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J.N. Malhotra Vs. the Lt. Governor of Delhi, Etc. - Court Judgment

LegalCrystal Citation
SubjectExcise
CourtDelhi High Court
Decided On
Case NumberCivil Writ Appeal No. 372 of 1978
Judge
Reported inILR1979Delhi699
ActsConstitution of India - Article 298; Punjab Excise Act, 1914 - Sections 34(1); Delhi Liquor license Rules, 1976 - Rule 23
AppellantJ.N. Malhotra
RespondentThe Lt. Governor of Delhi, Etc.
Advocates: R.S. Narula,; M.L. Mehra,; D.S. Narula,;
Cases Referred and T. Cajee v. U. Jormanik Seim
Excerpt:
.....would be increased to 158 as against 105 for the preceding year. on 21-3-1978, delhi liquor license rules were also amended including rule 33 (12) whereupon, the proviso that the number of consecutive dry days shall not exceed two at a time was deleted. on 31-3-1978 letters were addressed to the licensees by the government demanding payment of assessment fees, whereupon the present writ petitions were filed claiming amongst other reliefs, following reliefs in the nature of mandamus--; (i) seeking restraint order against the respondents from claiming assessment fee, firstly on the ground that rule 23 of the delhi liquor license rules 1976 does not mention assessed fee as separately imposable ; secondly the delhi liquor license rules 1976 are invalid as the lt. governor has no power..........it does not mention assessed fee simpliciter. rule 23 has, however, to be read with the subsequent rules. rule 24 deals with fixed fees only. rule 26(1) deals with fixed fees, while rule 26(2) deals with assessed fees. rule 31(19) (a) contemplates auction and assessed fee. this rule has to be read along with rule 23. it cannot, thereforee, be said that assessed fees as apart from fixed fees is not made payable by rule 23. (11) it was then argued that these rules have been made by the lt. governor. it is true that the lt. governor can make rules for carrying out the provisions of the act under section 58(1). but, since these rules apparently relate to the subject matter covered by section 59 they should be construed to be made by the lt. governor not under section 58(1) but under section.....
Judgment:

V.S. Deshpande, C.J.

(1) The context of law and facts out of which these petitions arise may first be stated. LAW:

(2) The Punjab Excise Act, 1914 (the Act), as applied to Delhi gives to the Government the complete power of control and regulation of the sale of liquor in Delhi. Its provisions are not open to challenge as being contrary to the fundamental right of freedom of trade and business guaranteed by Article 19(1)(g) of the Constitution because consumption of liquor is harmful to the health of the people except in medicinal doses. The restrictions on such a trade imposed by law and executive action are, thereforee, reasonable even if they amount to a total prohibition of it. The present petitions are concerned with the sale of the so-called foreign liquor manufactured in India under licenses granted by the Government. The relevant provisions of law for the grant of these licenses are as follows :

'34.(1) Every license, permit or pass granted under this Act shall be granted

(A)on payment of such fee, if any,

(B)subject to the such restrictions and on such conditions,

(C)in such form and containing such particulars.

(D)for such period, as the Excise Commissioner may direct.

'35.(1)Subject to the rules made by the Excise Commissioner under the powers conferred by this Act, the Collector may grant licenses for the sale of any intoxicant within his district.

'57.No suit shall lie in any civil court against the Government or any officer or person for damages for any act in good faith done, or ordered to be done in pursuance of this Act or of any other law for the time being in force relating to the excise revenue.

'58.(L)The Lieutenant Governor of Delhi may, by notification, make rules for the purpose of carrying out the provisions of this Act or any other law for the time being in force relating to excise revenue.

'59.The Excise Commissioner may, by notification, make rules

'(D)prescribing the scale of fees or the manner of fixing the fees payable in respect of any license, permit or pass or in respect of the storing of any intoxicant.

