Messrs Fedco (P) Ltd. and Another vs S. N. Bilgrami and Others

Rewritten Version Notice: This is a rewritten version of the original judgment.

Court: Supreme Court of India

Case Number: Petition No. 171 of 1958

Decision Date: 9 December 1959

Coram: K.C. Das Gupta, Bhuvneshwar P. Sinha, P.B. Gajendragadkar, J.C. Shah

In the matter of Messrs Fedco (P) Ltd. and another versus S. N. Bilgrami and others, the Supreme Court of India delivered its judgment on 9 December 1959. The case was heard by a bench consisting of Justice K.C. Das Gupta, Justice Bhuvneshwar P. Sinha, Justice P.B. Gajendragadkar, and Justice J.C. Shah. The petitioners, Messrs Fedco (P) Ltd. and a second company, applied to the Chief Controller of Imports and Exports, Government of India, New Delhi, for five import licences. These licences were subsequently obtained from the joint Chief Controller of Imports and Exports in Bombay, allegedly on the authority of the Chief Controller, and the petitioners placed purchase orders for the goods covered by the licences. Some of the ordered goods actually arrived in Bombay, but before the goods could be cleared, the petitioners received a notice from the Chief Controller stating that there were reasons to believe the five licences had been obtained by fraud. The notice informed the petitioners that, pursuant to clause 9 of the Imports Control Order 1955, the Government intended to cancel the licences unless the petitioners could show sufficient cause before the Chief Controller.

In response, the petitioners sent a telegram requesting that the Chief Controller disclose the particulars of the alleged fraud and allow them to inspect the papers and documents relied upon in reaching the conclusion of fraud. By way of a letter they explained that they considered themselves victims of foul play by an unknown party seeking to damage them and to bring them into disrepute with the authorities. The letter expressly reserved to the petitioners the right to add to, amend, or alter their explanation after they had obtained inspection of the said papers and the particulars of the alleged fraud. The petitioners’ representatives subsequently met both the Chief Controller and the Director of Administration of his office, renewing their request for the particulars and for inspection of the relevant documents. Neither the particulars nor any inspection were provided. The Chief Controller informed the representatives that the issue of the licences had not been authorised by him and that the licences had been fraudulently obtained. The Director of Administration told them that the recommendations on which the disputed licences had been granted by the joint Controller were not genuine. Rather than denying the fraud alleged, the representatives ascribed the fraud to some other party, as they had done in earlier statements.

The petitioners contended that clause 9(a) of the Imports Control Order 1955 infringed Articles 19(1)(f) and 19(1)(g) as well as Article 31 of the Constitution of India. They further argued that they had not been given a reasonable opportunity to be heard, a requirement mandated by clause 10 of the Imports Control Order. The judgment thus examined the interplay between the statutory power to cancel licences under clause 9 and the constitutional guarantees of freedom of trade, profession, and property, as well as the procedural safeguards required by natural justice.

The Court observed that the petitioners had not been afforded a reasonable opportunity to be heard as required by clause 10 of the Imports Control Order. The Court, speaking for the majority, held that clause 9 of the Imports Control Order does not confer unrestricted power to cancel a licence, nor does it permit arbitrary action, because clause 10 of the Order supplies the safeguards of natural justice. The Court rejected the argument that, before a licence may be cancelled under clause 9, it must be shown not only that fraud occurred but also that the licence holder himself was a party to the fraud. The regulatory scheme of import licences is premised on the licence being granted on a true statement of fact; this foundation collapses if the licence is obtained through fraud or misrepresentation, regardless of whether the licence holder participated in the fraudulent act. Consequently, the power to cancel a licence under clause 9 is a reasonable limitation on the rights guaranteed by Article 19(1)(f) and (g) of the Constitution and, being grounded in a valid law, does not offend Article 31. The Court stressed that there is no universal standard of reasonableness; what constitutes a reasonable opportunity to be heard must be assessed in the particular facts of each case. The Court must be satisfied that the person against whom action is contemplated has a fair chance to persuade the authority that the alleged grounds for action are either non-existent or insufficient. In the present case, the Court could not conclude that the failure to provide the petitioners with further particulars or to allow inspection of the documents amounted to a denial of a reasonable opportunity to be heard, even though the petitioners were more interested in demonstrating that the company was not a party to any fraud than in proving that no fraud had occurred at all.

Justice Subba Rao, delivering a separate opinion, affirmed that the Chief Controller of Imports, exercising powers under clauses 9 and 10 of the Imports Control Order, 1955, performs a quasi-judicial function and is therefore bound by the principles of natural justice when cancelling a licence. The judgment referred to the authority of cases such as Rex v Electricity Commissioners, Ex Parte London Electricity Joint Committee Co., [1924] 1 K.B. 171; Rex v London County Council, Ex Parte Entertainments Protection Association Ltd., [1913] 2 K.B. 215; and Province of Bombay v Khusaldas S Advani, [1950] S.C.R. 621. The language of clause 10 expressly provides that, when the allegation involves fraud, the affected party is entitled to be informed of the particulars of the alleged fraud, to inspect the documents on which the allegation is based, and to have a personal hearing. In the circumstances of this case, the Court found it impossible to hold that the petitioners, who did not admit any fraud and must be presumed innocent, had been given a reasonable opportunity to be heard within the meaning of clause 10, because they had not been supplied with the necessary particulars nor allowed to examine the relevant documents.

