Full Judgment Text
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 12
PETITIONER:
NARAYANAN SANKARAN MOOSS
Vs.
RESPONDENT:
THE STATE OF KERALA AND ANOTHER
DATE OF JUDGMENT12/10/1973
BENCH:
DWIVEDI, S.N.
BENCH:
DWIVEDI, S.N.
REDDY, P. JAGANMOHAN
GOSWAMI, P.K.
CITATION:
1974 AIR 175 1974 SCR (2) 60
1974 SCC (1) 68
ACT:
Indian Electricity Act (9 of 1910) s. 4(1) and (3)-
Consultaion with State Electricity Board before revocation
of licence of licensee-If mandatory.
HEADNOTE:
Section 4(1), Indian Electricty Act, 1910, as amended in
1958, provides that the State Government may, if in its
opinion the public interest so requires, and after
consulting the State Electricity Board, revoke a licence in
certain cases. Sub-section (3) provides that no licence
shall be revoked under sub-S. (i) unless the State
Government has given to the licensee not less than three
notice in writing stating the grounds on which it is
proposed to revoke the licence, and, has considered the
cause shown by the licensee.
On June 21, 1962, the respondent-Government wrote to the
State Electricity Board that the respondent considered that
the licence of the appellant should be revoked under s.
4(1)(a) and requested the Board to communicate its views.
On July 26, the Board recommended the revocation. On August
17, the respondent issued a notice to the licensee, of which
the appellant was proprietor under s. 4(3), to show cause
why the licence should not be revoked. On November 5, 1962,
within three months, the appellant sent his explanation. On
April 6, 1963 the respondent wrote to the Board that they
had considered the explanation of the licensee, that since
the explanation was not satisfactory the respondent had
decided to revoke the licence. and inquired if the Board was
willing to purchase the undertaking. On 20th April, 1963,
the Board expressed its willingness to purchase the
undertaking with effect from August 1, 1963. On May 17. 1963.
the respondent revoked the licence with effect from August
1, 1963, and directed the appellant to deliver the
undertaking to the Board.
The appellant’s writ petition to the High Court challenging
the orders was dismissed.
Allowing the appeal to this Court,
HELD : (1) Section 4 contemplates that the Board should make
its recommendation only after considering the explanation of
the licensee. When the government consults the Board on the
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 12
question of revocation of a licensee the Board is to make up
its mind as to whether it should recommend, (i) to revoke
the licence, or (ii) not to revoke the licence, or (iii) to
permit the licence to remain in force subject to such
further terms and condition, as may be though proper. The
Board would not be able to make a choice out of these three
courses without considering the explanation of the licensee,
because, the explanation may make out case for not revoking
a licence. In the present case, the Board was consulted
much before the receipt of the appellant’s explanation. The
entire chain of correspondence between the Government and
the Board shows that there was no second consultation
between the Government and the Board regarding the
revocation of the licence after the Government had received
the appellant’s explanation to the show cause notice. Any
telephonic consultation is out of question, because, such
telephonic consultation could not be held with the three
members of the Board at one and the same time, nor could the
members bestow collective consideration on the matter before
giving the Board’s opinion thereon. [64D-E; 65F; 68F-H; 69A-
C]
(2) There is no force in the contention that the
consultation with the Board is only as regards ’public
interest. [69C]
(3) The words "after consulting the Board" show that the
construction suggested by the respondent that the Board was
to be consulted only at the stage when the Government takes
a provisional decision is not correct. [69D]
(4)Having regard to the object and context the condition
of consulting the Board after the licensee’s explanation was
received is mandatory and the breach of this condition will
makes the order of revocation void, [70F]
61
(a) The power of revoking a licence is a drastic power as it
results in the severe abridgment of the right to carry on a
business. Having in mind the requirements of Art. 19(1)(g)
of the Constitution, Parliament has prescribed conditions to
prevent the abuse of power and to ensure just exercise of
