RM. A.R. A.R. R.M. A.R. ARUNACHALAM CHETTIAR Vs. THE UNION OF INDIA (UOI), REPRESENTED BY SECRETARY TO GOVERNMENT, MINISTRY OF INDUSTRIAL DEVELOPMENT, INTERNAL TRADE AND COMPANY AFFAIRS, (DEPARTMENT OF INDUSTRIAL DEVELOPMENT) AND ORS.

JUDGEMENT

(1.) W .P. No. 3544 of 1970. - Over an extent of 122.93 acres of land in Athipet North a licence to manufacture salt - therein for a period of 25 years, commencing from 1st November, 1953, was granted in favour of Smt. Udaya Nagarathinammal. On a due application for transfer of the licence the same was transferred in favour of one L. Arunachalam Chettiar. At or about that time L. Arunachalam Chettiar was in need of finance and therefore he associated the petitioner with him for financing the project of manufacture and sale of salt in the factory. In consideration of such financial help rendered, the petitioner expressed his desire to become a joint licensee. In consequence thereto and on representations made for the purpose, the petitioner was recognised, on 3rd September, 1959, as joint licensee for the manufacture of salt in the factory along with L. Arunachalam Chettiar.

(2.) PRESUMABLY in view of the advances made by the petitioner he wanted to safeguard his interest. The petitioner therefore obtained a power of attorney which inter alia empowered him to assume management of the factory. The power of Attorney, however, was not recognised by the appropriate authority and therefore it had to be cancelled on 3rd August, 1960. Immediately thereafter the Department undertook an investigation into the alleged irregularities committed by the licensees of the salt factory as above and in or about December, 1960 the licence was suspended. L. Arunachalam Chettiar, who was originally the licensee, was prosecuted and the material for such prosecution was given by the petitioner himself. This prosecution failed because it was instituted beyond time. On 27th May, 1962, a show cause notice was issued to the petitioner and L. Arunachalam Chettiar charging them with unauthorised removal of salt with the idea of evading lawful duty payable thereon. The period during which such irregularities and illegalities were charged to have "been committed ranged between 1st January, 1958 and 3rd August, 1960. These proceedings were initiated by the Salt Commissioner who satisfies the definition of 'Collector' under the Central Excises and Salt Act, 1944. In December, 1962 the Salt Commissioner ultimately passed orders after taking the explanation of the petitioner, as by then L. Arunachalam Chettiar discretely kept himself back and did not even file an explanation. The Salt Commissioner, after perusing the records and on the basis of the material made available before him, cancelled the licence and imposed a personal fine of Rs. 1,000 on the petitioner. The petitioner took up the matter m W.P. No. 49 of 1967 to this Court. Kailasam, J., allowed the Writ Petition on the ground that the Salt Commissioner had no power to pass the order withdrawing the licence, but sustained the personal fine of Rs. 1,000 and made it clear that it was open to the appropriate authority to take such steps as it deemed fit. Thus fortified with the judgment of this Court a fresh show cause notice, dated 16th August, 1969, was once again issued by the Government of India calling upon both the petitioner and L. Aiunachalam Chettiar to answer a charge similar to the one levelled against them by the Salt Commissioner earlier. A statement showing unauthorised removals of salt was appended and the licensees were asked to explain such malpractices. They were also asked to show cause why penal, action, namely, withdrawal of the licence, under Rule 115(1) of the Central Excise Rules, 1944, should not be taken against them for violation of Rule 131 of the Central Excise Rules, 1944. Here again L. Arunachalam Chettiar did not file his explanation, but the petitioner did. At about the time when fresh proceedings were initiated by the Government of India, the petitioner had to file a civil suit O.S. No. 1853 of 1964 on the file of the Court of the City Civil Judge, Madras for recovery of moneys advanced and for other reliefs. It appears that an advocate -commissioner was appointed to investigate and report on the number of bags removed by L. Arunachalam. Chettiar without authority. It is stated that the Commissioner found that between February 1960 and August 1960, 40,000 bags were missing, out of which 21,200 bags were in the custody of the Government, 9,000 bags were said to have been washed away and the balance was accepted by L. Arunachalam Chettiar as having been removed without authority. On the basis of the said report the petitioner obtained relief. The report of the Commissioner was in the main placed before the Central Government along with his explanation and the petitioner claims that the entire delinquency is attributable to L. Arunachalam Chettiar and he did not transgress in any way the conditions of the licence as a joint licensee thereof. The Central Government, on the basis of the earlier report of the Salt Commissioner and after perusing the entire records including the explanation of the petitioner, acted under Rule 115 of the Rules and cancelled the licence. The order impugned was passed on 2nd July, 1970. The order refers to an enquiry having been held in respect of the various fraudulent transactions indulged in by the licensees, the later show cause memo, issued by the Ministry, the perusal of the material by the Ministry as well as the report of the competent authority made in the earlier enquiry and their conclusions on the same. Ultimately the Government found that there was a deliberate violation of the conditions of the licence and that the licensees committed serious illegal activities and that they are liable both jointly and severally for the same and in that view and in exercise of the power conferred on them by Rule 115 withdrew the licence in respect of the salt works held by the petitioner and L. Arunachalam Chettiar. It is this order which is challenged in this Writ petition.

(3.) A licence under the Central Excise and Salt Act, 1944, hereinafter referred to as the Act, is issued under Sections 6 and 7 of the Act. No one can, except under due authority and in accordance with, the terms and conditions of a licence as prescribed, undertake the production or manufacture or any process of the production or manufacture of salt, amongst other specified goods. The prescription, as to form, restrictions and conditions of such a licence to manufacture salt etc. are prescribed under the Rules. Section 37(2) refers to such a general rule -making, power. In particular Section 37(2)(v) provides for the making of Rules to regulate the production or manufacture, or any process of the production or manufacture, the possession, storage and sale of salt. On and from 1st June, 1958, a form of licence for the manufacture of salt was notified in the Gazette of India, dated 12th April, 1958. Clause 21 of the conditions in the form so prescribed provides inter alia for the cancellation of the licence in case of repeated violations or in the event of the licensee having been; convicted for a criminal offence under the Indian Penal Code. These are some of the relevant statutory provisions relating to licences issued under the Act to the production or manufacture, or indulging in any process of the production or manufacture, the possession, storage and sale of salt.