Holding

The order cancelling the fifth respondent's licence was not a 'cancellation' under Section 34 of the U.P. Excise Act, and consequently the licence granted to the appellant was provisional and could be terminated without notice.

Summary

The dispute concerned the grant of an FL‑16 excise licence in Varanasi. The fifth respondent, Mohd. Khalil, held a temporary licence which was cancelled on 3 July 1993 by the District Excise Officer. Assuming a vacancy, a notification was issued and the appellant, Gorakhnath, was granted a licence. The fifth respondent successfully obtained restoration of his licence, and the appellant challenged this, arguing that the cancellation was illegal, that no vacancy existed, and that his licence could not be cancelled without notice under Section 34 of the U.P. Excise Act. The High Court held the appellant’s licence to be provisional and dismissed his writ petition. The Supreme Court affirmed that the cancellation did not fall within the meaning of Section 34, so no notice was required, and the licence granted to the appellant was merely a temporary arrangement that ends upon restoration of the fifth respondent’s licence. The appeal was dismissed.

Issues considered

Whether the cancellation of the fifth respondent's licence on 3 July 1993 constituted a 'cancellation' within the meaning of Section 34 of the U.P. Excise Act.
Whether a vacancy existed to justify a fresh grant of licence to the appellant.
Whether the licence granted to the appellant was a permanent licence that could be cancelled without notice.
Whether the principles of natural justice were violated in the cancellation of the appellant's licence.

Legislation cited

U.P. Excise Acts. 34

Subjects

excise licencecancellationSection 34natural justicetemporary licencevacancyadministrative law

Judgment

A GORAKHNATH
v.
STATE OF UTIAR PRADESH AND ORS.

OCTOBER 11, 1996

B [B. P. JEEVAN REDDY AND S.C. SEN, JJ.)

U.P. Excise Act: Section 34-F!16 Licence-Grant/renewal, etc.-Hear-
ing-Cancellation of licence without notice-Held : No Cancellation within
the meaning of Section 34-Hence, No notice necessary.
c Prior to 1961, F/16 licence stood in the name of A, brother of K • the
fifth respondent. In that year, the name of fifth respondent was also added.
'A' died in March, 1979. Accordingly, the licence for the excise year 1979-80
was renewed in the name of fifth respondent alone. On May 24, 1980, the
licence in favour of fifth respondent was cancelled and a temporary licence
D was issued to one 'R'. Fifth respondent complained and took several
proceedings in that behalf. Ultimately, he filed a writ petition in the High
Court which was allowed and the licence in favour of the fifth respondent
was renewed and continued to be renewed till and including the excise year
1991-92. For the excise year 1992·93, the fifth respondent applied for
E renewal in the usual course, but on the report submitted by the office, the
District Excise officer cancelled the licence in favour of the fifth respondent
with the result that the licence in respect of the said shop was deemed to
be vacant.

A notification was issued on October 16, 1993 calling for applications
F for the grant of a regular licence in respect of the said area. Eleven persons
including appellant applied. The licence was granted to appellant against
which .the fifth respondent again took proceedings before the excise
authorities. On May 20, 1994, the District Magistrate accepted the fifth
respondent's case and directed the renewal of the licence, for the year
G 1994-95, in his favour. The appellant preferred an appeal against the order
which was dismissed by the Additional Excise Commissioner. A revision
was also dismissed, whereupon appellant approached the High Court by
way of a writ petition.

The writ petition was dismissed by the High Court on the ground
H that once it was rightly held that the order of cancellation was competent
590
GORAKHNATH~STATE 591
and erroneous, it must follow that there was no vacancy in the licence and A
hence, calling for applications for grant of licence and the consequential
grant of licence was incompetent in law. However, the High Court rejected
the appellant's plea that cancellation of his licence without hearing him
was illegal being violative of principles of natural justice. it opined that
the licence granted to the appellant has to be treated as an interim or B
temporary arrangement, subject to the claims of the fifth respondent.

In appeal to this court, the appellant assailed the order on the
grounds that fifth respondent had no licence at all, hence there was no
question of cancelling his licence; that since fifth respondent had not even
applied for licence, there could be no question of renewal or grant of C
licence; that a permanent/regular licence can be cancelled only on any of
the grounds specified in Section 34 of the U.P. Excise Act; and that as the
licence was also not cancelled with notice, the order was violative of
principles of natural justice.