the power,. [69G]
(b)When revoking a licence the State-Government acts in
two stages. It forms a tentative opinion regarding
revocation of a licence and calls for explanation from the
licensee. When the explanation is received, Government
considers it and thereafter, if not satisfied, passes the
final order of revocation. But first impressions and
provisional judgments have a tendency to become Ultimate
ideas and final judgments. Therefore, Parliament interposed
the condition of consultation with the Boar before
government takes its final decision. The Board is an
independent body consisting of three members one of whom is
a technical expert, the other a financial expert and the
third an administrative expert. While considering the
facts presented to it by the Government and by the licensee
in his explanation, the Board will act with an open mind
and will offer unbiased counsel to the Government. [706-E]
(c)The clause "if in its opinion the public interest so
requires" and cls. (.a) to (d) of s. 4 prescribe some of the
conditions precedent for the exercise of the power of
revocation and an order of revocation in breach of any of
these conditions will be void. The phrase "after consulting
the State Electricity Board" occurs between the clause ’if
in its opinion the public interest so requires’ and cls. (a)
to (d). The context shows that the consultation with the
Board is also a condition precedent for making the order of
revocation and breach of this condition precedent would
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 12
entail the same consequences as the breach of other
conditions, [69G-70B]
(d)It is true that the opinion of the Board is not binding
on the government, for, in spite of the Board advising
against revocation, the government, if satisfied that it is
necessary to revoke the licence, may revoke the.licence. But
this should not be regarded as an overweighing
consideration, because, it will normally be difficult for
the government to ignore the Board’s expert advice. [71D-E]
State of U.P. v. Manbodham Lal Srivastava, [1958] S.C.R.
533, H. N. Rishbud v. State of Delhi, [1955] 1 S.C.R. 1150.
Ram Gopal Chaturvedi v. State of Madhya Pradesh, The State
of Bombay V. D. .A. Korgaonkar, [1970] 1 S.C.R. 472, Rollo
v. Minister of Town and Country Planning, Civil Appeal
No._289 of 1958 decided on 6-5-1960, Derham v. Church
Commissioners for England, [1954] Appeal Cause 245 referred
to.
(5)It is true that the appellant did not urge the point,
regarding consultation with the Board, in the High Court.
But no prejudice would be cause to the respondents if the
point was.permitted to raised in this Court. [63A; 65G]
(a)The counter affidavits of the Government and the Board
show that the Government as well as the Board understood
that petition as raising the challenge to the orders on the
ground of want of due consultation with the Board before
making the impugned orders and they have replied to the
implicit challenge in the petition. [63F-G]
(b)The facts requisite for deciding the issue are on
record and the appellant had raised the point as a ground in
the statement of the cm, and the respondents are not taken
by surprise. [63G-H; 64A]
State of U.P V. Manbodhan Lal Srivastava, [1958] S.C.R. 533,
Hamdard Dwakhana (wakf), Delhi and another v. Union of India
and others, [1965] 2 S.C.R. 192, Kargagatchi and others v.
Nagarathinathachi, [1965] 3 S.C.R. 335, State of Mysore v.
Guduthuk Thimmappa and son and another, [1967] 1 S.C.R.
627, and Motibhai Pulabhai Patel & Co. v. M/s, R. Prasad and
others, [1969] 1 S.C.R. 580, distinguished.
JUDGMENT:
CIVIL APPELLATE JURISDICTION :Civil Appeal No. 1279 of 1967.
Appeal from the judgment and order dated the 1st February
1965 of the Kerala High Court in O.P. No. 1138 of 1963.
62
B. Sen, S. S. Ananthakrishna Iyer, K. B. Rathee, N. M.
Ghatate and S. Balakrishnan, for the appellant.
V. A. Seiyid Mahmud and A. G. Pudissery, for respondent
No. 1
A. R. Somanatha Iyer and M. R. K. Pillai, for respondent
No. 2
The Judgment of the Court was delivered by
DWIVEDI J. The Kattayam Electric Supply Agency, Kottayam, is
the licensee for the supply, of electric energy in Kottayam
in the State of Kerala. The appellant, N. S. Mooss, is the
proprietor of the licensee, By an order, dated May 17 1963,
the State of Kerala revoked the licence with effect from
August 1, 1963. The order was made under s. 5(1) (a) of the
Indian Electricity Act, 1910 (hereinafter called the Act.
