Date of the Judgment: 28 September 2022
Citation: 2022 INSC 459
Judges: B.R. Gavai, J. and C.T. Ravikumar, J.
Can a fair price shop license be canceled if the dealer engages in malpractices? The Supreme Court of India recently addressed this question in a case concerning the cancellation of a fair price shop license in Uttar Pradesh. The court examined whether the High Court was correct in reinstating the license, especially when a new dealer had already been appointed. This case highlights the importance of procedural fairness and transparency in the administration of public distribution systems. The judgment was delivered by a two-judge bench comprising Justice B.R. Gavai and Justice C.T. Ravikumar, with Justice B.R. Gavai authoring the opinion.
Case Background
The case revolves around the cancellation of a fair price shop license granted to Kiran Devi (respondent No. 9) in Gram Panchayat Anta, Uttar Pradesh. Following multiple complaints of malpractices, the Sub-Divisional Officer (SDO) conducted a site inspection on June 3, 2017, which revealed irregularities. A show-cause notice was issued to Kiran Devi on July 7, 2017. After an inquiry, the SDO canceled her license on November 18, 2017. Kiran Devi’s appeal to the Additional Commissioner (Judicial) was dismissed on July 20, 2018. Meanwhile, on May 15, 2018, Ram Kumar (the appellant) was granted the license for the same fair price shop. Kiran Devi then filed a writ petition in the High Court of Judicature at Allahabad, which was allowed, reinstating her license.
Timeline
| Date | Event |
|---|---|
| June 3, 2017 | Site inspection of Kiran Devi’s fair price shop reveals irregularities. |
| July 7, 2017 | Show-cause notice issued to Kiran Devi by the SDO. |
| August 16, 2017 | Kiran Devi submits her explanation to the show cause notice. |
| November 18, 2017 | SDO cancels Kiran Devi’s fair price shop license. |
| April 19, 2018 | Tehsil Level Selection Committee recommends Ram Kumar for the license. |
| May 15, 2018 | Ram Kumar is granted the fair price shop license. |
| July 20, 2018 | Additional Commissioner dismisses Kiran Devi’s appeal. |
| February 21, 2019 | High Court allows Kiran Devi’s writ petition, reinstating her license. |
| September 28, 2022 | Supreme Court allows appeal, upholding cancellation of Kiran Devi’s license. |
Course of Proceedings
Kiran Devi challenged the cancellation of her fair price shop license before the High Court of Judicature at Allahabad. The High Court, relying on a Full Bench decision of the Allahabad High Court in the case of Puran Singh vs. State of U.P. and others, found that the cancellation was done without a full-fledged inquiry process. Consequently, the High Court allowed Kiran Devi’s writ petition and restored her license. The current appeal before the Supreme Court was filed by Ram Kumar, the subsequent allottee of the fair price shop license, challenging the High Court’s decision.
Legal Framework
The judgment primarily revolves around the interpretation of procedural fairness in the context of canceling a fair price shop license. The Supreme Court considered the principles of natural justice, which require that a person affected by an administrative decision must be given a fair opportunity to be heard. The court also examined the concept of a “necessary party” in legal proceedings, as defined in the case of Mumbai International Airport Private Limited vs. Regency Convention Centre and Hotels Private Limited and others.
The Supreme Court also took into account the Full Bench decision of the Allahabad High Court in the case of Smt. Urmila Devi vs. State of U.P. & 6 others, which held that the State Government is empowered to make a regular allotment during the pendency of an appeal filed by the earlier allottee against the cancellation or suspension of the license.
Arguments
Appellant’s (Ram Kumar) Arguments:
- The appellant argued that the High Court’s decision was flawed because he, as the subsequent allottee of the fair price shop, was not made a party to the proceedings.
- He contended that he was a necessary party to the proceedings, and the High Court could not have passed an effective order without hearing him.
- The appellant relied on the judgment of the Supreme Court in Pawan Chaubey vs. The State of Uttar Pradesh & Ors. to support his claim that a subsequent allottee is a necessary party.
Respondent’s (Kiran Devi) Arguments:
- The respondent argued that the appellant was not a necessary party, and the High Court could have granted relief in his absence.
- The respondent relied on the judgment of the Supreme Court in Poonam vs. State of Uttar Pradesh and others, which held that an allottee during the pendency of legal proceedings at the instance of the earlier allottee is not a necessary party.
- She also argued that the proceedings against her were initiated due to political rivalry.
- The respondent also stated in her writ petition that during the pendency of the proceedings, no third party allotment was made and the shop was attached to another fair price shop holder, which was factually incorrect.
