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Thursday, January 10, 2013

The respondent had availed the benefit of the licence being fully aware of the Rules, notification and the terms incorporated in the licence. The Rules provide that he has to pay from the date of the settlement and in this case, the settlement took place on 5th June, 2006. In view of what has been engrafted in the Rules, there cannot be any trace of doubt that the respondent has to be made liable to pay the licence fee from the date of the settlement. There could not have been condonation of default. Such a concept is alien to the present nature of trade and a licencee cannot claim any benefit under the same as the whole thing is governed by the command of the Rules. That apart, we are unable to subscribe to the interpretation placed by the High Court that the auction-purchaser is liable to pay from the date of issuance of licence but not from the date of the settlement as that runs counter to the plain language of Rule 24. Reading the Rules in a comprehensive manner in juxtaposition with the notification which forms the terms and conditions of the licence and the nature of the trade, the irresistible conclusion is that the liability accrued from the date of the settlement and, therefore, we find that the order passed by the Excise Commissioner was just and proper and there was no warrant on the part of the High Court to interfere with the same. 32. Consequently, the appeal is allowed, the order passed by the High Court is set aside and that of the Excise Commissioner is restored. The parties shall bear their respective costs.


                        IN THE SUPREME COURT OF INDIA

                        CIVIL APPELLATE JURISDICTION

                        CIVIL APPEAL NO. 128  OF 2013
                (Arising out of S.L.P. (C) No. 19133 of 2009)


State of Bihar and Others                          ... Appellants

                                   Versus

Nirmal Kumar Gupta                           ..Respondent






                               J U D G M E N T


Dipak Misra, J.



      Leave granted.

   2. The pivotal issue that emerges for consideration  in  this  appeal  is
      whether the Division Bench of the High Court of  Judicature  at  Patna
      has correctly interpreted the effect and impact of  the  Bihar  Excise
      (Settlement of Licences for  retail  sale  of  country/spiced  country
      liquor) Rules, 2004 (for short “the Rules”) and the sale  notification
      published by the Collector  of  Kishanganj  in  Excise  Form  127  for
      various excise shops in groups in the said district for the year 2006-
      07 and the terms of licence.

   3.  As the factual matrix would exposit, the Collector,  Kishanganj,  got
      the sale notification in Excise Form  127  issued  for  settlement  of
      various excise shops in various groups in the district  of  Kishanganj
      for the financial year 2006-07 which stipulated  that  the  settlement
      shall be made on 23rd March, 2006  on  auction-cum-tender  basis  and,
      accordingly, applications were invited from  interested  persons.   As
      the settlement could not be effected in respect of group ‘ka’ shops in
      the said district, the Collector issued a second notification on  17th
      May, 2006 for the said group  ‘ka’  which  consisted  of  six  country
      spirit shops and three spiced country  spirit  shops.   On  5th  June,
      2006, the group ‘ka’ excise  shops  were  settled  in  favour  of  the
      respondent at a monthly licence fee of Rs.8,29,600/-.  The  respondent
      deposited the advance security of Rs.8,29,594/- on 7th June, 2006  and
      further Rs.8,29,600/- on 22nd June, 2006.  The  Collector,  Kishanganj
      moved the Commissioner for his approval and the same  was  granted  on
      1st July, 2006 in the office of the Collector on 5th July, 2006 and on
      that day itself, the licence was issued in favour of  the  respondent-
      licencee.  It is the case of the appellant that as the respondent  did
      not deposit the requisite 1/4th amount of the annual  licence  fee  as
      advance security as prescribed under the Rules but  did  so  in  three
      instalments, there was delay in obtaining the approval from the Excise
      Commissioner in terms of Rule 17(kha) of the Rules.  Despite the delay
      in the payment of the advance deposit, the Collector  had  recommended
      his case for approval and, eventually, the Commissioner  approved  the
      grant of licence in respect of group ‘ka’ shops and,  ultimately,  the
      licence was issued, as stated earlier, on 5th July, 2006.