In the present case the petitioners had not admitted any fraud and therefore were to be presumed innocent. The Court observed that they had been afforded a reasonable opportunity to be heard in accordance with clause 410 of clause 10 of the Imports Control Order, 1955, for the purpose of proving their innocence. The Court further held that, without being supplied the specific particulars of the alleged fraud and without being shown the documents on which such allegations were based, the petitioners could not have ascertained whether any fraud had actually occurred or, if it had, who might have been responsible. Consequently, the cancellation of the import licences was deemed arbitrary and was ordered to be set aside. The judgment was entered in the original jurisdiction under Petition No. 171 of 1958, which was filed under Article 32 of the Constitution of India for the enforcement of fundamental rights. The petitioners were represented by counsel, while the respondents were represented by the Solicitor-General of India and other counsel. The judgment dated 9 December 1959 was delivered by a bench consisting of the Chief Justice and other judges, with the opinion of Justice Das Gupta forming part of the judgment, and Justice Subba Rao delivering a separate judgment.

The first petitioner was a company incorporated under the Companies Act, having its registered office in Bombay and carrying on the business of dyes, chemicals, plastics and various other goods. The second petitioner was the Chairman and a Director of that company. In the writ petition the petitioners sought the issuance of a writ of certiorari, or any other appropriate writ, direction or order, to quash the order issued by the Chief Controller of Imports and Exports, Government of India, New Delhi, which had cancelled five import licences previously granted to the company by the Joint Chief Controller of Imports and Exports, Bombay. They also prayed for an order directing the Collector of Customs, Bombay, to assess the goods that had arrived in Bombay under those licences and to allow the company to clear them. The five licences in question were dated 24 July 1958 (two licences), 16 August 1958 (two licences) and 4 September 1958 (one licence), and the total value of the authorised imports was Rs 25,75,000. The petitioners explained that the licences were obtained on the basis of five applications sent by registered post to the Chief Controller of Imports and Exports, New Delhi—three applications on 17 June 1958, one on 26 June 1958 and one on 22 July 1958. For each application the company received a letter from the Delhi office informing it that the application had been forwarded to the Joint Chief Controller of Imports and Exports, Bombay, together with the necessary comments, and requesting the company to contact that officer.

In the course of the proceedings, the petitioner company communicated directly with the Joint Chief Controller of Imports and Exports in Bombay while also corresponding with the Chief Controller of Imports and Exports in New Delhi. In each of its letters to the New Delhi office the company acknowledged receipt of the letters that had been sent by the Chief Controller’s office and, at the same time, wrote to the Joint Chief Controller in Bombay requesting that the licences be issued as promptly as possible. After the licences were finally received from the Bombay office, the company placed orders for the goods covered by those licences and a portion of the goods actually arrived at Bombay. Before any of the imported goods could be cleared, however, the company was served with a notice dated 24 September 1958. The notice alleged that there were reasons to believe the five licences had been obtained fraudulently and, invoking the powers set out in paragraph 9 of the Imports Control Order, 1955, declared the Government’s intention to cancel the licences unless the company furnished sufficient cause against the cancellation within ten days of the notice.

On 26 September, the petitioners’ legal representatives sent a telegram to the Chief Controller in New Delhi seeking the particulars of the alleged fraud and requesting an appointment to inspect the papers and documents on which the allegation was based. The following day, on 27 September, the company addressed a letter to the same officer. In that letter the company provided a written explanation, pointed out that it was the victim of foul play by an unknown person seeking to damage its reputation and to place it in disfavor with the authorities, and expressly reserved the right to amend, add to, or alter the explanations after a full inspection of the relevant papers and after receiving the specific particulars of the alleged fraud. The company also asked to be granted a personal hearing on the matter.

This written explanation was handed to the first respondent, Mr Bilgrami, by the company’s representatives during an interview on 30 September. During that interview the representatives informed Mr Bilgrami that, in the absence of any details of the alleged fraud and without an opportunity to inspect the supporting documents, the petitioners could not furnish a complete explanation. They reiterated that they reserved the right to submit further explanations once the particulars were disclosed and the papers inspected. The company’s representatives met again with Mr Sundaram, Director (Administration) of the Chief Controller’s Office, on 14 October 1958. At that second interview they again requested that the particulars be provided and that they be permitted to examine the documents. No particulars were supplied, no inspection was allowed, and on that very same day the first respondent issued the order of cancellation.

