W.P.(C.) Nos. 2775/2012 & 3197/2012 Page 1 of 54
* IN THE HIGH COURT OF DELHI AT NEW DELHI Judgment reserved on: 29.05.2012 % Judgment delivered on: 11.06.2012
+ W.P.(C) 2775/2012
GLOBAL VECTRA HELICORP ..... Petitioner
Through: Mr. Neeraj Kishan Kaul Senior Advocate, Mr. Atul Nanda, Senior Advocate, with Ms. Rameeza Hakeem & Mr.Sandeep Bajaj, Advocates.
versus
DIRECTORATE GENERAL OF CIVIL AVIATION
AND ANR ..... Respondents
Through: Mr. A.S. Chandhiok, ASG, with Ms.Anjana Gosain & Mr. Ritesh Singh, Advocates.
AND
+ W.P.(C) 3197/2012
MR. ROHIT HANS AND ANR ..... Petitioners
Through: Mr. Parag P. Tripathi, Senior Advocate, with Mr. Akshay Chandra, Advocate.
versus
DIRECTORATE GENERAL OF CIVIL AVIATION
AND ANR ..... Respondents
Through: Mr. A.S. Chandhiok, ASG, with Ms.Anjana Gosain & Mr. Ritesh Singh, Advocates.
CORAM:
HON’BLE MR. JUSTICE VIPIN SANGHI
ORDER
VIPIN SANGHI, J.
C.M. Nos. 5957/2012 & 6842/2012
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1. The petitioners have preferred the aforesaid writ petitions to seek a writ of mandamus quashing and setting aside the order No. AV.1404/48/97-80.I dated 07.05.2012 issued by respondent No. 1, i.e. the Director General of Civil Aviation (DGCA), whereby the DGCA has suspended, with immediate effect, the Non-Scheduled Operator‟s Permit (NSOP) No. 08/1998 issued to the petitioner, by invoking sub-Rule (6) of Rule 134A of the Aircrafts Rules, 1937 (the Rules). The impugned order is premised upon the withdrawal of security clearance of the petitioner company Global Vectra and it‟s Director–Sh. Ravi Rishi, by the Ministry of Home Affairs (MHA), Government of India. The petitioner also assails the action of respondent No. 2, i.e. the MHA in withdrawing the security clearance of the petitioner company.
2. The case of the petitioners in W.P.(C.) No. 2775/2012 is that petitioner No. 1 Global Vectra Helicorp Ltd. (herein referred to as Global Vectra) is a company registered under the Companies Act, 1956. Petitioner No. 2 is a Citizen of India and working as the Senior Vice-President of Global Vectra. Global Vectra is claimed to be the largest private helicopter company in the country with a fleet of 23 aircrafts of various makes. Global Vectra offers its off-shore transportation services to oil & gas sector and also provides chartered services throughout the country. Global Vectra is a listed company, and it holds ISO: 9001-2008, 14001-2004 & OHSAS 18001-2000
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certification. Global Vectra claims that it has been awarded contracts from renowned agencies including:
(i) Ministry of Home Affairs, Naxal Management Division
(ii) National Geophysical Research Institute
(iii) Atomic Mineral Directorate, Department of Atomic Energy
(iv) Fugro Airborne Surveys Corp.
(v) ONGC Group and Group II
(vi) GSPC
(vii) Shri Mata Vaishno Devi Shrine Board
(viii) Government of Arunachal Pradesh
3. The petitioners submit that Global Vectra has obtained an NSOP from respondent No. 1 to carry on its operations, which has been renewed from time to time. The current NSOP of the petitioner is valid till 31.12.2012. The petitioners further submits that Civil Aviation Requirements (CAR) have been issued under Section 133A of the Aircrafts Act, 1934 ( the Act ). The NSOP issued to the petitioner is governed by CAR dated 01.06.2010. The CAR sets out the process of making an application for obtaining NSOP and the nature & manner of security clearances involved. According to the petitioners, there is no concept of security clearance of a company or body corporate which applies for obtaining an NSOP. Security clearance is granted in respect of a specific persons/individuals holding specified position in the applicant company. It is the Chairman and the Directors of the
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petitioner company, who require security clearance, and they have been granted such clearance from time to time. Specific reference is made by the petitioners to the introduction contained in the CAR dated 01.06.2010, Section 3 Air Transport Series „C‟ Part III, Issue II bearing File No.: AV.14027/02/2002-AT.1 issued by respondent No. 1. The said introduction reads as follows:
“1. Introduction
Sub-rule (3) of Rule 134 of the Aircraft Rules, 1937 specifies that no air transport service, other than a scheduled air transport service or an air transport service to which the provisions of sub rule (1) or (2) of rule 134 apply, shall be operated except with the special permission of the Central Government and subject to such conditions as it may think fit to impose. In other words, permission of the government is required for operation of non scheduled air transport services. The power, in this regard, is delegated to the Director General and to the Joint Director General of Civil Aviation, based on which the permission is given by way of issuing a Non-scheduled Operator‟s Permit (NSOP). This Civil Aviation Requirement contains the minimum airworthiness and operational requirements and also the procedural requirements for grant of an NSOP. In this issue of the CAR, the requirements for grant of NSOP (Passenger) and NSOP (Charter) have been amalgamated and a uniform code for operation of non-scheduled air transport services has been laid down. This CAR is issued under provisions of Rule 133A of the Aircraft Rules, 1937 and the requirements contained here are complementary to the requirements of ICAO Annex 6 Part I, as applicable to non-scheduled operations.
This CAR cancels CAR Section 3 Series „C‟ Parts V and VI”
4. The “Non-Scheduled Air Transport Services” is defined in clause 3.3 to mean “an air transport service, other than a scheduled air transport service as defined in para 3.2 above, being operated for
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carriage of passengers, mail and goods, and includes charter operations”.
5. The NSOP is defined in clause 3.5 to mean “a permit authorizing an operator to carry out non-scheduled air transport services subject to conditions as may be specified in the permit”.
6. The eligibility requirements in relation to the NSOP are provided in clause 4, which reads as follows:
“4. ELIGIBILITY REQUIREMENTS
4.1 An NSOP shall be granted only to:
a) a citizen of India; or
b) a company or a body corporate provided that:
(i) it is registered and has its principal place of business within India;
(ii) its chairman and at least two-thirds of its directors are citizens of India; and
(iii) its substantial ownership and effective control is vested in Indian nationals.
Where, Foreign Direct Investment is envisaged for obtaining Non-Scheduled Operations Permit with FDI up to 74% and investment by Non-resident Indians (NRI) up to 100% is allowed through automatic route and for Helicopter services/seaplane services, wherein FDI up to 100% is allowed through automatic route, the composition of Board of Directors and the substantial ownership and effective control of the management shall be as follows:
(i) The majority of Directors on the Board of the company shall be Indian citizens;
(ii) The positions of the Chairman, Managing Director, Chief Executive Officer (CEO) and/or Chief Financial Officer (CFO), if held by foreign nationals, would require to be security vetted by Ministry of Home Affairs (MHA). Security vetting shall be required periodically on yearly basis. In
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case something adverse is found during the security vetting, the direction of MHA shall be binding on the licensee.”
7. Clause 5.1 deals with the aspect of grant of initial No Objection Certificate/import of aircraft. The applicant desirous of obtaining the NSOP is first required to apply for an initial No Objection Certificate (NOC). The applicant is required to submit along with the application “the particulars of Board members of the company in proforma given at Annexure-II & III, as applicable”. There are other requirements as well, with which we are not concerned for the present. Clause 5.1.3 provides that the Ministry of Civil Aviation may issue NOC after scrutiny of, inter alia, “security clearance of Board members etc”. Clause 8, inter alia, provides that after import/acquisition of the aircraft in accordance with the requirements of clause 4.2 of the CAR, the applicant may apply to DGCA for grant of NSOP in the proforma given at Annexure VII. The requisite fee is also prescribed in this clause and it provides that after such scrutiny, as necessary, and based on the satisfactory preparedness demonstrated by the applicant, the DGCA shall issue the NSOP along with operations specifications, stipulating the conditions, if any, considered necessary, to those applicants who meet the requirements of the CAR. Clause 10 of the CAR, inter alia, provides that any change in the Board of Directors at any time shall be intimated to the Ministry of Civil Aviation and DGCA along with details of new Chairman or Director in the prescribed proforma. It also
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provides that a new Chairman or Director shall not be appointed unless the security clearance has been obtained from the MHA through Ministry of Civil Aviation.
