IN THE HIGH COURT OF JUDICATURE AT PATNA CWJC No.9169 of 2008 M/S LAKSHMI CHEMICALS Versus THE STATE OF BIHAR & ORS ----------- For the petitioner: Mr. Nawal Kishore Agrawal, Senior Advocate Mr. Sanjeet Kumar, Advocate For the State : Mr. Lalit Kishore Senior Advocate AAG-III Sri Anshuman Singh, J.C. to AAG-III --- 4. 2.9.2008 Heard learned counsel for the parties. The petitioner has come to this Court for quashing the appellate order dated 2.6.2008 ( Annexure-1) passed by the Secretary, Department of Agriculture, Government of Bihar as also for quashing the order dated 19.3.2008 ( Annexure-2 ) passed by the Director, Agriculture, Bihar, by which the licence granted to the petitioner under Section 13 of the Insecticides Act for manufacture of insecticides has been cancelled and further for consequential directions. The facts relevant for consideration of the present matter are that the petitioner was granted licence/ provisional permission to manufacture insecticides on 20.3.1978 and since then the said licence has continued to be renewed from time to time and a number of insecticides have continued to be added in the said licence and ultimately, according to the petitioner, it was entitled to manufacture as many as 38 items. On 27.7.2007, an inspection was made at the premises of the petitioner’s factory and the inspection report was prepared, in which certain irregularities and discrepancies were noted. Subsequently, a show cause notice dated 1.10.2007 was issued to the petitioner by the Director, Agriculture in which the violation of the Insecticides Act, 1968 2 and the Insecticides Rules, 1971 was delineated on as many as 14 counts. The petitioner replied to the said show cause on 4.12.2007. In the meantime, the Inspection Team headed by the Joint Director, Agriculture submitted a report on 30.7.2007, in which the recommendation was made on the basis of findings made during the course of the inspection for renewal of the licence of the petitioner. By letter dated 31.7.2000 ( Annexure-13), the Joint Director, Agriculture enclosing the said report wrote to the Director, Agriculture for taking further steps for the renewal of the licence of the petitioner. However, by the impugned order dated 19.3.2008 after mentioning that in the course of the inspection on 27.7.2007, nine discrepancies were found and further holding that the explanation submitted by the petitioner was found unsatisfactory, the licence of the petitioner was cancelled. Against the same, the petitioner filed an appeal before the Secretary, Agriculture, which was rejected by the impugned order dated 2.6.2008 taking into consideration the fact that the petitioner had been operating its business without licence after December, 2004, which was in utter violation of the relevant provisions of the Insecticides Act and for the said reasons, the order of the Director was confirmed and the representation of the petitioner was rejected. Learned counsel for the petitioner submits that as many as 14 charges were mentioned in the show cause issued on 1.10.2007 which were duly replied by the petitioner, but the Director, Agriculture in his order dated 19.3.2008 cancelling the licence of the petitioner has mentioned 9 grounds against the petitioner out of which three grounds, 3 namely, ground Nos. 2, 6 and 8 respectively were non- existent in the original show cause according to the petitioner. It is stated that no show cause was asked from the petitioner regarding the discrepancies found in the quantity of chemicals and the Stock Register. It is further submitted that there was no allegation regarding the employees not being medically examined within the prescribed period, nor there was any allegation that the samples as collected by the Inspection Team were found to be not as per the standard. With respect to the last ground, it is submitted that the petitioner was subsequently informed about the samples being not found according to standard, against which a protest had been made and the second packet of the sealed samples collected on the date were sent for re-testing to the Central Insecticides Laboratory, Faridabad, which by its report dated 16.4.2008 has held that the sample conforms to the relevant specifications in the test conducted. It is, thus, submitted that ground no.8 in the impugned order is contrary to the facts and becomes non est on account of the subsequent report of re- testing. With respect to ground No.6, learned counsel points to Annexure-17, which shows that all the employees were medically examined in each quarter and the reports were duly certified by a qualified Doctor. This, according to the learned counsel, also belies the finding given regarding the proper documents not being maintained regarding quarterly medical examination of the employees. Regarding finding No.1, it is stated by learned counsel for the petitioner that there is no provision in the Act or the Rules for verification of the Stock Register by the