Arun Tandon, J.@mdashThis bunch of writ petitions is directed against the orders of the State Government passed in exercise of powers u/s 11(2) of the U.P. Excise Act, 1910 (herein after referred to as the ''Act''). Under the orders impugned the revisions filed by the petitioners have been rejected. Since the facts in all these cases are more or less common, Civil Misc. Writ Petition No. 1641 of 2004 (Smt. Indira Devi v. State of U.P. and others) is being treated as the leading case. The relevant facts mentioned therein are being reproduced for the purposes of deciding the controversy.
2. At the outset, it may be recorded that the writ petition of Smt. Indira Devi (supra) and connected matters were decided by the High Court vide order dated 4.5.2005. The orders of the State Government (Revisional Authority) were set aside and it was held that the petitioners were liable to pay the license fee only for the period up to the date their license was cancelled (i.e. 19.2.2003 in the case of Indira Devi).
3. Not being satisfied, the State of U.P. filed separate Special Leave to Appeals before the Apex Court which were converted in Civil Appeals, leading being Civil Appeal No. 2161 of 2007. The Civil Appeals have been allowed vide judgment dated 21.10.2009. The matter has been remitted to the High Court for decision afresh with liberty to the parties to file additional affidavits if they so desire.
4. Additional affidavits have been filed on behalf of the petitioners and the State, which shall be dealt with at the appropriate stage.
5. The facts on record of the leading petition of Smt. Indira Devi are as follows:
The District Magistrate, Allahabad on 20.3.2002 published an advertisement in various newspapers including Rashtriya Sahara inviting applications in the matter of grant of privilege for retail sale of country liquor in respect of various localities at Allahabad. A copy of the Advertisement is enclosed as Annexure CA-1 to the first supplementary affidavit filed by Shri Yogesh Kumar Rai dated 4.2.2010. The Advertisement specifically mentions that in respect of shops of country liquor of district Allahabad, applications are invited from prospective applicants. Minimum guaranteed quantity and basic license fee in respect of country liquor shop, security money and the earnest money have been fixed. The list in that regard is available alongwith all other details in the office of District Excise Officer. After inspection of the same, the applicants may submit their applications up to 23.3.2002.
6. Indira Devi alongwith one Mahesh Chandra Gupta with reference to the said Advertisement and after examining the basic license fee, the minimum guaranteed quantity fixed and other details and conditions in respect of the shop for the locality of Nawabganj district Allahabad made her application. Since there were more than one eligible applicants for the same shop, process of draw of lots was resorted to. The petitioner was selected after draw of lots for the shop in question.
7. The petitioner after deposit of the required money as per the U.P. Excise (Settlement of License for Retail Sale of Country Liquor) Rules, 2002 (herein after referred to as the Rules, 2002) started operating the license on the basis of the privilege so granted in her favour. However, she committed default in deposit of the monthly installment of the license fee as fixed for the shop after some months. This resulted in cancellation of the license granted in her favour vide order dated 19.2.2003. A recovery citation was issued on 24.2.2003 demanding the balance amount of license fee fixed for the entire excise year and which was short deposited by the petitioner.
8. The recovery proceedings so initiated were subjected to challenge by Indira Devi by means of Civil Misc. Writ Petition No. 14117 of 2003. The writ petition was decided with a direction to the Collector to consider the grievance of the petitioner.
9. The Collector by means of the order dated 9.5.2003 rejected the representation of the petitioner and held that the recovery of the short paid license fee referable to Rule 2(m) of Rules, 2002 was in accordance with law.
10. Against the order of Collector, the petitioner filed an appeal u/s 11(1) of the Act before the Excise Commissioner. The appeal was partly allowed and the Excise Commissioner directed that the security amount may be adjusted against the amount due but maintained the demand of balance amount of license fee as fixed for the entire excise year. The petitioner approached the State Government by way of Revision u/s 11(2) of the Act. The Revision has been dismissed vide order dated 8.1.2004. Hence this petition.