   4. As there was breach of the conditions of the  licence,  a  demand  was
      raised for the period commencing 5th June, 2006 to 5th July,  2006  by
      the Excise Superintendent, Araria-cum-Kishanganj on 27th March,  2007.
      On receipt of the demand  notice,  the  respondent  moved  the  Excise
      Superintendent on 29th April, 2007 asking him to withdraw  the  demand
      on the ground that he had  not  utilized  the  privilege  during  that
      period.  Thereafter, he challenged the demand notice before the Excise
      Commissioner, who rejected  the  application  vide  order  dated  18th
      September, 2008.  Being grieved by the said order he  moved  the  High
      Court invoking the writ jurisdiction in CWJC No. 16577 of 2008.

   5. The High Court referred to Rules 16, 17, 20, 22 and  24  and  recorded
      its opinion in the following manner: -

                 “That group of shops have been settled  in  favour  of  the
           petitioner in the midst of excise year, is not in  dispute.   It
           is also a fact that on 5th June,  2006,  the  bid  made  by  the
           petitioner for group ‘ka’ excise shops  of  Kishanganj  District
           was highest and accepted by the  auctioning  authority  by  such
           acceptance is subject to approval of  the  Excise  Commissioner.
           There also does not seem to be any dispute that there  was  some
           default on the part of the petitioner in payment of the  advance
           security amount.   However,  the  default  seems  to  have  been
           condoned as despite the said default, his bid  dated  5th  June,
           2006 was not cancelled and licence was issued in Form 26C of the
           Rules on 5th July, 2006.  Rules 16 and 17  of  the  Rules,  when
           read together, would show that the final acceptance of  the  bid
           by the auctioning authority, by itself,  does  not  entitle  the
           bidder to get the licence as the said bid has to be accepted  by
           the Commissioner of Excise and only after it is accepted by  the
           Commissioner, then the licence is issued.  In  the  backdrop  of
           the aforesaid legal position, when we turn to the facts  of  the
           present case, it would be seen that although highest bid of  the
           petitioner was accepted on 5th June, 2006 but  it  was  only  on
           30th June, 2006 that the Licensing Authority recommended to  the
           Commissioner of Excise for approval of  settlement  and  it  was
           approved by the Excise Commissioner, Bihar on 1st July, 2006 and
           after receipt of the approval from the  Excise  Commissioner  on
           5th  July,  2006,  the  licence  was  issued  by  the  Licensing
           Authority on that date.  Surely, in the backdrop  of  the  facts
           that the licence was issued on 5th  July,  2006  the  petitioner
           could not have been fastened with the liability to  pay  licence
           fee from 5th June, 2006.”

                                                       [Underlining is ours]

   6. Questioning  the  correctness  of  the  aforesaid  conclusion,  it  is
      submitted by Mr. Gopal Singh, learned counsel for the State of  Bihar,
      that the High Court has fallen  into  error  by  construing  that  the
      default has been condoned though there is no concept of condonation in
      such a trade.  It is urged  by  him  that  as  the  requisite  advance
      licence fee was not deposited as per the Rules, the approval could not
      be obtained earlier and hence, the Department,  not  being  at  fault,
      should not suffer the loss of revenue more so when  the  licencee  had
      accepted the conditions enumerated in the licence. That apart, submits
      Mr. Singh, as per the Rules, in such a situation, the  respondent  was
      legally bound to pay the licence fee from the date of settlement.

   7. Mr. Shantanu Sagar, learned counsel appearing for the respondent,  per
      contra, has submitted that the High Court has correctly determined the
      controversy that the liability would be from the date of issue of  the
      licence and not earlier than that, for unless the licence  is  issued,
      he cannot trade in liquor and further it cannot be said that the State
      has parted with the exclusive privilege.

   8. To appreciate the controversy, it is necessary  to  refer  to  certain
      Rules.  Rule 16 of the Rules deals  with  the  acceptance  of  bid  or
      tenders.  It reads as follows: -

           “16. Acceptance of bid or tenders.– (1) The Auctioning Authority
           shall not be bound to accept the highest bid or  tender  or  any
           bid.  If  the  highest  bid  or  tender  is  not  accepted,  the
           licensing officer shall  instantaneously  declare  the  date  of
           fresh auction, mentioning the reasons.  In such a  circumstance,
           the entire deposited advance money will  be  refunded  to  those
           applicants who do not want to participate in subsequent auction.