No inspection of the documents was permitted, and on the very same day that the interview with Mr Sundaram took place, the first respondent issued the order of cancellation. The petition set out ten grounds in Clauses A to L of paragraph 15, but on analysis the Court reduced them to four principal grounds. First, the Court observed that Clause 9(a) of the Import Control Order, under which the cancellation was effected, was unconstitutional because it violated the petitioners’ rights under Article 19(1)(f), Article 19(1)(g) and Article 31 of the Constitution. Second, the Court noted that the cancellation order was made without complying with the mandatory requirement of Clause 10 of the Import Control Order, which obliges the authority to give the licensee a reasonable opportunity of being heard. Third, the petition claimed that the first respondent, Mr Bilgrami, had no legal authority to make an order under Clause 9 of the Import Control Order. Fourth, the petition asserted that the petitioners were denied equal protection of the laws under Article 14 of the Constitution, since other similarly situated persons had been afforded a proper opportunity and a personal hearing before any action was taken against them, whereas the petitioners were not given a chance to show cause for the cancellation of their licences and were denied a personal hearing. Regarding the third ground, the Court explained that it was based on a mistaken understanding of the law because an amendment made on 27 February 1958 had inserted the words “or the Chief Controller of Imports and Exports” after “the Central Government” in the relevant clause, thereby vesting the Chief Controller with the authority to cancel any licence without needing a separate delegation. Consequently, on the dates in September and October 1958, the Chief Controller in New Delhi possessed the power to cancel licences under the Import Control Order. The Court observed that this amendment had been pointed out by Mr Bilgrami in his affidavit, and that the petitioners’ counsel did not press the third ground, nor the fourth ground concerning the alleged infringement of the petitioners’ right to equal protection. The Court further held that the failure to provide the petitioners with a reasonable opportunity of being heard was, by itself, sufficient to justify the relief sought, and that whether other persons had been given a fair hearing was irrelevant to the petitioners’ claim. In opposition to this application, the first respondent, Mr Bilgrami, contends inter alia that the provision for cancellation of a licence under

In this matter the respondent, Mr Bilgrami, asserted that clause 9 of the Imports Control Order did not contravene any of the fundamental rights guaranteed by Articles 19(1)(f), 19(1)(g) and 31 of the Constitution, and that the petitioners had been provided with an adequate and reasonable opportunity to be heard before the cancellation order was issued. He explained in his affidavit that four applications for licences—three dated 17 June 1958 and one dated 26 June 1958—had been received in his office and that each of these four applications had been rejected. He further contended that while those rejected applications remained in his office, four additional applications bearing the same dates and containing identical particulars, together with a fifth application dated 22 July 1958, suddenly appeared in the office of the Joint Chief Controller of Imports and Exports in Bombay. These applications were accompanied by five separate letters, one for each application, which purported to contain recommendations for the issue of licences issued from the office of the Chief Controller of Imports and Exports in New Delhi and were signed by Shri M L Gupta, Deputy Chief Controller of Imports and Exports. The respondent claimed that Shri Gupta’s signatures on those letters were not genuine. He further maintained that although the letters suggested that the issue of the licences had been authorised by him, he had in fact given no such authority. When the petitioners’ representatives interviewed him on 30 September 1958, he informed them of the “general nature of the fraud” and told them that the licences had not been authorised by him and had been obtained fraudulently. The respondents also stated that during a subsequent interview on 14 October 1958 with Mr Sundaram, Director of Administration in the Chief Controller’s office, the petitioners were expressly told that the recommendations on which the disputed licences were based were not genuine. The petitioners’ principal contention was that clause 9(a) of the Imports Control Order was itself invalid because it violated their rights under Articles 19(1)(f), 19(1)(g) and 31. Clause 9(a) provides that the Central Government, the Chief Controller of Imports and Exports, or any other officer authorised in this behalf may cancel any licence granted under the order or render it ineffective if the licence was granted through inadvertence or mistake or was obtained by fraud or misrepresentation. The Court observed that in the present case there was no allegation that the licences had been granted through inadvertence or mistake, and therefore it was unnecessary to examine whether the provision allowing cancellation on the basis of mistake or inadvertence was invalid. The remaining question, as framed by the petitioners, concerned the validity of the provision for cancellation on the ground of fraud or misrepresentation as a reasonable restriction in the public interest on the exercise of the petitioners’ right under Article 19(1)(f).

In this matter the Court examined whether the clause that permits cancellation of a licence on the ground that it was obtained by fraud or misrepresentation constitutes a reasonable restriction on the public interest, as contemplated by Article 19(1)(f) of the Constitution. The Court first observed that the statutory scheme does not confer an unfettered power to cancel a licence, nor does it allow for arbitrary action. The provision does not require a separate rule within the Order granting a right to be heard, because the principle of natural justice nevertheless imposes such a requirement. Accordingly, the Court noted that clause 10 of the Imports Control Order expressly provides that no action may be taken under clauses 7, 8 or 9 unless the licence holder or importer has been afforded a reasonable opportunity to be heard. The learned counsel for the petitioners did not challenge the validity of the provisions on the basis that they bestow unlimited authority to cancel a licence, nor did he argue that clause 10 fails to satisfy the requirements of natural justice. Instead, his contention was that, while it may be reasonable to cancel a licence if the licence holder himself has committed fraud in obtaining it, it would be wholly unreasonable to cancel a licence merely on the basis that fraud or misrepresentation occurred without demonstrating that the licence holder was personally involved in the fraudulent act. The Court considered that, in the overwhelming majority of cases, if a licence is secured through fraud or misrepresentation, it is logical to infer that the individual in whose favour the licence was issued must have been a party to the fraud or misrepresentation. The petitioners’ counsel further suggested a hypothetical scenario in which an adversary of the intended licence holder procures the licence by means of fraud with the ulterior purpose of later accusing the licence holder of fraud, thereby exposing him to criminal prosecution, reputational damage, and the ruin of his business. The Court held that it was unnecessary to determine whether such a scenario could actually arise in the present case. Moreover, the Court emphasized that the fact that the fraud may have been orchestrated by an enemy of the licence holder is immaterial to the issue at hand. The entire framework of import control and regulation operates on the premise that a licence is granted on the basis of a true and correct statement of material facts. That basis is lost when the grant is induced by fraud or misrepresentation. Whether the licence holder himself or some other party is responsible for the fraudulent act, the essential point remains that the justification for granting the licence ceases to exist, and consequently the licence cannot justifiably continue.

