Mineral Development Ltd vs The State Of Bihar And Another

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

Court: Supreme Court of India

Case Number: Petition No. 159 of 1956

Decision Date: 15 December, 1959

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

In this case, the Supreme Court of India delivered its judgment on 15 December 1959 in the matter of Mineral Development Ltd versus The State of Bihar and another. The petition was filed by Mineral Development Ltd, which held a mining lease for mica under the Bihar Mica Act, 1947. The respondents were the State of Bihar and an additional party. The bench that heard the petition comprised Chief Justice Bhuvneshwar P. Sinha, Justice P. B. Gajendragadkar, Justice K. C. Das Gupta and Justice J. C. Shah, together with Justice Subbarao K. The official citation of the decision appears in 1960 All India Reporter 468 and 1960 Supreme Court Reports (Second Series) 909. Subsequent citator references include several Supreme Court reports spanning the years 1961 to 1988. The matters before the Court involved the interpretation of fundamental rights under Articles 19(1)(f) and 19(1)(g) of the Constitution, the permissible restrictions under clauses (5) and (6) of Article 19, and the constitutional validity of Section 25(1)(c) of the Bihar Mica Act, 1947. The Court was called upon to examine whether the State’s action in cancelling a mining licence constituted an unreasonable restriction of the petitioner’s constitutional freedoms.

The Secretary of the Government of Bihar, Revenue Department, issued a notice to the petitioner, charging it with violations of sections 10, 12 and 14 of the Bihar Mica Act, 1947, and demanding that it show cause why its licence should not be cancelled. The petitioner requested the particulars of the alleged violations, and the Government supplied the requested details. The petitioner then filed a written representation denying the allegations. After a lapse of two years from the date of this representation, the Government issued a notification cancelling the petitioner’s licence under Section 25(1)(c) of the Act. Consequently, the petitioner approached this Court under Article 32 of the Constitution, seeking a writ of certiorari to set aside the cancellation order and a writ of mandamus directing the State to refrain from giving effect to that order. The petitioner contended that the Government acted illegally, with mala fides, and in breach of its fundamental rights under Articles 19(1)(f) and 19(1)(g). It further argued that Section 25(1)(c) operated as an unreasonable restriction on those rights and that, even if the provision were valid, the cancellation without a reasonable opportunity to show cause violated the second proviso to that section. After considering the arguments, the Court held that the provisions of Section 25(1)(c) of the Bihar Mica Act do not impose an unreasonable restriction on the fundamental rights guaranteed by Articles 19(1)(f) and 19(1)(g). The Court further affirmed that any restriction a State imposes under clauses (5) and (6) of Article 19 must be reasonable, and that the power to cancel a licence under the Act is exercised in pursuit of the Act’s public interest objectives and must conform to the principles of natural justice.

In this case the Court held that any limitation on a fundamental right must not rest on the mere unfettered discretion of the executive. The Court explained that it was obliged to apply the concept and principle of reasonableness articulated in The State of Madras v. V. G. Row, and to determine whether a particular statute satisfied the objective test of “reasonableness.” The statutory conditions imposed by the Bihar Mica Act, which governed the grant of a licence, were described as plainly reasonable and necessary for the regulation of the mining industry. The power to cancel a licence, which the Act vested in the Government under section 25, was said to exist solely to achieve the purpose of the Act – namely the enforcement of provisions enacted in the public interest – and that power could be exercised only on the basis of objective criteria and in conformity with the principles of natural justice.

The Court further observed that the general proposition that whenever a discretionary power is given to a State Government or the Union Government by law, that law must automatically operate as a reasonable restriction on a fundamental right, was inconsistent with the notion of fundamental rights because such rights are guaranteed against State action. Accordingly, the fact that the power was conferred on the State Government rather than on a subordinate officer was merely one factor that could be considered in assessing the reasonableness of the law; the ultimate determination of reasonableness depended on the cumulative effect of the circumstances surrounding the conferment of that power.

