Fair price shop cancellation is invalid absent effective hearing and reasoned consideration under Clause 16.

The petitioners’ self-help group had operated the Fair Price Shop at Village Sonpur since 2012. Allegations were made that ₹50 was collected from certain ration-card holders for verification and ₹20 for plastic bags, and that the shop was operated by family members instead of the President and Secretary.

After issuing a show-cause notice, the Sub-Divisional Officer (Revenue) rejected the petitioners’ reply as unsatisfactory and, by order dated 16 June 2022, cancelled the allotment and attached the shop to another fair price shop.

The petitioners contended that the ration-card holders had subsequently filed affidavits denying the allegations, but that such material was not properly considered.

The petitioners’ statutory appeal before the Collector was dismissed on 13 September 2023. A further appeal before the competent State authority, later transferred to the Commissioner, Surguja Division, remained pending.

During the pendency of the proceedings, the SDO issued a public notice dated 2 May 2025 proposing allotment of the shop to another self-help group; its operation was stayed by the High Court in earlier proceedings.

The Commissioner subsequently rejected the petitioners’ application for interim stay on 17 August 2026, while keeping the substantive appeal pending. Thereafter, the SDO attached the Sonpur shop to the Bishnupur shop by order dated 4 August 2026.

The Court applied Clause 16(3) of the Chhattisgarh Public Distribution System (Control) Order, 2016, which requires issuance of a show-cause notice and an appropriate and effective opportunity of hearing before cancellation of a Fair Price Shop authority letter or forfeiture of security.

It applied the principles of natural justice, particularly audi alteram partem, holding that a decision affecting the shopkeeper cannot be taken without genuine consideration of the defence raised.

Relying on Raghunath Sharma v. State of Haryana, 2025 SCC OnLine 1148, and State of Punjab v. Davinder Pal Singh Bhullar, (2011) 14 SCC 770, the Court recognised that an order passed in violation of natural justice may be treated as a nullity.

Under State of Jharkhand v. Ambay Cements, (2005) 1 SCC 368, Union of India v. Mahendra Singh, 2022 SCC OnLine SC 909, and OPTO Circuits (India) Ltd. v. Axis Bank, (2021) 6 SCC 707, where law prescribes a particular procedure for an act carrying serious consequences, that procedure is mandatory and must be followed in the prescribed manner.

Although a show-cause notice had been issued, the SDO’s order merely recorded that the petitioners’ reply was “not satisfactory” and did not demonstrate consideration of the affidavits of the ration-card holders or the other material relied upon in defence.

This was prima facie inconsistent with Clause 16(3), which requires an effective opportunity of hearing rather than a merely formal opportunity to submit a reply.

The Commissioner was also required to consider the complete record and the alleged procedural illegality while deciding the application for interim relief. Since the records were incomplete and the substantive appeal remained pending, rejection of stay without addressing these matters could not be sustained.

In view of the apparent breach of mandatory procedure and natural justice, the Court considered it inappropriate to allow the cancellation proceedings to continue and directed a fresh enquiry, without expressing any opinion on the merits of the allegations.

The competent SDO was directed to conduct a fresh enquiry under Clause 16 of the Control Order, 2016, furnish the relevant relied-upon material to the petitioners, provide an effective opportunity to submit their explanation and supporting evidence, and pass a reasoned and speaking order, preferably within 30 days.

Until completion of the enquiry and issuance of a fresh order, the petitioners were permitted to operate the Sonpur Fair Price Shop, and the attachment order dated 4 August 2026 concerning attachment of the shop to Bishnupur was directed to remain inoperative.