STATE OF HARYANA AND ORS. v. JAGE RAM AND ORS

Citation: [1980] 3 S.C.R. 746

Court: Supreme Court of India

Bench: Y.V. CHANDRACHUD, P.N. SHINGAL, O. CHINNAPPA REDDY

Case summary

It cannot ever be that a licensee can work out the licence if he finds it profitable to do so; and he can challenge the conditions under which he agreed to take the licence, if he finds it commercially inexpedient to conduct his business....

Judgment text

STATE OF HARYANA AND ORS. JAGE RAM AND ORS. April 21, 1980' [Y. V. CHANDRACHUD, C. J. , P. N. SHINGHAL AND 0. CHINNAPPA ;REDDY, JJ. ] Writ Jurisdiction-Article 226 of the Constitution of India, 19SOc- Petition under reciprocal rights and obligations arising out of Contract cannot _. be enforced-Excise duty, Fees, and Price for parting with the Privirege by -.... J Sttile, explained-Punfab Excise Act (Act 1 of 1974) and Pun/ab Iiftlor ' O Licence Rules, 1956 as amended upto 22-3-68-Whether notice of reauction necessary under Rule 36(3) of the Liquor Licence Rules. In the auction for the financial year 1967-68 held on March 27, 1967 for the . retail vend known as "Biswan Mee! " Sooepat, the respondents offered the highest bid for a quota of Rs. 62,100 proof litres for which they became liablo under condition 14(iii) of the auction to pay an amount calculated at the rate of Rs. 17. 60 per litre that is to say, Rs. 10,92,960-00.

On the bid being lrnoUed in their favour, respondents deposited a •nm of Rs. 45,527-50 being 1/24th of the total amount payable by them by way of security for the due performance of the terms of the auction, as required by conditii>n No. 15(1) 0f the auction and Rule 36 (22A) of the Punjab Liquor Licence Rule urt in CA 1042 and 1043/()8 dt. 21-8-72, the High Court allowed the writ petition and quashed the order cancelling the respondents' licence and cajlin! l upon them to pay the difference between the amount payable by them under tlteir bid and the amount realit;ed in the reauction of the vend. It has given to the appellants a certificate to appeal to this Court under Articlel33(1) (a) of tile Constitution since the subject matter in dispute was . of the value of meie lban Rs. 20,-000 at the time when the Writ Petition was filed, as also on lhe .. ,. le of the proposed appeal. Allowmg the appeal, the Court HIU:>:: I.

The Writ jurisdiction of the High Court under Article 226 of the a.. stitution is not intended to facilitate aYOidance of contractual obligations W>lontarily incurred by the petitioner. (755 D] In the instant case the High Court was in error in entertaining the writ petitions for the purpose of examining whether the respondents could avoid their contractual liability by chailenging the Rules under which the bids offered by them -were accepted and under which they became entitled to conduct their busiiiess. It cannot ever be that a licensee can work out the licence if he finds it . profi1able to do so; and he can challenge the conditions under which he agreed to take the licence, if he finds it commercially inexpedient to conduct his business...

The occurrance of commercial difficulty, inconvenience or hardship in the pedormance of those· conditions, like the sale of liquor being less in sum~ mer than in winter, can provide no justification for not complying with the terms • of the -00ntract which they had accepted with open eyes. [755 F, 756 C-DJ Har Shanker and Ors. v. The Deputy Excise and Taxation Con1missioner and flirs. , [1975] 2 SCR 254 @ 266; Sham Lal v. State of Punjab, AIR 1976 SC 2045, fdlowed. BMjan Lal Saran. Singh & Co. v. State of Puniab, [1967] Current Law Jciurnal, p. 460; Overruled. 2. '·lkre is no doubt that a distinction does exist between the Rules which were im)1Ugned in Bhajan Lal, and in the instant case on one hand and the Rules which were impugned in Har Shanker's case on the other. Jn'' f~~ in , '' ' '. ·«'\. ' Har Shanker's case the impugned Rules were those as amended on Z2;:l-68 in order to meet the judgment of the High Court under appeal in the instant case.

Even assuming that there is a material difference in the Rules which are im~ pugned in the instant case and those in Har Shanker's, ye1t the jurisdiction of the High Court is a bar to the respondents to wriggle out ~Jf their cOD. tractual obligation. [756 E-H] 'B In Har Shanker's case, this Court held that since rights in regard to the manufacture and sale of intoxicants are vested in the state; it is open to it to part with these rights for consideration; tha. t the amounts Which are 'Charged to the licensees who offer their bids in auction sal~s of vends are neither in the nature cf a tax nor in the nature of excise duty; and that, the true natur. e of the charge which the Government levies in such cases is that it is price which the State charges as a consideration for parting with its privileges in favour of licensee. Such a charge is a normal incident of a trading or business tranSaction. What the State could itself do in the exercise of its privilege, it. authorises ae.