8. On this basis, the petitioners submit that the security clearance relates to the Directors and Chairman of the applicant company to whom the NSOP is granted, and there is no requirement of security clearance to be obtained by the company itself, and consequently, no security clearance was ever granted to the petitioner company. The petitioners submit that Mr. Ravi Rishi resigned from the position of Director of the petitioner company w.e.f. 05.12.2011, and this fact was communicated to the respondent-DGCA on 31.01.2012. The petitioners disclose that Mr. Ravi Rishi is personally being investigated by the Central Bureau of Investigation (CBI) as regards the allegations arising out of supply of components and spare parts to M/s Bharat Earth Movers Limited (BEML) in relation to Tatra Trucks. The petitioners submission is that till, as late as, 27.04.2012 the Special Protection Group (Cabinet Secretariat) was in correspondence with petitioner No. 1 as regards modification to be carried out to the helicopters for carriage of VVIPs/protected persons. Suddenly, to the shock and surprise of the petitioner, it has been served with the impugned communication dated 07.05.2012 issued by respondent No.1, purportedly in exercise of its power under Rule 134A (6) of the Rules, by which the petitioner‟s NSOP No. 08/1998 has been
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suspended with immediate effect. The petitioners‟ grievance is that the said action virtually tantamounts to blacklisting Global Vectra without any show cause notice, hearing or reason. The entire business of the petitioner Global Vectra has come to a grinding halt. Global Vectra would have to lay-off approximately 296 employees. It is stated that Global Vectra incurs a fixed expenditure of about Rs.40 Lakhs a day. It would suffer loss of Revenue of approximately Rs.75 Lakhs per day. The petitioners claim, that after taking into account the claims for damages that it would be saddled with; the cost of borrowing and leasing, the per day cost incurred by the petitioner would be to the tune of Rs. 2 Crores. The petitioners claim that the suspension of the NSOP is in breach of Articles 14, 19 & 21 of the Constitution of India. The petitioners further submit that since Mr.Ravi Rishi had resigned as Director from Global Vectra in December 2011 itself, which was also duly communicated to the respondent No. 1, the withdrawal of his security clearance, in any event, could not have led to suspension of the petitioners‟ NSOP. As there is no concept of company – specific security clearance, the so-called withdrawal of the security clearance of Global Vectra by the MHA is also challenged by the petitioners.
9. The further submission of the petitioners is that the impugned order, though purporting to suspend the petitioner‟s NSOP, virtually amounts to cancellation thereof as there is not outer time fixed for such suspension. It is further submitted that the power under Rule
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134A(6) can be exercised with a view to make further inquiry. However the impugned communication does not contemplate any further inquiry. The petitioner submits that the impugned order therefore amounts to a virtual black listing of the petitioner and destroying the petitioner‟s business. It is also submitted that under Rule 134A(6) of the Rules, the NSOP could be suspended in the interest of public safety. It is argued that there is not a whisper in the impugned order to suggest that the same has been passed in the interest of public safety. The petitioner seeks to draw a distinction between “public safety” on the one hand, and “internal security” on the other hand. It is submitted that the power under Rule 134A(6) cannot be exercised unless the authority perceives a sense of breach of public safety. Public safety, according to the petitioner, in the present context would mean, the safety of the public in relation to the operation of the petitioner‟s NSOP. It is argued that in case the petitioner-Global Vectra was found to be not complying with the requirements of the CAR in relation to maintenance, safety and operation of the aircrafts, thereby endangering the lives of the passengers, crew and others, the issue of public safety would arise. It is argued that, that is not the case in hand. The petitioners submit that the withdrawal of the security clearance of Sh. Ravi Rishi, and the so-called withdrawal of the security clearance of the petitioner-Global Vectra in no way concerns public safety.
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10. The petitioners submit that the impugned order has been passed without any prior show cause notice or hearing to the petitioner company. The impugned order is, therefore, in breach of the principles of natural justice and offends Article 19(1)(g) qua the petitioners. It is in this background that the petitioner, by the aforesaid application seeks stay of the operation of the impugned order dated 07.05.2012.
11. After the filing of the first petition, W.P(C) 3197/2012 has been preferred by two individual petitioners, namely Shri Rohit Hans and Shri Raj Menon, who claim themselves to be shareholder and Director of Global Vectra respectively. In this petition as well, the substantive relief prayed for is similar to that sought in the first petition. The petitioners in this writ petition also seek the same interim relief i.e. to stay the operation of the impugned order dated 07.05.2012. They also seek the interim relief that Global Vectra should be permitted to carry out is flying operations until the disposal of the petition.
12. Mr. Neeraj Kishan Kaul, Senior Advocate has appeared for the petitioner in W.P(C) 2775/2012 and made his submission, while Mr.Parag Tripathi, Senior Advocate appeared on behalf of the petitioners in W.P(C)3197/2012. Since their submissions are common and overlap, I shall be referring to them, without any distinction, as the submissions of the petitioners. The respondents have been represented by Mr. A.S. Chandhiok, the learned ASG and he has made his submissions.
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13. Keeping in view the urgency in the matter, i.e., the suspension of the petitioner, Global Vectra‟s business activities altogether, and the consequences being suffered by the petitioners because of the suspension of the said operations, I have heard learned counsel on the aspect of grant of interim relief at this stage.
14. The respondents produced the record of respondent no.1 on the very first date of hearing, i.e., 09.05.2012 and they were directed to produce the record of respondent no.2 to show as to in what circumstances the security clearance of the petitioner, Global Vectra and Mr. Ravi Rishi had been withdrawn. Respondent no.2 produced the said record as well and the same has been perused.
15. Before I proceed to record and deal with the submissions made by the learned senior counsels on both sides, I consider it appropriate to reproduce Rule 134A of the Rules, which read as follows:-
"134A. Non-Scheduled Air Transport Services –
(1) No air transport service, other than a scheduled air transport service, shall be operated by any air transport undertaking of which the principal place of business is in any country
outside India except with the special permission of the Central Government and subject to such terms and conditions as it may think fit to impose in each case.
(2) No air transport service, other than a scheduled air transport service, shall be operated; by an Indian air transport undertaking unless it holds a Non-Scheduled Operator's Permit granted by the Central Government.
(3) The application for grant of Non-Scheduled Operator's Permit shall be, made to the Central Government in such
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form and such manner, and shall contain such particulars or documents as may be specified by the Director-
General.
(4) The Non-Scheduled Operator's Permit granted under sub-rule(2) shall, unless suspended or cancelled, remain valid for a period not exceeding two years, which may be renewed for a period not exceeding two years at a time.
(5) The Central Government may, if it is satisfied that ,-
(a) any of the conditions of the Non-Scheduled Operator's Permit has not been complied with and the failure is due to any wilful act or default on the part of the holder of such Non-Scheduled Operator's Permit or by any of his servants or agents, irrespective of whether or not such wilful act or default of the servant or agent was with the knowledge or approval of the holder of the Non-Scheduled Operator's Permit, or (b) the holder of the Non-Scheduled Operator's Permit has failed to establish a safe, efficient and reliable service, or (c) the Non-Scheduled Operator's Permit was obtained by suppressing any information or by giving wrong information, cancel or suspend the Non-Scheduled Operator's Permit for such period as it thinks fit:
Provided that no such Non-Scheduled Operator's Permit shall be cancelled or suspended without giving a show cause notice, in writing, informing the holder of Non-Scheduled Operator's Permit the ground on which it is proposed to suspend or cancel the Non-Scheduled Operator's Permit and giving him a reasonable opportunity of making a representation in writing within such reasonable time as may be specified in the notice and, that person so desires, of being heard.
(6) Notwithstanding anything contained in sub-rule (5), if the Central Government is of the opinion that in the interest of public safety it is necessary so to do, it may, for the reasons to be recorded in writing, summarily suspend the Non-Scheduled Operator's Permit with a view to make further enquiry.”
16. Apart from raising the submissions recorded hereinabove, the petitioners point out that Mr. Ravi Rishi is also the Director of another
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company by the name of M/s Indo Copters Pvt. Ltd, which too is operating in the same business after obtaining an NSOP from respondent No.1. The respondent-DGCA issued a communication dated 07.05.2012 to M/s Indo Copters Pvt. Ltd communicating the withdrawal of security clearance of Mr. Ravi Rishi by the MHA, and requiring the said company to remove Mr. Ravi Rishi from the Board of Directors of that company with immediate effect, and to intimate respondent no.1, compliance of the Companies Act, and in particular Section 252(1) and 252(2) thereof, within 7 days. A copy of the said communication has been annexed with W.P(C) 3197/2012. The petitioners submit that there is no justification in treating the petitioner Global Vectra differently. Since the said Mr.Ravi Rishi had already resigned from the Board of Directors of Global Vectra, there was no need to suspend the NSOP of the said company merely because the security clearance of Mr.Ravi Rishi may have been withdrawn by the MHA subsequently.
