# [1962] 1 S.C.R. 540

- **Citation:** [1962] 1 S.C.R. 540
- **Court:** Supreme Court of India
- **Decided:** 1960-01-18
- **Bench:** B. P. Sinha, s. K. DAS, A. K. Sarkar, N. Rajagopala Ayyangar, J. R. Mudholkar
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/1962-1-s-c-r-540-2145
- **Pages:** 10

## Headnote

Import
Licence-Cancellation-Grounds for cancellationLicensce to be given a reasonable opportunity of being heard-Principles of natural justice-Violation of-Imports (Control) Order,
I955. els. 8, 9, IO.
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, 1960, 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. g 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 cancelJa ti on of the licences under the said rule. On July
2, 1960, the Chief ControlJer 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 ..... Youare 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, 1960, 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. IO of the Imports (Control)
'
I
I S.C.R. SUPREME COURT REPORTS
541
Order, 1955, which required that "No action shall be taken
z96z
under els. 7, 8 or 9 unless the Iicensee ...... has been given a
reasonable opportunity of being heard", and that the cancellaSinha Govindji
tion of the licences arbitrarily deprived the petitioner of his
v.
fundamental right to carry on his business under Art. 19 of the Deputy Chief ConConstitution of India. The correspondence between the peti- i,olln of Imports
tioner and the Import authorities showed that after the receipt
& Expo'''
of the letter dated July z, 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. roof the Imports (Control) Order
1955, which embodied the principles of natural justice, and that
the orders dated August 3, r960, cancelling the licences granted
to the petitioner, were bad and must be quashed.
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. R. Gagrat and G. Gopalakrishnan,
for the petitioner.
H. J. Umrigar, R. H. Dhebar and T. M. Sen, for
the respondents.
J
1961.
March 23.
The Judgment of the Court was
delivered by
S. K. DAS, J.-These are two writ petitions in s. K. Das J.
respect of two orders 'dated August 3, 1960, by which
the Joint Chief Controller of Imports, Madras,
cancelled two import licences,