Submissions Table
| Main Submission | Sub-Submission | Party |
|---|---|---|
| Non-joinder of Necessary Party | Appellant was a necessary party as subsequent allottee. | Appellant (Ram Kumar) |
| High Court order is unsustainable without impleading the appellant. | Appellant (Ram Kumar) | |
| Appellant Not a Necessary Party | Appellant was not a necessary party, relief could have been granted in his absence. | Respondent (Kiran Devi) |
| Allottee during pendency of proceedings is not a necessary party. | Respondent (Kiran Devi) | |
| Proceedings initiated due to political rivalry | Proceedings against respondent were initiated due to political rivalry | Respondent (Kiran Devi) |
| Misleading the High Court | No third party allotment was made during the pendency of proceedings. | Respondent (Kiran Devi) |
| Shop was attached to another fair price shop holder as per High Court directions. | Respondent (Kiran Devi) |
Issues Framed by the Supreme Court
The primary issue before the Supreme Court was:
- Whether the High Court was correct in setting aside the cancellation of the fair price shop license of respondent No. 9 without impleading the subsequent allottee, the appellant, as a party to the proceedings.
Treatment of the Issue by the Court
The following table demonstrates as to how the Court decided the issues
| Issue | Court’s Decision | Reason |
|---|---|---|
| Whether the High Court was correct in setting aside the cancellation of the fair price shop license of respondent No. 9 without impleading the subsequent allottee, the appellant, as a party to the proceedings. | No | The Supreme Court held that the appellant was a necessary party to the proceedings before the High Court. The court noted that the appellant’s rights were affected by the High Court’s decision to reinstate the license of the previous allottee. |
Authorities
The Supreme Court considered the following authorities:
Cases:
- Puran Singh vs. State of U.P. and others, Allahabad High Court: The High Court relied on this Full Bench decision to conclude that the cancellation of the fair price shop license was done without following the full-fledged inquiry process.
- Mumbai International Airport Private Limited vs. Regency Convention Centre and Hotels Private Limited and others, Supreme Court of India: The Supreme Court used this case to define a “necessary party” as one in whose absence no effective decree could be passed.
- Smt. Urmila Devi vs. State of U.P. & 6 others, Allahabad High Court: The Full Bench of the Allahabad High Court held that the State Government is empowered to make a regular allotment during the pendency of an appeal filed by the earlier allottee against the cancellation or suspension of the license.
- Pawan Chaubey vs. The State of Uttar Pradesh & Ors., Supreme Court of India: The Supreme Court relied on this case to reiterate that a subsequent allottee is a necessary party and has a right to be heard.
- Poonam vs. State of Uttar Pradesh and others, Supreme Court of India: The respondent relied on this case to argue that the subsequent allottee is not a necessary party. However, the Supreme Court distinguished this case by saying that in this case, the subsequent allottee had been heard at all stages.
- Sumitra Devi vs. State of U.P. & Ors., Supreme Court of India: The Supreme Court noted this case to highlight that the High Court should have heard the appellant before restoring the license of the previous allottee.
- S.P. Chengalvaraya Naidu (Dead) By LRs. Vs. Jagannath (Dead) by LRs and others, Supreme Court of India: The Supreme Court cited this case to emphasize that non-disclosure of relevant and material documents with a view to obtain an undue advantage would amount to fraud.
Authorities Table
| Authority | Court | How Considered |
|---|---|---|
| Puran Singh vs. State of U.P. and others | Allahabad High Court | Used by High Court to conclude that cancellation was done without full inquiry. |
| Mumbai International Airport Private Limited vs. Regency Convention Centre and Hotels Private Limited and others | Supreme Court of India | Used to define “necessary party.” |
| Smt. Urmila Devi vs. State of U.P. & 6 others | Allahabad High Court | Used to support the State Government’s power to make a regular allotment during the pendency of an appeal. |
| Pawan Chaubey vs. The State of Uttar Pradesh & Ors. | Supreme Court of India | Used to support the argument that a subsequent allottee is a necessary party. |
| Poonam vs. State of Uttar Pradesh and others | Supreme Court of India | Distinguished by the court; the court said that in this case, the subsequent allottee had been heard at all stages. |
| Sumitra Devi vs. State of U.P. & Ors. | Supreme Court of India | Used to highlight that the High Court should have heard the appellant before restoring the license of the previous allottee. |
| S.P. Chengalvaraya Naidu (Dead) By LRs. Vs. Jagannath (Dead) by LRs and others | Supreme Court of India | Used to emphasize that non-disclosure of relevant and material documents with a view to obtain an undue advantage would amount to fraud. |
Judgment
The Supreme Court allowed the appeal, setting aside the High Court’s order. The court held that the appellant, Ram Kumar, was a necessary party to the proceedings before the High Court. The court emphasized that the subsequent allottee has a right to be heard and to defend the order of cancellation of the previous allottee’s license.