other to do by charging a price for parting with its privilege. A price can neither be a tax nor excise duty. Therefore, even if any concession was made in the High Court, the true legal position that the amounts whi pay ' the difference between the amount payable brth. em under their bid; and the amount realised in the reauction of the vend. It has given to the appellants a certificate to appeal to this Court under Article 133(fX;I) of the Constitution since the subject matter in dispute was of the wlae of more than Rs. 20,000 at the time when the Writ Petition was •it, as also on the date of the proposed appeal. ff It is no longer in dispute that the auction at which the responthls' bid was accepted is go\terned by the Punjab Liquor Licence Re, 1956 as amended by the notification dated March 3l, 1967 is~u~ HAllWINA v. JAG!! MM (Clumdrar:hud; C. 1. ) 751 the ·Excise and Taltation Commissioner, Haryana, which came into force on April I, 1967.

The amended rules, in so for as they a~ rele- \'ant for our purpose, read thus : 36. (I) Subject to such changes as the Financial Commisioner may make each year before the annual auctions the Coffector shall, on the basis of the probable sales during the It next licence year determine, in the case of country liquor vends, the minimum quota of country liquor and the licence fee calculated thereon . . . . . . . . The minimum quota and the licence fee calculated thereon.......... , for each vend shall be an- . nounced by the Presiding Officer at the time of auctions. 36. (16) Bids in respect of country liquor vends shall be received in terms of quota of country spirit in proof litres to be lifted during the whole year, and the successful bidder shall be 'liable to , pay licence fee calculated by multiplying the . quota bid by Rs. 17 ·6. 36.

(22-A) A person to whom a country spirit shop has been ·sold shall deposit in a Government Treasury under head "Licence fee on country spirit" subordinate to Majo ead "X-State Excise Duties" by way of security an amount equivalent to one-twenty-fourth of the amount of the licence fee determined under clause (16) within a period of seven days of the date . of auction and the aforesaid amount of security shall be refundable to him at the end of the year, unless the same or any part thereof is forfeited or adjusted against any amount of fee, duty or penalty due from him in respect of his licence. In the event ofthe amount of security deposit or any part thereof beinl} forfeited or adjusted as aforesaid the deficiency shall be made good by him within seven days of the happening of such . an event failing which the licence shall be liable to cancellation . r by the Authority by which it was granted. 36.

(23) (2) A person to whom a country spirit shop is • ;;old shall pay the amount or licence fee as calculated nuder . clause (16) in 22 equal instalments, each instalment being payable on the 10th and 25th of each month starting from the month of April. In the event of failure to pay the instalment by the id is required to be multiplied by a certain figure per proof litre and further because the respondents were given the facility of paying the amount by instalments while lifting the quota from time to time. What the respondents agreed to pay was the price of a privilege which the State parted with in their favour. They cannot therefore avoid their liability by contending that the paymeut which they were called upon to make is truly in the nature of excise duty and thatlno such duty can be imposed on liquor not lifted or purchased by them. In Panna Lal v.

State of Rajasthan(l) it was held by this Court that • the licence fee stipulated to be paid by the licensees was the price or consideration or rental which the Government charged them for parting with its privilege and that it was a normal incident of trading or business transaction. It is true that the Court also said that no excise duty could be collected on undrawn liquor but it held that while enforcing the payment of the guaranteed sum or the stipulated sum mentioued in the licences, the Government was not seeking to levy or recover e! ci. se (I) {197611 SCR. 219. HA'RYANA v. JAGE llAM (ChandrllChud, C. 1. ) 759 duty on undrawn liquor. In the instant case too, what the Govern- 4- ~t is trying to recover from the respondents is in essence the price of the privilege with which it has parted in their favour and not excise dnty on undrawn liquor. Strong reliance was placed by the respondents on the decisions of . Ws Court in Bimal Chandra Banerjee v.

State ofMadhya Pradesh, (1), IJ 2 State of Madhya Pradesh v. Firm Gappulal etc. ( ) aud Excise Com" mis4ioner, U. P. , Allahabad v. Ram Kumar(3) in support of their contention that what they are called upon to pay by the Government is excise duty. In Bimal Chandra Banerjee,(! ) it was held by this Court that tile levy of excise duty on undrawn liquor was beyond the power of the State Government and that therefore the rule imposing the condition C' to that effect was invalid. That decision was followed in tbe Madhya Pradesh case(2) where also, the licensees were required to pay what was described as "Pratikar", which was nothing but excise duty on undrawn liquor. The same situation obtained in the U. P. case(3) because, the real nature of the payment which the licensees were required to make there was excise duty on undrawn liquor.