On the same date, the State of Kerala made another order
under s. 5 ( 1 ) (c) and (3) of the Act directing the
appellant to. deliver the undertaking to the Kerala
Electricity Board (hereinafter called the Board) on or
before July 1, 1963. The appellant filed a writ petition
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 12
under Art. 226 of the Constitution challenging the two
orders. The High Court has dismissed the petition. Hence
this appeal.
Sri Sen, counsel for the appellant, has urged four points
before us. One of these points is : The Board endorsed the
State proposal for the revocation of the licence before the
explanation of the appellant reached the State. The
explanation was not placed before the Board and accordingly
not considered by the Board. So there was no due
consultation of the Board and the order of revocation is
void. As we are accepting this point, it is not necessary
to notice his remaining points. We shall state only such
facts as are necessary for the decision of the aforesaid
point.
On August 17, 1962, the State Government issued a notice to
the appellant under s. 4 (3) of the Act asking him to show
cause why the licence should not be revoked. He was asked
to send his explanation within three months and three days
from the date of the receipt of the notice. Much before the
issue of this not I ice. On June 21, 1962, the State
Government sent the letter No. 11795-EL 1/61/17/P.W. to the
Board. The letter states that the Government considered
that the licence of the appellant should be revoked under s.
4(1)(a) and requested the Board to communicate its views to
the Government. On July 26, 1962 the Board sent its reply
to the Government. The reply letter is No. B.VII/57051/62.
The Board recommended the revocation of the licence. On
November 5, 1962, Within three months of the issue of the
notice under s. 4(3), the appellant sent his explanation to
the Government. The Government was not satisfied with the
explanation. It passed the impugned order on,May 17, 1963
revoking the licence. These facts support Sri Sen’s
contention that the Board’s recommendation was made without
looking into the appellant’s explanation. Indeed. it was
humanly impossible for the Board to have looked into the
explanation.
Counsel for the State Government and the Board have raised a
preliminary objection. They point out that the argument
advanced by Sri Sen was neither raised in the writ petition
nor urged before the
63
High Court. According to them, it should not be allowed to
be raised in this Court. it is true that the point is not
specifically raised in the writ petition. But, in our view,
it is embedded in paragraphs 6 and 22 of the affidavit
accompanying the petition. Paragraph 6 asserts that the
aforesaid two orders are "illegal and void and of no
effect." Paragraph 22 states that "the entire proceedings
culminating in the issue of, (the two orders) constitute a
gross violation of the .... provisions of the Act" Paragraph
22 clearly asserts that the impugned orders have been made
in breach of the statutory conditions for revoking a
licence. Earlier we have, said that Sri Sen’s contention is
embedded in paragraphs 6 and 22. We are reassured of our
construction of these paragraphs by the fact that the
Government as well as the Board have also construed the
petition in the same sense and have controverted it in their
affidavits. Paragraph 3 of the affidavit filed on behalf of
the Government states : "(The appellant’s) objections were
considered and the Government formed an opinion that it was
in public interest to revoke the licence and after
consulting the Electricity Board revoked the licence as the
Government were satisfied that in their opinion the,
petitioners hid made wilful and unreasonably prolonged
default in doing several things required of him by or under
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 12
the Indian Electricity Act." In reply to paragraph 22 of the
petition, the Government’s affidavit states that "orders
were passed in accordance with the provisions of all the
relevant Acts and the Rules and after considering the
objections raised by the licensee." Paragraph 5 of the
Board’s affidavit is more outspoken and elaborate. It
states : "The State Government consulted the Board in the
matter of revoking the licence of the Kottayam Electric
Supply Agency by invoking s. 4 (1) (a) of the Indian
Electricity Act, 1910 and the’ Board vide letter No. BVI/
5705/62, dated 26-7-1962 endorsed the views of the
Government on the matter (and) recommended the revocation of
the licence." Paragraph 18 of the Board’s affidavit is a
reply to paragraph 22 of the appellant’s affidavit’s.