Department and thus, the said 4 charge is contrary to law . Regarding Item No.3, in the impugned order dated 19.3.2008, it is stated by learned counsel that there is no provision in the Rules regarding the size of the bag in which packing is to be done and, therefore, the said finding is also contrary to law. With regard to Item No.4, learned counsel submits that the Lakshmi Zyme is a herbal enzyme for plant protection and not for human or animal consumption and thus, it is not hit by Rule 10 ( c ) and it is further submitted that the same was not, as a matter of fact, stored with the insecticides but had been taken out for supply. In any case, it is submitted by learned counsel that the same cannot be a ground for cancellation of licence of the petitioner. Regarding the findings having been given with respect to 38 pesticides and not 37 as contained in the impugned order dated 19.3.2008, learned counsel refers to the earliest provisional permission granted to the petitioner in this regard by certificate dated 18.3.1978 in which as many as four insecticides , including Malathion 50% E. C. were permitted for manufacture. It is submitted that the other three items have been subsequently declared as banned insecticides by the Government but the petitioner continued to be given the licence for manufacture of Malathion 50% E.C. In the subsequent renewal order dated 17.6.2000 ( Annexure-3) as many as 20 pesticides were permitted for manufacture by the petitioner, but due to inadvertence Malathion 50% was not mentioned therein which has been noticed by the petitioner and a representation was made to the authorities on 30.12.2000 to add 5 the same also to the list of pesticides permitted for manufacturing. It is pointed out that the admitted position is that subsequently further insecticides were added to the list bringing the same to 37 without taking into consideration Malathion 50 %, but since the licence for Malathion 50% was never withdrawn by any conscious order, the petitioner continued to manufacture the same and filed a representation with regard to its exclusion earlier inadvertently. It is submitted that the finding against the petitioner regarding item No. 6 is also contrary to the factual position. Regarding the charge of carrying on business without proper licence , learned counsel for the petitioner refers to Rule 11, which provides that the application for renewal of licence must be filed before its expiry and after the date of expiry within three months with a late fee. It is submitted that on account of strike by the Non- Gazetted Government employees, the petitioner could not apply for the licence before 31.12.2004, but subsequently applied on 18.3.2005 with late fee, which fact is admitted by the respondents. Learned counsel in this regard relies upon the Explanation (2) given to the said Rule 11 in which it is provided that where an application for renewal is made after the expiry of the licence with late fee, the applicant shall be deemed to have been carrying on business in accordance with the expired licence ( from the date of expiry ) till the date of communication of the final order on that application. It is, thus, contended by learned counsel that the petitioner having duly applied within the period admissible by the statutory Rules, it has rightly continued to carry on the business since at no point of 6 time its application for renewal has been rejected by the authorities. It is also pointed out that even prior to the two years period of licence commencing from 1.1.2007, the petitioner had in the month of December,2006 itself again applied for renewal of its licence and thus, there has never been a situation where the petitioner has carried on its business without a licence as per the deeming provisions of Rule 11. The submission of learned counsel for the petitioner is that the petitioner having filed a detailed reply to the show cause, it was not open to the Director, Agriculture to have rejected the same and cancelled its licence without a consideration of the explanation given in the reply to the show cause. It is submitted that by a one line statement in a mechanical manner, without any application of mind, the show cause reply of the petitioner has been rejected, which is an arbitrary exercise of power in violation of Article 14 of the Constitution. In view of the above facts and materials placed by the petitioner on the record, it is submitted by learned counsel that at best the petitioner could have been found guilty of a few technical lapses and for the same, the authorities could have warned him for rectifying the same instead of cancelling the licence itself for such technical lapses. It is pointed out that the Inspection Team headed by the Joint Director had also recommended for issuing a warning and for renewing the licence. Learned counsel in this regard relies upon the observations made by the Supreme Court in the case of Harbanshlal Sahnia and anr V. Indian Oil