# NARAYANAN SANKARAN MOOSS v. TIIE STAIB OF KERALA AND ANOTIIER '

- **Citation:** [1974] 2 S.C.R. 60
- **Court:** Supreme Court of India
- **Decided:** 1973-10-12
- **Case number:** Civil Appeal No. 1279 of 1967
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/narayanan-sankaran-mooss-v-tiie-staib-of-kerala-and-anotiier-6149
- **Pages:** 12

## Headnote

NARAYANAN SANKARAN MOOSS
v.
TIIE STAIB OF KERALA AND ANOTIIER
'October 12, 1973
(P. ]AGANMOHAN REDDY, S. N. DWIVEDI AND P. K. GOSWAMI, ]].]
A
Indian Electricity Act (9 o/ 1910) s. 4(1) and (3)-Consulrarion with State
B
Electricity Board before revocation of licenie of licensee-If mandatory.
Section 4(1). Indian Electricty Act, 1910, as amended in 1958, provides that
thC State Government may, if in its opinion the public interest so requires, and
after consulting the State Electricity Board, revoke a licence ia. cenain casca..
Sub-section (3) provides that no licence shall be revoked under sub-8. (i) an--
less the State Government has given to the licensee not less than three moaths
notice in writing stating the grounds on which it is · proposed to rev.ob the
licence, :ind, has considered the cause shown by the licensee.
On June 21. 1962. the respondent-Government wrote to the State Electricity
Board that the respondent considered that tho licence of the ap;:iellant should be
revoked under s. 4(l)(a) and requested the Board to commumcate its views.
On July 26, the Board recommended the revocation. On August 17, the respondent issued a notice to the licensee, of which the appellant was proprietor under
s. 4(3). to show cause why the licence should not be revoked. On November
s. 1962, within three months, the appellant sent his explanation. On April , 6,
1963. the respondent Mote to the Board that they had considered the explanation of tho licensee. that since the explanation was not satisfactory the respon·
dent had decided to revoke the licence. and inquired if the Board was willing to
purchase the undertaking. On 20th April, 1963, the Board expressed its willingness to purchase the undertaking with effect from August 1, 1963. On May
17. 1963. the respondent revoked the licence with effect from August 1, 1963,
and directed the appellant to deliver the undertaking to the Board.
ThO appellant's writ petition to the Jli8-h Court challenging the orders was
dismisSed.
Allowing the appeal to this Court,
HEID : ( 1) Section 4 conte·mplates that the Board should make its recommendation only after considering· the explanation of the licensee. When the
covemment consults the Board on the question of revocation of a licenc:ee the
Boa.rd is to make up its mind as to whether it should recommend, (i) to revoke
the licence, or (ii) riot to revoke the licence, or (ill) to permit the licence to
. remain in force subjer;t to such further terms and condition, as may be though
c
E.
proper. The Board would not be able to make a choice out of these three
F
courses without considering the explanation of the licensee, because, the expla·
nation mav make out case for not revokini:i; a licence. [n the present case, the
Board was consulted much before the receipt of the appellant's explanation. The
entire chain of correspondence between the Government and the Board shows
that there was no second consultation between the Government and the Board ' ·
regarding the revocation of the licence after the Government had received the
appellant's explanation to the show cause notice. Any telephonic consultation
is out of question, because. such telephonic consultation could not be held With
the three members of the Board at one and the same time, nor could the mem• . G
bers bestow collective consideration -on the matter before giving the Board's
opinion thereon. (640-E; 65F; 68F-H; 69A.C]
·•
. .
(2) There is nO force in the contention that the consultation With the Board
is only as regards 'public interest. [69C]
•
(3)-The words_ .. aft.er consulting the Board .. show .that the construction-.
suggested by the respondent that the Board was to be consulted only at the stage -,
when tl1.e Government takes_ a provisional decision is not correct. [690)
_
' R
( 4) Having .regard_ ~ the object and context the colldition of Consulti~g the
. Board airer the licensee's e~planation was received-is mandatory and the breach
of this condition wiII makes the order of revocation

## Text

NARAYANAN SANKARAN MOOSS
v.
TIIE STAIB OF KERALA AND ANOTIIER
'October 12, 1973
(P. ]AGANMOHAN REDDY, S. N. DWIVEDI AND P. K. GOSWAMI, ]].]
A
Indian Electricity Act (9 o/ 1910) s. 4(1) and (3)-Consulrarion with State
B
Electricity Board before revocation of licenie of licensee-If mandatory.
Section 4(1). Indian Electricty Act, 1910, as amended in 1958, provides that
thC State Government may, if in its opinion the public interest so requires, and
after consulting the State Electricity Board, revoke a licence ia. cenain casca..