Paragraph 18 asserts that the impugned orders "were passed
in accordance with Law and the Rules thereunder." It is thus
unmistakably plain that the Government as well as the Board
understood the petition as raising a challenge to the orders
on the ground of want- of due consultation of the Board
before the making of the impugned orders. And they have
replied to that implicit challenge in the petition. It
appears to us that there is little force in the preliminary
objection that Sri Sen’s contention is not raised in the
petition.
It is true that this point was not urged on behalf of the
appellant in the High Court. But as the facts requisite for
deciding the issue are on record, we think that we should
allow the point to be raised as it goes to the root of the
matter. It may be noted that the appellant has raised this
point in ground No. 6 of his statement of case. That ground
is : ."The Government without any further though and relying
solely on this report proceeded to revoke the licence and
sought the view of the Electricity Board on the matter. The
Board with the Managing Director of the Company as one of
its members readily accepted the report and agreed with the
suggestion of the Government for revocation of the licence.
It is after having made up its mind to revoke the
64
licence, as seen from Ex. R-2, that the Government issued
notice to the appellant to show cause against revocation."
It cannot be said that the respondents have been taken by
surprise. They already, know that the point would be
agitated in the Court.
Counsel for the Government says that if the point had been
clearly taken in the petition and raised in the High Court,
the Government could have led evidence to show that the
Board was consulted a second time after receipt of the
appellant’s explanation and that the Board, after
considering the, explanation, had again agreed with the
Government’s proposal. He has advanced an extreme argument
that even telephonic consultation could have been held
between the Government and the Board after the receipt of
the explanation.
Telephonic consultation is out of question. The Board is
constituted under the Indian Electricity (Supply) Act, 1948.
It is a corporate body. It consists of at least three
members. One of them has experience of commercial matters
and administration; the other is an Electrical Engineer with
wide experience; and the third has experience of accounting
and financial matter in a Public utility undertaking,
preferably an electricity supply undertaking. Section 13 of
the said Act provides that all orders and decisions of the
Board shall be. authenticated by the signature of the
Chairman. It is obvious that telephonic consultation could
not be held with. three members of the Board at one and the
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 12
same time, nor could the members bestow- collective
consideration on the matter before giving the Board’s
opinion thereon. We have little doubt in our mind that
there was no second consultation between the Government and
the Board after the receipt of the explanation. Had there
been a second consultation, the Board would surely have
disclosed it in its counter-affidavit. The evidence already
on record excludes the possibility of a second consultation
after the receipt of the explanation. We have earlier
quoted the number and date of the Government letter by which
the Government asked for the Board’s opinion on the issue of
revoking the licence. The number and date of the Board’s
letter recommending revocation of the licence has also been
mentioned earlier. On receiving the Board’s letter, the
Government sent another letter to the Board. It is dated
April 6, 1963. The number of the letter is 11795-WY/61-
20/PW. The subject of the letter is : "Electricity Electric
Supply Agency acquisition of." The letter makes reference to
two earlier letters : "(1) Government letter No. 11765-
ELI/1/17/PW; (2) your reply No. BVI/5705/62 dated 26-7-1962.
It may be seen that the Government letter referred to above
is the letter by which the Government asked for the opinion
of the Board ,on the question of revocation of the’ licence.
The second letter is the reply of the Board recommending
revocation of the licence. We have already referred to
these letters. The. Government letter of April 6, 1963
states that the Government "have considered the explanation
furnished by the Kottayam Electric, Supply Agency.. . . . to
the show cause notice served on him (No. 11795/ELI/61/19/PW
dated 17-81962) under S. 4(3) of the Indian Electricity Act,
1910. Since the
65
explanation is not satisfactory, the Government in public
interest have decided-to revoke the licence granted to the
said Agency." It adds : "I am therefore directed to enquire
as required under section 5(b) of the said Act whether
the Kerala State Electricity Board is willing to
purchase the undertaking. If so, the willingness of the
Board may be communicated to the Government at the earliest.
The Board replied to this letter. The reply is dated
April 20, 1963. The letter’s number is LAW 5705-62/20-4-63.
