Justice Sandeep Kumar set aside notice of Managing Director, Bihar State Mining Corporation Limited for violating doctrine of audi alteram partem in Bhojpur case

In Shivshankar Kaushik Infrastructure Pvt. Limited vs. The State of Bihar through the Principal Secretary, Mines and Geology Department, Government of Bihar & Ors. (2026), Justice Sandeep Kumar of Patna High Court delivered a 16-page long judgement dated January 27, 2026, wherein. he concluded:"....the impugned letter dated 03.03.2023 imposing penalty upon the petitioner is hereby quashed and set aside. The matter is remitted to the respondents to consider the matter afresh and pass a speaking order after giving a reasonable opportunity of hearing to the petitioner. 20. With the aforesaid observations and directions, the writ petition stands allowed." It was one of the seven judgements delivered by the High Court on January 27.  

In the penultimate paragraph of the judgement, Justice Kumar observed:"18. In the present case, it appears from the records that the inspection was conducted behind the back of the petitioner and after inspection the petitioner was neither provided the inspection report nor show-cause was issued to him, and the impugned order imposing penalty has also been passed without hearing the petitioner, which is in complete violation of principles of natural justice and therefore non est. Moreover, the respondent authorities had provided merely 24 hours’ time to deposit the penalty amount and the petitioner under the threat of non-generation of his e-challans had deposited the aforesaid penalty amount. The action of the respondent authorities in grating only 24 hours time to deposit the huge penalty amount imposed upon the petitioner is totally arbitrary and therefore, unsustainable."

He pointed out that "17. It is a cardinal principle of law that no one should be condemned before being heard, which is also an integral part of the principles of natural justice. Considering the aforesaid decision of the Hon’ble Supreme Court in the case of Krishnadatt Awasthy (supra), it is clear that the principles of nature justice must be adhered to strictly. The doctrine of audi alteram partem has three basic essentials. Firstly, a person against whom an order is required to be passed or whose rights are likely to be affected adversely, must be granted a reasonable opportunity of being heard. Secondly, the authority concerned should provide a fair and transparent procedure and lastly, the authority concerned must apply its mind and dispose of the matter by a reasoned and speaking order.

The petitioner had prayed for issuance of an appropriate writ, order or direction in the nature of certiorarı for quashing the notice dated March 3, 2023 issued by the Respondent Managing Director, Bihar State Mining Corporation Limited whereby and whereunder a penalty of Rs.96,97,705/- was  levied upon the petitioner for allegedly excavating 90060 cubic feet sand from beyond the permissible environment clearance area. It had also prayed for issuance of appropriate writ, order or direction in the nature of mandamus commanding the Respondents to refund the penalty amount of Rs.96,97,705/- deposited by the
petitioner on March 3, 2023. It prayed for holding that Respondent Managing Director was not the competent authority to levy penalty upon a settlee under Rule 30(1) of the 2019 Rules.It prayed the High Court to hold that penalty cannot be levied upon a valid settee under Rule 56(2) of the 2019 Rules. It prayed for holding that letter dated March 3, 2023 was issued by the Respondent Managing Director is bad in the eyes of law since the same has been issued in glaring violation of the principles of natural justice as the petitioner has not been afforded any show cause notice whatsoever to controvert the allegations upon which the penalty has been levied. It also prayed the Court to hold that the levy of penalty was in gross violation of the maxim audi alteram partem as the petitioner was condemned unheard without an opportunity to defend the charges against it. It prayed the Court to hold that the imposition of penalty upon the petitioner was in violation of the 2019 Rules.

It was the case of the petitioner that the respondent-Bihar State Mining Corporation Limited had published a notice inviting e-auction for selection of sub-contractors for operation of sand ghats in the district of Bhojpur. The petitioner had participated in the said tender process and being the highest bidder, he was awarded Khangaon (Bahiyara) sand ghat after quoting an amount of Rs.5,53,41,610/-. Thereafter, the petitioner had deposited the requisite amount and accordingly, work order was issued in his favour. It was the case of the petitioner that an agreement was also executed between the petitioner and the respondent- Bihar State Mining Corporation Limited which was registered on June 27, 2022. Thereafter, the petitioner started carrying out the mining activities, but all of a sudden the Managing Director of the Bihar State Mining Corporation Limited issued the impugned letter dated March 3, 2023, whereby a penalty of Rs.96,97,705/- was levied upon the petitioner for excavating the sand beyond the permissible mining area and the petitioner was directed to deposit the penalty amount within 24 hours. The petitioner, had deposited the penalty amount under compulsion and threat of restriction on generation of e-transit challans.  

