TMI Blog1984 (5) TMI 263X X X X Extracts X X X X X X X X Extracts X X X X ..... r the year 1969-70 at the Collectorate. At the commencement of the auction, the Deputy Excise Taxation Commissioner had read out the auction announcements and conditions of auction as required under r. 36(4) of the Punjab Liquor Licence Rules, 1956 ('Rules' for short). The respondents Messrs Lal Chand Bal Raj etc. offered the highest bill of ₹ 10,11,000 and their bid was provisionally accepted by the Deputy Excise Taxation Commissioner and they were declared to be the highest bidder as required under r. 36(22) of the Rules. Subsequently, the bid was accepted by the Excise Taxation Commissioner exercising the powers of the Financial Commissioner on March 21, 1969 as required under r. 36(22) of the Rules. The respondents however failed to deposit ₹ 50,550 as security amount as required under r. 36(22A) and thereby contravened condition No. 15(i) of the conditions of auction and r. 36(23) of the Rules. They were accordingly served with a notice dated April 9, 1969 by the Deputy Excise Taxation Commissioner requiring them to show cause why the licence for country liquor vend, Mandi Dabwali should not be put to re-auction under r. 36(23A) of the Rules and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ise Commissioners of different States and they were also requested to give wide publicity in their States regarding the re-auction of the licence. At the time of re-auction held on April 23, 1969, there were as many as 52 bidders and ultimately the liquor vend, Mandi Dabwali was re-sold at the highest bid of ₹ 6,65,000 for the remaining part of the financial year. On May 8, 1969, the respondents were served with a notice of demand of ₹ 3,46,000 representing the loss on re-sale. The High Court by the judgement under appeal, quashed the notice of demand following the decision in Kanhiya Lal Bhatia Co. v. State of Haryana Ors. The High Court following its decision in Kanhiya Lall's case, supra, held that the State Government had no authority to demand the amounts for failure of which the vends were put to re-auction on the ground that the licence fee levied was in the nature of excise duty. Recently, this Court has in State of Haryana v. Jage Ram Ors. reversed the decision of the High Court in Kanhiya Lal's case, supra, and held that the amounts which the State Government had changed to the respondents were neither in the nature of a tax nor in the nature ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s on which, any licence may be granted. The licences, in a large measure, owe their existence to the rules framed by the Financial Commissioner under S.59. S.60 of the Act, insofar as material, reads: 60 (1) Recovery of dues-The following moneys namely: (a) all excise revenue; (b) * * * * * * *. (c) all amounts due to the Government by any person on account of any contract relating to the excise revenue; may be recovered from the person primarily liable to pay the same, or from his surety (if any), by distress and sale of his moveable property or by any other process for the recovery of arrears of land revenue due from land holders or from farmers of land or their sureties. The Punjab Liquor Licence Rules, 1956 framed by the Financial Commissioner in exercise of his powers under s.59 of the Act make detailed provisions regulating the manner in which a licence for the retail vend of country liquor shall be granted by public auction, and the conditions to which it shall be subject. R.36(22A) of the Rule provides that a person to whom a country liquor shop has been sold shall deposit by way of security an amount equivalent to one- twenty-fourth of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be questioned , by those who, had their venture succeeded, would have relied upon those very powers to found a legal claim. Reciprocal right and obligations arising out of contract do not depend for their enforceability upon whether a contracting party finds it prudent to abide by the terms of the contract. By such a test no contract could ever have a binding force. To the same effect are the decisions of this Court in State of Haryana Ors. v. Jage Ram Ors. and the State of Punjab v. M/s Dial Chand Gian Chand Co. laying down that persons who offer their bids at an auction to vend country liquor with full knowledge of the terms and conditions attaching thereto, cannot be permitted to wriggle out of the contractual obligations arising out of and acceptance of their bids by a petition under Art. 226 of the Constitution. The observations in Har Shankars case, supra, did not touch upon the question whether such a contract must be in compliance with Art. 299 (1) of the Constitution. The question whether the process of licensing by public auction of liquor vend involves a contract at all or is merely the grant of a privilege and the bidding at a public auction is with a view ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the executive power of the State within the meaning of Art. 299 (1) of the Constitution. R.N. Misra, J. speaking for the Court in Ajodhya Prasad Shaw's case tried to highlight the problem in these words: Law is well settled and parties before us do not seek to canvass that this constitutional requirement is not mandatory. In the field it covers it is a prerequisite to bring into existence a valid contract. The question for examination in the present case is, however, different. Is there a contract at all and in case it involves a contract is it one purported to be made in exercise of the executive power of the State Government is the question for examination The learned Judge went on to say: In case the result of our investigation is that it is not a contract in exercise of the executive power of the State in terms of the language used in the Article, it would follow that this constitutional requirement has no application. I have already indicated that the settlement of the shop, the collection of the fee and the grant of the licence are all statutory acts by the prescribed authority. The intention of the Constitution is not to extend the principles in Art. 299 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rticular statutory