17. The petitioners place reliance on the decision of this Court in A.K. Sharma V. Director General of Civil Aviation and Another, 98(2002) DLT 738(Division Bench). In this case the petitioner company was also providing air taxi services under an NSOP. The NSOP was sought to be cancelled on the ground that the competent authority had refused security clearance to the Directors of the appellant company. The Division Bench in para 44 observed as follows:-
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“44. So far as the facts of the present appeal are concerned, since no show cause notice was issued by the respondents to the appellants, we do not even know why the permits were cancelled. The allegations that the Directors of the appellant Company and the appellant Company itself did not get security clearance, in the circumstances, means, nothing at all. What was the nature of the security clearance require, why was security clearance not necessary for two years and then suddenly became necessary and was thereafter not given is not at all clear. It is also not clear whether the security clearance is expected to be concerned with the aviation business or whether it can relate to criminal case and financial transactions which the Directors of the appellant Company are said to have illegally indulged in. From the averments made in the counter affidavit filed by the respondents, it appears that the denial of “security clearance” is with reference to the misdemeanors and irregular financial transactions. What nexus, if any, does this have with aviation is not very clear. In other words, the factual basis and the reasons for the sudden cancellation of the permits granted to the appellant Company raise too many questions. Notwithstanding this, this case is not one out of the ordinary so as to warrant our giving any positive direction to the respondents to permit the appellants to carry on their aviation business, without any security clearance, whatever that might mean.”
18. The petitioners submit that even if Mr. Ravi Rishi was under investigation by the CBI in relation to Tatra truck contracts, that by itself is not a ground to hold that his security clearance should be withdrawn, or the security clearance of the petitioner company Global Vectra should be withdrawn, when he is no longer a Director of the said company. It is not explained what nexus, if any, the alleged
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involvement of Mr.Ravi Rishi in the Tatra Truck deal could have on the so called security clearance of the petitioner company Global Vectra. The petitioners also place reliance on the decision of this Court in R.K.Machine Tools Ltd and Another V. UOI, W.P(C) 13457 of 2009 and two other writ petitions, to submit that the principles of natural justice are required to be complied with even when action taken is not punitive, but only an interim measure, i.e. pending an inquiry.
19. The submission of the petitioners is that the requirement of recording of reasons in writing before summary suspension of the NSOP, prescribed in Rule 134A(6), is to safeguard the rights of the licensee against arbitrary, whimsical or mala fide conduct on the part of the State. The reasons, unless communicated – even if only briefly, would leave the licensee in the dark as to why such a sudden and drastic action has been taken against it which virtually leads to sudden closure of its business activities. The licensee would neither be able to respond to or deal with the grounds on which such action is taken, nor effectively challenge the same before a Court of law. Consequently, those reasons which are recorded have to be communicated. The petitioner submits that, even though, recourse of Rule 134A(5) need not be had while suspending the NSOP i.e. the Central Government may proceed to suspend the NSOP simply on the formation of an “opinion”, and not upon recordal of its “satisfaction”, there has to be compliance of the principles of natural justice, and the said principles
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cannot be a given a complete go-bye. It is submitted that there has to be grave urgency in the matter, to dispense with the procedure prescribed in sub-Rule (5) and to take resort to sub-Rule (6) of Rule 134A. Therefore, the reasons that the respondents record should display a sense of urgency, so as to justify the taking of sudden and immediate action of suspension, without even complying with the procedure of grant of a show cause notice and hearing to the petitioner. There should be material on the record to show urgency i.e. the requirement of immediate public safety.
20. The petitioners further submit that the reasons that the respondents may record would be open to judicial review. The petitioners also argue that the principles of natural justice, unless expressly excluded by statute, have to be read into the provision contained in Rule 134A of the Rules.
21. The petitioners further submit that the Ministry of Civil Aviation, which is the concerned Ministry, has to act independently, while recording its reasons in terms of Rule 134A(6), even though its action may be founded upon the withdrawal of the security clearance by the MHA. Reliance is placed on the decision of a Division Bench of this court in Sheru V. Deputy Commissioner of Police (Licencing) Delhi, 1993 (25) DRJ (DB).
22. The submission of the petitioners is that in the present case also, there was absolutely no justification for suspending the petitioner‟s
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NSOP. As aforesaid, Mr.Ravi Rishi had resigned nearly 5 months before the issuance of the impugned order. The Ministry of Civil Aviation/DGCA, as is evident from the impugned order, have based their exercise of power vested under rule 134A(6), entirely upon the factum of withdrawal of security clearance of Mr. Ravi Rishi and Global Vectra. There is no application of mind by the DGCA on the issue whether, in the light of the aforesaid withdrawal of security clearance, the NSOP deserves to be forthwith suspended without even granting an opportunity to the petitioner, Global Vectra.
23. The submission of the petitioners is that merely because the respondents purported to exercise their power under Rule 134A(6), it does not mean that the said exercise of power cannot be questioned or examined by the Court. Reliance is placed on the decision in International Cargo Services Vs. UOI & Another, 120 (2005) DLT 195 (Division Bench). The petitioners also place reliance on the decisions of this Court in M.N. Gupta & Another V. University of Delhi & Others, 1992 (22) DRJ 293 ;Liberty Oil Mills & Others Vs. Union of India & Others, (1984) 3 SCC 465.
24. The petitioners have also placed reliance on M/s Ajantha Industries & Others Vs. Central Board of Direct Taxes, New Delhi & Others, (1976) 1 SCC 1001, to submit that the obligation to record reasons also includes within itself the obligation to communicate the same.
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25. The petitioners further submit that the respondents cannot now conduct an inquiry or investigation to justify the suspension of the petitioners‟ NSOP. The investigation contemplated by sub-Rule (6) of Rule 134A of the Rules is not for the purpose of finding out the reasons for passing an order of suspension of the NSOP. The reasons for ordering immediate suspension of the license should pre-exist as they form the basis of action taken under sub-Rule (6) of Rule 134A.
26. Mr. A.S. Chandhiok, learned ASG has opposed the interim prayer made by the petitioners for stay/suspension of the impugned order pending further hearing of the matter. Mr.Chandhiok submits that the respondent is proceeding with its inquiry and investigation as contemplated by Rule 134A(6). The respondent is willing that, it shall take a decision- whether or not to continue the suspension, within three weeks. In case the respondent, after investigation, finds that the suspension is not justified, the respondent would revoke the same. However, in case the respondent desires to continue the suspension, a hearing shall be granted to the petitioner and an order to that effect shall be passed by the respondent. Mr. Chandhiok submits that there is no vested right in the petitioners to carry on the business of a non-scheduled carrier. He submits that the security clearance had been granted not only in respect of Mr. Ravi Rishi, but also in respect of the petitioner company Global Vectra. In support of this submission, the records of MHA were produced before the Court to show that at the
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time of initial grant of security clearance by the MHA, not only the then existing directors, but also the petitioner company Global Vectra was granted security clearance. Mr. Chandhiok submits that clause 12 of the CAR dated 01.06.2010 provides that the operating permit is liable to be suspended or cancelled in case of breach of any of the requirements of the said CAR or of any of the provisions of the Act or the Rules. According to him, in the present case, the petitioners have breached the Rules of the CAR inasmuch, as, the security clearance of Mr. Ravi Rishi and the petitioner company have been withdrawn by the Ministry of Home Affairs.
27. Mr. Chandhiok submits that, whereas the decision to grant/suspend the NSOP is taken by the DGCA, the security clearance has to be granted by the MHA. He submits that once the security clearance in respect of the petitioner-Global Vectra as well as it Director Mr. Ravi Rishi was withdrawn, that formed sufficient material for the DGCA to base its decision on, to suspend the petitioner‟s NSOP. The DGCA is not required to question the wisdom of the MHA in withdrawing the security clearance of the company-Global Vectra and its Director-Mr. Ravi Rishi. In fact, according to him, the DGCA had no option but to suspend the petitioners‟ license in view of the withdrawal of the security clearance by the MHA.
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28. Mr. Chandhiok submits that the petitioners have not disclosed as to what is the relationship, link & control between Mr. Ravi Rishi and the petitioner company. He submits that Mr. Ravi Rishi and his family members own and control the majority stake in the petitioner company, and his daughter continues to remain on the Board of the petitioner company. He submits that the disclosure, at this stage, of the reasons for the suspension of NSOP, would interfere with the ongoing investigations. He places reliance on People’s Union for Civil Liberties and Another Vs. Union of India & Others, (2004) 2 SCC 476. He submits that the Supreme Court in this decision has held that every right – legal or moral – carries with it a corresponding obligation. It is subject to several exemptions/exceptions indicated in broad terms. General exemptions/exceptions under those laws entitle the Government to withhold information relating to, inter alia, national security including defence and public safety. The Court further held that reasonable restriction on the exercise of the right is always permissible in the interests of the security of the State.
29. He also places reliance on Bishnu Ram Borah & Another vs. Parag Saikia & Ors., (1984) 2 SCC 488. In this case, the Court was concerned with the aspect of proprietary of grant of liquor license. The High Court in exercise of its jurisdiction under Article 226 of the Constitution of India had issued a writ of mandamus requiring the Deputy Commissioner to grant the liquor license. The Supreme Court
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set aside the decision of the High Court, holding that “the rules of natural justice must necessarily vary with the nature of the right and the attendant circumstances. The grant of a liquor licence was not a matter of right but merely in the nature of privilege,…………..”
