JUDGMENT
S. Ravindra Bhat, J.
1. The writ petitioner has questioned the decision communicated to it by the respondents namely the Indian Oil Corporation and the Delhi Development Authority (hereafter referred to as IOL and DDA, respectively) cancelling the allotment of the lease in respect of site No. 2, Vasant Vihar allotted for a SKO/LDO godown.
2. One Shri Bhoop Singh had been granted allotment of a site, for the purpose of SKO/LDO storage on 6.12.1995. The allotment letter specified that the premises of the storage would not be used for any other purpose; condition 6 stipulated that the building on the plot was to be constructed as per approved specifications, after permission by the DDA and the Delhi Urban Arts Commission. After the appeal of the said allottee/licensee Shri Bhoop Singh the dealership was transferred to one Virender Sharma, IOC with consent of DDA and possession was handed over to the authorized representative of IOC on 24.4.1998 for storage of Superior Kerosene Oil (SKO)/Low Density Oil (LDO) at the site. The petitioner firm is the proprietorship concern of Virender Sharma; it claims to have been carrying on business activities, in furtherance to the dealership agreement with IOC. It claims that on 28.8.2005 it received a letter from IOC for the first time, communicating that the license fee to the DDA had not been paid for use of the site. It is claimed that the petitioner approached the IOC but did not make any written representation/communication. On 24.5.2005 the impugned letter was issued by the IOC, informing that the allotment to the site had been cancelled by the DDA and that possession ought to be handed over by 30.5.2005 failing which coercive action to take possession would be initiated. The petitioner approached this Court questioning the said letter dated 24.5.2005. It is alleged that the letter dated 28.2.2005 informing about arrears of license fee mentioned the figure to be Rs. 7,99,351/-, payable to the DDA, as on 31.12.2003. The petitioner claims that the margin towards commission available for sale of SKO was very low and that the quota having been declined from 220 KL to 280 KL per month, it was difficult to sustain the overheads like license fee etc. It is claimed therefore that the petitioner had requested for waiver of license fee. It is further claimed that the allegation that certain unauthorized constructions having been undertaken upon the site was without basis since the construction had been approved pursuant to specifications of the IOL and permission was granted in that regard. In its letter dated 24.5.2005 to the IOC it also took the position that there was about 12 KL of LDO was stored in the underground tanks besides 200 KL lube.
3. The impugned cancellation has been attacked as arbitrary and void, as it was not preceded by any show cause notice or opportunity of hearing. It is also averred that the allegation levelled by the IOC that no activity at the site existed was contrary to the record. The IOL itself was supplying its products which were being sold in retail from the site. If the DDA had alleged that no activity was taking place, the IOL should have responded appropriately, revealing that it was making effective regular supplies. It has also been alleged that the IOC has taken advantage of its position as a lesseee and not responded properly to the DDA, thus causing prejudice and loss to the petitioner which is indicative of conspiracy. The order has therefore been questioned as arbitrary.
4. The IOC in its reply as alleged that the petitioner is guilty of suppression of certain communications, particularly letters dated 24.3.2004 and 3.5.2004 whereby it was categorically informed that a three storeyed building has been constructed without authorization or approval and that even by letter dated 30.1.2003, the IOC had informed outstanding dues to the extent of Rs. 7,81,286/- payable in addition to interest, by the petitioner. This was accepted by the petitioner which deposited only Rs. 1,39,440/-. The letter dated 3.5.2004 had enclosed the demand note by the DDA, issued on 21.4.2004 towards license fee and also raised a demand for license fee Rs. 7,99,351/- within a week. This letter had also shown confirmation regarding use of subject at site for storage of SKO/LDO.
5. It is claimed that the petitioner deliberately withheld the notice/letter issued by the DDA on 25.2.2005 which had been disclosed to it by the IOC on 28.2.2005. The letter/notice sought a clear response as to how the building has been constructed and with whose permission as well as demanded deposit of license fee to the extent of Rs. 7.99 lakhs.
6. The IOC placed reliance on a letter dated 31.1.2005 issued by the DDA on the question of outstanding arrears towards license fee and also that its non-compliance of such demand by the petitioner automatically led to cancellation of the allotment.
7. The IOC has further relied upon an undertaking dated 10.7.1998 which, it is alleged has not been disclosed to this Court. In terms of the undertaking the petitioner agreed to abide by all the terms of the license deed to be executed between DDA and IOC and that as and when IOC would call upon it to execute the sub license deed, he undertook to do so. Therefore it is averred that the petitioner could not have evaded its liability; it was fully and at all times aware of the various amounts due and payable but chose not to deposit them. In these circumstances, it could not claim to be absolved of the liability.