Corporation Ltd. and others: ( 2003) 2 Supreme Court Cases 107, in paragraph no.7 of which it has been 7 observed as follows: ”Moreover, as noted, the petitioners’ dealership, which is their bread and butter, came to be terminated for an irrelevant and non-existent cause. In such circumstances, we feel that the appellants should have been allowed relief by the High Court itself instead of driving them to the need of initiating arbitration proceedings.” Learned counsel for the State, on the other hand, has sought to justify the impugned order stating that a proper show cause had been issued to the petitioner leveling as many as 14 charges and giving it an opportunity to explain the same and to which the petitioner has also filed its show cause reply and after considering the same, the Director of Agriculture had rightly come to the conclusion with respect to 9 of the charges and, accordingly, after rejecting the explanation submitted by the petitioner he has cancelled the licence of the petitioner. It is submitted that there has been full compliance of the principles of natural justice and therefore, it is not open to the petitioner to challenge the action of the authorities on that count. Learned counsel for the State also seeks to support the appellate order by stating that the same has been passed since the petitioner had admitted that it had been operating its business without licence after December, 2004. Learned counsel submits that the petitioner even after the cancellation of its licence by the order dated 19.3.2008 continued to operate its business without the licence, which is in violation of the provisions of the Insecticides Act and noting the same, the Secretary, Agriculture has confirmed the impugned order dated 19.3.2008. Learned counsel for the State, however, is unable to 8 satisfy the Court as to the requirement of verification of the Stock Register under the provisions of the Act or Rules or regarding the size of packing. He is also unable to satisfy this Court regarding the number of items for which the licence has been granted, which fact having been clearly averred by the petitioner could have been verified from the record available with the Department. He is also unable to meet the point regarding the finding having been made on non-examination of the employees medically without there being any charge with respect to the same. It is conceded by him that the subsequent report of the Central Insecticides Laboratory, Faridabad nullifies Charge No.8 found in the impugned order regarding the manufactured items being not as per the standard. Learned counsel for the State is also unable to meet the point raised by the petitioner regarding the petitioner being deemed to have been carrying on its business legitimately in accordance with the expired licence until the final order could be communicated regarding its application for renewal. So far as the statement of learned counsel for the State that the petitioner had been carrying on business and continued to operate its unit after the cancellation of the licence on 19.3.2008 is concerned, the same is not borne out from the record or from the impugned order of the appellate authority. The said order merely states that after December, 2004, the petitioner continued to operate its business without licence. It is evident from the provision of the Rules that the said finding of the appellate authority is contrary to the legal 9 provisions. Admittedly, the renewal applications of the petitioner had not been rejected by the authorities at any stage. Thus, the petitioner was entitled to continue its business under the provisions of Explanation (2) given to Rule 11 of the 1971 Rules. Thus, on a consideration of the aforesaid facts and circumstances, it is evident that the authorities have acted in the present matter in a most unreasonable and arbitrary manner. It is evident that most of the charges said to have been found against the petitioner are not borne out from the materials on the record. There has also been a misconception on the part of the respondents of the provisions in this regard of the Insecticides Act and Rules. Whatever charges remain would not amount to a lapse of such nature for which an order of cancellation of licence could have been passed by the Director of Agriculture. So far as the order dated 2.6.2008 of the Secretary, Agriculture, the appellate authority, is concerned, it is based upon a complete lack of understanding of the provisions of Rule 11 of the Insecticides Rules, 1971. For the aforesaid reasons, the writ application is allowed. The impugned orders dated 2.6.2008 and 19.3.2008 (Annexures 1 and 2 ) respectively are quashed. The respondents are directed to consider the application made by the petitioner for renewal of its licence in accordance with law. However, it would be open to the authorities to take any other appropriate action on the basis of the inspection report dated 27.7.2007. VPS ( Ramesh Kumar Datta,J.)