Sub-section (3) provides that no licence shall be revoked under sub-8. (i) an--
less the State Government has given to the licensee not less than three moaths
notice in writing stating the grounds on which it is · proposed to rev.ob the
licence, :ind, has considered the cause shown by the licensee.
On June 21. 1962. the respondent-Government wrote to the State Electricity
Board that the respondent considered that tho licence of the ap;:iellant should be
revoked under s. 4(l)(a) and requested the Board to commumcate its views.
On July 26, the Board recommended the revocation. On August 17, the respondent issued a notice to the licensee, of which the appellant was proprietor under
s. 4(3). to show cause why the licence should not be revoked. On November
s. 1962, within three months, the appellant sent his explanation. On April , 6,
1963. the respondent Mote to the Board that they had considered the explanation of tho licensee. that since the explanation was not satisfactory the respon·
dent had decided to revoke the licence. and inquired if the Board was willing to
purchase the undertaking. On 20th April, 1963, the Board expressed its willingness to purchase the undertaking with effect from August 1, 1963. On May
17. 1963. the respondent revoked the licence with effect from August 1, 1963,
and directed the appellant to deliver the undertaking to the Board.
ThO appellant's writ petition to the Jli8-h Court challenging the orders was
dismisSed.
Allowing the appeal to this Court,
HEID : ( 1) Section 4 conte·mplates that the Board should make its recommendation only after considering· the explanation of the licensee. When the
covemment consults the Board on the question of revocation of a licenc:ee the
Boa.rd is to make up its mind as to whether it should recommend, (i) to revoke
the licence, or (ii) riot to revoke the licence, or (ill) to permit the licence to
. remain in force subjer;t to such further terms and condition, as may be though
c
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proper. The Board would not be able to make a choice out of these three
F
courses without considering the explanation of the licensee, because, the expla·
nation mav make out case for not revokini:i; a licence. [n the present case, the
Board was consulted much before the receipt of the appellant's explanation. The
entire chain of correspondence between the Government and the Board shows
that there was no second consultation between the Government and the Board ' ·
regarding the revocation of the licence after the Government had received the
appellant's explanation to the show cause notice. Any telephonic consultation
is out of question, because. such telephonic consultation could not be held With
the three members of the Board at one and the same time, nor could the mem• . G
bers bestow collective consideration -on the matter before giving the Board's
opinion thereon. (640-E; 65F; 68F-H; 69A.C]
·•
. .
(2) There is nO force in the contention that the consultation With the Board
is only as regards 'public interest. [69C]
•
(3)-The words_ .. aft.er consulting the Board .. show .that the construction-.
suggested by the respondent that the Board was to be consulted only at the stage -,
when tl1.e Government takes_ a provisional decision is not correct. [690)
_
' R
( 4) Having .regard_ ~ the object and context the colldition of Consulti~g the
. Board airer the licensee's e~planation was received-is mandatory and the breach
of this condition wiII makes the order of revocation Yoid.
[701:)
'
60
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61
(a) The power of revoking a licence is a drastic power as it results in the.
severe abridgment of the right to carry on a business.
Having in
mind~ die -
requirements of Art. 19( 1) (g) of the Constitution, Parliament has prescribed
certain conditions to prevent the abuse of power and to ensure just ex:ercise of
the power .. [ 69G]
(b) When revoking a licence the State-Government acts in two stages. It
forn1s a tentative opinion regarding revocation of a licence and calls for explanation from the licensee.
When the explanation is received, Government consi-
'ders it and thereafter, if not satisfied, passe's the final order of revocation. But
first impressions and provisional judgments have a tendency to become ultimate
ideas and final judgments. Therefore, Parliament interposed the condition of
consultation with the Board before government takes its final
decision. The
Board is an independent body consisting of three members one of whom is a
technical expert, the otber a financial expert and the third an administrative
expert While considering the facts presented to it by the Government and by
the licensee in his explanation, the Board will act with an open mind and will
offer unbiased counsel to the Government.
[706-El
(c) The clause "if in its opinion the public interest so requires" and els. (a)
to (d) of s. 4 prescribe some of the conditions precedent for the exercise of the
power of revocation and an order of revocation in breach of any of these conditions will be void. The phrase "after consulting the State Electricity Board"
occurs between the clause 'if in its opinion the public interest so requires' and
els. (a) to (d). The context shows that the consultation with the Board is also
a condition precedent for making the order of revocation and breach of this
conditidn precedent would entail the same consequences as the breach of other
conditions. (69G-70B]
(d) It is tru'e that the opinion of the Board is not binding on the government, for, in spite of the Board advising against revocation, the government, if
satisfied that it is necessary to revoke the licence, may revoke the licence.
But
this should not be regarded as an overweighing consideration, because, it will
normally be difficult for the government to ignore the Board's ·expert advice.