The letter informs the Government that the Board was willing
to purchase the undertaking with effect from August 1,
1963. On May 17, 1963 the Government revoked the licence
with effect from August 1, 1963. The same day another
order was passed by the Government. The number of the Order
is 11795-EE 1/61-31/PW. The material portion of the order is
:
"Whereas the Government have, under S. 5,
sub-section
(1) Clause (b) of the Act enquired from
the Kerala State Electricity Board whether the
Board is willing to purchase the undertaking
owned by the Kottayam Electric Supply agency
And whereas, the Kerala State Electricity
Board has in its letter No. Law-I-5705/62
dated 20-4-63 intimated the Government that it
is willing to purchase the said Undertaking;
Now, therefore, in exercise of the powers
conferred by
Section 5, sub-section (1) Clause (c) and
Section 5 Sub-section (3) (of the Act) the
Government of Kerala hereby give notice to the
Kottayam Electric Supply Agency to sell and
deliver possession of the said Undertaking to
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 12
the Kerala State Electricity Board on or
before the first day of July, 1963."
This entire chain of correspondence between the Government
and the Board would unmistakably show that there was no
second consultation between the Government and the Board
regarding the revocation of the licence after the Government
had received the appellant’s explanation to the show cause
notice served on him. In the circumstances of the case we
are satisfied that no prejudice will be caused to the
respondents if the point is permitted to be raised in this
Court. So we permit Sri Sen to argue the point.
In State of U.P. v. Manbodhan Lal Srivastava,(1), Hamdard
Dwakhana (Wakf), Delhi and another v. Union of India and
others, (2) Karpagathachi and others v. Nagarathinathachi(3)
and State of Mysore v. Guduthur Thimmappa and son’ and
another(4) this Court did not permit a new issue of fact to
be urged by the appellant. In Motibhal Pulabhai Patel & Co.
v. M/s R. Prasad and others(5) the case
(1)[1958] S.C.R. 553.
(2) [1965] 2 S.C.R. 192.
(3) [1965] 3 S.C.R. 335.
(4) [1967] 1 S.C.R. 627.
(5) [1969] 1 S.C.R.580.
6-L447 SuP CI/74
66
was remanded to the High Court and the appellant was allowed
to urge before.the High Court his new contention. The facts
of all these cases are different from the facts of the
present case. The Government cannot derive any assistance
from them.
It is necessary to consider whether the Act obligates the
Board to consider the explanation of the licensee, before
recommending any action against him. Section 4, as it stood
originally read:
"(1) The State Government may, if in its
opinion the public interest so requires,
revoke a licence in any of the following
cases, namely:
(a) where the licensee in the opinion of the
State Government makes wilful and unreasonably
prolonged default in doing anything required
of him by or under this Act;
(b) where the licensee breaks any of the
terms or conditions of his licence the breach
of which is expressly declared by such licence
to render it liable to revocation;
(c) where the licensee fails, within the
period fixed in this behalf by his licence or
any longer period which the State Government
may substitute therefore by order under sub-s.
(3), cl. (b) and before exercising any of the
powers conferred on him thereby in relation to
the execution of works:
(i) to show, to the satisfaction of the
State Government, that he is in a position
fully and efficiently to discharge the duties
and obligations imposed on him by his licence,
or
(ii) to make the deposit or furnish the
security required by his licence;
(d) where the licensee. is, in the opinion
of the State Government, unable, by reason of
his insolvency fully and efficiently to
discharge the duties and obligations imposed
on him by his licence.
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 8 of 12
(2) Where the State Government might, under
sub-s. (1) revoke a licence, it may, instead
of revoking the licence, permit it to remain
in force subject to such further terms and
conditions as it thinks fit to impose and any
further terms or conditions so imposed shall
be binding upon, and observed by, the
licensee, and shall be of like force and
effect as if they were contained in the
licence."
The original section 4 was considered by the Privy Council
in Hubli Electricity Company v. The Province of Bombay.(’.)
The Privy Council held that in s. 4(1) (a) the opinion of
the Government
(1) A.I.R. 1949 P.C. 136.
