TMI Blog2009 (3) TMI 1058X X X X Extracts X X X X X X X X Extracts X X X X ..... ses. Indisputably, they furnished security. Some of them paid their kist regularly. Two sets of proceedings were initiated, as noticed hereinbefore, one in terms of Rule 6(28) and another in terms of Rule 6(30) of the Rules. The principles contained in the Heydon s Rule shall squarely be attracted in this case. It is a settled principle of interpretation of statute that when an amendment is made to an Act, or when a new enactment is made, Heydon s rule is often utilized in interpreting the same. For the purpose of construction of Rule 6(30), as it stands now, the Court is entitled to look to the legislative history for the purpose of finding out as to whether the mischief prior to such amendment is sought to be rectified or not. Applying the Heydon s rule, we have no other option but to hold that such was the intention on the part of the Rule making authority. It is also not a case that forfeiture was ordered in view of the judgment of conviction passed against the licensees. The step taken by the respondent State, for forfeiture of amount of deposit as also recovery of the amount of loss purported to have been sustained by them, could have taken recourse to in terms of Rul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder the contract, the provisions of the Indian Contract Act and/or the terms of the contract would be relevant. Ordinarily, they should not be mixed up. If having regard to the provisions of Section 18A of the Act no contract for a period of more than one year could have been granted, damages could not have been calculated on the basis of the contract. The order of cancellation as also the forfeiture of security amount was passed. No statement had been made as to how and in what manner the State suffered any loss. If the amount of security is to be taken into consideration indisputably there would be no default. We may not moreover lose sight of another fact. Raids were conducted; shops were sealed on specific allegations, namely, the licensees had mixed some poisonous substance with liquor. They were prosecuted for adding Diazepem . Evidently, the fact that the chemical report showed that Diazepem had been mixed with toddy have prejudiced the licensing authority. Such prejudice is apparent even on the face of the impugned order passed by the High Court. Therefore, we are of the opinion that it was not a case where even Rule 6(28) could have also been resorted to. As w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1. 25060 of 2005 (V.K. Ashokan) Licencee of Shop Nos. 55 to 96 of Thrissur Excise Range 26.09.1997 vide order of Assistant Excise Commissione r Rule 6 (30) of the Abkari shops (Disposa l in Auction) Rules. Writ Petition O.P. No. 5742 of 1998 dismissed by the judgment impugned in the S.L.P. Accused No. 1 in S.C. No.83 of 1999-acquitted by the Sessions Judge by judgment dated 16.05.2008 . 2. 25467 of 2005 (V.K. Ashokan) Licencee of Shop Nos. 109 to 222 of Irinjalakuda Excise Range 27.10.1997 vide order of the Assistant Excise Commissione r Rule 6 (28) of the Abkari shops (Disposa l in Auction) Rules. Writ Petition O.P. No. 6609 of 1998-judgment of Single Judge on 21.07.1989. Writ Appeal No. 1822 of 1998 dismissed by the impugned judgment in this S.L.P. Accused No. 2 in S.C. No.210 of 1999-acquitted by judgment dated 16.05.2008 3. 1568 of 2006 (P.K. Rajan) Licencee of Shop Nos. 1 to 54 of Cherpu Excise Range 26.09.1997 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Petitioner s late husband was accused No.1 in S.C. No. 210 of 1999 which case ended in acquittal by judgment dated 16.05.2008. 5. On or about 6.3.1997, the Government of Kerala published a notification in its Gazette expressing its intention to part with its privilege of vending toddy through retail shops in the notified Excise Ranges for the year 1997-98 wherefor public auction was proposed to be held on the dates notified therefor. We are concerned with shops situate within Thrissur Range, Irinjalakuda Range, Cherpu Range, Vadanappally Range and Anthikad Range. 6. Indisputably, although the notification for holding auction for one Financial Year was published, the Collector of the District held auction for three years, namely, 1997-98, 1998-99 and 1999-2000 purporting to be on the basis of the past practice prevalent therefor. Appellants participated in the said auction and became the successful bidders. On the date of auction, they entered into a temporary agreement in Form-II appended to the Rules, which was for a period of three years. They were, however, granted license to deal in the said commodity only for one year. 7. The Board of Revenue is said t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were referred to the Commissioner of Excise for confirmation of sale. At that stage, the Board purported to have come to the conclusion that in cases where licenses were cancelled in terms of the provisions of Rule 6(30) of the Rules, Rule 6(28) would also be automatically attracted and on the basis thereof, the decision of the Assistant Commissioner was upheld. 