[710-E]
E
State of U.P. v. Ma11botllu11n Lal Sri1·asta1·a, [1958] S.C.R. 533, H. N. Rish~
F
G
H
bud v. State of Def/ii, f 19551 1 S.C.R. 1150. Rani Gopal Chaturvedi v. State of
Madhya-Pradesh, The State of Bombay v. D. A. Korgaonkar, [1970) 1 S.C.R
472, Rollo v. Minister of Toll'JI a11d Country Pla1111in~, Civil Appeal No. 289 of
1958 decided on 6-5-1960, Derlian1 v. C/iurcll
Commissioriers
for England,
[1954] Appeal Cause 245 referred to.
(5) It is true that the ap_Pellant did not urge the {JOint1 regarding consultation with the Board, in the High Court But no prejudice would be cause to the
respondents i~ the point was.permitted to raised in this Court.
[63A; 650)
(a) The counter affidavits of the Government and the Board show that the
Government as well as the Board understood the petition as raising the challenge
to the orders on the ground of want of due consultation with the Board before
making the impugned orders and they have replied to the implicit challenge in
the petition
f63F·G]
(b) The facts requisite ·for deciding the issue are on record and· the appellant had raised the point as a ground in the statement of the case, and the res~
pondents are not taken by surprise.
[63G-H; 64AJ
State of U.P. v. Manbodh'am Lal Srivastava, [1958] S.C.R. 533, Hamdard
Dwaklklna (wakf) 1 Delhi and another 'i- Union of India and others. [196S]
2
S.C.R. !92, Kargagathachi and others v, Nagarathlnathachi, [1965] 3 S.C.R. 335,
State of Mysore v. Guduthuk Thimmappa and son and another, [1967] 1 S.CR.
627, and Motibhai Pulabhai Patel & Co. v. M /s. R. Prasad and others, [1969]
I S.C.R. 580, distinguished.
CIVIL APPELLATE JURISDICTION :Civil Appeal No. 1279 of 1967.
Appeal from the judgment and order .dated the 1st February 1965
of the Kerala High Court in O.P. No. 1138 of 1963.
62
SUPRBME COURT REPORTS
[ 1974) 2 s.c.1.
B. Sen, S.S. Ananthakrishna Iyer. K. B. Rathee, N. M. Ghatate an4
·s. Balakrishnan, for the appellant.
V. A. Seiyid Mahmud and A. G. Pudissery, for respondent No. 1
A. R. Somanatha Iyer and M. R. K. Pillai, for respondent No. 2
The Judgment of the Court was delivered by
DwIVEDI J.
The Kattayam Electric Supply Agency, Kottayam, is
the licensee for the supply of electric energy in Kottayam in the State
of Kerala. The appellant, N. S. Mooss, is the proprietor of the licensee,
By an order, dated May 17 1963, the State of Kerala revoked the .. ,
licence with effect from August 1, 1963. The order was made undef
s. 5(1) (a) of the Indian Electricity Act, 1910 (hereinafter called the
Act. On the same date, the State of Kerala made another order under
s. 5(1)(c) and (3) of the Act directing the appellant to deliver the
undertaking to the Kerala Electricity Board (hereinafter called the
Board) on or bei<lre July 1, 1963. The appellant filed a writ petition
under Art. 226 of the Constitution challenging the two or&n. The
High Court has dismissed the petition. Hence this •appeal.
·
Sri Sen, counsel for the appellant, has urged four points before us.
One of these points is : The Board endorsed the State proposal for
the revocation of the licence before the explanation of the appellant
reached the State.
The explanation was not placed before the Board
and aclcordingly not considered by the Board, So there was no due
consultation of the Board and the order of revocation is void. As we
are accepting this point, it is not necessary to notice his remaining
points. We shall state only such facts as are neeessary for the decision
of· the aforesaid point.
On August 17, 1962, the State Government issued a notice to the
appellant under s. 4 (3) uf the Act asking him to show cause why the
licence should not be revoked. He was asked to send his explanation
within three months and three days from the date of the receipt of the
notice. Much bdore the issue of this notice. On June 21, 1962, the
State Government sent the letter No. 11795-EL l/6n17 /P.W. to the
Board. The letter states that the Government considered that· the
licence of the appellant should be revoked under s. 4 (I) (a) and
requested the Board to, communicate its views to the Government. On
July 26, 1962 the Board sent its reply to the Government. The reply
letter is No. B.Vl/5705/62. The Board recommended the revocation
of the licence. On Noveinber 5, 1962, within three months of the
issue of the notice under s. 4 ( 3}, the appellant sent his explanation to
the Government. The Government was not satisfied with the explanation. It passed the impugned order on May 17, 1963 revokini the
licence. These facts support Sri Sen's contention that the
Board's
recommendation was made without
looking
into
the
aopellant's
explanation. Indeed. it was humanly impossible for the Board to have
looked into the explanation.
