Court’s Decision
The Patna High Court, presided over by Justice G. Anupama Chakravarthy, set aside the cancellation of a public distribution system (PDS) dealer’s licence and the subsequent dismissal of his statutory appeal and revision. The Court held that even if a licence holder fails to submit a reply to a show-cause notice, the licensing authority must pass a reasoned order on merits.
Relying on a Division Bench decision in Yogendra Prasad v. State of Bihar, the Court quashed the orders of the Sub-Divisional Officer (SDO), District Magistrate, and Divisional Commissioner, observing that their actions were mechanical and devoid of independent application of mind.
The matter was remanded to the SDO, Supaul, for fresh consideration on merits, with directions to provide the petitioner an opportunity of hearing and to complete the exercise within three months.
Facts
The petitioner was a licensed PDS dealer in the Pipra block of Supaul district. On 1 April 2011, the Sub-Divisional Officer-cum-Licensing Authority cancelled his licence on the sole ground that he failed to submit an explanation to the show-cause notice within the prescribed period. The order did not evaluate the factual allegations or evidence regarding any actual misconduct in the operation of the fair price shop.
Aggrieved, the petitioner filed a statutory appeal before the District Magistrate, which was dismissed on 21 August 2012 without assigning substantive reasons. The petitioner then filed a revision before the Divisional Commissioner, Koshi Division, which was rejected on 4 July 2018 on the ground that the licence had already been cancelled 11 years earlier and the vacancy had since been filled up, rendering revival “pointless.”
The petitioner then approached the High Court under Article 226 of the Constitution, challenging all three orders and seeking restoration of his PDS licence.
Issues
- Whether a PDS licence can be cancelled merely because the licensee failed to respond to a show-cause notice within time, without a decision on the merits of the allegations.
- Whether the appellate and revisional authorities acted legally in dismissing the appeal and revision without addressing the core procedural irregularity in the original order.
- Whether the High Court can direct reconsideration of the case after a prolonged lapse of time when the vacancy has already been filled.
Petitioner’s Arguments
The petitioner’s senior counsel, Mr. N.K. Agarwal, argued that the SDO’s order dated 1 April 2011 was mechanical and violative of natural justice. He submitted that mere non-filing of a reply to the show-cause notice could not justify cancellation without a reasoned order on merits.
He relied upon the Division Bench judgment in Yogendra Prasad v. State of Bihar (LPA No. 861 of 2004, decided on 6 September 2004), which held that even in cases of non-response, the authority must examine the record and determine whether there was any actual breach of licence conditions. The petitioner emphasized that the cancellation was done without any inquiry, inspection, or evidence, thereby violating the principles of natural justice.
He further contended that both the appellate and revisional authorities failed to exercise their statutory powers properly, as they endorsed the SDO’s order without any independent reasoning. The Commissioner’s decision to dismiss the revision merely on the ground of delay and subsequent filling of the vacancy, counsel argued, was erroneous and perverse, since legality of the original order could not be negated by administrative developments.
The petitioner, therefore, sought restoration of his licence or at least a remand for fresh adjudication.
Respondent’s Arguments
The State, represented by the Additional Advocate General, did not contest the applicability of the Yogendra Prasad precedent. The government counsel conceded that the earlier orders suffered from procedural infirmities and that a remand for fresh adjudication on merits would serve the ends of justice.
He, however, submitted that given the long lapse of time since cancellation and the filling of the vacancy, the High Court should not directly order restoration of the licence but should instead direct the competent authority to reconsider the matter afresh after giving due hearing to the petitioner.
Analysis of the Law
Justice Chakravarthy examined the legal framework governing PDS dealership under the Bihar Trade Articles (Licences Unification) Order, 1984 and the Control Orders issued under the Essential Commodities Act, 1955. The Court noted that a fair price shop licence, though regulatory, cannot be cancelled arbitrarily or without compliance with the principles of natural justice.
The Court emphasized that a show-cause notice is a procedural safeguard, not a punitive formality. Even if a dealer fails to reply, the licensing authority must independently assess the allegations, evaluate evidence, and record findings of misconduct before cancellation. Failure to do so renders the order unsustainable in law.
The Court reiterated the principle that “mechanical cancellation without application of mind violates Article 14 of the Constitution.” This reasoning aligns with settled law that discretionary administrative powers must be exercised in a reasoned and fair manner.
Precedent Analysis
- Yogendra Prasad v. State of Bihar (LPA No. 861 of 2004) – The Division Bench held that a licensing authority cannot cancel a PDS licence merely because the licensee failed to respond to a show-cause notice. It must decide the matter on merits, recording reasons based on evidence.
Reference: The High Court in this case directly relied on Yogendra Prasad to quash the orders and remand the matter for reconsideration. - Union of India v. Mohd. Ramzan Khan (1991) 1 SCC 588 – The Supreme Court held that denial of opportunity to respond to adverse findings amounts to violation of natural justice, even in disciplinary proceedings.
Application: Reinforces that administrative penalties must follow reasoned, fair procedure. - Ridge v. Baldwin (1964 AC 40) – The English precedent that shaped Indian administrative law; it mandates that natural justice must be observed whenever rights or privileges are affected by administrative orders.
Relevance: The judgment’s principle underpins the High Court’s finding that PDS licences, being livelihood-related rights, cannot be withdrawn arbitrarily.
Court’s Reasoning
The Court found that the Sub-Divisional Officer had acted mechanically, cancelling the licence solely due to non-submission of a reply, without examining any material evidence of misconduct or irregularities. The appellate and revisional authorities, instead of rectifying this illegality, simply rubber-stamped the order.
Justice Chakravarthy held that such conduct defeats the very purpose of administrative hierarchy designed to ensure fairness and error correction. The Court categorically stated:
“Even if the licence holder does not file any explanation to the show-cause notice, the authority concerned is legally bound to pass an order on merits.”
The Court also observed that the Commissioner’s finding that the issue had become “academic” after 11 years was legally untenable, since illegality in the original order cannot be validated by the passage of time or by filling up of vacancies.
Accordingly, the Court quashed the orders dated 01.04.2011, 21.08.2012, and 04.07.2018, directing the SDO to reconsider the matter afresh on merits, giving the petitioner a fair opportunity to file an explanation, and to conclude the exercise within three months of receiving the order.
Conclusion
The Patna High Court allowed the writ petition and remanded the case to the Sub-Divisional Officer, Supaul, for a fresh, reasoned decision after affording the petitioner full opportunity of hearing.
The Court directed that the entire process must be completed within three months, and any fresh order passed must be communicated to the petitioner immediately. The Court also clarified that procedural fairness, not technical compliance, is the cornerstone of administrative justice.
Implications
This ruling underscores a vital administrative law principle — that failure to respond to a show-cause notice does not permit automatic or mechanical action by the authority. The decision strengthens procedural fairness in PDS licensing and other livelihood-linked regulatory frameworks.
The judgment also sends a clear signal that administrative decisions affecting civil rights must be supported by reasoning and evidence, even when the person concerned defaults procedurally. It reiterates that natural justice cannot be sacrificed at the altar of expediency or administrative convenience.
FAQs
1. Can a licence be cancelled if no reply is filed to a show-cause notice?
No. The authority must still decide the matter on merits and record reasons; non-response does not justify mechanical cancellation.
2. What happens if the appeal or revision authorities endorse an illegal order?
The High Court can set aside all such orders and remand the matter for fresh consideration with directions for compliance with natural justice.
3. Does long delay or vacancy filling prevent reconsideration?
No. Procedural illegality cannot be cured by delay or administrative changes; the authority must still rectify the error and issue a reasoned order.