11. Before this Court two pleas have been raised on behalf of the petitioner for the purposes of challenging the demand of the balance amount of the license fee and the recovery proceedings taken for the purpose:
(a) Once the license of the petitioner has been cancelled on 19.2.2003, all the contractual obligations came to an end, therefore, the petitioner cannot be asked to pay the monthly installments of license fee in respect of the period subsequent to 19.2.2003 i.e. after the date of cancellation of the license.
(b) That the Rules, 2002 do not contemplate recovery of the loss caused to the State Government because of cancellation of the license in the midst of the year as was earlier provided under the Rules as framed in the year 1991. This change brought by the Rules, 2002 is for obvious reasons. Therefore, the petitioner cannot be saddled with the liability to make good the loss which had been caused to the State Government because of the cancellation of the license in the midst of the year for whatever reasons it may be.
12. It is also contended before this Court that the Rules, 2002 specifically Rule 12 and Rule 14 contemplate the action to be taken by the Excise authorities in case the licensee fails to deposit the monthly installment of the license fee/fails to lift the minimum guaranteed quantity of the liquor after deposit of the money. The District Excise Officer is required to adjust the short fall from the security deposit and to issue a notice to replenish the security amount so adjusted. If the licensee fails to replenish the security amount, his license is to be cancelled. According to the petitioner the consequences of cancellation of license are provided for under Rule 21(c). Therefore, no other coercive action can be taken against the licensee after cancellation of his license nor any loss of revenue can be recovered.
13. Counsel for the petitioners Shri Neeraj Sharma, Advocate and Shri Mukesh Prasad, Advocate have referred to the judgment of this Court in the case of Dhunmun Ram @ Badri Prasad v. State of U.P. and others, 1979 UPTC 1033, as well as to the judgment in the case of
14. Standing Counsel, Shri U.K. Pandey in reply submits that the petitioner had entered into a contract with the State Government for grant of exclusive privilege for retail sale of country liquor in respect of the shop in question with open eyes. Petitioner was aware of the total amount of basic license fee as well as license fee which in turn was to be calculated with reference to the minimum guaranteed quantity of country liquor for the excise year fixed for the shop by the Collector. The detail of the basic license fee alongwith the minimum guaranteed quantity were displayed in the office of the District Excise Officer shop-wise. Petitioner after going through the aforesaid information had submitted an application for grant of privilege for retail sale of country liquor in respect of the locality of Nawabganj, District Allahabad. The petitioner had been selected by draw of lots. Petitioner, after deposit of the basic license fee, the security money, the earnest money as well as some installments of the license fee, started operating the licence. The petitioner cannot wriggle out of his contractual obligations to pay the entire amount of the consideration fixed for the grant of exclusive privilege for the year, even if her license has been cancelled as per the provisions of Rules, 2002 because of the conduct of the petitioner herself.
15. It is the case of the State that the petitioner cannot take benefit of his own wrong and draw mileage based on the order of cancellation by not depositing the agreed amount of consideration. According to the State the petitioner is wrong in contending that the earlier provision for recovery of short fall after cancellation of license under the Tender-cum-Auction Rules, 1991 has not been similarly incorporated under the Rules, 2002. The conditions have now been made more harsh under the Rules, 2002. It is now contemplated that any money recovered by the State Government while running the license on daily basis subsequent to the cancellation of the regular license, will not accrue to the benefits of the earlier defaulting licensee. For the purpose, he referred to Rule 20(b) of Rules, 2002.
16. It is the case of the State that the contract between the State and the petitioner was complete once after draw of lots the petitioner was selected and the settlement of the shop in his favour was signed by the competent officer. In the facts of the case, the petitioner also deposited basic license fee, security money and earnest money as well as some of the monthly installment of license fee and ran the license for larger part of the excise year. The petitioner must pay the entire consideration for the excuse year as was agreed upon between the parties for obtaining the privilege for trade in country liquor. He further points out that the controversy raised by means of the present petition stands answered against the licensee under the Division Bench judgment in the case of Brij Kishore (Supra). The Division Bench has held that petitioners are liable to pay the license fee as they had agreed to the conditions in the matter of grant of exclusive privilege by filing an affidavit which included payment of the basic license fee and the license fee fixed for the entire year.