Counsel for the State Government and the Board have raised
a
preliminary obiec'tion. They point out that the argument advanced by
Sri Sen was neither raised in the writ petition nor urged before the
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N. s. MOOSS v. KERALA (Dw/vedl, /,)
83
High Court. According to them, It should 1<ot be all.owed to be raised
in this Court. It is true that the {'Oint is not specifically raised in the
writ petition. But, in our view, it IS embedded in paragraphs 6 and 22
of tbe affidavit accompanying the petition. Paragraph 6 asserts that the
aforesaid two orders are "illigal and void aud of no effect." Paragraph
22 states that "the entire proceedings culminating in the issue of (the
two orders) constitute a gross violation of the •••• provisions of the
Act." Paragraph 22 clearly asserts that !he impugned orders have
been made in breach of the statutory conditions for revoking a licence.
Earlier we hav" said that Sri Sen's contention is embedded in para·
graphs 6 and 22 .. We are reassured of our construction of these paragraphs by the fact that the Government as well as the Board have also
construed the petition in the sarn~ sense and have controverted it in
their affidavits. Paragraph 3 of the affidavit filed. on behalf of the
Government states: "lThe appellant's) objections were considered
and the Government formed an opinion that it was in public interest
to rev9ke the licence IUld after consulting the Electricity Board
revoked the licence as the Government were· satisfied that in their
opinion the petitioners bad made wilful and unreasonably prolonged
default in <19ing several things required of him by or under the Indian
Electricity Act." In reply to paragraph 22 of the petition, the Govern·
ment's ~avit ~!ates that "otders were passed in accordance with the
provisiO!\S of all the relevant Acts and the Rules ·and after considering .
the objections raised by the licensee."
Paragraph 5 of the Board's
affidavit is more outspoken and elaborate. It states : "Th: State
Government consulted the Board in the matter of revoking the licence
of the Kottayarn Electric S11pply Agency by invoking s. 4 ( ll (a) of
the Indian Electricity Act, 1910 and the Board vide letter No. BVI/
5705/62, dated 26-7·1962 endorsed. the views of the Government on ·
the matter (and) reC'Ommended the revocation of the licence." Para··
graph 18 of the Board's affidavit is a. reply to paragraph 22 of. the·
appellant's affidavit's.
Paragraph 18 asserts that the impugned
orders "were passed in accotdaIK:e with Law and the Rules there··
under." It is thus unmistakably plain that the Government ns. well as
the Board understood the petition as raising a challenge to the orders
on the ground of want of due consultation of the Board before the
making of the impugned orders. And they have replied fo that implicit
challenge in. the petition.
It appears to us that there is little force in
the preliminary objection that Sri Sen's contention is not raised in the
petition.
It is true that this point was not urged on behalf of the appellant
in the Hi2b Court. But as the facts requisite for deciding the issue are
on record, we think that we should allow the point to be raised as it
goes to the root of the matter. It may be noted that the appellant has
raised this ooint in ground No. 6 of his statement of case. That ground
is : "The Government without any further tho•1g'1 and relying solely
on this report proceeded to revoke the licence and sought the view of
the Electricitv Board on the matter. The Board with the MaM2ing
Qirector of the Company as one of its members readily accepted the
report and agreed· with the suggestion of the Government for revoca·
tion of the licence. It Is after having made up its ·mind to revoke the
64
SUPREME COURT REPORTS
[ 1974] 2 s.c.R.
licence, as seen from Ex. R-2, that the Government issued notice to
the appellant to show cause against revocation." It cannot be said that
the respondents have been taken by surprise. They already know that
the point would be agitated in the Coun.
Counsel for the Government says that if the point had been clearly
taken in the petition and raise? in the High Court, the Government
could have led evidenqb to show that the Board was consulted a
secbnd time after receipt of the appellant's explanation and that the
Board, after considering thf. explanation, had again agreed with the
Government's proposal. He has advanced an extreme argument that
even telephonic consultation could have been held between the Government and the Board after the receipt of the explanation.
Telephonic consultation is out of question. The Board is constituted under the Indian Electricity (Supply) Act, 1948. It is a corporate body. It consists of at least three members. One of them has
experience of commercial matters and administration; the other is an
Electrical Engineer with wide experience; and ,the third has experience
of accounting and financial matter in a Public utility undertaking,
preferably an eletricity supply undertaking. Section 13 ,of the said Act
provides that all orders and decisions of the Board shall be authenticated by the signature of the Chairman. It is obvious that telephonic
consultation could not be held with three members of the Board at
one and the same time, nor could the members bestow collective
consideration on the matter before giving the Board's opinion thereon.
We have little doubt in our mind that there was no second consultation between the Government and the Board after the receipt of the
explanatioo. Had there been a second consultation, the Board would
surely have disclosed it in its counter-affidavit.