30. Mr. Chandhiok has also placed reliance on the decision of the Supreme Court in Ajit Kumar Nag Vs. General Manager (PJ) Indian Oil Corporation Ltd., Haldia & Ors., (2005) 7 SCC 764. The Court relied upon the Constitution Bench decision in Union of India Vs. Tulsi Ram Patel, (1985) 3 SCC 398, wherein it had been held that in certain circumstances application of the principles of natural justice could be modified and even excluded. The Supreme Court held “that in certain circumstances, application of the principles of natural justice could be modified and even excluded. …. …. …. It could also be excluded where the nature of the action to be taken, its object and purpose and the scheme of the relevant statutory provisions warrant its exclusion. The maxim audi alteram partem could not be invoked if import of such maxim would have the effect of paralyzing the administrative process or where the need for promptitude or the urgency so demands. The Court stated that if legislation and the necessities of a situation can exclude the principles of natural justice including the audi alteram partem rule, a fortiori so can a provision of the Constitution, for a constitutional provision has a far greater and all pervading sanctity than a statutory provision.”
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31. Mr. Chandhiok also places reliance on the decision in Bycell Communications India Private Limited Vs. Union of India & Others, 2010 (117) DRJ 327, wherein the decision taken by the Foreign Investment Promotion Board, Ministry of Finance, Government of India, revoking its approval granted to the petitioner to undertake activities of GSM cellular phone services all over India, was under challenge. The said revocation was challenged by the petitioner on the ground of it being violative of principles of natural justice. It was also the petitioners‟ case that a mere allegation that the funds sought to be invested in the business were tainted, could not obviate the necessity of an inquiry and compliance of principles of natural justice. The Court rejected the challenge after perusing the record. In paragraphs 21 & 22 of its decision, the Court held as follows:
“21. Having perused the information received by the security agencies from secret sources, this Court does not consider it appropriate that a direction should be issued to the Respondents to disclose that information to the Petitioner. There is merit in the contention of the Respondents that the disclosure of such information would compromise the confidentiality attached to those inputs. The assessment of the Respondents, that disclosure of the information is likely to jeopardize and expose the source cannot possibly be reviewed by this Court in exercise of its powers under Article 226 of the Constitution. This Court is also of the view that the material is not of such nature that it can be asked to be disclosed to the Petitioner. This Court also finds merit in the contention that the assessment of the inputs received from the intelligence and security agencies by the Respondent FIPB is a matter of subjective satisfaction over which this Court cannot sit in appeal. This Court is satisfied that such assessment is made on the
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basis of objective criteria and does not call for interference by this Court.
22. This Court is satisfied that there was material available with the Respondents to justify the withdrawal of the security clearance by the MHA granted earlier to ByCell. The inputs so gathered were on the basis of the information provided by the Petitioner in response to the detailed questionnaire. This Court is not, therefore, able to accept the submission of the Petitioner that the procedure adopted by the Respondents and the decision taken to revoke the approval earlier granted are violative of the principles of natural justice. This court does not find any ground having been made out for holding that the impugned decision is violative of the Petitioner‟s right under Article 14 of the Constitution. While the petitioner may have satisfied other requirements of the policy concerning FDI and grant of UASL, the security angle was a crucial factor. The lack of security clearance in the instant case was a valid ground for withdrawal of the FIPB approval earlier granted.”
32. Mr. Chandhiok has also placed reliance on the decision of a Division Bench of the Bombay High Court in Dani Aviation Services Pvt. Ltd. Vs. Union of India, Ministry of Civil Aviation, AIR 2010 Mad 87. In this case, the appellant was engaged in the business of providing ground handling services at the Airport. The employees of the appellant were required to get security clearance. The security clearance not having been granted, the entry permit passes issued to the petitioner‟s employees were taken back which was challenged by the appellant and successfully. The writ petition was dismissed by the learned Single Judge and writ appeal was also dismissed by the Division Bench. In paragraphs 11 & 12 of the decision, the Division Bench held as follows:
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“There is no difficulty in accepting the submission of Mr.Rajagopalan that normally all public authorities have to act in consonance with the principles of natural justice and opportunity to explain ones position ought to be afforded to a person. The principles of natural justice are however not a strait jacket formula. In the instant case, Rule 92 of the Aircraft Rules itself makes it clear that the ground handling services provider shall be subject to the security clearance of the Central Government. Regulation-6, referred to above, make it clear that BCAS has the power to impose such restrictions as may be necessary on the ground of security. The regulation Other conditions lays down that the Circulars issued under the Aircraft Act, 1934 would be applicable. These regulations are made under Section 42 of the Airports Authority of India Act, 1994 and the circular dated 19th February, 2007 requires prior clearance to the ground handling agencies and in the event, any company comes to adverse notice, the same is not allowed to work at the airport and shall be liable to be removed.
12. The aforesaid provisions are made in the interest of the general public and even if Article 19(1)(g) which gives the right to the citizens to practice any profession, trade or business was to be considered, the present restrictions would be reasonable restrictions under sub-Article 19(1)(g) in the interest of the general public. It is another matter that Article 19 does not apply as fairly conceded by Mr.Rajagopalan… … …. At the highest, Article 14 would be an article to apply as canvassed by Mr.Rajagopalan. But, as stated above, the aforesaid provisions of law make it clear that it is the security at the airport, which is more important. The decision taken by the respondents is stated to be from the point of view of national security. In such matters, the prime position of the State to take necessary measures has to be accepted. The High Court cannot sit in a judgment over the decision of the respondent, which are taken from the point of view of security. Mr.Ravindran has rightly referred and relied upon a Division Bench judgment of the Bombay High Court dated 10th June 2008 in W.P.No. (LOD) No.656 of 2009 in the case of Akbar Travel of India (Pvt) Limited vs. Union of India and others. In that matter also, in a similar situation, Bombay High Court has held that the Court cannot indulge in guess work and hold that the inputs available to the Government do not endanger the security of the airport. These are matters which are
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better left to the authorities in charge of security of the vital installations and they are in charge of laying down standards and norms for protecting and safeguarding them. ”
33. Premised on the aforesaid decisions, the submission of Mr.Chandhiok is that this Court should not interfere in the present matter as the decision taken by the respondents is in national interest and concerns national security. The respondents have also tendered in Court a compilation of documents to show that the petitioner-Global Vectra had, in its prospectus, issued while undertaking public issue of shares, disclosed that Mr. Ravi Rishi holds control and sway over the petitioner company. It is argued that merely because Mr. Ravi Rishi may have stepped down from his position as a Director of the petitioner company, it does not lessen his control over the affairs and conduct of business of the petitioner company.
34. Mr. Chandhiok submits that in A.K. Sharma (supra), the Court did not direct the grant of security clearance or the grant of the license to the petitioner.
35. Mr. Chandhiok also places reliance on the decision of the Supreme Court in State Bank of Patiala & Others Vs. S.K. Sharma, (1996) 3 SCC 364, wherein the Supreme Court has held that there may be circumstances where observance of prior notice/hearing may defeat the very proceedings, which may result in great prejudice to public interest. The Supreme Court referred to Liberty Oil Mills
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(supra) in this decision. The Supreme Court drew a distinction between “no notice” / “no hearing” / “no adequate hearing”, i.e., between “no opportunity” and “no adequate opportunity”. The Supreme Court summarized the principles with regard to compliance of rule of audi alteram partem. One of the principles stated by the Supreme Court was that there may be circumstances where the interest of State or public interest may call for curtailing of the rule of audi alteram partem. In such situations, the Court may have to balance the public/State interest with the requirement of natural justice and arrive at an appropriate decision.
36. Mr. Chandhiok has also placed reliance on the Supreme Court decision in Malak Singh & Others Vs. State of Punjab & Haryana & Others, (1981) 1 SCC 420. In this case, the Supreme Court held that if it could be shown in the facts of a particular case that the observance of principles of natural justice would not serve the ends of justice, they need not be followed; otherwise it would become the master instead of the servant of justice. It was held that it would be contrary to public interest to reveal the information in the history sheet, particularly the source of information as the revelation of the source of information will put the informant in jeopardy. It was held that rule of audi alteram partem is not attracted in such a situation.
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37. In his rejoinder, learned senior counsel for the petitioners Mr.Parag Tripathi submitted that in case the respondents have any apprehension with regard to the conduct of the petitioners, the petitioners are even willing to agree to nomination of directors by the respondents on the Board of the petitioner company so as to maintain transparency of its operations, till such time the issue is resolved. The petitioners are also agreeable to make such other changes in the Board of Directors of the petitioner company as the respondents may consider necessary to maintain transparency in the working of the petitioner company. The petitioners have also sought to distinguish the various decisions relied upon by the respondents.