It would be unreasonable for the licence to be allowed to remain in force after it has been shown to have been obtained by fraud or misrepresentation. Consequently, the Court held that the statutory provision permitting the cancellation of a licence, provided that the licencee is first afforded a reasonable opportunity to be heard, constitutes a permissible restriction on the exercise of a citizen’s fundamental rights protected by Article 19(1)(f) and Article 19(1)(g) of the Constitution. Because the cancellation is carried out under a law that is validly enacted, there can be no violation of any right conferred by Article 31 of the Constitution.

The principal allegation advanced by the petitioners was that the licence holder had not been given a reasonable opportunity to be heard before the cancellation order was issued. The Court observed that if a reasonable opportunity to be heard is denied, the cancellation would amount to an unjustified intrusion upon the petitioners’ rights. Accordingly, the record had to be examined to determine whether the petitioners successfully demonstrated the absence of such an opportunity. The requirement of a reasonable opportunity to be heard consists of two components: first, the mere existence of an opportunity to present one’s case; and second, the reasonableness of that opportunity. Both components are matters that the Court can adjudicate, and it is within the Court’s jurisdiction to decide whether an opportunity was provided and, if so, whether it was reasonable.

In the present matter, the Court noted that a notice calling upon the licence holder to show cause against the proposed cancellation had been issued. That notice expressly stated that the cancellation was being considered on the ground that the licences had been obtained fraudulently. After the issuance of the notice, a personal hearing was conducted. On the basis of these steps, the Court concluded that the statutory requirement that an opportunity to be heard be given had been satisfied.

Nevertheless, counsel for the petitioners vigorously maintained that, although an opportunity was technically provided, it was not a reasonable one. In support of this contention, counsel emphasized two specific deficiencies: the petitioners were not supplied with the detailed particulars of the alleged fraud, and despite repeated requests, they were not permitted to inspect the relevant documents. The Court therefore had to consider all surrounding circumstances to decide whether the failure to disclose the fraud particulars and to allow inspection of the papers deprived the petitioners of a reasonable opportunity to be heard.

The Court explained that there is no fixed, invariable standard for “reasonableness” in such contexts. Rather, the test is whether the Court’s conscience is satisfied that the person against whom action is contemplated has a fair chance to persuade the authority proposing the action that either the grounds for the action do not exist, or, if they do exist, they are insufficient to justify the proposed measure. Ultimately, the determination of reasonableness must be based on the specific facts and circumstances of each case.

The Court explained that in assessing whether a party has been afforded a reasonable opportunity to be heard, it must consider the entire factual matrix, which includes the nature of the proposed action, the specific grounds relied upon, the documentary material supporting the allegations, the stance adopted by the person against whom the action is sought, the content of any response raised, any further requests for opportunity, any admissions made by conduct or otherwise, and any other relevant circumstances that assist in reaching a fair conclusion. In the present matter, the proposed action consisted of cancelling five import-export licences. This proposal emanated from a provisional conclusion reached by Mr Bilgrami, who, based on the material available to him, believed that the five licences had been obtained through fraudulent means. The Court identified three principal foundations for that provisional conclusion. First, four licence applications—three dated 17 June 1958 and one dated 26 June 1958—were found to be identical in every detail to four applications presently located in the office of the Joint Controller of Imports and Exports in Bombay; those four applications had indeed been received, subsequently rejected, and were then retained in the Chief Controller’s Office. Second, four additional applications bearing the same dates and particulars, together with a fifth application dated 22 July 1958, were discovered in the Bombay office; each of these five applications was accompanied by forwarding letters that purported to bear the signature of Mr M L Gupta, recommending the licence and asserting that the first respondent had authorised the issue of the licences on those applications, although the signatures were subsequently found not to be Mr Gupta’s genuine signatures. Third, the same forwarding letters claimed that the issuance of the licences had been authorised by Mr Bilgrami in his capacity as Chief Controller of Imports and Exports, New Delhi, a claim that Mr Bilgrami himself knew to be false because he had not given such authorisation. The Court observed that the notice served on the petitioners’ company, inviting them to show cause against the contemplated cancellation, expressly stated that the licences appeared to have been obtained by fraud.