Regarding the requirement of “reasonable opportunity,” the Court described the concept as elastic and not capable of a simple precise definition. What constituted reasonable opportunity in one set of facts might not be reasonable in another. The Court stated that it was its duty to examine each case in its totality and to decide whether a person had been given a reasonable opportunity to show cause. The Court also emphasized that tribunals or authorities performing quasi-judicial functions were bound by the same principles that governed the doctrine of bias as applied to ordinary judicial bodies. In the present matter, the Court found that the Revenue Minister had exhibited personal bias as understood in the cited decisions and therefore should not have participated in either initiating the enquiry or in cancelling the licence.

The Court concluded that the essential conditions required to enable the Government to act under section 25(1)(c) of the Bihar Mica Act had not been established, and that the State Government had failed to afford the petitioner a reasonable opportunity in the sense of the second proviso to section 25(1). The Court followed The State of Madras v. V. G. Row, [1952] S.C.R. 597, and held that the precedent set in Thakur Raghubir Singh v. Court of Wards, Ajmer, [1953] S.C.R. 1049, was inapplicable. The petition, filed under Article 32 of the Constitution for the enforcement of fundamental rights, was identified as Petition No. 159 of 1956, with counsel for the petitioners and the Advocate-General for the State appearing for the respondents.

Bihar, Bajrang Sahai and R. C. Prasad appeared for the respondents. The judgment was rendered on 15 December 1959. The petition, filed under article 32 of the Constitution, was presented by Mineral Development Limited against the State of Bihar and another respondent. The petitioner sought a writ of certiorari to set aside the notification dated 7 September 1955 issued by the Government of Bihar, which cancelled the licence held by the petitioner, and also asked for a writ of mandamus directing the respondents to refrain from giving effect to that cancellation order. The petitioner, referred to as the Company, had obtained rights over the Ramgarh and Serampur estates located in the Hazaribagh district of Bihar. The estates were owned by Raja Bahadur Kamakshya Narain Singh, who is hereinafter called the proprietor. On 29 December 1947 the proprietor executed a mining lease in favour of the Company, granting it rights to all minerals in 3,026 villages for a term of 999 years. Approximately on 3 January 1951 the Deputy Commissioner of Hazaribagh issued to the Company licence number H.L. 261-H in form ‘B’ under section 6 of the Bihar Mica Act, 1947 (the Act), authorising the extraction of mica. The licence was renewed on a yearly basis by the competent authority, with the final renewal expiring on 31 December 1954. On 7 March 1953 the Secretary to the Government of Bihar, Revenue Department, served a notice on the Company alleging violations of sections 10, 12 and 14 of the Act and directed the Company to show cause within fifteen days why its licence should not be cancelled. In response, on 20 March 1953 the Company wrote to the Secretary requesting detailed particulars of the alleged infringements. After a reminder, the Government supplied the requested particulars by a letter dated 1 May 1953. On about 17 May 1953 the Company filed a written representation contesting the allegations and explaining how it had complied with the statutory provisions. No further communication occurred between the parties after that representation. Nevertheless, on 7 September 1955, more than two years later, the Government issued a notification cancelling licence number 261-H of 1951. The cancellation deprived the Company of the ability to continue mining operations on the extensive area it had leased from the proprietor. In its petition the Company asserted that it had invested approximately Rs. 16 lakhs to obtain the lease, had expended substantial sums on prospecting and developing the mines, and that the Government’s arbitrary cancellation prevented it from working the mines, resulting in the loss of employment for a large number of labourers.

