Holding

The second proviso to clause 11(1) of the Punjab Foodgrains Dealers Licensing and Price Control Order is constitutionally valid, reasonable, and does not violate Article 14 or Article 19(1)(g).

Summary

The Supreme Court examined the constitutional validity of the second proviso to clause 11(1) of the Punjab Foodgrains Dealers Licensing and Price Control Order, 1978 (as amended 1980), which allows the licensing authority to suspend a foodgrains dealer’s licence for up to ninety days without giving the dealer a reasonable opportunity to be heard. The petitioners argued that this power was arbitrary, violated Article 14, infringed the right to trade under Article 19(1)(g), and was exercised mala‑fide to curb inter‑state wheat exports. The Court held that the power is an interim measure necessary for public interest, is limited to specified breaches, capped at ninety days, and subject to appeal, thus satisfying the test of reasonableness and not breaching Article 14. It also found no evidence of bad faith or bias in the licensing authority’s actions. Consequently, the petitions were dismissed.

Issues considered

The second proviso to clause 11(1) of the Punjab Foodgrains Dealers Licensing and Price Control Order, 1978 (as amended 1980) confers an arbitrary or excessive power violating Article 14 of the Constitution.
The power to suspend a licence without a prior hearing infringes the fundamental right to carry on trade or business under Article 19(1)(g).
The suspension of licences was motivated by extraneous considerations, i.e., to prevent inter‑state export of wheat, constituting mala‑fide action.
Whether the procedural requirement of a proper affidavit under Order XIX Rule 3 of the Code of Civil Procedure was complied with.

Legislation cited

Code of Civil Procedure, 1908s. Order XIX Rule 3
Constitution of Indias. Art.14, s. Art.19(1)(g), s. Art.301, s. Art.32
Punjab Foodgrains Dealers Licensing and Price Control Order, 1978 (as amended 1980)s. clause 11(1), s. second proviso

Subjects

Article 14Article 19(1)(g)licensing authoritysuspension of licencePunjab Foodgrains Dealers Licensing Orderconstitutional validitymala fideinterim suspensionpublic interestfoodgrains trade

Judgment

31
A
>·
SUKHVINDER PAL BIPAN KUMAR
v•

• STATE OF PUNJAB & ORS. B
December 2, 1981

[A.D. KOSHAL, A.P. SEN AND V. BALAKRJSHNA ERADI, JJ.J

Punjab Foodgrains Dealers Licensing and Price Control Order, 1978-Second
proviso to clause I I-Scope of-Licensing -Authority could suspend a licence with- c
out giving reasonable opportunity of stating a licenscee's case for a period not

- exceeding ninety days during pendency or in contemplation of proceedings for
cancellation of licence-Power, if excessive and unguided.

Clause 11 of the Punjab Foodgrains Dealers Licensing Price Control Order
1978 (as amended in 1980) empowers the licensing authority to cancel or suspend
a licence if the licensee contravenes any of the terms and conditions of his licence D
or any provision of the order. The first proviso to this clause enjoins on the
authority to give to the licensee a reasonable opportunity of stating his case
before cancelling or suspending his licence. The second proviso provides that
"the licensing authority may suspend a licence without giving a reasonable
opportunity to the licensee of stating his case for a period not exceeding 90 days
during the pendency or in contemplation of the proceedings for cancellation of
1f his licence." E
The petitioners, whose licences had been suspended under clause II, conten-
ded that the second proviso to clause ll(l) of the Order conferred on the licen-
sing authority unguided, uncontrolled and arbitrary power to suspend a licence
which infringed their fundamental right under Article 19(1)(g) of the Constitu-

- tion and that conferral of such unguided power offended Article 14 of the Cons-
titution and (2) that the suspension of the licence was mala fide and motivated
because it was passed on extraneous considerations namely, to prevent them from
exporting wheat from the State to other parts of the country in the course of
F

inter state trade and commerce.

Dismissing the petitions,

HELD : The power conferre_d on the licensing authority under the second G
proviso to clause 11(1) of the Order is not of an excessive nature and beyond
what is required in the interest of general public.