(E)regulating the time, place and manner of payment of any duty or fee ;

(F)prescribing the authority by, the restrictions under the condition which, any license, permit or pass may be granted including provision for the following matters :

(V)fixing of the days and hours during which any licensed premises may or may not be kept open, and the closure of such premises on special occasions ;'

FACTS:

(3) For the year 1978-79 auctions were held by the Collector of Excise authorised by the Lt. Governor and the Excise Commissioner on terms and conditioas which are at annexure A of the writ petition for the grant of two kinds of licenses :

(1)in Form L-1 for the whole-sale sale of foreign liquor and

(2)in Form L-2 for retail sale of foreign liquor, from 22-3-1978 to 27-3-1978. The terms and conditions were published on 9-3-1978. On 21-3-1978 a corrigendum (Annexure R-III) was issued making changes in the terms and conditions of the license, two of which are material. Under condition No. 17 the. highest bidder for the license at the auction has to deposit 12-1/2 per cent of the total amount of the bid for the license. The corrigendum added that one month's advance assessment fee would also have to be deposited at that time. In condition No. 22(a) before the corrigendum the wholesale licensees were to pay excise duty, license fee and assessment fee, but the amendment changed the liability for the payament of assessment fee by making it payable by the L-2 licensees instead of the L-1 licensees. The reason for the amendment was to correct a mistake. In the terms and conditions of the auction of these licenses for the previous two years, namely, 1976-77 and 1977-78 the assessment fee was payable by the L-2 licensees in accordance with Rule 26(2) of the Delhi Liquor Rules, 1976. But condition No. 22(a) of the terms and conditions of license for 1978-79 contrary to Rule 26(2) had made it payable by L-1 licensees. Hence the correction. At the time of the holding of the auction the terms and conditions of the auction were read out by the Officer presiding at the auction at each of the auctions held daily from 22-3-1978 to 27-3-1978. The terms and conditions so explained included the amendments made by the corrigendum of 21-3-1978. The report (Annexure R-1) of so having explained these terms daily to the bidders is made by the Presiding Officer Shri A. C. Kher for all these actions on 28-3-1978. This repart was made before any controversy had arisen between the bidders and the Government. Further, each of the successful bidders from 22-3-1978 to 27-3-1978 signed a declaration (Annexure R-II) before his bid was accepted that he had carefully read the terms and conditions of the auction including the corrigendum issued vide office order No. 16(3)/78-79/Ex(P), dated 21-3-1978 and that he voluntarily agreed to abide by all these conditions. Each one of these bidders also agreed to abide by the Rules and also not to claim any compensation in connection with the measures taken in furtherance of the cause of prohibition. On 11-3-1978 a Pressnote by the Government had declared that the number of dry days for the year 1978-79 would be increased to 158 as against 105 for the preceding year (Annexure R-IV). The Delhi Liquor license Rules were also amended on 21-3-1978 the material amendment being that of Rule 33(12) deleting the proviso that the number of consecutive dry days shall not exceed two at a time (Annexure R-V). On 31-3-1978 letters were addressed to the licensees by the Government demanding payment of assessment fees.

(4) Thereupon the present writ petitions were filed. The L-2 licensees petitioners claim the following reliefs in the nature of mandamus, namely,

(A)The respondents be restrained from claiming assessment fees;

(B)No condition of license be enforced against the petitioners which was not originally in the terms and conditions, but which came subsequently into it by the corrigendum ;

(C)The increase in the number of dry days by notification dated 31-3-1978 be quashed ; and

(D)The license-fee be reduced in proportion to the number of dry days declared after the auction.