13. On or about 19.12.1997, the Assistant Commissioner of Excise issued another order forfeiting the amount of security deposit purporting to act in terms of Rule 6(28) of the Rules, stating: As per order number first cited, the licences of toddy shops of Cherpu, Thrissur and Anthikad ranges was cancelled under Rule 6 (30) of Abkari Shops (Disposal in Auction) Rules 1974, since the Original purchasers of toddy shops of above ranges for the year 1997-2000 violated the rules and licence conditions and committed the offences punishable under Section 57(a) and 56 of Abkari Act and also Section 22of NDPS Act 1985 consequent on the detection of Diazepam in the samples of toddy sent for chemical analysis from toddy depot and toddy shops of the above ranges. Board as per reference 2nd cited have ordered that rule 6(28) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epartment to cancel the licence. Sri K. Ramakumar appearing for some of the licencees submitted that licences were cancelled without notice to the petitioners and the principles of natural justice have been violated. Further counsel also referred to Section 26 of the Kerala Abkari Act and submitted that only Commissioner has got the power to cancel the licence and the cancellation of the licence by Assistant Commissioner was without jurisdiction. Identical are the contentions raised by Advocate Sri. Premjit Nagendran as well. Additional Advocate General on the other hand supported the action of the department. Holding that the order cancelling the licence having been passed as diazepam had been detected on chemical examination of the toddy seized from the business premises of the appellants and furthermore they having defaulted in payment of kist, committed an offence punishable under Section 57A(iii) and Section 55(1) of the Abkari Act. 18. The contention raised before the High Court that the licence was granted for a period of one year and hence for rest of the years appellants were not liable to pay the kist amount, was rejected stating: Consequently contention of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellants having with their eyes wide open took part in the bid for a period of three years and having entered into agreements for the said period cannot be permitted to contend that the contract was for one year. ii. Having regard to the provisions contained in Rule 5(10) of the Rules read with conditions of the Agreement as contained in Form I and Form II appended thereto, the mode of determination of the quantum of damages being fixed, namely, the original amount minus resale amount plus cost of resale, the amount which was payable to the State and the amount which was offered by the new purchasers together with interest at the rate of 18% per annum, the losses suffered during the period 1998-99 and 1999-2000 can also be recovered by the State having regard to the terms as contained in the agreement as it is not denied or disputed that the appellants executed agreement for a period of three years. 21. The Act was enacted by Maharaja of Cochin By Act No.10 of 1967, it was extended to the whole of Kerala. By reason of the provisions of the said Act, manufacture or sale of liquor, including country liquor is regulated. The regulatory statute, indisputably, is made in terms of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing power or for any other purpose. Rule 2(d) defines the term Assistant Excise Commissioner to mean an Officer in executive charge of an Excise Division and includes any officer appointed by the Government under clause (b) of Section 4 of the Act to exercise the powers and to perform the functions of an Assistant Excise Commissioner under these rules. Rule 2(db) defines the term Auction purchaser to mean an open bidder or a tenderer declared as an auction purchaser in the auction. The term Board of Revenue is defined by Rule 2(e) to mean the Board of Revenue, Kerala constituted under the Kerala Board of Revenue Act, 1957. Rule 3 empowers the State to take policy decisions for grant of privilege for any period in all or any of the independent shops within the tracts or taluks to be notified in the Gazette by way of public auction shop by shop or in lot or lots, inter alia, by the Collectors of the Districts. Rule 4 provides that the number, location and the period for which the privilege of vending, selling or supplying is to be auctioned and the dates of auction shall be notified in the Gazette at least 10 days before the commencement of the auctions. Rule 5(10) envi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ace the sum adjusted from his deposit within fifteen days of receipt of notice from the Excise Officer in charge of the Division in which his shop is situated. Interest on account of loss by resale shall be calculated from the date of confirmation of the resale of the shop. Provided that the Assistant Excise Commissioner concerned may before confirmation of cancellation by the Board of Revenue, restore the licence cancelled by him subject to confirmation by the Board of Revenue, if the defaulter pays up the amount defaulted by him before the expiry of one month from the date of such cancellation. Rule 6(30) reads as under: 6(30) Infraction of any of the rules or the conditions of the licence either by the licensee or by any person in his employment shall entail on the licensee or his agent or both, a fine of ₹ 5,000 or cancellation of the licence or both. An officer of and above the rank of the Assistant Excise Commissioners shall be competent to impose all or any of the above penalties: Provided that if the holder of such licence or permit, sells or stores for sale liquor in any premises other than the licenced premises, such penalty shall not be less tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with its privilege of vending toddy and foreign liquor in respect of several Ranges including Thrissur, Irinjalakuda, Cherpu, Vadanappally, Anthikad. 