8. It is also alleged that the petitioner only had a license XBI issued under the Explosive Rules whereas Section 5 of the prescribes that no person can be in possession of specific class of explosives without a license under the rules. It is further alleged that SKO/LDO are specified classes of explosives under the rules. Thus under Rule 32, the licensee was permitted only to transport and not store the concerned explosives. It is also alleged that only a licensee in Form XIII /Form XVI read with Rule 32 could store the concerned explosives. The petitioner never had that license and therefore was not utilising the dealership for storage.
9. The allegation that the impugned order was arbitrary or without show cause notice is denied; the IOC claims that it was bound in terms of the arrangement with the DDA to hand over the plot once the license was cancelled. It is also alleged that the petitioner was given sufficient opportunity to comply with the demands and it could not complain of un-reasonable or arbitrary procedure.
10. The DDA filed two affidavits in these proceedings. In the first affidavit it has alleged that possession was handed over to the authorized representative on IOC on 24.4.1998 for storage of SKO/LDO. The terms of the license which were clear enough, indicated that the premises were for storage and were not to be used for any other purposes. The building on the plot was to be constructed as per approved specifications and after approval of the DDA and Delhi Urban Arts Commission. The DDA claims that the site was inspected on 24.1.2005 when it was observed that no business activity pertaining to the activities for which the site was allotted were being carried on, that a double storeyed building had been unauthorizedly constructed which was locked. It is claimed that on 31.1.2005 notice was furnished to the IOC asking it to explain why allotment of the plot should not be cancelled. This was not replied to; a final notice was issued on 25.2.2005. The IOC had informed DDA through its letter dated 28.8.2005 that the petitioner was supplying SKO to the retailer at their door steps through tankers and not storing it in the underground tanks installed at the site. It is claimed that due to non-utilization of the site, unauthorized construction and non payment of the license fee DDA issued the cancellation order. In the additional affidavit of the DDA much of the same position has been reiterated; however copies of various notices/demands issued to the IOC dated 30.1.2003, 21.4.2004; (a copy of which was also marked to the petitioners). Copies of letters dated 31.1.2005, 25.5.2005 and the cancellation letter dated 4.4.2005 have been enclosed.
11. Mr. Jayant Bhushan, learned senior counsel contended that the action of the IOL and the DDA were arbitrary and unreasonable. At no point it was urged, the petitioner was given categorical and a clear show cause notice that in the event of non-compliance with the specific demands the allotment of the site would be cancelled. He stated that all the letters concerned were issued by the IOL but calling upon the petitioner to deposit license fee. However, none of these indicated the likelihood of action or consequences for non-compliance. In that sense the petitioner was completely deprived of proper opportunity. It was claimed that all the letters written by the IOL in 2004-05 merely directed payment of license fee. In these circumstances an abrupt and unilateral action of the IOC in accepting the cancellation by the DDA, amounted to adoption of an arbitrary and unreasonable procedure.
12. Learned Counsel urged that a reading of the correspondence between the petitioner and IOC would show that at all material times the dominant concern was deposit of license fee. The question of unauthorized construction or non-utilization of the site for storage, being factors that could lead to cancellation had never been adverted to. If the intention was to take advantage of those two grounds, the respondents were obliged, in unfairness to put the same to the petitioner. Learned Counsel urged that the construction carried out at the premises was with the knowledge of the IOC and in accordance with specifications approved by it. If there was indeed a mistake and the petitioner should have obtained an approval or sought sanction for plan or modified the structure to bring it in conformity with law or regulations, the minimum requirements of natural justice ought to have been complied with. If show cause notices were issued in that regard, the petitioner could have taken remedial action. It was submitted that the letter dated 3.5.2004 issued by IOL asked the petitioner to deposit license fee. Learned Counsel also urged that permission for storage of SKO had been applied and that the Department of Explosives, Central Government had written to the petitioner on 29.4.2005 that a license would be necessary for furnace oil/LDO if it acceded 45 KL at any one time. He also urged that the said department had issued license to deliver kerosene from tankers into containers subject to provisions of the Petroleum Act. All this was within the knowledge of the IOC. The allegations on the third head were baseless and unfounded.