           (2)   If the bid amount in any auction is finally accepted,  any
           subsequent  offer  with  regard  to  that  bid  shall   not   be
           considered.  No further negotiation shall be entertained by  the
           Licensing Authority or the officer conducting the auction.”

   9. Rule 17 of the Rules which provides for final acceptance of the bid is
      as follows: -

           “17. Final acceptance of bid. – (a) The recommendation to  grant
           exclusive privilege of retail sale for  the  shop  or  group  of
           shops to the person bidding highest, and acceptance  under  Rule
           16, shall be sent to the Commissioner of Excise by the Licensing
           Officer, and after his acceptance a licence will be issued.

           (b)   The amount of highest bid, accepted  will  be  the  annual
           amount of licence fee.”

  10. On a perusal of  the  aforesaid  two  Rules,  it  is  vivid  that  the
      Licensing Officer conducting auction accepts the bid and,  thereafter,
      sends his recommendation for grant of exclusive  privilege  of  retail
      sale for the shops or group of shops to the Commissioner and after his
      acceptance, the licence is issued.  The pertinent part of this Rule is
      that the amount of highest bid accepted would be the annual amount  of
      licence fee.

  11. Rule 19 provides  for  payment  of  advance  security  in  the  manner
      prescribed therein.  The said Rule is reproduced hereinbelow: -

           “19. Payment of Advance Security. –  After  the  declaration  of
           acceptance of the  highest  bid  the  Licensing  Authority,  one
           fourth, portion of the annual licence fee shall be paid  by  the
           highest bidder as advance security in the following  manner  for
           due execution of a contract: -

           a) An amount equivalent to sixth portion of annual  licence  fee
              shall be immediately deposited in cash or in the form of Bank
              Draft.  The amount of cash/Bank Draft  and  that  of  advance
              money deposited previously under Rule 11(a)  and  Rule  11(c)
              respectively, shall be adjusted in part from security amount.

           b) The payable remaining amount on account of  advance  security
              shall have to be deposited within  ten  days  of  auction  or
              before commencement of the licence whichever is earlier.”

  12. On a plain reading of the said Rule, it is manifest that  the  highest
      bidder has to immediately deposit one fourth of the annual licence fee
      as advance security money in the manner provided  in  sub-clauses  (a)
      and (b) of the Rule.

  13. Rule 20 deals with the consequences of default  in  advance  security.
      It reads as under: -

           “20. Default in advance  security.  –  In  case  of  failure  to
           deposit the amount of advance security, as mentioned in Rule 19,
           within the prescribed time, the settlement and the  licence,  if
           issued, shall stand cancelled and the deposited amount, if  any,
           shall be forfeited to the Government.  In such a circumstance, a
           re-auction or alternative  arrangement  shall  be  made  by  the
           Licensing Authority.”

  14. The aforesaid  Rule,  when  properly  scrutinized,  clearly  lays  the
      postulate that if the advance security  amount  is  not  deposited  in
      accordance  with  the  time  limit  prescribed  under  Rule  19,   the
      settlement and the licence, if issued, shall stand cancelled  and  the
      deposited sum, if any, shall be forfeited to  the  Government.   Thus,
      there is a distinction between settlement and issue of licence.

  15. Rule 23 deals with adjustment/refund of advance security  amount.   It
      stipulates that the security amount referred to in Rule  19  shall  be
      refunded at the end of the settlement  period  if  all  the  dues  and
      claims of the State Government with regard to the  auctioned  shop  or
      group of shops have already been paid by the licencee.

  16. Rule 24 deals with the commencement of the period of licence.   It  is
      as follows: -

           “24. Commencement of the period of licence. – A  licence  issued
           in favour of any auction-purchaser shall be effective  from  1st
           April of the excise year unless the Licensing  Authority  orders
           otherwise.  The auction-purchaser shall be liable to pay the bid
           money from the first day of the  licence  period,  even  if  the
           licence has been issued thereafter.

                 Provided that if any shop or a group of shops is settled in
                 the midst of the excise year, the  licence  shall  commence
                 from the date of settlement of the shop  or  the  group  of
                 shops.

