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Ram Babu and ors. Vs. State of U.P. and ors. - Court Judgment

LegalCrystal Citation
SubjectCommercial
CourtAllahabad High Court
Decided On
Case NumberCivil Misc. Writ No. 13031 of 1975
Judge
Reported inAIR1981All16
ActsConstitution of India - Article 226
AppellantRam Babu and ors.
RespondentState of U.P. and ors.
Appellant AdvocateS.N. Agrawal, Adv.
Respondent AdvocateStanding Counsel
DispositionPetition dismissed
Excerpt:
commercial - validity of agreement - article 226 of constitution of india - petitioners running liquor and bhang shops as highest bidders in auction - accepted by government on payment of bid amount - petitioners deducting amount as liquor shops closed for a day in a week - order passed by government and was in force at the time of entering contract - state government demanded full payment - petitioner maintained no written contract executed in compliance with article 299 - held, demand of state government not illegal - plea of petitioners could not be sustained. - - state of madhya pradesh (air 1967 sc 203). the facts of that case are clearly distinguishable......making necessary deposits the petitioners had deducted some amount on the ground that the country liquor shops had to be closed on every tuesday in pursuance of an order passed in this behalf by the government. by the same notice they were required to pay the full amount failing which the same was to be recovered as arrears of land revenue. aggrieved the petitioners have instituted this writ petition with a prayer to issue a direction to the respondents not to enforce the aforesaid notice.2. it has been urged by counsel for the petitioners that since the mode of payment of the contract money was on daily basis, the petitioners were entitled to make deductions in respect of closure of the country liquor shops on every tuesday.3. having beard counsel for the parties, we, however, find it.....
Judgment:

N.D. Ojha, J.

1. In an auction held on 17th March, 1975 for the grant of a licence for one year to sell country liquor and Bhang in respect of certain shops situated in tahsil Garautha, District Jhansi, the petitioners were the highest bidders, their bids being for a sum of Rs. 2,20,000. On account of interim orders passed in certain writ petitions, the bidof the petitioners could not be accepted. However, on 31st March, 1975, as would be presently shown, an agreement wasarrived at between the petitioners and the District Excise Officer, whereby the petitioners agreed to run the shops in question on payment of the same amount of Rs. 2,20,000/- on a temporary basis till final orders were passed by the High Court in the writ petitions. Since the agreement arrived at, as aforesaid, could be terminated at any time, the mode of payment of the contract money was agreed to be on daily basis. On the basis of that agreement, the petitioners became entitled to run the shops in question with effect from 1st April, 1978. It is not disputed by the petitioners that they did run the shops thereafter with effect from 1st April, 1978 and also made various deposits towards the auction money. A notice D/- 16th (sic) 1975 was subsequently served on the petitioners informing them that while making necessary deposits the petitioners had deducted some amount on the ground that the country liquor shops had to be closed on every Tuesday in pursuance of an order passed in this behalf by the Government. By the same notice they were required to pay the full amount failing which the same was to be recovered as arrears of land revenue. Aggrieved the petitioners have instituted this writ petition with a prayer to issue a direction to the respondents not to enforce the aforesaid notice.

2. It has been urged by counsel for the petitioners that since the mode of payment of the contract money was on daily basis, the petitioners were entitled to make deductions in respect of closure of the country liquor shops on every Tuesday.

3. Having beard counsel for the parties, we, however, find it difficult to accept this submission.

4. Annexure '1' to the rejoinder-affidavit is copy of a letter, dated 31st March, 1975, from the Excise Inspector addressed to the petitioners, informing them that it had been decided that till final orders are passed by the High Court, the petitioners could be granted temporary licence on daily basis with effect from 1st April, 1978, in respect of the shops of country liquor and Bhang on payment of the amount of Rs. 2,20,000/-. It would be seen that this sum of Rs. 2,20,000/- represented the highest bid of the petitioners made on 17th March, 1975 in respect of the aforesaid shops. As is clear from a copyof the petitioners' letter of the same date filed as annexure 'CA-1' to the counter-affidavit the petitioners offered that they were prepared to run the shops temporarily on the basis of their highest bid of Rs. 2,20,000/- until final orders were passed by the High Court. The endorsements made below that letter indicate that the offer of the petitioners in this behalf was accepted and communicated to the petitioners on the same date, namely, 31st March, 1975. It has not been denied by counsel for the petitioners that on 17th March, 1975, when the petitioners made their bid for Rs. 2,20,000/- the order of the Government, requiring country liquor shops to be closed on every Tuesday, was in force. The petitioners made the bid with their eyes open and knew that they will have to keep their country liquor shops closed on every Tuesday. On 31st March, 1975, when the temporary licence was granted to the petitioners, it was agreed by the petitioners that the amount of Rs. 2,20,000/-, which was their highest bid, would continue to represent the auction money payable by them even for the temporary licence. It was only the mode of payment in which a variation took place, namely, that the amount of auction money was to be calculated and paid on a daily basis. This, as already seen above, had to be done in view of the nature of the contract, namely, the licence granted to the petitioners was temporary liable to be terminated at any time. In this view of the matter, and particularly keeping in view of the conduct of the petitioners, referred to above, we are of opinion that the mode of calculation for payment of the contract money on daily basis was on the face of it to be as follows :--