On the issue of the particulars of the alleged fraud, the Court noted that the first respondent, in his affidavit, conceded that at the time of filing he was unable to furnish detailed particulars because they were unknown to him. Nevertheless, he asserted that he had communicated to the petitioners’ representatives—the director Mr Parikh, the second petitioner Mr Rangwala who was Chairman of the company, and the company’s solicitor Mr Hussaini Doctor—the general nature of the fraud. The affidavit, in paragraph 23, recorded Mr Bilgrami’s own words: “I say that the Director of the petitioners’ Company, Shri B K Parekh and Shri Rangwala and their attorney’s partner, Mr Huseni Doctor, saw me on 30 September 1958. I told them that the issue of the licences had not been authorised by me as they purported.” The Court therefore concluded that while specific details of the fraudulent conduct were not yet available, the respondent had at least disclosed to the company’s senior officers that the licences had been obtained without his authorisation and that the fraud was of a general nature.

Bilgrami testified that on 30 September 1958 he informed the petitioner’s director, Shri B. K. Parekh, the chairman, Shri Rangwala, and the company’s solicitor, Mr Huseni Doctor, that the licences in question had been obtained fraudulently, although he could not at that time specify how or by whom the fraud had been committed because a police investigation was already under way and the precise details were unknown. After hearing this information, the petitioner’s chairman began to argue that the fraud might have been motivated by the Gujarati–Maharashtrian and anti-Muslim sentiments among the employees of his firm. In response, Mr Rangwala filed an affidavit in which he repeatedly denied Bilgrami’s claim that the company’s representatives had been told of the “general nature of the fraud.” Nevertheless, the court noted that Bilgrami’s categorical statement in paragraph 23 of his affidavit—that he had told Mr Rangwala, Mr Parekh, and Mr Huseni Doctor that the issue of the licences had not been authorized by him as they purported—was not expressly contradicted in the reply affidavit. In paragraph 20 of his own affidavit, Mr Rangwala acknowledged that Bilgrami’s statement did not specify how or by whom the fraud had been carried out, but he added that Bilgrami merely asserted that the licences had been obtained by fraud, without denying any further allegation. The court also observed that Mr Rangwala did not expressly deny Bilgrami’s assertion that, during the September 30 interview, he had suggested that the fraud might have arisen because of certain feelings among his firm’s employees. Consequently, the court found it reasonable to conclude that, besides stating that the licences had been obtained fraudulently, Bilgrami had indeed informed the petitioner’s representatives on 30 September 1958 that although the licences appeared to have been authorized by him—referring to the forwarding letters recommending the licences—such authorization had never actually occurred. Instead of rejecting Bilgrami’s claim and affirming that the licences were genuine, the petitioner’s representatives appeared to deflect responsibility by alleging that an external enemy, rather than the company, had perpetrated the fraud. The petitioners’ representatives also met with Mr Sundaram on 14 October 1958. Although no direct statement from Mr Sundaram is recorded, Bilgrami’s affidavit, paragraph 24, indicates that Mr Sundaram likewise told the petitioner’s representatives that the recommendation letters on which the licences were based were not genuine.

The Court observed that the licences which had been disputed and granted to the petitioners were not genuine, a contention that the petitioners themselves reiterated in slightly different wording in paragraph twenty-nine of their affidavit. The Court noted that a letter dated eighteen December 1958, written by the first respondent and reproduced as an annexure to Mr Rangwala’s reply affidavit, concluded with the following passage: “It may be stated that the fact that the following letters referred to above were not genuine were mentioned to the representatives of your firm when they interviewed Shri D R Sundaram, Director (Administration) on fourteen October 1958.” Although Mr Rangwala attached a copy of this letter to his affidavit, he made no assertion that the statement contained in the concluding portion of the letter was false. The Court therefore held that this omission supported the conclusion that Mr Bilgrami’s claim—that Mr Sundaram had told the Company’s representatives that the forwarding letters containing the recommendations on which the licences had been issued were not genuine—was correct. Paragraph twenty-nine of Mr Bilgrami’s affidavit recorded that when Mr Sundaram informed the Company’s representatives of this, they were unable to provide any explanation. When Mr Rangwala addressed paragraph twenty-nine of the affidavit in paragraph twenty-three of his own affidavit, he did not contend that Mr Sundaram had failed to tell them that the licences were based on forged documents, nor did he state that they had offered any explanation after being so informed.

In considering the entire backdrop against which the notice of cancellation was issued, the Court examined the petitioners’ letter dated twenty-seven September, the interviews that took place on thirtieth September and fourteenth October, and especially the attitude of the Company’s representatives, who appeared more intent on demonstrating that the Company was not a participant in any fraud than on proving that no fraud had occurred at all. The Court concluded that the omission of further particulars or the opportunity to inspect the papers did not deprive the petitioners of a fair chance to persuade Mr Bilgrami that the grounds for cancelling the licences were unfounded, or, even if such grounds existed, that they did not warrant cancellation. Accordingly, the Court held that the petitioners had been afforded a reasonable opportunity to be heard on the proposed action. Consequently, the petitioners were not entitled to any relief, and the petition was dismissed with costs. Subba Rao J. then expressed that he had carefully read the judgment of his learned brother, Das Gupta J., and, while respecting his colleague’s reasoning, he could not agree with the conclusion. He reiterated that the facts were fully detailed in the earlier judgment and proceeded to restate the material facts: the first petitioner, M/s Fedco (Private) Limited, is a company incorporated under the Indian Companies Act with its registered office in Bombay, and it is engaged in the trade of dyes, chemicals and plastics.