24. Indisputably, a fax message was received from the Excise Commissioner by the District Collectors of all the districts which are in the following terms: Please refer to your fax message No. R5-381/97 dated 17.3.1997 regarding the Abkari auction held on 17.3.1997. As the Gazette Notification was only for 97-98, confirmation can also be only for 97-98, provided the bidders are willing to pay 1/3rd of total bid amount as rental for 97-98. For 98-99 and 99-2000 separate Government approval will be obtained for extension of agreement at the same rates, without fresh auction. If the bidders are willing to accept these conditions Board of Revenue will confirm the bids for 97-98 and take action for extension beyond 31.3.1998. Please confirm the above within 24 hours. Pursuant to the above fax message received from the Excise Commissioner by the District Collectors of all the districts, a permanent agreement was thereafter entered into in Form II. Separate licenses were issued for one year, i.e. for 1997-98 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interpretation of statute that when an amendment is made to an Act, or when a new enactment is made, Heydon s rule is often utilized in interpreting the same. {See Philips Medical Systems (Cleveland) Inc. vs. Indian MRI Diagnostic and Research Ltd. Anr. [2008 (13) SCALE 1]}. For the purpose of construction of Rule 6(30), as it stands now, the Court is entitled to look to the legislative history for the purpose of finding out as to whether the mischief prior to such amendment is sought to be rectified or not. Applying the Heydon s rule, we have no other option but to hold that such was the intention on the part of the Rule making authority. 27. We may furthermore notice that the legal position becomes explicit having regard to the provisions of Rule 6(32) and Rule 6(34). They provide for similar consequences but in absolutely different situations. Rule 6(32) provides for forfeiture only in a case where the amount of fine is not paid. It is not a case where Rule 6(32) was directed to be applied as the licensees did not deposit the amount of fine imposed on them. It is also not a case that forfeiture was ordered in view of the judgment of conviction passed against the licensees. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... either denied nor disputed that apart from the lack of inherent jurisdiction to initiate such a suo motu proceeding, neither any notice was issued to the licensees nor any proceeding was initiated therefor. The principles of natural justice had, thus, not been complied with. A bare perusal of the provisions contained in Rule 6(28) would clearly show that the order of cancellation of licence need not be passed only because it is lawful to do so. The Licensing Authority in such matters exercises a discretionary jurisdiction. The proviso appended to the said rule is a clear pointer to the said effect. In a given case, it is possible for a licensee to show that although in fact he had not paid the kist, he could not do so for sufficient or cogent reasons; he also could raise a plea which could have been accepted by the Licensing Authority that interest of justice would be subserved if he is allowed to deposit the amount with interest or penalty, as the case may be. 30. For the aforementioned reasons, we are of the opinion that it was impermissible for the Assistant Commissioner of Excise to pass the said order dated 19.12.1997 opining that the consequences of forfeiture under rul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t be lawful and may not be contrary to the legislative policy. The rule making power is contained in Section 29 of the Act. At the relevant time, Sub-section (1) of Section 29 of the Act provided that the government may make rules for the purpose of carrying out the provisions of the Act which has been amended by Act No. 12 of 2003 with effect from 1.4.2003 empowering the State to make rules either prospectively or retrospectively for the purposes of the Act. Referring to State of M.P. VS. Nandlal Jaiswal [(1986) 4 SCC 566] and Khoday Distilleries Ltd. vs. State of Karnataka [(1995) 1 SCC 574], it was held: 27. The State may have unfettered power to regulate the manufacture, sale or export-import sale of intoxicants but in the absence of any statutory provision, it cannot, in purported exercise of the said power, direct a particular class of workers to be employed in other categories of liquor shops. 28. The Rules in terms of Sub-section (1) of Section 29 of the Act, thus, could be framed only for the purpose of carrying out the provisions of the Act. Both the power to frame rules and the power to impose terms and conditions are, therefore, subject to the provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me may also be held ultra vires Article 14 of the Constitution. 33. We have noticed hereinbefore that the Commissioner of Excise being a higher authority had already expressed his opinion that application of Rule 6(28) of the Rules is automatic consequent upon the cancellation of licence in terms of sub-rule (30) of Rule 6. Assistant Commissioner of Excise could not have taken a different view. If only the Assistant Commissioner of Excise had the original authority to issue such a notice and not the Commissioner of Excise being an higher authority, the law laid down by this Court in Commissioner of Police, Bombay vs. Gordhandas Bhanji [AIR 1952 SC 16] would have been applicable. The proceeding, thus, in a case of this nature should have been initiated by the Assistant Commissioner of Excise and not by the Commissioner of Excise. Where the statutory authority, it is well known, exercises his jurisdiction conferred on him by a statute, he has to apply his own mind and the procedures laid down therefore must be scrupulously followed. 