## Text

March 23.
540
SUPREME COURT REPQRTS
SINHA GOVINDJI
v.
[1962]
THE DEPUTY CHIEF CONTROLLER OF
IMPORTS AND EXPORTS AND OTHERS
(B. P. SINHA, c. J., s. K. DAS, A. K. SARKAR.,
N. RAJAGOPALA AYYANGAR and
J. R. MUDHOLKAR, JJ.)
Import
Licence-Cancellation-Grounds for cancellationLicensce to be given a reasonable opportunity of being heard-Principles of natural justice-Violation of-Imports (Control) Order,
I955. els. 8, 9, IO.
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, 1960, 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. g 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 cancelJa ti on of the licences under the said rule. On July
2, 1960, the Chief ControlJer 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 ..... Youare 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, 1960, 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. IO of the Imports (Control)
'
I
I S.C.R. SUPREME COURT REPORTS
541
Order, 1955, which required that "No action shall be taken
z96z
under els. 7, 8 or 9 unless the Iicensee ...... has been given a
reasonable opportunity of being heard", and that the cancellaSinha Govindji
tion of the licences arbitrarily deprived the petitioner of his
v.
fundamental right to carry on his business under Art. 19 of the Deputy Chief ConConstitution of India. The correspondence between the peti- i,olln of Imports
tioner and the Import authorities showed that after the receipt
& Expo'''
of the letter dated July z, 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. roof the Imports (Control) Order
1955, which embodied the principles of natural justice, and that
the orders dated August 3, r960, cancelling the licences granted
to the petitioner, were bad and must be quashed.
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. R. Gagrat and G. Gopalakrishnan,
for the petitioner.
H. J. Umrigar, R. H. Dhebar and T. M. Sen, for
the respondents.
J
1961.
March 23.
The Judgment of the Court was
delivered by
S. K. DAS, J.-These are two writ petitions in s. K. Das J.
respect of two orders 'dated August 3, 1960, by 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
SUPREME COURT REPORTS
[1962]
I96I
and thus arbitrarily and without authority of law
deprived the petitioner of its fundamental right to
Sinha Govindji
v.
carry on its business under Art. 19 of the ConsDeputy Chief Con· titution.
froller of Imports
The point for decision is a short one and we need
"' Exports
only state such facts as bear upon that point. The
petitioner's case is that the proprietor of the firm is a
s. K. Das 1· 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 value 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 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 Ministry 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
I
,..
..
I
1 S.C.R. SUPREME COURT REPORTS
543
Govindji, Bellary or any Bank, or any other party who may be interested in the said licence Sinha Govindji
No. 836640/60/AU/M dated Second February, 1960,
v.
are hereby directed not to enter into any commit- Deputy Chief Conments against the said license and return it im- froller of Imports
mediately to the Joint Chief Controller of Imports
& Exports
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 impossible for me to show cause against it. I may, however, sLate that I have not done anything 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."
S. K. Das J.
544
SUPREME COURT REPORTS
[1962]
Then, on August 4, 1960, the petitioner received two
orders dated the previous day by which the two
Sinha Govindji
v.
licences in favour of the petitioner were cancelled.
Deputy Chief Con- The orders stated (we are quoting only one of the
troller of Iinports orders which are similar in terms):
& Expo>ts
"Whereas M/s. Sinha Govindji, Bangalore Road,
S. K. Das].
Bellary or any bank or any other person have not
come forward furnishing sufficient cause, against
Notice No. l/LCL/60/CDN(I) dt. 27-5-1960, propos.
ing to cancel licence No. A 863296/60/AU/M dt.
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 th.e
I
•
.•
.J
I S.C.R. SUPREME COURT REPORTS
545
effect that the petitioner had no machinery and equip-
'96'
ment to manufacture the relevant articles from the
Sinha Govindji
imported raw material. On receipt of this letter a
v.
joint investigation was held by the Assistant Director Deputy Chief Conof Industries, Bellary, and the Deputy Director, Small t>olfrr of Imports
Industries Service Institute, Hubli, and it was found
0 · Exports
at the time of inspection that the petitioner firm had
no machinery and equipment at the premises, nor s. K. Das J.
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:
"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 S(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
r96r
Sin! a Govindji
v,
Deputy Chit] Controller of Impotts
&, Expo1/s
S. K. Das].
546
SUPREME COURT REPORTS
[1962]
On the other hand, you are called upon, under
clause 10 of the said Imports (Control) Order, 1955,
to show cause, within 15 (fifteen) d,ays 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 suffi.-
ciently 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
t
1 S.C.R. SUPREME COURT REPORTS
547
opportunity of being heard within the meaning of cl. 10.
'96'
The respondents, however, rely on the letter dated
Sinha Govindji
July 2, 1960, in support of their contention that
v.
the petitioner has had a reasonable opportunity of Deputy Chief Conshowing cause aginst the cancellation of the two troll" of Imports
licences.
{> Exports
On behalf of the petitioner it has been submitted,
not without justification, that the letter dated July 2,
s. K. Das f.
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, particularly 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
SUPREME COURT REPORTS
[1962)
'96'
other relevant documents in order to enable the petitioner to show cause. It said that the petitioner would
Sinha Govindji
v.
show cause as soon as the relevant documents were
Deputy Chief con· received and it also said that a personal hearing would
frolter of Imports be asked for and prayed that in the meantime no
&·Exports
further action should be taken. No reply was given
by the respondents to the aforesaid letter of the petis. K. Das f.
tioner'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 a much later date, nor was any information 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 orders had been made without
waiting for any explanation. On August 10, 1960, the
solicitor submitted a written authority, saying that it
was unnecessary to call for it and that the two licences had been ~ancelled 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 and 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 happoned after the
receipt of the letter dated July 2, 1960, it is abundantly clear that the petitioner has had no real opportunity of being heard with regard to the ground alleged
in the letter, before the cancellation orders were made
L
...
1 S.C.R. SUPREME COURT REPORTS
549
on August 3, 1960. There was, in our opinion, a clear
r96r
violation of the requirement of cl. 10, which embodies
5
h G
. d .
the principles of natural justice. The cancellation
"' av'''" 1'
orders are, therefore, bad and must be quashed. We Deputy Chief conallow the writ petitions and order accordingly.
Thc1,,11er of Imports
petitioner is entitled to its costs; there will be one
.:~ Exports
hearing fee.
Pet it ions allowed .
THE ORIENT PAPER MILLS LTD.
v.
THE STATE O:F ORISSA AND OTHERS
(And Connected Appeal)
(S. K. DAS, J. L. KAPUR, M. HIDAYATULLAH,
J. c. SHAH and T. L. VENKATARAMA AYYAR,JJ.)
Sales Tax--Tax imposed on sales outside the State-Refund, if
claimable by dealer or purchaser-Asscssee's fundamental rightReasonoble restriction-Orissa Sales Tax Act, r947 (XIV of r947),
ss. 98, ct. (3), r4-0rissa Sales Tax (Amendment) Act, r958 (28 of
1958), s. r4.1-Constitntion of India, Art. r9(r)(j).
The appellants who were registered as dealers under the
Orissa Sales Tax Act, 1947, used to collect sales tax from the
purchasers on all sales effected by them including sales to dealers in other states.
They were assessed to and paid tax on
their turnover which included sales outside the State of Orissa,
but after the decision of this Court in State of Bombay v. The
United i'>fotors (India) Ltd., [1953] S.C.R. 1069, they applied
under s. 14 of the Act for refund of tax paid on the ground that
sales outside the State were not taxable under cl. (r)(a) of Art.
286 of the Constitution read with the Explanation.
Refund
was refused by the Sales Tax Authorities and the Board of
Revenue.
In petitions moved by the appellants foe writs of
certiorari anrl 1nandamus against the orders of the Boa;d of
Revenue the High Court ordered refund of tax paid for certain
periods and refused it in regard to other periods.
The Orissa
Sales Tax Act \Vas, ho\.\·ever, amended in 1958 with retrospective effect incorporating s. 14-A which provided that refund
could be claimed only by the person from whom the dealer had
realised the amount by way of sales-tax or otherwise.
S. K. Das J.
Ig6I
March 24.