D' These decisions cannot help the respondents because the true position, as stated earlier, is that the amount which the respondents are called upon to pay is not excise duty on undrawn liquor but is the price of a privilege for which they offered their bid at the auction of the vend which they wanted to conduct. I Thus the respondents must fail in their contention both on account of the objection to the maintainability of their writ petition and on merits concerning the nature of the payment which they are liable to tnake. There is however one other point which cannot be overlooked' and on which the respondents may possibly have a plausible case. It is urged by Shri Tirath Singh Munjral for the respondents that the reauction which was held on May 23, 1967 was not in accordance with the Rules and therefore, the respondents cannot be called upon to pay • the difference between the amount which they had agreed to pay and G the amount which was fetched in the reauction of the vend.

In paragraph 14 of the writ petition, it is averred that the respondents were never informed as to where and at what time the resale of theevend would be held on May 23, that no notice of the intended resale was give1;1 as required by Rule 36(3) of the Punjab Liquor Licence Rules . ~ [1971] I SCR. 844. ~ {1976] 2 SCR. 1041. (3) [1976] supp], SCR. 532. 1956, that in fact no other notice was published or affixed at any conspicuous public place notifying the proposed resale nor indeed was the resale announced even by the beat of drum. According to the respondents, no wide publicity was given to the reauction and even the residents of the adjoining villages who would have been interested in offering bids were not aware of the reauction. All that happened on May 23, according to the respondents, was that one Lal Chand, a leadii:tg licensee of Haryana, went to the office of the Excise & Taxation Officer, Rohtak, and managed to have his bid accepted.

These irregularities it is contended, resulted in the startling consequence that whereas in the auction held on March 27, 1967 the highest bid, namely, of the respondents was for a quota of 62,100 litres equivalent to Rs. 10,92,960 ·00. in the reauction held on May 23, 1967 the highest bid was only for a quota of 15,000 proof litres equivalent to Rs. 2,46,400 ·00. In the counter-affidavit dated August 16, 1967 filed by Shri Pritam Singh,'. Deputy,Excise & Taxation Commissioner, the allegations made in paragraph 14 of the writ petition are deniecl by saying that the reauction held on May 23, 1967 "was duly published in accordance with rules". The High Court has rejected the contenction of the respondents in this behalf. But it seems to us that its judgment on this' aspect of the matter suffers, with respect, from a misunderstanding of the grievance of the respondents.

Their main grievance that du'e publicity was not given to the reauction, as a result of which proper· bids were not received, has been overlooked by the High Court and it merely dealt with the question whether the respondents themselves had I notice of the reauction and whether the date of the reauction·ought to have been fixed by the Financial Commissioner himself and by no other person. The High Court is right that the respondents did have notice of the reauction, as is clear from the order dated May 17, 1967 passed by the Deputy Excise & Taxation Commissioner, ·Headquarters, Haryana, while cancelling the' respondents' licence. It also appears clear that the date of the reauction need not be • fixed by the Financial Commissioner himself. But there is no discussion whatsoever in the judgment of ·the High Court, on·the question as to whether due publicity was given to the reauction"'as required by the Rules.

In\ paragraph 14 of their ~rejojnder • aflidavit filed in the High Court on September 14, 1967, respondents had stated that it was incorrect that the reauction was duly published· in accordance with the Rules. Along wih their rejoinder, respondents filed affidavits of three Sarpanchas, three members of the Pancha:yatsand a Lamberdar to show that no notice whatsoever was given of HARYANA v. JAGE RilM (Chandrachud, C. 1. ) 761 A the reauction to the people in the vicinity of Biswan Mee! village. The High Court has not even made a reference to these affidavits, while dealing with the particular point (namely, contention No. 2 before the High Court), which bears out what we have stated above that it really misdirected itself' while examining the contention raised by the . respondents in regard to the absence of due publicity for the reauction.

n This makes it necessary to remand the matter to the High Court 1n order to enable it to record its findings on two outstanding questions: (I) whether it was necessary according to the Rules which were in force at the relevant time to give adequate publicity to the reauction ang, ,(2) if so, whether such publicity was in fact given to the reauction. If the officers of the State have defaulted in carrying out their obligation, if any, in the matter of giving due publicity to the reauction, the consequence could be that the respondents may not be liable to pay the difference between the amount which ·they were liable to pay and the amount realised in the reauction. In the result, except for the contention in regard to the two questions D mentioned in the preceding paragraph, the State must succeed. We shall, however, have to await the findings of the High Court on the .

two points mentioned above before passing the fuial order, which can only be done after the findings of the High Court are received. ·we direct the High Court to decide the aforesaid questions on the ' 1-. .. ~ material as it stands on the record and on such further material as the parties may desire to adduce. The State, especially, may like to file a further affidavit in reply to the rejoinder affidavit ofthe respondents along with which the affidavits of three Sarpanchas, three members of certain Panchayats and of a Lamberdar were filed. The High Court will certify its findings to this Court within three months }<' from to-day. y '" :S. R. Appeal allowed in part. • '10-463SCI/80