The power of suspension conferred by the second proviso to clause 11 is
by way of an interim measure, pending an enquiry as to whether there was any
breach which must result in cancellation of the licence. The power of suspen- H
sion is a necessary concomitant of the powc;r to grant a privilege or a licence.
32 SUPREME COURT REPORTS [1982) 2 S.C.R.

A So long as the dealers complied with the conditions of licence and the provi-
sions of the Order they are free to carry on their trade or business in foodgrains.
If they commit a breach they must face the consequences that their licence may
be cancelled or suspended and also face further consequence of suspenion of
their licence during the pendency or ·in contemplation of the proceedings for
such cancellation if the breach is of such a nature that it must remit in the
cancellation of a licence. The power of suspension conferred under the second
B proviso is an important step taken by the Government to subserve the object of
the legislation and in is public interest. Nor could it to be said that it does not
satisfy the test of reasonableness. [37 A-G] '

Nor again could it be said that there is warrant for the submission that the
second proviso confers upon the licensing authority unguided, uncontrolled and
C uncanalised power to suspend a licence. It does not suffer from the vice of
arbitrariness and is, therefore, not violative of Article 14 of the Constitu-
tion. [37 G]

It cannot be said that licensing authority has an unrestrained power of
suspension of licence because the suspension can only be for specified
-
D reasons which are spelt out in the second proviso. The power of 'suspen-
sion is not exercisable unless there is a breach and the breach is of such a
nature that it must entail cancellation of the licence. The first proviso is in
the nature of limitation on the power contained in clause 11(1) and the second
proviso carves out an exception to the first proviso by dispensing with the re-
quirement of affording a reasonable opportunity to the I icensee in case of sus-
pension of his licence during the pendency or in contemplation of the proceedings
E for cancellation. The power of suspension during the pendency of an enquiry
cannot be exercised unless there is contravention of any of the terms and condi-
tions of the licence or any of the provisions of the Order. Secondly, it provides .,,-
for a reasonable safeguard in that it limits the period of suspension which would
necessarily depend upon the nature of the breach which in no case can exceed 90
days. Thirdly, as a check on improper exercise of power of suspension by the

F
licensing authority an additional safeguard is provided by way of appeal to the
Director of Food Supplies. [38 E-H]

On the material on record there is nothing to show that the licensing
-
authority acted with improper motives or was actuated with bias in directing the
suspension of the license held by the petitioners. The affidavit filed by a partner
of one of the petitioners dot's not fulfil the require men ts of Order XIX rule 3 of
•
G the Code of Civil Procedure under which it is incumbent upon the deponent to
disclose the nature and source of his knowledge with sufficient particularity. The
allegations in the writ petition are not sufficient to constitute an averment of
ma/a fide so as to vitiate the orders of suspension. The burden of establishing
malafides lies very heavily on the person who alleges it. [39 E F)
.......
H ORIGINAL/CIVIL APPELLATE JURJSDICflON : Writ Petitions
Nos. 7477-79 of 1981
SUKHVINDER PAL v. PUNJAB (Sen, J.) 33

A
(Under article 32 of the Constitution of India)

AND

SPECIAL LEAVE PETITION (CIVIL)
NOS. 9116 & 8735 of 1981

From the judgment and order dated the 15th October, 1981
and 22nd September, 1981 of the Punjab and Haryana High Court
in Civil Writ Petitions Nos. 4734/81 & 4370/81 respectively.

B. Dat1a for the Petitioners in Writ Petitions.
c
Ravindra Bana for the Petitioners in both SLPs.

O. P. Sharma and M. S. Dhillon for the Respondents.

The Judgment of the Court was delivered by
D
SEN, J. These petitions under Art. 32 of the Constitution and
the connected special leave petitions mainly challenge the consti-
tutional validity of the second provise to sub-cl.(!} of cl. 1 I of the
Punjab Foodgrains Dealers Licensing and Price Control Order,
1978 (for short 'the Order'}, as inserted by the Punjab Foodgrains
Dealers Licensing and Price Control (First Amendment) Order, 1980, E
with effect from March 27, 1980, as violative of Arts. 14 and 19 (1)
..... (g) of the Constitution, as also the legality and propriety of the
action of the licensing authorities in suspending the licences held
by the petitione[s.