           The  Licensing  Authority   shall   mention   details   of   the
           shops/licences to  be  settled  and  annual  minimum  guaranteed
           quantity to be lifted under those licences and the reserved  fee
           thereof, in the sale notification for every excise year.”

  17. The said Rule has to be carefully x-rayed and understood.  It  clearly
      lays down that the licence shall be effective from 1st  April  of  the
      excise year and the auction-purchaser shall be liable to pay  the  bid
      money from the first day of the licence period, even  if  the  licence
      has been issued thereafter.  The proviso further  stipulates  that  if
      any shop or a group of shops is settled in the  midst  of  the  excise
      year, the licence shall commence from the date of  settlement  of  the
      shop or the group of shops.

  18. The High Court, interpreting the Rule position, has  opined  that  the
      shops were settled in favour of the respondent in  the  midst  of  the
      year, i.e., on 5th June, 2006, and after obtaining the approval on 1st
      July, 2006 from the Excise Commissioner, the licence was issued by the
      Licensing Authority on 5th July, 2006, and, therefore, the  demand  of
      licence fee for the period from 5th June, 2006 to 5th  July,  2006  is
      not sustainable.

  19. As the factual matrix would reveal, the notification in Form  No.  127
      was issued on 23rd March, 2006.   The  terms  and  conditions  of  the
      settlement  of  excise  shops  were  duly  incorporated  in  the  sale
      notification and as per Rule 8, the terms and conditions mentioned  in
      the notification are deemed to be included in the  conditions  of  the
      licence.  As per the first notification, all the three country  spirit
      shops could not be settled and further steps were taken for settlement
      and, eventually, the bid of the respondent was accepted on  5th  June,
      2006 with the annual licence fee of Rs.99,55,200/- or at a monthly fee
      of Rs.8,29,600/-.  The respondent was required to  pay  1/4th  of  the
      annual licence fee as advance security money but he failed to do so in
      time.  He deposited the requisite amount in three  instalments,  i.e.,
      first on 7th June, 2006, second on 22nd June, 2006 and third  on  17th
      July, 2006.  As per Rule 19(a),  he  was  required  to  deposit  1/6th
      portion of the annual licence fee immediately in cash or in  the  form
      of bank draft.  The remaining amount of advance  security  was  to  be
      deposited within ten days of the auction or before the commencement of
      the licence.  Thus, the respondent failed  to  comply  with  the  said
      Rule.  However, the Collector recommended his case on 30th June,  2006
      which was accepted on 1st July, 2006 and the licence was issued on 5th
      July, 2006.  It is worthy to note that thereafter,  demand  notice  of
      Rs.16,03,893/-  was  issued  by  the   Excise   Superintendent.    The
      Commissioner took note of the fact that  out  of  Rs.74,36,071/-,  the
      licencee had paid Rs.66,36,794/- and, hence, a  sum  of  Rs.7,99,277/-
      remained to be paid.  Be it noted, on 3rd March, 2007, the licence was
      cancelled for breach of other conditions and in the present  case,  we
      are not concerned with  those  conditions,  for  the  controversy   in
      praesenti only relates to the demand commencing 5th June, 2006 to  5th
      July, 2006.

  20. The High Court has opined that the  State  had  not  parted  with  the
      exclusive privilege till the licence was issued.   Under  Rule  24,  a
      licence issued in favour of the auction-purchaser  is  effective  from
      1st April of the excise year unless  the  Licensing  Authority  orders
      otherwise and the auction purchaser is liable to  pay  the  bid  money
      from the first day of the licence period even if the licence has  been
      issued thereafter.  That apart, he is supposed to pay the licence  fee
      from the  commencement  of  the  settlement  period  and  the  licence
      commences from the date of the settlement.  In the case  at  hand,  it
      was settled on 5th June, 2006.  The licence was issued  on  5th  July,
      2006.  The principle of condonation of default has been taken recourse
      to by the High Court on the foundation that despite default in  making
      deposit of advance security, the  licensing  officer  recommended  his
      case for approval to the Commissioner of Excise.  The default,  as  we
      perceive, comes into play if there  is  violation  of  Rule  19  which
      stipulates for advance security.  There is no dispute  over  the  fact
      that there was delay.  The respondent was clearly responsible for  the
      same.  The licensing officer thought it appropriate to  recommend  his
      case and the Excise Commissioner did approve it and on receipt of  the
      approval, the licence was issued on  the  same  day.   The  respondent
      accepted the licence knowing fully well the terms  and  conditions  of
      the licence and that he has to pay the licence fee from  the  date  of
      the settlement.