It was submitted by counsel for the petitioner that the impugned order of penalty dated March 3, 2023 indicates that on February 24, 2023 and February 25, 2023 inspection was conducted and it was found that the signboard and boundary wall were not erected and the sand was found to have been excavated outside the permissible area, however, neither the petitioner was intimated about any inspection nor the alleged inspection was conducted in his presence. It was further submitted that neither show-cause notice was issued to the petitioner nor any inspection report was provided to him before imposing the penalty. The petitioner had not excavated the sand beyond the permissible area and the imposition of penalty of such a huge amount is completely illegal and in violation of the principles of natural justice as the same has been
passed without issuance of any show-cause notice to the petitioner and without affording an opportunity to rebut the allegation.

In support of this submission, counsel for the petitioner placed reliance on decisions dated May 9, 2023 passed by a coordinate Bench of the High Court passed in in M/s. Uma Associates vs. State of Bihar & Ors.; the judgment dated August 1, 2025 passed in M/s. Shri Vijay Kumar Singh vs. The State of Bihar & Ors. and the judgment dated August 1, 2024 passed in Maa Bhawani Traders vs. The State of Bihar & Ors.

Referring to Rule 20 and 56 of the Bihar Minerals (Concession, Prevention of Illegal Mining, Transportation & Storage) Rules, 2019, counsel for the petitioner submitted that there is no provision in the Rules, regarding recovery of price of mineral for illegal excavation as a compensation. Also Rule-30 specifically provides that for the first time violation, a penalty of Rs.1,00,000/-can be imposed upon the setttlee, however, even assuming that the allegation against the petitioner was true then also the aforesaid imposition of penalty is totally illegal and not sustainable.

Justice Kumar noted that the central argument of the counsel for the petitioner was that the impugned penalty order was passed in complete contravention of the principles of natural justice as no show-cause notice was issued to the petitioner before imposing the penalty and even no opportunity of hearing was afforded to him. He observed:"15. I find substance in the submission of learned counsel for the petitioner that before passing the impugned order of penalty neither show-cause notice was issued to the petitioner nor he has been heard and further the enquiry report has also not been supplied to the petitioner. Even the learned counsel for the answering respondents is not in a position to show anything from the records indicating that before passing the impugned order either the show-cause notice was issued to the petitioner or that he has been heard. Further, the respondents had provided only 24 hours time to deposit the penalty amount. 

Justice Kumar underlined: "In my opinion, the penalty could have been imposed upon the petitioner only after a proper inquiry conducted in his presence, which is absent in the present case." 