- It appears that the licences held by the petitioners who are
foodgrains dealers in the State of Punjab, have been suspended by
orders passed by the District Food and Supplies Controllers,
Faridkot and Bhatinda, for a period not exceeding ninety days
F

under the second proviso to sub-cl. (I) of cl. 11 of the Order. The
orders of suspension of licence in each of these cases rest on the
allegation that the licensee has committed a breach of conditions G
Nos. 4, 8 and 10 of the licence. The petitioners have all been served
with notices under the first proviso to sub-cl. (1) of cl. 11 of the
Order to show cause why their licences should not· be cancelled.

Some of the petitioners accept that in the recent past their
licences were suspended under the second proviso to sub-cl. (I)
of cl. l I 9f the Qrder for alle¥eg \Jre11ch of tile li~em;e congitjon~
34 SUPREME COURT REPORTS (1982] 2 S.C.R.

for having sold large quantities of wheat to dealers outside the
A State without disclosing the names of the purchasers in their stock
registers. It, therefore, appears that the present suspension is for
a repeated breach. These petitioners have filed the petitions under
Art. 32 of the Constitution for protection of their fundamental
rights to carry on trade or business as foodgrains dealers within the
meaning of Art. 19 (I) (g) read with Art. 301 thereof. '
B
The other petitioners allege that because they approached
the High Coutt by way of petitions under Art. 226 of the Consti-
tution, complaining against restrictions placed on movement of
wheat by rail, their licences have been suspended under the second
proviso to sub-cl. (1) of cl.I I of the order as a punitive measure.
c Incidentally, these petitioners had first moved the High Court under
Art. 226 of the Constitution, but the High Court dismissed their
writ petitions summarily. The connected special leave petitions are
directed against the order of the High Court.

The State of Punjab in the counter-affidavits filed by the
I) Deputy Secretary to the Government of Punjab, Food and Supp-
lies Department, Chandigarh, and the District Food and Supplies
Controller, Faridkot, controvert the allegations of the petitioners.
It is stated that the petitioners have been served with show-cause
notices under the first proviso to sub-cl.( I) of cl. 11 of the Order
for cancellation of their licences, for breach of the licence
E conditions.

Learned counsel for the petitioners seek to assail the consti-
tutional validity of the second proviso to sub-cl. (I) of cl.I I of

F
the Order on two grounds. First of these is that the second pro-
viso to sub cl. (I) of cl. 11 of the Order, inserted by the Punjab
Foodgrains Dealers Licensing and Price Control (First Amendment)
brder, 1980, confers upon the licensing authority unguided, uncon~
-
trolled and arbitrary power to suspend a licence and it, therefore,
infringes the fundamental right to carry on trade or business guaran-
teed under Art. 19 (I) (g) of the Constitution. It is also urged that
the conferal of such unguided, uncanalised and arbitrary power on
G th~ licensing authority, without any guidelines whatsoever, makes
the impugned proviso unconstitutional as offending Art. 14 of the
Constitution. The second contention is that the suspension of the
foodgrains dealers' licences held by the petitioners was ma/a
fide and .motivated, as in reality it was not on account of any breach
H of the licence conditions on their part, but on extraneous considera-
stJkB.VINbER PAt v. PUNJAB (Sen, i.) 35