Dismissing the Appeal, this Court D

HELD : 1.1. The order dated July 3, 1993 expressly purports to
cancel the licence of the fifth respondent. On that date_, the fifth respondent
., was holding a temporary licence. It was that licence which was cancelled.
The order of the District Magistrte clearly mentions that fifth respondent E
was having a temporary licence on that date. (594-F]

1.2. If the fifth respondent was holding a licence on July 3, 1993, there
is no substance in the argument that he did not apply for renewal of the
licence for 1993-94. (594-G]
F
1.3. The fifth respondent was agitating against the cancellation of his
licence throughout. It was during the pendency of the proceedings taken
by him that a notification was issued calling for applications for a fresh
grant and licence was granted to the appellant. The said exercise was on
the supposition that by virtue of the cancellation of the fifth respondent's G
licence, a vacancy has arisen. Once the said supposition is not true - in the
sense that the said cancellation was found to be illegal - the grant of licence
to the appellant must be deemed to be provisional and a temporary
arrangement, as rightly held by the High Court, notwithstanding the fact
that it may have been described as a permanent licence. Once the fifth
respondent's licence is restored, the licence granted to the appellant comes H
592 SUPREME COURT REPORTS [1996] SUPP. 7 S.C.R .
. A to an end by operation of law. [594-H, 595-A-B]
1.4. It is not really a case of 'cancellation' within the meaning of
Section 34 of the U.P. Excise Act. Hence no notice was also necessary to
be given to the appellant. [595-C]

B CIVIL APPELLATE JTJRISDICTION: Civil Appeal No. 13103 of
1996.

From the Judgment and Order dated 15.9.95 of the Allahabad High
Court in C.M.W.P. No. 707 of 1995.

C S.K. ·Dhaon, Mukesh Prasad and Prashant Kumar for the Appellant.

Ms. S. Janani and A.K. Goel for the Respondents.

The Judgment of the Court was delivered by

D B.P. JEEVAN REDDY, J. Leave granted.

The dispute pertains to the grant of FL-16 licence in respect of the
area Kachchi Sarai, Dal Mandi, Sector-II, Varanasi. Only one· licence is
sanctioned for the said area.

Prior to 1961, the licence stood in the name of Mohd. Abdul Hamid,
brother of Mohd. Khalil - fifth respondent herein. In that year, the name
of fifth respondent was also added. Abdul Hamid died in March 1979.
Accordingly, the licence for the excise year 1979-80 was renewed in the
name of fifth respondent alone. On May 24, 1980, the licence in favour of
F fifth respondent was cancelled and a temporary licence was issued to one
R.S. Tiwari. Fifth respondent complained against the same and took
several proceedings in that behalf. Ultimately, he filed a writ petition in the
Allahabad High Court [Writ Petition (C) No. 15434 of 1981] which was
allowed on August 29, 1986. Pursuant to the said order, the licence in
G favour of the fifth respondent was renewed and continued to be renewed
till and including the excise year 1991- 92.
.,
For the excise year 1992-93, the fifth respondent applied for the
renewal in the usual course. Thereon, a query was raised by the District
Excise Officer as to the circumstances in which licence was granted to the
H fifth respondent in 1984 an later. The fifth respondent furnished his ex-
GORAKHNATH v. STAIB [B.P. JEEVAN REDDY, J.) 593

planation to the said query but no orders were passed in the matter. While A
so, Sri Surender Tripathi filed an application dated June 4, 1993 requesting
for grant of a temporary FL-16 licence in the name of his wife, Shanti Devi.
On the said application, a report was submitted by the office that while the
fifth respondent had not applied for renewal of licence for the year
1993-94, he is yet running the business on the basis of a temporary licence.
B
~ [This fact is taken from the order of the District Magistrate dated May 20,
1994.] On this report, the District Excise Officer, Varanasi, cancelled the
licence in favour of the fifth respondent with the result that the licence in
respect of the said shop was deemed to be vacant. A notification was issued
on October 16, 1993 calling for applications for the grant of a regular
-.... licence in respect of the said shop. Eleven persons including the appellant c
herein, Sri Gorakhnath applied. The licence was granted to Gorakhnath -
against which the fifth respondent again took proceedings before the excise
authorities. On May 20, 1994, the District Magistrate, Varanasi accepted
(·
the fifth respondent's case and directed the renewal of FL-16 licence, for
the year 1994-95, in his favour under an elaborate order. In this order, the
4
D
District Magistrate set out the history relating to the grant and the sub-
sequent litigation concerning the said licence and found that the cancella-
tion of fifth respondent's licence by the District Excise Officer by his order
dated July 3, 1993 was incompetent in law and not warranted on facts. The
appellant preferred an appeal against the order of the District Magistrate
which was dismissed by the Additional Excise Commissioner. A revision E
filed before the Government was also dismissed, whereupon he ap-
proached the Allahabad High Court by way of a Writ petition (C) No. 707
of 1995.