67
was not subject to any objective tests. The Privy Council
said "The language leaves no room for the relevance of a
judicial examination as to the sufficiency of the grounds on
which the Government acted in forming an opinion." However,
it was held that the opinion should relate to "anything
required under the Act." The’ Privy Council said : "If it
relates to something which was not required under the Act
the revocation of the licence would be invalid."
Then there came our Constitution with its Art. 19(1)(g)
conferring on the citizens. the right to carry on business
subject to reasonable restrictions in public interest. This
Court in Dr. N. B. Khare V. The State of Delhi(1) held that
if an Act, which imposes restrictions on the rights
specified in Art. 19, does not provide for a reasonable,
hearing to the party affected, the restriction could not be
said to be reasonable in certain circumstances. It seems
that Parliament realised, though late, in 1958, that s. 4
may not stand the test of Art. 19(1) (g). Accordingly it
made radical amendments in s. 4. The amended section 4 reads
"(1) The State Government may’ if in its
opinion the public interest so requires, and
after consulting the State Electricity Board,
revoke a licence in any of the following
cases, namely :--
(a) where the licensee, in the opinion of
the State Government, makes wilful and
unreasonably prolonged default in doing
anything required of him by or under this Act;
(b) where the licensee breaks any of the
terms or conditions of his licence the breach
of which is expressly declared by such
licence, to render it liable to revocation;
(c) where the licensee fails, within the
period fixed in this behalf by his licence or
any longer period which the State Government
may substitute therefore by order under
section 4A, sub-section (1) and before
exercising any of the powers conferred on him
thereby in relation to the execution of works-
(i) to show, to the satisfaction of the
State Government, that he is in a position
fully and efficiently to discharge the duties
and obligations imposed on him by his licence,
or
(ii) to make the deposit or furnish the
security required by his licence;
(d) where in the opinion of the State
Government the ’financial position of the
licensee in such that he is unable fully and
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 9 of 12
efficiently to discharge the duties and
obligations imposed on him by his licence;
(7) [1950] S.C.R. 519.
68
(e) where a licensee, in the opinion of the
State Government, has made default in
complying with any direction issued under
section 22A.
(2) Where in its opinion the public interest
so permits,
the State Government may, on the application
or with the consent of the licensee, and after
consulting the State Electricity Board, and
the Central Government where that Government
is interested, and if the licensee is not a
local authority, after consulting also the
local authority, if any, concerned, revoke a
licence as to the whole or any part of the
area of supply upon such terms and conditions
as it thinks fit.
(3) No licence shall be revoked under sub-
section (1) unless the State Government has,
given to the licensee not less than three
months’ notice in writing, stating the grounds
on which it is proposed to revoke the licence
and has considered any cause shown by the
licensee within the period of that notice,
against the proposed revocation.
(4) Where the State Government might under
sub-section (1) revoke a licence it may
instead of revoking the license permit it to
remain in force subject to such further terms
and conditions as it thinks fit to impose and
any further terms or conditions so imposed
shall be binding- upon, and be observed by the
licensee, and shall be of like force and
effect as if they were contained in the
licence.
The amending Act adds sub-sections (2) and (3) and converts
the former sub-section (2) into sub-section (4). It adds
clause (e) to sub-section (1). It also adds ’and after
consulting the State Electricity Board’ in the opening part
of sub-section (1). The amendments relevant in this case
are the phrase ’after consulting the State Electricity
Board’ and sub-section (3) which now provides for a hearing
to the licensee before revocation of. his license.
It appears from a reading of S. 4 that when the Government
consults the Board on the question of revocation of a
licence under s. 4, the Board is to make up its mind as to
whether it should recommend (1) to revoke the licence, or
(2) not to revoke the licence, or (3) to permit the licence
to remain in force subject to such further terms and
conditions as may be thought proper. It is difficult to
conceive how the Board will make a choice out of these three
courses without considering the explanation of the licensee.
The explanation may make out a case for not revoking the
licence or a case for continuance of the licence with
certain over-added conditions. In a particular case the
Government may propose to revoke the licence under s.