tions. It is said that the real purpose was to prevent them from
A
exporting wheat from the State of Punjab to various other States in
the course of inter-State trade and commerce within the meaning
of Art. 301 of the Constitution. We are unable to accept any of
these contentions .
•
To make the point intelligible, it is necessary to deal with
the scheme of the Order. CI. 3 of the Order provides that no per-
son shall carry on business as a dealer except under and in accor-
dance with the terms and conditions of a licence granted by the
licensing authority. Cl. 7 (3) thereof provides that where an
application for grant of a licence is not refused, the licen-
sing authority shall grant a licence in Form B subject to the
c
- conditions specified therein. Condition No. 4 of the licence enjoins·
that the licensee shall submit to the licensing authority concerned
fortnightly returns in Form C of the stock receipts and deliveries.
Condition No. 8 of the licence lays down that the licensee shall
exhibit the price list of foodgrains held by him for sale and it shall .·
D
indicate separately the prices of different varieties of foodgrains.
Condition No. IO thereof interdicts that the licensee shall give all
facilities at all reasonable times to lhe licensing authority or any
officer authorjsed by it or the State Government, for the inspec-
tion of his stocks and accounts at any shop, godown or other
place used by him for the storage, sale or purchase of foodgrains
etc. Cl. 11 of the Order provides for cancellation or suspension of
Er
a licence. The power of cancellation or suspension of a licence
which was subject to the giving of a reasonable opportunity to the
lincensee of stating his case was not adequate and sufficient to effec-

- tively check and control flagrant breaches of the provisions of the
order, during the pendency of the proceedings for cancellation of
a licence. The State Govenment, therefore, inserted the second
proviso to sub-cl. (I) of cl. 11 of the Order. CJ. 11 of the Order,
as amended, in so far as material, reads :

"Cancellation or suspension of licence :-(I) If a G>
licensee or his agant or any person acting on his behalf
contravenes any of the terms and conditions of his licence
or any provison of this Order then, without prejudice
to any action that may be taken against him, the licensing
authority may by ,an order in writing, cancel or suspend H
licence in so far as it relates to the foodgrains in respect of
which contravention has been made.
SUPREME COlJli.T REl'ORtS (1982] 2 s.c.•.
A Provided that no order shall be made under this clause
unless the licensee has been given a reasonable opportunity '
of stating his case;

Provided further that the licensing authority may
suspend a licence without giving a reasonable opportunity
B to the licensee of stating his case for a period not exceeding
ninety days during the pendency or in contemplation of
the proceedings for cancellation of his licence.''

It is plain upon the terms of sub-cl. ( 1) of cl. 11; of the
c order that it deals with the substantive punishment of cance-
llation or suspension of a licence. The power of cancellation
or suspension of a licence of a foodgrains dealer under
sub-cl. (I) of cl. 11 of the Order is, however, subject to the
limitation contained in the first proviso. The power of can-
D cellation or suspension of a licence is, therefore, not exercisa-
ble by the licensing authority until it affords a reasonable opportu-
nity to the licensee of stating his case. This necessarily entails the
holding of an inquiry into the question of the alleged breach. The
making of an inquiry into the breach of licence conditions by a
foodgrains dealer is a time-consuming process which may many a
time verily frustrate the purpose and object of the Order. The State
E Government was evidently of the opinion in the light of
the experience gained in the recent past, that for effec-
tive control and regulation of the trade in foodgrains, it was
necessary and expedient that the licensing authority should be

F
clothed with powers to suspend a licence on the spot when it
detects contravention of any of the terms and conditions of the
licence or any of the provisions of the Order. Otherwise, a food-
grains dealer after committing flagrant breaches of the terms and
-
conditions of his licence and the provisions of the Order, may,
with impunity, carry on his trading activities without any check or
control.
G The power of suspension conferred by the second proviso to
sub-cl. (I) of cl. 11 of the Order is by way of an interim measure,
pending the holding of an inquiry as to whether there is any breach
which must result in cancellation of the licence. It is true that the
suspension of licence is a drastic measure, if taken without affording
H to the dealer a reasonable opportunity of stating his case, but it is
sUKHVINDER PAL v. PUNJAB (Sen, 1.) 31
a measure of social control in the interests of the community.
A
>
The power of suspension is a necessary concomitant of the power to
• grant a privilege or a licence. By reason of cl. 3 of the Order, no
dealer can engage in the business of purchase and sale of foodgrains
except under and in accordance with the terms and conditions of a
licence issued by the licensing authority in that behalf. The dealers
B
are free to carry on their trade or business in foodgrains, subject to
their compl)'ing with the terms and conditions of their licence and
the provisions of the Order. But, if they commit a breach, they must
face the consequence that their licence may be cancelled or suspen-
ded under sub-cl. (1) of cl. 11 of the Order. They must face the
further consequence of suspension of their licence during the
pendency or in contemplation of the proceedings for cancellation of
c
- the licence, if the breach is of such a nature that it must result in the
cancellation of a licence. As already stated, the power of suspen-
sion is a necessary adjunct of the power to grant a licence. In view
of the acute shortage of foodstuffs in the country, the Government
is bound to take all effective steps to implement the provisions of D
the Act and the various orders issued under s. 3 thereof, from time
to time. The conferal of the power of suspension of the licence of
a foodgrains dealer under the second proviso to sub-cl. (1) of cl. 11
of the Order during the pendency or in contemplation of the
proceedings for cancellation of his licence, is an important
step taken by the Government to subserve the object of the legisla- E
tion and is in public interest. It cannot be said that the second
proviso to sub-cl. (1) of cl. 11 of the Order does not satisfy tile test
of reasonableness. It seeks to strike a proper balance between the
freedom of trade or business guaranteed under Art. 19 (1) (g) and