In Krishnadatt Awasthy v. State of M.P. & Ors., reported as (2025) 7 SCC 545, Supreme Court has emphasized the imperativeness of principles of natural justice, particularly, before an administrative authority acting in a quasi judicial function and has held as under:-
“43. The opportunity of hearing is considered so fundamental to any civilised legal system that the courts have read the principles of natural justice into an enactment to save it from being declared unconstitutional on procedural grounds [Olga Tellis v. Bombay Municipal Corpn., (1985) 3 SCC 545].
44. It has been argued before us that if the failure to provide hearing does not cause prejudice, observing the principle of natural justice may not be necessary. In this context, a three-Judge Bench of this Court in S.L. Kapoor v. Jagmohan [S.L. Kapoor v. Jagmohan, (1980) 4 SCC 379] speaking through Chinappa Reddy, J. considered such arguments to be “pernicious” and held that “[t]he non-observance of natural justice is itself prejudice to any man and proof of prejudice independently of proof of denial of natural justice is unnecessary”. The Supreme Court, however, has drawn out an exception where “on the admitted or indisputable facts only one conclusion is possible, and under the law only one penalty is permissible, then the Court may not compel the observance of natural justice” [Swadeshi Cotton Mills v. Union of India, (1981) 1 SCC 664 : (1981) 51 Comp Cas 210; Aligarh Muslim University v. Mansoor Ali Khan, (2000) 7 SCC 529 : 2000 SCC (L&S) 965]. 
45. Professor I.P. Massey [I.P. Massey, Administrative Law (8th Edn., 2012).] has commented on this shift as under: “Before the decision of the highest Court in S.L. Kapoor v. Jagmohan [S.L. Kapoor v. Jagmohan, (1980) 4 SCC 379], the rule was that the principles of natural justice shall apply only when an
administrative action has caused some prejudice to the person, meaning thereby that he must have suffered some “civil consequences”. Therefore, the person had to show something extra in order to prove “prejudice” or civil consequences. This approach had stultified the growth of administrative law within an area of highly practical significance. It is gratifying that in Jagmohan [S.L. Kapoor v. Jagmohan, (1980) 4 SCC 379] , the Court took a bold step in holding that a separate showing of prejudice is not necessary. The non-observance of natural justice is in itself prejudice caused. However, merely because facts are admitted or are undisputable it does not follow that the principles of natural justice need not be observed.”
46. In State Bank of Patiala v. S.K. Sharma [State Bank of Patiala v. S.K. Sharma, (1996) 3 SCC 364 : 1996 SCC (L&S) 717], the Supreme Court observed that where an enquiry is not convened by any statutory provision and the only obligation of the administrative authority is to observe the principles of natural justice, the court/tribunal should make a distinction between a total violation of the rule of fair hearing and violation of the facet of that rule. In other words, a distinction must be made between “no opportunity” or “no adequate opportunity”. In the case of the former, the order passed would undoubtedly be invalid and the authority may be asked to conduct proceedings afresh according to the rule of fair hearing. But in the latter case, the effect of violation of a facet of the rule of fair hearing has to be examined from the standpoint of prejudice.
47. In Dharampal Satyapal Ltd. v. CCE [Dharampal Satyapal Ltd. v. CCE, (2015) 8 SCC 519 : (2015) 33 GSTR 1], this Court dealt with the prejudice question as under: (SCC p. 540, para 42) “42. So far so good. However, an important question posed by Mr Sorabjee is as to whether it is open to the authority, which has to take a decision, to dispense with the requirement of the principles of natural justice on the ground that affording such an opportunity will not make any difference? To put it otherwise, can the administrative authority dispense with the requirement of issuing notice by itself deciding that no prejudice will be caused to the person against whom the action is contemplated? Answer has to be in the negative. It is not permissible for the authority to jump over the compliance of the principles of natural justice on the ground that even if hearing had been provided it would have served no useful purpose. The opportunity of hearing will serve the purpose or not has to be considered at a later stage and such things cannot be presumed by the authority. This was so held by the English Court way back in the year 1943 in General Medical Council v. Spackman [1943 AC 627 (HL)]. This Court also spoke in the same language in Board of High School & Intermediate Education, U.P. v. Chitra Srivastava [Board of High School & Intermediate Education, U.P. v. Chitra Srivastava, (1970) 1 SCC 121] ….”
48. In a more recent decision in State of U.P. v Sudhir Kumar Singh [State of U.P. v. Sudhir Kumar Singh, (2021) 19 SCC 706] , the position of law was summarised as under: (SCC pp. 748-49, para 42)
“42. …42.1. Natural justice is a flexible tool in the hands of the judiciary to reach out in fit cases to remedy injustice. The breach of the audi alteram partem rule cannot by itself, without more, lead to the conclusion that prejudice is thereby caused.
42.2. Where procedural and/or substantive provisions of law embody the principles of natural justice, their
infraction per se does not lead to invalidity of the orders passed. Here again, prejudice must be caused to the litigant, except in the case of a mandatory provision of law which is conceived not only in individual interest, but also in public interest.
42.3. No prejudice is caused to the person complaining of the breach of natural justice where such person does not dispute the case against him or it. This can happen by reason of estoppel, acquiescence, waiver and by way of non-challenge or non-denial or admission of facts, in cases in which the Court finds on facts that no real prejudice can therefore be said to have been caused to the person complaining of the breach of natural justice.
42.4. In cases where facts can be stated to be admitted or indisputable, and only one conclusion is possible, the Court does not pass futile orders of setting aside or remand when there is, in fact, no prejudice caused. This conclusion must be drawn by the Court on an appraisal of the facts of a case, and not by the authority who denies natural justice to a person.
42.5. The “prejudice” exception must be more than a mere apprehension or even a reasonable suspicion of a litigant. It should exist as a matter of fact, or be based upon a definite inference of likelihood of prejudice flowing from the non-observance of natural justice.”