17. I have heard learned counsel for the parties and have gone through the records of the present writ petition.
18. In exercise of powers u/s 41 of the Act, the Rules, 2002 have been notified. These Rules contemplate grant of license for retail sale of country liquor in Form CL 5-C in respect of different localities of a district by the Collector of the District.
19. Under Rules, 2002 the consideration for parting with the exclusive privilege of retail sale of country liquor is in two parts - Basic license fee as defined under Rule 2(d) and license fee as defined under Rule 2(m) which refers to the minimum guaranteed quantity fixed for the shop. This minimum guaranteed quantity is defined under Rule 2(c). For ready reference Rule 2(c), 2(d) and 2(m) are being quoted herein below:
2(c). ''annual minimum guaranteed quantity'', means the quantity of "strong" country liquor, as fixed by the Licensing Authority in accordance with the general or specific instructions issued by the Excise Commissioner and guaranteed by the licensee to be lifted by him for his retail shop during an excise year for the purpose of retail sale. However if any licence is granted after the commencement of the excise year then its annual minimum guaranteed quantity shall be reduced proportionately according to the number of days remaining in the excise year;
2(d). "Basic Licence Fee" means that part of consideration for the grant of licence for the exclusive privilege of retain sale of country liquor under Section- 24 of the Act, payable by the person selected as licensee before the license is granted to him, for the whole excise year or part thereof on such rates as notified by the Excise Commissioner in consultation with the State Government from time to time.
Provided that if such shop is settled after 30th September the basic license fee shall be half of the amount so fixed as basic license fee for the year.
(m) "license fee" means the remaining part of consideration for grant of licence for exclusive privilege of retail sale of country liquor under Section- 24 of the Act, payable by the licensee, in addition to the basic license fee. This sum shall be equal to the excise duty leviable on the minimum guaranteed quantity fixed for the shop.
20. It is also worthwhile to mention that Rule 2(n) provides for the facility of monthly installment in respect of license fee covered by Rule 2(m) i.e. in respect of other part of the consideration. Rule 2(n) reads as follows:
2(n). monthly installment of licence fee? shall be 1/12th part of the licence fee in addition to the basic licence fee and shall be payable every month. However the excise duty involved in the quantity of country liquor lifted during the month by the licensee may be adjusted against the monthly installment of the licence fee subject to the provisions of these rules.
21. Reference may also be had to Section 24 of the Act which confers the power upon the Excise Commissioner to grant a license for exclusive privilege for trade in country liquor or any intoxicating drug in local area. Section 24B of the Act which is in the nature of declaration clarifies, for the purposes of removal of doubts, that the amount described as license fee in Clause (c) of Section 41 of the Act is in essence, rental or consideration for grant of such right or privilege by the State Government. Section 41(c) of the Act is the source of power for the Excise Commissioner to make rules for the purpose of fixing fee for any license etc. including consideration for grant of exclusive privilege u/s 24 & 24A of the Act.
22. From a reading of the aforesaid statutory provisions, it cannot be disputed that what is prescribed under the Rules, 2002 as the basic license fee and the license fee is nothing else but the consideration for parting with the privilege for a right to trade in country liquor.
23. The power to fix number and the location of the shops under rules, 2002 has been conferred upon the licensing authority namely the Collector of the district. The period of the license is notified as the excise year in which the license is to be granted (Ref. Rule 5 of the Rules, 2002). Rule 7 of the Rules, 2002 provides that the list of retail shops of the country liquor for which the Collector proposes to grant license in the district concerned shall be exhibited alongwith shop-wise basic license fee, annual minimum guaranteed quantity, license fee, security amount and the earnest money at the Collector''s office, Tehsil Office and the office of the District Excise Officer/District Excise Commissioner of the Charge. The applications for grant of license are required to be made in prescribed form alongwith the processing fee. The last date for submission of the application has to be notified by an Advertisement in newspapers. Eligibility of applicants is detailed under Rule 8. A District Level Committee has been constituted under Rule 9 for selection of the licensee for retail sale of country liquor for a particular shop. In case the list of eligible applicants is found to be more than one for a particular shop, then the selection of the licensee is to be made on the basis of draw of lots. Rule, 2002 also contemplates that no more than two shops shall be allotted to any one person. On selection of the licensee, he is required to deposit the basic license fee, security amount and to arrange for a suitable premises. Rule 14 provide for monthly installments of the license fee and consequences of failure to deposit the same. Rule 21 contemplates the cancellation of the license and the penalty. Rule 14 and 21 reads as follows:
14. Payment of monthly installment of licence fee and consequences of failure.--(a) The licensee shall be liable to pay the monthly installment of licence fee by the last day of the month. However the duty involved in the quantity of country liquor lifted by him during the month and credit balance of licence fee from previous month, if any, shall be adjusted against the monthly installment of licence fee according to provisions of these rules.
