Sinha Govindji vs The Deputy Chief Controller of Imports and Exports

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

Court: Supreme Court of India

Case Number: Petitions Nos. 307 and 308 of 1960

Decision Date: 23 March 1961

Coram: B.P. Sinha, S.K. Das, A.K. Sarkar, N. Rajagopala Ayyangar, J.R. Mudholkar

In this case the petitioner, Sinha Govindji, who was engaged in the manufacture of celluloid and plastic bangles, obtained two import licences from the Ministry of Trade. The first licence was dated 18 January 1960 and the second licence was dated 2 February 1960. Both licences authorised the import of cellulose‑nitrate sheets for two distinct licensing periods, namely the period from April to September 1960 and the period from October 1960 to March 1961.

Subsequent to the issuance of the licences the authorities of the Imports and Exports department received information indicating that the petitioner neither possessed any machinery or equipment at his premises nor held any municipal licence or factory licence required for his trade. Acting on that information the department issued a notice on 27 May 1960 to the petitioner stating that the Government of India intended to cancel the licences granted to him. The notice invoked the power conferred by clause 9 of the Imports (Control) Order, 1955, and demanded that the petitioner furnish sufficient cause within ten days of the notice if he wished to oppose the proposed cancellation.

The petitioner replied that the notice failed to specify which of the grounds enumerated in clause 9 was being relied upon, rendering it impossible for him to show cause. He further asserted that he had done nothing to justify cancellation of the licences under the said rule. On 2 July 1960 the Chief Controller of Imports and Exports sent a letter to the petitioner wherein the information obtained by the department was reiterated. The letter alleged that the petitioner had obtained the Essentiality Certificate from the Director of Industries by fraud and misrepresentation, and that he had subsequently obtained the licences on the basis of that certificate. The Chief Controller invoked clause 10 of the Imports (Control) Order, 1955, and directed the petitioner to show cause within fifteen days as to why further issue of licences should not be suspended under clause 8 of the same Order for contravening the Imports Trade Control Regulations.

Despite the petitioner’s objections, on 3 August 1960 the department issued two orders dated 4 August 1960 cancelling both licences in favour of the petitioner. The petitioner challenged the validity of those cancellation orders on several grounds. Chief among them was the allegation that he had not been given a real opportunity to show cause against the proposed cancellation, in direct contravention of clause 10 of the Imports (Control) Order, 1955, which requires that “No action shall be taken under clauses 7, 8 or 9 unless the licensee… has been given a reasonable opportunity of being heard.” The petitioner further contended that the cancellation arbitrarily deprived him of his constitutional right to carry on his business under article 19 of the Constitution of India.

In this matter, the Court observed that the petitioner claimed his fundamental right to conduct his business had been infringed under article 19 of the Constitution of India. The record showed that after receiving a letter dated 2 July 1960 from the import authorities, the petitioner was not afforded any genuine opportunity to be heard on the grounds alleged in that letter before the cancellation orders were issued on 3 August 1960. The Court held that, on the facts, there was a clear violation of the requirements of clause 10 of the Imports (Control) Order, 1955, which embodies the principles of natural justice. Consequently, the orders dated 3 August 1960 that cancelled the licences granted to the petitioner were deemed invalid and were ordered to be set aside.

The judgment originated in the original jurisdiction of the Supreme Court and concerned petitions numbered 307 and 308 of 1960, filed under article 32 of the Constitution of India for the enforcement of fundamental rights. Counsel for the petitioner was instructed by senior advocates, while counsel for the respondents were also appointed. The judgment was delivered on 23 March 1961 by Justice S. K. Das. The two writ petitions challenged two orders dated 3 August 1960, by which the Joint Chief Controller of Imports in Madras cancelled two import licences, numbers A 863296 and A 836640, dated respectively 18 January 1960 and 2 February 1960. These licences had been granted to Messrs Sinha Govindji, whose address was Bangalore Road, Bellary, for the import of cellulose nitrate sheets valued at rupees 75,000 each for two licensing periods covering April to September 1959 and October 1959 to March 1960.