The High had passed seven judgements in Bhola Prasad Choudhary @ Bhola Choudhary vs. The State of Bihar, Rakesh Kumar Roy vs. The State of Bihar, Lal Jha vs. The State of Bihar, Avinash Kumar vs. The State of Bihar, Shivshankar Kaushik Infrastructure Pvt. Limited vs. The State of Bihar, Narendra Kumar vs. National Textile Corporation Ltd. & Ors. and Ganga Vishnu Shah vs. The State of Bihar & Ors. on January 27, 2026.

Provisions under Bihar Prohibition and Excise Act suffer from infirmities:Patna High Court

In Mahendra Prasad Singh @ Mahendra Singh vs. The State of Bihar through the Principal Secretary Excise and Prohibition Department, Government of Bihar & Ors. (2025), in his 29 page long judgement dated September 1, 2025, Patna High Court's Division Bench of Justice S. B. Pd. Singh and Acting Chief Justice P. B. Bajanthri concluded:"the respondent authorities are directed to release the house of the petitioner henceforth which was seized in connection with Prohibition Case No. 1217 of 2024." The respondent authorities were: The State of Bihar through the Principal Secretary Excise and Prohibition Department, Government of Bihar, the Excise Commissioner, Bihar Excise, Patna, the Divisional Commissioner, Magadh Division, Patna, the District Magistrate-cum-Collector, Patna, the Superintendent of Excise, Madh Nishedh Bihar, Patna, the S.H.O. of Excise, P.S. Patna and the Investigating Officer, Excise and Prohibition Case no. 1217/2024, namely Devendra Singh, S.I. Excise and Prohibition, P.S. Patna, District Patna. The judgement was authored by Justice Singh. 

The petitioner had sought issuance of writ/writs, order/orders, direction/directions in the nature of Mandamus seeking directing the respondents S.I. Madh Nishedh Excise, P.S., Patna, so that to immediately release the seized ground floor building, which was earlier given on rent to respondent no. 8, on rent each month Rs. 1500/- total area 300 sq. feet ground floor building of the petitioner, which was earlier on rent utilized by Randhir Kumar, the respondent no. 8, but the same room was seized by the S.H.O. of Excise P.S., Patna in connection with Prohibition case no. 1217/2024, dated 21.05.2024 registered under Sections 30(A), 32 and 56(B) of Bihar Prohibition and Excise Act, 2016 and (Amendment) Act, 2022, which was illegally seized by the police. He also prayed for directing the respondent to immediately release the ground floor of building house of the Bihar, which was earlier seized by the police in Excise Case but the petitioner is being the house owner of the said premises, which was used by the respondent no. 8 after agreement on rent. It also sought a direction for the respondent to freeze/seize the house of the petitioner which is subject matter of Excise Case which was seized by the S.H.O. of Excise P.S., Patna but that property which was utilised by the tenant that is respondent no. 8, so far, the petitioner was given the said property ground floor house on a rent on the basis of an agreement dated October 1, 2023, and in the said ground floor there is a water logging, because in the said premises the respondent no. 8 have kept some goods items, therefore, in view of the under Section 45 of the Cr. P. C., the said building order for custody and disposal property pending trial in certain cases must be released in favour of the petitioner, because the petitioner has got no knowledge about the said building, which was used by the tenant respondent no. 8 and doing some illegal business having without knowledge of the petitioner.  

