T. Ramaprasada Rao, J.
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, i960. 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, i960 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 1 awful 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, i960. 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 shewing 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 i960, 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 deliquency 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. The petitioner's contentions are as follows: As the records in the main disclose that it was L. Arunachalam Chettiar who was the culprit and might be said to have committed an offence, the petitioner ought not, to be penalised and as per the practice of the Department, the benefit arising under the licence should have been severed and the petitioner ought to have been recognised as the ultimate licensee. He would also say that as he helped the Department in prosecuting L. Arunachalam Chettiar for his culpability, the records produced by him as prosecution witness cannot be used against him and his licence cancelled. As such records form the basis of the charge, he ought to have been given a further opportunity to explain and in this behalf the principles of natural justice have been violated since information gained by the Department behind his back was adversely employed against him. The third argument is that under Section 37(3) of the Act, he can only be civilly penalised by demanding a penalty not exceeding two thousand rupees and that penalty having been imposed, the licence cannot be cancelled. Further, under Rule 115 under which the Central Government has cancelled the licence, the finding of a competent authority should be the basis of action and such a finding can be assumed only if a criminal Court finds the delinquent guilty. As there is no such finding, the resultant cancellation of the Central Government based on the report of its officers is illegal. It is in this context it is said that the word 'offence' in the Rule should be understood as an offence of which a criminal Court has taken cognizance and dealt with. The learned Central Government Standing Counsel placed strong reliance on the judgment of this Court in RM. AR. AR. RM. AR. Arunachalam Chettiar v. The Salt Commissioner, Jaipur and Ors. W.P. No. 49 of 1967, which covers most of the contentions raised. As regards cancellation it is sought to be sustained on the ground that there has been a breach of the condition of the licence and if there is a violation it tantamounts to an offence under the Act and hence the action taken is-sustainable and the challenge against the order in question is unsustainable.
4. 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 pf 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.
5. It is not in dispute that if a licensee clandestinely removes salt from the manufactory without subjecting it to excise levy, it is a violation of the conditions of the licence. That a proper account of all the excisable goods manufactured in the factory under reference is not maintained is not also disputed. That such irregularities were committed and admitted by the joint licensee to have been indulged in is indisputable. The evasion of duty relates to several thousands of bags. It is therefore normal to assume that the conditions of the licence have been deliberately and repeatedly violated. In spite of such positive but undeniable facts, the case of the petitioner is that all such irregularities are attributable to L. Arunachalam Chettiar and not himself and so he ought not to be penalised. The practice of the Department who leniently and favourably dealt with a normal joint licensee as against a culpable joint licensee is presssed into service. Even assuming that there was such a departmental practice, Courts cannot compel the Department, unless they, are willing, to continue such a practice if it is found to be not strictly warranted under the conditions of the grant. This Court when it is asked to issue a rule of certiorari has to see whether the impugned order suffers from an error apparent 6r an apparent error of law or was passed without jurisdiction or illegal exercise of jurisdiction. If in one case or two, the department condoned a joint licensee and excused the other, it is by no means an enforceable precedent in a Court of law. Further, the facts therein may be entirely different. A licence is merely a leave to do a thing which enables the licensee to do lawfully what he could not otherwise do except unlawfully. Being purely a permissive right, the licensee cannot compel the licensor to continue him as licensee irrespective of the proved fact as to violation of the conditions of the licence, may be by the joint licensee. The licence being one and indivisible and is granted for a particular thing envisaged under a statute or contract, the benefit arising thereunder is not severable simply because it is granted to more than one individual.
6. No doubt in a private litigation between the parties, namely, the petitioner and L. Arunachalam Chettiar, the Commissioner appointed therein reported that the irregularities committed during the period in question are solely attributable to the acts of omission and commission on the part of L. Arunachalam Chettiar. But the overall situation presents one solid picture that in the course of manufacture, sale or disposal of salt in the factory, there was a deliberate avoidance in the payment of excise duty in the said factory. It may be due to certain acts of the joint licensee. On that score the petitioner who is a co-licensee cannot escape the blame. Further, the petitioner who financed the enterprise and who want to the extent of securing material and records to assist the department to criminally proceed against L. Arunachalam Chettiar cannot be said to be obvious of what was happening in the factory. Above all, in a writ proceeding, Courts are slow to interfere with factual findings of competent authorities, unless the conclusion is based on no evidence or is hopelessly perverse. That is not the case here. The Department had the right to use the information furnished by the petitioner even as against him to decide for themselves whether the privilege granted tot the petitioner and another to manufacture salt should continue. If they decided to cancel the licence, as they had the power to do so, the action is not violative of the principles of natural justice. The department indeed considered the explanation of the petitioner and after considering the material secured by the Department and in the light of the disclosures made of the petitioner himself, who did not voluntarily approach the Revenue to confess the guilt of his co-licensee, came to the factual and reasonable conclusion that the petitioner's conduct revealed his complicity in the illegality committed during the period 1st January, 1958 to 31st August, i960. The fact that the petitioner who was heavily financing L. Arunachalam Chettiar was recognised as joint licensee from 3rd September, 1959 is enough to sustain the reasonable finding of fact as stated in the challenged order. In the circumstances of the case it cannot be said that the foundation of the order is extraneous material, of which the petitioner had no notice. The order is mainly based on the information furnished by the petitioner himself. There is no apparent error in the order, nor can it be said that the principles of natural justice have been violated.