The petitioner’s grievance was that respondents 1 and 2 had cancelled the licences without providing a reasonable opportunity to be heard, as required by clause 10 of the Imports (Control) Order, 1955, before the impugned orders were passed. The petitioner alleged that this denial of a hearing amounted to an arbitrary deprivation of his fundamental right under article 19 of the Constitution to pursue his business. The Court noted that the issue for determination was limited to this point and therefore only the material facts bearing on it needed to be recounted.

The petitioner explained that the proprietor of the firm was an Indian citizen engaged in the manufacture of celluloid and plastic bangles, among other items, at Bellary in the Mysore State. After the two licences were issued, the firm entered into firm commitments to import cellulose sheets amounting to rupees 99,000. On 4 March 1960, the petitioner received two letters from the Assistant Controller of Imports, Madras, requesting information on the extent to which the licences had been utilized and directing the petitioner not to enter into new commitments against those licences without specific prior approval from the Controller’s office. This correspondence gave rise to further communications between the petitioner and the controlling authorities, the details of which are not essential to the present reasoning.

On 27 May 1960 the petitioner received two notices, of which the Court set out the full text of one. The notice declared that, exercising the powers vested by clause 9 of the Imports (Control) Order, 1955, the Government of India, through the Ministry of Commerce and Industry, proposed to cancel licence No A 836640/60/AU/M dated 2 February 1960, which was valued at Rs 75,000 for the import of Cellulose Nitrate Sheets from the Soft Currency area except South Africa. The licence had been granted by the Joint Chief Controller of Imports and Exports, Madras, to Messrs Sinha Govindji, residing at No 18, Bangalore Road, Bellary‑2. The notice required that sufficient cause against the proposed cancellation be furnished to the Joint Chief Controller of Imports and Exports, Madras, within ten days from the date of the notice, either by Messrs Sinha Govindji, by any bank, or by any other interested party. It further directed that, in view of the above, Messrs Sinha Govindji, any bank, or any other interested party should not enter into any commitments against the said licence and should return the licence immediately to the Joint Chief Controller of Imports and Exports, Madras. The notice was signed by J. K. Sarkar, Deputy Chief Controller of Imports and Exports. The Court noted that the notices did not specify which ground under clause 9 of the Imports (Control) Order, 1955, was being invoked for the proposed cancellation. Clause 9 enumerates four grounds for cancellation, namely: (a) that the licence was granted through inadvertence or mistake or obtained by fraud or misrepresentation; (b) …; (c) …; and (d) …. The Court omitted the latter three grounds as they were not relevant to the present case. By a letter dated 30 May 1960 the petitioner referred to the earlier correspondence and observed that clause 9, under which the proposed action was to be taken, provided for cancellation on various grounds, but the notice failed to disclose which specific ground was being relied upon. Consequently, the petitioner argued that without knowledge of the precise ground it was impossible to show cause, and asserted that it had done nothing to justify cancellation and that, as far as it could see, no ground for cancellation existed. On 4 August 1960 the petitioner received two orders, dated the previous day, effecting the cancellation of the two licences in its favour. The orders, similar in wording, stated that Messrs Sinha Govindji, any bank, or any other person had not come forward with sufficient cause against Notice No 1/LCL/60/CDN(1) dated 27 May 1960, which proposed to cancel licence No A 863296/60/AU/M dated 18 January 1960, valued at Rs 75,000 for the import of Cellulose Nitrate Sheets from the Soft Currency Area except South Africa, granted by the Joint Chief Controller of Imports and Exports, Madras. The orders cancelled the licence under the powers conferred by clause 9 of the Imports (Control) Order, 1955, but, as the Court observed, they likewise failed to state on which specific ground the cancellation was based.

