Delhi High Court
Global Vectra Helicorp vs Directorate General Of Civil ... on 11 June, 2012
Author: Vipin Sanghi
* 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
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
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
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
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
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
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
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
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.
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.
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
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
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:-
"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
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
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
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.
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
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.
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
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."
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
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:
"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
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
(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.
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.
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
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
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 2/3 rd 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
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."
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
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
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.
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
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.
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.
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
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
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.
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.
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
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
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
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.
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."
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
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.
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
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
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.
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
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
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'