38. At this stage, I am not finally disposing of the matter. The counter-affidavits of the respondents, and replies to the applications have yet to be filed. Even the reply to the civil miscellaneous applications has not been filed. Normally, the Court would grant time to the respondents for filing the counter-affidavits and the replies to the civil miscellaneous applications seeking stay. However, in view of urgency of the matter, as expressed by the petitioners, the Court directed the respondents to produce their records to show to the Court the manner in which the power under Rule 134(6) of the Rules had been exercised, and the Court has heard the legal submissions, as aforesaid, founded upon the precedents cited by the parties.
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39. I, therefore, proceed to decide, at this stage, on the basis of case law cited before me and on the basis of my perusal of the records of the respondents, as to what should be the ad-interim arrangement that should be brought into force immediately and till the aforesaid applications for stay and the writ petitions are taken up for further consideration by the Court.
40. In support of their submission with regard to the meaning of the expression “public safety” the petitioners refer the decision in People’s Union for Civil Liberties (supra). In this case the Supreme Court was considering Section 5(2) of the Telegraph Act, 1885. This provision used two suppressions i.e. “public emergency” and „public safety”. The Supreme Court, in the aforesaid context, interpreted the expression „public safety” by observing “the expression “public safety” means the state or condition of freedom from danger or risk for the people at large.” The Supreme Court also observed “Neither the occurrence of public emergency nor the interest of public safety are secretive conditions or situations. Either of the situations would be apparent to a reasonable person.”
41. Prima-facie, I do not agree with the petitioners submission that the expression “public safety” used in Rule 134A(6) of the Rules, refers to aspects only regarding operation of the air services by the petitioner, and it does not take within its scope aspects of internal security or security of State. Pertinently, clause (b) of sub-Rule (5) of
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Rule 134A talks about failure to establish “a safe, efficient and reliable service”. If the intention of the Central Government, which has framed the Rules, was to limit the meaning of the expression “public safety” to mean a safe, efficient and reliable service- as contended by the petitioners, it could have used the aforesaid words and expression as used in clause (b) of sub-Rule (5), in sub-Rule (6) as well. However, the Central Government has consciously used a term of wider import, i.e. “public authority”, which would cover the aspect of safety vis-a vis not only the legitimate activities of the NSOP holder but all other activities, and arising out of other attributes pertaining to the licensee. The whole emphasis of Rule 134A read with Rule 4 of the Rules is on safety and security of the public and the State. Otherwise, there was no need to insist on requirements such as Indian/NRI shareholders, Indian Directors, etc.
42. Reference made to the decision in People’s Union for Civil Liberties and Another (supra) in support of the petitioners‟ submission appears to be misplaced. The Supreme Court in the aforesaid decision was construing Section 2(5) of the Telegraph Act, 1885. It is clear from the reading of para 28 of the Supreme Court decision in People’s Union for Civil Liberties and Another (supra)that the expression “public safety” took its colour from the expression “public emergency”. In the context of the aviation, in my prima-facie view, “public safety” would have to be given its widest
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meaning, which would include internal security, i.e. the security of State as well.
43. The observations made by this Court in A.K. Sharma (supra) does not advance the case of the petitioners. The said observations show that the Court raised various issues. However, they were not answered by the Court.
44. I now proceed to consider the petitioners submission that there is no requirement of obtaining or granting security clearance of a company or a body corporate license/NSOP holder, and security clearance has to be obtained/ granted only in respect of the Chairman and Directors of the company/body corporate holder.
45. The submission of the petitioner that the security clearance is required only in respect of the members of the Board of Directors, Chairman, Managing Director, Chief Executive Officer and / or Chief Financial Officer, if held by foreign nationals, does not appear to be correct. Clause 4 of the CAR dated 01.06.2010 sets out the eligibility requirements. It, inter alia, provides that the NSOP may be granted to a company or body corporate, which is registered and has its principal place of business within India; its Chairman and at least 2/3rd of its directors are citizens of India; and, its substantial ownership and effective control is vested in Indian nationals. In case FDI is envisaged, investment of NRIs could be up to 100%. In such situations, the CAR provides that the majority of the directors on the Board shall be Indian
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citizens, and the security clearance of Chairman, Managing Director, Chief Executive Officer and / or Chief Financial Officer, would require to be vetted by MHA on an annual basis. It provides that if something adverse is found during the security vetting, the directions of the MHA shall be binding on the licensee.
46. The procedure prescribed in CAR is that first the applicant has to obtain a NOC. The applicant is required to submit the particulars of Board members of the company. In case of NRI‟s/foreign nationals, Annexure-3 to the CAR is required to be filled, whereas in the case of Indian nationals on the Board of Directors, Annexure-2 to the CAR is required to be filled. Clause 5.1.3 of the CAR provides that after scrutiny and security clearance of Board members, etc., the applicant may be issued initial NOC by the Ministry of Civil Aviation.
47. Clause 8 of the CAR provides that after import/ acquisition of the aircraft in accordance with the requirements of the said CAR, the applicant may apply to DGCA for grant of NSOP in the form prescribed in Annexure-7 to the CAR. Clause 8.3 of the CAR provides as follows:
“8.3 After such scrutiny as necessary and based on the satisfactory preparedness demonstrated by the applicant, DGCA shall issue the operating permit for Non-Scheduled Operations along with Operations Specifications stipulating any conditions, if considered necessary, to those applicants who meet the requirements of this CAR.”
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48. From the above, it is evident that in the matter of grant of security clearance, the Central Government is expected to carry out such scrutiny, as considered necessary. It has to look deep, i.e. behind the facade of the company or the body corporate. The rule itself postulates the lifting of the corporate veil. This is evident from the fact that the Central Government is expected to examine the aspect of security clearance of the persons who are running, or are in control of the affairs of the applicant organization.
49. The operation of any aircraft over the Indian territory is bound to involve internal security aspects. An aircraft has the potential to be used for anti-national activities such as the carrying out of unauthorized surveillance, espionage, attacks, smuggling of contrabands, and for transportation of persons, including fugitives. There may be several other undesirable purposes to which an aircraft could be put. The potential of an aircraft to carry out such like undesirable and dangerous activities – by its very nature, is higher than the other common mode of common transport, i.e. by land. The potential threat, i.e., the scale of threat is also higher.
50. The requirement of security clearance of the managers, i.e. Chairman, Directors, etc. of a company or body corporate, where the company is held by NRI‟s, is to safeguard against the presence of persons with doubtful credentials, who may act against the interests of India. The factum of India being subjected to repeated terrorist strikes
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by elements, who are sheltered beyond the boundaries of India, can be taken cognizance of, and, cannot be ignored. There is nothing in the CAR to suggest that, apart from the specific officers of the company or body corporate, the company or body corporate itself would not be scrutinized for the purpose of granting security clearance. Take, for instance, a company, the shares whereof are entirely or overwhelmingly, indirectly held by entities hailing from one or the other nations inimically disposed towards India. The shares could be held indirectly through other holding/front companies, and the said holding/front companies could ostensibly be owned or controlled by Indian nationals or NRIs. Does it mean that in such a situation the Central Government/MHA would be helpless, and cannot terminate the security clearance of the company or body corporate holding the NSOP, even though it may have come to its notice that the company is effectively owned and controlled by such inimical and hostile elements; its activities pose a threat to public safety and security, and; whose sheer presence raises severe and grave doubts about the public safety and the security interest of the nation? In my view, the answer to this question has to be an emphatic “No”. The Central Government/MHA would be entitled to withdraw the security clearance of not only the directors, but also of such a company or body corporate. There may be cases, where the MHA/Central Government may not be able to lay its hands on any direct evidence or material to justify the withdrawal of
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the security clearance of any of the directors of the Company/body corporate, or may not be able to say that the said company/body corporate is remotely held by entities who pose a threat to the Indian public or the national interest. However, its activities may have been found to be highly objectionable and such as to reasonably justify the opinion that its continued operations would be prejudicial to public safety or internal security. It cannot be said that, in such a situation, the security clearance of the company/body corporate cannot be withdrawn.
51. Take another instance. There could be a situation where, though the company/body corporate is a wholly Indian owned company, whose directors are also Indian citizens with clean record and, in respect of whom, the MHA can possibly have no objection from the security point of view, however, the company/body corporate has been infiltrated by a group of persons who are indulging in unauthorized, and anti-national activities. Could it be said that the security clearance of such a company cannot be withdrawn, merely because its shareholders/directors are not found to be of objectionable background, or because their conduct is not found to be objectionable from the public safety point of view? Once again, in my view, the answer has to be in the negative.
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52. A perusal of the files produced by the respondents indeed shows that when the petitioner-Global Vectra first applied for issuance of NSOP, security clearance was not only granted in respect of its directors, but also in respect of Global Vectra, the company.