In this matter the respondent authorities issued two cancellation orders that were virtually identical, one of which read as follows: “Whereas M/s. Sinha Govindji, Bangalore Road, Bellary or any bank or any other person have not come forward furnishing sufficient cause, against Notice No. 1/LCL/60/CDN(1) dated 27‑5‑1960, proposing to cancel licence No. A 863296/60/AU/M dated 18‑1‑60, valued at Rs. 75,000 for the import of Cellulose Nitrate Sheets from the Soft Currency Area except South Africa granted to the said M/s. Sinha Govindji, Bangalore Road, Bellary, by the Joint Chief Controller of Imports and Exports, Madras, Government of India, in the Ministry of Commerce and Industry in exercise of the powers conferred by clause 9 of the Imports (Control) Order, 1955, hereby cancel the said licence No. A 863296/60/AU/M dated 18‑1‑60 issued to the said M/s. Sinha Govindji, Bellary.” The orders, however, failed to specify any ground upon which the licences were being cancelled. The petitioner objected that the cancellation of the two licences caused the customs authorities to retain his goods, which had already arrived at the port and were awaiting clearance, thereby exposing him to heavy demurrage charges and other losses. Nonetheless, the petitioner’s principal contention was that he had been denied any real opportunity to show cause against the proposed cancellation, an omission that the petitioner alleged contravened clause 10 of the Imports (Control) Order, 1955, which provides: “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.” In response, the respondents explained that after the licences had been issued, a letter dated 16 February 1960 was received from the Director of the Small Industries Service Institute, Bangalore, stating that the petitioner possessed no machinery or equipment required to manufacture the articles for which the raw material had been imported. Following receipt of that letter, a joint investigation was conducted by the Assistant Director of Industries, Bellary, and the Deputy Director of the Small Industries Service Institute, Hubli. The investigation concluded that at the time of inspection the petitioner’s firm had neither machinery nor equipment at its premises and further lacked any municipal licence or factory licence. Consequently, on 2 July 1960 the Chief Controller of Imports and Exports wrote to the petitioner, conveying the findings of the investigation and demanding that the petitioner show cause why further issuance of licences should not be suspended under clause 8 of the Imports (Control) Order, 1955. The relevant extracts from that letter were quoted as follows: “Gentleman, I write to refer to your letter dated the 21st May, 1960, and 30th May, 1960, on the above subject, and to say that a joint investigation conducted by the Deputy Director, Small Industries Service Institute, Hubli, and Assistant Director of Industries, Government of Mysore, Bellary, revealed that at the time of inspection of your firm by them, no machinery and equipment existed in your premises and that you had no Municipal licences or Factory licence or Factory.” Thus, the respondents argued that the petitioner’s request for relief could not be entertained and that, in accordance with clause 10, the petitioner was required to show cause within fifteen days from receipt of the letter why his licences should not be suspended.

The letter stated that at the time of inspection no machinery or equipment was found on the petitioner’s premises and that the petitioner did not possess any municipal licence or factory licence. It further observed that the petitioner had obtained the Essentiality Certificate from the Director of Industries by fraudulent means and by misrepresenting facts, and that the licences in question had been secured by presenting that certificate to the Joint Controller of Imports and Exports in Madras. The correspondence declared that this conduct directly violated the Import Trade Control Regulations as defined in paragraph 6(vii) of Chapter V of the Import Trade Control Handbook of Rules and Procedure, 1956, read with clause 8(b) of the Imports (Control) Order No. 17/55 dated 7 December 1955. Consequently, the letter rejected the petitioner’s request made in the referenced letters and, invoking clause 10 of the same Imports (Control) Order, demanded that the petitioner show cause within fifteen days of receipt of the letter as to why further issue of licences should not be suspended under clause 8 of the Order for the alleged contravention. The letter warned that failure to respond within the stipulated period would be taken as an admission that the petitioner had no defence, and that the office would proceed to adjudicate against the petitioner without any further reference to him.

The respondents argued that the July 2, 1960 letter sufficiently set out the ground for cancellation of the petitioner’s licences and that, because the petitioner furnished no satisfactory explanation, the cancellation orders issued on August 3, 1960 were proper. They further contended that the requirements of clause 10 of the Imports (Control) Order, 1955 had been met by the content of the July 2 letter. Upon careful examination of the affidavits filed by both parties, the Court concluded that the petitioner had not been afforded a reasonable opportunity to be heard before the cancellation orders were made. It noted that the earlier notice dated May 27, 1960 failed to specify any ground for the proposed cancellation; it merely referred to clause 9 without indicating which of the four grounds contained therein would be invoked. As a result, the petitioner’s letter of May 30, 1960 explained that, lacking knowledge of the specific ground for cancellation, the petitioner could not meaningfully respond to the show‑cause requirement. Since there was no dispute that the May 27 notice was deficient and the respondents did not persuade the Court that the notice alone could satisfy the hearing requirement, the Court held that the cancellation orders were procedurally defective and therefore must be set aside.