The evidence already
on record excludes the, possibility of a second consultation after the
receipt of the explanation. We have earlier quoted the number and
date of the Government letter by which the Government asked for the
Board's opinion on the issue of revoking the licence. The number
and date of the Board's letter recommending revocation of the licence
has also been mentioned earlier. On receiving the Board's letter, the
Government sent another letter to the Board. It is dated April 6,
1963. The number of the letter is 11795-WLY/61-20/PW. The sub·
ject of the letter is : "Electricity-Kottayam Electric Supply Agencyacquisition of." The letter makes reference to two earlier letters: "(J)
Government
letter
No.
11765-ELl/1/17/PW; ·(2) your reply
No. BVI/5705/62 dated 26-7·1962.
It may be seen that the Government letter referred to above is the
letter by which the Gqvernment asked for the opinion of the Board
on the question of revocation of the licence. The seoond letter is the
reply of the Board recommending revocation of the licence. We have
already referred to these letters. The Government letter of April
6,
1963 states that the Government "have considered the
explanation
furnished by the Kottayam Electric Supply Agency.. . . . to the show
cause notice served on him (No. 11795/ELl/61/19/PW dated 17-81962) under s. 4(3) of the Indian Electricity Act, 1910. Since the
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N. s. MOOSS v. KBRALA (Dwivedi, /.)
65
explanation is not s·atisfactory, the Government in public' interest liave
decided to revoke the licence granted to the said Agency." It adds :
"I am therefore directed to enquire as required under section 5 (b)
of the said Act whether the Kerala State Electricity Board is willing
to purchase the undertaking. If so, the willingness of the Board may
be communicated to the Government at tlie earliest.
The Board replied to this letter. The reply is dated April 20,
1963. The letter's number is LAW l 5705-62/20-4-63. The Jetter
informs the Government that the Board was willing to purchase the
undertaking with effiect from August l, 1963. On May 17, l963 the
Government revoked the licence with effect from August 1, 1963. The
same day another order was passed by the Government. Th_e number
of the Order is 11795-EE 1/61-31/PW. The material portion of the
order is :
"Whereas the Government have, under S. 5, sub-section
(1) Clause (b) of the Act enquired from the Kerala State
Electricity Board whether the Board is willing to purchase
the undertaking owned by the Kottayam •. Electric Supply
agency ;
.
, ;.
And whereas, the Kerala State Electr\~iy Bqard has in
its letter No .. Law-I-5705/62 dated'2~· intimated the
Government that it is willing to purchase ·the said Under·
taking~
·,;.,,,,,
Now, therefore, in exercise of the ~s
conferred by
Section 5, sub-section ( 1) Clause ( c) ;uict;~tion 5 Subsection (3) (of the Act) the Governnienf'!6t Kerala .hereby give notice to the Kottayam Electric Supply Aaency to
sell and deliver possc;ssion of the said Undcrtaking·;to the
Kerala State Electricity Board on or before the first day of
July, 1963."
/:,\:'
;
This entire chain of correspondence between the Government and
the Board would unmistakably show that die~ was no second consultation between the Government and the Board regarding the revocation of the licence after the Government had received !Jie appellant's
explanation to the show cause notice served on him. II) the circ'umstances of the case we are satisfied. that no prejudiee wilf be caused to
the respondents if the point is permitted to be raised in this Court. So
we permit Sri Se_n to argue the point
In State of U.P. v. Manbodhan Lal Srivastava,('), Hamdard
Dwakhana (Wakf), Delhi and another v. Union of India and others,(')
Karpagathachi and others v. Nagarathinathachi(')
and State of
Mysore v. Guduthur Thimmappa and son and another(') this Court di~
not permit a new issue of fact to be urged by the appellant. In Motz·
bhai Pulabhai Patel & Co. v. Mis R. Prasad and others(') the case ~
(!). [19581
s.c.~. 533.
(3) [1965] 3 S.C.R. 335.
(5) [1969]
(2) [1965) 2 S.C.R. 19l.
(4) [1%7] 1 S.C.R. 621,
S.C.R, 580,
6-IA47 SuP Cl/74
66
SUPREME COURT REPORTS
[ 1974] 2 S.C.R.
was remanded to the High Court and the appellant was allowed to
urge before the High Court his new contention. The. facts of all these
oases are different from the facts of the present case. The Government cannot derive any assistance from them.