The counsel of the petitioner submitted that from bare perusal of the FIR, it was evident that the name of the petitioner transpired in the present case only for the reason that he was the owner of the said building from where the alleged recovery has been made. The premises in question was given on rent is not in dispute. There was not even iota of evidence which could suggest that the petitioner was facilitating the culprit or providing access for storage of incriminating articles. Either directly or indirectly, he did not contravene Section 30 of the Bihar Prohibition and Excise Act, 2016 and for this reason his premises was not liable to be confiscated under Section 56 of the Act. The counsel also submitted that the petitioner had given the said house on rent much prior to the alleged incident and for this reason, no case would be made out against the petitioner as he was not in possession of any incriminating article in contravention of any provisions of the Act and neither he was having any knowledge of running of illegal business by the tenant Dr. Randhir Kumar. When the petitioner was able to satisfy the authorities that the premises in question was let out on rent and nothing came on record suggesting the knowledge of the petitioner about the storage of several types of Homeopathic medicines in the premises in question, seizure of premises of the petitioner appears to be arbitrary, unreasonable and illegal. These authorities did not take into consideration the rights of the petitioner under Article 19 (1) (g) and Article 300 (A) of the Constitution of India, whereunder, the petitioner had a right to own the property and he had also  got right to carry on any occupation, trade or business. The action of the authorities was arbitrary, unreasonable and shows complete non-application of mind when the fact was crystal clear that the premises owned by the petitioner was undisputedly being used by the tenant under a valid deed of agreement. 

Referring to the specific offences under the Bihar Prohibition and Excise Act, 2016 under which the petitioner was charged, Justice Singh observed:"....it seems that whenever offence punishable under this Act has been committed, any premises or part thereof used for committing any offence might be seized/confiscated and released upon penalty. It leaves no doubt that a premises can be seized and even confiscated and auctioned merely upon its involvement in any offence under the Act. This is indeed a draconian provision and so it must be used with complete circumspection. The existing provisions of the Act gives unfettered and unguided and arbitrary powers to the authorities. In the absence of any specific guidelines, such powers can be abused or misused and such powers can be exercised arbitrarily insofar as alleged proven charge and commensurate penalty could be seen in the better legislation- like provisions of Criminal Procedure Code read with Indian Penal Code, where the sentence/conviction is proportionate to the proved charges. 12. We have noted some disturbing trends with regard to the aforesaid provisions. Though the Act talks about necessary directions, guidelines, regulations, instructions to be issued by the State Government with respect to mode and manner of search and seizure, destruction and confiscation, we have provisions only under Section 57 B of the Act and Rules 12 B, 13 B and 14 of the Bihar Prohibition and Excise Rules, 2021 to meet such situations. These provisions are clearly insufficient and authorized officers are very likely to misuse the provisions and the decisions are taken arbitrarily."

Justice Singh added: "....there is no subjective assessment under Section 56 of the Act regarding involvement of the premises and the hardship which will be faced by the persons apparently without any fault of their own. Let us take certain examples to make issue clear. As in the present case, the premises was given on rent and apart from the tenant/lessee, the owner has been made accused. We can take another example of the joint family owned premises. Suppose a person of the joint family keeps a bottle of liquor in the premises without knowledge to other inmates, will that premises be seized and sealed and confiscation proceeding will be started ousting all the inmates of joint family property simply on the ground that the law provides so? Third example could be taken of a government quarter. If any recovery is made from a government quarter, will the State come forward and seize/seal/confiscate and auction the property? Then another issue which is to be considered is that there is no subjective relationship between the quantity of liquor seized and the premises sealed or the penalty imposed as we could decipher from the aforesaid provisions. Even the Rules, though provide for taking status of the individual, nature of his involvement in the crime, location of the premises and quantum of intoxicant recovered while deciding the quantum of the tine, yet the Rules also provide that the fine shall not be less than Rs. one lakh. This is simply absurd as to whether there is recovery of 100 ml. of intoxicant or 1,00,000 liters, minimum fine shall be Rs. one lakh. The provisions of law discussed here-in-before even give complete discretion to the confiscating authorities with regard to imposition of penalty since no guidelines have been provided. This may create anomalous situation as the jurisdictional authority in one area, in similar circumstances, may impose a lesser penalty, whereas for the same act, the jurisdictional authority in another area may impose higher penalty. 14. Enactment of law and rules in such manner may make such laws and rules arbitrary and the same goes against the spirit of Article 19 (6) of the Constitution...."