The respondents sought to rely upon the letter dated 2 July 1960 to argue that the petitioner had been afforded a reasonable opportunity to show cause against the cancellation of the two licences. In response, the petitioner contended, with justification, that the July 2 letter dealt with a separate issue – namely the suspension of the grant of further licences under clause 8 – an issue that also required a reasonable opportunity to be heard under clause 10. The operative portion of the letter expressly invited the petitioner to “show cause, within fifteen days from the date of this letter, as to why further issue of licences to you should not be suspended under clause 8.” Consequently, the letter was directed at a proposed action under clause 8.

The respondents, however, pointed out that the subject matter of the July 2 letter referred to the notices dated 27 May 1960 for cancellation of the licences and also mentioned the earlier correspondence on the same subject, specifically the petitioner’s letters dated 21 May 1960 and 30 May 1960. On that basis, they argued that the petitioner should have understood, from the reference to the subject‑matter and the earlier letters, that the grounds mentioned in the July 2 correspondence related to proposed action under both clause 8 and clause 9, even though the operative part mentioned only clause 8. It was acknowledged that the content of the July 2 letter ought to be examined from a substantive perspective rather than through a strict technical construction of statutory language.

When the letter is considered in that substantive light, it becomes difficult to conclude that the letter asked the petitioner to show cause against the cancellation of its licences, particularly in view of the subsequent departmental letters that would later be referred to. Assuming, for argument’s sake, that the letter did require the petitioner to show cause, the subsequent events are relevant. The petitioner received the July 2 letter on 5 July 1960 and, within ten days, its solicitor wrote requesting a copy of the joint investigation proceeding and the accompanying report. The solicitor’s letter also sought other relevant documents that would enable the petitioner to prepare a proper show‑cause submission. It indicated that the petitioner would file its show‑cause once the necessary documents were received, would seek a personal hearing, and prayed that no further action be taken pending those steps.

The respondents did not reply to the solicitor’s request until 6 August 1960, which was three days after the cancellation orders had already been issued. Moreover, the petitioner was not provided with a copy of the investigation report until a considerably later date, and no information was conveyed to the petitioner that the report would not be made available. These circumstances raised doubts about whether the petitioner had been given a genuine opportunity to be heard before the cancellation orders were made.

The Court observed that the petitioner was required to show cause immediately, yet the petitioner received no response to the letter dated 15 July 1960 until three days after the cancellation orders had been issued. The cancellation orders, according to the Court, plainly stated that no cause had been shown, even though the petitioner had explicitly asked for an opportunity to be heard on the matter. In the letter dated 6 August 1960, the respondents indicated that the issue would be considered only after receipt of a letter of authority from the solicitor, executed in proper form on stamped paper, and they made no reference to the fact that a cancellation order had already been made in the interim. The respondents did not wait for any explanation before proceeding with the cancellation. On 10 August 1960, the petitioner’s solicitor filed a written authority asserting that such an authority was unnecessary because the two licences had been cancelled arbitrarily and without granting the petitioner a chance to be heard. Subsequent correspondence dealt with a proposed action under clause 8, and the petitioner contested the accuracy of the joint investigation report on several essential points, including the alleged absence of machinery and equipment. The Court noted that it was unnecessary to discuss the details of that correspondence, as the proposed action under clause 8 was not the subject of the present proceeding. The Court further stated that, considering the events after the receipt of the letter dated 2 July 1960, it was evident that the petitioner had been denied any real opportunity to be heard on the grounds raised in that letter before the cancellation orders were issued on 3 August 1960. The Court concluded that there was a clear breach of clause 10, which embodies the principles of natural justice, and therefore declared the cancellation orders to be invalid and ordered them to be set aside. Accordingly, the writ petitions were allowed, the petitioner was awarded costs, a single rehearing fee was ordered, and the petitions were dismissed in favour of the petitioner.