(b) The licensee shall be required to submit his account and licence fee passbook, giving details of the country liquor lifted by him and the licence fee deposited, to the District Excise Officer by 5:00 p.m. of the 1st day of the next month for verification and calculation of licence fee due from him.
(c) In case there is any short fall in the licence fee, after due adjustment of duty involved in the country liquor lifted by the licensee and credit balance of licence fee from previous month, according to provisions of these rules and District Excise Officer shall adjust the outstanding balance amount of licence fee from the security deposit of the licensee and also issue a notice to the licensee by the 3rd day of the next month to replenish the deficit in security amount either by lifting such quantity of country liquor involving duty equivalent to the adjusted amount or by depositing cash or a combination of both. In case the licensee fails to replenish the deficit in security amount by the 10th day of the next month his licence shall stand cancelled.
21. Suspension and cancellation of the licence and penalties.
(1) Licensing Authority may suspend or cancel the licence--
(a) if any bottle or container of country liquor is found in the licensed premises on which duty has not been paid and which does not carry security hologram duly approved by the Excise Commissioner as a proof of payment of duty;
(b) if any bottle or container of any other kind of liquor or intoxicating drug (for which licence is not granted) is found in the licensed premises;
(c) if any liquor or intoxicating drug is found in the possession of the licensee against the provisions of the Act or rules;
(d) if the affidavit submitted by the license at the time of application is found incorrect and assertions made therein are found to be false;
(e) if it is found that the licence has been obtained in a false name or the licensee is holding the licence on behalf of some other person;
(f) if the licensee fails to deposit monthly installment of licence fee or replenish the deficit in security amount within prescribed period;
(g) if the licensee is convicted of an offence punishable under the Act or of any cognizable and non-bailable offence, or any offence punishable under Narcotics Drugs and Psychotropic Substances Act, 1985 or of any offence punishable under Sections 482 to 489 of the Indian Penal Code.
(2) The Licensing Authority shall immediately suspend the licence and issue a show-cause notice for cancellation of licence and forfeiture of security the licensee shall submit his explanation within 7 days of the receipt of notice. Thereafter the Licensing Authority shall pass suitable orders after giving due opportunity of hearing to the licensee.
(3) In case the licence is cancelled the basic licence fee, licence fee deposited by him shall stand forfeited in favour of the Government and the licensee shall not be entitled to claim any compensation or refund. Such licensee may also be blacklisted and debarred from holding any other excise licence.
24. Rule 21(3) which is relevant for our purposes provides that if the licensee fails to deposit the monthly installment of license fee, his license shall be cancelled and the money deposited by the licensee shall be forfeited. He shall not be entitled to any compensation or refund and shall be black listed from holding any other license.
25. It is needless to emphasis that it is well settled that no person has a right to trade in intoxicating liquor. The State has the excessive privilege to grant license for trade in intoxicating liquor. The State and its authorities under the Act and Rules 2002 have determined the consideration for parting with the privilege to trade in country made liquor, to be in two parts in the facts of this case i.e. basic license fee and license fee.
26. The petitioner was fully aware of the total money she had to pay as consideration for obtaining the privilege for the excise year. It is not in dispute that the petitioner was well informed of the basic license fee, the security money, the earnest money as well as the minimum guaranteed quantity of the shop before making of the application.
27. The petitioner had submitted her application and the affidavit after being fully aware of the basis license fee and the minimum quantity of liquor fixed for the shop in question by the Collector. She was selected after draw of lottery. The petitioner acted upon the selection by payment of the basic license fee, the earnest money, the security amount and part of the license fee in shape of monthly installments. The contract between the State and the petitioner was complete on the dates she was selected as a licensee for the shop in question and she had acted upon the selection so made by depositing the money indicated above.