The petition asserted that the company had suffered massive losses because a large number of its labourers had been dismissed, leaving the firm in a state of heavy financial distress. It therefore sought the reliefs previously mentioned, arguing that the Government had acted illegally, with mala fldes, and had infringed the petitioner’s fundamental rights under Article 19 (1) sub-clauses (f) and (g) of the Constitution. The first respondent named in the petition was the State of Bihar, while the second respondent was the Additional Secretary to the Government of Bihar in the Revenue Department. The respondents filed a counter-pleading in which they denied the allegations leveled against the Government and contended that the cancellation of the licence had been carried out within their lawful authority and in strict compliance with the provisions of the Act. The learned counsel for the petitioner, Mr Chatterjee, organized his arguments into four principal points. First, he claimed that the Bihar Mica Act 1947, as amended by the Bihar Mica (Amendment) Act 1949, was ultra vires because the State lacked constitutional competence to enact it. Second, he argued that the provisions of that Act were repugnant to the Central Mica Act 1948, and that, to the extent of any such repugnancy, the Central Act should prevail, thereby rendering the licensing provisions of the State Act ineffective. Third, he maintained that the petitioner possessed fundamental rights under Article 19 (1)(f) and (g) to acquire, hold, and dispose of his property and to engage in any occupation, trade, or business, and that section 25(1)(c) of the State Act imposed an unreasonable restriction on those rights, rendering it void. Fourth, he contended that even if that section did not violate fundamental rights, the Government’s order cancelling the lease without giving the petitioner a reasonable opportunity to show cause, as required by the second proviso to that section, infringed his constitutional right. The Court noted that the first two contentions need not be examined because the petition could be disposed of on the basis of the last two. Consequently, the principal question before the Court was whether the provisions of section 25 of the Act infringed the petitioner’s rights under sub-clauses (f) and (g) of Article 19 (1). The Constitution provides that “All citizens shall have the right… (f) to acquire, hold and dispose of property; and (g) to practise any profession, or to carry on any occupation, trade or business.” While clauses 5 and 6 of Article 19 empower the State to impose reasonable restrictions in the interest of the general public, the Court recalled the doctrine of reasonableness as explained by Chief Justice Patanjali Sastri in State of Madras v. V. G., emphasizing that any restriction must pass the test of reasonableness.

The Court cited the observation that: "It is important in this context to bear in mind that the test of reasonableness, wherever prescribed, should be applied to each individual statute impugned, and no abstract standard, or general pattern of reasonableness can be laid down as applicable to all cases. The nature of the right alleged to have been infringed, the underlying purpose of the restrictions imposed, the extent and urgency of the evil sought to be remedied thereby, the disproportion of the imposition, the prevailing conditions at the time, should all enter into the judicial verdict." The Court observed that the test of reasonableness, wherever it is prescribed, must be applied to each individual statute that is challenged. The Court also held that no abstract standard or general pattern of reasonableness can be fixed for all. The Court explained that the nature of the right to be infringed and the purpose underlying the restriction must be examined. It also stated that the extent and urgency of the evil to be remedied, the disproportionality of the measure, and the prevailing conditions must be considered. The Court then said it is its duty, considering those factors and any other relevant elements, to decide whether a statute meets the objective test of reasonableness. While accepting this general principle, counsel for the petitioner relied heavily on the earlier decision of this Court in Thakur Raghubir Singh v. Court of Wards, Ajmer. Citation for case is (2) [1953] S.C.R. 1049, 1055, and it supported the petitioner’s contentions. The earlier case specifically concerned section 112 of the Ajmer Tenancy and Land Records Act (XLII of 1950) statute. That provision stated that if a landlord habitually infringed a tenant’s rights, he would be deemed a "landlord who is disqualified to manage his own property". The provision linked this definition to section 6 of the Ajmer Government Wards Regulation, 1888, and said the landlord’s property could be placed under the Court of Wards’ superintendence. The determination of whether a landlord habitually infringed his tenants’ rights was left solely to the Court of Wards. The petitioner, whose estate was taken over, challenged the validity of the power given to the Court of Wards. The Supreme Court held the provision void because it imposed an unreasonable restriction on property rights, making enjoyment of the right depend solely on the subjective discretion of an executive officer. Justice Mahajan, speaking for the Court, observed that a law which deprives a person of possession of his property for a period on the basis of an executive officer’s pleasure cannot be described as reasonable. He added that such a provision wholly negates the fundamental right by making its enjoyment depend on unchallengeable discretion and provides no civil remedy for the aggrieved citizen. The operation of section 112 of the 1950 Act with regulation 1 of 1888 allowed the Court of Wards to assume superintendence of property of a landlord who habitually infringed the rights of his tenants. The Court of Wards could exercise this power at its own discretion and based on its subjective determination.