-
I
the social control permitted by cl. (6) of Art. 19 of the Constitution.
It is, therefore, difficult to hold that the second proviso to sub-cl.
(I) of cl. 11 of the Order is of an excessive nature beyond what is
required in the interests of the general public.
F

There is no warrant for the submission that the second pro-
viso to sub-cl. (I) of cl. 11 of the Order confers upon the licensing G
authority unguided, uncontrolled and uncanalised power to sus-
pend a licence and is, therefore, void by reason of Art. 14 of the
Constitution. It is urged that the impugned orders of suspension
in these cases are for a period of 89 days, and the licensing authority
would, as in the past, pass fresh orders of suspension ad infinitum H
38 SUPREME COURT REi>Okts [1982) 2 S.C.R.

A completely paralysing the business of the petitioners. There is no
substance in the contention that repeated orders of suspension of a
licence can be passed under the second proviso in respect of the
same breach. The second proviso expessly states that the licensing
authority may suspend a licence for a period not exceeding nine1y
days. It, therefore, fixes the period of suspension. From its very
B terms, it is obvious that there cannot be repeated orders of suspension
of a licence under the second provison in respect of the same
breach. Normally, the order of suspension under the second
proviso to sub-cl. (I) of cl. I l of the Order after the expiry
of the period of 90 days, would automatically lapse. However, if
the licensee commits another breach, after the expiy of the period
of suspension, there is nothing to prevent the licensing authority to
suspend his licence afresh.

On a fair reading of the second proviso to sub-cl. (1) of cl. 11
-
of the Order, it cannot be said that it commits to the unrestrained
will of the District Food and Supplies Controller, who is tbe licensing
authority, the power of suspension of a licence. It does not con-
fer arbitrary and uncontrolled power because the suspension can
only be for specified reasons and the second proviso lays down the
cirumstances or grounds on which the power may be exercised.
Such guidelines are expressly and specifically stated. In the first
E
place, the power of suspension is not exercisable unless there is a
breach and the breach is of such a nature that it must entail can-
cellation of the licence. The substantive provision contained in sub-cl.
(1) of cl. 11 of the Order provides for the power of cancellation or

F
s1,1spension, if any dealer commits any contravention of the 'terms
and conditions of his licence or any provision of this order'. The
first proviso is in the nature of a limitation on the power contained
in sub-cl. (!), and there can be no cancellation or suspension of
-
a licence unless the licensee is afforded a reasonable opportu-
nity of stating his case. The proper function of the second
proviso is to carve out an exception to the first proviso. It
dispenses with the requirement of affording a reasonable opportunity
to the licensee in case of suspension of bis licence during the pen-
dency or in contemplation of the proceedings for cancellation. It
must, however, be read along with the main enacting provision in
sub-cl. (l ), and, if so construed, the power of suspension during the
H pendency of an inquiry cannot be exercised unless there is contraven-
tion of any of the terms and conditions of the licence or any of the
SUKHVINDER PAL v. PUNJAB (Sen, J.) 39

