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Monday, August 24, 2015

“Provided further that no defaulter of abkari arrears due to the Government shall be permitted to renew the licence unless he produces from the Excise Department a certificate to the effect that he has cleared 50% of the abkari arrears pending at the time of renewal of the licence.”

                                                                  REPORTABLE

                        IN THE SUPREME COURT OF INDIA

                        CIVIL APPELLATE JURISDICTION

                        CIVIL APPEAL NO.2508 OF 2008



M/s. Modern Hotel                                   …..Appellant

      Versus

Commissioner of Excise & Ors.                    …..Respondents



                               J U D G M E N T


SHIVA KIRTI SINGH, J.


The appellant is a partnership firm and is aggrieved  by  dismissal  of  its
Writ Appeal No.1055 of 2002 by an order dated 09th January 2008 wherein  the
Division Bench has chosen to place complete reliance on an earlier  Division
Bench judgment dated 24th June 2005  in  W.A.No.1151  of  2005  (M/s.  Hotel
Highway & Anr. v. N.K. Subhin & Ors.).
The issue falling for consideration is mainly one of law relating  to  scope
and interpretation of a proviso to Rule 13A(5) of the Foreign  Liquor  Rules
as in force at the relevant time in the State of  Kerala.   Subsequently  it
appears that Rule 13A, dealing with  grant  of  different  kinds  of  excise
licence,  along  with  proviso  has  been  renumbered  as  Rule  13B  w.e.f.
1.4.2003.  The relevant proviso needs to be noticed :

      “Provided further that no defaulter  of  abkari  arrears  due  to  the
Government shall be permitted to renew the licence unless he  produces  from
the Excise Department a certificate to the effect that he  has  cleared  50%
of the abkari arrears pending at the time of renewal of the licence.”


The facts of the case need not detain us for long  except  noting  that  the
appellant firm was having a FL-3 licence to run a bar attached  to  a  hotel
at Kundara in Kollam District.  The partnership firm was  re-constituted  on
01.10.1995 and one Shri J. Sasikumar was admitted as one  of  the  partners.
On 11.05.2001 the request of the appellant firm  for  renewal  of  its  FL-3
licence was rejected by the Excise Commissioner on the ground  that  one  of
the partners had conducted abkari business in the  year  1981-1982  and  had
incurred dues to the Government of Rs. 70 Lacs which had  further  grown  on
account of interest and until 50% of the abkari arrears pending at the  time
of renewal of the licence was cleared, the licence of  the  appellant  could
not be renewed.  Appellant preferred writ petition  in  the  High  Court  of
Kerala wherein by an interim order the respondent authorities were  directed
to grant renewal for the year 2001-2002  on  the  condition  of  payment  of
Rs.20 Lacs towards the arrears in addition to  the  licence  fee.   On  such
payment the licence was renewed for that year.  But the writ  petition  came
to be dismissed on 02.04.2002 on a finding that  a  partnership  firm  could
not claim a separate juristic identity as it is only  a  totality  of  every
partner  and  so  long  one  or  more  partner  suffers  from  liability  or
disqualification, the licence  could  not  be  renewed  till  the  statutory
requirement of the relevant rule was satisfied.  The appellant filed  appeal
bearing W.A.No.1055 of 2002 before the Division Bench.  By an interim  order
dated 15.04.2002 appellant’s licence was ordered to be renewed for the  year
2002-2003 on similar condition requiring payment  of  additional  amount  of
Rs.20 Lacs over and above the licence fee.  On compliance, the  licence  was
renewed accordingly.  On account of another interim order  dated  13.05.2003
appellant’s licence was renewed for the year 2003-2004 also  on  its  paying
Rs.10 Lacs in addition to the licence  fee.   The  appellant’s  licence  got
further renewal upto the year 2007-2008 only  on  the  strength  of  earlier
additional deposits of Rs.50 Lacs in total.   The  writ  appeal  itself  was
heard on merits and dismissed by  the  impugned  judgment  dated  09.01.2008
following earlier Division Bench judgment dated 24.06.2005.
On behalf of appellant our attention was drawn to a  subsequent  development
mentioned in I.A.No.1 of 2009 filed in this appeal.  Paragraphs  9,  10  and
11 of the I.A. disclose that the Government of Kerala  declared  an  Amnesty
Scheme (One Time Settlement Scheme) on  26.05.2008  wherein,  if  the  other
conditions were satisfied, a lump sum payment of 75% of the  principal  dues
could be sufficient to waive the remaining principal  as  well  as  all  the
penalty and interest.   Taking  advantage  of  that  scheme  the  defaulting
partner Mr. J. Sasikumar along with his partners of  the  other  partnership
paid 75% of the principal amount, i.e., Rs.53,09,440/- and as a  result  the
Excise Department on 10.11.2008 issued a certificate that no amount was  now
outstanding from said Mr. Sasikumar.  The certificate  is  an  enclosure  to
the I.A.  and  discloses  that  on  payment  of  earlier  noted  amount  the
defaulters including J. Sasikumar got  amnesty  from  paying  not  only  the
remaining 25% of the  principal  amount  but  also  from  liability  to  pay
Rs.2,73,47,650/- towards interest upto 31.05.2008.  On the strength of  such
payment and subsequent development, in the  I.A.  the  appellant  sought  an
order from this Court for  unconditional  return  of  Rs.50  Lacs  in  total
deposited by the appellant for getting several renewal  of  its  licence  as
per interim orders of the High Court.