28. The legal position in that regard has been settled by the Division Bench of the High Court after considering the Rules, 2002 in the case of Brij Kishore Jaiswal (Supra). The Division Bench has gone on to hold that a concluded contract comes into existence between the State and the applicant, the moment the applicant is successful in draw of lots and his/her lottery slip/application is counter signed by the licensing authority (Ref. Paragraph 58 of the judgment). The Division Bench has further explained that even if there had been some default in deposit of the money towards security etc., the person concerned would be treated to be a de facto licensee if he had exploited the privilege by selling the liquor in the locality.
29. The Court may now turn to the two basic contentions which have been raised by the counsel for the petitioners.
30. The first plea raised by the petitioners that once the license has been cancelled, all rights and liabilities under contract come to an end is basically the same argument which had been accepted by the learned Single Judge while deciding the present writ petition earlier under judgment and order dated 4.5.2005. To be precise in the said judgment dated 4.5.2005, reference was made to a particular paragraph of the judgment in the case of
The passage of Deokar''s judgment on which reliance has been placed by the learned Single Judge of the High Court for holding that in the absence of any provision in the Uttar Pradesh Excise (Settlement of Licences for Retail Sale of Country Liquor) Rules, 2002, balance licence fee cannot be recovered from the respondents after cancellation of the licence has been culled out from the dissenting judgment, which obviously does not represent the majority view. On this ground the appeals deserve to be allowed.
31. This Court has to examine as to whether under the statutory provision of Rules, 2002, the petitioners are still liable to pay the balance amount of license fee short paid by them even when their license has been cancelled in the midst of the excise year.
32. On behalf of the petitioners repeatedly reliance was placed on Rule 2(n), 12, 14 and 21 of Rules, 2002, in support of their contention that once the licence has been cancelled the liability to pay the monthly installment of licence fee referable to Rule 2(m) of Rules, 2002 ceases and as a result whereof there cannot be any further demand of balance monthly installments subsequent to the date of cancellation of licence.
33. In my opinion the contention so raised is wholly misconceived for the following reasons:
The facility to make payment of part of the consideration termed as licence fee referable to Rule 2(m) in monthly installments in fact is a concession/facility provided to the licencee. The amount of consideration payable for obtaining the privilege as determined under Rules, 2002, is the sum total of basic licence fee and licence fee fixed for the excise year which continues to be the same irrespective of the facility of deposit of licence fee in monthly installments. This consideration for obtaining the privilege was guaranteed by the petitioners at the time of entering into the contract for grant of exclusive privilege. The facility of deposit in monthly deposit of part of the consideration cannot be read in a manner to reduce the total amount of consideration payable for parting with the privilege. It may also be recorded that the licensee like the petitioner cannot be permitted to wriggle out of their contractual obligation by taking benefit of his/her own wrong because of which his licence had to be cancelled under the Rules, 2002.
34. Between the petitioner and the State the consideration agreed upon has to be paid in to even if the licence of a person is cancelled in accordance with the term and conditions of the grant for the acts and omission of the licensee himself. It has to be kept in mind that the privilege to deal in intoxicating liquor granted to a licensee is hedged with conditions. It is not an absolute right. Violation of the prescribed conditions like selling of illicit liquor etc. may result in cancellation. Can in such a situation it be said that the licensee is not liable to pay the agreed amount of consideration. The answer has to be a big No. Therefore, cancellation of license for violation of conditions of Rules, 2002 does not in any way lead to a situation whereby the licensee can evade the payment of contracted amount is agreed to be paid for obtaining the privilege.
35. The Division Bench in the case of Brij Kishore Jaiswal (Supra) has explained that so far as Rule 12 is concerned, it is an option available to the licensing authority but if such action has not been taken by the licensing authority, no benefit will accrue in favour of the licensee.