(5) The L-1 licensees say that a representation was held out by the Government as per copy at page 45 (Annexure A) of the writ petition No. 1288 of 1978, stating that in all 28 shops would be auctioned in different localities and the petitioners were led to believe that they would be able to sell liquor as a wholesaler to the 28 retailers, but actually the Government auctioned only 25 shops. The petitioners, thereforee, pray that the license fee due from them be reduced proportionately. They also join L-2 licensees petitioners about the ground of challenge and the reliefs claimed by them. The Preliminary Question :

(6) In considering the maintainability of the present writ petitions our approach would be the same as was explained by the Division Bench in Niranjan Lal Dalmia v. Union of India and others, 2nd (1975) 2 Delhi 548, particularly because subsequently in Har Shankar and others. The Deputy Excise and Taxation Commissioner. : [1975]3SCR254 , the same approach was adumbrated by the Supreme Court.

(7) The reliefs asked for by the petitioners are in the nature of mandamus. According to 11 Halsbury's Laws of England, Third Edition, page 84. 'There are two basic requirements for the issue of a writ in the nature of mandamus. Firstly, the writ is issued for the performance of a public duty by statutory or public authority. Secondly, the writ is issued as an extra-ordinary remedy in the absence of an equally convenient beneficial or effective ordinary remedy'. It would be seen that neither of these requirements is satisfied by these writ petitions.

(8) The respondents are statutory and public authorities. The petitioners have not, however, been able to show that they have failed to perform any public duty which needs to be enforced by this court by the issue of mandamus. The relationship between the petitioners and the respondents is dominently contractual and not statutory. The rights of the petitioners arise out of contracts and not out of any statutory provision. The terms and conditions of the auctions for the grant of a license either L-1 or L-2 are offers made by the respondents which are accepted by the petitioners bidding at the auctions and paying the price determined by the highest bid in each auction.

(9) It is well settled that the capacity of respondent No. 1 acting as the administrator on behalf of the President of India and of respondents 2 and 3 who are subordinate to him to enter into contracts arises originally from Article 298 of the Constitution. They have the executive power to enter into a contract even though there may be no statute at all authorising them to do so (Ram Jawaya Kapur v. State of Punjab, : [1955]2SCR225 ). There are two restrictions on the exercise of such executive authority. Firstly, the subject matter over which it is exercised must fall within the legislative competence of Parliament. It is well known that in respect of a Union Territory like Delhi, the legislative competence of Parliament is unlimited in view of Article 246(4) of the Constitution and section 58(b) of the General Clauses Act. Secondly, the executive authority must not be exercised contrary to any law or statute.

(10) The crucial question on which the maintainability of these writ petitions depends is whether the petitioners can show that the respondents have contravened any law. It is only then that the petitioners can seek to come to this court under Article 226 of the Constiturtion. Section 24(1) of the Act authorises the Excise Commissioner to grant licenses to the petitioners subject to such restrictions and on such conditions as he may direct. The terms and conditions of the auction accepted by the petitioners have been authorised by the Excise Commissioner. Section 35(1) authorises the Collector to grant licenses to the petitioners subject to the rules made by the Excise Commissioner. The power to make the relevant rules is given to the Excise Commissioner by section 59(d)(e) and (f)(v) of the Act. The assessed fee is made payable by Rule 23 of the Liquor license Rules, 1976. The scale of the assessed fee in respect of L-2 licenses is laid down by Rule 26(2) of the said Rules. It was, however, argued for the petitioners that Rule 23 does not mention assessed fee as separately imposable. It mentions only three kinds of fees, (a) fixed fees, (b) fixed and assessed fee, and (c) auction fee. But it does not mention assessed fee simpliciter. Rule 23 has, however, to be read with the subsequent rules. Rule 24 deals with fixed fees only. Rule 26(1) deals with fixed fees, while Rule 26(2) deals with assessed fees. Rule 31(19) (a) contemplates auction and assessed fee. This rule has to be read along with Rule 23. It cannot, thereforee, be said that assessed fees as apart from fixed fees is not made payable by Rule 23.

