Show cause notice and hearing are mandatory before imposing penalty; their absence invalidates the penalty proceedings.

Penalty proceedings require a show cause notice and a meaningful opportunity of hearing before any penalty is imposed under Section 126(3). The absence of a notice initiating the penalty proceedings fails to satisfy the statutory hearing requirement and breaches principles of natural justice. Consequently, a penalty imposed without these procedural safeguards cannot be sustained.

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Issues: Whether penalty could be imposed without issuance of a show cause notice and an opportunity of hearing.

Analysis: Section 126(3) requires that no penalty be imposed without affording the person an opportunity of being heard. The undisputed absence of a show cause notice initiating penalty proceedings resulted in non-compliance with that requirement and breach of the principles of natural justice.

Conclusion: The penalty imposed upon the petitioner could not be sustained for want of a show cause notice and opportunity of hearing.

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