It is necessary to consider whether the Act obligates the Board to
consider the explanation of the licensee before recommending any
action against him. Section 4, as it stood originally read:
"(1) The State Government may, if in its opinion the
public interest so requires, revoke a licence in any of the
following cases, namely:
(a) where the licensee in the opinion of the State Government makes wilful and unreasonably prolonged
default in doing anything required of him by or under
this Act;
(b) where the licensee breaks any of the terms or conditions of his licence the breach of which is expressly
declared by such licence to render it liable to revocaA
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( c) where the licensee fails, within the period fixed in this
behalf by I.is licence or any longer period which the
State Government may substitute therefor by order
under sub-s. (3), cl. (b) and before exercising any of
the powers conferred on him thereby in relation to
the execution of works:
E
(i) to show, to the satisfaction of the State· Government, that be is in a position fully and efficiently
to discharge the duties anti obligations imposed
on him by his licence, or
(ii) to make the deposit or furnish the security required by his licence;
F
(d) where the licensee is, in the opinion of the State
Government unable, by reason of his insolvency fully
and eflicient1y to discharge the duties and obligations
imposed on him by his licence.
(2) Where the State Government might, under sub-s. (1)
revoke a licence, it may, instead of revoking the licence, permit it to remain in force subject to such further terms and
conditions as it thinks fit to impose and any further terms
or conditions so imposed shall be binding upon, and observed
by, the licensee, and shall be of like . force and effect as if
they were contained in the licence."
The original section 4 was considered by the Privy Council in
Hubli Electricity Company v. The. Province of Bombay.(') The
Privy Council held that in s. 4( 1) (a) the opinion of the Government
(1) A.I.R. 1949 P.C. 136.
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N. s. MOOSS v. KERALA (Dwivedi, J.)
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was not subject to any objective tests. The Privy Council ,said : "The
language leaves no room for the relevance of a judicial examination as
to the sufficiency of the grounds on which the Oovernment acted in
forming an opinion." However, it was held that the opinion should
relate to. "anything required under the Act." The Privy Council said :
"If it relates to something which was not required under the Act, the
revocation of the licence would be invalid."
Then there came our Constitution with its Art. 19(1)(g) confer·
ring on the citizens the right to carry on business subject to reasonable
restrictions in public interest. This Court in Dr. N. B. Khare v. The
State of Delhi(') held that if an Act, which imposes restrictions on
the rights specified in Art. 19, does not provide for a reasonable hear·
ing to the party affected, the restriction could not be. said to be reason·
able in certain circumstances. It seems that Parliament realised, though
late, in 1958, thats. 4 may not stand the test of Art. 19(1) (g). Accordingly it. made radical amendments in s. 4. The amended section 4
reads :
"(1) The State Government may, if in its opinion the
public interest so requires, and after consulting the State
Electricity Board, revoke, a licence in any of the following
cases, namely :-
(a) where the licensee, in the opinion of the State Gov·
· ernment, makes wilful and unreasonably prolonged
default in doing anything required of him by or under
this Act;
(b)
(c)
where ·the licensee breaks any of the terms or condi·
tions of his licence the breach of which is expressly
declared by such licence to render it liable to revocation;
where the licensee fails, within the period fixed in this
behalf by his licence or any longer period which the
State Government -'inay substitute therefor by order
under section 4A, sub-section ( 1) and before exercising any of the powers conferred on him thereby in
relation to the execution of works-
(i) to show to the satisfaction of the State Government, that he is in a position fully and efficiently
to discharge the duties and obligations imposed
on him by his licence, or
(ii) to make the. deposit or furnish the security re·
quired by his licence;
( d) where in the opinion of the State Gqvernment the
financial position of the licensee in such that he is un- .
able fully and efficiently to discharge the duties and
obligations imposed on him by his licence:
-----
(7} [1950] S.C.R.. 519.
68
(e)
SUPREME COURT REPORTS
[ 1974] 2 S.C.R.
where a licensee, in the opinion of the State Govern·
ment, has made default in complying with any direction issued under section 22A.
(2) Where in its opinion the public interest so permits,
the State Government may, on the application or with the
consent of the licensee, and after consulting the State Electricity Board, and the Central Government where that Gov·
ernment is interested, and if the licensee is not a local uutho·
rity, after consulting also the local authority, if any, concern·
ed, revoke a licence as to the whole or any part of the area
of supply upon such terms and conditions as it thinks fit.
(3) No licence shall be revoked under sub-section (1)
unless the State Government has given to the licensee. not
·Jess than three months' notice in writing, stating the grounds
on which it is proposed to revoke the licence and has con·
sidered any cause shown by the licensee within the period of
that notice, against the proposed revocation.
( 4) Where the State Government might under sub-section
(I) revoke a licence it may instead of revoking the license
permit it to remain in force subject to such further terms
and conditions as it thinks fit to impose and any further terms
or conditions so imposed shall be binding upon, and be
observed by the licensee, and shall be of like force and effect
as if they were contained in the licence."
The amending Act adds sub-sections (2) and (3) and converts
the former sub-section (2) into sub-section (4). It adds clause (e)
to sub-section ( 1). It also adds 'and after consulting the State Electrictiy Board' in the opening part of sub-section ( 1). The amend·
ments relevant in this case are the phrase 'after consulting the State
Electricity Board' and sub-section (3) which now provides for a hearing to the licensee before revocation of his license.