provisions of the Order. Secondly, it provides for a reasonable
safeguard, in that it limits the period of suspension. The period of
suspension would necessarily depend upon the nature of the breach,
and in no case, can it exceed ninety days. During this period, the
licensing authortiy is expected to complete the inquiry and take a
decision as to the cancellation or otherwise of the licence. Thirdly,
B
as a check upon possible injustice that might result from an improper
exercise of the power of suspension of a licence by the licensing
authority under the second proviso, there is an additional safeguard
to a dealer by way of an appeal to the Director, Food and Supplies,
under cl. 13 of the Order. This Court has repeatedly laid down
that where the discretion to apply the provisions of a particular
statute is left with the Government or one of the highest officers, it
c
will be presumed that the discretion vested in such highest authority
will not be abused. It would, therefore, appear that the second
proviso to sub-cl. (I} of cl. 11 of the Order furnishes sufficient guide-
lines for the excercise of the power of suspension of a licence during
the pendency of or in contemplation of the proceedings for cancella· D
tion thereof, and it does not suffer from the vice of arbitrariness and
is, therefore, not violative of Art. 14 of the Constitution. On
the contrary, as already indicated, it affords reasonable safe-
guards.

E
There still remains the question whether the impugned orders
of suspension are ma/a fide or motivated. We are unable to hold
from the material on record that the licensing authorities acted with
improper motives or were actuated with bias in directing the suspen-

-
sion of the licences held by the petitioners. All that is averred in
para 9 is: F

"{Under oral instructions of the Punjab Government
from the Civil Supplies and Food Department to all
the Licensing Authorities, including the Food Department
and Supplies Controllers, instructions were issued that if G
any one dealer is found exporting wheat to another State,
there being no direct or indirect ban on such movement, he
should be punished at the spot by way of suspension of
licences so that the dealer may not export wheat to any
other State for which there are no restrictions imposed by
H
40 SUPREME COURT REPORTS [1982] 2 S.C.R.

A any law or notified order or even the terms and conditions
of the licence."

The petitioners then go on to say in para 12 :

B
"Under oral instructions from the Secretary, Food
and Supplies Department, the Director Food and Civil
Supplies, and up to the District Food and supplies Contro-
ller, the Punjab Government has imposed restriction on
inter-State movement of foodgrains. There are already
c restrictions on stock holding and dealer to dealer sale. The
petitioners have never violated any conditions of the liceµce
except that they have been, in exercise of their fundamental
rights, exporting foodgrains to various destination outside
the State of Punjab ... "

D In the case of M/s Sukhwinder Pal Bipan Kumar in support of the
petition, there is an affidavit of one Raj Kumar, claiming to be a
partner, who asserts that the allegations in paras 9 and 12 are
'correct to the best of my knowledge'. To say the least, this is no
affidavit at all. Under order ·XIX, Rule 3, of the Code of Civil
Procedure, 1908, it was incumbent upon the deponent to disclose
E the nature and source of his knowledge with sufficient particularity.
The allegations in the petition are, therefore, not supported by an
affidavit as required by law. That being so, the State Government
was fully justified in answer, 'Denied. There is no restriction on
the movement of wheat'. The Deputy Secretary in his counter-
F affidavit has further denied .that the impugned orders of suspesion
were passed on the direction of the State Government. In our view,
the allegations in the writ petitions are not sufficient to constitute
an averment of ma/a jides so as to vitiate the impugned orders
of suspension. The Court would be justified in refusing to carry out
investigation into allegations of ma/a ft.des, if necessary particulars
G of the charge making out a prima facie case are not given in the
petition. The burden of establishing ma/a ft.des lies very heavily on
the person who alleges it. The petitioners who seek to invalidate r
the impugned orders of suspension must establish the charge of bad
H faith or bias or misuse by the Government of its powers. The r
impugned orders of suspension ex facie show breaches of conditions
Nos. 4, 8 and 10 of the licence by the petitioners. The question
whether or not, they commjtted the l)re!\ches is !\ matter for
SUKHVINDER PAL v. PUNJAB (Sen, J.) 41

inquiry by the licensing authorities under sub-cl. ( 1) of cl. 11 of the A
Order.

In the result, the petitions must fail and are dismissed with
costs.

B
P.B.R. Petitions dismissed.

-