The total number of closed days in the year was to be deducted from the total number of 365 days of the year and the sum of Rs. 2,20,000/- was to be divided by the remaining number of days. The amount found on such calculation was to be the amount to be paid by the petitioners on daily basis for the temporary licence. We are unable to accept the submission made by counsel for the petitioners that for finding out the amount payable on daily basis the sum of Rs. 2,20,000/- had to be divided by 365 days of the year and then the amount payable for the total number of closed days in the years was to be deducted therefrom. We accordingly findno illegality in the demand made by the respondents by the impugned notice dated 16th August, 1975.

5. It was then urged by counsel for the petitioners that since no contract had been executed in writing in compliance with Article 299 of the Constitution, the agreement arrived at between the parties on 3Ist March, 1975, was not enforceable. Reliance in support of this submission has been placed on a decision of the Supreme Court in K. P. Chowdhry v. State of Madhya Pradesh (AIR 1967 SC 203). The facts of that case are clearly distinguishable. As is apparent from paragraph 10 of the report, the bid made by the appellant of that case had not been accepted by the appropriate authority and indeed no agreement between the appellant and the Government had been arrived at. In Timber Kashmir Pvt. Ltd. v. Conservator of Forests (AIR 1977 SC 151), it was held that although a contract cannot be executed without sanction, nevertheless if the sanction could be either expressly or impliedly given by or on behalf of the Government, and if some acts of the Government could fasten some obligations upon the Government, the lessee could also be estopped from questioning the terms of the grant of the sanction even where there is no written contract executed to bind the lessee. In Har Shankar v. Dy. Excise and Taxation Commissioner (AIR 1975 SC 1121) it was held :

'Those interested in running the country liquor vends offered their bids voluntarily in the auctions held for granting licences for the sale of country liquor. The terms and conditions of auctions were announced before the auctions were held and the bidders participated in the auctions without a demur and with full knowledge of the commitments which the bids involved. The announcement of conditions governing the auctions were in the nature of an invitation to an offer to those who were interested in the sale of country liquor. The bids given in the auctions were offers made by prospective vendors to the Government. The Government's acceptance of those bids was the acceptance of willing offers made to it. On such acceptance, the contract between the bidders and the Government became concluded and a binding agreement came into existence between them. The successful bidders were then granted licences evidencing the terms of contract betweenthem and the Government, under which they became entitled to sell liquor, The licensees exploited the respective licences for a portion of the period of their currency, presumably in expectation of a profit. Commercial considerations may have revealed an error of judgment in the initial assessment of profitability of the adventure but that is a normal incident of all trading transactions. Those who contract with open eyes must accept the burdens of the contract along with its benefits. 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, had their venture succeeded, would have relied upon those very powers to found a legal claim. Reciprocal rights 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.'

This case was followed in a subsequent decision of the Supreme Court in State of Punjab v. Balbir Singh (AIR 1977 SC 1717), where it was held that where in an auction for country liquor vend, the petitioner was the highest bidder, his bid was accepted and licence was issued and on the petitioners' committing breach of conditions of licence, demand for payment of still-head duty was made in enforcement of liabilities arising out of mutually agreed conditions of auction, such a demand could not be quashed in a writ petition. In the instant case also, as seen above, the petitioners' offer made on 31st March, 1975 to run the shops on the basis of their highest bid of Rs. 2,20,000/- was accepted by the respondents and the petitioners were permitted to run those shops temporarily. The petitioners derived benefit under the said agreement by actually running the shops thereafter in pursuance of the agreement dated 31st March, 1975. In this view of the matter even this plea that the impugned demand was illegal inasmuch as no written contract had been executed in compliance with Article 299 of the Constitution cannot be sustained.

6. In the result, the writ petition fails and is dismissed and the interim order is vacated. There shall, however, be no order as to costs.


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