  21. At this juncture, we may usefully address to the issue  whether  in  a
      case of this nature, the principle of condonation of default by way of
      conduct can  be  attracted.   First  of  all,  under  the  Rules,  the
      authorities are entitled to forfeit the amount deposited when there is
      non-compliance of the Rules.  It is to  be  borne  in  mind  that  the
      nature of the trade has also its own significance.   In  Amar  Chandra
      Chakraborty v. The Collector of Excise, Govt. of Tripura, Agartala and
      others[1], this Court held thus: -

           “Trade or business in  country  liquor  has  from  its  inherent
           nature been treated by the State and the society  as  a  special
           category requiring legislative control which has been  in  force
           in the whole of India since several decades.   In  view  of  the
           injurious effect of excessive consumption of  liquor  on  health
           this trade or business must be treated as a class by itself  and
           it cannot be treated on the same basis  as  other  trades  while
           considering Article 14.”

  22. In the  case  of  Nashirwar  etc.  v.  State  of  Madhya  Pradesh  and
      Others[2], this Court opined that the State has the exclusive right or
      privilege in manufacturing and selling of liquor and a citizen has  no
      fundamental right to do business in liquor.  It has been further ruled
      that it is within the police power of  the  State  to  enforce  public
      morality by prohibiting trade in noxious or dangerous goods.

  23. In Har Shandar and Others etc.  v.  The  Deputy  Excise  and  Taxation
      Commissioner and others etc.[3], the Constitution Bench reiterated the
      principles that there is no fundamental right to do trade or  business
      in intoxicant and the State has the authority to prohibit  every  form
      of activity in relation to intoxicant including manufacture,  storage,
      export, import, sale and possession.  It has also been laid down  that
      a wider right to prohibit absolutely would include the narrower  right
      to permit dealings in intoxicants in such terms of general application
      as the State deems expedient.

  24. In State of M.P.  and  others  etc.  v.  Nandlal  Jaiswal  and  others
      etc.[4], this Court held that trading in liquor is inherently punitive
      in nature.

  25. In M/s.  Khoday  Distilleries  Ltd.  v.  State  of  Karnataka[5],  the
      Constitution Bench has ruled that the right to  carry  on  occupation,
      trade or business  does  not  extend  to  trade  or  business  or  any
      activities which are injurious and against the welfare of the  general
      public.  It is further held therein that a citizen has no  fundamental
      right to do business in intoxicant as liquor.

  26. In M/s. Ugar Sugar Works Ltd. v. Delhi Administration  and  others[6],
      this Court  reiterated  the  said  principle  and  emphasized  on  the
      regulatory powers of the State.

27.   In State of M.P. and Ors. etc. etc. v. Nandlal Jaiswal and  Ors.  etc.
etc.[7], a two-Judge Bench, while expressing the view  that  Article  14  of
the Constitution is attracted to grant of exclusive right or  privilege  for
manufacture and sale of liquor  as  it  involves  the  State  largesse,  has
stated thus:-


          “33. But, while considering the applicability of  Article  14  in
          such a case, we must bear in mind  that,  having  regard  to  the
          nature of the trade or business,  the  Court  would  be  slow  to
          interfere with the policy laid down by the State  Government  for
          grant of licences for manufacture and sale of liquor.  The  Court
          would, in  view  of  the  inherently  pernicious  nature  of  the
          commodity  allow  a  large  measure  of  latitude  to  the  State
          Government in determining its policy of  regulating,  manufacture
          and  trade  in  liquor.  Moreover,  the  grant  of  licences  for
          manufacture and sale of liquor would essentially be a  matter  of
          economic policy where the Court would hesitate to  intervene  and
          strike down what the State Government had done, unless it appears
          to be plainly arbitrary, irrational or mala fide.”


