Statutory subsidy cannot be withheld on unsupported material; arbitrary show-cause action may justify early court intervention.

Administrative withholding of a statutory subsidy must be supported by relevant, reliable material and by a lawful basis for doubting compliance with the applicable control order. The text explains that certificates from the statutory inspection machinery were not shown to have been lawfully discredited, while a separate study relied on by the authorities was directed to a different purpose and did not establish breach. It also notes that, although courts normally avoid intervening at the show-cause stage, intervention may be justified where the notice rests on no credible material and continued administrative action would be arbitrary.

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Issues: (i) whether the withholding of subsidy to the fertiliser manufacturers was justified on the basis of the PDIL report and the data relied upon by the authorities; (ii) whether the High Court was justified in interfering with the show cause notice and directing payment of subsidy at the threshold.

Issue (i): whether the withholding of subsidy to the fertiliser manufacturers was justified on the basis of the PDIL report and the data relied upon by the authorities.

Analysis: The subsidy scheme depended upon the fertiliser satisfying the prescribed standard under the Fertilizer (Control) Order. The record showed that the statutory inspection machinery had already certified the manufacturers' product as conforming to the standard, and there was no material showing that those certificates had been doubted or discredited through any lawful process. The PDIL study was undertaken for a different purpose, namely to assess the use of low-grade indigenous rock phosphate for disability allowance, and not to determine whether the manufacturers were in breach of the control order. The assumptions in the notice regarding the grade of rock phosphate required to produce standard SSP were unsupported by reliable data and were contradicted by the material placed on record.

Conclusion: The withholding of subsidy was unjustified and arbitrary, and the claim could not be rejected on the basis of the material relied upon by the appellants.

Issue (ii): whether the High Court was justified in interfering with the show cause notice and directing payment of subsidy at the threshold.

Analysis: Ordinarily, courts do not interfere at the stage of a show cause notice. However, where the action is founded on no credible material and the official records themselves support the party affected, interference is warranted to prevent arbitrary administrative action. The authorities had no reliable basis to doubt compliance with the control order, and the manufacturers were already facing serious prejudice from withholding of subsidy. In those circumstances, requiring them to undergo a further notice process would have served no useful purpose.

Conclusion: The High Court was justified in quashing the notice and granting relief directing payment of the subsidy.

Final Conclusion: The appeals failed, the challenge to the High Court's order was rejected, and the direction to release the subsidy in accordance with the scheme was sustained.

Ratio Decidendi: Administrative action withholding a statutory subsidy must rest on relevant and reliable material; where the basis is unsupported and arbitrary, the court may intervene even at the show cause stage.

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