(11) It was then argued that these rules have been made by the Lt. Governor. It is true that the Lt. Governor can make rules for carrying out the provisions of the Act under section 58(1). But, since these rules apparently relate to the subject matter covered by section 59 they should be construed to be made by the Lt. Governor not under section 58(1) but under section 59. Since the Lt. Governor has no power to make the rules under section 59 these rules are invalid. In our view, it is unnecessary to decide the question whether the rules are valid as being made under section 58(1) or invalid as being made under section 59. For, the terms and conditions of the contracts between the parties could be offered by the respondents to the petitioners in exercise of the executive power conferred by section 34(1) and section 35(1) irrespective of whether any rules under section 58 or section 59 are made at all It is well settled that the executive power of the Government under Articles 53, 73, 298 and 310 of the Constitution can be exercised without any legislation or rules being made so long as it does not contravene any law, B. N. Nagaraja v. State of Mysore 0043/1966 : (1967)ILLJ698SC , and T. Cajee v. U. Jormanik Seim, : (1961)ILLJ652SC . A fortiori, if such executive power is derived not merely from the Constitution but from a statute then it can be exercised without rules being made under the said statute. The words 'subject to the rules made by the Excise Commissioner' in section 34(1) do not mean that the Collector there under cannot grant licenses except under the rules made by the Excise Commissioner. They simply mean that licenses granted by the Collector there under shall be subject to these rules, if so made. Firstly, the assessment fee levied is not contrary to but is in accordance with the Rules 23 and 26(2). Secondly, if these rules are invalid then the assessment fee is recoverable purely and simply under the contracts entered into by the petitioners. These contracts are not contrary to the rules whether they are valid or invalid, nor are they contrary to sections 34(1) and 35(1).

(12) It was then argued that the terms 5, and 20 are stated by term 32 to be in addition to the other conditions mentioned in the Act and the rules. The provisions of Rules 33(12) must also be read to be a condition of the contract. The said rule contemplates that a list of dry days is to be announced prior to the auction and the Excise Commissioner with the prior approval of the Lt. Governor may add to or delete from the said list. Since no such list is shown to have been announced before the auctions in these cases the declaration of dry days and particularly the increase of the dry days from 105 in 1977-78 to 152 in 1978-79 is contrary to these rules. Firstly, the rule does not require any list as such to be announced before the auction. Secondly, the rule expressly gives power to the Excise Commissioner to add to the number of dry days. Thirdly, the restriction imposed by the proviso that not more than two consecutive days shall be dry days has been deleted from the rule by notification dated 21st March, 1978. Lastly, the rule being framed by the Lt. Governor and not by the Excise Commissioner would be invalid, if it is framed under section 59 and not under section 58(1). For all these reasons we have to base our decision as to the validity of declaration of dry days by the respondents in relation to the petitioners only on the terms and conditions of the contracts. According to terms 5, 19 and 20 the Excise Commissioner has absolute power to declare the number of dry days in a year from time to time and no compensation is payable to the licensees by the loss caused to them by the declaration of such dry days. Section 54 of the Act referring to closure of the shop of the licensees for the preservation of public peace has not been invoked for the declaration of dry days and does not, thereforee, apply.

(13) It was then contended that the assessment fees cannot be levied by way of contract even though agreed to by the petitioners, but must be levied by law in view of Article 265 of the Constitution. The Supreme Court has, however, held in Har Shankar's case (supra) that the license fee or fixed fee is a price for the sale of the license and is neither a tax nor a fee. It has, thereforee, to be fixed by contract and not by law. It was argued that this decision does not apply to the assessment fees because it is not a part of the price for the grant of the license. As contrasted with the auction fee which is the amount secured by the respondents from the highest bidder at the auction and constitute the price for the license the assessment fee need not be paid at all unless the licensee sells liquor under the license. Since it is payable after the grant of the license it cannot be termed as price for the grant of the license. This argument ignores the basic fact that the contract is formed by the offer of the terms and condition of the auction accepted by the petitioners. The payment of assessment fee is a part of the term of auction. Unless and until the bidder agrees to pay the assessment fee he cannot bid at the auction at all. The price for the license is constituted by the payment stipulated in the terms of the action. It is not material that the auction fee is determined at the auction by the highest bid, while the assessment fee may be determined after the auction and the grant of license by the number of bottles which may be sold by the licensee. Both the fees arc price paid by the bidder for securing the license. Further, just as a percentage of the auction fee has to be deposited at the time of the auction before the grant of the license, one months advance assessment fee is also to be deposited at that time before the grant of the license according to the amended terms of the auction.