In the present case the Court observed that the statute under discussion described a landlord who habitually infringed the rights of his tenants, yet the Act failed to provide any mechanism for determining whether a particular landlord actually fell within that description. Moreover, the prerequisite for the Court of Wards to assume superintendence—namely the prior sanction of the Chief Commissioner—was itself a matter left entirely to the discretion of that official. Consequently, the Court noted that the Act placed the entire decision-making power in the hands of the executive without furnishing any procedure to ascertain the grounds on which the executive might act. The Court further held that the earlier decision could not be applied to the present facts because the circumstances differed in material respects. The core issue, therefore, was whether section 25 of the Act imposed unreasonable restrictions on the petitioner’s fundamental rights secured under Articles 19(1)(f) and 19(1)(g) of the Constitution. The Court acknowledged that the State is competent to enact laws that, in the public interest, place restrictions on citizens’ enjoyment of mineral rights; however, the petitioner contended that the law granted the State unfettered discretion to prevent an owner or lessee from enjoying his land or leasehold interest or from conducting mining operations for a permanent or indefinite period, and that such a grant of power was unreasonable. The Court found that this argument possessed a degree of plausibility and therefore warranted examination of the statute’s actual provisions. The Act, originally enacted in 1947 and subsequently amended, declared its objective to be “to regulate the possession and transport of, and trading in, mica in the Province of Bihar.” The legislation was prompted, the Court observed, by the scarcity of mica, its industrial importance, and the need to control both domestic consumption and foreign export. The petitioner’s counsel did not dispute this purpose and even conceded that reasonable restrictions on the petitioner’s mining activities could be lawfully imposed. The Court then outlined the relevant provisions: section 4 prohibited possession of or trade in mica without a licence, proprietor’s certificate, or digger’s permit; sections 5 and 6 established the procedure for granting proprietor’s certificates, miner’s licences, or dealer’s licences; sections 10 to 12 defined the duties of licencees and registered proprietors to keep accounts and to produce them for inspection; section 14 barred the removal of mica from one place to another without a pass; sections 17, 19 and 21A prescribed penalties for contraventions of the Act and its rules; and sections 22 to 24 dealt with miscellaneous matters, including empowering a police officer to arrest without warrant persons guilty of an offence under the Act, as well as to search, seize and detain mica removed without a pass. After setting out this framework, the Court turned to section 25, noting that the learned counsel’s principal argument centred on its provisions.

In order to apply the provisions of section twenty-five, the Court first read the entire statutory provision, which reads as follows: “Section 25. (1) The State Government may cancel the licence or proprietor’s certificate of any licensee or registered proprietor who— (a) allows his licence or proprietor’s certificate, as the case may be, to be used on behalf of any other person as authority to buy or have in his possession or sell mica extracted from a mica mine or from a mica dump; or (b) being a person to whom a miner’s licence has been granted extracts mica from a mine the particulars of which are not endorsed on his licence; or (c) is guilty of repeated failure to comply with any of the other provisions of this Act or rules made thereunder; or (d) is convicted of an offence under Chapter XVII of the Indian Penal Code committed in respect of mica: Provided that a licence or a proprietor’s certificate shall not be cancelled solely by reason of conviction from which the licensee or the registered proprietor has no right of appeal or revision; Provided further that a licence or a proprietor’s certificate shall not be cancelled unless the licensee or the proprietor has been furnished with the grounds for such cancellation and has been afforded reasonable opportunity to show cause why his licence shall not be cancelled. (2) A fresh licence or proprietor’s certificate shall not, without the previous sanction of the State Government, be granted to any licensee or registered proprietor whose licence or proprietor’s certificate has been cancelled under this section.” This provision contains the most severe penalty that the Act permits against a licence holder or proprietor, namely the power of the State Government to cancel the licence. The authority to exercise this power is vested in the highest executive of the State, who is expected to act honestly, impartially and in the public interest without extraneous considerations. The section sets out clear standards for the State Government to apply to the facts of each case. Clauses (a), (b), (c) and (d) of sub-section (1) describe with sufficient particularity the types of defaults and abuses that a licence holder must commit to attract the penal consequences. Clause (c), which is the focus of the present matter, represents the ultimate step that the State Government may take to remove a recalcitrant operator from the mining industry, provided that the operator is guilty of repeated failures to comply with any provision of the Act or the rules made thereunder, other than the situations covered by the preceding clauses. The discretion of the State Government under clause (c) of subsection (1) is limited by two important restrictions: (i) the non-compliance must be repeated rather than a single, isolated breach, and (ii) before cancelling the licence the State Government must give the licence holder a reasonable opportunity to show cause why the licence should not be cancelled.