13. Learned Counsel submitted that neither the DDA nor the IOL can take refuge in the stand that the DDA was not obliged to issue notice or grant hearing to the petitioner. He relied upon the decision of the Supreme Court in Cantontment Board v. Taramani Devi AIR 1992 SC 61 to submit that even though the parties to a contract may not have obligation to each other, regarding issuance of notice but if the impact of decision by one of them is likely to be felt by or injure a third party, particularly within the knowledge of the party likely to take such action, it is bound to grant such third party reasonable opportunity of hearing. It was also claimed that in such cases the real affected party, in fairness, is entitled to be heard. Counsel also relied upon the decision in Lord Shiva Birajman in HB Yoglaya v. State of U.P. 2004 (13) SCC 518 to say that wherever demolition action is contemplated and possession is sought to be taken, notice and reasonable hearing is an obligation cast on the party initiating the action.
14. Ms. Rashi Malhotra, learned Counsel for the IOC urged that the court should not exercise discretion in favor of the petitioner. She contended that the petitioner had suppressed receipt of correspondence prior to 28.2.2005 from this Court. This was with the obvious intent of misleading the court. All these letters conclusively establish that the petitioner at material times was aware of its obligations to deposit license fee. It was fully aware of the amounts payable but intentionally chose to not deposit them. The IOC had marked copies of the demand notices issued by the DDA including letters dated 31.1.2005 and 25.2.2005. These were also not discussed or reveled to the court. Learned Counsel further submitted that as per the undertaking furnished by the petitioner on 10.7.1998, it was duty bound to comply with the terms that bound the IOC, including the requirement of having to deposit license fee. In addition it was made aware about allegations levelled by the DDA regarding unauthorized constructions. In these circumstances the petitioner was given sufficient opportunity and cannot be now heard to complain unfairness in procedure.
15. As far as the question of license is concerned, learned Counsel urged that the petitioner had intimated regarding storage of oil only on 15.4.2005, which is quite evident from the letter issued by the Department of Explosives. She also relied upon the circumstance that the license for delivering kerosene from tankers into containers was issued only on 13.8.2004. In the totality of these facts, it was urged that clearly in all material times the petitioner was fully aware of its obligations and defaults but yet chose not to take any action. Therefore, the cancellation was justified.
16. Mr. S.D. Salwan, learned Counsel urged that the petitioner was bound to seek approval not only in terms of specifications by the IOC but also in terms of the building bye-laws and regulations. It was not as if the requirements of having to obtain sanctions and permissions stood suspended or were inapplicable to petroleum products outlets. Admittedly, the petitioner had not sought any permission. The officials of DDA had visited an inspection at site in January, 2005. The petitioner was fully aware of this. Yet it chose not to approach the DDA.
17. Counsel contended that the license fee which was a condition for continuing the allotment had to be paid. This obligation was breached and despite several reminders the petitioner continued to default. The DDA issued various notices between January, 2003 and April, 2005. Some of them were also marked to the petitioner. Nevertheless, the defaults not only remained they also mounted. Counsel urged that there was no privity of contract between the DDA and the petitioner compelling it to issue a show cause notice. Instead, notices and communications were addressed to the licensee viz. IOL; IOL in turn, communicated the demands to the petitioner. Learned Counsel lastly urged that the petitioner suppressed several facts such as knowledge of various notices and letters in these proceedings and persuaded this Court to entertain the petition. This itself disentitled any relief in exercise of discretionary jurisdiction under Article 226 of the Constitution of India.
18. The question which arises for consideration, therefore, is whether the action of the respondents cancelling the lease in respect of the plot is valid and justified. The undisputed facts which can be gleaned from the pleadings and documents placed before the Court are that the petitioner had to pay license fee in terms of the arrangement entered into between IOC and DDA, for the site. It fell into arrears and was notified in early 2003, and later separately on two occasions in 2004. By February, 2005 the arrears had mounted to nearly Rs. 8 lakhs. IOC had notified the petitioner about its liabilities and even required the deposit of amounts within specific time framed. The petitioner refrained from fulfillling its obligations. The IOC received a demand letter on 31.1.2005 and 25.2.2005, from the DDA pressing for the payment of license fees and also alleging that the SKO/LDO Depot on the site was non-functional. The letter of 31.1.2005 had averted to unauthorised construction also. The petitioner did not respond to the letter issued by the IOC, reiterating the demand for payment of license fee.
19. In the rejoinder filed by the petitioner, the receipt and existence of previous letters of the year 2004 have been disputed. Two things, however, stand out in the whole chain of correspondence. One that the letter dated 24.3.2004 of the IOC, adverts to correspondence with the petitioner enclosing latest rent receipts from the DDA, on the issue of reconstitution of the firm. That letter talks of unauthorised construction and demands that the land ought to be handed back to the IOC to facilitate its surrender to the DDA. . Two, a copy of the DDA’s letter dated 21.4.2004 produced along with additional affidavit, indicating arrears to the tune of Rs. 7.9 lakhs towards license fee was marked to the petitioner. The additional affidavit, filed during the course of the proceedings on 20.7.2006 has not been denied.