In this case the first petitioner, M/s Fedco (Private) Limited, was a company incorporated under the Indian Companies Act with its registered office in Bombay and engaged in the trade of dyes, chemicals, plastics and various other goods. The second petitioner was the chairman and a director of that company. The company dispatched five applications by registered post to the Chief Controller of Imports and Exports in New Delhi. Three of those applications bore the date 17 June 1958, one was dated 26 June 1958 and the final one was dated 22 July 1958. In each of the applications the company requested that import licences be issued so that it could place orders and import different types of goods from West Germany. For every application the company later received a letter, purportedly from the Chief Controller, informing it that the application had been forwarded to the Joint Chief Controller of Imports and Exports in Bombay together with the necessary comments. The company acknowledged receipt of those letters. Subsequently five licences were issued by the Office of the Joint Controller in Bombay: two of the licences were dated 24 July 1958, another two were dated 16 August 1958 and the fifth licence was dated 4 September 1958. Relying upon those licences the company placed orders with a foreign firm in West Germany and the ordered goods, of considerable value, actually arrived at the Bombay port. By a letter dated 23 September 1958 the Joint Controller requested the company to return the five licences that had been granted, without the company having to undertake any further commitments.

After some further correspondence between the company and the Chief Controller, the company received on 24 September 1958 a notice from the Chief Controller stating that the Government had reason to believe that the licences had been obtained fraudulently and that, unless the company could show sufficient cause to the contrary within ten days of the notice, the licences would be cancelled. On 16 October 1958 the company received an undated order from the Chief Controller purporting to cancel the five licences. In response, the company and its manager filed a petition under Article 32 of the Constitution, seeking a writ of certiorari or any other appropriate writ to set aside the order of cancellation and to direct the Collector of Customs in Bombay to assess the imported goods and allow them to be cleared. The petitioners, through counsel, raised two principal points. First, they contended that clauses nine and ten of the Imports Control Order, 1955, which were invoked to cancel the licences, infringed the fundamental rights guaranteed by Article 19(1)(f) and (g) of the Constitution because those provisions amounted to an arbitrary and unreasonable restriction on the rights to practice any profession, carry on any occupation, trade or business, and to move freely throughout the territory of India. Second, they argued that the Chief Controller had failed to comply with clause ten of the Order, since the company had not been afforded a reasonable opportunity of being heard before the licences were cancelled, and that this procedural lapse rendered the cancellation unlawful.

The Court observed that the cancellation of the licences by the Chief Controller constituted an infringement of the Company’s rights guaranteed under Article 19(1)(f) and Article 19(1)(g) of the Constitution. The Court further held that the first contention raised by the petitioners need not be examined because it was clear that the petitioners had not been afforded a “reasonable opportunity” as contemplated by clause 10 of the Imports Control Order, 1955. For the record, the relevant provisions of clauses 9 and 10 of the Order were set out as follows: clause 9 provided that “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;”. Clause 10 stipulated that “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.” The Court noted that it was not in dispute that the Central Government had delegated the power to act under these clauses to the Chief Controller. Consequently, the Court framed the initial question as to whether the inquiry contemplated by clause 10 was limited to a purely administrative function or whether it amounted to a quasi-judicial function.

To answer this question, the Court referred to the established criteria for distinguishing a quasi-judicial act from an administrative act, as articulated by Lord Justice Atkin in Rex v. Electricity Commissioners, Ex Parte London Electricity Joint Committee Co. (1), further elaborated by Lord Justice Scrutton in Rex v. London County Council, Ex Parte Entertainments Protection Association Ltd. (2), and authoritatively restated by this Court in Province of Bombay v. Khusaldas S. Advani (3). The criteria require that (a) the body exercising the power must have legal authority; (b) that authority must be conferred for the purpose of determining questions that affect the rights of persons; and (c) the body must have a duty to act in a judicial manner. The Court found that all three conditions were satisfied in the present case. Under the aforesaid clauses, authority to cancel a licence was vested in the Central Government or any officer authorised by it, and such cancellation inevitably impacts the rights of the affected parties. Moreover, clause 10 imposes a clear duty upon the authority to afford the affected party a “reasonable opportunity of being heard.” Accordingly, the Court concluded that, by virtue of clauses 9 and 10 and the authorities cited in (1) [1924] 1 K.B. 171, (2) [1931] 2 K.B. 215, and (3) [1950] S.C.R. 621, the Chief Controller performs a quasi-judicial act and is therefore bound by the principles of natural justice when cancelling a licence. Clause 10, without ambiguity, embodies the principles of natural justice through the well-known phraseology “reasonable opportunity” and “being heard,” which obliges the authority, when alleging fraud, to disclose the particulars of the alleged fraud, to permit inspection of the supporting documents, and to provide a personal hearing for the party to explain its case and refute the charge.