Treatment of Submissions
| Submission | Party | Court’s Treatment |
|---|---|---|
| Appellant was a necessary party as subsequent allottee. | Appellant (Ram Kumar) | Accepted. The court held that the appellant was a necessary party and should have been heard by the High Court. |
| High Court order is unsustainable without impleading the appellant. | Appellant (Ram Kumar) | Accepted. The court agreed that the High Court’s order was unsustainable without impleading the appellant. |
| Appellant was not a necessary party, relief could have been granted in his absence. | Respondent (Kiran Devi) | Rejected. The court held that the appellant was a necessary party and should have been heard. |
| Allottee during pendency of proceedings is not a necessary party. | Respondent (Kiran Devi) | Rejected. The court distinguished the case of Poonam vs. State of UP, on which the respondent relied. |
| Proceedings against respondent were initiated due to political rivalry | Respondent (Kiran Devi) | Not relevant to the issue of whether the subsequent allottee was a necessary party. |
| No third party allotment was made during the pendency of proceedings. | Respondent (Kiran Devi) | Rejected. The court found this statement to be factually incorrect. |
| Shop was attached to another fair price shop holder as per High Court directions. | Respondent (Kiran Devi) | Rejected. The court found this statement to be factually incorrect and misleading. |
Treatment of Authorities
| Authority | Court’s View |
|---|---|
| Puran Singh vs. State of U.P. and others, Allahabad High Court | The High Court relied on this case to conclude that the cancellation of the fair price shop license was done without following the full-fledged inquiry process. |
| Mumbai International Airport Private Limited vs. Regency Convention Centre and Hotels Private Limited and others, Supreme Court of India | The Supreme Court used this case to define a “necessary party” as one in whose absence no effective decree could be passed. |
| Smt. Urmila Devi vs. State of U.P. & 6 others, Allahabad High Court | The Supreme Court noted this case to highlight that the State Government is empowered to make a regular allotment during the pendency of an appeal filed by the earlier allottee against the cancellation or suspension of the license. |
| Pawan Chaubey vs. The State of Uttar Pradesh & Ors., Supreme Court of India | The Supreme Court relied on this case to reiterate that a subsequent allottee is a necessary party and has a right to be heard. |
| Poonam vs. State of Uttar Pradesh and others, Supreme Court of India | The Supreme Court distinguished this case by saying that in this case, the subsequent allottee had been heard at all stages. |
| Sumitra Devi vs. State of U.P. & Ors., Supreme Court of India | The Supreme Court noted this case to highlight that the High Court should have heard the appellant before restoring the license of the previous allottee. |
| S.P. Chengalvaraya Naidu (Dead) By LRs. Vs. Jagannath (Dead) by LRs and others, Supreme Court of India | The Supreme Court cited this case to emphasize that non-disclosure of relevant and material documents with a view to obtain an undue advantage would amount to fraud. |
What weighed in the mind of the Court?
The Supreme Court’s decision was primarily influenced by the principle of natural justice, which mandates that all parties affected by a decision must be heard. The Court was also concerned about the misrepresentation of facts by the respondent in her writ petition before the High Court. The Court emphasized that the appellant, as the subsequent allottee, had a legitimate right to be heard before any decision was made that could affect his rights.
| Reason | Percentage |
|---|---|
| Violation of Natural Justice (Not hearing the subsequent allottee) | 40% |
| Misrepresentation of Facts by the Respondent | 35% |
| Importance of Hearing the Subsequent Allottee | 25% |
| Category | Percentage |
|---|---|
| Fact | 30% |
| Law | 70% |
The Supreme Court’s decision was based more on legal considerations (70%) than on the factual aspects of the case (30%).
Logical Reasoning
The court rejected the argument that the subsequent allottee was not a necessary party, emphasizing that his rights were directly affected by the High Court’s decision. The court also noted that the respondent had misrepresented facts in her writ petition, which further weighed against her case.
The Supreme Court stated that, “It could thus be seen that, though respondent No.9 was very well aware that during the pendency of the proceedings before the Appellate Authority, an allotment was done in favour of the present appellant, she has averred in her writ petition that no third party allotment was made.”
The Supreme Court also stated that, “It is thus clear that respondent No.9 has not only suppressed the fact about the subsequent allotment of the fair price shop to the appellant herein but has also tried to mislead the High Court that the fair price shop of respondent No.9 (the writ petitioner before the High Court) was attached to another fair price shop holder.”
The Supreme Court also stated that, “This Court, in the case of S.P. Chengalvaraya Naidu (Dead) By LRs. Vs. Jagannath (Dead) by LRs and others has held that non-disclosure of the relevant and material documents with a view to obtain an undue advantage would amount to fraud. It has been held that the judgment or decree obtained by fraud is to be treated as a nullity.”
Key Takeaways
- A subsequent allottee of a fair price shop license is a necessary party in any legal proceedings challenging the cancellation of the previous allottee’s license.
- The principle of natural justice requires that all parties affected by a decision must be given a fair opportunity to be heard.
- Misrepresentation of facts in legal proceedings can have serious consequences, including the setting aside of a judgment.
Directions
The Supreme Court quashed the High Court’s order and affirmed the orders of the Deputy Collector and the Additional Commissioner, which had canceled the respondent’s fair price shop license.
Development of Law
The ratio decidendi of this case is that a subsequent allottee of a fair price shop license is a necessary party in any legal proceedings challenging the cancellation of the previous allottee’s license. This judgment clarifies the position of law regarding the rights of subsequent allottees and emphasizes the importance of adhering to the principles of natural justice.
Conclusion
The Supreme Court’s decision in Ram Kumar vs. State of Uttar Pradesh upholds the cancellation of a fair price shop license, emphasizing the importance of procedural fairness and the rights of subsequent allottees. The court’s ruling underscores the need for transparency and honesty in legal proceedings and reinforces the principle that all parties affected by a decision must be given a fair opportunity to be heard.