The Court observed that the licence may be cancelled only when the defaulter is a truly recalcitrant operator and, before such cancellation, the State Government must provide the licence holder with a reasonable opportunity to show cause why the licence should not be withdrawn. The Court further noted that cancellation of a licence does not prohibit the licence holder or the proprietor from applying for a fresh licence; the sole requirement is that any new licence may be issued only after obtaining prior sanction from the State Government. In these circumstances, the Court considered whether the provision in question imposes an unreasonable restriction on the petitioner’s fundamental rights. It held that the statutory conditions attached to the grant of a licence are plainly reasonable and necessary for the regulation of the mining industry. The provisions of the Act, as previously explained, are intended merely to compel a licence holder to maintain proper accounts, to produce those accounts before the authorities when demanded, to prevent removal of mica from the fields without the requisite passes, and to impose penalties for contravention of the rules. The only objection, therefore, concerns the power to cancel a licence that is conferred on the State Government under section 25 of the Act. The Court stressed that this power is directed solely at achieving the object of the Act, namely the enforcement of its provisions, which have been enacted in the public interest. Moreover, the power is to be exercised on the basis of objective criteria and in conformity with the principles of natural justice. Consequently, the Court could not conclude that section 25(1)(c) of the Act imposes an unreasonable restriction on the petitioner’s fundamental rights under Articles 19(1)(f) and 19(1)(g) of the Constitution.

The Court clarified that it does not intend to establish a general proposition that every discretionary power granted to a State Government or the Union Government by law automatically operates as a reasonable restriction on a fundamental right. Such a blanket rule would undermine the very notion of fundamental rights, which are guaranteed against State action. Accordingly, the fact that a power is vested in the State Government rather than in a subordinate officer is merely one factor that may be considered when the judiciary assesses the reasonableness of a particular law; the overall reasonableness must be determined by examining the cumulative effect of all circumstances surrounding the conferment of the power. The Court then turned to the question of whether the State Government complied with the requirements of section 25(1)(c), read with its second proviso. The proviso permits the State Government to cancel a licence only after granting the licence holder a reasonable opportunity to show cause why the licence should not be cancelled. This proviso therefore confers a quasi-judicial authority on the State Government. The Court observed that the notion of “reasonable opportunity” is flexible and cannot be defined with precise certainty, and that its application must be determined on a case-by-case basis.

