BAL RAJ TULI, J. - (1.) THESE four writ petitions (Nos. 2980, 3069, 3565 and 4004 of 1972) were admitted to a Division Bench and came up for hearing before P. C. Pundit and B. S. Dhillon, JJ. The learncd Judges have, referred the following questions of law for decision to a larger Bench by order dated February 8, 1973 :-1. Whether the rules of natural justice require that before cancelling the liquor licence of an excise licensee under Section 36 (c) of the Punjab Excise Act, a notice for an oral hearing must necessarily be given to him?
(2.) WHETHER the rules of natural justice require that before the security of a licensee is forfeited, he must be given a notice for oral hearing against such forfeiture or whether Ihe necessary result of the cancellation of the licence was automatic forfeiture of the security and, no such notice was essential? Whether Section 36 fc) read with Sections 40 and 80 of the Punjab Excise Act was ultra vires the Constitution of India, being violative of Articles 14 and 19 (1) (f) and (g) of the said Constitution? This Bench has been constituted to decide these questions. 2. It is not necessary to give thc facts of these cases in detail. Suffice it to say that the petitioners obtained liquor licences and due to certain irregularities alleged to have been committed by them, their licences were cancelled and securities deposited by them were forfeited cither in whole or in part. They filed the present petitions to challenge the orders of cancellation of their licences and the forfeiture of the amounts of securities. Admittedly, they were issued notices to show cause why their licences should not be cancelled. The orders of cancellation were passed after taking into consideration their explanations but without affording them any opporl unity of oral hearing. The petitioners have claimed that they were entitled to hearing before their licences were cancelled and thc orders of forfeiture of security deposits were made. They also submitted that Section 36 read with Sections 40 and 80 of the Punjab Excise Act, 1914 (hereinafter referred to as the Act), was ultra vires Articles 14 and 19 (1) ff) and (g) of the Constitution. It is in these circumstances that the above-mentioned three questions of law have been referred to us for decision. 3. As regards the necessity of granting oral hearing to a licensee before an order is passed for the cancellation of his licence, it may be observed that rules of natural justice do not amount to codified law nor can be put into a straitjacket. They do not supplant the law but only supplement it where possible. They are followed with a view to do complete justice to the parties. The most important rule is audi alteram par-tem, that is, no person shall be condemned unheard. The person proceeded against must be afforded an adequate opportunity of defending himself against the charge and proving his innocence. This matter has been elaborately dealt with by the Supreme Court in A. K. Kraipak v. Union of India, AIR 1970 SC 150, wherein it was observed :-" The aim of the rules of natural justice is to secure justice or to put it negatively to prevent miscarriage of justice. These rules can operate only in areas not covered by any law validly made. In other words, they do not supplant the law of the land but supplement it. " The same observations were relied on in Union of India v. J. N. Sinha, AIR 1971 SC 40, in para 7 of the report, wherein it was further said : 'it is true that if a statutory provision can be read consistently with the principles of natural justice, the Courts should do so because it must be presumed that the legislatures and the statutory authorities intend to act is accordance with the principles of natural justice. But, if on the other hand a statutory provision either specifically or by necessary implication excludes the application of any or all the rules or principles of natu-ral justice, then the Court cannot ignore the mandate of the legislature or the statutory authority and read into the concerned provision the principles of natural justice. Whether the exercise of a power conferred should be made in accordance with any of the principles of natural justice or not depends upon the express words of the provision conferring the power, the nature of the power conferred, the purpose for which it is conferred, and the effect of the exercise of that power. " A Full Bench of this Court in Mulkh Raj Krishan Kumar and Co. v. State of Punjab ILR (1972) 2 Punj and Har 161 = (AIR 1973 Punj 62) (FB) had to decide whether the proceedings for the cancellation of a licence like the one held by the petitioner-firms were administrative or quasi-judicial in nature and the procedure that had to he followed by the Deputy Excise and Taxation Commissioner in such a matter. The decision has been tersely summed up in the head-note as under :- ". . . . . the cancellation of the liquor licence affects the civil rights of the licensee in so far as he is debarred from carrying on the licence for the unexpired period and becomes liable for the short-fall in case the amount received on re-auction is less than the amount he had bid for that period. It is, therefore, necessary that the licensee must be issued a notice to show cause or to explain why his licence should not be cancelled on the basis of the default committed by him. Section 36 of the Punjab Excise Act does not provide that on such a default being committed, the licence shall stand cancelled or shall be cancelled. A discretion has been given to the licensing authority to cancel or not to cancel the licence even if a default has been committed. That discretion has to be exercised judiciously after taking into consideration the facts of each case. Although power of cancellation has to be exercised by an administrative officer of the Excise department, the proceedings for cancellation of the licence are quasi-judicial in nature. An appeal against such an order is provided by the statute and unless the licensee is afforded an opportunity to place his defence or version before the Collector, it will not be possible for him to determine judicially whether the order of cancellation of the licence is the only order to be passed in the case. He will have to deal with the explanation of the licensee in order to enable the appellate authority to consider whether the Collector had rightly and for good reasons cancelled the licence or had erred in doing so. In quasi-judicial proceedings it is also necessary to pass a speaking order giving reasons in support of the conclusion. The necessity of giving reasons postulates that the authority dealing with the case will weigh objectively all