Article 19(6) of the Constitution of India reads: "Nothing in sub-clause (g) of the said clause shall affect the operation of any existing law in so far as it imposes, or prevent the State from making any law imposing, in the interests of the general public, reasonable restrictions on the exercise of the right conferred by the said sub-clause, and, in particular, nothing in the said sub-clause shall affect the operation of any existing law in so far as it relates to, or prevent the State from making any law relating to,— 
(i) the professional or technical qualifications necessary for practising any profession or carrying on any occupation, trade or business, or
(ii) the carrying on by the State, or by a corporation owned or controlled by the State, of any trade, business, industry or service,
whether to the exclusion, complete or partial, of citizens or otherwise”.

Justice Singh recalled the decision of the Supreme court in Romesh Thappar vs. State of Madras, reported in 1950 SCC 436, considered the possibility of law concerned being applied in unconstitutional manner and held such law be declared void.

He also referred to paragraph 85 of the Court's decision in E .P. Royappa vs. State of Tamil Nadu and another, reported in AIR 1974 SC 555. It reads: “85. ...Articles 14 and 16 strike at arbitrariness in State action an ensure fairness and equality of treatment. They require that State action must be based on valid relevant principles applicable alike to all similarly situate and it must not be guided by any extraneous or irrelevant considerations because that would be denial of equality. Where the operative reason for State action, as distinguished from motive inducing from the antechamber of the mind, is not legitimate and relevant but is extraneous and outside the area of permissible considerations, it would amount to mala fide exercise of power and that is hit by Arts. 14 and 16. Mala fide exercise of Power and arbitrariness are different lethal radiations emanating from the same vice : in fact the latter comprehends the former. Both are inhibited by Arts. 14 and 16. It is also necessary to point out that the ambit and reach of Articles 14 and 16 are not limited to cases where the public servant affected has a right to a post. Even if a public servant is in an officiating position, he can complain of violation of Arts. 14 and 16 if he has been arbitrarily or unfairly treated or subjected to mala fide exercise of power by the State machine. It is, therefore, no answer to the charge of infringement of Articles 14 and 16 to say that the petitioner had no right to the post of Chief Secretary but was merely officiating in that post. That might have some relevance to Art. 311 but not to Articles 14 and 16. We must, therefore, proceed to consider whether the transfer of the petitioner first to the post of Deputy Chairman and then to the post of Officer on Special Duty was arbitrary, hostile and in mala fide exercise of power. What was the operative reason for such transfer: was it the exigencies of public administration or extra administrative considerations having no relevance to the question of transfer? Was the transfer to the post of Deputy Chairman or Officer on Special Duty so irrational or unjust that it could not have been made by any reasonable administration except for colaterial reasons? These are the questions which call for our consideration”.

Justice Singh noted that although these observations were made in a different context, yet the underlying principle remain the same. There cannot be any arbitrariness in the matter of state policy and principles. 

Justice Singh also referred to the Supreme Court's decision in Menka Gandhi vs. Union of India, reported in (1978) 1 SCC 248, wherein it was held that that every law has to be just, fair and reasonable; otherwise it will be considered unconstitutional. 

Justice Singh observed that the provisions of law as framed under the Bihar Prohibition and Excise Act "does not appear to be perfect law and suffers from a number of infirmities. However, since the provisions of Act or the Rules framed therein are not in challenge, we refrain ourself from making any further comments on the provisions under the Act."

With regard to the case before him, he noted that it was undisputed that the premises in question was let out on rent. The said lease deed was prepared for 11 months between the parties which was effective from October 1, 2023 to August 30, 2024 and this period covered the alleged date of occurrence, pertaining to this case. He underlined in the penultimate paragraph of his judgement that in such a situation, "the petitioner could not be made to suffer for being the landlord/owner of the premises in question if recovery of some intoxicant materials have been made without his knowledge or intention."