authority as distinguished from the Union or the States enters into a contract which is statutory in nature. Such a contract, even though it is for securing the interests of the Union or the States, is not a contract which has been entered into lay or of behalf of the Union or the State in exercise of its executive powers. In respect of forest contracts which are dealt with by this Court in K.P. Choudhary's, Mulamchand's, Rattan Lal 's and Firm Gobardhan Dass's cases, supra, there are provisions in the Indian Forest Act, 1927 and the Forest Contract Rules framed thereunder for entering into a formal deed between the forest contractor and the State Government to be executed and expressed in the name of the Governor in conformity with the requirements of Act. 299(1), whereas under the Punjab Excise Act, 1914; like some other State Excise Acts, once the bid offered by a person at an auction-sale is accepted by the authority competent, a completed contract comes into existence and all that is required is the grant of a licence to the person whose bid has been accepted. It is settled law that contracts made in exercise of statutory powers are not cover ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there was reauction of a liquor vend on the highest bidder's failure to deposit one-sixth of the bid amount as security deposit and the question was whether the State was entitled to recovery in a suit the deficiency on reauction. The decision in Minocha's case is clearly distinguishable for two reasons: first, there was nothing to show that the bid had been accepted by the Excise Commissioner under r. 359(2) of the U.P. Excise Manual. Further, r. 357 under which the excise authorities put the vend to reauction had not been published in the official gazette as required by s.77 of the U.P. Excise Act, 1910 and thus had no statutory force. No such question arises in these cases as the liability that is sought to be enforced against the respondents by the impugned notices of demand is a statutory liability in terms of condition 15(1) of the conditions of auction read with r.36(23) of the Rules and the amount is recoverable from them in the manner laid down in s.60 of the Act. The short question that falls for determination in these appeals is whether the State Government was entitled to realise the difference which the respondents had agreed to pay under the terms of auctio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ake good the difference between the amount which was payable by them and the amount which was fetched at the re-auction. The principle laid down in Jage Ram's case, supra is clearly not attracted in the facts and circumstances of the present case. The first contention regarding the invalidity of reauction held on April 23, 1969 based on r.36(3) of the Rules must therefore fail. Equally futile is the contention that the respondents had withdrawn their bid and therefore they could not be mulcted for the difference between the amount which they were liable to pay and the amount realized by re-sale of the vend. This is not a case of the type reported in Union of India ors. v. M/S. Bhim Sen Walati Ram which laid down the well-settled principle that an offer can always be withdrawn before it is finally accepted and that a conditional acceptance is not an acceptance in law. In Bhim Sen Walati Ram's case, supra, the Court held that the contract of sale was not complete till the bid was confirmed by the Chief Commissioner and till such confirmation the person whose bid had been provisionally accepted was entitled to withdraw his bid and that when the bid was withdrawn before th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pay the shortfall. The second contention that the respondents had withdrawn their bid and were therefore not liable for the loss of re-auction of liquor vend at Mandi Dabwali cannot be sustained. In Har Shanker's case, supra, this Court held that the writ jurisdiction of the High Courts under Art. 226 was not intended to facilitate avoidance of obligations voluntarily incurred. It was observed that one of the important purposes of selling the exclusive ar right to vend liquor in wholesale or retail is to raise revenue. The licence fee was a price for acquiring such privilege. One who makes a bid for the grant of such privilege with full knowledge. Of the terms and conditions attaching to the auction cannot be permitted to wriggle out of the contractual obligations arising out of the acceptance of his bid. In dealing with the question, Chandrachud, J. said: . The powers of the Financial Commissioner to grant liquor licences by auction and to collect licence fees through the medium of auctions cannot by writ petitions be questioned by those who held their venture succeeded, would have relied upon those very powers to found a legal claim. Reciprocal rights and obligations ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich is in these terms : A person to whom a country spirit shop is sold shall pay the annual licence fee in 23 equal instalments, each instalment being payable on the 10th and 26th of each month starting from the month of April. In the event of failure to pay the instalment by the due date, his licence may be cancelled. There was a fundamental breach of an essential condition by the respondents. In a commercial contract of this nature, for the performance of which a definite time has been fixed and the contract specifies the mode of payment i.e. specifies the dates on which The installments of the licence fee are to be paid, time is of the essence of the contract. R.36(23)(1) of the Rules specifically makes time of the essence. It therefore follows that payment to the instalments on the due dates was a condition pre- requisite to the performance of the contract, and that the failure of the respondents to make such payments relieved the State Government of their obligations. The Excise Taxation Commissioner would therefore have been justified if he had cancelled the licence under r. 36(23) and put the liquor vend to reauction for the remaining period of the financial year ..... X X X X Extracts X X X X X X X X Extracts X X X X
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