The Court observed that Article 311 of the Constitution supplies illustrative examples of how the doctrine of reasonable opportunity is applied in varied factual settings, and stressed that what constitutes a reasonable opportunity in one circumstance may not be reasonable in another. Consequently, the Court held that it is the duty of the judiciary, in each case, to examine the totality of circumstances before it and to determine whether a person has been afforded a reasonable opportunity to “show cause” in accordance with the second proviso to section 25(1) of the Act. The Court further noted that tribunals or authorities entrusted with quasi-judicial functions are bound by the same principles that govern the doctrine of bias as are regular judicial tribunals. In this regard, the Court referred to a recent decision in Gullapalli Nageswara Rao v. The State of Andhra Pradesh (1) and reproduced the well-settled principles governing the doctrine of bias: (i) no person shall be a judge in his own cause; (ii) justice must not only be done but must also appear to be done manifestly and undoubtedly. From these maxims the Court derived that if a member of a judicial body is subject to any bias—whether financial or otherwise—favoring or opposing a party to a dispute, or is in a position where bias must be presumed, that member must refrain from participating in the decision or sitting on the tribunal. The Court further reiterated that any direct pecuniary interest, however small, in the subject matter of inquiry disqualifies a judge, and that even a non-pecuniary interest will have the same disqualifying effect if it is sufficiently substantial to generate a reasonable suspicion of bias. The Court emphasized that these principles are equally applicable to authorities, although they are not courts of justice, when they are required to act judicially in determining the rights of others, that is, when they discharge quasi-judicial functions. In light of these principles, the Court identified three primary questions for consideration in the present matter. First, it must be examined whether the authority operating on behalf of the State Government—admittedly the then Revenue Minister who issued the impugned order—was personally biased against the petitioner. Second, the record must be scrutinised to ascertain whether the petitioner was actually given a reasonable opportunity to show cause, or whether that right was denied. Third, it must be determined whether the State Government found the petitioner guilty of repeated failure to comply with any other provisions of the Act or the rules made thereunder, and consequently cancelled the licence on that basis. The Court noted that the learned Advocate General, appearing for the State, contended that the State Government had exercised its power under section 25(1)(c) of the Act. According to that submission, a notice calling upon the petitioner to show cause was issued by the State Government on 7 March 1953, and the licence that had been granted to the petitioner was later cancelled by the State Government through a notification.

The notice cancelling the licence was dated September 1, 1955. During the period in which that notice was issued, Sri Krishna Ballav Sahay served as the Revenue Minister of the Government of Bihar and he exercised authority over the department that dealt with mines. A political rivalry existed between the Revenue Minister and Sri Raja Bahadur Kamakshya Narain Singh, who was the former landlord of the Ramgarh and Serampur estates in Hazaribagh district and who had leased the lands that are the subject of the present dispute to the petitioner. The State’s case contends that the lease was benami solely with respect to the proprietor, whereas the petitioner maintains that the proprietor’s wife, Rani Lalita Rajya Luxmi Devi, is the registered shareholder of the mining company. The question of whether the lease is benami only for the proprietor is currently the subject of title suit No. 53 of 1954, which is pending before the Subordinate Judge of Hazaribagh. Consequently, for the purposes of the present proceedings the Court assumes that a genuine dispute over title exists: the State Government asserts that the lease is benami only for the proprietor, while the petitioner claims to be the true lessee and argues that the proprietor’s wife holds merely a registered share in the company. Irrespective of which version is ultimately proven, the proprietor—either directly or through his wife—has a strong interest in the company, and the Government’s position is that the proprietor is the owner.

The petition alleges that the proprietor had opposed the Revenue Minister in the 1952 general election to the Bihar Legislative Assembly for the Giridih and Barkagaon constituency and that he defeated the Minister. It further states that, before that election, the Revenue Minister instituted a criminal proceeding against the proprietor in the District Court of Hazaribagh, charging him under section 500 of the Indian Penal Code. The High Court, by a judgment dated April 15, 1952, recorded the admitted fact that a political rivalry existed between the Minister and the proprietor and, in response to a petition to transfer the case, ordered that the criminal proceedings be moved to another forum. Ultimately, this Court transferred the criminal case from the State of Bihar to the jurisdiction of a Magistrate’s Court in Delhi on the ground that the political rivalry created a real risk of bias. Those facts are not repudiated in the counter-affidavit filed by the State. In that counter-affidavit a terse statement appears: “ That the allegations in para. 14(b) of the petition about the alleged political rivalry between Sri Kamakshya Narain Singh and Sri Krishna Ballav Sahay, the then Minister, Revenue, has no bearing on the facts of this case so far as the orders of the Government are concerned and to that extent the allegations are denied.” From this it can be inferred that the State does not deny the allegation of personal bias on the part of the Revenue Minister against the proprietor. It is likewise undisputed that the proceedings against the petitioner were initiated while the Revenue Minister was still in office and that the final order