7. It is next urged that if a licensee is found guilty of an offence punishable under Sections 9, 10, 24, 27 and 29 of the Act action for cancellation of licence can be undertaken by the Central Government and not otherwise. The scheme of the Act postulates two sets of offences. One set can be characterised as violations of statutory prescriptions amounting to an offence under the Act involving a civil penalty. The other set are criminal offences to be found and adjudicated upon as such by appropriate criminal Courts. If a person is found criminally liable he suffers a double jeopardy in the sense his licence is cancelled by invoking the civil sanctions under the Act and he has to suffer the punishment imposed by the criminal Court for the concerned offences if he is found guilty. But if a person violates a condition of the licence and repeats the same deliberately and eggs on his co-licensee to indulge in illegalities resulting in evasion of duty lawfully payable under the Act, then it is open to the department to deal With the delinquent licensee administratively and cancel the licence. These two modes of surveillance can coexist and adoption of one does not have an impact on the other, nor does it bar such a criminal penalty. As pointed out by Ramachandra Iyer, C.J., in Wellington Talkies v. Collector of Tiruchi : (1963)1MLJ215 :
Under the terms of the licence issued under the Madras Cinemas Regulation Act, 1955, the provisions of the Rules under the Act must be deemed to have been made a part thereof and a breach of any of the rules will also entail the administrative punishment which the authority is competent to impose under the terms of the licence. The right to take administrative action under the conditions of licence can in no way be affected by the penal provisions contained in the Act in respect of contravention of any of the provisions of the Act or rules.
There is a distinction between a penal provision and a suspension of a licence with a view to enforce the conditions thereof. While Sections 8 and 9 of the Act relates to prosecution entailing the termination of the licence as well, the sanction provided under condition 16 of the licence issued under the Act and Rules is administrative punishment intended to enforce due adherence to the rules and conditions and there is no overlapping of the field.
To a similar effect is the decision in Sivagaminatha Moopanar and Sons v. Income-tax Officer I.L.R. (1956) Mad. 415 : (1955) 2 M.L.J. 477 : A.I.R. 1956 Mad. 1. In fact, the above ratio has been approved by a Full Bench of this Court in Mohammed Kasim v. Collector of Central Excise : AIR1962Mad85 . It appears that the imposition of a civil penalty by the departmental agencies who are to secure the strict observance of the law relating to licences and grants under the Central Excise Act will not exonerate the transgress or from liability to criminal proceedings, if he is liable upon these identical facts.
8. The other ground of attack on the impugned order is based upon Rule 115 of the Rules framed under the Act and the competency of the Legislature to make such a rule. Mr. Venugopal says that under the rules an original power is created to punish offenders under the Act and this is not possible in the absence of a specific statutory provision in the main enactment. Reliance was placed upon Ganpati Singhji v. State of Ajmer : 1SCR1065 . There the Chief Commissioner of Ajmer was empowered under the rules framed under the Ajmer Laws Regulation for the establishment of a proper system of conservancy and sanitation. But the Chief Commissioner left it to the District Magistrate to see that persons desiring to hold a fair were in a position to establish proper system of conservancy. The rules contemplated the Chief Commissioner to bring a conservancy system into existence and incorporate in it his rules for their due compliance. Instead of that he delegated the said power without authority to the District Magistrate. In those circumstances the Supreme Court said that the net effect of the directions of the Chief Commissioner was to establish a system of ad hoc control by the District Magistrate through the issue of a permit and by vesting of other powers in him under the rules, which the Court said is not within the intendment of the section which authorises the making of the rules. There was abdication of legislative power and unauthorised delegation. But in the Central Excises Act the scheme is entirely different. Section 37 refers to the power of the Central Government to make rules to carry out the purposes of the Act. Sections 6 and 7 refer to the grant of a licence to manufacture certain specified goods including salt and prescribe the form and conditions of licence. The form and conditions have been duly notified as prescribed. Rule 115 vests in the Central Government power to withdraw a licence, if an authority competent to do so finds that the licensee committed any civil offence punishable under the Act. Under Section 38 such rules made and notifications issued shall have effect as if enacted in the Act. It is not stated that the rules and notifications have not been issued and made in proper form. Thus Rule 115 creates an original power in the Central Government to deal with a transgressor, in case the violation or offence is properly found. Therefore the ratio in the Supreme Court decision is totally inapplicable and the Central Government has the requisite authority to deal with a given situation and punish the offender.
