS.
Fact of the Case:
Wholesale dealers in foodgrains applied for renewal of their licenses under the Bihar Foodgrains Dealers' Licensing Order, 1967. The Deputy Commissioner required them to produce Income Tax and Sales Tax payment certificates and assets of their property duly verified by the Income Tax authorities. Some of the petitioners were able to comply with some of the requirements, but at the time the impugned order was made, they had not done so, and renewal of the license, in case of some, was postponed and in case of some it was refused.
Finding of the Court:
1. Clause 6 of the Licensing Order is not ultra vires or violative of Articles 14 and 19(1)(g) of the Constitution, provided it is interpreted in a limited sense to mean that the licensing authority cannot refuse to grant or renew a license for any arbitrary or whimsical reason not connected with the object and provisions of the controlling legislation. 2. The licensing authority has no power to insist for the production of a clearance certificate from the Income Tax Department or the Sales Tax Department or to produce a certificate of valuation of property. 3. The circular of the Finance Department dated 10.9.49, which laid down conditions for the grant or renewal of licenses, is not valid and cannot be relied upon by the licensing authority. 4. The refusal to renew the licenses on the ground that the petitioners had not produced Income Tax and Sales Tax clearance certificates or that they had not invested at least Rs. 10,000/- in the business is illegal and void.
Issues: 1. Whether Clause 6 of the Licensing Order is ultra vires or violative of Articles 14 and 19(1)(g) of the Constitution. 2. Whether the requirement by the licensing authorities of production of Sales Tax certificate, Income Tax certificate or property certificate was valid and can be sustained in law. 3. Whether the licensing authorities could refuse to renew the licenses on the basis of the circular of the Finance Department dated 10.9.49 or whether that circular was valid or whether they could refuse to renew the licenses of the petitioners in both the cases on other grounds, as has been done in these cases. 4. Whether C.W.J.C. 856 of 1969 can be entertained when the petitioners had not availed of the alternative remedy provided under Clause 9.
Ratio Decidendi: 1. The power to refuse to grant or renew a license conferred on the licensing authority under Clause 6 of the Licensing Order is in a very wide language. However, it cannot be exercised in an arbitrary or whimsical manner and must be based on reasons which are germane to the object of the controlled legislation and have a probative relation or nexus with the purpose of such legislation. 2. The requirement of recording reasons clearly shows that the licensing authority cannot refuse to grant or renew a license for any arbitrary or whimsical reason not connected with the object and provisions of the controlling legislation. 3. The licensing authority has no power to insist for the production of a clearance certificate from the Income Tax Department or the Sales Tax Department or to produce a certificate of valuation of property. Such a provision has not been made either in the Act or in the Licensing Order. 4. The circular of the Finance Department dated 10.9.49 is not valid and cannot be relied upon by the licensing authority. It was issued several years prior to coming into force of the Essential Commodities Act, 1955 or the Licensing Order and lays down conditions for the grant or renewal of licenses which are not supported by the Act or the Licensing Order.
Final Decision: 1. Clause 6 of the Licensing Order is not ultra vires or violative of Articles 14 and 19(1)(g) of the Constitution. 2. The requirement by the licensing authorities of production of Sales Tax certificate, Income Tax certificate or property certificate was not valid and cannot be sustained in law. 3. The licensing authorities could not refuse to renew the licenses on the basis of the circular of the Finance Department dated 10.9.49 or on the ground that the petitioners had not produced Income Tax and Sales Tax clearance certificates or that they had not invested at least Rs. 10,000/- in the business. 4. C.W.J.C. 856 of 1969 is maintainable even though the petitioners had not availed of the alternative remedy provided under Clause 9.
N.L. Untwalia, J.
1. These two writ applications have been heard together as common questions of fact and law are involved in them and both are being disposed of by a common JUDGMENT :. In C.W.J.C. 856 of 1969 there are 11 petitioners, out of whom petitioner no. 11, the Jamshedpur Chamber of Commerce, seems to be an unnecessary party. The three respondents are (1) the State of Bihar, (2) the Deputy Commissioner, Singhbhum, Chaibassa and (3) the District Supply Officer, Singhbhum, Chaibassa. The petitioners have obtained a rule from this Court under Article 226 of the Constitution of India against the respondents to show cause why Clause 6 of the Bihar Foodgrains Dealers' Licensing ORDER :, 1967 made under Section 3 read with Section 5 of the Essential Commodities Act, 1955 (Central Act 10 of 1955), hereinafter called the Licensing ORDER :, be not declared ultra vires and why a writ in the nature of certiorari should not issue to call up and quash the ORDER :dated 19.6.69 passed by the Deputy Commissioner, Singhbhum, respondent 2, a copy of which is Annexure 4, as also the circular of the State Government contained in Annexure 5 along with the covering letter (Annexure 6) and the letter (Annexure 7) written to some of the petitioners. Cause has been shown by filing a counter-affidavit on behalf of respondent 2. Learned Standing Counsel I appeared at the time of the hearing of the application.
2. Petitioners 1 to 10 are wholesale dealers in foodgrains who had valid licences granted or renewed under the Licensing ORDER :upto the year 1968. In December of that year they applied for renewal of their licences for the year 1969. Upon this, a letter dated 14.1.69 was written to petitioner no. 10 by the Deputy Commissioner, a copy of which is Annexure 1 to the writ application, to produce the up to date Income Tax and Sales Tax payment certificates and the assets of its property duly verified by the Income Tax authorities within a week from the receipt of the said notice, failing which adverse inference on these points would be drawn. According to the petitioners' case, they approached the Income Tax Department for the said purpose, but in spite of their best efforts they were not able to obtain the required certificates. The Deputy Commissioner then wrote a letter to the petitioners on 1.7.69, a copy of which letter written to petitioner no. 10 is Annexure 2 to the writ application. He directed the petitioners to file the payment certificates of the Sales Tax and the Income Tax Departments, but, as it appears from this letter, certificates in regard to the property were not insisted upon. Some of the petitioners were able to comply with some of the requirements--some were able to comply with all. But at the time the impugned ORDER :was made they had not done so, and renewal of the licence, in case of some, was postponed and in case of some it was refused, as would appear from the certified copy of the report made by the District Supply Officer, respondent 3, to the Deputy Commissioner, respondent 2 (Annexure 4), upon which the latter passed the ORDER :s on the margin of the report. In some cases time was granted and in the case of petitioner no. 1, to connect his serials 5 to 8 in Annexure 3, the chart prepared by the office of the District Supply Officer, the reason found mentioned by the Deputy Commissioner in his ORDER :dated 19.6.69 is as follows:
Show cause perused. In view of the circular of the F.D. (No. 2128F dated 10.9.49) we may not issue the licences. An investment of less (than) Rs. 10,000/- admitted by the applicant does not appear to be sufficient to carry on wholesale business.
This refusal to renew the licence was in exercise of the power under Clause 6 of the Licensing ORDER :. Of course, the petitioners could go in appeal under Clause 9 to the Commissioner but in this case they did not go and came straight to this Court. Their application was admitted and the stay of the impugned ORDER :was granted.
3. In the co
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