36. Rule 21(3) provides for the consequences which follow from non deposit of the installments and after cancellation of the licence. The aforesaid provision does not dilute the contractual obligation to pay the agreed amount of consideration for the excise year. Therefore, it is held that because of cancellation of the license of the petitioner due to his own acts and inactions, he cannot be permitted to wriggle out of the contractual obligation to pay the entire consideration agreed upon.
37. The Apex Court has repeatedly held that writ proceedings under Article 226 of the Constitution of India cannot be resorted to for the purposes of avoiding the contractual obligation (Ref.
38. Rule 3, 6, 9, 10 and 11 of the Rules, 2002 provide for the procedure in the matter of grant of licence. These rules do not provide for anything which may lead to take a view contrary to the Division Bench judgment in the case of Brij Kishore (Supra).
39. Now turning to the second issue raised on behalf of the petitioner namely that the provision as it stood prior to the Rules, 2002 permitted recovery of the loss caused to the State Government after cancellation of licence from the earlier licensee has not been so incorporated in the Rules, 2002. Therefore, it logically follows that loss of revenue caused due to cancellation of licence in the midst of the excise year cannot be recovered from the licensee.
40. In my opinion the Standing Counsel appears to be justified in contending that the position in that regard has been made worse for licensee under the Rules, 2002. It is worthwhile to reproduce Rule 20(b) of Rules, 2002 which has material bearing on the issue.
20(b) The amount of daily basic licence fee so realized during the interim settlement shall be adjusted against the amount of basic license fee at the time of regular settlement of the shop.
41. From a simple reading of the aforesaid rule, it is apparently clear that the money recovered by the State Government while running the licence on daily basic licence fee after cancellation of the regular licence is to be adjusted against the amount of consideration at the time of subsequent regular settlement of the shop. The regular settlement of the shop contemplated by Rule 20(c) has necessarily to be subsequent to the cancellation of regular licence earlier granted. What logically follows is that the benefit which was earlier available to the licensee prior to Rules 2002, namely adjustment of money recovered while the shop was being run on daily basic licence fee subsequent to the cancellation against the total amount recoverable from the defaulting licensee has now been done away with. The amount of money recovered as the daily basic licence fee does not accrue in favour of the earlier licensee whose license is cancelled. His obligation to pay the contractual amount remains intact irrespective of the subsequent running of the shop on daily basis or not after cancellation of his license. It, therefore, logically follows that Rules, 2002 have made the position worse for the licensee in the matter of payment of his contractual amount after cancellation of licence. The obligation to pay the entire consideration flows from Rule 2(d) and 2(m) read with Section 24 and 24B of the Act, as recorded above. In view of the aforesaid, the second plea raised on behalf of the petitioner also do not appeal to the Court.
42. So far as the judgments relied upon by the counsel for the petitioners are concerned, it may be mentioned that in the case of Dhunmun Ram (Supra), the High Court had considered the provisions as they stood with regard to sanction of the bid by the Excise Commissioner before any concluded contract could come into existence. The Court went on to hold that short fall in revenue after re-auction in the facts of that case were damages and not the recovery of the balance license fee. The judgment is distinguishable having record to the change in the legal position under the provisions of Rules, 2002 read with Section 24B of the Act.
43. The Division Bench of this Court in the case of Brij Kishore (Supra), has specifically held that the judgment in the case of Rajendra Singh Chauhan (Supra) does not lay down the correct law, the judgment in the case of Anil Kumar and another (Supra) only follows the law laid down in the case of Rajendra Singh Chauhan.
44. Reference may also be had to the judgment of this Court in the case of Basant Lal and others v. District Excise Officer, Allahabad and others, 1986 UPTC 801, wherein it has been held that fixation of minimum guarantee quantity was in fact a part of the consideration for parting with the exclusive privilege. To similar effect is the judgment of the Division Bench of this Court in the case of Gavendra Pal Singh and another v. Commissioner, U.P. Excise passed in Civil Misc. Writ Petition No. 2989 of 2002 decided on 6th January, 2003,
45. For the reasons recorded above, this Court finds no illegality in the recovery of the balance amount of the consideration which was agreed upon by the petitioners to be paid for obtaining the exclusive privilege as also in respect of the recovery proceedings initiated thereto. Writ petition lacks merit and is accordingly dismissed.
Interim order, if any, stands discharged.