It appears from a reading of s. 4 that when the Government con·
suits the Board on the question of revocation of a licence under s. 4,
the Board is to make up its mind as to whether it should recommend
(1) to revoke the licence, or (2) not to revoke the licence, or (3)
to permit the licence to remain in force subject to such further terms
and conditions as may be thought proper. It is difficult to conceive
how the Board will make a choice out of these three courses without
considering the explanation of the licensee.
The explanation
may
make out a case for not revoking the licence or a case for continuance
of the licence with certain over·added conditions. In a particular case
the Government may propose to revoke the licence under s. 4(1)(c)
on the ground that the licensee has failed to show that he is in a position fully and efficiently to discharge the duties and obligations imposed
on him by his licence. Similarly, it may propose to revoke the licence
under s. 4 (1) ( d) where the financial position of the licensee is such
that he is unable fully and efficiently to discharge the duties and obligations imposed on him by his licence. In none of these cases the
Board will be able to make a just choice out qf the aforesaid three
B
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H
A
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E
H
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N. s. MOOSS v. KERALA (Dwivedi, /.)
69
courses without applying its mind to the explanation of the licensee.
In case of a charge un~er s. 4(1)(d), it is open to the Board to
advanc7 a loan. to. the hcensee and recommend against the proposed
revocation of his hcence.
We are accordingly of opinion that s. 4
contemplates that the Board should make its recommendation only
after considering the explanation of the licensee. It would follow that
the Board should be consulted by the Government after the licensee's
explanation has been received.
We have already said that in the
present case the Board was consulted much before the receipt of the
appellant's explanation and that the Boord consequently could
not
consider the explanation at the time of making its recommendation in
favour of revocation of the licence.
Col\llcel for the Board has submitted that the Board is to be
consulted only as regards 'public interest'. It is sufficient to state that
we find no force at all in this argument. In the alternative, it is said
that the. Board is to be consulted only at the stage when the Govern·
ment takes a provisional decision to revoke the licence.
Th.e words
'after consulting the Board' have been added by an amendment. The
suggested, construction would make the amendment a mere pompous
word-spinning.
It is now to be seen as to what is the effect of this premature con·
sultation of the Board by the Government on the impugned order. The
Act does not expressly provide for the conseque,nce of premature con·
sultation. It does not say that the order of revocation is void. Sri
Sen contends that the order will be void. Counsel for the Board, on ·
the other hand, contends that it will not be void. According to him,
the provision regarding consultation of the Board is directory, and not
mandatory. Non·compliance with a directory provision does not nullify
the order. .It is not disputed that if the provision is mandatory, the
order of revocation will be void.
The object and setting of the phrase "after consulting the Boar~
in section 4 will have to be examined for deciding whether the prov1·
sion is mandatory or directory.
(H. N. Rishbud v. State of Delhi
[1955) I S.C.R. 1150).
The power to revoke the licence is a drastic power. The revocation of licence results in severe aeridgment of the right to carry ?n
business. Havingin mind the ri:quiremen~s of A~t .. 19(1) (g), Parha·
ment has, 'jt~s to us, prescnbed cert~1n conditions to preve11t the
abuse, of 'p~''and to ensure just ex~r~1se of power. Clauses (a} .to
fd) of s, '4'jirel!Cribe some of the cond1tto11s precedent for the exercise
of po\\'er, · The order of revocati?ll, in breach o~. a?Y one C?f. thos~
conditions will undoubtedly be void. The clause if. m its opm1on the
public interest so requires" is also a condition. precedent. On ~ sue·
cessful showing that the order of revocation bas been mi:d.e ~1thout
the Government applying its mind to the aspect of pubμc. mterest
or without forming an honest opinion on that .aspect, 1t will, we ~aye
no doubt be void. The phrase "after consulting the State Electrtc1!Y
Board" i~ sandwiched between the clause "if in its opinion the public
I
70
SUPREME COURT REPORTS
[ 1974 j 2 S.C.R.
Interest so requires" and els. (a) to (d). In this cont~xt it appears to
us that consultation with the Board is also a condition, precedent for
rhaking the order of revocation. Accordingly the breach of this con·
dition precedent should also entail the same consequence as the breach
of the other conditions referred to earlier. It may be _observed that
the phrase "after consulting the State Electricity Board" did not find
place in s. 4 as it stood originally. It was introduced in s. 4 in 1959
by an amendment. It seems to us that it was introduced in s. 4 with
the object of providing an additional safeguard to the licensee. When
revoking a licence, the State Government acts in two stages. At first
it forms a tentative opinion in favour of revoking the licence. Then it
calls for an explanation from the licensee. When the explanation is
received, it considers the explanation. If not satisfied with the expla·
nation, it passes the final order of revocation.