In order for a licensee accused of fraud to be able to understand the specific allegations and to have a personal hearing in which to explain his position and potentially clear himself of the charge, the authority must provide those basic safeguards; without them, any opportunity to be heard would be merely a hollow formality. With that principle in mind, the Court examined the factual record to determine whether the petitioners received such a reasonable opportunity in the present matter. The issue could be decided solely on the affidavits submitted by the parties, and for the purposes of this petition the Court treated the affidavit filed by the Chief Controller as a full and accurate account of everything that transpired between the Chief Controller and the representatives of the Company. According to that affidavit, a notice dated 24 September 1958 was served on the petitioners. The notice, in very brief language, declared that the licences granted to the Company by the Joint Controller had been obtained fraudulently and that, exercising the powers stipulated in paragraph 9 of the Order, the Government of India intended to cancel those licences unless the petitioners could furnish sufficient cause against the proposed cancellation within ten days of the notice’s issuance. Upon receiving that notice, the Company, through its solicitors, dispatched a telegram requesting that the Chief Controller refrain from publishing the notification. Two days later, on 26 September 1958, the Company’s solicitors sent a further telegram asking the Chief Controller to supply them with the particulars of the alleged fraud and to arrange an appointment for them to inspect the papers and documents on which the Chief Controller relied. On the following day, 27 September 1958, the Company sent a letter to the Chief Controller setting out the relevant facts. In that letter the Company asserted that it had honestly accepted the licences and had never doubted the bona-fides of the grant; it expressed a belief that it might be the victim of foul play by persons seeking to damage its reputation; and it reported that Mr B. K. Parekh, a director of the Company, together with the Company’s solicitor, Mr Hooseini Doctor, met the Chief Controller on 30 September 1958. During that meeting the Company’s representatives handed over an explanation and personally informed the Chief Controller that, in the absence of any particulars of the alleged fraud and without being allowed to inspect the papers relied upon, the Company could not provide a complete defence. They therefore reserved the right to make further explanations once the requested particulars and inspection were permitted. The Company also asked for a personal hearing after receiving the required particulars and being allowed to inspect the documents. The Chief Controller replied that the licences had not been authorized by him in the manner claimed by the Company and that they had indeed been obtained fraudulently, although at that point he could not specify exactly how the fraud had been carried out or identify the persons responsible.

In the proceedings, the Director of the company asserted that the alleged fraud might have been motivated by Gujarati-Maharashtrian and anti-Muslim sentiment among the company’s employees. The Director also told the Chief Controller that the company could not furnish a complete explanation without receiving the particulars of the fraud and being allowed to inspect the relevant documents, and that the company reserved the right to give a further explanation once those particulars and inspections were provided. The Chief Controller declined to supply the particulars of the fraud, and the company was not permitted to inspect any papers. On 3 October 1958 the company sent a letter recording the discussion that had taken place at the interview with the Chief Controller, and forwarded that letter to the Chief Controller. The company then dispatched another letter reminding the Chief Controller that it had not received any particulars of the alleged fraud; that letter was personally delivered to Mr Sundaram, the Director of Administration in the Chief Controller’s Office, on 14 October 1958. During that interview Mr Sundaram told the petitioners that the recommendations underlying the disputed licences were not genuine. Subsequently, on 16 October 1958 the Chief Controller cancelled the five licences that had been issued to the company. The Court was asked, on the basis of these assumed facts, whether the Chief Controller had afforded the petitioners a “reasonable opportunity of being heard” so that they could establish that no fraud had been committed in obtaining the licences. The learned Solicitor General, appearing for the respondents, argued that the company had admitted the fraud and that its only defence was the suggested communal motive; he further contended that the Chief Controller’s statement that the licences had not been authorised by him, together with Mr Sundaram’s remark on 14 October that the recommendations were not genuine, amounted to sufficient disclosure of the particulars of fraud, thereby satisfying the requirement of clause 10 of the order. The Court found this argument difficult to accept, observing that it presupposed the company’s acceptance of the Chief Controller’s version. For the purpose of the petition the Court assumed the petitioners’ innocence. The notice issued required the petitioners to show cause why the licences should not be cancelled on grounds of fraud. By letters and in person the petitioners repeatedly requested the particulars of the fraud and permission to inspect the relevant documents so that they could present a further explanation to oppose the cancellation. The affidavit filed by the Chief Controller merely disclosed that, in his conversations with the solicitor and the director, he had told them that he did not issue the licences and that he could not specify how or by whom the fraud had been committed, without providing the detailed particulars sought by the petitioners.

The Chief Controller recalled that, when he met representatives of the Company, he informed them that he had not issued the licences in question. In the affidavit submitted by the Chief Controller, he acknowledged that the petitioners had asked for the specific details of the alleged fraud and had also requested an opportunity to inspect the relevant documents. Nevertheless, the Chief Controller maintained that the petitioners had already been given sufficient information about the accusations against them and characterised their request for document inspection as mischievous. The Chief Controller further recorded his own words regarding the particulars of the alleged fraud, stating: “I told them that the issue of the licences had not been authorised by me as they purported to be and that they had been obtained fraudulently, though at that stage I was unable to say how exactly and by whom the fraud was committed.” The discussion with Mr Sundaram dated 14 October 1958 did not advance the inquiry beyond this point. The Chief Controller was not empowered by the Central Government to conduct a full enquiry, and even if his statement that the recommendations underlying the disputed licences were not genuine were correct, it did not resolve the matter. Consequently, despite the petitioners’ explicit requests, no detailed particulars were provided to them, no facilities for inspecting the pertinent documents were offered, and no date was scheduled for any enquiry into the alleged fraud.