                                                         [emphasis supplied]


28.   In P.N. Krishna Lal and Ors. v.  Govt.  of  Kerala  and  Anr.[8],  the
Court expressed thus:-


          “28....dealing in liquor inherently pernicious or dangerous goods
          which endangers the community or subversive of morale, is  within
          the legislative competence under the Act. The State  has  thereby
          the power to prohibit trade or business which is injurious to the
          health  and  welfare  of  the  public  and  the  elimination  and
          exclusion from the business is inherent in the nature  of  liquor
          business. The power of the legislature to evolve the  policy  and
          its competence to raise presumptive evidence should be considered
          from this scenario.”


                                                         [emphasis supplied]


29.   In Secretary to Govt., Tamil Nadu and Anr.  v.  K.  Vinayagamurthy[9],
it has been held as follows:


          “7....So far as the trade  in  noxious  or  dangerous  goods  are
          concerned, no citizen can claim to have trade in the same and the
          intoxicating liquor being a  noxious  material,  no  citizen  can
          claim any inherent right to sell intoxicating liquor  by  retail.
          It cannot be claimed as a privilege of a citizen of a State. That
          being the position, any restriction which the State brings forth,
          must be a reasonable restriction within the  meaning  of  Article
          19(6) and reasonableness of the  restriction  would  differ  from
          trade to trade and no hard and fast rule  concerning  all  trades
          can be laid down....”


30.   In State of Punjab and  Anr.  v.  Devans  Modern  Breweries  Ltd.  and
Anr.[10], it  has  been  reiterated  that  trade  in  liquor  is  considered
inherently noxious and pernicious.


31.   We have referred to the aforesaid decisions to accentuate  the  nature
of the trade, the role of the State, the economic  concept  of  the  policy,
limited attractability of Article 14 of  the  Constitution  as  regards  the
legislation or policy, the restriction inherent in the policy and  the  duty
of the court.  
On the aforesaid touchstone, we are required to  see
whether
the doctrine of condonation by conduct,  especially  in  the  present  case,
could have been taken recourse to by the High  Court.   
The  respondent  had
availed the  benefit  of  the  licence  being  fully  aware  of  the  Rules,
notification and the terms incorporated in the licence.  
The  Rules  provide
that he has to pay from the date of the settlement and  in  this  case,  the
settlement took place  on  5th  June,  2006.   
In  view  of  what  has  been
engrafted in the Rules,  there  cannot  be  any  trace  of  doubt  that  the
respondent has to be made liable to pay the licence fee  from  the  date  of
the settlement.  
There could not have been condonation of default.   
Such  a
concept is alien to the present nature of trade and a licencee cannot  claim
any benefit under the same as the whole thing is governed by the command  of
the Rules.  
That apart, we are unable to  subscribe  to  the  interpretation
placed by the High Court that the auction-purchaser is liable  to  pay  from the date of issuance of licence but not from the date of the  settlement  as that runs counter to the plain language of Rule 24.  
Reading the Rules in  a
comprehensive manner in juxtaposition with the notification which forms  the
terms and conditions of the  licence  and  the  nature  of  the  trade,  the
irresistible conclusion is that the liability accrued from the date  of  the
settlement and, therefore, we find that  the  order  passed  by  the  Excise
Commissioner was just and proper and there was no warrant  on  the  part  of
the High Court to interfere with the same.


32.   Consequently, the appeal is allowed, the  order  passed  by  the  High
Court is set aside and that of the Excise  Commissioner  is  restored.   The
parties shall bear their respective costs.





                                                             ……………………………….J.
                            [K. S. Radhakrishnan]



                                                             ……………………………….J.
                                                     [Dipak Misra]

New Delhi;
January 08, 2013
-----------------------
[1]    AIR 1972 SC 1863
[2]    AIR 1975 SC 360
[3]    AIR 1975 SC 1121
[4]    AIR 1987 SC 251
[5]    (1995) 1 SCC 574
[6]    AIR 2001 SC 1447
[7]    AIR 1987 SC 251
[8]    1995 Supp (2) SCC 187
[9]    AIR 2002 SC 2968
[10]   (2004) 11 SCC 26

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