Mere Lodging of FIR Under S. 3/7 Essential Commodities Act No Ground for Cancelling Fair Price Shop License: Allahabad High Court - 2025-06-10

Covering Law & Justice.

FIR Alone Cannot Justify Cancellation of Fair Price Shop License, Rules Allahabad High Court

Allahabad, UP - In a significant ruling with wide-ranging implications for the public distribution system, the Allahabad High Court has held that a Fair Price Shop (FPS) license cannot be suspended or cancelled merely on the ground that a First Information Report (FIR) has been lodged against the licensee under the Essential Commodities Act, 1955.

Hon'ble Mr. Justice PrakashPadia delivered the common judgment while deciding a batch of 22 writ petitions, led by M/S Sajid Vs. State Of U.P. And 02 Others . The court quashed the cancellation orders issued by various District Supply Officers across Uttar Pradesh and directed the immediate restoration of the petitioners' licenses.

Case Background

The petitioners, all licensed Fair Price Shop dealers, had their licenses suspended and subsequently cancelled by district authorities. The primary ground for this action in each case was the registration of an FIR against them, typically under Section 3/7 of the Essential Commodities Act, often coupled with sections of the Information Technology Act and the Indian Penal Code. The allegations generally pertained to irregularities in the distribution of food grains, such as misusing Aadhaar cards and diverting supplies through the E-POS (Electronic Point of Sale) system.

The petitioners challenged these cancellations, arguing that the authorities had acted illegally by not conducting a proper and independent preliminary inquiry as mandated by the U.P. Government Order dated August 5, 2019.

Key Arguments

Counsel for the Petitioners , led by Sri Vishal Tandon , argued that the administrative action was arbitrary and violated principles of natural justice. They contended: - No full-fledged inquiry was conducted, and the petitioners were not given an opportunity to cross-examine witnesses or present their case. - The cancellations were based solely on the lodging of an FIR, which is merely an allegation and not a finding of guilt. - The issue is squarely covered by a binding Full Bench decision of the Allahabad High Court.

Counsel for the State , led by Additional Advocate General Sri Ashok Mehta, defended the cancellations, stating that inquiries had revealed malpractices like illegal withdrawal of food grains. However, the State counsel conceded the legal position established by precedents that an FIR alone is not a sufficient basis for cancelling a license.

Court's Reasoning and Legal Precedents

Justice Padia 's judgment heavily relied on a chain of established legal precedents, emphasizing the sanctity of procedural fairness. The court cited three key decisions:

1. Bajrangi Tiwari Vs. The Commissioner (2017): A Full Bench of the Allahabad High Court had unequivocally answered in the negative the question of whether an FPS license can be cancelled merely on the lodging of a criminal case.
2. Amit Kumar Vs. State of U.P. (2024): A single-judge bench of the High Court reaffirmed the Bajrangi Tiwari principle, additionally stressing that the inquiry procedure outlined in the Government Order of August 5, 2019, must be followed before any adverse action is taken.
3. Mohd. Amir Vs. State of U.P. (2025): The Supreme Court dismissed a Special Leave Petition filed against the Amit Kumar judgment, thereby giving its seal of approval to the High Court's view.

The court extracted a pivotal observation from its own precedent:

"In full Bench judgment of this Court in Bajrangi Tiwari (Supra) it has been clearly held that fair price shop can not be cancelled merely on the ground of lodging criminal case."

The judgment underscored that the procedure laid out in the Government Order dated 05.08.2019, which requires a preliminary inquiry, is mandatory. The court found that the respondent authorities had failed to follow this prescribed procedure and had instead taken punitive action based on the premise of a pending criminal case.

Final Decision and Implications

Concluding that the administrative actions were legally untenable, the court held:

"In view of the above discussion, the Court is of the opinion that the fair price shop licence/agreement could not be cancelled on the ground of registration of F.I.R. under Section 3/7 Essential Commodities Act."

The court proceeded to quash all the impugned cancellation and appellate orders across the 22 petitions and ordered the concerned authorities to "restore the fair price shop licence of the petitioners forthwith."

This judgment reinforces a crucial administrative law principle: administrative actions that have civil consequences must be preceded by a fair inquiry and cannot be based solely on the initiation of criminal proceedings. It provides significant relief to numerous FPS dealers and sets a clear directive for administrative authorities to adhere to due process before cancelling licenses essential for public welfare.