(14) The conclusion is that the rights of the petitioners, if any, are based only on the contract and not on any statute or law. The grievances of the petitioners are understandable only as being breaches of contract and not breaches of any law. In Har Shankar's case (supra) the Supreme Court held that petitions which are based on such a contract are not maintainable under Article 226 of the Constitution implying that the remedy of such contractors would be by way of a suit. It was argued for the petitioners before us that section 57 of the Act barred such a suit and, thereforee, the only remedy of the petitioners would be under Article 226 of the Constitution. This argument is not supported by section 57 which is as follows :

'NOsuit shall lie in any civil court against the Government or any officer or person for damages for any act in good faith done, or ordered to be done in pursuance of this Act or of any other law for the time being in force relating to the excise revenue.'

Section 57 is in line with many other similar statutory provisions in which public servants acting in exercise of statutory powers or purporting to do so under colour of office are protected for acts done in good faith from liability for damages in case it is found that their acts were either beyond or contrary to these powers given to them by the statute. Hence it bars only a suit for damages against such public servants or against the Government in respect of such acts. But a suit for a declaration or one for declaration and injunction or some such relief other than damages for bona fide acts done under the statute are not barred by section 57 of the Act. Similarly, suits for specific performance would not be barred there under. In view of this position it is unnecessary to consider as to what were the terms of the contract between the parties.

(15) However, in deference to the argument made and in the interest of completing the discussion we may refer to the argument that the contracts entered into by the respondents with the petitioners contained only those terms and conditions as they existed before the issue of the corrigendum dated 21-3-1978. The assessment fee would, thereforee, be payable by L-1 licensees and not by L-2 licensees. This is a question of fact, but the material before us was sufficient for the finding on the same. Firstly, the corrigendum is issued on 31-3-1978. It clearly shifts the liability for payment of assessment fee from L-1 licensees to L-2 licensees. Secondly, auctions were held from 23-3-1978 to 27-3-1978 and each of the successful bidder has signed a declaration on each of those days accepting the terms and conditions of the auction including those inserted therein by the corrigendum. Thirdly, the payment of assessment fee by L-2 licensees is in accordance with Rule 26(2) of the Delhi Liquor license Rules, 1976. It is the L-2 licensees who have paid such fees for the years 1976-77 and 1977-78. The unamended condition 22 (a) making L-1 licensees liable for the assessment fee was, thereforee, contrary to Rule 26(2) and was obviously a mistake. This mistake was corrected by the corrigendum. Hence it was called a corrigendum and not an amendment. Fourthly, Shri A. C. Kher, the officer who presided over these auctions from 22-3-1978 to 27-3-1978 recorded a report on 28-3-1978 that the terms and conditions of the auction including those of the corrigendum were read out and explained to the bidder by him. This report has been made at a time when there was no controversy about the payment of assessment fee. It is a document ante litem motam. Lastly, when the demand for payment of assessment fee was made by the respondents on 31-3-1978 from the petitioners no petitioner took up the stand that he had understood the terms and conditions of auction to mean that the assessment fee was payable by L-1 licensees and not by L-2 licensees. Against these circumstances there is absolutely nothing to show that the petitioners were such simpletons that they entered into these contracts thinking that the assessment fee was payable by L-1 licensees.