In this case the Court found that the Revenue Minister possessed a personal bias against the proprietor and that the Minister acted on the belief that the lease held by the proprietor was a benami arrangement. Consequently, the Court held that the Minister, within the meaning of earlier decisions, was personally biased and therefore should not have participated either in initiating the enquiry or in cancelling the licence. The Court then turned to the statutory issue, observing that section 25 of the Act was constitutionally valid, and considered whether the requirements of that provision had been fulfilled here. The Court indicated that if the statutory conditions were not met, the State Government’s order, issued in contravention of those conditions, would inevitably violate the petitioner’s fundamental rights. The principal ground of challenge to the impugned order was that the State Government had failed to give the petitioner a reasonable opportunity to show cause why his licence should not be cancelled. The mining lease in question covered a lease-hold interest over 3,026 villages for a term of 999 years. The petition alleged that the petitioner had expended approximately Rs 16 lakhs to obtain the mining lease, together with a substantial sum on prospecting and developing the mines. On 7 March 1953 the Government of Bihar, through its Revenue Department Secretary, issued a notice to the petitioner requiring, within fifteen days of receipt, a response as to why action under section 25(1)(c) of the Act should not be taken to cancel miner’s licence No. 261-H. The notice alleged that the petitioner had committed violations of sections 10, 12 and 14 of the Bihar Mica Act, 1947 in relation to mica godowns at Marhand, Sultana, Simaria and Kowabar, and described these acts as repeated failures to comply with the Act. Upon receiving the notice, the petitioner wrote on 20 March 1953 requesting the Government to furnish the particulars of the allegations, and reiterated the request on 27 March 1953. Subsequently, on 1 May 1953 the Government transmitted Memorandum No. A/M1-8022/53R to the petitioner, setting out the specific violations. The memorandum, titled “Repeated failure to comply with the provisions of the Bihar Mica Act, 1947,” detailed that between 3 December 1952 and 11 December 1952 the Inspector of Mica Accounts had inspected various godowns of the petitioner and discovered contraventions of sections 10, 12 and 14. The Court noted that, although the inspection spanned several days, it effectively constituted a single inspection.

The memorandum indicated that the inspection of various godowns resulted only in relatively minor defaults in complying with the provisions of the Act. It also noted that one of the items listed pertained to an inspection allegedly carried out on 6 March 1952, for which the petitioner had been prosecuted and convicted, yet the licence had been renewed for another two years despite that conviction. Consequently, the outcome of that particular inspection was not relevant to the enquiry that had been triggered by the notice dated 7 March 1953. After setting out the particulars, the memorandum concluded that “it is clear that the Company has been guilty of repeated failure to comply with the provisions of the Bihar Mica Act, 1947,” and on that basis directed the Company to show cause why its licence should not be cancelled under section 25(1)(b) of the Act. Section 25(1)(b) provides that the State Government may cancel the licence of any licence-holder who, “being a person to whom a miner’s licence has been granted extracts mica from a mine the particulars of which are not endorsed on his licence.” The learned Advocate General conceded that the Government had not actually acted under clause (b) of section 25(1) and that the reference to that clause in the memorandum was a mistake, the intended reference being to clause (c) of section 25(1). On 17 May 1953 the petitioner submitted a detailed explanation concerning the charges. The petitioner began by stating that all relevant books of account and stock books had been seized by the Inspector of Mica Accounts and had not been returned despite repeated requests, and therefore it reserved the right to make further submissions once the books were returned. It also pointed out that, at the time of the inspection, it had not been asked to explain the alleged irregularity according to the usual procedure applicable to such matters, and thereafter proceeded to answer each of the allegations. The explanation offered by the Company appeared plausible, and even if the alleged contraventions were true, they seemed too trivial to justify the severe action taken by the State. In 1954 the Government instituted a suit against the proprietor seeking a declaration that the various companies created by him were fictitious and that the transactions entered into were benami. Following the petitioner’s explanation, there was a lull of more than two years; during that period the State Government neither returned the seized account books nor invited the petitioner to make further submissions or to examine the accounts seized by the authorities. Then, on 7 September 1955, a notification was issued stating that the Governor of Bihar was pleased to cancel the petitioner’s licence, directing the petitioner to cease operating the mica mines immediately and to produce the books of account relating to those mines on 12 September 1955.