53. It would tantamount to a surrender of the sovereign power of the State, and failure of performance of one of its most fundamental obligations, if the State were not to act in any of the above situations, or any other appropriate situations, to withdraw the security clearance of the company/body corporate. Therefore, I reject the petitioners‟ submission that no security clearance was required to be obtained by, or granted to the company-Global Vectra, and the security clearance of Global Vectra could not have been withdrawn under any circumstance.
54. Before proceeding further, I would like to examine Rule 134A of the Rules. The power vested in the Central Government under Rule 134A undisputedly is exercised by the respondent No. 1/DGCA. No air transport service, other than a scheduled transport service can be operated except with the special permission of the Central Government and subject to such terms & conditions as it may think fit to impose in each case. In the present case, the NSOP undisputedly was issued to the petitioner company.
55. Sub-Rule (5) of Rule 134A provides that the Central Government may, “if it is satisfied” that any of the conditions of the NSOP have not been complied with, and the failure is due to willful act or default on
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the part of the holder or any of its servants or agents, irrespective whether or not such willful act or default of the servant or agent was in the knowledge of, or with the approval of the holder of the NSOP, may cancel or suspend the NSOP at any time it thinks fit. Two other conditions for taking such action are – where the permit holder has failed to establish safety, efficiency and reliable services or, where the NSOP has been obtained by suppression of any expression or by giving wrong information.
56. The proviso to sub-Rule (5) introduces the requirement of compliance of the principles of natural justice by providing that the NSOP shall not be cancelled or suspended without giving a show-cause notice in writing, informing the holder of the permit the grounds on which it is proposed to suspend or cancel the permit, and after giving him a reasonable opportunity of making a representation in writing within a reasonable time, and also granting a hearing, if the person so desires. What is noteworthy is that the action that the Central Government may take under sub-Rule (5) of Rule 134A, is permissible only after arriving at a satisfaction with regard to the failure, breach – willful or otherwise, of the NSOP conditions, etc. The action taken under sub-Rule (5) of Rule 134A is, therefore, the culmination or a final action, post show cause notice and a hearing to the licensee.
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57. On the other hand, sub-Rule (6) of Rule 134A deals with a situation of emergency. It provides that notwithstanding anything contained in sub-Rule (5), if the Central Government “is of the opinion” that in the interest of public safety it is necessary so to do, it may for reasons to be recording in writing, summarily suspend the NSOP, with a view to make further inquiry. This means that if the Central Government comes into possession of information or material, on the basis of which it forms an opinion that a situation exists, which calls for immediate action of suspension of the NSOP in the interest of public safety, it may summarily suspend the NSOP. Sub-Rule (6), therefore, dispenses with the requirement of a prior show-cause notice and a hearing, before suspension of the NSOP. This is not a final decision. It is only an interim arrangement.
58. The reason for the vesting of such a power is not difficult to understand. There may be situations where urgent and immediate action is called for, to prevent breach of public safety and to preserve the same. In such a situation, the grant of a show-cause notice and a hearing may irreparably and irretrievably damage public security and safety. Therefore, in the course of its investigation and further inquiry, the Central Government may, on the basis of opinion formed by it, founded upon the material/ evidence that it may have gathered or come to know of, summarily suspend the NSOP, with a view to carry out further inquiry.
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59. Sub-Rule (6), however, seeks to provide a safeguard against imprudent, arbitrary or mala fide invocation of the said emergency and summary power. It provides that the Central Government shall record its reasons in writing while invoking sub-Rule (6) of Rule 134A. The object & purpose behind such a requirement is clearly to oblige the competent functionaries to apply their mind objectively to the situation in hand, and to provide good and sufficient justification for taking such a drastic step of summary suspension of the NSOP without any prior notice or hearing to the affected party, i.e., the holder of the NSOP.
60. The submission of the petitioner that the reasons, as recorded in writing by the DGCA, should display a sense of urgency so as to justify the invocation of sub-Rule (6) of Rule 134A appears to be correct. As to why the DGCA has decided to proceed under sub-Rule (6) of Rule 134A, and not to follow the procedure prescribed in Rule 134A (5), should be discernable from the reasons that the DGCA is obliged to record in writing, before resorting to summary suspension of the NSOP. If the situation that exists does not call for immediate suspension of the NSOP, but may otherwise give cause to the DGCA to issue a notice in terms of sub-Rule (5) of Rule 134A to the NSOP holder, action cannot be taken under sub-Rule (6), but may be taken under sub-Rule (5). The reasons that the DGCA records for acting under sub-Rule(6) should display a sense of urgency, which requires immediate and urgent interim action, and the situation should be such that it would be
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imprudent to wait to take action under sub-Rule (5) of Rule 134A of the Rules. The taking of an action under sub-Rule(6) of Rule 134A does not mean that no further action needs to be taken thereafter. After the culmination of the inquiry, the Central Government should either proceed to take action under sub-Rule (5) i.e., to issue a show cause notice to propose final cancellation of the NSOP, or to withdraw the suspension of the NSOP. Either way, the process has to be taken to its logical end.
61. In the present case, the DGCA received an input from the MHA that security clearance of the petitioner-Global Vectra and Mr. Ravi Rishi had been withdrawn. The DGCA was well-aware of the fact that Mr. Ravi Rishi has already resigned from the Board of Directors of Global Vectra in December 2011, as a communication to that effect had been issued by the petitioner on 31.01.2012. Therefore, the issue to be considered by the DGCA was: whether the withdrawal of the security clearance of the petitioner-Global Vectra by the MHA was a reason good enough to resort to immediate suspension of the NSOP, or not. It appears from the records that the proposal to withdraw the security clearance of the petitioner-Global Vectra was not initiated by the DGCA or the Ministry of Civil Aviation. This being the position, when the DGCA received the communication from the MHA, informing it of the withdrawal of the security clearance, the DGCA should have, at the very least, enquired from the MHA the reasons for such
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withdrawal of the security clearance. The DGCA, however, did not undertake any such exercise and simply proceeded to suspend the petitioner‟s NSOP by resort to sub-Rule (6) of Rule 134A.
62. In R.K. Machine Tools (supra), the respondent, Ministry of Defence, UOI had put “on hold” all contracts with the petitioner companies without any prior notice to any of them and the petitioners were not made aware of the reasons for the said decision even till the disposal of the writ petition. Consequently, contracts worth crores of rupees had come to a standstill and the bills of the petitioners for past supplies were also not cleared. The learned Judge held that indefinite suspension of the contract without offering any reason for such decision would undoubtedly cause severe prejudice to the petitioners. In Saraswati Dynamic (P) Ltd V. UOI, 2003 IV AD(Delhi) 225, the Court placed reliance on Eurasian Equipment and Chemicals Ltd V. State of West Bengal, (1975) 1 SCC 70. The Court rejected the contention of the respondents that the principles of natural justice have to be complied with only when suspension is resorted to as a punitive action, and not when it is an interim order i.e. pending an inquiry. It was also held that the suspension could not continue indefinitely without affording to the petitioner an opportunity of being heard. The Court also referred to the decision in Bharat Filling Station V. IOC, 104(2003) DLT 601, wherein suspension order was sought to be justified on the ground that an FIR had been registered.
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The Court, in Bharat Filling Station (supra) set aside the suspension order. The Court in para 22 of its decision in R.K.Machine Tools Ltd (supra) observed as follows:-
“22. The more sensitive the case, the greater the requirement for complying with the principles of natural justice. After all, every person accused of an offence has to know what the basis of the allegation is. This Court is not called upon to decide at this stage the merits of the individual cases at all. It is only concerned that the principles of natural justice should be complied with by the Respondents before taking any decision adverse to any of the Petitioners. It is therefore made clear that the merits of the contentions of either party are not being depicted in this order. All contentions are left open to be agitated in appropriate proceedings.”
63. In Sheru (supra), the arms license of the petitioner was suspended with immediate effect and he was directed to show cause as to why his arms license be not cancelled. The Court examined the issue whether under section 17(3) of the Arms Act, there is power to suspend the arms license pending inquiry into its revocation, and also the issue whether the notice given to the petitioner under Section 17(3) of the Arms Act was valid in the facts of the case before it. Jaspal Singh, J in his judgment observed as follows:-
“15. Coming to the second question posed in the introductory part of this order. I find absolutely no justification for the order of suspension. The incident on which the action is founded is of 7-7-91. The order of suspension is of 27-3-92. The long lapse of about 8 months militates against any emergency or urgency or need for immediate remedial action. The order itself speaks of no such urgency or need.
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16. Besides, what has been noticed by me above it may be mentioned that an order of the description must pass three tests. Firstly it must show that the Licensing Authority applied its mind to the material placed before it and thereafter deemed it necessary for the security of the public peace or for public safety to initiate action under section 17(3)(b) of the Act. What the impugned order does is that it makes mere reference to the police report. The police report, however, is not a part of the order and there is nothing on the record to show as to whether that report or any part thereof was accepted and made the basis of the order. Anyhow, although the pendency of a minor or capital crime case may possibly lead to an action under clause (a) of Sub-section (3) of Section 17 on the ground that such a person is "unfit for a license under this Act" more so where the licensed weapon is used or employed in the alleged crime, the pendency of one single criminal case of the nature as in the present case where admittedly no forearm was used and only simple hurt was allegedly caused cannot attract clause (b) of sub-section (3) of Section 17. For that reason also the 'Order Cum Show Cause Notice' cannot be sustained.”
