Penalty proceedings based on a vague show-cause notice and undisclosed material prima facie violate natural justice.

The petitioner, a Fair Price Shop dealer, challenged the order dated 10 August 2026 passed by Respondent No. 5, imposing a penalty of ₹21,24,88,979, stated to be 1.5 times the prevailing economic cost, for alleged deviation/siphoning of PDS commodities.

A show-cause notice was issued to the petitioner on 29 May 2026 under the West Bengal Public Distribution System (Maintenance and Control) Order, 2013, although that Order had allegedly been repealed with effect from 1 August 2024 upon promulgation of the West Bengal PDS Control Order, 2024.

The petitioner submitted his reply on 10 June 2026 and was granted a personal hearing on 30 June 2026.

He contended that the notice was vague, did not identify the beneficiaries or activation periods of the allegedly dubious E-Ration Cards/DRCs, and did not disclose the calculation or supporting materials forming the basis of the proposed penalty.

1. Whether the impugned penalty order dated 10 August 2026 was prima facie arbitrary, beyond jurisdiction, and vitiated by failure to provide reasons, calculation details and supporting materials.

2. Whether the show-cause notice was legally defective for vagueness and for failing to disclose the beneficiaries, relevant activation periods, alleged diversion particulars and computation of the proposed penalty.

3. Whether non-supply of the inquiry report, complaint, stock-verification materials and calculation sheet violated the principles of natural justice and caused prejudice to the petitioner.

4. Whether, pending exchange of affidavits and production of the original records, interim protection should be granted against enforcement of the impugned order.

The Court considered the West Bengal Public Distribution System (Maintenance and Control) Order, 2013 and the petitioner’s contention that it stood repealed by the West Bengal PDS Control Order, 2024 with effect from 1 August 2024.

It applied the principles of natural justice, including the requirement that a show-cause notice must disclose the material allegations and that the affected person must be furnished with documents relied upon by the authority, particularly where non-supply causes demonstrable prejudice.

The Court relied upon Abdul Hakim v. State of West Bengal & Ors., MAT 53 of 2026, dated 17 June 2026, wherein the Division Bench held that an FPS licence-holder could not automatically be blamed for DRCs which were issued, activated or later deactivated by the licensing authorities; that reliance on subsequent deactivation and non-reactivation could not, without more, establish non-existence or diversion; and that non-supply of the inquiry report, complaint and basis of calculation violated procedural fairness.

The Court also applied the principle that an administrative or quasi-judicial penalty order must disclose reasons and the basis of computation.

The Court found that the petitioner had established a prima facie case because the show-cause notice did not identify the beneficiaries, the relevant activation periods of the E-Ration Cards/DRCs, or the basis and break-up of the alleged diversion.

The methodology appeared similar to that criticised in Abdul Hakim, namely treating initially active DRCs as non-existent merely because they were subsequently deactivated or not reactivated.

Since the FPS dealer apparently had no control over the issuance, activation or deactivation of the DRCs, the allegations required independent verification rather than automatic attribution to the petitioner.

The Court further noted that the report relied upon for calculating the substantial penalty appeared to pre-date the show-cause notice but had not been supplied to the petitioner, and that the complaint said to be the genesis of the proceeding had also not been furnished.

The failure to disclose the calculation basis and supporting documents deprived the petitioner of a meaningful opportunity to respond and prima facie satisfied the prejudice test under natural justice.

However, as disputed questions of fact remained, the Court deferred final adjudication until affidavits and the original records were produced.

The State respondents were directed to file an affidavit-in-opposition within four weeks, with any reply to be filed within two weeks thereafter.

The State was also directed to produce the original inquiry report, stock-verification report, complaint, calculation sheet and proof of supply of the relevant materials along with the show-cause notice.

Pending further consideration, Respondent No. 5 was restrained from giving any effect or further effect to the order dated 10 August 2026 or taking coercive steps against the petitioner until 27 January 2027.

The matter was directed to be listed in the monthly list of December 2026.