the facts and make a decision on the merits. It is, therefore, necessary in proceedings for the cancellation of a licence that principles of natural justice should be observed and a notice should be issued to the defaulting licensee to show cause why his licence should not be cancelled on account of the defaults alleged to have been committed by him and which defaults are covered by the provisions of Section 36 of the Act. The giving of such a notice is not expressly or by implication excluded by any provision of the Act or the Rules framed thereunder. It is, therefore, to be presumed that the legislature intended that the Collector, before cancelling the licence, should act in accordance with the principles of natural justice. " It is also clear from Section 40 of the Act that when a license, permit or pass is can-called or suspended under Clause (a), (b ). (c ). (d) or (e) of Section 36, the holder shall not! be entitled to any compensation for its cancellation or suspension nor to the refund of any fee paid or deposit made in respect thereof. Section 37 empowers the competent authority to cancel any other licence, permit or pass granted to a person whose licence, permit or pass is cancelled under Clause (a), (b), (c), (d) or (e) of Section 36, within the same district, which is an additional penalty imposable on a licensee as a consequence of the cancellation or suspension of his licence under Clause (a), (b), (c), (d) or (e) of Section 36 of the Act. It is, therefore, all the more necessary that before taking such drastic action, which results in far-reaching consequences involving a pretty heavy financial loss, a fair and proper enquiry into the culpable allegations levelled against a licensee should be made after affording him an adequate opportunity of hearing. If the licensee raises controversial issues and asks for an oral hearing, it must be granted. Nay. if the controversial facts can be resolved on taking evidence, an opportunity to lead evidence on such matters should also be allowed to him. Similarly, the department can also lead evidence to prove the defaults committed by the licensee and to rebut his defence in order to enable the authority to take action for cancellation or suspension of the licence. As an illustrative case, the facts of C. W. 3069 of 1972 may be referred.
(3.) IN this case, the petitioner obtained the licence for the year 1972-1973. The previous licensee was M/s. Tilak Chand and Co. and its unsold stock had to be taken over by the petitioner on April 1, 1972. He alleged that M/s. Tilak Chand and Co. delivered to him the stock on April 2, 1972, after preparing the list which was signed by the petitioner as well as by Tilak Chand on behalf of M/s. Tilak Chand and Co. In that list, 15 pints of Diplomat Whisky were mentioned and the total number of pints of whisky delivered to the petitioner was mentioned as 148. The Assistant Excise and Taxation Officer inspected the liquor vend of the petitioner on May 11, 1972, at 9. 45 p. m. and detected the following irregularities :-" On physical verification of the stock, the stock was found in excess by 12 quarts and 19 pints of whisky and Gin, besides the sale of 14 quarts and 11 pints of whisky and Gin stated to be made by the time of inspection. Thus 26 quarts and 30 pints of whisky and Gin were found in excess. 42 pints of Rum were found short as against the sale of only two pints of Rum stated to be made by the time of inspection. It is thus clear that correct accounts of day to day sales were found to have not been maintained at the vend. " After inspection a notice was issued to the petitioner to show cause why his licence should not be cancelled. In response to that notice the petitioner submitted his explanation and the Assistant Excise and Taxation Officer was satisfied that the petitioner's stock was correct except to the extent of three pints which were in excess. The case of the department was that 12 pints of Diplomat Whisky were handed over to the petitioner by the previous licensee instead of 15 shown by him and 145 pints in all, instead of 148, were delivered. It was said that 5 had been over-written by 8 and to support this plea reference was made to the Department's own registers. Evidently, in this case, the petitioner had to be granted an oral hearing in order to prove his defence that he had received 15 pints of Diplomat Whisky from the previous licensee. From the order of the Collector, it is not clear whether he had examined Shri Tilak Chand in order to find how many pints of Diplomat Whisky were handed over by him to the petitioner and whether there was any overwriting. This was a very important fact to be proved in the case in order to enable the petitioner to show his innocence and to prove that he had not committed any default which entailed the penalty of cancellation of the licence or the forfeiture of the security deposit which was of Rs. 10,000/ -. He had also paid Rs. 7,000.00on account of licence fee. The effect of the order was that bis licence was cancelled and the licence fee paid and the security amount deposited by him were also forfeited without affording him any real and fair opportunity by merely describing his explanation as unsatisfactory. In such a case the licensee must not only be heard orally but he should be afforded an opportunity to produce evidence to substantiate his plea in defence. It is thus clear that in order to comply with the principle of natural justice, audi alteram partem, the licensee must be given a full and true disclosure of the facts sought to be used against him and the hearing afforded must be adequate and substantial in order to enable him to safeguard his rights. In other words, the hearing must be fair, proper and in substance and not mere form. If such a hearing is denied, the action will be struck down as void. Under the requirements of a full hearing, a party has the right to defend himself against the charges levelled against him by arguments, proof and examination of witnesses where necessary. Then and then alone will it be said that the hearing has been a proper, fair and meaningful one. It is not necessary to refer to various decided cases on the point because it will depend on the facts of each case as to what kind of oral hearing should be granted if one is required by the licensee. The licensee must state in his explanation to the show-cause notice that he wants an oral hearing and/or an opportunity to adduce evidence etc. In short, the procedure before the Collector in proceedings under Section 36 of the Act must conform to the procedure before a judicial tribunal. The answer to question No. 1 is returned in the above terms. ;