64. In International Cargo Services (supra), the petitioner‟s license as a custom house clearing agent was suspended with immediate effect and the petitioner was called upon to surrender all cards issued to it. The Court took notice of Regulation 20 of the Customs House Agents Licencing Regulation, 2004, which, inter alia, provided that the Commissioner of Customs may, in appropriate cases where immediate action is necessary, suspend the license of a custom house agent where the inquiry against such agent is pending or contemplated. The Court in its judgment observed as follows:-
“7. The principles of natural justice have twin ingredients. Firstly, the person likely to be adversely effected by the action of the authorities should be given notice to show cause or granted reasonable opportunity of being heard in
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consonance with the maxim audi alteram partem. Secondly, the order so passed by the authorities should give reasons for arriving at any conclusion showing proper application of mind. Violation of either of these principles normally would render an order particularly quasi-judicial in nature invalid. Violation of principles of natural justice is violation of basic rule of law and would invite judicial chasticism. However, this rule is not without exceptions. Of course, the exceptions to such a rule are rare. Where the legislative scheme of provisions of a statute suggest that intent of the legislature is to take emergent action, in that event and subject to fulfillment of ingredients of the provisions, an order could be passed without affording pre-decisional hearing and an expeditious post-decisional hearing may amount to substantial compliance with the basic rule of law. Regulation 20 (1) empowers the Commissioner of Customs to revoke the license of an agent and even order forfeiture of part or whole security. This action could be taken restricted to the grounds spelled out in the regulation itself. This power can hardly be invoked by the authorities for instantly revoking a license while under 20 (2) of the regulations the same authority may in appropriate cases where immediate action is necessary suspend the license of the agent where enquiry against such agent is pending or contemplated. The emphasis is on the expression 'immediate action is necessary' and 'enquiry against such agent is pending or contemplated'. Furthermore, this regulation opens with non-obstante expression 'notwithstanding anything contained in sub-regulation (1)'. Thus, provisions of sub-regulation (2) would take precedence and recourse thereto can be taken despite the pendency of proceedings for revocation of license. In normal course, the procedure prescribed under Regulation 22 has to be followed by the authorities. In a case where immediate or emergent circumstances do not exist, notice should be issued to the agent, before authorities could pass an order in exercise of their powers under Rule 20 (1) or 21. However, this may not be quite true in an emergent situation. Where the authorities are of the considered view that the facts and circumstances disclose sufficient grounds for invoking emergent provisions and it is absolutely essential to suspend the license of the agent, in public interest, there the authorities may do so without serving a notice on the agent, but at the same time ensuring that post-decisional hearing is granted to the agent and the matter is considered with utmost
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expeditiousness. The rules of natural justice would have to be read into regulation 20 (2) but with the proviso that post-decisional hearing in emergent situation and subject to the satisfaction of the competent authority would be granted at the very first possible opportunity. Wherever a license is suspended without hearing, the authorities would be under obligation to grant post-decisional hearing to the agent immediately thereafter and ensure that the authorities after hearing the concerned party and upon due application of mind consider the matter whether the order of suspension should continue during the period of enquiry or otherwise. Such an approach would be just, fair and would further the object sought to be achieved by these provisions. The expression 'immediate' has to be harmoniously read and construed with other provisions including the provisions of regulations 20 and 22. The period specified in regulation 22 would have the effect of rendering the expression 'immediate' ineffective and meaningless. Therefore, applying the principle of harmonious construction, the provisions will have to be given their true and correct meaning and they should be permitted to operate in the field in which they are intended to operate by the legislature, so as to avoid any conflict between the language of these two provisions. An order of suspension is bound to have serious consequences upon the business of the agent and tantamounts to practically closing the business of the agent. As such to permit an order of suspension, even passed in emergent situations, to continue for indefinite period without hearing the agent would definitely be infringement of the principles of natural justice and basic rule of law as well. The only way in which both these provisions can operate without conflict is to hold that an order of suspension in 'emergent' situation can be passed for recorded reasons without hearing the agent at the first instance but should be granted opportunity of showing cause immediately thereafter and the authorities are expected to apply their mind whether the order of suspension so passed should be permitted to continue or not. This power is an exception to the normal rule of audi alteram partem and Therefore recourse to it should be only in the case of immediate action in public interest or to prevent breach of statutory provisions, regulations or conditions of license, failing which serious consequences are bound to flow.
8. x x x x x x x x x
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9. It would be relevant to make a reference to the provisions of Section 146(2) of the Act, under which the board has been empowered to make regulation, but only for the purposes of carrying out the provisions of this Section and under clause (e) of the said section, regulations can be framed, the circumstances in which a license may be suspended or revoked. This by itself indicates the need to act strictly in accordance with regulations and ensure that the circumstances spelled out in the regulation are satisfied, before any order adverse to the interest of the agent is passed by the authorities. An exception to a rule cannot be permitted to frustrate the substantive rule itself and must be construed so as to ensure that an exception remains an exception and does not obliterate the rule itself.
10. x x x x x x x x x
11. The exclusion of principles of natural justice by specific legislative provision is not unknown to law. Such exclusion would either be specifically provided or would be imperative consequence of language of the provision. Instead of making a final order without hearing, a temporary action may be necessary without a full hearing. In such cases, 'due process' is specified by offering a full hearing before the final order is made. Of course, such legislation may be struck down as offending due process, if no safeguard is provided against arbitrary action. It is equally settled principle that in cases of urgency, a post-decisional hearing would satisfy the principles of natural justice. Reference can be made to the case of Maneka v. Union of India, (1978) 1 SCC 248 and State of Punjab v. Gurdayal, AIR 1980 SC319. The provisions of regulation 20(2) clearly indicates exclusion of principles of natural justice, at least at the initial stages, by necessary implication. In cases where the conduct of the agent is such that it would cause serious prejudice to the public interest as well as violates the provisions of the Act, it may be a case of invoking the provisions of the regulations with immediate effect. The provisions of the Act and the regulations classify different situations. The situations relate to providing of right of hearing in terms of regulation 22 for invoking powers under the regulations 20 (1), while in an emergent situation under regulation 20 (2) the post-decisional, hearing but within the shortest span would be adequate compliance to the principles of natural justice.
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We must herein emphasise the need on the part of the authorities to no way prolong the order of suspension even by a day than necessary, without granting hearing to the applicant.”
65. In M.N. Gupta (supra), the University had proceeded to remove the petitioner, who was a member of the governing body of the college without complying with the principles of natural justice. The said removal was sought to be justified by resort to statute 11(G)(4) which empowered the vice Chancellor to take immediate action in case, according to his opinion, any emergency has arisen, which requires such action to be taken. The Court examined the claim of urgency set up as a defence before it and observed as follows:-
“The next question is about the formation of opinion by the Vice Chancellor before exercising his powers under Statute 11(G)(4). For this the only material on record is the letter of the Vice Chancellor dated 13th August 1991 addressed to petitioner No.2. The letter starts with the words "it has been brought to the notice of the University...". Merely something being brought to the notice of the University cannot be a substitute for the words "in the opinion of the Vice Chancellor". One could understand if nothing had been said. In such an event it could have been possible to argue that the Vice Chancellor formed his opinion and on that basis wrote the letter. But having said that it has been brought to the notice of the University, and nothing else, it is difficult to accept that the Vice Chancellor formed the requisite opinion that an emergency had arisen so as to enable him to exercise powers under Statute 11(G)(4). No record has been made available before us to show that before issuing the impugned letter the Vice Chancellor had recorded his opinion about a situation of emergency having arisen on account of the alleged remarks of petitioner No.2. For this reason alone, the action of the Vice Chancellor under Statute 11(G)(4) is liable to be struck down.”