Writ Petition (C) No. 707 of 1995 has been dismissed by the High F
Court under the order impugned herein. The reasoning of the High Court
is: once it is rightly held that the order 1of cancellation [of the fifth
_, respondent's licence] dated July 3, 1993 is competent and erroneous, it
must follow that there was no vacancy in the licence and hence, calling for
applications for grant of licence and the consequential grant of licence in
j favour of the appellant is incompetent in law. The High Court rejected the
G
appellant's plea that cancellation of his licence without hearing him is
~:
illegal being violative of the principles of natural justice. It opined that the
l licence granted to the appellant, even if described as permanent, has to be
treated as an interim or temporary arrangement subject to the claims of
the fifth respondent and that once the latter is held entitled to renewal of H
594 SUPREME COURT REPORTS (1996] SUPP. 7S.C.R.
A licence, the appellant's licence is liable to come to an end. The High Court
further observed that the cancellation of the appellant's licence was not on
account of any fault of his but only because the licence of fifth respondent
was ·restored to him. In view of the further fact that the appellant has
availed the remedy of appeal and revision wherein he had full opportunity
B of putting forward his case, there are no grounds for exercising the discre-
tionary and extra-ordinary power of the High Court under Article 226 of
the, Constitution in favour of the appellant, said the High Court.

Sri S.K. Dhaon, learned senior advocate for the appellant, assailed
the order of the High Court on the following grounds: (a) on July 3, 1993,
C fifth respondent had no licence at all, hence there is no question of ,,
cancelling his licence. Once, it is held that there was no cancellation of fifth
respondent's licence, the reasoning of the High Court that grant of licence
to the appellant - though described as permanent - must be deemed to be
a temporary arrangement becomes unsustainable; (b) the fifth respondent
D had not even applied for renewal of licence for the year 1993-94, hence
there could be no question of renewal or grant of licence in his favour and
a
(c) the licence granted to the appellant was permanent/regular licence
which could be cancelled only on any of the grounds specified in Section
34 of the U.P. Excise Act and admittedly none of the said grounds were
present in this case nor was the licence cancelled with notice to the ' '
E .appellant. The order being violative of principles of natural justice, is void.

It is not possible to agree with any of the above contentions. The
order dated July 3, 1993 expressly purports to cancel the licence of the fifth
respondent. As stated supra, on the date of cancellation the fifth respon-
F dent was holding a temporary licence. It was that licence that was can-
celled. The order of the District Magistrate dated May 20, 1994 clearly
mentions that fifth respondent was having a temporary licence on that date.
Once this is so, the first ground of attack fails being premised upon an
incorrect factual assumption. The second ground also fails in view of that
fact; if the fifth respondent was holding a licence on July 3, 1993, there is
G no .substance in the argument that he did not apply for renewal of the I
licence for 1993-94.

Coming to the third ground of Sri Dhaon, it would be seen that the
fifth respondent was agitating against the cancellation of his licence [by ·
H order dated July 3, 1993] throughout. It was during the pendency of the
GORAKHNATII v. STATE [B.P. JEEVAN REDDY, J.) 595

proceedings taken by him that a notification was issued calling for applica- A
tions for a fresh grant and licence was granted to the appellant. The said
exercise was on the supposition that by virtue of the cancellation of the
fifth respondent's licence, a vacancy has arisen. Once the said supposition
is not true - in the sense that the said cancellation was found to be illegal

... - the grant of licence to the appellant must be deemed to be provisional
and a temporary arrangement, as rightly held by the High Court, not-
B
withstanding the fact that it may have been described as a permanent
licence. Once the fifth respondent's licence is restored, the licen.ce granted
to the appellant comes to an end by operation of law. It is not really a case
of "cancellation" within the meaning of Section 34 of the U.P. Excise Act.
No notice was also necessary to be given to the appellant. C
The appeal accordingly fails and is dismissed. No costs.

S.S. Appeal dismissed.

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