4(1)(c) on the ground that the licensee has failed to show
that he is in a position fully and efficiently to discharge
the duties and obligations imposed on him by his licence.
Similarly. it may propose to revoke the licence under S.
4(1) (d) where the financial position of the licensee is
such that he is unable fully and efficiently to discharge
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 10 of 12
the duties and obligations imposed on him by his licence.
In none of these cases the Board will be able to make a just
choice out of the aforesaid three
69
courses without applying its mind to the explanation of the
licensee. In case of a charge under s. 4(1) (d), it is open
to the Board to advance a loan to the.licensee and recommend
against the proposed revocation. of his licence. We, are
accordingly of opinion that s. 4 contemplates that the Board
should make its recommendation only after considering the
explanation of the licensee. It would follow that the Board
should be consulted by the Government after the licensee’s
explanation has been received. We have already said that in
the present case the Board was consulted much before the
receipt of the appellant’s explanation and that the Board
consequently could not consider the explanation at the time
of making its recommendation in favour of revocation of the
licence.
Counsel for the Board has submitted that the Board is to be
consulted only as regards ’public interest’. It is
sufficient to state that we find no force at all in this
argument. In the alternative, it is said that the Board is
to be consulted only at the stage when the Government takes
a provisional decision to revoke the licence. The words
,after consulting the Board’ have been added by an
amendment. The suggested construction would make the
amendment a mere pompous word-spinning.
It is now to be seen as to what is the effect of this
premature consultation of the Board by the Government on the
impugned order. The Act does not expressly provide for the
consequence of premature consultation. it does not say that
the order of revocation is void. Sri Sen contends that the
order will be void. Counsel for the Board, on the other
hand, contends that it will not be void. According to him,
the provision regarding consultation of the Board is
directory, and not mandatory. Non-compliance with a
directory provision does not nullify the order. It is not
disputed that if the provision is mandatory, the order of
revocation will be void.
The object and setting of the, phrase "after consulting the
Board in section 4 will have to be examined for deciding
whether the provision is mandatory or directory. (H. N.
Rishbud v. State of Delhi [1955] 1 S.C.R. 1150).
The power to revoke the licence is a drastic power. The
revocation of licence. results in severe aeridgment of the
right to carry on business. Having in mind the requirements
of Art. 19 (1 ) (g), Parliament has, it seems to us
prescribed certain conditions to prevent the abuse of power
and to ensure just exercise of power. Clauses (a) to (d) of
s. 4 prescribe some of the- conditions precedent for the
exercise ,of power. The order of revocation, in breach of
any one of those conditions, will undoubtedly be void. The
clause if in its opinion the public interest so requires" is
also a condition precedent. On a successful showing that
the order of revocation has been made without the Government
applying its mind to the aspect of Public interest or
without forming an honest opinion on that aspect, it will,,
we have no doubt, be void. The phrase "after consulting the
State Electricity Board" is sandwiched between the clause
"if in its opinion the public
70
interest so requires" and cls. (a) to (d). In this context
it appears to us that consultation with the Board is also a
condition, precedent for making the order of revocation.
Accordingly the breach of this condition precedent should
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 11 of 12
also entail the same consequence as the breach of the other
conditions referred to earlier. It may be observed that
the phrase "after. consulting the State Electricity Board"
did not find place in s. 4 as it stood originally. It was
introduced in s. 4 in 1959 by an amendment. It seems to ’us
that it was introduced in s. 4 with the object of providing
an additional safeguard to the licensee. When revoking a
licence, the State Government acts in two stages. At ’first
it forms a tentative opinion in favour of revoking the
licence. Then it call for an explanation from the licensee.
When the explanation is received, it considers the,
explanation. If not satisfied ’with the explanation, it
passes the final order of revocation. First impressions and
provisional judgments have, a tendency to become ultimate
ideas and final judgments. They would settle unconsciously
on the investigator’s mind as the imperceptible, dust-
particles on an optical lens. They would dim his
understanding and obfuscate his observation. Facts which
will dovetail with them would arrest his attention; facts
which will conflict with them would flit his observation.