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66. The Supreme Court in Liberty Oil Mills (supra), in paragraph 20 observed as follows:
“20. We have referred to these four cases only to illustrate how ex-parte interim orders may be made pending a final adjudication. We however, take care to say that we do not mean to suggest that Natural Justice is not attracted when orders of suspension or like orders of an interim nature are made. Some orders of that nature, intended to prevent further mischief of one kind, may themselves be productive of greater mischief of another kind. An interim order of stay or suspension which has the effect of preventing a person, however, temporarily, say, from pursuing his profession or line of business, may have substantial, serious and even disastrous consequences to him and may expose him to grave risk and hazard. Therefore, we say that there must be observed some modicum of residual, core natural justice, sufficient to enable the effected person to make an adequate representation. (These considerations may not, however, apply to cases of liquor licensing which involve the grant of a privilege and are not a matter of right”
67. In Ajantha Industries (supra), the Supreme Court was concerned with the interpretation of Section 127 of the Income Tax Act. Section 127 of the Income Tax Act, as amended by Section 27 of the Finance Act No. (2), 1967, provides that the Commissioner may, after giving the assessee a reasonable opportunity of being heard in the matter, wherever it is possible so to do, after recording his reasons for doing so, transfer any case from any Income-Tax Officer to any other Income-Tax Officer. The issue arose whether the reasons, which are recorded by the Commissioner, are required to be communicated
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to the assessee. It was argued on behalf of the Revenue that mere recording of the reasons on the file is complete compliance of Section 127, and there is no requirement of those reasons being communicated. The Supreme Court rejected this submission in the following words:
“9. ……………… We are unable to accept this submission.
10. The reason for recording of reasons in the order and making these reasons known to the assessee is to enable an opportunity to the assessee to approach the High Court under its writ jurisdiction under Article 226 of the Constitution to even this Court under Article 136 of the Constitution in an appropriate case for challenging the order, inter alia, either on the ground that it is malafide or arbitrary or that it is based on irrelevant and extraneous considerations. Whether such a writ or special leave application ultimately fails is not relevant for a decision of the question.”
68. The respondents cannot invoke the power available to it under Rule 134 (6), and fight shy of providing its reasons for resorting to such summary action. The permit holder would be entitled to know, at least, broadly – as to what is the material on the basis of which its permit has been summarily suspended. The Central Government may not be obliged to provide detailed information in this regard, such as, the details of the investigation already carried out by it; the source of its information; the direction of further investigation, and; the steps being taken by it to unearth the truth. However, it can certainly communicate, broadly, as to what has led to the summary suspension of the NSOP.
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69. It is not enough for the DGCA to say that it has acted on the basis of the communication of the MHA, that the security clearance of the petitioner company-Global Vectra and Mr. Ravi Rishi has been withdrawn. The MHA is also a part and parcel of the Central Government. If MHA decided to withdraw the security clearance of the petitioner-Global Vectra and Mr.Ravi Rishi, even the MHA was obliged to examine the issue: whether the said withdrawal should be preceded by a show-cause notice, or not. The MHA cannot act independently of the CAR in the matter of withdrawal of the security clearance, because when it granted the security clearance, it was acting in discharge of its obligation to consider the said aspect, under the CAR. Only if the material before the MHA was such as to justify immediate and summary action of withdrawal of the security clearance, it could have done so. For example, if the MHA found that the petitioner-Global Vectra is involved in espionage activities, it could have recorded the prevailing urgency, and taken the decision to withdraw the security clearance forthwith.
70. However, that does not appear to be the case in hand. On a perusal of the files produced by the MHA and the Ministry of Civil Aviation and the DGCA, prima facie this Court did not find any such material on record so as to justify such summary withdrawal of the security clearance of Global Vectra by the MHA, without putting Global Vectra to notice, and granting a hearing to them. There did not appear
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anything on the record to show such grave urgency as to justify taking action under Rule 134A(6) and not under 134A(5) of the Rules.
71. My aforesaid observation may not be understood to mean that the material available on the record of the respondents is not sufficient to arrive at a satisfaction, either for the purpose of withdrawal of the security clearance of the petitioner-Global Vectra, or for the purpose of withdrawal of the NSOP by resort to Rule 134A(5) of the Rules. As held by the Madras High Court in Dani Aviation Services Pvt. Ltd. (supra) and also by this Court in Bycell Communications India Private Limited (supra), it is not for this Court, in exercise of its jurisdiction under Article 226 of the Constitution of India, to assess the materials and evidences on the basis of which the MHA may act while seeking to withdraw the security clearance. The assessment of inputs received from, inter alia, the intelligence and security agencies is a matter of their subjective satisfaction, over which this Court cannot sit in appeal.
72. However, the petitioner has a right to participate in the exercise that the respondents should undertake to arrive at such subjective satisfaction, particularly, when the materials on the basis of which the respondents have proceeded to presently act, do not appear to be such which require to be entirely withheld from them. It could be that after hearing the petitioners, the respondents may decide not to withdraw the security clearance and, consequently, the NSOP of the
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petitioner-Global Vectra. The petitioner would, therefore, be entitled to be communicated the reasons, if only briefly, which form the basis of the immediate withdrawal of the security clearance by the MHA and the withdrawal of the NSOP by the DGCA.
73. The observations made by the Supreme Court in People’s Union for Civil Liberties and Another (supra) relied upon by the learned ASG does not specifically advance the respondents case. The observations relied upon are very general and there can be no quarrel with the proposition that every right carries with it a corresponding obligation. It is also well-settled and well-recognised that there could be reasonable restrictions imposed on the exercise of a right in the interest of the security of the State. It is not even the petitioners‟ submission that there should be absolutely no restriction on the petitioners‟ right to operate its services under the NSOP. The question that arises in the present case is whether, while curtailing the petitioners‟ rights under the NSOP, the respondents have acted in a legal and non-arbitrary manner.
74. The decision in Bishnu Ram Borah & Another (supra) is not applicable in the present case, as that was the case dealing with the grant of a liquor license. Liquor trade is recognized as extra commercium. There is no right to carry on such a trade. Consequently, the rights under a liquor license are in the nature of a privilege which may be withdrawn at any time by the State.
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75. There can be no quarrel with the proposition laid down by the Supreme Court in Ajit Kumar Nag (supra). The principles of natural justice need not be followed in the emergent situation covered by Rule 134A (6) to the extent that a show-cause notice or hearing is not necessary before taking immediate action of suspension of NSOP. However, one principle of natural justice which, even in such situations, is required to be fulfilled is the recording of reasons for resort to such immediate suspension of the NSOP, pending an inquiry, rather than resort to Rule 134A(5) of the Rules.
76. My aforesaid observations are in tune with the decision of the Supreme Court in Malak Singh & Others (supra) and State Bank of Patiala & Others (supra).
77. The proposal made by Mr. Chandhiok with regard to grant of a hearing to the petitioner for the purpose of deciding whether or not to extend the suspension of the NSOP beyond three weeks does not appear to be in consonance with the aforesaid decisions. The petitioner is entitled to know the reasons, even if briefly, leading to the suspension of the NSOP. It is only then that the petitioner can effectively deal with the said reasons in its endeavor to convince the respondents that there is no material to justify suspension or cancellation of the NSOP. The grant of opportunity of hearing as proposed by Mr. Chandhiok would not serve any purpose, as no
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information/intimation has been issued to the petitioner as to why the suspension order has been issued.
78. The action taken by the respondent-DGCA in suspending the NSOP of the petitioner-Global Vectra in the present case cannot be explained in the light of the fact that in relation to M/s Indo Copters Pvt. Ltd. – another company operating under the NSOP granted by the DGCA to operate the helicopter service in India, wherein Mr. Ravi Rishi is the majority shareholder, the only action taken was to require the removal of Mr. Ravi Rishi from the Board of Directors. The NSOP of M/s Indo Copters Pvt. Ltd. has not been suspended by the respondents. It is not explained as to what is the difference in the two cases, i.e. of the petitioner-Global Vectra and of the M/s Indo Copters Pvt. Ltd. The respondents have not been able to show from the record as to what suddenly propelled them to withdraw the security clearance of Global Vectra, when, till the month of April 2012 they were dealing with the petitioner-Global Vectra, inter alia, for the purpose of providing special security measures to the VVIPs/protected persons.
79. The petitioners have also made an offer, as recorded above, that they are willing that the respondents may introduce their nominees in the Board of Directors of Global Vectra so as to be able to keep a watch and vigilance over the activities of Global Vectra.
80. In the light of the aforesaid discussion, I am inclined to grant ad-interim relief to the petitioners, and to stay the operation of the
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impugned order dated 07.05.2012 till further orders, subject to the condition that the respondents shall be entitled to nominate two directors on the Board of Directors of Global Vectra. The petitioner- Global Vectra and its office bearers shall fully cooperate with the said directors and provide all information to the said nominated directors as may be sought by them and they shall be entitled to participate in all Board meetings of Global Vectra. The nominee Directors be nominated by the DGCA/Ministry of Civil Aviation/Ministry of Home Affairs, in consultation with each other, The nominated directors shall enjoy all rights & privileges as are enjoyed by the other directors on the Board of Directors of the petitioner- Global Vectra.
81. I also make it clear that it shall be open to the respondents to serve a notice upon the petitioners in terms of Rule 134A(5) of the Rules and to take a decision after providing adequate opportunity to the petitioners thereon if they choose to do the same. If such an action is taken, the present order shall merge with the decision that the respondents may take after complying with the provisions contained in Rule 134A(5) of the Rules.
(VIPIN SANGHI)
JUDGE
JUNE 11, 2012
‘BSR’