This Court on 18.01.2010 heard  the  parties  in  respect  of  I.A.No.1  and
passed the following order ;

      “We have heard learned counsel for the parties in the I.A.  We  direct
that, as an interim measure, the amount of Rs.50,00,000/-, which is  claimed
by the appellants by way of this I.A., be refunded to them  subject  to  the
outcome of the result of the main appeal, on furnishing of security  to  the
satisfaction of the Commissioner of Excise.”



In terms of that order the appellant has obtained refund of Rs.50 Lacs  from
the concerned authority but  on  furnishing  of  required  security  to  the
satisfaction of the Commissioner of Excise.

When this appeal was taken up for hearing learned counsel for the  appellant
initially took the stand that due to passage of time and other  reasons  the
appellant was not keen to  press  the  appeal  provided  the  appellant  was
absolved of its liability created by furnishing of security for Rs.50  Lacs.
 In other words, he wanted this Court to order  for  discharge  of  security
furnished by him  to  the  Commissioner  of  Excise.   This  prayer  of  the
appellant was strongly contested  by  Ms.  Bina  Madhavan,  learned  counsel
appearing for the respondents by placing reliance  upon  averments  made  in
the counter affidavit (additional) filed in response to I.A. No.1  of  2009.
In paragraph 6 of the counter affidavit the  respondents  have  relied  upon
relevant proviso to Rule 13A(5) of the Foreign Liquor Rules and  have  taken
the stand that the liability or disqualification of each of the  partner  in
the defaulting firm shall be distributed but  if  such  liability  continues
then for the purpose of the proviso the liability of  one  of  the  partners
will  be  liability  of  the  firm  for  the  purpose  of   abkari   arrears
disentitling renewal as provided in the proviso.  According  to  respondents
the High Court has correctly decided the law that a partnership  firm  is  a
totality of every partner and that the default of one of  the  partners  can
be taken into consideration for treating the firm as  a  defaulter  even  if
only one of its partners continues to be in arrears of abkari dues.

So far as deposit of Rs.50 Lacs made by the appellant  towards  abkari  dues
as per interim orders is concerned, it is respondents’ clear stand  that  as
per Rule 6(25) of Abkari Shops (Disposal in Auction) Rules, 1974  the  whole
of Rs.50 Lacs had to be and was appropriated towards  interest  existing  at
the time the remittance was made and only the  remaining  dues  of  interest
along with permissible 25% of the principal amount was subsequently  written
off as per Amnesty Scheme of 2008.  The claim  of  the  appellant  that  the
amount of Rs.50 Lacs was required to be or  had  been  kept  in  a  suspense
account has been strongly refuted as false with a  positive  statement  that
the said amount was appropriated towards interest  in  accordance  with  the
relevant rules.

Having heard the parties and applied our mind to the relevant facts and  the
rules we find ourselves in agreement with the submission on  behalf  of  the
respondents that appellant is not entitled to receive refund of  Rs.50  Lacs
on account of subsequent deposit of required percentage  of  principal  dues
under the Amnesty Scheme of 2008.   The  amnesty  earned  in  2008  must  be
confined to the arrears of interest outstanding  at  the  relevant  time  in
2008 and by that date the earlier deposits of Rs.50 Lacs  had  already  been
appropriated towards interest.  No fault can be found in appropriating  that
amount because there is no dispute regarding the actual outstanding  amounts
of principal and interest which clearly  find  mention  in  the  certificate
dated 10.11.2008 (Annexure P-6) to I.A. No.1 on which appellant  itself  has
placed reliance.

We are also of the considered view that since there was no challenge to  the
proviso to Rule 13A(5) of the Foreign Liquor  Rules,  the  respondents  were
well within their legal rights to insist that at least  50%  of  the  excise
dues against the partners of the  appellant  was  required  to  be  paid  in
accordance with the proviso, to get the desired renewal.  Such  decision  of
the High Court in our considered view does  not  require  any  interference.
Section  5  of  the  Indian  Partnership  Act,  1932  (the   Act)   provides
unequivocally that the relation of partnership arises from contract and  not
from status.   Such  contracts  clearly  cannot  override  provisions  in  a
statute or statutory rules.  Section 49 of the Act  stipulates  for  payment
of firm debts and also of separate debts of any partner  by  use  of  firm’s
property and if there is no surplus then separate property shall be  applied
for payment of a  partner’s  separate  debts.   Other  than  the  defaulting
partner can always claim their loss, if any, from the latter.

We have taken the aforesaid view for an additional reason  that  the  factum
of excise dues of one of the partners of the appellant  and  its  subsequent
payment under the Amnesty Scheme is not in dispute or controversy.  This  is
apparent from the certificate dated 10.11.2008.  Though large  part  of  the
interest amounting to several crores could not be recovered but that was  on
account of grace shown by the Government itself by formulating  the  Amnesty
Scheme of 2008.  In such circumstances  exercise  of  writ  jurisdiction  to
help the defaulter would be inappropriate. It would be unjust to direct  for
refund of Rs.50 Lacs on the premise that its recovery in the manner made  is
being questioned by the appellant.

For the aforesaid reasons we  find  no  merit  in  this  appeal  and  it  is
dismissed accordingly.  It is clarified that appellant is  now  required  to
redeposit Rs.50 Lacs to meet its liability under the security  furnished  as
per interim order of this Court dated 18.1.2010.  It is directed  to  do  so
within six weeks along with interest at the rate of 6% per  annum  from  the
date of receipt of that amount till its redeposit. There shall be  no  order
as to costs.


                       …………………………………….J.
                       [VIKRAMAJIT SEN]


                        ……………………………………..J.
                              [SHIVA KIRTI SINGH]
New Delhi.
August 19, 2015.


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