If by any chance he happens to notice refractory facts, he
would seek to reconcile them with his first impressions and
provisional judgments. This understanding of human
psychology seems to have persuaded Parliament to interpose
the condition of the Board’s consultation to the Govern-
ment’s action. The Board is an independent body. It
consists of three members. One of them is a technical
expert, the other a financial expert, and the third an
administrative expert. While considering the facts
presented to it by the Government and by the licensee in his
explanation, the Board will undoubtedly act with an open and
unconditioned mind and will be able to offer unbiased
counsel to the Government. Having regard to the object and
context,. we are of the view that the condition _of
consulting the Board is mandatory and the breach of this
condition will make the order of revocation void. We have
already held that the Board was not consulted after the
explanation was received. Accordingly we are of opinion
that the order is void. The consequential order of
acquisition will ipso facto fall down.
Counsel for the Board has relied on State of U.P. v.
Manbodhan Lal Srivastava (supra), Ram Gopal Chaturvedi v.
State of Madhya Pradesh(1) and The State of Bombay v. D. A.
Korgaonkar(2). He has also relied on Rollo v. Minister of’
Town and Country Planning(3) and Derham v. Church
Commissioners for England(4) Ram Gopal Chaturvedi v. State
of Madhya Pradesh(1) and. State of Bombay v.D. A.
Korgaonkar(2) have followed Manbodhan Lal Srivastava
(supra). In Manbodhan Lal this Court held that Art.. 320(c)
of the Constitution is directory and not mandatory. A
Government employee was dismissed from service after
complying with the provisions of Art. 311(2) of the
Constitution. The U.P. Public Service Commission
(1) [1970] 1 S.C.R. 472.
(2) Civil Appeal No. 289 of 1958 decided on 6-5-1960.
(3) [1948] (1) All England Law Reports 13.
(4) [1954] A.C. 245.
71
was consulted as to the punishment to be imposed on him.
But it was consulted before the explanation of, the employee
was received by the Government. The argument was that as
the Commission did not have the, opportunity of considering
his explanation, there was no real consultation as required
by Art. 320(c). It was also argued that Art. 320(c) is
directory. The proviso to Art. 320 empowers the approved.
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 12 of 12
This Court pointed out several reasons for the view that
Art. 320(c) is directory. The proviso to Art. 320 empowers
the appropriate Government to issue directions as to the
classes of cases in which consultation of the Commission
will not be necessary. The proviso therefore indicates that
the provision is directory. Another reason given by the
Court is that Art. 320(c) does not occur in the Chapter in
which Art. 311 occurs. It finds place in the Chapter deal-
ing with the Public Service Commission. Accordingly it
cannot be said that it confers any right on Government
employees. The third reason given is that consultation of
the Commission is not binding on the Government. The first
two reasons do not apply in our case. We have shown earlier
that the condition of consulting the Board has been inserted
by an amendment of s. 4 with the object of creating a
safeguard in favour of the licensee. There is no provision
in the Act authorising the Government to waive the condition
of consultation in any case. It is true that the third
reason given by the Court in Manbodhan Lal (supra), applies
in this case. As there, so here the opinion of the Board is
not binding on the Government. In spite of the Board
advising against revocation, the Government, if satisfied
that it is necessary to revoke the licence may revoke it.
But having regard to the object and context of s. 4, we are
of opinion that it should not be regarded as an over-
weighing consideration. It will normally be difficult for
the Government to ignore the Board’s expert advice. We are
satisfied from the object and context of s. 4 that
Parliament intended to make consultation of the Board an
imperative condition to revoking a licence.
In the result, we allow the appeal and, set aside. the order
of the High Court. The petition of the appellant under Art.
226 of the Constitution is allowed and the notice No. 11795-
EL 1/61/19 PW dated 17-8-1962, the order of revocation No.
11795/EL 1/ 1PW dated 17-5-1963 and the order No. .11795-EL
1/61-31/PW dated 17-5-1963 directing the appellant to hand
over the’ Undertaking to the Board are quashed. The
appellant shall not get his costs here as well as in the
High Court, as the point on which the appeal is allowed was
not raised in the High Court’.
V.P.S. Appeal allowed.
72