34. In Ramana Dayaram Shetty vs. The International Airport Authority of India ors. [AIR 1979 SC 1628], this Court held: It is a well se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice being a conscious end of State policy, there is a vast and inevitable increase in the frequency with which ordinary citizens come into relationship of direct encounter with State power- holders. This renders it necessary to structure and restrict the power of the executive Government so as to prevent its arbitrary application or exercise. Whatever be the concept of the rule of law, whether it be the meaning given by Dicey in his The Law of the Constitution or the definition given by Hayek in his Road to Serfdom and Constitution of liberty or the exposition set-forth by Harry Jones in his The Rule of Law and the Welfare State , there is, as pointed out by Mathew, J., in his article on The Welfare State, Rule of Law and Natural Justice in Democracy, Equality and Freedom, substantial agreement is in juristic thought that the great purpose of the rule of law notion is the protection of the individual against arbitrary exercise of power, wherever it is found . It is indeed unthinkable that in a democracy governed by the rule of law the executive Government or any of its officers should possess arbitrary power over the interests of the individual. Every action of the exec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,10,00,000/-. A security of ₹ 1,51,00,000/- has been furnished. Appellant started carrying on business on and from 1.4.1997. They paid tax for first-half of the year 1997-98. They had allegedly defaulted in payment of the kist for the month from July 1997 onwards which was due on 1.10.1997 as per Rules. Raid, as noticed hereinbefore, was conducted on 19.7.1997. Indisputably, the officers of the Excise Department of the State of Kerala sealed the shop due to which the appellants could not carry out any business from July till October. Apart from the fact that they were required to pay the kist for a period of six months and not for a period of two and a half years, the demand of ₹ 11,10,23,687/- made on them cannot be said to be legal and valid. Appellant had inter alia contended that the auction amount for one year being ₹ 5,03,33,333/- out of which they had already deposited ₹ 3,20,00,020/- being an amount for more than the rental for a period of seven months, there was no default. Indisputably, the said amount of ₹ 3,20,00,020/- included the amount of security. But in the event, the license was to be cancelled with effect from 19.7.1997, the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oned backdrop, we may analyze the provisions of sub-Rule (28) of Rule 6. It confers a discretionary jurisdiction on the Assistant Commissioner of Excise. Exercise of such jurisdiction in favour of revenue, if any, would furthermore be subject to confirmation by the Board of Revenue. The said statutory authority may at its discretion cancel the licence. While doing so, it may order a resale at the risk and cost of the licensee. It may at its option also direct the management of the business of the contract by the departmental agency or otherwise dispose of the same. It is only when one or other direction is issued, all losses on account of such cancellation and resale or departmental management or other disposal of the privilege shall be borne by the defaulting licensee. It is of some importance to notice that whereas all losses are to be borne by the licensee but he would have no right to the gain, if any, which accrues by reason of such resale of license or taking over of the management of the business by the departmental agency or disposal thereof otherwise. Actual losses suffered by the State by reason of any of the aforementioned actions taken must therefore be clearly ascertai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Railway Company [1906] I.L.R. 19 Mad. 188, but this view no longer is good law in view of the judgment of this Court in Fateh Chand vs. Balkishan Das (1964) 1 SCR 515, (AIR 1963 SC 1405). This Court observed at p.526 (of SCR): Section 74 of the Indian Contract Act deals with the measure of damages in two classes of cases (i) where the contract names a sum to be paid in case of breach, and (ii) where the contract contains any other stipulation by way of penalty.... The measure of damages in the case of breach of a stipulation by way of penalty is by Section 74 reasonable compensation not exceeding the penalty stipulated for. The Court also observed: It was urged that the section deals in terms with the right to receive from the party who has broken the contract reasonable compensation and not the right to forfeit what has already been received by the party aggrieved. There is however no warrant for the assumption made by some of the High Courts in India, that Section 74 applies only to cases where the aggrieved party is seeking to receive some amount on breach of contract and not to cases whereupon breach of contract an amount received under the contract is sought t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xed some poisonous substance with liquor. They were prosecuted for adding Diazepem . Evidently, the fact that the chemical report showed that Diazepem had been mixed with toddy have prejudiced the licensing authority. Such prejudice is apparent even on the face of the impugned order passed by the High Court. It has not been denied or disputed before us that all the appellants have since been acquitted of the said charges by a competent criminal court. It was in the aforementioned situation we thought of taking into consideration all aspects of the matter so as to do complete justice to the parties. In the peculiar facts and circumstances of this case, therefore, we are of the opinion that it was not a case where even Rule 6(28) could have also been resorted to. As we have not applied our mind to the judgment rendered by the criminal court leading to the acquittal of the appellants, we leave the parties to seek any other remedies available to them in law, 42. For the aforementioned reasons, the impugned judgment of the High Court is set aside. These appeals are allowed. Consequently the Writ Petitions stand allowed to the extent indicated above. However, in the facts and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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