The learned Solicitor General questioned what advantage the petitioners might have obtained had they been supplied with the particulars and permitted to inspect the documents, a line of enquiry the Court considered to be one-sided. The Court observed that the proper question should have been whether the petitioners were afforded a reasonable opportunity to be heard and to demonstrate their innocence. Setting aside any attribution of blame to either the petitioners or the respondents, the Court outlined several conceivable scenarios. First, the petitioners could have been guilty of fraud, knowing that their original applications had been rejected by the Chief Controller, yet having similar applications surreptitiously introduced in the Bombay Office with forged recommendations bearing the signature of Deputy Chief Controller M L Gupta of New Delhi, thereby obtaining the licences through deception on the part of the Joint Chief Controller in Bombay. Second, a third party—perhaps a rival trader or members of the Company’s own staff—might have devised a complex scheme to damage the Company’s reputation, forging fresh applications after learning of the original rejections, slipping them into the Bombay Office, and securing licences in the petitioners’ favour, a theory the Court described as rather far-fetched. Third, after the initial rejections, fresh applications might have been filed in the New Delhi Office, subsequently forwarded to the Joint Chief Controller in Bombay with directions issued by the Deputy Chief Controller of New Delhi. Fourth, the original applications submitted by the Company might not have been rejected at all; instead, they could have been approved by the Chief Controller or his Deputy and then dispatched together with duly signed recommendations from the Deputy Chief Controller, eventually reaching the Joint Controller in Bombay in the ordinary course of business.

In this case the Court noted that the licences had been sent to the Joint Controller in Bombay and that they had been issued in the ordinary course of business. The Office of the Chief Controller in New Delhi, after becoming aware that the licences had been issued in contravention of rules or orders prohibiting issuance for goods to be imported from soft-currency areas, is alleged to have fabricated a false narrative that the original applications had been rejected and that fresh applications had been introduced in the Bombay Office. The Court observed that these explanations represent only a few of the possible scenarios and that many other explanations might exist. The Court further observed that when a notice alleging fraud was served on the petitioners, the petitioners were unquestionably entitled to receive the details of the alleged fraud. The Court explained that the Chief Controller could have supplied the petitioners with the following particulars: (i) the date on which the petitioners’ applications were rejected; (ii) the date on which the rejection orders were communicated to the petitioners; (iii) a statement that no letters had been issued to the petitioners regarding the forwarding of their applications or the recommendations to the Joint Chief Controller in Bombay; (iv) a statement that, after the rejection of the applications, the Office of the Chief Controller had received no letters from the petitioners; (v) a declaration that the applications on which the licences were granted were not the same applications that had been sent to the Delhi Office; (vi) a finding that the signature of Mr M L Gupta on the recommendations had been forged; and (vii) a declaration that the Bombay Office possessed no record of receiving any applications from the Delhi Office. The Court held that, had these particulars been provided, the petitioners could, by examining the relevant documents, have demonstrated that no fraud had occurred, that no order rejecting the applications existed, that the dispatch book showed the applications had been forwarded to the Bombay Office and that the original applications were not present there, that the dispatch and receipt books reflected the correspondence between the Chief Controller and the petitioners, and that the signature of Mr Gupta on the recommendations was authentic. The Court emphasized that the petitioners never admitted any fraud. When confronted with the notice, the petitioners could not ascertain whether fraud had been committed or, if so, how it had been carried out, because they had not been furnished with the required particulars or shown the documents. The petitioners therefore requested the particulars, inspection of the relevant documents, and a personal hearing; all of these requests were denied. Consequently, the Court found that the petitioners had not been afforded a reasonable opportunity to be heard within the meaning of clause 10 of the Order. The Court highlighted that the stakes were high and that the cancellation order had been made arbitrarily and in complete disregard of the principles of natural justice. The Court clarified that it was not expressing any view on the merits of the case and that, whether or not the petitioners were guilty of fraud, they ought to have been given a reasonable opportunity to be heard before their licences were cancelled.

The Court observed that the petitioners had not been afforded a reasonable opportunity to be heard before they were declared to have committed fraud and before their licences were cancelled. By noting the absence of such an opportunity, the Court concluded that the procedural safeguards of natural justice had not been observed. Consequently, the Court directed that a writ of certiorari be issued to set aside the order of the Chief Controller which had cancelled the licences that had previously been granted to the petitioners. In directing the issuance of the writ, the Court sought to restore the status quo ante by nullifying the cancellation order on the ground that it had been made without the required hearing. Following this direction, the Court entered its final order. In accordance with the view expressed by the majority of the judges, the petition was dismissed. The dismissal was ordered to be accompanied by an award of costs against the petitioners. Thus, the Court both nullified the licence-cancellation order through the writ of certiorari and, at the same time, dismissed the petition with costs as directed by the majority opinion.