9. The argument that under Section 37(3) only a monetary penalty can be imposed and not an order withdrawing the licence is without any force. Section 37(3) is an enabling provision which authorises the imposition of a 'fine' if no other penalty is provided under the Act. I am not called upon to go into the propriety of the fine imposed in this case as it has not been challenged in appropriate proceedings after this Court upheld the same in RM. AR. AR. KM. AR. Arunachalam Chettiar v. The Salt Commissioner, Jaipur and Ors. W.P. No. of 1967. In fact, Kailasam, J., confirmed the imposition of fine by the Salt Commissioner and gave liberty to the Department to take such action as it deems fit. It is on the strength of this a fresh show cause notice was given and proceedings were started de novo. The petitioner not having taken earlier this objection in the form raised cannot urge the same at this stage, when the challenge is against the cancellation of the licence on totally different grounds.
10. The last argument is that as Rule 115 contemplates a finding by a competent authority before the Central Government can act, such a finding can only be given by a Court and not by the Collector of Salt Commissioner. This is again covered by the decision of Kailasam, J., in the above cited Writ Petition. The learned Judge said:
Under Rule 2(ii)(b) the word 'Collector' means in relation to salt the Salt Commissioner, and includes any officer specially authorised under Rule 4 or 5 to exercise throughout any State or any specified area therein all or any of the powers of a Collector under these rules. The Salt Commissioner will, therefore, be an authority to grant a licence and to enforce the conditions of the licence Under Rule 115 he will be an authority competent in this respect to find, whether a person has committed any offence punishable under the. Act or not. The contention of the learned Counsel for the petitioner that the competent authority referred to in the rule is only the criminal Court cannot be accepted, as under the Rules a Salt Commissioner is empowered to find whether an. offence has been committed or not. He will satisfy the requirements under Rule 115 and will be the authority competent in this respect to find whether an offence punishable under the Act has been committed.
It is on the basis of the finding of the Salt Commissioner and after perusal of the entire records and after perusing the explanation of the petitioner, the impugned order was passed. There is nothing illegal about it. There is no error of law or apparent error in it. The Central Government had the jurisdiction to pass the order. The writ petition fails and it is dismissed. There will be on order as to costs.
11. W.P. No. 194 of 1971. - This writ, petition is closely connected with the earlier writ petition. Here the petitioner is challenging the order of assignment or lease of the salt factory granted by the 1st respondent in favour of the 2nd respondent. In the earlier writ petition we have seen that the Salt Commissioner cancelled the licence in favour of L. Arunachalam Chettiar and consequent upon such a cancellation an auction was held in 1966 so as to dispose of the right to manufacture salt in the factory in question. In that auction the 2nd respondent was the higher bidder. Before steps could be taken to hand over possession of the factory to the 2nd respondent, the petitioner filed W.P. No. 49 of 1957 and obtained the necessary orders of stay. Even after the disposal of W.P. No. 49 of 1967, the 2nd respondent was not put in possession of the salt factory, nor were any steps taken to regularise the situation. As seen from the facts in the earlier case, the Central Government which considered once over the transgressions of L. Arunachalam Chettiar and the petitioner, again by its order which was impugned in the earlier case, withdrew the licence granted in favour of L. Arunachalam Chettiar and the petitioner. The order of cancellation was made on 2nd July, 1970. Later the Government instead of putting the right of manufacture of salt in the factory to auction, has chosen to assign the land for the purpose by entering into a pucca lease dated 24th October, i960. The petitioner is aggrieved by this order whereby the factory has been leased to the and respondent. Hence the petitioner prays for the issue of a writ of certiorari.
12. The petitioner's only contention is that when the original, order of cancellation of the lease by the Salt Commissioner was not set aside by this Court, thereafter it is no longer open to the Government to keep alive the benefit if any, which might have accrued to the 2nd respondent by reason of his highest bid at the auction held in 1966. Therefore the impugned order which is but a further processing of the inchoate auction held in 1966, has to be removed. Factually the situation is this as stated in the counter affidavit of the Deputy Salt Commissioner:
In the year 1970, after the disposal of the matter by the Government and after communicating the said order to the petitioner, steps were taken to hand over the property to the 2nd respondent herein, who was the highest bidder. The 2nd respondent paid the security deposit of Rs. 3,265 on 21st August, 1970, and a ground rent of Rs. 246 on 6th August, 1970. The land was assigned, to the 2nd respondent herein for a period of 20 years from 2nd August, 1970 and a lease deed was executed on 24th October, 1970 pending registration of the lease deed, a licence valid upto 31st December, 1970, was issued to the 2nd respondent herein on 25th November, 1970. These steps were taken to avoid loss to the Government, as the salt factory remained idle from 1962. It may also be stated that the rule nisi in W.P. No. 3544 of 1970 was served on the Union of India at Delhi On 30th November, 1970.
Thus the appropriate authority in the interests of the revenue of the State has deemed it convenient and expedient to grant a lease after the due cancellation of the licence. Even if the argument of the petitioner that a public auction should precede a grant of a lease of a salt factory, is to be accepted he is not affected in any way if the State in their discretion and in order to avoid further loss, decide to grant the assignment without following the formality of an auction. If by the challenged grant there is likelihood of loss of revenue to State, the matter has to be dealt with at other levels. So long as the 1st respondent acted within-his judicial discretion to make the assignment, there is no want of jurisdiction in it. There is no other apparent error either in the order. The writ petition is dismissed. There will be no order as to costs.