First impressions and
provisional judgments have_ a tendency to become ultimate ideas and
final judgments. They would settle unconsciously on the investigator's
mind as the imperceptible dust-particles on an optical Jens.
They
would dim his understanding and obfuscate his observation. Facts
which will dovetail with them would arrest his attention; facts which
will conflict with them would flit his observation. If by any chance he
happens to notice refractory facts, he would seek to reconcile them
with his first impressions and provisional judgments. This understanding of human psychology seems to have pursuaded Parliament to
interpose the condition of the Board's consultation to the Govern·
ment's action.
The Board is an independent body.
It consists
of
three members. One of them is a technical expert, the other a finan·
cial expert, and the third an administrative expert. While considering
the facts presented to it by the Government and· by the licensee in his
explanation, the Board will undoubtedly act with an open and unconditioned mind and will be able to offer unbiased counsel to the Gov·
ernment. Having regard to the o1!iect and context, we are of the view
that the condition .of consulting the Board is mandatory and the breach
of this condition will make the order of revocation void.
We have
already held that the Board was not consulted after the explanation
was received.
Accordingly we are of opinion that the order is void.
The consequential order of acquisition will ipso facto fall down.
Counsel for the Board has relied on State of U.P. v. Manbodhan
Lal Srivastava (supra), Ram Gopal Chaturvedi v. State of Madhya
Pradesh(') and The State of Bombay v. D. A. Korgaonkar(2 ). He
has also relied on Ro/lo v. Minister of Town and Country Planning(')
and Derham v. Church Commissioners for England(')
Ram .Gopal
Chaturvedi v. State of Madhya Pradesh(') and State of Bombay
v. D. A. Korgaonkar( 2 ) have followed Manbodhan Lal Srivastava
(supra). In Manbodhan Lal this Court held that Art. 320(c) of the
Constitution is directory and not mandatory. A Government employee
was dismissed from service after complying with the provisions of Art.
311 (2) of the Constitution. The U.P. Public Service
Commission
(1) [1970] 1. S.C.R. 472.
12) Civil Aopeal No. 289 of 1958 decided on 6-5-1960.
(3) [1948] (I) All England Law Reports 13.
(4) [1954] A.C. 245.
A
B
c
D
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F
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B
c
D
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N. s. MOOSS v. KERALA (Dwivedi, l.)
71
'
was consulted as to the pnnishr.(ent to be imposed on him. But it was
consulted before the explanation of the employee was received by the
Government. The argument was that as the Commission did not have
the opportuniiy of considering his explanatfon there was no real con;
sultation. as ,required by Art. 320(c). lt w~s also argued that Art.
3~0(c) 1s. directory .. The proviso to Art. 320 empowers the approvo1d.
'1!1is .court pomted out several reasons for the view that Art.
32,0(c) 1s directory.
The proviso to Art. 320 empowers the appropnate Government to issue directions as to the classes of cases in
w.hich consultation of the Commission will not be necessary. The proviso therefore indicates that the provision
is
directory.
Another
reason given by the Court'is that Art. 320(c) does not occur in the
Chapter in which Art. 311 occurs. It finds place in the Chapter deal·
ing with the Public Service Commission.
Accordingly .it ciianot be
said that it confers any right on Government employees. Tift! third
reason given is that consultation of the Commission is not binding on
the Govermμent. The first two reasons do not apply in our case. We
have shown earlier that the condition of consulting the Board has
been inserted by an amendment of s. 4 witli the object of creating a
safeguard in favour of the licensee. There is no provision in the Act
authorising the Government to waive the condition of consultation in
any case. It is true that the third reason given by the Court in Man-
. bodhan Lal (supra)' applies in this case. As there, so here the opinion
of the Board is not binding on the Government. In spite of the Board
advising against revocation, the Government, if satisfied . that it is
necessary to revoke the licence may revoke it.
But having regard to
the object and context of s. 4, we are of opinion that it should not
be regarded as an over-weighing consideration. It will normally be
difficult for the Government to ignore the Board's expert advice. We
are satisfied from the object and context of s. 4 that Parilament in·
tended to make consultation of the Board an imperative condition to
revoking a licence.
·
In Jhe result, we allow the appeal and set aside the order of ·thil
!High Court.
The petition of the appellant under Art. 226 of the
Constitution is allowed and the notice No. 11795-EL 1/61/19 PW
dated 17·8·1962, the order of revocation No. '11795/EL 1/61·30/
PW dated 17·5·1963 and the order No.
11795-EL 1161·31/PW
dated 17·5·1963 directing the appellant to hand over the Undertaking
to the Board are quashed.. The appellant shall not get his costs here
as well as in the. High Court, as the point on which the appeal is
allowed was not raised in the High Court.
V.P.S.
Appeal allowed.