20. The above circumstances, no doubt lead to a an inference that the petitioner was aware about its obligation to pay the license fee at least from the year 2004. The petitioner also did not reply to the notice dated 28.2.2005, in writing.
21. One of the cardinal rules of administrative functioning impinging upon the rights of citizens or a group of individuals is the duty to adopt a fair procedure and give adequate opportunity to the party likely to be effected by any adverse decision. The question is whether the respondents breached such principles. It is well-established that requirements of natural justice and fair play mandate that an adverse order ought to be preceded by a show cause notice and adequate opportunity. Such notice too has to be specific and inform the concerned party about the particulars of the allegations and the tentative action proposed. The object of these is to elicit information and explanation so that the decision maker takes cognizance of such factors, which are vital in the decision making process. The recent trend in administrative law is to place emphasis not merely on the form of hearing as much as the fairness in the procedure adopted. This is because courts have increasingly felt that natural justice ought not to be imprisoned in pre-conceived moulds or straight jackets. Yet, one of the fundamental principles is the requirement to follow a fair procedure.
22. A notice, the Supreme Court has held, in Food Corporation of India v. State of Punjab 2001(1) SCC 291, is not an “empty formality”, but meant for a purpose. A vague and unspecific notice, held the court, would not provide reasonable opportunity to the notice to file objections, meeting the grounds or allegations. The exercise is fraught with peril, if the “notice” does not indicate the likely action to be taken. Thus, in decisions leading to adverse commercial consequences, such as blacklisting, the Supreme Court has time and again invalidated administrative action not preceded by such notice ( Ref Erusian Equipments & Chemicals Ltd v. State of West Bengal AIR 1975 SC 266, Raghunath Thakur v. State of Bihar AIR 1989 SC 620.). None of the notices or communications addressed to the petitioner ever adverted to the possibility of the allotment to the site being cancelled. In Harbanslal Sahnia v. Indian Oil Corporation 2003 (2) SCC 107 the Supreme Court had held that cancellation of dealership of petroleum products can be subject matter of public law proceedings, in judicial review under Article 226 of the Constitution, if issues involving infraction of principles of natural justice, are involved. The court had set aside the judgment of the High Court holding that the petitioner there did not deserve relief.
23. The petitioner’s consistent lament is not that it discharged the liabilities; rather the emphasis is that it ought to have been given a specific notice detailing the two grounds on which the cancellation of license were premised. Though the petitioner could not claim to be unaware of its obligations; yet its sins could not absolve the respondents from adopting a fair procedure of issuing a specific notice, detailing that the defaults would lead to cancellation of allotment, and granting such reasonable opportunity to it, as was warranted in the circumstances.
24. The two decisions of the Supreme Court cited on behalf of the petitioner, have held that even a third party likely to be effected by an administrative or a statutory decision has to be given notice and hearing by the concerned authority. The judgment in the Cantonment Board case (supra) is an authority on the point that even a third party sub lessee would have to be issued with a specific notice, particularly if the consequences of the order would be visited upon it. Therefore, the DDA cannot say that there was no privity of contract as between it and the petitioner; the record bespeaks to the contrary. Copies of intimations about arrears of license fee were marked to the petitioner from time to time.
25. As to the objection taken by the respondent regarding suppression of facts by the petitioner, I can do no better than to follow the rule indicated by the Supreme Court in SJS Business Enterprises v. State of Bihar 2004 (7) SCC 166, that the rule disqualifying a litigant from obtaining relief, is premised on the need of the courts to deter abuse of the judicial process, and that the rule applies only when the suppressed fact is a material fact, “in the sense that had it not been suppressed it would have had an effect on the merits of the case.” Here, the three notices alleged to have been suppressed have been denied by the petitioner; they are no better than the ones placed before the court, as they too do not measure up to the standards of what a valid notice ought to contain. Therefore, I cannot sustain the charge of the petitioner having suppressed materials, or material facts, from the court.
26. In view of the above discussion, the impugned cancellation of the site is hereby quashed. The respondents shall issue a proper show cause notice, detailing with specificity, the allegations levelled against the petitioner, and after granting it suitable opportunity of meeting the charges, issue a reasoned order. The respondents are free to issue such orders as may be appropriate, on the question of license fee. All rights and contentions of the parties are left open. The writ petition is allowed in the above terms. No costs.