The authorities required the petitioner to produce the books of account that pertained to the mines in question, specifically those relating to the godowns, and they set the date for this production as 12 September 1955. From the description of events that preceded this demand, it became clear that a licence which conferred rights of considerable importance had been withdrawn, and the reasons offered for doing so were at most insignificant. The inquiry that led to the cancellation was conducted by a department that was headed by the Minister, and the record showed that the Minister displayed a clear bias against the petitioner. The department cited certain technical non-compliances of the statutory rules that were supposedly discovered during an inspection of selected godowns, and it used those alleged breaches as a justification for withdrawing the licence. No opportunity was afforded to the petitioner to examine its own accounts or to explain, with reference to those accounts, the alleged defaults. After the petitioner submitted its reply, the authorities created a misleading sense of security within the petitioner, only to issue, after a lapse of two years, a formal notification that cancelled the licence. In addition to this action, the State filed a separate suit against the proprietor seeking a declaration that the lease in question was benami and requesting other reliefs. The record suggested that the Revenue Minister exercised hidden influence over the inquiry, and that the proceedings were initiated because of a political rivalry between the proprietor and the Revenue Minister. Although the stakes were high, the inquiry was carried out in a manner that denied the petitioner any genuine chance to explain its conduct or to refute the allegations, and the cancellation order was ultimately signed by the same Revenue Minister who had directed the inquiry.

In these circumstances, the Court concluded that the petitioner had not been given a reasonable opportunity as required by the second proviso to section 25(1) of the Act. Moreover, the State Government had failed to demonstrate, on the basis of the material before it, that the petitioner had committed a repeated failure to comply with any provision of the Act. The particulars that the Government had furnished did not disclose any such repeated failure. Under section 25(1)(c) of the Act, a repeated failure to comply with the provisions of the Act is a necessary condition for the cancellation of a licence; consequently, unless such repeated failure is established, the State lacks the authority to cancel the licence under that clause. The notice that commenced the proceedings and the subsequent notification cancelling the licence did not expressly state that the petitioner was guilty of “repeated failure” within the meaning of the said provision. Although the Government’s particulars alleged that the petitioner had repeatedly failed to comply with the Act, those particulars were unsupported. Apart from a default that occurred in March 1952, the only alleged contravention was discovered by the Inspector of Mica Accounts during a single inspection of certain godowns conducted between 3 December 1953 and 11 December 1953. The findings of that one continuous inspection could not, on their own, constitute proof of a repeated failure as contemplated by section 25(1)(c).

In examining the evidence, the Court observed that nothing in the record demonstrated that the petitioner had been found guilty of violating any provision of the Act on any occasion after the default that occurred in March 1952. The only prosecution that had been mentioned earlier concerned that March 1952 default, and the Court noted that the petitioner had not been prosecuted for any other breach of sections 10, 12 or 14 of the Act. Moreover, the Court held that the prosecution relating to the March 1952 default could not be used as a basis for the cancellation, because the State Government had nevertheless renewed the licence for the financial year 1953-54. Given this state of the record, the Court concluded that the respondents had not succeeded in proving that the petitioner was guilty of the “repeated failure” required by section 25(1)(c) of the Act. Because that essential condition was not satisfied, the respondents possessed no authority to invoke section 25(1)(c) to cancel the licence. The Court further stated that the Government had also failed to give the petitioner a reasonable opportunity to be heard, as required by the second proviso to section 25(1). Consequently, the Court accepted the petition, granted a writ of certiorari and set aside the order dated 1 September 1955 of the Government of Bihar that had cancelled miner’s licence number 261-H of 1951. The Court also ordered that the respondents pay the costs of the petition. The petition was therefore allowed.