(16) Much was made of the fact that the terms and conditions of the license were not made known to the bidders ten days in advance of the date of the auction as required by Rule 31(3) and (4). This again is a question of fact. The terms and conditions of auction are dated 9-3-1978. They were apparently proclaimed more than ten days before the holding of the auction. Assuming for the same of argument that they were not made known to the petitioners ten days before the auction. This condition was entirely for the benefit of the petitioners. No public policy is involved in it. If the petitioners chose to accept the terms and conditions of auction without their having been made known to them more than ten days before the auction the petitioners waived the benefit of the rule. The right to trade in liquor not being a fundamental right as held in Har Shankar (supra), the benefit of the rule could be waived by the petitioners. Further, the rule was framed by the Lt. Governor and on the argument of the petitioners themselves it was invalid. If so, the petitioners could not invoke it in support of the writ petitions.

(17) The result is that the petitioners who were holders of license in form L-2 have not shown any contravention of any law against which the relief in the nature of mandamus could be claimed by them under Article 226. As held in Har Shankar, thereforee, these writ petitions are not maintaible under Article 226 as they arise only out of contractual rights.

(18) The petitioners in Civil Writ 1288 of 1978 are holder of the wholesale license in L-1. Their grievance is that the original representation by the Government that 28 shops would be sold to retailers was relied upon by the petitioners in offering the highest bid for the grant of wholesale license. The petitioners calculated that they would be able to sell liquor to 28 retailers. Later, however, the Government granted retail licenses only to 25 shops. The peptitioners had already changed their position by giving the highest bid for the grant of a wholesale license. The Government was estopped from going back from the representation that retail license to 28 retailers would be granted. The amount of the license fee payable by the petitioners turn L-1 license should, thereforee, be reduced in the proportion in which 25 stands to 28. The petitioners also aver that the respondents had no right to declare dry days after the auction as the petitioners had thought that the number of dry days would be the same as in the year 1977-78. The petitioners are also entitled to reduction in the amount of the payment of license fee due to this subsequent declaration of more dry days on the same ground of estoppel.

(19) Firstly, the terms and conditions of license accepted by the petitioners clearly state that no compensation is payable to the petitioners for any reason whatever except under section 54. Since the reduction of the amount is not claimed by the petitioners under section 54 the claim is barred the terms of the contract itself.

(20) Secondly, what was the representation made by the respondents to the petitioners A declaration of policy had already been made on 10-3-1978 by the Government that the number of dry days in 1978-79 would be 158. The actual number of dry days declared is only 152. It was said that this declaration was made by an executive Councillor and not by the Excise Commissioner. The declaration was made by the notification of the Delhi Administration, It was an official declaration of policy. The petitioners were put on notice. The petitioners cannot contend that there was any representation thereafter that the number of dry days in 1978-79 would be the same as they were in 1977-78.

(21) Thirdly, the terms and conditions of the license made it clear that no compensation would be payable to the petitioners for whatever reason. This was also notice to the petitioners that even if the petitioners suffered a loss by whatever reason such as declaration of more dry days after the auction the amount of license fee would not be reduced.

(22) Fourthly, Rule 31(11), (12). (16), (17) and (19) (d) shows that the highest bid may not be accepted for various reasons and a retailer shop may not, thereforee, come into existence even though the auction may be held for it. This risk was brought to the notice of the petitioners by the terms and conditions of the auction. We are of the view, thereforee, that no representation was made by the respondents to the petitioners that either 28 shops would be auctioned to the retailers or that the number of dry days would not be increased after the auction. The petitioners, thereforee, are not entitled to any reduction in the license fee for those reasons.

(23) For the above reasons, this writ petition and connected writ petitions 437, 513 to 523, 525 to 527, 534, to 535, 537 to 543, 568 to 576, 592, 614 to 619, 1288, 1299, 1300, 1313, 1314, 1318 and 1362 all of 1978, fail at the threshhold on the preliminary ground that they are based purely on contracts and are not, thereforee, maintainable under Article 226 of the Constitution. These writ petitions are dismissed with costs.


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